Trust me. I'm a politician!

The importance of trust

One of the qualities which a politician in a democratic society must possess in abundance is trust. Without it, it is almost impossible to repeatedly go back to the electorate in order to ask voters for their support. There does not appear to be much trust around at the present time however. Trust in the British government has recently fallen sharply as dissatisfaction with its handling of the Covid-19 crisis has mounted. But this is more than about Covid, as evidenced by the recent riots on the streets of the US. 

Trust is the basis of our economic system. It is the foundation upon which contracts are drawn and on which trade takes place. To put it even more simply, in the absence of trust many value-generating transactions would simply not take place. The basis of trust in western democracies is rooted in governments: They draw up the legal framework upon which our economies operate and it is therefore important that we continue to have confidence in them. The basis of that trust began to fray in the wake of the 2008 financial crash when governments assured their electorate that a return to normality would occur sooner rather than later. When that did not occur, populist voices began to make themselves heard in countries as disparate as Greece, Italy, the Philippines, UK and the United States. Voters stopped believing that the system was helping them and the perception became entrenched that it was biased in favour of others, be it the rich, foreigners or those from a different ethnic background. As a result, the US elected Donald Trump as President and the UK voted in favour of Brexit as these were solutions which it was promised would look after the interests of voters.

... And how to lose it

But the roots of populism do not run deep. Neither the Johnson government nor the Trump Administration have a coherent plan of what they want to do, other than deliver on the populist platforms on which they were elected. Trump’s America First strategy has resulted in conflict with China and undermined the institutional framework which has supported the global economy for the past 70 years. In the UK, the Johnson government continues to believe it has a duty to deliver a full departure from the EU by the end of this year, irrespective of the fact that the landscape has changed since the December election, and irrespective of the economic costs that the current policy orientation is likely to inflict.

Indeed, based on his past performance Boris Johnson is the least trustworthy occupant of the Prime Minister’s office in modern history (it is one of history’s great ironies that the British electorate trusted Jeremy Corbyn, his opponent in the 2019 general election, even less). Johnson was a brilliant cheerleader for Brexit but never once has he stopped to consider its economic consequences. The Covid-19 crisis has called his judgement further into question. Although Johnson gained considerable personal sympathy following his brush with the coronavirus, and for a time his polling ratings surged, the fact that Britain has the highest death rate in Europe has raised a lot of questions about the government’s handling of the crisis. 

We should reserve judgement until such times as a deeper investigation of the crisis is conducted but we can draw conclusions from the government’s handling of the Dominic Cummings affair. The overwhelming consensus of opinion is that Cummings, who is Johnson’s most trusted adviser, broke the lockdown rules. One of the more unedifying aspects of the whole affair was the way in which the Attorney General risked the independence of her office by aligning with the government. As Murray Hunt from the Bingham Centre for the Rule of Law put it the most important aspect of this issue “is what the episode reveals in general about the mutual dependency of the rule of law and public trust.” 

Impossible to trust the UK government on Brexit

Anybody who was already concerned about the government’s position on Brexit will not be assuaged by recent events. I have never been convinced that Brexit is about improving the wellbeing of the British people – there is, after all, no evidence to support this position. Efforts by the Johnson government to go so far as proroguing parliament to drive it through should wake people up to the lengths it is prepared to go to make this ideological project a reality. If the electorate increasingly distrusts its own government, it should come as no surprise that EU negotiators are not prepared to take the Johnson government at its word. The recent spat between the UK’s Sherpa David Frost and Michel Barnier makes clear that the two sides remain far apart as we move closer to the point at which the UK will have to make a decision on whether to extend the transition period.

There is some substance to the UK’s criticism that the EU is treating the UK differently to other parties seeking to do a trade deal, but it is disingenuous to claim that the proposals represent anything other than those outlined in the Political Declaration signed last October (as Barnier hinted without saying so explicitly). We thus find ourselves returning to the vexed issue of trust. There is an increasing sense in Brussels (and indeed elsewhere) that the UK has no intention of reaching a trade agreement with the EU by the end of this year, despite the fact that the Political Declaration suggests “the Parties envisage having an ambitious trading relationship on goods on the basis of a Free Trade Agreement, with a view to facilitating the ease of legitimate trade.” Nor is it prepared to seek an extension of the Transition Period, which implies that the UK will fall back to trading on WTO rules at the start of 2021.

As the tide of globalisation ebbs, there can have been no worse time in the post-1945 period to embark on a trade policy based on WTO rules. Many economists (including me) have made the point that failure to reach a trade agreement will impose significant economic costs on the UK. But what has changed in the interim is that the global economy now faces its deepest recession of modern times. A rational government would immediately have declared force majeure and asked for an extension. But the Johnson government has long since adopted an economically irrational approach to Brexit and I cannot determine whether its stance represents a crazy bargaining ploy in a bid to force more concessions from the EU or whether it means what it says about a no-deal Brexit.

You do not have to be as cynical as this jaded economist to believe that the government is prepared to hide the costs of a no-deal Brexit behind the smokescreen of a Covid-induced recession. After all, they say you should never let a good crisis go to waste. But the actions of this government over recent months with regard to fudging the rules (the Cummings case) and blurring the evidence (the selective use of data in reporting the UK Covid-19 outbreak) are consistent with the Albert Einstein view that “whoever is careless with the truth in small matters cannot be trusted with important matters.”

The governance problem

Irrespective of one’s views over Brexit, there can be little doubt that the post-referendum negotiations have done great harm to the UK’s reputation for good governance. The British reputation for pragmatism has been trashed by the ideological positions adopted by all sides in the Brexit debate which threatens to do significant damage to the British economy. Whether a no-deal Brexit will or will not damage the economy is not the point: The mere possibility that it might illustrates that the government is prepared to take risks with the livelihoods of people whose interests they are meant to be serving. This is not good governance. 

The dictionary definition of governance is the process of decision-making and the process by which decisions are implemented. Government is one of the key actors in this area because it sets the institutional framework against which decisions are taken. The United Nations defines eight key characteristics of good governance: It is (i) participatory; (ii) consensus oriented; (iii) accountable; (iv) transparent; (v) responsive; (vi) effective; (vii) efficient and (viii) equitable. In addition, it should be ”inclusive and follow the rule of law [thus ensuring] that corruption is minimized and that the views of minorities are taken into account and that the voices of the most vulnerable in society are heard in decision-making. It is also responsive to the present and future needs of society.”

Measured in terms of these criteria, the post-Brexit decision-making process fails on a number of counts. Arguably the post-referendum process fails on the consensus criterion (i), although Brexit supporters will argue that the referendum was the greatest act of participation in British democratic history outside of an election. But there can be no doubt that the pre- and post-referendum process was not consensus oriented (ii). Unless the government puts the terms of its deal to the electorate, there is a case for suggesting that the accountability principle (iii) is also not satisfied – recall that the electorate did not express a view on the nature of Brexit. I would argue that the process also fails on point (vi) – such has been the inability of the government to make a case that will satisfy all parties, that it is clearly not effective. And it clearly was not efficient (vii) because the process has absorbed so much legislative time that the government has not had time to devote to other pressing policy areas.

On the plus side, the process does satisfy the transparency criterion (iv) though only because the courts forced the government to cede parliament a role in determining the course of Brexit. Whether the other points will ultimately be satisfied, only time will tell. But given the fact that younger voters voted heavily in favour of remaining in the EU, it is clear that “the future needs of society” have not been taken into account.

All these things matter because the UK’s view of itself is bound up with its reputation for stability. Italy has had 65 governments since 1946; the French political system was reconstituted as recently as 1958 whilst the Federal Republic of Germany is only 70 years old. Britain prides itself on its parliamentary democracy which has remained substantially unchanged over 300 years and whose direct roots can be traced back to the 13th century. It was supposed to be unthinkable that a Greek-style crisis of governance could ever happen in the UK. But it has. This does not mean that the UK is immediately about to fall apart at the seams (though it sometimes feels like it). But there are likely to be longer term consequences which will act to its disadvantage.

For one thing, the UK’s reputation as a business-friendly environment has been badly damaged. One thousand days after the referendum and with just nine days to go until EU membership is due to lapse, businesses have no idea about the nature of future trading arrangements with the EU. As a result of this mounting uncertainty, businesses have cut back on investment. We do not need to rake over the coals of what is happening in the car industry but Japanese manufacturers did warn in 2016 that they set up shop in the UK in the 1980s to ensure access to the EU, and that an abrupt departure would have ramifications for their future business decisions. 

Financial institutions which are already suffering from low interest rates, an inflated cost base and ever more stringent regulation, could not afford to wait around for governments to decide on the nature of the financial passporting regime and have been planning for more than two years how to secure business continuity. Around 7,000 jobs and £800 bn in assets (10% of total UK bank assets) have moved out of London to other European financial centres. It is highly unlikely that they will come back. And I have long expressed concerns that business that might otherwise have come to London will bypass it altogether. There are indeed indications that firms are opening their first European offices in the EU rather than the UK (Kroll Bond Rating Agency and Norinchukin Bank to name but two). 

The nature of the UK could itself be subject to change in future. Scottish voters predominantly rejected Brexit, as indeed did Northern Irish voters. The SNP’s raison d’etre is to push for Scottish independence from the rest of the UK and I have long believed that 10-15 years after the first independence referendum, which took place in 2014, there would be a push for a rerun. I stand by that view, particularly if Scotland is dragged out of the EU against its will. The question of whether Northern Ireland will remain part of the union in the longer term is also relevant. The DUP, which has played such a big role in the Brexit drama, gained only 36% of the vote at the general election two years ago and the vote share of pro-Union parties was only narrowly ahead of nationalist parties which would support a united Ireland. Many Irish commentators believe that a united Ireland is inevitable in the long-run – they may well be right. 

Many of these issues could have been avoided if the Brexit process had not descended into factionalism which prevented pragmatic decisions from being taken quickly. With the executive and legislative arms of government at loggerheads, the question has naturally arisen as to whether the system of government is broken. But it is not the institution of government which is the problem. It is those who are managing the process. Only today we have had the Leader of the Opposition walk out of a meeting of party leaders because of differences of opinion with other participants whilst the Prime Minister blames parliament for the UK's current predicament. This is not the behaviour of political leaders.

For a medium-sized country such as the UK to have held a prominent position on the world stage long after its military and financial clout have been diminished speaks volumes for its judicious application of soft power. But as one Italian journalist said to me recently, “I used to look up to the Anglo Saxon system of government compared to my own. Now I no longer do.” The damage caused to the UK’s international may not easily be repaired – if indeed it is repairable at all.