The Economist - USA (2019-08-03)

48 Britain The EconomistAugust 3rd 2019

2 the effects, and that must take action to

mitigate them. But “businesses do not

want to,” says Sam Lowe, a researcher at the

Centre for European Reform, another

think-tank. “They want government to

bear this cost.”

Kicking business into action is harder

than it looks. The first problem is Duke of

York syndrome. Some firms put in place

contingency measures the last time a no-

deal exit loomed. Many felt that their mon-

ey was wasted. “Marching them back up the

hill again will be a challenge,” said Martin

McTague, from the Federation of Small

Businesses, a lobby group, especially when

Mr Johnson himself said during his cam-

paign to become prime minister that no-

deal has a “million to one” chance of hap-

pening. “The million-to-one line will reso-

nate more than a technical notice or a

billboard from government saying ‘get

ready’,” says Joe Owen of the ifg.

Second, scaring business into action

sits uneasily with Mr Johnson’s pathologi-

cal optimism. A description of the threat of

no-deal alarming enough to get business to

prepare energetically would frighten the

horses; too rosy an account of the future

and people will not prepare.

The markets, at least, are taking seri-

ously the government’s apparent determi-

nation to leave with or without a deal. In Mr

Johnson’s first week as prime minister the

pound fell by 3% on a trade-weighted basis.

It is nearing $1.20 against the dollar, its

lowest level since the referendum.

The government hopes that talk of a big

fiscal boost will counterbalance the gloom.

It is said to be planning an autumn budget

that would get the economy “going gang-

busters” by exit day. Mr Johnson has floated

various giveaways, including raising the

thresholds at which people start to pay the

higher rate of income tax and more money

forthenhsandpolice.Atthepoultryfarm

hepromisedtocompensatefarmerswho

loseoutfromanyno-dealdisruption.

YetBritainwillnotbeabletospendits

away out of no-deal chaos. In suchan

event,annual borrowing would anyway

risebysome£30bn(1.4%ofgdp) asthe

economyslowed,official estimatessug-

gest.A governmentwhichpromisedlotsof

extraspendingandtaxcutsontopofthat

wouldtesttheconfidenceofinvestors.And

a no-dealBrexitislikelytobeprimarilya

shocktothesupplysideoftheeconomy.

Fiscalstimulusaimedatsupportingde-

mandwould do nothingto help bottle-

necksatDoverorfirmsthatwerenolonger

legallyallowedtosellintotheeumarket.

Notalltypesofchickencomecheap.^7

Source: The Economist

Cripes! Almost allroadsfromherelookscary

July 2019

Gets concession

from EU

Doesn’t get

concession

from EU

Election

No-deal

looms

Parliament

triestoblock

no-deal

Referendum

Britainleaves

EUwithoutdeal

Succeeds;

government

stumped

Parliament passesdeal;

Boris triumphs

Parliament

rejects deal

Government

proroguesParliament;

nationonstreets

Optsforsnappoll

Fails

O

nly a fewyears ago London and Dub-

lin were congratulating each other on

forging a new golden age in Anglo-Irish re-

lations. Brexit has put paid to that, as a

phone call between Boris Johnson and Leo

Varadkar, the Irish prime minister, on July

30th demonstrated.

That there was no communication be-

tween Mr Johnson and Mr Varadkar for a

week after the former assumed power was

itself a symptom of the deterioration in re-

lations. When they did talk, neither

budged. Mr Varadkar insisted that the Irish

backstop—the default provision which

would allow goods to move freely over Brit-

ain’s only land border with the European

Union after Brexit—must stay. The eu, he

said, was united on the issue. Mr Johnson,

in line with the views of the hard-Brexiters,

insisted that it must go.

Very likely Mr Johnson, captured as he

has been by hard-Brexiters, would have

taken that line anyway. But his position is

complicated by his government’s reliance

in Westminster on the votes of the Demo-

cratic Unionist Party, the hardline North-

ern Irish unionists who are allergic to any-

thing that suggests the weakening of the

United Kingdom and the strengthening of

links between Northern Ireland and the

Irish government. The dupalso insists that

the backstop must go.

As though the Brexit impasse were not

bad enough in itself, it is undermining the

historic 1998 Good Friday Agreement. The

deal is already fragile. The Belfast Assem-

bly, which is at its heart, has been closed for

more than two years because of arguments

over a botched green-energy scheme, with

the result that Northern Ireland does not

have a government. Mr Johnson visited

Belfast on July 30th for talks aimed at get-

ting things back on track, without success.

But a British departure from the eu

without a deal, which seems increasingly

likely, will endanger the peace agreement

further. In the absence of a Northern Irish

government, the British government will

probably reimpose direct rule on the prov-

ince to avert or address any disruption that

a no-deal Brexit may cause. “Without it”,

said a report from the Institute for Govern-

ment published this week, “Northern Ire-

land will be left even more exposed to the

economic shocks of a no-deal Brexit than it

is currently.”

Direct rule would take Northern Ireland

right back to where it was two decades ago,

before the Good Friday Agreement. That

would further exacerbate relations be-

tween the British and Irish governments,

and would infuriate nationalists in North-

ern Ireland, where anti-London sentiment

is running high. This is partly because na-

tionalists tend to be pro-eu, and partly be-

cause they regard the Johnson govern-

ment, like that of his predecessor Theresa

May, not as an impartial arbiter but as an

ally of the dup. There are fears that vio-

lence could resume.

Mr Johnson’s priorities seem clear

enough. While his first contact with the

Irish prime minister was confined to that

15-minute phone call, he spent much of an

evening in Belfast dining with leaders of

thedup.^7

If the game of chicken ends in a crash,

Ireland is where it will happen

Northern Ireland

Vroom, vroom

Correction:In “Pastures old” in our issue of July

27th, we accidentally merged two regiments,

referring to the “regimental goat of the Royal Welsh

Guards”. It belongs to the Royal Welsh, not to the

Welsh Guards. Our apologies to both regiments,

and the goat.