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Westlake Legal Group > Free trade

Tim Morris: Freeports will be transformational, with the right approach

Tim Morris is the Chief Executive of the UK Major Ports Group.

Increasing trade and prosperity in the UK post-Brexit, or, as coined by the Prime Minister “unleashing Britain’s potential,” featured heavily in the Conservative Manifesto. Boris Johnson reiterated this commitment in his inaugural address to the country on 13th December, stating that the Government would ‘prepare for an economic package to boost British business and to lengthen [the UK’s] lead as the number one destination for overseas investment’.

A key part of this package are freeports, something the Prime Minister has expressed his personal support for in the past. With the consultation on freeports now live and the Budget soon to be announced, the Government is presented with ample opportunity to demonstrate the seriousness of its intent.

Freeports undoubtedly offer the promise, in the right circumstances, to boost post-Brexit Britain’s capability to trade with the world and to produce thousands of jobs in some of the UK’s most deprived areas, a number of which include historical Labour seats that Conservatives won in 2019. However, ensuring that the potential of the proposal is met will require decisive and carefully considered policy.

Freeports are an area, or linked area, that are subject to special rules to boost economic development, including differentiated duty treatment. These duty changes normally involve businesses avoiding onerous tariffs on imports and exports, and different models can be applied to different regions to boost specific industries. A freeport of course does not have to be a seaport. However, as 95 per cent of the UK’s trade with the world is by sea, the focus of this initiative to “boost British business” and “overseas investment” is clear.

With the UK leaving the EU, freeports have come back into focus. The UK has of course had the ability to establish freeports as an EU member- the UK had a total of seven freeports between 1984 and 2012 – and could indeed tweak duty rules today. But the opportunity now before us is to take a step change approach that this country hasn’t done before, really harnessing the potential of a full package of measures including, but certainly not limited to, duty treatment and bottom-up support. We don’t pretend that freeports are a silver bullet, and they must be part of a wider strategy to ‘level-up’ often hard-hit coastal communities all around the UK, but experience from elsewhere shows they can be transformational in the right circumstances.

Tariff and duty changes alone are not enough for long-term, sustainable success. Another vital area where Government can play a decisive role is in establishing planning rules which set out upfront the criteria for development, so locations can capture investment opportunities quickly.

Streamlined processes for approving the movement of goods for import and export will help all businesses, particularly SMEs, trade with the world more. High capacity road, rail and energy links must be in place upfront, so businesses are ready to trade straight away.

Incentives both in terms of funding and accounting treatments such as capital allowances are common across all nations battling to secure inward investment.

Finally, a strong local commitment must be central to making freeports work long-term and deliver benefits to surrounding communities, including through aligning local skills providers with the skill needs of the ‘Zone’.

We strongly believe that the adoption of these measures must be a core part of the new Government’s work. They are most powerfully combined within a freeport model, but can in fact individually bring benefits to the UK’s capacity to trade and to boost coastal communities.

Many port operators, together with local stakeholders, are interested in submitting freeports proposals. For industry and potential investors, it is crucial that the process for becoming a freeport is fair, transparent and evidence-based. Through such a process, a meaningful raft of policy and regulatory levers, as well as strong local support, we are confident that freeports and ports more generally can grow their vital contribution to the UK and all our lives.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Greg Hands: Trade policy is back, so it’s time MPs mastered the topic

Greg Hands is MP for Chelsea and Fulham, and Co-Chair of the Free Trade Parliamentary Caucus.

Many things will change in this Parliament; the importance of trade will be probably the largest and most durable shift, now that Britain has left the European Union.

Today I am launching in the House of Commons the Free Trade Parliamentary Caucus, which will seek to both make the case for free trade, and to bring expertise into Parliament to allow them to have a more informed say.

The return of Britain’s independent trade and regulatory policy presents a once in a generation opportunity to increase economic growth, strengthen our relationships with other countries and play a leadership role in promoting liberalising trade around the world.

Of course, we cannot assume that any of this will happen automatically. But one of the biggest changes brought about by Brexit will be the Government’s independent trade policy and the Parliamentary scrutiny of it.

Trade is back at the heart of government, where it should always have belonged. I was one of the founding ministers at the Department for International Trade, under Liam Fox, who was the first Cabinet Minister solely for trade since 1983. He has been ably succeeded by Liz Truss, who gives way to nobody in her enthusiasm and drive for the subject.

Trade policy is one of those cross-cutting issues which affects nearly every department. Many think that trade is all about tariffs and quotas. Those are important. But most trade negotiations are taken up by discussions over behind the border barriers – that means regulation and competition issues. In addition to the DIT, the Treasury and Department for Business are instantly involved.

There will be aspects that will affect the Home Office, too, such as the labour and migration elements of trade agreements. The working of the Irish border, and the precise details of how East-West trade between Britain and Ireland works will require careful thought and close collaboration with Irish authorities by HMRC and potentially the Northern Ireland Office.

Fishing and farming are two of the sectors most affected by leaving the EU, making the Department for the Environment, Food and Rural Affairs a major player in any trade negotiation.

The Scottish and Welsh Governments, and the Northern Ireland Assembly, will also have roles, as many of these matters are devolved (although trade policy and international treaties are clearly not).

It is well known that free and fair trade is the fastest way for developing countries to escape poverty but is unfortunately not always practiced by the developed world. The Department for International Development will soon find it has another, powerful weapon in its armoury.

Trade is a pillar of foreign affairs. Trade agreements may be legal in nature and economic in content but are often motivated by geo-politics. Japan, for instance, is motivated to sign a bilateral trade deal with the UK and for our early accession to the Comprehensive and Progress Trans-Pacific Partnership (CPTTP) trade block of 11 nations, which is partly driven by the commercial and security threat of China. They hope closer economic ties will bring a stronger relationship and greater security co-operation.

The close relationship between commerce, diplomacy and security means the Ministry of Defence is also part of the trade dialogue. And that’s even before we get to the defence procurement opportunities in trade negotiations.

We all know the NHS is off the table in any trade talks. But there will still be professional licencing to agree, along with any issues around drug patents and pricing. DCMS will have issues around domestic content restrictions, intellectual property rights and digital competition. The Department for Education will want to ensure education – one of our export success stories – continues to thrive.

So Government will have to work closely together, led by the Department for International Trade. The same is true of both Houses of Parliament.

After 47 years without our own trade policy, it is no surprise that we lack domestic expertise. There have been heroic efforts by civil servants at the DIT to master the brief, and a handful of Parliamentarians who stand out for their interest and knowledge of trade and customs policy.

But on the whole, we are reliant on British experts who learned their trade overseas, such as Shanker Singham who spent 20 years practicing trade law in the United States, or dual nationals like Crawford Falconer, New Zealand’s former Ambassador to the WTO and Chief Trade Negotiator, who joined the UK government as Chief Trade Negotiations Adviser in 2017.

There is a small, but important community of trade policy commentators at think tanks too, like Allie Renison at the Institute of Directors, David Henig at the Trade Policy Observatory and Sam Lowe at the Centre for European Reform.

Of course, trade is about much more than just trade agreements. Barriers can be analysed and reduced plurilaterally, multilaterally or bilaterally, with or without formal treaties. One thing is for sure though: MPs and Lords will be poring over the fine detail in the coming years. The Department has set a target of 80 per cent of UK trade being covered by trade agreements within three years. Priority deals include of course the EU itself, as well as the United States, Japan, Australia, New Zealand and the CPTTP.

As we enter the transition period, we face intense trade negotiations on multiple fronts and our taking back of our independent seat at the WTO. It is unprecedented for a pro-liberalising trade G7 nation to re-join the WTO with the opportunity to impact the evolution of global trade. The challenges for Ministers, civil servants and business are real. But the opportunities for our economy and our relationships around the world are considerable.

It for these reasons that I am launching a Free Trade Parliamentary Caucus with fellow MPs Suella Braverman and Mark Garnier. The Trade Caucus will be an opportunity for Parliamentarians to deepen and broaden their understanding of trade policy, discuss challenges and opportunities and advocate for free trade in the UK and globally.

We will look at the role of trade in foreign affairs, how free trade can help the world’s poorest countries and how to create high paying jobs through boosting UK exports. Whether colleagues represent a rural constituency with a significant number of farmers, a coastal constituency home to commercial fishing fleets or have a personal interest in foreign affairs, international development or the economy – trade policy matters too.

I have been heartened by the level of interest from colleagues, and hope those who cannot make it to our inaugural meeting today will join the group and get involved.

We owe it to our constituents and to the country to make a success of leaving the European Union. I hope the Free Trade Caucus will be one way of doing that.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

David Gauke: The drama of Brexit is not done yet

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

It is the morning after the night before. For most readers of this website, it is a moment of triumph as we leave the European Union. This is an historic moment: many have campaigned long and hard to deliver Brexit and it is perfectly legitimate to celebrate it.

Personally, I never had much of an emotional attachment to the European institutions or the more integrationist aspirations of some pro-Europeans, but I do believe that our prosperity and global influence will be diminished by our departure. So, forgive me, but I stayed clear of the English sparkling wine last night.

We remain a divided nation and this is not a moment where the country comes together in one shared emotion. Some sensitivity is required from all sides. Steve Baker, in particular, has been impressive in making the case that the manner of our departure should not aggravate existing divisions.

It is now time to focus on what happens next. What will our future relationship with the European Union look like? In truth, it is what we should have spent the General Election campaign debating, but did not.

The UK Government’s position for some time is that everything should be agreed before the end of the year. No extension to the Implementation Period because that wouldn’t be ‘getting Brexit done’. (You might have thought that Brexit was ‘done’, has just been done, but clearly it is a little more complicated than that).

In recent weeks, the Government has also been more explicit that its focus is on zero tariffs and zero quotas, but with ability for the UK to diverge on regulations. Alignment (dynamic or otherwise) is out of the question. After all, what is the point of Brexit if you cannot make your own rules?

It has to be said, it is a fair question. But there are some big consequences of trying to pursue ‘the point of Brexit’. Even with zero tariffs and zero quotas, you will be very far from having frictionless trade. For an advanced economy like ours, most of the costs of trade barriers relate to non-tariff barriers. Even if we land the deal we are looking for, trade with the EU will be more complicated, bureaucratic and expensive than is currently the case – as Michael Gove acknowledges. The Government’s own analysis suggests that the cost of pursuing a Canada-style free trade agreement will be 4.9 per cent of GDP in fifteen years’ time.

But won’t this give us lots of exciting new opportunities to trade with other places, especially the US? Some realism on this point would be welcome. Let us put to one side the likelihood of getting a free trade deal with every relevant country including the US; the benefit to the economy of moving from WTO terms to a good free trade agreement is not that dramatic.

The Government’s analysis is that the upside of getting a FTA with everyone else of any significance is only in the range of 0.2 to 0.7 per cent of GDP. To state the obvious, that is a lot less than 4.9 per cent.

I know, I know. Remoaners like me made these arguments in 2016 and 2019 and we lost. We did. But that doesn’t make the economic analysis wrong and it doesn’t mean that the decision to reject alignment in, for example, manufactured goods will be painless. There are people – probably quite a few of them, some of whom voted Tory for the first time in order to ‘get Brexit done’ – who will lose good jobs as a consequence of the decision to ensure we are able to set our own rules.

To be fair, there is much less of the ‘have cake and eat it’ about the Government’s new approach. There is no more of the nonsense that we will the ‘exact same access to the single market’ as we had before. There is an acceptance that there are trade-offs and if the conclusion is that sovereignty matters more than prosperity, this is the right strategy.

There is nothing much on non-tariff barriers, nothing for services, greater divergence between Great Britain and Northern Ireland (let us skirt over the issue of checks in the Irish Sea) but at least the Government knows where it stands, has Parliament behind it and can move quickly. There is no reason why this can’t be done quickly. Right?

Maybe not. At one level, a zero tariffs, zero quotas deal is very good for the EU. After all, they export a lot of goods here. It is not great if your economy is based on services or if your manufacturing industry relies on cross-border supply chains vulnerable to additional friction (in other words, it is not great for us). But surely the German car manufacturers will love it. After all, we are always being told they are on the verge of intervening to help us out.

There are two obvious difficulties. The first is that, in addition to ‘zero tariffs and zero quotas’, the EU are also focussing on ‘zero dumping’. They take a pretty broad view of what constitutes ‘dumping’ but we are immediately in the realm of Level Playing Field conditions. Workers’ rights, environmental protections, state aid. There is nothing new in this featuring in FTAs – the EU-Canada FTA has plenty of it – and that is with Canada being three thousand miles from the EU. The EU will want more extensive requirements on us than they do with Canada. It is complicated stuff, takes a while to work out and some of it will be politically sensitive. There might be some things a UK Government wants to do but won’t be able to because of the Level Playing Field provisions. Some of my former colleagues might argue this raises questions of sovereignty, accountability and democracy.

The second issue is fish. If the issue of fish stands in the way of concluding a deal, it will be the ultimate triumph of politics over economics. The fishing industry matters to those relatively small numbers directly involved both in the UK and the EU. Maybe it matters to our own self-image as an island nation but, economically, it doesn’t really matter much at all. But the fishing vote is geographically concentrated, it appears to have very high (by which I mean ‘unrealistic’) expectations of the benefits of Brexit and there is probably a widespread, sentimental sympathy for it. Finding a compromise on fish won’t be easy.

So where does that leave us? The Government has a mandate to pursue a more distant, less ambitious relationship but even though it is aiming low, it may still miss its target. Reaching a deal on fish and the Level Playing Field Provisions will be challenging. Received wisdom is that both sides will move sufficiently to get something over the line by the end of the year but the parties will find a way to maintain the status quo as we take our time to resolve outstanding matters, thus avoiding a cliff edge.

I am not so sure. Even if the issue of fish can be dealt with, the Prime Minister will need all of his persuasive qualities, a lot of political capital and considerable flexibility to land a compromise on the Level Playing Field conditions. He might question whether the political price he would have to pay to deliver a very thin FTA is really worth it after all. This doesn’t make a WTO exit at the end of 2020 the probable outcome but the risk does look under-priced. The drama of Brexit is not done yet.

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Saqib Bhatti: Openness, transparency, freedom. Lodestars for our future on the day when we leave the EU

Saqib Bhatti is MP for Meriden.

Tonight marks a new future for the UK, as we fulfill the promise every Conservative MP made in the election campaign to leave the European Union. This milestone allows us to look ahead and fully focus on the opportunities that Brexit will bring: strengthening ties with partners around the world and investing in future growth.

As someone who has run a business, and also led the Greater Birmingham Chambers of Commerce, I wholeheartedly support the Prime Minister’s commitment to ‘level up’ the UK to ensure that every corner of the country benefits from economic growth post-Brexit. And this message of ‘levelling up’ need not be constrained to the UK – Brexit will allow Britain to look beyond Europe to build and establish new trading relationships across the globe.

The first and foremost opportunity ahead of us is that offered by the Commonwealth – an important institution for our future free trade agreements which boasts thriving markets. Three of the five fastest growing economies in the world are members of the Commonwealth, meaning more potential customers, suppliers and partners for UK business.

We should be confident that there are huge opportunities outside the borders of the EU which the UK is well-placed to take advantage of, thanks to its status as a world-leading regulator and market creator. For investors, open, transparent and stable trading environments are the building blocks of leading financial markets, which is why the UK has continued to receive votes of confidence and inward investment since the referendum. Innovation in regulation and governance has been led by Britain, creating an environment where businesses and investors thrive.

Remember, we were told that Brexit would prompt an exodus of jobs from the UK to European capitals such as Paris, with estimates ranging from 30,000 to 75,000. These claims have proven to be completely unfounded, with EY calculating that only a thousand banking jobs have moved to the continent since the vote to leave the EU. Whilst much of the UK’s attractiveness is due to our pro-business environment and competitive tax system, it is also because Britain’s regulatory regime is seen as far more predictable and trustworthy by international firms compared to those on the continent.

Take the AMF – the French financial markets regulator – which is often seen as imposing protectionist policies, and unwelcoming to not only investors but even journalists who cover them. Last year, it fined Bloomberg News €5 million for publishing an article about French company Vinci based on an incorrect press release – an article retracted within half an hour of publication. Bloomberg argued that the fine was unprecedented, disproportionate and ‘risked seriously undermining the liberty of the press.’

But such actions by the AMF are not a one-off. The regulator led a four-year investigation into investment firm Muddy Waters for daring to question the accounting practices of French retailer Casino. These charges were eventually dropped, leaving Muddy Waters to criticise France as ‘an unwelcoming place for investors who are also whistle-blowers’. Looking forward, the French Government is about to introduce new regulations which will make it more difficult for overseas firms to invest in what it deems to be sectors of “strategic importance” such as Artificial Intelligence.

This unpredictable behaviour from regulators sends alarm bells ringing in those firms considering operations in France. There has been much talk from Paris about overtaking London as Europe’s financial centre, but such a hostile approach to market activity from the AMF only weakens this ambition. Indeed, it’s no wonder that UN trade data shows the UK has retained its position as the top destination in Europe for FDI, with inward investment into Britain by the end of 2018 worth $1.89 trillion (£1.48 trillion), more than Germany ($939 billion) and France ($825 billion) combined.

So if we are to attract investment from our Commonwealth partners and forge new trading links, the UK must maintain our pro-enterprise agenda to cement our status as being a place where both businesses and investors can thrive. This will set ourselves apart from regulatory regimes on the continent that are becoming more insular by placing greater burdens and restrictions on businesses, and which could well influence the future direction of EU-wide regulations. Falling into the trap of becoming too interventionist, like the AMF, will only serve to do more harm than good in the long run. By becoming a champion of free trade and a reliable friend to business, this Conservative Government can harness Brexit to truly unleash Britain’s potential.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

David Gauke: As a non-Tory at the last election, my worry is that this Government won’t be Conservative enough

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

The Government’s objective for the first 50 days of this Parliament is easily identified – passing the Withdrawal Agreement Bill and leaving the EU. In many senses, the nature of the next Government will only become clear once we move beyond that, but we are getting some indications as to where it is going.

It may not come as a total surprise to you that I have one or two concerns. After all, I had the Conservative whip withdrawn, I resigned my party membership, stood as an Independent and argued that the country should not return a Tory majority. And my concerns? That this Government might not be Conservative enough.

The Prime Minister described himself as ‘a Brexity Hezza’. However oxymoronic that phrase may be, it is an interesting insight.

Michael Heseltine is a great man. He served with great distinction in a number of Cabinet roles and his commitment to ensuring that the entire country can prosper is something that the Government is right to try to emulate.

I also owe him a particular debt – he kindly endorsed me in the general election and spoke on my behalf. At the age of 86, he remains one of the best public speakers in the country. When he speaks, people should listen. (I would argue that a few more people listening to him in South West Hertfordshire in December would have been particularly desirable.)

But just as the views and actions of Margaret Thatcher have often been over-simplified and misunderstood, claiming the mantle of ‘Hezza’ does not justify the abandonment of all Conservative orthodoxy.

Let us take four characteristics that ran through the approaches of the Governments in which Thatcher and Heseltine served. In each case, there is at least a doubt that Johnson Government will observe the same approach.

First, fiscal conservatism. Thatcher’s Government placed greater emphasis on reducing borrowing than cutting taxes or increasing spending. The tax burden rose in the years after 1979 and public spending was tightly controlled.

The current Government’s commitment is, as yet, less clear. Sajid Javid won an important battle to ensure that there were fiscal rules within the manifesto, but there were also plenty of spending and tax commitments. Given the expensive demographic pressures on the public finances that the country faces, plus the significant short term risks for the economy because of Brexit, a fiscally prudent Budget on March 11 would be sensible. It doesn’t look inevitable.

Second, as well as ensuring that we only spend what we can afford, we should also spend it wisely. The taxpayer is entitled to expect that a Conservative government, in particular, extracts good value for money. That should mean focusing on outputs not inputs and, where there are areas of significant increases in public spending, these should be matched by significant public sector reforms.  During the campaign, we heard more about extra spending or extra people but, in delivering on those pledges, it is essential that additional resources are deployed as effectively and efficiently as possible. We need to hear more about this.

As for changing the rules on infrastructure expenditure so that more is spent in the north of England, there is a good case for it. But those rules shouldn’t be replaced by a free-for-all whereby multi-billion projects are determined on the basis of ministerial whim. Rigour and the need for value-for-money must remain at the heart of all these decisions.

Third, be wary of supporting uneconomic businesses. Of course, there was a divergence between the Thatcher and Heseltine approaches to intervening in the economy but let us not forget that it was Heseltine who was prepared to close loss-making pits.

As a former Chief Secretary to the Treasury, I am uneasy about the bail-out of Flybe. Yes, it is not unheard of for a business to be given ‘time-to-pay’ their tax liabilities and, yes, regional connectivity is a legitimate policy objective. But every time a private business is bailed out by the taxpayer, the pressure grows the next time there is a potential insolvency. There is a case to be made for an interventionist industrial policy, even if that means ‘picking winners’ but the political imperative is very often on government to ‘pick losers’ – in other words, preserve loss-making ‘zombie’ businesses.

This issue may become particularly acute as the year goes on. Even if we get a deal with the EU, the Government clearly wants the ability to diverge from the EU, and there is no more talk of ‘frictionless trade’ with the EU – merely ‘zero tariffs and zero quotas’, which is a very different thing. This will mean that those businesses with complex supply chains face very considerable problems. It would be naïve to assume that this won’t threaten the viability of many businesses.

And, by the way, the risk of a WTO Brexit at the end of 2020 is, in my view, significantly under-priced. I will return to that issue in greater detail in future.

I mention this not just to antagonise those ConservativeHome readers who continue to question why I am allowed to write on this website. It is to make the point that there could be quite a lot of businesses for whom the adjustment to our glorious post-Brexit future will be painful. Some of them won’t be able to make it, not without some taxpayer support. Some of them might be able to make it but quite fancy a piece of the action if the Government is in the habit of providing financial support.

Of course, they will all say it is temporary and as long as the Government is sufficiently far-sighted, there will be no need to lay-off thousands of workers located in newly marginal seats. Nice little Conservative constituency you’ve got there, Prime Minister, we wouldn’t want anything nasty to happen here, would we?

So for the sake of the taxpayer, the Government should tread warily in bailing out businesses. The more you do it, the harder it is to stop. And the pressures in the next year or so may be immense.

There is a fourth attribute common to both Margaret Thatcher and Michael Heseltine – a belief in free trade. As with every major Conservative figure for generations, they recognised that removing trade barriers is of enormous benefit to businesses who are able to export and consumers who can better access imports. The increased competition brought by reducing trade barriers helps economies become more efficient and drives up productivity. We saw this in the 1980s when the consequences of membership of the Common Market played through and inefficient UK companies were driven out of business by European competitors, and efficient UK businesses were able to expand because of access to European markets.

Evidently, this country is about to go in the opposite direction. Departure from the Single Market and the Customs Union will inevitably result in increased trade barriers with the EU. Regulatory divergence will increase those barriers yet further. Pretending that this can be fully compensated for by entering into trade deals with other countries is, sadly, delusional.

Margaret Thatcher once said that the facts of life are conservative. I might no longer be a member of the Conservative Party, but I think this is broadly right. The public finances have to be sustainable. Taxpayers’ money should be spent wisely. By and large, the market and not government should determine which businesses survive. Free trade is a driver for prosperity.

The Conservative Party has changed. It is a change that has enabled it to win a large majority. But the economic facts of life remain the same. I hope the Government will remember that.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Edward Parson: Keep the International Development Department. But scrap the 0.7 per cent aid target.

Edward Parson is a former Sevenoaks District Councillor and International Development Consultant, and contested North Durham at the 2019 General Election

At the height of election fever in December, there were mooted reports of a Whitehall shakeup – this included a possible merger of DFID with the Foreign Office, but more recent reporting suggests a reversal. This article will highlight why DFID should be kept intact as a separate Department, and why it is more important than ever to protect the aid budget.

Keeping DFID as a separate department

Whilst Britain spends £14 billion (2017) on overseas aid, 30 per cent of the aid budget is now spent outside of DFID, with departments like the Foreign Office taking an increasing portion under its control.

As a consultant, I supported aid work with both departments, and found that DFID managed its portfolio with far greater efficiency and scrutiny than the FCO. This view is supported by a National Audit Office report which found the lack of transparency in departments outside of DFID gave uncertainty that UK aid was being used effectively.

Official Development Assistance (ODA) spending requires specialist knowledge and tools to ensure public money is dispensed overseas in the best way. DFID has had many years to hone this model, maintaining a focus on outcomes rather than process.

However, to continue as a separate department, DFID should improve how it aligns traditional aid objectives with Britain’s strategic goals. Part of the reason that the aid budget is being hived off from direct DFID control is for other departments to spend aid in a non-traditional way.

The Conflict, Stability and Security Fund is a good example of such a hybrid model, combining typical aid outcomes such as global peace and prosperity with UK national security objectives. There is no reason why DFID can’t adopt this mind-set wholesale, ensuring that aid spending always works to benefit Britain and the recipient state. This measure would help DFID to take back control of the aid budget, permitting the high levels of transparency and scrutiny that come with it.

Preserving our ODA Spend

An even greater reason to commit to DFID and its funding is for the supporting role it plays in enabling strong foreign policy. This role will be critical as we leave the EU, and is broken down into three aspects:

  • Soft power: It is becoming less common for our aid to be “tied” (conditional on political reform) and this is a good thing. Despite this, aid still helps to open doors and engenders goodwill in the beneficiary state. This allows us to exercise influence and support the important diplomatic work of the Foreign Office. Aid can also be applied more directly to instigate positive overseas reform. For example, using aid to lead investment in sustainable solutions which tackle global environmental challenges.
  • Trade: With Britain leaving the EU, we will have an independent trade policy for the first time in decades. In order to develop strong trading relationships, we’ll rely on free and fair markets, which can be facilitated through a concept known as ‘Secondary Benefits’. The idea is that by developing overseas economies we open up markets in which to do business – an approach that’s been championed by Alok Sharma. Secondary Benefits also emerge incidentally during the implementation of aid programmes. For example, an aid funded health programme could be leveraged to sell NHS expertise, within or beyond the scope of that particular programme.
  • Global Leadership: The UK still operates at the top table of international affairs, and this comes with certain responsibilities. The UK sets a high bar in giving generously to less well off states and we must think about the example we would set in abandoning our serious commitment to aid. Furthermore, much of our aid has a subsidiary effect of promoting our closest held values, such as democracy, the rule of law, and equality. These beliefs are by no means globally ubiquitous, and we face a challenge from countries like China and Russia aiming to spread their own contravening set of values. China, in particular, has been accused of rigging their aid, creating one sided conditional arrangements that aim to politically or economically exploit less developed countries. We must contrast this, by offering a fairer option for vulnerable nations in need of help.

Removing the 0.7 per cent overseas aid pledge

These points could appear obvious, but need reinforcing to illustrate the important and sometimes neglected benefits of retaining our leading position on aid. However, this does not mean to say we should preserve the model as it is.

We pledge to spend 0.7 per cent of GDP on aid, which is an arbitrary amount devised over 50 years ago based on a suggestion by the World Council of Churches. More than anything, this pledge is rigid and makes it difficult to cancel failing and wasteful projects.

We must replace this target with an outcomes-based budget, which focuses on what we want to/can achieve, rather than how much we want to spend. This could mean spending more than 0.7 per cent in some years and less in others, based on what our goals are and what’s achievable at that point in time.

Overall, DFID must continue specialising in the dispensation of aid, with the resources and Cabinet level representation that an independent department provides. Equally, our strong commitment to aid should be unwavering, as an integral arm of our foreign policy.

However, we must devise a replacement for the 0.7 per cent GDP target and make our aid as mutually beneficial as possible. This will ensure the most efficient use of public resources, and help guarantee popular support for this vital work.

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Tom Tugendhat: The three foreign policy actions that Johnson should take now that he has this huge majority

Tom Tugendhat is MP for Tonbridge and Malling and is one of the leaders of the One Nation Group.

The moment a revolution happens is often only clear with hindsight. Last week’s landslide needs no time for review. It was a lightning bolt releasing an energy that has jolted Parliament and our country into action – and could kickstart new partnerships around the world.

For the first time in a political generation, the UK has a leader able to make a mark on the world. With a five-year term looking certain, a voice tested on the G7, the EU and NATO, and with the ability to legislate others can only dream of, Boris Johnson is positioned to achieve what he has previously only spoken about: Global Britain.

He now has the mandate to act to make this more than a slogan.

 Over the coming months many will focus – rightly – on the EU trade talks. They are going to determine much of the change that is coming to our economy and the relationships our businesses build with the world.

But despite its proximity and economic weight, it won’t be in Brussels that our future is written, but here in London. How we decide to act will shape our future.  

To harness the storm, there are three things we should do now.

The first is to build a new partnership of democratic powers. The creation of a new alliance of those orbiting between the might of the US or China would see mid-sized democratic nations – the Mid-Dems – defend the rule law and economic system that has made us largely prosperous and peaceful since the Second World War. As newly freed-spirits, we can lead a new way of working together. On defence, there is no doubt that our American alliance is the underpinning of our sovereignty, but on trade? That’s where China’s importance grows.

China poses its own challenges. We want closer trade relationships, but the absence of the rule of law, the undermining of civil liberties, the lack of respect for intellectual property and more, leaves little chance to freely exchange ideas and deepen relationships.

That’s why a networked alliance is what we should be looking for. Together with other Mid-Dem countries, such as  Australia, Chile, Germany, France, South Korea and Japan, we can build a partnership to defend the rules that have made us all stronger, working together on climate change, and protecting us all against the whims of powers more inclined to use leverage than law.

Working together would help reawaken many of the existing institutions. In the United Nations, for example, where the US has played less of a role than many of her allies would like, China has become dominant. Buying votes on UN bodies like the Food and Agriculture Organisation may not sound a good investment until you factor in the influence it has on UN members dependent on aid who will be voting in the upcoming ballot to lead the World Intellectual Property Organisation.

As companies like Vodafone know well, WIPO controls international use of frequencies that modern technology relies on, and sets the norms to prevent the IP thefts now normal in China. Beijing is slowly taking control of the existing international order as America steps away. We need to work with like-minded states to protect what matters and contain what doesn’t.

As well as new partnerships, we should join existing bodies, like the TPP.  Opening talks with the members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, as the new club of 11 states was recently renamed, would expand our horizons. Setting a new trade agenda without aiming for the harmonisation of the European Union will give us reach. Though the geography sounds distant, shipping costs are near historic lows, and our alliance with countries from Mexico to Japan, who have already invited us to join, would build on existing trading relationships and demonstrate to suitors that Britain has options.

That’s the only way we’ll get the deals we need. If we look like beggars, we’ll get crumbs and would be selling ourselves short. We have a huge market, a skilled workforce and some of the most innovative technology in the world, matched with the rule of law and the firm expectation of five years of stable government. So we’re in a stronger position than anyone to benefit from the network building TPP.

The third decision we must take is to invest in ourselves. A house divided makes easy prey for other and the fractures in the United Kingdom are clear for all to see. That’s why the One Nation agenda is so important. Uniting our country so that we’re more than a city state of London with a UK hinterland is essential to everything we seek to achieve. Investment in rail, road, communications and education are as essential to our future prosperity as reforming the Foreign Office.

The new strategic policy review could bring all this together. For the first time in decades the levers of British influence – defence, diplomacy, aid and trade – could sit alongside domestic efforts in education and infrastructure to give the Prime Minister the strength to act.

While Emmanuel Macron has pension problems and a looming election, Donald Trump is going through impeachment and a coming poll, and Angela Merkel has already announced her resignation, Johnson can look out with confidence at the coming five years certain his majority and with a more distant horizon than any of his global peers makes.

This is a chance Britain can grasp to shape not just our home but our world. I’m confident that the Prime Minister can bring his words to life and make Britain global again.

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Dean Godson: What Johnson should do now in this Government’s first hundred days

Dean Godson is Director of Policy Exchange.

How does a newly re-ascendant Conservative Government maintain the momentum of the greatest electoral success since Margaret Thatcher’s triumph over Michael Foot in 1983?

This is the question posed and answered in a new Policy Exchange briefing paper, The First Hundred Days – published today with a foreword by John Howard, the former Australian Prime Minister. Howard is of course a great friend to the United Kingdom and a leading light in the broad “Conservative international”; he is always willing to offer solidarity and counsel to the global centre-right. He greatly admires Boris Johnson, and this is reciprocated.

His words are of particular interest since this is the golden era of the Australian way in UK politics – witness the leading roles of Lynton Crosby and Isaac Levido in successive Conservative election campaigns. Few, if any, American political consultants have enjoyed comparable influence in British elections.

Early on in the Conservative leadership race this summer, Crosby addressed Policy Exchange to invoke the example of the great Robert Menzies, the Australian Liberal Prime Minister whose leadership spanned the 1930s and 1960s – and who spoke of “the forgotten people”. If ever there was an election for the forgotten man and woman in Britain, this was surely it.

But how to make the bond between Johnson’s Conservatives and the “forgotten people” permanent? How to forge this into a governing programme?

In his foreword, Howard praises Johnson’s leadership skills and notes that he connected to wide sections of the British public by giving people hope during the election campaign. He also urges him to “seize the moment” – to take advantage of his new power in Parliament to implement the ideas and promises contained in the Conservative manifesto. Prime Ministers who don’t move fast to take advantage of electoral triumphs regret it, he notes.

The First Hundred Days offers a roadmap for how to do just that – across our four key research themes of Prosperity, Place, People and Patriotism. It reflects the content of the winning manifesto and builds on the theme of a new national consensus, as there seems to be on getting Brexit done among other issues.

There are some simple things that need doing. We need a date for a Budget. Local authorities in devolved countries cannot set their budgets until devolved governments have set theirs; devolved governments cannot set their budget until the UK Government has done so.

There are bigger themes too. Drawing on the research paper of last summer, Modernising the United Kingdom – a landmark in think tank terms – we urge the Government to publish its English Devolution White Paper and bring forward its National Infrastructure Strategy, focusing on cross-border projects as well as connectivity within the four nations of the Union. It is clear that levelling up the United Kingdom, so that London does not leave the regions behind, will involve – as Howard puts it – “stepping forward with the right investment in transport and other infrastructure where needed… but stepping back so that decisions are not always imposed from the top by central government”.

There are opportunities in housing and planning policy too – not just to overcome Nimbyism by building beautiful homes and places, but to provide some public sector workers, such as police officers and nurses, with affordable key worker housing. As a chapter on housing, outlines, the Government should announce that the next Affordable Homes programme will allocate more capital grant funding to schemes that provide a significant proportion of submarket rental homes for local key workers.

Science, as the Prime Minister made clear in his early speeches on the steps of Downing Street and in Manchester, will be a priority for this Government. We outline how a Defence Advanced Researcy Projects Agency-style agency, for high-risk, high-payoff research – at arms-length from ministers – can be created in shadow form within months at UK Research and Innovation, with funding from April next year, while a Bill creates the genuine Advanced Research Projects Agency.

The chapters on the constitution explain that the Government will need to do more than simply repeal the Fixed Term Parliaments Act in order to restore constitutional norms in Parliament. A new Bill will have to show that it is clear that the Prime Minister (subject to the Sovereign’s approval) is to have the ultimate responsibility to dissolve Parliament and call a general election. The Constitution, Democracy and Rights Commission must be set up quickly as well. But it should not mean delaying, for example, the amending of the Human Rights Act to protect UK forces from a sustained and illegitimate legal assault in the form of lawfare.

There are more fronts that can be opened within the first hundred days. There is a chance for the greenest budget ever, by announcing seed funding for three new British battery gigafactories, to accelerate conversion from fossil-fuelled vehicles to electric vehicles. The Government could protect academic freedom and free speech on campuses, with a Bill to establish beyond doubt in law that academic freedom means that opinions and speakers considered unwelcome by a small number of students cannot simply be banned or no-platformed. With an eye to 1st February, when we should have left the EU, the Government could also start negotiations to enter into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (an idea supported explicitly by Howard).

The good news is that, although the Tories have a parliamentary majority comparable to 1983 or 1987, they have in Number 10 Downing Street a sharper team of policy experts than Margaret Thatcher did. Whether or not there are calls for a new Department of the Prime Minister – as there were in the early 1980s – it is clear that this policy operation will be central to this Government’s reforming agenda. It has its work cut out for the next 100 days but the stunning election result gives it a strong mandate for its mission of modernisation and consensus-building.

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Stephen Booth: An inconvenient truth for Remainers and Leavers alike. This was the result that the EU wanted.

Stephen Booth is Acting Director of Open Europe.

What will Brussels, Berlin and Paris make of Thursday’s momentous UK election result? There may be mixed feelings induced by the realisation that Brexit is definitely going to happen. But the overriding emotion is likely to be one of relief that the UK has finally reached a settled decision to leave. Leo Varadkar summed it up by saying, “I think it’s a positive thing that we have a decisive outcome in Britain.”

The clarity of the result and the breathing space offered by a sizeable majority may have increased the chances of the UK and the EU reaching a new trade deal, but neither side’s red lines are likely to change substantially. Therefore, in my view, a looser UK-EU economic relationship, rather than a pivot towards a “softer” Brexit, remains the most probable outcome.

It has been popular among many commentators to deride the campaign slogan “Get Brexit Done!” by noting that key UK-EU negotiations are yet to come and that, given the EU is unlikely to disappear anytime soon, Brexit will be never-ending.

Of course, there is still much left to do, and our relationship with Europe could never be “settled” in a one-shot deal. However, we should not underestimate the consequences of bringing the first phase of Brexit to a conclusion.

Over the past three and half years, without a solid parliamentary majority for any course of action, the UK spent more time negotiating with itself than with the EU. The size of Boris Johnson’s majority undoubtedly gives him much more flexibility, although the election results in Scotland and Northern Ireland illustrate that simmering tensions within the Union may yet play an important role over the course of this parliament.

To the relief of many, including in the EU, parliamentary process will no longer be at the centre of the Brexit action in anything like the same way. Once the formalities of passing the Withdrawal Agreement Bill are out of the way in the coming weeks, the future UK-EU relationship will become primarily a matter for negotiation between the UK government and the EU.

The Government will also have greater capacity to act in other areas directly or indirectly linked to Brexit, such as trade negotiations with non-EU countries and crafting a new UK immigration policy. Equally, having now secured the means to implement the 2016 Brexit vote, the Conservative Party will now need to craft a compelling narrative of what Brexit is actually for, which was conspicuously absent from this election campaign.

Some are suggesting Johnson’s new-found room for manoeuvre will enable Johnson to “ditch the ERG” in favour of an extension to the transition period, and a “softer”, “deeper” UK-EU relationship. This assumption is likely to be mistaken. Firstly, asking for an extension in June 2020 would not only mean breaking a campaign promise, but once again entering into arduous negotiations with the EU about money, and fish, without a guarantee of a trade agreement in return.

Secondly, a softer Brexit, and the degree of alignment with EU rules that would require, is at odds with what we know about Johnson’s own strong preference for divergence. Just as importantly, the EU has framed Brexit as a binary choice between a high alignment, high market access relationship (like Norway) and a low alignment, low access relationship (like Canada).

The EU shows no signs of fundamentally altering its offer to the UK, whether the negotiations take place over 11 months or two years. In addition, even if it was tempted by the prospect, Brussels will not be able to count on a “reverse Brexit”, or even “soft Brexit”, faction in Parliament to put pressure on the government to soften its negotiating position.  It is easy to see where the path of least resistance lies.

This is not to say it will all be plain sailing. Within the broad parameters of a “Canada-style” deal, detailed technical negotiations will be important in determining the eventual balance of market access versus obligations on the so-called level playing field. But the details of UK-EU rules of origin for goods, however important, are unlikely to grip the media and the country in the same way as whether Brexit will actually happen or not.

Brussels may be relieved that it now has a stable negotiating partner in London. However, the EU has yet to fully wrestle with the implications of Brexit and what its ideal long-term outcome is. When things get difficult within the EU, the lowest common denominator often prevails and flexibility can be in short supply.

Foreign policy and geopolitics could also play a greater role in the UK-EU negotiations in the next phase, representing the second pillar of a new “grand bargain”. Emmanuel Macron’s mooted new, intergovernmental “European Security Council” is not only borne of his frustration with the EU’s impotence on foreign policy; it appears specifically designed as a means of enabling the UK to remain within the “European orbit” on major international issues. The UK might well ask that it gets something in return if it is to ensure the success of such a venture.

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David Gauke: An election won. But a year on: “You promised us you’d get Brexit done, but all we hear about is Brexit”

David Gauke is a former Lord Chancellor and Justice Secretary.

November 2020. An all-day Cabinet Meeting had concluded. The decision had been reached and an anxious Prime Minister was preparing to address the nation from the Downing Street lectern. The meeting could have gone worse – only three resignations – but there was no concealing the fact that the Prime Minister and the Government were in a tight spot. The honeymoon had finally come to an end.

Prime Minister Boris Johnson had had a good few months. He was the first leader of the Conservative Party since Margaret Thatcher to win a comfortable majority last December. Even though he had lost a few seats in London and the Home Counties (one particularly eye-catching shock in Hertfordshire), the fear of Corbyn and a desire to ‘get Brexit done’ had been enough to breach the red wall and return a majority of over 30.

His Withdrawal Agreement Bill had been rushed through Parliament and, on 31 January, the UK finally left the European Union. It was a moment of great historical significancem even if the moment itself was much of an anti-climax. After all, the terms of the implementation period meant that nothing very much changed on 1 February.

Labour and the Liberal Democrats, although receiving a majority of the votes between them in last year’s general election, had entered into a period of introspection. A few elder statesmen warned of the consequences of leaving the EU on the terms agreed, but no one was listening. After all, the people had spoken in both a referendum and a general election. Who cared what a few out of touch Jeremiahs had to say?

That spring, the economy continued to drift on comfortably enough. It is true that the oft-promised tidal wave of investment that was supposed to flood the country did not materialise (after all, investors wanted to know about the future relationship), but many businesses remained sanguine that, now that Brexit had been delivered, the Prime Minister would pivot to finding a sensible accommodation with the EU.

The Prime Minister had said that he would get a comprehensive free trade agreement before the Implementation Period expired, but would not extend the Implementation Period beyond 31 December 2020. There was more than a little scepticism about this position and some confidence that these were pledges not to be taken literally.

At least, that was the position until the political excitements of May. Alarmed at the lack of progress towards reaching a free trade agreement, sources close to Sajid Javid had suggested to The Times that ‘EU intransigence’ meant that it may be necessary to extend the Implementation Period by 12 months.

The reaction soon put paid to that idea. Within hours, a letter of objection had been submitted by 25 newly elected Conservative MPs – all of whom had become members of the ERG – pointing out that they had won their seats on the basis of ‘getting Brexit done’ and that ‘extending vassalage wasn’t getting Brexit done’. Senior Cabinet Ministers briefed that they would resign rather than allow the Implementation Period to be extended. Lord Farage threatened to form a new party.

By the end of the day, the Chancellor had made it abundantly clear that he was resolutely opposed to any extension of the Implementation Period and that he had not authorised any briefing to the contrary. The pound fell.

Progress towards a trade deal remained slow throughout the summer. The UK said that a deal should be easy because the parties began the process aligned on a large range of matters. The EU pointed out this was all very well if the intention was for both parties to remain aligned. An agreement could be quickly agreed if the UK accepted ‘dynamic alignment with EU regulations’. The Prime Minister said that this didn’t constitute Brexit.

The EU also offered a ‘barebones’ deal, but it required all sorts of concessions from the UK that appeared politically impossible. The French made some threatening noises about fish; Scottish Conservatives MP (who had happily seen off the SNP last year) demanded that our fishermen should not be betrayed; the Prime Minister deployed the Royal Navy, the practical purposes for which were not entirely clear.

Meanwhile, discussions with the US about a free trade deal had run into the ground. The Prime Minister won much praise for robustly dismissing demands from the US for acceptance of their food standards and increased drug prices. Donald Trump said that the Prime Minister had been ‘very, very mean’ and withdrew an invitation to the Prime Minister to visit Washington. None of this did the Prime Minister any harm with the public, although he was forced to admit that no progress was going to be made in reaching an FTA with the US until after the Presidential election.

The Opposition made a push towards extending the Implementation Period in June but Johnson saw off all Parliamentary manoeuvres with ease. He had the numbers. And he remained confident that a trade deal was in sight. The markets were not so sure. The pound fell.

Party conference was a triumph. It is true that the economy seemed to show signs of slowing as uncertainty grew. Clearly, Brexit had not been entirely ‘done’ but the Prime Minister delivered a barnstorming speech attacking the European Union for being cumbersome and bureaucratic, and that its delays in signing up to an agreement just demonstrated how right we were to escape the clutches of this sclerotic entity. The audience loved it. And the pound fell.

Post-conference, the mood began to change. Inflation picked up as the consequences of the depreciation in sterling worked its way through the system. Living standards were starting to fall; business investment was now falling fast.
Much of the country blamed the EU for the failure to reach an agreement. But much of the country did not. ‘Get Brexit done’ was now a phrase only used ironically.

A clip of the Prime Minister being harangued by an angry first-time Conservative voter from Wakefield went viral. “You promised us you’d get Brexit done but all we hear about is Brexit”, Johnson was told. “Why should I ever trust you Tories again?” To be fair, it was the only interrogation the Prime Minister had received for some weeks after he had declined broadcast interviews for weeks.

Not long afterwards, the deadlock in the EU negotiations was broken. The UK had been curiously reluctant to set out its positive demands for an FTA and it was left to the EU to take the initiative. It brought back the proposal was a ‘barebones’ agreement. It addressed tariffs and quotas which mattered to the EU.

But it did nothing for services, left the UK as rule takers in a host of areas and, when it came to fish, required that the demands of the French and others were accepted in full.

‘What else are you going to do?, the Prime Minister was asked after a testy exchange with the President of the European Commission. ‘You have weeks left before the Implementation Period comes to an end. This is the deal. Sign it or Great Britain leaves on WTO terms.’

That takes us to our emergency Cabinet meeting. So what does the Prime Minister do? Agree to a deal that, on any fair assessment, gives the EU all that it wants but fails to deliver any of the UK’s negotiating objectives. Or leave on WTO terms having, one year previously, acceded to the EU’s objectives on the divorce payment, citizens’ rights and Northern Ireland.

Two very bad options. The Treasury advises that the economic hit of both choices will be considerable but that, in this case, a bad deal will be better than no deal. Politically, the Prime Minister ponders whether he could sell such a deal as a triumph. It evidently isn’t a triumph, but that hasn’t always stopped him in the past.

Either way, the honeymoon is properly over. A general election may have been won on promises to put Brexit behind us and move on, that getting a comprehensive free trade agreement would be easily achieved and that our post-Brexit future would be filled with opportunities to trade with the rest of the world. A year later, those promises collide with reality. There is a price to be paid.

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