Sunak’s Brexit problems run deeper than ‘Swiss deal’ rumours

Almost three years after the UK left the EU, battles over what Brexit means in practice are still raging in the background.

Whether it’s the Northern Ireland protocol bill, the unresolved issues with the EU retention law or the debate over what to do with migration, Brexit has never been ‘really’ done, despite being pushed off the front pages.

The problem for Rishi Sunak is that the Brexit debacle could now take decisive center stage as reports suggest the government is preparing a bespoke ‘Swiss-style’ deal with the EU.

The Swiss model would see the UK gain additional access to the single market in exchange for liberalizing EU migration, payments to the EU budget and more oversight by the European Court of Justice.

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The reports led to fierce protests from the ERG and strong denials from the government.

But it’s worth looking at the bigger picture here.

There have been a number of headlines in the past week that cast the quality of Britain’s post-EU economic picture in a difficult light. First came George Eustice’s vicious attack on the UK-Australia free trade deal, then came the OBR’s comments that Brexit was having a “significant adverse effect” on UK trade, and finally YouGov A poll shows that one in five people who voted for Brexit now think it was the wrong decision.

As each story unfolded, it became clearer and clearer that Brexit and its fallout are still very much alive. Sunak’s view that Brexit has “delivered” for the British people is under serious attack.

Brexit-skepticism behind the autumn statement

The financial turbulence caused by the mini-budget has raised the UK’s post-Brexit economic picture to levels not seen since 2016.

Truss’ new economic proposals were about creating an economic niche for the UK as a post-Brexit low-tax, low-regulation hub: what supporters call a “Singapore-on-Thames”.

In constructing his package, Truss prided himself on disregarding the received wisdom of the British establishment. The opposition of the “Blob” and the market swings really proved that his strategy worked. Britain’s sluggish financial regime was being shaken to its core – after all, Truss would think, a Brexit-rich golden economic age is upon us.

But the explosion of Trussonomics shattered the dream of “Singapore-on-Thames”. Brexiteers, whose low-tax, low-regulation vision is the central dream that inspired their Euroscepticism, recoiled from the market’s scathing indictment.

How will the UK now implement and exercise its post-Brexit sovereignty?

As the mini-budget was carefully and deliberately set aside by Jeremy Hunt last Thursday, it was clear that the chancellor wanted to return to a simpler economic time: before Johnson, before Truss and before Brexit.

The party will not sidestep the advice or the infamous “short cuts” that angered Michael Gove during the referendum campaign. In this bittersweet lesson in financial prudence, Jeremy Hunt just couldn’t get enough of the experts!

Ultimately, the autumn statement amounted to an admission that the Trussite rationale behind Britain’s exit from the EU was ill-conceived. Austerity is back – Brexit possibilities be damned.

No wonder insiders are pointing fingers at the treasury for the source of the ‘Swiss deal’ leak. Indeed, when asked on Friday whether rejoining the single market would boost growth, Hunt said “unrestricted trade” was “very beneficial”.

But leak or not, it is clear that the chancellor is more Brexit-sceptic about Britain’s economic situation – a stark contrast to the pro-Brexit attitudes of Johnson and Truss.

Many Brexiteers are not happy.

Angry ERG

Over the past 30 years, the European Research Group (ERG) has exerted considerable influence on the Conservative party, pushing successive prime ministers to adopt tougher and more flexible positions on Europe.

Predictably, the “party within the party” is not happy to learn that the government plans to end Britain’s economic ties with the EU.

responds to Sunday Times ERG leader Iain Duncan Smith said: “The chancellor himself needs to slap this story down, it should never have happened, and if he meant it, he needs to understand what it means to the government.”

It’s clear where IDS thinks the story is coming from.

The ERG was also one of Truss’ strongest supporters over the summer – expecting the then foreign secretary to deliver post-Brexit opportunities and pave the way for a “Singapore-on-Thames”.

So in a post-Truss world, ERG is looking for purpose. The group reportedly couldn’t decide between Penny Mordaunt and Sunak when it came time to replace her.

But Brexit purity is the ERG’s specialty, and the “Swiss Deal” leak has created some enthusiasm for the group’s pro-Brexit bloodstream. Immediately, the organization met on Monday afternoon. I imagine that softening the government’s stance on Brexit was on the agenda.

Fishy Rishi

For veterans of the 2016-2019 Brexit battles Sunday Times troop will have created unwanted flashbacks to Theresa May’s failed Czech deal. As one ERG member commented: “Effectively, this is Theresa May’s rejected deal by another name.”

A well-known adviser of the May administration also made this comparison on Twitter: “Switzerland without freedom of movement is basically a check.” We tried it. A lot”. Indeed, the scale of opposition to the Checkers deal in 2018 was so great that any attempt to revive its proposals or try something similar is surely doomed.

However, there is a question about Sunak’s position here, having voted for the Checkers deal all three times as a junior minister during May’s tenure.

Sunak has always been more at home with the CBI than the ERG, and the suspicions of pro-Brexit elements of the Conservative party show this. The prime minister is no ideologue and his technocratic leanings understandably terrify the more dogmatic corners of the party tent.

So while any form of Checkers 2.0 is unlikely to be brought back, it is highly unlikely that Sunak will advocate for closer trade ties with the EU. In any case, expect noise from both Brexiteers inside and without party after that.

The Farage factor

It is worth recalling that the Conservative party’s approach to Brexit during the period 2016-2019 was conditioned and shaped by the Faraqist threat on the right.

After the UK left the EU, this threat subsided, but it never went away. As a starting anchor GB News, Farage was able to both put populist pressure on Conservative prime ministers and at the same time insist that he was resigning from frontline politics. Very clever stuff indeed.

But the truth is that Farage has never been far from a full-fledged comeback. And there will be few happier than that Sunday Times More so than the former UKIP leader. The routine is familiar: shout “crisis” and “Brexit treason” and signal a comeback tour to “crush” the Tories once and for all.

Farage found out Sun: “I’m not ruling anything out… If they really betray Brexit, I have to do something.”

But even without Farage, the existence of parties such as UK Reform and Reclaim means there is no shortage of potential political homes for disaffected Brexiters. Sunak will have to be careful. Around 840 people have already joined Reform UK since Hunt made his autumn statement on Thursday – and more will no doubt come if Brexiteers feel the Prime Minister is indeed soft on Brexit.

What’s next for Brexit?

The “European question” has always caused political difficulties, especially for conservative prime ministers. The difference now is that Brexit had to be resolved. The main challenge for Conservative politicians is therefore not Brexit ‘fatigue’, but a strong public backlash against the party repeating old arguments and opening old wounds.

Unfortunately for the Prime Minister, a Brexit showdown looks increasingly inevitable.

The economic situation will lead to calls from the left of his party (which apparently includes his chancellor) for closer economic ties with the EU. But on the right of the party, ERG members will want to go back to Boris Johnson’s optimistic, bluff Brexiteers. In times of economic distress, nationalism has always been used as a distraction tactic.

The altar, as is often the case, will be caught between these two rival factions – and ultimately it’s a zero-sum game. ERG members and Faragist rightists want nothing less than total victory.

In this sense, talk of a “Swiss deal” is simply a distraction. The main Brexit arguments will come.