The leaked memo:
- The Political Domain
The Prime Minister’s over-riding objective has been to keep her party from repeating its history of splitting four times in the past 200 years over global trade - each time being out of power for 15-30 years. The public stance of Government is orientated primarily to its own supporters, with industry in particular being on the radarscreen - yet.
The Government’s appeal to the Supreme Court has to be seen in this light - it is about avoiding any more public debate than necessary because it will expose splits within the predominantly “remain” Conservative MPs and intensify the pressure from predominantly “leave” constituency parties. A General Election is only a last resort for three reasons - boundary changes (that favour the Conservatives) will not be effective until 2019; the Fixed Term Parliaments Act obstructs Prime Ministerial freedom to call an election at will; and it may suit major decision makers to slowly shift away from more difficult aspects of Brexit on the grounds that Parliament has forced them to do so.
The divisions within the Cabinet are between the three Brexiteers on one side and Philip Hammond/Greg Clark on the other side. The Prime Minister is rapidly acquiring the reputation of drawing in decisions and details to settle matters herself - which is unlikely to be sustainable. Overall, it appears best to judge who is winning the debate by assuming that the noisiest individuals have lost the intra-Government debate and are stirring up external supporters.
The Supreme Court appears likely to delay its ruling until early January and, assuming it sustains the High Court, a short enabling bill will then be submitted to Parliament, permitting the Government to invoke Article 50 in March as planned. The Government will probably be able to face down wrecking amendments, but the debate in Parliament will certainly shift expectations of what will be achieved/sellable in Brexit negotiations. Remain supporters can be expected to reserve their fire until winners and losers emerge from negotiation and the political atmosphere allows more sophisticated assessment of choices.
- The Government Domain
Individual Departments have been busily developing their projects to implement Brexit, resulting in well over 500 projects, which are beyond the capacity and capability of Government to execute quickly. One Department estimates that it needs a 40% increase in staff to cope with its Brexit projects. In other words, every Department has developed a “bottom up” plan of what the impact of Brexit could be - and its plan to cope with the “worst case”. Although necessary, this falls considerably short of having a “Government plan for Brexit” because it has no prioritisation and no link to the overall negotiation strategy.
However, it may be six months before there is a view on priorities/negotiation strategy as the political situation in the UK and the EU evolves. Despite extended debate among Permanent Secretaries, no common strategy has emerged, in part because the potential scope and negotiating positions have to be curtailed before realistic planning can happen, in part because of the divisions within the Cabinet. It is likely that the senior ranks in the Civil Service will feel compelled to present potential high level plan(s) to avoid further drift.
Departments are struggling to come up to speed on the potential Brexit effects on industry. This is due to starting from a relatively low base of insight and also due to fragmentation - Treasury “owning” financial services, DH-BEIS both covering life sciences, DCMS for telecoms, BEIS most other industries, DIT building parallel capability focused on trade etc.
Capability-building is making slow progress, partly through deliberate control by the Cabinet Office and partly from Treasury’s opening negotiating position that Departments will meet Brexit costs from existing settlements - although no one is treating that position as sustainable. Expectations of increased headcount are in the 10-30,000 range. Initiatives to build capability are getting off the ground - the Diplomatic Academy is providing trade training programmes, Cabinet Office is discussing system-wide capability programmes.
The Autumn Statement on 23rd November is expected to provide some headlines in terms of infrastructure investment, making the UK fit for growth and the inclusive economy. It will not provide resources for the Civil Service to grow its Brexit capacity and capability. In fact, we are more likely to see a further squeeze on Departmental operating costs to compensate for new spending.
:: The Industry Domain
Government expects lobbying on three levels to continue:
1. Company-specific decisions - the Nissan investment decision is a prime example. These are viewed as major opportunities/threats for Government. Other major players can be expected to, similar to Nissan, point a gun at the Government’s head.
2. Industry insights - the major challenge for industry and Government are “the unknown unknowns” where industry has to educate Government fast on the most important negotiating issues - e.g., they think they know about talent, but know they know little about data.
3. Overall business concerns - the province of CBI and largely dealt with as a PR issue.
Industry has two unpleasant realisations - first, that the Government’s priority remains its political survival, not the economy - second, that there will be no clear economic-Brexit strategy any time soon because it is being developed on a case-by-case basis as specific decisions are forced on Government.
