The past week brought us news about the UK government formally starting a dispute with the EU over the UK’s exclusion from the EU’s science programmes – Horizon, Euratom, and Copernicus. This does not bode well for the resolution of another key Brexit issue, namely the Northern Ireland Protocol. This week, NI businesses have made a strong appeal to the EU and UK to finally make progress on the protocol, especially given the looming cost of living crisis.
But these big Brexit issues have been somewhat side-lined in the British public discourse by more mundane concerns, most importantly water pollution by Britain’s private water companies. Interestingly, one question people are asking is whether Brexit is to blame for the problem. The fact that the answer is less easy to come by then one may think presents an opportunity to reflect on the multifarious ways in which Brexit impacts the UK. Together with other persistent post-Brexit issues, it illustrates that causality is complex and the impact is often indirect, which makes it at times tempting to fall into conspiracy thinking, as has happened in past weeks with the discussion of Charter Cities. To be better able to resist this temptation, it is important to try and get to the bottom of just how complex the impact of Brexit is on various areas of the UK economy and society.
Brexit or not Brexit? Raw sewage on Britain’s beaches
One hotly debated topic these past few weeks was the dumping of raw sewage into rivers and the sea up and down the country, which has led to various pollution alerts to beach goers. Some commentators see this issue as an unambiguous and direct result of Brexit. The reason for this claim is that last September, when the government granted water companies a legal waiver allowing them to discharge untreated wastewater into the environment, the main reason given for the decision was the shortage of treatment chemicals. This shortage resulted from a shortage of lorry drivers, which in turn is partly a Brexit effect.
However, that waiver expired in January 2022. Therefore, the current issues are not a result of Brexit in that direct sense, i.e. the current discharges are not justified by chemical shortages, but rather fall under an exemption in the Environment Act that allows water companies to discharge untreated wastewater after certain weather events. The strong rains two weeks ago may qualify as such (although it would probably be a case for lawyers to decide).
The case against the sewage issue being a direct result of Brexit is reinforced when considering that even during EU membership UK water companies regularly released raw sewage into the environment in breach of EU legislation. In fact, in 2012, the commission took legal action against the UK over the issue. The ECJ found that the practice was illegal under EU law. However, despite the ruling, the UK government has struggled to enforce these rules, as environmental campaigner Feargal Sharkey argued on Twitter.
Since Brexit, the difficulties the UK government has had to make water companies comply with their obligations under UK environmental legislation may have been made worse by Parliament. The government published a new Environment Bill in January 2020, which lead to heated debates about the issue of raw sewage in Parliament last year. The conservative majority in the Commons initially rejected an amendment proposed by the Duke of Wellington in the Lords, which would have created a legal duty for water companies to reduce raw sewage discharges. However, due to the public backlash, the government ultimately did introduce its own amendment imposing an obligation on Water companies to ‘secure a progressive reduction in the adverse harm’ resulting from discharges. Critiques last year criticised the amendment in the new (‘world-leading’) Environment Act as toothless and vague. The current issues seem to confirm that view.
So, is Brexit to blame for ‘sewagegate’? The fact is that the new Environmental Act, which risked removing any legal obligation to reduce raw sewage discharges and then introduced a toothless clause, can be seen as a result of Brexit. Indeed, when the Environment Bill was published, the government state that the bill “sets a new and ambitious domestic framework for environmental governance as we maximise the opportunities created by leaving the European Union.” So, Brexit seems to have been the impetus for the legal initiative. Importantly, due to Brexit, the government was not bound by EU legislation or the threat of ECJ legal action in this area anymore. And this is where the case of water pollution is very much related to Brexit. In fact, its seems to be another emerging pattern from the first couple of years outside the EU: wherever there is real leeway to do things differently after the exit from the EU, the current government consistently uses that leeway – in line with the unofficial Tory party economic doctrine – to favour the interests of shareholders and rentiers at the expense of everyone else. In this instance, rather than forcing water companies to make the necessary investments in infrastructure – which was the justification of the full privatisation of the UK water back in the 1980s and still is the main line of defence of some conservatives defending private monopolies –, legislation and enforcement remain lax, so that water companies can continue to pay out excessive profits to shareholders, while customers have faced a 70% increase in bills since privatisation. The water industry is hence the perfect illustration of a a broken economic system that redistributes from the bottom to the top. That system is not the result of Brexit per se, but in many cases Brexit has made it easier for UK governments to reinforce that logic, because some external constraints on government action have been removed.
Immigration and labour shortages
An area where Brexit has had a clear, immediate, and undeniable impact is migration. Ditching the free movement of people and introducing a new points-based immigration system has arguably been a Brexit promise that Johnson’s government actually kept. Now that the effects of the new system start to become more and more visible, a debate has started over whether what we are seeing is what Brexiters had promised or not. Conservative MP Neil O’Brien in an article on the Conservative Home web page (and a Twitter thread) argues that the new post-Brexit immigration system is not doing what was promised, namely reduce net migration. Rather, the system is changing immigration patterns, by shifting the inflows from the EU and richer non-EU countries, to poorer ones in particular South-East Asia. In O’Brien’s interpretation, that shift is not what was promised and will have negative fiscal implications, because “the fiscal impact of European immigration is more positive (or less negative) than from the rest of the world.” Migration expert Johnathan Portes, provides evidence that clearly contradicts O’Brien’s claims, both in terms of what was promised and the negative assessment of the economic and fiscal impact of immigration. Importantly, immigration is crucial for the NHS and expected to have a positive impact on productivity. Moreover, immigration has shifted not only geographically from low skills to higher-paid, higher skill jobs – such as doctors, nurses, IT professionals, which implies immigrants – wherever they are from – contribute more to the public purse. So, according to Portes, the economics of immigration speak a clear language, namely that immigration is having a positive effect on the UK economy.
Interestingly, and perhaps this is the one positive effect of Brexit, a clear majority of people in the UK seem to start realising that too. The FT ran an article reporting that British people’s view on immigration has changed towards a much more positive view in the past ten years or so. While the Referendum campaign was dominated by barely veiled – and indeed sometimes openly (e.g. Farage’s Turkey poster) – xenophobic arguments, the labour shortages and supply chain disruptions caused by Brexit and the Pandemic have illustrated just how much Britain depends on immigrant workers. Conservative MPs may try and continue politicising immigration, but for now public opinion seems to slowly become more realistic about the issue. Some observers suggest politicians may have to follow suit.
But of course, the shift in post-Brexit migration patterns described by Johnathan Portes also hint at the other well-known impact of Free movement of people: While Brexit mainly meant an end to a flow of low-skilled workers from EU countries and an increase in high-skilled ones from further afield, the obvious implication is that there is a gap opening up in the low-skilled workers segment. This has been a well-known fact for months and at one stage Johnson tried to construe it as a planned Brexit benefit. Since then, of course, inflation has hit, belying the idea that fewer low-skilled immigrants meant more job opportunities and higher wages for British workers. To be sure, the Oxford Migration Observatory’s most recent report refers to some qualitative evidence that wages have increased in some low-wage roles. But with inflation projected to hit 18% next year, it seems very doubtful that this trend will be sustained in real terms, nor is it benefitting all low wage workers. So, what remains after the ad hoc high wage Brexit promises have been eroded by inflation, are very real impacts of continuing labour shortages on UK producers and consumers. This was confirmed again this week by news from the National Farmers Union who estimate the waste of food rotting on fields due to labour shortages at £60m.
Another, unintended consequence of Brexit is that the new migration regime seems to create new opportunities for exploitation, as the Oxford Migration Observatory also notes. Indeed, in a worry investigation into the conditions of Indonesian migrant workers who come to Britain as fruit pickers, the Guardian investigation revealed that some of these workers are pushed into debt bondage by brokers who (illegally under UK law) charge fees for finding them jobs in the UK. This may be a temporary and fixable problem, but the point is that in this area too Brexit has not delivered any perceptible benefit, but rather create new problems without solving any of the old ones.
The common thread: A flawed economic system
The underlying issue that is common to all these problems is the UK’s broken economic system. For forty years now, successive UK governments have relentlessly worked towards putting in place an economic system that supposedly maximises efficiency by relegating the state to the role of a rule-maker, while putting ‘markets’ in charge of much of the economy and what used to be the public services. That system justifies the prioritising of shareholder interests over the interests of any other stakeholder in the economy and as such constitutes the root cause of many of our troubles.
A perfect illustration of that flawed economic system came last week from P&O Ferries. DP World, the Dubai-based owner of P&O Ferries, which made headlines earlier this year for illegally sacking 800 UK-based crew, announced record profits this week, illustrating once again – if there was need for further illustration of that – that sacking workers often is driven by shareholder greed not economic necessity. The news comes during the same week that UK prosecutors announced that P&O will not face any criminal charges over the unlawful sackings. This episode may only be indirectly related to Brexit, but again it illustrates the tragic irony that the root causes of the discontent that led many people to vote for Brexit, namely the declining living standards and working people’s fears over their future, are not solved by Brexit. So, P&O Ferries is not a product of Brexit, but rather both are the result of the same underlying economic system. Worse still, in spite of all the promises, the government clearly has no intention to use any new-found ‘Brexit freedoms’ to do anything to address the issues working people worry about. The leaked recording of our most likely next PM slagging off British workers provides some explanation of why workers’ grievances are not taken seriously. That sort of attitude from our most senior politicians may also go some in explaining while in some parts of the population there is a genuine Brexit paranoia spreading.
Brexit impact paranoia: Freeports & charter cities
Another interesting Brexit-related ‘event’ in the past weeks was an at times heated debate among ‘Remainers’ or ‘anti-Brexiters’ about Freeports and Charter Cities. Chris Grey and Sam Lowe both have written excellent articles (here and here) explaining why the UK government’s plan to establish Free Ports can by no means be seen as part of a plan to turn the UK into a libertarian Nirvana where entire urban areas are run by private corporations as some have claimed.
That said, what the concern about Charter Cities shows, as George Monbiot’s article implies, is that given serious questions about foreign interference in the EU Referendum and the well-established links between the UK’s ruling elite and all sorts of murky donors and US right-wing libertarians, parts of the population have completely lost any trust in the government. People may be forgiven for not putting anything past this government, and especially the most likely incoming PM Liz Truss who seems easily seduced by libertarian ideas. It is understandable that this can lead to a sentiment that there is a large-scale conspiracy going on.
Yet, in this instance, the worries do not seem justified; not just because, there is no evidence for the plans some people fear Brexiters are pursuing, but more fundamentally because that is simply not how Brexit works. Indeed, the key point is the one Sam Lowe makes in his blog post: the purpose of Freeports was not so much to start a more radical deregulation and depoliticization movement that will end with charter cities; rather, the purpose of announcing Freeports was announcing Freeports. In other words, it was another act of mainly symbolic policy making. Indeed, like many times before, in the absence of any real-world Brexit benefits, the UK government increasingly resorts to fabricating Brexit benefits for the attention of the British population. That is the case, as I have argued many times before, with Free Trade Agreements, whose content is often massively underwhelming and sometimes outright disastrous for parts of the UK economy, but whose only purpose it is for the government to be able to announce alleged Brexit benefits. It is also the case of regulatory divergence from EU law, which – just like FTAs – has become a goal in itself, independently of any real-world impact. Thus, Jacob Rees Mogg, the BOGEMin, has created a dashboard of retained EU law in British law that will allow it to regularly announce Brexit benefits in terms of getting rid of EU laws. It does not matter whether repealing these laws actually has any positive impact on the UK economy and society. Rather, getting rid of them has become a goal in itself, which means every time such a law is deleted from the statute book – whatever the real-world impact – Brexiters have a reason to celebrate. Repealing retained EU laws – contrary to economic growth, jobs, inflation, etc. – is something the government has complete control over, thus making them a tremendously useful tool for the government to distract the Brexit voting half of the population from the real-world negative effects of Brexit. Freeports are most likely just another piece of symbolic policy-making. They are something the government has complete control over and can claim as a benefit of Brexit, even though their impact on the UK’s economy will most likely be negligible (relocating economic activity rather than stimulating new one) and their impact on society, the environment most likely negative. So, like with FTAs, regulatory divergence, the most likely explanation is that we are once again firmly in the area of symbolic policy making, rather than in the realm of a grand plan.
More generally, having followed Brexit for over six years and studied the actors involved quite closely, Brexit is much more likely to be a botch job, rather than a carefully planned grand conspiracy (even though some sinister influences are very likely to have taken place). Anyone who has ever attended a faculty meeting at a University Department for instance will be suspicious of claims that people with oversized egos will easily come together and successfully plan the takeover of the world. That’s unlikely in the best of cases, but it is even more unlikely when involving Ayn Rand-reading egotistic careerists whose only reason for being in politics is their own narrow self-interest. No coalition of such people could last very long as is illustrated by Michael Gove backstabbing of Johnson or Sunak and Truss’s tearing into each other during the Tory leadership contest. Therefore, while we should not underestimate the harm Brexit still can do to the UK – including through deregulation – the fundamental driver of post-Brexit politics is more likely to be egocracy rather than grand conspiracies.
The signs of an onset of Brexit impact paranoia amongst Remainers is an important reminder that critical thinking needs to remain firmly grounded in reality and committed to applying the same standards of scientific scepticism to its own arguments than to the arguments of those we criticise. If that is not the case, we are quickly surrendering ground to conspiracy theories and as such give in to Brexiters’ long-standing strategy of moving away from reality into a world of fantasy. Needless to say, Brexiters have a lot more experience with fantasies, and therefore this is hardly a terrain on which we can beat them.