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MICHAEL WHITE: Boris Johnson wants to have his rouble cake and eat it

Boris Johnson wants to have his rouble cake and eat it, writes Michael White. - Credit: Xinhua News Agency/PA Images

MICHAEL WHITE on the Kremlin, Rex Tillerson and spreadsheet Phil’s positive spin.

There’s nothing like a top-notch spy scandal to distract the Great British public, which has been spoiled rotten by them since Burgess and Maclean did their Keystone Cops flit to Moscow in 1951.

It set the parameters for John Le Carre’s Cold War thrillers and a host of imitators in real life as well as fiction.

So the poisoning of Russian double agent, Sergei Skripal, and his daughter, Yulia, in the shadow of Salisbury Cathedral provides a media distraction from the grinding toil of Brexit negotiations. But it also presents a reality check to post-Brexit Whitehall and the dwindling effectiveness of its rebranded ‘Global Britain’ diplomacy which a committee of MPs mocked this week as superficial.

The government’s allies in Nato and the EU have all made soothing sympathetic noises about solidarity. Not Donald Trump, of course, but he rarely criticises the Russians. His Secretary of State, Rex Tillerson, was supportive, but was tweeted out of a job within 24 hours, replaced by the nationalist ex-Congressman, Mike Pompeo.

In any case, talk is the easy bit, as Theresa May and her work experience foreign secretary are in the process of finding out – and Trump would have done by now, if he was keen to learn. Tillerson was someone May felt she could do business with. His fall is another blow. That’ll teach him to call the Very Stable Genius a ‘moron’.

London has always been the EU’s hard-line outlier in urging a tough stance on Russian transgression against international norms in the ever-lengthening Putin era while simultaneously hoovering up dubious oligarch cash and law suits. That’s partly a function of our open ‘casino economy’ and Anglosphere Cold War history, partly of geography. Russian armies have not occupied our capital as they have so many other EU member states. And – as we found during the recent snow – it’s Paris, not Moscow, which threatens our emergency gas supplies.

For trade, energy and much else, other Europeans feel much scarily closer and therefore either more cautious about poking the Russian bear with another sanctions stick or just more equivocal about the hall of mirrors occupied by spies. ‘Skripal had it coming, didn’t he?’ Or ‘it’s fake news cooked up by M16’. After all, if Labour’s real leader, ‘Fun John’ McDonnell, can equivocate on Andrew Marr’s sofa, and Jeremy (‘Labour leader’) Corbyn can play party politics with Salisbury, why shouldn’t Russia’s near-neighbours take a convenient free pass too?

Whatever sanctions package Whitehall eventually settles on will have to be tougher than the slap with a Kleenex delivered after the Litvinenko poisoning was traced to Kremlin musclemen. But Boris Johnson will have to persuade allies to endorse them. Since most don’t think much of Boris, or of London’s ‘McMafia’ approach to Russian rouble laundering, that may be difficult – even without the Brexit freezer. It smacks of wanting your rouble cake and eating it.

Meanwhile real life goes on and the news is not all gloomy. Spreadsheet Phil Hammond delivered his spring statement – a kind of low calorie vegan budget – and managed to sound more frantically upbeat than usual about the UK’s economic prospects without getting carried away. More Tigger than Eeyore, as he felt moved to explain.

Hammond didn’t actually find a few quid down the back of the Treasury sofa, as briefed by some, preferring to attack Labour’s extravagant spending plans as a cheaper option. Is that still spine-chilling after eight years of austerity and such obvious pressure on key public services, health and education? John McDonnell made the most of his moment. Both were overshadowed by Tillerson’s fall.

Anything that sustains May’s Chancellor’s political share price on the Tory backbenches and among disaffected party activists is good news for those who seek to soften the economic damage that Brexit threatens to do to the British economy – fears which are not diminished by the persistence absence of substantial evidence to the contrary from Camp Brexit.

Hammond’s appeal to the EU27 to help protect the City’s pre-eminence (‘a global public good’ says the IMF) inside a future free trade agreement (FTA) for mutual gain met with a sniffy response in Brussels. But it is true and will require a lot of detailed, highly technical, work, not posturing, to bring about.

Paris may seek to seize London’s financial crown and other EU cities would like a share of a decentralised pie: a recipe which should cheer New York. The outcome won’t be like that and prayer alone will not save the EU27 or us from bad consequences. Whitehall assessments on Brexit scenarios – the famous three options which MPs had to fight to get published – confirms that the worst-case option (leaving under WTO terms only) could cost 7.7% of UK GDP over 15 years. New research suggests that potential tax losses – £60bn of revenue? – may be double that previously feared. Not much change for the NHS there.

Those minutes are blinking away on Michel Barnier’s digital clock and the EU summit in Brussels on March 22-23 will only confirm the negotiating guidelines for whatever future FTA (‘Canada plus-or-minus’?) may emerge. But many of those paid to worry about these things in business and the City fear that the EU 27’s governments – the politician sitting around the council of ministers table next week – are woefully ignorant, too preoccupied with their own domestic problems to realise the risks that a hard Brexit would mean for them too.

In effect, they have delegated Brexit to the European Commission which has its own avowed agenda, to protect the Union’s greatest achievement, the single market and its infrastructure – including the euro and free movement – at almost any cost. When member states read the small print of that cost, economic and budgetary, it may be too late to get sensible compromises back on the table. It is true here too, of course, with those regions and firms (often small ones) least prepared for the downside.

That is the fear. On past evidence Brussels will respond by battening down the hatches. But the insurgent populists now so visible everywhere will stop them and do with active encouragement from Donald Trump’s nationalist ambassador, Steve Bannon, recently wooing whatever Marine le Pen calls the NF now.

Whoever gets on top of Italy’s new coalition – Five Star or the League – poses a veto threat to Franco-German plans for further monetary integration. It is a further sign of unsettled times that Juncker aide Martin Selmayr’s appointment as the EU’s senior civil servant in a backstairs fix is still causing waves – thus breaching Alastair Campbell’s wise rule on resignations: if the row is still on page one after a week, the minister will have to go. But this one won’t.

Yet there are shafts of sunshine amid the cloud. On some analysis last week, Guy Verhofstadt, former Belgian prime minister, now the Strasbourg parliament’s Brexit pointman, is now seen in Whitehall as a potential ally after his flying visit to see David Davis (who is accused of staying at home too much). Why? After all the parliament’s 13-page draft resolution on the ‘association agreement’ it envisages with Britain makes clear that a third country (us) rejecting binding rules and EU court mechanisms ‘cannot enjoy similar benefits or market access’.

That looks clear enough and remember, the parliament has a veto. But some in Whitehall detect a more flexible and dynamic approach to post-Brexit relations – not least by what it did not say – than the official European Council’s draft, promulgated by its president, Donald Tusk. Thus the parliamentary draft looks to the EU treaties where Articles 8 and 27 set out association agreements and other forms of bilateral cooperation in ‘specific cases’ (medical?) with friendly neighbouring states, not all of them bent on joining the EU.

Mere wishful thinking in Whitehall (again)? Or a legal framework which could dig everyone out of a nasty hole? And nasty it may be. A new study by the law firm Clifford Chance and consultancy Oliver Wyman, suggests that five major sectors will be hit hardest – financial services, agriculture and food, cars and chemicals/plastic – by Brexit turbulence. Well-prepared firms will take preventive measures to mitigate the non-tariff barriers of regulation and compliance which present the biggest threat. Small firms are most vulnerable and a good deal would reduce – but not eliminate the damage.

If only. But Brexit’s fallout is not confined to its international ramifications – either in trade or poisoned Russians. On Monday, day six of the committee stage of the EU (Withdrawal) Bill’s long progress through the Lords, peers fretted about its deficiencies, not least the absence of parliamentary scrutiny of powers that will be repatriated back to Britain after March 29, 2019 – and how ministers might amend EU-retained laws as they alone see fit.

Border controls, data protection, clinical trials (and their alignment with EU ones), regulatory alignment in the chemical industry and human rights, were among the concerns raised by earnest peers until nearly 3am on Tuesday. Faced with criticism of its sweeping Henry VIII powers of amendment ministers offered to time-limit them. In her Mansion House speech May promised to align UK medical regulation with Europe’s – which should ease some anxiety.

But the concern which have some of the greatest potential to upset the sovereignty boat of the post-Brexit, not-so-United Kingdom are those which Edinburgh and Cardiff’s devolved governments are fighting over, Belfast’s too if it had managed to have a functioning devolved administration for the past year. After all, the Brexit Irish border controversy threatens the province’s most valued commodity, the peace that arises from the Good Friday Agreement.

Under the 1998 devolution legislation Westminster reserved many key powers – notably over agriculture, the environment and fisheries – to the UK parliament. But much of them in reality were handled at EU level anyway. Bringing them home is a big deal. You only have to say ‘fishing rights’ or ‘farm subsidies’ to see why, especially in areas where land use – the Highlands – or fishing boats – Aberdeen or Hull – are powerfully emotive grievances.

Whitehall’s initial position was to say that it would retain the repatriated powers, at least to begin with. It then retreated and said that most would go straight to Holyrood or Cardiff Bay, among them water quality (another emotive issue on the wet side of the country), energy efficiency (ditto) and the elusive matter of carbon capture and storage. But of the 153 policy areas, identified by a government paper last week as coming home, some 20 or so will not be devolved as appropriate to the regions.

Agriculture and product quality are among them. Why? Because divergent standards might undermine the UK’s single market. I pause to allow you an ironical cheer. They will get the point in Brussels. But the devolved governments (Scotland and Northern Ireland voted Remain) complain about a ‘power grab,’ even in Labour Wales which voted Brexit. They plan to enact ‘continuity bills’ to assert their rights in these matters, putting them at odds with Clause 11 of the withdrawal bill which requires them not to diverge from retained EU law, as was the case with EU law before Brexit. More irony.

Experts now doubt that Nicola Sturgeon could, as once threatened, use her own veto to block Brexit. But this is another source of centrifugal friction within the UK on top of the simmering Irish border problem, not the ‘fake news’ row Brexiteers pretend. Political clashes which have to be resolved in courts smack of clashes between Catalonia and Madrid – as may be the intention in some quarters.

There is even rash talk, not confined to Twitter, that Whitehall secretly plans to repeal the devolution acts in their entirety. The duty minister, Lord Bourne of Aberystwyth, formerly the Welsh Tory leader, Nick Bourne, did his best to calm elderly peers and dismiss ‘scare stories’ to the contrary. Promised amendments to improve Clause 11 are finally published and on their way to the Lords for scrutiny, he assured them.

Ministers protest they are committed to openness and transparency. But even its intentions towards the integrity of the UK – ostensibly the declared point of Brexit sovereignty – is shrouded in uncertainty.

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