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Safeguarding the Union?

Safeguarding the Union
Written by Graham Gudgin

The Governments new Command Paper Safeguarding the Union makes strenuous efforts to show that Northern Ireland remains an integral part of the UK economic union notwithstanding remaining EU influence. This article argues that the economic impact of the reformed Northern Ireland Protocol will be small and that the union is safe.

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The UK Government’s new Command Paper ‘Safeguarding the Union’ is the third attempt to get right the relationships between Northern Ireland GB and the EU as a consequence of Brexit. The original Northern Ireland Protocol, designed in Theresa May’s time as PM and signed off under Boris Johnson, was unworkable. The objections of unionist and others in Northern Ireland were recognized as legitimate in the February 2023 Windsor Framework which removed some of the most damaging trade aspects of the Protocol. This did not go far enough for many unionists and the DUP brought down the Northern Ireland Assembly in protest, and Northern Ireland remained without a devolved administration for the last two years.

The lack of devolution is blamed by many for all manner of ills in the provision of public services in Northern Ireland but the value of devolution is over-rated. The media often refer to Northern Ireland’s excessively long NHS waiting lists as a consequence of the suspension of Stormont but in fact Northern Ireland had the longest waiting lists of any UK region long before the DUP walked out of the Assembly. None of the UK’s three devolved governments have been particularly effective in delivering public services and Northern Ireland has perhaps been the least effective.  The suspension of devolution did though lead HM Treasury to restrict the flow of funds to Belfast with the result the many public sector employees, including teachers, have had no pay rises for three years during a period of high inflation, and subsidies to firms have been restricted.

The pressures on the DUP to return to Stormont have thus been severe and the new Command Paper has provided the context for them to do so. There was never any possibility of changing the legal basis of the Protocol but the Paper tidies up some outstanding impediments on cross-channel trade or promises to try and do so. It also goes as far as humanly possible to provide confidence to the DUP that the union is safe. HMG always bend their language to their purpose. In the 1990s they asserted no selfish strategic in Northern Ireland when wooing Sinn Fein. Now they emphasise their unionism.  We can however take this as genuine since The Irish Taoiseach, Leo Varadkar said he had difficulties on aspects of the Paper, ‘I think it very much puts the British Government in the position of being advocates for the union whereas in the past they signed up for rigorous impartiality’. He also disliked ‘negative language about the all-island economy’, but more about that anon. The Northern Ireland Office Ministers are both unionists and Brexiteers and the drafting of the Command Paper should not be a surprise. Whether the sentiments will survive a Labour Government is another matter but with Stormont up and running Sir Keir Starmer may wish to leave sleeping dogs lie.

In many ways the Paper is a triumph of civil service drafting which provides a contrast to the early documents on the Protocol. The Sinn Fein leader, Mary-Lou McDonald may have claimed that Irish Unity ‘is now within touching distance’ but this party has a long self-serving history of seeing unity just around the corner. The likelihood is that the new devolved government will settle down to address the pressing issues of health and other matters emphasized by their constituents. Irish Unity will return to the back burner.

The original Protocol was a punishment regime imposed by the EU and agreed to by weak UK governments in order to secure its essential ‘Trade and Cooperation’ free-trade agreement. Food imports into NI from GB required individual veterinary certificates for each item amount to hundreds per supermarket shipment lorry. Some foodstuffs, seeds and plants were banned from entering NI and NHS medicines were barred unless approved by the EU. Parcels from Amazon etc. required import certificates. Even nationalists in NI saw the unnecessary madness in this and recognized that goods bound only for NI did not require these checks to protect the EU’s single market.

As a result, the Windsor Framework negotiated under Rishi Sunak removed many of the most egregious aspects of the way in which the Protocol was operated. The legal basis originally agreed with the EU remained intact but the operation of trade across the Irish Sea was greatly simplified. Nonetheless a border remained in principle. Some agri-food products and some imports, for example veterinary pharmaceuticals, remained difficult to move from GB to NI.  Data from the regular UK Business Insights and Conditions Surveys indicate that the number of GB firms selling into NI dropped by one sixth after the Protocol came into force in January 2021 and there is little evidence that the Windsor Framework improved this.

There is certainly evidence that firms in NI are buying less from GB. New trade figures published by the NI Statistics and Research Agency just before Christmas show that purchases from GB fell from 30% of all goods bought in NI in 2019 to 25% in 2022. So, if goods were not being bought from GB where did they come from? The data shows that the main beneficiary was not the Republic of Ireland where the share of NI sales has been broadly flat at 7%. The beneficiary was instead Northern Ireland itself. Goods bought in NI have increasingly originated within NI, increasing from 51% of all purchases in 2019 to 55% in 2022. Instead of an emerging economic united Ireland, firms appear to be reacting to the Protocol by buying locally rather than from GB but not increasing purchases from the Republic. This may raise prices and restrict choices for NI consumers but at the same time will raise their incomes. Fears that the Protocol would lead in the direction of an all-island economy appear to be misplaced.

While the Windsor Framework undertook the heavy lifting, including removing restrictions on VAT, and setting up a Green Lane for imported goods which could be proved to be for consumption in Northern Ireland rather than crossing the Irish land border. The new Command paper tidies up the remaining impediments to trade from GB to NI through the Green Lane (now renamed the Internal Market System) covering a guaranteed 80% of freight movements. Together with the removal of the customs post at Cairnryan in Scotland, the aim is to minimise the notion of a trade border. Residual checks are removed for agri-food goods and the Government promises action to free up the flow of veterinary pharmaceuticals. Claims that no Irish sea border now exists are however exaggerated. Firms still have to register as trusted traders to avoid paperwork and checks, and a pan-UK system of labelling goods as ‘UK only’ has had to be introduced. Neither of these would necessary without a trade border and do not exist for instance for trade between England and Scotland.

The Paper also announces a raft of new institutions and working groups to reassure Unionists and to promote the local economy. No NI settlement has ever been agreed without a promise of more inward investment and this one does the same, but none of this will in my view do much to change economic reality in NI. It has rather been designed to persuade the DUP to return to Stormont and in this it has been successful. One of the Command Paper’s helpful contextual changes has been the abandonment of the 2017 undertaking that UK ministers should support the ‘all-island economy’. The latter concept which a 2022 Policy Exchange report had already shown to be essentially meaningless, is now viewed by the UK Government as ‘a divisive and misguided political notion’. The Policy Exchange report argued that with different currencies, different fiscal and monetary arrangements including different interest rates and VAT and excise duties, and with separate legal systems, the two parts of Ireland are distinct. Both have their own distinctive health, education and social security systems and much else besides. Financial support for GB helps to ensure living standards as high as those in the tax-haven that is the Republic of Ireland’s economy.

Although some changes have been made to the application of EU law, firms in the Province remain subject to dynamic alignment with EU regulations on goods production with no say from NI. Controversially, the Command Paper promises to monitor all new UK product regulations for their potential impact on Northern Ireland. This can easily be interpreted as promising no future divergence from EU regulations but my understanding is that Government legal advice is that this undertaking will not prevent regulatory divergence. It is true that regulations governing the 16% of the NI economy which produces goods rather than services are same as in the Republic but after three years outside the EU these still differ little from those in GB. If a Labour Government takes over in 2024, little further divergence is to be expected. There is no reason to accept the view that Irish Unity is on the horizon.

Even a Sinn Fein First Minister will find that she is only co-head of the NI Government alongside a DUP colleague, and in a position of having to be seen to be doing her best to administer this part of the UK effectively. In any case the First Minister and Deputy First Minster have co-equal powers and are better thought of as joint First Ministers. I well remember from my own time as Special Advisor to the First Minster from 1998 to 2002 how much effort was involved before each meeting of the NI Executive in ensuring that both the First and Deputy First Ministers approved all policy proposals.

All of this correcting of the poor negotiating of the Theresa May administration in face of EU intransigence has come very late in the day and too much remains for NI to be at peace with itself. But as the Command Paper says, Northern Ireland remains firmly part of the UK. We can reasonably ask why all of the reforms could not have been included in the original Protocol, and EU intransigence is an important part of the answer. The EU has not admitted its part in bringing down Stormont yet again, but it has quietly gone along with reforms to make the operation of the Protocol tolerable to unionists.

Opponents of the new Command Paper and of the DUP returning to Stormont will reasonably point out that the undemocratic imposition of EU regulation of production within Northern Ireland and the fact of a trade border within the UK are a constitutional outrage. They are also an outrage that could have been avoided if mutual enforcement of customs regulations had been adopted instead of the panoply of complex arrangements in the original Protocol. Nonetheless the economic impact of the reformed arrangements are relatively small and there is little indication that they will underpin a drift to Irish Unity. There is no prospect of any UK Government endangering its TCA free trade agreement with the EU in order to remove the NI Protocol.  The DUP is right to recognize this reality and to congratulate itself on the reforms it has been able to persuade the UK Government to adopt

Dr Graham Gudgin CBE is Research Associate at the Centre for Business Research in the University of Cambridge. He was special advisor to the First Minister in Northern Ireland 1998-2002.

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Graham Gudgin