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  • Here we are, Robert.

  • The road to Brexit.

  • Are we nearly there?

  • Bong.

  • Bong.

  • Robert.

  • I can sense your frustration in the writing.

  • OK.

  • So here we are.

  • It's the end of January, 2020.

  • This whole thing started in June, 2016,

  • but it's a moot point whether we are, in fact, there.

  • So I think if we were actually drawing the road,

  • it would have sort of gone like that, and through there,

  • and around here, and dead end, and then

  • it would have gone over here.

  • But actually, I think we are.

  • I think we are at Brexit.

  • It is happening at the end of this week.

  • 31st of Jan.

  • Even the people who most aggressively campaign to stop

  • it accept it's happening.

  • It is happening.

  • Nothing can happen to stop it now.

  • So I've got a little surprise for you.

  • Here we are.

  • Here's one I made earlier.

  • Excellent.

  • Here we are.

  • So...

  • Bong.

  • On Brexit night, on Friday night, you

  • may have to do the bongs, because there will not

  • be any official Independence Day bongs from the Big Ben.

  • There is a party in Parliament Square, which

  • Nigel Farage and his Brexit party crowd

  • have organised, where I believe they have tape

  • recordings of Big Ben bonging.

  • My favourite aspect of this is that nobody really contemplated

  • the fact until quite late, that the UK is leaving the European

  • Union at midnight, but that's midnight Brussels time.

  • So in fact, we're leaving at 11.00pm.

  • And among other things, is the Graham Norton Show on BBC

  • is being postponed, so that we can all watch

  • the great moment of departure.

  • The interesting thing is that actually as the day has

  • approached, Boris Johnson has sort of taken pains

  • to almost play down any idea of triumphalism,

  • because he's now got this strange task of having

  • to lead a nation which was split down the middle on Brexit.

  • So he can't really afford to have bongs, parties, call

  • it Independence Day, as presumably the Daily Express

  • and Nigel Farage would like.

  • Well, it's going to be straight.

  • He's treading quite a fine line.

  • So there's going to be a countdown clock,

  • I believe on the door of Downing Street.

  • He's doing an address to the nation.

  • Government buildings are going to have lights on them

  • in red, white, and blue.

  • Red, white, and blue.

  • It's a red, white, and blue Brexit.

  • Exactly.

  • And then in Parliament Square, Nigel Farage and his crowd,

  • him, other people from the Brexit party,

  • and the sundry talk radio figures,

  • are all speaking about what a great day it is.

  • And as you said, Britain's Independence Day.

  • It is interesting that a number of the Conservative MPs who

  • have, not all of them, but a number who were very strong

  • advocates for Brexit, they're all

  • trying to take the same tone that you were just saying.

  • It's like, actually, look, we know,

  • we recognise this is a sad day for a lot of people.

  • We need to just go about this with a degree of humility,

  • which I think is a good thing, actually.

  • If they can stick to it, it's a good thing.

  • OK.

  • So one of the things that has happened as well,

  • is it not just that Brexit is definitely happening?

  • This place, parliament becomes much less exciting,

  • and, indeed, relevant than it has

  • been for the last few months, because

  • of Boris Johnson's majority.

  • As it regains his sovereignty.

  • Yeah.

  • Exactly.

  • So as he regains his sovereignty,

  • it's actually kind of sidelined.

  • So I'm sorry, Big Ben, we're going to put you over there.

  • Because, the story, as it develops, in fact,

  • the next significant moment is the end of this year, right?

  • Yeah.

  • And middle point of this year, end

  • of June, because here we are now, Brexit day,

  • but there is another journey to here

  • when a whole load of decisions will have to be made,

  • and then to here.

  • Yeah.

  • Just after Brexit day.

  • So it's very early February.

  • We get the first sight of negotiating

  • mandates for the European Commission, which

  • are being agreed now.

  • And we should see them first week of February.

  • We're also promised a speech by Boris Johnson - again,

  • first week of February - where he sets out

  • what his approach to these negotiations is going to be.

  • I'm told that the EU mandate is going to be very, very

  • detailed, and the Boris Johnson one

  • is going to be more thematic.

  • But he's sending his big EU negotiator

  • David Frost out to do battle.

  • And so we're going to get a first sense of where the battle

  • lines are going to be.

  • What are we calling this?

  • We're calling this the UK priorities, or...

  • Yeah, something like that.

  • Yeah.

  • These are the battle lines, which will

  • determine the rest of the year.

  • As you said, June is when the British government

  • has to ask for an extension of the transition period

  • beyond December, 2020 on the assumption

  • that it's not to get the deal done in time.

  • And nobody thinks that's going to happen.

  • Which is interesting, isn't it?

  • Because when this started to come up in the autumn

  • there was some chat about how, if you sort of got to here,

  • what happens if you get three-quarters of the way

  • through the year?

  • You're really making a lot of progress on the negotiations.

  • A deal is very definitely possible.

  • It's on the cards.

  • But it is going to take longer.

  • You're kind of stuffed, because back here you should

  • have asked for an extension.

  • What happens here?

  • Is there a realpolitik way in which

  • both sides, EU and the UK, start to say, well, you know what?

  • We need another couple of months.

  • But you're sort of screwed by this legal deadline.

  • Before the election, I don't know if you remember,

  • Boris Johnson was given to talking about Gatt

  • - was it Gatt 24?

  • I can't remember what number Gatt it was.

  • But we said that if you were close to securing a trade

  • agreement, the two sides could roll over

  • their existing arrangements.

  • So in theory, I suppose there's that.

  • But the truth is that the Conservative side

  • believes in the deadline.

  • It doesn't believe in paying more money to the European

  • Union.

  • In the period of transition, the UK

  • has to take and accept all of the rules from the European

  • Union, which no longer has any say.

  • So just to be absolutely clear what we're talking about,

  • so from Brexit day itself.

  • To the end of December, '20.

  • The end of this month, January to December,

  • we are in a period of transition.

  • So we're effectively out of the EU.

  • We are no longer a member of the European Union,

  • but we abide by the existing arrangements

  • while we negotiate our end state.

  • And that's what we still don't know.

  • And in return for those, I think life goes on as normal.

  • So the truth is, the morning after Brexit, for most people,

  • nothing will have changed.

  • Absolutely.

  • Absolutely.

  • But the Conservatives do not want

  • to go beyond that deadline.

  • It was possibly the price of the day of Nigel Farage pulling out

  • of the general election.

  • And so they've rather put themselves up against it

  • because time is on the European Union's

  • side in this negotiation.

  • And if the UK is frightened of falling over

  • the edge of another no-deal cliff,

  • then the European Union has a lot of advantages in this.

  • The interesting question, and it's very hard to know,

  • because at this stage everyone's just being tremendously gung

  • ho, and it's the early opening rounds,

  • is that - I've heard it from enough people

  • to think it's at least possibly true

  • - that the UK actually is prepared to go over the cliff

  • this time.

  • And one reason for that is that the moment you

  • say you're diverging on regulations,

  • and regulatory alignment, a lot of the issues like lorries

  • at Dover, and all of the friction in trade,

  • becomes a reality anyway.

  • And the government is committed to regulatory divergence.

  • So that seems to me the whole battleground.

  • There is a really horrible way in which there is

  • a kind of deja vu about this.

  • But we've got the whole of this year

  • before we get back to this threat,

  • this threat of a cliff edge, which we experienced twice.

  • It felt like so many more times last year in 2019.

  • Well, I still got the tins of tinned tomato

  • in my house's spare bedroom.

  • Exactly.

  • No, but exactly.

  • So the whole nation, and, indeed, the rest of the EU

  • was sort of poised - this feeling of danger

  • twice last year.

  • And we might end up back there, so it's not

  • quite the end of a road.

  • There is a sense of going back in a circle.

  • Yeah, absolutely.

  • I mean, it's absolutely...

  • I mean, if the UK was prepared to do the kind of Brexit

  • that Remainers wanted, which is very close in alignment.

  • Hopefully incredibly close to the European Union.

  • There is the easy part of this, the easier part,

  • which is an agreement to have zero tariffs and zero quotas,

  • which both sides fundamentally want.

  • That's the easier part of this game.

  • But the European Union looks like it's

  • going to hang very tough on the issue of what

  • it calls level playing field.

  • Which is not having the UK able to compete

  • against the EU by having much lower corporation tax,

  • by having all sorts of sweeties that it can offer to business

  • to attract business to the UK and away from the EU.

  • They want the UK to commit to that level playing field, which

  • would defeat any economic purpose of Brexit

  • for those who believe there is one.

  • And the UK is very resistant to this.

  • Of course, the chances of it diverging wildly

  • on the 1st of January, 2021 are very slim,

  • but it doesn't want to commit to what's

  • called dynamic alignment, where every time the EU changes

  • rules, the UK has to change.

  • So that is the bulk of the battleground...

  • that and fish are the bulk of the battleground.

  • I'm going to come on to fish.

  • Please do draw some fish, because this

  • is what I've been looking forward to all week.

  • This is the fish bomb.

  • That is a bomb, not a fish.

  • OK.

  • Look, he's got an eye.

  • Now it's a fish.

  • All right.

  • I'm going to draw a better fish.

  • That is a better fish.

  • There we are.

  • Oh, it's a shark.

  • I hear the scales falling from his eyes.

  • Should we say that?

  • Yes, OK.

  • It's got to have some fins, otherwise it's not a fish.

  • There we are.

  • We come onto fish, because there's fish,

  • there's cars, which stands for kind of manufacturing industry,

  • and then there's the huge service

  • economy of the UK, which is the City of London,

  • but also all of the service sectors of the economy.

  • But I just want to take you back a stage

  • though, because describing this cliff edge the end of December,

  • and the fact that the government,

  • Boris Johnson, Sajid Javid, to an extent,

  • have been saying very clearly there will be divergence,

  • and this will be the absolute deadline.

  • There will be no extension.

  • We have heard that from Boris Johnson before.

  • Dead in a ditch.

  • I'd rather be dead in a ditch than not leave on October

  • the 31st, 2019.

  • This is a prime minister who plays by different rules,

  • is allowed to play by different rules by his party

  • and by the country, it seems.

  • So if for the moment, but say we did get to here,

  • it's not necessarily political death for him.

  • I would be astonished if he does agree an extension.

  • I really would be surprised.

  • And I think the first half of this year is going to be awash.

  • There'll be lots of lawyers, lots of anger.

  • And I don't believe...

  • I think we'll get to here, which is the German presidency

  • of the EU.

  • And I think this is where it's all going to happen.

  • I mean, you're completely right obviously.

  • It could all be posturing.

  • It could just be the starting point and opening...

  • No, it might be sincere now, but how sincere would it be...

  • sincere would it be on the 20th of June when you're thinking...

  • I don't believe they will extend.

  • I really don't.

  • That part, I believe what the government's saying.

  • OK.

  • Whether they're really prepared to topple over, and stick

  • to their hard line, that's harder to say.

  • But there are some reasons why they might.

  • You've got a majority of 80.

  • He's got four and a half years.

  • He's got time to weather any immediate political storms.

  • Now, obviously some storms are so bad,

  • if you think about Black Wednesday,

  • people look at the government, go, no, you're no good,

  • that's it.

  • Well, that is the comparison they should be

  • having in their mind as well.

  • But the difference is, at that point,

  • Labour party was led by John Smith.

  • And we're not sure who the Labour party will be led

  • by then, but it's not going to be anybody like John Smith.

  • He may think he's got the political time and room

  • for manoeuvre.

  • And as I said, if you are refusing to align regulations.

  • If the level playing field isn't happening,

  • then a lot of the visible grief of Brexit,

  • of a no-deal Brexit almost, will be there,

  • because you will have problems at Dover,

  • you will have friction introduced into trade supply

  • chains.

  • And they may take the view that this

  • is the price we have to pay to get what we want.

  • And the problem is, because - it is

  • the same as sort of the madman theory - madman theory -

  • that actually it's only if you can make

  • you believe you'll really do it that you have

  • any chance of breaking through.

  • OK.

  • I'm going to let you talk about the fish now.

  • So you've got your fish.

  • Yes.

  • But the fish have opponents, right?

  • The main reason why this is, in fact, an excellent drawing,

  • is because fish could torpedo...

  • Oh, God.

  • The whole thing.

  • It's a fish torpedo.

  • While you're explaining why fish could torpedo the whole thing,

  • I'm going to try and draw a Nissan car.

  • This is going to be a first for me.

  • It's probably going to look like any other car.

  • As long as it doesn't look like a fish.

  • Just to warn you.

  • So look, the point, the fishing industry

  • has become a massive and disproportionate factor

  • in all of the conversations.

  • I'm sorry.

  • I'm mesmerised now by the Nissan.

  • And of all of the conversations that have gone on so far.

  • Because fishing is less than 1 per cent of Britain's GDP.

  • It's tiny as an industry.

  • It is, however, disproportionately

  • important in certain places, particularly

  • Scotland, places that, again, are

  • going to matter a great deal.

  • And since a big part of Brexit, a big part of the philosophy

  • of Brexit, is we left behind...

  • Take back control.

  • Take back control, but also that we left behind and betrayed

  • communities that couldn't compete like London could.

  • Then, fishing communities, and the fish

  • becomes a template for what you're trying to achieve.

  • The government wants to show a win on fish.

  • On the other hand, it is also, in one respect, its best

  • negotiating card, because this matters hugely,

  • the issue of access to Britain's territorial waters,

  • certainly up to 6 miles, I think it

  • is, is a huge issue to French fishermen,

  • to Spanish fishermen.

  • And they are very worried about it.

  • And they want this brought right into the trade talks.

  • And so it is something that Britain could negotiate with,

  • if it's prepared to disappoint the fishermen,

  • its own fishermen, a bit.

  • And that was the question.

  • Because it's also the case that much of the fish

  • caught by British fishermen is actually sold in Europe.

  • So unless we're all going to start eating Pollock ourselves,

  • they do actually need access to the European markets.

  • It's about 80 per cent.

  • Now, is this a cod that doesn't have fins, by the way.

  • So, in fact, the fish come right up here,

  • because the fish are going to be front and centre, as it were,

  • of the negotiations.

  • Because it's this question of...

  • One day we're going to call one of these:

  • you've had your chips, haven't you?

  • I can see it already.

  • Oh, God.

  • Not...

  • over my dead body.

  • But anyway, so this question trading off

  • sovereignty and control over access to EU markets

  • is really what the whole thing is going to be about.

  • But on the other hand, as you were saying,

  • that's actually, in numbers terms,

  • a very small part of the British economy.

  • What is far bigger in economic terms, but also

  • as politically potent is the manufacturing areas.

  • So we've got this, you know, for example,

  • the car manufacturing industry in the UK,

  • which is a huge employer in the Midlands and the North,

  • the areas the Conservatives just won successfully from

  • the Labour party.

  • They want to hold those seats.

  • This is no small part of their political task in the next

  • and four and a half years.

  • But if you take back control without compromise,

  • you really are jeopardising those jobs.

  • And you're jeopardising employment in those politically

  • sensitive areas.

  • What sort of a trade off is this?

  • It's kind of bonkers, no?

  • Absolutely.

  • And it is very striking, by the way.

  • I mean, some of the comments that

  • were being attributed to quite senior Conservatives,

  • saying, well, we can't worry about legacy industries,

  • by which they mean the cars.

  • And the British automotive sector

  • is on a downhill slope anyway, which may or may not be true.

  • I mean, certainly the case I can't imagine Japanese car

  • companies building any new models in Britain

  • unless something changes dramatically.

  • But you can't just go wiping out whole sectors.

  • I mean, 150,000 jobs.

  • It's hundreds of thousands of jobs.

  • Dependencies.

  • Fish is a really interesting topic,

  • because for an economist, this is a no brainer,

  • you sell out the fishing industry

  • to get a better deal for the rest of the economy, which is,

  • of course, what happened when we joined the EEC, as it was then.

  • Which is why it's a political issue around which so

  • much resentment has built up.

  • Imagine the resentment that would build up politically

  • if you destroyed the car industry in this country.

  • Yeah.

  • There is the issue of regulatory divergence.

  • But no company that is selling primarily into the European

  • market is going to diverge from EU rules anyway,

  • or put itself in a position where it could find tariffs

  • slapped on it because it's in receipt of state aid, or...

  • it would be judged illegal under European terms.

  • So there is an aspect to which the market might settle this

  • a bit, but, yeah, I mean, there are some really,

  • really horrible trade...

  • I mean, someone said to me a while back the trade policy

  • is something that the UK has not had to think about for decades.

  • Because we've been part of a huge trading

  • block, and they've taken care of the negotiations for us.

  • And they've been a big guy in the scene.

  • So anyone in the EU's negotiating

  • with this side from America and China

  • is that the EU has the upper hand.

  • Trade policy is always corrosive.

  • It always leads to big fights.

  • There's always somebody losing out.

  • There are always interest groups who

  • are against free trade as well, full stop.

  • So trade policy is going to become a hot issue in all kinds

  • of ways that people haven't got...

  • and we sorted of a couple of them.

  • There'll be other ones that hadn't

  • occurred to us at all that will become really, really

  • difficult.

  • So what about the UK services sectors then,

  • including, of course, financial services, which

  • is a huge earner in terms of the tax take

  • and all the rest of it?

  • Does that also come into this very early part

  • of the negotiations?

  • Sajid Javid, the chancellor, has been talking very tough on,

  • we will diverge, we will divert.

  • You've even seen Mark Carney, the outgoing governor

  • of the Bank of England, start to say, OK, well, if Brexit

  • is really happening it might be in the City of London's

  • interests to divert.

  • So what am I going to draw for the City of London?

  • Should I try for the gherkin?

  • Go for a gherkin, yes.

  • I'll go for a gherkin while you chat.

  • There we go.

  • It's not a gherkin without fins.

  • I'm going to do contouring on my gherkin.

  • So, again, one of the issues is that the City of London

  • is not a homogeneous unit.

  • Different people have different interests.

  • It's not even all in London.

  • No.

  • And yet, there is one message coming out.

  • And it is a message that partly has

  • been led by the Bank of England, which

  • is to say, we don't want regulation

  • - we have to be the regulator.

  • We have to set policy, and, therefore,

  • we can't have others regulating for our service industry

  • of our financial services.

  • As a result of which it's very hard

  • to see how you get much more than basic equivalence in which

  • there's sort of mutual recognition,

  • but liable to cancellations with 30 days' notice, I think.

  • It's very hard to see what the UK is gunning for in this area.

  • And it's, I think, to some extent,

  • relying on a view that says the City of London,

  • Britain's financial service industry,

  • is so strong and so powerful that we can risk this as well.

  • We can survive.

  • Because we carry too much clout.

  • I think the concern that people have

  • is not that the financial services industry could fall

  • apart in 2021, but that over time power and influence

  • just moves.

  • And seeps away other global cities.

  • European capitals have made a number

  • of the major financial services companies open hubs

  • within the European Union.

  • At the moment those hubs are quite small.

  • But they starting actually, would be like this bit,

  • if you will, your trading, or whatever it is, coming over,

  • it is a huge issue about which the government

  • has said nothing very notable.

  • And yet it has been the engine of British growth.

  • OK, so what we're concluding is that, really,

  • the first half of this year is where

  • the action is going to be.

  • Are we?

  • No, no.

  • We're not.

  • I think it's where the...

  • Where the noise is going to be.

  • It's where all of the shouting, and grape shots, and anger

  • will be.

  • But then after June, where it's too late to extend again,

  • you're still in negotiation.

  • But you think that's still in play.

  • You think the extension is going...

  • Well, the only reason I say this is because it's politics.

  • And we have a UK prime minister who gets away

  • with stuff, essentially.

  • And how is it in anybody's interests,

  • either the UK or the EU, if we end up

  • in this kind of no man's land?

  • And so that's why my feeling is that it actually

  • does become clearer, if not totally clear,

  • by the midpoint of the year, what

  • the costs and benefits are.

  • I do think you have to factor in, though,

  • just how powerful and strong a position Boris Johnson is in.

  • He has just won an election.

  • He's got a very big majority.

  • He's got a party in no great mood to defy him.

  • We've seen a little bit of defiance

  • this week over the issue around Huawei.

  • But they're not in a mood to have a fight with him.

  • They broadly agree with him.

  • He's going to be there longer.

  • If you were looking at which European leaders are going

  • to be in place in five years time - well,

  • four and a half years time - well, Boris Johnson you'd bet

  • would be there.

  • ...will be gone.

  • Macron, who knows?

  • So actually he's quite stable at the moment.

  • And he's able to use that stability for a while

  • until things start to go wrong down the horizon.

  • So the thing is, Robert, clearly he's got a majority of 80.

  • He's looking more secure than any prime minister

  • that we've been used to in recent years.

  • But that's not saying much, right?

  • And the situation's quite volatile.

  • And also, if you look at the UK's other important alliances,

  • you know, it's quite difficult to say, for example,

  • that our relationship with...

  • I wondered where you were going with this.

  • That our relationship with the US

  • isn't looking all that brilliant in the UK at the moment.

  • The tensions over the UK decision

  • to let in Huawei to run our 5G network,

  • for example, has really annoyed America.

  • The British government is supposed to want this great US

  • trade deal as well.

  • Nothing in terms of the vision of where the Johnson

  • government is actually taking us as an endpoint

  • is as secure as it seems at the moment, I would say.

  • I think that's right.

  • And I think if there's one other area where the rubber has hit

  • the road, or whatever the appropriate metaphor -

  • it is Anglo-US relations, because not only has Britain

  • pushed back against some really ferocious lobbying by the US

  • about whether it lets Huawei into the 5G phone network.

  • And I mean, it was really.

  • And I think the government was stung

  • by the scale of the opposition, and could

  • blowback within cabinet and among often quite loyal people.

  • So I'm going to start with that.

  • They've got the digital services tax,

  • which is due to be introduced in the budget.

  • It's just coming into effect from the budget, which is

  • going to hit the tech giants.

  • And, again, that led to threats from Steve Mnuchin.

  • There'll be retaliation on autos if the UK does that.

  • So there are all these ways in which we have the capacity

  • to upset the US.

  • And for some people, the US trade deal

  • was the prize of Brexit.

  • Having said which, it's very striking

  • that you hear people in government talking

  • about the serious members of government

  • understand that it's the European trade

  • deal that matters.

  • That all this talk about the US is great, and it's wonderful,

  • but actually, it's all about getting this one.

  • So the development of the Anglo-US relationship over

  • the next year is going to be...

  • it's going to be absolutely fascinating to watch.

  • But then, again, US is in an election,

  • which is never the great place to be

  • having these conversations.

  • No, indeed.

  • But what I would say is that even though I wouldn't

  • necessarily bet against you on us

  • keeping to that end of December, 2020 date

  • for having done a final deal, or going

  • over that threatening cliff edge again,

  • I think there is a lot of instability, actually.

  • And there are still a lot of things up for grabs.

  • So what you're saying is, I'm not going to bet against you,

  • but I'd like it to be on record.

  • That's right.

  • That is exactly what I'm saying.

  • But I have got something for you though.

  • I've got your Brexit dividend.

  • You've got one.

  • We have got...

  • it's not one of the special ones.

  • But anyway, 50p, your Brexit dividend.

  • With friendship to all, isn't it?

  • Peace, prosperity, and friendship to all.

  • Yeah.

  • It's been a great journey.

  • Got to get one of those.

  • I'll use them as a pound.

Here we are, Robert.

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