If civil servants want to play politics with Brexit, they must stand up and be held to account like politicians

If civil servants want to play politics with Brexit, they must stand up and be held to account like politicians

“The Treasury is determined to stay in the Customs Union”.

“The coalition of forces pushing for a softer Brexit is considerable. The Treasury, long an advocate of retaining close economic ties to the EU, is newly emboldened.”

“This piece… on how the Treasury is pushing the Government towards a softer Brexit is well-informed.”

Not the words of a hardline Eurosceptic but the words of Charles Grant, Director of the pro-EU Centre for European Reform, in October and July respectively last year.

Grant has since found himself at the epicentre of the latest row over the leaked Brexit reports, after Jacob Rees-Mogg asked Brexit Minister Steve Baker at the Despatch Box in the House of Commons whether he could:

“…confirm that he heard from Charles Grant of the Centre for European Research [sic] that officials in the Treasury have deliberately developed a model to show that all options other than staying in the customs union are bad, and that officials intend to use the model to influence policy?”

Baker responded that, while Rees-Mogg’s account was “essentially correct”, at the time he “considered it implausible” and stressed the need to be “very careful not to take this forward in an inappropriate way.” Grant subsequently refuted this account of the conversation, which was reported to have taken place at an on-the-record lunch hosted by Prospect magazine at the Conservative Party Conference in October last year.

Prospect subsequently released a recording of Grant’s comments, the transcript of which reads as follows:

“We’re all assuming Britain’s going to leave the Customs Union, I think that is likely but not certain. I think it is certain we’ll leave the EU, it’s certain we’ll leave the Single Market. It is not certain we’ll leave the Customs Union for two reasons.

“Firstly I’m not sure there’s a majority in Parliament for that. The Labour Party is now in favour of staying in a customs union with the EU, you just need a fairly small number of Tory rebels and we stay in the Customs Union.

“Secondly, the Treasury is determined to stay in the Customs Union. In private, Treasury officials say that we know we’re going to stay in it during the transition and hope that when we’re in the transition, people will understand that the economic costs of leaving are rather high. And there is [sic] unpublished papers sitting in the Treasury that certain people are trying to get hold of under FOI requests showing that the economic costs of leaving the Single Market and Customs Union are greater than the benefits of doing trade deals with any other country in the world.”

Steve Baker has since issued an apology, accepted by Charles Grant, admitting that he made an honest mistake in his recollection of events and committing to correcting the record:

“This morning in Parliament, I answered a question based on my honest recollection of a conversation. As I said, I considered what I had understood to be implausible, because of the impartiality of the civil service. The audio of that conversation is now available and I am glad the record stands corrected. In the context of that audio, I accept that I should have corrected the premise of the question. I will apologise to Charles Grant, who is an honest and trustworthy man. As I have put on record many times, I have the highest regard for our hard working civil servants. I will clarify my remarks to the House.”

So much for what Grant didn’t say. What Grant did say, however, nonetheless raises serious questions about the broader conduct of the civil service in this whole affair.

Let us rewind a few days to remember why this row is taking place at all.

This row is occurring because senior officials in the Treasury, with the assistance of officials from DExEU and the Cabinet Office’s Europe Unit, and all acting under their own initiative, prepared a report without permission from ministers or Downing Street. That report was subsequently leaked to the press at a crucial moment during the political debate over the Government’s approach to the end-state of the negotiations, before ministers from the Department for Exiting the European Union had even seen it.

It was, in every sense, a political intervention.

Remainers have since rallied round to defend the civil service from political attack. On principle, they are correct.

Civil servants, following the civil service code and working under the direction of their ministers, should rightly be immune to political attack – this is fundamental to the proper functioning of the civil service within government and the UK’s democratic political system.

But this is not what has happened here. The Treasury, “determined to stay in the Customs Union” as Grant says, has been pursuing its own agenda – contrary to stated Government policy since the Lancaster House Speech in January 2017 – with the aim of “pushing the Government towards a softer Brexit.”

Internal debates are entirely to be expected within government, and had the report been released through official channels with the approval of ministers, Treasury officials could have been rightly aggrieved at their critics’ decision to play the man and not the ball, even if they could have expected more than a little scepticism towards their economic modelling efforts following the debacle of the reports released in the run-up to the referendum. Those reports, however flawed, at least had the full and open support of the then minister in charge, George Osborne.

But by going behind their ministers’ backs and choosing to directly intervene in the rough-and-tumble of domestic politics, they have waived their right to stand behind their ministers for political protection.

It is unacceptable and severely undermines our democracy for civil servants to launch political attacks on their own initiative and then run to hide behind the defence of civil service impartiality, rather than facing up to criticism in the political arena which they themselves have chosen to enter. If they wish to make political interventions themselves, they should go out and get elected first. Either they should have the honour to resign for breaking the civil service code, or they must stand up and take the flak, fair and square, like the politicians they aspire to be.

They cannot have it both ways.

So what of the claim itself that “officials in the Treasury have deliberately developed a model to show that all options other than staying in the Customs Union are bad, and that officials intend to use the model to influence policy”? Rees-Mogg was indeed incorrect to claim that Grant had made that specific claim himself, but there is a degree of coordination to the escalating events which have unfolded in the past weeks which defies coincidence.

First, the CBI – of pro-Euro, pro-ERM and pro-appeasement fame – re-entered the political fray two weeks ago with a major intervention calling for the UK to remain in the Customs Union. Fuel was added to the fire the following week by Philip Hammond’s comments at Davos that there would only be “very modest” changes to the UK’s relationship with the EU after Brexit, before the Treasury’s leaked forecasts landed right on cue this week, ahead of the Cabinet’s final decision, reportedly due next week.

To quote Grant once more: “the coalition of forces pushing for a softer Brexit is considerable”.

That “officials intend to use the model to influence policy” is not in doubt – they have already made a naked attempt to do so. The corresponding question as to whether they have “deliberately developed a model to show all options other than staying in the Customs Union are bad” is more nuanced but essentially answers itself.

By relying so heavily on the ‘gravity model’, with its principal modelling assumption that trade declines with distance, as the central basis for forecasting the UK’s post-Brexit trade – as the pre-referendum forecasts also did – the Treasury have chosen an approach which will necessarily generate lower forecasts for leaving the Customs Union than for staying in it. Treasury officials do not even need to bother running the numbers to know ex ante that their gravity-based model will generate negative forecasts from leaving the Customs Union, since the EU is geographically closer than Britain’s other trading partners. Economists Gudgin, Coutts and Gibson (2016) at the University of Cambridge examined the Treasury’s use of gravity models in its pre-referendum report and found it wanting.

Used in this way, this type of model becomes a blunt object which provides little meaningful insight beyond that which a back-of-the-envelope calculation would. It cannot capture the subtleties of a future UK-EU trading relationship – indeed the leaked report has not even tried to model the Government’s preferred outcome. Nor can it factor in the effects of future domestic policy, the impacts of new technologies, or shifts in global trading patterns. Other terms could be crowbarred into the model to try to reflect this, but the huge levels of subjectivity inherent in doing so render such an approach meaningless in trying to formulate accurate predictions, especially over a timescale of 15 years where the number of unknowns greatly outweighs any factors which can be reliably predicted.

Nor can it take into account any of the significant changes likely to occur in the EU over the next 15 years, with moves towards greater centralisation and away from pro-market policies already looming before the UK has even reached the exit door. The fundamental structural problems of the eurozone have not been fixed and there is no realistic prospect of this happening in the near future, leaving the eurozone uniquely vulnerable to future economic shocks.

In the political context in which they have been deployed, the forecasts are little more than tautologies. Treasury officials might as well say “we have chosen a model where trade declines with distance to show that trade declines with distance.” There is no need for them to “fiddle the figures” since they know they will get to the figures which support their aims before they even start.

Either way, the signs are pointing to the Treasury getting closer to what it wants, by fair means or foul. The Financial Times is reporting that senior officials are considering whether the UK should strike a customs union deal on goods with the EU, with discussions reportedly “live” in Whitehall now. Such a move would undermine a central plank of Theresa May’s Lancaster House agenda and would likely trigger a drastic loss of public confidence in the Government’s delivery of Brexit. Nor would Brexiteers sit back and let this happen quietly.

The fragile truce within government over Brexit has been comprehensively shattered by the Treasury’s ill-advised intervention. If civil servants wish to go on the attack like politicians, they should have the honour to stand up and be held to account like politicians too.

They cannot have their cake and eat it.