This is nothing like Theresa May’s vassal treaty

Much is still to be resolved, but the new agreement will allow Britain to chart its own economic future

Two cheers for Boris Johnson, who has defied the doubters and doomsters by securing a deal that goes some way to correcting the flaws in Theresa May’s Withdrawal Agreement. The pound jumped, stock markets surged. Yet the idea that this resolves the uncertainties that have been hanging like a cloud over business investment and the wider economy is, I fear, for the birds.

True enough, it potentially removes the threat of a no-deal outcome, but there is no guarantee that it will pass Parliament – and even if it does, it fails to offer much comfort over the exact nature of Britain’s future political and economic relationship with the European Union.

In this regard the agreement merely prolongs the uncertainty, rather than ends it. What is more, it leaves the transition period unchanged, which means there is little more than a year left to hammer out the free trade agreement with zero tariffs and quotas to which the UK Government aspires.

Quite how extensive this FTA might be is left hanging. Commitment to maintain “a level playing field” across a wide range of fields, from the environment to state aid, competition, social and employment standards, and, ominously, “relevant tax matters”, suggests a degree of continued alignment with EU rules and purposes. It is also left unclear as to who would adjudicate in disputes – our own courts or the European Court of Justice. In any case, there is zero chance of all this being agreed in a year unless the UK concedes ground to the EU on multiple fronts. At this stage, the political declaration is essentially a fudge. It decides virtually nothing.

This has the advantage of making the declaration more acceptable on both sides, at least for the time being. Each can read into it what they like. But it sets up future negotiations for repeated standoffs and cliff edges.

Still, as a way of leaving the EU, it is better than the alternatives. Given the choice between this and the continued threat of a no-deal exit, most people would say this. It also goes much further than May’s deal in addressing the underlying purpose of Brexit.

There is not much point in leaving the European Union if only to remain subservient to its rules and regulations. This would be the vassalage of May’s deal – subjugation to rules you have no say in making. The FTA proposed makes divergence much more possible, as well as giving Britain the freedom to strike its own trade deals. Potentially, these freedoms offer a significant economic dividend.

Yet business and finance are very much divided on quite how advantageous such independence might prove in practice. Insurers see some competitive advantage in escaping the restrictions of European solvency regulation, but the banking and big business sectors are on the whole quite happy with the status quo and see plenty of downsides in being answerable to multiple regulatory regimes.

At the time of leaving Europe’s single market, the City will be entirely compliant with EU law, so you might think the EU would have no issue with granting the “equivalence” status that would allow Uk-based finance to continue operating in Europe as a whole. But equivalence tends only to be granted to countries that are converging with the EU. If the intention is to diverge, then it becomes problematic for the EU.

Issues such as this point to how hard it is going to be in practice to achieve the ambitious free trade agreement the Government is aiming for. You cannot both be a part of Europe’s single market and diverge from it. There are going to be some big commercial casualties from these underlying tensions in the years ahead.

DUP opposition to the fiendishly complicated arrangements agreed for Northern Ireland is understandable enough; with a border imposed in the Irish Sea, they see their Britishness being progressively stripped away. A renewed sense of betrayal hangs heavy in the air. Yet from an economic perspective, they could hardly have asked for more. As part of both the European and British internal markets, Northern Ireland will enjoy a status many other UK regions, including London and Scotland, would give their eye teeth for. For them, it is a cake and eat it Brexit that could in time reap big economic benefits as a British gateway to the European Union.

We have a deal, but one that doesn’t really settle matters. It stands more chance politically of squaring the circle than May’s Brexit in Name Only, but it sets course for a relatively “hard” Brexit with uncertain economic outcomes. What’s more, this is just the divorce. How we get along in future has yet to be agreed, and that could be just as difficult a process as the separation itself.

Ultimately, Britain’s course can only be settled by an election, with Johnson’s “FTA Brexit” pitched against Labour’s “workers’ Brexit”, which is in essence just an even softer version of May’s deal. And all the while Remainers believe they are still in with a chance of revocation in a second referendum. This is a long road, with the promised land still nowhere near in sight.