In an earlier report we noted the potential for the British government to be perceived as beholden to the influence of foreign money. Calls for greater donor transparency have gone largely unheeded, and the use of political donations is currently under scrutiny at Westminster in at least one of the several ongoing inquiries into government conduct. However, the strong showing in local elections, a huge majority in Westminster, and the alarming rate of demise of the traditional opposition Labour Party, indicate that the political winds are blowing in favour of Prime Minister Johnson’s party, if not necessarily in favour of his other role as Minister for The Union. Even at Westminster, however, things are not entirely comfortable for the government.
Currently, there are seven inquiries into various aspects of lobbying involving ministers and/or senior civil servants at Westminster. Most are akin to research rather than investigation in that they are unlikely or unable to lead to any serious sanction of individual or collective behaviour. One inquiry is led by a corporate lawyer in a law firm which is a Tory fund donor and which has undertaken work to oppose greater transparency in lobbying. His report will be presented to the Prime Minister for consideration. Another is led by a senior civil servant who will also report to the Prime Minister. It is unsurprising, therefore, that some have described this process as being akin to the Prime Minister marking his own homework. Opposition claims of “Tory sleaze” may have merit (subject to the outcome of investigations) but do not appear to have influenced public opinion, a situation in itself which raises questions about the condition of British democracy.
Financial institutions acknowledge the political risks of Scottish independence but do not appear to be hedging against that scenario. In truth, there is very little prospect of an early referendum on independence while Holyrood prioritises dealing with Covid. That said, it is already clear that the new Scottish government will legislate for a referendum, possibly within the first half of the new legislative term. Polling indicates that a vote on independence is simply too close to call at this stage, and so UK investors doubtless feel that there are enough political risks on their plate in dealing with Brexit and Covid just now.
Nevertheless, a clear trend to emerge from the elections is that the ruling Conservative party at Westminster has become the party of England (and, some would argue, English nationalism), while Scotland has returned a pro-independence majority to Holyrood; meanwhile a struggling Labour party has done surprisingly well in Wales. The situation in Northern Ireland (NI) brings further separatist momentum of its own – see below.
Although the Scottish National Party failed by one seat to achieve an overall majority – a difficult target to reach under a voting system geared at producing widespread representation, often via coalition – it will command a pro-independence majority in alliance with the Greens. Already, Scotland’s First Minister, Nicola Sturgeon, has made clear her view that an independence referendum has been mandated once the priority of dealing with the pandemic has been achieved.
Meanwhile, in case you missed it, Northern Ireland reached the grand old age of 100 this month, and is still displaying a high degree of fighting spirit – pun intended. A centenary would normally be a cause for celebration and yet the prospects for Northern Ireland’s unionists are not cheerful. Events to mark the centenary are low key, partly because of the pandemic and partly because the divided nature of the polity itself necessitates a sensitive and non-triumphalist approach, something which has not always been evident in NI’s troubled history.
At this historic moment, however, Irish unionism finds itself a house divided, as evidenced by the resignations of the leaders of NI’s two main unionist parties. One can no longer speak of Lord Craigavon’s “Protestant Government for a Protestant State”; aside from the iniquity of the sentiment in the turbulent context of Irish affairs, demographic change in NI has rendered the phrase obsolescent. For unionists this might not matter too much in the short term, there being little or no prospect of a referendum on Irish unity on either side of the border. However, taken in conjunction with the effect of Brexit’s Northern Ireland protocol, and the effective creation of a sea border between NI and GB, there is growing unease in unionism regarding the long-term prospects for the union.
It is ironic that the ruling Conservative and Unionist party should have signed up to the NI protocol and consequent sea-border, an act which makes clear the irrelevance of NI to members of that party. A poll conducted among members of the Conservative party in June 2019 famously indicated that 63% and 59% respectively would be willing to countenance the loss of Scotland or NI from the United Kingdom in order to achieve Brexit. Those who espouse “Global Britain” include many who are prepared to reduce the UK to England and Wales, an unbalanced rump union. Conservative and Unionist belief is clearly being bested by a form of English nationalist sentiment, one of the underlying motivations of Brexit, and a powerful stimulus to populism in the UK.
What does all this mean for the conduct of the business of government, against the background of several inquiries into the behaviour of ministers, including the Prime Minister? Overseas investors in the UK will already have priced in the effect of Brexit – though its final costs are yet to be made clear. No-one would be rash enough to predict the imminent demise of a political union that has lasted for centuries. Prime Minister Johnson is noted as a highly effective campaigner, and will bring those skills to bear on behalf of the status quo. However, no one would be imprudent enough to ignore the steadily mounting evidence that the governing Conservatives are the party of England, while nationalists are consolidating their control of Scottish affairs. Meanwhile, Brexit has undermined an already fragile Peace Agreement in NI, where unionism feels under serious threat; it is perhaps ironic that the catalyst for that threat – Brexit – should be fuelled by English rather than Irish nationalism. While investors may not yet be hedging against the breakup of the United Kingdom, it does seem increasingly clear that the UK poses political risks which will have to be taken into account in the near term.
Mark McGuigan is TSG’s geopolitical risk advisor specializing in the CEE region. He is a former financial sector intelligence consultant and an ex-RAF officer. He writes here in a personal capacity. TSG is a research (including due diligence) specialist, also offering Ethics Compliance and Advisory services to its clients. TSG offers expertise in Eastern Europe, as well as East Asia.