Chuka Umunna fails to understand incentives - par for the course

Quite what Chuka Umunna’s political beliefs are - other than Chuka Umunna - is somewhat difficult to divine. Other than the general belief that everyone needs to be told, hand-held, through what they wish to do. Centrists of no particular belief are often enough statists after all.

So, it comes as no surprise to find that Umunna doesn’t understand incentives.

Most firms that export only to the EU do not have the paperwork they need to carry on their business after a no-deal Brexit, government figures suggest.

Gosh, you mean bureaucracy and box ticking are an important part of trade with the EU? Who would have thought it?

In more detail:

Firms that export and import beyond the EU already have an EORI number, but registration has become a pressing issue for the 245,000 who trade internationally only within the EU. A no-deal Brexit would be particularly difficult for them because, instead of having current rules apply during a transition, they could find their trading opportunities shut down after 31 October without an EORI number.

Chuka Umunna, the former Labour MP who is now the Lib Dem Treasury and business spokesman after defecting to the party, said he had obtained figures from the government showing that just 66,000 of these traders had an EORI number. He said that at the current rate of progress it would take until 2021 for all firms to get the paperwork they need.

“These figures reveal that an overwhelming majority of UK exporters to the EU are unprepared for a no-deal Brexit and will not be in a position to deal with the mountain of red tape and bureaucracy it will burden them with on 31 October,” Umunna said.

“Pursuing a no-deal Brexit is a wholly irresponsible political choice of the new administration for which there is no mandate and which will put businesses and jobs at risk.”

Well, how big a problem is this? As the government itself says:

Apply for an EORI number

It takes 5 to 10 minutes to apply for an EORI number. You may get the number immediately, but it could take up to 3 working days if HMRC needs to make more checks.

That is, the number who don’t have a number on Monday October 28th could be a matter of mild concern. It isn’t today.

And why isn’t it? Because incentives. People tend to do what they need to do in order to carry on doing what they wish to do. There is no direct incentive today for small firms to apply for such a number. Come mid-October that incentive rather starts to appear. Therefore we expect the rate at which numbers are applied for to rise. Incentives matter, d’ye see?