Excuse me, this isn’t the Brexit I ordered.” Like a diner sending back the house red for not being a vintage claret, leading Conservatives are complaining that their flagship policy does not meet expectations.
This unhappiness was best articulated by cabinet minister and chief Brexit negotiator Lord Frost in his pre-Christmas cabinet resignation. Lamenting the “current direction of travel”, Frost complained that Boris Johnson is resiling from the dream of “a lightly regulated, low-tax, entrepreneurial economy, at the cutting edge of modern science and economic change”.
Other economic liberals voice similar concerns. Iain Duncan Smith, former Tory leader and co-author of a report for Downing Street on potential post-Brexit reforms, wrote recently: “we have yet to see the Government seize this opportunity” of moving from the “EU’s deeply risk-averse precautionary principle to . . a proportionality principle”.
With personal and corporate tax rises just introduced, ministers pledging not to scale back employment rights and an increasing role for the state, the buccaneering post-Brexit vision of a low-tax, low-regulation UK seems more remote than ever. So long Singapore-on-Thames, hello Sweden.
Instead, ministers are left scrabbling around for totemic but inconsequential measures like restoring the crown stamp on beer glasses. Brexit was meant to be the shock treatment that forced Britain back into free-market entrepreneurial ways. Small wonder some Tories are disappointed and are organising to pressure Johnson into delivering the Brexit they wanted.
In part, this is due to the pandemic, which raised spending and diverted ministerial attention. But it also reflects a basic disconnect between Brexit’s leaders and its supporters. For many rank-and-file Leavers, Brexit was never about shrinking the state. Not for nothing did the Leave campaign pledge to spend savings from an EU exit on the NHS. Johnson’s 2019 majority is remembered for his pledge to “get Brexit done”; almost as prominent were commitments to invest in health, schools and policing.
Remainers might at this point permit themselves a small chuckle. Free-market Leavers did, after all, secure their win on the coat tails of this larger, less laissez-faire group. And yet they are right to be frustrated. Even opponents of Brexit should be able to see that, having broken free of the Brussels orbit, a different approach to regulation can bring economic and social benefits.
The clearest changes so far are new immigration and agricultural subsidy regimes, neither very light touch. The state aid and takeover regulations seem more designed to facilitate governmental intervention than prevent it. In some sectors, wage inflation is practically an official policy. The new chemical safety regime offers more domestic bureaucracy for multinationals that need also to comply with EU regulation. Ministers are keen to break free of EU data laws but are rightly nervous of straying too far lest the UK lose its European data adequacy certification. In almost every trade-off, valuable market access was surrendered for a sovereignty that is being little used.
On the size of the state, Tories are in an uphill struggle. MPs may fret about tax levels but neither they nor their voters evince much appetite for a return to austerity. Tax or spending cuts, if found, will be incremental rather than transformational.
But on regulatory reform, 2022 needs to be a year when potential Brexit dividends are pursued. For reasons of legislative simplicity, the UK imported most EU law on exit, promising to prune it afterwards. Yet progress is glacial, initiatives are stifled by departmental fiefdoms and the lack of a strong cabinet champion.
The Treasury is still to deliver long-promised reform to the Solvency II regulations to ease capital requirements, giving pension funds more flexibility to invest in UK infrastructure and business. It is arguable whether this will free up as many billions as hoped but, for a country meant to be newly nimble, the process is achingly slow. Rules on fintech and challenger banks were also identified by Duncan Smith’s task force as ripe for reform.
Agricultural genomics is another area where the UK could benefit by breaking free of EU prohibitions. Gene editing (which works with an organism’s existing DNA) can increase crop yield, reduce pesticide use and enhance certain foods’ health benefits. By actively supporting research into gene-edited crops, the UK (or at least England) could build a new base for biotech and agri-science. There may also be scope for some, more limited, flexibility on research into genetic modification.
Covid has surely made the case for a more agile regime for clinical drug trials and easing rules on the use of data for advances in artificial intelligence and machine learning in the health sector. It is unclear how far the UK will be able to shift data regulation but ministers should push as far as they can in turning the UK into a health-tech hub.
The dream of liberal Brexiters of an ultra-competitive low-tax state may have faded. But Johnson could use the political boost of delivering reforms for his disenchanted MPs. More important, he owes it to the economy to make the UK as attractive to business as possible. Whether one sees Brexit as fabulous or foolhardy, it is absurd not to take the wins that are available.
Tories are wondering what happened to the Brexit they promised
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