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3 February 2022

Why Brexit is disappointing even its supporters

The reality that Leavers are facing is that the promised benefits of Brexit are hard to achieve while the costs are hard to avoid.

By David Gauke

It is time to take a break from writing articles about why Boris Johnson should resign. I have written several of those in recent weeks and he still has not done so. Maybe one more denunciation would do the trick, but I might give it a week.

Instead, let us have another look at Brexit.

Monday 31 January marked the second anniversary of our departure from the EU. The government took the opportunity to publish a paper, The Benefits of Brexit, which sets out “how the UK is taking advantage of leaving the EU”. Wherever you stand on the wisdom of Brexit, the response has been much the same: is that it?

It is no surprise that those of us who were sceptical about the case for leaving the EU are underwhelmed by the benefits set out. “Reintroducing our iconic blue passports”, “reviewing the EU ban on imperial markings and sales” and “enabling businesses to use a crown stamp symbol on pint glasses” were among the highlights. I doubt many Remainers will reconsider their positions on the basis of these achievements.

Of more interest has been the response of those who supported Brexit. My old friend Daniel Hannan was a central figure in the Eurosceptic movement and in Vote Leave. Having read the government’s paper, he asked on the ConservativeHome website: “Two years after Brexit, and a year after the end of the transition, how are we doing?” He is not encouraged. “Overall, I’m afraid, the document is thin, watery, tasteless gruel.”

Hannan’s argument is that the government is too cautious, too beholden to vested interests, too frightened of the “hard work and short-term unpopularity” that change involves. Officials get much of the blame but Hannan also says that ministers “must accept collective responsibility here”.

He points out that he favoured a softer, Swiss-style Brexit to avoid the “high price” of “the rows we went on to face over Northern Ireland” but that he was content to go along with “absolute regulatory freedom”. His difficulty, however, is that “it is idiotic to pay that price and then not use the freedoms it bought.”

Hannan is not alone. The former Brexit minister David Frost has been making similar noises and there are many Conservatives MPs who, to use the shorthand, favoured the “Singapore model” for the UK who are disappointed. If many of them conclude that the fault lies with the Prime Minister this may have significant implications for his future. But the responsibility for failing to pursue Brexit as the second act of Thatcherism does not fall on Johnson’s shoulders but on the political and practical realities.

Neither the 2016 referendum nor the 2019 general election was fought on the basis that Brexit would usher in a brave new world of deregulation. Ever since Margaret Thatcher’s 1989 Bruges speech, Conservative Euroscepticism has viewed the EU as a soggy, corporatist, social-democratic project. But that was not the argument that were put before the British people. Instead, both the 2016 and 2019 campaigns reassured the public that employment and environmental protections would be maintained. To the extent that deregulation was mentioned, it was generally in the abstract and not the specific.

The coalition of support that backed Brexit in 2016 and Boris in 2019 was not formed on the basis of a unified view on economic matters but on cultural issues such as immigration. The consequence is that it is now harder for the Conservatives to pursue the free-market economic policies that Hannan demands. Hannan complains (rightly, in my view) that the Prime Minister overruled the Trade Remedies Authority recommendation to repeal some EU steel tariffs “seemingly at the behest of some MPs in steel-producing constituencies”. Well yes, that was always more likely to happen once the Conservatives focused on winning industrial seats by appealing to nationalist voters.

As for the practical issues, regulatory divergence comes at a cost. Let us take data protection, for example. It is perfectly reasonable to argue that the EU system can be improved upon but if our system diverges, the EU may conclude that our protections no longer provide the equivalent of theirs — at which point British businesses will face additional administrative burdens. “Absolute regulatory freedom” in reality is inevitably constrained by the fact that businesses operate across borders.

Hannan highlights financial services as a potential area of reform and, to be fair, there are few equivalence arrangements to lose. There may be useful reforms that could be undertaken but very few in the sector think such reforms will be transformative. It turns out that most EU regulations (often heavily influenced by the UK when we had a seat at the table) are really not that bad.

The lesson of the last two years is that for all the grand talk of deregulatory opportunities in the abstract, pursuing such an agenda in the specific usually comes with significant risks but with a very limited upside. 

This point will be of particular relevance if we have a Conservative leadership contest. No doubt there will be candidates promising a bold deregulatory agenda. This time sceptics and enthusiasts alike should demand that such promises are clear and specific and face proper scrutiny.

In the meantime the country pays a high price for regulatory freedom — as events in Northern Ireland continue to demonstrate — but the benefits continue to disappoint even the most ardent of Brexiteers.

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