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31 March 2022

Brexit has been disastrous – but neither Labour nor the Tories want an honest debate

The Tories want to boast about a policy that is damaging growth and the opposition is too frightened to explain why.

By David Gauke

For the last two years our focus may have been on Covid and now Ukraine but our relationship with the European Union continues to be of importance. The signs are that the Conservatives want to make Brexit a major issue again by the time of the next general election.

This, in large part, reflects the fact the Conservative Party has little else to say. The coalition that voted Tory in 2019 had more in common on cultural issues than on economics. Every fiscal event exposes the lack of cohesion in the Conservatives’ economic thinking. In a low-growth economy, it will be impossible to achieve falling borrowing, low taxes and the promised additional funding for public services, as Rishi Sunak is discovering.

On boosting economic productivity, the Chancellor is asking some of the right questions and has a three-word slogan — “Capital, People, Innovation” — but has only got to the stage of asking businesses what he should do. It is hard to see how this will translate into anything that will make a tangible difference by 2024. 

There is no obvious agenda on public service reform. Boris Johnson’s big idea this week was that if pupils fall behind in English and maths schools should “intervene and help get them back on track”. Perfectly sensible but not exactly breaking new ground.

To be fair to the government, it has been consumed by two crises — the pandemic and the invasion of Ukraine — but this does not mean it will get a free pass for lacking a record of achievement or exciting new ideas. Its best bet may be to play a variation on an old tune: Keep Brexit Done.

We saw signs of this in the Prime Minister’s speech to the Conservative Party spring conference when he claimed that the Brexit vote was an example of the freedom-loving nature of the British people, who shared this characteristic with the Ukrainians resisting the Russian invasion. For those of us Johnson-sceptics who thought that his handling of the Ukraine conflict had been broadly adequate, it came as a reminder that he does not have what it takes to be a war leader that can unite the nation.

This particular speech was so egregiously crass that even many Brexit-supporting commentators condemned it but there is evidence that it is part of a strategy. The Times recently reported that David Canzini, the Prime Minister’s new deputy chief of staff, told No 10 staffers that the number one priority was delivering on the promises of Brexit. Keeping the Leave/Remain divide alive appears to be the plan.

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One obvious problem with the strategy is that Brexit, as an economic project, is evidently not going well. In its Spring Statement assessment, the Office for Budget Responsibility confirmed its previous assessment that Brexit has cost us 4 per cent of GDP (twice the long-term hit of Covid) with none of the supposed benefits resulting in any material economic contribution. The economic damage has been caused by a decline in trade with the EU, which Sunak was forced to admit was “unsurprising when you change a trading relationship with the EU” and that a change in our relationship “will obviously have an impact”. Unsurprising to those who thought Brexit would be costly would be more accurate. Sunak also maintained that the UK was not becoming a less open economy which, given the trade numbers, is obviously nonsense. We have not even implemented import checks yet and may have to delay them further.

The Prime Minister’s solution to falling trade, by the way, is characteristically vague, boosterist and ignorant. “There is no natural impediment to our exports, it is just will and energy and ambition,” he told the Liaison Committee

The mounting evidence of the economic damage caused by Brexit ought to be a worrying vulnerability for the government, with Labour pushing the line that the reason taxes are having to go up is because economic growth is so weak. It is a very good point.

Pointing out that growth is low is one thing but setting out a convincing explanation that growth would be higher with a change of government is another. There is, of course, an oven-ready solution to low growth, which would be to repair our economic relationship with the EU. Some of the 4 per cent hit to GDP caused by us leaving the single market and customs union could be recovered if we were to move closer to these institutions.

Labour, however, is reluctant to reopen the issue for much the same reason that the Conservatives are keen to talk about Brexit. Both parties assume that if our relationship with the EU is a prominent issue at the next general election, this will favour the Conservatives.

It is a curious state of affairs. The government wants to boast about a policy that is damaging growth; the opposition is keen to show that we are growing slowly but is frightened to explain why. Both parties are being evasive.

We are starting to see a debate about how we restore strong economic growth but both main parties want to discuss anything but the inadequacy of our trading relationship with the EU. This does the country no favours. If we want a stronger economy, this has to be addressed.

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