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18 September 2017

There is no Commons majority for Boris Johnson’s low tax, low regulation Brexit

The loss of the Conservatives' majority denied the party the option of pursuing a free market route. 

By George Eaton

In his leadership bid Daily Telegraph Brexit article, Boris Johnson resurrected the vision of a low tax, low regulation UK. Many Conservatives have long aspired to use EU withdrawal as a Trojan Horse for a smaller state. 

Back in January, Chancellor Philip Hammond warned that Britain would change its “[economic] model” if the EU refused to grant the government’s preferred deal. But after Hammond later ruled out “unfair competition in regulation and tax”, Johnson has sought to claim this mantle. “It [Brexit] means simplifying regulation and cutting taxes wherever we can,” the Foreign Secretary wrote.

Before the EU referendum, Johnson’s ally, International Development Secretary Priti Patel, declared: “If we could just halve the burdens of the EU social and employment legislation we could deliver a £4.3bn boost to our economy and 60,000 new jobs.”

But there is one decisive obstacle to this programme: parliament. Had the Conservatives won the large majority they expected, the possibility of a free market Brexit would remain. But without a majority at all, it is inconceivable. The Tories simply do not have the votes they need to slash taxes and regulation (there would be enough rebels to eradicate the government’s slim working majority of 12). Britain will not become the Hong Kong of the West (the oft-cited Singapore is a hotbed of interventionism.)

It was precisely for this reason that Hammond retreated in July. Though the hard Brexiteers blame the “soft” Chancellor for repudiating this path, the true blame lies with the voters. Had the Tories stood on the libertarian manifesto proposed by some, they would likely have fared worse, not better. As Labour’s performance demonstrated, many voters crave a larger state.

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Indeed, if the government is ever to raise the revenue required to deliver £350m a week extra for the NHS (as promised by Johnson), it will need to increase, not reduce taxes (indeed, Labour has considered embracing the policy itself). Since the UK’s net EU budget contribution was, in fact, £252m a week last year, the government could not meet the £18.2bn pledge simply by ceasing EU payments. 

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Were Johnson, or another Tory, to soon replace May, the Conservatives could of course seek a new mandate from the electorate. But as long as the risk of allowing Labour into power remains, Tory MPs will not vote for an early contest.