Boris Johnson has signaled his willingness to adopt a more interventionist approach to business than many members of his party might like. Exiting the European Union, he said at a Westminster press conference on Friday morning, would give government greater freedom to support struggling British industries when jobs are under threat. Speaking just two weeks ahead of the 12 December election, the Prime Minister also promised to introduce a “buy British” policy in the public sector. This would give preference to local companies over foreign competitors when state contracts are put out to tender. Such a policy would be in breach of strict EU competition laws.
Johnson’s policy announcement echoes arguments made by Frank Field, the former Labour MP and Brexiteer, in an article for Spotlight’s report on manufacturing in September. Both state aid and “buy British” are central planks of the left-wing Eurosceptic tradition. When expressing their opposition to the European project, Bennite Leavers, as well as socialist economists such as Grace Blakeley and Costas Lapavistas, have often cited the limitations imposed by the EU on sovereign governments wanting to take a more activist role in the economy.
Jeremy Corbyn’s lukewarm endorsement of Remain in the 2016 referendum was widely attributed to his dislike for the EU’s economic model. The Labour manifesto itself contains commitments to “support our steel through public procurement”, “put British innovation at the heart of our procurement to support local sourcing and reshoring”, and to “use the power of public procurement to strengthen local jobs and supply chains”.
Johnson’s willingness to adopt central tenets of the Labour Leaver platform is part of a Conservative strategy to target the so-called “red wall” of seats in the North and Midlands. Appealing to traditional working-class voters whose allegiances to Labour are seen to have waned in the wake of the referendum, the Prime Minister has attracted the ire of the Institute for Economic Affairs, a free-market think tank that has traditionally been seen as close to the Conservative Party. Responding to the announcement, Julian Jessop, an IEA economics fellow, said, “the Conservatives are showing little understanding of the benefits of free trade, let alone the benefits of Brexit. A ‘buy British’ policy would make it harder for the public sector to access the best products at the best price, wherever they happen to be made. As a result, consumers or taxpayers will pay more for a lower quality service. Everyone will suffer if there is less choice and less competition.”
As this week’s New Statesman leader attests, far from Brexit facilitating a “Singapore-on-Thames” style programme of tax cuts and deregulation – a programme that organisations like the IEA and many in the Conservative Party would approve of – “the Conservative manifesto instead betrays a more statist turn,” embracing Keynesian fiscal stimulus measures, abandoning budget surplus targets and outlining plans to borrow for investment that are reminiscent of Labour’s 2017 election manifesto.
The Institute for Government think tank reports that in 2015 the UK’s total public procurement market was valued at over £260 billion, or around 13 per cent of GDP. Proponents of “buy British” policies say giving first preference to native companies would strengthen local economies, producing multipliers and preventing the offshoring of dividends and profits abroad. Opponents say it amounts to Trumpian protectionism, displaying a beggar-thy-neighbour approach that forces the Treasury to pay more for uncompetitive goods and services. Earlier this year, at the height of concerns about the future of British Steel, EU state aid rules were thrown into the limelight as Corbyn called on then-Prime Minister Theresa May to rescue the ailing company.
Allie Renison, Head of Europe and trade policy at the Institute of Directors, an industry body, said the proposals “do not fit easily with ambitions for a ‘Global Britain’. Indeed they suggest a retreat away from free and open markets.”
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