Tue. Jan 18th, 2022


Excuse me, this is not the Brexit I ordered. ” Like a meal that sends the house red back because it is not a vintage claret, leading conservatives complain that their flagship policy does not live up to expectations.

This unhappiness was best expressed by Cabinet Minister and Chief Brexit negotiator Lord Frost in his pre-Christmas cabinet resignation. Regrets the “current direction of travel”, Frost complained that Boris Johnson resists the dream of “a lightly regulated, low-tax, entrepreneurial economy, at the forefront of modern science and economic change”.

Other economic liberals express similar concerns. Iain Duncan Smith, former Tory leader and co-author of a report for Downing Street on possible post-Brexit reforms, wrote recently: “we have not yet seen the Government seize this opportunity” to change from the EU’s deep risk-averse precautionary principle. . a principle of proportionality ”.

With personal and corporate tax increases just introduced, ministers promise not to scale back employment rights and an increasing role for the state, the exciting post-Brexit vision of a low-tax, low-regulation UK seems more remote than ever. So long Singapore-on-Tems, hello Sweden.

Instead, ministers are left to scramble for totemic but unimportant measures such as restoring the crown stamp on beer glasses. Brexit was meant to be the shock treatment that forced Britain back into free market entrepreneurial ways. No wonder some Tories are disappointed and organizing to pressure Johnson to deliver the Brexit they wanted.

This is partly due to the pandemic, which increased spending and diverted ministerial attention. But it also reflects a basic decoupling between Brexit’s leaders and its supporters. For many delegates, Brexit was never about shrinking the state. The Leave campaign did not promise to spend in vain saving an EU exit on the NHS. Johnson’s 2019 majority is remembered for his promise to “get Brexit done”; almost as prominent were commitments to invest in health, schools and policing.

Remaining can afford themselves a small laugh at this point. After all, free market leavers have secured their victory on the tails of this larger, less laissez-faire group. And yet they are ready to be frustrated. Even opponents of Brexit should be able to see that a different approach to regulation can bring economic and social benefits, after breaking free from the Brussels orbit.

The most obvious changes so far are new immigration and agricultural subsidy regimes, also not very light touch. The state aid and takeover regulations seems more designed to facilitate government intervention than to prevent it. In some sectors, wage inflation is virtually an official policy. The new chemical safety regime provides more domestic bureaucracy for multinational companies that also have to comply with EU regulation. Ministers are keen to get rid of EU data laws, but are rightly nervous about going too far so that the UK data adequacy certification. In almost every consideration, valuable market access has been sacrificed for a sovereignty that is rarely used.

Over the size of the state, Tories is in an uphill battle. MPs may be concerned about tax levels, but neither they nor their constituents show a strong appetite for a return to austerity. Tax or spending cuts, if found, will be incremental rather than transformational.

But over regulatory reform, 2022 should be a year when potential Brexit dividends are pursued. For reasons of legislative simplicity, the UK has introduced most EU exit legislation, promising to cut it accordingly. Yet progress is enormous, initiatives are stifled by departmental leeway and the lack of a strong cabinet champion.

The Treasury will continue to deliver promising reforms to the Solvency II regulations for a long time to facilitate capital requirements, giving pension funds more flexibility to invest in UK infrastructure and business. It is debatable whether it will release as many billions as hoped, but for a country that is meant to be new brisk, the process is bitterly slow. Rules on fintech and challenger banks have also been identified by Duncan Smith’s task force as ripe for reform.

Agricultural genomics is another area where the UK can benefit by being exempt from the EU ban. Gene editing (which works with an organism’s existing DNA) can increase crop yield, reduce pesticide use and improve the health benefits of certain foods. By actively supporting research into no-edited crops, the UK (or at least England) can build a new base for biotechnology and agri-science. There may also be room for some, more limited, flexibility on genetic modification research.

Covid has certainly called for a more agile clinical trial of clinical trials and the easing of rules on the use of data for advances in artificial intelligence and machine learning in the healthcare sector. It is unclear how far the UK will be able to shift data regulation, but ministers should push as far as possible to turn the UK into a health technology center.

The dream of liberal Brexiters of an ultra-competitive low-tax state may have faded. But Johnson could use the political boost to deliver reforms for his disillusioned MPs. More importantly, he owes it to the economy to make the UK as attractive as possible for business. Whether one considers Brexit to be fabulous or foolish, it is absurd not to take the victories that are available.

robert.shrimsley@ft.com



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