On Brexit, the Tories have fallen prey to magical thinking
Ministers still wish away hard trade-offs without a clear vision for prosperity if there is no deal
Jonathan McHugh illustration of Camilla Cavendish column 'On Brexit, the Tories have fallen prey to magical thinking'
© Jonathan McHugh 2020
December 11, 2020 4:00 pm by Camilla Cavendish
In the weeks following the Brexit referendum vote, I sat with two of the wisest heads in government — the late Lord Heywood and Sir Oliver Letwin — to parse the different courses the UK might take to exit the European Union. Experts came and went, and possible permutations were sketched: "Canada-plus", "Norway" and other regimes. It was obvious there would be a trade-off between sovereignty and market access. The only question was the balance the next prime minister would strike between the two. This in turn would partly be driven by his or her economic vision.
Four years later, the UK and EU stand on the cusp of a momentous event. Yet the UK is still trying to wish away the trade-offs, with no coherent vision for future prosperity. What many Leavers thought was going to be buccaneering Britain is turning out to be a Britain engorged with Covid-led state intervention, no serious prospectus for deregulation, and few radical policies to help enterprise either.
For a long time, I assumed there must be a secret plan. By seeking a thin trade deal, ministers have already put up big trading barriers to our nearest and biggest market. It would be highly risky to do that without a cunning alternative to support jobs and livelihoods. European leaders have thought the same: the British state, with its high-handed attitude, must have something up its sleeve.
That is why, fearing unfair future competition, Brussels is insisting that any deal must guarantee a "level playing field" in areas like labour standards and restrictions on state aid.
The threat is surely exaggerated. Far from becoming a Singapore-on-Thames, the UK has been heading in the opposite direction. Boris Johnson has embraced a more social democratic model with big spending, social protections and environmentalism. There is little now that suggests a serious desire to depart from most EU standards. As a result, the EU and UK are locked in a row that may tip both sides into a damaging no deal, on a mistaken premise.
The full horror of this impasse now seems to be dawning on some Brexiters. Many ministers seem to be squinting at events, barely able to look and instead busying themselves with trivia. The culture secretary wants Netflix to warn viewers that the TV series The Crown is a fictional dramatisation. The education secretary claims Britain got a head start on vaccinating against Covid-19 because "we're a much better country". Jingoism and nostalgia often rise as empires crumble.
Regardless of how anyone voted in 2016, we all want our country to prosper. But now we've reached the eleventh hour, I'd like someone to say what the plan is and to be reminded: why exactly are we doing this?
Ever since Theresa May declared in January 2017 that the UK could not "possibly" stay in the single market or a full customs union, most Tories have been unwilling to accept the implications. A few Leavers tried to develop a prospectus for how to forge a new path in the world — such as hedge fund manager Paul Marshall. But ministers didn't listen.
As a result, the UK is now underprepared for the situation it has triggered. If global Britain is to be a dynamic trading nation, for example, we will need excellent transport links and logistics. Yet Heathrow has been overtaken by Paris Charles de Gaulle as Europe's busiest airport, in part because ministers dithered for so long over passenger testing for Covid-19. And some UK ports are so congested and inefficient that shipping companies have imposed surcharges on exports to Britain.
Reducing red tape is another obvious area where Brexit could bring benefits. But many companies want to maintain equivalence to protect their supply chains. The UK also wants higher standards than Brussels on animal welfare. This doesn't feel like a free market drive for regulatory divergence. Meanwhile, at least over the short term, Brexit is leading to reams of increased paperwork.
One good idea is to create an Office of Regulatory Assessment to illuminate the cost of regulatory burdens on businesses and to help boost economic growth, as similar reforms did in Canada 20 years ago. Yet no such body exists, despite the apparent belief of Mr Johnson's former adviser Dominic Cummings in deregulation. The proposal instead comes from the Campaign for Economic Growth, a new ginger group, which is alarmed by the lack of progress.
Perhaps the pandemic has derailed this kind of detailed thinking. But even before Covid-19 struck there was no strategy to achieve the campaign promise that Brexit would "see a pent-up tidal wave of investment into our country". The 2019 Conservative manifesto contained this statement but didn't say how. Beyond a few paragraphs about technology and R&D, it said little about business. At the subsequent election, Mr Johnson forged a coalition which has only accentuated the government's desire to spend, raise the minimum wage and "level up" the north. There is no concomitant desire to protect the service industry in the south, or plan to generate the needed revenues.
Of all the brilliant minds I met in Whitehall's echoing corridors in June 2016, none foresaw how much the Conservative party would fall prey to magical thinking. However damaging a "no deal" will be, one Tory moderate told me this week that it might be the only way to force the government to get its act together, accept the trade-offs it has so far wished away, and start to think seriously about how Britain can prosper alone. Deal or no deal, that work starts now.
The writer, a former head of the Downing Street policy unit, is a Harvard senior fellow
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