In the run-up to the Brexit referendum in 2016, I shared with most pro-Europeans a profound sense of dread at the prospect of a Leave vote. For one thing, I couldn’t see how the British state would manage to implement the decision. The practical challenges of leaving a highly-integrated trade bloc looked insurmountable. The instability would damage our international reputation, not to mention be an immense distraction from domestic issues. And if different parts of the UK voted in different ways, the Union could fracture.
More than any of this, however, I worried about what economic forces would be unleashed. You only had to listen to Brexit’s chief proponents, people like Daniel Hannan and Jacob Rees-Mogg, talk about the kind of country they wanted to live in. We needed to slash the size of the state, the argument ran, cutting worker protections and tax rates for businesses. The closer we moved to the uber-capitalist US model, and the further from European social democracy, the better. It was time to let the free market rip. For those on the centre left like me, this was among the most important reasons for voting Remain: to stop this future coming to pass.
It never did. Five years since the vote, Brexit has gone as disastrously as predicted—except in this respect. The second Thatcherite revolution has not materialised. In fact the direction of travel seems to be in precisely the opposite direction: the government has pledged to “level up” the UK and better share resources around the country. The pandemic has necessitated emergency spending but the government’s change in approach is more fundamental than this: Boris Johnson’s electoral project depends on him distancing himself from the austerity platform of his predecessors.
In this respect, Brexit Britain is turning out to be not quite as expected. What does that mean?
To understand the intellectual vision that animated the Brexit project, one of the best places to look is the short 2012 book Britannia Unchained and its promotional material. The UK has a “bloated state, high taxes and excessive regulation,” it explains. “We cannot afford to listen to the siren voices of the statists”; only through radical reform can we prevent “an inevitable slide into mediocrity.” Three of the five authors—Dominic Raab, Kwasi Kwarteng and Priti Patel—were among the most vocal Leave campaigners on the Tory benches during the referendum. All three are now senior members of the cabinet, along with a fourth co-author, Liz Truss.
They were not the only ones to realise Brexit could serve as a Trojan horse for laissez-faire economics. Membership of the EU bound the UK to uphold certain standards of social and environmental protection; once we had left, much of that could theoretically be rolled back. “It is a fact that while we remain a member of the European Union, our hands are tied and we are powerless to act on reducing the burdens of red tape,” said Patel before the referendum. “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,” she added on another occasion.
The ideal was sometimes described as “Singapore-on-Thames,” with the UK as a successful low-tax, light-touch regulatory regime off-shore from the main landmass. Writing for the ConservativeHome website, in an article titled “A Singapore-style economy isn’t a threat, it’s a growth strategy,” Hannan explained that “lower tariffs, lower taxes and lower regulations do not bring lower wages.”
Meanwhile, outside the customs union the UK would have the freedom to set its own tariffs. We could open up protected industries to global market forces, increasing competition in sectors like agriculture and textiles and lowering prices for consumers. Rees-Mogg in particular was a champion of this idea.
The free-market case for Brexit drew intellectual inspiration from think tanks like the Thatcherite Institute of Economic Affairs, whose director would later offer one of the clearest statements of intent: “Brexit provides us with a once-in-a-generation opportunity to radically trim the size of the state and cut the regulatory burden.” The pro-Brexit Economists for Free Trade, beloved of the hardline Brexit caucus in parliament, predicted turbo-charged growth from a bonfire of red tape.
It was against this backdrop that Brexit seemed so offensive to social democrats. Bluntly, a Leave victory risked putting these people in charge. For those of us who believed the country was best served by a generous safety net, strong protections for workers and robust public services funded by high levels of taxation, it was another reason to back Remain. Indeed, we told left-wing Brexiteers—or Lexiteers—that they were pursuing a fantasy, entirely detached from the reality of Brexit as a hardline deregulatory mission.
But were we wrong? Boris Johnson’s government has delivered a hard Brexit: we have left the single market and the customs union. But the uber-capitalist utopia is simply not in prospect.
Instead, the government seems to be embarking on a very different kind of project. Johnson paid homage to the idea of deregulation during the referendum campaign, and he channelled support from free-market ideologues on his way to the party leadership. But it was different from the start. In office he renounced the spending cuts made by George Osborne, and with the general election victory at the end of 2019, austerity became an electoral impossibility: harsh cuts were now inconsistent with Johnson’s voting coalition, which relied upon poorer areas in the former industrial north whose constituents had no appetite for further retrenchment.
The March 2020 Budget confirmed the shift. The new chancellor Rishi Sunak—himself a Brexiteer—unveiled what felt at the time like a staggeringly generous package, with an immediate stimulus to help buttress the economy against the emerging Covid threat, which formed part of a much larger boost over five years. Borrowing more was the “right economic thing to do,” he said, since interest rates were at a “multi-decade low.” The right-wing Adam Smith Institute called the change of approach “seriously concerning.”
The spending ballooned as the virus spread. With emergency help for the NHS and other public services, the (repeatedly extended) furlough scheme, tax cuts, grants to businesses, the boost to universal credit and more, borrowing reached a peacetime record. Radical measures on the economy were necessary; they were hardly dogmatically right-wing. Proper capitalists would arguably have desired the destruction of businesses which failed to adapt. (Hannan opposed rescue of the banks in 2008 for this reason). Instead the government has spent extraordinary sums in a bid to keep them viable.
There have, it is true, been moments when the austerity mindset has reasserted itself, notably on the 1 per cent nurses’ pay rise and most recently the derisory fund to help pupils catch up on lost learning. Sunak has nodded at his duty to balance the books. We will have to see what happens. But Johnson’s priorities appear to be elsewhere: the momentum is more with the idea of “building back better.” The public will expect permanently higher NHS spending.
An innovation taskforce—one of a handful of similar initiatives—has proposed regulatory reforms, but the weight of opinion is against slashing standards.
No one is clamouring for the US model; even talk of a trade deal with America has been met with intense opposition from the agricultural lobby and consumers who fear compromising food safety. As for cutting environmental red tape, the UK is more committed than ever to tackling climate change ahead of hosting the COP26 climate conference in Glasgow in November. On tax, all the talk in the wake of the G7 summit is about asking corporations to pay their fair share. The state has even taken greater control of the railways.
Brexit has in many ways been disastrous. Most economists, disentangling its costs from those of the pandemic, find it has caused immense economic damage, estimated in one study at £40bn in lost output over the next two years. It has turbo-charged the Scottish independence movement and wreaked havoc in Northern Ireland. It has unleashed populist attacks on institutions including parliament, the courts, the BBC and the civil service. And the UK has brought forward draconian immigration and asylum reforms. But it has not, yet, been a project of economic libertarianism.
It turned out that the same coalition which made Brexit possible thwarted its most laissez-faire interpretation. The constituencies which backed Leave in 2016 and then voted Conservative for the first time in 2019 had no desire for a smaller state, while farmers and fishermen—both totemic Brexit constituencies—want more protection, not less. Johnson is simply much keener to retain their support than he is to remodel the British economy. Far from completing the second Thatcherite revolution, he once described himself as a “Brexity Hezza.”
The first lesson is that those of us who warned of a future of anarchic capitalism were probably wrong. The second point is about the indeterminacy of Brexit. Even some of its most vocal champions didn’t know what Brexit meant.
In politics, you don’t always get what you bargained for. Much to the frustration, one expects, of Rees-Mogg, Hannan and their fellow travellers, who appear to have achieved everything and nothing that they wanted.
