ANDREW NEIL: A year after quitting the moribund EU, why aren’t Boris Johnson and his Brexiteers making the most of our freedom?
That would be too ridiculous for words.
The plan was to strike out in a new and distinctive direction, free of Brussels’s red tape and with an emphasis on entrepreneurial endeavour, less government and lower taxes.
Yet on the eve of tomorrow’s first anniversary of a Brexit trade deal with the EU, Britain has never looked more European.
The continental economies of Europe are notorious for saddling their workers not only with high income taxes, but onerous supplementary ‘social charges’ in order to pay for generous health and welfare benefits. That is now our direction of travel too.
From next April, National Insurance contributions (NICs) for both employers and employees will rise 1.25 per cent, supposedly to pay for social care and the always cash-thirsty NHS.
Surely it cannot have been the intention of those who fought so long and hard to take Britain out of the European Union to make Brexit Britain more like Europe. Pictured: President of the European Commission Ursula von der Leyen (centre right), President of the European Council Charles Michel (front R), French President Emmanuel Macron (L), Azerbaijani President Ilham Aliyev and Georgian Prime Minister Irakli Garibashvili in Brussels on December 15
This means workers will pay NICs at a rate of 13.25 per cent and, given that the basic rate of income tax stands at 20 per cent, even those on modest incomes of, say, £25,000 a year, now face an effective marginal rate of tax of 33.25 per cent. Very European indeed.
But it doesn’t stop there. Income tax thresholds have been frozen which means many low-paid workers will start paying tax for the first time and those on only moderately decent incomes will drift into the 40 per cent tax bracket.
Most European economies are also fond of levying high taxes on business, which might explain the EU’s sclerotic economic performance for much of this century.
For the past decade, even when we were inside the EU, Britain was going in the opposite direction, steadily cutting taxes on company profits.
No longer. Incredibly, even though we’ve now left the EU, we are heading for European levels of corporation tax, which will rise from its current 19 per cent to 26 per cent by 2024. The upshot of all this is clear. The British tax burden is the highest in modern times.
State spending now accounts for over 40 per cent of GDP. Taken together it means we’re heading towards a European-style high-tax, big-government economy. It’s not exactly the Brexit we were promised.
Of course, coping with Covid has been expensive. Pandemics, like major wars, increase the scope and size of government. But even when the pandemic fades, there is no reason to think that the state will shrink.
Indeed, it’s remarkable how little we’ve taken advantage of what was meant to be a new freedom. It’s one of the reasons that Lord Frost (pictured with Boris Johnson), the Government’s tough and highly experienced Brexit negotiator, resigned last weekend
Boris Johnson’s Government is a cheerleader for net zero carbon emissions by 2050, and has made levelling up the poorer North with the richer South its core mission (especially now it has so many Northern MPs).
Forcing us to go green and moving resources around the country will, by definition, require massive state intervention, and that spells yet higher taxes and bigger government.
It doesn’t get more European than that.
Indeed, it’s remarkable how little we’ve taken advantage of what was meant to be a new freedom. It’s one of the reasons that Lord Frost, the Government’s tough and highly experienced Brexit negotiator, resigned last weekend.
Probably the biggest Brexit win was using our new-found independence to approve and procure Covid vaccines and start their roll-out, without waiting for the EU’s sluggish regulatory processes to grind into action.
We’ve also allowed Swiss shares to be traded on the London stock market (a practice banned by Brussels in 2019), ended VAT on women’s sanitary products, reformed alcohol duties in line with the strength of the drink, moved falteringly towards establishing freeports, and introduced a points-based immigration system which treats EU and non-EU citizens alike. All of the above were possible because we’ve broken with Brussels. All worthwhile, no doubt. But hardly game-changing. In truth, the way to transform post-Brexit Britain is via regulatory reform.
It is complicated, unglamorous and doesn’t lend itself to politicians’ soundbites. But it is where the promise of Brexit lies. Lord Frost was preparing a report on which rule changes would make the biggest difference. Sadly, what momentum there was behind this initiative is now at risk with his departure.
The EU styles itself as a ‘regulatory superpower’ because the size of its market allows it to establish global rules and regulations for doing business. But its rules are dominated by what’s known as the precautionary principle, which militates against risk-taking. This is Britain’s opportunity. We could start by scrapping the EU’s onerous GDPR rules on digital privacy.
If we had fewer, better regulations covering cutting-edge technologies such as gene therapy, cyber security, digital investment, artificial intelligence, robotics and medical advances — areas in which we are already ahead of the EU —then the chances of a genuine Brexit dividend become possible.
It all appeared so much more straightforward five years ago during the Brexit referendum campaign.
The Leavers made out it would all be so simple, when it’s been anything but. The Remainers claimed it would be a calamity, when it hasn’t.
I interviewed the main players on both sides of the argument for BBC TV. I don’t remember the Leavers telling us we’d need to pay a divorce bill of £40 billion.
I remember George Osborne (then Chancellor) telling me on air that Airbus would likely up sticks and leave. It’s still here, investing more than ever
Nor did the Leavers have much to say about the peculiar position of Northern Ireland, which still bedevils Brexit to this day. They said a free trade deal with the EU would be a piece of cake, when it has proved to be painful, protracted and far less efficient than the single market.
But Remainers got so much wrong, too. I remember George Osborne (then Chancellor) telling me on air that Airbus would likely up sticks and leave. It’s still here, investing more than ever.
The boss of the London Stock Exchange predicted the City of London would lose over 200,000 jobs. In fact, at most 7,500 jobs left for European financial centres, dwarfed by the hundreds of thousands of extra jobs created in finance since the referendum.
We were told to expect recession and mass unemployment. Brexit caused neither.
That great guru of global banking, Jamie Dimon, the billionaire CEO of America’s biggest bank JP Morgan, forecast a new financial golden age for Frankfurt and Paris on the back of London’s misery.
It never happened. And today nobody is hiring more people faster in London than JP Morgan.
Around £29.4 billion of new investment has flowed into Britain’s high-tech industries this year, over twice as much as in 2020, twice as much as Germany and three times as much as France.
Over one-third of all investment in European high-tech is now made in Britain, which boasts 116 unicorns (tech start-ups worth over $1 billion), more than France, Germany and Sweden combined. Only America and China have more.
For those who want to bring their companies to market and raise capital, Britain is easily the largest market in Europe, again behind only America and China.
Clearly Brexit has deterred none of this.
It shows the promise that awaits if we ever get around to creating the sort of light-touch regulatory environment in which the technologies and entrepreneurs of tomorrow will feel welcome.
If we fail, it will be because the current Johnson Government, despite being full of those who led the Brexit charge from the top down, in 2021 inexplicably rushed headlong in the wrong direction.