26 June 2023

We have taken back control from Brussels only to cede control to Whitehall


Have you noticed how much more of a nuisance it is to deal with your bank these days? Personal accounts are subject to needless extra checks. Business accounts have become so cumbersome that some investors are shifting their operations overseas.

But here’s the thing. The multiplication of these pettifogging rules has come about since Brexit. Instead of easing the strictures we inherited from the EU, such as its heavy-handed Money Laundering Directive, we have gone the other way, adding further regulations of our own.

Why? Because, when we took powers back from Brussels, we handed them to our own regulatory agencies. And those agencies turned out to be every bit as risk-averse, hidebound and uninterested in competitiveness as the Eurocrats were.

It emerged this week that Jeremy Hunt’s plan for a “Big Bang 2.0”, a repeal of Brussels financial services rules, was being held up by the Financial Conduct Authority. Likewise, any tax cuts might in effect be vetoed by the Office for Budgetary Responsibility.

Seven years after we voted to leave the EU, similar stories are being played out across Whitehall. Seven is the Biblical number for completion, but Brexit is complete only in the sense that the 1972 European Communities Act has been repealed.

Now this is not nothing. Our laws are again supreme on our own soil (except in Northern Ireland). We decide for ourselves what to plant in the ground, what to fish from the sea, whom to allow across our frontiers and on what terms. 

These gains are worth stressing because, in our demented and apparently unending Brexit culture war, any suggestion by a Leaver that we do something differently is pounced on as an admission that Brexit has failed. So, for the avoidance of doubt, I don’t regret for a moment having restored the supremacy of Parliament. What I regret is the way Parliament refuses to impose itself on our standing bureaucracies.

Why, to give a trivial but telling example, do we still have quotas on olive oil from outside the EU? We inherited them from a bloc that had Spanish, Italian and Greek farmers to placate, but even the most dunderheaded protectionist must struggle to explain why we restrict the importation of olive oil from, say, Tunisia. Whom do we imagine we are protecting?

Why, similarly, have we not repealed the EU’s working time restrictions – or even interpreted them more flexibly, as a number of its member states do?

Why have we replicated its intrusive rules on chemical imports instead of returning to our old risk-based approach?

Why do we place our fine arts market at a competitive disadvantage vis-à-vis New York and Geneva by applying the EU’s preposterous droit de suite rules?

Why have we gold-plated Brussels restrictions that push up the cost of energy, making our steel, paper and ceramics industries uncompetitive?

Why have we downgraded our plan to opt out of the EU’s data regime, the GDPR – a system that did not even come into effect until after the Brexit vote?

Heaven knows it is not because EU regulations are perfect. On the contrary, on the handful of occasions that we have plucked up the courage to diverge, we have been vindicated. Our refusal to participate in the joint procurement programme gave us the fastest vaccine rollout in the world (and prompted Brussels, in a fit of pique, briefly to declare the Irish border closed). Lifting the ban on gene editing has boosted both our biotech and agrifood sectors.

So why the reluctance to diverge in other fields? Is it sheer institutional inertia? Or is our administrative state deliberately holding the door ajar in the hope of future re-entry?

Whatever the explanation, the failure to grasp new opportunities has done for the Conservative government. Ministers are coiled in serpentine bureaucracy, like Laocoön and his sons. Voters don’t want to hear that this or that decision was blocked by the Health and Safety Executive, or judged to be incompatible with net zero, or at odds with the Equalities Act. As far as they are concerned, the buck stops with the Tories.

This is especially true of two policies that cannot be blamed on the EU. First, our public health authorities (unlike their Swedish counterparts) took a decision to impose an unnecessarily long, harsh and ruinous lockdown. Second, and partly in response to that lockdown, the Bank of England began to magic up unimaginable sums of money.

The currency debasement had begun before the pandemic. Since March 2009, when quantitative easing was launched, our money supply has increased by an almost incredible 50%. But half of that increase – no less than £400bn – came in response to the lockdowns. 

That policy, not the war in Ukraine, is the chief cause of our inflationary woes. Sure, the rise in energy prices has not helped. Neither, come to that, has the Government’s readiness to pay dole to more than five million people when there are over a million job vacancies. A hotelier told me last week that employers have to offer £13 an hour – the equivalent of nearly £30,000 a year – to tempt unskilled workers off a combination of benefits and cash-in-hand top up work.

So, yes, there have been policy failures. But by far the worst failure has come from an organisation that Tony Blair made immune to political intervention, namely the Bank of England. Not only did the Bank carry on creating money long after any possible justification had ceased; it also refused to raise interest rates 12 months ago, when doing so might have mitigated the inflation crisis. Now, we have the worst of all possible worlds: high interest rates, high taxes, high prices and low growth. Our national debt has overtaken our annual output, and servicing the interest costs more than the education budget.

In theory, a government could snatch control back from the Bank of England and restore sound money. In practice, it won’t happen, because voters will always back technocrats over politicians. Andrew Bailey can be as incompetent as he likes, secure in the knowledge that Rishi Sunak will carry the can. 

On Thursday, the shadow chancellor, Rachel Reeves, herself a former Bank of England employee, declared that it would be wrong for her as an MP even ‘to comment on the decisions that an independent central bank has to make’. She was, depressingly, reflecting the mood of the nation.

And so we are stuck in a doom loop. The worse our executive agencies perform, the more we blame our MPs, and the louder we clamour for even more powers to be shifted from elected representatives to appointed functionaries. We somehow imagine that sitting on an official body makes people wise and disinterested. We want such bodies, not only to run our economy, but to control our politicians.

We cheer when a committee determines who should sit in the House of Lords. Incredibly, we want such a committee to determine who should sit in the House of Commons, a kind of IPSA for misconduct, made up of woke civil servants.

Meanwhile, our commentators blame everything on Brexit – even when they privately admit that there is no connection. As the Euro-enthusiastic physicist Brian Cox put it on Friday, ‘Brexit is now, in a majority of voters[sic] minds, linked with high interest rates, trade friction, travel friction and general incompetence. The reality may be more complex, but that doesn’t matter – it’s about perception.’

In fact, almost the opposite is true. We have taken back control from Brussels only to cede control to Whitehall. Perhaps it’s time to try democracy.

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Daniel Hannan is an author and columnist. He teaches at Buckingham University and is a member of the Board of Trade.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.