Owen Paterson: To make Brexit a success, we must break free from the over-taxed, over-regulated European model
Owen Paterson is a former Environment Secretary and former Secretary of State for Northern Ireland. He is MP for Shropshire North, and is a member of the advisory board of Leave Means Leave.
Since the Prime Minister’s speech at Lancaster House in January, it has been Government policy to deliver Brexit by withdrawing the UK from both the Single Market and the Customs Union. Plainly, this was completely consistent with the referendum result and the Leave campaign which rested on taking back control of our money, laws and borders. Whilst we are members of the Single Market, we are bound by the free movement of people, so cannot control our borders and the Customs Union controls our international trade policy.
But leaving these two pillars of the EU is not simply a question of complying with the “logic” of the referendum. Rather, it is imperative if — as an independent, sovereign nation — we are to reap the benefits which that independence brings. Cardiff University economists predict that Brexit will lower consumer prices by around eight per cent — benefitting the poorest households most of all — and see an overall gain to GDP of seven per cent, or £135 billion each year. The reduction in food prices alone would represent a saving of £305 per household per annum.
The Government’s approach, as outlined at Lancaster House, was thus completely sensible. But we are now told that UK could maintain “full alignment” with the rules of the Single Market and the Customs Union once we leave. To its advocates, this suggestion will allow for continued easy trade with Europe, but they miss the point. Of course exporters to any market have to meet its standards, but Single Market membership requires us to apply all its regulations to the whole domestic economy, potentially damaging our future ability to trade around the world. At present, only around 12 per cent of GDP is a result of exports to the EU, yet the other 88 per cent must still obey all its rules. Coupled to this, any advantages that membership might have at present are set to diminish as the EU is comparatively outgrown by the rest of the world. In 1999, 61 per cent of our goods exports were to the EU, but by 2015, that figure was 47 per cent. By 2025, it has been estimated that it may have fallen to just 35 per cent. The European Commission itself admits that 90 per cent of global economic growth in the next ten to 15 years is expected to be generated outside Europe, a third of it in China alone.
We must be allowed – outside the Single Market and Customs Union – to seize these opportunities. Australia, Canada, Japan, New Zealand, South Korea, the United States and others will be watching the negotiations closely, knowing that they will only be able to do deals with an independent United Kingdom in full control of its own laws.
If Brexit is to succeed, we cannot be yoked to the high-taxing, high-spending European model. We know from President Macron’s speech in September that he wants to “harmonise the tax base” across the EU, introducing a “binding rate range” for Corporation Tax “that member states must commit to ahead of the next European budget in 2020”. In their mania for the political project of “ever-closer union”, it seems the EU will continue to make the same unwise decisions, from the disastrous effects of the Common Agricultural and Fisheries Policies to the misery of the Eurozone crisis.
Margaret Thatcher saw the single currency as the route to a “federal Europe by the back door”, and any still unconvinced of that underlying motive need look no further than Martin Schulz, former President of the European Parliament, who called explicitly for a new treaty for a federal state at the SPD conference, saying that “those who are against should just leave the European Union.”
We cannot, surely, allow ourselves to be dragged along as the European freight train hurtles down that impoverishing path. We must recognise, as did Churchill, that “for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
Instead, we can learn from countries around the world which have maximised the benefits of their independence. Most notably, the decisions made in Singapore after 1965 — moving from import-substitution to export-led industrialisation and attracting global corporations — saw its economy grow by an average of ten per cent each year for the first two decades of its history, and achieved full employment (down from nine per cent unemployment in 1965) by 1975. In more recent times, enhancing wage flexibility in the labour market, promoting innovation and deregulating service sectors have ensured a second phase of growth, transforming Singapore from an essentially Third World country to First World – with the second highest life expectancy anywhere – in a few decades. Britons were 20 per cent richer than Singaporeans in 1980; we are now 40 per cent poorer. Similarly simple arrangements in Hong Kong mean that they are now almost 20 per cent richer than us.
Ultimately, taxation is a confiscation of money and over-regulation is a confiscation of time. Neither promotes growth, and freed from the European consensus a new, simple and efficient system can allow us to fund the essential services we need, while boosting the economy and allowing businesses across the country to thrive.
If the EU wants to stick to protectionism, to burdensome regulation, to their extreme aversion to innovation, then so be it. We will have to diverge.
The Government has been clear from the outset that a reciprocal free trade agreement with zero tariffs is in all our best interests, but if the EU will not discuss it or if the price — either financially or in concessions of sovereignty — is too high, then our trade will continue on WTO terms. Some have cast this as a leap into the dark, falling off a cliff or any number of hysterical images. It is not. WTO terms would provide known rules which, crucially, we would have a say in shaping.
At present, the UK — one of the largest economies in the world — is represented at the WTO as 1/28th of the EU vote. Post-Brexit, we will retake our full, independent seat, conferring a right to vote and giving a right to initiate new standards and propose amendments to existing ones. We will, once again, be free to co-operate with long-standing allies across the anglosphere and the Commonwealth ensuring that world regulation does not prejudice our local needs. Indeed, it is worth remembering that we will be free, if we wish, to strengthen our laws, demanding higher standards of animal welfare, for example.
The Prime Minister has undoubtedly been very generous to the EU so far. But now is not the time for timid concessions which would dilute Brexit to the point of worthlessness or overlook the largest democratic vote ever returned in this country. She must be bold in stating — both at home and in the negotiations — that we will not remain irretrievably aligned to the rules of an institution which the British people so emphatically rejected as we forge our own, global path to a freer and more prosperous future.
December 19th, 2017: Conservative Home