Over the past two years we may have focused on Covid and now on Ukraine, but our relationship with the European Union continues to be important. Signs show that the Tories want to make Brexit a major issue again by the next general election.
This largely reflects the fact that the Conservative Party has little else to say. The coalition that voted Conservative in 2019 had more in common on cultural issues than on the economy. Each tax event reveals the lack of cohesion in the economic thinking of the Conservatives. In a low-growth economy, it will be impossible to get the lower borrowing, lower taxes and promised extra funding for public services, as Rishi Sunak discovers.
On boosting economic productivity, the Chancellor asks some of the right questions and has a three-word slogan – ‘Capital, People, Innovation’ – but is only at the stage of asking business what it should be doing . It’s hard to see how this will translate into anything that will make a tangible difference by 2024.
There is no obvious civil service reform agenda. Boris Johnson’s big idea this week was that if pupils are falling behind in English and maths schools they should ‘step in and help them get back on track’. Perfectly sensible but not really innovative.
To be fair to the government, he’s been consumed by two crises – the pandemic and the invasion of Ukraine – but that doesn’t mean he’ll get a free pass for lacking a record of achievement or exciting new ideas. His best bet might be to play a variation on an old tune: Keep Brexit Done.
We saw signs of this in the Prime Minister’s speech to the Conservative Party’s Spring Conference when he claimed that the Brexit vote was an example of the freedom-loving nature of the British people, who shared this characteristic with the Ukrainians resisting the Russian invasion. For those of us Johnson-skeptics who thought his handling of the Ukraine conflict had been broadly adequate, it reminded us that he doesn’t have what it takes to be a unifying warlord. the nation.
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This particular speech was so grossly egregious that even many pro-Brexit commentators condemned it, but it is proven to be part of a strategy. the Time recently reported that David Canzini, the Prime Minister’s new deputy chief of staff, told staffers at No 10 that the number one priority was delivering on Brexit promises. Maintaining the Go/Stay divide seems to be the plan.
An obvious problem with the strategy is that Brexit, as an economic project, is clearly not going well. In its assessment of the spring statement, the Office for Budget Responsibility confirmed its previous assessment that Brexit has cost us 4% of GDP (twice the long-term hit of Covid) without any of the supposed benefits resulting in a material economic contribution. The economic damage was caused by a drop in trade with the EU, which Sunak was forced to admit was “not surprising when you change a trade relationship with the EU” and that a change in our relationship “obviously will have an impact”. Unsurprisingly for those who thought Brexit would be costly, it would be more accurate. Sunak also argued that the UK was not becoming a less open economy, which, given the trade figures, is obviously nonsense. We haven’t even put import controls in place yet and we may have to delay them further.
Incidentally, the Prime Minister’s solution to the trade crash is usually vague, provocative and ignorant. “There is no natural obstacle to our exports, it’s just willpower, energy and ambition”, he told the Liaison Committee.
Growing evidence of Brexit’s economic damage should be a worrying vulnerability for the government, with Labor saying the reason taxes need to rise is because economic growth is so weak. This is a very good point.
Pointing out that growth is weak is one thing, but giving a convincing explanation that growth would be higher with a change of government is another. There is, of course, a ready solution to weak growth, which would be to repair our economic relationship with the EU. Part of the 4% of GDP affected by our exit from the single market and the customs union could be recovered if we moved closer to these institutions.
Labour, however, is reluctant to reopen the issue for the same reason the Tories are keen to talk about Brexit. Both parties assume that if our relationship with the EU is a big issue in the next general election, it will favor the Conservatives.
It is a curious situation. The government wants to brag about a policy that hurts growth; the opposition is keen to show that we are growing slowly but are afraid to explain why. Both parties are evasive.
We are starting to see a debate about how to restore strong economic growth, but the two main parties want to discuss everything except the inadequacy of our trade relationship with the EU. It does the country a disservice. If we want a stronger economy, we have to fix this problem.