One of the main things that’s holding up an UK-EU trade deal is the demand that the UK sticks to current state aid rules. Boris and Frost are refusing to budge. They want the freedom to do whatever they wish with state aid in post-Brexit Britain.
Restrictions around state aid spending are in place to ensure governments do not prop up failing industries or distort the free market by handing out public money to troubled sectors – either halting their collapse or giving them an artificial competitive advantage.
When you get rid of state aid rules, horrible things can happen, particularly from a centre-right perspective. Eliminating all laws surrounding the use of state aid is one of the first acts a new socialist regime would likely carry out as it would allow them to nationalise on the cheap, among other nefarious things. The government can buy one energy company, then lower prices astronomically in order to make the competition go bust. After that, they own the only energy company in the country; nationalisation the easy way.
It is for this reason that Tories used to feel extremely protective of laws limiting state aid. Several years ago, while I was working on a project about what post-Brexit regulation might look like, we noticed that by flexing the state aid rules just a little bit, we could help improve the lot of certain sectors. Take UK airports where, as in the rest of the EU, they cannot get regional funding from government if their airports exceed three million passengers per annum. We found that by flexing this limit to five million, you could greatly help a lot of airports in the UK as well as get more regional routes that are currently commercially unviable up and running. Except when we pitched this to the Tory MPs on our advisory panel, they expressed deep doubts about toying with state aid rules, even to such a minor degree. ‘Imagine what a Corbyn government would do with loosened state aid restrictions,’ one of them told me with a certain twinge of horror.
Some of you might be thinking, ‘Just because the government wants the ability to change state aid rules, that doesn’t mean they are necessarily going to use that freedom. This is about sovereignty; about us having a choice in the matter’. The counterargument is that the government is pushing pretty hard for something they supposedly don’t ever really want to use. Imagine if, instead of state aid, the government was holding up trade talks with the EU because it wanted to be able to pay welfare claimants much more than the Brussels maximum currently allows them to. Sure, you could chalk that up to desiring sovereignty back – but why exactly would a Conservative government want the ability to do that thing in particular so badly?
The answer might be to allow the government maximum leverage in order to cushion the Brexit blow for certain sectors. If so, there are three things to consider:
First and foremost, why does the government think a post-transition Brexit will be so dire that whole industries will have to be propped up – even if we get a trade deal with the EU?
Secondly, this seems to be a real unwinding of Margaret Thatcher’s legacy. She went to great effort to stop the UK government propping up failing industries with taxpayers’ money – and now Boris Johnson is doing something that only makes real sense if he wants to create a whole tranche of companies that can only survive through the charity of state largesse. I mean, if the Tories want to undo Thatcherism at its deepest roots, fine; all I ask is that conservatives who value Thatcher’s legacy think long and hard about the dismantling of a significant part of it by a Tory government.
Third and finally, wanting to move state aid rules significantly to the left represents a crossing of the Rubicon – in what way are the Conservatives the party of free markets if this is their priority? If the answer to that is ‘the red wall’, I will retort with the following, further queries: what was the point of defeating Corbyn only to ape Corbynism in such a vital way? Was getting Brexit done more important than the reason you wanted Brexit in the first place? If the free market isn’t the answer to making Brexit work, what does the Conservative party think the free market isthe answer to any longer? Freed from the clutches of EU state aid policy, we might be about to find out the answers to these questions.
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