Daniel Hannan is a writer and columnist. He was a Conservative MEP from 1999 to 2020, and is now President of the Initiative for Free Trade.
Remainers were right after all. Almost every catastrophe they predicted has come about. Our economy has collapsed, unemployment is rising, several countries have closed their borders to us, civil liberties have been suspended and lorries have piled up in Kent. We have seen empty shelves and angry protesters and even (in East Africa) a plague of locusts.
True, none of these things happened as a result of our leaving the EU. Indeed, January 1 saw a smooth flow of traffic at the Channel ports – in marked contrast to the previous week when, still under EU law during the transition period, hundreds of mainly Eastern European drivers were trapped in Kent by France’s border closures. Still, however you cut it, we are in a worse place than anyone could have imagined a year ago.
These various catastrophes were, of course, supposed to be triggered by what Opposition politicians used to call (as if it were a single noun) “a-disastrous-no-deal-Brexit”. It is already becoming hard to remember how widely that outcome was expected. Several Conservative MPs, some of them good and sensible people, left their party because they did not believe that Boris Johnson would sign an agreement with the EU. In the event, he came back with the most comprehensive trade deal that the EU has with any sovereign country.
That gain, though, is insignificant next to the cost of Covid and its associated lockdowns – costs which, through a tranche of bad luck and a sprinkling of bad judgment, are higher for Britain than for almost any other country.
Eleven months of bad economic news have dulled our sensitivity to big numbers. Still, it cannot be repeated to often: we are utterly skint. The first lockdown caused a sharper contraction than any comparable period during the Great Depression or the two world wars. We have not yet had the chance to assess the cost of the second. Now we are in a third. The economist Julian Jessop reckons that every month of lockdown costs around £18 billion – 10 per cent of our GDP.
How are we going to recover? It may sound obvious, even trite, but the only way out of a mess like this is growth. The primary purpose of economic policy for the next five years should be to generate revenue. That doesn’t mean that we give up on improving public services, improving the environment, levelling up and all the rest. It simply means acknowledging the reality: without money in the kitty, these other things are impossible.
What can governments do to stimulate growth? They can stop putting barriers between businesses and their customers. Some of those obstacles are fiscal. Countries with lower, flatter and simpler taxes tend, other things being equal, to grow faster than countries with higher and more distortive taxes. We need to cut some taxes and suspend others – especially, in the short term, taxes on investment and employment.
Then there are the regulatory barriers – everything from planning restrictions that inflate the cost of housing to staff ratio rules that give us the most expensive childcare in Europe. I could fill a longer article than this one simply by listing them. Consider, as just one subsection, the EU laws we can now disapply: the Temporary Workers’ Directive, the REACH Directive, the End of Life Vehicles Directive, the droit de suite rules and other regulations that hurt London’s fine arts market, the Alternative Investment Fund Managers Directive, chunks of MiFID II, GDPR, the bans on GM.
Even as I ran through that list, you will have spotted the problem. A consequence of the pandemic has been to make voters around the world, including here, more authoritarian, more dirigiste, more demanding of state intervention.
It is hard enough in normal times to make the case for smaller government. Every privatisation is unpopular until it happens. Every regulation calls into existence a tribe of beneficiaries who arrange their affairs around it. But the perception of a common threat, as any psychologist will tell you, makes us even more collectivist and change-averse.
Our reaction may be irrational and atavistic, but it is no less real for that. If we were looking at the past year logically, we would see that the private sector often succeeded where state bureaucracies failed. Public Health England, Ofqual, NHS procurement and a hundred other agencies were unable to discharge their basic functions. But Tesco kept its shelves full, Amazon expanded to meet our demand and Pfizer found a vaccine.
The trouble is that we rarely think logically in a crisis. We instead fall back our Stone Age instincts, turning inwards, sticking to our tribe and demanding strong leadership. There might be a perfectly rational case to the effect that, for example, rising unemployment and falling wages make it impossible to keep increasing the minimum wage. But find me a politician who is prepared, in the current climate, to articulate that case. There might be an argument that a diminished private sector cannot continue to fund the public sector as though nothing had happened, and that the pain of lower wages should be spread. But, again, find me any MP who is prepared to explain that there is no money to Give Our NHS Heroes A Pay Rise.
We have won the right to make different decisions outside the EU. But the Coronavirus has diminished our appetite to exercise that right, just as it has made the need for reform more urgent.
Still, one way or another, change is coming. To succeed outside the EU, we need to be fitter, leaner and more globally engaged. The only question is whether we make the necessary decision now, or whether we wait to have our hand forced by economic reality.