Hunting the Benefits of Brexit

 

 

Stephen Weatherill, Jacques Delors Professor of European Law (Emeritus), Faculty of Law and Somerville College, University of Oxford.

 

Introduction

Two reports published on the same day, 31 January 2022, appear likely to help us to understand what are the consequences of the decision to leave the European Union taken by the people of the United Kingdom in June 2016, over five and a half years ago. At last, one might suppose, we can reckon with what Brexit truly entails, beyond the vacuous slogan "Take back control!" and the dismal evasion of policy detail captured by "Brexit means Brexit!". And yet …

"The Benefits of Brexit: how the UK is taking advantage of leaving the EU" is a report published by the UK government - hereafter Benefits of Brexit. "Doing Things Differently? Policy after Brexit" is a report published by UK in a Changing Europe, an ESRC-funded body based at King's College London - hereafter Doing Things Differently?. And, to declare an interest, I wrote the short comment on Consumer Protection in this report.

Both reports aim to chart the trajectory of Brexit Britain's new found regulatory freedoms. Both reveal how little has been done so far in the two years since the UK left the EU. Doing Things Differently? Is sober, detailed and thoughtful on why this is and on what may be expected in future. Benefits of Brexit is, in stark contrast, disingenuous in its misdescriptions of the consequences of Brexit and shameless in its inflated claims about joys to come in future.

 

Benefits of Brexit: four strands

Benefits of Brexit offers a glossy 105 pages of exultation about having taken back control. It careers widely and wildly across the terrain of Brexit, shouting about what to do with this new regulatory freedom. But anyone hoping for detail - costed, impact-assessed, granular detail - will be disappointed. It is not supported by cost-benefit analysis: in fact it is full of claims about benefits, but it is rare to find even a hint that there may be costs too.

The report is wearyingly unsystematic, repetitive and rambling. This is probably deliberate. It appears to be designed to conceal the need for detailed inquiry beneath a splurge of performative energy and a blizzard of misdirection. But there are lurking within it four distinct strands to its zeal to identify "Benefits of Brexit". The four share the common feature that none of them truly counts as a Benefit of Brexit. The list of four comprises, first, changes that the UK could make today which could have been readily made as a member of the EU; second, changes which are a consequence of Brexit but which entail disadvantages for the UK not advantages; third, changes which are highly unlikely to be made for good economic, political and legal reasons; fourth, changes which are little more than pie in the sky - they are vague appeals to an imagined future world of bounty.

Strand one: Changes that the UK could make today which could have been readily made as a member of the EU.

Scattered through Benefits of Brexit are claimed benefits of Brexit which are at best only marginally facilitated by Brexit and at worst of no relevance at all to Brexit. Some are familiar tropes. Page 6 promises a review of "the EU ban on imperial markings and sales", and page 7 advises that it will be possible once again to use the crown stamp on pint glasses. But there was no EU ban on imperial markings and sales, nor on use of the crown stamp on pint glasses. EU law requires only that metric measurements be used, and does not preclude that they be accompanied by imperial measures. Similarly it requires a CE mark on pint glasses but does not preclude the addition of a crown stamp.  (Whether such trivial matters deserve any place on a checklist of governmental policymaking is another question, as is the claim at page 6 that imperial units "are a core part of many people's British identity"). Much play is made of the Turing student educational exchange scheme (pages 13, 80) which, we are told, will engage mobility worldwide in over 150 destinations. But although the ERASMUS scheme funded through the EU was focused on Europe nothing prevents an EU Member State putting in place its own global version. The Turing Scheme could have been created as a self-standing supplement to ERASMUS while the UK was a member of the EU. And - of course - no celebration of Brexit would be complete without welcome for the return of blue passports, and page 6 of Benefits of Brexit dutifully cites their reintroduction. But EU law never stopped the UK from preferring blue passports. In similarly deceitful vein page 9 cheers the opportunity to reduce taxes on alcohol but the UK's relatively high taxes on alcohol are a domestic choice not an EU obligation. Why else were UK consumers so eager to buy their booze in the hypermarkets of Calais and points South, where - in the EU - prices were so much lower than in the UK largely because of the local disinclination to tax wine heavily or at all?

At least in these instances the matters cited have some connection of sorts with EU law and practice. In other areas Benefits of Brexit makes claims to regulatory changeability as a result of Brexit which are simply false because EU law has little or nothing to say about the matter, in some circumstances because the matter lies beyond the reach of the EU's competence. Consider selling heritage products like Burberry, Northampton handmade men's welted shoes, and Harris Tweed (page 58), a new independent regulator for English football (page 64), safer streets (page 65), allowing people to get married at sea (page 75) and Community Forests (87). Good things? Quite possibly. Things now feasible only as a result of Brexit? Absolutely not.

There are still more egregious claims to be found in Benefits of Brexit: consider deploying HMS Queen Elizabeth to the Bay of Bengal (page 18), hosting COP26 and working through NATO (page 99). These have no legitimate place in a report which purports to catalogue consequences of Brexit.

There would be value in a report which pins down what really is changeable as a result of Brexit. (Even more value had it been prepared before June 2016). Benefits of Brexit is not that report. It lacks rigour. Actual or potential changes which are opened up by Brexit are not separated from actual or potential changes that could have been made as a Member State of the EU. The result is analytical mush.

 

Strand Two: Changes which are a consequence of Brexit but which entail disadvantages for the UK not advantages

The most spectacular example of this second type of misdescription is found in Benefits of Brexit's claims about action taken to reduce friction at the UK's (more precisely, GB's) borders. Technical work is underway to make export health certificates operate digitally, and this involves discussions with EU partners (page 10). Digitisation more generally is presented as a means to reduce trade barriers (pages 42-43, 94-95). Page 74 commits to reducing frictions in supply chains.

This is desirable, but as far as trade with the EU-27 is concerned this is about reducing the costs of the frictions introduced as the direct consequence of Brexit. Withdrawal from the EU, especially when accompanied by abandonment of its customs union and the ecosystem of its internal market, guarantees exposure to the barriers to trade which, inside the EU, membership has consigned to history. That is not a benefit of Brexit - it is a cost of Brexit. Benefits of Brexit is a title to be taken scrupulously literally: it does not even acknowledge that there may be consequences of Brexit which are not benefits.

There are other manifestations of this sly attempt to depict attempts to reduce the harm flowing from Brexit as benefits, and they are equally unconvincing. Page 11 heralds the creation of a domestic scheme to protect geographical indications, but leaves unmentioned that UK producers used to enjoy EU-wide protection guaranteed by EU rules. Duty free shopping is welcomed at page 14, but that is a poor substitute for the rights enjoyed by a consumer in the EU to bring home from another Member State unlimited amounts of goods for personal consumption without the need to pay any difference in taxation between that levied in state of purchase and state of residence.

 

Strand Three: Changes which are highly unlikely to be made for good economic, political and legal reasons.

Much of Benefits of Brexit is devoted to bite-sized summaries of gleefully bright horizons across a number of sectors of the economy, but the reality is that the UK is likely to find that departing from the EU model is costly, even if possible in principle. There is barely any recognition in Benefits of Brexit that regulatory changes which are in principle possible after Brexit may be opposed by interest groups, contradict economic rationality or even violate international legal norms. The report presents a vision of a UK unshackled from EU obligations, as if there are no other sources of influence which constrain regulatory freedom. It is here that Doing Things Differently? is particularly helpful in offering a more sober narrative.

Take procurement. At page 79 of Benefits of Brexit we are told that the regime will be made simpler, allowing the £300 billion spent annually on public procurement "to generate social value and unleash opportunities". How did EU rules restrain this? We are not told. How much is lost as a result of the impediments created by Brexit to ability to compete in EU markets and to have EU suppliers compete in the UK? This is ignored. Sanchez-Graells, writing on the subject in Doing Things Differently?, acknowledges the play made of loosening procurement rules in the Leave campaign during the referendum, including promises to use Brexit as a means to "Buy British". But a chapter in the Trade and Co-Operation Agreement which sets the terms for the UK's future relationship with the EU commits the UK to a set of rules which largely replicate the market access commitments which apply within the EU, and the UK has also assumed obligations which applied to it via the EU when it was a member state found in the Government Procurement Agreement of the World Trade Organisation. Consequently, as Sanchez-Graells notes, the UK government issued a notice in February 2021 which explains the high level of continuity in obligations, Brexit notwithstanding. Such changes as have been made, such as a fresh approach to assessing social value in government contracting, are described as "modest" by Sanchez-Graells, and "most, if not all, would have been possible before Brexit". It means that "there is virtually no scope for a Buy British policy", and so he concludes that "not much has changed and, rhetoric apart, there is limited scope for further change", especially given the density of existing international commitments.

Freedman and Loutzenhiser make similar points about tax in Doing Things Differently?. The extent of existing international treaty obligations combined with the domestic pressure to legislate to curtail tax avoidance make it unlikely that Brexit will herald major changes even if in principle the obligations of EU membership are now at an end. In fact, far from reducing taxes, the Finance Act 2021 raised corporation tax from 19% to 25% with effect from April 2023 - which, as they point out, could have been done as a member of the EU. In similar vein scope for freeports is widened by the ending of the application of EU state aid rules in the UK (subject to Article 10 of the Ireland/Northern Ireland Protocol) but there are persisting international obligations which circumscribe UK regulatory autonomy in the field. They point out that the UK has chosen to remove VAT on women's sanitary products but at a more general level with Brexit comes complexity for traders selling into the EU who need to find a way through the VAT registration process. Benefits there may be - costs there certainly are. Overall Freedman and Loutzenhiser predict only modest changes in the field of tax.

Energy is another sector in which, according to the contribution of Watson and Drummond in Doing Things Differently?, the UK has not chosen to pursue any significant deviation from EU rules. Nor do they predict any such shifts. In the case of eco-design regulations and the development of the broader circular economy, they find that UK government proposals published in November 2021 have a "similar focus" to the EU's, and that maintaining "market access for regulated products may constrain future divergence." Kassim makes similar observations about aviation, which is "a sector where international regulation is extensive and detailed, leaving little scope for independent lawmaking, regulatory divergence or policy experimentation"". It means for example that safety standards set by the International Civil  Aviation Organisation are now implemented in the UK by the Civil Aviation Authority rather than the European Air Safety Agency (EASA) "but since the UK has little discretion over the substance of the rules, regulatory autonomy is an empty shell".

Bailey and Rajic tell a similar story of constrains imposed by international agreements in relation to autonomous vehicles, and caution too of the economic costs of diverging from EU practice as it emerges. Jordan tells a story of "policy parallelism" between the UK and the EU in relation to climate change, an area where international action is plainly required and where moreover the EU-UK Trade and Co-operation Agreement is relatively robust in the nature of its commitments. Treatment of genetically modified organisms and gene editing have been areas where it has been suggested the UK could be bolder than the EU, but Ely's essay in Doing Things Differently? concludes cautiously that "the government is coming to understand the complexities of reconfiguring a tightly interwoven set of technical, legal, and institutional arrangements, and the political challenges of balancing public opinion, strategic industries, and different trade interests". Freeguard notes that the UK has not yet moved from general EU data protection rules to specific UK ones, "suggesting reform may be more difficult than it looks" and he thinks it "tough for the UK to develop a distinct direction" given the clout of China, the EU and the US as dominant regulators in the field of data systems.

Financial services is a sector in which the UK has chosen to prioritise regulatory autonomy over alignment with the EU's rules. The contribution of Hall and Heneghan to Doing Things Differently? spells out the consequences. Reduced market access has so far led to some 7,400 jobs and 1 trillion euros worth of capital moving from London to financial centres in the EU-27. This, they note, is only the start: numbers will rise once COVID-related restrictions are lifted and EU rules become still more restrictive. The UK's aim is to improve the global appeal of London as a place to do business in financial services, but Hall and Heneghan cite research which shows it is highly unlikely that trade with countries more geographically distant than the EU can compensate for the losses.

Doing Things Differently? therefore tells a story of relatively modest substantive changes in most sectors, for good and carefully explained reasons associated with continuing legal obligations and economic connection and geographical proximity to the EU. Most of all the UK is simply not big enough to become a dominant regulator. Benefits of Brexit is hopelessly incomplete in its account, for it fails to engage with evidence and detail which would challenge its portrayal of Brexit as a new dawn for the UK's regulatory freedom.

 

Strand Four: Changes which are little more than pie in the sky - vague appeals to an imagined future world of bounty.

The tone of Benefits of Brexit is bright and breezy. A charitable interpretation would treat it as sunnily optimistic, eager to please and to inspire. A grumpier verdict would condemn it as fatuously uncritical. Everything, it seems on page after page after page, is for the best in this best of all possible Brexit worlds: the newly unshackled UK is about to soar to success on a wave of fresh and energetic regulatory reform.

This covers both the changed regulatory techniques which the post-Brexit UK intends to deploy and the particular sectors in which it proposes to unleash this new dynamism. This is truly the heart of any plausibly successful Brexit. The UK needs to show how it will do things differently, now that it no longer subject to the obligations of EU membership, and it needs to present some kind of case to underpin claims that doing things differently will mean doing things better.

Benefits of Brexit is rich in its glowingly positive vocabulary, but much less persuasive in its substance.

Pages 20 - 33 chart the intended approach to regulatory strategy, and the sub-section carries the title "The Best Regulated Economy in the World". Modesty and caution have no place in Brexit Britain! Let the opening paragraph on page 20 speak for itself:

"Our regulatory system is recognised globally. We want to raise the bar even higher as we embrace our new found freedoms outside of the EU and position ourselves as a global hub for innovation and a science and technology superpower".

The British are coming!

The pages that follow take vainglory to towering heights. One can expect a "supercharge" in sectors where the UK has competitive advantage (page 21); cutting-edge technologies will be unlocked (page 22). Five stated regulatory principles burst the banks of banality. There will be a "sovereign approach", the UK will lead from the front; proportionality will reign; there shall be recognition of what works; and there shall be high standards set at home and globally. It will be strategic! Holistic! Efficient!

Digging too deep into this mire of verbiage invites misery. Let page 26 capture the mood:

"Outcome-focussed, experimental regulators. We will encourage bold, outcome focused and experimental activity from regulators, who will work collaboratively with businesses, for example using test -beds and sandboxes to support innovation and the co-creation of future industries."

It's regulatory reform the David Brent way.

There is nothing wrong with identifying organising regulatory principles, and the five chosen by Benefits of Brexit are mostly well-intentioned if vague, even if one might wonder whether any other country appreciates or even cares that the UK is planning to "lead from the front". What really counts is how the principles are put into practice. Sector by sector, how is Brexit going to be exploited to improve the shape of UK regulation and consequently the performance of its economy?

Benefits of Brexit sweeps its gaze across a number of sectors. It is a "World of Future Opportunities", as the title on page 34 claims.  The UK will be "a science superpower by 2030" and "a global hub for innovation by 2035" (page 36). How? By creating a "research and development ecosystem" which will - of course - be "world class", and by establishing a new agency which will operate "with minimal bureaucracy". Top scientists will be encouraged to move to the UK. It is not explained how. As for quantum technologies, the UK has a "unique global position" (page 38), though no explanation is offered of what is unique about it. But a new strategy and a "top class environment" for quantum technology is promised. The digital economy, we learn, is thriving, and is to be supercharged, and data flows underpin exports worth over £83 billion to 2022 priority countries, which are the USA, Australia, Dubai, Korea, Singapore and Colombia. How the gravity model of trade has been refuted is not explained. A "pro-innovation" approach is promised, which will be more agile and lighter-touch than the EU's (page 40), and the next page, 41, claims the UK approach will be "more flexible and targeted" than the EU's. Details come there none.

A UK data protection regime will be created which will be "ambitious, pro-growth and innovation-friendly". (Who would promise the opposite?) This is important enough for the exact same phrase to be used twice in the space of eight lines on page 40. In new technologies the UK "can become a world leader" (page 41), and the same phrase and claim attaches to digital trade (page 43), where, we learn, the UK recently "spearheaded" the adoption of a set of G7 digital trade principles. This barrage of jubilation is exhausting, yet it goes on and on, a cascade of unverifiable claims to current superiority and future pre-eminence. Financial services will be "at the forefront of the major global trends … over the coming decade" (page 48), backed by "nimble policymaking and agile regulation" (page 49); a "first in class regulatory landscape for professions" will be created (page 50); a "progressive regulatory and business environment for new aviation technology" will be developed, which will be (in some undefined) way) "less prescriptive" than the EU's (page 56). In the field of agriculture, surely a place for concrete post-CAP ideas, we are offered the desire that "we want people around the world to be lining up to buy British" (61) and a promise to "do even more to supercharge our burgeoning English and Welsh wine industry" (page 62).

Throughout Benefits of Brexit it is not enough to be good, nor even to be better, the UK must be best. The UK is to become "the safest place in the world to be online" (page 44). There are no prizes for guessing which country will "set the global standard for a risk-based proportionate regulatory framework" for online safety (page 44). The UK has "taken the lead globally" in cybersecurity (page 45) and is to be a "Life Sciences superpower in the next ten years" (page 46). One wouldn't know how this will be achieved from Benefits of Brexit but the report asserts that Brexit "gives us the opportunity to design a world-class sovereign regulatory environment for clinical trials" (page 46) and "a world-leading regulatory framework for medical devices" (page 47). So too the UK will be "world leading when it comes to road safety" (page 74). There will be a "world leading approach to green finance" (page 84), and the Environment Act 2021 is - wait for it - "world-leading" (page 86). Anyone with any awareness of the series of Home Office blunders and scandals in recent years, let alone those actually on the wrong end of policy horrors such as Windrush, will gasp at the effrontery of the claim that in matters of immigration "We intend to be global leaders in providing a streamlined and seamless experience " (page 96), and that at the UK border there will be contactless solutions to create "a world class customer experience" (page 97).

It's easy to mock this puppy dog enthusiasm. It's impossible not to, in truth. Benefits of Brexit is world leading in flim flam and shiny enthusiasm. Use the search function: "innovation" appears on 79 occasions; global/ globalised/ globally - 126; transform/ transforming/ transformation - 16; "world leading" - 8; "world-leading" - 11; "world class" - 2; "world-class" - 4; "leadership" - 10; "ambitious" - 17; "superpower" - 8. The relentless buoyancy is numbing, and robs the narrative of any depth or persuasiveness. How one longs for an admission that in this or that sector the UK will do no more than pull its weight or seek humbly to follow leads from elsewhere. But that is not the mood of Benefits of Brexit. Its golden thread is unpersuasively inflated claims about Britain's actual and potential role as a regulatory leader or, at least, best in class performer. Its claims are not simply vulnerable to the charge made above that it neglects the good economic, political and legal reasons which explain why the UK's departure from the EU's regulatory model is unlikely to be radical in many sectors. More than that it makes claims about the UK's future pre-eminence which are frankly implausible.

Benefits of Brexit claims that new-found regulatory freedom will permit UK-specific choices, both in the design of domestic regulation and in the shape of trade deals with third countries. But the assumption that these choices will deliver superior outcomes to those achieved and achievable through EU membership, though one that animates Brexit generally, needs to be demonstrated not simply asserted. Benefits of Brexit adds no flesh to the bones. One of its few attempts to lend concrete detail to its case is found at page 27 where we are told of a target to "cut £1 billion of business costs from retained EU red tape". This is evidently a figure which is plucked from the sky. It strengthens the impression that Benefits of Brexit is written to advertise the government's deregulatory credentials rather to offer a clear-sighted list of options which are realistically available.

It is here that Doing Things Differently? is helpful. It looks at detail. Yes, Brexit permits UK-specific choices, but what really might that mean? And will whatever benefits might be found really exceed the costs of departing from the EU model, most of all the trade friction introduced with a bloc to which almost half of UK exports are routed? More generally is there any traction in the idea that the UK can lead as a regulator - if it can't, it is simply creating trade barriers between itself and every other jurisdiction across the planet by choosing to regulate differently. Doing Things Differently? tracks these questions across a number of important sectors, and, as explained above, it comes to conclusions about economic, political and legal obstacles to reform in the UK which in their detailed caution serve as a sharp rebuke to the exaggerations and lack of balance which litter Benefits of Brexit.

 

Conclusion

In any normal world identifying the Benefits of Brexit in a carefully costed and realistic manner would have preceded a referendum on whether to pursue Brexit. But that milk has been spilled. Brexit is done, and Brexit entails significant change. Free movement is ended, EU state aid rules are no longer applicable (subject to the Ireland/ Northern Ireland Protocol), the Common Agricultural Policy is now a stranger to the UK, management of fisheries has been profoundly altered, and so on. How much of this is a benefit is open to discussion. So, for example, the UK is no longer bound by EU free movement rules which entails also that UK nationals are no longer able to rely on those rules in order to live and work in the EU-27. Taking back control entails also losing control - the UK has chosen to shake off the disciplines of EU membership but the disciplines of EU membership to which all Member States are subject are no longer available to benefit citizens of the UK. This is what leaving the EU means. One might agree this is a benefit, one might think the benefits, such as they are, are outweighed by the loss of influence and participation in the EU network of reciprocal obligations. But it isn't 2016 any more. Those dice have been rolled.

Equally it is depressing to read in Benefits of Brexit that withdrawal from the EU restores the UK's status as an independent sovereign country (page 5) and that EU membership entailed giving up sovereignty (page 30) - it didn't: entering into an international treaty is an exercise of state sovereignty, not its abdication, just as withdrawing from a treaty is an exercise of state sovereignty - and one can only regret that the 2017 White Paper's sober explanation that 'Whilst parliament has remained sovereign throughout our membership of the EU, it has not always felt like that"     is now regarded by the UK government as a concession too far to reality. But sovereignty talk too is just 2016 on repeat. It's over. What matters now - and what Benefits of Brexit purports to demonstrate - is what will be done with these supposed new-found freedoms. That is the agenda needed in 2022.

Benefits of Brexit reveals a feeble menu. It fails to distinguish between opportunities presented by Brexit and changes that could have been made by the UK as a member of the EU; it claims as advantages of Brexit things that are truly simply attempts to reduce the disadvantages of Brexit; it ignores good economic, political and legal reasons for scepticism about the UK's scope to diverge from EU rules and practice; and it offers a wildly optimistic flurry of claims about the UK's world-beating future which are sorely lacking evidence base or plausibility.

Doing Things Differently? begins with a brutally detailed essay by Winters and Morita-Jaeger making clear that Brexit-induced trade losses with the EU far exceed possible gains from new trade deals with third countries (as they point out, the government's own published figures admit this) and their contribution is rich in detailed scepticism about post-Brexit UK trade policy and potential. Benefits of Brexit does nothing to counter this, because (as its title promises) it literally refuses to consider costs that are a consequence of Brexit. Energetic divergence from EU rules carries the price tag of increased friction to economic activity. This is a trade-off the addressing of which must lie at the heart of any realistic plan for Brexit. Benefits of Brexit - in sorry mimicry of the Leave campaign back in 2016 - refuses even to acknowledge the issue.

The Prime Minister's Foreword to Benefits of Brexit cries that "the act of Brexit was not an end in itself but the means by which our country will achieve great things". He adds "the bolder we are, the greater the gains will be for all of us". Yet more than five and a half years on from the fateful referendum we are still dealing in a Brexit that is painted in the colours of imperial units, the crown on pint glasses, and - of course - blue passports.

Benefits of Brexit's most striking feature is its needy tone. It has the feel of a country hectoring the world about its qualities, and hoping it has an audience. It is alarmingly light on detail, evidence and concrete proposals that are realistically capable of fulfilment. In that respect the voice of the UK government in 2022 still has a loud echo of 2016's Vote Leave campaign. The strong message of Benefits of Brexit is that the government's plan for Brexit is to say stridently that there is a plan for Brexit. A world-leading ambitious best in class transformative plan for Brexit. The strong message of Doing Things Differently? is that reality is a great deal more obstructive and complicated.

Barnard & Peers: chapter 26

Photo credit: Khayri R.R. Woulfe via Wikimedia Commons