Nigel Farage is talking about Brexit again. In recent months, he has been conspicuous by his silence on all things EU – conscious, perhaps, that most voters take a rather dim view of how Brexit has turned out.
But, with his speech in the City of London to set out Reform UK’s economic plans – which ditched his party’s general election pledge to cut £90bn of taxes, in favour of a pledge to form “the most pro-business” administration – he has now waded back into the debate, arguing that the UK has “not taken advantage of the opportunities to deregulate and become more competitive”.
The political logic is clear: Farage is saying that the problem is not Brexit, but the politicians who have failed to properly implement it. If only the UK had pushed harder to rip up EU red tape, we would not be in the mess we’re in.
But his economic and regulatory logic is fundamentally flawed. A close study of recent Brexit history (we happen to have produced one) shows that Conservative governments did, in fact, aspire to deregulate the UK economy. That they failed was due not to a lack of political will, but to reality – and the dawning realisation of the economic damage it would do. It is the very “business people” Farage claims to speak for who pushed hardest against the “Brexit opportunities” agenda.
Take the Conservatives’ flagship deregulation legislation: the Retained EU Law Bill (now Act). This created a “sunset” deadline after which all EU-derived law (running to thousands of pieces) would disappear by default, except where ministers actively chose to retain specific pieces.
This is about as radical a deregulatory proposal as has ever been conceived – a country seeking to sweep away a core pillar of its legal system overnight. Business went berserk – and for good reason. Radical deregulation creates major uncertainty. A sudden repeal of the rulebook prevents businesses from planning ahead and puts foreign firms off investing in the UK.
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Nigel Farage claims that, since leaving the European Union, the UK has ‘not taken advantage’ of the opportunities to deregulate business (PA)
Consequently, Rishi Sunak abandoned the sunset clause, with then business secretary Kemi Badenoch declaring: “We are not arsonists.” Farage, however, seems to have his matches ready. Promises to make good on the “opportunities” of Brexit “in every sector” are not going to appeal to most businesses.
Deregulation also affects the UK’s trade performance. International trade relies on the principle of harmonisation: the more common rules and procedures you have between two jurisdictions, the simpler trade becomes. Ergo: the more the UK diverges from the EU rulebook, the harder it is to trade with our largest trading partner.
Though, in principle, the UK may be able to design “bespoke” regimes which are less bureaucratic than the EU’s, the result is that businesses then need to navigate different regulatory processes for each market – adding more cost overall.
After Brexit, the UK toyed with the idea of simplifying EU-derived “GDPR” rules on data privacy – a seemingly crowd-pleasing promise to get rid of the annoying cookie pop-ups on websites. But it abandoned the plan as the realisation hit home that this would lead to a loss of “adequacy” with the EU rulebook – adding hundreds of millions of pounds a year in administrative costs for businesses which exchange personal data with EU counterparts.
And though Farage laments the lack of greater control over fish, the blunt truth is that the biggest cost to the UK’s fishing industry has come from the loss of regulatory alignment with the EU on animal health standards – which has made it harder, and in some cases impossible, to export British seafood to the EU (hence this government is now seeking to negotiate an “SPS” deal to rectify the problem).
Conservative governments learned all this the hard way, gradually abandoning most of their plans for divergence as the costs became clear. In abandoning requirements for UK-specific conformity assessments on manufactured goods, business secretary Grant Shapps stated that doing so would “remove barriers to businesses so they can get on with their top priorities”.
So are there no opportunities for Farage to seize? Services might be one, as costs of divergence are generally lower in services trade (where the UK is less reliant on the EU). However, while the Starmer government is seeking to find regulatory opportunities in AI and financial services, it has come up with little to date.
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The rate of UK-EU alignment has increased significantly in recent months (UK in a Changing Europe)
What about unpicking EU protections on workers’ rights and environmental protections? The Working Time Directive, after all, became a bete noire of the Eurosceptics. But again, there is a reason they did not act when in power. The British public – and perhaps especially the Reform UK voter base – favour strong regulation in these areas.
And finally, of course, even if Farage came up with a coherent set of proposals for deregulation, he would then face a delicious dilemma. Deregulation will require more bureaucrats, not fewer.
Farage promises to “reduce the size of the bloated state”, but the task of identifying legislation to reform, and then designing and implementing the new rules, would be a major administrative undertaking for Whitehall.
The UK civil service has doubled in size since Brexit, and a key reason for this is that Whitehall has had to take on jobs that were previously left to EU regulators. The more the UK seeks to do things differently to the EU, the more British bureaucrats we will need to do the heavy lifting.
If Farage’s real priority is to cut the state to save cash, there is one obvious thing to do – join the EU single market.
Joël Reland is a research fellow at UK in a Changing Europe