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The burden of choice

by Sam Ashworth-Hayes | 31.08.2016

In theory, leaving the EU frees the UK to chart a fundamentally new economic course. In the real world, the EU’s power to dictate the terms of our continued access to the single market is likely to circumscribe our political choices, potentially feeding resentment among Brexiteers. Some post-referendum policy suggestions have already left our European neighbours distinctly unimpressed. Attracting particular ire is a proposal to cut UK corporation tax in an attempt to cushion the economic blow of Brexit – and attract business from the continent.

The Swedish prime minister, Stefan Löfven, warns that if Britain goes ahead with tax cuts, the EU might play rough during future negotiations. If the UK decides to “begin that kind of race,” he said, “that will make discussions more difficult. Aggressiveness from Britain in those types of issues – that doesn’t improve the relationship.”

Predictably, Brexiteers have raised howls of protest. “The whole point about Brexit is we make our own laws,” said Conservative MP Owen Paterson, adding that, “it’s absolutely nothing to do with a foreign prime minister.”

But nations do not exist in isolation. When London alters its tax system, Stockholm keeps a wary eye on its coffers. Before June’s referendum, Löfven would have had a limited influence on UK tax decisions. The EU does not set a minimum rate of corporation tax, and under the bloc’s voting rules Britain usually ended up getting its way.

Post-Brexit, however, Sweden and every other EU member will effectively hold a veto on our future access to our largest market. If we want a good trade deal with the EU, our former partners may well make it contingent on the UK playing ball on tax and other issues.

At the same time, the vote to leave has opened a series of fundamental economic questions. Do we want to be in the single market, with its rules on state aid and workers rights? If the answer to that is ‘no’, it opens up another set of issues that ultimately boil down to what sort of country we really want to be.

Do we want to create a free market utopia, scrapping rules on working time and gender equality, abolishing tariffs and adopting Patrick Minford’s relaxed attitude towards the elimination of British manufacturing? Or do we want to follow the protectionist wing of the Brexit movement, cutting migration and raising barriers to trade with the rest of the world? Is our future with the Anglosphere or, as geographical common sense dictates, with Europe?

These are not questions we are used to asking. Membership of the EU has acted as a commitment device, forcing a compromise between left and right. The great opening of Europe’s markets was part of a grand bargain: workers’ rights would be protected across the bloc and money would be spent on the poorest regions that could not keep up. Brexit has shattered this policy consensus.

The tragedy is that we may have regained the ability to ask the big questions, only to find others answering them for us. Setting up shop as the Singapore of the North Sea might appeal to the liberal Brexiteer, but not to France. With each member state holding a casting vote on our single market lifeline, we may find that, far from taking back control, we have given away control of our future.

Edited by Alan Wheatley

One Response to “The burden of choice”

  • Thank you. Articles like this that really help to inform and give hope for the future. With each passing week it seems increasingly unlikely that the exit will happen in a very bad way if at all. How will the hard core exit team take it? Will there be violence that is more wide spread as they express their displeasure? Reading comments in the Guardian and Independent shows that they don’t have a grasp of reality and many want the exit promised by Gove and Johnson (and Farage and IDS and, and,). How can the government be made to accept responsibility for many of the problems currently blamed on the EU? How can the lies of the tabloids be curbed?