By David Campbell Bannerman, Chairman of The Freedom Association
When you hear of Brexit changes in the media, inevitably there is an excessive emphasis on the claimed negatives of Brexit: supposed lorry delays, increased paperwork (how do they manage trading with the rest of the world – 57% of our exports go to the rest of world!), the loss of benefits such as pet passports, free movement or the expensive Erasmus student programme (replaced by the UK Global Turin programme).
The campaign to ‘Re-join’ the EU has already started, and this is the latest return to failed and tedious Project Fear claims. But strangely Dover and other ports are flowing freely, and the media have given up hanging around there hoping to see major disruption.
Well, how about these benefits of Brexit?:
New Free Trade Opportunities: The UK has gone into superdrive on signing new free trade agreements (FTAs) with nations all round the world – the latest count is around 63 but before Christmas a new one was being added daily!
Yes, it is true that quite a number are rolled over EU trade deals, adapted for a post-Brexit UK, but even these deals are going further than the EU’s own deals – such as the Japan one. This is because the UK is more free trading and less protectionist than the EU is, and this is reflected in the UK deals being struck.
The UK can also do deals that the EU has failed to do. Whilst it is currently highlighting its rather embarrassing China investment agreement, this is not a full free trade deal – investment is normally a chapter or two of fuller trade deals and there is no China Free Trade Agreement.
The EU has failed to deliver on 12 years of negotiations with India for a free trade agreement, but the UK is in prime position to do a deal. I was responsible for reporting on the EU-India FTA, and can see real benefit for the UK, particularly in cutting massive taxes on ‘luxury goods’ – from Scotch whisky to Jaguar cars (ironically, as Tata is an Indian company).
A US trade deal would be of great benefit to the UK, and at least five negotiation rounds have taken place. Whilst there are rumours of President Biden being cooler on the UK deal and more pro-EU, delivering a ready-to-go trade deal will make him look good. Given the length of negotiating trade deals, it is quite common for political opponents to complete deals started by rivals, as with the EU-Canada deal, where I met Prime Minister Trudeau in Strasbourg.
Then there is an opportunity to join a trade bloc fast outpacing the EU – the CPTPP (Comprehensive and Progressive Trans-Pacific Partnership) which accounts for 14% of the global economy, and where countries such as Japan and Australians are backing us.
Cutting EU Red Tape and Overregulation: In the EU Referendum, the combined total of the EU’s body of law, the Acquis Communautaire – was assessed at 700,000 pages, equivalent to a Nelson’s Column of paper. It will be even more now. One of the main reasons for dissatisfaction with the EU was the scale and unsuitability of this body of law.
The UK should now be assessing what EU laws, now incorporated into UK law, can be improved, retained or swept away. 47 years of inherited legislation, simply placed into UK law by the Great Repeal Act, can now be revisited anew. The UK won the vital battle in the EU negotiations not to be tied into EU laws, including not slavishly adopting new EU laws with no input, as Norway has to do within the EEA Agreement and not signing up to retaining existing laws through ‘non regression’ clauses.
The first indication of new Brexit freedoms is the banning of live animal transport - which can be distressing to animals if long distance – and is something that EU Single Market legislation protects.
But in bigger terms, we are talking or reviewing the Working Time Directive, that costs the NHS £4 billion a year alone for unnecessary use of locums, or counting surgeons sleeping overnight in a hospital to ensure an early start as working, thereby reducing their effectiveness. Historically, the UK rejected this under Social legislation but the EU got round it by forcing it through under Health and Safety laws.
There is the Agency Workers Directive, which hit the UK harder – with 8 out of 10 jobs affected across the UK (250,000) owing to Britain’s more flexible economy and greater value on self-employment – can now be reviewed or removed with the right sort of activity. This sought to make the self-employed, employees, with much of the same costs for businesses after 12 weeks of work by ‘Temporary Agency Workers’. This is a lifestyle choice that the contractors prefer, and this can now be respected again.
The REACH Chemicals Directive, still not fully implemented or even fully costed, which seeks to place grossly onerous and costly demands on small business in particular, can also be reworked to suit British needs and sensibilities. Chemicals is an important business to the UK, and one we have some expertise in.
A real win is for smaller businesses wanting a share of UK Government Public Procurement schemes. EU rules require much greater ‘bundling’ up of contracts which suit larger companies and EU competitors, and make it harder for British SMEs to compete for a share of this £292 billion market. The Prime Minister and Ministers are on record wanting to see the share taken up by British SMEs and their 5.8 million people - to rise from one quarter of central Government procurement contracts - £12.4bn a year - contracts now to one third, and change criteria to include investment in apprenticeships, environmental standards and past performance on value for money. Covid has only driven the need for such home-based suppliers. Government defence contracts should also be more favourable to UK bidders within the rules.
The EU Landfill Directive which has resulted in fortnightly bin collections and was estimated by the Local Government Association to threaten to reach £1billion a year in fines. That’s £1 for every £25 collected; £50 on each council tax bill, and paid directly to Brussels. This was a lowest common denominator issue: the UK has more old rock quarries to fill, whilst the Netherlands has very few given its low-lying geography. An environmentally responsible review is possible whilst still encouraging widespread recycling.
These are just a few examples of savings and reform that can be made from those 700,000+ pages of EU laws, with the potential to save billions in costs, and the creation of many new business opportunities.
Saving EU membership fees. Whilst this has been a controversial area, it was true that the gross contribution to the EU was around £19 billion a year (£350m a week under EU control), with £11bn a year being the net contribution after deductions for returned monies such as research grants and farming subsidies. Contributions are not as simple as Treasury cash transfers – for example, a contribution of around £2bn to EU international aid was not accounted for.
If that seems modest, think of the period of our membership at 47 years, then that equates to £517bn, nearly equivalent to clearing our Covid support package of £280bn twice over (whilst saving £40bn plus in additional contributions to the EU Covid scheme - had we stayed in the EU).
Personally, I would like to see a proportion of this – say 15% - £1.65bn a year – over 15 years - spent on reopening local railway lines and improving local roads. The money has until now been going to building transport infrastructure in other EU nations to date. So why not hypothecate for our trains, our roads, other transport instead, to help restart the British economy?
Cutting the Cost of Living. An immediate benefit of leaving the EU’s Customs Union is a significant drop in the cost of living in the UK. Opponents have tried to obscure such benefits in the haze of extra paperwork, border controls and EU supply hold ups. What is not reported is the reality that the UK is now deploying its own system of tariffs and quotas, and that these are simpler and now far less onerous that in the EU.
Think of the Customs Union as a castle with high tariff walls designed to keep imports away or to reduce the amount let in by raising the barrier. Food prices actually went up 20% when the UK joined the EEC in 1973. Now the British equivalent – the UK Global Tariff schedule – involves lower walls, more open gates and less high barriers. Cars and agriculture remain protected. The result will be good news for consumers and producers alike. The UKGT is hardly easy reading, but it cuts import taxes from only 47% tariff free in the EU to 60% now, rising to 80% with further trade deals.
So, LED lamps go from 3.7% to zero for example, copper alloy tubes from 5.2% to zero, cocoa powder for cooking 8% to zero. We don’t have a banana or orange producing industry to protect with 20% tariffs as Spain and the EU do. The former head of the British Chamber of Commerce, John Longworth, estimates that food costs will be 40% cheaper.
Taking back control of our borders – One of the many reasons a majority of UK citizens voted to leave the EU was immigration. Those who wished to take back control of our borders were (and still are) described as racists and xenophobes. This is not true. When the UK was a member of the EU, immigration from EU countries skyrocketed. As a result, immigration from non-EU countries had to be severely restricted. With controlled immigration, we have the ability to recruit from all round the world, not just the EU, and we can now manage entry through a new Australian-style visa system.
Restoring Tax freedoms – It is an illusion to think that sovereignty over tax has not been invaded by the EU. A small tax maybe, but one highly symbolic return of sovereignty is the tampon tax, where a 5% VAT rate could not be abolished whilst in the EU, but has been immediately on Brexit. VAT is the second largest UK tax and is mandatory for all EU members; forming much of the payment of our membership fee, alongside customs duties, which are now also returning to HM Exchequer.
VAT now could be abolished and replaced with a number of other more local taxes. Could we return to a UK Retail Sales Tax that VAT replaced? Or could we usher in a new US style layering of sales taxes – with some going to national assemblies, or some to city mayors or counties, to reflect devolution reality?
The EU was also moving in on Corporation Tax receipts through a Common Consolidated Tax Base, where richer members subsidised poorer members. The EU also wants to label low Corporation Tax as a form of State Aid, with Ireland and Belgium in the frame, and the Commission has fought several court cases on this in the ECJ, unsuccessfully – so far.
Establishing Real Freeports – Again, it is claimed incorrectly that the EU has ‘freeports’ – that is low or zero taxed areas where goods can be imported duty free, be worked on, and then re-exported very competitively. The EU versions must follow EU Single Market rules and tax policies.
Britain can introduce a number of true freeports, with low or zero taxes and light regulation to compete effectively with lower cost areas around the world rather than Europe, and bring local jobs and training to areas needing major economic development; particularly as Britain boasts many ports and harbours around its coast. Freeports is a personal crusade for Rishi Sunak.
The UK can also now run its own shaped and appropriate Regional Aid schemes, free of the prescription of EU programmes which were also heavily weighted towards benefiting poorer areas of the EU and were so often ruled unavailable to UK regions, as I as an MEP witnessed directly. The UK Shared Prosperity Fund has real potential for British businesses; and Britain has been denied the successful Enterprise Zones of the Thatcher era on grounds of EU rules.
Trade in Services benefits – Again, negative briefing has intervened on the UK-EU trade deal being a ‘thin deal’ because it doesn’t have services. The reality is that services do not have tariffs and therefore tend to be secondary in FTAs, despite the UK and EU economies being around 70-80% services. There is not much on services in the EU-Canada CETA deal either, despite Toronto being the 10th largest financial centre in the world, well ahead of Frankfurt and Paris, although the EU-Japan deal is a bit better.
The real benefit of service treatment is leaving EU interference and intervention behind, rather than specifically reducing non-tariff barriers, which can come later.
For example, with follow up agreements in Data and Financial Services and equivalence between the UK and EU expected, there will be substantial scope for regulatory divergence across wide areas of technological and financial regulation. For example, the unpopular Alternative Investment Fund Managers (AIFM) Directive, which hit the City of London and Hedge managers hard, can be revisited and even removed. SOLVENCY II’s excessive insurance capital holding regulation can be eased, and the UK will be saved from the devastating threat of the EU’s favoured Financial Transaction Tax on trades.
Rebuilding Britain’s Fishing Industry – Whilst British fishermen didn’t get all they desired immediately, and the system of allocations is complex, and the process being more slow burn, they are still getting a substantial increase in quota – with the share of British waters fished by British boats rising to 75% from 50% now over 5 years. After that a trade off can be enacted between achieving more quota and losing preferential access to the EU market for UK-caught fish.
The industry has a chance now to rebuild from Scotland to Cornwall, after the devastation of the EU’s Common Fishing Policy, and the Government has a £100 million fund able to help the industry with new boats, facilities and skills.
Restoring British Farming – similarly, the EU’s Common Agricultural Policy did not benefit Britain’s more efficient farming industry, heavily subsidising French and Polish farmers in particular at the UK’s cost. Leaving the EU with a deal avoiding heavy agricultural tariffs has brought extraordinary harmony in a future, fairer, more suitable and more innovative vision between farmer representatives, food industry and environmental groups on the way forward, which bodes well for the future.
Still retaining some of the best of the EU – The UK has left the EU but not Europe, or the 47 nation Council of Europe. In addition, as many non-EU European and some non-European nations do, Britain can continue to remain in favoured EU programmes, paying a membership fee for each. In particular, the important Northern Ireland Peace Programme continues, supporting reconciliation in Northern Ireland, and Britain stays in the Horizon research programme, which was one area the UK did do well out of from within the EU, such as for science. Continuing the Erasmus Student programme was favoured, but proved not possible in negotiations, but the new UK Global Turin Scheme will replace it. Erasmus tended to favour EU students coming to the UK, at British taxpayers’ expense.
Strengthening The British Union – contrary to many claims, the case for breaking up the British Union is weakened not strengthened by Brexit, because nations such as Scotland, if they became independent and joined the EU, would have to join the Euro, involving large Greek-style public spending cuts, the loss of Barnett payments, and face a hard border with the rest of the British Union, where 60% of Scottish exports go to.
In conclusion, many of the benefits of Brexit have been deliberately and unhelpfully rubbished or obscured, for political reasons. But now, with five years since the referendum, it is time to move on together, united as one, and together to seize the very real opportunities Brexit now presents our country and its businesses.
David Campbell Bannerman is Chairman of The Freedom Association, a former Member of European Parliament 2009-19, and a strategic trade adviser