Even with a huge majority and an imploding Tory Party, there is only so much a new government can do. The list of things in this country that are falling apart and the issues that the last government allowed to fester are as long as your arm. But the biggest drag on Britain’s future prospects is Brexit.
The new government must confront that truth squarely, and one option would be to conduct a thorough inquiry into its economic effects and how to mitigate them. If we don’t understand what went wrong, how can we move forward? A reckoning with Brexit would be cathartic – but it could also pose acute political dangers.
And we must move forward. Because the care system, courts, and councils are all near collapse. The NHS, asylum seekers, the water companies, the university sector and prisons are all in urgent crisis.
Even a new government has to get its priorities right and for this one the very first thing is to get the economy growing so that it can then afford to fix all the other problems.
That is why the chancellor Rachel Reeves’s very first speech was about investment, investment, and more investment. It is also why she asked the Treasury, in her very first act, to calculate how much the low growth of the last 14 years has cost the British economy.
The answer was that if growth in the UK had even reached the average for the G7 nations, the country would be £140bn wealthier, and the tax take for the government would be £58bn higher every year.
Growth in May of 0.4% – and the fact this was seen as a success – just highlights how flat and painfully anaemic the economy has been for far too long. But there is still an enormous amount of lost growth to make up for.
Although the new Labour government has already worked out where all the money has gone, the only other audit it has announced is a review of the MoD and defence spending. As for a Brexit review – not a peep.
The Treasury must have done its own calculations of how much Brexit has cost the economy. It must know how much of the £140bn that we have lost due to low productivity and weak growth is down to leaving the EU. I have always thought it would make perfect sense for the new government to publish that figure as soon as it got into power. It seems that Keir Starmer and Rachel Reeves don’t see it that way.
The one figure that we have, published by the Office for Budget Responsibility (OBR), showed Brexit is costing the UK the equivalent of 4% of its GDP, or national wealth, each year.
The Treasury’s figure is quite possibly higher than that – a figure of 6% is perfectly possible. And it’s worth noting that some of the effects of Brexit haven’t appeared yet.
So why hasn’t this happened? A professor of law once told me about the dangers of barristers asking expert witnesses questions that they didn’t really want answered.
Consider a question such as: “You say that the victim was shot with a 9mm automatic but there are thousands of such guns around. What makes you think the victim was shot with the defendant’s gun?” That might invite the reply: “The marks on the bullet in the corpse matched the rifling in your client’s gun, and your client’s fingerprints were on the bullet we recovered from the deceased’s body and were also all over the gun. Oh, and the victim’s blood was on the gun and your client’s clothing.” The question has not helped the defence.
Lawyers make sure they never ask questions to which they don’t already know the answer and never ask questions that are going to make things worse for their client. The same thing might well have occurred to our new, lawyerly prime minister. If you ask your civil servants and economists at the Treasury or even the Department of Business, or overseas trade: “How much is Brexit costing us?”, you will get an answer. Doubtless a well-reasoned and researched answer, with accompanying evidence and footnotes and a very worrying conclusion with a very large number in it.
It would include the figures from the ONS on the collapse of foreign investment in the UK, and the fact that France now attracts more foreign firms than we do. The flatlining of UK business investment since 2016 would also be in there, with all their implied damage to productivity.
Then there is the loss of business in the City of London, much of which has gone to Paris and Amsterdam, not something that happened before Brexit. The fact that our exports and imports are 15% lower than they should be – that would be in there. The damage to small businesses, especially their ability to trade overseas, the billions wasted on new border posts, inspection facilities, vets and red tape – extra form filling alone costs £7bn a year – the delays at the borders and the new passport checks that are due later this year and which may “freeze” our border crossings overnight – all of this would form a part of a full appraisal of the cost of Brexit.
But here lies the problem. If you were to publish not just the opinion of the OBR, or of respected thinktanks such as UK in a Changing Europe, or NIESR, all of which have done the calculations, but of the Treasury itself, then you are making a rod for your own back.
Because then there would be an official figure, one that the government could not ignore. And that would be a problem.
The obvious solution would be to admit the figures are terrible and only reversible by immediately rejoining at least the EU’s single market and most probably the EU as well. Fine for you and me, of course, who support such policies. But it would cause the government acute political pain.
The right wing press are already screaming treason, just because the new foreign secretary, David Lammy, has visited Berlin. Boris Johnson, has already claimed that Labour will make the UK a subject of Brussels, and that the very idea that we should have talks about easing red tape at the border is “Brexit Betrayal”. Providing evidence that his policies were mad will only make him and his little band of co-delusionists parp even louder.
The result would be a united Tory-Reform front. Which would be politically dangerous. So why risk it?
Then there is the other issue – that the EU doesn’t really want us back. It has wasted years and huge resources ushering us out of the door. What’s more, UK-watchers in Brussels know that, although the majority of Brits and most major parties would love to rejoin, the British electoral system means that the Tories could be back in No 10 in five years. At that point, they would try to take us out again. The EU is not interested in yo-yo membership.
Even governments with huge mandates have limited bandwidth to do the things that they want to do. Brexit destroyed the last five British prime ministers and left the government without the time, energy or resources to do more important things, such as build prisons or support the NHS.
The result is that the government is rather unlikely to publish an audit of the cost of Brexit any time soon. It is far more likely to follow the advice of someone like Charles Grant, director of the Centre for European Reform, who has written an open letter to Starmer, suggesting a way ahead. Grant proposes a slow improvement in our relations with the EU and a mending of the fences trampled flat by stampeding Tories. This path urges ministers to be realistic about British power and to develop expertise on the EU and its workings. The new government should be realistic, pragmatic and grown up.
The greatest advantage that the Labour government has going for it, is that it is not a Tory government. It can easily and safely ignore Nigel Farage and Mark Francois, not least because every time they scream “treason”, it will not be about rejoining the single market but about ever so slightly better cooperation on data sharing, slashing the odd inch of red tape, a minor tweak to improve criminal extraditions, or small sensible security improvements.
Labour likes the EU and hates Brexit – but not that much. Rejoining is a long-term project. Last time we joined it took over 15 years of asking nicely, the slow realisation that we were the sick man of Europe and that the EU was the future.
In Starmer’s view, we are in it for the long term.
