Surely it cannot have been the intention of those who fought so long and hard to take Britain out of the European Union to make Brexit Britain more like Europe.
That would be too ridiculous for words.
The plan was to strike out in a new and distinctive direction, free of Brussels’s red tape and with an emphasis on entrepreneurial endeavour, less government and lower taxes.
Yet on the eve of tomorrow’s first anniversary of a Brexit trade deal with the EU, Britain has never looked more European.
The continental economies of Europe are notorious for saddling their workers not only with high income taxes, but onerous supplementary ‘social charges’ in order to pay for generous health and welfare benefits. That is now our direction of travel too.
From next April, National Insurance contributions (NICs) for both employers and employees will rise 1.25 per cent, supposedly to pay for social care and the always cash-thirsty NHS.
It is not possible that those who worked so hard for Britain’s exit from the European Union intended to see Brexit Britain look more European than they did. Pictured are President of European Commission Ursula von der Leyen, President of European Council Charles Michel, President of European Council (front R), French President Emmanuel Macron and Ilham Aliyev of Azerbaijan. They were photographed in Brussels on December 15,
Frozen
This means workers will pay NICs at a rate of 13.25 per cent and, given that the basic rate of income tax stands at 20 per cent, even those on modest incomes of, say, £25,000 a year, now face an effective marginal rate of tax of 33.25 per cent. This is very European.
But it doesn’t stop there. It has been decided to freeze the income tax thresholds. This means that low-income workers who earn less than $40,000 will be required to start paying taxes.
Most European economies are also fond of levying high taxes on business, which might explain the EU’s sclerotic economic performance for much of this century.
Even though we had been in the EU for a decade, Britain has steadily cut taxes on profits over the last decade.
It’s not so. Incredibly, even though we’ve now left the EU, we are heading for European levels of corporation tax, which will rise from its current 19 per cent to 26 per cent by 2024. All this leads to a clear conclusion. British tax burden has reached its highest point in modern times.
Over 40% of GDP now comes from the state. Taken together it means we’re heading towards a European-style high-tax, big-government economy. It’s not exactly the Brexit we were promised.
Covid was a costly problem. As major wars increase the size and scope of government, pandemics also tend to expand its reach. However, even if the pandemic is over, it’s not unreasonable to believe that the state will diminish.
Indeed, it’s remarkable how little we’ve taken advantage of what was meant to be a new freedom. It’s one of the reasons that Lord Frost (pictured with Boris Johnson), the Government’s tough and highly experienced Brexit negotiator, resigned last weekend
Boris Johnson’s Government is a cheerleader for net zero carbon emissions by 2050, and has made levelling up the poorer North with the richer South its core mission (especially now it has so many Northern MPs).
The state will have to force us into going green by moving our resources across the country. That would require massive intervention from the government, which in turn means that taxes are higher and more government is required.
It doesn’t get more European than that.
Indeed, it’s remarkable how little we’ve taken advantage of what was meant to be a new freedom. It’s one of the reasons that Lord Frost, the Government’s tough and highly experienced Brexit negotiator, resigned last weekend.
Probably the biggest Brexit win was using our new-found independence to approve and procure Covid vaccines and start their roll-out, without waiting for the EU’s sluggish regulatory processes to grind into action.
We’ve also allowed Swiss shares to be traded on the London stock market (a practice banned by Brussels in 2019), ended VAT on women’s sanitary products, reformed alcohol duties in line with the strength of the drink, moved falteringly towards establishing freeports, and introduced a points-based immigration system which treats EU and non-EU citizens alike. All of the above were possible because we’ve broken with Brussels. It was all worth it, I’m sure. However, it isn’t game-changing. The only real way to change Britain post-Brexit is through regulatory reform.
It is complicated, unglamorous and doesn’t lend itself to politicians’ soundbites. It is the place where Brexit promises to be. Lord Frost was working on a report about which rule changes could make the most difference. Unfortunately, the momentum behind this initiative now stands at risk due to Frost’s departure.
The EU styles itself as a ‘regulatory superpower’ because the size of its market allows it to establish global rules and regulations for doing business. But its rules are dominated by what’s known as the precautionary principle, which militates against risk-taking. This is Britain’s opportunity. We could start by scrapping the EU’s onerous GDPR rules on digital privacy.
If we had fewer, better regulations covering cutting-edge technologies such as gene therapy, cyber security, digital investment, artificial intelligence, robotics and medical advances — areas in which we are already ahead of the EU —then the chances of a genuine Brexit dividend become possible.
Divorce
It seemed so much simpler five years earlier during the Brexit referendum campaign.
The Leavers made out it would all be so simple, when it’s been anything but. The Remainers claimed it would be a calamity, when it hasn’t.
BBC TV interviewed both the leading players in the debate. I don’t remember the Leavers telling us we’d need to pay a divorce bill of £40 billion.
George Osborne, then Chancellor of the United Kingdom, used to tell me that Airbus was likely to leave. It’s still here, investing more than ever
The unique situation of Northern Ireland that still plagues Brexit was not something the Leavers had much to say. When it turned out to be far more difficult, slow, and inefficient than the single market, they claimed that a free trade agreement with the EU was possible.
But Remainers got so much wrong, too. George Osborne, then Chancellor of the United Kingdom, told me that Airbus was likely to leave and he would continue telling me this on air. It’s still here, investing more than ever.
London Stock Exchange boss predicted that the City of London will lose over 200k jobs. The reality was that only 7,500 jobs were transferred to European financial centers, dwarfed in comparison by hundreds of thousands more jobs added in finance after the referendum.
Our expectations were that there would be mass unemployment and recession. Brexit caused neither.
Unicorns
That great guru of global banking, Jamie Dimon, the billionaire CEO of America’s biggest bank JP Morgan, forecast a new financial golden age for Frankfurt and Paris on the back of London’s misery.
That has not happened. JP Morgan has the fastest rate of hiring people in London today.
Around £29.4 billion of new investment has flowed into Britain’s high-tech industries this year, over twice as much as in 2020, twice as much as Germany and three times as much as France.
More than a third of European high-tech investment is made now in Britain. The country boasts more unicorns (tech start ups valued over $1 billion) than France, Germany, and Sweden. China and America are the only countries with more unicorns.
Britain, which is second only to China and America, offers the best market for those looking to take their company to the market.
It is clear that Brexit has not stopped anyone from doing this.
This is a sign of the potential that lies ahead if we can ever create the regulatory environment where entrepreneurs and technologies of the future will be welcomed.
Failure will result from the fact that the Johnson Government of 2021, which is comprised of many who led the Brexit campaign from the top, ran headlong into the wrong direction.