The Guardian view on state subsidy: Brussels was not the problem
The purpose of Brexit is summarised by its advocates in a word – sovereignty. In practice, that means the power to enact laws that European Union membership would forbid. With the exception of border control, the leave campaign avoided spelling out what those legal departures might be.
The picture is coming into focus. On Wednesday, the government described the outline for a system of industrial subsidy. These rules will replace the state aid regime by which Brussels enforces a level economic playing field between member states. The theory is that a nimble, proactive state can make strategic interventions to support upand-coming sectors, enhancing British competitiveness.
In practice, it is unclear what a new subsidy regime can achieve that was unavailable before, nor whether notional new freedoms can compensate for disruptions to trade flows and supply chains caused by exit from the single market. The specifics of what will be permitted have not been published, but the general concept is said to be adherence to “a set of UK-wide principles” and not “red tape”. That woolly distinction will not survive the legislative process. Companies seeking help and officials granting it will need to know whether decisions will later be challenged in court.
Even when regulations are known, there will be divisions in the Conservative party about their purpose. Tory Euroscepticism historically targeted Brussels rules on the grounds that they represented too much intervention in the economy, not too little. Advocates of that model make unhappy converts to what they fear will become a 1970s-style strategy of picking industrial winners from Whitehall.
Boris Johnson is a true believer in state activism, which he sees as a tool for his social and economic “levelling up” agenda, although that confuses different functions of subsidy. It can accelerate the growth of dynamic businesses or prop up failing ones. It would be politically convenient if worthy recipients were all located in areas of social deprivation, but that cannot be guaranteed.
This points to the bigger question hanging over Brexit. How drastic a departure will it really be from the way Britain’s economy has been run? A revealing case study is provided by the automotive sector, which is often singled out as a suitable beneficiary for political support. Carmakers are lobbying governments around the world for help effecting the transition from fossil fuels to electricity.
This week, Nissan is expected to announce plans to locate a battery “gigafactory” in Sunderland – a move that ministers will hail as a vote of confidence in Brexit Britain. That will be a significant step forward for the UK in terms of electric vehicle infrastructure. But it still lags well behind Germany and the US. Britain also trails behind similarly sized European markets when it comes to supporting consumers in switching away from petrol engines, whether through grants to purchase new vehicles or by installing charging points. On both measures, France and Germany are well ahead. They have managed this advantage without leaving the EU.
Brussels rules were never the obstacle to British industrial underperformance, so there is no reason to suppose that scrapping them will automatically fix it. Government that invests in the workforce and thinks of the long-term strategic horizon is every bit as important. But that is not the spirit in which Brexit was enacted by a prime minister who sees only shortterm political points to be scored.
Britain will have to make the most of economic life outside the EU. There will be opportunities alongside costs. But it will be hard for a government to know what they are or capitalise on them when its diagnosis begins with the fiction that a shortage of sovereignty was ever the problem.