The UK
does have a ‘special relationship’ – but it’s with Europe
William
Keegan
The
government is only deceiving itself by trying to ‘make Brexit work’ and
forlornly pursuing a trade deal with Trump
Sun 5 Jan
2025 07.00 GMT
Walter Scott
knew a thing or two: “Oh what a tangled web we weave/When first we practise to
deceive.”
In many
ways, however, Keir Starmer, Rachel Reeves and their colleagues were deceiving
themselves when apparently deceiving the electorate on the subject of taxation.
Just as the
great mistake made by Harold Wilson, one of Starmer’s heroes, in 1964 was to
rule out a policy move that his advisers knew was necessary to achieve his
other ambitions – the move being devaluation of the pound to a less
uncompetitive rate for overseas trade – so Starmer and co made the mistake of
brushing aside advice from the estimable Institute for Fiscal Studies that the
success of his “mission” (to fix the foundations, etc) would require
substantial increases in the principal rates of tax. Principal because, instead
of frolicking around the margins of the unpopular taxes raised in the recent
budget, the chancellor should have resorted to the obvious sources, namely
income tax and VAT.
All this
fuss about the so-called “black hole” was, sadly, misplaced. The fuss should
have been about the physical harm that more than a decade of austerity had
wreaked on the British economy and its public services, and the increases in
taxation that would be necessary to repair the damage. Unlike the period of
austerity under the 1945-51 Attlee government, forced by the devastation of the
1939-45 war, the austerity imposed by the Cameron-Osborne government from 2010
was a cynical political choice.
This is a
rough time for the new government, but also for the country. The boasts about
reviving economic growth – to the fastest in the group of seven leading
industrial nations – have been followed by the embarrassment of a flatlining
economy, with some commentators saying further tax increases are hardly likely
to improve the situation.
Unlike
Attlee’s postwar austerity, that imposed by the Cameron-Osborne government was
a cynical political choice
Well,
perhaps they should note that although tax increases with no counterbalancing
increases in public spending would be one of the last things a stagnating
economy requires, if those tax increases are financing a boost to public
services and economic demand in the economy, the prospect is altogether
different.
Here, we
come – I know you have been waiting for it – to that mammoth in the broom
cupboard, the second policy decision with which Starmer and Reeves have been
deceiving themselves: the idea that they can revive growth while trying “to
make Brexit work”.
The evidence
is now overwhelming: Brexit doesn’t work. The monstrous amount of paperwork at
the borders is making life increasingly difficult for smaller businesses, many
of which have almost given up on trading with our main partner, namely the EU.
Wine importers have to pay an extra bureaucratic charge for consignments that
leave the EU and then again when they enter the UK. As one wine importer
observed: “This is bad enough, but at least, unlike perishable imports, the
wine does not go off during the customs delays, although costs certainly go
up”.
It is all
such unnecessary, self-imposed harm: a serious drag on the economic growth the
prime minister and chancellor have staked their reputations on. There is so
much to do, and a return to the customs union and the single market would
provide a boost to trade and growth that is lacking on both sides of the
Channel. It is all very well the prime minister wanting to “reset” relations
with our former partners, but so far what has been proposed hardly amounts to a
row of beans.
The idea
that appointing Peter Mandelson as ambassador to Washington will improve our
trading prospects is laughable. Much is made of Mandelson’s experience as an EU
trade negotiator when he was a Brussels commissioner, but close observers
during the Doha round did not think he was that effective.
With Trump
heading for the White House and Elon Musk – the enthusiast for the appalling
Alternative für Deutschland – having such influence, this government should not
kid itself about a special relationship with Washington. For decades, until
that disastrous 2016 referendum, our real special relationship was with the EU.
Given the disturbing geopolitical forces besetting Europe, our future lies in
re-establishing that relationship. We need the protection of the EU and they
need us. Well-meant minor gestures are all very well. But “resetting” should
mean getting close to rejoining!
Meanwhile,
Starmer should not be running scared of the egregious Nigel Farage. Labour
should be pointing out that, of the two big factors currently harming the
economy – austerity and Brexit – Farage was responsible for the ills of Brexit,
on which he is now trying to capitalise. He is a political impostor: a
snake-oil salesman.
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