Announcing the UK-EU Trade and Cooperation Agreement on the steps of Downing Street, Boris Johnson proclaimed that the UK had “taken back control of every jot and tittle of regulation”. Delivering a Brexit that allowed the UK to take back control” of its laws was a – if not the – red line for the government during negotiations with the EU, which meant the UK left the single market and customs union. The chosen form of Brexit meant costly barriers to trade were erected between Great Britain and the EU (and down the Irish Sea, given Northern Ireland must remain aligned with many EU rules under the Northern Ireland Protocol), but in return the UK won the prize of regulatory freedom.
The question now is what that prize will be used for. Having cast off EU rules, it is still unclear what the government wants to do with its new found freedoms, or whether it is even up to the job of making the difficult choices autonomy brings.
There are good reasons why the government might want to do things differently. EU rules were often criticised as being too “one size fits all” which failed to take account of the different preferences or economic needs of individual member states – an inevitability given the need to reach compromise between a range of views.
Outside the EU, the UK government can better tailor regulation to British needs. Since the start of the year, there has been a flurry of government consultations suggesting possible reforms, such as banning the export of live animals for slaughter, permitting greater use of GM foods or introducing a simpler regulatory regime for domestic banks. Regulatory reform could also promote innovation and see the UK gain an economic advantage by regulating first in areas of new technology, such as fintech and precision medicine. This could involve building on the UK’s success in trialling innovations such as “regulatory sandboxes”, which allow firms to test new products in controlled environments.
But just because ministers can change EU rules it doesn’t always mean that they should. Diverging will often carry costs that must be weighed against the benefits. It could trigger trade disputes with the EU that lead to a loss of access to EU markets for British firms, undermine the UK’s other international obligations and make British exporters less competitive by forcing those trading with the EU to comply with two sets of regulations rather than one. It could also upset already strained relations between Westminster and the devolved administrations, who want to remain closer to many EU rules, and critically could deepen the Irish sea border, further inflaming political tensions in Northern Ireland.
And beyond the political rhetoric, there doesn’t appear to be widespread public support to water down regulation inherited from the EU in worker’s rights and environmental protections.
The Prime Minister’s former Brexit negotiator Lord Frost has talked up the “huge advantage” of the UK’s new-found regulatory freedom, but polling suggests the public favour higher, not weaker, standards. It is unlikely to be in the UK’s interest to diverge across the board.
The case is strongest in areas such as financial services and life sciences, where the costs tend to be lowest and the UK’s comparative strength leaves it well placed to adopt its own regulatory approaches. But in other areas, including manufacturing, where EU rules are often the global standard that UK firms must follow to trade with the bloc, regulatory freedom may best be exercised by choosing to stay aligned. The recent call from Tim Martin – boss of Wetherspoon’s – for greater EU immigration illustrates that even the most ardent supporters of autonomy from the EU do not necessarily want drastic change.
Exercising post-Brexit autonomy will force the government to be clear about its values – and make tough calls. For example, it will need to decide if the promise of free trade agreements with the US and Australia – and the likely acceptance of chlorinated chicken or hormone treated beef – outweighs the economic and political costs of undercutting UK producers and riling the devolved governments.
There is still little sign that the government has a strategy for regulating outside the EU – and divergence for its own sake is no way to proceed. Without leadership and a cross-government plan, siloed thinking risks unintended consequences. It is essential that ministers do more to ensure coordination – including issuing clear guidance setting out how departments should navigate the new considerations that apply when making regulation outside the EU.
For now, however, the government is approaching divergence like a game of space invaders played blindfolded. Pursuing a “hard Brexit” was based on a calculation that the heavy upfront costs of disentangling the UK from the EU would be more than made up for by unlocking the ability to do things differently – adopting nimbler, less burdensome regulation that better meets the needs of the UK economy and society.
But taking advantage of these opportunities requires the government to be frank about the trade-offs involved. Having taken back control of regulation, the government now needs to take responsibility for the difficult choices that freedom brings – rather than crossing its fingers and hoping it doesn’t get hit.
Joe Marshall is a Senior Researcher at the Institute for Government and lead author of Taking back control of regulation.