The EU is beginning to feel the benefits of Brexit – but what about Britain?
Jacob Rees-Mogg once said it would take half a century to reap the full benefits of Brexit. He is now the newly created Minister for Brexit Opportunities and has set out urgently to locate them by appealing to readers of The Sun to send in their ideas.
A year after Boris Johnson “got Brexit done” we are only partly waking up to its consequences, not least because of the induced national coma of the pandemic. Some MPs are still struggling to join the dots. At the last Prime Minister’s questions the Conservative MP for Dover, Natalie Elphicke, tested the bounds of satire by declaring that the long queues of lorries leading into the port in her constituency were “not because of Brexit, but because of Brussels bureaucracy and red tape.”
Rees-Mogg has always been blunter that there would be turbulence resulting from leaving the EU. So blunt that it is probably just as well for hopes of a diplomatic settlement that he is not assuming responsibility for the Northern Ireland Protocol. The Foreign Secretary took that over after the resignation of Lord Frost and it remains with Liz Truss in the increasingly muddled organogram of the Johnson Government. In any case, that particular border conundrum seems most likely to offer “opportunities for fresh disasters”, as Boris Johnson once commented of his personal career progression.
As the UK searches for benefits from Brexit, in the face of a shrunken economy and stymied trade with its closest trading partner, European nations, who sincerely wanted us to remain members, are beginning to find the benefits of no longer having us around the table. The European Union is rebalancing in a way which all but makes it certain that the UK – or at least England – will never return as a full member state, however fanatically “remoaners” might wish it.
Exhibit number one in the case for “never” is something barely noted by the British public during the first lockdown; in the summer of 2020, the EU established a €750 billion Covid-recovery fund agreed when the Union set its budget for the next seven years. The pandemic funds, backed by borrowing by the European Central Bank (ECB) consist of €390bn of grants and €360bn low-interest loans to be shared out between the 27 member states. Draw-down and allocation of resources are for each national government to determine – subject to a possible veto by the majority of EU members; 37 per cent of investment is earmarked for green climate programmes, and 20 per cent for digital.
Not surprisingly the EU did not find it easy to agree on the programme. Budget negotiations dragged out at the top level, even without the Brits, for more than ninety hours. Sweden, Denmark, Austria, and the Netherlands were nicknamed “the Frugal Four” for objecting, along with Finland, to such high spending. They capitulated in the end to the benefit of “the ClubMed”, a perennial British bugbear. President Macron hailed it as a “historic agreement”. Chancellor Angela Merkel commented flatly “during the last negotiations David Cameron’s views loomed large. Now he is no longer with us, others have come to the fore.”
Marking a switch in emphasis from the Northern and Eastern members towards the Mediterranean states, the greatest take-up of the funds has been by the countries proportionately worst hit, including Spain, Greece and Italy. “We would have vetoed it,” was the view last week of one well connected international banker with both Italian and UK citizenship, wearing his British hat, who, post-Brexit, has switched his centre of operations from London to Milan.
Italy — like the UK one of the “big four” European G7 members — is the only European country to have been hit as hard by Covid-19 as the UK. It has recorded almost 150,000 deaths compared to our 159,000. Taking account of population size that equates to 2,473 deaths per million compared to 2,341 here.
Italy is exercising its EU membership to the full and is drawing generously on the EU’s recovery fund, earmarking €191bn for its recovery and resilience Piano Nazionale di Ripresa e Resilienza, for both the public and private sector. That is the equivalent of spending several percentage points of GDP or two British furlough schemes worth each year for the next five years. Chancellor Rishi Sunak is not contemplating recovery expenditure of anything like that here. The Build Back Better and Levelling up schemes are long on aspiration and comparatively short of cash commitments. After spending generously as much as £400m on specific relief during the pandemic itself, the UK government, unlike many allies, has chosen to look beyond the pandemic rather than focus future plans specifically around Covid recovery.
The investment priorities of Italy and the UK are still similar: infrastructure, research, training, the digital economy and security. Italy has its own version of levelling up, this time for the poorer south of the country known as the Mezzogiorno.
Italy’s national debt ratio is already much greater than the UK’s. British hackles will bristle at the thought of corruption and wastage when so much money is flowing around the continent. Yet Italy is enjoying a period of stability with a national unity government of appointed technocrats headed by Mario Draghi, former head of the European Central Bank (ECB).
The desire and aim of each country is to stimulate economic growth, as the engine to pull the country out of debt. The approach is radically different to the UK’s and it is shared EU-wide. In Greece, the government of Kyrios Mitsotakis, something of a pin-up of the centre-right, is splashing the cash for investment, as is the leftwing government of Spain. “The total €140bn in recovery funds and loans Spain has received since it joined the EU. It’s a spectacular amount,” Deputy Prime Minister Teresa Ribera told the Financial Times.
Meanwhile, Wales and Scotland are complaining they are being short-changed of the equivalent to the EU structural funds they used to receive. Britain’s farmers are not getting the same level of subsidy either, as they were promised by the government during Brexit negotiations.
The desire and aim in both the EU and the UK is to stimulate economic growth. Growth or austerity are the only engines that can pull any country out of spiralling debt.
Old Europe is pulling more closely together in the absence of the UK and not only in the economic sphere. Berlin and Paris are more equivocal about confronting Russia over Ukraine than Westminster. The antics of the governments in Poland and Hungary have dampened enthusiasm for the enlargement of the community – which any way was a British-led project designed to dilute the power of Brussels.
Such inward-looking caution, with national risk and risk management mutualized across the EU, is precisely what the UK rejected when a majority voted to “take back control”. This, more than economic gain, is what appealed to Jacob Rees-Mogg.
The two different remedies are now being tested live in nation-sized laboratories. We shall see for which countries opportunity knocks in terms of wealth and well-being, although most of us can’t afford to wait for fifty years.