Why are ministers reportedly poised to introduce legislation that undermines their commitments on state aid?by Raphael Hogarth / September 7, 2020 / Leave a comment
While Brexit talks have been displaced from the front pages by the coronavirus crisis, negotiators have been whittling down their disagreements. They can now see a way through on most of the big sticking points that threatened to block a trade deal at the start of the year—rules on labour and the environment to prevent a race to the bottom, EU access to UK fishing waters and the system for resolving future disputes.
On the rules for state aid, however, it appears there has been little progress. This is now such a bone of contention that the prime minister is threatening to walk out of negotiations if the EU does not drop its demands for legal restrictions on the UK government’s ability to subsidise its own companies. It is even reported that the government will legislate to rip up the commitments it has already made in this area.
It is strange that Brexit negotiations are snagged on state aid. It is strange, first, because the UK’s future trading relationship with the EU is being negotiated by a Conservative government, led by a self-proclaimed libertarian, not instinctively fond of wading into the free market to subsidise businesses with taxpayers’ money. True, there are elements in Boris Johnson’s government including chief of staff Dominic Cummings who do genuinely care about making sure ministers can subsidise British business without any legal restrictions—but that is strange in itself, given that Cummings wrote in 2015 that the “vast majority” of state aid issues in government are mere bogeymen, “easily dealt with if you have a sensible process and reasonable goals.”
It is strange, secondly, because even if this government did want to start handing out more state aid to businesses and industries it liked, it could do so, even if the UK were still bound, after the end of the transition period, by the EU state aid rulebook. UK spending on state aid as a percentage of GDP was 0.38 per cent in 2018: among the lowest in Europe and significantly lower than other comparable countries such as France (0.79 per cent) and Germany (1.45 per cent). Ministers are fighting awfully hard to throw off a yoke so light they can hardly feel it.
It is strange, thirdly, because even if the government…