Brexit, the Conservative Majority and the UK Political Economy- Part 1: Introduction

Our new blog series examines the policy implications of the 2019 UK general election, examining trade, immigration, environment and labour market policy under the recently elected Conservative government.

The recent election of a new Conservative Government with an 80 seat majority in the House of Commons at last provides certainty regarding the thorny issue of Brexit. On the 31st January 2020, the UK left the EU and entered an eleven-month transition period. Yet much uncertainty remains as to the future direction of the UK’s political economy under the Tory party; both with regards to our future trading relationships as well as the shaping of domestic policies. What is certain is that the two are intrinsically interlinked.

Once the transition period ends on the 31st December 2020, the Government will no longer be legally obliged to align with EU rules and institutions. As such, the UK will be able to determine policy and regulations related to many areas of governance including trade, migration, financial services and data policy. The state will also be able to independently determine regional subsidies and state aid. This blog series offers some reflections on the possible routes that may be taken by the current administration, and on the policy implications that have arisen across key sectors of the economy from the withdrawal of the UK from the world’s largest free trade area.

One thing we are told we can be certain about is the determination of the Government to diverge from the regulatory framework governing free trade within the European Union. On 3rd February, Boris Johnson offered further confirmation (following Sajid Javid) that the UK will seek to diverge from the EU regulatory framework. Arguing that regulatory alignment with the EU was unfit for the UK economy, the Prime Minister returned to a rather more historical understanding of the benefits of free trade; evoking the idea of comparative advantage heralded by Ricardo in the nineteenth century:

We in the global community are in danger of forgetting…David Ricardo’s…principle of comparative advantage, which teaches that if countries learn to specialise and exchange then overall wealth will increase and productivity will increase, leading Cobden to conclude that free trade is God’s diplomacy’.

Yet, the speech seemingly failed to engage with the realities of global trade today in which non-tariff barriers (standards and regulations) are the most important aspect of ensuring free, and frictionless trade. Up to 80% of global trade now takes place through supply chains, with substantial trade in components. For comparative advantage to emerge, there needs to be alignment with trade rules; and crucially this includes reducing non-tariff barriers in order to allow supply chains to function.

The broader question of trade policy also relates to how domestic sectors and regions of the UK will be affected. How will UK trade policy be shaped and how will it impact upon particular sectors and communities? The particular historical period evoked by Johnson in his speech this week (the 1846 repeal of the Corn Laws) was characterised by strong institutions and lobbying groups vying for power and influence (such as the Anti-Corn Law league). Where are the institutions today to represent particular sectors and industries? And with such a strong majority, will the Cabinet listen to the concerns of car manufacturers in traditionally Labour voting areas for example?

Confusion and contradiction surrounds the future direction that the Conservative Party will take the country; not only in relation to global trade but also in relation to domestic policy. Exiting the EU arguably gives the Government much more leeway to deregulate and to pursue a more free-market approach to economic policy. Yet, aside from Brexit, there is a sense within the UK that many of the more interventionist policies advocated by the Labour Party were popular among voters, including nationalisation programmes for natural monopolies such as public transport and energy and water provision. On the one hand, the Tories seem to advocate for more statist approaches through increased public spending as was pledged within the Conservative Party manifesto. The renationalisation of Northern Rail and recent hints of Government support for the continuation of HS2 funding illustrates a commitment to investment. On the other hand, many cabinet members and Johnson himself appear to hold a particular liberal brand of right-wing Toryism, almost laissez faire in their approach to the role of the market within society.

Each of the blog pieces within this series which will be published over the coming weeks will examine points of contradiction and tension within the formulation of policy by the Conservative Party. While there is still much uncertainty regarding the future path to be eventually taken by the Government, each author grounds their argument based on the existing evidence. 

Our series begins with Andrew Gamble writing on contradictions between the idea of the ‘Global Britain’ free trade agenda and the pledge to ‘level up’ the country and end the inequalities which emerged as a consequence of the similar trade policies which occurred in the 1980s. Tom Hunt discusses the implications for the UK labour market after the UK’s withdrawal from the EU and illustrates the tensions within the Tory Party which will likely shape the future of labour regulations. Natalie Langford and Merve Sancak examine the dichotomies present within the political economy of migrant labour; in which political ambitions to ‘end’ low skill migration collide with sector-specific dependency on low wage foreign labour. Examining the case of agriculture and construction, they illustrate the divergence present at a sectoral level; with agriculture being promised the expansion of temporary migrant labour schemes whereas construction will not benefit from such programmes (at least for now). Matt Bishop discusses trade policy in the wake of the election, and the challenges which face the Government in balancing post-Brexit trade and industrial strategy. The blog shows that Brexiteer narratives about trade are misguided, and the nominal sovereignty they hope to achieve will in reality provide less autonomy than the UK has at present. Charlie Burns examines the implications for environmental policy in the UK following Brexit and interrogates whether the government’s claims to aspire to be a ‘green superpower’ post-transition phase can be realised in practice.

The complexity surrounding the future direction of the UK political economy is enormous, and there is still much uncertainty with regards to the aims and ambitions of the current Conservative Government. However, we hope this series will shed light on the key challenges and opportunities facing the UK in the post-Brexit period.

Read all of the posts in our blog series on Brexit, the Conservative Majority and the UK Political Economy.