Boris Johnson has shown himself to be a fan of political brinkmanship since taking office last July. Yet at the end of a momentous week in British politics — with the EU threatening legal action against Britain over proposed breaches of the Brexit withdrawal agreement, and the government decried for being prepared to break international law — Mr Johnson looks like he has finally come too close to the brink. Why would he take such a large risk at such an important juncture? One reason being suggested for his willingness to torpedo the Brexit talks and tear up an agreement he himself signed is state aid.
Publicly, the government has so far provided few details of what it wants to do. Alok Sharma, the business secretary, said the UK would be content to follow the subsidy rules set out by the World Trade Organization from next January. It must have the flexibility “as an independent sovereign nation” to intervene to support new and emerging industries as well as to protect jobs.
What this means in practice is unclear but WTO rules on state aid apply only to goods and are inherently limited as a domestic framework. Rather, if suggestions from Westminster are true, both Mr Johnson and his chief adviser, Dominic Cummings, are happy to risk a no-deal Brexit to be able to pursue — without constraint — their vision for the UK. Only then, so the argument goes, will the government have the freedom to build its own trillion-dollar technology champions — the new titans of the economy that will let Mr Johnson’s Global Britain prosper. Only in this way will the UK escape being an also-ran in the technologies of the future, forced to rely on US or Chinese innovation.
This approach must be exposed for what it is — wrong on every count. It is wrong to be prepared to sacrifice Britain’s trading relationship with its closest neighbours for the ability to support new industries. It is also wrong to cast the EU regime as constraining Britain’s ambitions in this area; it allows for sectoral aid. As a member of the EU, Britain has spent far less on state aid as a percentage of GDP than France and Germany.
Even worse, it goes against the grain of decades of British industrial policy: opposition to picking winners helped to improve competitiveness and indeed, helped to stiffen the resolve of other nations against it. Instead, Mr Cummings appears intent on repeating the mistakes of Harold Wilson who promised but ultimately failed to transform the UK with the “white heat” of technology.
Even more worryingly, the approach appears to suggest that Mr Johnson and Mr Cummings really do believe that state aid can make the next Microsoft or Google. That is incorrect. Today’s successful technology pioneers were not built under the direction of government or indeed with state handouts. There are exceptions to this, notably in sectors such as defence or national security. What drives innovation are top-class universities and research facilities, areas where Britain excels. Where governments should play a role is in fostering the right environment to enable new companies to thrive. That means attracting the right talent — and capital. Many of Britain’s start-ups have complained of a shortage of long-term funds.
It should not be left to the particular passions of individuals — be that Mr Cummings or a local councillor — to determine which start-up merits state aid. A well-functioning state aid system must be able to prevent arbitrary, distortive and wasteful decisions. Mr Johnson’s attitude does a disservice to a post-Brexit Britain. It is time for him to step back from the brink.
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