Rishi’s deal gives Brexit a second chance. He MUST seize it, starting with the Budget, writes ANDREW NEIL
Rishi Sunak’s new deal with the European Union over Northern Ireland is a remarkable watershed in more ways than one — with implications far beyond the Six Counties.
Yes, it consolidates Northern Ireland’s position within the United Kingdom while honouring the Good Friday Peace Agreement and the province’s special relationship with the EU single market. But it also heralds a new era of good feelings between London and Brussels from which both sides have much to gain.
And it imbues Sunak’s premiership with a new sense of achievement and purpose just when it was badly needed.
Until this week the Sunak Government seemed listless, merely languishing in the doldrums until the next General Election took it out of its misery. The Windsor Framework changes all that.
Suddenly Sunak has pulled off what was thought to be impossible. It had certainly proved beyond the capabilities of his three Tory predecessors, including Boris Johnson, whose hopes of using the argy-bargy over the Northern Ireland protocol as a springboard to a new Tory leadership challenge now lie in tatters.
Rishi Sunak’s new deal with the European Union over Northern Ireland is a remarkable watershed in more ways than one — with implications far beyond the Six Counties
Sunak’s deal heralds a new era of good feelings between London and Brussels from which both sides have much to gain
Sunak’s success and enhanced authority should embolden him with a new purpose: to deliver on the promise of Brexit so eagerly advanced in the 2016 referendum yet so hard to divine ever since.
Those diehard Brexiteers on both sides of the Irish Sea who are still inclined to nitpick over the details of the Windsor Framework and plot to obstruct its implementation because they have nothing better to do would be more usefully employed leveraging it as a springboard to post-Brexit success.
After all, they’re the ones who promised us sunny uplands if we voted to leave the EU. Seven years on and the landscape still looks pretty gloomy. Some even wonder, sotto voce, that it might not have been worth the candle, given the small Brexit dividend to date.
Time, perhaps, for them to get behind Sunak and change that, rather than try to undermine a perfectly good deal that has the support of London, Belfast, Dublin, Brussels and Washington DC — and the overwhelming majority of the British people.
The Budget on March 15 would be a good place to start. If the Government is serious about realising a Brexit dividend then it must surely accept that most Tories, many non-Tories and nearly all business folk think it frankly barmy to proceed with raising corporation tax (CT, on company profits) from 19 per cent to 25 per cent, as Sunak and his Chancellor, Jeremy Hunt, are curiously intent on doing.
Just when Britain needs to re-establish is competitive credentials in the eyes of international business, it’s hard to see the point of raising the most crucial business tax by a third. It hardly sends a signal that we’re open for business.
Sunak-Hunt argue that they need the revenue to get a grip on the public finances. But revenues, including CT, are doing just fine, thank you, without further increasing tax rates. The Chancellor has over £30 billion more headroom to cut taxes or increase spending than the Office for Budget Responsibility was forecasting only three months ago.
Tax revenues are much more buoyant than predicted, the recession looks like being shorter and shallower than mainstream economic opinion thought (there might not even be a recession) and collapsing wholesale energy prices — predicted several times in this column — mean the cost of the Government’s energy price guarantee has been slashed.
Until this week the Sunak Government seemed listless, merely languishing in the doldrums until the next General Election took it out of its misery. The Windsor Framework changes all that
Once again we see the folly of using OBR forecasts as the overarching basis for economic policy. It was the one thing Liz Truss got right in her brief stint in 10 Downing Street.
Far from raising CT, Hunt might want to redeem the pledge he made when running for the Tory leadership of cutting it to 15 per cent. Or keep it at 19 per cent and add in further incentives to investment in the hi-tech areas that will define our future.
Business investment flatlined after the Brexit referendum, collapsed during the pandemic and has barely recovered to its pre-pandemic level. If raising CT is the answer in these circumstances I have no idea what the question was.
Of course, Britain’s large budget deficit and national debt, made worse by the pandemic and war in Ukraine, mean no Chancellor can be profligate without inviting the harsh judgment of the debt markets (as Truss found out the hard way). This limits scope for personal tax cuts.
But our fiscal position is no worse than most major economies (bar Germany) and better than many, including America and France. The Chancellor could indicate how in the years ahead he intends to widen the tax brackets, with a down payment in next month’s Budget, so that fewer low-paid fall into the 20 per cent basic rate band and fewer middle-income earners face a marginal rate of 40 per cent-plus.
It is true that tax cuts do not necessarily pay for themselves but skilful cuts in marginal rates that encourage more investment and harder work can. That must surely be at the heart of any post-Brexit tax-cutting strategy. We shall see if the Chancellor gets that on March 15. Don’t hold your breath.
Any attempt to breathe new life into Brexit, however, will need more than tax cuts. It will require radical steps to unleash Britain’s entrepreneurial animal spirits to take full advantage of all post-EU freedoms, from new low-tax enterprise zones freed of the most onerous planning controls, to more liberal, less risk-averse regulatory regimes for pharmaceuticals, life sciences, financial technology, robotics and artificial intelligence — in all of which Britain has a chance to excel.
The EU approach to regulation is prudential. Its primary purpose is to avoid anything risky. Hence the reason there are so few dramatic hi-tech breakthroughs in Europe these days.
In America, nine out of ten of its richest billionaires owe their wealth entirely to the hi-tech businesses they founded. In contrast, over half Europe’s richest billionaires inherited their wealth. Post-Brexit Britain needs regulatory regimes for hi-tech business more like America’s than Europe’s.
If Brexit is to be a success — and the jury is still out on that — it will require a national strategy to marshal our assets and allow them to flourish. We are so used to running ourselves down that we often don’t realise how many assets we have.
We are a soft-power superpower, a creative hub in the audio-visual industries second only to America. In recent years more Hollywood blockbusters have been made in Britain than in Hollywood. For America’s TV and film industries we are its biggest production hub outside North America. Before this year is out, Greater London will have more studio infrastructure than Greater Los Angles.
The world-class universities in Oxford, Cambridge and London create a research and development triangle unrivalled in Europe. Only America’s Ivy League universities are in the same class.
We need to develop it with more investment and create similar world-beating university alliances in the North, between Manchester, Liverpool and Leeds, and in Central Scotland between Glasgow and Edinburgh. Every one of these cities boasts a Russell Group university.
The Windsor Framework will help. It means Britain’s best universities can once again be part of Europe’s multi-billion euro Horizon research programme. It will result in better UK-EU trade arrangements when the existing agreement comes up for reconsideration in 2025, which will be good for economies on both sides of the Channel.
Brussels is said even to be looking more kindly on accommodating our distinctive post-Brexit financial regulations.
The Windsor Framework has pumped fresh life into the Sunak Government and even given Brexit a second chance. Of course, there is still much to be done and no time to lose.
If next month’s Budget doesn’t grasp these new opportunities and fresh possibilities with both hands then it won’t just condemn the Sunak Government to oblivion — it will mark Brexit as a failed experiment. March 15 is shaping up to be a rather significant date in the British political calendar.
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