• Forty Years Since the Advent of Thatcherism

    On Friday next, the 3rd of May, it will be 40 years since Margaret Thatcher won the British general election of 1979 and became the UK’s first woman Prime Minister.

    For her devoted followers, it will be an opportunity to celebrate, marking – as they see it – the dawning of a new era. For most of the rest of us, however, it will be seen in retrospect as the date that ushered in what is today called “neo-liberalism” – the belief that government should have only a limited role, that individuals should be free – and encouraged – to pursue exclusively their own interests, irrespective of the damage that might be caused to others and to our environment, that there is no place for Keynesian demand management, that trade unions are incompatible with a free market, and – famously, as Mrs Thatcher had it – that “there is no such thing as society.”

    Whatever the merits or otherwise of these tenets, we should be careful not to elevate “Maggie” Thatcher to the status of world-changing pioneer and innovator. The truth is that her role in bringing about the neo-liberal revolution was that of time-server and hand-maiden rather than heroine and prime-mover. The doctrines she made her own were on the whole the product of other people’s thinking.

    Her senior colleagues in her own party – Keith Joseph and Nicholas Ridley, for example – were more important thinkers than she was and had done much to prepare the ground before 1979. And Friedrich Hayek was probably the most important single contributor to the acceptance of the doctrine that – as Ronald Reagan was proclaiming in the USA at the same time – “government is not the solution to the problem – government is the problem.”

    Where Mrs Thatcher came into her own is that her very limitations as a thinker made it easy for her to drive through the programme that others had devised for her. She was not assailed by the doubts that might have given pause to a more thoughtful person. Her strength was her strength – the simple force of her personality that allowed her to dominate a male Cabinet – best exemplified by a Spitting Image skit of the time when Thatcher and her Cabinet were dining in a restaurant and the waiter asked Thatcher what she wanted. “I’ll have the steak”, she said. “And the vegetables?” the waiter enquired. “They’ll have the steak as well,” Thatcher replied.

    Whether the ideas were hers or not, however, her supporters will maintain that their implementation made a huge difference – and a difference for the better. Even today, her supporters will argue that her tenure as Prime Minister heralded a national revival and reversed what would otherwise have been a national decline.

    Sadly, these romantic notions have no foundation. Her espousal of monetarism, her removal of exchange controls (in partnership with Reagan), her disregard of manufacturing industry, and (despite her antipathy to the idea) her inability to resist and reverse British membership of what became the EU, all intensified and hastened the decline of British manufacturing and left the country ill-equipped to face an uncertain future.

    On the wider canvas of the world as a whole, her contribution was equally negative. Her collaboration with Ronald Reagan (hardly an intellectual giant) helped to convince onlookers that neo-liberalism was the way of the future and that it could not, and should not, be resisted. Their joint decision to remove exchange controls was a major step – indeed, the major step – towards a global economy – one in which global corporations no longer needed to pay any heed to elected governments, but could insist on getting what they wanted by simply threatening to move their investments elsewhere, to regimes that offered lower costs and rules and regulations that were less effective to protect local workers.

    In New Zealand, Rogernomics and the “mother of all Budgets” were the direct progeny of those Thatcherite certainties – the distant echo of those certainties still influences our politics today and serves to inhibit the ambitions of reforming governments.

    Even as a standard-bearer for feminism, she was a disappointment, She apparently espoused what R.H.Tawney called “the tadpole” philosophy; when she finally made it to the lily pad as a frog, after all the other tadpoles had fallen victim to predation, she croaked “There’s nothing wrong with this system – I made it!”

    Yes, we should mark and understand the significance of the forty year anniversary – but whether it is something to be celebrated is much more open to question.

    Bryan Gould
    28 April 2019



  • The Need for “Fair Governance”.

    Why Democracy and Self-Government Are Crucial for Any Brexit Trade Deal

    When I entered the House of Commons following the October 1974 election, I made my maiden speech on the subject of housing – it had been the topic most consistently raised with me at the free legal advice service I had provided in Southampton as the Labour candidate for Southampton Test.

    But shortly after that, I made a speech on the topic that most concerned me. It was on the constitutional implications of our Common Market membership, and I argued, on the basis of the constitutional law I had taught in the Oxford law degree course, that the Common Market would significantly diminish British parliamentary sovereignty.

    The speech went well, to the extent that it provoked interventions from our own front bench, contesting what I had to say – and I was gratified that Norman Buchan (who had also been in the Chamber and who became a good friend) went about telling colleagues that they must “listen to Bryan Gould on the subject of sovereignty”.

    But I learnt a further lesson from that episode. While I may have been reasonably comfortable with the term “sovereignty”, for many of my colleagues it meant little. It had a fusty tone to it, and seemed more suited to the nineteenth century and the works of A.V. Dicey and Walter Bagehot, than to the exigencies of the modern day.

    From then on, I tried to explore the issue in terms of democracy and self-government. These were concepts that my colleagues could understand and embrace – and if even the newest country or former colony could see that self-government was the essential condition of the independence that was sought, how could it be dismissed by the British, with their long history, as being of no account? And for the left, democracy and self-government fitted in easily as essential elements in a socialist programme.

    As the Brexit process works its way to a conclusion, these elements remain at the heart of what might constitute a solution. It seems likely that – as an outcome of the May/Corbyn talks – there will be considerable interest in an arrangement that would see the UK remain as part of a customs union – which would inevitably also mean an acceptance of many elements of the single market. It might be hoped that this would avoid some of the complexities of an Irish backstop or of an extended transition period, and point the way to the longer-term trading arrangement which would benefit all parties.

    But such a proposition would immediately raise for the British issues of democracy and self- government – or, if you prefer, of governance and sovereignty. Those issues would not directly arise if the exit process produced a clean break; the UK would then be in the same position as any other sovereign country, free to negotiate trade deals with the EU and to walk away from them if they were not satisfactory.

    It is sometimes argued that even a free trade agreement would necessarily involve some loss of independence, so what would be the big deal if such a consequence arose from the customs union and single market? But this is to misunderstand the essential difference between a FTA and what would be involved in belonging to the customs union and the single market.

    Yes, a trade agreement, like a contract voluntarily entered into by a private individual, commits the parties to a certain course of action and to that extent closes off some options for the duration of the contract – but that is very different from entrusting to another entity the ongoing power to decide for us what obligations might or might not be undertaken in the future.

    If a significant loss to democracy and self-government is to be avoided, the outcome apparently being considered, in other words, could only work for the UK if some concept of “fair governance” or pooled sovereignty were to be jointly adopted by the EU and the UK. What are the chances of that being agreed?

    There is little evidence, whatever encouraging noises may be made, that the EU will be ready to see any derogation from its usual rules as to who has the power to regulate and decide tariff levels, permissible state aids and so on. It is hard to see that the EU would re-vamp the Treaties to allow the UK an equal voice with the 27 ongoing member states. The UK would therefore struggle to have any significant influence over matters decided by the other twenty seven.

    A further complicating factor is that the euro-zone is increasingly moving towards becoming one economic entity which will at some point vote and decide such matters with a single voice. Given the fact that the EU’s governance gives each eurozone state votes and voice, the aggregate impact of this means any divergence of view or interest between those states and the UK acting on its own could not easily be resolved.

    Would that matter? Yes, without governance rights in any such arrangement, a British government would lose control over many of the most important factors governing British trade and economic development. This loss would extend further than the obvious consequences.

    In respect of fixing tariffs, for example, it would not just be a matter of fixing (or raising) tariffs to keep out non-EU competition. A British government would also be denied the power to reduce tariffs, if it so wished, so as to encourage the import of essential non-EU goods, such as medicines, construction materials and other products that might benefit investment in British industry.

    As a result, if a solution involving UK “membership” of the customs union and elements of the single market is to be sought, it will depend on the readiness of the EU to embrace some new mechanic for “fair governance” or pooled sovereignty to prevent the UK from being unfairly prejudiced by significant decisions over which, in practical terms, it would have no say. Without a fair say, its so-called membership would not end up as a magnifier nor provide an attractive trading arrangement, but would instead restrict UK interests and suppress UK growth and opportunities.

    It remains to be seen whether the EU is prepared to accept fair governance as a possibility for the sake of avoiding a “no deal” exit. Without some assurance on this, the proposed solution should be rejected.

    Bryan Gould
    4 April 2019

  • My European Journey

    In 1964, when I had completed my studies at Balliol College, Oxford, and emerged with a post-graduate law degree with first-class honours, I was undecided as to what I wanted to do next. As a New Zealand Rhodes Scholar, I had the option, of course, of returning to my homeland, either to practise or teach law, or perhaps to serve in the New Zealand diplomatic service.

    I realised that I wasn’t quite ready to return home – there was still a lot of the world to see – and so, almost on a whim, I entered for the Foreign Office entrance exam, and, very much to my surprise, I came top. The Foreign Office thought that it was perfectly understandable that I might want to join their ranks (and my passport then described me, after all, not only as a New Zealand citizen, but also as a British subject), so it seemed an attractive option.

    I was first sent off to Tours in France to spend three months at the Institut de Touraine to brush up on my somewhat rusty schoolboy French. On my return to London, I was appointed to Western Organisations and Coordination Department which was regarded as the department that dealt with the issues that were most important to British interests. – the appointment supposedly marked me out as a “high flyer.” It was presided over by the legendary FO eminence, Sir Con O’Neill, and headed up by John Barnes, a famously feisty and irascible FO figure. They were both excellent role models for a tyro diplomat.

    My less exalted colleagues, with whom I worked on a daily basis, were also instructive and fascinating in their perceptions of where Britain stood at that time, and they were also more than ready to discuss them with even a junior colleague.

    The question of Britain’s true role in world affairs was indeed a live one. Dean Acheson, the American Secretary of State, had recently advanced the proposition that Britain “had lost an empire but had not yet found a role” and we were less than decade away from the ill-fated Suez adventure which had revealed with cruel clarity how little room we had to operate without American support.

    My Foreign Office colleagues were not slow to recognise the accuracy of Acheson’s aphorism and they were – post-Suez – not so prone to wishful thinking as to imagine that we had as much influence with the Americans as we would have wished. In retrospect, I can see that it was already becoming clear that the Americans had opted to put their European eggs in the German, rather the British, basket – a development brilliantly exposed and analysed by Yanis Varoufakis in his And the Poor Suffer What They Must.

    The loss of empire, and the limitations of a role that, at best, meant riding as self-appointed (and not necessarily greatly valued) shotgun for the Americans, meant that “finding a role” was a major Foreign Office preoccupation. Inexplicably, the possibility that heading up the Commonwealth might fill the gap seemed not to occur to anyone; the Commonwealth was beyond the FO’s purview and was the responsibility of a separate department of state.

    It is hard to think that any other comparable country would in such a cavalier fashion have turned its back on the opportunity offered by a world-wide association of countries, including some that were destined to become major players on the world stage – countries, like India, Australia, Malaysia, Canada and South Africa that had strong historic, cultural and trade links with the mother country and that would in most cases have welcomed the chance to develop those links further.

    That blind spot, and the limitations of our role as an American ally, suggested that a new sphere of British influence should be urgently sought. The obvious candidate was Europe; the Common Market was in course of establishing itself and seemed to beckon as a possible beneficiary (so it seemed to British minds) of British leadership.

    The initial British reaction to the project had been cool, but as interest in it grew, a snag presented itself. The French President, Charles de Gaulle, was not keen to see France again involved with Britain and potentially beholden in any way to British support, and was determined to see the Common Agricultural policy, one of the twin pillars on which the Franco-German bargain was constructed, set in concrete before he would allow the British to join and try, as he feared, to dismantle it.

    The lifting of de Gaulle’s veto on British membership became the primary focus of British policy. I was personally involved in the effort to promote an arrangement called the Western European Union, whose purpose was never well defined but was vaguely to do with military cooperation with our European allies. It was primarily used, however, as a means of circumventing the French veto by allowing us to stay in touch with and to meet regularly with those allies.

    The WEU would meet in Common Market capitals and the chance would be taken to compare notes as to how de Gaulle could be faced down. I recall, for example, accompanying Michael Stewart when he was Foreign Secretary to a WEU meeting in Luxembourg and helping to write the speech he delivered on that occasion.

    I was in due course appointed to a position in our Brussels embassy and, although my role was a commercial one, I was also involved in the efforts being made to promote the cause of our membership of the Common Market. I saw at close quarters the efforts, such as the Wilson/Brown tour of Common Market capitals, made to drum up support for the cause. I was, incidentally, the duty officer on the weekend of the 1967 devaluation of sterling and was required to give advance notice of that development to the Belgian government.

    I had by this time, despite my early enthusiasm for British membership of the Common Market, seen enough to know that it was very unlikely to serve British interests. The Franco-German bargain on which it was based required Britain to forego access to cheap and efficiently produced food and raw materials from around the globe and instead to push up food prices to European levels, thereby negating the one competitive advantage enjoyed by British industry – the lower wages made possible by lower food costs.

    The Common Market also meant that the British market was opened up to direct competition from powerful German manufacturing which, by virtue of the FrancoGerman deal, had privileged and unrestricted access to the whole Common Market— and as a result, British industry (with the help of home-grown policy mistakes) was in due course duly (and literally) decimated.

    I was left with the impression that the Foreign Office at the time had been induced to act as the agent for Europe in Britain, rather than the other way round – influenced perhaps by the consideration that if all major decisions were in future to be made in Europe, the standing of the Foreign Office in Whitehall would be enhanced.

    By the time I had decided to leave the Diplomatic Service and take up a Fellowship as a law don at Worcester College, Oxford (with a longer-term intention of pursuing a political career), I was clear that Europe (or at least the version presented by the Common Market) was a snare and a delusion.

    I recall that, when – in the early 1970s – I had become the Labour candidate in Southampton Test, Roy Hattersley – at that time, the coming man – came to speak for me at an election rally in the city. We got on very well, and he at one point took me aside and said that, when I entered the House of Commons, he would have something important to say to me. I took this to mean that he would offer to make me his Parliamentary Private Secretary – the first small step on the ministerial ladder.

    When I was eventually elected, however, one of the first speeches I made – drawing on my knowledge of the constitutional law I had taught in the Oxford law course – was on the theme that Common Market membership would mean a damaging loss of parliamentary sovereignty. Roy was in the Chamber and heard the speech. I heard no more from him on the subject of a PPS-ship and our relations were – sadly, from my viewpoint – somewhat strained from that point on.

    I rapidly became known as an “anti-Marketeer” – a label I did not object to, though I always resented being described as “anti-European” which, in view of my interest in European history, the frequency of my holidays in European countries, and my appreciation of European art, sculpture, music, literature and architecture, was manifestly absurd.

    My views opened me up to considerable criticism from some quarters. I recall being interviewed on the subject by Charles Wheeler, the esteemed BBC political correspondent, on College Green, outside the House of Lords. When the interview was over and I had explained my views, he berated me in no uncertain terms, attacking “you people” as knowing nothing about the subject on which I had pontificated. When I described to him my long involvement with the issue, he had the good grace to apologise and to look a little deflated.

    On another occasion, I was introduced by a friend to a young woman in the Central Lobby. “This is Bryan Gould,” he said, “He is an intelligent anti-Marketeer.”

    “Is there such a thing?”she said airily, thus exemplifying the attitude, constantly met, that all the best-informed and right-thinking people were committed to a future in “Europe” (whatever form that might take) and that only the ignorant took a different view. Such people regarded themselves as the cognoscenti of European issues; they had an almost religious certainty that they were right, and that the promised land had been revealed to them.

    With other like-minded people, like Nigel Spearing, I got myself appointed to the House of Commons Scrutiny Committee whose function it was to examine Common Market legislation and judge its impact on domestic law. It provided a useful way to keep tabs on what the Common Market was up to.

    In the world beyond Parliament, I also became active on the issue. With the help of long-time colleagues like John Mills, Shaun Stewart, Austin Mitchell, and David Stoddart, I became a leading figure in the Labour Common Market Safeguards Committee and chaired it for a time. The LCMSC’s fringe meetings were for many years the best attended gatherings at Annual Conference.

    On one such occasion, the LCMSC organised a joint meeting with those of a different view, at which David Marquand and I would each speak.  David was personally likeable and less dogmatic than most of that ilk, but I think I can say that my own training in the forensic skills proved to be a decisive advantage.

    At a special conference event, on one occasion, I heard a powerful speech by Peter Shore and, later, an equally powerful one by Michael Foot. I made contact with Peter and we became firm friends and allies. He eventually made me his PPS.

    That appointment came to a sad end. My own Labour government introduced one evening some subordinate legislation whose effect was to impose duties on imported lamb. Many anti-Marketeers objected to the measure, as I did – but in my case, not – as was sometime supposed – because of my New Zealand background, but more pointedly because I thought it was wrong to tax food destined for the tables of ordinary families.

    I duly voted against it. The following morning, I was accosted by a journalist, Tony Bevins of the Sunday Express, who said “You voted against the government last night, didn’t you?” When I agreed, he said “I’m going to get you sacked as PPS.” True to his word, he raised the issue with Jim Callaghan at a press conference later that day and the Prime Minister felt obliged to require Peter to dismiss me.

    My profile as a leading anti-Marketeer brought me into contact with people of similar views on all sides of the House, not least with people like Ronnie Bell, Neil Marten and Enoch Powell. These links, which I tried to manage very carefully for obvious reasons, led to my chairing for a short time the Safeguard Britain Campaign, the all-party group formed to resist further involvement with the Common Market. I resigned after a while because I found it too difficult, while collaborating with right-wingers, to maintain my standing with my Labour colleagues.

    The referendum in 1975 provided the next milestone in my involvement with the issue. I took an active part in the campaign, speaking at a number of pubic meetings. I recall one evening in Southampton, when I marched in candlelight with a large crowd to the venue, and was accompanied by my parents who were visiting on holiday from New Zealand. They had never been to such an event in their lives, and enjoyed it immensely. The referendum result was a great blow to them, as it was to me. It was produced because those who, it was thought, could be trusted and knew about these things, had strongly supported a “yes” vote.

    Over this period, Peter Shore, Michel Foot and I sometimes discussed the question of whether patriotism could have any part to play in formulating left-wing politics. Our conclusion was that there was no reason to leave all the best tunes to the devil, and that the push for democracy and self-government, or “sovereignty”, was a legitimate element in a socialist programme.

    I think is fair to say that my own chances of advancement were somewhat diminished by my known position on the Common Market issue and I found myself being cold-shouldered by Euro-enthusiasts. The issue undoubtedly created a fault-line in party unity and contentious matters within the party tended to be resolved by votes cast by one side of the Common Market issue against the other. The pro-Marketeers tended to come from a more centrist position within the party.

    They formed a cohesive group who watched out for each other; I recall overhearing a conversation in which anxiety was expressed as to whether one of their number, Giles Radice, had been able to improve his vote in the Shadow Cabinet elections. An indication of how closely they worked together as a group and how ruthlessly they discriminated against those who did not share their enthusiasms came shortly after I was elected. The Prevention of Terrorism Act had just been enacted and my lawyer’s concerns about its provisions and their impact on civil liberties brought me to the attention of Alex Lyon who was Minister of State at the Home Office. Alex mentioned to me the possibility of my becoming his PPS.

    As luck would have it, Tommy McAllister, a constituent of Bob Mitchell (the Southampton Itchen Labour MP) was arrested under the Prevention of Terrorism Act for pro-IRA activities – and, as Bob was away on holiday, his family came to see me.

    I visited him in Winchester prison and was satisfied that he was (although an Irish nationalist) no threat to security. If he had been resident in the UK for 20 years or more, the Act could in any case not apply to him. I discovered that he had had a Southampton address for 19 years 9 months and that prior to that he had served on a merchant ship sailing out of Southampton, which was the equivalent of residence.

    I accordingly wrote a long hand-written letter to Roy Jenkins, the Home Secretary, making the case that Bob’s constituent could not be subject to the Act. My argument succeeded, but it prompted Roy Jenkins to make inquiries about me – and when he was told of my views on the Common Market, he vetoed my appointment as Alex Lyon’s PPS.

    I enjoyed an occasional success on the floor of the House – especially on one occasion at Prime Minister’s Question Time when I trapped Mrs Thatcher into an uncharacteristic admission of failure on her return from a meeting with Common Market counterparts. But I fear that my identification with the issue reduced my ability to make common cause with a substantial part of the Parliamentary party.

    Through this whole period, I was constantly involved with European issues. In 1989, Neil Kinnock asked me to run the Euro-elections campaign for Labour, which I agreed rather reluctantly to do. I was also consulted on European monetary developments. Roy Jenkins, as President of the European Commission by this time, put forward in 1978 his proposals for a European Monetary System. Jim Callaghan stopped me in the corridor one day and asked me whether I thought we should join. In line with my abiding interest in exchange rate policy, I replied that it would be essential to join at a competitive rate, since getting locked in at the wrong rate would be damaging for us. Jim nodded thoughtfully and said “that’s what Helmut says.”

    I was rather more closely involved with the successor to the EMS, the Exchange Rate Mechanism, which was a rather more serious attempt to hand exchange rate (and therefore monetary) policy over to a European agency. I spoke regularly against such a proposal, which seemed to me to threaten many of the disadvantages that were subsequently to become apparent when the euro was created. I became, within the Shadow Cabinet, the principal opponent of British membership, to the extent that Sam Brittan of the Financial Times told a PLP economic committee that they should put Bryan Gould “on a slow boat to China” so that the obstacle I represented could be removed.

    In the event, a “slow boat to China” was not needed. I was removed from the issue by being moved from Trade and Industry to the Environment portfolio. Neil and I had, by this point, diverged somewhat in our views of “Europe” and he was keen to demonstrate his European credentials. I attributed this shift to the influence of his son, Stephen, who had studied at an Italian university and to his own increasing warmth, matching that of his wife, Glenys, towards the European “ideal”.

    The European issue was given significantly added point when the Maastricht Treaty was put forward. It seemed to me to represent a major further step towards a European super-state and a consequent loss for Britain of the powers of self-government. I spoke against it whenever I was able but I was profoundly depressed by the lack of interest shown in it by my own colleagues. The Chamber I spoke to was usually virtually empty – my colleagues could not only not be bothered to reach a view on the subject but were content to let the issue be resolved by default.

    The attitude of the Labour front bench was a complete disappointment to me. They had persuaded themselves, following a speech by Jacques Delors at the TUC Conference, that the so-called Social Chapter was of great value and could be secured only as part of a settlement that included the Maastricht treaty.

    I was considerably disaffected by all this, to the point that I decided that I had to resign from the Shadow Cabinet in order to register my disagreement with their policy. That, in turn, led to the loss of my seat on the National Executive Committee, and in due course to my resignation from Parliament altogether and my acceptance of the Vice-Chancellorship of a New Zealand university.

    My return to New Zealand was a great success from a personal point if view. It gave me time to lick my wounds and to reflect on the fact that the battle over Europe was no longer mine to fight. It was a relief to turn to other matters.

    But my journey across “Europe” was not over. In 2016, in the run-up to the referendum on EU membership (for the outcome of which I had no great hopes), my wife and I were coming off a cruise liner and boarding a bus in Rome. The only other people on the bus were an elderly couple from Manchester. They were keen to get into conversation and it became clear that top of their minds was the referendum.

    I was reluctant to discuss the matter, for fear of provoking a disagreement, but I became a little more enthusiastic when they revealed that they were desperate to vote to leave. Their account of what the EU had meant for them and their jobs, houses, services and way of life confirmed all that I had gleaned from my own sources.

    I suddenly became aware that if their view was replicated on any scale, the referendum was not a foregone conclusion. The result, when it came, was still a major (but very welcome) surprise, but less so than it might have been.

    Since that date, I have had the frustrating experience of having a lot to say (much of which I have published in New Zealand on my website and in the columns that I write) – but I have had no means of commenting on the debate in the UK, since my usual outlets, (such as the Guardian), have forsaken their normal standards of impartiality in order to become campaigners for a position contrary to my own and accordingly did not welcome what I wanted to say.

    I nevertheless followed very closely the convoluted process by which the UK sought to disengage from the EU stranglehold and I was delighted when, after the Theresa May exit deal had been rejected by the House of Commons for the third time, I was approached by one of London’s leading international finance lawyers, who suggested that, with another round of “indicative “ votes about take place, it might be opportune to alert the Labour Party to the constraints that a Labour government would face if the exit deal allowed, as was proposed, that the EU Commission would have the de facto power to prohibit, for as long as the Irish backstop and transition arrangements remained in place, the kind of state aids and interventions that such a government would wish and need to utilise in order to prepare the economy for a new, post-Brexit situation.

    I immediately agreed to write such a piece. I had no idea whether it would influence any outcome, but it was a great pleasure for me to be called into service – at 25 years and 12,000 miles distance from the scene of so many of my past battles. I wish my colleagues – and the country – well for a happy and conclusive ending to this sad chapter in British history.

    Bryan Gould
    3 April 2019






  • The EU, State Aids and a Labour Government

    It is a truism that one of the most important issues in politics – particularly for the left – is the extent to which the state can and should intervene in the operation of the free market. It is surprising, therefore, that the Labour Party has been so slow to recognise that the European Union takes a very particular and potentially damaging stance on that issue.

    The EU’s attitude towards the role of the state has always been one of its cardinal features. Paradoxically, one of the two fundamental building blocks of what was originally the Common Market was one of the largest state interventions ever put in place in a market economy. The Common Agricultural Policy was a major use of state funding and policy, designed to provide a huge benefit to inefficient French agriculture (and we shouldn’t forget that the German factory worker, with three or four dairy cows in his basement or barn, also benefited greatly).

    The CAP was regarded by President de Gaulle as so important that he maintained his veto on British membership of the Common Market until he could be sure that the CAP was set in concrete. I was personally witness to this in my work at the time on British relations with Europe in both the Foreign Office and our Embassy in Brussels.

    The corollary to the CAP, and the second leg of the Franco-German bargain on which the Common Market rested, was a guarantee that efficient German manufacturing could have unrestricted access to that total market. That Franco-German bargain was of course completely inimical to British interests – something that would not have displeased, and may even have been seen as payback by, the two countries that had no reason to love the British, having been in one case defeated by them, and in the other, rescued but only with their help.

    The bargain required Britain to forego access to cheap and efficiently produced food and raw materials from around the globe and instead to push up food prices to European levels, thereby negating the one competitive advantage enjoyed by British industry – the lower wages made possible by lower food costs. The Common Market also meant that the British market was opened up to direct competition from powerful German manufacturing – and British industry (with the help of home-grown policy mistakes) was duly (and literally) decimated as a result.

    It should come as no surprise that the question of state aid or otherwise should still be a live issue in the UK’s current and changing relationship with the EU. The customs union established by the EU regulates and prohibits the use of tariffs to inhibit or distort the operation of the free market; and the single market was put in place to ensure that state aids could not be used as an alternative means of gaining a competitive advantage for one member economy at the expense of others.

    The strict enforcement of these rules – commonly found as well in comprehensive trade agreements such as the TPPA and NAFTA – means that a major aspect of the state’s power to intervene in a free-market economy is removed. The effect, if not the intention, was to create in the EU a land, if not “fit for heroes”, at the very least fit for multinationals – an aspect of the EU that seems hardly to have registered with the British left.

    The issue of state aid or otherwise remains a live one as the UK attempts to extricate itself from the EU embrace (or perhaps “stranglehold” is more accurate). One of the difficulties created by the need to avoid a “hard border” on the island of Ireland is that the so-called backstop would require the UK, for as long as the backstop was in place, to comply with the rules of the single market and therefore with the restrictions placed by the EU on state aids. The problem would not end there; the EU, determined not to allow a competitive advantage to a non-EU member if they can help it, would retain the de facto power under the proposed exit agreement to dictate to the UK the extent to which state aids would be permitted, for as long as the transition period lasts.

    These provisions, to which little attention has so far been paid, at least by the left, would deprive a British government, and particularly a Labour government, of many of the levers and instruments which would be needed if a newly independent British economy was to function efficiently in its changed circumstances.

    In the modern world, an economy that wishes to remain competitive and efficient would certainly need the flexibility to keep pace with new developments and to take advantage of new opportunities. An economy, for example, that wished to protect the environment and to build a new and flourishing green economy would need to be encouraged and directed into such areas. The same can be said of any attempt to take advantage of new technologies, new materials and new skills, all of which would be necessary to the functioning of an efficient modern economy and which could best be encouraged and enabled by government policy and intervention.

    But the use of taxes or subsidies or tax relief to promote certain kinds of investment would fall foul of the EU’s prescriptive and restrictive approach – so, too, might state investment in important infrastructure projects – road, rail, airports, for example – that might be seen as improving the competitiveness of British industry.

    Such interventions would come naturally to a government of the left – and such a government would be rendered completely ineffectual if it were denied the chance to pull such levers. Yet, that is exactly what is now proposed by the EU. The British economy, perhaps struggling to adapt to a new trading situation, would find itself not only with perhaps reduced trading opportunities with the EU but also having to identify and secure new trading links elsewhere, and without the ability to adapt quickly to those new circumstances.

    A new Labour government in Britain would find itself, in other words, denied one of its principal raisons d’etre. It would face the new post-Brexit situation with one hand tied behind its back. Having given up membership of the EU, it would still be subject to the EU’s prohibitions on state aids and could well find itself frustrated in doing what it wanted to equip the economy to face new challenges.

    The solution to the problem is to defer the departure date until a new trade agreement for the future can be reached. That would remove the need for a transition period and avoid a hiatus during which the UK was still subject to EU prohibitions and therefore unable to take steps to protect itself in the new circumstances.

    Sadly, there is a powerful strain of opinion on the left that regards the quest for economic efficiency and success as somehow unworthy of the high-minded. Such bien-pensants appear to give priority to their dream of a European destiny and to disregard the interests of Labour voters. Those voters may not share their insouciance.

    Bryan Gould
    30 March 2019

  • Brexit Explained

    For most New Zealanders, Brexit remains an impenetrable mystery – and, as the saga lurches from one crisis to the next, (most recently, with the rejection of Theresa May’s “exit deal” by the House of Commons) – the British are equally at a loss.

    As someone who was – as both diplomat and politician in Britain – closely involved with these issues over a period of decades, I have the temerity to attempt an explanation of why they are so confused and difficult to resolve.

    What is called “Brexit” in fact covers three separate but obviously linked issues. First, is the decision by a majority in the 2016 referendum that the UK should leave the European Union. Secondly, is the exit deal that has to be negotiated with the EU – that is, the terms on which the UK will be permitted to leave. And thirdly, there is the “political declaration” – an agreed statement by the UK and the EU as to how they see their future post-exit relationship developing.

    Much of the difficulty that the ordinary public, in both the UK and New Zealand, has in understanding the issues arises because various parties with conflicting objectives have a common interest in jumbling together these three separate issues.

    To take the referendum decision in favour of leaving the UK first. That decision must be regarded, whether one agrees with it or not, as the definitive judgment by the British people on their more than 40 years experience (not a snap judgment therefore) of being part – not of “Europe” but of a particular organisation that has evolved to become the European Union.

    That judgment was a negative one, and one that only the people could make. They may be told by “experts”of various sorts that they got it wrong, that they “don’t understand” and that they were misled. But only they had the day-today experience over decades of seeing their jobs disappear, of feeling that the country they lived in was no longer their own because all the decisions that mattered were made in Brussels, of seeing their streets and neighbourhoods, schools and health clinics taken over by immigrants from Eastern Europe.

    It is no accident that the pro-Brexit votes were delivered in large numbers in the north of England rather than in the more affluent south where people were less exposed to the daily reality of these downsides.

    It is not as though the facts do not support the popular concerns. Over the period of EU membership, Britain’s manufacturing industry was decimated and Britain’s trade languished in perennial deficit – so much for the supposed economic benefits of EU membership – and that is to say nothing of the large taxpayer-funded annual subscription paid into EU coffers.

    These consequences had been forecast by commentators such as myself at the point when Britain joined what was then the Common Market in 1973. It was clear to us that Common Market membership would require Britain to give up its access to preferential treatment for its manufactures in Commonwealth countries and to efficiently produced food and raw materials from those same countries, and to face up to direct competition from German manufacturing in their own home market – with consequent damage to British living standards, trade and manufacturing.

    Those who oppose Brexit, however, choose not to recognise these consequences of EU membership and have focused instead on trying to overturn the referendum decision. Both the EU itself and Remainers in Britain have sought to discredit the case for Brexit by praying in aid the quite separate issue of the difficulties posed in the way of withdrawal. It has served both their purposes to discredit the whole idea of Brexit – (an issue that had surely been resolved by the referendum) – by emphasising the problems raised by the process of withdrawal.

    For the unelected EU bureaucrats, it has been necessary to show to other members that withdrawal is not an easy option. Their concern has been to deter others (of whom there are many) who are unhappy at the way that the European Union has operated and, in particular, has weakened and in some cases destroyed the economies of countries like Greece, Spain and even Italy.

    They have been encouraged to make withdrawal as difficult as possible by those elements of domestic opinion which retain the hope of re-opening the whole issue. Neither seems to realise that the difficulties placed in the way of withdrawal will simply confirm to the British people the value of getting out of an entanglement that threatens to throttle them.

    Similar forces have been at work in the difficulty Theresa May has had in securing support from the British Parliament for her exit deal. Her problem has been the convergence of very different interests on the part of those who have their own (differing) reasons for resisting the exit deal. There are the members of her own party and of Parliament in general who oppose Brexit and the referendum decision and want to see it overturned. Conversely, there are also many in her party who believe that her exit deal does not go far enough in breaking Britain’s links with the EU. Add to these, the normal Parliamentary opposition from the Labour Party and the concerns of the DUP – the Government’s coalition partners from Norther Ireland – and throw in the ambitions of those in her own Party who want to replace her as leader and you have a toxic mixture of anti-deal votes.

    The dilemma now facing the British Parliament is that no next step is likely to resolve the problem. Replacing Theresa May as Prime Minister or the Tories as the government would leave the Brexit situation exactly where it is now – that is, unresolved. A second referendum would be no better, representing, as it would, the additional downside that it would be seen as a denial of the democratic decision taken by British voters and reinforcing the sense they had from the outset that their voices were not being listened to.

    The short-sighted decision taken in Westminster means that the most likely outcome is a no-deal exit – one that is undoubtedly risky and potentially damaging. Those who have engineered it have no one to blame but themselves.

    Bryan Goud
    16 January 2019