We’re being lied to about the ‘benefits’ of the Single Market

EU flags are waved near Elizabeth Tower
EU flags are waved near Elizabeth Tower

The UK establishment is attracted to the EU single market like a mouse to a mousetrap. They will never understand how damaging it has been. They fail to grasp that it is not so much a market as a way of grabbing power and exercising control. Labour’s belief that if they align us more closely with the EU we will grow faster is the opposite of what will happen. The EU is a low growth zone. EU per capita GDP is now just half that of the US. They watch the US grow much faster while killing too much enterprise and innovation that could change things.

The UK economy grew by two thirds in the two decades before 1972 when we joined the EEC and its common market. Our growth dropped down to a half in the two decades that followed. In 1992 the EU claimed to have completed its single market construction. In the two decades that followed that event our growth fell further. You will search in vain for a growth burst from either 1972 or 1992. Indeed we entered a nasty recession in 1974 after joining, though not mainly caused by the EEC. In 1991-2 we had another nasty recession, directly caused by the EU’s deeply damaging Exchange Rate Mechanism.

In the 1970s, the UK under Labour and Conservative governments lost a large amount of manufacturing, unable to deal with the shock of the ending of tariffs on European trade. We plunged into a prolonged balance of trade deficit with the EEC/EU, who liberalised trade in goods where they were strong but failed to open up their service sectors where we are strong.

Today, the single market is an ever growing complexity of rules and laws. It makes innovation difficult, laying down how things should be done and made. It is costly and off-putting for small businesses. It backs large European companies that look to the EU to protect them from overseas competition and from home market smaller disrupters. The EU has just watched as the US has given birth to the dominant companies of the digital revolution. The EU tries to regulate them, while needing to use their software, mobiles, searches, chips and apps to do so.

Adding more laws from the EU to our law codes, or borrowing more money with them for EU led subsidy programmes will not boost our growth today any more than it did from 1972 to 2016.

As single market minister, I remember the two lies they wanted me to spread. The first was that around 300 laws would be required to complete it. Yet they have carried on with excessive lawmaking ever since. The second was it would boost growth. Instead, UK and EU growth fell further.

Labour needs a growth strategy that would work. That means fewer restrictions, more incentive for enterprise, and working with great US corporations more as they currently control the future.

Labour live a contradiction on growth and the EU. They claim to oppose austerity economics. The origin of this approach is the EU Treaty which requires members to keep state debt below 60 per cent of GDP and to keep annual borrowing below 3 per cent. The UK’s current economic rules which Rachel Reeves wishes to strengthen are a version of seeking to get state debt falling by year five and controlling annual deficits. I am no cheerleader for a public spending-led borrowing binge of the kind both main parties backed over Covid, but I do think our current regime is anti growth. The OBR often insists on tax rises based on a forecast of large numbers in five years time that are likely to be wrong.

A growth strategy needs a control framework that comprises the 2 per cent inflation target and a growth target. It will need lower tax rates, which in due course will generate more revenue from growth.