The future looks bleak for Tory free-marketeers

21 May 2021

11:40 PM

21 May 2021

11:40 PM

The free-market Tory right’s victory on the Australia trade deal obscures the fact that the economic direction of the party has turned against them since the Brexit vote. As I say in the Times today, this is a big-spending Tory government that believes in an active role for the state in fostering innovation and driving growth. As one cabinet minister puts it, ‘It is a kind of Faustian bargain. The Tory right defeated the One Nation Tories on Europe but had to become One Nation Tories on the economy.’

There are several reasons why Brexit hasn’t ushered in the shift to the right on economics that many hoped (or feared). The electoral coalition that delivered both the referendum and the Tory majority in 2019 is not a libertarian one. From the moment that Vote Leave decided to base its campaign on being able to spend more money on the National Health Service, it was inevitable that Brexit wouldn’t lead to this country becoming a new Singapore.

The changing nature of Conservative support is just one factor behind the party’s new approach. A combination of Covid and China has changed how people think about globalisation. It has placed a new premium on the importance of domestic production and short supply chains.

Otherwise successful and prosperous countries that don’t have substantial vaccine manufacturing capability — think Canada and Japan — have struggled. Every prosperous country will now want the ability to manufacture vaccines and other essential supplies in its own territory.

The UK waking up to the threat that China poses has reminded policy makers that ownership matters, as the decision to phase out Huawei’s involvement in Britain’s 5G infrastructure demonstrates. The new National Security and Investment Act gives the government far greater powers to block foreign takeovers and investments in British firms. This will, inevitably, make Britain a slightly less open economy than it was before.

The Tory right may have routed Michael Heseltine and his fellow One Nation Tories on the European question. But the price they have had to pay is adopting a far more Heseltinian approach to the economy.

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