New creed of unchained Tory interventionism means a wild ride for business

“We haven’t taken power back from unelected bureaucrats in Brussels just to hand it to our own unelected bureaucrats back home”, explained a Conservative minister as he justified the latest government incursions into territory once left to regulators.

Recent events underscore this approach and show ministers gathering powers they once left with independent bodies. When it comes to shaping the business climate, “take back control” has a specific meaning for Boris Johnson’s team. Where once rules were set by politicians but enforced by regulators, now ministers are both judge and jury. 

Last week Liz Truss, the trade secretary, overruled the newly created Trade Remedies Authority after it rejected a number of steel tariffs. Truss, one of the most free-market minded ministers, brought forward emergency legislation to retain the import duties after business secretary Kwasi Kwarteng raised fears of cheap imports and lost jobs. The move may not survive a World Trade Organization challenge.

Meanwhile, a bill setting out the new state aid regime placed final decisions not with competition authorities but with ministers. The structure is of a piece with the National Security and Investment Act, which vests power in ministers to block takeovers in 17 areas — some remarkably broad, such as energy, transport and communications — on the grounds of security or resilience.

Many of these steps are defensible (though the tariff move does not bode well for the TRA) but they highlight a clear and deliberate trend. Ministers are expanding their powers to alter the business landscape on strategic priorities such as the levelling up of regions, scientific research and the drive to net zero.

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Alongside this has been a surge of subsidies, most recently to secure a new Nissan battery plant in Sunderland and a Stellantis electric vehicle factory at Ellesmere Port. A hydrogen strategy due later this month will see funds to encourage businesses to invest in the technology. Much of this is essential. UK industrial strategy and support has trailed competitors. In 2018, the country’s recorded subsidies were half those of France and a sixth of the German figure. Such support is not new. Even Margaret Thatcher found funds to subsidise inward investment, not least for Nissan.

Yet there is a different feel to this and it comes from the easing of constraints. Tories like to herald it as a Brexit dividend, though much of what they wish to do was also possible in the EU. (France and Germany were still members last time I looked.) But the UK can now move more rapidly and forcefully. 

This can bring uncertainty for investors. Many Tory MPs lament Alphabet’s purchase of the UK artificial intelligence company DeepMind. Any similar venture will know that the new rules might be used to frustrate such a sale in the future.

Over time, a degree of predictability may emerge. The ministers at the forefront, such as Kwarteng and the chancellor, Rishi Sunak, are no 70s corporatists. They recall the doomed efforts of previous governments to “pick winners”. Nor do they have a jingoistic desire to block takeovers without reason. But industrial intervention is now exposed to cruder political calculations and pressures. Ministers have weakened domestic constraints and lost the excuse that EU rules prevent action.

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A demonstration of just how dramatic a government response can be came in April with its ferocious efforts to thwart the creation of a European soccer super league. Determined to kill the misconceived plan, ministers threatened emergency measures, even including limiting work permits for overseas players at the clubs involved. Oliver Dowden, the culture secretary, told MPs: “We are examining every option, from governance reform to competition law and mechanisms that allow football to take place.” The clubs caved in without testing his resolve, which was probably the calculation. But it also showed a Tory regime that is ready to tear up the business rule book when politics demands it.

Another example was the abrupt decision to buy a stake in the low-orbit satellite company OneWeb, against the clear advice of officials. Insiders are more optimistic about the purchase than they were a few months ago but it was still a striking departure from the norm. 

A desire not to be blocked or restrained by outside bodies is very Johnsonian and it can also be seen in other areas, not least the moves to curb the powers of judicial review.

Many of the policies are sound and the defence is that decisions are reverting to elected politicians. But the key point is the rise of a new creed of Tory interventionism, highly active and highly political which allows for fewer checks on its actions. This brings uncertainty into competition, merger and state aid policies, which are then prey to party politics, quixotic decisions and wasted money. If the plans are robust they should withstand independent and global scrutiny.

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A more strategic industrial policy is overdue especially if the government is to fulfil its goals. But it still needs clear parameters, self-discipline and metrics against which to measure actions. The challenge for the more orthodox economic ministers, having uncorked the bottle, is to find a way to restrain the exuberance of a prime minister and MPs disinclined to drink in moderation. Otherwise the price of this approach is a UK business landscape that is merely more political and less predictable.

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