Understanding Radical Supply Side Reform and Its Contradictions

As the concept of radical supply side reform gains prominence in the political discourse, particularly with the push for Brexit, it's important to unpack its complexities and examine its alignment with pre-existing political commitments.

The Current Climate and Johnson's Government

The approach to radical supply side reform as advocated by prominent Brexiteer Steve Baker presents a paradoxical stance. This strategy contrasts sharply with the promises made by Johnson and the Conservative Party during the 2019 elections. Instead of creating a 'supersized tax haven,' the government is implementing higher taxes, with corporate tax rates increasing from 19% to 25% – the highest since 1950. Additionally, deregulation has remained slow, indicating a departure from the initial expectations.

Changing Expectations and Electoral Backlash

Many first-time Tory voters believed they were signing up for substantial government spending aimed at 'leveling up' areas in the north of England. Will Tanner, director of the center-right think-tank Onward, articulates this point clearly:

"The electoral coalition the Conservatives assembled in 2019 was united about many things. But 'radical supply side reform' was simply not one of them. You can enjoy an 80-seat majority including the red wall or you can pursue Singapore-on-Thames. You can’t do both for long."

This statement highlights the disconnect between expectations and reality, creating a significant backlash from voters who feel misled by the government's promises.

Challenges in Implementing Popular Reforms

Implementing reforms that would be well-received by voters is proving challenging. One such example is the working time directive, a principal target of Tory MPs during Britain's EU membership, which included a 48-hour working week. When reports suggested the government might scrap this directive, there was immediate backlash, forcing the business secretary Kwasi Kwarteng to reiterate his commitment to workers' rights.

The Economic Reality of Brexit

The push for radical supply side reform and the subsequent economic consequences of Brexit are further complicated by the government's own independent forecasters. According to the Office for Budget Responsibility (OBR), which is responsible for producing independent fiscal and economic forecasts in the UK, Brexit is expected to lead to significant economic damage:

Brexit will cause twice as much long-term economic damage as the Covid pandemic. The economy is forecast to be 4% worse off in the medium term. Trade will be 15% lower than it would have been without Brexit.

These forecasts translate to a tremendous economic hit: a ￡100bn annual loss and ￡40bn less in tax revenue.

Conclusion

In summary, while radical supply side reform sounds promising on the surface, its implementation struggles to align with broader economic and social goals, especially those related to 'levelling up.' The economics of Brexit indicate that pursuing supply-side reforms under these conditions risks exacerbating economic disparities rather than mitigating them. The government's actions and forecasts highlight the difficulties in achieving both comprehensive supply-side reforms and extensive social leveling, raising questions about the authenticity and feasibility of the current policies.

Ultimately, these developments underscore the need for a more nuanced and realistic approach to economic and social policies, emphasizing the importance of clear communication and comprehensive planning in the face of complex political and economic challenges.