The Times: Divergence is the big prize that Brexit offers

At the risk of infuriating both sides in the parliamentary civil war over Brexit, I humbly suggest a compromise. The central issue is divergence: how much should Britain aim to veer away from the Continent in how it regulates products and services, and how much would the 27 countries and the European Commission allow us to diverge before denying us a trade deal at all?

Between the hope of Philip Hammond, the chancellor, for “very modest” divergence and Jacob Rees-Mogg’s fear that this would leave us a “vassal state”, there is a gulf. Yet (like the English Channel) it may not be unbridgeable. Part of the compromise would be for Britain to start out in close alignment on existing products and services, but to be free to diverge not by repealing existing laws, but as new technologies and conundrums arise.

David Davis, the Brexit secretary, hinted at such a thing last week. There is never much appetite for wholesale repeal of regulation. It is all too easy for opponents to portray it as a dangerous betrayal of the safety of the public, even if this is not the case.

Besides, repeal is surprisingly unpopular with a sector groaning under the burden of a regulation, however much that sector protested when the regulation first came in. By the time the financial sector has adopted and adapted to some heavy-handed rule on money laundering that (let’s imagine) requires the inside-leg measurements of clients to be rechecked every six months by an independent tailor, it will have geared up to meet the rule. It quite enjoys the barrier to entry. Insurgent competitors struggle to find tailors who are not already signed up.

The tailors now have a lucrative new business line and will lobby hard for keeping the regulation in place, by leaking to the media blood-curdling stories of frauds that could be perpetrated were inside-leg measurements not taken. This is the reality of regulation, its dirty little secret: it always benefits incumbents by raising hurdles to new entrants, and it creates vested interests. Even the most egregious rules, ones that clearly get in the way of offering better value to customers while doing nothing to protect them, prove almost impossible to repeal.

To read Matt Ridley’s piece for The Times in full, click here.

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