Ahead of the ten year anniversary of the EU referendum on 23 June, UK in a Changing Europe experts have written a short series of blogs reflecting on some of the issues at the heart of Brexit then and now. Here, Joël Reland reflects on Brexit and regulation.

The Leave campaign’s central slogan – ‘Take Back Control’ – evoked the idea of EU rules preventing the UK from looking after its own best interests. Boris Johnson bemoaned Brussels “telling us how powerful our vacuum cleaners have got to be, what shape our bananas have got to be” while a Leave campaign briefing claimed that EU regulations serve ‘a small number of large multinationals’ and ‘crush entrepreneurial competition’.

Against that backdrop, Theresa May quickly decided that regulatory freedom would be central to her Brexit agenda, using her first Party Conference speech to promise that “our laws will be made not in Brussels but in Westminster”.

But it soon became apparent that this would both add major costs to EU trade – due to leaving the single market – and create a regulatory border with Northern Ireland (which had to remain aligned to EU law to keep the Irish border open).

This realisation was, according to Philip Hammond, “like a light bulb going on” – leading May to develop the ‘Chequers deal’, under which the entire UK would continue to adhere to all EU regulations necessary to maintain frictionless trade in goods. Boris Johnson and David Davis resigned at this “semi-Brexit” and May ultimately failed to get her plan through Parliament.

Johnson subsequently won an election promising to use ‘post-Brexit freedoms to transform the UK for the better’ and accordingly negotiated a Brexit deal which gave Great Britain near-total control over its law-making, at the cost of new trade frictions with the EU and – despite his denials – Northern Ireland.

Yet Johnson’s administration consequently struggled to develop a plan for unpicking EU red tape. A 105-page paper called ‘The benefits of Brexit’ outlined a long list of options for regulatory reform, but gave no sense of prioritisation or how policy would be delivered.

The strategy – if there was one – focused on the quantity, not quality, of reform. In 2022, the newly-installed Minister for Brexit Opportunities, Jacob Rees-Mogg, announced plans for a ‘Brexit freedoms bill’ – officially titled the Retained EU Law (REUL) Bill – under which all REUL (i.e. EU-derived law) would expire by default, except where ministers chose to retain specific pieces. It was accompanied by a Retained EU Law Dashboard, to provide live data on the proportion of REUL which had been abolished.

The highly performative approach was heavily criticised, especially by business, for creating a deeply uncertain regulatory horizon which prevented long-term planning and risked citizens losing vital legal protections – especially as officials did not even seem to know how much REUL was out there in the ether.

The plan was eventually abandoned under the Sunak government, with then-Business Secretary Kemi Badenoch stating “we are not arsonists… I do not think a bonfire of regulations is what we wanted”. Since then, the rate of plans for divergence has slowed significantly.

A glance at the REUL dashboard today might make you think that a bonfire of EU red tape has, nevertheless, been lit. It shows that 37% of REUL has been reformed – with 23% repealed and 13% amended or replaced (the other 1% has expired).

But this, in fact, amounts to little more than a glorified regulatory spring clean: the vast majority of ‘reformed’ REUL has either been subject to technical amendment (e.g. restated in a new legislation) or is no longer of relevance (e.g. legislation relating to the 2001 foot-and-mouth crisis or EU regimes which the UK is no longer part of).

Moreover, our series of Divergence Tracker reports, shows that successive UK governments have delivered little in the way of substantive divergence from EU law.

There have been a smattering of changes to financial services regulations, such as lifting the cap on bankers’ bonuses, while rules on the use of genetic editing techniques have been liberalised. Several ‘freeports’ have been established; the export of live animals for fattening and slaughter has been banned; and certain alcohols are now taxed by strength, not quantity. There have also been some symbolic changes, such as permitting the sale of Champagne in pint-sized bottles and new guidance on selling groceries in imperial measures.

Given regulatory control was so central to Brexit, what explains this lack of action? One reason was that the government never set a clear strategy for divergence, while the civil service – overwhelmed with a wide range of new post-Brexit regulatory functions – had little capacity to focus on strategic ideas for reform.

But the most fundamental reason is that divergence, more often than not, adds costs to trade. The government argued that regulation could be better ‘tailored’ to UK interests (rather than being a cross-EU ‘compromise’). But, from a trade perspective, regulation is all about compromise: creating common standards between parties which reduce trade frictions.

‘Tailoring’ regulation to a single country therefore increases frictions, and several marquee plans for divergence – including on data protection, medical devices and conformity assessments – were abandoned for this reason.

British companies have made it more than apparent that they prefer to avoid divergence where possible. Across multiple sectors – from vehicles to products to food – they have voluntarily opted to adhere to new EU rules, even though they do not apply in Great Britain, because it is necessary to maintain access to the EU market. This is the reason why Rachel Reeves now argues that divergence “should be the exception, not the norm”.

One final curiosity is that the UK has repeatedly used its regulatory freedom to move in a similar direction to the EU. It has set higher emissions reduction targets and has an earlier phase-out date for combustion engine vehicles. Its new rulebooks on online safety and digital markets bear an uncanny resemblance to the EU Digital Services and Digital Markets Acts. And employee protections have increased, despite earlier promises to scrap the Working Time Directive.

Even the few notable cases of divergence often serve to strengthen the hand of the state – increasing animal welfare protections and alcohol taxes – while a fully-fledged UK-US trade deal remains elusive, not least because of public opposition to any watering down of food standards.

Brexit has revealed the UK’s regulatory instincts to be much more European than many assumed.

By Joël Reland, Senior Researcher, UK in a Changing Europe.

If we scrap social media, what replaces it?

Darlington by-election 1983 SDP-Liberal Alliance candidate, Tony Cook (l) out campaigning

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The Lib Dem love affair with by-elections probably started in 1963, when Eric Lubbock stormed to victory in Orpington. After decades in the electoral doldrums, we snatched a formerly safe Conservative seat and we have been hooked ever since.

Of course, in Lubbock’s days it was possible for a by-election result to come as a genuine surprise. In an age before 24-hour news channels, social media and internet polling, a big by-election swing would genuinely come out of the blue and, with the element of surprise, could also bring political oxygen and a bounce in the polls.

The predictions that come with big by-elections are rarely borne out. Sadly, the boast following by-election wins –  for greats like Shirley Williams and Roy Jenkins – that the mould of British politics had been broken, turned out not to be true.

Thankfully, however, the predictions of a Lib Dem demise – after we finished behind the Hamilton Academicals’ Fan Club candidate in the Hamilton by-election of 1999 – were equally overstated.

To say that they don’t always meet their billing is not to deny their occasional lasting impact. By-elections can often be the coup de grâce for unpopular policies or struggling leaders.

The poll tax may have sparked riots on the streets of London, but it was a string of by-election losses in previously safe Tory seats that finally persuaded the then Conservative government to ditch it and later their leader, Margaret Thatcher.

So, will we be adding Makerfield to that list of memorable by-election dramas? Almost certainly, although, as I write this, the reason is still to be determined.

Future political histories may give it a chapter to itself, recounting the bold and gutsy move of the man who went on to become prime minister. Alternatively, it may become a footnote referencing a long-forgotten figure who reached for the stars and failed. There will, I suspect, be nothing between the two extremes.

That a by-election should be the path to 10 Downing Street is rare, but not without precedent. In 1963, it was a by-election in Perth that allowed Alec Douglas-Home to move from the red benches to the green and hence to No 10.

The by-election circus is a tame affair these days compared to the contests of yesteryear. Gone are the days of daily press conferences and packed-out public meetings. No longer are we entertained by the likes of the late Vincent Hanna skewering some poor unsuspecting and unprepared candidate. Like real circuses, the big beasts are no longer there.

By-elections can often be the coup de grâce for unpopular policies or struggling leaders

In 1983, the SDP-Liberal Alliance campaign in the Darlington by-election came to grief when its candidate was caught on TV nodding in agreement with Screaming Lord Sutch (Monster Raving Loony Party). The campaign stalled, never recovered and he finished a distant third.

As a footnote to that particular incident, let me now reveal that, a week or so afterwards, I was in the overspill audience of a public meeting where Shirley Williams was speaking. From behind me there came repeated “hear hear” and “good point”. Turning to identify the source I was surprised to find that it was none other than Lord Sutch himself.

For a Social Democrat to agree with a loony was the political kiss of death but for a loony to agree with a Social Democrat did no harm whatsoever.

Lord Sutch went on to feature in by-election campaigns for many years after that and ultimately finished off the Owenite SDP by beating them in the 1990 Bootle by-election.

Life is rarely fair. Always true but never more so than in a by-election.

Andy, Keir, Nigel et al – you have been warned. 

Alistair Carmichael is the Liberal Democrat MP for Orkney and Shetland

Starmer was speaking ahead of the by-election on Thursday (Alamy)

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The Prime Minister also reiterated that he would not walk away from Downing Street, saying that the Labour Party should focus on winning the Manchester mayoral election that would be triggered by Burnham becoming an MP, not a leadership contest.

On Thursday, voters in Makerfield will head to the polls in what is widely seen as the most significant by-election of recent times, with Burnham widely expected to launch a bid to replace Starmer in No 10 if he is victorious. 

Speaking to Sky News at the G7 in France, the Prime Minister described Burnham as a “huge asset”.

“I’m sure I’ll talk to Andy after the weekend, of course I will. I’ve spoken to him many times in recent weeks,” he said.

“He’s a huge asset. He’s been a fantastic mayor in Manchester. If he comes back into Parliament…He’ll be a fantastic asset for our party and for the country.”

Asked if he would bring Burnham into his cabinet if the mayor wins in Makerfield tomorrow, Starmer said: “Oh, Andy is a great asset. And, yes, I want him to have a big role in government.”

Starmer could face a formal leadership challenge within days of a Burnham victory in Makerfield, with not just Burnham but also former health secretary Wes Streeting expected to launch bids. The resignation of John Healey as defence secretary over defence spending last week put added pressure on the PM’s precarious position.

The PM has said he would fight any bid to replace him, but accepted that he has “got to turn things round” following bruising local election results in May.

“That’s what I want to do. And I’ve been very clear about that. Okay. Do I recognise that? That means we’ve got to turn things around. Yes, I do, but that’s what I want to do. But, yes, I recognise ahead of local election results. So we’ve got to turn that around.”

Burnham’s biggest obstacle to victory in Makerfield on Thursday is Nigel Farage’s Reform UK. A More In Common opinion poll published last week put candidate Robert Kenyon five percentage points behind Burnham (45 vs 40).

Aerial drone view of Westbrook Bay, Margate Kent (Alice Baddeley/Alamy)

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As the MP for a coastal constituency that has often been overlooked by Westminster, I believe this question must be central to Labour’s mission in government.

The economic case is clear. Coastal economies have grown at half the national average since the financial crisis, yet they possess enormous potential that is currently being squandered – from port and renewable energy potential, to the creative economy and fantastic people crying out for better opportunities. If we could match that potential with institutions and capital capable of turning it into sustained economic growth, it could be a huge gamechanger for our whole economy.

That is why development corporations deserve far greater attention. Widely used across Europe, these bodies operate outside of short-term political cycles while remaining accountable to local leaders and communities. Their purpose is simple: to bring together public and private capital, assemble land, deliver infrastructure and unlock long-term regeneration.

For many left-behind areas, development corporations could be transformative. They offer a way to move beyond the piecemeal funding competitions and short-term grant schemes that have too often characterised centralised government thinking.

Yet their potential is currently being held back by the way Britain treats borrowing. Under existing arrangements, borrowing undertaken by development corporations is counted as public debt under the Chancellor’s fiscal rules, effectively treating it in the same way as borrowing directly undertaken by the Treasury. This creates a powerful disincentive for ambitious regeneration projects, even when those investments are commercially viable, low-risk and capable of generating substantial long-term returns.

This constraint is increasingly being recognised by investors themselves. Last year, some of Britain’s largest pension funds and insurers urged the government to allow development corporations greater borrowing flexibility for major regeneration schemes. They argue that the current system makes it harder to acquire land, invest in infrastructure and bring forward housing and growth projects that would ultimately strengthen the economy. Giving development corporations the ability to borrow responsibly would unlock a powerful mechanism for growth.

These organisations can capture the increase in land values created by planning decisions and infrastructure investment, then turn those gains into housing, transport improvements, public spaces and further economic development. Rather than relying on repeated injections of central government funding, they can help create a virtuous cycle of regeneration.

This is not an argument for abandoning fiscal discipline. Fiscal rules exist to ensure governments can meet their obligations and maintain market confidence. But those rules should not prevent well-governed investment vehicles from pursuing commercially sound projects that expand the tax base and strengthen local economies.

For many left-behind areas, development corporations could be transformative

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We already rightly distinguish between day-to-day spending and capital investment because they have fundamentally different economic effects. The same principle should apply here. If bond investors trust that development corporation borrowing will deliver strong economic returns, this shouldn’t impact government borrowing costs.

Many European countries make far greater use of publicly backed development bodies in this way, but Britain remains unusually centralised, both in how investment decisions are made and how they are financed. Too often, projects that could deliver economic transformation are delayed not because they lack economic merit but because of Whitehall accounting conventions. Imagine what locally accountable development corporations could achieve if given the tools to act.

Britain’s economic future depends both on the success of its cities and on the renewal of places like those at the coast that have too often been left behind. Development corporations offer a vehicle for that renewal. Giving them the ability to borrow outside the fiscal rules, within clear parameters and for clearly defined regeneration purposes, would not weaken our growth strategy – it would strengthen it.

If we are serious about tackling Britain’s regional inequalities, we must stop treating regeneration as a cost and start recognising it as an investment in our country’s future. 

Polly Billington is Labour MP for East Thanet