Corbyn's opposition to Brexit is vindicated by the EU state aid rules

Jonathan Ford in The FT

Some six years ago, British minicab company, Addison Lee took Transport for London on a journey through the law courts that ended up in 2015 at the European Court of Justice. At issue was a rule that allows only black cabs to use London’s bus lanes. 

Hardly an EU matter you might think, worrying about transport policy in Britain’s capital. But think again. The minicab company argued not only that the rule infringed its freedom to provide services; it was also illegal state aid. Letting black cabs use a bus lane was, in effect, selective support for a specific participant in the wider taxi trade. 

Admittedly the argument did not prevail in Luxembourg and London’s bus lanes remain limited to buses and traditional taxis. But while the ECJ failed to deem the policy state assistance, it did not entirely rebut the principle. 

The justices recognised that TfL’s policy could affect trade between member states because it potentially made it harder for European-owned minicabs to penetrate the market. The definitional ratchet of unfair state aid turned gently another notch. 

“It illustrates how the definition of state aid has expanded over the years,” says James Webber, an antitrust partner at the law firm Shearman & Sterling. “Originally designed to contain industrial subsidy competition, state aid is now much wider than commonly assumed, covering many public spending decisions such as infrastructure investment and tax changes which could be seen to benefit a specific region, sector or even just to incentivise desirable corporate behaviour.” 

Quite right too, you might say. Unfettered subsidy competition is not only wasteful; it is ultimately pointless, for any advantage is lost if it descends into a free-for-all. Which is why it was so uncontentious when Theresa May conceded early in Brexit negotiations that the UK would stick with EU state-aid rules. But in practice what has been signed up to is far from uncontentious. The prime minister’s agreement has contrived to put the UK into a uniquely disadvantageous place, forced to follow the EU’s state-aid rules but not protected by them in return. 

The mischief lies in the so-called Irish backstop, which would leave the whole of the UK still subject to single market regulation in state aid even though the country was formally outside the EU. As a consequence, Britain will continue to apply not only those substantive state-aid rules that existed at exit, but any new ones too. 

The rules are only part of any state-aid decision. What really matters is the discretionary power possessed by the commission to approve or disapprove — sometimes with conditions — any plans member states propose which trigger state-aid concerns. That is inevitably a political process. The UK’s Hinkley Point nuclear project was generously state-aided. But the commission blessed it because two big member states — Britain and France (which was supplying the technology) — had the clout to ram it through. 

While that clout disappears along with Britain’s representation in Brussels at Brexit, UK interests are in theory protected because the discretionary power passes from the EU to the Competition and Markets Authority. But really it does not. In practice the UK regulator will have to get the European Commission’s sign-off, and the final arbiter will be the ECJ. And that is just in Great Britain. In Northern Ireland, the commission will remain in total control of the whole process itself. 

Its discretion may not be used in Britain’s favour. Not only will the UK no longer have insider clout, but it will also be seen as a strategic competitor. Just last week, the foreign secretary Jeremy Hunt was in Singapore, talking admiringly about its economic model, which extends fiscal support to favoured industries. It remains to be seen how keen the commission will be to sign off fiscal measures designed to enhance UK competitiveness and offset any exit bumps. 

Worse, Britain’s anomalous backstop status may mean that while it cannot protect its own industries, it will be defenceless against EU states dangling subsidies to encourage British companies to relocate. State aid in the EU is not problematic if it attracts jobs to the union from non-EEA countries. European goodwill is the only backstop here. 

There is no certainty too that this will be unravelled in any trade deal. Given the permanence of the backstop, the EU has no incentive to offer Britain more favourable terms than the ones in the withdrawal agreement. 

 The deal would unwittingly lock Britain into a regulatory iron maiden of Brussels’ manufacture. As with such contraptions, extraction once inserted may prove harder than clambering in.

Learn from Northern Ireland: beware entrenching Brexit divisions

 The unloved backstop in May’s deal offers a new strategic advantage writes MATTHEW O'TOOLE in THE FT


In my hometown, as with a handful of others in Northern Ireland, there is an Irish Street, English Street and Scotch Street. They were named to reflect the origins of people who have lived alongside one another for centuries, without ever quite becoming one people. 

These streets long predate the creation of Northern Ireland following partition in 1921; they predate the Act of Union between Britain and Ireland in 1801. At the most basic level, they reveal the enduring dilemma of that part of Ireland: how to accommodate more than one thing. How to live with ambiguity without antagonism. A task at which we have failed in the past with appalling consequences. 

The Northern Ireland backstop is now routinely described as the central barrier, or stumbling block, in agreeing orderly terms for the UK’s withdrawal from the EU. This view has become conventional in London — particularly among Brexiters, but also many Remainers — with little attempt to understand the prior problem that required solving. This tendency has been compounded by the extraordinary power currently wielded at Westminster by the Democratic Unionist Party, which does not welcome ambiguous interpretations of Northern Ireland’s current status, nor of its history. It opposed the Good Friday Agreement of 1998, which enshrined the principle of consent (Northern Ireland remaining in the UK until a majority voted otherwise) but added several asterisks that qualified UK sovereignty. 

That the DUP is the only party representing Northern Ireland in the Commons is itself further evidence of the place’s ambiguity. Sinn Fein, which holds the rest of the seats but does not take them, has never recognised the legitimacy of the UK parliament’s authority. 

It is the persistence of this dividing axis in one small corner of Europe that was always — and I do mean always — going to complicate Brexit. But something more is happening: at the very moment Northern Ireland’s divisions again require subtle accommodation, Britain’s own divisions are making that impossible. Guided by the baleful influence of the DUP, whose guiding mission is to assert Northern Ireland’s unadulterated Britishness, Britain is becoming more like Northern Ireland. 

Karen Bradley, the Northern Ireland secretary, was rebuked recently for implying precisely this — that the region’s divisions contain warnings for Britain at large. Northern Ireland, she wrote, “in particular, knows the damage that division can do”. Notwithstanding her previous confessed ignorance on the place she now governs — not knowing that unionists tended not to vote for nationalist parties, and vice versa — Ms Bradley was not wrong. 

Brexit has created — or perhaps revealed and clarified — an intense division in British politics, and in British life. As in Northern Ireland, reality itself is increasingly defined by the split over EU membership. Contradictory narratives — of national self-harm versus thwarted national liberation — are congealing in the veins of Remainers and Leavers. Several studies, including a recent analysis by polling expert John Curtice, have shown how entrenched Remain or Leave identities have become: far more fundamental than attachment to any political party. Voters on each side are now invested in these identities in a way that prevents compromise. 

There are clear limits to this analogy, dictated by respect for Irish history and its ancient and recent traumas. Britain is not the same as Northern Ireland, which is precisely the point of the backstop. It should, however, be careful about becoming any more like it, however maddening each side of the Brexit divide finds the perceived distortions of the other. 

It is also wrong to imply both sides are as bad as each other: fault lies largely with the Brexiters, whose zeal has driven the country to this precipice. But whether Britain ends up leaving the EU or not, its divided society will need to a find a way of accommodating tribes that have become remarkably entrenched in little more than two and a half years. 

In a few days, I travel back to Northern Ireland to spend Christmas. The place whose ambiguities are at the centre of Brexit, but where the views of most people are eerily absent from the debate in London. The backstop, unloved by virtually all sides in British politics, is mostly welcomed in a land that has learnt to live with constructive ambiguity. It remains a useful diplomatic concept as an alternative to purity and further division. 

The backstop guarantees Northern Ireland access to both UK and European markets. It offers the place something it has rarely known: strategic advantage. The chance to put its contradictions to a more productive use rather than hostility. 

If only divided Britain would give it the chance.