Government and Institutions

IEA: Calls to expand state aid translate to “support for cronyism”

IEA spokespeople respond to the Conservative Party's 'Brexit roadmap'

Commenting on the Conservative Party’s pledge to introduce a new state aid regime, Head of Regulatory Affairs at the Institute of Economic Affairs Victoria Hewson said:

“For all the lip service the Conservatives pay to free markets and free enterprise, today’s announcements about state aid call into question their basic understanding of how these systems work.

“Current state aid rules already stifle our economy, by allowing government interventions – in special circumstances – to give support to struggling industry. Extending these rules, by allowing government to use taxpayers’ money to prop up industries that have no future, would be to move swiftly in the wrong direction, crippling the emergence of new and innovative businesses that our economy relies on.

“Calls to expand state aid translate to veiled support for cronyism. Interventionist and protectionist policies always end up disadvantaging smaller businesses in favour of a few giants.”

Commenting on the Conservative Party’s pledge to promote a ‘buy British’ rule for public bodies, IEA Economics Fellow Julian Jessop said:

“A ‘Buy British’ policy is pure protectionism, and it comes with heavy costs.

“The Conservatives are showing little understanding of the benefits of free trade, let alone the benefits of Brexit. A ‘buy British’ policy would make it harder for the public sector to access the best products at the best price, wherever they happen to be made. As a result, consumers or taxpayers will pay more for a lower quality service.  Everyone will suffer if there is less choice and less competition.”

Commenting on the protectionist features of the Conservative Party’s ‘British roadmap’, IEA Senior Academic Fellow Prof Philip Booth said:

“There is no way a government can distinguish between supporting businesses that go to the wall as a result of circumstances beyond their control and “bailing out failure”. If government bailed out businesses that failed through no fault of their owners, it would be bailing out thousands of businesses each and every year.

“It is dangerous and misleading to adopt this protectionist narrative, that globalisation has hollowed out communities. We have seen how President Donald Trump’s tariffs have hurt the industries they are designed to help. Protectionism in the UK would be a disastrous policy to adopt.”

Notes to editors:

For media enquiries please contact Emily Carver, Media Manager: 07715 942 731

For further IEA commentary on trade and Brexit, click here.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties