How the well-funded Legatum Institute has written the hymn sheet for a Dirty Brexit

| 28th November 2017
Shanker Singham of the Legatum Institute.

Shanker Singham, director of Economic Policy and Prosperity Studies for the Special Trade Commission of the Legatum Institute, appears on C-SPAN3.

C-Span
Dirty Brexit: The open secret that Brexit is more about financial and environmental deregulation than immigration is confirmed by the Legatum Institute, argues BRENDAN MONTAGUE

Talking to those countries, there is great appetite for this because the world of trade has been slowed and because the levels of output have been down since the crisis [of 2007].

The country appears ever more divided by Brexit. The factions within the Conservative party are on the precipice of all-out war. The Labour party is struggling to reconcile supporters who value internationalism with those instinctively opposed to the oppressiveness of European institutionalism.

The division is now between families, neighbours, newspaper editors, cabinet ministers and nations. This is the public manifestation of the decisive split between members of the one-percent, with two different approaches to global capitalism. Leading the charge against the European Union for the super rich is the Legatum Institute.

The institute is, according to the former EU negotiator Miriam González Durántez, steering the Conservatives in its Brexit talks. It has “unparalleled access to [David] Davis and Theresa May” she argues, “and that seems to have been at the origin of some of the preposterous positions on Brexit taken by the government so far.”

Shadow civil service

Further, the Mail on Sunday reported earlier this month that the Legatum Institute may have assisted a “plot to ‘hijack’ Number 10” as it reportedly helped write a private letter from Boris Johnson and Michael Gove to Theresa May demanding a hard Brexit.

The paper also claims “the pro-Brexit European Reform Group of Tory MPs... is using the institute’s resources to provide a ‘shadow civil service’ on Brexit”. A spokesperson for the institute told the MoS: “‘The Legatum is politically neutral, and has never provided funding to the ERG.”

Shanker Singham is the director of Economic Policy and Prosperity Studies for the grandly titled Special Trade Commission of the Legatum Institute. He read chemistry at Balliol College, Oxford and become a trade and competition lawyer before working at Legatum.

Singham reportedly holds regular meetings with Davis and international trade secretary Liam Fox. He was the only think tank representative to attend an event with Davis and 33 business leaders at Chevening House in June this year, according to The Times.

Singham is the lead author of The Brexit Inflection Point: The Pathway to Prosperity which was launched at the institute’s salubrious offices in Charles Street, Mayfair.

Baron Howell of Guildford, was the only noticeable notable at the event. He served as energy and then transport minister under Margaret Thatcher and was more recently Minister of State in the Foreign Office, was in attendance. He is, also, George Osborne’s father-in-law.

Anti-competitive outcomes

The Legatum report makes it clear that the Brexit division centres on regulation, such as the limits placed on finance capital and on the destruction of the natural environment. Speaking to each other, they are clear that this is about profit making.

For example, it states: “Much EU regulation, across sectors, has been damaging to trade and competition and needs to be reviewed by the UK outside the constraints of the EEA. However, this does not mean advocating deregulation - the UK would still look to regulate these policy areas, in most cases with the same overall objectives and goals, but with less distortion, in a more pro-competition, pro-consumer manner, in ways that better suit the UK market.

“The recent trend however shows that the UK is being outvoted more frequently in the European Council and being compelled to accept regulation that the government does not consider to be in Britain’s best interests but is unable to amend or reverse.”

It goes on to state: “The regulatory opportunity therefore requires the UK to be able to adopt a regulatory system based on outcome- and effects- based regulation, not the prescriptive rule-book approach of the EU.

“The former approach to regulation is more in line with common law jurisdictions, allowing economic forces to prevail and for markets to find their customer welfare-increasing equilibrium. A prescriptive rule book approach however is agnostic about economic effects and is more likely to lead to anti-competitive outcomes.

Specific regulations

“The task will be to find the space where the UK can mutually recognise both systems (the subject of a forthcoming Legatum Institute paper). But such a result is needed both for UK firms and for UK consumer welfare.”

The paper goes on to examine the “global regulatory agenda”. It states: “The challenge is how other countries look at the UK - and the likelihood that it is sufficiently in control of its regulatory choices to be a proper partner, capable of agreeing and implementing its own measures on technical barriers to trade and services regulation.”

The report notes that the EEA Agreement “restricts members’ regulatory reform”. It adds that for post-Brexit Britain, “[i]n areas like industrial policy and agriculture, this must mean a much more open, liberal economic environment than the EU. This is good for Britain, and will make the country a better trading partner for others.” This section concludes: “[I]n services, the EU is moving in a negative direction.”

Singham was even more explicit in his talk, and in answering questions. He argued that due to Brexit, Britain found itself in a unique space where its regulatory and trade regime was currently identical to the European Union.

However, the government could now strategise a “divergence” that would allow trade with the EU to continue but would allow Britain to remove specific regulations. This would make it more attractive to financial institutions wanting to sell services from the UK.

Reducing regulation

Further, countries trading with the UK may be able to break the EU stronghold, resulting in some regulations being abandoned across the continent, he seemed to be suggesting. “Talking to those countries, there is great appetite for this because the world of trade has been slowed and because the levels of output have been down since the crisis [of 2007].

“We are in a very bad place. The percentage of trade in GDP is going down. We [globally] are not in a good place and there is an appetite from those countries to negotiate with the UK.” He concluded: “The trade policies are moving forward... this is very much on a razor’s edge and we have to move forward now.”

The conflict is over a single issue: regulation. How much power should the nation state have to regulate, to control, the activities of actors in the marketplace? Should the finance sector be restricted in the invisible products it can sell? Should the car manufacturer be able to build SUVs that pour pollution into city centre streets?

Chaos and confusion ensues because different factions of capital sit on each side of the conflict. Ranged on one side of the debate is the capital represented by the institutions, agencies and bureaucrats of the European Union. The chief executives and shareholders who value stable rules and regulations across an entire continent.

The EU became a Thatcherite project, reducing regulation and breaking down trade barriers as much as practicable, but no further. The EU has effectively banned the national ownership even of natural monopolies like the railways.

Distressed sectors

So, on this side we have the very wealthy, who want European governance that is strong and stable. This may be because they are the chief executive who wants its product line to remain saleable, or property tycoon sitting on a significant portfolio more interested in staying rich than someone else getting rich. It may be a philanthropist funding environmental campaign groups because her attention has turned from current profits to sustainability, to future survival.

The opposing faction of capital is finance, and its closest associates. Finance is interested in immediate returns, high risk, right here, right now. It appears to despise all regulation, especially regulation of finance itself, and resists and sabotages the institutions that regulate.

The Legatum Institute appears to be at the forefront of the financiers' advance. Where does its money come from? Christopher Chandler owns Legatum, a hedge fund based in Dubai. The fund gives millions to the Legatum Foundation, which in turn provides the money to run the Legatum Institute.

According to Private Eye Christopher Chandler and his brother Richard “turned a family inheritance of $10m into $5bn”. The magazine reported: “The Chandlers’ Sovereign Global Investment made money by finding undervalued assets the rest of market ignored, Richard explained – ‘transition economies or distressed sectors where information is not easily available and standard metrics don’t apply’.

Backroom lobbyists

“Sovereign was one of the first funds to pile into Brazil when the country opened to outside investors in 1991. It moved into Russia after the collapse of communism, and bought up assets in Japan and Korea during the banking crisis of the early 2000s.”

Finance capital is clear about what Brexit is for. It is to transform Britain into a low regulation state, and, with luck, break the semi-regulated cartel that is the European Union. This is necessary because capitalism right now is almost flatlining, and is not going to save itself. It needs to be fed, and your pension, and your planet, is its feed.

At the close of the event I spoke to Lord Howell, who voted to remain in the EU. I wondered if the Legatum Institute was proposing a Brexit where financial services deregulation would not have to involve environmental deregulation. He argued strongly that both environmental and service regulation in play, but added: “I would use the word ‘reform’... I think we can have better focused regulations.”

And the people in environment movements - what does this all mean for them? Guy Shrubsole, a campaigner at Friends of the Earth, said: "Legatum's demands for deregulation after Brexit, and its full-throttled support for letting the market loose, raise questions about who is trying to profit from the Brexit process. People who voted leave were urged to do so to 'take back control' - not cede control to a shadowy network of think-tanks and backroom lobbyists."

This Author

Brendan Montague is editor of The Ecologist. He tweets at @EcoMontague.