Labour’s Poisoned Chalice

The so-called Brexit war committee met at Chequers on 22 February. Government policy on Brexit is now broadly described as “ambitious managed divergence”. What this means no one quite knows. What everyone knows is that the Brexit war committee is at war with itself. The hope is that the UK will pick the EU rules it likes and reject those it doesn’t. This is unilateral cherry picking. A deal that solely benefits the UK will, ipso facto, disbenefit the other EU 27 countries. It’s pure illusion, according to European council president Donald Tusk. It simply won’t happen.

The policy of “ambitious managed divergence” is designed to placate both leavers and remainers in the Tory party. Hard Brexiteers like Boris Johnson and Jacob Rees-Mogg want a clean break from the EU, freeing the UK to strike trade deals with minimum regulation, with non-EU countries, while Soft Remainers like Philip Hammond and Amber Rudd want as little divergence as possible from EU rules and regulations. The two positions are incompatible. Hence the stitch up at Chequers.

How “ambitious managed divergence” will affect workers’ rights, for example, is at present an unknown. Theresa May has said these rights will not only be protected, but enhanced once the UK leaves the EU. Given the Tories record on workers’ rights over the years it would be advisable not to hold one’s breath. It should also be noted that EU membership guarantees many rights enjoyed by UK workers. And we should be warned that Prime Minister wannabe Boris Johnson wants full divergence from EU rules and regulations. The letter sent to Theresa May from 62 hardline Tory brexiteers, including Boris Johnson, calls for “full regulatory autonomy.”

In the search for free trade deals outside the EU, the UK will be able to create its own regulatory standards, but it will also have to adhere to those adopted by other trading organisations, including the World Trade Organisation. These standards may be lower than those existing within the EU. Almost certainly, any trade deals with the United States will include lower food standards as the furore over chlorinated chickens has shown. Donald Trump may say he wants a beneficial trade deal with the UK but the main beneficiary will be the United States, not the UK.

Theresa May has said she wants a bespoke deal with the EU that includes frictionless trade between the UK and the EU. But frictionless trade with the EU is impossible outside of the single market and the customs union. And May has been very clear that the UK will be leaving these two trading blocs. It’s difficult to see the UK getting all that it wants from exiting the EU without being in a customs union that offers similar trading arrangements – which May herself said she preferred in her Lancaster House speech – to those that currently exist. These at least would help to avoid a hard border in Ireland, with its potentially adverse effects on the Good Friday Agreement.

Outside the EU the UK will continue to have the problem of producing goods and services that non-EU customers want at a price they are prepared to pay. It will not automatically happen once we leave the EU. The UK’s record in the trade in goods leaves a lot to be desired. The last full year statistics for 2016 show that the UK had a deficit of £135 billion in goods, partly offset by a surplus of £95 billion in services. Due to the decline in UK manufacturing over decades, it now accounts for just 10% of national output. The problem facing any government is how to boost manufacturing in an economy that is short-termist. Business has failed to invest in the UK’s long-term future and the uncertainty around Brexit has diminished business confidence.

There is confusion within the cabinet over the arrangements that will exist during the transition period, now referred to as the implementation period. Some in the cabinet believe that during the two year period the UK can begin to extricate itself from the clutches of the EU. But Guy Verhofstadt, the EU’s chief Brexit coordinator told UK Brexit ministers, “Transition is simply a continuation of the existing situation, so nothing different can be implemented.” This was confirmed by Theresa May in her Florence speech in September 2017. She said that during a transition period “access to one another’s markets should continue on current terms”.

Labour’s position on Brexit is a little clearer following Jeremy Corbyn’s speech in Coventry on 26 February. Corbyn told his audience that Labour would pursue “a new, comprehensive UK-EU customs union to ensure there are no tariffs with Europe and to avoid a hard border in Northern Ireland.” Labour would also “negotiate a new and strong relationship with the single market”, but would seek “protections, clarification or exemptions” in relation to nationalisation and state aid.

There is more than an element of wishful thinking behind Labour’s policy.  Wanting something is not the same as actually achieving it. Labour says that “A new customs arrangement would depend on Britain being able to negotiate agreement of new trade deals in our national interest.” Being able to trade with the rest of the world while a member of a customs union that provides similar benefits to the customs union is like having one’s cake and eating it, a charge Labour has levelled at the government.

Labour has now distanced itself somewhat from the Tories. Its new policy may attract enough Tory remainers to defeat the government on an amendment calling for a customs union to be included in the Trade bill. This is now not likely to be debated until after the Easter recess and possibly the local government elections in May. (Elections which many Tory MPs will be watching to see if there are likely to be lost at the next general election). But would this be a wise move if it led to a vote of no confidence and a general election? More on this later.

According to opinion polls Labour members and voters support the UK staying in the EU, with 30 pro-EU Labour MPs urging the NEC to consult members about Brexit. Consult on what? Leaving the EU is not simply an internal matter for Labour. The referendum has been held and the result known. The opinions of half a million or more Labour members can no longer influence that decision. This is pure mischief making by Corbyn’s opponents, posing as party democrats.

Furthermore, Labour should ignore the calls for a second referendum from those on its own back benches. If it were held it would probably result in a protest vote against politicians in general, not just those who don’t respect the decision made in June 2016. Politicians are already held in low esteem.  A second vote could sour politics and politicians for generations.

Nor should Labour allow itself to be captured by Tory remainers, hoping that together they can defeat the government on an amendment to the Trade bill calling for support for a customs union. If the government were defeated on the amendment and a general election was held which led to a Labour victory, Labour would be left holding the poisoned chalice of Brexit. Better therefore to leave things be and let the Tories sort out the mess of their own making. Corbyn’s respect for the 2016 referendum result, which he repeated in his Coventry speech, is the only politically honourable position for Labour.