Brexit, Covid-19 And Labour’s Task
The decision not to extend UK membership of the European Union (EU) beyond 31 December leaves the government with two options. Either make a deal with the EU by this October; although Johnson is hopeful that an outline deal can be reached by the end of July if the EU is prepared to compromise. Or the UK leaves without a deal at the end of the year, and reverts to World Trade Organisation rules. With Europhobes like Foreign Secretary Dominic Raab and Trade Secretary Liz Truss favouring a no-deal and Prime Minister Boris Johnson and Chancellor Rishi Sunak hoping to negotiate a deal favourable to the UK, the stage is set for a possible conflict of interests. Although at the moment there is little sign of opposition to Johnson’s aim of an outline deal by 31 July.
In preparation for the UK leaving the EU, Liz Truss has already held trade talks with her US counterparts. The news that leaked out of the talks suggest the UK is prepared to lower hygiene standards on food imports from the USA. Truss has dismissed concerns about the import of chlorinated chickens with a threat to impose higher tariffs on such foods. How she can square this with the promise of cheaper food from a deal with the USA is anyone’s guess. The UK has some of the world’s highest animal welfare standards. British farmers are therefore understandably concerned that they could be undercut by US farmers where more intensive farming methods enable them to produce cheaper food. Once the UK leaves the EU, competition from the US and elsewhere could potentially destroy British farming. At this early stage in the talks we are unclear about the USA’s intentions for access to the NHS. It appears that the government have ruled this out, but the prospect of profits for US pharmaceutical companies from NHS contracts, in return for an attractive deal for the UK, may prove to be irresistible. It should be noted that a favourable deal with the USA would add 0.2% to GDP, compared with an estimated loss of 5% from leaving the EU.
Boris Johnson won the 2019 general election because he successfully persuaded voters in leave areas that, whereas a Labour government would mean more dither and delay, a Conservative government would deliver on the 2016 referendum result. And the first three months of his premiership were primarily focused on that objective. But events have a long history of waylaying the best laid plans. Covid-19 was such an event, for which Johnson and his government were totally unprepared. The virus had hit parts of Europe, particularly Italy and Spain, at an earlier stage. Yet in spite of the obvious threat to the UK, the government dithered and delayed. The lockdown, imposed later than other countries, has caused avoidable deaths and dealt the economy a blow from which it could take years to recover.
Rishi Sunak’s measures to deal with the economic impact of Covid-19 are a necessary, but no more than, sticking plaster. Unemployment is currently around 2.8 million and is expected to go higher when his furlough scheme, which covers 9.2 million workers, ends in October. From August, employers will have to contribute towards the cost of the scheme, around £14 billion per month, a total of £70 billion by the end of the scheme. (The £70 billion is equal to the estimated amount of tax avoidance in the UK per year). The payments will place an extra financial burden on companies. Labour has called for a carefully targeted sectoral approach, with extended help for the self-employed, including hairdressers and other vulnerable groups at risk of long-term unemployment.
But bolder, longer term measures are needed to move the economy rapidly forward. The question is this: is the government prepared to give the state a bigger, permanent role in Britain’s future economic development?
The UK needs investment in education, skills and training. For years employers fell short of their responsibilities for skilling and training their workers. This failure forced governments under Cameron and May to step in with short-term schemes dressed up as permanent apprenticeships and eventually with a mandatory VET levy on larger firms. The recent announcement of a government strategy to invest more in skills and training, including apprenticeships for every young person aged 16 to 25, looks attractive. Details of the jobs and skills package was promised for late June/early July. Whether they will prove to be real apprenticeships or simply measures to disguise the expected massive unemployment figures when the furlough scheme ends, remains to be seen.
National output fell by 10.4% in the three months , January to March, with a further fall of 20.4% in April alone. However, the Office for National Statistics (ONS) has warned that caution must be expressed due to the difficulty of collecting data under the government’s public health restrictions. Nevertheless the decline in output for the second quarter is expected to be higher than that for January to March. Over the full year the fall in output is forecast to be 10.2%, with a further decline to 14% if the economy is hit with a second wave of the virus.
With the economy tanking the government is anxious to get people back to work, albeit on a gradual basis and with strict conditions placed on distancing and the wearing of protective masks when travelling. With non-essential shops and stores having already opened, consumer spending will rise. From 4 July further easing of the lockdown will occur when the hospitality sector, which includes pubs and restaurants, can open in what the government calls a “Covid-secure way”, with more handwashing, ventilation and table service indoors, along with safe distancing. A relaxation of the lockdown will also occur in other areas of entertainment, such as galleries and museums. The government is clearly hoping to strike a balance between protecting people’s health and preventing total meltdown of the economy. But easing the lockdown is a huge risk: there could be a new outbreak of the virus as has occurred in Beijing and some US states. The media euphoria over ‘independence day’ may yet prove to be misplaced.
Keir Starmer has shown his lawyer’s forensic skills in dealing with the government’s handling of the pandemic to date. But a critical analysis of its overall performance will have to wait until international comparisons can be accurately made. Labour needs now to knuckle down to producing practical policies for the economy. Work on a plan for a green new deal is already underway, but more detail is required before a proper judgement can be made of its potential. More joined up thinking and action is required, with shadow Business Secretary Ed Miliband working with other key cabinet members on a comprehensive plan to rebuild Britain’s economy, with the state playing a more prominent role. We need targeted investment in local economies to help create jobs, particularly for young people where, unless this happens, there is likely to be stiff competition in the digital technology world of work. Labour also needs to provide workable solutions to the gross inequality in income and wealth arising from globalisation over the last three decades. Under this, by far the greater share of the increase in wealth has gone to the richest 5%.
Writing in the Guardian on 19 June Ed Miliband claimed that Labour is learning lessons from the 2019 election defeat. Drawing on the recent ‘Labour Together’ report which examines why Labour lost that election he wrote, “To make the most of our wider movement we must put aside the factionalism and division of recent years.” As Labour Affairs has consistently pointed out, those responsible for the factionalism and division were the former Blairites in the party who refused to accept Jeremy Corbyn as leader and constantly sought to undermine him. They were determined that he would never become Prime Minister; some even preferring a Tory government.
Miliband is correct to argue that Labour’s problems in its historic heartlands go back decades. They began under Thatcher’s premiership in the 1980s with the decline of traditional jobs in manufacturing, mining, the docks and steel industry and continued under Major in the 1990s. In Labour’s thirteen years in government Blair and Brown failed to address adequately the problems, exacerbated by technological change, in these predominately Labour areas. Most of the replacement jobs under Labour were in the public sector, which declined due to austerity. And Cameron and May then created millions of low-paid, insecure jobs.
But Miliband must accept his share of the blame for four successive election defeats. Following Cameron’s election victory in 2010, the Tories accused Labour of being responsible for the 2008 financial crisis which left the country deeply in debt. As Labour leader, Miliband failed to answer this false accusation, leaving voters to believe the Tories’ lies. His further weaknesses as leader led Labour to defeat at the 2015 general election.
The next general election is about four years away. Labour has a mammoth task to win back the lost ‘red wall’ seats in the north and midlands, as well as capturing a multitude of seats elsewhere. It should avoid being drawn into the culture war being fostered by Johnson and Cummings. Cummings is the mastermind behind the Tory targeting of focus groups in the Labour seats won in the 2019 election. He believes he understands that the way people feel about themselves and the country largely determines how they vote. The Brexit vote in those constituencies is a prime example of this. His strategy is to draw voters’ attention away from the economy which is likely to be in a bad shape come the next election and appeal instead to their sense of identity and patriotism. It’s important for Labour to identify with voters’ concerns, but it won’t win if it fights the Tories on this prepared ground. It must make the economy the main focus, offering voters believable, practical solutions to their problems. We look forward to commenting on these in the near future.