Simon Nixon / May 2024
Photo: Shutterstock
Amid all the coverage of last week’s local elections, one figure stands out: the Conservative’s national share of the vote was just 25 per cent. That was roughly in line with the party’s current average share of the vote in national opinion polls at 23 per cent, which in turn happens to be exactly the percentage of people in Britain who think Brexit is going well. That is surely not coincidental.
Everything that has gone wrong for the Tories can be traced to Brexit. Barely a day passes without fresh evidence of the damage that it is causing. Last week it was the introduction of new border checks which will heap costs onto business. The week before, it was news that Goldman Sachs is relocating a top team to Paris, the latest evidence of the “slow puncture” in the City. Brexit is the Deepwater Horizon of British politics, a devastating economic oil spill that no one knows how to stop.
Without Brexit, the Tories might have got away with austerity. Without Brexit, they would never have dared to install as prime minister someone so flawed as Boris Johnson, so deluded as Liz Truss, or so inadequate as Rishi Sunak. Without the Brexit-driven four per cent hit to productivity and 15 per cent hit to trade in goods, the Tories would not have had to push up taxes to a 70 year high. Nor would they now be starving crumbling public services of funding in an attempt to bring them down. Remain voters long ago turned their backs on the Tories in disgust. Now disappointed Leave voters are mutinying too, blaming the Tories for Brexit’s failure.
An Ever-Expanding Oil Slick
Labour thus finds itself on the cusp of power, an outcome unthinkable when the Tories won a landslide victory in the 2019 election. But if Labour owes the transformation of its fortunes to Brexit, what is striking is how little it has to say about it. Soon the ever-expanding oil slick will be its problem, threatening to suffocate its hopes of delivering an economic and social revival. With new cliff edges looming as grace periods expire and the EU introduces new carbon taxes, the damage will only get worse.
Yet the party’s policy towards the EU remains vague. It says Brexit is settled and that it won’t be seeking to rejoin the customs union and single market. Instead it wants to secure a new “geopolitical partnership” with the EU. In an essay in Foreign Affairs, David Lammy, the shadow foreign secretary, said that: “The centrepiece of this relationship should be a security pact that drives closer coordination across a wide variety of military, economic, climate, health, cyber, and energy security issues.” But how this pact might deliver the improved trade and investment relationship or lower trade barriers that Labour says it wants, the party is unable to say.
In many respects, this vagueness is understandable. The party is conscious that despite its 20 point-plus lead in the polls, there are still many undecided voters. It doesn’t want to scare Leave voters whose support it needs in target seats. Nor does it want to antagonise the right-wing press which remains dominated by editors and commentators who were complicit in the Brexit disaster. Besides, the one lesson Labour learned from Ed Miliband’s doomed leadership, it is that opposition is no place to conduct a policy seminar, to open up a debate about finely-balanced trade-offs. This is not a conversation that the party wants or needs.
A more important reason for Labour’s lack of detail on European policy is that it doesn’t know what it wants. Out of office for 14 years, its small team of shadow ministers and policy advisers lack the detailed understanding of EU issues to assess what is negotiable and the associated trade-offs. The party has already had to drop its original aim of using a scheduled 2025 review of Boris Johnson’s Brexit deal to seek changes to the trading relationship after the EU made clear that this was only intended as an implementation review. A wider renegotiation of the Trade and Cooperation Agreement (TCA) would require a new Commission mandate from member states. British officials privately think that could take up to two years.
Wishful Thinking
Labour’s decision to seek a security pact should be deliverable, not least because it builds on what the EU has previously offered. In the political declaration attached to the 2019 Brexit withdrawal agreement, the two sides committed to a deep and enduring security partnership as part of the future relationship. Yet Johnson chose not to pursue such an arrangement. Although Britain and the EU have been cooperating well over the response to Russia’s invasion of Ukraine, many in Europe would welcome deeper engagement with Britain at a time of rising geopolitical tension. Indeed, it is one of the absurdities of the Johnson deal that the EU has far more structured relations with the US, Canada, Australia and South Korea, with whom it has regular bilateral summits, than it does with Britain.
Labour’s proposed security pact will create opportunities for regular contact at all levels from ministers to officials. That will help to rebuild trust, severely damaged by years of ill-tempered Brexit negotiations, enable the rebuilding of institutional knowledge and allow both sides to influence each other’s policy-making. More broadly, Labour hopes that the changed security situation in Europe following Russia’s invasion of Ukraine, war in the Middle East and deteriorating relations with China will open up opportunities to make changes to the TCA that currently appear out of reach. Should Donald Trump be re-elected as US president in November, calling into question America’s commitment to European security, the need for Europeans to work more closely together will be compelling.
But the idea that a changed geopolitical context may ease some of the barriers to a closer economic relationship, thereby avoiding some of the most politically tricky trade-offs, may be wishful thinking. Labour has previously expressed hope that the Brexit deal could be improved in various small ways to ease barriers to trade. These include a veterinary agreement to reduce border checks, a mobility deal that would include mutual recognition of professional qualifications and improved touring rights for musicians. There is speculation that Labour could seek to link Britain and the EU’s emissions trading systems and carbon border taxes, as well as seek deals on access to raw materials and common approaches to AI.
Rule(-taker) Britannia?
Yet none of these are straightforward. In each case, the price of a deal is likely to be a commitment by Britain to dynamically align with EU rules and to accept some role for the European Court of Justice in adjudicating disputes. Even if Labour was willing to accept this (and Starmer has also said that the UK would not be a rule-taker), negotiations will inevitably be complex. It took Canada nine rounds of negotiations to agree a deal on mutual recognition of professional standards.
Besides, the EU’s response to geopolitical tensions looks likely to prioritise its own integration as the key to strengthening its economy and enhancing its strategic autonomy, rather than cutting deals with third countries such as Britain that could undermine single market cohesion. The EU-commissioned report by Enrico Letta, the former Italian prime minister, published last month called for the EU to deepen the single market in capital markets, digital services, energy and defence. The EU’s proposed new European Defence Industry Programme, which aims to strengthen the European defence industry by incentivising common procurement, is restricted to suppliers based in the single market and would therefore exclude British contractors.
To entice the EU into a new negotiation, Starmer would need to offer something bolder than a series of minor one-sided deals for the benefit Britain. He would need to convince the EU that Britain wasn’t engaged in another attempt at “cherrypicking” access to the single market and that any deal it struck with Labour would not be reversed by a future Conservative government. It would also need to be satisfied that Starmer could withstand the inevitable attacks from the Brexit-supporting media. Starmer’s abrupt dismissal of the EU’s recent proposal for a new youth mobility deal, while understandable in a UK political context, has inevitably raised doubts about how different Labour would really be.
The Cameron Trap
Yet seeking a new negotiation with the EU carries risks for Starmer. He would need to take care to avoid the repeating the calamitous mistake of David Cameron, who staked the country’s fortunes on a reckless promise to renegotiate the terms of EU membership ahead of a referendum without knowing what he wanted or whether it was negotiable. Having ruled out a return to the EU single market and customs union, Starmer would need to be confident that the benefits of an improved deal would be worth the investment of political capital. To commit to dynamic alignment would be a bold step. EU rules are evolving all the time and there is growing pressure in some sectors to allow divergence as a way to regain competitiveness.
Labour’s desire for a better relationship with the EU is undoubtedly sincere. But as a succession of Tory negotiators have discovered, goodwill alone is not enough to overcome the formidable political and legal obstacles to better trading terms. Labour may have convinced itself that saying as little as possible about Europe now offers the best chance of not just winning the election but defeating the Tories so comprehensively that it can look forward to at least a decade in office to remedy the calamitous legacy of the last 14 years. But its lack of a clear European policy is likely to quickly become a problem once in government.
Under pressure for early economic wins, Labour may find it hard to resist the temptations of economic nationalism in the form of protectionism and industrial policies that only increase divergence, putting future deal further out of reach. Business and investor hopes of lower trade barriers could quickly turn to disillusionment, adding to the economic gloom. If Labour waits until it is in office to work out what it wants to do on EU trade, let alone defers any reappraisal to a putative second term, it may already be too late to cap the Brexit well. The toxic tide that has engulfed the Tories will then threaten to overwhelm Labour too.
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