What should Labour's Brexit policy be?

An immediate return to the EU is out of the question. But restoring frictionless trade is vital

November 22, 2022
Photo: SOPA Images Limited / Alamy Stock Photo
Photo: SOPA Images Limited / Alamy Stock Photo

Here’s a thought experiment. Suppose Keir Starmer and his closest shadow cabinet allies were to meet for an away day, at the highest levels and in the utmost privacy, to discuss Labour’s policy as we approach the next election, and set itself the following exam question: leaving aside the words to be written in the next manifesto, and the slogans to be used in the election campaign, what policy on Brexit would be best for Britain?

Until now, Labour has been extremely cautious. In 2019 it was scarred not just by the way it collapsed to its worst election defeat since 1935, in terms of the number of MPs elected, but by the way it lost dozens of “red wall” seats across the Midlands and North. Various factors contributed to this disaster, such as having Jeremy Corbyn as party leader. But, without doubt, Brexit was a factor. British membership of the EU was seen as a self-serving passion of a remote metropolitan elite—a symbol of the decline of prosperity in our industrial heartlands.

However, YouGov finds that more people than ever say Britain was wrong to leave the European Union; and a variety of pollsters agree, albeit by varying margins, that a new referendum would produce a majority for rejoining the EU. Yet Keir Starmer and his shadow ministers insist that while they would “fix” Brexit, and the steps they would take would be relatively modest. They fear that the pro-Euro majority might crumble as it did ahead of the 2016 referendum.

Let us accept that this justifies caution in opposition, just as Tony Blair and Gordon Brown promised in 1997 to keep Tory tax and spending plans for the first two years of a Labour government—and kept under wraps their plan to give independence to the Bank of England. Hence the thought experiment. Accepting the need for pre-election restraint, what plans should the party keep up its sleeve for post-election action? What might we expect from a private away day summoned to decide a strategy for government?

I would be surprised if Starmer and his colleagues could not agree by lunchtime a consensus on a basic analysis of where things stand:

  • The end to frictionless trade has cost Britain dearly: the government’s own Office for Budget Responsibility may well be about right in estimating a permanent cost of 4 per cent annually in Britain’s gross domestic product—around £100bn a year. The GDP of the United States and the main European economies is now higher than it was before Covid struck. Britain’s GDP is lower, and getting lower still.
  • This cost has deepened the current crisis. To be sure, no government would have an easy time in the face of rising energy prices; but Brexit has made things worse. Taxes will be higher, public services worse and living standards lower than they would have been had we remained in the EU.
  • If a magic wand could be waved, and British membership of the EU restored overnight, our prospects would be transformed. With a return to frictionless trade, alongside the other benefits of being in the EU, we would need less austerity. The recession would be shortened. A swift return to growth would boost the government’s tax revenues, reduce its welfare bill and improve the public finances. This in turn would reduce the pressure on interest rates, which would be good news for mortgage-payers.

Having spent the morning reaching this point, what would our high-level Labour group decide in the afternoon, when the discussion moves on to what Starmer would DO as prime minister, rather than SAY as leader of the opposition?

Plainly an immediate return to the EU is out of the question. In order to reverse the 2016 referendum without facing the accusation of defying democracy, any return would need an explicit mandate, following either a further referendum or a future manifesto commitment. In any event, the process of returning would take time, and might have awkward moments. All this must be a future dream, not an early policy.

The real question is: what could Labour do while the UK stays out of the EU? To undo the economic damage of Brexit, a restoration of frictionless trade is vital. This is what we had as a member of the single market (the creation of which was, arguably, Margaret Thatcher’s greatest triumph), alongside our membership of the customs union. 

The biggest political obstacle to this is that one of the requirements of membership of the single market is freedom of movement. It’s because of this that the Single Market is often ruled out. (The other big requirement, that our exporters would have to meet EU standards, is not a serious issue: there is little public support for any relaxation of standards on product standards, workers’ rights or the environment.)

However, the EU principle is economic: it demands freedom of movement of labour, not of people. Member states have no requirement to admit immigrants who don’t have jobs or quickly find one. And polls find that most people, including many Leave voters, are happy for EU citizens to come to the UK if they come here to work. Such a policy could be enforced by some kind of identity card for people coming to the UK, combined with criminal penalties for employers who hire undocumented immigrants. There is no reason why this could not be combined with Starmer’s wish, in his speech to the CBI, to train up more British workers to fill vacancies. Training and freedom of movement can be both/and, not necessarily either/or.

By the end of the afternoon, then, we might expect Labour’s private discussion to reach the point that there is a potential way forward that would help the economy, and thereby help the party achieve its other policies on welfare, health, education, law and order, and other public services. If implemented, it might well attract public approval.

One significant hurdle remains: the need to win support for this policy before its success can be demonstrated. We can expect a fierce, nationalist backlash (“Don’t lose control”?)—from committed Brexiters. Pro-Europeans across the political spectrum would need to make the economic argument for close co-operation across the Channel far more effectively than they did six years ago.

There is no easy answer to this. An ambitious policy would take time to execute. The negotiations with Brussels could be messy and frustrating. But the prize is great—as is the huge and continuing cost of failing to reach for it. Working with the EU to repair the damage of Brexit will require political skill and courage of the highest order. Which brings us to the question that will hang in the air for the away day participants: are we up to the challenge?