Progress | Centre-left Labour politics

Trading a three course dinner for a bag of crisps

Labour’s commitment to the customs union means little unless we also endorse the single market, writes Roger Liddle 

Thursday’s disappointing local elections change little on Brexit. On the most important issue facing Britain, the Conservatives remain irreconcilably divided, Labour to its shame, hopelessly confused.

22 months after the referendum vote, the government cannot even decide its future policy for our customs borders, never mind reach  agreement with the European Union on the subject– and remember a border has, by definition, two sides to it. The Brexit ‘war Cabinet’ – a telling phrase that sums up how some Conservatives view future relations with the EU – is at sixes and sevens – or rather fives and sixes after the split vote against the Prime Minister last week.

But the time for fudge is running out. We have already reached a position where there is absolutely no prospect of frictionless trade being maintained at the end of the so-called implementation period in January 2020, without an extension of our membership of the customs union for at least a further two to three years. This may not even be legally possible in the withdrawal agreement. But without it, there will bring be huge costs in endless lorry delays and bureaucracy on both sides of the UK-EU border. This failure of policy is quite extraordinary when one thinks of how the Conservatives see themselves as the ‘party of business’. And of course without some practical solution, there is no alternative to a ‘hard border’ in Ireland.

On the customs border question, the government is divided between into two warring camps: those who favour a Mrs May ‘customs partnership’ or the Boris Johnson/David Davis/ Liam Fox ‘maximum facilitation’ plan. Both involve technologies that are unproven: what the Commission dismisses as ‘magical thinking’. Magical or not, both have no chance whatsoever of being operational by the end of the transitional period in 2020.  But for the Brexiteers, the imposition of a customs border between the United Kingdom and the EU (however ‘soft’ and ‘as frictionless as possible’ they convince themselves, or possibly pretend to others, unproven technology could make it) has become an essential condition for breaking free of the EU’s hated customs union and single market.

Mrs May’s customs partnership, however complex and impractical it may prove, has at least the merit of attempting to maintain one common customs border between a single ‘free trade zone’ between the EU and the UK on the one hand and the rest of the world on the other. It is intended to avoid what the Brexiteers ‘max fac’ plan cannot avoid: some form of physical border in Ireland.

Ironically, as the ‘war Cabinet’ was spending two and half hours wrangling indecisively over the pros and cons of these plans, the House of Lords – on the 18th full day of its consideration of the EU Withdrawal Bill – was debating a cross party amendment moved by Chris Patten to insert on the face of the Bill, a binding commitment to the Good Friday agreement and no hard border in Ireland. Lords ministers assured the House that, while they agreed wholeheartedly with the principle of the amendment, it was completely unnecessary because avoidance of a hard border was an unbreakable government commitment. A few hundred yards away in Downing Street, the Brexiteers were securing a majority for a plan that made certain quite the opposite: the imposition of a hard border. Happily, the Lords was not convinced by the Lords front bench arguments by 309 votes to 241.

On virtually every argument the Brexiteers made in the referendum, they have been exposed at worst as liars, at best as unrealistic dreamers. Indeed they now but rarely attempt a principled argument for Brexit: the whole debate has become about how to ‘minimise the damage’. Virtually all the Brexiteers have left in their rhetorical armoury is the contestable assertion that Brexit is the ‘will of the people’ that must be obeyed, without of course giving parliament or the people a meaningful say on whatever deal they manage to cobble together.

But there is one benefit of Brexit that its supporters continue to trumpet: that Brexit will enable Britain to pursue an independent trade policy what will enable ‘Global Britain to seize economic opportunities in the dynamic growing parts of the world outside Europe.’ This argument now constantly dominates their discourse, but is badly flawed.

However uncertain the prospects of free trade deals with the rest of the world, the Brexiteers are prepared to sacrifice an awful lot for them. They would sacrifice the certain benefits of the free trade that we currently enjoy as members of the European single market–nearly half our total trade. They would put at risk our ability to replicate outside the EU the trade agreements that the EU has negotiated for Britain as a member of the EU with other parts of the world. Together with the EU single market, these amount to some 70 per cent of our trade in all.

The big trade deal of course that could be done when we are outside the EU, is with the United States. US trade accounts at present for some 15 per cent of our trade and unusually Britain enjoys a trade surplus. But we know only too well what Donald Trump thinks of free trade: look how he threatens tariff wars with China and Europe. Yet Liam Fox would prioritise a free trade deal with the US that in all likelihood would involve reciprocal sacrifices on our part of chlorinated chicken, beef that does not conform to our high health and animal welfare standards, and access for US health providers to NHS contracts. The idea that Donald Trump would be doing us any favours without giving him many more in return is fantasy politics.

Giving up on the single market and customs union is, as Sir Martin Donnelly, Liam Fox’s former permanent secretary put it, in terms of economics, like sacrificing a three course dinner for a bag of crisps. And for this, the Brexiteers would also put at risk peace in Ireland on the argument that the ‘Good Friday’ agreement is now history.

Yet staying in the EU customs union, which I now view as an odds-on prospect unless there is a complete negotiating breakdown, is not enough. In truth it is only a fraction of what pro-Europeans should be demanding. Labour should be fighting to stay in the single market as well.

In terms of economics, the customs union does nothing to preserve Britain’s great strengths in services, which are the most dynamic and successful part of our trade, with non-financial services increasingly important in sectors such as business consultancy; law accounting and public relations; fast expanding digital services; TV and film; design and architecture. Unfettered rights of establishment in any EU country, free movement of employees, and mutual recognition of qualifications are of fundamental importance to the success of these service businesses on which many of the decent, well paid ‘jobs of the future’ depend.

As for social protections, the losses from being outside the single market will prove huge. We lose the embedding in our law, as a result of EU law, of employment rights and environmental standards. We lose the potential to harmonise business taxes and ensure that big corporations pay them. We open ourselves up to a ‘race to the bottom’.

But Labour still cannot muster the courage to come out in favour of the single market. Two objections are made, both of which are badly flawed.

On the left some say the single market is incompatible with socialism. It all depends of course what one means by socialism. It is a complete falsehood that single market rules prevent governments pursuing an active industrial policy. Nor does it stop governments taking firms into public ownership: Macron has already done that. What state aid rules do restrain are open ended subsidies to loss making firms without evidence that state intervention will return the business to viability. If defiance of that constraint is intended to be a defining question of Labour policy in the future, frankly this is a return to the failed policies of the 1970s and a recipe for economic disaster.

The second objection is immigration. The single market requires free movement of people, particularly the low-wage eastern European immigration that people voted in the referendum to stop. I recognise that immigration played a huge part in our referendum defeat. But Labour’s position now has to be as Alastair Campbell put it in his brilliant speech to the Progress conference, to ‘fight Brexit and the causes of Brexit’. Much more could be done within EU rules to stamp out abuses of free movement. Labour should be arguing for a radical new set of more interventionist labour market policies to cut the dependence of employers on business models that assume a ready supply of cheap migrant labour. Finally we should be demanding EU reform, as Macron has just achieved with the new EU posted workers directive. Above all, Labour should offer solutions to populist resentments, not give in to them; demonstrate how migration has brought huge benefits to our economy and public services; and celebrate the expansion of liberty and personal freedom that free movement brings to British citizens. .

For the Commons, the Brexit crunch is coming – maybe in a matter of weeks, certainly later this year. In the House of Lords we have been doing our best to bring it on. And the question, to which at present I have no certain answer, is whether our party, the Labour party, will live up to its historic responsibilities.

Brexit is not an issue that can be run away from, as some Corbynistas imagine. Of all the political decisions that Britain has faced since the second world war, Brexit is a shaping decision of overarching importance that if we get wrong, poses the greatest threat not just to Britain’s future prosperity, security and standing in the world, but to the capacity of a future Labour government  to make transformative change in our society.

To attract the global investment that produces decent well-paid jobs. To protect and enhance worker, consumer and environmental rights without the pressure Brexit Britain would be under to join a race to the bottom. To have the collective power to face up to global corporations that will not pay their fair share of taxes.  And to tackle the multiple issues posed by interdependence – climate change, the pollution of the oceans, migration and terrorism – in cooperation with partners whose values and interests we mainly share.

Socialism in one country was never a viable strategy for a democratic progressive movement, as Keir Hardie and Ramsay Macdonald well understood. It is a nonsense in today’s world. If Britain cannot remain part of the EU, we must maintain the closest possible partnership with our EU partners of which the single market is the essential foundation stone.

Labour has still to face up to this essential truth. The hard Brexit towards which Mrs May is leading us is far worse than the status quo of membership. And if that is the choice, parliament should have the courage to reject the bad deal that is on offer and in the last analysis, put the issue back to the people.

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Roger Liddle is a Labour member of the House of Lords and a member of the Progress strategy board

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Photo: Creative Commons 2.0

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Roger Liddle

is a peer, a former adviser on European affairs to Tony Blair, and chair of Policy Network

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