Harsh truths rather than populism

by Sean Rickard

Two statements of policy aspirations from the new Labour government have left me wondering just where they are going with UK-EU relations.   First, business and trade secretary, Jonathan Reynolds, popped-up in the Observer outlining a twin-track approach for trade policy, in closer ties with the EU will be pursued while seeking new global partnerships further afield.   Dissembling he described the UK’s imminent entry into the CPTPP as a real win for British exporters.   Experts are united – including the OBR – that membership will deliver next to nothing to the UK economy – just 0.04% to GDP in the long run’ according to the OBR.   We already have rolled over agreements with the CPTPP’s largest members from our membership of the EU – though Canada has now imposed tariffs on UK exports of cars and some food items.   Further the OBR estimate that the two separate bilateral deals negotiated by the UK with Australia and New Zealand – both members of the CPTPP – might increase the level of real GDP by a combined 0.1% by 2035.

The minuscule, projected benefits from these trade deals contrasts with reputable expert calculations that the UK economy will be 4-5 % smaller than if we had stayed in the EU – a net-reduction in GDP of £100bn per year and an annual loss of some £40bn in tax revenue for the Treasury.   What is unclear in Reynolds comments is what he means by pursuing closer ties with the EU.   It should be of little concern that if the UK were to rejoin the single market it would have to leave the CPTPP but even allowing for desperate governments making the best of a small deal, his words do not auger well as Starmer continues to rule out rejoining the single market.   Further confusion has been sown by Starmer’s meetings with Chancellor Olaf Scholz and President Emmanuel Macron which he presented as offering ‘a once in a generation opportunity to reset our relationship with Europe’ and to ‘turn the corner on Brexit.’   As noted previously in this blog, he may speedily finalise a separate accord on defence collaboration but achieving a meaningful improvement in economic ties will be more challenging; restoring relationships to the levels of civility and respect normally expected in friendly government dealings is not sufficient.   

The UK is desperately in need of improved economic dealings with the EU as evidenced by the fact that despite being in office less than two full months, this latest round will mark Starmer’s fifth meeting with Scholz and his fourth with Macron since he became prime minister.   There is no doubting Starmer’s serious intent to bolster relations with European allies, but in reality Brussels has signalled it has little appetite to reopen full-blown trade negotiations and in my view is unlikely to do so until it is confident that there is an overwhelming majority in the UK ready to effectively rejoin.   Starmer can talk to Scholz and Macron on many issues, but trade remains an EU competency.   The key question is just how long will it take the new government to come clean and admit that its growth objectives cannot be delivered outside the EU.   The recent announcement on winter fuel payments demonstrates that the Labour party has learnt the hard truth that to be successful it must seek to be respected rather than loved.   No doubt there are more hard truths to come in October’s budget but real change means facing up the dominant hard truth; namely, Brexit has been an unmitigated disaster and must be reversed.  

In his recent book on Liz Truss’ short premiership Anthony Seldon concludes that the Conservative party’s long-standing reputation for economic competence and cool-headed pragmatism had been severely tested since 2016, but the final thread was snapped by Liz Truss.   Brexit was in part the outcome of austerity which involved the easy populism of tax cuts rather than hard truths regarding public investment but also the elevation of Tory self-preservation above the country’s interest.   Brexit was the apotheosis of the defining pattern of the 2010-2024 Tory administrations, where time and again the government pursued policies that made Britain poorer.   Despite the rabid support of the right-wing media, the population has now seen through the fantasies to the reality of Brexit.   Brexit rather than preserving the Tory party has – at least for the time being – destroyed it, confirming that resort to populism never ends well.

If the government is to succeed, it will have to do more than repeat the mantra that it is unambiguously pro-growth.   Starmer must prepare the ground for re-entry by being honest about Brexit: erecting trade barriers against our largest trading partner was an act of madness that is denying the government some £40bn per year to spend on chronically under-funded public services.   Even with the best will – involving the Daily Mail, the Telegraph and the contemptible Daily Express admitting their misguidance – rejoining is some years off.   But Starmer could take positive steps now by accepting regulatory alignment with Europe and adopting a more realistic approach to free movement.

The new government should embrace the EU’s proposal to allow the free movement of UK and EU citizens under the age of 30 to work for up to three years.   Also, if it is serious about supporting higher education it must remove the recent Tory obstacles for universities in attracting foreign students.   Why on earth foreign students and their families are classed as immigrants when in fact they are very valuable customers boosting the economy as well as our education system can only be explained by lazy populism supplanting harsh truths.   A primary focus on reversing Brexit is not to deny the growth prospects inherent in supporting builders rather than pandering to nimby voters.   The country chronically short of affordable housing and its ailing infrastructure needs massive investment if the country is to benefit from green energy.   Keir must learn the lesson of the last fourteen years of mis-governance, telling the truth always trumps populism.