Labour’s Brexit Conundrum

What should Keir Starmer's stance be on Brexit as the next General Election comes into view and the Labour Party enjoy significant leads in opinion polls?

The result of the EU referendum in June 2016 immediately plunged the Labour Party into a difficult position. For the next three years, Labour MPs who had campaigned for Britain to remain part of the European Union were forced to strike an agonising – if not impossible – balance between respecting the referendum outcome and fulfilling their duty to act in what they saw as their constituents’ best interests.

Some advocated for a “soft” form of Brexit that would keep the UK inside both the EU Single Market and Customs Union (the two institutions that previously made free and frictionless trade between GB and EU member states possible). Others with a more glaring disdain for Brexit joined the “People’s Vote” campaign, which demanded a second referendum on any withdrawal agreement negotiated between the UK government and the EU.

In the end, Labour’s Brexit policy in the 2019 General Election represented an uneasy mix of these two visions. Labour promised to renegotiate a new withdrawal agreement – one that would result in closer ties with Europe - and to put this hypothetical new deal up against the option to remain in a second referendum.

As it happened, Labour’s resounding defeat in that election took the Brexit issue out of the Party’s hands. With an 80-seat majority in the Commons, Boris Johnson’s Conservatives were able to pass the necessary legislation to deliver Britain’s exit from the EU, which was finalised on 31st January 2020.

Although it has been almost two years since the UK embarked on a new trading relationship with the European Union, Brexit remains an important, contentious, and to some extent, unresolved issue. For several reasons, it is a topic still fraught with political difficulty for the Labour Party in particular.

Whatever the potential long-term benefits of Brexit, most clear-eyed observers agree that so far Brexit has had a constraining effect on UK economic growth.

The latest analysis from the Office for Budget Responsibility (OBR) predicts that Britain’s new trading relationship with Europe will cause a 4% fall in long-run productivity relative to remaining in the EU.

• This is predominantly down to the increase in non-tariff barriers to UK-EU trade. These include costly and time-consuming customs checks on goods, which were not necessary when Britain was part of the Single Market and Customs Union.
• In particular, small businesses wishing to export to Europe are struggling to cope with the increased bureaucracy Brexit has caused, as this Financial Times film documents.

Labour shortages, partly caused by a fall in net migration from the EU since 2016, are also said to be holding back Britain’s economic recovery. This problem has been more acutely felt in the last two years because of an increase in the number of over-50s in Britain retiring early, many because of long-term health issues. ONS figures suggests that there are 500,000 more economically inactive people due to long-term sickness than there were before the Coronavirus pandemic.

Despite all of this, the complex politics of Brexit encouraged Sir Keir Starmer to avoid discussing the issue for the first two years of his leadership. The Party’s official position on Europe is vague and contradictory. Despite Labour’s assertion that Britain’s new trading relationship with Europe has been damaging, their policy is to retain the current Trade and Cooperation Agreement with the EU but improve upon it to “make Brexit work”. In a recent speech to the CBI, Starmer claimed that Labour wanted to reduce barriers to trade with Europe but ruled out re-entry into the EU Single Market.

Labour’s Brexit stance is based on an electoral calculation. In 2019, Labour’s most shocking defeats came in seats that had voted overwhelmingly for Brexit. The so-called ‘Red Wall’ in the north of England became a Blue Wall, as many were convinced to vote Conservative for the first time.

Clearly, Labour strategists have determined that the party will not win back seats in Leave-supporting areas if it is still seen to harbour negative attitudes toward Brexit. This view was reflected recently by Labour’s Shadow Immigration Minister, Stephen Kinnock, who argued that the campaign for a second EU referendum had damaged Labour’s chances in 2019, and that continued “Brexit bashing” would be a major impediment to future election success.

Arguably, Labour is right to take a pragmatic, perhaps safe, position on Brexit. Despite the Party’s pro-European instincts, the last thing Labour want is to fight the next election on an issue they already have lost the argument over.

But there are also risks associated with Labour’s Brexit policy. Accepting current trade arrangements with the EU would make it harder for Labour to achieve their ambitions in government, and there is evidence suggesting that a closer relationship with Europe has electoral appeal.

The Labour Party has asserted that it wants to fight the next election on the issue of economic growth. But the structural problems limiting the UK’s potential output – like low productivity – are, for the time being at least, being made worse by the consequences of Brexit.

Sir Keir Starmer has already levelled with Labour supporters that, because of the state of the UK economy and public finances, if the party wins the next election, it may not be able to do “good Labour things as quickly as we would like.” By limiting growth, which limits government tax revenues, Brexit is an obstacle to the socially transformative investments a Labour government would seek to undertake.

Might Labour also be missing a political opportunity with their current stance on Europe? There is evidence that public opinion is turning against Brexit.

According to recent polling from YouGov, 66% of people think the government is handling Brexit badly, compared to 24% who think it Brexit is being handled well. That is the worst any government has polled on the Brexit issue for almost three years. Yet, Starmer very rarely criticises the government’s policy toward Europe because of the Party’s fear that an attack on the government’s competence vis-a-vis Brexit would be successfully misconstrued by the Tories as an attack on Brexit itself.

Since the referendum, YouGov has also been asking the public this question: “In hindsight, do you think Britain was right or wrong to vote to leave the European Union?” The results from the polling fieldwork show that 32% of people think it was the right decision, whilst 56% believe it was the wrong one. A net Brexit approval rating (for want of a better expression) of -24% is the lowest since the fieldwork began in August 2016.

It should be noted that an overwhelming majority of Leave voters still support Brexit: 70% think it was the right decision and 19% think they made the wrong choice. But this net Brexit approval rating of 51% among Leave voters is also the lowest since YouGov’s polling started. Polls can be volatile, but the trend of public opinion for the past year is clearly one of increasing Brexit scepticism.

What are the chances of Labour’s Brexit position changing? And what form might any policy evolution take?

There is no doubt that Labour’s current Brexit plans run contrary to the party’s pro-European ideological instincts. Starmer is no Eurosceptic; he himself supported the People’s Vote campaign. Although, nothing in the Labour’s recent pronouncements suggests a change in policy is imminent.

However, it is difficult to see how Starmer could fulfil his commitment to reducing trade barriers with Europe without a substantial revision of the Trade and Cooperation Agreement. Re-joining the Single Market represents the easiest way of easing the pressure on the UK economy. It is also a policy that may have some cross-party appeal: Tobias Ellwood – a senior Tory MP and chair of the Defense Select Committee – came out in favour of Single Market membership earlier this summer.

Labour should be careful about ruling out major changes to the UK-EU trade relationship. Sir Keir Starmer has committed to fighting the next election on economic growth, leading an “unashamedly pro-business” party, and protecting those most vulnerable to the rise in the cost of living. If Brexit continues to make doing all of those things more difficult, a serious reconsideration of Labour’s policy on Europe may be needed before the next election.