By Pat Tanner
Theresa May’s Lancaster House speech explicitly declared that the UK will not only be leaving the European Union but will also be leaving the Single Market and the institutions of the European Union, including the European Court of Justice. The effect will be to create new tariff barriers and non-tariff barriers on trade, which will raise prices, depress trade and lower investment thereby lowering living standards and losing jobs.
These economic consequences will have a direct political impact. All political forces who embrace it will be standing on a platform of lowering living standards over a prolonged period. Defence of living standards and jobs therefore means opposing this policy.
To counter the unpopularity of this ‘hard Brexit’ the Tories are clear that they will further ramp up racism. For them the entire project is cast in terms of ‘regaining control’ over borders. From the referendum result itself this means a rise in hate crime in general, most of it directed against black and Asian people.
For Labour the first challenge is therefore to be honest about what is happening. Unfortunately, Labour’s shadow minister for Brexit Keir Starmer failed that initial test. Unlike the overwhelming bulk of commentators of left and right who accurately understood May’s orientation to a hard Brexit, he told the House of Commons that he was pleased that the Prime Minister had rejected ‘Hard Brexit’ and had in fact come on to Labour’s ground of ‘tariff-free access’ to the Single Market.
This is delusional, and has the effect of disarming Labour in the fight against Tory plans which will lower living standards significantly. May signalled that the UK will not only be leaving the EU but the Single Market and even the customs union. The latter is a poor substitute for Single Market membership as it covers only the trade in most goods and excludes services entirely. As the UK has a very large deficit on trade in goods and has a smaller but significant surplus in trade in services, even this would cause large-scale damage to the UK economy. Yet even this half-way house to ‘Hard Brexit’ is rejected by an immigration obsessed Tory government.
At the same time, a ‘free trade agreement’ with the EU is inconceivable as May also rejects the jurisdiction of the European Court of Justice which would need to adjudicate in any disputes between the trading partners. In an unusual note of realism, she suggested the UK’s relationship with the EU may have to fall back on World Trade Organisation rules, which includes very widespread tariffs on goods, strict application of non-tariff barrier rules and very limited trade agreement on services.
Rejection of all these options is now accompanied by threats to turn the UK into an offshore tax haven from May and her Chancellor Philip Hammond. This would mean radical reductions in taxes, particularly for the best off, and therefore major reductions in social services and social security. Both May and Hammond have held out the prospect of no agreement with the EU at all, a disorderly departure which would rupture all existing EU trade and overseas investment to the UK.
John McDonnell offered a very different and much clearer judgement. He argued that the speech amounted to ‘pulling up the drawbridge on one of the biggest markets on the planet’ which would destroy jobs. Diane Abbott said that the Tories were prioritising the reduction of immigration over the defence of living standards. She went further, arguing that polling showed only 20 per cent of voters were willing to accept lower living standards to reduce immigration, and that Labour would speak for the 80 per cent who do not.
One of the many illusions surrounding the Brexit debate is that the UK will be able to determine the outcome of negotiations. In coming days, there is likely to be a series of strong reactions from European leaders showing how false that perspective is. Conversely, Trump’s presidency has led to over-excited forecasts of the benefits of a free trade agreement with the US. The US would be able to impose its demands on the UK alone, in a way that it cannot versus the much larger EU. There would be very damaging consequences for the public sector, with enforced privatisations, as well as for environmental standards and workers’ rights.
The fall-out from Brexit is going to last for a considerable time. It will significantly depress living standards, rising inflation is already doing that even before Brexit happens. Racism will rise further and pull political forces in its wake. At the same time, the traditional fault lines in the state, such as the Britain’s colonial hold over Northern Ireland will re-open along with new ones such as the agitation for Scottish independence.
Labour must face these developments in a clear-headed fashion. May has been forced to concede votes in both the Lords and Commons on exit terms as well as on triggering Article 50. Labour should use the latter to set out its priority, staying in the Single Market not curbing immigration. It should also state clearly it will vote against the exit terms if they will damage the living standards of the majority. John McDonnell is right. No-one voted for unemployment and wage cuts. Leaving the Single Market will destroy jobs and cut living standards. Diane Abbott is also correct. Labour can speak for the overwhelming majority if it fights for prosperity and rejects the frenzy against immigration.
The UK economy will remain in a market if it leaves the EU Single Market. It will just be a much smaller, less productive one. The overwhelming majority of the population will be worse off. The Tory plan will severely damage the interests of the working class and must be resolutely opposed.