Labour’s Brexit Policy Is Unworkable – They Must Back Remain And Reform

Exempting the UK from EU rules on state aid form the centrepiece of Labour’s Brexit policy, and whilst the intentions behind it are good the policy itself is is unworkable

The goals driving the Labour Party’s Brexit policy are laudable. Few would argue that the UK’s economy has managed to spread prosperity across all regions of the country, nor that it isn’t over reliant on the financial sector. Jeremy Corbyn’s and John McDonnell’s recognition that the UK requires a new economy, one which is nurtured through state involvement in the creation of green, high-tech, manufacturing jobs is truly exciting. Especially after nearly 50 years of neoliberalism. But - and here comes the reverse side of the coin - the policy is unworkable.

The European Union cannot, and will not, allow the UK to remain a member of the customs union whilst exempting itself from EU rules on state aid and procurement. There are only two options open to Labour in regard to extricating the UK from the EU’s rules on state aid, which are, although many may not know this, far stricter than the World Trade Organisation’s.

The first is a hard-Brexit trading on WTO terms. We know that the Labour Party leadership, the majority of Labour Party MPs and the majority of MPs within the House of Commons do not support this – and rightly so. Therefore, the second option of remaining and reforming is the only one left on the table - why? Because the EU has a shown, time and time again in its trade negotiations with other countries, that the closer a country wishes to integrate itself with the EU – a la Ukraine – the more it will have to necessarily adopt EU rules on state aid and procurement.

The EU cannot, and will not, allow the UK to remain in the customs union whilst engaging in extensive state aid practices in industries - such as the automobile industry - which could negatively affect other member states. Especially when some of those states, such as Germany, drive the European project and would have the most to lose from such practices. It is for this very reason that state aid rules exists, and it is for this very reason why Labour’s Brexit stance is not a serious option.

The most cursory glance of the Withdrawal Agreement clearly shows that the EU would prefer a Theresa May led government which has already agreed to adopt current and future EU state aid rules from a “common rulebook”, than a Corbyn led government which would engage in extensive state aid practices outside of the strictures of the Single Market, whilst enjoying all the benefits that come with being a member of the Customs Union.

Some progressives, such as Tom Kibasi, director of the Institute for Public Policy Research, deserve credit for having begun to call out the falsehoods propelling what some are now calling “Lexit”. Setting aside the unrealistic nature of Labour’s Brexit policy, there are further reasons why progressives – and the Labour Party in particular - should fight for remain and reform, with the reform of EU rules on state aid being at the top of the agenda.

The first comes down to the fact that the UK has far more power inside the EU than it does outside of it. Progressive forces in Europe such as Podemos in Spain, La France Insoumise in France and Bloco de Esquerda in Portugal - to name but a few - have pledged to seek the reform of EU rules on state aid and fiscal policy. They would be invaluable allies for any future progressive government in the UK.

Finally, there is the irrefutable fact that the UK has historically simply not used the state aid rules currently open to it as an EU member. These exemptions on EU state aid rules allow the government to intervene and/or support businesses and sectors such as; small and medium sized enterprises; research, development and innovation; employment and training; employment and training directed towards those with disabilities; infrastructure; regional aid; culture and heritage conservation and environmental protection. The UK has room to manoeuvre which it simply has not used; in 2016 the UK spent 0.36% of GDP on state aid whereas Germany spent 1.31% and France 0.65%.

The European Union can be reformed. The UK’s economy can be reformed, and I believe – alongside the National Health Action Party which I represent - that both of these goals can be achieved inside the European Union working in collaboration with our European partners. The Labour Party cannot afford – neither can the country – to avoid the truth for much longer. The types of Brexit on offer from both of the main parties simply do not work. Its time to go back to the people.