A New Mindset

In the same spirit as the Labour manifesto that contained numerous policies dependent on Hard Brexit, whereas no other policy in the Conservative manifesto necessitated leaving the EU at all, Caroline Flint writes:

Dire economic warnings won’t persuade the public to abandon Brexit. The vote on June 23 last year was a political choice, not an economic one. Against prevailing opinion, the public voted out. The driving motivation was control over immigration and borders – even if there was an economic cost. 

I’m convinced that the UK will leave the EU in 2019 with a divorce deal, plus a transitional period of minimum change, possibly including a temporary extension to, or partial, single market membership for a few years. 

But Labour cannot wait until 2019 to look to life beyond the EU. Our macro-economic policy has been subsumed into EU-wide treaties and directives. A new mindset is required. The Conservatives’ overriding goal is new trade agreements. Labour should not accept this as the singular test of economic policy.

The UK regains some freedoms the day we cease membership of the single market. Whatever its benefits, single market membership constrained UK economic policy. Nor was it a silver bullet to solve the UK’s economic problems. 

Single market advocates should demonstrate some modesty. The single market did not prevent Conservative austerity, nor the banking crash (it may even have helped it). Nor did it close the UK’s productivity gap with France or Germany. 

Labour requires a new economic policy, placing due emphasis on our national economic needs: Britonomics, a platform for a post-2020 general election; not a pledge to reverse Brexit.

What might Britonomics comprise? 

A skills-first labour market strategy 

Free movement is an economic policy. It creates an easy means for employers to flex their workforce up and down, or to recruit wholesale from the EU. Long term investment in training and upskilling a UK workforce is undermined. Short-term labour strategies are rewarded. Why would any employer take on the cost of training workers, if they can simply import workers to do the jobs? 

Time and again, the private sector fails to train the next generation of workers. In 2015, the Construction Industry Training Board forecast that an additional 224,000 construction workers were required up to 2020. That same year, only 9,500 construction apprenticeship were completed; the Federation of Small Business reported two thirds of builders refusing work because of labour shortages; and the UK built 140,000 fewer homes than were required to meet demand. London alone employs 60,000 European construction workers. Is the answer to import even more workers or to pursue an ambitious training policy? 

Managed migration 

Labour could begin to define a fair, managed migration policy. A starting point is to agree our attitude to skill shortages. Is it ethical to employ 55,000 NHS staff, including 10 per cent of our NHS doctors, from the EU? Does the UK poaching nurses from other countries create shortages in other countries? Management of migration; identifying skills shortages; and ramping up training programmes, go hand in hand. But shouldn’t the UK impose a penalty on employers who recruit wholesale from abroad? I recently met a local road haulier who contrasted his business, with three EU HGV drivers, with a major supermarket chain, where almost every HGV driver was Eastern European. 

Skills must include functional English. Despite tough talk, UK governments have been feeble in addressing workers with poor English in public-facing jobs. A care home manager described an employee searching for a lady’s purse when she said she wanted to spend a penny. A contractor installing kitchens in social housing in Kent provided residents with a mobile number for a supervisor, because the workers might not understand the resident. Good English and cultural understanding is essential to good customer service. 

VAT 

In 1994, John Major’s government increased VAT on gas and electricity to 8 per cent. Labour reduced it to 5 per cent, the EU minimum. Freed from EU constraints, Labour may wish to further reduce or scrap VAT for essential commodities like gas and electricity.

A muscular economic nationalism

Given Britain led the industrial revolution, there is a sense that when we lose historic industries, we lose some of our identity. In 2015, Europe’s second largest blast furnace, at Redcar, closed after 100 years of production. UK steel producers faced historically low steel prices. Despite the threat of closure, government funding to extend the blast furnace life would, a government spokesperson confirmed, be a ‘form of state aid and be illegal’ under EU law. As with the coal industry, state aid was not allowed to smooth the closure, nor prolong the life, of an iconic steelworks.

Free market thinkers argue politicians should not intervene. I couldn’t disagree more. Are we really neutral over whether British, Chinese or Polish steel built the Firth of Forth Queensferry Crossing? I hope not. Britonomics means the UK unashamedly defending our primary industries. UK procurement: tilting the field UK government procurement could favour British-based producers by including local employment, training and supply chain requirements in contracts. Such criteria must specify what ‘local jobs’ actually mean. 98 per cent of London Olympics contracts went to UK-registered firms, but around 28 per cent of jobs went to Eastern European workers, temporarily resident in East London postcodes. Why can’t a UK goal be to ensure the successor missile to the Trident D5 is a UK design? Or find a British alternative to a French/Chinese built nuclear power station?

Regional funding 

Lobbies and interest groups demand protection of farming and structural funding post-Brexit. But this assumes we agree with the hurdles and conditions EU funding required. The UK may want to set our own criteria for funding, to rebalance the UK economy or promote sectoral growth.

Skills, migration, procurement, taxation, UK research and development, primary industries, regional funding and more – Labour requires policy answers for a post-Brexit world. The thinking starts now.