Labour MPs should start embracing a no-deal Brexit

Labour MPs should start embracing a no-deal Brexit

The below is an extract from Economists for Free Trade’s recent report, No Deal is the Best Deal for Britain

The Brexit negotiations have brought an interesting paradox to light: politicians who have opposed the UK leaving the EU without ‘a deal’ have almost certainly made it more likely that we will end up with No Deal.

The EU took Theresa May’s refusal to prepare for no deal as a signal that the option was being ruled out. As a result, the EU was able to offer the UK a choice between a Withdrawal Agreement entirely in the EU’s interests and abandoning Brexit completely. However, if the EU has miscalculated and Brexit will happen come what may, then No Deal is now more likely than had we made serious preparations for it from the start.

For Labour MPs who want to stop Brexit completely, taking No Deal off the table is entirely rational. Things are different though for Jeremy Corbyn. He understands that going back on the Referendum result would not only be disastrous for democracy but would lose the Labour Party trust and credibility with a range of voters, and not just those in northern, leave-leaning seats. Corbyn now needs to grasp that taking No Deal off the table completely is simply incompatible with respecting the referendum result.

In fact, taking the No Deal option seriously is the best route to a better deal for the UK. Even if it is too late to renegotiate a formal revised withdrawal agreement, a more limited deal to continue tariff-free trade might still be possible before 29th March. But if that does not happen in time, once we have left, the economic arguments for tariff-free trade will continue to be strong and no longer inhibited by distractions such as the fictitious Irish hard-border problem or the lure of a second referendum.

The shameful lack of preparation for No Deal by the Tories means that short run disruption will be greater than it could have been. But Labour MPs must not be seduced by exaggerated horror stories of Project Fear Mark II. The vast majority of customs and other border checks already take place electronically, well away from borders. Indeed, Labour donor and businessman John Mills has explained how his company trades with a range of non-EU countries with extremely low border costs, whilst manufacturers such as JCB also see no major threat from leaving without a deal.

Whisper it, but there is also an economic upside to a No-Deal Brexit. In the first place, there is no justification in international law for the UK to hand over anything like £39 billion to the EU as a ‘divorce payment’. Without the Withdrawal Agreement, some of that amount can be used to ease transition costs for business affected by new customs procedures and tariffs, whilst also freeing up money to invest in key public services. Just as welcome for businesses will be the rapid end to uncertainty which a clean break with the EU on 29th March will bring.

The heart of the matter, though, is that a clean break from the EU will allow UK politicians (and by extension the electorate) to decide in what direction the UK goes. For example, the Labour front bench seems determined to stay in the EU Customs Union. It is an eccentric policy given that, by imposing high tariffs on many non-EU goods, the main purpose of the customs union is to protect businesses from overseas competition, thereby keeping prices of food and clothing high for hard-pressed consumers. However, if this is really thought to be a price worth paying to maintain existing protection for international companies, then a future Labour government can simply choose to have tariffs on non-EU goods at the same level as the EU. It certainly does not need the Tory Government to commit to this in a legally-binding treaty.

It is understandable that Labour MPs are worried by the prospect of Tory free-marketeers taking advantage of a No-Deal Brexit. But the other side of the coin is the restrictions to Corbyn’s economic agenda, which are inevitable under any other outcome. The EU is at heart a system aimed at making life easier for big multi-national companies and any formal withdrawal agreement will limit Labour’s options over nationalisation, industrial state aid, to say nothing of VAT reforms such as abolishing the Tampon Tax. The solution of course is to persuade voters to back the Labour vision of our economic future. Indeed, a key advantage of a clean break from the EU should be the reinvigoration of national and local democracy.

Jeremy Corbyn needs to keep the option of No Deal on the table on democratic grounds alone. But, properly managed, no deal makes political and economic sense both for the country and the Labour Party.