Labour’s role in securing the best possible deal
Ever since the referendum result, the Labour Party has found itself caught between the rock of Remain resistance and a hard Brexit-related place. It is a dilemma that even the wiliest political leaders would struggle to solve. On the surface it seems the paradox of having the strongest Remain and Leave constituencies all represented by Labour MPs has necessarily left the party paralysed, forced to fuss over process while contributing almost nothing of substance.
But in spite of these obvious difficulties, recent weeks have created a large number of open goals for the Opposition. Undoubtedly the question of our membership of the EU has been resolved once and for all. The challenge for us now therefore is securing the best possible adaptation to what will clearly be radically changed circumstances, regardless of the final details in whatever Brexit deal awaits us.
The precarious position of the UK’s financial services industry, exposed to this storm more than all other industries, is the clearest example. Whilst it is true that the Prime Minister has been quick to reassure us that there will be no “cliff-edge” exit, and has on occasion referenced the importance of transitional arrangements, the truth is that her strategy of being willing to walk away with no deal whatsoever leaves financial services in a near-impossible position.
Labour must now strongly advocate the necessity of transitional arrangements. Our party is well-placed to reassure the public that this is nothing to do with special treatment for banks, but about reducing as much as possible the disruption to the many economic activities that depend on UK-EU cross border services. We know well that exiting without an agreement would mean many products and services – be they finance leasing, deposit taking, commercial lending or consumer credit – would simply cease to move across borders.
It is true that the UK is likely to be granted third country status and equivalence by the EU, ensuring that activities such as fund management and fund marketing can continue as at present. Despite this, deposit taking, payments services and clearing services, among others, are almost certain to be subject to severe disturbance under anything but the most generous free trade agreement.
It is not difficult to see a scenario where economic contagion arises, as business activities in both the UK and EU become curtailed, with firms in all industries no longer able to access the wholesale funding they have become accustomed to. This argument is too important for the Opposition not to make it the centrepiece of its demands for the Government’s forthcoming White Paper.
There will naturally be at least some short-term disruption in how services are provided between the UK and the EU after our exit, but there is nothing inevitable about sustained and serious long-term damage. Labour’s opportunity for renewed relevancy in the debate will most easily come by making the case for well-understood and clearly communicated transitional or “bridging” arrangements between the UK’s exit in March 2019 and the subsequent new relationship, whatever form that takes.