“… the sharp social divisions by age and educational background that were uncovered across the rest of Britain by the referendum are also in evidence north of the border...”
It’s probably unsurprising then that abandoning largely working class ‘leavers’ in favour of a direct appeal to Britain’s middle class ‘remainers’ has now become central to Labour’s Blairite wing and this has now manifested itself in support of what they term the ‘People’s vote’ and the rest of us call a re-run referendum. More of this later.
The central issue is Theresa’s May’s deal and why we must reject it.
It might seem that if the alternative is another referendum, then perhaps we should consider supporting May’s deal. This is impossible for the Left. In Article 7 of the withdrawal agreement titled ‘State Aid’ It reads: “with a view to preserving a robust and comprehensive framework for State aid control that prevents undue distortions of trade and competition, the Union State (the EU) aid laws provisions listed in Annex 8 of this protocol shall apply to the United Kingdom, in respect of measures which affect that trade between parts of the single customs territory…”
In the political declaration which sets out the framework for the future relationship that Theresa May and large sections of big business would like to have with the EU after the implementation period in December 2020, this is reinforced. In the section on Economic Partnership we read that the economic partnership will be “underpinned by provisions ensuring a level playing field for open and fair competition” and in section xiv of that document we are told that this will cover “state aid, competition … building on the level playing field arrangements provided for in the Withdrawal Agreement…”
The final thing we have to note about May’s deal is the notorious backstop designed to ensure frictionless movement of goods over the Irish border.
In the words of the legal advice offered to the Prime Minister by the Attorney General, Geoffrey Cox:
“…the current drafting of the protocol does not provide for a mechanism that is likely to enable the UK lawfully to exit the UK wide customs union without a subsequent agreement. This remains the case even if parties are still negotiating many years later, and even if the parties believe that talks have broken down and there is no prospect of a future relationship.”
So should the deal be accepted either we will find ourselves locked in the backstop with the legally binding requirement to implement State Aid rules or May’s government will conclude a deal embedding ‘a level playing field’ which will no doubt look very like existing state aid rules.
What would this mean for a radical Labour manifesto?
The National Investment Bank
The 2017 Corbyn manifesto declared: “Our National Transformation Fund (NTF) will see the creation of a Scottish Investment Bank with £20 billion of investment to nurture business growth and stimulate the economy and create jobs. The NTF will deliver the investment that every part of Britain needs to meet its potential, overcoming years of neglect.”
The EU state aid rules prevent national governments from providing various forms of aid to companies. So, the EU would need to satisfy itself that any lending done by NIB was not undercutting commercial banks, and thus effectively, from the EU’s point of view subsidising the rates at which companies could borrow.
The Green Investment Bank experience highlights the difficulties here. In 2012 the EU commission ruled that the Green Investment Bank could use £3bn of UK government funds (a small sum in comparison to Labour’s commitment) on condition that it only gave loans to projects that could not find sufficient funding from commercial markets. Permission was granted for four years only, with the caveat that it might be withdrawn after that if lending markets opened up to low carbon projects.
The commission accepted that the Green Investment Bank concept had safeguards to give precedence to private investment and preserved a level playing field between competitors. Incidentally, but perhaps inevitably, The Green Investment Bank is now the Green Investment Group an independent organisation owned by Macquarie Group Limited, having been privatised by the Tories.
The national investment bank would in reality need to try to function by working through sectors exempted in the EU rules, for example channelling money through SMEs and showing that it was not providing competition to existing commercial institutions. It could not, for example, fund the ailing steel industry, making a re-industrialisation strategy even more difficult.
Public Ownership of the Railways
There would also be a concern about what the Tories might negotiate over taking the Railways back into public ownership, another popular measure in the Corbyn manifesto. It is very likely they would include the terms of the EU’s Fourth Railway Package because the outline political declaration promises “ a level of liberalisation in trade and services well beyond the Parties WTO commitments” and “Mutual opportunities in the Parties’ respective public procurement markets beyond their commitments under WTO Government Procurement Agreement…”
The Fourth Railway Package “…includes the proposal to open up domestic passenger railways to new entrants and services from December 2019. Companies would be able either to offer competing services, such as a new train service on a particular route, or to bid for public service rail contracts through tendering. The proposed changes would make competitive tendering mandatory for public service rail contracts in the EU.”
And because the EU also insists that infrastructure and operations must be separated, this not only makes it impossible to implement Corbyn’s plans but it makes a nonsense of Nicola Sturgeon’s recent call for Scotland to have the power to nationalise and one assumes integrate rail and track, while insisting that we remain in the EU.
Public Procurement and Energy
The Corbyn manifesto also promises that: “…We are committed to a procurement process that supports the British steel industry and defence manufacturing industry, which in turn provide good jobs throughout the supply chain…”
But given what the Political declaration states about public procurement Labour would be faced with provisions like Article 87 (1) of the EC Treaty, tells us that “any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings …Therefore, procurement … may be prohibited if they qualify as State aid.”
Similarly, Labour’s manifesto pledge to “Regain control of energy supply networks through the alteration of operator license conditions, and transition to a publicly owned, decentralised energy system and “Reverse the privatisation of Royal Mail at the earliest opportunity” would be in jeopardy. This includes, for example even taking just the National Grid into public ownership.
According to Professor Danny Nicol:
“Under Article 106, the EU prohibits public monopolies exercising exclusive rights where this violates EU competition rules. The EU’s Court of Justice has interpreted Article 106 as giving private companies the right to argue before the national courts that services should continue to be open to private-sector competition.”
Extensive state intervention and state ownership then, as promised by the Labour Party would be nearly impossible, if this approach is built into any future deal between the UK and the EU as seems very likely in terms of the language of the political declaration.
In conclusion it is important to highlight the dangers of accepting the Blairite arguments for a second referendum.
In January 2013, David Cameron made a pledge of an in/out referendum if the Conservatives won the 2015 election, which they duly did with a clear majority. The European Union Referendum Bill was passed during a vote in the Commons by 544 to 53, with support from Labour MPs giving the motion a majority of 491. Cameron at that point ruled out a second referendum saying it was a “once in a generation, once in a lifetime” decision. On 23rd of June 2016 the people of the UK took that decision and it was to leave the EU. The European Union Notification of Withdrawal Bill triggering article 50 was passed by 498 votes to 114, in February 2017, once again with official Labour Party support. From start to finish it was as democratic an exercise as is possible under current arrangements in the UK.
To suggest that it was somehow flawed democratically, as 2nd referendum supporters like Chuka Ummuna maintain, is to deny history to suit their pro-EU political prejudices.
It is also intensely anti working class, because, as we have seen, the decision to leave the EU had considerable support from working class votes who had suffered most from EU and Tory austerity.
The Labour Party cannot turn its back on the working class voters who want and voted to leave the EU. If it does, then it will haemorrhage support in Leave voting areas and perhaps alienate working class voters for a generation. And if a second referendum restores us to cold embrace if the neo-liberal EU, then Labour will find it impossible to implement radical aspects of its manifesto.
Labour must, as it is doing, insist on a general election and seek a deal that dumps the EU’s neo-liberal provisions and if the EU refuses such a deal then the priority of the Labour Party must be defending working class interests and that cannot be done trapped in a neo-liberal club for corporate capital or accepting a deal that effectively imposes the same rules through a free trade agreement.