Insight
On Europe, Labour should reconsider its ‘red chains’ by Aslak Berg, 16 May 2025 Labour’s reset with the EU will fail to deliver a significant boost to economic growth. A fundamental refashioning of the EU-UK relationship would require Labour to think again about freedom of movement. Generals, it is said, are always preparing to fight the last war. Similarly, British politicians are always preparing to confront the issues that dominated British politics around the Brexit referendum for fear of unleashing a populist backlash. But this leaves them unable to confront the issues of tomorrow. Labour’s red lines have hamstrung the government’s approach to Europe, leaving it with few options to reverse the economic damage that Brexit has wrought. The fear of revisiting freedom of movement has been particularly damaging. Economic growth is the British government’s number one priority, according to Prime Minister Keir Starmer. British growth has been lacklustre since the financial crisis and slower than in the EU, despite the UK being relatively unaffected by the intervening euro crisis. Juxtaposed with the US, the difference is even starker. The Labour government has shown that it is capable of being hard-nosed and courageous to promote growth, for example in tackling long-standing problems such as the need for planning reform. And, since the government has no money, it has also shown willingness to make tough and unpopular choices that risk angering its own base, such as cutting development aid and winter fuel subsidies for the elderly, whilst increasing defence spending. The search for economic growth has extended to seeking closer ties with the European Union. This makes sense, as Brexit – by disrupting trade and economic ties with the EU – is a significant driver of British economic underperformance. Calculating the counterfactual size that the British economy would have had without Brexit is a difficult exercise, but the best estimates from such counterfactual analyses are in the range of 4-5 per cent, depending on whether you believe the government Office for Budget Responsibility (OBR) or the Centre for European Reform.
CER INSIGHT: ON EUROPE, LABOUR SHOULD RECONSIDER ITS ‘RED CHAINS’ 16 May 2025
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