Labour has to rebuild ties with Europe

The cabinet committee responsible for Britain’s relationship with Europe met in Downing Street yesterday.

So what? It was only the second time the committee had met since last year’s election, which is remarkable considering the UK is in urgent need of a growth strategy. The most obvious one lies in plain sight – a comprehensive upgrade of the country’s £800 billion trading relationship with the EU. But Labour’s self-denying ordinance against discussion of the EU customs union and single market rules this out.

Worse, “there hasn’t been a central push for a coherent strategy on Europe,” says Charles Grant of the Centre for European Research. So in a major speech on the economy today Rachel Reeves, the chancellor, will be reduced to talking about

• Planning and pensions reforms – and the goal of building 1.5 million new homes this parliament;
• Big public infrastructure projects – including a third runway for Heathrow and a ‘Silicon Valley’ between Oxford and Cambridge; and
• Europe – but in code, with a possible mention of the Pan-Euro-Mediterranean convention, or PEM.

Nothing to do with the customs union. Everyone anxious for progress in EU-UK relations stresses this above all – the PEM is not the customs union. Rather (see map), it’s a big, loose club designed to help its members

• simplify supply chains and
• save on tariffs

… by extending the list of countries where their exporters can source ingredients and components without violating rules of origin. As one expert puts it: “It means you can source cloth in Egypt, process it in the UK and then put it on the market in Germany as if it were a German product.”

Whose idea? Europe’s. The PEM was set up in 2012 but the UK left it when it left the EU five years ago, and it was Maroš Šefčovič, the EU trade commissioner, who floated the idea of Britain rejoining in answer to a journalist’s question last week.

• At first Downing Street was lukewarm, ruling nothing out.
• By Sunday, Reeves was “happy” to consider it.
• On Monday two obelisks of Leave orthodoxy, Lords Daniel Hannan and David Frost, said they too saw nothing wrong with it in principle, even though Conservative front-benchers say it would start unpicking Brexit.

Not much in it. All sides recognise UK PEM membership might not mean much in cash terms because it would only change the rules on trade with non-EU countries; the EU-UK Trade and Cooperation Agreement already covers rules of origin.

What troubles the EU is that for all Labour’s talk of a reset, in six months it has produced no concrete asks. “We are open to ideas,” a senior commission figure says. “We’d just like to know what the UK’s ideas are. It’s about time they told us.”

Why so slow? Keir Starmer is cautious, the CER’s Charles Grant argues in a forthcoming essay. He’s also extremely busy. He’s advised by people who’ve told him if he so much as “talks positively about Europe” that will hurt Labour where the anti-immigrant Reform party is strong. “And there are very few people at the top of the UK government who know anything about the EU.”

That could change. Nick Thomas-Symonds, Starmer’s point person on Europe, is “a really genuine improvement” on his predecessors, the commission official says.

What’s more… In Reeves’s search for growth, there is no serious alternative to stronger economic ties with Europe. UK pension funds are mesmerised by the US. Housing and infrastructure are already competing with each other for scarce labour following a 366,000 slide in construction worker numbers in five years. Note to Reeves’s colleague Yvette Cooper, the home secretary: you will have to let more people in.