Winner of the New Statesman SPERI Prize in Political Economy 2016

Tuesday, 18 June 2019

For too many Conservatives there is no spoon

The Tory party has lost its battle with reality. But there remains one hope, a man with a joke and a smile that can set the UK free from the EU. Unfortunately to do that he may set the UK free from democracy as we know it.

For those not familiar with the film Matrix, there is a scene where the hero Neo encounters a boy bending a spoon with his mind. The boy hands the spoon to Neo. The dialog goes on:

Spoon boy: Do not try and bend the spoon. That's impossible. Instead... only try to realize the truth.
Neo: What truth?
Spoon boy: There is no spoon.
Neo: There is no spoon?
Spoon boy: Then you'll see that it is not the spoon that bends, it is only yourself.

Neo then appears to bend the spoon with his mind. In the film the spoon isn’t real, but a digital simulation fed to unconscious humans to keep them alive. But what would happen in the real world if you really, really wanted to bend that spoon, and there was another world where you could make that happen? You could get to that world by talking a blue pill offered to you by a kind of anti-Neo.

Welcome to the contest for our next Prime Minister, where the electorate is just a small group of party members and Conservative MPs. The current contest is all about Brexit. Brexit is stuck. The goal of Brexiters, taken up by many (but definitely not all) who voted for it, is to gain complete independence from the EU and all its rules and regulations. They hoped to do this by leaving the Single Market and Customs Union, and replacing them with a free trade agreement (FTA) with the EU. Unfortunately they brushed aside two obstacles: the Irish border and the Good Friday Agreement.

Together they are a spoon that so many Conservatives want to bend by wishing it so. The Irish government and the EU live in the real world, so they know that an FTA with the EU would require a hard border on the island of Ireland. A hard border is incompatible with the Good Friday Agreement. As a result, either Northern Ireland or the UK has to keep their trading rules such that there cannot be a hard border in Ireland. The backstop ensures this will happen. Complete independence for the UK from the EU is therefore impossible, just like bending a spoon by thought alone.

Most Conservative candidates for Prime Minister pretend they can really bend the spoon. Many suggest it can be bent using soon to be invented technology. Technology that would make a hard border anywhere near the actual border unnecessary. But these candidates have a problem. If such technology could be found, the EU have said they would be happy to apply it. And if such technology is just around the corner, why would the Brexiters object to the backstop that will soon be removed? The fact that the same Brexiters who say the technology is almost apon us also refuse to accept the backstop suggests they do not really believe in bending spoons.

One or two candidates say that, if only they are given a chance to stare into the whites of the EU negotiators eyes, they can make the EU bend. This is also impossible. Others suggest that we can leave in October with No Deal and then we can do the FTA we want, because the EU will want the £39 billion that we have already agreed we owe them. In reality if we break our existing agreements with the EU after a No Deal Brexit the EU can do things like fail to let our airplanes fly.

Many of those voting for our next Prime Minister may understand all this deep down. They agree with the spoon boy that you cannot bend a spoon by thought alone. Instead they want to take the blue pill, and go to a world where almost anything is possible if you want it enough. A world where you can wish away the Irish border problem. The same world where we once stood alone and won WWII all by ourselves.

These Conservative party members are not hanging on every detail of alternative arrangements for the Irish border to check that they will actually work. They don’t mind too much how we leave and what is done to parliament to make that happen. They just want their blue pill and their anti-Neo to make all their difficulties disappear. They want someone to get Brexit done and banish Farage and then diminish Corbyn so they might actually win another election. They want there to be no spoon, because life would be too difficult if today’s reality turned out to be all there is. In particular, and to mix imaginary tales horribly, if they recognised reality they would have to give up their precious, Brexit.

Just after the 2017 general election I wrote about the Zugzwang that the Conservative party found itself in. Zugzwang is a term in chess where a player finds themselves in a position where every move that it is possible to make ends up making them worse off. In that situation the chess player would like to skip their move, but the rules say they cannot. What I had in mind then was that most Tory MPs wanted to be rid of May because she was clearly a hopeless leader who had called an unnecessary election with a commanding lead in the polls and lost it all. Yet these same MPs could not get rid of May because they would get a Brexiter instead.

I underestimated the Zugzwang the Conservatives were in. I hadn’t realised the depth of the rabbit hole that Brexiters were prepared to take the Conservative party and its members. Brexit could have happened if the Brexiters had not voted against May’s deal. Instead they have taken a referendum that promised the easiest trade deal with the EU in history and pretended it is mandate for No Deal at all. Their supporters in the press egg them on and most in the broadcast media let this pass.

At the bottom of the rabbit hole of Brexit, where only complete independence for the EU is acceptable, you can only survive by taking the blue pill. The blue pill takes you to another place where most Conservative members and MPs want to live. And Boris Johnson, who can seemingly make any bullets fired at him stop dead in mid air with a joke and a smile, is the person who can make this happen. Boris Johnson will offer you a red pill and a blue pill. The red pill that is reality and the blue pill where thought can bend spoons. Pills like the two articles he wrote before he decided to champion Brexit.

Unfortunately that other place where you go if you take the blue pill is not fictitious. They have seen it across the Atlantic. Johnson is in reality their Trump. Trump can get away with so many things that once were considered outrageous, and he only gets away with it because he has a party machine and media behind him that is prepared to tolerate and justify anything Trump does so they can stay in power, as long as the party serves its backers’ interests. A UK version of Trump is the only way of delivering an outrageous thing like No Deal Brexit.

Johnson, like Trump, is criticised for his lies and personal behaviour but he just laughs it off and nothing seems to matter. There are much more worrying similarities between the two. Johnson, like Trump, cannot concentrate for long, says or does the wrong thing at critical moments, has no vision except his own advancement, and makes serious mistakes that go beyond his words and his personal life. His genius is to turn his own incompetence into a joke, so he appears so refreshing compared to most politicians. Although the jokes may be well rehearsed, the incompetence is real. When you are worse off because of his incompetence it isn’t funny anymore, but you just need enough people who are yet to experience his incompetence first hand and who appreciate a funny politician and the job is done.

Which leads to a critical realisation. If Johnson is the UK’s Trump, then the spoon is not just the Irish border, or the consequences of a No Deal Brexit. The spoon has to be politics as we once knew it, democracy as we once knew it.

The first spoon that will be bent is an independent media that asks critical questions based on facts. As William Davies and others have observed, Johnson’s first leadership press conference was positively Trumpian. Journalists who ask tough questions were booed. Later pressure will be brought through the Tory media or elsewhere such that journalists quickly learn that asking such questions is more trouble than it is worth. Small outposts of critical thought may remain, because you only need to control what most people see and read to bend the spoon to your will. Whereas Trump plays the media through his tweets, Johnson can shrug off using racist imagery about Muslim women by offering the MSM cups of tea.

The spoon may become the judiciary, that has already raised the wrath of parts of the governing party, its press and its members by daring to allow parliament the final say in enacting Article 50. The already unprecedented number of attacks by politicians on the civil service will morph into a politicisation of the civil service that Thatcher would never have dreamed of. And very soon the spoon may be parliament itself. Johnson is committed to imposing the most devastating kind of Brexit on the UK if he cannot get a deal by October, and parliament may well try to stop him. Johnson has not ruled out ignoring or suspending parliament and going ahead anyway. If his poll numbers are not as favourable as some hope, or the deal he offers Farage is rejected, he may be tempted to bypass parliament rather than call an election.

The spoon that Johnson and his party want to bend or to pretend doesn’t exist is pluralist democracy itself. It will happen slowly, each stage seemingly not so bad because each happens with a joke and a smile. We can only hope that just because most Conservative members want to live in a world where there is no spoon, enough voters prefer changing the real world in ways that enhance rather than diminish our democracy.

Friday, 14 June 2019

Bill Mitchell's fantasy about Labour's fiscal rule

My last post about outlandish attacks from some MMTers on Labour’s Fiscal Credibility Rule (FCR) was designed to be read by non-economists, and I didn’t want to bore them or waste space with all the fantasies Bill Mitchell has spread about the rule. But as I’ve had one of those fantasies tweeted back to me many times in response, I want to lay it to rest here.

That fantasy is that the Bank of England somehow has control of when the knockout happens. The knockout is when the rule is suspended and instead you have as much fiscal stimulus as is necessary to get the economy out of recession. It is triggered when interest rates hit their lower bound. At that point all monetary policy has left are unconventional policies, which are less reliable than fiscal policy, so it makes sense to go for a full fiscal stimulus. 

The way this simple rule has been spun by some is that it gives the Bank of England control over when the knockout is triggered. In reality the rule does no such thing. The Bank will have announced beforehand where the lower bound for rates is, and when a recession happens such that the Bank cuts rates to this lower bound the knockout is triggered. This is simple, unless of course you hate the rule because it is not MMT.

To see how MMters spin this as the Bank being in control of the knockout, you have to construct a fairy tale where the Bank is evil. Although they are supposed to do everything to end a recession, in this fantasy they have a higher calling, which is to impose austerity. So what the evil Bank does is announce that the lower bound is X, but when a severe recession hits they cut rates to X+0.25% and no further. They undertake all kinds of unconventional monetary stimulus but insist that rates are not at their lower bound, just because they do not want any fiscal stimulus.

What the fairy tale requires is that all 9 members of the Monetary Policy Committee (MPC), who actually set interest rates, collude to deceive the Chancellor and the public. In reality the M in MPC does not stand for Masonic - 4 of their members are external members. They would have to swear in public that the real lower bound is X and have to explain to parliamentary committees why rates have not been cut to X despite being in a major recession with rapidly rising unemployment and falling output.

I know many more past and current MPC members - both from the Bank and from outside - than I suspect Bill Mitchell does. What always impresses me is how seriously they respect the mandate they are given. They might have their individual views on fiscal policy, as Mervyn King did, but there is just no way they would collude to harm the economy because of those views. Most of those I have met are quite positive about the contribution fiscal policy can make in a severe recession, so they wouldn’t even want to deceive the public on this score even if they felt able to.

But let’s put all that to one side. After all I am sure MMTers would just say this shows I’m too much part of the elite, or I am incredibly naive, or whatever. Let’s just suppose this conspiracy happened. Each member of the MPC swore blind that rates were still not at their lower bound, and had concocted some kind of story about why rates should be kept above their lower bound despite rapidly rising unemployment and falling output etc etc.If all that happened, what would a Labour Chancellor do?

The Chancellor, together with much of the non-partisan press, would see what was going on. They would observe that in the middle of a recession the MPC were deliberately not cutting rates to the stated lower bound for no good reason other than a nefarious motive. The Chancellor would first embark on a temporary (less than 5 years) fiscal stimulus, which he is free to do under the FCR rule even without the backstop. If rates stayed at the same level for months as the recession continued, and the Bank embarked on all kinds of unconventional stimulus measures, the Chancellor would conclude, as any reasonable observer would, that the lower bound had been reached. The Chancellor would then invoke the FCR backstop, allowing him to expand on their original fiscal stimulus. Once the recession was over, I doubt very much that the current monetary framework would survive, which is yet another reason why no MPC would never embark on this fairytale.

MMters sometimes retort that the Chancellor would get political flack for triggering the backstop in this situation. In the middle of a recession with unemployment rising I doubt there would be much flack at all, besides the usual nonsense from the Tory press. But I find it supremely ironic that MMTers are prepared to use media reaction as an argument, as if the media reaction to any Chancellor adopting MMT would be all sweetness and light. Just imagine how abolishing the MPC, and saying taxes do not help finance spending, would go down with most journalists. People in glass houses shouldn’t throw stones.

Mike Norman Economics, commenting on my earlier post, says compared to Bill Mitchell I’m out of my league. That would be the league for telling fairy tales I assume. While one part of the left indulges in polemic and spinning fantasies against Labour policy, thankfully we have another part that is getting on with the serious business of preparing for a transforming government that will finally reverse what neoliberalism really is.

Tuesday, 11 June 2019

Is Labour’s fiscal policy rule neoliberal?

That is the charge some on the left, particularly followers a movement called MMT, have laid against Labour's Fiscal Credibility Rule (FCR). MMT stands for nothing very informative, but it is a non-mainstream left-wing macroeconomic school of thought. Bill Mitchell, one of the leading lights of MMT, has run a relentless campaign against the FCR through his blog. As my own work with Jonathan Portes helped provide the intellectual foundation for the FCR, I will try and explain why I find the neoliberal charge nonsensical.

Although MMT has had its biggest impact in the US, it is increasingly discussed by those on Labour’s left (e.g. pro and con). Here I will give a lay person’s guide to only the aspects of MMT that lead to its dislike of Labour’s rule. MMT’s key idea is that fiscal policy (changing taxes and government spending) is better suited to stabilise the macroeconomy than a central bank setting interest rates.

Almost without exception, advanced economies use interest rates set by an independent central bank to control output and inflation. In the UK the Bank of England’s mandate (the inflation target and how quickly it has to be reached) is determined by the Chancellor. If the Chancellor wants to raise the inflation target or scrap it altogether they can do so. But the month to month task of actually choosing what interest rate is most likely to meet the Chancellors mandate is left to the Monetary Policy Committee (MPC), who are either Bank insiders or outsiders appointed by the Treasury.

Why is the choice of setting interest rates delegated to the MPC? Getting this choice right is a highly technical task, requiring detailed discussions of different forecasts and macroeconomic models. If the MPC is working well, they bring strong expertise to the table to help make a decision.

These experts could just give their advice in secret to the Chancellor, leaving the Chancellor to accept or reject their advice. The danger in doing that is the Chancellor will allow party political motives to influence what they do, to the detriment of the economy. As one Treasury insider once told me in the years before the Bank of England (BoE) became independent, the Chancellor recognised that rates had to rise but there is no way it was happening before the party conference.

A fundamental problem with today’s way of doing things occurred during the Global Financial Crisis. Interest rates fell to a level that became their lower bound. Central banks thought that cutting rates any further was ineffective and risky. When that happens, something else needs to step in to stimulate the economy. The BoE tried various measures (like Quantitative Easing), but they were all rather hit and miss because they had not been used much before.

Under the Labour government in 2009 fiscal policy was used to provide the stimulus that monetary policy could no longer reliably give. But in 2010 the Coalition government was elected and decided fiscal stimulus had to become austerity, with disastrous results in the UK and other countries that adopted it. Most macroeconomists rejected austerity in 2010, and their number increased steadily as the impact of austerity became clear.

It is now received wisdom among academic economists that when interest rates hit their lower bound, fiscal policy needs to provide a large stimulus to the economy. Labour’s fiscal credibility rule is the first in the world to formalise this. If interest rates hit their lower bound, the normal rule is suspended and a fiscal stimulus occurs that is sufficient to end the recession. Labour’s rule is therefore designed to prevent austerity happening again.

MMT wants to go one step further. It wants to use fiscal policy to stabilise the economy at all times, and not just when monetary policy is out of action. This is not a ridiculous proposal. The question is whether it would work as well as the current regime. Most macroeconomists prefer using interest rates when possible because rates can be moved quickly. It also allows this decision to be easily delegated to experts, which avoids party political influence getting in the way of macro stabilisation. However an obvious drawback of the current regime is that it cannot work when rates hit their lower bound, so in a bad recession you have to switch to fiscal policy. Labour’s fiscal rule hardwires that switch into policy.

If you are still reading you have probably decided by now that the debate between MMT and mainstream macro about whether to use fiscal policy all the time or just when interest rates hit their lower bound is pretty technical and best left to macroeconomists. I think that conclusion is correct. But why do many MMTers, as they are known, call Labour’s rule neoliberal? To understand this, you have to understand that MMT is far from just another school of macroeconomics.

MMT is also a political movement of the left. Mitchell himself supports Lexit. They are therefore naturally indignant that a Corbyn led government has adopted a rule that is derived from mainstream economics rather than adopting MMT. Their aim is to win a political as well as an economic battle. Pretty much anything is fair game in this political battle, including describing those like myself who defend Labour’s fiscal rule as neoliberal. (To see how ludicrous this charge is, see here.)

These attacks do however raise a legitimate issue. Why the need for a fiscal rule at all? Why not let the Chancellor choose the deficit depending on the economic circumstances? The answer is provided by something called deficit bias, which preoccupied economic policy before the global financial crisis (GFC). In the 30 years before this crisis, the ratio of OECD government debt to GDP almost doubled for no justifiable reason.

Deficit bias happens because politicians like cutting taxes or raising spending through borrowing, because it puts off any obvious economic pain. But if deficit bias does substantially raise the debt to GDP ratio, as it did before the GFC, then more debt requires paying more interest which in turn requires higher taxes or lower spending. Deficit bias does not avoid the downside of cutting taxes or increasing spending, it just puts it off until a later date. Deficit bias has not gone away. Donald Trump cut taxes for the rich, but he avoided a lot of political flack by doing this through borrowing.

Contrary to many alarmists in the City, the world does not come to an end if you have deficit bias. Deficit bias just makes life harder for future governments. So it is good practice, and a sign of fiscal responsibility, for governments to follow a fiscal rule. Nothing about this good practice need be neoliberal.

You can certainly make a fiscal rule neoliberal through asymmetry (deficits matter, but surpluses do not) and saying the only spending should be cut and not taxes raised to reduce an excessive deficit. Labour’s fiscal credibility rule does neither of these things. It targets the current deficit, leaving public investment free to meet public needs and benefit from low borrowing costs. The target only needs to be met in 5 years time and this period rolls forward. As a result the rule is compatible with the Chancellor enacting a modest stimulus during a mild recession. In a severe recession a fiscal stimulus is mandatory, making austerity impossible.

MMTers like to suggest that government spending could be higher under MMT than under the FCR. This is simply false if the MPC is doing its job. Indeed if higher interest rates reduce demand, as most empirical evidence suggests, for given taxes government spending will be higher under the FCR than under an MMT policy.

MMTers might argue that leaving interest rates decisions to a central bank is neoliberal. That charge has less force for the UK, where the Chancellor has complete control of the Bank’s mandate, than in the Eurozone for example. Delegation of decisions to experts is hardly neoliberal. Is the UK organisation that decides whether drugs are cost effective, NICE, a neoliberal organisation? There is a legitimate issue of what happens when experts fail to do their job, but that is an issue for UK monetary policy that has nothing to do with Labour’s fiscal rule.

MMTers over the top criticisms of Labour’s fiscal rule do however raise some serious questions about MMT. MMT has been important in the US in helping to counteract excessive concern among many Democrats about budget deficits, and in fighting nonsense that says we cannot afford to tackle climate change. However both points can be made using entirely conventional macroeconomics, as my article on the Green New Deal showed. Yet MMT also wants to be a revolutionary movement that overthrows mainstream macroeconomics.

There have been two revolutions in macroeconomics in the last 100 years, but both have brought major and radical new ideas to the table. As yet, MMT only offers ideas that can easily be expressed as part of the mainstream. For example using fiscal rather than monetary policy was a big debate when I was studying as an undergraduate more than 40 years ago. That does not make MMT’s ideas wrong, but they are certainly not revolutionary and they will certainly not replace the mainstream, even if MMTers call all their opponents neoliberal.

Saturday, 8 June 2019

After the Peterborough victory, has Labour’s Brexit policy been redeemed?

In the 2016 EU referendum, Leave got about 61% of the Peterborough vote and Remain 39%. In 2017 Peterborough became a classic Labour Tory marginal where other parties were nowhere to be seen. It was exactly the kind of marginal that Labour’s policy of supporting Brexit is designed to keep. If you ask those who support Labour’s current Brexit policy, nearly all their marginals are like Peterborough.

The only thing that might confuse people is that Peterborough is not really part of the ‘North’, where if you believe some simplistic accounts is where all the Leave constituencies are. As I showed in my last post, this is something of a myth. If there is a UK divide, it is between Scotland, Northern Ireland and London where Remain has clear majority support and the rest of the UK, where there is a slight tendency for the Leave vote to be higher in the East than the West.

If Labour had lost in Peterborough, there were plenty of excuses ready. One would undoubtedly have been that by-elections are not like General Elections. But in fact the stakes were pretty high in Peterborough. If Labour Remain voters did not vote for Labour, there was the clear prospect of giving the party of Nigel Farage its first seat in parliament. This was not just of symbolic importance. As nearly all Remainers will know, the balance of voting in parliament is close. If you allow the Brexit party to capture a Labour seat, you make it harder to vote down No Deal and get a majority for a People’s Vote. If there was a time for Remainers to vote tactically for Labour, Peterborough was it.

In this sense you could argue that this by-election was for Remainers like a General Election, where the first concern is not to let the Conservative or Brexit party win. Does victory in Peterborough mean Labour's Brexit strategy is therefore working? The honest answer is no. The Liberal Democrats vote rose by a factor of over 3 compared to 2017. Labour won with just 31% of the vote. The main reason they won was that the Brexit vote split between the Conservatives and the Brexit party.

Will the Brexit vote split in a similar way in any future General Election, allowing Labour to win its Leave marginals with a much reduced vote? Maybe, or maybe not. We know the Conservatives will do whatever they can to avoid that outcome, and that may include cooperating with Farage so they do not fight in the same seats. It would be foolish indeed for Labour to assume that Brexit disunity saves the day for them in all their Leave marginals in any General Election.

The other important point is that the latest polling suggests that opinions have changed since 2016, with in particular many financially insecure voters turning away from Brexit. When you take that into account there as many marginals in Remain constituencies as Leave constituencies. These findings appear to be not on the radar of many supporters of Labour’s current Brexit policy. We have yet to see what would happen in these equally important Remain marginals.

Some supporters of Labour’s current policy can be very dismissive of polls. I find polls to be very informative, but only if they are carried out in an impartial way. This very recent poll described in the New Statesman by Christabel Cooper and Christina Pagel is more revealing about how the country as a whole currently feels about Brexit than the Peterborough by-election. It shows that since the 2016 vote, feelings about Remain have hardened with 70% of Remainers strongly preferring Remain to alternatives, while 24% of Leavers would prefer Remain to their least favourite Leave option.

This reinforces my point that the 2016 referendum is not a mandate for any particular form of Leaving. Any compromise deal is going to be disliked, and perhaps hated, by large numbers of Leavers and Remainers. (Leaving with No Deal will also be disliked by many Leavers as well as Remainers.) Another important result from this analysis is that among 2017 Labour voters, 72% of Remainers would mind “a lot” about leaving the EU, whereas only 25% of Labour Leavers mind “a lot” about Remaining. With as many marginals in Remain as Leave areas, why is Labour choosing to support a Leave option?

Tuesday, 4 June 2019

Labour’s position on Brexit is not a compromise, but is taking the wrong side

The elections for the European parliament showed us the implications of a basic imbalance in politics today. Brexit is the dominant issue, yet both of the major parties support one side, the Brexit side. The Labour leadership tells itself that it is trying to bring the two sides together. It tells itself, by aiming for a softer Brexit than May wanted, it is trying to compromise. But as someone once said, Brexit is Brexit, and those voting in the European elections agreed.

To see why Labour’s position will not bring people together, just look at what happened to the Conservative vote. May was trying to achieve a very hard Brexit, where we were neither a member of the Single Market or Customs Union. She failed mainly because the Brexit extremists in her own party did not support her. European election voters punished the Conservatives and sided with the Conservative extremists. They didn’t want compromise.

Suppose Labour, after winning a future general election, enacted their softer Brexit. Would voters come together recognising Labour had attempted to unite both sides? Those voting for the Brexit party of Nigel Farage certainly would not. That slightly more Labour voters from 2017 voted fot the explicit Remain parties combined than Labour in the European elections suggests no appetite for compromise on that side either. Labour would instead suffer the fate of Theresa May and be hated by Remainers and Brexiters alike.

It is for that reason that this discussion is purely academic. Not because Labour would not win an election advocating a softer Brexit: there is a non-zero probability they would. Instead it is because Labour would end up being like Theresa May in failing to achieve their desired Brexit. As I argue here, the Conservatives would say Labour’s Brexit was a betrayal. Labour would only stand a chance of getting it through parliament if they agreed to have a second referendum with Remain on the ballot, and they would lose that referendum badly because Remainers and Brexiters would vote against them.

This dislike of a compromise is not irrational. Brexiters have ending up with No Deal because anything else fails to get complete independence from the EU. They are quite right to say that a softer Brexit would be worse for sovereignty than Remaining, because it amounts to pay, obey but no say. Equally for most Remainers a soft Brexit is qualitatively worse than staying in the EU. Look at the way the EU has supported Ireland in these negotiations, they would say. The moment you leave the club, you lose the backing of one of the most powerful political and economic organisations in the world. They are quite right to point to the many flaws in believing that the 2016 referendum is a mandate for any particular type of Brexit.

Why therefore are Labour antagonising their 2017 voters and their members by having a Brexit position that will be very unpopular and impossible to achieve? The answer normally given is that this is the only way to win a general election. Anything else risks losing ‘heartland seats’ because Labour voters will vote for a Brexit party. While this idea might have had some validity in 2017, it has since become an article of faith rather than an evidence based argument.

The basic problem with this argument is that there are many Remain voters in the constituencies that voted Leave in 2016. Polls throughout 2019 suggest a 3 to 1 ratio: by supporting Brexit Labour are losing three times as many Remain voters as any Leave voters they would lose by supporting Remain. The European elections backed part of that finding up with actual votes, and also suggested Labour are in danger of losing Leave voters anyway with their current stance. If anything like that ratio persists, they will lose their traditional heartland seats because Remain voters will not vote Labour.

The table below is from the Ashcroft exit poll for the European election. It compares the percentage of voters who voted for Labour or explicit Remain parties, and also the Leave/Remain balance, by region. The most Leave orientated regions are to the left. Overall this sample is almost certainly biased to Leave voters, because only a tiny number of young people (18-24) voted, and polls regularly show a small lead for Remain over Leave.

Lab L

The first point to make is that the outliers here are London and Scotland. Elsewhere, the Leave vote varies from 59% to 50%, and the Remain vote from 38% to 46%. The idea that leave voters are predominantly in the ‘North’ is nonsense. (If anything, the English divide is East versus West outside London, but it is still a small tendency rather than a real divide.) A key consequence of this observation is that areas like the East Midlands and the North East still contain many Remain voters.

These voters made their choice on the basis of the current policy stance of their parties. Nationally about a third of Labour voters in the European election want some kind of Brexit (Ashcroft does not give a regional breakdown), and two thirds want to Remain. The final row applies that percentage to the Labour vote in each region to get the percentage of Labour leavers. These are the maximum number of voters that Labour could lose from its European election result if it became a Remain party. Compare that to the total number of Remain voters, nearly all of whom could vote Labour if it became a Remain party.

The article of faith that those who justify Labour’s current stance cling to is that Remain voters will return to Labour in any general election, while if Labour became a Remain party any Leave voters would be lost. Examples in the past of protest votes that have all but disappeared are given to justify that faith. But it is never explained why Remain voters will come back to Labour even though it supports Brexit, but Leave voters will not come back in a general election if Labour supports Remain. In addition Brexit is not like anything in the past. It has divided the country like no issue before it. As I showed above, you really need pretty well all Labour Remainers to return to the fold to get a number smaller than the number of likely Leave losses.

The idea that Remain voters, and not the Leave vote, will return en masse to Labour in a general election relies in part on a universal use of tactical voting that is simply unrealistic. A good example will be the forthcoming Peterborough by-electon, which is a classic example of a Leave marginal that we are told Labour has to keep its current Brexit policy to win. If the European elections are anything to go by, Brexit will win. In 2017, when Labour just won, the LibDem and Green vote was small. Let’s see if Labour voters from 2017 will unite to keep the Brexit party out.

Some say it worked in 2017, so why will it not work in the future? Many things have changed since 2017 (when Labour still lost). The stance of the EU is now clear, and therefore so is the range of deals the UK could possibly get. The Remain movement is much stronger. But the Labour party has also changed. The 2017 election was the era of Starmer’s 6 tests, which included the ‘exact same benefits’. Today those tests are gone, and instead we have prolonged negotiations between the government and Labour over a possible Brexit deal. Too many Remainers who voted for Labour in 2017 feel they can no longer trust Corbyn on Brexit.

The weakness of the argument to keep current policy and ignore the European elections and the polling evidence has lead some to resort to nostalgia. The argument goes that the working class support for Leave is above the national average, and Labour should be a party of the working class. Labour is becoming less and less a working class party. Supporting Remain would be to “abandon much of the working class – and with it any prospect of a Labour government” according to Lisa Nandy.

There are three main holes in this argument. First there are plenty of working class voters that support Remain. Adopting a Brexit policy, even if it is milder than Theresa May’s hard Brexit, is in danger of alienating those voters. Second, Labour stopped being the party of the working class some time ago. Its heartlands today are in large cities and university towns, and supporting Brexit betrays its new heartlands. It betrays the young who overwhelmingly support Remain and overwhelmingly support Labour.

Third, the way you get the working class vote back is by promising or enacting economic measures that help the working class, and not by offering a weaker form (in their view) of Brexit to socially conservative working class voters. If Brexit, then why not immigration? If you think about it, Labour have been trying to appease exactly the same group of voters who voted Brexit for at least a decade, and they have failed miserably for one simple reason. Anyone who wants Brexit enough not to vote Labour is not going to be convinced by a party that is Remain at heart and which is offering them a half baked version of what they want. It was true for immigration under Blair/Brown and Miliband, and it remains true for Brexit.

I said there was still a chance that Labour with its current Brexit policy could win the next election. However the probability that it could win an election with a new policy that fully supports Remain is much higher, and certainly over 50%. The Leave voted could be divided, but the Remain vote if Labour supports Remain much less so. The key to any change in policy is to recognise that, thanks to the Brexiters, a ‘middle way’ (Labour’s current policy) is no longer possible. It will always be opposed by a blocking coalition of No Deal Brexiters and Remainers. The choice is now No Deal, a hard Brexit under the Tories or Remain. Of those three Labour have to support Remain.

What about a small shift in Labour policy, supporting an unconditional People’s Vote where Remain is always a choice on the ballot? The trouble with that policy is it traps Labour with endless questions of under what circumstances Labour would support Remain. Instead of the campaigning party Labour should be on Brexit, it becomes in most voters eyes the party of convoluted explanations. The next Brexit battle is to stop No Deal, and Labour can only do that effectively if it stops pretending it can achieve a softer Brexit.