Labour’s about to find out that alignment is not the same as agreement
Good afternoon. No surprises then, Labour won a landslide. But after a rather insipid campaign defending deliberately wishy-washy pledges the party leadership is now shifting gear to promising delivery that will make a difference.
The performance of Reform UK in many of the seats Labour won narrowly means that — as discussed last week — the government is going to need appreciable achievements come 2029 if it wants to counter the simplistic allure of rightwing populism.
And given Reform’s success, one of those achievements, I suspect, is going to be lower immigration figures so that Labour can say it succeeded where successive Tory governments failed and delivered where Farage and friends said they could not.
(If that’s correct, it may create future conflicts in other policy areas: we’ll need more bricklayers faster than we can train them if we’re going to have a house building boom; we’ll continue to need high numbers of international students if tuition fees aren’t going up; the NHS and social care staffing shortages won’t resolve themselves.)
But for now, on planning reform, investment and industrial strategy the announcements have been coming thick and fast, while on rebooting the EU relationship — another potential growth enhancer in the medium term — the new government has also signalled it wants a fast start.
David Lammy went zipping straight off to EU capitals of key allies like Germany, Sweden and Poland, while Nick Thomas-Symonds — who will captain the EU-UK relations from the Cabinet Office — was in Brussels within hours of his appointment, and then went to the Nato summit in Washington.
It was a high-energy opening to a process which — as Charles Grant at the Centre for European Reform sets out rather beautifully in this open letter to Keir Starmer — is actually going to take rather a long time.
That’s not because of a lack of political will among newly elected Labour MPs but because, as Anand Menon at the UK in a Changing Europe observes, there is a mismatch between the broad political ambition and actual policy deliverables, particularly when it comes to trade.
What do I mean by this? Well, on the campaign trail Labour talked about repairing Brexit in broad terms, deepening alignment on agrifoods (via a veterinary agreement), harmonising chemical regulations and a deal on professional qualifications.
But this week, talking to figures in the food, chemicals, packaging and tech industries, it is increasingly clear that putting Humpty back together again will not be simple — not least because the industries apparently being lined up for alignment are not internally aligned!
A chemicals case study
Take chemicals. Rachel Reeves in her interview with the FT last month hinted strongly that chemicals regulation was an area where Labour — not trapped by Tory ideological orthodoxy on Brexit — could help the industry by aligning.
But Steve Elliott, chief executive of the Chemical Industries Association trade body, which represents many of the bigger players in the UK, said while the industry welcomes the government’s determination to deepen trade links with the industry’s biggest market, dynamic alignment is not a simple or immediate fix to the problems caused by Brexit for a number of reasons.
Firstly, some of the UK-based industry is fearful of what the EU’s Reach chemicals regulatory regime will become, focusing on a more “hazard-based” approach to regulation. In contrast Elliott says that UK Reach, whilst not perfect, does offer a more “risk-based” stance, reflecting the UK’s long-standing approach to managing chemicals, even whilst part of the EU decision-making process. Frustratingly for an industry that craves clarity, consultations on the UK regime are still not concluded more than four years after Brexit.
Secondly, where the dual regulatory regime created by Brexit has inflicted cost on the industry, many of those costs — like dual labelling and testing — have already been absorbed. Saving those costs might not necessarily be worth going back to the EU regime for all companies.
And thirdly, bearing in mind the old EU adage that ‘alignment doesn’t get you access’, the industry doesn’t want the worst of all worlds: where it aligns with complex EU regulation but, because the UK remains outside of the single market and still needs to prove compliance at the border, it doesn’t get commensurate levels of friction-free access to EU supply chains but remains a rule-taker from Brussels on chemicals regulation.
“When it comes to alignment, it’s a case of ‘be very careful what you wish for’,” adds Elliott, who also notes that the industry can’t give a definitive answer until it knows what level of alignment we are talking about, and what costs and benefits it might bring. The more immediate ‘fix’, he added, would be better implementation of the long-standing Chemicals Annex in the existing EU-UK trade deal, which could go a long way to strengthening links with the European Union.
Food for thought
Sections of the food industry have similar considerations, as not all industry members would benefit from so-called ‘dynamic’ alignment where the UK follows all EU rules and puts them, or an equivalent, into UK law.
Some companies will not want to follow EU rules on, say, banning titanium dioxide food whitener, or the use of a pesticide that’s banned in the EU, but is useful for growing oilseed rape or barley in the UK. As one senior industry insider characterised it: “It’s not straightforward, either politically or practically.”
Packaging
The packaging industry is another example, where new EU rules on the sourcing of packaging materials — you need to know right “down to the last tree” as one industry executive puts it — means that there may well not be consensus over aligning.
For a Labour government that is now starting to engage with industry and for industry lobby groups starting to engage with their members, alignment presents a complex web of questions about how trade-offs are managed in a world where the UK has started to diverge from the EU by default.
In 2018 Boris Johnson reportedly said “fuck business” and then did a deliberately low-ambition trade deal with Europe a few years later that was hugely costly for goods manufacturers and exporters. Starmer’s government, if it calculates it’s worth aligning, may also have to make decisions that not all businesses like. In short, you can’t please everyone.
That’s why alignment, as and when it comes, is, I suspect, going to be more piecemeal and incremental than the blanket, big-ticket ‘fixes’ that are anticipated in some quarters of the ‘remain’ lobby.
As William Bain, international trade lead at the British Chambers of Commerce notes, there are “several possible modes of alignment” with EU legislation on tradable goods. Aslak Berg, the Centre for European Reform economist, sets them out clearly here.
Even though, as Bain cautions, it is “not possible to salami slice friction-free access into the single market” it should still be possible to find mutually beneficial agreements with the EU that can cut costs for firms trading with customers in the bloc and increase bilateral trade.
So perhaps not dynamic alignment, but something closer to the model used by the EU in its Deep and Comprehensive Free Trade Agreements with countries like Ukraine and Moldova, where UK law approximates EU law in its effect and barriers to trade fall over time as a result.
Even though there are reasons why the EU Commission might not accept such an approach, “such a framework could still work well for a UK seeking to slowly rebuild relations with the EU,” Berg posits — but with the emphasis on the “slowly”.
Britain in numbers
This week’s chart (thanks to my colleague Amy Borrett for drawing) rather eloquently makes the point that the challenge of building houses is not simply about the number of planning permissions handed out by councils in England.
Successive governments have set a target of building 300,000 new homes a year and during the last government permissions ran at — or above — that rate for much of its tenure. Completions, however, are a different matter: in the year March there were only 153,800.
Obviously it’s still very early days for the new government, but the word around Whitehall is that they may yet surprise on the upside when it comes to planning reforms.
One experienced Whitehall insider expressed surprise at how far the reforms are going behind the scenes, describing them as “punchy” and “more than I’d expected to see”.
Reeves doesn’t have many other ‘growth levers’ to pull so she may simply be planning to yank the planning one pretty hard, including some quite radical reforms to the National Planning Policy Framework. Full details are expected towards the end of this month.
The idea of ‘land value capture’ is worth looking out for. It’s not a new idea, or indeed a specifically Labour one, since Tory governments have also toyed with it. But it now seems Labour intends to screw its courage to the political sticking-place and force it through.
We must, of course, wait and see what happens but the early signs are considerably bullish — although the size of the Labour majority and the rise of Reform means that policies that force development will now potentially be on Labour seats.
As Richard Dunning, professor of planning at Liverpool University, tells me, it’s not often that you have a Chancellor of the Exchequer citing planning reform in their first big speech, or the deputy prime minister being in charge of housing policy, and both backed in Number 10 on their agenda to ‘get Britain building’.
The easy thing is to assume that Labour will fail on this, just like so many previous governments, but the early signs show that Starmer’s government is running towards an issue from which the previous government ran away from.
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