Ed Balls’ memoirs have a regular refrain. He quotes Ken Clarke as having said that “good economics is good politics”.
Apparently, the former chancellor thought that “taking tough, difficult or controversial decisions on the economy always ends up being better for your political fortunes than ducking those decisions”.
It is a maxim that I try to hold to.
The current widespread opposition to the UK retaining its membership of the Single Market, even while we leave the EU, needs examining against this Balls-Clarke test.
I understand the political reasons why some might oppose membership. If free movement of labour across the continent is an inseparable part of the Single Market deal, there will be some in politics for whom this is a dealbreaker. “Immigration!” has been the constant background music in each General Election over the past decade.
But never mind the politics for a moment, what about the economics? If leaving the Single Market is a bad choice for the economy of our country, ought politicians not to give that more mind? That is my view, and underpins the decision of the 49 Labour MPs – myself included – who voted in favour of retaining Single Market membership last week.
The sovereignty argument
There are two principle objections to our pro Single Market stance: sovereignty and immigration.
First, some object that to remain a member of the Single Market, we will need to subject ourselves to the decision-making powers of a body external to the UK. This is the “sovereignty” objection. Those who argue against Single Market membership say they prioritise the right of the UK to make its own decisions about the movement of people, goods and capital. Never mind the economic loss, they say, political self-determination is more important.
But normally, we recognise that alongside our autonomy, we also prize cooperation.
Allowing our country to be held to external standards, voluntarily agreed to, has enabled Britain to maximise our influence globally since the Second World War. We do this through Nato and the WTO, and we will continue to do it through any future trade deals we sign.
Second, given the above, the answer to the question of which international deals to sign up to can be answered by weighing the costs against the potential benefits. In which scenario do we lose most? In which do we have most to gain? Now, most economists believe that Brexit will cost us dearly. Single Market membership has the potential to limit those costs. Leaving the EU with no deal is the worst possible economic alternative.
The other objection to the UK’s continued membership of the Single Market is perhaps less philosophical than the sovereignty question.
Opponents of our membership say that we simply cannot accept anything other than a visa system for EU migration, that we cannot offer EU nationals the chance to work in Britain without a new system to strictly limit their numbers. The poison of successive General Elections has seeped through the body politic and galvanised the unmitigated opposition to immigration.
For those of us who think this is wrong, we should avoid allowing our position to be caricatured. Freedom to work does not amount to open borders. There are legitimate and necessary constraints on this freedom, for both national and social security reasons. No one has the right to travel across a border either to commit acts of violence, or to take from a welfare state to which they have not first contributed.
But it is inescapable that, as our country ages, we will need more people of working age to pay tax to provide the healthcare and pensions that enable older people to live with dignity. As the dependency ratio worsens, migration from the EU will become economically more necessary – not less.
Free movement has not been bad for Britain
As an economic argument, the idea that free movement of labour has been bad for Britain is impossible to sustain. The familiar line is that low skilled migration depresses wages of British workers.
But the Bank of England looked at this and found that a massive 10 percentage point rise in the proportion of migrants working in low of unskilled jobs results in a wage impact of under two per cent. For context, only about seven per cent of semi-skilled workers and 15 per cent of unskilled workers are currently from the EU. Our abysmal record on productivity has been a far bigger drag on wages than EU migration ever could be.
The economics is clear: Single Market membership provides Britain with the best possible economic chance. The bad economics of leaving the Single Market will eventually become bad politics – in fact, it already is. Theresa May asked for a verdict on her vision of Brexit and lost her majority as a result.
The challenge for us now is to stop this act of economic self-harm before irreversible damage is done. Time to change course.