Brexit: an economic strategy from the left?

If we are agreed that the UK economy needs an overhaul from the Left, where does Brexit come in? Interview with Green MEP Molly Scott Cato.

Molly Scott Cato Julian Sayarer
31 October 2017

Will Brexit give the public more power to scrutinise secretive international trade deals like TTIP? Wikimedia. CC.From state aid rules and the Transatlantic Trade and Investment Partnership (TTIP), to VAT on women’s sanitary products, a range of arguments have been presented as reasons for why Brexit can help the UK left.

Molly Scott Cato, Green MEP for the South West and member of the Panama Papers Committee of Inquiry, explains where the UK fits in with progressive tax and industrial strategy at EU level, and the chances of a socialist reboot of a UK economy risking Brexit downturn.

Julian Sayarer: Would Brexit better enable the UK to make unilateral moves on, for example, initiatives like a Financial Transaction Tax?

Molly Scott Cato: The UK has consistently blocked progressive measures on tax in Europe. Whilst the Financial Transaction Tax is an EU initiative (under the voluntary process of enhanced cooperation), there has never been anything to prevent the UK implementing such a tax unilaterally. France and Germany have led efforts to create and implement this tax but the UK has been one of the countries seeking to sabotage it in Europe.

It is far more likely that post-Brexit a Tory government will seek to turn the UK into a tax haven, undercutting tax rates in Europe in a desperate attempt to lure corporations to the UK. A Labour government, desperate to secure jobs and growth, might also be tempted to lure business through low taxes. 

JS: Does Brexit help protect the UK from the effects of sweeping corporate and legal changes embodied in deals including TTIP?

MSC: It was in no small part thanks to massive opposition from civil society across Europe, including many campaign groups in the UK, that TTIP fell. Greens in the European Parliament spearheaded political opposition against TTIP. They have done so against CETA too – the trade deal between Canada and the EU. Yet Labour barely squeaked as this dodgy trade deal passed through without any parliamentary debate.

The neoliberal impulse is stronger under WTO rules – which is where the UK is heading without a deal with the EU. The EU has the highest standards on environmental and social issues; standards which are unlikely to survive Brexit. Liam Fox is already negotiating new trade deals, in secret, with himself as the only member of the Board of Trade. And the best he is aspiring to is cutting and pasting existing EU deals. So, we will get the same intention but worse in practice because we are a weaker market and so have less negotiating clout.

JS: EU laws concerning VAT presented an obstacle to zero-rating women's sanitary products. Could Brexit simplify such changes in future?

MSC: This is a typical example of blaming the EU when it is muddled policy making back home that is really to blame. When Britain first joined the European Economic Community in 1973, under a Conservative government, it agreed to VAT on sanitary products being 17.5%. Following political pressure on the Treasury in the form of Early Day Motions from Labour MP Chris McCafferty and taken up by fellow Labour MP Dawn Primarolo in 2000, it was eventually reduced to 5%.

When the VAT Directive was last negotiated in Brussels in 1991, the UK Tory government, asked for a long list of exemptions – including pistachio nuts, Bingo games and razors, but mysteriously, not sanitary products. Since then, and ahead of the EU referendum, George Osborne struck a deal with EU tax commissioner Moscovici that the UK would have flexibility on this issue.

Moscovici confirmed to me recently that there will be more subsidiarity and national flexibility in the new VAT package he is launching this autumn and it will provide EU members states the option of VAT zero rating for sanitary products.  


Molly Scott Cato MEP has played a key role in fighting the tampon tax- but is it really imposed by the EU? Flickr/MollyMEP. Some rights reserved.

JS: To what extent are EU state aid rules an obstacle to Labour's vision of industrial policy?

MSC: The Labour leadership just needs to listen to leading law experts on the matter. Indeed, former adviser to Labour’s shadow Europe ministers, Andy Tarrant co-wrote a report dispelling such claims.

They conducted a legal assessment of 26 of Labour’s economic proposals and found that the effect of EU or Single Market membership to be negligible.

In addition, Brexit would not provide an optout from state aid rules anyway, as the World Trade Organisation imposes similar limits on subsidies members can pay to domestic industries.

The UK would have to more than triple the amount it spends on state aid to even match the proportion of GDP which Germany spends on subsidising its public companies. And it is worth reminding Labour that French railways and German municipal energy are examples of exactly what Labour wants to do in terms of public ownership.

A far greater threat to Labour’s plans would come from a ‘cliff edge’ Brexit: leaving the single market and customs union would trigger an economic recession which would drastically reduce tax revenue and so prevent Labour in government carrying out their economic stimulus policies. 

The EU is categorically not an obstacle to Labour’s industrial policy.

JS: What are your main fears, and do you have any optimism, for the UK left making gains in the fallout of Brexit?

MSC: The hard Brexit being driven by extremist Tories is nothing less than a soft coup. Behind the myth of taking back control is the reality of a power shift away from Parliament and towards Ministers. This deliberate undermining of democracy is one of the most worrying aspects of Brexit.

But when we look to Labour for a clear and strong alternative we find a party as terminally divided on Brexit as the Conservatives. Labour cannot claim to be a government in waiting when they won't even provide opposition on the dominant political issue of the day. Indeed, at their conference, the ‘Lexit’ wing of the Party was prepared to block a debate on Brexit.

Critically, the Left seemed to have failed to grasp that the economic damage that Brexit will do will make all their dreams of a better future for Britain and for Britain's working people turn to dust.

There is one simple message for Labour on Brexit: you can’t be anti-austerity and pro-Brexit. Their ‘cake and eat it’ approach – believing we can secure a bespoke deal between the UK and the EU – will fail to materialise and this will be their undoing.

My hope remains that the historic mistake to leave the EU can be reversed through a ratification referendum on the final deal – or indeed no deal.

Greens will campaign to remain in the EU in such a referendum; a vote that will allow people themselves to democratically end this damaging and dangerous chapter in our county’s history.

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