Does Ed Miliband have a plan B?

The Labour leader tried to put a brave face on Thursday’s results. But he was fooling no one, least

It was a "quadruple whammy". The election of President Salmond. Failure to secure an overall majority in Wales. The crushing of the electoral reform dream. And, most staggering of all, defeat by the Tories in England in the share of the popular vote.

In last week's New Statesman, a senior Ed Miliband adviser said: "Every single hurdle that's been put in his way . . . he's got over." Not this one. Thursday was Ed Miliband's first big electoral test since becoming leader. He failed it.

But, and it's a big but, Labour's leader has also been presented with a corridor of opportunity. A narrow escape route has opened up. The question is whether he has the courage to traverse it.

Ever since defeating his brother, Miliband has in effect been a prisoner of that victory. His win, endorsed by a minority of his parliamentary colleagues and party members, came with a mandate to reject New Labour's brand of neoliberalism and construct a "progressive majority".

Unable to expand his political base, he has, through a combination of choice and necessity, stuck with that strategy, and the tiny but influential Compass-site clique that advocated it.

Go Chris? Or go solo?

To the extent that there has been a meaningful discussion about Labour's direction over the past six months, the options have boiled down to this: should the party appeal to a small and large "L" liberal constituency, or to a small and large "C" conservative one? By and large, Miliband has attempted the former. And the results of that approach were there for all to see on Thursday night and Friday morning.

Before last Thursday's elections, a shadow cabinet source told me: "Everyone's watching very closely to see how Ed responds. If things go badly have we got our own plan B?"

The answer appeared to have been provided in a briefing to yesterday's Observer. "The Labour leader says disaffected Lib Dems should stand with him", ran the introduction. The article went on:

While Miliband insists that his objective is still a majority Labour government and his immediate focus is on working with the Lib Dems against Tory policies, his overtures suggest that the party is prepared to plan for the possibility of a Lab-Lib deal after the next election.

Neal Lawson, director of Compass, welcomed this approach: "Ed Miliband knows he can't win a two versus one election against the Tories and the Liberal Democrats. And the best he can hope for right now is a progressive coalition government with a Liberal Democrat party that has dumped Nick Clegg."

The reaction among others was less effusive. "Has Ed Miliband gone mad?" asked one backbench MP who supported him for the leadership. "This is mental. The task is to define Labour and hit the Tories," said another. "I don't get it," said a shadow cabinet source. "Ed said: 'The voters have sent a message to David Cameron'. They did. It was, 'Oh well, carry on if you must.' "

Another senior Labour insider put it this way: "Ed has a clear choice. He can chase after a non-existent progressive majority, or he can try to bring middle- and working-class Tory voters home to Labour. Or, to put it another way, he can try to win on his own, or lose with Chris Huhne."

Ditch the compass

This is the choice, and opportunity, Miliband faces. If he wants, he can use the election results to relaunch his strategy. It would not be seen as a U-turn, but as an empathetic response to the voters.

It would show that he possesses the pragmatism he frequently accuses Cameron of lacking. And it would communicate that he has not given up on the prospect of victory.

There is obviously a downside. It would also mean confronting some of his erstwhile supporters. Policy shifts on important areas such as the economy, law and order, benefit reform, immigration and constitutional reform would be required.

But those internal battles would assist in giving him the definition he currently lacks, and would draw in support from those who to date have been wary of his style of leadership.

There are also signs that many of his own inner circle would back such a strategy. "The word among the shadow cabinet is a lot of Ed's people themselves want to dump all this progressive nonsense. It's only really Ed himself and the Compass mob who are clinging to it."

Ed Miliband tried to put a brave face on Thursday's results. But he was fooling no one, least of all himself.

The consensus was clear: south of the border, the big winner was Cameron and the big loser Clegg. If Labour's leader wants to take the fight to the former he cannot do so by appealing to a tiny rump of Liberal ultras clinging to the tattered legacy of the latter.

Miliband has a plan B. The question is whether he has the strength and courage to implement it.

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What is the EU customs union and will Brexit make us leave?

International trade secretary Liam Fox's job makes more sense if we leave the customs union. 

Brexiteers and Remoaners alike have spent the winter months talking of leaving the "customs union", and how this should be weighed up against the benefits of controlling immigration. But what does it actually mean, and how is it different from the EU single market?

Imagine a medieval town, with a busy marketplace where traders are buying and selling wares. Now imagine that the town is also protected by a city wall, with guards ready to slap charges on any outside traders who want to come in. That's how the customs union works.  

In essence, a customs union is an agreement between countries not to impose tariffs on imports from within the club, and at the same time impose common tariffs on goods coming in from outsiders. In other words, the countries decide to trade collectively with each other, and bargain collectively with everyone else. 

The EU isn't the only customs union, or even the first in Europe. In the 19th century, German-speaking states organised the Zollverein, or German Customs Union, which in turn paved the way for the unification of Germany. Other customs unions today include the Eurasian Economic Union of central Asian states and Russia. The EU also has a customs union with Turkey.

What is special about the EU customs union is the level of co-operation, with member states sharing commercial policies, and the size. So how would leaving it affect the UK post-Brexit?

The EU customs union in practice

The EU, acting on behalf of the UK and other member states, has negotiated trade deals with countries around the world which take years to complete. The EU is still mired in talks to try to pull off the controversial Transatlantic Trade and Investment Partnership (TTIP) with the US, and a similar EU-Japan trade deal. These two deals alone would cover a third of all EU trade.

The point of these deals is to make it easier for the EU's exporters to sell abroad, keep imports relatively cheap and at the same time protect the member states' own businesses and consumers as much as possible. 

The rules of the customs union require member states to let the EU negotiate on their behalf, rather than trying to cut their own deals. In theory, if the UK walks away from the customs union, we walk away from all these trade deals, but we also get a chance to strike our own. 

What are the UK's options?

The UK could perhaps come to an agreement with the EU where it continues to remain inside the customs union. But some analysts believe that door has already shut. 

One of Theresa May’s first acts as Prime Minister was to appoint Liam Fox, the Brexiteer, as the secretary of state for international trade. Why would she appoint him, so the logic goes, if there were no international trade deals to talk about? And Fox can only do this if the UK is outside the customs union. 

(Conversely, former Lib Dem leader Nick Clegg argues May will realise the customs union is too valuable and Fox will be gone within two years).

Fox has himself said the UK should leave the customs union but later seemed to backtrack, saying it is "important to have continuity in trade".

If the UK does leave the customs union, it will have the freedom to negotiate, but will it fare better or worse than the EU bloc?

On the one hand, the UK, as a single voice, can make speedy decisions, whereas the EU has a lengthy consultative process (the Belgian region of Wallonia recently blocked the entire EU-Canada trade deal). Incoming US President Donald Trump has already said he will try to come to a deal quickly

On the other, the UK economy is far smaller, and trade negotiators may discover they have far less leverage acting alone. 

Unintended consequences

There is also the question of the UK’s membership of the World Trade Organisation, which is currently governed by its membership of the customs union. According to the Institute for Government: “Many countries will want to be clear about the UK’s membership of the WTO before they open negotiations.”

And then there is the question of policing trade outside of the customs union. For example, if it was significantly cheaper to import goods from China into Ireland, a customs union member, than Northern Ireland, a smuggling network might emerge.

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.