A very bad night for the Lib Dems in Scotland

The Lib Dems lose their deposit after winning just 2.2 per cent of the vote in the Inverclyde by-ele

Despite talk of the SNP pulling off a shock defeat, Labour was always likely to win last night's Inverclyde by-election. In the end, the party's margin of victory - 5,838 votes - was greater than many activists expected, and Ed Miliband can celebrate his fourth consecutive by-election win this morning.

The SNP, who came within 511 votes of capturing the sister seat in last month's Scottish Parliament elections, were hopeful of victory but Labour's majority of 14,416 proved too great to overturn. It's further evidence that while Alex Salmond has established the SNP as the natural party of devolved government, Labour is still the party of choice in Westminster elections.

The other noteworthy thing about last night was the disastrous performance of the Lib Dems. Their share of the vote plummeted from 13.3 per cent to 2.2 per cent, losing the party its deposit, and they were pushed into fourth place by the Tories. Sophie Bridger, the Lib Dem candidate, won just 627 votes on a respectable turnout of 45.4 per cent, only 339 more than the Ukip candidate, Mitch Sorbie.

The recriminations have already begun, with the Scottish party attributing its defeat to Nick Clegg's toxic reputation. As the former MSP Ross Finney commented: "There were clear issues of trust in the leadership". Expect to see the Scottish Lib Dems do even more to differentiate themselves from the national leadership over the coming months.

The result in full

Iain McKenzie (Lab) 15,118 (53.8%, -2.2%)

Anne McLaughlin (SNP) 9.280 (33%, +15.5%)

David Wilson (Con) 2,784 (9.9%, -2.1%)

Sophie Bridger (LD) 627 (2.2%, -11.1%)

Mitch Sorbie (UKIP) 288 (1%, -0.2%)

Labour majority: 5,838 (20.8%, -17.6%)

Turnout: 28,097 (45.4%, -18%)

George Eaton is political editor of the New Statesman.

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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.