by Gordon Rayner and Tony Diver
What might be in the next Labour manifesto? It may seem rather early to ask that question, but conversations are already going on in Downing Street about the direction of travel and, in particular, one idea that sums up the current battle over the future of the party.
A cabal of what used to be termed Remoaners is trying to convince Sir Keir Starmer that he should commit to re-entering the EU customs union. Some even think a second referendum on EU membership would be a good idea.
Others in Number 10 are appalled at the suggestion, arguing that it would alienate working class Leave voters and drive them into the hands of Reform UK.
The Europhiles appear to be in the ascendancy, and believe Rachel Reeves’s zero-growth Budget has just strengthened their case. They argue that rejoining the customs union – or even the EU itself – would provide a boost to the economy and deliver the growth that the Government says is its number one priority. Cutting spending and taxes to stimulate growth is, naturally, anathema to them.
Surrounded by Remainers
Those arguments are familiar to a Cabinet that all voted Remain in the 2016 referendum (Lord Hermer, the Attorney General, once said that his dream law would be “the European Union (Please Can We Come Back?) Act”).
Sources who spoke to The Telegraph say the most influential voices on this side of the debate are: Tim Allan, Downing Street’s director of communications; Alastair Campbell, who did Allan’s job during the Blair years; and Tom Baldwin, Starmer’s biographer and a former Labour Party communications chief.
Campbell, in particular, is “fanatical” about rejoining the EU, ignoring all counter-arguments, according to those who have observed him, while Allan, who was his deputy in the first year of the Blair government, has already flipped the Government’s messaging on Brexit from not mentioning Brexit at all to blaming all of the country’s ills on Brexit.
Baldwin, who worked as director of communications for the People’s Vote, which campaigned for a second EU referendum, is one of Starmer’s most trusted friends and is often seen in Downing Street.
Starmer himself also argued for a second referendum when he was shadow Brexit minister, even attending a People’s Vote rally.
While their opponents cannot be described as Eurosceptics – it is safe to assume that, like the Cabinet, everyone around the Prime Minister voted Remain – they are at least pragmatists, recognising that there is no public appetite for refighting the Brexit wars.
Chief among them is Morgan McSweeney, the Prime Minister’s embattled chief of staff, who insists that Labour can only retain power by winning back traditional Labour voters who backed Leave and who feel Labour has been too soft on migration.
Shabana Mahmood, the Home Secretary, is the most visible proponent of the McSweeney strategy, with her tough talk on migration designed to woo those who are thinking of voting Reform in 2029.
Rejoining the customs union
Those allied to the Europhiles insist that any discussions about closer alignment with the EU are informal and have played down claims of any organised plot to push Starmer into a new stance on the EU.
As fanciful as the idea of a second EU referendum may seem, there are forces at play that could at the very least make it much more possible that the Labour Party commits to rejoining the customs union.
“People are well aware that the new arrangements with the EU agreed earlier this year only bring limited economic benefits,” says one Labour insider. “And you would have to go much further to realise bigger economic benefits.
“Most people have felt until now that was politically undoable, but in terms of economic growth there is now a view that more integration brings bigger rewards.”
In May, Starmer agreed a “reset” of relations with the EU, which included concessions on youth visas and fishing in return for fewer restrictions on trade.
He claimed at the time that it would boost the economy by £9bn and redress what No 10 said had been a 21 per cent drop in exports to the EU and a 7 per cent drop in imports.
In the same month Labour trumpeted trade deals with India and the US – the sort of trade deals that would have been impossible before Brexit. One of the key arguments in favour of leaving the EU was that it would enable Britain to trade more easily with other major economies, including the US, our single biggest trading partner, and emerging economies like India.
But Europhiles argue that the Office for Budget Responsibility has claimed Brexit has curbed economic growth by 4 per cent, which, they say, means even closer ties are needed. They also cite recent opinion polls that in some cases suggest a majority of people would back rejoining the EU.
We can all remember how wrong the polls were before the 2016 EU referendum though, and as one Labour source put it: “No one is ever going to want to hold a referendum ever again. David Cameron took Britain out of Europe by accident and I can’t see anyone wanting to roll the dice again.”
Which is why the idea of rejoining the customs union is seen by some Europhiles as a more achievable goal.
“If you wanted to rejoin the customs union or do anything on that scale you would have to put it in the manifesto,” says a Labour source.
One senior Labour MP confirms: “There is an active debate going on in Downing Street about whether they should put rejoining the customs union into the next manifesto. It would take us beyond slowly going back into the EU regulatory regime.
“I think it would be a huge mistake. It would make the next general election, which is going to be extremely difficult, even more difficult because traditional Labour voters, many of whom we have lost, who voted to leave the EU are unlikely to come back if that was a manifesto commitment.”
Rejoining the customs union would make it easier for companies to trade with the EU by removing customs checks and tariffs, but it would mean Britain could no longer negotiate its own trade deals with other countries and would almost certainly have to abandon the ones it has put in place since Brexit. It would also make Britain a rule-taker once again, without any ability to help make the rules as a non-member state, and the EU would undoubtedly want Britain to pay to be part of the customs union.
Nevertheless, there is strong support for the idea from some in Number 10 as well as from some in the Treasury. It is because Starmer is regarded by so many as an empty vessel, without a clear ideology, that Europhiles believe they can stamp their ideology on him and convince him that the second referendum he once argued for – or effectively reversing Brexit by taking Britain back into the customs union, without a referendum – could be his legacy.
All of that, of course, is assuming Starmer is still Prime Minister by the time of the next election, and many people think he will be gone after the local elections next May.
“Lots of things might change after May,” says one former Government adviser. “If things go badly for Labour, as is expected, and if the Lib Dems and the Greens do well, there will be growing calls to forget about chasing Reform voters and shore up what you might call the progressive coalition which might represent the majority of voters.
“That might tilt the balance in favour of the customs union argument.”
Those opposed to McSweeney’s approach of winning back Reform voters point out that polling shows Labour has lost more support from its 2024 voters to the Liberal Democrats, Greens and nationalist parties in Scotland and Wales than to Nigel Farage’s party.
Attempt to oust McSweeney
Significantly, Labour’s messaging on Brexit has changed radically in recent months, coinciding with Allan’s arrival in No 10 in September.
“Previously we had a ‘don’t mention the war’ policy towards Brexit,” one Labour backbencher reflects. “Now, not just Rachel Reeves but everyone else is taking a much more aggressive attitude towards what they say are the negatives about Brexit.”
Why blame Brexit for all of the country’s ills – rather than the Tories, as has been Labour’s policy until now – if not to influence public opinion in favour of undoing some of the key changes that Brexit brought about?
Struggling governments always try to blame external forces for their country’s ills, and having run shy of welfare reforms or tax cuts, and having failed to stimulate growth, Labour needs to find an excuse for the tanking economy. Brexit fits the bill for many on the Left.
Aside from next year’s local elections, changes in personnel might have a major impact too. McSweeney has been fighting for his job for months, and if his enemies finally manage to force him out, the biggest obstacle for the Europhiles will have been removed. There is speculation that Starmer might then offer the job to his old friend Baldwin.
“If Morgan is next out of the balloon that would change everything,” one Labour figure says.
Earlier this month McSweeney was blamed for alleged Downing Street briefings against the Health Secretary and wannabe prime minister Wes Streeting. Tellingly, Campbell appeared on LBC Radio suggesting there were people in No 10 who thought they were “starring in their own movies” and that they should be “brought to heel or kicked out”. Meanwhile, Baldwin told the Today programme: “The damage of this story is we’re still talking about it 36 hours after it broke. We’re on the radio talking about spin and anonymous people on the sidelines and backroom advisers.”
It was to Baldwin that Starmer turned earlier this year when he wanted to disown his controversial comments about Britain being at risk of becoming an “island of strangers” because of immigration, granting his biographer an interview that was published in the Observer.
McSweeney was widely believed to have been behind the speech, which critics compared to Enoch Powell’s 1968 “Rivers of Blood” speech in which Powell said that in future Britons would be “strangers in their own country”.
Starmer angered McSweeney’s acolytes when he told Baldwin: “I wouldn’t have used those words if I had known they were, or even would be, interpreted as an echo of Powell. I had no idea – and my speechwriters didn’t know either.”
Some Starmer loyalists believed Baldwin was instrumental in Starmer’s decision not only to apologise for his earlier comments but also to distance himself from much of the political strategy of his first year in office, a strategy dominated by McSweeney.
Moves behind the scenes
If Starmer is ousted within the next year, the two people most likely to replace him are Mahmood and Streeting. If Mahmood were to become prime minister it seems the idea of rejoining the customs union would be dead, but what of Streeting? He is an ardent Remainer and has said he is “glad that Brexit is a problem whose name we now dare speak”.
Many Labour MPs believe that if Streeting were to gain the job he openly covets, he would realign Labour as a social democratic party that would attract current Lib Dem voters. And Lib Dem leader Sir Ed Davey is wedded to the idea of rejoining the customs union, and is writing to all Labour MPs urging them to back a parliamentary Bill calling for a customs union with the EU in order to force a symbolic vote on it in Parliament. He even asked Starmer recently if he would commit to doing the same.
Streeting is a shrewd politician – shrewder than Starmer – and there is a belief that he would only dare to commit to something as bold as rejoining the customs union if he thought the political risk was low, which would depend on whether Reform’s support was holding up or not.
Downing Street declined to comment on Friday.
The official line remains that Britain will not rejoin the single market, the customs union or freedom of movement. (“No, I do not think that is the way forward,” was Starmer’s reply to Davey on the question of rejoining the customs union, last month).
Nevertheless moves to bring the UK ever closer to the EU continue behind the scenes.
In an apparent reference to the UK’s exit deal with the EU, Nick Thomas-Symonds, the minister for European Union relations, told The Spectator magazine this week: “We have probably the one trade deal in human history that raised barriers, so we’re trying to bring them down. Just as we chose as a sovereign nation to sign an FTA [free trade agreement] with India, just as we chose an economic deal with the United States, we are choosing to align with another high standards jurisdiction.”
Even those who are evangelical about rejoining the customs union acknowledge that doing so would involve compromises not only in trade policy but in domestic policy.
One key area of conflict is over housing policy. Rejoining the customs union would inevitably mean having to meet EU standards again in a swathe of areas, just as ministers are trying to water down rules on biodiversity and nature, to reach Labour’s target of building 1.5 million new homes by the next election.
There are also concerns about Reeves’s desire for a youth mobility deal, which is in conflict with Mahmood’s tougher stance on inward migration.
“The Treasury wants to go full-fat on youth mobility experience,” says a source. “That’s not always in total alignment with their friends at the Home Office.”
Shared values
One ally of Starmer says Downing Street has been persuaded of the need to form closer ties with the EU after Donald Trump’s decision to cut US aid to Ukraine and impose tariffs on key trading partners.
“When it looked like Trump was going to withdraw support for a country on the EU border, that created an existential crisis,” the source says. “If you are looking for a stable economic partner, Trump has shown he can’t do that. It forced us to turn towards the EU and them to turn towards us.”
Starmer, meanwhile, is said to be “ideological” about Britain’s “blood bond” with the EU, but his affinity with Brussels has “more to do with 1945 and less to do with 1972 [when Edward Heath signed the Treaty of Accession]”.
In other words, a source says, the Prime Minister sees the EU as a union of “shared values” against tyranny, rather than a pure trade bloc.
Whether or not Starmer is still Prime Minister by the time of the next general election, the battle for the future direction of the Labour Party will continue, and like any battle it will inevitably result in casualties. Only one side can win the internal debate over rejoining the customs union, and the losers might not even be in politics by the time they get to see which side the public agrees with in 2029.
*Published first on "The Telegraph"
By: N. Peter Kramer