Should Keir Starmer change his mind and back the UK joining the EU single market?

Probably not – having our close friends and neighbours regulate our economy for us would not end well

“Handing over the regulation of UK financial services to the governments of the City’s major competitors would see those services regulated in a way that worked for Paris and Frankfurt but not necessarily for London and Edinburgh.”

“An economic case without a political case is no case at all. That is why Keir Starmer is right to reject UK participation in the EU single market.”

Speaking to the BBC’s Newsnight programme from the World Economic Forum in Davos on 19th January 2023, Keir Starmer repeated his opposition to the UK joining the EU’s single market. “There isn’t a political case” for it, he said, but added that the UK’s present trade deal with the EU “is not a good deal”, “and that is why we have been clear we want a closer relationship with the EU.”

I have been arguing for a while that Keir Starmer is right about this , and that those who, like London’s Mayor Sadiq Khan, want a “pragmatic debate” about rejoining the EU single market, always underplay what an undemocratic option it would be for the UK. It would be an undemocratic option because it would mean accepting EU decisions and applying EU laws on key issues without the UK having any say.

Participation in the EU single market via the “Norway” option

An obvious template for the UK to join the EU single market would be an economic relationship with the EU similar to that of Norway. Norway is one of three EFTA States (Norway, Iceland and Liechtenstein) which have an agreement with the EU whereby they participate in the EU Single Market, apply EU Single Market legislation, and make significant financial contributions to EU projects.

In practice the EFTA States have no choice but to adopt new EU rules. The EFTA States are free to negotiate their own trade agreements with other countries because they are not part of the EU customs union. Since they are not part of the customs union, there are customs checks on trade between the EFTA countries and EU countries, and tariffs are imposed on goods containing significant non-EFTA or non-EU components.

The free movement of workers

The free movement of workers would return under any variation of the Norway model likely to secure EU agreement. According to opinion polls a majority of Brits think Brexit was a mistake and would vote to rejoin the EU. This suggests that free movement is something that the public overall is willing to accept, though it could be a vote-loser in some and parts of the country. But if free movement might not be fatal to the prospect of a Norway-type soft Brexit, the UK being subject to EU laws without having any influence over the content of those laws very likely would be.

The Norway model would hand over regulation of British businesses and the City to the governments of their major competitors and create a serious democratic deficit

The impression that EU single market laws are only concerned with technical rules that nobody need care about is a false one. They regulate in one way or another subject matter that is economically and politically important. A non-exhaustive list includes transport by air, road, rail and sea, pollution and the fight against global warming, company law, the award of public contracts, state support for businesses, energy markets, take-overs and mergers, the activities of advertisers, lawyers, banks and insurance companies and the National Health Service. Financial services and the services which support them are of key importance to the UK. They contribute more gdp and tax revenue than does UK manufacturing industry. Handing over the regulation of UK financial services to the governments of the City’s major competitors would see those services regulated in a way that worked for Paris and Frankfurt but not necessarily for London and Edinburgh.

The Norway package would not be available to the UK as of right – the EU does not work that way

The EFTA States do not apply single market tax harmonisation rules, but there is no guarantee that the UK would be offered the same terms as Norway. In the UK’s negotiations with the EU after Brexit EU negotiator Michel Barnier often reminded the UK that the EU was not bound to offer the UK a trade option simply because the EU had offered that option to other trading partners.

The UK might have to accept EU tax rules and rejoining the common fisheries policy as the price of joining the single market

The EU might suspect the UK of always being only one government away from a Singapore-on-Thames tax-cutting agenda and one obvious insurance policy against that would tying the UK to EU laws on tax harmonisation. But the UK would be bound by all those rules, not just those guarding against the improbable “Singapore-on-Thames” scenario. On top of that, France might insist that the UK rejoin the common fisheries policy, to restore France’s pre-Brexit fishing quotas in UK waters. That might be good for some UK fishing operators and bad for others.

A “Norway” solution would lack the democratic legitimacy of EU Membership and would lead to serious friction with the UK’s closest trading partners and allies

As a Member State of the EU, it was the UK’s influential participation in the EU legislative process (with a veto in some cases such as for example tax harmonisation) which gave democratic legitimacy to the application of EU law in the UK. If the UK joined the EU single market along the lines indicated above, the UK would have no say in the making and amendment of EU law which applied in the UK, and that democratic legitimacy would be lacking.

An independent Committee appointed by the Norwegian Government reported that “Norway is in practice bound to adopt EU policies and rules …without voting rights.” It noted that “this democratic deficit is the price Norway pays for enjoying the benefits of European integration without being [an EU Member].”

It is highly unlikely that any UK Government and Parliament would be willing to sign a blank legislative cheque to the EU as the price of participating in the EU single market. If they did do so, as sure as night follows day, the EU would adopt legislation which would apply in the UK but which would be highly controversial in the UK, and the UK’s political relations with the EU would deteriorate. An economic case without a political case is no case at all. That is why Keir Starmer is right to reject UK participation in the EU single market.