Brexit begins: What will it mean for Economic Justice?

30 March 2017 - 11:30am

Owen Espley is senior economic justice campaigner at War on Want. This article was carried by Left Foot Forward.

With a single short letter signed by the Prime Minister, Article 50 has been triggered. The countdown to Brexit has begun.

Formal negotiations on how the UK will leave the European Union will now start. The implications are wide-ranging, and there are many unknowns, not least in terms of how far the UK’s future economy will serve economic justice. The following key issues are at the heart of the UK’s future:

Protecting workers’ rights

Workers’ rights are in peril. One worker’s right under immense assault is freedom of movement. This hard won right ensures workers have mobility to seek decent conditions and decent work. War on Want believes that EU residents in the UK should have the rights they currently enjoy guaranteed. But more than that, we must ensure future migrant workers do not lose their right to change employer, and enjoy equal social and labour rights. The alternative is a race to the bottom, making all workers insecure.

This will be a crucial issue moving forwards and comes hard on the heels of the appalling racism that has underpinned so much of the debate around Brexit. There is a deep concern that the impact of Brexit will be racist and entrench deep racial inequality. Worryingly, the shocking rise in racist violence witnessed after the referendum, combined with an increasingly securitised and privatised internal border regime, suggests the UK is already on the path to becoming a divided society with different rights for different groups of people.

Social and environmental regulation

For years, the EU has regulated all economic activity within the European Single Market. There is a strong argument that it will be difficult to maintain strong social and environmental regulation outside the EU and therefore it would be better for the UK to stay in the single market and be subject to its regulations even when it won’t have a role in negotiating them.

That said, it is inaccurate to paint the EU’s regulations as always being good for social issues and the environment. European Court of Justice (ECJ) rulings have not all been favourable to social and environmental concerns. For example, in Sweden, a Latvian construction company won a contract to build schools, yet, they were able to ignore Swedish labour standards and pay their workers at Latvian rates. 

The Court ruled in the company’s favour when challenged. This complex balance between the rights of business and people is bound up in ECJ rulings. How the UK relates to future ECJ rulings may determine whether the UK slips behind EU standards in the future. Many hard won rights are secured by EU regulations, such as the rights of agency workers and the working time directive, and these could be put at risk. But many significant rights also depend on past ECJ rulings.

Transparency and accountability

One of the ways EU law may be transferred is through so-called ‘Henry VIII’ powers, which allow the government to set regulations through executive orders and effectively bypass parliamentary or democratic scrutiny. If this happens ministers will be able to water down EU social and environmental regulations either through a bonfire of ‘redtape’ or by slowly chipping away at regulations in response to big business lobbyists. 

Tax regulation

When it comes to tax regulation, one government minister has already proposed that if the UK doesn’t get the kind of access it wants to the single market, it could effectively become a tax haven off the shores of the EU. The UK already acts as a tax haven within the global economy, it remains to be seen whether the EU has the regulatory muscle to isolate the UK if it takes that predatory approach on tax.

The financial sector

The EU’s position towards the City of London raises questions about the future role of the City of London in the UK’s economy. The EU’s approach may see the financial power of the City of London diminish. This would come at a cost to the City of London’s contribution to the UK’s GDP, but may create the space for a rebalancing away from finance in the UK economy. There is mounting evidence that an oversized financial sector places a cost on the rest of the economy. 

The lack of a UK brake on the EU financial regulation could coincide with greater freedom for the UK to support parts of the UK economy which provide greater public benefit. Outside the single market, the UK could be less subject to state aid rules and rules on public procurement. It would also be much easier, outside EU rules, to renationalise the railways,  a policy which has widespread public support.

Trade deals

Central to the UK government’s approach to regulation is the negotiation and agreement of future trade deals. The UK government has strongly favoured agreements such as TTIP and CETA, which have included threats to social and environmental protection, de facto embedding of privatisation of public services including the NHS, and sought to give companies the right to sue governments in ‘corporate courts’.

We’re at a crossroads. It is possible to imagine different paths the UK could follow but weighing the risks of each is a difficult task.

On one path the UK would seek to compete in the world economy through a race to the bottom on social and environment regulations for the benefit of the elite. This path would seek to extract ever more wealth from around the world through unfair trading relations. On this path, if the UK chooses to engage in unfair tax competition it may face a powerful EU opponent, able to isolate the City of London through restricting access to the EU’s financial services market, the rest of the world may not have the ability to protect itself. If you think this path is the most likely then staying a part of the single market seems favourable.

On the other path, freedom from EU market regulations could potentially enable the UK, through tools such as public procurement and subsidies, to ensure business better serves social and environmental goals.

Determining how to respond to these negotiations are difficult as so much is uncertain. They also reverberate far beyond questions about the economy, to fundamental questions about the nature of our society. What is clear is that these negotiations must not be left to an elite out of touch with ordinary people.

Social movement and trade union action is needed, as always, to shape the future in favour of economic and environmental justice, to stand up for universal rights, and demand no watering down of social and environmental regulation.

It is only through grassroots movements of people that economic justice is ever realised. The triggering of article 50 must also be the trigger to build an economic justice movement up to the challenges we face.

War on Want has key principles it believes we should retain that should shape our future regardless. Read more here


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