All the ways Labour is rejoining the EU by stealth

Telegraph

04-05-2025

It's been billed as the 'reset' summit. In just over a fortnight, Sir Keir Starmer will welcome EU leaders to London, where he is hoping to strike deals on defence, food and net zero.
If anything needs a reset, it's the UK economy. Britain has struggled to break out of its moribund growth rate, with the economy just 3.4pc bigger than its pre-lockdown size. By contrast, the US is 12.2pc larger.
Labour now risks a doom loop of weak growth and high borrowing costs that could force Rachel Reeves to keep raising taxes or slashing spending this parliament to plug a borrowing black hole.
And while the Chancellor has been courting deals in the US and China, she recently suggested it's the one on Britain's doorstep she covets the most.
The UK's trade relationship with the EU is 'arguably more important' than the one it has with the US, Reeves said on a trip to Washington last month. While the Chancellor was swiftly rebuked by No10, the mask is slipping. Despite Labour's manifesto pledge to be 'confident in our status outside of the EU', ministers are beginning to let their anti-Brexit feelings show.
Douglas Alexander, the trade minister, launched a tirade against Britain's exit from the EU last week, branding it 'devastating' and describing efforts to strike deals with other countries a 'post-imperial delusion'.
The existing Trade and Co-operation Agreement between the UK and the EU is not scheduled for renewal until 2026. But ministers are intent on striking bespoke deals before then that can exist within the overarching agreement.
Agreements could eliminate the red tape faced by Britain's biggest companies, including supermarkets Sainsbury's, Marks & Spencer and Asda, who recently wrote to Brussels to ask officials to relax border checks on food and drink.
Yet any deal risks alienating Donald Trump, imperilling trade talks with the US and putting Britain at risk of incurring the the 20pc tariff facing EU exports.
Sir Keir has also laid out a series of red lines in talks with Brussels, vowing Britain will not return to the single market, allow free movement or sign up to a customs union that would tie our trade policy to the bloc. The EU has its own demands, with officials pushing for long-term access to British fishing waters.
The Government is racing to strike new deals with the EU in an effort to boost rearmament efforts and stimulate Britain's moribund economy.
However, Nigel Farage's success in local elections and victory in the Runcorn & Helsby by-election suggest that backdoor deals and reversing Brexit by stealth will not be tolerated.
Some fear the process has already begun.
Food standards
The most politically contentious area in any trade deal with the EU is food.
Brussels has long spurned an animal and food safety deal with Britain unless the country is 'dynamically aligned' to the EU's rulebook. In other words, increased market access is tied to the adoption of EU legislation overseen by the European Court of Justice.
This was first floated during the wrangling over Northern Ireland, when the Conservatives were attempting to avoid customs checks in the Irish Sea, but the Tories baulked at any talk of European Court of Justice (ECJ) involvement.
At the time, British negotiators wanted the same deal as New Zealand, where the country and EU mutually recognised each other's standards as equal. This was never on the table for the UK, despite the fact that standards have not been lowered in the years after Brexit.
Despite the hurdles, Sir Keir is desperate to remove the checks on agricultural products such as cheese and beef that are one of the biggest trade barriers. Food sold to the EU must be accompanied by a slew of forms and subject to inspections.
The National Audit Office has estimated that implementing post-Brexit border checks has cost the Government more than £4.7bn so far, with traders facing 'increasing additional costs and administrative burdens' numbering in the hundreds of millions of pounds.
Now, negotiators are looking at a deal that is strikingly similar to the proposals rejected by the Tories as unconscionable. A 'Swiss-style' model is being looked at in which London would adopt the EU's rulebook and decide whether to adapt to every change.
Labour will argue that adopting each evolving law going forward would be in the 'national interest', it is understood.
But such a move would prove hugely controversial and open Labour to charges of reversing Brexit by degrees.
Veteran negotiators believe Labour showed its hand too early by making a manifesto pledge to deliver a sanitary and phytosanitary (SPS) deal, wonk speak for a food standards deal. This, critics charge, played into the bloc's favour as it left the party desperate for a deal.
Brussels is using the issue as leverage to try to get their hands on British fish. The EU has long wanted a guarantee of long-term access to Britain's fishing waters and negotiators have seen the opportunity to link Britain's food deal to those fishing rights.
The Telegraph understands that any veterinary deal would be time-limited and linked to fisheries arrangements. If EU fishing boats are blocked from UK waters, SPS access would also be withdrawn.
The current landing zone appears to be a two-year period, which falls between the one year Britain wanted and five years for Brussels.
However, it risks leaving few people happy. A time-limited deal would still leave a sword of Damocles hanging above the head of businesses that want to trade with the EU, while Britain's fishing industry would also be up in arms.
Washington will be watching closely.
'The US has already taken the EU to the World Trade Organisation (WTO) over what it thinks are very protectionist standards that it says are designed to keep it out,' says Jill Rutter, at the Institute for Government, a think tank. 'The US hates most EU regulations and wants to get rid of them.'
A recent report published by the Office of the US Trade Representative on foreign trade barriers was full of complaints about dynamic alignment, the very idea the EU is now pushing on Britain.
'They have 35 pages on what they hate about the EU and five pages about what they hate about the UK,' she says. 'But most of what they hate about the UK is that we still follow EU rules, and they've been sabre-rattling about it.'
Lord Frost, who was Britain's chief negotiator for exiting the EU, believes it is vital the UK does not cede powers to Brussels.
'We don't give away powers. We don't give away the right to set our laws to the European Commission and the EU. We don't give away our fishing rights. We don't give away our climate policy. That's how I would've approached this. But we seem to have made all these concessions that ought to be our cards to play in this.'
Sources close to the White House are also warning Sir Keir to tread carefully. 'He wants to cosy up to the EU at a time like this? He needs to make a choice between the EU and the US, and the pending tariffs against the EU are not tariffs he should want to attract to the UK,' says one Trump ally.
Youth mobility
The ability for young Europeans to work in and travel freely to Britain has been at the heart of EU demands for any 'reset' deal.
It was listed as an 'offensive interest', alongside fishing, by the bloc's officials in early talks over Labour's approach to rehashing cross-Channel relations.
The EU tabled a proposal in the dying days of the Conservatives' time in power that would have seen an unlimited number of young Europeans given access to the UK, with students charged the same university fees as Britons and no need to pay the NHS levy that foreign residents are usually subject to.
Before its election victory, Labour had ruled this out as dead in the water. But as talks over the reset developed, it soon became clear that some countries, including Poland, would be willing to crash the entire negotiations if a youth mobility deal was not part of the final agreement.
To satisfy Brussels' demands, Labour is understood to be considering an offer to replicate the arrangements between the UK and Australia. Under that agreement up to 45,000 Australians aged under 35 can come and live and work in the UK for up to two years.
The plan would see tens of thousands of young Europeans arriving in the UK for two years, with a possible extension. The exact numbers would be capped based on Home Office concerns around immigration figures. Under a reciprocal scheme Britons aged 18 to 30 would be given the same rights in EU countries.
Miguel Berger, Germany's ambassador to the UK, insisted last week that the EU was not seeking a return to free movement of people.
'It's based on a visa scheme. So it's no freedom of movement,' he said. 'It is not migration because people would stay, have the experience and then go back home.'
They may even contribute to the Treasury's coffers. A Home Office assessment published in 2016 suggested the average person coming to the UK under the scheme contributes roughly £10,000 a year in taxes.
Rutter says many businesses stand to benefit from the scheme. 'It might relieve some of the staff shortages we see in retail and hospitality,' she says.
Even Frost said he would be open to a time-limited scheme that ensured the floodgates did not open.
'[These schemes] are capped. They're for very short periods. You have to get clearance before you can arrive. They're short-term work visas. They aren't really youth mobility arrangements at all, and there are very low levels,' he told the Daily T podcast last week.
A poll last year suggests many Britons agree. More in Common found that 58pc of people believe a youth mobility scheme is a good idea, compared with 10pc of people who think it is bad.
However, Frost insisted that any mobility scheme must have an expiry date.
'One is freedom of movement, one is a short term visa scheme. They're very different things. One is a total breach of principle. One is a little bit more pragmatic. I don't know where they're going to end up on this. Wherever we end up, we should be getting something for it.'
'Pay to play' on defence
Talks between Brussels and London on a security pact have been going on for years, with the unveiling of a defence deal expected to be the centrepiece of the meeting between Brussels and London on May 19.
The accord would be modelled – at least in part – on the EU-Norway Security and Defence Partnership signed last year, which would pave the way for regular talks as well as intelligence-sharing and a forum to discuss long-term issues such as support for Ukraine and maritime security. The French wasted no time trying to tie fishing rights that expire in 2026 to a defence deal, a move the UK rejected.
While a Norway-style pact would be welcome, Rutter at the Institute for Government says the bigger prize is access to a new €150bn (£130bn) European fund designed to ramp up defence spending. It would in theory allow British companies such as BAE Systems or Babcock to bid for and win lucrative contracts for arms projects across the bloc.
However, the idea is controversial in Brussels.
'Many question whether the UK, as a third country with quite a big defence industry, should be allowed to benefit from the EU's big rearmament programme, and on what terms,' Rutter at the Institute for Government says.
It has been widely reported that the UK will need to pay to play. Thomas Regnier, the commission's defence spokesman, has said 'third countries' must 'negotiate specific, mutually beneficial agreements on the participation of their respective industries in procurements'.
In other words, pony up. Paying for access is likely to leave a bitter taste in the mouth of Brexiteers who derided Britain's contribution into the EU budget.
'Defence could end up being like a Trojan horse to slowly reverse Brexit,' says one prominent business leader. 'Defence co-operation will have to filter through to other areas. Because if you're starting to supply into the European defence industry, you're going to need to be able to navigate customs and rules of origin and all that other stuff.'
To the executive, all this is positive. But for many Brexiteers, this will be their worst nightmare.
Product standards
The Product Regulation and Metrology Bill may sound dull, yet it is vitally important to understand for anyone who cares about Brexit.
The legislation, which is working its way through parliament, will give ministers sweeping powers to unilaterally align UK standards with Brussels, and cover most consumer products and many industrial goods, but exclude food, aircraft and medicines.
It is meant to help avoid divergence between Great Britain and Northern Ireland, which continues to follow EU product rules under the Windsor Framework negotiated by Rishi Sunak. Future divergence could mean products made in Great Britain are no longer permitted in Northern Ireland.
However, Joël Reland, at UK in a Changing Europe, a think tank, says there are drawbacks. 'For one, this sort of voluntary alignment does not bring any relief from EU regulatory checks. You follow EU rules, with no say over their design, but still don't get market access.'
The bill is being passed through secondary legislation, meaning it receives far less scrutiny than if it were primary legislation.
Frost believes the arrangement will effectively enable Brussels to use Northern Ireland 'to keep this whole country in line with EU rules in certain areas'.
'I simply don't understand the logic, and it's going to end up with us giving away a lot of powers to Brussels [which] are going to be very, very difficult to get back,' he told The Telegraph.
'The Government is pushing through this carefully named product regulation bill that gives powers to align our laws with the EU's on all manufactured goods that will come into force probably towards the end of this year.
'Watch out for this concession after concession by stealth, bit by bit until we get pulled back into the tractor beam.'
Net zero
In another sign that Sir Keir wants the EU reset to be about more than just trade, Britain and the EU are exploring relinking their carbon markets.
Both sides charge manufacturers for each ton of carbon dioxide they emit as part of their goals to reach net zero. They do this through emissions trading schemes (ETS) that set an overall cap on emissions, with companies able to buy or trade allowances if they want to emit more.
Britain left the EU's scheme at the end of 2020 as part of its exit from the EU and launched its own carbon market in 2021.
While carbon prices in the UK are currently almost half that of the EU, benefiting producers here, the planned implementation of the so-called EU Carbon Border Adjustment Mechanism (CBAM) next year will introduce extra levies on electricity, aluminium, iron and steel, among other things, imported into the EU. The UK plans to introduce its own CBAM a year later.
Supporters argue that linking the two markets will lead to higher Treasury revenues and ensure that British companies won't be stung by extra levies when trading with their largest export partner.
But Trump's administration has already indicated carbon border taxes are in their firing line and that they could be subject to retaliation under plans that the US president has ordered to be drawn up 'within 60 days'.
India has also criticised the tax, with its trade chief Piyush Goyal warning that the carbon tax 'is going to cause the death knell of manufacturing in Europe'.
Marley Morris, at the Institute for Public Policy Research (IPPR), a think tank, says there will be losers if the UK ties itself to Brussels. 'At the moment, the UK and EU's carbon price are really quite far apart, and so if the UK increases its price, then producers would obviously be hit harder,' she says. 'And so that might in itself go down badly with countries like India and the US.'
The backdrop is warnings from industrialist Sir Jim Ratcliffe and the chemicals industry that high electricity costs, partly fuelled by green levies, are already killing British factories.
In search of growth
Closer ties with Brussels will be controversial and will not be cost-free.
But with very little room for manoeuvre, Sir Keir may yet be tempted by a decision that George Osborne claims will be a boost to growth at the stroke of a pen.
Speaking on his Political Currency podcast last week, Osborne, a former Tory chancellor and Remain campaigner, highlighted the Office for Budget Responsibility's verdict that Brexit implied a 4pc hit to GDP over the very long term.
'As I understand it, the OBR may give the Labour Government 2pc of that back if they turn a hard Brexit into a soft Brexit. [So] if you're sitting in the Treasury trying to make the sums add up ... are you going to have to raise taxes because you don't want to break your fiscal rules?'
He added: 'If [Reeves] can get an EU trade deal, some estimates say it would be worth seven times the planning reforms to the British economy.'
Such maths may look attractive on paper, but would they translate to reality?
'The one thing we know about Donald Trump is he viscerally hates the EU,' Rutter at the Institute for Government says. 'So there's always a risk that even if a deal doesn't actually have any implications at all for the US, it puts the UK back in the EU box anyway.'
If all goes the way Labour hopes, Sir Keir and his counterparts will have deals to announce at the upcoming summit. For the Prime Minister, it will be an achievement to celebrate that he hopes will boost growth and slash red tape.
Yet with Trump fuming against Brussels and with Farage in the ascendency, closer ties with the EU may well turn out to be a poisoned chalice.