It’s time for the UK to be brave in talks with the EU

Good afternoon. This Labour government has attracted widespread criticism in its first five months in office for failing to build a narrative with voters on its key policy areas. 

When an inertia narrative has taken hold, it becomes very difficult to escape. Witness Sir Keir Starmer’s ‘reset-that-wasn’t’ speech at Pinewood Studios, which had the perverse effect of drawing attention to the inertia narrative rather than scotching it.

However this week, on the subject of the EU ‘reset’ there was a clear attempt to build a new sense of momentum. First chancellor Rachel Reeves went to Brussels to speak to the Eurogroup of euro-area finance ministers, and then António Costa, the new European Council president, came to Downing Street to see Starmer.

Reeves repeated the mantra that Labour wants a “very ambitious” reset with Brussels, while Starmer is expected to receive a formal invitation to meet EU27 leaders next February to discuss a defence and security pact.

Given the current geopolitical context in Europe, deeper co-operation on defence, including joining some EU defence structures, provides an important potential platform from which to rebuild the relationship.

For those concerned with substance, it’s possible to overlook the symbolic importance of these moments — a statement that the UK now has a Labour government that no longer considers it a political offence to ‘break bread’ with EU leaders.

The ‘reset’, as the tiggerish Europe minister Stephen Doughty told the Lords EU Committee this week, is continental in scale, stretching from the Arctic, via Ukraine, to the western Balkans: “This is part of a reset with Europe, writ large,” he said. 

To that point, this week I had the chance to talk to a delegation of senior US business executives, led by the US Chamber of Commerce, who were in London touring Whitehall departments trying to get a handle on the new government.

One US investment banker observed that, after ideological constraints of the Tory Brexit years, it was genuinely cheering to see Reeves owning the relationship with Brussels, doing a press conference with Eurogroup president Paschal Donohoe.

The City made its own accommodations with Brexit a long time ago, when it became clear that passporting was to be revoked, but this banker reflected how it was still important to see the UK “back in the room”. He gently chided those who would be churlish. 

Seeking deliverables

But the challenge for Labour here, having invested the early political capital in being open about wanting a closer relationship with Europe on both security and trade, is to deliver a return on that investment. 

Otherwise it reinforces the corrosive narrative that it’s all a waste of time bothering negotiating with Brussels, which is why the lack of ambition on the UK side — despite ministerial protestations to the contrary — is so perplexing.

The German finance minister Jörg Kukies, put it succinctly after the Reeves meeting, noting that the UK’s red lines on the single market, customs union and free movement, had to be respected even if they put fairly hard limits on what could be achieved. 

“We used to do a lot more [trade] on a relative basis with the United Kingdom than we are doing now . . . So, of course, any progress would be highly welcome, but we completely understand that the UK population has taken a different decision. And we have to respect that.”

That is the message the EU Commission reinforced, in a paper circulated to EU member states setting out their interests in the upcoming negotiation. It advised the bloc to stick firmly to the “no cherry picking” mantra that underpinned the 2017-20 negotiation.

The uncompromising position, as I reported this week, extends even to areas like the electricity market, where the EU has an absolutely clear interest in resolving post-Brexit blockages.

Doing so would deliver €44bn in savings to EU and UK consumers by 2040 and reduce investment costs in North Sea wind by 16 per cent, according to business consultancy Baringa. To quote one energy industry executive, that seems remarkably “shortsighted” on the EU’s part.

Thinking bigger

And yet, the question the UK side urgently needs to ask itself is whether it has done enough to challenge those Brussels orthodoxies; to make the case that the UK, in the new geopolitical context, should have a sui generis relationship.

To be clear, this is not about a David Davis-style demand for special treatment just because we’re British, which Reeves came perilously close to repeating this week.

’New Brexit deal is in your best interests, Reeves tells EU’ was the headline in The Times. That raises hackles in Brussels. As one EU official waspishly observed: “Are we going back to a UK defining the EU’s interest?”

I hope not. It didn’t work in 2017, and it won’t work now, as the Commission response makes clear. To make a difference, the UK has to reframe the conversation from 2017, by demonstrating a level of ambition that challenges pro forma EU positions.

UK ministers talk about “ambition” but EU officials and diplomats roll their eyes when that is followed by a list of domestic political constraints that rule out progress in areas like electricity trading, customs barriers or youth and professional mobility. 

Listening to Cabinet office minister Nick Thomas-Symonds give evidence to the Lords this week, there was little to disabuse them, as he stuck doggedly to the manifesto shopping list: veterinary deal, mutual recognition of qualifications, easier visas for musicians. 

Seizing the moment

One argument for more bravery is that Labour might as well get something for its pain, since it will suffer sniping from the political right in any event — as we saw this week. 

The Tories grumbled that Reeves should be talking to America, not cuddling up to Brussels, and the rightwing Guido website mocked Starmer over the electricity story, predicting that the reset would be a “one-sided sellout”.

The way to neutralise those attacks — and they will keep coming — is through concrete deliverables. Resolving the trade, mobility and regulatory issues that, as one pharma executive on the US Chamber of Commerce delegation put it, “make it harder and harder to make the case for the UK in global boardrooms”.

But to do so, the UK would have to improve its offer and challenge those Commission orthodoxies. Or, like the German finance minister suggested, the reset will be met by a collective shrug from EU member states, however friendly. “We tried, but well, what could we do?”.

This is not to be churlish. On the contrary. Reeves and Starmer must be applauded for engaging with Europe. Trump’s return to the White House and the looming prospect of a settlement being forced on Ukraine creates a unique moment. 

It will be fleeting, but as this report from the European Council for Foreign Relations shows, public opinion on both sides of the Channel is more forward-leaning than the politicians. 

It’s time for both sides to be brave.

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Britain in numbers

This week’s chart shines a spotlight on Scotland where first minister John Swinney has made eliminating child poverty his main priority since becoming first minister in May, writes Simeon Kerr in Edinburgh

For the past two decades Scotland has outperformed England and Wales in terms of tackling child poverty and inequality, as the chart shows.

But despite bespoke policies, such as the £26.70-per-week Scottish Child Payment introduced in 2021, the statistics also reveal a dogged lack of divergence from the UK average.

Relative child poverty today is no lower than when the Scottish National party inherited power in 2007. Around a quarter of children — 240,000 — remain in relative poverty after housing costs.

Bolstered by a record block grant delivered by Rachel Reeves’ UK budget, finance secretary Shona Robison’s presentation of the Scottish budget last week sprayed money across the system to alleviate child poverty.

Her political “rabbit out of the hat” was a commitment — unlike Starmer’s administration — to end the two-child benefit cap in Scotland by the beginning of the 2026-27 financial year, a month before the SNP faces off against Labour in the Holyrood election.

The Scottish government says the decision should lift 15,000 children out of poverty. It will cost £150mn, rising to £200mn by the end of the decade, according to the Scottish Fiscal Commission.

But the budget document argued that single policies aren’t enough and that “a package of interventions” would be needed to alleviate child poverty as much as possible.

These included a record £21bn for the NHS, boosting the affordable housing budget by £200mn to deliver at least 8,000 homes, and £120mn for headteachers to address the poverty-related educational attainment gap.

With an extra £800mn in benefit spending next year, the social security bill will account for 13.5 per cent of day-to-day spending, up from 9.7 per cent three years ago.

With Scotland set to spend £1.3bn more on social security than it receives in funding from the UK government, the shortfall is due to be borne by higher earners, who pay more tax north of the border.

Swinney hopes that, if passed in February, his budget can prove that these fiscal interventions finally bring down child poverty faster than elsewhere in Britain.

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