We should choose to stay in the single market

With opinion on migration turning, it would be a better form of Brexit than keeping the customs union

In Voltaire’s satire, Candide, the Leibnizian optimism of the age is lampooned through a rather splendid character called Dr Pangloss, who believes – absurdly – that, despite all the misfortune that life heaps on him, “all is for the best in the best of all possible worlds”.

Much the same, Pollyannarish mindset seems to have taken hold in financial markets, where there is almost no news, however concerning, capable of seriously challenging the prevailing complacency. As a general rule of thumb, markets assume the best until proved otherwise.

It’s the same with the Brexit negotiations where, despite the setbacks, standoffs, and the apparently intractable nature of the Irish border issue, the assumption is that somehow or other things will be fine. In a rational world, this is indeed what ought to happen. It’s overwhelmingly in everyone’s economic interest to reach an accommodation.

But politics are rarely rational, and for fear of setting a precedent that might cause the whole EU construct to unravel, Brussels is determined to make leaving as uncomfortable as possible. In the Irish border issue, Brussels has hit on pure gold.

It’s the Achilles’ heel of Brexit, and EU negotiators are exploiting it for all it is worth. Only by staying in the so-called customs union, they insist, will the need for a hard border in Ireland be removed, and can the Good Friday Agreement be honoured. It’s a view that has found plenty of support among Remainers, if only because in the choice between an unsatisfactory exit that denies Britain the freedoms it seeks, an acrimonious no-deal exit, and staying in, voters might change their minds and want to stay in.

There is, however, a better way that would at one and the same time heal the rift with the EU, allow a continued high degree of access to European markets and leave the UK free to pursue its own trade, agricultural and fisheries policies. Rather than stay in the customs union, we should instead choose to stay in the single market.

Unfortunately, Theresa May has ruled that one out too. Her avowed intention is to leave both the customs union and the single market; Brexit, she said at the start of her premiership, was above all a vote for immigration controls. These would be incompatible with the single market’s so-called four freedoms – free movement of goods, services, capital and, crucially, people across borders.

As has now emerged, the oddity of her position on migration, given that she was a Remainer, is that it was much more hard line than many of the leading lights of the Brexit campaign itself, including Michael Gove and Boris Johnson. As is often the case in switching sides, she seems to have over compensated. By contrast, Mr Johnson declared himself to be a liberal on such matters in his interview with the Daily Telegraph last week, and more recently even went so far as to advocate an amnesty for illegal immigrants.

It’s amazing how quickly the tone of the debate on migration has turned, most visibly in recent weeks in the outpouring of public sympathy for the Windrush generation. Since reaching its peak just ahead of the referendum vote, the amount of net migration from Europe has eased somewhat. Eastern Europe is increasingly fed up with losing its brightest and best to the supposedly better prospects that Britain can offer. Perversely, acute labour shortages have forced Eastern Europe to fall back on its own migrants – mainly from Ukraine in Poland’s case. Mark Rutte, the Dutch Prime Minister, is meanwhile openly calling for the same restrictions on free movement as were denied to David Cameron during his unsuccessful renegotiation. The debate has moved on.

All this leads logically to the conclusion that remaining in the single market – like Norway via the existing ante-chamber of the European Economic Area – would be a far more sensible form of Brexit than continuing with the customs union. Brexiteers are right to think this latter outcome an even worse form of imprisonment than our current arrangements.

Continued membership of the single market would admittedly require significant concessions on ECJ jurisdiction, and it wouldn’t entirely solve the Irish border issue. On the other hand, it would promote a healthier climate in negotiations with the EU and it would better protect our trade with the rest of Europe than any of the alternatives. These include staying in the customs union, and the Government’s own tortuous efforts to negotiate the “broadest and deepest possible partnership” – aspects of which are tantamount to staying in the single market and will require similar concessions to succeed.

Politically, Mrs May has made her choice and boxed herself in. It may require a new prime minister in the shape of one of the Cabinet’s more liberal Brexiteers to pull off the required somersault.

In Candide, the hero eventually abandons blind optimism in favour of resigned pragmatism – “we must cultivate our garden”. Markets are counting on something similar.