A Level Economics 8: Division of Labour and Specialisation

 What are the advantages and disadvantages of specialization?

Advantages of Specialization:

1. Increased Productivity: Specialization allows individuals and nations to focus on specific tasks or industries, leading to improved skills, knowledge, and expertise. This specialization can result in increased productivity as individuals become more efficient in their specialized area. For example, an individual specializing in software development can become highly proficient and productive in coding and programming.

2. Resource Allocation: Specialization enables efficient allocation of resources. By concentrating resources in specific industries or sectors, economies can maximize their utilization. This leads to the efficient use of labor, capital, and other resources, enhancing overall productivity and output.

3. Economies of Scale: Specialization often leads to economies of scale, which occur when larger quantities of goods or services are produced, resulting in lower average costs. Specialized firms can benefit from cost efficiencies and improved production processes, making their products or services more affordable for consumers.

4. Comparative Advantage: Specialization allows individuals and nations to leverage their comparative advantage. Comparative advantage refers to the ability to produce a good or service at a lower opportunity cost compared to others. By specializing in areas where they have a comparative advantage, individuals and nations can engage in mutually beneficial trade, increasing overall welfare.

Disadvantages of Specialization:

1. Dependence and Vulnerability: Overreliance on specialized industries can create vulnerability and dependence on specific markets or sectors. Economic shocks, changes in demand, or technological disruptions can significantly impact specialized industries, leading to economic instability and job losses. For instance, an individual specializing in a declining industry may face difficulty finding alternative employment.

2. Reduced Diversity of Skills and Knowledge: Specialization often requires individuals to focus on a narrow set of skills, limiting their versatility and adaptability. This reduced diversity of skills and knowledge may pose challenges when transitioning to different roles or industries. Moreover, in the face of rapid technological advancements or market shifts, individuals with specialized skills may find it difficult to adapt to new demands.

3. Unequal Distribution of Benefits: Specialization can lead to income disparities and unequal distribution of benefits. Certain specialized occupations or industries may offer higher wages and economic advantages, while others may face lower wages and limited opportunities. This can result in social and economic inequalities within societies.

4. Overdependence on Global Trade: Specialization can increase an economy's dependence on international trade for essential goods and resources. While trade offers opportunities for growth and access to a broader range of goods, it also exposes economies to risks such as trade barriers, geopolitical tensions, or disruptions in global supply chains. Overreliance on specialized exports can make an economy vulnerable to external shocks.

In summary, specialization brings advantages such as increased productivity, efficient resource allocation, economies of scale, and the ability to leverage comparative advantage. However, it also carries disadvantages including dependence and vulnerability, reduced diversity of skills and knowledge, unequal distribution of benefits, and potential risks associated with global trade. Balancing specialization with diversification can help mitigate some of these disadvantages and promote long-term economic stability and resilience.

A Level Economics 7: Production Possibility Frontier

Discuss the connection between long-term economic growth, productivity changes, and shifts in an economy's PPFs. Explain how advancements in technology, increased efficiency, and investments in human capital can contribute to outward or skewed shifts in the PPFs. Provide relevant examples to support your explanation.

Long-term economic growth is closely linked to productivity changes, and these changes can lead to shifts in an economy's production possibility frontiers (PPFs). Advancements in technology, increased efficiency, and investments in human capital play crucial roles in driving productivity growth, which can result in outward or skewed shifts in the PPFs.

1. Advancements in Technology: Technological progress is a key driver of long-term economic growth. Innovations, new inventions, and the adoption of advanced technologies can significantly enhance productivity by improving the efficiency of production processes. For example, the invention of the steam engine during the Industrial Revolution revolutionized manufacturing and transportation, leading to an outward shift in the PPFs of countries that embraced this technology.

2. Increased Efficiency: Improving efficiency in resource allocation and production methods can also drive long-term economic growth and shift the PPFs outward. Efficiency gains can arise from factors such as process improvements, better management practices, and specialization. For instance, if a country implements streamlined supply chains, adopts lean production techniques, or optimizes resource allocation, it can produce more output with the same amount of resources, resulting in an outward shift in the PPFs.

3. Investments in Human Capital: Human capital refers to the skills, knowledge, and capabilities of the workforce. Investments in education, training, and health contribute to the growth of human capital, leading to higher productivity levels. An educated and skilled workforce can employ advanced technologies, adapt to changing market demands, and drive innovation. For example, countries that invest in quality education and provide opportunities for lifelong learning can experience significant productivity growth, which translates into an outward shift in the PPFs.

These factors, advancements in technology, increased efficiency, and investments in human capital, can contribute to both outward and skewed shifts in the PPFs. An outward shift represents an expansion in an economy's production possibilities, allowing for increased output levels of existing goods and services or the production of new goods and services. Skewed shifts occur when there is a disproportionate improvement in the production capabilities of one good relative to another, reflecting changes in comparative advantage due to factors like specialization or resource availability.

For instance, let's consider an economy that heavily invests in renewable energy technology and implements policies to promote clean energy production. As a result, the economy experiences a significant increase in the productivity and efficiency of renewable energy production. This leads to an outward shift in the PPF, enabling the economy to produce more renewable energy while maintaining or even reducing the production of traditional fossil fuel-based energy.

In summary, long-term economic growth is intertwined with productivity changes, and advancements in technology, increased efficiency, and investments in human capital are key drivers of productivity growth. These factors can contribute to outward or skewed shifts in an economy's PPF.

A Level Economics Essay 15: Productivity and PPF

 "UK IMMIGRATION CONTINUES TO RISE" - Using diagrams explain, in each case, how changes in population and agricultural productivity may affect an economy’s production possibility frontier.

Production Possibility Frontier (PPF) represents the boundary or curve that shows the maximum potential production combinations of two goods an economy can achieve, given its available resources and technology. It illustrates the trade-off between producing different goods or services.

Productivity refers to the efficiency with which inputs, such as labor and capital, are utilized in the production process to generate output. It measures the amount of output produced per unit of input. Higher productivity means more output can be produced with the same amount of resources or the same level of output can be achieved with fewer resources.

1. Changes in Population: When there is a change in population, particularly an increase, it can have an impact on an economy's PPF. Let's assume that the population of an economy increases, meaning there are more people available to participate in economic activities.

Diagram:

• Horizontal axis: Quantity of consumer goods
• Vertical axis: Quantity of capital goods

Initially, we have a PPF curve that represents the economy's production capacity based on the existing population. However, with an increase in population, the available labor force also increases. This can lead to a shift in the PPF curve outward, indicating an expansion of the economy's production capacity.

The outward shift of the PPF curve signifies that the economy can now produce more goods and services, both consumer goods and capital goods, due to the increased availability of labor. This can result in higher output levels and an expansion of the economy.

2. Changes in Agricultural Productivity: A change in agricultural productivity can also impact an economy's PPF. Let's assume there is an improvement in agricultural techniques or technological advancements that increase the productivity of the agricultural sector.

Diagram:

• Horizontal axis: Quantity of consumer goods
• Vertical axis: Quantity of agricultural goods

Initially, the PPF curve represents the trade-off between producing consumer goods and agricultural goods, based on existing levels of productivity. However, if there is an increase in agricultural productivity, the economy can produce more agricultural goods using the same amount of resources.

As a result, the PPF curve shifts outward, indicating an expansion of the economy's production possibilities. The economy can now allocate more resources to the production of consumer goods without sacrificing the production of agricultural goods. This can lead to higher output levels and improved living standards.

It's important to note that the diagrams presented here simplify the relationship between changes in population, agricultural productivity, and the PPF. In reality, the impact of these factors can be more complex, as there are other variables at play, such as technology, resource availability, and the overall efficiency of resource allocation. Nonetheless, the diagrams help illustrate how changes in population and agricultural productivity can influence an economy's production possibility frontier.

How to fix the British economy

 Tim Harford in The FT

I recently argued that the UK’s economic performance has been disastrous for 15 years. The consequences are plain to see: people are struggling to make ends meet; taxes are high, yet public services are overloaded; fights over a shrinking economic pie are leading to widespread strikes. All this is taking place at a time of low unemployment, so we cannot simply wait for the business cycle to rescue us. 

If we could somehow improve the UK’s productivity growth rate, all of these problems would become easier to solve, and we could return to the business-as-usual of each generation being able to earn more than their parents, while working less and enjoying better conditions. 

But how? 

Start with a diagnosis of what ails the UK economy. The view from the right is that the UK is suffering from excessive taxes and red tape. This seems implausible. Taxes are certainly high by historical standards, but they have only recently spiked, yet productivity and growth have been disappointing since 2007. And there are plenty of richer economies with higher taxes. 

Nor is red tape to blame. According to the OECD, UK product market regulations are among the most competitive. 

The critique from the left focuses on inequality, but this is an old and mostly separate problem. Like any mixed-market economy, the UK is an unequal society, but income inequality in the UK is slightly lower now than at the time of the financial crisis and has barely changed over the past 20 years. A more relevant manifestation of inequality is the one between global titan London and regional capitals such as Manchester, which remain far behind in terms of value added per worker. 

Then there’s the centrist critique: blame Brexit. Now I am as prone to highlight the idiocies of Brexit as anyone, but unless Nigel Farage has discovered a time machine, a referendum decision in 2016 cannot be blamed for poor productivity performance starting around 2007. Brexit has solved nothing, and by creating barriers to trade with our most important trading partners, along with endless uncertainty, it is demonstrably making the situation worse. But the UK’s economic problems became apparent long before the referendum. 

The slightly tedious truth is that taxes, regulation, inequality and Brexit can all take a little bit of blame, alongside a gaggle of other culprits. (Professor Diane Coyle of Cambridge university has memorably likened the case to an Agatha Christie mystery: everybody did it.) 

To pick a few of these culprits at random, the quality of management in British companies is the worst in the G7, according to research by economists Nick Bloom, Raffaella Sadun and John Van Reenen. The country skimps on investment; total investment was the lowest in the G7 over the four decades preceding the pandemic. As a result, energy and transport infrastructure is run down. The Transpennine railway project is a case in point: a decade of dithering, nearly £200mn wasted and a project which was supposed to have opened in 2019 still exists largely in the imagination. Why? Politicians were more interested in announcing plans than in planning. 

Low investment from the private sector is now a more acute problem than in the public sector. Is this managerial incompetence? A lack of business finance from a too-concentrated retail banking sector? A logical response to the chronic political uncertainties of the past 15 years? 

Then there is the education system. It works well at the top, where British universities are still magnets for talent, but schooling is patchy and many young people, especially from deprived backgrounds, are poorly served. 

Kate Bingham, who chaired the UK’s Covid vaccine development programme, recently wrote in the FT that “short-term pressures are crowding out long-term solutions”. She was pleading the case for the UK’s life-science industry, but she could easily have been describing the British condition. Short-termism is now ubiquitous. For such a venerable polity, we have developed a shocking inability to think beyond the next few weeks. 

The few examples of policy excellence in the past 15 years have been times where our politicians or civil servants have risen to the challenge in a moment of crisis: I would suggest the Brown-Darling plan to prevent the banking system collapsing in 2008, the Johnson administration’s vaccine task force in 2020 and Johnson’s full-throated early support for Ukraine in 2022. Even when the UK government excels, it is not thanks to patient long-term reform and investment. 

It is easy to produce a list of sensible ways forward: modernise taxes to raise more revenue with fewer distortions; improve relations with the EU and streamline UK-EU trade, especially in services; liberalise planning rules to create jobs and cheaper, better homes. But all policy wonks and most politicians know this; nothing ever happens. 

It is sobering to re-read the LSE’s Growth Commission report of 2017. Many of its proposals were not policy proposals, but institutional reforms to keep the politicians away from policy proposals: Bank of England independence, but for everything. Contemplate the recent accomplishments of Whitehall and Westminster, and you see where the Growth Commission was coming from. 

While researching this column, I found a video of the commission’s co-chair, John Van Reenen, in which he described “what we need to do over the next 50 years”. It seemed an impossibly daunting timescale. Then I realised the video had been posted almost exactly 10 years ago. We could have started then. We didn’t, and we’ve gone backwards. We could at least start now.

Why are the rich world’s politicians giving up on economic growth?

 Even when they say they want more prosperity, they act as if they don’t writes The Economist

Dec 14th 2022

The prospect of recession might loom over the global economy today, but the rich world’s difficulties over growth are graver still. The long-run rate of growth has dwindled alarmingly, contributing to problems including stagnant living standards and fulminating populists. Between 1980 and 2000, gdp per person grew at an annual rate of 2.25% on average. Since then the pace of growth has sunk to about 1.1%.

Although much of the slowdown reflects immutable forces such as ageing, some of it can be reversed. The problem is that reviving growth has slid perilously down politicians’ to-do lists. Their election manifestos are less focused on growth than before, and their appetite for reform has vanished.

The latter half of the 20th century was a golden age for growth. After the second world war a baby boom produced a cohort of workers who were better educated than any previous generation and who boosted average productivity as they gained experience. In the 1970s and 1980s women in many rich countries flocked into the workforce. 

The lowering of trade barriers and the integration of Asia into the world economy later led to much more efficient production. Life got better. In 1950 nearly a third of American households were without flush toilets. By 2000 most had at least two cars.

Many of those growth-boosting trends have since stalled or gone into reverse. The skills of the labour force have stopped improving as fast. Ever more workers are retiring, women’s labour-force participation has flattened off and little more is to be gained by expanding basic education. As consumers have become richer, they have spent more of their income on services, for which productivity gains are harder to come by. Sectors like transport, education and construction look much as they did two decades ago. Others, such as university education, housing and health care, are lumbered with red tape and rent-seeking.

Ageing has not just hurt growth directly, it has also made electorates less bothered about gdp. Growth most benefits workers with a career ahead of them, not pensioners on fixed incomes. Our analysis of political manifestos shows that the anti-growth sentiment they contain has surged by about 60% since the 1980s. Welfare states have become focused on providing the elderly with pensions and health care rather than investing in growth-boosting infrastructure or the development of young children. Support for growth-enhancing reforms has withered.

Moreover, even when politicians say they want growth, they act as if they don’t. The twin problems of structural change and political decay are especially apparent in Britain, which since 2007 has managed annual growth in gdp per person averaging just 0.4%. Its failure to build enough houses in its prosperous south-east has hampered productivity, and its exit from the European Union has damaged trade and scared off investment. In September Liz Truss became prime minister by promising to boost growth with deficit-financed tax cuts, but succeeded only in sparking a financial crisis.

Ms Truss fits a broader pattern of failure. President Donald Trump promised 4% annual growth but hindered long-term prosperity by undermining the global trading system. America’s government introduced 12,000 new regulations last year alone. Today’s leaders are the most statist in many decades, and seem to believe that industrial policy, protectionism and bail-outs are the route to economic success. That is partly because of a misguided belief that liberal capitalism or free trade is to blame for the growth slowdown. Sometimes this belief is exacerbated by the fallacy that growth cannot be green.

In fact, demographic decline means that liberal, growth-boosting reforms are more vital than ever. These will not restore the heady rates of the late 20th century. But embracing free trade, loosening building rules, reforming immigration regimes and making tax systems friendly to business investment may add half a percentage point or so to annual per-person growth. That will not put voters in raptures, but today’s growth is so low that every bit of progress matters—and in time will add up to much greater economic strength.

For the time being the West is being made to look good by autocratic China and Russia, which have both inflicted deep economic wounds on themselves. Yet unless they embrace growth, rich democracies will see their economic vitality ebb away and will become weaker on the world stage. Once you start thinking about growth, wrote Robert Lucas, a Nobel-prizewinning economist, “it is hard to think about anything else”. If only governments would take that first step.

BREXIT - The Great Taboo in British Politics

George Parker and Chris Giles in The FT

As he battled to save his job this month, Boris Johnson warned his MPs not get into “some hellish, Groundhog Day debate about the merits of belonging to the single market”. Brexit, he warned his mutinous party in a sweaty House of Commons meeting room, was settled. 

Later that day, Johnson limped to victory in a confidence vote, but only after 41 per cent of his MPs had voted to oust him from Downing Street. He is safe for now but the defining project of his premiership — Brexit — still hangs like a cloud over Britain’s fragile economy. 

Johnson may not want his party “relitigating” Brexit but neither does Sir Keir Starmer, leader of the opposition Labour party, around a third of whose supporters voted Leave in the 2016 referendum. Nor does Andrew Bailey, governor of the Bank of England. Rishi Sunak, the chancellor, would rather talk about something else. Brexit has become the great British taboo. 

But as the sixth anniversary of the UK’s vote to leave the EU approaches, economists are starting to quantify the damage caused by the erection of trade barriers with its biggest market, separating the “Brexit effect” from the damage caused by the Covid-19 pandemic. They conclude that the damage is real and it is not over yet. 

The UK is lagging behind the rest of the G7 in terms of trade recovery after the pandemic; business investment, seen by Johnson and Sunak as the panacea to a poor growth rate, trails other industrialised countries, in spite of lavish Treasury tax breaks to try to drive it up. Next year, according to the OECD think-tank, the UK will have the lowest growth in the G20, apart from sanctioned Russia. 

The Office for Budget Responsibility, the official British forecaster, has seen no reason to change its prediction, first made in March 2020, that Brexit would ultimately reduce productivity and UK gross domestic product by 4 per cent compared with a world where the country remained inside the EU. It says that a little over half of that damage has yet to occur. 

That level of decline, worth about £100bn a year in lost output, would result in lost revenues for the Treasury of roughly £40bn a year. That is £40bn that might have been available to the beleaguered Johnson for the radical tax cuts demanded by the Tory right — the equivalent of 6p off the 20p in the pound basic rate of income tax. 

Despite these sobering figures, Johnson’s complaints about the prospect of “relitigating” Brexit was exaggerated, intended to portray himself as the victim of a putative plot by pro-Remain MPs. In fact, British politicians — and the wider country — are still traumatised by the bitter Brexit saga, and deeply unwilling to revisit it. 

Still, this month has seen the first stirrings of a debate that until now has been buried as the evidence of Brexit-induced economic self-harm starts to pile up. Few are talking about reversing Brexit altogether, but another question is being asked: should the UK start to explore with Brussels ways of softening its edges? 

Show, don’t tell 

Downing Street insisted this week it was “too early to pass judgment” on whether Brexit was having a negative impact on the economy, which could be heading into a recession. “The opportunities Brexit provides will be a boon to the UK economy in the long run,” Johnson’s spokesman said. 

Both Johnson and Sunak insist that it is hard at this stage to separate Brexit’s economic impact from the shock of Covid. In the meantime, the prime minister promotes the “benefits of Brexit”, such as new trade agreements with Australia and New Zealand and the freedom for the UK to set its own rules. 

Sunak has promised a reform of rules in the City of London, including reforming the EU’s Solvency II rules to allow insurers to spend more money on infrastructure projects. He has announced eight new freeports with special tax privileges. 

But economists have not yet been able to find any significant positive impacts of these policies. Some, including Johnson’s patriotic promise to put a “crown stamp” on pint glasses in pubs and to allow traders to sell their wares in pounds and ounces, are primarily symbolic. 

Critics of government Brexit policy are routinely derided. Suella Braverman, attorney-general, last week accused the ITV presenter Robert Peston of “Remainiac make-believe” after he challenged her over the government’s unilateral plan to rip up the Brexit treaty relating to Northern Ireland. Braverman claimed the so-called Northern Ireland protocol had left the region “lagging behind the rest of the UK”. In fact, Northern Ireland (the only area of the UK to remain in the EU’s single market for goods) is the best performing part of the country, apart from London. 

When Bailey appeared before the House of Commons treasury committee in mid May, the BoE governor acknowledged that his predecessor Mark Carney had made himself “unpopular” for saying Brexit would have a negative effect on trade, but that the bank held to that view. 

Kevin Hollinrake, a Tory member of the committee, says Bailey was trying to avoid becoming a political target and was “deliberately avoiding” talking about Brexit. “It’s a singular issue for the UK,” the MP says. “We have changed our immigration rules. It’s about non-tariff barriers. You’ve got to be willing to look at what’s happening on the ground.” 

While some gloomy predictions have failed to materialise, such as former chancellor George Osborne’s 2016 warning of a recession immediately after a Leave vote, there is growing evidence that Brexit is causing more lasting damage to UK economic prospects. 

Ministers are becoming more reluctant to proclaim the economic upsides of Brexit. Kwasi Kwarteng, business secretary, was asked last week at the FT Global Boardroom to list some Brexit benefits. He focused on the UK’s ability to respond swiftly to Russian aggression in Ukraine — “it has substantial benefits particularly in international policy” — rather than on business. Sunak’s allies say the chancellor’s approach is to “show, not tell” on Brexit, pushing through City regulatory reforms rather than giving boosterish speeches on its economic merits. 

The fallout in data 

The first and most obvious economic blow delivered by Brexit came when sterling fell almost 10 per cent after the referendum in June 2016, against currencies that match the UK’s pattern of imports. It did not recover. This sharp depreciation was not followed by a boom in exports as UK goods and services became cheaper on global markets, but it did raise the price of imports and pushed up inflation. 

By June 2018, a team of academic economists at the Centre for Economic Policy Research calculated that there had been a Brexit inflation effect, raising consumer prices by 2.9 per cent, with no corresponding increase in wages. 

Some households, such as those relying on state pensions, were compensated in higher benefits, but the CEPR team found no overall offset with higher incomes. “The Brexit vote delivered a swift negative shock to UK living standards,” they wrote. 

While the UK was still in the EU and during the Brexit “transition phase”, there were no significant effects on trade flows. But this has changed since stricter border controls were introduced at the start of 2021, imposing no tariffs, but significant checks and controls at the formerly frictionless border. 

Economists have used this point in time to contrast how the UK’s trade performance compares with those of other countries before and after the TCA’s imposition. The results have been increasingly ugly, especially for small companies trading with Europe. 

Red tape caused a “steep decline” in the number of trading relationships after January 2021, according to a study by the Centre for Economic Performance at the London School of Economics. The number of buyer-seller relationships fell by almost one-third, it found. 

The same group found food prices had risen as a result of Brexit. Comparing the prices of imported food such as pork, tomatoes and jam, which predominantly came from the EU, with those that came from further afield such as tuna and pineapples, it found a substantial Brexit effect. “Brexit increased average food prices by about 6 per cent over 2020 and 2021,” according to the research. 

Summing up the effects on trade in which imports from the EU have fallen while exports have not risen, Adam Posen, head of the Peterson Institute of International Economics, says “everybody else sees a recovery in trade following Covid and the UK sits flat”. 

The third visible effect of Brexit on the UK economy has been in discouraging business investment. In the first quarter of 2022, real business investment was 9.4 per cent lower than in the second quarter of 2016. That fall was mostly due to Covid, but it had flatlined since the referendum, ending a period of growth since 2010 and falling well short of the performance of other G7 countries. 

Weak investment is a particular worry for Sunak, who sees business investment as the route to greater prosperity. Before departing the BoE in 2020, Carney told a House of Lords Committee that Brexit uncertainty was holding back business investment. Worse, he said, business planning for various Brexit scenarios was taking up a lot of management effort. “Time spent on contingency planning is time not spent on strategic initiatives,” he said. 

Since then, negative perceptions of the UK have continued among business with the chancellor finding he had little bang for his £25bn buck of super deductions in corporation tax to encourage capital spending. As Bailey told MPs last month, the super-deductor was “not at the moment having the impact that was expected”. 

Complaints about high immigration was one of the most contentious issues of the referendum, with a central promise of the Brexit campaign being tougher controls over the number of people entering the country. While net immigration from EU countries has stopped, with effectively no change apparent in the two years to the end of June 2021, net immigration from non EU countries has remained high, with 250,000 in the latest year. 

Collateral damage 

There is, as yet, little appetite among Britain’s political leaders for a return to the EU — even if the other 27 member states were prepared to open the door. Even the pro-EU Liberal Democrats admit reversing course is a long-term aspiration, rather than an immediate goal. 

As part of his attempt to avert a coup, Johnson wrote to MPs this month that he had “created a new and friendly relationship with the EU”. The opposite is true. Brussels restarted legal action against the UK this week over the Northern Ireland protocol: relations are at rock bottom. 

The EU has warned that British scientists will be excluded from the €95bn Horizon research programme as “collateral damage” in the row about Northern Ireland. The prospect of any kind of rapprochement at the moment, at least while Johnson remains prime minister, seems remote. 

But in recent weeks, a tentative debate has started over whether the UK would be better off trying to reach accommodations with the EU to smooth trade in some areas, rather than launching a new front in the Brexit war with unilateral action over Northern Ireland. 

In an article much-discussed at Westminster, the pro-Leave Times columnist Iain Martin wrote this month: “To deny the downsides of Brexit on trade with the EU is to deny reality.” 

Tobias Ellwood, a former Tory defence minister, suggested Britain should rejoin the EU single market to soften the cost of living crisis, and said there was “an appetite” for a rethink and claimed polling indicated “this is not the Brexit most people imagined”. And Daniel Hannan, a leading Tory Brexiter, repeated his longstanding view that Britain should have stayed in the single market under a Norway-style relationship with the EU, while adding that to rejoin it now “would be madness”. 

Anna McMorrin, Labour shadow minister, was recorded telling activists: “I hope eventually that we will get back into the single market and customs union.” She was forced to apologise by Starmer: such talk remains dangerous in political circles. 

Even so, a Starmer-led future Labour government would change UK relations with the EU. The party’s mantra has become “make Brexit work”: rejoining the single market may be off the agenda, but Labour wants to find ways to improve on the bare-bones tariff-free trade agreement Johnson negotiated with the EU. 

Rachel Reeves, the shadow chancellor, told the Financial Times last year that Labour wanted to strike a deal with the EU to reduce the most onerous paperwork and checks on food exports. The party also wants an agreement with Brussels on the mutual recognition of professional qualifications. 

Even among the Eurosceptics in Johnson’s cabinet, there is now an acceptance that the UK should be seeking to rebuild economic relations with the EU, including in areas like the Horizon programme, to avoid exacerbating the looming cost of living crisis. 

“Would I like to be in a better place on Brexit?” asked one pro-Brexit cabinet member. “Yes, absolutely. But we’ve got to find a way of doing it without it looking like we’re running up the white flag and we’re compromising on sovereignty.”