UK Labour Party Suffers Biggest Split In 38 Years Over Corbyn Anti-Semitisim, Brexit Bungle

In what is the biggest split in Labour since the “gang of four” senior figures left the party in 1981 to form the Social Democratic party (SDP), seven Labour MPs, including Chuka Umunna and Luciana Berger, have resigned from the party over Jeremy Corbyn’s leadership, saying they will sit as a new independent group.

In a press conference on Monday, the MPs – who also include Gavin Shuker, Angela Smith, Chris Leslie, Mike Gapes and Ann Coffey – said Corbyn’s Labour had radically departed from their values.

The main drivers behind the backbenchers decision to split seem to be:

1) the anti-semitism row within the Labour party and;

2) the lack of support for a second referendum (the awfully titled People's Vote).

As The Guardian reports, Umunna, the former shadow cabinet minister, said the established parties “cannot be the change because they have become the problem”, and put party interests above the national interest.

He said it was “time we dumped this country’s old-fashioned politics” and created an alternative.

Berger, the MP for Liverpool Wavertree, said it had been a “difficult, painful but necessary decision” for them all, before criticising Labour for becoming “sickeningly institutionally racist”.

The Jewish MP, who is heavily pregnant and has been subject to antisemitic abuse, said she had become “embarrassed and ashamed” to be in the Labour party because of its failure to tackle antisemitism in its ranks.

“I am leaving behind a culture of bullying, bigotry and intimidation. I look forward to a future serving with colleagues who respect each other,” she said.

Leslie, the MP for Nottingham East and a former shadow chancellor, said Labour had been “hijacked by the machine politics of the hard left” and was no longer the party he and others had joined.

Gapes said he was “sickened that Labour is now a racist party” and he believed its leader was “on the wrong side on so many international issues” from Russia to Syria.

In response, Corbyn said he was “disappointed that these MPs have felt unable to continue to work together for the Labour policies that inspired millions at the last election and saw us increase our vote by the largest share since 1945”.

“Labour won people over on a programme for the many not the few – redistributing wealth and power, taking vital resources into public ownership, investing in every region and nation, and tackling climate change,” he added.

“The Conservative government is bungling Brexit, while Labour has set out a unifying and credible alternative plan. When millions are facing the misery of universal credit, rising crime, homelessness and poverty, now more than ever is the time to bring people together to build a better future for us all.”

Finally, as Mizuho's Peter Chatwell concludes, if this group is to be called "The Independence Group" (contradicting the unionist agenda they surely wish to represent) then we think they are merely succeeding in:

  1. marginalising Remainers into a new entity (we assume some Tory Remainers will join in the future)

  2. leaving the Conservatives and Labour with clear pro-Brexit mandates

The creation of another political party then this will fragment UK politics further at this point, at a time when a mandate for some party to do something is what is needed --> greater tail risks.

This looks awfully like a bungled mess of the creation of a new party, which, we think is more likely to be GBP negative, gilt positive, by giving Brexit a less effective opposition.

We strongly doubt that these departures, if they happen, do lead the Labour party to back a second referendum (dropping their attempts to create a General Election). If the Labour party was to surprise us and change stance, then the kneejerk reaction should be GBP positive, gilt price negative.