In an explosive memo, the deputy leader attacked a “series of assertions based on no evidence” that was leaked to the media ahead of a shadow cabinet meeting on the controversy.
Mr Watson said most of the document was “an accurate and fact-based reflection of the state-of-play”, adding: “That is what we have always come to expect from Labour’s staff.
But he warned: “However, the summary section that was leaked to the media bore little relation to the evidence of the main report.”
Mr Watson urged people to “draw your own conclusions” about why only the summary – which argued Labour would not benefit from campaigning for a Final Say vote – was leaked.
In the memo, he underlined the threat to Labour from sitting on the fence, predicting a “catastrophic loss of votes to parties such as the Liberal Democrats and the Greens that could enable a Conservative landside”.
The hopes of many Labour MPs of a fundamental shift to outright support for a second referendum came to nothing last week, when the meeting broke up without agreement on a new policy.
Mr Corbyn restated his existing position that “it is now right to demand that any deal is put to a public vote”, which could be a general election or second referendum.
And he alarmed those pressing for a commitment to campaign for Remain by saying any referendum ballot paper should contain “real choices for both Leave and Remain voters”.
In the memo, revealed by the Politics Home website, Mr Watson criticised the diluting of the pro-Remain message in an 18-page analysis by Greg Cook, Labour’s polling expert.
“I fear this episode is another part of a process that for too long has concealed the risks of maintaining our current Brexit ‘strategy’ from the shadow cabinet, MPs and the wider party,” the deputy leader wrote.
“The truth is that all the evidence from recent elections and independent polling is that our current position on Brexit – the defining political issue of our time – has confused many of our voters, lost us the support of many others and significantly damaged our party’s prospects.”
The shadow cabinet is expected to debate Labour's Brexit position again at its regular weekly meeting on Tuesday, with Final Say supporters still hoping for a decisive shift.
They want Mr Corbyn to make a full-throated declaration that he will campaign for another referendum – and, crucially, to remain in the EU if it takes place.
However, the leader has floated the option of copying Harold Wilson’s approach, during the 1975 referendum, when the then-leader took no position, allowing both wings of his party to fight it out.
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