Leaving the EU is nicknamed “Brexit” and advocates to do so nicknamed "Brexiteers". Those wishing to remain are termed "Remainers".
I have now attended a debate with leading economists speaking on both sides of the Brexit argument, plus a debate with politicians including arch-Brexiteer and international businessman John Redwood MP. They have spoken. I have considered. What have I decided? There’s a few weeks till the vote itself, enough time for something to happen to change my mind. But what follows is my view so far.
INTERACTION BETWEEN THE EU, EEA, EURO AND OTHER INSTITUTIONS
- The European Union (EU) consists of 28 countries in western Europe plus recent joiners from eastern Europe, including the UK but excluding:
- The Eurozone (EZ) is those countries that have adopted the Euro as their currency. At the foundation of the Euro in 1999, three EU countries dd not participate:
- UK, still retaining Pounds Sterling as its currency
- The European Economic Area (EEA) is the EU plus Norway, Iceland and Lichtenstein.
- Membership of the EEA and/or EU requires "Free Movement of People" (FMOP) to allow workers to follow and fuel economic activity as it develops in different parts of the EEA (much like people can move around the UK):
- Norway, for example, has accepted FMOP and is a proper member of the EEA. But they have no representation in the EU, and therefore no say on the regulations affecting Norway's trade with the EEA (the "Norway Model")
- Switzerland has a strong history of independence, and have not accepted full FMOP. They are therefore not able to be members of the EEA, but are members of the single market in a limited capacity (the "Swiss Model")
- The Schengen Agreement is where border controls no longer exist between countries in continental Europe. As a consequence of their surrounding sea, three countries chose not to join, but retain the right to check passports of everyone entering the country:
- UK, which therefore still retains some control over its borders compared to Schengen countries
- Eire (though the border with Northern Ireland is open)
- The European Commission in Brussels is the civil servants that set trade regulations, set other regulations such as Data Privacy, administer grants and administer other aspects of the EU. The UK is well represented, alongside other EU countries. It is understood this representation would be lost if the UK were to leave the EU. Like Norway and Switzerland, the UK would have to simply accept any regulations applying in the EEA as an export market.
- The European Parliament is the body of representatives directly elected by EU citizens, and known as MEPs. They have increasing power over the laws emanating from the Commission.
- The European Court of Justice (ECJ) is the court responsible inter alia for ensuring each EU country complies with EU regulations.
- The European Court of Human Rights (ECHR) is completely separate from the EU. However leaving the auspices of the ECHR would require Brexit, as signing up to the ECHR is a condtion of EU membership
- Brexiteers say the UK could negotiate exclusion from FMOP, whilst enjoying either full EEA membership or an equivalent trading relationship with the EEA countries. Certainty in this regard is a central assumption of the Leave campaign. For example, John Redwood looked me in the eye when he said it would definitely happen.
- However the recent re-negotiation attempts led by David Cameron suggest FMOP is an unmoveable condition for membership of the EU, and also the EEA. Given the UK's physical proximity to the EEA countries, it is likely to be a condition of any other free trade agreement that might be struck with the EEA
- In my view the UK would not have sufficient negotiating clout fot the EEA to agree anything else. Removal of FMOP is at best a maybe, not a certainty.
Here is a necessarily complex but nonetheless useful picture of the countries in each of the areas described above:
If you would like a little more background on the European institutions, click here.
THE KEY ASPECTS IN THE LEAVE/REMAIN DECISION
1. Democracy and UK Sovereignty
2. Economic Consequences
DEMOCRACY AND UK SOVEREIGNTY
- The EU organisations are not democratic in anything like the same way as Westminster. The beauty of democracy is not only who to vote for, but the opportunity to vote AGAINST what is not liked That is not so easily available in the EU
- Too many of the senior positions in the EU are posts not elected by EU citizens directly . Only today I have read about Germany trying to squeeze more Germans into influential EU posts
- The wars in Europe of 1914-18 and 1939-45 were to stop German dominance. It’s ironic but perhaps inevitable that German industrial strength now makes Germany the most dominant country in the Eurozone, with its leaders calling the shots. Do we want Germans we haven’t elected running the EU of which we are a part? No.
- The “one size fits all” policies emanating from the unelected Commission in Brussels do not necessarily suit the UK. Better to set our own policies and regulations..(Though arguably policies set in Westminster for the whole UK are also just as much a compromise for each area.)
- Indeed the constraints of needing to comply with European dictats make it very difficult for our elected representatives in Westminster and the various government departments to do their job the way they would like. One reason why people who have been in ministerial positions are so against the EU.
- In particular, the UK cannot strike its own trade deals with the likes of the US and China, as some European countries outside the EU have done. We currently have to do so under the auspices of the EU, with inevitable dilution of the UK’s interests.
- Leaving the EU would also potentially allow the UK to re-join influential world bodies in its own right, such as the World Trade Organisation, not just as a small part of a 28-nation EU.
- The rest of the EU is a very major export market for the UK. UK manufacturers and service providers would need to comply with EU regulations in those export markets. Easier to use the same regulations in the UK, i.e. accept the EU regulations in the UK. That would also make it easier for UK businesses to start exporting.
- Leaving the EU would mean we have no representation in the Commission nor other EU bodies with influence over those regulations. The UK now has many people in senior and junior positions in the EU Commission in Brussels that can look after the UK’s interests. The UK would have no such influence if it left the EU.
- America has already said they do not have the interest (and probably resources) to do a trade deal with the UK, until after one has been concluded with the EU. The UK would have to wait.
- America wants us in the EU for this and many other reasons. Indeed it is not clear that the UK could necessarily be at the top table of global organisations in our own right. Outside the EU is risk of the UK having less influence globally, as well as far less influence in the EU
- It is unclear how many years it will take to do useful trade deals with important countries outside the EU. Certainly any potential benefits of Brexit in this regard will be delayed.
- Brexit would require a new relationship with the EU and EEA. It is likely that any UK government and leader in place after a Brexit decision would go for an interim arrangement that maintains being part of the free market, i.e. becoming a member of the European Economic Area (EEA) like Norway. This would avoid the worst of any initial turmoil in leaving the EU. But this would mean accepting EU rules whilst losing influence, and likely accepting the continuation of Free Movement of People.
- A more detailed transitional plan involving the EEA is known as “Brexcit” (with a C), but has yet to be acknowledged as an option by the UK Government. Indeed that is a key problem with the Leave campaign. There is no clear vision of where we want the UK to go, and how we will get there. Just jump off the ship and see what happens. High risk!
However the economic assessments by the OECD, LSE and many other economists support HM Treasury in suggesting the end-result would at best be no better than remaining in the EU, and potentially far worse. Brexiteers argue about the individual assumptions made, but the concensus of these organisations against Brexit on economic grounds is powerful.
This is because striking a deal with the EU would probably be no better than today, and there would be a delay in achieving any advantages from trade deals outside the EU. In the meantime, investment decisions are being postponed, and many would be scrapped if the UK came out of the EU and/or the EEA.
There would also be economic malaise in the transition, due to uncertainty of what trade deal would be finally struck with the EEA, and consequent deferral of business investment.
Brexit would have an immediate destabilising effect. Rocking the boat may well mean casualties. Individual import/export companies getting into trouble. Investment into the UK deferred. Jobs lost. The economy and the UK’s finances hit hard, when it is already under pressure. We don’t want a self-induced recession! Brexiteers say there is no such risk. Bit people who talk to the bosses of big and small businesses say that a recession is a real worry.
Short term costs of Brexit are therefore sadly inevitable. Incurring such pain can only be considered if there is a pot of gold at the end of the rainbow. That looks unlikely in any reasonable timescale.
On that basis, there is the risk of economic damage from Brexit short term without any strong economic case longer term. In my view this overrides any net advantage of Brexit for democratic and sovereignty purposes.
So far “Remain” looks the better bet. But there’s more to consider.
Conversely we Brits can live, work and retire anywhere else in the EU. A benefit we wouldn't want to lose.
The UK is not however a member of the Schengen Agreement, which has removed frontier borders across the European continent. The UK still operates border controls, which means that non-EU citizens that get into continental Europe CANNOT then move freely into the UK.
Nonetheless there are two levels of concern about immigration:
- There has been significant net migration of people into the UK from the EU, especially the newer countries in Eastern Europe. The influx of Poles, Romanians and others is very obvious across Britain. This tends to drive down the wages and availability of lower skilled jobs, put British tradesmen out of business, and put enormous strain on the country’s infrastructure such as schools, hospitals and roads. Housing is also under pressure, creating rises in house prices and rents that adversely impact British-born youngsters as they try to find a decent rental or get on the housing ladder
- Net migration with countries outside the EU is arguably still too high too, despite such immigration being under the UK’s control
It is calculated that the taxes paid by such immigrants far exceeds the benefits they obtain directly or indirectly. Perhaps a net benefit to the Treasury of over £20 billion per year. That dwarfs the net contribution the UK pays to the EU each year.
The trouble is, the UK Government is not spending the extra that’s needed on infrastructure, and certainly there aren’t enough new houses being built. Is the UK already full?
Other problems with high immigration mirror the effects of immigration from Commonwealth countries back in the 1960s 70s and 80s. More men than women, upsetting the balance of young men and young women in the total community. Plus the formation of ghettoes with cultures that do not necessarily match what the UK would like. The individuals can be lovely, but collectively can be a real problem. The emergence of terrorist cells in such communities is upsetting, to say the least. If only when in the UK they would do as the Brits do!
So there are significant problems with high immigration, especially if it far exceeds emigration to produce high "net immigration"..
That’s not to say that immigration doesn’t produce benefits to the UK:
- The diversity of cultures adds to the allure of living in the UK. The range of cuisine is just one manifestation.
- Immigrants are a valuable resource in a variety of jobs that are not attractive to the indigenous UK population. Who drives the buses, cleans the loos, staffs the NHS and does so many of the menial jobs in the UK? Immigrants.
- Employers also find immigrants much better and keener employees at all levels of skill. It’s not surprising that someone prepared to leave their homeland will likely be more ambitious than someone who has just stayed in the UK.
But what would be the consequences to immigration of Brexit?:
- Firstly if the UK is to have a transitional arrangement being part of the European Economic Area (EEA), then it is virtually certain that would involve the continuation of Free Movement of People (FMoP) with the EU, as discussed above. Brexiteers argue that is not the case, but I do not believe the UK has a strong enough negotiating position to go any further than the minimal concessions achieved in the recent re-negotiation led by David Cameron. There would also be no change with non-EU countries. So no change at all to the immigration position in the short term. That could last for years.
- Assuming the UK would be looking to retain the advantages of free trade in any longer term deal with the EU, then again Free Movement Of People is highly likely to be a condition. It’s a key principle of the EU. Free movement into Europe is also a benefit to Brits that we wouldn’t want to lose.
So Free Movement Of People between the EU and UK is unlikely to be affected by Brexit, in any realistic scenario, or certainly not for years. This is contrary to the central plank of many people advocating the UK leave the EU.
Indeed UKIP have just sent out an email circular with point number one being “Only by voting to leave can we control our borders”. But pragmatically it’s only a maybe.
As to non-EU immigrants, the situation could become much worse. Currently, under the Dublin Treaty, if someone arrives in the EU it is the responsibility of the first country to handle any asylum request, and look after that person whilst that happens. That’s the background to the camps springing up in Calais, under a bilateral agreement with the French, given that the are no border controls across continental Europe.
Brexit would mean the Dublin agreement would no longer apply, and the French may (or may not) withdraw the agreement. In any case United Nations asylum rules would then apply. People, would have to be let into the UK and looked after whilst asylum is considered. That would put additional pressure on infrastructure and public finances. It would also mean that criminals and other undesirables cannot be quickly deported.
So contrary to popular belief, Brexit is unlikely to change the immigration position with the EU, and could make handling immigrants from non-EU countries worse.
When those voters who want to leave principally due to their immigration concerns understand the likely reality, will that element of Leave support collapse? I expect so.
The problem is that it is clear that the EU is in no mood for reform, now or later, and is set on that integration path. It is not in any real sense a “reformed EU” like our PM likes to say. We have to like the EU or lump it, at least as the principle assumption. Any positive change we can achevie in future would then be a bonus.
(As an aside, the creation of the USA took decades, with similar tensions amongst the member states. Yet creation of a highly centralised administration resulted in the most dominant economy in the world. Economically not at all bad, and maybe economically worth compromise by the UK with the EU in due course.)
Maybe it is worth the UK keeping membership of the EU for now and:
- Trying to secure a better deal whilst remaining a member (perhaps as a ‘reward’ for the UK Government campaigning to stay in, as distinct from the recent threat to leave)
- Hold a further referendum should the EU renege on that MoU, or there be any other significant change that is not in the UK’s interest
Would Brexit produce a significant economic advantage? So many organisations and economists are saying the long term picture is at best no better than remaining in the EU, and potentially far worse, dependent on the assumptions made. It is only individual Brexiteers suggesting a major economic advantage in any reasonable timescale to justify the inevitable short-term pain of transition, In my view they are looking through rose-tinted spectacles. That strongly points to Remain.
On immigration, the key Brexit options would likely mean no change in the Free Movement Of People with the EU. This is a major tenet of the free market, and something on which there was virtually no movement during the UK's recent re-negotiation. There is also a potentially higher cost in respect of people from non-EU countries. Brexit could actually make matters worse, and would be very unlikely to make them any better. When that becomes widely understood, a significant portion of Leave support is likely to collapse. Advantage Remain.
Even if immigration could be better controlled, this issue is far outweighed by the economic advantages of remaining in the EU.
There are many other factors we could consider, but none are as significant as discussed above.
When it comes down to it, “It’s the economy stupid”. That points to “Remain”, as do other considerations on balance. For those of us who are Eurosceptic, it is clear that whilst we might prefer to leave the EU in theory, in practice we need to remain in the EU. If we can improve the UK’s position in the EU, all the better, but that’s not an expectation.
There’s then a matter of timing. Arguably there is no good time to leave the EU. But now is certainly not desirable. There’s plenty of other negative pressure on the UK economy, and it is not healthy enough to withstand the likely shocks arising from Brexit, which might well tip the UK into a self-induced recession.
Furthermore, and this is perhaps the clincher, Brexit could trigger exit tensions in other parts of the EU and lead to the collapse of the Euro, given the pressure it is under. That would be economically disastrous for the UK, because it would be disastrous for our customers in Europe. Can we take the risk?
Unless a substantial reappraisal of factors becomes necessary before 23rd June, I will be voting “Remain”. I suggest you do too.
THE FINAL FRONTIER - THE EIRE/UK BORDER
For those living in Northern Ireland, the border with Eire is a major concern. Agreements in recent years mean the border is open. Border posts have been removed. People can cross the border conveniently as if it isn’t there.
In theory this means non-EU immigrants could get into Eire and straight into the UK. However this is too difficult and expensive for most, and the open border does not seem to be a practical problem to date.
What would happen in the event of Brexit? Well we wouldn’t want all those lovely Irish coming in, to the UK, would we?. Nor all those other EU citizens who could get into Eire somewhat more easily than non-EU people. The Eire/UK border would become a real issue and would inevitably need to be closed.
Back up with the frontier posts. Patrolling miles and miles of open country. Recent agreements in tatters.
Brexit would be disastrous.