THE CASE FOR BREXIT


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On 23 June 2016 the British public will vote on the “once in a generation” question, regarding our membership of the EU. Boisdale Life believes in opinion and debate, and our restaurant tables have been abuzz with EU exchanges. In our exclusive look at the arguments both for and against, we asked six prominent figures to argue the case – including a Tory MP who wants to remain and a Labour MP keen to leave! CEO of Capital Economics, Roger Bootle kicks-off the conversation and argues strongly the economic case for leaving the European Union.

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There are three main categories of argument supporting the case for the UK to leave the EU, relating to economics, migration, and sovereignty / democracy. Each deserves careful consideration but in the end the third of them holds the key to everything.

 

THE ECONOMIC BACKDROP

Ironically, when we joined the EU in 1973, and again when we voted on continued membership in 1975, it was widely believed that economic matters were the predominant issue.

We joined what was widely referred to as the “Common Market” and most people believed that this had very few implications for sovereignty and the role of the UK’s political institutions.

The economic argument was blissfully simple: the UK had experienced along period of relative economic failure. By contrast, the six continental members of what we now call the EU had enjoyed a burst of rapid growth. As we know, the British establishment likes clubs. It was persuaded that membership of this European club was somehow transformatory.

As so often with the British establishment’s judgements, this one was decidedly curious. For hardly anyone seems to have noticed that just about every other developed country had grown at a faster rate than the UK – indeed, at just about the same rate as the Common Market countries. The outlier was not the Common Market, but the UK.

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In subsequent decades, this pattern of relative success changed. The impulses which had driven the original six member countries towards higher rates of economic growth – the recovery from wartime destruction and the movement of millions of people from agriculture into more productive industry – were fading. Then, in the 1980s, the UK embarked on a programme of radical reforms which greatly improved its relative economic performance. By the time that the euro was formed in 1999, Britain was already slightly outperforming most of the rest of the EU. Subsequently the gap widened significantly as the single currency proved to be just the disaster that some of us had forecast.

 

WEIGHING ECONOMIC COSTS AND BENEFITS

So much for the history. From where we stand today, the economic arguments for and against leaving the EU are finely balanced. The main advantages we get from membership are the ability to sell into the “single market” without let or hindrance, and without facing the EU’s external tariffs, and the EU’s clout in negotiating international trade deals. Our main losses from EU membership derive from the costs of EU regulation and the annual membership fee that we have to pay to the EU, which amounts to about half to three-quarters of a % of GDP.

Actually, it seems that the advantages of belonging to the single market are not that great, as witnessed by the fact that umpteen countries around the world, from the mighty United States to tiny Singapore, manage to sell successfully into it without being members. Nor, by the way, do they seem to be troubled by not having a seat at the table when EU regulations and standards are framed. Indeed, in many cases the rate of growth of their exports into the single market has been greater than ours. Furthermore, it seems as though the advantages of the EU’s clout in trade negotiations are pretty minor. Many small countries around the world have concluded more and better free trade agreements than the EU has. For clout isn’t everything. The difficulty of reaching agreement between 28 member states, each with different interests and preferences, coupled with the caution induced in prospective trade partners by the sheer size of the EU, appear to more than offset it.

Although different economists judge the relative weight of these factors differently, it seems to me that the balance is likely to be quite small, one way or the other. Nevertheless, there is another economic factor that I think is highly significant. Because the EU’s recent growth rate has been low compared to almost all developed economies, its share of the world economy has been falling sharply. Given the combination of continued slow productivity growth and very poor demographics, its share is likely to fall a good deal further. The EU has already made some appalling economic decisions, including the Common Agricultural Policy and the introduction of the euro. Heaven knows what further blunders lie ahead. Why should Britain want to keep itself shackled to a corpse?

 

MIGRATION MOVES UP THE AGENDA

The subject of migration is surely going to play a major role in the coming referendum. Yet it played virtually no role at all in discussions leading up to the UK’s 1973 entry, nor in the debates surrounding the 1975 referendum. It is not difficult to understand why. Although the free movement of people was one of the freedoms laid down by the Treaty of Rome in 1957, it was not believed that this would cause the UK any significant problems.

Indeed, it would be beneficial if people could relocate themselves in different member countries in order to perform different jobs, in keeping with their preferences, skills and the distribution of job vacancies. This was just another example of the benefits stemming from free markets – and the bigger the market the better. No one imagined that this freedom would lead to the mass migration of people across borders.

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It is thoroughly reasonable for countries and their people to be concerned about the level of immigration. Even though some immigration is probably good for economic dynamism, the numbers are critical. If a country has no effective control on the number of people coming in then, quite apart from social cohesion, this risks creating chaos and over- crowding in all sorts of public services, including health, as well as placing great strain on the housing market.

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The early members of the EU were all at similar stages of economic development and therefore with similar standards of living. By contrast, later extension of the Union to the east encompassed many former members of the Soviet bloc. Most of these countries were relatively poor and, once in the EU, their citizens had a clear motive to move westwards. Many of them did.

The total number of EU citizens having the right to settle in the UK is now over 500 million, compared to 280 million in 1973. What’s more, the EU has not finished with expansion. Several countries in the Balkans, including Serbia, with a population of 7 million, are knocking at the door. Meanwhile, Turkey, with a population of nearly 80 million, has been in negotiations with the EU for some time.

Furthermore, the migration issue has acquired added importance through the huge number of refugees fleeing the conflict in Syria and Iraq, potentially bolstered by umpteen millions more from further east, as well as from Africa. For any individual EU member, its borders are now only as secure as the most porous borders among the other 27 members of the bloc. And the signs are that the most porous borders are very porous indeed.

Nor is this just a matter of lax enforcement. It is easy to imagine that other EU countries might reasonably take a different attitude to the absorption of large numbers of refugees. Mrs Merkel’s apparently generous gesture of welcoming about 1 million migrants into Germany last year was surely informed by both Germany’s continuing guilt about the Second World War, and a background perception that the German economy is due to encounter serious difficulties resulting from the prospective sharp fall in the German population.

Neither of these points applies to the UK. With the euro we have seen how disastrous a one-size-fits-all monetary policy is. Why would we want to subject ourselves to a one-size-fits-all migration policy?

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SOVEREIGNTY AND DEMOCRACY

It is doubtful whether the man on the Clapham omnibus pays “sovereignty” much heed – at least when the issues are clothed in that word. But being able to frame our own laws as well as the electorate being able to kick out politicians who do not meet with its approval do resonate with most people – unsurprisingly. They are two fundamental attributes of a free, democratic country. We have lost both. We desperately need to regain them.

The majority of legislation now originates in Brussels and EU law is superior to UK law. The European Commission, which is the driving force behind most of what happens in the EU, is unelected. (I might also add that it is unelectable.)

True, the European Parliament is a nominally democratic body in that its members are elected by popular franchise. But, partly because of language barriers, there are no genuine EU-wide political movements. Moreover, the electorates of Europe are left completely unstirred by the Parliament’s deliberations. Indeed, in European elections voter turnout is risible. Why should we in the UK, the originators of the rule of law and parliamentary democracy, be ruled by an unelected bureaucracy, “supervised” by a tinpot assembly?

I don’t think that we were wrong to join what we now call the EU. Indeed, in the 1975 referendum I voted to stay. But since then things have changed radically: we’ve changed, the EU’s changed and the world’s changed. John Maynard Keynes once said: “When the facts change, I change my mind. What do you do?” It is a question that everyone intending to vote in this referendum should ask themselves – and those who would like to be regarded as their leaders.

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