Tag Archives: EU

Don’t Blame the Judges, it’s the Politicians who are Idiots..


Yesterday the High Court ruled that the government cannot use Crown prerogative to give notice to leave the EU under Article 50.  Unlike most who are commenting on this, I have read the judgement (here).  Although I am no lawyer, the prose is clear and the point simple.

Firstly, Laws can only be made, amended or repealed by Parliament (i.e. both the House of Lords and the House of Commons).  In this context, a law is anything that affects the rights of a UK citizen.  However, the Crown (i.e. the government) can do things that don’t affect the rights of UK citizen without reference to Parliament, including entering into Foreign Treaties and going to war.  Now these actions may well affect the wealth, health and happiness of the UK citizens, but they don’t affect their rights and so don’t require Parliamentary approval.

Although our membership of the EU is by Treaty (currently the Lisbon Treaty) it also grants the UK citizen rights in UK law, courtesy of the European Community Act 1972, as amended.  Triggering Article 50 means that, absent any agreement with the EU to the contrary, the UK would leave in 2 years.  some of the rights granted in ECA 1972 would expire, and that therefore means that Article 50 cannot be triggered Crown privilege.  Hence the ruling.

Now, there are grounds for arguing that the ruling is wrong, or that the case should not have been heard. No doubt the government will make them on appeal. It may or may not win.  However, as we stand we have a population that voted to leave, a government that undertook to enact the result of referendum and a Prime Minister who is now hamstrung.  The situation is exacerbated by the bleating of self-interested politicians opposed to Brexit (and their acolytes in media and elsewhere) who are currently conflating the need for Parliamentary approval to trigger Article 50 with a line by line negotiation of an exit, or at least setting out the exit terms.

The ruling does not of itself require Parliamentary oversight of the exit process.  All it requires is an Act to trigger Article 50, accepting that doing so will cause the loss of certain individual rights (most of them are quite arcane or silly, like losing the right to elect an MEP as the main rights accruing to EU citizens are already incorporated in UK law).  Such an Act would probably get through the House of Commons, but it might stall in the House of Lords – although Mrs May could solve that by creating 200 or more Brexit peers.  She might also be able to invoke the Parliament Act.

However, all of this is going to take time, and that time is causing uncertainty which in turn is doing economic damage to the UK. It is also frustrating the will of most of the people and is showing in stark relief just how unfit our current Parliament is.  While it would be unprecedented for a referendum to be binding the Referendum Act 2016 could have expressly included wording to allow the use of Crown prerogative – as David Cameron clearly stated he intended to.  But perhaps such an obvious provision was left out on purpose. It remains a scandal that the entire government operated on the assumption that the vote would be to remain.  If it is the case that no consideration was given to how to leave (in a technical, legal sense) as part of the preparation of the Referendum Act then the cabinet of the time were fools, and their advisers incompetents.

While I can see the obvious attraction for Mrs May in winning an appeal, there is a significant chance that the government will lose it – certainly its performance thus far in court has been pretty poor. And it if loses it may lose worse.  I think Mrs May’s best course is to introduce a sort Act, defy anyone in the House of Commons to vote against it (as it is now government policy she can and must whip it).  The House of Lords, which you may recall remains in a state of unreformed idiocy, will then face the choice of obstructing the people’s will and that of their government, or gritting their teeth and passing it.

Tomorrow is the 5th of November.  As Parliamentarians and their advisers head off for their recess they should reflect upon the mess that they have created.

There is only one flavour of Brexit


Thanks to UKIP’s pugilists the party conference season has been more interesting than usual. Predictably the Labour party has gone navel gazing while Tim Fallon (who?) and the Liberal Democrats want a rematch on the referendum – oh the irony. Meanwhile some Tories and some commentators seem to have invented the “Hard” and “Soft” flavours of Brexit. Clearly there has been some weed smoking…
The facts are simple. The result was out. The EU bureaucracy does not want us to leave; nor do many of the member states nor a fair chunk of the UK government establishment. Their solution is to kick the can down the road and just keep talking, pretending the vote never happened.

The EU treaties provide for a simple exit, via Article 50. They do not provide for membership of the single market without the acceptance of free movement. While it is perhaps possible that the EU treaties could be amended to allow this, it is unlikely to happen in any fast time frame. As such a treaty change would probably require ratification by all member states it’s a reasonable bet that it would never pass.

So there is no point in discussing it. Which means that there is no “hard” of “soft” option on Brexit. We just do it. there are some minor discussions to be had within agencies such as Europol, but they are all minor and in most of them we hold the whip had – (“You want access to our intelligence? Then show us your own” etc.) With nothing to negotiate and nothing to agree, we could be gone in six months.

Now, while leaving the EU means leaving the single market there is no reason why the UK could not offer EU members the opportunity to export to the UK tariff free. Given that the UK is a major market for the EU the member states would be likely to rather want that. Particularly the Germans. (The top selling car in the UK is the Ford Fiesta. Made in German. Number 2 is the Ford Focus, made in Germany. In fact seven of the top 10 selling cars in the UK are made in Germany).
Of course, the UK is not a charity so we would request reciprocation – any tariff being charged on any UK export to EU would result in the UK charging tariffs on imports from the EU. The genius of this position is that if gives the problem to the EU to sort out with its remaining member states. While some Eurocrats may want to savage the UK it is unlikely that their paymaster, Mrs Merkel, will be able to survive allowing the EU to destroy the German car industry and prevent it from taking advantage of the UK’s open market policies.

And it does not require a treaty. The agreement would exist de facto, not de jure. Those who remember the Cold War should remind themselves that the entire country of East Germany was never recognised in English (and other) Law. Yes, we noticed their wall and fence. Yes, we prepared to deal with their armed forces and no doubt expended treasure upsetting their regime – but we did not recognise it as a country. In the same vein, therefore, we simply do not have to recognise the Single Market, just deal with it on tariff free terms.

We can adopt a similar approach to passporting, enabling our financial service industry to operate in the EU but outside their regulation. We just apply a higher level and offer the reciprocal to them. For example, we allow Deutsche Bank, BNP and the rest to continue operating in the UK under (effectively) EU regulation provided that NatWest and HSBC may operate in EU, as they do today. We can also point out that bank operations are largely dominated by the Basle conventions, which are voluntary and global, rather than the EU directives. London is the largest financial market in the world. Paris and Frankfurt don’t even make the top 10 and last time I checked most EU currencies and financial companies desperately need access to the vast pool of capital and expertise that exists in London. Again, we make the offer to the member states who can then instruct the EU apparatus.

Having thus solved the problem of Brexit and evaded the (alleged) downsides the government can then turn to a more serious problem.

It is appalling that there was no contingency planning in place to cover the possibility of a Brexit vote. This is an abject failure by the Civil Service. My understanding is that the Cabinet Secretary, Jeremy Heywood, was instructed to prevent any such preparations from happening by David Cameron, citing a similar (apparently) instruction issued by Gordon Brown in the run up to the Scottish Independence Referendum. It was felt, I understand, that making such preparations risked them leaking and demonstrating that the out option was viable.

The result of this is that since Brexit we have had no clear leadership, no action and no plan. This has directly impacted upon the value of the pound and indeed allowed the development of the hard / soft fallacy. This has done material damage to the economy and could even constitute maladministration – which is (broadly) the crime of deliberately governing badly. Mrs May has already had to remind the Civil Service and government machine that Brexit is Brexit and it will happen. She should now take them to task for their abject failure to prepare. “My political masters told me to do it” is not a defence if the instruction was clearly against the country’s interest.

The government can use the time thus saved to return to the very real problems confronting the country; the deficit, public sector productivity and the rest. They may well find it easier to find solutions now that Brussels plays no part in our law making.

Brexit is Brexit, out is out. Just do it.

Cheer Up – Here Comes the Sun….It’s Going to Be All Right


It’s been one heck of a week.  As the settling dust is obscured by the fur and feather of a Tory party leadership spat, reported on by a media that has an ill focused lens I thought it time to just revise where we are, what has to be done and how it should happen.

The simple fact is that a small but clear majority of Britons want out of the EU.  Moreover, they were promised by the Prime Minister that he would initiate the exit via Article 50 if Out won.  So we now have 17 million Britons feeling betrayed, and the rest of the country less than impressed with the integrity of government or political debate.  The EU are pretty unchuffed too, as are remoter parts of the UK and the metropolitan set.  Let’s sift the wood from the trees.

Why did we vote out?

From Lord Ashcroft’s exit polling (which is usually OK), the reasons for voting out were:

  • Sovereignty
  • Immigration
  • Concern about EU expansion of powers of geography

It seems unlikely that any acceptable exit will include anything less than cessation of the EU freedom of movement (which I’ll return to), as some wannabe PMs risk finding out the hard way.

As regards the generational split, it’s hard to take seriously as although 73% of 18-24 year olds voted to say, according to Sky data published in New Statesman on 36% of them could be bothered to vote.  Notwithstanding a fatuous Facebook petition the result stands as a clear instruction from the UK electorate to Parliament.  The fact that people over 45, whom in any sensible culture would be considered wiser people, voted overwhelmingly to leave.  So we are quitting.  The next question is how.

What next?

There are two ways of leaving.  One is via Article 50, which allows for up to 2 years to negotiate a settlement.  This can be done by a Prime Minister without requiring a vote in the House of Commons.  The other is to repeal the Acts of Parliament that enabled membership, but that requires a vote in the House of Commons which might well not pass.  It would also give no opportunity for negotiating a settlement or controlled exit.

So What Needs Negotiating?

As the vote has rejected free movement the UK needs to agree a mutual visa regime for EU nationals.  That is, actually, trivial as EU nationals become the same as anyone else.  According to ONS data there are some 200,000 US citizens resident in the UK. Moving EU nationals into this regime is no big deal.  Ensuring UK citizens currently resident overseas are secure is also no big deal.  The only problem with ending free movement is that it has hitherto been a condition of tariff free access to the EU Single Market (for every country other than Liechtenstein), including for EEA members.

The single market (a misleading term) is worth about 13% of our GDP.  If we had to pay tariffs the rate would be around 2% (various sources, try the World Bank).  Frankly if you are selling a product to a customer and there isn’t room for a 2% price hike or profit cut you will be going bust soon anyway.  Moreover, in the short term the depreciation in the pound already has it covered.  Bottom line is that tariff free access is not worth it.  As I have blogged before, we pay £2 in EU membership fees to secure £1 in tariff reduction.  And, of course, tariffs cut both ways.  EU exports more to us than we do to them, so we might make £5 billion a year out of import duties.  Every little helps, but it’s a rounding error.

There is just one fly in the argument that we don’t need a single market, and that is passporting.  This has nothing to do with people moving; it’s all about finance.  And it’s important so switch on.

Passporting

In 2007 an EU directive called MiFID came into force, replacing an earlier directive.  MiFID is the Market in Financial Instruments Directive, which does what is says on the tin.  You may remember that there was a financial disaster the next year, so MiFID 2 is on the way – although it has problems.

Specifically, MiFID regulates how banks (and other financial industries) are authorised.  A bank authorised in the UK can use that authorisation to operate in any other EU country (it could do this in a similar way under the earlier directive).  In the absence of passporting, a bank would have to be regulated in each country that it operates – and complying with those regulations costs money and assets (known as regulatory capital).

So, as it stands, Brexit means the UK withdraws from MiFID and all the banks doing business in the UK have to open a branch in an EU country and conduct their EU operations from there.  As much of the UK economy is based on international finance that is bad for the UK’s GDP, and good for those who covet London’s pre-eminence as the world’s global financial centre (i.e. the French and the Germans).  So it seems the cost of controlling immigration from the EU may be the loss of The City’s pre-eminence, or at least some of its profit, which would be very bad.

I’m not so sure that this should be a concern.  For a start, London – like New York, Hong Kong and Singapore is a financial centre.  It does it all banking, share trading (the stock exchange), commodities trading (in US this is done in Chicago not New York), insurance (in Germany banking is in Frankfurt but insurance is in Munich), shipping and so on.  Finance is interconnected so if you were going to move from the City or Docklands quite where to go is not obvious – but you may have to go to more than one location.  And that move won’t be cheap.

Moreover, most of these destinations lack the hard and soft infrastructure to cope with a sudden influx of global firms.  Much as Dublin might want it there simply isn’t room to accommodate the workers.  And let’s not forget that the EU member states rely heavily upon London to provide them the finance they need to prop up the Euro and expand their faltering economies.  Making life more difficult or expensive for the finance industry is in no-one’s interest, although it is the biggest stick in the EU’s negotiating option.

Of course, MiFID only applies to the EU.  Banks and most other financial organisations are global.  Banks are regulated globally under the Basel Accords, which determine how much capital they must hold etc.  These global agreements are administered by a committee comprising the G-20 countries plus some others with heavy banking involvement (e.g. Hong Kong and Singapore).  There are, perhaps surprisingly, no direct powers of enforcement – they are accommodated in national or EU laws.

There is a strong case for moving MiFID to a similar structure, why should 28 (now 27) countries required different regulations to the rest of the world?  And remember, post Brexit the EU is under 20% of the world’s economy (and that is falling).

Given that the UK is leaving, that the UK’s population has rejected uncontrolled migration financial institutions have the choice of moving to multiple other locations, which will take time and cost money or finding a better idea.  The EU’s choice is between inhibiting the flow of finance to its struggling economies or find a better idea.  The other 27 countries face the choice of seek to seduce City Firms into your jurisdiction (at odds of 1 in 27 of success) while interrupting the flow of capital, or find a better idea.

The better idea will be to separate MiFID into an institution and run it like that.  Original members are EU28, but membership of MiFID is not conditional upon EU membership, simply on complying with its rules.  Rather than waiting for the EU to do it (which they won’t) we just sit down with all the major finance players and sort it.  Better, let’s make it a global standard and call it the Junkers Agreement (never underestimate the vanity of a bureaucrat).  Base it somewhere with decent skiing or great beaches and away we go.  As all UK and EU financial institutions are MiFID compliant we can continue passporting while they merge into global MiFID.

That looks interesting, but might be tough to pull off.   Why are the British so against immigration?  Surely they can be won round?

Migration Economics

The up side of migration is well rehearsed and clear.  It enables countries to access skilled labour when it needs it without the cost and delay of having to train it from scratch, nor nurture it from the cradle until it became economically useful.  Historically the economies of the US, Canada and the Antipodes have benefited enormously from significant immigration from Europe, including the UK.  The chief benefit is high economic growth.

However, in the UK it is a little different.  Immigrant labour, i.e. the work of those who come to the UK and settle here permanently, is indeed helpful.  What does not help is short term labour from EU countries who are here to support their families in their country of origin.  The reason is simple.  The immigrant who has determined that their future is in the UK invests in the UK, keeps all their wealth in the UK and spends in the UK.  This spending generates more income for the vendors of the stuff the immigrant buys, and that in turn triggers more spending.  National turnover increases almost exponentially from the creation of a single immigrant job. This is known as the multiplier effect.

Migrant labour is different.  The migrant is here to work hard, pay tax and then return to his homeland with cash in his pocket.  Sure, the original job gets done and tax gets paid.  But rather than building a home and life, the migrant’s mission is to live as cheaply as possible, so he spends the minimum -sharing rooms rather than a house and purchasing little beyond subsistence living.  An immigrant may earn £10 per hour, pay £3 in tax and spend £6 of his remaining £7.  The migrant might spend perhaps £2.50 of the remainder, leaving £4.50 untouched.  The UK economy loses £3.50 of new sales to trickle down, so the multiplier effect is much weaker.

This may explain why UK growth is not as strong as it should be.  Many of the jobs created have been filled by migrants, who are hoarding and exporting the cash to other EU economies.  Thus there is a weak multiplier effect and growth is slower.  It is unfortunate that the government seems to have no reliable data on immigration, but this would explain why it’s taking so long for the economy to grow and why Osbornes sums are wrong.  Migration is part of the problem.

It seems to me therefore that the government can’t escape from the need to control migration; the people want it and the economy needs it.  However, this is not likely to be found compelling by the EU member states, and if they don’t play ball then the financial institutions will have to set up at least some offices in the EU27, which will cost the UK some income.  The UK needs to find another negotiation tool.

Fret not – it created one last week.

Nextexit

Here is a chart produced by the PEW Research centre from 2016 data collected before Brexit.

EU Approval Ratings by country

The stark conclusion is that the EU is hardly inspiring confidence within the electorates of its member states.  The Poles and Hungarians probably like it because they have high levels of their workers sending home cash from other EU countries.  The Eurozone is struggling to grow and the EU is part of the problem in its abject failure to secure any meaningful trade agreements, in its flawed and inflexible agricultural system and its unaccountably.  Now that the British have shocked their own leaders (but, interestingly, not this PEW report) others.

It may therefore be that the EU has bigger problems than the Euro, which is an astonishing agreement.  It may well be weak and desperate and suffering from an incipient existential crisis.  It is suffering from the delusion that it can make it hard for the UK to leave. Even if it does, what message does that send to the other member state populations.  And if, as is likely and reasonable, we depart on pragmatic terms then others will follow.

In which case we need to play hard ball.  Our line is:

  • UK will no longer allow free movement of EU nationals (or anyone else)
  • We don’t need the single market.
  • We’ve globalised MiFID

The first two will take almost no time to agree; the third we can put into some other entity pending resolution (and we all need that quickly) but as all financial institutions in EU and UK are currently MiFID compliant and everyone needs finance it’s not a block.  Job done.  Bye Bye.  We could get that done in a month which would avoid further harm to the UK.

Ouch – This Hurts

It’s not been a great week for UK PLC.  But in the circumstances, caused more by Cameron’s abject dereliction of duty than Brexit per se, it could have been much, much worse.  We’ll come to politics later.  Let’s deal with what has happened.

The bad, but unsurprising bit was that the pound fell.  No surprise there as lots of people had to close out positions etc. and lots of silly people hadn’t anticipated the vote out.  The FTSE 100 held on, unsurprising as much of its earnings are from multi nationals (we Brits really do global stuff).  FTSE 250, which is more UK and Europe centred, had a harder time.

The interesting bit is the UK Gilt yields fell (which means that the price of UK debt rose – as more people wanted to buy it than sell it).  Read that again.  Post Brexit people were effectively lending the UK money cheaper that pre Brexit.  Now, the ways of the markets are odd and there are many parameters to look at, but if bond investors were worried about the UK’s future they would be selling, not buying.

And the Euro fell against the US dollar.  Which means that investors didn’t view Brexit as healthy for the Eurozone.

So, how much longer will this go on.  Well, until we have a plan of how to leave with an indicative timetable.  Once we have that the markets will be able to stabilise.  We are now suffering not from Brexit, but from political failure.

How Not To Lead

It was unfortunate that the government forbade the Civil Service from preparing any contingency plans.  This, combined with Cameron’s self-indulgent resignation, has achieved the near impossible and added a political crisis and uncertainty to what was always going to be a tad tricky.  The welterweights that inhabit the House of Commons now need to grow up.

Whoever they appoint needs to immediately start Article 50.  I would not be surprised if it was not started by Cameron as soon as the Civil Service has something as the markets and EU need to hear it.  So, of course, do the 17 million who, like me, voted out who were assured by their Prime Minister that he would immediately honour the result.  The fundaments of democracy are now at risk in this country.

Aside from the trustworthiness of the Prime Minster (and Cameron has plumbed depths that make even Blair blush) there is the minor matter of the complete disconnect between the elected representatives and their electorate.  Boris Johnson’s attempts earlier this week to pretend that the UK doesn’t really mind immigration was in brazen disregard of the outcome.  Indeed, quite how so many MPs misread the dissatisfaction with the EU is odd.  Referring to the 43% of social group AB and 50% of C1 who voted out as “swivel eyed loons” or “Little Englanders” seems reckless and, from those who have done little more than a degree and some party work, intensely irritating.  Clearly we need to change how we select out politicians.  That is a debate for the future, but it has been brewing some time.

Mending the nation won’t take so long.  As the full extent of Project Fear becomes apparent many of the remainers will see that they were duped. 43% of remainers made their minds up in the final month of the campaign, 25% in the final week. And what will make them see this?  The future.

Here Comes The Sun

The moment we confirm that we are leaving the private sector can get on with what it does best – creating wealth.  Better than that, as a nation freed of the economic navel-gazing of the EU we can get on and start doing deals round the globe – mostly in the Commonwealth countries.  India is already making overtures – as we share language, legal structures, culture and even cricket we’ll be pushing at an open door.  Better yet, the Indian economy and growth is heavily based in services, which is what we do.  India’s economy is growing at 7.9%, its annual increase in GDP is US$163 billion, compared to US$255 billion (and falling) in EU.  Where would you rather invest?

Finally

I am not saying that this will be easy, and the Cameron tantrum has made things much harder than they need be.  But Brexit has happened; the truth about the EU is becoming apparent and we’re on course to be rid of it.  As a bonus, we have also had a demonstration of how inadequate, self-serving and remote many of our politicians are.  The system is clearly broken but it is our system; we pay for it and it reports to us.

Brexit will prove to be cathartic.

 

My Last Words on EU Referendum


This is my final blog post on the referendum.

I have found the entire debate profoundly depressing. The media coverage has simply intensified that feeling.  Both sides have produced dud numbers and fatuous arguments; very few journalists seem capable of rigorous interview and many columnists, most of all Toynbee, seem to inhabit a world that I do not recognise.  I approach Thursday with one overwhelming thought, and that is that politics in the UK is broken and that must change.  Now.

Continue reading My Last Words on EU Referendum

David Cameron is right – but the war is between us and our politicians


I suppose it was inevitably that someone in the EU debate would mention the prospects of war between European powers.  It is intensely disappointing that it should be the Eton and Brasenose, Oxford educated Cameron.  Either Oxford is not all it is cracked up to be (Cameron was described as “one of the ablest students I have taught” by Professor Vernon Bogdanor – but he could be wrong) or Cameron is both being insincere and treating us with contempt.

Continue reading David Cameron is right – but the war is between us and our politicians

EU Referendum Poll


My experience from blogs, meetings and general discussion is that the mainstream polling does not reflect the public mood.  I reckon its 45:20 in favour of Brexit, (with 35% undecided) which is a long way from what is published in the press, or indeed the current odds offered by on-line bookmakers.  So given the power of WordPress I thought I would conduct my own research. – hence this poll.

 

Leaving The EU Isn’t Rocket Science


Several of the weekend’s newspapers have criticised the Vote Leave campaign for failing to spell out how the UK will actually leave the EU in the event of a vote for Brexit.

Its an odd accusation as the process is set out in Article 50; basically we negotiate.  Talk of the Norwegian or Swiss models is claptrap – we’re the UK and will adopt our on terms.  I covered this in my recently published (and sadly not yet widely read) pamphlet on the EU debate Tilting At Windmills and so have produced the relevant chapter below.  Enjoy.

Continue reading Leaving The EU Isn’t Rocket Science

An alternative to budget commentary…


My objective assessment of which way to vote on 23rd June turned out to require more effort and words than I had anticipated.  At 12,000 words its too long for a blog post so I have uploaded it to Amazon and it should be available in softback and Kindle formats tomorrow, St Patrick’s Day. I will blog the link to Amazon, and have put the summary and conclusions on a new page on my blog site (click here).

Regular readers of this blog may not be surprised that I will still be voting out.  I did find myself surprised at the reasoning; in the final analysis I conclude that::

A vote for Brexit is very probably to the UK’s advantage provided that the UK and EU can agree sensible exit terms.

Brexit is probably not in the rest of the EU’s interest, but given a pro Brexit vote it is vital for the EU to agree sensible exit terms with the UK as soon as possible.

Surely the politicians couldn’t screw that up?  Could they?

I had not appreciated the EU’s position and they really are in a logical and factual bind. I suspect that much of the hyperbole comes from this.  In the pre-internet age that might have worked, I don’t think it will today.

While producing it I have continued to marvel at the low quality of debate, complete with wild extrapolations, over use of “could” and “might”and all the other intellectually bankrupt practices that have sadly become commonplace in politics.

I have encountered very few who say that they intend to vote to stay; those that I have are mostly still in education.  I concede that this observation may say more about my narrow social circle than about the way the country will vote but most of my social circle rarely agrees with me.

My only worry is that, having voted to leave, we cannot find a politician robust and capable enough to lead the departure negotiations.  At some stage Cameron is going to have to accept the possibility of a Brexit vote is larger than he believes and start preparing to enact the people’s will.  If he does not have a clear statement of what we expect from Europe (and how we intend to get it) ready to publish no later than a few minutes after the vote is counted Sterling and the Euro are going to have a roller-coaster ride which could well cause unnecessary economic damage to both UK and EU.  Not having such a plan in place is, I think, evidence that Cameron is neglecting his duties to a level bordering on misfeasance.

 

 

The EU Referendum Should Be Held On Bonfire Night


It looks increasingly likely that we will have the referendum on Europe this year. Notwithstanding the media commentary I think it will be difficult to hold it in June so I propose 5th November, which has an appropriately historical significance. I’ll get to that in a bit.

The question will be a choice between staying in the EU on terms slightly modified by Cameron, or leaving it. The rational person will make this choice based upon which is most likely to be best for the UK. Of course, defining best is therefore fundamental. There are generally assumed to be three components to this measure, GDP, sovereignty and the UK’s part in the community of nations (whatever that is).

Taking the last point first, if the vote is to leave the UK will remain a permanent member of the UN Security Council, a signatory to the Europe and Convention on Human Rights, a founder member of NATO, the founder member of the Commonwealth, a nuclear power and the 5th largest economy in the world. We will no longer be represented overseas by the EU foreign commissioner (a plus to most rational people as we already have the FCO) and we will have no direct input into the future evolution of the EU, nor will we be bound by its directives. If fact most of the directives are enacted through UK law, so we will continue to be bound by them until they are repealed. The short version is that the only change is our lack of direct influence in shaping EU development. This is in part mitigated by the fact that as the EU’s largest export market we would have significant indirect influence. It is unlikely that the UK’s part in the community of nations is going to determine the outcome of the vote.

Sovereignty is more straightforward. Voting to leave means that all future laws and treaties entered into (or broken) will be determined solely by the Houses of Parliament. MPs will also be able to decide which parts of EU law to repeal. Of course, some of these laws will also be interpreted and enforced with regard to the European Convention on Human Rights, so Mrs Blair and Mrs Clooney’s livelihoods will not be at risk. Given the more direct relationship between Westminster MPs and their constituents compared to MEPs and theirs, this would arguably make the UK more democratic. Perhaps more importantly, government departments would be directly accountable to Parliament and thus to the people; they would no longer be able to cite EU decisions or regulations as a reason for a particular piece of bureaucracy. This argument is compelling to those who believe either that UK government is better than that of the EU (which should be a majority) and those of a libertarian disposition, to whom any reduction in the amount of government is a positive advance. Not a majority of the UK perhaps, but politicians underestimate their numbers at their peril.

Which brings us to economics. There are two fundamental problems with making the decision based upon the impact on GDP. The first is that all economics is based upon the theory of the “rational consumer” while all asset bubbles, panic sales, brands and the like demonstrate that most consumers are far from rational. The second is that, as noted by Niels Bohr, “all forecasts are hard – particularly if they involve the future.” The Bank of England is required to produce quarterly forecasts of inflation, which it publishes. These clever graphs have an error budget in them and clearly demonstrate the problems inherent if forecasting just one parameter. As GDP is in effect the collective purchasing decisions of the UK population and all the companies in the UK for a year there are far more than one parameter. Last year there were claims that many companies would leave the UK in the event of an out vote; so far no company has said that and at least two, Toyota and Hitachi, have said that they will stay. The reason is obvious; the EU exports more to the UK than the UK exports to the EU. If the EU refused to continue the UK’s tariff free access to the EU markets we would reciprocate which would hurt the EU more. It is also very expensive to move a car factory, particularly one as efficient as the Toyota one.

So the rational person will conclude that there is not much in it either way, which is about where the polls have it at the moment. But the rational person has to make a decision, so he (or she) will start to look at the emotional issues (which is, of course, where the less rational – spelt poorly educated – began). The obvious issue is migration.

Leaving the EU actually does not have much of a direct effect for the simple reason that most migrants arrive somewhere else in the EU and find it hard to cross the channel or North Sea. If we have a migrant problem it is because for much of the past two decades the Home Office has consistently failed to enforce our border controls. The one change that leaving the EU will bring is that it will remove the automatic right of an EU citizen to live and work in the UK. The key word is automatic. It will also remove the same right from UK citizens in other EU countries. The concern that an absence of readily available EU workers to fill jobs in the UK is really not defensible; they can come in under a similar (or improved) visa system to non-EU citizens. The fate of ex-pats is harder to predict. That said, few EU countries are going to wish to lose solvent contributors to their economy so I suspect current expats will be granted whatever visas become required.

The less obvious issue is the contempt with which much of the UK electorate loathes the current parliamentary establishment. I believe that this goes beyond the historic lines of tribal voting and is the result of the rise of the professional politician, and this is my 5th November point. Since the farce of the Iraq War and the missing WMD, the astonishing and sudden wealth of Blair, the horror show of Cameron and Osborne and the expenses scandal(s) politicians have managed to fall very low in the public esteem.

At the same time their ability to deliver anything useful, like say a balanced economy or even a balanced budget, is diminished by globalisation. There is nothing, absolutely zip, that Westminster can do about the oil price. Nor can it do much about the Chinese economy or any of the other myriad drivers of our wealth. The best any chancellor can legitimately claim is that their policies have not overly hurt the economy and public – and precious few can claim that. All prime ministers since Thatcher have had to go to war but only Blair and Cameron have joined recreational wars and then lost them (in warfare if you have to ask who has won it isn’t you). None have managed to reform the House of Lords, indeed one could argue that the removal of the hereditary peers has actually made it worse. I think that an increasingly wide selection of the British electorate subscribes to the “a plague on both your houses” school of thought – also spelt “we want our country back.”

In those circumstances when faced with a choice between “stay” recommended by Corbyn, Blair, Cameron, Alec Salmond and whoever replaced Nick Clegg the option of flicking them two fingers and voting “go” will be irresistible.

But it won’t end there. At the moment some are saying that the mechanics of leaving will require negotiation. Why? The day after the vote has been counted if it is “out” then all Mr Cameron has to do is stop writing cheques to Brussels, recall our commissioners and MEPs and get on with running the UK. He also has to state that, subject to reciprocation, imports to UK from EU will be tariff free and EU citizens currently resident in UK will have their current rights. That’s less than five minutes’ work.

The only possible thorny areas are the Common Agricultural Policy (CAP) and the Common Fisheries Policy (CFP). The former is solved by Westminster taking over responsibility for payments. That is pretty much a trivial change. CFP is a bit harder as upon leaving the EU we will wish to re-establish our territorial waters. Again, an announcement that with immediate effect fishing rights of non UK vessels within what are once again UK territorial waters are cancelled and that all such vessels are to leave UK waters at best speed will establish the policy. What’s left of the Royal Navy will be busy for a bit but that is what they are there for.

In any competent administration the wording would already be drafted and the contingency plans in existence. Civil servants are going to have to get busy, but I fear that they won’t. If there is an out vote followed by delay I suspect that there will be fireworks, real and metaphorical, on a similar scale to those Guido Fawkes attempted.

 

In or Out? A Rational Approach to the EU Referendum


Now that the dust has settled on the general election we face some 18 months of campaigning and debate about the long overdue Euro referendum. Depressingly it seems that the quality of debate has already sunk to infantile and I type this in the hope of raising it slightly.

Continue reading In or Out? A Rational Approach to the EU Referendum