Brexit - a personal analysis

Sovereignty & democracy

Britain fought a civil war and more recent world wars to establish and maintain democratic principles with elected and accountable representatives, national sovereignty and national laws.

In contrast to the system we enjoy in Britain, the EU’s process of government is opaque, complex and cumbersome with minimal accountability and the objective of ‘ever closer union’ with centralised supra-national regulation for all members.

In respect of the UK’s sovereignty and government I see the referendum as the most important vote in a generation.

I am strongly in favour of international co-operation and free trade, having worked worldwide myself.  However, co-operation does not require creation of a super-state and unfortunately the EU often appears to fail in these respects, with bumbling decision making and focusing inwardly with protectionist policies and a ‘fortress Europe’ mentality. The expensive common agriculture policy is an example having raised prices for consumers in Europe whilst excluding products and disadvantaging poor farmers elsewhere.

I see the principle of how we are governed, involving elected representatives whom we can hold to account, as fundamental.

EU laws and regulations take precedent over English laws and we have reached the stage where they comprise possibly the majority of new UK legislation. Apart from direct regulation, the EU also controls what can be decided by our Parliament. A matter as simple as reduction of VAT on sanitary products cannot be decided without special appeal to the EU (VAT is regulated by the EU which generally has a minimum rate of 15% and would like to do away with the UK zero rate). The EU process is complex and technocratic rather than democratic. (Has the EU ever proposed a referendum on key treaty changes?) 

Laws and regulations are prepared by the European Commission, which consists of unelected bureaucrats from the member states. The elected European Parliament does not prepare any laws itself and the highest power is held by the Council of Ministers, which is not directly elected, but involves various groupings of ministers from the EU states. So when we vote for MEPs there is very little they can do to affect the workings of the EU.

Within the EU we cannot control who comes into the country. I am in favour of providing asylum and of migration between states, but believe that immigration should be under national control and a key element of national sovereignty. Within the EU we are currently in the position where we cannot control migration from the EU whilst turning away valuable visitors from elsewhere.

2.    Financial considerations

Whilst I see the democratic principles as the key issue, both sides have promoted misleading claims regarding economic issues. 

'Project fear', spearheaded by David Cameron, George Osborne and the Remain group has issued misleading statements and propaganda at taxpayers’ expense.  The alleged "£4,300 cost per household" made a good headline, but was actually a projection of rather lower growth by 2030 and not an actual cost at all. In fact the difference is well within the margin of error on economic forecasts, so ultimately meaningless. (The analysis was roundly criticised by Nigel Lawson, former Chancellor of the Exchequer and Mervyn King, the previous Governor of the Bank of England, amongst others.)

This analysis did not mention the costs associated with continuing EU membership, including:

•        The prior Treasury estimate of up to 7% loss due to EU tariffs quotas and restrictions (so avoiding these costs could result in a £4,639 gain per household)!
• ·       The fact that as one of the strongest economic members of the EU the UK has potential liabilities for European funding mechanisms and banks such as the European Investment Bank estimated to be around €150bn. (By coincidence also a cost of £4,600 per household cost by remaining – although hopefully the liability would not arise in full!)

Meanwhile the Leave campaign has focused on “taking back the £350m sent to Brussels every week” and being better off. As this is not the net contribution this is simplistic, although arguably more related to actual figures than George Osborne’s estimate of the 2030 household position. (Britain is the 2nd greatest net contributor, and would be the greatest but for the rebate, and a net importer of EU goods.)

One of the best financial assessments I have seen has been commissioned from Capital Economics by Neil Woodford, the legendary fund manager. This concludes that leaving would have minimal economic impact but could be beneficial (an extract is shown below). If there were a leave vote, the ultimate economic outcomes would be a reflection of the policies and decisions of the UK government and as such far more under our democratic influence than remaining and relying upon Brussels.

The current EU (even before potential accession of new states) is over-regulated, relatively deficient in external trade, economically sluggish, suffers from structural euro debt issues and appears unable to decisively address key issues ranging from Greek debt to the migrant crisis.

As the world’s 5^th largest economy Britain has influence and potentially more so outside rather than inside the EU.

Quote from Capital Economics, The Impact of Brexit 2016

“Although the impact of Brexit on the British economy is uncertain, we doubt that Britain’s long-term economic outlook hinges on it. Things have changed a lot since 1973, when joining the European Economic Community was a big deal for the United Kingdom. There are arguably much more important issues now, such as whether productivity will recover. The shortfall in British productivity relative to its pre-crisis trend is still over 10%, so regaining that lost ground would offset even the most negative of estimates of Brexit on the economy. Based on assessing the evidence, we conclude that:

– The more extreme claims made about the costs and benefits of Brexit for the British economy are wide of the mark and lacking in evidential bases

– It is plausible that Brexit could have a modest negative impact on growth and job creation. But it is slightly more plausible that the net impacts will be modestly positive. This is a strong conclusion when compared with some studies

– There are potential net benefits in the areas of a more tailored immigration policy, the freedom to make trade deals, moderately lower levels of regulation and savings to the public purse. In each of these areas, we do not believe that the benefits of Brexit would be huge, but they are likely to be positive

– Meanwhile, costs in terms of financial services, foreign direct investment and impacts on London property markets are more likely to be short-term and there are longer-term opportunities from Brexit even in these areas

– It is not likely that any particular region or regions of the country would be more adversely affected by Brexit than the country overall. Likewise, we do find support for the notion that Brexit would benefit some sectors more than others, but the range of outcomes for production / manufacturing industries is probably wider than for services

We continue to think that the United Kingdom’s economic prospects are good whether inside or outside the European Union. Britain has pulled ahead of the European Union in recent years, and we expect that gap to widen over the next few years regardless of whether Brexit occurs.”

(Post by Simon)