To remain or leave: the case to stay taking account of arguments to leave

One argument of leave campaign is not true

A letter which I have recently received from Leave.EU, and has presumably been sent to millions of other potential voters, starts with a statement which is not true, namely that “in 1975 we voted for a Free Trade Area known then as the Common Market”. Although the sub-clause that it was informally called the Common Market is true, the reality is that the UK had previously been a member of the European Free Trade Area (EFTA) which consisted of six countries, the UK, Denmark, Sweden, Norway, Finland and Iceland, before it joined what was then  the European Economic Community. The EFTA countries including the UK had Free Trade arrangements with the EEC so in effect the UK was already part of a wider free trade area. It specifically decided to leave the free trade area in order to join the EEC because the EEC had moved to a deeper degree of economic integration, which was underpinned by profound political commitment aimed at making war between its member states impossible. One motivation in the UK for joining was that the deeper level of economic integration was perceived as a reason for the much faster growth—at the time—of the six original EEC member states that that of the UK. But many supporters of entry in the UK also believed in the political purpose of the EEC, not least the prime minister of the time Ted Heath who had experienced war between European countries first hand. If the UK was merely entering a slightly different form of Free Trade Area than the one of which it was already a member, how could it have inspired the passionate opposition of prominent politicians like Enoch Powell and Tony Benn?

But complete honesty is not easy for either side in this campaign

It is not just important  that this Leave.EU statement is untrue but also that it takes a leading role in their campaign. Regrettably the long campaign with proponents of each side scraping around for something new to motivate potential voters is likely to lead to more and more assertions whose truth is at least tendentious and at worst completely absent.  Although this post is passionately committed to the UK remaining part of the EU, it will attempt to respect the truth and separate opinion from fact.

EU membership does have its costs

There are three main arguments used by opponents of EU membership. These are the budgetary cost, the inability to reduce immigration from other EU member states and the loss of sovereignty. They are all valid ones. EU membership is not a free lunch. However, all three are being routinely exaggerated by many on the Leave side.

The budgetary cost in net terms is about £7bn a year, 0.5% of GDP or 1.2% of public expenditure. It is normally presented in gross terms by EU opponents which is about double the figure but the absence of EU expenditure in the UK would have consequences if not replaced which and these consequences are not spelled out by the Leave campaign. For example would the UK government decide that farmers who have received substantial public funding since well before the UK joined the EEC, be left to sink or swim with EU funding not replaced at all? Would scientific and technological research funding (the UK receives more such funding than in other EU member state) be slashed?

According to official figures which are based on samples and so not precise net immigration to the UK is running at around at around 325,000 a year, of which about 175,000 comes from the EU, which is a reasonable concern given we are already quite densely populated. About 190,000 come from outside the EU and therefore would not be affected directly by leaving the EU. Given that there is substantial net inward immigration from outside the EU due to such factors as family reunions and business needs for highly skilled personnel, it is reasonable to suppose that unless there was a deliberate policy of discrimination against the EU, there would be substantial inward net migration from the EU even if the UK left as long as the relative job-creating dynamic of the British economy continued. Nevertheless leaving the EU would make it possible to reduce net inward EI migration by 50-100,000 a year. This would not be likely to reduce pressure on the health and care sectors since some of the people excluded would be likely to include those coming to work as doctors, nurses, other hospital workers or carers. Nor would it relieve pressure on housing since many workers from eastern Europe work in the building sector. It would however help a little to reduce pressure on school places and also a little on the need to build on green spaces.

The third argument about sovereignty is a valid one in terms of principle but much less so in terms of its practical impact. The theoretical underpinning of the EU, and its predecessors, since 1951, has been based on the idea of a pooling of national sovereignty to make war between member states impossible. Those who believe that national sovereignty is a principle that overrides other policy aims could never have supported UK membership in the 1970s and could not have done so whatever David Cameron had been able to achieve in renegotiating the terms of membership. However, the practical impact of EU legislation on individuals and businesses is hugely exaggerated. In most areas of health and safety legislation the UK goes further than required by EU law. On environmental legislation few people are calling for dirtier bathing or drinking water or more air pollution. There is a long list of supposed regulations interfering with daily life from children playing with balloons to women’s institutes recycling jam jars, but most on close examination turns out to be either a complete invention or an addition to EU requirements made by British lawmakers or officials. Indeed I am not aware of any such complaint that has real substance, though some probably do exist since the EU is certainly not perfect.

Political arguments are more important for those with strongest views, but economic ones may sway more voters

Given that there are costs to membership, what are the arguments for paying those costs? They are both economic and political. In my opinion, the political arguments are the more important, but the economic arguments may sway more voters. Attempts have been made by various studies to quantify the economic impact on output and jobs of leaving, in contrast to remaining. However, there are so many variables involved that any such estimate is really little more that an informed guess. It is better to try to analyse the impact and let the reader draw his or her conclusions. Opponents of EU membership assert that it will be possible to negotiate a free trade area. This may be true as affects goods trade. There is no very good reason why the EU should impose tariffs on UK exports if the UK does not do so on EU exports to the UK. However, if the possibility of anti-dumping duties was to be avoided there would have to be rules on state aids. There would also be a risk that some of the non-tariff barriers due to discriminatory regulation which existed before 1986 could re-emerge.

Lack of single market would most affect services exports

The clearest change would be that there would no longer be a single market in the provision of services. The legal provisions needed to enable free trade in financial, legal, accounting, engineering, IT, architecture and other services have proven substantial and 24 years after the supposed completion of the single market programme, many barriers have been removed but there is much still to be done. What can be said is that leaving the single market would mean that the process of removing barriers to services trade between the UK and the rest of the EU would be reversed instead of continuing if the UK remained in the single market. It is possible to leave the EU while still being in the single market as is the case with Norway and to a large extent with Switzerland, but in order to remain in the single market, these countries must implement EU legislation, allow free movement of people and pay into the EU budget. Since the absence of these are the main arguments for leaving the EU, it would make little sense to leave the EU but remain in the single market. Services trade would therefore be adversely affected, also because British citizens would no longer be free to work in the EU.

The view of businesses

That is the broad picture. In detail the experience of EU membership is different for every different type of business dealing with conditions and regulations relevant to it. There does appear to be a very large majority of businesses which want to stay in the EU. From the CBI 80% favour staying in and 5% want to leave. Admittedly the CBI is an overtly pro-EU organization. The Federation of Small Businesses (FSB) is more neutral. Even so its policy director, Mike Cherry states on the FSB website that : “Small firms seek measures to boost cross-border trade and economic growth – the completion of the single market, simplification of VAT, a smarter approach to regulation and protection of the opt-out under the Working Time Directive”. The completion of the single market would not be possible outside the EU and it is hard to see how cross-border trade could be boosted. The opt-out from the Working Time Directive is protected and inside the UK has had success in pushing for smarter regulation (the volume of new legislation being proposed by the present Commission has been greatly reduced compared to previous ones) and can work to simplify VAT. The latest survey of members by the British Chambers of Commerce, which is also neutral as an organisation, shows 59.5% intend to vote to remain while 30.1% intend to vote to leave.

Ultimately, it is the ability of the UK to influence the political future of Europe that is in question

The political argument in favour of staying in the EU is the most important one. For those whose ideal is a theoretically sovereign UK acting on its own to protect its interests in a globalised world, economic costs are worth paying. The case in favour of EU membership is that we will have an ongoing role in an endeavour that has achieved 70 years of peace and a fair degree of prosperity. Whether a member or not, what happens in countries across the Channel is bound to matter for the UK. NATO, which is mentioned by EU membership opponents as an alternative, is an alliance designed to defend its members against potential outside threats but it is not able to make a significant contribution to stable and harmonious relations between its own members. In addition, the UK can exercise more influence on the world beyond the EU’s frontiers by working with neighbours than trying to act on its own. It is true that the influence that the EU has been able to exert to spread peace and stability beyond its borders towards the east and south has recently been a failure. But to start to unravel the EU’s own structure would risk undermining any chance of coherent policies.