Facts and Impartial Analysis
for the EU referemfum
on 23 June 2016
Summary
Intro
Immigration
Economy
What Happens Next?
Industries
Defense and Security
Sovereignty
Energy & Climate Change
About
Britain’s Decision
V
oters’ weighing up their decision to vote to stay or
leave the EU could be forgiven for being confused. Each
and every day, one side says black whilst the other counters
white.
This guide seeks to offer an abbreviated version of an impartial, objective overview of the key issues
surrounding this vote drawn from an eBook published last
month called “Britain’s Decision – Facts and Impartial Analysis for the EU Referendum on 23 June 2016” (see here:
http://goo.gl/3oZXnl ).
That book was commissioned by The Hunter Foundation
and asked impartial economists and academics to offer objective views on the key issue. In some respect you could
call this “Myth Busters” instead – both sides in the debate
seem to be creating hyperbole beyond reason, whereas this
summary attempts to bring us all back to the core issues
and likely outcomes.
3
Immigration
Much of the debate so far has centred on the free movement of
EU citizens. Migration is often discussed in polarized terms and so
we’re here to set out the facts.
To start, 2/3rds of the UK population according to polling see the
amount of benefits European migrants can claim in the UK as being
the most important issue. In actual fact…
Immigrants with no work can be treated
very differently (negatively some might say)
by the benefits system.
David Cameron secured two main new
agreements on Immigrants from the EU
prior to announcing the vote and they were:
1
2
Immigrants whose children live in another member
state will only be entitled to benefits index linked to
the country in which they live
In work benefits (where a worker receives eg housing benefits due to low wage) could be subject to an
emergency brake. This means if a country can show its
being unduly impacted by immigration they can delay
parity/equality for migrants for 7 years. In this case
migrants would gradually ‘earn’ parity over a four-year
period on for example housing benefits.*
4
*
H
owever, Legal opinion believes
that the Court of Justice of the European Union could easily strike the In
work policy as illegal – only time would
tell were we to vote to stay in the
Union.
H
ere is some factual based analysis on our current
situation.
It is important to note that predicting the long-term
future is impossible, hence why it is more difficult to
predict the benefits of leaving at this moment in time.
That is not to say that they don’t exist, we’d just rather
not mention anything that is based on anything other
than facts.
55
Pro Remain
Migrants boost our economic growth
They make a substantial contribution to our public services
through taxes
They’re less likely than natives to be supported by the welfare system. (Additionally, immigrants with no work can be
treated very differently, negatively some might say, by the
benefits system)
If we were to leave and impose hefty immigration policies,
it’s likely that we would face similar restrictive policies
Pro Leave
Migrants have modest effects on the employment and conditions of native-born workers
66
It’s the
Economy, Stupid
M
uch has been made of the economic impact of EU
membership with wild forecasts being presented by both sides of
the argument. The fact is that ten-year forecasts are about as reliable as a three-month weather forecast.
Based on an analysis of all predictions, what seems likely is that in
the short-term, leaving will have a negative economic impact. The
Centre for Economic Performance at the London School of Economics puts this conservatively at a net cost to the UK economy
of 1% of GDP equivalent to £20 billion – the remain campaign
claim 5%, or £100 billion.
The Leave campaign however, claim that freed from EU legislation
and trade agreements, the UK economy would flourish. In the medium to long-term there is no hard evidence to either support or
deny that claim.
Parallel to actual trading relationships will be the issue of inward
investment – where a foreign entity outwith the EU invests in a EU
country. The UK has been the single biggest recipient of inward
investment in the single market since its inception in 1993.
The reasons for this are to be found in both language and stability
(economic and legal) and of course in part access to the EU market place – 72% of investors cited this. Clearly were we to vote
7
L
eave, that stability would be called into question at
least in the short term.
Again in the short term, it seems inconceivable that
inward investment will not slow as new trade agreements
are reached, hence a short-term negative impact is to be
expected. Medium to long-term impacts will depend on
the depth and breadth of trade agreements made and the
UK’s ability to exert influence therein.
Should the UK leave the EU but negotiate a new settlement to facilitate trade, then we may have a trading
agreement but a. have no influence over new legislation
covering particular industries and b. be liable to adopt
said legislation if we wish to continue trading. We also
may be able to negotiate another, more flexible trading
position but this is impossible to predict at this point.
These options are outlined in the following section.
8
Pro Remain
Short-term, it is very likely that a leave vote would result
in a negative economic impact (predictions of the net
cost to the economy range from 1% of GDP, or £20
billion to 5% or £100 billion)
Access to the EU market is an attraction for foreign
investment
Pro Leave
The level of trade neither creates nor destroys jobs - if
Brexit were to largely impact UK’s external trade, then of
course employment would decrease in export industries,
but domestic demand would take up the slack in employment
99
What Happens Next?
F
ollowing on from the last section, the options that the UK
would have and their implications are set out here:
Most commentators believe that were we to vote Leave, the UK
would seek unrestricted access to the EU market place per other
non-EU countries in which case we’d have three possible options:
Option 1:
Norway or EEA Option
In summary, membership of the EEA (European Economic Area)
may be available on similar terms to Norway whereby the UK
would have sovereignty, however that sovereignty would be subjugated by having to follow EU rules without having a vote on
said rules. This would require agreement of the EEA member
states and 27 EU members - in other words it would not happen overnight causing significant short-term impacts on the UK
economy. (The argument put by the leave camp is that whilst
short-term pain may be possible, long-term we would gain more.
As can be seen by all forecasts, this is not a fact nor are the supposed negative impacts forecast by the stay side – see economic
impact for more content).
10
Norway makes payments to the EU for social and economic
cohesion but does not receive any rebates per the current UK
membership of the EU. Norway has to accept free movement of
labour as do Switzerland – these are the terms they have negotiated to trade within the EU; many commentators believe the UK
would have to accept similar terms; hence in considering this we
need to again review concerns over immigration and the impacts
therein (if we agree free movement of labour what do we gain on
this issue?)
Pro Remain
UK would still have to follow EU rules but would be unable
to influence said rules
We may have to accept terms such as free movement of labour in order to come to this type of agreement
Agreements take time and would likely cause at a minimum,
short-term economic disruption
Pro Leave
UK would have more sovereignty and could negotiate better
trading agreements
11
Option 2:
Swiss Option
The Swiss did not join the EEA but agreed a bi-lateral agreement
to gain access to the EU market – to do so 120 Treaties were
signed between 2000 and 2004 (these things as noted take time).
Their agreement is more flexible with the Swiss not bound, as
Norway are, to future EU legislation, but the Swiss have to have
their own legislation to the same effect…Free trade in services
and agriculture are exempt from the agreement however Switzerland like Norway makes payments to the EU whilst receiving no
rebates and accepting free movement of labour.
Pro Remain
Negotiations take a long time for agreements like this and
would likely cause at a minimum, short-term economic disruption
We would still have to make payments to the EU, whilst receiving no repayments
We may still have to accept free movement of labour
Pro Leave
UK would have more sovereignty
We wouldn’t be bound to future EU legislation
12
Option 3:
New Model
If Immigration really is important to voters in the Leave camp,
then it seems apparent that the UK Government would, in order
to gain access to the EU market, have to define a Norway-Swiss
style agreement that DID NOT accept the free movement of labour.
There is no forecast nor model that could predict if that would
be possible or not. What is factually incontestable is that this will
take years of negotiation and in the short term at least that will
cause considerable negative economic impact.
Pro Remain
Because this hasn’t been done, negotiations would likely
take years
Pro Leave
UK may be able to come to an agreement that wouldn’t accept
the free movement of labour
1313
How would our
industries be affected?
Agriculture
In the UK, the Common Agricultural Policy (CAP) is regularly
mocked by opponents of the EU as being ineffective, expensive, bureaucratic and bad for the environment. Although many
spokespersons from the world of farming also criticise certain aspects of this policy, the vast majority underline that it has played
a vital role in the development of British agriculture.
The CAP and its initial emphasis upon price support mechanisms
played a major role in intensifying British agriculture to such an
extent that the country is now 62% self-sufficient. Specifically,
the UK now imports £40 billion of foodstuffs (of which 70% from
other EU states) and exports £20 billion, 62% of which are
destined for the rest of the EU.
Pro Remain
These payments structure the British agricultural industry
and, according to most experts, provide it with the stability
that a return to a free market approach would not provide
Contemporary British agriculture is deeply dependent upon
the CAP - it’s highly unlikely that a UK governmentoutside
the EU could support its farming any better than the CAP
currently does
14
Proponents of remaining in the EU argue that trading from
outside the EU would inevitably mean more bureaucracy,
controls and, above all, the reintroduction of tariffs
Moreover, they add, to continue to export to ‘Europe’, a
whole series of EU food quality and safety norms would still
have to be respected without British stakeholders having an
opportunity to influence them ‘upstream’.
Pro Leave
We spend over £2.5 billion per year on agriculture
Form-filling and delays are often ascribed to the EU
1515
Fisheries
T
he fishing industries in both Scotland and the UK are acutely
affected by EU membership. This is because under the rules of
the Common Fisheries Policy (CFP), the territorial waters of the
Member States are shared and treated as ‘European’ for fishing
purposes. The CFP has therefore had overall responsibility for
managing all European fisheries, including addressing problems
of collapsing fish stocks, over-fishing, fish discards and market
organisation.
Unlike their farming counterparts, the main UK and Scottish fishing organisations have been reticent to adopt formal positions
on the referendum vote. Instead, it has been environmental social movements who have expressly spoken in favour of remaining in the EU to continue building momentum towards consolidating sustainable fisheries management in all European waters,
including those of the UK. The arguments for remaining in the
CFP are that marine issues transcend borders and that their successful management depends upon international cooperation
and clear rules.
1616
Pro Remain
However, despite the information opposite, the CFP has
been reformed and moved away from a ‘command and
control’ top-down management style by the European Commission, towards more participatory regional approaches
Even if the CFP has many problems, it nevertheless provides
a coherent framework for improving ecosystem management
which can and must continue to be worked upon in a direction favourable also to UK fishing interests
Proponents of ‘Remain’ argue further that the reformed CFP
European Maritime and Fisheries Fund has a budget of £190
million to which UK businesses and local communities can
apply, e.g., to add value to products
Imposition of new trade barriers following a Brexit would,
they argue, seriously disrupt markets at a critical point when
stocks and sales are recovering after years of collective efforts by many in the industry and beyond.
17
Pro Leave
The CFP has probably been one of the most denounced EU
policies, and this by a range of different public officials and
stakeholders, including politicians, fishermen, environmental
social movements and scientists alike.
Those in favour of ‘Leave’ blame the CFP for failing to
address fundamental problems facing the industry
Regional advisory councils have not been given the necessary powers to take key decisions for handling a mixed fishery.
A core argument made by these CFP critics is that Brexit
would allow the UK to regain its lost control over its territorial waters, including its northern fishing grounds.
A reassertion of UK authority over these grounds through
regional management structures would, it is argued, provide
the best opportunity for the UK industry to grow and adapt
1818
Economics
of EU Membership
F
or the period 2014 – 20 the UK will pay around £ 16.9 billion
into the EU budget annually; almost a quarter is returned under
the rebate system and a further £ 5 billion through the Commons
Agricultural Policy (supporting farming and fisheries). Hence the
UK’s net contribution is circa £ 8 billion per annum or £ 2.25 per
person per week.
By way of comparison, total UK Government spending of 2016 is
expected to be £753.9 billion making our EU membership a cost
of circa 1.6% of overall spending in the UK.
Pro Remain
The figure opposite is only 1.6% of overall UK spending
Pro Leave
The UK spend £8 billion per year on EU membership
19
Defence and Security
T
he UK is not a member of the Shengen passport free area,
which means our national borders are controlled by the UK for
the UK. William Walker, Professor of International Relations at St.
Andrews University says this on the overall issue:
“Futures can be imagined where Brexit would result in a stronger,
more united UK and stimulate a collective effort, led by France
and Germany, to reform the EU to prevent further disaffection.
They are implausible. It is more likely that Brexit would weaken
the UK, increase governmental discord and intensify strains in
relations between its nations and regions. Abroad it would strengthen the forces of dissolution that already threaten the EU’s survival, risking a return to conflict and violence.”
The EU’s chief purpose is economic. NATO, the special relationship with the US, cooperation in intelligence gathering, the
nuclear deterrent and a competitive defence industry are the bedrock of the UK’s security. The country’s departure from the EU
would have little effect on its security and the means of its attainment, however, it is predicted that leaving could deliver a period
of uncertainty and lever significant European instability, hence
significantly more pressure on that security.
20
Pro Remain
Because UK is not a member of the Shengen passport
free area, we have full control over the security of our
borders.
Pro Leave
A departure from the EU is unlikely to significantly affect our security
2121
Sovereignty
H
aving more influence in or out of the EU is a mute point. To
participate in trade agreements and alliances by their very nature,
the UK will need to adhere to agreements and laws not necessarily
set by the UK. The choice may be characterised as ‘freedom with
handcuffs’.
In an interdependent world being on our own may provide greater
flexibility but it does not guarantee power or influence.
Pro Remain
In a leave vote, to participate in trade agreements and
alliances, the UK would need to adhere to agreements
and laws not necessarily set by the UK.
Pro Leave
In an interdependent world being on our own
may provide greater flexibility. (But it does not
guarantee power or influence).
2222
Energy & Climate
T
he UK’s Secretary of State for Energy and Climate
Change, Amber Rudd, recently argued that energy bills
in the UK would soar by £500 million a year if the UK left
the EU. This figure was strongly disputed by leave campaigners, amongst whom is her Minister of State at the
Department for Energy and Climate Change, Andrea
Leadsom.
EU interventions mean that UK energy and climate
change policies are closely entwined with EU-wide regulations. The recent dispute by the UK Ministers is whether
these regulations are adding unnecessary costs to UK
households and businesses: whether directly, through
taxes; or indirectly, through the additional regulatory burden on businesses and the public sector.
The wider EU framework has driven extensive changes in
the UK energy system. For example, the closure of many
old coal-fired power stations in recent years, including
Cockenzie Power Station in East Lothian. Renewable energy targets for Member States have driven the expansion of renewable energy in the UK.
The UK agreed with the EU to meet a target of 15% of
total energy needs from renewable sources by 2020. This
target has driven the extensive development in the UK to
increase the role of renewables, with some success – particularly in renewable electricity – but at the cost of substantial public subsidies paid through consumer bills.
23
W
hether these changes in the UK’s energy system
are seen as positive, which will generally be the case for
‘Remain’ campaigners, or negative, which will generally
be the case of ‘Leave’ campaigners, typically depends on
one’s wider political views about the relative importance
of climate change and the environment as a priority for
government action; and the extent to which governments
should intervene or allow the free market to operate.
In other words, ‘Leave’ campaigners are more likely to
view
government intervention negatively, because they believe it imposes unnecessary costs on households and
businesses to deliver outcomes that a functioning market
system should deliver; and to see climate change and
environmental improvement as of lesser importance than
economic factors, whereas ‘Remain’ campaigners are likely to view the opposite.
It’s important to note that a key assumption of the
‘Leave’
appears to be that if the UK leaves the EU then all obligations to renewable energy and energy efficiency standards will be
redundant. However, the UK has also signed up to United
Nations commitments under the UN Framework Convention on Climate Change (UNFCCC), most recently by signing the Paris Agreement in December 2015. Meeting
the obligations of this Agreement will require the UK
to develop a clean, efficient energy system by around
mid-century, regardless of whether the UK is part of the
EU or not.
24
Pro Remain
The EU has undoubtedly played a key role in the development of climate and energy policy in the UK.
Apart from certain specific circumstances, the EU cannot
adopt any measure that affects a Member State’s right to
determine the conditions for its energy resources. Products
from vehicles to white goods have become dramatically
more efficient as a result of EU regulations.
We’d still need to comply with environmental and energy
regulations if we want to continue trading in the EU in the
event of a leave vote
Pro Leave
EU energy regulations come at the cost of substantial public
subsidies paid through consumer bills.
However, the UK is still bound to environment and energy
obligations under UN commitments.
Additionally, if the UK vote to leave and wish to negotiate
a trade agreement with the EU, we still need to abide by
rules and regulations governing the single EU market, including many environmental and energy rules, but with less
influence over their content.
25
UK Constitutional Impact
A
ccording to the latest polling and subject to the thinnest
of margins, if Scotland and Northern Ireland’s population votes
to stay in the EU they could in fact drag the rest of the UK with
them to stay in. Likewise the majority in Scotland and Northern Ireland may be dragged out of the EU despite a predicted overwhelming majority voting to stay in if England votes
overwhelmingly to exit.
This may raise constitutional questions on all sides of the UK borders. The SNP in Scotland noted “material change” (e.g. voting
to come out of the EU) could herald another Referendum. Equally English voters may not wish to accept a Scottish and Northern
Irish minority dictating to the majority.
The fact is we are a democracy where majority rules. A yes or no vote either way will
fuel debates and discussion and should be
expected for some time to come.
2626
Britain’s
Decision
DESIGNED BY
27