A Last Minute Guide on Everything You Need to Know Ahead of the EU Referendum
Historical Context
The EU found its beginnings in the post WW2 period of uncertainty, as an international remedy to the damning consequences of poor policy following the Great War (including the historically condemned Treaty of Versailles), and poisonous nationalism that had torn and divided Europe at its seams.
Unification of steel and coal industries
By sharing production of coal and steel, resources which had been central to the war effort, the main opponents of the war would be economically integrated. This would prevent conflict, particularly over natural resources; the French occupation of the Ruhr from 1923-25 had been a major accelerator in German right wing party formation and anti-allied forces feelings.
This idea as a form of conflict resolution was first proposed by Robert Schuman, French foreign minister; the European Coal and Steel Community (ECSC) would be the first step to “Make war (between France and Germany) not only unthinkable but materially impossible”
The United Kingdom
Churchill had expressed an early interest in a United States of Europe in 1940 based on Anglo-French union with common institutions and military. By 1946 his stance had changed, in Zurich he stated that the European project should be based around France and Germany, not Britain.
“Britain was with Europe, but not of it” Winston Churchill
That Germany and France were founding members was significant and seen as a symbol of peace. The Inner Six countries set out with a long term vision, not by legislative fixes but by apotheosized commitments to complete integration (“Vollintegration”) of labour practices, product standards, tax structures, freight rates and administrative procedures. These commitments were aimed towards the creation of a united Europe with a community of eco
Farming
The Common Agricultural Policy (CAP) has undergone changes throughout the years. Direct payments from Brussels, varying from around £2.5 - £3 bn a year, supplement farmers’ incomes in the aim of making them less vulnerable to short term fluctuations in prices. These are subject to ‘cross-compliance’ regulations, taking into account land usage, and compliance with environmental regulations, animal welfare and other rules.
Although changes have been made to level out discrepancies between payments received between farms, current subsidies do still tend to favour the largest and wealthiest farms. If you travel through rural areas of the UK, you will see many farms displaying Vote Leave posters. This is because many farmers don’t feel that they get much out of our EU membership, and that, in any case, supermarkets will take payments into account when they are paying suppliers.
On the upside, however, EU membership does give farmers access to the single market, to which we export a lot of our goods. This is not a perfect relationship, as exemplified by the current crisis of the dairy industry whereby oversupply in other members of the market can drive values of British produce down. However, overall this access is beneficial and it is not something we would be likely to give up, even in the case of Brexit.
The government has taken no clear stance on what would happen to farming subsidies if we left the EU, and Liz Truss (Secretary of State for environment, farming and rural affairs) has described it as a “leap into the dark.” The NFU has remained neutral in the debate.
The Veterinary Profession
The BVA has remained neutral in the Brexit debate, but has released a relevant information booklet. Much is unknown about the impact of leaving the EU, as it is very dependant on what negotiations and agreements are made.
On law and regulation the BVA have stated that “much of the UK’s legislation relating to animal health and welfare, and public health, derives from Brussels – including legislation on disease control, imports and exports, animal welfare, veterinary medicines, and food safety. In a BVA Council debate in April 2015 it was agreed that membership of the EU had enabled the UK to influence and improve animal health and welfare standards in other Member States”.
Economic points: How much would we save if we left the EU?
The Leave campaign claim that EU membership costs us £350 million each week, and that if we leave the EU this money will be ours to spend as we wish. However, this figure is misleading as it does not account for the money we receive from the EU in rebates (to farmers and on aid to poorer British regions such as areas of Wales and Cornwall) and it doesn’t take into account other payments to British businesses. So, unless the UK government did nothing to fill any of these shortfalls, the largest feasible claim for weekly savings, based on 2014 figures, is £140 million/week, although it could be less if the UK continued to pay some fees to the EU, as part of trade agreements.
£140 million a week is still no small saving. However, the stakes are a lot higher than this simplified ‘membership fee.’ Both sides agree that the results on growth, whether positive or damaging, are far wider and more significant than the direct cost of EU membership.
George Osborne has announced that “in the long run GDP would be over 6% smaller” based on the Treasury’s post Brexit 15 year forecast. This would mean that after 15 years the UK economy would be 6% smaller than it would be if we stayed in the EU i.e. around £115 billion pounds smaller per year. Different forecasts use different models to generate their figures and it may not be pertinent to take forecasts as far ahead as 2030 too faithfully.
It is clear that in the short term there will be uncertainty if we leave. Andrew Lilico, chairman of Economists for Britain at Vote Leave, accepts the likelihood of short term negative impacts: “at or around the time of leaving... I think most of the estimates of the short term impact, showing of the order of 2%, maybe 3% at the upper end, are about right.” This 2-3% loss in growth equates to £40-60 billion, several times more than any reasonable evaluations of our annual contributions to the European Union.
In the long term, the consensus across both sides of the debate is that trade with the EU would fall. The Treasury model assumes that inward investment would fall, as EU companies may not want bases outside of the single market. Vote Leave disagree, arguing that this slack will be filled with an increased capacity for trade with the rest of the world, and that lower regulations might be good for the economy. Both sides are in agreement that there would be no significant long term increases in GDP. However, economic and trade arguments are not the sole basis for the Vote Leave campaign.
Immigration
Migration of EU born citizens living in the UK increased by about 160% from the turn of the 21st century to the current day, from around 1 million to around 3 million migrants. This can largely be attributed to new countries joining the EU, a lot of the growth was between 2004 and 2009 when countries such as Poland and Romania gained access to the EU labour market for the first time. There has also been a spike in migration from older EU members e.g. Spain, Italy Portugal, where unemployment has been high recently. The official statistics show that net migration to the UK has typically been between 200,000 and 300,000 a year for the past decade. The numbers are very high by historical standards, but it should be noted that well over half of that net migration has been from outside of the EU.
There are different possibilities for what could happen if we leave the union. If we follow the Norwegian/Swiss models, and maintain an arrangement with access to the single market, we will still have to allow EU citizens to move and work freely within the UK, and nothing would change. If the UK was willing to give up access to the single market, and impose stricter controls, for example the same regulations applied to migrants from outside the EU, there would likely be a significant reductions in net EU migration, at around 100,000 less per year. This is because around 60% of EU migrants are in low skilled work, and would not then qualify for a UK visa.
However, it is probable that in the long term the amount of migrants to the UK would not change significantly, although there may be more migration from outside of Europe, due to its historical benefits. The National Institute of Economic and Social Research has concluded that EU migrants are of benefit to the economy and public finances both in the short and long term. This is due to high employment rates and a relatively young age distribution meaning less of a burden on public services. On the whole recent EU migrants tend to be concentrated on the lower end of the income distribution. However, even in lower skilled jobs there is likely to be a positive contribution.
If we really want to control immigration, perhaps we could work with the EU to ensure that workers rights to fair pay, treatment and union representation are respected. As veterinary students many of us will have worked with migrant farm workers and experienced first hand the cases when Eastern European workers are working in suboptimal conditions.
Britain has one of the highest proportions of low paid jobs in Western Europe and has existed in this “low skill equilibrium” for some time. Some argue that the problem is essentially supply-side; we may have some excellent universities but many, perhaps a large minority, are insufficiently prepared by schools and other educational programmes for an evolving labour market. Another argument however is that in most European countries unions act as a political force to drive up wages and working conditions; forcing firms to invest in productivity gains to justify those wages. Margaret Thatcher, of course, floated our unions out to sea in the late 80s whence they haven’t been seen in any meaningful sense since.
It could be argued that with automation putting many formerly safe skilled and semi-skilled jobs under threat, we can expect a higher proportion of the workforce to be working minimum wage jobs (the figure is currently 10%). Recent media attention has given some insight into exploitative labour practices at such august tax dodgers as Amazon and Sports Direct. The point is, if we are moving towards a lower-skill economy where most commercial interactions are handled online then perhaps it would be wiser to heed the lesson of post-war Europe. We should be working with the European Union to strengthen labour protections across the continent and compete on a level playing field; rather than compete in the race to the bottom for labour regulation and corporate taxation which could follow Brexit. Higher wages and better job security are not just satisfying rallying cries - they could also stimulate demand and growth; maybe even raise cash for the Exchequer to pay back all our angry creditors, as is the main goal of Osborne’s radical budget of debt reduction.
Beyond economic concerns however, it is clear that immigration is an issue of culture and identity. Politicians have dodged nimbly (or otherwise) round great big elephants before and shall do so again but the farrago of Leave’s slow fade to the issue of immigration has been particularly insightful. Nigel Farage says that immigration is changing our country for the worse and he may have a point, if unwittingly. Over 300,000 migrants arrive in this country every year and 60% of them are employed in “low skill jobs”. In practice these are often the toughest jobs there are; care work, agricultural labour and food processing for example all rely heavily on migrant labour. For these, some migrants travel away from their families for a job with long hours, no long term security and poor wages. In exchange we offer what can best be described as charitable condescension and at worst veiled loathing. We risk creating a disenfranchised underclass of worker without public representation or the rights guaranteed by both the EU and ILO. It doesn’t really matter if union action is legal if workers are on zero hours contracts.
Of the 73 MEPs Britain sends to the European Parliament, 24 belong to UKIP. In 2009 the people of North West England saw fit to elect Nick Griffin as their representative to that illustrious chamber. In fairness to the electorate, one must assume that they thought so little of the European body politic that they collectively conspired to elect the most odious man they knew of as an act of sardonic defiance. Should Britain vote to Remain by any convincing margin it seems likely that UKIP would be severely diminished as an electoral force; those European seats might be up for grabs by more constructive forces.
Self Determination
A concern that has been raised throughout the years is a suspicion of ‘creeping federalism’ within Brussels, symptomatic of emasculation of member states’ national sovereignty. In essence it is a question of the democratic legitimacy of the supranational state and to what degree federal bargains detriment our self jurisdiction. Nigel Farage is a proponent of this argument, stating that in our time in the EU we have been overruled on all of the legislation that we have voted against. However, this is still a low figure, around 55 times, compared to the times which we have been in favour of legislation, at around 2000.
This is a broad political debate, but it is worth noting that a lot of EU legislation that has been ‘imposed’ on the UK does not have much of an effect on us, for example legislation on tobacco production, of which we have a very small market. Moreover, we still hold the right to veto on big topics such as the much talked of ‘EU army,’ and the potential for Turkey to join the EU.
An important point from the Remain campaign is that in the event of Brexit it is likely that in order to continue trading with the EU the UK would need to comply with many of the existing EU rules. However, the UK would no longer have input to the development of new EU legislation, and the Remain campaign argue that it is better to be in it to change it.
Conclusion: Outlook on Brexit
It’s Friday morning and Britain has voted Leave. The pound drops, investors dump shares and the FTSE records some horrendous one day fall while the smart money flows out of London. This would be a time of great uncertainty; this is not only inevitable but also in some sense premeditated. David Cameron is offering the nation a stark choice, limply backing the status quo and neglecting to in any sense detail how the alternative might function in reality. This ensures that markets are panicked by the prospect of Leave as much by their uncertainty as fear for Britain’s long term economic future.
In the ideal “Leave” scenario we break from our continental cousins smoothly, quickly and cheaply. A free trade pact with the EU would be more or less inevitable though it would most likely still involve some financial contribution and regulations on goods exported from Britain to Europe (some 44% of the total). Norway, widely touted as the ideal “outsider” model, pays €107.4 per capita annually to the EU budget net of rebates, compared to the €139 each Briton pays. However, Norway is also bound by EU competition laws (such as those forbidding state subsidies to firms) and labour, safety and quality regulations for goods exported to the EU. In fact, it has been estimated that leaving the EU would save less than 10% of the £30 billion or so annual cost of compliance. So many businesses would still be burdened by the biting yoke of EU red tape, but we would be able to negotiate our terms; excluding some “protected” industries and probably curbing the flow of labour.
Most economists believe that Remain is the more viable economic alternative for Britain. This is certainly true in the short term. In the longer term however there is cause for some optimism if we were to Leave; assuming that free trade deals are struck. Essentially “doing a Norway” is leave-lite; we pay a bit less and can ignore the European bureaucracy up to a point. Downgrading to silver membership may be a false economy however; we will be unable to influence decisions which affect British businesses except perhaps as official “observers” in the European Parliament. Instead of sending politicians like Cathy Ashton to help build a better Union we will be adversarial negotiators for whom few in Brussels will have much sympathy.
The Norwegian approach sounds appealing, but it runs contrary of Leave’s assertions that we can exert global power post Brexit. Norway is quite chill - they have a lot of oil, a wonderful social democracy and a navy which could quite happily take on the RNLI on its day. Norway does not have a veto in the European Council, nor does it sit on the UN Security Council. Should we vote Leave, some might question whether an ageing fleet of nuclear submarines is enough justification for the latter accolade.
Overall, whether we leave or stay, this is a watershed moment in British politics. It is a decision that you should be part of and hopefully has engaged many more voters into the fray of Brussels polity than otherwise would have taken an interest. If we stay, it opens the door for engagement and changes in our relationship with the EU, and hopefully quiets the voice of Leave and UKIP for a time. If we leave, we enter a time of uncertainty; of London’s position as the axis of trade between Europe, Asia and America and even our relationship as Great Britain, as voting divides may leave us open for another Scottish independence referendum. We will be fine in the long run, but the real question is will we be better off? And is it worth the short term shocks? At the end of the day, the choice, once detangled into those issues that are political vs those that are European, is mainly an ideological position. It’s up to you.