Guest article by Michael Bruntisfield

We are delighted to publish a guest article by Michael Bruntisfield, a consultant to Frank Investments. Michael has written a report about the current situation of the EU referendum, which we hope you will enjoy reading and we welcome any comments you may have:

 

A Personal Perspective on the Brexit Debate

As the referendum campaign gains momentum, the man in the street is frustrated. He is unable to obtain objective and unbiased information on complex issues which he considers he needs to inform his voting intentions; the sheer tedium of the debate weighs upon him, and he suspects that he is being asked to cast a vote on an issue which primarily engages those whose minds are already made up. Ironically, there is no shortage of information, data and opinion: no day passes without coverage of the issues, prejudices and attitudes in the media. However, even when these facts are accepted and agreed they are used equally persuasively to support opposing positions. So, a bemused and weary electorate is being called upon to exercise its own judgement in answering a question, with which many say it should never have been confronted as it divides one party rather than parliament.

I write to clear my mind and to explain the reasons for my own decision as to how I will vote. Given the elusiveness of a consensus regarding the facts of the case, and the ease with which they can be deployed to support either side of the argument, I adopt a broader approach to the debate. This paper seeks to make sense of the big issues involved and judge them on an assessment of the opportunities which breaking free of European entanglement will present versus the risks of a divorce, which is probably irreversible.

My starting point is the early 1970s, specifically the decision taken by the Conservative Party government to join the European Economic Community (EEC)* in 1973, and, following a change of government, the referendum regarding the UK’s future which followed two years later. At that time, the electorate was split in the same manner as it is now into three constituents (of differing sizes): those unequivocally in favour, the waverers (a majority of whom became lukewarm positives), and the convinced antis. However, the relative sizes of the three constituencies have likely changed and the undecided waverers may well now outnumber the committed. Thus they are critical to the outcome of the looming referendum: if the risk of foregoing what they know is outweighed by the opportunity they perceive, the UK will leave the European Union (EU). Leaving aside the irrational extremes, I believe it is useful for those swing voters to reflect on what has changed since they last voted to make them adjust their opinion. That is, what has changed, first, in the Union itself, secondly in respect of our membership of it and, thirdly, as to the broader world and the UK and EU’s position in it.

(*European Union from the Treaty of Maastricht, 1993.)

How has the European Union and the wider continent changed since the UK’s accession, and has that been of benefit or not to the UK? Most obviously, the community has significantly expanded and the continent’s east/west ideological divide has closed. Expansion in membership has brought its own difficulties, not only in terms of adding new and varied national agenda to bedevil policy making, but also complicated decision-making for 28 separate national leaders at a time when the Union is seeking to address a number of crises simultaneously. Territorial and communal disputes remain a feature of our shared continent and its diverse inhabitants but thankfully are no more than a distant echo of those of the last century. Mine is the first generation of Europeans in the last 300 years to have lived more than 50 years without having had to take part in a continental conflagration. The European Union can surely claim to have contributed to the continuing healing of historical divisions both across the continent and more immediately in Ireland, where Northern Ireland’s long running ‘Troubles’ proved more amenable to solutions proposed by two nominally equal members of the community. The peace process is foreseen to be at some risk should the island of Ireland again have an internal economic border. A common market has been completed for goods, if not for services, an initiative which British governments championed and from which our open economy has notably benefitted. Recently, however, the European Union has been beset by crises, which have challenged its cumbersome processes and threatened its cohesion. The economic problems of the inner core are intractable, with Greece remaining a potential catalyst for another acute phase of the rumbling crisis in the Eurozone, which fortunately the UK did not join and, it is accepted, will never do so. However, a rupture of the Eurozone could be the catalyst for a broader re-alignment, which might present as many opportunities as hazards to the UK, should it be willing to be part of the solution as opposed to a disengaged observer. Other overtly political pressures augment the recent fissiparous tendencies in Europe. The legitimacy of European institutions is questioned, notably in Italy and France, while Catalonia could depart Spain – particularly if cheered by the example of Scotland, which could break our union as a consequence of Brexit. To these internal strains must be added that of an albeit peaceful invasion of immigrants, Jihadi terrorism - with which it should not be conflated - and Russian revanchism. At a more macro level, the EU is split industrious north from indebted south, Eurosceptic versus Europhile and liberal west against increasingly authoritarian east. It resembles nothing so much as the Holy Roman Empire - in one of its more prosperous and peaceful periods - with the European Commission substituting for the House of Hapsburg. A vote to stay is undoubtedly one for the uncomfortable status quo: a vote to leave is a choice for the unknown, which will be applauded by Putin and will appall our Anglosphere allies. Moreover, the shape, duration and outcome of the exit negotiations which will follow a vote for Brexit are unknowable (whatever the irresponsible assertions to the contrary), and are likely to have to be conducted by a government under new leadership with understandably truculent former partners. 

The UK is a semi-detached member of the EU, and has become more so in recent years. Martin Wolf of the Financial Times summed up current attitudes as, “We do not want to be in but we do not want to be out either. So please make an EU we would like.” It is hardly surprising that we are viewed as difficult if not cantankerous partners. The preferred EU preferred by the reluctant stayers would have the following broad characteristics: a common market rather than the political union into which we were ‘conned’, within which we could ‘take back control’ of our borders, and be freed from ‘interference from Brussels’ and excess regulation.    

The claim that the electorate was conned is difficult to sustain. Margaret Thatcher herself made it clear that what was proposed was much more than a trade deal. Joining the EEC meant accepting “The need to work together as a community and as an alliance of nations for the wellbeing and betterment of mankind.” Harold Wilson, typically more pragmatic than high-flown in his reactions, also recognized that the compromises inherent in membership were key to Britain’s prosperity, “Being ‘in’ does not in itself solve our problems, but it offers the best framework for success, the best protection for our standard of living, and the best foundation for future prosperity.” Furthermore, the media explained the implications of the 1975 vote, as evidenced by the Financial Times’ editorial on the referendum, “Greater European unity must be the objective for which the Community must strive.” One can disagree with the decision to join the EEC but a claim that the electorate was misled holds little water.

The EU has undoubtedly added to the regulatory constraints under which Europeans live and trade. However, regulation is not a negative per se, for a market, internal or common, which protects the interest of consumers and allows producers to compete on a level playing field requires regulation. It is not solely a matter of issuing rulings on banana curves and teabag recycling, and populists who irresponsibly rail against EU regulations citing isolated examples to suit their own purposes rightly risk being called ‘deluded’, as was Boris Johnson by Andrew Tyrie, Treasury Select Committee Chair, a dry and circumspect politician not habitually driven to such hyperbole. Indeed, the OECD rates the UK as one of the least regulated economies, which is borne out by the robust performance of our flexible labour market, which is the least regulated in Europe. There is a certain irony in the observation that the British have not only been the most assiduous enforcers of regulations emanating from Brussels but have also been quick to gold-plate their provisions. It is arguable that self-imposed domestic red tape is a greater problem than that handed down by Brussels, with our planning system (in our sole control) being the principal historical culprit, and the recently introduced national minimum wage, again a domestic initiative, likely to crimp employment and economic activity while, astonishingly, promoting immigration. In the event of Brexit, there is little prospect of existing regulations being removed by a UK government, as that would hazard the negotiation of trade deals with the EU which will be maintaining them. Apropos of regulation and its assumed unattractiveness, is it not surprising that it has not deterred recent successful applicants from joining the community, nor those waiting in line or pushing to have their cases heard?

Immigration and the conflated ‘taking back control’ (of our borders) are the touchstone issues of the referendum debate. There is great confusion over migration and the asylum crisis, the allaying of which is not in the interests of the populists with skin in the political game. There is a widespread assumption that immigration is overwhelmingly from the EU. This is not the case: in the 12 months to June 2015, EU net migration into the UK was 180,000, non-EU migration, which is under national rather than EU control, was 201,000. Another statistic is also of relevance: in the same period, 45,000 British citizens emigrated, most to the rest of the EU, exercising that freedom of movement which risks being denied to them should we apply restrictions to our fellow Europeans. For a number of reasons not just related to controlling immigration, the UK was not a signatory to the Schengen treaty. This has allowed us to maintain our external border on the continental mainland and to reach an agreement with the French to hold non-EU immigrants in France rather than sending them over the Channel for us to process. While this understanding is bilateral rather than EU in scope, it will likely come under pressure in the event of Brexit for is there any incentive for the French to maintain a domestically unpopular agreement struck with a counterparty now no longer a European partner? Immigration from the EU has certainly been bigger than expected and there are now about three million EU immigrants in the UK. Excess immigration, it is claimed, burdens the taxpayer, puts pressure on public services and contributes to the housing shortage – despite any reliable evidence. Authoritative studies have found, however, that EU immigrants (if not those from elsewhere, whose entry is subject to our control) are net contributors to the economy and fiscal system. The former foreign minister of Poland pointed out the irony of David Cameron demanding that social benefits be withheld from those who do not want them. Migration surely augments the pressure the housing market is under, but the root of that problem lies in the sclerotic planning system. As for ‘immigrants taking our jobs’, the lie to that is the UK’s full employment. In sum, the UK in common with other rich countries requires immigration to sustain its public services; the source of immigrants has a critical impact on their contribution, and the only sure way to reduce immigration is to make the country less attractive, which will impact those of us here more than those wishing to join us.

Is regaining precious sovereignty over our own trade, which is another key component of the taking-back-control promise of Brexit supporters, a realistic prospect? The new nativists on the extremer edges of the Brexit camp, maintain that such is the worth of UK trade to the EU that as well as gaining more freedom to trade beyond Europe, we will gain quick and easy access to its markets. This is one of those areas of the ‘facts’ debate which is both intractable and arid. There is no way of accurately forecasting the nature, scope and price of any deal that is made with the EU following Brexit. Moreover, a frosty EU may well prevaricate and push back on coming to an early agreement, fearing that easing Brexit may encourage others into the departure lounge. What is undisputed is that Brexit would create enormous uncertainty around trade and investment, not only with the EU but also with the rest of the world, with which the community has some 53 trade deals all of which would have to be re-negotiated by the UK (long unpracticed and under-resourced in that skill). For now, we can only heed precedent rather than appeal to facts. Other European countries which have signed free trade agreements with the EU are required to observe its rules (while having no powers over setting or changing them) and must pay for the privilege – at a rate in line with a member’s contribution. The UK’s economy is dependent on services, a capability in which we lead the EU and which sustains our role as the world’s principal international financial centre. London is not only preeminent as a financial centre, it also makes a very significant contribution to the nation’s economic activity, employment and tax revenues. Services, despite UK advocacy, have not to date been covered by EU free trade agreements, and Frankfurt, Paris, Luxembourg and Dublin (and the governments which promote them as European financial centres) will surely seek to take full advantage of London’s predicament. The best analysis which I have read of these issues was that of the (Irish) first head of the WTO, Peter Sutherland, in the Financial Times of 31st March, 2016, ‘A Year of magical thinking for the Brexiters’. He concludes his article by identifying the saddest of ironies: the UK has been particularly successful in creating a free trading EU in its own image.  

Taking back control of our legal system is another populist cry; it sounds so straightforward, but in reality the issues are complex and difficult to navigate, with constitutional, political and economic implications. For those with an appetite for this particular element of the Brexit debate, the LSE blogs are enlightening. To keep things moving in this piece and to avoid the risk of over-indulging in arcane arguments, I make only a couple of broad points to try and illustrate how fraught is this area and how important it is not to be swayed by simplistic posturing and glib arguments. The EU clearly suffers from a democratic deficit and this challenges the legitimacy of its laws, particularly when their provisions do not reflect legal precedents in member nations. On the other hand, there are reputational risks - and these particularly apply in the field of human rights - in going our own way and sending a mixed message regarding our commitment to international cooperation and legal protection. Secure in a democracy of long duration, we are more confident - perhaps to the point of risking complacency - in internal precedents acting as reference points for our freedoms, in contrast to our continental peers whose experience is one of failed democratic accountability and totalitarianism. I would caution that our freedoms may be protected even better by acknowledging European as well as our own legislative and constitutional reference points. The UK’s parliamentary system has been characterized as an elective dictatorship; its lack of constraints on the executive risks bad law which serves the short term political ambitions of the ruling party. This temptation is manifest and recorded, and the brake on precipitate political activism that European law has been seen to apply cannot just be dismissed as negative interference. One thing is pretty certain: as is the case with all dislocations, Brexit will create winners and losers. Among the winners are surely lawyers who will benefit handsomely from the longest and most expensive divorce in history. 

Central to the UK’s national interest are peace, democracy, prosperity and stability at home and in the near-abroad. We live not only in a globalized world but also one that has become markedly more dangerous in the decades since the UK joined the European community. While NATO is the central plank of our security structure, membership of the EU surely augments it with complementary relationships, most notably in relation to cooperation in the grinding and inevitably long term struggle with terrorism, and in combatting international crime. Again, in the event of Brexit, while cooperation will not be allowed to wither it will become more challenging and complex at a time of critical need and when lines of communication need to be shortened. The UK has not only influenced the EU for the better (witness agriculture and fisheries and in being a steadfast advocate of free trade) but has been acknowledged by both friends and potential foes as more influential on the international stage by virtue of its membership. On our departure, the EU, responding to France’s lead, and with Germany no longer able to call on our support, is likely to become more dirigiste and protectionist. This is an outcome which does not serve our commercial interest and counters any perceived competitive benefits derived from our new independence. To this must be added the local political hazards of Brexit: cohesion of the UK, the future of the peace process in Northern Ireland, and damaged relations with our nearest EU neighbour across the Irish Sea, whose economy is entwined with ours. Further afield Brexit jeopardizes the closeness of our alliance with the US (whoever is president), which has expressed clearly its wish to see the UK remain part of the European community and thereby remain the keystone in the transatlantic bridge. If Brexit is bad for Europe, it is axiomatic that it is also bad for the UK.  It risks placing us on the wrong side of history – as our younger voters instinctively recognize.

The UK was a late and hesitant joiner of the EEC, perhaps a former imperialist in search of a new role, certainly a worried relative underachiever in economic terms and, as we ourselves acknowledged sheepishly, in genteel decline – a phrase which happily has fallen out of common use in recent years and which we should be in no hurry to see used again. We elected to join the community with some reluctance, with eyes as much on the rear view mirror as the road ahead, regarding accession from our nation-of-shopkeepers’ perspective as a limited and largely commercial contract. This was a fundamentally different motivation from that of the originators, who whole-heartedly committed themselves to develop an institution which would ensure that Europeans would no longer resort to war to resolve their conflicts. There is a certain irony in the fact that this was well-recognized by Margaret Thatcher in 1979,

 “I think our support for the EEC has been very half-hearted. You really cannot join any group of nations and spend all your time criticizing it. The EEC is free Europe getting together. Had we had some vision like that after the First World War, we might never have had the Second. My son does not have to go and fight as his father had to fight. Surely that is the most valuable thing of all, the reason for keeping Europe together.”

There are also questions of duty and obligation, well presented by Tony Abbott, the former prime minister of Australia and a self-confessed Anglophile and admirer of the British Empire, in a recent article in the Times. In his words, Britain should keep trying, not give up; the best way ahead is to continue to demand that Europe changes, not to insist that Britain leaves. David Cameron’s view was and remains right, Britain is better-off in a reformed EU. However, reform is an ongoing project which the UK should lead rather than a short term objective of negotiations undertaken to appease his party’s Eurosceptic wing. Tony Abbot echoes that sentiment: “Britain’s challenge now is to save Europe, not leave it”, a mission not without historical precedents. There is much to dislike about the EU but little will be improved by the UK leaving it. Moreover, leaving a club of which one has been a member for nearly half a century, at a time when it faces a number of crises, is perfidious. The UK cannot remain isolated from the impact of many of the unresolved difficulties which Europe faces and in which it has a stake. Accordingly, it is in our national interest to be committed to their resolution in partnership with our neighbours.   

Here is a long quote from The Economist, which summarizes well my sense for my country’s position and the rationale for its membership of the EU, and my hope that it renews its commitment to the EU.

“Though an island with strong links to other continents, Britain has the political and economic character of a peninsular; idiosyncratic, but nonetheless part of the mainland. Perhaps the two most consistent features of the country’s history have been the overspill of events on the continent into the British Isles, from the Black Death to the euro-zone crisis, and to the to-and-fro of traders, soldiers, thinkers and other migrants. Today there are about as many Britons living in the EU - two million - as there are nationals of other EU states in Britain. Even the most striking institutional examples of British exceptionalism - its language, legal system and church - are the products of centuries of communion with its neighbours.

An effect of this web of interdependencies and intermingling is the attitudinal overlap between Britons and other Europeans, whose views towards the individual, the state and religion they share to a much greater degree than those of Americans…. Even Margaret Thatcher, the patron saint of Euroscepticism, noted (quoting one of her predecessors) that: “We are Europeans, geographically and culturally and we cannot, even if we would, disassociate ourselves from Europe.”   

Whether or not David Cameron should have called a referendum on the UK’s membership of the EU is a moot point and one outside the scope of this paper. He was surely right, however, in stating, “That this is perhaps the most important decision the British people will have to take at the ballot box in our lifetimes.” The choice with which the electorate is confronted is truly strategic, for the detailed issues are too complex to judge. In this context, voters will likely be swayed principally by fear and, critically, by whom they trust when it comes to expressing their view, for it is difficult to measure what our situation might have been should we have never joined the EEC. The essence of the case for the EU has not changed since we were last asked to vote on our membership of it, and there is ample evidence in a deteriorating international environment that the case is stronger now than it was 40 years ago. I have some confidence, therefore, that my fellow electors will opt for that with which they are familiar. I hope that they do so in sufficient strength to give the government the mandate to commit itself with less equivocation to our European future.

 

 

Bruntisfield

14th April, 2016

 

Posted on April 18, 2016 .