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11 April 2016

Why Britain should “Remain In” the EU: Three Project Fs - Future, Fantasy and Fear

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Graham Bishop illustrates the three 'Project Fs' that now dominate the Brexit debate and explains why Project Future is the one British people should have in mind when voting in June 23rd.

Coming to a balanced conclusion on the merits of these three “Projects” is particularly important to those whose livelihood hinges on our relationship with the EU. They may be: an EU citizen living here who could become a `migrant’ overnight; an employee of an EU-based company that might decide at some stage to re-locate; or an employee of a supplier to such a company. Anyone in these categories cannot avoid a heavy, direct (and personal) responsibility for their own future.

Project Future is all about building on what we know today.

We know that EU membership brings the famous Four Freedoms: free movement of people, goods, services and capital – the foundation of the Single Market.  (The free movement of people is actually free movement of workers and those who can look after themselves – not of welfare claimants.)

On present trends of economic and population growth, the UK should overtake France in the next few years to become the second-most powerful country in the EU. That will give even greater influence on steering a bloc that accounts for a third of world imports – 2 ½ times that of the US.  That sheer global clout is vital for a country where `imports + exports’ are more than 60% of GDP.

Ahead of the Prime Minister’s February “re-negotiation” with the rest of the EU, the government undertook a massive analysis of the `Balance of Competences’ between the UK and the EU. The 32 volumes/3000 pages sought an answer to the question: does the UK need to demand the repatriation of some powers from the EU? The clear-cut answer from this massive exercise was No – the balance was about right. This can hardly be surprising as the UK already has a string of opt-outs from policies that it dislikes e.g. the euro and Schengen. Moreover, the UK was a prime mover in the creation of the Single Market three decades ago. The success of the Single Market hinged on the creation of a body of rules to give “minimum harmonisation” of trading standards so that the cross-border flow of goods and services would not be obstructed by hidden protectionism.

The old concept of safety in numbers has suddenly come to the fore again as Russian adventurism in the Ukraine and Syria has reminded us all of the founding purpose of NATO: a mutual self-defence pact that obliges us – eventually - to go to war if one of the members is attacked. NATO is a pooling of sovereignty that makes debates about mythical EU rules on straight bananas seem utterly irrelevant, especially as we prepare to mark the centenary of the Battle of the Somme.

However, we live in rapidly changing times and the euro zone is still adjusting to the massive shock from the Great Crash of 2008/9. Part of the response is a move to more economic integration. One example of the positive implications for the UK is the potential impact on the City of London –presenting a huge commercial opportunity to consolidate its position as the world’s leading financial centre. That will create even greater employment, tax revenues and foreign exchange earnings. According to TheCityUK research, financial services already employ over 7% of the UK workforce (with 2/3 outside London), producing nearly 12% of total economic output and contribute £66bn in taxes and generating a trade surplus of £72bn.

Project Fantasy

If we wake up on June 24th to find that we have Brexited, what exactly happens next? Nobody has any idea – least of all those who argue for the UK to leave the EU!

Lord Mandelson – EU Trade Commissioner 2004/8 – has branded as `fantasy politics’ the concept of a quick and simple re-negotiation of trade deals around the world. The Cabinet Office paper on the process of withdrawing specifies 53 Treaties to be re-negotiated. Mayor of London Johnson argued for a trade deal modelled on that recently agreed between the EU and Canada - but changed his mind within a couple of weeks. The Canada deal does not cover services – as with all `free trade’ deals - took seven years to negotiate even after years of preliminary work and has yet to be ratified unanimously by all EU states.

EU Commissioner Lord Hill recently said “As the person who is responsible helping to draw up the rules for Europe's financial services, one thing is clear to me: if the UK were to vote to leave, it's fantasy to suggest it could quickly secure access to the single market on the same terms as it has today.”

The people of Britain deserve better than Project Fantasy from those who argue for historic and irreversible change – yet fail to provide any substantial, precise plan for creating a good outcome.

Project Fear

We all know that Project Future is steadily moving to deal with the legacy of the Great Crash and to create a more competitive European economy that can thrive in the years ahead. If Project Fantasy turns out to be well-named, UK citizens have every right to be fearful of the possible consequences.

An obvious example is the risk to the service industry of the City of London.  Unless the UK `slavishly’ follows any new EU rules on financial markets, there will be a progressive erosion of the City’s earnings. The recent Budget forecast the Government’s deficit next year at £72 billion - even after the City’s tax contribution still running at well over £60 billion.

The Office for National Statistics has just published the data for our deficit in trade/services with the rest of the world (the current account deficit of the balance of payments) in 2015. It set yet another new record since 1948 at 5.2% of GDP - £96 billion even after the City’s trade surplus of £72 billion. This deficit – proportionately – is the biggest amongst all industrialised countries and is more than four times that of any other EU state (except Cyprus). No wonder that Bank of England Governor Carney recently warned about relying on the “kindness of strangers” to fund this deficit.

Many people will pay for Project Fantasy with their jobs. Could you be one of them?

© Graham Bishop

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