The arguments made during the first referendum in 1975 on “Do you think that the United Kingdom should stay in the European Community (the Common Market)?” were, as I remember, largely economic, tied in with a vision of where the UK’s future place in the world ought to be.
Would it do better linked to the old Empire, most of which was now becoming independent, or as part of an expanding Common Market, free of internal tariff barriers, in non-communist western Europe?
It’s true there was some discussion about sovereignty. Formidable speakers like Enoch Powell and Tony Benn abhorred any tampering with the sovereignty of the Westminster parliament, as had Hugh Gaitskell before him, but such constitutional questions seemed to many people rather academic. It is therefore interesting to turn to the recent second referendum and there to the factors found to have influenced people’s votes (see the data provided by the Rowntree Foundation and Lord Ashcroft’s polls in the weblinks below).
Here the issue of sovereignty was cited as the main reason for opposition to the EU by those who voted leave, and economic prospects as third in importance. However the second most significant reason cited in the 2016 referendum on “Should the United Kingdom remain a member of the European Union or leave the European Union?” was a new one: the better control of immigration.
Admittedly in 1975 immigration in general was a controversial issue – the “rivers of blood” speech by Enoch Powell 1968 had stirred passions – but the immigrants objected to then were not from Europe; furthermore, the free movement of persons in the EU, and the entry to the UK of a large number of them, particularly from Eastern Europe, had yet to come.
Between 1975 and 2006 the powers of European institutions expanded. After all, for markets to operate smoothly and effectively rules need to be applied by governmental bodies capable of enforcing them. For there to be a level playing field it was understandable that there should be freedom of movement of goods and services, with common standards, for example of weights, measures and hygiene.
Furthermore the players in the market – business people, workers and investors – from all countries needed to have the same opportunities everywhere. Hence the four freedoms of the single market (of goods, services, people and capital), mentioned in the 1957 Treaty of Rome, were set up in stages by the treaties of Maastricht 1993, Amsterdam 1999 and Lisbon 2009.
The European institutions responsible for regulations included the Commission (EU secretariat), the Council of Ministers and the European Parliament, and the directives so produced have become part of the law of the UK. Alleged infringements of the rules are brought to the European Court of Justice in Luxembourg whose judgements are mandatory on any member.
(As an aside, it’s important to distinguish between the European Court of Justice and the European Court of Human Rights based in Strasbourg. The latter is the court of the Council of Europe – founded in 1949 and consisting of 47 member states of which the EU 28 states are only a part – and concerned with the upholding of Human Rights, in particular the Convention on Human Rights. The Court’s decisions are not mandatory though have considerable authority; for example, when it decided that the UK was wrong in not giving prisoners the vote, the UK government refused an immediate change but has since come to a compromise.)
The UK now is in the formal process of leaving the EU. It began in May 2015 when the UK parliament voted by 544 to 53 to hold a referendum; this was held in 2016 with the question: “Should the United Kingdom remain a member of the European Union or leave the European Union?” Though the margin of victory in the referendum was slight – 52 to 48% to the nearest point – the overwhelming majority in the parliamentary vote to hold the referendum and the long campaign leading up to it gave added weight to the final referendum vote and has made many MPs feel under an obligation to support a Brexit deal even if it is not what they personally would have chosen.
In October 2016 Theresa May said she would trigger Article 50 of the 2009 Lisbon Treaty in March 2017; however, Gina Miller’s court case forced May to put the issue through Parliament and, in early 2017, MPs voted to trigger Article 50, with the consequence at 11pm on 29th March 2019 the UK is to be out of the EU.
At the time of writing both sides are proposing that there will be a transition period from March 29th 2019 to the end of December 31st 2020 after which all the changes will apply.
Furthermore, by the end of 2017 substantial progress was made in negotiations about the respective rights of EU and UK citizens, the financial compensation to the EU owed by the UK and the mutual desire not to have border posts between Northern Ireland and the Republic.
But what has still to be decided is the nature of the future relationship between the two bodies. The deadline for doing so and agreeing the transition has been set by David Davis and Michel Barnier as Oct 2018.
One option is for the UK to remain part of the Single Market. This would preserve London as a global financial centre but would entail accepting the four freedoms and the jurisdiction of the European Court.
Another is to retain membership of the Customs Union alone. That would mean no tariff barriers and so no need for border posts, for example in Ireland, but UK would not be allowed to make trade deals with other countries outside the EU.
The two remaining possibilities already on the table are,
first, for the UK not to leave at all,
or, second, to come out with no deal and move to the World Trade Organisation rules which would mean being subject to all the EU tariffs and doing any deals on an ad hoc basis.
What the UK government seems to be hoping for is a “bespoke” customs deal that does not prevent the UK making other trade agreements; this might mean avoiding border posts in Ireland by registering goods on which tariffs are due at the point of dispatch or by treating local trade around the border as so small that it can be disregarded.
Not unnaturally the EU is wary of this; what can start as a little local trade can expand vastly if smugglers get it.
How things will turn out eventually it is hard to be sure. The negotiators need our support – not least to conduct the negotiations in the right spirit. When passions run high it is very easy to demonise opponents.
What concerns me is that the UK should not lose some of the good things the EU has brought us, for example about the environment, conditions at work, and action against tax injustice.
One of the consequences of Brexit would be that vast quantities of EU directives would have to be brought over into UK law and adapted to fit our own institutions.
The (Great Repeal Bill) was read the first time in the House of Commons on 13 July 2017, and completed its passage through the Commons on 17 January 2018, by passing the Third Reading by 324 votes to 295. It has completed First and Second Readings in the House of Lords, and Committee Stage is scheduled to begin on 21 February 2018.
The necessary action, in a short space of time so that there is not a legal vacuum, is likely to give considerable power to government over against parliament, possibly in ways that cannot be afterwards reversed.
Even more concerning is the division the debate seems to have brought out within our own society. According to the studies of both the Joseph Rowntree Foundation and of Lord Ashcroft, the groups in general voting remain were those under 40, better educated, with good jobs, in London, Scotland and Northern Ireland. The leavers were generally poorer, unemployed or in less lucrative employment, and in areas not so much of high immigration but of a rapid increase in immigration over the last few years.
Maybe the divisions were already there but it has taken the referendum question to bring them out. The challenge now is to use the negotiations and the eventual decision and implementation as a means of fostering social and environmental justice for all, including migrants and refugees.
Though difficult, it is a moral and religious imperative.
John Nightingale, 11th February 2018
https://lordashcroftpolls.com/2016/06/how-the-united-kingdom-voted-and-why/ https://www.jrf.org.uk/report/brexit-vote-explained-poverty-low-skills-and-lack-opportunities? https://www.theguardian.com/politics/2016/feb/25/britains-1975-europe-referendum-what-was-it-like-last-time
As John Nightingale who sent the link says, this ‘reads well’:
Each year the Financial Times conducts a survey of leading economists on the UK’s upcoming prospects. The New Weather Institute is part of that survey and predicts a bumpy ride. A lot of the FT material sits behind a paywall, so for interest here are the answers we gave to their questions (which are themselves interesting in terms of locating mainstream concerns) on issues ranging from economic growth, to Brexit, monetary and fiscal policy, inflation, immigration and, unavoidably, Donald Trump.
How much, if at all, do you expect UK economic growth to slow in 2017?
It is time to stop measuring the health of the economy using orthodox economic growth measured by fluctuations in GDP as the primary indicator. By mistaking quantity for quality of economic activity, worse than telling us nothing it can be actively misleading. It tells us nothing about the quality of employment, the intelligence of infrastructure, the economy’s resilience, the environment’s health, or the life satisfaction of the population. As the United Nations Development Programme pointed out (as far back as 1996), you may have growth, but it might be variously jobless, voiceless (denying rights), ruthless (associated with high inequality), rootless (culturally dislocating in the way that fed Brexit, for example) or futureless (as now, based on unsustainable resource use). All of this said, I would expect the undifferentiated volume of UK economic activity not to rise significantly over the course of 2017. If anything, the opposite is more likely due to a combination of the instability resulting from the lack of clarity over Brexit, and the unknown global impact of a rise in economic nationalism in the United States under a Trump Presidency.
Compared to what you thought 12 months ago about the UK’s long-term economic prospects outside the EU, are you now more optimistic or more pessimistic than you were?
I am more pessimistic than 12 months ago. Official optimism from the UK government over negotiating Brexit appears either disingenuous or extremely naïve to anyone with a wisp of experience of trade negotiations. If it is a case of being disingenuous to save political face, the sheer lack of public realism demonstrates a kind of poor management of expectations that is likely to feed a creeping disillusionment in the process, as deadlines are missed and compromises made. If simply naïve – and it is publicly recognised that Whitehall chronically lacks negotiating capacity – it raises the spectre of levels of incompetence that make it impossible to be optimistic about the UK’s long-term economic prospects.
Inflation has started to increase in recent months. To what extent do you expect inflation to rise in 2017?
The minor movements of inflation to a shred over 1 percent keep rates at historically very low levels. A bit more spending on shoes, clothes and furniture barely constitutes even cause for comment. You could say that the rate is rising because it doesn’t have much else to do. With broader economic uncertainties so strong, we are still in touching distance of a deflationary environment. And, with high consumer debt levels still worrying the Bank of England, the low inflation rate stands to exacerbate debt burdens. With the economy in a kind of limbo due to the opaque future ushered in by our unknown future relationship with the EU, I expect inflation to do nothing more dramatic than it has done for most of the last twenty years in an upward direction. But there is always a danger that it might weaken further, which will be a much bigger problem.
In December, the Monetary Policy Committee said the next interest rate move could as easily be up as down. Will there be a shift in this monetary policy stance by the end of 2017?
There is a strange and tenacious myth in economic commentary that a single, meaningful interest rate prevails across the economy. In practice, of course, this is nobody’s. What matters to the economy is that cheap, patient money is available for things that matter, such as building a resilient and efficient low-carbon infrastructure. Equally, the cost of money for risky and potentially damaging activities should be high. Unfortunately because of broader policy, pricing and market failures the opposite is often the case. Hence, tax breaks, subsidies and the way investment portfolios get managed means that money flows cheaply in fossil fuel infrastructure and operations. At the same time, necessary and successful emergent sectors like solar and other renewables can still struggle for affordable, patient capital. The privatisation and weakening of the mission of the Green Investment Bank is deeply concerning in this regard. Once again, prevalent economic uncertainties seem to be having the effect of putting everyone, the MPC included, on ‘watch’, and unlikely to do anything radically different in the ‘phony war’ period of approaching Brexit negotiations.
Immigration is likely to be central to the Brexit negotiations in 2017. How much do you think immigration will change and what effect do you think this will have on the UK economy?
It is tempting to ask how will we know how much immigration will change? Statistics are notoriously unreliable and, as the Financial Times has pointed out, become ‘less reliable the more detail you look for.’ A significant proportion of immigration is unrelated immediately to Brexit negotiations, though not to broader government policy. But on this, the government appears deeply divide, such as differences in approach to the control of foreign students between Philip Hammond, Theresa May and Amber Rudd. If anything, far from being downgraded by the Brexit debate, the economic importance of immigration to key UK sectors has been made more acutely obvious, ranging from higher education, to food, retail and a range of other service industries. Importantly, many of the drivers of population movement from inequality to conflict and environmental degradation show no sign of lessening and, if anything, growing worse. The tone and promise of government policy seems mostly to affect the degree of xenophobia experienced by immigrants rather than significantly changing their numbers. With all these things in mind, I doubt trends in immigration will change much in 2017 and that this will buoy-up a UK economy facing a wide range of threats.
Fiscal policy: Philip Hammond is expecting government borrowing to fall in 2017. His new fiscal rules provide headroom for more borrowing than currently forecast. To what extent will he need to use it and why?
The UK is weighed-down with an aging, creaking, high-carbon infrastructure. The case for public investment as necessary to rebuild the foundations for a modern, clean and efficient economy to underpin our quality of life is overwhelming. The cost of money for conventional borrowing is cheap. And the decision by the Bank of England to expand its quantitative easing (QE) programme from £375 billion to £445 billion in the wake of Brexit, demonstrates that public money creation is also possible when the situation demands it. Up to date, QE has benefited the banks, and the holders of certain assets, with broader economic benefits being questionable. But, as Mark Carney has previously indicated, there is no reason in principle why it cannot be used in a more intelligent and focused way to aid the productive, low carbon economy. I and others have consistently argued that far more good could be done if the same basic mechanism was used, for example, to capitalise a much larger and more ambitious green investment bank via bond purchases. The work subsequently undertaken such as large scale energy efficiency retrofitting of the UK housing stock and the roll out of renewable energy would generate good quality local employment and better prepare Britain for the future. There is no sign yet that the government intend to seize this opportunity and rather too many signs that any borrowing that is undertaken will not be put to as good use.
How do you think Donald Trump’s presidency will affect the UK economy in 2017?
The effect of Donald Trump’s presidency on the UK economy in 2017 will be as unpredictable as the bounce of an American football. Nobody seriously can know what it will be, other than increasing general levels of uncertainty, because nobody seriously believes that Trump himself knows what he will do in office. We can speculate that his brand of economic nationalism will be tempered by the full realisation of China’s leverage over America, just as we can question its initial sincerity. Especially as even as he was tub thumping against China, branded Trump products were available which carried globalisation’s legendary Made in China mark.
However, combined with the sentiments unleashed by Brexit, and the UK government’s active new embrace of industrial strategy, it is possible that the economic pendulum may swing back some degrees from globalisation toward localisation. Done in a purely autarchic way this might be negative. Done with respect to international cooperation and obligations, and to help build a more environmentally sustainable economy, it could snatch success from the jaws of chaotic self-destruction.
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