Tuesday, 23 February 2016

Ian Stewart, Chief Economist for Deloitte's, asks what are the alternatives to EU membership?

THE date for the UK referendum on EU membership is to be Thursday 23rd June 2016. The last referendum took place in 1975, just two-years after the UK joined the EEC. In that referendum the electorate voted 67.2% to 32.8% to stay in. Since then, the EU has grown from 9 to 28 members. As the pound slumps to a seven-year low against the dollar fuelled by investor uncertainty about the UK's economic prospects should it vote to leave the EU (BREXIT), we thought it might be useful to publish an analysis from Ian Stewart, Chief Economist, for Deloitte's. The following is taken from the Deloitte 'Monday Briefing':

"* UK voters have consistently been among the most euro-sceptic in Europe. Nonetheless, in the last 40 or so years the UK public has been more likely to support staying in the EU than leaving. Since Ipsos MORI started polling the public in 1977, on average 47% of UK voters have supported membership and 40% have opposed it, with an average of 12% undecided. The pro-EU vote dropped to a low of 26% in 1980 rising, over the following decade, to a peak of 63% in 1991, shortly before the pound's ejection from the European Exchange Rate Mechanism.  
* More recent opinion polls from a number of pollsters show a marked narrowing of the pro-EU lead since last summer, partly in response to the migration crisis. Across four polls carried out since January, the pro-EU vote averaged 43% and the antis 41%, with 2% undecided. There is a wide variation in the readings between individual polls and telephone polls show higher level of support for EU membership than online polls.  
 * The salience of migration in today's debate marks another difference with 1975. The Maastricht Treaty of 1992 established the right of people to live and work anywhere in the EU. EU enlargement into Central and Eastern Europe in 2004 led to a marked rise in immigration into the UK and pushed migration up from the list of UK voter concerns. More recent migration from North Africa and the Middle East, and the breakdown of the EU's Schengen agreement, have added new concerns. Since last year YouGov's polls show voters rating immigration as the most important issue facing Britain.  
 * Yet whatever the polls say about migration, the bedrock economic issues of "what will it mean for jobs" and "am I better off in the EU" are likely to prove decisive. As in the Scottish referendum and last year's General Election, the safety of the status quo, and fear of the unknown, will be significant factors.  
 * The current, pervasive sense of geopolitical and economic uncertainty – encompassing everything from chaos in the Middle East, to a more assertive Russia, terrorism, the slowdown in China and sluggish world growth – heighten the appeal of the status quo.  
 * At the heart of the pro-EU campaign will be the message that leaving would be a huge risk. As the Prime Minister said on Saturday, "I believe Britain will be safer, stronger and better off in a reformed EU". Of those campaigning for Brexit, he said, "All they are offering is a risk at a time of uncertainty: a leap in the dark. Leaving Europe would be a threat to our economy and national security." The Prime Minister's strong personal poll rating is an asset for the pro-EU campaign - and one which the Brexit camp hope will be offset by Boris Johnson's emergence, yesterday, as one of their own. 
 * Attitudes to the EU tend to divide along lines of age, education and social class. Support for the EU is strongest among younger, university educated, and more prosperous voters. The EU is least popular among older, more conservative voters, and those without university degrees. 

* YouGov reports that 63% of under-30s favour staying in the EU, a proportion that falls to 44% in the 60s. The people who voted to stay in the Common Market in 1975, those in their 60s and above, are now most likely to vote to leave. 
 * Those belonging to the 'AB' social class – generally the higher managerial and professional occupations – support the EU by 56% to 44%. A majority of people in the 'DE' and 'C2' social grades are opposed to EU membership as are those for whom GCSEs are their highest qualifications. 
 * Support for the EU has consistently been highest in London and Scotland and lowest in East Anglia, Yorkshire and the West Midlands. In February Ipsos Mori found 54% of voters across the UK favoured EU membership while 62% of Scots did so. The Scottish National Party argues that if Scotland votes to stay and the rest of the UK votes to leave Scotland should hold a further referendum on independence. 
* With the race apparently close and polls showing between 10-20% of voters yet to make up their mind, undecided voters will be crucial to the outcome. Their views are likely to be influenced by the media verdict on the Prime Minister's renegotiation. But it also seems likely that the centrifugal pull of the status quo will see the "don't knows" shift disproportionately towards the pro-EU camp. 
 * One of the major challenges for the anti-EU campaign groups is that there is no agreement on an alternative to EU membership. All options are speculative. Any settlement would depend on what the UK sought to achieve following a vote to leave the EU, and what its former EU partners and other countries were prepared to concede. The most frequently talked of options are the Norwegian and Swiss models or operating under the rules of the World Trade Organisation.  
 * Outside the EU Norway has membership of the European Economic Area (EEA), giving it full access to the Single Market and an opt-out of certain elements of the EU, such as the Common Fisheries Policy. The downside is that Norway has to accept almost all EU legislation, including on the free movement of people, and makes significant contributions to the EU budget, while having no direct say in EU decision making or regulations.  
 * Switzerland's membership of the European Free Trade Agreement (EFTA) offers a more distant relationship with the EU. As an EFTA member, Switzerland has been free to negotiate the terms of its relationship with the EU and rest of the world on a bilateral basis. Budget contributions to the EFTA secretariat are minimal. In practice Switzerland has signed up to a high proportion of EU regulation, including the free movement of people, and has to make contributions to a number of large EU programmes, in return for access to the Single Market. 
 * At the other end of the spectrum, the UK could opt for the most distant economic relationship with the EU and forego preferential access to EU markets along Swiss or Norwegian lines. As a member of the World Trade Organisation (WTO) the UK would acquire Most Favoured Nation (MFN) status and would be free to negotiate its own free trade agreements with the EU and other countries. This is the experience of countries such as Australia, which obviously is not subject to EU regulations and budget contributions, but does not have unfettered, tariff-free access to the Single Market.  
 * These examples only illustrate the experience of other nations outside the EU. The UK is a much larger, more populous nation than Norway and Switzerland and there is no precedent for the departure of a nation from the EU. Much would depend on whether the negotiations that followed a vote to leave would be harmonious or fractious. In such negotiations the UK would face a trade-off between autonomy and accepting regulation to gain access to EU markets. A more distant relationship with Europe would give greater control over borders and regulations, but could also mean a more restricted access to EU markets.  
 * The UK's aims in any negotiations would depend partly on the result of the referendum. A narrow vote to leave could lead to the UK government trying to achieve further adjustments to the UK's relationship with the EU that could be presented to voters in a second referendum. A landslide vote to leave which was seen as a rejection of EU migration would make it difficult for the UK to seek a Norwegian or Swiss style settlement which requires free movement of people.  
 * In the referendum voters will be choosing between a known, if evolving, relationship with the rest of Europe and leaving the EU. A vote to leave would be the start of a long and complex process of negotiation as the UK sought to create a new position in the world.  
 * The pro-EU camp will emphasise the risks and uncertainties of leaving. In response their opponents will seek to create a vision of a confident, prosperous Britain secure outside the EU, but on friendly terms with it.

* We will return to this question of what life might look like outside the EU in a future edition. In the meantime we will cover the referendum news, the polls and the bookies' odds each week in the "Brexit and European politics" section of our news stories."

1 comment:

barry said...

The report from the Involvement and Participation Association highlighted how the EU has played a fundamental role in extending and expanding workers rights in the UK. 1) Protection for part time and temporary workers, 2) Protection from discrimination, 3) rights for working parents, 4) right to holiday pay, 5)regular lunch breaks, 6) health and safety, 7) paid maternity leave, and 8) worker participation in decision making. In addition the EU has proposed a wealth tax. This is in addition to measures to safeguard the environment and secure social justice. I am conflicted as to whether to vote yes in the referendum and support the distinct campaign for a social Europe as opposed to a free trade area enshrined in the Single Market or abstain following the arguments of Rupert Read in which he argues the case for spoiling your ballot since in his opinion the choice between Remain or leave is unpalatable.