EU Referendum - George's view

On June 23rd this year we will all be faced with the decision on whether to continue with our membership of the European Union.

I promised, in reply to a number of enquiries about the referendum, that I would make public any decision I reached after I had chaired two public Question Time style meetings in the constituency. The second and final meeting was held on Friday March 18th.

Having made that promise I now write to let you know that I have concluded that I will vote to remain in the EU.

What follows is not an attempt to persuade.

How anyone else answers this question is entirely up to them and, being a referendum, no-one’s decision on this matters any more than anyone else’s.

Rather, I hope to present a framework that helped me to reach my decision.

What conclusions are drawn from that framework and the importance attributed to different factors are entirely a personal matter and I know full well that many will disagree with my decision and some may want to tell me why.

Both my office and I will very much welcome any such correspondence, all of which will be read and acknowledged. I make an absolute promise that I will, with an open mind, consider any points made.

That said, what we will not be doing is engaging in an argument or, in other words, please do not expect to receive a substantive reply.

Mine is one vote amongst many millions and, as I will not be campaigning directly on the issue or making deliberate use of the office to which I was elected to press my view, there is no advantage to anyone, particularly my staff or those constituents who need our help, in consuming limited staff resources to such an end.

I hope what follows may be of some help and interest to those who feel inclined to work their way through it. No-one would pretend it’s an easy read. 

Where to start?

This might seem a bit odd but I think that, if we are going to work our way through the evidence and see how it might persuade us one way or the other, each of us has to start by acknowledging to ourselves where we sit on the argument already.

Why? If we don’t then we then we take a real risk of falling victim to something psychologists call ‘confirmation bias’. This is the quite natural tendency to acknowledge and agree with arguments that confirm our own view and discount those that don’t.

It’s a very powerful force and I have seen it in spades in the two EU question times I ran, both among those answering the questions and those listening to replies.

It was fascinating to watch the audiences on both evenings where certain people among the nearly 1,000 who came to listen, could be seen nodding at certain points followed by tut-tutting and shaking of heads seconds later. This happened even when both points were being made by the same speaker.

It was pretty clear that some information was being discounted simply because it didn’t agree with a pre-existing opinion.

Of course it’s possible that all those doing this had researched the issue deeply and rationally discounted the information previously. It’s also possible this wasn’t the case.

For those of us coming with a degree of genuine uncertainty then a mind open to new information and challenge is essential.

What is the question?

‘Should the United Kingdom remain a member of the European Union or leave the European Union?’ looks simple enough as a proposition but I suspect the issues driving someone’s answer will be as different as from the millions of people who will be answering it.

It may be:

  • I want to control immigration much better than we do now
  • I want to be sure I keep my job
  • I want Britain to be more like it was when I was younger
  • I don’t want Europe to go to war again
  • I’ve no idea but I’m going to tick a box anyway

or any combination of these and any number of other issues.

Of course this is true of all democratic choices to some degree. The difference here is that:

  • this is a question we were only asked once, many years ago in very different circumstances (so we have very little experience to guide us)
  • it is very complicated (so it’s difficult to work out what matters)
  • so much of the relevant information is hard to find and understand (so it’s difficult to weigh the facts in the balance)

The consequence is that we are forced to make a decision with incomplete information. There’s nothing terribly unusual about that but this is a pretty extreme case.

As such, quite understandably, most of us will simplify and personalise the question.

If we don’t do that, we find ourselves going round and round in circles looking for signposts, following where they point, following another and another only to find ourselves back at the same signpost we started with.
So my mission has been to simplify the question for myself in such a way that I can come to a reasonable conclusion, however tenuous it may be.

I have started by trying to summarise the propositions of both sides of the argument as they are currently being made.

I think they go something like this:

Remain

The EU needs to change in many ways and the new deal negotiated by the Prime Minister is a good start. We can only change things further if we are still in the EU.

Being part of such a large bloc of nations with formal agreements on free trade, free movement, security and many other issues is in our national interest.

There are enormous financial risks associated with leaving and those arguing for exit haven’t painted any kind of coherent picture of what the future might look like.

No-one has any idea how long it might take to renegotiate relationships with the EU and countless other countries.

It’s almost certain in the case of the EU that any renegotiated relationship will require to sign up to most of the rules we currently have to follow with no influence on what those rules are.

Leave

We are choking in European rules and regulations and our own courts and Parliament are constantly being overruled by decisions from the Commission and European Court of Justice.

The EU reaches into many parts of our national life that it has no right to be involved in.

The Prime Minister’s deal changes nothing of importance and isn’t enforceable anyway.

If we take back control of our own sovereignty we will stand proud in the world, forging our own distinctive relationships with other countries, unfettered by the sclerotic, undemocratic, bureaucratic, wasteful beast that is Brussels.

Exit will allow us to control our borders.

We’re a large country, the world’s 5th biggest economy, members of NATO, the UN Security Council etc.

Everyone will want to trade with us (particularly the EU with whom we have a trade deficit) and while renegotiating terms will be complicated, we shouldn’t be scared of striking out on our own to find the best deal for the country (rather than the EU) wherever we can.

There are, of course, different arguments bound up in these positions so I’ve tried to tease them out. I’ve framed them from the Leave point of view though I could just as easily have done the reverse.

  • Being a member of the EU doesn’t work for the UK

     

    • It is expensive
    • It is undemocratic
    • It overregulates
    • It overreaches
    • Free movement opens us up to untenable levels of immigration
  • The Prime Minister’s deal changes nothing substantially and isn’t legally enforceable
  • Regaining sovereignty is key to our future success
    • UK law should always have precedence
  • The UK is an important global player
    • We will be able to renegotiate our financial and other relationships with both the EU and other countries to our advantage
    • There are plenty of working models out there that suggest the way our relations with other nations might work after Exit

My thoughts on the answers

Now I’m not and never will be an expert on these issues but I have learned much from:

  • our two Question Time evenings
  • many documents both printed and online
  • 6 years as a member of parliament with all that brings in exposure to the expertise of colleagues

What follows are my thoughts on the questions I have suggested summarise the arguments. 

Being a member of the EU doesn’t work for the UK
Being a member of the EU has, at the very least, coincided with a period of overall positive economic performance.

This coincidence should not be mistaken for causality - there are too many factors at play to draw such a firm conclusion – but, according to an FT analysis (behind a paywall) at the most macro of levels, the EU seems not to have hindered our recovery from being the ‘sick man of Europe’ in the early 70s. Further, international comparators outwith the EU suggest that our performance has been above the mean.

So, on the broadest of metrics, I observe that the historic evidence that ‘being a member of the EU doesn’t work for the UK’ is at the very least ‘case not proven’ to use the Scottish legal term.

Is the EU expensive?
According to FullFact.org we are the 2nd largest donor to the EU and in net terms that figure sits at about £8.5 billion per year after all EU spending in the UK and our rebate deducted.

While no-one would pretend that £8.5 billion is a small amount of money, in relative terms against all Government spending it is not enormous. In that it allows us, at the very least, to participate in a free market of some 500m consumers, I do not think it is excessive.

It may be that for some this complaint is as much a about the cost of the EU’s operations internally i.e. the cost of running itself as about the membership fee. If so, then I have little evidence to present beyond agreeing that it seems to me that the lack of transparency and clear democratic control of the Commission’s budgets makes it very likely. 

Issues like the insistence on increasing the EU’s budget when most nations face cuts internally and the parliament changing location once a month are clearly not encouraging indicators.

It is undemocratic, overregulates and it overreaches
First I would observe that some of the lack of democracy is deliberate. The complex structure of the EU with the three centres of the Council of Ministers, the Commission and the European Parliament has been set up to allow nations to retain a degree of sovereignty.

To put this another way, if we want total transparency and clearly accountable democracy, the only alternative is to turn the EU into a nation state. I doubt that is what many people in the UK really want to happen.

As to regulation I see a great many papers on new regulatory proposals, from both the EU Commission and European Parliament, in my job as Foreign Office whip.

There can be no doubt that the EU seeks to regulate a great deal. The unknowns here are how much of this the UK parliament would also seek to regulate anyway, how much it already does regulate in the same way and which the EU rules simply overlay or on which UK parliament would like to regulate but does not because it is politically expedient not to do so.

On EU involvement in the UK more generally, my principle reference has been a study started in 2012 and finished in 2014 by the Foreign & Commonwealth Office called “Review of the Balance of Competencies”. If you are wondering what this means the FAQ explains:

“It means examining the extent to which EU action affects the UK and analysing what that means for our country. It will look at how EU laws are put into place in the UK, what effect they have and where more EU activity could be to the national benefit or where less would be appropriate. This stemmed from a Coalition Commitment to examine the balance of EU competences.”

This wasn’t an internal review. It sought views thus:

“Government departments will consult Parliament and its committees, business, the devolved administrations, and civil society to look in depth at how the EU’s competences (the power to act in particular areas conferred on it by the EU Treaties) work in practice.”

There are 32 separate reports and 3,000 pages of analysis ranging from Agriculture to Transport and Free movement of persons to Competition policies.

Thankfully each of them has a summary page and broadly the conclusion seems to be that the balance is about right.

We can argue long and hard about the conclusions that were reached, who contributed and why they contributed but this was a mighty piece of work and I, for one, take its conclusions seriously.

Free movement opens us up to untenable levels of immigration

No-one living in almost any part of the UK can deny that there is a very substantial amount of inward migration from the EU and that this has happened with great speed.

My own experience suggests that this has a number of effects:

  • Services and infrastructure are put under stress
  • The character of communities has changed with great speed with all that can mean for community cohesion
  • Wages in those communities have been depressed, particularly for unskilled workers, although the evidence (see Centre for Economic Performance paper referenced below) seems to be that this effect, while certainly there, is relatively small.

These issues certainly pose real challenges which cannot be dismissed.

However this does not tell the whole story. UKandEU.co.uk is an academic site based at Kings College, London that describes itself thus:

“The UK in a Changing Europe Initiative promotes rigorous, high-quality and independent research into the complex and ever changing relationship between the UK and the European Union (EU).

It provides an authoritative, non-partisan and impartial reference point for those looking for information, insights and analysis about UK-EU relations that stands aside from the politics surrounding the debate.”

This document from the site makes interesting reading (the first two pages are relevant). In short it shows that EU immigrants as a whole are significantly younger than the resident population and have higher levels of employment (particularly those from the new EU states) than residents. 

This profile matches what I see on a day to day basis and suggests (I have no empirical evidence) that they make lower demands on services and on out of work benefits than those already here.

That said I suspect it is likely that, due to the skill profile of these migrants, they may make more demands of the tax credit system than the average resident.

The Centre for Economic Performance, based at the London School of Economics, has more information on EU immigrant profiles here.

It is probably also worth noting here that we should be wary of making judgments on something as broad as ‘free movement’ using short run evidence on proposals that will affect us over the long term.

The UK economy is currently enjoying relative outperformance when compared to the rest of Europe. I don’t think it is unreasonable to suppose that this will not always be true.

What will happen to EU migrant flows in those circumstances is anyone’s bet. Those of you of a certain age will remember the TV programme “Auf wiedersehen pet”. Net migration of EU citizens from the UK isn’t just a fantasy; it has happened before and has involved not just EU citizens going home but UK nationals going abroad to seek work.

This also reminds us that there are some 1.25 million UK citizens living elsewhere in the EU whose status, if were to exit, becomes uncertain.

Finally we should note that, as abstainers from the Schengen arrangements, we are not as exposed to the huge movements of refugees coming from Syria and elsewhere as the rest of the EU. Certainly, if and when these refugees are granted EU citizenship, then they are free to come to the UK but not otherwise. In that respect, our borders still remain as intact as they would be if we were not members of the EU.

Having looked at the evidence on free movement and EU migration, the best I can say is that the evidence is balanced. There are some clear problems caused by such rapid changes but inward migration has brought benefits too.

If then the evidence on the effects of ‘free movement’ is equivocal, then I find myself forced to ‘go with my gut’ to some extent.

As a parent I see my children able to travel unhindered throughout Europe, living where they please and working whenever and wherever they want to. That, and all the freedom it brings, seems to me to be something of real value and reflects an extraordinary achievement in bringing together a continent that has, for so long, been at odds with itself. We shouldn’t dismiss this lightly.

The Prime Minister’s deal changes nothing substantially and isn’t legally enforceable

All the evidence I have heard suggests that:

  • the Prime Minster got more than most experts thought he would
  • what he got is a useful start in getting the EU to accept that reform is required
  • the total package, while it has some real wins, could not be described as fundamental change
  • the legal agreements governing the changes are by no means watertight
  • the balance of opinion is that watertight or not, it is likely that the EU hierarchies will not work actively to undermine the agreement
  • the European Court of Justice is capable of interpreting the governing law unhelpfully and there is precedence for them doing so

So a number of confusing signals.

Ultimately then I fall back on asking myself whether or not the PM’s deal is fundamental to how I vote. I conclude that, for me at least, it isn’t.

Why? Because the work I have now done on this has convinced me that the issues that matter are much more fundamental than whether we achieved meaningful short-term change.

In reply to a number of constituents writing to me about the referendum over the last few months I replied that I would wait and see what the PM came back with before making a decision. 

Given I’m now saying I don’t think it really matters this may seem like a classic case of the ‘confirmation bias’ I identified early on in this document; the negotiation didn’t create substantial change so I decide, post facto, that it wasn’t important.

That’s a fair conclusion to reach but I hope you’ll allow me a swerve. What I suspect I was really doing in my replies was making an excuse for putting off thinking about the issue properly.

Mea culpa.

For further reference, amongst many others, Open Europe, the Centre for European Reform, and Full Fact have written extensively on the deal.

Regaining sovereignty is key to our future success

This is probably the most important matter of all because it underlies everything else. I believe understanding what sovereignty really means is the key to making a decision on the referendum.

In short, sovereignty is the extent to which you, me, a company a country or any other legal entity is in control of its own decisions.

It’s almost impossible to think of anyone who has complete control of themselves. All of us rely on others in some shape or form and, in doing so, we lose control of some things and gain others.

To get a feel for how deeply we understand this, think of this simple example: when we go out to dinner we accept that, in exchange for someone cooking for us, we have a limited choice of dishes.

Obvious I know, but the point is that this is something we all live with every single day and understand well.

But losing sovereignty at a national level is a very emotive subject, resonating as it does with a feeling of national identity, shared history, systems of law, philosophical outlook and so on.

Looked at this way it goes a long way towards explaining why EU rules, regulations, over reach, the ECJ and so on are seen as so important.

The shorthand version is “we know what’s best for this country and we’ll do better for ourselves if we don’t have someone telling us what that is”.

This is a perfectly valid starting point but I believe that, before we can possibly decide that the answer is that we should leave the EU, we should push emotion to one side and be confident we know:

  • how the compromises on sovereignty we have made by being part of the EU overstep what is reasonable
  • what sort of compromises on sovereignty we will have to make outside the EU and how will they differ from what we have now with the EU

The first question has been the subject of most of the first part of this paper. What follows - briefly because much is speculation - addresses the second using the final section of headline questions as a guide.

The UK is an important global player

This is undoubtedly true but important to establish as it is a genuine pre-condition to many of the arguments made for exit.

As the world’s 5th largest economy, a member of the UN Security Council, NATO and on countless other scores it would be foolish to assert that the UK isn’t big enough to stand on its own.

It is also important to understand that the bigger nations in the EU - the UK, France and Germany - make larger compromises of sovereignty to be part of the organisation than others and have more reason to be sceptical of the value of making them.

So it is simply not reasonable to argue that the UK shouldn’t consider the possibility of leaving nor that it doesn’t have good reasons to think about doing so.

We will be able to renegotiate our financial and other relationships with both the EU and other countries to our advantage and there are perfectly good models for this

As argued above, I don’t believe the evidence of what we lose in sovereignty and gain in co-operative benefits (economic and otherwise) supports a prima facie case for exit.

But that doesn’t mean that a case for exit cannot still be made. It certainly can but it needs to be clearly beneficial to us over and above the status quo.

My view is that a great deal of what we will hear on this will be at the wider end of projections. Headlines saying ‘Person X says projecting the likely outcome of leaving is difficult to forecast’ don’t exactly sell newspapers or persuade voters one way or the other.

So we need to look for rational analysis.
There have been a number of papers published on this such as ‘Britain Outside the European Union’ from the Institute of Economic Affairs, ‘Life after BREXIT: What are the UK’s options outside the European Union?’ from the Centre for Economic Performance, ‘Alternatives to membership: possible models for the United Kingdom outside the European Union’ from the UK Government and many others all of which are of some use.

But none of these have sought to predict economic outcomes. That is until this week when Open Europe published ‘What if . . .? The consequences, challenges and opportunities facing Britain outside the EU’

This report takes a very methodical and balanced approach to the problem, looking at a huge range of possible outcomes based around different exit scenarios, possible trading relationships struck, how the UK conducts itself post exit and so on. It also looks carefully at the economy by sector.

Their final analysis is that the most likely economic outcome of Brexit is a band of change in economic growth by 2030 from -0.8% to +0.6% with the possible extremes of the range from -2.2% to +1.55%.

Their conclusion is clear:

Given the difficulty in leaving the EU and the extent of the political and economic challenges the UK would need to overcome to make Brexit work in its long-term interests, it would be foolhardy to leave without first testing the limits of EU reform. Limiting the areas of EU interference and further market liberalisation would be the most beneficial option for both the UK and the EU.

If the UK puts as much effort into reforming the EU as it would have to in order to make a success of Brexit, the UK and the EU would both be far better off.

It is only fair to point out the Open Europe has always been an enthusiastic supporter of EU reform over exit but anyone looking carefully at this paper will, I think, have to acknowledge that it is difficult to accuse the paper of bias in its analysis.

This paper isn’t gospel of course. It remains entirely possible that the analysis will be wrong by a considerable margin. But my view is that:

  • in the absence of similarly well researched alternatives I have little else of substance to go on
  • even if it is wrong by 100% (i.e. a wide range of -4.4% to +3.1% by 2030) that seems to me like an insufficient incentive to warrant exit from the EU.

Conclusion

Prior to coming into politics I started up and ran businesses.

Now this may seem a little counterintuitive in the context of entrepreneurship but, over time, I learned to favour low risk options.

We all hear about the enormous successes of entrepreneurs who stuck their necks out and created extraordinary businesses by being bold but we hear very little of the thousands who took similar risks and failed.

Having been exposed to both sides, I can tell you that most entrepreneurs will favour a low risk low return option every time. 

I am forced to conclude that the lower risk proposal in this case is staying in the EU.

To summarise:

  • I do not believe the evidence supports the contention that our membership of the EU results in a level of inappropriate interference in our national life resulting in unacceptable erosion of sovereignty
  • If we leave the EU we will be have to renegotiate our relationships with the EU and others and, in doing so, yield sovereignty in many as yet unknown ways and with highly unpredictable outcomes.
  • The net economic effects of leaving are highly uncertain
  • We have achieved some small progress down the road of reform and I believe that the bigger prizes for the UK and the whole of the EU lie in further, more ambitious reform.

In short I believe the evidence leads me to conclude that I’d prefer to remain in the EU and work to make it better rather than leave and take our chances. 

But that’s just me. You may well very well disagree.

George Hollingbery. 21/3/16