Tuesday, June 7, 2016

Why I will Vote Leave: The Risks of Staying within the EU

We've asked our campaigners to share the reasons they have decided to Vote Leave...

Nobody is talking about the risks of staying within the EU. Now is the time to do so.

As we are into the last month of the campaign, we must examine certain aspects which have not been focused on sufficiently so far. Much of the debate today has centred about the risks of leaving the European Union and there has been a lot of confusion in the minds of the public about the veracity and logic of the statements made by both sides of the debate. There are several things to consider.


The arguments about free trade and the effect on the economic performance of the UK have revealed the deep divisions on the opinions and the assumptions made in the various analysis that been put forward. The Remain campaign has constantly invoked scaremongering and fear tactics throughout and to some extent, whilst annoying many on the Brexit side, has been successful in casting doubt in the minds of many of the public who may otherwise think differently.  So where is the EU going and what is the position of the UK in an EU dominated by policies and actions designed to ensure the further enlargement and dominance of the Eurozone? One also needs to also reiterate the already well-rehearsed arguments about immigration and security.

There are several questions to consider and which should be of vital importance to the British people:
  • Integration. What institutions will be developed to ensure the further development of the Eurozone and what will be the implication for non-Eurozone members?
  • Bailouts. What would happen if another Eurozone country needed a bailout or support if the UK were not contributing to the funds necessary to stabilise the situation?
  • Growth. What are the current growth prospects for the European Union?
  • Influence. Is it likely that the UK will retain significant influence as a continuing member of the European Union when so many items on the EU integration agenda are outside of our control?

Progress towards an integrated Europe

In February 2015 Jean-Claude Juncker presented an eight-page analytical note to EU leaders. In it he stressed the Commission’s desire to press for further consolidation within the Eurozone despite anti-Brussels sentiment from certain member states. The memo sought to suggest that member states would be bound by a proposed new Eurozone budget, it would have the right to bind certain member states into bailout style reform programmes and even penalties for whether tougher rules are needed to ensure that the reforms are carried out. Mr Juncker put forward the suggestion that the EU could continually monitor and survey the national policies of member states and that they should sign up to a system of stronger common governance over any structural reforms to be required.

In the same memo, he also mooted the possibility of a Eurozone-only Parliament which would vote on matters specifically related to the achievement of greater stability within the Eurozone and would not allow non-euro member states such as the UK, to have a voice, despite countries such as the UK would being either directly or indirectly affected by the consequences of such changes.

In June 2015, "The Five Presidents Report" set out plans to strengthening Europe’s economic and monetary union. The aim is to turn the Eurozone area into a rock solid architecture which will guarantee growth, jobs and prosperity for all citizens that share the currency. The report sets out three different stages the turning this vision into a reality:

Stage I is to use existing instruments and current treaties to boost competitiveness and structural convergence achieving responsible fiscal policy at national and Euro Area level in order to complete the Financial Union. 
Stage II or” completing EMU”, envisages more far-reaching actions to make the convergence process more binding through a set of commonly agreed benchmarks which are then defined in new EU legislation. This would also involve the creation of a Euro Area Treasury. They have also proposed the creation of an advisory European fiscal board to coordinate and complement existing national fiscal councils and to develop a common macroeconomic stabilisation function to better deal with shocks that can be managed at the national level alone. The intention of this is to improve the cushioning of large macroeconomic shocks and to make EMU more resilient. 
Stage III is envisaged to be achieved by 2025 at the latest and is to encourage and facilitate a deep and genuine EMU and to attract other EU member states to join if they’re ready to do so.

The UK is not a member of the euro and has no wish to join. Accordingly, the UK will have no say in any of these institutions and only a limited voice on their development. The Remain conviction that we will "retain our seat at the table" and have influence on all Euro Area decisions is completely false. In reality, the development of the Eurozone and the fiscal integration that the above plan envisages will become the dominant policy themes for the EU going forward. The creation of various institutions to support the Euro Area will not involve the UK and we will have no say in their running or purpose. Increasingly, the UK will lose influence in the management and development of the European Union and will interact with the new institutions created to facilitate EMU from the outside.


What would happen if another Eurozone country needed a bailout or support if the UK were not contributing to the funds necessary to stabilise the situation?

There is no doubt that the continuing economic situation of weaker countries in the Eurozone such as Greece, Spain and Portugal continues to dominate the agenda in Europe. More importantly, Mr Cameron has agreed that he will not use any of our budget contributions to participate in a bailout of any Eurozone country suffering economic hardship. Although this is completely consistent with us having our own currency and having no desire to join the Euro, it means that we will be at odds with the policy objectives of 19 existing member states. In addition, as five of the remaining states are looking to join the Eurozone in the future it is unlikely that we will find them to be political allies when the UK wishes to exercise Mr Cameron’s veto on new EU legislation that he negotiated early in the year as part of his “reform negotiation”.

So, in the event that a bailout be necessary, it is hard to see that if Eurozone members have committed to fund a bailout that there will be sufficient reserves or funds left to deal with the other matters that face European Union. The UK may well wish to promote its own policy agenda, say, in agricultural policy, financial services or energy, but it is highly unlikely that our concerns and political priorities will be anything other than subsidiary to the bigger policy agenda of strengthening the Eurozone and further integration. In particular, in times of stress other member states will prioritise their willingness to provide money to the Eurozone at the expense of anything that the UK would consider to be a priority. This position of subsidiarity is one that the UK cannot contemplate if it is to continue as a full member of the European Union and Mr Cameron has failed to secure any comfort on how we move forward with this group.


The European army

The Times on 27 May reported that the further developments of proposals to create a European army are being kept secret from British voters until the day after the referendum. The plans which have been drawn up by the EU’s foreign policy chief seen the development of new European military operational structures which could lead to the creation of an EU army.

The origins of such proposals come from the Lisbon treaty which fuse together European Commission structures with national diplomacy and gave the Commission a mandate and powers to consider issues such as military planning. Although these proposals fall short of creating an EU army, it does provide the impetus for nations to cooperate together to strengthen their security and defence on a coordinated basis using EU structures. Certain campaigners on the Brexit side, such as Liam Fox, have already voiced their opinion that this would conflict with the UK’s involvement in NATO and undermine our wider security.

Whilst these proposals are still far from formulated, they do indicate the direction of travel and the wider political ambition of the Commission. If the UK remains within the EU, can David Cameron really stand back from all the proposals that are said to be for the good of the EU as a whole without sacrificing some degree of control of our national security and military planning? The Remain campaign has not even attempted to address this issue which is vital to our national security with their own independent deterrent and military capabilities.


The economy and risks of belonging to the EU

Much has already been written about the effects on the economy of leaving the EU and there have been scare stories and inaccurate information on both sides. The “Vote Leave” campaign regularly quote the £350 million a week going to Brussels and that this is equivalent to one new hospital a week that could be built. This number is easily attacked because it completely ignores the rebate that we get (which is a result of Mrs Thatcher’s agreements in the past) and the amount paid to the UK in agricultural subsidies and other grants et cetera (although we have no control over how this is spent). This reduces the net contribution down to around £9 billion. Note, however, that this rebate is under threat (it was granted in 1984 when Britain was one of the poorer members of the EEC, and will be subject to further negotiations between Britain and the EU). In the same way, it is hard for anyone to substantiate the claims made in the recent Treasury paper and Mr Osborne’s claims that we would lose £4,300 per family, and £36 billion in tax receipts. He also claims that if we adopted a Canadian style trade model for a new trade deal with the EU that did not require freedom movement, it will reduce Britain’s GDP by 6.2%. These numbers simply cannot be substantiated.

The reality is that on the day following a Brexit vote nothing will change. The trade agreements we have in place will remain until negotiations are completed and we have a period of two years to complete that negotiation. In economic terms we have a strong hand, which is helped by the weakness of growth in the Eurozone (forecast to grow this year by approximately 1.6%) and the large balance of payments deficit in trade between the UK and the EU.

It is often quoted that we should attempt to do trade deals such as the one Norway has with the EU but which requires them to accept free movement of people. Our economic position is significantly different. Taking Norway as an example, the population is approximately 4.3 million people whereas the UK has a population of approximately 64.8 million. Perhaps even more importantly, Norway is a massive exporter of oil and gas in the into the European Union and as a huge trade surplus as a result. During the last year, this surplus was approximately €25.4 billion and made Norway the EU’s fifth-largest trading partner. In contrast, the U.K.’s trade deficit with the EU was £68 billion.

If we were to leave the European Union, we would become the largest single external trading partner within the approximate market share of 16% of all EU exports. This means that we should approach trade negotiations with confidence given the lacklustre growth within the EU and the large surpluses that France and Germany both run with the UK.

There may be however, a severe backlash from the politicians of Europe because the European integration project is of their greatest concern. If the UK is seen to leave on favourable trade terms, what does that mean for the countries that are also unsure of the political direction of Brussels and the drive of the European Union to create a more integrated superstate? Some commentators already pointed out that this could lead to the disintegration of the bloc and it is this reason that political pressure has been brought to bear on David Cameron and others in the debate.

There is no doubt that despite assurances to the contrary from all sides that their analysis is correct, nobody can accurately predict the exact outcome following the referendum. The economy will experience change but it would do so in any case. Given our trade surplus with non-EU countries and are rising proportion of trade with them, it seemed sensible to at least give ourselves the opportunity of negotiating our trade agreements with those countries individually and without interference from the EU, whilst not been afraid of being able to negotiate with the EU from a position of strength. In the end, we will have to rely on economic self-interest of the remaining EU states to enter into a sensible and appropriate relationship with the UK after Brexit.




This narrative is designed to help people look at certain of the policy statements from the European Union and to identify how it will change in the years ahead if Britain remains as a member. There is no doubt that the Brexit could lead to a destabilisation of the European Union as other member states may reopen the debate on ever closer union and the policy changes and loss of sovereignty that it requires to fully integrate the institutions required to maintain the euro and form a de facto superstate. For those of us, who believe that to remain in the European Union poses greater long-term risk to the UK and further loss of sovereignty and decision-making, and that there are substantial economic opportunities for the UK with the wider world, then the only way forward is a vote for Brexit.

Michael Redican-Managing Director MAR Consult Ltd.


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