The vote for Europe is still months away yet already we’re drowning in a sea of distortion, exaggeration, scare-mongering and outright lies.
We guess the Sun’s headline this week about the Queen and Brexit is one. It’s possible the newspaper will apologise but the damage is done. Its front page screaming Queen Backs Brexit will still circulate on social media.
Neville Price, in a letter to the Chronicle the other week, directed us to a report commissioned by a City investor. Mr Price cited it as proof that the Brexit scare-mongers were wrong — leaving the EU will not be a catastrophe.
Being independent, the report, which only looks at whether investors will lose money or not, seems to make the point that it makes little difference whether we are in or out. Business will not collapse, but neither will we save much money.
We’re guessing the report is as fair as any. It was prepared by Woodford Investment Management, whose only dog in the fight is whether it turns a profit. The report makes interesting reading, summarised below. We’ll start with the hot topics.
PUBLIC FINANCE: the cost to the public purse is a big issue. The headline figure to bear in mind is the near-£100m this area will get back from the EU between 2014-20.
In 2014-15, the UK paid £13.7 billon to the European Union, plus an additional £2.3bn payment based on VAT receipts. It received back £4.8bn the British rebate, plus a £0.8bn fee for collecting duties on the EU’s behalf, a net cost of £10.4bn.
This is offset by £4.4bn in funds handed back by the EU, for example via the Common Agricultural Policy and to poor cites, like Stoke-on-Trent. This leaves a net cost of £6bn.
This is not a lot: “The Office for Budget Responsibility’s … suggests it would only take a 0.8% reduction in the level of output for public borrowing to be £10bn higher,” notes the report, ie any saving is wiped out.
If we adopt a Norway-style contribution, the cost could be “at least 56%” of current levels and may only mean a fall of 17%. The Government might need to compensate businesses for the loss of EU structural funds, such as the European Regional Development Fund which is worth £83m for the Stoke-on-Trent and Staffordshire area between 2014-20. Wales also gets a lot of money from the EU.
MIGRATION. The report notes that net migration from Europe has more than doubled since 2012, and boosted the UK workforce by around 0.5% a year. Migration has helped support economic growth without pushing up wages and inflation, keeping interest rates lower for longer.
The report said Britain might have to keep free movement to gain access to European markets but this was “unlikely”. The UK was likely to restrict the number of low skilled workers entering the country, and encourage more skilled workers.
“This would be a potential headache for low-wage sectors heavily dependent on migrant labour, such as agriculture, but could benefit other sectors with a shortage of highly skilled labour,” said the report.
RED TAPE/PRODUCTIVITY: UK productivity is notoriously bad and this would not change if we left the EU. It would stay poor.
Red tape caused by the EU’s 100 most expensive legislation costs £33bn a year but the report indicates that nothing much would change. Norway does not adopt many European Union laws, but complies with the more significant ones. And, as the report noted: “British governments have shown more zeal for financial services regulation than other European countries recently.”
So we’re quite capable of making our own red tape — readers of Charles Dickens will know that this has been the case for a long time.
TRADE/MANUFACTURING: the report says the EU is the destination for about half of all British goods, rising to 63% if countries with a free trade agreement with the EU are counted.
It concludes that a favourable trade agreement is likely, as there are advantages for both sides. The worst-case scenario, in which Britain faces tariffs, would be an “inconvenience rather than a major barrier.”
“It is probable that the impacts of Brexit on trade would be relatively small,” said the report.
The City would suffer in the short term, more than most sectors, as the UK would lose influence over the single market’s rules, “but it would not spell disaster,” concluded the report.
It did say that if passporting rights — the ability to trade financial services across the EU — were lost, exports of financial services could halve from £19bn to £10bn, though it played this down.
Overall the report doubted that Britain’s long-term economic outlook hinged on Brexit — but there were many unknowns, and a lot of “coulds” and “mights”.
In summary: for the three hot topics for the Out camp — migration, the cost of the EU and red tape — the latter two seem to face little change with only migration looking different post-EU.
The UK might control its migration, but migrant workers help keep inflation down, and controls could be “a potential headache” for low-wage sectors heavily dependent on migrant labour, such as agriculture.
So basically: swings, roundabouts and status quo. On paper, it seems to make very little difference being in or out, with both camps over-egging their case.
Admittedly the EU has its flaws. Shuttling between two cities is ridiculous and the EU accounts never being signed off by its auditors is outrageous. (On the other hand: who’d miss MEPs? Nobody). But all government has it flaws, from Westminster down to our local town halls.
The big question would seem to be: do we feel European? Do you want the UK to be part of Europe or go it alone?
Whatever you views on those two questions, don’t let them be swayed by the misinformation coming from both camps.