We now have to throw our all into winning a victory for remain. Defeat on Europe would represent a much wider defeat for British social democracy
By Roger Liddle
The alarm bells are ringing: the 23 June referendum is on a knife-edge. A significant part of what was once seen as Labour’s “core” working-class vote is drifting into the leave camp. This is the revolt of the “left behind”; the penalty the British economic and political establishment is paying for not sufficiently addressing the problems of the “losers” from globalisation and the parallel processes of European economic integration; the arrival with a vengeance in Britain of the politics of Donald Trump, Marine Le Pen and our own homegrown variant, Nigel Farage.
Labour’s left will argue that New Labour was to blame for this mass alienation of working people from British socialism. They are right to the extent that New Labour in government did not do enough to bring fresh hope and opportunity to old industrial communities that felt left behind. However, what we are seeing in Britain is mirrored in the experience of the Dutch Labour party, the Austrian and German Social Democrats and the decline of Nordic social democracy. In Britain, we suffer from a particularly toxic combination of factors that have catalysed anti-European populism. On the one hand, the weakness and feebleness of the political class for decades in making the case for Europe. On the other, the collapse of productivity and the squeeze on working families’ living standards since the financial crisis of 2008, to which, in the public mind, the surge in immigration over the last decade is (wrongly) linked. In this referendum, we face the fight of our lives.
The leavers are playing the emotional cards so much better than the remainers. However flawed their arguments, Vote Leave make a gut appeal that Brexit is the chance to “take back control” of our future. The leavers have a strong and committed base of support among older voters, the most likely group to go to the polls. Their campaign relies on the endless repetition of half-truths and distortions: yet it comes across as conveying energy, conviction and passion. The fact that the leavers’ thin arguments are treated as seriously as they are reflects poorly on the quality of the national debate. No one can stop the constant flow of misrepresentation from our largely foreign-owned press. At times though it seems the BBC’s great tradition of robust impartiality has been replaced by a timid and passive rule of equal time for unchallenged assertion and counter-assertion. Yet the main blame rests with a political class (and Labour is not immune from blame here) that has rubbished the EU for decades, but now expects the electorate to vote for staying in.
The leave campaign relies on the endless repetition of half-truths and distortions: yet it comes across as conveying energy, conviction and passion
As Sir John Major has said, EU membership is one of the factors that has helped transform Britain from being the “sick man of Europe” in the 1970s to a much richer country today. Of course, our EU membership boosts the booming parts of Britain: principally, London and most of the south-east with its thriving economic base in financial and professional services, consultancy, the digital revolution, design and the creative industries.
Yet staying in the EU is an essential foundation for progressive advance in Britain. The European single market, through the enlarged “home market” it offers our firms, and the overseas inward investment into the UK it promotes, is also an essential support for what remains of the industrial backbone of England – in the car industry, aerospace, pharmaceuticals and advanced manufacturing. Virtually every single reputable academic study and every international organisation concerned with the global economy, presents compelling evidence that Britain receives a significant boost to GDP as a result of EU membership. Across the whole of the UK, Britain’s pensioners, public services and the future funding of the NHS depend in large part on the tax dividend that flows from that success. Our regional economies depend on the EU to have any hope of sharing in a more broadly based prosperity. They have been big beneficiaries of the EU structural funds when national (Tory) governments were reluctant to cough up a penny. Our universities have benefited greatly from EU research cooperation and funding.
More than this, our EU membership – and this is where the “single market” means so much more than a “market” – requires us to sustain the basic standards of a civilised society – everything from human rights and equalities to the protection of rare species and consumer protection and product safety rules. Of course, some regulations can be disproportionate and go too far – and this happens sometimes under both UK and EU law, but this is an argument for EU reform, not for Brexit. The Brexiteers want a deregulated society in which rules are scrapped, not their burden made proportionate. The only people who would benefit from the deregulated nirvana that the Brexiteers envisage would be a minority of irresponsible business people who want to make themselves rich at the expense of the wider public good: even rich elites need the strong regulations that the EU provides to protect them from pollution and other environmental and public health risks. Outside the EU, the danger is that Britain descends into a competitive race to the bottom. Inside the EU, by setting rules for one that are made rules for all, we strengthen our ability as a nation to guarantee a fairer deal for working people under a future Labour government. Rather than taking away the possibility of democratic self government, the EU extends its potential. It enables its member states to tackle issues together that they could not succeed in tackling on their own. Tax avoidance by large corporations and rich individuals is a classic example.
Through close institutional cooperation with our EU partners we are better able to meet the growing number of global challenges and security threats that face us as a nation. Membership of the EU multiplies British sovereignty. It strengthens the shield of security that protects our citizens and enables Britain to be a bigger “force for good” in a troubled world. No nation can shut itself off from these troubles by closing its borders. In a world of increasing interdependence, national sovereignty in many spheres is increasingly a chimera. The reality is that Brexit would reduce our sovereignty over what matters, not strengthen it. If we cannot work together with French, Germans and other European nations in facing common challenges, who else will be Britain’s friends? The United States could not be clearer that Brexit will reduce our influence in Washington. Every head of government in the Commonwealth wants Britain to remain in the EU.
This is not a referendum most of the Labour party wanted. Pro-Europeans always knew that David Cameron was taking a terrible gamble with the nation’s future. But if the leavers win, it will in large part be Labour’s responsibility: “our people” will have voted for Brexit. We now have to throw our all into winning a victory for remain. Defeat on Europe would represent a much wider defeat for British social democracy.
The task of winning the referendum is a matter for the coming weeks and days, but the outcome will affect our potential as a country for generations. We also need to recognise one stark fact about our opponents. If we succeed in persuading a majority of the electorate to vote to remain, the leavers will never accept the result. They will feel robbed. They will try to bring the issue back. This is why Labour must never again allow the case for Europe to be sidelined in its public appeal. It is core to the battle for a more progressive social democratic Britain.
But we are where we are. The campaign to remain in the EU is led by a Conservative prime minister and chancellor who throughout their political career have defined themselves as Eurosceptics. That many Eurosceptics have followed their lead and now pronounce themselves firmly against Brexit, shows, of course, a welcome realism. And, of course, it has always been an abuse of the English language to equate “Euroscepticism” with “anti-Europeanism”: a sceptic is someone who is by definition cautious and suspicious of any enthusiasm, but open to persuasion as to its logic and legitimacy. Nonetheless “Eurosceptics against Brexit” is not the most stirring campaign cry.
Remainers have made some progress by pointing out starkly the risks involved in Brexit. But “Project Fear” has to be balanced by a “Project Hope” which is, so far, dismally absent in the campaign. No wonder that younger people, who instinctively favour remain, and simply see our membership of the EU as part of the modern world, feel uninspired to go to the polls.
The remain strategy has relied heavily on an assumption that strong support for our continued EU membership from the business and political establishment would see them home. “Establishment” support still carries some weight. It is a positive for remain. However, business, as well as politicians, have badly lost moral authority with the public. 2016 is not 1975. Then, the prime minister, Harold Wilson, turned a 60-40 majority against staying in a mere six months before the poll, into a 65-35 backing for Britain’s membership on polling day. He was assisted by a spirited cross party “Yes for Europe” campaign led by Roy Jenkins, Edward Heath and Jeremy Thorpe. Today is different. The electorate observes a Conservative party at war with itself, the strongly pro-European Liberal Democrats destroyed as an effective force in the 2015 general election, and a Labour party that has been largely absent from the field of battle.
Seeking a role in the world
The referendum is the biggest decision about Britain’s future and role in the world since the end of the second world war. We are a long, long way from the world that in 1945 Ernie Bevin then so brilliantly surveyed from his Foreign Office window. Great Britain is no longer one of the “Big Three”; the Soviet Union has collapsed; and the world has pivoted to Asia. Britain no longer stands at the centre of the three circles of influence that Winston Churchill graphically described – the British Empire and Commonwealth; the Atlantic Alliance with the United States; and the continent of Europe. Churchill recognised that “splendid isolation” had never worked as a successful policy for Britain for long. The consequences of isolation were never “splendid” and Britain always ended up involved in bloody European conflicts because it had few alternatives. As a consequence, hundreds of thousands of British lives have been lost through the centuries.
Since 1945, the Empire has long gone and the Commonwealth, though rich in ties of sentiment, language and culture, is neither an economic force nor an effective political alliance. The United States values its close relationship with Britain (though we are by no means the only country to claim a “special” relationship with the United States), but as President Obama made clear in London, its value today lies in the fact that Britain is a leading player in the EU. Out of the EU London would count much less in Washington. Our EU membership is now the focal point of British influence in the world. There is no other table at which a British prime minister can sit.
Our membership of the EU has been at the heart of Britain’s “national strategy” since the 1960s. EU membership was Britain’s response to Dean Acheson’s famous quip in his speech at West Point in December 1962 that Britain was “a country that had lost an Empire and has not yet found a role”. Yet, for decades, this national case for our EU membership has rarely been made with force and conviction by our political leaders. The Conservative party had great difficulty adjusting to the loss of Empire. It retained a romantic attachment to a “mother of parliaments” view of Westminster democracy despite its increasing constitutional archaism and dysfunctionality. It never fully bought the argument that by “pooling” some national sovereignty, we added to Britain’s strength, influence and power in the modern interdependent world. And it hated Jacques Delors’ vision of European economic integration culminating in the euro and a more social Europe. For the heirs of Thatcherism, Europe was, as Margaret Thatcher herself put it in her Bruges speech, bringing in through the back door those elements of socialism that she imagined they had thrown out through the front. Prior to the Conservative victory in the 2010 election, the Conservative party in the House of Commons had opposed every single one of the four new EU treaties that the Labour government signed and demanded a referendum on each one.
Our EU membership is now the focal point of British influence in the world. There is no other table at which a British prime minister can sit
As for Labour, for decades Europe seemed at odds with the creation of a post-1945 British socialist commonwealth and the post-imperialist view that Britain had a distinctive role of “moral leadership” in the world. Hugh Gaitskell, the son of an Indian civil servant, was emotionally attached to the Commonwealth and that played its part in explaining why he said Common market membership would be the “end of a thousand years of history”. It was left to Harold Wilson to manoeuvre a reluctant Labour party into Europe, which the Bennite insurgency in the early 1980s attempted, but failed, to reverse. Labour under the leadership of Neil Kinnock, John Smith and Tony Blair became pro-European to its core. Blair repeatedly tried to make the case for Europe, but was too easily deterred by the wall of hostility that greeted his pro-European interventions in the press, and especially the Murdoch-owned titles. No wonder that under Blair and Brown, the default position in support of EU membership became “standing up for British interests in Brussels”: the politics of seeing our EU membership as a “zero-sum” game in which Europe and our EU partners were “de facto” positioned as being on the enemy side.
This half-heartedness about Europe showed itself once more in Jeremy Corbyn’s depressing reluctance to engage in the British referendum debate until late in the day. Yet maybe on the Labour side things are stirring. On 14 April, Corbyn surprised his many critics – both inside and outside the party – with a speech on Europe in which he argued that Labour is “overwhelmingly for staying in because we believe the European Union has brought investment, jobs and protection for workers, consumers and the environment, and offers the best chance of meeting the challenges we face in the 21st century. Labour is convinced that a vote to remain is in the best interests of the people of this country”. Those who complain that his support for Europe was qualified by the phrase “warts and all” are not being fair. His formulation of support for Europe, “remain to reform” is a less elegant reworking of the early Blair mantra “pro Europe, pro-reform in Europe”, much as that point will annoy his entourage.
Of course, Corbyn’s vision of “reform” might be somewhat different to that of more moderate mainstream social democrats. For example, the Labour leader makes a lot of his opposition to TTIP on the grounds that it would facilitate the privatisation of the NHS by US multinationals and allow global corporate power to overturn national rules and social protections. An intelligent counter to this position is that no such agreement would ever be sanctioned by the EU. There is simply no way that a “neoliberal” TTIP would pass the scrutiny of the European parliament. This is an example of how the “democratic deficit” in the EU has been partially closed by the Amsterdam and Lisbon treaty reforms that gave much increased powers to the European parliament, including the right to veto trade deals. New Labour backed these extensions to the parliament’s powers, notwithstanding the fact that Corbyn’s support for these treaties may have been at best “lukewarm” in the House of Commons. But in the context of the referendum, this is a quibble, not an ideological gulf: what matters is that the Labour leadership is “on side” for Europe. That is a significant gain for the pro-European cause among a section of the electorate that strongly identifies with Labour and will not pay much attention to the recommendations of the prime minister.
There remain, however, problems with Labour positioning on the referendum. Corbyn argues that his support for Britain remaining in the EU is based on a “socialist case”, which is assumed to be quite different from the “neoliberal”, pro-business arguments in favour of our membership of what, in the 1970s, Corbyn would have derided as a “capitalist club”. A politically damaging conclusion is drawn from this sense of difference: Labour should avoid at all costs “siding with the Tories” in campaigning for Britain’s continued EU membership. Labour, it is argued, must not repeat the mistakes it allegedly made in the Scottish referendum. But Labour attitudes are based on a misreading of those events.
It is a fact that a very high proportion of the Labour voters who voted for independence in the September 2014 referendum deserted for the Scottish National party in the May 2015 general election. But it is not logical to argue that the reason former Labour voters made this switch is because the “Better Together” campaign led by Labour’s Alastair Darling was seen as siding with the Tories against the Scottish people. Of course, this was the SNP charge. But Labour’s problems in Scotland stretch way back before the referendum. The SNP has been in government in Holyrood since 2007 and won a remarkable overall majority under a PR system in the 2011 Scottish parliament election. The 2014 referendum triggered a switch from Labour to the SNP that was already there in the making. By then, Labour had already lost its position as the champions of Scotland against the London political establishment.
There is indeed a strong progressive case for Europe, which many Conservatives would not make. Yet if Labour puts all its emphasis on its differences with the government, its position runs the risk of coming across as sectional, qualified and hesitant. Instead Labour should be arguing strongly and clearly that the EU we presently have is in the national interest, much as it needs further reform. This overwhelming national interest case for the principle of our EU membership unites men and women of goodwill across all the mainstream parties. It is a patriotic as well as a progressive argument. On the fundamental question of Britain’s EU membership, Labour is in agreement with Cameron and Osborne and we should not equivocate about showing we mean it.
The economic case: a social and progressive one
The economic argument for our membership is, at root, a strong social and progressive argument too. Economically, Europe is at the centre of our trading relationships, accounting for 44 percent of our trade. The European single market is our home market in which we can trade freely. This European market with 500 million customers offers British-based businesses a scale of home market eight times the size of the UK’s alone. It is on the back of competitive success in that bigger “home” market that British businesses develop the scale to compete in global markets. Britain has also become a magnet for inward investment from all over the world. These should not to be dismissed as “business” arguments of no relevance to working people. They are about good jobs and the size of people’s packets. The single market is also of vital relevance to the economies of the UK’s more deprived regions and nations: think of the benefits that Nissan brings to the whole of the north-east.
The leavers argue that Britain could enjoy much the same level of “free trade” with the EU if we left, in a free trade area that, according to Michael Gove, stretches from Iceland to Albania. Yet the Albanian prime minister has since pointed out that the level of “free trade” access his country presently enjoys to the EU single market is so limited that Albania’s application for EU membership is one of the top priorities of his government. However, for the Brexiteers, EU withdrawal is assumed to be a process of painless simplicity: all that is needed is a free trade agreement with the EU and what conceivable obstacle could stand in the way of that, given that they sell more to us than we sell to them. In their eyes, it would be in the EU’s overwhelming interests to maintain an open trading relationship with the UK. In addition, any short-term economic dislocation as a result of Brexit could be made up by taking advantage of our new freedom as a sovereign nation state to strike free trade agreements with the rest of the world.
In the Brexiteers’ view, Britain could continue to enjoy all the economic benefits of being in the EU club in terms of unimpeded access to the EU’s single market, without having to stick to the club rules or contribute any of the club membership fee. This is not the way clubs of any kind normally operate
These leavers’ arguments are central to the Brexit case and, at best, are based on half-truths. The propositions on free trade, migration and EU budget contributions are mutually incompatible and wholly undeliverable. If Brexit wins the day on 23 June, the leavers will have built their victory on three central flawed propositions. First, “free trade” with the EU will be secured on a quick basis with no problems. Second, by voting to leave Britain can stop paying the EU contributions which they (falsely) claim amounts to £350m a week. Those alleged savings are then promised to any cause by which the leavers believe a vote for Brexit might be won. Third, by voting to leave the UK can “regain control” of its borders and stop EU migration into Britain.
In the Brexiteers’ view, Britain could continue to enjoy all the economic benefits of being in the EU club in terms of unimpeded access to the EU’s single market, without having to stick to the club rules or contribute any of the club membership fee. This is not the way clubs of any kind normally operate: if, in a fit of pique, you send your resignation to the secretary of your local golf club and cancel your direct debit to pay its fees, you do not expect to be welcomed with open arms if you try to play a game on the course without entering the clubhouse. Somehow the Brexiteers think Britain will be granted an honorary membership that transcends the rules and avoids the fee.
The Brexiteers face a massive contradiction in their position. Ending budget contributions and stopping free movement are the promises that will have won the vote for Brexit but they are essential pre-conditions of our present access to the EU market. Why should our former EU partners offer us as non-members a better deal than they enjoy themselves as members– access to the single market without any of the commensurate obligations to contribute to the budget or permit free movement?
In addition, according to the leavers, Brexit will free Britain from all the burdensome EU regulation they constantly rail against; the “straight banana” regulations (not that such fantasies have ever existed, though Boris Johnson cavalierly invented them when he was the Daily Telegraph’s correspondent in Brussels), health and safety rules, and environmental and social protections they so resent. They wilfully ignore the essence of the European single market as a hugely complex body of common standards for which all members sign up: it is those common standards that avoid the need for businesses to comply with 28 different sets of standards when they trade. They enable goods and services to be sold across the whole of the EU’s 500 million-strong market without the need for costly adaptations which, if we adopted different standards for our home market (as the Brexiteers want), would make our exports more difficult and, in some cases, uncompetitive. Rather they appear to assume that our former partners will be so delighted by Britain’s decision to withdraw that they will allow businesses based in Britain to be “free-riders” picking and choosing which aspects of EU regulation they choose to abide by. If the EU made this concession to the British, imagine the pressures from within member countries to enjoy the same privileges: it would be the end of the common market foundations of the EU. If on Brexit, Britain wants unimpeded access to EU markets we will have, at the very minimum, to comply with EU regulations, which we would have had no say in setting: that is in addition to paying budgetary contributions and allowing free movement.
The harsh politics of Brexit
The cardinal error the Brexiteers make is in misunderstanding the EU politics of a British vote to leave. For them, the emotional excitement of recapturing the sovereignty they believe Britain has lost as a result of our EU membership outweighs any rational political calculation on their part of how our partners will react. In their eyes, any sense of bitterness on the continent at Britain’s rejection of the EU will be temporary. They ignore the inevitable sense of hurt that the lengths to which the EU has gone in order to accommodate British exceptionalism (our legally tight “opt-outs” from the euro and Schengen; the “special status” acknowledged in the Cameron renegotiation) have been spurned by the British people. They do not appreciate how a British vote to leave will send shock waves through the EU body politic, assailed as it presently is by populist minorities on its right and left.
Brexit poses an existential threat to the EU itself. It will force the rest of Europe either to close ranks or disintegrate. For some Brexiteers, this latter prospect is, in truth, the supreme prize. As Gove has implied, a British vote for exit would be a victory for democracy if it leads to the breakup of the EU. Presumably he imagines that the pre-1914 “concert of Europe” – a Europe of independent sovereign states without the encumbrance of any EU supranational arrangements – would be a more democratic settlement for Europe and lead to more harmony between the peoples and nations of Europe than what they see as the “the dictatorship of Brussels”.
All of Europe’s history since the second world war tells us that the political class on the continent totally reject this view and will fight to the last breath to keep Europe together. Unlike the British Brexiteers, they know that the real alternative to the EU is the centuries-old curse of European civilisation – nationalism. As the former French president, Francois Mitterrand, put it in 1995 in his magnificent farewell speech to the European parliament: “le nationalisme: c’est la guerre’’. In five simple words, that is the case for Europe.
In order to stem what our partners would interpret as the existential risk to Europe’s unity and peace that Brexit would be seen to pose, their natural reaction will be to demonstrate that leaving the EU is not a cost-free option for which any ten-a-penny rabble rouser can whip up support. If Britain turns its back on Europe on 23 June, there will be real sorrow across the continent, but it would be an error of historic proportions to mistake real sorrow for sympathy, special treatment and a free ride. Yet that is what our Brexit “prime minister in-waiting”, Boris Johnson, appears to think awaits him in the chancelleries of Europe.
The truth is that negotiating a smooth exit from the EU will prove much more difficult than defending Britain’s national interests within the EU. The EU is not a state with a single government that decides its policy on a rational calculation of the overall EU interest. Rather it is a partnership of 28 sovereign states (27 without the UK) who work together through a constant and complex process of institutionalised negotiation and bargaining. Inside the club the rights of each member state are properly respected. Brexiteers cannot bring themselves to recognise this, because they have a twisted view of what the EU is. The EU is not a federation, a United States of Europe under the domination of an unelected commission: this is an invention of Eurosceptic fantasy. The governing principle is of “equality between the member states”. While in terms of population size and economic and political importance, some member states are inevitably more equal than others – and this reflected in the EU’s voting rules – there is an unwritten convention that ever single member state’s interests have to be taken into account.
The truth is that negotiating a smooth exit from the EU will prove much more difficult than defending Britain’s national interests within the EU
In the event of Brexit, Germany would undoubtedly not want to burn bridges with Britain. As the most important member state, it has great weight in the EU. But its position is by no means hegemonic. Cameron eventually showed that he understood this, in the enormous efforts he made in the British renegotiation to obtain the assent of every head of government. They listened to him then because Britain is a member – and he obtained more than some people (including this author) expected through his renegotiation for his reform agenda. But if Britain voted to leave, the respect accorded to the insider vanishes overnight. If we vote Out, our EU partners will make sure we are in reality Out.
Formally, British exit according to the Treaty would be negotiated with the European commission alone. The UK would not be allowed to take part in any discussions in the council of ministers that affects the British position. But behind the veil of the commission, would be 27 sovereign states each anxious to protect their own interests, establishing common positions with each other that took very little account of UK interests. While the EU will act as one, it contains within it a complex range of competing national interests.
This is the central flaw in the leavers’ proposition that “they” have more to gain from trading with us than we have from trading with them. It all depends on who “they” are. Some member states have a much bigger trade surplus with Britain than others: many no surplus at all. Doubtless the Germans would continue to seek unimpeded access for their Volkswagen and BMW exports to Britain. But it is a fair guess that French and Italian manufacturers of generally smaller cars, where British exports are much more competitive at present, would not feel so accommodating. They would insist on tariffs being levied on British exports to the EU market. Who can tell how the politics of this would work out within the EU 27, but the chances are that it would not be well for Britain. If we end up trading cars “under WTO rules” as some Brexiteers glibly imagine, our car exporters – and the 750,000 jobs in Britain they represent – would end up facing a crippling 10 percent tariff. This would be a disaster, for example, for the north-east where Nissan production has become essential to the region’s economic recovery and strength.
But it is not just a question of tariffs where, in the auto industry, Britain could find itself at a disadvantage. Outside the EU, Britain would no longer have a seat at the table when technical regulations come up for review, for example on emissions as they did as a result of the recent VW scandal. The standards would be set in French, German and Italian interests, not the UK’s. This is not scare-mongering. In the recent review of standards, the initial proposals from the commission would have had the unintended effect of excluding Ford engines manufactured in the UK from the European market: the UK got the proposals modified only because we had a minister at the negotiating table. This sectoral example – in which thousands of British jobs are at stake – is repeated sector by sector.
One provision of the EU treaties – that the leavers have ignored or claimed not to notice – would give the EU insiders, not the United Kingdom, the whip hand in negotiations following a Brexit vote. The negotiation deadline for exit under Article 50 of the Lisbon treaty is subject to a two-year time limit that can only be extended by unanimity among the 27. This gives any single member state effectively the power to force us out after two years if we have not accepted an arrangement on the terms the EU has offered. With no agreement on the EU 27’s terms, after two years, Britain would effectively be trading with the EU on a WTO basis. That means no “single passport” protection for services, tariffs on vital UK exports to the EU, and total exclusion from EU processes of future regulation setting. The Brexiteers ask people to believe it would be “alright on the night”. The Brexiteers need a little more understanding of European realpolitik.
As for the claim that a loss in trade with the EU could be made up by a ‘sovereign Britain’ concluding free trade agreements of its own with the rest of the world, even if this was possible (which most impartial judges doubt, certainly on anything much less than a 10-year time scale) it is not clear whether this would be a beneficial strategy for the UK. Free trade within the EU is mutually advantageous through the single market because it means competition between countries with similar standards of living: it rewards success in devising innovative hi-tech products and services that meet the needs of one of the richest markets in the world. Free trade with Asia, Africa and Latin America means competing directly with low wage economies with much lower social, environmental and safety standards than Britain has adopted as a result of our EU membership. Of course the 2004 EU enlargements have brought into the EU some countries that are much poorer than the old EU 15 and, as a result, companies have moved production east to take advantage of skilled workforces willing to accept lower wages, but they have to comply with EU standards in other respects. Free trade with emerging economies in the wider world is a much more problematic concept for a developed country like the UK. The scale difference between eastern Europe and the size of global emerging economies is vast. As a recent Open Europe report on what Britain would need to do to make a success of Brexit pointed out, free trade agreements with emerging markets would involve large-scale domestic job losses in manufacturing and farming. Britain could, of course, compete but only by choosing the “low road” to competitiveness in the global economy. That means lower wages, weaker standards, and fewer social protections. The rich would continue to prosper. Working people face a much grimmer prospect.
EU budget myths
The Brexiteers make much of the £350m a week Britain allegedly pays into the EU coffers. Leavers claim this money could be used to rescue the NHS, as well as a host of other good causes. But the figure they use is a wilful distortion of the truth. It ignores the rebate that Thatcher negotiated, which can only be changed by unanimous agreement: in effect Britain has a veto over its own rebate.
Moreover, of the actual net contribution we make to the EU each year, we get back around half back – in support for regional aid, farmers, university research etc. The Brexiteers are unclear whether in the event of withdrawal, they believe the British Treasury should substitute fully for the EU budget – or whether the savings would simply be used to close the deficit, cut taxes or for other spending purposes.
Were withdrawal from the EU to lead to a significant economic shock for the UK a loss of national output of as little as one percent of GDP could more than wipe out the benefit of any savings in EU net contributions
It is also important to keep the EU contribution issue in perspective.The public accounts show the public cost of our EU membership as £10.4bn in 2014-5. This itself represents a lot less than 10 percent of Britain’s total spending on the NHS. In addition that figure takes no account of the financial grants that British companies and institutions receive directly from Brussels, nor the preferential benefits of borrowing from the European Investment Bank. Were withdrawal from the EU to lead to a significant economic shock for the UK, as the governor of the Bank of England warns is likely, a loss of national output of as little as one percent of GDP could more than wipe out the benefit of any savings in EU net contributions. The Treasury estimates the permanent cost of Brexit could be a lot higher, roughly in the range of 4-7 percent of GDP. No reputable economic forecast disagrees with the thrust of this assessment. The issue of the net budget contribution is in reality a distraction.
Paying into the EU budget would also be a precondition of retaining our full access to the EU single market. Norway, which is outside the EU, pays almost as much as we do per head as the price of its access to the single market. In per capita terms our net contribution is large, but only the eighth largest in the EU. Our net contributions are no longer out of line with those of France and Italy, economies of similar size to Britain’s. In short, the situation has moved on from the late 1970s and early 1980s when the size of Britain’s budgetary contributions to the then European Community were unfair.
The EU budget does need reform. Money could be better spent and an EU budget reform is an essential element in a progressive agenda for Europe. But the scale of our budget contribution is not a “make or break” argument for or against membership.
The “end free movement” fallacy
Brexiteers argue that, as a result of EU withdrawal, we will “regain control of our own borders”. This misleading phrase has been allowed to gain wide currency. As a non-member of Schengen, with the natural barrier of the English Channel, Britain as a full member of the EU has successfully maintained its own border controls. Indeed, the 1999 Amsterdam treaty codifies that right under EU law. However, the phrase is being deliberately repeated as a xenophobic code for the proposition that Brexit will enable the UK to keep other EU citizens out of Britain. The intention of the leavers is to “stop free movement”.
There are many real issues surrounding “free movement”. The scale of potential migration from eastern Europe after 2004 should have been anticipated and it wasn’t. There have been inevitable strains on housing and public services as a result. Britain should have insisted on stronger labour market safeguards. EU funds should have been directed at areas where services were under strain. This should be a priority for EU budget reform.
The prime minister was right to insist in his renegotiation on a tightening of the free movement rules and the payment of benefits. The treaty rights to work, visit and settle in other EU member states is not a right to live off their social benefits. He was also right to insist that tax credits that supplement the wages of low-paid workers should be “earned” before they are paid, not paid automatically on arrival in the UK.
The government could, however, do more domestically to ease the strains of migration.
- The new national living wage should encourage British citizens to take low-paid jobs that previously only migrants were prepared to accept. UK employment services should be instructed to help bring about this shift in labour supply.
- Help with affordable housing should be targeted on areas of acute housing stress and confined to those who have built up entitlements on council “waiting lists”.
- More appenticeships should be offered to UK school leavers educated in the UK with a firm offer of a permanent job at the end of training, subject to reasonable performance on the part of the trainee. If this contract is not fulfilled, the government contribution to the apprenticeship’s cost should be repayable by the employer as a deterrent to employers recruiting EU migrants because they are as skilled, but will work for lower pay.
- Problems in local hospitals could be eased by a special programme to promote recruitment of EU nurses and doctors to the NHS for a 10-year period until more locally trained medical staff become available.
Pragmatic responses of this kind would help ease tensions. The Brexiteers, however, are not interested in pragmatic responses. They stir the populist pot on the migration issue by making unrealistic promises to end free movement.
- No country outside the EU has been granted full access to EU markets without also accepting the free movement principles of the European treaties. If Norway and Switzerland have to stick to these rules, how could Brexit Britain avoid them? A significant economic price would have to be paid as a result of insisting on far stricter controls on immigration than the Norwegians and Swiss accept.
- Brexit will not stop legal migration into the UK. Migration from the EU accounts for less than half the total of migrants living in the UK. Yet many Brexiteers say they want to see more migration from other parts of the world. In order to win votes for Brexit, they hold out the hope to Commonwealth ethnic minorities living in the UK that existing rules on family unification will be relaxed as a result of Brexit. Who’s telling the truth here?
- A Brexit that ended free movement will increase the likelihood of illegal immigration to the UK. This is precisely what happened when Germany imposed transitional controls on free movement in 2004. In retrospect, German policymakers wish they had not done this. It simply caused huge unmanageable problems of illegal working. Similar problems would arise in Britain unless all visitors are required to obtain full visas before arrival. Otherwise, it would be impossible to police EU visitors overstaying their holiday and working illegally.
If in order to reduce these abuses, the UK introduced a visa regime for EU citizens, how would the leavers avoid a similar regime being imposed on British citizens travelling to the continent? This might involve paying large visa fees to go on holiday. For the two million British citizens who live and work on the continent, the Brexiteers’ ambitions would raise all manner of issues about the civil rights of British citizens, including their entitlement to health care.
- Brexit will weaken existing UK border controls. At present we rely on cooperation from Belgium and France to enable the UK to carry out border checks on their territory. This is vital to UK management of asylum claims as well as the detection of terrorists and criminals trying to enter the UK. There is no guarantee whatsoever that on Brexit this level of friendly cooperation with our neighbours would be maintained: much informed opinion thinks it will not. If Britain is no longer a member of the EU, existing police and security cooperation with our partners will also weaken. There will be no automatic exchange of information. Without that information it will be impossible to identify terrorist and criminals at the UK border. The thrust of British policy should be to strengthen cooperation with the rest of Europe on security and crime, not move in precisely the opposite direction.
- Would the leavers seriously block all EU migration to Britain? If they attempt to prevent the thousands of young French, Italians and Spaniards who come to study, learn English and work part time in the UK, how can they argue that the rights of the two million British citizens who regularly travel, live, work, study and conduct relationships on the continent will be magically unaffected? Isn’t this proposition to say the least politically naïve?
- Who will fill all the essential jobs that EU migrants presently take in Britain, if as might well happen, many continental migrants return in fear to their own countries but “new” migration from the EU is stopped? The main factor in migration are the ‘pull’ factors in the British labour market. If employers cannot recruit unskilled EU citizens to do the jobs that they cannot find people in Britain to do, then the natural reaction of employers would be to offer jobs to non-EU citizens. Without tighter immigration controls, migration from non-EU countries would grow.
- In order to reduce overall migration numbers, the government is at present ‘upping’ the minimum salary and educational requirements for visas. If that policy is pursued and EU free movement ended, would that not leave Britain with massive labour shortages that would limit economic potential and lead to an inflationary spiral?
In England a large section of what is left of the old working class “core vote” is attracted by the emotional appeal of anti-immigration, anti-EU populism. To argue that Labour can minimise the risk of defection of its working-class supporters to rightwing populists by keeping its mouth shut on Europe is perverse. Rather, the referendum campaign should be the opportunity to make the contrary arguments.
To argue that Labour can minimise the risk of defection of its working-class supporters to rightwing populists by keeping its mouth shut on Europe is perverse
Free movement is a two-way street that millions of Britons – from all social classes – take advantage of: it is absurd to suggest that the only people in Britain who benefit from EU migration are the better off who “want their cleaners and au pairs”. Overall, free movement offers a much better deal for Britain than pulling up the drawbridge against our near European neighbours. The problems caused by migration should be tackled, but to attack the principle of free movement without thinking through the consequences, is frankly reckless and would damage all groups in society.
Labour should make a robust progressive case for Europe
- The economic case for remain, in terms of jobs and living standards, as presented by the chancellor and prime minister, is overwhelmingly powerful, but Labour has to demonstrate that this isn’t simply a set of arguments which work to the benefit of big business, City banks and the “winners” from the last three decades of European economic integration and globalisation. What is at stake is not just the prosperity of the better off: EU withdrawal would damage the jobs and living standards of working people as a whole. EU membership is essential to a broadly based prosperity. There is no serious weight of economic opinion, no independent authority such as the IMF or Bank of England, no foreign leader who disputes the thrust of the Treasury’s detailed economic assessment. To leave would be to inflict both heavy short-term and permanent losses on the British economy. It would be similar in scale to a re-run of the 2008 financial crisis, with a permanent loss to UK productive potential. It would damage inward investment by overseas companies, especially in parts of the country that feel “left behind”, such as Nissan in the north-east and JLR in the Midlands. It would hurt the self-employed and those in small businesses, who may not themselves depend on exports to the EU’s single market, but certainly depend on the custom of companies and their employees that do. The potential damage to the three million jobs that depend on our EU trade cannot be isolated from the other 30 million jobs in the economy.
- The cost of leaving the EU would inflict on public services and social benefits another round of austerity, at least as big as that which the country has suffered since 2010. Even if one assumed most of the “first order” economic benefits of EU membership benefited only the banks, big business and the better off – and this is demonstrably not the case – the resulting bonus in growth does make a positive impact on the economy as a whole and add to the tax revenues available to spend on public services such as the NHS. A five percent shock to economic growth as a result of leaving the EU, which many economic experts forecast as quite plausible, would require a £35-40bn annual cut in public spending if taxes were not to rise: roughly four times the size of Britain’s net contribution to the EU.
- What makes Europe’s single market distinctive is its commitment to the principles of a “social market”: a belief that markets should be properly and proportionately regulated under a common set of rules, in which free competition across borders is underpinned by a floor of social rights, environmental standards, consumer protections and safety rules. Sometimes the EU may have got the balance of these rules wrong. But the leavers want to get rid of these rules altogether because they see them as a “regulatory burden” – a cost that holds free enterprise back. They deliberately avoid being clear which EU rules they would abolish once the UK left, because they know that would demonstrate how unpopular their Brexit national strategy for Britain would be. But the essence of their economic argument is that a deregulated Britain could compete more effectively in world markets and that depends on the assumption that virtually all EU regulations will be swept away. They believe in the “low road” to competitiveness in the global economy based on low wages and low costs, in other words a ‘race to the bottom’.
- The EU still remains the most powerful economic bloc in the world. The Eurozone is not the “basket case” economy the leavers try to paint it as. Many of its members provide models of economic and social progress that a progressive Britain should emulate. The Nordic and Benelux countries and Germany have a far more outstanding record than the UK in terms of research, innovation, growth per capita and exports. France, Italy and Spain have huge economic strengths, even though youth unemployment in those countries is far too high. Poland and other eastern members that joined in 2004 are rapidly converging with the more developed European countries, with their markets growing for our goods and services. In terms of key comparable measures of child poverty and young people not in education, employment or training, the UK emerges relatively poorly by comparison with our partners. A progressive government in the UK has much to learn from the successes of other EU countries, where the state and industry work in more effective partnerships than we do in the UK to create apprenticeships, develop new innovations, promote exports and build social cohesion.
- Europe’s single market still has enormous untapped economic potential – in energy, digital and services which will only come about by deepening European economic integration. For social democrats, this opportunity has to be seized as the chance to raise productivity and innovation – Britain’s most fundamental economic challenges. Social democrats should aim to build a more prosperous European “single and social market”. A more integrated single market can be a stronger social market in five ways. First, a jobs boom in higher productivity sectors will provide good jobs and decent wages for the many millions who in British society today now feel “left behind”. Second, a more “social” EU can set more socially balanced free movement rules that deter exploitative undercutting of the “rate for the job”. Third, a “social” EU can ensure that big businesses pay their fair share of taxes and stick to corporate governance rules that promote a more responsible capitalism. Fourth, the role of EU structural funds in helping weak regions and victims of structural economic change needs to be rethought and re-energised. Fifth, an EU-wide basic income should be introduced to relieve extreme poverty (and reduce migratory pressures) in the poorest EU member states. This, of course, is a controversial idea. Even more controversially, it should be financed by new EU-wide levies on financial services, carbon emissions and other environmental and public health “bads” that are designed both to raise revenues and change behaviours. Yet social democrats should be prepared to argue for bold measures that would both be efficient and equitable and that would simultaneously tackle gross inequalities and prevent a race to the bottom.
- EU trade policy is a progressive opportunity, not something that, as the leavers argue, holds Britain back. If the EU is a barrier to our exports in the emerging countries as the leavers claim, why is it that Germany exports three times as much to China as the UK does? The leavers’ trade policy for Britain would be to turn our back on the European single market and negotiate an “Albanian” free trade deal. At the same time, they would seek to open up trade with the world’s emerging economies. This “across the open seas” trade strategy would force Britain further down the “low road” to competitiveness by allowing unfettered access to our markets for goods and services from all over the world – in many cases, from countries where trade unions are illegal, there is no minimum wage, no effective safety regulations at work, no environmental rules and no proper enforcement of international agreements on child labour. Within the EU we face problems of unfair competition as in the case of Chinese dumping of steel. But, by being part of a powerful economic bloc of 500 million people, we have much more leverage and potential bargaining power. A major challenge for the European centre left is to devise a progressive trade strategy. The aim should be to use Europe’s power as a bloc to promote trade that is both free and fair, and advances workers’ rights in all countries. Only a socially balanced TTIP, which does not promote the privatisation of health services, would gain the necessary approval of the European parliament. The EU has to balance obtaining better market access for its goods and services in rapidly developing markets, with opening up its own markets where a top priority should be allowing more exports from countries, for example in Africa and the Middle East, that would promote economic development and political stability in Europe’s neighbourhood and reduce migratory pressure.
- The EU is a global standard setter, not a standard “taker”: as an EU member, Britain should play a leading role. The leavers boast of “taking back control”. In fact, leaving the EU would weaken our sovereignty, not enhance it. The trade example is only one. The EU is the biggest force in the world, for example, for high standards in human rights and action against child labour and modern slavery; environmental quality in areas such as high standards for clean beaches, drinking water quality and waste disposal; product safety; protection of rare species and action against deforestation; and reduction of carbon emissions in order to tackle climate change. By acting together in these areas the EU gains global clout because of its market size and political power. Britain acting on its own would not be able to exercise the same level of influence and control. Of course, the EU does not always get things right: the recent VW scandal on diesel emissions showed it too ready to accept manufacturers’ assurances on testing and this is now being addressed. But outside the EU, Britain would no longer have the clout to be a global standard setter: we would be a “taker” of standards set by others in order to gain access to their markets and all too often the competitive pressure of economics would make Britain the supporter of the lowest common denominator, not a leader in creating a better world.
- Progressives should fight for “free movement with fair rules”. Leaving the EU might stop immigration from the EU, but the leavers fail to explain how delivering on this pledge would come at a very high price for everyone. Any reduction in migrant numbers would come at an unacceptable cost in terms of exports and lost jobs; strain on public services as EU citizens who work in the NHS and social care would not easily be replaced; and inevitable adverse consequences for British citizens living, holidaying, working, or studying on the continent. The best way of dealing with migration is not to accept passively the damage we would do to ourselves by stopping it, but to make EU free movement work in a more progressive and socially just way. The structural challenges of migration, and the associated problems of refugees from conflicts elsewhere in the world, and the threat of terrorism are ones we can meet better by working with our partners in the EU, while remaining outside Schengen and maintaining our own border controls.
- EU membership is increasingly important to our security. Sharing police and intelligence information is something on which Britain should be taking a lead, not trying to bow out. Free movement has not prevented Britain continuing to enforce national border controls against foreign criminals or terror suspects trying to enter the country. Indeed, cooperation with France and Belgium has made border controls more effective. Cooperation might well fall by the wayside with Brexit. In the modern world we cannot protect our security simply by putting up barriers at the frontier. It is in the UK’s national interest to see the EU’s common border strengthened. If we want to be able to detect criminals and terrorists trying to enter the UK, we need full cooperation with our neighbours. The only sure guarantee of such cooperation is through the structures of the EU.
- The EU multiplies Britain’s capacity to be a force for good in the world. For example, there is a cross-party consensus in Britain that as a nation we would want to be at the forefront of international efforts to tackle climate change and promote sustainable development. It has been shown at successive international meetings that if the nations of Europe are to have influence on climate change policy, they have to establish a common front. It is only through that common position that we can attempt to match the weight of the United States, India and China. And it is through forging a common position within the EU that the leaders in climate change persuade the laggards among the EU members to offer realistic commitments. Outside the EU, both Britain and the EU would be less significant players. Similarly on development aid, where the UK can be proud of its leading role as a 0.7 percent donor, we channel a considerable proportion of our overall effort through EU programmes. The reason for doing this is obvious: it maximises impact. By persuading our partners of the development priorities that matter to us, we thereby multiply the impact of our efforts. By the scale of our commitments, we lead by example.
- The unity of Europe is a great progressive cause. To talk of a united Europe, does not mean a United States of Europe. But the EU is the most successful peace project in Europe’s barbaric history. Through its complex structures which mix intergovernmental cooperation with necessary elements of supranational sovereignty pooling, it has brought together 28 nations that live together in peace. Starting with Franco-German reconciliation in the 1950s, it embraced as new democracies the former southern European fascist dictatorships of Greece, Portugal and Spain. Following the collapse of the Soviet Union it was able to reunite virtually the whole of Europe as a union of 28 sovereign democracies that guarantee basic rights and operate within the rule of law. There are blemishes, but the award of the Nobel peace prize to the EU in 2013 was surely justified in the broad sweep of historical judgement. It is the rise of nationalism and populism that now threatens one of the greatest achievements of European civilisation, which it must be the mission of social democrats in Britain and the rest of Europe to counter. We cannot do this by leaving the EU or contemplating, without a turn of the hair as many leavers do, its break up.
- Our EU membership is the foundation of the “open society” Britain has become. That society, for all its gross inequalities and flaws, offers Britons the opportunity to lead more fulfilling lives than previous generations enjoyed. Yet it faces major threats, both to its future economic competitiveness and national security. The essence of the question is whether we are stronger or weaker defending our open society through membership of the EU. Those voting for Brexit essentially want to pull up the drawbridge and reject modernity. Yet, in a world of chaos in the Middle East, with a resurgent Russia and a troubled Africa on Europe’s borders, and huge challenges like climate change and migration, it surely make more sense to work closely in a relationship of institutionalised cooperation with our nearest neighbours whose interests and values we largely share. Working with our EU partners can be at times frustrating, as other countries are entitled to defend their national sovereignty and interests as fiercely as we do. But the EU provides a successful framework for working together that for decades has guaranteed peace, democracy and a social market economy. That is why the choice is so fundamental. To vote to leave would give huge impetus to both the possible break-up of the EU as well as the breakup of Britain.
In some respects the choice in the referendum has historic parallels with the arguments between the appeasers and those who believed in collective security in the 1930s. Like Europe, this was a difficult issue for some in the Labour party: many opposed British rearmament on the basis that it would facilitate another capitalist war. But, ultimately, as the threat from the fascist dictators mounted and the unreasonableness of their intentions became clear, the advocates of collective security won the day. In 1940 Labour joined Churchill’s coalition and, with him, fought off those Conservatives who wanted to negotiate a peace deal with Hitler. The philosophical justification for Labour’s position was set out with great brilliance by Evan Durbin in his Politics of Democratic Socialism. He argued that democracy was an essential foundation of social democratic progress. Rejecting Soviet communism, he argued that there could be no progress towards a socialist society without democracy as its foundation. That also meant that Labour had to be prepared to defend democracy if need be by force of arms if dictators of either the right or left threatened its future.
We could easily end up a miserable country: an uneasy mix of a protectionist backwater and an offshore haven for tax dodgers and capitalist exploitation in a race to the bottom from which only the few would benefit
Today the stability and strength of the EU is one of the main guarantors of our civilisation. It has to be defended at all costs. That is why we should join Cameron in making a national case. Today’s leavers are not appeasers. But, fundamentally, they believe that we would be better off simply looking after own interests. And, at heart, they want Brexit because they want to see the break-up of the EU.
They are deniers of the realities of interdependence and economic and political power in the modern world. They refuse to recognise that the great challenges to our civilisation require collective action if they are to be tackled effectively. To avoid the commitments that our membership of the EU entails, they are prepared to abandon the only meaningful capacity for collective action between likeminded countries that we presently have. They would abandon Britain to a future of economic weakness and political marginalisation. We could easily end up a miserable country: an uneasy mix of a protectionist backwater, that most Brexit voters want without realising its consequences for their living standards and public services, and an offshore haven for tax dodgers and capitalist exploitation in a race to the bottom from which only the few would benefit. If we abandon Europe on 23 June, it will be difficult, probably impossible to find a way back. We must not let this happen. We must make a patriotic as well as progressive case before it is too late.
Roger Liddle is a member of the House of Lords and co-chair of Policy Network. He is a former special adviser to Tony Blair on European affairs and from 2004-2007 he served in the European commission, first in the cabinet of the EU trade commissioner and then as economic adviser to the European commission president Jose Manuel Barroso. He is the author of The Europe Dilemma: Britain and the Drama of EU Integration