Why a British exit is not inevitable

Why a British exit is not inevitable

Why a British exit is not inevitable

Written by Charles Grant, 17 April 2014

As someone who wants Britain to remain in the EU, I have long been sceptical of my side’s ability to win a referendum on that question. The two televised debates between Nick Clegg and Nigel Farage, on March 26th and April 2nd, only reinforced the gloom of pro-Europeans: opinion polls found that a clear majority of those watching thought the UKIP leader had out-performed the deputy prime minister. However, having read the latest polling from Lord Ashcroft, based on an unusually large sample of 20,000 people, and having taken part in a panel discussion with a representative sample of British voters that he had brought together, I now think that a referendum is winnable (the polling was carried out before the Clegg-Farage debates).

I see three reasons for optimism. First, as the audience made clear during the panel discussion, a lot of people want to know more about the EU. They know that some of the media cannot be relied upon to give the facts, that the issues concerning membership are very complicated and that they would like to be better informed.


If and when a British referendum comes, I hope that those involved will agree to copy an idea from the last Irish referendum on the Lisbon treaty, in 2009. An independent Referendum Commission, which took responsibility for providing both sides of the argument, and the key facts about the Lisbon treaty, won the respect of both sides of the campaign.


I am glad to see that a new body, Full Fact, has recently been established in Britain. Its mission is to ensure that British politicians’ statements are accurate – on the EU and every other subject. Full Fact, which has no view on whether Britain should remain in the EU, monitored and commented on the Clegg-Farage debates in real time.

Second, several of those who spoke from the floor during the panel discussion were concerned that very few people in the UK are making the case for the EU. Though the British people are in some respects eurosceptic, many of them have noticed that the country’s European debate has been lop-sided. On the anti-EU side there are a lot of outspoken politicians in UKIP and the Conservative Party, most of the tabloid newspapers and some well-funded lobbies. On the other side are a small number of newspapers, the Liberal Democrat Party, a few ageing Conservatives and business lobbies such as the Confederation of British Industry.


I recall ministers telling me during the time that Labour was in power (1997-2010) that they were pro-European but had been advised not to make the case for the EU because many voters were either hostile or indifferent to that subject. My own conversations with Conservative MPs have led me to believe that more of them than one might imagine are sympathetic to the EU, but for obvious reasons they hide views that are heretical in their party. To some extent, the pro-Europeans have lost the argument by default. In a referendum campaign politicians would, one hopes, say what they really thought. But they should not postpone speaking frankly until the campaign itself, by which time it may be too late to shift opinion. More of them need to find the courage to try and shape the current debate.


Third, Lord Ashcroft’s polling reveals that the key group of voters in any referendum campaign will be those he describes as ‘discontented sceptics’, who make up 27 per cent of the electorate. Most of them want to leave the Union, but their priority is jobs and the state of the economy, and they accept that the EU delivers some benefits. They do not like the EU because of the migration that stems from membership, the loss of sovereignty, the regulations and the cost of Britain’s contribution to the EU budget. They also think that the other EU members tend to club together against British interests. But this group is open to argument, and if significant numbers can be persuaded that the EU is good for jobs – or that the problems may be less acute than they had imagined – the referendum is winnable. That means that those in favour of membership need to be more effective at getting across the best facts and arguments.


If I was advising the Yes campaign on the arguments to use in a referendum, I would make five points. The first three are economic. One, if Britain leaves the EU it will lose foreign direct investment. In recent months companies such as Airbus, Ford, Goldman Sachs, Hitachi, Nissan and Siemens have all said that they are keen for the country to stay in the EU. Some of them add that they would review their investments if Britain were to leave.


Second, membership of the EU provides access to the world’s biggest single market, in terms of value. Quitters have yet to explain a viable alternative for the British economy. Norway and Switzerland have access to parts of the market but have to accept the EU regulations that govern it, without having a vote on them. Although neither of those countries is a member of the EU, they have to pay into its budget: Norway’s per capita net contribution is 83 per cent that of Britain, whereas Switzerland’s is 40 per cent (according to the House of Commons library). They must put up with the principle of free movement (the Swiss recently voted in a referendum to limit the right of EU migrants to work in Switzerland; as a result the Swiss will lose some of their privileged access to EU markets). Switzerland has never had access to EU services markets, which are of particular importance to the British economy.


Third, the EU is forging trade-liberalising deals with many other parts of the world. For example, British exports to South Korea have doubled since the EU-South Korean free trade agreement came into force in 2011. Deals are in the pipeline with Canada, India, Japan, Thailand and – because the UK and Germany pushed to get talks started – the United States. Of course, small countries that are on their own can also negotiate trade deals, but only a big trading bloc like the EU gives Britain the leverage to extract significant concessions from trading giants like the US or China. The Scotch Whisky Association, for instance, argues that its distilleries need the EU to open up protected markets (the European Commission has recently negotiated the opening of Canadian, Colombian and Peruvian markets to exports of Scotch, and hopes to do the same for India).


The final two points are political. The West no longer dominates the world. China, Russia, India, Brazil and many other powers have a lot of influence, which is natural as their economies become larger. The US, these emerging powers and the EU are the key players in shaping global rules, on trade, financial regulation, climate change and security. If a medium-sized European country like Britain wants to be able to influence the emerging global order, it needs to be a leading member of the EU. On its own it does not have a great deal of clout.


It makes sense for the British to work with the other European countries because, despite our differences, we share not only many interests but also – and this is the fifth point – values. Just about everybody in the EU is committed to democracy, the rule of law and a free press. When Russia starts using force to change international borders, as it has done recently, the EU states do not react in an identical way. But they have shown that they can respond by taking a series of steps, together, that help to defend the principles they believe in. The European states are more likely to influence Russia when they concert their efforts. The bottom line is, we are stronger when working with our partners.


Charles Grant is director of the Centre for European Reform.

Roundtable on 'Is the emerging markets success story over?'

Roundtable on 'Is the emerging markets success story over?' with John Calverley,

Roundtable on 'Is the emerging markets success story over?'

12 May 2014

With John Calverley, head of global macroeconomic research, Standard Chartered

Location info

London

Breakfast on 'Is the West condemned to economic stagnation?'

Breakfast on 'Is the West condemned to economic stagnation?'

Breakfast on 'Is the West condemned to economic stagnation?'

22 May 2014

With Stephen King, global chief economist, HSBC

Location info

London

Event Gallery

Issue 95 - 2014

Bulletin issue 95 - April/May 2014

Issue 95 April/May, 2014

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CER bulletin - Issue 95
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Bulletin issue 95
Author information

Christian Odendahl

Christian Odendahl

Christian Odendahl

Chief economist

Biography

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Chief economist
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Christian Odendahl

Christian Odendahl is chief economist at the Centre for European Reform. Christian works on European macroeconomics and growth; the eurozone, its institutions and political economy, monetary and fiscal policy; as well as German politics and economics.

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Areas of expertise: 

Eurozone, European macroeconomics and growth, fiscal and monetary policy, Germany.

Areas of expertise

Eurozone, European macroeconomics and growth, fiscal and monetary policy, Germany.

Languages spoken

English, German, Swedish
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