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Scaremongering to keep the UK in

It is difficult to keep track of all the problems that will occur should the British people vote to leave the EU since a new story appears almost every day. There will be increases in mortgage rates, in air fares, in mobile roaming charges, a bonfire of workers’ rights, cuts in R&D funding, European Health Insurance Cards will be void, and there will be problems on the Irish border.

They leave one wondering how the UK ever survived as an independent country, or how independent countries elsewhere in the world manage to cope. These notes examine a small sample of these stories to frighten the votes, some of them extending back a few years.

1. Leaving the EU would mean the break-up of the United Kingdom

William Hague, the former Foreign Secretary has joined EU enthusiasts in arguing that a vote for Brexit will mean the break-up of the United Kingdom. Their argument depends on a string of contingencies: that a majority of Scots will vote to remain while the majority of English voters choose to leave, that they will then have an irresistible argument for another referendum, that the UK government will not be able to resist, and that in this second referendum they will reverse the vote of the first, and decide to leave.

An answer in a letter to the Daily Telegraph, 24 Dec 2015:

SIR – William Hague’s assertion that Brexit would lead to the break-up of the United Kingdom is as illogical as it is scaremongering. It is not Government policy to offer a

second independence referendum to Scotland.

If the UK leaves the EU, Scotland would actually be less likely to leave the UK for three reasons.

First, as part of Brexit, major powers of great relevance to Scotland – such as farming, fishing, trade and environment – would be returned to the UK and could then be further devolved to Scotland.

Secondly, Scotland could not be sure it would be allowed back in the EU alone. Even if let in, after Turkey and Serbia’s accession in, say, 2025, it would be forced to adopt the euro and lose the rebate.

Thirdly, an independent Scotland would be born bankrupt. Oil prices are $36 a barrel now, while Scottish National Party economics relied on a figure of $100, and 65,000 jobs have been lost in the Aberdeen area recently. It would also lose £1,700 per head in UK public spending.

The Scots are canny and are more Eurosceptic than is often claimed; a third of the SNP is pro-Brexit and the only area of the UK to vote against joining the European Economic Community in 1975 was the Highlands and Islands.

David Campbell Bannerman MEP
Co-Chairman, Conservatives for Britain

Numerous bloggers have made the same points less succinctly, some even predicting that the second referendum will include all Scots wherever they may be residing in the United Kingdom.

 

2. David Cameron, Prime Minister, on the huge number of asylum seekers that would come to Britain overnight, February 2015

The Prime Minister said that voting to leave the EU would result in migrant camps such as “the Jungle” in Calais moving to southern England, and that a “huge number” of asylum seekers could come to Britain “overnight” because France would pull out of current border arrangements in the aftermath of an EU exit. A vote to leave would give French politicians the chance to “tear up” the deal, which lets UK border guards check passports at Calais.

France responded saying it would not pull out of its border arrangements with the UK even in the event of Britain voting to leave the European Union.

The importance of this instant contradictory news report is not whether or not France would in the end reconsider its border agreement or not. It is that it demonstrates that the Prime Minister had not earlier sought advice of the French government’s likely future actions, and is himself actively engaged in making up scare stories off the top of his head.

The normal procedure for governments that control their borders is to advise air or marine carriers of the documents passengers will require on entry, and to warn them that if they are not supplied at the point of entry, the would-be entrant will be returned to their point of departure at the carrier’s expense, and with a possible fine. There is no reason why this procedure should not be applied post-Brexit. It is already applied to passengers arriving in the UK from non-EU countries.[1]

3. Dominic Grieve, a former Attorney General on the dangers of Brexit for expats, 2015

‘EU exit would make 2m Britons abroad illegal immigrants overnight.’[2]      – Dominic Grieve, March 2015, former Attorney General

‘Spain might demand that British retirees on the costas pay for their own healthcare or it may try to limit migrants’ access to healthcare…Their healthcare is costly to the Spanish treasury, which is struggling to balance its books’.[3]      – The Centre for European Reform

The International Law Commission told the UN in 1959: ‘Private rights acquired under existing law do not cease on a change of sovereignty.’

The Vienna Convention on the Law of Treaties 1969 refers to ‘acquired rights’, which individuals build up over time and hold despite any changes in future treaties enacted by their nation. Article 70 states that the termination of a treaty “does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination.’

A House of Commons Library note clarified: ‘Generally speaking, withdrawing from a treaty releases the parties from any future obligations to each other, but does not affect any rights or obligations acquired under it before withdrawal. Therefore, the EU’s freedom of movement rights would be honoured for all those citizens who reside in other EEA nations prior to any Treaty changes’.[4]

4. Peter Mandelson on the impossibility of the UK negotiating trade agreements on its own, 2014

‘India would laugh in our faces if Britain tried to negotiate a free trade agreement outside Europe… They would walk away and leave us whistling in the wind.’[5]

He declined to explain why India, apart from the collective agreements in which it has participated or negotiated, has also concluded bilateral agreements with Singapore, Chile, Korea, Malaysia and Japan, and did not leave any of them ‘whistling in the wind’. Why, for that matter, is it currently negotiating an agreement with EFTA, as well as the EU? EFTA’s combined GDP is smaller than that of the UK. The WTO Regional Trade Agreement Information System has many examples small countries have been able to conclude agreements with large ones including China and the US. The largest economy of the present 18 trading agreement partner countries of the US is Australia.[6]

 

5. Sir John Major, on the loss of foreign investment in the UK post-Brexit

‘If the UK left the EU, ‘foreign-owned companies would then migrate to the EU.’[7]  – Chatham House, 14 February 2013

‘We would lose inward investment – ask Japan or Korea, or even America.’[8]  – Institute of Directors, 28 November 2013

In 2007, the Commission decided that ‘the internal market has not been able to deliver in terms of promoting further the role of the EU with respect to global investment flows.’[9]

As it happens, some of Ernst & Young’s researchers in 2013 accepted Sir John’s invitation and, in a manner of speaking, did ‘ask Japan or Korea or even America’. They reported ‘that European companies regard the UK’s integration into the EU as being important to the country’s attractiveness for FDI, while those in the US and Asia do not.’[10]

Earlier in the same survey, they identified 14 factors that make the UK attractive for existing or potential investors, none of which refer, even vaguely, to the EU.[11]

 

6. Peter Mandelson, on the impossibility of trading ‘at will’ in the EU without being a member, 2013

In May 2013, in an article in The Daily Telegraph, Peter Mandelson, a former EU commissioner, sought to discredit what he chose to call the ‘anti-Europeans’ argument… that we can continue trading at will in Europe, with the same privileges as now, without being part of its policy-making, its regulatory rules and its policing of the market’s openness. This is a grave deception.’[12]

A good many countries ‘trade at will’ in Europe more successfully than the UK without the privileges of membership, without being part of EU policy-making, without helping to make its regulatory rules or policing its openness. As a result, the exports of goods and services of many of them have grown more rapidly over the life of the Single Market than those of the UK. Who is deceiving whom?

 

7. Robert Peston, on David Cameron’s veto of a treaty to defend the euro, 2011

At the time, BBC TV’s Business Editor, Peston explained to his national audience that if multinationals ‘begin to see the UK as an isolated island, they will not wish to stay. So it would really matter if the UK’s place in the world’s biggest market … were somehow in doubt. Which is why… businesses are now desperate to hear a positive statement from Mr Cameron about how the UK’s position in the Single Market can somehow be buttressed.’

This is a variation on the long-running argument that FDI in UK depends on EU membership. The UK share of FDI inflows to Europe increased significantly over the year following his veto, while that of France and Germany plummeted. A euphoric UKTI report on 23rd July 2013 noted the spurt in FDI in the UK.[13]

 

8. The Economic Research Institute and Bertelsmann Foundation predictions of economic costs to UK of Brexit, 2015

This is a very short report, (published 27 April 2015) and needless to say, only its worst case scenario was reported. The institute is partly responsible since it headlined its worst case scenario in which the UK had no trade agreements with the EU to 2030. However, its main conclusion is that ‘depending on the extent of the UK’s trade policy isolation its real GDP would be between 0.6% and 3% lower by 2030.’ Since they put Britain’s EU budget payment at a low 5%, they conclude that Brexit ‘could not compensate for economic losses, even in the best case scenario.’[14]

If trade meaning ‘total isolation’ was more severe, and ‘dynamic economic consequences such as weakening of innovative power as well as London as a financial centre are taken into account’ then we get the headline figure that the loss ‘could reach 14 per cent’ by 2030. But this 14 per cent depends on the arguments of another economist, and is the second paper explains only, a ‘theoretically conceivable value’. The press reports did not notice that. Raoul Ruparel, head of economic research at Open Europe, described this report as “one-sided”, “short on detail” and using assumptions, such as the 14pc of GDP potential loss to the UK economy, that had been pulled “out of nowhere”. Open Europe has itself placed the costs between 0.8 per cent of GDP, and in the best case scenario predicted a gain of 0.6 per cent of GDP.

The curious thing about these model-based predictions is that they have realistic means of incorporating the probable reactions of the actors involved between 2016 and 2030. For instance, when ‘dynamic consequences are taken into account Germany’s estimated GDP losses would come in between 0.3% and 2%’. But are German automotive manufacturers merely spectators watching the decline of their best market? Is the UK, the most globally-connected society on the planet, likely to descend into severe isolation?

 

Notes

[1] ‘France contradicts Cameron over Calais migrant camps’, Daily Telegraph, 9 Feb 2016

http://www.telegraph.co.uk/news/newstopics/eureferendum/12147334/France-contradicts-Cameron-over-Calais-migrant-camps.html

[2] www.theguardian.com/politics/2015/mar/18/dominic-grieve-brexit-2m-britons-abroad-illegalimmigrants-eu-echr.b

[3] For a full discussion and these and further references p.382-3, Change or Go

[4] House of Commons Library, Leaving the EU, Research Paper 13/42, 1 July 2013

[5] ‘Lord Mandelson: Britain ‘bonkers’ to leave European Union’, Angela Monaghan, The Guardian, 1 April 2014:
http://www.theguardian.com/business/2014/apr/01/lord-mandelson-britain-bonkers-leave-european-union

[6] https://www.wto.org/english/tratop_e/region_e/rta_participation_map_e.html

[7] www.johnmajor.co.uk/page4370.html

[8] www.johnmajor.co.uk/page4364.html

[9] Fabienne Ilzkovitz et al, Steps towards a deeper economic integration: the Internal Market in the 21st century: A contribution to the Single Market Review, by the Directorate-General for Economic and Financial Affairs, N° 271, January 2007, ISSN 1725-3187: http://ec.europa.eu/economy_finance/index_en.htm.For an extended discussion pp.728-733, Business for Britain, Change or Go, How Britain would gain influence and prosper outside an unreformed Europe, London, 2015.

[10] Ernst & Young’s attractiveness survey, UK 2013, No room for complacency, London, 2013. p.35 http://www.ey.com/Publication/vwLUAssets/Ernst-and-Youngs-attractiveness-survey-UK-2013-No-room-for-complacency/$FILE/EY_UK_Attractiveness_2013.pdf

[11] ibid. p.26

[12] Peter Mandelson ‘David Cameron must not cave in to the UKIP threat’, Daily Telegraph, 16 May 2013

[13] An enlarged version of his report appeared on his website. ‘Big Business Deeply Troubled By Cameron’s Veto’ Robert Peston, December 11th 2011.

[14] https://www.bertelsmann-stiftung.de/en/topics/aktuelle-meldungen/2015/april/brexit-could-be-expensive-especially-for-the-united-kingdom/Brexit – potential economic consequences if the UK exit the EU.

There is a second, slightly longer version of this paper called Policy brief#2015/5 which ends with an editorial paragraph saying Brexit must be avoided! http://www.bfna.org/sites/default/files/publications/Brexit%20-%20potential%20economic%20consequences%20if%20the%20UK%20exits%20the%20EU.pdf


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