Jonathan Russell, of UK200Group member firm ReesRussell, gives his opinion on the up and coming EU Referendum in his latest blog post.
Several weeks ago I was asked if I would speak at a debate on the benefits of staying within or leaving the EU. My answer was ‘Certainly – which side would you like me to argue?’. The response from the organiser was ‘Oh for leave – I thought that was where you were positioned’. This was a bit of a shock to me as only 18 months ago I would have had no hesitation in saying I would support remain but have to say then I had done no research and when I was asked on this occasion I think I would have said I was one of those who were undecided and seeking information.
So anyway I accepted the invitation, I enjoy debating anyway, and said no problem that I would argue the leave side. This meant, naturally, I intensified my enquiries not just to help me make my decision but so I could also present a balanced argument – it is my belief, unlike, it would appear, most politicians, that a balanced argument is much more likely to convince a person. So I have been doing considerable research and I formally declare that I am very much now in support of a leave vote but this morning I received details of the event at which in 10 days’ time I am to speak and I find Whilst I am supported by Charles Crawford CMG a former British diplomat the remain campaign has put forward Ed Vaisey MP and Baroness Royall of Blaisdon. I therefore realise that I have some big guns being wielded against me so I need to ensure my arguments are sound.
So why have I moved from a remain to a leave supporter. Essentially I believe this is a political argument but is being fought very much on economic lines so I will deal with what I believe the political question is first.
The Political Question
Do we as a country wish to become a part of the United States of Europe which will ultimately be directed and controlled by unelected civil servants where locally elected governments only have control over local issues? Essentially a similar relationship that County and District Councils have to our own Parliament. Or do we wish to retain our own (UK) local control?
If your answer is yes to the first then you wish to remain and if yes to the second you wish to leave.
I appreciate some of you may think that the choice is a little extreme and even those arguing for remain are saying we will only be better off in a ‘reformed’ EU – they don’t say in what way reformed nor how such reforms will be achieved. I have one simple answer to the question which is for you to look at Article 7 TEU which essentially gives the Commission the power to exclude countries from the decision process if they feel the country is going against the basic concept of the EU which is ultimately political union.
The Economic and other arguments
I now look at the arguments which will be put before us as voters.
We will all be worse off if we leave the EU because of the need for the free movement of goods and service for trading – remember although free trade in services was part of the deal done by Margaret Thatcher in Maastricht it still actually hasn’t happened. The reason for this is because we will have to negotiate lots of trade agreements with the 28 countries – actually we won’t because EU legislation doesn’t allow individual members to agree trade deals with other countries which has been part of the UK problem. Since its inception the EU has actually only signed three free trade agreements and a number of Trade Partnerships and this is currently what the Commission has to say about trade:-
‘Over the next ten to 15 years, 90% of world demand will be generated outside Europe. That is why it is a key priority for the EU to tap into this growth potential by opening up market opportunities for European businesses abroad. One way of ensuring this is through negotiating agreements with our key partners.
As tariffs are relatively low in world trade today, trade barriers lie behind the customs borders: hence the EU aims to conclude Deep and Comprehensive Free Trade Agreements (DCFTA) that, on top of removing tariffs, also open up markets on services, investment, public procurement and include regulatory issues.’
This is against a background that in 1972 when we signed up for the Common Market Europe accounted for about 30% of World GDP but now it accounts for less than 15% and part of that reason is the methodology of the EU itself. Whilst the EU is an open and free trading area for its own members it is protectionist of its internal market so actually prevents free trade with the rest of the World. We are now in a World where tariffs generally are reducing driven in part by the World Trade Organisation.
Here is an extract from a paper produced by the Institute of Economic Affairs
“Now suppose trade barriers are reduced. This shifts the equilibrium: it is now possible for people to be part of the same economic area, without having to be part of the same political entity. They are able to trade with one another without having to agree on politics. This means the economic benefits of large markets can now be reaped without incurring the political cost of heterogeneity. Consequently, the optimal size of a political entity falls.
This is an exact reversal of the conventional rationale for EU-federalism, which holds that globalisation makes larger political entities necessary. Au contraire: it is the very globalisation that makes smaller political entities viable.”
So my research seems to suggest that politics gets in the way of economic reality more than the other way round.
We are bombarded by experts who are saying how bad economically it will be for the UK to leave the EU though I have yet to see arguments telling us how good it will be to remain. But I did a bit of research on the history of the predictors and have found an interesting correlation. It would appear that those predicting doom and gloom for leaving are in general those who suggested leaving the ERM would be a disaster, that we should have joined the Euro and failed to predict the financial crash whilst those, the minority, who are suggesting UK would be better off leaving seem to be generally those that were in the minority on the other issues. Whilst I don’t know which set of experts will be right as a betting man I would normally go for the ones with a better track record.
The UK has benefitted in the past from the free movement of labour and I fully support the free movement of labour but I can have a problem with the free movement of people which is what the EU membership demands. The UK since introducing the National Living Wages has the highest guaranteed weekly income of any EU state so therefore we attract people from around the EU to fill these low paid jobs. As employers they will always chose the best person for the job so if a highly educated and intelligent person from an Eastern European country (who might be earning more picking fruit on a farm in UK than doing a skilled job in his/her home country) applies and the UK person who would apply is less educated and skilled who does the employer choose. But for some skilled jobs the good use of English might be very important but we and Eire are the only English speaking countries so when it comes to say filling care jobs where communication is vital it would be better if we could recruit from English speaking locations. However, with a Government trying to control the statistics of net migration the barriers are put up because they can’t control those from the EU.
Yes a vote to leave is full of uncertainty but I would argue so is remaining with the issues of uncontrolled migration and asylum, the economic woes of the Eurozone and will the Euro survive plus the unequivocal declaration for ever closer political union which apparently we can block but where does something like that leave the EU?
One final thought is about the Euro and I have a simple explanation of how to consider it. If you take the UK it has long been the case that London and the South East generate the bulk of the on-going wealth of the country and Scotland, Wales and the Northern Ireland plus the North and South West of England are essentially subsidised. We however just have a single currency which is worth the same wherever you are in the country.
The Euro and the Eurozone is the same. Germany has become a huge financial success on the back of the Euro because the value of the Euro is determined by the value of the whole territory (the Eurozone) so German manufactured goods have been cheaper than if say they had continued with the Deutsche Mark. It meant that countries with less efficient economies benefitted from a stronger currency than their local one might have been. The big difference is however that unlike the UK the wealth is not then equally redistributed because individual countries (the equivalent of our district councils) were not adequately subsidised. Now with the likes of Greece the system is imploding and either the wealthy Eurozone countries have to pick up the tab or (as is more likely with the current political unrest) chop off the offenders like some festering canker. Or the other solution is dilution or in the EU sense enlargement so the failing district becomes a smaller part of the whole. The problem is what of the non Euro countries who are in the EU – how do they avoid contagion?
So yes to leave the EU is a leap into the potential unknown but I would argue the known of remaining is too me even less palatable. Come 23rd of June I will vote to leave as will, I suspect those who are risk takers, those who are risk averse will take the remain option because logic tells us that status quo is the less risky option. Before you do take that logical choice just convince yourself it is the less risky option.
If you would like to find out more the UK200Group ran a debate under their Campaign for clarity and I will be arguing my corner on 3rd June at 7pm in the Corn Exchange Faringdon Oxon.
Jonathan Russell is the managing partner of ReesRussell LLP in Witney Oxfordshire and Russell Phillips Gerrards Cross Buckinghamshire who are member firms of the UK200Group. These are his personal views. He can be contacted on 01993-702418.
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