The EU referendum - Should we stay or should we go now?

One of my favorite all time songs is the 1981 rock classic by the Clash “Should I stay or should I go” was unusual in the backing tracks were sung in Spanish, which is a loose link to the title of this analysis on the EU .If you are hoping that this post will tell you the decision to make or even tell you who is right and wrong, please don’t bother reading any more. I do not write to tell you what to do but merely how I arrived at my conclusions and also bring some less discussed information to your attention in this important debate. The issues around the debate are far reaching and very complex. In my opinion no matter which way you vote you will be both wrong and right in different areas and so in the end it comes down to a judgement call. I cannot hope to cover all topics in any detail but will point people at more detailed articles that have helped me make the judgement call. Most people do not have the time or even inclination to spend around 40 or so hours researching the topic and most certainly do not have the economic training to fully understand many of the more detailed economic arguments or misleading statistics. I understand this is a long post but it does contain relevant information not really being discussed on TV. The main issues seem to arise out of the following:

1. Safety and security
2. The NHS
3. The economy
4. Impact of immigration
5. Sovereignty

Safety and security

Certainly there are agreements in place after 40 years that will be affected - like Europol membership. However Britain does have a much stronger intelligence network than most countries in Europe and gives a lot more intelligence than it receives. The free movement of people does cause serious security issues as does the inability to identify and deport EU criminals but at a higher level I cannot believe that we and the EU would be stupid enough not to share information for the security of both sides. Yes, it will take time to sort out things but we have at least two years to put arrangements in place. As such for me this is not a deciding factor.

The NHS

The leave camp say there would be more money for the NHS if we leave from the 10 Billion net differences in money paid to the EU. The remain camp say who would man our hospitals if we closed off immigration. In fact the current immigration policies probably restricts the numbers of nurses we can bring in.

To me both are silly points.

The money allocated to the NHS is decided upon as part of overall spend by the government which has the very difficult job of deciding where to allocate scare resources. If we vote to leave it will take a while to determine immigration policy. It is obvious that people with the skills to man our hospitals would be allowed in be it from the EU or outside. The point that our NHS will suffer because of a lack of qualified people is nonsense if we use a points system. I just cannot see that the NHS has an issue either way to do with this vote as the funding is part of the overall allocation of funds from the taxes generated.

The economy

This I believe is the remain camp’s trump card and the issue they would like everyone to focus on. They have quoted numerous bodies like the treasury, most economists, the Bank of England, the European Bank, the IMF and many business owners. David Cameron asks us to believe the “experts” as if economics is like engineering or science. Economist opinions are fine if they are highly limited to one thing like What is the short term impact of raising VAT by 1%?. However for a question like how will the UK economy be in 5 years time due to brexit - the basic analogy is rubbish. Sorry, but economic predictions are not a science and are more like astrology than astronomy. Would you place your vote based on what most astrologists say? If so ask Russell Grant instead of the IMF. The answer will have the same percentage chance of success. As someone whose job it is to follow predictions for the economy for the last 20 years I believe I am safe in saying that most experts cannot with any level of accuracy predict the state of the economy in 5 years time. Almost none predicted the crash in 2008 and the recent huge fall in the oil price. Most said we should join firstly the ERM and the Euro and both those pieces of advice turned out to be completely wrong. The IMF in particular has an horrendous record of prediction and missed all of the above and the seriousness of the European economic crisis.HM Treasury has difficulty getting our own growth and inflation figures correct for one year forward let alone over a long period of time. It is not that they are lying but the world economy but the impact of that on any one country has far too many permutations to predict with and degree of accuracy. In addition so called experts wish to persuade often take an extreme view in making predictions http://www.niesr.ac.uk/blog/when-experts-agree-how-take-economic-advice-over-referendum.I know it seems stupid and arrogant to discount the predictions of most “experts” but longer term economic forecasts are simply nearly always wrong. I personally prefer to take the view of Neil Woodford who for people in the financial world is as close to a genius as it is possible to get. His record of investing decisions is almost second to none. Unlike economists Mr Woodford has to put his money and his client’s money where his mouth is and buy and sell stocks largely based upon changes he sees happening in the economy. Unlike most economists he has a proven successful track record for over 20 years. He believes in the long term it will not make a big difference either way. So if you cannot really predict the long term, then what about the short term. Yes, one thing you can be certain of is that the markets do not like uncertainty but prefers the status quo. In the short term the pound will almost certainly drop against the dollar.( great news for our economy) This however will make our exports cheaper as we have a trading surplus with the rest of the world but a huge deficit with the EU. This will have a really helpful impact on our companies that export to the world. However overall I believe there is likely to be a slight negative impact for couple of years after which our economy will become much stronger than if we stay in the EU. What about the EU trade. Firstly, nothing happens for two years. I believe the uncertainty will then switch to the Euro as other countries will also be considering an exit. This will cause the Euro to fall – good news for them as they have been trying to do that for the last few years. Will the EU try and make it difficult for us? Yes they might but eventually after a few years to do the negotiations cooler heads will prevail. These are the export figures from the main EU countries to the UK.

1. Germany: $98.7 billion
2. Netherlands: $50.9 billion
3. France: $36 billion
4. Belgium: $34.8 billion
5. Ireland: $25.5 billion
6. Spain: $20.8 billion
7. Italy: $24.7 billion

As you can see these are significant amounts of money and profits for EU companies. German car manufacturers alone make profits on $32 billion of exports to us. They will simply not allow the government to drag its heels on an export deal to the UK. If we vote to come out of the EU, the UK will be their biggest export market and money and eventually profits always talks loudest and so a deal will be struck. They cannot afford it not to be at a time when their economies are under severe pressure. Will it have a serious long term negative impact on the UK – I doubt it. The world is moving ever faster and the less regulated, fast and flexible countries win business by taking advantages of new opportunities. Eventually, by being able to make our own decisions the UK will be able to react much more quickly than is possible for the 28 countries of the EU thus creating a very healthy economy in the longer term. One thing we do know for certain is that centralised bureaucracies react far too slowly to be effective in the modern internet driven world. For instance because we were not in the Euro we boosted our economy by starting quantative easing in 2009 - a year after the crash – the EU did not start until 2015 which many people believe was far too late. There are also serious risks by staying in the EU. Except for Germany and the UK many long term members of the EU are suffering serious problems with their economies. Most people know about long term financial and unemployment problems in Spain, Greece and Portugal but what about Italy. Nobody is mentioning the huge problems in Italy which when it goes wrong, will make the Greek bailout look like chicken feed. Already the ECB is forcing Italy to take austerity measures as if that worked out well in Greece. The FT have said “This is not just an Italian headache. The country’s banking woes could easily become the rest of Europe’s”. With most other EU countries struggling, Italy could well break the Euro and spell severe financial problems for all countries heavily associated with it. In 2013, Italian government debt stood at 132.6% of GDP, which represented the second-largest public debt among Eurozone countries and the fifth largest worldwide. All the banks have around 360 Billion euros in non-performing loans which will at some point have an huge impact on the countries financial stability. I know we are not part of the Euro but we already had to pay towards the Greek bailouts so surely it is inevitable we end up paying for Italy too. The bottom line is that business and trade is now global and some of the key EU member states are inward looking and protectionist. For instance EU tariffs on imported agricultural products average 18% to maintain uncompetitive farmers which hits the poor badly as food costs form a large proportion of their outgoings. Is it a leap into the unknown and too big an economic risk to leave the EU. Possibly yes. However, the glowing economic future of the UK inside the EU is by no means as certain as the Remain campaign would suggest. In fact quite the opposite we already know it carries severe problems as the growth figures are among the worst in the world. Without the inclusion of the UK. as of 2015Q4, the Eurozone would still be lagging behind their pre-recession levels. In summary because of the complexity of the world markets I don’t believe either side can really say with any real certainty how this will impact the UK. As such I agree with Neil Woodford and would suggest that the economy is a neutral decision. As such this is not an area that is swaying my decision.

Impact of immigration

This has become a huge issue in the debate. At present the numbers coming in are considered unsustainable in the long term and with this I agree but not because “they” take our jobs and are all here for benefits. I believe most immigrants are used to hard work and are striving to make a better life for themselves and their families – something we all want. However this country is one of the most crowded of all countries in the EU. Along with Germany we are also seeing the highest level of net immigration in the EU. This is not surprising as it is ourselves and Germany who have among the lowest levels of unemployment in the EU and significantly better average standards of living than many newer joining countries in the EU.I believe it is unsustainable because the long term net immigration trend is significantly increasing upwards. I would even suggest that the ONS (Office of National Statistics) figures stated and used by both sides is massively understating the actual immigration figures. Why? Just look at the method that is used to actually compile the ONS figures. Basically, they simply ask a sample of people coming in on planes and boats- Are you planning to stay temporarily or longer term? Call me a cynic but is an EU person coming in to look for work likely to tell the truth in most cases? If you compare the figures for the number of people who applied for a National insurance number (not a woolly sample but actual applications) from the Department of Work and Pensions the difference is remarkable. In the year to March 2016 there were 826,000 NI applications of which 630,000 were EU nationals. In summary the ONS say 330,000 and the DWP say 826,000. That 2.5X as many more people than the official figures. Which one is right or more correct - a sample question or actual applications? However it is the ONS figures which are used. No, this is not a conspiracy theory that we are deliberately being lied to – It’s just very little emphasis has been put on collecting accurate data as the increasing numbers did not start to become significant until 6 years ago. However, to me it’s pretty obvious the figures used for immigration are far below the actual numbers coming in. I am told that immigrants pay more into the system than they take out and I believe this. However, this does not account for all the invisible costs. Extra people automatically lead to extra costs for the NHS, schools, housing and infrastructure (simply more cars on the roads in towns and cities)The problem this uncontrolled immigration creates is because we cannot really control our borders to EU immigrants, we cannot plan long term for our infrastructure, housing, and schooling. In addition how much more crowded do we want to be in the long term? Planning rules are already being altered to make it much easier to build many more homes. What impact will this have on our lifestyles and those of our children when our cities and towns become ever more crowded and more and more of the country is swallowed up by new towns and the growth of existing ones. I believe the danger comes with the likelihood that numbers coming in from the EU will continue to increase and increase faster. Why? – I believe it’s very difficult for a family to simply up sticks and move to a new country without friends and family for support. However, the people from EU that are here already will now offer both encouragement and support and make it much easier for friends and family to join them. After all who doesn’t want friends and family living close to them. I believe this will create a tide of ever increasing numbers arriving in the UK. On this issue of long term unsustainability for an already overcrowded country I believe the vote falls firmly to the Leave side.

Sovereignty

The argument that Britain has lost sovereignty, and even its democracy, by being in the European Union is I believe at the heart of the case for Brexit. The UK government estimated that about 50 per cent of UK legislation with “significant economic impact” originates from EU legislation. Jeremy Paxman disagrees and believes it is closer to 59%The bulk of those laws - around 60 per cent - relate to the fields of agriculture, fisheries and trade with non-EU states, but abiding by EU law has a ripple-effect that impacts almost all aspects of British life, from small businesses, to immigration, welfare and the courts. Other areas where European laws hold sway or influence include data protection, immigration law, asylum law, criminal justice, broadcasting, biotechnology, and some areas of family law. The main point is that in the event that a UK law is in contradiction to an EU law the EU law will take precedence. Before the Treaty of Lisbon was passed in 2007, each member state had a vetoover the EU’s policy changes. Today, that can be decided by a majority vote. As a result of the Treaty of Lisbon, Britain lost its veto in over 40 policy areas. David Cameron would have us believe we can lead in Europe by staying in. However in the past 20 years, there have been 72 occasions when Britain has strongly opposed a particular measure on the Council of the European Union. On all 72 occasions, we have been outvotedby the other member states. In fact in many disagreements, Germany is most likely to vote against us. As many laws are decided by the EU council of 28 members at which no minutes are taken and so no one can be held accountable it is possible (and I believe probable) that Germany’s increasing economic influence in the EU will sway other voting countries - to our detriment. Since 1973, the UK has lost 101 cases in the European Court and won only 30. That’s a failure rate of 77%.At present, 19 of the 28 member states are members of the Eurozone, with an additional seven due to join shortly. Only two countries have a legal veto out of joining the Euro in the longer term all countries in the EU will have to be in the Euro. That will leave just Britain and Denmark outside the Eurozone. By surrendering our right to veto any further integration of this political bloc, we have given up our strongest bargaining chip in any disagreement with the other member states. We will have no choice but to swallow all new laws or regulations that the EU comes up with, however detrimental they are to Britain’s interests. In 10 years time there will be at least 30 countries in the euro (with new joiners) and only 2 not. Which way is all EU legislation going to lean? In our favour, or in favour of all the Eurozone countries? I think the answer is obvious. We will almost be forced to join the Euro by wave after wave of legislation that is not in our best interests. The longer we wait the harder it will be to leave. Will we put up with ever increasing integration as is the declared intention of the EU? The 5 presidents report shows the direction are going as a matter of policy ( see section 2) by stating “more far-reaching actions will be launched to make the convergence process more binding” Very simply they want one tax system, one army and one central Bank and laws which make it impossible to disagree wit any central decision. In twenty years there will be no need to have a Parliament. If we vote to Remain, particularly after Cameron has just surrendered one of our few remaining vetoes, Britain’s influence will ebb away to nothing. Any talk of leaving in future will be dismissed as an empty threat. We will have demonstrated our willingness to accept membership of the EU on any terms.

Summary

Do we want to give up our rights to govern ourselves simply because we are afraid of losing a bit of money in the short term? (Even that is not certain).The ever increasing unification of the EU may be a wonderful idea in principle. In practice the reality is that it has been an economic failure as shown by its trend downwards compared to most other countries. Ask yourself – if it’s such a great idea why after almost 50 years has no other area in the world done anything similar? I believe that is because it is not just an economic union but a political one. In 1975 we voted for an economic free trade zone not a political union. Of course if you are happy to live in a nation state of Europe where most laws, taxes and decisions are made in Brussels rather than our own parliament – vote remain.

‘Men fight for liberty and win it with hard knocks. Their children, brought up easy, let it slip away again, poor fools. And their grandchildren are once more slaves.’ – DH Lawrence

I believe we are big enough and strong enough to move forward without fear. We have many strong links (the commonwealth) to other countries across the world. The idea of voting to leave is a vote for “little England” is ridiculous. There are 195 countries in the world and only the 28 in the EU and yet we cannot form trade agreement with any of them directlty. I will vote to connect more with the whole world with “win win” agreements forged on a one to one flexible basis rather than be held into a slow and ponderous political union which is simply outdated in the digital world. Yes, we will almost definitely see a short term downturn in our economy - but is it worth it? The power to control our own borders for sensible long term planning is essential. To even be classified as a country the power to set our own laws and our own legal system to prevail is paramount. This is fundamental to a free country which hopes to be able to react quickly to conditions in this fast changing world and prosper in the longer term. This is why I will be voting to leave on June the 23rd.