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06 September 2017
Policy Options Paper 2
13th March 2017 – For immediate release
UK GOVERNMENT SHOULD CHANGE COURSE IN BREXIT NEGOTIATIONS TO BUILD
A NEW, CONSTRUCTIVE RELATIONSHIP WITH THE EU
A new policy paper released today by the Conservative Group for Europe (CGE), the main campaign group for Conservative pro-Europeans, argues that the risks are high that the outcome of the exit negotiations will cause significant damage to the political and economic interests of both Britain and the EU, blighting relations for a generation. The CGE brings together over 30 Parliamentarians as members, with Ken Clarke MP as President and Neil Carmichael MP as Chairman.
The full paper available here
In the Group’s first policy paper in a planned series during the Article 50 period, author and CGE Vice Chairman Edward Bickham sets out the risks from a bad or chaotic Brexit, saying that the British Government is in serious danger of ‘asking for the wrong things, in the wrong way and on the wrong timescale’.
Bickham: “With the Article 50 process starting, the Government should change direction to deliver a better Brexit that unifies the country and maximises the economic and political interests of both the UK and the EU. That will involve disappointing the Brexit zealots. The negotiations will be difficult, but the UK government faces a choice – either pursue a Brexit with a strong UK-EU institutional relationship that could be a win-win, or settle for a deal that destroys prosperity and influence.”
The paper’s main points include:
- The Government has adopted an intimidatory stance towards critics, claiming that the Referendum has given it a mandate. It is not defying the ‘will of the people’ to believe that the Government is pursuing an unnecessarily extreme form of Brexit – there is no mandate for “rupture”. Its White Paper adopts a divisive ‘winner takes all’ approach, which threatens to perpetuate divisions and risks further alienating the Conservative Party’s natural supporters in business.
- The Prime Minister has expressed a desire for “a new strategic partnership between Britain and the EU”, but has provided no clues about how this would be organised. The Government’s determination to rule out preserving any aspects of the current relationship – such as membership of Euratom – seems driven by hostility towards the EU in particular and supranational institutions in general rather than a pragmatic pursuit of the national interest.
- It is in Britain’s interest to preserve a uniquely close relationship with the EU through a new institutional relationship rather than ad hoc arrangements, with the fullest possible participation in the Single Market, continuing co-operation in areas like the environment, science and research, higher education and aviation, and the preservation of uniquely close working arrangements on security, crime and foreign policy. The volatile nature of the new US Administration and the aggressive behavior of Russia make this a bad time to reduce the ability of European countries to work closely together on foreign and security policy.
- Negotiating a new ‘institutional relationship’ could build on ideas around ‘variable geometry’. Potential approaches worth exploring include an Association Agreement; the Continental Partnership idea championed by the think tank Bruegel; or the creation of a bespoke Britain-EU Partnership Council.
- It is wrong to assume that it is impossible for Britain to retain Single Market membership whilst limiting freedom of movement. If negotiations are conducted in a constructive spirit, a grand bargain might yet be achieved. If Britain were, for example, willing to trade some influence over Single Market rules, then it might be possible to secure restrictions over freedom of movement such as an emergency brake, greater constraints on access to benefits and requiring job or study offers before people move to Britain.
- It is unwise for Britain’s negotiating strategy to be driven by an ideological hostility to the European Court of Justice. It has been a good arbiter of Single Market rules and doesn’t deserve to be accorded ‘bogey man’ status. Any UK-EU Free Trade Agreement would involve accepting rulings by a supranational arbitrating authority.
- Any EU Free Trade Agreement will fall far short of replicating the benefits of the Single Market, especially in services. Independent estimates warn that FTAs with new countries are unlikely to make a big impact in softening the impact of loss of Single Market membership. So if an exit from the Single Market becomes inevitable, the Government should negotiate a significant transitional period, during which Britain should retain its place in the European Economic Area (EEA). The UK would suffer more than the EU from a ‘train-crash’ Brexit.
- The EU 27 also have a significant interest in a positive outcome. They should ask themselves whether an institutional, rather than ad hoc, relationship with Britain may facilitate a continuing alignment in areas like foreign policy. Similarly, they should consider whether helping Britain to meet its problems regarding migration may be a price worth paying for maintaining the current scope of the Single Market. Do they want, even unwittingly, to abet the nationalist elements in the UK by imposing a ‘hard’ Brexit which maximises the schism between Britain and the EU?
- Some European politicians suggest that the costs of a ‘hard’ Brexit will be too high and that British opinion will ultimately demand that the country rescind its decision. They are almost certainly wrong. The more likely scenario would see the EU used as a scapegoat for Britain’s ills; so for the EU 27 to plan on the basis of a British change of heart would be a serious miscalculation.
CGE Chairman Neil Carmichael MP commented: “This publication is a powerful contribution to the necessary debate following the referendum decision as the period of negotiation under Article 50 begins. Securing the best possible deal for the UK is essential for peace, security and prosperity but the ultimate outcome must also enjoy widespread support in order to enable leavers and remainers to come together in the national interest. It should be studied with these objectives in mind.”
Bickham added: “Many statements from British Ministers have lacked empathy with our partners and failed to create the mutual confidence essential for successful negotiations. Many Continental leaders see the British approach as transactional, nationalistic and hostile to the EU.
“The Prime Minister has been disingenuous in simultaneously urging that the country should come together, whilst setting out negotiating objectives that polarise opinion. The Government is mistaken in its rigidity towards the ECJ, and its current approach is likely to cause serious economic dislocation and damage to employment, living standards and public services.
“The greatest weakness of the Government’s approach is that it is piecemeal. Like the Tin Man in the Wizard of Oz it lacks a heart. There is no vision for the new relationship: how it would work and how we would hope to have influence over the policies of our closest neighbours.
“Britain’s interests, values, security and prosperity are so inextricably linked with the countries of the EU that these must be managed in a structured way. Negotiating a new ‘institutional’ relationship will require goodwill and a longer-term strategic sense from both sides. Otherwise the real danger is that the negotiations will be hijacked by nationalist elements and that relations will be poisoned for a generation.”
The Conservative Group for Europe
Every Conservative Prime Minister, from Macmillan to Cameron, has recognised the importance of strong and committed British participation in European political and economic institutions. The Conservative Group for Europe was founded almost fifty years ago initially to campaign for British membership of the European Economic Community and thereafter for Britain to play a leading role in the European Union. Although we believe that the 2016 Referendum was a flawed process, Britain is now embarking on a course to leave the EU. The role of the CGE in these new circumstances is to campaign to preserve the fullest practicable political and economic co-operation between Britain and the EU in pursuit of our shared interests, prosperity and security.
President: The Rt Hon Kenneth Clarke QC MP Vice Presidents: The Rt Hon Lord Inglewood DL, Robert Buckland QC, MP, John Bowis OBE
Chair: Neil Carmichael MP Deputy Chair: The Rt Hon Sir Nicholas Soames MP Vice Chairs: Edward Bickham, David Melding AM
YCGE Chair: Alex O’Brien Treasurer: Mark Leverton Hon Secretary: Sarah Chilman Membership: Liz Spencer
Patrons: The Rt Hon Lord Carrington KG CH KCMG MC, The Rt Hon Lord Deben, The Rt Hon Lord Heseltine of Thenford CH, The Rt Hon Lord Hunt of Wirral MBE, The Rt Hon Lord Hurd of Westwell CH CBE, Lord Kirkhope of Harrogate, The Rt Hon Sir John Major KG CH PC ACIB, The Rt Hon Lord Patten of Barnes CH, Lord Plumb of Coleshill DL, The Rt Hon Caroline Spelman MP, Tom Spencer, Ian Taylor MBE & Robert Walter
Policy Options Paper 1
1. Achievements: the EU has served Europe and Britain It has reconciled the countries of Western Europe; it underpinned the democratic transition of Greece, Spain and Portugal; and it has been crucial in bringing stability to the countries of Central and Eastern Europe. The EU has played a key role in generating prosperity, raising environmental and labour standards and it provides a framework for member states to work together to solve problems. Let’s preserve and build on its success.
2. Interests: Britain shares most of the same interests and values as our European partners. Many of the leading emerging markets do not share our world view or a commitment to human rights and liberal democracy. The EU member states share many of the same challenges too – to our security from ISIS and Russian aggression; to our prosperity from the shift in the economic balance of power towards the East; to social cohesion from the tendency of globalisation and technological advances disproportionately to benefit the elite; and the need to tackle the root causes of large-scale migration. We can more effectively advance our interests working together.
3. Prosperity: Britain has prospered in the EU. Since 1973, when Britain joined the EEC, our economy has grown by 103% compared with 99% for the US and 97% for Germany. We are Europe’s leading destination for foreign investment. The scale offered by a Single Market is good for our companies’ ability both to trade in Europe and to compete in world markets. Completing the Single Market for capital flows, energy and the digital economy would add 7% to Britain’s GDP. It is argued that the EU imposes unnecessary red tape but objective evidence for this is scant – the OECD ranks the UK as having amongst the most lightly regulated product and labour markets; and we rank in the top 10 in the Global Competitiveness Index and the World Bank’s ‘Doing Business’ Index. Europe is the largest knowledge producing area in the world; we must strengthen our scientific and research base in order to compete with the US and China. British universities are big net beneficiaries of EU science and research spending and benefit from their participation in European networks.
4. Patriotism: Support for Britain to Remain in the EU is a rejection of the ugly face of intolerance and nationalism and an affirmation of a positive and confident view of Britain’s role in Europe and the world. It recognises that the national interest is best served through working closely with our neighbours to solve problems and to promote our values. Patriots recognise that in the modern world we need to share sovereignty.
5. Influence: Britain is better able to project influence in the world when we work with our EU allies. The EU is the world’s leading exponent of soft-power. It is an influential advocate of: tough action against climate change; and, as part of the biggest economic entity in the world, trade liberalisation. It was a major actor in blocking Iran’s nuclear ambitions and has implemented tough and effective sanctions against Russian aggression in Ukraine. The EU’s positions on key strategic issues will continue to have major implications for British interests; inside the EU we can shape them. The US has made it clear; we matter more to them as an influential country within the EU than we do alone.
6. Security: a significant proportion of crime – e.g. terrorism, cybercrime and drug and human trafficking – has an international dimension. Through Europol, the European Arrest Warrant and intelligence sharing, the EU provides an important framework for fighting crime and terrorism, as the former heads of MI5 and MI6 and senior police officers have made clear. Much more could be done together.
7. Environment: pollution doesn’t respect borders. The EU has worked effectively to tackle air and water pollution, to reduce the health impacts of toxic substances and to combat climate change. 95% of British beaches now meet exacting EU standards. Let’s keep up the pressure and defend the higher standards that the EU has helped to create.
8. Opportunities: the EU has created many benefits for individuals. British citizens can move around Europe to study, work and live, expanding the opportunities available to us all. When we travel in the EU we have the security of knowing that our health will be looked after. The EU has played a major role in opening up air travel through cheap flights; it has intervened to stop mobile phone companies from ripping us off when we travel in the EU; and it is working to promote fair competition in digital services.
9. Peace: For centuries our young men have died in European wars. Over 20 million soldiers and civilians from the current EU countries died in the World Wars. The EU’s greatest achievement has been to bind the countries of Europe together so as to discourage nationalism and promote co-operation. But as the recent conflicts in the Balkans and Ukraine and the rise of nationalist parties in some EU countries remind us, we should not take our peace and stability for granted; things can unravel quickly.
10. Geography: It is a fundamental truth that Britain is a European country. Whilst Britain trades internationally and plays an active role in world affairs, the continent is our natural political, economic and cultural hinterland. It makes sense for us to work closely with our neighbours to tackle common problems. If we choose to alienate our closest allies and trading partners there is no other bloc with which we would we have the same confluence of economic and strategic interests.
Britain has done well within the European Union. With a mandate from the British people, the Prime Minister will speak with renewed authority. Britain should take a lead in pushing for further reforms aimed at making the EU more effective in foreign policy and in combating crime and terrorism, in encouraging less regulation, in advocating for the completion of more international trading deals, and in completing the single market in capital, energy, services and the digital economy. There is a challenging agenda ahead. Let’s lead Europe not leave Europe.
1. If we left the EU we would regain control of our borders and slash immigration
In fact, we retain control of our borders and can check the passports of everyone entering or leaving. We retain the right to exclude EU citizens on grounds relating to security or serious crime. Britain has complete control over immigrants coming from non-EU countries but despite this their number still exceeds immigration from Europe. Free movement within the EU is associated with other benefits for Britain: the ability of Britons to work and live throughout other EU members states and access to the Single Market.
2. EU migrants come to Britain and either steal our jobs or leech off our benefit system
Britain has a record number of people in employment. Since 2010 1.5 million new jobs have been created for British citizens and unemployment has recently fallen to 5% – which is close to full employment. Thus there is little evidence that EU, or other, migrants are depriving British people of jobs. On average EU migrants have a higher rate of educational attainment than the UK host population and in the first decade of the century they contributed a net £20 billion in tax revenues compared with the benefits they received. EU migrants are more likely to be in work than the host population. Under the Prime Minister’s renegotiation package, EU migrants will not be able to access full UK benefits until they have been in Britain for at least four years, will not be able to claim universal credit whilst they look for work and if they haven’t found work after six months they can be required to leave.
3. David Cameron’s ‘renegotiation’ achieved nothing worthwhile
On the contrary, that view is only taken by those who all along set the Prime Minister up to fail. In fact, the Prime Minister obtained major changes that give Britain a special status in the EU. He obtained recognition that the United Kingdom is not committed to the objective of ‘ever-closer Union’. He got recognition that the EU is a multi-currency zone, obtained important safeguards for Britain and other non-Eurozone member states and received a guarantee that we will never be liable for a Eurozone bail-out. He obtained an ‘emergency brake’ that means that EU migrants will have to wait at least four years before they enjoy full access to our benefits system. He also obtained commitments that the EU will move rapidly ahead with completing the Single Market in capital, energy and services.
4. The EU is undemocratic and the Brussels bureaucrats run the show
This isn’t true. In fact the real power in the EU lies with the European Council, made up of the heads of government of the member states, and the Council of Ministers. National Ministers are, in turn, accountable to their national parliaments. The directly-elected European Parliament also has an important voice in shaping EU legislation. Whilst the European Commission acts as the Executive for the EU, it is appointed by the member states every four years, can be dismissed by the European Parliament and is accountable to the Parliament for its work programme. Under pressure from Ministers, the current Commission has slashed the volume of legislation and new regulations.
5. Europe is always telling us what to do – 60% of our laws are made in Brussels
Important legislative or policy decisions are taken by the Council of Ministers in which British Ministers play a leading role. Under Margaret Thatcher’s Government there was agreement to adopt more majority voting in order to take decisions faster in agreeing rules for the Single Market. This was in our national interest. Within the EU we have agreed that there are policy areas where it makes sense to work with our neighbours and partners – such as the Single Market, agriculture, competition policy and the environment. Britain is no more ‘told what to do’ by the EU than we are party to telling Germany or France ‘what to do’. It is a two-way street. According to the House of Commons Library about 13% of our substantive laws are made jointly with other member states. Much of EU legislation relates to technical standards and it is misleading to compare much of it with, for example, a UK Education Act.
For a Single Market, based on a common corpus of standards, to function effectively there needs to be a means of resolving legal disputes which is where the European Court of Justice comes in. The primacy of EU law in clearly defined areas is a long-standing part of EU membership – it enables countries that breach the rules to be held to account.
6. We don’t have any influence and are always on the losing side when it comes to votes
This isn’t true. Britain was the prime moved in the creation of the Single Market and one of the principal advocates of bringing the former communist countries of Central and Eastern Europe into the EU. It works with allies such as Germany, the Netherlands and the Scandinavian countries to advocate a liberal approach to international trade and frequently with France in promoting joint European foreign policy initiatives. Since 1999 we have voted against a final decision on 56 occasions but have been on the winning side 2,466 times. It is, however, true that we don’t do well when it comes to votes in the Eurovision Song Contest – but that isn’t an EU institution.
7. Britain’s economic performance is held back by the EU
Britain has done very well since we joined. Of course, because we are an independent country with control over our economic policies, the most important factor in determining our economic performance is the reforms we have made at home. Nevertheless the EU Single Market and the EU’s external trade deals provide Britain with a benign and relatively stable environment. According to the Institute for New Economic Thinking at Oxford University, since we joined in 1973, Britain’s per capita GDP has grown by 103%, edging out the US on 97% and Germany on 99%. Since 1998, in real terms Britain has grown by 38%, a figure exceeded amongst rich European countries only by Sweden. Our performance has out-paced the US and Canada suggesting that the EU is not a burden for Britain.
8. The EU is a vast bureaucracy strangling Britain in red tape
The EU gives us a stable extended home market of over 500 million people which enables British companies of all sizes to do business from Birmingham to Brindisi whilst following just one set of product standards – that means less red tape for our exporters. EU regulations have not harmed Britain’s competitiveness, we rank 6th in the World Bank’s Doing Business Index which rates how easy it is to operate in 192 countries. The OECD judges the UK to have one of the most liberal labour markets amongst advanced economies. In the Global Competitiveness Index Britain ranks 10th, albeit we could improve whilst remaining in the EU, since four other member states rank above us – Germany, Holland, Sweden and Finland.
9. Britain is being sucked in to a European Super-State against our will
The process of European economic integration started with six countries in the mid-1950s.60 years on there is still no Super State. With 28 countries able to veto new treaties it is unlikely that there ever will be. Under legislation introduced under the Coalition Government, Britain must hold a referendum if a significant transfer of sovereignty is proposed. We have a special status in the EU but outside the Euro, outside Schengen and with an explicit exclusion from ‘ever-closer union’. We have a veto over radical proposals in areas like the creation of a European Army.
10. Britain pays £350 million a week to the EU which would be better spent on the NHS
Britain’s net contribution – after the rebate and accounting for EU spending programmes in Britain – is £120 million a week. This makes us a smaller contributor than Germany or France. On a per capita basis Britain is the eighth largest contributor. By way of comparison, research for the CBI indicates that membership of the EU delivers an economic benefit per head of £1,225 annually. Every major institution – such as the independent Institute for Fiscal Studies or the IMF – that has reviewed the economic impact of Brexit has concluded that it would be a significant risk to the economy. It would reduce investment, increase unemployment and create a significant hole in the public finances – meaning that services like the NHS would likely be subject to cuts rather than receiving additional funds. This is why leading figures in the NHS advocate that Britain should remain in the EU.
- Britain’s farmers have had no reliable assurances from the Leave Campaign about what type or level of agricultural support would be provided in the event of ‘Brexit’. Indeed the Leave Campaign have implied that all the money associated with the EU Budget, including the rebate and the parts of the budget spent in the UK, such as on farm support, should be diverted to the NHS.
- 60% of our food and drink exports go to the EU – worth £11 billion and equivalent to 10% of our agricultural output. 97% of British lamb exports go to the EU, along with 92% of our beef, 74% of dairy produce and two thirds of our cereal exports. If we left EU we would lose the ability to influence the rules governing the Single Market. If we excluded ourselves from the Single Market then our exports could face tariffs of up to 70% for beef, 40% for lamb and 30% for cheese.
- The National Farmers’ Union Council – representing over 70% of farmers in England and Wales – voted overwhelmingly on 18th April 2016 to support continued British membership of the EU. The Tenant Farmers’ Association and the NFU in Scotland also back ‘Remain’.
- A report by the NFU found that if we left the EU food prices would rise and farm incomes would fall. On two out of three trade and agricultural support scenarios the report predicts a fall in average farm incomes of between €17,000 (c. £13,500) and €24,000 euros (c. £19,000).
Times are hard for British farmers. The global economic slowdown, good harvests across the world and the closure of the Russian market to key EU agricultural exports have severely depressed prices. But a British exit from the EU would make matters a lot worse. All farmers in England currently receive a flat-rate subsidy of 248 euros (c. £200) per hectare except for moorlands, where the rate is 65 euros (c. £50). For many famers this is the difference between profit and loss; for others between staying in, or going out of, business.
Reform of the Common Agricultural Policy
Significant reforms have been achieved in the Common Agricultural Policy (CAP) over the last 25 years. The CAP and rural development funds now account for less than 40% of the EU budget compared with over 80% when Britain joined.
Since 1992 there has been a shift away from product support and market intervention and towards supporting producer incomes. In 1992, for example, over 90% of CAP expenditure related to market management, driven by export refunds and intervention purchases. By 2013 this element had fallen to below 5% of farm spending. The butter mountain and wine lakes are a thing of the past. A significant proportion of the CAP budget is now devoted to environmental objectives and rural development. There is still further room for improvement in areas like reducing inspections and streamlining the audit process. In 2017 negotiations will start on the next phase of agricultural reform; Britain will press for a smaller and simpler CAP.
The impact of leaving the EU on British farmers
There are three major areas of risk for British farmers from a Leave vote: loss of financial support; loss of free access to EU markets; and the loss of preferential access to third country markets.
Loss of financial support
British farmers receive around 3 billion euros (c £2.4bn) in support from the EU. The Leave Campaign have pledged that in the event of a British withdrawal, £350 million per week extra would be spent on the NHS. This is a massive and misleading over-statement of Britain’s net contribution. But, after allowing for the British ‘rebate’, the biggest element in the money coming back to Britain consists of support for farmers. On 14th June they stated that farmers would continue to receive support until 2020 but how this squares with the commitment to NHS spending is unclear. The Leave Campaign don’t say what the plan for agriculture should be outside the EU. What we can deduce in the event of Brexit, is that, over the medium term, British farmers would no longer receive anything like current levels of support – resulting in significant job losses and reduced amenities in the countryside.
Access to the EU Single Market
Over 60% of our food and drink exports go to other EU countries; accounting for seven of our top ten markets. The UK has 73 products with protected status across the EU. These rules, which cover products from Melton Mowbray pies to Cornish pasties and from Worcestershire cider to Arbroath Smokies, help British producers to add value to their products and protect against inferior copies. Amongst our most successful food and drink exports are Scotch Whisky (32% of exports go to the EU) which employs 40,000 people and Scottish Farmed Salmon (45% of exports go to the EU) which employs 6,000.
If we sought to negotiate a version of the Norwegian model for continued access to the Single Market the economic impact of a Leave vote would be reduced but Britain would still have to make a budgetary contribution and accept freedom of movement. If we opted out of the Single Market the impact on trade access would be far more severe. The Leave Campaign claim that Britain would be able swiftly to negotiate a free trade deal with the EU. But it is fanciful to think that any such deal would come close to delivering the same access or influence as Britain enjoys as part of the EU. It is probable that EU Single Market rules would continue to apply as a condition of any trade agreement.
The EU negotiates international trade deals on behalf of its member states and as the biggest economic entity in the world it has considerable muscle. Agreements are already in place with 53 countries with some additional major agreements approaching completion. These would all need to be replaced with Britain in a weak bargaining position as the party with the need to get something in place quickly. At best, British farmers and food exporters would face years of uncertainty.
In terms of new agreements, the EU and the USA are well advanced in seeking a deal but, as President Obama has made clear, the US likes to conclude multilateral pacts and Britain would be at the back of the queue. Moreover, such UK-only deals might come at a price such as opening the British market to products like US and Argentine beef, US pork and Australian sugar. How high would farmers’ concerns rank in the UK’s negotiating priorities?
Were Britain to leave the EU, it would be a reckless gamble for British farmers and for our food and drinks industry.
- Firstly, it is highly likely that there would be big cuts in the level of support provided for British farmers.
- Secondly, we would lose our ability to influence the rules of the Single Market and, depending on what sort of deal is concluded, potentially find our current unfettered access to EU markets constrained by tariffs and quotas. At best our access to EU markets would be clouded in uncertainty for a prolonged period.
- Thirdly, our access to many third country markets will depend on replacing EU deals already in place or negotiating new ones from scratch. Britain is likely to be negotiating from a position of relative weakness: under time pressure, short of experienced trade negotiators and without the heft that goes with speaking for a market of 500 million consumers. It may be that the concerns of farmers will weigh less decisively in the minds of British negotiators than is the case for the EU.
According to an independent study commissioned by the NFU, following a potential Leave vote, food prices would rise but agricultural incomes will fall. Under post-Brexit scenarios modelled by leading farming consultancy, LEI Wageningen UR, with financial support removed and either a Canadian-type free trade agreement with the EU or a relationship based on WTO rules, annual average farm incomes in Britain would fall by between €24,000 and €17,000 euros.