Thursday, 12 May 2016

Polls indicate outcome of UK referendum on the EU too close to call - Brexit is a real possibility.

Blair Horan: Currently the polls for the UK referendum on EU membership, which takes place on 23 June, indicate that the result is on a knife edge and that Brexit is a very real possibility. While most polls conducted since the campaign began in late February show a small lead for the Remain side there is a clear  age divide with the prospect that an expected  higher turnout among older voters over 50, a majority of whom back Leave, could yet decide the outcome.

The Prime Minister, David Cameron, gained concessions in the renegotiation of the UK’s membership conducted with other EU leaders in February, including protection against discrimination for non-Eurozone currencies, an opt-out from ‘ever closer union’ and a temporary mechanism to discriminate against other EU workers on access to in-work benefits. This agreement concedes  most of the detailed demands that he set out in November 2015, but these  were a far cry from the fundamental reform of the EU that he promised in his Bloomberg speech of January 2013 when he launched his strategy for a renegotiation and referendum.

Gambling Britain's future in the EU

It was an extraordinary decision by Cameron to gamble on Britain’s future in the European Union based on both the narrow party interest of trying to appease Tory eurosceptics, while also seeking to outflank UKIP at the 2015 general election. Cameron had come to the leadership of the Conservative Party in 2006 saying it needed to stop ‘banging on about Europe’, but in selecting William Hague as his shadow  Foreign Secretary he chose someone who had long determined that should the opportunity arise that Britain should seek to reset its relationship with the EU. A rebellion of 80 Conservative Party MPs over a motion on Europe in October 2011 became the catalyst for Cameron’s decision to renegotiate the terms of membership and put the outcome to an In/Out referendum.

Europe had not featured as a major issue in the Conservative party manifesto for the 2010 election but from 2012 onwards Cameron along with  his senior Ministers were relentless in their criticisms of the EU calling for a new Europe of free trading sovereign states and raising the idea of restrictions on free movement of people.

Margaret Thatcher's legacy

The origin of the Conservative party’s current problems with Europe can be traced back to the Milan European Summit in June 1985, when the then Prime Minister, Margaret Thatcher, was outvoted on the convening of the Intergovernmental Conference that led to the Single European Act 1987. This laid the basis for the completion of the Single Market by 1992, with much of this achieved by the extension of qualified majority voting.

However, the new Treaty also laid the basis for the single currency and a significant expansion of workers’ rights under the Social Chapter. While Thatcher supported the trade related developments, she was vehemently opposed to both the single currency and the social dimension of the Single Market. In her infamous Bruges speech of September 1988, she said that, “We have not successfully rolled back the frontiers of the State in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels.”

Foundations for euroscepticism

It laid the foundation for eurosceptism as a major force in the Conservative Party that grew stronger as the process of European integration deepened, starting with the Maastricht Treaty in 1992 and ending three Treaty revisions later with the Lisbon Treaty in 2009. With each new intake of MPs in successive Westminster elections the pro European wing of the Tory party, represented since the 1970s by Heath, Howe and Heseltine, dwindled away.

In contrast, that same month of September 1988, Jaques Delors the President of the European Commission persuaded the TUC that workers stood to gain from the social dimension of the Single Market which was strongly promoted by the Delors Commission. A British Labour movement that since the early post war period opposed European integration as a threat to national social and economic planning began to believe  that social progress could come through the European Community that would also act as a restraint on the free market ideology of the Conservative party.

Conservatives eurosceptics and UKIP often ask why can’t we just have what we voted to join -a Common Market? This refers to the commonly used term for the European Economic Community in Britain in the 1970s and implies that it was only a free trade arrangement. In fact the EEC was deliberately structured as a Customs Union with a common external tariff and provision for some harmonisation of social and economic policies.

Early post war US administrations strongly supported a Customs Union in Europe due to its potential for political integration and were opposed to the free trade area desired by the UK because it involved a similar level of discrimination against US exports without any potential political benefits. The Bonn Declaration of July 1961, agreed just one month before the first UK application to join the new Community, had made the political dimension of the European project crystal clear. The US viewed a united Europe as a bulwark against an emerging Soviet threat, whereas the UK still retained global ambitions and only decided to join under Macmillan’s premiership because they feared isolation through  the US and the emerging EEC acting together.

After the Conservative Party lost power in 1997 it opposed every new European Treaty and increasingly promoted a flexible, free trading lightly regulated Europe of co-operating nation states as an alternative to the deeper political integration that it considered had already gone too far. The Bloomberg speech by David Cameron in January 2013 in which he set out his intention to achieve a fundamental reform of the EU was based on that alternative vision of a free trade Europe of nation states developed by his Eurosceptic predecessors, in particular, the Foreign Secretary William Hague. Cameron claimed in this speech that the original purpose of the European Union –to secure peace had changed following the fall of the Berlin Wall and that the only value of the EU for Britain was the free trade relationship in the Single Market. Free movement of people was only added to his agenda later when it became clear that UKIP would make immigration the centrepiece of their campaign in the European Parliament elections in 2014.

Cameron's list of demands to Tusk

In November 2015 when Cameron sent his list of specific demands to Donald Tusk, the President of the European Council, it contained a modest set of proposals specific to the UK, rather the fundamental reform of the EU with a new settlement subject to the democratic legitimacy and accountability of national parliaments that he called for in his Bloomberg speech. This reflected the limits of what in reality was achievable in the negotiations alongside the fact that the extensive Balance of Competences Review carried out by the UK had concluded that the existing balance was broadly right.

Although the new settlement for the UK agreed at the February European Council is not the fundamental reform that Cameron set out to achieve in 2013 it is a significant response to the much more modest demands on four issues made by Cameron in November 2015. The agenda on competitiveness is mainly a reflection of on-going work in the Commission and European Council to scale back on regulation, advance the completion of the Single Market and conclude more free trade agreements.

In return for commitments not to impede further integration in the Eurozone, principles were agreed that are designed to ensure that non-euro currencies are not placed at a disadvantage as banking union is progressed to completion. This allows for a review mechanism for the UK or other member states should problems arise, but a veto is specifically ruled out. In the event of a disagreement that cannot be resolved it will be decided by the Court of Justice based on the principles agreed and there was no concession in relation to the existing rules on qualified majority voting.

The opt-out for the UK from ‘ever closer union’, an idea that refers to the peoples of Europe rather than states, was conceded and will be incorporated in the Treaties at the time of their next revision. It is of symbolic rather than of practical importance but along with the existing extensive opt-outs for the UK on the Euro, Schengen and Justice and Home Affairs it does make the UK’s relationship more trade based than is the case for other member states.

A mechanism to allow the UK to deny full in-work benefits to other EU workers over a four year period along with a connection between the place of residence of the child and the amount of child benefit payable was also conceded. Much was made in the text of the agreement that the in-work benefit restrictions were not discriminatory because they followed Court of Justice case law but in fact to date the case law has only allowed for discrimination in the case of economically inactive migrants and jobseekers and has never allowed it in the case of workers. However, this mechanism will only be available for a once off seven year period, corresponding to the initial transition period available to the UK but not taken at the time of the 2004 Accession of ten new member states.

The main advantage of the agreement for Cameron is that he can claim with justification that the EU responded to the demands he made in November 2015 and that the UK now has ‘the best of both worlds’ because  in addition to existing opt-outs the UK now has a special relationship and is no longer committed to deeper integration. The economic arguments for staying in the EU are compelling because the EU Single Market is the best match for the export profile of the UK in both goods and services and could not be replaced by emerging markets such as China. The recent UK Treasury report also shows that Brexit would lead to an economic loss and in that it is consistent with many other reports including one from the OECD.

The Leave campaign not consistent on economy

The Leave campaign has not set out a consistent position on the economy so far, with Michael Gove stating that a free trade agreement without accepting Single Market rules is a given because even Albania has one while a Report by eight economists from the Leave campaign argues for trade based on WTO rules rather than access to the Single Market. The reality is that a free trade deal with full access to the Single Market requires the acceptance of all the rules otherwise the UK would have a competitive advantage over the remaining EU/EEA member states. Trade based on WTO rules involves tariffs and even free trade within the Single Market involves costly disruption to important intra industry supply chains because customs controls are applicable.

Should the UK vote to leave the impact on Ireland would be significant. Exports to the UK have declined from over two thirds at the time we joined the Community in 1973 to around 18% for goods and services today. However, it is much higher in the more labour intensive indigenous sector, in particular, food and beverage where over 40% of exports go to the UK. Even if the UK negotiated a free trade agreement to remain in the Single Market it would involve customs posts and procedures between Ireland and the UK because the UK would be outside of the Customs Union and the common external tariff.

Thus, some customs controls at the border between Northern Ireland and the Republic would be very likely. Were the UK to leave the Single Market as well as the EU then passport controls could not be ruled out. The initiative for this might well come from the UK, fearing that the Republic could act as a backdoor for EU immigration through Northern Ireland into Great Britain. Interestingly, when the common travel area was suspended due to the war from 1940 until 1952, the passport controls that were introduced were between Ireland both North and South and Great Britain and not between Newry and Dundalk.

A recent poll conducted by YouGov shows significant differences between, age, region and social class, with a majority for Brexit in voters over 50, regions in England other than London and the North and among C2,D and E social classes. This would indicate that turnout could play a decisive factor in the result if the younger more pro Europe voters fail to turn out in sufficient numbers compared to older voters. In his Bloomberg speech in 2013 Cameron claimed that the fall of the Berlin Wall meant that peace and security was no longer an issue in Europe. Russian aggression in Crimea and the rise if Isis proved him completely wrong and since November 2015 he has increasingly promoted the importance of the EU for peace and security in Europe.

A recent poll by Ipsos MORI showed that while the economy is the top issue overall that immigration is very important to undecided voters. If the economy, trade and security become dominant themes in the closing stages of the campaign, then the Remain camp should prevail. However, if the emotive issues of immigration and sovereignty gain traction in the campaign in the final weeks then sentiment could swing towards Brexit. If that were to be the outcome of the referendum  there will be profound implications not just for the UK and Ireland, but for the very future of the European project.

Blair Horan is Secretary of the trade union Charter Group which campaigns for a Social Europe.

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