18 June 2016 by
After the tumult and tragedy of the campaign, it is vital that voters go into Thursday’s vote focused on a sober assessment of the issues.
This is one of the most important decisions Britain will make for generations. It needs to be anchored in a balanced analysis of the likely effects on the British economy of remaining in the European Union.
Official bodies such as the Treasury and the International Monetary Fund have made a series of exaggerated warnings about the effects of leaving, based on improbably precise forecasts that ignore what is actually happening inside the EU itself.
Remaining inside is very worrying for British competitiveness, jobs and prosperity. The financial system, on which everyone in Britain and all its businesses depend, is probably the most vulnerable part of the economy.
Clearly, the headline costs to the taxpayer are going to increase. Brussels is running out of money and that is likely to mean a substantial rise in the UK’s £10bn net contribution.
The EU has delayed a mid-term review of its 2014-20 budget until after the UK referendum. It is looking for more money because it has blown its budget. The EU has identified a gap of £20bn because of a backlog of “unpaid bills”. The UK may have to pay £2.4bn of that.
There will be costs from the Eurozone crisis. In 2015, the Commission acted in what George Osborne called “flagrant breach” of its own undertakings when it demanded UK assistance for the third rescue package for Greece.
Britain can be forced, under qualified majority voting, into taking part in further bailouts.
The elections in Germany next year could also result in a government there that demands more help from outside in sorting out the Eurozone.
The IMF will be putting pressure on EU states including Britain to forgive Greek debt and come to the rescue of Italian banks, but with its mountain of debt can this country afford to?
It is true this is the world’s fifth biggest economy, but the Government has been unable to prevent the near doubling of its own debt to £1.6trn since 2010 and large current account deficits are compounding the problem.
If borrowing costs for businesses and mortgage holders go up in the next few years, this will not be as a result of leaving the EU but because foreign investors are losing confidence in Britain’s ability to balance its books.
It is little wonder Mark Carney, the Governor of the Bank of England, has warned of the dangers of relying on “the kindness of strangers” from abroad to finance Britain’s borrowing.
Most of the concerns for business about leaving the EU have been overstated, such as leaving the much-vaunted Single Market. It was meant to be the economic pay-off for surrendering so much independence.
But it has not delivered. British trade with Europe in the two decades before the Single Market was introduced in 1992 actually increased more quickly than in the decades since. It has instead turned into a rule-generating mechanism in Brussels under the guise of “harmonisation”.
There have also been warnings that if Britain leaves, financial institutions would no longer be able to operate across European borders. But changes to EU regulation in the form of the so-called “MiFID 2” directive, due to come into force in 2018, will make it far simpler for financial companies from third countries to operate across European borders.
There are a series of potentially damaging measures on the agenda. They include the proposed Financial Transaction Tax which would impose £4bn of costs on UK savers and pensioners, according to the City of London. Contract and company law may be harmonised and there are nascent attempts to take away Britain’s seats on global bodies such as the IMF and the Financial Stability Board.
It is an illusion to believe this country can set the rules to its own advantage by being “at the heart of Europe”. In many ways the key decision in Britain’s relationship with Europe was taken when it stayed out of the single currency. Since then, the UK has gradually moved to the edge of decision making.
I suspect that if Europe had been more willing to agree genuine reform when the Prime Minister went to Brussels for his renegotiation, the polls would be looking far better for Remain than they do today.
Instead, British influence has been further eroded. The UK will lose its veto on all Eurozone integration measures, likely to be the main field of action for European decision-making in the next few years, with inevitable effects on the British economy.
It is absurd to suggest Britain cannot thrive outside the EU. It is too big an economy to be ignored. For any country that wishes to alienate Britain there are many more that will want to increase their trade with it.
As an outward looking trading nation, Britain more than ever needs the freedom to rebuild its strength for its own requirements.
The country will benefit from regaining control over its contribution to the EU and those such as farmers and scientists who receive grants need not lose a penny.
Britain needs a strong financial system to power and diversify the wider economy. This can be achieved far better if the UK is free from the constant threats to competitiveness that Brussels poses.
The safe and secure option for Britain’s economic future is to vote Leave this Thursday.
Michael Geoghegan, former HSBC chief executive