Wednesday, 10 May 2017

Unmasking the Myths - The Three Big Brexit Myths- Immigration,Controlling our Laws & Better Off Alone

If you believe our Prime Minister Brexit is what this election is all about: to give the country the strongest possible leader with the strongest possible backing so that they can secure the best possible Brexit deal for the country.Theresa May had been a lifelong supporter of the EU. Like her mentor Margaret Thatcher she was a strong advocate of the economic benefits of being part of the Eu’s single market. However, all that changed a year ago. Immediately following the referendum, she appears to have had a dramatic conversion to become a born again Brexiteer. Since that epiphany, the cornerstone of Theresa May’s Brexit vision has not been the economic benefits of free trade with Europe but to ensure “we” have complete control over immigration and over our laws. Sure, she wants the best trade deal she can get with Europe but if the price of control means the loss of free trade that’s a price she is happy to pay; whatever economic damage it causes, apparently. Yet the clear implication of her message is that wrapped in her union jack under her “strong and stable leadership” her “red white and blue” Brexit will deliver it all. Not only will she bring us full control over our borders and laws but we can have a great trade deal with the EU too without having to be shackled to the single market. It’s Boris Johnson’s “we can have our cake and eat it.”            
In this article I will explain why, I’m afraid, the vision of Brexit she paints is one huge deception, designed simply to get her elected with the biggest possible majority. It is a deception built on three big myths. Each of those myths plays very directly to the gallery of popular opinion and prejudice:
  •         The need to reduce net immigration below 100,000 a year
  •       The need to take back control of most of our laws from the EU
  •       That we will be economically better off alone
However, as I will explain, all the evidence points to very different results for Theresa May’s proposed path to Brexit:
  •         Only a modest reduction in net immigration
  •       A likely reduction in democratic control of our laws
  •       No free trade with the EU and resulting serious economic damage (which cannot be offset by free trade deals elsewhere).
This will be rather more like Boris Johnson’s “Titanic success” of a Brexit.

Anyone who knows anything about how the EU works will tell you that Boris Johnson’s “we can have our cake and eat it” Brexit is just a deluded fantasy. (Just ask the Greeks!). This has just been spelt out to us by the leaders of the EU itself  and the leader of the two most powerful leaders of European nations- Germany and France.

 In basic terms, there are really only two types of Brexit on the menu. There's hard boiled; outside the EU single free trade market and customs union but with complete control of EU immigration and our own laws. Then there’s soft boiled; still in the single free trade market and the customs union (or a deal that amounts to about the same thing) but accepting free movement to/from EU and EU laws governing the market. Though they may try to dress it up a bit differently the government is basically going for the hard Brexit and Labour the soft Brexit. (And the Lib Dems would like no Brexit at all).

A large swathe of “working class voters” in the North and Midlands, traditionally more typical Labour supporters, voted Leave in the Referendum. They did so because they were deceived by one or more of the big Brexit myths. Those same voters are now overwhelmingly intending to vote Tory because they believe only the Tories’ born again Brexiteer leader Theresa May can be trusted to deliver the proper Brexit they voted for i.e. a pure, hard Brexit. Therefore, the same myths that deceived them into voting Leave are now alive and well in this election. As the Prime Minister knows only too well it is those Brexit myths coupled with the “strong and stable” leader myth that will potentially deliver her the keys to no. 10.

If you want to understand why I am convinced the reasons for Theresa May’s Brexit plans are just myths then please read on. Note, like all myths there is a superficial basis of truth to them, but scratch beneath the surface and you’ll find there’s no substance to them.

Brexit Myth 1- Controlling our Borders- The Evils of Immigration

This is a classic case of adding 2 and 2 and making 5. People see more migrants and at the same time see serious economic and social problems of failing public services, unaffordable housing and low wages (while the “rich” just get even richer).  They assume there must be link between their problems and the increased immigration.

Brendan Cox, the widower of the tragically murdered MP Jo Cox said this government's migration policy is "a masterclass in how to get the crisis wrong; set an unrealistic target [keep immigration below 100,000], miss it, report on it quarterly and in doing so show a complete lack of control heightening concern and fanning the flames of resentment." At the same time government policies of austerity and underfunding of public services have exacerbated the problems that caused the concerns over immigration in the first place.

The alleged cost and burden of immigration on the face of it is a strong argument for leaving the single market. In 2015 net immigration into the UK was 1/3rd of a million. 20 years ago it was well below 100,000 a year. It is argued that the current high levels of immigration place a huge demand on our already overstretched NHS, education system and housing stock. It is also argued that such high numbers of immigrants competing with us for jobs creates unemployment and depresses wages, particularly for the poorest. Because of the EU’s free movement rules the government has had no control whatsoever over immigration from the EU and therefore effectively cannot control immigration overall or plan for its demands.

But is EU immigration actually a burden on the UK?

EU immigrants through their taxes actually put more into the UK government coffers than they take out in terms of benefits they receive or services they use- by £2.5 billion a year. This is because most EU migrants are younger and fitter than the average UK citizen and nearly all just come here to work. Most also come to the UK already trained and geared up for work. This saves the UK billions in education and training, especially in specialist fields like medicine, science and engineering. At the lower end, EU migrants also come prepared to do essential jobs that UK citizens are often reluctant to do, such as care workers or farm labourers.

EU immigrants actually place less demand on NHS and social services than the rest of us because they are younger and fitter than the average UK citizen. You are far more likely to find EU immigrants caring for you or your family in hospitals and care homes than being cared for. Although they make up 4.7% of the UK population they account for 5% or our nurses, 10% of our doctors (already trained of course) and about 13% of our care workers. 

 EU immigrants do increase the burdens are in our schools and housing (although they actually take up 3% less social housing per person than the average UK citizen). However, the question must be asked since the government is £2.5 billion a year better off from the taxes of EU immigrants why is it not re-investing that revenue to increase expenditure on schools and public housing in areas bearing the immigration burden?

EU immigration does not create unemployment or reduce wages
In 2003, just before the start of significant EU immigration our unemployment rate was 5% and the numbers in work 28 million. In 2015, our unemployment rate was still at 5% and numbers in work had increased to 31.5 million.  EU immigration has very slightly depressed wages for the lower paid but only by the equivalent of 1p per hour

Leaving the EU single market is unlikely to stop high immigration levels
Leaving the EU’s free movement zone would probably reduce net immigration, but probably not by very much. Immigration to the UK would still almost certainly remain relatively high because:

1.     Even now, most of our immigration comes from outside the EU. We could control and reduce this in theory but the government chooses not to, mainly because these immigrants are needed to do jobs here. The pledge to reduce net immigration to below 100,000 which Theresa May has repeated for a third election in a row is therefore just pure populist propaganda. Don’t forget that until she became Prime Minister Theresa May was Home Secretary for six years - the senior Minister responsible for immigration. She couldn’t have done much about EU immigration, but she had plenty of power to reduce immigration from elsewhere, i.e. most of it, but chose not to. This exposes her immigration pledge as a bare faced lie, yet for a third election in a row many people are falling for it.
2.     We have an ageing native population and a reducing native workforce to sustain them. We need a significant supply of labour from overseas to help care for our elderly and do other jobs which not enough of the natural population want to do (e.g. farm labourers or care workers) or have enough right skills to do (eg certain scientific/engineering jobs). If we have less immigrants coming from the EU we will probably only end up replacing them with immigrants from elsewhere.
3.     The end of free movement would be a two-way street. 1.2 million Britons currently live in the EU. Our exit from the EU single market potentially means many of them returning here if they lose their own benefits of free movement and equal benefits. Many are going to be economically quite inactive and likely to be heavier consumers of health and care services.
4.     There is likely to be a significant increase in illegal immigration. The new French President Macron has already warned us that once we leave the EU and its single market France are very unlikely to maintain our policed border in Calais. Instead we will likely end up with refugee camps in Dover.
EU immigration levels are likely to fall even if we remain in the single market. Overall net annual immigration has already fallen by 60,000 between 2015 and 2016. Immigration from the original Eastern members spiked after they initially joined joined but then levelled out. The same is likely to be true of the more recent joiners.

If we leave the single market immigration from countries outside Europe will inevitably  increase. It may even offset reduced immigration from within Europe. There are two obvious reasons for this. First, if we lose free trade access to the EU the aim is to do lots of ambitious trade deals outside Europe with countries like India. These countries have already told us that the price of freer trade will be freer movement of their citizens to the UK (Does that sound familiar at all?) Second, there will be an economic need to recruit immigrants from somewhere to do jobs that UK citizens can’t or won’t do. This is why in their more honest moments even hard Brexit ministers like our Foreign Secretary have admitted that immigration is unlikely to fall significantly when we leave the single market.

Brexit Myth 2- taking back democratic control of our own laws

It is argued that if we remained in the single market un-elected officials of the EU would still undemocratically impose oppressive laws on the UK, tying us up in its sticky red tape. How can we ensure our laws are just and appropriate for us when 75% of our laws are imposed by the EU? But these arguments do not stand up to the evidence.

       Even as a full EU member the vast majority of our laws are made here in the UK and not by the EU. About 15 to 50% of our laws have been partly influenced by EU law, but only about 13% of our laws are substantively European in origin. However, not all laws are equal in their impact on our everyday lives. Much of the EU’s laws are very specific in regulating terms of trade in a myriad of different industries and have no real impact on the wider public.
      Of those EU laws that have a wider impact many of them are actually beneficial and make life better and fairer, often protecting ordinary folk from injustice and exploitation by the rich and powerful. Indeed, our Supreme Court have just forced our government to comply with EU law by taking action to reduce our air pollution which annually causes about 40,000 deaths.  (Note by the way decisions of the European Court of Human Rights, eg over prisoner’s voting rights, have nothing at all to do with the EU).
       Virtually all the unjust laws imposed on us in reality come not from the EU but our own UK government. The EU has no or virtually no power over most areas of law making that effect our everyday lives (as long as we treat EU nationals equally). And once we are outside the EU it will have even less power even if we remained in the single market. Our health service. Our education system. Our welfare state. Our housing policy. Our taxation policy (save for VAT). Our armed forces and when and whether we go to war. When I think of all the unjust laws and government decisions that have made me most angry in recent years I cannot find any that came from the EU. The bedroom tax, the illegal invasion of Iraq, reducing welfare benefits for the working (and non-working) poor, the selling off of control of our public services to private companies, reducing taxes on the rich and increasing them on the poor, reductions in access to justice. These laws were all made here in the UK.
      In employment law the EU provide foundational underpinnings which our own government cannot remove even if it wanted to. These include minimum paid holiday and maternity/paternity leave, rights of agency workers and maximum working hours.
      If we left the single market those trading with the EU are likely to be tied up in more not less red tape because there are more not less hoops and hurdles for anyone importing or exporting from outside the single market.
      Shut out from the free trading single market the government would be desperate to do whatever free trade treaties it can with non-European countries. A hard Brexit is likely to mean opening up our public services like the NHS even more open to foreign companies taking over our public services. (This is potentially what would have happened with the TITP US/EU deal until European opposition killed it off). It will be impossible for our government to say no without breaching the treaty and the resulting damage to our trade.
      Add to this the Great Reform Bill about to go through Parliament. This will give government ministers Henry VIII type powers to decide which bits of European law to keep or throw away without any Parliamentary scrutiny whatsoever. This can only lead to a net loss rather than gain to our democracy.

Brexit Myth 3- Better Off On Our Own

Cost of contribution to the EU

The true cost of our contribution to the EU is not the “£350 million a week” claimed on those red buses last year. It’s about £100 million a week. That’s still a significant sum. However, it is tiny compared to other annual items of government expenditure; about 0.3%. If we remained within the single market when we left the EU we would probably pay something close to this (as do countries like Norway pro rata).The real question is whether we would get value for money for our annual fee? I would suggest if we leave the single market we will likely lose a lot more than we save in membership fees.

Cost/benefit from international trade in or out of the single market

The EU gives us free access without trade tariffs to the biggest single market in the world of over 500 million people. It is the only market right on our doorstep and 44% of our current trade is with the EU. 3 million UK jobs are directly linked to it and many more jobs are indirectly supported by those jobs. Money coming into the UK through trade with the EU circulates around the economy like oxygen carried in our blood. Car manufacturers from outside of the EU single market typically pay tariffs of at least 10% to export to the EU. The profit margins on cars made in the UK are also currently about 10%. Therefore, exiting the single market is likely to make selling our cars to Europe unprofitable overnight. That’s even before we consider the huge problems for car manufacturers if we leave the Customs Union, because of how cars are made these days in Europe; by multiple quick seamless transfers of parts between different countries. This cannot happen if we leave the Customs Union. An exit from both the single market and customs union would therefore likely mean the virtual end of the British car industry and the loss of many thousands of jobs. Hence the apparently surprising support of Jeremy Clarkson for remaining in the EU!

Membership of this single market also affects the price we pay for goods and services we buy from Europe. Every single serious economic organisation who has looked into has advised that if we leave the single market and customs union the negative effects on international trade would make our government and most of us significantly worse off than if we remained. The list of the organisations giving these warnings is lengthy and impressive including; the London School of Economics, the National Institute for Economic and Social Research, the Bank of England, the Institute of Fiscal Studies, the OECD and the International Monetary Fund. 

90% of economists who have analysed the data and projected the likely outcomes have come to the same conclusion. The outcome of a hard Brexit will be either fairly or very bad for our national and individual incomes. This is expected to result in an eventual overall fall in the income the UK generates each (Gross Domestic Product) of £26 to £55 billion a year due to a combination of factors resulting from leaving the EU single market; increased costs of imports, big reductions in foreign direct investment, reduced productivity and reduced exports. 

As a knock-on effect the IFS also estimates that the UK government itself will lose tax revenues of £20 to £40 billion every year, likely to mean serious spending cuts, tax rises or both. 

Some might say this is just doom mongering. Just like George Osborne's threatened post-referendum economic crisis and budget which never happened. However, this misses the point. We haven’t left the EU or the single market yet so our economy has yet to experience the harsh reality of the trade barriers we would face outside the single market.

An additional loss, which may be even harder to quantify is the expected damage to our scientific research, because of the loss of substantial direct EU investment in science and the reduction in invaluable knowledge collaboration with leading scientists throughout Europe. It is not surprising therefore that 83% of research scientists opposed Brexit and similar arguments apply to a hard Brexit.

But won’t the costs just be borne by the elite? Won’t most of the country, especially the poorest, be better off?
No. The economic consensus is that the economic cost of a hard Brexit would not be just born by the rich. The pain would be evenly shared across the income distribution – every income group, including the poorest, would lose out by similar proportions. The average Treasury forecast is that the average household by 2030 would be about £4,300 a year worse off than if we had remained in the single market. The Bank of England, the IMF and many economists are concerned that a hard Brexit could well lead to another recession. Recent experience tells us in a recession the poorest always suffer most.

But don’t the EU need us more than we need them? So surely the EU will just do a trade deal with us, won't they?
No44% of our exports go to the EU. No other EU country exports more than about 10% of their exports to us.  And the remaining EU countries will know that any loss of exports to us will be partially offset by exporting more to their EU neighbours to take up the gap in the market left by us. We have far more to lose than any of the other individual countries that make up the EU. There is not a single country in (or outside) Europe that has secured a free trade deal with the EU that has not had to accept free movement of people within the single market. Just ask Switzerland and Norway.  If we want to do a free trade deal we would have to accept this. All senior European leaders have told us; the leaders of the EU itself Donald Tusk and Jean-Claude Junker as well as the leaders of the two most powerful national leaders Angela Merkel and the newly elected Emmanuel Macron. This is not just negotiating bluff. The EU inevitably feels there have to be consequences to leaving the biggest trade club in the world. Otherwise what’s the point of being a member of the club? They will be determined to halt a domino effect of other countries following suit and the whole union falling apart. 

And then we come to the EU divorce bill for our share of future EU obligations we had already committed to. Hopefully it won’t be quite as much as 100 billion euros but most serious commentators  believe it will be 10s of billions. If we remained in the single market the cost would likely be a fraction of that as we would still be contributing to the club annually even though we were no longer a full member.

But who cares about trade with Europe anyway as we can just do our own trade deals with the rest of the world, can’t we?
We should care because the European single market is the only market right on our doorstep. If we leave the single market undoubtedly Theresa May will be desperate to deal whatever deals she can with other countries. However, we will be starting two goals down with other countries. First, the EU already has trade deals with 50 other countries we will lose rights to. Second, we will only be speaking for a market of 65 million rather than 500 million, so we are unlikely to get as good a deal or as quickly as the EU. Even President Trump recently had a change of heart and admitted that doing a deal with the EU would be prioritised above a deal with the UK.

Theresa May’s Brexit vision is nothing more than a dangerous illusion dreamed up to capture votes (as the German Chancellor and others have warned us). It does not stand up to any critical analysis of the hard evidence. The inescapable conclusions are that her “pure” hard Brexit would leave us all significantly poorer not richer, will make negligible difference to immigration levels and if anything will make Britain less not more democratic. Frankly if (as I fear) Theresa May wins the election our best hope is that Theresa May is actually lying to us (just as she did over the 100,000 net migration target); that despite what she says, if she cannot get a good trade deal she will sacrifice greater control of our borders and laws for the economic benefits of the single market. However, if she does that she'd better be prepared for a huge backlash from the millions who'd believed that  wrapped in her union jackshe would bring us the "have your cake and eat it" Brexit- complete control of our borders and laws as well as a good trade deal. I'm afraid that just ain't gonna happen.

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