Referendum: The guide for the perplexed

As an economist as well as a campaigner for Israel and against anti-Semitism, a number of people have asked me for advice to help them decide how to vote.

Which outcome is better for the economy and jobs?

Remain. 95% of economists who responded to a poll said that it would be best to remain in the EU. The Bank of England, the OECD, the LSE, the IFS and the Treasury have all warned of the consequences of leaving the EU. Over 200 economists signed a letter in The Times supporting the Remain decision. Being in the EU gives the UK access to a tariff-free market of 450 million people, with which the UK does nearly half of its export trade.

But can’t the UK leave the EU and just sign a free trade deal with them – like Norway and Switzerland?

Yes but it would be much inferior to being in the EU. Switzerland has taken years to sign agreements. Norway pays more per capita to the EU than the UK, without having any say in EU policy. And both countries are still obliged to accept free movement of EU citizens (see below).

But the UK is the fifth largest economy in the world. Won’t the EU be bending over backwards to give the UK the best possible terms for an agreement?

No and this shows a misunderstanding of the nature of trade negotiations – which are all about the relative size of markets. The UK has a population of 64 million, EU27 around 450 million. UK exports to the EU are 45% of total UK exports whereas EU27 exports to the UK are less than 10% of total EU27 exports. In other words the high value cards all lie with the EU. Added to which, there are anti-EU groups in other Member States. If the EU were to offer the UK a ‘sweetheart’ deal, it would encourage the calling of ‘Out’ referenda in other countries, most notably Denmark.

The government has warned of a ‘home grown recession’ if the UK votes to leave. Would you agree?

There is a high risk of a recession. We have already seen the impact of heightened concern of a Leave vote. The stock market and sterling have both fallen. Business and consumer confidence is down. After a Leave vote, these moves would become much sharper. Lower equity prices will cut household wealth, implying lower consumer expenditure. The UK’s credit rating will be cut. Some companies will pull out of the UK — some have located in the UK because they want to be located in the EU. There will be a long period of uncertainty while the post-Brexit regime is being negotiated and while a new Prime Minister and Cabinet is chosen. Holidays will be more expensive. Taxes will have to rise because the economy will slow. Interest rates cannot do the work of stimulating the economy because they are already at historic lows.

But surely leaving the EU leaves the UK free to negotiate trade deals with the rapidly growing countries, such as China? Why hasn’t the EU done these deals?

There are reasons for the absence of an EU trade deal with China and the same reasons would apply to the UK. China has an undervalued exchange rate – so if we granted free access to the EU or UK markets, they would price out European products. Look at the impact cheap Chinese steel has had on steel companies in the UK. And China subsidises its State Owned Companies. They therefore do not compete ‘on a level playing field’ with European companies. In any case the EU – with over 500 million people – has much more bargaining power in trade agreements than the UK, with 64 million.

But what about the euro? Isn’t the UK better off out of the EU when the eurozone breaks up, as it inevitably will?

The main problem in the euro area is Greece. Greece manipulated economic data in order to gain entry to the euro and its governments have not legislated the necessary economic reform for the country to remain comfortably in the euro area. But that does not mean the euro area will break up. I believe the Greeks, the other euro area members, the ECB and the IMF will continue to do what it takes to keep Greece in the euro area. And if I am wrong, that doesn’t mean the end of the zone. It makes perfect sense for neighbouring countries with similar economies to have a common currency. In any case the UK is not in the euro area and can remain outside as long as it wants. As such it has no obligation to contribute to support Greece. The euro has otherwise been a success. It has been stable and is the second most popular reserve currency.

But we need to leave the EU to cut immigration!

Immigration is a complete red herring in this vote. Because every country in Europe which has signed a free trade agreement with the EU has had – in exchange – to concede free movement for EU citizens. Swiss voters in a plebiscite voted to limit free movement but the EU has told Switzerland that if it wants to keep its trade agreements it has to allow free movement. The Leave campaign is downright dishonest to play on people’s concerns about immigration by suggesting that leaving the EU will reduce immigration. It will not.

Will leaving the EU increase the terrorism risk in the UK?

Yes. Because it will reduce the extent of security cooperation between the EU and the UK. Former Jihadist Aimen Dean, who started working for MI5 and MI6 after quitting Al Qaeda, warned that IS and Al Qaeda supporters would see Brexit ‘as a first step in the destruction of the Union,’ which they perceive to be the successor to the Roman Empire. He argues that the recent atrocities in Brussels and Paris were part of a larger strategy that seeks to escalate tensions between Muslims and non-Muslims, to destabilise and ultimately ‘destroy non-Islamic institutions and states’

You’re not a security expert. How can you be so sure?

Because security experts have said that a UK exit will reduce the volume of security intelligence available to the UK. For example, Pauline Neville-Jones. Sir Richard Dearlove disagrees but he is out of touch – he left MI6 more than 12 years ago

What about Turkey?

The prospect of Turkey joining the EU any time soon is a falsehood put out by the Out campaign. Turkey fulfils only one of 35 Chapters necessary for EU entry. Three Member States (France, Hungary, Austria) are committed to a referendum, if the prospect of Turkey entering ever materialises. The agreement as regards refugees from Syria and Libya allows Turks to come to the EU but only to the Schengen area (of which the UK is not a member) and only for three months. – not to live and not to work. Like immigration, Turkey is another red herring beloved of the Leave campaign.

The EU is becoming a Federal Superstate. I don’t want that.

Another myth put out by the Leave campaign. Further integration has to be by Treaty. It takes an Inter Governmental Conference (IGC) to negotiate Treaty changes. Any single country can block an IGC. There is no agenda for a ‘Federal Super State’. The Leave campaign suggest that the Five Presidents Report is the blueprint for a ‘Federal Superstate’. That is another falsehood. This report is mainly about how to strengthen the euro area.

The EU was a free trade organisation. It was never a political organisation. It has become a political organisation without the agreement of the electorate.

Those who say this ignore history. The EU was founded (as the Coal and Steel Community, in 1951) with the express purpose of ensuring that France and Germany, by close trade linkages, would never again go to War with each other. The success of this aim was recognised in the award of the 2012 Nobel Peace Prize to the EU. In any case ‘political’ is an undefined term. Everything is ‘political’. Deciding how to divide the bill in a restaurant is ‘political’. It is about the way we live together. And the way countries live together.

I want to vote Leave because the EU is anti-Israel

Israel is irrelevant in this referendum. Neither UK nor EU policy will be any different if there is a vote to Leave. The same applies to anti-Semitism. To leave the EU is a leap in the dark. There are enough uncertainties already – Jihadi terror, Putin’s adventurism, the possibility of a Trump Presidency, uncertainty in the Middle East, the slowing of the Chinese economy – to name but five. Do we really want to add yet another uncertainty?

Will a vote to Leave increase the chance of Jeremy Corbyn becoming Prime Minister in 2020?

Yes, for three reasons. First, the hit to the economy (set out above) will reduce the popularity of the Government and increase that of the Opposition. Second, there will be turmoil in the Conservatives.  Third, Mr Corbyn will be able to point to the failure of the Prime Minister to achieve the necessary reforms to the EU to win the referendum and his mistake in calling the referendum, purely to keep the Conservatives united in order to win the 2015 election. This is why Mr Corbyn is keeping his distance from Mr Cameron in the Remain campaign, for example refusing to appear on the same platform as the Prime Minister.

The EU is not democratic and the UK has lost sovereignty by being a member

Being part of the international system involves pooling sovereignty when the gains justify it. The UK gives up sovereignty by being a member of NATO and the IMF, for example. The EU is no different.

The EU is perfectly democratic. The Council – which determines policy – comprises democratic politicians. The Parliament has increasing powers – you vote for an MEP. The reason why there is not full democracy – eg electing the President of the EU Commission, Jean-Claude Juncker – is precisely because the EU is not a ‘Federation’. If there were direct elections for the President, national governments would rightly complain that they were being usurped, and rightly so.

Thank you. I am still confused but at a higher level. Where can I get more information?

I recommend two factchecking sites: and UK In A Changing Europe

You can also contact me and I will do my best to respond.

About the Author
Jonathan Hoffman is a blogger who has written for United With Israel, CiFWatch (now UK Media Watch), Harrys Place and Z-Word.
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