On the Referendum #6: Exit plans and a second referendum

[NB. This blog was published in June 2015 but pundits have written about it since then so I’ve added some links at the bottom.]


There are three connected questions that add up to some interesting problems for both sides of the referendum debate:

1) Will the Government suggest a second referendum? Offering a second vote would give them the opportunity to reverse a loss in the first, so that YES means victory and NO does not necessarily mean defeat. European governments have held second votes repeatedly over the past quarter century. One can imagine them saying: ‘If the public votes NO we will have to negotiate an exit deal with the EU and we believe that it is only right that the public has a vote on the final deal.’ If it did, it would be likely that Labour would do the same. Perhaps Labour will suggest this and the Government would feel obliged to agree.

2) Should NO demand a second referendum in the hope of forcing the parties to commit to one? One can see why NO might argue for a second vote. It enables NO to make a NO vote seem much less risky. ‘If you vote YES, you won’t get another vote for another 40 years – if ever. You should vote NO to Cameron’s rubbish deal. If you vote NO, you will force a new Government to negotiate a new deal and give you a new vote. A NO vote is much safer than a YES vote.’ Further, as a matter of democratic accountability, given the enormous importance of so many issues that would be decided in an Article 50 renegotiation – a far, far bigger deal than a normal election – it seems right to give people a vote on it.

3) Does NO need to have a unified plan for exit? A Government trying to leave the EU obviously needs an exit plan. The SNP needed an exit plan. But the NO campaign is neither a political party nor a government. It has no locus to negotiate a new deal. Does it need an exit plan, or does that simply provide an undefendable target and open an unwinnable debate for a non-government entity?

A. Creating an exit plan that makes sense and which all reasonable people could unite around seems an almost insuperable task. Eurosceptic groups have been divided for years about many of the basic policy and political questions. An interesting attempt at such a plan is FLEXCIT based on using the EEA as a transition phase – remaining in the Single Market and retaining a (modified) version of free movement – while a better deal, inevitably taking years, is negotiated. This is an attempt to take the Single Market out of the referendum debate. I will discuss the merits of this idea another time when I’ve studied it more.

B. Even if one succeeded, the sheer complexity of leaving would involve endless questions of detail that cannot be answered in such a plan even were it to be 20,000 pages long, and the longer it is the more errors are likely. On top of the extremely complex policy issues is a feedback loop – constructing such a plan depends partly on inherently uncertain assumptions about what is politically sellable in a referendum, making it even harder to rally support behind a plan. Further, in market research I have done it is clear that 15 years after the euro debate the general public know nothing more about the EU institutions than they did then. Less than 1% have heard of the EEA. Few MPs know the difference between the EEA and EFTA or the intricacies of the WTO rules. The idea that the public could be effectively educated about such things in the time we have seems unlikely.

C. There is much to be gained by swerving the whole issue. No10 is dusting off its lines from the Scottish referendum. Perhaps they can be neutralised.

‘Different people have different ideas about the best way to leave. For example, some people suggest we should leave the EU but simply remain in the Single Market while we negotiate a new deal. Others have different ideas. Global rules set by the World Trade Organisation provide some guarantees against European countries discriminating against British trade. But none of this is the real point. We are not a Government. We can’t negotiate anything. A NO vote as a simple matter of law does not mean that we leave the EU tomorrow. A NO vote really means that a new government team must negotiate a new deal with the EU and they will have to give us a vote on it. If you want the EU to keep all the power it has and keep taking more power as it has for decades, and you’re happy paying billions to the EU every year instead of putting it into the NHS – then vote YES. If you want to say ‘stop’, vote NO and you will get another chance to vote on the new deal.  If the country votes YES, we’ve lost our chance to change anything. We may not get another vote for decades, after we’ve had to bail out euro countries and had another few decades of the EU’s useless and inhumane immigration policy. If the country votes NO, we can force politicians to get us a better deal.’

This approach might allow NO to avoid its biggest problem – the idea that a NO vote is a vote to leave in one jump and is therefore a leap in the dark. It would allow NO to portray YES as the truly risky option. This approach would enable NO to build a coalition between a) those who think we should just leave (about a third) and b) those who dislike the EU but are worried about leaving (about a third) and who may be persuaded that ‘Cameron’s deal is bad and we should try to get a better one but the only way to force this is to vote NO’.

This approach would be based on a legal and political fact: a NO vote would not mean that we had, or immediately would, leave. The day after a NO vote our legal situation would be identical to today: we would remain a member. A NO vote might mean the government is obliged to start negotiating to leave, presumably under Article 50, though many questions arise such as – would the PM have to resign, if not how could he credibly negotiate such a deal, and what about the timing given a 2020 election and it may have to happen with a new PM, etc? What a NO vote really means would depend upon what the political parties say they will do and this remains unclear as these issues have not been explored yet.

There is no clear answer to these problems. The conundrum is inherent in the fact that those who want to change our relationship with the EU are operating in a very hostile environment. Campaigners forced David Cameron to have a renegotiation and referendum instead of focusing efforts on building a national movement that could be used by a leader who actually wanted to leave and could therefore do it in an optimal way.

But – we are where we are, the referendum is going to happen. How to maximise chances of avoiding disaster?

Expanding the debate to consider a second negotiation and a second referendum offers potential advantages. It also has potential disadvantages. But as a matter of fact a NO vote does not mean we would immediately leave and it seems likely that the parties will be forced by public opinion to offer a second vote, and therefore this could be turned to the advantage of NO. There is no escape from the fact that ending the legal supremacy of EU law is an extremely complex enterprise, unravelling decades of legislation, legal judgements, and practice. There is no scenario in which all the problems caused by the EU can be solved in one swift stroke.

I have not reached any conclusion. These are the sort of things that need to be discussed BEFORE a NO campaign launches officially. In the euro campaign we pursued Sun Tzu’s maxim – ‘winning without fighting is the highest form of war’ so we tried to stop a referendum happening. The situation now is different and much more dangerous. In such a situation, going along with the conventional wisdom could easily mean losing in a conventional way. The current landscape means the NO side faces disaster if it loses but no victory even if it wins. In such circumstances, it is wise to consider ways to reshape the landscape.

To those who say these discussions should happen only in private, I strongly disagree. Much about a campaign has to remain secret but these big questions are necessarily part of public debate. A decade has been largely wasted. These big things must be confronted now in parallel to establishing a professional campaigning organisation and public discussion raises the probability of the NO campaign getting things right.

Please leave comments / corrections etc below.

Ps. There is also the issue of what happens with the euro and a new IGC/Treaty. It is likely there will have to be one, the Monnetists want one, and they always see disasters in Leninist fashion as ‘beneficial crises’. So there is also the prospect of a UK government being forced to have another referendum on a future Treaty. One way or another, the first referendum is unlikely to be the end of the matter. It takes a long time to correct a huge historical error, if it can be done at all.

Ps2. [Added 28 June.]

In the Sunday Times, 28 June, Tim Shipman writes re Boris reading the above:

‘Boris Johnson is preparing to call for a “no” vote in Britain’s referendum on the European Union in an attempt to extract greater concessions from Brussels than David Cameron is demanding.

‘In a stance that puts him on a collision course with the prime minister, the mayor of London believes Britain should reject any deal Cameron puts forward because the EU will not give enough ground.

‘Johnson has told friends that a “no” vote is desirable because it would prompt Brussels to offer a much better deal, which the public could then support in a second referendum.

‘Johnson said: “We need to be bold. You have to show them that you are serious.”

‘The mayor’s views, shared with friends last week, will send shockwaves through Downing Street. Both the “yes” and “no” camps had assumed that he would support Cameron in arguing for Britain to vote yes.

‘Johnson made the comments after reading a blog by Dominic Cummings, the former Tory aide who is organising the “no” campaign, in which he argued that Eurosceptics should say: “If you want to say ‘stop’, vote no and you will get another chance to vote on the new deal.”

‘A friend of the mayor said: “I don’t think in his heart Boris wants us to walk away. But he’s interested in us saying no because it won’t be what we want. That would mean a second vote. He thinks the only way to deal with these people is to play hardball.” …’


 

15 October 2015

Three columnists have written about this blog today.

1. Matthew Parris in the Spectator.

2. Simon Jenkins in the Guardian.

3. James Kirkup in the Telegraph.

They all have interesting points that I’ll answer when I have some time.

NB. Fans of Colonel Boyd…

DC

On the Referendum #3: The errors of Steve Richards

It will be useful to catalogue pundit comments on the EU and the referendum.

I just saw Steve Richards’ latest column. In it he writes:

‘Step back from the party-wrecking, PM-destroying obsession with Europe and the EU would have to be invented if no one had already done so. Most sceptics hail the single market. The single market needs rules. Elected politicians must agree the rules. Criminals move between borders. In order to catch them, co-operation and common practice is required. Again there needs to be democratic accountability. It is called the EU. There are many other examples of why we need to be part of it.’

This is badly flawed logic and a very misleading elision of concepts.

Most sceptics hail the single market.’

Wrong, but never mind the sceptics. Most businesses do not. Polls going back to 2004 show that most British businesses think the costs and problems with the Single Market outweigh the gains and would prefer Britain to regain the power to make our own trade deals and retake our own seat on the WTO – which would bring real influence, rather than the chimera of influence chased by the Foreign Office from meeting room to meeting room. (Cf. ICM poll of 1,000 businesses, April 2004, reported p1. of The Times.) You will rarely hear a hint of this on the BBC which is repeating its terrible mistake of the euro campaign, conflating the remarks of very political businesspeople running the CBI with the ‘voice of British business’.

Many CBI bigshots have very important interests in keeping in with their regulators in Brussels. This partly explains why they cheated their membership surveys on the euro before they were exposed by Business for Sterling in 1999, after which they rapidly had to pull out of the euro campaign in January 2000. BBC interviewers should ask Adair Turner, responsible for some of the dodgier CBI surveys, more about all his rubbish predictions about the euro, particularly his predictions about how the euro’s low interest rates would be great for Ireland (Mandelson ditto).

The public does not buy the Single Market rationale either and hasn’t for at least a decade. In a September 2004 ICM poll, the public were asked which of the following is a more persuasive argument:

a) ‘Common EU rules make trade and business easier, and the Single Market is good for jobs and living standards.’

b) ‘We can trade and cooperate with Europe without giving away permanent control over the economy to politicians we can’t vote out.’

The public agreed with (b) by 72:24. This view was consistent across all demographics.

Outside the fifth of the country who consistently tell pollsters they would vote to join the euro tomorrow, support for staying in the EU now rests almost entirely on fear of the unknown and not on any positive emotion about its benefits.

The single market needs rules. Elected politicians must agree the rules.

What is the Single Market? It is not a free trade area. It was created mainly by Delors in order to spark further political integration in the EEC, as Delors said himself on many occasions. It was sold in Britain as a trade liberalising project, partly because of the cunning of Lord Cockfield and the Foreign Office in presenting it as such to Thatcher who did not listen to John Hoskyns on the subject. SM rules were created to fulfil a primarily political purpose, not an economic one. The Foreign Office’s propaganda campaign on this subject has many useful idiots.

In my previous blog in this series, Professor Epstein explained the many differences between i) a free trade area based on non-discrimination and ii) a Single Market based on regulatory harmonisation. You do not need ‘rules of a Single Market’ in order to promote trade, as all the other countries in the world know. In many fields, the regulatory harmonisation of the Single Market is far more extreme than that imposed by the federal government on US states.

Many of the rules are there to please big business lobbyists who want to crush their competition – one of the many reasons Adam Smith rightly warned against the power of big business. These rules apply to 100% of businesses despite EU trade accounting for only ~15% of GDP.

The SM has hardly inaugurated the great boost to European growth that was promised. Many attempts to prove its success have failed. Economists have no reliable way of proving whether the theoretical gains outweigh the regulatory costs. A small proportion of companies would suffer problems if we were to leave the Single Market without any transitional arrangements. Others would gain.

Further, membership of the EU and Single Market are different things. Norway, for example, is a member of the SM but not the EU. I am not saying that this is a preferable relationship to EU membership, just that it is a fact that one can be part of the SM without being a member of the EU, so Richards is wrong on another level.

‘Criminals move between borders. In order to catch them, co-operation and common practice is required. Again there needs to be democratic accountability. It is called the EU.’

Many countries have agreements with EU countries on dealing with criminals. Membership of the EU is manifestly not needed to cooperate on international crime, terrorism etc. In fact, by far our closest allies in chasing terrorists are those countries we have had intelligence sharing agreements with since 1945. The intelligence services of these countries meet each other every week in London to discuss such issues – none of the participants are members of the EU and intelligence is shared on condition that it is not passed to EU members.

‘The EU would have to be invented if no one had already done so.’

There are reasonable grounds to prefer to stay in the EU though I do not agree with them. As Blair admitted in the privacy of his notes to Gould, they are primarily political – not economic.

Particularly given modern technology, there are strong reasons to support international cooperation and all sorts of joint efforts. One can support such goals while also thinking that the EU overall undermines effective global cooperation, economic growth, democratic accountability, and the rule of law. One can think, as I do, that one of the reasons why it would be good for Britain to leave the EU is that we could thereby increase valuable international cooperation, and that an entity very different to the EU would do far better at advancing peace and prosperity.

Reasonable people can be pro and anti the EU. Considering it as if it is a priori obvious that the EU is the best way of organising things is a mistake. It is far from obvious. Given the vast corruption, volume of regulation, bought influence by multinationals and trade unions, and the damage to democratic accountability, there are, a priori, many reasons to think a very different institution would be preferable.

*

Finally, SR was a prominent pro-euro pundit. Like others he bought Blair’s propaganda about the wonders of the euro and how inward investment would flee. He wrote in 1998 that ‘I reach a confident conclusion: Britain will be in the single European currency early in the next century’ and he exhorted Blair to ‘start putting the case [for the euro] more enthusiastically’. It would be nice to see some self-reflection from such people about why they were wrong about the euro before they repeat all the same predictions about leaving the EU. (NB. Tetlock’s groundbreaking study – most ‘political experts’ are no more accurate than chimps throwing darts at a dartboard.)

Pundits like Richards are the first to complain when people make spurious arguments about immigration. They should avoid making similarly spurious arguments about the Single Market, international criminals, and the EU – and they should learn from their mistakes on the euro the danger of following SW1 conventional wisdom.

Updated 4 June

On Twitter, Steve Richards said:

‘1/ You were right about the Euro.Those who opposed it deserve huge credit – does not mean EU withdrawal should follow.

2/ UK is part of a bigger EU and no Euro:- The dream of anti-Maastricht rebels. You'[r]e side has won and shd be celebrating.’

Re 1 he is of course right. It does not follow and I did not say it does.

Re 2. I assume he means that the EU is bifurcating into a core-euro/non-core-non-euro organisation which represents a victory for a strand of UK eurosceptics.

While this is preferable to the entire EU = Eurozone, I would not define this as a ‘victory’ or cause for celebration. The problems of the euro are – exactly as they were intended to do by its architects – driving further political integration. While it remains possible that this will prove to be the wonderful success long promised, it is at least a dicey proposition. Many elements of the process seem to me clearly damaging. One that got little attention last year was the sacking of the EU’s chief scientist at the behest of various anti-science political groups. This hardly augurs well for the EU being the Kantian beacon that Brussels claims as its rationale. The enormous structural corruption, from the agriculture policy to Brussels lobbyists, is another reason to doubt the Monnetist claims.

Further, because the Eurozone dominates the EU and the UK is outweighed under majority voting, the Eurozone does many things it thinks are in its interests but which are not in our interests. I would prefer a situation in which we stopped (petulantly and embarrassingly) blocking the euro countries and let them do what they want while pursuing our own path, based on focusing on science and education and the big problems facing us and the wider world.