Economic arguments in favour of Europe may not resonate with a sceptical public
‘If anyone thinks after this that an EU referendum is a good idea, they must be off their heads’ (Better Together campaigner, quoted here).
Last month, after a vibrant and passionate referendum campaign, the Scots voted to stay in the UK by a majority of 55 to 45 per cent. Yet, despite mobilising the political classes at Westminster, getting the support of many businesses and financial companies, and enjoying the backing of large sections of the media, the Better Together campaign struggled to generate much enthusiasm for the 307 year old union between England and Scotland. Instead, the independence movement chipped away at a 20 per cent poll deficit and, at one stage, looked like it might win outright. Alex Salmond and his supporters are widely thought to have constructed a more appealing narrative for the future of Scotland, based on optimism and a call for ‘home-rule’, with a social democratic tinge. At the same time, the nationalists successfully positioned themselves as underdogs fighting against the might of the London establishment.
What, if any lessons, might we draw from this episode for any future referendum on Britain’s membership of the European Union?
In one sense, of course, the parallels are not exact. If the Conservatives are returned to government next year, they will first attempt to renegotiate Britain’s membership of the EU. As a result, any deal that Cameron secures may impact significantly on the dynamics of the referendum debate. Cameron may be able to agree a package of concessions he can successfully sell to a public, which, although unhappy with the status quo, cannot quite bring themselves to contemplate ‘Brexit’, at least just yet. Currently, though, the omens on this front don’t look good. Euro-sceptics, such as the Fresh Start group, have been quick to publish a list of reform demands, some of which would require alterations to EU treaties. For their part, some EU member-states have made clear that they will try to help Cameron where they can, but have consistently ruled out anything involving treaty change. In short, diplomatic space for a deal appears to be shrinking fast.
Yet, in other ways, parallels between the Scottish debate and any future EU referendum can be drawn. Like Better Together, any pro-EU campaign is likely to draw heavily on economic arguments for maintaining a union. It will point to the fact that nearly half of UK exports go to the EU and that approximately three million British jobs are directly dependent on this trading arrangement. It will also assert that the UK’s superior record in attracting foreign and direct investment is at least partially dependent on its position as a ‘gateway’ to Europe. What is more, overseas firms often help to enhance the skills, productivity and competitiveness of the supply-side of the economy. All these gains would be put at risk if Britain votes to leave the EU.
The problem is that the economic arguments may not resonate with the public quite as loudly as conventional wisdom suggests. ‘It’s the economy, stupid!’ has become a popular explanation of why people vote the way they do in elections. However, one lesson from the Scottish debate is many voters seemed to shrug off, and even ignore, constant predictions of economic disaster if Scotland left the UK. Take for example, the issue of the currency. Despite repeated claims by all three UK party leaders that Scotland would not be able to join a currency union with England in the event of secession, and despite counter-threats by Salmond that he would risk Scotland’s credit rating by refusing to take on Scotland’s share of UK debt if a currency union was not forthcoming, the final referendum result was close. By which, I mean it was, arguably, closer than would have been expected if perceptions of economic competence decisively shaped voters’ decisions.
Even if the economic arguments do resonate, there will nevertheless be times when the economics for and against a particular territorial union will be difficult to demonstrate conclusively. The debate concerning future oil revenues in Scotland is a case in point. Better Together was quick to point to Ian Wood’s claims that the nationalists repeatedly exaggerated the potential future output of North Sea oil. Wood himself suggested that a further 12–24 billion barrels might be recovered, with 15 to 16.5 billion barrels thought to be the most realistic. The SNP-led Scottish government consistently stressed the higher figure of 24 billion, pointing to other studies by different authors that had produced higher predictions concerning future oil reserves. In doing so, it was able to draw some of the sting from Wood’s critique.
Similar ambiguities plague the economic arguments surrounding Britain’s membership of the EU. Take, for example, the so-called ‘regulatory burden’ imposed by Brussels. Pro-EU campaigners can point to OECD data showing that EU product markets are among the most liberalised in the world, whereas Britain’s labour market is only slightly more restrictive than the US and Canada’s. In other words, membership of the Single Market does not mean rigid harmonisation, with countries having freedom to adapt EU minimum standards to ‘local’ conditions. Euro-sceptics may attempt to counter this argument by asserting that, if UK markets are to be regulated, such regulation is better formulated by the UK parliament. They will say that purely ‘national’ regulations are likely to be simpler and easier to administer than laws designed to apply to 28 different countries. Open Europe has recently stated that UK regulation is 2.5 times more cost effective than that of the EU. The point is that, in the end, these claims may cancel each other out.
In such circumstances, the electorate may end up focusing more on the political arguments for and against EU membership. It’s here that comparisons with the Scottish campaign are most worrying for supporters of Europe. If the Scottish referendum exposed the lack of emotional appeal of the union of the UK, then generating a wave of popular enthusiasm for the EU in Britain seems like a pipe-dream! By contrast, euro-sceptics (like the Scottish nationalists) will be able to tap more easily into the increasing antipathy felt within many parts of Britain to the London/Brussels establishment and promote a positive narrative based around the twin themes of ‘liberation’ and ‘self-government’. In Nigel Farage, they have a charismatic (if occasionally accident-prone) leader likely to be able to deploy this strategy effectively.
If the EU referendum campaign evolves in this way, it’s difficult at present to see how the pro-Europeans will be able to counter it.