The initial focus of the EU referendum debate was the prospects for the British economy. The most credible estimates have shown that leaving the European Union would worsen those prospects. With the Leave campaign unable to offer a coherent counter-narrative, the debate has shifted to the issue of how membership of the Union affects parliamentary sovereignty and, in particular, British control over levels of EU immigration.
How should voters assess this debate? Sovereignty is not something to be hoarded. It is an asset that governments can use nationally or in co-operation with others, issue by issue, depending on which approach is the most beneficial to their citizens. The question, therefore, is whether the UK is likely to benefit from continuing to link certain aspects of its sovereign power with the EU. There are four reasons to believe, on balance, that it will.
First, successive British governments have pooled their sovereign power principally where being part of a large, collectively regulated market offers more advantages than would working alone. The EU has delivered the UK more than 50 international trade agreements (twice as many as the US has signed); European safety and environmental standards have improved life for UK citizens and simplified life for British companies exporting to the EU, preventing a competitive race to the bottom; restrictions on state aid discourage member governments from undercutting each other’s industries. Under these rules, Britain currently has one of the best growth rates and lowest unemployment levels among the leading developed economies.
The idea that Brussels is over-regulating British business is a fallacy. The UK has attracted the most foreign direct investment in the EU for the past ten years. The Organisation for Economic Co-operation and Development ranks the UK as having the second-least-onerous product regulations among OECD members and the World Bank rates the UK number six in the world for ease of doing business, ahead of the US.
The “costly” regulations that Leave campaigners complain about mostly reflect areas of British national consensus, whether about improving workers’ rights, promoting energy efficiency, or strengthening financial regulation. These regulations would, on the whole, be reimposed if Britain were to leave the EU.
Meanwhile, the UK has retained sovereign control over most of the matters of greatest concern to British voters, including health, education, pensions, welfare, monetary policy, income and corporation tax, defence, national policing and border security. Excluding commitments to the EU budget, MPs decide how to deploy over 98 per cent of public spending.
There are areas in which EU co-operation is dysfunctional – the management of fisheries, for example – and where the Union moves slowly, such as in concluding new trade agreements. Yet most of the causes of British economic weakness are self-inflicted. It is not the EU that has failed to invest effectively in primary and secondary education, the health system or transport and energy infrastructure, or that has failed to overcome wage differentials between north and south. Politicians who point the finger at the EU for British problems disguise their own failures as national legislators.
Second, regaining control over policy areas that are now delegated to the EU could be counterproductive at a time of growing international competition. Rather than making the most of a new era of global trading relationships, Britain risks cutting itself adrift in stormy seas. Emerging markets are facing difficulties, from China and Indonesia in Asia to Brazil in Latin America. Many of these countries are struggling to make the transition from an export-dependent economy to a consumption-led, middle-income one, and their political institutions may just not be up to the task. In this context, emerging markets are likely to be more hard-nosed as negotiators than ever, especially as Britain wants to export more of its financial and other services to these politically sensitive sectors.
EU economies that suffered badly in the eurozone crisis, on the other hand, such as Ireland and Spain, are growing strongly again and starting to create more jobs. The EU continues to boast some of the world’s most competitive economies and five of its strongest exporters. A large and wealthy single market of 500 million people, it can be a powerful trade negotiator at a time when size matters.
One of the most important advantages that the EU possesses is that its single market is governed by the rule of law, in contrast to the lack of transparency and persistent corruption in much of the rest of the world. As a result, the US still sends more than half of its annual foreign direct investment to the EU, while Chinese investment is also booming. Detaching itself from the EU would make Britain less attractive to international investors.
Third, remaining in the EU will give the UK the chance to influence the dismantling of barriers across the Union in ways that could enhance Britain’s future prosperity and security. EU countries are far behind the US when it comes to exploiting the economic potential of digital innovation, partly because they are still divided into 28 separate digital markets. European societies also demand higher standards of data protection than America does. Agreeing common rules on data retention would spur digital innovation across the EU, at the same time strengthening its negotiating hand over rules for data sharing with the US. Similarly, responding to the growing terrorist threat will require common EU rules on how to share huge amounts of data, protect identities and prosecute anti-terrorism investigations across EU borders.
Energy markets are another case in point. The UK is importing growing amounts of oil, gas and electricity from the European continent. The authors of a recent Chatham House study conclude that the UK will benefit economically from being in the EU’s new “Energy Union”, which is strengthening grid interconnections, storage policies and efficiency standards.
The Energy Union will also enhance UK security. By facilitating the flow of oil, gas and electricity across the continent, as well as improving transparency over corporate energy ownership, the EU will reduce the leverage that Russia and other external energy suppliers can apply over its member countries. And devising economic sanctions against Russia or Iran will be more feasible politically if individual EU members are less vulnerable to external pressures on their energy security.
Finally, what about immigration? This is the one policy area over which the majority of British voters have consistently wished to exercise greater sovereign control. Yet it is doubtful that doing so would achieve a material difference. After all, non-EU immigration, which the UK controls, exceeded that from the EU in 2015. So long as the British economy outperforms other EU members, it is likely that the UK will attract EU immigrants, whether it is in or out of the EU.
A subsidiary question is whether current levels of EU immigration are placing unsustainable pressures on public services, such as health, schooling and housing. If there are more people, demand for these services will increase. But with Britain at or near full employment, having more workers would also generate more tax revenue to pay for the services. A recent study found that EU immigrants contributed £20bn more in taxes than they received in benefits and public services between 2001 and 2011. EU immigrants also make up for staffing shortages in hospitals and among those taking care of Britain’s ageing society. The core problem facing schools and hospitals is a shortage of funds at a time of continuing austerity. Housing shortages are mostly linked to restrictive planning laws and short-term decisions taken by building companies.
Would an Australian-style “points system” give the UK the right to decide which immigrants to take and which to refuse? Yes, it would. But in doing so, British citizens would lose the right to live and work in other EU member states, as more than a million do today and as more might want to, should Britain’s economy not perform as well as its EU peers in the future.
Given that Turkey is now unlikely to join the EU, the best way for the UK to continue enjoying the benefits of its membership while easing possible levels of future EU immigration is for the Union as a whole to achieve more sustainable rates of growth. This will not be easy. But it is much more likely if Britain is part of it, helping others to make the right decisions, than if it is sitting outside, hoping for the best.
In the end, sovereignty is about securing outcomes. “Let’s take back control” is an empty slogan unless doing so improves prospects for British citizens. In an increasingly competitive as well as interdependent world, Britain will be better off pooling discrete areas of its sovereign power with 500 million fellow Europeans than leaving its population of 65 million beholden to the rules and whims of others.
Robin Niblett is the director of Chatham House, the international affairs think tank.
This article appears in the 07 Jun 2016 issue of the New Statesman, A special issue on Britain in Europe