Mistaken Assumptions about the EU Referendum battle

1. Business supports staying in the EU. WRONG.
Many businessmen make speeches about the advantages of staying in the Single Market. It is perfectly possible to stay in the Single Market and leave the EU, as detailed in the FLEXCIT plan, supported by us. Businessmen do not make speeches about supporting any other part of the EU membership.

2. The referendum is about business. WRONG.
By staying in the Single Market there will be no change to jobs, investment or trade.

3. The referendum is about the UK’s trading arrangements. WRONG.
Staying in the Single Market means there will be no change to jobs, investment or trade. Deciding future trading arrangements will be done at a future date by the democratic discussion in an independent UK.

4. The alternatives are presented as staying in the EU as it is or leaving it for an unknown future. WRONG.
There is no option of staying in the EU as it is. The correct alternatives were put by Jacques Delors, in 2012:: “If the British cannot support the trend to more integration in Europe, we can remain friends
but on a different basis. I could imagine a form such as an European Economic Area or a Free
Trade Agreement.

5. The referendum is about whether or not Cameron’s reforms are satisfactory. WRONG.
The referendum is about ‘remain in’ or ‘leave’ the European Union, not choosing between an ‘unreformed’ and ‘reformed’ European Union.

6. A ‘remain in’ vote proved to be a blank cheque in 1975.
The British government took a ‘remain in’ vote as authority to push through numerous further treaties, further integration and loss of independence. A new ‘remain in’ vote is another blank cheque.

7. The referendum is about British influence and sitting at the ‘top table’. WRONG.
The UK is not, and does not want to be, a member of the inner core of the EU either in the eurozone or the Schengen agreement on open borders. This lack of involvement has not diminished British influence because the EU long ceased to be the ‘top table’ and is nowadays more a transmission belt for regulation from global bodies.

8. It is safe to stay in the European Union. WRONG.
Staying in the EU means the UK is involved in the eurozone crisis and the refugee/migration crisis in the rest of the EU. These crises arise from the supranational nature of the EU and can be termed ‘existential’. It also means that the UK voters proclaiming they are not concerned about these
crises are willingly giving up their strong opportunity to change matters. The EU institutions will conclude they can move towards much faster integration.

Peer accuses CBI of ignoring the will of the people at the General Election

THE PRESS OFFICE OF                                                           

The Lord Stoddart of Swindon

(Independent Labour)                                                                                          

News Release


20th May 2015

Peer charges CBI with being “corporatist and anti-democratic”

The independent Labour Peer, Lord Stoddart of Swindon has strongly criticised Mike Rake the President of the Confederation of British Industry for his speech calling for the UK to remain in the EU, accusing the CBI of ignoring the General Election result and pursuing “corporatist and anti-democratic” policies.

Lord Stoddart said:  “I find it deeply worrying that the President of the CBI has learned nothing from the recent General Election results in which political parties with EU-sceptic credentials were overwhelmingly successful in comparison to those parties who still believe in EU membership; both in number of votes polled and in percentage terms.  In other words, the CBI wants to ignore the democratically expressed will of the people in pursuing its corporatist objectives.

“Sending lobbyists to Brussels rather than every capital in Europe might suit the big businesses represented by the CBI but SMEs, the lifeblood of our economy, are hugely disadvantaged.  We are seeing the results of this in the introduction of the EU’s heavy-handed new regulations that have forced small businesses which sell products online to register for VAT, even if they are well below the national threshold for VAT.  Many have simply abandoned online sales as a result.

“If the CBI wishes to continue to pursue its corporatist and anti-democratic policy on this issue, it needs to make clear precisely what the benefits are of staying in the EU and its approach to the problem that staying in the EU inevitably creates i.e. ever greater integration and much more red tape, which our country cannot afford.  We would all do well to remember that the CBI was one of the siren voices that led the campaign to scrap the pound and join the eurozone.  What a mess that would have landed us in!”

UK’s trade deficit in goods with the EU hits a record high

According to the Government’s Office of National Statistics, the trade deficit in goods with the other 27 member states of the EU reached £21.1 billion in the three months to February, a record high since comparable records began in 1998 and an increase of £1.5 billion on the previous three months.

The statistics provided further evidence of the growing reorientation of UK trade away from the EU.  The EU now accounts for 47.6% of UK goods exports – a figure that is probably overstated by 3-4% due to the “Rotterdam/ Antwerp effect” – the practise of recording goods shipped to these two large ports as exports to the EU even if they may well be then shipped on to a third country outside the EU.

Given that the demographics of the EU suggest a dimishing role for the EU as a a destination for UK exports and given that a tit-for-tat trade war would clearly hurt the other member states more than the UK because of the trade imbalance, these figures only strengthen the case for a new relationship between the UK and the EU where we can preserve our access to the Single Market while being free to strike our own trading relationships with the growing economies of the world.  For all its inadequacies as a long term relationship between the UK and the EU, a move to join Norway, Liechtenstein and Iceland in the EEA and EFTA would clearly be beneficial for our country’s exporters.

(with thank to Open Europe’s daily briefing service)

Photo by John D F

Open Europe goes native

Open Europe have asked me (quite rightly) to clarify their position: they presented four scenarios, two negative, two positive, for Brexit.  They are quite right to point out that it was the choice of the media, and especially of the Telegraph and the FT, to lead on the down-side.  The media could just as well have headlined their articles “Report shows that Britain could prosper outside the EU”.  I apologise to Open Europe if I misrepresented them in the heat of the moment.

I used to think of Open Europe as a half-way sensible, reliable, euro-critical think tank.  Some of their reports were quite helpful, at least for their data if not always for their conclusions.  So it is disappointing just before a General Election to see them going into over-drive as apologists for Brussels .

First there was their report, a few days ago,  claiming that leaving the EU would save only a tiny fraction of the regulatory costs of EU membership, so we’d do better to stay in and renegotiate – a proposition that could have come straight from the spin doctors at Conservative Central Office. They said that EU regulation currently costs £33 billion a year (a serious under-estimate, but let that pass).  But if we left, and (say) adopted the Norway model, as many recommend, we should still be subject to EU rules costing 90% of the current figure.  So stay and fight.

What they have done is to make a great case against the Norway option (which in any case UKIP could never accept, since it involves keeping the EU’s “free movement” rules).  They have not, however, made any case at all against Brexit.  And they’ve sought to give credence to the idea that significant renegotiation is possible.  If you can’t take the word of Jean Claude Juncker and other EU leaders that they will not give way on basic elements of the Treaties, then look at the history.  For over forty years British politicians have been declaring that they would win key concessions in Brussels, but they have failed over and over again, and we are ever deeper in the mire.

Then we had Dominic Grieve saying that any post-Brexit Free Trade Deal with the EU would necessarily imply free movement.  Plain ignorant nonsense, Dominic.  The EU has dozens of free trade deals around the world, and is negotiating dozens more, and only a handful — the EEA deals — involve free movement.

Now Open Europe does it again, headlining the news that “Brexit could lose the UK 2.2% of GDP”.  Even the headline is misleading — it cites the worst-case outcome from four scenarios.  The headlines ignore the best-case scenario, in which Britain gains 1.55% of GDP.  This report (say the media) “represents a significant challenge to Nigel Farage’s demand for Britain to leave the EU”.  OK.  So let’s respond to the challenge.

Of Open Europe’s four scenarios, only one bears any relation to UKIP policy, and that (surprise surprise) is the best-case scenario.  Let’s look at the four approaches:

1        “A hostile exit”: Britain would introduce “strict immigration controls and protectionist trade policies”.  UKIP wants managed immigration, not “strict immigration controls” (I assume Open Europe mean “closing the borders”).  And we are a free-trading party, absolutely opposed to protectionism.  This worst case scenario, that the Tory press has rushed to headline, is wholly unrealistic.  Nor do we anticipate a “hostile exit”.  Our trade with the EU will continue to be covered by WTO rules, and it is inconceivable that we should not negotiate an FTA with the remainder of the EU.

2        The Swiss model: According to Open Europe, this would still be negative (despite Swiss government studies showing that if they joined the EU as full members, like theUK, Switzerland would be much worse off).  But we don’t want the Swiss model, for much the same reasons that we don’t want the Norway model.

3        “Britain would begin to benefit if it signed FTAs with countries such as China”.  Exactly.  And that’s what UKIP would plan to do.  Outside the EU, we should be free to do so.  If little Iceland can negotiate an FTA with China, it beggars belief that the UKwould be unable to do so.

4        “Unilateral free trade” with deregulation.  We’re not sure we’d prioritise unilateralfree trade, but free trade and deregulation are a main part of our agenda, and here we agree with Open Europe that the effects would be positive — though we think that they under-estimate the benefits (including the massive competitive benefit of reforming our energy markets free of EU rules).

In summary, the Open Europe report is partly wrong, partly misleading, and wholly unhelpful.

One final point, particularly relevant in the context of my remark about Iceland.  We are constantly told that EU membership puts us in a much stronger position to negotiate trade deals.  It gives us “clout”.  But those familiar with such negotiations know that exactly the opposite is true.  The EU negotiators are ham-strung by the need to juggle the conflicting interests of 28 member-states, whereas their interlocutors on the other side of the table have to focus on just one country’s interests.  The EU negotiates from a position of invincible structural weakness.

I know this from my own experience in Korea in the early 90s, when I was MD of a Diageo/United Distillers subsidiary.  The EU representative office (I won’t call it an Embassy) back-pedalled on market access for Scotch (and Cognac and other European spirits) so as not to queer its pitch in trying to sell French or German high speed trains for the Seoul/Pusan route.  So much for “clout”.

The Weird and Wasteful World of EU Procurement Legislation

There has been much scaremongering about the scale of job losses were the UK to leave the EU. The reality, especially in the small business sector, is very different. Nigel Moore runs a specialised technical consultancy business and has experienced considerable frustrations when competing for business within the public sector, thanks to EU legislation. Nigel writes:-

Purchasing by the Public Sector and applicable privatised industry (utilities, transport and postal services) from, in Euospeak, economic operators (aka private sector etc.) has to comply with EU procurement directives (laws). These rules are intended to standardise purchasing (or procurement) practices in the EU and open up the markets; they are enacted into UK law above defined thresholds.
Custom and practice, and successive UK governments have tended to ‘gold plate’ implementation with restrictive interpretations and some extension below the EU mandated thresholds. EU procurement legislation and its’ impact is a complex and somewhat esoteric field, with the lawmakers far removed from the purchasing ‘front line’ and consequently the detrimental effects go largely unreported. Also changes to the rules only occur when the EU Commission wills it and involves considerable time delay (years) as all member states are involved.

The EU rules mandate the procurement process that must be followed by the buying organisation. The rules include requirements for: advertising for potential suppliers (tenderers) in the European Journal; following defined timescales; how the goods or services required are described and specified; how suppliers are pre-qualified before being invited to submit tenders; how these tenders are evaluated (for technical and commercial compliance); how contracts are awarded; and rights of appeal by unsuccessful tenderers (potential suppliers). Under the rules, purchasing is an involved, time consuming process. If an apparent mistake is made, an unsuccessful tenderer can appeal ultimately as far as the European Court of Justice, which has developed a considerable body of case law. Recent changes are in the pipeline for procurement legislation but it is too earlier to say what user and business friendly effects they will actually produce.

Pity then the buyers involved with this process and the potential suppliers. Much of their time is spent carefully following the process including regulations and case law, and is unproductive because it does not improve the actual purchase; for buyers this includes processing unsuccessful potential suppliers and their tenders or, for potential suppliers, trying to bid for work that ultimately they don’t win or even pre-qualify.

Buyers often reduce the number of businesses invited to tender by pre-qualification using comprehensive questionnaires. Consequently good potential suppliers, usually smaller businesses, are often excluded using somewhat arbitrary criteria not necessarily related to carrying out the contract before they know exactly what the work is. And pre-qualification tends to be in secret so potential suppliers may never know why they are not being invited to tender. Utilities can also use a pre-qualification scheme to identify potential suppliers to invite to tender instead of advertising details of the prospective purchase. Not helpful to suppliers; you don’t know what work is coming up, when or how tenderers will be selected to tender. Having been selected to tender, potential suppliers are all then deemed equally capable of carrying out the work, to the required standard, even if during tender evaluation, under greater scrutiny, the opposite is indicated.

It is also common cut down how often buyers place new contracts by aggregating small purchases into single larger framework contracts or agreements that will run for several years. Sometimes the purchases have little in common. These frameworks tend to be only suitable for larger businesses offering a wide range of goods or services, and exclude the smaller, specialist or innovative businesses. Until recently trying to provide access to smaller businesses by dividing up contracts into smaller lots was prohibited. Sometimes a larger company has overall higher costs, and not the specialised skills required to cover everything required; the system then rewards some less ethical practices like exaggerating capabilities.

In this country, in compliance with the EU rules, award of a contract to a compliant tenderer has tended to be based largely on lowest purchase cost. Consequently, you get the minimum of what you’ve asked for, not something better (there is no way to evaluate it) and probably some contractual arguments later. Socio-economic factors, like closure of a local factory (as happened in Derby over train manufacture) or loss of expertise or career opportunities are not considered (although actually allowed).

As a small specialised technical consultancy we have direct experience of Public Sector and utility (transport) procurement over many years. We also discovered that the struggles we faced were replicated elsewhere in the Public Sector for small businesses trying to win work. And it was a fruitless task trying to get anyone interested in the difficulties. It is very disheartening after working hard on the most difficult work, having done everything the Client wanted and then to know we will never have a chance of competing to get more work; framework agreements now being place. In some cases we knew well who would be doing the work and how we could, if allowed to, have done a much better job at lower cost. Yet we could very successfully compete overseas.

Obviously shutting down much of the economy to real competition and innovation carries costs, not least that many small innovative businesses struggle to be viable, or may never start in the first place; so there are knock-on effects far removed from the EU procurement legislation, which itself costs the Public Sector far more than it should in running EU compliant procurement processes.

The EU procurement rules create a playing field tipped heavily towards big businesses that excludes smaller and innovative businesses from much potential work that they could carry out. Further, they are complex, esoteric, slow, time and resource wasting and create avoidable stress for all those involved. Of course we could do better in devising more streamlined mainstream Public Sector procurement, for example, taking out 70-80% of the workload, which facilitates transparency, fairness, innovation, encourages entrepreneurial businesses and reduces risks. Procurement people get excited when they see what can be done.

The bureaucratic nature of EU legislation does not operate in the best interests of the UK’s vital small business sector. It is hardly surprising that many people in Nigel’s position support our withdrawal from the EU. As the recent Global Britain/Democracy Movement report “The Scaremongers” shows, remaining within the EU, rather than withdrawing from it, is the biggest threat to UK employment.

Photo by Eoghan OLionnain

Keeping business on side

A battle has erupted between Ed Miliband and a number of business leaders. It began when Stefano Pessina, the Chief executive of Boots, warned that a Labour government would be a “catastrophe” for Britain and said the party’s wider platform was “not helpful for business, not helpful for the country and in the end it probably won’t be helpful for them”.

Labour’s response has been to draw attention to Pessina’s decision to live in Monaco’s low-tax economy rather than the UK, but this is at best an irrelevant sideswipe. Other leading figures from big business have rallied to the support of Boots’ boss, including Sir Stuart Rose, the former Chairman of Marks and Spencer, who accused Miliband of being a “1970s throwback”. He went on to claim that Labour offers a “steady drum-beat of anti-business policies” including tax rises and lacks a “credible plan” to tackle the deficit.

With the confrontation currently in full swing, it is too early to judge whether or not these attacks will dent Labour’s chances, but for Ed Miliband, there is one worrying and very recent precedent: the Scottish independence referendum last year. Business leaders concerned about the economic consequences of independence spoke out. Alex Salmond’s sums were analysed by companies such as Deutsche Bank and were shown not to add up. When it came to the crunch, the famous Bill Clinton adage, “It’s the economy, stupid” proved its potency in persuading a majority of Scots to vote to keep the Union.

The lesson for ourselves and other supporters of EU withdrawal are obvious: we have to prove that EU withdrawal will not be an economic calamity and we have to convince big business of the fact. We may not win all the major companies round, especially those that benefit from EU funding or else have sufficient lobbying power to influence EU legislation in their favour, but we must ensure we have plenty of big-hitters on board.

Many small businesses are on side – indeed, EU legislation and the damage it causes to small businesses is one of the best recruiting sergeants for the withdrawalist cause, but winning round the City and the big multinationals will prove much harder. “Of course the EU will want to trade with us because we run a trade deficit with the other member states” isn’t good enough. In the long term, free from the EU’s onerous legislative burden, we will prosper as a nation, but with no clear road map for negotiating our way through the withdrawal process, business will use all its power to torpedo the case for independence.

Thankfully, Dr Richard North and Robert Oulds, among others are working on exit strategies which will be painless for business. Meanwhile, Ian Milne, who set up Global Britain initially to brief MPs and Lords about EU-related issues, has refocused his organisation’s efforts on winning the business community round. We already have some allies, but there is still a long way to go before withdrawal is viewed by big and small business alike as an opportunity rather than a damaging uncertainty. If Ed Miliband is sunk by these salvos from the business community, it will mean we have only two years at most before that all-important referendum. We must not allow them the opportunity to turn their guns on us.