There is a Tory rebellion against David Cameron going on.
The EU is like the Titanic, and we need to jump off before it sinks
26 February, 2016
The European Union is like the Titanic. Imagine being in Southampton harbour the day the Titanic set sail. Its size gave the impression of invincibility: safe and secure. It wasn’t. Despite receiving warnings of impending danger it didn’t change course, hit trouble and sank.
Because it is huge, some in the UK feel we would be safer and economically stronger in the EU. This is wrong. We now have the opportunity to jump ship to safety. An opportunity we are never likely to have again. Not a leap into the dark, but for those able to look ahead, a move to safety.
Brexit allows the UK to address directly the areas that the EU has rendered us rudderless in. These include returning sovereignty and having a meaningful immigration target that can be met. We can focus attention on what is needed for small firms and for ordinary workers across the whole country. Outside the EU we can position the UK to be outward looking.
The world economy is changing as never before. Globalisation, technological change and urbanisation mean countries need to adapt, be flexible and control their own destiny. In the modern era, talk of marriage and divorce is wide of the mark. It may not be a conscious uncoupling or an amicable split but we would strive in our post-Brexit negotiation to have an open relationship with the EU while having a polyamorous one with other countries across the world. The choice is between a global Britain and an inward-looking, insular EU.
Like those on the Titanic sitting in privileged first class, oblivious to what was going on down below, the EU has failed to confront any of the challenges it faced, such as mass migration, the eurozone crisis and youth unemployment. Instead of referring to EMU as European Monetary Union, I have always preferred to call it Even More Unemployment, as economic policy, set in Germany’s best interests, results in a lack of demand.
Leaving the EU will come with transition costs. While the UK public may want quick wins, the most important thing will be stability, a road map for the future and a clear strategic vision. Just as a new government may require one or two full terms to implement its manifesto, likewise it will take a number of years to repatriate powers and laws to our country.
Brexit will be an economic shock. We encounter such events throughout our own lives, when we move house or change jobs. Unless planned for they can be disruptive. That doesn’t mean growth will contract or jobs will be lost, but investment plans may temporarily be put on hold.
One way to picture this growth is the letter "V", or better still, a tick - a short fall in growth followed by a much larger rise. Pre- and post-referendum would resemble the downward stroke of the V. A rebound would follow later.
The first stage will be an agreement on our terms of exit. We could invoke Article 50 that triggers a two-year process. Or, depending upon the politics, engage in a major renegotiation. As we are the EU’s biggest export market, economic incentives suggest they will negotiate sensibly and agree a deal on goods and new guidelines on movement of people. However, the EU has not acted sensibly in recent years and they might not do so in any exit negotiations. This fear of a tough negotiation should not be a reason to vote to remain in the EU, but highlights the difficult near-term path ahead. But many countries outside the EU trade with it, we would be another, and one with a very competitive service sector.
This renegotiation period also allows time to put in place other necessary Brexit measures. One is a timetable to repatriate powers. Between 2013-14, Whitehall produced 32 detailed reports on the competences that the UK has transferred to Brussels in different areas. This provides a basis from which to work.
Another is to how better spend our EU contribution. This should go towards funding our public services properly. We also need to identify areas where EU funding may be withdrawn, such as scientific research, on students and the arts, and ensure this is covered fully with some of our previous EU contribution earmarked for these.
We have a great opportunity to make trade deals that boost exports, but first we would need to rebuild the skill set to do so. Inside the EU our demands are only one of 28 when it comes to trade. Outside, we would have to replicate existing deals, and learn from the likes of South Korea and Singapore, and make trade deals that play to our strengths, that are iterative and are with the fast-growing regions of the world.
With Brexit we have the opportunity to safeguard workers' rights, ultimately determined by Parliament and by UK voters, not bureaucrats in Brussels. It is not possible to protect workers’ rights with mass migration. But low migration does not mean no migration. An excellent Civitas report last December by Cambridge Professor Bob Rowthorn showed mass migration suppresses low-skilled workers' wages, and adds to pressure on housing and public services. The gains go to the migrants and to the employers. We need to control the scale and ensure we let in only the skilled migrants we need.
We should not kid ourselves that the City of London is somehow safe in the EU when we did not achieve a veto to protect it from greater control by the eurozone and from decisions of the European Court of Justice. Leaving creates initial challenges over passporting of financial services, and possible loss of euro clearing, but I am optimistic. London is so much more competitive than any other financial centre in Europe, with its concentration of skills, knowledge and expertise. Also, more regulation is being set at an international level, which is important as London’s competition is global.
We should not kid ourselves that the City of London is somehow safe in the EU
The vision is to be a globally competitive economy, based on low taxes for firms to succeed, leveraging off our universities and talent, and founded on rising productivity through increased investment, infrastructure and innovation.
We could remain on the Titanic; or be like a medium-sized ship that left harbour at the same time. The crossing may have been choppier to begin with, but it reached the new world safely.
Dr Gerard Lyons is economic advisor to Boris Johnson, the Mayor of London