BREXIT – was it worth it?

BREXIT – was it worth it?

As we entered the last quarter of 2021, nine months after the transitional arrangements with the EU ended, I wanted to finish my ‘trilogy’ by considering the impact that leaving the European Union is having on the UK and on Europe. A simple enough question now complicated by the ongoing global pandemic. Many virologists had been predicting such a event, but most governments had ignored them. Eighteen months later, we are all trying to live with the social and economic damage caused by several periods of restriction, closures and severe problems with shipping and the global supply chain.

But the UK faces two supply shocks.

One is a global supply shock as the world’s economies sluggishly wake up from the pandemic lockdowns, with the possibility of more co come. This manifested itself by backed up cargo ships from China in California’s seas, unable to offload their cargo, with similar problems in Europe; in thousands of cars left without microchips; in rising natural gas and oil prices.

On top of all that there are UK-specific supply shocks, as a result of fewer European workers, and the imposition of non tariff barriers on trade with the rest of Europe.

Both these shocks are pushing up general prices. The global shock may be dominant now, but in some sectors such as farming, and in the future, the UK-specific supply crunch may matter more. Are the shortages at petrol stations and on some shop shelves part of a transition to a new post-Brexit, post-Covid high-wage economy?

Wage rises

Some figures show wages up by extraordinary amounts, but this may be due to distortions in the statistics from lockdown and furlough. Up to a point it is good news for those with skills in high demand. But the wage rises are not the result of increases in productivity. They are the consequence of those two significant supply shocks. Costs are going up for the same amount of production. The trade-off between economic growth and inflation is getting worse. In simple terms, if this is right, the wage rises seen in certain occupations will be gobbled up by rising prices across the economy.

The impact of Brexit on the UK economy will be worse in the long run compared to the coronavirus pandemic, the chairman of the UK’s Office for Budget Responsibility has said. “Forecasts showed the pandemic would reduce GDP by 2%, but leaving the EU would reduce the UK’s potential GDP by a further 4% in the long term”. These comments come after the OBR also said the cost of living could rise at its fastest rate for 30 years, with suggestions inflation could hit more than 5%.

It is understandable that Boris Johnson should try to heap most of the blame onto the pandemic, but worryingly for some of his Conservative party colleagues, the Prime Minister is also suggesting that these problems have been caused by the mismanagement of his predecessors and by industry. But the UK has been in the hands of the Conservative governments since 2010 and industry has had to work within the parameters set by them. However, as the labour shortages worsened during October 2021, ever some government ministers admitted that the lack of EU workers is key to the problem and are suggesting that, as the British people had voted for tighter border controls in leaving the EU, (they the voters) are also to blame and must accept the situation! The Brexiteers have always admitted that there would be short term pain for (hopefully) the long term gains from leaving the EU. Is the UK starting to feel the pain?

Clearly in the weeks following the 2016 referendum, many EU workers felt unwelcome and no longer wanted in the UK, so they left. More left as the Brexit process groaned on, and also to be with their families in Europe during the pandemic. In general, the work being done by these ‘migrant’ workers was of low esteem (in the UK), waiters, truck drivers, meat processors, farm and care workers, and yes they were paid less money than UK nationals who were reluctant to do this work anyway. Therefore “Brexit” has had a significant effect on the UK’s labour market. In addition, many people have been reappraising their lifestyles for a post pandemic world. Working from home where possible, changing their work and even retiring early to spend more time with their families.

The deal?

So lets get to the heart of the matter. Serving those who had financially supported ‘Brexit’ and the Conservatives, the Johnson Government was clearly elected to “Get Brexit Done”. Beyond that, although there was a wish list and a few catchy slogans, they had no real strategic plan. The pandemic then consumed so much governmental time that concluding a”trade deal” with the EU in the eleven months prior to the end of the transitional period, became something of a side-show. Naturally a deal was done at the last moment, but was it a good deal? No, not for the fishermen who had been promised Utopia, not for the thousands of British exporters and even the bankers and financial services, who were promised freedom from EU red tape and immediate access to all global markets! And certainly not For Northern Ireland.

Why? The emphasis on a tariff free deal with the EU was centred around the major international manufactures such as aerospace and automotive, who could easily cope with the new situation anyway. The vast majority of the UK’s thousands of exporters realised on 1stJanuary 2021, that they had entered a new world of bureaucracy, customs forms, proof of origin, veterinary certificates and more. And of course some exports, mainly processed meats and dairy were banned from the EU altogether. Nowhere were these problems more evident than in Northern Ireland which, although part of the UK, remains under the protocol agreed that it would continue to follow EU rules on product standards (part of the EU’s single market rules) to prevent checks along the land border. Checks would instead take place on goods entering Northern Ireland at its ports from England, Scotland or Wales.

The UK’s government insists that these are “just teething problems” but its worth noting that the government has not fully implemented its own import controls. This was partly to ease any post-Brexit food shortages and price rises, but the necessary infrastructure was simply not in place. No doubt there will be more teething problems when it is.

We can understand, both sides had their famous ‘red lines’. The EU had to insure that only goods substantially made or sourced within the UK (or EU) would be tariff free. Then the UK refused to adopt any form of common standards or equivalence with the EU because it would infer an element of EU jurisdiction and may hamper other trade negotiations, for example with America and the former colonies.

Can we sum-up the effects of Brexit?

Having accepted that leaving the EU is deepening the labour and supply crisis within the UK. and that prices are raising, for the general public on both sides of the Channel, but perhaps not the Irish Sea, little has changed. There are some frustrations; the cost and complexity of trading across these new borders, or simply sending a gift parcel is now staggering. Personal banking is in a state of flux with some UK banks closing accounts for non-residents, while others are maintaining arrangements (at a price) with individual European countries. Some British goods are no longer available in Europe and of course, due to the pandemic’s travel restrictions, new registration requirements, visa and travel rules have still to be fully understood and tested.

But Brexit is not over. Political posturing over fishing, the Northern Irish Protocol and border controls could jeopardise the entire trade deal. One has to wonder if messes Johnson and Frost signed up to the deal with the express intention of eventually ditching the parts that they disliked, while blaming the EU for inflexibility. If this kind of speculation is indeed false, then Johnson and the UK’s government has a whole lot more to answer for. They negotiated and signed off the “Trade and Cooperation Agreement“, why then are they now saying that, it’s unworkable, they don’t like it and and perhaps had not understood it anyway?

We have had the privilege of being “Citizens of Europe” during such times of peace and prosperity that Churchill envisaged in1946, although some say it was never his intention for Britain to be any more than an observer! But it was DeGaulle who knew Britain, its people and politics so well that he foresaw the difficulties posed in its integration with continental Europe.

Naturally there have been political scandals throughout the long history of the British Parliament, which was once the envy of the free world. It is sad to see how the current leadership continues to degraded its global credibility and standing while authoritarian leaders look on with a wry smile. Yes, there are many who have seen a strong Britain and indeed a strong Europe as a threat, but what kind of Britain or indeed what kind of world are we are leaving for our children and grandchildren who will have to pick up the pieces?

P.S: Since October I have dithered over posting this text, which has been reviewed and amended several times. Once again the winter wave of Covid Variants are upon us with new advice and restrictions understandably pushing the longer term problems of ‘Brexit’ to the ‘back burner’; although I am sure that work is quietly going on and we will all be returning to the subject ‘in the fullness of time’!

Continue ReadingBREXIT – was it worth it?

Reasons for leaving the European Union

The general election in December 2019 resulted in the Conservative Party, under Boris Johnson, receiving a landslide majority of 80 seats. This was the mandate he was hoping for to ‘get Brexit done’. Was it ‘Brexit fatigue or the lack of credible opposition, or was it his campaign slogan?

Taking back control of our borders, our money and our laws. The title of a ministerial document signed by the Prime Minister dated November 2019.

In this post, it is appropriate to use these headings in understanding the reasons behind the UK leaving the EU.

Taking back control of our Borders

This flows from the economic relationship with Europe and embraces some of the main principals of the European Union. That is; the free movement of people, goods and services (including money). All as enshrined in the Maastricht Treaty, as well as in most of the Schengen Agreement, although the UK opted out of the latter in order to retain control of its borders, it still had to accept the principals of ‘free movement’.

The UK had traditionally been a melting pot of peoples and cultures. This owes much to its colonial past and the ability to bring in labour from the colonies in times of need. To its credit, Britain has often accept refugees from Europe and beyond, but this was always under its own governmental control and the openness required by the Maastricht Treaty did not sit well with the Home Office; which is the department responsible for border security and immigration. Immigrants were not always treated well in Britain, certainly not as equals, even in recent years.

The UK Home Office hostile environment policy is a set of administrative and legislative measures designed to make staying in the United Kingdom as difficult as possible for people without leave to remain, in the hope that they may ” leave voluntarily” or not come at all. The policy was first announced in 2012 under the Conservative-Liberal Democrat coalition. It was widely seen as being part of a strategy of reducing UK immigration figures to the levels promised in the 2010 Conservative Party Election Manifesto.

It has notably led to significant issues with the “Windrush generation” and other Commonwealth and European citizens being deported after not being able to prove their right to remain in the UK, despite being guaranteed that right. The policy has been cited as one of the harshest immigration policies in the history of the United Kingdom, and has been widely criticised as inhumane, ineffective, unlawful and that it has fostered xenophobia within the UK. We can recall many examples and in some cases the simple act of driving a “foreign registered” car in the UK can evoke abuse.

The Brexiteers managed to take advantage of this xenophobia by suggesting that the freedom of movement allowed EU workers to take jobs away from UK workers for lower wages. They famously suggested that, if the UK stayed in the EU, Britain would be overrun by thousands of Turkish workers; a completely false statement as Turkey was not in and was unlikely to join the EU.

There were of course many “Europeans” working in finance, business, research, education usually centred on London, but the vast majority took low paid work in, hospitality, healthcare, food processing, cleaning and agriculture; which most British people did not want to do anyway!

By leaving the EU (to quote form the government’s document):

Free movement will end, with our own Parliament deciding our domestic immigration policy in the national interest. New controls will be put in place as part of a fairer immigration system, which focuses on a person’s skills, not where they come from. The brightest and best will continue to be welcomed, serving the interests of the whole of the UK and reflecting the needs of businesses and communities.”

To trust this policy to an institution such as the Home Office is risky in the extreme!

As we have seen, British governments have always had a problem with the idea of free movement of workers if only because they felt that they had no real control over who entered (or left) the country. However remaining outside Schengen kept their ability for border and security checks which, as an island nation, were easy for the UK to implement, except for the Irish land border which is another problem.

We have seen several industries benefit from the free movement of people, goods and services and that so much of this has been facilitated by common laws and regulations.

The implication of the Governments statement is clear. The UK would be able to pick and choose as it wanted, as in the past, perhaps from the former colonies. Although there are pressures to allow such freedoms of movement within new trade negotiations with other nations, they hoped to regulate this by introducing a ‘points based system’ and tightening immigration controls.

Some British industries had been utilising the free movement of workers to mitigate the shortage of local or seasonal labour. This was predominantly the case for work in agriculture, transport, construction and hospitality, although many European workers were permanently integrated in other services such as health and social care.

They were all contributing to the UK economy, but were they undercutting the wages and depriving British people of their livelihood as some have claimed?

The answer to this started to become evident with the xenophobia created during the 2016 referendum and the hostile environment which flowed from the result. Many, especially the seasonal workers, had come from the poorer countries of Eastern Europe and worked away to provide for their families back at home. Clearly these European workers felt unwelcome and unwanted in Britain and as the value of their earnings in sterling diminished against the Euro, they started to go home or find work in other European states.

But how many EU nationals are still working or a least resident in the UK? The best estimate by the Office of National Statistics put the number at 3.5 million around the time of the referendum. This was thought to be inaccurate since it was based on voluntary information provided by people entering the UK! Although it is accepted that many EU nationals left the UK immediately after the referendum and more returned to their families in Europe because of the pandemic, applications for UK residency under the “EU Withdrawal Agreement” approached 6 million! A few multiple applications can not account for this huge discrepancy.

None the less, as Britain attempts to rebuild its economy, a shortage of labour is creating major problems for farmers and other sectors such as transport, hospitality, health and social care. Is the pandemic hiding the reality of loosing European labour?Time will tell, although there may very well be sufficient local labour to redeploy and re-train. For example, as the travel industry shrinks, is it too facetious, or silly to think of airline pilots retraining as HGV drivers and their aircrews working in hospitality and social care. The unwillingness of workers to redeploy into less well-paid jobs would prove the point that the UK had indeed been enjoying cheep labour from (Eastern) Europe.

On the cultural side, many of us have enjoyed freedom of travel throughout Europe. Perhaps a package holiday in Spain, a cheep weekend flight to explore a city, or just the pleasure of jumping in the car and crossing borders for an impromptu visit to friends and family. We can not underestimate the personal benefits of travel. The relaxing break from working life, visiting the wonders of other countries and opening our minds to other cultures, languages, foods and above all the people. Without doubt, restriction put in place by most governments due to the Covid pandemic, have hidden the true effect of new restrictions on European travel.

Regardless of these new restrictions or even because of them, many British people remain attracted to the idea of relocating to (mainland) Europe, France, Spain are still popular.

Of course the travel industry is as important to the UK as it is to every European country. It is clear that things will change for the British visitors both too and from Europe.

The early days of Britain’s departure from the EU has thrown up many surprises. They may not be specific to the UK but are normal global requirements, which British businesses and travellers had avoided as members of the EU. Tax and duty free goods, boarder delays, work permits and limits to visa free travel will become normal once again.

Taking back control of our Money

There is little doubt that the UK has achieved economic benefits from its membership of the European Community or Union. So much so that it quickly became a nett contributor to the European budget and even with the “rebate” remained among the top few contributors as the Union expanded. The concept of richer nations supporting the poorer ones is laudable and makes both economic as well as moral sense.

The Brexiteers view is that: “vast annual payments to the EU will end and the UK will leave the EU budget. Money can now be invested in domestic priorities, including the NHS. Every part of the UK will benefit, with billions in extra funding for Northern Ireland, Scotland and Wales”.

This oversimplifies things and we need to look on the side of the famous red campaign bus start an analysis. The bold inference was that the UK paid £350 million a week for its membership of the EU., money which could be spent on the British health services. This “estimation” was based on a UK Treasury gross estimation of £17.8bn for the year 2015. It had to be and estimation because the gross amount of £348 per week was never actually paid. This annual figure is purely hypothetical, however, since Margaret Thatcher negotiated Britain’s rebate in 1984, the UK has been required to pay significantly less than the 1% of national GDP that member states are normally expected to pay into the EU’s collective budget. The same Treasury figures clearly show Britain’s EU budget rebate for 2015 was £4.9bn. Deduct that from £17.8bn and you get £12.9bn – or £248m a week. This is the sum now recognised by the independent fact-checking.

But even that lesser weekly sum does not fairly reflect the cost to the UK of EU membership, because it ignores EU spending on the UK. Again in 2015, the Treasury estimated these receipts from Brussels at £4.4bn, money spent mainly in the private sector but also distributed by public bodies, to farmers and poorer parts of the UK, such as Cornwall and South Wales. This equates to a nett contribution of around £136m a week which would be available to spend on public services after leaving the EU, unless a future Westminster Government decides to stop spending money on British farmers, scientific research and the country’s poorer regions.

The question remains if this is too high a price to pay for access to the Single Market and Customs Union? One can also argue that the Westminster Government and not the European Union that ultimately controlled the direction of all UK’s budget which starved the NHS and Local Authorities of funding (affecting the care sector) by imposing austerity policies following the banking crises of 2008.

Taking back control of our laws
EU law in the UK will end, as will the jurisdiction of the Court of Justice of the European
Union (CJEU). The laws that we live by will once again be passed by our elected representatives in Belfast, Cardiff, Edinburgh and London – who are fully accountable to the people of the UK. UK courts will no longer refer cases to the CJEU, with our Supreme Court truly supreme.”

If you take the view, as many people do, that the European Union is just a big club, then any club must adopt rules, regulations and procedures for the benefit of its membership. And it must also have a means of arbitration to resolve any disputes.

Over the years the EU has developed a complicated structure, through which all its members can have their input, in as equal and democratic way as possible. With a seemingly endless list of institutions, The European Parliament; European Council; Council of the European Union; European Commission; Court of Justice of the European Union, plus numerous committees, it is no wonder that some view the EU as burdensome and unnecessary. However it has all grown from the desire for equality and democracy, perhaps too much democracy for some British parliamentarians and industrialists!

On the face of it through the participation of representatives from all the democratically elected governments and directly elected members of a European Parliament the setup is as good as it could be.

One can argue that, as a political institution, it is actually more democratic than the British parliamentary system by virtue of its proportional representation; there in lies the problem. By accident or design much of the UK has considered electing MEP’s as irrelevant, with low funding, publicity and therefore low voter turnout. This was a situation that, played into the hands of the nationalists whose only objective was to disrupt the European Parliament. In 2014, the UK Independence Party (UKIP) won 24 of the 73 seats and 27% of the popular vote greatly influencing the Cameron Government in holding the 2016 referendum.

When the European Parliament first met in 1952 (then known as the Common Assembly of the ECSC), its members were directly appointed by the governments of member states from among those already sitting in their own national parliaments. Since 1979, however, MEPs have been elected by direct universal suffrage. Earlier European organizations that were a precursor to the European Union did not have MEPs.

Each member state established its own method for electing MEPs – and in some states this has changed over time – but the system chosen must be a form of proportional representation. Some member states elect their MEPs to represent a single national constituency; other states apportion seats to sub-national regions for election.

Therefore when the United Kingdom joined the European Community on 1 January 1973 it became entitled to send thirty-six representatives to the European Parliament. For the first six years of Britain’s membership – from January 1973 to June 1979 – these members were nominated from the two Houses of Parliament and hence held a dual mandate. From January 1973 to June 1975 only twenty-one British members, Conservative, Liberal, Ulster Unionist and a cross-bench peer, attended the Parliament; Labour members attended from the first session after the referendum on British membership of the European Community in June 1975.

The allocation of seats to each member state is based on the principle of degressive proportionality, so that, while the size of the population of each country is taken into account, smaller states elect more MEPs than is proportional to their populations. As the numbers of MEPs to be elected by each country have arisen from treaty negotiations, there is no precise formula for the apportionment of seats among member states. No change in this configuration can occur without the unanimous consent of all governments.

For example in 2014 there were 751 seats. Germany was allocated 96 seats, France 74, Italy and UK each held 73 seats while Finland and Denmark held13 each. Naturally the success of any member or group within an organisation depends on enthusiasm and commitment. There is no doubt that many of UK’s politicians were enthusiastic and committed to the EU and the influence of the majority of UK’s MEP’s on European Legislation should not be understated. In fact as one of the “Big Three” along with France and Germany, the UK shaped European Law to such an extent that it had to be transpose into English Law in order to fill the legal vacuum as the UK formally left the EU!

The idea was that, anything deemed inappropriate could be revise as needed. Ironically, the government of Teresa May assumed that all this legal work would be nodded through at executive (Cabinet) level, but the English and Scottish Supreme Courts made it clear that the UK Parliament was the only legislative authority. This precipitated months of political uncertainty (even turmoil) since the only way that the May government could be sure of a majority in the House of Commons, was (literally) to buy the loyalty of Northern Ireland’s Democratic Unionist Party (DUP).

Meanwhile negotiations on EU Withdrawal Agreement (WA) were grinding to a stop over the problem of the border between Northern Ireland and The Irish Republic. Following the surprise Conservative majority in the December 2019 election, an eleventh hour deal was struck by agreeing to some form of border in the Irish Sea which was something Johnson himself had said must never happen. However he now had a sizeable majority and could sideline the DUP to get his deal done!

So the UK exited the EU on 31 January 2020 and entered an eleven month transition period during which a future trading relationship had to be agreed. Britain turned ‘full circle’, a good time to refer back to Winston Churchill’s suggestion of a “United States of Europe” and the comments made in DeGaulle’s Veto of 1963.

Continue ReadingReasons for leaving the European Union

History of UK’s relationship with EU

As the UK leaves the European Union, I wanted to take a fresh look at Britain’s post WW2 relationship with Europe, and what has become the EU, leading up the the 2016 referendum and the demise of the Cameron Government.

In undertaking this exercise I hope to better understand the opinions of others who take the opposing view to mine.

THE ORIGINS OF THE EUROPEAN UNION

During a speech in Zurich in 1946, Winston Churchill spoke of the need to form a ‘European Family’ or (he actually used the phrase) a ‘United States of Europe’ to ensure peace and prosperity for Europe.

The first formal move towards the European Union (EU) was an agreement between France, Germany, Italy and Benelux (Belgium, the Netherlands and Luxembourg), to share control of coal and steel. This was known as ‘The Schuman Declaration’ named after the French Foreign Minister, Robert Schuman, who was its pioneer.

In 1951 the six countries established the European Coal and Steel Community (ECSC). The plan behind the treaty was to pool coal and steel resources under the management of a supranational body in order to ensure that war in Europe was not ‘merely unthinkable, but materially impossible’. The underlying political agenda was also to strengthen Franco-German relations and make the two states dependent on each other in order to prevent future conflict. It was also hoped that the ECSC would lead to greater economic integration between its Member States.

The United Kingdom, one of the leading European powers after the end of the Second World War, sought to undermine efforts to create a ‘supranational’ Europe. The UK feared that being part of a more deeply integrated Europe might undermine its ‘special relationship’ with the United States. Ironically, its stance in opposition to deeper European integration annoyed US authorities and damaged its relationship with the US anyway.

However, the UK was invited to take part in talks that led to the founding treaties of the EU; the Treaty of Paris (1951) and the Treaty of Rome in 1957, which created the European Economic Community (EEC), or ‘Common Market’.

The British government did not engage in a significant way with these talks and signed neither treaty at the time. It disliked many of the supranational elements in the treaties, it was worried about damaging links with the US and Commonwealth countries and it wished to pursue a ‘one-world economic system’ policy in which sterling was a central currency.

However by 1963 the UK was beginning see the economic benefits of joining the EEC but its applications were being firmly rejected by France.

An Extract translated from the French President, Charles DeGaulle’s Veto on British Membership of the EEC (14 January 1963):-

If England asks in turn to enter, but on her own conditions, this poses without doubt to each of the six States, and poses to England, problems of a very great dimension.

England in effect is insular, she is maritime, she is linked through her exchanges, her markets, her supply lines to the most diverse and often the most distant countries; she pursues essentially industrial and commercial activities, and only slight agricultural ones. She has in all her doings very marked and very original habits and traditions”.

In short, the nature, the structure, the very situation (conjuncture) that are England’s differ profoundly from those of the continentals. What is to be done in order that England, as she lives, produces and trades, can be incorporated into the Common Market, as it has been conceived and as it functions? For example, the means by which the people of Great Britain are fed and which are in fact the importation of foodstuffs bought cheaply in the two Americas and in the former dominions, at the same time giving, granting considerable subsidies to English farmers? These means are obviously incompatible with the system which the Six have established quite naturally for themselves”.

The UK’s non-participation in the 1951 and 1957 treaties meant that when it did finally join the EEC in 1973 it had to accept many elements controversial among some British voters, which had been established before it joined. For example its supranationalism, the Common Agricultural Policy and its budget.

A TIME OF MANY CHANGES

There were many changes in Britain around this time, some, including replacing the old “purchase taxes” with Value Added Tax (VAT) were related to joining the EEC, others such as switching to “Metric Systems” had already been on the cards for a while.

In 1971, Britain made the switch from Roman-style currency (pounds, shillings and pence) to decimal currency. Although many pundits predicted that the changeover would be a disaster, it was a major success. Two key reasons for this success were; firstly that the Government provided lots of useful information both in the run-up to the changeover and during the changeover period; secondly the old coinage was rapidly withdrawn from circulation thereby helping the public confront change as soon as possible.

In contrast Britain’s metric conversion, failed to follow these critical success factors. During the second half of the twentieth century, most countries that had previously used traditional units adopted metric systems. Japan abandoned traditional units in 1955 and India started to adopt metric in the late1950s. With Britain announcing its plans to go metric in 1965.

The metric system is important for British trade and therefore for British jobs since 88% of trade is with metric countries. Despite legislation, British consumers still bought their meat and vegetables by the pound and to this day they travel in miles thus rating the economy of their vehicles in miles per gallon while buying the fuel by the litre!

A STRONG CASE FOR THE ECONOMIC BENEFITS

While Britain’s industrial performance had remained strong following the end of the war, many negative factors coalesced during the 1960’s and growth continued to be disappointing. Both main political parties had come to the conclusion that Britain needed to enter the European Economic Community (EEC) in order to revive its economy. This decision came after trying to establish a European Free Trade Association (EFTA) with other, non-EEC countries which had provided little economic stimulus to Britain’s economy. Levels of trade with the Commonwealth had halved in the period 1945–1965 to around 25% while trade with the EEC had doubled during the same period.

History is very clear that things have gone very well for the UK’s economy as a member of the EEC.

Firstly, since the year the UK joined the EEC, GDP per capita in the UK has grown faster than in the two other big economies of France and Germany and also exceeded growth in the USA. Secondly, growth in the UK was more equally shared than in the USA since 1974, median income in the UK grew by 79%, in contrast to 16% for the US.

As its immediate neighbour, the EU remains hugely important to the UK economy with 45% of all UK exports going to EU member states. Of that percentage, services account for 42% of these exports. Financial services and other business services (a category which includes legal, accounting, advertising, research and development, architectural, engineering and other professional and technical services) are therefore important categories of services exports to the EU.

A ROUGH RIDE POLITICALLY

Despite the benefits, Britain’s entry into the EEC never went smoothly.

The Conservative government of Edward Heath did not hold a referendum before the United Kingdom joined the European Communities in 1973. The Labour Party’s manifesto for the 1974 general election included a pledge for an in-out referendum after a renegotiation of its membership. Accordingly, after Labour won under Harold Wilson, the referendum was held on whether to remain in the Communities after a renegotiation of its membership. The result was 67% in favour of remaining.

In 1979, the United Kingdom opted out of the newly formed European Monetary System (EMS), which was the precursor to the creation of the single European currency.

The opposition Labour Party campaigned in the 1983 general election on a commitment to withdraw from the EEC without a referendum. It was heavily defeated and the Conservative government of Margaret Thatcher was re-elected. The Labour Party subsequently changed its policy.

Although no further referendums were held, various UK governments were supported on the basis of negotiations with the EU. In 1985, the United Kingdom ratified the Single European Act – the first major revision to the Treaty of Rome – without a referendum, but with the full support of the Thatcher government.

A rebate system was first introduced in 1985 and remained unchanged in its basic concept since. It is best understood with reference to some features of the UK economy and of the common budget at that time. Each year, the amount of the rebate was determined by a complex calculation, linked to several variables and which evolved over time to take into account developments in the EU and its financing system.

In October 1990 – under the Conservative governance of Margaret Thatcher – the United Kingdom joined the European Exchange Rate Mechanism (ERM), with the pound sterling pegged to a basket of eight other European currencies. Thatcher was forced to resign as Prime Minister in November 1990, amid internal divisions within the Conservative Party that arose partly from her increasingly Eurosceptic views.

The United Kingdom was forced to withdraw from the ERM in September 1992, after the pound sterling came under pressure from currency speculators (an episode known as Black Wednesday). The Conservatives remained in power with John Major as Prime Minister.

As prime minister from 1990 to 1997, John Major entered the scene as a pro-European, bent on being at the heart of Europe, in contrast to his predecessor Margaret Thatcher. He negotiated the Maastricht Treaty in 1992, his proud claim being to have obtained opt-outs from the final stage of Monitory Union (adopting the EURO) and from the Social Chapter. As well as most of the Schengen (open internal border) Agreement. Indeed, at the time little more could have been achieved to protect the UK’s position, which differed from that of its Continental partners.

The Treaty introduced European citizenship, allowing citizens to reside in and move freely between Member States. It established a common foreign and security policy with the aim of “safeguarding the common values, fundamental interests and independence of the Union”, with close cooperation on justice and home affairs to ensure the safety and security of European citizens. The European Communities became the European Union on 1 November 1993, the new name reflecting the evolution of the organisation from an economic union into a political union. ‎

The Referendum Party was formed in 1994 to contest the 1997 general election on a platform of providing a referendum on the UK’s membership of the EU. It fielded candidates in 547 constituencies at that election, and won 2.6% of the total votes cast, but failed to win a single parliamentary seat because its vote was spread out across the country.

In February 2016, the Conservative government of David Cameron under pressure from within his own party, negotiated “a new settlement for Britain in the EU” which was then followed by a referendum on the UK’s membership of the European Union in the United Kingdom and Gibraltar. The result was 52% for the UK to leave the EU. The new deal was discarded and the United Kingdom formally withdrew from the EU on 31 January 2020.

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