A"ertheEUReferendum:
WhatNextforBritainandEurope?
Prof.SimonHix
LondonSchoolofEconomics,and
ESRCUKinaChangingEuropeProgramme
@simonjhix
Outline
1.WhydidtheUKvotetoLeavetheEU?
Whydidn’t“ProjectFear”work?
Theroleof3i’s:inequality,idenJty,immigraJon
2.Whatare/mightbetheconsequencesforBriHshpoliHcsand
theeconomy?
3.WhatisthebestopHongoingforward,andhowmighttheUK
andtheEUgetthere?
WhatthePollsForecast
Source:
MaPhew
Goodwin
TheResult
51.9%Leave
17,410,742
48.1%Remain
16,141,241
72%turnout
withbigvariaHons
onvotepaPernsby
acrossthecountry
MoreNuanced
Geographical
Divides
Leave
RuralEngland&Wales,smalltowns,
EastCoast,NorthEast
Remain
London,universitytowns,
morecosmopolitanareasinSouth/
NorthernciHes
Source:BBC
SocialandEconomicDivisions
Source:FT
UKIPVote+25%=BrexitVote
Source:
JonMellon&
SteveFisher
Cosmopolitanismvs.Localism
SocialDivisions
atthe
IndividualLevel
Age
SocialClass
EducaHon
“InequalityandIdenHty”,MaPGoodwin
Averagein20most
pro-Remain
LocalAuthoriCes
Averagein20most
pro-Leave
LocalAuthoriCes
Universitydegree
45%
16%
Professionals
42%
23%
“Non-White”
26%
5%
Pensioners(>65)
11%
20%
MedianIncome
£27,000
£18,000
TheRoleof“English”IdenHty
AllParHesAreDivided(exceptUKIP!)
TheIssues:Economyvs.ImmigraHon
DistribuConalimpacts
ofimmigraCon:
Wagepressuresin
certainsectors
Pressureonpublic
services:schools,NHS,
housing
SocialintegraHon
pressures
Source:MaPhewGoodwin
“ProjectFear”workedinScoosh
referendumbutnotBrexitreferendum
YouGovPostReferendumSurvey,28June
Supportforasecondreferendum:
57%No,31%Yes(but61%ofRemainvoterswanta2ndreferendum)
ExpectaCons:
£350mwillbesavedandspentinBritain:
34%Yes,55%No(59%YesamongstLeavevoters)
ImmigraHonwillbemoreHghtlycontrolled:
48%Yes,42%No(75%YesamongstLeavevoters)
Wewillbelesssafeonceweleave:
31%Yes,53%No(83%NoamongstLeavevoters)
Peoplewillbesignificantlyworseoffonceweleave:
44%Yes,42%No(11%YesamongstLeavevoters)
TwoVersionsof“Leave”
NaConalists
Leave.EU/GrassrootsOut
(UKIP,Farage)
anH-immigraHon,naHvist,
EnglishidenHty
Libertarians
VoteLeave(Boris/Gove,LabLeave,+)
sovereignty/controllingimmigraHon
(“VoteLeave:TakeControl”)
freetrade,anH-EUbudget/regulaHon
ImmediateConsequences1:
PoliJcal&ConsJtuJonal
PrimeMinisterresigns->ConservaHveleadershipelecHon(by2Sept)
Labourleaderno-confidencevote(172to40MPs)->leadershipelecHon
EarlyGeneralElecHon(?),inAutumn2016orSpring2017
PressureinScotlandforindependence(Polls:54-59%supportIndependence)
NicoleSturgeoninBrusselstodiscussScotlandremaininginEU
SupportinBrusselsforScotlandremainingintheEU,e.g.
hPp://www.bbc.co.uk/news/uk-scotland-scotland-poliHcs-36649450
UncertaintyinNorthernIreland->Border?UnificaHonreferendum?
ImmediateConsequences2:Economic
£felltolowestlevelagainst
$since1985
FTSE100fellto2007level,
butthenrecovered
BanksstarHngtomovestaff
toFrankfurt,Dublin,Paris
Pauseininvestment
decisions->joblosses
ImmediateConsequences3:Social
ExplosionofspontaneousanH-immigrantaPacks
leafletsthroughdoorsinCambridgeshire
graffiHonPolishSocial&CulturalAssociaHoninLondon
lotsofanecdotesofpersonalaPacks
Policeconfirma57%increaseinincidentsof“hatecrimes”:
85vs.54oversameperiod4weekago
Whatisdrivingthis(inaddiHontopent-upanger)?
PeoplethoughttheywerevoHngto“kickforeignersout”
OnlyvaguecommitmentsaboutpermanentrightsofEUciHzens
inUKfromprominentpoliHcians
Longer-termConsequences?
PoliJcal&ConsJtuJonal
CollapseoftheLabourParty?
IfCorbynwinsagain,couldtherebeasplit?
LabourcouldlosemanyseatstoUKIPinNorthernEngland
IndependenceforScotland(tostayintheEU)
secondreferendumin2019/2020?
NorthernIrelandleavesUK?ReferendumonunificaHonwithIreland?
Devolvedtax-raisingpowerforLondon
SadiqKhan:“Londonmusttakebackcontrol”
=>lessmoneyforrestofthecountry
UKintheworld?LessimportanttoUS?
AlthoughUKsHllonSecurityCouncil,inG8,G20,NATOetc.
Longer-termConsequences?Economic
Treasury&othersesHmatea2-5%fallinGDPovernext5years
Midpoint=>onavg.£2,500perhouseholdworse-offthanifRemain
Pressureonpublicfinancesbecauseoffallingtaxrevenues(esp.lossofbanks)
=>higherdeficitsand/ormorespendingcutsand/orhighertaxes
InflaHon:fallingPoundwillleadtohighergrocery&petrolprices
but,housepriceswillprobablydeclineinlinewithlowerincomeexpectaHons
LowerregulaHonvs.baPleoverEUsocial(&environment)standards
EconomistsforBrexit:“eliminaHonofmanufacturing&increaseinwageinequality”
Trade:decliningtradewithEU(currently50%ofUKtrade)
butincreasedtradewithrestoftheworld(UK-USAFTA?)
EndofCityofLondonasaglobalfinancialcentre?
dependslong-termUK-EUrelaHonship(e.g.“passporHng”rights)
WhatNow?
ArHcle50oftheEUTreaty
1.AnyMemberStatemaydecidetowithdrawfromtheUnioninaccordancewith
itsownconsHtuHonalrequirements.
2.AMemberStatewhichdecidestowithdrawshallnoCfytheEuropeanCouncilof
itsintenCon.InthelightoftheguidelinesprovidedbytheEuropeanCouncil,the
UnionshallnegoHateandconcludeanagreementwiththatState,seMngoutthe
arrangementsforitswithdrawal,takingaccountoftheframeworkforitsfuture
relaConshipwiththeUnion.ThatagreementshallbenegoHatedinaccordance
withArHcle218(3)oftheTreatyontheFuncHoningoftheEuropeanUnion.Itshall
beconcludedonbehalfoftheUnionbytheCouncil,acHngbyaqualifiedmajority,
awerobtainingtheconsentoftheEuropeanParliament.
….
Art.50conHnued
3.TheTreaHesshallceasetoapplytotheStateinquesConfromthedateofentry
intoforceofthewithdrawalagreementor,failingthat,twoyearsa"erthe
noCficaConreferredtoinparagraph2,unlesstheEuropeanCouncil,in
agreementwiththeMemberStateconcerned,unanimouslydecidestoextend
thisperiod.
4.Forthepurposesofparagraphs2and3,thememberoftheEuropeanCouncilor
oftheCouncilrepresenHngthewithdrawingMemberStateshallnotparCcipate
inthediscussionsoftheEuropeanCouncilorCouncilorindecisionsconcerningit.
5.IfaStatewhichhaswithdrawnfromtheUnionaskstorejoin,itsrequestshallbe
subjecttotheprocedurereferredtoinArHcle49.
Medium-Term:“NorwayOpHon”?
Tominimiseeconomic,poliHcalandsocialrisk,theUKshouldrequestto
moveintotheEuropeanEconomicArea(EEA),unHlalonger-termsoluHonis
available
EEA=>partofthesinglemarket(freemovementofgoods,services,capital,
andpeople),includingfinancialservicespassporJng
But,nodirectaccesstoECJ,forexampleforTreatyinterpretaHons
veryimportantforfinancialservices
FreedomofMovementofPeople->EEAmeansfreemovement,
buttheEEAAgreementincludesa“Safeguardingprovision”,thatcouldbe
adaptedtoallowforamutualquotasystem
e.g.monthlyquotaonworkpermitsforEUciHzensinUK&UKciHzensinEU
Problemwiththe“NorwayOpHon”
HouseofCommonsForeignAffairsCommiPee(2013)Futureofthe
EuropeanUnion,11June2013,HC87-I
“NorwayandSwitzerland…areinpracHceobligedtoadoptEUlegislaHonover
whichtheyhavehadnoeffecHvesay.…OnourvisitstoOsloandBerne,we
gainedtheimpressionthatbothNorwayandSwitzerlandwerepreparedto
acceptwhattheyacknowledgetobea‘democraHcdeficit’…asthe‘price’for
theirconHnuedaccessto(partsof)theSingleMarket….However,our
interlocutorsinbothBerneandOslolargelyadvisedtheUKtoremaininside
theEU,asawayofretaininginfluenceoverthelegislaHonthatitwouldbe
obligedtoadoptifitremainedpartoftheSingleMarket.”
Longer-Term?
“AssociateMembership”=>someformofcommondecision-making?
UK-EUFree-TradeAgreement
anFTAisjustanagreementtotradeinasub-setofgoodsandservices=>farless
“open”thanthesinglemarket
Noagreement=>UKwouldbecomeanormalmemberoftheWTO
zero/lowtariffsonmanyindustrialgoods
buthightariffsonsomegoods&non-tariffbarriers(standards)onservices
2issueswilldominate(BorisJohnson:“Iwanttohavemycakeandeatit”):
1.Lossofcontrol:acceptrulesofEUtoaccesssinglemarket(“passporHng”/ECJ)
2.FreemovementofpeoplebetweenEUandUK
Whataboutsecurity=>anewEU-UK“SecurityAgreement”(withinNATO)?
IssuesfromtheEU’sSide:Economics
AngelaMerkel:“Iseenowaytoreversethis…UKcannotcherry-pick”
=>accesstosinglemarketmeansaccepHngfreemovementofpeople
=>EUwillmakerulesforEU:UKmustacceptthat,ifwantsaccess
UKwouldbeEU’slargestexternaltradingpartner
16%ofEUexportstoUKvs.15%ofEUexportstoUS
UKisGermany’sthirdlargesttradingpartner
7%ofGermanexports(belowFranceandUS)
ButEUtradewithUKisonly2-3%ofEUGDP,whereasUKtradewithEUis
18-20%ofUKGDP=>EUinastrongerbargainingposiHonthanUK
Singlemarketismoreimportantforservicesthangoods(alreadylowtariffs).UK
operatesalargesurplusinserviceswithEU,soneedsaccesstosinglemarket
IssuesfromtheEU’sSide:PoliHcs
Needtomakeitlookpainful,toavoid“contagion”
e.g.toDenmark,Sweden,Netherlands,Italy
Strongpressurenottounderminethe“fourfreedoms”
includingfreemovementofpeople
Anyfinalagreementwillrequireunanimousagreementbetweenall27
memberstates,anddomesHcraHficaHon,includingreferendums(e.g.
France)=>couldtakealongHme&bederailed
BaXleoverthefutureoftheEU:deeperintegraHonvs.moreflexibility
FrenchPresidenCalelecConin2017->EUdeterminedtostopLePen
Summary
UKwasneverfullycommiPedtotheEUproject
e.g.UKnotinEuroorSchengen,sonotinvolvedinkeydecisionsaboutthe
EurozonecrisisorthemigraHoncrisis
Britain(esp.England&Wales)voteddecisivelytoleavetheEU
drivenmainlyby“3i’s”:inequality,idenHty,immigraHon
BesthopeisaUK-EUrelaHonshiplinkCanada-USArelaHonship
freetrade,closeeconomicpartners,closesecuritypartners
UKchoice:AccesstosinglemarketorControllingimmigraHon?
ChoosingfullsinglemarketaccesswithoutimmigraHoncontrolswill
angerpeoplewhothoughttheywerevoHngto“restrictimmigraHon”
=>thiswillneedpoliHcalleadership&flankingpoliciestodeliver
RememberWhereWeStarted
“Thefuturetreatywhichyouarediscussinghasnochance
ofbeingagreed;ifitwasagreed,itwouldhavenochance
ofbeingraHfied;andifitwereraHfied,itwouldhaveno
chanceofbeingapplied.Andifitwasapplied,itwouldbe
totallyunacceptabletoBritain.Youspeakofagriculture,
whichwedon'tlike,ofpowerovercustoms,whichwetake
excepHonto,andinsHtuHonswhichfrightenus.Monsieur
lepresident,messieurs,aurevoiretbonnechance.”
RussellBretherton,BriJshForeignOffice
representaJveatameeJngoftheSpaak
Commicee,November1955