Boris's BOGOF
Boris Johnson’s putative return to the Commons overwhelmed any publicity for his, or rather Gerard Lyons’s, strategic analysis of the UK’s in/out EU options: The Europe Report: A Win-Win Situation, released 6th August. Four possible outcomes are envisaged: staying in either a largely unreformed EU or one reformed to the UK’s liking. The two departure options are seen as (a) good EU relations and pro-growth UK reforms and (b) poor EU relations and an inward-looking UK. Lyons makes the good point that “the UK can only achieve serious reform if it is serious about leaving, and it can only be serious about leaving if it believed that is better than an unreformed EU.” The title would have you believe both staying in a reformed EU and leaving are “Win Situations” that we can either choose one or use it to achieve the other, i.e. Buy One and Get One Free.
Lyons has produced an important review of the issues facing each sector but, at the end of the day, his conclusions are based on simple assumptions of the economic outcomes from each option. We do not need 108 pages of report, and 130 pages of appendices, to be told that the two high growth scenarios are more attractive than the two low growth ones. Furthermore, the conclusion that the two high growth scenarios are economically equivalent is similarly based on heroic assumptions. Lyons’s Panglossian vision of the UK outside the EU and reforming itself begs a great number of questions. The world is not ordered according to the way we order ourselves: trading with the EU will still be governed by EU regulations, likewise the US.
The paper has a number of failings: in particular it is not specific about the EU and UK reforms that would be needed, still less how they could be achieved and how likely that would be. For example, the only hope of securing the EU reform the UK seeks is for the UK to show benefit for EU as a whole, not just the UK. UK proposals to improve the EU market for financial services looks, to the rest of the EU, like UK self interest. We know that the rest of the EU does not accept the UK arguments because it is outvoted every time.
How would, as Lyons suggests, the UK leave the EU whilst at the same time improving the UK’s EU relationships? The chilling legal issue is EU Article 50 under which the remaining members decide the terms of the separation with no involvement of the departing member. Obviously there would be negotiation so that may not be as ugly as it seems. Trade would continue and we import more from the rest of the EU than we sell them but that is beside the point: could the UK protect its EU exports better than it could reduce its EU imports? De Gaulle reckoned that the UK needed continental Europe more than vice versa and the 1960s proved him right.
We should welcome this report for its discussion of many of the issues but we cannot rely on its findings. The City really does need to come up with a plan to protect its future but this is not it.