What’s Trump Going to Do for Me?

Sage gives some brief thoughts on the inauguration of Donald Trump as President of the USA.

swamp

I find it hard to get worked up over Donald Trump. I’m not a US citizen and don’t live there. I like to visit, but I haven’t been able to go for some years and I am not likely to go anytime during Trump’s first term – which given his age may be his only term. Just about anything that Trump might do domestically will have little or no effect on me.

Even if I had been eligible, I wouldn’t have voted for him. I would almost certainly have voted for Gary Johnson (Libertarian). I’d definitely have been in the ‘Anyone but Hillary’ camp. But what can President Trump do for me?

NATO and Wars

On foreign policy, then, yes, ‘The Donald’ could clearly have an effect on the whole world. I doubt that he will be anymore belligerent than Obama. It would be hard to get involved in more wars for longer than Obama did, Nobel peace prize or not.

Trump’s criticism of NATO maybe worrisome, especially for those NATO members who share borders with Russia. On the other hand, he does have a point: NATO countries really ought to contribute their agreed shares to the alliance budget both in cash and resources. A dependency culture in defence matters is no way forward. Perhaps too, an alliance built in the and for the Cold War of the 1950s is outdated in the 2010s, even if the primary threat is considered to be the same, being Russia/USSR.

Trade and Brexit

I’d like to think that Trump’s rhetoric on trade agreements with the UK does indicate a willingness to get a trade agreement with us as soon as #Brexit becomes a reality. While there is no practical reason why there should not be an early bilateral US/UK deal, it should be remembered that Trump also talks a lot of protectionism too. It’s possible therefore that any deal proffered by the US to the United Kingdom may not be as much of a free trade deal as I would like. Still, it must be better than being ‘at the back of the queue’, as Obama threatened last year.

Big Mouth Strikes Again

I’ve never met the guy, and never will[1]. Perhaps, therefore I shouldn’t judge him on appearances, but he seems, even on the basis of his own tweets, to be vain, arrogant and self-centred, even prone to tantrums. Mind you, he’s not the only politician to be like this. I’ve met a few UK politicos that are just like that. The difference being that they are usually better at hiding it that Trump: with Trump, WYSIWYG[2]. It’s this openness that makes Trump into an ‘anti-politician’, and perhaps makes him seem more honest, especially to his supporters.

I’m not so sure. Being completely open and saying exactly what you think at the time is not just bad diplomacy – it won’t win friends and influence people – it can also break some of the bounds of common decency. His remarks to and about Megan Kelly, for example, were quite unnecessary. Trump’s style can be refreshing, but I think he goes too far in this respect. As President, he needs to put his twitter account away, and think a little more before he opens his mouth.

“It’s Going to be Great” – Hopefully

I want Trump to be active in one area. I want him to order a complete and comprehensive review of US Government funding for ‘Climate Change’ research. Assuming that the political placements and eco-activists have first been removed from the relevant Executive bodies, I suggest the following:

First, he needs to order an independent review of NASA/NOOA climate data – from the initial data collection through the ‘adjustments’ to the final published figures. This should be conducted by academic statisticians who have little or no self-interest in the area of climate change. This will ascertain, once and for all, if there is a valid dataset or datasets on which an assessment of the degree of global climate change can be made, and establish the appropriate statistical error to be attributed to those datasets[3].

Second, he should ensure that Governmental funding for climate research is not predicated on a required outcome. That is to say that funding should be awarded indifferently to whether anthropogenic climate change is presupposed or not.

Thirdly, funding for ‘climate change’ be it research, development of green energies, green subsidies need to be significantly reduced, and some of the money saved spent in doing real work in cleaning up real damaging pollutants, such as clean air, removing plastics from the oceans to name but two. There are many more things that could also be done effectively for only a proportion of current climate change expenditure.

If Donald Trump can do this, and nothing else during his term, I will, as a non-American, be happy with that.

[1] Unless you can say that I ‘met’ President Clinton once when he waved at me from his presidential motorcade. I know he was waving at me, as I was the only person on that bit of the street at the time. If this counts as ‘met’, then I suppose it’s possible I’ll one day meet President Trump. Otherwise, no I won’t.

[2] What You See is What You Get

[3] Publicly available data sets rarely, if ever, show statistical error or error bars. They should.

Situation Vacant: Prime Minister of the UK – Must Have Safe Pair of Hands

 

Goodbye!

The resignation. Goodbye DC!                                                                                                      Photo PA

Cameron has resigned, Corbyn looks like he might have to and Tim Farron is a Liberal Democrat. While I remain convinced that Brexit was the correct decision, there must be a resolution to the UK crisis of leadership soon.

I take it as read that the UK will leave the EU at some point between now and the expected date of the next General Election in 2020. I don’t think that the EU will countenance any delay that could conceivably be any longer than that, and nor do I think that any Government could really refuse (although it might delay) to invoke Article 50 of the EU Constitution Lisbon Treaty. It may seem surprising, but it’s actually not possible for the EU to expel a member country, but suspension could happen[1].

Petulance

Granting a referendum is the only credit that can be given to Mr Cameron. Other than giving us the chance to vote, he has been, to put it mildly, disingenuous. Apparently, while he was ‘negotiating’ with Our European Masters for ‘reform’ of the EU, it was the case that the UK would do well outside the EU.

Mr Cameron did not get any ‘reform’ worth having. This might be because the EU officials and heads of government didn’t believe the UK would leave under Cameron so saw no need to give any serious ground. Just as likely, they had no intention of granting any reforms in any event.

So when those negotiations produced little of substance, suddenly Cameron now thought that Great Britain and Northern Ireland’s future was so reliant on continuing EU membership that voting leave would destroy our economy and lead to a third world war (or something). As others have observed, if Cameron really thought the latter, he should never have offered the chance to leave, or perhaps in doing so, he should have ordered the military to prepare for war!

Indeed, it seems very likely that it is Cameron’s fault that the Civil Service did not do as much planning for Brexit as might have been expected. It is widely reported that civil servants were ‘mentally working on a Brexit Plan’[2] but not doing any formal work. While it could have been damaging to the ‘Remain’ case if such plans had become public that is no reason not to do them. It is usual practice for the civil Service to prepare for the victory of either political party in a General Election (party manifestos are never detailed plans). Surely, Brexit planning should have taken place in the same way? That it did not, seems a major lapse on the part of the Prime Minister, as it won’t have been the fault of the civil service.

Having set out his stall as a very fervent ‘Remainer’, and having failed to carry the country with him, it is perhaps not unreasonable that Cameron should tender his resignation to the Queen, and no reason at all for her not to accept it.

However, there is no real excuse for his petulance in doing so[3]. It is symptomatic of an arrogant, self-centred man, who – having climbed up the greasy pole – showed little enthusiasm for governance. Leading the negotiations to leave the EU, and starting to speak to other trading partners around the world, would have been a way to restore his reputation and leave his mark on history as a responsible, mature and effective statesman.

Harold and Jim showed the Way

The 1975 referendum was played rather differently by the then Prime Minister, Harold Wilson, and his Foreign Secretary, Jim Callaghan. In order to try to maintain unity in the Labour Party – then largely sceptical – Wilson held a referendum. This was after a ‘renegotiation’ in which, really, very little was achieved. As Vernon Bogdanor has said “the re-negotiation was largely cosmetic because the key decision that had been taken, as I have said, was that it would not mean amending the Treaty of Rome”[4]. Callaghan and Wilson were, it seems, personally anti Britain’s membership of the EEC. As Bernard Donoughue observed of Wilson “He is required to be in favour, but really he is a little Englander”[5]. Wilson made only a few speeches in support of the ‘Yes’ cause in that referendum campaign[6]. Foreign Secretary Callaghan refused to commit at all. As Dominic Sandbrook observes “Wilson’s ambiguity was symptomatic of the entire campaign”[7].

There were good reasons for this. It meant that Wilson and Callaghan, as leaders of the Labour Party, were as inoffensive to both sides of their party as possible. Secondly, they could both appear somewhat above the fray, stable and statesmanlike. Thirdly, and more importantly, it meant that they were in a position to implement ‘the will of the people’, whatever that turned out to be.

David Cameron, as is well known, did not try to remain aloof. He threw himself into the campaign, making several appearances in televised debates and doing the round of the political talk shows. Both he and George Osborne were very closely associated with the ‘Remain’ camp. This has made it impossible for Cameron[8] to continue and enter into the negotiations that arise out of the UK’s departure from the EU.

Cameron could have been statesmen-like. He could have expressed his opinion, but soberly in a balanced way, perhaps in the form of a referendum-eve speech or statement ostensibly encouraging people to vote. But he didn’t. Cameron could have learned from Harold Wilson. But he didn’t. Enough of him.

So What to Do?

The Conservative Party has small majority in the House of Commons. The Labour Party is in greater disarray than the Tories. It seems then that the Conservatives can, and short of some coalition, must continue to form a Government[9]. But who should lead the Tory Party and become Prime Minister?

As I write, a few names are coming forward, and factions forming around the front-runners. Justine Greening is advocating Johnson/May ‘dream-team’ ticket. It is all moving rather fast. The Conservative Parliamentary Party and MEPs will select two names to go forward to a ballot of the (majority Brexit) Tory membership.

I’m not going to recommend anyone just now, but I would like to make a suggestion: that the Conservatives select someone who will not be their leader at the next General Election, but a ‘safe pair of hands’ to get Brexit on track.

Statesman or Stateswoman

The country needs a new PM as quickly as possible. Someone who will work for the next two to three years in negotiating and implementing Brexit in accordance with the article 50 procedure. They will also have to work very hard on new trade agreements with countries outside the EU[10].

Ideally, it would be an experienced politician with an eye for detail – as the devil will be in the detail with the upcoming negotiations. International diplomacy must be a strong point. Any candidate for the role must appear solid and reliable, certainly not a radical or a maverick.

By being an interim leader, they would be able to get on with the job without being attacked by the opposition parties, under any pretence, just for future electoral purposes. Once the UK is out of the EU, they should be prepared to stand down for a new Tory Leader who would then fight the general election of 2020.

Ideally, whatever their views on ‘Leave’ or ‘Remain’ might have been, they should not have had a high profile on either side of the campaign. I don’t suggest neutrality as a requirement as that would rule out pretty much everyone.

At the moment, I confess I can’t think of anyone who fits this bill. Perhaps there is a good candidate or candidates in the Lords? Or are the Tories completely washed up now? If so, who will lead us?

I’d be delighted to receive any suggestions in the comments below.

 

 

[1] See https://www.ecb.europa.eu/pub/pdf/scplps/ecblwp10.pdf for a discussion of this.

[2] See http://www.civilserviceworld.com/articles/news/gus-odonnell-civil-servants-will-be-mentally-working-brexit-plan

[3] http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=11663380&ref=NZH_FBpage

[4] Vernon Bogdanor Lecture  “The Referendum on Europe, 1975” Gresham College 15 April 2014

[5] Bernard Donoughue “Downing Street Diary”

[6] Which suggests that Mr Corbyn was using Harold’s Instruction Book in 2016, but Corbyn was neither Prime Minister nor is he as wily as Harold Wilson.

[7] Dominic Sandbrook ‘Seasons in the Sun’, p323

[8] And probably Osborne too. At time of writing, he seems to be incommunicado.

[9] There could be a dissolution and a new general election, but I will assume here that the Fixed Term Parliament Act is not over-ridden.

[10] In the longer run, this is actually more important than the arrangements with the EU. Hopefully this point

will not be overlooked.

So what does the EU cost us?

 

 

The ‘Vote Leave’ battle bus for the 2016 EU referendum carriers a slogan reminding voters that “We send the EU £350 million a week”. ‘Remain’ campaigners say this isn’t so, citing much lower costs of EU membership. Who is right? And why the difference between the two camps’ figures?

Not surprisingly, there a long running argument between the ‘Remain’ and ‘Leave’ camps in the UK referendum on EU membership about how much it really costs us to be in the EU. Is it £350,000,000 (gross) a week, or ‘only’ £120,000,000 (net)? I decided to find out a bit more, and look more closely at the elements of the money we get back from the EU.

What’s the difference? An accountant speaks…

I’ve obtained figures for the annual UK contributions to the EU for the last few years, as shown in table 1. I then simply divided the figures by 52 to get the average weekly equivalent, shown as table 2.

2009 2010 2011 2012 2013 2014 2015 (estimated)
Annual £Millions £Millions £Millions £Millions £Millions £Millions £Millions
Gross Contributions 14,129 15,197 15,357 15,746 18,135 18,777 17,779
Less: UK Rebate -5,392 -3,047 -3,143 -3,110 -3,674 -4,416 -4,861
Total Contributions 8,737 12,150 12,214 12,636 14,461 14,361 12,918
Less: Public Sector Receipts -4,401 -4,768 -4,132 -4,169 -3,996 -4,576 -4,445
Net Contributions 4,336 7,382 8,082 8,467 10,465 9,785 8,473

Table 1

2009 2010 2011 2012 2013 2014 2015 (estimated)
Weekly £Millions £Millions £Millions £Millions £Millions £Millions £Millions
Gross Contributions 272 292 295 303 349 361 342
Less: UK Rebate -104 -59 -60 -60 -71 -85 -93
Total Contributions 168 234 235 243 278 276 248
Less: Public Sector Receipts -85 -92 -79 -80 -77 -88 -85
Net Contributions 83 142 155 163 201 188 163

Table 2

It seems that the ‘Leave’ campaign figures are broadly in line with the average weekly gross contribution over the last three years. The net contributions, after the UK rebate and after the ‘public sector receipts’ is, quite a bit higher than InFact’s figure of £120m a week, being on average £184m a week over the last three years. To be fair, the figures I’ve used don’t include payments made by the EU directly to UK based organisations, rather than via the UK Government. That could explain the rest of the difference between the two campaign’s figures. Job done!

Well, no. That’s a boring and useless accountant’s answer. Reconciling the difference isn’t enough. We need to see which figure is genuinely meaningful in the context of deciding ‘is Britain better in or out of the EU?’ To do that, the ‘differences’ need to be looked at, carefully.

The Rebate: Mrs Thatcher, Tony Blair and the EU

The UK’s rebate represents a saving to British citizens of about £93m a week. It is the biggest single thing that reduces our net contributions to the Brussels Eurocrats. It was first negotiated by Margaret Thatcher in 1984 at the Fontainebleau European Council. Tony Blair, for reasons best known to himself, in 2005, allowed a change to the rebate to pay more towards the enlargement of the EU, in effect reducing the rebate.

MrsT

David Cameron has had, on several occasions, to defend the rebate. The other EU countries do not like it, and would be rid of it as soon as they could. Obviously, they will not try before the UK has held its referendum, and probably not until the existing agreement finishes in 2020.

My point is, that while it might be difficult for the EU to scrap the rebate, it conceivably could, especially if after a ‘remain’ vote by the British people, a Europhile PM might be prepared to surrender the rebate in return for who knows what? Appointment as President of the European Council, perhaps? The UK rebate is certainly not set in stone.

Perhaps we could let this one go. Any half decent UK PM will surely find it politically impossible to surrender the rebate. If we assume that the rebate should be taken into account – after all, we deduct the rebate money before sending any cash to Brussels – then the UK sends about £260m a week to Europe, based on the last three years or so.

What about the ‘public sector receipts’?

Grants, Grants, State Aid and All That

Public sector receipts from the EU are just that. The EU gives money to the various nation states, and they then distribute it. However, the nations don’t spend it how they like. They must spend it in accordance with EU policies. What local delegation there is, and there is some, still requires compliance with some very strict (and often very bureaucratic) EU diktats. Especially in the case of the European Regional Development Fund, these regulations are there simply to get around the rules against ‘State Aid’.[1] The breakdown of Public Sector Receipts, on an annual basis, is set out in table 3.

 

2009 2010 2011 2012 2013 2014 2015 (estimated)
Annual £Millions £Millions £Millions £Millions £Millions £Millions £Millions
EAGF 2,910 2,910 2,667 2,753 2,747 2,595 2,544
EAFRD 215 439 419 291 619 567 556
ERDF 639 758 605 438 279 1,053 1,032
ESF 609 644 389 585 246 263 217
Other Receipts 28 18 52 102 86 98 96
Total Receipts 4,401 4,768 4,132 4,169 3,996 4,576 4,445

Table 3

Taking the various categories in order, I set out what they are for, and how much influence, if any, local policy (by which I mean state, or in some cases regional) exerts on the expenditure of these receipts.

CAP

Over half the money paid back to Britain in the form of ‘Public Sector Receipts’, relates to the Common Agricultural Policy, shown in table 3 as ‘EAGF’ and ‘EAFRD’. While it must be said the CAP is considerably better now that it was in the days of high food prices and food surpluses that were either dumped overseas or destroyed, it is still controversial.

The EAGF is the European Agricultural Guarantee Fund and the EAFRD is the European Agricultural Fund for Rural Development. These are both elements of the Common Agricultural Policy (CAP). The EAGF represents support paid directly to farmers. The EAFRD supports rural development. What is important to stress is that, although administered by member states, the policies determining how each fund is spent are firmly under the control of the EU. As the EU Commission itself says of the EAFRD: “Spending is linked to a performance framework with target indicators and monitoring, which effectively requires Member States and regions to deliver clearly defined results in order to keep the full budget allocation.”[2] The UK did indeed subsidise agriculture before accession to the EU. I would expect that this would continue, in some form, post any Brexit. However, it could perhaps be much better targeted to local conditions than the CAP currently allows. While many French farmers (really smallholders by UK standards) are not as heavily subsidised as they were, the rules that currently support them are the same rules that support the larger scale farming mostly prevalent in the UK. This is not a good fit. While its true that a lot of UK farmers do want to remain in the CAP, many do not. A regime suited to the UK (dare I suggest a more market orientated one) could be both cheaper to the taxpayer and better for many farmers than the ‘one size fits all’ approach of the EU. In any case, the UK Government (or perhaps the devolved assemblies for Scotland, Wales and Northern Ireland) could democratically decide, not the French farmers’ lobby deciding for all the EU.

Regional Development: Wasting Money, Bureaucracy and Euro-publicity

EUsign

I’m biased. I spent three years of my life administering an ERDF grant, not mentioned here, and I’m bitter! These grants have horribly bureaucratic rules, and include major requirements for pro-EU publicity as a requirement.

In table 3 above, The ERDF is the European Regional Development Fund and the ESF is the European Social Fund.

This is a link to the Policy documentation for these funds, agreed between the UK and the EU Commission for the current funding round. Don’t try to read it all, its huge. Even the ‘Executive Summary’ is quite long. And this is just for England. The devolved governments of Scotland, Wales and Northern Ireland look after their own income from these funds. Administering these grants can cost as much as the actual delivered benefit. That is not including the checking of these grants carried out by internal audit of the DCLG and DWP for the ERDF and ESF respectively and sometimes by external auditors too.

There are detailed and complex requirements with respect to procurement, state aid law compliance, and even document retention, which has its own 8 page guidance paper. The following is an extract from the current guidance for ERDF:

“Grant Recipients must comply with and assist the Managing Authority to comply with document retention requirements under any applicable State Aid rules. Where Projects are operating under a State Aid scheme in accordance with the General Block Exemption Regulation (Commission Regulation (EU) No 651/2014) or De Minimis Regulation (Commission Regulation (EU) No 1407/2013), Grant Recipients must maintain detailed records with the information and supporting documentation necessary to establish that all the conditions laid down in the Regulation are fulfilled. Such records must be kept for 10 years after the last aid is granted under the scheme. For ERDF Projects, the last aid may not be granted under a scheme until 2023 meaning that documents will need to be retained until 2033.” GUIDANCE ON DOCUMENT RETENTION, INCLUDING ELECTRONIC DATA EXCHANGE, FOR 2014-20 ERDF PROJECTS

In other words, you need to store ERDF records for twenty years! HM Revenue and Customs only require company tax records to be kept for 6 years.

ERDRF grants from the EU usually don’t pay for the whole project being funded. They usually require match funding from the Government, local authority or other organisation – which might be a charity – or private sector.

“European funding is designed to fill the funding gap for a project when other sources of finance are not available. There must be a reasonable expectation that another source of finance has been identified to contribute to the eligible costs. This is referred to as match funding. The match funding cannot contain any other type of European funding or be used as match against another source of European Funding.” The National ERDF Handbook For the English Convergence and Competitiveness Programmes 2007–2013 If I give you £10 on condition that you use it to buy a book that costs £20, and I get to decide that it must be an economics book, would you be grateful? Especially if you’d given me £50 in the first place with no strings attached. Ok, it’s better than me not giving you anything back, but you might have been happy with a £10 book about philosophy.

The main points I want to make here is that the overall ERDF/ESF grants policy is made in Brussels, not here in the UK. They are horribly and expensively bureaucratic to run and administer. They require a high level of pro-EU publicity – which can be expensive. They don’t even pay for the whole cost of the project. From personal experience, I would suggest that a substantial amount (say 20%) of the cash the EU provides goes to pay the administrative and compliance costs required by the EU.

I suggest that should the UK leave the EU, many (but not all) of the projects funded by ERDF and ESF could be delivered using the existing match funding and perhaps some small scale support from HMG. The projects would be more targeted to local need, and much more efficiently and cheaply delivered than EU requirements allow.

The size of the grants received by the UK Government under these headings is misleading, as so much is wasted. The UK should be free to spend these monies as it wishes, not as Brussels dictates.

What is the Answer?

One could make a case for selecting any figure in the range from £350m a week down to £120m. In no case is our EU membership ’free’.

While the rebate lasts, it would not be ridiculous to reduce the gross contribution from about £350m to £260m and quote the latter figure. The rebate never gets to the EU and the EU has no control over how it is spent. However, the rebate is not fixed forever. It could disappear as soon as 2020, and it is not unreasonable to show to the voters how much the EU could cost.

The other monies that the EU lets the British Government ‘have back’, the Public Sector receipts, are not the Governments to spend as Parliament thinks fit. The agricultural subsidies are paid in accordance with the requirements of the Common Agricultural Policy, as set by the EU. The Regional Development and Social Funds are likewise under the control of EU policies, determined by EU priorities and these may not be those of the UK Government.

I’ve only mentioned in passing the payments made by the EU directly to organisations in the UK, which are not in any of the tables. These payments are in no way subject to the British government’s control. Do we say that the USA had reduced our contribution to NATO if it bought some defence equipment from the UK? No, of course not.

As with the entire EU debate, it all boils down to a matter of sovereignty. If the UK government cannot decide how to spend the cash that taxpayers give it, or indeed not spend it and reduce the tax take, then the UK Government does not control that money. It is not ‘our’ money.

I think that ‘Leave’ can fairly say “£350 million a week “, although “Currently £260 million a week, after Mrs Thatcher‘s rebate” might be better. However, I think that ‘Leave’s “£120 Million” is misleading. The ‘Public Sector receipts’ are not ours to spend as we like.


[1] The EU, as the EEC, was intended to be a free market (not including agriculture) within its own borders. Once it realised the power of giving away money, for whatever reason, to create clients for itself, it invented ways around its founding principles. These were all very bureaucratic and still are. Jobs for the boys! In the UK, the Civil Service have taken on the role of policing the system for the EU, it’s much more heavy handed and copper plated regulation in the UK than in any other EU country. No wonder the Government as a corporate body wants to stay ‘in’!

[2] ‘EU agriculture spending focused on results’ September 2015, Introduction page.

Lobby the Grandkids!

The ‘Britain Stronger in Europe’ campaign is asking youngsters to ‘Talk to Gran’, a campaign to lobby older people to get them to vote ‘remain’ in the upcoming EU referendum. But older voters may not be so easily persuaded. Will Granny and Grandad tell the youngsters a thing or two instead? Will grandparents who voted ‘Yes’ in 1975, be voting ‘Leave’ this time around? Are they ‘Once bitten, twice shy’?

I was 12 years old when the 1975 referendum on Britain’s membership of the European Economic Community (EEC) or ‘Common Market’ was held. I didn’t get a vote. The youngest voters who did get a vote in that plebicite, held on 5th June 1975, will be 59 on 23rd June 2016 when the next referendum is held. These are the Grannies and Grandads of today’s younger voters. How have the opinions of these voters on the question of the ‘European Project’ changed in the 41 years since the British electorate had a clear say on the ‘European Project’?

BritNex

As We Who are Left Grow Old…

There’s not actually a lot of evidence on the breakdown of voters’ opinions by age in 1975. While exit polling was done (by ITN), these just seem to have captured yes/no data, and nothing about the voters themselves.

The best contemporary information I have come across is an opinion poll by Gallup (fig 1).

Table 1 1975

Table 1 1975 referendum votes. Actual results and Opinion Polling data. Poll data is by Gallup. (1)

The data is, for some reason, incomplete. There is an age group (55-64) that is entirely missing. However for the present purposes this is of little matter. While, of course, some of the people in the missing group will still be alive in 2016, they will be at least 96 years old today, and not very many of them, so will have little influence in the 2016 vote. We can, I am afraid, assume that the people in the +65 group in 1975 are all no longer with us.

However, the voters in the younger groups, aged between 18 and 44 in 1975 will, by and large, be with us still, now aged between 59 and 85. These are the grannies (and grandads) that young ‘remainers’ are asked to persuade to vote to stay in the EU in 2016.

There has, of course, been significant demographic change in Britain since 1975. This reason, amongst others, means that we cannot really match the voters of today with those of yesteryear directly. Still, as a first approximation, it will suffice.

Idealism of Youth

Looking at the 1975 voters, Table 1 shows that the youngest group – a wide band of 16 years – were the least likely to vote ‘yes’ and amongst the least likely to vote ‘no’ and the least likely to vote at all. Given that youth were always supposed to be more ‘idealistic’, and even ‘adventurous’, why wasn’t there a greater support for ‘yes’ in this group? After all, Interrailing was popular amongst middle-class youth even back then, despite what some people appear to think.[a] The reason given at the time was simplistic, but may have been true: young people were more likely to support the Labour Party, and, within the Labour Party to favour the left. And the Labour Party was split between pro and anti-Marketeers, and the Labour Left was strongly anti-EEC.

Despite this, the youngest group is really only slightly less enthusiastic about the EEC in 1975 than the electorate in general. The difference is likely within the margin of error of the opinion poll. Perhaps, in the end, most followed the Labour leadership – Wilson, Callaghan, Jenkins – rather than the more charismatic left represented by Tony Benn, Eric Heffer and a young Neil Kinnock.

The number saying to the Gallup pollsters that they wouldn’t vote is a little higher than all the other age groups. However, this might just be more honesty on the part of the youngest voters. The poll suggests a non-voting rate in the younger age group pretty close to the eventual overall non-voting rate in the referendum. Certainly, it can’t be concluded that the 1975 under-34 voters were any more apathetic than the electorate as a whole.

Not Quite Middle Aged

According to the Gallup poll (Table 1 again), the ‘inbetweenie’ age group (35-44) were simultaneously the group most in favour of EEC membership, and the most opposed. Maybe childhood experiences of the war affected opinions both for and against closer involvement with the EEC. This group were perhaps more exposed to the trade union ‘out’ campaigning.

Again, the influence of senior politicians, such as Heath and Wilson, as opinion leaders and the pro-EEC stance of all the major newspapers (even including the Daily Mail and the Daily Express) was sufficient to bring the majority of voters in this age group to the ‘yes’ side. “It was plain that on a subject on which few people felt really strongly there was a general willingness to accept opinion leadership, particularly on the Labour side.” (1)

Once the non-voters are removed from this category, it can be seen that, within a modest margin of error, this age group was not far removed from that of the electorate as a whole – a clear majority in favour of Britain’s membership of the EU.

Where Are They Now?

Table 2 2016

Table 2 From YouGov survey. Fieldwork 29 Mar-4 Apr 2016 (2)

According to this poll by YouGov, shown in Table 1, young people today are much more likely to support remaining in the EU than their elders, either as they voted in 1975 and even more so as compared to the older age groups today. However, we can see that the views of those voting in the 1975 referendum do seem to have changed.

The younger half of the 1975 18-34 voters form just less than half of today’s 50-64 group of voters. The remainder are combined with all the voters aged 35 or over in 1975 in the modern group of 65+ voters. According to YouGov, these two modern age groups are in favour of leaving the EU, and by a clear margin.

Older and Wiser?

I know it’s a rather simplistic way of looking at the data, which has a lot of unmeasured complexity lying beneath it, but if it is assumed that the younger people who voted in 1975 are the same people who are likely to vote are amongst 2016’s older people, then we can draw some clear, if broad-brush, conclusions. For simplicity, I have averaged (mean) out the results for this analysis.

Table 3 CompareTable 3 Comparison of votes 1975-2016

It is perhaps no surprise that the expected turnout of these voters will be higher in 2016. It is an accepted truism that older people are more likely to vote than the younger. Partly, I suspect, it’s that older people have fewer other things to do. They are often retired. The reasons don’t matter for this purpose. The table (Table 3) shows a significant increase in the percentage actually expecting to vote. This might be an artefact of the polling system used, but it does ring true. However, it is unlikely that the expected turnout has a major effect on the balance between the Remain/Leave figures for 2016. I would be very surprised if those who did not vote in 1975 were all deep down anti-Europe voters who have continued to hold the same views for 40 years and are only now prepared to vote for them. Most likely, if the non-voters in 1975 had been forced to vote then, they would have been broadly as much in favour, or against, as the rest of their peer group.

What can be said, from this simplistic comparison, is that a significant percentage of those voting ‘Yes’ in 1975 will vote ‘Leave’ in 2016, and so will quite a few who didn’t trouble the returning officers in 1975. This isn’t just a statistical quirk. This looks like a significant change of mind.

So what has changed?

There are some basic factors that may explain the change. If political leadership means anything, then the fact that today the Conservative Party is very split on the issue of EU membership may be something to do with it, especially as it is generally accepted that old people are more likely to be Conservative than in their youth. The Labour Party, though broadly in favour of ‘Europe’ in 2016, still has a substantial number of anti-EU members, supporters and MPs.

I would also suggest that many of today’s older people who voted ‘Yes’ in 1975 are disappointed or disillusioned with the EU experiment. Either because the ‘democratic deficit’, identified by people such as Douglas Jay and Enoch Powell in the 1960s, has not been satisfactorily resolved. The belief that the EU, with its ‘ever closer union’ was not what was promised in 1975 seems strong in some quarters. Certainly, given the words used during the 1975 campaign and before, that we were joining a ‘Common Market’, and certainly not a ‘Union’[b], may now be seen as misleading. It doesn’t much matter if one argues that the evidence of the direction that the EU was to take was freely available in 1975, it is today’s perception that Britain was sold a pup by Wilson and Heath that rankles.

As it happens, in 1975 I was neither a voter (too young), nor a pro-marketeer. I therefore cannot say what changed my mind, as my mind has not changed on this subject. I will leave it up to those who were to explain for themselves… Perhaps to their grandchildren.

Talk to your Grandchildren

If young people can lobby their elders, why shouldn’t older people campaign by contacting the young? This isn’t a one-way street.

So, if you are a voter who has swung from being pro-‘Common Market’ to being a committed ‘Brexiteer’, go on, give the whipper-snappers a call. Tell your children and grandchildren why you’ve changed your mind in the last 40 odd years. It could be quite an eye-opener for them.

If you regret voting ‘Yes’ in 1975 because Heath and Wilson, or Thatcher or Jenkins told you to (or perhaps because Benn and Powell told you not to) tell the grandchildren. Don’t let today’s young voters make the same mistake and spend 40 years or more regretting their decision, made just because some politician suggested it.

The old are not ‘past it’. They can influence the young by sharing their experience: their life-lessons vote. They should not miss this chance to do so.

Update – 24 June 2016

Here’s the demographics for the EU referendum 2016, courtesy of Lord Ashcroft.LR-by-demographics-768x720

See also the discussion and further analysis by Lord Ashcroft. Generally, older people were for Leave, and the younger for Remain. Note that it wasn’t just the age groups who could have voted in 1975 that were majority ‘Leave’ in 2016, so were the slightly younger age group 45-54 who may have remembered (just!) the 1975 vote, but were too young to vote then. Basically my argument is unchanged by Lord Ashcroft’s data. Many of those who voted in both referendums changed from ‘In’ to ‘Leave’.

 

References

  1. Butler, David & Kitzinger, Uwe. The 1975 Referendum. London : The Macmillan Press, 1976. SBN 33319708 9.
  2. YouGov. YouGov Survey Results Fieldwork: 29th March – 4th April 2016. s.l. : YouGov, 2016.
  3. HM Government. Britain’s New Deal in Europe. London : HMSO, 1975.
  4. Wikipedia. Interrail. Wikipedia. [Online] [Cited: April 17, 2016.] https://en.wikipedia.org/wiki/Interrail.

Notes

 

[a] Interrailing started in 1972. It is not, and never was, limited to EEC/EU member states, and is available to younger residents of many European countries, including Russia. (3)

[b] “There was a threat to employment in Britain from the movement in the Common Market towards an Economic & Monetary Union. This could have forced us to accept fixed exchange rates for the pound, restricting industrial growth and putting jobs at risk. This threat has been removed.” [My emphasis] (2)

What Came ‘After the Common Market’?

Sage looks at the thoughts of Douglas Jay, a Cabinet member in Wilson’s Labour Government, who was a staunch opponent of Britain joining the European Economic Community. (Long, technical in parts)

For many years, I have had a copy of the Penguin Special “After the Common Market: A Better Alternative for Britain[1] by Douglas Jay, on my bookshelf, filed under: ‘unread’, ‘historical curiosity’, ‘politics’. I’m not entirely sure how it got there. I was aged five in 1968 when it came out, so I certainly didn’t buy it then!

Does Jay’s short book still have any relevance to the continuing and current debate on Britain’s membership of the EU, nearly fifty years after its was published?

Douglas Jay

Lord Jay is not a household name any more. He was a key figure in Labour politics from the 1930s up until his death, but nowadays his son, Peter Jay, is probably better known.

Douglas Jay was the Labour Member of Parliament for Battersea North from July 1946 to May 1983. During that time, he served as Economic Secretary to the Treasury and Financial Secretary to the Treasury under Atlee, and as President of the Board of Trade under Wilson, serving from October 1964 until 29 August 1967 when he resigned (or was sacked) over Harold Wilson’s policy of joining the EEC. He continued to be opposed to the UK’s entry into the European Economic Community and campaigned for a ‘no’ vote in the 1975 referendum. He was created a life peer in 1987, and died in 1996.

Presumably, he began writing ‘After the Common Market’ after his resignation from the Government in 1967. Certainly, he was aware of General de Gaulle’s second ‘non’ and Wilson’s devaluation of the pound, both in November 1967, which puts an earliest possible date for the final revision of the text.

It would make more sense, perhaps, if Jay had started to write the book in the Summer of ’67 in anticipation of a ‘oui’ from de Gaulle with a view to it being a campaigning document in a referendum, which Jay expected: “…if the party system does not enable a clear choice to be made [at a General Election]’ there is a strong case for a referendum before irrevocable decisions are made.” It was perhaps only after de Gaulle exercised the veto that the book’s slant became more that of seeking alternatives to Britain joining the EEC, an aspect addressed in the final few chapters. As none of these ideas happened, I do not address them here.

Jay was an economist before entering parliament, and held what can be described as ‘economic’ positions in government. It is not that surprising therefore that much of ‘After the Common Market’ presents an economist’s viewpoint. There is little ‘pure’ politics in it, and much of the politics that there is follows from the economic circumstances that Jay forecast would come about on Britain’s entry.

What was wrong with Britain being in the EEC?

In summary, Jay opposes Britain’s entry into the EEC on four major grounds:

  • Effect on the British balance of payments
  • Effect of the Common Agricultural Policy
  • Effects on the Commonwealth, EFTA and other non-EEC countries
  • Loss of Sovereignty

It is interesting that the second and fourth points still seem relevant today, whilst the first appears almost, if not entirely, irrelevant, and the third is now pretty much a ‘sunk-cost’. For reasons of space and time, I will not look here at the effects on other countries, except to note that of the eight EFTA members in 1968, six are now members of the EU. Also, since 1977 there have been no tariffs in industrial goods between the EU and EFTA.

However, much of Jay’s book is about the UK balance of payments, and so is this article. Did Jay misread this issue? And what was the issue anyway?

The balance of payments, the EEC and the ‘Pound in Your Pocket’

A lot of the book, and especially the chapter entitled ‘If Britain Joined’, deals with “the economic effects on Britain of joining the EEC”. To the modern reader the economics discussed seem rather old-fashioned, as it is very largely dealing with possible effects of EEC membership on the UK balance of trade – a very thorny issue in the post war years. It was especially so as it led to the devaluation of the pound in November 1967, presumably why Jay gives it such prominence.

The balance of payments situation today seems of interest only to specialists, rather than the ‘man in the street’. It is not considered as so important as it was. Instead it is now seen more as diagnostic of economic problems and successes and not so much a problem in itself. Why the change?

The economic and political history of the Wilson government from 1964 to 1970 is complex. There are many sources, not all in agreement. Broadly though, the ‘received view’ is that on its election in 1964, the Labour Government inherited a large current account deficit that had arisen due to earlier Conservative attempts to boost the economy. The increased demand in the economy had succeeded in drawing in imports, rather than producing more goods for home consumption and for export. This meant, put simply, that there were more pounds available to non-UK interests than they required.

In a free market, which there was not, this would normally mean a fall in the price of sterling against other currencies such as the dollar and (increasingly during this period) the Deutschmark. A cheaper pound makes imports more expensive and exports cheaper, thereby reducing the one and increasing the other, tending to reduce or eliminate the trade deficit. In a free market, in other words, there is a self-correcting mechanism.

However, following from the Bretton Woods agreement of 1944, sterling and other currencies were committed to a fixed currency exchange rate system. This linked all western currencies to the dollar, and the dollar was linked to gold. It was understood from the beginning of the arrangement that countries that ran a balance of payments deficit would struggle to maintain their currencies’ exchange rates. The IMF was set up under the Bretton Woods agreement with the aim of providing loans to help those countries. Restrictions on capital flows from one country to another were also introduced with a view to preventing speculative pressure on currency values.

Up until the mid-1960s, the Bretton Woods system was regarded as something of a success. The economic recovery in the non-Communist countries following the war had exceeded most expectations. M. M. Postan, writing in 1966/7, noted that the world “aggregate Gross Product increased by well over 85 percent between 1938 and 1964.” [2] Some economists and politicians may have thought that they had, more or less, solved the developed world’s macroeconomic problems, especially that of unemployment.

For a nation like Britain, still thinking of itself as a world power, to be in a position where it could not fulfil its Bretton Woods obligations and maintain its ‘pegged’ exchange rate, was thought to be shocking and ignominious in itself. To be forced into devaluation was politically damaging both at home and abroad. It could be seen as a reflection of an international lack of confidence in the abilities of the Government of the day – and certainly such lack of confidence could make matters worse with respect to demand for sterling.

Further, there were many countries, including most of the British Commonwealth, whose currencies were effectively tied to the pound via ‘Sterling Area’ arrangements. Devaluation of Sterling would mean significant capital losses to these nations, which held much of their own reserves in sterling. British Governments felt a responsibility to these countries, as well as to Britain itself, to maintain the value of the pound.

Finally, for most of the 1960s, Wilson was concerned that Labour would gain the reputation as a ‘devaluation’ party. The only post-war devaluation, before 1967, being under Atlee’s Government in 1949.

Jay was also concerned about the balance of payments for another reason. When the balance of payments was bad, leading to pressure on the value of the currency, loans from the IMF and other nations were (and still are) the only way to shore up the currency if a nations own reserves were too low to do the job. As Jay observes: “The truth is that financial and balance of payments weakness is bound to force any country, and has forced Britain, into a position when it cannot dictate the terms on which it borrows, and others can. The only solution is to strengthen the balance of payments, and ensure that this situation does not arise. That is why the prospect of Britain joining the EEC should mainly be examined in the light of the balance of payments.”

Jay had himself first-hand experience of political weakness when negotiating for loans. In 1965 there was a sterling crisis. On 10 September 1965 the US Federal Reserve and a number of European central banks placed huge orders for sterling, shoring up the pound. A deal had been done with President Johnson to get this support from the US: the deal required that Britain maintained its ‘East of Suez’ military capability, and introduce a statutory incomes policy. The latter condition being the first time that a single nation (rather than a multinational organisation like the IMF) had influenced Britain’s domestic policy in exchange for a loan. It appears that Jay, along with Wilson, Callaghan and Brown knew of this otherwise secret deal[3]. Jay therefore knew there were good reasons to worry about balance of payments crises. But why did he think that being in the EEC would make matters worse?

Changes to Trade

The Common Agricultural Policy (of which more later) would, according to Jay, lead to higher food prices, in turn leading to higher wages and hence higher production costs of manufactured goods which might be exported. “…our costs, both of exports and goods sold at home would be raised… It is obvious at first sight that this operation would mean a net loss to Britain’s balance of trade with the EEC.” In short, British goods would become more expensive than they would otherwise be with respect to those of the other EEC members, and also to those of other nations, hence reducing our ability to sell goods abroad.

“Next stage in the process would be further loss of exports to the Commonwealth, due to the loss of Commonwealth preference for British goods.” “for it [EEC membership] would compel Britain, not only to withdraw the free entry and preferences now enjoyed almost universally for Commonwealth goods in the British market, but in addition to impose a reverse preference on them.” i.e. impose a tax on imports of food etc., especially hurtful to the economies of Canada, Australia, New Zealand and South Africa[4], and this “would mean inevitably the withdrawal of the reciprocal preferences given by these countries to our exports.” Jay says that in 1966, Britain exported around £800m worth of goods to those four countries alone.

But this wasn’t all. “The worst threat of all to the British economy… after the Common Agricultural Policy, is the abolition of all exchange control even on the export of capital by residents of a member-country to any other in the group.” Jay cites Article 67 of Treaty of Rome. “not merely would there be complete freedom for any UK resident – bank, firm or individual – to indulge in genuine direct or portfolio investment anywhere in the EEC, but there would be complete freedom for a flight of refugee or speculative capital owned by any British individual or firm who was scared by the British balance of payments prospect, or wished to gamble on a fall in the pound.” Jay thinks that this would make “any rational economic policy, let alone a full employment policy, impossible for the UK.” He adds, “Never since 1939 has such freedom been granted to UK residents except within the sterling area.”

Reading Jay’s comments now, in 2015, demonstrates just how far things have changed since he wrote them. The idea that not having exchange controls would make a rational economic policy, not just different, not more difficult, but actually impossible seems remarkable. The shocked tone about giving UK residents economic freedom seem almost totalitarian! Such controls were intended to prevent currency speculation, of course, but were in practice draconian when considered with hindsight. Exchange controls were finally abolished in 1979.

In summary then, Douglas Jay believed that by joining the EU, the British current account deficit will get worse, the pound will come under pressure, reserves will be run down in defending the pound, and the IMF, or more likely Germany, will bale Britain out at great political cost. “In such circumstances [the UK requiring economic aid and loans, probably from EEC partners], it is hard to see how Britain … could possibly escape being politically subordinated to Western Germany.”

Was he right? Not really. There have been no serious British balance of payments crises since 1967. Jay, writing no later than in early 1968, was not to know that the Bretton Woods agreement would collapse in 1971 and that the pound would be allowed to float (more or less) freely thereafter[5]. The crisis of 1976, when the then Chancellor Jim Callaghan borrowed US$2.3bn from the IMF, was caused by the Government’s inability to borrow enough in the markets to fund its public spending, not simply to defend the pound[6]. While the poor balance of payment position didn’t help, it wasn’t the point of the crisis. Callaghan and Healey hoped to defend the pound to control inflation, but the Trade Unions and the rank and file Labour party members wanted them to spend a lot of money they couldn’t raise in tax[7]. Foreign holders of sterling were losing confidence in the Government’s general economic policy, and this was the root of the problem, not poor trade figures per se.

On the other hand, Jay was correct to predict that Germany would become the major player in terms of lending to countries within the EU that fell into difficulties. Jay did not predict a common currency in his book, nor did he foresee a united Germany back in 1968. But the future economic dominance of Germany in the EEC was a correct prediction, as well as that Germany would use that strength to influence domestic policies of other EEC members was also correct, for example by having the ‘final say’ in the bail-out of Greece in 2015.

Balance of Trade

UK Balance of Trade (expressed as % GNP)
Goods (oil) Goods (non-oil) Services Balance
Received Paid Balance Received Paid Balance Received Paid Balance net
1968 0.4 1.8 -1.3 16.5 17.0 -0.5 6.8 5.9 0.9 -0.9
1969 0.4 1.7 -1.2 17.7 16.9 0.8 7.1 6.1 1.0 0.6
1970 0.5 1.5 -1.1 18.0 17.0 1.0 7.8 6.7 1.0 0.9
1971 0.5 1.8 -1.4 17.7 15.8 1.9 7.9 6.7 1.2 1.7
1972 0.4 1.7 -1.3 16.5 16.6 0.0 7.6 6.4 1.2 -0.1
1973 0.6 2.0 -1.5 17.9 20.1 -2.2 7.9 6.8 1.1 -2.6
1974 1.0 5.6 -4.5 20.9 23.3 -2.4 8.7 7.4 1.3 -5.6
1975 0.9 4.2 -3.3 19.8 19.9 -0.1 8.1 6.7 1.4 -2.0
1976 1.1 4.7 -3.6 21.6 21.3 0.4 9.0 7.0 2.0 -1.2
1977 1.7 3.9 -2.3 24.0 23.1 0.9 9.2 6.9 2.4 1.0
1978 1.7 3.2 -1.5 23.1 22.5 0.7 8.5 6.2 2.3 1.5
Figure 1: UK Balance of Trade 1968-1978. Taken from Black, John, ‘The Economics of Modern Britain’, 1980.

 

Based on the figures for the period shortly before and after Britain joined the EEC, there was certainly no obvious sudden decline in the overall balance of trade (figure 1), although the balance of non-oil goods did get worse in 1973 and 1974. It should be remembered that there was an ‘oil crisis’ in 1973, which had knock-on effects throughout the economy.

The balance of trade, of course, has itself been awful for many years now. Since 1970 and up to 2014, the only years in which there was a trade surplus in goods were 1971, 1980, 1981 and 1982. How much of this deterioration can blamed on Britain’s EU membership?

In 2014, 44.6% of UK exports of goods and services went to EU countries, and 53% of imports were from the EU[8], as compared to Jay’s figures: “Some 65 per cent of our imports come from outside Western Europe, and about 65 per cent of our exports go to countries outside Western Europe.” So, if we take Jay’s  ‘Western Europe’ to include countries now in the EU which were not in the six EEC countries in 1968, we find that the proportion of exports outside the EEC/EU has fallen only by 10% over the whole period 1968 to 2014, and given that the EU now include countries such as Poland that Jay would certainly have considered as outside ‘Western Europe’ we can conclude, given the huge changes in world patterns of trade over those 46 years generally, that little difference has been made to our exports.

Imports from the EU however have grown considerably up to the present day, so that in 2014, the balance of trade with the EU is in deficit, which is large enough to outweigh the balance with the rest of the world (figure 2). Of course, if Britain did not import from the EU, it would probably have to import the same kinds of things from elsewhere.

JayFig

Figure 2: UK Exports and Imports 1999-2014 (ONS). Graphic from City AM http://www.cityam.com/218917/how-important-eu-uk-trade

Balance of Payments

UK Balance of Payments on Current Account 1968-1978 (expressed as % GNP)
Trade balance Property – Taxes Transfers Balance (current account)
1968 -0.9 0.9 -0.6 -0.6
1969 0.6 1.2 -0.6 1.3
1970 0.9 1.3 -0.4 1.8
1971 1.7 1 -0.4 2.3
1972 -0.1 1 -0.5 0.4
1973 -2.6 1.9 -0.7 -1.3
1974 -5.7 1.9 -0.6 -4.4
1975 -2 0.8 -0.5 -1.7
1976 -1.2 1.2 -0.7 -0.8
1977 1 0.2 -0.9 0.2
1978 1.5 0.6 -1.3 0.7
Figure 3: Taken from Black, John, ‘The Economics of Modern Britain’, 1980.

 

Again, the current account balance of payments (Figure 3) shows nothing of especial concern around the time of Britain’s entry into the EEC. While the balance does get worse from 1973 to 1976, it is not exactly at crisis point, and there is nothing to suggest that joining the EEC was as bad for Britain in this respect as Jay predicted in ‘After the Common Market’.

Common Agricultural Policy

Jay was very concerned about the impact of the Common Agricultural Policy (CAP) on the UK, and not just because of his concern about its effect on trade, described above.

Firstly, “The high food prices in the EEC are maintained by a form of protectionism known by the high-sounding title of the Common Agricultural Policy (CAP). It is in fact more restrictive and reactionary than any system of agricultural protection previously known, short of outright prohibition of imports.” This is done by a system of variable ‘levies’. “This means that the price is unalterably determined by the high cost of the inefficient home producer; and that if the world or import price falls, or home prices rise, the levy rises to make up the difference.” So the consumer “whose interests are barely considered at all at any point in the whole business” cannot gain by falling world prices.

Secondly, Jay complains that “it has meant the survival of highly inefficient, outdated – indeed almost eighteenth century – farming methods right into the second half of the twentieth century, with the inevitable consequence of strong and persistent pressure to keep up food prices in order to save this unproductive agriculture from extinction.”

Jays contrasts the CAP system with the British system of support for farmers then in force, which he supports. A scheme of making “so-called ‘deficiency payments’ from the Exchequer to the farmers which allows us to combine low prices to the consumer and the lowest import prices in the world, and therefore greater social equality generally, with a reasonable income for farmers and farm workers, a rapid increase in farming efficiency and output, and a great economy of manpower on the land.”

In short, the CAP kept the prices of farm goods high by tariffs on imports and price fixing of home produce, whereas the UK supported farmers by paying subsidies direct to the farmers, and letting consumer prices fall to market rates.

Jay is not entirely accurate in his description of the British system. There were at least some measures in place whereby agricultural prices were supported by market intervention and central marketing. A good example is the Milk Marketing Board[9]. In place from 1933 to 1994, the board bought up all UK milk production and managed sales to maintain prices.

None the less, Some of Jay’s criticisms of the CAP were also shared by the EEC Commission itself. In the late 60s, the increasing costs of CAP, and the inefficiencies of the small farmers were supposed to be tackled by the proposals contained in the Mansholt Plan. This would “encourage nearly five million farmers to give up farming: that would make it possible to redistribute their land and increase the size of the remaining family farms, in order to make them viable and guarantee for their owners an average annual income comparable to that of all the other workers in the region”. However, the farmers firmly rejected the plan.

By the late 1970s, overproduction in EEC farms was becoming an issue, especially in dairy. In 1979 penalties “for serious over-production” were introduced in that sector.

But it wasn’t until 1992 that there was any progress at all in changing the method of support for the agricultural sector from price maintenance to income support for farmers, the system broadly recommended by Jay.

While price support in 2015 is considerably lower than it was, and income support for the producer now forms a major element in the CAP, price support is by no means abolished (see ‘Agriculture: A Partnership between Europe and Farmers’). It is noteworthy that the present CAP is still trying to do the things recommended by the Commission in 1960s, such as modernising farming!

Despite the best efforts over the years of GATT and WTO, there are still CAP related import controls and tariffs in operation with regard to trade with the non-EU world. See, for example, HMR&C’s guidance.

So, in many respects, Jay was not wrong about the Common Agricultural Policy. The problems he identified with it have been somewhat ameliorated since he wrote ‘After the Common Market’, but have not gone away. In other words, the CAP is still expensive to maintain and administer and still encourages inefficient farming methods, although it is probably better now than it was in the 1960s.

However, Jay may well have been wrong with respect to food prices, although it is hard to say for certain. Certainly there were noticeable rises in food prices around the time the UK joined the EEC.

The major problem in looking at the data for the period around Britain’s accession to the EEC is inflation. UK inflation, following the ‘Barber Boom’ from 1972 and the first oil crisis of 1973, soared from an average of 5.4% 1968-70 to 7.8% 1971-1973 and 16.0% in 1974-78[10]. So the effects of any UK food prices rises due to the CAP might easily be covered up by rises for other reasons, such as higher fuel prices increasing distribution costs.

Variations in Inflation (%) 1969-1978
Commodity Group 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978
Food 5.4 5.0 9.5 6.8 12.3 16.7 23.3 15.7 16.2 8.5
Housing 6.3 8.7 10.5 11.7 15.1 19.8 22.5 15.0 14.9 11.6
Motor vehicle running costs 8.8 2.6 5.7 4.8 7.7 28.2 29.7 9.7 12.7 1.9
Fuel & Light 2.9 3.8 9.5 7.0 2.8 17.5 31.5 24.4 15.6 7.3
CPI 5.7 5.9 8.4 6.5 8.6 17.2 23.7 15.5 15.0 8.4
Figure 4: Taken from Black, John, ‘The Economics of Modern Britain‘, 1980.

 

Food price inflation was 12.3% in 1973, a year in which only the non-EEC influenced housing costs were inflating faster (probably ‘Barber boom’ effects) (Figure 4). This could be CAP effects, at least in part. After that, the oil crisis effects dominate in all categories. As the index itself has a weighting towards consumer food purchasing, comparing the price of specific food items[11] to the overall index doesn’t help much. A brief review of price data does not seem to suggest any special CAP effects over the period from joining the EEC that can be distinguished from general price increases, unless it is seen in the ‘one-off effect’ in 1973.

Today, there is nothing especially expensive about British food, at least in comparison to other developed countries.

According to a Guardian article in July 2014, Germany had the lowest priced ‘basket of goods’ as compared to London, and other EU and non-EU developed countries. This is broadly in line with data on numbeo.com in October 2015. The Guardian’s list includes many products not covered by the CAP, of course, but even when this is allowed for, Germany is still cheap by comparison to the other countries in the survey. The non-EU cities included in the survey, New York, Toronto and Sydney, are all more expensive than London. What is also noticeable is the variance between EU nations: Milk, at £1 (for 4 pints), is cheapest in the UK, but the highest EU country price is given as £2.15 in Paris, with Dublin being roughly half-way between at £1.53. My point is that, nowadays, there is nothing particularly expensive about food in the EU as compared to other developed countries’ prices, and that there is a good deal of variation within the EU itself, which shows that factors other than the CAP are influencing prices. This could be variations in local supply and demand for the various goods, or varied competitive environments between retailers. The linked Guardian lists several possible explanations. Of course, 46 years on from ‘After the Common Market’, and after nearly 22 years since the 1992 CAP reform, the effects of the CAP on British prices may have been lost amongst all the other factors that affect food prices.

 

Democratic Deficits

Perhaps where Jay has proved to be the most correct, and certainly his criticisms still remain, is in the context of the ruling institutions of the EEC. Jay notes “the fundamentally undemocratic nature of its [Treaty of Rome] constitution and of its ruling bodies: the Commission of officials, the Council of Ministers, the mass bureaucracy in Brussels, the Court and the so-called European Parliament which seldom meets.” Despite much ‘reform’ of the EEC/EU since 1968, these comments seem to apply just as much today.

“[The Community Parliament]’s only power, and that by two-thirds majority, would be to pass a vote of censure on the Commission which would require the whole of the Commission to resign.” This was deliberate by the framers of the rules, claims Jay, as “Either a supranational authority like the Commission is not democratically controlled at all, or there must be an effectively elected Parliament to control it; in which case a federal system and a further surrender of sovereignty are unavoidable.”

The EU Parliament today is different from that in 1968. For one thing, there are elections to the parliament whereas in Jay’s time members were selected by the governments of member countries. Direct elections being introduced in 1979. The parliament still does not have full legislative powers, it cannot initiate any legislation, but does now have the ability to ask the Commission to draft legislation for it. Much of its legislative power, and its control over the budget, is shared with the European Council (the Council of Ministers). While the EU parliament is certainly more powerful than Jay knew it was in 1968, it is still does not control the Commission, nor is it ever likely to.

Jay says that, in joining the Treaty of Rome “the British Parliament would hand over to the Council of Ministers and the Commission the power of legislating in the future, in ways not known at the time of signing the treaty, on the internal affairs of this country…without any approval or discussion by the British Government or Parliament.” With the strengthening of the powers of the European Parliament since 1968 one could amend what Jay says a little. He was completely correct in predicting the loss of sovereignty of the British parliament, of course, as it was as plain as day even 50 years ago that this was going to be the case. The institutions of Europe, at least when acting collectively, really can call all the shots today. This is especially obvious in the Eurozone countries such as Greece, where the domination of the Commission-led (and German influenced) ‘Troika’ in the internal economic affairs of that country is blatant.

“It [the EEC] is founded on the central belief that modern society ought really to be ruled by the expert, the technocrat, the super-bureaucrat, the scientifically equipped wise man, who can find the right answer by pure calculation, unaffected by the pressure of vested interests or politics. It is rooted in an essential distrust of the people.” The very nature of the Commission, still largely uncontrolled by any directly elected body, is that of a bureaucracy. Whilst it is now the case that the President of the Commission is now elected by the EU Parliament, it still cannot remove him (or her) without sacking the entire Commission and this requiring a 2/3rds majority. The Commission cannot really be said to be responsible to the parliament.

It is still a matter of debate whether the EU parliament should be fully democratic and really control the Commission, in which case it could be argued that, as Jay suggests, a fully united EU polity has formed. If one doesn’t want that, then it is perhaps best that the EU parliament remains relatively weak. However, what Jay said about it in 1968 remains broadly correct, despite the many reforms since.

… And Propaganda

“The Commission still controls the EEC ‘information’ machine, on which £1m a year is spent…from which propaganda and entertainment is conducted on a liberal scale throughout the EEC: one indirect source no doubt of much of the brainwashing propaganda encountered outside the Six as well as within.” According to Eurosceptic group ‘Business for Britain’, the EU budgeted to spend £536m on direct publicity in 2014. This may be a high estimate but it is difficult to pin down what the EU’s publicity budgets actually are. Each part of the Commission seems to have a publicity/PR department of its own, and funds can also be made available for special projects and campaigns from other sources. The estimate does not include publicity expenditure required as a condition of all EU grant funding, which can be a material proportion of the grant expenditure. I think we can conclude that EU publicity spending is as significant, if not more so, than it was in Jay’s day.

So, Was Jay Right or Not?

Jay was writing for his time, and he was a man of his time. In 1968 he was wedded to the post-war certainties and didn’t concern himself with the problems of the Bretton Woods system. He couldn’t foresee the collapse of the system and the change in economic assumptions that it implied. Thus his concerns about the UK balance of payments and hence the exchange rate are now rather old-fashioned.

He was right that the balance of trade would get worse, but perhaps wrong as to why that was. There is little reason to believe that the situation would be any better today if Britain had stayed out of the EEC/EU, and less that it made much difference around the time that Britain actually joined.

Douglas Jay did understand the nature of the EEC/EU as an institution, and correctly identified the ‘democratic deficit’ that underpins it, and the role and influence of the Commission and the other institutions that reduce or eliminate national sovereignty of member states. He was correct to identify the large expenditure of the EU/EEC on self-promotion and publicity. I am not sure that any of this was a great insight, however, as it was as plain as day then, as it is now, that this was how the EEC/EU worked.

What was perceptive, perhaps, was the identification of Germany, rather than France, as the lead nation amongst the rest, and the attribution of significant power within Europe to that nation.

While Jay was broadly correct about the CAP, in that it was expensive and wasteful even by the Commission’s own admission, for many years after 1968. It is possible, but not certain, that it did drive up UK food prices. It is likely that food consumed in Britain would have been cheaper that it was if Britain had stayed out, but for how much and for how long cannot be determined, and by now food prices in the UK are no different to anywhere else in the developed world. The issue for today really is how to ween farmers off subsidies of any sort without a collapse in the supply or unacceptable political consequences:  the same issues that Jay identified, but didn’t care about so long as they were the right sort of subsidies.

Jay was a socialist of the old school: central planning, central controls over the levers of the economy. However, he believed that these levers should be controlled by democratically elected bodies in sovereign nation states, and so he was bound to reject the idea of the non-democratic, bureaucratic EU.

 

 

 

[1] Jay, Douglas, ‘After the Common Market: A Better Alternative for Britain’ Penguin Books Ltd, 1968, ISBN 9780140522587. Unless otherwise stated, all quotes “.” are from this book.

[2] MM Postan, An Economic History of Western Europe 1945-1964, Methuen & Co, 1967

[3] Sandbrook, Dominic, ‘White Heat’, p125, Abacus, 2008 edition.

[4] South Africa was not in the Commonwealth at this time, primarily due to its apartheid policies, but was mostly included in Commonwealth trade agreements.

[5] Not always, of course. Various attempts to peg sterling to the Deutschmark and, most notoriously to the ERM, have been tried and failed since, but none failed simply because of balance of payments issues as such. They were self-inflicted by British Governments pursuing unsustainable policies.

[6] National Archives Cabinet papers. See especially Chancellors statement on page 8, referring to both external and internal deficit.

[7] See for example Callaghan’s speech to the Labour conference of 1976, where he warns party members: “Like everyone in the Labour Movement, I believe in a high level of public expenditure. But I part company with those who believe we can rely indefinitely on foreign borrowing to provide for greater social expenditure, a better welfare service, better hospitals, better education, the renewal of our inner cities and so on. In the end these things, comrades, are only provided by our own efforts.” Coincidently, the speech was written by Peter Jay, son of our author Douglas.

[8] http://www.cityam.com/218917/how-important-eu-uk-trade

[9] See http://ageconsearch.umn.edu/bitstream/6969/2/cp02fr01.pdf for a brief history and a discussion of how the MMB scheme interacted with the CAP and what happened on its abolition.

[10] Based on consumer prices. From Black, John, ‘The Economics of Modern Britain‘, 1980.

[11] See also ONS statistics on UK prices of various goods including many foodstuffs .xls file

He got what he wished for…

Sage’s forecast rapidly came true!

My last post suggested that the signatories of the letter asking President Obama to prosecute climate sceptics might regret asking for investigations into science funding. How right I was!

http://www.nationalreview.com/article/424875/climate-extremist-taxpayer-funded-ian-tuttle

The amount that fossil fuel companies spend on AGW research, be it biased or not, is insignificant compared to Government funding around the world. So its where there is big money that we are likely to find the leeches and troughers.

Wishful thinking?

Extract from the recent letter from a group of Political activists – oops I meant scientists – to President Obama:

“One additional tool – recently proposed by Senator Sheldon Whitehouse – is a RICO (Racketeer Influenced and Corrupt Organizations Act) investigation of corporations and other organizations that have knowingly deceived the American people about the risks of climate change”

These people should be careful what they wish for. A similar suit aimed at some of them might be interesting, to say the least.