Open Europe Blog

The big political news of the day happens to be strongly EU related – former Chancellor Lord Lawson’s piece in the Times (£) in which he argues in favour of a UK exit from the EU. So what to make of the piece – is it a game-changer or just a Westminster village story?

Lord Lawson rightly sets out many of the flaws inherent in the status quo – which we have looked at in detail numerous times,  from the democratic deficit through to the economic cost of over-regulation and the wasteful EU budget. He also draws particular attention to the threat of onerous and disproportionate costs from impending EU financial services regulation, with particular focus on eurozone-tailored rules imposed through an inbuilt majority in the EU’s decision-making process. Familiar stuff. The key question is whether the UK is better off fighting to address these issues from within the EU or leaving altogether? Lord Lawson argues that:

“The changes that Wilson was able to negotiate were so trivial that I doubt if anyone today can remember what they were… I have no doubt that any changes that Mr Cameron — or, for that matter, Ed Miliband — is able to secure will be equally inconsequential… That is why, while I voted “in” in 1975, I shall be voting “out” in 2017.” 

The media have really gone to town on this story – it’s an otherwise slow news day and everyone loves a good ‘Tory splits on Europe’ narrative. No doubt, it has further heated up an already hot debate – and if there’s one consequence, it’s that the intervention has made ‘better off out’ a slightly more respectable position. Lord Lawson remains a respectable figure.

But a game-changer, it is not. The responses to the article have conformed with already well marked-out positions: UKIP says its delighted, Dan Hannan tweeted that “we can really win this guys” while those who usually object to this kind of proposition, have objected.

Leaving aside his pessimism about a new EU deal (which we take major issues with), Lord Lawson – whose eurosceptic views are hardly a secret – actually doesn’t really tell us anything new. In particular, like most others who say the UK should leave the EU, he completely dodges the most important question of all: what’s the alternative? This is the weaker part of his piece:

“Over the past decade, UK exports to the EU have risen in cash terms by some 40 per cent. Over the same period, exports to the EU from those outside it have risen by 75 per cent. The heart of the matter is that the relevant economic context nowadays is not Europe but globalisation, including global free trade, with the World Trade Organisation as its monitor.”

“Today too much of British business and industry feels similarly secure in the warm embrace of the European single market and is failing to recognise that today’s great export opportunities lie in the developing world, particularly in Asia.” 

While Lord Lawson makes a fair point about British business not making the most of global opportunities, he creates a false choice between one or the other (we’ve been through this before). The point is not the global market place versus the European market, the point is to maximise the total volume of trade – this is what the Germans do very effectively.

While claims about 3 million jobs being at risk in the event of the UK leaving the single market are way overblown, the truth is, as we’ve pointed out numerous times, all the existing alternatives, from the Swiss and Norwegian models to the WTO-only model, suffer from major flaws. It is unclear which of these Lord Lawson proposes but, judging from the second paragraph above, he seems to suggest we fall back on the WTO regime. So he is arguing for a raft of extra costs slapped on UK exports, including a 10% tariff on car exports to the EU, in addition to barriers to market access for all UK financial firms (absent new deals, which Lord Lawson, again, doesn’t mention)?

Until those who advocate the mythical “UK option” actually flesh this concept out into a concrete and sell-able policy proposal, interventions like Lord Lawson’s will primarily be something that the Westminster chattering classes can have some fun with.

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