THE EU

In the Forward of the recent report entitled 'HM Treasury analysis: the long-term economic impact of EU membership and the alternatives', paid for with English taxpayers' money and circumventing the referendum spending limits, George Osborne, the Chancellor, asks 'Does Britain want to continue to be a country that faces out to the world? Do we want to be promoting our case at the top table of the world’s institutions? Is our national security best served by retreating from the world?' Osborne states that 'Using detailed analysis and rigorous economic modelling, this document sets out the Treasury’s assessment of the long-term economic impact of staying in the EU compared to the alternatives'.

The 'analysis' re-hashes some of the earlier arguments contained in an earlier document peddling pro-EU propaganda (see the English Rights Campaign item dated the 19^th March 2016). By basing the 'analysis' on the alternatives to which they have confined themselves, the Treasury's latest report is, by definition, biased. Osborne is aggressive about this: 'No country has been able to negotiate any other sort of deal, and it would not be in the EU’s interest to agree one.' Osborne insists that membership of a 'reformed EU' is necessary and that 'to put it simply, families would be substantially worse off if Britain leaves the EU'. In fact, the EU has not been reformed and the allegation is a lie.

Even a casual glance at this 200 page document reveals it to lack any semblance of objectivity. It is shameful that the referendum is being corrupted by the use of taxpayers' money to fund such garbage and those Brexit members of the Tory government would have been better off resigning their posts en bloc in response. We are even promised yet another report in the near future ('The short-term economic impact will be assessed in a future government publication'). One can hardly wait.

Osborne concludes the Forward by asserting that 'I hope that armed with these facts, the people of Britain will feel better informed and able to make this historic choice with confidence'. Indeed we should have the confidence to make an informed decision in the light of Osborne's 'analysis'. We should have the confidence to vote Leave.

The report kicks off with an Executive Summary, which quickly asserts that 'Much of the UK’s economic success is built on its long history as an open trading nation. Openness to trade and investment will be a key driver of the UK’s future economic security'. Consequently, 'The key economic criteria for judging the UK’s membership of the EU against the alternatives are therefore what it would mean for the UK’s economic openness and interconnectedness. This needs to be considered alongside the obligations that come with securing that access and the influence the UK has over those obligations'. From the outset, the report defines the issue in a way that facilitates the conclusions it wants to give. We are told that in order to achieve the openness (e.g. allow foreign firms to buy up the best of Britain's assets) we must be prepared to accept the 'obligations' (such as mass immigration) that the EU is forcing upon us.

The 3 models seen as an alternative to the EU are: 'membership of the European Economic Area (EEA), like Norway; [or] a negotiated bilateral agreement, such as that between the EU and Switzerland, Turkey or Canada; [or] World Trade Organization (WTO) membership without any form of specific agreement with the EU, like Russia or Brazil'.

In comparing EU membership with its alternative models, the report states: 'The analysis in this document shows that under all 3 models, the UK’s economic openness and interconnectedness would be reduced. Trade and investment flows would be lower. The UK would be permanently poorer if it left the EU and adopted any of these models. Productivity and GDP per person would be lower in all these alternative scenarios, as the costs substantially outweigh any potential benefit of leaving the EU'. We are told that there will be 'substantially weaker tax receipts' and 'higher government borrowing and debt, large tax rises or major cuts in public spending'.

But the pro-EU vision does not end there. The report goes so far as to claim: 'The total cost of leaving is likely to be higher. The new settlement for the UK negotiated by the Prime Minister in February 2016 included an ambitious agenda of economic reform in the EU. This will include the next stage of development of the Single Market, with a focus on bringing down the remaining barriers to trade in services, energy and digital, alongside completing major ongoing trade deals. If the economic benefits of reform are realised this could increase UK GDP by up to a further 4%'. It further alleges that if Britain were to leave then these reforms would be 'less likely to happen'. This is, of course, all pie in the sky.

The report continues with repeated assertions that the EU has increased the 'openness' of the British economy as a result of the Single Market and the EU's trade deals with other countries. It alleges that the benefits are greater than the costs of EU membership. It alleges that: 'Trade as a share of national income has risen to over 60% in the past decade, compared to under 30% in the years before the UK joined the EU' (this specious allegation is dealt with below), and that Britain should accept that 'EU membership means accepting the regulatory framework associated with it'.

The report is adamant that membership of the Single Market is a must, and that the terms of that membership are obligatory, including the need 'to accept the free movement of people and continue to make financial contributions to the EU'. Outside the EU, Britain would have to implement rules decided by others, whereas inside the EU Britain 'has significant influence over EU decision-making and the rules associated with the Single Market. This includes veto rights in the European Council'. This allegation is dishonest as Britain does not have a veto, and is dependent upon support from other countries to try and stop unwanted measures. Moreover, on leaving, Britain would not have to implement the Free Market rules; only those few firms that export to the EU would need to abide by EU rules, in the same way that exporters have to abide by the rules of any export market. The overwhelming majority of firms and organizations that do not export to the EU will be freed from having to comply with EU red tape (see the English Rights Campaign item dated the 7^th May 2016).

The report repeats that 'only the WTO alternative would free the UK from all the formal obligations that come with access to the Single Market'. This is true, but the report is totally unimaginative as to the freedom that regaining control of our own trade policy would bring and the advantages of that. Under the WTO rules we would be free to enter into bilateral trade arrangements to our own advantage. Nor would we have to tolerate hostile protectionist actions of others, such as the Chinese dumping of steel at below cost of production. We would be free to salvage our steel industry irrespective of EU procedures.

At one point the report comes close to admitting that Britain would be better off out of the EU when it states: 'To allow the UK to access the Single Market without agreeing to the rules of the Single Market would put their own businesses and consumers at a disadvantage'! In other words, were Britain to leave and yet be allowed to trade freely with the Single Market, then British businesses would be better off. The Osborne pitch is completely dependent upon his assertion that the EU will refuse to make a free trade deal, and that such a deal is the only thing that matters.

The report makes a mystifying comment that openness 'underpinned' Britain's 'economic revival following 3 decades of relative decline after 1945'. This ignores the positive impact of North Sea oil in the 1980s, or the benefits of selling off the nationalized industries, ignores the ERM calamity as well as the slump following the credit crunch and subprime mortgages fiasco. This is truly an astonishing rewriting of history.

This analysis has now only reached page 13 of the 200 page report and has yet to delve beyond the Executive Summary. To spare boring people, The English Rights Campaign will focus on certain 'highlights' of the remainder of the report.

Firstly, the report repeatedly stresses the importance of the service sector and of the importance of trying to persuade the EU to extend the Single Market to services. To be clear, although there are other services, it is the City about which the report is concerned: 'The financial services industry is crucial to the success of the UK economy. EU financial integration have helped UK financial firms grow both in size and in the breadth of services they offer. Financial services exports have increased from 1.6% of GDP in 1991 to 3.5% of GDP in 2015'. Bankers can make more money if Britain remains in the EU. As with the ruinous return to the Gold Standard after World War One, the interests of the City are considered more important than the interests of manufacturing. It cannot be stressed too much, the reason why the service sector is supposedly so successful compared to manufacturing is because manufacturing has been decimated by foreign competition, including by unfair trade practices of other countries (e.g. Chinese counterfeiting; N.B. see The Ponzi Class: Ponzi Economics, Globalization and Class Oppression in the 21^st Century, chapter 11 – available from Amazon, Kindle and CreateSpace).

Secondly, the report lauds trade with other countries as being the only thing that matters. For example it states: 'The key economic criterion for judging the UK’s membership of the EU against the alternatives is, therefore, what it would mean for the UK’s economic openness, access to global markets and its ability to trade with the EU and the rest of the world.' To be clear, by trade the report adds both imports and exports: 'openness to trade, defined as total trade (exports and imports) as a share of UK GDP, has increased significantly over the past 5 decades – rising from 23% of GDP in 1965 to 64% in 2015'. This is a nonsense argument. On this 'logic' the more Britain imports, and the bigger the trade deficit, the better. The report does not treat the trade deficit as a problem at all. In fact, it is a massive problem that is making Britain poorer each year and the scale of the deficit with the EU demonstrates the disaster that EU membership has been for Britain. The report itself sets out a table showing that Britain has a trade surplus with the rest of the world (despite the huge trade deficit with China), whereas there is a massive trade deficit with the EU.

Thirdly, the report argues that funding the deficit is a reason to vote to remain in the EU: 'The UK ran a trade deficit of £67.8 billion with the EU (3.6% of GDP) in 2015. This was comprised of a deficit in goods of £88.7 billion (4.8% of GDP), but a surplus in services of £20.9 billion (1.1% of GDP)', and that: 'The UK’s current account deficit means it is also a net borrower from the rest of the world. In turn, this implies the UK is exposed to changes in the perceived riskiness of lending to the UK. This exposure has been noted by the Governor of the Bank of England, who has said “the possibility of a risk premium being attached to UK assets because of certain developments exists, and that plays into the riskiness of the situation”. In other words, if concerns about lending to the UK increase, investors will require a return – or premium – for bearing that risk, making it more expensive for the UK to fund its current account deficit', and that: 'there might be a sudden stop in the UK’s ability to finance its large current account deficit outside the EU'.

Thus, rather than pay for imported goods by successfully exporting goods, under the Tories, Britain is content to run a massive balance of trade deficit and to sell off assets and borrow to fund that deficit. China, for example, is to be allowed to manipulate its currency, hack into computers, counterfeit, exploit other protectionist measures, and then spend the money it gets for its exports to Britain not on British goods, but lend that money back so that we pay them interest on it. This is not an economic model but a national bankruptcy model. The EU is little better, exploiting the one-size-fits-all euro to push down the prices of the manufactures from northern Europe and hence leave Britain with a substantial balance of trade deficit with them. Meanwhile, mass immigration continues uninterrupted, with the government pocketing any extra tax revenues paid but doing little if anything to meet the costs of that immigration, such as the strains on hospitals, schools, roads, housing, etc. and assumes that yet more immigrants will come to meet future costs. This is Ponzi economics (see The Ponzi Class: Ponzi Economics, Globalization and Class Oppression in the 21^st Century, chapter 12).

Osborne's assertion that Britain should remain in the EU to allow this state of affairs to continue is precisely why we need to vote to leave. Osborne has to be stopped.

It should be noted that Osborne's forecasts are based upon continuing very high levels of immigration (contrary to stated government immigration policy) and the ONS has recently estimated that the population of Britain might even reach 80 million by 2039 (being around 65 million now).

Fourthly, the report perversely tries to turn the trade deficit into a pro-EU factor: 'The UK’s current account deficit is identified by many of the studies as a risk. The decline in investor confidence could be amplified should overseas investors reassess the sustainability of the UK current account, leading to a sharp fall in sterling. A sterling depreciation is a common feature of the external analysis, with a trade-weighted fall of 15% to 20% anticipated by Citi, Goldman Sachs and HSBC. Most analyses recognise the potential for higher inflation caused by the exchange rate depreciation to reduce household real incomes and further depress consumer spending. Citi estimate Consumer Price Index (CPI) inflation at 3% to 4% year-on-year for several years, and HSBC see inflation increasing by up to 5 percentage points in the near term depending on how far import price rises are passed on to consumers.'

To describe the deficit as a 'risk' is an understatement. It is deeply damaging. It is unsustainable. Either trade is brought back into balance or ultimately, when the assets that can be sold have run out and the indebtedness reaches a ceiling of credibility, then there will be a sharp collapse in the value of sterling and a sharp economic contraction similar to that experienced by Greece. Yet Osborne, as a Ponzi economist, thinks Britain can keep running the deficit and that membership of the EU will facilitate this. Once again, this is a reason to leave the EU. Britain needs to bring its trade back into balance and thereby eliminate the risks associated with the deficit, as well as substantially increase the national prosperity and growth rate.

Fifthly, the report tries to dazzle with a number of equations and talk of the 'gravity modelling approach'. It does not matter whether it be described as 'the gravity modelling approach', or 'the back of the envelope approach', or 'the we will say anything we think we can get away with approach'. The fact is that the report is a sham. It is devoid of common sense. It is divorced from reality. It is a pretentious mishmash of excuses to remain in the EU regardless of the true merits.

The report, in particular with respect to its inability to tackle the trade deficit, constitutes a very good reason to vote to leave for the very reasons the report asserts Britain should remain. We need to leave to stop Osborne and his fellow Ponzi economists from their chosen economic path – their national bankruptcy model. We need to leave to enable Britain to bring its trade back into balance. We need to leave to stop mass immigration and all its accompanying costs, financial and otherwise. We need to leave the Single Market.

A Britain independent of the EU is a far more viable and appealing prospect.