Bruges Groups meeting 24 September 2014 – The EU’s attack on Britain’s most successful industry [the City]

Prof Tim Congdon  (Founder of Lombard Street Research)

Dr Gerrard Lyons  (Chief Economic Adviser to Mayor of London )

Lars Seiet Chistensen  (CEO Saxo Bank)

Robert Henderson

The three speakers were all agreed on this

1. The desirability of Britain’s financial services sector continuing to grow.
2. The dominance of London as a purveyor of financial products.
3. The damaging effect of the EU on the City in particular and British financial services in general, both at present and the great potential for much more destructive EU policies in the future.
4. The resentment of other EU members, particularly the large ones, of Britain’s dominance as a financial centre. Congdon and Christensen suggested that this resentment led to active attempts by the EU to take away this British dominance through EU legislation.

Other points to note were (a)  Congdon and Christensen being  certain that the only way forward for Britain was to leave the EU   because Cameron’s promised renegotiation would produce nothing of consequence and (b)  Lyons coming out with the “London benefits from immigration”  fantasy (exactly who  benefits?) and claiming, curiously , that what was needed was the “financial equivalent to the Luxembourg  compromise” to protect the City, curiously because the  Compromise, if it has any practical force at all (which is dubious), already covers such  financial matters because it embraces all aspects of the EU open to majority vote, viz “Where, in the case of decisions which may be taken by majority vote on a proposal of the Commission, very important interests of one or more partners are at stake, the Members of the Council will endeavour, within a reasonable time, to reach solutions which can be adopted by all the Members of the Council while respecting their mutual interests and those of the Community”.

“However, the Compromise, which is only a political declaration by Foreign Ministers and cannot amend the Treaty, did not prevent the Council from taking decisions in accordance with the Treaty establishing the European Community, which provided for a series of situations in which qualified-majority voting applied. Moreover, qualified-majority voting has been gradually extended to many areas and has now become normal procedure, unanimity being the exception. The Luxembourg Compromise remains in force even though, in practice, it may simply be evoked without actually having the power to block the decision-making process.”

It is a little bit disturbing that someone advising  a powerful politician such as Boris Johnson  is so ill informed about the reality of the EU.

The great omission from the event  was any consideration of what the British public wants.   All three speakers  completely ignored the democratic will of the British people.  The British may not like the EU,  but neither do they like globalism. It will be impossible to win a referendum on Britain’s membership of  the EU if the electorate know that all they are being asked to do is to swap the overlordship of Brussels for the  ideological despotism of free trade and mass immigration. (The laissez faire approach involved in globalisation is those with power enforcing an ideology by refusing to act to protect what the vast majority of human beings regard and have always regarded as the interests of their country and themselves.  It is a tyranny caused by the neglect of the rightful use of state power for the common good.)

Come questions from the audience  I was unable to get myself called. Had I been able to do so I should  have raised the question of  the democratic deficit and the impossibility of persuading the British electorate to vote to leave the EU if the alternative was more state sponsored globalism.  Sadly, those who were called to ask questions complete ignored these  vital questions

After the meeting I  managed to speak to Congdon  and put the question I had been unable to ask to him.  Congdon’s response was a simple refusal to discuss the question of protectionist measures. Indeed, he  became extremely animated in his refusal  saying he would have no truck with such ideas.  This is par for the course when I attempt to debate with laissez faire religionists.  They either do what Congdon does, refuse to debate or become abusive.  These are the classic behaviours of religious believers when their ideas are challenged.  These people know in their heart of hearts that their religion, whether it be sacred or profane, cannot stand up to close examination so in the vast majority of cases they a either refuse to debate or resort to abuse  which has the same effect.

Congdon also made the fantastic  statement that come an IN/OUT  referendum,  the British would vote to come out because they “have always valued freedom”.  Apart from this being historically a highly questionable claim, the vast  demographic changes over the past 60 years wrought by mass immigration have both diluted the Britishness of the population and the British population as a whole has been cowed by more than half a century of political correctness being enforced with ever increasing ruthlessness by  those with power in the country.

The other  issue  I raised with Congdon were the implications  that ever deeper  devolution had for the UK’s relations with the EU .  I put forward a plausible scenario: an in/out referendum is held. England votes 70% to leave while Scotland, Wales and Northern Ireland vote 70% to stay in. I asked Congdon what  he thought would happen if such a vote occurred.  Amazingly,  he said he had no idea.

I need not have weighted the votes so heavily towards a vote to leave in England. The discrepancy in size between England and the other home countries is so huge that  England  would not have to vote YES to leaving the EU by anything like 70 for and 30% against to ensure the referendum was won by the leave the EU side.

The official number of registered electors  qualified to vote in Parliamentary elections at  the end of 2012 and their geographical distribution was as follows::

The total number of UK parliamentary electors in December 2012 was 46,353,900, a rise of 0.5 per

cent from December 2011.

The total number of parliamentary electors in each of the UK constituent countries and the

percentage changes during the year to December 2012 are:

• England – 38,837,300, a rise of 0.5 per cent
• Wales – 2,301,100, a rise of 0.1 per cent
• Scotland – 3,985,300, a rise of 1.1 per cent
• Northern Ireland – 1,230,200, a rise of 1.4 per cent

Assuming for the sake of simplifying the example that there is a 100% turnout,  23,176,951 votes would be  needed for a vote to leave the EU.  If England voted by 60% to leave that would  produce  23,302,380 votes to leave , more than would be required  for a simple majority.

But that is obviously not the full picture, There would be a substantial vote to leave  in Scotland, Wales and Northern Ireland. The combined electorate of Scotland Wales and Northern Ireland in 2012  was 7,516,600.  If  70% of those voted to remain in the EU that would only be 5,261,620 votes.   There would be 2,254,980 votes to leave.  If England voted 54% to leave (20, 972,142 votes) the votes to leave in the whole of the UK would be  23,227, 122 (20, 972,142 +2,254,980) , enough to  win the referendum.

Of course that is not how the vote would be in the real world. The turnout would be nowhere near 100%,  although  it might well be  over eighty per cent if the Scottish referendum is a guide.   How   Scotland, Wales and Northern Ireland would vote is of course uncertain,  but  I have allotted  such a generous proportion of the vote to the stay in side in those  countries that it is unlikely I  have seriously over-estimated  the vote to  leave.  What the example does show  is that under any likely voting circumstances there would not need to be a very strong YES to leaving vote in England to override a very strong vote to remain part of the EU  in  Scotland, Wales and Northern Ireland.

If there was such an unbalanced result, that is with England voting to leave and the other three countries voting to stay or even if just one of Scotland, Wales and Northern Ireland voting to remain in the EU, this would ostensibly produce a potentially incendiary constitutional crisis, especially if  Westminster politicians keep on grovelling to the Celtic Fringe as they did during the Scottish independence referendum ( a practice which  grossly inflated the idea of  Scotland’s ability to be independent without any pain in many Scots’ minds).

I said an ostensibly incendiary situation because in reality there would be little appetite to leave the UK  if the hard truths of  what leaving the UK and joining  the EU would mean were placed in front of voters in Scotland, Wales and Northern Ireland. England or England plus one or two of Scotland, Wales and Northern Ireland would be a completely different kettle of fish compared with Scotland leaving the UK with the rest of the UK still in the EU. If any of Scotland, Wales or Northern Ireland wished to leave the UK they would  and join the EU with the rest of the UK or just England outside of the EU,  they would be faced with an England or a remnant UK state which had regained its freedom of action and would not be bound by EU law.

The strategy of those in who want  the UK to leave the EU should be to reduce the idea amongst voters in Scotland, Wales and Northern  Ireland  that leaving the UK and joining the EU after a UK vote to  leave has taken place would be an easy choice.  To diminish  the  vote to stay in those countries  a pre-emptive strike is required before the referendum  laying before voters in Scotland, Wales and Northern Ireland the realities of their relationship with the EU and the  UK if they  seek to leave .

This is something which should have been done during the Scottish referendum.  Indeed, the refusal of the Better Together side of the argument to point out these realties was one of the prime reasons for the NO vote not being much larger than it was, handsome as that result was.  The unionist side generally was deeply patronising  to the Scots with their  line that only Scots could have a say in the debate and that the rest of the union had to keep quiet for fear of upsetting the Scots and driving them to a YES vote.  It implied that Scots are essentially less than adults who could not either bear contrary views or have the wit to listen to hard facts.

The primary things the Scots, Welsh and Northern Irish should be reminded of are:

1. Wales and Northern Ireland are economic  basket cases which rely heavily on English taxpayers to fund their public expenditure. To lose that subsidy would cripple them both. Nor would they get anything like as much extra  funding from the EU – assuming it would have them as members –  as they would lose from the end of the English subsidy.

Scotland is in a better position because it is larger and has for the present at least significant oil revenues. But it is a very narrow economy relying very heavily on public service employment – a significant part of which deals with the administration of English public service matters –  while the private business side of is largely comprised of oil and gas, whiskey, food, tourism and financial services.

The figures below are the latest official estimates of the tax raised in each of the four home countries to the end of the 2012/13 financial year. These figures should not be treated as exact to the last million because there are difficulties in allocating revenue to particular parts of the UK, for example, with corporation tax, but they  are broadly indicative of what each country collects in tax I give two sets of figures to show the differences when oil and gas is allocated on a geographical and a population basis.

Table 1 Total HMRC Receipts (Geographical Split of North Sea Revenues), £m

UK         England    %       Wales      %     Scotland   %        N. Ireland %

2012‐13 469,777   400,659 85.3%    16,337 3.5%   42,415 9.0%       10,331   2.6%

Table 2 Total HMRC Receipts (Population Split of North Sea Revenues), £m

2012‐13 469,777   404,760 86.2%   16,652 3.5%   37,811 8.0%        10,518    2.6%

Compare this with public spending for each of the   home countries in the calendar year 2013 (I was unable to find expenditure figures for the financial year but they would be little different) :

England        £456.2 billion – difference of  £56 billion approx. between tax raised and money spent

Scotland        £53.9 billion  – difference  of £12 billion approx. between tax raised and money spent

Wales            £29.8 billion   – difference  of £13 billion approx. between tax raised and money spent

9. Ireland £19.8 billion   – difference  of £9  billion approx. between tax raised and money spent

NB differences between I tax raised and money spent are based on Table 1 figures which give the most favourable interpretation of Scotland’s tax position.

The approximate  percentage of overspend  (spending less tax collected) by each of the home countries is

England      12%

Scotland     22%

Wales          43%

1. Ireland 45%

The three smaller countries are accumulating debt at a much greater rate than England. In addition, small countries which go independent would find raising the money to meet their overspends would be much more expensive  than the cost of financing the debt as part of the UK

It is also worth noting in passing  the per head differences which are substantial between England and the other home countries.

In 2012/13, public spending per head in the UK as a whole was £8,788.

–              England £8,529 (3% below the UK average).

–              Scotland: £10,152 (16% above the UK average)

–              Wales: £9,709 (10% above the UK average)

–              Northern Ireland £10,876 (24% above the UK average).

If public spending per head was reduced to the present  English level in the other three home countries  approximately £16 billion would be removed from the UK  budget.

2. The vast majority of their trade is with England. Barriers created by England’s departure from the EU could have very serious economic consequences any of other home countries remained  within the EU.
3. Much of what they export to countries outside the EU has to pass through England.
4. All three countries would be net takers from the EU budget not contributors. The EU are unlikely to welcome with open arms three more small pensioner nations. There would be no guarantee that the EU would accept any or all of them as members, but even if they did they terms they would have to accept would be far more onerous and intrusive than they experience now.  In particular, they would almost certainly have to join the Euro as this is a condition for all new members.
5. An England or a reduced UK outside of the EU would have to impose physical border controls because any part of the UK which seceded and joined the EU would be committed to the free movement of labour within the EU (more exactly the European Economic Area – EEA). That would mean any number of immigrants from the EEA would be able to enter either England or a reduced UK via whichever part (s) of the UK had seceded and joined the EU.
6. Being part of the UK gives the smaller home countries great security because the UK still has considerable military clout – ultimately Britain is protected by nuclear weapons – and the size of the population (around 62 million and rising) is sufficient in itself to give any aggressor pause for thought. The proposal for armed forces made in the SNP sponsored White Paper on independence recommended armed forces of 10,000  regulars to start with rising to 15,000 if circumstances permitted.   That would be laughable as a defence force for a country the size of Scotland which has huge swathes of land with very few people on the land.  An independent Wales and N Ireland would be even worse off.
7. They could not expect to walk away from the Union without taking on a share of the UK national debt and of taxpayer funded pension liabilities proportional to their population, have a currency union to share the Pound, have UK government contracts for anything or retain  the jobs exported from England to do administrative public sector work  for England, for example, much of the English welfare administration is dealt with in Scotland.

If  this is done,  with any luck the enthusiasm for leaving the UK to join the EU if  England or England plus one or more of the other home countries has voted to leave the EU will diminish sufficiently to make a vote to  remain in the EU unlike or at least  reduce  the vote to stay in to level where there is not an overwhelming vote to either stay in or leave.