The Treasury Paper - A Basis for Debate

The Treasury Paper - A Basis for Debate

At long last the referendum battle seems to be joined. Until this week the points were all coming from the Brexit camp and the only riposte seem to be the government's rather unimpressive and very expensive leaflet. When would the Remain camp break cover, or had they decided to sleep out the campaign and rely on their opponents to trip themselves up? Well, we know now. The 200 page document from the Treasury showing the likely decline in GDP if we leave the EU is clearly the centrepiece of their case and by running the figures on different assumptions as to the new trading arrangements they have made it impressive. The broadside has been augmented by other salvos. Eight former US treasury secretaries have written to "The Times" supporting the Remain case (subject to the usual caveats about it being a matter for the British people). The Governor of the Bank of England talks about the economic cost of leaving. 200 entrepreneurs throw their weight into the lists. No doubt Mr Obama will add a word or two in due course.

Mr Gove has led the countercharge on behalf of the Leave campaign. He thinks that the basis of the Treasury paper is flawed and that, either because our vote to leave will result in others following or because the balance of trade between the UK and the EU makes it in the EU's interest, we will end up with good trading terms. He talks of a wider tariff free zone running from Iceland to Turkey, running independent of EU membership. Will matters run on in this way or will we be faced with exclusionary tariff barriers to discourage others from leaving? Who knows?

The trouble is that nobody does know. If Mr Gove is wrong, the UK will clearly take a considerable long-term financial hit. But then supposing we stay in the EU. There is just as much uncertainty In as Out. Will the EU learn lessons from the dislike it seems to have engendered both here and in other member countries and finally put the idea of subsidiarity, under which it only takes responsibility for those things which cannot be done nationally, into effect? Or will it just tick on, an increasingly over-regulated continent unable to compete with the US and the Far East? It is all very well for Mr Juncker, the President of the EU Commission, to say that the EU has interfered too much in national affairs, but the idea of subsidiarity has been there since the Maastricht Treaty which came into force in 1993 and no serious attempt has been made to release powers to the member states. What makes us think they will change now? If they get a "Remain" vote from Britain our leverage will be gone.

The difficulty with the debate is that there are too many uncertainties on each side, so that a decision is not so much a declaration of political principles as a giant bet. Will we be bound to a centralising and decaying system if we stay in? Will we be cut out of European markets if we leave? Is it realistic to think that we will be able to participate in those markets without freedom of movement?

These are difficult questions and the best thing about the last few days is that they are now the questions on the table. Hopefully then we will hear less about the spurious side issues (who really believes that we will cease to collaborate with the EU over the curbing of terrorism?) and the debate will focus on the real points until some sort of consensus emerges. With complex matter like this we all needed somewhere to start. Thank goodness that by producing a comprehensive economic analysis the Treasury have given everyone something to work from.

Reprinted from Shaw Sheet.


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