Unbiased pros and cons of EU membership : Part 3 – Corrupt and Undemocratic? The EU and UK governments

In this post I’ll explain how decisions are made in the EU,  how democratic or undemocratic it is, and how corrupt (or not) it is ; and then a discussion of the same for the UK government.

How the EU works – How democratic (or undemocratic) is it?

The EU has four main decision making bodies – the European Commission, the European parliament, the European Council and the Council of Ministers.

The European Council is made up of all the elected heads of government (Prime ministers or Presidents) of EU member countries, plus the President of the European Commission.

Candidates to be President of the Commission are selected by the European Council by Qualified Majority Voting (meaning larger countries get more votes based on their population).

Then the European parliament, (made up of MEPs elected in every EU member country, by the Proportional Representation voting system), votes to approve or reject the candidate for President of the Commission.

Then each country’s government gets to put forward candidates to be commissioners. The Commission President assigns potential offices to them (e.g Commissioner for agriculture) and the European parliament votes to approve or reject them, until enough have been approved that all offices are filled.

The Councils of Ministers are made up of ministers from member governments of the EU. E.g The Council of Ministers when dealing with EU agricultural policy or laws would be made up of the Agriculture Ministers of all national governments in the EU. Votes by any Council of Ministers are also usually by Qualified Majority Voting.

The European Commission can put forward proposals for EU laws (regulations).

Usually any EU law (‘Regulation’) the Commission propose has to be voted on by the European Council (if a very controversial or major issue), or else the relevant Council of Ministers, and also by the European parliament.

The European parliament can also vote to amend (propose changes to) the proposed law. If a majority of the parliament and a majority of the Council vote in favour of the law, it becomes EU law. If not, it does not.

This is called the “Ordinary Legislative Procedure” – shown in more detail in the picture at the start of this post - you can click on the picture to enlarge it.

There are some ‘Special Legislative Procedures’ in which the Commission and the Council are the only ones involved in making a decision on an EU Regulation, with the European parliament only consulted on its views. These are only used rarely and can only be used in certain policy areas.

Then there are EU Directives, which are made by the Commission, and in theory require no one else’s approval to enter into force. In practice though national governments can decide how to implement them.

Also in practice a country’s parliament can choose not to implement a Directive by voting to “derogate” from it, as Ireland’s parliament did over the First Railway Directive, although the EU sometimes takes legal action against and tries to sue member governments for not implementing Directives (though the European Court of Justice does not always rule in the commission’s favour).

International Treaties (such as the extremely controversial Trans-Atlantic Trade and Investment Partnership  or TTIP which the EU and US governments are negotiating on) are negotiated on by commissioners, but on a mandate given to them by the Council and parliament, and must also be ratified by majority votes for them in the European Council and Parliament, and by national parliaments also before they can come into force at EU or national government level.

This is all very complicated, confusing, blurs who is responsible for what ;  and far too much of it happens in secret (with the media banned from most meetings of the Councils and Commission, but allowed in the European parliament).

Even MEPs can’t make any photocopies of documents on the details of TTIP negotiations to show to anyone else for instance (1).

(This resulted in details of the negotiations being leaked – including that they did include the provisions for companies to sue governments for any regulation that limited their profits. (which EU officials had previously denied. (2)

This leak however makes it far less likely any agreement on these terms will be ratified – with the French government already saying it may not ratify TTIP after the leak (3))

However the EU, despite not being nearly as democratic as it should be, is far from being “completely undemocratic” as many of the its critics allege.

Three of the four main decision bodies are elected, and in practice no EU Regulation or Directive can pass without the approval of elected bodies. Nor can “unelected bureaucrats” (i.e European Commissioners) make any decision without elected representatives voting to approve them (or to reject them so they aren’t implemented).

How corrupt or influenced by big banks and firms is the EU?

For instance European Commissioners and their advisers are often former employees of big companies such as Exxon-Mobil – and some of them draw up EU energy and environment policy (4).

The head of the European Central Bank, Mario Draghi, is a former executive at Goldman Sachs bank.

Many other politicians and central bankers in Eurozone countries, have gone back and forth between senior positions in government, and being paid advisers to or executives of Goldman Sachs and other large banks (5).

It seems unlikely to be coincidence that the EU has issued 1 trillion Euros of ‘Quantitative Easing’ money to private banks, but won’t issue any to pay off debts of countries like Greece (6).

And around a third of European Commissioners, on finishing their time in office, go into jobs working for big banks or firms (7).

These are just examples, not an exhaustive list.

Now how democratic is the UK government? And how influenced by big business?

How democratic (or not) and how corrupt,
or influenced by big business, (or not) is the UK government?

MPs – The House of Commons

The House of Commons – the MPs of the UK parliament - are elected by the First Past the Post voting system, which bins millions of peoples’ votes unrepresented in every election, and lets parties get a majority of seats on a minority of votes (currently the Conservatives have 51% of MPs on 37% of votes) (8).

In theory elected MPs appointed government ministers direct civil servants on what laws to make and parliament votes on whether to amend them, pass them or reject them.

The House of Lords

The House of Lords, though unelected, has little power in practice. It can only send a bill (draft law) back to the elected House of Commons (made up of MPs) twice, with suggested amendments (changes). If the Commons send the bill back a third time the Lords cannot vote against it, even if their amendments have been rejected.

In practice the Lords have helped to prevent Prime Ministers with big majorities for their party in parliament rushing through laws before the public, MPs, or the media have had time to look at what those laws would do in detail – because many MPs just vote whatever way the party leader tells them to most of the time.

The Prime Minister can appoint unelected members of the House of Lords to be government ministers, which is more dubious.

Big banks and Companies’ Influence in government departments

A much more undemocratic – and arguably corrupt – factor - is that big banks and big companies that donate to party funds often second their employees to UK government departments. They then get to influence, write, or scrap, regulations for their industries.

The Ministry of Defence has dozens of staff seconded to it from arms companies it’s giving contracts to . Energy companies second dozens of staff at a time to the Department of Energy and Climate Change – including some from gas companies writing energy policy (9) – (12)

The four largest accountancy firms in the UK also routinely second staff to the Treasury, where they help draft tax laws. They then use the knowledge of tax laws and influence over them which they gain to help paid clients they advise (including big banks and companies) to avoid taxes (13) – (14).

Chancellor George Osborne has even given a job to the former head of the British Bankers’ Association writing tax law at the Treasury. (15)

There are no laws preventing advisers or ministers taking jobs with firms they did favours for in government. And advisers to ministers and Prime ministers are not elected, but appointed. 

In itself advisers being unelected would not be a problem, if so many of them did not have close involvement with private companies who profit from advice they give ministers – and if they did not often then take jobs with those companies.

For instance Sir Stuart Rose, an adviser to Health Secretary Jeremy Hunt, is also a paid member of the Board of Bridgepoint Capital – an investment firm which owns the majority of shares in the private healthcare firm Care UK (16).

Mark Britnell, an adviser to Prime Minister David Cameron on health policy, told a meeting of private healthcare firm executives that the NHS would be shown “no mercy” and that this was a “big opportunity” for them (17).

A year later he went into a job as a lobbyist for a company that lobbies on behalf of private healthcare companies (18).

The former head of HMRC – the Treasury’s tax collecting body – Dave Hartnett, now has a job working for the HSBC bank (19).

Under him HMRC let big banks and firms off with not paying large amounts of tax, without prosecution, in “sweetheart deals”, while aggressively prosecuting people on ordinary incomes for tax evasion (20).

The Campaign Against the Arms’ Trade’s Revolving Door blog shows the many former Ministry of Defence Ministers, advisers and chiefs of staff who have gone on to jobs working in arms companies (21).

Former Conservative Health Secretaries Stephen Dorrell and Andrew Lansley both went into jobs working for private healthcare firms after overseeing the contracting out of NHS services to private companies that donated to Conservative party funds (22) –(23).

Before that New Labour Health Secretaries Patricia Hewitt and Alan Milburn similarly went into jobs with private healthcare firms after also overseeing ‘Public Private Partnership’ contracts going to private firms, and the contracting out of NHS services to private firms.(24).

Again these are just examples, not every instance.

Big Business Influence through donations to party funds

There are no serious restrictions on political donations from big banks, big firms or the very wealthy to political parties.

Banks and hedge funds provided over half of the donations to Conservative party funds in the run up to the 2010 election (25).

The Coalition government including the Conservatives continued New Labour’s policy of massive Quantitative Easing of hundreds of billions of pounds, with every penny going only to private banks  (26).

In 2013 Mark Carney, a former executive at Goldman Sachs bank, was appointed Governor of the Bank of England (27).

Between 2010 and the 2015 election super-rich hedge fund managers donated £10 million to the Conservative party (28).

At the same time Chancellor George Osborne cut the top rate of tax from 28% to 20%, and abolished stamp duty reserve tax on asset management funds – which would include hedge funds (29).

Although he did later exclude hedge funds from a cut in Capital Gains tax for other businesses (30)

Leaving the EU without addressing these problems will not fix them.

It’s private political donations and the revolving door between government and business that are undermining democracy at every level of government.

The Leave Campaign’s leaders – Would they protect the NHS and stop TTIP?

Leave campaigners Michael Gove MP, Daniel Hannan MEP and Nigel Farage MEP  say they would increase NHS funding if we left the EU. Yet Gove and Hannan co-authored a book in 2009 which called the NHS “irrelevant to the modern world”. And Hannan told Fox News that the NHS was “a 60 year old mistake”. Farage has been caught twice saying the NHS should be replaced with private healthcare (31) – (33).

Gove , Ian Duncan Smith and Boris Johnson are also members of a Conservative government slashing public health spending so it can say the NHS has “failed” and needs “reforms”, while promising “big opportunities” to private healthcare firms that donate to Conservative party funds (34) – (35).

So are Cameron and Osborne, who are for staying in the EU, but Hannan and Gove’s previous statements suggests they would erode the NHS even more.

Boris Johnson’s supposed opposition to the Transatlantic Trade and Investment Partnership is not credible when he wrote an article praising its “brilliance” in 2014. (36).

So if Boris has his way he will probably just negotiate a TTIP style deal, but between the UK and the US rather than the EU and the US.

Sovereignty here just means Boris and pals handing more power to big business. And these are the people likely to become Prime Minister and government ministers once David Cameron stands down (As he’s said he will before the next General Election) if we leave the EU.

Of course many of the politicians campaigning for remaining in the EU are no more trustworthy – certainly not Cameron or Osborne.

Conclusion – Leave or Remain in the EU?

So the EU and the UK government both leave a lot to be desired. Both should be a lot more democratic than they are. Both are heavily influenced by big banks and big companies through donations to political parties and the revolving door of people going back and forth between government and big business.

Which you choose is up to you. You may decide that getting rid of one level of bad government is an improvement. Or that there is no point in leaving one corrupt and not fully democratic layer of government just to give another that is just as bad more influence – and that remaining to push for reform of both is the best way.

 

 (1) = www.guardian.com 18 Feb 2016 ‘MPs can view TTIP files – but take only pencil and paper with them’, https://www.theguardian.com/business/2016/feb/18/mps-can-view-ttip-files-but-take-only-pencil-and-paper-with-them

(2) = www.independent.co.uk 02 May 2016 ‘After the leaks showed what it stands for, could this be the end for TTIP?’, http://www.independent.co.uk/voices/ttip-leaks-shocking-what-are-they-eu-us-deal-a7010121.html

(3) = www.guardian.com 03 May 2016 ‘Doubts rise over TTIP as France threatens to block EU-US deal’, https://www.theguardian.com/business/2016/may/03/doubts-rise-over-ttip-as-france-threatens-to-block-eu-us-deal

(4) = Corporate Europe Observatory ‘Brussels, Big Energy, & revolving doors: a hothouse for climate change’, http://corporateeurope.org/pressreleases/2015/11/brussels-big-energy-revolving-doors-hothouse-climate-change

(5) = www.independent.co.uk 18 Nov 2011 ‘What price the new democracy? Goldman Sachs conquers Europe’, http://www.independent.co.uk/news/business/analysis-and-features/what-price-the-new-democracy-goldman-sachs-conquers-europe-6264091.html

(6) = BBC News 22 Jan 2015 ‘ECB unveils massive QE boost for eurozone’, http://www.bbc.co.uk/news/business-30933515

(7) = Corporate Europe Observatory 17 Mar 2016 ‘Revolving doors round-up’, http://corporateeurope.org/revolving-doors/2016/03/revolving-doors-round

(8)  BBC News Election 2015 Results,
http://www.bbc.co.uk/news/election/2015/results

(9) = www.guardian.co.uk 17 Feb 2015 ‘Dozens of arms firm employees on MoD secondments’, https://www.theguardian.com/uk-news/2015/feb/16/dozens-of-arms-firm-employees-on-mod-secondments

(10) = www.guardian.co.ujk 05 Dec 2011 ‘Energy companies have lent more than 50 staff to government departments’, https://www.theguardian.com/business/2011/dec/05/energy-companies-lend-staff-government

(11) = www.guardian.co.uk 10 Nov 2013 ‘Gas industry employee seconded to draft UK's energy policy’, https://www.theguardian.com/environment/2013/nov/10/gas-industry-employee-energy-policy

(12) = Independent 22 Apr 2015 ‘Big Six firms use influence to dictate energy policy, claims leading environmentalist’, http://www.independent.co.uk/environment/big-six-firms-use-influence-to-dictate-energy-policy-claims-leading-environmentalist-10196672.html

(13) = www.guardian.co.uk 26 Apr 2013  'Big four' accountants 'use knowledge of Treasury to help rich avoid tax', https://www.theguardian.com/business/2013/apr/26/accountancy-firms-knowledge-treasury-avoid-tax ( four main accountancy firms in the UK second staff to Treasury to write tax laws, then use knowledge of them to help clients avoid tax)

(14) = House of Commons, Committee of Public Accounts, 15 Apr 2013 ‘Tax avoidance: the role of large accountancy firms ‘, http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/870/870.pdf

(15) = www.guardian.com 09 Dec 2015 ‘Osborne criticised over Treasury job for former bank lobbyist’, http://www.theguardian.com/politics/2015/dec/09/former-bank-lobbyist-to-head-treasury-office-tax-simplification (former Chief Executive of British Bankers’ Association given job writing tax law for the Treasury)

(16) = Independent 14 Feb 2014 ‘NHS adviser Sir Stuart Rose has private health link’,
http://www.independent.co.uk/life-style/health-and-families/health-news/nhs-adviser-sir-stuart-rose-has-private-health-link-9129592.html

(17) = www.guardian.co.uk 14 May 2011 ‘David Cameron's adviser says health reform is a chance to make big profits’, http://www.theguardian.com/politics/2011/may/14/david-cameron-adviser-health-reform (for private healthcare firms – also told them NHS would be “shown no mercy”)

(18) = Guardian 23 Nov 2012 ‘David Cameron's former NHS privatisation adviser becomes lobbyist’, http://www.theguardian.com/politics/2012/nov/23/david-cameron-privatisation-adviser-health-lobbyist

(19) = www.independent.co.uk 24 Mar 2015 ‘Former HMRC boss Dave Hartnett forced to defend new job – with HSBC’, http://www.independent.co.uk/news/business/news/former-hmrc-boss-dave-hartnett-forced-to-defend-new-job-with-hsbc-10129195.html

(20) = www.guardian.com 29 Apr 2013 ‘Revealed: 'Sweetheart' tax deals each worth over £1bn’, http://www.theguardian.com/politics/2013/apr/29/sweetheart-tax-deals

(21) = Campaign Against The Arms Trade – Revolving Door Log,
https://www.caat.org.uk/issues/influence/revolving-door

(22) = www.guardian.co.uk 20 Oct 2015 ‘Ex-health secretary Andrew Lansley to advise firms on healthcare reforms’, http://www.theguardian.com/politics/2015/oct/20/andrew-lansley-advise-firms-healthcare-reforms

(23) = PULSE 01 Dec 2014 ‘Former health secretary takes up private management consultancy role’,  http://www.pulsetoday.co.uk/political/political-news/former-health-secretary-takes-up-private-management-consultancy-role/20008623.fullarticle (this time Stephen Dorrell MP)

(24) = Guardian 17 May 2011 ‘Former Labour ministers rushing to take private sector jobs, report finds’, http://www.theguardian.com/politics/2011/may/17/labour-ministers-consultancy-private-sector

(25) = Bureau of Investigative Journalism 08 Feb 2011 ‘Tory Party funding from City doubles under Cameron’, https://www.thebureauinvestigates.com/2011/02/08/city-financing-of-the-conservative-party-doubles-under-cameron/

(26) = BBC News 03 Dec 2015 ‘What is quantitative easing?’, http://www.bbc.co.uk/news/business-15198789

(27) = BBC News 30 Jun 2015 ‘Mark Carney takes over as head of Bank of England’, http://www.bbc.co.uk/news/business-23118515

(28) = www.independent.co.uk  04 Feb 2015 ‘General Election 2015: How hedge fund super-rich 'donated £19m to Tory party'’, http://www.independent.co.uk/news/uk/politics/how-hedge-fund-super-rich-donated-19m-to-tory-party-10024548.html

(29) = www.mirror.co.uk 24 Mar 2013 ‘George Osborne in Budget giveaway to Tory donors in the City’, http://www.mirror.co.uk/news/uk-news/george-osborne-budget-giveaway-tory-1781551

(30) = Telegraph 17 Mar 2016 ‘Budget 2016: private equity angered at exclusion from capital gains tax cuts’, http://www.telegraph.co.uk/business/2016/03/17/budget-2016-private-equity-angered-at-exclusion-from-capital-gai/

 (31) = www.guardian.co.uk 16 Aug 2009 ‘Key Tory MPs backed call to dismantle NHS’,
http://www.theguardian.com/politics/2009/aug/16/tory-mps-back-nhs-dismantling (Michael Gove MP and Daniel Hannan MEP co-authored book ‘Direct Democracy’ in 2009 which said the NHS is “no longer relevant in the 21^st century”. Hannan also told Fox News that the NHS was a “60 year old mistake”)

(32) = www.guardian.co.uk 12 Nov 2014 ‘Film shows Nigel Farage calling for move away from state-funded NHS’, http://www.theguardian.com/politics/2014/nov/12/film-nigel-farage-insurance-based-nhs-private-companies

(33) = www.independent.co.uk 20 Jan 2015 ‘Nigel Farage: NHS might have to be replaced by private health insurance’, http://www.independent.co.uk/news/uk/politics/nigel-farage-nhs-might-have-to-be-replaced-by-private-health-insurance-9988904.html

(34) = www.independent.co.uk 27 Nov 2015 ‘George Osborne actually cut public health budget by 20 per cent despite NHS promises, analysis finds’, http://www.independent.co.uk/news/uk/politics/george-osborne-actually-cut-health-budget-by-20-per-cent-despite-nhs-promises-analysis-finds-a6751311.html

(35) = see the blog post on this link and sources in it

 (36) = Telegraph 19 Oct 2014 ‘This trade deal with America would have Churchill beaming’, by Boris Johnson,
http://www.telegraph.co.uk/news/politics/11173369/This-trade-deal-with-America-would-have-Churchill-beaming.html

Unbiased pros and cons of EU membership 2 : Are the EU's actions towards Greece undemocratic? Would the UK leaving the EU help or harm Greeks?

Is the EU’s treatment of Greece democratic or not though? Unelected officials from the ‘Troika’ (European Commission, European Central Bank and International Monetary Fund) were sent to oversee Greek government departments’ spending , with the stipulation that “No unilateral fiscal or other policy actions will be taken by the [Greek] authorities. All measures, legislative or otherwise, taken during the programme period, which may have an impact on banks’ operations, solvency, liquidity or asset quality should be taken in close consultation [with the troika]” (1)

The Greek electorate voted in a party – Syriza – whose manifesto included scrapping EU imposed austerity. Then they were told this would not change the agreements made with the Troika by previous Greek governments.

German and Hungarian government politicians argue that they were representing the electorate of their own countries who were paying for financial support to Greece.

The reality is a lot more complicated than that as Germany benefited most from a free trade zone and single currency with weaker economies like Greece.

Despite myths of Greeks being lazy and tax avoiders, they in fact worked longer average hours than any other country in Europe even before the crisis , with Germans working considerably less hours on average(2) – (3).

And tax avoidance by the very wealthy is hardly something unique to Greece with e.g Switzerland, Luzembourg and the British Channel Islands being notorious tax havens, and many British companies, banks and billionaires avoiding tax in tax havens.

Greeks also had the options of defaulting on their debts and dropping the Euro as a currency and going back to their own currency, so they could issue money themselves, rather than having to ask the European Central Bank to issue them with Euros.

The Syriza Finance minister Yanis Varoufakis favoured at the least threatening to do this, and if necessary, doing. However the Greek government did not do it as the majority of Greeks in polls were against it, fearing that if done during a crisis it would lead to more panic and hyper-inflation.

This is still an option for the Greek government though, if it believes the damage done by EU imposed austerity policies is so bad that the other risks couldn’t be worse.

What there can be no doubt about is that the refusal of the same 50% debt forgiveness that Greece approved for Germany after World War Two, and the austerity policies imposed on Greece are both unfair and completely counter-productive.

Severe austerity cuts on the scale imposed on Greece reduce the size of the economy as a whole by reducing demand for private sector goods and services, reduce growth, and so make paying off any of the debt impossible.

From 2008 on during protests and riots against austerity measures Greek riot police have killed dozens of protesters and rioters, starting with what seems to have been the unprovoked murder of a 15 year old boy by armed police in December 2008 (4).

The EU have demanded that Greece run a budget surplus of 3.5% of GDP by 2018, which is over five times as large as the largest budget surplus that Germany, the strongest economy in the EU has ever had, at 0.6% of GDP in 2015 (5) – (6).

Even the IMF – one part of the Troika – has now said this ridiculous and argues that debt forgiveness and a relaxation of austerity are required for Greece (7).

What they don’t say is that, as Syriza have pointed out, some of the 1 trillion euros of Quantitative Easing money which have been created by the European Central Bank to hand to private banks could be used to pay off much of Greece and Spain’s debt (8) – (9).

Some people would argue that the UK leaving the EU could lead to the collapse of the EU and that this would free Greece from EU austerity policies.

However some Greeks, like Yanis Varoufakis,  a leading critic of EU austerity policies, want the UK to stay in as an ally for reform , arguing that if the EU splits up the result will be chaos and panic, which will be even worse for Greece (10).

He has launched an EU wide movement for democracy and against austerity policies called Diem25.

And the majority of Greeks , while they are angry and unhappy at what the EU has imposed on them, believe they are not in a position to leave the EU or go back to their own currency at the moment.

(1) = Open Democracy 14 aug 2015 ‘Greece has become the EU’s third protectorate’, https://www.opendemocracy.net/can-europe-make-it/jan-zielonka/greece-has-become-eu%E2%80%99s-third-protectorate

(2) = BBC News 26 Feb 2012 ‘Are Greeks the hardest workers in Europe?’,
http://www.bbc.co.uk/news/magazine-17155304

(3) = OECD Stat Extracts ‘Average annual hours actually worked per worker’, http://stats.oecd.org/index.aspx?DataSetCode=ANHRS

(4) = BBC News 05 May 2010 ‘Three dead as Greece protest turns violent’,
http://news.bbc.co.uk/1/hi/8661385.stm

(5) = BBC News 22 Jun 2015 ‘Greece spells out terms for debt crisis 'breakthrough'’,
http://www.bbc.co.uk/news/world-europe-33228119 (scroll down to subheading  ‘Greece debt talks : main sticking points’ ‘EU officials say Greece has agreed to budget surplus targets of 1% of GDP this year, followed by 2% in 2016 and 3.5% by 2018; Greece says nothing is agreed until everything is agreed’ )

(6) = AFP 23 Feb 2016 ‘Germany notches up record budget surplus in 2015: stats office’, http://www.newvision.co.ug/new_vision/news/1417803/germany-notches-record-budget-surplus-2015-stats-office

(7) = www.guardian.co.uk 23 May 2016 ‘IMF tells EU it must give Greece unconditional debt relief’, https://www.theguardian.com/business/2016/may/23/imf-warns-eu-bailout-greece-debt-relief

(8) = Greek Reporter 28 Jan 2015 ‘Greece: This is SYRIZA’s New Government Plan in Detail - See more at: http://greece.greekreporter.com/2015/01/28/greece-this-is-syrizas-new-government-plan-in-detail/#sthash.ahNA2k1R.dpuf’, http://greece.greekreporter.com/2015/01/28/greece-this-is-syrizas-new-government-plan-in-detail/

(9) = BBC News 22 Jan 2015 ‘ECB unveils massive QE boost for eurozone’, http://www.bbc.co.uk/news/business-30933515

(10) = www.guardian.com 05 Apr 2016 ‘Yanis Varoufakis: Why we must save the EU’,
https://www.theguardian.com/world/2016/apr/05/yanis-varoufakis-why-we-must-save-the-eu

Unbiased Pros and cons of EU membership - Part One : The EU, Immigration and its Effects on the UK

Immigration is one of the big issues in the EU referendum debate, with a lot of claims about how harmful or beneficial it is to the UK. Some of this is based in fact. A lot of it is not.

As someone who is (relatively) neutral on the EU referendum, though tending towards reluctantly voting Remain, and knows a little about the EU, I’m  trying to provide some facts to help people looking for some unbiased information on the pros and cons of being in the EU.

EU Freedom of Movement

The EU does have a Freedom of Movement rule, but this rule only applies to  “workers” and citizens of EU member states and their families. It does not apply to refugees or other migrants coming from outside the EU. The only exceptions would be the minority of asylum seekers who are granted not only refugee status, but full citizenship in an EU member country.

Would leaving the EU end Freedom of Movement or not?

Norway and Switzerland, who are not members of the EU, trade with the EU through their membership of the European Economic Area or EEA (basically a free trade zone without political integration of the kind most of the Leave campaign back).

However EEA membership requirements include the same Freedom of Movement rules with the EU as EU membership does.

It is possible that the UK, which is a considerably larger country and economy than Norway or Switzerland, might be able to negotiate a special deal that granted it single market access without freedom of movement, just as it negotiated opt outs from the Schengen agreement and from adopting the Euro as a currency as an EU member.

It would however be one country of 64 million people negotiating with a bloc of 27 countries with 440 million odd people, so those could be tough negotiations.

And while some remaining EU member states might want to continue access to the UK for their exporters, Germany and France would have a motive to make an example of the UK to discourage other countries from leaving the EU. German Finance Minister Wolfgang Schauble recently ruled out allowing the UK to stay in the single market if it leaves the EU (though of course he is just one minister of one EU government) (1)

A migrant crisis in the EU?

The scale of the “migrant crisis” in the EU, and how much it affects Britain, is also greatly exaggerated by much of the media. To see the full details, see the blog post on this link. In summary though, last year (2015) the total number of people coming to the EU from outside it was under 1% of its 504 million population spread between 28 countries. Many of the people who arrive each year leave or are deported. Only a small minority of these come to Britain. The UK gets a very small share of asylum applications relative to our population compared to other EU countries (2).

Open Borders?

There is a lot of talk of “open borders”. The EU does not have open borders with non-EU countries. Until last year some EU states – those that signed up to the Schengen agreement – did have open borders with one another. This has never included the UK or Ireland, which did not sign the agreement and have always required passports to be shown and customs checks for people entering or leaving the UK.

Several countries, including Hungary, have broken the Schengen agreement last year during the “migrant crisis”, by closing their borders with other EU countries.

British citizens living or working in other EU countries under Freedom of Movement

Another factor to consider is that somewhere between 1.2 million and 2.2 million British people are living or working in other EU countries, mostly under EU Freedom of Movement rules. And some of them do claim benefits (though, like citizens of other EU states in the UK, some of these are in-work benefits). (3) – (5).

If the UK did leave the EU, and did manage to get a special deal that meant Freedom of Movement rules didn’t apply, it seems massively unlikely that remaining EU member states would continue to allow British citizens Freedom of movement in their countries.

Some lawyers argue that under the 1969 Vienna Convention anyone who had lived in another EU country before the UK left the EU would retain “acquired rights” to stay there even after the UK left the Union (6).

But other lawyers argue the opposite, saying the Vienna Convention applies only to bilateral agreements between two states, and not to relations between the EU and former EU member states (7).

Either way UK citizens who wanted to go to live, work or claim benefits in other EU countries after the UK left the UK would have no legal right to do so.

And if the UK expelled citizens of other EU countries, they would almost certainly retaliate in kind by expelling British citizens from their countries.

Citizens of other EU countries living in the UK under Freedom of Movement

Most of the estimated 3 million citizens of other EU countries living in the UK under the same rules are in work (8) – (9).

Whether they would be able to stay in the UK if the UK left the EU would depend on the same factors are for UK citizens living in other EU countries outlined above.

It would also depend on what policies the UK government decided on and what agreements it could make with the EU.

What is certain is that if no deal was struck then most EU citizens currently in the EU would not meet the current UK government standards applied to non-EU nationals as required for a visa (10).

What percentage of immigrants to the UK are from the EU?

Roughly half. Net migration to the UK from the EU in the last quarter was 184,000. From non-EU countries it was 188,000 (click this link and scroll down to table 2). (11)

The number of people coming from EU countries has increased a bit faster than those coming from non-EU countries since 1990 though, probably due to the new member countries that have joined since then.

How does immigration from the EU benefit or harm the UK?

The big area where EU membership does have an effect on immigration in the UK is immigration from other EU member states to the UK increasing our population. Is this harmful to the economy and existing population of the UK, beneficial, neither, or a mixture though?

Does immigration increase unemployment and /or push down wages?

It’s often claimed by anti-immigration campaigners that immigration is pushing down wages and increasing unemployment in the UK, as well as overloading public services like the NHS and schools with more people than they can handle.

A London School of Economics study looking at wages, unemployment and levels of immigration in each of England’s counties between 2004 and 2012 found no connection between levels of immigration and unemployment or wages (12).

Some other studies found a small increase in unemployment caused by immigration from the EU, especially during recessions, but overall found there has not been enough research to say for certain (13).

The idea that immigration just causes unemployment and lower wages is based on missing out half the picture though. Yes immigration increases the supply of labour, but any population increase, whether due to immigration or not, also increases demand for goods and services from the same extra people, not only from the public sector but from private companies too. More people means more sales of products and services for lots of businesses, meaning more profits and more jobs.

If that was not the case then every time a country’s population increased for any reason – whether immigration or more people being born than are dying, it would immediately get poorer. The UK’s population has been increasing for centuries – and it’s been getting richer all the time.

So the overall effect on the unemployment rate and wages from any population increase should be roughly zero, all other factors being equal.

The exception of course is that some migrant workers send or take much of the money they earn working in the UK back to their home countries, which would reduce the wealth of the UK and demand for goods and services here compared to if people born here or staying here permanently had that job.

Strain on public services?

A rapid increase in population may well put strain on public services in some areas, especially as more immigrants settle or work in London and the South East, where most of the jobs are, and where they are more likely to be able to make contact with family members or friends who came before them.

Citizens of other EU countries make up about 5% of NHS staff, about the same proportion of the UK’s population who are citizens of other EU countries, but they make up 10% of NHS doctors (14) – (15).

Immigrants and the EU are easy to blame for national governments looking for someone to blame for the effects of their own policies. The NHS and schools have been under considerable strain for decades due to the “internal market” introduced under Thatcher, and the exorbitant cost of Private Finance Initiatives or PFIs brought in under Major’s Conservative government in the 1990s, expanded under both New Labour (who renamed them ‘Public Private Partnerships’ or PPPs) and then by the Conservatives again (renamed ‘PF2s’) under Cameron and Osborne.

For more on this see e.g the Migration Observatory link here  (which basically says the statistics to decide this have never been collected),  Full Fact on this link and the anti-immigration Migration Watch page on this link

Housing shortages and immigration

It’s often argued that immigration is the cause of the shortage of housing and high rents and rising house prices in the UK. How true is this though?

Most studies show 60% or more of immigrants in the UK rent privately owned properties, and that immigrants are more likely to rent houses from private landlords than people born here (16) – (17).

Studies also show that house prices actually fall in areas where immigrants live, as less people who aren’t immigrants want to live there (18).

While about 12.5% of the UK’s population were born in another country, figures from pretty much every neutral source show about the same percentage of immigrants as people born here are in social housing. So the common claim that immigrants get to “jump the queue” for social housing is false (19) – (21).

The shortage of social or council housing is largely caused by governments from Heath’s on selling off council houses at a discount price in order to get votes, without providing local councils with anything like enough money to build or buy replacements for most of them. This, along with a fall in the percentage of new houses that are publicly owned, has depleted the UK’s stock of social housing massively.

There are also over 1 million privately owned properties which no one lives in. So inequality is probably another cause (22).

The rate of population increase (mostly driven by increasing immigration in the last few decades) can’t be ignored as a factor, but it’s far from the only one – and not as high as many people believe. The net increase in population of 336,000 last year for instance was an increase of just over half of one per cent on the existing population of 64 million (23).

Population increase resulting in harm to environment and quality of life
Versus Immigration helping with our ageing population

The one area where immigration might be more harmful is that any population increase when population is already high can lead to damage to the environment and to peoples’ quality of life by more of the country becoming urbanised as more trees are cut down, more fields built over with houses, more roads are built, more cars are driven etc.

Immigration is certainly the main cause of population increase in the UK and most other developed countries, with birth rates among people born here lower than those among immigrants. The net increase in population last year was around 336,000, added to an existing population of 64 million, an increase of slightly over half of one per cent (24).

It’s also certainly true that the long term trend of immigration since the UK joined the EC and then EU has been to keep increasing, especially since the 1992 Maastricht Treaty which established Freedom of Movement within the EU, though even before we joined the EU the trend was to increase (25).

It seems likely that that trend will continue.

I would argue that the damage population increase can do to the environment and quality of life is the one area that EU membership and Freedom of Movement could be harmful overall to the UK.

But this has to be balanced against the way that immigration from the poorest countries can help the poorest people in the EU, and their families. Money sent home by migrant workers dwarfs all foreign aid combined.

This , of course, means some of the money earned by immigrants in the UK is not spent here, so does not increase demand for goods or services here.

The people who are migrant workers sending money home though, are also the ones who go home after earning some money, so those people don’t increase the UK’s population in the long term.

Plus the UK, like all developed countries has problems caused by an increasing average age. The proportion of pensioners, who require both pensions and more health care, is rising. The proportion of people of working age is falling. If we reduce the number of immigrants the proportion of pensioners may increase faster as the average age of immigrants and refugees is lower, most of them being of working age (26) – (27).

There are other possible ways to counteract this – for instance in France the 35-hour week and benefit incentives for having two or more children have given it a higher than average birth rate of 2 per woman (28).

But then population increase of any kind – whether due to people born here having children, or due to immigration, is just as harmful to the environment and quality of life.

So there are benefits and costs to either increasing or reducing population, though at some point we have to face up to the need to reduce the entire world’s population and the amount of pollution created per person.

The Real Scandal?

The biggest scandal (in my opinion) surrounding people coming from outside the EU to all countries in the EU is that the EU and its member governments (including the UK) are sending so many refugees back to countries which are clearly not safe, like Turkey, which has been sending Syrian refugees back to the civil war in Syria for years and is not really even a democracy any more (the President has stripped opposition MPs of their immunity from prosecution in preparation for jailing some of them). On top of that the Turkish government has restarted a civil war inside Turkey with its own Kurdish minority, and the UN has had to cut off food aid to many refugees in Turkey, Lebanon and Jordan as governments in the EU and other wealthy countries haven’t donated enough money to fund it.