Lord Lawson's Chatham House speech - The Case for Brexit

Summary

 

The European Union is a political project not shared by Britain

  • We continue to be fully subject to present and future EU legislation, driven by the objective of full-blooded political union.
  • The growth in decisions taken by Quality Majority Voting means that the UK will continue to be outvoted by eurozone countries.
  • In the Council of Ministers, Britain has opposed rules on 72 occasions, and lost 72 times.
  • Britain will not be protected from integrationist EU legislation post-referendum. The rest of the EU is committed to ever closer union.
  • Domestic legislation can be replaced whereas EU legislation is much harder to reform.
  • After we Vote Leave, we can regain control over our laws.
  • The European Union has proved itself to be unreformable
  • The ‘red card’ proposal is hugely difficulty to enforce, and would only bring about a ‘comprehensive discussion’
  • One of the most unattractive aspects of the European integrationist movement is its contempt for democracy. The eurocracy know what is best for the people; and if the people have the temerity to vote the wrong way in a referendum, they are told they must vote again.
  • Membership of the European Union, however well-intentioned, is an affront to self-government; and it offers nothing that remotely compensates for this.

 

No economic reasons for staying in the EU

  • The EU with its single market is the slowest-growing economic bloc in the world.
  • The single currency is dysfunctional, and the EU is unwilling to undertake structural reforms to address this
  • Only 15% of the UK economy consists of exports to the EU, and this is declining. Yet the whole UK economy is made subject to onerous EU regulation.
  • Brexit means that we would no longer suffer the heavy burden of EU regulation on the 85% of the economy that does not consist of exports to the Single Market.
  • EU regulation is damaging to our small and medium sized businesses, costing around £25 billion a year.
  • We are the most important market for the EU. We also buy more from them than they do from us.
  • It is ‘highly implausible’ that we would not be able to negotiate a free trade deal with the EU after a Leave vote
  • Outside of the EU, we would be able to strike our own free trade deals

 

The economic future for us is global

  • Security is of the utmost importance, but it has nothing to do with the EU or our membership of it
  • NATO is the guarantor of our security not the EU.
  • The UK is the only major EU country with a commitment to spend 2% of GDP on defence
  • Our special intelligence relationship with the United States, and the wider ‘Five Eyes’ intelligence agreement, which also includes Canada, Australia and New Zealand,  are key components of our national security
  • We will be better able to respond to the globalisation of the economy outside the EU, where most countries in the world are.
  • Our language, bilateral relationships, Commonwealth membership, legal system, timezone and status as a world financial centre makes us well placed to deal with these challenges. 

 

Full speech

It is always a privilege to speak at the hallowed institution of Chatham House.

The last time I did so was 27 years ago, during my final year as Chancellor of the Exchequer, when I chose to speak about Britain and the European Community, as it was then known. 

This was before the advent of European monetary union, indeed before the publication of the Delors Report which was to set out the proposals for monetary union; but it was already clear what that Report would conclude.

And I made clear my opposition to it – the first such speech by a British Minister.

If I may quote what I said then:

 “Economic and Monetary union…is incompatible with independent sovereign states with control over their own fiscal and monetary policies…

 “Monetary decisions [would be] taken not by national governments and/or central banks, but by a European Central Bank. 

 “Nor would individual countries be able to retain responsibility for fiscal policy…

 “It is clear that Economic and Monetary Union implies nothing less than a European Government – albeit a federal one – and political union: the United States of Europe”.

 

And this has of course been endorsed most recently by the EU’s so-called Five Presidents’ Report on the completion of monetary union, which calls for the creation of a single Eurozone finance ministry headed by a single Eurozone Finance Minister by 2025.

It is also what all economic history tells us.

There is not a single major monetary union in the world that is not also a fiscal union and a political union.

The economic and political logic is incontrovertible.

That is why European Monetary Union has so far proved one of the greatest economic and political disasters of our time.

But in a sense it was designed to fail.

Jacques Delors, whom I knew well when, as French Finance Minister, he was my opposite number in the European Community’s Ecofin Council and elsewhere. was well aware that it could make sense only as a stepping stone to political union.

It was a colossal, and some would say grossly irresponsible, gamble.

Not least because the lesson of history is that monetary union invariably follows, rather than precedes, political union.

That was the case, to cite just three examples, with the United States monetary union, the German monetary union and the Italian monetary union.

 

*    *    *

 

So the first and most important reason for Brexit is that the European Union is a political project whose overriding objective is one that we in Britain do not share.

Curiously, in this country, unlike on the continent, there is a reluctance to believe that politics can trump economics.

I will of course discuss the economics.

But let us be under no illusion: this is a political, and not an economic, enterprise.

This is what ‘ever closer union’ is all about.

In his letter to the Prime Minister ahead of last weekend’s charade of a negotiation, EU President Tusk declared that:

“References in the Treaties and their preambles to the process of creating an ever closer union among the peoples of Europe are primarily intended to signal that the Union’s aim is to promote trust and understanding among peoples living in open and democratic societies sharing a common heritage of universal values”

 It has to be said that this is so deliberately misleading that it might have been drafted by our own dear Foreign Office.

The Solemn Declaration on European Union,  concluded at Stuttgart in 1983, commits EU members to “an ever closer union of the peoples and Member States of the European Union”; and this has never been revoked – or even raised, it seems, by David Cameron during the current so-called negotiations.

In other words, we remain unwilling passengers in the back of a car driven by others to a destination we vehemently wish not to reach.

The Prime Minister claims, of course,  that we have secured an ‘opt-out’ from ever closer union, and thus from political union.

That is nothing new, in the important sense that our non-membership of the Eurozone had already established that.

But this is little comfort, since we continue to be fully subject to present and future EU legislation, driven by the objective of full-blooded political union.

Moreover, almost all EU decisions nowadays are taken by qualified majority.

And since the recent revision of voting weights, the Eurozone caucus within the EU enjoys an inbuilt qualified majority.

Not that, even before that, we had anything like the influence within the EU which the Foreign Office has always sought to pretend.

For example, over the past 20 years there have been 72 occasions in the Council of Ministers on which the United Kingdom has opposed a particular measure.

On each and every one of those occasions we have lost.

A scoreline of nil-72 is not very impressive.

 

*     *     *

 

What, then, of the economics?

Is there a powerful economic case for our remaining in the European Union, despite our fundamental disagreement with its overriding political objective?

The answer has to be an emphatic ‘no’.

The EU with its single market is the slowest-growing economic bloc in the world, and there is no reason to believe that this is going to change.

This is partly because of the dysfunctional single currency, and partly because of the deep-seated unwillingness to undertake the sort of structural reforms which we in this country put in place during the Thatcher era.

Meanwhile, despite the rebate of our net financial contribution to the EU secured by Margaret Thatcher, it still costs us some £10 billion a year net to belong the club.

That is money we pay and never see in any form again.

Money that could be so much better spent on our own national priorities.

The gross subscription is almost twice as much – some £700 a year, year in year out, from every household in the land.

Even more costly is the burden of EU regulation, particularly damaging to our small and medium-sized businesses.

This has been reliably calculated at getting on for £25 billion a year.

And the flood of new EU regulation is unceasing – partly because it is an article of EU faith that ‘more Europe’ must ipso facto be a good thing; and ‘more Europe’ is all too often interpreted as more EU regulation.

It is perfectly true that Whitehall, too, is capable of engaging in excessive regulation: it’s not all Brussels.

But the fundamental difference is that unnecessary or undesirable indigenous regulation can be repealed, as it was during the 1980s when I was in government.

By contrast, EU regulation is untouchable.

Nor, despite lip service being paid to the notion of subsidiarity, is there ever any transfer of competence back from the EU to the member states.

Never.

The principle of the acquis communautaire is absolute: the ratchet is irreversible.

In his seminal Bloomberg speech, three years ago, the Prime Minister announced his objective of securing “fundamental, far-reaching reform” of the European Union, including an end to the ratchet.

I am sure he did his best.

But he has failed completely.

The European Union about which we will be voting on 23 June is not only wholly unreformed.

It has proved itself to be unreformable.

Instead of the fundamental reform he explicity sought, the Prime Minister has been obliged to fall back on an exercise in damage limitation – how to limit the damage that EU membership inflicts on us.

The most that he has been able to get our partners to agree to is what he likes to call a ‘red card’.

What this consists of is an agreement is that, in the unlikely event of our being able to secure the agreement of at least 55% of the EU to oppose a measure that we believe would be damaging to the UK – and then only on the grounds of so-called ‘subsidiarity’ – the EU presidency would put the matter on the agenda for – and I quote – “a comprehensive discussion”.

Some red card!

 

*     *     *

 

What, then,  of the claim that it is imperative for us to retain what is referred to as “access to the single market”, and that EU regulation is a price that has to be paid for this, whether we are inside the EU or out of it?

This  claim is totally confused, on at least two grounds.

In the first place, exporters to the EU market obviously have to conform to EU regulations, just as exporters to the United States have to conform to US regulations, and so on around the world.

But only some 15% - and declining – of the UK economy consists of exports to the EU.

The other 85% consists of exports to the rest of the world –another 15%, and rising – and, preponderantly, particularly for smaller companies, many of which do not export at all, business within the UK.

We are, after all, the fifth largest economy in the world.

Brexit means that we would no longer suffer the heavy burden of EU regulation on the 85% of our economy that does not consist of exports to the so-called single market.

The second is that, under the terms of the World Trade Organisation – of which more in a moment - we would enjoy access to the single market whether or not we were a member of the Union ourselves.

The UK, for example, imports goods from all over the world, and not exclusively from our fellow-members of the European Union; and so it is for the rest of the EU.

This because we live, happily, in a relatively free trading world.

So what is meant by ‘access to the single market’ is presumably tariff-free access.

That would be desirable, but it is by no means essential.

The EU’s Common External Tariff has a weighted average of somewhere between 3 and 4%, which is hardly a massive burden.

However, it is highly implausible that we would not be able to negotiate a free trade agreement, once outside.

Indeed German industry, for one, would insist on it.

Not least the powerful German motor industry, for whom the UK is far and away their largest export market.

Overall, we are the rest of the EU’s most important market, taking some £300 billion of their goods and services a year, far more than we sell to them.

And since we are so big, our bilateral deal would inevitably be better thanthose secured by little Switzerland and even smaller Norway – not that either of those two successful countries have suffered from being outside the European Union.

The myopic Little Europeans in our midst frequently ask those of us who wish to see this country leave the European Union what precisely is our alternative to EU membership.

The short answer is that the alternative to being in the EU is – wait for it - not being in the EU.

It may come as a shock to the Little Europeans that most of the world is not in the European Union, and most of these countries are doing better than most of the EU.

I have already sketched out part of what that might imply for the UK.

There is, of course, much more.

For example, outside the EU we would be able to resume our full membership of the World Trade Organisation, which we have had to forfeit as a member of the EU, able to negotiate free trade agreements with countries outside Europe (as Switzerland, for example,  has done with great success) and generally act as a force for liberalisation within the WTO.

On the regulatory front, having repealed the European Communities Act, which establishes the primacy of EU law over our own UK law, all the existing laws and regulations which emanated from Brussels would initially remain in place as UK laws and regulations.

But – and this is the political nub of it –  the UK government and parliament would then be free to decide which to retain, which to repeal, and which to amend.

More generally, the Prime Minister has made it clear that, whatever the result of the referendum, he will implement the decision of the British people, which I am confident he would do in good faith, with the full backing of the Cabinet and our excellent civil service.

If, as I hope, the decision is to leave the EU, we can be confident that that decision will be implemented smoothly and effectively.

The present Foreign Secretary has, rather shamefully, tried to scare the British people by saying that, if we leave, our former partners will combine to punish us.

There is no legal way in which they can do this.

More importantly, it would not be in their interest to do so.

But if we vote to remain within the EU, then they would indeed be legally able to punish us, and it might well be in their interest to do so.

There is seldom gratitude in politics.

 

*    *    *

 

When, some three years ago,  I first came out publicly in favour of Brexit, in a long article in The Times, the Financial Times’ principal EU commentator, in a column agreeably entitled ‘Lord Lawson is Right’, concluded with these words:

“There may be reasons why the UK may wish to remain in the EU. But whatever they are, they are not economic.”

In the light of the unbelievably insubstantial nature of the provisional changes so far negotiated  by the Prime Minister, I suspect we are likely to hear more from those arguing that we should remain in the EU about the alleged non-economic benefits of EU membership.

In particular we will be told that it is necessary for our security in a dangerous world.

We do indeed live in a dangerous world; and security is certainly of the first importance.

But this has nothing whatever to do with either the European Union  or our membership of it.

What it has got to do with is NATO, of which we are a leading member and the only major EU country with a commitment to spend 2% of GDP on defence, plus our special intelligence relationship with the United States, and the wider ‘Five Eyes’ intelligence agreement, which also includes Canada,

Australia and New Zealand, which is crucial for our ability to defend our people against terrorists.

None of these countries were members of the European Union when I last checked.

 

*     *     *

 

The world we live in today is a very different one from that of 1973, when we joined what was then known as the Common Market. 

Britain today is the very opposite of the sick man of Europe we were then.

Germany has been peacefully reunited.

The Soviet Union is no more.

The world economy has been transformed by the coming of globalisation, with the emerging ecomonies of Asia, Latin America and much of Africa inexorably, however many bumps there may be in the road, catching up with the West as they abandon socialist economics and embrace the market economy.

That is the world of today and tomorrow, which this country, freed from the constraints of the EU, has the opportunity to take the greatest advantage of.

Our own Foreign Office, in its 2013 ‘Balance of Competences’ report, has documented how and why there is no other European nation which has comparable global potential, from our membership of the Commonwealth to the fact of English being the world’s language, from our bilateral relationships with key members of our former empire, to London’s position – which owes nothing to EU membership – as the world’s foremost global financial centre. 

Indeed, London remains threatened by misguided EU legislation, not least the proposed Financial Transactions Tax, which Chancellor George Osborne has fought vainly to get declared illegal.

It is of course true that London is helped by being in the European time zone.

But that will still be the case if and when we leave the EU. 

And just as the issue before us today is not about the European time zone, so it is not about Europe as such.

The European Union is not Europe.

It is one episode in Europe’s long and remarkabkle history, and one that has long since served any useful purpose it may have had.

For my own part, I not only love this country: I also love France, which is why I have chosen to live there.

The issue before us is not whether you like Europe or not: it is about a relatively recent institution in Europe’s remarkable history, the European Union, and Britain’s relationship with it. 

To suggest that, at least for the UK, and possibly for others too, this institution is now past its sell-by date, is in no sense to be ‘anti-European’.

 

*     *     *

 

I have explained why, in my considered opinion, EU membership is on balance economically harmful to the UK, and why the economic future for us is global.

But at the end of the day the issue before us is a much more fundamental one. 

The European Union suffers not only from a bureaucratic surplus: it also has, as is widely accepted, a serious democratic deficit.

Those who are committed to the European project, the creation of a full-blooded political union, see this as simply a transitional phase: once the United States of Europe has been achieved, it will of course be a democracy.

Maybe so, although – as David Cameron rightly observed in his Bloomberg speech - there is no genuine European demos, whereas there is of course a very real British, and for that matter French, demos.

But what is abundantly clear is that is that the EU as we know it now is profoundly undemocratic.

Indeed, one of the most unattractive aspects of the European integrationist movement is its contempt for democracy.

The eurocracy know what is best for the people; and if the people have the temerity to vote the wrong way in a referendum, they are told they must vote again.

This is a matter of concern to many people throughout the European Union; but it is a matter of particular concern in this country, with our addiction to freedom and democracy.

And it is intimately connected with something even older and even more fundamental: self-government.

Membership of the European Union, however well-intentioned, is an affront to self-government; and it offers nothing that remotely compensates for this.

What the British people want, I believe, and what we now have in our grasp, is a genuinely global future as a self governing democracy.

We have within our grasp a once-in-a-lifettime opportunity to seize control of our destiny – to be free, to prosper, and to stand tall.

 

*     *     *

 

I leave you with one last thought.

If we were not now a member of the European Union, would the British people vote to join it?

I believe the answer, emphatically, is ‘No’.

In which case it is clear that, whatever the short-term hassle, we should leave.

 

*     *     *

 

There are three possible destinies for our country.

We could, as most of big business and big banking were calling for not so long ago, give up our currency, join the Euro, and accept being part of a federal United States of Europe.

We could, as David Cameron is now recommending, keep the pound sterling, and stay out of the European political union, but remain shackled to it: a sort of colonial status.

Or we could, as I would urge, make 23rd June 2016 the date of the British declaration of independence, and vote to leave the European Union.

 

That is the case for Brexit.

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