The economic and financial costs and benefits of the UK’s EU membership Contents


1.A recurring complaint in the debate on the European Union is the absence of ‘facts’ about the case for and against the UK’s membership on which the electorate can base their vote on 23 June. Hugh Bearryman and Carolyn Frank, the owners of small businesses, each with different views on the merits of membership, summed up this concern in evidence to the Committee:

Hugh Bearryman: “It has to be laid out clearly and precisely. At the moment, it is not. That is why some people are veering to one side and some to the other. It is purely because it is their gut instinct, not because they know.”1

Carolyn Frank: “If I was voting today, I think I would vote “yes”, but that is more of a gut feeling because there is not enough information available publicly to make that decision.”2

2.The forthcoming referendum is not an election. There is no manifesto for Brexit;3 and even if there were, the public could not be assured that it could be fully implemented in the event of Brexit. What would follow a vote to leave depends partly on the positions taken by the 27 other EU Member States, which cannot be known. Neither the Government nor the Leave campaign have spelled out their own detailed approach to the UK’s future relationship with the EU and the rest of the world in the event of Brexit nor how they would fill the policy vacuum in areas where the EU presently exercises power.

3.There are also uncertainties–albeit somewhat more quantifiable ones–to remaining in the EU. The Five Presidents’ Report envisages far-reaching changes to the economic governance of the Eurozone in order to put the single currency on a sustainable footing. It is uncertain whether the political will exists to make these changes, raising the prospect of continued Eurozone economic malaise and future crises. Even successful reforms may fundamentally change the relationship between countries outside the single currency, and those within it. The Chancellor highlighted, prior to the completion of the Government’s renegotiations, that these developments bring with them the “very real risk that badly thought-through legislation will be imposed on the UK”.4 Over the longer term, the EU may also seek powers to act in other areas through changes to its Treaties; under the European Union Act 2011, the UK electorate would have to give its consent to this in another referendum.

4.In short, there are facts about the UK’s present relationship with the EU, some of which are set out in this Report. But in considering the UK’s future relationship with the EU and its economic implications–whatever the result of the vote on 23 June may be–there are few facts to help the electorate make their decision, and mainly judgements that Britain would be better off remaining in the EU which appear to be the prevailing institutional view of mainstream economic opinion with the IMF, the World Bank, the OECD, the IFS, the CBI and the TUC all making arguments in favour of Britain remaining in the EU.

5.Based on the evidence it has received, the Committee–a cross-party group representing a range of opinion on the merits of EU membership–has considered some of these judgements to be more credible than others. A principal aim of this Report is to identify the range of post-referendum outcomes the Committee considers to be plausible, and hence which judgements should be taken seriously.

6.Campaign groups and others have made many factual-sounding claims about the effects of EU membership and the consequences of Brexit. But in order to be meaningful, these claims must be underpinned by judgements about how the UK would fare, and the policy choices the Government would make, outside the EU.

7.It does not make sense to claim, as does Lord Rose, Chairman of the Stronger In campaign, that households benefit by £3,000 per year from EU membership,5 without specifying the alternative arrangement under which those benefits would be lost. Equally, it is not meaningful to say, as did Boris Johnson, the most prominent spokesperson for the Vote Leave campaign, that EU membership raises food bills by £400 per year thanks to the Common Agricultural Policy (CAP), without specifying whether and how the UK agriculture sector would be supported after Brexit.6

8.The public debate is being poorly served by inconsistent, unqualified and, in some cases, misleading claims and counter-claims. Members of both the ‘leave’ and ‘remain’ camps are making such claims. Another aim of this report is to assess the accuracy of some of these claims, and enable the wider public more confidently to set aside unqualified assertions about the economic impact of their vote.

9.This Report focuses exclusively on the economic consequences of EU membership and Brexit. For many, the case for staying in or leaving turns on more than economic logic: as Arron Banks, co-founder of put it, “This is not about pounds and pence. It is about our democracy.”7 The economic effects may be a second-order consideration for some when set against the importance in principle of the UK regaining greater power to control its affairs.

10.Influence, power and control over the country’s affairs (sometimes loosely described as sovereignty) are, in and of themselves, not amenable to economic evaluation. Consequently, this Report does not analyse them in detail, except to consider how far the UK, acting on its own, may pursue superior economic policies. But there is a connection between the economic relationship that the UK might have with the EU, and the powers it would be able to repatriate. In particular, as a member of the EU, the UK enjoys certain rights, and is bound by certain obligations, upheld and enforced respectively by a supranational court, the European Court of Justice (ECJ). Membership of the EU means accepting the “rules of the game” and the verdict of the referee. An important judgement needs to be made about whether, outside the EU, the UK would be able to retain the rights afforded by membership, including its present level of access to EU markets, while picking and choosing its obligations, and reasserting the authority of its own institutions to interpret the rules.

11.Staying in or leaving the EU will also have political consequences. Indeed, for some, it would seem that the true prize of leaving the EU is the opportunities it might create to change how the country is governed; as Dominic Cummings, Campaign Director for Vote Leave, put it, “when we vote Leave it is only one part of a general process of national renewal that we need”.8 Many leave campaigners also hope that Brexit will be a catalyst for what they see as desirable changes to the way the EU operates, while many remain campaigners hope that a vote to stay will achieve much the same thing; Will Straw, Executive Director of Britain Stronger in Europe, has written about “Britain’s role in reforming EU institutions, as part of a strong wider pro-Europe campaign”.9 But neither detailed programmes of national renewal, nor likely changes to the EU’s institutional architecture–beyond the Government’s renegotiation package–have yet formed a major part of the campaign. In any case, and to the extent these issues do now form part of the public debate, their likelihood and merits would be highly complex to evaluate, and they are not considered in this Report.

1 Q205

2 Q157

3 This term is used throughout this Report to refer to a UK exit or withdrawal from the EU

4 Rt Hon George Osborne, speech at Open Europe conference, 15 January 2014.

5 See, for instance, Lord Rose, speech at launch of Britain Stronger in Europe campaign, 12 October 2015

6 See, for instance, Boris Johnson, speech in Dartford, 11 March 2016

7 Q1563

8 Q1212

9 Institute for Public Policy Research, Staying in: A reform plan for Britain and Europe, November 2012

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27 May 2016