If Britain Left The EU? It Never Really Joined

By Zak Mir

It would appear that on the EU issue people remain polarised between the initial stated benefits of a free market and free movement of people and services, and the nightmare of the PIIGS economic disaster, Brussels red tape/gravy train, and of course the economic straitjacket of the single currency.

All of this is rather complicated. But luckily most of it has been simplified ahead of the May General Election into an immigration issue, combined with the spectacle of Greece leaving the Eurozone, and presumably telling its debtors to take a hike.

Of course, the promise from UKIP is that, if it holds the balance of power, there will be a swift referendum on EU membership in the UK. This would be 2 years before the date set by a clearly squirming Prime Minister David Cameron who made this offer in order to take the wind out of the sails of the Eurosceptics.

But I think that from an economic and political perspective it is worth reiterating a few points which may be relevant going forward to UK GDP and the level of sterling. The irony is that while we struggled for so many years to get into the European Economic Community in the 1950s and 1960s, the UK was never part of the top table even once it got in.

This is because during this period going into the 1970s the economy here was on its knees. Then in the 80s and 90s as the situation improved the complex question was how to integrate our economy, and especially our currency, with goings-on across the Channel.

This culminated in the ERM debacle of 1992, which was arguably the luckiest break the UK has ever had on the economic front. Chancellor and then Prime Minister Gordon Brown pressed home this advantage by ensuring that there were simply too many conditions to be met in order for us to adopt the euro. This meant that although economic policy both at the Bank of England and the ECB has been quite similar in terms of interest rates, we have diverged in a positive way, especially by not being blocked in delivering QE quickly after the financial crisis.

The real issue though, in terms of the UK leaving the EU is actually to determine what the big differences before and after will be. Surely, having our own currency really means that we were never more than a semi-detached member of the project, and can therefore not really claim its alleged failings as having contaminated our system?

Indeed, the years of failure across the English Channel have led to a brain drain and a cash drain in terms of the City of London attracting the best in Europe to work and invest here, much in the way that the hot money has travelled here from Russia in the wake of the economic implosion there.

Therefore, Europe’s downfall has been vastly to the UK’s advantage, and as an FT.com article reminded us this week via a University College, London survey, over the past 10 years EU migrants have contributed £20 billion more in taxes than they have received. This position is not likely to be changed after any Brexit, and it would not be sensible to change it either.

Of course, much of the anti-EU brigade relies on anti-Brussels feeling, which is essentially based on the idea that no one likes being told what to do, especially by foreigners. However, it may be worth noting ahead of any exit from the EU that we simply find that while on a sentimental basis sovereignty being returned feels good, from an economic or political standpoint the issue turns out to be something of a red herring.