Benefits of Brexit

I’ve recently been challenged by a constituent to name one clear, tangible benefit to local people of leaving the European Union. It reminded me of the need to write this article: to talk not just about implementing the referendum result, or sovereignty, or democracy – but also about practical benefits to local people and businesses. I’ve split these benefits up into different categories.

This is a ‘work in progress’ – lots to add later.

A: Benefits of not having to fully comply with European Union legislation

 

1. The EU Procurement Directive won’t be able to force us to give State contracts to overseas businesses

At present, we have to put contracts out to tender – often awarded on the basis of price. This means that local businesses often lose out on getting contracts, and creating jobs.

Of course, there may be times when it’s actually in our best interests to award a contract to an overseas firm. But in a lot of marginal cases, the advantages to jobs and the local economy will far outweigh the disadvantage of an additional (say) 1-2% on cost.

2. We won’t have to comply with the VATMOSS legislation, boosting jobs

I’ve had various businesses in my constituency contact me, explaining that the legislation makes it very difficult for them to trade with other European Union countries. This requires businesses (even if they’re below the VAT threshold) to charge VAT at the applicable rate in the country they’re selling to within the European Union.

One North East business owner, who sells low-cost technology (e.g. mobile phone apps) told me they were likely to have to stop selling to the EU because compliance costs outweighed the benefit of low-volume sales to other EU countries. Instead, they now trade more with America, Canada, Australia and New Zealand (English-speaking nations make it easier to sell their products).

Another North East business, below the UK VAT threshold in the UK, told me that by the time they’d added 25% Swedish VAT to their products and postage, they could no longer sell to other EU countries competitively. They had to downsize as a result.

These examples aren’t unusual; I received quite a number of letters and emails from businesses in the North East about the same issue.

Even the EU’s biggest fan, Guy Verhofstadt, has criticised VATMOSS.

3. Compliance costs will be lower outside the European Union…

…and I’m not referring to workers’ rights, etc.

Take,  for example, the new GDPR legislation. I spoke recently to the principal of an accountancy firm which has had to spend substantial amounts of money on consultancy, take employees out of the office for training on the new legislation, and make substantial changes to the way they deal with clients. None of this has made the slightest tangible difference, but the overall cost of compliance is a substantial portion of the annual turnover of the business.

4. We won’t have threats like the Copyright Directive to the free functioning of the Internet

….and no, I’m not against copyright enforcement.

However, requiring ISPs, search engines, and social media platforms to use automated crawlers to delete content suspected of being copyrighted will result in the removal of substantial amounts of legitimate content as well.

5. We won’t have to comply with EU State Aid regulations…

Sometimes it’s necessary to take rapid action to protect local businesses. When SSI in Redcar closed, there were many reasons: the strong pound (at the time), China dumping steel below cost price on world markets, high energy prices, etc.

In such situations, it’s often appropriate to give State Aid to allow a business which should be profitable to survive a tough time (and when the State Aid is less than the redundancy/unemployment payments the State would have to make if it didn’t).

However, Articles 107 and 108 of the TFEU prevent the UK from giving such State Aid without the EU Commission’s approval. The UK government could hide behind that, didn’t ask for Commission approval, and SSI went under – costing thousands of jobs both directly and in the supply chain.

The blame here should be attached both to the UK government, and to the EU institutions.

With Brexit, the UK will also regain the power to enforce its own trade defence mechanisms, which would have avoided the delay whilst 28 countries all negotiate what to do. Different countries took different approaches; the result was paralysis at a time when we couldn’t afford it.

6. Brexit should finally end the madness of double-testing products

I visited a business in the North East which lost a significant proportion of its turnover once the EU’s Biocidal Products Regulation had kicked in. The problem: products which had already been fully tested to some of the highest standards in the world required re-testing because of new EU legislation requiring testing to take place at EU level. This led to the disappearance of some products from the market which could not justify huge fees being paid. This was exacerbated by an inability to receive the supposed ‘discounted’ rates.

Jobs were lost as a result in the North East.

This is nothing new; the REACH Directive had a similar impact on chemicals. Products which had already been tested to British standards required re-testing to EU standards, even when the EU standards were lower than the UK ones. This led to products disappearing from the market (Cutlass, for example).

7. Brexit means we don’t have to comply with rules restricting ‘natural monopolies’

There are certain ‘natural monopolies’ in the country – the postal system, for example: it’s inefficient to have competitors duplicating the same work. In these situations, privatisation basically doesn’t work well and national ownership makes sense.

EU legislation has watered this down. There are many examples of this, for example:

i) Postal Services Directives 97/67/EC and 2002/39/EC leading to Post Office closures

ii) Directive 2002/77/EC required the splitting up of the Directory Enquiries service, which has led to consumers being ripped off for £11+ for a 90-second phone call

iii) Directive 91/440/EC impacts upon the UK’s ability to organise the railways, leading to the current mess of a system. (With this benefit of Brexit, there are caveats: it’s very much also the UK’s fault through underinvestment and mismanagement)

B: Areas where the UK will be free to act differently

 

1. The North East is a strong fishing region. Outside the EU, our fisheries will recover through reclaiming our 200-mile limit

Since joining the EU, our fisheries have been decimated. EU quotas have proven to be completely ineffective, leading to the ‘discards problem’ amongst other issues – where dead fish are thrown back into the sea to avoid breaching quotas. The various attempts at EU level to resolve this problem have failed.

In the meantime, EU-flagged vessels have the right to a majority of the value of fish in UK waters. Furthermore, the system of sales means that much of the ‘British’ quota in our own waters still goes to foreign vessels.

Outside the European Union, conservation can be managed more effectively (Australia, for example, does this much better than the EU) – for example limiting time at sea rather than type of catch – whilst also giving North East fishermen more work because EU nations won’t be allowed to overfish our waters.

Defenders of the EU point out that fish don’t respect national boundaries. This is a red herring; they don’t respect EU boundaries either, and much of our boundaries are with non-EU nations (Norway, Iceland).

2. We can negotiate our own bespoke trade deals with third countries

This should be an obvious benefit, but one question often asked by people who are pro-EU is this:

Why would we get better deals as one nation than the whole EU27 put together?

The answer is that the issue isn’t about ‘better’ deals but ‘more appropriate’ deals for the UK. Let’s remember that:

i) The EU27 economy is the world’s second-largest; the UK economy (treating the EU as one) is the world’s fifth-largest

ii) The EU27 economy is only around 5 times the size of the UK economy

iii) Therefore, there aren’t many bigger trading opportunities available for third countries; the ‘bulk buy’ argument rarely applies

iv) The EU27 is incredibly slow at negotiating trade deals; getting in there first provides huge opportunities

v) The EU27 has to negotiate its own negotiating position with the Member States; therefore, individual national interests often conflict – the negotiating position itself is often a compromise

vi) The UK would be able to negotiate far quicker and realise the benefits of trade deals before the EU27 does (noting that the European Union is likely to be only the world’s fourth-largest economy by 2050 according to Commission figures)

3. The net EU membership fee

The UK will, ultimately, save the net (not gross) membership fee paid to the European Union. The ‘Boris bus’ £350 million per week figure should not have been used (as I pointed out during the referendum campaign). The £180 million per week (or so) net fee is a genuine saving once any ‘divorce bill’ has been paid for the first couple of years.

Pro-EU advocates in the North East claim that the North East is a ‘net beneficiary’ of EU funds. Whilst this is not actually true, even if it were true, it would be irrelevant: the UK could replace every penny of EU funds and still have the £180 million left over.

This is actual cash; whether GDP rises (as I believe) or falls (as Remain adherents suggest) the £180 million per week would still be there.

I also believe that EU funding could be better spent directly by the UK rather than on EU-determined projects, as I argued in more detail in Britain Beyond Brexit.

4. VAT

The EU-mandated VAT is one of the most inefficient forms of indirect taxation on the planet, costing billions every year to businesses and the Treasury through costs of compliance, fraud, etc.

Outside the European Union, the UK will be free to choose a fairer and simpler form of indirect taxation.

 

C: I disagree with the premise that immigration control isn’t a benefit of Brexit

 

One of the key problems with uncontrolled immigration from the EU is that an oversupply of unskilled and semi-skilled labour drives down wages. Even if there existed a reasonable mechanism by which the UK might enforce the permitted restrictions on those who do not find work in the UK, uncontrolled immigration does lead to lower wages (hence, why it tends to be supported by big business).

By prioritising skilled immigration over unskilled, this downward pressure on wages will be reversed – whilst developing the skills base within the economy.