Sunday, 14 July 2024 17:55

Beyond immigration, Europe is a complete non issue for this election

Wednesday, 08 April 2015

Labour has found common cause with big business in opposing a referendum on membership of the European Union, but both exaggerate the economic risks of such a vote

Not since Michael Foot has a Labour leader so comprehensively managed to unite the business lobby against him. It’s not hard to see why. Ed Miliband pays lip service to the vital importance of wealth creation, but it is perfectly obvious that he doesn’t understand the first thing about it.

Labour last week published a “manifesto for business”, which in a vacuous sort of way was a reasonable enough nod towards the interests of enterprise and economic advancement; it pushes some of the right buttons – not least the commitment to cut and then freeze business rates for 1.5m small business properties.

Yet being pro-business is about a good deal more than a few minor gestures. It requires a mindset and belief system that seems almost wholly alien to the Labour leader.

When Mr Miliband meets business leaders, he listens, but he doesn’t hear. Not only does he believe in a strongly redistributional, anti-wealth policy agenda, but he leaves little doubt that he would actually implement it given half a chance. This is not just crowd-pleasing rhetoric; he means what he says. In an age of political spin and sophistry, there may be something to be said for the re-emergence of the conviction politician.

As an economic strategy for Britain, on the other hand, Mr Miliband’s approach would be a disastrously desctructive one. Tony Blair, the former prime minister, has warned of the dangers for Labour if it drifts back to its roots as a traditional left wing party. This should be the least of his worries; the threat posed to the economy by the proposed mix of “pre-distributional” market interventions, tax increases and general fiscal incontinence matters a whole lot more.

However, on one thing Mr Miliband does still intriguingly command the support of the bulk of British commerce. In seeking to make a virtue of Britain’s membership of the European Union, Mr Miliband perfectly aligns himself with mainstream business thinking. Indeed, had it been Ed’s Blairite brother, David, who was Labour leader, it would have split the business lobby down the middle, with Labour’s European credentials cancelling out any natural affinity with the otherwise pro-business Tories.

On cue, up pops Tony Blair with his first intervention in the election campaign. This is also very possibly the last he will be allowed given the perceived toxicity of the personal brand. A referendum on the European Union will be a huge distraction, he warns in positively apocalyptic terms, creating a greater degree of uncertainty for business than anything since the Second World War.

Labour’s policy stance on Europe is rich with irony, and not just because of its one-time position as the more Eurosceptic of the two main political parties. Its proposals for the public finances are also the very reverse of what is being ordered by diktat throughout the EU’s eurozone core. Against what Europe has been prescribing, even Tory strategies for reducing the deficit are very much “austerity-lite”, while Labour plans for the next parliament would be considered so fiscally reckless as to invite a string of automatic fines.

It’s odd, to put it mildly, that Mr Miliband could supposedly be so much in love with a project which has manifestly laid waste to the European economy and whose macro-economic policies seem so completely at odds with his own, overtly Keynsian, demand management “solutions”.

It is only when it comes to stifling regulation of business and finance that Labour finds common cause with the eurocrats. Even on immigration, Labour has been trying belatedly and opportunistically to repudiate Europe’s principled approach to free movement of workers. Labour is drawn far more to the EU’s protectionist instincts than its noble free market principles.

Mr Miliband would counter that this is not an argument about the madnesses of the eurozone. Rather it is about Britain’s place in Europe. Yet the two issues are frankly virtually indistinguishable these days. Ever since Maastricht, the UK has been a semi-detached member of the EU. Even if not yet part of the euro, all members other than Britain and Denmark are legally obliged eventually to become so. Policies which, perceived as necessities, have bound single currency members ever more tightly together were always inevitably going to push the UK further apart. The central questions are therefore not so much whether the UK is in or out of the EU, as what kind of relationship it enjoys with the eurozone, and what price it has to pay for a favourable one.

And like it or not, we do have to have some kind of a relationship with this behemoth on our own doorstep. A visitor from another world would find it faintly odd that while we attempt to cosy up to China, and less notably these days, our old allies in the US, jurisdictions over which we have no influence whatsoever, we seem only to want to push Europe further away.

Nonetheless, to deny voters their say, which is essentially Labour’s approach, is to fall into the same “we know better” trap as much of the eurozone hierarchy.

I’m sorry, but I simply do not believe Tony Blair, or the main business lobbies, when they say that even to have the argument is to poleaxe business confidence. Much the same thing was said about the Scottish referendum. In the event, there was virtually no evidence of it being a significant drag on growth, either north or south of the border.

As for direct inward investment into the UK, that’s been poor by historic standards for quite a while now, and has very little to do with either UK political uncertainty, or questions about Britain’s commitment to Europe. Today’s cross border investment strike is a global affair.

None of this is to lightly dismiss the risks of a messy, almost accidental exit. For sure, this would have very negative consequences, at least in the short run, for business sentiment and therefore UK living standards. Yet in the scale of things, a difficult exit is far less of a threat to the economy than another explosion at the heart of the eurozone itself, or even just a continuation of Europe’s present state of economic stagnation.

Despite the noise, Europe is most unlikely to be a deciding issue at this election, or indeed have any impact at all beyond its interface with immigration concerns. In or out, voters are wise enough to know that Britain has no option but to maintain cordial relations with its neighbours, and that’s all that business really needs.

Source: The Telegraph

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