Would Britain be better off out of the EU?

21st November 2011

This could be interpreted as good news, whatever your viewpoint on UK membership of the EU.  Nigel Farage, leader of anti-EU grouping United Kingdom Independence Party, hailed the poll as the "centre ground of British public opinion." 

But the good news for the often less vocal advocates of continuing membership – or even of building closer ties such as Lord Heseltine's belief that the UK would eventually join the Euro – is that the 40% for withdrawal figure is substantially lower than the anti-EU number in a poll a month ago.

Then Mindful Money cited The Guardian with its ICM  poll showing 49% – or around a tenth more of the population than in the more recent Harris poll – took an anti-EU stance. Of course, much depends on the actual wording of the question posed – and headlines on the day the poll is taken.

But if the two polls are capable of comparison, then over four million adults have switched to a less euro-sceptic position over the past four weeks.

21 thoughts on “Would Britain be better off out of the EU?”

  1. Russell says:

    Shaun, it seems to me that entering into the EU removes most of the macro economic tools that a government usually has in its armoury to manage an economy. You can’t adjust exchange rates; you have little control over interest rates (since you can’t control the destination of a common currency) and you have no local control over import dutues and tariffs. This only leaves
    – control of the money supply (either via credit or taxation – the latter being of little use if you don’t have a robust tax collection system) and
    – unemployment policy/public sector investment whereby you can force average wage costs to become competitive by bleeding the populace

    1. JW says:

       Used to be called ‘the gold standard’. Now German productivity is the new ‘rare metal’.

    2. Anonymous says:

      Hi Russell

      There is also regional policy which you could argue has been applied by the European Investment Board, the Common Agricultural and Fisheries Policy etc. It could be part of a way out but I do not sense the will to expand it on a scale to help.

      Actually regional policy is invariably applied too weakly and in the UK for example goes on and on and on for that reason ( for its supporters anyway, the other side of the argument is that it will not work).

  2. JW says:

    Hi Shaun
    Did you have a good ‘long’ bank holiday? Were you waving your flag? Thankfully ex-UK I didn’t have to join the mass hysteria.
    Anyway glad you are back so we can enjoy your daily updates. Its only when you can’t read them you realise how much you miss them!
    I must admit . like AEP in the DT, I have got to the point with the EZ ‘ just show us the money’. You can only listen to their PR rubbish for so long. And as Germany has the money, its a case of waiting to hear her definitive views. I can’t really believe she will pay for this mess, so eventually she will leave the show. In the meantime the human misery count increases.
    Can I go off topic with the news out of OZ today. With the rest of the world slowing down she posted increased GDP of 4.3% annualised. I wondered , had she found inter-galactic customers? No, exports are down, which lines up with softer China and India. So where is the growth? Investments and customer expenditure. Specifically investments in more hole-digging stuff to extract the dirt China wont want as much of, and lower interest rates fueling the housing ( and equity withdrawal) overheated market. Of course this is heralded in OZ as ‘proof’ of a world-beating economy with forecasts of 3% annual growth in perpetuity, and in the MSM as ‘look how good it is for them’. In the ‘real’ world , its a ‘down-under’ bubble expanding just before it goes ‘pop’.  I wonder where all those young Aussis are going to stay in London alongside the Spanish etc.

    1. Anonymous says:

      Hi JW

      As a mild royalist ( constitutional monarchy seems more attractive than any of the cast list of likely UK Presidents) I enjoyed some of it particularly the concert. I did however note that the only person who appeared unable to sing live was the one who had in fact won a singing competition so another entry was made in my lexicon for these times!

      I was interested too in the numbers from Oz but they are the past and I think that as I have written before the RBA has been too slow in its response for her likely future. Oz has had a good run out of the commodities boom which has now slowed…

    2. Anonymous says:

      Hi JW

      Here is an example of what you mentioned.

      http://www.cityam.com/forum/aussienomics-big-cuts-no-qe-booming-growth

  3. Anonymous says:

    Hi Shaun
    Herve Hannoun ( Deputy General Manager Bank for International Settlements) agrees with you that expectation of central bank intervention in markets is a fools’ paradise. He advises central banks to reinvent their capacity to surprise markets, reduce their balance sheets and decouple from fiscal capture. He advocates that markets are left to fumble to establish their own price levels as capitalism intended and allow markets and balance sheets to correct. This chimes with Ernst & Young’s Alan Hudson ( insolvency supremo) calling for zombie companies ( but strangely not banks it seems as reported in The Telegraph) to be allowed to go to the wall. Perhaps banks pay the insolvency fees to Mr Hudson’s department or maybe he thinks banks should die by the sword also I dont know……I’m all for even playing fields, but double standards turn my stomach.

    1. Anonymous says:

      Hi Shire

      If we look at central banks ability to surprise markets that weapon has been almost entirely lost. It was nice of him though to implicitly suggest that central banks need people of that sort of mindset!

      If Ernst and Young have been correctly reported then they have made a mistake. If you clear up the zombie banks you will deal with many zombie companies too. I was rather struck by some of the numbers for Thomas Cook over the weekend.and wonder how a travel agency like it can recover from large losses in a downturn…

  4. Alinewton says:

    Talking about rabbits and hats, I was musing the other day that the whole Eurozone debacle resembled nothing more than a Tommy Cooper performance. As each new trick is introduced with much fanfare, it is then dicarded after the first desultory attempt to make it work, only to br followed by further rummaging in the box of tricks.

    The two differences being that although unstated we all knew that Tommy was supposed to be funny, and that the show only lasted 30 minutes so the joke hadn’t time to pall. Perhaps Mr Van Rummpy should discard his scoutmaster’s woggle and adopt a fez for the last act before the final curtain!

    1. Anonymous says:

      Hi Ali

      A fez would make him look quite ridiculous which would chime with much of what he says! With apologies to fans of Saracens rugby club…..

  5. Rods says:

    Hi Shaun,

    I hope you had a good weekend and another great blog for the start of a short week.

    Totally agree with you on cleansing the banking system, by guaranteeing retail deposits and letting them go bust. I think a more realistic estimate of what Spain will need to support their banks is €200bn and it well be much more than that!

    I think everybody is beginning to suffer from Euro-fatigue where the politicians are running around in ever decreasing circles, expending much hot air with useless meeting after meeting, at some point they will disappear with their hype and hyperbole up their own rear ends.

    I can’t see any other solution apart from the dismantling of the Eurozone, which will occur in an orderly or disorderly fashion. With the current Euro-fools in charge I certain it is going to be the latter. The alternative of full fiscal union, cannot happen in time as new treaties take years to negotiate and be implement and even if the Euro survived that long it does not resolve the underlying imbalances between the different economies.

    I think the current impasse shows that political union will never work as the EU is still 27 separate nations with each country trying their best to look after their own, which is natural and understandable. It should have stayed as a free trade area, we would all be much better off. With common manufacturing standards defined through ISO / BS and other institutions.

    The problem with the 17 Eurozone countries is like: The leaders have all met at a restaurant for an expensive meal. France and the Latin block all go mad and order vast quantities of the most expensive dishes and drinks off the menu. The North are much more prudent. At the end of the meal when the bill arrives it is much too big for France and the Latin section to be able to pay their part, so they look to Frau Merkel to pay for everybody. Frau Merkel then gets a calculator out, the French and the Latin block murmur how embarrassing she is checking the bill. At the end of the calculations the Nothern Eurozone countries all get out their credit cards out to pay their portion of the bill and leave, leaving France and Latin block to arguing on how they are going to pay the rest of it on their maxed out credit cards. Hollende jumps up and says solved! Growth, that’s what we need growth, the rest say what do you mean. We all call Frau Merkel and our credit card companies and get her to guarantee the growth we need on our credit cards ceilings to pay the bill.

    My record of the day in keeping with your AC/DC theme and the Spanish economy is: This house is on fire by AC/DC

    1. Anonymous says:

      Hi Rods

      Thank you. As the day has gone on we have had more and more rumours of a Spanish bank bailout done on the cheap. Sometimes it feels like a continual carousel of rumours and leaks which then disappear like a shower on a hot summers day.

  6. Anonymous says:

    Hi Shaun,

    An excellent post today. Exposure of failing politicians and at very least incompetence.  I suggest that they should know better and they do know better. (with apologies to JRR Tolkien) Incompetence seems an unlikely explanation, crony capitalism and corruption seems to fit the facts better. These incompetents are unlikely to rise to the top in a meritocracy….

    1. Anonymous says:

      Hi Expat

      Was that Bilbo Baggins?

      1. Anonymous says:

        That was Treebeard  on Saruman. But where is Frodo Baggins to destroy the ever closer and ever more expensive union ?

  7. Anonymous says:

    Buenas tardes, Shaun.

    Yes, I quite agree about the typical and really quite laughable statement from Botin that the amount that Spain needs to bail out all of its banks is ‘modest’. If you can describe €40bn thus!! Look at it this way. There are 1m+ unsold new properties on the market. Let’s imagine that constructors borrowed an average of €125k per property, hoping to sell them for €200k. In fact they can only be sold, with a lot of expensive renovation, for €50k. Builders are bankrupt and banks lose €75bn but probably won’t get around to admitting that any time soon, external auditors or not. But wait, there’s more. All around Spain people have mortgages. Given the collapse of house prices (with perhaps another 20% to go), many of the newer ones will be under water. With 24% unemployment and no state mortgage rescue plan, there will be big problems, and already are. Who knows the number there, but I bet it’s another €50bn at least. So that’s an estimated €125bn. And then there are legions of uncompleted infrastructure projects… Clearly the Spanish government knows the real numbers and is hoping for the best. Sadly I don’t think that will work. They should be planning for the worst as well.

    The bald statement from the government (Soraya Sainz de Santamaria, the #2) recently that Spain is in terrific shape and really only has a little problem with some ancient real estate loans was, shall we say, disingenuous. It’s not in great shape as a glance at the industrial production figures you mentioned will show. An interesting example is olive oil. The EU rather unkindly allowed duty free imports of olive oil from Morocco. That hugely undercut the Spanish version, that now sells for around €2.20/L but costs €2.80/L to produce. Andalucia, where there are wall to wall olive trees in certain vast areas, is suffering badly having lost its protected market. Industrial production may have fallen but could still be profitable, just about. Olive oil production is making a  loss, and to cap it all, this year’s harvest looks like being a record.

    There are many positive things about Spain, but honesty about the state of the banks and the general economy is not among them.

    I could go on at even greater length (OK, I won’t) but the idea that Spain’s problems are wholly related to some rotten banks is fanciful. You can have excellent infrastructure but that is not enough. You need a concerted ethos of innovation, marketing and competitive productivity. These are based on a solid and broad based education system, and like the UK, that is where a start needs to be made and soon. Meanwhile the educated minority is moving to Germany where they are appreciated, and probably will not be back any time soon.

    1. Rods says:

      Hi Barncactus,

      If you are looking for further undeclared problems then look no further than the Electricity utility suppliers. Under the last socialism Government there were huge subsidies for renewable energy and very fast growth. This now accounts for about 9% of Spain’s electricity generation. Unfortunately, this much more expensive sources of electricity have to be accepted by the utility companies and this has meant that generator costs are higher than the the capped prices they are allowed to charge customers.

      This has lead to the suppliers running up Government backed huge debts of €20bn and growing. It will not be until 2013 that this funding gap stops growing and this will only be with a 30% increase in Electricity prices to consumers this year and 17% rise in 2013. The last Government found it very difficult to increase electricity prices and with their economy in free-fall, I can’t see this getting any easier, so expect this ‘can’ to be kicked further down the road, so there will be much more debt before they reach break-even.

      http://www.energyrealities.org/detail/spain-electricity-power-currents/erpFA8A685015A17FC44 

      Currently every time somebody lifts up a financial carpet in Spain, like this or the €7bn, 2 years overdue from the regions to medical suppliers, underneath there seems to be wads of unpaid invoices or IOUs!

    2. Anonymous says:

      Hi Barncactus

      It all sounds rather like the Irish banking system where everything was fed out like it was on a rope with lots of notches. And if we stick with the 40 billion Euro theme the Irish banks gave  bigger bill to Ireland than Spain is claiming she will get from hers!

  8. David Lilley says:

    Shaun,

    You were very brave to issue this blog before the big event of the day which might have changed everything, the ECB interest rate decision. You judged correctly on how this descison would probably go.

    The ECB majority decided to keep the rate at 1% and Mario made a statement, similar to that made a few times by Ben Benancke, that monetary policy has done enough and it is time for the legislators to do more. Ben frequently brings up the unsustainable US defict and debt whilst Mervin King does not say anything beyond his responsibilities.

    Strangely the markets continued to rise following the ECB decision which, combined with Brussel’s comments that bank shareholders and bond holders should take the hit, seemed to leave the Spanish banks with no source of immediate funding.

    Three years ago Spanish banks were hailed as operating on a different model to UK banks and not in any danger. Santander even bought Alliance and Leiceter and Bradford and Bingley because it was in such good relative shape.

    Now the Spanish banks are in the same boat as the Irish banks 2/3 years ago despite two stress tests. When the Irish banks saw a massive exodus of corporate deposits and share sales they had to get a second rescue of E30b from the Government and this in turn led to the Irish bailout.

    Ireland and Spain are similar. Ireland has one in four or five houses empty and Spain has 800,000 empty new builds. They are both casualties of the property bubble.

    The E40b estimate of the Spanish bank bailout agrees with others but the ex CEO and chairman of Citi estimated E100b. Certainly nothing that Spain could raise and they will not approach the troica until after the second Greek elections.

    There are two articles on Morningstar today about the EZ problems. One expects the Euro to go and the other, by PIMCO (with a major contribution by Ed Balls’ brother), explains why PIMCO and others are divesting themselves of risky EZ treasuries.

    1. Anonymous says:

      Hi David

      it is my opinion that there is quite a debate going on at the ECB with I suspect some making the point that the balance sheet is too extended and exposed and others looking for more easing. Actually with some in the middle it could be split 3 ways in the way that the Fed and Bank of England have been. Getting agreement going forwards is going to be harder I think or to put it another way it will need less political pressure and more economic pressure.

      I was worried by the Santander purchases from the beginning. Not by it buying a UK  bank but by the way we allowed it to buy several. I always feared that we could end up regretting  the scale of that and have little faith in ring-fencing. Exactly what ring-fences have bankers observed over the credit crunch?

      As to the current equity market rise the sharpness of it could make it what has the unpleasant name of a dead cat bounce as its only real backing has come from the PBOC’s rate cut. Likely to be too little too late as I have observed before..

  9. David Lilley says:

    I always have too much to say and here is some more.

    Wasn’t it Marx who contribute the theory of boom and bust? A boom sows the seeds for a bust and a bust sows the seeds for a boom, and boom and bust are inevitable.

    A bust leads to a boom because sellers have to reduce their selling prices and the unemployed workers from the bust are prepared to work for less and bingo we are back in business.

    But when Gordon Brown was in a pickle he beat the system. He increased benefits by 6%, pensions by 5.5% (inflation was only 2% at the time) and yet increased NMW by 6% and UBS by 7%. The following spring we lost 38,000 shops despite him making it difficult to close a shop by making the owner continue to pay full business rates on an empty shop. The moral is that of the Golden Goose and isn’t this the EZ problem.

    Even Soros, who is not a reliable witness, who has put foreward a dozen solutions to the EZ debt crisis, has now declared that it is a competitiveness issue as first stated by Mervin King. I disagree with his new solution which is basically that Germany should pay.

    The solution is that the state should not grow so large that its spending and taxation kills the golden goose of wealth creation and competitiveness. Then the highly efficient Greek private sector wouldn’t have to support an electolary legitimised massive and corrupt public sector. The solution is that government should govern, full stop.

    This is how Margeret (I was a liberal at the time) got us out of our Greek tragedy. Government should concentrate on its core business “of governing” and not mine coal, collect bus fares etc for the benefit of poor managers who could prop up their failure with taxpayers money. We didn’t just have banks calling on the taxpayer. We had rail, post, telephone, gas, electricity, buses, steel, coal, motor and many more.

    Lets get back to reality of boom and bust and let the bust fix the problem.

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