About this guide (which you can also read here)
The facts behind the claims
This booklet has emerged from a collaboration between the UK in a Changing Europe, created to provide impartial information on the UK-EU relationship to as broad an audience as possible, and Full Fact, the UK’s independent factchecking organisation.
The referendum on UK membership of the EU is starting to dominate the headlines. As the campaigns gather steam, the public is being bombarded with conflicting claims about the costs and benefits of that membership. Many of these are at best unsupported by evidence, and at worse simply untrue.
Unsurprisingly, many people do not know what to believe or who to trust.
Our intention in putting together this series of analyses was not to provide an exhaustive or definitive account of the arguments being used ahead of the referendum on British membership of the EU to be held on 23 June.
Rather, it was to investigate some of the claims being made by the rival campaigns. We take two claims per theme – one each from the Remain and Leave camps – and subject them to rigorous analysis. As organisations sharing a commitment to ensuring that the public be as well informed as possible, we thought it was important to ensure that the information being provided was as accurate as possible.
This would not have been possible without the hard work and occasional forbearance of our authors, all Senior Fellows of the UK in a Changing Europe initiative. We would like to record our thanks to Angus Armstrong, Catherine Barnard, Iain Begg, Damian Chalmers, Sara Hagemann, Simon Hix, Jo Hunt, Hussein Kassim, Jonathan Portes, Simon Usherwood and Richard Whitman for their efforts and hope that they think this finished product was worth the time they spent on it.
Most importantly, we hope that the analyses presented here serve to provide some clarity for those confused by the competing claims and unsure which ‘facts’ to trust.
Navigating the choppy waters of any political campaign can be treacherous. When the choice involves an institution like the EU, about which most people readily admit to being ill-informed, it becomes more treacherous still. Yet with such a crucial decision to make, the British people deserve to be properly informed.
Anand Menon – Director, UK in a Changing Europe ukandeu.ac.uk
Will Moy – Director, Full Fact fullfact.org
The European Commission is an influential body, whose operation is central to the workings of the EU. Although it is one of several EU institutions that work closely together in decision-making, the Commission is probably the institution that comes to mind when people think about the EU.
The role it plays and its influence is controversial, according to UK in a Changing Europe Fellow Hussein Kassim.
As a permanent bureaucracy with important political functions, the Commission is more powerful than the administrators of most international organisations.
The Commission is important, but doesn’t run the EU: Claims that the EU is run by the European Commission, or that the Commission is the government of Europe, aren’t correct. They exaggerate the power of the Commission, and understate the role of
other institutions which debate, amend and pass EU laws. They also ignore the influence of the EU’s member countries. This may be because the European Union is a political system that borrows from many places without taking any one in particular as a model.
The EU has little in common with Whitehall or Westminster, making it difficult to describe in terms of the way government works in the UK.
The Commission has political leadership as well as administrative functions. It formally proposes new laws, oversees the budget, manages some policies, and represents the EU in trade agreements. It also has more staff than other EU institutions. There are around 33,000 civil servants in the Commission, 68% of whom are on permanent contracts.
It is led by a 28-person ‘College’, which includes one Commissioner from each member country. This is headed by the Commission President, currently the former prime minister of Luxembourg, Jean-Claude Juncker.
The Commission President is nominated by the prime ministers and presidents of the EU member states. The President then allocates jobs to other Commissioners, who are nominated by their government. The whole College must be approved by majority votes in the European Parliament and among prime ministers and presidents.
There are other EU bodies, equally or more important: The Commission’s size, influence, responsibilities and political leadership explain why it’s often said to ‘run the EU’. But it is not the most important institution when it comes to making decisions.
That distinction belongs to the European Council, according to Professor Kassim. This brings together the top political leaders from the member states. The European Council sets the strategic direction of the EU.
Crucially, the Commission has only a limited role in EU law-making. It can decide some less important rules, and in general it is the only institution that can propose new laws, but it doesn’t have the power to pass them on its own.
Professor Kassim says that some of the proposals that it brings forward have been requested by national political leaders. And there is no guarantee that a Commission proposal will become a law. The authority to make law belongs to the European Parliament and the Council of the European Union.
The Parliament is directly elected by EU citizens every five years. The Council of the European Union, sometimes called the Council of Ministers, is where representatives of all 28 member countries negotiate.
These two institutions debate, amend and pass EU law. Each has a veto.
Put differently, a Commission proposal only becomes an EU law when it attracts the support of two majorities. It needs both a majority in the Council, representing at least 55% of EU countries and 65% of the EU population, and a majority in the Parliament.
Although it doesn’t pass EU laws, the Commission helps to enforce them: The Commission plays other roles too. It’s responsible, along with the EU court, for ensuring that EU law is obeyed by governments and firms. In playing this role, the Commission works with the member countries. It doesn’t have its own agencies in the member countries in the way that the US federal government has agencies in US states.
The EU also decides on competition policy in Europe – for example, whether state subsidies should be approved, and whether mergers should go ahead. It also negotiates trade deals for the EU. The Transatlantic Trade and Investment Partnership with the United States, known as TTIP, is being negotiated by the Commission. Member countries, through the Council, give detailed instructions, monitor the Commission closely, and have the final say on whether or not to approve any agreement.
The Commission is perhaps the most visible EU institution, but it is not necessarily the most powerful and is certainly not the government of Europe.
Discussions about democracy are essentially about yardsticks. Depending on what you look at, and compare against, you will get different answers. And in that sense, both arguments are correct.
The reason is that people don’t agree on what ‘democracy’ is. We know it is about people being involved in how they are governed, but there are many different ways to turn that into reality.
‘Democracy’ means different things to different people: To take the most obvious example, when we talk about democracies, we often mean representative democracies, where we elect people to represent our views and make decisions on our behalf. That’s
very different from a direct democratic approach where, like in the EU referendum, decisions are taken by the population at large. Moreover, while we might accept Abraham Lincoln’s famous formulation of ‘government of the people, by the people, for the people’, we seldom agree even on whom ‘the people’ might be.
For some, ‘the people’ means an ethnic, linguistic and cultural community. But it’s also possible to argue that what ties ‘the people’ together is accepting a set of rules, where culture is less important than participation in community life.
Moreover, democratic standards may depend on the issue at hand. Do the same standards apply for regulations about selling fresh fruit as for organising the use of military force, or building a system of social security?
These questions confront all countries. The UK monarchy and a partly-hereditary House of Lords would strike some as ‘undemocratic’ compared to elected heads of state or upper chambers.
The EU has more democratic controls than a typical international organisation…
All democracies limit the power that any person or institution wields, but do so in different ways. The EU is an international organisation, like the United Nations or NATO, founded on treaties between its member countries.
The political leaders of those countries decide on the EU’s political agenda, and national
ministers are the main decision-makers when it comes to policies. However, the EU far surpasses other international organisations in its democratic control, just as it reaches into far more areas of public policy than its counterparts elsewhere:
• EU citizens directly elect the members of the European Parliament. Its approval is generally needed for new EU laws. These elections also then shape the choice of European Commission President, who needs to have the approval of the Parliament;
• Citizens can ask for specific new laws to be considered by the EU, through a European Citizens’ Initiative, although this has not resulted in any new laws to date;
• Member countries have accepted that the EU creates a set of legal rights, not only for states, but also for EU citizens, (‘direct effect’) which cannot be overridden by those countries (‘supremacy’ or precedence).
…but it’s not a typical international organisation:
However, precisely because of the extent of these rights and processes, many observers question whether the EU should be judged by the yardstick of a state. The EU court says that the treaties in effect constitute a ‘constitutional charter’. The scope of EU
activities distinguish it from other international bodies, which have limited areas of
Compared to a country, the EU has democratic shortcomings:
Seen in this light, there are a number of key democratic shortcomings or failings, according to UK in a Changing Europe Fellows Sara Hagemann and Simon Usherwood:
• The European Council and the Council of Ministers (the two bodies where member countries meet) still hold many sessions in private or only make some records public, which makes it difficult to know who has said what, or how individual countries have voted;
• Implementation of EU laws still often happens under the opaque ‘comitology’ system, although it has been changed recently;
• The European Parliament lacks some of the powers normally associated with national parliaments. It cannot formally propose new laws or raise taxes;
• There is no clear alternation of power. While different groups might gain more seats in the European Parliament, this is not necessarily matched by similar changes in the ‘executive’ branches of the EU – the European Commission, and the governments in the Council;
• Perhaps most significantly, most EU citizens do not identify strongly with the EU, so some will argue that it doesn’t have the legitimacy that national systems enjoy.
There are still questions about the right balance to strike:
There is a tension that might be obvious from this list. The obvious remedies would imply a considerable strengthening of EU powers, making it look even more like a state.
This dilemma is clearest with the increasing powers given to the European Parliament – which has nonetheless seen declining turnout for elections. In the absence of a shared European community of the kind found within countries, it might not be possible – even if it is desirable – to build a system that unifies people like many nation states have done. But this does not of itself mean that some form of democracy is impossible.
Dr Hagemann and Usherwood say that the question is how to get the best balance in a system which seeks to address the needs of both states and peoples in Europe, especially within an EU that handles both mundane technical regulations and highly political questions.
Leave claim: “The EU costs the average UK household as much as £9,265 a year.”
Remain claim: “The CBI says that all the trade, investment, jobs and lower prices that come from our economic partnership with Europe is worth £3000 per year to every household.”
There are good reasons not to rely on either of these specific claims.
Adding up different studies answering different questions doesn’t work:
The CBI figure of £3,000 quoted by Remain campaigners is not a credible estimate, according to UK in a Changing Europe Fellow Jonathan Portes. It is based on a selection of studies produced at different times (some date back well over a decade), using different methodologies, and designed to answer different questions.
Some looked at the economic impact of EU membership to date, and some at the future impact of a vote to leave. Some are not even specific to the UK.
Mr Portes says that it doesn’t make much sense to add them up like this, nor to use the results to get a single estimate of the costs or benefits of EU membership.
Taking a single study that makes a lot of assumptions about the future is also risky The £9,625 figure used by Leave campaigners is based on a study from the Institute of Economic Affairs. It argues that EU membership reduces the value of the UK economy, measured in GDP, by about 13%. It assumes that on leaving the EU, the UK would remove all barriers to trade with the rest of the world, and abolish all EU regulations in areas like the environment and the labour market. This may not happen, and if it did, savings may not be this high. For instance, other experts say that the UK already has a relatively loosely
regulated labour market, suggesting that gains from cutting back on EU rules would be small.
The calculation also includes some arbitrary and unsubstantiated ‘gains’, according to Mr Portes, such as the claim that UK contributions to bailing out eurozone countries have, or possibly will, cost us 2% of GDP.
If individual economists can come up with such different numbers, what can we say about the economic impact of EU membership?
We can at least point to some areas of substantial, if not universal, consensus among economists generally.
EU membership so far has made the UK’s economy more open and this has made it bigger
The Bank of England says that EU membership has seen increased openness to flows of trade, investment and labour. It says that there is plenty of evidence suggesting that openness helps economic growth and improves living standards, although it also leaves the UK more exposed to economic and financial shocks from overseas.
Professor Nick Crafts, a leading economic historian, says that EU membership has increased UK productivity – and so GDP – by about 10%.
Any precise number about the future will be wrong…
If economists are right that EU membership boosted UK growth in the past, there is no guarantee that it would do so in future. The impact of a vote to leave would depend crucially on two things.
First, the trading arrangements between the UK and remaining EU countries. These would have to be negotiated after the referendum. Second, the economic policies adopted by the UK government after we leave.
We cannot predict these with any certainty. Credible studies talk about a range of possible
…but economists think that leaving would come at some economic cost
There is a wide consensus that leaving the EU would come at some economic cost. For example, every year the Financial Times surveys a group of over 100 economists. This year, three-quarters thought that leaving would reduce the size of the economy in the medium term compared to staying in.
Fewer than one in ten thought leaving would improve growth prospects. The FT has published each economist’s answer. Similarly, a recent gathering of economists at the Royal Economic Society also expressed support for staying in the EU.
The FT also reviewed three recently published studies, by the Centre for Economic Performance at the London School of Economics, Price Waterhouse Coopers for the CBI, and the consultancy Oxford Economics, which support this view. All three use credible methodologies generally accepted by economists and researchers, in contrast to the estimates used by the campaigns, according to Mr Portes.
They suggest that leaving the EU would have some negative impact on the UK economy compared to staying in, with that impact being smaller the closer any new arrangements are to our current economic relationship with the EU.
The estimates range from close to zero in one model (if we continue to be part of the Single
Market, keep allowing free movement of labour from the EU, and so on) to significantly negative if leaving results in substantial new barriers to trade.
Why care about economic growth? While economists generally conclude that membership has benefitted the UK economy overall, what happens to the economy does not affect
everyone in the same way. Some regions and sectors may gain, while others may lose. This is why the Bank of England talked about past EU membership both raising economic growth and boosting living standards. Economic growth on its own does not necessarily mean that you personally or even people generally will be better off.
For that reason, it’s not helpful to take an overall estimate of the effect on the economy and turn it into an amount per household.