Dominic Raab is the Member of Parliament for Esher and Walton, and is a Justice Minister.
I’m convinced that Britain’s best days lie ahead, and that our brightest prospects lie outside the EU. Don’t get me wrong. Brexit is no lottery ticket. Nor am I predicting economic apocalypse if we stay. As a prominent businessman recently put it to me, the real question is: which vision – inside or out – offers the greatest rewards against the more manageable risks? Take job creation. I believe the campaign to Leave has the more credible case for optimism – for three reasons.
First, by wresting back democratic control over how our laws are made, we can cut unnecessary regulation. Research by Open Europe suggests the hundred most onerous EU measures load £33 billion of costs onto the economy, heaping burdens on employers. That doesn’t mean we would lose all those costs by leaving. It depends what red-tape we cut. We might want rid of the blunt EU Working Time Directive, but no-one suggests we wouldn’t have limits on working hours. The point is we’d have control to tailor the rules to get the optimum balance between freeing up employers to hire more people, and preserving vital protections for employees.
Open Europe also points to examples of regulation, like the EU Climate Change and Energy Package, where it estimates that 95 per cent of predicted benefits from the EU regulations failed to materialise. The very process of EU decision-making often turns reasonable ideas into harmful law. The new EU General Data Protection Regulation was touted as an initiative to promote the digital single market. By the time it became a formal proposal, the estimated annual cost to the UK economy was £360 million, driven by bureaucratic burdens like requiring all firms to have data controllers. Once negotiated – between 28 governments, the Commission and European Parliament – the costs had only gone up. In reality, now, there is rarely any EU business regulation where the UK strategy is anything other than damage limitation.
That hits small businesses the hardest. The EU Commission’s own analysis suggests their regulation hurts small and medium sized enterprises (SMEs) ten times more than big business. That’s especially damaging for us, because 60 per cent of UK employment and 85 per cent of recent job creation is by SMEs. Outside the EU, the UK would be able to adopt smarter and lighter regulation – enabling firms to hire more people (and pay better wages with the costs saved).
The second cause for optimism about job creation, outside the EU, is the opportunities for more energetic free trade. In 2014, just 11 per cent of UK firms exported. If we want British businesses to create more jobs, export growth is vital. The EU has exclusive power to negotiate free trade deals. Could we do a better job?
A plausible argument is that the EU has size on its side. But are big players more likely to negotiate with the EU behemoth than middle-sized economies? The evidence suggests otherwise. The EU has no free trade deals with large economies. The biggest is South Korea, an economy half size of the UK. In contrast, the Swiss – with a quarter of Britain’s GDP – have free trade deals with China, Japan and are in meaningful negotiations with India.
Quality counts, too. Research for CIVITAS shows Switzerland, South Korea and Chile each secured preferential access to markets with greater combined economic size than the EU has with its deals. And they included ‘services’ in 90 per cent of their agreements, compared to 68 per cent of EU deals. Even more striking, after 10 out of 15 deals signed by the EU, growth in UK exports actually fell. After most deals secured by the Swiss, Koreans or Singapore, export growth rose.
This matters, because markets beyond the EU are the opportunities of the future. British exports outside of the EU already amount to 56 per cent of the total, having doubled in a decade – almost twice as fast as the growth in exports to the EU.
Far from helping us tap into emerging markets, the special interests and protectionism of the EU holds us back. A mid-sized economic dolphin like Britain would have greater agility to navigate the waters of global free trade than the cumbersome EU whale. And that opens up enormous new opportunities for job creation.
If those are two reasons for believing greater rewards lie outside the EU, a third suggests the risks have been exaggerated. Of course, we would retain a strong trading relationship with the EU. We have the fifth biggest economy in the world. European companies now sell us £68 billion more than we sell back. There are various models on offer – Swiss, Norwegian, Turkish – but since our economy is bigger than all of those combined, it’s reasonable to expect we would negotiate a bespoke British deal. That’s why, from Unilever’s Paul Polman to Barclays’ Mark Astaire, leading business figures dismiss doomsday predictions of economic harm from Brexit.
UK unemployment is half the Eurozone level, which rose over the last five years, while Britain created over two million jobs. There are risks to Britain remaining so closely linked to such an uncompetitive economic model. But, in terms of jobs, the real case for leaving the EU lies with the positive opportunities from winning back the freedom to craft our own laws at home, while trading more energetically abroad with the global economies of the future.