EU Referendum


Brexit: an application of Bootleomics


21/04/2014



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It is nearly two weeks since the IEA "Brexit" prizes were announced, and far from starting a debate, as the Lord Lawson hoped it might, the IEA intervention has killed it dead. Within a few days of the prizes, publicity had sagged and it has now been four days since there has been any media at all.

Nevertheless, I am continuing to work offline on upgrading our own version of the "Brexit" plan, I've been hard at it all weekend and have now been able to upload the latest version of "Flexcit" (v.04), accessible here or from the button on the menu above.

Added to the original are more than 6,000 words in over 20 pages, the additions alone longer than one of the entire submissions selected as a finalist for the IEA prize. Oddly enough, I am inspired by a quote I extracted from a paper written almost exactly a year ago by Ben Harris-Quinney of the Bow Group.

"It is now not enough to simply bemoan the failings of the EU", he wrote. "The first priority for all eurosceptics should be to find a superior and realistic alternative, and to actively and constructively work towards it".

What I'm currently working on is an evaluation of why some pundits favour the "Swiss option" for leaving the EU, over the "Norway option", the essence being, in part, that the former supposedly offers a greater chance of securing cost-savings.

From the work I have done so far, it seems that the justification for this is, to say the very least, rather ingenious, coming from Open Europe. I thought it worth running it on the blog to see what my regular ex-readers thought of it.

To save their money, Open Europe, it seems, have a theory is based on a comparative analysis of cost/benefit ratios, as between EU and UK law. According to Open Europe, EU law comes out at 1.02, which means that every pound spent delivers a mere £1.02 of benefits. On the other hand, UK law comes out at 2.35 which means that every £1 spent delivers £2.35.

When the two ratios are compared, they tells us, this gives a 2.5 times advantage to UK law, which has Open Europe arguing that it is more cost effective to regulate nationally than it is to regulate via the EU.

This is a delicious theory, and one that would be very attractive – if it was valid. But the big problem for me is that chalk seems to be being compared with a very ripe cheese. Let's look at a few bits of legislation from the two different systems, in a target year of 2008/9.

On the UK side, we have the Estate agents (Redress scheme) Order 2008 and Estate Agents (Redress Scheme) (Penalty Charge) Regulations 2008. These ensure that consumers have access to independent redress from estate agents and estate agents are fined for non-membership of redress schemes.

Picking more or less at random from the EU side, we have Directive 2008/105/EC of 16 December 2008 on environmental quality standards in the field of water policy (amending and subsequently repealing several other directives).

On the UK side, we have the Local Transport Act, an Act which seeks to empower local authorities by giving them strengthened powers to deliver a local transport system that is best suited to local needs. Back to the EU, we have Council Directive 2008/72/EC of 15 July 2008 on the marketing of vegetable propagating and planting material, other than seed.

The UK then can have Street Works (Charges for Unreasonably Prolonged Occupation of the Highway) (England) Regulations 2009. This is designed to reduce the number of occasions when works in the highway by undertakers take longer than the agreed duration and so help to reduce the inconvenience and disruption caused.

From the EU we then have Directive 2008/28/EC of 11 March 2008 amending Directive 2005/32/EC establishing a framework for the setting of ecodesign requirements for energy-using products.

Back on the UK side, we have Pensions Act 2008 which introduces measures aimed at encouraging greater private pension saving. And from the EU we have Directive 2008/68/EC of 24 September 2008 on the inland transport of dangerous goods.

Clearly evident from this small sample is that very obvious fact that the two legislatures are operating in completely different areas. But even if we expand the sample, it is still evident that we are dealing with very different legislation sets, covering completely different territories.

Taken as a whole, we can accept that the UK law offers a cost/benefit of 2.35 and the EU delivers 1.02 but – and it's a very big "but" – if the UK had produced all the EU law, can we assume that the cost/benefit would have turned out at 2.35 instead of 1.02?

And that, of course, is the point. Different law sets will have different outturns, with the cost/benefit ratio determined as much by its nature as its origin. The idea that changing the source of the legislation will, necessarily, produce a different outcome is surely absurd.

However, from here the plot thickens. When Mr Roger Bootle's firm Capital Economics produced its NExit plan for Wilder's Partij voor de Vrijheid last February – for an undisclosed fee - it went for the "Swiss option" on the basis that the Open Europe scenario could save the Dutch a shed-load of money.

Looking at the comparative analysis of cost/benefit ratios, they decided these could be applied to the Netherlands. Thus, after NExit, Capital Economics argued that, for every regulation transferred from Brussels to Den Haag, costs could be reduced "in line with the difference in the benefit to cost ratios".

Based on an equally dubious estimate of the number of laws that could be repatriated and re-enacted to become domestic law (failing to recognise that much of it now stems from international agreements), the firm then applied the modern equivalent of the magic wand, called "modelling".

This clever technique, straight out of the "climate change" arsenal, allowed Capital Economics to claim that their "Swiss option" gave them an extra €326 billion (2013 prices) in cumulative gross domestic product over the period between 2015 and 2035 (about €15bn a year), "purely from a reduction in the regulatory burden".

Add a nice snazzy diagram (above) and you have a classic example of Bootleomics – very clever and persuasive until you make the mistake of looking at the detail. But, to strengthen its credibility, you can now rely on the six IEA "Brexit" finalists choosing the very same "Swiss option".

And it wouldn't have hurt having that nice Mr Bootle as an advisor to the judging panel, despite being kicked off as a judge after complaints of lack of impartiality. Nice work if you can get it.