The future of the left since 1884

A battle to be won

As with the referendum on membership of the then European Economic Community (EEC) 41 years ago, the economic context is once again important this year, though I believe that the instinctive economic argument is often overlooked as each side throws...


As with the referendum on membership of the then European Economic Community (EEC) 41 years ago, the economic context is once again important this year, though I believe that the instinctive economic argument is often overlooked as each side throws different facts at the public.

Back then, like with the Conservatives now, it was a badly split Labour party which called the referendum and suspended cabinet responsibility so senior figures could campaign on either side. Indeed, the split was so significant that Jim Callaghan commented that the referendum would be “a little rubber life raft into which the whole party may one day have to climb.”

Unlike now, the media in the 1970s was fairly unified in favour of ‘Yes’, with only The Spectator and the Morning Star being on the ‘Out’ side.

But like today, the business community was very supportive of staying in: in 1975 an Economist poll of 653 chief executives found that 95 per cent declared their support.

In the end, the vote was won by a margin of 2 to 1, and the economic context was influential.

In economic terms, Britain was the ‘sick man’ of Europe in the 1970s. Between 1958, when the EEC was established, and the late 1960s, GDP per head in France, West Germany and Italy per head had risen 95 per cent compared to 50 per cent in the UK and our prospects were poor. It’s no wonder there was a decisive victory for in.

In 2016, aside from immigration, the key issue is once again the economy. It’s likely to be closer than in 1975 in part because the economic situation is not so overtly perilous for the average person, despite the toll that six years of self-imposed austerity has taken. Remember that in 1975, inflation had reached 24 per cent and petrol prices had almost doubled in the previous 12 months.

Nevertheless, the economy will prove decisive on June 23rd and the consequences in my view will be economically stark should we end up leaving.

But for me, it’s less about using figures that I imagine few believe anyway to win the argument with undecided voters – the three million jobs dependent on trade with EU Member States, the cost of regulation et cetera – and more about winning the argument conceptually that as a trading nation, trade, and therefore the economy, will be stronger inside the single market.

So it’s worth reiterating what the single market means for trade, growth and productivity. Some of these arguments are ideologically difficult for political thinkers on the left but are integral to why we should remain in:

Trade and investment

Selling products within the single market is cheaper. Rather than having to adhere to 28 different sets of product regulations, the EU works to harmonise non-tariff barriers such as consumer safety. And the removal of tariffs makes selling cheaper. Regardless of whether we are in or out, we will still trade with our nearest neighbours, whose economies are most similar to our own. The single market simply makes that easier and cheaper. And market size is a major reason for Foreign Direct Investment (FDI) flows. So for us, English-speaking, with a very open economy and access to the world’s largest single market, more capital flows into the UK. Little wonder therefore that we are the largest recipient of FDI in the EU.


Do we accept – can we explain to the public – that opening up markets is good for competition and therefore growth?  That some businesses will not cope but those that do have access to a bigger market and economies of scale? As a director of a car parts company based in Stockton-on-Tees said, “If you’re an ambitious business do you want a 1.6m [car] market or a 18m potential market?”


Whilst the UK has a real productivity problem – a great deal of which lies at the feet of George Osborne – without the EU we would be in an even worse position. Professor Nick Crafts of Warwick University thinks we would be 10% less productive had we not been in the EU. And not without reason – the openness and size of the single market allows the most productive firms to specialise in what they do best and then expand; greater competition means that they must constantly innovate to survive; and easier investment flows means capital is invested where most appropriate. This all leads to increased productivity.

There is a battle to be won. Trade, growth, productivity all benefit from membership of the single market, which in turn helps job creation and improves standards of living, but we must win the argument on a conceptual level and not with dry facts.

Image: G Cacakian


Shabana Mahmood MP

Labour MP for Birmingham Ladywood

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