Wednesday, January 27, 2016

What the House of Commons library did and did not say about jobs

One of the things to watch out for - from both sides - in the EU referendum debate is when people quote selectively from respected "impartial" sources.

A classic example is the way some people quote selectively from successive versions of reports by the House of Commons library summarising economic relations between the UK and the rest of the EU which are relevant - if considered correctly - to the costs and benefits of EU membership.

The most recent version, Briefing Paper 06091 published on 19th January,

"In brief: UK-EU economic relations" can be found at

What the "Britain stronger in Europe" group actually said this week, which is correct, is
"Over 3 million UK jobs are linked to our trade with the EU – that’s one in every ten UK jobs."
However, what is often claimed by some of those remain supporters who are a bit cavalier with the facts - I'm sure we can all remember one politician, very prominent at the time, who suggested this a year ago - and what "Remain" is often accused of claiming by "Leave" supporters (not always justly) is a similar but quite different claim -  that three million UK jobs result from Britain's EU membership.
Follow the link above and you will see the actual quote from the House of Commons library document is as follows:
"Both the Conservative – Lib Dem Coalition government and the previous Labour government stated that over three million jobs are linked, directly or indirectly, to exports to the EU. This is not the number of jobs linked with membership of the EU as some trade with EU countries would still take place if the UK were to leave the EU."

and also, in more detail:

'Both the Conservative – Lib-Dem Coalition government and the previous Labour government stated that over three million jobs are linked, directly or indirectly, to the export of goods and services to the EU. For example, in a speech in June 2014, the then Chief Secretary to the Treasury, Danny Alexander, said:

"Indeed, the latest Treasury analysis shows that 3.3 million British jobs are connected to Britain’s place in Europe."

Under the previous Labour Government, a figure of 3.5 million was quoted:

Mr. Clifton-Brown: "To ask the Chancellor of the Exchequer what estimate he has made of the number of UK jobs which are contingent upon UK exports to the EU."

Angela Eagle: "The Government estimate around 3.5 million jobs in the UK are linked, directly and indirectly, to the export of goods and services to the European Union."

The methodology behind this estimate was explained in the following PQ:

The estimate of 3.5 million jobs linked to trade with the European Union is based on the assumption that the share of UK employment linked to trade with the EU is equal to the share of total UK value added (GDP) generated in the production of goods and services exported to the EU.

The calculation uses data from UK Input-Output tables to estimate the proportion of UK value-added content generated in exports of goods and services and applies this to the values of UK exports to the EU. This is then divided by total UK GDP and the resultant proportion then applied to the total UK labour force to estimate the proportion of the labour force linked to EU exports on a value-added basis.8

It is important to note that this estimate is the number of jobs related to trade with other EU member states. This is not the same as saying that over three million jobs are dependent on the UK’s EU membership, since some trade with EU countries would take place even if the UK withdrew from the EU. In response to a Freedom of Information request, the Treasury made this point, telling Open Europe that the 3.3 million figure was "not an estimate of the impact of EU membership on employment"'

That last qualification is extremely important.

If remain campaigners say that more than three million jobs are linked to UK trade with other EU countries they are telling the truth. If they say those jobs would all go if we leave, they are not.

However, "Leave" campaigners have to be careful too.

Under the so-called "Norway Option" or under "Flexcit" plans which start with a "Norway -like" position and negotiate onwards from there while keeping free trade, there would not be additional tariff barriers so those jobs should be reasonably safe. There are of course other issues with the Norway option (see previous posts.)

Under the so-called "WTO" option it's not that simple. The "Most Favoured Nation" rules of GATT and the World Trade Organisation mean that the EU would have to offer a Britain which had voted to leave trading terms at least as open as the best terms agreed with any country which is NOT part of the European Single Market.

This severely limits the ability of the EU to push for punitive terms of trade on a departing Britain if they were foolish enough to try to do so. It does not mean there could be no increase in tariffs or non-tariff barriers at all. There could be, and hence a threat to some of those three million jobs under that scenario is a legitimate concern.

Hence the only real answer to the question of how many jobs depend on the EU is that it depends very much what alternative is on offer.


Jim said...

Well done Chris, and glad to see you have taken my advise. Look at the optios that are real world workable, and reach a conclusion.

That's exactly what the government will have to do if presented with a vote to leave, and they will reach the same conclusion. Flexcit is not perfect, and the path out is not perfect, that is admitted from the start, But its the best plan we do have, its been thought about discussed amended and further discussed and further amended up the ying yang. Though I grant you it is still not "perfect".

In the end however when you do look at the options, then you reach pretty much the same conclusion we all did.

Jim said...

Well, the truth is the IEA launched a brexit plan competition a couple of years ago, Dr Richard North thought it was a good idea to enter, and to amalgamate a lot of discussion held on the EU referendum blog into it. it grown and grown and was actually shortlisted, then the IEA changed the rules to make the whole thing more economics based (which you could have expected from the IEA, but we never had planned for that). Any way Flexcit did not win that prize, but, freed from the word limit of the IEA competition it has since grown and been developed over the last 2 years to become the most comprehensive exit plan we have.