Oh! What a surprise!
Our spirits will fall and then rise; For amiable Healey Has turned out quite mealy By cutting our spending to size.
Sloshed up to the eyes!
Our liquor he will now excise. Though our incomes may wax, He will take them in tax, From our pockets our money he'll prise.
This dose I surmise, For others may be very wise. Though the standard of life Should be slashed by the knife, I fear I must ask for a rise! Basil Charles Europe than on the world market throughout 1974. But this apparent support for the EEC case in fact shows its weakness. 1974 was a year when Europe had relatively good harvests while the American wheat harvest, which is of course the backbone of world food supply, was worse hit by weather than probably any time this century. Not surprisingly this ensured that the world wheat price was kept up to unusually high levels.
One can certainly say however that if the 1975 harvest in the US and Canada is even average or only slightly below average, there is not the slightest doubt that the price of EEC wheat, and therefore virtually all EEC agricultural products will, long before the end of the year, be very much higher than the world price. The only sense in which it is true to say that the era of cheap food is gone forever is that most currencies, and particularly the pound, have depreciated against almost all real commodities, but in so far as there is going to be cheap food, it is going to come from the world outside the EEC, except of course, to those countries outside the EEC who are sold grossly subsidised EEC food products to relieve the mountains which grow up as the common agricultural policy produces vast quantities of over-priced and unsaleable agricultural products. This again is a strong case for being outside the EEC and getting the benefit of the subsidised exports sales rather than inside it doing the subsidising and buying goods at a grossly inflated price.
We are now in a better position to put into perspective the hidden cost of EEC membership which come about because we would be forced to buy dearer EEC food products as against cheaper world alternatives (or, as in the case of New Zealand, where we are graciously allowed to buy products from the outside world, it is ensured that their price is raised to the EEC level). There have been very few years since the war when EEC prices have not been higher than world levels, and in spite of the population explosion in developing countries, there is not the slightest reason to believe that there will be more years in the immediate future when the EEC will have lower prices. As a matter of statistical fact world food production has increased faster than world population, and as a matter of hard economic fact, those countries whose population is increasing fastest are in general not, in any case, in the market for very much temperate food production — they tend to rely on the aid which is normally given from the residue of production after the saleable part has been sold.
However, as an act of generosity to the pro-Europeans one may say that one year in every four or five one might expect some combination of bad harvests in the United States, Russia, or somewhere else to force up the price of some or even most foodstuffs on the world market higher than that in Europe. But the remaining three or four years the reverse will be the case.
Thus in addition to the net loss on its balance of payments which Britain will admittedly suffer due to having to pay to the community budget, there will in most years be an added loss due to having to buy dearer EEC food. The extent of this loss will vary, from a gain of perhaps a few hundred million pounds in the odd year when EEC prices are lower than those of the rest of the world, to very considerable losses perhaps of the order of £1,000 million when world prices are highly depressed as a result of unusually good harvests. In present money terms I think it is reasonably fair to assess a loss of £400 or £500 million per year on average over a fouror five-year cycle as the hidden costs of EEC membership plus the overt costs of payments to the budget which in my estimate would be of roughly the same order of magnitude. Thus Britain's balance of payments is likely to be debited with an average £750 million to £1,000 million loss per year as a result of EEC membership. Of course, even a loss of £1,000 million a year
is perhaps not very significant if Britain is running a deficit of £4,000 million, as it did in 1974. However even our present Government (or at least some members of it) recognise that this is not a state of affairs which can go on for very long, and if Britain were ever in a position where it looked likely to achieve a balance, or a modest surplus in its balance of payments, an average annual loss of £1,000 million would be a crippling extra burden to carry.
There is no time to go into the various less important economic aspects of Britain's leaving the EEC. However there is one point which has to be dealt with — the threat that should there be a 'No' vote in the referendum, there will be an immediate run on sterling. Certainly I would not totally discount this — particularly if all the opinion-formers say so loudly enough — but there are certain reservations which should be made. A run of this nature would only happen under these circumstances if sterling was in a desperately weak condition, and if it were in such a condition, a run would be extremely likely sooner or later anyway. If there is one thing we ought to have learned from the period between 1964 and 1967 it is that almost anything could trigger off a sterling crisis, and short term measures to postpone such a crisis barely lasted for that week which Mr Wilson feels is a long time in politics.
If we are likely to face a sterling crisis, we might as well do so while achieving something which will benefit Britain's future balance of payments rather than harm it. And this leads on to my second reservation about the possibility of a sterling crisis. If a `No' vote is seen as a defeat for Mr Wilson personally, and a possible augury of the forthcoming collapse of the Labour Government, it is far from clear to me that there will be any sort of a sterling crisis. I fear that many of our foreign holders of sterling lack that childlike confidence in the abilities of Mr Wilson and his government to maintain the value of sterling, and might well feel that any alternative could scarcely be worse and might well be better. In which case there would be a postponement of the crisis at least until it was clear what the political implications were, and under our present situation a postponement of a sterling crisis is the best we can hope for in any case.
The Common Market is, in fact, the political analogue of the Concorde project. In both cases the project was started with the highest hopes and the noblest idealism, but with a sadly deficient examination of the true costs and benefits to Britain of the project. Similarly, in both cases, the costs mounted and the benefits appeared more illusory, the embattled supporters of the project instead of admitting their mistake, insisted on talking of gains in periods further and further into the future and making the very real point that as more and more money and prestige had been invested in the project, abandoning it would become more costly and less advantageous, so why not carry on. Just as it would have been better never to have started Concorde,. it would have been better for Britain never to have applied for membership of the Common Market. It is unquestionably true that the effect of our two years' membership of the EEC will make the cost of leaving higher than if we had never joined.
But, again, exactly as with Concorde, the cost of continuing with this ill-fated venture will be higher still. I predict that if we do continue in the EEC, in two or three years, pro-Marketeers will be saying that, of course, had we known in 1975 the true costs of membership, it might well have been desirable not to have joined, but by 1977/8/9 we will have already gone too far to turn back and will have to continue until the great day when all the EEC geese turn into swans. It would be a great deal better economically for everybody if this process were brought to a halt now.