Why I’m a reluctant left-wing Brexiteer

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To be lumped-in with the Faragian “Little Englander” stereotype of those who are extremely sceptical about the European Union (and who, admittedly, probably comprise the vast majority of such sceptics) is an extremely uncomfortable position for a socialist to find himself in. The belief that all humans are inherently equal and that accidents of birth should not predestine someone make us fundamentally hostile to nationalist notions of exceptionalism (whether explicit or implicit). We comfort ourselves with the fact that ours was once the prevailing opinion within the political left, championed by heroes like Tony Benn, Michael Foot, and my own particular favourite, Peter Shore (pictured above).

In the coming weeks, I intend to provide a left-wing critique of the European Union. Subsequent blogs will consider the role of the European Court of Justice, in particular, in entrenching a neoliberal ideology into the legal orders of EU Members States; the one-way street of privatisation and marketisation that is driven by the EU; and the EU’s ideological choice to impose harsh austerity measures in response to the Eurozone crisis. All of these, I believe, demonstrate that the EU forces Member States to adhere to conservative ideology.

I have never been a rampant Europhile (as a student, I regarded the Young European Federalists with considerable disdain), and have always looked upon the European Union with a critical eye, believing that significant reform was necessary, but possible. Two parallel processes have led me to conclude that such reform is not possible. The first, is that in becoming more expert in European Union law, as a student and then a lecturer and writer, I have come to conclude that only the wholesale revision of the core principles of the Union could transform the EU from a neoliberal, free-market union to a social union. Second, recent events in Europe have convinced me that no will exists within EU institutions to make such a change and, indeed, the institutional support for neoliberal free-market capitalism has become more trenchant, and more harsh. Both of these I intend to deal with more comprehensively in the coming weeks.

In essence, there are two orders of complaint about the path that the European Union has taken.

The first order complaint is fairly ideologically neutral: that the European Union deprives the citizens of Member States of any direct say over matters that would usually be the subject of political discourse and division. Invariably, the main proponents of this argument appear to be drawn from the right. Complaints about the surrender of sovereignty can frequently be heard from the Conservative benches of the House of Commons, but seldom heard from the Labour benches.

The second order complaint is distinctly partisan, and from a left-wing perspective more worrisome: that having been deprived of any direct say over matters that would usually be the subject of political discourse and division, we have had imposed upon us a free-market ideology from which we are not at liberty to depart.

Though the preference for free-market ideology has been evident, in particular in judgements of the ECJ, since the early days of the EEC, the abandonment of the façade of ideological neutrality came during the 1980s. During this period we saw the entrenchment of a consensus that arose in the 1980s, when almost every Minister in the Council was drawn from the centre right. This consensus led to both the Single European Act and the Treaty of Maastricht. Unlike in domestic politics, that ideological choice cannot be undone by a majority, even a relatively sizable one. A similar uniformity of ideology as was evident in the 1980s would be necessary before a reversal of this ideological choice became possible, let alone likely. Such uniformity becomes less and less likely as more and more states are represented at the Council.

It is surprising, therefore, that so many on the Conservative benches are so antagonistic towards the European Union, relative to those on the Labour benches. If Conservatives don’t like that their political autonomy over the ideological direction of the country has been stripped away, they can at least console themselves with the fact that the levers of power of which they have been deprived are nonetheless being pulled in a manner that is, for the most part, to their pleasing. For example, John Major’s government actually quite liked the EU’s deficit-limitation rules because they represented the entrenchment of “good conservative values”. Arguably, John Major is the most successful Conservative Prime Minister in British history because he succeeded in entrenching conservative ideology in the British Constitution in a manner that no other politician in the history of the Kingdom had ever achieved.

By contrast, the more elitist elements of the left are quite at peace with not pulling the levers of power themselves provided that they are being pulled in a manner of their pleasing (the internationalisation of human rights is a good example thereof). But in EU Member States control over the levers of power has been surrendered and that power is being exercised in a decidedly right-wing manner. It is astonishing, therefore, that the Labour Party should be the strident defenders of the European Union, while it is the Conservatives who are amongst its harshest critics. The Labour Party has convinced itself that the European Union can be a vehicle for left-wing ideology when sixty years of evidence has shown that the opposite is, in fact, the case.

So my objection to the EU is not rooted in some intrinsic objection to the internationalisation of exercise of political power. My objection is that the internationalisation of that political power has been to entrench a conservative ideology to which I am fundamentally opposed, and to prohibit the governments of Member States from acting in any manner that departs from that ideology.

Projection: SNP Majority of 13, surprise gains for Lib Dems and UKIP

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feb 16 survation

SNP: 71
Labour: 24
Conservative: 16
Lib Dem: 7
Green: 7
UKIP: 4

Survation 16 February 2016

NB: if tables and charts don’t show, refresh page.

From now until the Scottish Parliament election in May, this blog will feature analysis of opinion polls and projections as to the result. These projections, I believe, are the most sophisticated presently in public circulation (see below for an explanation as to why).

The headline figures have been widely publicised and contain few surprises, save for the strong performance by UKIP in the regional vote share. The SNP leads Labour by 53% to 22% in constituency voting intention. The regional list voting intention see the SNP on 45%, Labour on 18%, the Conservatives on 15%, the Greens on 9%, with the Lib Dems and UKIP on 6% each.

However, some of the most surprising data is in the regional subsets. The Liberal Democrats show signs of recovery in key regions – Highlands and Islands, Lothians, and South of Scotland – formerly strong areas for the party. Perhaps unsurprisingly the Greens show their greatest growth in the Lothians (which once returned two Green MSPs), but the party also sees significant growth in Central Scotland (a seat in which eluded the Greens even at their 2003 high water mark). The Conservatives show modest growth, possibly suffering somewhat from the surprisingly strong numbers for UKIP in regions where the Tories would expect to poll more strongly.

The SNP’s seemingly interminable advance in the polls appears to have been halted in the South of Scotland, with Survation showing a decline in both parties’ shares, but no swing whatsoever from the SNP to Labour. Surprisingly, the Tories also show a sizeable drop in support in South of Scotland, possibly explained by the strong showing by UKIP in the Survation poll.

Projected into seats, it comes as little surprise that this represents a near clean-sweep for the SNP. Elaine Murray narrowly retains Dumfriesshire for Labour, and would be Labour’s sole constituency representative in May. On the basis of this poll, Labour isn’t even within 10% of the SNP in any other seat. The Conservatives, by contrast, win three constituencies, though not the three that they won in 2011. On the basis of the Survation data, the Tories lose both Ayr and Galloway and West Dumfries, but gain Eastwood and Edinburgh Pentlands. It’s worth noting that Eastwood will almost certainly be a three-way dogfight, and the Conservative candidate in Pentlands will not be the late and widely-liked David McLetchie. Liam McArthur loses Orkney to the SNP, but the Lib Dems are compensated with a seat on the Highlands and Islands list, meaning a return for erstwhile retired MSP Jamie Stone.

Overall regionally, Labour goes from seven to four in Glasgow and West of Scotland, and six to four in Central Scotland. Labour loses a further two seats in Mid Scotland and Fife, and one each in Highlands and Islands, Lothians, and North East Scotland. The Greens repeat their 2003 feat of two seats in Lothians, and a seat each in a further five regions. UKIP wins seats in four regions, including sneaking the last seat in Glasgow. If David Coburn is looking for the best place to run for the Scottish Parliament, at the moment that looks like either the Highlands and Islands or Mid Scotland and Fife.

A note on methodology

Over the past few months I have developed a complex system for translating opinion polls into seat projections. A system which, I believe, is far more accurate than the existing publicly available seat-forecasters. This is largely because my system uses the data subsets from opinion polls to forecast every seat, both constituency and regional, individually. This is, I believe, a far superior method for a number of reasons.

First, we can see in the polls and recent elections that the most stark shifts in voting intention have been in Central Scotland and Glasgow.  In the above Survation poll the regional list swing from Labour to the SNP is in the order of 10%. By contrast, the regional list swing in the Lothians is 2%, and in South of Scotland is zero. Psephologists will always point out the hazards in placing too much faith in uniform national swings, but the variations this time are so stark as to render national figures alone far more questionable than in previous elections. On this basis, using the constituency voting intention regional data subsets provides a better picture than a uniform national swing.

Second, national figures severely distort projections with respect to smaller parties. 4% of the vote spread evenly across the eight regions will see a party return no MSPs whatsoever. However, 6% of the vote in half of the regions would see a party return four MSPs.

Third, the most crucial seat in every region, and also the most difficult to forecast, is the last one. In 2011, the SNP succeeded in poaching the final seat in five of the eight regions, in most cases by slim margins. Had four of those five seats gone the other way the SNP would have never won a parliamentary majority. By the time the final seat in a region has been allocated, the main parties’ votes could well have been divided by denominators as large as 11, presenting a uniquely welcoming environment for minor parties to secure a seat. While projecting those eight last seats is extremely difficult, the only way to do so with even a modicum of accuracy is to compute each region individually, rather than on a national basis.

I do not pretend that for a minute that the projections I will be sharing are a perfectly accurate forecast. In some instances, the polling subsets for particular regions (such as the Highlands and Islands) are so small that the likelihood of error is significant. This is a flaw in the underlying polling, and not the system I use for projecting seats. Furthermore, though regional variations are easy to detect and project, the polling data suggest that similarly stark variations exist amongst socio-economic groupings. While it would be possible to project socio-economic variations out of the polls onto individual seats, I am possessed of neither the raw data (broken down by constituency and region), nor the time, to make such projections. From this blog, regional variations are, for the time being, as good as it gets.

Sorry Stewart Hosie, it’s EU rules that make “tax dodging” so easy in the first place!

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European Court of JusticeAs sure as night turns to day, politicians love a bandwagon. Stewart Hosie is the latest to take a ride on the Google tax bandwagon, writing to European Commissioner Margrethe Vestager, asking that she conduct inquiries as to the propriety of the Corporation Tax settlement between HMRC and Google. To complain to the EU’s Competition Commissioner about companies shopping around for favourable tax treatment is quite incredible, given that it’s the EU treaties that makes Google’s alleged “tax dodging” possible in the first place! Not only that, the European Court of Justice (ECJ) has a long history of striking down national laws designed to combat tax avoidance.

Article 49 of the Treaty on the Functioning of the European Union (TFEU) prohibits restrictions upon freedom of establishment of nationals of Member States in the territory of another Member State including establishment of companies. Article 58 TFEU further prohibits any restrictions on the free movement of capital. National laws, including tax laws, which infringe upon those rights are, in almost all circumstances, not permitted. This has resulted in a number of laws designed to clampdown on tax avoidance being struck down by the ECJ.

The case of Sandoz concerned a requirement to pay Austrian stamp duty on loans. Austrian law contained a provision designed to prevent the arrangement of loans outside of Austria to avoid paying the tax. In his opinion on the case, Advocate General Leger took the view that

[t]he principle of the free movement of capital was introduced inter alia in order to enable Community nationals to enjoy the most favourable conditions for investing their capital available to them in any of the States which make up the Community.

The Court agreed with the Advocate General’s position, holding that the measure

deprives residents of a Member State of the possibility of benefiting from the absence of taxation which may be associated with loans obtained outside the national territory. Accordingly, such a measure is likely to deter such residents from obtaining loans from persons established in other Member States.

It follows that such legislation constitutes an obstacle to the movement of capital within the meaning of Article [63 TFEU].

If the very purpose of free movement is to ensure the allocation of resources to their most efficient location, it logically follows that measures which inhibit “shopping around” for the most favourable environment for those resources must surely be unlawful.

Of even greater relevance is the decision of the ECJ in Cadbury Schweppes. At issue in the case was the UK’s controlled foreign corporation (CFC) rules, designed to prevent companies from shifting profits outside of the UK to avoid tax, were compatible with the treaties. The Court in Cadbury Schweppes reiterated its earlier pronouncement in Barbier that

a Community national cannot be deprived of the right to rely on the provisions of the Treaty on the ground that he is profiting from tax advantages which are legally provided by the rules in force in a Member State other than his State of residence.

…

the mere fact that a resident company establishes a secondary establishment, such as a subsidiary, in another Member State cannot set up a general presumption of tax evasion and justify a measure which compromises the exercise of a fundamental freedom guaranteed by the Treaty.

In other words, under EU Law the fact that a company shifts its operations to another EU state (such as Ireland or the Netherlands) to take advantage of more favourable tax treatment cannot be prohibited. Anti-avoidance rules may not be applied, even where there is an explicit intention to avoid tax, where the taxpayer nonetheless carries on genuine economic activities.

And herein lies the problem. For all we complain about “opacity” and “lack of transparency”, the reality is that the arrangements of Google, like so many other enterprises who have been the subject of much public and political ire, are not, in fact, artificial at all. At of end 2014 Apple and Google had 4,000 employees a piece in Ireland, and Facebook approximately 500.

The EU Treaties allow companies to locate anywhere in any Member State in order to take advantage of more favourable treatment. If you want to complain about laws that facilitate tax dodging, start with the EU Treaties.

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