Brexit: A Norway Bargain

You’ll hear it often during the course of the next few months:

“They simply can’t tell the British people what ‘Brexit’ looks like. And the solutions they do propose – like the Norway Option – mean we’d have to comply with almost all of the rules and have no say in the decision making. And we’d still have to contribute into the EU budget!”

Ok, so I’m paraphrasing. But get used to this rhetoric. This will and already has formed a key part of the Remain campaign’s arsenal.

And they have a point, at least on the first count. The Leave side is yet to articulate a clear and coherent vision of how Brexit will happen and what will be agreed with EU partners.

The issue here seems to be twofold. First, continued divisions and disagreements between the Leave campaigns (Grassroots Out and Vote Leave) have left the matter unresolved and the space open to attack. This may or may not be ameliorated by official designation for one of the campaigns from the Electoral Commission.

Second, some see the case as a little odd. The Conservative government, after all, will be the ones tasked with negotiating an agreement in the event of a Leave vote. And yet their official position – albeit under special privileges for ministers to campaign as they wish – is in support of the Prime Minister’s EU renegotiation package.

What really matters here is that this is an essential issue for the undecided. Barring socio-economic disaster in the EU before June 23^rd, high uncertainty around a Brexit vision will produce a decisive Remain victory. David Cameron has already leapt on this issue, making Article 50 invocation sound like the two years a terminally ill patient spends waiting to die – this in spite of the fact it would fall to his government to negotiate an agreement.

The Leave campaign needs to reduce this uncertainty, and quickly. There are plenty of options out there for exit strategies, which cover a spectrum of risk levels and degrees of compromise. ‘Flexcit’, for example, is a phased withdrawal plan put forward by Richard North, retaining status as a European Economic Area (EEA) member via the European Free Trade Association (EFTA). This is a lower risk approach that begins with a Norwegian-style relationship.

And so this brings us full circle back to my opening ‘quote’. The second count is that Norway carries almost all of the costs and all of the laws of the EU, without any of the influence. Norway ministers, the critics say, lament their lack of influence over decision making and legislation, while remaining burdened by substantial financial contributions to the EU.

So is there any truth in this?

Norway gets access to the EU’s internal market via the EEA. This arrangement facilitates the free movement of goods, capital, services and people between EU and EFTA members.

But things are little more complex than that. Free movement of goods, for example, means customs-free trade, but this excludes food and beverages benefiting from EU subsidisation. There is also a question mark around Norway’s freedom of movement arrangements and whether this would satisfy a British electorate fed up with net immigration numbers regularly topping 300,000. One way of selling the proposition is the EEA’s ‘emergency brake’ mechanism, a concept similar in nature to the agreement David Cameron has reached on in-work benefits. This may prove a sticking point for Leave campaigners, however, some of whom have vociferously criticised the negotiated brake.

Nonetheless, the Norway model is not half as bad as the Remain side makes out. Indeed, closer scrutiny of the empirical evidence exposes a number of false claims and exaggerations.

They have argued, for example, that Norway adopts almost all of EU law. In fact, of the 23,000 or so EU laws currently in force, the EEA has incorporated around 5,000. By way of Norway’s participation in the EEA, this means that Norway is subject to roughly 21% of EU law. Even lower estimates have been reported by the Norwegian Foreign Ministry, who estimate the figure at around 10%.

On the claim that Norway has to pay significant contributions into the EU budget for access to the single market, this is untrue and misleading. Norway’s EEA package provides for a range of financial contributions, but these include voluntary grants to assist post-Communist development in Eastern Europe. Between 2009 and 2014 these grants amounted to €804 million – none of which is remitted to the EU or is part of the EU’s budget.

In addition, Norway provides 95% of the funding to EEA grants, again not part of the EU budget. The net contribution for these grants – after programme funding is returned to Norway – is estimated at €90 million per year.

This leaves the cost of access to the single market, paid for through the EEA budget. Currently this budget is around £16 million, of which 55% is borne by Norway. Adjusted on a pro-rata basis this means the cost to the UK would be less than £100 million per annum. Moreover, Richard North has estimated that even if we assume the full contributions on a pro-rata basis, our gross contribution would be £2.5 billion per year. And compared to a gross contribution of £19.2 billion in 2015, that is a colossal saving.

And then there’s a wider democratic point. Norwegians are overwhelmingly against EU membership, voting against at referendums in 1972 and 1994. Today 70% say “No” to the EU.

Despite some potential campaigning obstacles, the Norway option is a sensible, off-the-shelf model on which British voters’ short-term doubts about single market access could be assuaged. The Leave side may require more convincing yet, but this model may just be their best hope of securing a Brexit vote.