Cameron’s Referendum Gamble

This is Colm McCarthy’s latest column for the Farmer’s Journal. They’ve very kindly let us repost it here:


The decision last Thursday to detach the United Kingdom from the European Union was taken by referendum, a procedure familiar in this country but a constitutional novelty in the UK. Ireland has a written constitution and one of its provisions is that it can be modified only by popular vote. If the Irish government wished to scrap EU membership it would have to seek deletion, by referendum, of the article inserted on entry in 1972. There are other countries with written constitutions which can be modified without a popular vote, usually by some kind of parliamentary supermajority.

Britain is completely different. There is no written constitution at all and parliament is completely sovereign. The UK joined the European Economic Community without a popular vote, could leave without a popular vote, could abolish the monarchy, invade France, expel Scotland or opt for a decimal calendar. Constitutionally a referendum in the UK is always a war of choice, never a war of necessity. The referendum last week was only the third such national poll in British history and the first to go against the incumbent prime minister.

Britain’s first-ever national plebiscite was called by Harold Wilson, the Labour premier, in 1975, not to approve British entry to the EEC but to confirm the entry decision already taken and implemented by simple majority of the sovereign parliament. Wilson called a referendum to heal a rift on Europe in his party, as did David Cameron this time round. Wilson won a comfortable 2 to 1 majority with all main political leaders, including Margaret Thatcher, campaigning in favour. He was widely criticised for this unprecedented constitutional adventure but it was low-risk – there was little likelihood that the electorate would vote for exit. The cost of the ‘wrong’ result was also low – Britain had been in the EEC only a few years, it was a much more limited organisation than the EU has since become and exit would have been a major nuisance rather than a major crisis.

The second also produced a vote against change. When the Conservatives formed a coalition with the Liberal Democrats in 2010 they promised their partners a referendum on the voting system. It was opposed by both Conservatives and Labour and duly defeated 2 to 1. The ‘wrong’ result would again have been no big deal, a limited move towards proportional representation.  Britain’s first two national referenda thus shared some key features. The Prime Minister who initiated each had good reasons to expect a win, and the stakes were not too high. Defeat would hardly have ended their political careers.

The third referendum shared none of these features. David Cameron’s decision was announced in January 2013 at a time when his party trailed Labour in the polls and faced vote leakage to the Eurosceptic UK Independence Party of Nigel Farage. Both his Liberal Democrat partners and the Labour party favoured continuing in the EU and opposed the holding of a referendum. At the time a YouGov opinion poll showed that 40% would vote to stay in the EU with 34% voting to quit and 26% undecided. Cameron promised to hold the referendum should he win a Conservative majority at the election in 2015 which he duly did. It was never likely to be anything but close.

Moreover the European Union had become far more than a free trade zone, with extensive and detailed common policies covering energy, transport, environment, worker protection and a single market in financial services. The international economy had not recovered from the worst downturn since the Second World War. The consequences of withdrawal from the EU by a key member were unlikely to be minor, never mind predictable or easily managed. Cameron’s decision in January 2013 has been described, accurately, as a roll-of-the-dice, a high-stakes gamble driven by concerns about internal party management. His decision to resign was the correct one: he has landed Britain, Europe and indeed the world economy in an unholy mess at the worst possible time.

He is not the first of Europe’s leaders to place domestic political concerns ahead of economic prudence. The faulty design and subsequent mismanagement of the Eurozone owes much to short-sightedness in Germany. The next domino to drop could be in Italy, for long the least successful of the major Eurozone economies. The government plans a referendum in October on constitutional reforms supported by mainstream opinion. But it may be lost. It provides an opportunity to disgruntled voters to give the establishment another kicking in an over-indebted country with a dodgy banking system and could end the political career of Prime Minister Matteo Renzi. More importantly for Ireland, it could spark a terminal crisis for the common currency. The anger of European leaders with the United Kingdom’s referendum gamble is entirely understandable.

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

29 replies on “Cameron’s Referendum Gamble”

‘His decision to resign was the correct one: he has landed Britain, Europe and indeed the world economy in an unholy mess at the worst possible time.’


Must be roight up there with the finest of Old Etonian Chumps.

The Eurowallahs are entitled to be angry but as Nehru observed “the purely agitational attitude is not good enough for a detailed consideration of a subject.”

Italy’s banks are the weakest link in the chain.

The FT’s Janan Ganesh argued, I thought persuasively, before the vote, that the UK’s discomfort with the EU would have needed to be faced sooner or later. Better by Cameron supporting Remain than his Conservative replacement, after he had been deposed, arguing for Leave. The referendum may have been unavoidable.

Popular discontent was – and remains – the real problem, as Kevin O’Rourke and others have argued. To me, the solutions to that are not obvious, once you step past shallow denunciations of ‘neo-liberalism’ which (as Dan O’Brien has noted) is denounced by its critucs without ever being defined. A bit like the stance of scattergun critucs of the EU, in fact.

“Neo-liberalism” is only undefined if you limit your reading to the likes of Dan O’Brien (who himself apparently limits his reading to the likes of Dan O’Brien). Here, try this on for size:

Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning.

Attempts to limit competition are treated as inimical to liberty. Tax and regulation should be minimised, public services should be privatised. The organisation of labour and collective bargaining by trade unions are portrayed as market distortions that impede the formation of a natural hierarchy of winners and losers. Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counterproductive and morally corrosive. The market ensures that everyone gets what they deserve.

I didn’t have to go far to find it. You might also fruitfully try recondite and obscure sources like this. Or you could just hope that it turns up one day in a Dan O’Brien column.

guimoardf: Whatever else it may have been the referendum was not ‘unavoidable’. There is always a political choice under the UK constitution. It preserved Cameron’s position in the Conservative party and arguably helped to halt the rise of UKIP and win the 2015 election. It looks like it may also dissolve both the UK and the EU.

In countries with written constitutions referendums are indeed unavoidable (Ireland) or banned altogether (Germany, based on experience). Here’s a tentative long-range projection: there will be no more referendums in Britain, or what’s left of it.

“What I don’t understand is that those who want to leave are totally unable to tell us what they want,” Jean-Claude Juncker, the president of the European commission, said after Cameron’s final EU summit on Tuesday. “I thought that if you wanted to leave you had a plan … they don’t have it

Cameron modelled himself in many ways on Blair, for whom big political gambles always resulted in backing – if reluctant – by his party and its backers.

Many Brits voted leave because of a pent-up resentment of decades of being told by the political class that no matter how much they disagreed with EU policy or personality, there was nothing they could do about it.

The genie is out of the bottle now and the EU’s response is a disaster in marketing terms. It amounts to:

“We are more or less akin to a black hole. If you try to leave we will destroy your economy. Don’t anyone else get any ideas. Have a population that doesn’t like EU direction or policy – suck it up, or what are you going to do, leave?!!!” …accompanied by the really unhelpful trademark air of self-satisfied, relaxed, smugness in parts of Brussels.

The referendum result in the UK will bring to an end decades of woolly and unfocused bitching about Europe. The Euro sceptics now have to move their argument on from “we should be allowed a referendum” to addressing specifics. A reasonable debate, involving an engaged electorate can now start to occur.

The problem is that parts of the EU are angrily sulking, parts are ruthlessly focused on how they can benefit from an opportunity they had been quietly looking forward to, and parts are focusing like a laser beam on the navel of their own domestic electoral strategy.

Merkel is by comparison trying to behave like a grown-up.

That argument simply does not stack up. A section of the UK establishment, after decades of simmering resentment, have chosen to take on the other countries of the EU by engineering a totally irresponsible and foolhardy referendum and any suggestion that the latter will simply lie down under such treatment is misplaced, not because of any ill-will on the part of the countries concerned but because their politicians feel the interests of their countries are under direct threat. It is as simple as that. If they have been waiting to benefit from an “opportunity” from the departure of the UK, some evidence to that effect might be advanced.

As I said on the other thread, there is now literally a gallop by said establishment to try and sort itself out. They will get no quarter. Nor do they deserve it. What will change the situation, if it is to change, will be a change in perception of the UK electorate as to where their interests lie. The waters of the WTO are as cold as the Atlantic.

You make some excellent points.

Hollande has surely added a considerable amount of fuel to the situation with his remarks at the Somme commemorations in northern France.

“His hardline comments came after a meeting with David Cameron in northern France at the Battle of the Somme centenary commemorations. “The decision has been taken; it cannot be delayed and it cannot be cancelled. Now [the British] have to face the consequences,” Hollande told reporters.”

A French premier choosing Thiepval as the place to admonish the British and to tell the “to face the consequences” of their decision, is at best terrible insult memory of the British who died defending French soil.

“Merkel is by comparison trying to behave like a grown-up.”

Perhaps she realises that there is more at stake than poaching banking jobs to the benefit of Paris.

That’s not one argument, it is a series of points. Which don’t you think stack up?

It has been common knowledge for a long time that Paris in particular has coveted City business and its remarkable contribution to UK tax revenues and employment. Are we to pretend we don’t know this unless evidence is produced?

It is not helpful for Hollande to be telling everyone the UK referendum is irrevocable, he has no authority to declare that. It is a vote expressing a popular preference to leave rather than remain in the EU as it currently is. It is for the UK parliament to decide a course of action. We are already hearing talk of new “tax breaks” for City employees willing to relocate to Paris.

I’m not sure other EU countries are being asked to lie down under reprehensible treatment from the British. The UK establishment has progressively run out of road for fending off an expression of pent up frustration with the institutions of the EU by the populace.

Cameron thought he could get enough reform to face it down, but failed on both counts. The divide on Europe in the Tory party is very real and visceral – it is not just an establishment game.

Much of the recent public pressure relates to immigration and follows Blair’s failure to limit Eastern European immigration like Germany did. That disinterest stems from the disconnect between the North London Labour elite and the party’s base. Basically Labour had no immigration policy and the effects of that – an entirely UK decision – have been felt in the referendum. Those pressures are on the rise in the rest of the EU – just delayed by having opted earlier to restrict inflows.

Much of the debate about the EU has been nonsensical. The vote to leave will get decades of frustration out of the way and clear the ground for a proper discourse and a reappraisal of the UK’s relationship with the EU. Nobody knows where that will lead in terms of public opinion, which has now usurped the traditional role of MPs and will therefore start to be more responsible – now it knows that it actually counts.

I don’t think the teaching of lessons or the showing of no quarter are constructive or helpful from a Europhile perspective.

Your arguments seemed to me to boil down into one (hence the wording I used). That the situation that now exists is somehow (i) the fault of the rest of the EU and, that being the case, there is (ii) an onus on it to be nice to the departing member or, at least, to take Merkel’s phrase, not to be nasty to it. If (i) is the case, I must have been reading the wrong UK newspapers, not just in recent times but for the past 30 years, from the anti-EU missives of Boris Johnson when he was writing for the Telegraph as its Brussels correspondent to the present day. As to (ii), the UK has a list of opt-outs negotiated over the same period as long as your arm. It has run out of road because it sought one that did not just allow the UK to opt-out but undermined one of the basic principles of the EU and threatened its very existence.

As to EU27 countries, and notably France, attempting to take advantage of the situation, what can one expect given these circumstances? The sorcerer’s apprentices that created it had no regard to the interests of other countries, least of all to those of their nearest neighbour, when bringing it about.

The divided UK establishment is finally waking up to the disastrous situation in which they have placed the UK.The date to have a new Tory PM in place did not emerge from thin air. The EU27 will be meeting to discuss their next moves two weeks later.


In fairness the immigration issue was not just about “Eastern Europeans”.

UK nationals have long resented immigrants, remember the signs, “employees required, no dogs no Irish need apply”.

It is only after a number of years that the newly arrived race of immigrants is accepted. Despite the hostility shown to the Irish immigrants decades ago, the Britons have come to accept the Irish as they have integrated fairly well.

Given enough time the “eastern Europeans” too will become more integrated and accepted.

With regard to races of immigrants who are slightly more different than the native Briton, these immigrants are a feature of colonialism from the British Empire, not the EU. Pakistan is not a member of the EU.

The British media has made a profession of bashing the EU, it’s institutions and its various flaws, whilst totally ignoring the good features.

Mr Peter Mandelson has an excellent article in the FT yesterday. “Reaping what they have sowed.”

How the Struggle for Europe was lost..

@ Seafoid,

Indeed Caroline Aherne is a great loss, a very talented lady.

Personally I find the benefits of Ireland’s EU membership very rewarding, just to mention a few..

1) No currency exchange issues.
2) No visa issues.
3) Other changes are taking effect like reduction in mobile phone roaming charges (which continue to get lower).
4) Access to another world, whether it be cuisine, arts, culture, history, employment, travel, tourism etc.
5) It is an important safety valve, for when Irish politicians throw the economy off the cliff again (which they will via low intelligence populism and narrow thinking) we have access to more stable mature prospects in the EU 27.

Living in Ireland is like living in a two bed apartment, but with EU membership it is akin to suddenly having your apartment extended to 26 more rooms.

I enjoy talking to EU nationals now living in Ireland, I enjoy listening to their experiences here and the comparisons between their home country and Ireland. I find their view points to be very enlightening.

Broadly writing, the cultures across the EU 27 are very compatible, high emphasis on personal choice and capitalist market orientated economics.

However there are cultures (of which I am not going to name) which are strongly incompatible. We see evidence of this almost on a weekly basis.

Sadly there is little courage among our elected representatives to admit that there could be the possibility of a culture(s) which is incompatible with the modern western world.

I cannot blame immigrants, because if you cannot live in a war torn bombed out country where Hell has been unleashed, they you are just going to up sticks and try and live some where else.

There appears to be little recognition in Europe that the European periphery borders with nations which are in appalling circumstances.

Civil war is raging in numerous nations, and the wars seem interminable, Lebanon, Egypt, Syria, Iraq just to mention a few.

The migrant / refugee issue can only be solved in a holistic approach to bringing peace and stability to the EU periphery, in particular the Middle East and continent of Africa.

It is very unfortunate that the UK and France which complain so much about “the Jungle” at Calais have also added to the refugee crisis in the destabilization of Libya, which no doubt Berlin secretly agreed to.

Europe is reaping what it has sown.


“Your arguments seemed to me to boil down into one (hence the wording I used). That the situation that now exists is somehow (i) the fault of the rest of the EU ..”

I have re-read it and there are 7 points in that post. 2 are critical of aspects of the post referendum reaction in the EU. None of them suggested that the leave vote was the fault of the EU.

Perhaps you should re-read it too.

From his appearances on Sunday morning it seems at least Tony is up to speed.


The rise in immigration that has affected areas of the UK not previously accustomed to it and tipped public reaction, particularly blue collar, over the edge has been that from Eastern Europe. It might not be admirable, but it it is the way it is – and is likely to be replicated throughout much of the EU.

Many areas have previously had their character completely changed within a decade, but there was always a reluctance to complain too loudly because the non-white immigration was felt to leave objectors open to accusations of racism. People feel freer to object to mass immigration in some areas from Eastern Europeans.

There were many reasons for the vote, but immigration was a key one.

2″…. but immigration was a key one.”

No, its not: but it seems like it is. A key causal factor (for the indigenous, waged-labour population) is the unfettered cross-frontier ‘movement’ of low-waged or unemployed persons from a relatively ‘deprived’ area (how-so-ever you wish to define this) toward an area where the migrants believe that they will have opportunities for a better living. Is this so very hard for theoretical economists and Free Market cheerleaders to understand? Seems so. That the Red-Top media and other demagogues should choose to classify economic migration as ‘immigration’, goes without saying. The United States of Europe (federal government, one currency, one official language and all …) is, I would opine, a tad in the [h]opiate domain.

Basically, the unfettered cross-frontier movement of anyone other than tourists and visiting business persons is a guarantee for serious social and political Trouble. “Are we there yet?” “Looks like it!”


Immigration seems to be the only way to generate what little growth there is. More heads mean more consumption. It also boosts corporate profits by driving down wages. I can’t see how the interests of workers and elites can be met in the absence of proper growth

In a “great game” sort of way I can’t think of a significant modern time in Europe when France and Germany have allied to the exclusion of UK/England. Not that it has quite happened yet, but generally UK/France take on Germany or UK/Germany take on France. To have France and Germany (potentially) lined up against you feels like a political failure.

But it also feels like a big fat failure to lose a country the size of the UK out of the EU. If the aim is a federal, democratic Europe then it would be bigger and more powerful with the UK in it. I note that Angela Merkel is said to be questioning Jean-Claude Juncker who seems to me to have been completely unstatesmanlike so far. Also, the UK will remain a player in NATO and other world organisations. It seems still to be on the table as to whether the UK will actually go, but I note that in the longer run, over a generation say, it is possible that the UK will look to come back (they can re-apply, right?) in which case there are long term gains to think about as well as short term ones.

Personally I couldn’t vote Leave particularly after the last week when, with no Tony Benn style left-argument really getting through, a vote Leave meant endorsing a bunch of racists with real-life consequences. But I do think there’s a real problem with the EU (and EZ in particular) having baked-in NeoLiberal structures which are hard-to-reach democratically. I appreciate my left/socialist friends arguing for ‘stay in and reform’ but I find it very hard to see it happening. For example, Water Charges in Ireland currently show that resources can go from public to private but not the other way around.

Finally to note that Osborne today is following Ireland’s lead in a race-to-the-bottom on corporate tax. Interestingly a tax cut for corporations being the first on the list after threatening tax rises for the public as an inevitable consequence of Leave. Whilst I think Ireland can make a good case for the current level and not all FDI is by any means evil to have a policy which is based around nicking other nation’s business at the expense of collecting tax is a risky proposition. Picketty talks about this.

I do not think you need worry. Germany is clearly the country most anxious to arrive at an accommodation with the UK cf.

One could say that the difference between the three dominant European powers is that France and Germany are in a marriage which both know they cannot break while that between the UK and the rest of the EU has always been of a much less binding nature. Germany, in a word, will push her interests but never to the point of a rupture with France.

It is clear that the two sides to the upcoming Brexit negotiations are disunited. However, the side arriving at set positions is the EU and largely courtesy of the Commission. Juncker may not be everyone’s cup of tea, especially that of the editors/owners of the eurosceptic UK press which has done so much to undermine the UK’s relationship with the EU (and , indeed, democracy as it would be widely understood, in the UK) but he is the head of the body which Article 17.1 TEU states “shall ensure the application of the Treaties, and measures adopted by the institutions pursuant to them. It shall oversee the application of Union law under the control of the Court of Justice of the European Union”. It is also a body which must act as a college i.e. individual members form the President down can take no decisions on their own (with the exception of what might be described as some management duties allocated to the President by recent treaty changes).

It may suit the larger countries to downplay the the role of the Commission (and Juncker is certainly making that task easier) but it would be silly of the smaller countries – Ireland included – to confuse the person of the head of the Commission with the role that that body must play.

As to the Brexiteers cf.

Only Blair (and his one-time Chief of Staff, Jonathan Powell) are making any sense on the UK side. The will of the people can change. (No less a person than John Kerry also indicated that the Brexit process is not necessarily irreversible). Insofar as one can identify a crunch issue exercising ALL concerned on the UK side it is whether, once the Article 50 procedure is invoked, the UK has embarked on a ski jump or a ski slope i.e. with the capacity to ski off the piste of the slope ahead is clearly leading to what some view as a precipice. An understanding on this point between the two sides prior to any invocation of Article 50 would appear to be a sine qua non. The problem is that the issue goes to the heart of the policy dispute, and the struggle for power, in the UK.

Gavin how precisely did the now-abandoned water charges ‘show that resources can go from public to private but not the other way around’?

Colm, I doubt you’ll get an answer – and I don’t think you’re holding your breath. As is your wont you’ve put your finger on a disingenuous left-wing attempt to distract public attention from the water sector stitch-up by key players in the sheltered public, private and semi-state sectors. It was the revelation of aspects of this stitch-up that disgusted and angered so many ordinary voters. Despite continued left-wing and pseudo left-wing efforts to hijack this fully justified disgust and anger, it still rumbles on. The latest instalment in the on-going saga is the appointment of this “expert commission” on funding domestic water services.

On a much smaller scale, and in a different jurisdiction, the water charges debacle evidences the kind of arrogance, greed and stupidity that contributed to the Brexit vote.

The Tory elite, though elected, are not in touch with the mindset of Brexiters – their vote is as much about vengeance as about immigration or jobs – they feel they have had to deal with the consequences of globalization while the middle classes have continued to prosper – in brief ‘if I can’t have it you aren’t going to either’. The more protective labour laws in most of the rest of the EU have kept the majority onside, just

Other issues around English hubris and the emphasis on individualism in their culture make them unsuitable for the European project.

Their ‘sensible’ reputation on the global stage has been greatly diminished by this act of self harm and their ‘tuck and roll’ approach to leaving the moving bus that is the EU is something for us all to behold and tell our grand children about

The will of the people in the UK can only be ascertained by direct consultation via another referendum, which is most unlikely to take place, or through a general election, with parties campaigning on the basis of a leave or stay platform (in the light of the ongoing Brexit negotiations, which might indicate a defensible stay position). Legal, or any other technical argument, will not win the day.

A vital question is also the view that the Irish electorate takes in response to the developing Brexit drama as this will largely decide the view of their politicians. The central question is whether the narrative of supposed ill-treatment by the EU during the crisis, as epitomised by this piece in the Examiner, still has traction.

If this online poll is any guide, as in the case of the referendum on the fiscal treaty, the answer is no.

Derek Scally on “old German wine in new Brexit bottles”.

The lesson is not new. However, it appears to have been largely forgotten.

The answer is also the obvious one; all concerned must stick to their lasts as defined by the treaties.

As the basis for the Brexit negotiations is clearly Article 218.3, on general third country agreements, the Council is free to appoint a lead negotiator as it sees fit. But there is no possibility of the negotiations being carried out without the resources of the Commission. This is the middle ground to which the smaller member countries should stick like limpets.

If, and when, it comes to the negotiation of a trade agreement, the treaties are unequivocal; the Customs Union and the Common Commercial Policy are exclusive competences of the Union and the Commission “shall conduct the negotiations in consultation with a special committee appointed by the Council to assist the Commission in this task” (Article 207 (3)) TFEU).


“At a separate hearing of the Treasury select committee, leading constitutional lawyers revealed that the French government legal service has informed the French government that the UK would be entitled to rescind a notice to withdraw even though it had invoked article 50.”

It seems that it is a ski slope rather than a ski jump that is under construction.

Hi Colm,

“how precisely did the now-abandoned water charges ‘show that resources can go from public to private but not the other way around’?”

I’ll try not to say AFAIK or ‘I think’ throughout but take it as read.

In stages. The water charges haven’t been abandoned. There’s an expert report on the way for further political discussion. On the Europe front a very credible source reports, “There is, anyway, an EU directive which requires that users, including householders, pay for water, as they do in other EU member states.” I appreciate this payment, which is very different from taxation, might be to a publicly owned institution. The same learned writer says, “The decision to establish Irish Water as a state company was always the logical solution.” but I see this as a ratchet mechanism which makes a sell-off more likely in the future. The original set-up for Irish Water did have the look of something that was going to be sold (similar to the idea to sell off Coillte now I think of it).

I appreciate that economists might mean something quite specific when they use the term, ‘resources’. Here I mean more ‘natural resources’ in the general sense, otherwise if, say, money is a resource then, yes, banks have been brought into public ownership.

I know some people debate whether neoLiberal means anything at all. I think it does – or is at least discussable – and it’s meaning is that free trade is best and state interference in the economy is always a Bad Thing. It comes out amongst other things as globalisation and in Europe an ‘independent’ ECB that targets inflation but not growth, the Stability and Growth pact, reforms that tend towards weakening unions and labour rights, etc. As it is based in capitalism it also means alienable property rights and enforceable contract. What I see is things that were understood to be collective being turned into property and then bought and sold for profit. (Aside: I’m always a bit bemused by the tragedy of the commons thought experiment. They’re a good example of a collective resource that lasted some 800 years and were then expropriated).

I appreciate EU treaties have a variety of stated aims but I think there is a inbuilt bias towards the free market. I note, for example (ignoring recent developments), that if a Corbyn lead government tried to nationalize the UK water system it might spark a case that would go to the ECJ.

Two genuine questions.

Is there a significant example from the last ten years or so of a natural resource in he EU and/or EZ moving from private to public ownership?

What would happen if an Irish government attempted to nationalise the Corrib Gas field?

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