UK Politics « Business for New Europe Blog

Britain and the Future of Europe – Debate with David Miliband, Liam Fox, Hugo Dixon and Andrew Lilico

By Phillip Souta

By Conor Brennan

David Cameron’s EU negotiating strategy is “putting a gun to our own heads” warned Former Foreign Secretary David Miliband, while Conservative MP Liam Fox would support Britain leaving the EU if the Prime Minister did not get a “good deal”.

Speaking at an event hosted by Business for New Europe and the City of London Corporation on Monday 11 February, Miliband argued that membership of the EU was good for Britain as we have done well out of the Single Market and have “never lost a vote on financial services.”

Photograph: Jeff Gilbert

Debating the future of Britain in Europe before an audience of 250 business leaders, academics, British and foreign journalists and members of the diplomatic community, Miliband said that the current strategy by the government was “putting a gun to our own heads” and he stressed the importance of local associations in the future of global competiveness.

Former Secretary of State for Defence, Dr Liam Fox stated that he did not want to remain in the EU “at any price”. He claimed that currently the EU project was “unsustainable” because it is seven per cent of global population and 25 per cent of GDP but spends 50 per cent of social welfare spending.“Europe needs to change” claimed Dr Fox, citing barriers to competiveness and the democratic deficit as areas in need of reform. He supported David Cameron’s pledge for an in/out referendum, adding that it is not an excuse to deny the people a say in Europe’s destiny because you may be scared of the outcome.

Editor-at-Large of Reuters News Hugo Dixon said the UK needs to be “an active member of a reformed union”. Highlighting three ways to pursue this agenda, Dixon stated that Britain needed to build alliances and “play the diplomatic game”; stop talk of unilateral repatriation of powers and instead seek to develop multilateral agreements;and finally understand the differences that still exist within the EU and how this is impeding a closer fiscal union.

Andrew Lilico, director and principal of Europe Economics, argued that the EU is foremost a political project and its “internal logic” is driving it towards a unified federation of states. He added that this will leave Britain outside the core of possibly 23 member states with little influence over decisions and rules that it is affected by. Lilico dismissed the idea that a federation of States is “just hearsay” and compared this to before the formation of the Euro currency – people did not think it would come to fruition.

Addressing this point David Miliband argued that the Treaty of Rome proposed an “ever closer union of the peoples of Europe” and in this regard the EU has successfully offered free movement of people and improved tolerance of different cultures in Europe. Hugo Dixon disagreed Europe “was on the brink of greater integration”, claiming that even the banking union has rolled back on many fiscal union integration policies.

Concluding the debate chaired by Roland Rudd chairman of BNE, Dr Liam Fox criticised the Euro as a “flawed concept” by allowing the wrong countries to join. He also stated that people were told “the sky would fall in” if Britain did not join the Euro or the Schengen agreement, when clearly neither has happened, which should be borne in mind. Lilico added that Britain “had lost influence by not joining the Euro” and this was exactly problem that it will have in the future.

Leveson – “clear evidence of misreporting on European issues”

By Phillip Souta

By Conor Brennan

For those interested in the European debate, Volume 2, pages 687 and 688 of the Leveson Report make for interesting reading. Lord Justice Leveson said, “there is certainly clear evidence of misreporting on European issues.” On a story in the Daily Mail reporting an apparent EU ban on plastic bags, he commented that it “was based on a deliberate or careless misinterpretation of EU proposals…” (9.54 below)

On misreporting of EU issues in the press he said, “the cumulative impact can have serious consequences. Mr Blair explained that the misinformation published about Europe by some parts of the press made it difficult for him to adopt particular policies or achieve certain political ends in Europe that he might otherwise have done.” (9.55 below)

Extracts

Lord Justice Leveson. Photograph: Dan Kitwood/Getty

9.53 Articles relating to the European Union, and Britain’s role within it, accounted for a further category of story where parts of the press appeared to prioritise the title’s agenda over factual accuracy. On Europe, Mr Campbell said:

“Several of our national daily titIes – The Sun, The Express, The Star, The Mail, The Telegraph in particular- are broadly anti-European. At various times, readers of these and other newspapers may have read that ’Europe’ or ’Brussels” or ’the EU superstate’ has banned, or is intending to ban kilts, curries, mushy peas, paper rounds, Caerphilly cheese, charity shops, bulldogs, bent sausages and cucumbers, the British Army, lollipop ladies, British loaves, British made lavatories, the passport crest, lorry drivers who wear glasses, and many more. In addition, if the Eurosceptic press is to be believed, Britain is going to-be, forced to unite as a single country with France, Church schools are being forced to hire atheist teachers, Scotch whisky is being-classified as an inflammable liquid, British soldiers must take orders in French, the price of chips is being raised by Brussels, Europe is insisting on one size fits all condoms, new laws are being proposed on how to climb, a ladder, it will be a criminal offence to criticise Europe, Number 10 must fly the European flag, and finally, Europe is brainwashing our children with pro-European propaganda! Of the UK press and the European institutions – I speak as something of a Eurosceptic by Blairite standards – it is clear who does more brainwashing. Some of the examples, may appear trivial, comic even. But there is a serious point: that once some of our newspapers decide to campaign on a certain issue, they do so with scant regard for fact. These stories are written by reporters, rewritten by subs, and edited by editors who frankly must know them to be untrue. This goes beyond the fusion of news and comment, to the area of invention.”

9.54 Although Mr Campbell’s evidence may have been exaggerated for effect, there is certainly clear evidence of misreporting on European issues. Mr Campbell drew attention to a Daily Mail story claiming that “the EU” was going to ban grocers from selling eggs by the dozen, followed by a story that there had been a U-turn and the ban would no longer take place. The reality is that there had never been a ban proposed and the original story was based on a deliberate or careless misinterpretation of EU proposals.

Full Fact drew attention to a number of further ‘anti-EU’ stories which misrepresented facts, including a Daily Express report on EU plans to ‘ban’ plastic shopping bags, when the reality was that a consultation had been launched to explore a variety of options, including a potential ban, for reducing waste from plastic bags.

9.55 The factual errors in the examples above are, in certain respects, trivial. But the cumulative impact can have serious consequences. Mr Blair explained that the misinformation published about Europe by some parts of the press made it difficult for him to adopt particular policies or achieve certain political ends in Europe that he might otherwise have done. He said:

“My distinction is between that and how you actually report the story as a piece of journalism. So if you take the issue to do with Europe, what I would say is that those papers who are Eurosceptic are perfectly entitled to be Eurosceptic. They’re perfectly entitled to highlight things in Europe that are wrong. What they shouldn’t do is, frankly, make up a whole lot of nonsense about Europe and dish that up to the readers, because that’s – I mean, how does the reader know that’s not correct?”

9.56 That, ultimately, is the foundation of the criticism made in this section: there can be no objection to agenda journalism (which necessarily involves the fusion of fact and comment), but that cannot trump a requirement to report stories accurately. Clause 1 of the Editors’ Code explicitly, and in my view rightly, recognises the right of a free press to be partisan; strong, even very strong, opinions can legitimately influence the choice of story, placement of story and angle from which a story is reported. But that must not lead to fabrication, or deliberate or careless misrepresentation of facts. Particularly in the context of reporting on issues of political interest, the press have a responsibility to ensure that the public are accurately informed so that they can engage in the democratic process. The evidence of inaccurate and misleading reporting on political issues is therefore of concern. The previous approach of the PCC to entertaining complaints only where they came from an affected individual may have allowed a degree of impunity in this area: in the context of misleading reporting on political issues, representative bodies are likely to be far better placed to monitor, and complain about, inaccuracies.

Link to The Leveson Inquiry Vol. 2

Norway highlights need for UK engagement with the EU

By Phillip Souta

By Conor Brennan

Speaking at the All Party Parliamentary Group on the EU on Monday 5 November, Professor Fredrik Sejersted, director of European Law at the University of Oslo said that Norway’s relationship with the EU is based on “dynamic homogeneity” and “integration without representation.”

Co-author of a review of Norway’s model for European integration, Professor Sejersted said that the “Europeanisation of Norway was far more than people were aware of.” Talking about the political climate in Norway, he said “we don’t have right-side eurosceptics. Our eurosceptics are on the left, like the UK in the 1970s.”

Oft cited as a model the UK could adopt if they were to leave the EU, it is important to examine the relationship between Norway and Brussels. A report published in January 2012, entitled “Outside and Inside, Norway’s agreements with the EU” shows what the UK’s relationship with the EU may look like if it were to follow the Norwegian model.

It not only covers all the areas where the European Economic Area (EEA) agreement is integrated into Norwegian policy but also assesses the impact of the arrangement across Norwegian society.

Professor Sejersted said “dynamic homogeneity” meant applying the vast majority of EU rules without representation. He did not see it as a model for EU integration but “an accident of integration.”

The 6,000 EU legal instruments implemented by Norway impacts on all 17 government departments and 430 municipalities. The report concludes it would not be prudent for Norway to disengage with this kind of deep integration. Professor Sejersted said that the EU should be credited for modernising the Norwegian labour market and industrial sector over the last 20 years.

Looking ahead to future models which Norway could use and the UK could learn from, Professor Sejersted described the possibility of a Free Trade Agreement with the EU as “completely unrealistic.” He said that Norway’s integration with the EU has gone far beyond tariff-free trade in goods. Labour migration, free movement of capital and financial services are “very important and hugely beneficial” and require more than a FTA, he claimed. He gave as an example the fact that 50 per cent of Norway’s large Sovereign Wealth Fund worth over £400 billion in total is invested in the EU. Norway has an FTA with the EU signed in 1972 covering oil.

Professor Sejersted said that it would be easy to conclude from the report that Norway should join the EU and gain the representation on decisions at EU level. However, the mainstream political parties used the report to maintain the status quo because there are “suicide clauses” in every Norwegian coalition agreement that cause the government to collapse if any party raises the possibility of EU membership. The current economic climate in the EU and high oil and gas prices benefiting the Norwegian economy means there has not been an EU referendum debate.

Commenting on the comparison between Norwegian and British public and media reaction to EU integration, Professor Sejersted said mainstream political parties “did not want to wake the dragon” and stir the level of heated public debate which occurred at the time of the EU referendum in 1994. The referendum attracted an 89 per cent turnout and Norwegians chose to stay out of the EU by 2.2 per cent. Norway’s first attempt to join the EU was in 1972, at the same time as the UK was negotiating membership.

The review of Norway’s relationship with the EU was conducted by a panel of 12 independent experts, not civil servants, he explained. Professor Sejersted said it is important for the UK to form as clear a picture as possible of the realities of leaving the EU and moving towards alternatives. The audit of EU competences initiated by Norway is one of the few in depth examples of how such disengagement may happen. He said, “if this report had come at a different time in history when Norway was doing less well, this report could have sparked an EU membership debate in Norway.”

Nick Clegg calls for “engaged and balanced” approach to the EU

By Phillip Souta

By Conor Brennan

The UK will become “isolated and marginalised” if it is “pulled towards the edge” of the European Union stated Deputy Prime Minister Nick Clegg on Thursday 1 November.

Clegg criticised the “proposals doing the rounds” on repatriation of EU powers back to the UK. “A grand, unilateral repatriation of powers might sound appealing but in reality it is a false promise”, he claimed.

According to the Deputy Prime Minister taking this route would leave the UK in a “very dangerous” position and he outlined his vision for an “engaged and balanced” approach to the EU which he believes would benefit the UK. Clegg proposed a three prong strategy – “tough on the money, more jobs, more criminals behind bars”.

This involved, Clegg stated, supporting Prime Minister David Cameron’s aim to negotiation a real terms freeze on the EU budget, deepening of the Single Market and also not supporting the UK opt-out of EU crime and policing laws which benefit the domestic justice system.

Regarding the current EU budget negotiations, the Deputy Prime Minister said “it’s our job to make realistic, responsible and hard-headed decisions on behalf of the British people”. He was adamant a “real terms freeze was a good offer”, suggesting a cut to the budget in real terms may be unrealistic.

The speech by Clegg came the morning after parliament passed a motion calling for a real terms cut to the EU budget. A total of 53 Conservative MPs rebelled against the party whips and with the support of Labour defeated the government by a 13 vote majority.

Labour were being “opportunistic” and scoring party political points, claimed Clegg. Shadow Chancellor Ed Balls, he continued, does not even believe a real terms cut is possible.

One in ten jobs in Britain, according to Clegg, rely on trade between the UK and the Single Market. He continued his robust defence of the UK’s role in the Single Market by stating “one of the reasons big multinationals come here is because we offer a launching pad to the world’s largest borderless marketplace”.

Finally the Deputy Prime Minster summarised his thoughts on the upcoming decision on the EU crime and policing laws opt-out. He stressed a final decision has not been made regarding the 130 measures which is due in 2014.

Clegg challenged those who do not believe the EU crime and policing laws are needed, telling them to “prove it”. He reiterated his belief that crime and terrorism was a cross-border problem and thus should be confronted at a transnational level.

This was a speech aiming for the centre ground and full of pragmatic rhetoric. Whether the Deputy Prime Minister’s speech outlining his vision for future engagement with the EU will shift the debate towards pragmatic terms is yet to be seen. As Clegg stated, expectations should remain couched in realistic terms. He will need to work hard to force the debate towards these terms and the UK away from the edge of the EU.

Conservative Party Conference Blog: Is Europe part of the problem or part of the solution?

By Phillip Souta

By Ariane Poulain

Our final panel discussion in the ‘Europe: From Crisis to Growth’ series, hosted in partnership with the Centre for European Reform and Open Europe, and sponsored by JPMorgan, was held last night at the Conservative Party Conference in Manchester. The panel was moderated by Mats Persson, Director of Open Europe and included David Lidington, Minister for Europe, Harriet Baldwin MP and Charles Grant, Director of the Centre for European Reform.

David Lidington, leading the discussion, stated the UK does not have much room to be complacent because “Europe faced both an immediate crisis and a long-term strategic challenge” – respectively, the unsustainable debt levels across EU member states and the growing emergence of the rising powers. Lidington recognised the economic crisis was not necessarily homogeneous across EU member states but emphasised that “reducing debt and boosting competitiveness faces us all.”

When the world looks back at the 21^st Century, Lidington is certain that the shift of global economic influence will be seen as fundamental. To prevent being left on the sidelines of history, the EU must focus on three key things to prevent long-term decline: control and reform EU-level spending, boosting trade ties and restoring public faith in the EU.

Firstly, taking control of EU-level spending requires the EU re-focusing on what it really needs to spend funds on. At present, “money is being spent that does not focus on jobs and competitiveness in the long term and this applies to both large and small member states.”

Secondly, the EU single market is essential to the UK and Lidington said, the UK must push to complete the single market, particularly the increasingly important digital single market as well as ensuring the EU remains “outward looking.” He strongly emphasised the importance of the UK pushing the EU to seek a transatlantic trade deal after the US presidential election, “it would be two giant markets coming together and really effectively setting global standards.”

Thirdly – and more widely in Europe – Lidington called for public faith to be restored and the worries about the democratic deficit to be addressed. He also voiced concern over the current domestic, political developments across EU member states – such as in Greece, Hungary and Finland – which “indicate movements that have a nasty tinge to them and remind us of some of the darkest times in European history.”

Overall, Lidington recognised there are historic challenges taking place in the EU right now but, on several fronts, we must not take for granted valuable policies, such as those which secure social and employment rights. He concluded that we need to have “a serious and grown up discussion about the political architecture of Europe” and “we [the UK] has a relationship with Europe which will not cease to exist.”

Charles Grant focused on growth, the eurozone crisis and the UK’s position in the EU for his contribution to the panel discussion. On a whole, his views on restoring the eurozone and the role of the EU in the UK’s ability to secure growth were in line with the Minister’s.

On growth, Grant stated the importance, firstly, of the EU’s “weight to collectively secure beneficial external trade deals” and secondly, “the single market as a major part of growth.” Grant recognised that the EU single market is not perfect, nor complete but pushing the agenda further is vital. He also placed particular significance on the importance of the digital single market and used Nokia as an example because they currently have to cooperate with 27 different telecoms/digital domestic markets.

Moving forward, Grant considered the future of the eurozone and strongly believed that if the euro falls apart it would lead to competitive devaluation, a surge in protectionism and the European economy would spiral downwards which, all in all, the single market would unlikely survive. With this in mind, Grant praised measures by the ECB and said that Mario Draghi has taken important steps forward and said he had faith that buying debt, a banking union and greater economic integration in the eurozone would help the EU move from crisis to growth.

However, he said “there are excessive austerity measures being pushed on Southern Europe from Germany and this is creating negative sentiment and feeding into the anti democratic views” and that there is a “great dirth of leadership in Europe” but three good, sensible leaders emerging at the moment are Mario Draghi, Radik Sikorski and Mario Monti.

Grant concluded by considering the above in relation to the UK’s position in the EU. “Whether or not the EU goes down the road of new institutions, the eurozone will have a euro agenda” he stated and advocated that “the UK must ensure that new institutions are limited at the euro-level because it is very important not to impose rules on the City of London” beyond our control but at the same time, the UK should not stop others going ahead of treaties to restore the eurozone because that would be very damaging to the single market. Grant continued, “we need friends and allies to ensure European deals made are in the UK’s best interests; if we throw our toys out of the pram then this is less likely and we are not going to benefit the single market.”

Harriet Baldwin MP began by stating that she was very happy the UK maintained monetary sovereignty because the euro was deeply flawed and when member states joined the single currency they benefitted from the boom. Today, they are dealing with the after effects. Baldwin said eurozone members are “now in a deflationary process and there is no ability for currencies to adjust to the real economy of previously booming countries.”

Baldwin moved on to identify the two flaws of the eurozone and what she viewed as the three possible options to move from crisis to growth. The eurozone, stated Baldwin, has no real lender of last resort and the budget deficits have all varied significantly and to resolve the crisis she first considers “what is the best scenario for her constituents and the most economically beneficial.”

The three possible options are: the EU gives up on the eurozone and the single currency breaks up, the eurozone “carries on lurching” or the design flaws in the euro are fixed. Baldwin accepted that a break-up of the eurozone would be a“ghastly economic shock to the economic system” and that for the eurozone to continue in its current form is beyond what a democracy can suffer.

Baldwin recognised that fiscally responsible countries are pretty annoyed that they will have to underwrite the debt of profligate counties and stated that “economically, the best possible outcome was clearly to have eurobonds and the UK should not stand in the way but, in fact, encourage as much as possible because it is clearly in the UK’s best interests.”

She was also in agreement with Grant that Draghi is helping to restore the euro with the direction he is moving the ECB towards as a lender of last resort. Once the eurozone is restored, Baldwin considered what the UK’s position in the EU would be and said that “monetary sovereignty combined with single market access would be a great place for the UK to remain.”

Making sense of the government’s Balance of Competencies review

By Phillip Souta

By Conor Brennan

Director of Business for New Europe, Phillip Souta, said businesses were “worried the UK is becoming isolated from the EU” at a Review of the Balance of Competences event at the European Parliament offices in the UK this morning.

Speaking alongside a panel which included Baroness Sarah Ludford MEP, Sajjad Karim MEP and David Seymour (currently Consultant Editor to Nucleus), Phillip Souta said that talk of an exit from the EU had now become “mainstream in the UK.” He stated the reason the review had come about was because of political pressure and it should be remembered the review cannot be entirely divorced from a political context.

Phillip Souta highlighted the campaign for EU reform lead by Andrea Leadsom MP and described the suggestion of a rolling in / out option for progressive UK Governments as “a recipe for legal uncertainty” and would have a negative impact on businesses. Concluding, he argued that reforms were needed in the EU and that the review could be a positive exercise.

Baroness Sarah Ludford MEP conceded she had initial reservations when the government announced a review of the balance of competences between the EU and the UK but was more positive about the assessment “by the day” and believes this could be an “extremely valuable exercise.”

Using the European criminal justice system as an example, Baroness Ludford highlighted the advantages of the UK using the EU where it was best deployed. The recent European Arrest Warrant issued for Jeremy Forrest, a teacher who had absconded with his 15 year old pupil to France, was a perfect example, she claimed.

Baroness Ludford praised a recent speech by Polish Foreign Minister, Radosław Sikorski, which called for the UK to re-engage with the EU.

The Review of the Balance of Competences should be fed into the decision making on the possible opt-out of the crime and policing laws in 2014, according to Baroness Ludford. She continued, a mass opt-out of these laws should not be made on “knee-jerk political dogma.”

Finishing, Baroness Ludford stated she remained enthusiastic about the review and on completion it could become something which is offered to the UK’s European neighbours as a model for their own engagement with the EU.

Sajjad Karim MEP stated that everybody agreed there was a case for reform in the EU but previously there has not been a mature debate in the UK on the EU. He said that he believed the review, initiated by the government, will support a mature debate on the role of the EU in Britain. According to Sajjad Karim this review is an assessment on the “grandest scale” and he hoped people in the UK would engage with the review and submit evidence.

In the following discussion, Baroness Ludford said she hoped the review would highlight benefits of the EU which many people may take for granted. For example, she highlighted that one million people from the UK live within the EU and exercise the free movement of people benefits associated with the EU.

Phillip Souta stated that 50% of the UK automotive industry exported to the EU and uncertainty on the role the UK has in the EU would not bode well for this industry.

Chairing the panel discussion, David Seymour said that often businesses were accused of blackmailing the UK if they publicly supported the EU and he was glad to hear Phillip Souta relay concerns of UK businesses.

The introduction of a single European Parliament seat in Brussels was an important reform that needed to be enacted in the EU replied Baroness Ludford to a question regarding reform in the European Union.

However, Mr Souta said he believed a change in the electoral process of MEPs would have a greater impact on the democratic deficit experienced in the UK on European matters.

Speaking before the panel discussion, a representative from the Foreign and Commonwealth Office outlined the general premise of the review set up by the government and confirmed more information will follow in the coming months.

UK at “extreme risk” from eurozone crisis

By Phillip Souta

By Conor Brennan

A report released today by Maplecroft ranks the UK as the country most exposed to the Eurozone crisis. Covering 169 countries outside of the Eurozone, the report places the UK in the top “extreme risk” category. Maplecroft came to this conclusion on the basis of its “high level of economic integration with the countries using the Euro, together with its lack of domestic resilience to an economic slowdown.”

The UK also comes top of the risk chart because foreign direct investment (FDI) from the Eurozone accounts for 20% of the UK’s GDP and British banks are exposed to £380 billion in Eurozone bank and sovereign bonds. That represents 27% of UK’s GDP. They say that exposure could “enhance solvency problems for financial institutions.”

Maplecroft conclude that the situation is “compounded by a large and unyielding fiscal deficit of approximately 8% of GDP and net public debt over 80% of GDP, making the UK’s capacity for a fiscal response to further economic crises in the Eurozone severely limited.”

Figures also released today by the Office for National Statistics shows UK GDP shrank by 0.7% in the second quarter of 2012. This puts the UK in recession for three straight quarters and the deepest for 50 years.

The UK government has sought to blame this on the Eurozone crisis. If that is right, and views on whether it is differ, the UK has direct influence over these external factors.

Future negotiations in Europe regarding debt mutualisation and a European banking union give the government an opportunity to outline how they wish the EU to address the on-going crisis. David Cameron, the Prime Minister, has stated his readiness to use his veto once more for “the national interest.” The national interest, in this case, is not accepting European supervision of banks or contributions to a common European deposit guarantee system. Mr Cameron should not be afraid to publicise the benefits of a scheme which will play an integral role in recovery of the Eurozone and consequently the British economy.

Over 50% of foreign direct investment to the UK comes from EU member states and the single market adds €600bn a year to our economy according to the UK government. There is no doubt the EU has beneficially enhanced the competitiveness and export potential of British industry. It is not surprising the UK tops Maplecroft’s index of countries most dependent on the Eurozone.

The Maplecroft report also concludes that Sweden, Poland, Hungary and the Czech Republic are at “extreme risk.” Those countries are also more towards the economically liberal end of the spectrum when it comes to EU members. The fact that there are so many members that share the UK’s concerns presents an obvious avenue for engagement. The government’s current strategy of seeking to be as uninvolved in the negotiations on the future of Europe as possible risks squandering a chance to wield considerable influence over the outcome.

Photo: Maplecroft, 2012

David Cameron appears to accept his plan is “general election, renegotiation, referendum” at House of Commons Scrutiny Committee

By Phillip Souta

By Phillip Souta

A revealing exchange this afternoon at the House of Commons liaison Committee between the Prime Minister, David Cameron, and Bernard Jenkin MP. The exchange gives further credence to the idea that David Cameron may be planning to announce that he is going to put an undertaking to renegotiate the UK’s relationship with the EU and put the outcome of that to a referendum into the Tory election manifesto in 2015. He makes further reference to a speech in autumn (probably at the Tory party conference) where he will set his position out in “more detail.”

We include a full transcript of the exchange below. The Prime Minister does not reject, indeed seems to accept in the tone of his answer, Jenkins’ “general election, renegotiation, referendum” point.

House of Commons Liaison Committee, 3 July 2012, c. 4.30PM

Bernard Jenkin: Prime Minister, I think you are proposing a very interesting and positive sequence of events – general election, mandate for renegotiation, leading to a referendum to address this status quo, or unsatisfactory status quo, issue. But can I just test my understanding, I mean is the lack of safeguards for the City an example of the unsatisfactory status quo?

David Cameron: I think the lack of, um, safeguards, is, it’s a permanent battle we have with Commissioner Barnier about Single Market regulation; so far I think the Treasury’s done an excellent job of defending Britain’s interests over things like CRD4 and other such directives. But what I think, the point I’m trying to make is, if another treaty comes forward that specifically concerns this area then the need for safeguards gets greater.

Jenkin: So you’re saying that as the eurozone federalises and generates the dynamic of integration that actually makes the status quo more difficult for the United Kingdom in the EU.

Cameron: Well it depends how they do it – I mean if you take for instance the banking union, I’m not trying to be evasive, this is very difficult – I spend a lot of time thinking about this

Jenkin: You’re being very candid.

Cameron: If the banking union – well that worries me to – but if the banking union [laughter] but if the banking union is done in a particular way through the ECB rather than the EBA which is an institution of the European Union and if there are safeguards as it goers under enhanced cooperation, there are safeguards to the Single Market, then that’s less worrying that the different way of doing things, so we have to see what instruments are brought forward, what the risks are and make our views accordingly.

Jenkin: But in addressing the unsatisfactory nature of the status quo, are you talking about nibbling back certain powers and competencies here and there or are we talking about what we might describe as a more fundamental change in our relationship with the EU? Or is this something that you don’t feel able to decide at the moment?

Cameron: I’m going to obviously make this speech in the autumn, when I set this out in more detail, but I’ve always felt that the powers over things like the social chapter, a lot of the Home Office legislation, those are areas that I think frankly the European Union shouldn’t have got into, but certainly Britain shouldn’t have got into with the European Union, so those are the ones that I would particularly highlight.

Britain will win if it leads reforms for the whole of the EU but risks losing if it demands a special deal

By Phillip Souta

The Prime Minister, David Cameron, faces tough choices on Europe

By Phillip Souta

A story in today’s FT(£) by George Parker trails the announcement of a long-awaited coalition agreement commitment to review the “balance of competencies” between the UK and the EU. This will be a process David Cameron will want to keep a very close hold of as it risks causing him major problems with his self-avowedly euro-sceptic backbenchers.

Those who want wholesale repatriation of large pieces of the social and employment laws making up the EU’s single market are set to be disappointed. David Cameron and William Hague know it is not on the table – they have been told so by France and Germany, point black. They see it as an attempt to enjoy all the benefits of the single market whilst ditching the obligations Britain finds irksome, and there is no appetite to give us a special deal.

The other argument David Cameron will have to face down is that those demands should be our price for agreeing whatever the eurozone ultimately needs to do to get out of the current crisis. There are two issues there. First, getting out of the eurozone crisis is an end in itself and a UK priority, so putting a price on it stretches credibility, and at worst, could be seen as a cynical ploy. Secondly, as we saw last December, if Britain says “no”, it will be ignored by the vast majority who will proceed regardless.

The “review of competencies” is therefore unlikely to provide the red meat craved by so many on David Cameron’s back benches.

The process could however be turned on its head from what the Douglas Carswells of this world want into something genuinely constructive.

Instead of asking for a special deal for the UK, the UK should argue for reforms for all the EU’s member states, and lead a coalition of like-minded members to achieve them.

Three specific reforms spring to mind immediately.

First, the working time directive, whilst introducing significant improvements in people’s working rights, is far from perfect. Opt outs from the 48 hour working week should be formalised across the EU for those who do wish to work longer, and there is a strong case for the SiMAP and Jaeger cases classifying “on call” time as working time to be re-examined.

Secondly, the common agricultural policy continues to account for too much of the EU’s budget. The Commission’s proposals for the 2014 to 2020 budget see 37 per cent of the EU’s common funds being spent on “preservation and management of natural resources (including CAP)”. The CAP artificially increases food prices in the EU and UK, is bad for development of poorer countries, and diverts funds from support for research and development.

Thirdly, currently poor regions of rich members get cohesion funds. There is a strong case to say that rich states should look after their own regions with an average income of below the 75 per cent EU average. We estimate that this would save the EU €91 billion over seven years from 2014.

These are specifics which do not even touch on completing the single market which should be the UK’s number one priority, but are quite particular alternatives to the “special deal for Britain” proposals some would like to see.

BNE report on Scotland fact not “fantasy”

By admin

Holyrood debating chamber - Photograph: Creative Commons

By Daniel Furby and Phillip Souta

A newly independent Scotland would not be guaranteed automatic entry into the EU following a vote for independence according to a report released last week by BNE. It was covered in the Times (£), the Daily Express, the Scotsman, and the Herald.

Tory leader Ruth Davidson said the report “destroys the SNP’s case for automatic accession into the EU”. A spokesman for the SNP dismissed the report’s claims as “wrong” and Alyn Smith MEP (SNP) branded it a “fantasy”.

Mr Smith claimed that “Scotland will be an EU Member State on day one of independence” and advanced four propositions to evidence this. A look at these propositions shows they do not hold water.

First, Mr Smith claims that Scotland’s membership would be negotiated as a deal, “done by the Council, using qualified majority voting.” This is wrong. There is no legal basis in the EU’s founding treaties – before or after Lisbon – for the Council itself to say that the EU should have 28 instead of 27 members either on the basis of unanimity or QMV.

The reason is that no such power has been conferred on the EU by its members (see Articles 4(1) and 5(1) of the Treaty of European Union). It is therefore a decision to be taken by the Member States and as such, Scotland would have to negotiate, sign and ratify an accession treaty under Article 49 TEU, as every new member has had to do until now. That treaty would have to be agreed unanimously and ratified by all the other EU members. The last example is the Treaty on Accession of Croatia to the EU (Council Doc. 14404/11, 7 November 2011), not yet in force pending its ratification by the 28.

Secondly, he claimed that after Lisbon, “the treaties are now set up to accommodate enlargement without renegotiation.” This is also incorrect. Scotland would have to conclude an accession treaty under Article 49 TEU to modify the Treaties in order to allow its accession.

Even if the scope of modifications would be narrower in the case of Scotland, the Accession Treaty would nevertheless have to modify a number of provisions of the current EU Treaties, to begin with, the list of Member States given in Article 52 TEU. Other provisions would also have to be modified – see the Croatian example where the Treaty provisions were modified in Part II of the Act of Accession, a number of which would also be pertinent in the case of Scotland.

If Scotland wished to retain the UK’s opt-outs and derogations for example, amendments would have be written into the relevant protocols annexed to TEU and the Treaty on the Functioning of the European Union (Protocols 15, 19, 20, 21 and 30) and written into Scotland’s accession treaty. EU Treaties cannot be modified without a modifying treaty being unanimously agreed and ratified by all Member States, either under Article 48 (amendments) or Article 49 (accession).

Thirdly, Mr Smith claimed that, “the report also appears to fail to understand that MEP numbers for each State are now determined by formula rather than negotiation.” This is also incorrect; it is true that the Lisbon Treaty changed the system of how MEP allocations are decided to “avoid the traditional political horse-trading between Member States”, but the final say still remains with the European Council which decides the matter by unanimity.

In reality there is no self-standing precise “formula” in the Treaty. Rather, there is a cap on the number of MEPs at 751, the most a member state can have is set at 96 and the minimum is six – each members’ number of MEPs is then set according to the principle known as “degressive proportionality.”

This is set out in Article 14(2) of the TEU and has the effect that members with smaller populations get proportionally more seats relative to the size of their populations than larger ones – So Germany has 92 MEPS and not 120, and Malta has 6 and not three quarters of one. On this basis, the Decision establishing the precise composition of the European Parliament is adopted by unanimity by the European Council on the initiative of the Parliament and with its assent. The current decision would have to be modified according to this procedure (see Article 14(2) TEU).

Finally, Mr Smith states that “weighted voting [in the Council] will disappear in November 2014.” This is wrong. According to the Lisbon Treaty (protocol 36 on Transitional Provisions, Article 3 (2-3)), the present system of voting can still be used until 31 March 2017 on any issue governed by QMV, if a member of the Council so requests it (there is a transition period from November 2014 to March 2017).

Mr Smith may be right that “Scotland will be an EU Member State on day one of independence” but it would by no means be automatic and that the terms of membership would have to be negotiated. BNE’s report is not an attempt to influence the independence debate in one direction or another, but rather to shed light on an important part of it.

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