InsightEU has hitherto been devoted primarily to countries in the euro zone. In this drama the UK is a side player with relatively little to contribute either usefully or unhelpfully to the euro zone crisis. Although its economic, fiscal and banking problems are similar to those in the troubled euro zone countries, it should have been able to look at the debate in the euro zone about how much more fiscal, banking and political integration should took place in the comfortable knowledge that it would not be required to sacrifice more of its sovereignty. However, the increasing extent to which British politicians have committed themselves to a referendum after the next general election (due in 2015), and the increasing gap in opinion polls between members of the public with a negative view of the EU (54% according to a Populus poll in mid-December) and those with a positive view (18%), have in recent months raised the possibility that the UK will leave the EU towards a more than even chance.
A UK-EU divorce would be a blow to the EU
The Financial Times columnist Gideon Rachman has argued that if the EU is to maintain its record as a body which has underpinned reasonably harmonious relations between its member states, it is not only the future of Greece in the euro zone/EU which should be considered but also the future of the UK in the EU. He is surely right that the exit of any country, especially a large country, would be a blow. Moreover, the UK has made positive contributions in terms of its open market policy, which has allowed more businesses from other EU countries to thrive in the UK than in many other EU countries, and Lord Cockfield, a commissioner appointed by Margaret Thatcher, played the key role in the 1992 single market programme. Moreover, if the EU wants to have an influence on the global stage, this would be weakened by the departure of the UK, (although so would the influence of the UK). He then argues that it would be worth making concessions to keep the UK in. However, it has to be pointed out that the UK already has concessions: it has opt-outs from monetary union, and the borderless Schengen zone and is now opting out from the whole of justice and home affairs integration (though still retaining an option to opt back into to any particular areas it sees as beneficial). The UK also has a budget rebate, paid for by other member states. On December 12th, the UK succeeded in winning a special voting regime to protect its interests in the single market in banking against possible adverse effects from other member states going ahead with a deeper banking union.
Could concessions keep the UK in?
Mr Rachman says that a “few eye-catching changes in Britain’s relationship with Europe could alter the nature of the debate in the UK” and elaborates:
“a good start would be the repeal of some job-killing social legislation – such as the working time directive, or the agency workers directive. A broader cut back of EU powers in areas such as education, health and safety legislation and regional spending would also be helpful.”
There is little evidence that the directives mentioned are job-killing. Sweden and Denmark have close to the highest employment rates in the world—well above the US—despite being subject to these directives. The working time directive is largely ignored in sectors such as the law and banking. It is true that, because there has for so long been debate over these directives eliminating them would be eye-catching and would answer long-argued criticisms from right-of-centre politicians and economists in the UK. But politically the change would be difficult because many on the left in Europe are as obsessive about the need for social legislation to prevent alleged social dumping as those in the right (mainly in Britain) about the alleged impediments to business. If revoking these two directives would make a real difference to the chance of the UK staying in, the difficulties in repealing them might be worth confronting. But in the same paragraph he goes on to ask for broader cutbacks in EU policies. In fact, the EU’s powers in education are limited to promoting student exchanges. It encourages the Bologna Process, which includes many countries outside the EU, which promotes the voluntary harmonization of degrees (largely towards the UK model), itself important in promoting a unified employment market. With regard to health and safety there is much that is added by the UK to EU legislation. If it can be shown that some aspects of EU health and safety legislation add a lot to costs while making little impact on health and safety they should be repealed but this would be a matter for technical discussion. A broad rollback of health and safety legislation would provoke huge and justified opposition from unions, consumer groups and health professionals and might well add to the cost of health services. The most costly forms of health legislation such as those dealing with removing asbestos (this closed the main European Commission building for several years) are because of real problems.
Unrealistic UK demands would lead to humiliation and likely exit
The president of the renowned euro-sceptic British based think-tank Open Europe, Lord Leach has made much more sweeping demands for renegotiation including opt-outs from agricultural policy, fisheries policy and regional policy. That would require going back on what the British agreed to in the 1975 referendum when all those policies were part of the EU, and when agricultural policy was far more prescriptive than it is today. Lord Leach argues that the core of the EU is the single market and that much of the rest should be dispensed with. But trade in food is an integral part of the single market. The agriculture and fisheries policies, though they have flaws, are a key part to the political deal which has allowed these sectors to be part of the single market. The agricultural policy was in the EU’s early years a central pillar of the bargain under which France agreed to dispense with its traditional industrial protectionism and it remains important to France. In many ways, the single market is seen in France as an Anglo-Saxon concept. Lord Leach’s proposal would be seen in France as demanding that the single market would move from being 80% Anglo-Saxonised to virtually 100%. Although agriculture in the EU has become gradually more subject to market disciplines and less to price fixing, and efforts can be made to continue down that road, a complete abolition of the Common Agricultural Policy is not feasible. If Britain makes such a demand and is rebuffed, the impact on British public opinion will be negative and the chances of a referendum leading to an exit correspondingly increased. Lord Leach presents himself as a moderate euro-sceptic who hopes that the UK will stay in a reformed EU. But if negotiation demands are made which cannot be met the chances that the UK Independence Party (UKIP) will succeed in its aim to bring the UK fully out of the EU will rise. Moreover the UK will be perceived as unreasonable which will make it more difficult to take the UK seriously on demands which, though difficult, might possibly be achievable, like those mentioned above on employment law.
It should be possible for UK governments to request changes to the EU but to describe this as a renegotiation of the UK’s terms of membership is likely to be counter-productive. The attempt of the British Labour government to renegotiate the terms of membership in 1974 led to only cosmetic change and so is not a good precedent. It is true that the referendum outcome was nevertheless to stay in but the attitude of the press and the public to the then European Community was then radically different. If one country renegotiates its own terms, others will want to do the same and, if this were to happen, the EU, including the single market, would become riddled with holes. The UK government needs to argue its case for change in a way that takes account of the interests and views of its partners, and tries to change their views in its own direction, rather than antagonizing them as does much of present British rhetoric, including that of those who claim to be against pulling out. For example, the British have to be aware that the less wealthy member states in both the south and the east attach great importance to the regional policy which provides investment funding for less well-off regions. The demands of the Conservative-Liberal coalition government for a real terms budget freeze and cuts in the cost of administration are reasonable, but the opposition Labour Party’s demand for a nominal freeze and real terms cut would have faced implacable opposition from the countries adversely affected. In contrast to many national budgets, the EU budget has been kept at not more than 1% of its GDP for the last 15 years despite the EU’s expansion to include many less rich countries which have become net beneficiaries of the budget.
Britain’s EU partners have some room to help
Having said all this, the UK’s EU partners and the EU institutions should not close their eyes to all UK arguments. In particular the refrain often heard in some member states, not least Germany, that “more Europe” is needed, deserves criticism. In some respects, closer integration is needed within the euro zone and the UK for its part should respect the right of its partners, if their parliaments agree, to move closer together. However, even in the euro zone, the case for more Europe should be made in the context of what actually needs to be done. The idea felt in the UK and sometimes to a lesser extent in other countries, that the EU wants to meddle in all aspects of peoples’ lives is often based on fabrications, but there are 100,000 pages of legislation and it is reasonable to suggest that some of this might be serving little useful purpose. It would show strength and confidence rather than weakness if EU legislators could accede to the principle that legislation can be removed as well as added to.
For many in the UK, the EU is about the single market and should not be about anything more. But for its partners, including France and Germany, the EU is about much more, and always has been. The extent to which the market economy should reign supreme is debated even amongst centre-right Christian Democrats. If this is a debate which has traditionally taken place largely at national levels, it is spreading to an EU level. The implications for society of a single market being regulated in a sufficiently harmonized way to allow free flows of goods, capital, services and workers are profound. As noted much of the deeper integration which is likely to take place will be at a euro zone level but UK policy makers need to understand that remaining part of the single market also has political implications, implications which imply the need for persuading the British public to give its backing to the measure that are needed to make a single market work including compromise with partners (ie sometimes not getting ones own way).
There are some things that the institutions and the UK’s partners can reasonably be asked to do to help British public opinion become more favourable to remaining in the EU. But the onus is much more on the side of UK politicians and other opinion formers to explain to the British public what the EU is about, why it sometimes needs compromise and why (pace the Labour Party labourship) it requires a subscription fee which is not likely to fall although it must be controlled (in fact it has been better controlled than national budgets).