John Bruton

Opinions & Ideas

Category: UK membership in the EU

OVERCONFIDENCE CAN LEAD TO POLITICAL, AS WELL AS FINANCIAL, MISTAKES

The-UK-and-EU-flags-010A ballooning current account (or balance of payments) deficit, and an explosion in household borrowing.

These were the two signs of impending difficulty, that Ireland ignored between 2005 and 2008.

 In 2008, Irish public opinion was so optimistic that it felt it could afford to reject an EU Treaty in a referendum, notwithstanding the disproportionate benefits Ireland got from EU membership. It reversed this decision in a subsequent referendum in 2009.

The UK is exhibiting some of the same symptoms of overconfidence at the moment.

The UK current account or balance of payments deficit for the last quarter of 2015 was 7% of GDP – the deepest deficit since 1955.

The UK is spending more abroad than it is earning there.

It is making up the difference with borrowing. A country that is borrowing more abroad must be particularly sensitive to the volatile opinions of foreigners.

UK households now owe almost £1.5 trillion overall, up 4% on a year ago. The vast majority of that debt is in the form of mortgages, where lending growth has been climbing steadily since the start of 2015. Much of that has been driven by the buy-to-let sector.

And now the UK is about to have a referendum on whether it should leave the EU altogether. And in the UK case, unlike Ireland, the government has said firmly that there will be no second referendum

UK voters should be wary of overconfidence. They should remember what happened in Ireland.

The UK needs its neighbours to prosper, just as its neighbours need the UK to prosper.

THE OFFER TO DAVID CAMERON….IS IT REALLY A “REFORM”?

The-UK-and-EU-flags-010The concessions the UK is winning to encourage its citizens to vote to stay in the EU could make the EU even more complicated than it is.

They could slow down decision making still further, at the very time when problems are becoming more, not less, urgent. This would not be “Reform”. Yet David Cameron says he wants the keep the UK in what he calls a “reformed European Union” Already the UK is

  • exempt from joining the euro,
  • exempt from the common border rules of Schengen, and
  • does not have to take part in EU activities to combat crime(although it can opt into these on a pick and mix basis).

It is a semi detached member of the EU, which makes it harder for the UK to exercise leadership in the EU.

Now the UK is seeking, and may be granted at a Summit next Thursday, new concessions. These concessions are being sought because UK public opinion is convinced that the EU is undemocratic and should be curbed. They are convinced the only locus of true democracy for the UK is Westminster. The truth is that neither the EU, nor Westminster, is a perfect expression of democracy.

In Westminster a party can have an overall majority of the seats with only 37% of the vote.

In the EU, while the members of the European Parliament and the Council of Ministers, who make the decisions each have democratic mandate, the people of Europe have only a very indirect vote on who is to be the President of the European Commission. EU voters, unlike Westminster voters, do not have a sense that they can throw the EU government out of office. But, instead of focussing on how to make the EU level governance more democratic, UK negotiators have concentrated on enhancing the capacity of the 28 national parliaments to block EU law making.

Given that the UK is a global player, one would have expected it instead to focus on making global and EU wide governance more democratic, rather than slowing things down or simply repatriating powers to the national level.

NEW OBSTACLES TO EU LAWMAKING ARE NOT “REFORM”

As part of the package devised to respond to UK requests, EU rules are to be changed to allow 55% of national parliaments to apply to have an EU law blocked before it has been properly considered by the Council of Ministers and the European Parliament. This “Red Card” power is to be exercised within 12 weeks of the law having been presented at EU level.

This blockage is supposed to be grounded on a claim that the EU law breaches to principle of “subsidiarity”.

Subsidiarity is a philosophical concept, around which there can be so many differences of opinion, that it does not constrain this blocking mechanism being used for reasons of pure political opportunism. One could easily envisage an EU law, that had been introduced to open up the EU market for legal services, being opposed virulently by lawyers in every member state.

Or one could imagine an EU law, to open up the energy market across borders, being opposed by high cost producers in a number of states. As it is, the lawyers and the energy companies can, and do, already fight such laws in the European Commission before they are presented, and then in the Council of Ministers and the European Parliament while they are being debated, voted upon, and compromised in and between Parliament and Council.

Now, to allay UK worries, a new field of operation is being opened up for the lobbyists who want to stop an EU law…the 28 national parliaments of the EU.

EU lobbyists will now be tempted to open offices in the capitals of all member states, so that they can be ready to lobby on behalf of clients to persuade members of national parliaments to use of the Red Card to stop a future EU law a client might not like.

Parliamentary majorities can change and many EU countries are governed by coalitions or minority governments, so one could envisage EU lobbyists seeking to exploit domestic inter party rivalries, or domestic instability, to win support for the use of a Red Card by a national parliament. All national parliaments are equal in this system, so the 55% blocking vote could come from countries that represent only a small minority of the EU population. It is therefore surprising that the UK, which is a big country, is championing this mechanism.

It is surprising for another reason.

The UK is primarily an exporter of services rather than goods. It is in the area of services, rather than goods, that the EU Single market is furthest from completion.

Therefore services is an area where the EU will need to pass the most laws to sweep aside national restrictions on competition from other EU states.

As a services exporter, the UK would have much more to gain than to lose from EU Services liberalisation legislation. Yet it is the UK which seeking a red card that would make it easier for opponents of liberalisation to delay and block EU liberalisation legislation!

PREVENTING THE EURO ZONE ACTING QUICKLY IN A CRISIS IS NOT “REFORM”

Another proposed concession to the UK could also complicate EU decision making on economic and financial matters.

Here the UK concern the is about rules being made to govern the euro, which might inhibit UK financial operators making full use of the euro zone market. On the other hand, as we have learned from the crisis, banking problems in one jurisdiction infect others very easily. UK and US banks were exposed by the Greek crisis and did not complain when EU action protected their interests!

The EU authorities may have to act very quickly if there is a new banking crisis. The EU banking union is not complete, especially as far as deposit insurance is concerned.

Yet to satisfy the UK, it is now proposed that a member state, like the UK that is not in the euro zone, be free to appeal a proposed EU law, which is proposed to safeguard the euro, to the European Council (where it may be able to veto it)

This is despite the fact that it is also proposed, in the special package for the UK,

  • that non euro members are to be freed of any financial obligation for euro area costs, and that,
  • in non euro zone countries, supervision of banks be a “matter for their own authorities” according to the text.

The proposed procedure would allow a non euro member, like the UK, to delay an EU law that is needed, in the view of the states that are in the euro, to safeguard their currency or the ensure the solvency and proper supervision of their banks, in the interests of customers and depositors.

It is unclear what happens when the appeal is brought to the European Council.

The European Council usually decides issues by unanimity, so one could envisage an urgent EU law to safeguard the euro or the euro zone economy being vetoed there by the UK, which was not even in the euro.

This is giving the UK power without responsibility.

The proposal for the UK does say that “member states whose currency is not the euro shall not impede the implementation of legal acts linked to the functioning of the euro area and shall refrain from measures which could jeopardise the attainment of the objectives of the economic and monetary union”.

But these are all matters of judgement on which it may not be easy to find unanimity, especially when time is short, and national interests collide.

BRITAIN SHOULD RAISE ITS SIGHTS…THE ONLY WAY TO WIN THE REFERENDUM

For the past two millennia, Britain has had a vital interest in the peace and prosperity of continental Europe.

It has gone to war many times to preserve it.

English is the language of EU governance. The EU Single Market is a modern application of the ideas of Adam Smith.

Two hundred years ago, when European states were much less interdependent than today and was recovering from the Napoleonic Wars, the then UK Foreign Secretary, Lord Castlereagh, persuaded the European powers to make, in his words, “a systematic pledge of preserving concert among the leading powers and a refuge under which all minor states may look to find their security”.

While his views on Ireland were mistaken, Castlereagh’s views on Europe were not. Rather than seeking a series of further exemptions, and so called “reforms” that will slow further an already complex EU lawmaking system, David Cameron should follow Castlereagh’s example and set out his country’s own comprehensive vision for the peace and prosperity of Europe.

Then he might give himself a chance of winning the Referendum he has chosen to have

IF THE UK GETS AN ACCEPTABLE EU DEAL, WILL IT STILL KEEP COMING BACK FOR MORE, EVERY TIME AN EU TREATY HAS TO BE REVISED IN FUTURE?


A “Daily Mail” poll,  last week, showed that, in a sudden change, 51% of UK voters now want to leave the EU, whereas 49% want to stay in.

This big change in opinion seems to be related to the refugee crisis, because the poll also shows voters strongly favour David Cameron’s unwillingness to accommodate large numbers of refugees as against Angela Merkel’s support for all EU countries accommodating a substantial quota.

This dramatic change in opinion shows how a referendum result on a particular day can turn on unexpected events, and how a permanent decision can be influenced by what may prove to be temporary phenomena

The UK already had a referendum on whether to stay in the EU in 1975.  Now it is to have another in 2017. But will this 2017 referendum settle the question?

Eurosceptics, like Nigel Farage, have welcomed the decision of David Cameron to change the wording of the question UK voters will be asked to decide on, from a “Yes” or “No” to UK membership, to one which asks whether UK voters want to “remain” in, or “leave”, the Union. 

This change was recommended to David Cameron by the Electoral Commission who felt the earlier formulation favoured those who wanted the UK to stay in the EU.

“Leave” implies action, “remain “could be construed as endorsing passivity.  “Yes” would have implied positivity, “No” negativity. Generally people prefer to be positive. So perhaps Nigel Farage is right to be happy.

The bigger risk here is not in the wording of the question. It is in the political reality  that, in a referendum, temporary considerations, like anger at some current government policy on an unrelated matter, may induce people to make a permanent decision that they would not make in normal circumstances.

That is why I prefer parliamentary democracy to referendum democracy. 

In a referendum, the issue has to be reduced to a single question decided on a single day. 
In the parliamentary system the decision is usually taken over many months, in a process which allows greater flexibility, and opportunities to change direction in light of what is learned. 

But a referendum is what we are going to have, so it behoves everyone in all the 28 EU countries to do what they can to ensure, if they want the UK to stay in the EU, that the negotiation is concluded in a way that presents the EU in the best possible light to the UK electorate.

The UK’s negotiating approach, and the frame of mind in which the UK people approach the negotiations, are important here too. If the UK gets a good deal, that is endorsed in a referendum, will UK citizens then fully commit to the EU, or will they retain an attitude of conditional and skeptical membership, waiting for the next opportunity to find fault?

In 2003, I was chairman of the committee of the Convention on the Future of Europe which dealt with Justice and Home Affairs.  Our task was to redraft the provisions of the EU Treaties dealing with cross border crimes. The UK had long been suspicious of continental courts having jurisdiction over UK citizens and wanted to limit EU activity in this field.

At each stage in the negotiation, the other parties to the negotiation went as far as they thought they could to accommodate UK concerns, only to find that once that was settled, the UK came back looking for more concessions on the same points.

The Convention’s “final” draft of the proposed EU Constitution, was not final. The UK looked for, and got, more concessions in the draft approved by the Heads of Government. 

Then, when the Constitution failed in referenda in France and the Netherlands, and was replaced by a slightly slimmed down “Treaty” in Lisbon, the UK looked for, and got, even more concessions on their concerns, including a complete opt out, with a right to opt in at will.

Will the other states go all the way to their bottom lines, in the negotiation of the “improved” terms of UK membership if they think the UK will adopt a similar tactic and keep coming back for more? They will ask themselves how an EU of 28 members would work, if every country that UK approach.

Suppose the final deal is one that satisfies UK voters by a narrow margin, will future UK governments then be likely to go on looking for further concessions afterwards, on the same issues, every time there have to be any further revisions of the EU Treaties? 

If the answer to these questions is yes, and there are many in the UK who will never be satisfied with what the EU offers, then the other 27 members may hold back from their maximum concession. 

David Cameron may then find he has raised expectations in the UK unduly, and may fail to convince UK voters to remain in the EU.

Or he may find that his electorate wants to “experiment” with leaving the EU, just as many US voters want to experiment with Donald Trump, or some UK voters seem to want to experiment with Jeremy Corbyn.

There also is the related risk that UK voters may see the referendum as an opportunity to “make a statement” about their sense of who they are, rather than make a final, fully considered, decision about the future of Europe. 

So we must prepare for the possibility of an EU without the UK.

DAVID CAMERON’S SPEECH

The Conservative plan, as set out in David Cameron’s speech, is to try to renegotiate the terms of UK membership in the EU, if it wins the next general Election, and put the terms to a referendum.

The risk is that Labour may feel under pressure to adopt a similar policy, so as to prevent a leakage of its votes to UKIP.
It is very unlikely that the results of any such renegotiation, whether conducted by Labour or the Conservatives, will satisfy British popular expectations.  And if that is the case, the UK electorate may choose in a referendum to leave the EU.

This renegotiation is likely to be a disappointment because the expectations in Britain are vague and unrealistic. David Cameron did not offer any clear negotiating objectives in his speech.

SINGLE MARKET IS NOT A FREESTANDING ENTITY

He seemed to think that the EU Single Market was some sort of freestanding entity separate from common EU policies on regulation, working time, transport, and education. But for other EU nations, it was in return for policies on these things, that they opened their markets to the rest of the EU, in the first place. The Single Market is a delicate political construct that cannot be easily unpicked.

And while accepting that the EU needed to resolve the euro crisis, he wanted  “contrition” to be expressed  by those who created the euro, notwithstanding that  Economic and Monetary Union was on the EU agenda before a previous Conservative Prime Minister negotiated the  UK’s entry terms! 

He also wanted the goal of “ever closer union” dropped from the EU Treaties, even though that too was part of the Treaty before the UK joined.

He is 40 years late with these ideas

RENEGOTIATION WILL BE WITH 26 OTHER GOVERNMENTS

The UK renegotiation will not be   with bureaucrats in “Brussels”. It will be with the Governments of every one of the other twenty-six states in the EU. Britain may want to pay less, but other countries may want it to pay more. Many other EU countries see the very things British negotiators would most like to be rid of – like the working time directive – as part of what they gained, in return for their opening  up to the Single Market in the first place.

Concessions on these issues will, in particular, be anathema to left leaning Governments, of which there are an increasing number.

Exempting Britain from the Common Agricultural Policy (CAP), another possible British demand, will get nowhere.

Repatriating regional policy will not go down well with countries who have recently joined  the EU, and  whose incomes per head are much lower than those in Britain


ALL EU RULES HAVE BEEN MADE WITH BRITISH INVOLVEMENT
British popular opinion has been constantly led to believe that the  EU is a foreign entity, with which Britain has a sort of treaty,  and not as what it actually is – a Union of which the UK has  a participating member with a vote on every decision.

The role of British MEPs, British ministers, and a British Commissioner in EU decisions has been systematically ignored in the UK media and all decisions inaccurately presented as emanating from an “unelected” bureaucracy.
If possible results of a renegotiation are hyped up in the next British General election, and  lots  of “red lines” promised, the actual results of the renegotiation will prove to be paltry by comparison. That could lead to UK exit.

IMPACT ON NORTHERN IRELAND PEACE 

I am particularly worried about the effect of Britain leaving the EU on the fragile situation in Northern Ireland.
Northern Ireland, and its reversible peace process, is being ignored in the debate taking place in Britain. It is also being ignored in the rest of Europe, where the impatience with the British is palpable.

Obviously if the UK leaves the EU, it will negotiate a new relationship with the EU. 
But what sort of relationship will it be?
One of the big drivers of anti-EU sentiment in Britain is immigration of EU citizens from central and eastern European countries, like Romania, Bulgaria, and the Baltics. Gordon Brown famously encountered this sentiment during the last British General Election.

IMMIGRATION CONTROLS AT NEWRY?

If the UK leaves the EU, it would be free to restrict immigration from some EU countries. But, as a continuing member of the EU, the Republic of Ireland could not do so. So if the UK wanted to prevent these EU citizens entering the UK through the Republic, it would have to introduce passport controls at Newry, Aughnacloy, Strabane and on all other roads by which such EU immigrants could cross the border from the Republic into the UK.

CUSTOMS POSTS AT STRABANE?

If the UK is outside the EU, tariffs would have to be collected on UK exports entering the Republic and vice versa. Average EU tariffs are quite low, but some tariffs, on things like dairy products and clothing, are quite high. Customs posts would have to be placed on all roads leading across the border to ensure collection of these tariffs. Smuggling, with all its potential as a funding source for other forms of illegality, would become very profitable again.
But the human and political cost in border counties would be the worst aspect of it. Nationalist communities would again feel cut off from the Republic by the inconvenience of passport controls, and of customs posts
Since Northern Ireland came into being as a separate entity in 1920, the large nationalist minority there has retained a very strong sense of identification with the rest of the island.

The possible reintroduction of customs posts, and of immigration controls, would undermine the efforts that have been made , in the Good Friday Agreement, to reduce the divisions between North and South and between Ireland and the UK.

Given that UK Prime Ministers have had to devote so much time to the so called “Irish Question” for the last 150 years, it is amazing that the current UK debate on EU membership is being conducted as if Ireland did not exist, or the UK had no interest in it.
Some might say that  fears of the UK having customs posts and passport controls on the Irish border are exaggerated because they think the UK outside the EU could  easily negotiate a free trade and free movement deal with the EU

UK CANNOT BE BOTH IN, AND OUT, OF THE EU AT THE SAME TIME

There is a big snag here.

To enjoy continued free access to EU markets for its goods and services, Britain would have to continue to apply EU rules, as now, but WITHOUT having had any say at all in them – something the UK does have as an EU member. 
David Cameron had a point yesterday when he argued that the nature of the EU is changing in response to the euro crisis, and as a non euro member the UK’s relationship with the EU will change anyway.
 But there was absolutely no need for him to promise an in or out  referendum, which places him in a straight jacket.

COPYRIGHT JOHN BRUTON & CONTENT

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