Great Britain and the European Union after the 2015 general election. Keynote PATRICK DIAMOND

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Great Britain and the European Union after the 2015 general election Panel discussion of Tuesday 30th June 2015 Diplomatic Academy of Vienna Keynote PATRICK DIAMOND Research Director,

1 Great Britain and the European Union after the 2015 general election Panel discussion of Tuesday 30th June 2015 Diplomatic Academy of Vienna Keynote PATRICK DIAMOND Research Director, Policy Network, London; University Lecturer in Politics at Queen Mary, University of London Information: Dr. Gerhard Marchl Karl-Renner-Institut, European Politics 1

2 Introduction I am delighted to be here. Thank you to the Karl Renner Institute and the Vienna School of International Studies for organising tonight's event. Thank you also to Dr. Marchl and Dr. Duffek for inviting me. My theme will be Great Britain and the European Union after the 2015 general election. The 2015 election in Britain was momentous. In fact, on one level not that much changed on the surface. The ruling Conservative party s vote share remained fairly static. The Labour vote share slightly increased. But quite unexpectedly, the election delivered a majority Conservative government, even though many polling companies had predicted that Labour was likely to be the largest party. This was due to the collapse in the Liberal Democrats' support as the junior coalition partner in , alongside fears that the Conservatives were able to create about the real possibility of a Labour coalition with the Scottish National Party that might threaten English interests, and therefore the future stability of the UK. Having the perspective of a former UK political adviser, it must be said that Labour's position was strategically weaker than it appeared on the surface: the party went into the election significantly behind on the two critical factors that tend to determine the outcome of British elections: strength of leadership and credibility on the economy. Labour had never recovered its reputation following the financial crisis in , and Ed Miliband was not regarded by the electorate as a plausible future prime minister. Of course, the unexpected election result has left many pro-europeans in Britain and across the continent nervous: Cameron's parliamentary majority means there will now almost certainly be a referendum on the UK's future membership of the EU, probably in Referendums are an inherently uncertain business. In 1992, the Danish people voted unexpectedly against ratification of the Maastricht Treaty. In 2005, a new European constitutional treaty was rejected by voters in France and the Netherlands. In the UK last September, the referendum on Scottish independence led to a relatively close result to remain in the UK: a margin of 55 to 45 per cent. This was a much closer outcome than most commentators had expected, leading to panic within the British political class. Britain last held a referendum on membership of the European Community forty years ago in Then, voters were, at least on the surface, more deferential and respectful of political authority. Today, that appears to be much less the case according to social attitudes surveys. Politics has never been held in greater disrepute. The rise of right and left political populism across Europe is a further expression of deep alienation from the political mainstream. And it is another reason why we should be reluctant to predict with any certainty the outcome of a UK referendum in 2016 or I will return to this theme in a moment, but let me begin by setting out exactly what Prime Minister Cameron is trying to achieve in the renegotiation process. What concessions will Mr Cameron extract? First of all, there is recognition in London that any fundamental rewriting of the European treaties is unlikely to occur within Mr Cameron's self-imposed timetable. 1 This has led to an adjustment of political expectations, in part because the government faces time constraints and cannot afford a lengthy and drawn out negotiation. The Cameron Government is under some pressure: of course, it has just won a general election and its standing in the country is reasonably high. But it secured less than 37 percent of the vote in the 2015 election, so the Conservatives cannot count on being able to persuade a majority of UK voters. Within a year from now, the government may begin to suffer significant mid-term unpopularity, particularly 1 2

3 if the economic recovery runs out of steam. It needs the referendum to take place sooner rather than later. As a result, we are likely to see is a more modest range of reforms achieved in the renegotiation process with no question of any fundamental rewriting of the European treaties. What is the package likely to contain? The government is apparently seeking the following headline reforms: 1. New controls to prevent vast migration flows when a country enters the EU for the first time. 2. Tighter rules to prevent so-called benefit tourism in the EU. 3. Enabling groups of countries to block EU legislation through national parliaments. 4. Freeing business from onerous red tape and over-regulation, ensuring the EU focuses on securing free trade deals with Asia and the USA. 5. Ensuring Britain's criminal justice system is protected from interference by the European Convention on Human Rights (ECHR). 6. Developing a vision for the EU in which power flows back to nation states and away from Brussels. 7. And above all, insisting that Britain should no longer be subject to the EU treaty objective of ever closer union. For Cameron, these changes would enable him to pursue what he believes to be a pragmatic Conservative position on Europe in favour of the enterprise and dynamism of the European single market, but against any further diminution of sovereignty with proper physical controls in place to regulate the flow of people. Cameron can contain and even unify is own party by demonstrating that his vision of the UK-EU relationship is consistent with that of the Euro-sceptics modern hero, the former British Prime Minister, Margaret Thatcher. But how likely is it that these goals will actually be achieved in the UK's renegotiation process? It has to be said that there is a strong flavour of rhetoric over substance in this exercise. 2 For example, the ECHR and its relationship to the UK criminal justice system has nothing to do directly with our EU membership. It simply isn't the case that legions of European bureaucrats and parliamentarians are actively trying to stifle British business with red tape, bureaucracy and regulation - whatever the popular image presented by the Eurosceptic media. In any case, a strong competitive single market requires the EU to enforce common rules which excessive deregulation would undermine, probably at the expense of many British companies. On migration, the UK has conceded that it cannot breach the right to free movement enshrined in current EU treaties for existing members. Nor would it necessarily be to the government's benefit given that 2.3 million Britons are currently residing in other EU member states. There will certainly be sustained efforts to curtail 'benefit tourism', as other countries in Northern Europe support measures that tackle abuse which undermines support for the welfare state. It may be that migrants will be entitled to benefits only if they have a proper record of defined contribution in their home country after a minimum period of residency. In any case, the actual numbers involved across the EU are believed to be very small. 2 3

4 Furthermore, there are already powers in the Lisbon Treaty for national parliaments to issue 'yellow card' warnings on proposed EU legislation, as my colleague Roger Liddle makes clear in his recent pamphlet on the threat of 'Brexit'. Cameron has already abandoned any attempt to win a change demanded by his Eurosceptic wing: a unilateral right for the UK Parliament to disapply EU laws in the UK. That said Cameron will almost certainly secure an opt-out of the present treaty text calling for ever closer union. The Government will no doubt regard this as a negotiating triumph, but arguably it begs further questions about this 'pick and mix' approach. One major question is how to relate to the Euro-zone countries in order to prevent the City of London being disadvantaged by rules that the UK government will have no role in overseeing - the British government wants an end to UK involvement in 'ever closer union' yet at the same time, it demands a seat around the table as economic and financial integration proceed apace. This is surely not a sustainable position for the longterm. As we have seen, David Cameron has been forced by a combination of a squeezed political timetable and a realistic assessment of what his EU partners are willing to concede to commit to a seemingly cosmetic series of reforms. It is unlikely that these will quell European divisions within the Conservative party over the long-term, whatever the outcome of the referendum next year. Another dilemma for Mr Cameron is that in order to win concessions, the Prime Minister has to show that his reforms will be good for Europe, not only for Britain. But to win the referendum in the UK, he has to make the case that the government has delivered for UK interests. This is not, of course, a zero-sum game, and the British have forged new coalitions of support in Northern Europe, bolstered by the election of a new centre-right government in Demark. However, the UK Prime Minister has arguably made his job harder by creating the impression he has little interest in making the EU work for all the member-states. This may make it harder to extract key concessions. Labour's position So what of the opposition Labour party s contribution to this renegotiation process? Labour enters the debate as a broadly pro-european party. At the 1983 election, Labour had advocated leaving the EEC having become increasingly hostile to Europe in the 1970s, but under Neil Kinnock s leadership, Labour became passionately pro-european, regarding the EU as a bulwark against Thatcherism in the form of the Social Chapter and new social rights. This attitude continued under John Smith, Tony Blair and Gordon Brown in the 1990s and 2000s. There was a reasonably strong consensus in the party which treated pro- Europeanism as central to modernised social democracy, with a few dissenters having only a marginal impact on the debate. After 2010 when the issue of a referendum first emerged, Labour's former leader Ed Miliband held firm and argued that the proposed referendum was not necessary: it was attacked as a political device designed to placate Mr Cameron's anti-european backbench MPs - who some in the Conservative party feared might defect to the populist, anti-european right wing UK Independence Party without a major change in European policy. 3 However, now a referendum is all but certain to take place, Labour will have to fully participate in the referendum campaign, still demoralised after its crushing 2015 election defeat. It would also be fair to say that the mood within Labour is no longer unconditionally pro- European. The generation of leaders who were ardent European enthusiasts such as Tony Blair and his former Foreign Secretary, Robin Cook, has moved on. There is particular concern within the party currently that Labour's traditional support base is being eaten away by the defection of its own supporters to UKIP with Europe (and more particularly immigration) seen as key factors. In 2015, UKIP didn't win seats from Labour, but in dozens 3 4

5 of constituencies in Northern England it came a good second - and is ready to pounce next time. Key voices within the Labour Party would support reforms that curtailed free movement of labour within the EU, especially for Eastern European migrants who are believed to be taking jobs and under cutting the wages of indigenous workers. 4 The evidence for this proposition is slim and there is every reason why countries such as the UK with a population that is demographically ageing will need more not fewer migrants by But the debate remains ill-tempered and divisions over Europe in British politics extend to the Labour Party as well as the Conservative party. Some of the major British trade unions are also become more hostile, particularly as the government s vision of Europe grows more pro-free market and in favour of deregulation. The UK debate So how will the debate now unfold? Even conceding the case for a referendum was a major political gamble by Mr Cameron. The risk is not only to his government's own political authority if Mr Cameron loses, but to the very cohesion and stability of the UK state. 5 A no vote in a referendum would in all likelihood lead to the break-up of Britain. Were the UK to reject staying in, it is likely that a no vote in England would be contradicted by a vote in Scotland to stay in. For various historical reasons, Scotland is much closer to a pro- European position, wanting to align itself with the Nordic States of Northern Europe, rather than England which is perceived to be closer to the US model. Wales also tends to be more pro-european, partly reflecting the past legacy of structural funds supporting its formerly industrial areas. And in Northern Ireland, membership of the EU has been critical for accommodating the nationalist community within the peace process. If England did vote to leave, there is every possibility that Scotland, Wales and Northern Ireland would take a different position - calling into question the territorial cohesion and political viability of the UK state. As a result, it could easily mark the end of the UK as we know it today. So how can pro-europeans prevent this outcome and ensure Britain remains in the EU? That question is itself the subject of lively debate across the political spectrum. Janan Ganesh, a leading political commentator on the Financial Times, has argued that the case for staying in has to be based on a hard headed economic argument about the grave risks of the UK leaving the EU. Just as in Scotland, the referendum was ultimately won by pointing out the catastrophic economic consequences of Scotland leaving the UK, the case for Britain staying in the EU will be won by emphasising the incalculable threat to jobs, inward investment, and living standards posed by a UK departure. Other voices warn of the dangers of a campaign strategy that plays only to people's fears, but offers little in terms of optimism and hope: the pro-european case they argue has to be partly based on an appeal to shared values - that we are better off in Europe and fully engaged in the EU than we are sitting on the margins. 6 The world is insecure, uncertain and unpredictable: we are better placed to meet multiple global security and economic challenges working with our European partners who share our values and interests, as well as our neighbourhood. By working with our EU partners, we can amplify and increase the UK's influence in the world. That point is underlined by the UK's current relationship with the United States: the fact is that since the 1960s, Britain has been stronger in Washington when it has been seen as influential within Europe. The recent sense that Britain is a more marginal player in Europe has coincided with Mrs Merkel's growing influence with the US President. President Obama says he still believes in the UK special relationship, but he is clear that the relationship would

6 be a lot less special if Britain departed from the EU. Of course, there are lots of practical and common sense arguments as to why Britain should stay in and they are being made, not least in Roger Liddle's case against 'Brexit'. 7 Three million British jobs depend on our membership of the single market. The UK is an attractive place for inward investment because it offers a gateway into the single European market, as well as the opportunity to access new global markets overseas. Neither are the exit options in truth very palatable: the 'Norway scenario' requires Britain to comply with EU rules it can then do little to shape or influence. The choice of just abandoning Europe altogether means that thousands of British companies would face high tariffs to access European markets, while their products and services were discriminated against because they did not comply with European standards. Nonetheless, it is clear that the 'yes' campaign will have to speak fluently and convincingly both to the self-interest and the shared values of the British people. What will the result of the referendum be? Let me conclude by addressing the most difficult question this evening: what will the result of the referendum be? A recent poll by the organisation Ipsos MORI revealed that 56 per cent of British voters would opt to stay in while 36 per cent would choose to leave. This the highest level of recorded support for British membership since the early 1990s. That dynamic can, of course, change, but it appears as if Britain's appetite to get out of the EU peaked in 2012 when 49 per cent of voters wanted to leave and just 41 wanted to remain in. Since then, support for remaining an EU member has steadily increased. Peter Kellner, a leading expert on public opinion in the UK, argues that the British people often express hostility to Europe in the abstract, but when offered an opportunity to say concretely whether they want the UK to remain an EU member, they opt to stay in. It is also worth reminding ourselves that for all the heat and light generated by the European question, it is not an issue that troubles most British voters: in the recent general election, a poll suggested that fewer than 1 in 10 British voters ranked Europe as one of the three most important issues facing the country. Of course, none of this means that the result of a referendum is a foregone conclusion - far from it. 8 Public opinion remains febrile particularly on issues such as identity and immigration, which in turn foments hostility to Europe. The decline of deference already referred to means no one can rely on the ability of the political class to 'herd' voters in the right direction. In the 1975 referendum, the entire UK media (with the exception of the Communist Morning Star newspaper) supported a yes vote. But today, the majority of the UK media is generally hostile: Mr Murdoch, for instance, sees the EU as a high-tax, high regulation bureaucracy totally unfit for a world of rapid globalisation. Their influence may have waned, but the media and newspapers in particular still have enormous agenda-setting capability. Moreover, British business in 1975 was strongly in favour of British membership. Again, that is changing: there are UK based businesses such as hedge funds that have grown more hostile to the EU in recent years. At the same time, business in general is probably less trusted on politics, particularly in the wake of the financial crisis: a call for a 'yes' vote by major British business organisations won't necessarily positively influence voters. And there is, at the same time, always the possibility of unexpected 'shocks' during the referendum campaign - economic shocks triggered perhaps by a break-up of the Euro, or security shocks created by unanticipated events or a terrorist attack somewhere in the world. This might have very little to do with Britain's membership of the EU, but it might nonetheless 7 8 6

7 provoke a spike in anti-eu sentiment which changes the course of the referendum campaign. Conclusion I have sought to show in this brief talk that there is a lot at stake here. The decision to hold a referendum was not a risk free option and the consequences are likely to be very far reaching indeed. If the referendum were to go wrong, it is unlikely that the UK could survive in its existing form. Even if there is a convincing vote to remain an EU member, it is possible that the renegotiation package achieved by Mr Cameron will not be enough to placate Conservative party sceptics in the long-term. The vision of the UK as a participant in the consolidation of the European single market but little else is unlikely to be an intellectually sustainable position. In the City of London, for example, one of the Conservative party s most vocal supporters, the fear is not ever closer union : it is UK marginalisation from the major economic and financial policy decisions likely to be taken by the EU in the years ahead. The City may dislike certain features of EU politics and policy-making, but it understands that the central goal of British policy must be to preserve London's preeminence as one of the world's leading financial centres. The trick that Prime Minister Cameron has to pull off is to keep the UK in the EU, without causing an irreversible split in his own party, which has been at war over Europe since the late 1980s. That is likely to prove a tricky balancing act. In truth, a much bigger British vision is needed, of course, which goes beyond political management in the Conservative party. The question of Britain s global role can only be settled by reimagining the UK state as a federal polity at the heart of the EU accepting European norms of welfare and security, pursuing a committed pro-european future. The UK at present is, to say the least, a long way from embracing that role, but it may not necessarily remain that way forever. 7

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