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IDC conference on Brexit

Date de publication: 14.06.2016

Warwick Lightfoot holds up a copy of the 1971 government White Paper on EEC membership (IDC, 14 June 2016)

The UK’s In-Out Referendum

Warwick Lightfoot,

IDC, 14 June 2016

 

 

In this note I have tried to explain how the UK has come to have an in-out referendum on the EU, the range of issues in play in the referendum campaign and the changing taxonomy of political support for the EU the UK relationship with the EU has been difficult from the start. I have also tried to identify recurring themes in the debate about our membership and some of the particular dimensions thrown up by the present campaign. Among the recurrent themes are the difficult personalities, the boredom with Europe and a perception that its institutions and policies are difficult to reconcile with UK economic and social institutions such as the common law. I will try and explore these in a thematic non-chronological manner to illustrate the character of the present UK debate which is rooted in the debates, fears and aspirations of the last sixty years. And there is an element of overlap where matters such as sovereignty run across any attempt at a neat boundary for convenient analysis.

I come to these debates with a view. I am one of the Economists for Brexit. I have progressively travelled from a youthful enthusiasm for UK membership of the EEC, to one of disappointment, serious reservation about the direction of travel and now the firm belief that the UK should detach itself the institutions of the EU and remove itself from the obligations of the Treaty of Rome and the jurisprudence of the European Court of Justice. While I have a developed opinion on this matter, I hope that I retain a sense of balance and that I remain capable of describing the arguments and how we got here without traducing the arguments or giving a misleading gloss on matters. One cannot avoid the fact that there has always been an element of the comedy in this protracted saga. It is more Evelyn Waugh or Muriel Spark than Thomas Mann.

In the immediate post-war years the attitude of the British Government to European co-operation and development was generally favourable. Winston Churchill in a famous speech in Zurich in 1946 called on Europe to unite. But it was not at all clear that the British political elite thought that the UK should be part of such a European union.

 

Britain’s original reservation about a United Europe

As the Coal and Steel Community evolved into the proposals that led to the Messina Conference and the Treaty of Rome the UK Government decided to stand apart. The post war Attlee Labour Government had stood aside from the Coal and Steel Community. Britain’s socialist ministers thought that their European counterparts were too Christian Democrat in outlook and would impeded the sort of nationalisation and socialist economic controls that they preferred. The essential concern of Conservative ministers in 1956 was the UK would be obliged to do things by its potential partners that the British Government would not want to do. Their points of anxiety principally turned on the residual legacies of Empire - UK commitments as part of the Sterling Area, Commonweal trade preference and, what was perceived as the UK’s central relationship, the relationship between the UK and US.

  

There was also an element of personality.

The UK Government response to the Messina conference was co-ordinated by the Chancellor RAB Butler. He did not like the Dutch Foreign Minister J W Beyen deputed by the Messina six to approach. Beyen, a now largely forgotten figure, has been described as ‘silky,’ and ‘exotically sophisticated by Dutch standards’. Butler could not stand him, describing him as very ‘pushy ’and later said that he had ‘to overcome my personal repugnance of him’. The Treasury viewed Messina as inspired by politics as much as economics and that the common market would be unacceptable for the UK. Later Butler recalled the he and the Prime Minister Sir Anthony Eden were just bored by the Europeans. The Prime Minister was much more worried about his relationship with President Eisenhower and his visits to Washington.  The excitement of Washington and the White House and the boredom with tedious encounters with European ministers, Commissioners and the Council of Ministers would be a repeated feature of the UK relationship with Europe. Margaret Thatcher although a much more nuanced figure than often perceived, relation to Europe, invested much more in her relationship with Ronald Reagan and was much more interested on getting on with American politicians in general than obtaining a working relationship with her European partners. She had an unfortunately poor relationship with Helmut Kohl. Tony Blair regarded himself as a genuine European yet from 2003 the Iraq war meant that Mr Blair put the American relationship first. Gordon Brown was notorious for his dislike of the Council of Ministers. Horsing around with the US president seems much more fun to British prime ministers. There is no doubt that the Remain Campaign and Downing Street regard the interventions of President Obama, the former US Treasury Secretaries and Michael Bloomberg as much more important than anything coming from Europe.

 

Reservations about French style bureaucratic institutions and expensive illiberal policies

The perception of practical reservation increased as the new community developed. The Common Market was more protectionists in international trade, more interventionist in its agricultural support polices, and the feel and character of many of the institutions and polices was more dirigiste, more institutionally bureaucratic on the French model, and less liberal than the British political tradition was comfortable with.  These reservations hardened in the 1960s. The Treasury identified problems with an expensive and inefficient CAP, higher UK food prices and a significant UK EEC budget contribution. These concerns were marshalled in Treasury briefing papers produced by Sir Douglas Allen the head of the Treasury. Although, these concerns were effectively set aside by the political imperative to apply for membership in the 1960s and 1970s, they have certainly coloured the practical transaction of business since 1973.

Of course it is necessary to remember that the political culture of the 1950s and 1960s both in Britain and in France was very different to the present public agenda. It was the world of the post-war Keynesian welfare consensus, the age of the nationalised industries and a much more collectivist outlook, exemplified by very high income tax and inheritance tax rates and huge trade union power across the economy in the public and private sectors. It was also a world of fixed exchange rates within the Bretton Woods system and the constant need to maintain the external balance that presented practical constraints for both Britain and France before 1971.

 

What changed the attitude of Britain’s Political and Economic Elites towards Europe?

The attitude of the British political elite swiftly changed. The Anglo-French disaster of Suez, which initially made the British determined to repair their relationship with Washington on a basis of an acknowledged and tame dependency. The apparent prosperity of the Common Market transformed opinion. The British political and economic elite went through a series of crises of confidence. At their heart was the UK’s all too evident relative economic decline. The Treasury and Bank of England lost control of domestic monetary conditions with the result that there was a rising, unstable and relatively high rate of inflation. Trade union power emasculated innovation and undermined every major sector mining, manufacturing and in particular docks, car manufacturing and newspapers in Fleet Street. Nationalised industries reduced the rate of return on capital. There not just one but two Achilles heels the labour market and the balance of payments. It was a saga of inflation, declining foreign exchange reserves and devaluation and slow economic growth in comparison to Germany France and Italy. In contrast the countries of the Common Market that had been poorer, caught up and over took the UK in prosperity and wealth. 1954 to 1959 unit labour costs in manufacturing industry rose by 25 per cent twice as fast as in other industrial countries. From 1950 to 1958 annual manufactured exports in West Germany rose 15 per cent, in Netherlands 9.8 per cent, in by Italy 8.9 per cent. In contrast in Britain they only rose by 1.8 per cent. From 1950 to 1960 annual average percentage growth rates were: West Germany 7.8, Italy 5.8, France 4 .6 and Britain 2.7. By 1964 all countries in North West Europe surpassed Britain in output per head.

 

 

Ted Heath, EEC Entry and Mendacious Reassurance

At the end of the 1960s the attitude of the political and business elites was: we must join this club. Harold Macmillan had tried to join in 1962 only to be blocked by General de Gaulle’s veto. When Harold Wilson prepared to make the UK’s second application in the late 1960s, he informed the House of Commons that he had told the General that ‘we do not intend to take no for an answer’. Harold Wilson applied and was duly vetoed by President Charles de Gaulle in 1967.  Ted Heath’s Conservatives that unexpectedly won the 1970 election made membership of the EEC its priority. The UK’s political and economic elites associated Europe with economic and business success. The reservations about sovereignty were brushed aside. Ted Heath had been responsible for the Common Market application in Macmillan’s Government and was a genuine enthusiast for UK membership.

In its White paper in 1971 Mr Heath said ‘there is no question of any erosion of essential national sovereignty’. Ministers did not lie but in the debates they evaded categorically stating that the law of the European Community would have supremacy over British Law. The Prime Minister said ‘in joining we are making a commitment that involves our sovereignty, but we are gaining an opportunity’. The magnitude of the constitutional decision was obscured by words that were as soporific as they were opaque. The argument was an economic community, and there would be no political aspect without Britain’s agreement. There was a Veto, it was all about trade and economics and no one wanted to create a United States of Europe.  The French wanted to remain French the Germans, German. A federal political union on the model of the United States was nonsense. Years later of course Sir Edward Heath  derided the suggestion that from the start the European project was anything other than an intrinsically political project saying in 1992 ‘ From the first, the Community was political, it still political. It will always be political.’ But that is not what he said as Prime Minister in 1972 in the debates of the European Communities bill.

 

The 1975 Referendum

There was deep public hostility to the EEC. This hostility was amplified by the more general failure of the Heath Government that was defeated in a general election in Februaryn1974 after a miners strike had resulted in a state of emergency that restricted the working week to three days.  The Labour Party and the nationalists in Scotland and Wales campaigned for a referendum that could take Britain out of the EEC and Labour promised to put renegotiated the terms to the people in a referendum. It was essentially a cosmetic exercise, and concluded that the UK should stay for trade, and that UK sovereignty was fully protected by the veto. The Labour party had moved to the radical left the perception of relative decline and absolute crisis was profound. The Conservative Party and the business community along with right of the Labour Party wanted to retain the protection as they saw it of a treaty of economic laws regulating and limiting industrial subsidies and trade protection. The new Conservative Leader of the Opposition Mrs Thatcher was an enthusiastic supporter of Britain’s membership, famously sporting s pullover with all the flags of the EEC emblazoned on it.

The response of the left of the Labour party in the 1970s to the British economic crisis was the ‘siege economy’ -  the Alternative Economic Strategy- at its heart were nationalisation, industrial intervention, workers co-ops and a huge Keynesian demand stimulus with the balance of payments protected by import controls, most of which were incompatible with Common Market. Political and business elites and the wider voting public saw Europe as a protection against the proposed ‘siege economy ‘of Mr Benn and the Labour Left.

There was a highly stylised and compelling critique of the loss of sovereignty that the Treaty of Rome implied, but this was perceived as a somewhat recondite and exaggerated concern. Mr Tony Been, Mr Enoch Powell, Mr Perter Shore and Mr Foot were the main articulators of this concern about sovereignty and the subordination of Parliament to the decisions of the ECJ in Luxembourg.

Mr Douglas Jay an economist and former President of the Board of Trade and Mr Shore the Secretary of Trade developed a critique that emphasised the illiberal character of the Common Market’s trade policies and the inefficiency, expense and welfare losses of the Common Agricultural Policy and the scale of the UK‘s net contribution to the EEC budget and the EEC’s high external tariff. This was very much an argument made in the tradition of David Ricardo and John Stuart Mill, revitalised in contemporary economics of the 1970s by a Canadian economist at the LSE Professor Harry Johnson. It is the strain of thought that colours the analysis of Economists for Brexit, the group of economists that I am a member of chaired by Professor Patrick Minford.

In 1975 the UK voted overwhelmingly to remain in Europe. Most ‘sensible’,’ moderate’, popular politicians argued the case for Europe and the business community was unanimous. Roy Jenkins, Ted Heath, Mrs Shirley Williams, Mr Jeremy Thorpe the Leader of the Liberal Party and Dr David Owen, represented the most persuasive faces of British politics. Harold Macmillan was wheeled out to great aplomb to call on the British people to stay in the EEC.

The principal right wing opponent of the EEC Enoch Powell had expressed views on immigration and race that made him a political pariah. Mr Shore and Mr Douglas Jay were in many ways interesting and intellectually intriguing politicians, but not remotely ‘user friendly’. While politically Mr Benn and Mr Foot were the sort of characters used to frighten readers in children’s’ literature. Most of the opposition to Europe came from the Labour Party the Trade unions and the hard left, while the Conservative Party and the right were united in support of Europe.

 

Britain’s Everyday Life with its European Partners

When the 67 per cent yes vote was announced the Labour Prime Minister Harold Wilson said that matter was finally settled. Home Secretary Roy Jenkins and later President of the EC Commission said: "It puts the uncertainty behind us. It commits Britain to Europe; it commits us to playing an active, constructive and enthusiastic role in it." Things did not quite work out like that.

At the Council of Ministers the UK took its place. The routine soon developed: most Commission proposals were either opposed by the UK in principle or presented practical problems even when there was no policy objection. From British ministers and officials it was a constant stream of no, best not, and can’t. Fishing and Farming were a constant irritation and the size of the UK budget contribution was a source of growing animosity. I held a debate in the Oxford Union in 1980 on the subject of the UK’s net contribution to the EEC Budget.

A regular pattern of points of irritation developed – set out by Sir Julian Bullard the UK Ambassador to West Germany in a speech to the Anglo-German Königswinter Conference in 1985. These were farm policy reform, the net budget contribution and the protectionist stance that the EU took in GATT trade talks. 

The issue of membership was dead. There were a few interesting maverick MPs Mr Jay, Mr Shore, Sir Teddy Taylor and Sir Bill Cash who opposed UK membership and stirred up trouble and the tabloid press enjoyed silly Euro stories. The Commission offered them plenty of copy and the loony bungling Brussels bureaucrat became a character in popular culture in the same way that clergymen and Church of England bishops were for previous generations. The EU and the Commission were regarded as a joke. At the height of controversy surrounding the proposed European Social Charter the Sun rana headline on 1 November 1990 that read "Up Yours Delors"

The EMS became the first major test of UK membership. In 1979 the Labour Prime Minister James Callaghan chose to keep sterling out of the ERM and was criticised by Mrs Thatcher for doing so. By the mid-1980s big business, much of the City and the establishment and their aligned commentators wanted sterling to enter the ERM. Monetary policy and exchange rate management has always been contentious in the UK since Churchill returned to the Gold Standard in 1925. The ERM united two toxic issues into a highly unstable cocktail: monetary policy and Europe. It divided the Thatcherite ministers in the Conservative Government. It pitched the Chancellor Nigel Lawson against Mrs Thatcher and Nicholas Ridley. The Conservative ministerial elite, however formed part of a broader elite and business consensus that supported Sterling’s Entry into the ERM.

The argument surrounding the ERM resulted in Nigel Lawson resigning as Chancellor of the Exchequer and in Sir Geoffrey Howe’s removal from the Foreign Office in 1988 and was one of a succession of crise de regime that punctured the life of the Thatcher Government between 1979 and 1990, such as the defenestration of the wets from the Cabinet in 1981, the Falklands War and the Westland affair.

Before sterling entered the ERM it was a source of continuous embarrassment the UK government. An embarrassment played out each week at Prime Ministers questions. When would the UK join, why can’t it join, is sterling too weak to join, interest rates and the costs of a mortgage have risen because we won’t join, sterling has fallen today because you and the Chancellor have not an agreed policy, and so on.

Membership of the ERM in September 1990 provoked an acrimonious debate within the parliamentary Conservative Party and among the Conservative Party’s supporters in the City of London. The withdrawal of sterling and the collapse of the ERM’s narrow bands’ regime in September 1992, undermined public confidence in the European project. And it significantly damaged the Conservative Party’s reputation for economic competence, from 1992, until the Great Recession destroyed Labour’s economic reputation.

 

Jacque Delors, the Single Market and the British Left

In the 1970s the hard left broadly opposed Europe, the moderate left was divided and the right broadly supported it. This alignment was significantly modified from 1988 onwards. To balance the Single Market the President of the Commission Jacques Delors proposed a series of social measures encapsulated in the Social Charter and the Social Action Programme tabled at the Paris Summit in 1989. A year earlier Delors had addressed the UK TUC Congress early in September 1988. He said that the Single Market would in practice mean that 80 percent of all future economic and social legislation would pass through the Commission and would be determined by Europe. He bluntly told the trade unions and Labour Party that they would get social legislation passed through Europe that they could not obtain a majority for in the House of Commons.  This attracted Labour to Europe along with the undoubted mischief of irritating Mrs Thatcher, whose opposition to the ERM and reserve about the dynamism of the Delors Commission was becoming increasingly apparent.

 Neil Kinnock the Labour Leader embraced Europe. In fact the whole Kinnock family embraced its institutions. Mrs Kinnock became a European MEP, Mr Kinnock became a Commissioner and his son Stephen married into Europe. Uncharitable members of the public in the 1990s sometimes observed that Europe’s institutions were a munificent source of outdoor relief for the Kinnock family. A matter raised with me by a London cab driver last week and explored recently in the columns of the  Daily Mail. For Mr Kinnock it was something of a Damascene conversion given his previous hostility to it. As Leader of the Opposition, however, he used Labour’s support for the ERM and further European integration to good effect in taunting Mrs Thatcher who was isolated from the majority of her senior colleagues in her government, on these issues.

 

The working of the Single European Act and the role of the European Court of Justice

The measures taken under the Single European Act – the qualified majority voting for measures necessary to complete the internal market began to ring alarm bells across Whitehall and in Westminster in 1987 and 1988. The UK was often unable to block measures that it did not like. The Commission began to abuse the opportunity presented to get policies passed that were not strictly or even remotely part of the single market programme – such as measures on tobacco advertising – there was  a Speaker’s Counsel legal opinion expressing concern about the constitutional implications of this. There was also a growing concern that the European Court of Justice effectively widened the powers and remit of EU institutions when they were subject to challenge from member states. The UK Treasury solicitors felt that cases that a conventional judicial tribunal would normally decide in the UK’s favour were often lost in Luxembourg. This was the case with Erasmus Programme and the Working Time Directive. It seemed that a social democrat Commission was imposing socialist social regulation on a liberal UK Conservative Government in the UK.

There was an increasing focus on the role of the European Court Justice. A minority of lawyers, such as the late Leolin Price QC and Martin Howe QC, began to become concerned by what were perceived as political reading of the EC’s directives and treaties. An expansive interpretation was given to their words that surprised UK lawyers used to a much stricter tradition of statutory construction. These concerns were abroad among lawyers working at the Treasury Solicitors on EC matters and were ventilated in the Justinian column of the FT in the mid and late 1980s. They most comprehensively marshalled in a speech given by the Lord Neil QC the Warden of All Souls College Oxford are written up into a form of counsel opinion January 1995. Lord Neil argued that ‘the methods of interpretation adopted by the ECJ appear to have liberated the Court from the customarily accepted discipline of endeavouring by textual analysis to ascertain the meaning of the language of the relevant provision…. From the beginning the Court has sought out the spirit of the various texts and their underlying scheme… The court consists of an elite cadre entrusted with a special mission. A Court with a mission is not an orthodox court. It is a potentially dangerous court – the danger being in uncontrollable judicial power. The reputation of any court is inextricably linked with the intellectual integrity of its decisions. The more its decisions are perceived to be logically flawed or skewed by doctrinal or idiosyncratic considerations the lower will be its public repute.

 This resulted in growing hostility to the EU regulation among Conservatives and the business community. Mrs Thatcher in her Bruges speech to the College of Europe in 1988 expressed her view that her Conservative Government had not reformed the trade unions and reduced labour market regulation, only to have it brought back through the ‘back door’ of EU regulation. She said ‘We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels’.

 

Euro-sclerosis, Single Currency and Structural Unemployment

By the mid-1980s the EC was exhibiting a lack of economic dynamism, unemployment was rising and economic growth was slowing. The European social model was exhibiting many of the structural problem that are now commonly acknowledged.  By 1990 Germany and France plainly had problems with high social costs and in France deep structural rigidities were aggravated by the francfort. Instead of remedying these structural problems the Commission and the German and French governments appeared to being trying to impose their unsustainable social costs on the rest of Europe to avoid what the German Social Affairs minister Norbert Blum called social dumping. In contrast Mrs Thatcher and her Chancellors Sir Geoffrey How and Nigel Lawson had transformed the relative performance of the UK economy: privatisation, trade union reform, monetarism and supply side reform had create a dynamic market economy. Europe increasingly appeared as a source of cost, regulation and impediment.

The single currency provoked the first steps of the journey that has led many British politicians who once supported the EEC to advocate leaving the EU. Nigel Lawson is a good example. He was a strong supporter of the ERM, but he opposed the single currency from the start. Not just opposing the Delors report as Chancellor in 1989, but denounced the Werner report in a column in the Sunday Times in 1971. Likewise Dr David Owen was a strong supporter of Roy Jenkins and EEC entry in the 1970s but opposed the euro in the 1990s and is now energetically campaigning for the UK to leave the EU.

 

Maastricht and Sovereignty

Maastricht Treaty agreed in 1991 resulted in a bitter debate in the Conservative Party and crystalized the Eurosceptic position: EU policy and its institutions were fundamentally defective and needed to be changed, no further powers should be transferred and power should be repatriated. At this point no major active political figure advocated leaving the EU. The debate on Maastricht, however, morphed into a more fundamental debate about the Single European Act and the Treaty of Rome itself. The Conservatively Partly became a progressively more Eurosceptic Party. In contrast Labour and the Nationalist Parties became increasingly supportive of Europe and even toyed with the idea of joining the Euro.

 

Sovereignty

Maastricht in effect reignited the big constitutional questions that UK political leaders had glossed over in their quest for membership in the 1960s and 1970s. These were concisely stated by the Lord Chancellor Viscount Kilmuir in 1962 when his advice was sought by Harold Macmillan about the UK’s first application. Loss of sovereignty was in three parts. First Parliament would surrender some of its functions to a Council of Ministers which could by majority vote make regulations that became UK law. Second the Crown’s treaty making power would in part be transferred to an international organisation. Third British courts would sacrifice some of their indolence by becoming subordinate in some respects to the European Court of Justice. Lord Kilmuir said ‘‘it will not be easy to persuade Parliament or the public to accept them’. He also advised that the constitutional questions should be brought out  into the open now’ otherwise those who are opposed to the whole idea of joining  the Community will certainly seize on them  with more damaging effect later on. Late Hugo Young in his book This blessed plot: Britain and Europe from Churchill to Blair ‘a prophetic warning, after many tears of relatively acquiescent silence there grew up some of the most bitter arguments in the whole of this history.

Instead for public consumption Macmillan wrote a pamphlet that explained that by signing the Treaty of Rome we ‘in renouncing some of our own sovereignty, we would receive in return a share of the sovereignty renounced by other members. This he called ‘pooling ‘. The obligations would not alter the position of the Crown, ‘nor rob our Parliament of its essential powers, nor deprive our Law courts of their authority in domestic life’ Lord Kilmuir’s clear and blunt advice was watered down for public consumption.

Separately there has been a growing irritation with European Convention on Human Rights to the so called Strasbourg Convention within the aegis of the Council of Europe and a framework technically and legally wholly separate from the EU. Although the ECJ has for more than twenty years operated as though it were bound by the Convention and it has been effectively incorporated in the domestic law of the of the EU in the Lisbon Treaty as the Charter of Rights.

 

The Single Currency

The construction, introduction and operation of euro exemplified everything that seemed wrong with Europe. Maastricht’s fiscal rules were not economically relevant tests to assess entry, the economies involved were potentially exposed to asymmetric shocks, it was not remotely an approximation of an optimal currency area, there was no provision of a lender of last resort, one monetary policy would not be appropriate for the whole currency zone and at a time when there would be a premium on flexible product and labour markets the EU was doing the opposite, with the Social Chapter. The banking and fiscal crises in Greece, Italy, Ireland Spain and Portugal from 2007 vindicated the UK’s reservations about the project.

 

The Transformation of Conservative Opinion

This led to growing hostility to Europe within the Conservative Party. Every Leader since John Major has been a Euro sceptic – William Hague, Ian Duncan Smith. Michel Howard and David Cameron. Cameron was elected on a pledge of withdrawing the Conservative Party from the EPP on the grounds that the EPP has pledged to a European federal agenda. And much to the irritation of Angela Merkel and the British business elite led by the CBI and the City of London Corporation, he did so in 2009. The problem can be succinctly stated. The EPP had an EU manifesto that looked forward to a federal Europe. The Conservative Party in the UK said it was opposed to a federal Europe, yet subscribed to the EEP European political objective. Conservative candidates would be stopped on the street in elections and could not explain this apparent contradiction. In 2010 the Conservative Party promised to have a referendum on the Lisbon Treaty, but were unable to carry it out. In Coalition with the Liberal Democrats they legislated so that any future treaties transferring significant powers to EU would require ratification in a referendum.

From 2010 there was growing pressure on David Cameron to promise an in-out referendum. This came principally from the Eurosceptic right of the Conservative Party in Parliament. And a pledge to hold a referendum was put into the Conservative Manifesto in the 2015 election. This was done for three reasons: to appease rebellious Conservative MPs; to try and retain Conservative voters who were threatening to defect to UKIP, that convincingly won the UK elections to the European Parliament in 2014; and with a view to resolving the controversy surrounding the UK’s membership of the EU.

 

Europe’s relative economics decline

Large parts of the Conservative Party, many investors, business people and the commentariat now have a much more jaundiced perception of the EU’s economic performance. The currency is perceived as a failure. The benefits asserted by the Padio Schiopppa report have not materialised and structural labour market problems have been compounded by the lack of flexibility with the exchange rate and domestic monetary conditions. Europe’s rate of growth has slowed relative to that of the US and the UK. Its reluctance to embrace change whether in relation to GM crops, bio-technology or applications of new chemical technologies to metallurgy indicate economies that lack innovation and dynamism as well as exhibiting continuing and unaddressed structural rigidities. What is more these problems have been identified over and over again and hardly any progress has been made on them. The Delors Report on Competiveness and Growth in 1992 came and went. A Sapir review of the EU’s economic problems. The Lisbon agenda to make Europe the most innovation and technologically dynamic economy in the world by 2010 is simply lost.

The perception of the relative EU economic success has been important in shaping public opinion in the UK. In the 1960s and 1970s there was a general understanding of the German economic miracle and the success of the Common Market Six. There was a pragmatic desire to share in that material success. Now structural unemployment, slow growth and the problems of the euro-zone undermine that materialistic support. The big economic question is the judgement that people make about the merits and efficacy of the EU’s single market.

 

UKIP

The role of UKIP should not be underestimated. Formed as a political joke in 1992 by a couple of university teachers at the LSE, rooted in the classical liberal tradition, it developed in to a progressively more important political party. It won the 2014 Euro elections, got 13 per cent of the vote in the 2015 General Election. Led by a charismatic, provocative populist Nigel Farage, who along with the Fist Minister of Scotland run circles round both the Prime Minister and the Leader of the Opposition in the 2015 general election debates. Until 2015 Labour and the Liberal Democrats and the nationalist parties in the devolved territories welcomed the success of UKIP: it was a problem for the Tories, in a first past the post electoral system UKIP had the potential to prevent the Conservatives from winning a parliamentary majority. David Cameron between 2005 and 2010 had significantly underestimated UKIP’s impact both on Westminster’s electoral arithmetic and Britain’s wider political culture. The referendum was conceded to appease Eurosceptic Conservative MPs and to persuade Conservative voters thinking of voting UK to vote Conservative in the 2015 election. It was motivated by the UKIP threat to the Conservative popular vote.

 

It Becomes Respectable to Leave

Two years ago Nigel Lawson in an interview in the FT made it clear that he would not be campaigning to remain in the EU without a fundamental renegotiation of the UK’s terms of membership. Later in an article in the FT he explained that he thought the institutions and polices of the EU were out of date including the Single Market. There is no doubt that Nigel Lawson made it intellectually and politically respectable to advocate leaving the EU. The late Denis Healey in an interview in the New Statesman in April 2013 said that he would vote to come out in a referendum, because of the Olive Tree line. The line between southern and northern Europe that separates the observation of law, regulation and the payment of taxes.

Even in retirement Lady Thatcher avoided expressing what appears to be her view in her final years that the UK should leave. There is an entertaining review of Charles Moore’s second volume biography of Mrs Thatcher in a recent edition of the New York Review of Books exploring whether Mrs Thatcher would have supported a leave vote. Among the mainstream parties the principal advocates for leaving are all Conservatives. Nigel Lawson who resigned over the ERM is now a leading figure in Vote Leave. One of the most noteworthy advocates of Brexit is Dr David Owen the former Labour Foreign Secretary who originally left the Labour Party to form the SDP in 1981 partly over Labour’s then hostility to Europe is voting to leave and has written a persuasive short book The UK’s In-Out Referendum presenting the case on ground of national security and geopolitical relationships to leave. Lord Owen is concerned that the EU’s determination to build a defence capability would undermine NATO and US commitment to European security. In his judgement the US commitment to Europe’s defence is imperative, given that the US accounts for over 75 per cent of NATO defence spending. He is campaigning very energetically, writing in the Sunday Times, giving interviews to the Sunday Telegraph and going on the stump in his old Devonport constituency in Plymouth.

 

The Labour Party and Mr Jeremy Corbyn

The Labour Party, the SNP, the Welsh Nationalists and the Liberal Democrats are solidly pro-European. Paradoxically the new Labour Leader is an anti-European who entered Parliament tin 1983 on a platform of leaving Europe. Mr Corbyn voted against Maastricht and the Lisbon Treaty and is a principled member of the hard left Campaign Group. He continues to regard the EU as a capitalist club that presents obstacles that would hinder a genuinely radical socialist economic programme. Given overwhelming support of his party for Europe, Jeremy Corbyn has compromised his distaste for Europe in exchange for the unity of his party under his leadership. But Mr Corbyn has brought no vim or enthusiasm to the Remain Campaign. FT headline says it all: ‘Corbyn accused of sabotaging Remain case’. Mr Corbyn in a high profile speech to show that he was campaigning to stay in, laced it with criticism of the TTIP, he explained that none of us is satisfied with the EU as it is, and went on to say that much of the Chancellor George Osborne’s economic case for remaining was exaggerated. When asked in a TV interview how he rated the EU Corbyn said 7 out of 10.

The Labour Remain case is presented by Alan Johnson an amiable but light weight former Home Secretary, unusual among modern senior Labour politicians because he is  a genuine working class former trade union leader, he started life as postman. It has to be said that some of Mr Corbyn’s interventions inviting an in vote in the referendum campaign appear almost calculated to provoke a leave vote from electors, by extolling the benefits of migration.

The Labour case for remaining is that Europe has given UK social protection and social rights. This would appear to overlook the role of the 1906 Liberal Government, the Attlee Labour Government in 1945, and the Wilson and Heath administrations in the 1960s and 1970s. The Equal Act 1970 was the achievement of Mrs Barbara Castle before the UK entered the EEC and she of course was a doughty opponent of membership. The Health and Safety at Work Act 1974 and the creation of Employment Tribunals have their origins in the Industrial Relations Act 1971 and the Employment Protection (Consolidation) Act 1978 that had nothing to do with the EEC.

The three principal Labour politicians campaigning for Brexit are interesting, impressive and engaging MPs. Frank Field the great expert on social security policy, Kate Hooey a moderate London MP originally from Northern Ireland and a unionist as opposed to a nationalist or republican, and perhaps most interesting Geisler Stuart MP a German former MEP and the widow of the distinguished economist and Labour Party economic adviser Derek Scott who was a strong critic of the EU. During the course of the campaign they have been joined by Mr John Mann and the veteran left-wing Mr Dennis Skinner, the ‘Beast of Bolvover’.

 

Europe, the Conservative Party and the Conservative Leadership

Controversy over European integration contributed, partially to the success of Michael Heseltine’s challenge that ended Mrs Thatcher’s imperium in 1990. There were other matters: the Community Charge, interest rates at 15 per cent, inflation at 10 per cent and her manner with senior colleagues and leadership style.

John Major’s leadership of the Conservative Party was ruined to a significant degree by the controversy over Maastricht and the collapse of John Major’s monetary policy the ERM. He led the Conservative Party to victory in 1992 in the trough of the recession, but the devaluation of sterling and its removal from the ERM destroyed the Conservatives credibility on the economy. Not least because the economy started to appear to recover ( the reported data and the time was different from the revised figures now available)  at roughly the time sterling left the ERM and went on to enjoy many years of steady growth with low levels of inflation. The bitterness of the Conservative debate in the 1990s is illuminated by Sir John Major’s choleric and ad hominem intervention in the present referendum debate.

The 1992 Parliament was marked by the threat of a leadership challenge, John Major’s resignation and John Redwood’s challenge in 1995 and the final years of the Parliament taken up with open manoeuvres ahead of an inevitable leadership election where what seemed like half the Cabinet made speeches of increasing Eurosceptic intensity to position themselves for the event. Even strong supporters of Europe such as Malcolm Rifkind the Foreign Secretary courted the Eurosceptic vote. In 1997 John Major led the Conservative Party to its biggest defeat since the Great Reform Bill in 1832. The morning afterwards John Major was magnanimous and gracious resigning with the words "when the curtain falls, it is time to get off the stage.’  In each of the four leadership elections that followed the decisive political test as opposed to other tests of character, talent and competence, was the extent to which a candidate was sound on Europe. This effectively excluded Ken Clarke the Europhile former Chancellor of the Exchequer. David Cameron in 2005 was careful to present himself as a Eurosceptic with the pledge to take the Conservatives out of the EEP.

The in-out referendum has now become a proxy war for the next Conservative Leadership. David Cameron is committed to standing down ahead of 2019, hence an obvious eventual vacancy. The Prime Minister accused Boris Johnson in an irascible statement in the House of Commons of supporting Brexit for reasons of leadership ambition. Much of the referendum debate has taken on the tone of blue on blue warfare and appeared to be an internal Conservative Party debate. Journalists have caricatured it variously as the Conservative Party’s own Game of Thrones and the Eton Wall Game. In the ITV debate the Secretary of State for Energy Amber Rudd chose to personalise referendum debate around the leadership ambitions of Boris Johnson, his character and personal probity in sexual relationships.

 

Who will win?

The working assumption is that the Remains side will win. First the electorate will vote for the status quo, on small ‘c’ conservative grounds. If it ain’t broke, why fix it? Europe, the EU its policies and institutions have never been much of a priority in terms of the electorate’s concerns. Both the Government and the Official Labour Opposition recommend that the UK should remain and there is a strong business and City of London establishment consensus that it would damage the economy. Eight months ago the principal pollsters exemplified by Bob Worcester assumed Remain 60 per cent Leave 40 Per cent and may be 56: 56 per cent. The polls are now implying a closer result. None the less the betting and the expectation is that the UK will vote to remain in. There are now several polls suggesting Leave has a lead and many Labour MPs are reporting that many Labour voters are voting Leave.

 

How has the Campaign gone? 

The Government Remain campaign got off to a bad start. The renegotiation was exposed as Jacob Rees-Mogg MP vividly expressed it in the House of Commons as ‘thin gruel’. Almost half the Conservative MPs about 160 MPs made it clear they would vote to leave. Seven members of the Cabinet announced they would campaign to leave. The great coup was for the Leave campaign to get the support of the Secretary of State for Justice Michael Gove, a close friend of the Prime Minister whom Cameron hoped to keep on side.  Mr Gove is a close friend of the Prime Minister, is clever, socially liberal and in every way a modern metropolitan figure. Over the weekend the then Mayor of London Boris Johnson appeared to sit on the fence. He gave the impression that he would probably come down on the side of Remain, in the end with great publicity and theatricality he announced that he would campaign to leave. This gave the Leave Campaign a degree of early momentum. Johnson has a genuine personal traction with the electorate that is not currently possessed by other British politicians.

One interesting feature of the campaign has been listening to senior Conservative politicians such as the Prime Minister and Chancellor making the positive case for Europe. Since the mid-1980s, despite the enthusiasm of Conservative ministers for the Single Market there have been few cogent and passionate statements of the case for Europe until February.

The media impression – FT and BBC - is that the Remain campaign has a better and more focused ground campaign. That is not my impression and may reflect Remain media briefing – I am not suggesting that Leave has a better ground campaign, but I simply have not seem much of the Remain campaign. Out of London in the country side in the west of England and in Cornwall you see Leave posters, but no Remain posters.

 

 

The UK Government’s Remain Case: Project Fear

The Government has set out a case for remaining in the EU that draws on its successful defeat of Scotland’s attempt to leave the Union. There are principal two arguments for remaining. The first is a national security argument predicated on sharing information through Interpol, and exchanged of police intelligence as part of counter terrorism. Various former head of the Secret Intelligence Services and a variety of retired generals and ambassadors, the head of Europol have been wheeled out describe great danger. They have then been contradicted by other British and American intelligence experts who point out that nation al security is a matter for national governments not the EU and that in practice EU rules and the jurisprudence of the ECJ can make border controls and deportation more difficult.

Second argument is economic: Brexit is an economically illiterate disaster. As the Prime Minister puts it leaving the EU would ‘trash’ the UK economy. Big employers, the CBI , the big banks, the City of London Corporation, the OECD, the IMF and the Governor of the Bank of England Mr Mark Carney have repeated a series of arguments very similar to the HM Treasury’s report on the long-term and its short term report on the consequences of Brexit. Among the international names wielded out have been all the former US Treasury Secretaries. Among these Mark Carney is probably the most influential with the British public.

President Obama came to wish HM the Queen a happy 90th Birthday and took the opportunity to tell the British people to vote to Remain. Part of his argument was that the UK would not be able to make swift progress on a US –UK trade agreement, put it somewhat clumsily – the UK would go to the back of the queue.  Downing Street was not just very pleased by the President’s visit but positively ecstatic. Yet it is not clear from the polling that it helped the Remain campaign as much as hoped. It appears the public took against the President’s intervention and the vote leave vote went up. Indeed there now appears to be some polling evidence to suggest that President Obama’s intervention provoked irritation and did more harm than good to the Remain campaign.

There is one issue that transcends all other arguments on Europe with the public which is migration. The Budget, the CAP, the Single Currency and the threat of a federal Europe hardly register on the political radar of the public. Immigration does. The perception that the EU’s free movement of people leads to uncontrolled immigration that costs Britons jobs, lowers wages, puts pressure on housing, schools and the local health service is potent with the public and is the main emphasis of the Vote Leave Campaign.

The background media noise of the EU’s relationship with Turkey, the migrants leaving from Libya to Italy by boat, the Albanians who came by boat across the Channel, the French strikes and the continuing problems with the Greek public finances, all colour the mood of the debate during the campaign itself.  The Prime Minister and Chancellor by invoking the threat of war, an economic disaster and a fall in house prices have exposed themselves to an element of ridicule. The uncomfortable exchange between David Cameron and Faisal Islam on the Sky ‘debate’ and the ribald response of the audience illustrate the impression that the public regard much of the Government’s case as an exercise in hyperbole.

 

The British Establishment case of Why Europe Needs the UK to stay

The British political establishment has a conceit that it should be leading Europe and Europe needs Britain. Europeans cannot be relied on to make sensible decisions without British ministers and officials being present. This is the repeated refrain from the Cabinet table and elite communities that are close to the British political establishment. At the Cabinet in April 1962 it was agreed that after the departure of Adenauer and de Gaulle Britain may again have to save Europe from itself, in July 1962 the Cabinet minuet records that ministers should not overlook the fact that if we entered we would be able to exercise a decisive influence upon it. In an interview with The Sunday Times six weeks before sterling was ejected from the ERM in 1992, John Major, whose asserted policy was to put Britain at the heart Europe, speculated about sterling eclipsing the DM and becoming the anchor currency the ERM. In the same way university vice-chancellors and scientists argue that the UK has to remain in order to ensure that EU science programmes spend their money sensibly. There are a succession of letters from the Chair of the Russell Group of elite university vice- chancellors, the President of the Royal Society making these points about UK leadership. One letter written to the FT was from the Vice Chancellor of Exeter University who currently chairs the Russell Group of elite universities, is best known for having closed his university’s chemistry department. In an article for the referendum in History Today Richard Overy argues that the British presence in Europe is about ensuing that the core values of a liberal society are protected. The FT’s columnist Wolfgang Munchau is probably closer to the truth writing on 13 January that ‘whatever the referendum’s outcome, the chances of the UK playing an active role in shaping Europe’s future are minimal

 

The Renegotiation

The Government staged a renegotiation of the UK’s terms of membership. As Jan Werner Muller writing in the London Review of Books put it the Prime Minister ‘secured some largely symbolic gains. But on the issues that really mattered – above all, free movement within the single market – other member states were uncompromising’. The changes are cosmetic and will make little practical difference. Access to some social security transfer payments will be limited and their generosity will be slightly reduced for EU migrants. Something that is largely beside the point because most of the migrants are young and are not coming to apply for benefits and would not qualify. And the any diminution of the pull factor of benefits will be more than offset by the impact of the new Living Wage which will be one of the highest minimum wages in the OECD. The cosmetic character of the new terms of membership is a reprise of Harold Wilson’s renegotiation in 1975.

 

 

Referendum

Referendums had never been part of the UK’s constitutional practice until 1975. They were genuinely seen an ‘unconstitutional’ and plebiscites in Nazis Germany and other fascist countries in the first part of the 20th century gave them a bad name in the UK. The term plebiscitary democracy was pejorative. There had been a plebiscite on the border between the six counties and the Iris Republic in 1972 but that if anything was a reflection of the unusual political and legal status of Northern Ireland within the UK since the Government of Ireland Act 1921.

The Labour Party turned to a referendum in the 1970s because it was divided. As James Callaghan put it was a life boat to climb into. Referendums have now been used to test opinion of devolution in Scotland Wales, independence in Scotland, directly elected Mayor in London and other cities and the Conservative Liberal Democrat Coalition tested public opinion on changing the electoral system from first past the post to the Alternate Vote, a system that could potentially yield a more proportionate legislature.

The British political establishment was of the clear judgement that any sort of referendum over the EU was something they did not want. 1975 was sufficient. The controversy over the Maastricht Treaty resulted in an intense debate about a whether the UK should hold a referendum on the Treaty in the way that many other countries such as Denmark, France and Ireland did, or a referendum specifically on the issue of whether the UK would join the euro. There were also calls for a broader referendum on membership itself on the argument that we had been misled in 1975, it was supposed to be all about trade and it was never intended to be like this. In the 1990s the Labour Party was united in its support for Maastricht, the Social Chapter and further European integration. There was some division among Labour politicians over the euro with opinion on both sides.

The party that was divided was the Conservative Party. The argument for a referendum was that Europe divided parties. In practice there were minorities in both parties that would like to come out and given that all the major parties were broadly united on being in, public opinion could not be tested in a general election. Hence the foundation of UKIP. There was also the argument of party management. The Conservative Party could have turned to a referendum in the way that Labour did in the mid-1970s. John Major would not do so, because he thought he would get the legislation through Parliament and he would not risk being thwarted in a referendum.  In 1994 Sir James Goldsmith founded the Referendum Party that fielded candidates in the 1997 election saying that the question Do you want the United Kingdom to be part of a federal Europe or do you want the United Kingdom to return to be an association of sovereign nations that are part of a common trading market?, should be put to the British people.

The Liberal Democrats came to the view that changes in the UK’s relationship with Europe, such as entry into the euro should be determined by referendum. The Conservative Party came to the view that and decided that if the UK were to join the euro there should be a referendum.

 

 

 

Character of the Debate and the impact of migration

 

 

Membership of the EU has always been contentious. The applications in the 1960s were controversial. Ted Heath’s entry with the ‘whole hearted consent of the British people’ in 1973 was acrimonious with charges of betrayal. The divisions within parties very sharp and often personal. The Conservative Prime Minister Edward Heath has remained a focus for opprobrium. But it was very much a debate for people involved in the political process or for the minority of the electorate who possess a heightened sense of political engagement. Most electors were not that interested. It was generally assumed that to the extent the electorate focused on Europe, it was hostile to its policies and institutions, attacking the working of EU policies and institutions was usually popular – a good applause line in a speech, but the electorate were just not that interested in it really. David Cameron has predicated his leadership of the Conservative Party on that judgement, describing UKIP as a party of ‘just a bunch fruit cakes, loonies and closet racists mostly’ in a radio LBC interview with Nick Ferrari in 2006. Immigration from Poland, Bulgaria and Romania has changed that.

The free movement in people and the migration of people from the accession countries since 2004 has changed that. There is now great interest in migration, European migration and the role of the EU in shaping or constraining UK immigration policies. The change and the new salience of immigration as a political issue is best exemplified by the unfortunate, albeit revealing, exchange between the Labour Prime Minister Gordon Brown and Mrs Pat Duffy, a Labour voter in the 2010, where the Prime Minimiser had to apologise for dismissing her concerns as the thoughts of a ‘bigoted’ woman.  That immigration makes the debate more populists and polarising.

The rhetoric of the campaign on both sides has been polarising and exaggerated. The House of Commons Treasury Select Committee has produced an astringent report excoriating the exaggerated economic claims of both sides.

 

The Re-playing of previous grudge matches of the last twenty and thirty years

There has also been an element of attempting to re-play previous grudge matches. Economists for Brexit remind the public that 365 economists thought the 1981 budget that tightened fiscal policy at the trough of a recession would lead to permanent recession, were wrong. Sir John Major the former Conservative Prime Minister has had a go at going over some of the Maastricht ground of the 1990s, attacking Ian Duncan Smith and breaking new ground with an ad hominem attack on Boris Johnson. Lord Heseltine in giving the eulogy at Lord Howe’ s memorial service came close to using recollections Sir Geoffrey’s differences with Mrs Thatcher as a plea to remain. And Mr Blair’s intervention on the Andrew Marr Sunday interview provoked Yanis Varoufakis into a reprise of Iraq war.

 

The UK’s difficult relationship with the Supranational European Institutions is not unique as the French experience illustrates

France has had difficulty in forming a working relationship with the EU. The left opposed the Coal and Steel Community and was pretty hostile to the Common Market in its early years. France blocked the European defence union in the 1950s, almost voted against the Maastricht Treaty in 1992 and went on to vote against the proposed constitution 2005. President de Gaulle’s suspicion of supranational institutions and bureaucratic technocracy, exemplified by the Faucet Plan show that form the start significant parts of French political opinion were at the least ambiguous about the erosion of national sovereignty. The concern about sovereignty e forcefully again at the time of the design of the euro and the institutions to support it. France had many reservations about the federal s that Germany suggested would be needed to support such a currency, and which the monetary union in the Five Presidents Plan is now beginning to turn to. Philippe Seguin provided a cogent critique of the Maastricht Treaty and the problems that supranational institutional development provided for national communities and for politicians beyond the left.

In terms of the UK’s present referendum debate may be the last word should be given over to General de Gaulle the Common Market was incompatible with everything that mattered: Britain’s relationship with the USA, the way she fed herself, the state of sterling, her enormous external debts. In 1963 he said ‘ England in effect is insular, she is maritime, she is linked through her interactions, her markets and her supply lines in the most diverse and often the most distant countries; she pursues essentially industrial and commercial activities, and only slight agricultural ones. She has, in all her doings, very marked and very original habits and traditions’.

 

Warwick Lightfoot

June 2016.



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