Europe, America and the Coalition

Two of the Conservative Party’s most influential thinkers, Nick Boles MP and Daniel Hannan MEP, discuss their contrasting visions with the Editor of Standpoint, Daniel Johnson

Nick Boles MP (left) and Daniel Hannan MEP

Daniel Johnson: You’ve both produced remarkable books, you’ve both played an important part in the intellectual regeneration of the Conservative Party, but you do represent very different points of view. The best way to highlight that is to focus, Nick, on your proposition that the coalition, if it is to do the job properly, needs to last two parliaments, not one. That requires some sort of electoral pact in 2015. Can two parties that remain in coalition for over ten years continue to be two parties, or will they become a Liberal-Conservative party? Dan, what do you make of this proposition?

Daniel Hannan: It’s a matter of historical fact that these coalitions tend to lead to a political realignment. The Tories gobbled up the Liberal Unionists in 1912; they gobbled up a number of Lloyd George “coupon” Liberals after the First World War; they gobbled up the National Liberals after the Second World War. A consequence of those past mergers is that there is a liberal strain in the Conservative Party. The present coalition offers us a unique opportunity to marry the economic liberalism of the Conservative Party with the political radicalism of the Lib Dems. Nick makes the point in his book [Which Way’s Up? The future of coalition Britain and how to get there, Biteback, £8.99] that, if Gladstone were around today, he’d probably be a Conservative; and I think that’s right. There are a number of Gladstonians in the Conservative Party, including me.  Which side would I have been on in the great polar divisions of British history? I’d have been for Parliament in 1642, for the Revolution in 1689, for Reform in 1832 and for Gladstone against Disraeli. I suspect I’d have been one of those traditional Whigs who left the Liberal Party when it began its drift towards social democracy at the end of the nineteenth century, and who ended up as Conservatives: as you know, the “and Unionist” bit in my party’s title dates from their formal accession. A similar merger might be on its way again, but whether or not it happens isn’t really in the Tories’ gift; it has more to do with the internal dynamics of the Liberal Democrats. 

DJ: But if you were David Cameron would you offer a pact of that sort?

DH: Not this side of a general election: it’s inadvisable to look as though you’re taking the voters for granted. Much more seemly to wait and see what hand you’ve been dealt on polling day, and then play it accordingly.

DJ: Nick, what’s your view on this?

Nick Boles: I guess I have a high and a low argument. The high argument is that while the two parties don’t agree on lots of things, actually on the biggest challenges facing the country, the biggest transformations and reforms that we need to implement, there is a surprising degree of agreement. So both Daniel and I and large parts of the Liberal Democrat Party are radical localists. That’s a huge thing we have to do and frankly it could on its own consume most of the energies of this government. We also believe that the key challenge for the state is actively to spread opportunity through education and other things to the least well-off in society, leading people up, as it were, making the playing field more level. That again is something that both parties share. My argument is that that’s the high-principle argument — that there’s enough in common to keep us busy for at least ten years. Not necessarily forever — which would then speak for merger — but just for the time we’re in. The low argument is this: MPs, particularly but not only Liberal Democrat MPs, are going to come under a lot of pressure over the next few years. MPs sitting on very small majorities are going to feel particularly vulnerable to that pressure. I do feel that it would be good if a message was being sent to those MPs letting them know that if you stick with us, if you go through the dark days and the tough times with the coalition, remain loyal, vote our measures through, there will be a reward at the next election. 

DH: Do you expect all Liberals to do that though? Given that offer, some of them will say no thank you.

NB: I agree but I think this would flush out those who are not really onside and they will probably be rebelling against us, but it might keep a few waverers inside the tent. 

DH: I think that’s exactly right. I can understand why Tories don’t want to talk about a Lib Dem split: they don’t want to look as though they’re crowing. But Lib Dem tensions are the real story. The media are obsessed with splits coming from the “Tory Right”, whom they like to build up as a pack of almost pantomime grotesques. In fact, the Lib Dems are far more likely to sunder.

NB: There are genuine problems for Liberal Democrat MPs. Frankly, their weekends are a lot more miserable than most Tory MPs’ weekends at the moment. They are getting it seriously in the neck on a number of issues — tuition fees, some of the benefits changes. I just feel we will need to offer them something which says that we are going to reward you for your loyalty, and we’ll consider you to be partners and allies. And what do you do for partners and allies? You help them when they face a difficult challenge. 

DJ: We have a coalition led by social liberals, people from both parties who largely share common assumptions about the way society should function, issues about crime and punishment, sexuality and so on. However, a large part of the base on the Conservative side is socially quite conservative. Is that going to create an unsustainable tension over the long run?

NB: I don’t think it is. In a strange way, as a sort of microcosm, the marriage of me and my constituency is rather a good object lesson. Grantham and Stamford would not be in anybody’s list of trendy liberal metropolitan constituencies. Lincolnshire is not a very right-wing place but it is deeply, deeply small “c” conservative. They picked me knowing that I was gay, in fact it was the last thing I said in my open primary. In the very last minute of the 30 minutes I ended up telling them because I didn’t know if they all knew, and they still picked me. Ours is a relationship which is two-way: I’ve certainly changed some of my views on certain things. I’ve found with them that where the social conservatism comes in is over something I spend a bit of time on in my book — immigration. They say that this is a challenge to the cultural integrity and the union of our country. They are worried about the way immigration is undermining a sense of self-conscious Britishness. That is really important to people. Now, I’ve learned from them and shifted my views on that particular debate. But actually on the touchstone issues of sexuality and race and all of that they’re all completely onside with the changes that have been made, not just in the Conservative Party but in British society. I don’t see an obvious piece of legislation or an obvious proposal which will provide a fault line. Europe is perhaps more likely to, but on social conservatism versus socialism I don’t see a problem. 

DJ: How about you, Dan?

DH: It’s in the nature of my job that I get to spend — and enjoy spending — a lot of time with my local activists. I have about 80,000 Conservative Party members in my region, perhaps a third of the national total, and my experience of local associations bears out what Nick has just said. A lot of people who are labelled “social conservatives” often turn out to have a rather British live-and-let-live attitude to life. They absolutely understand that you can disapprove of something without wanting to ban it, and that that distinction is critical to a free society. It’s the same distinction they drew over banning handguns or outlawing foxhunting. You can call it libertarianism, if you like, but they’d call it common sense. Conservative activists, in real life, are not the way they’re caricatured in the press, they’re much more unpolitical than people imagine…

NB: Hallelujah!

DH: …they’re much more unideological, undoctrinaire, which I suppose you could say makes them better Conservatives. The one issue where I see real discontent is European integration, because it equally offends the ideological and the unideological Tories. It seems to be against common sense that, for example, we should be cutting budgets at home while upping our contributions to the EU budget, that we should be scrapping quangos at home but surrendering more power to the biggest quango of the lot, namely the European Commission, that we should be aiming to decentralise power in the way that Nick just outlined while at the same time centralising power in Brussels. Most Conservatives are very much on board with the coalition and its domestic agenda: I’ve been surprised by the extent to which even those of my activists who have spent their lives fighting the Lib Dems understand that we had to deal with the outcome that the electorate had given us. The main stumbling block — and I don’t think I’m just choosing to hear this, it’s genuinely what I’m getting — is over the EU and, specifically, over not getting the referendum people feel they were promised.

NB: I do agree with that but I think the reason why is less about the Conservative Party than the coalition as a whole. The Conservative Party is much more unified than it’s ever been on Europe, in the sense that we’re all eurosceptic, it’s just a matter of degree. My view is more that the bloody thing gets in the way and wastes our money — not such an ideological position perhaps but nevertheless it’s on a continuum. Therefore the reason I think there’s a fault line is the fact that it’s the Liberal Democrats and the Conservatives in the coalition: it’s the only set of issues on which we have fundamentally opposed positions and both feel pretty strongly about it. On almost everything else we might disagree, but one group will feel very strongly and the other party will let it ride. Or we genuinely agree, in which case it’s obviously easiest.

DJ: Europe seems to be an article of faith for both parties.

DH: Actually, I don’t think it has anything to do with the coalition. I’ve observed — I call it, rather pretentiously, Hannan’s First Law — that no party is ever Eurosceptic while in power. Across Europe as a whole, concern about national sovereignty is an exclusively opposition phenomenon. Once a party takes office, it finds itself encased in a massive state machine. The Foreign Office, the home civil service, the NGOs, the big corporations, they all have a vested interest in European integration. To challenge all of them, to take on the entire nomenklatura, would consume all a politician’s energies; it would take up his entire government programme. I don’t believe that many British MPs are actively Euro-federalist. Let me put it like this: if Britain were already outside the EU, if we enjoyed a Swiss-style bilateral deal, it’s hard to imagine many Tory front-benchers arguing that we should become full members. But, being in, they don’t like to challenge the status quo. It’s easier to drift with the current.

DJ: Dan, you’ve argued in books and speeches for a straightforward referendum: in or out? But what about you, Nick?

NB: I’m actually a genuine believer in referenda so if there was a growing swell of opinion for one I wouldn’t be against it, but it’s not something I feel very strongly about either way. I wouldn’t support the proposal to get out because I do believe our interests are common interests, and the benefits of having common interests are just about greater than the problems caused by the EU. And I do believe, maybe naively,  that the Thatcher government did show you can make it work, and make it work for Britain. It requires a particular attitude which she had, and which no prime minister since then has had until, I hope and believe, David Cameron. So I would be against pulling out but in terms of having a referendum I’d be relaxed about it. I feel it would be cathartic for the nation to have a moment to decide and really go through a process and come to an answer.

DJ: But could the coalition survive that? 

DH: The hilarious thing is that an in-or-out referendum was, in fact, Lib Dem policy. It tells you a great deal about our political culture when almost all observers now say that it’s the Lib Dems who would resist the implementation of their own manifesto pledge; everyone just takes it for granted that such promises are meaningless. Perhaps I’m being terribly innocent about all this but, instead of starting from what you think the outcome of such a referendum would be and then working backwards, what about asking in principle whether the EU is the sort of issue where it’s proper to consult the country in a plebiscite. The idea that referendums are alien to our system of representative democracy has been blown out of the water. Until 1997, we’d had only four such votes: one each in Wales, Scotland and Northern Ireland, as well as the Common Market referendum in 1975. Since 1997, we’ve had a further 45, some on pretty trivial issues. We’re about to have a national ballot on a technical change to the voting system — a change, by the way, which neither of the two coalition parties proposed at the last election. The Tories were clear in their support for first-past-the-post, the Lib Dems in theirs for STV. Neither suggested AV. Yet at the same time we’re being denied a referendum on Europe, which all three parties were recently promising. If you were asking in the abstract what kind of question would be appropriate for a referendum, EU membership ticks every box. Is it an issue of major constitutional importance? Yes. Does it involve the location of power? Yes. Does it divide the parties internally? Yes. Is it the kind of issue that cannot easily be settled at a general election? Yes. All our constitutional authorities — Bagehot or Dicey or Erskine May — would see this as a textbook case of where a national ballot is proper. The only argument against a referendum is fear of the result and, in a democracy, that is no argument at all.

NB: I think that would be true if you were saying that was the only reason not to have a referendum ever. I wouldn’t support having one now because I think the logic is to do it when there’s a change on offer — that’s why the logic of having a referendum over the Lisbon treaty was so strong. I think that the natural way that it would occur is that if there were say a further treaty which proposed further transfers of power and sovereignty, that there would be first a referendum on that treaty which presumably the Conservative Party, certainly I, would be arguing that we should be voting against. If that was then successful and the British people rejected that transfer of powers there would then probably be some form of a crisis within the European Union at which point it would be natural to say this might be the moment to have a bigger question about the thing. I think that’s the logic of it. 

DH: I don’t just want a referendum on Europe. I’m always and everywhere in favour of referendums: they’re a splendid device to remind people in our profession for whom we work. The reason I want a referendum on EU membership isn’t that I think it’s the easiest way to get out of the EU — it’s that, on an issue of this magnitude, it’s right in principle to consult the people. But what should the tripwire be? Well, the coalition seems to be inching towards a citizen’s initiative procedure — in other words, a way to trigger a vote by getting enough signatures, so that we can have referendums on issues that people, rather than just MPs, want. Surely that’s the right way to test the strength of public opinion on the European question. If enough people demand a referendum on EU membership, we should hold one. If not, then I’ve plainly misjudged the temper of my countrymen, and I’ll be in no position to complain.

NB: No, I think that would be reasonable and one would have debates about how many people would have to sign up. If a million wanted it, then…

DH: Or instead of setting an arbitrary figure, why not say that there should be referendums on, for example, the top three proposals over a parliamentary term, the ones that had attracted the most signatures? 

DJ: Is it conceivable that a Cameron-Clegg coalition could survive that kind of constitutional crisis in which the two leaders would be arguing on opposite sides?

NB: I think they could survive the argument. They couldn’t survive the result, particularly if the result were the result that Daniel [Hannan] would like, which is for us to pull out. There is no way the Liberal Democrats would continue for more than ten seconds in a government that then had to implement a negative result on an in-or-out referendum. But could they survive the process of having a debate? Well, they are doing it on AV. I think there is a lot of nonsense speculated about the AV referendum. People keep saying, if the Lib Dems lose the referendum, then how will the coalition stay together? It’s completely the wrong way round. The risk for us, in a narrow way, is that if they were to win the change to AV, then there would be a very strong argument within the Liberal Democrat ranks that after they got what they came for, they would then need to make themselves an independent force as much as possible. They would need to get out as soon as they could. If they lose the AV referendum, as I hope they do, then I genuinely think they only have one thing left to them, and that’s to demonstrate to the British people that even within first-past-the-post a more than two-party system is a good thing and the Liberal Democrats are a good party to have in government. Then they’ve got to stay and see it through. 

DJ: Is there anything that the coalition can learn from America? Dan, your book [The New Road to Serfdom: A letter to America, Harper, £15.75] is very much addressed to America, urging them not to go down the European route in dealing with this economic crisis. Do you agree with that, Nick, or have we more to learn from them?

NB: I suspect that this is our area of greatest disagreement. If we were sticking to the narrow economic agenda, I broadly think we’d agree that continental Europe doesn’t necessarily offer more answers than it does problems in terms of getting growth back into the economy. On the broader question of where the American state and policy should go, I suspect we disagree. I basically take a simple logical position. I believe in the NHS, I believe it is reformable, I think it is a good thing, I’m proud of it, I’ve relied on it. I’ve had cancer and it gave me care for free and frankly I was very glad I didn’t have to think about who was paying for it. I think it can be made more efficient through some of the reforms we’re proposing. I think therefore that it’s absolutely a step forward that Obama has made healthcare reform his centrepiece. 

DH: Would you extend that reasoning to other policy areas? Should housing, for example, be broadly controlled by the state, allocated according to need and funded out of general taxation?

NB: No, I don’t think that that is our system, and we as a coalition are dramatically reforming social housing. I just happen to think that on healthcare — and I have lived in Germany, France and the US as well as here — our system, given the particular nature of healthcare and where it ranks on all of our hierarchies of fear and need, is potentially the best combination of value and of cost-effectiveness. I think the American system is literally the worst. While it is very, very good for a very few people, for the rest their current system is literally the worst. 

DH: Whenever you discuss healthcare, you find that the political has become personal. So people will say, with great feeling, that the NHS must be wonderful because it looked after their Auntie Maud so beautifully. But, if you think about them, such arguments really have nothing to do with how we structure health funding. In a country as wealthy as ours, we should expect people to be treated successfully, and the NHS has plenty of incredibly kind and devoted employees. At the same time, if you look at measurable data, such as waiting times and survival rates from the moment of diagnosis, we lag well behind other developed countries. Nor is it true any more that the NHS is relatively cheap. Health spending here is now above the OECD average, but outcomes are well below. We could, in short, be doing a lot better. Still, of all the reforms that I’ve pushed, this is the one I least expect to be taken up, because public opinion in Britain is overwhelmingly in favour of the existing model. This is partly, I have to say, because a surprising number of even quite educated and informed British people have been convinced that free healthcare for the poor is a unique property of the NHS. As you know, Nick, having lived abroad, there isn’t a country in the industrialised world where people are denied treatment for want of means. Still, we are a democracy, and most people plainly like the existing system. 

On the broader question of the direction of the US, I’d make the same argument in Britain as I do in America: don’t become like Europe. Here’s my starting point. In 1974, Western Europe — which I’ll define for the sake of argument as the 15 member states of the EU as it stood prior to the admission of the former communist countries — accounted for 36 per cent of world GDP. Today, that figure is 26 per cent and in 2020 it’ll be 15 per cent. Over the same period, the share of world GDP occupied by the US has held pretty steady at around 27 per cent. So something is plainly going wrong in the EU, and that something isn’t hard to discern: over-regulation, excessive taxation, centralisation, uniformity. The free English-speaking nations should avoid going down that road.

NB: On economic arguments, if you were giving me a choice between moving more in the French or Swedish direction and moving more to an American direction I wouldn’t want to go in either direction. If I’m forced to choose between the current Republican Party and the policies on which they ran in the recent elections and the Obama administration, while I can criticise many of the things the Obama administration has done and, even more, all the things that it hasn’t done, I know absolutely the one which is closest to the modern Conservative Party policy: the Obama administration.

DH: I wonder if that’s really true. One of the things that strikes me, watching the Republicans now, is that a lot of the issues they were campaigning on five or ten years ago have been substantially de-emphasised or dropped. You don’t often hear them talking about guns, or abortion, or gays, or immigration. All they’re really talking about now is tax cuts and the level of debt. In other words, they’ve become a narrowly fiscally conservative party. 

NB: They have not. That is absolutely not true. They are not fiscally conservative because they have not in any way, unlike us here, grappled with what it actually means to be fiscally conservative. To preach tax cuts at the same time as you have a huge and ballooning deficit is not being fiscally conservative.

DH: They’re preaching spending cuts as well.

NB: They’re not. Name me a spending cut, name me a national security cut they want to make. They are being the worst of oppositions, just like, I’m afraid to say, in times gone past we were in that they are proposing a whole lot of entirely mutually incompatible things. They are not willing to take the hard choices which George Osborne did — and lots of people attacked him for it — when he said we had to have fiscal balance before we can start looking at tax cuts. We can’t have any unfunded, upfront tax cuts. 

DJ: You’re right that the coalition has been brave in cutting expenditure, but now it’s got to boost growth. It’s got to come up with supply-side policies which will soak up some of the unemployment. In your book, you strike me as slightly old-fashioned on this in that you praise Michael Heseltine, you favour industrial policies, you talk about hard-nosed pragmatism. Is that going to be enough? Don’t we need now a really radical free-market explosion of activity?

NB: I was tweaking the tail of Daniel and others in that. My argument really is that Margaret Thatcher was much more of an interventionist than she’s given credit for or even perhaps she herself has latterly claimed, and much less of a purist. My key example is the North Sea. She put the full weight of government behind ensuring that North Sea oil and gas became a huge industry for Britain. She identified this source of unique competitive advantage for the country and anything that needed to be done by government to make it happen she was going to do. When I propose, therefore, that we have an industrial policy, God knows there’s no money, so I’m not talking about subsidies and certainly not picking out particular firms. I picked three sectors, just as examples, where we are well placed to dominate the world, where we have a huge competitive advantage: education, financial services and entertainment. Those are the things that the new middle classes of China and India and everywhere else will want more of because they don’t get them at home and we are very well placed to supply them. What I want is this government to pick a few sectors and do everything in its power to clear away the regulatory obstacles in that particular area.

DH: Obviously I’m all in favour of governments clearing obstacles out of the way. Still, it’s worth noting that the sectors you’ve just mentioned have managed to become successful without government help — in some cases, indeed, in defiance of state intervention. Think of the way in which private schools, to which the last government was no friend, have marketed themselves globally and built franchises across Asia. Many of our universities are doing similar things. Of the three sectors that Nick identifies, financial services is overwhelmingly the biggest generator of revenue. But look at what’s happening to the City: it’s being asphyxiated by regulation, both from Whitehall and from Brussels. Instead of every bright and ambitious foreign financier wanting to work in London, we now see people leaving for Geneva, for Singapore, for Shanghai. Why? 

Well, it’s not one single measure, it’s a number of things: the bank levy, the new top-rate tax, the duties on non-doms and, above all, the shift in regulatory power to Brussels. The EU has just created three new invigilatory authorities to cover banking, pensions, equity and insurance. All right, their remit is initially limited, which is how the EU usually works. But, over time, they will do what all bureaucracies do and expand their terms of reference. Supervisory control will shift from our own regulators to officials who, in many cases, bear no goodwill either to the City of London or to the capitalist system. Which neatly brings me back to where I started: the contradiction between the excellent things which the coalition is doing in a domestic context and its failure to extend its logic to the EU. I’ve been very pleasantly surprised by how much David Cameron has achieved in his first seven months: deficit reduction, education reform, shifting people from welfare dependency into productive work. And I’ve been especially impressed by some of the coalition’s constitutional reforms: fewer MPs, lower ministerial pay, open primaries, recall mechanisms, referendums. 

But there comes a moment when what you’re doing at home runs up against the constraints of EU membership. You can’t push jurisdiction downwards in the United Kingdom and, simultaneously, upwards in the EU. You can’t be for referendums in general, but against the one referendum that everyone wants. You can’t shift power from unelected functionaries to elected representatives while at the same time empowering the Eurocrats. You can’t ask your domestic departments to make, on average, a 19 per cent budget reduction while increasing your contribution to the EU budget by 60 per cent. The City is a neat illustration of how Brussels controls essentially internal matters. People think of the EU as something that happens across the Channel: doubtless expensive and disagreeable, but hardly immediate. In fact, it curls its tendrils into almost every cranny of our national life. No government can carry through the programme it would ideally have wanted as long as it recognises the primacy of EU law. That, ultimately, is why we need to settle the question of Britain’s membership. 

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