It’s Crunch Time for Britain in Europe

We have a tremendous opportunity to reconfigure our place in the EU. Does David Cameron have the courage to seize it?

Iain Martin

When David Cameron became leader of the Conservative party he was determined to avoid a subject that had proved fatal to his predecessors. The European question would not derail his leadership, as it had that of Sir John Major and before him Margaret Thatcher. Isn’t it great, he was fond of saying several years ago, that the Tory party isn’t having the usual row with itself over Europe.

In the event it turns out that on Cameron’s watch it is crunch-time for Britain and the European Union. We will be compelled in the next few years — quite possibly even months — to choose what kind of relationship we want with those in charge of a new hegemony on the continent.

Much of post-1950s Conservative policy has been predicated on avoiding having to make precisely those kinds of stark choices about Europe. At the heart of it was a very British self-delusion, rooted in the notion that the pro-Europeans running other countries didn’t really believe in what they said they believed in. Britain would be “in”, but whenever criticism was voiced governments claimed that this was fine because our continental partners were not serious about realising their founding father Jean Monnet’s integrationist vision. Or if they were serious, they could be blocked or slowed.

It always was a poor Foreign Office-designed argument at odds with the evidence. Now, after the crisis of the Eurozone it becomes impossible to make the case with a straight face. The grand historical error that was the creation of the single European currency is being compounded by a drive to some form of common economic government by compulsion in the Eurozone.

Cameron, being an establishment figure who has liked to see himself above petty party politics, originally attempted to pursue a policy in line with the pragmatic tradition.

Yet on December 9 last year, at what was then the latest “Save the Euro” summit, he did something rather extraordinary. Wielding the veto, he broke the historical continuum by which Britain moved gradually from a trading relationship to deep immersion in an integrationist project. Britain would not sign up to France and Germany’s treaty facilitating a fiscal union, the prime minister told his fellow EU leaders. It was one against 26, the 17 of the Eurozone and the other nine EU members, many of them slated to join — eventually. The 26 will press ahead, while Britain stands (not for the first time in its history) alone.

When Cameron unexpectedly broke free of the old thinking and vetoed it was like a dam bursting. His overwhelmingly eurosceptic party, which had been fractious and mutinous, was overjoyed. Polling has suggested strong backing from the public. Pro-EU forces in Britain, including the Conservatives’ coalition partners the Liberal Democrats, went into an extended period of mourning, lamenting that Cameron had left Britain isolated in Europe. Although, as Terry Smith, the pugnacious and hard-headed City CEO, put it: Britain is isolated in the way that a man on the Southampton quayside who has turned down a ticket on the maiden voyage of the Titanic is isolated.

Suddenly there is Tory optimism that on Europe Cameron is on the verge of achieving something important. He has, it seems, found his “game-changer” and gained the opportunity to revivify his premiership. To understand why, and to fully appreciate the enormity of what he appears to have started, one has to examine the post-war history of the Conservative party and the profound shift in its attitude to Europe.

Edward Heath was always the Tory exception. Here was a leader more gripped by pro-European fervour than possibly even Monnet himself. His war experiences, and the failure of his efforts on behalf of Macmillan to negotiate EEC entry, meant he was eventually prepared to accept dreadful terms dictated by the French on fishing, agriculture and financial contributions. As Robin Harris notes in his magnificent new party history, The Conservatives: “Few political lives in modern Britain brought such unhappy consequences as the life of Edward Heath.”

Beyond Heath, British involvement with the EEC, the EC and then the EU has been presented by the Conservatives mainly in terms of a fudge, with the economic benefits of membership hyped up and the downsides either not acknowledged or only rarely dealt with. Where there were concessions to be made, it was intoned gravely that they were “in the national interest” (one of the most bogus of phrases in politics). Outside the battle for national survival in a major war, the “national interest” is usually a cover for establishment groupthink and sly deal-making, devoid of principle.

Tory ministers tended to talk about Europe either in terms of dull technical practicalities and regrettable compromises made in search of  illusory “influence” or, occasionally, as the free-trading wave of the future and economic modernisation.

Tory pragmatism explains the approach of John Major during the Maastricht negotiations in 1991-92 and of Margaret Thatcher for much of her premiership. If there were supposed benefits, and in the case of the single market there obviously were economic gains, those raising objections could be dismissed as fundamentalists who were out of touch with the modern realities of cross-border co-operation. Before the end of the Cold War there was the example of Nato to point to. Didn’t it involve a pooling of sovereignty for greater defence security? Wasn’t the coming European Union just the economic equivalent of Nato?

The attitude of the senior civil service was pivotal. In 1998, in This Blessed Plot, Hugo Young revealed to devastating effect how senior officials in the Foreign Office and elsewhere had run a shadow policy, propelling Britain towards much deeper immersion in the European project than ministers thought they were signed up to accept. If the politicians would not drive Britain towards its destiny then officials would do so by stealth in conjunction with their fellow bureaucrats across the water. To obscure this the overwhelmingly Europhile Whitehall mandarinate cunningly promoted the idea that Britain was a tough negotiator on individual measures. Occasional “concessions” won by ministers disguised the underlying direction of travel. Cleverly, here they appealed to the vanity of Tory ministers, who in office tend to like the idea that they are hard-headed realists or grown-ups who understand the compromises involved in wielding power.  

And then came the Bruges speech in September 1988 and the birth of Thatcher Mark II. When it was delivered, the mandarins in the Foreign Office and those on the Tory front-bench who were heirs of Heath, in respect of Europe, understood that Margaret Thatcher’s new position was a direct challenge to the established order. Perhaps feeling guilty that she had gone much further than was wise in agreeing to hand over more powers to Brussels, she scandalised other European leaders by warning of the perils of further integration.

What is often forgotten, however, is that the Bruges speech was a direct response to the new and aggressive campaign for a “social Europe” emanating from Brussels. The prime minister had been infuriated by a series of provocative speeches that summer made by Jacques Delors, then President of the European Commission. He had rounded off with an address to the Trades Union Congress (TUC) in September 1988 that helped to complete the Labour movement’s transition from euroscepticism to pro-Europeanism. Europe, Delors suggested, promised an alternative way of securing worker protection and satisfying the collectivist impulse that had been thwarted in Britain by Thatcherism.

The Foreign Office, which (it has been claimed) had privately urged the TUC to invite Delors, was appalled: not by the federalist speech of the President of the Commission in Bournemouth but by the prime minister’s daring intervention in Bruges. For committing such an insurrectionist act, Mrs Thatcher would somehow have to be dealt with. Two years later, with the failure of her reform of local government finance (the so-called poll tax) and her increasing difficulties with Cabinet colleagues available as a cover, a plot was hatched and she was taken out by an alliance of largely europhile Tory ministers.

It is illuminating to watch footage of the event in the Commons on October 30, 1990, which led directly to her ousting. Her famous outburst (“No, no, no!”) came when she was taking questions after making a statement on the previous weekend’s Rome summit, at which she had been ambushed on the question of European Monetary Union. She was viscerally opposed to a single currency, although to maintain Cabinet unity she had been boxed into accepting British membership of the Exchange Rate Mechanism (ERM), which fixed the pound within agreed parameters in relation to other European currencies — in practice, the Deutschmark.

The history of the period is sometimes misremembered, refracted as it is through the prism of pro-EU reporting by organisations such as the BBC. On that day Mrs Thatcher was actually responding to eurosceptic concerns about her reliability. That was in doubt because she had agreed to so much integration earlier in her premiership. Norman Tebbit, David Owen, Tony Benn (with Michael Foot sitting on the bench behind him) and others tested her. Her attempts to offer a robust defence angered her Cabinet colleagues. Two days later, Geoffrey Howe resigned from the Cabinet, Michael Heseltine challenged Mrs Thatcher, and she resigned after failing to win decisively in the first ballot.

In the ensuing leadership contest, John Major (then seen as the Thatcherite candidate) triumphed over both Heseltine and Douglas Hurd. However, Major quickly sought to put the Tories back on a pragmatic path, flying to Bonn to assure the German government that he would put Britain where it supposedly belonged: “At the heart of Europe.”

But there was a problem. It soon became apparent that Thatcher Mark II had been right and those who removed her wrong about Europe. Conservatives and others realised that Britain should never have had any part in monetary union, and hanging around on the edges trying not to cause a fuss would not prove very profitable either. Today she is also being proved right that the attempt to fold disparate European economies together into a single currency would be a disaster for the countries involved.

Within two years of Mrs Thatcher’s fall, Britain had been blown out of the ERM, destroying the Tories’ hard-won reputation for economic competence. Cameron was a young special adviser to Chancellor Norman Lamont at the time of the ERM crisis. He had a front row seat. The opt-outs that Major had painstakingly negotiated at Maastricht were insufficient to satisfy important elements in his party. Along with eurosceptics outside the Conservative fold who saw the party as an inadequate vehicle for their views, these dissidents had had more than they could tolerate of the diet of Tory pragmatism.

Then throughout the party’s long spell out of power, the Thatcherite eurosceptic forces grew in strength until there was nothing left of the Heathite Tory Europhiles, Kenneth Clarke and a handful of others aside.

This was David Cameron’s inheritance when he became leader in December 2005. His party had come to broadly accept the Thatcher analysis on Europe, although it was so scarred by the disunity of the mid-1990s, when the Tory establishment had struggled to compute that Thatcher Mark II had been right, that much of the party was wary of being defined solely by its views on Europe. This gave Cameron a good deal of room for manoeuvre.

In the leadership election he cultivated the image of a moderate eurosceptic who would avoid going on about the subject. The new Tory leader quietly withdrew the Conservatives from the European People’s Party, a centre-Right federalist organisation, and attempted to set up an alternative European outfit for (mainly Central and Eastern European) sceptics. The ensuing criticism and difficulties seemed to shake Cameron. He had gone against his instincts, which have tended to dictate avoidance of confrontation or risk. Cameron is innately cautious, unless cornered and forced to be daring. Still, during the row over the Lisbon treaty in 2007 he promised a referendum and his shadow foreign secretary William Hague assured the party that even if the treaty had been ratified when the Tories came to office, they would not let matters rest there. The manifesto for the general election in 2010 talked of returning powers to Britain from Brussels.

As prime minister, however, he proceeded at first to prove the truth of Hannan’s First Law (so named by the prominent Tory eurosceptic Dan Hannan MEP). This law stipulates that, however it may behave in opposition, no party is ever eurosceptic in office. In several areas, notably regulation of the City, Cameron and Osborne handed over powers to EU institutions with breathtaking insouciance. The compromises required by coalition were a complicating factor, of course. Nick Clegg is a former functionary in the Commission — a creature of Brussels, that is — and from the start Cameron was terrified of offending him for fear of precipitating the collapse of the coalition.

But the presence of Clegg as his deputy cannot, alone, explain Cameron’s initially misguided approach to Europe. He tried to pick-up where Major left off. It is not widely appreciated how much Cameron listens to the last Tory incumbent at No 10. The former prime minister is consulted regularly, and is encouraged to act as an outrider when N0 10 wants to test an argument. Cameron has in turn copied Major’s policy of trying to win concessions but then basically trundling along behind France and Germany. On Europe, Cameron was behaving like a Major man, when the vast bulk of his party is Thatcherite.

His party started to intervene. In parliament MPs grew increasingly restless, particularly the impressive new intake that tends to be solidly eurosceptical. The Tory leader seemed to have been captured by the mandarinate and the integrationist UK Permanent Representation to the EU in Brussels. Many Tory MPs despaired of his diplomatic efforts. Although their demands were inchoate, and they had not coalesced around future potential leaders, they were proving very difficult for party managers to control. The rebellion of 81 Tory MPs calling for a referendum on Europe was the biggest manifestation yet of his party’s unhappiness.

The prime minister’s key adviser and closest friend in politics, Steve Hilton, had also become exasperated with Cameron’s vacillations and appalled by the continued impositions from Brussels that hamper competitiveness and recovery. Late last summer the chancellor and the prime minister had even decided that in order to save the single currency they had, quite suddenly, been converted to fiscal union for the eurozone, although they didn’t look as though they really believed it. They then said they thought such a move would trigger a renegotiation with the Eurozone that might offer the possibility of a repatriation of powers to Britain. Next they were less sure about renegotiation; finally, they thought definitely not, as they didn’t want to cause a fuss.

But then Cameron came under great pressure in the days leading up to the December summit. Cabinet ministers — such as welfare secretary Iain Duncan Smith and Northern Ireland secretary Owen Paterson — had worked out that the only language Cameron understood was that of force. They organised with the rebel MPs, and impressed on Cameron that he had to find a way out of agreeing to a new treaty of the 27 members of the EU. If Cameron had defied his party it would have meant full-scale mutiny and irresistible demands for a referendum. Through a combination of pressure and Cameron’s mild-euroscepticism hardening into conviction, the prime ministerial resolve was strengthened.

Events in the eurozone crisis were also making it increasingly difficult to maintain the fiction on which British policy had long been based. A new and closely integrated entity, one that threatens to eclipse and supersede the existing European Union of 27, is being created. It will presumably mean attempts to create a European Treasury and a eurozone bloc that can permanently outvote Britain. What will its relationship be with the Commission? Whatever they succeed in creating — and there is a strong chance they will blow up the entire European economy in the attempt — the nature and construction of the EU is changing dramatically before our eyes. Led by Germany and France, a large number of countries want to go where the UK has little or no inclination to follow.

Here is a tremendous opportunity. Chances to reconfigure our place in the world and to re-energise our economy come along only rarely. British policy-makers in coming years could choose to reconnect with a much deeper and less defeatist strain of thinking from our history, in which we want peaceful cooperation and will only intervene in the affairs of Europe when we have to because our interests are directly imperilled. That does not mean “splendid isolation”. How could it when Britain is an open, free-trading nation with one of the greatest global cities as its capital?

It means negotiating our way to a friendly trading relationship with the eurozone, and extracting ourselves from the worst, energy-sapping elements of EU membership entirely. If the 26 get their treaty, although that will hardly be straightforward with several countries planning referendums, Europe will have been transformed. A renegotiation for Britain then becomes the natural next step.

There is no reason to suppose that this cannot be achieved if it is tackled with verve and some prime ministerial determination. Initially, there would be rancour and Britain will encounter unpopularity at summits. For instance, Cameron made great play of defending the City in Brussels, but in truth he conceded oversight last year and a slew of harmful regulation is coming London’s way next year. Ultimately, though, the Germans have no interest in disrupting trade and ceasing to sell us BMWs or Volkswagens or the French their wine. As Hamish McRae points out: “The rest of Europe sells £66 billion more of goods and services to the UK than we sell to it.”

New arrangements would involve a recognition of the shifting balance of power and reflect the rise of the emerging economies such as India, China and Brazil and Commonwealth countries to which the last Labour government, fixated on Europe, paid too little attention. There is an increasingly prosperous world beyond Europe’s borders. With Europe in relative decline, and growth possibilities elsewhere, starting to rebalance our trade makes perfect sense.

The Foreign Office, at William Hague’s insistence, has done a good deal of preparatory work on this in the last year, which is a positive amid the gloom, and Cameron has taken an interest. It will take great courage for Cameron to resist calls for a U-turn. The pressure on him to return to a more traditional pragmatic, or unprincipled, position is intense. The mandarins, blind-sided by a veto they didn’t imagine Cameron would use, are working to try to regain control of the direction of UK policy. The same forces that tried to take Britain into the single currency — led by organisations such as the CBI and other representatives of the big business orthodoxy — are loudly predicting the end of civilisation as we know it.

But persevere and there could even be a great prize for Cameron. Churchill famously said in 1946: “We are with Europe, but not of it. We are linked but not compromised. We are interested and associated but not absorbed.” Churchill was no isolationist. He understood that Britain was part of the European family of nations, yet grasped that for reasons of history, culture and inclination it was ill-suited to submersion in a supra-national project of the kind our partners are hell-bent on creating.

If Cameron can build on what he did in Brussels, win back substantial powers, build better links with the increasingly prosperous world outside troubled Europe’s borders and get close to that Churchill ideal, he will find himself ranked amongst the greats.  

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