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INVESTMENT INSIGHTS ARCHIVE
Originally posted in May 2015
BRITAIN’S UNION - A SWISS CHEESE & TURKEY ROLE?
By Ben Davies
In our April edition in Views, we began the debate on whether – ‘To Brexit or Not to Brexit?' Now it has become imperative to understand how we can best Brexit, as the probabilities have risen considerably since the outcome of the 2015 election. The Tory majority win ensures that we will have our say on this matter in an EU in-out referendum by no later than the 1st January 2018.
Remember the Conservatives’ Manifesto guaranteed British citizens such a referendum when they stated in their 'Let Britain Decide' campaign 'we will negotiate a better deal for Britain in Europe then give the British people their say in an in-out referendum.'
I have spent many a coffee-break debating the merits or not of Brexit with my colleagues, particularly David Stevenson, and group think notwithstanding, we all feel the hullabaloo surrounding our relationship with the EU is just that. We would wager that any meaningful reform is likely be non-existent and that
Britain will eventually follow Switzerland, Norway and even Turkey’s model and try to position ourselves for an EU Single Market-lite relationship. Britain will be part of a two-tier or two-speed Europe. As David puts it, let’s hope we are in the economic cohort which is fastest. We will just continue to opt out of “ever closer union” when it most makes sense (repeal of the Human Rights Act isn’t one of those that does though, by the way) and we will continue to squabble over EU budget contributions. Nothing much will change.
We would concede that powerful structural realities could be more of a positive than we suspect in any UK negotiations. First off Germany’s demographic is aging and the UK’s population will surpass that of Germany’s, paving the way for the UK to usurp her as the European economic powerhouse. Politicians are myopic and as this reality is not imminent, I wouldn’t want to overplay its significance. Secondly and more importantly the British Armed Forces, despite defence cuts, remain central to NATO’s position in Europe.
Referendum Rules
The most important aspect of the referendum is that we observe fair rules of engagement. The date of the vote, the campaign preceding it and the funding available should be done in a meritocratic process. Some of these elements are even enshrined in legislation, such as ‘purdah’ rules that limit government announcements in the run-up to the polls. The EU itself should also keep interventions to a minimum.
Cameron will be focussing on improving our sovereign independence whilst enabling healthy relations for future cooperation with the EU. A fine balancing act that in reality, involves wresting past and future power from Brussels and back to Britain by pursuing:
Freedom of global trade and finance, but not through 'ever closer union'
Repatriation of laws and legal process from EU back to Britain
Firmer immigration and border controls, like preventing 'benefit tourism'
A better deal for British taxpayers
Angela Merkel’s influence on her European partners will be instrumental to enabling any reform, but not at the cost of jeopardising the four freedoms of the European Project. Grexit contagion risk may well constrain her sympathies. She also has to contend an election next year, so her own domestic position could further constrain her interventions to assist Cameron’s needs.
Clearly, there is considerable scepticism as to whether Cameron has ever even intended to properly renegotiate terms with Brussels, not least of all from within his own party. They see him as paying lip-service to such reform, to keep his American paymasters happy. This is not entirely unwarranted criticism, but I still find it somewhat uncharitable.
Many believe the Prime Minister offered voters a final say on the EU purely to satiate the Eurosceptic rebels and neuter Farage's ability to exploit fears of EU oppression and migrant invasion. Whatever Cameron's motives were at the time, it worked. He kept the party visually unified and won the election. I, for one, believe Cameron is far more politically astute and committed to extracting a better deal for Britain. I just worry he can’t deliver one because of the Eurocrat’s (Brussels) intransigence and quite apparent Anglophobia, or is that just UEFA’s Platini antipathy I witness. These European institutions all blend into one for me.
If Cameron pulls off decent reform – he will be ‘the diplomat’ personified – in the Kissinger mould. In 2011 he blocked the proposed Treaty changes that would lead to greater fiscal integration across all EU member states. So Brussels will take him seriously in light of both this and his recent election win, which has certainly won him some political capital, at 6 least for now. This political capital won amongst domestic voters, if not eroded, will likely also tip the EU vote to an ‘in’ one. After all, the PM’s popularity will be instrumental to such a voter outcome.
My main concern is the reform list is very broad and without specifics it will be very difficult for us to judge his success. What would be considered decent reform anyway? Cameron could fudge it and push for a snap referendum. He could buy cheap votes by limiting access to welfare for 'benefit tourists' and bolster support from commerce just by the act of bringing a swift vote. A snap vote would bring an end to regime uncertainty quicker and would be welcome by all sectors of the economy, but it wouldn’t solve our growing issues within the EU. I personally would vote to exit, in this event, as it is highly unlikely he will have negotiated any material reforms in so short a period, as many will require ratification of Treaty changes. I even include a promise to change, here.
Let's be honest, if there was a referendum sooner I suspect the British would vote to stay in. There was talk that a vote could coincide with the May 2016 Scottish, London, Welsh and Northern Irish elections, but Cameron has already stated this won’t be the case; accepting voters on this day are more pro-European and could have undue influence on the ‘in’ (Yes) campaign.
According to the ComRes poll for Open Europe, any perceived reform wins, looks as if they will guarantee an 'In' vote.
It is a snap referendum, which members of a newly formed Conservatives for Britain; (CfB for short), purport to fear most, for the reasons I have cited.
CfB is a group of Conservative Party members who:
Consider the UK’s present relationship with the EU to be untenable
Take an optimistic, globalist view of the UK’s future
Support the Party’s policy of renegotiation and referendum based on the Wharton Bill franchise and question
Wish to explore what objectives the negotiations must achieve to ensure that they meet the PM’s objective, which is “to reform the EU and fundamentally change Britain’s relationship with it” (PM, Hansard, Col 1122, 23 March 2015)
Will discuss how to prepare for a possible “out” campaign, to be activated if it is apparent that negotiations will not achieve the objectives
The CfB is an excellent checks and balance on the government and the debate at large, as this vote has constitutional significance, so we need them, and as my colleague David Stevenson opined in his very thoughtful blog piece last week, the stability of the UK 'constitutional' settlements is potentially in jeopardy, EU ‘out’ vote or not. It's really worth a read, so please do.
Prime Ministers and cabinets are often more psychologically constrained by the realities of their office than they need be. I see the CfB's 'intervention' as a positive, not because I necessarily mistrust Cameron; far from it. We should savour the democratic right of party members not to have to kowtow to the party line. They should be able to express their true views, even if this undermines this line and even electoral position. We so often chide politicians for being populous in their motivations, that we should applaud this group. It is their right to exercise a view and it is our right to act on the information presented by them and other proponents of the 'yes' or 'no' (in or out) parties. The CfB’s position signals to Eurocrats that Britain means business and will require real reform if we are to stay, as Cameron will receive extreme pressure internally from his party.
Although ministers and all Tories should have an independent and unrestrained viewpoint, I likewise do not believe government advice should be impartial and disinterested. If Cameron believes he has achieved reform and encourages the people to vote to stay in, it is up to others to disprove that he has not and vote not to stay in. Although there should be an equanimous period where there is no ministerial activity on the subject by either party in observation of election purdah. There should also be impartiality on funding, i.e. it should be a level playing field, as we don't want one entity or another to 'buy' the outcome by shaping the media. Although this will happen anyway, just in kind.
The CfB has grown from 50 to over 100 led by their chairperson Steve Baker, MP for High Wycombe. I have met Steve Baker, in his a role as founder of the Cobden Centre, which promotes prosperity through an open and free society based on stable, sustainable economy in which there is meritocratic opportunity. (Such society is built on honest money, meaning we must end excessive credit expansions that fuel false booms followed by financial crises causing devastating human cost and spreading untold social disruption)
Steve Baker stood for election in part, so he could help re-educate government on the role of money in society. Based on this, he strikes me as a resolutely principled, fair and decent man.
Steve and I also share a common view on the EU and the bureaucrats in Brussels. It's a dim one. They have insidiously oppressed member states’ national interests by interfering in their legal, regulatory and political executives. The core tenets of free circulation of goods, offering of services, movement of financial capital and migration has been undermined by the centralisation of the EU, which threatens to choke these very same freedoms through over-regulation, restrain and taxation on each and every sovereign member states.
Steve Baker recently wrote an eloquent op-ed in the Telegraph, declaring the CfB's position, in which he makes the observation that many overlook or just don't comprehend, which is, to foster free trade with Europe and the rest of the world, closer political union is not required. The two are not connected. "Freed trade requires an absence of government restraint, not unified government."
EU Bastards ‘Out’
The progressive metropolitan literatti at The Guardian talk of the 'bastards' of the CfB, in a reference to Sir John Major's off tape, but recorded description of the Tory Eurosceptics whose attempts to derail the UK's Maastricht treaty negotiations in the early 90s nearly brought down the government. In reference to keeping the Maastricht Rebels within his cabinet, Major invoked Lyndon Johnson's maxim that "It's probably better to have him (them) inside the tent pissing out than outside pissing in." Although I don't care for the Guardians inflammatory narrative, the CfB are more moderate in their approach, and Cameron would be advised not to make these Eurosceptics his enemy.
Purdah will ensure Whitehall draws a veil over itself and cuts itself off from influencing public debate on the referendum, allowing time for the public to digest previous dialogue without undue bias. The term purdah, interestingly, comes from the Urdu (parda) and Persian (pardah) words, meaning veil or curtain and the practice of Muslim and Hindu societies screening women from men or strangers by use of a veil or curtain. Let’s hope it’s observed.
We all know how the Tories have a history of burning their very own veil of unity that binds them. Right wingers and former ministers, like John Redwood and Owen Paterson, who opposed Major on Europe in the 90s still reside within the CfB, but I believe that with Steve Baker at the helm their intentions are to both ensure a positive outcome for negotiations and secure a better future for Britain's pursuit of prosperity through liberty.
Likewise, Cameron's position seems quite straightforward:
“Let’s be clear: in politics you should try and explain what it is you want to achieve, and what I want for my country is to reform the European Union, to make it better, and then recommend that we stay in the European Union because we need those trade links, we need those markets open, we want that influence in the world, that is good for Britain.
"There are Conservative Members of Parliament who want to leave the European Union come what may. But if you’re part of the Government, then clearly you’re part of the team that is aiming for the renegotiation referendum.”
Unfortunately his position with regard right to free speech within his own party seems less so. Any more miscommunications, the likes of which we saw at the G7 meeting, on whether cabinet members can elect to campaign and vote contra to the government need eradicating. He really doesn't need to inflame a hornet’s nest, he needs to focus on the job in hand, and if he does that I believe he will be supported fully by his party.
Never mind the CfB’s call for an 'out' vote, if Cameron is observed to be failing in his negotiation, would he himself declare his support for an exit? It seems unlikely to me. I suspect he won't because that would be at odds with his 'One Nation' commitment which he signalled in his acceptance speech outside Number 10. He knows the threat to a schism in our own Union is now no longer existential, and by declaring his intention to devolve powers to the regions of England, Scotland, Ireland and Wales, his ability to play a good poker hand on Brexit has perhaps been handicapped.
EU officials may chance that if Cameron threatens exit in the absence of full reform, he may not pull the trigger, as Scotland's SNP are pro-EU, and any exit may result in an immediate Scottish Independence referendum. Cameron is going to have to hold a real poker face and hope Europe doesn't call his bluff.
Again, I would reference David Stevenson's editorial at our site, where he points out one of the threats to our Union's stability is Europe:
"I am a pro-European but I view the referendum debate as a useful one, allowing us to clarify our collective investment in a project that is troubled. I am stunned by the consensus that we Europhiles will win this debate easily. That consensus view strikes me as arrogance of the first order and I sense that if a proper debate is engaged we pro-EU types could very easily lose. This prompts my first crisis – what next after we leave the EU?
I am happy to concede that there could easily be a life outside of the EU; it’s just that I have not seen a clear strategic explanation and plan from the opposing camp explaining what happens next? I am aware of how angry many are at the corruption and unaccountability of the EU, but what’s the ‘plan Stan’?”
Here I disagree with my right honourable colleague and Editor-in-Chief, he is wrong, there have been ideas and plans drawn up that we can implement. A series of papers and reports, conducted by the Institute of Economic Affairs and Open Europe, provide a roadmap based on these premises, that any EU discussion and the viability of Great Britain within it should seek to push for greater market liberalisation and less EU interference in our executive, legislative and judicial 'constitutional' branches. Simple. (Continued under Election Insights).
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