UK and European flags flying

UK and European flags flying. Photograph by Lancastrian

British Prime Minister David Cameron has announced an “in/out” referendum for UK voters on European Union (EU) membership, scheduled for 2017.

There were few surprises in this, as the full text of his forthcoming speech had been leaked to the media.

Business has already reacted cautiously to the plan, while French foreign minister, Laurent Fabius, dismissed Cameron’s notion of ‘Europe à la carte’, where Britain could pick and choose where and when it participates in EU treaties. Fabius made his comments on the basis of Cameron’s leaked speech.

Cameron has long promised a “red meat” speech that would deliver a stern message to EU institutions on the limits of British integration with the continent. Unlike Margaret Thatcher, who delivered an infamous speech decrying a “European superstate” at Bruges in 1988, Mr. Cameron chose home soil at Bloomberg’s studio in London to deliver his address.

The Reluctant European

Britain has long been the EU’s awkward partner. The reluctant European. Twice – in 1950 and in 1956 – the UK rejected the opportunity to join the European common market, only to apply twice, unsuccessfully, for membership in 1961 and 1967. Finally, the UK acceded to membership with its third try in 1973.

For 70 years, the Conservative and Labour parties have had one thing in common: distrust of the European project. From Attlee to Brown; from Churchill to Cameron; both moderate and conservative Tories; and both socialist left and ‘New’ Labour have never felt entirely comfortable with supranational institutions and the Rhenish Franco-German model of regulatory economics and centralised planning.

In 1975, Labour Prime Minister Harold Wilson held a referendum on British membership of the (then) European Community (EC), following Conservative Prime Minister Edward Heath’s concessions to gain membership on disastrous terms in 1972.

Wilson’s referendum was a political disaster, as voters endorsed EC membership overwhelmingly, with 67% support. However, Britain was left as the second-largest contributor to the EC General Budget, despite the desperate state of the economy, which forced the UK to draw upon IMF funds in 1976–77 to meet its balance of payments obligations.

It was left to Margaret Thatcher in 1984 to “get Britain’s money back”; she re-negotiated the British budgetary contribution to Europe, which returned over £700 million annually to the Treasury’s coffers.

More recently, Tony Blair committed to holding a referendum on British membership of the Eurozone in his 1997 campaign, although he was at marked variance with his shadow chancellor, Gordon Brown.

Blair also committed to a referendum on the abortive EU Constitution, which was comprehensively repudiated by French and Dutch voters in 2005. Consequently, Blair argued that a referendum was not needed, as the Constitution was dead.

In 2003, Blair once again promised to deliver a referendum on British entry into the Eurozone “within the current parliamentary term” (i.e., by 2005).

A clear pattern emerged from Blair’s Labour: there would not be a democratic vote on any substantial EU issue while he was in office. In reality, Blair was never serious about bringing the pound sterling into the Eurozone, while he knew that other European electorates would drown the Constitution before it reached the English Channel.

Never Stand Between David Cameron and the UKIP Vote

But Cameron is a break with the previous Tory consensus. No Conservative leader has ever countenanced exiting the EU.

Why is Cameron playing this most dangerous game: gambling with an unpredictable electorate? Look no further than the polls. The Conservatives trail Labour by 9% according to YouGov polling, with the UK Independence Party (UKIP) on 10%, equalling the Lib-Dems’ 10%.

A week ago, Cameron argued that there was a “massive change taking place in Europe”, and said Britain was better off in Europe. However, Cameron explicitly noted that he did not favour an “in/out referendum.” He contradicts that in the text of his speech, stating that:

“… we will give the British people a referendum with a very simple in or out choice. To stay in the EU on these new terms; or come out altogether.”

Labour would be compelled to support EU membership, which is odd, considering their chequered history with Europe. In 1983, in the longest suicide note in history, Labour leader Michael Foot pledged to exit Europe within 10 years. Tony Blair and Gordon Brown both signed that manifesto. So did Foot’s successor, Neil Kinnock, who, later, without any apparent sense of irony, served as a European Commissioner (the graveyard of failed politicians), amassing six pensions. Not quite Tony Blair’s £20 million. But we’ve all got to start somewhere.

Frankly, the only mainstream pro-Europe party is the Lib Dems, and this referendum puts Nick Clegg between a rock and a hard place: unable to support his own coalition government; unwilling to countenance a pact with Labour.

To Be or Not To Be…In Europe

Opposition Leader David Miliband has also been skewered by Cameron’s in/out referendum proposal. This is classic wedge politics, of course; what option does Miliband have but to support “democracy”?

Miliband has been compelled to follow the Eurosceptic line and it’s not difficult to understand why. To this point, he has confirmed Britain would not enter the Eurozone under his leadership, and he would not repeal the referendum legislation. A political victory for Cameron; Labour has been cast in the role of follower, not leader.

But let’s be crystal clear here: if it comes to a 2017 referendum none of the mainstream political parties will support a British exit from the EU. Not one of them.

Why? Here’s Why…

First, Britain is the EU’s top inward investment destination. Always has been.

Second, more euro business is conducted in the City of London than the bourses in Paris and Frankfurt combined. That means more euro-denominated debt issues, corporate bond issues and foreign exchange wash through the British capital than any other EU city. That is why David Cameron furiously threatened to veto proposals for a EU financial transactions tax in 2011.

Even as the ink dried on Cameron’s speech, the EU Commission in Brussels, in a fit of spectacularly bad timing, opened the door for 11 EU countries to implement the new tax on trades on derivatives, stock and bonds. All that means is that more financial institutions will write their trades or do their settlements in London, Amsterdam, Stockholm or Copenhagen, rather than Rome, Paris or Frankfurt. It’s noteworthy that neither Belgium nor Luxembourg, long the principalities of banking, investment and secrecy, are having no truck with this particular proposal.

Third, 50% of British exports go to the EU. Certainly, the figure can be exaggerated by the Rotterdam-Antwerp effect, but Britain and Germany are Europe’s biggest trading partners as well, with two-way goods and services trade totalling £153 billion in 2012. The UK car industry also saw a record 1.2 million vehicles exported last year, with a significant amount of EU-imported components. Free and unfettered trade access to the automotive components sector within the EU is clearly a key aspect of British auto industry’s success.

Re-negotiate is the watchword

Cameron has pressed the case for “re-negotiation” of the EU treaties. This is Mrs Thatcher redux. It means the Cameron government will seek opt-outs from specific EU policies, such as the financial transaction tax. Then, if the Conservatives survive, they can present a triumphant fait accompli to voters in 2017, citing their victory over the Brussels bureaucrats.

All of this is readily achievable. Britain, Denmark and Sweden negotiated successful opt-outs from the Maastricht Treaty in 1992 that kept all three out of Eurozone. Neutrals Austria, Finland and Ireland remained outside the European Security and Defence Policy in 1999. Greenland left the EU in 1984 (as a part of the Danish state).

In 2017, with opt-outs finalised, Cameron can run an “In” campaign. Labour and the Lib Dems will support it. UKIP will run an “Out” campaign, but it will be on its lonesome on the far right of British politics.

Don’t forget: referenda in Europe (i.e., actually asking voters) have lousy prospects of success. This is why political elites usually avoid such tiresome exercises in democracy at all costs. Mind you, even getting Britons to vote on any EU issue could be an Everest to climb; in 1999, only 24% of Brits gave a flying fig about European Parliamentary elections. In 2009, it was better, with 34% actually showing up, but still a 4% down on 2004 turnout.

A referendum in 2017? I’ll believe it when I see it.

David Cameron will likely be a political footnote by then. Just like Brown and Blair.

By Remy Davison, Monash University

Remy Davison’s Chair is funded by the EU Commission.

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