The future of the European Union: UK Government policy - Foreign Affairs Committee Contents



2  UK influence in the EU and the December 2011 European Council

UK influence in the EU

21.  In his first major speech in office, in July 2010, the Foreign Secretary, the Rt Hon William Hague MP, declared that he aimed to deliver a foreign policy that "extends [the UK's] global reach and influence". The job of the FCO, he said, was to help the UK "exercise maximum influence in the world". Mr Hague's focus on UK international influence included the EU, where he suggested that the previous Government had not been "serious about advancing Britain's influence". Mr Hague said that the current Government was "determined to put this right".[45]

22.  In the debate over the UK's EU policy, the think-tank Open Europe contended that "'influence' is a term too often used in a rather lazy and undefined way". Open Europe argued that the debate on UK influence in the EU should focus on identifying the concrete cases where the UK should exercise influence and had or had not done so.[46] However, most witnesses did use the notion of UK 'influence' in the EU in general terms:

On the one hand, witnesses tended to evaluate—or advocate change in—policy in terms of its impact on UK influence in the EU. They tended to take it as read that, if it is in the UK's interests to be in the EU, the UK's interests will be better served the more influence the UK has there.[47] Such witnesses therefore held that sustaining and expanding UK influence in the EU should be a UK policy objective.

On the other hand, differing assessments of the extent of the UK's influence in the EU underpinned judgements about the feasibility or desirability of particular policies—up to and including the Government's policy of keeping the UK in the EU. Judgements about the feasibility of the Prime Minister's 'renegotiation' agenda rest partly on views about the extent of the influence that the UK could wield with other EU Member States (see paragraphs 145-148).

23.  We were presented with two radically divergent pictures of the extent of UK influence in the EU:

According to some witnesses, the UK's influence is "small"[48] or "minimal",[49] and the UK "must now admit to [...] the fact of [its] impotence and lack of influence".[50]

According to other witnesses, the UK wields significant influence. For example, Professor Michael Dougan and Dr Michael Gordon of Liverpool Law School contended that the 2007 "Lisbon Treaty was widely seen across Europe as a triumph for the UK's vision of European integration".[51] Richard Corbett, an adviser to European Council President Herman Van Rompuy and former MEP (providing evidence in a personal capacity) told us that the UK's contribution to the EU was "greater than it sometimes seems to realise itself".[52] Several commentators have also argued recently that UK opinion often under-appreciates the extent to which the UK has shaped EU policies and practices over the past quarter century.[53]

24.  These differing assessments of the extent of the UK's influence in the EU correlated strongly with differing assessments of the value to the UK of remaining an EU Member. Witnesses who perceived the UK to be influential typically urged that it should remain in the EU. Those who saw the UK as having little influence were most likely to favour withdrawal. As Nigel Farage MEP put it: "If we have no influence, then what is the point of our membership?" (although he said explicitly that having influence in the EU would not of itself warrant being a member).[54] The smaller the UK's influence in the EU, the smaller the relative loss of UK influence over the Union that would be involved in withdrawal.

25.  Witnesses who perceived the UK's influence in the EU to be small were of two types: on the one hand, those such as Mr Farage who saw the UK's low levels of influence as inherent to the EU project; and, on the other, those such as Brendan Donnelly of the Federal Trust, who saw the UK's weak influence as the self-inflicted consequence of decisions by successive UK governments which, Mr Donnelly suggested, "cannot but undermine the political rationale for British membership" of the EU.[55] Witnesses including Mr Donnelly saw a risk of a self-reinforcing spiral, whereby weak UK influence in the EU increases the perceived likelihood of the UK leaving, which weakens UK influence.[56]

26.  There is no readily available objective measure of any Member State's overall influence in the EU. Studies of EU decision-making suggest that a Member State's influence can vary from policy to policy, depending on the nature of the policy area, the decision-making procedure involved, and the Member State's will and capacity to make a difference.[57] However, having posed the question "which states exercise most influence?", one standard textbook recently stated baldly that "the larger states do".[58] With respect to Member States' institutional positions in the Union, the UK is one of the four which have the same largest share of weighted votes in the Council of the EU: France, Germany, Italy and the UK all have 29 of 345 votes, or around 8% (falling marginally to 29 of 352 after Croatia's expected accession on 1 July 2013).[59] In the European Parliament (EP), the UK has 73 of 754 seats, or around 10%, the third-largest share after Germany and (by one seat) France.[60]

27.  Several witnesses argued that the UK had an additional asset for influence in the EU, in the shape of the English language. Richard Corbett said that English was now the "lingua franca" of Europe.[61] For example, according to a report by the French Senate in 2009, the share of European Commission documents drafted in English rose from 46% in 1996 to 73% in 2008. In the Council, in the period 2003-2008 the shares of documents drafted in English ranged between 60% and 79%, varying partly according to the Member State holding the rotating Council Presidency.[62]

28.  The former EU Council official and MEP Michiel van Hulten drew our attention to the work of the organisation VoteWatch Europe (of which he is Managing Director) on voting outcomes in the Council of the EU.[63] According to data which VoteWatch Europe generated for us, in Council votes between July 2009 and March 2013 the UK was in the minority more often than any other Member State, by some distance. It voted against proposals in the Council on 10.5% of occasions, compared to 5.9% of occasions for the next-most 'contrary' Member State, Austria. If only votes where at least one Member State abstained or voted against were counted, the share of occasions on which the UK voted with the minority rose to 35.0%, against 19.2% for Austria.[64] These data might suggest that the UK was the least influential Member State, because it was faced most often with a proposal in the Council with which it did not agree. However, Mr van Hulten urged caution in interpreting the data, on two grounds:

By definition, voting data only capture Member States' positions on matters that have been put to a vote—and the Council Presidency country only typically puts matters to a vote when it is sure that they will be approved. The voting data do not capture a Member State's influence in preventing a matter from coming to a vote in the first place.

The voting data may pick up Member States' attitudes not only to the measure at issue but also to being seen to be in a minority, in principle. According to Mr van Hulten, "some countries, and the UK in particular, strategically vote 'no' to make that point that they are opposed, whereas other countries may vote in favour despite the fact that they are opposed because they want to show that they are good Europeans".[65]

29.  In EU foreign policy, the think-tank the European Council on Foreign Relations (ECFR) compiles an annual European Foreign Policy Scorecard which rates the EU's performance on top foreign policy issues from year to year. Since 2012, ECFR has also graded individual Member States by their performance on a number of elements of EU foreign policy. ECFR grades Member States as 'leaders' where they took initiatives or supported EU policy in an exemplary way, or as 'slackers' where they impeded EU policies or failed to 'pull their weight'. In both the 2012 and 2013 Scorecards, ECFR classed the UK as a 'leader'; in both years ECFR placed the UK equal second, with France and behind Germany.[66]

30.  Among witnesses who saw the UK as influential in the EU:

the Scotch Whisky Association said that "the EU legislation of greatest interest to our sector often bears the hallmark of UK participation", and that the UK had been influential over EU positions in trade negotiations with third countries and EU entry terms for new Member States;[67]

the campaign group Nucleus said that "in a whole variety of areas, from security to climate change, [the UK is] the 'lead' nation";[68]

Dr Robin Niblett, the Director of Chatham House, said that UK leadership in the EU had been "instrumental" in the breakthroughs made at the November 2011 UN climate change conference in Durban;[69] and

Mr van Hulten told us that the UK "punched above its weight" in the EU.[70]

For its part, in its written evidence submitted in May 2012, the FCO listed a number of areas where it considered that the UK had exercised leadership within the EU over the longer term and seen its policy preferences reflected in EU action. These included: the building of an EU coalition for economic growth through reform, EU leadership towards a new international climate change treaty, EU support for new Arab democracies, EU sanctions on Burma and Syria, the 'twin-track' approach to Iran, and progress towards EU membership for Croatia and Serbia.[71]

31.  The policy-makers and observers to whom we spoke in other European countries, both inside and outside the EU, mostly saw the UK as influential within the Union. They typically pointed to what they saw as the UK's significant influence in the EU when explaining why they wished the UK to remain a member, and why they found it difficult to understand the wish of some in the UK to withdraw. Commenting on such views in January 2013, The Economist asked rhetorically: "if Britain were so impotent, why would they care?"[72]

32.  Differing assessments of the extent of the UK's influence in the EU are likely to feature heavily in the arguments both for and against the UK's continued EU membership in coming years. There is no readily available objective measure of a Member State's overall influence in the Union. However, the point of a Member State having influence in the EU is to achieve EU policy outcomes that realise its interests and objectives. Policy outcomes are thus a useful indicator in the debate. We therefore recommend that, in the reports which the Government will publish arising from the Balance of Competences Review, it should indicate, in each policy area, the extent to which UK policy preferences have or have not been fulfilled. This could help to inform public debate.

UK influence in the EU: the December 2011 European Council as case study

33.  As we noted at the outset of our Report, our inquiry was triggered by events at the December 2011 meeting of the European Council. Our witnesses largely assessed the December 2011 meeting in terms of its messages about, and impact on, UK influence in the EU.

UK diplomacy

34.  During 2011, there was a growing consensus among commentators and policy-makers that the longer-term stabilisation of the Eurozone would require further fiscal and economic policy integration among its Member States. In the run-up to the scheduled December 2011 meeting of the European Council, a key question was whether the further Eurozone integration at issue would or should involve EU Treaty change. The Eurozone states had first raised the possibility of EU Treaty change for these purposes in October.[73] According to the account which the Foreign Secretary provided to us at our request in February 2012, with the notable exceptions of Germany and France the preferences of most Member States going into the December European Council were for no EU Treaty change over Treaty change, but for Treaty change over a possible agreement outside the EU Treaties.[74]

35.  At the December meeting, European Council President Herman Van Rompuy put forward proposals for EU Treaty change. The Prime Minister made the UK's agreement to EU Treaty change conditional on the inclusion in the amended EU Treaty of a set of provisions which he put forward at the meeting. Other Member States declined to agree to the Prime Minister's requests, so EU Treaty change became impossible. Other Member States decided to enshrine in a separate treaty, outside the EU framework, the provisions for greater fiscal and economic policy integration which had been under discussion. At the conclusion of the European Council meeting, it was not clear how many non-Eurozone Member States might join this 'fiscal compact' treaty, although the total number of likely signatories from among all 27 Member States was not less than 23.[75] In the event, 25 Member States signed up when the 'fiscal compact' treaty was ready for signature in March 2012, leaving only the Czech Republic and the UK outside. The UK had had observer status in the Working Group which developed the text of the new treaty after December 2011. The 'fiscal compact' treaty, properly the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG), came into force on 1 January 2013 after it had been ratified by the required twelve Eurozone states.[76]

36.  Under the TSCG, among other provisions, Contracting Parties are to enshrine a 'balanced budget' rule in national law, and may face a case in the European Court of Justice (ECJ) and possible fine if they fail to do so. The TSCG further provides that, from March 2013, no Eurozone state may receive financial help as part of any new programme with the European Stability Mechanism (ESM, the Eurozone's permanent bailout facility) unless it has ratified the TSCG. The TSCG also formalises regular meetings of the Eurozone Heads of State or Government. The Eurozone states are to hold at least two Euro Summits a year and appoint a semi-permanent summit president.[77] The Euro Summits are to discuss the "specific responsibilities" of Eurozone states with respect to the single currency, "other issues concerning the governance of the Euro area" and "strategic orientations for the conduct of economic policies to increase convergence in the Euro area". The Heads of State or Government of states which have ratified the TSCG but are outside the Eurozone are to participate in Eurozone summits for discussions of competitiveness for TSCG states and "modification of the global architecture of the Euro area". Otherwise, the President of the Euro Summit is to keep non-Eurozone TSCG states and non-TSCG EU Member States "closely informed" about Euro Summit meetings.[78] We summarise the different groups of Member States belonging to the Eurozone, the TSCG and the EU as part of Annex 3.

37.  The Foreign Secretary confirmed to us that the Government's view would have been that, had the provisions of what became the TSCG been incorporated into the EU Treaties, UK ratification of the resulting EU Treaty change would not have required approval in a referendum under the terms of the European Union Act 2011. The Government would have regarded the EU Treaty changes as exempt from the 'referendum lock' instituted by the Act because they would have affected only Eurozone states. As a result, in the Government's view, the Treaty changes would not have implied any transfer of power or competence from the UK to the EU.[79] Professor Michael Dougan and Dr Michael Gordon of Liverpool Law School told us that this was their reading too.[80] However, Mr Hague appeared to acknowledge that the Government's view might have been challenged in Parliament and/or via judicial review.[81] Under the European Union Act 2011, UK ratification of EU Treaty change—of any sort—requires primary legislation.[82]

38.  Beyond the bare outline of events set out above, media reports at the time made clear that there were widely differing accounts of the December 2011 European Council. These assigned to different parties prime responsibility for the failure to reach agreement among all 27 Member States.[83] Our witnesses similarly presented differing accounts:

According to the FCO, the Government had legitimate concerns about closer fiscal and economic policy integration in the Eurozone 'spilling over' into Single Market matters; and about the risk, more specifically, that instituting such closer Eurozone integration through the EU Treaties (rather than without Treaty change) would have made it easier for the EU institutions to act in Single Market matters in the interests of the Eurozone. According to the FCO, the Government indicated to its EU partners throughout autumn 2011 that if the Eurozone states sought EU Treaty change to provide for their greater integration, it would require Treaty-level safeguards to mitigate this risk.[84] The Government seemed to perceive this risk to rise significantly with the circulation, only one day before the European Council, of a letter to President Van Rompuy from German Chancellor Merkel and then-French President Sarkozy in which the two leaders called for "a strong economic pillar" to the Eurozone, to be instituted through Treaty change. This "pillar" was to "foster [...] stronger growth and enhanced competitiveness" in the Eurozone as well as fiscal discipline, and would possibly encompass financial and labour market regulation and some tax issues.[85] However, at the European Council meeting, President Sarkozy in particular indicated that he would not accept the UK's proposals under any circumstances.[86] At the time, the Foreign Secretary referred to the "detail" of the Government's requests, saying that the Government could not finalise its proposals until after it had seen the letter from Chancellor Merkel and President Sarkozy, in order to ensure that they were "calibrated to the precise Treaty changes proposed".[87] However, according to a further letter from the Foreign Secretary in February 2013, a year after his original account to us, at the December 2011 meeting the Government had sought other Member States' agreement only to the "principle that safeguards were needed to protect the Single Market as greater integration took place" (emphasis added).[88]

Other witnesses put the failure to agree EU Treaty change more squarely at the Government's door. They criticised either the substance of the Government's position, or what they saw as poor UK diplomatic work in the run-up to the December 2011 meeting, or both. Brendan Donnelly, of the Federal Trust, saw the December 2011 European Council as "a simple failure of British negotiating tactics". He thought that the Prime Minister might have found a more sympathetic hearing for his proposals "with better preparation and presentation".[89] The former senior European Commission official Graham Avery reported a view he had heard that, professionally, the negotiation had fallen below the UK's usual standards;[90] and the think-tank Open Europe said similarly that any future requests for safeguards that the UK Government might make needed to be "better thought-through, prepared and communicated" than those put forward in December 2011.[91] The campaign organisation Nucleus and the former diplomat Sir Colin Budd suggested that the Government's position failed in December 2011 because it presented its requests only at the last minute and had not secured allies among other Member States.[92]

39.  The Government has declined to publish the document containing the proposals that the Prime Minister put forward in December 2011 as the Government's condition for Treaty change, on the grounds that it does not publish draft documents circulated as part of international negotiations. However, in response to a request from the Treasury Committee, the Chancellor, the Rt Hon George Osborne MP, outlined the UK's proposals in a letter.[93] Mr Osborne's letter largely accorded with a document which was published in the media and claimed there to be the document which the Prime Minister put forward at the December meeting.[94] According to Mr Osborne's letter, the Government had requested the inclusion in any amended EU Treaty of seven items. Our understanding of the relevant legal provisions is that three of the Government's requested provisions would have established a requirement for unanimous EU decision-making on financial regulatory matters which, under the current EU Treaties, require only a qualified majority because they are part of the Single Market.[95] A further UK proposal would have established that all EU levies with fiscal impacts, including levies on the financial sector, would be treated as fiscal matters (and would thus be subject to unanimity) rather than as regulatory matters in the Single Market (which require only a qualified majority).

40.  Sir Howard Davies judged some of the safeguards which the Government requested in December 2011 to be "useful" and "important". However, he told us that few of the UK's EU partners "saw the logic" of the Government's requests for safeguards concerning the financial sector in response to proposed Treaty changes that were to do with fiscal policy. (The Prime Minister appeared to acknowledge this point to the Liaison Committee in July 2012.)[96] Sir Howard suggested that the Government's requests might have been more appropriate as part of the subsequent discussion of EU banking union (see paragraphs 82-87).[97] Graham Avery and Richard Corbett saw the problem as having been that the UK appeared to request 'compensation' for Treaty changes "that imposed no new obligations on it".[98]

41.  Mr Corbett also stressed the significance for other Member States of the UK wishing to introduce unanimous decision-making for Single Market matters. He reminded us that majority voting in the Single Market has been "the norm since the Single European Act signed by Mrs Thatcher". According to Mr Corbett, in December 2011 the UK's position in this respect was "quite a surprise" to other Member States and raised fundamental questions about the possibility of other EU members wishing to revert to unanimous decision-making for matters of particular concern to them.[99]

42.  At the December 2011 European Council, concerns in principle about the possible implications for the UK of closer Eurozone integration led the Government to request safeguards in return for agreeing to EU Treaty change. We regard the Government's concerns as legitimate. Furthermore, the haste with which Member State governments—including that of the UK—were obliged to react to proposals for EU Treaty change in December 2011 posed significant diplomatic challenges. However, some of the specific requests which the Government put forward at the December 2011 European Council appear to have been misjudged for the circumstances. In some respects, the UK Government 'got ahead' of its EU partners and was seeking to mitigate risks for the UK which had not yet arisen, at a time when other Member States were more immediately focused on shoring up the Eurozone. The Government's diplomatic preparation for the December 2011 European Council, in terms of finding allies, appears to have fallen short.

The significance of December 2011: differing interpretations

43.  We asked our witnesses to assess the extent to which the December 2011 European Council was a watershed in the UK's EU policy and place in the Union. They were split:

Some felt that the episode represented continuity. The campaign organisation Nucleus saw the meeting as part of a pattern of self-imposed marginalisation by the Government.[100] Nigel Farage MEP argued partly for a 'continuity' interpretation, in that, in his view, the episode barely diverted the EU from "getting on with the business of integration as fast as possible".[101] The former civil servant and EU official Sir Michael Franklin thought that both the EU and the UK had been able to proceed with business despite the failure to agree in December 2011.[102] The FCO saw the December 2011 European Council as one episode among many which demonstrated "how strongly [the Government is] prepared to defend our national interests".[103]

The economist Ruth Lea, on the one hand, and Liberal Democrat MEPs, on the other, argued that December 2011 should (or might well in future) be seen as a watershed—because, for Ms Lea, it exposed the UK's isolation in the EU, and, for Liberal Democrat MEPs, it marked the first time that other Member States had "decided that they could not work with the UK".[104] Dr Niblett also thought that the divergence within the EU which was manifest in December 2011 warranted the 'watershed' label.[105] The think-tank Open Europe agreed that December 2011 might be a watershed and was positive about the idea, inasmuch as the episode "could signal the start of a new political settlement" in the EU.[106]

44.  For Liberal Democrat MEPs and the Liberal Democrat Parliamentary Party Committee on International Affairs, the significance of December 2011 lay in what they identified as a reversal of the UK's traditional approach to EU negotiations. Whereas they saw the UK as previously having sought to exercise influence by remaining always at the negotiating table, they saw the Government's stance in December 2011 as having allowed other Member States to move to negotiations among themselves, without the UK.[107] According to the Liberal Democrat Parliamentary Party Committee on International Affairs, "this broke the number one rule that has guided British policy on Europe for decades".[108]

45.  In its Report on the TSCG in April 2012, the European Scrutiny Committee focused on the legal significance of the new Treaty. The European Scrutiny Committee was interested in two points in particular:

i)  Whether it was lawful for some Member States to establish a new treaty outside the EU framework to pursue their objectives when EU Treaty change could not be agreed. The European Scrutiny Committee saw this as circumventing the EU's established decision-making rules and, as such, as a "dangerous precedent".[109] However, Professor Dougan and Dr Gordon told us that it was a "remarkable proposition" to suggest that "recourse to an international treaty is somehow improper [...] whenever a Member State(s) tries and fails to persuade its partners to amend the EU Treaties".[110]

ii)  Whether it was lawful for Member States to provide in a non-EU treaty for the use of the EU institutions—in the case of the TSCG, for the European Commission and ECJ to have a role in the enforcement of the treaty's provisions. Media reports at the time suggested that the UK Government might have believed that it would be unlawful for other Member States to provide for the use of the EU institutions in this way, and that other Member States would therefore be obliged to agree to its conditions for EU Treaty change. However, at the December 2011 European Council, the legal service of the Council of the EU reportedly gave advice that the use of the EU institutions in a non-EU framework could be permissible.[111] The European Scrutiny Committee concluded that this aspect of the TSCG was "legally unsound".[112]

46.  Concerns about the use of the EU institutions under the TSCG led the Government formally to "reserve its position" on the TSCG, as set out in a letter in February 2012 from UK Permanent Representative to the EU Sir Jon Cunliffe to the Secretary-General of the Council of the EU, Uwe Corsepius. In his letter, Sir Jon said that the Government understood the need for the Eurozone to have "proper fiscal discipline, properly policed". However, he noted that "the EU institutions must only be used outside the EU Treaties with the consent of all Member States, and must respect the EU Treaties". He stated that the Government considered it "important to ensure that no objectionable precedents are set".[113] In its response to the European Scrutiny Committee Report in June 2012, the FCO used even stronger language. It said that if, following the entry into force of the TSCG, "the participating Member States were to act in a manner prejudicial to the operation of the Single Market or the operation of the EU Treaties the Government would wish to consider all possible avenues of action available to it including possible recourse to the European Court of Justice". The FCO said that if it ever decided to take any action on the TSCG, it would inform Parliament.[114] Professor Dougan and Dr Gordon acknowledged that there were "solid legal arguments" on both sides as to whether the use of the EU institutions in a non-EU framework required the consent of all Member States, or only some. However, they drew our attention to the ECJ's ruling in the case of Pringle v Government of Ireland in November 2012, which they said offered a "clear affirmation" of the possibility under EU law of Member States requesting an EU institution to undertake some non-EU functions on their behalf.[115]

47.  We conclude that the longer-term significance of the December 2011 European Council was twofold:

First, other Member States are willing politically to move to further integration without the UK when they are legally able to do so; and avenues may be available for them to do so under certain circumstances. In December 2011, for Eurozone states, meeting the perceived needs of the Eurozone took priority over negotiating EU Treaty change among all 27 Member States. For its part, the UK Government was prepared to see EU Treaty change fail at the negotiating stage—for the first time since the UK joined the then-European Economic Community in 1973—and other Member States move to a negotiation without the UK.

Second, given the prospect of closer integration within the Eurozone, the UK Government now considers that protecting the UK's interests in the Single Market may no longer be possible under qualified majority voting, and that tougher decision-making thresholds may be required. This represents a significant shift in the position which the UK has held on the Single Market since the Single European Act of 1986.

The impact of the December 2011 veto on UK influence in the EU

48.  In his statement to the House following the December 2011 European Council, the Prime Minister implied that, by proving himself willing to veto EU Treaty change, he had strengthened the UK's position in the Union. "If you are not prepared to say 'no' from time to time, you do not have any influence or power", he claimed.[116] Professor Patrick Minford of Cardiff Business School saw the Prime Minister's stance as having communicated, both in the UK and in other Member States, that the UK had interests at stake in Eurozone developments and was "not necessarily going to go along with things that would be against" them.[117]

49.  Over the longer term, several witnesses felt that the Prime Minister's December 2011 veto would weaken the UK's overall influence in the EU. They suggested, variously, that the December 2011 European Council and its outcome:

raised fundamental doubts about whether further Eurozone integration and the UK's position could be reconciled, and constituted the latest episode to reinforce a sense that the UK was probably on a trajectory different from that of the rest of the EU;[118]

furnished other Member States with what could be an important experience of engaging in further integration without the UK;

formalised structures in which the UK would not be represented, in the shape of the Euro Summit;[119] and

perhaps made other Member States less inclined to try to accommodate UK concerns. Charles Grant, Director of the Centre for European Reform, spoke of the Prime Minister's veto creating "upset", annoyance and "ill will".[120]

For these reasons, several witnesses suggested that the outcome of the December 2011 European Council increased the risk of other Member States 'caucusing'—that is, holding key discussions, reaching understandings and doing deals—without the UK.[121] Sir Colin Budd warned of "the incremental effect of the widespread and increasing assumption in the rest of the EU that the UK perspective, when it comes to considering the future of Europe, is of less and less importance".[122] Michiel van Hulten said that the UK had lost influence "in the atmospherics" and noted "a feeling that [...] people are no longer willing to listen to the UK in the same way as before".[123]

50.  In the shorter term, with respect to specific EU policy issues since December 2011, Sir Colin Budd said that there was "accumulating evidence that [agreement on the TSCG] has reduced [the UK's] capacity to influence future EU legislation in the areas it covered".[124] Sir Howard Davies said that the financial sector was "nervous" lest the UK lost influence over forthcoming pieces of EU financial sector regulation as a result of the December 2011 meeting.[125] At the least, witnesses did not identify any concrete immediate benefit to the UK from the December 2011 episode.[126] However, over spring-summer 2012, when they were providing evidence, witnesses also could not identify a concrete case in which the UK had lost out as a result of the Government's December 2011 stance.[127] Such witnesses included Charles Grant, who immediately after the event had assessed the December 2011 European Council as a "disaster" for the UK. By June, he said that this assessment needed to be "downgraded", at least as it applied to the short term.[128] In July 2012, Sir Howard Davies told us that there was so much going on in the Eurozone, "that fuss in the middle of the night in December has almost vanished—receded into the mists".[129]

51.  Since December 2011, the Government has posted both 'wins' and 'losses' in terms of securing its policy preferences in major pieces of EU business. For example:

In February 2012, eleven other Heads of State or Government joined the Prime Minister in writing an open letter to European Council President Van Rompuy and European Commission President Barroso pushing for liberalising EU reforms to stimulate growth. The FCO told us that the letter "effectively became the agenda for the [March 2012] European Council and our proposals on free trade, deregulation and completion of the Single Market were included in the final communiqué from the summit".[130]

At the June 2012 European Council, the Member States agreed that London would host one of two satellite courts of the new EU patent court, after Germany and France had initially appeared to agree to split the sites between only the two of them.[131]

In December 2012, the Member States reached an agreement on the proposed Single Supervisory Mechanism (SSM) which incorporated several UK objectives. The SSM is the first element in the EU's proposed banking union. The Chancellor declared the deal to be a "good agreement for the Eurozone and the wider European Union, including the UK".[132] (We discuss the SSM deal further in paragraphs 82-87.)

At the European Council in February 2013, the Member States reached agreement on the overall ceilings for the EU's next long-term budget, the Multiannual Financial Framework (MFF), for 2014-2020. Going further than a call for a real-terms freeze that the Prime Minister had first made with three other Member State leaders in December 2010, the Member States agreed on a real-terms cut in the budget—the first time in the EU's history that such a cut has been agreed.[133]

In late February 2013, Ministers in the Agriculture and Fisheries Council reached agreement on elements of a reform of the Common Fisheries Policy, including a ban on fish discards. The Fisheries Minister, Richard Benyon MP, called the deal "a historic moment in reforming the broken Common Fisheries Policy".[134]

In March 2013, the UK was defeated in its attempt to resist the establishment of an EU cap on bankers' bonuses, as part of amended EU legislation on banks' capital requirements (the 'CRD IV' package).[135] Charles Grant had noted in July 2012 that the UK had never been outvoted on a financial services matter, even when—under qualified majority voting—technically it could have been. He warned then that this 'gentlemen's agreement' was the sort of arrangement that might break down if goodwill towards the UK weakened too far.[136] However, the bonus cap was effectively added by the European Parliament as its 'price' for agreeing to the wider package,[137] in which the Government had earlier in 2012 won agreement to one of its key objectives, namely flexibility to implement higher capital requirements than those set at EU level.[138] We note that a request to revert to a unanimity requirement for decisions on maximum harmonised standards in the financial sector was among those to which the Prime Minister failed to win agreement at the December 2011 European Council (see paragraphs 38-42).

For his part, Mr Hague told us in March 2012 that the disagreement at the December 2011 European Council had "not spilled over into other areas". He did not believe, he said, that "anything that [had] happened so far [had] reduced [the UK's] clout, leverage or ability to lead on all the other issues with which the EU is concerned [...] It has not made any difference to those things at all".[139] Several witnesses commended the Government for proceeding constructively with 'business as usual' in the EU following the December 2011 meeting.[140]

52.  We have not found that, by itself, the Prime Minister's veto of EU Treaty change at the December 2011 European Council has so far had a decisive overall effect, either way, on the UK's ability to exercise influence in day-to-day policy-making in the EU. Although broader factors also carry weight, it is necessary—and may be sufficient—for a Member State to construct such influence on a case-by-case basis, by developing well-prepared positions and alliances.

53.  Our evidence suggested a number of lessons that the Government might draw from the December 2011 European Council in order to exercise influence in the EU more effectively. Since we found that they were applicable beyond the circumstances of December 2011, we set them out in paragraphs 80-81.

 


45   William Hague, "Britain's foreign policy in a networked world", FCO, London, 1 July 2010 Back

46   Ev 117 Back

47   For example, Sir Colin Budd at Ev 60 Back

48   Ev 155 [Brendan Donnelly] Back

49   Ev 120 [Ruth Lea] Back

50   Ev 103 [Nigel Farage MEP] Back

51   Ev 112 Back

52   Ev 186; Professor Schnapper made a similar argument, at Ev 172. Back

53   Janan Ganesh, "Britain suffers delusions of weakness not grandeur", www.ft.com, 17 December 2012; "Muscles in Brussels", The Economist, 14 January 2013 Back

54   Ev 103; see also Ev 120-122 [Ruth Lea]. Back

55   Ev 155 Back

56   Ev 138 [Liberal Democrat Parliamentary Party Committee on International Affairs], 154-155 [Brendan Donnelly] Back

57   For a recent survey, see Nathaniel Copsey and Karolina Pomorska, "Poland's power and influence in the European Union: The case of its eastern policy", Comparative European Politics, Vol. 8 (2010), pp 304-326 Back

58   Neill Nugent, The Government and Politics of the European Union, 7th edition (Palgrave Macmillan, 2010), p 273 Back

59   Council voting weights before Croatia's accession are as in Protocol 36 to the EU Treaties, on transitional provisions, summarised at www.consilium.europa.eu/council?lang=en. Voting weights following Croatia's accession are established in Croatia's Accession Treaty, Article 20: OJ L 112/21, 24 April 2012. The UK has 12.5% of the EU's population (2013).  Back

60   The UK's share of EP seats will fall marginally, to 73 of 766, between 1 July 2013 and the end of the 2009-2014 EP term, because Croatia's incoming twelve MEPs are simply being added temporarily to the total. In the EP to be elected in 2014, the UK's share of seats is expected to rise again slightly, to 73 of 751, when the maximum EP seat number established in the Lisbon Treaty is expected finally to be achieved. The UK will retain the third-largest complement of MEPs throughout. The post-2014 distribution of seats has been proposed by the EP (subject to the maximum established in the Lisbon Treaty) and awaited the Council's agreement as we prepared this report in spring 2013: see European Parliament resolution of 13 March 2013 on the composition of the European Parliament with a view to the 2014 elections, TA(2013)0082. Back

61   Ev 186. Sir Colin Budd used the same phrase, at Ev 62. Back

62   Sénat, Rapport No. 258 (2008-2009) de M. Jacques Legendre, fait au nom de la commission des affaires culturelles (1) sur la proposition de résolution européenne présentée par M. Hubert Haenel au nom de la commission des affaires européennes (2) en application de l'article 73 bis du Règlement, sur le respect de la diversité linguistique dans le fonctionnement des institutions européennes, 11 March 2009 Back

63   Q 105 Back

64   Ev 189-193. The data which VoteWatch Europe provided to us for July 2009-March 2013 updated those presented in Figures 6, 7 and 8 of its report Agreeing to Disagree: The Voting Records of EU Member States in the Council since 2009, published in July 2012 and available at www.votewatch.eu/blog/wp-content/uploads/2012/07/votewatch-annual-report-july-2012-final-7-july.pdf. Back

65   Qq 105-106 Back

66   www.ecfr.eu/scorecard/home Back

67   Ev 103, 105-106 Back

68   Ev 162 Back

69   Ev 153 Back

70   Q 96 Back

71   Ev 80 Back

72   "Muscles in Brussels", The Economist, 14 January 2013  Back

73   Conclusions of the European Council, 23 October 2011; Euro Summit Statement, 26 October 2011 Back

74   Letter from Rt Hon William Hague MP, Foreign Secretary, to the Chair, 15 February 2012, published with "Developments in UK foreign policy", oral evidence taken before the Foreign Affairs Committee on 8 March 2012, HC (2010-12) 1879-i, at Ev 18-21; see also Qq 1, 12 in Mr Hague's evidence on that occasion. Back

75   Statement by the Euro Area Heads of State or Government, 9 December 2011 Back

76   By mid-May 2013, the number of Eurozone states to have ratified the TSCG had risen to 14, and five non-Eurozone Member States had also ratified the Treaty; see Annex 3. Back

77   The Eurozone states appointed European Council President Herman Van Rompuy as the Euro Summit President in March 2012, for a two-and-a-half-year term. They agreed formal "Rules for the organisation of the proceedings of the Euro Summits" in March 2013. The European Scrutiny Committee summarised the provisions of the TSCG after para 12 of its Report Treaty on Stability, Coordination and Governance: impact on the eurozone and the rule of law, Sixty-second Report of Session 2010-12, HC 1817. Back

78   Title V TSCG Back

79   Q 168. The relevant provision of the EU Act (2011) is Article 4(4)(b). Back

80   Ev 112 Back

81   Q 168 Back

82   At the December 2011 European Council, European Council President Van Rompuy put forward two possible procedures for implementing the EU Treaty changes that were sought: the simplified revision procedure under Article 48(6) TEU; or use of the 'passerelle' mechanism which is possible under Article 126(14) TFEU. Before passage of the European Union Act 2011, under the European Union (Amendment) Act 2008 the UK could have ratified EU Treaty change implemented through a 'passerelle' mechanism without primary legislation. The European Union Act 2011 provided that EU Treaty change of any sort (barring a few exceptions in Section 10), including that implemented through a 'passerelle', requires primary legislation.  Back

83   See, for example, "The moment, behind closed doors, that David Cameron lost his EU argument last night", Bagehot's Notebook, www.economist.com, 9 December 2011 Back

84   Letter from Rt Hon William Hague MP, Foreign Secretary, to the Chair, 15 February 2012, published with "Developments in UK foreign policy", oral evidence taken before the Foreign Affairs Committee on 8 March 2012, HC (2010-12) 1879-i, at Ev 18-21; see also Qq 3, 12 in Mr Hague's evidence on that occasion. See also the letter from Rt Hon George Osborne MP, Chancellor of the Exchequer, to Andrew Tyrie MP, Chair, Treasury Committee, 27 February 2012, published by the Treasury Committee on its website at www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/other-committee-work-/parliament-2010/correspondence-session-2010-12. Back

85   "Text: Sarkozy and Merkel's letter to Van Rompuy", Reuters, 7 December 2011 Back

86   HL Deb, 10 January 2012, col 7 [Lord Howell, then-FCO Minister of State] Back

87   Letter from Rt Hon William Hague MP, Foreign Secretary, to the Chair, 15 February 2012, published with "Developments in UK foreign policy", oral evidence taken before the Foreign Affairs Committee on 8 March 2012, HC (2010-12) 1879-i, Ev 20; see also Q 12 in Mr Hague's evidence on that occasion. Back

88   Ev 84 Back

89   Ev 154 Back

90   Ev 77 Back

91   Ev 118 Back

92   Ev 61 [Sir Colin Budd], 163 [Nucleus] Back

93   Letter from Rt Hon George Osborne MP, Chancellor of the Exchequer, to Andrew Tyrie MP, Chair, Treasury Select Committee, 27 February 2012, published by the Treasury Committee on its website at www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/other-committee-work-/parliament-2010/correspondence-session-2010-12 Back

94   As published by the Daily Telegraph, see www.scribd.com/fullscreen/75193128. Andrew Duff MEP published the same text in On Governing Europe (Policy Network, 2012), pp 40-41.  Back

95   The matters in question were: transfer of powers relating to the prudential supervision of credit institutions, other financial institutions or financial market participants; decisions establishing maximum harmonised standards in the financial sector; and decisions on the relocation of the headquarters of any of the European Supervisory Authorities. Back

96   Q 17 Back

97   Q 2 Back

98   Ev 77 [Graham Avery], 186 [Dr Corbett] Back

99   Ev 186; see also Ev 154 [Brendan Donnelly]. Back

100   Ev 163 Back

101   Ev 103 Back

102   Ev 66 Back

103   Ev 81 Back

104   Ev 120-121 [Ruth Lea], 138 [Liberal Democrat European Parliamentary Party]; see also Nigel Farage MEP at Ev 103, who took a similar view to Ms Lea.  Back

105   Ev 150 Back

106   Ev 114 Back

107   Ev 107 [Liberal Democrat European Parliamentary Party], 138 [Liberal Democrat Parliamentary Party Committee on International Affairs]; Professor Schnapper took a similar view, at Ev 172. Back

108   Ev 138  Back

109   European Scrutiny Committee, Sixty-second Report of Session 2010-12, Treaty on Stability, Coordination and Governance: impact on the eurozone and the rule of law, HC 1817, para 67 Back

110   Ev 111 Back

111   "False assumptions underpinned British strategy", www.ft.com, 16 December 2011; "That clever Mr Legal", Charlemagne, www.economist.com, 18 December 2011 Back

112   European Scrutiny Committee, Sixty-second Report of Session 2010-12, Treaty on Stability, Coordination and Governance: impact on the eurozone and the rule of law, HC 1817, para 68 Back

113   Published by the European Scrutiny Committee, Sixty-second Report of Session 2010-12, Treaty on Stability, Coordination and Governance: impact on the eurozone and the rule of law, HC 1817, Ev 74 Back

114   European Scrutiny Committee, First Special Report of Session 2012-13, Treaty on Stability, Coordination and Governance: impact on the eurozone and the rule of law: Government Response to the Committee's Sixty-second Report of 2010-12, HC 393, June 2012, p 2 Back

115   Ev 111, 113-114. Professor Whitman and Thomas Raines suggested that the TSCG might set a precedent under which "sub-27" groups of Member States might task EU institutions, including the External Action Service, with carrying out aspects of their foreign, security or consular policies; Ev 127-128.  Back

116   HC Deb, 12 December 2012, col 528 Back

117   Q 109 Back

118   For example, Ev 154 [Brendan Donnelly] Back

119   Ev 109 [Liberal Democrat European Parliamentary Party], 163 [Nucleus] Back

120   Q 33 Back

121   For example, Ev 138 [Liberal Democrat Parliamentary Party Committee on International Affairs] Back

122   Ev 61 Back

123   Qq 96, 104 Back

124   Ev 61 Back

125   Q 7 Back

126   Qq 8 [Sir Howard Davies], 109 [Professor Minford], Ev 108 [Liberal Democrat European Parliamentary Party] Back

127   Q 8 [Sir Howard Davies]; see also Q 104 [Michiel van Hulten], Ev 114 [Open Europe]. Back

128   Qq 33-34, 37; see Charles Grant, "Britain on the edge of Europe", CER, 9 December 2011. Back

129   Q 8 Back

130   Ev 80; see "David Cameron and EU leaders call for growth plan in Europe: full letter", Daily Telegraph, 20 February 2012; Conclusions of the European Council, 1-2 March 2012. Back

131   "Cameron blocks EU patent deal", www.ft.com, 28 June 2012; "Summit gives birth to common EU patent", www.ft.com, 29 June 2012 Back

132   HC Deb, 19 December 2012, col 103WS Back

133   "Cameron wins rare victory in Europe", www.ft.com, 9 February 2013. The agreed ceilings for 2014-2020 are, in 2011 prices, 960 billion for commitments (1% of EU GNI), down by 3.4% and from 1.12% of EU GNI in 2007-2013; and 908 billion for payments (0.95% of EU GNI), down by 3.7% and from 1.06% of GNI in 2007-2013: see "Summary of the European Council agreement" on the Council website, at www.consilium.europa.eu/special-reports/mff/summary-of-the-european-council-agreement, and House of Commons Library, "EU Multiannual Financial Framework (MFF) 2014-2020", Standard Note SNEP 6455, last updated 22 March 2013. The European Parliament must approve the MFF; as we finalised this Report in May 2013, the EP was expected to vote on the issue before the 2013 summer break. Back

134   "EU fish discards deal welcomed by UK", www.guardian.co.uk, 27 February 2013 Back

135   "UK overruled on financial services law", www.ft.com, 27 March 2013; Council of the EU, "Bank capital rules: Council confirms agreement with EP", press release, 27 March 2013 Back

136   Q 37 Back

137   "Battle rages on bank bonus clampdown", www.ft.com, 19 February 2013 Back

138   "Finance ministers agree bank rules as UK wins concession", www.euractiv.com, 16 May 2012 Back

139   "Developments in UK foreign policy", oral evidence taken before the Foreign Affairs Committee on 8 March 2012, HC (2010-12) 1879-i, Qq 15, 30 Back

140   For example, Ev 66 [Sir Michael Franklin] Back

 
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Prepared 11 June 2013