Foreign Affairs CommitteeWritten evidence from Brendan Donnelly, Director, Federal Trust
1. This submission addresses all the four questions posed by the Committee in its call for evidence. In summary, I argue that as a result of decisions by successive British governments the United Kingdom is likely to be for the foreseeable future a spectator rather than a shaper of the most important developments in the European Union. The events of the European Council in December 2011 were in my view a clear illustration of this reality.
2. I am the Director of the Federal Trust, a research institute concerned with subnational and supranational political structures. From 1994 to 1999 I was a Conservative Member of the European Parliament. My submission is offered in a personal capacity.
To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union?
1. At one level, the European Council of December 2011 can be regarded as a simple failure of British negotiating tactics. The British position was not that of refusing to join the proposed Fiscal Compact act as a matter of principle, but rather of being willing to do so if certain changes were made in the Union’s decision-making procedures in order to “renationalize” the regulation of financial services. The European Council’s consideration of this proposal had not been well prepared, nor was it well conducted during the meeting of the Council by the British side. With better preparation and presentation, it might have been possible to secure a more sympathetic consideration or at least a less brusque rejection of this British proposal.
2. Beyond the immediate issue of questionable negotiating tactics, however, the events of December 2011 mark the unsurprising culmination of a series of events and decisions by successive British governments which have weakened British influence and standing within the European Union. The continuing refusal to join the euro; the continuing refusal to participate in passport-free travel in the Schengen area; the passage of the EU Bill in 2011; the commitment of the Coalition government to stand aside from any further European sovereignty-pooling over the five years of its existence; and finally the perceived attempt of Prime Minister David Cameron to unpick in December 2011 central elements of the European single market—all these steps have cumulatively led Britain’s partners in the European Union to the conclusion that the political trajectory of the United Kingdom within the European Union is likely over the coming years to be at best one of semi-detachment and at worst eventual total withdrawal. This has fundamentally changed the political “terms of trade” between the United Kingdom and the rest of the Union. Britain’s partners in the Union emphatically do not think today that the British government believes “we are all in this together.”
3. It would have been surprising indeed if this growing perception on the part of Britain’s partners had not led eventually to a diminution of British negotiating capacity within the Union. The enormous fund of good will towards the United Kingdom from its European partners and clever diplomacy by British officials and ministers have to some extent postponed this day of reckoning. But the increasing centrality of the Eurozone and its structures to the future evolution of the European Union has inevitably hastened the process of British marginalization. The Coalition agreement stipulates that during its five years of office the United Kingdom will not join or make any preparations to join the euro. The larger party of government has as its established policy not to join the euro in any circumstances. Against this background, the British government cannot reasonably expect to play any significant role in the European Union’s current defining debates, those about the future of the Eurozone and about the implications of that future for the wider structures of the Union. There will no doubt continue to be some areas of the European Union’s activities where the United Kingdom will be able to make a constructive contribution. But the crucial question of the euro is not one of them. That fact has the profoundest consequences for Britain’s position within the European Union.
Between now and 2020, what institutional architecture and membership should the UK seek for the EU? Should the UK embrace a formalised two (or more)-tier EU and start to develop ideas for multiple forms of EU membership?
4. Over recent months, the British government has found itself in the unexpected position of urging upon its partners in the Eurozone a quicker and deeper process of integration than some of them might wish. Britain’s position outside the Eurozone deprives these calls of political authority or significance. The fact that they are being made highlights however the uncomfortable alternatives with which a United Kingdom semi-detached from the European Union finds itself confronted. The success or failure of the Eurozone is a matter of central economic importance to the United Kingdom, not least in view of the British economy’s current fragility. There is a more than plausible case to be made for arguing that the success of the Eurozone can only be achieved by greater political and economic integration among its members. Yet when the current British government calls upon its neighbours to pursue more vigorously such integration, it is spectacularly reversing centuries of British foreign and European policy, central to which was the avoidance of united European structures potentially hostile to the United Kingdom. While a more deeply integrated Eurozone will no doubt be a more positive factor for the British economy than one which has disintegrated, its successful integration may well pose in the medium term a new set of political and economic problems for the United Kingdom. There could be no guarantee, or even likelihood that the approach of this integrated Eurozone to such questions as macro-economic policy, financial regulation, trade and competition would always be congenial to the United Kingdom.
5. Ironically, its very semi-detachment within the European Union dispenses the present British government from needing to form any very precise view of the appropriate future structures for the Eurozone and of the European Union in general. Unless the single European currency ceases to exist, or its membership is radically reduced, decisions on these matters will overwhelmingly be taken by others, and it will be up to Britain to make what it sees as being the best of the situation with which it is confronted. In the chaos that would follow the collapse of the single currency, Britain’s voice might (but not necessarily) be a determining one in the reconstruction of European co-operative and integrative structures. Otherwise, its role will predominantly be that of a spectator. Even on the question of how many other countries from within the Union will wish to share Britain’s role as spectator, and to what extent, the British capacity to shape events should not be over-estimated. Before the European Council of last December, there were well-publicized calls in this country for the United Kingdom to play a role of leadership for the member states of the Union not in the Eurozone. The outcome of the European Council clearly suggests that these calls are unrealistic.
What is the relationship between the new “fiscal compact” Treaty and the EU’s acquis? What impact might the conclusion of the “fiscal compact” Treaty have on other aspects of the EU and its policies, such as the EU budget, enlargement, or the Common Foreign and Security Policy?
6. The “Fiscal Compact” is unlikely of itself to compromise the present acquis of the European Union. On the other hand, the Compact is unlikely to be the final building-block of the greater economic, fiscal and political integration emerging from the present difficulties of the Eurozone. If this integration continues on its present path, the current acquis of the Union will inevitably come to form an ever smaller proportion of the Union’s legal instruments and structures. The members of the integrated Eurozone will be well placed to shape the new elements of the acquis and in some instances to revise the existing acquis, according to the Union’s established decision-making procedures. Fear of this latter prospect may well have weighed with Mr Cameron in his abortive attempt to change some of the Union’s decision-making procedures at the European Council last December.
7. The Fiscal Compact is equally unlikely to affect directly the three mentioned policy areas of the European budget, enlargement and the Common Foreign and Security Policy. The Eurozone countries are clearly unwilling to use the European budget as a major instrument of macro-economic or fiscal adjustment; if they had wished to do so, that would inevitably have created controversy with member states outside the Eurozone. The terms of the debate surrounding the continuation of the British rebate/abatement in the next Financial Perspective for the European budget are long familiar to all involved. The Fiscal Compact will neither exacerbate nor mitigate this probable confrontation. The debate about the further enlargement of the Union in general and specific candidate countries in particular is already a complex one, and the Fiscal Compact will not simplify it. The Common Foreign and Security Policy is a predominantly intergovernmental arrangement with its own specific decision-making procedures, in which Britain plays and is likely to continue to play a significant role. If the countries of the Eurozone were willing to adopt between themselves decision-making procedures for their contribution to the Common Foreign and Security Policy more akin to those of the Union’s other policy areas, then that would of itself be a radical innovation. No such change however seems in immediate prospect.
Should the UK Government support the incorporation of the “fiscal compact” Treaty into the EU Treaties? If it should, what demands and safeguards, if any, should it make its condition for doing so?
8. Paragraph 6 above sketched out the possible implications of the increasing integration of the Eurozone for the evolution of the Union’s acquis. These implications are not greatly affected by whether the Fiscal Compact is incorporated into the EU Treaties or not. If a future British government were able to secure some “renationalization” of decision-making in return for accepting the Compact’s incorporation into the Treaties, then it might regard itself as having achieved some desirable measure of “protection” against future developments of the acquis driven primarily by the member states of the Eurozone. To judge from the events of December 2012, it seems unlikely that any such quid pro quo would be on offer. It would of course be open to a future British government to acquiesce in incorporation of the Pact into the European Treaties as a simple gesture of goodwill to its partners, which will avoid legal complications for them and make no objective difference to the United Kingdom. Whether it will wish or be politically able to make this gesture cannot be predicted today.
Final Comment
9. The Committee’s Chairman, Mr Ottaway, remarked in connection with the proposed report that he was “starting from the assumption that the UK should and will remain an EU Member.” A recurrent theme of this submission is that Britain’s present capacity to influence the Union’s decision-making is small and likely to become smaller. When Britain joined the European Community in 1973, a central reason why it did so was in order to influence European decisions that, for better or worse, would crucially affect British interests. Policies pursued by successive British governments which put that influence at risk cannot but undermine the political rationale for British membership of the European Union.
28 May 2012