The UK and Europe

Britain is by nature and political inclination a reluctant European. In this respect, it is quite unlike any other member of the European Union. The original six countries (France, West Germany, Italy and the Benelux) formed the club in the 1950s because it seemed the best way to put behind the memory of a war that had damaged not only their economies and societies, but also their moral fibre. Most of the countries that joined later, from the Mediterranean to Central and Eastern Europe, similarly saw the European project as a way of escaping from their often unhappy, recent history. Britain, however, felt that the war had been a glorious period from which it had emerged as a winner, both militarily and morally. In this sense, the war boosted the British belief that they still had a global role and responsibility, as well as a large empire to run. All of this meant that there was, in Britain’s eyes, no need for any retreat to a position built around Europe alone.

Britain considers the EU on an essentially pragmatic and transactional basis, not as an important part of their identity and as an underpinning of their security, like other members

These historical sentiments may have proved misguided. But they remain important because they inform British attitudes about the European Union (EU) even now. Almost all of the other member countries see the EU in emotional terms as an important part of their identity and often, also, as an underpinning of their security and prosperity. Britain is different: it considers the EU on an essentially pragmatic and transactional basis. If membership seems to be desirable because it boosts trade and employment, fosters the success of British companies and protects the interests of the financial services industry in the City of London, then Britons will support it. But if the British people were to be persuaded that these were no longer strong enough reasons to be members of the club, they would be perfectly happy to no longer belong.

This way of thinking about Europe helps to explain two particular oddities about Britain compared with other countries. The first was its decision not to join the nascent European club in the 1950s. It deliberately stood aside from both the European Coal and Steel Community when it was formed, in 1951, and from the Messina conference that agreed, in 1956, to set up the European Economic Community. By the time the British government had belatedly decided to apply for membership, in 1961, France had acquired a president, Charles de Gaulle, who was mistrustful of the British and virulently against the entire Anglo-American establishment. De Gaulle vetoed two attempts by Britain to join, which is why the country managed to get in only in 1973, after his death.

In 2015, Britain is the only country still having a debate about its continuing membership in the European Union

The second oddity about Britain is that today, in 2015, it should still be having a debate about its continuing membership in the European Union. It is true that ever since the British joined, they have complained about various aspects of the European project: their heavy budget contribution, the common agricultural policy, the common fisheries policy, excessive red tape and regulation and the continuing drive towards ever closer union. But other countries, like Denmark, Sweden and even some of the newest members, have also had their complaints. Where Britain is alone is in continuing to discuss the question of whether it might be better off leaving the EU altogether. And that is the debate that the new Conservative government of David Cameron has now relaunched by promising that before the end of 2017, it will hold an in/out referendum, asking voters if they want Britain to remain a member of the EU.

Mr Cameron has said that before such a referendum, he will renegotiate certain aspects of Britain’s membership. The implicit threat is that if he does not get most of what he wants, he will be happy to advocate withdrawal. Yet, the reality is that all British governments, whether Tory, Labour or coalitions, have quickly come to appreciate that it would be better to remain full members, if only because the alternatives to membership are unattractive, unattainable or both. So, Mr Cameron is almost certain to campaign to stay regardless of whatever he wins from his renegotiation.

This conclusion is reinforced because what Mr Cameron has actually asked for seems to be relatively minor. He would like to change the rules to make clear that migrants from the rest of the European Union cannot claim benefits, including in-work benefits, for the first four years after they arrive in Britain. He wants some form of exemption from the treaties’ aspiration of pursuing ever closer union among the peoples of Europe. He seeks to give national parliaments a bigger say in policing and occasionally blocking EU legislation. He wants a renewed commitment to complete the single market in services, digital and energy. And he hopes to secure some guarantees that, as the euro zone pursues deeper political and economic integration, it will not discriminate in any way against countries, like Britain, which have chosen not to join the single currency.

Mr. Cameron has presented these proposed reforms as fundamental changes in Britain’s relationship with the EU. In reality, they are nothing of the sort. What he is in fact seeking is a set of measures that he has reason to believe his European partners are prepared to accept, but that he also hopes he can present, both to his Eurosceptic backbenchers and to the British people, as significant concessions, even if they seem relatively modest. In effect, he is trying to repeat the success of Harold Wilson, who came to power as Labour prime minister in 1974 with a promise to renegotiate the terms of Britain’s membership of the then European Economic Community and to put the results to an in/out referendum.

In the event, Wilson succeeded spectacularly. Before he began his purported renegotiation, opinion polls suggested that there was a substantial majority in favour of leaving. He won almost nothing in his renegotiation and even eschewed any treaty change. And yet, helped by a strong cross-party consensus and the support of almost the entire media and British business, he managed to win a two-thirds majority for staying in the EEC in the referendum in June 1975. That settled the issue for more than a generation. But now Mr Cameron has reopened it.

On the face of it, he seems to be in a better position than Wilson was. Just as in 1975, his demands for change are not so significant as to threaten the entire project, so his European colleagues can surely agree to enough of them to allow him to proclaim victory. Unlike 1975, moreover, most of the opinion polls have suggested that there is already a majority in favour of remaining a member of the EU. It seems likely that the Labour Party, despite having chosen a new Eurosceptic leader in Jeremy Corbyn, will back staying in. The Liberal Democrats, several leading newspapers and most of British business will do the same. In these circumstances, it certainly should be possible for a politician as skilled as Mr Cameron has shown himself to be to win his referendum.

Yet, possible is not the same as certain. Wilson, in 1975, had one huge advantage over Mr Cameron, 40 years later: the perception that the British economy was lagging behind the rest of Europe. Indeed, this view had been crucial to the first application to join, lodged by the Conservative government of Harold Macmillan, in 1961. Throughout the 1960s and 1970s, the thinking in London was that continental Europe, especially West Germany, but also France and the Benelux trio, was leaving Britain behind economically. In the post-war euphoria of 1945, Britain reckoned that it was the richest country in Europe. Only 15 years later did it come to realise that several continental economies had overtaken it. By 1975, when Wilson held his in/out referendum, the perception that Britain was the sick man of Europe had taken a deep hold among voters. Only a year later, after all, Britain became the first developed country to call on the International Monetary Fund for a rescue loan.

As Mr Cameron will recognise only too well, that is all a big contrast with today. Instead, the perception over the past 15 years has been that a combination of Margaret Thatcher’s liberalising reforms of the 1980s and the troubles of the euro zone since 2008 has created a situation in which the UK economy is consistently outperforming most of the rest of Europe. In 2015, indeed, the British economy was the fastest-growing among the G7 group of rich countries, which is one reason why Mr Cameron’s Tories won the general election in May. As British voters approach a referendum on whether to stay in or to leave the EU, they will be conscious of Britain’s relative economic success. And at least some may be vulnerable to the lure of a key message from the United Kingdom Independence Party (UKIP): that Britain suffers from being “shackled to a corpse” instead of engaging with more dynamic, faster-growing countries across the Atlantic and in Asia.

Here is also a second reason why the “In” campaign will find it harder to win than it was in 1975. The “Out” campaign is now both better financed and better organised. UKIP, which won 4 million votes but only one parliamentary seat in the May 2015 general election, has over the past few years managed to energise a core of supporters who consider leaving the European Union to be their top priority. In 1975, almost all mainstream newspapers were in favour of staying in the EEC (the sole exception was the communist Morning Star). This time, a number of papers, including the Daily Express, the Daily Mail, the Daily Telegraph and, possibly, The Sun, may be campaigning to leave. In 1975, the government managed to paint the Out campaign as a group of eccentrics and nationalists. This time, it will find it much harder to repeat that trick.

Unlike 1975, most of the opinion polls have suggested that there is a majority in favour of remaining a member of the EU

And there is a third big reason for Mr Cameron to worry about the referendum: immigration. UKIP, in particular, has managed to conflate Britain’s EU membership with the issue of its inability to keep down immigration, especially with the sight of hundreds of thousands of refugees from Africa, Afghanistan and Syria, who have been trying to reach European shores. The simple proposition that UKIP advances is that Britain cannot control its own borders and choose its own immigrants so long as it remains in the EU since it is bound to accept the treaty-guaranteed right to free movement of people. Should there be a renewed immigration or refugee scare in Europe at just the moment when the referendum is being held, there is a risk that the vote may turn into one about immigration, not EU membership, and that it may then be lost.

Referendums are, in any case, risky affairs. Over the past 25 years, there have been numerous examples of national referendums on European Union issues that have been lost, often unexpectedly and despite solid campaigning on the Yes side by the entire political elite, most of business and the mainstream media. Denmark and Ireland have both rejected EU treaties, only to be asked to approve them in a second vote. The Danes and Swedes have also voted against joining the euro. And in 2005, the voters of France and the Netherlands spectacularly rejected, by large majorities, the draft European Union constitutional treaty (much of whose content was later included in the Lisbon treaty, which was passed without a referendum anywhere except in Ireland, whose voters accepted it only at a second attempt). Then, there is the example of the Scottish referendum on independence that was held in September 2014. At first, opinion polls suggested that this would be easily won by the unionist side. But as the vote drew closer, the gap narrowed, and in the end, the margin was much tighter than anybody outside of Scotland had expected.

For all of these reasons, and despite the reassuring precedent from 1975, it would be a huge mistake to assume that the in/out referendum, when it comes, will be easy for Mr Cameron to win. He will be under fire from his own Eurosceptics and from sections of the press for failing to win big enough concessions in Brussels. There is every chance that the world economy will be less benign in 2016 than it was in 2015. The euro crisis remains unresolved, with a serious risk that Greece, in particular, could again become a controversial issue. Migration will still be a cause for public concern. And Mr Cameron’s government, like all governments, may well be suffering from mid-term unpopularity.

If Britain leaves the EU, there would be lower GDP as a result of trade disruption, lost exports and lost foreign investment

Given these circumstances, how best can the government (and the In campaign) try to win? One answer is to lay as much emphasis as it can on the economics of EU membership. It is inherently impossible to prove either way what the consequences of British exit (or Brexit) would be for the British economy, in large part because nobody can be sure what precise arrangement Britain would make with the EU after leaving. But most reputable studies, even from Eurosceptic think-tanks, suggest that there would be some cost in lower GDP as a result of trade disruption, lost exports and lost foreign investment. The only circumstances in which economists manage to predict any gain in GDP would be if a post-Brexit Britain were to adopt highly liberal policies of ultra-low taxes, minimal regulation, low wages, unilateral free trade and complete openness to immigration. None of these, most notably the last, seem politically likely to follow a decision to leave the EU.

Yet, economics alone is unlikely to win the day against powerful counterarguments. So a second option is to talk up the broader case for continuing EU membership. Opinion polls suggest that voters see advantages in working with other European countries in such areas as trade talks, climate change, counter-terrorism and even in foreign policy. The antics of Russia’s Vladimir Putin in Ukraine have put more emphasis on the importance of the EU’s common foreign and security policy. Indeed, right across Europe, support for the EU has risen in recent years in part because of a perceived growing threat from the Kremlin, as well as fears of a resurgence of violence and war across the Middle East.

The trouble with this line, however, is that it is extremely hard for a prime minister and party, which have spent so many years denigrating Brussels and all of its activities, to suddenly start praising the EU as a bulwark of foreign policy in a dangerous world. There would be gasps of disbelief were Mr Cameron to start saying that he is pleased to have a nascent European external action service in Brussels or that he welcomes EU summits discussing what to do about Mr Putin. The Tories have spent too long arguing that the North Atlantic Treaty Organisation (NATO) is the only valid defender of European security for them now to talk up the EU’s foreign and security policy with any credibility.

Hence, the third and most likely option for Mr Cameron, as he seeks to win an endorsement for staying in the EU, is to play up the negative consequences and risks associated with withdrawal. This tactic worked, in the end, in the Scottish referendum. On the EU, as on Scotland, it would start with an assumption that when voters are in doubt about any issue, they will tend to prefer the status quo to any big change. Pollsters reckon that as many as a quarter of British voters would back withdrawal in any circumstances; a slightly smaller number would want to stay no matter what. It is the remaining 50% or so of the electorate that will be open to persuasion, and the natural tendency will be for the largest chunk of this group to prefer that things remain as they are.

There are also some obvious risks associated with withdrawing from the EU that the government can emphasise. Simple uncertainty is one. Although the Lisbon treaty provides, in its article 50, for the possibility that a member country can declare its intention to leave and then be given two years to negotiate the terms of doing so, nobody has ever used this provision. So nobody knows how hard it would be to negotiate a new deal, nor how long it might take.

Pollsters reckon that a 25% of British voters would back withdrawal from the EU; a slightly smaller number would want to stay no matter what

A second grave source of uncertainty is the precise model that a post-Brexit Britain might choose to adopt. It could seek to join the European Economic Area, a club of non-EU members that consists of Norway, Iceland and Liechtenstein. These three countries are required to apply practically all of the European Union’s rules and regulations and even to contribute heavily to its budget in order to retain full access to the EU single market. Yet, they have no say over the legislation that they are obliged to implement. Many Norwegians are dissatisfied with this situation on the grounds of loss of democratic input into law making.

An alternative might be Switzerland, which is not forced to implement European Union legislation, but in practice is expected to do so in order to keep full access to the single market for goods. But the bilateral arrangements between Switzerland and the EU are cumbersome and took many years to negotiate, so Brussels will not want to replicate them for Britain. Besides, the Swiss do not have full access to the single market for services, including financial services, which is a serious potential drawback for the British economy, which is heavily oriented towards services. Like the EEA countries, Switzerland also has to accept free movement of people from the EU, an issue that is now extremely problematic as Swiss voters in 2014 said yes to a referendum that proposed limits on migration from the EU. At least for now, the EU is refusing to accept this proposal.

If not Norway or Switzerland, what other alternative is there? Britain could seek a customs union like Turkey’s or a deep, comprehensive free-trade agreement like that negotiated by some other applicant countries. But in most of these cases, access to the single market for services remains restricted, and there is still an expectation that countries will observe most or even all of the EU’s directives and regulations. Or, Britain could simply rely on the rules of the World Trade Organisation, of which both it and the European Union would be members. But in such a case, there might be tariffs on certain British exports, notably of cars, chemicals and foodstuffs. The odds are that this would at minimum create much uncertainty, and it would also be likely to divert foreign investment away from Britain.

Eurosceptics have responded to these uncertainties over alternatives to full membership with three assertions. One, which is probably correct, is that both sides of such a significant trading relationship would have an interest in some kind of free-trade deal. A second is that because Britain imports much more from the rest of the EU, especially from Germany, than it exports, Britain has greater bargaining clout in putting together such a deal. Yet, this seems implausible: the rest of the EU is a much more important market for British exports (45% of the total) than Britain is for the EU (10%).

The third suggestion is that Britain, the fifth or sixth-biggest economy in the world, has special clout for negotiating favourable treatment in Brussels. Yet, this seems overly optimistic. A big reason why countries like Norway, Switzerland and even Turkey have managed to strike relatively favourable deals with the EU was that they have all been seen as potential members. A post-Brexit Britain, on the other hand, would have just decided to leave. The temptation for the EU institutions and the other 27 national governments not to be too generous to Britain would be clear. Indeed, it might become an imperative: too kind a deal with Britain might just mean that some other countries would choose to follow it through the exit door.

The upshot of all of this is that Britain after Brexit might face, at best, grave uncertainty over its future relationship with the EU, leading to some leakage of foreign investment and possibly to some multinationals choosing to move location. Or, at worst, it might find itself obliged to stick to all the EU rules and regulations that Eurosceptics badly want to avoid, with the added sting that it would lose any say over how they are drawn up. The In campaign should certainly be able to make something of these risks to help secure a vote to remain full members of the EU.

There is one more area in which negative campaigning might work: the likely effect on Scotland. Scotland’s independence referendum in September 2014 produced, after some last-minute wobbles, a decisive ten-point victory for those wanting to remain in the union. Yet, it was followed only nine months later by a massive election victory in Scotland for the Scottish Nationalist Party, which now has 56 of the 59 Scottish seats in the Westminster parliament. At the time of the Scottish referendum, the SNP promised that the result would settle the issue for a generation. But the leader of the SNP, Nicola Sturgeon, has since made clear that if British voters were to back Brexit from the European Union, that might create new conditions for holding a fresh Scottish referendum on independence. In short, Brexit might well mean not only British withdrawal from the European Union, but also the break-up of the British union, the United Kingdom, as well.

The odds in advance of a referendum campaign are that a combination of such negative factors with a Tory government, under Mr Cameron, which is advocating a vote to stay in the European Union, ought to produce a clear decision by British voters to remain. But it is unlikely to be won by as large a margin as the two-thirds majority won by Wilson in 1975. And right up until the vote itself, the outcome may remain uncertain, as last-minute events, differential turnout or a host of extraneous factors might affect the result. Were the vote to go against Mr Cameron, the political fallout in Britain would be huge. It is hard to see him remaining as prime minister. His party might well split between pro- and anti-Europeans. There might even be an early election in which Labour and the Liberal Democrats could expect to do well. In short, much is riding on the result of the EU referendum in Britain.

The question that much of the rest of Europe will be asking, however, is much simpler: will the referendum definitively settle the issue, meaning that Britain will at last become a fully committed and active member of the European Union, with no reservations to hold it back? The answer to this question is, sadly, no, for two reasons.

The problem is that the referendum will not settle the issue definitively, and Britain will still have its reservations about the EU

The first is that the campaign for Britain to leave the EU is unlikely to die just because a referendum returns a decision to stay, especially if the margin of victory is reasonably close. UKIP, which took 4 million votes in the May 2015 election, is not going to disappear, and neither are the Tory party’s backbench Eurosceptics. Some will claim to have been robbed by an unfair campaign. Others will, like the Parti Quebecois in Canada, see one referendum loss as merely a prelude to a reinvigorated second campaign at some future date. There seems likely always to be a sizeable rump of British politicians who will want to get out of the EU.

The second reason is more subtle. It is that already, before and also after any referendum result, Britain is semi-detached from so much of what the European Union does. For many years, there was a popular notion in Brussels that the EU was a two-speed organisation: more enthusiastic countries would proceed more rapidly to full political and economic integration, leaving the less enthusiastic to catch up later. Economic and monetary union has shattered that idea. Now, there are countries, foremost among them Britain, which seem almost certain never to join the euro. This means that the club is no longer one of two speeds; instead, it has turned into one of different ultimate destinations.

The notion of what is known in Brussels jargon as variable geometry has become entrenched ever since the Maastricht treaty on economic and monetary union was ratified in 1992. Britain and Denmark secured opt-outs from the treaty provisions requiring countries to join a single currency. Other countries were also required to comply with the so-called Maastricht criteria before they could join the euro. In this way, a division of the European Union into those that are in the euro and those that remain outside was created.

It is mirrored in a number of other, albeit less significant, areas. Several EU countries are not in NATO (Ireland, Austria, Finland and Sweden) and so take a minimal role in European security and defence policy. Similarly, a number of the EU members are not in the passport-free Schengen zone (Ireland and Britain by choice, Bulgaria, Croatia and Romania because they are not ready). Britain and Denmark have opted out of substantial parts of the EU’s justice and home affairs policy. In effect, the European Union has turned into a sort of Swiss cheese with holes in it. But Britain stands out in some respects as having more holes than cheese.

The British will not try to stop further political and economical integration, but they will stand aside from the process

Will a Britain that votes in its referendum to remain in the EU decide that it wants to join more fully in all of its other policies? It seems highly unlikely. There is zero prospect of Britain joining the euro. Indeed, Mr Cameron’s government is using much of its negotiating capital persuading euro-zone countries to accept a requirement that they must not discriminate against non-members in discussions over the EU’s single market. There is equally little chance of Britain signing up to Schengen. In effect, Britain under Mr Cameron has decided to remain in a broadly semi-detached position. The British will not try to stop the euro zone, in particular, from becoming more integrated politically and economically. But they will stand firmly aside from the process.

In short, even after a positive result in the EU referendum, Britain will continue to be somewhat on the margins of the club, especially of a more deeply integrated euro zone. It is to be hoped that Mr Cameron and his government will still throw themselves more actively into normal EU business, ranging from foreign affairs to climate-change to trade policy (a notable part of this is the current negotiations on the Transatlantic Trade and Investment Partnership with America). But Britain will remain what it always has been: a reluctant European.