Wednesday, 14 December 2011

Walking away from Europe (or should that be driving?)

It seems to me that David Cameron's decision to veto the amendment to the Lisbon treaty sets the UK clearly on a course to ultimately leave the EU, or to leave it in all but name. It was an epoch-making decision. The UK could "leave the EU in all but name" if the other 26 members proceed with closer fiscal and political union independently. Ultimately they could decide to exclude the UK from the single market in goods, labour, services and capital, as it would be easy for twenty-six to gang up on the one that was outside the new club. They could make their new rules without the need for unanimity. This is the huge risk that Cameron's decision runs. UK industry (what is left of it) is clearly worried about this too.

It is totally pointless for Nick Clegg to express his "disappointment" about the result of the summit. He is part of this government and he is jointly responsible for all its actions. This is at his door too. If he could not ensure that he, as the leader of the minority party in the coalition, had a veto on the veto, then his coalition seems to have failed at a critical point. The very fact that Timothy Kirkhope, the leader of the Conservative MEPs, feels he has to say "We are still a full member of the European Union and will remain so" indicates how in his mind, and that of many others, we are actually on the way out.

It does seem that withdrawal from the EU is what the British people want:
52 per cent of people agree that the euro crisis is an ideal opportunity for Britain to leave the EU altogether.
The British media has convinced British people of the absurd idea that, in the words of Nigel Farrage,
[Europe has] decided to head off on the Titanic towards economic and democratic disaster and we are now in a life boat.
There has been a massive failure of pro-European leadership in the UK over a long period. It would be hard for youngsters growing up now to understand how it was that the Conservative Party originally took Britain into the EU. Edward Heath's Conservative party was pro-European, but since then the party has become by imperceptible steps more and more anti-European, to the point where nobody notices the fact that David Cameron, regarded as being somewhere in the centre or on the left of his party, is by far the most anti-European leader we have had, not excluding Margaret Thatcher. Cameron made his direction plain even before he became PM, by withdrawing his MEPs from the European People's Party, the main centre-right group in the parliament, and aligning them with various odd far right elements instead. This was a harbinger of the situation we now find ourselves in: on a course heading further and further into the fringes of Europe.

In the last few years no-one in the British political mainstream, to my knowledge, not even the most pro-European, has been arguing that the UK would be better off in the eurozone – which it clearly would have been, particularly had it joined when the zone started. The European argument in Britain has been lost by default. We are abandoning ship. Many agree that ship is The Titanic. But it is not, this belief is mere insular schadenfreude. We are casting ourselves adrift in an open boat while the mother ship sails away with renewed purpose. For the idea that the euro or the EU will fail is absurd to nearly everybody in the rest of Europe. The economic ills of the eurozone counties are no greater, less in many cases, than those of the UK.

The UK has become ridiculously dependent on the financial services industry, and that industry has benefited enormously from the free market in capital. The argument that resulted in the veto revolves around a proposed tax on financial transactions in the EU, 75% of which occur in the City of London. Cameron therefore argued that the UK would be disproportionately affected, which is true. Other leaders argued, however, that any exception for the UK, any difference in the taxes on transactions between different states, would undermine the single market, which is also true. Hence stalemate.

The problem at bottom is therefore the unbalanced character of the UK economy, not anything being done in Europe. The problem is the collapse of British manufacturing. We do not have enough to export any more, we have to import too much, and the stuff we have to import, particularly oil and metals, is becoming much more expensive, hence a huge budget deficit. Blaming this on the American mortgage market of several years ago, or the banks, or the overspending of the Greeks, is bizarre blame-shifting.

Another problem has been the failure to start to put the UK economy on a more environmentally-sustainable basis. The Germans introduced their tough environmental and recycling laws two decades ago, and everybody in the UK at that time said these would bankrupt them, and would bankrupt us if we followed suit. Well, who is bankrupt now? But this is still the view of the present Chancellor of the Exchequer, who views UK and European environmental regulations as a brake on growth, and who feels that sustainability and wealth-creation are opposing desires which need to be "balanced". Hence, for example, this government's new planning proposals, which drive a coach and horses through the whole concept of publicly-controlled planning for the benefit of all, in favour of a market free-for-all.

The German government has genuinely promoted cycling, as the UK's has not. The Germans also introduced (eminently sensible) legislation requiring all bikes to be sold with lights (a idea always resisted by the UK cycle trade). Result: the Germans have developed an industry manufacturing high-quality bike lighting, and we buy all our bike lights from them (or the Netherlands, or Taiwan). OK, this is very small beer on the scale of the motor industry, or most other areas of the economy. But it is an example of the interrelations between environmental policy, industry and economic success in a world trying trying to establish more sustainable economies.

The drift of the UK away from the EU matters to a blog mostly concerned with cycling, this one, because with it goes, most probably, a psychological drift away from more collective, egalitarian and pro-environmental transport solutions, and a drift back towards the exclusive influence of the English-speaking world, the USA, Canada and Australia, with their emphasis on the right to use a car everywhere and for everything. In practice, a political drift away from Europe is likely to make UK transport campaigners' jobs even harder.

One tangential result of all this, however, which has probably not occurred to the Conservative and UKIP europhobes, is that their campaign is also pushing the United Kingdom apart. For the Celtic nations are not in agreement with the English about wanting to sever ties with Europe. The current UK may break away, but this greatly increases the chances of the other parts of the UK breaking away from England, in order to remain as full members of the EU. An independence referendum is on the cards in Scotland in 2014 or 2015, and the SNP wants to make an independent Scotland part of the Nordic group of countries, economically and politically tied to Norway, Sweden and Denmark.

So in seeking to preserve that which they most want to protect, an independent and strong United Kingdom, the anti-Europeans may themselves actually drive its destruction. And then where will England be?


  1. "In the last few years no-one in the British political mainstream, to my knowledge, not even the most pro-European, has been arguing that the UK would be better off in the Eurozone – which it clearly would have been, particularly had it joined when the zone started."

    Why would the UK be better off in the eurozone? It isn't clear to me at all.

    Maybe it would have undervalued our currency in the same way that Germany's has been undervalued, which has left them booming while other countries (the other countries whose relative weakness Germany has benefited from) have been left up the creek.

    I think it's clear that if the UK was in the eurozone from the start the euro would have been stronger than it has been, so we wouldn't have had anything like the same export boom that Germany has had. (And even in that scenario, I'm sure there'd still be no money left when our Labour government left office.) And what is the outcome of Germany's boom? They've had a nice decade and now they're facing (and refusing to pay) the bill.

    We, too, could have been screwing southern Europe and deluding ourselves about how competitive we are - is that what you mean?

    What seems clear to me is that everyone within the EU would be better off if They had completed the single market and left it at that. The single currency has been botched from the start, with countries breaking the rules (not least France and Germany, I'm led to believe) and with Greece falsifying their accounts in order to gain membership, and look at the mess we're in because of it.

  2. It is very clear that David Cameron sees him self as leader of the Conservative Party first and the UK is a secondary consideration.

    Not only that, it is a party that has forgotten that in the last election did not achieve a majority but actually lost the election. They are in coalition with another party, they do not have a mandate from the people of the UK to act as they please.

    Instead they behave like an Oligarchy ruling for their own self interest. It is extraordinary to hear that Tory backbenchers talking about an "English Spring"! As if this is some sort of equivalent of the grass roots movements calling for democracy in the Arab states. These were the people who oppose electoral reform at every turn. They try to block any attempt to bring about greater democratic representation in the UK. If this was Egypt they would have been members of the Mubarak regime!

  3. As an adopted Scot (from Zambia) originally, I entirely agree with David. What has pushed us away from England for decades has been this ridiculous British Bulldog mentality that successive conservative (with a small C) governments have pandered to, and this obsession with the City of London. It is nothing to do with nationalism. We in Scotland see ourselves as part of a broader community, with accompanying wider responsibilities.

    The only special thing the City of London has is its place on a time zone midway between the Asian stock markets and New York. Everything else could be done just as easily elsewhere in a few years by some enterprising country. We make or grow precious little here in the UK of real value - and our (Scottish) oil profits, which have obscured the real picture for so long are also on the way out. Time to wake up and smell the coffee!

  4. Dealing first with the Euro, I have to agree on at least this point, that stronger economies have benefited at the expense of weaker ones, in that Germany has had a low exchange rate vis a vis Greece so that Germany can price compete in Greece in a way that Greece cannot price-compete in Germany. The Germans should indeed now pay for the benefits they have been given by supporting the weaker economies now - if they don't, they will lose out in the long run.

    That doesn't make the Euro a bad idea overall though. If the UK had joined it, I think we can safely say that the Euro would have looked very different now. Perhaps not problem free but not in the state it is now in.

    What is, and always was a bad idea, which goes back through successive administrations at least as far as Thatcher, is the promotion of our financial services industry at the expense of all else, particularly manufacturing. As a senior exec in the financial services sector I am only too well aware that my prosperity has more to do with luck (choosing the "right" career) and an unduly sympathetic treatment by government, than with my own talents.

    The City's pre-eminence in financial markets is partly due to its time-zone location, between the great markets of New York and the Far East, but in that respect Paris or Frankfurt would have done equally well. Two other factors are probably more important, regulation which is generally even more lax than in the USA (we still don't have a regulator with the teeth of the SEC, and have only recently caught up on anti-bribery) and a hugely favourable tax regime.

    I am not talking about mainstream corporate or pesonal tax rates, where actually France and Germany are not really materially more burdensome than the UK, indeed their top rates of tax are now lower than ours. I am talking about the mainland tax haven which is the "non-domicile" rule, together with sweetheart deals with certain industries which permit them to treat their remuneration as something else which suffers much lower rates of tax. So we have become very attractive to a footloose tribe of bankers and hedge-fund managers from many countries who have no emotional attachment to London and would just as willingly decamp to Singapore or Frankfurt if they paid less tax there.

    As we know, the benefits they bring are totally illusory. The benefit to the UK economy from banks for example is a good deal less than UK taxpayers have recently spent propping them up. Cameron is now playing russian roulette with all our futures to protect "The City" which if anything has damaged us greatly, and at best (at least the bit he is really talking about, ie investment banking) contributes no more than a couple of percent of our GDP.

    What does that have to do with the price of fish? On the one hand, such industry as we have left (mainly subsidiaries of US, Korean or Japanese, indeed even Indian, companies) is aghast at the idea we may depart the EU. They know full well that is suicide - we would never be accepted as the US' 51st state. But then, yer average Tory politician (and too many "New" Labour ones too) would never dirty his hands in industry, much preferring to secure a few nice City directorships and consultancies. They are feathering their own nests, and licking the hands that feed them.

    It augurs ill for anything or anyone which/who can't lay claim to a wealthy special interest.

  5. As a Dutch European I have to say I'm sorry to see the UK, or maybe just England, leave the EU. But has your heart ever really been in it? I know mistakes have been made and that the EU head-office in Bruxelles needs some major changes, but getting out may not be to the UK's advantage in the longer run, it seems only the 'City' has a reason to rejoice while the euphoria lasts.