Andrea Leadsom MP: The British option for EU reform can be based on trade and less interference

Andrea Leadsom is the Member of Parliament for South Northamptonshire. Follow Andrea on Twitter.

There is no doubt that change is needed. EU legislation and regulation impacts on almost every aspect of life in the UK. The British public are demanding a change. A recent YouGov survey (July 2012) shows that two-thirds want a referendum on or before the General Election in 2015. And almost half - 48 per cent - would pull out if given a choice today, versus 31 per cent who want to stay in. However, as I hear from my own constituents, most people in the UK want a renegotiated relationship with the EU rather than a simple in-out choice. The same YouGov poll suggests that if the UK were to renegotiate a new deal to protect Britain's interests in the EU, 42 per cent would vote in a referendum to stay in, and 34 per cent to leave. And that is why I am working so hard on the Fresh Start Project, to set out the options for renegotiation, and then build support for making it happen.

Whether we like it or not, change is coming. In the foreword to the recently published Fresh Start Project Green Paper: Options for Change, the Foreign Secretary wrote:

“The eurozone crisis is setting in train what may well be profound changes in the structure of the European Union. These will pose very important choices for every country in the European Union, inside the eurozone or out.”

The choice facing the eurozone now is about politics, not economics. Even though some countries are facing extreme difficulties due to high levels of government debt, if the eurozone chose to pool their government debt, they would be in a better position than the US, and only marginally worse off than the UK (Euro area government debt is 88.2% of GDP, US public debt is over 100% of GDP, and the UK’s is 86.4% of GDP). But that is a big if. Politicians and public in many euro states, most notably Germany, are reluctant to take responsibility for the debt and future spending of other euro states, such as Greece, Italy and Spain. The Germans, in particular, want strong, watertight budget control at the EU-level before pressing ahead with any pooling of debt. But whatever happens in the EU, the changes to EU treaties required to make it happen will present the UK with a rare opportunity to negotiate a different relationship. I want the UK the seize this opportunity and hope that the Fresh Start Project will help to do that.

To be clear, I do not want the UK to leave the EU; I want a substantial renegotiation of our membership. I want the UK to be part of the EU for trade, but at the same time to have more direct control over a range of policies that are currently decided at European level. The Prime Minister’s comments to the Lord Mayor of London's banquet in July where he called for a looser EU "with the flexibility of a network, not the rigidity of a bloc" point to the right direction.

The concept of a multi-tier europe, or of different levels of membership of the EU, is already a reality - some countries opt-in to Schengen, some to the euro, some to defence cooperation, some to cooperation in justice and home affairs, and some opt-out of these various areas, while some non-EU states opt-in to various EU levels of cooperation - and is gaining more traction in Brussels. The EU remains a substantial trade partner - 48.6% of UK goods exports go to the EU - and significant opportunities for growth remain, particularly in Services. Services account for 71% of EU GDP, but only 3.2% of this is from intra-EU trade. This is a huge opportunity and the government is right to continue to push for the completion of the Single Market in services.

In the debate last week, a number of alternatives to membership were discussed:

• Most Favoured Nation terms - Around half of manufactured exports to the EU would face an average tariff of over 5%, with some sectors particularly hard hit. UK car exports to the EU would face tariffs of 10%. This would have a significant effect on UK business, and make the UK a less attractive location for FDI. The UK would also lose its influence on framing EU regulation, and it is unlikely to be an option that any UK government would seek.
• The EEA or "Norwegian Option” - The UK would be outside the customs union, and hence subject to complex and costly rules of origin. The UK would still be subject to most EU regulations, but with little ability to shape them. Access to the single market for goods and services would be maintained, and the UK would not be subject to CAP, CFP, or regional policy, and is likely to have a significantly reduced budget contribution. 
• A Free Trade Agreement or "Swiss Option" - Outside the customs union and subject to rules of origin, but not formally subject to EU social or product regulation. In practice, all product regulation is likely to be replicated in order to export to the EU. Not subject to CAP, CFP, or regional policy, and likely to have a significantly reduced budget contribution. Free trade subject to negotiated agreement.
• Part of the Customs Union or "Turkish Option" - Member of the customs union, so with free access to trade for goods - services and agricultural products are not covered. Required to negotiate free trade agreements with any country that the EU opens trade negotiations with. Outside the EU Treaties and Institutions, so not subject to CAP, CFP, or regional policy, and not likely to make a significant budget contribution. Not subject to social regulation, but subject to all product regulation.

None are likely to be as good as a renegotiated membership.

For me, the ideal situation is a rolling opt-out of all EU policies. The EU is frequently criticised for its ratchet effect - that new treaties only ever add to the levels of cooperation and regulation, and few powers are ever returned to the member states. This inability to change any of the "acquis communitaire" - the body of law built up through successive treaty changes - could be challenged. For example, each change of national government in the member states could trigger a new opportunity to opt-in or out of EU legislation.  Tricky, yes, but isn’t this exactly what happens when you have a change of government at Member State level?  It is ridiculous that EU directives and regulations that were introduced over 30 years ago can be so difficult to change.

And in the shorter term, there is a broad list of policy areas that are crying out to be renegotiated. Some of the prime examples include:

Financial Services:

The Prime Minister himself has prioritised seeking safeguards against anti-competitive EU policy making in financial services, Britain’s most important industry employing over a million people in this country and generating 11% of our Exchequor revenues.  

Business growth:

A key EU policy area affecting Britain’s prospects for growth and economic recovery is the Social and Working Time Directive with its convoluted and anti-business focus.  Do we want our one million young people currently not in employment, education or training to get jobs, or do we want to prioritise rights for existing workers?  These are choices we have to make. Do we want more and more EU regulation that affects our small and micro businesses, the vast majority of whom are UK businesses with no activity in Europe?  Do we want to see the training of young doctors in our NHS hampered by EU regulation of on-call hours?

Regional Policy:

The UK could negotiate the repatriation of regional spending in richer Member States, focusing the Structural Funds solely on the poorer EU countries, which would reduce the total EU budget by around 15% (based on figures for the 2007-2013 period). 

Fisheries Policy:

CFP reform takes place every ten years in the decennial review. The European Commission put forward its latest proposals in July 2011, and aims to have the reformed CFP in place in 2013. The on-going negotiations therefore present the UK with a unique window of opportunity to push for comprehensive reform.

Now is the time to create a British vision for our relationship with the EU - not the Norwegian option, not the Swiss option, not the Turkish option, not the UKIP option, but the British option... more trade and less interference.