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Andrew Lilico

Andrew Lilico: The FU Treaty significantly changes our relationship with the EU so when's that referendum coming?

OK - so the government has capitulated on the "veto".  That's happened.  But in all the discussion about this so far, the central point seems to have been missed of why we had the "veto" in the first place.  During the negotiations on the new Treaty, the government requested insertion of a protocol in respect of financial services.  If our partners had agreed to that, Cameron indicated he would sign.  They didn't, so he didn't.  But we didn't get the protocol in there.  Why was the protocol requested?  That was explained in a letter to the Telegraph a couple of days before the Treaty summit, signed by (inter alia) the PPS' of David Cameron and George Osborne - so the very highest authority.  It stated:

"Although there have undoubtedly been regulatory failures in recent years, future [financial services] policy should primarily be decided by Britain, not the EU...From 2014, Britain will have only 12 per cent of the votes in the Council of Ministers and 10 per cent in the European Parliament, yet it accounts for 36 per cent of the EU’s wholesale finance industry and enjoys a 61 per cent share of the EU’s net exports of international transactions in financial services...It is imperative that the Government fights our corner by arguing either for a new EU protocol or a Britain-specific legal safeguard."

Note the discussion in the middle about what happens from 2014 (as a consequence of the Lisbon Treaty).  That is a direct reference to the argument in the Open Europe report (and the presentation thereof at the APPG) on which the Telegraph letter is based.  As I put it at the time:

"Whereas in the past, EU-level policymakers had been reluctant to over-rule Britain in respect of such a major industry, that was no longer true. Many continental politicians blamed “Anglo-Saxon finance” and Anglo-Saxon regulatory norms for creating the crisis. Their last interest would be in reluctance to impose on these. Once that instinctive reluctance were removed, then the low weight that the UK carried in QMV votes, relative to the size of the Financial Services sector, left it almost uniquely vulnerable. That would be exacerbated by Lisbon, with the increased role of the European Parliament and changes to QMV rules that meant the Eurozone 17 would have a qualified majority from 2014 on if they voted as a block."

A central concern of the December negotiations was that the Treaty creating a Fiscal Union of the Eurozone would effectively bind the members together as a single state.  They would increasingly vote as a block.  That would tend to happen naturally as part of the deepening integration between Fiscal, Economic and Monetary Union members but we can make the idea concrete and current by noting that the Greek and Italian governments have been replaced, in recent months, by governments more acceptable to the French and Germans.  Block voting is already here, and will become more common.

This fundamentally changes the nature of the European Union.  Whereas the Lisbon Treaty was an agreement between 27 countries (arguably 28 if, as we should, we include the European Union itself as a state - which under the Lisbon Treaty it legally is), with the establishment of the Fiscal Union the European Union will effectively become a Treaty agreement between 11 countries - ten non-Eurozone members and the Eurozone - and that number will fall further over time as additional countries join the euro.  Under the Lisbon Treaty rules on qualified majority voting, the Eurozone will by 2014 have a qualified majority - if the Eurozone votes as a block, exercising its common identity, it can outvote the rest of us.  We will shortly belong to a Treaty agreement whereby we commit by Treaty to do whatever the Eurozone country block-demands, whether or not we vote against it and no matter how many other EU allies we marshal to our cause.  That is a different deal from what we signed at Lisbon.

Establishment of Fiscal Union thus changes the nature of the European Union very profoundly.  The MPs' letter to the Telegraph and the proposed protocol attempted to respond to this profound change in the EU in a very limited way, repatriating a tiny number of financial services regulation powers.

Well, we didn't get the protocol.  And the new Treaty has proceeded to creating a Fiscal Union.  There is a series of interesting debates to be had about the use of EU institutions etc..  But standing back from these, we should not fail to notice that even as a non-EU Treaty, it still establishes a Fiscal Union between Eurozone members, will still greatly increase their tendency to block-vote, and thus still changes the nature of our relationship with our EU partners and how the EU Treaty works.

None of this is affected one iota by whether or not we ourselves are signatories of the new Fiscal Union Treaty.  It is the actions of others, drawing together into one Eurozone country that block-votes, that changes the relationship, not our own actions.  The new Fiscal Union Treaty changes the nature of the EU Treaty.

I am no fan of referendums.  But given the Government's undertakings (whether or not in law, definitely in terms of promises) to have a referendum on any significant change in our relationship with the EU, how can it be defensible to contend that this profound change in the Treaty should not result in a referendum?  If a change from a Treaty with 26 partners in which any one country had to marshal a significant weight of allies to achieve a qualified majority to a Treaty with ten partners in which one country (the Eurozone) can achieve a qualified majority by itself does not constitute a significant change in our relationship with the EU, what would?


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