Report: Reforming the EU – update on Brexit negotiations progress

Reforming the EU – an institutional perspective

On Wednesday, I had the pleasure of being hosted by Europe House with some other students, bankers, civil servants, charity workers, lobbyists and other members of public life, in order to hear an institutional perspective on the negotiations currently being led by the British government on reforming the EU.

The panel consisted of Lord Boswell, Chair of the House of Lords EU Select Committee, Jacqueline Minor, European Commission Representative to the UK and Visiting Fellow to the LSE European Institute, Martin Westlake. Clearly that gave us a view from the British side, the European side, and the view from academics who are being consulted on the issue.

Jacqueline Minor started the discussion and outlined the Commission’s stance on the 4 major demand areas from Prime Minister Cameron – the increased drive for competitiveness in the EU, the importance and protection of national sovereignty in EU decision-making, an enshrinement of the relationship between Eurozone & non-Eurozone countries, and finally reform of the benefits entitled to EU citizens resident in the UK. She described some of these demands as easy to fulfil, some more difficult, and some utterly “problematic”.


It has been widely agreed what the easy ones are; the increase in competitiveness is something widely accepted across Europe as one of the things the Union is lacking and needs addressed. Mrs Minor pointed to the completion of the digital and services markets – particularly the capital markets union – as evidence that Britain is not alone in the EU as wanted to drive towards this. In fact at a time when the Union is showing deficits in speed, democracy and popularity, competitiveness and economic performance is one of the few things which I have no doubt the EU institutions feel they can and should pick up on. She also pointed to the smaller number of regulations passed by the EU this year – just 23 in relation to somewhere in the region of 100 that are usually passed.

I feel this is the area where the Prime Minister and British industry wants to drive at in particular; completing the single market has been one of the major successes of the EU, and the further equalisation and standardisation of the playing field is no doubt within its capabilities. However the raft of regulation which comes from the EU is something which many parts of British industry struggle to tolerate. I was only talking with my boss a couple of weeks ago, who used to work in the financial sector drafting contracts, and he told me about the huge number of difficulties he faced in accommodating the EU regulations in UK businesses. I think there’s a wide consensus in Britain that huge amounts of regulation is an area in which the EU should not tread. In fact when it comes to the City of London, and financial regulation, this will be one of the key deciding factors in support for the EU.

Lord Hill, EU Commissioner for Finance said in the FT this weekend that you cannot target your regulation against the businesses involved, it cannot be a means of trapping firms – and this is especially true for the financial sector. At the same time, EU regulation can also be beneficial. The working time directive is an oft used example of how the EU’s regulations also work to support Social Justice in the Union, and I believe that is very important as well, one of the areas the EU can stand out as a champion of. The fact is, the EU has to work out how to put its regulations in where it counts, where it will have the most effect with the least level of restriction and bureaucracy.

The issue which at first also seems obvious is the topic of ever-closer-union. That oft quoted clause of the Lisbon Treaty which in Britain has been very skewed away from its original intention. To many people, this has come to mean the EU obligating its member-states into an ever closer political union. It does not mean this. Not only does the quote often exclude the full clause – ever closer union of European peoples – it was in the preamble of the treaty and was meant as a slogan of the modern EU, a rallying cry – not a legally binding agreement. Therefore it is easy to see why the Commission has been quick also to accept this as one of the demands chalked up as ‘easy’. However what makes this proposal are interesting is that Mrs Minor lumped this demand together with the issue of sovereignty in the Union, and still labelled it as an easy fix. This may be down to what a few of my friends at university consider an unwillingness by the EU and those in favour of the Union to admit that the EU means giving up several sovereign rights that the nation-states previously enjoyed. It simply does. You cannot be a part of a supranational project like this, and still expect to retain the same level of sovereignty you had at the beginning and we all need to come to terms with this, especially considering that for the citizen, in the long run it will simply mean a shift of sovereign rights from the national to the European level – and no loss either.

The Commission representative demonstrated this lack of being honest about implications by the apparent wide acceptance that the national parliaments need a greater say in the running of the Union. Of course, there is already a ‘yellow card’ system, whereby national parliaments can force the Commission to explain and reconsider (though not completely abandon) legislation, if there are 9 in favour of this. British officials however have pushed for a ‘red card’ which supposedly gives the nation-states rights to force the abandoning of proposals. Of course this would not be a veto, as it would still require more than 1 state to block the legislation. The fact is, exactly how this would work has not been fully explained, which seemed to give Mrs Minor some cause for concern over whether this would be passed in the reforms.

My issue, which was mentioned by Lord Boswell in his piece, is that the red card paints the national parliaments in a very negative light when it comes to cooperation in the Union – Boswell said something along the lines of it seems the national parliaments are only there to block EU legislation. Instead, he proposed a ‘green card’, where parliaments would provide their approval rather than rejection. The distinction may seem trivial, but it defines the kind of Union we are in – one which is inclusive and respects the different stages of the democratic process, as opposed to one where there is constant dissonance and disagreement between the different centres of power. However that, and the Commission’s overall stance on the issue points out to me a different area of dissonance – over the point of increased national parliamentary powers, which I will come to in a moment.

There are 2 major areas which have caused contention in Cameron’s list of demands in the Commission’s eyes. Firstly, is the concept of creating a permanent 2-speed situation in Europe. However this really means something else entirely, as Italian Diplomat Vincenzo Celeste pointed out in the debate at King’s College on Tuesday, this implies both parts of Europe have the same destination, whereas the UK government, and Chancellor of the Exchequer George Osborne in particular, have been keen to point out, the British people do not have the same destination in mind, supposedly. The Lord Select Committee is keen to clarify whether this is the case, but assuming this is, then the idea of 2 speeds is nonsense when Britain does not intend to end up as part of the Schengen Area, or with the Euro as its currency for example.

Mr Celeste referred to this as being really a 2 pillar Europe, however that doesn’t sound right to me. It’s better I think to stick with the French term for the issue – Europe à la carte, meaning ‘according to the menu’; picking and choosing which parts of the project you want. Mrs Minor put her finger the main practical issue, which was picked up by the Italian Diplomat on Tuesday evening and Lord Boswell’s select committee – that the creation of legitimate mechanisms to moderate this relationship between the Eurozone and the rest of the Union would be tremendously difficult. The fact is that if the 19-strong currency union do as they do now in the Council, they can act as a bloc which forces through their interests. And it is here that I think the institutional understanding of Cameron’s ‘red card’ demand is a misinterpretation, which was highlighted to me by the Telegraph’s analysis of Cameron’s demands he made a couple of weeks ago.

Osborne defined it as an ’emergency brake’ – red card is suppose to shroud this very brash terms in EU vernacular. The fact is if Cameron can implement this and get say 8 other countries to vote with him, he can effectively block EU legislation weighted in favour of the Eurozone. Not a veto, but not a mere demand for an ‘explanation’ as the yellow card does.

This is why Boswell’s ‘green card’ idea seems like it misses the point -it is supposed to block legislation, not support the passing of European legislation. This is also why the Telegraph described this demand as the most contentious of the lot.

The journalist writing in question, one Mr Toby Young, wrote that the move would require treaty change however – something which the 27 other states would have to hold to – which on the other hand could require referenda – and would need to be sold as legitimate to the British public, which I doubt the populist right-wing would buy.Young also wrote that he doubted it would in the end be very important anyway – Britain tends to fight for issues that other non-Eurozone members do not consider as important, and those states may join the Eurozone as time goes on.

The fact treaty change requires as unanimous vote in the European Council is another obstacle to this being an effective reform. Any Eurozone nation (Young used France here) could easily veto the reform. And of course they would.

Unlike the Commission, or at least Jacqueline Minor, there are many figures who are considerably more against the idea of a dissonant Europe. Xavier Bettel said at the ALDE Congress a couple of weeks ago simply that “Europe is not à la carte”.

Explicitly labouring the point that you do not get to pick and choose as a member, that you can’t take the good bits and leave the difficult parts such as questions of solidarity to the rest, clearly showed that there is a considerable distaste for this part of the deal in the other European capitals. Being President of the Council of the EU, his voice is important in the EU. However the Luxembourg Presidency ends in December and will be replaced by the Netherlands in January. Dutch Prime Minister Mark Rutte does not seem any more in favour of the proposal despite being one of David Cameron’s closer allies in Europe.

The FT reported on Thursday Rutte having said that providing Britain with special guarantees could make a deal impossible to reach by the December summit of the European Council and could potentially scupper a deal altogether. Lord Boswell’s comment may put the nail in the coffin here however, as he said on Wednesday that treaty change in time would likely be impossible, however such a deal would nevertheless have to be legally binding. Considering all these factors, I sincerely doubt a reform of this rapidly rising issue in the heart of the Union will be made in time for the deadline of Britain’s referendum in 2017.

This issue however that the Commission representation at Europe House felt was the most contentious was the idea of restricting benefits to EU residents of the UK. I think this is mainly because unlike the Eurozone-non-Eurozone conflict, this issue strikes at the heart of one of the key pillars of the European project – freedom of movement. Despite it coming under fire after months of the refugee crisis and recently the security problem demonstrated in the tragic events on Paris on 13th December, few European politicians are willing to give up this fundamental idea behind the European Union. Xavier Bettel told the Congress hall in Budapest on 19th that the idea that anyone in Europe can go to any country and expect the same standard of living as nationals of that country is paramount in our concept of the Union.

Lord Boswell in his committee’s review told us he wants to discover whether this issue of benefit entitlements is one exclusive to Britain. It’s not just entitlements however, as Jacqueline Minor pointed out it is also a case of the export of child benefit, which all parents living in the UK are entitled to claim, regardless where the child is a resident of.

The fact is that this issue may be more poignant in Britain because the British system – as Martin Westlake pointed out on Wednesday – is based on need (of course, more rightly) than on contribution, as in other European social welfare systems. He, as well as the Telegraph journalist Toby Young and Dutch PM Mark Rutte, all suggested that perhaps a fix to this issue, instead of restricting social welfare purely to EU residents, is to modify Britain’s welfare system. Westlake did admit that it seems strange to suggest this, considering that before we entered the EU, the system was considered to work fine – why should we change for the EU? And I think this issue would play into the heart of British mistrust towards the EU and into the hands of the populist right in undermining the Britons’ support for the Union. Why should Britain change to accommodate foreigners? I think it would speak a lot more clearly and could be used a lot easier than any other issue and will be incredibly difficult – like the issue of Europe à la carte – to solve. The difference being, this one could severely and easily impact the voters.

Does Britain have a voice in Europe?

The FT reported on Thursday that David Cameron had abandoned any real chance of a negotiation settlement in December, conceding that there would be higher priorities on the agenda than Britain’s EU membership. This I think is at the heart of what these negotiations are about – is Britain important in some way to Europe, and why? Many people have different perspectives on this. Professor Simon Hix spoke at LSE a couple of months ago on the subject of the referendum, and he said that Britain’s referendum really isn’t on the radar of EU bureaucrats and politicians really, and his sentiment was supported by Wolfgang Münchau and to some extent I think Lord Boswell in that Britain’s influence in EU proceedings and importance overall is very limited. Münchau himself said last Tuesday at King’s College London that he really doesn’t buy the argument that Britain is a force for competitiveness and free trade in Europe, and that its influence is very limited. In a bloc of 28 countries you can see how this sounds logical. On the other hand, Martin Westlake argued on Wednesday that Britain has been rather successful in getting what in wants when it comes to Europe, particularly using Margaret Thatcher’s victory on the topic of a rebate in 1984 as an example. On the other hand, all those countries – France, Germany, Italy, Spain, Poland – that want Britain to stay in Europe want it for different reasons, mainly in countering other big players in Europe. Britain is a force for free trade, for reform, for the protection of national parliamentary power – however have any of these notions come from the British people? On the other side, Cameron and Osborne say that Britain wants no part of an ‘ever-closer-union’, but again, has that question actually been answered?

There are so many unknowns in the European question for Britain, that it seems difficult to imagine a referendum providing an informed result. However it remains to be seen how far the negotiations will influence people’s decision. On the last issue at least, a positive outcome of the negotiations may go some way to convincing people Britain does have influence in the EU. But again, that’ll depend on what is agreed. What is certain is that these negotiations will be difficult to win in their entirety, and could have a profound impact on the state of the Union and the referendum campaign.

by Sam Hufton