A long, dangerous period in the UK’s relationship with Europe begins on Wednesday. David Cameron will make a speech of rare importance, setting out his policy.
Unless his spin doctors have completely lost their touch, we know pretty much what he will say: if the Conservatives win the 2015 election, they will seek to negotiate a new deal with Brussels, including the return of some powers. That new membership package will be put to a referendum: will Britain stay in the EU or leave?
The inevitable first result will be at least two years of uncertainty for the UK economy, as the country locks itself into a full time political brawl.
If the eurozone’s woes have been the biggest deterrent to corporate investment since 2010, they will now be replaced, especially for potential foreign investors, by fear that the UK could leave the EU.
Under Cameron’s policy, not until the referendum result is declared – perhaps only in 2018 – will that fear be lifted.
What can still be avoided is more lasting damage to the UK’s prospects – and especially to those of the City of London.
A halfway house?
If the UK left the EU, many industries would be likely to suffer. But they would at least retain access to the single market for goods and services, because the country would probably join the European Free Trade Area, like Switzerland, Norway and Iceland.
Eurosceptics might not be so excited about Efta membership if they realised that these countries pay dues to the EU for their privileges, and have to abide by much of European law — including free movement of people. Taxation without representation, anyone?
Efta membership is essentially a ‘lite’ version of EU membership that works for countries like Switzerland and Norway, whose governments have sought to enter the full union but whose populations have rejected it in referenda.
These countries have a strong popular attachment to independence, but are also highly pragmatic. They recognise that they need free movement of goods, services and people; and that to make a single market work, there needs to be a single set of rules.
Iceland is now trying to join the EU — just as countries in North America, Latin America, Africa and Asia are trying to forge local economic communities.
A compromise like Efta might work for the UK in ordinary trade, though it is hard to imagine the John Bulls of the Conservative Party and British press submitting to Brussels “diktats” without a full EU member’s powers of vote or veto.
But would Efta membership work for financial services?
More than any other, finance is an industry based on regulation. Money itself only exists by virtue of laws and institutions.
An EU without Britain could change its laws to marginalise the City without blinking — and need not fear retaliation. Without a voice in Brussels, how could the UK stop it? Look how Switzerland has given ground on its cherished banking secrecy.
Outside the EU, the UK would need to spend more of its energy and political capital buttering up other European governments than ever before. Some independence.
Blundering towards a chasm
For at least 25 years, the UK’s political debate on Europe has been childishly facile. The biggest risk for the City is that it carries on in that vein, leading the country blindly to a Brexit or a botched renegotiation of membership that helps no one.
Cameron’s speech at least creates a chance to get at the truth about how Europe works, and uncover the real national interest.
For example, the UK’s net contribution to the EU in 2009 was €3.9bn, or 0.25% of UK GDP and much lower than Italy’s. Knowing that, many might call it a cheap entry ticket.
Or consider the endless sniping at the EU’s “lack of democratic accountability and consent”, as Cameron is set to say tomorrow. In fact, every EU decision is taken according to an agreed constitution, with powers shared between national governments and the European Parliament. The EU may not please everyone all the time — but it is highly democratic.
The only way to ward off what could be a disastrous wrong turning for the UK is for those whose interests are at stake, on both sides of the debate, to arm themselves with the facts and speak out.
Over to you, London.
