28 May 2015

Ignore those who dismiss substantial reform

There has been much pessimism about David Cameron’s EU reform and referendum strategy since he was re-elected. Unsurprisingly, people at both extremes of the EU debate are keen to dismiss substantial reform as impossible and are therefore pushing for an early EU referendum, largely to serve their own agendas – one group because they think the EU is fine just as it is, and the other because it wants the UK to leave the EU without even trying to change it. Cameron should ignore both of them.

There are three facets which David Cameron needs to manage when it comes to the EU reform push and EU referendum – substance, process and speed. They should be prioritised in that order.

Undoubtedly the most important issue for Cameron is the substance of the reform which he is able to achieve. He has an unrivalled opportunity, backed up by his surprisingly strong democratic mandate, to push for comprehensive reform of the EU. Having raised the prospect of reform, Cameron must now deliver tangible changes upon which he can recommend to the electorate that they back membership. It is for these two reasons that he must be ambitious in his goals.

What may Cameron propose?

We have a rough idea of some of the policies he will propose. The first is a substantial reform of the access to in-work benefits for EU migrants, as recommended by Open Europe. This will bring us back to free movement of workers, as opposed to benefits, which was the original intention.

The second is safeguards against the Eurozone writing the rules for all 28 member states. This is vital for the future of the EU as a whole. It is clear the Eurozone needs to make changes to survive and have any hope of prospering. It is also clear that a number of EU members will not be part of this, and will need guarantees that in the future they don’t end up out of the euro but run by the euro. The third is a stronger role for national parliaments.

I would also like to see him take advantage of a scheduled 2016 review of the wasteful EU budget to push for an overhaul. For example, limiting the EU’s regional funds to only the EU’s poorest countries – rather recycling cash amongst richer states – would allow for a far more effective policy whilst saving UK and European taxpayers billions.

Cameron should also launch a renewed drive to open the single market up to competition – the bedrock of the EU. This must go way beyond vague promises to “complete the single market”, which we have heard for decades. There needs to be a detailed and results-focused roadmap to breaking down barriers that still exist to trade in Europe, particularly in the services sectors that are the future of Europe’s economies. Cameron should not be afraid to point out to those EU states keen to lecture him on being “anti-European” that they are often the ones which put in place protectionist barriers, hampering policies which could bring real economic benefits across the EU. If there is no appetite at the level of the EU 28, then a smaller number of countries should be allowed to cut these trade barriers under so-called ‘enhanced cooperation’.

Open Europe’s EU Reform Index and achievability of reform

In an effort to add further detail to this list, Open Europe [has published] an “EU Reform Index”. This highlights all the potential reforms which Cameron might pursue and how achievable each one is. This will help identify where and how best to spend political capital.

Managing the process of reform will also be important. Cameron should not be afraid of pushing for some form of EU treaty change. Yes, it will be difficult, but it is not impossible. As always in the EU, where there is political will, there is a way.

There is no better evidence of this than the Eurozone crisis. Despite early protestations in 2010 from German Chancellor Angela Merkel and others that there would be no bailouts, they soon totalled hundreds of billions of euros and led to treaty change just over a year later. A treaty change is a small price to pay to keep the EU’s second largest economy in the club. We should also not forget that treaty change is not a black and white issue, but filled with shades of grey. The limited treaty change used by the Eurozone for its bailout fund is a possible option, as is a legally binding political agreement over future treaty change.

Ultimately, it is clear to all involved that the EU treaties are not fit for purpose – neither for the Eurozone nor for the multi-tier EU, which is now a political fact. Cameron needs to demonstrate progress towards a new settlement that will incorporate the changing nature of the EU and the Eurozone. Not everything will be achieved over the next year or two. Therefore, the current process of EU reform and referendum should not be viewed as the final act but the beginning of a new relationship. But there must be substantive change that definitely sets a new tone.

The final issue is that of speed. Yes, it would be nice to have the referendum sooner rather than later but this should flow naturally from the points above. The risk is that an early referendum – without a full reform process – fails to settle the issue, leading to greater uncertainty in the medium term. In the end, the best way to get the outcome which Cameron says he wants and the British public seem to want, is to get the substance and process of reform right. The timing will then take care of itself.

This op-ed was originally published in The Daily Telegraph on 18 May 2015.