20 April 2016

UK needs plan in the event of a Remain vote just as it needs one in the event of a Leave vote

Last week, Open Europe published a liberal, free market guide to Brexit motivated in part by the unwillingness of Leave campaigners to set out their vision for a post-Brexit UK and to engage with the economic trade-offs it entails. However, we have also been frustrated by the conservative (in the small c sense) case set out by Remain campaigners and their corresponding unwillingness to discuss the implications for what a victory for their side entails for the UK’s future role in an evolving EU – something that brings with it both risks and opportunities for the UK. If it is to make continued membership a success, the UK needs a strategy for further reform to build on what was achieved during the renegotiation, and this in turn requires alliances.

Therefore, we have today published a new joint report with the Freedom Institute, a leading Polish think-tank, setting out Polish and British visions for the future of the EU. Although the two countries do not agree on absolutely every issue, the report identifies several areas of consensus and mutual interests which ought to form the basis of a common British-Polish agenda for further EU reform in the event the UK remains a member. This is not an endorsement of a Remain vote, but an attempt to flesh out the broader strategy we believe the UK should pursue in the event of continued EU membership in order to maximise the economic benefits while safeguarding its interests as a non-Euro member. Poland is already an important player within the EU, and as the second largest non-Euro member state, it ought to become a key EU partner for the UK in future.

The report sets out a joint diagnosis of the many challenges facing the EU and presents distinct Polish and British viewpoints on how the EU ought to respond to these. It then sets out a set of jointly agreed conclusions and recommendations which we believe ought to form part of a shared Polish-British agenda for EU reform in the event of a Remain vote. Below is a summary of the key principles underpinning this agenda.

A more flexible EU enjoying greater democratic legitimacy

The EU needs to accept that different levels of integration for different member states are a fact – it needs to learn how to live with these differences and how to manage as opposed to trying to eliminate them. The UK will not join the Eurozone and has declared it will not be bound by ‘ever closer union’ within the EU. Poland will not join the single currency for some time, although it wants to retain this as a long-term option. At the same time, the Eurozone is likely to embark on a path towards deeper integration.

However the Eurozone develops in the near future, countries outside of it will require a different arrangement, and the emergence of a flexible, ‘multi-form’ EU is the best hope of reconciling the inevitable comprises of national sovereignty entailed in European cooperation with national democratic consent. Although the EU proved unwilling to entertain such a fundamental debate during the UK’s renegotiation, it cannot be put off indefinitely and any future EU treaty negotiations prompted by calls for further Eurozone integration will put it back onto the agenda.

Safeguarding and expanding the single market

Eurozone integration must not come at the expense of the rights of non-Eurozone states or the single market which remains the glue that holds the wider EU together. Not only does the integrity of the single market have to be protected, more needs to be done to exploit its full potential in areas like energy, digital, and above all in services. This is a dynamically growing area within national economies, but there are still too many barriers to cross-border EU trade. At the same time, there should be no attempts to force one-size-fits-all policies in areas like labour market regulation and more needs to be done to remove unnecessary red tape with a specific focus on rolling back growth-hampering regulations  on SMEs and microenterprises.

Modernising the EU budget

The EU budget remains poorly designed with far too much money invested in relatively low-productive areas of the economy. In future, the budget ought to focus on the development needs of countries like Poland and other Central and Eastern European member states where better infrastructure is key to being better able to compete in the single market. Research and innovation should also be a priority – this is an area where the UK is particularly strong, and which is also important for a country like Poland which needs to put its economies on a path away from competing solely on the basis of low-cost and towards a more independent and sustainable form of development.

A secure Schengen area and more realistic foreign and security and enlargement policies

The UK has opted to remain outside of the border-free Schengen area while Poland views it as a key benefit of membership. Nonetheless it is also in the UK’s interest to ensure that if Schengen is to survive in the longer term it is stable – this effective policing of its external borders.

When it comes to foreign and security policy, the EU cannot replace nation states and neither should it attempt institution-building for its own sake. Neither should it seek to usurp the role of NATO in terms of military security. However, the EU can add value when it serves as forum for member states to address competing interests and to try to formulate joint approaches to common challenges such as Russia’s aggression in Eastern Ukraine or the migration crisis.

In the past, the EU has successfully used enlargement as a foreign and security policy tool to bring stability and increase prosperity in its neighbourhood. However, in view of enlargement fatigue, the traditional model of enlargement has reached its limits. The EU therefore needs a new, more realistic alternative to its ‘all or nothing approach’ which entails greater market access and political co-operation alongside some level of financial assistance but without the rights and responsibilities that come with full membership – this could complement the emergence of a ‘multi-form’ EU as set out above.

Ultimately, this referendum campaign should start with the question ‘what does the country hope to achieve in the coming decades?’ We can then debate whether these objectives can best be achieved outside or inside the EU. This requires deeper thinking about the UK’s strategy both inside as well as outside the EU.