Cameron’s top man on Europe looks back and tells all about how a leader who wanted his party to stop banging on about Europe ended up destroying the UK’s place in the EU—and himselfby Ivan Rogers / November 25, 2017 / Leave a comment
On 24th November, Ivan Rogers gave a lecture at Hertford College, Oxford on David Cameron, having worked as Permanent Representative of the UK to the European Union while Cameron was Prime Minister. The talk was part of a Prospect/Hertford series on PMs since Margaret Thatcher and their relationships with the continent.
Rogers warns of the Brexit challenges ahead: “All we shall see, at very best, on UK-EU trade in 2018 is a political agreement on ambit, not legal texts.”
Here, find Charles Powell’s lecture on Thatcher, Chris Patten’s on John Major, Andrew Adonis’s on Tony Blair and Stewart Wood’s lecture on Gordon Brown.
I want, in this lecture, to attempt a serious examination of David Cameron’s approach to the question which has bedevilled British politics for two generations.
And, in so doing, to attempt to gain some distance from the political soap opera accounts and from the post referendum hysteria on all sides, and to offer an account of the issues and the politics with which Cameron was grappling, and some insights as to why he took the positions and decisions he did.
There is much that I cannot possibly cover in a single lecture. I am not going to offer thoughts on why the Eurosceptic wing of the Conservative Party grew, radicalised, and I think markedly changed its focus. Nor try and analyse the public vote in June 2016. Nor go much outside the economic policy arena. Nor will I address the referendum campaign.
I cover many of the policy issues which contributed to the Brexit vote, all of which predate Cameron’s arrival in office. Any serious Brexit history has to span at least the last quarter century.
But my subject is David Cameron. So I start with why, having intended to stop his party obsessing about the European Union to the exclusion of nearly all else he believed they should be doing, he was unable to do so. Then I cover why the post financial crisis eurozone crisis very nearly ruptured the EU-UK relationship in 2011, and how Cameron tried to deal with that. Then I show why the decision to hold an in-out referendum stemmed from that crisis, and why the absolute core of the Cameron renegotiation agenda was already decided in 2012, centred on whether Britain’s berth in the EU but outside the eurozone could be made permanently sustainable, and was always primarily about British exceptionalism more than pan-EU reform. I next cover how the free movement and borders issue emerged much later as the central political problem for the renegotiation to address, and how and why that effort failed.
I will focus on Cameron personally, his policy thinking and his political approach.
But I can only start with the political position he inherited.
If one looks at the Eurobarometer polling on whether one’s country’s membership of the EU was a good or a bad thing, and compares the UK public’s response to those of the publics of the other major Member States, the UK’s line never once gets as high as any one of the other lines between 1998, the year after Tony Blair took office, and polling day in 2016.
Twelve of those 18 years were years of the Blair and Brown premierships. Deep public scepticism about the direction of the EU project and/or Britain’s place in it, is not a short term phenomenon.
Had there been a referendum in the UK on the Lisbon Treaty, which emerged, misbegotten, from the tortuous process begun in early century to draft a new Constitutional Treaty, who seriously doubts that the UK public would have voted “no,” and thereby killed it, and probably forced, much earlier and in different circumstances, the existential debate over British membership?
Cameron himself promised, when Leader of the Opposition, that there would be such a referendum, if the Treaty had not already been ratified by all Member States before he took office. By the time he took office, it HAD been universally ratified, including here.
Plenty in his own party ignored the phrase “if it had not already been ratified” and wanted him to reopen the whole issue post ratification. He did not. Could not. But what he did do was to legislate domestically in the European Union Act of 2011 to put an effective lock on any further UK commitment to any further steps towards political integration.
He clearly hoped, via that Act, to calm the party’s post Lisbon Treaty frenzy, and thereby to persuade it to “stop banging on about Europe,” as he put it in first first Party Conference speech as Conservative leader.
Listen: Tom Clark and guests discuss the economic impact of Brexit
His own view, often expressed to his close team, was that very few of the great domestic issues with which he wanted the Coalition government to grapple were much impacted by the EU, and that the public rarely viewed the EU question as amongst its central preoccupations.
In his view, the project to modernise his party, and render it electable, after, unprecedentedly in all Conservative Party history, three consecutive leaders had failed even to make it to Downing Street, was to reconnect it with what real voters cared about, and stop it obsessing over issues which most voters viewed as tangential to their lives.
Yet that stance was, within 18 months of Cameron’s taking office, effectively in tatters.
In a phrase: the eurozone crisis.
One of the questions I was most frequently asked by my EU colleagues both as UK EU Sherpa, which I was from late 2011 to 2013, and as the UK’s Permanent Representative till early this year, is why the eurozone turmoil post the financial crisis appeared to have destabilised British politics and policy on the EU, to a greater extent than their own countries’.
Many said, privately, that we were surely in a rather comfortable “have our cake and eat it” world, outside the “machine infernale” that the eurozone appeared to have become for them, insulated to a fair degree from its shocks and better equipped with policy instruments to react to them, but benefitting from membership of those parts of the EU into which we had, over the previous 20 years, chosen to opt, and carve out a unique British status.
The reason was actually simple. As the crisis in the eurozone intensified, they needed to make urgent institutional changes to shore up monetary union and prevent disaster. But no such institutional changes, requiring changes in the primary law, could, under the EU Treaties, be made unless all the Member States agreed and ratified them. In other words, the UK was obliged to legislate, at speed, to permit changes deemed by the members of the eurozone essential to save the Eurozone, in discussions in which, inevitably, as were outside the monetary union, we were not present.
Simultaneously, of course, the worsening real world impacts of the crisis, notably in Southern Europe, propelled greater numbers of people to seek work in the healthier more open labour markets elsewhere, including the UK’s. I come back to the free movement issue later.
And the persistent failure, as Cameron saw it, of the eurozone to grip the crisis rapidly enough, led to very anaemic growth—or worse—which weighed on UK growth, and exacerbated the challenge he and George Osborne faced in tackling the UK’s public finances.
Cameron turned up the volume, deploying typically vivid language about the need for a “big bazooka” and for eurozone politicians to permit the European Central Bank properly to “stand behind” its currency.
That in itself created tensions with key eurozone players. Stewart Wood, in an earlier lecture, alluded to the Gordon Brown style of engagement and press management around Finance Ministers’ Councils, which was frequently felt by European colleagues to be British grandstanding.
At the time of the eurozone crisis, for the eurozone’s key players, here again were those Brits, standing apart from the Continent’s existential crisis, insulating themselves from all financial liabilities, avoiding all “solidarity,” save with Dublin, but feeling able to lecture the eurozone from the sidelines, without, in their view, understanding fully the political economy impediments to solutions.
“The European Council of December 2011 was very nearly the moment of terminal rupture between the UK and the EU”
But, in Westminster, the passage of legislation specifically and solely designed to cauterise eurozone wounds and address eurozone needs, inflamed Conservative opinion. The mood amongst many of the backbenchers was that the eurozone was the proverbial burning building with no exits, might be nearing collapse, needed our urgent assistance in preventing collapse, and needed Treaty changes in its own interests. So, no better time to name our price for Treaty changes of our own. Many were gunning for an in-out referendum right away. They were not talking much about free movement, borders or the European Court of Justice then. It was about divorce from the burning building.
By the time I arrived as Sherpa, succeeding Jon Cunliffe, now Deputy Governor of the Bank of England, the issue had detonated at the European Council of December 2011.
That was very nearly the moment of terminal rupture between the UK and the EU, and its role as a harbinger of what lay ahead and as a catalyst for decisions on both sides which led inexorably to Brexit has, in my view, been hugely underestimated.
This is not the place for a very detailed account of what happened at that Council and in the run-up to it.
But the dynamics of the crisis were clear. Cameron made clear that he was now no longer prepared to allow the 26 (as it then was) again to amend the Treaties to enable the changes now required by the eurozone members, unless, simultaneously, amendments were agreed to the Treaties which gave the UK satisfaction on the key anxieties he and George Osborne had about the relationship between the then 17 eurozone members and the then 10 non-members.
The concern here was that vital national interests could be overridden by an organised near automatic Qualified Majority of eurozone members. Jon Cunliffe was instructed to try and get a Protocol to the Treaties addressing UK concerns agreed as part of the December Council package.
In retrospect, I would say the draft Protocol was a remarkable document. It covered precisely nothing outside the world of the financial sector. There had been discussion of other issues, primarily the age-old Tory bugbear of EU social legislation. But none made the cut. Cameron ultimately concluded he could only seek to address institutional questions connected to the management of the crisis.
There was a mixture of three areas in which the UK sought a return to unanimity from qualified majority voting to give ourselves a veto lock, and three other issues which, whilst important, were essentially second order Finance Minister Council concerns. It was several pages of dense prose on Treasury, Bank of England, financial sector issues.
In other words, the issues Cameron was trying to put on the table were not “popular”ones: had the document ever been visible, one would have struggled in vain to explain to an average voter why they should care about any of it.
But these were first order preoccupations. The aftermath of the financial crisis came close to bringing the eurozone down, and forced it to address, at speed, issues of its construction and governance in ways which opened serious fault lines over conflicts between the financial stability driven needs of the eurozone and the Single Market interests of non-members.
The UK constituted a very high percentage of EU wholesale market activity, with London being massively the biggest financial centre in the european time zone—its growth and dominance in the past 30 years partly propelled by the huge legislative project of the Single Market, driven by the UK. The question of whether and how the UK could effectively defend its interests when it was not a member of what, to most others, had become the central economic project of the Union, which, in an existential crisis, they needed to strengthen at speed if it were not to disintegrate, became equally existential for the UK.
But the Cameron attempt to lever open the negotiation got nowhere. Berlin and Paris essentially went round him. A couple of days before the December European Council, Angela Merkel and Nicolas Sarkozy, at a European People’s Party Heads meeting at Marseilles decided to circumvent a potential British blockade of the amendment of the Treaties by doing the deal at 17 via a partly intergovernmental Treaty process, which would not require UK ratification. The resulting Fiscal Compact is now known as the Fiscal Stability Treaty.
That decision was not notified to London. And it only really became clear during the night of the Council that a deal had been stitched up to bypass the UK, that the Council’s lawyers’ reservations had mysteriously evaporated, and that all other Member States had been squared, so Cameron was on his own.
To others, notably Berlin and Paris, the UK’s proposed Protocol looked like the UK opportunistically exploiting an existential crisis of the eurozone merely to further longstanding British interests. The resentment was deep, and the mood sour.
To Cameron, though, the eurozone members’ manoeuvre was the eurozone privileging its own urgent institutional reforms over his.
None of what was agreed that December proved of lasting importance. It was the manner of agreeing the inconsequential that had consequences.
In rather typical Cameron fashion, he turned this situation to short term political advantage by representing it at home as him having vetoed others’ desire for a change in the Treaties in the absence of anything to address UK needs. He seldom—probably never—had a warmer reception on a European issue from his own benches. Poll ratings bounced sharply, and he was lionised for having forced the eurozone players to go another route.
But over that Christmas, he drew lessons.
First: the attempt to force permanent institutional changes which he thought the UK needed had failed. Others had circumvented him, rather than engaging.
Second: others really did view their key project and interests as having primacy.
Third, and more soberly: his methodology for delivering the changes he thought the UK most needed, had not worked. He had gone, late, with a fully drafted document, with a lot of disparate demands. It was much too complex a document for leaders to digest, which they were able to dismiss as a ragbag which would require months of real work to refine. And it contained asks—notably turning clocks back from majority to unanimity voting, according the UK a de facto veto on things of critical importance to the eurozone—which were never going to fly.
Fourth, although bigger institutional changes would, he thought, ultimately, require the eurozone to reopen the Treaties for larger scale change, they were patently very reluctant to do so, and they had developed a technology to enable them to carry on muddling through without opening up a route whereby he could force UK issues on to the table. He could not stop a repetition of the Fiscal Compact type device.
As the crisis intensified in 2012, and the question of Grexit (the possible departure of Greece from the eurozone and the potential contagion effects of permitting or forcing it to leave) dominated the Spring and Summer, the eurozone moved more rapidly to start developing a so-called Banking Union—the only politically feasible institutional step it might be able to agree, given the impossibility of reaching any agreement on debt mutualisation or on a eurozone transfer union.
Cameron was pro a Banking Union, provided it was a genuine one—and providing the UK had no part in it.
And again, given there is no legal base in the current Treaties which permits eurozone-specific legislation, those of us around him spent a large part of that year ensuring that the use of Single Market articles of the Treaty as a legal base for Banking Union legislation did not suck us into a project which we viewed, but others did not, as one intrinsic to the monetary union, not the Single Market.
Again, this was not a theoretical concern. And it carried huge taxpayer risks and generated inevitable political heat at Westminster.
To be clear, there was, in my view, simply no reputable alternative position to the one Cameron took on these issues. And this is why the Union of 2012 was so different from the Community of pre Maastricht years, and why much criticism of the UK supposedly absenting itself from a central role is so misplaced.
Cameron and others around him had lost confidence in the views of some within the British system, most notably in the Foreign Office, who harked back to an earlier era and suggested he should want a more central role in developments which he, rightly, saw as being bound up solely with monetary union, and not relevant to our own position—in the Single Market, but permanently outside the eurozone.
Monetary union radically changed the dynamics of the Union, and the impact of the financial crisis was to bring latent governance tensions to a head. There could be no case for the UK, outside monetary union, and dealing, alone, with its own extraordinary banking crisis, bearing the huge taxpayer costs of UK bank bailouts and resolutions, participating in any way, at further taxpayer cost, in the resolution of the Eurozone’s crisis.
This could be—often was—represented across the channel as in some way indicating a lack of UK solidarity at a time of crisis.
That criticism of the UK’s transactional approach carries real force on some issues. But on these issues, it misunderstands the nature of, and obligations in, a monetary union.
“In reality, Cameron’s position was the classic old Eurosceptic stance captured in the phrase ‘common market good; political union bad'”
For Cameron, it again crystallised the need to make even clearer that there were not two speeds of membership, involving all going to the same destination, some by the express, and some trundling by the slow train. There had to be clear recognition that there were viable, different, permanent destinations within the EU. And that not all were inexorably heading to a Banking union, a Fiscal union and a Political union.
In reality, his position was the classic old Eurosceptic stance captured in the phrase “common market good; political union bad.” Many of his Conservative opponents in the referendum campaign, professed to believe precisely the same. But a Single Market-only centred membership, about which many talked in the decade before the referendum, has now largely disappeared from their view straight after it.
For the UK, in other words, ever closer Union was not the destination. And carving ourselves out of that became, to him, both politically or symbolically, but also substantively, important.
I do not know precisely when David Cameron decided when he would offer the public an in or out referendum. We were discussing it with him well into the summer of 2012, around G8, G20 and EU Banking Union summits, but it was gestating before that.
But this then was the context in the first quarter of 2012, when the survival of the eurozone in its current form was still in question.
He thought that public consent for UK membership on current terms was wafer thin. He was clearly right.
He personally deeply disliked the Lisbon Treaty settlement, and its institutional implications. More on that shortly.
He saw major risks to the UK from the developing fault-lines over the potentially diverging interests of the eurozone from those of the eurozone non-members.
His first attempt to address those issues head on had not cracked it.
And he now knew that he would never get agreement to a de facto British veto on developments, by returning issues from qualified majority to unanimity voting. He also knew that others had found a way to deliver the requisite short medium term changes to the eurozone without opening up the Treaties for what he thought the UK needed.
He increasingly thought that he needed not just to address the Eurozone vs EU27 issues, but to deliver permanently different tiers or destinations of membership. Hence the desire to take the UK out of the Treaty language committing all to the vocation of ever closer Union.
So here we already have, in other words, by early 2012, a high proportion of what Cameron ultimately tried to cement in the renegotiation of 2015-16.
My own view is that he was right to view the tensions between eurozone and broader EU interests in the issues around financial services, banking union, and potentially subsequent developments towards deeper integration, as a central question for the UK to seek to resolve.
For all that this held little interest for the public and the vast bulk of the media, in Cameron’s view this had become the central issue of our membership which later led him to the proposal, made in his Bloomberg speech a year later in January 2013, to attempt to renegotiate UK membership terms, to be followed by an in-out referendum. My contention here is that his thinking about the key permanent changes he needed, was set far earlier than other commentators have suggested, and was determined above all by his experiences in December 2011.
In the post Monetary Union world, he was right to think that virtually all of the subsequent necessary further integration steps of the monetary union members would be driven by the imperatives of the currency union, not those of the single market.
That drove him to think that the EU needed to permit, permanently, multiple different end states for its members. He hoped others might be in the UK tier, but, frankly, he did not hold his breath on that, and he assumed the number of “outs” would fall appreciably further, exacerbating the UK’s problem if he did not fix it.
Their economic incentives, as well as their Treaty obligations, were very different from the UK’s. They might simply have no rational economic choice but to cleave close to the eurozone core. The view of some in the cabinet that we might aspire to permanent leadership of some sizeable outer tier was, he thought, self-deluding.
If the core then stood by the Treaty imperative for all those without an opt out to join the monetary union in the end, or leave the EU, the EU needed to make more concrete that the UK could, in perpetuity, stay, alone in its own version or category of membership.
This pitch was central to the Bloomberg speech in which Cameron went public with the commitment to an in-out referendum in the event of a Conservative election victory.
I will come back in a minute to some other key elements of Bloomberg.
But before I do, an excursus on the crucial subject of money, and the UK contribution to the EU Budget. Because a key reason for the delay in the Bloomberg speech was a major domestic blow-up over the issue which eventually figured so prominently on the side of the red referendum battle bus.
Cameron suffered a stinging defeat on the floor of the House in late October 2012, when his proposed stance for the impending EU Budget negotiations—which was to advocate a real terms freeze, far below the proposal on the EU leaders’ table—was rejected by a combination of the Labour opposition led by Ed Miliband, and 53 Tory rebels, marshalled by, amongst others, players who defected to Ukip within 18 months.
One can find few better illustrations of the toxicity of the UK’s EU Budget contribution in Westminster than this episode. I speak as someone who has dealt with EU Budget crises and personally defended the UK rebate that Margaret Thatcher won 33 years ago, more often than any other top UK official. I once, just briefly, even understood how it worked.
“Cameron thought that public consent for UK membership on current terms was wafer thin. He was clearly right”
The political reality, which again tells us a lot about perceptions of public sentiment towards the EU five years ago, was that Ed Miliband’s Labour saw the political opportunity of allying with Tory Eurosceptics to advocate a cash freeze or cut, knowing that it was unnegotiable, in order to have a populist stick with which to beat the government once any budget deal was done.
Most on the Labour side may have been surprised by the famous 350 million figure on the side of the bus, as the alleged savings from ceasing to make any contributions to the EU Budget. But they cannot seriously have been shocked by the deployment of the argument.
But Cameron’s defence too is instructive. He accused Labour of having given away half the rebate in the previous Budget negotiation in 2005, which Tony Blair chaired. And he said, with some justice, that he was going for a tougher settlement than any achieved since Fontainebleau.
Facts are always hard to stick to, amidst the emotions that the budget contribution and the rebate have generated in the UK debate on the EU over the last 30 years.
Two, I think, do stand out, though.
First, the ceiling on spending Cameron agreed in 2013 was actually lower as a percentage of EU GDP, despite the Union containing 28 members, many of which had been impoverished by over 40 years behind the Iron Curtain, than it had been when John Major concluded the Budget negotiations of 1992 for a solely western prosperous Community of 12.
Four years before that, and four after Fontainebleau, in other words, nine years into Margaret Thatcher’s Premiership, the Community had even resorted to a Budget year of ten months to try and make the numbers add up. British politics barely even felt the ripple.
So one cannot really argue that the ferocity of the UK political debate is a function of the overall size of the EU Budget.
Second, though, the UK’s net contribution rose dramatically just before and through the Cameron tenure. But that was indeed because the UK rebate was, in the 2005 deal, disapplied on structural funds spending in the newly acceded Eastern Member States. And the effects of that decision grew rapidly at the end of the 2007-13 Budget Framework period. After Cameron’s election as PM.
For the general public, the 2 most visible effects of the enlargement policy championed so vigorously by the British elite were something close to a tripling of the UK’s net contribution to EU coffers, and the huge influx of Eastern European labour to the UK, facilitated by the Blair Government decision to open the UK Labour market without the transitional periods permitted by the Treaties.
And for much of the public, both those effects were major negatives, and the arguments on both played a heavy, perhaps decisive, part in the decision to leave in June 2016. Vote Leave’s Campaign Director, Dominic Cummings, said as much about the importance of the 350 million claim in getting over the line.
When the UK’s pro EU elites excoriate Cameron’s decision on the referendum, or his strategy to win it, they have also, I think, to reflect on how they underestimated the real world consequences of enlargement for the bulk of what David Goodhart has termed the Somewhere classes. And the extent to which their policy preferences, couched in terms which made it sound morally reprehensible to question them, fuelled the wider public disillusionment with the metropolitan elites which partly explains the Brexit vote.
There was a great and serious argument to be made as to why it was in the UK interest to bring in much poorer, ex communist states, and be prepared to pay major sums of UK taxpayers’ money to help try and speed up their integration into the western world.
It was though, I think, rarely, if ever, compellingly made at leader level. And by the time of the referendum, the fear of the consequences of further enlargement—even if the scare over the likelihood and consequences of Turkish membership was absurd—had become a serious factor in the public wanting out.
To return to Cameron personally on money, I would argue he ran a very smart Budget negotiation, and one saw him, at European Council level, at his most engaged and effective. He was all over the detail. My point is simply that, though he delivered an impressive deal, it made scant impact on the politics of UK membership. The same, incidentally, applied to other issues—from Russian sanctions to the handling of the Ebola crisis—on which Cameron’s leadership at European Council level was impressive.
By the time the Bloomberg speech was finally delivered in January 2013, the main contents had been well trailed with other EU leaders, and they knew that the key commitment to an in-out referendum was the central component.
They also knew that Cameron would seek what he termed a “new settlement” before putting the issue to the people.
They knew too that a new settlement had, for him, to take legally binding form, or, as he made clear to them, his opponents would argue it was impermanent and readily reversible. So they knew he was committing ultimately to delivering Treaty changes in the UK’s interests.
For all, the timescale on which he was promising to have the referendum—by the end of the first half of the parliament i.e. by late 2017—was just not compatible with that demand, given that he could not possibly set the process in train until after he had won a UK General Election in 2015. The Lisbon Treaty had made any substantial Treaty change process much lengthier and more unappealing to the Member States, and given the European Parliament a much stronger institutional role.
It was evident that most leaders hoped the issue would simply never arise. Many—most, I think—counted on him not winning the election. Some thought, misreading both him and British politics, that, even if he won, the commitment might get quietly buried.
There was consequently very little substantive engagement on the menu that Bloomberg outlined until after he returned to office in May 2015. By then, the things he most wanted to pursue had been nailed down in the Conservative manifesto for the election.
So the wise-after-the-event thoughts as to how he might have been bolder and got further with EU leaders by the time the process kicked off wholly ignore the realities of the timetable.
Both Jon Cunliffe, by now the UK Permanent Representative, and I warned in 2012 of the inevitably extremely compressed timetable to deliver any Treaty change, notably with the timing of the French and German elections in 2017. There was just a brief window from summer 2015 till summer 2016.
Thereafter, we advised, the euro elites would likely only resurface and at best resume thinking about major institutional changes by the end of 2017. You can see the reasoning behind that judgment even this week in Berlin. By the time they did resurface, given the timetable he had announced, we would be in the very last stages of a referendum campaign, with others consequently having no incentive—indeed no need—to move. They could time him out. Or force him to postpone the poll. Neither politically sustainable.
The quest for what Angela Merkel described as a package of “surgical strike” Treaty changes, which might be done under the so-called Simplified Revision Procedure, this avoiding, as all wanted to, a full blown Convention preceding an Inter Governmental Conference, kicked off in 2013. We spent our nights examining what could and could not be done under the Simplified Procedure, and what would trigger the use of the Ordinary Revision Procedure, the timetable for which would kill us.
“As we are now rediscovering, legal form and process are critical in anything involving the EU”
Cameron had very good grounds to hope, at the time of Bloomberg, that “surgical” Treaty changes would be a runner. But it soon became evident that Merkel’s own shortlist for inclusion in any such package was running into huge trouble. By the end of 2013 indeed, it was clear that a German drive to deliver more binding constraints on eurozone members’ structural reform efforts was foundering on French-led resistance.
What looked merely difficult at the time of Bloomberg already looked impossible by year end. By the time I moved to Brussels in November, I was focussing on ways short of immediate Treaty change of delivering permanent, legally binding, change that would be bullet proof, but which would still need translation into the Treaties after the referendum.
I set all this out on process because, as we are again now rediscovering, legal form and process are critical in anything involving the EU, as indeed they are in all trade issues.
Political agreements, with high falutin aspirational guff are one thing. Legally binding agreements, Treaty changes and trade deal texts are another. All we shall see, at very best, on UK-EU trade in 2018 is a political agreement on ambit, not legal texts.
That bind is central to the current prime minister’s own difficulties on money. “Nothing is agreed till everything is agreed” sounds fine until you discover that all that can be agreed is a “framework,” as specified in Article 50—a purely political, not the legal trade, agreement.
So much of the UK political commentary then and since simply ignores the reality of the type and ambit of the package that Cameron could ever have constructed at this speed, and got translated into legally binding form. And for him, legal “bindingness” and permanence was always key.
He thought worthy aspirational blather, as he described it, on the need to intensify efforts on, and speed up completion of, major trade deals or Single Market packages, or deregulation initiatives, would cut no ice with the public, let alone his party.
This had consequences for the saleability to the European side of what he in the end pitched for in the renegotiation. Some others hoped he would go for less bindingness, less emphasis on British exceptionalism, and more on pan-EU reform. They hoped he would use the renegotiation to expedite and promote policy initiatives many of them backed the UK in wanting.
But in my many conversations with him on the balance between pan EU policy reform efforts and nailing down UK exceptionalism legally, he always, in the end, came down heavily for the latter. And when it came down to whittling down his list to what he thought a manageable set of key asks—bearing in mind the experience of 2011 I described above—he always relegated the broader competitiveness asks.
Politically, I think this was because he thought the public would not care less, had heard it all before, and were deeply cynical about politicians claiming that “the EU is moving the right way, thanks to British leadership.” For him, these would always be primarily just words which went to what he termed the “European Conclusions graveyard in the sky.” They were worth little.
Substantively, he did not believe that any of the potential economic initiatives, however widely supported, would really move the dial on UK or EU productivity, by the time of the referendum. Consistent with what he believed from the time he took office, he thought that to nearly all the major productivity challenges for the UK, EU level action was not actually hugely relevant – either way.
UK productivity was not far behind German or French levels because the EU was depressing it. Nor would it be transformed by things which could only be done if we left. Nor was EU membership holding back his Government on employment creation.
And, frankly, as he often said to me, he did not really believe that most other leaders were with him anyway on his conceptions of the policy and governance reform the EU needed. All of this tilted him towards delivering a more exceptional sui generis British status, than broader EU reform. In retrospect, I think he thought he had put more ambition into the Bloomberg speech for pan-EU reform than he should have.
This is not to say he was not focussed on where the EU could be much bolder on external and internal trade. He played a central political role with Merkel, in trying to get the Transatlantic Trade and investment Partnership (TTIP) off the ground with Obama, did likewise on the Canada and Japan deals, and pushed a liberal trade agenda across the board. Similarly on internal trade liberalisation, via Single Market initiatives, he consistently led the pack at European Council level. And, having started frustrated by the whole way the European Council worked, he became ever better at delivering on what he cared about at it.
But he just did not believe that such deals, however good, would be hugely transformative of UK economic performance. Any more than he would believe that trade deals struck after Brexit will be.
Whether this constitutes his version of the “muscular intergovernmentalism” to which Stewart Wood alluded in discussing Gordon Brown’s European policy, on which I also worked for many years, I am not sure!
But I see greater similarities between, and continuities with, the Major, Blair, Brown approaches than I see discontinuities. All called for more openness, more flexibility, less rigidity, more Atlanticism, less focus on / constraint by European social legislation.
To EU27 eyes, Cameron would rank as much the most Eurosceptic of those four, and indeed be viewed as less enthusiastic than Margaret Thatcher about the need for a comprehensive Single Market legislative agenda—she, after all, sent Arthur Cockfield to Brussels precisely to devise the Single Market programme. Unlike John Major, he had no desire to be at the heart of Europe. But he is in an identifiably highly British stream of thinking, which viewed the tackling of internal behind-the-border barriers to trade as the central economic objective of the EU, and which advocated muscular multilateralism and an aggressive regional trade pact agenda externally.
“‘Nothing is agreed till everything is agreed’ sounds fine until you discover that all that can be agreed is a ‘framework'”
The radical British discontinuity, for others, is—of course—now. The champions of the Single Market for the last 30 years have now concluded, while, rather comically to others, still, from the touchline, urging the others to get on and deepen it faster—that they cannot any longer themselves abide living within that Single Market. The same reaction applies now to British exhortations to proceed with enlargement: why on earth, think others, should we listen to you, given you could not, domestically, bear the consequences yourselves, having been the greatest advocates?
We are leaving the Single Market because of the role of the ECJ in supranational, sovereignty-encroaching adjudication, and because we cannot any longer live with all the four freedoms which underpin the market project. And we can accept the free circulation of goods, services and capital, but not that of people.
For others, that is a regrettable choice, but a sovereign one for us alone to make.
But one cannot enjoy the benefits of three other freedoms without the fourth. That issue too, on which leaders will, as Cameron found, be as theological as their apparatchiks, will set the parameters of the very difficult trade discussions that lie ahead.
I will come back to that critical issue—free movement, migration and the Cameron agenda—shortly, as it became central to the entire renegotiation, despite having been absent in 2011 and barely visible in Bloomberg.
But I want to turn to one other key component of Bloomberg: the Cameron view on democratic accountability.
Cameron’s view was clearly and bluntly expressed in the Bloomberg speech. I quote: “There is not, in my view, a single European demos. It is national parliaments which are, and which will remain, the true source of real democratic legitimacy and accountability in the EU… Those are the parliaments which instil respect, even fear, into national leaders. We need to recognise that in the way the EU does business.”
Once again, this was a pretty conventional British position, which could have been espoused by any British prime minister since we joined the EEC in 1973.
As Permanent Representative, I kept on expecting more fleshed out proposals to come from the Foreign Office setting out in some depth what we had in mind by way of either Treaty compliant or future Treaties changing proposals for embedding national parliaments better in the EU legislative and consultation processes. Rather little ever came. They were some pragmatic ideas for how one would enable a proportion of National Parliaments, acting together, to brandish a so-called yellow card to force the Commission to withdraw and rethink legislative proposals. That was about it, though.
Yet the rise in status and power of the European Parliament, and the change in the institutional balance—the Commission increasingly attentive to the EP, conscious of its capacity to bring the Commission down, and the relative toothlessness of the often divided Council—was, again, post the Lisbon Treaty, a much bigger problem for Cameron than it had been for his predecessors.
It was all very well thinking that the EP lacked the democratic legitimacy, and was a self-important talking shop obsessed with pursuing its institutional aggrandisement, but it had, via successes in several inter Governmental Conferences over a generation, succeeded in accruing very real power.
At the practical, operational level, the way in which the Ordinary Legislative Procedure operated virtually across the board post Lisbon, completely changed the game. Yet the British system still disproportionately focussed its energies on the Council—because that’s what ministers attended and cared about—and was only patchily effective at influencing the parliament’s position.
And at the political level, Cameron’s own crucial decision to take the Tories out of the European People’s Party (EPP) Group, and to set up a new Group, the European Conservatives and Reformists (ECR) enthused his parliamentary party. It helped win him the party leadership. He did it because, ultimately, he did not subscribe to the core political goals of the EPP for the EU. But it undoubtedly lessened the Conservatives’ influence inside the belly of the beast, in which the backroom deals and manoeuvres of the three “mainstream” Grand Coalition parties largely dictated key appointments and institutional positions on key policy issues.
Around capitals, I have already alluded to the way Cameron was effectively blindsided on the Fiscal Stability Treaty by the Merkel-Sarkozy agreement at the Marseilles EPP leaders’ meeting in December 2011. Even had he still been in the EPP room, nothing prevented the key eurozone strategy sessions taking place without him, of course. But the syndrome of marginalisation in the debates on the centre Right of EU politics, and the tendency not to recognise the extent to which the pitch had been rolled on key issues in Party formation before the UK got in the room, was more general.
This problem went deeper than just the traditional British transactional approach to EU issues, which again was common to all British PMs during our time in the Union. And the mutual misreadings of interests and incentives which we saw in the renegotiation, and we are seeing in even starker form now, stem from the absence of systematic informal political level contacts which build understanding. Not many Tories now intuitively understand Christian Democrats in the way they did 20 years ago. The same is true in reverse.
I recall Frau Merkel saying in a bilateral in 2012 in Berlin “but your vision of the EU is so cold, David.” I think he thought this was the pot calling the kettle black: from a leader who calculated, to the nth degree, the domestic political viability and consequences of every step she took at EU level—whether on the euro, on Greece, on energy policy or on the migration crisis. But she also meant the importance of European political party family ties, which to her, as to others, are genuine bonds of solidarity which impact how far you are prepared to go for the other partner.
The emblematic case, which brought together the uncomfortable post Lisbon weight of the parliament and the importance of European political family affiliations was the appointment of Jean Claude Juncker to the post of Commission President in 2014.
Cameron’s primary beef was not with Juncker the man, much as he regarded him as the quintessential insider fixer type with which the European publics, in his view, were increasingly unenamoured, but with the entire Spitzenkandidaten process. This was the brainchild of European Parliament apparatchiks, which successfully confronted national leaders with a process that none of them really wanted, but which, collectively they could not effectively oppose, not least because, in the European party formations to which they belonged, their own party members legitimised it. Domestically, of course, it was not politically possible at home to say “it is the whole process to which I object, not the man.” But to have succeeded in the EU, that was precisely what needed saying.
National leaders thus lost control of a nomination process which had hitherto been their sole prerogative. And for the first time in the Union’s history, they were prepared to outvote by qualified majority, a leader who had opposed the process and was not prepared to agree the outcome of it.
Others calculated, in classic European fashion, that no leader would do what Cameron duly did: go down in flames in a vote rather than acquiesce and find a price. His calculation, on the contrary was that to do anything else would send precisely the wrong signal for the renegotiation ahead.
It was again a complete mutual misreading of incentives and each other’s political cultures which presaged many others that lay ahead. I warned my European colleagues in Brussels that summer—privately, but it was leaked—that we risked sleepwalking into a very major crisis.
We duly did so a bit over a year later, after the election.
For others, the outright Cameron General Election victory in May 2015 was a surprise, and the prospect of having to go through the renegotiation process was an unpleasant one. They all remembered December 2011. I spent much more of my time personally persuading people that we were for real, and wanted an outcome which reconciled their potential further integration with our securing a viable, permanent berth in an outer tier, than on any other issue. Many started with grave doubts about whether Cameron was in earnest: his personal diplomatic grand tour was designed to address precisely that.
“One cannot enjoy the benefits of three other freedoms without the fourth”—Rogers on the free movement of people
The Greek crisis was, yet again, looking critical that summer. There was an unedifying attempt in a eurozone Summit that July to renege on an agreement Cameron had, painfully, secured years previously to ensure that the EU Budget—and hence UK taxpayer funds—could not be raided for bailouts.
The migration crisis was also intensifying both in the Balkans and the Mediterranean. Merkel’s unilateral decision in the August to open German borders to hundreds of thousands of Syrian refugees set off a huge and bitter internal EU debate about burden sharing. That the UK had an opt out from the compulsory mechanism the Commission proposed for allocating refugees to member states added to the sense that the British were semi-detached, and insulating themselves from yet another Continental crisis.
For those whose crisis was one of uncontrolled mass migration of refugees from OUTSIDE the Union, the British obsession with controlling free movement WITHIN it by EU citizens, felt a sideshow, and they objected even to the UK “migration” nomenclature, which, for us, covered two issues which, for others, were completely different.
So the appetite really to spend leader time on the UK question was limited, and the mood fraught.
On the two core primary law issues I identified earlier, which Cameron duly tabled as central demands, reactions were mixed. The desire to carve the UK permanently out of the Treaty vocation of the ever closer Union of our peoples—there when we joined the EEC, and with the language refined by John Major in the early 90s—caused considerable bemusement and some anger. It took a huge effort to get there in the final text for leaders. My personal view was that, while the political symbolism was clear, and the marker of a multi tier EU as the clear destination was critical, the legal effect and potential real world consequences were less significant.
On the relationship between the eurozone “ins” and the “outs,” Cameron’s major personal diplomatic efforts to explain his preoccupations made the mood less toxic than in 2011. He achieved a pretty broad intellectual and political recognition that there were serious problems to fix here, and, in avoiding demands for a straight UK veto right he could never have got, secured the good will that delivered an agreement worth delivering.
The problem here—and generally, of course—was clear. The whole point of this central demand was to secure such guarantees as we could get, that our vital national interests could not be ridden roughshod over by a built-in qualified majority from the eurozone voting en bloc to assert their own interests. But if this was the concern, then all on the other side of the table knew full well that leaving the EU would not address our concerns: it would merely leave us without any voice within the EU to prevent our interests being overridden.
This is not for today’s lecture, but this issue will shortly resurface with a bang, as we are hearing from Michel Barnier, when the 27 make clear what they intend to offer in financial sector issues in the negotiations for a Free Trade Agreement which lie ahead. To state the obvious, they will offer far less on market access than we had when we were inside the Single Market—and with no real voice for the UK on the regulatory order to which those wishing to do business into the EU will be subject. No non member of the EU or EEA gets anything close to what members get.
And in dealing with the Cameron renegotiation demands they all knew that, as did he. This is why the alleged terrors of the threat to walk away from the table, which Cameron was constantly being exhorted to do by some on his own side, were, for the EU, so much less than advocates seemed to think.
Whether others fear that you will walk away in any negotiation depends not on frequency, volume and vehemence of threats to do so. It depends on whether, as they assess them, the other side thinks you can walk away to a better state of the world than you are walking away from. And the people negotiating with Cameron held one truth as self-evident: however squeezed the British felt on their vital national interests by the strains between the eurozone and the probably dwindling band of the non-eurozone, it would obviously be totally impossible for the UK to secure the protections it was seeking—and Cameron had been seeking for years—from outside the EU.
They assumed that the UK’s desire for a major voice in the ordering of the legislative and regulatory framework of the wider European system would win out over all else in the end. We would not, to coin a phrase, put politics above prosperity.
“To state the obvious, they will offer far less on market access than we had when we were inside the Single Market”
Just as they are, right now, calculating that if the UK’s vision of post Brexit Britain is one in which it concludes a plethora of free trade deals with other trading blocs and third countries, it is scarcely going to leave out the biggest, closest trading bloc from its list. In other words, the threat to walk out to go to WTO-only terms with the EU must totally contradict the UK’s own sober assessment of its best interests post Brexit, and it can safely be assumed that the UK government sees huge economic value in not going there.
On the core question of the future relationship between eurozone members and the “outs,” Cameron got virtually everything he set out to achieve. This would have been a highly significant step, had we remained in, and it is instructive that, as we leave, precisely the same issues are now returning to the debate on what we can secure from the outside. To which the answer will prove: something very different, because we shall be outside the Single Market, of which there is no partial, half-in, half-out membership.
He achieved a set of principles (and a mechanism to enforce them) which set out that those outside the Eurozone/Banking Union would not be discriminated against, would not participate in bailouts, would keep their own supervision and macro-prudential regulation, and would have specific provisions within the single rule book for financial institutions for the Single Market, which opened the way to necessary differentiation between those in and outside the Banking Union on bank regulation.
This sounds, and is, incredibly technocratic stuff. But it was critical for the governance of the country if we remained in the EU, and for the pursuit of the UK’s best economic interests. No elite outside the UK was in any doubt about the significance and substance of this package, which further built of the fine foundations of British exceptionalism.
And so… I have gone this far without confronting the critical issue of free movement of people and the control of immigration, because I thought it was important to make clear that the decision to offer an in-out referendum long predates the point at which that issue became central. And to stress that it was the domestic and cross Channel political tensions unleashed by the Eurozone crisis which put us on the tramlines to Brexit.
As I say, the issues of the relationship between the Eurozone and the non-eurozone, and the question of how to carve the UK out of ever closer Union, and demonstrate that permanently different destinations were possible in a more flexible, less rigid union which recognised profound national differences, were there as cardinal negotiating objectives from the start.
So were aspirations for an enhanced role for national parliaments to rebalance power in the light of the rise of the European Parliament.
So were the usual themes on the need to speed up progress on big external trade deals and on the faster development of the Single Market in areas seen—just those short four years ago—as important for the UK to lead the development of a genuine pan-EU market.
But you can search high and low in Bloomberg in vain for any serious preoccupation about the operation of free movement. This was a dog that barely barked in my time in No 10 as UK sherpa. As late as 2013, post Bloomberg, when we were discussing the broader menu of issues which might constitute ambitions for the renegotiation list, my recollection is that age-old preoccupations about European social and environmental regulation, about agriculture, fisheries, regional policy and about a variety of other issues on the agendas of Open Europe and the Fresh Start Group were always further up the candidate list.
Yet it of course became the thorniest issue of the renegotiation and a central issue for the referendum.
And post exit, it is the decision to “take back control” of our border, coupled with the decision to exit the jurisdiction of the ECJ, which oblige us to exit the Single Market: the project with whose advocacy, alongside the enlargement to the East, all continental elites associate the British above all.
I alluded earlier to the cost of enlargement to the UK Exchequer from the disapplication of the rebate in the Budget deal of 2005 to structural funds in the new Central and Eastern European Member States.
The political effect of the decision of May 2004 to allow free movement of people into the UK from those states without the seven year transitional period for which their Accession Treaties provided, of which all the other major western Member States took advantage, was even more critical.
I agree with what Andrew Adonis said in an earlier lecture. I recall remarkably little discussion of it inside No 10 before May 2004. The official internal forecasts we saw of the potential numbers of arrivals were, as one looks back, just laughably low, and were discredited within months. We should all have asked ourselves then whether they could possibly be right.
The one serious high level discussion before the decision which I recall, because, as Principal Private Secretary, I was there to take the minute of their bilateral, was a meeting between the then Governor of the Bank, Mervyn King, and the PM.
King pressed the case to open the labour market without transition on the grounds that it would help lower wage growth and inflation, address supply bottle necks in a fast-growing pre financial crisis economy, and help keep interest rates low. He made the same case publicly in subsequent speeches, when the numbers arriving were vastly higher than had been forecast.
It is perhaps an under-appreciated irony that two of today’s most Establishment Eurosceptics were, when themselves in office, strong advocates of key European mechanisms, which, in very British fashion, they instrumentalised for entirely domestic ends: Nigel Lawson in his determination to join the ERM, without ever intending to join EMU, to anchor UK policy and curb inflation. Which it did, but the fall-out of exit in 1992 was a key component in the subsequent sceptic turn in Conservative politics. King on free movement and exploiting first mover advantage -as no other major EU Member State opened its labour market without the transitional periods—to tap a near inexhaustible supply of labour to address UK needs.
The economic benefits of the unprecedentedly large scale free movement which took place between 2004 and 2007 to both employers, to the economy as a whole and to the public finances, were seen as axiomatic.
I am not saying there was no preoccupation at all pre financial crisis with the distributional impacts and the potential impact on native workers’ wages, and on access to public services. A different decision was taken by 2007 about the transition periods for Bulgarian and Romanian accession.
But this was an immigration and free movement policy driven by the desire to fuel UK growth, and by the belief that we were stealing a march on EU competitors and further consolidating the advantages of the UK model over that of a sclerotic Germany, which we were all characterising still in 2004 as the decade-long sick man of Europe.
Cameron told us he believed that the decision to open the labour market immediately, especially in circumstances where the other major players had not, had been a big mistake.
Of course, he inherited office after the financial crisis, not before it.
I come back to the pre crisis policy thinking and the fiscal position. In the Pre Budget Report of 2005, the Treasury revised up trend output by a quarter point, but only till 2007. In PBR 2006, they decided that this quarter point upward revision to 2.75 per cent would persist in all years of the forecast. 0.6 was on the back of population growth: this is where the effects of the surge in free movement come in. Projected productivity growth was above two. This was a world of pretty generous increases in welfare and health spending financed out of healthy public finances, and justified by reference to that permanently raised trend growth rate.
As is obvious from this week’s Budget, this is not the world Hammond faces. Whether on migration or productivity.
At the macro level, migration looked like an unadulterated blessing for the UK economy, and for the UK employer class in 2004-07. It no doubt was.
But, several years after the crisis, with middle class and working class living standards at best stagnating, the political issue which I think crystallised in the Brexit…