Lord Leach: EU reform is the best option, even for us sceptics

Open Europe’s chairman Lord Leach of Fairford has an op-ed in today's Times, where he argues:

Fifteen years ago, when a handful of businessmen set up Business for Sterling to stop Britain joining the euro, we were cold-shouldered by the BBC, patronised as Little Englanders by the Establishment and attacked relentlessly by the CBI’s leadership. 

By the time the previous Government dropped the idea of entering the eurozone, we had nearly 1,000 chairmen or chief executives on our supporter list. 

The centre of gravity has shifted as politicians today line up to argue that the EU in its current form has exhausted its usefulness, and exit is no longer to be feared. Even the most ardent Europhiles pretend amnesia about their former enthusiasm for the single currency. “More Europe” as the answer to every problem has become a bad joke. Even “Thus far and no further” has been replaced by serious questioning of the status quo. In short, the game is up for the Europhiles. 

I disagree, however, with Nigel Lawson and others who have given up on reform and want us to head for the exit. Procedurally, withdrawal would be a nightmare. The famous Article 50 in the EU Treaty would give us two years to negotiate, during which time EU laws would still apply to the UK, without us having any effective say, as we would be sidelined in the EU institutions. That alone should make us pause before pushing the eject button. 

The majority of the public, the political class and business, as shown by multiple polls, are sceptical about the EU but rather than leaving it they want a new deal to reduce its power over their lives. With good reason, for there are two jokers in the pack. First, none of the recent “outers” has set out a credible alternative. It is easy to say “Europe needs us more than we need it” or that if Asians and Americans can trade happily with the EU from outside it, so can we. 

 But this glosses over the reality that without free trade agreements many of our businesses would lose a chunk of their market. The car industry and the City would be especially hard hit. In theory, free trade agreements could cure that, but they would take time to negotiate and the EU would see no advantage in protecting our lead in those business areas. The eurozone’s attack on the City has been brutal enough; and the French would be particularly keen to block British financial services firms from having access to EU markets in perpetuity. 

But it is the second joker in the pack, Germany, that is far more important. Angela Merkel is a cautious leader and doesn’t shoot from the hip. She knows that without radical reform the risk of Britain leaving is huge. She also knows what the consequences would be, as do the Netherlands and Sweden. The EU would lose half its military capacity, nearly 15 per cent of its budgetary contributions, its financial powerhouse, its principal channel to the Anglophone world and its main opponent of protectionism. Berlin would be in a voting minority against the French-led, high spending, uncompetitive Club Med countries. 

Both David Cameron and Chancellor Merkel would therefore be playing with fire if they tried to buy off the British electorate with trivial concessions, as Harold Wilson did in 1975. The public won’t wear it and Germany would risk finishing off its dream of European unity and losing its most effective fellow reformer. 

The first necessary step to a new order would be to redefine the EU as the Single Market, not as a vague aspiration to political union, still less as a currency union. Safeguards would have to be put in place to ensure that the eurozone does not write the rules for the rest of the member states. The next step would be to strengthen the powers of Westminster over EU decisions. 

There is already support for these two reforms in Europe. With those in place, Europe could move to much greater flexibility. Member states could group together in passport unions, fishing or agricultural regimes, defence arrangements or tax and currency unions, but none of this would be obligatory. Subsidies, employment law and energy policy would no longer be micromanaged from Brussels. 

These kind of reforms would ensure that Britain would be at ease in Europe for the first time for 30 years. Norway and Switzerland could join such a structure and the Turkish issue would become more soluble. The euro problem would not go away, but the taboo that makes any change to the eurozone unmentionable would be broken. 

We cannot go on as we are, firefighting crises and ill-judged regulations inside a Union that has become the world’s economic laggard. Most of the necessary reforms have been identified and discussed across the continent. Now we will have to see whether Germany and its Nordic allies will be willing or able to deliver them. 

None of us knows what will happen next. There is still all to play for, and this complex game with so many other players should not be reduced today to a black-and-white argument about staying on the pitch or going home.