David Cameron and his Ministers continue to tread fine line on EU migration reform

UPDATE: The Prime Minister has now given his conference speech. This is the passage on EU migration:

"Immediate access to our welfare system, paying benefits to families back home, employment agencies signing up people from overseas, not recruiting here, numbers that have increased faster than we in this country wanted and at a level that was too much for our communities and for our labour markets. All of this has to change and it will be at the very heart of my renegotiation strategy for Europe. Britain: I know you want this sorted, so I will go to Brussels, I will not take no for an answer and when it comes to free movement I will get what Britain needs."

So, no new policy announcement today. However, David Cameron's reference to the "numbers that have increased" and "at a level that was too much for our communities" leaves the question we posed below hanging. He could argue that tackling migrants' access to benefits (particularly in-work benefits) will help with the numbers, as it could reduce the incentive for some to migrate, particularly those at the lower end of the job market. Will he be prepared (or be allowed) to stop there?

Original post: The Times and the Mail today both feature stories on the increasing pressure on David Cameron to take a stronger stance on migration from the EU.

The Times suggests that senior figures within his party are calling on him to use his renegotiation to explore the introduction of quotas on migrants from existing EU member states. It quotes London Mayor Boris Johnson saying that

“We all want change, we all want a renegotiation. We want sensible control of the numbers of people coming in. I think you would agree that it is the right and duty of every state to have some idea of how many people want to settle in its boundaries, what jobs they propose to do there, and how much they cost the local authorities. Isn’t that fair enough?”

As we have noted before, the free movement debate is about fairness and volume. So far, David Cameron and his Ministers have concentrated on the former - rules on migrants' access to benefits can be changed through secondary EU legislation via QMV and co-decision with MEPs and there is widespread support for addressing the issue among like-minded countries in Northern Europe. David Cameron is also on the record saying that he wants new conditions placed on migrants from countries that join the EU in future. However, the latter issue, addressing the numbers of migrants coming from existing EU member states is much tougher - it means addressing what is seen as a fundamental tenet of the EU and altering it would require unanimous agreement, almost certainly via treaty change.

Home Secretary Theresa May and Foreign Secretary Philip Hammond have both been quoted on the subject today, but both have stuck to line that an 'emergency brake' or measures to tackle the numbers of migrants would apply to new members of the EU, not existing ones.

May said:

"This is an area where David Cameron and I have said we need to look to the future to talk about the rules, particularly for countries coming into the EU in the future, and putting some sort of brake on their access to full free movement. For example, one idea we’ve suggested is they shouldn’t have full free movement rights until their GDP, their economy, is at a certain level compared to other economies within the EU."

Similarly, Hammond told an Open Europe fringe event that:

“It isn’t going to be enough just to look at benefit abuse...We are going to have to look at how we accommodate future new member states with the implementation of free movement, future new member states and how we restrict them. We are going to have to look at how we deal with destabilising flows."

There has been speculation that Cameron will address the issue in some way in his conference speech today, it will be interesting to see how he treads what is an increasingly fine line.

Fairness vs Volume: EU free movement debate hotting up in upper echelons of the Tory party

The Times yesterday noted that pressure among some senior Tories is building on David Cameron to prioritise the negotiation of 'curbs' on the free movement of persons. The word 'curb' is used often in this debate, but it is not always clear what it is that people are demanding be 'curbed'.

There are essentially two issues here: one about fairness - fair, sound and transparent rules around who can access what benefits and when. And one about the level of EU migration - volume. The first is what David Cameron and Downing Street have been trying to address by tightening EU migrants' access to out of work benefits. As we've noted before, more could certainly be achieved through amending legislation at the EU level.

Other issues that arguably fall into this category are access to the UK's system in-work benefits, such as working tax credits, which are meant help to boost incomes at the lower end of the labour market and ease the transition from out of work benefits. However, the UK is currently unable to regulate EU migrants' access to these under the EU's current non-discrimination rules and the definitions of an 'EU worker' set down by EU courts. This is another area that could potentially be addressed to some degree by amending secondary legislation.

But what is clear is that an increasing number of Tory 'big beasts' - Iain Duncan Smith, Theresa May and Boris Johnson - are looking to address the second issue: public concerns about the volume of EU migrants (the latest stats showed a marked increase in the number of central and eastern EU workers). This is a much taller ask and would almost certainly require treaty change and therefore unanimity. This does not make it entirely impossible but certainly more difficult than addressing concerns about fairness. Remember, this involves amending one for the most fundamental principles of the EU treaties.

Another massive question is how, exactly, strengthened control over the volume of EU migration could work in practice.  There have already been suggestions that the Home Office is considering options that fall under this category. In May 2012, at the height of the Greek social and economic crisis, it was reported that Theresa May was looking at whether emergency immigration controls could be applied if required by exceptional circumstances. Another proposal, put forward by David Goodhart, is that governments should be able to introduce qualifications or restrictions on free movement "if the EU inflow breaches a cap of, say, 75,000 in a single year".

In any case, this will be a key debate within Tory ranks leading up to the potential 2017 EU referendum.

Martin Callanan for EU Commissioner?

Commissioner Callanan?

The most high profile UK casualty of last week’s European Elections, other than Nick Clegg obviously, was Martin Callanan, the leader of the Conservatives’ European Conservative and Reformist Group (ECR) in the European Parliament. He lost the sole Conservative seat in the North-East of England. This has caused people in Conservative circles, including the influential Conservative Home website, to float the idea that he would be the ideal candidate for the UK’s European Commissioner. Is this true and if so could it happen?

The decision of who will be the next UK Commissioner is ultimately in the gift of David Cameron who has let drop a few hints already. Firstly, we had a job description leaked in a Number 10 memo that said they were looking for a “political heavyweight who speaks another language”. But there were other considerations. Avoiding a by-election, being a ‘eurosceptic’ but not offending Nick Clegg, and above all someone who could communicate the EU reform and referendum policy to the public and Conservative party alike.Some candidates have some of these qualities. The widely tipped Andrew Lansley has cabinet experience and is a big “big beast” in the Conservative Party but does not tick all the boxes, although in Lansley’s case his Cambridgeshire seat is considered safe from UKIP in a by-election, which would be an additional plus.

Callanan is new to the shortlist and is probably not a bookies' favourite. But he is a popular figure in the Conservative party, particularly among its grass roots, and well known in Brussels where leading the ECR group has given him the knowledge of building alliances and the power-broking needed for the job. In this role he has been through EU budget battles, fisheries reform, negotiating the car CO2 package as well as ensuring the ECR group's survival. Meanwhile, and crucially in many Conservatives' eyes, he has not “gone native”. Added to that, Callanan’s background in the North-East is a perfect counterfoil to Nigel Farage’s appeal to disgruntled former Conservative voters outside London. We do not know if he wants the job but he could well be suited for the tricky role of balancing an economic portfolio, pushing a Conservative reform agenda and credibly selling this in the UK.

So does Callanan tick all the boxes? Well he is not yet a household name in the UK, but running a European Parliament group is valued more highly elsewhere in Europe than in the UK – after all, Martin Schulz, the Socialist EP group leader was a serious candidate for the top job of EU Commission President prior to the elections.

Would Nick agree? Since the election result was a disaster for Nick Clegg it might be safe to assume that his ability to block a candidate is reduced, potentially removing one more obstacle.

Will he get it? Most likely not. As the press has already been reporting (including the FT), the post will probably go to Lansley.

Is Lord Lawson's intervention likely to be a game-changer?

The big political news of the day happens to be strongly EU related – former Chancellor Lord Lawson’s piece in the Times (£) in which he argues in favour of a UK exit from the EU. So what to make of the piece – is it a game-changer or just a Westminster village story?

Lord Lawson rightly sets out many of the flaws inherent in the status quo - which we have looked at in detail numerous times,  from the democratic deficit through to the economic cost of over-regulation and the wasteful EU budget. He also draws particular attention to the threat of onerous and disproportionate costs from impending EU financial services regulation, with particular focus on eurozone-tailored rules imposed through an inbuilt majority in the EU's decision-making process. Familiar stuff. The key question is whether the UK is better off fighting to address these issues from within the EU or leaving altogether? Lord Lawson argues that:

“The changes that Wilson was able to negotiate were so trivial that I doubt if anyone today can remember what they were… I have no doubt that any changes that Mr Cameron — or, for that matter, Ed Miliband — is able to secure will be equally inconsequential… That is why, while I voted “in” in 1975, I shall be voting “out” in 2017.” 

The media have really gone to town on this story - it’s an otherwise slow news day and everyone loves a good ‘Tory splits on Europe’ narrative. No doubt, it has further heated up an already hot debate - and if there's one consequence, it's that the intervention has made 'better off out' a slightly more respectable position. Lord Lawson remains a respectable figure.

But a game-changer, it is not. The responses to the article have conformed with already well marked-out positions: UKIP says its delighted, Dan Hannan tweeted that "we can really win this guys" while those who usually object to this kind of proposition, have objected.

Leaving aside his pessimism about a new EU deal (which we take major issues with), Lord Lawson - whose eurosceptic views are hardly a secret - actually doesn't really tell us anything new. In particular, like most others who say the UK should leave the EU, he completely dodges the most important question of all: what's the alternative? This is the weaker part of his piece:

“Over the past decade, UK exports to the EU have risen in cash terms by some 40 per cent. Over the same period, exports to the EU from those outside it have risen by 75 per cent. The heart of the matter is that the relevant economic context nowadays is not Europe but globalisation, including global free trade, with the World Trade Organisation as its monitor.”

“Today too much of British business and industry feels similarly secure in the warm embrace of the European single market and is failing to recognise that today’s great export opportunities lie in the developing world, particularly in Asia.” 

While Lord Lawson makes a fair point about British business not making the most of global opportunities, he creates a false choice between one or the other (we've been through this before). The point is not the global market place versus the European market, the point is to maximise the total volume of trade - this is what the Germans do very effectively.

While claims about 3 million jobs being at risk in the event of the UK leaving the single market are way overblown, the truth is, as we've pointed out numerous times, all the existing alternatives, from the Swiss and Norwegian models to the WTO-only model, suffer from major flaws. It is unclear which of these Lord Lawson proposes but, judging from the second paragraph above, he seems to suggest we fall back on the WTO regime. So he is arguing for a raft of extra costs slapped on UK exports, including a 10% tariff on car exports to the EU, in addition to barriers to market access for all UK financial firms (absent new deals, which Lord Lawson, again, doesn't mention)?

Until those who advocate the mythical "UK option" actually flesh this concept out into a concrete and sell-able policy proposal, interventions like Lord Lawson's will primarily be something that the Westminster chattering classes can have some fun with.

Will one of the Conservative 'Big Beasts' convert the party to 'better off out'?

Every Tory Big Beast needs to say something on Europe...

It is an essential qualification of the exclusive Conservative club of 'Big Beasts' - a group of high-profile Tories competing to succeed David Cameron, or who at least have considered themselves leadership contenders at one point or another - to have made an intervention on the UK's fraught relationship with Europe, preferably in a powerful article followed up by a substantial and well-thought through speech. With the half way mark in this Parliament crossed, and with the possibility of the Tories winning the 2015 general elections seemingly shrinking by the day (though much could still change), the Conservative Party is quietly contemplating a life in opposition, and who might possibly take over from Cameron.

For a range of reasons, Europe will feature prominently in any leadership campaign, and one particularly uncomfortable question will be difficult to avoid: will any of the contenders openly advocate the UK leaving the EU, thereby (if selected) making the Tories a 'better off out' party in opposition?

Well, here's our Big Beast watch, in chronological order (based on interventions in the debate over the least year). If we've omitted anyone, our apologies.

Michael Gove: A serving Cabinet Minister he nevertheless let if be known in the Mail on 13 October 2012 that he wants Britain to give other EU nations an ultimatum: "Give us back our sovereignty or we will walk out."

Philip Hammond: Not to be outdone he added his name to Goves's comments telling the BBC on 14 October 2012 that "What Michael is reflecting, and many of us feel, is that we are not satisfied with the current relationship between the EU and the UK."

Owen Paterson: He ventured outside of his pursuit of EU agricultural and fisheries reform on 7 December 2011 to tell the Spectator that "If there was a major fundamental change in our relationship, emerging from the creation of a new bloc which would be effectively a new country from which we were excluded, then I think inevitably there would be huge pressure for a referendum."

David Davis: A former Minister and Shadow Home Secretary, runner-up to Cameron in the last leadership contest and senior member of the BB club. He made a speech on the 19 November 2012 saying "We should seek the repatriation of a whole range of powers to create a new relationship between Britain and the EU" based on the original "Common Market [via] the so-called double referendum strategy." One referendum to approve a negotiation strategy and another to "approve the new negotiated relationship, or if it was not good enough, it would trigger the negotiation to leave the Union."

Boris Johnson: The Mayor of London on 4 December 2012 delivered his speech (video here) setting out a similar theme of renegotiation and referenda saying the UK should "Boil it to down to the single market, that's the great achievement of the European Union, I think we could easily scrap the social chapter, the fisheries policy." He concluded "The choice is going to be very simple: it's between staying in on our terms or getting out."

Dr Liam Fox: The Former Defence Secretary and leadership contender was next on 10 December 2012. In his speech to RUSI and Open Europe he argued that there was a new consensus forming that the "debate has centred on the need for a defined negotiating period over the EU issue ending in a much needed referendum." Concluding "To be frank, if the choice is between the current trajectory towards ever closer union and leaving, then I would choose to leave, albeit reluctantly. If the choice is between a looser, more economic relationship and leaving, then I would choose to stay. It is a view that, I believe, is gaining ever greater traction with the British people."

George Osborne: The Chancellor made an intervention in an interview with Die Welt saying: "I very much hope that Britain remains a member of the EU. But in order that we can remain in the European Union, the EU must change."

Adam Afriyie: The young pretender to the BB club and a former shadow Minister. He wrote an article for the Telegraph on 11 January 2013 arguing that "It is now time to ask the British people what they want. If the Government is to fulfil its commitment to offer people a real choice and a real change in our EU relations, then in my view it would be wise to offer two referendums: one in this parliament and a conclusive one in the next."

Andrea Leadsom: A new MP and therefore not traditionally considered a BB, Andrea Leadsom has however been a leading light in the Conservative EU Fresh Start project, working with a large number of her fellow MPs. Her views are summed up in an article for Conservative Home on 3 February 2013 after the Fresh Start manifesto was published on 16 January 2013.

Andrew Mitchell: Another BB new to the backbenches he added his weight to the European debate in an article for the FT on 19 February 2013 where he echoed David Cameron's sentiments and put forwards some ideas for European reform. However Mitchell has been widely tipped to be nominated as the UK's next EU Commissioner in 2014.

Theresa May: Although not a traditional BB, the Home Secretary may not have made any major interventions on the overall EU question, she made a speech on 9 March 2013 arguing that "by 2015 we’ll need a plan for dealing with the [non-EU] European Court of Human Rights. And yes, I want to be clear that all options – including leaving the Convention altogether – should be on the table."

Jesse Norman:  Another junior backbencher and not a conventional BB but has been widely tipped as a future leader, and he has raised his profile as the leader of a rebellion against the Coalition's plans to reform the House of Lords. He has now entered into the EU sphere with a thought-provoking article for the Telegraph yesterday followed up by a speech to the Localis think tank.

Of course David Cameron's speech of 23 January 2013 is the yardstick against which they will all have to be measured.

So what do we make of them? Well there is a surprising amount of agreement between the Big Beasts centred on the idea of a EU renegotiation followed by a referendum. Whoever is leading the Conservative party (in Government of Opposition) for the foreseeable future will probably subscribe to some variant of this. But there's also a possibility that someone goes down the 'better off out' route, perhaps triggered by some event in Europe which is perceived as a blow to the UK's chances of getting a new EU deal.

Who might that be? The comment field is open...

Don't say MPs don't do detail on Europe




 

Too often the UK's political discussion of the European Union is conducted by politicians, on all sides of the debate, whose strong opinions are complemented by an absence of any real understanding of or willingness to engage with the detail of individual EU policy areas. A sterile and noisy debate that ends up characterising people as 'Pro' or 'Anti'. Well today we saw something different - a group of MPs actually engaging with the nitty gritty of the EU's individual policy areas and it makes for interesting reading.

Earlier today the EU Fresh Start Group of around 100 Conservative MPs launched their manifesto - and you can't accuse them of not dealing with the substance. The manifesto sets out a blueprint for a new relationship for Britain within the EU which the group hopes will be taken on as Government or Conservative Party policy. So what does it contain?

Much of what they wish to do can be done within the EU treaties. For instance they wish to see and list significant and specific reforms to areas such as the CAP, CFP, EU budget, regional policy as well as an end to the domestic 'gold-plating' of EU regulation. All this could be done without changing the EU's rulebook. In addition, they have identified five areas where EU treaty change would be required. These are:

• An emergency brake on financial services.
• Devolution of social and employment law to the national level.
• A UK opt-out from policing and criminal justice measures not covered by block opt-out.
• A single market safeguard.
• The abolition of the second European Parliament seat.

There will be the usual refrain that 'none of this is achievable' and 'they will say no'. The truth is that we don't know how much of this will be picked up by the government or eventually accepted. But it's absolutely extraordinary that the same people who used to moan about MPs not engaging with policy on Europe, now complain about Fresh Start conducting the exercise.  

Let the best argument win.

What happens now? Well the publication and work is perfectly timed to feed into David Cameron's EU speech to end all EU speeches now due for 18 January in the Netherlands. No 10 today called the Fresh Start contribution "interesting." We will wait and see.

David Cameron with the "Fresh Start" MP Andrea Leadsom

Cameron's EU speech: The only way is up?

When it comes to Europe, the UK government can make your head spin. Cameron's EU speech is now officially scheduled for Friday 18th Jan, after several twists and turns.

The speech was originally scheduled to take place at the end of last year but with the controversial EU budget negotiations taking centre stage and the anniversary of Cameron’s veto setting an adversarial tone it was pushed into the start of this year (the official line was that Cameron was looking to consult more closely with his EU partners).

After the turn of the year, the guessing game over the timing and location resumed, with the government keen to invoke the spirit of Thatcher’s 1988 speech in Bruges. Eventually, it was settled. 22nd January in the Netherlands.

Unfortunately, that date turned out to be a bit of a disaster: the 22 January 2013 is the 50th anniversary of the signing of the Elysee Treaty. Unsurprisingly, the French and German governments were none too happy with the timing, given that it clashes with a major landmark in Franco-German conciliation (so much for further consultation with European partners - or rather 2 minutes worth of Google-research). 

This is hardly impressive handling of a delicate topic (we can’t help but think back to our ten lessons which we outlined following the UK veto in December 2011, with two of the top three being - get in early and communicate effectively.)

The good thing is that, following all the interventions from near and afar - and all the hyperventilating from all sides - there's no way Cameron can now try to manage the reactions to his speech; he lost control of that long ago. So he might as well forget the choreography, and instead set out what he actually believes in, keeping in mind that it needs to work for both the UK and Europe if it is to work, and articulate his genuine vision for the future of Europe.

Hopefully, it can only go up from here.

A bit more on the 'EU speech to end all EU speeches'

David Cameron, interviewed on Radio 4's Today programme, has given some more details about his forthcoming big EU speech to end all EU speeches (well...). So what should we expect? Here are some key excerpts:

He said a new EU settlement "is not something we should be frightened of, it is something we should embrace."

He believes there's a "real chance" of it happening and that

"The Dutch and German Prime Ministers have both been making arguments along those lines."

That he floats Germany is interesting. He was not to be drawn on what exactly the referendum would be on or when:

"We will have a new settlement and  then will put that to the British people in a very straightforward way so that they can give or not give their consent to those changes"

But what if the reform-sceptics - on all sides - are right and reform is not on the table, would he ever consider leaving the EU?

"If you are saying to me, would Britain collapse if it left the European Union? No, of course not. You could chose a different path. The question is what is in our national interest and I have always been very clear it is in our national interest as a trading nation to be in the single market but not like Norway just accept all the rules of the single market pay for the privilege of being part of it and as it were be governed by fax from Brussels."

This is all familiar stuff: Cameron thinks the UK is better off in (he's been saying that for ages), is committed to the UK public being given "fresh consent", implicitly via a referendum, and he denies all charges of "blackmailing" or inadvertently risking the UK's EU membership via renegotiation.

Could Europe be an unlikely area of consensus for the revamped Coalition 2.0?

Over on Liberal Democrat Voice's the 'Independent View', we argue that:

Following the bad blood within the coalition over the collapse of Lords reform and the constituency boundary review, there has been much speculation that the two parties will enact a policy ‘reset’ after conference season, with Oliver Letwin and Danny Alexander already reportedly working out the details. Most people looking for potential fresh common ground between Tories and Lib Dems would hardly place ‘Europe’ at the top of their list. However, while the parties are unlikely to ever see eye to eye on the EU, given political will, there are a number of areas of potential agreement.

For example, both parties already agree on the need to amend the Working Time Directive. However, in terms of immediate action and potential achievability, there is no better target than reforming the EU budget. While the UK and other member states struggle to balance their books, the EU budget has grown year on year despite the vast majority of spending going on policies at best irrelevant, and at worst outright damaging, in the fight to deliver the jobs and growth Europe so desperately needs. 

Around 40% of the budget still goes on the Common Agricultural Policy; mostly subsidies to farmers and landowners which act as an outright disincentive for modernisation given they are de-linked from any meaningful economic activity. It is difficult to think of a policy more offensive to liberal values than the CAP: market distorting, sustained by effective lobbying from vested interests, staggeringly wasteful and inefficient, and disproportionately harmful to the least well off in society via higher food prices. Moreover, despite the Commission’s rhetoric, the CAP’s ‘green’ credentials are poor. Slimming down and radically refocusing the CAP by explicitly tying it to environmental objectives such as biodiversity would not only be hugely efficient, it would add credibility to the coalition’s claim of being the ‘greenest government ever’.

Another area in need of overhaul is EU regional spending; the current structure involving all regions in all member states, irrespective of their relative wealth, is economically irrational. For this reason, spending should be limited to the least wealthy member states where it can have the biggest positive impact, an objective endorsed by Nick Clegg. This would save the UK around £4bn net over seven years which could be ploughed straight back into developing the UK’s least wealthy regions, helping the Lib Dems to achieve their long-standing ambition of ‘rebalancing’ the economy away from its over-reliance on London and the South-East.

These measures would require the coalition adopting a much tougher line in the on-going negotiations over the EU’s next long-term budget than it has done, or else risk the existing flawed spending patterns becoming locked in until 2020. While achieving these reforms will not be easy, if pitched correctly, they could command support all across Europe.

These measures would deliver a number of wins; saving UK taxpayers’ cash, soothing coalition tensions, and securing electoral popularity – Lib Dem members and voters are in tune with national opinion in wanting more national control over many policy areas currently significantly influenced by Brussels. Having shown that they can be ‘tough’ on the EU, Lib Dems would then have greater credibility when making the positive case for its continued involvement in other areas.

Referendum confusion: Is Cameron protecting Britain from British plans for a eurozone superstate?

The eurozone crisis alone is complicated enough. Add in UK domestic politics and calls for a referendum on EU membership, and this stuff becomes maddening.

Today's Europe coverage in the UK press was a wonderful cocktail of a euro Armageddon, EU-UK relations and a huge dose of British domestic politics.

The Telegraph reported that:

"The Prime Minister dismissed as 'nonsense' a suggestion from Angela Merkel, the German chancellor, that the European Union should eventually have a single national identity and described as 'nonsense' the idea of loyalty to a common European flag."

It also noted that Merkel said yesterday, “We need more Europe, a budget union, and we need a political union first and foremost”, which led the paper to proclaim that "David Cameron promises to 'protect' Britain from German plans for a eurozone superstate with common banking and political systems".

But is that really what's going on here? It's true that both Cameron and Osborne have floated the idea of "safeguards" if the eurozone presses ahead with a banking union and further integration. But here's the thing: Germany's default position remains strongly anti-fiscal burden sharing, meaning that Merkel's 'budget union' is still based on exporting German fiscal discipline to the eurozone-level by introducing stronger budget oversight and enforcement mechanisms - only then could some form of debt mutualisation be considered. A German-led superstate still seems years off - if it ever will be agreed (no matter how much other parts of the eurozone or markets might like to see it right now).

In contrast, David Cameron last month called for a bigger bailout fund, shared eurozone bonds and a more active monetary policy from the ECB - in other words, the eurozone quickly moving to "joint and several liabilities" with stronger states indefinitely underwriting weaker ones. That would really be a German-led super state.

So, who's plans are Cameron and Osborne really trying to 'safeguard' themselves against? Of course, Cameron is right to stay well clear and seek safeguards in return for nodding through treaty changes designed to achieve a fiscal or a banking union, for example for UK financial services. But this discussion leaves the impression that Cameron is actually seeking safeguards against his own plans for eurozone integration. Not necessarily a contradiction, but not a good starting point for future negotiations over EU treaty changes either.

There's also a second confusion: an EU referendum.

In response to questions about the impact on Britain of more eurozone integration, Osborne yesterday told the BBC Today Programme that:

“I think what the public are concerned about, the British people would be concerned about, would be if there was any transfer of power...A reshaped relationship with Europe would imply, would involve, a transfer of sovereignty or powers from the UK to Brussels.” 

In reality, Osborne merely re-stated what's in the 'referendum lock', i.e. a substantial transfer of powers to the EU will, by law, trigger a public vote. But the context is confusing. In all likelihood any eurozone focused treaty change would not legally and constitutionally impact the UK enough to trigger a referendum. Furthermore, the government's talk of safeguards suggests that, if none are present, the UK would veto any treaty change before it actually gets to a referendum. So a referendum still looks unlikely, at least on the back of the eurozone crisis.

Osborne and Cameron are in an unenviable position - the eurozone crisis threatens to send Britain into a deeper recession, and remains a fundamental threat not only to the UK economy but also now to the Conservatives' 2015 election prospects. Tory backbenchers and UKIP are both breathing down the necks of the Conservative leadership over an EU referendum. All factors considered, Osborne and Cameron are doing a decent job balancing all these interests.

At the same time though, as we hint at in today's Telegraph, the UK government could end up in a rather strange position by sending all these political hares running at the same time. Is it going to veto the same Treaty changes (to establish a fiscal / banking union) that it is now effectively calling for? If it's deemed that these treaty changes de facto transfer powers away from the UK - i.e. by shifting the institutional balance of power towards the eurozone at the UK's expense - will it then also call a referendum on those treaty changes? What would the question be?

This may all work out both in the polls at home and in talks in Europe. But given the unrealistic expectations it raises - and how very difficult it will be to square all these various factors - it may well come back to haunt the Tory leadership, at home as well as abroad.

Coalition rope pulling - the European Arrest Warrant

Yesterday's news that a British man has been served with a European Arrest Warrant (EAW) in a high profile case he was cleared of by a Portuguese court in 1995 has again raised the issue of the malfunctioning European Arrest Warrant (EAW).

The problems with the EAW are well documented and mostly flow from the flawed assumption that all European justice systems are broadly of the same quality and tradition - the reality is that they differ - as well as an absence of civil liberties checks and a proportionality principle, some hand down better justice than others.

That being the case, there is a need for stronger safeguards before the UK hands over its own citizens to other countries. Reform has been spoken of for years (the need for it even admitted by the European Commission) so why the muted British response? As with much of the Government's programme it comes down to internal Coalition horse-trading. Here is how the parties stack up:

Conservatives:

• As a backbench MP, David Cameron described the EAW "highly objectionable":

"I find the European arrest warrant highly objectionable because of the problem of dual criminality... let us be clear about what it means. One of our constituents goes to Spain on holiday, commits an alleged offence, and returns home. All that is necessary for him or her to return is that the warrant is correctly filled out… and that a district judge in the UK sees the warrant and judges that the offence falls into one of the 32 categories. At no time is it asked whether the offence is a crime in this country."

• 102 Conservative MPs backed the conclusions of Open Europe's recent report which argued for the block repatriation of EU powers on crime and policing, with the option of opting back in to selected measures.

• Conservative MPs and MEPs have long campaigned for reform of the EAW. Conservative MPs, including David Cameron, voted against the EAW in the House of Commons and made EAW-reform a part of their last European Parliament Election Campaign saying “Conservative MEPs will uphold civil rights, and will work to avoid a repeat of the lack of safeguards in the European Arrest Warrant.”

Liberal Democrats:

The issue of the EAW cuts across two Liberal Democrat core beliefs; a commitment to European co-operation and Civil Liberties.

• Nick Clegg recently defended the EAW as "indispensable" though also admitting that it needed reform.
• Liberal Democrat MEPs helped to shape the EAW in the European Parliament; Sir Graham Watson MEP was the Parliament's rapporteur (Nich Clegg and Chris Huhne were both MEPs at the time)
• Ed Davey, now a Business Minister (then Lid Dem Europe's spokesman) was keen on the EAW at the time of the Lisbon Treaty debates, arguing the Conservatives wished to create a “Costa del Crime”.
• Curiously Nick Clegg has also championed reform of other extradition arrangements, such as the US/UK extradition treaty calling it "lopsided and unfair".
• In fairness, Lib Dems have also called for reform of the EAW, with MEP Baroness Ludford highlightingd the EAW's problems (she is also a patron of Fair Trials International).

So what will happen when a decision is forced on the Coalition in 2014?

As we have highlighted in a recent report, under the Lisbon Treaty, the UK will have to decide by 2014 whether to accept the jurisdiction of the European Court of Justice (ECJ) over the EAW and 130 other EU Crime and Policing measures. At this point (or preferably before) the Coalition will have to decide whether it wants the ECJ to have permanent jurisdiction over an unreformed EAW or leave the EAW altogether.

The Conservatives and Liberal Democrats have long held opposing views on the EAW that will be difficult to climb down from and make the collective decision very tough. In the end it is likely the loudest voice will prevail - and this could well turn into a loud and noise debate.

But perhaps there is another way forwards. There is a growing consensus that the EAW and extradition laws generally need to be reformed, something the Liberal Democrats recognise with regards to the UK/US extradition treaty when the wider issue of Europe is not at stake. It should therefore be possible to find a middle ground. This would be for the Coalition to opt out of ECJ jurisdiction over the unreformed EAW and argue for reform in order to make it possible to rejoin it later. For this to happen it would be best to make the decision now in order that the substantive negotiation is completed in time for 2014.

Internal coalition disagreements aside, surely this is an area where all sides stand to gain from EU reform?

The pitfalls of holding an EU referendum on election day

Amid the last-minute efforts to finalise the details on the Greek debt swap, just a couple of thoughts on UK domestic politics vis-a-vis the 'EU referendum question'.

Earlier this week, the excellent Tim Montgomerie of Conservative Home, had a piece asking whether an EU-related referendum should be held on the same day as the General Election (for now, we'll leave aside the tiny detail of what a successful outcome from an EU referendum would be and indeed what the question should be).

Tim notes,

"One of the reasons why the Conservative Party had such good results in last year's local elections was that many extra Tory voters came out to vote in order to defeat AV. Additionally we had the centre right press all united in campaigning hard against a change to the electoral system. This has led some Tory strategists to wonder if a referendum on the same day as the next general election might produce similar dividends."

He goes on,

"Could a referendum on Britain's relationship with Europe, for example, ensure high energy levels among Tory leaflet deliverers and also high turnout amongst Tory-inclined voters? The extra advantage of a vote on Europe would be that it would reduce the incentive to vote for UKIP (ConHQ are increasingly concerned that a strong UKIP vote might again make the difference in many marginal seats). People could use the Europe referendum to register their scepticism about Brussels and at the same time vote Conservative to ensure Labour wasn't elected by the backdoor."

This is an interesting discussion, and Tim makes some very good points. But for what it's worth, we believe that this strategy, no matter what the question might be, would be a mistake. The reason is simple: most successful referendum campaigns have managed to take party politics out of the equation. By decoupling the referendum question from party politics, there's a far greater chance of building political momentum, and a majority 'national position', as the preferred answer would cut across party political divides.

For any Europe-related referendum this is particularly important, as Labour and Lib Dem voters would have a proportionally greater propensity to vote against European integration than their respective party leaderships and MPs. For example, 34% of Labour voters would vote to leave the EU if a referendum was held today (national average is 43%), according to a December poll. At the same time, 36% of Labour voters and 30% of Lib Dem voters are in favour of "less EU integration" according to another recent poll.

This inclination to vote against "more Europe" would be seriously undermined if a referendum was linked to the General Election, where voters would be more likely to vote 'under orders' along party political lines rather than on the issue at hand. (Incidentally, in the past, the dominant school of thought inside the Conservative Campaign Headqaurters has been that the more Europe is raised as an issue, the more likely people are to vote for UKIP. We're sceptical of that line of thinking).

Such a move could therefore prove an own-goal for those in favour of changing the UK-EU relationship. Better then to keep the two separate. Without taking a position on which question should be asked, that is.

What will the next Conservative manifesto say on Europe?

Over on Conservativehome we have an article highlighting the importance of and looking at potential senarios for the next Conservative election manifesto:

The discussions at the EU summit will inevitably focus on Greece and the eurozone and so mercifully the UK will again largely be a spectator. However, EU leaders are also seeking to further advance the “fiscal compact”, which Cameron refused to sign up to back in December, again highlighting how the end point for the UK is inevitably different to that of the eurozone. It is now settled that the UK will never join the Euro, and neither can it subscribe to further integration - yet the eurozone is speeding towards fiscal union and all EU states bar the UK and Denmark are legally obliged to join. It is therefore clear that, at some point new membership terms will need to be defined, but how? Crucial to this will be what becomes policy in the Conservative Party’s next manifesto.

David Cameron on 4 November 2009

We have a precedent to follow as we have been here before, (in November 2009) - the last time the Conservatives set out detailed proposals on the UK’s relationship with the EU. The Czech President had just bowed to the inevitable and signed the Lisbon Treaty, creating a strategic problem for the party leadership that it could no longer ignore. On the one hand Conservative MPs, (and more importantly candidates) were viscerally hostile to the Treaty, generally believed the EU had gone too far and wanted powers back. On the other the Conservative leadership did not to wish promise anything it knew would be difficult to deliver and (rightly or wrongly) to say anything that could lead to a hostile reaction from Sarkozy and Merkel. What came out of the frantic internal discussions was set out in a speech by David Cameron’s on 4 November 2009.

The speech committed the Conservatives to an attempt to undo some effects of the Lisbon Treaty but not to full scale renegotiation and definitely not a referendum, apart from on future transfers of power to Brussels. But David Cameron also stated “of course we can return to this subject in a manifesto for the parliament after the next one…” and, in the event he failed to achieve his ends:

“we would not rule out a referendum on a wider package of guarantees to protect our democratic decision-making, while remaining, of course, a member of the European Union.”

So it is Conservative policy (Coalition excuses aside) to consider a referendum if it proves impossible to achieve anything this Parliament – which is looking increasingly likely. And the million dollar question: a referendum on what, exactly?

7 manifesto options

Well, here are the options that could go in a manifesto:

In/out, binary referendum: This would commit the Conservatives to a public vote on EU membership, with the options being the status quo versus full withdrawal from the EU.

Pros: It would post a clear, binary question in a referendum and satisfy a fraction of the parliamentary party.

Cons: Both answers would be wrong. A "stay in" would kill off efforts to radically reform the EU (which an overwhelming majority of the British electorate wants), while an "out" vote would trigger more questions than it answers (e.g. alternatives to membership – EEA, Swiss-style bilateral deals, Customs Union, WTO rules). The referendum campaign would also fundamentally split the Conservatives while uniting everyone else (Lib Dems, Labour, Business and Media).

No referendum – a manifesto commitment to renegotiate: A commitment to seek to renegotiate its membership terms and so gain a popular mandate via the general election.

Pros: It gives an incoming government flexibility to negotiate when the time is right.

Cons: It does not answer the desire for a referendum or give an explicit and provide the forceful show of opinion that might be needed to aid negotiations.

A mandating referendum: This seems to be what David Cameron was hinting at in 2009. A referendum would grant the government a mandate to renegotiate the treaties with the other EU states.

Pros: It could give a clear expression of the British people’s desire to repatriate powers.

Cons: It would immediately bog an incoming government down in a referendum campaign many people would not understand. What happens if nothing is achieved in the negotiations? What happens if the referendum fails to attract a good turnout or people vote no? It would be a bit like holding a referendum on who we want to win the Euro 2012.

A confirmatory referendum: An alternative to the above is to promise to renegotiate the UK’s EU membership and put the outcome of the negotiations to a referendum.

Pros: It is clear what the electorate are giving their approval to.

Cons: If nothing much is achieved people in favour of a wider negotiation may not vote, feel let down or potentially vote No. What happens if they vote no?

A mandatory and confirmatory referendum: This option would allow for two referenda - one before renegotiation and one after.

Pros: It is the purest option democratically and it’s clear what the vote would be on.

Cons: It could involve voter fatigue and shares some of the pitfalls of 2 and 3 above.

A reserved referendum: In this case the manifesto would commit the Government to renegotiation, but with the ‘nuclear option’ of a far wider referendum if the negotiations fail to achieve a significant repatriation of power.

Pros: This would give the incoming Government some bargaining power, would show it meant business and give it some flexibility.

Cons: It would be up to the government to decide if its negotiating mandate had been met so potentially avoiding a more in-depth examination of the UK’s membership of the EU.

A multi-stage, multi-option referendum: A final option, which is gaining traction, is to combine some of the above scenarios. This could involve French-style rounds of referenda, i.e. a first round would involve in, out or renegotiate, with a second round involving a vote on the two runner-ups.

Pros: It would fairly capture the options on the table and potentially give a UK government a very strong mandate.

Cons: Again, some of the same problems re-emerge, for example, when will the electorate vote, ahead of the re-negotiation or afterwards? The whole process could also become prohibitively complex.

There’s then the question of what would actually be entailed in a re-negotiation package with respect to what powers a government would actually wish to ask back. Working with an All Party Parliamentary Group on EU reform, Open Europe is currently setting out a number of areas where powers, in various forms, could flow back to the UK, putting its relationship with Europe on a sustainable footing (see here, here, here and here ).

The ground is moving under our feet - the status quo is no longer an option.

Which one will they chose and why?

We still have a long way to go, and more so than in any other area, the Conservatives may be overtaken by events, as it’s still anyone’s guess exactly where the eurozone – and therefore the EU – is heading. But it’s absolutely clear that Conservatives, of all ranks, need to start to seriously think this through. Which way will the Conservative leadership jump?

Rebels in need of a cause?

As you are undoubtedly aware by now, last night 79 Conservative MPs defied a three line whip to vote for a referendum on the EU. There have been Tory euro rebellions before, and no doubt there will be again – but this one was different. Not only did it take in nearly half of all Tory backbenchers, but it also included many of the 2010 intake untainted by the Tory euro wars of old. This new group are not against the EU in its entirety but wish to see some form of EU reform where powers are returned to the member states. Much can be said about yesterday's vote - and we'll return to this issue when the dust has settled and tempers have cooled down.

Leaving aside the issues of Cameron's party management skills, backbench powers and residual discontent over the Coalition (pretty big issues in domestic politics for sure), yesterday's debate, whilst good in part, did suffer from a certain lack of clarity and definition.

We know that many MPs are unhappy about the status quo in Europe - that was clear from the interventions. But moving beyond discontent, what sort of Europe are MPs/should MPs be arguing for? David Cameron said that he agreed with the rebels as to their ends but not their means – yet scratch the surface and there are a variety of opinions, some informed, and some less so. Some MPs talk of repatriating powers, others of a free trade agreement, and some of a Norway-style arrangement as if these were mutually interchangeable. In fairness Tory MP Nadim Zahawi made exactly the same point during his speech yesterday. There is also disagreement as to what the UK's negotiating position ought to be; some believe the eurozone crisis has given the UK a golden opportunity to demand reform, while others take a more cautious line.

But - and this is where the debate is likely to head next - there's growing agreement across the political spectrum that the move toward eurozone fiscal union creates a new situation for the UK and one the UK needs to respond to in a strategic manner. It is unclear when or if there will be a new treaty, but when the time comes the UK will need to know what to ask for. In other words, we need to calmly and rationally weigh up the UK’s membership of the EU and decide what our priorities should be.

Strategies should include:

What does the UK need to safeguard from an unsympathetic eurozone voting caucus? What should be decided at the national level only? How can safeguards and carve-outs be made watertight and legally binding, given the EU's history of circumventing such measures (think Charter of Fundamental Rights)? What does the UK do if there's a new eurozone-only Treaty, stripping the UK of its veto over the next step of European integration, but leaving it exposed to the secondary effects?

These questions need answering, and the government needs to draw up a plan to make sure the UK's priorities get pushed through. It is important that the UK ascertains who its potential allies are, what its negotiating levers are, and when to use these to maximum effect. Encouragingly, it looks like this process might already be under way, as the government announced this afternoon that a review of which powers could be returned from Brussels to Westminster is in its early stages, with Europe Minister David Lidington saying that he “would welcome constructive suggestions from the Opposition as well as any part of this House as that work is carried forward."

If last night’s vote increases the sense of urgency in the need to come up with such a properly thought-out strategic plan then it will have served some good.

If not then it will be just another chapter in Conservative Party’s internal politics.

European "union"

So, by Wednesday, EU leaders will have held nine meetings in five days, which is extraordinary. In addition, they will also have seen through a huge number of rows. So how many rows can we count to, over the last week or so? Here we rank them in order of their potential significance and level of intensity.

1) The 'you shut up' row: French President Nicolas Sarkozy finally lost it with David Cameron's consistent criticism of the eurozone leaders' handling of the crisis, reportedly telling him he "had lost a good opportunity to shut up", while also trying to cut Cameron out of important meetings deciding the bank recapitalisation plan (a move that eventually failed). You can understand Sarkozy's frustration but if he snapped at everyone who criticised the handling of the crisis we'd imagine he wouldn't have too many people to talk to.

Result: Sarkozy 0 Cameron 1

2) The 'laughing at Berlusconi' row: After teaming up and privately lambasting Italian PM Silivio Berlusconi for his lack of economic reform (or any reform at all) despite the growing market fears surrounding his country's debt sustainability, Sarkozy and German Chancellor Angela Merkel let their feelings slip publicly by laughing in response to a question on whether Berlusconi had convinced them of his ability to finally make the necessary reforms. Not the proudest moment for either the French or German leaders but sums up what seems to have been another bad weekend for Berlusconi in a terrible year. To top it off he returned to Italy and announced a plan to increase the retirement age by two years, a policy likely to put him on a collision course with his coalition partner Lega Nord. In terms of consequences then this row could be a biggy, given that it may threaten the stability of the Berlusconi government.

Result: Merkel & Sarkozy 2 Berlusconi 0

3) The 'not so happy couple' row: Despite seeming united while ganging up on Silvio, the facade of unity between Merkel and Sarkozy was quickly shattered. In something that seems more like a scene out of a bad High School Musical sequel, Merkel is reported to be hurt after Sarkozy remarked to other leaders about the Chancellor,"she says she is on a diet and then helps herself to a second helping of cheese". We'd imagine this could turn out to be one of the more costly insults in history if Merkel decides to remove any sympathy for the French government or banks from her approach to the crisis. Add to this the reports of a loud slanging match at Jean-Claude Trichet's leaving party and all does not look well behind the scenes for the EU's proverbial power couple.

Result: Sarkozy 0 Merkel 0 (Only half-time, could easily turn into a rout for Merkel)

4) Merkel v the Bundestag: Last Friday saw the recent tensions within the Bundestag come to a head, with the parliament refusing to give Merkel a mandate to negotiate on at Sunday's summit, eventually forcing the EU to agree to hold another summit on Wednesday. In terms of consequences for eurozone decision-making, this one is key. The row over how much say the Bundestag has in the eurozone crisis negotiations and policies has been simmering for some time and we expect this to be the first of many flash points. Merkel took an early lead by sidelining the Bundestag but with the recent German Constitutional Court ruling and by forcing Merkel's hand here, the Parliament has clawed it back.

Result: Bundestag 2 Merkel 3 (but plenty more to come, with Bundestag on the up)

5) Conservative Party 'rebellion': Yes, we put this fifth, despite this being the biggest internal test Cameron has faced to date - this is because, to us, it's a bit of an inflated Tory row. Scratch the surface, and the Conservatives are more united on Europe than they ever have been (arguably) - most of them want renegotiation. Still, media loves that old Tory split story and there are widespread reports of a growing 'rebellion' in the Conservative Party ahead of today's vote on the prospect of an EU referendum. Definitely, become a bigger issue than the government would have wanted and has gained some vocal support but with a three line whip the government looks likely to get its way eventually (albeit after handling the situation poorly). The actual motion is non-binding and the Government will win the vote in any case. But in terms of political outcome, it's finely poised, though we give it a draw for now.

Result: Government 2 Rebels 2

6) The 'banks won't pay' row: An old classic here, with the usual arguments between the banks led by the Institute for International Finance (IIF) and EU officials. Banks refuse to take bigger write downs angering the officials and stalling any permanent solution. As long as the write downs continue to be voluntary in nature the banks will continue to hold the power.

Result: EU officials 1 Banks 4

7) The ECB 'footnote' row: As we noted in our post on the latest troika report, the IMF and the ECB had a significant disagreement over the debt sustainability in Greece and the level of write downs needed to keep Greece stable. The IMF looks to have one out given the analysis in the report, although the ECB got a footnote in stating it doesn't agree with the scenarios. A win for the IMF but given the previous row and result it may become a moot point.

Result: IMF 2 ECB 1

The EU summit - our take

So the eurozone crisis talks go on, but for those of you interested, the conclusions from this week's EU summit can be found here. There were no surprise statements as most decisions were deferred to the extra meeting on Wednesday, though most EU leaders did their best to give assurances at their respective press conferences that they're making "good progress". A few points:

- It was agreed that a full European Council meeting will precede Wednesday's eurozone meeting - a concession to the UK, Poland, Sweden and other 'outs'.

- How to leverage EFSF still needs to be resolved, with two options reportedly under discussion - none of them, thankfully, involving the ECB (according to Merkel).

- No agreement on what to do with Greece.

- EU leaders seem to have reached a preliminary agreement on bank recapitalisation, with most reports stating that leaders see a need for a €100bn capital injection (add or take away a few billions) into the EU's banking sector, first coming from private funding, then governments and finally EFSF as a last resort.

- Viewed from London, it's interesting that that draft conclusions state that any EU treaty change must be agreed by all 27 member states. This is of course the case per definition for an EU Treaty change but could also be an attempt by the UK and others to steer the eurozone away from pursuing a eurozone-only Treaty (similar to Schengen), effectively stripping the UK and other non euro-members of their veto over changes that could have an indirect, but significant, impact on them.

At his press conference, David Cameron also said that any EU Treaty change could be used to "advance British interests", which is interesting. Cameron is probably playing to sceptics at home ahead of tomorrow's vote in the Commons on a motion calling for an in/out referendum. But by upping the game like this, it will be difficult for him not to deliver some sort of safeguard or even powers back when EU Treaty changes or further eurozone integration are put on the table (a first discussion over Treaty change can be initatied as early as December). That pressure will be there even if that change technically impacts on the eurozone only.

As we've argued before, the eurozone crisis is changing the way Europe operates, which has all kinds of implications, for example steering the EU in a more "inter-governmental" direction. The implication for the UK's Coalition government is clear, however: Cameron and Clegg simply can't freeze the EU as an issue during this parliament, as was its original strategy. The status quo is no longer an option, whether they like it or not.

Now, at his press conference, Cameron flagged up the risk of an integrated eurozone effectively taking bloc-decisions with a profound impact on the UK economy, but without the UK having a presence at the negotiation table, for example in trade and financial services. He's absolutely correct to highlight this potential risk.

But he is wrong to say, as he also did at the press conference, that we shouldn't 'get ahead of ourselves' on a potential EU treaty change, as such changes "take years". It's true that Treaty changes will be slow-moving, but the key to set the agenda in EU negotiations is to get in early and get in with clear objectives, meaning that now is the exact right time for the Coalition to develop a game plan for how to achieve reform in Europe. Not through grand posturing or meaningless symbolic demands, but a concrete, credible and positive blueprint, forming a part of the constitutional and political settlement that is likely follow in the wake of the eurozone crisis, whatever turn that crisis takes. And just for the record, there's a crucial difference between the immediate crisis, which is wholly inappropriate to seeking to exploit and the long, political discussion that will follow afterwards, where the UK has little choice but to engage with its own sets of demands (like everyone else).

Following tomorrow's vote in UK parliament on an in/out referendum, this is where the debate on EU reform probably needs to move on to.

Why not have a free vote on the EU Referendum?

Monday will witness a showdown in the UK Parliament over a motion calling for a referendum on the UK’s EU membership. According to the motion, a public vote should be called with three options: stay in, withdraw or stay in but renegotiate the terms. The motion has triggered a flurry of MP maneuvering and comment (see here, here, here, here and here for example) With the raging eurozone crisis as a backdrop, the feeling is that the UK government's strategy - to freeze the issue of 'Europe' during this parliament - is being overtaken by events and public opinion.

Potentially 67 Tory MPs could vote against the Government, according to most recent reports, alongside a handful Labour and DUP MPs. Two alternative amendments have been tabled, one by George Eustice MP calling for a referendum on the EU but only after a successful renegotiation of powers. His amendment also calls for the Government to publish a White Paper in the 2012-13 session of Parliament on what EU powers the Government would seek to repatriate from Brussels.

Earlier today, Cameron indicated that the government will not support either the motion or the Eustice amendment. MPs will be on a three-line whip to vote against the motion, but it remains unclear whether Cameron will whip MPs to vote against the Eustice amendment - though chances are he will whip against it, given that even the 'compromise' amendment is still unacceptable to the Lib Dems.

In the Times, Dominic Raab MP argues,

"The executive should have the magnanimity to allow the legislature its say…There will always be different shades of opinion in a democratic party: on the extent of repatriation; whether a referendum should be held in the short or longer term; or whether we should withdraw altogether. But the political weather has changed – at home and abroad. The Government would do better to have this rising headwind to its back than its front.”

George Eustice added that:

"I think the government has handled it very, very badly and have escalated this into a conflict that was entirely unnecessary."

It's hard to disagree. Irrespective of what one thinks about a referendum on EU membership, why not allow a free vote?

We have a whole lot to say about the arguments for and against a referendum, but a couple of brief points:

It's clear that the public is becoming increasingly restless with the current EU-UK relationship, although this is not confined to the UK, witness the growing frustration with EU's elite's disregard for national democracy (the No votes in the Netherlands, France and Ireland, the bailouts etc) and the remoteness of EU institutions all across Europe. It is therefore hard not to have some sympathy for people who feel that a referendum on Europe is long overdue.

At the same time the outcome of an in-out referendum, if it was held today, could well generate a 'stay in' vote, due to the uncertainty that would be triggered by a No vote (fuelled by the fragile economic situation - we could see echoes of the second Irish referendum on the Lisbon Treaty). As Peter Oborne noted at a recent Open Europe event, an in-out referendum would unite the media establishment, a large part of the business community (think 'rules of origin' and potential trade tariffs), the Lib Dems, most of Labour, but would split the Conservatives right down the middle. The risk is that a Yes vote also would kill the question of EU reform for a very long time - leaving the current, sub-optimal structure in place for far longer than need be.

In any case, an 'out' vote would not settle the question of the UK's future in Europe as it would trigger a hugely complex round of negotiations with other EU countries in order to establish a new relationship. And here's the thing, at the moment, there are no credible alternatives to membership. In or out of the customs union? How to avoid trade disruptions? How to secure market access across Europe for the City? etc etc. For example, replicating the European Economic Area, a la Norway and Iceland, would be pretty disastrous, given that it would still subject the UK to Single Market regulation, but without giving Britain a voice at the table when these laws are forged (although at least Norway gets autonomy over fishing - a key industry - and agriculture in return). A series of Swiss-style bilateral agreement seems like a more credible option, but again, that will involve a hugely cumbersome and unpredictable negotiation process.

But regardless of these arguments, surely MPs should be free to weigh up the pros and cons for themselves and make up their own minds? By coming down so hard on MPs over this vote, Cameron risks re-creating the very same 1990s-style tensions over Europe that the leadership has tried so hard to avoid.

The whole point of the first-past-the post electoral system is to give MPs some autonomy from the party leadership in order to be able to better represent their constituents' interests and respond to their concerns, rather than to always follow the party line. In contrast, under proportional representation, the decision making process within parties is very centralised, as the party leadership has the power to de-select MPs from the party list at the next election.

The Tories made a principled stand on keeping first-past-the post during the recent AV referendum, arguing that one of its key advantages over proportional systems was to empower backbench MPs vis-a-vis the executive. It seems somewhat hypocritical then that they are now maintaining a similar system of rigid, centralised party leadership diktat via the three line whip that would not be out of place in any PR system.