20 February 2016

Thanks to David Cameron’s deal, Britain has the best of both worlds


David Cameron apparently took three shirts to the crunch summit of European Union leaders in Brussels that began on Thursday afternoon. By the time the prime minister finally clinched a deal on Britain’s future relationship with the EU on Friday night, he may have wished he had taken more. His hard-won “new settlement” enables him to put his “heart and soul” into keeping Britain securely in the EU in the upcoming referendum.

Cynical Outers thought the gruelling negotiation marathon was orchestrated to make Cameron’s achievement look more impressive to a hostile media and sceptical voters. But like most conspiracy theories, this assumes more coordination than a host of disparate actors are capable of. For sure, all 28 EU leaders wanted to be seen to fight their country’s corner. But a deal in the early hours of Friday morning would have signalled that. It is scarcely credible that all those exhausted, busy leaders would have been willing to deliberately stretch the talks out all day Friday – let alone that their ruse wouldn’t have been exposed had they tried.

The truth is that what Outers were always going to dismiss as smoke and mirrors was a hard-fought deal. French suspicion of perfidious British financiers is real. Poland’s desire to protect the interests of its citizens working in Britain isn’t fabricated. Greece’s threat to veto the agreement unless the EU guaranteed that it wouldn’t be turned into a giant refugee-holding camp was genuine.

For sure, the deal is not, and never was going to be, a root-and-branch reform of how the European club works. The next opportunity for that will be when the EU Treaties are changed, not just for Britain’s particular needs but in the interests of all 28 members and the good functioning of the club as a whole. Nor does the agreement pander to the misconceived preferences of many Outers for harmful limits on two-way freedom of movement or ending the supremacy of the EU law – and with it the safeguards against protectionism in the single market.

But it is a special deal for Britain which goes a long way to address the political concerns raised by the prime minister and gives the UK important guarantees that any further integration in the eurozone won’t harm its interests. Given that EU negotiations generally work on the basis of give and take, the fact that Britain has obtained significant concessions without offering anything in return is a considerable achievement. As Raoul Ruparel and Stephen Booth of Open Europe rightly put it, “the deal is not transformative, but neither is it trivial.”

The deal is along the lines of the draft that I summarised for CapX recently. It provides for an annual review to reduce unduly burdensome business regulation. It states explicitly that the EU Treaty words about “ever closer union” do not commit Britain to further political integration. And it enables a majority of national parliaments to give a “red card” to EU measures that unduly trample on national sovereignty.

One of the hardest-fought battles was with France, which feared that special treatment for non-euro members would give the City of London an unfair advantage in the single market for financial services. One big victory for Cameron was that the emergency brake to protect the interests of non-euro members can be pulled by a single government, ie, Britain alone. Since what the eurozone does will affect Britain whether or not we are in the EU, the best way to safeguard British interests is clearly by remaining a member.

The other big battle was with the so-called Visegrad Four – Poland, Hungary, the Czech Republic and Slovakia – over EU migrants’ welfare entitlements.

Britain’s openness to EU migrants is a boost to our dynamic, flexible economy, as I have explained for CapX. So it is a good thing that the deal won’t compromise freedom of movement. Since studies show that EU migrants pay more in taxes than they take out in benefits, any pressure they may put on public services is due to the failings of those services not migrants’ failure to pay their way.

But the deal does go some way to address the government’s specific concerns about welfare benefits for EU workers. When, say, a Pole working in Britain makes a new claim for child benefit for a child back home, the payment can be indexed to the lower cost of living in Poland, as can all such claims from 2020. Britain will be able to exercise an emergency brake for seven years to pay lower in-work benefits, notably tax credits, to EU migrants for their first four years working here. Non-EU migrants will no longer be able to bypass Britain’s illiberal restrictions on bringing a foreign spouse into the country by getting married in another EU country. That, along with her belief that EU membership bolsters Britain’s national security, was enough to win over Home Secretary Theresa May, whom Brexiteers had been wooing.

While the deal does not involve immediate treaty change, it is legally binding and can only be reversed by unanimity – ie, with Britain’s consent. But the changes to EU migrants’ welfare entitlements also require the consent of the European Parliament after the referendum, which is likely but not guaranteed.

One of the Leave campaigns’ main weaknesses is their absence of a credible leader. That was highlighted at the Grassroots Out (GO) rally last night. This culminated with UKIP’s Nigel Farage introducing Saddam-supplicant George Galloway as a surprise star guest. Even hardened Outers such as CapX’s Tim Montgomerie and the IEA’s Ryan Bourne were briefly tempted to switch to Remain. To add to the cross-party “appeal” of GO, Labour’s Kate Hoey suggested that Jeremy Corbyn and John McDonnell were convinced Outers.

More worryingly for the prime minister, Michael Gove has chosen principle over loyalty and will back Brexit. The justice secretary’s move could provide cover for other cabinet ministers to jump ship. And Boris Johnson will finally be forced to end his unedifying equivocating about which side to back to further his all-consuming ambition of succeeding Cameron. While London’s mayor is more popular in the capital than outside it, he would provide a genial, optimistic and attention-grabbing lead for the Leave campaign.

The phoney war is finally over. The battle for Britain’s future in Europe can begin in earnest. While the crisis-hit EU is deeply flawed and will continue to need reform, remaining a member is better for Britain than the alternatives. The UK already enjoys the best of both worlds: it is a full member of the single market, with an important say in setting EU rules, but outside the dysfunctional eurozone and much else. And thanks to the prime minister, Britain now has an even better deal.

Philippe Legrain, who was economic adviser to the President of the European Commission from 2011 to 2014, is a visiting senior fellow at the London School of Economics’ European Institute and the author of European Spring: Why Our Economies and Politics Are in a Mess — and How to Put Them Right.