Facts finally collide with ideology on Europe

By Philip Stephens

There have been some glum faces around David Cameron’s cabinet table of late. To the chagrin of some eurosceptic colleagues, the government’s much-heralded audit of Britain’s relations with the EU is coming up with the wrong answers. Brussels is neither sucking the lifeblood from British democracy nor stifling its economy with unnecessary regulation. For all its inevitable irritations, the Union seems to be serving the national interest.

The government has published the first tranche of reports in a comprehensive review of Britain’s EU membership. This first batch includes studies of the “balance of competences” in the single market, tax policy, foreign policy and defence, food safety and animal welfare, health and development. Given the political sensitivities within the coalition – Nick Clegg’s Liberal Democrats do not share widespread Tory hostility to most things European – the task in large part has been in the hands of neutral civil servants.

The result is a series of reports that tell the story as it is, shorn of ideology and political judgments. This is what persuaded the prime minister to defer publication until backbench Tory MPs hostile to the EU had safely departed Westminster for the parliamentary recess. Mr Clegg wanted the reports released at a ministerial press conference. Mr Cameron’s office insisted there should be no fanfare. 

Pro-Europeans seeking a knockout blow in favour of the EU status quo will be disappointed. Though the reports say the single market has provided significant advantages for the British economy, they also acknowledge the difficulty of quantifying the gain. And while business backs the level-playing field legislation needed to make the single market work, there is less of a consensus around environmental and social regulation.

What is most striking, however, is the distance the conclusions stand from the original intent of the review. The exercise was to have provided a springboard for the large-scale repatriation of EU powers sought by hardline eurosceptics as a minimum requirement for continued membership. Iain Duncan Smith, Owen Paterson and Philip Hammond were among cabinet ministers who protested at the even-handed approach of officials. During one Whitehall exchange, an adviser to Mr Hammond complained the foreign policy and defence report was unduly weighted towards the evidence.

Three broad conclusions arise from the reports. The first is that the single market holds up a mirror to the close integration of modern economies. Companies depend on the “four freedoms” of goods, services, persons and capital. Cross-border supply chains, common standards, mobile workforces and multicentre manufacturing are the stuff of today’s business. These processes depend on common standards and regulation. 

Japan has voiced publicly what many third countries have said privately. Foreign investment (and the jobs that go with it) in the UK is vitally dependent on access to other EU markets. At a more mundane level, Britain’s food processing industry could not work if its complex cross-border production chains did not all operate under uniform regulation. The same applies across other industries and many services. The implication is that if Britain were to leave the EU, it would be obliged by economic realities to opt back into the panoply of regulation – only this time without any say in shaping the rules.

The second conclusion is that Europe and the rest of the world are complementary markets for British business. The evidence submitted by Vodafone tells the story. The advent of EU telecommunications regulation gave the company a chance to scale up from a national to a European provider; once established in Europe it could realise its global ambitions. Looking through the other end of the telescope, overseas companies such as BMW use their British operations to sell cars to emerging markets – a practice made possible only because of EU trade agreements with third countries.

Third, whatever their rhetoric, British governments often choose to operate through Brussels even when there is no obligation so to do. Thus in foreign policy and defence, where the institutions of the Union are relatively weak, more often than not Britain seeks to co-ordinate with its EU partners. Elsewhere, it wants to extend Union competences: animal welfare would seem a natural province for decision-making at national level, but Britain is vociferous in pressing for EU-wide rules.

All in all, the reports throw up plenty of instances when the EU needs reform or where European rules should be dropped in favour of national choices. They underline, however, how difficult and costly it would be for Britain to unravel the facts of interdependence. The ideology of the eurosceptics has collided with the evidence. No wonder Mr Cameron waited for the safety of the summer parliamentary recess.

Copyright The Financial Times Limited 2013.