Bagehot: From this weeks economist.

Remember this article when we discuss the EU:

British politics

Bagehot's notebook

Britain and the EU

The House of Commons ponders free love, or the EU equivalent

Oct 18th 2011, 22:05 by Bagehot

THE tortured and tortuous question of Britain's membership of the European Union took a new turn this afternoon, with a decision by the House of Commons Backbench Business Committee to hold a debate and vote on October 27th on whether to hold a national referendum on Britain's ties to the EU. The committee (a newish body which has nothing to do with business and commerce, but which instead gives rank-and-file MPs the power to parcel out a certain amount of debating time without the say-so of the government or party leaders) was responding to a petition signed by more than 100,000 voters, calling for the public to be granted their first referendum on Europe since 1975.

A hardcore of those signing the original petition probably would like a straight in-out referendum (ie, they would like to leave, in most cases). However, in a bid to broaden potential support among MPs next Thursday, a Conservative MP, David Nuttall, put forward a motion suggesting a referendum, to be held by May 2013, offering the public three options:

1. the United Kingdom should remain a member of the European Union

2. leave the European Union

3. renegotiate the terms of its membership in order to create a new relationship based on trade and cooperation

This three-way split closely follows the tactic deployed by some prominent British Eurosceptic ginger groups, such as Global Europe, which involves commissioning opinion polls on British public attitudes to the EU, which "discover" that the option with the most support is one in which the country gets to stay in the club, but on more agreeable terms. There is just one flaw with this approach, which is that voting to be given a sweeter deal is not quite the same thing as securing it. The vote next Thursday is exceedingly unlikely to end in the holding of the referendum that Mr Nuttall wants, not least because the Conservatives appear minded to whip their MPs against.

But if he were to have his way, you could guarantee with some confidence that the resulting referendum could deliver option 1 or option 2. You could have no confidence that it would deliver option 3, because there you are moving away from the relatively familiar territory of ratifying referendums towards something completely unknown in the British system, namely a mandating referendum. A vote for option 3 would amount to instructions to the British government of the day to go to Europe and demand a better deal from the other 26 members (who may well be dealing with the collapse of the euro zone at around that moment). And they might say no.

It is a little like a group of old soaks in the golf club bar, deciding to vote on whether to stay with their ill-favoured wives, divorce them, or seek a free love arrangement. Suitably emboldened by gin, they can vote for free love if they like. That does not mean their spouses will agree. 

Even ConservativeHome, the highly influential and deeply Eurosceptic website for the Tory grass-roots, seems to shy away from a pre-emptive mandating referendum, insteadfavouring a post-hoc ratifying referendum after any future negotiation of a looser relationship with Europe.

I have written before, most recently in this recent print column, that many British Eurosceptics—enraged (often with some justification) by the latest slab of protectionist/statist/corporatist Euro-red tape—announce that the time has come for a new relationship with Europe centred on the single market and open, tariff-free trade, but without all that extraneous nonsense about EU regulations on long working hours, maternity pay and Greenery or all that vast EU spending on farms or motorways in far-flung corners of Europe of which we know little. In essence, what most brilliant sceptic wheezes boil down to is a plan to be a low-regulation, low-tax, low-contribution free rider on the single market.

The problem is that to our largest continental trading partners, such as France, Germany, Spain, Italy or Poland, those self-same labour market, social or environmental rules, and that self-same EU spending on farms or structural funds are not an extraneous add-on to the single market. They are an integral part of a grand bargain dating back to the foundation of the single market, in which increased competition and openness to trade was offset by a guarantee that European union would not trigger what was feared across much of the continent as a race to the bottom on working conditions or regulation. That is often frustrating and requires Britain to fight its corner constantly. But there it is. The British think differently from the large markets some 25 miles away across the English Channel, but if Britain wants to carry on trading with its neighbours, it has to do some sort of deal with them.

A common trope among sceptics is that because Britain imports more from the rest of the the EU than it exports, Britain somehow enjoys a whip hand. They need us more than we need them, is a common line. Alas, relative scale matters as much as the direction of trade flows. In my print column of a few weeks ago, I note that the titchy state of Rhode Island runs a trade deficit with the other 49 states, but that does not mean that the 49 need Rhode Island more than it needs them. (Note to sceptical readers, I am not saying that Britain is like Rhode Island. I am using an extreme example to argue that running a trade deficit is not enough, on its own, to enjoy economic power over a trading partner or partners. Britain may run a deficit with the rest of the EU, but the importance of the other 26 EU members to Britain in terms of a share of trade is greater than Britain's importance to the others as a block. They are 26, we are one.)

So what happens now? The Conservative Party, as mentioned above, seems minded to use the full force of party discipline to defeat the motion. David Cameron, the prime minister and Tory leader, made clear during his party's annual conference this month that he is opposed to an in-out referendum on Europe, for the simple reason that he wants Britain to stay in. The Tories support seeking the return of powers from the EU to Britain, but the government (to the disgust of many MPs, it should be said) feels that now is not the time, with the euro zone in disarray. Should the propping up of the single currency force a hefty treaty change at some future date, then Britain can be expected to make some demands in exchange for nodding the treaty through. A favoured option could include seeking a protocol saying that Britain, with some 70% of the trade in some financial transactions in the EU, should never be outvoted on City regulation. More broadly, ministers feel that bidding too high and too early (eg, by demanding the wholesale return of social or employment policies) would merely prompt the 17 countries that use the euro to sort out their own treaty on an inter-governmental basis outside the EU, denying Britain leverage.

The BBC reckons a few dozen Tories could still rebel, leaving the Labour opposition in an interesting role. Labour's goal next week, it must be assumed, will be to cause the Conservatives and their coalition partners the Liberal Democrats the greatest number of headaches possible, ideally by portraying the Tories as split and obsessive about Europe. There is also coalition mischief to be had: though the Lib Dems are the most pro-European party in Britain, they have in their day promised an in-out referendum on Europe, in the interests of democracy. That said, the Labour leader Ed Miliband is by instinct pretty pro-European. So it is hard to imagine Labour voting en masse for the motion.

In short, the vote next Thursday is unlikely to be the crunch moment that leads to a referendum on quitting the club. The Nuttall wording is also unlikely to survive, unamended. Even if the Commons were to vote for a referendum next week, the vote would not be legally binding on the government.

But Europe is not going away. The greatest sources of backbench Tory disgruntlement towards the coalition government all touch on Europe—sources of grumpiness include anger at having to pay anything towards propping up the euro, even through the International Monetary Fund; the cost implications of various EU-climate change/renewable energy targets and anger at meddling Euro-judges (by which British sceptics mean the European Court of Justice but also the non-EU European Court of Human Rights). Next Thursday's vote will decide very little. But the sceptics wanting their vote will be back.