The EU is close to agreeing new measures to give it control over Europe’s economies. It will come as a “six pack” – six directives and regulations to try to ensure that in future, unlike the past, the EU will control budget deficits, spending levels and tax levels to restore stability.
The UK will agree to all this. The government will claim it is all about sorting out the Euro. They will argue that of course the Euro area needs the EU to meddle and control budgets. After all, it is Euro states borrowing too much which has landed them in a great mess. Surely it is time for the EU to put a stop to it. The UK will be safely opted out.
It is true that four of the six measures apply just to the Euro zone members. So far so good.
However, the other two apply to all member states of the EU including the UK. One demands that the UK tables a budgetary framework with the Commission. The country is meant to comply with the “reference values on deficit and debt in the Treaty”, and to adopt a multi annual fiscal planning horizon and submit its homework to Brussels to be marked.
The other is a proposal for a surveillance regulation. The EU wishes the UK to submit “for the purpose of multilateral surveillance at regular intervals under Article 121 of the Treaty in the form of a convergence programme, which provides an essential basis for price stability and for strong sustainable growth conducive to employment creation”. The EU “shall monitor the economic policies in the light of convergence programme objectives with a view to ensure that their policies are geared to stability and thus to avoid real exchange rate misalignments” etc
The government will say it does not have to submit new documents – the EU can read the Budget Red Book for itself. As practically no-one else seems to read the book, that at least would be a use for it. They will say the EU can give us advice but cannot impose penalties. The government already has to submit figures, and the EU already passes judgement or gives an opinion.
However, it still entails obligations on the UK to submit facts and figures and to hear the EU’s view of our policies. They do still regard our exchange rate as a matter of concern, just as they did when the UK political establishment wrongly put our exchange rate into the EU managed system with such disastrous results. I would be happier if we were clearly opted out of the entire six measures. Their passage offers a great opportunity to the UK to start to redefine its relationship.
As the government agrees we cannot and should not join in the Euro, there is no need for us to work with them in any way on budgets, taxes and exchange rates. Doing so merely encourages them.
Some of their aims are a good idea. If only the UK had kept its deficit down to 3% and its stock of debt to 60% of GDP, we would all be better off. However, that misses the point. These new proposals wish to tighten the surveillance, and give the EU more say over the UK’s economic policy. This policy has to be settled in the UK Parliament, and to be one of the main items debated in elections, if we are to be a democracy.
It is scary that the draft regulation seems to regard the UK exchange rate as common property where the EU should have its say. When they last did that properly through the ERM it did untold damage to our economy.
The Uk needs to be opted out of all of this. What may make sense for the Euro area should be irrelevent to states with no intention of ever joining.