Ever since the Greek voters rejected EU austerity policies the Euro area has been in a state of shock. The rest of the zone, led by Mrs Merkel, tried to pretend nothing had happened. If Greece wanted the rest of the money under the last loan agreement, they said she had to carry on with the cuts and the privatisations to qualify. If she refused to comply with the pre determined EU spending, tax and economic policies then there would be no more money. The Greek government for their part said they had just won an election with a mandate to tear up the agreed policies of the loan. The irresistible force of EU policy had just met the immoveable object of the Syriza political movement.

The tensions became clear through substantial withdrawals of funds from the commercial banks in Greece. The EU blinked first, and advanced large sums under an emergency loans programme from the European Central Bank. Greece did not have to comply with the wider loan agreement in order to qualify for large additional borrowings. The difficulties also showed as the Greek government struggled to find the cash to pay the day to day bills. The EU blinked again, and gave the Greek state permission to issue Treasury bills to raise the money to pay the pensions and wages. The first two messy rounds went to Syriza.

On Friday Greece is meant to repay the IMF some money. We are now told they can delay until the end of the month, when more will be owing. The IMF has now blinked. The IMF, the ECB, the EU, France and Germany met earlier this week to construct a “final” offer to Greece. Presumably this is another attempt to lend Greece more money with conditions attached. Greece was not invited to the meeting. The Greek PM spent his time writing a furious article condemning Euro area economic policy and explaining again he was elected to change it.

My guess is the Euro area leadership and the institutions that have lent so much money to Greece will blink again. They will offer to lend more money with less onerous terms. In due course they will have to accept they have lost a lot of the money they have lent to Greece in recent years, and construct an elegant way of writing some of it off or down. If they dig in and demand full enforcement of their loans and loan conditions and turn off the cash taps they are currently using to fund Greece, the Greek government may decide to walk away from the debts. If the Greek government meekly surrenders then it loses all domestic authority, and it may prove difficult to implement the policy changes the EU demands.

It is a dangerous and fascinating contest. It is a real tragedy for all the Greek unemployed and struggling businesses caught up in it. I do not think Syriza’s economic policy will lead to a strong Greek recovery, nor do I think the EU should carry on with the policies for Greece that have done so much damage to jobs, incomes and output in recent years. The obvious first step in a Greek recovery would be exit from the Euro, the one policy neither side will accept. If they stay inside the Euro then there is a simple choice: yet more unwelcome austerity, or much larger transfers of cash from the richer parts of the zone, which have to be grants, not loans. It has to begin with a major debt write off by the EU states and institutions that have lent money. The Euro scheme for Greece is indeed being part of the European Unemployment and Recession Organisation. It is now testing democracy in an extreme way.

In 1999 I published “The death of Britain?”. In  it I forecast that Labour’s large programme of constitutional change was misjudged, and would undermine the UK from within and from without. The current Parliament has to try to repair the damage. The modern Labour party is rapidly rethinking its stance  on Scottish devolution, the problem of England, high levels of migration and the relationship with the EU. They need to do so as they examine  the results of their handiwork in the electoral success of the SNP and the Conservatives, and UKIP’s  move into second place in some former safe Labour seats, challenging them on migration and identity issues.

I argued in the book that lop sided devolution would fuel Scottish nationalism and pull the country apart. I argued that massive transfers of power to the EU would undermine people’s trust in our democratic system as they found they could change MPs and governments but in many areas we could not change policy and outcome owing to EU laws . So it has proved.

I pointed out that Labour decided to offer most self government to Scotland, where nationalist sentiment was strongest. “Usually the granting of more and more powers for separate development and separate government within a once unified state leads inexorably to stronger nationalist movements and often to eventual separation”. “Over the next few years the new settlement of evolved government….will sorely test the powers of cohesion of the Union”.

I saw this movement as part of the European EU of the regions agenda, where the EU has always wanted to regionalise the UK and always wanted to split up England. The strain  was clearest when the EU is directly involved. “The White Paper (on devolution) offers a rosy prospect. It suggests the role of Scottish Ministers  and officials will be to support and advance the  single UK negotiating line (with the EU)which they played a part in developing…..The problem will arise if the Scottish Parliament has a different political balance from the Westminster one”. Labour legislated for a powerful Scottish Parliament in the belief that only they could win the elections to it!

Today we see that as feared greater devolution gave the SNP a  bigger platform to advance their cause. We find that large areas of life from borders through welfare to energy and business are now substantially controlled or influenced from the EU. Though we do not have the extreme dislocation  between election results  and policy that we see daily in the Eurozone, we now have considerable difficulties  as electing a new government may not fix all that we want fixed as the government is not  able to carry out the people’s wishes in some areas, owing to overriding EU power.

The problem of England, the problem of damaged democracy from excess EU control, and the problem of Scottish nationalism  were predictable results from Labour’s constitutional revolution. The 2015 Parliament has a mighty task to settle the kingdom and restore UK democracy. As Labour must now realise, the EU issue is not just some Conservative preoccupation. A future Labour government could find itself unable to pursue the policies it wanted under EU law. A future Labour government is also much less likely, all the time they lack a solution to Scottish nationalism on the one hand, and to the deep disillusion with the EU’s migration and welfare policies on the other. They lost heavily in Scotland because they were not left wing enough, and in England because they were too left wing and careless of England’s needs.

 

It should be clear to anyone that you cannot have a democratic UK under the current Treaties. Nice, Amsterdam and Lisbon certainly prevents that, and arguably parts of the Rome Treaty as well.

Restoring the UK’s ability to veto new EU proposals in the major areas that Labour surrendered would help, and would be a minimum requirement. It would still leave substantial jurisdiction transferred to the EU which makes it difficult or impossible for the UK to control its own borders, pursue its own welfare policy, control its own fishing and many others. To remedy this the UK would also need the capability to override Brussels and ECJ decisions where the UK Parliament thought that essential. There would then be a retrospective veto available for the worst cases.

A better and more realistic way of getting agreement to a new relationship that would work for us and them would be to define what the UK wishes to stay in. The business community seems to be surprisingly keen on all the rules and regulations of the single market when it comes to making any decision about the UK’s future. The UK could agree to belong to the single market, with rights to sit around the table and be outvoted on new proposals, whilst withdrawing from anything to do with borders, welfare, criminal justice, fishing and others.

The problem with all of this is  twofold. The EU is well known to expand its jurisdiction. After a new settlement the EU would likely decide more and more things were single market with a view to ensnaring the UK in them. The EU has introduced qualified majority voting for many of these matters, so the UK would be back in the position of having to comply with things it did not agree with.

This shows why it will be very difficult to negotiate a new relationship that does restore UK democratic control, and why many will decide leaving is the easiest option. Leaving also means we will be £15 billion a year better off. Those who wish to stay in at any price have to explain why this is a bill worth paying, and tell us what might stop it going up too much in the future. As much of the rest of the EU in Euroland is going to have to send much larger transfer [payments from rich to poor, how do we avoid the UK being sucked into that system? The impact of a common policy o0f sharing on our fisheries should be a warning to us of what can happen when you let the EU run something for you.

Restoring our democracy

The historic 2015 Parliament has as its prime task the restoration of the powers of the British people. We need to change our relationship with the EU so that when the people speak in elections, their elected representatives can carry out their will.

Today we can say confidently “It’s our democracy, stupid”, that lies at the heart of our political debate.

The renegotiation is about who makes the ultimate decision.  If we wish to decide who comes to our country, or who receives welfare benefits, can we have a relationship with the EU that allows the UK Parliament to do so?

We see growing unrest on the continent as countries locked into the Euro seek change to economic policy at the ballot box only to find their new governments cannot make the changes they want owing to Euro area rules. The UK wisely kept out of the Euro so we could remain self governing.

It comes as a shock to many voters to discover that their wishes on issues as wide ranging as welfare, border controls, energy and justice may be against EU law and beyond the power of their Parliament to remedy. Today there are all too many areas where the UK has lost its right to self government.

The renegotiations are about the growing gulf between what a once sovereign people want, and what their EU controlled Parliament can now achieve. Throughout the EU now,  it’s not so much a democratic deficit, as a democratic disaster.

The Prime Minister rightly identified this damage to our democracy in his Bloomberg speech, and  called for a new settlement. He is happy to negotiate a restoration of national democracy for all members, or just for the UK as a non Euro member of the EU. He has pointed out that as a non Euro member it is vital the UK is protected from creeping EU government power which they may need to run the Eurozone but which should not apply to us.

Some say this cannot be negotiated. I say it must be negotiated or we should leave. The EU prides itself in the long democratic traditions of some of its members, and the shorter though no less prized democratic histories of the rest. Each country fought to achieve its own freedoms. It is vital these treasures are not damaged in a rush to support the Euro or to give in to the bureaucratic consensus, which may be wrong and is often unpopular.

Other states may agree that there are many matters that should ultimately be settled by national Parliaments. They may agree that a member state should have the ability to override EU law or policy where the public and parliament so wish. They may accept that the UK has a case for a range of special opt outs, building on its large opt out from the Euro.

The collision between the popular will and the EU consensus policy is at its most intense today in Greece. This may spread to Spain and Italy, as opinion polls show. It lies behind the growing strength of the National Front in France. The UK’s disagreement is contained within a mainstream party recently elected to govern with a majority. Whilst the EU would be wise not to underestimate the power of UK feelings about borders and welfare as expressed in our recent election, it allows an easier solution for the rest of the EU than the concerted forces now ranged against the Euro scheme in the southern states. With the UK the EU has the option of simply solving the UK problem as a non Euro member  by  opts out and treaty changes for the UK alone, or solving the problem more generally for all states. For its part the UK has a realistic solution of leaving the EU if no relief is forthcoming, whereas Eurozone members have better grounded  fears about simply leaving as they are so dependent on each other within the zone.

 

Isn’t demanding more rights to veto and opt out tantamount to leaving the EU?

The EU used to work  with a large number of vetoes for individual countries. In more recent years these vetoes have been removed by treaty or eroded by legal and administrative practice.

It all depends what type of Union other countries want. If all the rest wish to become part of a United States of Europe with a wide range of centralised policies and controls, then it would indeed be best for the UK to leave. If, as they say, they want  trade and co-operation  but not a single state, then there could be ways of reconciling member state sovereignty with mutual agreements. Now is a good time to sort out which it is to  be, as the Euro area contemplates what more it needs to do to achieve growth and harmony within the currency zone.

 

Does this risk our EU trade?

The good news is our trade with the rest of the EU is not at risk. The German government has made clear they would want a free trade agreement with the UK if we left the EU. As the EU sells us so much more than we sell them, they have every interest in continuing with what we have on the same or similar terms.

The common external tariff is now very low if by any chance we ended up having to pay it. The 10% tax on cars is unattractive, but I am sure Germany would have no wish to have to pay 10% on every car exported to the UK so it would be simple to agree for neither side to impose it.

The UK has no intention of taking its trade deficit elsewhere. UK consumers will still want to buy German cars and French wine, and will be able to do so on good terms. In return anyone making things in the UK for sale to the continent will enjoy similar terms.

Our trade is not at risk, but our freedoms are if we stay inside the present EU. The joy of a new deal or exit is they offer us the continuation of our trade and the restoration of our freedoms. The 2015 Parliament will be the Home Rule Parliament. Just as Scotland and England deserve and need more self government, so our United Kingdom needs to restore the sovereignty of the British people and the strength of its once mighty Parliament.

 

 

In the run up to the Euro I was invited to various meetings and even dinners with senior Germans. They thought that if they explained to me the inevitability of the Euro and the alleged joys of more European integration I would see their point and change my mind. These events always started very amicably, with my hosts praising part of the UK’s democratic traditions and past and even finding good things in what I had said and written. As the meetings wore on the Germans usually switched to empty threats and silly menaces, claiming the UK would lose all inward investment, would become poorer, would be sidelined and ignored if we dared to stay out of the Euro. The more I heard the German case, the more threadbare it seemed. They dreamed of a Euro that allowed them to trade in a devalued currency, whilst not accepting the need to send transfer payments to the parts of the zone that were going to lose out and experience high unemployment.Time passed, and events did not turn out as the Germans forecast.

In the run up to the UK referendum I once again find myself in discussion with senior Germans, though not over dinner this time. During the course of a short interview or other public exchanges again the German position vacillates weakly between charm and threat, between reassurance and empty menace. Our trade is not at risk, as the German government has made clear. Whatever happens in the referendum the UK is not about to take her trade deficit somewhere else. We will carry on buying German cars and machinery. In  return Germany will carry on buying about half as much from us as we buy from them, on current or similar terms, because it makes sense for her to do so. It is odd to go round threatening the customers with interruption to supply when you have plenty to sell. The German government is wise to take a more sensible pragmatic view of the UK’s wish to have a different relationship, not joining in the political union and is sensible in saying they want a trade agreement if all else fails.

The EU was for many years led by Germany and France acting together , as equal partners. I had this explained to me by a former French Minister one day when having lunch with her prior to an EU Council. Their two domestic governments have a habit of close working, their politicians meet or discuss the upcoming council agendas prior to the meetings, and there is a common Franco German plan on many matters. This relationship has been weakened by the arrival of Mr Hollande, who is now the junior partner to Germany, with less good co-operation at the top, though the two governments still remain closely linked at all other levels.

It was always difficult to see how the UK could have influence or shape the Union even before the Euro. Our view of a trade agreement, with political co-operation on a limited range of issues where all sides wanted it, was always being undermined by a massive legislative programme,  and by progressive removal of powers from national democracies by treaty change and by new laws. It got a whole lot more extreme when most of the others joined the currency union.

As the Euro is now driving much of the need to integrate government further, it is difficult to see that the UK can pretend to be a full member of the EU any more. Of course we were right to keep our currency. We are now right to demand other parts of our democracy back that have  been surrendered, as they are not necessary  to protect our trade. Of course the Euro now creates the need for a political union. Every currency needs a country to love it, and taxpayers and a government to back it. The UK is correctly not in the Euro, so it should not be part of these arrangements for much closer union.

It is difficult to see why the UK should have to pay a bigger contribution to the EU because our economy is growing faster than Euroland. The EU penalises success, when we wish to reward it.

I always think it wise to look at what big institutions do, rather than believe everything they say. The parade of executives from large multinationals telling us the UK has to stay in the EU or else, does not ring true.

Since the election of a Conservative government – which came as a surprise to most business people and commentators – the Stock market has gone up. The referendum they fear so far has not done damage. Investment and output is rising again now the election uncertainties are behind us.

The car companies who told us in the 1990s that they would take their new investment elsewhere if we did not join the Euro, are announcing record levels of UK output and have invested heavily here in recent years despite our refusal to join their currency of choice.

I do not understand why some large companies have such a passion to link the UK ever more closely to the economic disaster that is the Euro centred EU. In the 1980s some of these same large companies lobbied and lobbied to get a reluctant Conservative government to join the European Exchange Rate Mechanism. They told us few who opposed it that we were wrong. As the Chairman of a large industrial quoted group at the time, I remember failing to persuade the CBI officials that they should not back this ill fated scheme. Their support for it – along with the Labour party, the TUC and the rest of the establishment – delivered us a nasty boom and bust which did a lot of damage to jobs, investment and profits. It was entirely predictable, so why did they visit it upon us?

Today you might have thought the CBI would be speaking out against the ruinously expensive energy EU policy gives us. This is doing damage to the UK/EU industrial base and leading companies to place their new industrial investment outside the EU altogether. You might have thought they would get behind the Prime Minister’s renegotiation, and egg him on to get rid of more Brussels laws and rules that hinder business and jobs. Instead they take every available media opportunity to undermine his position by telling us all we must vote to stay in whatever is on offer.

The voters will not believe the big lie that some imply, that 3 million jobs in exports to the rest of the EU are at risk if we leave. Germany and the rest of the EU has made quite clear they will want to carry on trading with us. They don’t want us taking our deficit with them elsewhere.

I am all in favour of business people joining in this crucial debate about our future. Those who own or control their own companies have every right to speak for their companies as well as for themselves. Some executives of multinationals imply they speak for their companies, but they have never polled their shareholders on this matter.

For years some Eurosceptics have written to me and others complaining that there is no referendum on staying in the EU. They argued that the Conservatives could not win a General election, and argued that if they did they would rat on the promise. Well, they were wrong on both counts.

Now they are writing to say Mr Cameron cannot negotiate a decent new relationship, or allege he is not trying to. I do not accept these criticisms either, but were they true surely that just makes it a whole lot easier to win the referendum to come out of the EU.

What Eurosceptics need to do is to cheer up. Tomorrow can be better than today. Life outside the current treaties can be a whole lot better than within them. Restoring the sovereignty of the UK voters, and returning powers to Parliament to exercise on their behalf, is a democratic process that people of all parties and of none can buy into.

If we paid less into the EU we could spend more on the things we prefer, and cut our borrowings. If we were free to make our own trade agreements with the faster growing parts of the world we could expand our exports more rapidly. If we did not have to impose all the rules and costs on our trade with the rest of the world and here at home, we could be better off. If we were back in charge of our affairs we could decide how many migrants to welcome, and who should receive benefits.

Causes are advanced and votes won by being optimistic, positive, and by reaching out to people who disagree with you. Fighting old battles over ideological purity do not advance the general cause of a more prosperous, more democratic UK.

Her Majesty will announce the extra powers for Scotland which Labour and Conservatives offered prior to the referendum. As we have discussed recently, this will need to include a new financial settlement when Parliament comes to debate and approve the detail. She should also announce early progress on English votes for English needs (EVEN) , which I expect to be undertaken by an amendment to Standing Orders of the Commons in the first instance.

The bigger question behind this work is can the Union now be stabilised? Is there some degree of devolution which will satisfy the majority of Scots, even if it leaves their SNP MPs disappointed? Is there some complementary level of devolution to England which can make England think we now have a fairer settlement? How do we avoid devolution being a process rather than a settlement? Might it prove to be like peeling an onion, where there is always another layer to remove, as the SNP hope?

I wrote “The death of Britain?” at the end of the last century, arguing that lop sided evolution at home, and the transfer of substantial powers abroad in the EU could prove to be forces which threatened the union of the UK. So it has proved. A new constitutional settlement needs the repatriation of power from Brussels, and a fair devolution of power to all four parts of the Union. This in turn requires a sense that the money is shared fairly.

Our union is above all a currency, benefits and tax union. We pool all the revenues, share all the expenses, and follow one overall budget, money and interest rate policy. If Scotland seeks to unpick too much of the spending and borrowing part of this it can undermine the rest, and can lead to a sense of greater unfairness in other parts of the Union. You only need to calculate precisely who puts in what and who takes out what if you no longer wish to pool everything. Knowledge of exact contributions and disbursements soon leads to rows over the settlement and the idea of common insurance is damaged.

The SNP will be a vocal part of the opposition. They will mainly be arguing about money. They think the UK should borrow and spend more, especially in Scotland. They do not see the irony that they also think the UK should stay in the EU come what may. If we obeyed the rules of the EU properly we would immediately cut public spending and put up taxes to get down to the 3% maximum permitted deficit. So why don’t the SNP rail against EU budget rules in the way they do against “tory spending plans”?

I think the most powerful intervention the parties of the Union made in the referendum campaign to sway more Scots to vote for in was when all 3 main union parties said they would not let an independent Scotland remain in the sterling system. I think this had far more impact than offers of yet more devolution. Union parties should learn from that experience.

Yes, I see the parallel with the EU. If the EU says to us there is no chance of change, then let us leave. Our commitment to the EU is far less deep and well based than Scotland’s reliance on the pound. Were I a Scottish nationalist I would want my own Scottish currency to become fully independent. I found it odd they could not say this. I guess it was because most Scots do want to stay with the pound.

I welcome the Referendum Bill proposed in the Queen’s Speech and welcome Labour’s conversion to it. It is better to go forward with the support of parties that attracted 81% of the vote between them for what is a crucial decision and vote of the UK electorate. We knew already that the referendum idea was far more popular than the Conservative party in the General Election, and some people voted Conservative primarily to get that referendum.

The dinner last night between the President of the Commission and the Prime Minister was also an important stepping stone on the way to the vote. I think it is a good idea that the PM gives trying to negotiate the best deal for the UK his best shot. I urge people from all sides of the debate to support him in doing so. If as UKIP argue there is no willingness to negotiate from the other side, then it makes winning a vote for Out that much easier as undecided voters will be swayed by the unhelpfulness and unreasonableness of the rest of the EU.

If, on the other hand, the rest of the EU sees that the UK has no wish to be drawn into the emerging political union, and wants a trade and business based relationship where we can co-operate and do things together that suit both sides, then that may be the easiest way of achieving the new relationship.

My bottom line is the UK needs to restore her democracy, so where the UK voters and Parliament wish to make a change or to decide a matter we can do so without interference or override from the EU. Today electors have signalled very clearly they want the UK to settle its own migration and benefits policy. So be it. Tomorrow it might be our energy policy or our criminal justice policy. If you want a democracy then Parliament has to be able to respond to the public mood, and needs the powers to take action to do so.

Many of us are fed up with being told that we cannot change things for the better or as the public wants because we have some old treaty commitment or legal requirement from Brussels. By the back door a long forgotten Parliament binds its successors, by adopting an EU policy which we cannot change.

The EU’s latest crisis is not just the pressure in the UK for a new deal, but also the opposition of the Greek people and government to Euro austerity, the coming opposition in Spain on a similar basis, and the rise of the National front in France demanding more power for French government. UK Conservatives have no love of these disparate forces on the continent, but at the highest level they do spring from a common problem, the lack of democratic accountability of the EU to national electorates, and the unpopularity of various EU policies. This year’s elections so far in Greece and the UK have posed differing challenges to the EU establishment. Spain has just done so in local elections and may do so in national elections later this year.

The EU would be wise to debate a solution with Mr Cameron, as some of the others may have more extreme demands.

This week is Queen’s Speech week. Parliament is formally opened on Wednesday. I will produce some pieces this week on the themes of the speech and my advice for the next year’s government programme.

One of the big arguments of the election was about aspiration. Labour concentrated on expressing their hatred of the rich, hoping that jealousy would be the winning emotion. After the results were known they have agreed they overdid the taxes on the better off, and failed to speak to people who want to better themselves. The Conservative message of tax cuts for the many was more popular. Labour has now decided to drop its proposal of a Mansion tax.
Their criticisms of Non Doms were more popular, but always lacked detail over who would lose the status, and how they proposed to tax income and assets owned by people abroad if the people were not full time residents and citizens of the UK. It seemed unlikely they would make everyone who comes to the UK for a given period to invest, spend and employ people pay tax on all their worldwide income and assets that they hold elsewhere. If they did it would dry up a lot of inward investment.

One of the interesting things about democratic politics is that jealousy often does lose elections rather than win them. Labour’s wish to abolish grammar schools was to proceed by asking all the parents to vote in an area, with a large majority of parents of pupils who did not get places at the grammar school. In the first referendum they fought, they lost. Many parents thought it was fine for the winners of the grammar competition to receive the grammar education. They gave up the idea of these votes.

The reasons jealousy often does not work are varied. Some just see it as an unpleasant emotion. Some aspire to the higher levels of income and wealth that left wing parties condemn and wish to tax. Many people who are on lower incomes and have no immediate prospect of being on a higher income may have people in their family or amongst their friends who are better off and they wish them no harm. Some think it reasonable that if someone is a great footballer or singer that they keep a reasonable proportion of the money they earn.

Conservatives too have to grasp that whilst most of us want the rich to pay more, and to pay an appropriate higher proportion of our total taxes, if you overdo the rates or the rules you can end up with less revenue. The message of the election is also that many people do not think the rich should be taxed out of the country or into indolence.