UK-EU ties: 'Interests of euro area states might become different from British' - expert

If it is impossible for a British national ever to be head of one of those institutions, if these institutions are increasingly doing different things that don’t affect the UK – that is a problem that the all British political parties realize. That is the first thing. The second thing is that the interests of the euro area states might become different from the British.

So, for example, the euro area has made a strong case that financial services should be much more tightly regulated. And they almost form a voting majority in EU.

Now, if they vote as a block – this is a problem for the UK. The UK has about 40% of the financial services industry in the EU. It suddenly finds itself, if you like, on the lonely side of the debate – one state against seventeen or eighteen. And this of course leaves it feeling vulnerable.

And you also said that there was some dissatisfaction with the EU social policies. Could we focus on that a little bit?

Well, there are two aspects to this. Historically, the Conservative Party, and these concerns tend to be focused on the Conservative Party in some parts of the writings in the press, have not liked the fact that the EU engages in labour law.

So, a large number of employment rights in UK are governed by the EU law. And historically, this has been something the Conservative Party don’t like – the engagement in a lot of labour law reforms under the period of Margaret Thatcher, and they saw this being reintroduced.

More recently, this is also focused on welfare payments for EU citizens coming from other EU states. There is a big debate in the press about citizens, particularly from Central-Eastern Europe coming on working to the UK and receiving social benefits and then, in some cases, sending back those benefits to their families in their home state.

The sums tend to be relatively small and whenever one looks at any of the evidence – these EU citizens are claiming proportionately much fewer benefits than British nationals.

But it’s become a big thing in the press and this has been something that the British Government wants to reform.

We have now been talking about the position of the Conservative Party. What about other parties? And what about the voters? What about the electorate?

Well, what has happened also, if we just turn to the electorate, is that since the crisis the British public opinion has become more Eurosceptic, like the public opinion across the EU, one has to say. So, for the first time ever in some of the opinion polls you have a majority of people that want to leave the EU.

This has created a further problem for the Conservative Party because it’s led to the rise of the UKIP, which is the party that wants to take the UK out of the EU and have much stricter policies on immigration. And this has led to, I think, some of the policies the Conservative Party is now adopting.

In terms of the other parties, the Labour Party, I think it is fair to say, is still developing its EU policies. Its EU policy is far from clear, but it is highly likely that they will not be against some reforms in the relationship between the UK and the EU. They recognize that things have changed since the crisis.

They also acknowledge, I think for the reasons of electoral expediency, that something has to be done about migration. So, it would not surprise me, their position is not yet strongly formulated, if they actually adopt some of the positions of the Conservative Party.

Not exactly recently I’ve been talking to several EU analysts, quite some time ago. I suppose it was something like six months ago or so. Their position was that if the UK decides to walk out of the EU – that would create more problems for the UK than for the EU. There are a couple of things which struck me in that statement. First of all, it looks like the EU adopts – shall we put it – an unfriendly position in this situation. It is not going to try to talk to the UK to make it stay, is it?

I’m not sure about that and I think you’ll find a variety of positions across the EU. So, for example, some of the concerns the UK arise about the EU are shared by, for example, some of the governments in Central-Eastern Europe – the Polish and Czech. The German Government and Angela Merkel have made it very clear that she wants to do everything to keep the UK in. The Dutch Government has some concerns similar to the UK’s, as do the Swedish.

What is the case is – the UK is obviously much smaller demographically, politically, economically than the rest of the EU in any relationship, whether it is within the EU or outside it, it would be the weaker partner. To what extent concessions will be made? We’ll have to wait and see. I think there are some states that will not want to make very many concessions. I think there are others that are willing.

If you look at the concessions of the UK, the current Government plays two tunes. There is a tune that they play to the other governments in the EU, which is to ask for quite modest reforms I think. It is – increasing the powers of national parliaments (which most governments want to do), maybe a little bit of change in social policy (which other governments also want).

Of course, this week, you quoted to me the phrase that David Cameron used yesterday about radical reform, he has to say that because he is talking to his activists. And he has a party that’s really quite split on the EU. So, he has to come back to them and say – “What I’m doing is very-very substantial”. So, he has to say to the others that the bottle is half empty, whereas to his own party he has to say it is half full.

So, Professor, in this situation, when part of the decision makers are not happy with the relations with the EU, but, like you say, the UK would be the weaker side in any scenario – what would you suggest doing?

The reality I have argued is – you have to find some scenario which combines two things. The first thing is that whether the UK is in the EU or not, it will have to end up obeying most EU rules. Russia, for example, applies a lot of EU laws itself because it just has to trade with the EU. And Russia is not a member of the EU. For the UK that problem will be many times worse, partly because trade is much greater between the UK and the EU than Russia and the EU and partly because of just the historical legacy of these laws.

So, the first thing is – the UK has to accept that most of these laws are going to stay in place, whether they like it or not. The second place, and this is the real challenge, is to think of some ways that these laws can have greater democratic authority. There is a feeling at the moment within a large part of the British population, but it is not confined to the UK, that these laws are something that was somehow imposed upon them and they resent that they cannot be changed, there is no responsiveness.

So, my own view is that you have to find some new mechanisms for responsiveness. And that doesn’t mean new powers for the European Parliament, but maybe saying that the EU laws are a little bit less intrusive, the states don’t need to comply with it all the time, that the odd law can apply in some states but not others – these sorts of things, so that people feel that they get some ownership over the laws that apply on their territory. And I feel that that is a good thing in any state. This is what we mean when we talk about democratic authority.

Sir, thank you so much!