David Cameron: Divided loyalties
The UK prime minister’s EU referendum strategy looks like backfiring badly
Prime Minister David Cameron Delivers His Keynote Speech At The Conservative Party Conference©Getty
David Cameron has to overcome the Ukip threat and win a general election before offering an EU referendum
The pink glow in David Cameron’s cheeks seemed especially pronounced. Maybe it was the stinging Alpine air; maybe it was the praise being lavished on a newly resurgent British economy. But the prime minister’s message to the assembled plutocrats and world leaders at Davos last week was bullishly simple: Britain is on the way back.
Mr Cameron hopes that same message of economic renaissance will propel him to victory in next year’s British general election. But in the salons of Davos, just as in the tea rooms at the Palace of Westminster, one word casts a shadow over his grand political strategy and optimism: Europe.
The prime minister’s promise of an “in-out” EU referendum in 2017 – if his Conservatives win the general election – was once seen as a lifeline by Mr Cameron, the only means by which he could contain his fractious party’s euro-obsessions. Now some senior Tories see it as a noose.
As Conservative MPs step up their demands on Mr Cameron to renegotiate a radical new settlement with the rest of the EU, the prime minister is being pulled in the other direction by powerful industry groups, including an increasingly vocal City of London, urging him not to jeopardise Britain’s place in Europe.
The gap between what many Tory MPs want and what Mr Cameron may be able to deliver is growing by the day. “I can’t see how he can get through a referendum campaign without the party splitting and without a leadership challenge,” says a confidant of the prime minister. If he manages to come through the election, Europe may be the prime minister’s biggest and final political fight.
Mr Cameron gave a typically breezy response to his daunting political task in Davos: “I’m confident that we’ll have a successful renegotiation with a successful referendum,” he said. What Europe needed – he added with a smile – was some “practical, Conservative, common sense”.
Common sense is not the first thing that springs to mind when European leaders reflect on the Conservative debate on Europe. Since advocating Britain’s membership of the European club in the 1970s in the belief it was little more than a free trade association, many Tories now regard the EU as an aspirant superstate, imposing outdated social constraints and red tape on the UK economy.
Tory splits over Europe helped to bring down the last two Conservative prime ministers – Margaret Thatcher and Sir John Major – and Mr Cameron’s attempt to juggle what he sees as the national interest with the visceral instincts of his party leaves him vulnerable to a similar fate.
The wounds run deep. Sir John recounted to a recent press lunch his frustration in dealing with eurosceptics in his cabinet in the 1990s. “Calling three of my colleagues bastards was absolutely unforgivable,” he said. “My only excuse is that it was true.”
Sitting feet away from him at the lunch was Bernard Jenkin, one of the Tory MPs who made Sir John’s political life miserable. He is now a convener for a new generation of eurosceptic MPs. This month Mr Jenkin organised a letter signed by 95 Tory MPs – a third of Mr Cameron’s party – calling on the prime minister to secure for national parliaments a veto over current and future EU laws.
Tory turncoat
That was too much for William Hague, once regarded as the most eurosceptic Tory leader in the party’s history and now foreign secretary. He said the Jenkin proposal would lead to a free-for-all. “The European single market would not work,” he said. It is a sign of the sceptical drift of the party that Mr Hague is now regarded by some as “a turncoat”.
The eurozone crisis has reinforced the certainty of the eurosceptics that they were right all along. While Thatcher’s party was split between pro and anti-Europeans, euroscepticism is an article of faith. “The more time that goes on, the more sceptical the party gets about Europe,” says David Davis, a senior Tory MP.
The party’s relentless focus on Europe (a subject of only peripheral interest to many Britons) infuriates Mr Cameron. While he wants to concentrate on new data showing Britain’s economy is growing at its fastest rate since 2007, he is facing another Tory revolt on Europe, this time on immigration.
Dozens of his MPs have been pushing an amendment to a government immigration bill that would reimpose work restrictions on Romanians and Bulgarians until 2019. The fact that this would be illegal under EU law cuts little ice with Tory MPs.
If Mr Cameron thought he could calm his party’s passions on Europe with his promise of an in-out referendum, he was wrong. “People think this talk of a renegotiation is all hot air,” says one Tory MP. “They think Cameron and Hague are being far too complacent. That’s why they are raising the stakes now – they want to encourage him.”
The open defiance of Mr Cameron by many Tory MPs creates several threats that may ensure that he does not even get to hold his promised referendum. The first hurdle comes in May with the European parliament elections, when the populist UK Independence party may top the poll, pushing the Tories into third place.
Mr Cameron will try to depict this as a typical protest vote for a party whose maverick leader, Nigel Farage, admits to running on an election manifesto in 2010 that was total “drivel”. But will the Tories react by panicking and demanding a tougher approach by Mr Cameron towards the EU? “That’s the question of 2014,” says one cabinet minister.
Even if Mr Cameron can hold his party together, he then has to win a general election, scheduled for May 2015. Although the opposition Labour’s poll lead over the Tories is shrinking, one senior Tory MP says: “Our central assumption is there will be another hung parliament.” Even if he managed to hold on to power – perhaps in coalition again with the pro-European Liberal Democrats – Mr Cameron’s authority with his eurosceptic right would be further diminished by a second failure to win an outright majority.
In that febrile atmosphere, Mr Cameron would then attempt to renegotiate Britain’s EU membership terms with the aim of selling the resulting deal to the British voters in a Yes campaign in 2017.
Mats Persson, of the right-leaning Open Europe think-tank, says: “The party is going to split, there’s no doubt about it.” He argues that this is not the end of the world. After all, Harold Wilson’s governing Labour party campaigned on different sides in the UK’s 1975 referendum on continuing membership in the then European Economic Community.
But this is the Conservative party: talk of betrayal would inevitably be in the air as Mr Cameron prepared to persuade Britain to vote Yes to stay in Europe. “The biggest risk for him would be a pre-referendum leadership challenge,” says Mr Persson. Downing Street insiders also concede that some Tory MPs might challenge Mr Cameron, if only to weaken him ahead of a referendum campaign.
City concerns
The prospect of Mr Cameron leading Britain into a referendum campaign at the head of a warring party, halfway through his second term, and in the face of a blizzard of hostile coverage from the UK’s eurosceptic media, has focused minds in the business community and most notably in the powerful financial services sector.
The City has always had close links with the Tories and has largely avoided being drawn publicly into the debate about Europe. But last year important organisations decided they had to become more vocal.
Bankers attending last year’s Tory conference were startled by the pervasive mood of “rabid” euroscepticism. “It seems to me they are bending more and more to eurosceptic concerns because of Ukip, and the more they do that, the more unhappy business will be,” says a City worker. “Companies want better outcomes from Brussels but you don’t get it by shouting insults from the sidelines.”
City lobbyists are gearing up for intensifying discussions with senior Tories. The Square Mile realises that if it waits for the referendum to be called, it could be too late to influence the debate.
George Osborne, the chancellor, is seen by the City as “pragmatic” on Europe, combining a mixture of diplomacy and occasional use of the European courts to protect the interests of London against power plays by the eurozone. Lobbyists hope he will be a moderating influence on the debate.
The City’s appeal for moderation on Europe was captured by its various submissions to the government’s “balance of competences” review, which is examining the division of powers between Westminster and Brussels. The view was that there was no need for a “repatriation of powers” but that Britain should strengthen its ties with Brussels, for example by boosting the number of UK officials working there.
Companies, however, are far from united on EU strategy, with the chiefs of big banks striking a more positive tone on the advantages to London of the EU single market than sceptical hedge fund managers and private financiers. But the overwhelming message to Mr Cameron is to be realistic. “There is no prospect of negotiating a better deal for Britain of any significance,” says a leading City manager.
Mr Osborne insisted that the EU would need a new treaty to underpin the eurozone and to create the banking union and fiscal discipline demanded by Berlin. At that point, he argued, Britain would make its play and call for a better deal from the EU, including a safeguard to ensure that eurozone countries do not act as a caucus to lay down terms to countries outside the single currency area.
Mr Cameron is also expected to demand restrictions on benefit claims by EU migrant workers, the right of a group of national parliaments to show a “red card” to proposed EU rules, changes to the EU’s working time directive and action to show that Europe “gets it” on the need to boost competitiveness. Britain is also trying to break free of restrictions imposed under the European Convention on Human Rights.
Too many enemies
Mr Persson believes other European governments might accede to such a list of demands if Mr Cameron shows deft statesmanship. But, he says, the Conservative party is its own worst enemy and could scupper any negotiation by making unrealistic demands on the prime minister.
“It would be an unfortunate irony if the Tories rip themselves apart at a time when the appetite for reform is growing across Europe. If it descends into disarray there is a risk that the Tory party could become a bigger obstacle to a new settlement in the EU than anyone in Brussels or Paris.”
Managing his restless party while simultaneously presenting himself as a reliable European ally is proving difficult for Mr Cameron. Across Europe, there is bafflement that Mr Cameron is now railing against the enlargement of the EU to the east and demanding controls on free movement of labour – the two policies previously regarded by Britain as among the best parts of EU membership.
Potential friends in eastern Europe are turning their backs on him. Mr Cameron’s claim that UK taxpayers pay benefits to children living in Poland created a storm in Warsaw. Donald Tusk, the Polish prime minister, resorted to donating to charity a cherished Arsenal football shirt given to him by the UK prime minister.
While Angela Merkel, German chancellor, has called for a new EU treaty, she has never specified a deadline and does not need one as urgently as Mr Cameron. Her government is increasingly resorting to the kind of “legal gymnastics” decried by Mr Osborne this month to carry out eurozone reforms within existing rules.
On recent banking union negotiations, for instance, Berlin accepted an intergovernmental pact outside the treaties, partly because the alternative would have been to give Britain a veto. “Nobody wants to give the UK the keys,” says one EU official.
Lawyers in London and Brussels are looking at alternatives to accommodate Mr Cameron’s desire for a renegotiation without reopening the EU treaties, thus avoiding triggering referendums in some countries. Perhaps Mr Cameron could instead win a binding declaration from other EU leaders to meet some of his concerns?
Maybe, but it would not be enough to satisfy a sizeable chunk of his party. And while Tory MPs would urge him to strike a more eurosceptic stance, business groups would be clamouring for Mr Cameron to make the case for staying in the EU.
In the end, he would still rely on the goodwill of European leaders to help him out. “My own feeling is that the strategy of a referendum that he announced 12 months ago is now almost impossible to achieve,” says Charles Grant, director of the Centre for European Reform. Mr Grant argues that in his quest to win re-
election and to vanquish the threat of Ukip, Mr Cameron is simply making too many enemies.
French connection
The case of François Hollande highlights the problem. In Mr Cameron’s mind, the French Socialist president – in the run-up to a re-election campaign in 2017 – will sign an EU treaty enforcing German fiscal discipline on France while also agreeing to a dose of Anglo-Saxon free-market capitalism to help the Brits. He might then submit the text to a referendum of the kind that split the Socialists in France in 2005. Yet Mr Cameron has approached this delicate diplomatic task by deploring Mr Hollande’s stewardship of the French economy, linking his policies with those of the Labour opposition in Britain.
Mr Cameron’s position on Europe remains precarious; something that Mr Hollande may well point out when the two leaders meet at RAF Brize Norton tomorrow for an Anglo-French summit. Given the scale of the challenge ahead, the prime minister will need all the friends he can get.