Home > General Politics, Labour Party News, Law > A review of IPPR’s Staying in Europe: a good position paper, but needs added socialism

A review of IPPR’s Staying in Europe: a good position paper, but needs added socialism

This piece was intended for New Statesman, but my emails were ignored, then for Labourlist, but it was too long: hence the slightly more restrained style and lack of bloody swearing about the bastards.

There is a delicious irony in the fact that Will Straw’s new IPPR pamphlet Staying in Europe, which seeks to advise the UK government on the potential for a ‘grand bargain’ over the 2014-2020 EU budget, is published on the very day it emerges that other European countries are looking to exclude the UK from any bargaining at all.

In any event, it’s pretty doubtful the Conservative leadership will be taking too much notice of what IPPR, Labour’s favourite think-tank, has to say, and it’s reasonable to assume the pamphlet is aimed much more at Ed Miliband’s team anyway. Indeed, the parallels between what Miliband told the CBI and some of the content of Will’s new pamphlet suggests that there’s been quite a lot of dialogue between Labour HQ and IPPR before publication. This is hardly surprising, not just because IPPR as an institution has the ear of the Labour policy wonks, but also because Will’s father was involved in the previous, abortive attempt at a ‘grand bargain’ over the budget, and presumably has quite a lot of insight into how it all might work a bit better ten years on.

If Cameron does decide to use the veto this week, the current budget will most likely simply be rolled on into the 2014-2002 ‘Multi-Annual Financial Framework’ (MFF) period (unless the ’26 only’ option now apparently being explored legally does come to fruition). If that happens, then the nearer we get to 2015 without a new MFF agreed, the greater the potential for Labour to start to be involved in substantive discussions (albeit behind the scenes) with allies – like France, I would then hope – on how a belated but more coherent MFF might look.

All of this means that this new pamphlet is worth taking seriously as an indication of Labour’s substantive policy planning in this area (as opposed to the ‘framing’ exercise Miliband was carrying out over the weekend).

The pamphlet has four main sections.

First, there’s some polling data and some deliberative workshop findings which can be boiled down to the message that people are anti-Europe, but if you can get them focused on specific policy areas (e.g. security and environmental protection) where the benefits of transnational working are clear, then they can be quite pro-Europe. It may seem a bit harsh to dismiss so briefly the part of the project which probably took up most of the budget – they even went to Macclesfield, though presumably in standard class – but this section does little more than restate the argument that if pro-Europeans get the argument framed right, they will win, because they are right.

Then there’s the section on the referendum question. Will is admirably straight up on this. Yes, he says, there should be a straight in/out referendum post-2015 because: 1) the ‘repatriation of powers’ strategy put forward by the Tories, as a way of avoiding the question, is a nonsense; 2) only a straight question will settle the matter once and for all; 3) it will provide the catalyst for pro-Europeans to get their act together and present a sound case for continued EU membership.

In this, he reflects my own views (I have no idea if Will’s ever read a word I’ve written) that calling a referendum in Labour’s first term would be a sign of strength rather than a distraction, although, as I shall argue, Will is hamstrung by his apparent belief that, other than for sorting out the Commission’s budget and tinkering with some of the democratic mechanisms, the EU is in a good place.

The third main section gets to the heart of IPPR proposal for a ‘grand bargain’ over the EU budget:

Britain should attempt a ‘grand bargain’ – offering to give up its rebate, but only in return for a much smaller overall budget, meaningful reform of the CAP and structural payments, and greater measures to enhance growth. To ensure that giving up the rebate was palatable to the British public, it should be contingent on a reduction in the overall size of the budget so that Britain’s contribution to the EU becomes smaller than it is today.

Will, perhaps understandably, glosses over the fact that this has been tried before. Last time around (2005) Blair’s self-delusions led him to renounce roughly a third of the rebate in the belief that his French-speaking charisma would then get him the deal on the Common Agricultural Policy CAP) he wanted. Chirac saw Blair coming a mile off.

Nevertheless, on its own terms, the bargain suggested here by Will, but which has its roots in an Open Europe report from earlier this year, seems an attractive one. Who wouldn’t want a budget which ends up substantially lower for pretty well everybody involved, while at the same time removing from the whole equation what, for everyone else in Europe, is the anachronism of the UK rebate negotiated by Thatcher in the 1980s?

The problem comes when we get down to the detail of how the overall budget gets cut.

Leaving aside the welcome, but in budget terms very small, proposal to end the Strasbourg-Brussels monthly to and fro, there are two main areas for consideration. First, there’s the Structural Funds – the money which means that buildings built with regeneration cash tend to have the EU logo on their signage. Will suggests that as part of the ‘grand bargain’ such funds should be restricted to the 12 accession countries in view of their lower GDPs. As a result, the UK would save €4.6 billion, although it would lose €1.5 billion in funds “which have historically benefited regions outside London and the south-east”.

This, he says, “would have the advantage of reinvigorating regional policy in England”, but only as long as equivalent funding were ring-fenced from the savings. Fair enough, if you think that will really happen, but it’s easy to forget what a massive benefit these funds have been to places like Merseyside (not to mention Ireland), and the impetus that being ‘Objective One’ regions gave it (not to mention Ireland, which developed its initial Celtic Tiger status on the back of European structural funds. Further, the acknowledgment that Greece, Cyprus, Spain and Italy should get €8 billion a year in temporary funds to help with their “structural reforms” because they will lose out on their European Structural Funds seems to be little more than calling the same funds by a different name.

Second, and of much greater consequence, is the cutting of farm payments:

Farm payments, in the form of the common agricultural policy, should also be reformed. Open Europe proposes reforms to replace the current CAP structure with a system of agri-environmental allowances. Payments would be made where environmental gains are greatest. In addition, they propose cutting direct payments by 30 per cent to create a combined saving of €23.9 billion per annum.

Again, this sounds great, until you go back into the Open Europe report and find, in a footnote, where this 30 per cent calculation actually comes from:

The 30% figure mirrors cuts to the UK’s Department for Agriculture, Food and Rural Affairs (footnote 14, p.13).

That is, it’s a purely ideological ‘from thin air’ proposal, based on an implicit assumption that farm payments are all a waste of taxpayers’ money, and with no assessment whatsoever of the impact such a cut might have on farms, an on rural and wider economies.

Pointing out that the 30% cut proposal is from thin air is not to say, of course, that the current farm payment process is the right one; it is illogical that landowners with wealth unrelated to their farming activity (e.g. the Queen) should be getting payments in the same way as those who need them to stay on the land and produce*. But for Open Europe simply to pluck a 30% cut out of the air – and for IPPR to accept it uncritically – is not just methodologically incorrect, it is also potentially damaging to the social fabric if the whole of Europe.

First of all, it fails to take into account that the EU has in fact already reduced CAP expenditure from 70% of the European budget in 1985 – when price support through direct purchase by the Commission led to the ‘butter mountain’ – to around 30% in 2011, with a further 11% on broader rural development (see also Jon Worth on the ‘framing’ of this EU budget stuff).

Ultimately, though, it is important to remember that the CAP originated in the postwar concern for food security in the context of wholesaler power over the farmer (in the days before major farm size expansion), and although burgeoning land yields, and then the unintended consequences of payment systems have caused major problems (see here for a good impartial, brief history), the idea of the people being able to buy food at affordable prices from farmers who stay in business is still a pretty good one, and one which may be of increasing importance as climate change creates increasing volatility.

So while reform may be welcome, it should be thought through on the basis of livelihood (of both farmers and consumer) and environment, and recognise that proper account of this could even result in an increase in CAP expenditure, rather than be based a short-term desire to cut the EU budget as a way of resolving the rebate issue. (In the meantime, of course, the obvious route open to the UK government is to tax farm payments in relation to overall landowner wealth, with the Queen paying 100% tax.)

Finally, the fourth section of Will’s report covers the institutions of the EU, reflecting closely what Miliband told the CBI:

Too many have turned a blind eye to these failings, believing their understandable real passion for the case for Britain being in Europe should mean a passionate defence of the institutions of the European Union.

A good deal of what Will proposes makes sense, especially the need for the European Commission to retreat from its historic role of policy maker (remember, it existed before the Parliament and long before the Council) to become a civil service operating at the behest of the two democratic(ish) bodies.

In the end, though, this section tinkers round the edges of an institution which has neoliberal orthodoxy at its core; it seeks to streamline its decision-making processes, but not to change fundamentally what those decisions might be. This is hardly surprising; this pamphlet should be seen in the light of a study from earlier this The Third Wave of Globalisation, with a foreword by Peter Mandelson, in which Will argues, for example, that:

The IMF should assess both deficit and surplus countries against a ‘symmetric’ current account target of plus or minus 3 per cent of GDP.

This proposal is strikingly similar to ( (well ok, copied from) the ‘six-pack’ regulations of the Stability and Growth Pact which came into law in 2011 (and the Fiscal Compact simply echoes it), under which fiscal expansion as a measure to promote employment and growth are effectively made illegal under European law (we wait to see to what extent the sanctions set out in law will actually be imposed).

Thus, while IPPR promotes a Labour approach to Europe which effectively defends the status quo while resolving some of the surface tensions, the challenge for people like me on the left of the Labour party is to argue and militate for an approach which builds on Miliband’s recent ‘framing’, and his rhetorical commitment to developing fundamental change with his “allies” but in which:

Labour needs to enunciate clearly that Europe is not currently working for working class people, because its institutions have been captured by the Right, and it needs to have a clear plan for their recapture by the Left**. This is not an anti-Europe stance. This is an anti-rightwing Europe stance.

I think Will’s pamphlet falls short in this regard. In the end it is a well presented case for Labour’s tactical approach to outwitting the Tories over Europe (though written in the guise of advice to the Tories), rather than a strategy for a more socialist Europe. Nevertheless, as an expression of where Labour is now positioning itself (and this is a better place than it was before people like Will took hold), it is well worth reading (mercifully short at 50 pages), and is a welcome, well-written contribution to our understanding.

* It also creates (resolvable) problems in developing countries as cheap produce flood their domestic markets, but I won’t cover that here.

** I’ll be blogging soon on what practical way forward on this.

 

 

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  1. Will Straw
    November 20, 2012 at 6:50 pm

    Dear Paul

    Thanks for taking the time to write this. A few points by way of reply:

    1) TCF has long been one of my favourite blogs on the left so, yes, I do read what you write (although I have to confess that I didnt know you shared my conviction on the case for a referendum).

    2) Our calculations on the EU Budget are intended to be indicative rather than prescriptive. By which I mean that we intended to show that there was a better deal out there for Britain and the EU. While I share Labour’s conviction that the budget should be cut in real terms I fear that they looked opportunistic because they were unwilling to set out a political strategy for achieving their goal. Cameron’s appears to be to use the veto. IPPR’s is to offer a ‘grand bargain’.

    3) You are right that we based our ideas on Open Europe’s report but I give more merit to their proposals than you do. On structural funds, if we are to reconcile a commitment to both localism and solidarity then we have to conclude that continuing to support poor people in the ascension countries make sense but subsidising poor regions in Germany (and vice versa) makes little sense. Instead, we should have the courage of our convictions and ensure that we do a better job ourselves of supporting our own deprived regions with projects that are consistent with an industrial strategy. In the periphery countries, which should be more prosperous if they can resolve their debt problems without recourse to austerity, it makes much more sense to provide support to enhance jobs and growth (a remedy) than to provide fiscal transfers (a sticking plaster). Hence the switch from structural funds to infrastructure and innovation funds.

    4) Agricultural payments have, indeed, come down but can it make sense for 40% of the EU budget to go towards what represents just 3% of EU GDP? This seems to me to be an achronistic nonsense in the 21st century. Indeed, although the EU is better than the US in allowing developing countries access to our markets, the subsidies are still holding back their development. Would the French accept a 30% reduction? Perhaps not but it would certainly put the shoe on the other foot if Britain showed that it was wiling to sacrifice some or all of its rebate if (and only if) there was meaningful reform here and now of the CAP. Indeed, it might be in our geopolitical interests to show that Britain is not the only country capable of throwing its toys out of the pram in the Council.

    5) I think you may have misread my point about the symmetrical targets. These relate to current account (net trade plus net income plus net payments) imbalances rather than fiscal deficits and would have been a far better early warning system for the global financial crisis than the EU’s excessive deficit procedure, As it happens the Six Pack includes provisions for a 0.5% deficit cap which is ludicrous and would effectively outlaw Keynesianism. But it also includes an assymetric current account target of -4% or +6%. This would have allowed Germany off the hook for building up unsustainable current account surpluses in the years before the crash when the mechanism should have been pointing out the instability of both Germany’s surpluses and Spain, Portugal, Ireland (and the UK’s) current account deficits.

    6) I see the Commission as undemocratic rather than neo-liberal (Delors couldn’t be characterised as the latter even if Barroso’s fiscal policy might be) hence the need to return power to the European Council, European Parliament and (crucially) national Parliaments.

    All the best

    Will

    • paulinlancs
      November 21, 2012 at 11:29 am

      Will, thanks for this. Respoding to your points in order:

      1) That’s nice.

      2) I agree, it didn’t look great. Fortunately on this occasion, no-one was watching. But they will be later on, and we need a more substantial offer.

      3) I think we’ll have to agree to disagree here, not least as the strcutural funds are not the most important aspect in the debate now. Nevertheless, I think to dismiss them as a sticking plaster is a bit unwarranted. Is Liverpool Albert Dock a sticking plaster? Would the Ebbw Valley light railway be operating at double the initial projected usage if it hadn’t been for the impetus and direction provided by European funds? A counterfactual isn’t provable, but I doubt it. That’s not to say that most shouldn’t be directed to the accession states, but I think if states don’t take regional inequalities seriously (as Brtiain hasn’t), I think it’s perfectly valid for Europe to step in, as the same way.

      4) On Open Europe, my main critisism is that they simply haven’t evidenced their numbers.

      On CAP, I’m uncomfortable with your view that the socialisation of basic food prices is an anachronism. As I’ve said, you don’t have to think the CAP is perfect to accept that, if subsidies were removed tomorrow you’d end up with an entirely dysfunctional food system. But this needs more space than we have here.

      5) I happily concede my misreading. It was a half-remembering of the Globalisation report, which i read months ago and went back to for a quick quote (not least to ensure that an interesting report was flagged up to the intended NS readership); I should have gone back and re-read more carefully.

      Having said that, I think the main point is that we concur around the economic stupidity, and political arrogance, of the six-pack (whether or not it ever gets implemented). The need to challenge this stupdity should be a central point – much more than a grand bargain over a budget which is small beer in the grand scheme of things – of Labour’s policy approach.

      I’ll blog more about the rationale and practicalities of such an approach.

      6) Delors isn’t around, and wasn’t around for the Lisbon Treaty etc..

      I think you underestimate the potenital for the European parliament to become the main driving force behind a new democratic EU.

  1. November 20, 2012 at 5:05 pm
  2. November 23, 2012 at 1:13 pm

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