The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.

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Aiming for the Heart of Europe: A Misguided Venture

Paper No. 33

John Bercow MP

Foreword by the Rt. Hon. Lord Tebbit of Chingford CH
John Bercow's lecture on Britain and the European Union is a model of clarity, comprehensive in scope and compelling in its logic.

There has been a fundamental change in the nature of what was the European Economic Community when the United Kingdom gained admission. Like many others who believed in European free trade and the argument that the European nations should bind themselves by treaty to pursue free trade policies (such as an end to state subsidies of industry) I campaigned for a yes vote in 1975.

My views on that have remained unchanged over the past twenty years but during that time the EEC has changed, first to the European Community then to the European Union. It never was - and by its very nature could not be ideally suited to the interests, needs and ambitions of every member state, least of all Britain which has always been more different to each of the others than any of them to each other. None the less, we have over the years played our full part. Despite that we have never succeeded in changing the Community in any major respect to meet our needs and ambitions. The Common Agricultural Policy remains as hostile to our interests as ever it was. Even Margaret Thatcher's apparent success in securing a legal framework to deliver the Single Market has been perverted by our partners' refusal to enforce its provisions, and the European Court's rulings by which social legislation is imposed on Britain under the pretence that it is needed to remove barriers to trade.

As John Bercow explains, the Maastricht Treaty was a watershed. Until then it was possible to argue coherently that the European Community could remain an economic association of sovereign states. Since then - and even more since Amsterdam - there can be no argument that it is heading towards political, monetary and economic union or the birth of a state called Europe.

Once the provisions for monetary union become embedded in the Treaty of Rome then the treaty could be nothing other than the constitution of that state. It is Maastricht which gave enormous new energy to the continental bacon slicer which remorselessly takes slice after slice, salami style, from the remaining body of our right to govern ourselves. Always, we are told, it is too thin a slice to notice and before long we will be told it is too late to stop. What has gone, we will be told, cannot be put back and what is left is not worth worrying about.

It is a tribute to the political logic of John Bercow that his lecture leads the reader or listener inexorably to the key questions.

Is our present position so far along the road to provincial status that we have no option but to march on to that destination whether we want to or not? Could we stand firm where we are? Or must we seek to return towards a relationship with our continental partners like that on which we embarked in 1972?

And what if our partners insist on taking the European Union on to a destination to which we do not wish to go? What would be the consequences? Could parliament renounce the Treaty - or would that be an illegal act of rebellion?

John Bercow illuminates these questions which so much of the establishment would prefer were kept in the closet. For that he deserves our thanks and our attention.

Introduction

I believe that for Britain to aim to be at the heart of Europe is a misguided venture. I shall attempt to justify that view by considering five factors: the conflicting views between Britain and her continental partners of the aim of the EEC, now the EU; the impact of the European Treaties upon this country; the political motivation for the single currency; the application of subsidiarity; and the cost to Britain of her membership of the EU. On the strength of that analysis, I shall suggest that there are alternatives to deeper European integration which all democratic political parties should contemplate.

Conflicting Views of the Aim of the European Economic Community

The founding fathers of the Treaty of Rome had three objectives. First, to achieve peace in Western Europe and the reconciliation of France and Germany. Structures were to be created that would render impossible a repetition of the wars of the 1780s, 1870, 1914 and 1939. Secondly, to form a customs union, and importantly not a free trade area, with high external tariffs, facilitating the emergence of a strong trade block in Western Europe. Thirdly, to build an alternative superpower to rival the United States and the Soviet Union.

The Treaty of Rome called for "an ever closer union among the peoples of Europe" but, beyond the goal of a Common Market, it provided for common domestic policies only in the spheres of agriculture and transport. However, the reference to ever closer union, the stated wishes of European leaders and the passage of almost sixteen years before our accession meant that you did not have to be Sherlock Holmes to sense what was in store for us. The Schuman Plan, devised by Monnet and Schuman, aimed:

"to place the French and German production of coal and steel as a whole under a common "higher authority" within the framework of an organisation open to the participation of the other countries of Europe ... by pooling basic production and by instituting a new high authority whose decisions will bind France, Germany and other member countries".

It added "This proposal will lead to the realisation of the first concrete foundations of a European federation". Interestingly, in his memoirs, Monnet recalls remarking at a dinner that "the British will not find their future role by themselves: only outside pressure will force them to change".

Initially, Conservative statesmen perceived the federal or centralised Europe that was in prospect and wanted no part of it. Churchill, in his 1947 Temple of World Peace Speech, emphasised that the Temple would have four pillars: the United States of America, the Soviet Union, a United Europe and the British Empire and Commonwealth. He radiated goodwill towards the idea of a United States of Europe but saw the future of Britain as being outside it.

In 1962, Anthony Eden foresaw the direction in which the EEC was intent on travelling. He said,

"The experiment of the Six cannot succeed without federation and I think it most probable that if we join the Six we shall be faced with that decision in a few years time. I am sure that it must be federation in the sense of one parliament, one foreign policy, one currency etc. So far as I can judge events in the continent of Europe, I do not want to become a part of such a federation".

Despite Eden's prescience, Conservative Prime Ministers from Macmillan onwards sought to place Britain at the heart of this process. Variously, they either believed, or simply conveyed the impression, that they could halt the process of European integration and instead replace continental ideas with an Anglo Saxon model for the new Europe.

Harold Macmillan personified a generation of Conservatives who accepted the inevitability of the end of Empire and realised that Britain could no longer afford an imperial role. To Macmillan, and like minded fellows, a new role for Britain would be found in the European Economic Community. We could provide the Europeans with political leadership due to our diplomatic experience, special relationship with the United States and skills in negotiation. Britain would have a new Empire on her doorstep.

Macmillan misjudged the determination of the founding fathers of the European Communities to achieve their federal goal. That goal was incompatible with the British vision of a Europe of sovereign nations dedicated to free trade and co-operation. There could be only one winner in the battle over the future of Europe and it would not be Britain. The first rebuttal came with de Gaulle's veto over Macmillan's application for British membership of the EEC. De Gaulle said:

"England, in effect, is insular. She is maritime. She is linked through her exchanges, her markets, her supply lines to the most distant countries. She pursues essentially industrial and commercial activities and only slightly agricultural ones. She has, in all her doings, very marked and very original habits and traditions. In short, England's nature, England's structure, England's very situation differs profoundly from those of the Continentals."

The agenda and tactics of Edward Heath were different. He simply misled the British public until he achieved British membership of the EEC. The 1971 White Paper, proposing Britain's entry to the Community, a copy of which was sent to every household in Britain, emphasised that there was "no question of Britain losing essential sovereignty." Heath dismissed fears of a loss of independence as "completely unjustified" and was at pains to reassure the doubters that Britain would keep control of her own affairs. "No nation" in the Community would be able to "over-ride another", the vital interests of Britain would be guaranteed and, above all, she would keep her own Parliament, courts and legal systems, it said. On the strength of this propaganda blitz, you may think that Mr Peter Mandelson and Mr Alastair Campbell have been wrongly credited as the inventors of "spin" and that Edward Heath had mastered the technique some 25 years earlier. I could not possibly comment.

Of course, Heath was not acting alone. In 1972, his Solicitor General, Sir Geoffrey Howe, said that a common market was at the heart of the Community and added "The impact of the Community law is, by definition, confined to essentially economic matters."

In practice, Community law has extended far beyond such matters but it is only fair to record that in order to secure Britain's entry to the EEC Heath gave in on the "essentially economic matter" of Britain's fishing rights, notwithstanding repeated pledges by his chief negotiator, Geoffrey Rippon, that the Government would not do so.

Given Heath's pre-entry assurances, and the remarks of Geoffrey Howe, it is interesting to note that in 1990, when asked by the interviewer, Peter Sissons, whether, when he took Britain into Europe, he really had in mind "a united states of Europe, with a single currency", Heath replied "of course, yes". Whether Heath confided in Sir Geoffrey at the time, we do not know. I think we should be told.

The Impact of the European Treaties on Britain

(A) SINGLE EUROPEAN ACT (1986)
As we have seen, signing the Treaty of Rome committed Britain to a common market, common agricultural and transport policies and the significant but unelaborated goal of "ever closer union amongst the peoples of Europe". Accession to the European Communities also entailed the primacy of Community law over our own. Despite the professed aim to create a common market, the Community concluded that it had not been achieved. Hence the need for the next major milestone in the development of the Community, the Single European Act of 1986. Margaret Thatcher was herself a driving force behind the Act and some of her Ministers positively fizzed with enthusiasm about the Single Market which it spawned. She and they believed that the Act achieved the Thatcherisation of Europe through the furtherance of free trade. Perhaps the fact that the then Commission President, Jacques Delors, an avowed socialist, was a passionate advocate of the Act and the Single Market should have sounded the alarm bells to British Conservative leaders, but it did not.

The Act provided for a major extension of qualified majority voting. There are 87 votes in the Council of Ministers, weighted loosely according to size of population. 62 are required to pass a proposal and 26 to block it. The UK has 10. The Act not only reduced the use of the national veto it also substantially increased the number of European Union competences, notably in environmental and social policies. It also conferred new powers upon the European Assembly, now the European Parliament.

The European Commission ruthlessly used the Single Market programme to push through a determined harmonisation programme. This entailed no fewer than 1,368 directives, and a mass of attendant regulations, that were binding upon Britain. As a result, a uniform, heavily regulated Europe emerged, instead of what Britain had envisaged: a diverse, freely trading Community in which products would be mutually recognised.

Ludicrous examples included carrots being defined as a fruit when applied to jam made from the vegetable and laws being proposed on the noise made by lawn mowers. British industries were hit particularly hard when having to comply with the harmonisation legislation. All firms had to comply with the Single Market legislation even if they had no intention of exporting their products. Yet only about 30% of our output is sold abroad, under half of which goes to the European Union. Despite this we had to suffer the triple torture of more red tape; the burden of harmonisation on businesses, making it harder for many of them to export; and the fact that many countries ignored the rules of the Single Market, continuing to protect and subsidise their own industries.

While the Market may now be functioning effectively in some industries and parts of Europe, it is a disservice to the debate to pretend that it is an unqualified success. It is not.

Examples abound of the damage done to our businesses by a number of directives. 400 smaller abattoirs, half the total number of slaughterhouses in the UK, have been forced to close because they could not afford the cost of compliance with new EC export standards - which they had to satisfy even if they did not export. The Recreational Craft Directive, coming into force on 16th June 1999, will require thousands of small boat builders to comply with 50 new safety standards, most of which have yet to be agreed. It is expected to raise the price of yachts, motor cruisers and other pleasure craft by up to 15%, forcing many small boat builders out of business. The Taxation of Savings Directive, imposing a withholding tax, will raise costs; and plans to compel the payment of royalties on all sales and resales of works by artists still alive and for up to 70 years after their deaths have already dealt a swingeing blow to the London art market which hitherto yielded Britain £2 billion per annum in foreign earnings. These effects are a far cry from the rhetoric of removing barriers, boosting trade and increasing opportunity which accompanied the launch of the Single Market.

(B) TREATY OF MAASTRICHT (1992)
If the Single European Act was significant, the Maastricht Treaty was if anything still more so. Sadly, the tendency of successive Prime Ministers to claim that they were winning the argument in Europe, and that Britain was punching above her weight, applied to John Major. He was the master of this genre and returned from the Maastricht summit to proclaim that Britain had won game, set and match in the negotiations. Scrutiny of the Treaty, and events since, show that in fact he suffered a straight sets defeat.

It confers on Community institutions a breathtaking raft of new powers in respect of a range of subjects from roads to consumer protection, from training to the environment. The number of areas in which the European Commission has the sole right of legislative initiative increased from 11 to 20 and the Treaty provided for 111 increases in qualified majority voting. There are more powers for the European Parliament too.

You might question whether there is enough common ground between the member states to facilitate a common foreign and security policy but moves towards it were made. The policy allows "joint actions" which, we are told, "shall commit the member states in the positions they adopt and in the conduct of their activity".

John Major did win consolation prizes of "opt outs" from the Social Chapter and the single currency. With a cavalier disregard for the potential costs to British industry, the present Government has thrown away the first concession and signed the wretched Chapter. The second opt out is valuable, but it is only from the single currency itself. Britain is still committed to the first two stages of economic and monetary union.

(C) TREATY OF AMSTERDAM (1997)
The Amsterdam Treaty continues the onward march of the federalists. The Treaty extends qualified majority voting to 16 new policy areas. Few of them relate directly to trade or competition which were the original pretexts for QMV in the Single European Act. Employment, equal opportunities, research and development, public health, "social exclusion" and statistics all form part of the EU's agenda.

The European Parliament also received a significant boost at Amsterdam. This is no cause for good cheer amongst Conservatives or other supporters of British national sovereignty. For many federalists hanker after a more powerful European Parliament as the basis for a supposedly democratic European state. That is why they have consistently pressed for the extension of "co-decision", the one form of European legislation which, instead of giving the balance of power to the Council of Ministers, accords the Parliament and the Council equal status.

The Amsterdam Treaty extends co-decision to 27 new areas of policy including employment, equal opportunities, social policy and transport. This will do nothing to enhance competitiveness and could well be used in such a way as to undermine it. Yet the Prime Minister, far from being a bulldog on the subject, has been a poodle of our European partners, uttering not a word of protest.

The Treaty establishes a new Employment Chapter, which gives Brussels a role in co-ordinating the employment policies of the member states. Health and safety at work, working conditions, information to and consultation of workers, the "integration of persons excluded from the labour market" and policies on sexual equality will all be determinable by qualified majority voting. Furthermore, the Treaty moves further to a common foreign and security policy and a common defence policy.

The Amsterdam Treaty is not a recipe for diversity but a menu of uniformity. Centralising power, reducing the veto and deepening integration, it flies in the face of the Conservative vision of European cooperation. It is clear enough now why Jacques Delors, speaking to the European Parliament in July 1988, predicted that by 1998 the European Community would be the source of 80 per cent of our economic legislation and perhaps even our fiscal and social legislation as well. He was not merely celebrating the 1986 Single European Act but planning the next moves on the chessboard of Community politics.

What is the effect of successive Governments' quest to be at the heart of Europe? We are now signed up to a European Union which has a Parliament, a passport, a citizenship, a flag and an anthem and which wants a single currency, a single army and a single foreign policy. Of these, a single currency is the most imminent prospect.

The Political Motivation for the Single Currency

This is not the occasion for a detailed study of the arguments for or against Britain's entry to a single currency. However, as support for entry is high on the agenda of most of those who advocate that this country should be at the heart of Europe, it is as well to look at some of the economic and, in particular, the political considerations.

(A) ECONOMIC
British membership of a single European currency is not an obviously sensible economic proposition. Our business cycle has long been out of step with that of continental Europe and there is no evidence that convergence, if it happens, will be more than a meeting of ships which pass in the night.

The start up costs for business will be enormous, hitting small firms and retailers the hardest. We could no longer use the exchange rate to absorb shocks, be they rises in prices or the impact of natural disasters. Moreover, membership of a single currency will prevent Member States taking policy decisions to react to asymmetric shocks e.g. the collapse in confidence in the Russian economy. The UK's pattern of trade is global, not continental, and that pattern is set to continue. Sterling does not move with the European currencies but is influenced also by the US dollar. Changes in the European interest rate would affect this nation of homeowners far more directly than those of other EU member states. This country has funded its pension arrangements - others have not funded theirs. A single monetary policy will need to be accompanied by a single fiscal, i.e. tax policy, as the President of the Bundesbank has freely acknowledged. Unlike the United States, the European Union does not have the labour mobility that is a prerequisite of a successful currency union. The unemployed of Lewisham will not shift to Luxembourg to get a job. As the Governor of the Bank of England, Eddie George, has observed "it's less likely that people will be able to move to where the work is because of language and cultural differences".

Above all, the single currency entails a "one size fits all" policy. A single interest rate would apply to every member of EMU whatever its economic situation. That rate would usually be either too high or too low. The single currency would be the permanent form of the Exchange Rate Mechanism of which Britain was a member from October 1990 until September 1992. In barely 23 months, unemployment went up from 1.67 million to 2.85 million, interest rates were artificially high for too long and rose briefly to 15 per cent, thousands of people saw their homes repossessed and many others were driven into bankruptcy.

I hope the ten economic considerations cited above give cause for thought.

(B) POLITICAL
For me, the political objections to British entry to a single currency are the most compelling. Yet I was reminded recently that the political implications are not always recognised. An intelligent lady, whom I like and respect, came up to me and advanced the most common "economic" argument for the single currency. "I would like such a currency", she said, "because I wouldn't have to change money when I go abroad in Europe". I said that if that was all the single currency were about, I would agree with her. "Isn't it ?", she replied.

Let us be clear. We are not talking about a common currency, but about a single currency. Whilst some opinion polls have been seemingly ambiguous on the subject of the single currency, these polls, without exception, have not mentioned that Britain's joining the single currency will entail the abolition of the pound and the re-calculation of everything into euros, from shop prices to pension entitlements. Those polls that have mentioned the obligation to abolish the pound have all recorded a significant majority against Britain joining a single currency. The most recent Gallup poll, for example, showed that 65 per cent of respondents were against British entry to a single currency on this basis and only 33 per cent in favour. Amongst Conservatives, the figures were 76 per cent and 23 per cent respectively.

The legal framework is clear. Under the single currency, the European Central Bank will be responsible for monetary policy. It is prohibited by Article 108 of the Treaty of Amsterdam from seeking or taking instructions from any other body, even a democratically elected body, about its conduct of monetary policy. Equally, member states undertake not to seek to influence the Bank. So the Bank, comprised of people whom we will not elect and cannot remove, will be empowered to make decisions affecting millions of British people.

Yet their elected representatives have foresworn any attempt to influence those decisions. Stripped of the verbiage, that is the brutal reality of the single currency project. It will be no use electors complaining to the Government, let alone their local MP, about the effect of the ECB's policies. We should be mindful too that the Bank intends to regulate member states' borrowing and deficit levels and to bring about economic, as well as monetary, union. In short, a single currency means a single monetary policy, a single budgetary policy, a single fiscal policy, a single economy, a single Government and a single state. This is the federal European state which many member states want, which has long been developing by stealth but which virtually every British democratic politician except Sir Edward Heath and the Liberal Democrats claims to oppose. Politics has long been the driving force of the architects of the single currency. That is why the convergence criteria have been fudged - economics plays second fiddle to politics. Let the politicians speak for themselves ...

Chancellor Kohl, speaking in the Bundestag on 13th March 1991, said pithily: "however important the completion of economic and monetary union it would remain mere patchwork unless political union were established simultaneously. These two undertakings are, in our opinion, inseparable."

Yet the prize for candour must surely go to the former Prime Minister of Spain, Felipe Gonzalez, who wrote in May 1998:

"the single currency is the greatest abandonment of sovereignty since the foundation of the European Community ... It is a decision of an essentially political nature ... We need this united Europe ... we must never forget that the euro is an instrument for this project."

The Application of Subsidiarity

(A) ARTICLE 3B
Even without a single currency, the powers of the European Union over member states have increased exponentially over the last decade or so. John Major understood the growing public anxiety that Community diktat was becoming ever more widespread. In an apparent effort to allay concern, the Maastricht negotiators produced the so called "subsidiarity" principle. Actually, it was not novel and had been espoused by the Vatican in Rome when Mussolini was in power. However, Community leaders enshrined the concept in Article 3B of the Maastricht Treaty and said it meant that decisions should be taken at the lowest possible level. What does the article say and what does it really mean?

"In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the member states and can, therefore, by reason of the scale or effects of the proposed action be better achieved by the Community."

Two objections to this immediately arise. First, the article is not saying that action will be taken at the lowest level, as its supporters claim, but rather that the Community shall act if it judges it necessary to do so.

Secondly, if there is a dispute between the European Union and a member state as to which should be empowered to act, it is justiciable by the European Court of Justice. It is not an impartial arbiter but a body which is committed to European integration and which prides itself on a "dynamic" approach to EU law. In the Court's hands, application of the law has often been replaced by its invention. This hardly inspires confidence in the likely robustness of subsidiarity. Moreover, it can be argued that the notion of subsidiarity, far from being a tool of decentralisation, is in fact an admission that powers rest with the European state and that it will decide which of them it delegates. Suffice it to say that the wording of the article fully warranted the description of it by Lord Mackenzie Stuart, a former President of the European Court of Justice, as a "prime example of gobbledygook". He averred that to regard it as a constitutional safeguard showed "great optimism".

A crucial test of the robustness of the provision came on 12th March 1996 when the Advocate General gave his opinion on the Working Time Directive. He said "in view of the fact that the objective provided for in article 118A is harmonisation, there is no doubt that the aim of the contested directive can be better achieved by action at Community level than by action at national level". So those who hoped that we could preserve sovereignty over our domestic working practices were to be disappointed. Subsidiarity had been hyped and John Major had suggested that it could serve to scrap 25 per cent of European regulations but Article 3B has not brought about the repeal of a single directive or regulation. If anything, it has been a cloak for further centralisation.

(B) PROTOCOL ON SUBSIDIARITY AND PROPORTIONALITY
The Treaty of Amsterdam makes a bad situation worse. It contains a protocol on subsidiarity and proportionality. It states "the application of the principles of subsidiarity and proportionality shall respect the general provisions and objectives of the Treaty, particularly as regards the maintaining in full of the acquis communautaire and the institutional balance; it shall not affect the principles developed by the Court of Justice regarding the relationship between national and Community law, and it should take into account Article F4 of the Treaty on European Union, according to which the Union shall provide itself with the means necessary to attain its objectives and carry through its policies". In other words, where the Union already has power, it will not relinquish it. No net decentralisation can be expected. Moreover, Section 3 of the protocol states that "Community action within the limits of its powers" may "be expanded where circumstances so require".

The protocol does specify criteria which should be met before Community action can be taken. First, an issue should be "transnational" in character. Many would contend that the regulation of working hours is not a matter of transnational concern. The Community, backed by the Court of Justice, insisted otherwise. In truth, there is no agreed definition of "transnational" for this purpose. Secondly, for Community action to be taken, it should be necessary for the requirements of the Treaty to be fulfilled. This is no protection. Those who want maximum Community action need only draft clauses that either require or allow it. Thirdly, there should be benefits in scale or effect to justify Community action. The disbenefits in scale and effect of the Working Time Directive across the EU should have prevented its adoption but they did not. The truth is that the Community has only to invoke the "general provisions and objectives" of the Treaty to proceed as it wishes.

At the last count, in 1995, there were reported to be 24,000 regulations having immediate effect and 1,700 directives to which member countries must give effect through their domestic legislatures. Subsidiarity, which had been claimed as a benefit from the "heart of Europe" approach pursued at Maastricht, proved irrelevant as regulations increased by over 1,500 and directives by 120 in 1994 alone. This panoply of measures is part of the tidal wave of European law long lamented by our most celebrated judge, Lord Denning.

Cost of British Membership of the European Union

It is estimated that the annual cost of Britain's membership of the European Union is £10 billion in gross budgetary contributions. Of that sum, a little over half is returned in EU spending. The tendency of euro partisans to cite a lower figure as the "net" or "real" cost of membership is a trifle cheeky, however, as it erroneously assumes that EU monies are spent in Britain just as we would choose. This point has been powerfully made by Norman Lamont.
The Common Agricultural Policy jacks up our food prices to the tune of £6 billion per annum, though about half of that sum is rebated directly to our farmers. At a conservative estimate, therefore, our membership costs a minimum of £8 billion per annum, or one per cent of GDP, and probably rather more than that. This bald figure takes no account either of the costs of regulation or of the loss of sovereignty we experience, though both are considerable. Those costs and that loss are incurred in the name of under 15% of our output.

Despite these costs, those who insist on continued British membership cite our trade with the EU as a benefit which alone outweighs the undoubted costs. This thesis ignores a number of inconvenient facts. First, as Conrad Black has reminded us, if we include exports which are shipped on through Rotterdam and other European ports outside the EU and overseas investment earnings are included, the EU takes about 40% of our total exports. As a proportion of our total output, sales to the EU amount to less than 15% of our GDP. Secondly, we currently have an annual trade deficit of £3 billion with the EU. Thirdly, over the last ten years, direct net investment in the UK from the US and Canada has been half as much again as we have received from the European Union. Similarly, our net investment in North America has been more than double UK investment in the EU. In view of these numbers, the knee jerk reaction of Euro fanatics that life for Britain outside the EU would yield untold economic devastation seems misplaced.

The EU needs us for trade at least as much as we need it. Under the auspices of the World Trade Organisation, the Uruguay Round of trade liberalisation agreements has cut the EU's common external tariff from 5.7 per cent to 3.6 per cent and the drive for freer world trade should bring about further reductions. At least as important, both commercially and psychologically, is the evidence that other European countries outside of the EU happily trade with it. For example, Swiss exports to the EU have grown faster than those of Britain. Norway can tell a similar story. Outside of Europe, both Japan and the United States enjoyed faster export growth to the EU than Britain in the 10 years from 1983-1993. Moreover, the proportion of Canadian output exported to the US is four times that of Britain but Canada sees no need to share a court, a parliament or a currency with the Americans.

The reality is that Britain is a global trading nation. We sell our wares wherever we can and our success, especially since our economy was restored to health under Conservative Governments, has been conspicuous. That success is not contingent upon the EU. Our trade surplus until recently with every other continent bar Europe is testimony to the fact that we provide goods and services of a quality people want and at prices they can pay. That is why in telecommunications, in oil, in civil engineering, and in financial services, to name but a few, our trade is soaring. Politics forms no part of the equation save in so far as it creates a framework of open markets.

Two further reasons are adduced as to why we must stay in the European Union at all costs. First, we are reminded of the huge inward investment that we receive, notably from North America and Japan. Indeed, Britain attracts approximately 40 per cent of the total, more than any other member state. Europhiles present a doomsday scenario in which there would be an exodus of this investment if we were outside the EU. Access to the European market may be important to those inward investors but trade liberalisation agreements mean that access is not at risk. Surveys of foreign direct investors into the UK suggest that several other factors are uppermost in their minds when they choose Britain. Our costs and taxes are lower. Our labour market is more flexible. Our industrial relations are better. Our inflation is low. Our language has global reach. Our public administration is honest and we enjoy political and social stability.

The political argument for our EU membership is that we carry more weight as part of a block of countries than if we act alone. This is what might be described as a political economy of scale. Yet it is persuasive only if and in so far as club members share a common goal. In the recent round of trade negotiations Britain had to play along with the French line which was much more protectionist than our own. A prime example is trade in the audio-visual sector in which French brinkmanship put up barriers to United States products. Given a free hand, and taking account of our strong trade relationship with the United States, it is doubtful that we would have pursued such a course. We were, in other words, obliged to uphold a position directly in conflict with our own national interest. This is an inevitable consequence of being jammed into a common position - a consequence met especially often by Britain, whose interests tend to diverge from the Continental mean far more than do those of other States.

Conflict situations do not make a cogent case for the EU's indispensability to us either. In the Falklands, we gained practical help from the United States and much vacillation from a number of our European partners. In the Gulf, the meeting of minds with our American allies was palpable and the prevarication of the EU equally so. As for the imbroglio in Bosnia, the less said about how the EU acquitted itself, the better.

De Gaulle long ago pinpointed the Franco-German relationship as the key fact in European politics. He said "there is an interdependence between Germany and France. On that interdependence depends the immediate security of the two peoples. One has only to look at a map to see this. On that interdependence depends the destiny of Europe as a whole". The partnership between France and Germany is akin to what is known as an open marriage. The partners row and are sometimes even unfaithful but they always return to each other because they need each other.

It is a rarely observed fact that some of the most fervent advocates of closer European integration pride themselves on being traditional Conservatives or, as they often prefer to be called, Tories. A hallmark of a traditional Tory is an innate suspicion of grand schemes, over-arching theories and elaborate constructions of any kind. He is more comfortable with institutions and power that are rooted closer to home. He is a pragmatist who wants to see that an idea works. His is a natural scepticism which befits a Tory but there is sometimes scant evidence of it in the attitude of a number of my Euro enthusiastic colleagues. The mantra that "there is no alternative" to the ratchet of Euro integration will not wash. Neither will the attempt to induce the public to sleep-walk to federalism by telling them that it is "inevitable". Such an approach is disingenuous and a counsel of despair. There are alternatives. Parliamentarians owe it to their constituents honestly to address them.

Before doing so, let us remind ourselves of the situation we have reached. Continental leaders have long shared a federal or centralising agenda which British leaders either disbelieved or denied. The succession of European treaties has increased the powers of EU bodies and steadily reduced the spheres in which nation states can act alone. Our partners do not view a single currency as merely an economic device but as either a handmaiden or a tool of political union. Subsidiarity has proved at best an empty gesture and, at worst, a cloak for legislative expansion. Our EU membership imposes heavy costs on taxpayers and the Union's ambition to be a growing world power makes it a safe bet that those costs will rise.

What can Britain do? We should seek a renegotiation of our relationship with the EU. That renegotiation should start from the premise that we will stay in the EU if we can strike a deal that is in our interests and pull out if we cannot. It is in that spirit that we should look at the alternatives to the status quo.

The Alternatives

(a) The European Economic Area
We could opt out of the EU, but remain within the European Economic Area. It comprises the 15 members of the EU as well as Iceland, Liechtenstein and Norway. It offers four freedoms of the single market - of goods, services, capital and people. Its members must adopt single market legislation but they are free of the CAP, the CFP, the fiscal and monetary policy, home affairs policy and foreign and security policy of the EU.

Its advantage is that Britain would not join in further political integration but would maintain access to the single market. However, we would have only a right to be consulted about future single market directives but in disputes about the interpretation of such legislation we would be bound by the jurisprudence of the ECJ. We would also have to pay into a number of cohesion and structural funds. There are merits in the EEA option but given the jurisprudential ambition of the ECJ and the ballooning budgets of the EU there would be significant burdens too. There are probably better deals on offer.

(b) The Swiss Option
There is the Swiss option of a free trade agreement with the EU. Access to the single market entails more paperwork but the obstacles are not insuperable. Swiss exports to the EU constitute 63 per cent of its total exports and 15 per cent of Swiss GDP - much higher figures than ours. Growing trade for the Swiss has not required political integration and, importantly, they are not bound by single market legislation. What are the debits on the balance sheet? There are two. In trading with the EU, the Swiss have to adhere to preferential rules of origin to distinguish products sourced from the free trade area and those which originate outside it. In practice, these can be complex and burdensome. Secondly, the Swiss option provides only for free movement of goods - not of services, capital or people. This would jar with many British people and businesses. As an existing EU member, we could well obtain a different and better agreement.

(c) Nafta
A third option would be to seek to join the North American Free Trade Association. It is already negotiating with the European Free Trade Association and with Chile. Its culture, distinctively Thatcherite, fits more neatly with Britain's experience than the corporatist dirigisme of the EU. The combination of low taxes, restrained public spending and labour flexibility in the United States and Canada has created 2 million more jobs per year than the European Union for 15 years. Moreover, measured over the last 25 years and allowing for German unification, the USA has created almost five times as many jobs as the EU. Newt Gingrich has signalled enthusiasm for British involvement in Nafta and as US anxieties about a fudged single currency and EU protectionism grow the link becomes daily a more serious proposition.

(d) No Agreement
The other alternative is not to confine ourselves to one agreement but to use our position in the EU and our influence outside it to secure our interests. They are served by the widest possible free trade and international engagement. We have nothing to fear from global free trade, towards which the world is gradually moving, and everything to gain from it. William Hague has been right to challenge the EU to stop addressing the problems of the 1940s and to start addressing the challenges of the next millennium. The most central of those challenges for Britain is to build her trade relationships with North America, the Asia Pacific and China.

Allied to a crusading internationalism in trade and diplomacy is the self confidence to preserve our own institutions. Where other countries have suffered dictatorship, civil war or foreign occupation the British experience has fortunately been different. What some see as insularity by Britain is a justified attachment to the way in which we run our affairs. Napoleon said that a nation's policy is determined by its geography. If that is so we do well to remember that Britain is not at the heart of Europe but on her western edge.

Policy needs also to be determined by successful history and present need. In the spirit of liberty, democracy and the pursuit of prosperity, we need for the second time since 1945 to reverse a ratchet. Keith Joseph and Margaret Thatcher identified the socialist ratchet that undermined our prosperity at home, lowered our esteem abroad and sapped our faith in ourselves. They set out to reverse that ratchet and they succeeded. Today the task is to recognise that there is a ratchet for European integration. As the federalist juggernaut speeds ahead, ever more power is taken from the peoples of Europe and handed to unelected bankers, bureaucrats and judges.

The people of Britain will never knowingly consent to be governed by those who do not speak their language, live in their country or depend upon their votes. The power of self-government, the right to hire and fire our rulers and the capacity to chart our own destiny are inalienable birthrights. They should not be traded in for a mess of pottage otherwise known as a back row seat at a show called "The Heart of Europe". Our destiny is surely as a self-governing nation which trades freely with the world. The future is bright; the future is global. Our success in it is dependent upon the vision, self confidence and calibre of our leaders, our businesses and our workforce.

Biography

John Bercow was elected the Member of Parliament for Buckingham on 1 May, 1997 with a majority of 12,386.

He was educated at Finchley Manorhill School and the University of Essex where he graduated in 1985 with First Class Honours in Government. From 1986-87, John served as National Chairman of the Federation of Conservative Students and subsequently as student head of the Conservative Collegiate Forum.

After a spell in merchant banking, John joined Rowland Sallingbury Casey, the public affairs arm of the Saatchi and Saatchi group, in 1988. There he rose from a junior executive to a board director in five years. Meanwhile he became a Conservative Councillor in the London Borough of Lambeth in 1986 (until 1990) and served from 1987-89 as Deputy Leader of the 21 strong Conservative Opposition Group. He contested Motherwell South in the 1987 General Election and Bristol South in 1992.

In 1995, John was appointed Special Advisor to the Chief Secretary to the Treasury and later served as Special Advisor to the Secretary of State for National Heritage.

With a colleague, John runs the Advanced Speaking and Campaigning course which has trained over 400 Conservatives, including several current MPs. He has lectured in the United States to students of the Leadership Institute.

John Bercow is a member of the Trade and Industry Select Committee.