EU budget vote: Miliband shows inner steel

This week’s defeat for the government in the Commons vote over the EU budget was the result of a cynical but brilliantly played manoeuvre by Ed Miliband, showing why we are lucky that we have Ed and not Nicola Murray as the leader of the opposition.

Labour’s position has certainly caused some consternation among centre-left Europhiles. For example, George Irvin, a retired professor of economics who worked for many years at ISS in The Hague, writes:

By voting to cut the EU budget, Labour is aligning itself with budget cutters throughout the EU—in the main, centre-right parties. With euro-zone unemployment now above 11% (in some member-states above 25%!) and Europe headed for even deeper recession, any sensible progressive politician should be shouting out for co-ordinated fiscal expansion. What’s needed is the opposite of budget cutting—a far larger EU budget which could be used to reflate the economy and transfer resources towards the neediest regions.

The concern was quietly echoed in today’s Daily Mirror editorial

It is timely to remember this: EU membership gives us access to a market of 500 million people; 40% of our trade and 3.5 million jobs depend on our relationship with Ireland and continental Europe. Tactical votes in parliament will be won and lost as long as parties play political games … but we must not lose sight of the huge value to Britain of a seat at the European table.

It might seem unthinkable that Britain’s membership of the EU could be under threat, but it is worth watching this speech by former German Chancellor Gerhard Schroeder at the ‘Europa nach der Krise’ conference organised by the Nicolas Berggruen Institute on Governance in Berlin on 30th October 2012. Schroeder argues two main points specificaly about the difficult relationship between the EU and the UK. Firstly he argues that the political and business elite in the UK believe that Europe’s economic future depends upon services particularly financal services, whereas the mainstream consensus among German politicians is that the economy requires a significant manufacturing sector, and particularly a layer of medium size businesses. (The move by French President Hollande more towards a model of Rhineland capitalism is also a significant factor in bolstering the authority of this argument). Secondly, Schroeder argues that there is a core-Europe being forged through growing integration, and that “the unwilling must not be allowed to be a block on the willing”. He would implicitly allow Britain to take our ball home.

It is clear that exercise of a veto on the EU budget by David Cameron, especially in the context of growing economic crises in the Club-Med countries, would be intolerable to almost all European leaders. Labour has therefore created the perfect political storm for Cameron, who goes into negotiations revealed as a Prime Minister not in control of his own party, and with an unraveling coalition government. The increasingly other-worldly Euro-sceptic right are encouraged to demand Cameron to take a belligerent stance that he cannot prevail with.

So was Labour opportunist? I don’t think so. Certainly economic recovery demands stimulus to the economy at both European and British state levels, and it perhaps seems counter-intuitive to argue for a European budget cut. However, the left should not defend a European budget that is already imposing cripling austerity on Greece and Spain, and where the anachronistic Common Agricultural Policy swallows up a full 40% of the budget. Will Straw, suprisingly writing on Conservative Home suggests a progressive case for a budget cut:

The only way to break the impasse is for Britain to attempt a ‘grand bargain’. This would entail putting our £3 billion rebate on the table in exchange for an EU budget that leaves Britain better off than before. New research by IPPR shows that a 25 per cent reduction in the EU budget could do exactly that and leave enough left over to contribute to sensible projects to enhance much-needed growth across the continent.

Open Europe have shown that cutting CAP payments by 30 per cent and restricting structural funds to countries with below 90 per cent of EU GDP, as Tony Blair proposed in 2005, could save £35 billion per year from the EU budget. This saving would mean that Britain could give up its rebate and still end up saving £1.2 billion per year on our EU bill. That would be enough to compensate all the regions in the UK that would lose out from an end to structural funds.

Every country across Europe would get money back with France and Germany gaining most given the large size of their existing contributions. This would be enough for France to compensate their farmers and for Germany once again to take Britain seriously and shape a consensus for a smaller budget. Italy, the Netherlands, Czech Republic, Slovakia, Slovenia and the Baltic states are all countries that could be expected to support the reforms.

What is more, the single biggest obstacle to economic recovery in the UK is continued existence of the Tory led coalition government. Yesterday Ed Miliband demonstrated how being in opposition is different from being in government. Labour was able to throw a hand-grenade into the Tory camp, but this gesture creates no meaningful precedent over how a future Labour government would handle comparable budget negotiations in the future. By so doing, Labour deeply weakened the authority of the Tory government, and exacerbated tensions with the Lib-Dem passengers. Politics is a contact sport, and Ed Miliband showed that he is prepared to do what it takes to defeat this shower of old Etonians.