In federal states, centralisation accelerates in a crisis. Canadian confederation was a response to the threat of US expansionism after the Civil War. Both world wars pushed Ottawa and Washington to greater federal budgets, management, and spending.
The development of the EU itself has reflected the same trend. Its first attempt at founding was originally as a security response to the Soviet threat. Then the French reaction to the Suez Crisis was to push ahead with the EEC. The fall of the Berlin Wall drove an ambition to tightly embrace a reunified and more powerful Germany. 9/11 empowered the Commission to rehash binned JHA proposals. The Greek and Irish Eurozone crash encouraged the creation of the European Financial Stabilisation Mechanism bail out bonds. And there are shelves full of lesser examples along the way, because the EU model is in a constitutional loose ring binder whose impetus is aspirational.
That is why, as we stand in the midst of a new crisis, the UK has to achieve its Brexit transition quickly. Because what will follow in 2021 will not suit the exiting UK at all.
The EU27 are already in a heady battle over how to deal with the economic aftermath of Covid. The call of “we, the EU, must do something” is winning out. The member states are still though divided into three camps. The first are those that will be obvious beneficiaries from any financial support to be channelled via the EU – for the habitual recipients of social and regional aid, it’s ‘free money’ after all. Then there are the donor states; the UK has not been the only country to have won a rebate as a result of overpaying into the EU budget. But now there is the Franco-German development.
Paris and Berlin intend to “join our forces in ways we have not used before.” They now propose a European “Health Strategy”, with Healthcare strikingly starting to mirror the development of EU Defence procurement as a strategic sector. It’s a trend the document later reinforces by calling on more work done as Important Projects of Common European Interest (IPCEIs), whose medium term impact means generating a capability shared at (and via) EU level.
There is a €500 billion recovery fund being mooted, specifically associated with the work being done by the Eurogroup, and a major drive to tax harmonisation including a Common Corporate Tax Base (which will suit high tax economies fine). Then there’s the assertion of pushing for even more ambitious climate policy, no doubt to be pursued with the blind unilateralism of the 1970s peacenik. The document’s reference to “digital sovereignty” might raise hopes of Huawei doubters, until one reflects on the EEAS’s recent and embarrassing kowtowing over Chinese Covid cyber hostilities. There’s also partial movement towards more commonality in minimum wages.
The wider context is firmly and explicitly set in the forthcoming second Convention on the Future of Europe. As a reminder of where that leads to, the last one gave us a European Constitution that it took a referendum in France and the Netherlands to see rejected, which was even then only shaved down to create the Lisbon Treaty.
These aren’t even the most ambitious proposals that have been floated. Back in 2016 we obtained a document floated by the Slovenian Presidency that made the Franco-German text look positively conservative in its approach. The Overton Window in Brussels is a sliding patio door. No doubt we will see other proposals being circulated that now help place these ideas firmly in the ‘uncontroversial’ middle ground for diplomats and EU correspondents. And that, despite Angela Merkel latterly quoting Jacques Delors: “We also need political union, a monetary union alone will not be enough.”
The German Constitutional Court for now is a major sticking point, pushing back on a CJEU powergrab over the existing bonds set up. But there are ways round liabilities management that mask direct exposure now that the EU post-Lisbon has its own legal personality. Regardless of the veil, one thing that still needs to be asked though is who will pay ultimate surety for these €500 billion of bonds or loans.
The UK is already significantly exposed through its European Investment Bank and through RAL liabilities: under WA140.5, the UK taxpayer will not know until 2029 what the end bill will be even under the Withdrawal Agreement, and under WA150.8 the actual UK liability remains classified.
Any extension of the UK’s transition period must involve fresh UK contributions into the next EU multiannual budgetary planning system, and with it UK exposure to new EU liabilities. We know from recent shenanigans over fisheries M. Barnier is an uncharming and hostile negotiator. We also recall how the EU successfully abused the EU treaty text to drag the UK into past Eurozone bail out financing from which David Cameron unsuccessfully tried to argue it was exempt.
Politico Brussels is suggesting the new funding could be covered by doubling the EU’s ‘Own Resources budget’, from 1% to 2% of continental GDP. Presumably, that would apply to the UK’s contributions. So it might be worth reflecting for a second on precedent, because the last time there was any discussion on increasing GDP share of input into the EU budget was in 1994, with the EC Finance Bill.
In that debate, Teresa Gorman remarked,
“[My constituents] are at a loss to understand why our Government should give priority to the needs of our European partners while neglecting the increase that the taxpayer in this country will have to contribute, which is not a small sum, but which almost amounts to the equivalent that we are trying to raise on VAT”
Sir Teddy Taylor noted, “we must ask ourselves how on earth we can support extra funding for the EC when spending is so dreadfully tight at home.”
John Wilkinson stated, “The motor of European integration is fired and fuelled by our taxpayers’ money at a time when–perhaps tomorrow it will be confirmed–our taxpayers will see VAT on domestic fuel doubled and other imposts will be applied from the next financial year. Many taxpayers have suffered deeply in the recession, which was intensified by our membership of the exchange rate mechanism.”
Richard Shepherd complained on such EU funds that, “taxation is now utterly beyond the control of the electorate, the people, the citizens of this country who make our industry and our wealth. They are now taxed by treaty and sent to a foreign capital, Brussels, as I see it, without any intervention from the House and with no annual review.”
These observations and questions will apply all the more this time round.
The EC Finance Bill increased the share of UK GDP being handed over to the EU by 0.07% of GDP. That is as a percentage a fourteenth of what is currently at stake, even before we consider the increased physical sum in play. The increase lost John Major nine of his MPs – and with it both his majority, and what remained of his credibility. With so much UK taxpayer money at risk, it is a salutary example today.
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