Friday, 13 January 1995


New Statesman & Society, 13 January 1995

Tony Blair may not yet be ready to offer a referendum on European integration. But, writes Paul Anderson, Labour has made other significant changes in its approach to the European Union
On Tuesday, representatives of more than 100 blue-chip com­panies and industrial associa­tions – among them Hanson, Marks & Spencer and the National West­minster Bank – attended a £500-a-head seminar and dinner in Brussels organ­ised by the Labour Party. The event, Labour Working in Europe, netted the party some £40,000. In return for the cash, the business executives got the chance to listen to Tony Blair, John Prescott, Robin Cook and Gordon Brown talking about Europe.

The Times described the beano as marking "a new stage in the warming relations between Labour and the private sector" – and there's no arguing with that. But most of the journalists who fol­low Labour are disappointed that its significance did not end there.

Before Christmas, the rumour – at the very least not discouraged by Blair's office – had been that the Labour leader would use his keynote address to promise that a Labour government would hold a referendum on Europe if the 1996 inter­governmental conference (IGC) on Euro­pean union were to propose major consti­tutional changes, or agree to create a single European currency. In the event, he did no such thing. His speech merely reiter­ated what he said in a television intervi ew at the end of last month: Labour believes that the people should be consulted on further European integration, and if there is not a conveniently timed general election, a referendum is not ruled out.

Even this is a long way removed from Labour's position before Blair took over: as recently as last May, a policy document stated bluntly: "A pledge to hold a referendum on a single currency or on eco­nomic and monetary union would be a cynical ploy to paper over internal divi­sions. It would convince no one." But Blair stopped short of making the promise he had been expected to make. "I think we're well placed as we are on Europe," an aide told NSS. "There's no need to take it any further at this stage."

The stated rationale for this is that Labour can afford to take its time on deciding for or against a referendum: merely toying wit h the idea has the effect of exacerbating differences among the Tories. And indeed, the Tories are wor­ried about what Labour will do. A referen­dum is a central demand of the de-whipped Tory Euro-rebels, and it also has substantial support at cabinet level, mainly from the Eurosceptic right (Jonathan Aitken, Peter Lilley and John Redwood), but also from some on the centre-left (Malcolm Rifkind and Virginia Bottomley). John Major and Douglas Hurd, initially opponents of a referendum, have moved towards not ruling out the possibility. But the other two most senior members of the cabinet, Kenneth Clarke and Michael Heseltine, remain opposed. (So too, strangely, does Michael Portillo, who fears that a referen­dum on a single currency would go the wrong way for his Eurosceptic tastes.) For Labour just to hint that it might go for a referendum is enough to open yet another rift in Tory ranks, whatever Major's response.

This, however, is not the whole story, nor even the most important part of it. The main reason that Blair has held back on promising a referendum is to avoid splitting the shadow cabinet down the middle. Of course, some senior Labour figures see the promise of a referendum as a means of stealing a populist march on Major – most prominently Prescott, whose deputy leadership role now includes acting as ambassador to Labour's European socialist sister parties and liaising with the European Par­liamentary Labour Party (policy is the responsibility of shadow foreign secre­tary Cook). Last rnonth, Prescott declared to a BBC radio programme that a Labour government would "definitely" hold a referendum if "a major change we think is important" is proposed by the IGC”.

But ranged against this position, which was quickly disowned by party spin-doctors, are most of the rest of the shadow cabinet's senior politicians, including, crucially, Brown, Cook and other key Scots, who remember all too well the damage caused to Labour by the 1979 ref­erendum on Scottish devolution. On one hand, they are worried about a repeat per­formance of the protracted parliamen­tary wrangling over referendum details that so debilitated the Callaghan govern­ment of the late 1970s; on the other, they fear that a Labour promise of a referen­dum on Europe would be a hostage to for­tune now that Major has signalled that he intends to concentrate fire on Labour's proposals for devolution for Scotland and Wales.

If Labour accepts that constitutional change coming from Europe should be subject to a referendum, they argue, how can the party legitimately refuse referendums on devolution? And if it accepts devolution referendums, how can it pos­sibly avoid outcomes like those of 1979, when devolution was defeated by an unholy alliance of nationalists and unionists voting "no"?

The good news for Blair is that, referen­dum apart, Labour looks likely to be less divided over Europe in the run-up to the next election than at any time in the past 50 years. This might seem at first sight to be an outrageous claim: after all, it is less than two months since 40 Labour MPs voted against the European Communi­ties (Finance) Bill, defying the whips' instructions to abstain. But, beneath the froth of disagreements over parliamen­tary tactics, there is a growing consensus on Europe in the party.

Most obviously, there is now no signifi­cant body of opinion arguing for with­drawal from the European Union; indeed, it seems almost unbelievable that as recently as 1983 Labour fought a general election on a platform of getting out of what was then called the Common Market. Withdrawal has not been a seri­ous option for nearly a decade, however; what is remarkable today is the extent to which even Labour's "so far but no fur­ther" school of go-it-alone Keynesians, personified by Bryan Gould in the late 1980s and early 1990s, has lost its distinctive voice.

This is down in part to Gould leaving British politics, in part to the failure of the one-nation Keynesians – despite the best efforts of Peter Hain and Roger Berry – to advance an economic policy that is not just coherent, but is also credi­ble. But, as well, it has a lot to do with the way the party leadership has moved on Europe in the past couple of years. If the story of the Labour leadership's attitude to Europe under the once anti-European Neil Kinnock was one of ever-growing Euro-enthusiasm, since 1992 under two avowedly pro-European leaders the dom­inant theme has been the resurgence of doubts.

One reason is the realisation that Europe is by no means as popular with the voters as Labour thought in its most Euro-enthusiastic phase; the other is declining confidence in the ability of Europe to solve Labour's economic policy dilemmas. Labour's embrace of Europe from the mid-1980s onwards was based on a belief that the pursuit by a single medium-sized country of Keynesian counter-cyclical economic policies had been made impossible by the increasing global mobility of capital.

Labour strategists reckoned that the exchange rate mechanism of the Euro­pean Monetary System would protect a Labour government in Britain against speculation, while the European Com­munity would provide a framework within which all of western Europe could co-ordinate counter-cyclical policies. A significant minority of Labour politi­cians, particularly MEPs, even went so far as to argue for a federal European Keynesianism to combat unemployment.

Since 1992, however, this approach has looked decreasingly attractive. In autumn 1992, the collapse of the ERM in an orgy of speculation and sterling's forced devaluation severely undermined claims that European currency manage­ment could protect a Labour government from speculators: for several months, the Keynesians who had been arguing that sterling was overvalued all along had a field day attacking the leadership, helped by Brown's unwillingness to admit that an incoming Labour government in April 1992 would have devalued sterling within the ERM on taking office. The debate on the Maastricht treaty saw the biggest backbench Labour revolt on Europe since the 1970s.

The leadership stuck to its guns, how­ever, arguing that going it alone was no longer an option and pointing to the pos­sibilities of Europe-wide reflation, both through coordinated measures by national governments and, particularly after the publication of Jacques Delors' white paper in 1993, through action by the EU.

The Delors white paper was quickly watered down into more of a deregulatory package than a plan for Euro-Keynesian-ism – but even as recently as a year ago the idea that national governments could act together to reflate had a great deal of credibility. The Labour leadership could argue, with reason, that the balance of power in the EU was shifting to the left. Left-of-centre governments appeared to be on the cards in Italy and Germany; and, with the right presidential candidate in 1995, it was not impossible that the French left would recover from its dire position in the opinion polls.

Now, however, the picture is radically different. The left lost the 1994 Italian and German general elections and, since Delors' withdrawal from the French pres­idential race, is heading for defeat in France this spring. A Labour government elected in 1996 or 1997 is likely to be the only left-leaning government in a large EU country.

The Labour leadership's response to the wreckage of the Euro-Keynesian dream has been to adopt a far more pop­ulist approach to Europe. The first sign of this was last year's European election campaign, which emphasised the bene­fits of the social chapter, but was other­wise notable for its assault on EU bureau­cracy and waste – particularly the Com­mon Agricultural Policy (CAP) – insofar as it touched on Europe at all. Since Robin Cook replaced Jack Cunningham as shadow foreign secretary last autumn, the trend has been unmistakable.

In a television interview just before Christmas, Cook took a much tougher line on economic and monetary union than any senior Labour spokesperson for several years. Although Labour was in favour of the principle of a European cen­tral bank and a single currency, he insisted that "the central bank must be accountable politically to make sure that it pursues policies of growth and full employment" and that the convergence criteria for a single currency "must be convergence of the real economy – of output, of productivity, of growth". In similar vein, Blair this week emphasised that Labour's fundamentally pro-Europe stance was tempered by criticism of the C AP an d a restatement of the importance of moves towards economic and mone­tary union not being rushed.

Unsurprisingly, all but the hardest Labour Eurosceptics are delighted with the shift away from uncritical Euro-enthusiasm – at least for now. "It's great to hear Labour saying that Europe should be about jobs and growth," says Peter Hain. If Blair and the rest of the leader­ship keep on the same course, it's likely that they will get an easy ride from their erstwhile critics in the next couple of years. Whether that continues long into a Labour government, however, is another matter entirely.