Britain divided as Europe debate rears its head again

Old wounds were re-opened last month when more than 80 members of Prime Minister David Cameron's Conservative Party defied their leader by voting in favour of holding a referendum on Britain's relationship with the European Union. The party has long been divided over Europe and sceptics who a decade ago argued successfully that Britain should stay out of the single currency are now emboldened by the debt crisis that is swamping the eurozone. While the rest of the continent is focused on the political turmoil in Athens and Rome, they see a golden opportunity for fundamental change in Britain's role in the EU – or even its withdrawal.

The rebels were defeated, but the tensions go wider than the Tory party. The Conservatives' allies in the coalition government, the Liberal Democrats, are more favourably inclined towards Brussels; Lib Dem MP Martin Horwood, writing for PublicServiceEurope.com, called the dissenters "hugely irresponsible". And there is unease in the country – the debate in parliament was sparked by a paper petition calling for a referendum that gathered 100,000 signatures. More than 40,000 names are attached to a similar online petition, and a poll by ICM for The Guardian revealed that 70 per cent of Britons want a vote on the EU. Almost half said they would opt to quit the union. The Conservative MEP David Campbell Bannerman, who favours withdrawal, has published a pamphlet describing the EU as "undemocratic, protectionist, centralist and over bureaucratic".

Meanwhile French President Nicolas Sarkozy's anger at Cameron's interference in eurozone discussions – "You've lost a good opportunity to shut up" – demonstrated yet again the United Kingdom's strained relations with its European partners. As ever, Britain stands on the fringes of Europe, its politics mimicking its geography. Euro area countries are set to move towards deeper integration, a result of what Chancellor George Osborne has repeatedly called the "remorseless logic of monetary union," and it is remains unclear what role the UK will play in the new Europe. Geoffrey Van Orden, another Conservative MEP, pinpointed the threat. "Britain will be excluded from key economic decision affecting the single market and our international trading status by a closed block of eurozone countries operating separately within the EU under instruction from Paris and Berlin," he warned.

With the leaders of the three main parties opposed to an in or out vote, it is unlikely that one will take place any time soon. The leader of the UK Independence Party Nigel Farage, speaking to PublicServiceEurope.com, accuses the political elites of doing their "absolute best to make sure that the British people cannot have a referendum". Cameron has said that the midst of an economic crisis is the wrong time to pose the question, but Farage vehemently disagrees. "There'll never be a right time for people who are fanatically committed to EU membership and oppose the very principles of democracy. The attempt by them to kick the can down the road and say 'maybe there'll be a referendum in the future' does not wash coming from people who gave us cast-iron guarantees that we'd have one." The prime minister previously committed to a vote on the Lisbon Treaty, but it had been ratified before he came to power in May 2010.

Nevertheless, Cameron has put into law that there will be a referendum in the event of any further transfer of competence from London to Brussels, and insisted that he will work to return some powers to the British government – without specifying which ones. He has also ensured that the UK will not contribute to future bail-outs of eurozone countries except through its increased contribution to the International Monetary Fund, and argued strongly against policies such as the European Commission's proposed financial transaction tax that would hit the financial heart of London harder than anywhere else. Cameron is pushing for a freeze in the EU budget, and has ordered the civil service to conduct a wide-ranging review into Britain's relationship with the EU. But it is the repatriation of powers that is most controversial move.

The think-tank Open Europe claims that EU social policy costs British businesses and the public sector £8.6m every year. Returning some of those powers to Westminster, it says, could create 140,000 jobs in the UK and boost growth. Open Europe director Mats Persson told The Daily Telegraph: "Deciding social and employment matters nationally would be far more responsive to the needs of the British economy and the pursuit of jobs and growth" – though he also cautioned that it might prove counter-productive to use the current turmoil and uncertainty in the eurozone as an opportunity for "horse-trading". Instead he advocates a long-term plan to reshape the EU in Britain's interests.

Though opposed to some Brussels regulations such as the working time directive, Persson accepts that the single market is important for British business, and Cameron has made protecting it his priority in Europe. In October the prime minister said: "This is our key national interest, that Britain, a historic trading nation, has its biggest markets open and continues to have those markets open and fairly governed." But, at a conference in London last month the government's policy was described as "incoherent" by Phillip Souta, director of Business for New Europe, a coalition of business leaders. He pointed out that for a common market to work, all the members have to follow the rules rather than negotiate opt-outs or repatriate powers as Cameron proposes.

Coherent or not, the debate about the repatriation of powers is meaningless for Farage. He has no confidence that the prime minister will follow through with his promises – "I do not believe a single word he says on the European question" – and even if Cameron does make good on his commitment, it would almost certainly not be enough for the UKIP leader. "I'm not interested in begging for crumbs from the table," says Farage, also an MEP. "I don't want this power back, or that power back. I want our democracy back. I want my country back."

In recent weeks, as the eurozone crisis has worsened and acted as a drag on Britain's already sluggish economic performance, UKIP's poll rating has risen to around 7 per cent. But it is still the prime minister's coalition partners, the pro-EU Liberal Democrats, who hold greater sway over the Conservative leadership. Last month, Lib Dem deputy prime minister Nick Clegg, himself a former MEP, advised against a "unilateral raid on Brussels' powers" in an article for The Observer. He also dismissed talk that in a two-speed EU with a more deeply integrated eurozone, Britain should become a leader of the non-euro countries. "To limit our ambition like this would be an extraordinary own goal. Why would we seek to head up a smaller group with a fast diminishing membership?" he asked. Yet, only this week, Osborne attended just such a meeting with counterparts from fellow euro 'outs'.

Cameron is walking a tightrope between the Eurosceptics in his own party and beyond, and his coalition allies' more sympathetic attitude towards Brussels. But his middle-way – blocking a referendum but promising to claw back powers, demanding to be consulted on eurozone decisions but refusing to play a full role in finding a solution to the crisis – is proving a hard sell both at home and abroad at EU summits.

The uncertainty gives Farage an opportunity to make his voice heard. He wants Britain out of the EU, but remaining as a member of the European Economic Area – at least to begin with. "We will have the full right to trade with other European countries," he says – a point which he claims makes "null and void" the argument that EU membership is essential because so much of the UK's trade is with its European partners. "If even tiddly little countries like Norway and Switzerland can have free trade without membership of the EU, and if the EU can have or is negotiating 98 free trade deals around the globe at this moment in time, surely Britain can find something better even than that?" The Bruges Group think-tank has claimed in a report that switching to EEA membership could reduce Britain's regulatory burden by 70 per cent, equivalent to a massive tax cut for businesses.

The Swiss and Norwegian examples are used often by Eurosceptics but both countries have to accept many EU rules and pay into the budget without having a real say in their creation. As Norway's ambassador to the EU Atle Leikvoll told PublicServiceEurope.com this week, "When the commission proposal for new legislation is submitted to the European Council and the European Parliament for discussion and approval the EEA and European Free Trade Association states may give joint comments on the draft legislation. But the EEA/EFTA states do not take part in the formal approval process." In any case, aren't Switzerland and Norway too different – one a tax haven, the other dependent on oil – and too small to be compared meaningfully with Britain?

No, says Farage. "I thought the Europhiles had told us since 1975 that we were too small to survive outside the EU? Surely Norway and Switzerland prove that even small countries can survive." He refutes the idea that standing on the sidelines or pulling out of the EU would limit Britain's global influence. "Ever since the 1970s the foreign office has argued that we must be in the EU to have a seat at the top table and to have influence. We currently have no voice in the World Trade Organisation whatsoever. If we carry on down this course we'll lose our seat at the United Nations Security Council. Globally, as a full player in the EU, Britain will cease to exist. I ask you, which influence do we want, 8 per cent of the voting rights in the council or a voice in the world?"

For others, Britain's apparently declining influence within the EU is of great concern and Cameron has contributed to its reduced status. Edward McMillan-Scott is a Liberal Democrat MEP and vice-president of the parliament. But he represented the Conservatives until a dispute over Cameron's decision to pull the party out of the dominant centre-right European People's Party and form a new political group, the European Conservatives and Reformists. It was, McMillan-Scott tells PublicServiceEurope.com, a "big mistake in terms of giving ground". Clegg once called Cameron's new European allies a "bunch of nutters".

"That sort of gesture politics might work in opposition but in government it's caused big problems for Cameron," McMillan-Scott says, because EPP members are in government across the EU and dominate both the commission and the parliament in Brussels. Aside from the British prime minister, the only other leader in the new group is the Czech Republic's Petr Necas. "So when Nicolas Sarkozy and Angela Merkel get together in a pre-summit dinner in Brussels it's quite literally true that Cameron has breakfast with Necas." It would be "laughable" if it weren't so serious, McMillan-Scott adds. "Cameron has to cold-call the French and German leaders. There was a famous occasion last year when 'Merkozy' had a tête-à-tête to talk about economic issues and Europe's economic future, and Cameron rang Merkel to ask what had taken place and she apparently told her aide, 'Tell David I'll call him next week'." Cameron cannot, McMillan-Scott says, "understand the flavours of Europe".

As the Labour MEP Mary Honeyball put it in a recent blog post: "Why should euro saviour Angela Merkel or Nicolas Sarkozy go along with the demands made by David Cameron and George Osborne, two Europhobes who have gone out of their way to be insulting about the EU?"

A number of British politicians have argued against a referendum on the grounds that the EU is not a priority issue for the electorate. Farage denounces this as a "clever device of the political class". He says: "Make Europe 'Article 136 of the treaty, sub-section two, clause three, paragraph three' and if that's what Europe is then people aren't interested. But if you ask people: are they interested in uncontrolled immigration; are they interested in bureaucracy damaging their businesses; are they interested in a continuing bill of £45m a day, are they interested in the 20 billion sterling that we are now committed to potentially for EU bail-outs, the answer is that Europe, or the consequence of Europe, are number one on the agenda."

There can be no question that Britain is ready for a serious debate about its future role in the EU. Indeed it is long overdue. But currently there are few prominent figures in UK politics or media who are advocating closer ties with the union. The economist Will Hutton is one such lonely figure; he argued in The Observer last month that there is "another future" on offer which sees the UK "building a high innovation economy and aiming eventually to be in the same political club, with its currency, as the best in Europe". Perhaps so, but it might be better for Britain to decide whether it wants to be a part of the EU before the prospect of joining the euro is raised again.