Cameron vetoes EU treaty: what does this decision mean?

The Prime Minister has taken a hard line in Europe in a political gamble that could leave Britain is

The Prime Minister has taken a hard line in Europe in a political gamble that could leave Britain isolated.

"Where we can't be given safeguards, it is better to be on the outside," said David Cameron at 6.20am today, as he announced that he has vetoed a revision of the Lisbon Treaty.

This is a huge development. It is the first time that a major treaty, striking at the heart of the EU, will go ahead without a British signature since Britain joined in 1973. It will redefine the nature of Britain's relationship with Europe, essentially creating a two-speed EU.

As I blogged on Wednesday, Cameron was in a very tight spot politically: on the one hand, his Eurosceptic backbenchers were clamouring for a referendum, while on the other his Liberal Democrat coalition partners warned against the risks of isolating Britain.

Isolation is certainly the main worry in the papers this morning. Of the 27 member states, all but four signed up to the treaty, with just Britain, Hungary, Sweden and the Czech Republic remaining on the outside. Sweden and the Czech Republic may yet join after their leaders have consulted their parliaments.

The risk here is that Britain will not only lose influence in the UK, but that its position in the single market will be jeopardised. Defending his decision at that early morning press conference (which was held after more than 10 hours of negotiations that ran through the night), Cameron said:

Of course we want the eurozone countries to come together and to solve their problems. But we should only allow that to happen inside the European Union treaties if there are proper protections for the single market and for other key British interests. Without those safeguards it is better not to have a treaty within a treaty but to have those countries make their arrangements separately.

He insisted that he would work to ensure that any agreement works for all 27 member states, not just the 23 signed up to it.

So, Cameron will not be forced to go to Parliament with a contentious treaty, nearly 20 years after John Major's trials with Maastricht. But does this decision ease his political headache?

In short, not really. The decision has won grudging support ("Credit where it's due -- Cameron has shown backbone," said Roger Helmer MEP), but it is by no means certain that calls for a referendum will end. Eurosceptics could feasibly still argue that the new treaty marks a major change in the power structures of EU and that the British public should be consulted.

It is unclear how much Nick Clegg knew about Cameron's hardline stance on this, but the Prime Minister's calculation will be that the Lib Dems will not walk out of coalition over this issue.

The other risk here is that "Britain's interests" will not necessarily be safeguarded. Cameron made defence of the City of London his price, demanding that any transfer of power from a national regulator to an EU regulator on financial services be subject to a veto. The cost was too high, as French President Nicolas Sarkozy (who has been pushing for a two-speed Europe) explained:

David Cameron requested something which we all considered was unacceptable. We couldn't have a waiver for the UK and in my view it would have undermined a lot of what we have done to regulate the financial sector.

Financial services regulation will press ahead without Britain, then. However, the Guardian points out that these regulations are decided by qualified majority voting, in which Britain does not have a veto. It can currently form a "blocking minority" to prevent legislation from going through, but if more countries join the euro this will shrink.

Cameron has taken a huge political gamble, hoping to channel Margaret Thatcher and her intransigence in Europe, rather than John Major and his struggles over the Maastricht Treaty. It has yet to be seen whether it will pay off. The first priority must be the resolution of the eurozone crisis, which Cameron himself said is "our biggest national interest". The next stage of talks will focus on saving the euro -- without Britain's input.

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

Getty
Show Hide image

BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.