Guess what! Constructive engagement in Europe works

A new banking deal shows what can be achieved when Tory backbench wreckers aren't stealing the show.

The European Union has taken another small but significant step towards closer integration. Finance ministers have agreed to create a eurozone banking union – putting the largest banks in those countries that use the single currency directly under the supervision of the European Central Bank.

In principle, that will enable faster and more direct intervention in the event of a crisis. The deal is also supposed to limit European governments’ exposure to picking up the tab for any future bank failures.

Britain had a peculiar role in this chapter of crisis talks as a non-eurozone country that happens also to host the continent’s biggest financial centre. The UK government’s dilemma was that it needs to support the efforts of the rest of the EU in sorting out the mess in their banking system but without handing over regulatory powers that would put the City of London at a competitive disadvantage.

Some French and German politicians see the design of Europe’s post-crisis financial architecture as an opportunity to snatch London’s crown for Paris or Frankfurt. That impulse is reinforced by the view in much of continental Europe that the City is the ideological Mecca of a kind of rampant, greedy, profiteering approach to finance that caused the crisis in the first place.

To an extent, it plainly is. But the financial services industry also happens to be a vital strategic economic asset for Britain. It may not be very fashionable to admit it right now, but any UK government will see protecting the City’s status as a core part of its negotiating agenda in Europe.

On this occasion, George Osborne appears to have achieved his main goal, which was to ensure that British opinion is adequately represented in the new banking union’s decision-making process. Crudely speaking, the single currency members have accepted that decisions made by the European Banking Authority will need to be approved by a plurality of non-eurozone countries as well as a majority of eurozone ones. In other words, in theory, it won’t be possible for the single currency members to stitch up a plan that hobbles the City and then force it through against the will of non-euro members (i.e. Britain). That “double majority” protection was Osborne’s main demand going into the negotiations. He is now satisfied.

This deal sets an important precedent. Financial regulation is not the only area where Britain, as a non-eurozone country, needs to assert its interest and voting weight in European decision-making as the single currency members plough ahead with ever-closer integration. The planned Fiscal Union treaty agreed last December (from which David Cameron withdrew UK participation by waiving a symbolic veto) was the beginning of a process that redefines the EU as a political and economic project around the eurozone.

The obvious danger to Britain from that process is that the rules of the single market – the part of EU treaties that even ardent sceptics like – will be skewed by a caucus of single currency members in their select single currency meetings to the exclusion and detriment of the UK. Cameron has insisted that would be intolerable, but has yet to demonstrate how he might stop it from happening. This new banking union model with its “double majority” principle points to the kind of deal that might be struck in the future.

It is worth noting, however, that Britain was able to get this deal because other member states could be persuaded that their interests would ultimately be served by accommodating London’s request. Britain’s legitimate concerns about exclusion and the fact that the City is of strategic importance to the whole continent are points mostly well heeded in Brussels. London has never lost a major vote on a financial services point in the European Council and has never needed to wield a veto on the subject. It also helps that this issue was not ramped up by Tory MPs or the media into a point of zero-sum confrontation between heroic Albion and the wicked bureaucrats of Brussels. It just goes to show what can be achieved through constructive engagement and diplomacy.

None of these issues is going away. The main business of the current summit is to look at much broader proposals for deeper long-term eurozone integration. The overall trajectory is still towards a two-tier EU, with Britain in the outer layer. As today’s events have shown, that doesn’t have to mean second class membership. The real threat of exclusion and economic disadvantage doesn’t come from other countries harbouring conspiratorial grudges against Britain. It comes from Tory MPs and Ukip making it impossible for the Prime Minister to conduct realistic negotiations.

The Euro logo is seen in front of the European Central Bank in Frankfurt. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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"Michael Gove is a nasty bit of work": A Thatcherite's lonely crusade for technical colleges

Kenneth Baker, Margaret Thatcher's education secretary, has been in a war of words with one of his successors. 

When I meet Kenneth Baker, once Margaret Thatcher’s reforming education secretary, conversation quickly turns to an unexpected coincidence. We are old boys of the same school: a sixth-form college in Southport that was, in Baker’s day, the local grammar. Fittingly for a man enraged by the exclusion of technical subjects from the modern curriculum, he can only recall one lesson: carpentry.

Seven decades on, Lord Baker – who counts Sats, the national curriculum, league tables, and student loans among his innovations – is still preoccupied with technical education. His charity, the Baker Dearing Educational Trust, oversees university technical colleges (UTCs), the specialist free schools that work with businesses and higher education institutions to provide a vocational curriculum for students aged 14-19. He is also a working peer, and a doughty evangelist for technical education and apprenticeships in the upper chamber. 

But when we meet at the charity’s glass-panelled Westminster office at 4 Millbank, he is on the defensive – and with good reason. Recent weeks have been particularly unkind to the project that, aged 82, he still works full-time to promote. First, a technical college in Oldham, Greater Manchester, became the seventh to close its doors since 2015. In three years, not one of its pupils passed a single GCSE, and locals complained it had become a “dumping ground” for the most troubled and disruptive children from Oldham’s other schools (Baker agrees, and puts the closure down to “bad governorship and bad headship”). 

Then, with customary chutzpah, came Michael Gove. In the week of the closure, the former education secretary declared in his Times column that the UTCs project had failed. "The commonest error in politics," he wrote, quoting Lord Salisbury, "is sticking to the carcasses of dead policies". Baker is now embroiled in a remarkable – and increasingly bitter – war of words with his successor and one-time colleague.

It wasn't always this way. In 2013, with UTCs still in their infancy, he told the New Statesman the then education secretary was “a friend”, despite their disagreements on the curriculum. The bonhomie has not lasted. In the course of our hour-long conversation, Gove is derided as “a nasty bit of work”, “very vindictive”, “completely out of touch”, and “Brutus Gove and all the rest of it”. (Three days after we speak, Baker renews their animus with a blistering op-ed for The Telegraph, claiming Gove embraced UTCs about as warmly as “an undertaker”.)

In all of this, Gove, who speaks warmly of Baker, has presented himself as having been initially supportive of the project. He was, after all, the education secretary who gave them the green light. Not so, his one-time colleague says. While David Cameron (Baker's former PA) and George Osborne showed pragmatic enthusiasm, Gove “was pretty reluctant from the word go”.

“Gove has his own theory of education,” Baker tells me. He believes Gove is in thrall to the American educationalist E.D. Hirsch, who believes in focusing on offering children a core academic diet of subjects, whatever their background. "He doesn’t think that schools should worry about employability at all," Baker says. "He thinks as long as you get the basic education right, everything will be fine. That isn’t going to happen – it isn’t how life works!" 

Baker is fond of comparing Gove’s heavily academic English baccalaureate to the similarly narrow School Certificate he sat in 1951, as well as the curriculum of 1904 (there is seldom an interview with Baker that doesn’t feature this comparison). He believes his junior's divisive tenure changed the state sector for the worse: “It’s appalling what’s happening in our schools! The squeezing out of not only design and technology, but drama, music, art – they’re all going down at GCSE, year by year. Now children are just studying a basic eight subjects. I think that’s completely wrong.” 

UTCs, with their university sponsors, workplace ethos (teaching hours coincide with the standard 9-5 working day and pupils wear business dress), and specialist curricula, are Baker's solution. The 46 existing institutions teach 11,500 children, and there are several notable success stories. GCHQ has opened a cyber-security suite at the UTC in Scarborough, North Yorkshire, as part of a bid to diversify its workforce. Just 0.5 per cent of UTC graduates are unemployed, compared to 11.5 per cent of all 18-year-olds. 

But they are not without their critics. Teaching unions have complained that their presence fragments education provision and funding, and others point out that hard-up schools in disadvantaged areas have little desire or incentive to give up children – and the funding they bring – at 14. Ofsted rate twice as many UTCs as inadequate as they do outstanding. Gove doubts that the vocational qualifications on offer are as robust as their academic equivalents, or anywhere near as attractive for middle-class parents. He also considers 14 is too young an age for pupils to pursue a specialist course of vocational study.

Baker accepts that many of his colleges are seen as “useless, wastes of money, monuments to Baker’s vanity and all the rest of it”, but maintains the project is only just finding its legs. He is more hopeful about the current education secretary, Justine Greening, who he believes is an admirer. Indeed, UTCs could provide Greening with a trump card in the vexed debate over grammar schools – last year’s green paper suggested pupils would be able to join new selective institutions at 14, and Baker has long believed specialist academic institutions should complement UTCs.

Discussion of Theresa May’s education policy has tended to start and finish at grammar schools. But Baker believes the conversation could soon be dominated by a much more pressing issue: the financial collapse of multi-academy trusts and the prospect of an NHS-style funding crisis blighting the nation’s schools. Although his city technology colleges may have paved the way for the removal of more and more schools from the control of local authorities, he, perhaps surprisingly, defends a connection to the state.

“What is missing now in the whole education system is that broker in the middle, to balance the demands of education with the funds available," he says. "I think by 2020 all these multi-academy trusts will be like the hospitals... If MATs get into trouble, their immediate cry will be: ‘We need more money!’ We need more teachers, we need more resources, and all the rest of it!’."

It is clear that he is more alert to coming challenges, such as automation, than many politicians half his age. Halfway through our conversation, he leaves the room and returns enthusiastically toting a picture of an driverless lorry. It transpires that this Thatcherite is even increasingly receptive to the idea of the ultimate state handout: a universal basic income. “There’s one part of me that says: ‘How awful to give someone a sum for doing nothing! What are they going to do, for heaven’s sake, for Christ’s sake!’" he says. "But on the other hand, I think the drawback to the four-day working week or four-hour working day... I think it’s going to happen in your lifetime. If people are only working for a very short space of time, they will have to have some sort of basic income.” 

Predictably, the upshot of this vignette is that his beloved UTCs and their multi-skilled graduates are part of the solution. Friend and foe alike praise Baker’s indefatigable dedication to the cause. But, with the ranks of doubters growing and the axe likely to fall on at least one of its institutions again, it remains to be seen in what form the programme will survive.

Despite the ignominy of the last few weeks, however, Baker is typically forthright: “I sense a turning of the tide in our way now. But I still fight. I fight for every bloody one.”