EU Referendum Briefing 1: Can the UK control the EU’s future if it stays a member?

 ORIGINAL PUBLISHED ON EU LAW ANALYSIS BLOG

by Steve Peers

During the EU referendum campaign, a number of arguments have been made that staying in the EU is risky, because of possible future developments of the EU itself. While there will always be someone somewhere who says they would like to see an EU army, or some development related to the single currency, such an expression of opinion is meaningless by itself.  The fundamental issue is whether the UK could control such developments – either by vetoing them or opting out.

So what’s the worst that can happen? In this post, I’ll examine in turn the main alleged risks to staying in the EU. As we’ll see, in every single case the UK has control, either by an opt-out or a veto. In other words, none of these things can happen without the British government’s consent. Nearly all of them would also need our Parliament’s consent. And the large majority – all the fundamental possible changes to the EU that many are concerned about – would actually need the consent of the British public in another referendum. (Anyway, there’s nothing to stop the UK holding another referendum on EU membership in future, if it wanted to).

All of these safeguards for UK control of further developments of the EU exist in the current law of the EU – as I will show in detail. None of them are first created by the renegotiation of EU membership agreed this February.

I’ll look at seven issues where the UK has control over future EU developments:

a) defence;
b) transfers of power;
c) new Member States, including Turkey;
d) taxation;
e) non-EU immigration, asylum and criminal law;
f) the single currency; and
g) the EU budget, including the UK rebate.

There’s also an earlier blog post on the controversial issue of the planned EU/US trade deal (TTIP) and the NHS.

a) EU Defence and foreign policy

The UK has control over EU defence and foreign policy measures because they are in principle taken by unanimous vote, with only limited exceptions. On foreign policy in general, Article 31 TEU says:

Decisions under this Chapter shall be taken by the European Council and the Council acting unanimously, except where this Chapter provides otherwise.

The exceptions are where there has been a prior act or request of EU Presidents and Prime Ministers (who act by consensus), or where the EU is implementing a prior act already agreed by unanimity, or where the EU appoints a ‘special representative’. However, there is a kind of ‘emergency brake’ in all these cases:

If a member of the Council [ie a Member State government] declares that, for vital and stated reasons of national policy, it intends to oppose the adoption of a decision to be taken by qualified majority, a vote shall not be taken.

Also the majority voting ‘shall not apply to decisions having military or defence implications’. It’s also possible to apply majority voting to funding issues, but again there’s a military and defence exception (Article 41 TEU), and also there’s an exception for a Member State which chose to abstain on a proposal. The bottom line is that the UK is in control of whether it has to contribute to EU foreign policy funding.

So whether EU foreign policy relating to Ukraine or Russia (for instance) is a good idea or not, it has not been imposed on the UK government. Rather the government is in control, because it could have vetoed it. This means that if EU Member States can’t agree on an issue, there is no EU foreign policy on that issue, and they do as they like – as in the case of the Iraq War, for instance.

Some have raised the issue of the UK’s permanent seat on the United Nations Security Council. In fact Article 34(2) TEU refers to Member  States’ seats on the Security Council, not to any EU seat. The UK has control here, because it could veto any EU decision that required it to give up its Security Council seat, as part of its veto over any foreign policy matters. It’s suggested that the European Parliament wants that to happen, but the European Parliament has no role in EU foreign policy: Article 36 TEU says that it’s only consulted.

Anyway, a change to the UK’s Security Council veto  could only happen by means of a change to the UN Charter, and the UK has control over that: a veto, according to Article 108 of the Charter:

Amendments to the present Charter shall come into force for all Members of the United Nations when they have been adopted by a vote of two thirds of the members of the General Assembly and ratified in accordance with their respective constitutional processes by two thirds of the Members of the United Nations, including all the permanent members of the Security Council.

As for defence, can there be an EU army? Article 42(2) TEU says:

  1. The common security and defence policy shall include the progressive framing of a common Union defence policy. This will lead to a common defence, when the European Council, acting unanimously, so decides. It shall in that case recommend to the Member States the adoption of such a decision in accordance with their respective constitutional requirements.

So the UK has control over any possible ‘common defence’, by means of its veto. And there’s more: the ‘constitutional requirements’ that would apply in the UK are not only parliamentary approval, but also a referendum, according to the European Union Act 2011In general this law sets out a ‘referendum lock’ on further transfers of power to the EU, putting the British public in control over any future transfers. I’ll refer to this law again several times, since it sets many other limits on the development of the EU in future. It also requires a referendum before any British veto over foreign policy or defence is given up.

b) Treaty amendments and transfers of power

It’s sometimes suggested that there might be future transfers of power from Member States to the EU, as part of the developing single currency project (perhaps following the so-called ‘Five Presidents Report’ on this issue) or for some other reason. This is sometimes presented as a ‘superstate’, or as an inevitable outcome of the EU’s ‘ever closer union’ clause. However, the UK has control over these developments. First of all, the UK has an opt-out from the single currency, as discussed below.

Secondly, it also has a veto over future Treaty amendments. There are several ways to amend the EU Treaties, as set out in Article 48 TEU. They have two things in common: (a) the UK government has a veto over all of them (which it used in 2011, for instance); and (b) the British Parliament would have to approve each of them, either by voting in favour or deciding not to vote against.

But there’s more. The European Union Act 2011, first mentioned above, also gives control to the British public over any significant Treaty amendment, by means of a referendum. This would apply where the UK would drop nearly any veto. It would also apply to other transfers of powers to the EU from the UK, defined in detail as including:

a) ‘the extension of the objectives of the EU’;
b) any ‘conferring’ or ‘extension’ of any EU competences, including over ‘the co-ordination of economic and employment policies’ (an issue in the Five Presidents’ Report); or
c) giving any EU ‘institution or body’ any power to give orders or impose sanctions upon the UK.

It’s been suggested that the UK gave up a veto relating to single currency and banking issues as part of the renegotiation deal. This isn’t true, as the deal didn’t amend the Treaties and Parliament has not amended the 2011 Act.

So the control over any transfer of power from the UK to the EU is threefold: the UK government, UK Parliament and the British public.

c) New Member States

The rules on accession of a new Member State are set out in Article 49 TEU, as follows:

Any European State which respects the values referred to in Article 2 and is committed to promoting them may apply to become a member of the Union. The European Parliament and national Parliaments shall be notified of this application. The applicant State shall address its application to the Council, which shall act unanimously after consulting the Commission and after receiving the assent of the European Parliament, which shall act by an absolute majority of its component members. The conditions of admission and the adjustments to the Treaties on which the Union is founded, which such admission entails, shall be the subject of an agreement between the Member States and the applicant State. This agreement shall be submitted for ratification by all the contracting States in accordance with their respective constitutional requirements. The conditions of eligibility agreed upon by the European Council shall be taken into account.

So the UK controls whether a new country joins the EU, by means of a veto. The ‘constitutional requirements’ are an Act of Parliament in favour.

There has been some concern about new Member States joining the EU in future, but in order to join each new State must negotiate 35 chapters of detail about EU law. In 11 years’ of negotiations, Turkey has only agreed one out of those 35 chapters. It has not even opened many of them:

Moreover, the ‘conditions of eligibility’ include human rights standards, which Turkey doesn’t now meet. Cyprus would veto Turkish membership unless there’s a deal on the future of the island. The other countries applying to join have not agreed many chapters either.

In any event, the current Member States can insist on a long waiting period before the free movement of persons fully applies to new Member States. The majority of the Member States which joined the EEC/EU after it was founded (14 out of 22) have been subject to seven-year waiting periods before full free movement of people, and longer periods could be applied in future.

The UK veto over enlargement could only be dropped by a Treaty amendment, approved by the government, parliament and public under the European Union Act 2011.

d) Taxation

The main taxes harmonised at EU level are VAT and excise taxes. EU law sets a minimum rate for these taxes: it’s 15% for VAT, subject to exemptions. It also defines their scope. The UK has VAT exemptions on things like books, basic foodstuffs and children’s clothes.

While VAT is sometimes depicted as if it is imposed by the EU upon the UK, in fact the UK has consented to all VAT laws, since law-making in this area is subject to unanimity. The rule currently appears in Article 113 of the Treaty on the Functioning of the European Union:

The Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation.

So the UK has control in this area, since it has consented to every VAT obligation and excise tax obligation set by EU law. It’s the UK’s own decision to set the rate of tax for VAT and excise taxes (taxes on alcohol, tobacco and petroleum) above the minimum level. Many people would like to see further exemptions from VAT, such as on tampons or environmental services; but it was the UK government that agreed to commit itself not to lower these rates. Actually, the UK government recently agreed to a renewal of the 15% minimum rate. In any event, the EU has recently agreed to a more flexible approach, which will allow VAT to be dropped on tampons and possibly a broader range of other products and services.

It follows from the existence of the veto that the UK has control over any future amendment to EU tax law in these areas, including any removal of any exemption, by means of its veto.

What about other taxes? There is little EU involvement in other areas of tax law. So, for instance, the UK is entirely free to set rates of personal income tax, National Insurance contributions, corporate taxation, council tax and many more. However, there is some limited EU involvement in cross-border aspects of corporate tax, such as the recent law which aims to tackle cross-border tax evasion.

The EU adopts these laws on the different legal basis of Article 115 TFEU:

Without prejudice to Article 114, the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, issue directives for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the internal market.

Again it can be seen that unanimity is the rule. So the UK has a veto. This veto is further protected by Article 114(2) TFEU, which says that the majority voting that normally applies to EU single market law does not apply to ‘fiscal provisions’.

Therefore the UK has control over any new EU tax that might possibly be proposed to fund refugee and migration costs, or upon pensions, or upon anything else. We can simply veto it.

Can these vetoes be removed? As discussed above, due to the European Union Act 2011, they can only be removed (in whole or part) if the Treaty is amended with the consent of the UK government and parliament, and the British public in a referendum.

e) Asylum, non-EU migration and criminal law

The UK has an opt-out over EU laws on non-EU migration, criminal law and policing. This is set out in Protocol 21 to the Treaties.

As regards immigration and asylum, the UK opted out of most non-EU immigration laws, but opted in to the first phase of asylum laws from 2003-2005, using the veto which it had at the time to ensure that these laws did not require any change in UK asylum law. The only substantive EU asylum laws which the UK has opted in to since 2005 are the Dublin III Regulation (on returning asylum-seekers back to another Member State where they first entered) and the Eurodac Regulation (on fingerprinting asylum-seekers to that end). The UK opted out of recent EU laws on relocating asylum-seekers from Italy and Greece to other Member States.

The UK also has an opt-out from the Schengen system of open borders between Member States, and harmonised external border controls (see Protocols 19 and 20). This includes an opt-out from the EU laws on short-term visas (which concern stays of three months’ maximum). So the UK will not be covered by the proposed laws on waiving the short-term visa requirement for Turkish citizens, or for other countries (Ukraine, Georgia, Kosovo).

For the same reason, the UK will also not be covered by the proposed law on a European Border Guard. While this law originally provided for the border force to enter a Member State without its consent, that idea was dropped during negotiations. That would anyway not have applied to the UK; and in fact the EU court has ruled that the UK could not opt in to the EU law creating a border agency (the precursor to the proposed Border Guard law) even if it wanted to, without signing up to the whole of the Schengen system.

In the areas of criminal law and policing (which will be the subject of a separate blog post with more detail), the UK had a veto until 2009, when the Treaty of Lisbon came into force. Since that date, it has had an opt-out, which it has frequently used. In particular, it has opted out of the proposal for a European Public Prosecutor. Note that the EU’s police agency, Europol, is not a ‘federal police force’: the Treaty rules out ‘coercive powers’ for it, so it cannot arrest, question or detain people. Its main role is the analysis of police investigation data.

The abolition of the opt-outs on immigration and asylum, Schengen and criminal law would require a Treaty amendment subject to approval of the government and Parliament. The abolition of the Schengen opt-out would also require a national referendum, under theEuropean Union Act 2011. So would participation in the European Public Prosecutor.

f) The Single Currency

The UK’s opt-out from the single currency appears in Protocol 15 to the Treaties. Point 1 reads:

  1. Unless the United Kingdom notifies the Council that it intends to adopt the euro, it shall be under no obligation to do so.

This protocol does not expire at some point, as is sometimes suggested. Neither are ‘all Member States obliged to join the euro by 2020’. So the opt-out is valid for an unlimited period.

The protocol goes on to disapply the various EU law rules relating to the single currency. This has a number of implications. Due to the single currency opt-out the UK cannot be subject to austerity measures imposed by the ‘Troika’ that oversees bail-outs to Eurozone countries, since this only applies to states which adopt the single currency. Austerity policy in the UK is solely a decision made by our own government.

Furthermore the UK is exempt from some EU banking laws. Most notably it is not obliged to participate in the permanent bail-outs of Eurozone states. Only Eurozone states are involved in that, on the basis of a separate treaty. In fact the EU as such cannot adopt laws on permanent bail-outs, according to the EU court.

The UK could potentially be part of solely temporary bail-outs. But here the law wasamended to provide a guarantee that the UK would get its money back in the event of any default.

g) The EU budget – and the UK rebate

Of the money the UK in principle sends to the EU, there are two key features: a) a rebate, meaning some of that contribution is never sent at all; and b) some EU spending back in the UK. (For an overview, see here).

It’s often suggested that the rebate is not legally secure, and that the UK has no control over spending by the EU. Both suggestions are false.

The rebate is set out in the EU’s Own Resources Decision. This does not (as some suggest) have an expiry date (other Member States’ rebates will expire in 2020, but the UK rebate, and the law as a whole, will not). If the EU wants to amend this law, Article 311 TFEU applies:

The Council, acting in accordance with a special legislative procedure, shall unanimously and after consulting the European Parliament adopt a decision laying down the provisions relating to the system of own resources of the Union. In this context it may establish new categories of own resources or abolish an existing category. That decision shall not enter into force until it is approved by the Member States in accordance with their respective constitutional requirements.

It’s clear that the UK government can control the future of the rebate by means of a veto. Furthermore, so can Parliament, since the ‘constitutional requirements’ for the UK referred to mean that an Act of Parliament has to be passed for any amendment to the Own Resources Decision. These constraints have meant that the veto has stayed in place for over 30 years – although the UK government and parliament have agreed to some reduction in it over that time.

It’s clear that this rebate is not ‘conditional’, as is sometimes suggested. The UK has full control over the rebate money and can do entirely what it likes with it.

What about EU spending back in the EU? The basic rules on what the EU spends money on are set out in the law on the ‘Multi-Annual Financial Framework’. The latest such law is here. The UK does have control over the basic features of this law, because it has a veto over it, according to Article 312(2) TFEU:

  1. The Council, acting in accordance with a special legislative procedure, shall adopt a regulation laying down the multiannual financial framework. The Council shall act unanimously after obtaining the consent of the European Parliament, which shall be given by a majority of its component members.

It’s also useful to put the EU budget contribution into broader perspective. It’s less than 1% of UK spending (the small red section of the graph below). So if the UK no longer paid the contribution, it would be like getting a pay increase from £400 to £404. The average taxpayer is paying 12p a day toward the EU.

Conclusion

As we have seen:

a) The UK cannot be required to join an EU army without consent of the UK government, parliament and public;
b) Treaty amendments require the consent of the UK government and parliament, and (if there’s any transfer of powers) the public;
c) Accession of new Member States requires the consent of the UK government and parliament; it is a long way off for Turkey in particular and if it ever happens, will be subject to long periods of transition for workers to be admitted;
d) The UK has a veto on tax issues; the UK government, parliament, and public would have to consent to dropping it;
e) The UK has an opt-out from EU law on asylum, non-EU migration and criminal law; the UK government and parliament would have to consent to dropping it, and the public would have to agree to join Schengen or the European Public Prosecutor;
f) The UK has an opt out from the single currency and other related issues, and could only join after the consent of the UK government, parliament and public;
g) The UK has a veto over the basic EU budget revenue and spending rules, including the UK budget rebate; the veto could only be dropped with the consent of the UK government, parliament and public.

Of course, there are many other possible criticisms of the European Union. Some may be valid, and some not. But the argument that the UK government could be forced into any of the measures listed above is quite clearly false and scaremongering. All of the above possible developments are subject to the control of the UK government, and usually our Parliament and the general public besides.

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