The "No" votes in both France and Holland in May and June 2005 were resounding signals of no confidence in the way in which the European Union has developed in recent years. They ought to have indicated to the political elite across the European Union that a far more radical change of direction was required than almost any of its members were prepared to contemplate. Sadly, but predictably, the reaction has been very different. Instead of accepting that the French and Dutch votes showed that the people in both these countries - and no doubt elsewhere - wanted a more decentralised Europe, closer to the voters, the EU political and bureaucratic machine shows little sign of any fundamental change of direction. Centralisation, integration and progress towards a unified European state may have been at least temporarily slowed up but the direction of travel has not been reversed. The French and Dutch "No" votes have, however, shown that even in core EU states the mood of the electorate is moving against the EU's aspirations. The key issue is whether, in much more sceptical Britain, this could lead to a root and branch reappraisal of whether it is worth being in the EU at all.
Part of the reason for scepticism about the benefits of EU membership in Britain lies in concerns about differences in legal, institutional and democratic traditions between Britain and the ways in which these matters are dealt with on the continent. At the core of these concerns are well justified fears that the EU is a fundamentally undemocratic organisation, run by a series of technocracies, particularly the Commission and the European Central Bank, who are accountable to no-one but themselves. When combined with the clearly identifiable financial costs to Britain of our EU membership, however, the reasons why people in Britain have strong reasons for believing that we would be better off outside the present arrangements altogether become apparent.
The annual costs to Britain of our membership of the EU have been highlighted by the current attempts by the other EU Member States to cut back on Britain's rebate - currently worth an average of about £3.5bn per annum. Since we joined what was then the Common Market in 1973, our net contributions to the EU budget have amounted to a staggering £100bn in current money terms. Furthermore, they are set to rise substantially, as a result of increases in the EU budget, even if our present rebate remains intact. Obviously, they will rise even faster if the rebate is eroded. Nor has our net contribution been the only cost. Over the last thirty years we have had a constant balance of trade deficit with the other EU countries, which has severely weakened our industrial base. Our fishing industry has been damaged almost beyond repair by the Common Fisheries Policy. The switch from our traditional deficiency payment system for supporting agriculture to the Common Agricultural Policy regime raised food prices far above world levels, adding what is now estimated to be £36 per week to the average family's weekly food bill. The cost to the British economy of regulations, most of which come from the EU, net of any benefit derived from them, is now calculated to amount to over £20bn per annum.
The costs to Britain of EU membership are not, however, just those which can be calculated year by year, important though these are. In the longer term, much more significant is the impact which entanglement with the EU has had on Britain's long term growth rate. There is very strong evidence that this would have been considerably higher if we had never joined the EU and that it would be greater if we left. First, the European countries which did not join the EU, particularly Norway and Switzerland, have grown faster and now have much higher living standards than comparable countries in the EU, including ourselves. Second, the EU's growth rate has been far below that of most of the rest of the world, thus inevitably depressing our performance, as members of the EU trading bloc, ever since we joined. Thirdly, there is now overwhelming evidence that the economic and social model which the core EU ideology represents is increasingly ineffective at dealing with the challenges of globalisation, with very high rates of unemployment being the most obvious blight on the record of almost all the EU economies,. particularly those in the euro-zone. What then the alternative options which might be available to us? There are essentially four.
One possibility would be for us to stay as a full Member State of the EU while at the same time we attempt to renegotiate our relationship with the other countries in the European Union. This approach would have the advantage of leaving us still within the EU decision making processes but there would be major problems in implementing such a strategy. Unless - which seems unlikely - there emerged a consensus that the EU should move to a much more devolved structure, with the degree of integration to be chosen by each country and decision making powers being repatriated to all the nation states, it is difficult to see how an agreement could be reached which would meet Britain's requirements. The current arguments over capping or reducing Britain's net contribution to the EU provide all to clear a pointer to the fact that a major renegotiation of all the treaties by which Britain is bound to the EU would be extremely problematical, inevitably producing a protracted and damaging period of uncertainty. If Britain was minded to go for a root and branch change to our relationship with other countries in Europe, therefore, unilateral revocation by the British Parliament of the EU treaties would almost certainly be a better option.
Revoking the EU treaties would then open up a range of choices. One would be for Britain to adopt the same status as Norway, in the European Economic Area framework. This would still involve us in some payments to the EU but at a far lower level than at present. We would have to comply with most of the requirements of the Single Market, while we had less control over its development. We would be outside the Common Agricultural Policy and the Common Fisheries Policy. We would be free to pursue our own economic policies internally and to choose our own foreign, trade and aid policies when dealing with other countries in the world. This would be a change with substantial advantages but it is not the only option available.
Another choice would be for Britain to go one step further and to leave the EU arrangements framework altogether and to rejoin the European Free Trade Area, an existing organisation established before Britain joined the Common Market. A bilateral treaty would then be required to regulate Britain's relationship with EU policies where co-ordination was required, in much the same form as has been done by Switzerland. The advantage of this approach is that it would provide Britain with even more policy flexibility in all areas but at the cost of still less influence than would be the case with the European Economic Area over policy development within the EU.
Yet another possibility would be for Britain to withdraw from all the obligations established under the existing treaties governing supranational matters in Europe, and to become fully independent. This was the choice made by Greenland when it withdrew from what was then the European Economic Community in 1985. In view of the proximity of Britain to the continent of Europe and the very large common interests we have with our European neighbours on a range of issues where co-operation clearly does make sense, agreements to work together on a wide range of matters of common interest could still continue on a bilateral basis. We would, however, then be free from all the onerous economic obligations which we currently have to shoulder as a result of EU membership.
Which way to go has to depend on what the British people decide is in their best interests and what they vote to see implemented. The new mood in Europe reflects the fact that radical alternatives are no longer the preoccupation of a relatively small dissident minority. As the failings of the existing EU model become increasingly apparent and evidently less and less acceptable, the options for major change become more realistic. In no country are these likely to be more apparent than in the UK both because our traditions are more different from those of other Member States than the average and because we have had - and will continue to have as long as we are members - such a remarkably poor economic deal from the EU. Over any time span, the single biggest determinant of any country's self esteem, its position in the world and its ability to be at ease with itself stems from its economic performance. Ours has been pulled down by EU membership and would almost certainly be better in the short and the long term if we were no longer members. The time has certainly come where all of the several alternative options available to us ought to be actively considered and debated. The world is changing rapidly. Many countries, particularly round the Pacific Rim but also including the United States, are becoming progressively more important economically as Europe - at least relatively - declines. We need to look outward to the wider world, and not to feel permanently obliged to tie our future to institutions and policies which are manifestly failing both in themselves and in their ability to bring the people with them.