Merkel might be going, but the common rulebook would still mean Berlin writing our rules

If you ask any cabbie who’s running the EU they are bound to mention Angela Merkel – at least for now. But if you asked anyone in the Foreign Office, it’s likely they would go through unheard of names like Antonio Tajani or Mário Centeno before they’d get to the German Chancellor. Even then, squeamish officials […]

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If you ask any cabbie who’s running the EU they are bound to mention Angela Merkel – at least for now. But if you asked anyone in the Foreign Office, it’s likely they would go through unheard of names like Antonio Tajani or Mário Centeno before they’d get to the German Chancellor. Even then, squeamish officials are likely to mention her as part of the wider group of EU leaders, without singling her out.

Germany’s formal position under the European treaties might be no different to other member states – in theory the European Commission makes proposals and the Council and EU Parliament make the decisions – but as the UK’s former ambassador to Germany, Sir Paul Lever, mentions in his recent book, it’s Germany’s view which is sought by the Commission before it acts, and other governments make sure they know what Berlin wants before they decide on a course of action.

The extent to which German decisions dominate is well-known by the left-wing firebrand and former Greek finance Minister, Yanis Varoufakis. Before Eurozone meetings he would receive support for his ideas in private discussions with his EU counterparts, who were keen and willing to sort out the crisis. However, once seated round the table, the very same Ministers would defer to one man: Germany’s Wolfgang Schäuble. Representatives of ostensibly sovereign nations would flip their position completely if it became clear that the Germans had made their minds up on a proposal.

In Britain, former Cabinet Minister Iain Duncan Smith watched in frustrated amazement as Angela Merkel sabotaged Britain’s attempts to control immigration during David Cameron’s failed renegotiation attempts before the referendum. Later, Duncan Smith described it as if they were “sitting in a room even though they weren’t there. There was a chair for them, a German chair. They had a veto over everything.”

All this matters because if the UK plans to sign up to a ‘Common rulebook’ with the EU it will be Germany calling the shots. Recently Dyson attracted criticism for deciding to build a new electric car plant in Singapore. According to the firm, the decision was made “based on supply chains, access to markets and the availability of expertise, which offset the cost factor”. UKIP founder Alan Sked pointed out it might have also had something to do with the regulatory framework Britain is planning to sign up to. Why would a company trying to join a new market want an EU common rulebook written by their competitors? Kept inside the EU’s regulatory framework, the German government, under pressure from Audi and Volkswagen, could conceivably out-regulate their plucky British challenger.

As a recent paper by Roland Vaubel explained, if a qualified majority of member states within the EU which favour a high level of regulation gang up, they can impose higher regulations on the rest: “Thus, while regulatory collusion presupposes unanimity, the strategy of raising rivals’ costs merely requires a qualified majority.”  Vaubel says the anti-regulation coalition includes Ireland, the Scandinavian countries and the Netherlands but that various indices show that the UK has the least regulated labour market of all. If we stay tied to the EU, Britain is most at risk from damaging rule-changes.

We need to recognise that the ‘Common rulebook’ isn’t a neutral body of legal text. Like the EU itself, it is a mechanism which can – and will – be used to bend the rules to favour some nations over others. Few dare to admit this and credit is due to Sir Paul Lever who devastatingly exposes Berlin’s influence in his book Berlin Rules. Sir Bill Cash is another notable example who over the years has highlighted the hidden hand of Germany. But it’s time our negotiators recognised that the EU is not a federation of equals. Angela Merkel may be on the way out but Germany has consistently been the determiner of EU policy decisions and that won’t change after she is replaced. We must accept that if we decide to remain it will be Berlin, not Brussels, who will decide our fate.

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George Freeman: There was much to cheer in the Budget. But now we need an inspiring programme for growth.

At the moment, we are treading water and appear to be relying on popular support for Brexit, and the threat of Corbyn, to keep us in office.

George Freeman MP is Chair of the Conservative Policy Forum and The Big Tent Ideas Festival, and is MP for Mid-Norfolk.

On Monday, the Chancellor announced that “austerity is coming to an end”. Politically, there was a lot to cheer in this Budget – some good news and headlines for struggling high streets, our crucial Universal Credit reform, NHS workers and the vast majority of constituents who rely on public services. Furthermore, there were many helpful retail pledges for colleagues in marginal seats. Given the Brexit divisions and infighting, we badly needed some good news.

But if we are going to end the biggest squeeze on disposable incomes since the war, the central question for our future is this: how can we get back to the 2.5-3 per cent growth that we enjoyed pre-Brexit? Before the EU Referendum, we were one of the fastest-growing economies in Europe and the G7. Now we’re one of the slowest-growing.

The Budget invites the public to judge us on different metrics – no longer on our commitment to balance the books (abandoned) or reduce the debt (still growing), but on our ability to “end austerity”. People will now need to feel tangible improvements and see how Brexit can be a catalyst for much higher growth and prosperity.

Because this Budget won’t be decided on the comment pages of broadsheets. It will be decided on the ground.  By parents chatting at the school gates. Families looking after their ageing relatives in care homes. Commuters stuck in traffic jams because the housing has come, but the infrastructure hasn’t. Or the millions standing on trains every morning who’ve shelled out £2,000 for a season ticket and feel ripped off.

I no longer advise the Prime Minister, but here’s what I’d say if I still did. We need to remind people that every public sector pound has to be earned before it is spent, and that we need a more inspiring programme of business-led growth to drive prosperity and opportunity.  This means some big changes.

First, accelerating our transition from a service economy to an innovation nation.  Innovation is key to our driving up productivity, prosperity, inward investment and exports. We won’t escape debt with growth at 1.5 per cent and low productivity.  We need a renaissance of enterprise and innovation.  Such buccaneers as James Dyson and Richard Branson have done more to transform this country’s prospects than any government department ever will.  We need to stop the business-bashing and promote entrepreneurship and innovation. While the UK is still a crucible of start-up entrepreneurship, the engine is not yet humming: we have too many start-ups that are never scaled up, too little of our innovation funded by the City and too little that is taken global by British companies. We need a new national mission. We must be the innovation nation.

Second, tangible access to new markets for our innovation.We can’t just do research.  We need to innovate, manufacture and trade.  If Brexit means anything, it surely means an opportunity to go global. But that can’t mean importing cheap food and cheap clothes from sweatshops. We need to be exporting our innovation. The UK should be using every tool possible to unlock access to the fastest emerging markets in Africa and Asia.

For 40 years our whole economy has been geared to our being a European services economy. Why don’t we make Brexit the moment to embrace a new global strategy for higher growth through exporting technology and innovation into emerging markets? If the opportunity is properly seized, we could use our Industrial Strategy and public sector innovation to make Britain a crucible of new technology scale up and financing through the City.

We could then use our aid budget and global soft power in emerging markets to grow our exports and trade links with the fastest growing economies. Why don’t we offer some of the fastest emerging countries where we have a strong historic links a deeper Aid, Trade and Security Development Partnership?

Third, harnessing the public sector as a test bed of innovation. We’ll never export our innovation if we’re not using it ourselves. Innovation can’t be just about making a lucky few in the City rich beyond their wildest dreams. In order for us to be a test bed for new technology, we need to put enterprise and innovation at the heart of the public sector.  If we want to lead the world in digital health, we won’t do it unless the NHS is already a pioneer. You can have as many digital health clusters in Shoreditch as you like. But if the NHS isn’t testing and buying it, we will never become the innovation nation we need to be. Building, financing and growing these little start-ups into serious businesses of scale. The problem of the austerity era was thinking that our problems could be solved by cutting things. Actually, the only way our problems can be solved is by growing things.

Fourth, empowering local leaders to innovate more. Innovation can’t be ordered from on high. It comes from people having the power to make decisions themselves. That’s why we need to embrace bolder economic localism. Let’s remember that our national economic performance is made up of hundreds of local economies, all of which need to be growing faster. Another five years of ever-tighter spending controls from the Treasury risks undermining local growth and innovation.  Instead of delaying essential local infrastructure holding our growth hubs back, why not let them raise infrastructure bonds in the international capital markets and embrace bold ideas like integrated track and train mutuals which invests users money into better services?

Fifth, a new model of Treasury incentives. Too often, Whitehall’s funding orthodoxy rewards failure.  If you deliver more for less in the public sector we give you…less!   And give more to those failing.  If you ran a business like that it would be bust.  And depressing to work in. It’s no wonder that public sector leaders are so dispirited.  Many are leaving.  We need them to stay.  So why don’t we send a signal to encourage them, be bold and embrace a new model of incentives-based funding which rewards successful local service leaders for delivering efficiency and productivity? We need a new approach based on a radical idea: if an area reduces the deficit quicker than Whitehall’s average we should let them keep 50 per cent of the savings to re-invest.  Why not the same on growth? If councils grow their tax base, why not let them keep 50 per cent for local services?

Our choice as a nation is clear. Do we timidly manage our decline? Or do we set out a bold plan a brighter future? At the moment we are treading water and appear to be relying on popular support for Brexit, and the threat of Jeremy Corbyn, to keep us in office.

For a majority of voters, keeping Corbyn out and delivering Brexit are not good enough answers.  We need to show voters that this is the path to something more inspiring.  We need to start setting out a bold vision for Conservatism in the twenty-first century.