Trench warfare, 1985–97

This chapter deals with a turbulent phase in the history of Britain’s relationship with the EC/EU and it also covers a period of transformation in the character of the EC/EU. Much of the chapter focuses on the interrelationship between these two developments, as the emergence of new forms of European integration in this period was accompanied by deepening divisions over Europe within the Conservative governing party under the leadership of Thatcher until 1990 and thereafter of John Major until 1997. During this period, there was a decisive shift towards a degree of dynamism and integration in the EC that was comparable in scale and intensity to the formative years of the EC in the 1950s. Furthermore, in this period, as in the 1950s, the landscape of European integration often changed faster than the perceptions of British policymakers and in ways that confounded their expectations; significantly the word ‘ambush’ was used on several occasions in the second half of Thatcher’s premiership to describe her experience of dealing with an unexpected turn of events in the management of EC affairs in the domestic and wider EC context. The quickening pace of European integration in this period was most evi-

dent in the Single European Act (SEA) of 1986 and in the Treaty on European Union of 1992. During the same period, the seemingly immutable division of Europe and of Germany dramatically dissolved in 1989-91 with the end of the Cold War, the unification of Germany, the disintegration of Soviet dominance in Eastern Europe, and the collapse of the Soviet Union. This chapter briefly outlines these principal landmarks in the history of the EC/EU during the period 1985-97. It also offers some comparative assessment of the Thatcher and Major governments in their handling of these EC developments, and finally it provides detailed treatment of particular features of EC policy under each premier. The SEA originated in a decision by the EC heads of government at the

Milan European Council (June 1985) to convene an intergovernmental conference (IGC) on the EC’s future. The SEA, which was signed by all EC states in January 1986, aimed to create a single market by the end of 1992. This goal involved the elimination of all impediments to the free movement of capital, goods, services and persons, thereby creating the largest frontier-free

market in the advanced industrial world. The institutional provisions of the SEA established an important new principle in the decision-making procedure of the EC. The Council of Ministers was now empowered to take decisions by qualified majority voting (QMV). This innovation overcame the use of the national veto and immediately expedited the passage of the large amount of legislation required to give effect to the SEA. The significance of the SEA for the future development of the EC gave rise to a fierce debate that left its mark on the EC/EU in the 1990s. Some states, most notably the core or founding member states of the EC led by France and West Germany, saw the SEA as a means of advancing the cause of political, economic and monetary integration. They particularly emphasized general commitments in the SEA to the further development of European unity and of the EMS in particular. This view was strongly championed by Jacques Delors, whose presidency of the Commission (1985-94) restored its role as a dynamic force in promoting new schemes, most notably a three-stage plan for full economic and monetary union (April 1989) and also for a social charter of workers’ and citizens’ rights (May 1989). The debate over the EC’s future after the completion of the single market project intensified when the EC (April 1989) agreed to convene an IGC on economic and monetary union and subsequently decided (June 1990) to establish an IGC on political union. These IGCs opened in December 1990 and culminated in the signing of the Treaty on European Union in Maastricht (commonly referred to thereafter as the Maastricht Treaty). This treaty coined a new name for the EC – the more federalsounding ‘European Union’. The centrepiece of the treaty, however, was the commitment to forge an economic and monetary union (EMU) by means of three stages with the final stage to be completed by 1999 at the latest. The treaty also included provisions for a Social Chapter (previously known as the Social Charter) and for a common foreign and security policy (CFSP) which envisaged a more influential role for the EU in the international system. Between the making of the SEA and the signing of the Treaty on European

Union, two concepts increasingly crept into EC parlance, at least one of which had a bearing on the evolution of British policy through these years, while the other came to express a British preference in terms of the overall organization of the EC. At the time of the Fontainebleau European Council (June 1984), there was considerable talk, especially from President Mitterand of France, about the possibility of a ‘two-speed’ Europe and of pressing on with desirable changes to the EC: an implicit reference to Britain as a likely laggard. The idea of a two-speed or multi-speed Europe meant that some of the EC states, which were able and willing to integrate in a particular way should be free to do so in the expectation that the other member states would follow them in due course. What this meant in practice became evident in the negotiations on the Maastricht Treaty when the Major government secured two opt-outs, one of which allowed Britain to defer a decision on participation in the third and final stage of EMU while the second opt-out concerned the Social Chapter of the Maastricht Treaty. The other concept was variable-

geometry Europe. This expression was used to describe an EC/EU within which a group of member states able and willing to integrate in a particular way did so but was fully aware that other member states had no intention of following them, thereby making for a permanent difference in the degree of integration. This concept had a particular appeal to the British government in that it relieved the government of the necessity of participating in an EC/EUwide uniform approach to integrative projects (Wall 2008: 64), though at the same time such an arrangement held out the unwanted prospect of a two-tier EC/EU with Britain in the second division. Thatcher and Major shared a number of common features and conditions

in the course of their management of EC/EU policy at home and abroad. Both Prime Ministers had to respond to a substantial advance in European integration: Thatcher in relation to the SEA and Major in the form of the Maastricht Treaty. In both cases they faced a formidable coalition for major change in the EC that was spearheaded by France under the leadership of President Mitterand, (West) Germany under Chancellor Kohl, and the EC Commission under the leadership of Delors. In these circumstances, Thatcher and Major often found themselves on the defensive in their relations with their EC/EU partners and also with elements in their own party. Certainly, at one point each of them imagined an enhanced role for Britain in the EC. Thatcher, for example, seemed to open a new chapter in Britain’s relations with the rest of the EC in the mid-1980s, insisting that Britain was ‘ahead of the pack’ in its support for the single market project. Major came to power with the intention of putting Britain ‘at the very heart of Europe’. By the end of their period of office, however, each Prime Minister was increasingly isolated in domestic politics and largely ignored in EC/EU circles. In negotiations with their EC/EU partners each had entered into agreements that stored up trouble at home, and each recognized that the SEA and the Maastricht Treaty went somewhat further in a supranational direction than either had wished. In some respects the SEA was a fatal attraction for Thatcher. She strongly supported the idea of a single market, yet she disliked the introduction of a greater element of majority voting in the Council of Ministers and she failed to appreciate at the outset the significance of the SEA as a launching pad for further integration. For his own part, Major viewed the Maastricht Treaty as an unqualified triumph for his diplomacy, a case of ‘game, set and match’,1 but the opt-outs were a measure of how far the full treaty fell short of an ideal outcome for Britain. The ensuing parliamentary struggle to ratify the treaty, moreover, later described by Major as ‘the longest white-knuckle ride in recent British politics’ (Major 1999: 384), further exposed the increasingly deep divisions over Europe within his government and in the Conservative Party at large. Thatcher and Major also shared common ground in their approach to EC/

EU matters in so far as there were few, if any, substantial differences between them over policy. Major shared both Thatcher’s support for the creation of a genuine single market and her hostility to any further ceding of national

sovereignty. His views on the future development of the EU, as expounded in an article which he wrote in September 1993, were in line with Thatcher’s in that he entered a strong plea against ‘ever tighter political and economic integration’.2 Both opposed the substance of the plan for EMU in the form of a single currency, fixed exchange rates and a European Central Bank. Both wished to stay in the EC/EU game but with qualifications or opt-outs. Certainly, there were differences of emphasis between the two Prime Ministers, whether over their contrasting degrees of enthusiasm for the prospect of putting sterling in the ERM in 1990 or in their responses to German unification. That said, Thatcher and Major were of one mind both on entry to the ERM3

and in terms of the meaning of German unification for Britain’s EC/EU policy. Unlike the French government, neither was prepared to participate without qualification in further European integration in the form of EMU as a necessary price for controlling Germany. There were considerable differences of style between the two leaders that

entered into and influenced their conduct of policy. Thatcher was variously abrasive, obstinate or confrontational in her dealings with EC matters or with other member states. Major, however, was far more emollient and more intent on negotiating or finding a way through the new process of integration. Differences of style, for example, were evident in their handling of the question of German unification. Thatcher barely concealed her dislike and suspicion of the Germans, and her opposition to the unification of Germany was a matter of common knowledge. Major, who had no memories of the Second World War, did not share Thatcher’s stance. One of his first objectives on coming to power was to mend fences with the other EC states and especially to establish a close personal rapport with Chancellor Kohl of Germany. A very important difference between Thatcher and Major that had a direct

bearing on their EC/EU policy concerned domestic political conditions and Major’s relatively weak political position from the beginning of his premiership. Throughout her premiership Thatcher commanded substantial parliamentary majorities: 43, 144 and 119 respectively as a result of the general elections of 1979, 1983 and 1987. By contrast, Major not only suffered from comparison with his successor and was haunted by the spectre of Thatcher (Seldon 1997: 252-55) but also had a small and dwindling parliamentary majority of 21 as a result of the general election of 1992. This majority was gradually whittled away to an overall majority of only one by 1996, partly as a result of defections but mainly because of an unbroken run of by-election defeats. The question of EC membership in the closing years of Thatcher’s premiership sowed divisions in the upper echelons of the party especially within the Cabinet itself and also among MPs fearful of losing their parliamentary seats. It was ultimately the tide of opinion against her at this level that made Thatcher the victim of a palace coup. Major, however, faced a ‘peasants’ revolt’ in that the issue of EU membership now generated deep and widespread concern throughout all sections of the Conservative Party. Eurosceptic opinion was increasingly in the ascendant, so much so that under his

leadership the European issue was sometimes referred to as the party’s ‘San Andreas Fault’. At the same time, Major unlike Thatcher had to deal with a revitalized Labour Party which had gradually repositioned itself on the question of EC/EU membership and was not slow to take advantage of a Conservative Party at war with itself over Europe. The evolution of Thatcher’s European policy after the Fontainebleau Eur-

opean Council of June 1984 and throughout the remainder of her premiership admits of no easy explanation. However, the handling of three policy areas in these years – CAP and the EC budget, economic and monetary integration and the emergence of EMU, and British membership of the ERM – shed light on why Britain at this time was embroiled in increasingly acrimonious clashes with most of the other EC states and why at the same time deep divisions over European policy emerged in Thatcher’s Cabinet. The period immediately following the Fontainebleau agreement of 1984

saw a marked reduction in friction between Britain and its EU partners. Even so, differences persisted, not least over British efforts to curb the remorseless growth of the EC budget which on several occasions during the 1980s brought the EC to the verge of insolvency. The root problem was the CAP, which was extremely expensive and absorbed a large proportion of the total EC budget (65 per cent in 1986). The British strategy for getting the budget under tight control was to set strict limits on the growth of spending and to press for a radical reform of the CAP. However, the large farming constituency within the Conservative Party (‘The National Farmers’ Union was the Conservative Party at prayer’ in the words of Geoffrey Howe) meant that even Thatcher was not prepared to be as tough on CAP reform as she sometimes appeared to be (Wall 2008: 81-82). In yet another crisis over the EC budget in 1987, the Thatcher government agreed to an increase in overall resources only on condition that it would be accompanied by binding agreements to restrict the production and price levels of surplus agricultural products such as milk, beef and cereals (G. Howe 1994: 522-23; Thatcher 1993: 728-37). Throughout all the tortuous negotiations over the budget between 1984 and 1988, British tactics conformed to a common pattern. Initially, the government took the line that it could not possibly agree to any increase in spending. Then, at length after a great deal of argument, it finally acquiesced in return for tighter curbs on the amount devoted to agriculture. The procedure was ‘messy and negative’ (Riddell 1991: 193), and it was also a recipe for discord between Britain and the other EC states. From the mid-1980s onwards, however, there emerged a far more funda-

mental divergence between Britain and a majority of other EC members than differences over CAP and budgetary reform. This arose from differing reactions to proposals for a greater degree of economic and political integration. The Thatcher government viewed this drive towards greater unity with distinctly mixed feelings. On the one hand, it strongly disapproved of any changes which might have the effect of weakening British sovereignty. It was therefore adamantly opposed to suggestions that the powers of the Commission should

be strengthened and also to the introduction of a greater element of majority voting at meetings of the Council of Ministers. On the other hand, it saw considerable merit in some of the other ideas currently under consideration. Thus it strongly supported the removal of all hindrances to the free movement of goods, capital and labour. Its attitude here was influenced by a combination of political ideology and considerations of national self-interest. The elimination of commercial restrictions was fully in accord with the government’s staunch adherence to free market economics. But it was also hoped that Britain’s air transport and financial service industries – believed to be the leaders in their field – would derive great benefits from the establishment of unfettered competition (Thatcher 1993: 552-53). Another area in which the Thatcher government welcomed moves towards closer cooperation was foreign policy. European Political Cooperation (EPC) represented an attempt to extend the principle of harmonization to foreign affairs. The Thatcher government consistently took the lead in pressing for its further development, not least because it thereby obtained some protection at least from the charge of being wholly negative towards the development of the EC. In addition, there was no question of any surrender of sovereignty. The basis of EPC was close cooperation between independent governments – a formula that was always likely to appeal to any British government. The Thatcher government’s thinking about moves towards closer economic

and political union was set out in a discussion paper which it submitted to the Fontainebleau European Council of June 1984. The document, entitled Europe – The Future, advocated the abolition of impediments to trade within the EC. So far as constitutional change was concerned, though, the paper had very little to offer. There was a modest proposal for codification of existing procedures for political cooperation. In addition the paper emphasized the importance of retaining the national veto.4 The British government liked to portray this particular contribution to the debate about the EC’s future as a positive one. It claimed to be offering progress on the basis of sensible and practicable reform, as opposed to the more fanciful ideas emanating from the Commission and other quarters. It is possible, however, to view the British paper in a somewhat different light. Against such a background, the proposals put forward at Fontainebleau can be seen as an essentially defensive tactic – an attempt to avoid complete isolation in EC circles and to divert the general enthusiasm for political integration and institutional reform into channels that were more congenial to Britain. In the period after Fontainebleau, the Thatcher government continued to

fight a rearguard action against the drive for institutional change. But it was in a difficult position. There was powerful pressure from the Commission whose President, Delors, insisted that a single market was out of the question without the necessary political reforms to override national interests. Moreover, Britain was in a clear minority in its refusal to accept a greater degree of political integration. This became clear at the Milan European Council of June 1985 where, as noted above, it was agreed in principle to establish a fully

integrated single market by 1992. Thatcher acknowledged that this would mean abandoning the veto in the Council of Ministers in certain areas and was ultimately prepared to accept that. What she was opposed to was the establishment of an intergovernmental conference (IGC) to consider a wide range of institutional reforms and a possible revision of the Treaty of Rome in order to carry them through. She was under the impression that this could only be done on the basis of unanimity. In the event, however, Bettino Craxi, the Italian Prime Minister, who was chairing the session, called a vote – the first time ever in a European Council – and the majority approved the IGC, with only Britain, Denmark and Greece voting against (Thatcher 1993: 54851; G. Howe 1994: 409; Urwin 1995: 226-28). This was the first of several miscalculations by the British Prime Minister which she regarded as the Milan ambush (Wall 2008: 63). Despite this setback, the SEA was accepted by the British government.

Equally surprisingly, it was approved by the House of Commons with minimal opposition. Among those who voted for its acceptance, indeed, were Conservative backbenchers like William Cash and Peter Tapsell, who were later to be among its bitterest critics on the grounds that it represented an intolerable erosion of national sovereignty (H. Young 1998: 334-35). Their subsequent explanation for their acquiescence – that they trusted Thatcher’s judgement – is perhaps understandable.5