Ed Miliband knows a referendum on the EU makes sense

http://www.guardian.co.uk/commentisfree/2012/may/23/ed-miliband-referendum-eu-labour

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The Labour party will almost certainly promise a referendum on Britain's membership of the European Union in its next election manifesto. Moreover, when the inevitable decision is announced, all hell will break loose. Ed Miliband knows this, which is why behind the scenes he is walking a tightrope: staying non-committal, letting the debate play out within his team, but preparing the ground to avoid any screw-ups later.

The Labour leader's biggest worry is that a referendum would throw up more chaos within European financial markets and the party would be slammed by British business groups for harming the economy. But two different sources in the shadow cabinet offered me the same line in recent weeks: "Don't be surprised if the [EU referendum] question is included in the manifesto."

Unlike the Conservatives, the Labour party isn't split on membership of the EU. Most accept that Britain will be better off within, but the institutions need massive reform. Paradoxically, an EU referendum has been made more likely because pro-EU voices have long wanted to avoid the debate. Only yesterday, Gaby Hinsliff wrote in the Guardian that Miliband was "playing with fire" on the issue and should resist the temptation unless he knows he can win, but admitted it was hard to remember why she wanted to stay within the EU.

But there is a strong case for why Labour should offer a referendum on EU membership. It should also ask why the case for getting out is gaining currency beyond the usual suspects.

The key argument – the one that persuades Miliband the most – is that it says Labour is willing to listen to people and accept their will even it disagrees. Gordon Brown's habit of organising one "listening exercise" after another only reinforced the view he wasn't that interested in listening. A referendum will be accompanied by the point that Labour wants to engage people with its arguments rather than ignore them as it did in the past.

And then there is the economic case against the EU, long made by many on the left, that it is a deeply neoliberal institution. Its rules value private outsourcing over government ownership; it likes pushing competition into public services; and its policies on free movement of labour only depress wages for the lowest paid across the EU.

The euro's problems only strengthen this case. The eurozone has been exposed for its bias towards stronger economies (like Germany) over a weaker southern Europe; it focuses more on keeping inflation low rather than keeping employment high; and it is pushing a fiscal pact that has years of painful austerity written into its rules. The FT columnist Wolfgang Münchau recently pointed out that in order to save the eurozone for the longer term, many of the broad EU rules around taxes, the single market and employment laws would have to be junked and rewritten. This is an important point: the euro cannot survive unless the countries involved are integrated even tighter to avoid similar situations. If the austerity consensus of the eurozone is then imposed on the wider European Union, it makes it even less attractive for Labour to stay within.

Finally, there is the political argument against the EU. It has badly failed to connect with Britons: they are suspicious of its bureaucracy and unconvinced by its benefits. Many see its institutions as undemocratic and impenetrable. People feel disconnected from the EU – this is why they don't value it. Without massive reform this isn't going to change. And that reform won't come about by asking meekly.

It should come as no surprise that even Labour voters are now more sceptical of the EU than in its favour. The pro-EU voices have lost the argument against a referendum because their main case is that the public isn't sufficiently informed.

But let me put it another way: do those who want to avoid a referendum think their chances will get better later? I doubt it. A referendum on the EU is inevitable; the party has finally faced up that fact.

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