EU budget: Ed Miliband twisted the knife but the Tory right held the handle

http://www.guardian.co.uk/commentisfree/2012/nov/01/eu-budget-ed-miliband-tory-right

Version 0 of 1.

In yesterday's parliamentary debate, Ed Miliband pointedly compared David Cameron to John Major. He knew what he was doing. In a few hours, Labour would opportunistically join forces with the Tory right to inflict a damaging blow to Cameron's authority in parliament, and compel him to seek a cut in the EU budget. Labour is trying to relive the mid-1990s, recalling that it was Europe that shattered Tory unity and alienated its centrist voters.

In fact, things are potentially much worse for Cameron. Unlike Major, who positioned himself as a centrist on European monetary union, someone who could hold together a divided party, Cameron has always been a Eurosceptic. He stood for party leader and for prime minister as such. As a result, his bland, managerial approach to the EU is severely alienating the Tory base and backbenchers, whose rebellions exceed those faced by Major.

One would think that things would be made easier by the coalition. In effect, Cameron should be able to pursue a pragmatic, pro-business policy on Europe, telling his restless backbenchers that this is the price of admission to government. This is exactly what did happen at first. In negotiating a coalition agreement with the Liberal Democrats, the Tory leadership watered down its pledges to repatriate powers from the European Union.

But any benefit of the doubt extended to the coalition was always rather thin among rightwing Tory MPs. The millionaire Eurosceptic MP Bill Cash, who played a key role in the Maastricht rebellion, warned at the beginning that the government would be tested by whether it was prepared to use its veto to block the demands of the European Commission.

Even before a divisive issue like the EU budget arose, we have seen a record backbench rebellion come out of nowhere on Europe, demanding a referendum on membership of the EU. Now it's clear that the Tory right is quite prepared to threaten the leadership with the downfall of the government if it doesn't swerve to the right on this issue. And with Ukip sailing close to 10% in the polls, it's a threat that Cameron has to take seriously.

Worse still for Cameron is that the context of the eurozone crisis doesn't necessarily dictate a clear future role for British capitalism in Europe. Businesses in the UK have always been divided on this question. Larger sized manufacturing and service capital has tended to favour eventual entry into the eurozone. Already they benefit from free access to European markets. Their exports would be hit by tariffs if Britain were to pull back from the EU. But some sectors of business, particularly finance, have benefited from a more Atlanticist orientation, or simply look further afield than Europe for their profits. And they have the overwhelming support of small businesses who resent EU regulations.

All other things being equal, Cameron's most plausible course might be something like that recommended by the Eurosceptic Open Europe thinktank – maintaining roughly the status quo in Europe, but negotiating certain opt-outs, such as on agricultural policy. This would probably be the most acceptable policy to both business and his base. But the eurozone crisis has demanded a radical transformation of the EU, which is centralising massively in order to cope with the severe dysfunctions of the eurozone, and demanding more money to pay for this. Cameron talks up resistance to an EU "superstate", but it's not clear what he can do. He has admitted that the growing political and economic centralisation of Europe is unavoidable. The best he can do is defend the interests of the City within an expanded EU.

Yet, precisely for these same reasons, Miliband's short-term gain is likely to be superfluous. It is true that Labour was able, in the 1990s, to prise open cracks in a Tory government by opposing policies that they didn't disagree with. And there is a certain logic to inflicting a defeat on a coalition government in this way. The coded signal to pro-EU Liberals, perhaps, is that they can't get pro-European policies with the Tories in government and Labour in opposition.

But Labour can't even sustain this opportunistic opposition, because the stakes are too high. Notably, when Cameron was at risk of suffering a more substantial defeat over the question of having a referendum on membership of the EU, Miliband rode to the rescue and ordered Labour MPs to support the government. The most that Labour can do is paint the Tory leadership as weak and dithering, while agreeing with them on the fundamentals of policy.

As the European crisis forces them to converge on substance, the need for parliamentary histrionics grows. Cameron must perforce feed his Eurosceptic base and Miliband must occasionally look like he can defeat the Tories. Neither main party can afford to take a principled stance.