I remember doing a photo opportunity with Ruth on my way to Jura one year with the Scottish Conservative MEP Ian Duncan. As the three of us stood together, it was clear that Ruth was so much shorter than us that the photo would look ridiculous. ‘Hang on,’ she said, going over to her car boot. She came back with a large box of jump leads and proceeded to stand on it. We got our shot – and I thought, whatever ‘it’ is, this woman has got it.
Ruth came to embody the pro-devolution, anti-independence, modern, compassionate Conservative Party. We might have failed to modernise ourselves along with the UUP in Northern Ireland, but Ruth, I believed, really would make us a New Force in Scotland.
In 2009 the Calman Commission had recommended further devolution, and Ruth and I were resolute about turning that into a reality. Again, the old guard made their unhappiness apparent. But there was more than an electoral mandate for it, and overwhelming public support. The Scotland Act 2012 would see the biggest transfer of financial powers from Westminster since the creation of the UK. With the passage of the Scotland Act 2016, half of all spending in Scotland would be raised north of the border.
Meanwhile, the issue of a referendum was unavoidable. People had voted for it; we would deliver it. We would fight to keep the UK together, and we would have to do it soon – within the Parliament. There was a feeling that the SNP wanted to put it off as long as possible in order to gain maximum support. I wanted to deny them that advantage. We would also have to make sure that the whole process was fair, legal and decisive. Any hint that it was not would be an open goal for the SNP to deny its validity. And above all, it would have to be a single question: Scotland in the UK or out of it.
We had a suspicion that the SNP didn’t really want a proper independence referendum at all. They thought it might be lost, and were actually happy to carry on governing and to keep the grievance. What they might do was insist upon a second question on the ballot, offering far greater devolution – an attractive option to those nervous about independence. A vote for it would mean the nationalists could chalk up the result as a victory, as progress, and use it to pave the way for a referendum on total independence – which would be easier to win – at a later date.
I always believed we would win. We had the right argument. The polls were in our favour early on, and however alluring the Braveheart imagery from the SNP, the reality of Union – a shared currency, an open border, ease of business, shared welfare system and armed forces – was surely more appealing than going it alone. Hold the referendum, do it in a way we wanted, and win, and we could turn the tables on the nationalists and show that independence wasn’t inevitable. So on 8 January 2012, during an interview on The Andrew Marr Show, I announced that we would be holding a referendum.
There would be a lot to negotiate to even get to that point. I hired two brilliant characters to take charge. Ramsay Jones would be my Scotland media spad, while Andrew Dunlop would be my Scotland policy spad. They were the perfect duo: one a former journalist with a thick Scottish accent, a golf-loving, politics-loving wheeler-dealer; the other a meticulous, clever and universally respected adviser who I’d known back when I was working for Norman Lamont.
I said to them: ‘Alex Salmond will be thinking about the Scottish referendum 24/7, but I’m PM of the UK and I can’t. So I need you to be thinking about Scotland every hour of every day, and bringing me in when I need to take a decision.’ They did just that.
A few days after the announcement, Gordon Brown came to see me in the prime minister’s office in the House of Commons – a dark, wood-panelled, lead-windowed room overlooking Parliament Square. I expected it to be strange. This was a man who always found it fantastically difficult to have any frank or open conversation with a political opponent, and here he was, in his old office, with his successor.
But this issue was so much bigger than that. He made two points. One was that we must have independently verified information about what independence would mean. The second was that if we just presented an argument about the head and not the heart, we – and by ‘we’ he meant the new pro-Union team that was going to fight this thing – would lose.
The argument about the heart, he explained, must be put in the following way: ‘It’s not just that you can be proud of being Scottish and British, it’s that for many people being Scottish is more important than being British. But the crucial point is, even if that is how you feel, you can still want to be part of the United Kingdom.’
He was absolutely right. Of course the reality of the Union was the main selling point, but without acknowledging those deep emotional ties, we would be sunk. And I would make this argument in speeches and interviews for the next year and a half.
So the ball was rolling. George began speaking to Alistair Darling about leading the anti-independence campaign. The next big step was negotiations about the referendum itself: the what, when, where and how. The SNP wanted the question phrased in a way that people would be voting positively – with a Yes – to independence. They wanted the referendum in autumn 2014. They wanted sixteen- and seventeen-year-olds to be able to vote. And – though they didn’t admit it at the time – they wanted more than one question on the ballot paper.
In February 2012 I went up to Edinburgh for my first negotiation meeting with the slipperiest of characters, Alex Salmond. No matter how well you prepared for any telephone call or meeting, he would always raise a completely unexpected curveball issue to try to wrongfoot you. You felt constantly that he was trying to extract anything that could be used against you. I always used to say you had to count your fingers on the way out of a meeting with Salmond.
I still felt we had the advantage at this point. We had the machine – the whole of government, the majority of political parties. We had the money – business would want to fund a campaign to keep the UK together. And we had the message – the truest message there ever was: that our four nations were stronger together and weaker apart.
The talks with slippery Salmond continued. That summer, during my drinks at No. 10 for the lobby, I said to some Scottish reporters that I was beginning to wonder if there was no agreement because Salmond had no intention of signing up for a single-question referendum. They agreed. At that moment it really seemed it wasn’t going to happen, and that Salmond’s plan was to use the failure to get a deal as yet another argument for independence.
So I decided to force the pace, and apply some pressure on the Scottish government. During a visit to Glasgow at the end of July I told the Scottish media that an agreement could be reached by October. Nothing focuses a negotiation like creating a deadline. Salmond got the message. A few weeks later he reshuffled his deputy Nicola Sturgeon from her Health portfolio to head up the referendum preparations. This was the first indication that the Scottish government was prepared seriously to move matters forward.
And by October 2012 the referendum was back on. During a short meeting in Salmond’s office in St Andrew’s House he and I signed the Edinburgh Agreement. It paved the way for an autumn 2014 referendum, including sixteen- and seventeen-year-olds in the franchise, with Yes being a vote for independence – but, critically, just one question on the ballot paper.
People would argue that I gave too much away to get that single question. That with votes for the young, a long campaign and the positivity of a Yes vote, it was 3–1 to Salmond. But there was more to my concessions. I was determined to win the battle of perceptions as to whether the referendum was genuinely ‘made in Scotland’. I knew that if there was the merest hint of unfairness or sense that it was a Westminster stitch-up, Salmond would exploit it mercilessly. We needed it to have a force and legitimacy that could be used in future arguments against calls for a Scottish referendum.
I was happy. As I put it on tape shortly after the agreement was signed: ‘I think we genuinely have outmanoeuvred Alex Salmond and he is now in a position where he has signed up to a referendum he won’t win … So the nego
tiation was successfully done, I went up to Scotland, signed on the dotted line, and I hope that in 2015 we’ll be able to look back and say we saved the United Kingdom.’
If only it had proved that easy.
24
Treaties and Treadmills
Sitting around the huge dining table with twenty-six other European leaders, I looked at the time on my phone: 2 a.m. We had been at an ‘informal dinner’ discussing a new treaty to deal with the Eurozone crisis since 8 p.m., and it still wasn’t my turn to speak.
Herman Van Rompuy, the former prime minister of Belgium and now, thanks to the Lisbon Treaty, the first-ever formally appointed president of the European Council, was doing his characteristic ‘talk and talk until everyone collapses in agreement’. My team and I referred to it as ‘the Belgian method’.
I sat under the bright lights, surrounded by uncleared plates, with Ireland’s Enda Kenny on one side and the Spanish prime minister, José Zapatero, on the other. I waited patiently. My moment eventually came at 2.30 a.m. on 9 December 2011. I pushed the activate button on the microphone in front of me and launched what I privately called ‘my Exocet’. Without safeguards for Britain’s financial services and for the single market, I said, we would not be signing the new EU treaty they were proposing. And without our signature, there could be no treaty.
There were three big European moments in 2011, and this was the third.
It wasn’t what Nick Clegg and I had expected as we formed the coalition and looked ahead to what we thought would be five relatively Europe-free years.
In 2010 a new treaty (a significant change to European law, that usually sees power flow from member states to Brussels and has to be agreed by all those member states) looked unlikely, because the Lisbon Treaty had just been ratified. The process had exhausted Europe, and in December 2007 leaders committed to making no more changes ‘in the foreseeable future’. It was as though the volcano had erupted, and was now sure to lie dormant for some time.
In addition, we were in coalition. Not emphasising European policy – where we sharply disagreed – was a price we both agreed to pay to make the government function properly. Nick’s party was avowedly in favour of European integration, to the extent of still hankering after British membership of the euro. Mine was still the broad church of the Major years, but the balance had shifted markedly. There were still enthusiasts like Ken Clarke, Alistair Burt and Nicholas Soames, but the heart of the party was Eurosceptic. William Hague had summed up the mood with the slogan ‘In Europe, but not run by Europe’. Some were zealously, obsessively opposed to everything the EU did – and they happened to be members of the rebellious right-wing usual suspects. But then there was a large part of the new intake – modern, compassionate Conservatives – who were more stridently Eurosceptic than I had expected at the time and than people realise now.
It was still possible to have agreed Conservative positions on Europe – and we did. Our election manifesto set out support for the single market and enlargement, combined with the return of certain powers from Brussels to Britain, and a ‘referendum lock’ – a law that stated there could be no future transfer of powers from Britain to Brussels without a referendum.
The word ‘Europe’ wasn’t even mentioned in the ‘Coalition Agreement’, and in the ‘Coalition Programme for Government’ there was just one European policy, this ‘referendum lock’. After our aborted referendum pledge, caused by the Lisbon Treaty’s full implementation, it was the next-best thing.
Getting the lock into the ‘Programme for Government’ was made slightly easier by the fact that the Lib Dems’ election manifesto included a rather complicated referendum pledge of their own. In the event of another EU treaty, the Liberal Democrats had proposed that it should be accompanied by a full in/out referendum.
All this makes it sound rather as if I was not bothered by the EU’s failings. Far from it. I saw myself as a pragmatic Eurosceptic: I wanted to be in the EU – it would affect Britain regardless, so we should be at the table, fighting for our interests – but I also wanted to change it to make it work better for us.
I felt strongly that the Lisbon Treaty – the proposed 2005 European Constitution in all but name – had been agreed over the heads of the British people, without the referendum they had been promised by the Blair government. I disliked its substance, not just its form. It was yet another treaty that reduced national vetoes and centralised power in Brussels. And I wasn’t just trying to stop more powers going to Brussels. I genuinely wanted to get powers back.
I had supported the Conservative opposition to Blair’s decision to grant Poles, Hungarians, Czechs and others immediate access to our labour market when the so-called ‘A8’ countries joined the EU in 2004. And as leader of the opposition I had pushed for transitional immigration controls to be put in place before Romania and Bulgaria joined the EU in 2007.
In 2009 I took our party out of the EPP grouping because of its commitment to federalism and ‘ever closer union’.
In 2010 we promised in our manifesto to get out of the Social Chapter, which added labour and employment legislation to the rules of the single market. John Major had sensibly opted out of the Social Chapter at Maastricht in 1992; Tony Blair had foolishly surrendered this opt-out in 1997, without getting anything in return.
And even as prime minister, with all the coalition constraints, I had not been entirely silent on the Europe issue. I said in a Spectator interview in July 2011 that now we were in government, there might prove to be opportunities for the repatriation of powers.
So, in an ideal world, yes, we should recalibrate Britain’s relationship with Europe. But this wasn’t an ideal world; it was a world whose economy was in crisis and where we were in coalition. ‘Control the issue, rather than allowing it to control us’ became my mantra, for now at least.
And yet in an interconnected global economy, you’re never fully in control.
So far I’ve used the word ‘Europe’ as a proxy for the European Union of twenty-seven (later twenty-eight) countries out of fifty in the whole continent. But there was also the club within that club – the seventeen countries that used the euro as their currency. And it was this currency union that was to drive Europe to the top of the global agenda when I became PM in 2010.
If I was sceptical about the EU, I had always been deeply sceptical about the euro. My problem wasn’t just with the fact that the euro was an avowedly political project to unite Europe and override national governments. It was also that the currency union was established within a flawed framework. The euro was introduced on the basis that monetary policy – interest rates and the amount of money in circulation – was set by the European Central Bank (ECB).
Yet economic and fiscal policy – taxing and spending – continued to be set by national governments. Yes, there were rules about deficits, and procedures for monitoring Eurozone economies – the so-called ‘Stability and Growth Pact’. But they were incomplete and regularly broken (indeed, Germany and France were among the first countries to break them).
Monetary union without economic and fiscal union doesn’t work, not in the long term and particularly not if the countries it covers diverge in terms of productivity and economic performance. And it certainly won’t work if the rules are incomplete, fudged and frequently ignored.
Can a single currency spanning different nations ever work? Of course. The pound sterling functions effectively as a single currency across the four nations of the United Kingdom because we have common monetary, economic and fiscal policies. When one nation, or even one part, of the UK has a difficult year, it pays less in tax and receives more in public spending. These so-called ‘fiscal offsets’ are vital in making the system work. And because we share a common British identity and feel solidarity towards one another, we don’t (generally) complain that London is ‘subsidising’ Liverpool, or Glasgow is ‘bailing out’ Cardiff – we just let the sy
stem and the offsets work.
A single currency that crosses different countries, with widely differing economies, without such fiscal offsets – and without such solidarity – is, in my view, doomed to eventual failure.
My strong instincts about this issue flowed directly from Britain’s experience inside the Exchange Rate Mechanism in the 1990s, when the high interest rates across Europe left Britain with a tighter monetary policy than our economy needed. It was a disaster.
And disaster also struck the Eurozone. In this case it wasn’t high interest rates that initially caused the problem, but low ones.
After the euro was first established on 1 January 1999, these low rates enabled countries that had previously struggled to borrow at a low cost to go on a borrowing and spending spree. This created dangerous credit and housing bubbles, together with debts and deficits that the performance of these economies couldn’t justify. When the economic crisis struck in 2008, markets started to question the creditworthiness of these countries and the safety of their banks, and the interest rates they faced sky-rocketed.
First were the Greeks, who had manipulated their economic statistics to join the euro, subsidised an inefficient public sector, and failed to collect taxes. Portugal, Spain and Ireland were also vulnerable.
This was terrible, of course, but what had it got to do with Britain? We weren’t even in the single currency.
The fact was, if our neighbours were in trouble, so were we. The Eurozone was one of the largest markets in the world – and our biggest trading partner. ‘Contagion’ became the watchword, hence the document waiting for me on my first day in office, warning, among other things, that creditors might want to restrict their investments in other high-deficit countries – including ours.
For the Record Page 41