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Review of President Tusk’s proposals

President Tusk’s proposals to deal with Britain’s negotiating demands leave David Cameron with some things still to argue for; and they will require the agreement of all of the other 27 Member States. But Mr Cameron has achieved more than he has so far been given credit for in the immediate media reaction. The proposals take the form of legal texts, which are inevitably opaque, but these are texts designed to be adopted in legally binding form and, in some cases, to be included in the basic treaties of the European Union in due course. That in itself is an important safeguard of their durability.

The key texts are on migration and on the relationship between members of the Eurozone and non-members.

On migration, the text asserts that non-discriminatory treatment “may be subject to limitations on grounds of public policy, public security or public health”. “Overriding reasons of public interest”, quite widely defined, may also be used to restrict freedom of movement. Conditions may be imposed “in relation to certain benefits to ensure that there is a real and effective degree of connection between the person concerned and the labour market of the Member State”. New proposals will be brought forward by the European Commission (who, in EU law, have the sole right of legislative initiative). These will not make it possible to stop payments to non-resident children of a benefit claimant, but will enable a Member State to index those benefits to the standard of living in the Member State where the child lives. Most significantly, there will be an “alert and safeguard” mechanism. Under this, a Member State can declare that “an exceptional situation exists on a scale that affects essential aspects of its social security system, including the primary purpose of its in-work benefits system, or which leads to difficulties which are serious and liable to persist in its employment market or are putting excessive pressure on the proper functioning of its public services”. In those circumstances, the Commission would be responsible for bringing forward a proposal, which would need the majority agreement of other Member States, to “limit the access of [European] Union workers newly entering the labour market to in work benefits for a total of up to four years. The limitation would be on a graduated scale, i.e. the benefits would rise gradually during the four year period. For how long this derogation from the normal EU rules could be allowed is one of the issues still to be negotiated. The British Government will want seven years. For their part, the European Commission have (unprecedentedly in my experience) already said formally that they consider that “the type of exceptional situation that the proposed safeguard mechanism is intended to cover exists in the UK today” and that the UK would be justified in triggering the mechanism “in the full expectation of obtaining approval”.

Of course, this is not carte blanche for the UK. Any mechanism has to be applicable to other Member States, at least in principle, and no other member Government will allow what, in effect, is a derogation from Treaty obligations without prior authorisation.

More significant for the long-term UK interest, in my view, is the issue of the relationship between Euro-ins and Euro-outs. George Osborne has been rightly concerned to ensure that Eurozone members should not be able to use the fact that they constitute a qualified majority for voting purposes to discriminate, in measures of EU-wide relevance, against the minority of EU members who remain outside the single currency. Part of what is proposed is a safeguard mechanism whereby a (so far unspecified) number of Euro-outs could seek to suspend a decision on a particular issue and refer it to the Heads of Government in the European Council. George Osborne wants the trigger to be a single Member State. That is unlikely to be agreed. But, in any event, the mechanism is one of delay: the emergency brake can slow the car down, not stop it altogether. It is useful, but not decisive.

The main text on the relationship between Euro-ins and outs is much stronger. It will be a legally binding Decision of Member States – probably to be enshrined in treaty form in due course. In particular, it requires that any decisions taken by Euro Member States “shall respect the internal market and shall not constitute a barrier to, or discrimination in, trade between Member States”. Even more useful is the prohibition on “discrimination between natural and legal persons based on the official currency of the Member State or, as the case may be, the currency that has legal tender in the Member State where they are established”. As I read it, this is a valuable safeguard for the City’s role as a centre for Euro-denominated transactions.

David Cameron will try hard for an agreement at the European Council on 18/19 February. He will want to improve on this text but, above all, to insist that it not be diluted. I doubt if he has yet finally decided on the referendum date. But if a deal is done in two weeks’ time, June still looks likely.

Written By

Sir Stephen Wall