Mrs. Thatcher’s First Goevernment
Immediately on election as prime minister, Margaret Thatcher had commenced a campaign to reduce the UK contribution to the EEC budget. The common agricultural policy accounted for almost 70% of the EEC budget at that time. It had been established prior to UK membership, and its terms were much less favourable to the UK than to other EU countries, in particular, France and Italy. The UK had fallen significantly in terms of relative GDP per capita yet made much higher budget contributions. Finally, in 1984 UK rebate was obtained comprising an adjustment of UK contributions which has remained in place since that date.
Margaret Thatcher’s Conservative government was strongly pro-free market and was instrumental in the Single European Act reforms which sought to create a genuine EEC single market. The planned completion of the internal market was piloted by Lord Cockfield, the UK’s nominee, as Commissioner for the internal market. His White Paper identified the remaining barriers to the creation of a single market and set the basis for the program to eliminate those barriers by 1992.
The critical aspect was the removal of physical barriers at the borders which had remained in place, despite the elimination of customs duties and a single commercial policy. These barriers arose from differences in VAT and excise treatment and the regulation of goods, so-called fiscal and technical barriers.
Differences in goods’ standards applied across the EEC members. Progress on harmonising or approximating laws was very slow. Many anti-competitive practices had not been tackled. The European Court of Justice in a famous 1979 case ushered in a period of judicial activism by giving real and tangible effect to the basic EU principles including the free movement of goods.
Barriers to trade could be automatically invalidated by the courts unless they fell within one of the relatively narrow bases of justification for their retention by states. Prior to that case, the courts had taken the approach that the harmonisation of laws was to take place through the legislative mechanisms of the EEC.
The Single European Act
The Single European Act was the first major reform of the EU treaties. It introduced qualified majority voting in the European Council across a wide range of areas relevant to the completion of the single market. This effectively overturned the veto which had been instituted following the French walkout in the 1960s by which any member state could block a measure which it considered to be in its vital national interests.
Qualified majority voting required approval by a proportion of member states representing a proportion of the total population. The voting is effectively weighted with smaller states having a slightly greater percentage input than their population alone would justify.
The Single European Act was signed in 1986. After a decision of the Irish High Court and Supreme Court requiring a referendum for approval under the Irish Constitution, it was finally ratified became effective on 1st July 1987.The single market was largely successful and completed on time. The removal of the veto and qualified majority voting were significant factors in cutting through deadlock in the legislative process.
The single market measures involved significant changes to VAT and to the mechanisms for harmonising goods standards. It gave effect to the free movement of capital and free movement of services. All remaining exchange controls between the member states were removed. It assisted free movement of workers and provided a range of other measures which were designed to ensure free movement through EEC borders.
UK Resistence to Further Treaty Reform
Many in the UK argue that the development of the EU should have stopped at this point. It is argued that the EU should accommodate participation by members at this largely economic level without the later “political” developments that followed.
Although Margaret Thatcher had a somewhat fraught relationship with the EEC, she supported the measures to complete the single European market. Prime Minister Thatcher’s opposition to further European integration became more pronounced during her premiership and particularly with her third government in 1987. In her Bruges speech in 1988, Thatcher outlined her opposition to proposals from the EEC, for a federal structure and increased centralisation of decision making.
“We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level, with a European super-state exercising a new dominance from Brussels.”
The late 1980s and early 1990s saw the dismantling of the Iron Curtain and the reunification of Germany. Under the German Constitution, East Germany automatically became part of Germany and the European Communities. France exerted political pressure to strengthen political and monetary union to counterbalance German reunification.
Margaret Thatcher’s last year as Prime Minister coincided with the fall of the Berlin Wall and treaty negotiations leading to the unification of Germany. She and leading members of her party had expressed concerns about a reunited Germany, sometimes in undiplomatic and arguably racist terms. At the same time, Jacques Delors, as Commission President, was seeking the further reforms of the EU treaties which would later be reflected in the Maastricht treaty 1992.
Margaret Thatcher was initially opposed to German unification on the basis that it would undermine the stability of the international situation and endanger security. She expressed the concern that a united Germany would align itself with the Soviet Union and move away from NATO.
Infamously following a discussion in the European Council about European and monetary union Margaret Thatcher said, that it was ‘is very ironic indeed that, at a time when Eastern Europe is striving for greater democracy, the Commission should be striving to extinguish democracy and put more and more power into its own hands or into the hands of nonelected bodies. She said that Jacque Delors ‘wanted the European Parliament to be the democratic body of the Community, he wanted the Commission to be the executive and the Council of ministers to be the Senate. No. No. No.”
Enhanced Social Policy
Jacques Delors who had been a minister in the French Socialist government of President Mitterrand was president of the EU Commission for 10 years from 1985, during which time the single market was completed, the Social Chapter adopted and the Treaty of Maastricht adopted with the European Communities renamed and effectively remade as the European Union.
Commencing in the late 1980s, the single market reforms began to be counterbalanced with greater economic and social rights. Starting with very modest provisions in the Single European Act, the Maastricht treaty in 1993 and later treaties saw significantly increased EU powers in the area of social and economic rights, employment and the health and welfare of employees. The European Social Charter was adopted in 1989 although it did not become part of the treaties until 1999.
These reforms made the EEC, and later the EU, more palatable to left-wing opponents who have seen it as a capitalist club. Mandatory EU rules which could be introduced by majority voting provided a break on the continuing Conservative party social and employment law reforms in the UK. A significant element of the Conservative party saw the EU as an obstacle to the party’s reforming and liberalising agenda.
Famously in her 1988 speech in Bruges Margaret Thatcher explained her view of EU membership is that of willing and active co-operation between independent sovereign states and objected to power being centralised in Brussels or decisions being taken by an appointed bureaucracy. The Bruges Group was founded the next year and has remained as a think tank advocating change in the UK’s relationship with the European Union. It is closely associated with certain Eurosceptic members of the Conservative party.
Replacement of Margaret Thatcher and Maastricht
On 1 November 1990, Howe, resigned from his position as Deputy Prime Minister, ostensibly over Mrs Thatcher’s open hostility to moves towards European Monetary Union. In his resignation speech on 13 November, Howe commented on Thatcher’s openly dismissive attitude to the proposal for a new European currency a “hard ECU”): Although due primarily to other factors not least a misjudged reform of local government tax, Howe’s resignation hastened the end to Thatcher’s premiership.
Margaret Thatcher was replaced as prime minister by John Major who was unexpectedly re-elected in 1992 with a small majority. His government’s time in office was characterised by divisions and struggles with strongly Eurosceptic backbenchers opposed to the increasingly supranational elements reflected in the Maastricht treaty and the developments and momentum towards the later Amsterdam treaty.
The Maastricht treaty signed in 1992 was an important development in the move beyond a mere economic community. It introduced the concept of European citizenship established, the process for European monetary union and increased powers in the area of social and economic rights. Reflecting this change, the communities were renamed the European Union.
The UK’s negotiations in Europe were characterised by resistance to some key elements of treaty reform. John Major’s government secured important opt-outs from the Maastricht treaty and resisted the incorporation of the Social Chapter. 22 members of the Conservative party (supported from outside Parliament by Margaret Thatcher) voted against the implementation of the Maastricht treaty in UK law. The Labour whip was to abstain, but some Labour MPs voted against the bill.
On a Labour amendment to postpone incorporation of the treaty into UK law, the government adopted the protocol on social policy or the social chapter the vote was tied 317 to 317 and the proposal was rejected, only on the casting vote of the speaker.
The ERM Debacle and the Major Governments
Mrs Thatcher removed Geoffrey Howe as Foreign Secretary in July 1989 after he and Lawson had forced her to agree to a plan for the UK to join the European Exchange Rate Mechanism (ERM). Britain joined the ERM in October 1990. The arrangements worked in a broadly satisfactory manner until 1992. The system effectively broke down in 1992 following sustained attacks on the value of certain weaker currencies. Several countries including the United Kingdom and Italy and Ireland, were forced out of the mechanism. Ireland took a further 10 per cent devaluation of its currency. The mechanism continued but the currency fluctuation band was expanded from 2.25 per cent to 15 per cent either side of a central target.
The Euroscepticism in the Conservative party was reinforced by the dramatic failure of UK membership of the European exchange rate mechanism in September 1992. As in Ireland, the economy rebounded very strongly from the effective devaluation which seemed strongly to vindicate Margaret Thatcher’s opposition to the UK joining the mechanism. It was a particularly bitter memory for many Eurosceptics that the immediate cause of her removal from office was her resistance to the ERM and the unfolding and increasingly federal nature of the European Union.
The UK Conservative government of John Major which had recently been re-elected, never recovered the loss of public support following the UK’s ignominious exit from the European exchange mechanism on so-called black Wednesday 1992 despite running a full five-year term.
Eurosceptic Conservative MP Bill Cash established a foundation to fund legal challenges to the government. The anti-Federalist league was established, which ultimately led to the creation of the UK Independence Party (UKIP). Some of the rebels left the Conservative party to join that party including some of those who later served as leader.
The Maastricht treaty rebels continued to harass John Major’s government on European issues and came close to bringing it down on three occasions. In 1995, John Major resigned and called an early leadership election to reimpose authority which he won. Infighting in his government continued until the end of its five-year term.