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EU referendum: UK’s EU reform negotiations and the Tusk package

Published Tuesday, February 9, 2016

This Commons Library briefing paper looks at the Prime Minister’s proposals for EU reform, which he set out in a letter to the President of the European Council, Donald Tusk, in November 2015, concerning four broad areas: economic governance, competitiveness, sovereignty and free movement. It also looks at Donald Tusk’s package of draft texts to address UK concerns, their implications and prospects for agreement.

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David Cameron meeting with Donald Tusk

What did David Cameron ask for in his bid to change the UK's terms of EU membership before holding a referendum on whether to stay in or leave the EU?

What has the European Council President Donald Tusk come up with by way of a draft deal and will it be acceptable to the other Member States and the UK electorate? What's been going on behind the scenes?

David Cameron's EU reform demands

On 10 November 2015 the Prime Minister set out his demands in a letter to European Council President, Donald Tusk, A new settlement for the United Kingdom in a reformed European Union. It concerned the four broad areas of UK reform: economic governance, competitiveness, sovereignty and free movement.

In January 2016 there appeared to be growing optimism among EU and UK negotiators that a deal of benefit to both the UK and the EU could be achieved and agreed as a legally binding Decision of the Heads of State or Government within the existing EU legal framework. Any Treaty changes that were necessary could be made later on.

The most problematic of the Prime Minister’s demands has been the proposed restriction on in-work benefits over a period of four years, which other Member States, especially those in Central and Eastern European, are likely to find discriminatory and unpalatable.

Donald Tusk's Draft Decision

On 3 February 2016 Donald Tusk published a letter and six draft texts intended to address UK concerns, which he described as “a good basis for a compromise”.

Economic governance

Further integration is needed to achieve full Economic and Monetary Union (EMU) for those States whose currency is the euro, but any further measures aimed at deepening EMU will be voluntary for non-eurozone States.

Non-eurozone States must not create obstacles to further eurozone integration, but there will be respect for the rights and competencies of non-participating Member States. This mutual respect will include:

  • No discrimination based on the official currency of the Member State;
  • The European Central Bank (or Single Resolution Board or similar EU bodies) will have authority only over credit institutions in eurozone States, or over those Member States that have voluntarily adopted the EU’s prudential supervision;
  • Emergency measures to safeguard the financial stability of the eurozone will not result in budgetary responsibilities for non-eurozone States

Competitiveness

  • The internal market and the free movement of goods, persons, services and capital are essential objectives of the Union, and the EU must increase efforts to enhance its competitiveness to achieve this objective;
  • The EU institutions and Member States will take steps towards better regulation, reducing administrative burdens and compliance costs on economic operators (especially SMEs), and repealing unnecessary legislation (building on the Regulatory Fitness Programme);
  • European Commission will carry out an annual review of the EU’s efforts to simplify legislation and avoid over-regulation. The Commission will propose repealing measures that are inconsistent with the principle of subsidiarity, or would involve a disproportionate regulatory burden.

Sovereignty

  • In view of the UK’s special position under the EU Treaties, the UK is not committed to further political integration. References in the EU treaties to the process of creating an “ever closer union among the peoples of Europe” should not be considered as referring to an aim of political integration;
  • Reasoned Opinions issued by national parliaments under the Treaty protocols on subsidiarity and proportionality must be respected by all EU institutions in the decision-making process. Member States will discontinue the consideration of a draft legislative act where a number of national parliaments (55%) object to it on subsidiarity grounds (‘red card’);
  • National security remains the sole responsibility of Member States and the EU institutions will fully respect this.

Social benefits and free movements

  • Freedom of movement and non-discrimination will be respected, but recognising that the social security systems of certain Member States may be more attractive for workers than others;
  • It is legitimate to provide EU and national measures to avoid or limit flows of workers from other Member States of such a scale that they have negative effects for the States of origin and the States of destination.

After the adoption of final texts, the European Commission will submit proposals for amending existing EU secondary legislation to:

  • give Member States the option to index the export of child benefits to a Member State other than where the worker resides to the standard of living in the State where the child resides;
  • take account of a pull factor as a result of a Member State’s in-work benefits system by amending free movement legislation to provide for an alert and safeguard mechanism to respond to situations where the inflow of workers from other Member States is of an “exceptional magnitude” over a long period of time.

This will involve the receiving Member State obtaining prior approval from the Commission and the European Council to restrict access to in-work benefits to the extent necessary.

A Member State will be allowed to limit the access of new EU workers to in-work benefits for a period of up to four years from the start of employment. The restriction will be graduated as the worker becomes more integrated into the labour market.

Reaction to the Tusk drafts

Reaction to the Tusk drafts has been mixed, and the Prime Minister has yet to convince some other Member States, particularly in Central and Eastern Europe, and the European Parliament that they are beneficial to the whole EU rather than just UK ‘cherry-picking’, and not discriminatory. The negotiations are continuing at EU and bilateral levels.

The UK referendum

The date of the referendum is not yet known, and will to a large extent depend on whether there is agreement at the European Council meeting on 18-19 February.

The campaigns to leave and remain have already begun but are expected to intensify in the coming weeks. David Cameron has said members of his government are free to vote on either side in the campaign after the negotiations have concluded.

If the final agreement is satisfactory the Prime Minister intends to campaign to stay in the EU.

Recent opinion polls put the Leave campaign narrowly in the lead.

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