Details Created: Sunday, 26 June 2016 10:07 Written by David Yaffe and Carol Brickley

‘Independence Day’?

At 4am on 24 June, Nigel Farage, UKIP leader, could contain himself no longer, naming 23 June ‘Independence Day’, he issued a victory speech in advance of the result being declared that the British electorate had voted to leave the EU. ‘This is for the real people, for the ordinary people, for the decent people’, he claimed. Apart from insulting the 48% of voters who had opted to remain in the EU, nothing could have been further from the truth. The ordinary people in Britain, whether voting to remain in the EU or leave it, will gain nothing from the result. For the ranks of working class people whose living conditions have worsened under successive governments, they will continue to face relentless attacks on every aspect of their lives, from health, education and housing, to employment conditions and job security. This referendum was not about ameliorating the lives of working class Britons; it was exclusively driven by divisions in the ruling class on how to protect their wealth and power in the face of capitalist crisis and to defend the parasitic interests of the City of London, the financial arm of British imperialism, from European oversight and control. In or out of the EU, the working class in Britain and across Europe will continue to pay the price.

During the referendum campaign and in the hours since the result was declared, this has become abundantly clear. The immediate response was panic on the currency and stockmarkets of the world which drove sterling to its lowest level for 31 years and temporarily wiped £120bn off the value of Britain’s leading shares. As ratings agencies Moody’s and Standard and Poor’s downgraded Britain’s credit rating, the Bank of England was forced to step in, promising to ‘do whatever is needed’ to stabilise the situation.

On the political front, the result has been a seismic shift for the ruling class. Prime Minister Cameron quickly announced his resignation to make way for a pro-Brexit leader to conduct the negotiations to leave the EU. On the other hand, the Brexit victors, with the exception of Farage, were suddenly reluctant to press their advantage. As the polls closed, 84 Brexit-supporting Tory MPs called on Cameron to stay. After the result, Boris Johnson, who had just seen his path to leadership of the Conservative Party cleared of his main rivals – Cameron and Osborne – said there was ‘no rush’ to open negotiations with the EU.

What lies behind this reluctance is the fear that the main political beneficiaries of this ‘victory’ will be UKIP, not the right-wing of Tory party. Johnson and Gove, leading lights of the Brexit campaign, were happy to team up with Farage in a xenophobic campaign accompanied by a variety of ‘laddish’ antics and fanciful promises for future public spending.1 The anti-immigration propaganda worked, as it was meant to, in winning the votes of millions of working class people who believed what they have been told: that immigration is the cause of the decline in their living standards. Contrary to subsequent media comment, this xenophobia is not the unacceptable face of working class ideology; it is in fact the hallmark of a petit bourgeois world view, imposed on working class people. Now the referendum has been won, the Brexit Tories must tame this fury if they are to stand any chance of staying in power and defeating UKIP in the long term. Suddenly they need more time.

The EU leadership is not standing still. Horrified by the Brexit victory and the chances that this may have a domino effect throughout the EU at a time when the eurozone is crisis-ridden and immigration is a tinderbox issue, leaders of European institutions, Tusk, Juncker and Schultz, and foreign ministers from the EU’s six founding members states called for a speedy British exit to prevent ‘uncertainty’. Warnings have already been issued that the City of London should not expect to retain its privileged status as a financial centre in Europe. The new contradictions have only just begun. Already SNP leader Nicola Sturgeon is calling for a new referendum on Scottish independence.

And what of the Labour Party, which after years of Euroscepticism, threw its lot in with the Remain campaign? Within hours of the result, some leading Labour MPs were blaming leader Jeremy Corbyn for the Brexit victory. According to MPs Margaret Hodge and Ann Coffey, who tabled a no confidence motion, Corbyn’s lacklustre campaigning failed to mobilise Labour voters. Squabbling has reached a new pitch with Hilary Benn, Shadow Foreign Secretary, being sacked for leading a coup attempt encouraging Shadow Cabinet members to resign. As we reported in FRFI 251, attempts to unseat Corbyn and drive Labour further to the right are rife. According to a recent report, Labour ‘is becoming a toxic brand. It is perceived by voters as a party that supports an “open door” approach to immigration, lacks credibility on the economy, and is a “soft touch” on welfare spending.’2 Accordingly Labour must move to the right to win power. At a time when the Conservative Party will be mired in its own bitter leadership contest over the summer, Labour will renew its own internecine war. What will certainly not be a priority will be defending the interests of the British working class, in particular the poorest sections, the minority ethnic communities and Muslims who will be the targets of the new political disposition whether it is a right-wing Tory government or UKIP.

In FRFI 251 we published our view on the referendum (see below).3 David Yaffe argued:

‘We reject totally taking sides in what is essentially a dispute between sections of the ruling class over what would be for Britain necessarily totally reactionary outcomes – part of a European imperialist bloc or becoming an offshore centre for usury capital under the umbrella of US imperialism. The only principled communist position is to call for a boycott of the referendum while exposing the reactionary intentions of those on either side.’

Events since the referendum have proved this position to be correct. In the next issue of FRFI we will be commenting further, from a communist standpoint, on the post-referendum crisis as it engulfs Britain and Europe.

Carol Brickley

1. Within hours of the Brexit victory, Farage had withdrawn the campaign promise to spend the £350 million a week saved from the EU on the NHS.

2. ‘Labour: ‘not racist enough’”’, Robert Clough, FRFI 251 June/July 2016.

3. ‘EU referendum: the position of communists’, David Yaffe, FRFI 251 June/July 2016.

EU Referendum - The position of communists

The imperialist character of Britain is decisive in determining all the major economic and political developments in this country. The parasitic character of British capitalism, its dependence on the earnings from its vast overseas assets and particularly those of its parasitic banking sector to sustain the British economy, has made it extremely vulnerable to the global crisis precipitated by the financial crash of 2007/08. The continuing global crisis of the capitalist system, the growing conflicts between the imperialist powers, the destabilisation of entire regions of the world, forcing millions to flee to survive, has severely undermined Britain’s capacity to sustain its role as an independent imperialist power. These developments have brought Britain’s relationship with the European Union (EU) to a head. David Yaffe reports.

Nearly ten years ago we argued that the parasitic character of British capitalism would sooner or later force the British ruling class to make a choice between Europe and the United States.1 Britain’s relationship with Europe and the impasse the British ruling class finds itself in over this question is now upon us. Its resolution will have dramatic consequences for the rivalry between European and US imperialism and for the future role of the City of London. On the 23 June 2016 the British people will vote in a referendum to decide whether to remain in or leave the EU. The British ruling class is seriously divided and ferociously fighting to determine the outcome.

This is the second referendum the UK has had in relation to its ties to Europe. The first took place under the Wilson Labour government on 5 June 1975. The British ruling class, since the Second World War, has been divided on the issue of Europe. Before both referendums it proved necessary for the ruling party to try to renegotiate the terms of its membership, of the European Economic Community (EEC) in 1975 and the EU in 2016. At issue throughout was the status of British imperialism and, particularly, the independent role of the City of London, the financial arm of British imperialism.

British imperialism and Europe

After the Second World War, the US was fully behind some form of European union, something that would ease its plans for dominating and developing a Europe complementary to US economic interests. It wanted Britain to be fully involved, firstly, as part of the process to ease the replacement of Britain by the US as the world’s leading imperialist power, and secondly to ensure Anglo-US interests played a prominent role in developing the future European economy. Britain was in favour of European co-operation but only to the degree that it would not interfere with British plans to retain its status as a major imperialist power and the City of London as one of the world's leading financial centres. Britain, therefore, would not accept that it should submerge its sovereignty in Europe. Neither did it want to see any kind of continental unity which would inevitably mean the domination of Europe by a single great power – such as a revitalised Germany.

There have been various important developments since that period. Germany was unified in October 1990 after the collapse of the Soviet bloc and is now, indeed, the dominant European power. 28 countries are at present members of what is now called the EU. However, the British attitude to Europe throughout has not fundamentally changed.

In 1946 Winston Churchill made a speech in the University of Zurich calling for France and Germany to reconcile their differences and ‘build a kind of United States of Europe’. Britain, however, while giving support to such a development would not be part of it. Churchill’s view was best expressed in a Cabinet note of 29 November 1951:

‘I am not opposed to a European Federation including (eventually) the countries behind the Iron Curtain … But I never thought that Britain or the British Commonwealths should, either individually or collectively, become an integral part of a European Federation … We should not, however, obstruct but rather favour the movement to closer European unity and try to get the United States to support this work.’2

In January 1973, as European integration progressed, Britain under a Conservative government led by Edward Heath eventually joined what was then the EEC making it up to nine members. Two previous applications to join were vetoed in 1963 and 1967 by French President, Charles de Gaulle, who regarded Britain as a Trojan horse for US influence.

The Labour Party was divided on membership of the EEC and its manifesto for the October 1974 election promised that the people would decide through the ballot box whether to remain in the EEC. (An earlier election on 28 February 1974, precipitated by the miners’ strike and the three-day week, had resulted in a minority Labour government). Labour won the election of 10 October 1974 with an overall majority of three. It announced that it would renegotiate terms of British membership of the EEC. Renegotiations took place and a referendum was called for 5 June 1975. It asked: ‘Do you think that the United Kingdom should remain part of the European Community (the Common Market)?’, allowing a simple ‘Yes’ or ‘No’ response.

The renegotiations agreed included:

Changes to the Common Agricultural Policy to make it more flexible so Britain could import food from the British Commonwealth.

Smaller contributions to the EEC Budget.

The threat of a fixed exchange rate for the pound removed.

More flexible VAT rates with no VAT on necessities such as food.

Better deals for Britain’s Commonwealth partners.

During the campaign almost the entirety of the mainstream national British press supported the ‘Yes’ campaign. The left-wing Morning Star was the only notable national daily to back the ‘No’ campaign. The trade union movement led by the TUC was opposed to remaining in Europe and had boycotted key advisory positions in Brussels and Luxembourg when Britain joined in 1973. A one-day conference held by the Labour Party to debate Britain's membership of Europe on 25 April 1975 voted by almost 2-1 to leave the EEC. Most of the unions, including the two largest, the Transport and General Workers Union and the Amalgamated Union of Engineering Workers, voted to leave. The Labour Cabinet was split with 7 out of 23 members seeking withdrawal and given permission to campaign for a ‘No’ vote. The ‘Yes’ campaign was supported by the majority of the Conservative Party, including its newly-elected leader Margaret Thatcher. 249 of the 275 party members in Parliament supported staying in Europe during a free vote in April 1975.

The ‘Yes’ campaign enjoyed much more funding, thanks to the support of many British businesses and the Confederation of British Industry (CBI). On the day of the referendum over two-thirds of voters supported continued EEC membership with 67.2% voting ‘Yes’ and 32.8% voting ‘No’, on a turnout of 65%. The Labour Prime Minister Harold Wilson called the vote a ‘historic decision’ and Roy Jenkins, the Home Secretary said: ‘It puts the uncertainty behind us. It commits Britain to Europe; it commits us to playing an active, constructive and enthusiastic role in it.’

The divisions in the ruling class, however, did not go away. With the growing crisis of British capitalism they began to emerge again most strongly within the Conservative Party in the 1980s. In September 1988 Margaret Thatcher made her watershed speech in Bruges, Belgium, attacking certain developments in the EEC and calling for substantial reforms. However, while making clear her strong opposition to any European ‘superstate’, she nevertheless went on to say: ‘And let me be quite clear. Britain does not dream of some cosy, isolated existence on the fringes of the European Community. Our destiny is in Europe, as part of the Community.’

Britain joined the European Exchange Rate Mechanism (ERM) on 8 October 1990 at a rate of DM 2.95 to the pound sterling. If the exchange rate ever neared the bottom of its permitted range, DM 2.773, the government would be obliged to intervene. With UK inflation at three times the rate of Germany's, interest rates at 15% and the ‘Lawson Boom’ about to bust, the conditions for joining the ERM were not favourable at that time. On 16 September 1992, the Conservative government was forced to withdraw the pound sterling from the ERM after it was unable to keep the pound above its agreed lower limit. The pound dramatically fell.

After Thatcher was forced to resign as Prime Minister in November 1990, her replacement, John Major, was harangued mercilessly by the eurosceptics in his Cabinet (he famously called them ‘bastards’) and by the Tory party for what were regarded as his pro-European views. In a speech at Leiden University, the Netherlands, in September 1994 he made the case for a more flexible multi-speed Europe, and went on to give the British perspective on the 12-member EU. ‘It is quite simply that Britain is irrevocably part of Europe. We are hard-headed about it but perfectly clear. The British people know that their future rests with being part of the European Union’. This critical point had been made by Michael Heseltine in 1989, previously a Cabinet minister in Thatcher’s government and later to challenge her in the Conservative leadership contest, when he said: ‘The conditions which made it possible for Britain to be semi-detached from Europe for so long have vanished for ever. There is no empire to sustain us; we are no longer an industrial superpower; we can no longer pretend that Britain is in any sense an equal partner of the US. There is nowhere for us to go except as part of a European consortium.’3

In the context of the growing global stagnation of capitalism and the decision by the dominant European capitalist powers to build an imperialist bloc that could challenge US imperialism’s domination of the global economy, the British ruling class were increasingly being confronted by the choice: junior partner to US imperialism or closer alliance with a more integrated Europe. The Treaty of the European Union was signed at Maastricht in December 1991. Key components of the Treaty were the decisions to establish a European central bank by July 1998 and a common European currency by January 1999. This reflected the degree of integration of European finance capital.4 This could only exacerbate the divisions within the British ruling class. At the centre of its concern was the international role of the City of London.

The parasitic character of British capitalism, its dependence on the earnings from its vast overseas assets and particularly those of its parasitic banking sector to sustain the British economy, shows not only its vulnerability to any external financial or political shocks, but also that it is no longer capable of withstanding the economic and political challenge of US or European imperialism as an independent imperialist power.

Britain’s role as ally of the US in the brutal war and occupation of Afghanistan (2001) and Iraq (2003) caused, at the time, an increasingly strained relationship with the EU. It raised even more concretely the issue of Britain’s relationship with Europe in the context of the growing challenge to US imperialism’s global domination. We said at the time: ‘How long the British economy can sustain itself outside Europe, with Britain becoming more and more dependent on the parasitic dealings of the City of London, remains to be seen. The British ruling class knows that sooner or later it will have to make a choice between Europe and the United States. Whatever choice is forced on the ruling class, it is certain that any independent role of the City of London will be severely curtailed.’5

Since 1975 there has been a very significant change in the attitude of the British Labour movement to Europe. At the beginning of the 1990s it had become increasingly clear that British imperialism could no longer sustain a social democratic state. For sections of the British Labour movement a Keynesian welfare state was no longer sustainable on a national basis. A European-wide Keynesianism was seen as a more viable alternative, with British imperialism becoming a significant player within a European imperialist bloc. Sections of ‘left’ MPs within the Labour Party had already started the push for a new strategy towards Europe, putting their own opportunist gloss on the issues at stake. Typical were the Labour MPs Ken Livingstone and Harry Barnes: ‘Democratic socialists must build for a European future, placing social welfare and democracy on the agenda …On its own the sovereign nation state is no longer up to the job of dealing with the many pressing issues, such as the power of multinational corporations, ecological crises, new technology investment, the conversion of defence industries … The socialist project goes through Europe or it probably goes nowhere.’6 This is the ideological justification for the opportunist change in the attitude of the mainstream British Labour movement to the 2016 referendum on Europe. That is why Jeremy Corbyn, as leader of the Labour Party, now feels he has to speak out in favour of Britain remaining in Europe, reversing a long-held opposition.

The 2016 referendum

The background to the current referendum is the ongoing eurozone crisis and the deep splits in the Conservative Party over Europe, splits exacerbated by the challenge of the United Kingdom Independence Party (UKIP), its anti-EU stance and racist immigration policy. The overall exposure of UK banks to debt in the so-called ‘peripheral’ countries in Europe, the weight of banks and financial services in the British economy and the importance of the financial derivatives market for the City of London make Britain very vulnerable to a run on eurozone banks. That is why the British ruling class is so concerned that Europe should address the deepening debt crisis throughout the eurozone. On the other hand it is determined to protect the parasitic and speculative activities of the City of London from European oversight and control. So the British government continually demands safeguards for the City of London as the price for accepting European measures, such as a eurozone banking union, to address the crisis in the eurozone.

On 23 January 2013, Prime Minister David Cameron announced, in his Bloomberg speech, that he would renegotiate the terms of Britain’s membership of the EU and follow this with an in/out referendum on Britain’s membership by the end of 2017. He did this in a futile attempt to appease the eurosceptics in his party, outflank UKIP, and strike a populist pose to improve his party’s prospects in the next general election. It was a spectacular gamble which has created quite serious problems for the British ruling class.

On winning the 2015 General Election, Cameron set about renegotiating terms of Britain’s membership of the EU in the interests of stabilising his party. Key changes will mean:

A seven-year term for the emergency brake to restrict EU migrants in the UK claiming in-work benefits. It will cover individuals for no more than four years.

Child benefit payments indexed to the cost of living for children living outside the UK for all new arrivals to the UK, extending to all workers from 1 January 2020.

Any single non-eurozone country able to force a debate among EU leaders about ‘problem’ eurozone laws – though they will not have a veto.

An unequivocal opt-out stating that EU treaty ‘references to ever-closer union do not apply to the United Kingdom’.

Having achieved these changes he felt confident enough to bring forward the date of the EU referendum to 23 June 2016.

These measures did not appease the eurosceptics in his party. They do not, in fact, represent a significant change on the existing relationship between the EU and Britain. The outcome of the referendum is uncertain, all the more so since the disarray in the Conservative Party resulting from the 2016 Budget and the recent ‘Panama Papers’ revelations about Cameron’s wealth and his dead father’s investments in tax havens.

The ruling class is fundamentally split on the question of the EU referendum. The dominant sections of the ruling class are pulling out all the stops to ensure British people vote to remain in the EU. The Bank of England, the IMF, the OECD, large corporations and international banks, the CBI, and Blackrock – the world’s largest asset manager – and leading European politicians have waded in pointing out the economic risks of Britain leaving the EU. The former MI5 boss, Eliza Manningham-Buller warned of the risks to our security and safety. US President Obama joined this chorus during his visit to London in April when he made it clear that it was in US interests that Britain remained in the EU saying that: ‘The United States sees how your powerful voice in Europe ensures that Europe takes a strong stance in the world, and keeps the EU open, outward looking, and closely linked to its allies on the other side of the Atlantic. So the US and the world need your outsized influence to continue – including within Europe’ (The Guardian 22 April 2016).

US companies have $558bn invested in the UK, with around 7,500 companies employing 1.2 million people. London’s status as a financial market capital is built on ‘passporting rights’ that allow companies based in Britain to conduct business across the EU. This is why London has become the favoured headquarters of many US and international firms. In addition EU companies have accumulated investments of £741bn in the UK, some 60% of the total Foreign Direct Investment in 2014 (Financial Times 22 April and 16 May 2016). Britain’s exit from the EU (Brexit), the Remain advocates argue, would threaten these investments and undermine the flow of inward investment.

The government’s use of two Treasury papers on the impact of Brexit has raised the decibels to unprecedented levels. The first warned that the economy would be 6.2% smaller than current projections by 2030, costing every household the equivalent of £4,300 a year. The second reported that, following convulsions in financial markets, the economy would be tipped into recession with the loss of between 520,000 and 820,000 jobs. Wages would fall between 2.8% and 4.0%, the pound would go down between 12% and 15%, public borrowing would rise between £24bn and £39bn, house prices would be lower by between 10% and 18% and much more in this doomsday scenario.

Faced with this onslaught, the Brexit campaign, led by former London mayor Boris Johnson and Justice Minister Michael Gove, dismissed all these warnings and reports as exaggerated spin. They argue that an independent imperialist Britain can go it alone and negotiate new advantageous trade deals with the rest of the world. They have talked up the increased costs of remaining in the EU, but have essentially fallen back on exploiting xenophobic fears of increased immigration putting ever greater strain on public services and employment. Finally, stepping into the gutter, they have claimed that Turkey’s future membership of the EU will allow millions more to enter the UK within eight years, endangering UK security because of the ‘high level of Turkish criminality’.

What attitude should communists take to the EU referendum?

It is important to say something about the character of a United States of Europe under imperialism. Lenin, in an article ‘On the slogan for a United States of Europe’, written in August 1915, makes what are still indispensable points today. He wrote that under the economic conditions of imperialism, that is, the export of capital and the division of the world by the ‘advanced’ and ‘civilised’ colonial powers: ‘A United States of Europe under capitalism, is either impossible or reactionary’. And later he says of course ‘temporary agreements are possible between capitalists and between states’. In this sense ‘A United States of Europe is possible as an agreement between the European capitalists…but to what end? Only for the purpose of jointly suppressing socialism in Europe, of jointly protecting colonial booty against Japan and America…’7

In FRFI over many issues we have pointed out the process by which the European powers are taking steps to create a European imperialist bloc. We have spelt out the devastating impact it is having on the working class of the peripheral EU countries in the eurozone. There will be no let-up in the desperate conditions facing millions of ordinary Europeans as the dominant European countries push forward their programme step by step to create a federal European imperialist state. It would suppress progressive developments in the member states while confronting the economic challenge of the US and other imperialist powers and compete with them to divide up the spoils from the plunder and looting and super-exploitation of the oppressed nations.

In this referendum we are being asked to choose between two different paths for British imperialism as promoted by two factions of a divided British ruling class – an imperialist Britain within an imperialist EU or an imperialist Britain outside of it as a junior partner of US imperialism.

As we have repeatedly argued, Britain is going to have to make a choice to be with Europe or with the US. Either way the power of the City of London will be severely curtailed. As one European diplomat noted: ‘Britain is at a crossroads… Will it be the centre of finance in Europe, for Europe, which is what it is now? Or does it go offshore? Some people have the illusion that it could be a Greater Guernsey. That is not a good way to go.’ The commentator Will Hutton similarly remarks that Britain out of Europe would be a sort of Greater Guernsey suffering an economic rundown. The deepening eurozone crisis is inexorably confronting the British ruling class with choices it does not wish to make.

Sections of the Labour Party and the Trade Union Congress are calling for Britain to remain in the EU, under the guise of protecting workers’ rights supposedly guaranteed by the EU, against the austerity drive of the Conservative government. This opportunist support for European imperialism is only a cover for their own abject failure to fight against austerity at home in Britain.

Left and right social democrats, including the Communist Party of Britain, the SWP, and Counterfire, have joined together with the rail union RMT and other organisations to promote Lexit – the Left Leave Campaign. The Socialist Party and TUSC have taken up a similar position. They claim to be promoting a ‘working class, left-wing, internationalist case’ for voting to leave the EU. These opportunists say they are against austerity and fighting capitalism. A vote to leave the EU, they say, will lead to a ‘hopelessly fragile’ Conservative government and a ‘crisis of our rulers’, opening up ‘greater space for the left’. In reality they will be voting alongside UKIP for an independent imperialist Britain which will continue to plunder and loot oppressed nations throughout the world.

We reject totally taking sides in what is essentially a dispute between sections of the ruling class over what would be for Britain necessarily totally reactionary outcomes – part of a European imperialist bloc or becoming an offshore centre for usury capital under the umbrella of US imperialism. The only principled communist position is to call for a boycott of the referendum while exposing the reactionary intentions of those on either side. This is the way forward in building an anti-imperialist movement in this country, and it opens the path for communists to link-up with those other forces in Europe fighting against European imperialism.

Fight Racism! Fight Imperialism! 251 June/July 2016

1. See David Yaffe ‘Britain: parasitic and decaying capitalism’ FRFI 194 December 2006/January for a discussion on the parasitic character of British capitalism and the importance of the City of London for the British economy.

2. ‘United Europe’: Cabinet note by Mr Churchill. CAB129/48, C(51)32.

3. Michael Heseltine, The Challenge of Europe; Can Britain Win?, Weidenfeld and Nicolson, 1989.

4. See Trevor Rayne ‘Maastricht and a united Europe’ FRFI 105 February/March 1991.

5. See David Yaffe op cit FRFI 194.

6. The Guardian 21 November 1991.

7. Lenin, CW Vol 21 pp339-343.