United Kingdom

U.K. Strives to Stay Aloof From EU’s Economic Reform Debate

Britain's Chancellor Gordon Brown gives a speech to 500 business leaders, MPs and VIPs at Guildhall in London. (Photo: John D. McHugh / AFP-Getty Images)

Economic reform is perceived by many in the United Kingdom as something that other EU countries should be undertaking. The Blair government and most British economic commentators see the U.K. economy as being in relatively robust health when compared to the majority of its European counterparts, with good (if slowing) levels of growth, and satisfactorily high employment. This favorable position is primarily attributed by many to the success of economic reforms during the 1980s and 1990s.

Such positive perceptions are naturally welcome to the present government. It often seeks to highlight and even exaggerate the contrast between the British economy and the "sclerotic" economies of the other large member states. This rhetoric becomes all the more strident when responding to criticisms from across the Channel about the heartless ravages of "Anglo-Saxon economic liberalism."

A leading article in The Economist in mid-April spoke for the majority of prominent British decisionmakers when it concluded, from Italy's knife-edge election results and the French Government's U-turn over its proposed youth job law, that "the core countries of Europe are not ready to make the economic reforms they so desperately need — and that change, alas, will come only after a diabolic economic crisis." This more or less echoed a speech made a few days before by the then Trade and Industry Secretary, Alan Johnson, who had been blunt in warning against those EU politicians and member states who are reluctant to adopt reform, calling them "little Europeans."

The Financial Times later reported Mr. Johnson as being "very impatient" with the lack of progress by member states on the Lisbon Agenda of economic reform agreed six years ago. If the British government had initially seen the Lisbon Agenda as an important implement for inducing reform in its European partners, it may in future be less optimistic. The French government's abandonment of its youth employment law has been a stark reminder that painful economic reforms are reliant upon domestic political will.

But the U.K. cannot pretend to be spared all of Europe's travails. While Polish plumbers and their colleagues from the EU's new member states have proved an asset in the British labour market (and, to some, an implicit vindication of the U.K.'s economic liberalism), the influx of so many young workers has not masked the need for painful reforms to accommodate an ageing population. The current debate about the future financing of pensions is an uneasy recognition of structural problems to come.

In late March, more than a million people took industrial action against government plans to remove the right of some public workers to retire on full pension at age 60. It is also increasingly apparent that Gordon Brown's economy has its weaknesses, and that British complacency with respect to some neighboring economies is often misplaced. A recent survey by the Economist Intelligence Unit found that the U.K. had slipped down the league of countries most attractive to inward investment, because of "concerns over tax levels, regulation, poor transport infrastructure and low levels of productivity".

Awareness that Mr. Brown's stewardship of the economy may have been less successful than he claims has led to an increased public interest in alternative economic models for Europe, notably the Scandinavian model, which is seen as guaranteeing both social stability and economic progress. Increasing attention is also being devoted to Germany and its incipient economic recovery. Germany's recent economic difficulties have been a powerful motive for British self-congratulation, so success for Chancellor Angela Merkel's Grand Coalition would change many attitudes throughout Europe, not least in London.

This article was originally published in Europe's World magazine, Summer 2006.