Miliband’s EU call leaves dilemma for the City

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Businesses that fear Britain might be on the way out of the EU can breathe a little more easily this morning.

Ed Miliband’s announcement that a Labour government would be unlikely to hold an in-out referendum on Britain’s membership means the issue may well be off the agenda for some years.

According to the latest opinion polls, Labour is on course to be the biggest party at the next general election. Of course, the UK economy is improving, the polls could change between now and the poll next year. Mr Miliband has also yet to convince the pundits he is truly a prime minister in waiting.

But, in any case, the next government is almost certain to be a coalition. And the strongly pro-European Liberal Democrats will be much more tempted to enter a pact with Labour, rather than the Conservatives, now that Mr Miliband has adopted this stance on the referendum. David Cameron’s Tories have pledged to hold an in-out referendum on the issue in 2017.

Mr Miliband’s call seems to have been taken from a mixture of principle and pragmatism. As his article in the Financial Times makes clear, he is somebody who believes strongly in the EU – and who would be loath to see Britain leave.

But he must also have calculated he can take the political risk of ruling out a referendum. Mr Cameron’s Tories will now claim Labour is intent on denying the British people a choice on Europe.

But Mr Miliband will calculate that most voters care more about economic issues than the EU. The minority who care passionately about a referendum would probably vote UKIP or Tory, anyway.

Mr Miliband is also probably thinking ahead to the prospect of actually being prime minister. Having to fight a referendum to remain in the EU – within two years of winning – would be a potential nightmare. It would consume time and energy, and it would invite defeat and the early destruction of his premiership. Best avoided.

The Labour leader’s bold call on Europe also poses a dilemma for pro-EU interests in the City of London. Labour now looks like the party that can best guarantee continued British membership. On the other hand, it is also the party that has promised to whack up the top rate of income tax, as well as taxes on property and pensions. Interesting choice.

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