Can Hampton Court be Europe's Great House of Easement?

Among the wonders of King Henry VIII's 16th-century palace at Hampton Court was the Great House of Easement, a lavatory that accommodated 28 distinguished guests at a single sitting. When leaders of the EU's 25 member states meet in Hampton Court today, I trust that more modern and discreet facilities will be available, but the European Union itself needs a good session of Easement.

One British official, describing to me what he hoped would happen around the conference table in the palace's Great Hall and during coffee breaks in the Great Watching Chamber, used the startling word "detente". At times over the last few years, in bitter rows about Iraq, the failed constitutional treaty, the budget, the British rebate and the common agricultural policy, the major powers of Europe have seemed to be locked in a cold war. As usual, Britain and France have led the frosty feuding, but others have not been far behind.

The first objective of the informal Hampton Court summit is to improve the atmosphere, and give a sense that Europe is going somewhere again. The British presidency hopes this easement may make it easier to reach a deal on the EU's budget at the formal European Council in Brussels in December. To that end, Britain has made intensive efforts to repair relations with France, and Jacques Chirac has himself been making conciliatory noises. Under the Austrian presidency, in the first half of next year, the EU could then decide what institutional redesign to suggest in place of the stillborn consitutional treaty. Well, we shall see. I wouldn't bet on any of this.

Meanwhile, the EU's leaders will have before them a single paper, prepared by the European commission under its incisive president, José Manuel Barroso. It lays out the biggest problem for Europe, which is how to preserve what we have achieved over the 60 years since 1945, when confronted with dramatically increasing competition from China and India, rising prices of imported energy, and ageing European populations. Not content with cornering the world market in low-skill manufactures, China is set to overtake the EU in research spending by 2010, while Indian universities already produce more than a quarter of a million engineers each year. Within a decade there will, on present trends, be two Europeans of working age for every elderly citizen, compared with four to one today. Yet we allow ourselves the shameful indulgence of close to 20 million unemployed in the EU.

What is it that we're trying to preserve? People on the left often say "a European social model", but, as the commission paper acknowledges, it's hard to speak of a single European model, even within the existing EU, given the vast disparity between practices in different countries. According to the paper, Lithuania, Latvia and Ireland spend less than 15% of GDP on social protection systems, compared with 30% in Sweden. It is, however, entirely possible to speak of a common European approach, which tries to combine prosperity, social cohesion, environmental protection and quality of life. This is what the historian Tony Judt, in his splendid new history of postwar Europe, calls "Europe as a way of life". As Britain's Europe minister Douglas Alexander points out, in a pamphlet recently published by the Foreign Policy Centre, the UN's Human Development Index ranks all 25 of the EU's current member states in the world's top 50, and 12 of them in the top 20. Here's something of which we can be modestly proud.

The question is: can we sustain it? Unsurprisingly, the commission's paper is much more sharp and specific in analysing the problem than it is in proposing solutions. Here, all too characteristically of the EU, we find a long list of rather vague general goals, many of them to be advanced by the commission on a Europe-wide basis. In some areas, such as international trade negotiations, that's also right. Unusually for a British prime minister, Tony Blair has also signalled that he would welcome an EU-wide "shock absorber" fund, to help people adapt to the challenges of globalisation, and suggested a closer coordination of European energy policy. (In practice, that last proposal must also mean a more closely coordinated policy towards Russia, something we have disastrously lacked over the last few years, during which Chancellor Schröder, President Chirac and prime ministers Blair and Berlusconi have all kowtowed to Vladimir Putin's semi-dictatorship in their own sweet ways.)

Yet in socio-economic reform, as in culture, the strength of Europe is precisely its diversity. There is no single, universal solution, whether it be labelled "social" or "liberal". Some countries, like Sweden, do well with a high tax burden and public spending; others do badly. Some, like Estonia, flourish with flat taxes and "liberal" (ie neo-liberal) economic policies; that doesn't mean they'd be good for everyone. What matters is what works for you.

Europe should be like a great experimental laboratory, with countries constantly looking over each other's shoulders and stealing each other's best ideas. That's how Europe became the economic powerhouse of the world in the first place, and that's the only way we will regain our dynamism. In the jargon of contemporary business, this is called "benchmarking". We agree on the goals: higher growth and productivity, more innovation, less unemployment, reduced poverty. We don't all need to get there by the same route.

That said, there are some areas where we need the economies of scale that only the EU can provide. Trade is one. The top end of scientific research and development is another. Here, if we are to compete with the United States, China and India, we need to pool our national resources. As we cut spending on the CAP, so our spending on this should increase. In the meantime, President Chirac, no less, has made the useful suggestion that the European Investment Bank should be used to leverage an extra €30bn (more than £20bn)for research and innovation projects.

In the spirit of Franco-British detente, and general, all-round easement, let me suggest that a large lump of this money should go to an all-European research centre based in France. For France also has one of the perfect sites for such a centre: the magnificent modern building, and top-notch office facilities, of the European parliament in Strasbourg. (I owe this idea to a Franco-British manifesto recently published by the Institut Montaigne and the Centre for European Reform.)

It is ludicrous, and simply incomprehensible to most ordinary Europeans, that the entire European parliament still commutes between two vast buildings in Brussels and Strasbourg, at a cost to the European taxpayer of well over €200m a year. This is a folly that even Cardinal Wolsey, the original developer of Hampton Court, would not have contemplated, at the height of his wildest extravagance. Faced with escalating global competition, rising energy prices, ageing populations and creaking welfare systems, we can no longer afford such follies. So let's turn over the Strasbourg buildings of the European parliament to an all-European centre of research into the technologies of tomorrow. That would send the right message to Europe's citizens.

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