Mary Ann Sieghart: They are all Eurosceptics now

Last week, at a fringe meeting organised by ConservativeHome, the Foreign Secretary, William Hague, took questions from the audience. He had expected a barrage of Euroscepticism from this haven of the Tory right. Instead, he was asked loads about the rest of the world – Brazil, the Middle East, Asia, Africa – and only one about Europe, from a visitor who turned out to be Dutch.

Earlier this year, the European Union Act sailed through the House of Commons, without the tiniest rebellion by Liberal Democrat MPs – even though it promised that a referendum would have to be held before any major EU treaty change could take place. Given the firm Euroscepticism of the British people, this law makes any further integration involving this country pretty unlikely. What do these two incidents tell us? They are part of an untold story at the heart of government: that the two Coalition partners aren't nearly as far apart on Europe as most people believe.

The parties themselves were initially very worried about how they could reconcile their differences. Some Tories thought the Lib Dems wouldn't be able to deliver on the Coalition Agreement, which promised the referendum lock. The Lib Dems, in turn, were shocked when they entered government by how instinctively anti-European their Conservative colleagues were. But power has mellowed both sides and the convergence is now striking.

Hague, in office, is a pragmatic Euro-realist, far from the anti-European caricature he allowed to be drawn in opposition. He now sounds more moderate on Europe even than Sir John Major, who yesterday called for the repatriation of powers from the EU to Britain. When asked about this, Hague bats it away by saying there is no prospect of a new treaty during this Parliament.

The Chancellor, George Osborne, started out with serious doubts about the usefulness of European finance ministers' meetings. Now he prepares for them assiduously and makes an effort to cultivate alliances with his counterparts. As a result, his advice to the eurozone is listened to, not dismissed.

Meanwhile, Tory ministers have found that much of what they complained about in opposition is not even true. They were convinced that EU directives had been "gold-plated" by British governments – that Brussels regulations were made even more onerous by zealous British officials when they were put into law. After the Conservatives won power, they examined some 700 of these regulations and, to their surprise, found no evidence of gold-plating. "We were just wrong about that," admits a cabinet minister ruefully.

As for the Lib Dems, their naive Euro-idealism has dimmed as they have seen Brussels in action. Vince Cable is frustrated by many of the directives that hamper his ability to help business. Danny Alexander, a former director of the pressure group Britain in Europe, is now grappling with trying to negotiate the EU budget downwards. Nick Clegg wants EU regulation made less burdensome to help galvanise growth.

Many of their MPs – some of them junior ministers – are quietly sceptical about Europe. David Laws, Jeremy Browne, Alistair Carmichael, David Heath, Norman Lamb and Tim Farron are a lot less enthusiastic about the EU than, say, past leaders such as Paddy Ashdown and Charles Kennedy or the social democrats who left Labour in 1981 precisely because it was too anti-European. They don't make a lot of noise about it, because it doesn't go down well with their activists, but they know how their constituents feel. One veteran Lib Dem MP despairs of the way the EU takes silly decisions that are bound to be unpopular here. As he puts it: "Brussels shouldn't give a bugger for straight bananas."

Most importantly, the near-collapse of the eurozone has changed the terms of trade between the two parties. The official Lib Dem policy on the euro has been proved to have been plain wrong. Some senior ministers, such as Danny Alexander, have had the grace to admit it; others are less contrite. But for all of them, it removes the biggest bone of contention between the parties over Europe. Not a single Lib Dem in government now thinks we should join the euro any time soon.

In Brussels, it's a different matter. Bizarrely, Osborne has hugely endeared himself to the more fanatically Europhile Lib Dem MEPs by exhorting the eurozone states to become more fiscally and politically integrated. The Chancellor sees it as the logical outcome of a common currency area, one which he has no intention of entering. The MEPs see it as the culmination of their fantasies for a federal Europe which Britain might eventually join. As one Lib Dem minister puts it: "Our raving federalists have got an almost Leninist spirit – they think, 'This is our moment; at last it's going to happen.'" It may do, but without Britain.

Meanwhile, the spat over cats and human rights has been a useful displacement activity for both parties. It has allowed David Cameron and Theresa May to sound robustly anti-European to their sceptical supporters, even though the European Convention on Human Rights has nothing to do with the EU. And it has allowed the Lib Dems (and Ken Clarke) to sound liberal and pro-European. Everyone's happy.

The two sides even agree on what needs to be done. Clegg himself has been pressing inside government for a clarification of Article 8, which deals with the right to a family life – the clause which British judges have cited as a reason for not allowing foreign criminals to be deported. That's exactly what May wants too.

But if peace has broken out for now, can the Coalition survive a whole parliament without a row over Europe? It depends on whether the eurozone members decide they need a new treaty to establish greater economic and political union. If that happens, the sceptical wing of the Conservative Party will push for Britain to demand the repatriation of some powers in return for agreement.

Some Lib Dem ministers even agree with this. They are instinctive localists and wouldn't mind seeing Britain take back control of employment and social affairs, fisheries or agriculture. But that's not how Clegg, Alexander or Chris Huhne feel. They would much prefer to use a treaty renegotiation as an opportunity to win reform of the single market and EU regulations in a way that boosts growth. And they want to make common cause with other states that aren't in the euro to ensure that they don't lose too much influence outside the eurozone.

At least, though, this is an argument about tactics, not strategy. The Lib Dems aren't arguing for Britain to be part of a more federal Europe. Nor, for that matter, is the Labour Party. British business no longer wants to join the euro. Voters wouldn't dream of it. An enormous amount has changed in the past couple of years. We are (almost) all Eurosceptics now.

m.sieghart@independent.co.uk