William Wallace: Britain will need to change partners to build up a new special relationship

Over the past 13 years, Tony Blair and, after him Gordon Brown, have maintained the approach to Britain's place in the world that Margaret Thatcher – and long before her, Winston Churchill – had proclaimed.

Britain, they have all insisted, is a world power, with military forces deployable across the globe; the closest partner and most reliable ally of the United States. Co-operation with continental Europe is necessary but secondary; most of our European partners, except perhaps France, have only regional interests.

British ministers and diplomats should naturally lead in global negotiations, from financial and economic diplomacy to climate change, alongside the US. Our position as a permanent member of the UN Security Council, as a leading member of the International Monetary Fund and newer international bodies such as the Group of 20, enables us (as Douglas Hurd put it) to "punch above our weight".

Both the external and the budgetary underpinnings of this approach have now given way. Tony Blair discovered that the "special relationship" with the US no longer provided effective influence in return for loyal military support, as the Iraq inquiry is now uncovering.

The Obama Administration has made it clear that it prefers to deal with Britain as part of Europe, not as an exceptional partner. David Cameron has just cancelled a planned visit to Washington, failing to secure a promise that the President would spare time to see a potential Prime Minister. Worse than that, there are growing doubts in London that a Washington elite deadlocked by the bitter partisan divide between Republicans and Democrats has the capacity to provide the constructive global leadership that a British government would like to follow

Then there is the prospect of savage cuts in British defence. Forward projections for future UK defence spending already contain a 20 bn 35bn gap between funds allocated and equipment ordered.

Replacement of the nuclear Trident submarines, two massive new aircraft carriers and the strike aircraft to fly off them, more helicopters and armoured vehicles for the army, could only be paid for together by diverting funds from health, social services and elsewhere or by raising the overall level of taxation. The reality is that the strategic defence review which will be undertaken immediately after the election will have to make cuts in the defence budget, in the context of a sharp squeeze across the board in government spending.

William Hague in a speech last summer insisted that "this is not an East of Suez moment", referring to the budget-driven cutbacks of the 1960s when British bases were closed and force levels slashed. But those who are advising him understand that we cannot avoid similarly radical adjustments. The Foreign Office is already struggling to implement cuts approaching 20 per cent in its budget, leaving the UK with fewer diplomats and overseas posts than Germany.

Malcolm Rifkind and others have hinted at the scale of adjustment we may need to make, looking to France rather than the US as our closest partner and coming to terms with necessities of closer European co-operation. But the wide gap between public perceptions of British sovereignty and military power, and the practical co-operation between British officials and their continental counterparts, will pose real problems for any incoming government.

Many of Mr Rifkind's Conservative colleagues are uninformed about how

closely British police depend

on co-operation within

Europol, for example, in combating serious crime, or

how difficult it would be to achieve British objectives in international financial regulation, economic recovery or climate change without active engagement within the EU.

The widespread belief that the EU presents the greatest threat to British sovereignty is also far from the reality of day-to-day co-operation. British sovereignty has been unilaterally yielded to the US in intelligence matters, we have now been told; US bases on British soil represent a similar surrender of UK sovereignty.

Thatcherite deregulation weakened our economic sovereignty, allowing more and more British companies to be taken over by Swiss, German, American, Indian or Russian firms. When the chief of the naval staff calls for new ships to protect Britain's global trade links, he is seeking to protect Chinese containers on Korean-built and Danish-owned ships, taking German exports to East Asia.

Quietly, Conservatives in Westminster assure listeners that the Conservative leadership understands the painful reality, and that Cameron would prove a pragmatic and positive

European in Number 10. Yet many of his aspiring MPs, and more of the public, are unprepared for such a switch; attacks on the Liberal

Democrats for supporting the

EU are still going out in Conservative leaflets.

Nevertheless there is no money to support Churchillian ambitions, and no welcome in Washington for an escape from Europe's clutches. So there is, as Mrs Thatcher once said, no alternative.