We explain the referendum decision on British membership of the European Communities (EC) and European Union (EU) from a principal-agent perspective between the Prime Minister and the rank-and-file. We show that announcing a referendum on the Prime Minister's membership proposal helps to win the general election when the rank-and-file cannot agree on an intra-party compromise solution on the terms of membership. When the Prime Minister overcomes the mistrust of the rank-and-file against his effectiveness in having negotiated new membership terms with the other member states, the voters are more likely to follow his proposal. Otherwise, when intra-party controversies reveal the principal-agent problem, the initially uninformed voters can learn about the dysfunctionality of the Prime Minister's membership proposal and are more likely to reject it.