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[Mr Philip Hollobone in the Chair] — EU-UK Relationship (Reform)

– in Westminster Hall at 12:00 am on 18th September 2012.

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Motion made, and Question proposed, That the sitting be now adjourned.—(Greg Hands.)

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire 9:30 am, 18th September 2012

I am delighted to be serving under your chairmanship, Mr Hollobone, and to be debating a subject that is of great interest to you personally. I congratulate the Minister on his appointment—I believe this is the first time he is responding to a debate in his new capacity.

I am going to talk this morning about the work of the Fresh Start project, which is a group of Conservative MPs who have spent the past year looking at all aspects of Britain’s relationship within the EU and at how we can get a better deal for British taxpayers. In his foreword to the Fresh Start project’s review, which we published in June, the Foreign Secretary wrote:

“The eurozone crisis is setting in train what may well be profound changes in the structure of the European Union. These will pose very important choices for every country in the European Union, inside the eurozone or out.”

He added:

“Public disillusionment with our membership of the European Union has never been so deep.”

A July 2012 YouGov survey shows that two-thirds of those surveyed want a referendum on or before the general election in 2015. If given a choice today, almost half—48%—would pull out and 31% would stay in, but were the Prime Minister to renegotiate a new deal to protect British interests in the EU, the poll suggests that people would vote in a completely different way: most—42% to 34%—would vote to stay in the EU in a post-reform world.

Photo of John Baron John Baron Conservative, Basildon and Billericay

Given those findings, does my hon. Friend not think it strange that a letter sent to the Prime Minister at the end of June, signed by 100 of his parliamentary colleagues, urging him to consider putting a referendum on the statute book in this Parliament calling for a referendum in the next Parliament has not even been answered? Does she think it would be worthwhile for the Minister to answer that question today? I apologise that I will not be here for his reply to the debate, but I have a Foreign Affairs Committee meeting to attend.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

I have been following that matter and know that the Prime Minister has said that he will be responding shortly, so I am sure that my hon. Friend’s question will be noted.

Photo of Brian Binley Brian Binley Conservative, Northampton South

Does my hon. Friend recognise the need for contingency planning and negotiation before a referendum? Will she be urging the Minister that that contingency plans need to be created now and announced well before the European elections in 2014, and will she tell the Minister that, in this country, the F-word is impolite?

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

I almost entirely agree with my hon. Friend. I favour the idea of reform followed by referendum, but I think the reform is absolutely key and the poll survey shows that the British public think so, too. If the public saw reform, they would be content to remain a part of the EU.

What happens next is about politics, not economics. According to Eurostat, at the end of the first quarter of 2012, euro-area Government debt stood at 88.2% of euro-area GDP. On the other hand US national debt is more than 100% of GDP and in Britain it is 86.4% of GDP. My point is that if all euro-area debt were to be consolidated, the position within the eurozone in terms of consolidated debt would be no worse than either the UK or the US. This is about politics, not economics. It is about the extent to which eurozone members are prepared to underwrite one another’s debt. Politicians must make up their minds what they are going to do about the crisis.

Let me quickly run through where the big eurozone countries stand on debt pooling. Germany is firmly opposed to eurobonds at this stage, but supports greater central oversight of national budgets within the eurozone as a way to export German fiscal discipline.

Photo of Emma Reynolds Emma Reynolds Shadow Minister (Foreign and Commonwealth Affairs)

I congratulate the hon. Lady on securing this important debate. Does she recognise that the second largest party in Germany, the Social Democratic party, is in favour of eurobonds? The position of the German Government might well change after the federal election to be held at this time next year.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

The beauty of democracy is that it is not over until it is over. It is important to think about who is in power now and not who might be in power in the future. In June, Angela Merkel said:

“I don’t see total debt liability as long as I live.”

She also said:

“Apart from the fact that instruments like eurobonds, eurobills, debt redemption schemes and much more are not compatible with the constitution in Germany, I consider them wrong and counterproductive.”

Angela Merkel has been clear on the fact that she does not believe that debt pooling is the way forward. That does not mean that Germany is opposed to eurobonds in principle; but from Berlin’s point of view, a full fiscal union must be established first. German Finance Minister Wolfgang Schäuble put it very clearly when he said:

“We have to be sure that a common fiscal policy would be irreversible and well coordinated. There will be no jointly guaranteed bonds without a common fiscal policy.”

Italy’s Prime Minister Mario Monti, who is a technocratic, not a democratically elected leader, has said that his position is quite similar to that of Germany in that he believes that central oversight of national budgets is a necessary precondition to eurobonds.

In Spain, the centre-right Government are keen on introducing eurobonds in the next few years and seem to be ready to accept losses of budgetary sovereignty to achieve that. Mariano Rajoy has proposed a three-stage path towards debt pooling: in 2013-14, eurozone countries should adopt measures to meet the fiscal and economic convergence criteria imposed by the European Council; in 2015-16, a European fiscal authority should be created that would oversee national budgets; and in 2017-18, when fiscal targets would be imposed on the eurozone in its entirety, full eurobonds could be issued.

France has not made its position entirely clear. It tends to favour more solidarity immediately and fiscal union later down the track, but in the name of Franco-German solidarity, it seems to have dropped the idea of Eurobonds, at least for the moment.

Most importantly, what about the UK? At the Lord Mayor of London’s banquet, the Prime Minister called for a looser EU

“with the flexibility of a network, not the rigidity of a bloc.”

That is an important indicator of where the UK stands. It is important to recognise that the EU is already multi-layered.

Photo of Neil Parish Neil Parish Conservative, Tiverton and Honiton

For a long time, I dealt with the common agricultural policy, which is far too prescriptive to cover 27 countries with different climates and different soils. We want a flexible approach, so that this country can deliver good agricultural and environmental policies.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

I completely agree with my hon. Friend.

The concept of a multi-speed Europe is already a reality: some countries opt in to Schengen, the euro, defence co-operation, and co-operation on justice and home affairs, and some opt out. A multi-speed Europe is already a reality, not something we are inventing for the first time.

Photo of David Nuttall David Nuttall Conservative, Bury North

Is not the danger in saying that we have a multi-speed Europe that it implies that everybody is going in the same direction albeit at different speeds, whereas there are millions of us in this country who do not want to be going in that direction at any speed?

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

I entirely respect my hon. Friend’s views and perhaps I should say “multi-tier”, because his criticism is very fair—“multi-speed” is the wrong term. The point that I was trying to make is that there can be different relationships with the EU, not that different countries are all trying to get to the same end-point. His criticism is fair; I apologise for my careless writing there.

The key advantage of the EU for Britain’s national interest is that of a trade area. I think that most people, whether or not they are in favour of Britain’s membership of the EU, would accept that Britain will continue to trade with the EU. In fact, 48.6% of UK goods exports now go to the EU as a whole—

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

However, one can slightly reduce that figure if one looks at the Rotterdam-Antwerp effect, if that was the point that my hon. Friend was going to make.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

Not exactly. I was going to say that we can all be in favour of trading with Europe, but we do not have to be in Europe.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

Yes. I thank my hon. Friend for that intervention. I am coming straight on to that point now, so I am very pleased that he has raised it.

The EU is already a significant trading partner, but there are significant opportunities for growth. Services account for 71% of EU GDP, but only 3.2% of that comes from intra-EU trade, and the UK Government continue to push for the completion of the single market, especially in services. Financial services gave us 11% of our tax receipts in 2009-10, providing a trade surplus of £31 billion in 2010. Financial services is an incredibly important sector in which there is enormous capacity for growth. Of course, that is why the Prime Minister used his veto last December.

What are the alternatives to EU membership? There are probably four. First, there is most favoured nation terms, under which around half of manufactured exports to the EU would face an average tariff of more than 5%, with some sectors being particularly badly hit, such as UK car exports, which would face a tariff of 10%. That would have a significant effect on UK business, making us a far less attractive location for foreign direct investment. In addition, the UK would lose its influence on framing EU regulations, so it would be required to buy in to EU regulations in order to trade with the EU but would have no say in framing them.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

I would just like to get through my list of alternatives and then I will give way, if my hon. Friend wants to make a point. I am conscious that lots of other people want to speak.

The second alternative is the European economic area option, or the Norwegian option. The UK would be outside the customs union and hence subject to complex and costly rules of origin. The UK would still be subject to most EU regulations, but it would have limited or little ability to shape them. Access to the single market for goods and services would be maintained; the UK would not be subject to common agricultural policy, common fisheries policy or regional policy; and the UK budget contribution would probably be significantly reduced.

The third alternative is a free trade agreement or the Swiss option, under which the UK would be outside the customs union and subject to rules of origin, but would not be formally subject to EU social or product regulation. In practice, all product regulation would probably be replicated in order to export to the EU. Again, under this option the UK would not be subject to CAP, CFP or regional policy, and the budget contribution would probably be significantly reduced. Free trade would be subject to a negotiated agreement.

Fourthly and finally, there is the option of being part of the customs union, or the Turkish option, under which the UK would be a member of the customs union, with free access to trade for goods, but services and agricultural products would not be covered by that option. The UK would be required to negotiate free trade agreements with any country with which the EU opens trade negotiations. We would be outside the EU treaties and institutions, so we would not be subject to CAP, CFP or regional policy, and it is not likely that we would have to make a significant budget contribution. We would not be subject to social regulation, but we would be subject to all product regulation with no ability to influence the shape of it.

Photo of Brian Binley Brian Binley Conservative, Northampton South

Mr Hollobone, I must point out that I am sitting on a Statutory Instrument Committee this morning and I know that you would not want me to miss that, so I will have to go very shortly.

Will my hon. Friend destroy the myth and say that, because of the £57 billion deficit with Europe, Europe is not going anywhere in trade, simply because it is not in its interests?

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

That is absolutely correct in principle, but as my hon. Friend—being a business man himself—would admit, we cannot simply change overnight, so we would be subject to an exceedingly long-term renegotiation with enormous complexities along the way. It is not quite as simple as he puts it, but yes, essentially I agree with him—it is certainly in the EU’s interests to continue to do business with us, even more than it is in our interests to do business with the EU.

Personally, I think that if we were to leave the EU, the world would not end, but my point is that it would be far better for Britain to negotiate better terms and to remain part of the EU.

Photo of George Freeman George Freeman Conservative, Mid Norfolk

I congratulate my hon. Friend on securing this debate and on her leadership of the Fresh Start project. Does she agree that the explosion of the EU’s internal contradictions—the collapse of its relentless drive for federalism based on corrupted economics—creates a huge opportunity for this country, and that the majority of people in this country want us to take the opportunity to set out a positive vision of the Europe that we would be pleased to belong to—a Europe based on sovereign nation states trading with each other, which indeed was the Europe that people voted for when they were last given the chance to vote on Europe? Does she also agree that if we are to trade our way out of the present debt crisis, we need to lessen our dependence on the sclerotic eurozone economies and focus more on increasing our trade with the rest of the world, and that the EU framework needs to support that process? In my own field of life sciences, the EU’s policy on genetically modified products, for example, undermines that process.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

I am grateful to my hon. Friend for that intervention; he has made some really good points and I will address just a couple of them. It is absolutely the case that the EU is regulating us into being globally uncompetitive—uncompetitive not only within the EU but outside it as well. There are huge opportunities in China and the other emerging economies for Britain’s services, high-technology, financial services, manufactured goods and so on. Reform is essential.

As for the collapse of the euro project—the European project—it is true that, although we can certainly tolerate those who want to create some kind of federal Europe, at the same time Britain cannot be hampered by that movement. In a sense, therefore, their move to ever-greater fiscal union indicates the need for us to move towards having a far more clearly defined role that works better for British interests.

The Fresh Start project is all about saying that what we need is to renegotiate our EU membership—to remain within the EU but to have our absolutely best attempt at renegotiating a relationship that works for Britain, with full and free access to all EU assets, but without being hampered in a global world by EU regulation. What I want to see is fundamental reform.

What the Fresh Start project started to do just over a year ago, and with the support of more than 120 Conservative MPs, was to carry out a serious research project to see how different policy areas within the EU have affected Britain and British national interests; to make a cost-benefit analysis; and to see what we could change and how we could do that. It has been an enormous piece of work, which makes a splendid door-stop—I see that my hon. Friend Tim Loughton is weightlifting today as he carries copies around with him. I congratulate him on doing so.

In June, just before the recess, the Fresh Start project published our green paper setting out the options for change. We colour-coded green those things that we can do ourselves, of which there is a surprising number: the British Parliament could simply decide to reform the way that we do certain things and get a better deal for ourselves without even making reference to our European colleagues. Amber options are those where negotiated treaty change would be necessary, but it has often been the case that we have never even attempted to negotiate those treaty changes and we should certainly have a go at doing so. The red options defined in the options for change are those things where we need to say, in Britain’s best interests, that we are no longer willing to entertain EU sovereignty over British sovereignty, and therefore we wish to withdraw.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

On the green options—the things that can be done straight away—does my hon. Friend agree that the present situation is a consequence of the pro-Europe Labour Government, who gold-plated so much EU legislation to interfere in our lives and used the EU as a good excuse to do it?

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

I absolutely agree with my hon. Friend; he makes a very good point. That is never more true than in relation to the working time directive. Having recently carried out an inquiry with all of royal colleges, I know that the evidence is overwhelming that the training of doctors is suffering seriously as a result of the negotiated on-call hours, which the last Government presided over and allowed to happen, to the detriment of our NHS. They should be ashamed of that.

Photo of Emma Reynolds Emma Reynolds Shadow Minister (Foreign and Commonwealth Affairs)

I am sure that the hon. Lady did not do so deliberately, but that is not exactly an accurate account of what happened. We negotiated an individual opt-out, which this country retains. The European Court of Justice interpreted the rules on doctors’ on-call hours in a way that we felt was against our national interest, so we were then trying to negotiate whether being on-call constituted working time. It was no fault of our Government.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

That is absolutely not my understanding, but that is not a discussion for now, so we will have to park that.

The Green Paper was published in June and the Fresh Start project is now moving to phase 2, which is to suggest a manifesto for change by Christmas. I am delighted that 10 Conservative colleagues have each agreed to chair a policy area in which they have a particular expertise, and they will look to get buy-in from other colleagues to achieve a consensus on what specific reforms we will recommend the Government to pursue. By Christmas, we will end up with a specific manifesto for reform, which will be a shopping list of things that Britain would like to see changed.

One of the Government’s biggest challenges is the fact that FCO officials wring their hands when we talk about a shopping list of reform proposals.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

Yes they do. I have had several conversations with FCO officials who say that people can negotiate on only one or two points at a time. That is the way in which EU Commissioners and European parliamentarians squash the genuine national interests of one member state. They say, “You can talk only about the rebate, or only about 0% increase in the budget. You cannot talk about all the other issues that you want to include in your shopping list.” That will be the biggest challenge to any reform.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

My hon. Friend’s comments remind me of the story about a man wandering down Whitehall who asks the policeman, “On what side is the Foreign Office?”, to which the reply is, “Hopefully ours, sir.” I congratulate her on the fantastic work she has done with the Fresh Start group, which distractions have not allowed me to take part in, which I look forward to now.

Is not the real tragedy that those who say that we must stay such a close part of Europe, because we trade more with Belgium than with China, Brazil or India, miss the point that we should have been trading much more with China, Brazil or India, beyond the EU? The tragedy is that this country is not leading the crusade for a much more global, liberalising, deregulating, reforming and pro-competition Europe, and we should be. That is what most of our constituents and we all actually want.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

I am grateful to my hon. Friend and am delighted that he will be getting involved with the Fresh Start project himself. He is absolutely right. Is it not interesting that it is since this Government came into office that exports to China, Brazil and India have radically increased in percentage terms from the incredibly low level under the Labour Government, who preferred to create non-jobs in the public sector rather than real jobs in the private sector?

I want to run through a few ideas that have come out of the Fresh Start project and suggest them to the Government for serious consideration. There is no doubt that we have not only the opportunity, but the absolute need to get in there and make British interests very clear, long before the next European parliamentary elections in 2014.

Let me quickly run through some of the green options, which are things that we could be doing ourselves but are not doing at the moment. The UK is a significant member of the EU—one of the big three—and has worked with a number of allies to develop its vision of a free-trading, economically liberal EU. The UK has been enormously successful in achieving its strategic aims of enlargement and deepening of the single market. At the time of crisis in the eurozone, it is key that the UK sets out the vision of the EU that it wants and develops alliances in that direction. It is essential to set out a vision for a free-trade area that is globally competitive and determined to advance in the markets outside the EU and not just within it.

We could improve the scrutiny of EU legislation, including pre-legislative scrutiny. I welcome the European Scrutiny Committee’s inquiry into that and the work of the Hansard Society in looking at much more parliamentary scrutiny, including having specific EU questions, not just FCO questions, and having a Europe Department rather than just a Europe Minister in the FCO.

We should certainly look at pre-legislative scrutiny where, as in Denmark, Parliament gives authority to Ministers before they go to negotiate on our behalf, instead of them coming back to us with something that is almost done that we just need to rubber-stamp at the eleventh hour. There are good examples of where good pre-legislative scrutiny has made a big difference, such as the proposed ban on the short selling of equities. Due to the excellent work of Members of the European Parliament, that was reduced to a ban on the short selling of sovereign debt only. That was a massive saving grace to liquidity and free financial markets.

Better Brits in Brussels is an important issue. We have 12% of the EU’s population, but now only 4% of Commission staff. That has been allowed to slide abysmally. We have not done enough to allow our brightest and best young people to obtain the language skills they need to pass the European Commission test. I am delighted that the Government have restarted the European fast stream. That is an important move on which we should absolutely spend our time. When we visit MEPs and Commissioners in Brussels, we find that they have all gone native; they even speak with a sort of weird part French, part German, part English accent—if there is such a thing. They lose track of whom they represent. What we need is British people in the Commission representing British interests.

We want to remove gold-plating in social and employment laws as soon as possible. We have interpreted some EU directives in a hard and fast way, not least on the opt-out for doctors. As I understand it, in all too many cases, we offer doctors a contract for up to 48 hours a week, and then invite them to opt out of working only 48 hours a week. That is not exactly a terribly tempting offer. We need to look seriously at gold-plating.

We support deregulation at the EU level. The EU has agreed in principle to subsidiarisation for micro-businesses. It is not an EU competence to delve into micro-businesses if they are British-only businesses. They should not be subject to EU regulation, and we should be pressing as hard as we can to exempt British micro-businesses from any EU intervention whatsoever.

Finally, Britain could be using the European Court of Justice to our own ends far more than we are to challenge EU proposals. An example of a good decision by this Government to challenge the European Union is our challenge of the European Central Bank’s proposal that clearing houses with more than 5% of turnover in euros should be based in the eurozone. That is blatantly stealing Britain’s business in a lucrative area, and we are absolutely right to be challenging that decision at the ECJ. We ought to take those opportunities more often.

Those are just some of the green options for reform that Britain could be doing much more on. Other areas require us to get far more sleeves rolled up and people wading in, and I want to cover two. I recognise that a lot of hon. Members want to speak, so I will hurry up. The greatest of those areas is to achieve a rolling opt-in and opt-out of EU policies. There is no doubt that there will be a fiscal union—[ Interruption. ] Opposition Members laugh. They are not even prepared to listen, which I find astonishing. They should care that the British public have had enough of their ever closer part in the European Union. It is absolutely astonishing.

We should look at whether, for those who are not part of the fiscal union, we could have some sort of rolling opt-in and opt-out of EU policies. The logistics could be incredibly complicated, but when Governments change, policies are often completely changed. It is ridiculous to have an EU where something decided 35 years ago has never changed and a member cannot opt out of it. It would be far better for the countries that do not intend to be part of a federal Europe if they could opt out. When Governments change, they could have a window of opportunity to decide on which policies they want to remain a part of, and which areas of EU jurisdiction they want to remove themselves from. That is entirely possible. That would give the European Commission something else to do, so it can pay itself even more and employ even more staff, so it should be delighted at the prospect.

Perhaps the most logical major reform of all is to repatriate structural funds. We are in the middle of negotiations for the next multi-annual financial framework, which will determine the EU’s budget strategy from 2014 to 2021. The negotiations are subject to national veto, and so offer a huge opportunity to the UK to seek restraint and sensible reform that will better serve the British taxpayer. Perhaps the best example of that is to repatriate the local bit of EU structural funds.

From 2007 to 2013, provision for EU spending on the structural funds amounts to some €280 billion, which is about 30% of the total EU budget. During that period, the UK will make a net contribution to the structural funds of some £21 billion; that is the UK’s contribution after taking into account the money it receives from the structural funds. We pay £30 billion, and we get £9 billion back after the money is converted into euros, administered and 140,000 full-time equivalent European staff have decided which UK regions should benefit. In fact, under the European definition of UK regions, only two, west Wales and Cornwall, are net recipients of structural funds. All the other regions are paying significantly more for every £1 they get back in structural funds, which is a completely ridiculous state of affairs. Additionally, the European Union determines the allocation, not the British Government.

Spending plans are based on EU regions that simply do not fit economic and political realities. There is a top-down structure in which all spending plans require the approval of the European Commission and must comply with EU guidelines. So structural spending completely frustrates local innovation,

No rigorous performance criteria link disbursement of funds to clear results. The think-tank Open Europe finds no conclusive evidence that structural funds have had a positive overall impact on growth, jobs and regional convergence in the EU. The rules on the administration of the funds are excessively bureaucratic. For wealthier member states, including Britain, the funds completely irrationally recycle large amounts of money, via Brussels, not only within the same country, but within the same regions. The UK could negotiate the repatriation of regional spending to richer member states, focusing the structural funds solely on poorer EU countries, which would reduce the total EU budget for the next multi-annual financial framework by some 15%.

Photo of Bill Cash Bill Cash Chair, European Scrutiny Committee

I am listening to my hon. Friend with great interest. So far, she has not mentioned Mr Barroso’s speech of a couple of days ago. I wonder whether she appreciates that, however sensible her ideas may be on lists of functions and attitudes, the European Union does not have the slightest intention of entering any negotiations in that direction. That is the problem. I agree with most of what she says as a matter of aspiration, but the problem is we are not dealing with a European Union that is remotely on the same page.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

My hon. Friend makes an interesting point, but he contradicts what my hon. Friend Mr Binley said, which is that the EU will not allow us just to walk away, because the EU needs us more than we need it.

There is an opportunity for reform. There is no doubt that, as a non-eurozone member, we will not be subject to the calls for ever greater union. The absolute burden is for us to define what we want that renegotiation to look like. If we do nothing because we are afraid the EU will not listen to us, we will get nothing. We would then end up in a position in which we are either in or out. Having a good go at reform is the way forward, whether we succeed or fail; doing nothing would not be in Britain’s best interest.

Richer member states are perfectly capable of funding their own regional policy and determining which regions should benefit from structural funds. If we were to repatriate those local structural funds to richer member states, we would end up with a 15% headline cut in the multi-annual financial framework for the next period and every one of those richer member states, bar five, would receive a significant reduction in contributions, which is a win-win and something we ought to look to other member states to support.

There are so many areas of reform that would be in Britain’s better interest. I could go on and on, because the opportunities are widespread and the need for reform is urgent. The Prime Minister has prioritised seeking safeguards for financial services, which is Britain’s most important industry, employing more than 1 million people and generating more than 10% of our tax take every year.

Another key area is the social and working time directive. Do we want our 1 million young people currently not in employment, education or training to get jobs, or de we want to prioritise rights for existing workers? Those are the choices that we have to make, and the social and working time directive is undoubtedly hampering the opportunities for young people to get work.

Do we want more and more EU regulation that affects small and micro-businesses? Do we want to see the training of young doctors in the NHS hampered by EU regulation of on-call hours? The Fresh Start project has raised, researched and sought to answer those questions. By Christmas, we will have produced a short and punchy manifesto for change that will be a shopping list of reforms across all EU policy areas, including business, immigration, justice, agriculture, energy and many others. I know Front Benchers are keen to see reform, and I sincerely hope they will accept and adopt as Government policy the work of such a large group of Conservative colleagues.

Several hon. Members:

rose —

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Will those who would like to speak remain standing while we note who you are and how many of you there are?

Under Standing Order No. 47 and the direction of the Chairman of Ways and Means, I will now impose a time limit, otherwise the wealth of talent before me simply will not fit into the time available. The debate finishes in 54 minutes. As a minimum, I have to give the Front-Bench spokesmen 10 minutes each, so I will call them at 10.40. There are 34 minutes for 10 Back Benchers, which means the time limit will be three minutes; the bell will sound after two minutes. If there are interventions, you will not all get in.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Human Rights) 10:06 am, 18th September 2012

I congratulate Andrea Leadsom on securing this debate.

In the few minutes I have, I will address the impact of EU regulation on fishing and farming and why changes are important. I will also address why a referendum is important, because clearly the people of the United Kingdom of Great Britain and Northern Ireland should make all final decisions.

I presume we are all well aware of the bureaucracy that particularly impedes the fishing industry. There has been a reduction in the days at sea, the quotas they are able to catch and the numbers involved in the fishing industry. Alongside that, scientists have shown that there are more fish in the Irish sea than Europe, which controls the Irish sea, seems prepared to accept. For example, I am reliably informed that the white fish industry, which only has four boats left in Northern Ireland, conducted a joint survey and examination with scientists on cod in the Irish sea, and the data that were collected show that there is more cod in the Irish sea than is indicated by Europe. If Parliament and the local Assemblies had power, we would be in a position to change that right away so we might rejoice in the stability of our fishing industry instead of worrying about the future and where we go. That is an example of where we are with the fishing industry. Ten years ago,

Portavogie in my constituency in Northern Ireland had more than 100 boats; they are now down to 60. That indicates the problem.

We also have red tape in farming. Again, there are regulations imposed by Europe on poultry and pigs. We energetically—perhaps “evangelically” is a better term—enforce all those regulations, but other EU countries ignore the regulations and do not seem to care.

National opinion polls show that 61% of voters would leave the EU today; the YouGov poll shows that even more people want to leave. The time is right for the people of the United Kingdom of Great Britain and Northern Ireland to decide what happens in relation to the EU. I support what the hon. Lady has said, and I ask the House to do likewise.

Photo of David Nuttall David Nuttall Conservative, Bury North 10:09 am, 18th September 2012

It is, as always, a great pleasure to follow Jim Shannon. I congratulate my hon. Friend Andrea Leadsom on securing this debate.

As chairman of the Lords and Commons “Better Off Out” group, I agree that we should repatriate powers from the European Union. The only difference is that I think that we ought to repatriate all powers. Other countries in Europe should not have the power to tell this country what to do. Given all the problems in the eurozone, it is a fruitful time to renegotiate our relationship with the European Union.

However, based on the precedents, I fear that the hope of success is not great. Nevertheless, it is not beyond the bounds of possibility that in a few months or in two or three years’ time, those who wish to stay in the European Union and repatriate some powers will be successful. The British people will then be faced with what I call an in/in referendum: they will be given the choice of the status quo—staying in as we are now—or staying in with 17/20, 18/20 or 19/20 of the status quo and repatriating a few powers. I suspect that for millions of people in this country, that will simply not be good enough.

The question is what those people should do who think, as I do, that we would be better off outside the European Union. Faced with an in/in referendum, those who wish to be outside the European Union should take part in the referendum and, as a third option to come out will not be granted, simply write the word “out” on the ballot paper. Even if those votes are not counted, it will be clear how many spoiled ballots there are. We will know how many voted for the proposition, how many voted against it and how many voted to come out. That is one way for those of us who think that we would be better off outside the European Union to make our voices heard.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Without interventions, we are on track to get everybody in.

Photo of Chris Bryant Chris Bryant Shadow Minister (Home Affairs) 10:12 am, 18th September 2012

I, too, congratulate Andrea Leadsom, who has been a fiery speaker on these issues ever since she arrived in Parliament and is obviously making a big name for herself. I completely and utterly disagree with her. She made a fundamentally old-fashioned speech. It was as though Joseph Chamberlain and Arthur Balfour were among us again and protectionism was the order of the day.

We must turn around how we look at the issue. If we keep looking at it from the inside of the European Union rather than the outside, we will miss the fact that the growing economies—Russia, China, Brazil and the whole of Latin America—do not look on each individual country in Europe and think, “How can we do business with them?” They look at the whole of Europe and think, “How can we make investments that make sense across the whole of Europe?” The hon. Lady cited rising figures for exports from the UK, but she failed to mention that during the same period, EU exports to China, Russia and Brazil have grown faster than those in the UK. Many people suggest that visa liberalisation would do more to improve our trade with those countries, but I am hesitant about liberalising visas to Russia, Mexico, Brazil and China at the moment; I think that there could be profound dangers.

Several hon. Members have said that shared policies are a problem. Personally, I think that the common agricultural policy operates in an immoral way. It means that people in poor parts of the world are unable to feed themselves properly because we deliberately overproduce. However, if there were no common agricultural policy, there would be a French agricultural policy, an Italian agricultural policy and doubtless a British one, which would be even worse. I would like us to keep the policy but slash it in half.

Similarly, there are many aspects that benefit us directly. We need strong borders around Europe so that UK borders are strong. When Brits travel abroad, as they do in their millions every year, we need to ensure that they enjoy good medical standards. Brits buying homes in Spain need the rule of law. We need more Europe on some issues, rather than less. For instance, on mobile telephony, I have never understood why, when Europe is meant to be a single market, we are charged more for making a phone call in France or Germany than here at home in the UK.

Somebody said that we should trade with Europe and not in Europe. That is fundamentally naive about the politics of Europe. As for the idea of having a rolling opt-in and opt-out programme, it would mean that every country would abandon all its treaty obligations at every general election. That fundamentally misunderstands the whole nature of international law.

I agree with the hon. Lady about two things. One is an element of the repatriation of structural funds. It is crazy that we recycle money through Europe and that nobody can then follow the money, which is why the auditors cannot track it. The other is EU questions.

Photo of Peter Bone Peter Bone Conservative, Wellingborough 10:15 am, 18th September 2012

It is a great pleasure to serve under your chairmanship, Mr Hollobone. It is also a great pleasure, as always, to follow Chris Bryant. I return his compliment by saying that he spoke exceptionally well, and of course I disagree with every word that he said. He has a great ability to speak for the Labour party, which has made it clear that it wants more Europe, not less. That should be the message that goes out from this Chamber: Labour wants more and more Europe. That is perfectly fair, and I congratulate him on saying it.

I do not know whether you have noticed, Mr Hollobone, but more than 20 Conservative Members of Parliament have attended this debate. There are two Members representing the Democratic Unionist party and one representing the Liberal Democrats, but as for Labour, until the hon. Member for Rhondda came along, there was just the shadow Minister and her Parliamentary Private Secretary. It shows how little interest Labour has in Europe.

I congratulate my hon. Friend Andrea Leadsom on securing this debate and on how well she spoke. I regret that she was able to make that speech; in my opinion, she should have been in Government. She is highly talented. The only reason why she is not in Government is that she put her principles first and voted for the EU referendum. She is a highly respected Member and deserves to be listened to. Equally, I am delighted that we have a Minister who should also have been in Government a long time ago. I am sure that now he is here, there will be a change in the direction of Government policy. I live in hope.

A few years ago, I could have made the speech that my hon. Friend the Member for South Northamptonshire made. I have now come to realise that what she described will not be achieved by staying in Europe. The only way that we will achieve it is by leaving Europe and renegotiating. I think that it would be simple for the Prime Minister to unite the Conservative party, give us a huge leap in the polls and bring UK Independence party members back to voting Conservative. He could use the idea suggested by my hon. Friend, which is to renegotiate, then put two options to the British people: accepting the renegotiation or coming out of the EU. After the renegotiation, the Prime Minister can decide whether he will campaign for the new terms or for coming out. That would unite the Conservative party, and it is what I want to see our Prime Minister do when he leads us in the next general election.

Photo of Julian Lewis Julian Lewis Conservative, New Forest East 10:18 am, 18th September 2012

Mr Hollobone, thank you for announcing the batting order in advance. I have waited many years to find myself between a Bone and a Stone, and today I have achieved that poetic distinction. Having said that, I deeply resent the fact that my hon. Friend Mr Bone has just made the speech that I was about to make, particularly the remarks about my hon. Friend Andrea Leadsom—the Front Bench’s loss is the Back Benches’ temporary gain—and my hon. Friend the Minister, who worked extremely hard in opposition as the shadow Minister and richly deserves his belated promotion.

That great Eurosceptic Tony Benn would not thank me for saying that he has something in common with the arch-federalists, but I am afraid he does. Whenever Labour lost an election for being too extreme and left-wing, he would always say that the result of that election showed that the Labour party had had not enough socialism in its manifesto, rather than too much. That, I am afraid, is what we are experiencing with Europe at the moment: the worse it gets, the more federalist it wishes to become. History owes a debt of gratitude to the former Prime Minister, Mr Brown, without whose intervention the previous Labour Government would have signed us up to the European single currency. That goes to show that everybody is good for something. It is only a pity that the modern Labour party does not subscribe as firmly to the blocking tactics that former Prime Minister employed so successfully, to the benefit of the country.

I do not mind looking back a little, because the longer one is in this place the more one sees the same things going round and round. Again and again, people such as my hon. Friend Mr Cash are derided as being in some way on the fringe of politics, as outlandish, extreme and wrong; they are then proven to have been right, and the people who were actually wrong always end up carrying on as if nothing had happened. I am a little concerned that our current Chancellor of the Exchequer seems to accept that there is a remorseless logic to fiscal union for the people on the continent. Fiscal and political union on the continent is not in Britain’s interests and we should oppose it. We should not allow ourselves to be drawn down that route. Our benefit lies in a system of free, interacting nation states within Europe.

Photo of Bill Cash Bill Cash Chair, European Scrutiny Committee 10:21 am, 18th September 2012

My appeal is for all the Eurosceptic movements—the Euro-realists—to join together. The situation has now become critical. The Barroso speech sets out an agenda of more integration and a federal Europe, and we now confronted by the reality that they are not listening to us. They did not listen to us on Maastricht—it was our own Government who did not listen to us then. Fortunately, the Prime Minister himself has now said that he thought there should have been a referendum on that treaty, and that that would have sorted the matter out there and then. However, we are where we are. I am not seeking confrontation; I am seeking solutions. The situation is far too grave for us to be in a state of difficulty due to personalities or whatever else: we have unite around certain central principles.

I welcome the speech by my hon. Friend Andrea Leadsom. She knows that I believe—I said so in an intervention—that time has run out. In the Liaison Committee the other day, my right hon. Friend the Prime Minister said that he agreed with me that the situation in Europe was now unacceptable. I used the word “untenable”, but we came to an agreement. I suggested that we should have a convention so that we could get ahead of the curve and provide our basis, based on the principle of consent—on the fact that the people of this country, and for that matter the people of other countries, should decide, not the Euro elite and not the Governments who created this failed project, this undemocratic situation that has been allowed to develop. We need to get together. He said that that was a perfectly reasonable suggestion and that conversations were taking place in Europe. Unfortunately, the reality is that they have now been overtaken by the Barroso agenda. I fear that my right hon. Friend is, if I may say bluntly, in a contradiction: on the one hand, he says that it is unacceptable, but on the other hand he says we will not leave the European Union.

This kind of negotiation, or renegotiation, involves asking such fundamental questions about our relationship that other member states will not accept them. When they do not, our option will be clear: however much we might not want to, we will have to leave the European Union if that is the position that we have arrived at. The Barroso speech indicates that we are on a different page, so I call for urgency. We should have a referendum before the next general election. We should create the circumstances in which we are able to ask the British people, “What kind of Europe do you want?”

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell 10:24 am, 18th September 2012

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate warmly my hon. Friend Andrea Leadsom on the immense work she has done in leading on this important subject.

I was born in 1976, two years after the last referendum on Europe. A great many of my colleagues—I look at my hon. Friend Steve Baker—have had absolutely no say in Europe. We are now Government Members and this cancer of Europe has eaten away at debate throughout almost my entire political career, from the moment I was delivering leaflets on the doorstep 20 years ago. It is time to get this problem sorted out.

The constant rush for federalisation will have precisely the opposite effect to what the European Union was set up for in the first place. The laudable point of a European union was to try to prevent another war in Europe, but if people’s sovereignty is withdrawn, they will strike back: eventually, right-wing parties will get elected and say enough is enough and rise up in nationalistic fervour. Those who do not think that such things could happen only have to look back 20 years to Yugoslavia and see how dangerous it can be when people do not feel they have control of their destiny. We need a sensible way forward.

I do not propose that we withdraw from the European Union, although I fear, as my hon. Friend Mr Cash outlined, that might be where we end up; but we do need to renegotiate the relationship and to withdraw from the interference in our lives. When I say to people, “You had the vote and you decided,” they reply, “No we didn’t. We voted for a common trading area.” That is the point: the people voted for a common trading area, not for a European Union of increasing federalisation. This review is a very important piece of work. The Minister would have the support of the vast majority of Government Members if the Government worked to ensure that we have a common trading area, not a federal Europe.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden 10:27 am, 18th September 2012

I join in the congratulations to my hon. Friend Andrea Leadsom for all she has done to bring reason and detailed consideration of the facts to the debate on Europe. In doing so, she has contributed to the growing recognition, not just in the Conservative party but in other parties and in the country as a whole, that we need a better relationship with Europe. The question now is not whether we want or need a better relationship, but what the relationship should be and how we should get it. I will focus on how.

Some of my colleagues think the answer is an in/out referendum, which they see as a “get out of jail free card”. It is not. It is wrong in principle to pose abstract questions to the electorate, but it is also unwise in practice. A detailed study of every referendum since the second world war, where there is opinion poll data, shows that on average there is a 17% swing back in favour of the status quo. I remind my hon. Friends that that means one has to start with a 34% lead for change to have a 50% chance of winning. If we start from the present position, with roughly half of people being in favour of leaving and a third in favour of staying, as my hon. Friend the Member for South Northamptonshire said, the idea that we would automatically win a referendum and that a majority would vote for “out” is probably a mistake. What we should do and what we ought to do in constitutional principle is negotiate a new deal. That is why we elect Parliaments and elect Governments, and we should elect a Parliament committed to doing that.

Because a new deal will require unanimity among our partners, that will be possible only if our partners are the demandeurs: if they are going to be coming to us saying, “We want a new treaty, we want to change the existing treaties,” and they are probably going to be doing that on several occasions. The question that we ought to be confronting, and it would be proof that we are considering these matters seriously if we do, is whether we should go for a big bang solution and put forward everything that we want to change in one negotiation, or instead emulate the Euro-federalists and employ salami-slicing tactics—a slice here and another slice for the next treaty, and so on.

We should record that the first change will be the most difficult, because Europe has the doctrine of acquis communautaire, under which no power once ceded to Europe can be referred back to individual nation states. The EU will put up the most almighty opposition if we merely want to repatriate powers over regulating birdwatching. If we want more serious things, the opposition will be even greater, but we have to establish first the precedent that powers can come back to member states; then, we can get ever more. Personally, I think salami slicing is probably the approach to use, but we should be discussing these issues. When we do, we will prove that we are serious about getting the new relationship that this country wants.

Photo of Laurence Robertson Laurence Robertson Chair, Northern Ireland Affairs Committee 10:30 am, 18th September 2012

I congratulate my hon. Friend Andrea Leadsom on securing this debate and on a comprehensive speech.

We are coming to the end of the debate and a lot of what I should have liked to say has been said. The only thing that I disagree with a little bit is the idea that we are, in any way, going to reform the European Union. We can tinker here and there, but we cannot achieve fundamental reform of the EU, partly because, as my hon. Friend Mr Cash said, the other member states are simply not interested. The whole project is not about subsidiarity at all, or about recognising and respecting the rights of sovereign states; it is about ever-closer union. That is its objective. Because of that we will not achieve the kind of reform that we would like.

That is not to say that while we are in the EU we should not try for reform. I am delighted that Mr Paterson was promoted in the reshuffle, because I worked with him a lot in Northern Ireland and know that he is the sort of man to take on the Department for Environment, Food and Rural Affairs and, more importantly, to take on the EU, because it is in that Department that the EU has its worst effects. There is a chance for some change there, but overall I do not see us creating the kind of EU that we want. So we have to go for an in/out referendum.

My hon. Friend Alec Shelbrooke gave his age away, so I shall give mine. I am 54—[Interruption.] I know I do not look it. I have been a Member of Parliament for 15 years and have been in business and I have never had a vote on whether we should be in the EU, either in a referendum or in this place. I have never had any say at all—although I have paid tax and been in business and politics—and neither have my constituents.

When the Conservative party went into the previous general election, it said that it wanted to connect people again with politics—with the decisions that affect their lives. There is no bigger example of how they feel disconnected, and why they feel that way, than the EU. They cannot influence what it does and we Members of Parliament cannot. It is time that the people were given the right to say in or out.

Photo of Roger Williams Roger Williams Liberal Democrat, Brecon and Radnorshire 10:33 am, 18th September 2012

I congratulate Andrea Leadsom on securing this debate. I am glad that I am among hon. Friends from the coalition, although they are thinning out and perhaps their number will have thinned out even more after my contribution.

Many people are saying that the eurozone crisis and the vulnerability of the eurozone at the moment provides the opportunity for the UK to repatriate some of its powers, but this is wrong thinking. The single market is the key to our economic success and is about much more than tariffs and quotas; it is about environmental standards, product standards, property rights, how qualifications are measured and even about social and employment standards.

There is a much more important national interest for the UK at the moment: risks from deeper eurozone integration include the UK lacking access and influence. We must ensure that we retain our full rights. For example, the hon. Lady mentioned that financial institutions dealing in significant amounts of euros may have to relocate physically within the eurozone. We must fight that and speak up for our financial institutions.

The Norwegian and Swiss models have been mentioned, but those countries have to accept much European legislation and regulation to maintain their membership.

We are making progress, even now. I pay tribute to my right hon. Friend Mr Davey, who ensured, when a Minister in the Department for Business, Innovation and Skills, that many regulations relating to small businesses were repealed by the EU. The EU will consider many more of the regulations applying to small businesses with a view to limiting or reducing them.

We have had a useful debate. I am sorry that other hon. Members have not been able to play a bigger part in it. This is a key issue for us and a key national issue as we face this economic crisis.

Photo of Emma Reynolds Emma Reynolds Shadow Minister (Foreign and Commonwealth Affairs) 10:35 am, 18th September 2012

It is a great pleasure to serve under your chairmanship, Mr Hollobone. I congratulate Andrea Leadsom on securing today’s debate. I also congratulate the Minister on his appointment. I did not realise that we would have such an early opportunity to debate such an important issue.

The hon. Lady’s debate concerns the reform of the relationship between the UK and the EU, but it is worth mentioning briefly that we are against the nuclear option of reform: leaving the EU, as some Government Members have called for. We Opposition Members believe that the UK should remain in the EU. We reject many of the arguments advanced by hon. Members today, saying that it would be in the UK’s national interest either to leave the EU or reduce our relationship to one based on trade.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I am grateful that the shadow Minister is so honest and courageous so early on in her speech. She has made a clear pledge that the Labour party will definitely never give this country an in/out referendum.

Photo of Emma Reynolds Emma Reynolds Shadow Minister (Foreign and Commonwealth Affairs)

I did no such thing. Perhaps if he listened a little more attentively to what I said, the hon. Gentleman would not make such pointless interventions.

The EU remains the largest and richest single market in the world and accounts for more than half of our total exports. We export more to the German Länder of North Rhine-Westphalia than to China and India combined. We do more trade with Ireland than with the so-called BRICs—Brazil, Russia, India and China—put together. Without our exports to the EU and the rest of the world, the British economy would have gone back into recession a year ago.

Photo of Julian Lewis Julian Lewis Conservative, New Forest East

Given the hon. Lady’s typically robust response to my hon. Friend Mr Bone, are we to take it that the Labour party is not ruling out giving an in/out referendum to the British public?

Photo of Emma Reynolds Emma Reynolds Shadow Minister (Foreign and Commonwealth Affairs)

The hon. Gentleman seems to understand me better than Mr. Bone. Our position is that a referendum at this time would be a distraction from the Government’s priority of getting the economy back on track. The question about what our relationship with the EU will become is open now, given the nature of Mr Barroso’s speech last week, mentioned by the hon. Member for Stone (Mr Cash). We will see how that relationship develops in terms of what kind of political and fiscal union the eurozone states want to form.

Photo of Bill Cash Bill Cash Chair, European Scrutiny Committee

Does the hon. Lady recognise that the timetable has been accelerated by that speech and those who thought that it might be better to keep the matter open, including the Prime Minister, are now effectively finding that time has overtaken them—or soon will.

Photo of Emma Reynolds Emma Reynolds Shadow Minister (Foreign and Commonwealth Affairs)

The hon. Gentleman makes an interesting point. It is not yet clear at what point the European Commission, the German Government or other Governments will want to put treaty change on the table.

Photo of Emma Reynolds Emma Reynolds Shadow Minister (Foreign and Commonwealth Affairs)

In his speech, Mr Barroso’s mentions putting that treaty change on the table before the 2014 European parliamentary elections—I have read his speech closely—but it is still unclear whether that will happen in time for those elections. There will be a report by Herman Van Rompuy to the Council in December, which will be an important time for our Government to start to have a policy on the European Union. I shall come on to that.

Many of the hon. Members present who argue for withdrawal offer a false choice between trade with emerging markets and EU membership. They say, “Remain in the EU, or trade with the likes of China, India, Brazil and Russia.” We must of course improve our export performance to the rest of the world, but we will not build real export success if we start by cutting ourselves off from our largest existing market and our largest collective negotiating tool. The EU provides the collective political weight that we need to maximise our influence in negotiations. Hon. Members need not take that from me, they can take it from the Europe Minister, as set out in written evidence to the Foreign Affairs Committee as recently as May of this year, when he said:

“On trade, one voice representing half a billion consumers is heard more loudly in Beijing, Delhi and Moscow, than 27 separate ones.”

British businesses, workers and consumers will see the benefit of EU free trade agreements, such as the recent FTA with South Korea, which is worth £500 million to UK exporters, or the potential future agreements with the US, Canada, Singapore and India.

Photo of Laurence Robertson Laurence Robertson Chair, Northern Ireland Affairs Committee

When will that happen? I take a deep interest in Irish politics, and we export more to Ireland’s 4.5 million people than we do to more than a third of the world’s population in those emerging markets. We keep hearing how good it will be, but when will it happen?

Photo of Emma Reynolds Emma Reynolds Shadow Minister (Foreign and Commonwealth Affairs)

That question might be more appropriate for the Foreign Office Minister. The point that I am making, if the hon. Gentleman will listen, is that it is more likely that we will be able to prise open markets and change the rules of the game on intellectual property rights and other issues if we are part of the collective weight of the European Union. China, with 1.3 billion people, has much more interest in forming a trading relationship with a European Union representing 500 million consumers than with a single country within that Union.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

I am listening carefully to what the hon. Lady said about being in Europe to negotiate such trade terms. Will she clarify whether that means that we should have much further integration to open up those markets?

Photo of Emma Reynolds Emma Reynolds Shadow Minister (Foreign and Commonwealth Affairs)

That was not my point. We have much more influence and weight in international trade negotiations acting as part of the European Union than we do alone. I now want to make some progress.

Our membership of the European Union is also vital to attracting foreign direct investment. I want to agree with one point made by the hon. Member for South Northamptonshire, that it would not be in our national interest to be in the position of Norway. A recent report by some Norwegian academics pinpoints a democratic deficit in Norway’s relationship with the EU, because the country is bound by the single market’s rules, regulations and laws, over which it has no say. If we were to put ourselves in that position, it would not be in our national interest, so I agree with the hon. Lady on that.

We are in favour of our membership, but we are not defenders of the status quo. We would like to see a Europe that is more outward looking, that is stronger in the world, that is—crucially, at the moment—better able to deal with the eurozone crisis and that reforms some of its internal policies. We would like to see the multi-annual financial framework more focused on growth and job creation, a reform of the common agricultural policy and, crucially, a completion of the single market in services. The only way to achieve such reform, however, is to have influence in the EU and not to be stranded on the sidelines.

Regrettably, as a result of the Prime Minister’s walk-out at the European summit in December, our stock in Europe sits at an all-time low. [Hon. Members: “ Rubbish.”] If hon. Members visited European capitals and discussed with other politicians the stock of UK influence, they would have a pretty bad surprise. Negative tactics such as vetoes and empty chairs are instruments of last resort; they are open to member states and we should be prepared to consider their use in defence of a vital national interest, but in December no vital national interest was defended. The Prime Minister’s protocol on financial services was rejected as a retreat from existing single market rules, and the rest of Europe simply carried on without us. The Prime Minister’s action therefore incurred a loss of influence for no tangible gain. Ironically, as a result of what he did in December, the Government are more reliant on an institution that many Conservative Members love to hate, the European Commission, which we must now depend on to protect the single market and its integrity.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

I have to disagree completely with the hon. Lady. The Prime Minister’s use of the veto, far from giving us less influence in Europe, had the opposite effect. What was astonishing was the complete wall of ambassadors and others from the European Union coming to see many of those known to be interested in the EU to find out what the problem is, what was going on and what it is exactly that Britain wants. So she is completely wrong—what the Prime Minister did was a wake-up call and definitely in the interests not only of the City but of Britain.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Order. Before Emma Reynolds responds, she needs to think about bringing her remarks to a close. She has about two minutes left.

Photo of Emma Reynolds Emma Reynolds Shadow Minister (Foreign and Commonwealth Affairs)

I could not disagree with the hon. Lady more—I have made that clear.

Today’s debate is reminiscent of the 1990s: the divisions of the Tory party have not yet healed. We have seen three different positions on the Government side: no change and stay in; stay in and argue for repatriation and renegotiation; and to get out. The Conservative party is utterly divided. As long as the Government put the party interest before the national interest our stock in Europe will remain low and our ability to argue for reform will remain incredibly limited. It is regrettable that the Government are divided at home and weak in Europe, and that they are therefore incapable of being a strong and effective voice for reform in Europe.

Photo of Mark Simmonds Mark Simmonds The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs 10:47 am, 18th September 2012

I am delighted to see you in the Chair this morning, Mr Hollobone. I am sorry that the Minister for Europe, my right hon. Friend Mr Lidington, could not be present this morning. He very much wanted to participate in this important debate, but I was enthused to understand that I would be responding within my first 10 days in my new ministerial role.

I congratulate my hon. Friend Andrea Leadsom on securing the debate and on the articulate, intelligent and comprehensive way in which she introduced it. I thank all colleagues who have participated, many of whom fall into the category of what I call distinguished and principled colleagues. In the time available, I am afraid that I will not be able to answer all the specific questions.

I also want to put on the record the Government’s thanks to my hon. Friends the Members for South Northamptonshire, for Daventry (Chris Heaton-Harris), for Truro and Falmouth (Sarah Newton) and for Camborne and Redruth (George Eustice), who deserve enormous credit for the valuable, significant and serious work of the Fresh Start group. I hope that my hon. Friends and others will continue to engage with such a vital issue, in particular as we analyse the balance of competences in a process that my right hon. Friend the Foreign Secretary announced just before the summer recess and about which I intend to say more later.

Photo of Bill Cash Bill Cash Chair, European Scrutiny Committee

One fundamental competence that I hope my hon. Friend agrees needs to be reviewed is whether the British people are able to govern themselves by their own consent in general elections. Does he not agree that that is the most fundamental democratic question that needs to be addressed on the European issue?

Photo of Mark Simmonds Mark Simmonds The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs

My hon. Friend will not be surprised to hear that I will not answer that question directly this morning. I urge him and others, however, to engage positively and constructively with the forensic analysis of the balance of competences, which will feed into a national debate about the relationship that we should have with the European Union.

I want to be up front in ensuring that all hon. Members understand that the Government have been absolutely clear that there should be no further transfer of competence or powers from the UK to the EU over the course of the Parliament. That is in stark contrast with the Labour Government’s record. They were clearly wrong to sign the Lisbon treaty without consulting British voters in any way. They were quite wrong to give away £7 billion of our rebate and to get nothing in return, and they were quite wrong to drop out of our opt-out from the social chapter, which means that employment laws are decided in Brussels, not here.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

Does that not illustrate the folly of the comments by Emma Reynolds? She said that Britain is more isolated by taking a stance. We gave away all that money, and what did we get for it?

Photo of Mark Simmonds Mark Simmonds The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs

I agree with my hon. Friend. The Prime Minister’s veto back in December played a significant role in ensuring that he and the Government are always seen to be protecting the UK’s national interest. That is absolutely right. The comments of Emma Reynolds on this matter are confusing, particularly in view of her unwillingness to rule out British membership of the euro, which the Government have done.

Photo of Chris Bryant Chris Bryant Shadow Minister (Home Affairs)

If we are talking about things that will happen in the future, I would be delighted to know when the Government expect to have a resolution of the next financial perspective. The advice of the hon. Member for South Northamptonshire is to have a shopping list for the next couple of years, but a shopping list normally involves some spending, and I wonder whether, to secure some of the things she wants, the Government will abandon the rebate in that perspective discussion.

Photo of Mark Simmonds Mark Simmonds The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs

It is clear that the UK’s agenda and priorities—I hope to come to them in a moment—are about driving global competitiveness and economic growth to alleviate some of the problems that are prevalent in the eurozone. That includes further trading with the eurozone and—my hon. Friend George Freeman, who is no longer in his place, made this key point—not just with the eurozone, but further afield. This debate is extremely timely, and provides an early opportunity to discuss the issues. It is clear that events in the eurozone will have wide-ranging implications, and its ultimate shape is unknown and uncertain. The Prime Minister made it clear on the Floor of the House in June that as Europe changes to meet the current challenges, our relationship with it may also change. It is vital for Britain’s national interest, and for the European Union’s strength and prosperity, that we meet those challenges.

The coalition agreement that was set out at the beginning of this Parliament stated that the UK should be a positive participant in the European Union, working with our partners to ensure that all European nations are equipped to face the challenges of the 21st century, by far the most important of which is global competitiveness. I am the first to acknowledge that there is still much more to do to restore growth, both inside and outside the eurozone. The Government remain vigorously committed to developing the European single market, to smarter and less costly EU regulation, and to more free trade between Europe and the rest of the world. We need a Europe that delivers prosperity, job and wealth creation, and security, and a Europe that is more outward-looking, more dynamic and more competitive on the global stage.

Photo of Emma Reynolds Emma Reynolds Shadow Minister (Foreign and Commonwealth Affairs)

Would the Government not have more authority and influence when talking about growth in other European countries if we had growth here in the UK?

Photo of Mark Simmonds Mark Simmonds The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs

The hon. Lady makes an interesting point. It is vital in a globalising world to remain on the competitive side of the line. The reforms that this Government have put in place since the May 2010 election will make a significant contribution to that. They include making our tax system the most competitive in the G20, making the UK the best place in Europe to start, to finance and to develop a business, encouraging investment and exports as a route to balancing the economy after the shambolic economic mess that the Labour Government left to the coalition Government, and creating a more educated work force. Over time, those changes will deliver economic growth.

Aligned with that, the single market is a significant driving force for prosperity. That is why we will continue with an ambitious programme of deepening the single market while seeking to reduce unnecessary burdens. The single market supports UK jobs, prosperity and growth through increased trade and, vitally, helps the UK to attract inward investment from inside and outside Europe. We want the single market to continue to encourage competition and innovation throughout Europe, to help to increase productivity in the UK, and to bring down prices for consumers so that UK businesses can benefit from a single regulatory regime, simplifying regulation, liberalising services and developing a single digital market that will bring benefits to the UK.

Our national interests, our influence and our values are all advanced internationally through the co-operation of states. However, as many hon. Members have rightly said, there is no doubt that the EU requires reform, and we certainly do not agree with everything the EU does. It is absolutely clear that reform is required now more than ever. In our view, the UK should champion growth and the single market, and take the opportunity to shape Britain’s relationship with Europe in a way that advances our national interest in free trade, open markets and co-operation.

We have led the debate on reducing the burden of EU regulation on business, and securing agreement on a breakthrough step to exempt micro-businesses from new EU proposals, but clearly more needs to be done. We have secured agreement on a unitary patent after 23 years of EU negotiation. Amid all that change, my right hon. Friend the Foreign Secretary announced an analysis of the balance of competences between member states and the EU. That vital review will be an audit of what the EU does and how it affects us in the United Kingdom. It will look at where competences lie, how they are used, whether exclusive, shared or supporting, and what is important for our national interest. The process will begin in the autumn, and I urge all right hon. and hon. Members to participate.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Can my hon. Friend answer the question that our hon. Friend Mr Baron posed earlier? He and I delivered a letter to No. 10 Downing street with more than 100 signatures from Conservative Members requesting legislation in this Parliament for a referendum in the next Parliament on the balance of competences

Photo of Mark Simmonds Mark Simmonds The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs

I am grateful to my hon. Friend for that intervention. I confirm that the Prime Minister met my hon. Friend Mr Baron on 9 July to discuss the contents of the letter, and I understand that a formal reply will be sent to him shortly.

We have pressed for an open trading agenda that presents real opportunities and allows us to benefit from investment in the UK. Our commitment to free trade is why the UK is still the leading destination for foreign investment into Europe.

Photo of Mark Simmonds Mark Simmonds The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs

Perhaps my hon. Friend will bear with me. I am coming to a conclusion, but I will be happy to discuss with him afterwards the point he wants to make. I am running out of time, and I want to make a couple of key points.

The UK has been leading the way in trying to facilitate free trade negotiations and agreements, and it has done so successfully with South Korea. It is leading the drive for such agreements with Japan, Singapore, the USA and Canada.

My hon. Friend Mr Cash referred to the Barroso speech. I confirm that we are looking closely at its contents. We agree with some of the President’s analysis of the EU’s financial problems, such as the unsustainable levels of debt, the lack of competitiveness and some irresponsible behaviour in financial institutions, but the direction of travel is not always one that the UK wishes to take.

In conclusion, the immediate priority must be to restore market confidence, to drive growth, to negotiate more trade agreements, to open up new markets, and to create wealth and jobs through competitiveness, innovation and liberalisation.