EU Council

Monday 2nd July 2012 Commons Chamber

15:32

[The Prime Minister (Mr David Cameron)]

I am sure that, like me, the whole House will be deeply saddened by the deaths of three British servicemen in Afghanistan yesterday. These brave soldiers were demonstrating great courage to prevent Afghanistan from once again becoming a haven for international terrorists and therefore to help keep us safe here in the UK. The suspected perpetrator is in custody, and we will do everything in our power, with the Afghan national security forces, to ensure that justice is done. This tragic incident again demonstrates the very real risks that our soldiers face every day, and we will learn all the lessons that arise from it. I know that everyone in the House will want to send their support to our brave troops and their families at this difficult time.

Britain had three objectives at last week’s European Council: first, for eurozone members to take the urgent action needed to deal with the immediate crisis; secondly, to secure a comprehensive growth package firmly focused on Britain’s priorities; and thirdly to send a clear message to the rest of Europe about what we expect from the budget negotiations to come. I shall deal with each before turning to future policy and the Government’s response to the banking scandal.

First, on the eurozone, Britain has been clear that in the short term we want urgent action by eurozone countries and authorities to defend their currency and deal with the instability. In the longer term, we recognise that the remorseless logic of a single currency means that the eurozone may need closer economic and fiscal integration. Britain is not in the euro, and we are not going to join the euro, so we should neither pay for short-term measures nor take part in longer-term integration. The summit made some progress. On shorter-term measures, eurozone members agreed to use the bail-out funds to support intervention in bond markets; to put eurozone money directly into struggling banks; and to ensure that official loans to Spanish banks would not be given preferential treatment over private sector loans. Under the last Government, we could have been liable for financial support for these measures, as members of the EU bail-out fund, but this Government have repatriated that power so that the British taxpayer is not involved.

On longer-term issues, eurozone members agreed important steps towards closer integration following a discussion of a report by the President of the European Council and others. It is vital for Britain—and, we would argue, for the strength and prosperity of the whole European Union—that they do this in the right way. We therefore secured agreement that as this work goes ahead, the “unity and integrity of the single market” will be fully respected.

On the specific proposal of a banking union, we ensured that Britain will not be part of any common deposit guarantees or under the jurisdiction of any single European financial supervisor. I am very clear that British taxpayers will not be guaranteeing any eurozone banks, and I am equally clear that, while we need proper supervision of our banks, British banks should be supervised by the Bank of England, not by the European Central Bank. The original draft of the growth compact included a whole section on economic and monetary union which implied that a banking union might apply to all 27 countries. A number of countries worked together to ensure that that whole section of the growth compact was removed.

Our second objective involved growth. The growth programme includes commitments to deal with weak lending, including through an increase in funds for the European Investment Bank. Alongside this are clear commitments to complete the single market in areas such as services, energy and digital, in which Britain will be one of the prime beneficiaries. The agreed plan included dates and times by which those steps should be concluded.

We also agreed to go ahead with the European patent court. Businesses have complained for decades that they needed 27 patents to protect their intellectual property. That problem will now be solved. In finalising the agreement, Britain had two objectives: that the new patent should be redrafted so that it did not get snarled up in the processes of the European Court of Justice, and that a significant part of the court, covering pharmaceutical and life science industries, would be based in London. I am pleased to say that we secured both those outcomes. That will mean millions of pounds and hundreds of jobs for Britain.

Our third objective involved the EU budget for the next seven years. We want a budget that is focused on growth, not a focus on growth in the budget. EU members as a whole are €3.5 trillion more in debt now than when the last EU budget was negotiated. We have to face up to that tough reality. I made it clear that without the British rebate, we would have the largest net contribution in the EU as a share of our national income. Without our rebate, our net contribution would be double that of France and almost one and a half times bigger than that of Germany. So the British rebate is not up for renegotiation. It is fully justified.

On foreign policy, the Council welcomed the EU oil embargo against Iran, which came into force yesterday. On Syria, we called for united action by the United Nations Security Council to place more robust and effective pressure on Assad’s regime, including the adoption of comprehensive sanctions.

Europe is changing rapidly and fundamentally, and that presents real challenges for all countries. Those inside the eurozone have to face fundamental choices about whether to limit their national democracy and provide financial support to the weaker members. And like others outside the Eurozone, we in Britain also face big choices. As Europe changes to meet the challenges of the eurozone, so our relationship with Europe will change, too.

There are those who argue for an in/out referendum now. I do not agree with that—[Interruption.] I do not agree with that because I do not believe that leaving the EU would be best for Britain. Nor, however, do I believe that voting to preserve the exact status quo would be right. As I wrote yesterday, I do not believe that the status quo is acceptable, but just as I believe it would be wrong to have an immediate in/out referendum, so it would also be wrong to rule out any type of referendum for the future. The right path for Britain is this. First—[Interruption.]

[Mr Speaker]

Order. Members are a little over-excitable. They must calm themselves, and the Prime Minister’s statement must be heard.

[The Prime Minister]

First, we must recognise that, in the short term, the priority for Europe is to deal with the instability and chaos. Secondly, over time, we must take the opportunities for Britain to shape its relationship with Europe in ways that advance our national interest in free trade, open markets and co-operation. As I argued yesterday, that should mean less Europe not more Europe, less cost, less bureaucracy, and less meddling in the issues that belong to nation states. Thirdly, all party leaders will have to address the question. It follows from my argument that, far from ruling out a referendum for the future, as a fresh deal in Europe becomes clear, we should consider how best to get the fresh consent of the British people.

Finally, as I have said, as the eurozone moves towards a banking union, we must ensure that Britain takes responsibility for sorting out its own banking sector. On the unfolding banking scandal here in the UK, we need to take action right across the board, including introducing the toughest and most transparent rules on pay and bonuses of any major financial centre in the world, increasing the taxes that banks must pay, ensuring tough civil and criminal penalties for those who break the law and, above all, clearing up the regulatory failure left by the last Labour Government.

The British people want to see two things: they want to see bankers who acted improperly punished; and they want to know we will learn the broader lessons of what happened in this particular scandal. On the first, the Serious Fraud Office is looking at whether any criminal prosecutions can be brought, and at whether the full force of the law is being used in dealing with this. On the second, I want us to establish a full parliamentary committee of inquiry involving both Houses, chaired by the Chairman of the House of Commons Treasury Select Committee. This committee will be able to take evidence under oath; it will have full access to papers, officials and Ministers, including Ministers and special advisers from the last Government; and it will be given by the Government all the resources it needs to do its job properly.

The Chancellor will be making a full statement, but this is the right approach, because it will be able to start immediately, it will be accountable to this House and it will get to the truth quickly, so we can make sure this never happens again. I commend this statement to the House.

15:40

[Edward Miliband (Doncaster North) (Lab)]

I am grateful to the Prime Minister for his statement. On the tragic news from Afghanistan, all our thoughts are with the family and friends of the soldiers concerned. The news reminds us once again of the risks our troops face—day in, day out—and of our duty to do everything we can to protect them.

Let me start with the Prime Minister’s announcement on the banking inquiry. It is right for him to reconsider the position of last week on the need for a full inquiry. I welcome that recognition. I have to say, however, that I am not convinced by his way forward because I do not believe it measures up to the scale of what is required. However able or distinguished they are, politicians investigating bankers will not command the consent of the British people. People are understandably angry about the way their banks let them down, and I do not believe that the proposed way forward is the way we can build the consensus required for real change. After all, there have already been a number of Select Committee reports into the banking crisis.

I appreciate that the Leveson inquiry has been uncomfortable for politicians on all sides, but that is the way it should be. We will continue to argue for a full and open inquiry, independent of bankers and independent of politicians. That is the only way, in my view, that we can rebuild trust in the City of London and financial services.

Turning to the European Council itself, let me associate myself with what the Prime Minister said on Syria. Agreement—but, in truth, little progress—was reached at Geneva on Saturday, and the divisions within the international community on this issue mean that too little is being done to bring the escalating violence to an end. In that context, will the Prime Minister update the House on the position of Russia, which is clearly imperative in this regard, on a future for Syria without President Assad?

Turning to the main issues of the summit, it took place against a backdrop of the continuing crisis in the eurozone, a faltering global recovery and a double-dip recession here in the UK. The central challenge, then, was how we can have a Europe not of austerity and unemployment, but of jobs and growth. I am afraid to say that on that central issue, the Prime Minister cannot be part of the solution because he is part of the problem.

On growth, the Prime Minister used an instructive phrase in his post-summit press conference, when he said:

“Just as we have to tackle the euro crisis, so we have to tackle the growth crisis”.

Having at last admitted that there is a growth crisis, he added:

“Britain has been driving this debate.”—[Laughter.]

I do not think it was meant as a joke, but it suggests someone quite out of touch with reality. As he was speaking, the figures were coming in, showing the double-dip recession, created by him in Downing street, was worse and deeper than we thought. The UK is one of only two countries in the G20 in double-dip recession. There can be no solution to the growth crisis unless we tackle the crisis of demand in the European economies and globally? Will he tell us whether he advocated at this summit any measures to tackle the crisis of demand in the European economy, as well as the long-term measures he mentioned?

The Prime Minister talked about the banking regulator. How will he use his popularity and influence in Europe to secure specific legal safeguards between now and December’s final proposals to protect the very important British interest in the single market? He then talked about the patent court, and said, with his customary humility, that the outcome showed that he was succeeding. Only this Prime Minister could pretend, having argued that the court’s headquarters should be in London, that it was a diplomatic triumph that it had ended up being based in Paris.

As for the eurozone and bank recapitalisations, it is welcome that direct help can be provided for eurozone banks, but does the Prime Minister really believe that the funds that eurozone countries are making available are adequate? There are many reasons to believe that that is not the case.

Finally, there is Europe and the Prime Minister’s position—or should I call it his weekend hokey-cokey? On Friday, he ruled out a referendum. He said:

“‘I completely understand why some people want an in/out referendum… I do not think that is the right thing to do”.

Hours later—what a coincidence—100 Back Benchers and the former Defence Secretary called for an in/out referendum. Then, hey presto, on Sunday—[Interruption] —the Prime Minister hinted that he might rule one in. Then the Foreign Secretary—[Interruption.]

[Mr Speaker]

Order. I said that Labour Back Benchers should not be yelling when the Prime Minister was speaking, and the same applies to Government Back Benchers. I do not care what they are exhorted or encouraged to do from any quarter; it is not proper behaviour, and however long we have to continue, it is not going to happen. That is the beginning and the end of the matter.

[Edward Miliband]

Then the Foreign Secretary was sent out to say on television:

“The Prime Minister… is not changing our position.”

Three days, three positions. First it was no, then it was yes, and then it was maybe.

Can Members on both sides of the House have some clarity about the Prime Minister’s position? First, has there been a change in the Government’s position, yes or no? Secondly, the Prime Minister talked of a referendum being connected to the renegotiation of powers. To be fair to him, his position on renegotiation is longstanding, not least because he has got nowhere in negotiating it, but is he now saying that he may be in favour of withdrawal from the European Union if he does not get these powers? That would be a new position. It would be helpful—and I am sure that his Back Benchers would like it too—if we could have a “yes” or “no” answer to that question as well.

Thirdly, can the Prime Minister explain this? Last October, he said in the House:

“there is a danger that by raising the prospect of a referendum… we will miss the real opportunity to further our national interest.”—[Official Report, 24 October 2011; Vol. 534, c. 27.]

So why is he doing it now? We all know the answer to that question. It is not to sort out the crisis of growth, it is not to tackle youth unemployment, and it has nothing to do with the national interest. It is all about managing the divisions in the Prime Minister’s own party. But a nudge-nudge, wink-wink European policy is not good for the country, nor will it keep his party quiet.

Five years ago, the Prime Minister said that his party should stop banging on about Europe, but now he is the man getting out the drum. As John Major could have told him, it is not going to work. We have a veto that never was, a referendum that the Prime Minister cannot explain, a party talking to itself, a Prime Minister who is managing his party rather than leading the country, and a Government who are letting Britain down.

[The Prime Minister]

Let me start with the right hon. Gentleman’s questions about the inquiry into the banking scandal. I think that what he said was rather demeaning to Parliament, the House of Commons and the House of Lords. I see no reason why Parliament cannot get to the bottom of this if we take the best and brightest from both Houses and all parties, and there are few better people to do that than my hon. Friend the Member for Chichester (Mr Tyrie), who has considerable expertise. The key point, however, is that this needs to be done speedily. The Vickers Bill—the banking Bill—will be introduced in the House of Commons in January, and I want an inquiry to be completed by then so that we can take the best of that inquiry and put it in the Bill. I think that that is the right thing to do.

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

It is what you tried to do on Leveson.

[The Prime Minister]

The shadow Chancellor is intervening from a sedentary position. No one would like to see him in the dock of a courtroom more than me, but the job here is to get on with it, find the answers, and put them into law.

Let me now deal with the questions that the Leader of the Opposition asked about the European Union. He asked some very specific questions, including one about Russia and Syria. At the weekend, following some very hard negotiation by my right hon. Friend the Foreign Secretary, all parties agreed on transition by mutual consent. We now need to implement the policy, and all the P5 members need to do that.

The right hon. Gentleman talked about taking responsibility on the economy. When is Labour going to take responsibility for the twin crises: the crisis of the deficit and the crisis of failed banking regulation? He asked what we had done to protect the single market. If he looks at the summit conclusions, he will see that it says very specifically that the single market and its integrity must be protected. On whether the eurozone funds are sufficient, frankly, I think he is right to ask that question. We continually say it is very important that the firewall—the bazookas—are big enough.

On the right hon. Gentleman’s description of recent events, I think he probably ought to give up the hokey-cokey and stick to the Rubik’s cube. But let me tell him this: I am not going to take any lectures from a group of people who gave up the rebate and got nothing in return, who gave up our social chapter opt-out and got nothing in return, and who took us into the bail-out funds when we were not even part of the euro. Those are the people who say that the European Union has not got too much power and that they would join the euro if they were in power for long enough. The right hon. Gentleman likes to tell us endlessly about standing up to vested interests, but the fact is that he will never stand up to two big vested interests: the trade unions and Brussels.

[Sir Malcolm Rifkind (Kensington) (Con)]

While there is wide agreement in Britain as to the need for reforms in our relationship with the EU, does the Prime Minister agree that the worst possible moment to try to start negotiating with 26 other countries is when all the member states are, quite rightly, preoccupied with the very future of the eurozone and the potential of its collapse? Does the Prime Minister also agree that as the UK is fully protected by the statutory requirement for a referendum if there are any further proposals for the transfer of powers to Brussels, it must be the right policy to establish a link between any negotiations which we wish to begin, and the new treaty that would be required to have unanimous conset if the eurozone 17 wish to achieve a fiscal and banking union?

[The Prime Minister]

My right hon. and learned Friend has set out the situation very well. It is worth saying, as I said in my statement, that everyone has to recognise that the short-term firefighting is the EU’s urgent and immediate priority, but my point is that we are safeguarded through the referendum lock in respect of further powers being transferred. However, we must think about how Europe is developing, make sure we make the most of the opportunities, and then think about how to seek the consent of the British people.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

Does the Prime Minister agree that the customary celebrations after last week’s euro summit were, yet again, premature? There is not nearly enough money in the European stability mechanism, as its £500 billion is not enough to deal with Spain, let alone other countries. Equally, the German Chancellor’s opposition to eurobonds means there must be a question mark hanging over the eurozone. On banking, if we are to have a truth and reconciliation committee—which is fine—we must just remember that some of the most strident calls for deregulation over the last 30 years came from the Government side of the House.

[The Prime Minister]

I have great respect for the right hon. Gentleman, and what he says about the eurozone agreements at the weekend is absolutely worth listening to and having regard to. The point I would make is that for the first time in a long time there was a series of steps that countries such as Britain had been calling for about using the facilities to buy bonds and about direct recapitalisation of banks. They are hedged around with all sorts of ifs and buts, but that was progress. On the truth and reconciliation commission issue, I note that the right hon. Gentleman said that a full independent public inquiry is not the right way ahead. I think the way ahead we have suggested will be swift enough, but also strong enough to get to the answers—and to get to them quickly.

[Mr John Redwood (Wokingham) (Con)]

Given that there is practically no unpledged money left in the current bail-out fund and given that the new bail-out fund does not exist, did the member states assembled discuss how they are going to get hold of the £500 billion or more that they might need, and are they proposing to borrow it on the credit rating of countries such as Spain and Italy?

[The Prime Minister]

As ever, my right hon. Friend is incisive at getting to some of the difficulties in what is being proposed. I think we should be pushing the eurozone members into taking the short-term steps to try to help with financial stability, which buying bonds, directly recapitalising banks and sorting out issues of seniority are all about. We have to recognise the great difficulties they are going through in trying to raise adequate amounts of finance, but none the less it is in our short-term interests that they do deal with the crisis at the heart of the eurozone, because the high interest rates in Italy and Spain are not only hurting Italy and Spain; they are hurting us, too.

[Mr Jack Straw (Blackburn) (Lab)]

The right hon. Gentleman failed to answer the question from my right hon. Friend the Member for Edinburgh South West (Mr Darling), the former Chancellor of the Exchequer, just a moment ago, in which he asked the Prime Minister to recognise that the pressure for deregulation and a very light touch in the City was coming very strongly from him and—[Interruption.] Oh yes it was. So if there is to be truth and reconciliation, will there be some acceptance by the Prime Minister and the Chancellor that they got it woefully wrong in putting the pressure on us?

[The Prime Minister]

Everyone will have to account for what they have said and all the rest of it, but I have to ask: who was in charge for the last 13 years? Who was the City Minister who carried out this action? If the right hon. Member for Blackburn (Mr Straw) wants to go into the interstices of who said what and did what, I can tell him that the Conservative party—I do not think I was in Parliament at the time—actually voted against the tripartite arrangement that has so badly failed.

[Sir Menzies Campbell (North East Fife) (LD)]

May I welcome my right hon. Friend’s continuing, and occasionally warm, endorsements of Britain’s continued presence in Europe? Does he also agree that those who wish to take Britain out of Europe now have a duty to provide detail as to what the political and economic cost would be, rather than vague promises of the Elysian fields?

[The Prime Minister]

My right hon. and learned Friend makes an important point, which is that we need to make sure that the whole debate about our engagement in Europe is properly informed. I do support our membership; I do think that the single market is vital for us and that determining the rules of that market matters for us. However, it is important that we air these facts and figures, and the balance of competences review that will be launched shortly will help all parties, all politicians and all parts of civic society in Britain to see some of the arguments and some of the facts and the figures. I think that that will help to inform the debate.

[David Miliband (South Shields) (Lab)]

Further to that question, I wonder whether there are any circumstances, further to the Prime Minister’s negotiations, in which he will recommend to the British people that they should leave the European Union.

[The Prime Minister]

As I said, I want to stay in the European Union for the reasons I have given. But I will always stand up for the British national interest as I see it. That is the job of being Prime Minister.

[Mr Peter Lilley (Hitchin and Harpenden) (Con)]

My right hon. Friend will know that my opposition to excessive centralisation of power in Europe has never been in doubt. Indeed, the only doubt that my Euroscepticism has given rise to was that which John Major cast upon my paternity. Will the Prime Minister, none the less, agree that what we need is not a commitment to an in/out referendum, but a commitment to insisting that our partners give us back powers to govern ourselves if they want our agreement for them to subordinate themselves further to centralisation in Europe?

[The Prime Minister]

My right hon. Friend, whose parentage I have never questioned, nor would I ever do so, puts it very well. The fact is that Europe is changing very rapidly. The eurozone countries, in my view, are going to need to take some pretty bold integrationist steps. That will provide opportunities and openings for countries outside the eurozone, such as Britain, and we should maximise those opportunities to pursue our national interest. I firmly believe that that means remaining at the table for those things that really matter for us, but I think that is what we should do.

[Mr Peter Hain (Neath) (Lab)]

Is the Prime Minister concerned that on Europe and the referendum he sounds more like John Major by the day?

[The Prime Minister]

What matters is doing the right thing. I think that there are two positions that do not make sense. First, unless you actually want to leave the European Union now, and some people do, an in/out referendum now is not the right answer. But ruling out, for ever and a day, any form of getting the consent of the British people for what I would call a fresh deal and a fresh settlement in Europe also does not make sense. This is a question that all party leaders are going to have to answer. We are providing the answer—the right hon. Gentleman’s party leadership will have to do the same thing.

[Andrea Leadsom (South Northamptonshire) (Con)]

Will my right hon. Friend agree to consider carefully that the Fresh Start project’s options for change paper, which is being launched next week by my right hon. Friend the Foreign Secretary and is the culmination of a year’s work by parliamentarians from all parties and external experts, might possibly offer some of the solutions to the type of reform we are looking for in the EU? Will he also agree to reconsider the issues of competition in the banking sector that, in my opinion, are one of the major reasons why we are in this appalling situation?

[The Prime Minister]

I shall certainly consider very carefully what my hon. Friend says. As I said, the Foreign Secretary will shortly set out the balance of competences review and how the process will work. I hope that that will inform debate; clearly, the piece of work undertaken by her and her colleagues will help. She mentions the banking sector and there are clearly rules for financial services at the level of the single market that are required and it is very important that we have a say over them. The fundamental elements of banking union, however, flow from the single currency, not the single market. That is why that union should be carried out at 17, not at 27.

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

What discussions were there of the likely effects of the oil embargo on Iran and were there any discussions on the knock-on effect on prospects for a sustainable peace in the middle east?

[The Prime Minister]

There were brief discussions about Iran because the discussions about the single currency, the eurozone and the growth compact were so protracted. There is strong agreement in the European Union that the sanctions are right and necessary and I think that if we could get Iran to take a more sensible path on the issue of civil nuclear power, that would help unlock the problems of middle east peace rather than making them worse.

[Mr William Cash (Stone) (Con)]

I was heartened by my right hon. Friend’s interview on the referendum question, but given his negative answer to me on 23 May on that same question, will he take the advice of the London taxi driver to whom I have just spoken, who just said, “The British people are not stupid; they understand the position. Give them renegotiation, give them a referendum, get rid of the coalition agreement—then, he will be re-elected by a massive majority.”

[The Prime Minister]

I can see that it must have been a particularly satisfying and heart-warming taxi ride for my hon. Friend. As I have said, I do not think that an immediate in/out referendum is the answer, but ruling out a referendum is not the answer either. There are opportunities to build the sort of settlement we want in Europe and the Government believe that we should take advantage of them.

[Helen Goodman (Bishop Auckland) (Lab)]

Will the Prime Minister tell the House what indications he has had from European colleagues that they would be likely to agree the repatriation to this country of the social chapter and other powers?

[The Prime Minister]

We were able to renegotiate the bail-out power and get out of that part of the treaty, so we have had some small success on that agenda already. There is a big change coming in Europe. I cannot say how fast it is going to go and whether it will be a number of small treaties or a bigger treaty, but there will be opportunities. The eurozone countries will have to do more to integrate, which will give others opportunities to pursue their own agendas.

[Conor Burns (Bournemouth West) (Con)]

My right hon. Friend the Prime Minister will be aware that the British public are heartily sick of broken promises on European referendums, not least because of the decision of the Labour party to renege on a referendum on the Lisbon treaty. Can my right hon. Friend see the attraction of passing into law in this Parliament a binding commitment to a referendum in the following Parliament and that it might well strengthen his negotiating hand if he can look his fellow Heads of Government in the eye and know that any deal that he negotiates will have to be put to the British people, whose government, after all, we are talking about?

[The Prime Minister]

I take seriously my hon. Friend’s point and there is some merit in that argument. We have legislated in this Parliament for a referendum lock that we very much hope will apply to future Parliaments. The problem with the approach he suggests is that the change in the eurozone and in Europe is happening so rapidly that it is quite difficult to predict in legislation passed in this Parliament the exact nature of any referendum in a future Parliament, so I do not think that is the right way ahead. As I wrote in the article in The Sunday Telegraph, I think we need to show some tactical and strategic patience, knowing that we can safeguard our existing position with the referendum lock and make the most of the changes that are happening in Europe, as I have set out.

[Mr Denis MacShane (Rotherham) (Lab)]

Will the future referendum that the Prime Minister is now semi-pledging also cover treaty obligations relating to the European convention on human rights and the Council of Europe?

[The Prime Minister]

As the right hon. Gentleman knows, the two issues are separate, in that there is the Council of Europe, and the European Union. There is, of course, the attempt to make the European Union a signatory to the European convention on human rights, which I have considerable difficulties with, but as things stand, the two things are separate.

[Sir Tony Baldry (Banbury) (Con)]

Britain is a trading nation. Does my right hon. Friend agree that, as a trading nation, it needs unfettered access to Europe’s single market, and also a clear voice and say in the rules of that market?

[The Prime Minister]

My hon. Friend is absolutely right. That is at the heart of the case for remaining in the European Union. We export a large share of our gross domestic product; we need Europe’s markets to be open. I would not want to swap the status that we have, of having both access to the single market and a say over the rules of the single market, for the status of a country that only has access. It is very important, though, that as the eurozone develops and integrates, we make sure that there are safeguards to prevent caucusing at the eurozone level that could disadvantage us in the single market. There is a whole series of steps that we have to take, some of which are about safeguarding what we have, some of which are about making the most of the future, and all of which are achievable if we play our cards right in the years ahead.

[Kate Hoey (Vauxhall) (Lab)]

May I simply ask the Prime Minister to look at his terminology? In his statement, he mentioned Britain 12 times; he did not mention the United Kingdom once. Does he agree that if there is to be a referendum, which I think is inevitable, the people of Northern Ireland should have a very strong say? He must, in the European Council, refer to the United Kingdom, or the UK for short; saying “Britain” excludes Northern Ireland.

[The Prime Minister]

As ever, the hon. Lady is right about almost everything, and I am rightly chastised.

[Mr Edward Leigh (Gainsborough) (Con)]

What I suspect the majority of British people want is what they were offered in the only referendum that they have ever been allowed on Europe, namely a say on whether there should be a common market—no more, no less. Given that our partners have the overwhelming balance of trade in their favour, why should they veto our negotiation for a free market area? The door is unlocked; why does the Prime Minister not walk through it and renegotiate?

[The Prime Minister]

The point that I make to my hon. Friend, whom I respect hugely for his views, is that what we have in the single market is not just a free trade area, but a say in the rules about how that free trade area works. It does seem to me that absolutely central to Britain’s case for remaining in the European Union are those two key points. I think that there is a difference between a single market with rules and simply a free trade agreement. That is what I think we should continue to pursue.

[Keith Vaz (Leicester East) (Lab)]

May I welcome the continued support that has been given to Greece? It is not just a case of Greece repaying its debts; it is about the responsibilities that it has to the rest of the EU. Last year, as the Prime Minister knows, 100,000 people illegally entered Greece through Turkey. Will we ensure that those resources are directed towards protecting the borders of the EU?

[The Prime Minister]

I know that the right hon. Gentleman has great expertise in this area. It seems to me important that we support organisations such as Frontex, and the means by which those countries can protect their borders, but in all these European negotiations we always have to be careful about the language of burden sharing, because of course when we look at where people actually end up, in terms of asylum claims, it is often countries such as Britain, Sweden, and Denmark that bear a very large share of the burden, and we always have to be alert to that argument.

[Philip Davies (Shipley) (Con)]

Will the Prime Minister remind his coalition partners that in their 2010 manifesto, they said:

“The European Union has evolved significantly since the last public vote on membership over thirty years ago. Liberal Democrats therefore remain committed to an in/out referendum”?

Given that, and given that I know my right hon. Friend always likes me to remind him that he is in coalition with the Conservatives as well, may I remind him that an in/out referendum is now inevitable in this country at some stage, and that it would be to his advantage to be ahead of that curve, rather than being seen to be dragged into it later on?

[The Prime Minister]

My hon. Friend makes a good point. He often rightly criticises me for not delivering every part of Conservative policy, and now he is having a go at me for not delivering Liberal Democrat policy as well. I do occasionally make that point to our coalition partners, but as I have said, I think the sensible position to take is not having an immediate in/out referendum, but not ruling out a referendum in the future. Europe is changing; there are opportunities for Britain, and I am determined that we should take them.

[Mr Dennis Skinner (Bolsover) (Lab)]

With all these mixed messages, unlike the Thatcher regime, can the Prime Minister tell us whether he came to his present opinion before or after he met Andy Coulson?

[The Prime Minister]

Just to clear it up, I did not meet or speak with Andy Coulson at the weekend.

[Mrs Anne Main (St Albans) (Con)]

I completely disagree with my right hon. and learned Friend the Member for Kensington (Sir Malcolm Rifkind). With the chaos in Europe, there has never been a better time for other EU members to mind their business, not ours, and now is the right time to try to have a debate with them about which powers we would like to bring back, before we have any form of referendum.

[The Prime Minister]

My hon. Friend makes a powerful point. The argument that I would make is that although there may well be opportunities because of the needs that other EU members currently have, respecting the fact that they are fighting a fire in the eurozone, which is their urgent work that benefits us if they can deal with those bond spreads, deal with those banks, deal with those problems, the right time to consider institutional changes is as institutional reforms and treaties come through.

[Sir Stuart Bell (Middlesbrough) (Lab)]

The Prime Minister has referred several times to the national interest. He also referred to the brief discussion on the ban on oil imports from Iran. Is not that ban an example of how the European Union acting in concert can assist the British national interest?

[The Prime Minister]

Yes, I think that it is, but the argument that I would make is that that was an agreement reached through unanimity. It shows that what is required often in Europe is not institutional structures, but political will to come together and do the right thing. That is what we have done in relation to Syria, Iran and eventually Libya, so I am all for co-operating and often leading the debate with our European partners about foreign policy priorities. That is what we have done about Burma and sanctions, but I do not think that means the endless passage of powers from Britain to Brussels—in fact, quite the opposite.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

May I associate the Prime Minister’s Liberal Democrat colleagues with his expressions of condolence and sympathy following the deaths of our servicemen in Afghanistan? Does the Prime Minister agree that, while it is of course right that at the last election his party had a set of manifesto commitments on Europe, as did the Liberal Democrats, the coalition agreement is clear? There is provision for a referendum if there is a handover of power from the UK to Brussels. There is no provision for any other referendum, and we are agreed that the priority, as evidenced last weekend, is that 27 European countries work together to deal with the imminent, urgent economic crisis across Europe.

[The Prime Minister]

My right hon. Friend makes an important point. To be fair, in terms of coalition policy on Europe, we said clearly that there would be no further passage of power from Britain to Brussels. We have said that we should protect and defend the single market. Let us look at the achievements over the past couple of years. We have got out of that bail-out fund; we have promoted the single market in energy, digital and services; and we have written into conclusions after conclusions safeguards for the single market. That is all to the good, but all party leaders, whether Conservative, Liberal Democrat or Labour, must think of the future— how we evolve policy in a changing Europe, how we maximise the benefit for Britain, and how we take the British people with us. That is exactly what I am doing.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

The Prime Minister suggests the setting up of a parliamentary committee of inquiry. Whenever we have such inquiries and when they are compared with judge-led inquiries, the big difference is access to information, such as e-mail exchanges and other background material. Will he ensure that in its terms of reference such a committee will have the same powers as a judge-led inquiry?

[The Prime Minister]

The short answer to that is yes, I want it to have those powers. What Parliament has behind it is that, if people do not produce those policies, papers and people, they are in contempt of Parliament. We are seeing with the Culture, Media and Sport Committee inquiry that the whole concept of being in contempt of Parliament is being strengthened, and that is all to the good. The committee will have the powers that it needs and the expertise that it needs, but crucially it will be able to get on with the job straight away.

[David T. C. Davies (Monmouth) (Con)]

Does the Prime Minister agree that the last time we saw the current levels of interference in British domestic affairs, it led to the traumatic split with the Catholic Church? Does he agree that we would be better off having a second referendum than a second Reformation?

[The Prime Minister]

The point I would make—[Interruption.]

[Mr Speaker]

Order. I want to hear the Prime Minister on the subject of reformations and other matters.

[The Prime Minister]

As a rather wishy-washy member of the Church of England, I am finding answering this question rather difficult. The point I would make is that there are opportunities, but we should show patience because our colleagues in Europe are dealing with a fire-storm. We can pursue our interests and, I think, deliver on them over the medium term.

[Barry Gardiner (Brent North) (Lab)]

The EU decision on the oil embargo on Iran has caused great joy in the paint shops around the Arabian Gulf, as vessels have gone into dry dock to be repainted, renamed and reflagged. Can the Prime Minister set out for the House what practical steps are being taken to monitor Iranian vessels to ensure that there is an embargo in fact as well as in name?

[The Prime Minister]

The hon. Gentleman raises an important point. I believe that the embargo will be robust and we will make sure that it is policed. I do not want to set out in public what all those measures will be, but we will make sure that the points he makes are taken on board.

[Mark Pritchard (The Wrekin) (Con)]

Far be it from me to correct the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), but I understand that the Liberal Democrat manifesto referred to provision for a referendum if there is

“fundamental change in the relationship between the UK and the EU.”

The Prime Minister said in his statement that “Europe is changing rapidly and fundamentally.” Is it not time we had an in-or-out referendum in this Parliament, rather than relying on the outcome of the next general election, which of course nobody can predict?

[The Prime Minister]

I completely understand the view held by my hon. Friend and a number of other colleagues on our Back Benches either that we should want to get out straight away and so should have an in/out referendum straight away or, to be fair to him, that the change has been so fundamental that the referendum should be held sooner rather than later. I have set out my argument; I think it would be better not to do that immediately for the reasons I have given. I think that there is an opportunity for what I would call a fresh settlement and fresh consent that would be in the national interest of the whole United Kingdom.

[Pete Wishart (Perth and North Perthshire) (SNP)]

Well, it looks like we are going to have a referendum, maybe in two or three years’ time, and maybe there will be more than one question—a Euro-max option—and we do not know what the question will be, yet the Prime Minister has the gall and temerity to question the Scottish National Party’s referendum process. Does he believe that all this delay for two or three years will create a great deal of business uncertainty across the United Kingdom?

[The Prime Minister]

I have to say gently to the hon. Gentleman that there is a slight difference. As I understand it, his party has a very clear view that it wants to leave the United Kingdom, and fought an election in Scotland on having a referendum to do just that. What I am trying to do is help him to have that simple, single-question referendum so that the country can make a decision. I profoundly hope that Scotland will vote to stay in the United Kingdom, which I think would be in Scotland’s interests and in all our interests, but I have to say that we should not have to wait quite as long to get on with it as his First Minister wants.

[Mr John Baron (Basildon and Billericay) (Con)]

The Prime Minister has repeatedly said that now is not the time for an in/out referendum, so will he confirm that the letter I and 100 other colleagues sent to him urged him to legislate in this Parliament for a referendum in the next Parliament and so address the mass public distrust in politicians promising referendums on Europe, because they remember all too well the Labour party’s broken promises?

[The Prime Minister]

I absolutely hear what my hon. Friend says. I do not want to misrepresent him, and if I have done so in any way I absolutely apologise. That was never my intention. I read very carefully the letter he sent to me. He is not suggesting an immediate in/out referendum. As I said in reply to my hon. Friend the Member for Bournemouth West (Conor Burns), although it is possible to legislate in one Parliament to bind the next, as we have done with the referendum lock, I do not think that it makes as much sense to do that with a referendum for the future, because we do not know the exact pace of developments in the eurozone or the exact changes that will take place in Europe; I do not think that that is the right answer.

[Chris Bryant (Rhondda) (Lab)]

The coalition agreement makes another commitment in relation to treaty change: that the Government will campaign to abolish the ludicrous caravanserai between Brussels and Strasbourg, which we would all agree should be abolished. I am absolutely certain that the Prime Minister has got absolutely nowhere with that and possibly has not yet even mentioned it to the new French President, so why should people trust him when he promises more renegotiation and has not even managed to secure the one thing he is committed to?

[The Prime Minister]

I am still waiting for my apology, which I notice I have not yet got. Perhaps there will be a few more questions first. The hon. Gentleman will know that in order to deal with the problem of the two Parliaments we need a treaty change, so he should want to bring it on.

[Nicholas Soames (Mid Sussex) (Con)]

May I associate myself with the remarks of my hon. Friend the Member for Banbury (Sir Tony Baldry) about the importance of trade and the single market? Does the Prime Minister agree that if we are to see a return to prosperity in the European Union, the rules of the World Trade Organisation need to be vigorously enforced? To that end, it would be fatal were we not to be sitting at the table when those matters are discussed.

[The Prime Minister]

My right hon. Friend makes an important point. One of the things that we have made progress on over the past two years is the EU free trade deals with fast-growing parts of the world, including Korea, and obviously negotiations are under way with Singapore, India and others, including possibly Japan. In recent weeks, we have also made some quite exciting progress with the idea of an EU-US trade deal, so there are things that European nations can do together for our mutual benefit. Trade and the single market are clearly absolutely up there, and I very much agree with my right hon. Friend on that point.

[Mr David Winnick (Walsall North) (Lab)]

After what has happened today and the responses from the Prime Minister’s side of the House, does he now have some sympathy for what John Major had to endure from his party during the 1992 to 1997 Parliament?

[The Prime Minister]

I worked very closely with John Major and admire him very much. People now make a reassessment and see that he left this country an excellent economic record, which the Labour party completely squandered with a whole decade of debt.

[Mr Stewart Jackson (Peterborough) (Con)]

Irrespective of our personal views, why is it right that the people of Scotland will be given a potentially irreversible in/out referendum by 2014, yet the people of the United Kingdom will not be given a similar plebiscite on a matter of great import—this country’s relationship with the European Union?

[The Prime Minister]

I have great respect for my hon. Friend, who takes a very clear view about which he feels very deeply. I think that there is a significant difference, which is that in Scotland, like it or not, the Scottish National party is committed to leaving the United Kingdom and was elected with a mandate for a referendum to do just that, whereas in the case of the United Kingdom and the European Union, most people in our country want a fresh settlement with fresh consent, rather than the binary choice of leaving right now or, indeed as I said in my statement, voting to stay in right now and thereby almost confirming that status quo, which I am not satisfied with—and I do not think many people are.

[Paul Flynn (Newport West) (Lab)]

How many of the hundreds of new jobs that will come from setting up the patent court will be located in the city that has been the home of the brilliantly successful United Kingdom Patent Office, now the Intellectual Property Office, the city of Newport?

[The Prime Minister]

I do not know the answer to that question; I will have to look very carefully and, perhaps, reply to the hon. Gentleman. The parts of the court that we will have will be pharmaceuticals and life sciences, an area of great national expertise, and it is a good deal for London and a good deal for the UK.

[Joseph Johnson (Orpington) (Con)]

Unemployment in the eurozone today hit a fresh record high of 11.1%, with youth unemployment reaching the terrible level of 22.6%. Whatever happens to the euro, what recognition is there in Brussels of the risk of creating a lost generation unless the EU as a whole takes seriously the need to do serious labour market deregulation and to push ahead with the completion of the single market?

[The Prime Minister]

My hon. Friend makes a very important point. If we look at the different rates of youth unemployment throughout Europe, we find that we are certainly not one of the best, but certainly not one of the worst. We can look at countries such as Germany and Holland, which have very low rates of youth unemployment, different approaches to welfare from ours and different approaches to training, and we have a lot to learn from them, but overall what my hon. Friend says about opening up the single market—deregulating—is one of the key answers to getting young people back to work.

[Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)]

Can the Prime Minister explain to the House why existing anti-fraud legislation does not work in the case of the LIBOR rate-setting scandal?

[The Prime Minister]

As I have said, today we have asked the Serious Fraud Office to look specifically at the issue and to see whether there are criminal acts that it can address. It has the resources that it needs, and if it needs more resources it will be provided with them, but we have a Serious Fraud Office, which is the authority for both investigation and prosecution, to deal with just that question.

[Richard Harrington (Watford) (Con)]

I am sure that the Prime Minister remembers from his recent visit to Watford the several multinational companies, such as Medtronic and Hilton Worldwide, whose trade depends very much on their using the UK as a hub for their European operations. With that in mind, could he assure the thousands of my constituents who work for those companies that nothing that happened in the European Council will be detrimental to their interests—and, above all, that he will not be bounced into an in/out referendum that could put their jobs at terrible risk?

[The Prime Minister]

My hon. Friend is absolutely right. Britain benefits from being in the single market and having a say over the single market rules. One of the things that has happened over the last two years has been that, because of investments by companies such as Nissan, Honda and Jaguar Land Rover, we in the United Kingdom are now a net exporter of cars again, for the first time since 1976. Access to the single market and our role in the single market play a key part in that investment.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Businesses in my constituency are worried about jobs and growth. Given the size of our trade relationships with Europe, they want a Prime Minister who will show leadership in getting growth across Europe. What progress did the Prime Minister make on a growth package and how did he see that as being in the UK’s national interest?

[The Prime Minister]

I am grateful for the hon. Lady’s question. There was good progress on the growth compact. I think people had expected that it was all going to be an agenda, important though that is—project bonds and European Investment Bank spending is part of it. But the hon. Lady will see that in the growth compact, copies of which will be available in the Library, there are very clear commitments to the services directive, energy liberalisation and the digital single market. That is very much the British, and also Italian, agenda, which we have driven into the growth compact, which will really help our country.

[Several hon. Members]

rose—

[Mr Speaker]

Order. I am keen to accommodate more colleagues, but very large numbers of them are standing and I will not be able to accommodate them all. To maximise the number of participants, brevity will be of the essence.

[Richard Drax (South Dorset) (Con)]

The Prime Minister urges close integration as one solution to the problem in Europe. Closer integration, even among a smaller number of eurozone countries, is already leading to economic chaos and big civil disorder. Surely he should be advising everyone to go back to their currencies, except, perhaps, for the powerful countries in Europe, and then rebuild the economy, rebuild jobs and rebuild wealth.

[The Prime Minister]

We cannot make choices on behalf of other European countries. The eurozone countries say that they want a single currency and that they want that single currency to work. If that is the case, I believe that it follows that they will have to integrate more deeply. It remains to be seen whether all of them will be able to do that. What we see in Europe, week after week, are the difficulties of taking those steps. None the less, we cannot instruct those countries not to do something. That is their choice. We have made our choice, which is to stay out of the eurozone. As I said, we are not going to be involved in that integration and we will not be paying those bills. I hope that my hon. Friend can be reassured on that basis.

[John Cryer (Leyton and Wanstead) (Lab)]

Can the Prime Minister confirm that he is prepared to see the sacrifice of sovereignty and democracy in Greece and other eurozone countries to defend the single currency?

[The Prime Minister]

I would not put it like that. I cannot tell the Greek people what to do. My view is that the right answer for Britain is to be outside the single currency and not to be involved in this integration. People can go back to my election address in 1997, when I said that I opposed Britain’s joining the single currency. The reason why I opposed it was that I did not think it right to give up that sovereignty and level of democracy. That is a choice that those countries and those people must make; it is not for us to make it for them.

[George Eustice (Camborne and Redruth) (Con)]

I agree with the Prime Minister that the priority for this country should be to negotiate the return of powers from the EU and that any referendum should come at the end of that process, not the beginning. However, does he agree that we should reject the defeatism of the Leader of the Opposition and start to articulate the case for an alternative vision for the future of Europe?

[The Prime Minister]

My hon. Friend makes a very important point. There has been a defeatism from the Labour party, including when it was in government. When confronted with difficult choices about the rebate, it gave it up; and when confronted with the issue of the European constitution, it promised a referendum and did not deliver it. In the end, it always went along with absolutely everything. The Labour party has not yet told us whether it would sign the treaty that I refused to sign back in December. When it comes to this, it is the status quo party.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

There are significant misgivings about the impact of a banking union on the financial services sector in this country; the Prime Minister commented on some of them earlier, during his statement. What reassurance can he give the House that the strategy that he is currently following will not lead to the long-term disadvantage of finance in this country?

[The Prime Minister]

I do not believe that it will. We are trying to protect our interests in terms of the single market and our strong financial services industry. I believe that a banking union flows from the fact that there is a single currency rather than from the fact that there is a single market. That union should be at 17, and we will be able to protect our interests from outside it.

[Steve Baker (Wycombe) (Con)]

I welcome the progress that my right hon. Friend is making towards obtaining the full-hearted consent of the British people. Will he remind us, please, who denied the British people their say on the Lisbon treaty?

[The Prime Minister]

My hon. Friend makes a good point. The fact is that a promise was made of a referendum on the European constitution, which changed into the Lisbon treaty. The previous Government had every opportunity to deliver that referendum as country after country went through passing that treaty into law, and they completely failed and let the country down.

[Nia Griffith (Llanelli) (Lab)]

Will the Prime Minister give us a little more detail about the evidence that he used to convince his EU counterparts that the UK Government are serious about increasing demand, particularly in the light of the latest disastrous UK growth figures?

[The Prime Minister]

The point I would make to the hon. Lady is that there are parts of the growth compact that include expanding the role of the European Investment Bank, and we support that. We support the idea of project bonds—innovative finance—because part of the problem is the need for an active monetary policy required right across the European Union. However, we should not give up on the real wins for our economy of completing the single market in energy, digital and services, because real increases in both demand and supply could come about from that.

[Neil Carmichael (Stroud) (Con)]

No doubt there will be many more EU Councils to come, so does the Prime Minister think that he would be helped or hindered in his negotiations to protect Britain’s interests if there were an in/out referendum in the foreseeable future?

[The Prime Minister]

I am sure that the first half of my hon. Friend’s question is right. I have been Prime Minister for only two years, but I feel that I have spent about half my life in the Justus Lipsius building in Brussels, and I am sure that other summits will be coming along. The point about having an in/out referendum now is that if your view is that Britain should leave the European Union, then of course that is the logical thing to do, but if you want to fight from the inside for a fresh settlement and then a fresh mandate, the approach that I am setting out is the right one.

[Graham Stringer (Blackley and Broughton) (Lab)]

The Prime Minister has claimed success with the bail-out funds, which, of course, were not part of any treaty. Most of the powers that have been transferred from this House are in treaties. If he fails to renegotiate those powers and return them to this House, will he then agree to an in/out referendum?

[The Prime Minister]

On the bail-outs, I do not think that the hon. Gentleman is correct. The fact is that a treaty article was used for those bail-outs, and we have replaced what was called the EFSM, the European financial stabilisation mechanism, with the ESM, the European stability mechanism. I got it written into the preamble to the treaty that Britain would not be included in it and would not have to contribute to it. That is to our advantage, and it shows what you can achieve if you are prepared to negotiate hard and not just give in to whatever people want.

[Matthew Hancock (West Suffolk) (Con)]

I warmly welcome the announcement of the review into banking to replace the failed regulation drafted by Labour Members, but will the Prime Minister ensure that, as a deterrent, criminal sanctions are available in future for those bankers who are wholly irresponsible?

[The Prime Minister]

My hon. Friend makes an important point. The Chancellor will be going into more detail on this issue. We need to ensure that the regulators and the SFO have all the powers they need. People will not understand why crimes on the high street are punished in one way but crimes in the banks and elsewhere are punished in another way. That absolutely needs to be cleared up, and I am sure that this Government will do so.

[Wayne David (Caerphilly) (Lab)]

Given the Prime Minister’s support—in theory, at least—for a referendum on Europe, what is his position now with regard to a referendum on Lords reform?

[The Prime Minister]

We have set out in the House of Lords Reform Bill a very clear pathway for the House of Lords. House of Lords reform was in the hon. Gentleman’s party’s manifesto, it was in our manifesto, and it was in the Liberal Democrat manifesto, so I do not think a referendum is really necessary.

[Mr Peter Bone (Wellingborough) (Con)]

I can report that the relationship between Mrs Bone and the Prime Minister is blooming. I have just discovered that the Prime Minister has invited Mrs Bone to Downing street next week. She is very excited about the renegotiation and the Prime Minister’s words on the referendum. Could he please her even more at next week’s meeting by promising legislation in this Parliament for an EU referendum in the next Parliament?

[The Prime Minister]

As ever, I am looking forward to my meeting with Mrs Bone, but—how can I put this?—I do not want to get her too excited before the big day. I am afraid that I cannot satisfy my hon. Friend on that basis. We have in place the referendum lock, which I think should reassure Mrs Bone a lot.

[Mark Hendrick (Preston) (Lab/Co-op)]

What game is the Prime Minister playing? He is encouraging eurozone members to integrate closer and at the same time encouraging his Back Benchers by saying that we will have a referendum that could bring us out of the European Union.

[The Prime Minister]

I do not really understand what lies behind the hon. Gentleman’s question. It is intellectually coherent to argue that if countries want to be in the eurozone and to have a working single currency, they must take at least some of the steps that other single currencies, such as the dollar and the pound sterling, have taken. That means that they have to stand behind weaker parts of the union and that they need things such as joint debt issuance and a single banking system. That is just a fact of economic life. I see no contradiction in arguing that Britain should be outside the eurozone with a looser relationship with the European Union and that those inside the eurozone will have to take at least some of the steps that I have set out. If they do not, I think that the eurozone will have real difficulties.

[Mr James Clappison (Hertsmere) (Con)]

Does not the history of our membership of the European Union demonstrate that there is not just an issue with the single market, but that there is more of an issue with the ever closer union that is enshrined in EU treaties? Will my right hon. Friend assure us that to be meaningful, a referendum must encompass the question of ever closer union?

[The Prime Minister]

That goes back to one of the problems with the referendum in the 1970s, when people did not receive a full explanation of all that was envisaged by the original treaty of Rome. I am clear that I do not support ever closer union. I do not want to see an ever greater transfer of powers from nation states to Brussels. However, I think that Britain and the European Union can work very well together to maximise the single market and our co-operation on matters such as foreign affairs, while ensuring that it is in our national interest.

[Mr David Anderson (Blaydon) (Lab)]

Was the financial transactions tax spoken about at the weekend, whether formally or informally? Does the Prime Minister not realise that the people of this country would welcome that as a way of showing that bankers are being made accountable for their appalling behaviour?

[The Prime Minister]

The financial transactions tax was mentioned, because the growth compact says clearly that a number of eurozone members will go ahead with it. I do not support it and Britain will not take part, because unless there is agreement all over the world, the transactions will go to jurisdictions that do not have the tax. That would cut our jobs, our investment and our GDP. The people who would pay for such a tax would be not the bankers, but the pensioners, and I do not think that that is sensible.

[Nigel Adams (Selby and Ainsty) (Con)]

How bad does the Prime Minister think the financial damage to the UK would have been had we not got ourselves out of the euro bail-out mechanism?

[The Prime Minister]

I am grateful for my hon. Friend’s question. We can start to count the cost, because with things such as the Spanish bank bail-out, we can work out what percentage we would have paid. We have saved Britain considerable amounts of money by ensuring that we are not involved in the bail-outs.

[Mr William Bain (Glasgow North East) (Lab)]

Economic demand is continuing to fall across the eurozone, youth unemployment in Greece and Spain reached 52% today, and 5.5 million young people are unemployed across the EU. When will the Prime Minister finally acknowledge that the answer to such a chronic crisis of demand and jobs can never be harsher austerity?

[The Prime Minister]

The point that I would make to the hon. Gentleman is that because we are outside the euro, as well as having tough fiscal targets, which frankly anyone in my position would have to deliver to deal with the debt and the deficit that we were left, we can have a very accommodating monetary policy, with ultra-low interest rates. Our monetary policy is our own to determine because we are outside the euro. That is the difference between the situation in Britain and the situation in countries that are inside the eurozone.

[Jacob Rees-Mogg (North East Somerset) (Con)]

I completely support the Prime Minister in saying that the answer is less Europe, rather than more Europe. I wonder if I may bring his attention to part (j) of the communiqué, which states that the Commission will work on proposals for a

“common consolidated corporate tax base”.

Can I assume that Her Majesty’s Government will oppose those moves, as we are cutting corporation tax here, not trying to raise it to European levels?

[The Prime Minister]

He can.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

It is clear that the type of referendum that the Prime Minister has in mind is one in which the choice is to vote in favour of whatever settlement we manage to extract or in favour of the status quo. Does he think such a referendum would satisfy the in/out zealots on his Back Benches?

[The Prime Minister]

For people who want to leave the European Union—that is a perfectly honourable, respectable political tradition and Members on both sides of the House, probably even Liberal Democrats, have held that position—campaigning for an in/out referendum is a perfectly sensible thing to do. It is just not my view or the Government’s policy, and I do not think it is the hon. Gentleman’s, either.

[Mr Julian Brazier (Canterbury) (Con)]

I welcome the Prime Minister’s announcement of the progress in Russia’s views on Syria. Could we do more to persuade Russia that it is not in its interests to have a nuclear-armed Iran sitting on its border?

[The Prime Minister]

My hon. Friend is entirely right to make that point, and the Foreign Secretary has spent a lot of time with his Russian counterpart having exactly those discussions. There are great connections between resolving the situation in Syria and trying to get a resolution to the Iranian situation. It is worth noting that the oil sanctions have come in. They are tough and represent concerted action by the European Union, and I think they can make a difference.

[Huw Irranca-Davies (Ogmore) (Lab)]

The Prime Minister’s position on an EU referendum seems to be summed up in that comedy catchphrase, “Yes but, no but, yes but, no but.” Is he likely to come to a decision and resolve his teenage dilemma before the next election?

[The Prime Minister]

I think I would let Vicky Pollard stick to her own work and think of something different.

As I have said, I think there are only two positions that do not make sense for Britain. One is an immediate in/out referendum, which I do not think would be right for us, and the other is somehow to rule out for ever and a day any way of forming a new consent with the British people. I want to see a new settlement, and I think we should then get a new consent. That seems to me an entirely sensible and logical position to take.

[Mr David Nuttall (Bury North) (Con)]

At a time when EU countries are more indebted than ever before, why should the UK pay more so that the European Investment Bank can make yet more loans when there is an increasing risk that some of those loans will never be repaid? How much of the €10 billion increase in funding for the EIB will this country have to pay?

[The Prime Minister]

We account for about 14% of new loans made by the European Investment Bank. There is clearly weak lending by banks and there are problems in monetary policy right across the European Union, so the role of the EIB is helpful. It is important, though, that it maintains its very strong triple A credit rating.

[Several hon. Members]

rose—

[Mr Speaker]

Order. I am now looking for questions consisting of a single, short sentence. I am sure the hon. Member for Eltham (Clive Efford) will lead us in that exercise.

[Clive Efford (Eltham) (Lab)]

With reference to the answer that the Prime Minister gave to the hon. Member for West Suffolk (Matthew Hancock), if he genuinely believes that some of the actions of Barclays bank bordered on the criminal, will he now call for the resignation of Mr Bob Diamond?

[The Prime Minister]

I do not think it is for Prime Ministers to hire and fire bank chiefs. Mr Diamond will have to make himself accountable to his shareholders, and to this House when he answers questions on Wednesday. As I have said, I think he has some serious questions to answer.

[Dr Julian Lewis (New Forest East) (Con)]

Is it my right hon. Friend’s position that in any referendum on Europe while he is Prime Minister, the option of voting to leave the EU will not appear on the ballot paper?

[The Prime Minister]

No, that is not what I have said. What I have said is that I do not support an immediate in/out referendum. I believe that we should show strategic and tactical patience, and then I want to see a fresh settlement for which we seek fresh consent. The right time to determine questions about referendums and the rest of it will be after we have that fresh settlement. That is what we should do.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The Prime Minister has repeatedly endorsed the United Kingdom’s membership of the EU this afternoon. Will he say something about the circumstances in which he would endorse withdrawal from the European Union?

[The Prime Minister]

What I have always said is that we should act in the interests of the whole United Kingdom, and I do not think our best interests would be served by leaving the European Union. That does not mean that we meekly and lamely accept the status quo. We are not happy with the status quo, as the British public are not. I am not a defeatist who says that you have just got to take what you are given. We have already shown in a small way, by getting out of the bail-out fund, that we can do better, and I want Britain to do better.

[Ian Swales (Redcar) (LD)]

Is the Prime Minister aware of any significant City institutions that want this country to leave the EU?

[The Prime Minister]

I am not aware of any City institutions that want that. On the whole, the City institutions want to ensure that our position in the single market is safeguarded. I am not a mercantilist, but it is worth noting that the one sector in which we have a massive current account surplus with Europe is financial services. It is therefore important that we ensure we safeguard the interests of that sector.

[Mr David Evennett (Bexleyheath and Crayford) (Con)]

I welcome my right hon. Friend’s statement. Does he agree that we must continue to battle for radical and substantial reform of the EU and not be deflected from our national interests of trade and the single market?

[The Prime Minister]

My hon. Friend puts it extremely well. We should pursue the national interest. The key argument is membership of and influence over the single market. That lies at the heart of our case for being in the EU.

[Mr Sam Gyimah (East Surrey) (Con)]

Does my right hon. Friend agree that a referendum is only a means to an end and not the end in itself, and that it is therefore important for us to work out what Europe we want to emerge from this crisis and what it means for the UK national interest, so that we give voters a meaningful choice in the matter?

[The Prime Minister]

My hon. Friend is absolutely right. Before we get to the referendum question, we must ask the prior questions of what exactly Britain wants in Europe, what we have at the moment, what we would like to change and how we can best change it. All those prior questions need to be asked before we get to the vital question of how to secure the full-hearted consent of the British people.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

More Eurocrats work in education and culture than on the internal market and services. Will my right hon. Friend stand up for hard-pressed British taxpayers and ensure that our scarce resources are directed towards jobs and growth by completing the internal market?

[The Prime Minister]

The depressing statistic my hon. Friend gives is important as we go into the budget negotiations. We must ensure that the EU budget is focused on things that are likely to help with growth, such as the single market, rather than on regulation. She makes a very good point.

[James Morris (Halesowen and Rowley Regis) (Con)]

There has been a lack of growth in Europe, but does the Prime Minister agree that, despite concerns about our future relationship with the EU, we should focus on policies that target growth, particularly in important sectors for British business, such as energy and the digital market?

[The Prime Minister]

My hon. Friend is entirely right. That is why our approach in Europe—the positive steps we have taken—is about building an alliance with other European countries to push forward the single market and free trade agenda. It has been heartening that in recent months, people such as Prime Monti of Italy and Prime Minister Rajoy of Spain have been involved in that. There is no longer a north-south divide in Europe: many countries are pushing for the growth agenda that has been championed by both parties in the coalition.

[Gavin Barwell (Croydon Central) (Con)]

I welcome the Prime Minister’s stress on the importance of the single market and his statement that, in other areas, the EU status quo is not acceptable. Does he agree that this issue will be solved in the long-term only by giving the British people their say?

[The Prime Minister]

My hon. Friend is right that, in the end, as Europe changes and as we seek this fresh settlement, we will need to seek a fresh mandate. That is what the Conservative party at least has clearly recognised.

[Henry Smith (Crawley) (Con)]

At last week’s meeting, the European Council president said it could take up to a decade to implement EU treaty change. Does my right hon. Friend agree that it is therefore more important that the Government passed a referendum lock in legislation?

[The Prime Minister]

My hon. Friend makes a very good point. Europe is changing rapidly and, as I have argued, quite fundamentally, but some of the institutional changes will take quite a long time to come through, because it is difficult for democratic states to achieve what the eurozone countries are engaged in. It will take time, which is why, as I have said, we need the tactical and strategic patience to maximise our national interest.

[Robert Halfon (Harlow) (Con)]

I welcome the fact that my right hon. Friend has opened the door to a referendum on substantial renegotiation. Will he resist EU regulations on biofuels, which are pushing up prices at the pumps for hard-pressed motorists?

[The Prime Minister]

One question about biofuels is their sustainability—that might be what lies behind my hon. Friend’s question, but I will have a careful look at it.

[Charlie Elphicke (Dover) (Con)]

Although I welcome the Prime Minister’s setting up the banking review, does he agree that the real crime is that there is any doubt at all that interest rate rigging is a criminal offence? If we are to have truth and reconciliation, should we not see a bit more responsibility and a bit less of the buck-passing that we have seen from former Labour Cabinet Ministers today?

[The Prime Minister]

My hon. Friend makes an important point, but although there has been silence from the Labour party in this House, in the other place its Whip stood up and said, “Absolutely, this is squarely Labour’s fault.” It is a pity we do not hear a bit of that from the party here.

[Andrew Bridgen (North West Leicestershire) (Con)]

Given that the UK is running a large trade deficit with the rest—[Interruption.]

[Mr Speaker]

Order. We must hear Mr Bridgen.

[Andrew Bridgen]

Given that the UK is running a large trade deficit with the rest of the EU, does my right hon. Friend agree that our European partners would have much to lose from erecting trade barriers with this country, if the British people decided to leave the EU?

[The Prime Minister]

My hon. Friend makes a good point. Britain is not only a huge market for other EU goods but a large net contributor to the EU budget. For that reason, as I often say, our membership entitles us to just as strong a view as those who have joined other parts of the EU, such as the single currency. We should never be frightened of making our voice heard.

[Jason McCartney (Colne Valley) (Con)]

Does the Prime Minister agree that the Leader of the Opposition is wrong to criticise those who bang on about Europe, because by doing so he is criticising my constituents who bang on about the EU directives, whether on fish discards, animal experiments on stray cats and dogs or the levying of VAT on aviation fuel for the Yorkshire air ambulance?

[The Prime Minister]

As ever, my hon. Friend speaks up robustly for his constituents. Some of the issues that we face in our constituencies relate to the extra regulation, extra cost and extra bureaucracy coming from the EU, so he is absolutely right to make that point.

[Mr Speaker]

Last but not least, we must hear the voice of Kettering, Mr Philip Hollobone.

[Mr Philip Hollobone (Kettering) (Con)]

Given that my right hon. Friend is now not ruling out a future referendum on our membership of the EU, is it not time for Her Majesty’s Government to commission an official, full-scale, independent, comprehensive audit of the costs and benefits of our membership in order better to inform that referendum when it comes?

[The Prime Minister]

When my hon. Friend sees the balance of competences review, he will find that a lot of what he seeks is in it. The idea is to look through the competences exercised by the EU and nation states, and to work out the costs and benefits, so that we have a proper and informed debate. Where he and I will differ, I suspect, is here: I think we benefit from having access to, and a say over, these markets, and that is a powerful argument for remaining in the EU. Like him, however, I am not happy with the status quo, and I want us to seek to change it and then get consent for it.

[Mr Speaker]

Order. I thank the Prime Minister, the Leader of the Opposition and the 74 Back Benchers who have questioned the Prime Minister in 62 minutes of exclusively Back-Bench time.