European Council

Lord Cameron of Chipping Norton Excerpts

Monday 26th November 2012 Commons Chamber

[The Prime Minister (Mr David Cameron)]

With permission, Mr Speaker, I would like to make a statement on the European Union Council last week.

Last week’s Council was unable to reach agreement on a seven-year budget framework. This Government rejected a proposal that would have risked UK taxpayers paying for unaffordable increases in the EU’s annual budgets. We did so together with like-minded allies from a number of countries. As net contributors to the EU, those countries, like Britain, write the cheques and together we had a very clear message: we are not going to be tough on budgets at home and then sign up to big increases in European spending in Brussels.

Let me explain to the House the proposal we rejected, why a deal is still doable, why it is still in our interests to work to achieve that deal and why throughout these negotiations I will continue to protect the UK’s rebate. Our objective for EU spending in the seven years to 2020 is clear: we want to see spending reduced and will insist on at least a real-terms freeze. As the House knows, the actual EU budget is negotiated annually. What we were negotiating in Brussels last week, and will return to again next year, is the overall framework for the next seven years, which includes the overall ceilings on what can be spent. During the last negotiation, which covered the period 2007 to 2013, the last Government increased the payments ceiling by 8%. The commitments ceiling was effectively set at €994 billion, well above the level of actual spending. It was a bit like having a credit card limit far above what one can afford and it was an open invitation to the EU’s big spenders to push for higher and higher spending every year. We are still paying the price for that decision.

This year, 2013, the Commission and the European Parliament are attempting to grow the annual budget by another 6.8%. I am determined to get the ceilings down in line with what we can afford. Prior to the Council, the Commission produced a ludicrous proposal to increase the commitments ceiling still further to more than €1 trillion. We said no. The Cypriot presidency produced a slightly lower total, and going into this Council, the President of the Council, Herman Van Rompuy, produced a new proposal, this time with a ceiling of €973 billion.

As you can see, Mr Speaker, we were making progress in getting the ceilings down, but as I and other leaders made clear, it was not enough. We set out a number of very reasonable ways in which the seven-year ceiling could be reduced even further, by tens of billions more. What was disappointing at the Council was that having heard those proposals, the presidency offered a new proposal that failed to reduce significantly the previous total and simply redistributed money to buy off different countries. In a seven-year budget of almost €1 trillion, the idea that there are no real savings to be found is simply not credible. For example, when it came to the bureaucratic costs of the European Commission, not a single euro in administrative savings was offered—not one euro. We need to cut unaffordable spending. The deal on the table was not good enough and that is why we and others rejected it.

But we do believe that a deal is still doable. There is absolutely no reason why we should not be able to reduce the seven-year ceilings down to the level needed. There is plenty of scope for significant savings in the common agricultural policy and the structural and cohesion funds, but there are also savings to be had in the rest of the budget. For example, freezing the ceilings for security, justice and external spending would allow €7.5 billion of additional savings. There are some programmes, such as Connecting Europe, which have enormous proposed increases in their budgets that could be radically scaled back.

As I have said before, there is simply no excuse for not taking a much tougher approach towards the EU’s administrative costs. The EU institutions have simply got to adjust to the real world. A 10% cut in the overall pay bill would save almost €3 billion. Relaxing the rules on automatic promotion, which they have at the EU Commission, would save €1.5 billion. Reducing the extraordinary generosity of the special tax rules for Brussels staff—the levy—could save around another €1 billion, and changes to pension rights could save another €1.5 billion. All these are perfectly reasonable proposals. That is why a deal is still doable. We will push hard for these reductions when negotiations resume next year.

Let me briefly be clear about why we want a deal. If no deal is reached, the existing ceilings are simply rolled over and annual budgets are negotiated on a year-by year-basis, taking account of those ceilings. Crucially, we would not get the reduction we need in the seven-year budget ceilings negotiated by the last Government. The credit card limit would stay beyond what is affordable, tens of billions of euros higher even than the deal we rejected at this Council. It is therefore in our interests to get a deal, but it must not come at any cost. We must not lock in unaffordable ceilings for the next seven years, so if necessary we may have to galvanise a coalition of like-minded countries to deliver budgetary restraint through annual budget negotiations each year.

Finally, let me say a word about the UK’s rebate. As well as ensuring fairness in the overall size of the EU budget, it is also essential to ensure fairness in the net contribution that each country makes to that budget. At this Council, we faced, as ever, determined pressure from many sides for our rebate to be slashed. The changes on the table, in the proposal in front of us, would have cost the UK more than €1 billion every year. I was clear that all of that was completely unacceptable. Britain more than pays its way in Europe. On a per capita basis, Britain is the eleventh richest nation, yet as a share of our national income we are the third largest contributor, and that is with the rebate—or what remains of it after so much was given away by the last Government. Without the rebate, we would have the largest contribution in the European Union, double that of France and almost one and a half times as large as Italy’s or Germany’s. That would be completely unfair. It is why Margaret Thatcher was right to fight so hard to win the British rebate, why the last Labour Government did this country such a disservice by agreeing to give part of it away and why no Government I lead will ever put the British rebate back up for negotiation.

We put down a marker at this Council. We stood up for the taxpayer. Together with like-minded allies, we rejected unacceptable increases in European spending, and we protected the UK’s rebate. We are fighting hard for the best deal for Britain, and that is what we will continue to do. I commend this statement to the House.

[Edward Miliband (Doncaster North) (Lab)]

I thank the Prime Minister for his statement. Clearly, this is not the first EU budget negotiation to go into a second round, and no doubt it will not be the last. The real question remains what deal will eventually be delivered. I want to ask about the budget level, what the budget will be spent on and the Government’s negotiating position.

On the budget level, I was surprised by one omission in the Prime Minister’s statement. Somehow, he forgot to thank this House for sending him into the talks with the strongest possible mandate in the negotiations: a vote supported by Members on both the Government and Opposition sides. At the time of the vote, the Deputy Prime Minister, who I notice is absent, said that what was voted on was a completely unrealistic position and that there was no hope of getting a deal—a tell-tale sign that the opposite might be true.

Given that the Prime Minister now says that there is widespread support in Europe for a tough settlement, can he say what prospects there are for meeting the call of this House of Commons for a real-terms cut in the EU budget? Does he now regret not seeking to build alliances for a real-terms cut in spending at the outset of negotiations?

Looking ahead to the deal that still needs to be done, can the Prime Minister confirm in precise terms what he means by a real-terms freeze? There are obviously many different definitions around, but we have the Government’s definition set out by the then Economic Secretary in her memo of 16 July 2011. That was for a European budget of €885 billion in actual payments over the seven-year commitment period. The Prime Minister has been somewhat coy on this point, so can he confirm that that remains the position as set out by the former Economic Secretary to the Treasury?

Next, may I ask the Prime Minister about the composition of the budget, which is as important as the budget level itself? We need to reshape the budget so that it supports jobs and growth with investment in infrastructure, energy and research and development. He said as he arrived in Brussels that

“it is not a time for tinkering”,

and at his press conference on Friday he said:

“Already being contemplated is a big cut in agricultural spending”—

something that is supported in all parts of this House. However, what is the big cut in agricultural spending that he is talking about? Will he confirm that the proposal on the table sees agriculture spending remaining on average at 38.3% of the European budget—almost exactly the same level as it is now? Does he really believe that that is the major reform that is required in the spending of the European budget? Does he agree that what is even worse is that to keep the subsidies high, money is being taken from much-needed investment in energy and other infrastructure? I think that part of that comes from the Connecting Europe budget. Did he object to this part of the proposal?

As we anticipate the further negotiations in the months ahead, the wider stance of the Government towards the EU will also have an impact. The Prime Minister has said repeatedly that he is in favour of Britain remaining a member of the European Union. Why, therefore, is he allowing his colleagues to take the opposite position? Last month, the Education Secretary briefed that he is open to leaving the European Union. On Saturday, the chairman of the Conservative party said that we should threaten to leave if we did not get a good deal. Now we have the new vice-chair of the Conservative party—we think it is great to see him in his place—touring the studios, talking not about a budget deal but about a deal with the UK Independence party. Does the Prime Minister believe that such divisions help or hinder our national interest in delivering a good budget deal? Why, at a time of continuing negotiations over the budget, is he allowing members of his Cabinet openly to undermine his position on membership of the EU? It is no wonder that everyone, from British business to our European allies, believes that we are drifting towards the exit door.

As we look ahead to the next round of budget negotiations, is not the reality of the situation that the Prime Minister has a divided party on Europe? Instead of confronting the issue—[Interruption.] They say that they are not divided, but half of them want to leave the EU, and that is not the position of the Prime Minister—so we gather. He has a divided party on Europe, and instead of confronting the issue he is just letting the problem get worse. He spent his statement talking about the deal that he did not do; what matters is what he delivers for Britain. For as long as he allows his party to drag him towards the exit door, he will find it far harder to build lasting alliances and far harder to deliver for the national interest.

[The Prime Minister]

First, let me answer on the right hon. Gentleman’s specific points about figures. He asked about the scale of the cut that was envisaged for the common agricultural policy. In terms of tier 1 of the CAP, the proposal, to be fair to pillar one—to be fair to the Council and to the Commission—was to cut it from €336 billion to about €270 billion. So a cut was proposed for the CAP, but we made the point that even with that, we could go ahead and reach a good budget settlement. We said that without doing even more on the CAP we could reach a deal by looking at administrative savings and Commission savings, and also by looking at some of the programmes that are, quite rightly, being expanded, but expanded far too much. For example, Europe spent €8 billion on the Connecting Europe proposal in the last financial period, and it was proposed that that was increased to some €36 billion, so we could make significant cuts in that proposal and still land a sensible deal.

The right hon. Gentleman referred to the memorandum that we put in front of this House, which referred to the 2011 situation and the 2011 budget. What I have said is that, yes, we want a cut, but we should settle, at worst, for a real-terms freeze—and of course that freeze would be across the period 2013 to 2020.

The right hon. Gentleman asked why we had not built any alliances. I am happy to tell him that the Dutch, the Swedes, the Danes, the Finns and the Germans all very much backed our position. I might ask him about his alliance, as he is in alliance with the socialists in the European Parliament, whose position was to favour a 5% increase in the ceilings, not a cut. They wanted to end all rebates and to introduce a financial transactions tax of up to €200 billion. If he does not believe that, he should listen to the leader of the European socialists and democrats, Mr Hannes Swoboda, who said:

“Regarding the additional cuts, it is unacceptable that the majority of member countries are letting themselves be blackmailed by David Cameron”.

That is the view of the socialists.

The right hon. Gentleman has made his approach in this Parliament, but if he had been at the Council he would have heard a lecture by the socialist head of the European Parliament, who told the whole Council that anything that was a cut to what was being proposed would be completely opposed by everyone in the socialist group in the European Parliament, including his MPs. If the right hon. Gentleman wants to get a good deal for Britain, he might start by talking some sense to his socialist friends.

[Mr William Cash (Stone) (Con)]

Given the fact that, over the past 20 months, we have had about as many economic summits, and they have gone nowhere, given that Mrs Merkel is now saying that she wants the European Commission to be the European government and given the statements that have been made by Mr Barroso about a federal union, does my right hon. Friend not think that the time has now come to establish a lead on the question of a fundamental change in our relationship with the European Union and to do what the British people want, and get on with it as soon as possible, before it is too late?

[The Prime Minister]

I agree with my hon. Friend about the number of European Councils. That is undeniable; there has been a huge quantity.

I agree with my hon. Friend that there is an opportunity for a change in Britain’s relationship with the European Union. That is why I have talked about a new settlement and fresh consent for that settlement. Where I think I disagree with him is that we need to show some patience while the eurozone sorts itself out, and as the eurozone integrates I think there will be opportunities for that. As for his comments about the Germans, I hope that he is a regular reader of Der Spiegel online, because after the Council it said:

“Danke Grossbritannien…you’ve given hope to many people suffering under the terror of EU bureaucracy”.

[Keith Vaz (Leicester East) (Lab)]

A hundred thousand Syrian refugees have entered Turkey in the past year and 16,000 have applied for asylum in the EU, having crossed the border between Greece and Turkey. No matter what the Prime Minister’s negotiation position is in respect of the overall budget, will he give an assurance that he will protect the budget for Frontex, which protects the external limits of the EU, which must be in Britain’s best interests?

[The Prime Minister]

The right hon. Gentleman makes an important point. Frontex does good work and we have supported its budget, but like any Government, what we are asking the European Commission and European Council to do is attempt to do more for less. They have to look across each budget area, work out where the pressures are and, obviously, direct resources in that way, but they also have to try to find savings elsewhere, as every Department of Government has had to do.

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

As someone who supported my right hon. Friend in the Lobby a fortnight ago out of conviction, may I offer my congratulations to him on the alliances that he appears to have formed in Europe? Is that not an eloquent illustration of the principle that engagement is always more effective than detachment?

[The Prime Minister]

I am very grateful for my right hon. and learned Friend’s support. It has been important to have these alliances on behalf of countries that want a sensible settlement. We now have to work very hard to keep that alliance together so that we can land a deal that is in the interests of British taxpayers and, I would argue, taxpayers across Europe.

[Mike Gapes (Ilford South) (Lab/Co-op)]

The Prime Minister said that he wanted to galvanise a coalition of like-minded countries and referred in another answer to the Netherlands, Sweden, Denmark, Finland and Germany. Is it not a fact that, while they may have tactically agreed in this summit, there are very large differences between all those countries and his party’s position?

[The Prime Minister]

Actually, I think that the hon. Gentleman is wrong about that. The countries on the list that I read out are our classic allies that we put together in almost every year’s budget negotiations to try to ensure a reasonable outcome. The problem is that annual budgets are decided on a qualified majority basis, so we can be outvoted. The multi-annual financial framework is subject to unanimity, so we can put our case vigorously. The point that I made in my statement is that if we do not achieve a new framework, we will need even more than today to keep the tough budget discipline together for the annual budget negotiations that follow.

[Richard Ottaway (Croydon South) (Con)]

Far from being isolated, I congratulate my right hon. Friend on consolidating the alliance with Germany, Sweden, Holland and Denmark. Are there any signs that that new grouping will work with us on further reforms and, in particular, on reform of the single market?

[The Prime Minister]

The countries on the list that I read out tend to be fairly strong allies on much of the single market agenda. We are also joined in our support of the single market by the Italians and, to an extent, with the Spanish now that Mariano Rajoy is Prime Minister. We need to try to win the argument with large net contributors, such as Italy, that the best way to protect the interests of their taxpayers is to restrain the overall budget, rather than simply to measure their receipts under the CAP or the cohesion policy.

[Mr Dennis Skinner (Bolsover) (Lab)]

Isn’t this scenario getting a bit boring? When the Prime Minister went to Europe fighting alone, he came back with nothing. He has now formed alliances with all the dodgy people he referred to and he has still brought nothing back. Even John Major came back with two opt-outs—even John Major.

[The Prime Minister]

I will tell the hon. Gentleman what I have managed. The last Government put us into the bail-out fund; I got us out of the bail-out fund. The last Government gave away part of our rebate; I am keeping our rebate. We are making progress, but obviously we will have to do a little more to satisfy him.

[Michael Ellis (Northampton North) (Con)]

Does my right hon. Friend agree that the bloated Brussels bureaucrats are talking balderdash when they refuse to offer a single cut, despite the fact that more than 200 Commission staff earn more than he does and that they apparently have up to 93 holiday days a year?

[The Prime Minister]

I think that it is perfectly possible to save money in the Commission’s budget. Its staff have things such as automatic promotions, very generous pension arrangements and expatriation allowances for living in Brussels, even if they have been there for 30 years. It is time to have a clear-out of such things and the Commission needs to be convinced of that. Part of the point of building the alliance is to say to the Commission, “You really have to look at your own budget.” That is not the whole answer, because administration makes up only 6% of the total, but it can make a contribution.

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

I am concerned that the Prime Minister says that there are savings to be made in cohesion and structural funds. He is aware that many areas of the UK, such as west Wales and the valleys, enjoy receiving such payments. Is he saying that he can foresee a cut in that support?

[The Prime Minister]

There is a need for cuts in the overall cohesion and structural funds budget of the European Union, given the fiscal constraints that the net contributors are operating under. We should be frank and honest as a country in saying that, although there are regions of the UK that still benefit and should go on benefiting from structural funds, such funds should, on the whole, be for the poorest regions of the poorest countries. Britain’s negotiating position is different from that of many countries in that we do not go to Brussels and simply defend every penny that we receive; we try to seek an outcome that is right for the whole European Union. We cannot for ever argue for restraining the budget if we want to keep hold of structural funds for countries that are better off than most.

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

The Prime Minister will know that he is supported by those on the Liberal Democrat Benches in being robust in Brussels and in ensuring that the European Union understands that we live in a time of austerity in which it has to restrain its spending, as we are restraining ours. Although he is working satisfactorily with our allies on this matter, will he confirm that there is no truth in the rumour that we are trying to get an opt-out on the common market for financial services? If we are to prevent tax evaders, criminals and terrorists from using our country or any other to hide their assets, we need a common market for financial services. Will he confirm that we will lead in arguing for that objective?

[The Prime Minister]

We support the single market in all its forms. We are trying to ensure that when the banking union proposals, which include a proposal for a single supervisor under the European Central Bank, come through, they do not damage the interests of those countries that are in the single market but not the single currency. As I have already said, part of our G8 presidency next year will be targeted on cracking down on tax evasion, tax avoidance and the rest of it.

[Kate Hoey (Vauxhall) (Lab)]

What will the Prime Minister do if he does not get a real-terms freeze? Is he prepared to use his veto? Will he also make it clear that he is quite happy for decent, respectable people in my constituency to be members of UKIP?

[The Prime Minister]

I am very happy for anyone to join any political party—it is a free country. On the budget, we have a clear position. We are trying to get the ceilings down and cuts are already proposed. We want the ceilings down to such an extent that we achieve the real-terms freeze at worst, or a cut at best. I am convinced that we should achieve that if we keep the force of our arguments and keep the coalition of like-minded countries together.

[Nicholas Soames (Mid Sussex) (Con)]

My right hon. Friend the Prime Minister will have been fortified by the solid alliances he built in the interests of dealing with the budget. Does he agree that those alliances are particularly serviceable when it comes to driving ahead with the growth agenda in Europe? Will he not allow that to slip below the radar?

[The Prime Minister]

My right hon. Friend is absolutely right. We will keep pushing forward the growth agenda, based on completing the single market in digital, services and energy. It is also important to recognise that the budget, even with the reductions I propose, would still be a growth budget, because it would transfer funds from agriculture into growth areas such as supporting research and investment, from which Britain is quite well placed to benefit.

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

Does the Prime Minister believe that the rising tide of unemployment and poverty across western Europe is a price worth paying in order to save the euro?

[The Prime Minister]

The rising tide of unemployment across Europe is clearly a tragedy, but we need to look across Europe and ask why some countries are doing so much better than others at tackling unemployment, and particularly youth unemployment. Youth unemployment is far lower in, for instance, Holland and Germany than in Spain, Italy and—yes—the UK. There is more to learn about welfare reform, apprenticeships and education standards. We can apply those lessons here to ensure that we keep unemployment falling.

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

I hope the Prime Minister will be pleased to know that he is once again the toast of Somerset for returning from the European summit so successfully, and we look forward to his further success. For as Sir Francis Drake said, it is not the beginning but the continuing of the same until it is thoroughly finished that yieldeth the true glory. We look forward to the true glory of the Prime Minister when he comes back next time with a cut.

[The Prime Minister]

I am grateful to my hon. Friend for his remarks and his support, but I commiserate with him and many in Somerset who will not be toasting anyone today because they are suffering from the appalling floods over the weekend.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

As my right hon. Friend the Leader of the Opposition has said, we need to reshape the EU budget to support jobs and growth rather than cut investment in R and D, as this Government have done by 7% in one year. Will the Prime Minister say specifically what he is doing to support R and D investment within an overall budget cut?

[The Prime Minister]

I can; the hon. Lady makes a very good point. If she looks at budget heading 1a, which includes all research, university and other spending—out of which Britain, with high-quality universities, does quite well—she will see that, in the last period, 2007 to 2013, the EU spent about €83.5 billion. The proposal on the table on 22 November was to spend €108 billion. That is quite a significant 20% increase. I would argue that we could take that increase back a little in order to help to get an overall deal without harming the fact that this is a growth budget that wants to support research and jobs.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

I join my right hon. and learned Friend the Member for North East Fife (Sir Menzies Campbell) in commending engagement rather than detachment, but does the Prime Minister agree that this is not about submitting to European demands, but about staking out our own national interest and building alliances around that? Is not that a lesson for the future?

[The Prime Minister]

I do not want to come between this great friendship that is opening up across our Benches. It is important to form alliances to try to get deals that are in our national interest, but as in all these things we have to have a bottom line, and sometimes that means that we will have to go it alone.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

Does the Prime Minister agree with his party chairman that we should leave open the option of exiting the EU?

[The Prime Minister]

As the hon. Gentleman knows, my view is that the problem with an in/out referendum is that both the options are not really what I would want or what the British people would want. I do not think that keeping our membership as it is under the status quo is acceptable: nor do I think that walking away from Europe would be a sensible idea. That is why we need a new settlement—and new consent for that settlement —and that is what we will set out.

[Mr Edward Leigh (Gainsborough) (Con)]

At an appropriate moment of the Prime Minister’s choosing—say, around the next general election—will he grant the British people a referendum on our relationship with the EU?

[The Prime Minister]

I will be saying a bit more about that later this year. As I have said, I think that opportunities are opening up. As Europe changes—and the changes are coming because of the single currency and what it is doing to the European Union—options are opening up to form a different, better relationship that the British people would back. We will then have to work out exactly how to get the consent for that relationship that the British people deserve.

[Paul Blomfield (Sheffield Central) (Lab)]

Following the Prime Minister’s earlier answer, he will know that the draft research and innovation budget in Horizon 2020 includes a number of elements that were not part of FP7 and therefore the growth is misleading. Will he reassure the House that he will fight unambiguously to protect the research and innovation budget?

[The Prime Minister]

The hon. Gentleman makes a good point. The figures I read out are the correct ones—€83.5 billion in the last period and a proposal for more than €108 billion in the last negotiating box. I can reassure him that the like-minded group of countries that came together to argue for further tens of billions of cuts in this proposal were looking for only a very small reduction in that heading in the European budget. We can get down to the sort of figures we need without fundamentally changing that budget heading.

[Michael Fabricant (Lichfield) (Con)]

My right hon. Friend will know that I am rather keen on pacts. Does he recall that Opposition Front Benchers said that he would be in utter isolation when he went to negotiate in Europe? Does he agree with me that working with other countries, such as the five that he has mentioned, actually delivers results for the British taxpayer?

[The Prime Minister]

I absolutely agree with my hon. Friend. He is completely right to talk about the importance of working with other countries. I commend him on all the very good joint working that he managed to do in encouraging colleagues to go and campaign in the Corby by-election.

[Kelvin Hopkins (Luton North) (Lab)]

The Prime Minister and my right hon. Friend the Leader of the Opposition made much talk of agriculture today. Is it not time to call for the abolition of the common agricultural policy and the restoration of agricultural subsidies to national Governments, not the European Union?

[The Prime Minister]

The hon. Gentleman makes a very interesting submission to the balance of competences review that this Government are carrying out, and I urge him to engage fully with that process.

[Mr James Clappison (Hertsmere) (Con)]

I commend my right hon. Friend for doing all that can humanly be done to defend our national interest on this, but is not the most important alliance that he has formed the one with public opinion in Europe, which no doubt finds it astonishing that this profoundly undemocratic organisation is seeking a large increase at a time when the whole of the rest of Europe faces fiscal pressure and, in some cases, grave economic crisis—in no small measure due to the euro itself?

[The Prime Minister]

My hon. Friend makes a good point. While it is disappointing not to get a budget deal at the first time of asking, this will give European leaders further time to reflect on public opinion in their own countries. I think that many people across Europe in all those countries that are significant contributors to the EU—and maybe even some that are not net contributors —will agree that it is right that when difficult reductions are being made in budgets at home, the same should happen in Brussels.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does the Prime Minister agree that his negotiating hand in Europe would be stronger if there was not constant debate here, particularly among his own Back Benchers, about an in/out referendum?

[The Prime Minister]

I think what matters is that we need to explain very clearly to our European partners that we are committed members of the European Union. We think the single market is vital for Britain’s national interest. We stand behind, and have helped to arrange, some of the key successes for the European Union in recent years, such as the oil embargo against Iran, the enlargement of the EU and the completion of the single market—those are all British initiatives. But I think it is perfectly acceptable to explain to partners in Europe that we are not satisfied with every aspect of our relationship —we are prepared to stand up and defend Britain’s national interest.

[Mr Peter Bone (Wellingborough) (Con)]

Does the Prime Minister notice the difference between coming back from this European summit and coming back from some of the others? There is hardly anyone on the Opposition Benches to support their leader, but on the Government Benches, the Conservative party is united in supporting the Prime Minister.

[The Prime Minister]

I take it from that that even Mrs Bone is satisfied by the weekend’s activities, and that makes me a happy man.

[Nick Smith (Blaenau Gwent) (Lab)]

Voters in Blaenau Gwent support the EU, but do not want us to be a soft touch. They want investment in infrastructure projects in Wales and in research spending, and they want a big reduction in farm subsidies. Will the Prime Minister support continued investment in infrastructure projects in Wales?

[The Prime Minister]

Yes, I do support infrastructure investment in Wales and I do support the EU having cohesion and structural funds, but those funds have to be affordable. As I have said, I think that the better-off countries have to be honest about those countries that joined the EU as part of enlargement with a realistic expectation that some of their infrastructure was going to be brought up to scratch and, crucially, that they were going to be connected with the rest of the EU, when, of course, some of them have had previous economic connections heading in other directions. We should stand by those commitments.

[Mark Pritchard (The Wrekin) (Con)]

I congratulate the Prime Minister on standing firm on round one of the negotiations, but the budget talks underline how, over nearly four decades, the United Kingdom has lost its independence and the House of Commons has lost its sovereignty, given that any subsequent budget deal proposed by Her Majesty’s Government can be effectively vetoed by 26 other member states.

[The Prime Minister]

Where I agree with my hon. Friend is that I think there have been too many occasions where issues have gone to qualified majority voting rather than majority voting, and so the veto, as it were, has been given away in too many areas. Where I would not agree with my hon. Friend is that I think that Britain does benefit from our membership of the single market. It is important, in our national interests as a trading nation, that we do not only have access to that market, but help write the rules of that market. In that regard, I think the single market is very important for the UK.

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

Can the Prime Minister tell us whether his coalition of allies on Europe includes both the Mayor of London, who believes that an in/out referendum on EU membership would be a bad idea, and his Education Secretary, who believes we should be quitting the EU altogether?

[The Prime Minister]

The hon. Gentleman is a little bit out of date, as the Mayor of London has chosen a visit to India to make it clear how much he supports my policy.

[Mr Robert Buckland (South Swindon) (Con)]

As an enthusiastic European, may I congratulate my right hon. Friend on continuing to engage closely and constructively with our colleagues, and on building coalitions and consensus? May I urge him, in the months ahead, to carry on working particularly closely with the German Government to make sure that the progress made this weekend can be consolidated?

[The Prime Minister]

I will certainly continue to do that work. On the issue of the EU budget, I think there is a good reason why that coalition should stick together and push hard for a budget that, yes, is about growth, but comes in far lower than where it is today. I will work very hard to try to make that happen.

[Helen Goodman (Bishop Auckland) (Lab)]

I am afraid that I am still not quite clear what the Prime Minister’s view on a referendum is. Is it that he thinks it is not a good time now because of the problems in the eurozone, or does he take the view that it would never be right to have an in/out referendum?

[The Prime Minister]

My view is that Britain should be looking for a different and better settlement between Britain and the EU. That is something we can push for, because Europe is changing. The single currency is driving change in Europe. When we have achieved that new settlement, we should seek fresh consent for it—and, yes of course, that could include a referendum.

[Chris Heaton-Harris (Daventry) (Con)]

I also congratulate the Prime Minister on gaining so much support in these negotiations—this, not signing off the accounts of the Commission recently and other negotiations have shown to those living in the Brussels bubble that it is not business as usual when they deal with Britain. May I urge him to continue pushing for reductions in the various headings and especially to look at the EU quangos being set up?

[The Prime Minister]

I thank my hon. Friend for his remarks. He makes a good point. Given what we have done in the UK, such as abolishing or merging about 200 quangos and cutting central Government Departments’ own spending by about 30% in some cases, there is clearly room in the EU—not just in the Commission but in the other institutions—to find proper savings in cost and bureaucracy. We should continue pushing at that. The seven-year multi-annual financial framework provides the one moment when we really have the opportunity to drive home the advantage and make those cuts.

[Bill Esterson (Sefton Central) (Lab)]

One more time, then: does the Prime Minister agree with those in his party who want a referendum, or does he agree with those in his party who do not want a referendum?

[The Prime Minister]

I think I have already made the position clear.

[Mr Philip Hollobone (Kettering) (Con)]

My constituents are appalled that the European Commission should propose a budget with no administrative savings whatsoever, at a time when every Government in Europe are trying to cut back on unnecessary expenditure. Given that these people are clearly living in a parallel universe, what chance is there that they will advance administrative savings before the next budget round?

[The Prime Minister]

I am afraid it is worse than my hon. Friend says. According to so-called heading 5 —administrative costs—between 2007 and 2013 the EU was spending €56.5 billion under that heading, but the proposals from the Commission and the presidency of the Council were to increase that figure to €62.6 billion. Far from just freezing the figures, they were looking to increase them. That is one reason why I think it is perfectly possible to make a cut in their proposal. That is not unrealistic or tokenistic, or just some populist urge; it is a proper way of saving several billion euros and getting an affordable budget.

[Gemma Doyle (West Dunbartonshire) (Lab/Co-op)]

The Prime Minister cannot even galvanise a coalition of opinion in his own party, so I am not sure how he expects to galvanise a coalition of countries. Given that his own opinion is as clear as mud, how will he deal with the constant debate on his own Benches about an in/out referendum?

[The Prime Minister]

This Government are not frightened of standing up for Britain in Brussels. The last Government gave away part of the rebate and got absolutely nothing in return; they joined up to the bail-out fund for absolutely no reason; and they gave away our opt-out from the social chapter and got nothing in return. They just turn up in Brussels, give in and show absolutely no backbone.

[Martin Horwood (Cheltenham) (LD)]

I, too, commend the Prime Minister for his statement. Does not his commitment to negotiation and building alliances with other Governments demonstrate real British leadership in Europe, in contrast to the tub-thumping opportunism from the Labour Front Bench?

[The Prime Minister]

I agree with my hon. Friend. It was an extraordinary performance from the Leader of the Opposition to come here one day and tell us he was one of Britain’s leading Eurosceptics, only to go to the CBI and say that he was more pro-European than Tony Blair. He has been shown up as a complete opportunist.

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

Our letter in June, signed by 100 Conservative Back Benchers, called on the Prime Minister to legislate in this Parliament for a referendum in the next Parliament on our membership of the EU. The Prime Minister declined but said that he wished to continue discussions. In congratulating the Prime Minister on standing up for Britain, may I ask if he would allow us to have a meeting to discuss this matter, further to our letter?

[The Prime Minister]

I am always happy to meet my hon. Friend, who I know has strong views on this issue. He favours an in/out referendum and voting out, which is where he and I do not agree. I am happy to have that conversation with him, but I think it makes much more sense to look at the new settlement we would like to achieve within the EU before seeking consent for it. I do not think that legislating in advance is the right way forward, but I am happy to discuss it with him.

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

I welcome the statement. The Prime Minister has been absolutely consistent on this issue for two years. Rather than walking away from our allies, as some urged him, he stuck with them and expanded the alliance for a real-terms freeze. Does he agree that if we were to limit the scope of structural funds and reduce the deadweight costs of recycling between richer countries, we could not only reduce the EU budget, but allow countries such as Britain to have more money to spend on their own independent regional policy?

[The Prime Minister]

My hon. Friend makes an extremely important point. If we can encourage the better-off countries in Europe to take that approach, we can do exactly as he says and restrict the EU budget, but ensure that those countries that joined the EU with an expectation that they would get structural and cohesion funds to update their infrastructure can get those funds. That is important.

[Chris Kelly (Dudley South) (Con)]

I congratulate my right hon. Friend on once again doing the right thing by the hard-working taxpayers of Dudley South, unlike Labour. Is bamboozling and attempting to bully Heads of Government during such negotiations while depriving them of food and sleep for days at a time really any way to run a union of nation states?

[The Prime Minister]

I thank my hon. Friend for his support. He makes an important point about the working methods of the European Union, where meetings seem to be held at extremely late hours—although I have to say that, having gone to European Councils for two and a half years, there is certainly no experience of being starved of either food or drink.

[Margot James (Stourbridge) (Con)]

I congratulate the Prime Minister on the excellent progress he has made in forming an alliance of net contributors both in the run-up to and during the budget negotiations. Does he welcome, as I do, the closer relationship with Germany, which Der Spiegel has aptly dubbed “Merkeron”?

[The Prime Minister]

I am grateful for my hon. Friend’s support. I think it is a bit premature to raise this new spectre, as it were, but I certainly enjoy working closely with the German Chancellor, and there are many areas—not just the EU budget—where we agree very forcefully.

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

I do not think I have a particularly odd postbag, but I have never had one letter, e-mail, conversation or text that has encouraged me to ensure that we keep up the EU wine budget, ensure that the bureaucrats have a comfy lifestyle and increase their budget left, right and centre. The Brussels sprouts and turkeys of Europe will not be voting for Christmas. I congratulate my right hon. Friend on his firm stance and say more power to his elbow. I believe that my constituents are typical.

[The Prime Minister]

I am grateful for my hon. Friend’s support. On this side of the House at least we will go on arguing for a tough settlement.

[Christopher Pincher (Tamworth) (Con)]

Does my right hon. Friend recall the warning given by Aneurin Bevan—one Labour figure who knew how to stand up in Britain’s interest—who said that it is dangerous to send a British Foreign Secretary

“naked into the conference chamber”?

With respect to retaining our veto as a weapon in our negotiating armoury, does the Prime Minister think the Leader of Opposition could benefit from a bit of Bevan?

[The Prime Minister]

I think the Leader of the Opposition could benefit from a little bit of time with his socialist colleagues in the European Parliament, because they have done so much to try to undermine all of us who want to see a tough budget settlement. They are calling for a 5% increase, getting rid of all the rebates and having a financial transactions tax. That is what the socialists stand for in Europe and if the Opposition do not agree, they should have the courage to do what we did and leave their group.

[Gavin Williamson (South Staffordshire) (Con)]

I want to know from the Prime Minister whether he thinks we would have given away all our rebate or just most of it if the Leader of the Opposition had been in charge of our negotiations.

[The Prime Minister]

I do not think our rebate would last long with the Labour party. Tony Blair—the last Labour Government—gave away the rebate, in return for which they thought they had secured a promise for reform of the CAP, but they got absolutely nothing in return. It was a terrible piece of negotiation, and one, I am afraid, for which we are still paying the price.

[Dr Sarah Wollaston (Totnes) (Con)]

Far from being isolated in Europe, the Prime Minister has plenty of allies. Does he feel it was at all helpful to be able to go to Europe and demonstrate the strength of feeling of this House? Will he set out when this House—and more importantly the British people—will be able to see his proposals for a new settlement on our relationship with Europe and when the British people will be able to give their consent?

[The Prime Minister]

I do not think that anybody in the EU doubts the very strong views of this House of Commons and of the British public about our relationship with Europe and the fact that we should not be having big increases in the EU budget. That is well understood and this Government reflect that very clearly, unlike the last Government, who endlessly gave away our money. I have explained that I will be saying more this year about the new settlement that we are seeking in Europe.

[Guy Opperman (Hexham) (Con)]

People in Northumberland will be delighted that it is this Government who are keeping the rebate, stopping the budget rise and working with the fiscal sensibles in Sweden, Holland and Germany. Does the Prime Minister agree that fiscal restraint and constraint are gradually becoming the prevailing argument in Europe?

[The Prime Minister]

My hon. Friend makes an important point. We must work hard to keep this alliance together, because there are many countries and parties in Europe that want to see an even bigger EU budget. Sadly, that includes the socialist party, which Labour belongs to. It is campaigning and fighting for an increase in the budget. This is what the leader of the European socialists says:

“If the EU budget is decided on the basis of Van Rompuy’s latest proposal—or an even worse compromise—it will be a budget of broken promises.”

That is the policy that Labour is signed up to, and it is only this Government who are preventing it from happening.

[David Rutley (Macclesfield) (Con)]

I congratulate the Prime Minister on taking a strong lead, on putting the spotlight firmly on economic growth and on placing trade on the EU agenda. Will he tell the House what steps the EU is taking to tackle the burden of Brussels-backed bureaucracy, just as this Government are doing here in the UK in relation to historical home-grown regulations?

[The Prime Minister]

I am afraid that the answer to that is not nearly enough. There is some good news, which is that, at the last European Council before this one, we secured a commitment from the European Commission to examine existing regulations and to try to remove the most burdensome of them. It was disappointing, however, that at this Council, the European Commission would not brook any idea of reducing its bureaucracy or its budget. As I have said, the proposals being put forward were to increase the budget of the central administration, not to reduce it.

[Neil Parish (Tiverton and Honiton) (Con)]

I congratulate the Prime Minister on standing up for Britain and on having strong allies in Europe. The Council of Europe is beginning to see the light in regard to expenditure, but the culture of the European Commission is always to spend more and more. If it is good enough for this Government to cut back on Whitehall, why is it not good enough to cut back on the European Commission?

[The Prime Minister]

My hon. Friend makes an important point. That point was made not just by me but by a number of other leaders of Governments. We were talking about the tough pension changes, budget changes, administration changes and cuts that we have had to make, and it is just not acceptable for Brussels to continue as though nothing has changed.

[Mr David Burrowes (Enfield, Southgate) (Con)]

Before the European Council, the shadow Chancellor kept going on about the Prime Minister being weak and isolated. Following the Prime Minister’s strong leadership on budget reform, in alliance with countries such as Germany, Holland and Sweden, who in this House does my right hon. Friend now think is weak and isolated on Europe?

[The Prime Minister]

First, may I congratulate my hon. Friend on his absolutely superb piece of Movember fundraising? He would not look out of place in a spaghetti western, and I am sure that a number of film studios near Enfield will want to call on his services. So excited was I by his facial hair, however, that I have forgotten his question—[Laughter.] Ah, yes! He is absolutely right. The last Labour Government gave away our rebate, and if they got back in again, they would give away the other half.

[Jane Ellison (Battersea) (Con)]

May I congratulate the Prime Minister on the important work that he did this weekend, particularly the alliance building? It is clearly absurd of the EU to say that there can be no cuts in the central administrative budgets when, up and down this country, councils such as mine in Wandsworth are finding ways of doing it at local government level. Surely it is inconceivable that it cannot be done at EU level.

[The Prime Minister]

My hon. Friend is absolutely right. I have set out in my statement and also at the European Council a number of specific steps that could be taken on pay bills, on pensions and on automatic promotion. Frankly, however, perhaps the best way of getting the Commission to engage in the reality is to give it a cut that it has to achieve and then challenge it to do so. That is what we have done with some Government Departments. We have said to them, “Okay, you know your Department and your departmental spending better than anyone. Here is the sort of reduction you need to achieve.” There is not an organisation or business in the world that has not had to budget for a 10% or 20% reduction over the past few years, and we should ask the Commission to do that.

[Neil Carmichael (Stroud) (Con)]

This statement certainly demonstrates that the building of an effective alliance on the European Council really can deliver some results. Through good leadership, that is clearly benefiting this country. Does the Prime Minister agree that the next big thing to do is to make sure that we have a truly competitive Europe and that the alliance that he has created should be used as a powerful mechanism to demonstrate what we need and how to get it?

--- Later in debate ---

[The Prime Minister]

My hon. Friend is entirely right. That is why we spent so much time putting together the so-called like-minded group, particularly over single market issues where we have not only the traditional allies of Denmark, Holland and Germany, but the Baltic states, the Nordic states and now the Italians and the Spanish, along with others including the Hungarians and the Czechs. They all support single-market and growth-oriented measures, which is very encouraging.

[Mr Marcus Jones (Nuneaton) (Con)]

Can my right hon. Friend reassure us that he will never agree to any new EU taxes, particularly to an EU-wide financial transaction tax?

[The Prime Minister]

I can certainly give my hon. Friend the assurance that we do not support new EU taxes. One of the ways in which particularly the left in Europe has endlessly tried to argue for higher budgets for more spending is by altering the so-called “own resources” and coming up with new taxes. We oppose a financial transactions tax. Some countries may well go ahead and introduce it in any case. If they do, as far as I am concerned, that is their own decision and we will not take part in it.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

The current multi-annual financial framework has a commitment of €994 billion; the van Rompuy proposal cuts that to €973 billion. Does my right hon. Friend agree that this is progress, but still not good enough?

[The Prime Minister]

My hon. Friend is entirely right. The Commission initially came up with a proposal that was over a trillion euros. One problem has been the need to argue against a proposal that is clearly wrong and wrong-headed and bring it back to some sort of sanity before it becomes possible to argue about getting a proper outcome for the budget. It is not often that we hear politicians say this, but what is lacking in some cases is a Treasury approach of going through these budgets rather than having people like the permanent staff all sitting around in the Commission and in the Council protecting their own budgets rather than looking at the savings that should be made.

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

Did my right hon. Friend see the headline in last Friday’s Der Spiegel online, which read “Cameron leads revolt of the net contributors”? Of particular interest was the second online comment, which read “Wir sind heute alle Engländer! Danke Herr Cameron”—today we are all British; thank you, Mr Cameron. I do not think that we are at all isolated in Europe.

[The Prime Minister]

It is impressive to see Conservative MPs speaking German in the House of Commons. I am impressed by my hon. Friend and I take what he said as a compliment.

[Jason McCartney (Colne Valley) (Con)]

I praise the Prime Minister’s tough and principled stance at the EU summit. Those are not just my words—they are the words of some of my constituents who e-mailed me over the weekend. They had just been on a cruise around the Baltic, where they spoke to many citizens who were also fed up with being fleeced by the EU. As the Prime Minister goes back to the summit in the future to negotiate and get control over this bloated EU budget, will he realise that he has the full support not only of the British people, but of hard-pressed taxpayers in the EU, too?

[The Prime Minister]

I am grateful for my hon. Friend’s comments. He makes an important point—that we should use the time between now and the resumption of this European Council to try to make sure that the voice of people in Europe who want a tougher budget is actually heard, not just in Britain, but in other countries, particularly the net contributors.

[Jessica Lee (Erewash) (Con)]

My constituents, the good people of Erewash, are keen to know that the great British rebate, initially secured under Margaret Thatcher, remains safe in the Government’s hands. Can my right hon. Friend offer some reassurance that this important aspect of the budget remains a priority at the negotiating table?

[The Prime Minister]

My hon. Friend is absolutely right. It must remain a priority for Britain to make sure that there cannot be changes to our rebate. What happened at this European Council is that the disagreement about the spending figures dominated the discussions, so we did not really get on to the whole conversation about rebates and the so-called own resources and income side. I was very clear, however, that when we get to that discussion, there cannot be changes to the UK rebate.

[Stephen Mosley (City of Chester) (Con)]

The Commission and many EU countries have a vested interest in always increasing EU budgets. Has the Prime Minister given any consideration to whether there might be a better way of agreeing EU budgets in future?

[The Prime Minister]

My hon. Friend makes an important point, to which I referred to earlier. When a rotating president was responsible for trying to put the budget deal together, at least we felt that European taxpayers were getting more of a look-in than we do now that it is being done by the European Council and the European Commission. I think we need to make sure that the voice of the people of Europe, who want to see tough budgets, is properly heard. There may be more that Parliaments can do in scrutinising European spending and helping to come up with some sensible savings, which we can then take to the Council table and get agreed.

[Mr Speaker]

Order. I am extremely grateful to the Prime Minister, the Leader of the Opposition and other colleagues. The fact that 53 Back Benchers were able to take part in 44 minutes of exclusively Back-Bench time is a comment on succinctness.