EU-UK Relationship (Reform)

Andrea Leadsom Excerpts

Tuesday 18th September 2012 Westminster Hall

[Andrea Leadsom (South Northamptonshire) (Con)]

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

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

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

He added:

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

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

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

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

[Andrea Leadsom]

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

[Mr Brian Binley (Northampton South) (Con)]

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

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[Andrea Leadsom]

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

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

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

[Emma Reynolds (Wolverhampton North East) (Lab)]

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

[Andrea Leadsom]

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

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

She also said:

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

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

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

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

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

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

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

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

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

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

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

[Andrea Leadsom]

I completely agree with my hon. Friend.

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

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

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

[Andrea Leadsom]

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

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

[Mr Andrew Turner (Isle of Wight) (Con)]

Will my hon. Friend give way?

[Andrea Leadsom]

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

[Mr Turner]

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

[Andrea Leadsom]

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

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

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

[Mr Binley]

Will my hon. Friend give way again?

[Andrea Leadsom]

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

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

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

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

[Mr Binley]

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

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

[Andrea Leadsom]

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

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

[George Freeman (Mid Norfolk) (Con)]

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

[Andrea Leadsom]

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

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

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

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

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

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

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

[Andrea Leadsom]

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

[Emma Reynolds]

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

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[Andrea Leadsom]

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

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

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

[Chris Bryant (Rhondda) (Lab)]

No they do not.

[Andrea Leadsom]

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

[Tim Loughton (East Worthing and Shoreham) (Con)]

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

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

[Andrea Leadsom]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Mr William Cash (Stone) (Con)]

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

[Andrea Leadsom]

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

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

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

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

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

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

[Several hon. Members]

rose—

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[Emma Reynolds]

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

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

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

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

[Andrea Leadsom]

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

[Mr Philip Hollobone (in the Chair)]

Order. Before the hon. Member for Wolverhampton North East (Emma Reynolds) responds, she needs to think about bringing her remarks to a close. She has about two minutes left.