European Council

Bernard Jenkin Excerpts

Thursday 8th December 2011 Westminster Hall

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

It is an unexpected pleasure to be opening this debate, and also that it is taking place at all. We should, of course, have a full-day’s debate in the main Chamber in advance of a summit of the importance of the European Council summit that is about to take place. Under the previous arrangements there would have been such a debate, but the Government somehow do not seem able to provide for one under the new arrangements. Nevertheless, it is a great honour for me to have been given the responsibility to set out what many of us feel should be addressed at the forthcoming summit.

There is no doubt that this is a momentous moment in the history of Europe, and you do not need to take my word for it, Mr Turner. Speaking in Toulon last Thursday, President Sarkozy of France said Europe must be “refounded”, and he is talking today about the crucial historic moment of this summit. I think he is upping the ante a bit, perhaps unnecessarily, because no treaty will be signed at the summit. The participants will merely be agreeing issues in principle, and there will be long and arduous negotiations about the treaty text before anything is signed. In her speech to the Bundestag last Friday, Chancellor Merkel of Germany said:

“We have started a new phase of European integration”,

so the idea that nothing much of importance is happening in Brussels except trying to save the euro is a distortion.

The leaders of France and Germany came together on Monday to hammer out their vision, not just of how to save the euro but of the future of Europe. There will be only one real issue on the agenda in Brussels tomorrow: the final desperate act of European integration—fiscal union. In other words, the issue will be the formation of economic government of the 17. According to President Sarkozy and Chancellor Merkel in their letter to Herman Van Rompuy, this will

“need a renewed contract between the Euro area Member States”.

The coalition agreement never envisaged confronting a major change to the EU treaties in this Parliament. The EU was meant to be off the agenda and, indeed, the leadership of the Conservative party deliberately downplayed the issue of Europe, both before the election and in the first part of this Parliament. The Government have, therefore, found themselves ill-prepared for this crisis.

Official rhetoric on the EU might have moved on a bit from the days of John Major, but the substance of policy remains remarkably similar. My right hon. Friend the Prime Minister now says that there should have been a referendum on the Maastricht treaty, but he has yet to criticise its substance. From today’s perspective, does anyone seriously doubt that John Major should have vetoed monetary union? Maastricht also established the principle of the two-speed EU, with its dangerously comforting opt-outs. Subsequent treaties, not least the Lisbon one, have proved that two-speed, multi-speed, or whatever you want to call it, means only one federalist direction for the EU, with the UK having less and less influence, since opportunities for veto have been given away more and more. As a result, at this summit the UK is presented with the unenviable dilemmas of the forthcoming decisions. Once again, the UK is reacting to an agenda set by other member states, and Ministers are left managing what can be described only as a retreat. To cite another of the Prime Minister’s phrases,

“we cannot go on like this.”

The Prime Minister has made it clear that

“the bottom line for us is always what is in the interest of the UK”,

and I agree, but what is the bottom line? In his article in The Times yesterday, the Prime Minister said that he was still committed to forging

“a new kind of Europe…a more competitive, dynamic and outward-looking Europe…a Europe that has the flexibility of a network, not the rigidity of a bloc. A Europe that looks beyond itself with its eyes to the horizon, and recognises that it must change fundamentally or fall behind. A Europe that cherishes its national identities as a source of strength.”

Well, amen to that. I do not think that a single member of the Conservative party would object to that, or indeed that a single person in the country could. But we have heard this before. It is an echo of the previous Prime Minister’s plea for a “global Europe”. Tony Blair spoke of a Europe that is “democratic”—one thing that the eurozone will not be—and John Major spoke of a Europe that recognises that

“the nation state is here to stay”.

These British visions of a different kind of EU have been proffered and offered to various EU summits down the decades, but they are not on the agenda of our fellow member states, or of the EU Commission and the other EU institutions. They never have been, and other member states are not spontaneously going to come round to our way of thinking. They are not interested in discussing those visions.

The Government say that they might veto the treaty changes discussed at the summit, unless the treaty has

“the right safeguards for Britain…around things like the importance of the single market and financial services”.

It is very important that the Prime Minister has put that on the record, but it gives the lie to the idea that it is unthinkable for the UK to refuse to accept the EU’s plans for fiscal union without making demands of our own. We are constantly being harangued by people, who say that if we are asking questions about the summit we must somehow want to wreck it, but the Prime Minister himself has offered the prospect of a veto, so they need to make that accusation to him as well, and of course that would be ridiculous. I commend the Prime Minister for making it clear that he will stick up for British interests.

There is no need to delay ratifying treaty changes unless other member states object to the reasonable demands that the UK Government should make. Then it will be our European partners holding up the summit, not the UK. The UK must hold out for the fundamental change in our relationship with the EU that fiscal union will make indispensable. The Prime Minister reminds us what this is really about. It is about competitiveness, jobs and the growth of our own economy in the short, medium and long term. And, I have to say, I commend the words of the Deputy Prime Minister, who warned of the dangers of a huge “club within a club.”

Yes, that is exactly the threat we are now facing. Our prosperity and competitiveness are already under constant attack from the burden of EU regulation, and the agency workers directive and the working time directive are typical of the costly and unnecessary regulations that destroy jobs. It is estimated that these two laws alone cost the UK economy £3.6 billion per year, and if we are not prepared to deal with that, we are not dealing with the problem we face. The British Chambers of Commerce calculate that the cost of additional EU regulation introduced between 1998 and 2010 is a staggering £60.75 billion. A recent Open Europe report entitled “Repatriating EU social policy: The best choice for jobs and growth?” has estimated that EU social law costs UK businesses and the public sector £8.6 billion per year.

This afternoon I wish to set out how the Government are asking us to believe two unbelievable things. The first is that a move towards fiscal union and even closer integration in the eurozone will not fundamentally alter the UK’s relationship with the EU, and the second is that the best time for the UK to negotiate to repatriate powers will be not now but in a few years’ time, after the changes in the eurozone have been made and by which time the eurozone crisis will supposedly have been settled. I will then set out what the UK must demand, and is entitled to demand, if fiscal union is to proceed, and finally I will explain why a referendum in the UK on the treaty changes will be desirable, necessary and probably inevitable.

First, fiscal union in the eurozone will utterly change the relationship with the EU, as it will fundamentally alter the nature of the EU itself. We will be linked by treaty to what will effectively be a new economic state, and we will be like a rowing boat dragged along in the slipstream of a supertanker. The EU will be dominated by a bloc of 17 euro countries with shared economic priorities and structures of government—that huge club within a club.

Social policy is just one area in which EU policy is operating contrary to the UK’s national interest. Let us not forget, too, the direct financial costs of EU membership: a net contribution of £7.6 billion by the UK this year, a sum similar to the aid budget and equivalent to around a quarter of our defence budget. Let us remember that all those pressures on the UK arise from our existing terms of membership. That is how the EU institutions operate against our interests. If they are doing that now, what will it be like in future?

The reality of what is happening in the EU was very well set out in The Spectator today by my right hon. Friend the Secretary of State for Northern Ireland. He rightly warns that the EU17 is planning to become

“a new and very powerful country which can dominate us”

through the existing treaty arrangements. The article continues:

“His concern is that a fiscally united eurozone will spend as a bloc, tax as a bloc — and, when it comes to European summits, vote as a bloc.”

As he is right to go on to say:

“It is wholly unacceptable to have a new bloc in which we would be permanently outvoted… if they want to go ahead and form their new country, we want to get the power to run our country back.”

Secondly, the Government are asking us to believe that we will have a better opportunity to discuss our fundamental concerns after the new EU treaty changes have been agreed and ratified, perhaps after another two or three years. Does anyone seriously believe that Germany and France would agree to that? What leverage would we have then? Why would they need to listen after we have already signed the new treaties? This is not only the best opportunity for us to renegotiate our terms of membership; it is likely to be the only one, short of taking unilateral action.

Let us, in passing, dispose of another myth. Unless all EU27 member states agree to those changes, there will be no fiscal union. Even a treaty of the 17 member states would need the support of all member states, or none of the EU institutions could be involved with the new proposed arrangement. That is why my right hon. Friend the Prime Minister was absolutely right when he stated in The Times earlier this week:

“These institutions belong to all EU states”.

We should not allow them to be hijacked by a wholly new organisation.

A treaty change through article 48 of the treaty on European Union—the internal treaty revision procedure—would still require ratification by the UK. Any agreement falling short of fiscal union that avoids treaty change, such as altering protocol 12, as proposed by Herman Van Rompuy in his report, “Towards a stronger economic Union” would still require the UK’s approval at the European Council. There is, therefore, no way we can be bypassed if we place our demands on the table.

Far from it not being the time to renegotiate bringing powers back, this is the moment when we have the most leverage. We cannot afford to settle for another limited opt-out, safeguard, or protocol. That would not be the fundamental change that the Prime Minister and so many others say they wish to see. Things would simply carry on, but under the new arrangements, they would be worse.

What should the Government do now? A recent report by the TaxPayers Alliance, “Terms of Endearment”, sets out a list of powers that it would be desirable to repatriate to achieve a satisfactory new relationship. They include business regulation, employment law, fisheries and agriculture, and immigration and taxation.

I also much admire the work being undertaken by the all-party group on European reform and the Fresh Start project, under the leadership of my hon. Friend the Member for South Northamptonshire (Andrea Leadsom). She is doing a great service for her country. That work certainly needs to be done, but as she acknowledges, it is detailed and complex, and it really would be unreasonable to embroil the EU machinery in such a breadth of contentious issues and in such legal complexity at this time. Attempts at this summit to nibble at certain powers are bound to be disappointing, as opt-outs and protocols have so often been circumvented by the European Commission and the European Court of Justice in the end.

There is an emerging consensus among many Members of Parliament and elsewhere that we need a more straightforward solution. Some of us in the Fresh Start group agreed a mission statement earlier this year to help guide our work. It said:

“UK citizens want co-operation and free commerce with our EU partners, but a majority believes that too much power has been transferred to the EU without their consent; in areas ranging from policing to employment law, from Health and safety to immigration, our citizens want control over their own destiny. The euro-zone crisis has created an opportunity for a new relationship with our EU partners, in which the UK can take more decisions and Brussels fewer; this would be in line with the basic principle that the authority to pass laws should be democratically accountable to those who are affected by them”.

That is relatively uncontentious; I do not see how anyone can object to that manifesto.

At this summit, or later, in the light of what we will learn about the detail of Germany’s intention for the euro 17, the UK should seek agreement in principle that the UK Parliament, and not the EU institutions, decide what laws apply in our own country, and how they should be interpreted and enforced. That would, in effect, be the UK nationalisation of the EU acquis communautaire. There would be no instant annulment of EU directives or regulations. It would be a matter for renegotiation with the EU on a case-by-case basis over time, and the same would apply to new proposals such as the ludicrous financial transactions tax. That would enable us to establish a new relationship with our EU partners on a fundamentally different basis, while remaining in the customs union, which is the founding element of the single market.

The Prime Minister can say, perfectly reasonably, that he has done his best to co-operate with our EU partners in the crisis but that he must take Parliament and the British people with him. He can say that fiscal union is too big a change in our relationship to countenance without a referendum in the UK, but that he should offer to put this new relationship to the British people, and on that basis he would campaign for a “yes” vote. I would vote for that and I would campaign for a “yes” vote, so we can stay in the EU on that new basis. There is absolutely no reason why that proposal should delay this summit. If the other states wanted to do so, it would be up to them, as I have said. That would allow Westminster politicians to fulfil the promises that we have made so often and broken, to give the people the right to decide the destiny of our nation.

As the Prime Minister has said:

“It is wrong that we did not have a referendum on Maastricht, Lisbon and those other treaties.”—[Official Report, 24 October 2011; Vol. 534, c. 33.]

The changes being proposed in this treaty are Maastricht-plus. Refusing to hold a referendum in such a situation will not stand. The Prime Minister told us:

“Future treaty change will bring opportunities for Britain. The country wants us to stay in Europe, but to retrieve some powers.”

Now, we want that opportunity. We may not have another chance like this. This is the time to renegotiate our relationship with the European Union. It is the catalyst that might bring about the reform of the EU. If not now, when?

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[Andrea Leadsom (South Northamptonshire) (Con)]

I am delighted to follow the hon. Member for Luton North (Kelvin Hopkins) and to find myself agreeing with him yet again—we also agree on high-speed rail. I am also grateful to my hon. Friend the Member for Gainsborough (Mr Leigh) for his history lesson. I confess that I am one of those economists who tends to look at things from an economic perspective, rather than an historical one.

What concerns me about the latest proposals for eurozone crisis prevention measures is that they simply will not work. It boils down to the fact that what makes the difference between sovereign risk and credit risk is the undoubtedness of sovereign debt, backed by a lender of last resort. In the end, if a country is a sovereign risk, its lender of last resort can print money, its currency can devalue and it can get out of its difficulties that way. The eurozone has as yet failed to address that fundamental issue, and the measures that it now proposes mean nothing more than ever-greater fiscal integration, but without the ability to issue proper sovereign debt. Market chaos will therefore not cease for longer than the short term.

[Mr Jenkin]

Does my hon. Friend share my concern that, even if the European Central Bank was turned into a fully fledged sovereign central bank and printed unlimited sums, it might provide liquidity and buy some space for a while, but the fundamental structural problems between the different economies stuck in the eurozone would not be addressed? Austerity packages would still need to be applied, but the EU’s institutions do not have the democratic legitimacy to impose austerity on countries in that way.

[Andrea Leadsom]

Yes, I agree. The key issue is that if these countries are to have sovereign risk, they must completely guarantee and underwrite each other’s debt and obligations. That is very unlikely ever to be achieved in the EU, which just makes the problem of not having a lender of last resort even more existential for the eurozone. I therefore have genuine concerns about whether the proposals actually offer a solution.

Here we are on the eve of a very important summit, which is designed, on the face of it at least, to put the market’s fears to bed once and for all. The Prime Minister has a strong hand, because the German Chancellor and the French President need a treaty at the 27 member state level, for two practical reasons. First, if they started again, with just the 17 eurozone members trying to create a treaty between themselves, they simply could not do that in the time frame that the markets would permit them. That is a very practical issue, which they need to consider. Under the Lisbon treaty, however, treaty changes can be fast-tracked. Secondly, as was pointed out earlier, the 17, as a group, could not simply annex the EU institutions and use them for themselves; they would require the permission of the 27 EU members. For both those reasons, a treaty is needed at the 27 member state level, and that makes the Prime Minister’s hand very strong.

Like other Members, I am pleased that the Prime Minister is absolutely determined to protect Britain’s interests. What does that mean? First and foremost for every EU member, regardless of whether it is in or out of the euro, that must be about stopping the crisis—there is no doubt about that. If the euro descends into a disorderly collapse, that will easily cost 6% or 7% of British GDP, and it would probably push us into a worse recession than the one after the financial crisis of 2008. There is therefore no doubt that our top priority should be to solve the eurozone crisis.

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[Andrea Leadsom]

We will just have to agree to disagree. If people are in government, they govern. At the current moment, a referendum would be extraordinarily important in the history of Britain, but it would be extraordinarily difficult to get the sort of answer that would give the Government a coherent direction. It is for the Government to make the best decision at this moment. For what it is worth, I have always thought that a referendum needs to come at the tail end of a renegotiation of Britain’s relationship with the euro and that it should be used to ratify such a renegotiation, based on the simple question of whether Britain should be in or out of the EU on the basis of a pre-negotiated set of terms with the EU.

[Mr Jenkin]

I could accept that approach, and my hon. Friend has answered her own question about what the referendum question could be. We will not agree the treaty texts at the summit; the meeting will discuss issues of principle and the treaties will then be drafted, but their ratification will take months if not years. We are talking about a referendum some time during that period to ratify a new deal for Britain. Does my hon. Friend not think that that would be a sensible way to go? Would it not strengthen our Prime Minister’s hand if he was to put that view to those at the meeting this weekend?

[Andrea Leadsom]

I am perhaps not understanding. The calls that I have seen in the media are all about our needing a referendum, but now is not the moment for one.

[Mr Jenkin]

If I may say so, my hon. Friend has seen a bit too much of the Government’s propaganda, rather than heard what some of us have been saying. We cannot, of course, ask for a referendum on the spur of the moment; we are asking for a referendum on renegotiated terms of membership, which we desperately need and which this summit demonstrates that we will need. We should be able to tell our European partners, “Go ahead with your proposals for fiscal union. We don’t think they’ll work. It’s a big change for us, so we need these measures in return. As part of the ratification process, we will put this to the British people and recommend a yes vote, as long as you agree our terms.”

[Andrea Leadsom]

I thank my hon. Friend. In truth, right now, I genuinely believe that the Prime Minister has to focus his effort on creating the best solution for Britain, and that is what he is doing. As for all the demands for referendums, the fact that I am confused about what my hon. Friend has been saying, although I am quite close to these issues, demonstrates that other people will doubtless also be confused. The demands are seen as our party, at least, trying to cause trouble for the Prime Minister. For that reason alone, now is the time to get behind the Prime Minister, who has promised the British people that he will defend our interests.

Let me come to why defending the City is the key priority at the moment. People talk about renegotiating EU directives that have already been implemented, but as we have found as part of the Fresh Start project work, that is real spaghetti; it is extraordinarily difficult to unwind existing, implemented policies. I am a very practical person, and the best approach in terms of doability is to look at what has not yet been implemented and what the biggest threat to Britain is. On those two counts, there is no doubt that we should focus on financial services.

Financial services account for 11% of Britain’s tax take each year—about £50 billion. It employs nearly 2 million people; it is our biggest export; and it creates a huge positive trade surplus. Given that we have a big overall trade deficit, we would be looking at a far worse trade balance without financial services. Added to that is the fact that the potential for the future growth of financial services is all outside the eurozone; it is in the BRIC countries—Brazil, Russia, India and China—and America and Asia. That is where the potential lies. Yet, before the financial crisis, Britain was in a strong position in creating an EU financial services single market. We were influential. That was all about deregulation, open access to markets, growth and jobs. Britain did very well out of that and so, by the way, did the rest of Europe. Other eurozone countries did extraordinarily well, because the City was the entry-point to European financial services markets. That benefited us all.

Since the financial crisis, however, the agenda has changed. Britain has rightly changed its regulatory environment by greatly increasing controls, the closeness of supervision and the requirements for capital, liquidity and so on. The EU’s goal has been more to ban what it does not like: “Let’s reduce financial activity; we will constrain, prevent and reduce what is going on.” Nowhere in the EU treaties is there any talk of prudential decisions that the EU might make that would go against the fundamental commitment to single markets and growth opportunities, so the 49 EU directives and other proposals on financial services coming down the track are already in breach of the spirit of the EU treaties, which are all about creating better markets and more access.

I want to mention a couple of those matters in particular. First, on the financial transactions tax, people may think, “They will never do it; it would be cutting off their nose to spite their face and the business will simply go elsewhere.” Actually, however, I think many people in the EU are determined to do it, because they do not want the business. They think that Anglo-Saxon light-touch regulation and the success of financial services are partly to blame for the eurozone crisis. They are quite wrong, but that is where they lay the blame, so they would consider a financial transactions tax that would drive business abroad to be a good thing. To anyone who thinks, “They would not do it,” I would say that they would if they had the opportunity. Of course, that would be disastrous for Britain. It would not be a tax on bankers; it would be a tax on pensioners, investors and savers, because it would go straight to the bottom line of every investment portfolio. If anyone said that it would serve bankers right, I would reply that it would affect not bankers but savers. I could not support that.

Secondly, a slightly unbelievable idea has been proposed in the eurozone that a clearing house with more than 5% of its turnover denominated in euros should relocate to the eurozone. That would be daylight robbery and steal our business, and I am glad that the British Government are already challenging it in the European Court of Justice. Where in the single market treaties, which are all about growth and jobs, does that appear? How would it support British growth and jobs? It would not. I am extremely concerned about the tone and extent of EU directives coming down the track. They are not yet implemented; but unfortunately, under QMV, they could be implemented without Britain’s say-so.

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[Mr Jenkin]

Will the hon. Gentleman give way?

[Martin Horwood]

Is this on the subject of nuclear energy? Oh, okay.

[Mr Jenkin]

We have one of the best nuclear inspectorate and safety regimes in the world, if not the best. Is the hon. Gentleman seriously saying that he would prefer nuclear inspections to be run by the people who could not even get their accounts audited for the past 15 years, and who gave us the common agricultural policy and the common fisheries policy? Does he not see that these multinational European bodies are grossly inefficient and hopelessly unaccountable, which is why the British people have had enough of them?

[Martin Horwood]

Well, no, in short. If the hon. Gentleman has such enormous confidence in Britain’s safety regime, then he should be trying to export those safety standards to the rest of Europe. I cannot see how he can possibly conceive of a better vehicle for doing that than the European Union. Is he seriously going to approach 27 different European nations and try to encourage them to adopt our safety standards, or is he going to use the vehicle of—

[Mr Jenkin]

rose—

[Martin Horwood]

No, we need to move on from safety regimes. Is the hon. Gentleman seriously suggesting that that will be a more effective approach than trying to reach a common position across the European Union?

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[Martin Horwood]

I have resiled from no undertaking whatever. There is a great habit of selective quotation of the Liberal Democrat manifesto. The whole sentence said that we would offer an in/out referendum at a time of a fundamental shift in the relationship between Britain and Europe. That is why we supported a referendum at the time of the Lisbon treaty—I am not sure which way the hon. Gentleman voted on that, but I do not remember many Conservative Members coming into the Lobby beside us. Incidentally, we also supported a referendum at the time of Maastricht, and did not succeed then, either. If there is another fundamental shift in Britain’s relationship with Europe, I fully expect us to support a referendum at that point.

[Mr Jenkin]

Is the hon. Gentleman merely another of those politicians who only promises a referendum when he knows that he cannot deliver it?

[Martin Horwood]

That is a lovely rhetorical line, but that accusation has been levelled at the Liberal Democrats on many fronts, and yet we find ourselves in government and sticking to the letter and the spirit of our manifesto on a whole range of issues. [Interruption.] I opposed the increase in tuition fees and think that we ought to have stuck to that policy, too. We have, however, certainly delivered on the pupil premium and a whole range of things, such as taking many of the lowest paid out of taxation altogether or developing the green economy, and we will stick to our pledge on the European Union as well, which is to act responsibly and to propose referendums when it is appropriate, which will involve a wholesale examination of the relationship of nation states to the European Union. That is not happening at the moment, because we are looking at an economic crisis in which the eurozone countries face a fundamental question about control of fiscal discipline. Germany, quite reasonably, is saying that, in return for any shift towards, for instance, the European Central Bank acting as a lender of last resort, some process of fiscal discipline that is rather stronger than the one that has operated inside the eurozone until now must be enforced. The other member countries, however, retain the choice whether to submit to that fiscal discipline or to plan some different future for themselves.

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

It is a pleasure, Mr Turner, to serve under your chairmanship. I congratulate my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) on orchestrating this debate. I will make my comments relatively short, because I am conscious that other hon. Members wish to speak. Having said that, I believe that the EU summit is a defining moment, and a once-in-a-lifetime opportunity to create a better relationship with the EU. I sincerely hope that the Prime Minister seizes that opportunity and seizes the moment.

[Mrs Anne Main in the Chair]

It is my belief that we need a fundamental renegotiation of our relationship with the EU, based on free trade, competitiveness and growth, and not political union and deadweight regulation. That is a relationship that other countries enjoy. One is not speaking of utopia or a textbook theory. Other countries enjoy such a relationship. For example, Switzerland has meaningfully good relations with the EU and trades with it freely, but it is not weighed down by political regulation and moves to ever closer political union. Such a relation reflects the fact that in 1973, and then in 1975, the British people voted for a free trade area and not political union. It reflects the fact that people generally are fed up with mindless interference from the EU. It reflects the fact that businesses, particularly small and medium-sized enterprises, are fed up with regulation, some 90% of which comes from Brussels.

Such a relationship would reflect the fact that taxpayers are fed up with the increased cost of the EU. If one takes into account the diminishing rebates, the budget will come to around £40 billion over the next seven years. That would pay for a 6p cut in small business corporation tax in each of the seven years. My goodness, would that not be the spur for growth that we all want and are wishing for? I also believe that such a relationship would reflect the fact that this Conservative party—my Conservative party—is fed up with promises to rein in the EU, when very little has happened over the almost 40 years that we have been a member.

I am slightly more sceptical than most that we can work the repatriation of powers. There has been a lot of talk about that, but our history in repatriating powers has not been good. Let us take the working time directive as an example. We all remember the great hullabaloo about the importance of extracting the opt-out from that directive. It will be no surprise to hon. Members here that that directive was reintroduced through the back door. What are we doing now, before the summit? Once again, we are talking about repatriating powers such as the working time directive. If my memory serves me correctly, that power was supposed to be repatriated some time ago.

[Mr Jenkin]

The problem is that the word “repatriation” is open to confusion. The basic principle of the EU legal system is that powers cannot be repatriated. There is a judicial doctrine—the doctrine of the occupied field—and once member states have delegated a power to the European Union, it cannot be recovered. There is no mechanism for doing that, which is why we need a fundamental change in our relationship with the European Union to address the fundamental problem. The problem is the treaties.

[Mr Baron]

As I said at the start, I do not buy the repatriation of powers. I want a fundamental renegotiation of our relationship with the EU based on free trade, competition and growth. Such a renegotiation would recognise the fact that we want good relations with our EU neighbours, and we want good trade relations in particular, but we recognise that we need to engage better with the faster-growing economies throughout the world. In many regions of the world—those of the BRIC economies—growth rates are so much faster. This is not a little Englander approach; it is a globalist approach that recognises that we need to engage better with those faster-growing areas.

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[Mr Cash]

I think that the crisis is so great that that suggestion has to be taken on board seriously. I agree with the sentiment that lies behind that suggestion.

[Mr Jenkin]

I follow on the point about foreign direct investment that my hon. Friend made to the hon. Member for Wolverhampton North East (Emma Reynolds). It is interesting that Poland, which one might describe as a pre-in—it is not in the euro, but a pre-in nation state in the European Union—supports the German line. That is precisely because it is such a huge beneficiary of public subsidies arriving through the European Union, largely paid for by the German taxpayer, and because it is massively dependent on FDI. As a result it is effectively already a satellite state of the eurozone.

[Mr Cash]

We must understand that countries need investment. Therefore, in a sense, I am not critical about it. However, I know that the consequences of that are the reasons behind the problems presented to the Prime Minister tonight. There are dilemmas in the matter. I am not just being generous-minded; I understand that there is a triangulation, which is a problem.

I regard the Prime Minister to be, as it were, standing alone at the moment in a quadrangle that is surrounded by four 40 foot-high walls. On one side, he has the Euro-elite—Angela Merkel and Nicolas Sarkozy—and the Eurocracy. Another wall is the fact that he has to reduce the deficit, which he cannot do without growth, and he cannot increase growth without a viable European Union. Another wall is the Conservative party, not only in Parliament but in the constituencies, and the country at large. The final wall—I pay my respects to the hon. Member for Cheltenham—is the coalition and its ideas on the matter, which preclude repatriation and renegotiation—[Interruption.] The hon. Gentleman may say that, but we had it quite clearly stated.

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

It is a pleasure to serve under your chairmanship, Mrs Main, and I congratulate the hon. Member for Harwich and North Essex (Mr Jenkin). We might not agree on all the detail in relation to this debate, but I agree with him that the seriousness of the situation calls for time in this Chamber to discuss the European summit. The pre-summit dinner is only a couple of hours away, but it would also have been useful if the Prime Minister had been invited to last night’s dinner organised by the centre-right European People’s party, at which Chancellor Merkel, President Sarkozy, President Barroso and many other centre-right leaders—unfortunately, most European Union countries have centre-right Governments—were present. Unlike his centre-right equivalents, however, the Prime Minister was not invited, which is a shame.

[Mr Jenkin]

May I point out that if we had a Labour Prime Minister, he would not have been invited either?

[Emma Reynolds]

The hon. Gentleman makes a valid point. When we were in government in 1999, 11 out of 15 Governments were on the centre-left and we attended such meetings, which proved very useful indeed.

I respectfully beg to differ with those hon. Members who have said that the Prime Minister has a strong hand in the negotiations. Last Friday, the Prime Minister was relegated to a quick sandwich lunch with President Sarkozy in Paris, without the inclusion of even a press conference in the programme. The French press hardly noticed that he was there. Given that we are one of the largest economies in the European Union and used to be at the heart of its decision-making, it is incredible just how isolated this Government have made the UK. Today’s New York Times leads with an article that says that the UK is merely a “bystander” at this European Union summit. That is not in the national interest.

The past few days have served to remind us how the Conservative party likes to debate the European Union and of—perhaps this is a point of nostalgia for some—the long, tortuous and, in some cases, destructive history of the division in the Conservative party on the EU. It is worth remembering the context of the Prime Minister’s current position and the labyrinthine trajectory he took to get there. In his bid to secure his party’s leadership while in opposition, he promised to withdraw his MEPs from the centre-right European People’s party, but they still sit in the European Parliament with the same group, which the Deputy Prime Minister has called

“nutters, anti-Semites, people who deny climate change exists and homophobes”.

After becoming the then leader of the Opposition, the Prime Minister told his party to stop “banging on about Europe”, because he hoped that the issue could be put to one side and ignored. How wrong he was.

I say to this Government that, for a year, they ignored the impending crisis in the eurozone. It was only recently that they stopped being asleep at the wheel and woke up to the seriousness of the situation. Six weeks ago, we saw the unedifying spectacle of nearly half of Conservative Back Benchers defying the Prime Minister’s three-line Whip and voting for a referendum on our membership of the European Union. During that same debate six weeks ago, the Prime Minister said that he wanted to repatriate powers from the European Union. He reiterated that demand last month at the lord mayor’s banquet and declared himself a sceptic who wanted a European Union that was a network, not a bloc, while in the same breath extolling the benefits of our membership and demanding a say at the top table.

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[Emma Reynolds]

I agree that a co-operative approach is needed and that we need to constructively engage with our European partners. When you go to a European summit, you get what you want not by banging on the table, but by the power of your ideas and the strength of your alliances. [Interruption.] Government Members may laugh, but my right hon. Friends the Members for Kirkcaldy and Cowdenbeath (Mr Brown) and for Edinburgh South West (Mr Darling) showed at the London G20 summit in 2009 just what you can achieve by the power of your ideas and the strength of your alliances.

[Mr Jenkin]

rose—

[Mrs Anne Main (in the Chair)]

Order. Before the hon. Gentleman speaks, may I ask the hon. Lady to address the debate through the Chair? I have never been to an EU summit and have certainly never given away any powers.

[Mr Jenkin]

I remind the hon. Lady that, after the collapse of the European constitution, Tony Blair went to the European Parliament and said that the trumpets were outside the walls of Jericho and asked whether anybody was listening. Nobody was listening and we got the Lisbon treaty instead. There is no evidence that any Labour Prime Minister had any influence over the general direction of the European Union any more than we do now.

[Emma Reynolds]

I disagree entirely. When our party was in government, we were at the centre of European decision-making, and the truth is that we are not any more.

Six weeks ago the Prime Minister demanded repatriation of powers, yet yesterday, in a 1,000-word article in The Times, in which he set out his position for the European summit, he did not mention repatriation once. We agree that the priority should be given to providing a lasting solution to the eurozone crisis, because we think it is in the national interest, but we also say that Britain should have a strong voice in these negotiations. Unfortunately, because the Prime Minister has tried to face two ways on the issue—on the one hand placating his Eurosceptic Back Benchers and some members of his Cabinet, and, on the other, trying to have a realistic negotiating position with our European partners—the risk is that he will not deliver on either of those objectives. Whereas many Conservative Back Benchers demand repatriation, a split has emerged, not only in the coalition, but in the Conservative party, over the past few days.

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[Mr Jenkin]

I am most grateful, Mrs Main, for the opportunity to make a few remarks in the last couple of minutes available. My right hon. Friend the Minister for Europe is extremely generous, as always, in letting me reciprocate. No one doubts the sincerity of his commitment to doing the right thing for his country as well as for the party and the coalition. I also thank my right hon. Friend the Member for New Forest West (Mr Swayne), who has patiently sat through the debate on behalf of the Prime Minister, whose gesture we appreciate.

May I be brutally frank? I hear the Government still in denial about the significance of what will happen. We will have a treaty of the 27 that will create a massive shift in the focus of power to the 17. The EU institutions will be concentrating on that and we will become peripheral, so we need a fundamental change in our relationship with the European Union to compensate for that change, not least because our existing terms of membership are already very damaging to this country’s competitiveness, growth and job creation. At the summit, the United Kingdom should seek an agreement in principle—so that it does not hold the summit up—that renegotiation has to be on the table. If the Government cannot even obtain that at such a moment, they are not building a position from which to negotiate in future.

As for a referendum guarantee that does not actually guarantee a referendum, I have made my point about that Act of Parliament: it is not sufficient because it does not address our circumstances. The treaty change is without doubt significant and, if the Government want the British people to consent to it, they must inevitably concede a referendum or it will never be ratified.