European Council

William Cash Excerpts

Thursday 8th December 2011 Westminster Hall

[Mr William Cash (Stone) (Con)]

I should like to ask my hon. Friend a simple question. How much more important can things get than when we face a fundamental change in the relationship between ourselves and the EU? It is as simple as that. This is an historic question, and it demands a referendum. Why does she think otherwise?

[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.

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[Martin Horwood (Cheltenham) (LD)]

I start the Liberal Democrat contribution to the debate. This may alarm the hon. Member for Harwich and North Essex (Mr Jenkin), but I am going to agree with him about something. This debate should have taken place on the Floor of the House. As the hon. Member for South Northamptonshire (Andrea Leadsom) has just pointed out, we need to reform how we scrutinise European affairs in this Parliament. It is not adequate. In fact, I have already made a contribution to the discussions on scrutiny by suggesting to Ministers that we involve departmental and other Select Committees in scrutinising forthcoming European legislation, as she has just suggested. I strongly welcome that suggestion.

[Mr Cash]

As Chair of the Committee in question, I assure the hon. Gentleman that we frequently have arrangements whereby we refer particular directives and regulations to departmental Select Committees. Sometimes they do not actually look at them, despite the fact that we have asked them to do so. We also asked the Government, on behalf of the European Scrutiny Committee unanimously, for a full three-hour debate on the Floor of the House, of the kind that is taking place here, and it was refused. That is the state of play. That comes largely from the fact that we are in a coalition.

[Martin Horwood]

I do not think that it comes from the fact that we are in a coalition. I do not want to risk my Liberal Democrat credentials by agreeing with the hon. Member for Stone (Mr Cash) as well, but I think that this issue is worthy of a debate on the Floor of the House. I know that his Committee refers matters for scrutiny to departmental Select Committees, and it is not good enough if those Committees are not prepared to scrutinise those matters. They have the expertise and the Committee experts who can make a serious contribution to the scrutiny process. I restrain myself from suggesting that that might remove the necessity for the European Scrutiny Committee, but the point is that we need wider and deeper discussion of European matters in this Parliament, and I entirely agree with that.

One of the healthy things about being in a coalition is that we can bring different points of view on issues such as Europe, as well as others, to the table without actually having to conceal them and pretend to be coming from exactly the same place, which the previous Government had to do. None the less, it is slightly frustrating. I thought that we had settled quite a lot of the issues that are being debated at the moment. When we discussed at inordinate length the European Union Act 2011, which has already been passed, we spent countless hours debating when to hold a referendum and when to look at renegotiation of powers. We came to a conclusion and a settled view, as a coalition and as a Parliament, which was pretty clear. It represented something of a compromise between the Liberal Democrat and the natural Conservative positions, which seemed quite acceptable: a treaty change should be subject to an Act of Parliament, but if that treaty change involves a fundamental and significant shift in powers from the British to the European level of government, then that should be automatically subject to a referendum. Yet now, only a matter of months later, this whole issue seems to have been reopened. That is a problem, because it makes it more difficult—let us put it no more strongly than that—for Ministers to negotiate with confidence, knowing what position they are representing back in this country. We are not so much sending them naked into the debating chamber, as sending them so wrapped up in unrealistic expectations that they cannot move, which is a problem.

Ministers need to focus on the issues at hand in the Council, which are threefold. The eurozone is not the only issue, because there are two other important topics for discussion. On energy, if I can put it in the language of this debate, I speak from a nuclear-sceptic point of view. There is the welcome process of independent scrutiny, at European level, of the safety of European nuclear programmes. In the wake of the Fukushima disaster, which will potentially cost the Japanese economy hundreds of billions of pounds, it is incredibly important that the process is ongoing and rigorous. If I have a concern that I would like to be raised at the European Council, it is that the Commission report makes the case for tighter safety rules but does so in a limited way, even though it concedes that many of the regulations that were already in force before the Fukushima disaster in March are still not being applied throughout the European Union. Some states, including the UK, Poland, Slovakia and Belgium, have not updated national legislation in line with a European directive from 2009. At present, there are no common safety standards or criteria for nuclear power plants across the European Union. [Interruption.] The hon. Member for North Wiltshire (Mr Gray) says, from a sedentary position, “Good.” He may have a lot of confidence in British nuclear safety regimes. I hope he has exactly the same confidence in Polish safety regimes and in the safety regimes of other European nations. The bad news for him, I am afraid, is that radioactivity, as we found out after Chernobyl, is no respecter of national boundaries.

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[Martin Horwood]

The economy is still growing, actually, but that is a debate for another day. The voters made up their mind about who was responsible for the economic mess that we found ourselves in.

We are still in a vulnerable position, and all colleagues need to be able to go back to their constituencies, to look pensioners, small business people and others in the face and to say that we are doing everything that we can to speed a resolution of the crisis and that we are not throwing spanners in the works.

[Mr Cash]

Does the hon. Gentleman not agree that it is extremely unwise to make assumptions about the existing arrangements? They include so much over-regulation, centralisation and deprivation of oxygen for small and medium-sized businesses not only in this country but in the European Union that, precisely because there is no growth there—for all those reasons and some others—it is impossible for us to grow, what with the 40% of trade that we have with those other countries. Solving the causes of the failure of the European Union is so necessary.

[Martin Horwood]

The hon. Gentleman makes a rather interesting point about regulation of the smallest businesses, because we have a rather good case study. The Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), has been active in going to other European Ministers, in particular those with a similar outlook on economic policy, and taking a collaborative, positive and co-operative approach to reach agreement that we should lift onerous accounting rules from the smallest businesses, not only in this country but throughout Europe. [Interruption.] It might be a small concession, but it was progress through a collaborative process that has lifted some of the burden of European regulation from businesses in the UK. There will be other examples of what Members may call repatriation, if they want. In fisheries policy, we are likely to see the movement of powers over fisheries from the European level to national and regional levels in future. So it is possible to achieve change without a confrontational attitude and, as in both those cases, without treaty change.

As I have said, to defend Britain’s interests during the whole process is important. One of the ways to do so is to prevent marginalisation, which is a real danger. To an extent, I share some of the anxieties expressed by Conservative Members—it could happen that we might be excluded from the core of decision making in Europe—and I would not be happy with the Labour party’s approach that we should be observers to the process. I want us to be participants. We must ensure that Britain plays a central role in whatever new structures emerge from the crisis, and we need to be able to discuss and debate with the members of the eurozone how their economies move forward. As EU members, we will always have more say in the process than we would do if we committed the ultimate act of economic suicide and left the European Union, as some hon. Members might want. The risk, however, is that some marginalisation is possible, although we increase the risk of that if we roll up at European Councils with a list of unrealistic demands and throw a spanner in the work of resolving possibly the biggest crisis to have faced continental Europe for decades. That does not do us much good.

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[Mr William Cash (Stone) (Con)]

I congratulate my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) on securing this extremely important debate. It is a substitute for the debate that the European Scrutiny Committee has insisted should be held on the Floor of the House, but which has been declined by the Government so far.

[Mr Hollobone]

I am looking forward to my hon. Friend’s speech very much indeed. Would it not have been marvellous if the Leader of the House had timetabled an opportunity this week, perhaps on Wednesday afternoon, for the Prime Minister to hear hon. Members’ views on what he should say at the European Council? Then he would have been able to jet off today to that summit with all the suggestions fresh in his mind. Instead, it was up to the Backbench Business Committee to timetable the debate for this afternoon.

[Mr Cash]

I agree. People were not listening back in the days of Maastricht and they are not listening now. That is the problem. I give special thanks to my hon. Friend the Member for Harwich and North Essex not only for this debate but for the consistency that he has shown since the days of the Maastricht rebellion, which I had the honour to lead all those years ago and of which he was a very important member. He was a new Member of the House and he understood the position immediately, as did my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) and a number of others who have remained in the House.

This is not only an historic question but a national question. The now absent hon. Member for Luton North (Kelvin Hopkins) mentioned Peter Shore and Bryan Gould. When I set up the Maastricht referendum campaign, it was hon. Members on the other side of the House, such as Peter Shore and Bryan Gould, who joined me in that campaign. We presented a petition, which many people may recall, of well over 500,000 signatures; in fact, we reckon that we got 700,000 signatures all told. The petition was deposited, calling for a referendum on the Maastricht treaty. I was delighted that my right hon. Friend the Prime Minister said only a couple of weeks ago that there should have been a referendum on that treaty. As one who was very deeply engaged in the whole of that process, from beginning to end—much to the dismay of those who have now, in my opinion, lost the argument—I believe that the necessity of knowing the views of the British people remains implicitly entrenched in the arrangements that are now coming forward and that therefore a referendum is essential.

I should now like to move on to the present time. I want to address the question facing us today in terms of the broad landscape. I wrote a pamphlet that was published in effect in this very room when we had a conference between the leading Eurosceptics and the leading Europhiles. It involved Charles Grant of the Centre for European Reform, Roland Rudd of Business for New Europe and a galaxy of others. Both sides regarded it as essential that we should get together and properly debate the questions on both sides of the argument with many of the best people from the two sides of the debate. In that pamphlet, I set out details that I will not go into today, but I say to those who are interested and who read the transcript of these proceedings that it is available. Indeed, the Prime Minister has written to me, saying that it is a substantial document and effectively, therefore, it has to be answered. He has said as much to me, and it does have to be answered. I assume that my right hon. Friend the Minister for Europe will do so in due course.

This is an historic turning point for both the country and the Conservative party. The dream of ever-closer union and, indeed, political and economic union has failed, and the root of that trouble is the fantasy world, which has persisted for so many decades, of trying to create economic and political union among so many diverse countries with diverse cultures, diverse economies and diverse democratic traditions.

Only today I witnessed Mr Barroso on the television screens berating everyone in the most dictatorial language. He was saying that everyone had to come together for the sake of saving this project. They themselves are responsible for having created it and they are now attempting to save it, despite the fact that the causes of the present discontent come from the creation of this project in the first place by the very people who are now berating everyone else.

I will go further and refer to two documents that I have just obtained. One is dated 6 December. It is Mr Van Rompuy’s document, entitled “Towards a stronger economic Union”. There is not one word about democracy anywhere in that document—the word “democracy” does not appear. Similarly, in the letter written to the President of the European Council—Mr Van Rompuy, no less—by Mr Sarkozy and Angela Merkel, there is not a single reference to the democratic question. There is not one iota, not one jot of a reference to democracy in either of those documents, yet they are demanding that this failed project be continued with greater—deeper—integration. All the mistakes that have been made in the past are being reinforced in the new arrangement, which clearly will not work. It did not work before and it will not work now. It is a tragedy— I say that—that we are in the current position. I trust that the Prime Minister will address that during the next 48 hours.

This is not some theoretical experiment. It is about the daily lives of the British people and about our democratic traditions and economic performance. The idea that a fiscal union of 17 would be stable is simply and emphatically wrong. It will concentrate and increase the dangers of centralisation and will be fundamentally unstable. Germany will not be able to bail out the other countries, and it is a complete strategic failure for people, including the coalition Government, to think that it can.

Germany of course wants to preserve the euro, because it is doing so well out of it. One has only to consider the foreign direct investment by the Germans in other countries, the extent to which those countries are in effect economic satellites of Germany and the fact that the structural funds—I have the figures from the Library—are so incredibly important in generating investment backed by German contracts in those other countries, from which they then repatriate the profits. This is actually a German economic hegemony. Equally, I do not think that the Germans are inherently hostile about this. I say what I say without any hostile spirit, but I do say that we have to be realistic. We are desperately at risk. The British nation is in peril under these arrangements.

Furthermore, the impact of this economic conglomeration in the hands of one country in particular has led not only, in effect, to the dismissal of two Prime Ministers, whatever their merits or demerits, but to the voting arrangements, which follow from the qualified majority voting system. I am talking about the number of votes that are available to Germany when it wants to pursue a policy, because of its influence and, in effect, its control over the countries in question, which are dependent on it. That is the case not only in the eurozone of 17, but in so many of the other countries, including— I say this without any disrespect for them, because I love these countries—Poland and Denmark. Then of course there are Bulgaria, Romania, the Baltic states, Hungary and so on. The truth is that that is inherently in German national interests. Indeed, we have to look only at what Chancellor Kohl had to say in the 1990s, which I have included in a pamphlet that I wrote, called “It’s the EU, stupid”, to see the political determination behind Germany’s desire to ensure that the euro survives. Angela Merkel is now using that very language in the same context.

I do not blame the Germans. I have said in this Chamber that I recognise the fact that to a great extent they have shown their commercial nous—they have taken advantage of the system to ensure that they get the best out of it. The organisation is not a European union, but effectively a greater Germany.

We, above all other countries in Europe, ought to recognise that we should defend our own interests—not, as I said, in a hostile manner, but in a realistic and down-to-earth manner. We ought to get across the message that there should be, inherent in the proposed arrangements, a fundamental change in our relationship with the European Union. We and, if I may say so, the Prime Minister, have an absolute duty to protect the national interest that he says he wants to protect; to ensure that there is fundamental reform in the European Union, which he called for at the Mansion house the other day, to generate the growth that we need, with our 40% of trade with the Union and to guarantee that we are not drawn into an arrangement by which, through a majority block vote, we are consistently outvoted and become completely and utterly controlled by the system. It just does not make sense, and I believe that the system will not work.

It needs to be pointed out that not only is voting power naturally going to Germany, with its economic investments—it is doing extremely well out of the system—but Germany believes that it can require countries to obey rules. That is a much deeper question, a matter of attitude. We cannot require countries to obey rules just because we prescribe them. That is where I think the whole philosophy and the attitudes in the Eurocracy and in Germany go wrong. As we have heard, the Germans themselves have not obeyed the rules on the stability and growth pact when it suited them not to. An inherent dishonesty lies at the heart of the arrangements: someone disobeys the rules when it suits them, but insists that the rules be obeyed when they can benefit out of those rules. That cannot be right.

Countries are made up of individuals and individual companies, which have their own ideas as to how they should be democratically governed. Those ideas do not by any means fit within the rules prescribed from above or the conditions that are imposed. The Eurocrats, Germany and those who go with it on the matter simply do not understand that the lack of democracy is a fundamental flaw in the entire European project.

[Emma Reynolds]

Is the hon. Gentleman not a little unfair in singling out Germany? Germany is obviously the largest country to have done quite well out of the euro, but other eurozone countries in the group of healthy economies are doing pretty well economically. It is slightly unfair of him to single out Germany.

[Mr Cash]

I do not think it is. If the hon. Lady investigates, as I have, German FDI into the other countries, and then looks at the countries that are growing, she will see that there is a correlation with the amount of money that the Germans have provided. I give them credit for doing so on good investment projects, but some of them have been bad, as in Greece. The growth in some of the countries is buttressed and underpinned by German investment. That is the problem.

[Martin Horwood]

The hon. Gentleman is making an interesting speech. If he was Nicolas Sarkozy—if he can imagine that—exposed as his economy is to Greek debt in particular, what would he do, if he is so critical of the proposed arrangements?

[Mr Cash]

First, there is a strong case for getting out of the euro, because that would enable countries to—[Interruption.] It is described as irrevocable, but I have news for the hon. Member for Cheltenham (Martin Horwood): treaties and laws have been passed for not generations but centuries, and there are more treaties and international relationships that have been reviewed and changed than he might have had hot breakfasts. When those things do not work, there is a good starting point for reviewing them. That is what we are doing now.

[Mr Hollobone]

My hon. Friend thinks that there may well be a move to establish a fiscal union of the 17 eurozone countries. If that is not possible, and if an agreement of the full 17 cannot be achieved, does he think that there could be a move to establish a fiscal union with a smaller number of eurozone countries to let some of the peripheral economies have some kind of orderly default?

[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.

[Martin Horwood]

Will the hon. Gentleman give way?

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[Mr Cash]

I am not going to take an intervention, because otherwise we will be here all afternoon—we are going to be anyway. I simply make the point that the leader of the Liberal Democrats has been quite specific in saying that there should not be any repatriation.

Within the electorates of individual countries, decisions can be taken to improve economic performance, develop small and medium-sized businesses and remove burdens on business, but that is not the European method. We may be driven into the formula of the notwithstanding arrangements, which was endorsed by the European Scrutiny Committee report on sovereignty and Parliament, because if the situation is so critical, we may have to override European regulation. However, the European method has locked people, by unanimous decisions, into a European system that cannot be changed, other than by renegotiation, which is almost impossible, or by a notwithstanding arrangement of the kind I have mentioned. Such oppressive regulations and rules are based on theoretical assumptions, as with the Lisbon agenda and the 2020 agenda, which have failed. The result is no growth.

We need to move away from centralisation and integration and back to decision making by Parliaments in the United Kingdom and elsewhere on behalf of the electorates of every country, and also into an association of nation states by co-operating. The other alternative is not to remain a member of the European Union at all. We are reaching that kind of critical point. We may not have got there yet, but we are getting to it.

Effectively, there would have to be a European Free Trade Association-type arrangement, with countries co-operating for free trade, competitiveness and growth, as my hon. Friend the Member for Basildon and Billericay (Mr Baron) so rightly said. However, that arrangement would also have to be based on democratic consent and not exclusively on majority block voting arrangements. That would provide free choice in the marketplace and at the ballot box.

That is the route to solving the problem, not imposing economic prescriptions and rules that have already been broken in the past—invariably—and that will not be observed in the future, because we are dealing with people and not economic or theoretical machines. That is fundamentally the difference between the British approach, which favours freedom of choice, and the eurocratic and—I say this with respect—the Germanic approach, which is rule-based and completely different.

This week’s meeting presents the Prime Minister with a historic moment, given the scale of the crisis, and it is essential that he takes the right path. We cannot have a fiscal union and be within the same treaty; that is a contradiction within itself. It is not a neat Russian doll; it is angular and impossible. Actually, it will not fit. A treaty within a treaty is a house divided against itself and because both are built on sand the result of going down this route will be even greater chaos, whether there are 17 or 27 countries involved. That is the problem and the European Court of Justice simply will not be able to deal with the overarching contradiction that those two competing arrangements provide.

Whether it is the eurozone 17 or the eurozone 27 that we are dealing with, the Prime Minister must recognise that the intentions expressed by the Germans and the French are to pursue a model that is entirely unsuited to the UK and that will create a fundamental change in the relationship between the EU and the UK. As I have said already, countries in the non-eurozone will vote for fiscal union, and that will be disastrous, not only with respect to the single market and how it affects the City of London but with respect to EU directives. I have looked at those directives, but I do not have time to go through all of them now. I simply say that there are literally hundreds, if not thousands, of directives in other areas of the treaty. For example, I have mentioned transport, but other areas include communications and energy—the list is endless. I have the list; in fact, the Library has provided it for me. It shows all those areas that are decided by qualified majority voting and the few areas that are decided by unanimity. The fiscal solidarity within the 17—or within the 27, if that is the way it goes—will use that QMV in all the areas, because that will be the new deal. So we are really in grave peril for those reasons.

I believe that the creation of another treaty within the framework of the existing treaties will deliberately target, for example, the City of London, and that is not just accidental. I remember saying before Mr Nicolas Sarkozy was elected—I say this with some respect to him—that he might prove to be a very dangerous president of France, and from our point of view that has been proved to be the case, much as I think he is looking after French interests. I cannot complain about that; we cannot try to defend our own interests and then say that the French should not look after themselves. The problem is the unreality—the Alice in Wonderland world—in which we are now living, where the French are allowed to renegotiate and throw down the gauntlet to us about what they want, but we are supposed to acquiesce and do nothing much about that. That is why this debate is so important and should be taking place on the Floor of the House.

The critical voting block against the UK will be extremely important. In fact, at the moment it is 213 votes to 130 between the eurozone 17 and ourselves. If it turns out that there is a eurozone 27, there will still be all the economic critical mass and consequently there will still be a voting arrangement against us. For that reason, we are in serious difficulties. Therefore I say that it is an illusion to imagine that that critical mass will not exist.

We also have to repatriate, although I have said repeatedly for months now—if not years—that the fundamental change in the relationship between the UK and the EU is the key question, because when we have got that right we can also address the question of repatriation. As my right hon. Friend the Prime Minister said in 2005 in the Centre for Policy Studies lecture, it is imperative that we repatriate social and employment laws.

Then there is the question of our current account deficit with the EU, which is minus £51 billion. That is up by something of the order of £35 billion or £40 billion in one year alone, and yet our trading surplus with the rest of the world is £15 billion. In other words, there is nothing wrong with our competitiveness; it is just that we cannot be competitive inside the European framework. Therefore we must deal with that issue too.

Effectively, that means that we must re-gear our relationships as a matter of fundamental foreign policy and economic policy. The Foreign Office and the Treasury, through No. 10, must re-gear our relationships with the rest of the world: with the Commonwealth countries, including India; with the United States, of course, which is not part of the Commonwealth and which must be addressed in its own right; and with all the other countries, including Malaysia, South Africa and other African countries, and south-east Asian countries. All those countries offer huge opportunities and many of them operate on the basis of British commercial law and British contracts, adapted indigenously to provide the basis of their legal system and constitutional arrangements. We can be enormously optimistic about the future if we go down that route, not abandoning our trade with the EU, but ensuring that we get a proper balance in our relationship with the EU and putting the emphasis in the right place.

We are told that 3 million jobs are at stake in our trading relationships with the EU. Nobody is suggesting that we would not continue to trade with the EU, but the problem is that the other EU countries have no growth and our trading generates a deficit.

This issue is not just a technical question about Schengen, or otherwise; we must concentrate on the bigger landscape, which is the failure of the European project. It is also about our democracy and the individual electors who voted us into Parliament on the clear understanding that we would protect their interests. That is why a veto is necessary unless a renegotiation of our fundamental relationship with the EU, along the lines that I have described, is achieved, as well as the protection of our democratic interests and the rights of our constituents.

That is also why a referendum is required. The idea being peddled that a referendum is not required—leaving aside the issue of timing—because of the coalition agreement is wholly misleading. The coalition agreement is not law, and even section 4 of the European Union Act 2011, which I sought to remove from the original Bill by an amendment that was rejected by the Government, is not definitive in excluding a referendum where a new treaty or series of legal devices that have been put together has the effect of merely appearing to make provision for member states other than the UK. That is a matter of legal interpretation and we are by no means finished with it; indeed, I have a Bill coming forward in January that has been signed up to by six Chairmen of Select Committees and that will make that clear. But the important thing is that we engage in this debate.

The assumption that is being made at the moment—that we are unable to have a referendum because of section 4 of the 2011 Act—is wholly misleading. The constitutional position for a referendum, let alone the political and economic situation, is not clear-cut by any means, and it cannot override the fundamental principle, as set out in 1975 when a referendum was conducted, because the renegotiations in this instance involve a fundamental change in the overall relationship between the UK and the EU. A referendum is required, quite simply because the current proposals vitally affect the people of the UK. We must have a referendum—it is a matter of principle, honour and trust.

[Mrs Anne Main (in the Chair)]

Order. Before I call Mr David Nuttall to speak, I will point out that there are three other Members who have attended the debate and who would also like to speak. I will be calling for winding-up speeches from about 5.10 pm. I call Mr David Nuttall to speak, and there are three other colleagues who may wish to catch my eye after him.

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[Mr Lidington]

My hon. Friend makes a perfectly sensible point about the fact that other countries have departed currency unions since the second world war. It is fair to say that we have not had such a break-up of a currency union on this kind of scale, with economies that are so closely integrated, and in an age when information and capital can be moved rapidly, not just in national jurisdictions but globally, at the click of a computer mouse. Studies that I have seen say that it would be much, much more damaging and risky for the eurozone to break up, particularly if it broke up chaotically, than it was for some of those other currency separations, such as those of the Czech Republic and Slovakia. Incidentally, Slovakia, having broken with the Czech Republic, then decided to enter the eurozone and has engaged in some challenging austerity and competitiveness measures in order to try to make a success of that commitment.

Where I would agree with my hon. Friend is that this has been seen, by those who took part, as a political project as well as an economic project. However, to an extent that we sometimes do not appreciate in this country, those political ambitions have a much greater resonance among the wider electorates in many countries on the continent of Europe than they do here. That is due to all kinds of historical reasons with which we are fairly familiar. I want to emphasise that the prime objective of the summit ought to be to sort out the issues that remain unresolved from the eurozone meetings of 21 July and 26 October. Whether we talk about the European financial stability facility, bank recapitalisation or the detail of the Greek write-down, there is detail that has yet to be finalised, and that needs to be addressed rapidly. So, too, does the need for competitiveness, not only in the peripheral eurozone economies but in the global context of the European Union as a whole. It needs to be embraced as a priority by every single one of the member states and the European institutions. If I have time, I will come on to that. There is some evidence that that challenge is starting to be recognised and addressed.

I accept too—I will make this point very briefly—that if eurozone countries choose to push forward with greater economic integration, there will be a democratic challenge as well. How are economic policies to be made democratically accountable? I accept that that is a challenge for those countries. It is clearly for them, as independent sovereign countries, to decide how they individually address that.

Many hon. Members raised the issue of possible treaty change, and the safeguards that the United Kingdom would require should the eurozone follow that path. Let me set out the options in broad terms. One way to introduce stronger rules for the eurozone, which of course would not apply to the UK, would be a change in the treaty governing all 27 members of the European Union. That would be the most comprehensive way to provide tough sanctions to ensure that eurozone countries stick to their own rules on debt. A second option would be to allow the 17 countries of the eurozone to create a separate intergovernmental treaty of their own. That has happened before, with the Schengen agreement on open borders and with the European stability mechanism. The 17 are free to do that again. The likelihood, however, is that the signatories to such a treaty would want to draw on the EU institutions that belong to all 27 member states to monitor and enforce compliance with any new rules on tighter budget discipline. In both instances, we would have the power of veto. Treaty change at 27 requires unanimity and, while the content of an intergovernmental treaty at 17 is a matter for the 17 signatories, it cannot cut across the provisions of the existing EU treaties, nor can it seek to use the EU institutions without the specific agreement of all the EU 27.

[Mr Cash]

My right hon. Friend, I am sure, recognises the extreme danger of creating a treaty within a treaty. I am sure he realises that that would be a house divided against itself, and catastrophic for our democratic system.

[Mr Lidington]

As I said earlier, this is not without precedent. I am not saying that this will happen, but it is an option that has been floated quite openly by a number of European leaders as a possible way forward. Just as there is a negotiation within the eurozone about the measures and mechanisms to enforce discipline, so there is a negotiation with us and fellow non-euro countries. In the course of these negotiations, whichever option is followed we will make sure that our interests are protected. Of course, there is another option, which is to use the existing frameworks and treaties. That option is still on the table.

In the debate, there has been extensive discussion of the repatriation of powers and a referendum. We need to remind ourselves that this is the first Government in British history to have introduced a legislative guarantee of a referendum. The European Union Act 2011 ensures that there is now a legal requirement on any Government to hold a referendum before any agreement on treaty change that transfers competence or powers from the UK to the EU. I have never pretended that the Act is a panacea. It does not address the issue of repatriation of powers and that was not its purpose. It is a guarantee.

There has been some suggestion from hon. Members that the UK should hold a referendum on any changes the eurozone countries may choose to make. I want to reiterate the point the Prime Minister has made on this issue. What the eurozone countries may or may not do is have arrangements between themselves that pool some of their sovereignty. To say that we have to have a referendum in Britain about something that other countries are going ahead with anyway would not only be a rather odd approach for us to take, but it would probably mean that those countries would choose to go ahead in any case but using purely intergovernmental means, however messy and unsatisfactory from their point of view such an alternative might be. That may well yet happen, but holding a referendum on such a treaty would not bring back a single power.

Personally, I could draw up a list of powers—we had the list in the Conservative manifesto at the previous election—that I think are better decided nationally than by the EU. However, we have to be ruthlessly focused on what is most important to our national interest and, at this time, in particular to our national economy. That is why our priority in the negotiations is safeguards to keep the single market fair and open for our most crucial industries, including financial services, to which my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) made reference.