Yesterday, Bernard Jenkin MP organised a debate, in Westminster Hall, on the European Council. During the debate Bill Cash made the following speech and interventions.
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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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.
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 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.”
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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. (…)
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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.
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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, too. 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. (…)
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? 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.
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Mr Lidington: (…) 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.
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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.
