With permission, Mr Speaker, I would like to make a statement on the European Council held in Brussels last Thursday and Friday, which I attended with the Foreign Secretary, and which focused on the intensive economic co-operation needed within Europe and across the world as we follow through the agreements made at the G20 summit and ensure the co-operation needed in economic and environmental policies.

The Council expressed its determination to continue playing a leading role at global level. It called on its international partners to implement fully the commitments made at the London G20 summit, in particular by providing additional resources to international financial institutions and accelerating the reform of the financial and regulatory framework.

Member states have already stated their readiness to provide fast temporary support of up to a total of €75 billion to encourage growth and jobs. The Council also concluded that member states stand ready to take their share of further financing needs agreed by the London summit.

For many months, the UK Government have rightly been at the forefront of proposals to strengthen international regulation. That is why we have taken forward Lord Turner’s report. Radical proposals for reform of regulation were also a key outcome of the G20 in London. With so much of Britain’s financial sector activities linked to Europe as well as to the rest of the world, and with cross-border investments between the UK and the rest of Europe alone amounting to more than £200 billion every year, Britain needs greater European as well as wider international cross-border supervision. So in line with the recommendations of the reports from Lord Turner and de Larosière, the Council agreed the principles on which a new international framework for the regulation and supervision of financial services in Europe would be delivered.

First, there will be better early warning of financial sector risks through the creation of a new European systemic risk board, which will complement the work of the International Monetary Fund and the Financial Stability Board, and will help to identify problems early and thus prevent future financial crises from developing. Secondly, as proposed by Lord Turner’s review, which was itself welcomed by most people in the House, there was agreement to develop a strengthened and more detailed set of European rules for the single market in financial services, with measures to raise the quality and consistency of supervision across Europe, ensure that common rules are enforced, and improve co-ordination between national supervisors; and measures for mediation between the supervisors of institutions with operations in more than one member state. Thirdly, there was a clear commitment from the Council that

“stresses that decisions taken by the European Supervisory Authorities should not impinge in any way on the fiscal responsibilities of Member States.”

The principles agreed at the Council provide the foundation for a new financial supervisory architecture with the aim of protecting our financial system from future risks and helping to ensure that the international regulatory failures of the past will not be repeated. The G20 also decided that countries should take similar actions on economic policies, to get through what is recognised by the Leader of the Opposition as a “recession all over Europe”.

While the Council acknowledged that the co-ordinated measures taken so far in support of the banking sector and the wider real economy

“have been successful in preventing financial meltdown and in beginning to restore the prospects for real growth,”

it also emphasised the

“imperative…to continue to develop…the measures required to respond to the crisis.”

While it is absolutely right that we maintain our commitment to medium-term fiscal sustainability, it is equally vital, as the Council reiterated, that we remain determined to

“do what is necessary to restore jobs and growth.”

Recognising the worldwide nature of the financial crisis and that about 1 billion people face poverty, malnutrition or hunger, the European Council also decided that countries should continue to pursue together the millennium development goals, and also co-operate further on the environment.

The Council agreed that

“the time has now come for the international community to make the necessary commitments needed to limit global warming to under 2 degrees”,

and that a coherent response to the challenges of both climate change and the economic and financial crisis would, by enabling the move to a low-carbon economy, offer new opportunities for jobs and growth.

The Council repeated its call for all parties to co-operate in reaching an ambitious agreement in Copenhagen later this year, and to accelerate the pace of negotiations at forthcoming high-level international meetings, including the G8 and the Major Economies Forum next month. The Council agreed that both developed and developing countries should contribute finance in the fight against climate change, and that such global burden sharing should be done strictly on the basis of two principles: the ability to pay and the scale of emissions.

When the Council met in December, we agreed that we would seek to provide the legal assurances that Ireland needed to move forward on the Lisbon treaty—that is, on taxation, defence, the right to life, education and the family. But we were equally clear in doing so that there could be no change or amendment to the treaty, only clarification of what it will and will not do. That is exactly the purpose of the guarantees that the Council has agreed for Ireland. To be absolutely clear,

“the Heads of State or Government have declared:

the Protocol will in no way alter the relationship between the EU and its Member States. The sole purpose of the Protocol will be to give full Treaty status to the clarifications set out in the Decision to meet the concerns of the Irish people. The Protocol will clarify but not change either the content or the application of the Treaty of Lisbon”,

and that

“its content is fully compatible with the Treaty of Lisbon and will not necessitate any re-ratification of that Treaty”.

These guarantees will be set out in a protocol only at the time of the next accession treaty. This will be specific to Irish concerns. Its status will be no different from our own protocols and will be subject to ratification in this House.

On Burma, the Council marked the 64th birthday of Aung San Suu Kyi by expressing its deep concern at her continued imprisonment as the Burmese regime still pursues its contemptible and absurd sham trial. The Council called for her “immediate unconditional release” and agreed that if this does not happen, Europe

“will respond with additional targeted measures”

against the Burmese regime. It is absolutely right that we stand ready to step up sanctions. We will also work with Asia to further increase international pressure. I have talked to the Secretary-General of the United Nations, Ban Ki-moon, and I hope he will be able to visit Burma soon.

On Iran, the Council

“stressed that the outcome of the Iranian elections should reflect the aspirations and choices of the people of Iran.”

The onus is on Iran to show the Iranian people that recent elections have been credible, and that the repression and curtailment of democratic rights that we have seen in the past few days will cease.

We, too, have an expectation of Iran—that it meets its obligations as a member of the international community. I hope that Iran will respond to our efforts to achieve a genuine dialogue. It is therefore with regret that I should inform the House that Iran yesterday took the unjustified step of expelling two British diplomats over allegations that are absolutely without foundation. In response to that action, we informed the Iranian ambassador earlier today that we would expel two Iranian diplomats from their embassy in London. I am disappointed that Iran has placed us in this position, but we will continue to seek good relations with Iran and to call for the regime to respect the human rights and democratic freedoms of the Iranian people.

The Council unanimously agreed that it intends to nominate José Manuel Barroso to lead the next European Commission. As we look forward to the next five years, so this Council has put in place some of the building blocks for the future of Europe. It is by co-operating on the basis of our interdependence that we achieve more. By engaging and working in partnership with Europe and globally, we take forward our commitments from the G20 in April. By putting Britain at the heart of Europe, not on the sidelines, with Europe’s single market worth over £10 trillion, we in Britain can responsibly deliver security, new jobs, prosperity and a strong future for all our people. I commend this statement to the House.

I thank the Prime Minister for his statement. There are some areas of agreement: we very much welcome what he says about climate change and December’s vital Copenhagen conference; we also agree with what he said about Burma; and we very much agree about the future of José Manuel Barroso. Let me put it like this: it is important that we work together to keep the socialists out, and I am always pleased to do that.

On Iran, while the decision on how the Iranian people are governed must be a matter for them, is it not important to reiterate that their yearning for freedom and democracy reflects a yearning for universal values that we should support? Iran’s expulsion of diplomats is clearly not acceptable, and the British Government were absolutely right to respond. Should not we be clear that this is a dispute not between Britain and Iran, but among different groups in Iran about democracy and the future of their country?

On the economy, the Prime Minister says that measures are being taken throughout Europe to get the economy going again, but will he confirm that seven months after we proposed a proper national loan guarantee scheme to get lending flowing—

For goodness’ sake.

He says “for goodness’ sake”, but it would have made a good lot of difference. If he concentrated on the figures instead of shouting from a sedentary position, he would know that the latest figures on Britain show the weakest lending to business for almost a decade.

The Prime Minister also says that measures are being taken to tackle unemployment. Will he confirm that Britain now has the highest youth unemployment in Europe?

The Prime Minister talked about agreement across Europe. In that case, does he agree with the Prime Minister of Sweden, who said this month,

“let’s be honest: if the crisis we face today was created by people borrowing too much, the solution cannot be for governments to act in the same way”?

Can the Prime Minister tell us why Britain is heading for the biggest budget deficit in the G20? Have we not now reached the stage at which the best way to restore confidence and get our economy back on track is to be honest about the measures that are needed to sort out the mess that the Prime Minister has made of the public finances? When is he going to make a start on that?

Next, on financial regulation, we have long pressed for counter-cyclical capital requirements that force banks to hold more capital when the economy is strong, but does the Prime Minister agree that there seems to be—I put it politely—some confusion about precisely what was agreed about financial regulation? Of course, we agree about the early warnings that he mentioned, but he is missing the key question. Before the summit, the Government argued—quite rightly, in our view—that national supervision must be pre-eminent. Does he recall telling the House in March that he did not want any new body to have “powers over national supervisors”? If so, why does the communiqué say that the decision-making powers of the European system of financial supervisors will be “binding”? And why did President Sarkozy say that the UK had performed a U-turn and that such institutions always end up doing more than is foreseen? Is that not why the City of London says that we now have a situation in which binding arbitration, dictated by Brussels, could overrule the UK’s Financial Services Authority? Will the Prime Minister answer that point when he gets to his feet?

Next, on Lisbon, will the Prime Minister tell us why Irish voters are being forced to give their views twice when the British people have not been asked for their views once? Will he explain why the protocols that go into the treaty will not be debated or put into place until the next countries join the EU? Is it not the case that the Government want to delay the process until after the election? Is that not because they do not want the embarrassment of having to vote yet again in this place to deny people the referendum that they originally promised?

The Prime Minister said very clearly in his statement—I hope that I was following it carefully—that the Irish guarantees make no change at all to the Lisbon treaty. I am sure that the Irish people will receive that statement with great interest. Perhaps the Prime Minister should go and campaign for a yes vote; it would probably be the best way of securing the result that many of us would like to see.

Less than a fortnight ago, the Prime Minister promised a new era of openness and democratic accountability, yet in the last week he has tried to sneak through a secret inquiry into Iraq, deny the British people a say on the European constitution and avoid a debate in Parliament on the new protocols that have been agreed in Brussels. If he really believes in openness and accountability, should he not start by holding a debate now on the protocols agreed in Brussels and by offering people the referendum on the constitution that he promised, and while he is at it, why not do a proper U-turn on the Iraq inquiry—right here, right now?

I am sorry to have to start by saying one thing: 3 million jobs are dependent on Europe, 60 per cent. of our exports go to Europe and 700,000 companies trade with Europe, yet not one pro-European word has been stated by the Leader of the Opposition.

I agree with what the right hon. Gentleman has said on climate change; we both look forward to a Copenhagen agreement. I am glad that he also supports what we are saying on Burma. On the Iranian situation, we are both in agreement that we have to take action when our diplomats are expelled from Iran. But we do want good relations with the Iranian people, and we do want to remind Iran of the importance of human rights and respecting democracy.

As to the issues that the right hon. Gentleman raised about the European Council decisions on financial regulation, let me just say that a few months ago the Conservative party was telling us that we should be deregulating more. What we have had to do is work with other countries to build a regulatory system that can deal with the problem that exists when international institutions—banks and financial institutions—work in other countries.

Let me just tell the right hon. Gentleman that London depends on proper cross-border supervision. Four hundred European institutions operate in London, and we need a good regulatory system, in other countries as well as in our own, for financial supervision and the financial sector to work. He should be supporting the efforts that we are making to bring Europe and the rest of the world together to agree a common financial supervisory system.

I have to repeat to the right hon. Gentleman that what we agreed in Brussels was that there be shared and common rules; I believe that, the whole world over, we will get agreement on shared rules. We agreed that there be a system of proper audit; that means that what is happening in individual countries will have to be properly audited in future. We agreed a system of common supervision of financial institutions, but only in this sense: that each country’s individual financial services authority will be responsible for the individual institutions. Only when there is a dispute between the home and the host countries, or a dispute about the application of the general rulebook, will mediation take place within the European agency. That is the right way forward, because London is likely to benefit more from that, not less. The right hon. Gentleman should cast aside his habitual anti-Europeanism and support what is necessary in the interests of the financial services.

Let me also say to the right hon. Gentleman that I read out to the House exactly the undertakings that had been given by Ireland and given also as a decision of the European Council. They are very clear:

“the Protocol will in no way alter the relationship between the EU and its Member States. The sole purpose of the Protocol will be to give full Treaty status to the clarifications set out in the Decision to meet the concerns of the Irish people. The Protocol will clarify but not change either the content or the application of the Treaty of Lisbon.”

That is the right thing to do. The Irish were looking for clarifications about the impact of the treaty. They have received their clarifications, and that will be set out in a protocol. It will come to all Houses of Parliament and Assemblies in other countries when they have to confirm the next accession treaty. That is the right thing to do.

Instead of saying that somehow we have got it wrong, the right hon. Gentleman should know that we have done what is necessary, so that the Irish people are sure about the application of the treaty—in the same way as we got a protocol in Britain to ensure that the British people knew what the application of the treaty was. I repeat: more than a year ago, the constitutional concept was abandoned. That was the statement of the Brussels European Council.

The Leader of the Opposition failed to tell us about his party’s having joined a new European grouping only yesterday. It makes his party even more isolated and on the fringes of Europe. [Interruption.]

Order. The Prime Minister must be heard—preferably in courteous silence.

I know why Conservative Members do not want me to say this. While we are engaging in co-operation with the rest of Europe, the Leader of the Opposition is isolated and on the fringes, unable to support the level of economic intervention that we need. While we are taking action with other European countries against unemployment, his party opposes the action against unemployment that we are taking in Britain. He is isolated and on the fringes. We are working with other countries in Europe, but he cannot work with Germany, France or Italy, even when they have right-wing Governments. The Conservatives are isolated and on the fringes of the European Union.

I thank the Prime Minister for his statement, and I agree with what he said in light of the expulsion of the British diplomats from Iran. While we should of course monitor what is unfolding in Iran with due sensitivity, we should be utterly uncompromising in our view that hardliners in Iran should not seek to scapegoat either British diplomats or the media for problems entirely of their own making.

I welcome the Prime Minister’s saying that the Irish have received the reassurances that they sought on the impact of the Lisbon treaty. Does he agree that if the Lisbon treaty is finally ratified this autumn, Europe should then get on with tackling the problems that really matter to people—climate change, the economy and crime—and that any attempts by any future UK Government to reopen the terms of membership would be self-indulgent and self-defeating?

The summit was particularly important for setting out the framework for a European Union response to any future banking crisis, and I welcome the agreement. But does the Prime Minister not see—I have raised this with him before—that however strong the EU regulatory framework is in that area, unless the Government here act to disentangle the banking system, separating high-risk casino investment banking from the day-to-day business of high street savings and mortgages, our economy will continue to be vulnerable to a repeat of the banking crisis?

With recent reports suggesting that the impact of climate change may be even worse than we had feared, does the Prime Minister agree that the EU must be in the vanguard for an ambitious and comprehensive deal at the Copenhagen summit in December? Is he concerned, as I am, that the recent summit was light on detail on the crucial question of how much EU states will pay to assist adaptation to climate change in developing countries? It is those countries that will bear the brunt of the dangerous effects of climate change.

I am glad that the summit conclusions referred to the need for the EU to tackle cross-border crime, which I do not think the Prime Minister mentioned. Does he agree that it is essential that this country and our Government play their full role in measures such as the European arrest warrant and co-operation through Europol and Eurojust? Does he agree that rejecting those measures would be a betrayal of the British people, putting Eurosceptic dogma over the safety of British communities?

Finally, the summit text included declarations on Pakistan and Afghanistan. It is vital that there is adequate security in Afghanistan for the elections in August, and that Britain continues to play its role in Helmand province. In that context, will the Prime Minister confirm recent reports that he rejected the advice of his military commanders that there should be an increase in British troop numbers in Afghanistan? Can he not see that it would be the worst of all worlds to ask our troops to do their very difficult job in Afghanistan without committing enough resources for them to do that job properly?

I am grateful to the right hon. Gentleman for his remarks in support of the decisions of the European Council. I shall start where he ended, on Afghanistan. Let me make it absolutely clear that the number of troops in Afghanistan, as a result of decisions we made a few months ago, has risen over the course of this year from 8,100 to 9,000. That will be the case until after the Afghanistan elections take place over the summer and autumn months. There has been an increase, not a decrease, in the number of troops that we have set aside for the vital purpose of defending democracy in Afghanistan. I know the sacrifices that our British forces have made and the difficult terrain in which they operate, and I think the whole House will want to give them support in the magnificent efforts in which they are engaged to keep the peace in Afghanistan, bring stability to the region and ensure that democratic elections take place.

The right hon. Gentleman mentioned law and order, and I want to remind him of one justice and home affairs issue. As part of the Lisbon treaty negotiation, we secured an extension of our existing opt-in to asylum and migration measures, but we remain ready to co-operate on issues to deal with crime, so that we can deal particularly with the problem of organised crime across Europe.

We are in agreement on the importance of climate change, and indeed of the new evidence that is now available to us about the seriousness of the problem. The challenge for us is to get an agreement internationally on two big issues, and hopefully we can make progress even before Copenhagen. The first is to get intermediate targets so that countries are bound not simply to long-term targets but to intermediate ones—2020, 2025 and so on. I believe that we are making progress, but a number of countries have still to make their announcements on what they are prepared to do. The second thing is financing and the energy efficiency measures that have to be taken in developing countries, which do not have the money to move from, say, coal or other relatively cheaper sources to the energy-efficient investment that we are asking them to make. The world will have to make available the necessary resources, which is part of the discussion that we must have in the run-up to Copenhagen.

I agree with what the right hon. Gentleman says about the importance of financial services to our economy, but as I said to him last week, I do not think that he can assume that high street or ordinary retail banks and investment banks are not both sources of the problems that we have had, because high street banks had problems and investment banks had problems. His determination to separate the two is perhaps not the best way to move forward. In both cases, what we need is proper supervision, but we need it now, at a cross-border and international level. That is the purpose of the European measures that we have brought forward. I know that he wants to support greater co-operation in Europe, and this is one way in which British banks and British financial institutions can benefit from greater European co-operation.

The Prime Minister referred, in the context of the welcome agreement with Ireland, to the prospects for a future accession treaty. Can he say whether there was any discussion, either in the meetings or in the margins of the meetings, about the application by the new Social Democratic Government in Iceland for accelerated membership of the EU or about the difficulties between Croatia and Slovenia, which could block future enlargement in the Balkans?

I am grateful to my hon. Friend, who is an expert on both those areas of the world. Croatia was a subject of discussion. We hope that the differences between the two countries will come to be resolved, so that Croatia can accede to membership of the European Union. We know that Iceland is seeking to apply for membership of the European Union, but that was not discussed at the meeting.

rose—

Order. A very large number of Members are seeking to catch my eye. I am keen to ensure that as many as possible can participate, so I appeal to Members to ask one brief supplementary question.

Over what time period does the Council think that quantitative easing and excessive budget deficits should be brought under control?

The Council said that we have got to do what it takes to restore jobs and growth in the economy. Given that the problem that we have is not one of inflation or excessively high interest rates, it is right to take the fiscal action that is necessary. I do not think that any serious governing party in Europe agrees with the position taken by Opposition Members, which is that we should cut public expenditure at this time.

Given that the Prime Minister has outlined his view that European co-operation is fundamental, whether on building and maintaining jobs in this country, combating climate change or helping the developing world, can he tell me whether he really believes that retreating into Euroscepticism would be anything other than not only self-defeating self-indulgence, but massively damaging for Britain and the world?

I think it is damaging for our country that the main Opposition party cannot ally with the German Christian Democrats, the French party on the right or the Italian party on the right. The Opposition are out of touch and out of step. They are not in line with some of the major centre-right, Christian democrat or other right-wing parties in Europe, and I think that does Britain no good at all.

Before we can judge whether President Sarkozy was right in claiming that the Prime Minister had changed gears on European financial regulation, ought we not to resolve the problem, which emerged clearly at the Mansion House, of the disagreement between the Chancellor of the Exchequer and the Governor of the Bank of England about the necessary changes to our regulatory system, in order to replace the disastrous one that the Prime Minister introduced in 1997?

We have a tripartite system, where the Bank of England, the Treasury and the Financial Services Authority work together. [Interruption.] The Leader of the Opposition mentions the Fed. It is exactly a tripartite system that is being proposed in America as well, and it is right to have a financial services authority, a central bank and the Treasury of every country working together.

Can the Prime Minister confirm that the people of Ireland are to be asked to vote on exactly and precisely the same wording of a treaty that they previously rejected?

The Irish brought forward concerns about abortion, family law, taxation and neutrality. In the protocol, it is made clear what the treaty means in those areas. The protocol that they are to receive is exactly similar to the protocol that we have received.

The Prime Minister is quite right to highlight the view of the Irish Government and people that they wanted safeguards relating to their ability to set their own taxes and to make their own defence commitments and other policies. Does he agree that their having won guarantees on those issues at the EU summit is proof of a small country exercising significant diplomatic clout at the top table of the European Union?

The hon. Gentleman used to talk about an arc of security—[Hon. Members: “Prosperity.”]—an arc of prosperity that included Iceland, Scotland and Ireland. He must understand that the economic problems in Iceland and Ireland and the economic problems of the banks in Scotland were very big indeed.

The presidency’s conclusions call for strong action against criminal networks involved in human trafficking. On 20 May, the Prime Minister gave a commitment that the budget of the Metropolitan police trafficking unit would be increased. Is that going to happen soon?

I think that my right hon. Friend will find that there are very large resources going into this issue, but I will write to him with the details.

Why does the Prime Minister think that handing over the regulation of the City of London to countries that either have no experience of regulating large financial sectors or have been so conspicuously unsuccessful that none has a financial system even a quarter the size of our own will be beneficial to London?

Because we are in a global economy and we need to work with other countries to secure the prosperity of our country. As 400 financial institutions from the rest of Europe are based in London, it is in our interest that there is co-operation with other regulatory authorities in Europe. I hope that the right hon. Gentleman does not fall for the argument that Britain is somehow better off isolated from the rest of Europe. We are better off co-operating with Europe.

Does the Prime Minister consider that current developments in Iran have any implications for Iran’s policy of destroying the state of Israel?

We remain concerned about events in Iran and their implications for the rest of the world, but the most important question in Iran at the moment is that the views of the Iranian people as shown in an election should be properly fulfilled. The debate in Iran at the moment shows that people want greater transparency in the publication of the election results, so that it can be clear that the results reflect the will of the Iranian people.

With regard to Iran, does the Prime Minister agree that, coming from the present Iranian regime, Britain’s having been dubbed the embodiment of evil is actually a considerable compliment? Does this not reflect the admirably steadfast service provided by the British ambassador in Tehran and all his staff, including the two diplomats who have just been unjustifiably expelled? Does it not also reflect the admirable decision by the BBC to establish the Persian language service, and also the professional contribution that has been made by British journalists overseas in Iran over a considerable period—

Order. I think that the Prime Minister has got the gist of the question.

I am grateful for that question, because it allows me to put on record my tribute and my thanks to the ambassador and all his staff in Tehran, and to all those who are working for the United Kingdom Government. I also want to put on record our appreciation of the work that is being done in pursuing the freedom of the press by the BBC and other journalists. I believe that the reporting by the BBC is important now to the people of Iran.

My right hon. Friend rightly refers to unemployment as a great danger, and it is indeed rising unemployment that poses the greatest threat with regard to prolonging and even intensifying the recession. Was there any discussion about what member states can do to intervene in their economies to create jobs directly and to avoid this mass rise in unemployment?

The summit said that we would do what is necessary to restore growth and jobs, and that is the message that other countries in Europe have heeded from the recession. As there is not a problem with inflation or with high interest rates, it is right to take fiscal action to intervene to help move growth forward and, at the same time, to create employment. We have ourselves taken measures to create 150,000 extra jobs. I believe that without the action that we have taken to combat the recession, 500,000 more jobs would be lost. I believe that other countries recognise that it is necessary to intervene to deal with the problems created by the recession, and that we cannot adopt a do nothing approach and walk away.

Will the Prime Minister understand, contrary to what he has just stated, that the Irish arrangements amend the Lisbon treaty and fundamentally and greatly extend the Irish treaty protocol of 1992 so that these arrangements affect all member states and therefore require re-ratification now and must be enacted by a Bill in this Parliament, in Ireland and in all the member states?

I know that, whatever was decided at the European Council, the hon. Gentleman would be calling for exactly that. Let me just read to him what was said:

“The protocol will in no way alter the relationship between the EU and its Member States”.

[Interruption.] That was stated by the Council, including the Irish. The sole purpose of the protocol will be to give full treaty status to the clarification set out in the decision to meet the concerns of the Irish—

You’re just parroting!

Order. The hon. Gentleman has asked his question, and he must listen respectfully and silently to the answer.

I would simply ask the hon. Gentleman to read the decisions of the European Council.

The Council was right to commit itself again to reaching the millennium development goals. However, non-governmental organisations have recently highlighted that previous promises made by the Council and the G8 have largely not been met by other European countries, although a green light was given to the UK’s performance. What commitments were given and what future remains for the poorest people and the rest of the planet when so many previous promises have been lost?

My hon. Friend is absolutely right that the European Council, the G8 and then the G20 will have to continue to focus on how we achieve the millennium development goals. There are 40 million more children at school than in 2000, so progress is being made in a number of areas, including infant mortality as well as education, but there is a long way to go. That is why when we come to the G8 in a few weeks’ time, I will press for further action on famine and malnutrition, which has tragically risen over the last year, as well as continuation of the necessary action to meet the millennium development goals on infant and maternal mortality and education, as well as on the whole issue of poverty.

Given that the Zimbabwean Prime Minister, Morgan Tsvangirai, has been in Europe, including London, over the last few days, was Zimbabwe discussed at the European Council? Given the fact that we and other European countries are rightly increasing the amount of aid given to the country, should we not expect at the very least that all European broadcasters, including the BBC, should be able to broadcast freely from Zimbabwe?

I met Morgan Tsvangirai on Monday and I raised with him precisely that question about access for the BBC and other broadcasters in Zimbabwe. A media commission has been set up to register people who wish to broadcast from within Zimbabwe, and Mr. Tsvangirai assures me that action is being taken on that. We will have to follow it up, but that was the intention he stated to me.

As to the general issue of Zimbabwe, we have provided additional aid on a humanitarian basis to people who are suffering in Zimbabwe, but we must be sure that the promised reforms, constitutional changes and end of repression are actually happening before we can enter into long-term agreements about the reconstruction of the country.

May I welcome the announced creation of a single market in financial services and the improved co-ordination of supervision, recognising the potential that it offers to the City? In the event of tension between national and European supervision, will my right hon. Friend explain how he feels the mediation service will be sensitive to the specific needs of the British financial services industry?

I believe that the mediation service is in the interests of London, where 400 institutions from the rest of Europe are operating, as I said. We need the co-operation of other regulators to make sure that things are in order. Mediation can therefore take place in only two specific areas: first, to ensure that the rules—that is, the rulebook—are being observed; and, secondly, if there is a dispute between home and host country. In both cases, I believe that that mediation will be in the long-term interests of Britain.

Will the protocol in question be justiciable by the European Court of Justice?

In the same way that our protocol is.

In looking forward to Sweden’s presidency, with its emphasis on climate change and the economy, will the Prime Minister tell the House how much easier it will be to bring Europe out of what we all recognise as a Europe-wide recession by engaging with mainstream European leaders such as Chancellor Merkel and President Sarkozy rather than by throwing away our influence by joining up with the fruitcake fringe of climate change deniers, Obama-haters and commemorators of the Waffen SS?

It is in British interests that our parties work with Chancellor Merkel, President Sarkozy, Prime Minister Berlusconi and other leaders in Europe. It is sad that the Conservative party has rejected that centre-right grouping in favour of another grouping that contains a number of people with whose views I certainly could not agree and most people in this House would find it difficult to agree.

Beyond the need for more co-operation and closer financial surveillance, has not the Prime Minister now conceded that the mediation proposed on cross-border supervision will in fact now be binding on our national regulator?

No, Mr. Speaker. Only in two instances is the mediation binding and these two instances are in the interests of Britain. The first is if there is a dispute between home and host country. I can think of many instances where the possibility of such mediation would be in the interests of our country. The second is in the application of the rules. If we have common rules—we want common rules not just in Europe, but around the world—it makes sense to show that these rules are being observed.

On jobs and the leadership that the Prime Minister has provided, not least at the G20 summit, to help us get through this international recession, are there now grounds for cautious optimism that the Government’s measures have in fact saved the British banking system? Is it not worth noting in passing that as far as lending for investment is concerned, a number of British companies are having successful rights issues for this purpose?

I am grateful to my right hon. Friend for raising these issues. It is fair to say that we have gone further than other countries in the agreements that we have signed with the major banks in our country. The major banks have agreed to £70 billion of extra lending over the next year from 1 March and another £70 billion in the year after that. That additional money will become available to small businesses as well as large businesses and mortgage holders in this country. We have taken action not only to recapitalise the banks, but to make sure that the banks are in a position to lend to business and have agreed to do so. That is the difference between what was happening a few months ago and what is happening now.

On jobs, I repeat that the best estimate is that without the action that we have taken, 500,000 more jobs would have been lost. Any unemployment is to be regretted but surely it is our responsibility in a time of recession to do our best by helping unemployed people to get back to work. That demands the expenditure of money and that is the choice between ourselves and the Opposition; we are prepared to invest the money to help people back to work.

The Prime Minister has said that the guarantees to the Irish people will be given effect in protocols but these, apparently, are to be added to a completely different treaty as and when further countries accede to the European Union at some uncertain time in the future. In the meantime, do the guarantees have legal effect and if so, how?

They will be deposited, in the way that often happens, at the United Nations, and will have legal effect from the time the Lisbon treaty is in force.

Do not the people of this country have every right to expect that the Government place themselves in a position where they can maximise their influence on issues such as regulation of the financial services market, creating jobs and stimulating the economy, rather than marching themselves off to the fringes of the debate in Europe with some flaky right-wing group? Should not the Government be in the vanguard of discussions and make sure that they address issues of concern to all my constituents?

I know that some parties are happy to be in concert with the Polish Law and Justice party, the Czech forum, the Motherland party—[Interruption.] The Leader of the Opposition is saying that we are meeting the President of Poland; that is absolutely right, but we are not going into a grouping that takes extreme right-wing—[Interruption.]

Order. Mr. Kawczynski, I am keen to call you but if you keep yelling from a sedentary position, it does not advance your chances.

We are not going into a grouping with extreme right-wing groups who have views that not many people in this House would ever support.

In the light of the clear statements of informed observers that the presidential election result in Iran was hopelessly flawed, was not the Prime Minister somewhat embarrassed by the lukewarm statement from the European Council, and did he try to amend it?

No. The outcome of the elections in Iran is a matter for the Iranian people. We wish to ensure that the democratic rights of the Iranian people are upheld. We do not wish to have a quarrel with Iran. We wish to work with it on international matters that require the attention of both of us, but, of course, we cannot stand by when there is repression, and when there is violence and intimidation against the people of Iran.

Interim targets on climate change suggest that by 2020 there must be a reduction of 17 gigatonnes from business as usual. Given that only 5 gigatonnes are achievable within the developed world, at a cost of less than €60 per tonne, what assessment has the Prime Minister made of the amount of funds that will need to be made in offsets to achieve the required reduction?

This is a matter that the whole world will have to look at in the run-up to Copenhagen. We are going to need to provide finance in the same way that we provide overseas development aid, to ensure that the poorest countries are able to invest in energy efficiency. The first thing to do is to recognise the importance of climate change, the second thing to do is to get the intermediate targets, and the third thing to do is to get the finance that is necessary. I look forward to working with other countries, including America now, to get that climate change agreement.

Is the Prime Minister aware that very recently the Treasury Minister Lord Myners gave evidence to the European Scrutiny Committee in which he gave an unqualified assurance that the Government were strongly against giving EU financial authorities powers over national regulators? Why then do the conclusions to the summit agree to give the European system binding decision-making powers over national regulators in several important respects? Why do Ministers give an assurance to this House in one respect and then break that word a few weeks later?

But the principle that the right hon. Gentleman does not support is that we should co-operate and work with other authorities in Europe to deal with financial sector problems. If we are to co-operate with other authorities—and 400 other European institutions are based in London—it is in our interests that there is a mediation system to deal with disputes between the home country and the host country, and that is why it is in the British national interest to have that agreement. Equally, it is in our national interest to see the rules that are agreed being observed. These are the only two instances in which we have agreed to have mediation, but it is the right thing to do for Britain.

When my right hon. Friend was Chancellor, he will remember his Hungarian counterpart Bokros and the Bokros austerity measures. Now that he is a member of the MDF—the Hungarian Democratic Forum—and part of the Conservative grouping in the European Union, will this not make for a collision between the Council and the Conservative grouping in the European Parliament?

This new grouping in the European Parliament is, I believe, an embarrassment to all of us, but I have to say that even the Polish Law and Justice party supports a cut in VAT and is against a cut in spending. Even within their own new grouping, the Conservatives do not have a majority.

Does the Prime Minister not realise the extraordinary damage that his undiplomatic language is causing to Anglo-Polish relations? His comments on the Law and Justice party are an absolute disgrace and an affront to the Polish people who voted for that party and the President. Will he apologise to the Polish President and the Polish people, and categorically state that the Law and Justice party is not a fringe party?

I think the hon. Gentleman is getting too embarrassed by this new political grouping. I pointed out that the Polish Law and Justice party supports the cut in VAT and is against cuts in spending. I have praised it for those two policies; unfortunately, the Opposition party cannot accept those policies.

The poisonous influence of Iran continues to be spread around the middle east even as its Government oppress their own people and press ahead with plans to build nuclear weapons. What firm plans does the EU have to escalate the pressure on the Iranian Government to make sure they never get hold of nuclear weapons?

Iran has a choice: it can either become a full member of the international community by respecting human rights and its international obligations, or it will become increasingly isolated from the international community. I think that everybody in this House knows that that is the choice the Iranian Administration and the Iranian people have to make.

The House of Commons Library confirms that last year, the UK’s contribution to the European Union was £3 billion. Next year, it is going to be £6.5 billion. At a time when the Prime Minister’s Government are having to cut public expenditure in real terms, why is our contribution to the European Union more than doubling?

It is to pay our share as part of a European Union that includes the Czech Republic, Poland, Latvia and many of the other countries with which the Conservative party wants to be associated. I believe that it is right that we share the burden of membership of the European Union, so that every part of the European Union can look forward to prosperity.

Will this House have the opportunity to debate and vote on the protocol before the next Irish referendum?

The protocol will come before the House at the time of the next accession treaty. That is what was decided at the European Council and that is what I recommend to the House.

Who make the better allies for Britain—veterans of the Polish Solidarity movement, or veterans of Poland’s authoritarian communist Government?

If the hon. Gentleman wants to look at the new membership of the right-wing grouping that the Conservative party is now part of, I think he will be increasingly embarrassed by some of the views that are put forward by members of that grouping. They have rejected the mainstream in Europe as a Conservative party and are now isolated on the fringes of Europe and out of touch with European opinion.