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EU Council

Volume 537: debated on Monday 12 December 2011

Order. The House must calm itself, taking whatever medicaments are required for the purpose, and the Prime Minister’s statement must and will be heard.

Thank you, Mr Speaker.

I went to Brussels with one objective: to protect Britain’s national interest, and that is what I did. Let me refer to what I said to the House last Wednesday. I made it clear that if the eurozone countries wanted a treaty involving all 27 members of the European Union, we would insist on some safeguards for Britain to protect our own national interests. Some thought that the safeguards I was asking for were relatively modest. Nevertheless, satisfactory safeguards were not forthcoming, so I did not agree to the treaty. Let me be clear about exactly what happened, what it means for Britain and what I see happening next.

Order. I apologise for interrupting the Prime Minister. I hope that Members have now got it out of their system. The statement will be heard. Right hon. and hon. Members on both sides of the House will have ample opportunity to question the Prime Minister, but courtesy and parliamentary convention dictate that the statement will be heard.

Thank you, Mr Speaker.

Let me take the House through the events of last week. At this Council, the eurozone economies agreed that there should be much tighter fiscal discipline in the eurozone as part of restoring market confidence. That is something that Britain recognises as necessary in a single currency. We want the eurozone to sort out its problems. That is in Britain’s national interest because the crisis in the eurozone is having a chilling effect on Britain’s economy too, so the question at the Council was not whether there should be greater fiscal discipline in the eurozone, but how it should be achieved.

There were two possible outcomes: either a treaty of all 27 countries, with proper safeguards for Britain; or a separate treaty in which eurozone countries and others would pool their sovereignty on an intergovernmental basis, with Britain maintaining its position in the single market and in the European Union of 27 members. We went seeking a deal at 27 and I responded to the German and French proposal for treaty change in good faith, genuinely looking to reach an agreement at the level of the whole of the European Union, with the necessary safeguards for Britain. Those safeguards—on the single market and on financial services—were modest, reasonable and relevant. We were not trying to create an unfair advantage for Britain. London is the leading centre for financial services in the world, and this sector employs 100,000 people in Birmingham and a further 150,000 people in Scotland. It supports the rest of the economy in Britain and more widely in Europe.

We were not asking for a UK opt-out, special exemption or a generalised emergency brake on financial services legislation. They were safeguards sought for the EU as a whole. We were simply asking for a level playing field for open competition for financial services companies in all EU countries, with arrangements that would enable every EU member state to regulate its financial sector properly. To those who say that we were trying to go soft on the banks, nothing could be further from the truth. We have said that we are going to respond positively to the tough measures set out in the Vickers report. There are issues about whether this can be done under current European regulations, so one of the things we wanted was to make sure we could go further than European rules on regulating the banks. The Financial Services Authority report on RBS today demonstrates just how necessary that is—[Interruption]—and perhaps instead of talking Opposition Members will remember their responsibility for the mess that they created.

Those who say that this proposed treaty change was all about safeguarding the eurozone, and so Britain should not have tried to interfere or to insist on safeguards, are fundamentally wrong as well. The EU treaty is the treaty of those outside the euro as much as it is for those inside the euro, so creating a new eurozone treaty within the existing EU treaty without proper safeguards would have changed the EU for us, too. It would not just have meant a whole new bureaucracy, with rules and competences for the eurozone countries being incorporated directly into the EU treaty; it would have changed the nature of the EU—strengthening the eurozone without balancing measures to strengthen the single market.

Of course, an intergovernmental arrangement is not without risks, but we did not want to see that imbalance hard-wired into the treaty without proper safeguards. To those who believe that that was not a real risk, I tell them that France and Germany said in their letter last week that the eurozone should work on single market issues such as financial regulation and competitiveness. That is why we required safeguards, and I make no apology for it.

Of course, I wish those safeguards had been accepted, but frankly I have to tell the House that the choice was a treaty without proper safeguards or no treaty—and the right answer was no treaty. It was not an easy thing to do, but it was the right thing to do. As a result, eurozone countries and others are now making separate arrangements for the fiscal integration that they need to solve the problems in the eurozone. They recognise that this approach will be less attractive, more complex and more difficult to enforce, and they would prefer to incorporate the new treaty into the EU treaties in future. Our position remains the same.

Let me turn to what this means for Britain. Britain remains a full member of the European Union, and the events of the last week do nothing to change that. Our membership of the EU is vital to our national interest. We are a trading nation, and we need the single market for trade, investment and jobs. The EU makes Britain a gateway to the largest single market in the world for investors; it secures half of our exports and millions of British jobs; and membership of the EU strengthens our ability to progress our foreign policy objectives, too, giving us a strong voice on the global stage on issues such as trade and, as we have seen in Durban this week, climate change and the environment.

So we are in the European Union and we want to be. This week there will be meetings of the Councils on Transport, Telecommunications and Energy, and Agriculture and Fisheries. Britain will be there as a full member of each one, but I believe in an EU with the flexibility of a network, not the rigidity of a bloc. We are not in the Schengen no-borders agreement, and neither should we be, because it is right that we use our natural advantage as an island to protect ourselves against illegal immigration, guns and drugs; we are not in the single currency, and while I am Prime Minister we will never join; we are not in the new euro area bail-out funds, even though we had to negotiate our way out of them; and we are not in this year’s euro-plus pact.

When the euro was created, the previous Government agreed that there would need to be separate meetings of eurozone Ministers, and it is hardly surprising that those countries required by treaty to join the euro chose to join the existing eurozone members in developing future arrangements for the eurozone. Those countries are going to be negotiating a treaty that passes unprecedented powers from their nation states to Brussels. Some will have budgets effectively checked and re-written by the European Commission. None of this will happen in Britain. But, just as we wanted safeguards for Britain’s interests if we changed the EU treaty, we will continue to be vigilant in protecting our national interests.

An intergovernmental treaty, while it does not carry with it the same dangers for Britain, is none the less not without risks. The decision of the new eurozone-led arrangement is a discussion that is just beginning. We want the new treaty to work in stabilising the euro and putting it on a firm foundation. I understand why they would want to use EU institutions—but this is new territory and does raise important issues that we will want to explore with the euro-plus countries. So in the months to come we will be vigorously engaged in the debate about how institutions built for 27 should continue to operate fairly for all member states, Britain included. The UK is supportive of the role of the institutions, not least because of the role they play in safeguarding the single market, so we will look constructively at any proposals with an open mind. But let us be clear about one thing: if Britain had agreed treaty change without safeguards, there would be no discussion. Britain would not have proper protection.

Finally, let me turn to the next steps. The most pressing step of all is to fix the problems of the euro. As I have said, that involves far more than simply medium-term fiscal integration, important though that is. Above all, the eurozone needs to focus, at the very least, on implementing its October agreement. The markets want to be assured that the eurozone firewall is big enough, that Europe’s banks are being adequately recapitalised, and that problems in countries like Greece have been properly dealt with. There was some progress at the Council, but far more needs to be done. The eurozone countries noted the possibility of additional IMF assistance. Our position on IMF resources remains the one I set out at the Cannes G20 summit. Alongside non-European G20 countries, we are ready to look positively at strengthening the IMF’s capacity to help countries in difficulty across the world. But IMF resources are for countries, not currencies, and cannot be used specifically to support the euro—and we would not support that.

There also needs to be greater competitiveness between the countries of the eurozone. To be frank, the whole of Europe needs to become more competitive. That is the way to more jobs and growth. Many eurozone countries have substantial trade deficits as well as budget deficits. If they are not to be reliant on massive transfers of capital, they need to become more competitive and trade out of those deficits. The British agenda has always been about improving Europe’s competitiveness, and at recent Councils we have achieved substantial progress on completing the single market in services, opening up our energy markets, and exempting micro-businesses from future regulations. This has been done by working in partnership with a combination of countries that are in the eurozone and outside it. Similarly, on this year’s EU budget, it was Britain, in partnership with France, Germany and Holland, that successfully insisted on no real increases in resources—for the first time in many, many years in the EU.

On defence, Britain is an absolutely key European player, whether leading the NATO rapid reaction force or tackling piracy in the Indian ocean. Our partnership with France—[Interruption.]

Order. I apologise for having to interrupt the Prime Minister. Those on the Opposition Front Bench, at the moment, are making the most noise. [Interruption.] Order. This is not acceptable. The Leader of the Opposition will have an opportunity to reply on behalf of the Opposition, and his colleagues must conduct themselves with a degree of reserve.

Thank you, Mr Speaker.

Our partnership with France was crucial in taking successful action in Libya. Britain will continue to form alliances on the things we want to get done. We have always had a leading role in advocating the policy of enlargement and, at this Council, we all celebrated the signing of Croatia’s accession treaty. That was one European treaty I was happy to sign.

Let me conclude with this point. I do not believe there is a binary choice for Britain: that we can either sacrifice the national interest on issue after issue or lose our influence at the heart of Europe’s decision-making processes. I am absolutely clear that it is possible to be a full, committed and influential member of the European Union but to stay out of arrangements where they do not protect our interests. That is what I have done at this Council. That is what I will continue to do as long as I am Prime Minister. It is the right course for this country. I commend this statement to the House.

May I start by thanking the Prime Minister for his statement? We all note the absence of the Deputy Prime Minister from his normal place.

The reality is this: the Prime Minister has given up our seat at the table; he has exposed, not protected, British business; and he has come back with a bad deal for Britain. The Prime Minister told us that his first priority at the summit was to sort out the eurozone, but the euro crisis is not resolved. There is no promise by the European Central Bank to be the lender of last resort, there is no plan for growth and there is little progress on bank recapitalisation. Will he first tell us why his promise of action did not materialise and what that will mean for the British economy in the months ahead? At the summit that was meant to solve these problems, the Prime Minister walked away from the table.

Let me turn to where that leaves Britain. Many people feared an outcome of 17 countries going it alone. Few could have anticipated the diplomatic disaster of 26 going ahead and one country—Britain—being left behind. The Prime Minister rests his whole case on the fact that 26 countries will not be able to use the existing treaties or institutions. That is apparently the win that he got for this country. However, can he confirm that article 273 of the treaty on the functioning of the European Union allows those countries to use the European Court of Justice? No doubt they will end up using the Commission’s services and, yes, even the buildings—the point that he made in the negotiations. In case anyone had any doubt, that was confirmed yesterday by the absent Deputy Prime Minister, who said:

“Well it clearly would be ludicrous for the 26, which is pretty well the whole of the European Union…to completely reinvent…a whole panoply of new institutions.”

The Prime Minister will not even be sent the agenda for the meetings that will start in January. He will read about decisions affecting British business in the pages of the Financial Times.

The Prime Minister’s next claim was that he did not want to sign up to the fiscal rules being imposed on euro area countries. Can he confirm that no one even proposed that those would have applied to Britain? The next claim in his statement was that he did what he did because the treaty posed a grave threat to our financial services industry. However, over the whole course of the weekend, he has been unable to point to a single proposal in the proposed treaty that would entail the alleged destruction of the City of London. Will he tell us what the threat was?

In any case, there is nothing worse for protecting our interests in financial services than the outcome that the Prime Minister ended up with. Will he confirm that he has not secured one extra protection for financial services? The veto on financial services regulation—he did not get it. The guarantees on the location of the European Banking Authority—he did not get them. Far from protecting our interests, he has left us without a voice.

The sensible members of his party understand that as well as anyone. What did Lord Heseltine say—[Interruption.] Oh, how significant! That is what the Tory party now thinks of Lord Heseltine. What did he say at the weekend?

“You can’t protect the interest of the City by floating off into the middle of the Atlantic.”

It is no longer the Conservative party of Lord Heseltine; it is the Conservative party of the hon. Member for Stone (Mr Cash), who went out on Friday saying that this was exactly what he had always wanted.

What about the rest of British business, which the Prime Minister does not seem to have been thinking about? The danger is that the discussions about the single market, on which it relies, will now take place without us. Only this Prime Minister could call that leadership. The Deputy Prime Minister clearly does not agree with him. He said that the outcome leaves Britain “isolated and marginalised”. Does the Prime Minister agree with that assessment? How can he expect to persuade anybody else that it is a good outcome when he cannot persuade his own deputy?

The Prime Minister claims to have wielded a veto. Let me explain to him that a veto is supposed to stop something happening. It is not a veto when the thing that you wanted to stop goes ahead without you. That is called losing. That is called being defeated. That is called letting Britain down. I have not finished with the Prime Minister yet. Next, I want to ask him—[Interruption.]

Order. I am worried about the health of the right hon. Member for Mid Sussex (Nicholas Soames). He must calm himself and have a lie down, if necessary, while we listen to the Leader of the Opposition.

Next, I want to ask the Prime Minister about how he ended up with this outcome. The proposals he tabled, when he tabled them and his failure even to try to build alliances for them suggest someone who did not exactly want a deal. Can he confirm that what he actually proposed was to unpick the existing rules of Lady Thatcher’s Single European Act as regards the internal market? Given that those proposals would have changed 25 years of the single market, why did he make them in the final hours of the summit?

Where were the Prime Minister’s allies? If he wanted a deal, why did he fail to build alliances with the Swedes, the Dutch, the Poles and Britain’s traditional supporters? If he really did want to protect the single market and financial services, why did he not seek guarantees that those issues would be discussed only with all 27 members in the room?

In any case, the Prime Minister should not have walked away, because the truth is—[Interruption.] Just calm down. The truth is, the treaty will take months and months to negotiate. Other countries have carried on negotiating and carried on fighting for their national interest. The real answer is this: he did not want a deal, because he could not deliver it through his party. He responded to the biggest rebellion of his party in Europe in a generation by making the biggest mistake of Britain in Europe for a generation.

So this is a bad deal, which we ended up with for bad reasons, and it will have long-lasting consequences. It is a decision that means we are on the sidelines, not just for one summit but for the years ahead. The Prime Minister said in this House on 24 October that what mattered

“is not only access to that single market but the need to ensure that we are sitting around the table”.

He went on:

“That is key to our national interest, and we must not lose that.”—[Official Report, 24 October 2011; Vol. 534, c. 38.]

Well congratulations, Prime Minister, that is exactly what you have done. He has done what no Prime Minister ever thought was wise—to leave the room to others, to abandon our seat at the table.

The Prime Minister says he had no choice. He did. He could have stayed inside and fought his corner; he should have stayed inside and fought his corner. Faced with a choice between the national interest and his party interest, he has chosen the party interest. We will rue the day this Prime Minister left Britain alone, without allies, without influence. It is bad for business, it is bad for jobs, it is bad for Britain.

A lot of sound and fury, but one crucial weakness—the right hon. Gentleman has not told us whether he would sign up to the new treaty. He had about 15 minutes, and he could not tell us whether he is for it or against it. Has it got enough safeguards in it, or has it got too few safeguards? Would a Labour Government back it, or would they veto it? Let me tell him: if you cannot decide, you cannot lead.

Inasmuch as there were some specific questions, let me try to answer them. The right hon. Gentleman asks what the threat was to financial services. Why cannot he understand that if you allowed a new treaty of 17 members within the EU, without proper safeguards, huge damage could be done to the single market and to financial services? He asks what will happen when this new organisation goes ahead. Of course, a new organisation cannot do anything that cuts across the existing treaties or the existing legislation, so he does not even understand how the European Union works.

The right hon. Gentleman asks what we gained from the veto. I will tell him: we stopped Britain signing up to a treaty without any safeguards. That is what we gained.

On the issue of the City and financial services, the right hon. Gentleman completely fails to understand that this is a nationwide industry. It is not just the City of London; it is the whole of our country. I have to say, there was not a word about the report today showing that Labour was to blame for the appalling regulation of the Royal Bank of Scotland. Then, of course, we had a lecture—[Interruption.]

Order. Members must calm down. I have my eye on one hon. Gentleman from the north of England who entered the House 32 years ago and should know better.

Of course, then we had a lecture on how to negotiate. I have to say that I am not going to take any lessons from people who gave in time after time to the comfy consensus rather than ever stand up for Britain. Just look at the record: the previous Government joined a bail-out scheme even though it was not protecting a currency that they were a member of; they gave up the rebate even though they got nothing in terms of the reform of agriculture; and they signed up to the Lisbon treaty but never had the courage to put it to the British people. Every time, they just go along with what others want.

The Leader of the Opposition also talked about growth and jobs. Let me just say this: his plan, alone in Europe, is to spend more, borrow more and increase debt by more. All the while, if he wants to join the euro, he needs to understand that the treaty that is being established would actually make that illegal. The very thing he wants to do in Britain he wants to ban in Brussels.

But the key question the right hon. Gentleman cannot answer is this: does he back this treaty or not? If the answer is yes, he should have the courage to say so. If the answer is no, he should have the honesty to say that I was right to keep Britain out of it. And let me just say this: just because the right hon. Gentleman is in opposition does not mean that he should oppose Britain’s interests.

May I declare my admiration and full-hearted support for my right hon. Friend at this definitive moment in his first premiership, and query whether this Brussels summit achieved anything of strategic value to protect the threatened European banking system? Without the long-delayed and still unpromised massive support of the European Central Bank and the Bundesbank, the euro is doomed—[Hon. Members: “Doomed!”] Yes, doomed—and as Chancellor Merkel has said, the European Union is doomed with it.

I certainly agree with my right hon. Friend on the balance of effort that has been given, on the one hand, to new treaty powers and changes, and, on the other, to actually looking at what needs to be done, particularly in the short term, in terms of the firewall, bank recapitalisation and action by the ECB. More needs to be focused on those things rather than on the medium-term power changes in the EU, which I do not think are being hovered over by the markets, which are working out whether countries can pay their debts. In that regard, my right hon. Friend is right.

There was no draft treaty before the European Council last Thursday and Friday; there was a set of draft conclusions. Will the Prime Minister set out the paragraph numbers that he thinks would have damaged Britain’s interests had we agreed to them? Will he also confirm that we had a veto on a financial transactions tax before the Council and that we still have one; and that financial services regulation was subject to qualified majority voting before last Thursday and still is?

As I said in my statement, the eurozone members wanted to create a new treaty within the EU, which has all sorts of dangers. If the right hon. Gentleman looks at the letter that Angela Merkel and Nicolas Sarkozy sent, he will see that they specifically wanted the 17 to look at issues such as financial services and the market within that treaty. Without safeguards, a treaty within a treaty would have been far more dangerous than a treaty outside the EU.

Let me repeat this point: a treaty outside the EU cannot do anything that cuts across European treaties or European legislation. Of course, that is not without its dangers, but my judgment was that without safeguards, an EU treaty was more dangerous.

The leadership of the Prime Minister in Brussels compares favourably with the refusal of the Leader of the Opposition over three long days to indicate whether he would have supported the treaty. The public will come to their own conclusion.

Does the Prime Minister agree that the term “two-speed Europe” is inaccurate, because it implies a destination that all countries will reach except over a different period? Whereas, is it not the case that the UK and perhaps other countries will never find it possible to accept a destination that involves not only a single currency, but fiscal union, tax harmonisation and supranational control of budgets? Is it not necessary to have a fundamental debate about whether Europe can become a Europe à la carte in order to survive?

My right hon. and learned Friend makes an important point. This is not about the speed at which different organisations travel: it is about the fact that Europe already has different facets. Britain is not in the single currency or in the Schengen no-borders agreement, but we are a leading member of the single market and we play a huge role in foreign and defence policy throughout Europe and NATO. We should not be embarrassed about that, and we should do what is in our national interest—rather than thinking that the right thing to do is to sign up whether or not it suits us.

Will the Prime Minister confirm that in all the negotiations since 1973 the United Kingdom has never lost a significant vote on financial services regulation? Why does he think that his negotiating tactics in the future would fail where those of Margaret Thatcher and Tony Blair succeeded, and why does he think that it is helpful to have driven nine other members of the European Union who are not in the euro into Franco-German hands?

For all the right hon. Gentleman’s experience, I think that he is very naive about what is happening in Europe over financial services. Time and again—[Interruption.]

Order. Members must calm themselves. I am concerned for them, and I also feel that the Prime Minister must be heard.

There have been any number of examples of frankly discriminatory legislation against financial services in the European Union that have affected Britain very badly. Let me give the right hon. Gentleman one example. At the moment, the ECB is taking Britain to court on the basis that we should not be able to clear euros through London. So we would be put in the extraordinary position that banks in Britain could clear Swiss francs, dollars and yen, but—even though we are in the single market—we could not clear euros. That is one example of discriminatory legislation. When you are faced with a situation in which the 17 eurozone members want to go into a further treaty within the European Union, with all the powers and force that would have—[Interruption.] They are not going to have a treaty within the European Union: they are doing it outside—it is right to seek safeguards. That is why the right hon. Gentleman is naive not to understand that.

May I congratulate my right hon. Friend on his unequivocal statement that our membership of the European Union is vital to our national interests, and express the hope that he may give it some wider currency in his own party? He mentioned both the single market and the eurozone. What practical steps can our Government take now to assist in reaching a solution to the problems of the eurozone and towards enhancing the opportunities provided by the single market, both of which are essential to the economic prosperity of this country?

Let me repeat again to the right hon. and learned Gentleman that I do believe that it is in Britain’s interest to be in the European Union and to be active, especially on those dossiers where that is in our interest—chief among which is the single market. If we want to see what will make a difference to the single currency and the success of the eurozone, nothing matters more than competitiveness, where Britain should be very active, with others both in the eurozone and outside, to drive forward changes. We are fully committed to keeping up that work.

Any politician with experience of doing business in Europe knows that you never go to a key European meeting without having done extensive and thorough preparatory work, so that as you walk in you are pretty much sure of the outcome you will get. Either the Prime Minister did not bother to do the preparatory work, and betrayed Britain’s long-term interests through sheer incompetence, or he had made up his mind before to use the veto because he was afraid of his own Back Benchers. Which of those two was it?

Let me say to the right hon. Lady that I went to Brussels wanting a result at 27, but there were safeguards that I believed that Britain needed. Frankly, you can have all the experience of negotiating in the world, but if you are not prepared to say no from time to time, you do not have any influence or power.

I congratulate my right hon. Friend on his excellent statesmanship. Does he agree that Britain has much more negotiating strength today, because Europe knows that it is dealing with a Prime Minister who will say no if he needs to, than when we had two Prime Ministers who gave in to bad deal after bad deal, including giving away our rebate for no good reason?

I am grateful to my right hon. Friend. It is the case that on too many occasions under the previous Government, Britain was outnumbered, but on the issue of the rebate, it was given away for nothing in return simply because they wanted to go along with a cosy and comfortable consensus. Sometimes it is necessary to say no. In my judgment, we did not have the safeguards that we needed, so, as a result, it was right not to agree to this treaty.

Out of every European Council meeting, there are perceptions and realities. The Prime Minister did list some of the realities, but may I put it to him that the perception around the world, in not just Europe but the United States, is that we have committed a diplomatic catastrophe? The words “isolated” and “Britain” are fused. To come back from that, will he assure the House that in all future negotiations, he will take with him the Deputy Prime Minister, who, I believe, spoke for Britain?

The right hon. Gentleman, like so many of those who oppose what has happened, is part of exactly the same group of people who wanted us to join the single currency in the first place. They are never prepared to recognise that there are occasions when we need to safeguard our nation’s interests and we have to be able to say no.

Does my right hon. Friend agree that the best way to increase one’s influence within Europe and, indeed, within a coalition Government is to set up one’s position and stick to it?

I am very grateful to my right hon. Friend for that question. I always find this slightly surprising. Before going to Brussels I set out exactly what I was going to do and what I would do if I could not get the safeguards. I did exactly what I said I was going to do, but apparently in politics these days that is very surprising.

The Prime Minister must be right to do whatever is required to protect the 1.3 million jobs in our financial services sector. Will he confirm that the current EU proposals for the so-called maximum harmonisation of bank regulations could prevent us from implementing the conclusions of the Vickers commission to make our banks safer with a ring-fence?

My hon. Friend is entirely right. One of the things that we are concerned about is that if we want to take the extra action in this country to make our banks safe, including what Vickers is recommending, there is a danger—and this is the current advice—that the current European regulatory framework could stop us doing that. That is exactly the sort of safeguard—it is entirely reasonable, modest and relevant—to ask for in these negotiations. We did not get it, so, as a result, I was not content to go ahead with the treaty.

May I, on behalf of my right hon. and hon. Friends, commend the Prime Minister for the stance that he took at the European Council? Indeed, his stance has been welcomed by the First Minister and many in the community in Northern Ireland. The question is where we go from here because there is still qualified majority voting. We can still be outvoted by perhaps a vindictive Europe. Will the Prime Minister now indicate what his next step will be to change the fundamental nature of the relationship that we currently have towards one based on co-operation and free trade and away from ever-closer political union?

I am grateful to the right hon. Gentleman for his kind remarks. I have long believed, and still believe, that the balance of powers between Britain and Europe is not right, and I would like some of those powers returned. As Prime Minister, I specifically got the bail-out power back through my first negotiations on the European stability mechanism treaty. In the latest negotiations, we prevented a treaty from going ahead at the level of 27 because there were not adequate safeguards. Frankly, I think that we will see now a period of great change in Europe. No one quite knows where this new organisation outside the European treaties will go, what powers it will seek and how it will act. Neither does anyone know exactly how the eurozone will develop. My job in government is to protect and defend the national interest at all times, and that is what I will continue to do.

As someone who is not known for his hostility to the European Union, I fully support the Prime Minister for what was an inevitable decision. However, the relationship between the fiscal compact of the 26 and the European Union remains uncertain. In particular, the fiscal compact reads:

“The objective remains to incorporate these provisions into the treaties of the Union as soon as possible.”

In the light of that, does he agree that the battle for Britain’s interest still has a long way to go?

The other EU countries recognise that going ahead at less than 27 has its disadvantages: they do not have the power and authority of the European institutions fully behind them and it will make some of the things that they want to do more difficult. None the less, we have set out our position. We believe that those safeguards are necessary, and I will not, and have not, changed my mind about that. I want to make this point one more time because I am not sure that everyone has taken it fully onboard: the disadvantage for those countries that will have a treaty outside the EU is that it means that nothing can be done in that treaty that cuts across the EU treaties or the legislation adopted under them. That is an important safeguard, given that we could not get the safeguard within the EU treaties.

Order. If I am to accommodate the large number of Back Benchers, as I always wish to do, we will require brevity, a textbook example of which will now be provided by Mr Chris Bryant. [Laughter.]

I think, Mr Speaker, that that was an example of irony.

The single most important thing that our voters have seen over the past weeks and months has been the crisis in the economies across the whole of Europe, which is depressing the economy in this country as well. They want to ensure that they have jobs to go to next year. Last week, the Prime Minister surrendered an opportunity to do that; he surrendered his seat; and he surrendered to his Back Benchers. Is he not ashamed of himself?

And it all started so well! The hon. Gentleman is right to say that there is a crisis of jobs and opportunity across Europe, and a lot of that is linked to the chilling effect of the eurozone crisis. Some of that crisis needs to be resolved by better fiscal integration, and we can argue about whether that requires the treaty change being pushed for by France and Germany, but the real agenda—to help the eurozone and to help growth and jobs—is about competitiveness and the single market, and about ensuring that, even in the short term, there is the big bazooka, the re-capitalisation of the banks and the proper programme for Greece, which are all things that Britain has been pushing for.

On the protection of the national interest, will my right hon. Friend gently remind the Deputy Prime Minister and the Leader of the Opposition that even Edward Heath’s 1970 White Paper confirmed that we have to maintain and use the veto in the national interest and to protect the fabric of the European Union—then the European Community—as a whole? To adapt William Pitt’s phrase, my right hon. Friend has exerted all his influence to ensure that Britain is protected. Does he take it that Europe will learn from his example?

I am grateful for my hon. Friend’s support. I agree that it is important that, when considering changing the institutions of the EU, there must be unanimity, and the veto is there for a purpose—if you feel that the national interests are not being protected. It is important that we maintain that in the EU.

The Prime Minister talked of us being a trading nation, of investment in jobs and of the importance of the eurozone. Why, then, did he not help the Greeks in their bail-out? Why has he not supported the European financial stability facility? Why is he not helping the European stability mechanism? Building on the questions from the right hon. and learned Member for North East Fife (Sir Menzies Campbell) and my hon. Friend the Member for Rhondda (Chris Bryant), what specific measures can the Prime Minister announce today to help the euro, trade, investment and jobs?

I respect the hon. Gentleman, who has a long track record on these issues, but on the Greek bail-out I am afraid I just do not support him. Britain was not in the original Greek bail-out—rightly, I think—and we should not be in subsequent Greek bail-outs. Frankly, the last Government made a mistake in getting us into the euro bail-out mechanism. We have got out of that, but that does not mean that Britain is not a generous nation that wants to help its allies. We have lent £5 billion to Ireland, and our economies are very integrated. I think the Irish are doing some very difficult things to get their economy back on track, and we support them in the work they are doing.

Given that we are facing the worst financial crisis in living memory, does the Prime Minister agree with me that the UK coalition Government have a policy for dealing with it and that unfortunately the eurozone does not? What we now need, surely, is to work in parallel to ensure that we have outcomes that are not divergent, but deliver a strong pound and a strong euro.

I am very grateful for that question. Of course it is important to recognise in a coalition Government that both sides of that coalition cannot always achieve everything that they want to. However, it is important that we work together, and where we absolutely have agreed is on the importance of a programme of getting our economy back on track. It has been of huge benefit—and will continue to be of benefit to our country—that two parties have put their interests aside to work for the common good.

The thing that was obviously lacking last Friday was any reference to growth or any ambition to get growth in the European economy. Can the Prime Minister dispel the rumour that he offered no leadership on that by telling us what proposals he tabled on European growth?

I am afraid that that is completely wrong. Britain has been very consistent, tabling proposal after proposal for growth. It is a British proposal to complete the single market in energy, a British proposal to complete the single market in services and a British proposal, which has just been passed, to exempt all micro-businesses—those with fewer than 10 employees—from future European regulation. Britain has the most pro-growth, pro-enterprise, pro-single market Government, and that is the way it is going to stay.

May I congratulate my right hon. Friend on sticking to a very simple principle of fairness in the European Union: that the institutions for the 27 are there for the 27? May I also remind him and those on the Opposition Benches—and, indeed, the BBC—that he has the support not only of the Conservative party but of the British people for what he has just done?

I am grateful for what my hon. Friend says. The absolute key to this issue about the institutions is actually what the new organisation does, rather than necessarily what the institutions do. The key is to protect the single market and those things that are vital for Britain. As I keep repeating, the fact is that an organisation outside the EU treaties is not allowed to cut across those treaties or the legislation under those treaties. It would be a greater danger to allow a treaty of 17 to go ahead within the EU, with all the additional powers, bureaucracy and everything else that involves, unless, of course, you can get the safeguards I was seeking.

We have heard the Prime Minister give his account of the meeting. Can arrangements now be made urgently for the Deputy Prime Minister to explain to the House why he is very much opposed to what has occurred?

Let me be clear: the negotiating approach of the Government was agreed by the Government before I went to Brussels, because it was very important to set out and agree the safeguards that we believed were necessary—I also set them out to the House, by the way—and that was agreed. However, it is of course important to recognise that it is no surprise that Conservatives and Liberal Democrats have not always agreed about European integration. But, as I say, we have both put aside our interest to work in the national interest in having a Government who are able to clear up the mess that the hon. Gentleman’s party left.

If there were ever any doubt before, may I tell the Prime Minister that there is none today in the minds of the British people that we are led by a Prime Minister with the courage to put our country’s interests first? I thank him for displaying the bulldog spirit in Brussels last week, but will he discuss the long-term future of Europe with members of the European economic area and Switzerland and Turkey, which have customs union with the European Union, to ensure that we are all working together?

I am grateful for my hon. Friend’s support but would repeat the point I made last Wednesday. Of course Britain has a key interest in being in the European Union. I do not believe that the sort of options that other countries have outside the European Union give them anything like the influence that we have, because it is not just the markets we need open; it is a say over the rules of those markets. That is what membership of the single market gives us in this country.

Is it not utterly bizarre that the Prime Minister has marginalised this country and recklessly thrown away Britain’s international influence, from Washington to Beijing, solely to protect the City from regulation when it is urgently in need of some regulation? In any case, his veto cannot protect the banking sector from any future EU finance directives. Is he not therefore ashamed that never before has so much been thrown away for so little or, indeed, needlessly for almost nothing?

The right hon. Gentleman clearly wrote his questions before coming to the House and listening to my statement. As I set out in the statement, we were not seeking special protections for the City; we were seeking a level playing field. Indeed, in some ways, we were asking to be able to have more regulation here in the UK, not least because of the shambles of RBS. Let us be clear: the Financial Services Authority report today names only three politicians as culpable—Tony Blair, the former Prime Minister and the shadow Chancellor, who was the man partly responsible for this complete shambles that we now have to clear up.

This morning The New York Times questioned whether this country’s interests—or, indeed, the City’s interests—were not at greater risk, following this weekend’s events. Looking forward, what positive reassurance can the Prime Minister give to potential foreign investors that we will remain at the heart of European economic decision making?

International investors know that Britain has the advantage of being a member of the single market, but outside the eurozone and the euro. I would say to the hon. Gentleman that the greatest risk for Britain would be to go into a treaty, including a new treaty of the 17 at the EU level, that did not safeguard our interests. Of course I would rather that our protocol had been accepted and that those protections and safeguards had been put in place; they were not, so the greater danger would have been to go ahead with a treaty without those safeguards.

Given that Britain has, or perhaps had, many natural friends and allies in the rest of Europe, why does the Prime Minister think he failed to persuade a single one of them of his case?

There is great understanding of Britain’s interests in the European Union and great support for our backing of the single market, particularly among countries like Holland, Sweden and Germany and the Baltic states. We have just achieved a breakthrough deal—something the right hon. Gentleman never achieved in all his years in government—of a freeze in the EU budget. Britain did that by having allies and supporters in the EU who backed our move.

Does the Prime Minister share my concern that Opposition Members just do not get it? They talk about the need to create jobs in Britain, yet they criticise him for looking after Britain’s financial services that provide 11% of our tax base and 2 million jobs in this country and are our biggest net export. When are the Opposition going to understand that my right hon. Friend was standing up for British interests?

My hon. Friend makes a good point—that the financial services go way beyond the City of London. As I said in my statement, 100,000 people are employed in the financial services in Birmingham, and the sector makes up 7% of UK employment; it is responsible for £1 of every £9 collected in tax, and 3% of our trade surplus. It is a hugely important industry. There would be a threat if there were a treaty of the 17 in the EU without the proper safeguards; that is why I vetoed that approach.

Is this not the same Prime Minister who month after month has been castigating working people for not staying at meetings to deal with pensions? He has walked out, without using his veto; he has walked out, without getting a rebate like Mrs Thatcher; and he has walked out without a couple of opt-outs like Major. As Del Boy would say, what a plonker!

I can absolutely assure the hon. Gentleman that I did not at any stage walk out of the meeting. What I did was to press Britain’s interests as a British Prime Minister should.

Now that the Prime Minister has cast his vote on Europe so effectively in Brussels, does he think there is any chance that the British people might one day have an opportunity to do something similar over here?

I wondered how long we would take to reach that issue. I believe that this is the most important use of a referendum: if there is a proposal for this House of Commons, or any Government, to pass powers from this House to somewhere else, we should ask the British people first. That, for me, in a parliamentary democracy, is the right use of a referendum. However, as we are not signing a treaty, I think that the whole issue of a referendum does not arise.

Does the Prime Minister believe that if Baroness Thatcher and John Major had followed his negotiating tactics, we would have had the Single European Act or the opt-outs on Maastricht that John Major negotiated with Chancellor Kohl?

The point about the Single European Act is that it was in Britain’s interest, which is why Margaret Thatcher signed it. The Maastricht treaty was only in Britain’s interest if we could get an opt-out from the single European currency, and that is what John Major achieved. I could not get a treaty with safeguards, so I was right to say no.

I congratulate the Prime Minister on his leadership on this issue and on putting the British national interest first, unlike the Labour party when it was in power for 13 years. Has he seen the results of an opinion poll today, which show huge support in the country for his actions, unanimous support among Conservative Members, and, most revealingly and interestingly, the support of 49% of Liberal Democrat voters?

I am grateful to my hon. Friend for his support. The key issue for me was not whether this would be popular today, tomorrow or next week, but what was the right thing for Britain, and I judged that a treaty without safeguards was not right for Britain. [Interruption.] For all the interruptions from Opposition Members, I think that until they answer the question “Would you sign this treaty?”, a little bit of silence is needed.

Given that it was precisely the City of London’s deregulated recklessness that did so much to exacerbate the impact of the financial crisis in this country, can the Prime Minister tell us why he persists in behaving as if the interests of the City were synonymous with the national interest, which they clearly are not?

I am not sure that the hon. Lady was listening, but the point is that there are some ways in which we actually want to regulate banks and financial institutions more, but are not able to because of the European Union rules. Some of the other issues that I was considering were specifically about discrimination: it is quite wrong that we, as a member of the single market, are not able to deal in euros in the same way as we are able to deal in dollars and yen.

This was a very straightforward set of undertakings, and it was not about special protection for the City. I hope that I got that across in my statement, and I hope that the hon. Lady will support us when we reach those regulations.

Over the weekend it was impossible to meet a resident of Mid Bedfordshire who was not full of praise and admiration for what the Prime Minister had done in Brussels, but does he share my concern about the fact that the most cowardly and negative attacks over the weekend came not from the Labour party—which is incapable of opposition—but, unfortunately, from the Liberal Democrats? That cowardice is surpassed only by the absence of the Deputy Prime Minister from the Chamber today.

I am afraid that I do not agree with my hon. Friend, grateful though I am for her support. We have to recognise that we are in a coalition, and that parties in a coalition cannot achieve all the things that they want to achieve. I think that we must praise each other in the coalition when we make sacrifices on behalf of the country.

The Liberal Democrats did agree to the negotiating strategy that we pursued. I can be very clear: I came to the House, I said what I was going to do, and I then did what I had said I was going to do, because I could not achieve the safeguards that I wanted. That was a very straightforward way in which to act, and, I hope, one that every Member on this side of the House can support.

At what stage of the negotiations did the Prime Minister realise that France and Germany would do their best for us not to sign? As this is a period of Christmas cheer, can he give us an undiplomatic reply?

My right hon. Friend—[Interruption.] Well, we often agree. It was obviously a developing situation, but I had a meeting with Angela Merkel and Nicolas Sarkozy before the Council began. I had been to see the German Chancellor three weeks before the Council, I had been to see the French President a week before the Council, and I think that there was a good prospect of making an agreement. Conversations were also held with a huge number of Finance Ministers and other Government leaders. Clearly the 27 would rather have a deal at 27. They see the problems and difficulties of what they are proposing, but in the end they were not willing to give the safeguards—rational, moderate, reasonable and sensible though they were—and, as a result, I think I did the right thing.

I am sure that the Prime Minister will want to know that the toast of the people in Somerset was to the pilot who weathered the storm, because he has stood up for democracy, he has stood up for free trade and he has stood up for free markets, and this is to be wonderfully commended.

The Prime Minister said that he went to Europe seeking a treaty change and, had he got that treaty change, he would have had to have held a referendum. If that is the case, can he confirm that success in his eyes would have been a referendum? If so, why does he not hold one?

With huge respect to the hon. Lady, I think that she is wrong on both counts. I did not go to Brussels seeking a treaty change; the point was that if a treaty change was put forward, there needed to be safeguards for Britain. That is the first point. The second point is that I did not go thinking that a treaty change would necessarily lead to a referendum, because I was not willing to sign up to a treaty change that passed power from Britain to Brussels, so I am afraid that both parts of her question are inaccurate. I also did not go to Brussels with an impossibly long list of demands because of pressure or anything else; I went to Brussels with a set of proposals that were modest, reasonable and relevant.

Will my right hon. Friend reassure successful, outward-looking businesses in Mid Sussex, some of which are understandably anxious about the consequences of what may flow from this weekend, that what the United Kingdom seeks is an adaptable, flexible and competitive EU, and that we will continue to play a full and creative role in Europe, as well as fortifying our important, substantial bilateral relations elsewhere?

I agree wholeheartedly with what my right hon. Friend says and I will reassure those businesses. The absolutely key thing is that the single market, which is fully protected by the European Commission, the European Court of Justice and all the institutions of the EU, is unchanged. We have full membership of those treaties and of that organisation, and because the other EU members are going for a treaty outside the EU, that protection will remain. I would say to those businesses that not only do we maintain the single market, but we will keep up the pressure for something else they need, which is a more fundamental solution to the crisis affecting the eurozone.

The UK is 90,000 square miles in area, but the Prime Minister seems to think that only one square mile is of any importance. May I put it to him that his colleague—the self-styled “pragmatic revolutionary”—the Deputy Prime Minister was heavily supportive of the Prime Minister on Thursday and Friday, but was yesterday condemning him? Does the Prime Minister have any idea what he is thinking now?

On the issue of financial services, this is not about just one square mile of the United Kingdom. I think of people working in the financial services industry in Cardiff, and I think of banks, building societies and insurance businesses right across Wales. They need to know that there is fair regulation within the EU and they want those safeguards too. It is not just about those industries on their own; it is about the support they give to the other industries as well.

May I add my words of support for the Prime Minister, who at the weekend kept faith with this House and, more importantly, with the country? Can he confirm that, as the Foreign Secretary said yesterday, the existing treaties of the European Union belong to all 27 member states and that there can be no question of the eurozone countries having recourse to the institutions, mechanisms and procedures of those treaties?

I think what my hon. Friend says is important. The treaties belong equally to those who are in the euro and those who are out of the euro. The key thing is that if there are going to be further changes to those treaties—if you are going to allow the eurozone members to do something within the architecture of the European Union—it is important to get safeguards for those countries that are not in the euro, not going to join the euro, want to safeguard the single market and recognise that there is a potential threat to financial services. That is what we were about in Brussels and that is what matters.

Given the current economic crisis in Europe, does the Prime Minister believe that the Europe 2020 strategy still has a future as a successor to the Lisbon benchmarks, and is he confident that we will achieve those shared goals?

The short answer is that the 2020 strategy needs to have a future and we must encourage European Union countries to spend more time focusing on what really drives growth, which is completing the single market, rather than some of these initiatives on medium-term fiscal austerity and big transfers of sovereignty. I know that they are important—and particularly important for some in the EU—but real growth will be driven through the single market.

May I remind the Prime Minister that we on these Benches and the vast majority of the British people support what he did last week and are very glad that it was this party leader and this party leader alone who was speaking up for Britain at this summit? Does he agree with one of his predecessors? She said:

“Europe is strongest when it grows through willing co-operation and practical measures, not compulsion or bureaucratic dreams.”—[Official Report, 22 November 1990; Vol. 181, c. 451.]

I am very grateful for my hon. Friend’s support. The point I made in my statement about Europe being a network, not a bloc, is completely consistent with that. We should not be shy about its developing as a network, with some networks we want to be in and others we do not.

Will the Prime Minister confirm that British banks and finance houses hold about £75 billion of bonds issued by eurozone Governments and that in the event of a default, with nobody representing Britain, he will still be expected to get the British taxpayer to bail some of them out?

The exposure of the British banks to European countries is published by the Bank of England—quite right, too—and obviously we want to avoid a collapse of the eurozone and to ensure that it takes the necessary steps to prevent that from happening. This Government will obviously always do whatever is necessary to safeguard our financial system and the economy.

Against the odds, an excellent deal on climate change was agreed in Durban this weekend, with the UK playing a leading role alongside our EU counterparts. Would the Prime Minister reflect on whether such constructive and positive diplomacy might be a better approach to securing British interests than rushing for the exit?

I certainly agree that the Durban outcome is worth while and it is a staging post towards another global deal, which is very worth while. I am afraid I do not see any contradiction between being incredibly positive and constructive and having a bottom line. When you have a bottom line, it is quite important that you stick to it.

Over the years to come, as a result of the Prime Minister’s decisions, economic and financial power will inevitably drain away from London to Frankfurt. How is that in the interests of British manufacturing or British financial services?

This is exactly the argument that was made about the euro. I remember it very well. People said that if we did not join the euro, Frankfurt would be the major financial centre of Europe and not Britain. Frankly, it was scaremongering then and is scaremongering now—from the same people.

I welcome the Prime Minister’s statement and his standing up for British interests, which I am sure will be widely supported across the whole country. Does my right hon. Friend remember the words of the former Prime Minister, Tony Blair, after a confrontation with Europe, when he said:

“If we are isolated and we are in the right, then that’s the correct position”

to be in? Would he not agree?

Is this the first case in recorded history of a proud premiership team relegating itself to a second division, cheered on by the new English Tea party?

Again, this is the same argument that we had at the time of the debate about whether Britain should join the euro and it is largely the same people making it. They were in favour of it and felt that not joining the euro meant relegating oneself to the second division. Frankly, I am glad that Britain is out of the euro. We are able to set our own interest rates and make our own decisions for the benefit of our economy here in Britain and we are better off because of it. It is the same arguments from the same people; they were wrong then and they are wrong now.

The Prime Minister should be in no doubt that he did the right thing last week. Will he confirm that he will not make any further policy concessions to the lickspittle Eurofanatics on the Lib Dem Benches as a result of doing the right thing for Britain last week?

I am always grateful for my hon. Friend’s support but he tends to take it just a little too far. The coalition is right for Britain and I want it to go on working for the good of Britain. We have to recognise that that sometimes means we cannot get the things we want.

Will the Prime Minister explain specifically what safeguards are in place today for the City of London and British interests that were not in place last week?

Clearly, if we had been able to achieve the protocol on financial services there would have been greater safeguards, but the safeguard we do have is that we are not signing up to a treaty that could have put that industry in danger.

I congratulate my right hon. Friend on his bold and courageous stance in the early hours of the morning last Friday and I should like to pass on the thanks that many of my constituents have expressed to me over the weekend. Will he confirm that of the nations at the European Council that did sign up to an agreement, the Parliaments of Bulgaria, Poland, Denmark, Sweden, Latvia, Lithuania and others such as Hungary still need to approve and ratify it?

My hon. Friend makes a very good point. We do not yet know exactly how the new organisation and treaty will develop or how many countries will sign up to it. There will then be a huge process involving very detailed scrutiny by and punishment from the European Commission if Governments draw up inappropriate budgets or have a structural deficit of greater than 0.5%. Labour left us a structural deficit of—what was it?—7% or 8%? There are big processes to go through before the treaty is either finalised in March or implemented, for which it will again have to be put to Parliaments and, possibly, even to referendums as well. There are many hoops to go through.

I am not going to criticise the Prime Minister for using his veto because that job can safely be left to his Liberal Democrat colleagues who are hawking their consciences around the media. Surely, however, he would have done better to use the big bazooka later when the undemocratic and deflationary consequences of this Merkozy diktat became clear, because at that stage he would have had lots of allies, which he should have had now and used now.

The hon. Gentleman makes an interesting argument. There are big questions to answer for the countries that are signing this. I think you have to have that sort of fiscal co-ordination with a single currency—he and I probably agree that that is one of many reasons why we should not join a single currency. My job at that European Council was to stand up for Britain’s interests and that is what I did.

I welcome the stance taken by the Prime Minister. Given that the other members of the European Union refused to agree even to the very modest proposals that he put forward, what chance is there of their ever agreeing to allow this country to regain control over such matters as those covered by, for example, the working time directive?

I am grateful for my hon. Friend’s question, but I am not as pessimistic as he is that there is no prospect of rebalancing powers within the European Union. There are possibilities and opportunities. We did that in terms of the bail-out fund and I think there will be opportunities in future.

The concordat on the co-ordination of European Union policy is very clear—it requires the UK Government to engage with the devolved Governments in the formulation of UK policy, but that clearly did not happen on this occasion. How will the Prime Minister now explain to Cardiff, Belfast and Edinburgh that adopting an isolationist policy and abdicating all leadership is anything other than damaging and dangerous?

I do not accept that. In the final analysis, our relations with the European Union are a reserved issue for the UK Parliament and the UK Government. To be fair to this Government, we have gone further than any previous Government on the issues that really matter to people in Scotland—about the single market, fisheries and decisions taken within the European Union—to work very constructively with the other Administrations.

Does the Prime Minister agree that Britain’s influence in the world is dependent on our economic strength, our productivity and our competitiveness, and that we should not trade away these valuable assets?

My hon. Friend makes an important point. Every country in Europe is challenged at present in relation to its economy, and it is very important to make sure that we are safeguarding Britain’s interest, staying in the single market, seeking extra safeguards for finance and other industry, and making sure we can grow out of this crisis.

The Prime Minister must know that right across the UK, the majority of the public and—dare I say it on the Opposition Benches?—the majority of Labour voters support what the Prime Minister has done. He knows that that is the reality. Does he agree that instead of seeing ourselves isolated in Europe, what the public want to see now is our looking to be much more internationalist and less little Europeanist?

I have great sympathy with what the hon. Lady says. What it requires is both action within Europe on issues that matter to us, such as the single market, and a recognition that we should be refreshing and restoring our links with other parts of the world, whether it is the Gulf, the Commonwealth or the fast-growing countries of south-east Asia. This Government are committed to doing all those things.

In Aberdeen in the north-east of Scotland and in Norway, there is considerable concern that the draft regulations on offshore drilling for oil and gas threaten the gold safety standard achieved in the North sea. Will what happened last week make it easier or more difficult to get the qualified minority necessary to make sure that those regulations are withdrawn and a directive is used as a means of implementing them?

I do not think what happened last week will have any impact on that decision because these issues are dealt with properly in the single market, and an organisation set up outside the EU cannot cut across existing treaties or existing legislation. We should work very hard to make sure we get a good deal for the North sea.

The great former Labour politicians Peter Shore and Bryan Gould both said that the single currency would fail, and they have been proved absolutely right. Does the Prime Minister accept that the choice is between a controlled deconstruction of the euro or an uncontrolled crash, and will he make this point to his European colleagues?

What I would say to the hon. Gentleman is that “I told you so” is not an economic policy. I have every sympathy with what he says. I have never supported Britain joining the euro because a single currency implies a single economic policy and a single fiscal policy, and trying to run those things across different democracies is so incredibly difficult. That is what they are struggling with, but if I am asked what is Britain’s interest today, I would say that it is for the eurozone to sort out its problems. A break-up of the eurozone would have very severe consequences for banks across Europe and also for banks here in Britain, and could trigger some very, very difficult economic times. In spite of what the hon. Gentleman says, we should be working constructively to encourage eurozone countries to do what is necessary, particularly in the short term, to stabilise a difficult situation.

May I warmly congratulate the Prime Minister on standing up for British interests last week and on refusing to take the approach of Labour, who signed away £7 billion of British rebate for nothing in return?

I thank my hon. Friend for his support. What we do not know is what the Opposition’s approach is to this issue. Despite all the fury we have heard from those on the Opposition Benches, they cannot tell us whether they support the treaty proposal or not.

Britain will continue to be subject to EU single market financial services regulation. Do we not now have a major problem in that we will be absent when many of those rules are drawn up?

That is absolutely not the case because this new organisation cannot draw up or pass proposals that cut across EU treaties or EU legislation. The right hon. Gentleman knows this well. It is the case that Britain has suffered from some of the regulation that has come out of Brussels on financial services, and that we need greater safeguards. If we cannot get those safeguards within a treaty, it is better that those countries are in a separate treaty. That is a better safeguard than the alternative, and that is the point that he needs to understand.

The Leader of the Opposition’s argument that one should never leave an empty seat at the table is surely a criticism of the previous Government’s failure to join the euro. [Hon. Members: “What?”] There has been an empty seat at the table ever since we did not join the euro. Does my right hon. Friend agree that somebody who is never prepared to disagree with our European friends, even when that is in British interests, is not fit to hold the office of Prime Minister?

I am grateful for my hon. Friend’s support. His point about the creation of the euro being the fundamental moment that created these tensions in Europe is entirely right. The previous Government’s position was that they wanted to get us into the euro, but they realised that that was not possible. I think that that is still their policy. It was the creation of the euro that fundamentally changed the relationship in Europe, but even they decided that it was okay for eurozone countries to meet on their own. That is not being isolated; it is recognising the reality that Britain does not want to be in the euro, so we cannot stop the meeting going ahead.

Given that last Thursday was not about joining the euro but about protecting the interests of the euro as a currency and, therefore, the interests of our national economy, as the Prime Minister has said this afternoon and on several occasions over the past few weeks, why has he walked away from such a responsible position and allowed our economy potentially to be attacked if there is no success in looking after the interests of the euro? We did it with Ireland, and rightly so, so why are we not looking at taking action more widely to protect the interests of this country?

What we did with Ireland, as a very close neighbour, long-standing friend and integrated economy, was give it a bilateral loan, which was the right thing to do. I do not accept that the proposal put forward on Thursday night and Friday morning is the most important part of delivering a successful euro. We need to spend more time on the single market, on competitiveness and on short-term measures to stabilise the eurozone. I simple do not believe that whether a treaty is within or without the EU will make a huge difference to the future of the euro.

Order. Short, single-sentence questions and the Prime Minister’s characteristically pithy replies would enable me to get in all Members who are still standing. I ask them to help me to help them.

I have received an important message to pass on to the Prime Minister: “The efforts of the Prime Minister on Thursday night gave me great pleasure. Yours ever, Mrs Bone.”

Is it correct that the Deputy Prime Minister said that he is not here because he does not want to be a distraction?

The point is that the Deputy Prime Minister and I agreed the negotiating strategy for the European Council, and that is important because it was the whole Government who were doing it at the Council.

The Prime Minister was negotiating as the Prime Minister of the coalition Government. Does he agree that now is not the time to listen to either those who say that we should leave the EU, or those who say that we should push into political and fiscal union, and can he tell the British people that he will stick to the coalition policies and get the economy back on its feet?

I am grateful to the hon. Gentleman and absolutely confirm that that is the case. The coalition is united in wanting to have growth policies across Europe and in promoting the single market in a very active way, and I can guarantee that we will continue to do that.

The Prime Minister had the opportunity to visit Feltham and Heston last week and arrived late at the European summit. How many leaders of the 26 other EU member states did he speak with in the fortnight before the summit?

First, I went to Feltham and Heston because I do not believe in the normal chicken theory that Prime Ministers should stay away from by-elections, so I am proud to have gone. I spoke to a wide audience of DHL employees who live in the constituency and encouraged them to vote Conservative before Christmas. After that, I popped in to see my son’s nativity play, which was also a rare joy. I got to the European Council some time before it started and met the Italian Prime Minister, the French President and the German Prime Minister. In addition, I had had a series of telephone calls with the Dutch Prime Minister, the Swedish Prime Minister and many others besides. I am sure that the hon. Lady understands—it is called multi-tasking.

My right hon. Friend had no option but to use his veto, if British interests were to be protected. Does he agree that the euro sovereign debt crisis is still the most important threat to us all and that that is what our eurozone partners ought to be concentrating on, rather than unwanted treaty changes?

My hon. Friend makes a very good point. I quite understand why particularly the Germans want this fiscal union and want tougher rules because they do not want to see irresponsible behaviour repeat itself. One can debate whether that actually requires change in the treaty or not, but we have to spend more time on the other parts of solving the crisis, which are to do with short-term changes and longer-term competitiveness.

The Prime Minister is aware that this situation represents one of the most fundamental changes in our national politics and in European politics. Will he assure the House that in all his future negotiations he will be mindful to look after not just financial services but the manufacturing sector and other service industries that do not have a part to play in the City of London?

I completely agree with the hon. Gentleman. I do not see financial services on their own, because they obviously have a role in supporting the rest of the economy. The key in terms of Europe for the rest of the economy is the single market, and that is what we are determined to safeguard.

The UK wields its influence in the EU in many different ways, and our net contribution to the EU in 2010-11 was £9.2 billion. We are the second largest net contributor, so perhaps we could become a little more like the unions with Labour and demand a little more influence for our money.

My hon. Friend makes a good point, which is that we are a major player in the European Union, not least because we are the second largest net contributor, which gives us a huge amount of influence. We have safeguarded the European Union and its treaties—not allowing them to be changed if we were not able to get the safeguards that we needed.

Does the Prime Minister know the whereabouts of the Deputy Prime Minister; and will their tiff lead to separation and divorce?

I should like to pass on the hugs, best wishes and kisses from people in Macclesfield, who are very grateful for the stance that the Prime Minister took last week. Under the previous Government, from 2005 the burden of EU regulation cost British businesses billions of pounds each year. What steps is my right hon. Friend taking to reduce, rather than increase, the burden of EU regulation?

I am grateful for that question. We are working extremely hard, particularly in the area of the single market, to encourage the Commission, which is now looking at reducing the burden of the regulation that it passes and, specifically, the burden of regulation on businesses that employ fewer than 10 people. We have for the first time secured the idea of a moratorium: there will not be more regulations on them in the coming years.

May I remind the Prime Minister that it is the jobs of not just the banks and the City of London which matter here? Millions of jobs throughout the country and in constituencies such as mine rely directly on the EU and on Britain being at the centre of the EU. Now that we are no longer at the table, who is going to stand up for those jobs?

I say to the hon. Lady, first, that the RBS report reminds us of the terrible effect on the rest of the economy when the banking system goes wrong because it is not regulated properly, so there is a very important connection. Secondly, other businesses require us to safeguard the single market, and that is exactly what I did.

Given that we are the second largest contributor to Europe, does the Prime Minister agree that without our contribution Europe would fail?

It does mean that we have a huge amount of influence in the EU, and that we do drive, particularly in the area of single-market policies. My hon. Friend makes the point that we have to ensure that we get value for money, however, and that is why I am so keen that we manage to achieve a freeze in the EU budget this year.

There is great concern throughout the business community about the implications of the Prime Minister’s walk-out from the European summit. Will he reassure the House that the uncertainty caused by that decision will not impact upon real jobs in the real economy of the United Kingdom?

I can certainly give the hon. Gentleman that assurance, because we can say to international investors, to businesses looking at Britain, “You have all the advantages of the single market—access to Europe’s markets—but we are not in the eurozone. Of course, we are affected by what happens in the eurozone, but our interests are just over 2%, whereas countries in the eurozone with budget deficits like ours have interest rates more like 5%, 6%, 7%.”

Is my right hon. Friend aware of the words this morning of Chancellor Merkel’s spokesperson on last week’s vote? He said that

“this changes absolutely nothing of the fact that Britain is one of our closest partners and one of our most important allies and friends… We want to make the single market a joint success, and that is something for which we have Britain on our side… Britain thus remains a very important partner for Germany.”

Does my right hon. Friend not share my surprise that, if the German Chancellor can accept that it is perfectly possible to stand up for one’s national interest and be a good European, that fact should elude the Opposition?

My hon. Friend makes a very good point. That leads to something else, which is that the countries that are like-minded on single-market issues—Holland, Germany, Sweden, the Baltic states—want Britain to be there when we are discussing single-market issues. That is another reason I do not believe that this separate treaty and separate organisation will cut across the single market.

For the sake of clarity, can the Prime Minister tell the House where the Deputy Prime Minister is and why he is not here for this extremely important statement?

The Deputy Prime Minister agreed to the negotiating strategy. I am not responsible for his whereabouts, but I am sure he is working extremely hard.

The Prime Minister’s veto has rightly struck a chord with the nation. May I suggest that instead of this being the end of the affair, it should be the start of a process to recalibrate our relationship with the EU based on free trade and growth and not on political union and regulation, which has cost this country so much?

I am grateful for my hon. Friend’s support. Our position is that we want to get the best out of Europe for Britain. That means a focus, yes, on the single market, but it is not purely about a focus on trade—it is about recognising that that market is not just open for our goods but that we have a say in setting the rules. That is absolutely key to our national interest.

What will the Prime Minister say to those leaders of the manufacturing sector who believe that his actions have deeply undermined their interests? They include Ian Rodgers, the director of UK Steel, who said today that

“we are going to become less relevant in political decision-making”.

I do not agree with that. A lot of these arguments were made when Britain did not join the euro. A number of organisations, media outlets and, indeed, political parties and political leaders said, “If you stay out of the euro, you’ll marginalise Britain and it’ll be bad for our economy.” That was not the case. They were wrong then, and I think they are wrong now.

Most post-treaty analysis has focused on the use of the veto, but can the Prime Minister confirm that the detail of the fiscal union proposed by the rest of the European Union would, quite remarkably, render the Opposition party’s entire economic policy illegal?

That is a very good point. We know that the leader of the Labour party is committed to joining the euro, if he is Prime Minister for long enough. At the same time, if he supported this treaty—but frankly we have not heard today whether he is for it or against it—and joined this treaty he would make his own policy illegal and he would be fined by the European Commission for the policies that the shadow Chancellor, who I see is now not here either, has signed him up to.

Thank you, Mr Speaker.

Europe would not be in the economic and political mess that it is in now if we had not had to wait nearly 40 years before a British Prime Minister came back and said that he or she had used the veto. Can the Prime Minister tell us how, and when, he is going to repatriate some of the powers that have been so carelessly given away?

I am grateful for the hon. Gentleman’s support. As I said, we have brought back the bail-out power. We have prevented Britain from joining this treaty without the safeguards. I believe there will be opportunities in the future. There are areas, particularly in terms of costly regulation, where Britain has paid a high price for European regulation, and we should use future opportunities to act on that.

I bring some grandfatherly advice to the proceedings. I urge the Prime Minister to let the dust settle, keep calm and carry on carefully, but please to abandon the Carlos Tevez approach to Europe. Bridges need to be built, and the first bridge the Prime Minister can build is to get Tory MEPs to rejoin the group of mainstream European conservatives.

I am very grateful for the grandfatherly advice. I remember the advice that the hon. Gentleman used to give me when we both cycled in to the House of Commons many years ago, so I will take it carefully on board. I will also take away the Carlos Tevez reference and give it a bit of thought.

It is becoming increasingly obvious to everyone that the Lib Dem partners in this coalition are completely pointless. As the Prime Minister does not know the whereabouts of his deputy, will he assure the House and Mrs Clegg that he will send out a search party to look for him?

Did the hon. Gentleman really wait one hour and 34 minutes for that? I am keen to hold on to the rebate and I think that his constituents might want a rebate as well.

We are hearing from outside the House an answer that the Leader of the Opposition would not give on whether he would have signed the treaty last Thursday. His aides are saying that he would not have signed it. Will the Prime Minister press him further to give us an answer on whether he would have signed the treaty?

I am very grateful to my hon. Friend for looking at Twitter or whatever else it is that the Leader of the Opposition now uses. I gather that it is possible for the Leader of the Opposition to come back on that. Perhaps he can confirm whether he would have signed the treaty. I am happy to give him a few more minutes if we get a bit of clarity.

I think that the sensible approach, in conformity with convention, is to stick to questions to and answers from the Prime Minister in this Chamber.

In the words of one business leader today,

“Margaret Thatcher was a constant thorn in the side of European leaders, but she never vacated the negotiating table; I am anxious by the implications of what the prime minister has done.”

When will the Prime Minister give business in this country the reassurance that it needs about the impact that his walking away will have on jobs and the economy?

I think that business does understand that we must be in the European Union for trade, growth and jobs, and that our membership of the single market is key. However, there is a lot of damaging regulation coming from Brussels and we need to stand up to that. When new treaties are suggested that involve huge fiscal changes and other changes in the European Union, it is right that Britain should seek safeguards. I am not hearing the same message from business that the hon. Gentleman is hearing.

We have heard much this afternoon about the number of people who are employed in financial services. More than 2,000 of those jobs are located in my constituency. Can the Prime Minister reassure those employees that the action that he took last week was in their interests and that it will safeguard their jobs and not put them at unnecessary risk?

I can certainly do that. My hon. Friend makes the important point that this is an industry that is based around the country and not just in London. However, the protections of the single market go far beyond the financial services industry.

The Prime Minister has likened his experience of EU negotiations to playing chess against 26 different people. Will he therefore tell us what attempts he has made to build alliances with countries that have similar views to the UK, which could have played with him rather than against him?

Year after year, Ministers have had to stand at this Dispatch Box and apologise as the EU budget has gone up by 3%, 4%, 5% or more, because it is decided by qualified majority voting. I put together a qualified majority bloc so that we could get a real-terms freeze in the budget. There was help from Germany, France, Sweden and Holland. That is exactly the sort of constructive role that we play.

I am pleased that we have a Chancellor who understands that we need to take tight control of the fiscal reins of this country and that we have a Prime Minister who understands the difficult questions that need to be asked. I am surprised that we have a Leader of the Opposition who does not understand any of that and who cannot make his mind up. May I ask, with all humility, when the great British public will have the chance to have a say on Europe?

I am grateful to my hon. Friend for her support. I have given my answer on a referendum. I think that there is a role for referendums in a parliamentary democracy, but that comes at the moment when a Government or a Parliament proposes to give up power, rather than at other times.

There is a growing number, with countries such as Mexico, and now we have the Korea free trade agreement. I am very keen to try to finalise the Japan free trade agreement. Huge effort should be made to have such treaties, because they are good for both sides.

May I pay tribute to the Prime Minister for his practical approach to the negotiations last week? May I also say that his practical, obvious negotiating style now seems to be supported by the Leader of the Opposition, whose aides are briefing the press that he would not have signed the agreement, in the same way that the Prime Minister did not?

Ah. Either the Leader of the Opposition has no control over his aides, who are randomly briefing the press about his position, or he failed to tell the House, in his minutes and minutes of speaking, that he would not have signed the treaty. If he would have signed it, he can say I made the wrong decision, but if he would not, he will have to accept that I made the right decision. He either has to have the courage of his convictions or give an answer.

Will the Prime Minister confirm that his veto does nothing to strengthen financial services in the way that he would want? Now that he has adopted a position of isolation, does he think he is more or less likely to win those safeguards in the future?

The key safeguard that we did get was against a treaty without proper protections and safeguards for the single market. It was in Britain’s interest to do that, and that is what the hon. Gentleman needs to understand.

After last week’s isolation, can the Prime Minister confirm that he still agrees fully with the words of the coalition agreement that

“Britain should play a leading role”

and be

“a positive participant in the European Union”,

and that in that way we will help solve the economic crisis and bring growth and jobs to the United Kingdom?

I completely agree with that. We are members of the European Union, and that membership has not changed; nor have the treaties that govern the single market.

We all know that an ill-prepared Prime Minister failed to build the alliances and friendships to ensure that Britain’s best interests were protected in Europe last week. What will he be doing on his days off, when the leaders of the other 26 EU nations are sitting around a table, working hard and discussing economics that affect countries both inside and outside the eurozone?

What I will be doing is sorting out the mess that the hon. Gentleman’s party left when it left office.

My right hon. Friend might be interested to hear that I have recently visited businesses in Dudley South that are now exporting to markets such as Mexico, Brazil and the far east. Given the decline of the European Union’s share of world GDP and world trade over the past decade, does he agree that we need to ensure that we have robust relationships with the rising powers in Asia and south America as much as with the declining powers in the EU?

My hon. Friend is right. What we want is the best of both worlds. We want to have the single market in Europe and use it to drive free trade deals with countries in south and central America and the far east, so that we maximise trade for Britain, Europe and the world.

Is it not more likely than not that the 26 member states other than Britain will increasingly agree among themselves courses of action on financial services, the single market and other matters, and that even if Britain still has the right to oppose them in the full EU, it will not be able to stand out against 26 countries that have effectively agreed a position among themselves?

The new organisation outside the EU cannot draw up or implement agreements on financial services or other things that have an impact on the single market. Those things have to be done through the Single Market Council. Of course there will always be difficulties at that Council, where frankly my right hon. Friend the Chancellor has to fight Britain’s corner very hard, but the danger for us was allowing the treaty of the 17 to come into the EU without proper safeguards. That is why we behaved as we did.

Is my right hon. Friend aware that François Hollande, the front-runner for the French presidency in next year’s elections, has said that if elected he will tear up the accord because it is not right for France? Does that not suggest that there are socialists who appreciate it when Britain stands up for herself? Sadly, they are not our socialists.

I do not want to get drawn into the French election campaign, because despite reports to the contrary I am still on extremely good terms with my friend Nicolas Sarkozy, as the Libya campaign proved. I will say one thing: at least the Opposition leader in France has told us what he thinks. I can see the Opposition Front Benchers tweeting, blogging and poking for all they are worth, but they still do not have a policy.

The Prime Minister has referred to today’s Financial Services Authority announcement, and I have to say that he has selective memory loss, because it was he who was calling for less and lighter-touch regulation of our financial services when he was in opposition.

May I ask the Prime Minister why it was better to placate his Back Benchers than stay in the room, stand up and fight for British interests?

There are two points. First, the FSA mentions only three politicians, one of whom is the shadow Chancellor. On placating people, if the hon. Gentleman casts his mind back to last Wednesday, he will find that I was not particularly placating anybody with the moderate and reasonable requests I was making of the European Union. It was leadership on behalf of Britain, not any one part of it.

My right hon. Friend will be aware that he has the overwhelming support of my constituents from across the political spectrum. If we are to safeguard jobs and expand the economy, we must be equally robust in all our EU negotiations. He will know that the common fisheries policy adversely affects my constituency. Will he assure my constituents that his colleagues will follow his lead when negotiating on that matter?

I know how important the cod issue is to my hon. Friend’s constituents and people right across that region. I will ensure that Ministers in the coalition Government stand up for our fishermen.

The Prime Minister has stated that he wanted to deal at the level of 27 nations. Why, then, did he end up having bilateral discussions with just three?

The point is that it is quite clear that when it came to the issue of wanting a change to the treaty—[Hon. Members: “Answer!”] I am answering the question very directly. It was clear that the Germans and the French were leading the charge on wanting a change to the treaty, so it was very important to have discussions with them, but I also had discussions with the Dutch, the Swedish, the Irish and many others.

May I add my support to the Prime Minister and to the coalition Government for taking a tough decision under difficult circumstances? Will he confirm that over and above our contribution to the EU, we buy more from Europe than we export to it? The difference is about £100 billion in product, which the eurozone will need at the moment to help it out of its crisis.

My hon. Friend makes an important point. We have a large trade deficit with Europe, apart from in one area: financial services. Frankly, I wish our economy was more rebalanced. We are aiming to rebalance it, but it is important in the meantime that we recognise realities.

Successful completion of the single market could add 7% to UK gross domestic product. After Thursday’s summit and the Prime Minister’s policy of isolation, does he believe that he has more or fewer allies in Europe for something that is vital to our national interest?

We have huge amounts of allies and support for action on the single market. If the hon. Gentleman looks at what has happened in the past 18 months, he will see that there have been more positive steps taken by the European Commission on the single market than there have been for the past 10 yeas or more. If we look at what is happening on the services directive, energy, small business, we see that the penny has finally dropped that Europe has a role, but it needs to be about deregulation. That is no coincidence. One reason is that of the 27 countries sitting around the table, only four are run by socialists.

Many jobs in Suffolk rely on a fair, level playing field in the single market. If last Friday morning was not the time to stand up for British interests, when is?

My hon. Friend is right. Institutional arrangements and treaty arrangements in the EU must be agreed by unanimity. If anyone is not content with what is being put forward, it is perfectly acceptable to do what I did and say, “I am not happy to go ahead with the treaty without these safeguards.”

The Prime Minister has heard from Members on both sides of the House about the worries of manufacturing industry. Will he say specifically which exporting firms think that his actions last week will make exports easier rather than harder—which ones have come out and supported his move?

Frankly, I have found huge support from the business community for what I have said—and that spans a huge number of different industries. Many industries are asking what we will do about the problem of excessive regulation. That should be dealt with through the single market, which we will continue to do.