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European Council

Volume 551: debated on Monday 22 October 2012

With permission, Mr Speaker, I shall make a statement on last week’s European Council.

The European Union faces important choices in the coming months in order to meet tough economic challenges and deal with problems in the eurozone. There were no landmark decisions at this Council, but there was some limited progress on both issues.

As I have said, we are in a global economic race, and all European economies need to become more competitive. That means taking steps such as expanding their private sectors, reforming welfare and improving education. In terms of action at European Union level, we believe that it means lifting the burdens on businesses, completing the single market, and taking forward trade deals with the biggest economies and the fastest-growing countries and regions in the world. I have consistently promoted those solutions, and at the Council we made some progress.

On deregulation, I joined others to secure a new agreement that specifically refers to withdrawing legislative proposals from Brussels that stifle our businesses. Of course, we now need to see specific actions, but it is worth noting that the conclusions refer to the

“intention to withdraw a number of pending proposals and to identify possible areas where the regulatory burden could be lightened”.

On completion of the single market, as I reported in June, there is now a proper plan with dates and actions for completing the market in energy, services and digital, but once again it is important for that to be followed through in order to secure jobs and growth.

On trade, the Council agreed on an ambitious agenda to create 2 million jobs across Europe. That includes completing free trade deals with Canada and Singapore in the coming months, and starting negotiations with the United States next year on a comprehensive transatlantic trade and investment agreement. We made some new progress on launching negotiations with Japan “in the coming months.” That deal alone could increase European Union GDP by €42 billion.

Let me now turn to the eurozone. Britain is not in the eurozone and we will not be joining the eurozone, but it is in our national interest for the uncertainty surrounding the eurozone to end. I have argued for some time that a working eurozone needs a working banking union. It is one of the features that a successful single currency needs. Obviously you do not need a banking union because you have a single market; you need it because you have a single currency—so Britain should not, and will not, be part of that banking union.

Britain’s banks will be supervised by the Bank of England, not by the European Central Bank, and British taxpayers will not be guaranteeing or rescuing eurozone banks, but we do need eurozone members to get on with forming a banking union. At the Council, I joined those who were arguing for progress to be made on the plan that had been announced in June. To put it simply, I believe that it is not enough to have a banking union that is stripped of the very elements—such as mutualised deposit guarantees, a common fiscal backstop and a framework for rescuing banks—that are needed to break the dangerous link in the eurozone between sovereign debt problems and the stability of eurozone banks. But because not all countries outside the eurozone—like Britain—will want to join such a banking union, it is also essential that the unity and integrity of the single market is fully respected. The organisation that currently ensures a level playing field for banking within the single market is the European Banking Authority. We need to make sure that it will continue to function properly, ensuring fair and effective decision making. This, again, is specifically recognised in the conclusions. More broadly, as eurozone countries take steps to deepen their economic and monetary union—as they will—it is important that we secure, as I did, an explicit commitment in the conclusions that the final report and road map in December will include “concrete proposals” to ensure that the integrity of the single market is respected.

Finally, the next Council in November will discuss the financial framework for Europe between 2014 and 2020. We have not put in place tough settlements in Britain in order to go to Brussels and sign up to big increases in European spending. I do not believe that German voters want that any more than British voters, and that is why our Governments have led the argument in Europe for fiscal restraint, so I put down a marker that we need a rigorous settlement. As the letter signed in December 2010 by a number of European leaders said, given the tough spending settlements that all member states have had to pursue in their own countries,

“payment appropriations should increase, at most, by no more than inflation over the next financial perspectives”.

On foreign affairs, the Council, led by Britain, once again discussed further restrictive measures on the Syrian regime, and made clear to Iran that we will increase the pressure if there is no progress on the nuclear dossier.

Making our economies competitive, dealing with uncertainty in the eurozone, keeping the EU budget under proper control, and making sure the EU speaks with a strong and united voice on the key international challenges: this is our agenda, and I commend this statement to the House.

I thank the Prime Minister for his statement and associate myself entirely with the summit’s conclusions in particular on Iran and Syria. The dangers of the civil war in Syria spilling over into the wider region are now all too apparent, and we strongly support the EU playing its part to seek to prevent this from happening.

The backdrop to this summit is that across Europe there is low or no growth. I am afraid on this fundamental issue the Prime Minister has yet again returned from a European summit with nothing to offer. So, first, can he tell us whether he had any responses to the proposals on the immediate growth crisis facing Europe that he took to the summit? Europe urgently needs co-ordinated action to boost demand, with those countries with the scope to do so taking action, but yet again there was nothing from the summit.

Secondly, on the single market—which the Prime Minister makes great play of—he admitted that this summit simply reaffirmed what was agreed in June, but will he agree that the situation is actually slightly different from then? On energy, will he confirm that the conclusions were exactly the same as the Council’s conclusions 18 months ago? On digital, they sounded familiar to me, too, and there is a reason: they were exactly the same as they were in October 2011—a year ago. So when he said at his summit press conference, with characteristic humility:

“Who is driving that agenda”—

on energy, on digital—

“which has made so much progress this year? It’s Britain”,

what did he mean by that, because there has been no progress over the last year?

Thirdly, on banking, there are big issues facing financial services as others move towards a banking union, but the summit conclusions are vague at this stage. So can the Prime Minister clarify for us what his key demands are in relation to the crucial issue of voting rights, as banking union goes ahead? Can he tell us what specific safeguards he will be seeking, and can he tell us how he will be building support for his position among our allies—using his enormous popularity, which he has built up over the past two and a half years?

That takes me to the real problem the Prime Minister faced at this summit. At home last week, he was starring in his own version of “The Thick of It”. In Europe he was offering another chapter in his handbook of “How to Lose Friends and Influence”. This is what Finland’s Europe Minister said—[Interruption.] Those on the Government Benches do not like to hear about their lack of influence in Europe. This is what Finland’s Europe Minister said at the summit:

“Britain is…putting itself in the margins...the boat is pulling away and one of our best friends is somehow saying ‘bye bye’ and there’s not really that much we can do about it.”

[Interruption.] Some on the Government Benches are saying, “Hear, hear,” about leaving Europe; there is the problem for the Prime Minister.

That is not the French or the Germans talking—it is Finland. Even the Prime Minister cannot be glorying in fisticuffs with Finland. It is the land of the Helsinki accords, reindeer and the Moomins. Its Europe Minister is an anglophile; he is one of Britain’s friends. The Prime Minister does not seem to realise that all his bluster about fighting for Britain is meaningless if he alienates our natural supporters. Will he confirm that he really has become the guy who goes to Europe and picks a fight in an empty room? That is just as well, because he normally finds himself in an empty room.

The Prime Minister was asked about his isolation, and this is what he had to say:

“We are actually a very, very important and influential player…right there in the vanguard.”

If he thinks that, the problem is not that he is isolated, it is that he is completely deluded about the arguments going on in Europe. Last October, he said:

“This is not the time to argue about walking away”.—[Official Report, 24 October 2011; Vol. 534, c. 27.]

But that is exactly what his Cabinet is now doing. [Interruption.] The Education Secretary has chosen to walk away from this statement, but the Eurosceptic beauty contest has begun, with the Education Secretary, the party chairman and others joining the fray. The reality is that the Prime Minister has lost control of his party on Europe. We have a Prime Minister who is outside the room looking in at Britain’s empty seat at the table. There is one thing that our allies in Europe and the British people can agree on—his Government are a shambles and it is Britain that suffers.

I am sure that there was a question in there somewhere. Frankly, I am not going to take any lectures on Europe from a party that gave up part of Britain’s rebate and got nothing in return; that gave up the social chapter and got nothing in return; and that joined the EU bail-out fund and got absolutely nothing in return. It is this Government who introduced the referendum lock, who got us out of the bail-out mechanism and who will always stand up for Britain in Europe.

I think that the right hon. Gentleman did ask a question somewhere at the beginning: what did Britain bring to Europe’s growth crisis? We brought, last week, falling unemployment, falling inflation and a million more people in work. He asks what we want in terms of banking union safeguards. We want single market safeguards, but I note that he had absolutely nothing positive to suggest on any of these agendas at all.

The right hon. Gentleman talks about Britain’s influence in Europe. The single market in digital, in energy and in services is a British agenda that we are driving forward. He says that there has been no progress. There were never, under his Government, dates and specific actions for completing these markets, but there are now. Oil sanctions on Iran is a British agenda that we have succeeded in driving forward; pressure on Syria and support for the Arab spring countries is a British agenda; and trade deals with the US and with Japan, not just with Canada and Singapore, is a British agenda.

What else did we get from the right hon. Gentleman? He talked about what I was doing at the European Council, but it is worth remembering that when I was there he was, of course, preparing for his great trade union sponsored march. I thought that the House might welcome an update on how the sponsored walk went: Unite union—£6 million; Unison—£3.2 million; and the GMB—£3.2 million. That is what he was doing—calling for general strikes and disruption—when we are fighting for Britain.

When the Prime Minister made it admirably clear to Chancellor Merkel that Britain would not permit the European Banking Authority or the European Central Bank to have any control or oversight of the Bank of England, what was her response?

The point I would make to Chancellor Merkel—we do not actually fundamentally disagree about this—is that the single currency needs a banking union. At the heart of that banking union will be the ECB, with a new role as a banking regulator. But clearly as this country is not in the single currency our banking regulator will continue to be the Bank of England, and there will not be any question of the ECB having a say over the Bank of England—that is not the situation. Strangely enough, in a way the challenge is to persuade countries of the eurozone to go far enough in having a banking union that will help to break the link between banks that are in difficulty and sovereigns that are in difficulty. Just as we have a solid banking union for our single currency in the United Kingdom, they need a solid banking union for their single currency in the eurozone.

Did the Prime Minister make it clear—by the way, his use of “United Kingdom” versus “Britain” is improving, but it is not yet good enough—to the other European leaders that we would not contribute towards any of the millions of pounds that the European Commission wishes to spend to tell every European Union citizen how wonderful the EU is? Is that not a ridiculous waste of money?

I am very grateful to the hon. Lady for her school report and I shall continue to try to improve on my use of “United Kingdom” rather than anything else. On the issue of what the European Commission and European Union spend, as we get into this budget debate we should still look at the 6% of the money spent on the EU’s central costs and the fact that, as I said at the weekend, some 16% of Commission officials are paid more than €100,000 a year. Okay, 6% is a small percentage of the total but it is still meaningful in getting a good budget deal.

I commend my right hon. Friend and the Financial Secretary for so far complying with the European scrutiny rules on these banking proposals. Now my Committee has been able to recommend them for debate, and an early debate at that. However, given the reported advice of the Council’s legal adviser and the inherent impact of the proposals on our national interest, will he veto the proposals, not least because the proposed voting changes would expose the City of London to qualified majority voting, which would be very damaging to it?

The European Union is going about this change to banking union through a treaty base that requires unanimity, so Britain has a full part in the discussions; but I do not want us to veto proposals for a banking union for the eurozone because I think the eurozone needs a banking union. We should be putting our negotiating heft, as it were, towards ensuring that those of us remaining outside the banking union have proper safeguards. Let me make one last point: I am sure that my hon. Friend knows that a lot of financial services regulation in the European Union is already done by qualified majority voting.

If a referendum were held tomorrow, the Prime Minister would be in my camp in voting to stay in the European Union. According to one of Lord Rothermere’s organs, the Secretary of State for Education said that if there were a referendum today on whether the UK should cut its ties with Brussels, he would vote to leave. What is the Cabinet position? Is it that of the Secretary of State, who is an out-er, or that of the Prime Minister, who, like me, is an in-er?

I hate to disappoint the right hon. Gentleman, but we are not having an in-or-out referendum on the European Union tomorrow. I want us to achieve a new settlement between Britain—the United Kingdom—and the European Union and to put that new settlement to fresh consent. That is what should happen. I think that the idea of an in/out referendum is wrong, because I neither support the status quo nor think that leaving is the right answer.

I warmly welcome the Prime Minister’s wish to have a new settlement with the European Union and encourage him to negotiate just that. Is not our veto over a six-year budget perspective for which the others want a huge expansion of spending the opportunity to negotiate that new settlement?

The point about the European budget is that we need to maximise our negotiation leverage on that specific issue, as we are part of this union and we want it to have a sustainable budget. As I wrote in the letter of 18 December 2010,

“payment appropriations should increase, at most, by no more than inflation over the next financial perspectives”—[Interruption.]

The shadow Chancellor asks from a sedentary position what our leverage is, and it is very simple. The decision must be agreed by unanimity. Tony Blair, when he sat in that seat, gave up our rebate without any need, but we will not do that.

Were there any discussions, either at the summit or in the margins, about the acute immigration crisis facing Greece? As the Prime Minister knows, last year 100,000 illegal migrants crossed from Turkey to Greece. This year, 100,000 Syrians have moved into Turkey. Would the Prime Minister be prepared to contribute to additional rapid border intervention team—RABIT—forces on the border between Greece and Turkey to try to ease that crisis?

The Greek Prime Minister, attending his first European Council, raised that issue, which is clearly putting pressure on Greece. As the right hon. Gentleman knows, the British Government’s position is that we should continue to support the organisations that deal with these issues, such as Frontex. If there is pressure for more resources, we can consider that. We should always bear in mind, however, that when it comes to migration into Europe it is the countries of the north, including Britain, that face the greatest pressure from asylum claims.

Since the Government have raised the possibility of opting out of the European arrest warrant, which is vital for tackling human trafficking, organised crime and terrorism, did any of our European partners at the summit express the worry that Euroscepticism might make the UK go soft on crime?

Has the Prime Minister not realised yet why those others in Europe do not take very much notice of what he has to say? Does he not realise that they work it out that this Prime Minister is being constantly undermined by the antics of his Chancellor of the Exchequer, the ex-Chief Whip, Boris Johnson—it goes on for ever? This heir to Blair has suddenly become like John Major all over again.

Order. I know the Prime Minister will reply with very specific and focused reference to the deliberations of the European Council.

I am sorry not to be able to follow the humorous line that we had from the hon. Member for Bolsover (Mr Skinner), but in the unanimous negotiations required for a European banking union, will the Prime Minister try and repatriate powers that are currently subject to qualified majority voting?

My hon. Friend asks an important question. We need to see how the banking union proposals develop. We do not yet know whether it will be a full-on banking union or a restricted banking union. We do not know for certain the treaty base that will be pursued. If it is pursued on a basis of unanimity, it is absolutely key to make sure we safeguard the single market. I am very conscious of the fact, sitting round that table, that I am responsible for 40% of the European Union’s financial services industry. That, I think, must be our focus during these negotiations.

Could the Prime Minister clarify whether he intends to opt in or out, or out and back into the European arrest warrant, bearing in mind that it was recently used to bring Jeremy Forrest, the maths teacher who disappeared with Megan Stammers, back to the UK?

This issue has been discussed at great length by the Home Secretary, who set out in great detail in the House of Commons recently that we are minded to exercise the opt-out that the previous Government put in place, but there are safeguards that we want to seek for the arrest warrant.

Does my right hon. Friend share my concern that the development of a eurozone banking union demonstrates how the UK is increasingly finding itself in the worst of all possible worlds—bound and directed by a qualified majority that is solid in the eurozone? May I remind him that we already have a European Banking Authority which is based in London and operates by qualified majority vote?

I go a certain way with my hon. Friend, but the point is that the proposals for banking union have to be agreed by unanimity, so that is an important safeguard for Britain. But I do not think it would be in our interests to stop the eurozone putting in place something that a single currency needs in order to function. Our economy is suffering today because of uncertainty in the eurozone. Those high interest rates in Spain, Italy, Greece and Portugal affect us too, and they need action, including a banking union. We in the United Kingdom have a single currency—the pound sterling—and we are going to keep it. It works—and it works partly because we have a banking union. The countries of the eurozone need one too, so blocking it just for the sake of it does not make sense.

On completing the single European market in energy and digitalisation, there has been no change. Is that what the Prime Minister considers progress?

I think the hon. Gentleman is wrong, in that for the first time there is a series of actions and dates that have to be completed by a specific time. If he reads the growth pact, it is all set out in huge detail. In previous Council conclusions, there have just been warm words, rather than the dates and the actions, and that will make a difference.

My right hon. Friend will be aware that the biggest issue confronting families in Britain and across the European Union is the cost of living, with rising fuel and food prices and utility bills. In that context, he will have the strong support of Government Members in making it clear to our European partners that large increases in the EU budget would be utterly unacceptable to the British people.

I am very grateful for my hon. Friend’s support. If anything, since December, when Chancellor Merkel and the French, Finnish and Dutch leaders all signed the letter, along with me, the debt situation—the deficit situation—has got worse, so the pressure to make sure that we deliver a sensible settlement for the European budget has got even greater. That is why we will be sticking to our guns.

There is a case for saying that the institutions that Europe put in place after the second world war—and I would include NATO as well as the European Union—have played a role in making sure that we settle our problems around conference tables rather than on the fields of Flanders. To that extent, yes, I think that it is right. [Interruption.] Someone says, “Why not go?” We already have three of the five European Presidents going to Oslo to collect this prize, and I suggested that alongside them should be 27 schoolchildren —one from each country.

I welcome my right hon. Friend’s statement. When there is a danger of eurozone members taking a common position or, indeed, being required to do so, as is the case with the European Central Bank regulation, is it not absolutely essential that he stands up for Britain’s interests and insists on the safeguards that we need to protect our position in the face of a Europe that is increasingly divided between eurozone and non-eurozone countries?

My hon. Friend has absolutely hit the nail on the head. We want the eurozone banking to go ahead, but there are dangers, because if the ECB members voted en bloc in the European Banking Authority, they would automatically have qualified majority voting—that is the problem. That is why the conclusions of the summit include these words:

“An acceptable and balanced solution is needed regarding changes to voting modalities and decisions under the European Banking Authority…Regulation.”

That is very important conclusions language that we fought quite a battle to secure. My point is that I do not want to veto the banking union, but unless this problem is properly sorted—and Britain has a totally legitimate argument about why it needs to be sorted—we cannot allow it to go ahead.

The Prime Minister has said before that he brings something significant to the EU growth party. Can he inform the House what it is?

Among the most important things that Europe can do for growth are trade deals with the fastest growing parts of the world, completing the single market, and deregulating and cutting costs. All those are the agendas that Britain is driving forward and having greater success with than we have had for many years.

On maximising British influence within Europe, in the early days of this Administration the Foreign Secretary gave voice to the aim and ambition of seeing more UK citizens secure positions within the European Commission. Can the Prime Minister give us an update as to how that strategy is working?

We are making some progress on this issue. I discussed it specifically with Martin Schulz, the President of the European Parliament, who wants to see more British people involved in the Commission. I do not believe that it has to do with issues about pay; as I pointed out, Commission officials are rather better paid than members of our own Foreign and Commonwealth Office. However, we are looking at all the potential barriers to make sure that Britain is punching its weight in the Commission and elsewhere.

As the Prime Minister said goodbye to his Chief Whip, did it occur to him that he might have some difficulty persuading the rest of Europe to listen to what he was saying if he could not even convince his own Back Benchers?

This, obviously, was all discussed at great length at the European Council in all sorts of forums. I am delighted to welcome the new Chief Whip, who is in his place and is already doing a great job.

Does my right hon. Friend agree that the Leader of the Opposition’s remarks show how completely hopeless he would be at negotiating anything with the EU since he has no policies and his only strategy is to be best mates with them? Does he also agree that it will be essential, with European banking union, that we put in place safeguards against any financial transactions tax for British banks?

My hon. Friend makes a good point. Do we know where the leader of the Labour party stands on the EU fiscal treaty? We do not know. Do we know where he stands on the financial transactions tax? We have not got a clue. Do we know what he would do about the banking union? We have absolutely no idea. The Opposition have no positive message, but I know what they are up to in Europe. They are members of the European Socialists party, whose president is a Bulgarian who opposes gay pride marches. They have also signed up to scrapping the UK rebate—that is your official policy—and to increasing substantially the EU budget and introducing new EU taxes. They are your mates and that is your policy.

Order. I remind the House and the Prime Minister that I do not have any policy on these matters, so I would be very grateful if he did not involve me in this exchange. Secondly, I gently and politely make the point that we are here to talk about the policies of the Government.

I can certainly give a list of people I did not meet—the parties of the European Socialists party, which include the Polish communists, whom the Opposition sit alongside. They also sit alongside Romanian holocaust deniers, and, as I have said, the party’s Bulgarian president opposes gay pride marches. I will not refer to your mates again, Mr Speaker; they are the hon. Gentleman’s mates.

The whole country will be grateful for what the Prime Minister has done, especially because he has said, if I have understood him correctly, that when he is returned as Prime Minister, without the pesky Liberal Democrats in coalition, he will renegotiate with the European Union and put a referendum to the people in which they can vote yes for the renegotiation or no to come out.

As I was at the European Council meeting, I am afraid that I missed my hon. Friend’s 60th birthday. I am extremely sorry about that, but I hope that he and Mrs Bone got my belated card.

I think that Europe is changing. The deepening of the eurozone, which will inevitably happen as a result of the problems of the single currency, will open up opportunities for a different and better settlement between countries such as Britain and the European Union. We should pursue that. I have said that we should have both strategic and tactical patience, because the priority right now is dealing with the problems of the eurozone and the firefighting that has to take place, but I think it will be possible to draw up that new settlement and then, as I have said, seek fresh consent for that settlement.

On the subject of how to win friends and influence people, there were 15 Heads of State present at a European People’s Party meeting on Thursday night. Having walked away from that group, how many heads of nations did the Prime Minister seek to influence at his dinner later the same evening?

I did not have a dinner that evening, so the hon. Gentleman’s question was wrong. [Interruption.] The dinner was all 27 Heads of State and Heads of Government, and I can inform him that it started at 6 o’clock and went on until 3 am. I remind the hon. Gentleman that, when it comes to mates, he has to explain why his mates want to scrap the UK rebate, increase the EU budget and introduce new EU taxes. If they are your dinner companions, I would rather not turn up.

Did the Prime Minister discuss his plans for an EU referendum at the European Council? He may find an in/out referendum undesirable, but I find his in/in referendum equally unacceptable. Only an in/out referendum will do for the British people and it would be very much in the Prime Minister’s best interests if he stopped resisting it.

I agree with my hon. Friend about many things, but on this one we do not agree. The problem with an in/out referendum is that it would put two options to the British people, which I do not think really complies with what people want. Many people, me included, are not satisfied with the status quo, which is why the “in” option is not acceptable; but many people—also like me—do not want us to leave altogether, because of the importance of the single market to Britain, a trading nation, so they do not want to be out. That is why I think that an in/out referendum is not the right answer.

Even before the budget negotiations have begun, the Prime Minister has threatened to veto them. Does that not say volumes about even his lack of confidence in his own powers of persuasion?

What I have done before these budget negotiations is work together with other European leaders to set out what I think is acceptable. In the letter that we published on 18 December 2010, we said that

“payment appropriations should increase, at most, by no more than inflation over the next financial perspectives.”

In these negotiations we are dealing with taxpayers’ money and we are already a massive net contributor to the European Union. It is right to set out your position and stick to it, knowing that you have a veto if you need to use it.

May I commend the Prime Minister’s decision to stick to his guns and show consistency over the budget by insisting on a real-terms freeze? Does he agree that we will never drive reform in the EU if we continue to give it a blank cheque and allow it to spend whatever it likes?

My hon. Friend is absolutely right. Even if there is tough control over the European budget, as I say there should be, there is plenty of room to ensure that the cohesion countries receive the support that they need as their economies develop, to crack down on the administrative central costs, and to continue to reform the common agricultural policy and reduce the agriculture budget, which still makes up about a third of EU spending. There is plenty that can be done to get more money out of what is already spent and to use it more wisely.

Surely the Prime Minister must be aware that the vast majority of his Back Benchers are clamouring for a referendum. Why does he not get the money from Ashcroft to pay for it? He gives them millions.

I have explained the position on a referendum. I do not think that an in/out referendum is the answer. The vast majority of the British people want us to be in Europe, but to have a better deal in Europe. That is what we stand for.

So, the Prime Minister wants to renegotiate our membership of the EU and put the new terms to a referendum. However, will that be an in/in referendum or will a no vote end Britain’s membership of the EU?

We are getting slightly ahead of ourselves. We need to use the development of the European Union to seek a fresh settlement. There must then be fresh consent for the fresh settlement. There is time to elapse before that can happen because of the immediate firefighting in the European Union, and we can go on discussing it between now and the next election.

We have heard a lot today about protecting British interests, but will the Prime Minister set out how he expects to protect those interests from being harmed by closer European fiscal integration, when he did not even guarantee us a seat at the table for the negotiations?

My view is that it is inevitable that the eurozone countries will have to integrate further. As a country that is not a member of the eurozone, we must recognise that if those countries are to have a working single currency, they will have to make some changes. I therefore do not think that it would be right to stand in the way of everything that they need to do to build a currency that works. However, as that goes ahead, it is important that we safeguard our interests as a member of the European Union and, as I have said, seek a better settlement for the future.

Has my right hon. Friend had the opportunity to see today’s edition of Le Figaro? Its front page declares that punitive taxation has killed the little attractiveness that remained for Paris as a financial centre against the City of London. Will my right hon. Friend continue to be a champion for London?

I have not seen that front page, but given all the other front pages that there have been recently, I think that I should go away and read it at once. It is important that Britain remains attractive for investment, business, enterprise and start-ups. We are in a global race—a competition—and that gives us a head start.

What advice did the Prime Minister seek from the Education Secretary and the third of the Cabinet whose policy it is to withdraw from the European Union before he attended the Council? Is it not the case that if we became the new Norway or Switzerland and had their policies, we would still be net contributors to the EU budget, but have little say over how it was spent, and we would still be bound by the rules of the single market, but have no influence over what those rules said?

I always listen carefully to all my Cabinet colleagues, especially the Education Secretary. However, the Leader of the Opposition has to answer the question himself. The shadow Defence Secretary has said that it is time for a referendum. Is that Labour policy or not?

No, it is not. Well, the right hon. Gentleman has clarified one thing this afternoon. That is very good.

Does the Prime Minister agree that the best way to protect British interests is to strengthen the single market? By doing so, we might find some allies who are interested in a competitive and powerful single market monitored, ironically, by the European Commission.

My hon. Friend is entirely right. In today’s European Union, it is not just the northern countries—the Dutch, the Danes and the British—that are fighting for the single market. Italy is now run by Mario Monti, who is very pro completing the single market; the Spanish, under Mariano Rajoy, support the single market; and the former Baltic states in the east of Europe back this agenda. The balance within the European Council has shifted more in favour of single-market and competitive measures, which is good news for Britain.

The Prime Minister says that he wants a freeze on the EU budget. Does he think his chances of achieving that are greater when he is in the room negotiating or after he has stormed out in a huff?

I have never stormed out of any European negotiations, but what I have done is that when a treaty was on the table that was not in British interests, I vetoed it.

When it comes to the future financing framework, I have studied very closely what the last Labour Prime Minister who went through the process did, in 2005. To start with, he said, “I’m not going to sign up to this new financial framework, because it means losing the British rebate.” But then they gave him a bit of pressure, and he completely backed down and gave up almost half the rebate. In return, he got a promise of a discussion on reforming the common agricultural policy, and that discussion never even properly happened.

Motor manufacturers such as Honda will be very pleased to hear that progress is being made on negotiations with Japan. Does my right hon. Friend agree that only through Britain’s positive engagement in and continuing membership of the EU will we negotiate effective and comprehensive trade agreements?

My hon. Friend is entirely right. If Britain was not at the table, I do not believe a free trade agreement would have much chance at all. There are countries alongside us that are in favour of it, but we are probably one of the most enthusiastic. I met the Japanese equivalent of the CBI last week at No. 10 Downing street with the Business Secretary, and I said that I would push hard for a free trade agreement with Japan. We have got a change in the language of the conclusions to talk about starting the negotiations in the coming months. However, it is hard work pushing and driving that agenda, because many countries would rather not see that happen. We think it is good for Britain. One of our selling points is being the most open trading economy in Europe, and we need to keep that up.

The Prime Minister has said a lot about mates this afternoon. Was there any discussion about the relations between the EU and Russia? Russia’s activities, or intransigence, on Syria have made the situation immensely worse there and infected the situation in the Lebanon. If there was any such discussion, can he explain why his mates—not just the members of Putin’s party but his own Conservative Members of Parliament and two Conservative peers—voted against the resolution at the Parliamentary Assembly of the Council of Europe condemning Russia’s human rights activities?

I am afraid we did not get the apology that we were waiting for. We will have to be very patient.

I am afraid that the hon. Gentleman is wrong on a key detail. The Conservative representatives at the Council did vote for the report to which he refers.

I very much congratulate my right hon. Friend on his work on expanding trade with non-EU countries, but does he share my concern about the EU’s procrastination on completing free trade agreements with countries such as Canada and Singapore?

Good progress is being made on Canada and Singapore, and I believe that as the conclusions of the Council say, the negotiations will be completed “in the coming months”. The bigger challenges will be getting properly started on Japan and the US, which, as two of the world’s biggest economies, have the greatest potential of all.

The Government are committed to resisting the transfer of any further powers to Europe. Given that money is power, will my right hon. Friend commit to resisting any attempts to increase the size of the EU budget and therefore the UK contribution to it?

We are one of the countries in Europe that stand up for fiscal discipline and restrictions on the EU budget. I remind my hon. Friend that the annual budget negotiations are carried out under qualified majority voting. Last year we achieved a real-terms freeze in the European budget, and the year before we did not. Discussions and negotiations are under way for the 2013 budget, but the multi-year framework, which will control the budgets between 2014 and 2020, requires unanimity. That is where we can insist on the greatest possible discipline.

On that point, will the Prime Minister assure the House that he will get the toughest possible deal, particularly on farming policy, given the poor deal for farmers from the revisiting of the Fontainebleau agreement and the review of the budget rebate? We need to ensure that our farmers, who are already greening our economy, get the best possible financial outcome for the next six years.

Obviously we will look carefully at this issue and at how it will affect our farmers. As my hon. Friend knows, the last Government basically disapplied the rebate from the spending on cohesion countries, which had some perverse effects as far as our farmers are concerned. What matters is that we do a good deal for Britain in the round, including our farmers.

As the Prime Minister will know, I wrote to him over the weekend about the European Parliament’s extraordinary two-seat operation between Strasbourg and Brussels, which costs over £1 billion of taxpayers’ money and emits 100,000 tonnes of CO2. Does he agree that the so-called Strasbourg circus is an enormous waste of resources, and at the next Council of Ministers meeting in November will he push for an end to the farce, as in our coalition agreement?

I am grateful to my hon. Friend for raising that issue. It has long been our position that that system should cease and that we should have one seat for the European Parliament, and we continue to make that point.

Labour Members of the European Parliament want my constituents to pay more taxes so that the European Union can spend more of our money. Will my right hon. Friend assure the House that such crackpot ideas from the Labour party will be kicked into touch?

My hon. Friend is absolutely right, and Labour Members who say that that is not the case clearly have not read the policy document of the European Socialists party to which they belong, which calls for scrapping the UK rebate, increasing the budget, and imposing new EU taxes. That is what the Labour Members’ group stands for.

On the subject of influence within the EU, does my right hon. Friend agree that quite a number of countries in the eurozone might benefit from talking to a country that has generated 1 million private sector jobs over the past three or four years?

My hon. Friend makes an important point: there is a big range across Europe in how effectively our labour markets function, and if we look at unemployment rates—particularly youth unemployment— we see that the contrast between some of the best performing countries such as Holland, and the worst such as Spain and Italy, is very marked. The UK is not, I am afraid, among the best performing countries, but we should aim to be.

Many of my constituents tell me that they wish to see the future of this country far less closely tied to that of continental Europe, but they are increasingly cynical about how that will take shape. Will the Prime Minister reassure my constituents that he will lead us in the right direction?

I would say to my hon. Friend’s constituents, as I would say to everybody, that I think Britain benefits from having a positive and strong relationship with our European allies and partners. We are a trading nation and have been throughout our history. Some 50% of our exports go to European countries and we need not only those markets to be open, but to have a say in how the rules of those markets are written. That is in Britain’s interest. As the European Union changes, and particularly as the eurozone becomes a tighter bloc with its own banking and fiscal union, the relationship between those outside the single currency and those inside is clearly going to change. We as a country should be thinking about how we can maximise the interests of the United Kingdom as that happens.

The German Chancellor, Angela Merkel, is reported to have said that there is little point in holding the next EU summit if Britain wields its veto on the budget. Does my right hon. Friend agree that there is also little point in holding a summit if all the countries of Europe voluntarily surrender their vetoes? Is it not right to negotiate with our competitors from a position of strength, and use the tools of influence rather than the tools of effluence favoured by the Leader of the Opposition?

My hon. Friend makes an important point. We obviously need an agreement over time about the future funding of the European Union, and it makes sense to have a discussion about that. I am very clear about where that discussion needs to lead, and my view on that is not going to change. If we can come to an agreement in November, so be it, and if we cannot, so be it—happy to talk, but not happy to spend a lot of money.

The French press are today criticising their own Government, and talking about a financial exile because of punitive tax rates. Does the Prime Minister agree that it would be a good idea for Labour Front Benchers to take out a subscription for some of the French press, so that they understand how significantly poor punitive tax rates are for the economy?

That is an absolutely excellent suggestion. Labour Front Benchers also ought to consider the effect of a financial transactions tax, because that will be pushed ahead by some EU members. It would be a great mistake to start piling on extra taxes—[Interruption.] “Is that our policy?” I have no idea what the policy is of the right hon. Member for Morley and Outwood (Ed Balls). The real problem is that neither does he.

One area that has been missed in the Punch and Judy show that we have seen in the Chamber is the impact on foreign affairs. The Prime Minister spoke about additional measures on Syria. What additional measures is he planning?

A very successful Foreign Affairs Council met before the European Union Council. As I have said, the language on Iran was very tough—if there was not movement on the nuclear issue, the sanctions would be tightened up; and the language and conclusions on Syria were about further steps to put restrictions on the regime. Whether in discussing Syria or Iran, or indeed EU relationships with countries such as India and China, Britain is making a lot of the policy and a lot of the approaches.

All EU members are having to take cuts in their spending domestically. When possible, can we insist that further payments from this country to the EU should be proportionate to the cuts we are taking domestically?

This is an ingenious idea that others are also pursuing. It is a complex picture, because Britain is one of the few net contributor nations. We need to look at the starting point. We are the second largest net contributor, which is why our rebate and our tough position on that policy is completely justified.

The Prime Minister is being accused of being an isolationist, when, in fact, we do not need to be part of the banking union discussions because we are never going to enter the currency. Will he confirm that, on a lot of other points, we are at the heart of the discussion, including on keeping the European budget down?

My hon. Friend makes an extremely intelligent point. The creation of the single currency has created a different dynamic in Europe. Inevitably, if countries are not in and do not want to join the single currency, they will not be involved in every single discussion about the future of the single currency. That is what has created different pathways in the European Union. We must be mature about and accept that fact, and think, “Now we know it, how can we best protect and defend the British interest in the EU?” She makes a very important point.

Much of the discussion this afternoon has been on the need to protect our banking industry from regulation. For the avoidance of doubt, will the Prime Minister confirm that all our other exporting industries, such as pharmaceuticals, energy and oil, will be given the same respect in our negotiating position?

Of course—my hon. Friend makes an important point. I am not saying that we should stand up just for financial services and not for other industries. The industries he mentions are extremely important. However, we account for around 40% of the EU’s financial services, so it is an important industry. I am not a mercantilist, but it is one industry segment in which we have a substantial positive trade balance with the EU. A British Prime Minister, Foreign Secretary or Business Secretary would not be doing their duty if they did not speak up and point out some of the dangers of not having reasonable outcomes on those issues, but my hon. Friend is absolutely right that many other industries benefit from being members of the EU and from ensuring that we are writing fair rules for the single market.

My constituents will be horrified at any suggestion to increase the EU budget or the UK’s contribution to it at a time of such austerity here. I can assure my right hon. Friend that the vast majority of my constituents want him to stick to his guns on the multi-year settlement, to get a good deal for the UK, and to do what is best for the UK. Will he assure my constituents that they will be pleased with the outcome when the time comes?

I can certainly give my hon. Friend the assurance that we will stick to our position on that. I cannot tell him when a deal will be done—it does not have to be done this November. The important point is that the British position on not wanting real-terms increases will stay in place whether the deal is done in 2012, 2013, 2014 or at any point in future. That is the key thing that everyone needs to know.

Thank you, Mr Speaker. Can the eurozone have a banking union that works without that leading to economic and political union too?

I think that the short answer to that question is no. Over time, the more there is a banking union and a fiscal union, the tighter the political union will be drawn, because—for instance—German voters having to stand behind Greek deposits, or French voters having to pay for the restructuring of a Spanish bank are deeply political questions. In my view, as the eurozone deepens its commitments, as is inevitable for a working single currency, there will be pressures for further political union, and for further treaties and treaty changes. That is why I believe it is possible for Britain to seek a new settlement and seek fresh consent on that settlement, but we have to show some patience, because right now the issue in Europe is how to firefight the problems of the eurozone—get down interest rates and get the eurozone economy moving—rather than thinking through all the consequences of banking union and fiscal union in the way that my hon. Friend suggests.

I thank the Prime Minister and all colleagues for their succinctness, which enabled all 49 Back Benchers to contribute in well under an hour.