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EU: Prime Minister’s Speech

Volume 742: debated on Thursday 31 January 2013

Motion to Take Note

Moved by

My Lords, it gives me great pleasure to invite your Lordships’ House to take note of the Prime Minister’s speech on Europe. This was a bold speech about the future of our relationship with the EU, and was well worth waiting for. It may be too much to expect, but I hope that all noble Lords will today join me in welcoming the prospect of a new settlement in Europe, and in particular, the opportunity for the people of this country to have their say on it.

My right honourable friend the Prime Minister set the context for his speech by saying that he spoke as a:

“British Prime Minister with a positive vision for the future of the European Union. A future in which Britain wants, and should want, to play a committed and active part”.

It is well known that my party includes people across the whole spectrum of views on Britain in Europe. However, I believe that the Prime Minister’s plan to negotiate a sustainable basis for the UK to remain in active membership of the EU hits the sweet spot for our party and, I hope, for the whole country.

It is a fact that the financial crisis has exposed the fault lines in the euro, and there have to be changes to allow the eurozone to function. The lesson from history was that monetary union would not survive without deeper union on other fronts, and that is one of the many reasons why the UK will never want to join the euro. The first steps towards banking union have been taken with a single supervisory arrangement, which your Lordships’ House debated last week, but that is just the start of what will be needed to shore up the eurozone.

At the same time, countries outside the eurozone have to protect their own national interests against the development of a large voting bloc, particularly in relation to the single market. We have achieved protections in the context of banking union, at least for now, but the task will get tougher as the eurozone integrates further.

I am sure that those who are designing changes to the eurozone will move heaven and earth to avoid treaty changes; not because they are afraid of the UK, but because they will not want to risk testing popular opinion within the eurozone countries. Therefore, we may not have the opportunity of a treaty through which to negotiate a new way forward. Even if that opportunity does not exist, I believe the Prime Minister is right to pursue the reshaping of how the EU works, not just for us, but for all members.

The Prime Minister put forward five principles as the basis for a new start: the EU should be more competitive; there should be a flexible structure of membership, particularly for those who do not sign up to ever closer union; powers must start to flow back to member states; we need a bigger role for national parliaments; and any new arrangements must be fair for all members, particularly those outside the eurozone. I believe that all but the most ardent of federalists should support these principles. Yesterday, in the other place, the Labour Front Bench supported them and I hope that it will do so again today.

I am sure that some noble Lords today will try to dismiss the Prime Minister's determination to reach a new settlement in Europe as naive or foolish or both. I am sure that some whose careers and livelihoods depend on the EU’s institutions and powers hope that they can swat the UK away like an irritating fly, and carry on as before.

The UK’s concerns are not necessarily those of the majority but they are not held in isolation. Other countries will remain outside the eurozone and will need protection against eurozone bloc voting. Some countries within the eurozone, such as the Netherlands, also question the balance of powers between Brussels and their own democratic institutions. I am sure that many more have concerns about the decline in competitiveness in the EU, even if they do not yet share our view that the answer is less—not more—Europe. Importantly, there are countries, particularly those in the north, that positively want the UK to remain at the table as much as we want to remain there.

Of course, renegotiation will be tough. We cannot take it for granted that we can negotiate our way to a satisfactory relationship with Europe. I am absolutely convinced, however, that the British people must have the final word on whether or not we can remain in the EU, on whatever terms can be achieved. I know that some of your Lordships do not like referenda and believe that it is the role of politicians to make all decisions, but I do not share that view. I believe that the British people have to be consulted on major issues, and the EU and our relationship with it certainly is one of the major issues of our time. I believe that we can trust the British public to reach the correct answer. In recent history the British public have shown their innate common sense when given a referendum.

I hope that those on the Liberal Democrat Benches will not declare against a referendum simply because they might not like the answer. I gently remind them that before the previous election their leader fronted a campaign for what he called a “real referendum on Europe”; namely, an in-out vote.

I am listening very carefully to my noble friend’s impressive speech but, on a point of information, we should be clear that in 2008 at the time of Lisbon, the Liberal Democrats said, and repeated at the general election, that if there was a substantial shift of powers to Europe there should be a referendum. That was the position we took at the election. That is the position that has now been legislated for—just as a point of accuracy.

That is very interesting and we look forward to hearing further from the noble Lord later, but I have seen the videos of Mr Clegg on this subject.

Last week Mr Miliband was quick to say that he was against a referendum but almost immediately his colleagues briefed that he did not want a referendum now—or yet. We can agree on that. The Prime Minister is not promising one now, but in 2017. I will be listening intently to the Benches opposite today in the hope that we will get some clarity on their position. This is not just a debating point. I am not foolish enough to think that a Conservative victory in the next general election is a done deal and hence that my party’s policy will definitely be implemented. The electorate must be left in no doubt about whether and when any Labour Government would give them a say as well.

The scaremongers have been saying that the Prime Minister’s speech has cast a damaging shadow of uncertainty over the UK economy for the next five years. These prophets of doom also predicted, with spectacular inaccuracy, that Britain’s failure to join the euro would be our undoing. In any event, uncertainty was created as soon as the eurozone states faced up to having to work together in a deeper way. We have to protect our national interests so our relationship with the EU inevitably has to change. The Prime Minister is right to be on the front foot on this and to seek a comprehensive way forward.

If the Prime Minister can negotiate a good outcome for the UK, which meets the five principles that he set out, I am sure that the British people will vote to remain in but it is a big “if”. Some of my honourable friends in the other place are engaged in the Fresh Start project and have recently produced the excellent Manifesto for Change. This includes major changes to social and employment rules, in particular being free from the costly working time directive and agency staff rules. It also targets policing and criminal justice laws, agricultural and fisheries policies, the bloated EU budget and further financial services legislation. I hope that my noble friend on the Front Bench will outline what the Government will target. I know that revealing one’s hand is not good strategy in poker but for the sake of the public debate the Government need to be open about what they want to achieve in the national interest.

If the Government achieved most of the Fresh Start agenda, that could create an EU worth staying in but if they achieve significantly less than that, an out vote will seem to many of us like a better choice. Leaving the EU is not my preferred outcome but I am not afraid of the prospect if the deal on offer is substandard. An exit from the EU would not be the end of the world. Three million jobs might well be connected with the 40% or so of the UK’s exports that go to Europe but they are at risk only if, as pointed out by the man who calculated that figure, Professor Iain Begg, we stop trading with the EU. There is no sign that we will, not least because we have a persistent trade deficit with the EU. It is therefore rational for the EU to want to carry on trading with us. It is also not clear that we have to accept the kind of solutions to which Norway and Switzerland have signed up. There are many other countries in the world that trade with the EU without conditions attached.

Some assert that we would lose out on foreign direct investment but there is no evidence for this. International studies show that there is a host of unquantifiable social, political and institutional factors at play when decisions on investment are made. There is a lot more going for the UK than its EU membership and I remind noble Lords that we did not suffer, as was predicted, when we chose to stay out of the euro.

As we have debated several times over the years in your Lordships’ House, there is no definitive study of the economic impact of leaving the EU and successive Governments have refused to commission such a study. The noble Lord, Lord Pearson of Rannoch, who is in his place, has often sought to press Governments to do just that. Professor Begg’s verdict on the impact of exit is that we,

“would probably find that the economic plus or minus is very small”.

That is good enough for me. Exit would not be easy but the consequences need not terrify us into staying locked in a loveless marriage in the EU.

Let me conclude by wishing the Prime Minister the very best of luck in negotiating a new settlement in Europe but at the end of that road the Government must be honest about the quality of the deal available and the extent to which it meets our national interests. There must be no attempt to portray a sow’s ear as a silk purse. A referendum in 2017 is an exciting prospect, but its result will need to stand the test of time and we must be absolutely clear, which we were not in 1975, about exactly what we will get for our vote.

My Lords, I thank the noble Baroness for introducing the debate. Prime Ministers’ jobs are complex: they must lead; they must set the strategic policy direction for the country and the Government; they must optimise support both domestically and with allies abroad; and they are, of course, also party managers. Paramount among these things, however, are the interests of the nation and the reliable and honourable adherence to alliances. For Labour, the only question is the United Kingdom’s interest. We are facing today’s priorities and relying for the setting of those priorities on the good sense of the British public.

The European referendum statement shows that Mr Cameron has failed this key test of leadership—it is party first, and only party. The noble Baroness, Lady Noakes, made the point that the statement struck a sweet spot for the Conservatives. It is populist, certainly. It has been popular with his party and popular with much of the media, and it addresses, I suppose, Mr Cameron’s UKIP Achilles heel. But it is tactically bizarre, even in the unlikely event of the Conservatives being re-elected at the next general election. Detailed questions about what he would seek and what would be enough for him to agree to stay in have not been answered. None of those issues has been either set out or explored.

What we have instead is five years of what I believe will be crippling uncertainty. I declare an interest because I lead a finance business. Investors, I know, avoid uncertainty like the plague and look to de-risk. The longer the period of uncertainty and the greater the uncertainty about de-risking the less likely it is that they will do anything other than withhold their investment.

Mr Cameron’s priority is not, apparently, the triple-dip recession. It is not the lack of growth. It is not the 1 million unemployed young people. It is not the declining purchasing power of lower and middle-income families. It is simply this issue.

The move has been generously described, and I understand why, as sleepwalking out of the EU. However, a sleepwalker is not engaged in a voluntary activity: he does not make a calculation about setting off on his sleepwalk. Mr Cameron is a very sophisticated politician and he knows the nature of his gamble. The only logical explanation for this gamble is either that he has decided that, in all probability, we should leave the EU, or that he is reckless with regard to it happening. However, it is ruinous to British business and will be fatal for the interests of our country.

My Lords, I, too, thank the noble Baroness, Lady Noakes, for this opportunity to reflect on Mr Cameron’s speech last week. The Prime Minister was on that occasion speaking as leader of the Conservative Party, and, on that basis, it was indeed one of the best speeches on the EU delivered by a Conservative leader. It enabled the country to hear from him where he stood on the EU, where he expects to lead his party, and, if the voters give him the opportunity, where he expects to take this country should he get a mandate in 2015.

That is all well and good, one might say, except for the consequences. Broadly, there are three. The first is that by “coming out” so clearly, he has created considerable uncertainty for business, investment and jobs in terms of investment decisions and planning. Only today the London School of Economics has published a report on UK economic growth which points to the UK political process as being the greatest barrier to a virtuous circle of investment. It describes the PM’s decision to seek an in-out referendum as “misguided” because it creates the,

“very uncertainty that will damage investment and productivity right now”.

It points out that we need a more stable environment for investment. This is not improved by adding to policy risk which deters investors worried that the rules might change before their payback begins. This will not only affect the services and manufacturing sectors but adversely impact on financial services too, particularly at a time when the uncertainty of regulation around banking union is still so unclear.

The second consequence is that we have a firm commitment accompanied by a date. The Prime Minister might have done better both by his party and the country to have left things more open. Nailing the date of 2017 to a mast is perhaps unwise when he is not clear as to what exactly is to be renegotiated, with whom and in what manner. We are delighted that he has prioritised multilateral negotiations, working with other, like-minded countries to bring about the kind of changes that we all want in order to make the EU more competitive and fleeter of foot in meeting global challenges. Reform of the EU is not simply a UK priority but is shared across most of the Union. It may have been wiser to accept that the process needed time—conceivably more time than he has allowed himself.

Finally, while we greatly welcome the Prime Minister’s robust rejection of the Norway and Switzerland model, he risks creating greater confusion by not spelling out exactly what we would negotiate for. This Government have gone further than any other in ensuring that significant powers cannot be transferred to the EU by putting in place the European Union Act 2011. This is surely the right way forward, both for the UK and the European Union.

In concluding, I want to answer clearly the question from the noble Baroness, Lady Noakes, on the Liberal Democrat position. We proposed an “in or out” referendum in the previous Parliament against a backdrop of relative stability in both the eurozone and the European Union. It was right for the time. The situation has changed dramatically since then. A new architecture for the eurozone, and consequently for the European Union, is unknown, hence our view that this is not the right time to be putting up these lines.

My Lords, I declare an interest, which is in the register. I want to say one word first about the exercise on the balance of competencies currently being worked on by practically all government departments. Evidence and opinions have been called for in a wide consultation, with a deadline of 28 February for sectors including foreign policy, the internal market and animal health and welfare. This seems to me to be a valuable initiative and highly relevant to the negotiations foreseen in the Prime Minister’s speech, for which it will provide raw material. It is also highly relevant to the question of whether the principle of subsidiarity is being respected, which will no doubt feature in any future settlement or negotiation. Is subsidiarity being respected? We may doubt it.

In his speech the Prime Minister called for “fundamental, far-reaching change”, and the next Conservative manifesto will ask for a mandate from the British people for a Conservative Government, if elected, to negotiate a new settlement with a view to an “in or out” referendum. The Prime Minister states that power must be able to flow back to member states. He wants an EU that is competitive, flexible and fair—don’t we all? Of course, we cannot set out our priorities in detail now because we have to probe the opinions of other member states. In particular, we need to assess whether our priorities are more likely to be achieved by opt-outs or by decisions of the member states as a whole—that some issues could now be left to them. I think that there may some possibilities by the second route. Although a referendum of the British people provides the essential reassurance it is also legitimate to question how the end game will turn out. There could be much dispute on whether the result was good enough, which will make it difficult for the British people to take a clear-cut position on the referendum.

Finally, it is extremely important that we have a better and fairer presentation of European issues to the public, which is not always the case now. I can think of many cases in the media almost every day. Where do we go from here? Forwards, I hope, but I commend an opinion poll in last week’s Sunday Express which showed that 63% of the public considered that the EU issue was a distraction from the real concerns about the economy as a whole and a great majority thought that the United Kingdom would be in the European Union in 10 years’ time. That sounds like the voice of the British people.

My Lords, in March 1990 the European churches gathered in Geneva to celebrate the tearing down of the iron curtain. More than that, however, it celebrated the solidarity of the Christian churches never recognising the fracturing of Europe into two post 1945. That stance was vindicated. Later that year, I walked through the Brandenburg Gate with my German friend, Klaus Kremkau. It was the first time that he had walked through it since he was a young soldier cadet in 1945. Now he was crossing the threshold with an Englishman.

Early in his speech, the Prime Minister notes:

“today the main … purpose … is … not to win peace, but to secure prosperity”.

No one can doubt that, but peace, as we have seen to our horror in the past few years, can never be taken for granted, even in apparently stable states, so the European Union still exists to secure and sustain a lasting peace, without which there can be no prosperity.

The Prime Minister also notes that the British are not somehow un-European. Even in the seventh century, Saint Wilfrid, Saint Benedict Biscop and others proved that as itinerant travellers and missionaries across Europe. Perhaps that is part of what we are called to be now in a more political sense. In other words, Europe needs change. Its institutions are beyond middle age—almost elderly—but good missionary work always starts from within.

The Prime Minister spoke of three challenges and, as we have heard, five principles. I wonder what might be called the foundation of those principles. Here is a starter for two. Catholic social teaching developed the concept of subsidiarity, which became something of a motto of the European movement. Decisions should be made at the most local level possible. Somehow, the spirit behind that has been lost. Subsidiarity can underpin fairness locally, flexibility and even an appropriate passing of power back to member states—three of the Prime Minister’s principles.

Secondly, there is the democratic deficit. There is a feeling that Europe is ruled by the unelected, by bureaucrats. Such a characterisation has been fuelled by Eurosceptics and ruthlessly pursued by the less responsible media. Again, Christian culture has encouraged proper sharing in decision-making. Benedict’s rule argues for consensus, even at the most local level.

What should be our hope for Europe? Economic prosperity, yes, but not at the expense of the rest of the world. Social development, yes, and the Prime Minister hints at that throughout his speech. In the Christian tradition, human flourishing and fulfilment are the ultimate vision. We need economic and social progress, but there is one step more.

Let me return to the less responsible press. Twenty years ago, the Sun printed one of its celebrated headlines—please forgive my language in this Chamber, but I repeat it verbatim—“Up Yours Delors”. It was Jacques Delors who called for a vision founded on a soul for Europe. That remains essential. The greatest risk is colluding with a referendum process that puts us outside the tent. Reform is essential, but we shall achieve it only if we remain inside, working for Europe’s soul.

My Lords, those, both here and overseas, who think that the Prime Minister’s speech was all about getting some exclusive deal for the United Kingdom from the rest of the European Union are starting from entirely the wrong point. The first line of the Prime Minister’s speech was that this speech was,

“about the future of Europe”.

What he is concerned about, and what we should in all parties and sections be concerned about, is giving new direction to a European Union which is today lost in the thickets of the debate about the eurozone—which will continue for a long time, it has not been cured—overcentralisation and general unpopularity. That creates uncertainty which will continue and must be addressed.

To give new direction to that unsatisfactory situation throughout Europe, we need two things. We need colossal intellectual effort, similar to, or perhaps even greater than, that which went into the original Monnetiste ideas in the post-war situation; and we need new friends and allies all around Europe to mobilise the new thinking.

I believe that the friends are there. I think that the European budget experience last autumn showed that many people are determined to have a new approach in Europe. They are to be found in almost every quarter, not just in the smaller ex-satellite countries of eastern and central Europe but in France, Germany, Italy and other great countries.

On the intellectual side, huge new effort will be required. If I may say so, it must be more than diplomatic effort. I very much admire the team inside the Foreign and Commonwealth Office—indeed, some of them are my good friends—but the task now is one for which we will have to draw on the best brains in business, engineering, science, management and, I would hope, all the political parties to bring new direction to the eurozone and new relationships of its members to the central institutions. The task is to show how a modernised European Union can work and how treaties can be amended to allow that. The challenge now is to draw up the architecture for a more flexible, dynamic, democratic European Union which connects to the people. It is a challenge to which all those who are concerned about our position in Europe and the stability of Europe should now turn their efforts.

My Lords, the Prime Minister said in his speech:

“There are always voices saying ‘don’t ask the difficult questions’”.

I do not want to be one of them, so here are my difficult questions for the Prime Minister. First, if he can get a new settlement for Britain, he will campaign for a yes vote in a referendum,

“with all my heart and soul”.

What will he do if only minor concessions, or no concessions at all, are made?

Secondly, many EU leaders recognise that a new Europe built around the eurozone as it becomes more integrated should consider returning some powers to nations and regions. They have also made it perfectly clear that any such changes must apply to all member states; there will be no cherry picking. Is not cherry picking—in other words, a special deal for the UK— exactly what the PM seeks to achieve? Thirdly, some parts of the speech seemed to suggest that the PM might seek to derail the treaty change needed to stabilise the eurozone if he does not get his way on a special deal for the UK. Can we be assured that that absolutely will not be the case?

Fourthly, does the Prime Minister not see that his vision of the EU—

“whose essential foundation is the single market”—

is not shared by any other member of the Union? I refer to what the right reverend Prelate said. Other member states see the European Union as a far more rich entity than that. Is it not obvious that the bulk of the EU is moving in an entirely different direction from that specified by the Prime Minister? Fifthly, and finally, will an in-out referendum still be held by the date specified even if the longer term prospects for the EU are still not clear—which could very well be the case? I hope that the Minister will respond to all those questions in the absence of the Prime Minister.

My Lords, at the end of my noble friend’s speech on behalf of the Liberal Democrats, I heard some laughter from our noble friends on the Conservative Benches. If I recall correctly, she said that this was not the moment, and she was right. Do not listen to her, do not listen to me, listen to the Prime Minister only months ago, when a Motion for a referendum was tabled in the House of Commons and the Conservative party, led by the Prime Minister, voted against it for the reason that it was not right at the moment, that it was a distraction, and that it would distract us from tackling the recession.

The question is not why the Liberal Democrats have changed their mind, because we have held a consistent view throughout; it is why the Prime Minister has changed his mind in a matter of months. That reveals the lie to this whole affair. When a Prime Minister makes a speech, it necessarily contains some politics, but it also has as a primary purpose to contain what is in the best interests of this country. His speech was about politics and nothing else. It was directed not to the nation but to the Conservative Party. It aimed to put a sticking plaster over the gaping and bloody wound that now runs deep into the heart of the Conservative soul between those who see this country’s future in Europe and those who do not. It was also aimed at a second political purpose, which was to cut UKIP off at the pass.

By the way, I agree with my noble friend that it was a good speech. Measured by those purposes, it was a good speech. It was effective and well put together. It had an effect in the short term, but there will be a price to pay in the long term. That is for the simple reason that even were the Prime Minister to return with his arms full of the bounty about to be dished out to him by his European colleagues—I very much doubt that that will be the case—they still would not like it. This is because there is now a virulent Little Englander movement running throughout the Conservative Party. They do not want to renegotiate Europe; they want out altogether. It does not matter what the Prime Minister brings back; they will reject it.

However, he will not bring back much because of this fact. My noble friend Lord Howell is right. The European Union is always about negotiation. There is constant negotiation. It goes on all the time and we should be involved in that. But the difference between Britain and the rest is that we are negotiating wanting to get out while the rest of them are negotiating wanting to get further in. That is the fundamental difference. So the Prime Minister will return with too little to satisfy the Conservative Party. He will have held up our attachment to and concentration on the issue of jobs and getting ourselves out of this recession. He will have damaged investment into this country. He has given huge stimulus to the Scottish National Party, arguing the case for the break-up of the United Kingdom, and he will have set Britain on a path, intentionally or not, when he returns with too little and has to recommend “no” in a referendum which takes this country out of Europe. That would be devastatingly damaging.

Forgive me; in a three-minute speech I do not have time to take interventions. The fact is that the interests of this country have never lain outside Europe. Go back to Pitt, go back to Canning, go back to Churchill, go back to Macmillan—all of them have understood that our engagement in Europe was vital to the future of our country. The Conservative Party—the party of Little Englanders—is taking us away from that. This is folly.

How do I describe a speech that not only fails to solve the problems of the Conservative Party but deepens the problems of our recession, gives encouragement to those who would wish to see the break up of the United Kingdom and also removes our country from Europe? This is the House of Lords so I will say simply that it was deeply inadvisable.

My Lords, the Prime Minister was spot on when he summarised in his excellent speech that the key priorities of the European Union are peace and prosperity. We have had nearly 70 years of peace and we have had free movement of people and Europe is our biggest trading partner. So we should never take any of this for granted and I thank the noble Baroness, Lady Noakes, for initiating this debate.

However, the European project has had, right from the beginning, this utopian idea of a fully integrated United States of Europe. The euro, which we thankfully did not join, was a step too far that has demonstrated that the dream of a federal Europe cannot be realised. One size cannot fit all, and the only way that Europe can function in the future on a long-term basis is if there is full fiscal union and full monetary integration. These things can only happen if there is a surrender of sovereignty by eurozone members, so it can then be a true federal state like the United States of America or India. Although there may be a lull at the moment, the eurozone crisis has not gone away. This could be the lull before the storm. If the euro disintegrates, let us talk about referendums then.

We have lost a sense of balance and perspective in Europe. The European political system is frankly useless. We have MEPs who are completely disconnected. Most people in this country—and, I suspect, many noble Lords in this House—cannot name their MEPs. Many would not even be able to name one. The MEPs themselves have no connection with the so-called regions that they represent. It is nothing like the connection that MPs have with their constituencies. There is a disconnect. The Prime Minister’s speech did not touch on this.

There is also this ludicrous wholesale movement of the European Parliament between Brussels and Strasbourg. This sort of inefficiency irks us in this country, let alone things like the ridiculous working time directive. We are an open country and anything that curbs our sense of independence and openness makes our citizens want to run a mile.

There are restrictions in being part of Europe—not just financial ones. Look at the red tape, the regulations and the delays. The EU-India free trade agreement still has not happened after five years. If we had been able to negotiate a free trade agreement directly with India, it would have happened a long time ago.

We have already opted out of lots in Europe. We are not part of Schengen or the euro. But do we want to be a Norway or a Switzerland? We want to be at the top table and still remain a gateway to Europe and an integral part of the European Union. We need to renegotiate, as the Prime Minister has said, and then, if we do it on sensible terms, as the noble Lord, Lord Williamson, said, people will want to stay in Europe. We do not have to have the binary way of thinking: in or out.

To conclude, the European Union is fundamentally about peace and prosperity. Let us not lose sight of that and let us never take it for granted.

My Lords, there seems to be an irony at the heart of the Prime Minister’s speech on the issue of sovereignty. He asserts that it is,

“national parliaments, which are, and will remain, the true source of real democratic legitimacy and accountability in the EU”.

At the same time, he does not appear to trust our own national Parliament at Westminster to judge what kind of relationship we should have with the Union. The decisions of this Parliament to approve each of the treaties that govern our membership, from the European Communities Act of 1972, which I helped steer through the House of Commons, to the Lisbon treaty in 2009, are perceived as illegitimate.

The Prime Minister says that,

“democratic consent for the EU is now wafer-thin”,

in Britain, and that the people have had “little choice” over the endorsement of successive treaties. Is it really of no consequence that, at each stage, a majority of parliamentarians supported our membership on the basis of treaties negotiated by democratically elected Governments? Is it irrelevant today that a clear majority of MPs elected to the House of Commons wish Britain to stay in the Union and do not support his proposed renegotiation of our membership?

I would like to think that I am wrong in suspecting that the Prime Minister’s sudden conversion to the merits of a referendum is less about occupying the moral high ground of democratic consent than a search for a means to overcome the problems of internal party management. At the risk of appearing discourteous, I and some of my colleagues who are old enough to remember the complicated Wilson European era between 1967 and 1975, will recognise a distinct pattern of Wilsonian behaviour which I fear may be beginning to infect our Prime Minister in this context.

There is another irony on this particular subject. If it is,

“national parliaments, which are, and will remain, the true source of real democratic legitimacy and accountability in the EU”,

one wonders why the Prime Minister did not give his Bloomberg speech in the House of Commons rather than in a high-tech conference room in the City. One wonders whether it is because, as he said in his speech, it is national parliaments,

“which instil proper respect—even fear—into national leaders”.

In justifying his promise of a referendum in the next Parliament if the Conservative Party gains an absolute majority at the next general election, the Prime Minister said:

“A vote today between the status quo and leaving would be an entirely false choice”.

I disagree. Although I am no enthusiast for referenda and do not advocate one, it seems to me that at any time the choice between the status quo and a clearly defined alternative in the here and now—in this case whether to stay in or to leave the European Union as it actually exists and operates—is a straightforward proposition. I do not, however, believe that a referendum is the best way to address that question. As the Prime Minister said in his speech, our own national Parliament, not a widely consulted referendum, is the true source of real democratic legitimacy and accountability in the European Union. It was so in 1972 and is so today, and to introduce, in this particular context, the concept of a referendum does not serve the purpose of the Prime Minister, the Government or anybody else.

My Lords, the Prime Minister’s speech went down well with my very conservative mother, who celebrated her 100th birthday on the morning that he delivered it. I myself found quite a lot to commend in the analysis of what is wrong with the functioning of the European Union, but I wish that he had heeded Rab Butler’s dictum that politics is the art of the possible. The road he has taken for achieving the improvements he seeks is a road that leads to where he says he does not want to go—to Britain’s exit from the European Union.

When President Hollande told his cabinet that he wished Britain to stay at the heart of Europe, his Ministers hardly needed reminding that that could not be at any price. France is not alone in taking that view. David Cameron should take seriously what Poland’s foreign minister, Radoslaw Sikorski, spelled out in bold language in his Blenheim speech last September.

The Prime Minister reminds us in his speech that history has often proved heretics right. But one proposition, which he admits is heretical, is a heresy too far for most if not all of his European partners. He attacks the commitment of member states enshrined in the European treaty to lay the foundations of an ever closer union among the peoples of Europe. He respects the right of others to hold to that commitment but he says that that is not the objective for Britain, and that it may not be the objective of others, either.

However, attacking the founding principle of the Union is not the recommended way of seeking the indulgence of fellow member states, which is what he now needs. Why should they feel bound to meet the demands of a fellow member who rejects the club’s primary objective? Therein lays the dilemma he has created for himself. The price he must demand from his European partners in order to satisfy his Eurosceptic Back-Benchers and constituents is a price that the European partners will almost certainly not be prepared to pay.

However, he now has the bit between his teeth. He gallops around the Union with all the zeal—though happily not the belligerence—of Charlemagne seeking to bring a Carolingian renaissance to Europe. But David Cameron is no Charlemagne. Rather, he is the man of La Mancha, dreaming his impossible dreams and fighting his invincible foes; dreaming of treaties popping open at his command like champagne corks at a wedding reception; ready to fight the invincible foes drawn up on his Back Benches, waiting to fall on him when he fails to deliver what they believe he promised when they cheered him to the rafters last week. And then will he hear the ghostly voice of Andrew Bonar Law proclaiming: “I must follow them. I am their leader”?

As to the referendum, I happen to believe that the people will vote to stay in the European Union. We are a people, for better or for worse, much wedded to the status quo, as previous referendums demonstrated. If the case is well made that the advantages of staying far outweigh any perceived advantages of leaving, that, I believe, can and probably will be the result. But, in the mean time, the damage done to our relationships with our European partners will take long to repair, and confidence in us as members of the Union will not quickly be regained. That will be a task, I hope, that a future Labour Government will take up with enthusiasm and determination.

I wish the Prime Minister would not now be leading us down this long, dark, uncertain alley. Lord Birkenhead once said of Stanley Baldwin, “I think he’s mad”. He added:

“He simply takes one jump in the dark, looks around, and then takes another”.

If the Prime Minister has forgotten Rab Butler, he should at least seek to avoid being branded another Baldwin.

My Lords, it is an honour and privilege to follow the noble Lord, Lord Grenfell, in his witty and perceptive remarks. He and others have been right to suggest that the British people, in their hearts, know what the European Union has contributed to the continent of Europe: the end of the civil wars that have lasted for centuries. There is no need to win peace, but there is every need to sustain and support it, and to enable Europe not only to maintain internal peace but to adopt a peace-making role in the wider global community to which we belong.

The Prime Minister’s speech seemed to me to be clear in neither its goals nor its recommended process for changing the Union. The tone suggested that he was not looking for reform but for revolution. That is not the way in which democratic countries operate. We have seen considerable changes in the way in which Europe governs itself since it was formed. We have seen enlargement. We have seen the enthusiasm of other countries to become part of it. We in Britain have fostered that enthusiasm. As to the objectives and process, however, the Prime Minister had very little clue. He talked in general, unimpeachable terms about greater democracy, suggesting perhaps that national Parliaments should have a greater role. I question how 28 national Parliaments could decide for themselves, without some more representative body, how to deal with the working time directive, for example. Many of these national Parliaments believe that the working time directive is an extremely important part of the advance of social development in the Union. It is not all about achieving prosperity at the cost of the life standards of those who work. That seems to be the clear implication of those who are trying to suggest that the working time directive is nonsense.

As to process, the gradualism which we have seen has delivered substantial changes for the better. We now have qualified majority voting in the Council. We now have co-decision-making with the European Parliament. It makes no sense to ridicule that shaping of the expressions of interest of the British people and all the other peoples of the European Union. The European Parliament is the democratic foundation. We need to go further and make sure that other institutions are elected in a not dissimilar way.

My Lords, the Prime Minister has given notice that we want to invoke Article 48 of the treaty, and change the treaty which everybody sees as their treaty. Therefore, other Governments will now be trying to work out precisely what we might want.

On the five principles set out in the speech and listed by the noble Baroness, Lady Noakes, nothing that the Prime Minister said on competitiveness cannot be done inside the Council and inside the present treaty. The Monti report sets out what should be done and we do not need to change the treaty to do it.

On democratic accountability, the noble and learned Lord, Lord Howe of Aberavon, gets it right. I would add that I personally would find it offensive if any EU treaty should purport to lay down how a Government should be held accountable by their national Parliament.

On the fairness agenda, the noble Baroness, Lady Noakes, got it right. The aim is to try to ensure that, when the dwindling band of euro-outs do not constitute a blocking minority, they can still block in Council. I would have thought that the Prime Minister would have learned in the middle of the night in the European Council in December 2011 that it is not possible to do that. To get all member states to agree, and to entrench in the treaty, that the UK should have a blocking veto seems completely impossible.

On the fourth principle, that we should abandon the one-size-fits-all approach, the fact is that it was abandoned 21 years ago at Maastricht. EMU, Schengen, fiscal union, banking union—flexibility exists, and there is no attempt to force everybody into the same, rigid pattern.

The last of the Prime Minister’s principles was flow-back—the return of powers. That is in the treaty already, in Article 48. But what exactly do we want to flow back? The only example given was the working time directive, which is nothing to do with the treaty. That is Council business. If we want to change it, we must raise it in the Council.

So how are Governments in other capitals interpreting all this? I guess that they think that it is more to do with party management, and they understand that. But we are asking them to change their treaty, and I very much fear that the noble Lord, Lord Howell of Guildford, will be proved wrong; I wish that he was going to be proved right, but I think that the noble Lord, Lord Williamson, is correct that the audit exercise here in Whitehall is crucially important. That is going to be the foundation of the Government’s negotiating position, and I very much fear that it will be a demand for a series of opt-outs: a bout of cherry-picking from the treaty.

That would be unprecedented. There has never been a retrospective opt-out. Opt-outs are invoked when most want to go forward and somebody does not want to go forward. An opt-out has never been invoked because somebody wants to go backward. If that is the position in which we find ourselves after 2015—arguing that we want everybody else to carry on if they want to, but we want to take bits back—then we may be in the awkward “blackmailing” scenario to which the noble Baroness, Lady Noakes, referred.

I am afraid that other Governments will not agree, that it will not work, and that they will tend to say, “Make your minds up: in or out. No unravelling. Stop wasting our time. We have got work to do. Solve your domestic problem or invoke Article 50 and get out”.

My Lords, I believe that the Prime Minister’s speech was brave and far reaching. He made it clear that his view and his preference was that Britain should remain a full, active member of the EU. I agree, but I emphasise the term “preference” rather than the words “predetermined” or “inevitable”. As the Financial Times said, a whole confluence of trends has made a referendum inevitable: the increasing scepticism of the British people, the changing nature of the EU and the fact that we have not had a referendum since 1975. Some people call this a gamble. But democracy is sometimes a gamble: you do not know the outcome when you call an election. One of the worst features of the EU has been that it only welcomes referendums that produce the right result. My noble friend Lord Ashdown asked why, if the Prime Minister rejects a referendum in this Parliament, we should have one in the next? There is a slight problem, however. We are in a coalition with him and they are not likely to allow a referendum in this Parliament.

The Prime Minister’s proposals are designed to improve and strengthen Europe’s competitiveness, as my noble and learned friend Lord Howe said. There is a challenge; it requires improvement. That is why what he said is right. It is in Europe’s interest as well as ours that these changes should be made. The single market is valuable, but it should not require everything to be harmonised in the search for, as the Prime Minister put it,

“some unattainable and infinitely level playing field”.

The Prime Minister rightly wants to prevent the integration of the eurozone fragmenting the single market and discriminating against non-eurozone countries. That is an entirely reasonable and right affirmation of our natural interest.

The Prime Minister said in his speech that the single market,

“is the principal reason for our membership of the EU.”

That is one of the problems; that is what Europeans dislike. As Jacques Delors said the other day,

“The British are solely concerned about their economic interests … If the British cannot accept the trend towards more integration in Europe, we can nevertheless remain friends, but on a different basis”.

He went on to suggest a free trade area.

We do want the single market, but not at any price. We could have access to it with the free trade areas suggested by Delors. Of course, we would not be setting the rules, any more than Germany would be setting the rules of the single market in Britain—and Britain is now Germany’s most important trading partner. Outside the EU, Britain is not going to become an insignificant nobody. The US and the EU will still want us as an ally.

Forty-one years ago I made my maiden speech in the House of Commons, supporting our membership of the European Economic Community. I quoted Lord Rosebery about the 1707 Act of Union, when he said he wondered what affection might grow out of that union. I wondered what affection might grow out of our entry into the EEC. But I was completely wrong. As the noble Baroness, Lady Noakes, said, this is not just a loveless marriage but, one might add, a quarrelsome one. If there is no agreement on what the future of the marriage means, then it would be better eventually to separate and, as Delors said, remain friends and move on.

My Lords, the House is grateful to the noble Baroness, Lady Noakes. For much of the first 10 pages of his 13-page, portentous speech, I would agree with the Prime Minister. It should follow from his early arguments in favour of our interests in Europe that the prize of future economic prosperity for Britain is bigger than any one Government’s transient polling problems with a rival minority party, or the Prime Minister’s unwillingness to face down the militant Europhobes in his own party, as my noble friend Lord Kinnock put it this week.

It should follow, but it does not. On page 11 of the speech the die is cast and the Rubicon is crossed. If the Conservatives win the next election—and we on this side will do all in our power to make that an impossible “if”—then there will be an in-out referendum that will put, I believe, our whole economic future at grievous risk. Why? Why would the Government want to have a lengthy period of uncertainty hanging over the thousands of British businesses and their workforces whose job it is to sell into the European Union? Why would they ratchet up that uncertainty, at a time of double-dip, nudging triple-dip, recession?

Those businesses depend on Britain being a leading, influential member of the EU, pushing for day-to-day reform and growth, not a semi-detached, bags packed, ready to go, peripheral member. Why would the Prime Minister pay so much attention to those Eurosceptic friends who tell him that Britain would do just as well outside the EU, especially if we concentrate on trade with the emerging BRIC countries instead? Yes, the BRIC countries are strengthening, but the World Bank’s latest figures on GDP per capita must give us some much-needed perspective. GDP per capita for the UK is $39,000. For China, it is $5,000; for India, it is below $2,000. In order to grow out of this recession the UK needs to find the scale of export market that the BRIC countries at present cannot provide and which the European Union can. The BRIC countries together do not have the buying power of France and Germany alone.

Why would the Prime Minister risk the special relationship with the United States, as he second-guesses the proposed scale of treaty change that may never come about? I know that diplomatic language was used last week when the White House pleaded with the Government not to come out of Europe, but translated, President Obama is saying, “Are you all nuts? Has drink been taken?”. Why would the Prime Minister take such a gamble with our national interest? His speech should have stopped at page 10.

My Lords, I begin by thanking my noble friend Lady Noakes for having obtained this extraordinarily topical debate. There are three things in the speech on which I agree with the Prime Minister. First, Britain should continue to be a member of the European Union. Secondly, there are a number of areas in which the European Union’s institutions and policies are in need of reform. Thirdly, the relationship between this country and the eurozone will have to be watched with great care as the eurozone develops. A good deal to protect this country and therefore the City of London from the impact of the banking union was achieved at last December’s European Council, but there will be a need for continued vigilance.

Where I am confused by the speech is that the Prime Minister combines two different approaches to achieving his objectives. At one level he is suggesting that there should be a multilateral approach whereby, as he says, the changes would be,

“for the entire EU, not just for Britain”.

At others he is saying that there would be a unilateral negotiation to establish a new relationship for Britain. This approach has to be seen in the light of the Prime Minister’s discussion of his principle of flexibility. At first sight the concept of flexibility seems desirable, as suggesting that the European Union should not be set in concrete but should be allowed to develop as conditions develop. However, if we examine the speech more closely, it suggests that greater flexibility means greater freedom for member states to,

“pick and choose on the basis of what your nation needs”.

I believe that there is an opportunity to make progress in reform if we follow the multilateral route. My own experience meeting chairmen of European Union committees of other national parliaments suggests that there is interest in a collective approach. There are obvious targets, but other targets for reform may well result from the progress in the next two years of the “balance of competences” exercise which, as we know, is being paralleled in the Netherlands. That may reveal areas where there is no clear European value added—the converse of subsidiarity—and areas in which policies should be modified or responsibility returned to member states. The article by Guido Westerwelle in yesterday's Times seems to suggest that this approach would be welcomed in Germany, while the alternative of unilateral “cherry-picking” would be rejected.

There is not time to discuss the case for a referendum, which does not seem to be made unless there were to be a treaty change which transferred significant powers to Brussels. I was opposed at the time to the 1975 referendum but I have to say that, when it came, I much enjoyed it and I made a number of friends during the campaign. Perhaps the remarkable movement in voting opinion suggested that the process of education which a referendum provides is of great importance.

The speech was that of a party leader, not a Prime Minister. What interests me, and, I suspect, interests the country, is what the Prime Minister is going to say when the European Council meets in the summer and, we are told, President Hollande and Chancellor Merkel will be proposing changes in the eurozone. Those changes are essential due to the economic situation—you have only to see the results in America. This economic global situation is still very serious and we need to encourage that process of reform in order to keep the eurozone viable. That is essential in the British interest.

I hope that the coalition will be able to put forward a sensible negotiating position. I suggest that it should be the following. There is no need for an intergovernmental conference but there will be a need for treaty change to reform the eurozone. We in Britain will be helpful in that process. Within the European Council we will contribute to unanimity where there is to be an increase in integration for the eurozone countries. Such treaty amendment would come under the significant clause in the very sensible legislation passed in this Parliament in 2011 allowing for a referendum where there is a transfer of sovereignty which affects this country. However, these transfers of sovereignty will not affect this country and therefore there does not have to be a referendum. That is a practical new idea and a negotiating stance which should be put forward this summer.

At the same time, we must argue—and it is perfectly rational to do so—that you cannot have much greater integration of the eurozone countries without there being a profound impact on the single market and indeed on other aspects of the European Union. That is not a selfish or a foolish view; it is a serious view, and it ought to be represented by some of the diplomats in this House a little more frequently. The fact is that in that debate we will put forward issues. It has been rightly said that it has already been addressed in part, but not sufficiently, in the banking union. If the eurozone countries were to vote en bloc in the single market, as they wanted to do in the banking union, that would have a profound effect. It would mean that all the voting—all the weighting—would be unanimous, even if there were disagreement within the eurozone. That is a profound change.

I believe that the way to deal with this is not with British exceptionalism; it is to accept that the single market needs to be restructured at the same time as there is reform of the eurozone. The best and simplest way of doing that would be to take one single initial step—to ensure that Norway, Iceland and Liechtenstein, which are part of the EEA treaty, which has already separated out the single market from all the other aspects of the treaties, are invited in as full members. That would be a logical development. It would be a recognition of the fact that there are other European countries with interests and involvements in the single market, and it would ensure that Britain was not necessarily always alone because it was outside the eurozone. That is not an exceptionalist position. I believe that it could be argued for and it would be a sensible renegotiation—one which should not wait until after a general election which the Conservative Party may or may not win, but one which should happen now, in the present. That position should be put forward. There are other aspects of the single market that similarly should be addressed.

My Lords, my noble friend Lady Noakes rightly emphasised the central importance of the Prime Minister’s five principles, but I hope that they are more than just words and aspirations. I believe that they should form the bottom line of our negotiations in the months ahead. We must start and finish with them, not drawing down or clawing back towards them but building up within them.

However, we should be under no illusion from past experience that when the referendum eventually arrives there may still be no progress in negotiation, and that without a positive alternative the choice might still, in the Prime Minister’s words, be false. We must therefore, at the same time, urgently explore alternatives.

We live today in a network world. Tomorrow’s relationships will not be between blocs but between peoples and interests and common values offering new trading opportunities and new markets. In this regard, a refreshed, refunded and re-empowered Commonwealth, bound together not by wealth or military might but by shared values in democracy, the rule of law and human rights, embracing significant economic players such as India, Canada, Australia, South Africa, and Singapore, could have enormous potential. We would be going with the flow of our island history and the choice at a referendum would at least then be a real one.

I wish the renegotiations well but, if the principles are not achieved, I will have no qualms in campaigning and voting no. Of course we could survive and prosper outside the EU; to argue otherwise is to stray into the wilder realms of EU propaganda. But that is not the real question. Whether it is in our national interest is what matters—and that is not just about wealth.

Europe is changing and so are we. The flood of the tide is with us. We must take it.

My Lords, it is pretty clear that European Union social and employment laws are being lined up in the Prime Minister’s gun sight. He has made no secret of his wish to push the single market much more into a free trade zone, probably on NAFTA lines. If that line is pursued, trade unions in Europe and many Governments, of whatever political persuasion, will take the contrary view and will be determined to preserve a single market that has some employment and social standards within it.

Mrs Thatcher recognised the need for some social standards when she agreed that health and safety would be included in the Single Market Act—from which, by the way, comes the much derided working time directive. I wish that people would look at this in a bit more detail. Britain has an opt-out from the 48-hour rule. Fourteen other countries have opt-outs from specific parts of that directive. The one bit that really matters is the entitlement to four weeks’ paid holiday, from which 6 million British workers benefit. Is the Prime Minister perhaps proposing to take that back? I do not think that he will. You could go on into Social Chapter territory on equality and equal pay. Should the single market not have equal pay provisions for the new countries, and so on? Should it not have a voice in European works councils and through the information and consultation arrangements? Are we saying that, if we can do what we want, others can too, so undercutting our interests?

The Government can take away the rights of British workers that come from British law. They have done so recently. Three million British workers have been removed from the scope of unfair dismissal legislation. However, these European-based rights are a bulwark for workers in this single market. I warn noble Lords: if the Government are successful in an adventure of this kind, the response will be protectionism, just as it is in NAFTA, with American unions influencing the Democratic Party—the major obstacle to an EU/US free trade agreement. So be careful what you wish for. In the mean time, Europe’s unions are already on notice that they will have to fight with their Governments against any renationalisation of employment and social policy.

My Lords, I want to address a question to my noble friends in the Conservative Party, and it goes to the root of the whole approach to Europe.

The Conservative Party has traditionally been the party of law and order. It always seemed to me that the Conservative Party was at its best when its approach was pragmatic and not ideological. However, I find it very hard to reconcile that view with the attitude of the Prime Minister and the party to the block opt-out from the justice and home affairs jurisdiction of the European Union.

I hope that my Conservative friends will look at the evidence, because a lot of the evidence given to the Hannay committee has already been published. What emerges from it is that the evidence overwhelmingly rejects the idea of the opt-out. As far as policing is concerned, this is sheer common sense. More and more crime—ordinary crime and terrorism threats—is cross-border, and the answer to that is not national police reactions but cross-border policing. That is very much common sense. Think what we would lose.

The European arrest warrant has resulted in an enormous amount of time-saving and improvement in getting our criminals back from abroad, and criminals in this country back to their own countries. It has had its flaws, but most of them have been cured, as the Scott Baker report showed. We can improve it with further amendments if we are part of it.

Dominic Raab, MP, has said that a bilateral arrangement would be just as good as cross-border policing. Do my noble friends in the Conservative Party really believe that? As regards the European arrest warrant, will we have 26 separate extradition treaties with our colleagues? The whole idea is absurd. What would we lose? We would lose our position in Europol and all the successes that cross-border co-operation has so far achieved.

I therefore hope that they will look at the evidence and will approach the matter pragmatically. It seems to me that the evidence is—and it makes common sense—that the mass opt-out and bilateral approach will be a severe handicap in our fight against crime and terrorism. Is the Conservative Party truly ready to prejudice these aims of fighting against crime and terrorism for the sake of an ideological, visceral dislike of Brussels?

My Lords, I, too, thank my noble friend Lady Noakes for introducing this debate.

The Prime Minister sought to bring together the divergent views which existed within the Conservative Party, but it remains to be seen how successful that will prove to be over the coming months and years. I welcome the Prime Minister’s continued commitment to continued membership of the European Union, his acknowledgement of its achievements and his view that its original objectives of peace and reconciliation should not be taken for granted. Although he believes that the overriding purpose of the Union is now not to win peace but to secure prosperity, the two still go together, as the right reverend Prelate the Bishop of Wakefield made clear this morning. The prospect of EU membership remains a powerful motivation in those parts of the continent where the ideals of peace and democracy have only recently been or are still to be achieved. For them and for others the European Union is more than just a trade deal.

The Prime Minister recognises that some of the changes he wants can be achieved by amendments to existing European legislation, but he also states clearly that he wants treaty change, and I believe that this may be more difficult. We seem to believe that we have a great opportunity to achieve treaty change for our benefit because the eurozone member states want to make changes for the economic governance of the eurozone. Having lectured them on the need to “get a grip”, as I believe the phrase was, and sort themselves out so that uncertainty no longer affects the United Kingdom, I wonder how welcome the prospect of wholesale treaty change and a review will be.

Will the Minister say whether account has been taken of the procedures by which we are bound under the treaties with regard to treaty change, which require conventions and intergovernmental conferences unless it is not significant? I presume that the Prime Minister thinks that he is going for something significant. The timing is important, because until the process is complete how will the British people know what they are voting for or against?

We will not get our own way in negotiations by giving the impression that our partners need us more or as much as we need them. The tone we apply to our partners also has to change. The Government would do well to remind themselves of what the Polish Foreign Minister said, which was already referred to by the noble Lord, Lord Grenfell, that,

“don’t expect us to help you wreck or paralyse the EU”.

Perhaps more controversially, the Conservative Party needs a rapprochement with our natural allies in the EPP. If we can govern in coalition with the Liberal Democrats, surely we can have a sensible relationship in the EU with the EPP.

I fear that the demands of those who want a trade deal with no strings—all benefits and no burdens—will increase no matter what the Prime Minister announces, whatever and whenever he wishes to negotiate. History has proved them insatiable; UKIP policy is not the policy of the Conservative Party and my noble friend knows from her previous incarnation that people should not stand for election as Conservatives using the Tory party as an umbrella for otherwise unelectable UKIP views.

If the UK is to stay in the EU, as the Prime Minister wishes, he has to start the fight now, otherwise we will find ourselves out of the European Union as a result of an uncontrolled drift in that direction.

My Lords, I, too, thank the noble Baroness, Lady Noakes, for introducing this debate today. I will address one very specific point about the Prime Minister’s speech that raises a serious constitutional issue around the Civil Service.

In the passage dealing with a possible in-out referendum, the Prime Minister said,

“Legislation will be drafted before the next election. And if a Conservative Government is elected we will introduce the enabling legislation immediately and pass it by the end of that year”.

The difficult point is the commitment that the legislation is drafted before the next election. That is difficult because it is clear that the policy is not government policy or coalition policy. It is specifically Conservative Party policy. Noble Lords on the Liberal Democrat Benches have made that very clear today.

That raises the question of who will draft the legislation before the next election. If it were to be done by lawyers independent of the Government, there would be no problem. However, of course, all legislation in this country is drafted by the parliamentary draftsmen, and it would be an entirely improper use of these civil servants for the Conservative Party to instruct them to undertake this work—which is certainly not coalition Government work—before the next election.

If the Prime Minister and the Conservative Party plan to use the Civil Service for this purpose, they must think again, otherwise why should not the other party of Government, the Liberal Democrats, ask for completely different legislation to be drafted before the next election? Why should not my own party, the Labour Party, also ask for draft legislation to be prepared? After all, according to current polls we are more likely to win the next election.

This is a coalition Government, as we are reminded over and over again. They are not a Conservative Government, and they have to instruct the Civil Service as the Government of the day, not as a political party. Of course, it is perfectly reasonable and right for the Prime Minister to say that he would expect the legislation to be drafted, but if he wants it done by the civil servants, that has to be done after an election that his party has won. The Prime Minister must recognise that he is Prime Minister because he is in a coalition, not because his party won a majority at the 2010 election.

My Lords, I very much thank my noble friend Lady Noakes for raising this debate on a most important subject. I also thank the noble Baroness, Lady Symons of Vernham Dean, for raising a most disturbing constitutional point, to which I hope the Minister will be able to give us at least a preliminary response today.

I was very glad that the Prime Minister emphasised his apparent desire to remain a member of the Union. He said that repeatedly. Of course, he did not bring himself to say “full-hearted member”, which was in the original Conservative manifesto that we remember from many years ago. Apart from some limpid support from a few Czech politicians, the UK stands chillingly alone yet again in this chauvinistic posture.

Despite the eurozone crisis last year, most new member states are anxious to join in the euro, which they see remains a strong international currency, unlike sterling. That is one very important point that we have to acknowledge as we now see the eurozone economy and markets recovering. Instead of getting on with strengthening the Union to create a greater and greater collective sovereignty for all the members, which of course remain individual sovereign countries as well, a small number of witless—I am sorry to use that word—Tory MPs, scared of the euro and of UKIP in equal measure, have forced a foolish PM to abandon his own exhortation five years ago for his party to stop banging on about Europe all the time.

Struggling, therefore, to contain the atavistic forces that he has now unleashed, Mr Cameron will henceforth lead a country teetering on the brink of resolving its incoherent European policies in favour of either long-term half-membership or perhaps complete separation. The others are by now getting so fed up with the antics coming from Britain from one of the parties in the coalition that the bad member of the club is now disliked more and more. They may one day even invoke the Lisbon treaty machinery to ask us to leave. We have not reached that point yet and they are happy to go into discussions about so-called reform.

I am very glad to see, in contrast, that the Deputy Prime Minister is not going along with all this nonsense about an in-out referendum, to be promulgated many years before any real negotiations begin. The public must by now be thoroughly bemused by the twists and turns of the superficial referendumitis arguments by all politicians of all parties, with the dubious exception of Mr Nigel Farage and his colleagues.

My right honourable friend has clarified the latest position in asserting that it makes sense to wait before suggesting such a drastic step, since, sadly, we still have the very unappetising EU Act of 2011 on the statute book. After all, even a dubiously worded referendum at some stage in the future would be dealing, presumably, with powers returning to the UK rather than going away, were such a negotiation to be feasible, which is, as Ken Clarke said in the launch yesterday, a big “if”.

Parliament is constantly undermined. Our Conservative colleagues always say that they admire and respect history. Why do they undermine it by always talking about referendums when we made all the major decisions in British history without establishing Parliament’s authority again and again. That is what we need to do in this country.

Finally, why is it that myopic Tory politicians strongly approve of British companies being international, even to the extent sometimes of being slack on paying national taxes, but believe that countries have to be national only? This is a peculiar division and we need more clarification.

My Lords, I suggest that the Prime Minister's speech is a curate's egg—some good some bad. I include among the bad elements, the commitment to a referendum on a fixed timetable many years ahead on what may well turn out to be a false premise; namely, that wholesale treaty reform will be called for by others in a federating sense. That is not likely. They are more likely to go for rather modest changes to meet the requirements of the eurozone, so I regard that as unwise.

In one speech, the Prime Minister created a whole string of known unknowns. He should not have been playing Russian roulette with major national assets such as membership. I entirely see what the noble Baroness, Lady Noakes—I welcome her initiative in choosing this debate—said was not the end of the world. But nothing done by politicians has ever been the end of the world, yet. That does not mean that they have not done some damn stupid things.

It was wise of the Prime Minister not to choose a long laundry list of things that he wanted changed. Much more careful thought is needed as to how to approach this. I suggest three criteria are needed to be applied to any such changes. The first is: are the changes necessary for Britain's national interest and are they, at the same time, good for the EU as a whole? If the second condition cannot be met, they will not be agreed. The second criterion is: are they negotiable? The third is: do they match the Prime Minister's laudable objective of Britain staying in the European Union and influencing EU policy? The proposals published by the Fresh Start Group, which I would rather characterise as the false start group, would not fulfil any of those criteria.

However, we do need a positive agenda and we need that now. We do not need it in 2015 or 2016. We should be pursuing that now and be prepared to go outside the normal British comfort zone of single market completion, enlargement and freer world trade, although those are excellent things that we should be pursuing. But why are we not thinking more actively and intelligently about defence? The effect of austerity on defence budgets is surely pushing us all closer together.

My final word in the brief time that we have been allotted in this debate is; tactically astute, strategically reckless.

My Lords, as a man who conducts business and addresses conferences overseas, many of the arguments on European integration resonate very strongly with me. The European Union was established as a way of preserving peace and stability between its member states. It was what was needed then, and in the same way we must now react to internal and external changes that are happening in Europe and the world.

This is not about the interests of the United Kingdom versus the interests of other member states; it is about achieving large-scale reform to change the relationship between member states and the rest of the world in everyone’s interests. Europe needs to serve its member states better and help them to get the most out of the benefits that such a union provides.

The Prime Minister was very clear that he wants Europe to be a success and as such wants us to be a part of that success, and I share that sentiment. Europe itself is changing and we must push to make sure that it properly adapts. The completion of the single market was one of the key aims to which the Prime Minister referred, and rightfully so. This provides a strong foundational framework on which member states can build their economies.

We must allow the diversity of the different EU economies to flourish to increase competitiveness and achieve growth. Bureaucratic red-tape policies must be returned to the UK so that we can make our own judgments based on what works best for business here at home. I also agree with strengthening the role of national parliaments within the EU, as they are without a doubt the most democratically accountable and legitimate form of governance to their people.

Laws and regulations have been heaped on to British families and businesses from a foreign land, in a Parliament that they did not elect, and with a one-size-fits-all mentality. That is why I support the decision to hold a referendum in the next Parliament. People can then decide for themselves what will be in the best interests of their own country, and the integrity of the resulting decision cannot be questioned.

I also believe that the vast majority of people in this country would like us to remain in a union that helps us when we need it, allowing us to take good things from it but without inflicting unwanted repressive policies on its member states.

It is the job of the Government to get the best deal for their people, and this is exactly what the Prime Minister wants to do in negotiating a new settlement. It also makes sense to wait until the current turbulent waters have calmed before deciding what the future would hold for us in the union. Allowing member states the autonomy and liberty to do what is best for their people and their economies will enable us to contribute that much more and, I believe, form an even stronger bond of shared values and co-operation. I say this as a Conservative and ultimately as a supporter of the future of the European Union.

My Lords, I have three short minutes, and I will make three brief reflections. The first is that I have an overwhelming sense that this is where I came in. In 1960, I joined the Foreign Office as a desk officer responsible for Europe—political. At that time, after the failure to join the Rome treaty in 1957, the Conservative Government realised the danger of isolation and thrashed around trying to construct alternatives, hence the EFTA cul-de-sac, trying to build a relationship with a new Europe—for example by constructing an enhanced role for the Western European Union. In time, the Government and the people acknowledged that other alternatives were pipe dreams and that our future lay with our European partners.

The second is that Mrs Thatcher never threatened to leave the Community, however hard she fought her corner. Now, her political children, egged on by a nationalist press, seek to take events a stage further. They see little or no good in the current European Union and seek vainly for false alternatives. What is certain is that, outside the European Union, we would be a lesser attraction for foreign investment. We would have less clout in trade negotiations, and the best deals are possible when we work with our partners inside the Union.

Finally, I come to the Prime Minister’s speech on behalf of the Conservative part of the coalition. I have some sympathy for him as he has the impossible task of reconciling our partners and his party. He fails to recognise that international relations are essentially human relations. Some critics may well say that the Conservatives in opposition were too busy with their outside interests to build valuable personal relations with their natural partners: hence the Prime Minister’s absurd decision to leave the EPP, the family of the centre right, which led only to a mutual misunderstanding.

The EU is a club, and we are unlikely to persuade sympathetic club members if we threaten to leave. Suddenly and belatedly, the Conservative Party is beginning to appreciate the need for friends, particularly Germany, where 74% of the population supports the UK remaining within the EU. Thus, for the first time, the Foreign Secretary will participate in the Königswinter conference in May. However, let us look at the German Chancellor’s response at Davos to the Prime Minister’s speech. Yes, as government spin doctors tell us, she emphasised her support for free trade and open, competitive markets, but they ignore her warning on the referendum and the insistence that the Prime Minister will need to compromise. His dilemma is that, in so far as he compromises to win over our EU partners, he will lose his party. So we are back with unrealistic alternatives: hence my sense that this is where we came in.

My Lords, it is a privilege to listen to so many excellent speeches. I am neither a constitutional expert, nor a political expert on Europe, but I know a little about criminal justice and I want to use this occasion to draw some comparisons and to make some observations about the Government’s indication that they might wish to opt out of the European justice and home affairs provisions. A committee of your Lordships’ House, chaired by the noble Lord, Lord Boswell, is examining this. Here is a flavour of some of the answers they are receiving to that question.

On 16 January, one member of the committee, the noble Baroness, Lady Prashar, asked:

“So it”—

an opt-out—

“would be complex, complicated, risky and it is right that it would be a gamble?”.

Professor Peers of the University of Essex said yes. Would that all answers by witnesses were that succinct.

Of course, the opt-out on criminal justice is not the subject of this debate. I just want to use it as a way of looking at what would happen if you extended away from dealing with an important but minor part of the third pillar of some part of the European conventions to attempt to renegotiate our entire relationship with Europe. I draw your Lordships’ attention to an excellent article by Hugo Brady of the Centre for European Reform, entitled: Britains 2014 Justice Opt-out: Why it Bodes Ill for Camerons EU Strategy. He lists five reasons, but I am only going to talk about two. The first is Scotland. Policing and criminal justice are devolved powers, so it seems ill-advised for the Westminster Government to announce that they want to give up something that the Scots clearly want to keep in the same year as the referendum on independence.

The second is more important. It is what Brady describes as, “make your case clearly” or they will not understand. He describes the sense of bewilderment, turning to anger, contempt and disengagement by our European partners at the sight of the British trying to withdraw their support from something they invented in the first place. You cannot be a little bit pregnant. You cannot be a little bit divorced, but lots of people try. Many of us have seen friends have trial separations. They attempt to end in reunion, but they normally wreak havoc on relationships, partnerships and the prospects of future generations.

My Lords, in recent times we have witnessed the transformation of the European Union—previously warring countries co-operating, growing in economic strength and developing their negotiating power. We are living in a competitive world of power blocs. The European Union has also developed social policies that have been a worldwide example.

Of course, the Union should not be static, but our position should not be poisoned by threats and ultimatums. If federalism leads to a new treaty, then the British people, like all others within the EU, should be able to express their opinion in a referendum. Shouting from the sidelines is no substitute for being constructive and sometimes critical.

It is my experience within the EU that all controversial proposals are tackled in depth. Of course the Commission and others can make mistakes. They are human. Her Majesty’s Government are not exactly a shining example to the country. The Commission does its best, as do all the other institutions.

What this Tory-led Government really want is the adulteration, even the elimination, of the European Union’s social policies. It would be absurd for the UK to absent itself from specific areas of policy. Estrangement from our partners would be utterly mistaken, and that would be the inevitable outcome of what the Government are proposing. The pathetic aim of trying to pacify the Eurosceptics, who are so prominent in the Tory Party today, is bound to fail, and it will deserve to.

My Lords, I thank the noble Baroness, Lady Noakes, for her welcome initiative. She may remember that many months ago we had a conversation about Europe, and I told her that I was one of the only members of my local Labour Party to take the day off work during the 1975 referendum to urge people to vote no. The noble Baroness informed me that she, too, had taken the day off work to campaign for a yes vote. We have both developed different points of view from all those years ago—I because of the Social Chapter possibilities, which gave workers rights and women opportunities during an era, the 1980s and 1990s, that was pretty bleak for both. The noble Baroness’s view was affected by the very same issues, which I think she sees as red tape. I have a great deal of respect for her views, even though we may not agree. I simply want to illustrate that, as Europe develops, we are all entitled to change our minds and openly debate issues on their merits.

For 10 years, during the 1990s, I was one of the representatives of the TUC on the European TUC executive. I was privileged to move in the ETUC executive acceptance of the framework agreement on part-time workers, so I plead guilty but proud of my part in ensuring that workers, particularly women workers, should be treated equally. The irony was that we were working hard at the European level on these Social Chapter issues. They were negotiated and agreed with the social partners, which included the CBI, and I watched these directives being implemented, except in the UK. That Alice in Wonderland position was put right when the Labour Government were elected. While I think that the Prime Minister’s clever speech contained something for all views, except for those of us who support workers’ rights, a referendum is too far off to get worked up about. However, I agree that we should trust the British people, if and when the time comes.

Finally, I may be alone in this view but at present we have expert debates in this House arising from the European sub-committees, which are too rich for my diet, or we have one-dimensional exchanges in Question Time: “We should all leave Europe”, “Oh no we shouldn’t”. Those of us who are interested in the wider framework issues are looking for opportunities to discuss them in an intelligent, challenging forum where not everything is black and white and where there are no easy answers.

My Lords, noble Lords have gone back a long time, but I am going to go back even further. Some 63 years ago I was fortunate enough to be in Strasbourg when the Council of Europe met. Of course, the two world wars were on everyone’s mind. Winston Churchill made what I think would now be called the keynote speech and the Conservative Party delegation was led by Harold Macmillan. Since then, whenever I use the word “Europe” I include in it the United Kingdom; I do so again today. We have been on a very long journey since, but the idea of giving up and leaving does not yet occur to me.

However, where is Europe now? It is riven by uncertainty. It has two financial crises that differ from each other. The reasons for the crises are not yet fully understood, and as for putting to bed the question of the responsibility for them, we are still a long way from that. The crisis in the United Kingdom is the first one and the eurozone crisis is the second. The outcome of both is entirely uncertain as we debate this matter today. All we can do is analyse what we know. What we must agree on is that there have been flaws in the direction of travel, otherwise we would not be where we are. Can we just wait and see whether, having lived beyond our means, things will in some way correct themselves and we will be able to continue on the same path? That does not seem credible. Things have changed very radically over the past 63 years. There is a global market now of which Europe forms 7% of the population, and things are happening elsewhere.

We need to think through the following proposition: is this convoy of 27 nations likely to go in the right direction without reform? I think not. Strategy, not just tactics, should be on the table and we need to get on with the debate.

My Lords, in all my political experience I do not think I have come across a more absurd notion than a referendum that will only take place some four, five or six years after it is announced. But, of course, this is not a serious political idea. It is, as we know, a short-term and cynical party-political ploy designed simply to push the European issue beyond the horizon of the next election and to keep the Eurosceptics off the Prime Minister’s back until then. If there are costs in terms of investment and jobs and other costs to our national interest, then to hell with the national interest. That is what we are actually confronted with.

If we need further evidence of the superficiality of this exercise, it is in the fact that the Prime Minister hardly mentioned what the objectives of this negotiation or renegotiation are going to be. In all that elaborate speech only one sentence deals with them by mentioning three things: the environment, social affairs and crime. We have only to look at those three in order to realise that either we are faced with what is essentially a hypocritical exercise that is not intended to be taken seriously or else something that would be disastrous if pursued. Are we going to pull out of the European environmental policy? Are we going to get rid of the commitment to reduce emissions by 20% from their 1990 levels by 2020? Are we going to try to do it unilaterally? Does the Prime Minister mean the non-climate change aspects of environmental obligations such as water pollution? Are British factories going to be allowed to release any kinds of effluent into our rivers? If we believe in having environmental controls, is it not in our interests to make sure that our competitors on the continent of Europe bear the same level of costs? It is quite clear that this has not been thought through at all. It is an entirely cynical, short-term exercise.

The same applies to social policy. I would love to see the Prime Minister fight the next election on the basis that he is going to get rid of the working time directive or the parental leave directive. Is that to be taken seriously? And what about crime, which comes under justice and home affairs? We are told that the Government are already intending to opt out of the justice and home affairs chapter. In that case, what is the point of renegotiating something that we are going to opt out of? None of this makes sense.

There are many aspects of this which worry me. Obviously I am anxious about the costs of the uncertainty and even more anxious about the costs attached to our leaving the European Union, if that is the ultimate aim of this exercise; it could easily lead to that bad accident. However, my worst anxiety is that our continental partners will say—they may be far too diplomatic and astute to do so, but it is what more and more of them will think—“For heaven’s sake, the British are hopeless. They cannot make up their minds. They have been humming and hawing and coming and going for 30 years. They always oppose everything and they are very difficult. For God’s sake, if they want to leave, let them leave. Let’s conduct this negotiation in such a way that they end up having to go”.

When that happens, what is the prospect for this country? The prospect is the one that we have been trying to avoid for 500 years. It is why we fought Philip II, Louis XIV, Napoleon, Nicholas I and the Kaiser. We will find ourselves with a superpower on the European continent with whose policies we have in practice to align ourselves although we will have no influence whatever on their formulation. That is the position we shall be in, and under the shadow of that superpower we shall live for the rest of time—regretting the appalling decisions that we came to in a fit of absence of mind.

My Lords, I warmly welcome the Prime Minister’s speech simply because at long last it has set my party on an unstoppable path to serious treaty changes and a referendum. However, I have two reservations. The first is that I believe that the changes needed are so profound that they are unlikely to be agreed by the other countries, and the second is timing. These things are not going to happen until 2017. Anyone who has run any kind of organisation knows that when it starts to go seriously wrong, as Europe is doing now, its decline has a habit of accelerating. I do not believe that time is on our side and I am anxious that we will be overtaken by events.

A wise man once said, “All great issues are essentially very simple. We make them complicated when we do not want to face them”. I believe that that is true of Europe. The issue of Europe is essentially very simple. It is about who governs this country. That sounds simplistic, but it is true. It was the question in 1975, it is the question in 2013, and it is the question that the British people understand. It will be the question in 2017—and I have no doubt, when it is put to the British people, what their answer will be.

My Lords, I do not terribly want to get involved in a debate about what will happen when the referendum is held. Rather, I will make two points. The first is that within the next 12 months, I suspect that the Labour Party will commit itself to an “in or out” referendum, whether the noble Lord, Lord Davies, likes it or not. It is completely unsustainable for any party to stand at the next election saying that it is not going to hold a referendum when a major party like the Conservatives is doing so. I suspect that the Liberal Democrats will follow suit as well.

Not for the first time, I find that I agree with the noble Lord, Lord Kerr. He knows, as most noble Lords in this Chamber know, that the construct of the EU has been a series of treaties which need unanimous support, and that if you want to revise those treaties, it has to be done with unanimity. I therefore suggest that the chances of Britain renegotiating a position that entails treaty change is virtually non-existent, and by the same token, it will not be possible for Germany, Holland, Sweden and Finland to renegotiate to make the EU more competitive. If something needs treaty change, it will not happen; that is the reality of the position that we are in.

I have absolutely no idea who will win the election of 2015, but we will have either a Labour or a Conservative Prime Minister. Then what will happen? If Ed Miliband is Prime Minister, he will go off to Europe and come back with a minimal number of concessions. He will not be able to pull off the same trick as Harold Wilson: namely, minimal renegotiation and a vote for us to stay in the EU. He would have to win major concessions—which I do not think he will get—and, of course, at that stage he will be faced by a Conservative Opposition, led, I suspect, by a different leader, who will campaign vigorously against any move to keep us in the EU. Alternatively, if David Cameron wins, he will have to go off to Europe and come back with very serious concessions. I suspect that the best that he will be able to achieve will be some hybrid solution for the United Kingdom that will leave us more out of the EU than in. Either way, I do not see that we will do anything other than come out.

That brings us to my noble friend’s Liberal Democrats, who already have the somewhat suspect reputation of being the people whom Conservative and Labour candidates least want to face in an election. They have now added to that the reputation of being unreliable and untrustworthy when it comes to the coalition agreement that was set up at the beginning of this Parliament. So I do not think that an awful lot of people will want to go into a coalition with the Liberal Democrats ever again. If the opinion polls are right, they will probably get only 10 seats at the next election, so the question may not even come up.

My Lords, if a speech can be a 180-degree turnaround from a previous speech, this is it. The context of the Prime Minister’s speech is, of course, the Conservatives’ frustration, because they have missed the boat. The eurozone is recovering and the pound is falling against the euro. Therefore we no longer hear the speech from the noble Lord, Lord Lamont, proclaiming that the euro is dead. The problem now for the Conservative Party is the dictum, “If you can’t beat them, you’d better join them”, so the frustration grows apace.

The Prime Minister’s speech is intended to set up a scenario where he demands the repatriation of things such as employment rights, as my noble friend Lord Monks pointed out—as if, incidentally, that would make workers more inclined to vote to stay in the EU. However, as we heard—from the noble Lord, Lord Kerr, I believe—there is no such thing as a retrospective opt-out. The Labour Party—correctly—will have nothing to do with this scenario, including the referendum hypothesis. Apart from anything else, you do not expect the Labour Party to get heavily involved in highly imaginary negotiations conducted by an equally highly imaginary Conservative Government in 2016 or 2017, which, as everyone knows, are intended only to keep the Conservative Party together.

A Labour Government responsible for a hypothetical referendum presupposes equally a Labour Government, which I believe will be elected in 2015. Until nearer that time, what crystal ball are we supposed to look into and to say that one thing or another needs renegotiation followed by a referendum? I am sure that we in the Labour Party are not going to invent such a scenario on the back of an envelope just to meet the wishes of those who read the Daily Mail and the Daily Express. The fact is that this is a crisis for the Conservative Party; it is no crisis at all for the Labour Party.

My non-political friends to whom I talked last weekend, for example, are aghast at the political cynicism of the referendum announcement in particular. They do not think that this whole business has anything to do with the national interest. I therefore think that it will not necessarily be of any benefit to the Conservative Party.

My Lords, this might be termed the “boiling an egg” debate, because that is probably one of the very few things that you can usefully accomplish in the amount of time that each of us has been given to speak today.

I find myself very much aligned with my noble friend Lady Donaghy, who said that she campaigned for a no vote in 1975 for reasons of working people’s rights but has now come round to face somewhat the other way—as, indeed, have I. I would be very concerned should we, as a country, depart from the European Union. Perhaps the noble Lord, Lord Owen, summed it up best when he described the Prime Minister’s speech last week as the words of a party leader and not a Prime Minister—that is exactly it. I really think that the European Union and our place within it are too important to be used as a way of dealing with a little local difficulty within the Conservative Party.

On the question of a referendum, I will ask: why now? I do not see why at all, but why now? Nothing of any great importance has occurred within the past few months. You could say, “I believe that referendums are appropriate for parliamentary democracy”. Referendums do have their place—certainly they were appropriate in 1975, for the Scottish Parliament, for the Welsh Assembly and, indeed, for the voting system. But what has happened to make this a pressing issue? Furthermore, what is likely to happen of a constitutional nature? I think it is key to a referendum that it should involve something of a constitutional nature. What has happened in the past few months or will happen in the next five years to make a referendum necessary? You could say it could have happened after Maastricht or Lisbon, but I do not see why we should be positing it as a notion now, because there is no constitutional issue per se to discuss. The basic question would be: do we stay in the EU?

The noble Baroness, Lady Noakes, opened the debate by talking of uncertainty. I think that she talked rather disparagingly of scaremongers. I ask the noble Baroness whether the following are scaremongers: Sir Andrew Cahn of Nomura, Sir Richard Branson, Sir Martin Sorrell of WPP, the CBI, and indeed the noble Lord, Lord Browne, a close confidant of the Prime Minister. These are people of some substance, as indeed is Sir Nigel Sheinwald, who has made some pretty pithy statements in the past few days. So there is a bit more to it than perhaps meets the eye. The response might be, “What about the 50 business leaders who wrote to the Times?”. When you read their statement, it is clear that they did so very strongly from a position of wanting to remain within the European Union. That is different from the wishes of many people advocating a referendum who want us to withdraw.

I think that there will be a referendum, as various noble Lords have said. It is pretty much inconceivable that any of the main political parties will not suggest that at the 2015 general election. Therefore, I think that those of us who are in favour need to start making the positive case for remaining in the EU. We should not just deal with negatives but talk the case up.

I conclude by referring back to the noble Baroness, Lady Noakes, who said that she regarded the prospect of a referendum in 2017 as an exciting one. Well, placing her head in the mouth of a lion might be exciting, but it is not something that I would recommend.

My Lords, I thought the Prime Minister’s speech was exceptionally well crafted. He articulated why history and geography helped define the UK’s very singular attitude to the EU. He identified where and why many are unenthusiastic about some EU regulation. However, he also captured very well the benefits of the EU—the economic advantage and influence that arise from being part of the world’s biggest single market and political bloc. The EU has a bigger aggregated GDP than the US, and we are twice as big as China.

Most of us share the vision of the UK as part of a flexible network of independent European nation states, combining voluntarily, issue by issue, on matters of mutual interest. That is where, of course, we are now. We are out of the euro—thank goodness—and out Schengen, but in the single market, in NATO, unlike six other EU countries, and in the fight alongside France in Libya and Mali.

All organisations benefit from time to time from a reappraisal. However, the Prime Minister’s speech creates a problem of perception. Pace the noble Baroness, Lady Noakes, my work routinely takes me into contact with the world’s leading investors, with trillions of funds to place. They are already nervous of the eurozone and understand the UK’s dependence on it. They are careful decision-makers and I have no doubt that they will be further unsettled by the prospect of a referendum. The PM’s announcement was well argued, and the party-political need for it was understandable, but it was not cost free.

My Lords, I thank the noble Baroness and to some extent, for reasons I should explain, the Prime Minister for getting us to this debate. The Prime Minister has presented us and our European partners with a false prospectus: a referendum in four or five years’ time, on terms as yet unclear, and in economic and political circumstances that are unknowable. In so far as his negotiating position prior to that referendum is discernible from his speech, it is self-contradictory. His main point is that he wants to strengthen the single market, but he is looking to opt out of key pillars of that single market. You cannot have a true single market without common labour standards—the Social Chapter. You cannot have a true single market without some degree of commonality on financial regulations, which he resists to the benefit of and on behalf of the City of London. You cannot have a true single market without common environmental standards. That agenda is not one that can be negotiated without European partners. He might have a bit more luck on the justice side, but even there, although there may be some prospective, minor, further derogations, there will be no retrospective opt-outs, as the noble Lord, Lord Kerr, has said.

The PM has created unnecessary irritation among our European partners and damaging uncertainty for global investors. However, he may politically have done us all a great favour, in that he has at last provoked the pro-European elements in all parties to come out of their shell and start arguing the pro-European case. I have long been a pro-European, since before 1975, when it was deeply unpopular in the Labour Party, particularly in the left wing of the party, of which I was otherwise a member. I have often been dismayed at the lack of effective engagement by British Governments with Europe—my own as well as this one. I have often also been dismayed at the occasional arrogance and ineptitude of European institutions in relating to the real concerns of the people. However, it remains the case for Britain that our prosperity, our influence in the world and our prospects of reaching global agreements on climate change, trade, and peace and development depend utterly on the UK being a leading, constructive and authoritative partner within Europe. I ask those who object to the whole concept of ever closer union what they think are the consequences of the opposite dynamic. They need look no further than the borders of the EU, at the former Yugoslavia.

Like my noble friend Lord Grenfell, whose speech I greatly admired, I am not afraid of a referendum. However, whether we have one or not, in what timescale and on whatever terms, the Prime Minister has now triggered a revival among those of us who wish to argue the pro-European case. We will do so with equal passion and, one hopes, more logic than I suspect the next speaker, who will make the opposite case. To that extent, I thank the Prime Minister.

My Lords, in this heavily Europhiliac debate, I thought I would concentrate on just one of the basic misconceptions to which noble and Europhile Lords, and indeed the Prime Minister, still cling: that the single market is a good thing and that we might lose inward investment, free trade and jobs if we left the EU and its customs union. The single market is a bad thing: it is what imposes the thousands of regulations which weigh down all EU economies in their trade with the markets of the future. Together with the euro, it is the economic iceberg which will eventually sink the whole project of European integration, at great social cost.

As for us, in the mean time, our free trade with clients and suppliers in the EU will inevitably continue when we leave it. Articles 3, 8 and 50 of Lisbon oblige Brussels to negotiate a free trade agreement with a departing country. The EU already has FTAs with 67 countries and dozens more are in the pipeline. As its largest client, and with our substantial trade deficit, we will hold the whip hand in agreeing our own free trade agreement, which will be unique to us.

Your Lordships may have missed the Government’s Written Answer on 14 December to my noble friend Lord Stoddart, who had asked whether the burdens of single market regulation applied to countries signing FTAs with Brussels. According to the Answer:

“It is not the case that as a result of these trade negotiations the countries concerned will have to adopt all the legislation and regulations that apply to EU member states. The aim of these negotiations is to eliminate, as far as possible, duties applied to trade in goods and to address non-tariff barriers that affect trade in goods in services—ie rules, regulations and practices that affect market access. Non-tariff barriers can be overcome through a variety of methods. These include the adoption of international rules”—

the World Trade Organisation—

“mutual recognition of approaches to testing, standards, et cetera, and commitments to end discriminatory practices”.—[Official Report, 14/12/12; col. WA 263.]

What more do we want?

Why should inward investment be affected when the reasons for investing here will not have changed? It is interesting that our Invest in the UK agency gives 13 good reasons for investing here—and not one of them is our membership of the European Union. Therefore, I hope we will hear no more scaremongering from the same old quisling voices of big business and elsewhere, which told us that if we did not join the euro, the City of London was finished. It became number one in the world, so why should we listen to them now? Some hope, my Lords, but I trust that the British people will ignore the Brussels propaganda when the time comes.

My Lords, the three-minute rule has produced many excellent speeches in this debate, including many strong ones from my side of the House. Obviously, in keeping my own remarks brief, I cannot refer to them all but will just refer to two on our side. First, I thank the noble Lord, Lord Grenfell, for his humour and, secondly, I thank the noble Baroness, Lady Symons, for the originality of her speech. She made a major point of constitutional significance about the Civil Service role in drafting legislation. I hope that the noble Baroness, Lady Warsi, will answer that point in her reply. I also greatly enjoyed many of the speeches from the Liberal Democrat Benches and from the diplomats on the Cross Benches. There were excellent speeches from the noble and learned Lord, Lord Howe of Aberavon, the noble Lord, Lord Bowness, and the noble Viscount, Lord Eccles, on the Conservative side.

There are certain principles that we all accept in this debate. Everyone in this House, except for those who want to get out, believes that Europe needs fundamental reform. We would go along with what the noble Lord, Lord Howell, said about the need for a more dynamic and flexible European Union than we have today. We would support, in general terms, the unobjectionable principles that the Prime Minister set out in his speech. We all recognise that there is a particular problem where we have to seek safeguards—because of the closer integration of the euro area, those of us outside it must have safeguards against discrimination as a result of the euro area acting as a voting bloc.

Having said that those are principles on which we all agree, there is a fundamental disagreement about the Prime Minister’s strategy of renegotiation and referendum. People ask what Labour’s position is on a referendum. One might seriously ask how it is that the Prime Minister thinks that, at this delicate stage in our economic recovery—and that is putting it mildly when GDP is falling—and in an era when business, since the financial crisis, has become extremely risk-averse, a commitment to a referendum five years hence will help our economic recovery. Is it not the case that this is bound to add one way or another to the considerable pall of investment uncertainty which hangs over our economy? If the Prime Minister now believes, in January 2013, that a referendum is in the national interest, why, in October 2011, did he impose a three-line whip on his Members to vote against a referendum? Why, in his press conference after the June 2012 summit, when asked about a referendum did he dismiss it with a sweep of the hand and say what the British people want is a Government who stand up and fight for them in Europe? It was only the uproar in the Conservative Party—let me remind the noble Baroness, Lady Noakes—the day after that forced the Prime Minister to write his famous article in the Telegraph saying:

“For me the two words ‘Europe’ and ‘referendum’ can go together”.

Our position is clear. We have always argued, as we did during the passage of the EU Act 2011, that if there is a major transfer of powers or a big treaty there should be a referendum. At the moment we do not know whether there is going to be a treaty and we do not know anything about its contents or timing. The Prime Minister’s policy represents a unilateral demand to come up with something by 2017 that he can sell to the British people or we will be off.

There are many contradictions in this renegotiation policy. One is whether those who favour it regard a treaty change as essential to its success. Listening to the Benches opposite, particularly to the noble Baroness, Lady Noakes, I have found all this very confusing. On the one hand, the argument is made that we have to secure fundamental change if we are going to be able to recommend the yes vote to the British people, yet on the other, it is said that the treaty change may not be essential. In my view, it is impossible to achieve fundamental change in the way the EU works without treaty change. Of course we may be able to negotiate changes in policies or protocols that protect our position in various areas, but we will not get fundamental change without treaty change. I would like this question to be clarified in the Minister’s reply.

There is a lot of reference to the proposals of the Fresh Start Group as the kind of sensible mainstream view of what needs to change. My noble friend Lord Monks has already dealt with the social and employment aspects of that. This is not acceptable to our partners. On financial services, it cannot make sense to argue for the reintroduction of some form of unanimity on this aspect of the single market when in the other part of our mouths we are arguing that our partners should agree to major extensions of the single market in other areas. That is a completely contradictory stance, and the noble Baroness, Lady Noakes, ought to recognise that.

It was interesting that we had 40 speeches in this debate, with eight from Conservatives broadly in favour of the Prime Minister’s speech, but the question of where they will end up after the renegotiation is unclear. If David Cameron remains Prime Minister after 2015, he is going to face a harsh political choice: win a referendum yes and split the Conservative Party, or bow the knee to his party’s last ditchers, and, even more dangerous, fanciful renegotiators such as the Fresh Start Group, and secure his place in history as the Prime Minister who led Britain out of the European Union. He will have overwhelming support on this side of the House if he puts the country before his party. There were passages in his well-phrased speech last week where I just about managed to convince myself that that was what he might do. However, it would historically require a breach with a whole tradition of Conservative statecraft that the national interest is best served by keeping the Conservatives in power and winning elections.

So much is at stake here for all of us. Who really fancies Britain’s chances, in decades to come, as an offshore island? There is the real risk that five years away that is what we are going to end up as—maybe as a successful tax haven for hot money, various kinds of tax dodger and fleeing oligarchs, but there is no future for Britain shouting across the Channel, “Continent cut off”, at the 400 million steadily integrating single market. That is not going to bring real investors and real jobs in real companies to Britain. We need to be there.

We will end up being politically ignored by Washington and powerless to defend our values and interests against all the multiple challenges that we face, never mind the new ones that pop up in the desert in north Africa. Do we really want what is happening in the world today, which is the rise of the East, to mean that we opt out of the West? Let us hope that the Prime Minister means what he hinted at, that he will campaign to stay in Europe, with his “heart and soul”. Let us hope that those words were not a public oration sop to pro-European opinion, particularly business opinion, which rightly fears that he has set his European policy on a trajectory that he certainly never wanted, in the hope of a positive outcome that he has not the faintest idea how he is going to achieve. There were many fine words in the Prime Minister’s speech, but it was very bad day for Britain.

My Lords, I am grateful to the noble Baroness, Lady Noakes, for calling this debate to take note of the Prime Minister’s recent speech on Europe. I will try to address some of the individual questions from noble Lords but am sure you will agree that, with more than 40 speakers, I may not be able adequately to address all the issues raised and all the questions asked. The noble Baroness, Lady Donaghy, suggested a possible further debate with more time, and that may well be an option that your Lordships’ House can consider. The interventions today have been widespread in both view and substance and, like the noble Lord, Lord Liddle, I am struggling to highlight which of them really stuck in my mind. However, the contributions of the noble Lords, Lord Grenfell and Lord Hamilton, were amusing and engaging and brought interesting perspectives.

I will start by briefly recalling the context in which we are having this debate. Europe is facing a time of crisis. The Prime Minister highlighted in his speech the three main challenges facing all of us in Europe: the changes within the eurozone and the crisis that it brings; the lack of competitiveness in the face of a transformed global economy; and the democratic gap between Europe and its people. Faced with these challenges the European Union cannot stay still. For the eurozone to succeed, we accept that the countries that are part of it need to change. How they co-operate and the rules by which they work need to change. As Europe changes, our relationship with Europe will, and should, change. As the Prime Minister has said, we cannot bury our heads in the sand. We must face up to these challenges and ensure that the relationship that we have with the reformed EU at the end of this process is one that better protects our national interests and the integrity of the single market.

The noble Lord, Lord Hannay, is right in some of what he set out as criteria for negotiations. We are not only seeking an improvement in Britain’s position; we are looking for an improvement in the way that the EU works that will benefit all of its members. We want to see a more competitive and flexible EU, to show that power can flow in both directions and national parliaments to have a bigger role. The Government have been clear that we believe that active membership of the EU is in our national interest. The Prime Minister has said that when there is a referendum, he will campaign “heart and soul” for a vote to remain in a reformed EU.

There are many reasons why we are convinced that the best place for the United Kingdom is inside the EU. On the economic side, the EU supports UK jobs, prosperity and growth through increased trade, within the single market and through free trade agreements with non-EU states. The EU represents a market of 500 million people, with a combined GDP of around £11 trillion. It is the largest single market in the world, with a larger economy than those of the US and Russia combined. If Britain was not a member of the single market, UK firms would face export tariffs, reducing their competitiveness in Europe. The size of the EU and its global importance as an export market give Britain much greater influence with international trading partners than would be the case if we acted alone.

The single market also helps the UK to attract inward investment from both inside and outside Europe. The UK is the top destination in Europe for inward investment, attracting one-fifth of all foreign direct investment projects in Europe in 2011, for example. The single market encourages competition and innovation across the EU, bringing tangible benefits to people, as prices for consumers are driven down and productivity levels increase. However, this does not mean that we think the single market is complete. Indeed, further single market reform has even more to offer the UK through simplifying regulation, liberalising services, and developing a single digital market and a single market for energy.

Away from the economy, our membership of the EU can help to advance our national interests, influence and values internationally as part of a 27-strong—soon to be 28-strong—collective voice. I am not just talking about collective negotiation of free trade agreements with third countries, although these bring large economic benefits to member states, including the UK, and are a useful way of encouraging market opening in those third countries; I am thinking about the intelligent use of sanctions, which in the case of Burma have been attributed as one of the most effective levers in encouraging the regime to implement democratic change, and which the EU has implemented in response to the situations in Iran and in Syria, for example. I am also thinking about the common security and defence policy missions, which are a fast-moving response to security issues of real interest to the UK, such as piracy. Successes include training the Bosnian police force and increasing stability in Georgia.

The UK has long been a champion of further enlargement of the EU, which is key to achieving the UK’s economic and security interests in central Europe and the European neighbourhood. In 2011 the UK exported £16.6 billion in goods and services to the newest member states, approximately twice our exports to India.

The right reverend Prelate the Bishop of Wakefield spoke about the contribution of the EU to peace in Europe. The PM recognises the role that the EU plays within NATO in bringing peace and the rule of law to European countries. We hope to continue this through our support for the enlargement process.

There are also less quantifiable benefits, which we now take almost for granted. Membership of the EU provides freedom for British people to live, work, study and retire in Europe: 1.5 million UK citizens live in other EU countries, and UK citizens are able to work anywhere in the EU without requiring a work permit. Around 260,000 UK citizens are employed in other EU member states. There are 435,000 UK citizens claiming a pension and living abroad in an EU member state. Our membership of the EU also helps our students. Between 2011 and 2012, more than 13,500 UK students took part in the Erasmus scheme, studying for part of their degree in another European country.

I welcome the support of the noble Lord, Lord Williamson, for the balance of competences review. The PM has set out the principles of how he wants to change the EU and the UK’s relationship with it, not the specifics. The balance of competences review will give us an informed and objective analysis of where the EU helps and where it hampers. We expect this work to conclude during 2014.

My noble friend Lady Falkner asked what a fresh settlement would look like. All political parties will look at the evidence provided by the balance of competences review and use that to generate ideas for future policies. She is aware that this is being done over a period of four semesters, on specific subjects.

The noble Baroness, Lady Donaghy, spoke about EU measures on social policies, especially in relation to gender equality. I can assure her that there is no suggestion whatever of undermining gender equality and we have clear national legislation to support the current position.

The noble Lord, Lord Giddens, asked some very specific questions. What will the PM do if he does not get his concessions? We are not going into this negotiation looking to fail. We are confident that there are some very clear principles in the wider European Union. We have support among member states which also feel that we can have a better Europe. The answer to everything is not simply more Europe. He asked whether we were simply cherry picking, as did the noble Lord, Lord Kerr. The answer is no. The UK wants reform of the EU for the benefit of all member states. What we will be putting forward will show that. There were a number of other questions and the noble Lord may have to write to me to get the answers to them.

My noble friend Lady Noakes mentioned the Fresh Start report. The Foreign Secretary has written a foreword to this document, as my noble friend is aware. He welcomed its contribution to Conservative Party policy thinking, saying:

“Many of the proposals are already Government policy, some could well become future Government or Conservative Party policy and some may require further thought”.

This report is a valuable contribution to the debate and includes some ideas that are already government policy.

The noble Lord, Lord Monks, spoke of the benefits of EU social policy. The Prime Minister has said nothing about seeking to undermine the European social model. I think all parties agree that we need to look at how the working time directive impacts on our ability to run our health service, and we need to ensure that we remain competitive. As Chancellor Merkel has said,

“If Europe today accounts for just over 7 per cent of the world’s population, produces around 25 per cent of global GDP and has to finance 50 per cent of global social spending”,

surely something has to change.

My noble friend Lord Howell spoke about the need to build alliances. He is quite right. The UK does have alliances. The PM noted in his speech:

“So let us use this moment, as the Dutch Prime Minister has recently suggested, to examine thoroughly what the EU as a whole should do and should stop doing”.

The noble Lord, Lord Blair, spoke about opting out of the criminal justice system and whether this would make things more complex. We have committed to a vote in both Houses before a decision on whether or not to exercise the JHA opt-out. The UK national interest will be at the heart of any future policy and we are committed to a constructive working relationship with other member states on this.

The noble Baroness, Lady Symons, and the noble Lord, Lord Dykes, asked very specific questions about legislating on a referendum and whether that will be drafted by civil servants. Civil servants will not be working on this. It would not be HMG policy. Any work on drafting legislation before the election will be done by the Conservative Party.

We have had a wide-ranging discussion today and I was hoping that, unlike the other place, this is not a place where politics is always to the fore. Unfortunately, the noble Lord, Lord Liddle, was quite passionate in his critique of the Conservative Party. He said that Labour’s position on this was clear. I have to come back at him and say that Labour’s position on this is at best unclear and at worst dithery and confused. He will of course be aware of his leader’s comments at Prime Minister’s Questions on 23 January, where the right honourable Ed Miliband said:

“My position is no, we do not want an in/out referendum”.—[Official Report, Commons, 23/1/13; col. 305.]

Of course, only days earlier he had said:

“Committing now to an in/out referendum has big costs for Britain”.

Labour is clearly still formulating its policy. Worse than the present position, the noble Lord should also reflect on what his party did in government. Let us not forget that Labour waved through above-inflation hikes to the previous EU budget; gave away £7 billion of our rebate but failed to reform the common agricultural policy; signed up to the eurozone bailout; gave away our opt-out on the Social Chapter; and refused us a referendum on the Lisbon treaty. This is not the kind of place where these discussions should happen. We are not like the other place but the noble Lord, Lord Liddle, clearly wants this to be part of the discussions.

With the ongoing euro crisis the European Union is changing. These changes are raising a series of fundamental questions about the future of the EU and Britain’s place in it. The questions will not go away and we should be playing a leading role in shaping that debate. Britain should want to remain in the EU. We need to be in the single market, not just selling goods to Europe but with a say in the rules as well. Public disillusionment with the EU is at an all-time high and people feel that it is heading in a direction for which they did not sign up. We must address these matters, as the result is that democratic consent for the EU in Britain is now wafer thin. This must worry the party opposite as much as it worries us.

We want to negotiate a new settlement in Europe focused on competitiveness, fairness and respect for national democracies, and which allows powers to flow back to member states. We want fresh consent for this settlement. The Conservative manifesto in 2015 will commit us to negotiating a new settlement in the next Parliament. If we win the election we will hold an in-out referendum to stay in the EU on new terms or to come out if those terms cannot be negotiated. We will complete this negotiation and hold the referendum within the first half of the next Parliament.

It is clear that there will be challenges ahead on the road to a reformed European Union and a new settlement for the United Kingdom. But as the Prime Minister said, we believe strongly that Britain’s national interest is best served in a flexible, adaptable and open European Union, and that such a European Union is best with Britain in it. We will strive to achieve the right outcome for Britain and the right outcome for the rest of the European Union.

My Lords, I thank all noble Lords who have taken part in this good debate. I agree with the noble Lord, Lord Liddle, that three minutes did not diminish the quality of the contributions. That is the only thing on which I think that I agree with the noble Lord, Lord Liddle.

A regular criticism made of the Prime Minister was that this was simply a party political move. As my noble friend the Minister has pointed out, however, there is widespread disillusionment in the country with the EU, and in polls there is regularly a majority of the country which does not wish to stay in the EU and wishes to have major renegotiation. That is what my right honourable friend the Prime Minister is responding to, and it is unworthy of other people here to suggest that is solely for party political reasons.

My noble friend Lord Howell made the point that the Prime Minister wants to negotiate changes that benefit all of Europe and not just the UK. Of course it is the national interest that will determine how we vote when we get a referendum. While we want to benefit the rest of Europe we will judge the result against our interests and that is important. As my noble friend the Minister has pointed out, we are still unclear about the Labour Party’s position on a referendum, but I agree with the noble Lord, Lord Watson of Invergowrie, and others that the Labour Party will probably have to come to the table and offer a referendum to the people. Given the popular view of the voters, that will be irresistible and is just a matter of time. To him and all other doubters on this subject I say, “Bring it on”.

Motion agreed.