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Mr. Henry Bellingham (North-West Norfolk) (Con): My hon. Friend mentioned regulations. Does he agree that, although the Government say much about deregulation and trying to help small businesses and wealth creation, the time has come to get rid of the job-destroying social chapter?

Dr. Fox: If my hon. Friend will forgive me, I shall consider the things that need to change shortly. However, as regards the example that he gives, the   Conservative Government stood strongly against something that the socialists swept in as soon as they possibly could.

Changing demographics in Europe are likely to affect economic performance. A study that the City consultant Makinson Cowell published points to the problems of falling fertility rates and greater longevity. By 2010, the EU's working-age population will have begun a permanent decline. Over the next 40 years, the working-age populations of Germany, Italy and Spain will fall by a third. That will have a major impact on the European economy. The EU's projections suggest that economic growth in Europe will be only half that of America between now and 2050. Projected forward, the EU's share of global gross domestic product will slump from 18 per cent. now to only 10 per cent. by the middle of the century, while America's will rise from 23 per cent. to 26 per cent.

It is not only that the Anglo-Saxon economies of Britain, America and Australia are outperforming Europe, but, when faced with the challenge of competing with China, South Asia, India or the United States, the EU is beginning to look like an economic irrelevance.

None of the figures should give us comfort. Even if we interpret them as a sign not of European weakness but of British strength, we will still feel the effects of a faltering European economy.

Mr. Alex Salmond (Banff and Buchan) (SNP): The shadow Secretary of State is making an interesting speech, which might stand him in good stead—who knows? However, like the hon. Member for North Essex (Mr. Jenkin), I detected a shift in policy. In the earlier passages of his speech, he appeared to suggest that the Conservative party could support a constitution, with
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the proviso that it had the clarity of thought and limitations of the American constitution and Bill of Rights. Did I interpret that correctly?

Dr. Fox: Not for the first time, no.

What can be done? The big European economies such as France and Germany need to understand that the improved performance of the United Kingdom is based on the supply-side reforms—Conservative reforms—that were introduced in the 1980s. It will not be possible to maintain economies based on the European social model and compete successfully in an ever-more rigorous world economy. The burden of excessive regulation must be stripped away. A genuinely competitive single market must be completed, with more powers operated nationally, in line with the true principle of subsidiarity. We must also consider, as Civitas put it, the radical overhaul of the CAP, the removal of all external EU tariffs and the reaffirmation that EU members should not be responsible for each other's pension liabilities. Those are not definitive solutions but the beginning of a necessary debate.

Ed Balls (Normanton) (Lab): Will the hon. Gentleman give way?

Dr. Fox: I will not; I have given way several times already.

We can also build on the success of the accession countries, economically and politically. We have just reason in this country to be proud of having championed their cause. Approximately 15,000 UK companies export or invest in central Europe, attracted by the low costs of operating from that area. Three quarters of those are small to medium-sized, with fewer than 250 employees, but many are big City firms, particularly of lawyers and accountants. Since 1990, UK trade with the accession countries has increased nearly 10 times as fast as trade with the rest of the world. Slovakia, Poland, Hungary and the Czech Republic now proudly have Tesco stores.

However, the economic freedom inevitably has an effect on the centralising tendency that is so close to the heart of Europe's political elite.

Ed Balls: Will the hon. Gentleman give way?

Dr. Fox: I have told the hon. Gentleman that I shall not give way.

As The Economist put it,

That lesson has still to be learned by some of Europe's old masters. Last year, President Chirac slapped down accession states for daring to disagree with French policy on Iraq, and Chancellor Schröder threatens new EU states that use low tax rates to undercut German industry with financial retaliation.

Europe needs to have a genuine debate as we stand at the current crossroads. Yes, there have been many achievements, not least the liberation and stabilisation
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of Spain, Greece and Portugal, and subsequently the former east European states, from dictatorship to democracy. However, there are also many negative entries on the balance sheet.

The French and Dutch voters have done us all a great favour. They have stopped in its tracks a constitution that would have taken Europe in entirely the wrong direction. Perhaps the signing of the constitution by our Prime Minister was the high-water mark of European integration. We now have the chance to develop a more flexible Europe, which is more outward-looking, less centralised, less bureaucratic, more trusting of national identity, and designed to be the servant, not the master, of its citizens. The UK must champion that agenda with leadership and courage. Nothing is inevitable; change is possible. All that is required is the strength, belief and courage to see it through.

1.7 pm

The Minister for Europe (Mr. Douglas Alexander): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

I begin, on behalf of the Foreign Secretary, by extending his apologies to the House for his absence. My right hon. Friend is in Israel and the Palestinian territories.

The tone and tenor of the shadow Foreign Secretary's speech, not least his equivocation about Baroness Thatcher's view of the single market, reminded me why Europe, perhaps more than all other issues, has wrecked the Tory party and removed its prospects of power for well over a decade. Labour Members recognise that, with more than half our trade being with Europe, more than 3 million jobs linked directly or indirectly to exports to Europe and 750,000 British-based companies trading in the European Union, Britain's national interest is—and should continue to be—advanced by our engagement with the EU.

We further acknowledge that, on challenges as broad and diverse as environmental degradation and global poverty, Europe working together cannot only extend Britain's influence but can be a powerful and positive force for good, as we saw last month, when EU Development Ministers agreed a new collective target for overseas development assistance of 0.56 per cent. of EU gross national income by 2010. Only yesterday, EU Finance Ministers endorsed the commitment by the 15 richer EU member states to reach the United Nations overseas development assistance international target of 0.7 per cent. by 2015 and the agreement by the other 10 member states to work towards 0.33 per cent. on the same time scale. That will more than double EU aid in less than 10 years.

In my remarks today, I will reiterate the Government's response to the results of the French and Dutch referendums on the EU constitutional treaty. I will then
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address the wider case for economic reform in Europe and reaffirm that the Government will not act in a way that undermines the EU's continuing contribution to peace, stability and prosperity in Europe.

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