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Mr. Nick Clegg (Sheffield, Hallam) (LD): I agree with the hon. Member for Tiverton and Honiton (Angela Browning) that a fork in the road presents itself to us. I am not sure that I agree with her conclusion about where we should go when we encounter that fork. It is obvious that the overwhelming no votes in France and the Netherlands present us with a moment of crisis in a long history of crises in the development of the European Community and the European Union.
 
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It is somewhat ironic that the crisis seems to have been   elicited on the back of a text—this infamous constitution—which by any objective measure is more modest in the changes that it proposes to the function of the EU than many of the treaty provisions that preceded it. I hope that it is not an issue of debate that the Single European Act pooled far greater areas of policy, decision making and sovereignty at EU level than the constitution that we are discussing. Yet the comparative modesty of the constitution seems to have given way to a degree of public anxiety, the depth and breadth of which we have not seen for some time.

There are many reasons for that. The fact that it was called a constitution was arguably a mistake. It was a grandiloquent mistake that implied that a relatively modest treaty provision was dressed up to be something more than it was. As my right hon. and learned Friend the Member for North-East Fife (Sir Menzies Campbell) said at the beginning of the debate, the sheer pace of change in the European community and the EU—one treaty has been replaced by another, almost without pausing for breath, for a decade and a half—has perplexed many voters in many EU countries. I assume it is not a point of great dissent or debate to suggest that we need a prolonged pause for reflection. However, I suspect that as we consider what happens next, that pause will be much longer than many commentators believe.

What should we do during that pause for reflection? Instinct tells me that this is not just a crisis about the EU but a crisis of domestic politics in the Netherlands, France and, arguably, the UK. What has been lost is not only public confidence in the EU but public confidence in what Governments of all shapes and sizes in many different countries are saying to their electorates about the EU. That strikes me as a crisis of legitimacy and of confidence with much deeper roots than is often appreciated when we exchange blows about the EU and the mechanics of EU decision making. In my constituency and in groups in which I have discussed European integration, I have been struck by the fact that there is a hard-core minority that is passionately for and a hard-core minority—invariably, a little bigger, it must be conceded—that is passionately against. The vast majority of people, however, are bewildered, anxious, perplexed and confused by the European Union. They have lost their bearings and do not know in which direction the process is going.

In this period of reflection, the priority should be not to try to cobble together agreements or relaunch initiatives at EU level, but to try to re-establish in the UK and in the House a clearer understanding, free of prejudice, misunderstanding and misinformation, of what the EU is and what it is not. As the hon. Lady said, that requires a great deal of honesty and consistency. In parenthesis, the hon. Member for Woodspring (Dr. Fox) said that he would like the European Union to become more liberalised, deregulated, looser and dynamic in its economic management. When I was an MEP, a cornerstone of EU economic liberalisation in recent years was the proposal in 2001 for a takeover directive to allow British companies to take over companies in other EU countries more easily. It failed, because a number of Conservative MEPs did not vote for it. At about the same time, the "Everything but Arms" proposal was introduced by the European
 
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Commission to open the EU market to agricultural products from about 40 of the poorest nations on the planet. Again, Conservative MEPs resisted that move towards greater liberalisation of agriculture and trade.

Mr. Keith Simpson (Mid-Norfolk) (Con): I suppose the Liberal MEPs never voted against UK interests.

Mr. Clegg: We supported both proposals.

If we are going to trade blows over the European Union we need honesty and consistency. Both, however, have been lacking so far. Perhaps we should exploit the pause in the process by revisiting the well-established myths that have taken root in the domestic British debate about the EU. I have been struck by the number of times that it has been alluded to as if it were a disembodied entity or a malign spaceship hovering above us. We have no control over it—it zaps us helpless islanders with malign rules and regulations as if we had no say in the matter whatever.

The truth is that all European Union legislation is examined and scrutinised in depth by British civil servants, by British officials on the European Commission, by British Commissioners and by British Members of the European Parliament, and such legislation is always signed off in one shape or form by British Ministers in the Council of Ministers. How long should we persist in pretending that that process, in which we have a real stake, has nothing to do with us and that we do not share responsibility for decisions taken in our name in the EU?

On the myth of bureaucracy, listening to some hon. Members, one would think that the European Commission is a Goliath of unaccountable bureaucracy, but when I last looked, it was half the size of Birmingham city council. Listening to much of the debate, one would think that the European Union budget was out of control, but it is just more than 1 per cent. of EU GDP, while public spending in this country is fast approaching 40 per cent. of GDP, so the EU budget is comparatively very small indeed.

Another common misinterpretation is the suggestion that the EU is somehow inimical to economic competitiveness and liberalisation. If the history of European integration were to stop now, one of the greatest achievements would be the economic liberalisation that has taken place within the single market over the past decade or two. Could the old monopolies in France and Germany have been attacked without EU single market legislation? When I was a Member of the European Parliament, I worked on legislation to liberalise the telecoms market and the energy sector, which were highly protected sectors that British companies could not have entered without the battering ram of the EU single market.

On my first day in the European Parliament, a socialist Member gloomily declared to me that he had lost all faith in the EU because it had become a neo-Thatcherite construct, and that, like many French voters in the recent referendum, he was turning his back on the neo-liberal, Anglo-Saxon project. Perhaps that is the reason why the critique of European integration made by the hon. Member for Luton, North (Kelvin Hopkins), who adopts a left-wing stance, has been arguably the most intellectually coherent and consistent in today's debate, and it was ironic to hear Conservative Members vigorously support his left-wing approach.
 
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Turning to the allegation that EU institutions are Stalinist in their secrecy and lack of accountability, as has been mentioned previously, secrecy, lack of transparency and lack of accountability is found in one place—the Council of Ministers. I know of only two other legislatures in the world that legislate in secret like our Ministers and their colleagues in the Council of Ministers. One of those legislatures is in Pyongyang, North Korea, and the other is in Havana, Cuba, which shows the company that our Ministers are keeping as they continue to legislate in secret. On transparency, the European Parliament is an extremely porous place. Although the European Commission is occasionally dysfunctional, it is an unusually transparent bureaucracy compared with other Administrations in other capitals. Why do we not take it upon ourselves to open up the Council of Ministers to full public scrutiny? I hope that the Government take up that matter with greater alacrity in their forthcoming presidency.

We seem to agree that honesty, candour and a forthright approach should prevail on this great vexed issue. It is obvious that greater candour is needed if we are to make any headway on not only dealing with the fork in the road that we have encountered on the EU, but moving towards a broader consensus in the British political debate about the future of the EU as a whole.

6.9 pm

Mr. John Maples (Stratford-on-Avon) (Con): The hon. Member for Sheffield, Hallam (Mr. Clegg) made an interesting speech. I agree with him that far from all that the Commission has done has been wrong. For a long time, the then Common Market was one of the few proponents of free market economics in Europe, but many of us feel that it has got a bit stuck in recent years. The hon. Gentleman called, as did my hon. Friend the Member for Tiverton and Honiton (Angela Browning), for some reflection and debate in the country, but he has to face the fact that the biggest amount of reflection needs to come from those uncritical proponents and supporters of every integrationist measure that has come down the pipe, and I am afraid that those in his own party have been the least critical and the most enthusiastic. Those of us who have been sceptical about the process perhaps have a little less reflecting to do.

I congratulate my hon. Friends the Member for Ludlow (Mr. Dunne) and for Wantage (Mr. Vaizey) on their excellent maiden speeches, a standard that will doubtless be maintained in future debates.

In the last Parliament, these debates on Europe took on a ritualistic flavour, with the same Members making much the same speeches in much the same debates month after month and Session after Session. Until pretty recently, they shared the same characteristic—the rattle of hobby-horses being taken out of garages, dusted off and wheeled around the track at considerable length but saying nothing really new. I resisted the temptation to dust off my own speech, having made it about six times during the last Parliament and thinking that it might be helpful if we tried to move on a little bit.

Whatever our views, we all know that we have reached a turning point as regards the European Union. Something very big has happened—a constitution has been rejected by two central countries, one of which has been the driving force of the European project for the
 
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past few years. It is worth taking a moment to reflect on the reasons for that rejection. In France, those on the left rejected it, as the hon. Member for Luton, North (Kelvin Hopkins) said, because it was not kind enough to the social model and too free-market, while those on the right rejected it because they wanted something a little more protectionist. Some people in France and Holland were fearful of further enlargement—they did not like what had happened and were fearful of more, particularly in relation to Turkish entry.

I group those factors under the heading of fear of globalisation. We in Britain have come to terms with globalisation and feel reasonably at home with it. It is not a party political issue—the Conservatives made significant supply side reforms in the '80s and they have been largely accepted by the Labour Government. The reason why many countries do not feel equally comfortable with it is that they are trying to protect a social model that is very difficult to protect in such circumstances. If they want to create big tariff barriers around themselves and to continue to pay high wages and receive elaborate social benefits, they can do so, but it is a recipe for falling living standards that we would certainly reject.

Another set of reasons for rejection of the constitution would have come into play in this country were we to hold a referendum—a rejection of further centralisation and giving more power to Brussels. Those fears relate to a lack of democracy. Another factor is the fear of economic failure, but a lot has been said about that so I will not elaborate on it. That is partly a problem of the rigidity of the monetary policies pursued by the European Central Bank and the very fact of having a single currency. The social model that has made labour costs very high in France and Germany has prevented them from adapting as we have.

There are a variety of reasons that do not fit neatly into any one little package. The model of—I shall try to use a neutral phrase—ever-closer integration in a European Union of 25 is dead, and I do not see how it can be taken off life support except in a coffin. It is past and we have to look for something else. I am glad, in a way, because the ever-closer-integration model was inward-looking and likely to be protectionist and to lead to economic failure. But whatever one's views as to whether it was a good or a bad thing, we have reached a crisis point and we have to acknowledge that and try to move on.

The referendums and the debate have exposed irreconcilable tensions in the European Union. There is a tension between the highly protective social model and what the French and the Germans call Anglo-Saxon capitalism. There is tension on the question of enlargement, especially on whether Turkey becomes a member.

There are also tensions about the whole thrust of economic policy—whether in future it will be low tax, deregulated, highly competitive and take the world on its own terms—and the rigidity of the eurozone. The idea that people can come out of the euro piecemeal is simply not on—the costs for any country that chose to do that would be so enormous that it would shy away from such action—but I do not know whether it will all
 
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fall apart at some point because the problem is that fiscal policy is being asked to do all the work that the shock absorber of interest and exchange rates usually does.

Are we are a free trading Community? We have 15,000 external tariffs—on ski boots, biscuits, tennis racquets and so on. Why? We would like to burn them but I suspect that many of our competitors would not. The failure of the services directive, which was the only concrete aspect of the Lisbon agenda that was still alive, again brings into play the irreconcilable difference of view about the direction of European Union policy.

There are three ways in which we might proceed. Two are dangerous. The first is the total collapse of the EU. That would be very dangerous. The EU performs a function of giving us an institutional framework in which we can talk to each other, pursue common interests, of which we have many, and has, on the whole—perhaps less so recently—been a force for good with regard to the single market. The harmonisation directives go too far. They should not intrude into matters that are not to do with the single market, although I do not believe that we would have got as far as we have on the single market without the Commission.

It is worth reflecting on the history of the first half of the 20th century and what happens when countries in Europe do not talk to each other. Although those who credit the EU with peace in the second half of the 20th century are wrong, it is important for peace in the future that we continue to talk to each other. An institutional framework for European countries to act together, talk to each other and pursue common interests is tremendously important and we must not countenance the collapse of the EU.

The second danger is a rearguard action by the integrationists, who still try to pursue an agenda that has been comprehensively rejected in two countries. I suspect that it would also be rejected in this country. History shows that such referendums are repeated. Governments have said, "We've made a couple of changes; why don't you think again, Irish people, Danes" or whoever. That is not on this time.

The third alternative is tremendously exciting. It is a much more flexible Europe. The Government should not look so glum about it because the French and the Dutch have let them off a painful hook. I do not know whether the Foreign Secretary ever genuinely believed in the constitution. The Prime Minister got there by his usual process of making little concessions and thinking that he could patch it all up at the end, never believing that it would reach the current point. The Government have been let off the hook—they are free to think new thoughts—and the Prime Minister is in an ideal position to do it. He is the only leader of a big European country with a recent strong democratic mandate to do something. The leaders of Germany, France and Italy are in considerable difficulty domestically—they do not have the authority to deal with the matter, whereas the Prime Minister does. He has a way of moving off the ground that he previously occupied and on to his opponents' without a glimmer of shame or admission. I hope he does so in the case we are considering because he could promote a new vision of Europe which would preserve what is good, make it more democratic and relevant and allow different countries in Europe to do what they want in many matters. The referendums
 
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demonstrate that people do not all want to be told to do the same thing; they want much more control over their affairs.

I propose a flexible European Union, which we should use our presidency to promote. The Prime Minister has postponed the referendum. His saying that the constitution was dead would be the only excuse for that. Otherwise, he should hold it. I understand if, for reasons of diplomatic nicety, he wants to wait until the forthcoming summit to do that. However, the first thing he must do is tell his colleagues on the European Council, "This constitution is dead. We've got to start thinking again." Not only is the constitution dead but the programme of ever-closer union must receive a serious rethink.

The Amsterdam treaty provides for flexibility. Although the Foreign Secretary pretends that it was all to do with the constitution, the treaty of European Union, which established the European Community and was introduced at Amsterdam, allows a core or group of countries to integrate more if they want. I believe that we should have two-way flexibility. If countries with a strong European social model want to integrate more, I do not want to stand in their way. Similarly, if we do not want to be part of that, we should not have to be. I therefore suggest that we need to agree that there is a core of largely economic issues to do with the single market, free trade, and some but not many aspects of the environment and the labour market. We would accept majority voting and the Commission's role for that core. Everyone would have to subscribe to that. However, the rest of it should be à la carte, and what is à la carte should be intergovernmental. One of the big problems that a lot of people such as me and my hon. Friends have with the constitution is that it has rolled pillars 2 and 3 into pillar 1 and given the Commission authority over areas that, when set up by   Maastricht, were intergovernmental. I would like what is intergovernmental to be maintained as intergovernmental, and other areas to be brought back to being intergovernmental.

We have common interests on a huge number of issues: asylum, immigration, security and the environment. We need to pursue many of them together but they should be pursued on an intergovernmental basis. [Interruption.] I am making my own speech. I want some machinery within which we can pursue those common interests on an intergovernmental basis. I want us to maintain our veto and to let everyone else maintain theirs, except in very exceptional circumstances.

Were they here, the Prime Minister and the Leader of the Opposition would probably agree that our agenda for the European Union over the next few years will be about its economic performance—completing the single market, the services directive, lowering tariff barriers, improving competition, perhaps through an independent competition authority outside the Commission, and budget reform. Those are much more likely to be able to be pursued in the kind of Europe that I am talking about than in the integrationist model that the constitution—

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