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Mr. Straw: No, it would not. Those are not alternatives. People who want reform in one sector also want reform elsewhere. Those who want a socially responsible but liberal market economy want all those things. On the whole—this is not an exclusive point—they also want greater efficiency in the way in which the EU spends its money. People in the other camp want to keep hold of existing, rather dirigiste, structures. They do not want the services directive and are dragging their feet on implementation of the Lisbon agenda. Such a trade-off is not available.

Mr. Ian Davidson (Glasgow, South-West) (Lab/Co-op): Is the Minister being too modest? If he aspires to be a future Minister of the month, should he not be more ambitious in tying reform of the CAP to reform of the budget? Given that the CAP is a racket and increases welfare dependency among farmers, should we not be looking for a much greater cut in its budget—far greater than would be contained within a 1 per cent. ceiling of the EU budget? Surely it is unwise to accept at this stage that we are prepared to pay 1 per cent. because if we get drastic cuts, as we should, in the CAP, the budget will decrease at a much greater rate.

Mr. Straw: I am probably much more modest than my hon. Friend—

Mr. Davidson: There is more to be modest about.

Mr. Straw: That is almost certainly true. I think that my right hon. Friend the Minister for Europe, who has done an outstanding job and will continue to do so, will clean up on the Minister of the month competition each month, at least for the rest of this Parliament.

We have to live in the world as it is, with the available possibilities. That part of the agenda set out by my hon. Friend the Member for Glasgow, South-West (Mr. Davidson)—his transitional demand, to use language
 
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with which he will be familiar from his past—is probably not achievable. Of course, it was always the case with transitional demands that those who made them were never satisfied in the rare event of them being delivered.

I want to make progress on the other issue: the EU constitutional treaty. In my statement to the House on 6 June, I set out the Government's position on the treaty. As I said then, the forthcoming European Council will be the first opportunity for EU Heads of Government collectively to discuss the treaty since the no votes in the French and Dutch referendums. The Council needs to hear from the French and Dutch Governments about the reasons for the referendum results, and how they see the future of their ratification processes.

Obviously, I cannot anticipate the conclusions of the Council, but in the meetings of EU Foreign Ministers that I attended earlier this week, there was emerging consensus that at least decisions on whether to proceed with ratification should be left to individual member states. There is also growing recognition of the need for—to use the now well-worn phrase—a period of reflection. As I told the House on 6  June, Britain's position is that currently it would not be sensible to proceed with Second Reading of the Bill providing for our ratification of the treaty by referendum, given the current uncertainty over its future following the referendums in France and the Netherlands. We will, however—to use another phrase of some antiquity—keep the situation under review.

A direct and important issue raised by the no votes is whether the extension of the enlargement process to Bulgaria, Romania, Croatia and Turkey, and then to other parts of the western Balkans, will continue. Due to the sentiments in countries that voted no, there have been suggestions that there are questions about the enlargement process. We need to be clear about that. First, the EU's commitments on enlargement are categorical and were made under existing treaties, not the new constitutional treaty. Secondly, although, in our judgment, the process of enlargement would have been assisted by the constitutional treaty, it is taking place under the existing acquis, the EU's current rules and treaties, and not those of the constitutional treaty. We shall be pursuing those commitments, as the EU presidency, from next month. Lastly, when Foreign Ministers discussed the matter, the general sentiment in the room, which I hope will be translated into formal conclusions on Thursday and Friday, was that the European Council should recall the December European Council conclusions and underline the need to implement in full the commitments in respect of enlargement for Turkey, Bulgaria and Romania and the other countries involved.

Malcolm Bruce (Gordon) (LD): How does the Foreign Secretary view the decision by the French authorities that after Romania and Bulgaria no further enlargement can take place without a referendum of the French people? How does that sit with the position that he has just explained?

Mr. Straw: There are two points involved. The first is when the European Union as a whole signs off the process of accession by Romania and Bulgaria. That has to be done by treaties that must be signed and ratified by
 
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each member state. It is for each member state to make its judgments about how ratification should proceed. I am pleased that in the House—as I often explain to my Foreign Minister colleagues—although one or two issues relating to the EU are contentious, there has always been a bipartisan, all-party approach to enlargement. We have never had demands—I hope that we do not—for enlargement treaties to be subject to referendum. It is for France to decide whether it has a referendum just as it was a matter for us to decide that.

Keith Vaz (Leicester, East) (Lab): Does my right hon. Friend recall that in fact Conservative Front Benchers tried to block the last enlargement by calling for a referendum on the Nice treaty? It would be good to hear their continued commitment to the enlargement of the EU.

Mr. Straw: My hon. Friend has made a helpful point and I thank him for it. The Conservative party, too, needs a period of reflection—[Interruption.] It needs a period of even longer reflection on its approach to the EU and I hope that wiser counsel will prevail.

Apart from the obvious decisions of the referendums in France and the Netherlands to say no to the constitutional treaty, the ballots raised wider issues about how the European Union can be made more relevant to people's lives. It was striking that in both France and the Netherlands, exit polls showed that a majority of older voters had supported the constitutional treaty, while younger voters in the main were opposed. That suggests that those who lived through the destruction caused on the continent by the second world war were more acutely aware than younger generations of how much the European Union had done to cement peace and stability.

In the UK, the situation is reversed: polls show that younger people tend to be more favourable towards the EU, in part perhaps a reflection of our relative economic success in recent years and of Europe's contribution to that. Yet the lesson from those two patterns of opinion is the same: if the European Union is to remain relevant to Europe's future generations, it cannot simply rely on the achievements of the past, but must continue to deliver practical benefits in the future. It must show that Europe can adapt and bring results on the issues that most matter to people's lives—jobs, prosperity, crime and personal security. Indeed. the EU has not only to deliver on those issues, but to show that it is delivering; to build a closer dialogue with Europe's citizens and to demonstrate how it is relevant to their lives.

Those challenges do not exist in a vacuum: we face them in the context of rapid change in the world outside Europe's borders. On current trends, people in the United States will be 50 per cent. richer than those in the EU by 2025. China's industrial production is growing at 17 per cent. a year, and its share of our imports increased tenfold between 1985 and 2003. India is producing 250,000 science and IT graduates every year, and is competing with European economies not just at the lower end of the market but in every sector, including cutting-edge industries such as software and biotechnology.
 
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To maintain prosperity and social justice in a more competitive and fast-changing world, the EU has to adapt. A European economy in which 19  million people are unemployed is not by any standards delivering a social Europe, so we need to look at how diverse social models, from Scandinavia to Spain to the UK, have delivered growth and social justice in Europe, and discuss how we can sustain and build on those successes in this new context.

We have to do much more to make a reality of the ambitious targets for economic reform, training and employment in the European Union that were set by its leaders at the Lisbon summit in March 2000, which we in the UK, but not many others, have achieved. EU regulation needs to be reviewed to ensure that it benefits business, and does not harm it. Furthermore, we must strengthen the EU's ability to act globally against threats to our security, while building on its strength as a force for good in international areas such as trade and aid.

The debate on the EU's future direction also needs to consider how the organisation itself operates. One of the issues discussed in the House when I made my statement nine days ago was how we could ensure that the Commission and the Council, if they so wished, could move ahead with proposals in a protocol to the draft constitutional treaty to give national Parliaments a more direct say in draft laws. I believe that should be so, and I hope that the House—it is not a matter for the Government, it is entirely for the House—will make rapid progress on the recommendations of the Modernisation Committee on improving not only the scrutiny of European legislation, but the depth and breadth of debates on issues that arise in the EU.

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