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Keith Vaz: Is it not right that if we are to fill the vacuum that exists because the constitution has been rejected, Britain and our partners need to move forward on the reform agenda? Some of those reforms were inherent in the constitution. Presumably, the hon. Gentleman would have no objection to EU countries moving forward on some parts of that agenda if it meant that the European Union would become more efficient and more effective.

Dr. Fox: Our party policy has been clear. If other countries want to move forward with plans that involve greater integration, that is fine if that is what they feel is good for them, as long as they do not force the United
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Kingdom to undertake reforms that it does not want to undertake. That concept of a more flexible Europe is central to our thinking.

Angus Robertson: Does the hon. Gentleman accept that some proposals in the constitution are worthy of consideration—for example, the Council of Ministers meeting in public when legislating? Could the spokesman for the Conservative party outline a brief list of aspects of the constitution that his party supports as part of a reform process?

Dr. Fox: A list? I can make it even simpler for the hon. Gentleman, and therefore more likely that he will understand it. We are happy to see powers returning from Brussels to the United Kingdom, but where there is any transfer of power from the United Kingdom to Brussels it should be put to a referendum of the British people. It is perfectly straightforward.

On the economic picture in Europe and the euro, what price is being paid for the speed at which the emblem of the EU's economic ambitions was introduced?

Mr. Straw rose—

Dr. Fox: I shall give way in a moment.

The euro was never an economic project; it was always a political project. The euro was designed to be the symbolic economic statement of political union. Such was the undue haste of its political architects that there was insufficient convergence before its introduction. The result has been an ill-fitting straitjacket that has left interest rates too low for some countries in Europe and too high for others. This is a clear vindication of the Conservative party's policy not to join the euro, yet the Government are still intent on abandoning the pound whenever they can. The Prime Minister said the euro is our destiny. Does the Foreign Secretary agree?

Mr. Straw: I want to ask the hon. Gentleman a question relating to European voting systems. Which system does he prefer—the Nice system or the one in the constitutional treaty?

Dr. Fox: We are perfectly happy to see improvements that do not give power away from the United Kingdom. Our objection to the system in the constitution concerns the extension of qualified majority voting into areas that are not currently dealt with by that method. I shall come on to the detail of the constitution in a moment. I am still dealing with the economic issue, on which the Foreign Secretary did not answer my question. The Prime Minister said that membership of the euro was Britain's destiny. Is that still the Government's position?

I asked the Foreign Secretary a simple question relating to the euro and European finance. Does he think that Britain would benefit from membership of the euro? He clearly does not know the answer. The Government's position is still that we would abandon our currency and join what is becoming ever more discredited as an economic project. The stability pact,
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which was designed to reassure those sceptical about financial discipline, has been a farce. A large country can get away with ignoring it, but a small one cannot. There is one rule for one group and no rule at all for another.

There is no doubt that resentment about the euro was at least one of the factors behind the French rejection of the constitution and was an issue in the Dutch referendum, too. With the death of the constitution, it is clear that there will not be a single political entity. [Interruption.] The question that inevitably will be asked is, what is the euro for? The treaty stated that the euro would be the currency of a single European union. The hon. Member for Rhondda (Chris Bryant) might do well to read it. What the euro is for is another question that needs to be considered at the summit.

We come to the EU budget, which the Foreign Secretary dealt with—

Mr. Straw: I know that the hon. Gentleman is familiar with the constitution. May I go back to the simple question that I put to him? It is not about the powers of the European Union—it is a binary question, yes or no, one or the other. Which voting system does he prefer—the Nice voting system or the one in the constitutional treaty?

Dr. Fox: To say that we would be delighted to continue with Nice would be to make a false statement of the party's position, but we did not regard what was in the constitution as an improvement, so we do not want to see the system changed. If we have to stay with the position under the Nice treaty or move to the position under the constitution, the answer is that we do not want to change to the position under the current constitution. That is a straightforward answer to the question. We would prefer to keep the treaty position as it currently is, rather than move to the abandonment of our vetoes under the constitution.

John Bercow (Buckingham) (Con): The subsidiarity and proportionality protocol of the constitutional treaty, though deeply flawed, can be regarded as a modest improvement on the inadequate provisions on the subject in the Nice, Amsterdam and Maastricht treaties. Does my hon. Friend agree that that provision could be implemented without a referendum?

Dr. Fox: Indeed. As I said earlier, the party would accept anything that is designed to increase the United Kingdom's ability to govern its own affairs, but anything that removes powers from the United Kingdom, including the abolition of areas where we currently have a veto, would be unacceptable and would have to be put to a referendum of the British people.

On the EU budget, the debate that we have had today and the debate that has taken place in Europe in recent weeks has been about how much extra we should be paying into the pot, but the real question that we should be asking is whether the pot should be increased at all. We should be aiming for an EU that does fewer things, but does them better. That includes doing them at a lower cost.

In the EU we have an organisation where, for almost a decade, the auditors would not sign off the accounts; where the whistleblowers, not the corrupt, get sacked;
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and where waste is endemic. Imagine a company going to its shareholders and asking for more money, when the auditors thought the accounts were indefensible. That is exactly what the Government are asking British taxpayers to do. There must be honest money—sound money—before there is more money, and we need reforms so that ultimately we need less money.

Mr. Paterson : The position is slightly worse than my hon. Friend depicts. Under the treaty there is a new competence, which is

That is in article III-254. Last week, the European Space Council met in Luxembourg, and despite the "No" votes in Holland and France thundered ahead, promising a programme that will cost the benighted European taxpayer 10 billion euros every year from now on, without any treaty basis or legal basis.

Dr. Fox: The treatment of the European taxpayer has always been at the bottom of the agenda for all those involved in the current project. What I found interesting about the Foreign Secretary's answer to my hon. Friend the Member for Altrincham and Sale, West (Mr. Brady) was the difference that seems to be emerging between the two sides of the House. We have said we think the European budget should be less, but that we should perhaps be spending money on some of the projects domestically. The Foreign Secretary said we would be spending more money domestically and increasing the size of the European budget. That means more cost to British taxpayers.

My hon. Friend the Member for Stratford-on-Avon (Mr. Maples) raised a good point. What can be done to improve the economic picture in the European Union? The big economies must undertake the sort of structural reform that we undertook in the 1980s. That is essential. It is not possible to maintain economies based on the current European social model and compete in a more competitive global economy at the same time. The burden of excessive regulation must be swept away. We need a genuinely competitive single market completed and more powers operated at a national level, in line with the true principle of subsidiarity. My hon. Friend said that the success of a single market in goods, capital and labour must be extended to the service sector if European businesses are to compete effectively. That should be done with minimum regulation.

The hon. Member for Glasgow, South-West (Mr. Davidson) is right. We need a complete overhaul of the common agricultural policy. The CAP roughly doubles our food prices, is unfair to developing countries, and is absurd and discredited. We need the removal of all the external EU tariffs and the reaffirmation that we are not responsible for one another's pension liabilities. These are essential protections for our taxpayers.

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