Foreign Affairs Committee - Minutes of EvidenceHC 87

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Oral Evidence

Taken before the Foreign Affairs Committee

on Wednesday 6 February 2013

Members present:

Richard Ottaway (Chair)

Mr Bob Ainsworth

Mr John Baron

Sir Menzies Campbell

Mike Gapes

Mark Hendrick

Andrew Rosindell

Sir John Stanley

Rory Stewart


Examination of Witnesses

Witnesses: Rt Hon William Hague MP, First Secretary of State and Secretary of State for Foreign and Commonwealth Affairs, Sir Jon Cunliffe CB, UK Permanent Representative to the EU and Simon Manley CMG, Director, Europe, FCO.

Q145 Chair: I welcome members of the public to this sitting of the Foreign Affairs Committee. This is the fourth, and is expected to be the final, evidence session of the Committee’s inquiry, "The future of the EU: UK Government policy".

The Committee has been taking evidence since last summer, and visited several European capitals during the autumn, but sensibly decided that it could not conclude its inquiry until after the Prime Minister’s major speech on the EU, which he finally delivered on 23 January. Today is the first date since the Prime Minister’s speech when it has been possible for both the Foreign Secretary and the Committee to meet. Foreign Secretary, welcome.

Mr Hague: Thank you.

Q146 Chair: I also welcome Simon Manley, the director of the Europe desk in the Foreign Office, and Sir Jon Cunliffe. Thank you very much for coming over from Brussels, Sir Jon-it is much appreciated. Foreign Secretary, I understand you would like to start with an opening statement.

Mr Hague: I wanted to say a few sentences very briefly, Chair-I spoke at length in the House on this last week-just to welcome your inquiry.

As you know, the Prime Minister believes, as I do, that Europe faces greater changes now than at any time since the fall of the Berlin Wall. We are determined to seize the opportunities that those changes offer-that is what the Prime Minister’s speech was about. They are opportunities to reform the European Union and our relationship with it in a way that is good for the EU and good for the United Kingdom as well.

We are not in the business of ignoring the challenges ahead, but in the business of confronting them, and we are going to play an active and influential role in shaping Europe to make it a driver for prosperity again. The focus is on competitiveness, flexibility and democratic accountability. I hope that that is an agenda that we will be able to take forward with the Committee.

Q147 Chair: Thank you. Can I start with the Bloomberg speech? How much input did the Foreign Office have in that speech?

Mr Hague: It depends on which part of the speech. The speech was in part a reflection of the Coalition’s priorities and beliefs about the European Union, as well as my speech in Berlin in October, which had many of the same themes. But the part of the speech that was about what we will do after 2015 was the Prime Minister speaking as leader of the Conservative Party. As you can imagine, on that part, the input from the Foreign Office came from the Foreign Secretary, as I am the foreign affairs spokesman of the Conservative Party, as well as the Foreign Secretary of the United Kingdom. Officials were not involved in any of that part of the speech, but they were of course able to give advice on those parts relevant to and representing Government policy in this Government.

Q148 Chair: Did you warn him that the original date of the speech was the same day as the Elysée Treaty meeting?

Mr Hague: There was a range of dates for this speech. Since the Elysée Treaty meeting was taking place, in the end we chose one of the other dates: Friday 18 January. Of course, as the Committee knows, the Algerian hostage crisis intervened, so we moved it to the Wednesday instead.

Q149 Chair: It is proposed that there will be an in/out referendum. It will be drafted before the General Election and would take place after it, if there is a Conservative Government. To what extent do you think the Foreign Office will be involved in the drafting of the legislation over the next two years?

Mr Hague: That is to be determined. The draft legislation would be quite simple. I don’t think that that involves a huge amount of official work. But we will involve the Foreign Office to the extent that is appropriate in pre-election arrangements. Of course, they will be required to work on arrangements in the event of any party winning the General Election. I imagine that that will fit within that, but we will do that in an appropriate way.

Q150 Chair: What are you asking your officials to work on, both in UKRep’s office and here? To what extent has the speech changed things? What is new that you are asking your officials now to look at that they would not be doing if the speech had not taken place?

Mr Hague: The officials are working on all the aspects of Government policy reflected in this speech and all our other utterances and policies. As you know, the European Council is taking place this weekend. There will be negotiations on the Multiannual Financial Framework and discussions at the same Council on trade and, to some extent, on foreign policy. We are heavily engaged-last Thursday, I was at the Foreign Affairs Council in the EU-on the full range of global issues that are discussed within the EU. We are very much engaged in driving forward the single market. The key principles of the Prime Minister’s speech concerning competitiveness and flexibility are absolutely ones that officials are working on all the time. That is part of the Coalition Government’s approach.

The implementation of the referendum commitment the Prime Minister gave is for the Conservative Party, a future Parliament and officials at that time, subject to whoever are the Government in that time.

Q151 Chair: So really, it hasn’t made much difference. This is work you would have been doing anyway.

Mr Hague: The key difference in the Prime Minister’s speech was a statement about how we will approach the future and shaping the debate for the future. It does not change the work of our officials on the single market, the Multiannual Financial Framework and the fisheries policy, which the European Parliament has voted on earlier today, in a direction that we can approve of-for a change. It does not change their work on these things.

Q152 Chair: You mentioned the Coalition. The Liberal Democrats do not really support this proposal. Has that caused problems in preparing the policy?

Mr Hague: It is, of course, a hybrid speech, to use a parliamentary term, although that is not unusual-it would be normal in a single-party Government- closer to a general election. Of course, it is more likely to arise in a coalition. In a mature democracy we all understand that. It has not caused a difficulty preparing it; it does mean that discussions about what the Prime Minister is proposing to do after the 2015 General Election are, of course, discussions among members of the Conservative Party. That would not be unusual. It would not be unusual if the Conservative Party was in government on its own for us to do that about what we will do in the next Parliament.

Q153 Sir Menzies Campbell: I was pleased to hear you begin by saying the Prime Minister’s commitment was to reform, because I think that is a commitment that is pretty well shared on all sides of the House of Commons.

May I ask you this question? Does the corporate memory of the Foreign Office recall the circumstances in which Harold Wilson in the early 1970s, along with Jim Callaghan, went round the capitals of Europe seeking renegotiation, came back and then, a bit like the emperor’s clothes, had a very threadbare offering to make. As a consequence, many people believed that the opportunity that had been taken was more of a device to deal with the internal difficulties of his own party, than it was something in the public interest.

Mr Hague: I am sure that the corporate memory does go back that far, but in addition, my own personal memory just goes back that far, and I think we would all have to agree that the circumstances of today are very different. Europe faces the triple challenge-the triple crisis, if you like-that the Prime Minister was describing: of the effect of the eurozone crisis on the EU as a whole; of maintaining its competitiveness in a global race that was not taking place in the same way in the 1970s; and of a growing gap between the EU’s institutions and the citizens of the EU member states. These are all factors that are present today that were not present in the 1970s. The Europe Union, or the EEC as it then was, was relatively new. Now it is a mature institution facing these multiple crises, and with other people advocating treaty change. That is in the so-called report of the four Presidents, it is in Commission President Barroso’s blueprint for the future-all of these call for treaty change for other reasons. The environment, the scale of the crisis and the requirements of other nations to bring about change in the EU are all much more intense than in the 1970s when it was simply a matter of a bilateral renegotiation.

Q154 Sir Menzies Campbell: But I do not think that any of these other countries that you mention have embarked upon a process which would lead to an in/out referendum. I do not hear that in France, for example, or Germany, or among the Baltic states, or anywhere else for that matter.

Mr Hague: They have had referendums of course. There have been referendums in many other countries on recent treaties over the last decade, when the British people have been, in my view, wrongly denied a referendum. People in other countries have had the opportunity to give their judgement.

Q155 Sir Menzies Campbell: But not on an in/out basis.

Mr Hague: No, not on an in/out basis, but as you will know, Sir Menzies, from campaigning for an in/out referendum at the last General Election for the Liberal Democrat Party, there is a large body of opinion in favour of that in the United Kingdom.

Q156 Sir Menzies Campbell: A comparison of manifestos would not take us very far. Can I ask about the approach here, and which of these two approaches is the one that you think is correct? Is it right to say while the eurozone is in difficulty, "We would like to help, and by the way, when that process is taking place, there are a number of other things we want to raise"? Or, is the position, "The eurozone is in trouble, and we are not going to help unless you examine these other issues which we think are important"? The reception that the British Government will get depends on which of these it is. Which is the approach that you think you are going to address?

Mr Hague: I would characterise it much more as the former of those two. To look at an example of that in practice, look at the recent negotiations concluded in December last year on the rules of the European Banking Authority. This is a change that is part of the so-called banking union proposals in the EU. Our approach to that is that we are not going to block the changes that eurozone members want, but we do want our own interests to be safeguarded, in this case in a new way. So we asked for something that initially quite a few Member States were not very enthusiastic about. Sir Jon might wish to add to that, as he was instrumental and part of the negotiations on this and supported the Treasury team in doing so.

We asked for a new procedure, "You can have a European Banking Authority that sets rules by the normal qualified majority but we want, as well, a simple majority vote among the ins and the outs of the eurozone, so that those out of the eurozone have their interests safeguarded." That has been agreed in the negotiations of December. Sir Jon, would you like to elaborate on that?

Sir Jon Cunliffe: Once one set out the principle that if a number of countries were coming together in a single institution and that institution would be round the table voting with all the votes of its members with a near automatic qualified majority, the point in principle was that you had to reflect that somehow by changing the voting arrangements. There was a new reality being created by that particular proposal and a number of changes were needed. Once the principle was agreed, then it was about the details.

Q157 Sir Menzies Campbell: That is an illustration of co-operation.

Mr Hague: Yes, and hard negotiation. The two can go together.

Q158 Sir Menzies Campbell: But ultimately co-operation.

Mr Hague: Yes.

Q159 Sir Menzies Campbell: Do you think that that is embraced in the notion that if we don’t get what we want, we would leave?

Mr Hague: That part of it is just democracy. The Prime Minister argued, correctly, in his speech that democratic consent has become wafer thin for the EU in this country. I very much believe that to be true. I don’t think we can deny people for ever. I am not sure anybody any more in the House of Commons is arguing that people can be denied for ever a say in their future in the European Union. Therefore, it is better to lead that debate, confront that, shape that and settle that. That is why the referendum pledge is important. It is not a threat; it is part of a vibrant, robust democracy that we have in this country.

Q160 Sir Menzies Campbell: Is that the interpretation that the Governments of France or Germany have put on this policy?

Mr Hague: Governments around Europe have of course reacted in a wide range of ways, as they did even to the proposal we made about banking rules. Chancellor Merkel said clearly that we must always discuss the interests of individual countries; we are of course ready to discuss British wishes and eventually we must find a fair compromise. She reacted in a pragmatic way and that is true of many other European capitals.

Q161 Andrew Rosindell: Foreign Secretary, you said that the credibility of our legitimacy within the EU is wafer thin. Do you agree that it has been wafer thin ever since we signed the Maastricht treaty without a referendum?

Mr Hague: There are many different types of wafers on sale of different thinness. I do not know how we define when wafer thinness arrives. It has diminished over all of that time. We have seen a series of treaties-Amsterdam, Nice and, most importantly, Lisbon-where there were widespread demands for a referendum and it was not held. In the case of Maastricht, of course, it was in the proposals of the party that won the general election, that it would ratify that treaty. In the case of the Lisbon treaty, there was neither a general election nor a referendum for people to be able to give their views. That was very undermining of the democratic legitimacy of the EU in the United Kingdom.

Q162 Andrew Rosindell: We are all delighted that there is going to be a referendum in four or five years’ time, Foreign Secretary. For it to be a meaningful referendum is it right that the Government today should be looking at alternatives, to be motoring to look at other alliances with perhaps the Commonwealth or other parts of the world we can trade and co-operate with? Are the Government going to make use of the next four years, so that when there is a referendum there is a clear alternative, and it is not just a question of being in or completely out of everything?

Mr Hague: Be clear that the Government’s objective, as the Prime Minister has expressed it, is to succeed in arriving at a new settlement and to be able to campaign for Britain to stay in the European Union. On the question of other relationships in the world, as the Committee knows, a major part of our approach to foreign policy is that we are building up relations all around the world, some of them, in my view, long neglected. Indeed, last year for the first time in a long time a bigger share of Britain’s exports went to outside the European Union than inside. Inside remains hugely important to us, but the balance has started to shift in that direction as the pattern of world economic growth has changed.

We are shifting hundreds of diplomats into the Asia Pacific and the Latin American regions, opening 20 new embassies and consulates elsewhere in the world. We are giving greater importance to the Commonwealth but I would not want the Committee to think that the Commonwealth is an alternative to the European Union. It has many great strengths and opportunities and more should be made of them but it is not and cannot become a single market, a trading bloc, a similarly united force on a variety of foreign policy issues as the European Union has become. We have to be realistic about that.

Q163 Andrew Rosindell: I turn briefly to the Prime Minister’s speech. Did he consider the implications of his proposals on not just England but the rest of the United Kingdom, particularly Scotland, which has its own issues, Northern Ireland and Wales, but also Gibraltar, which is a part of the European Union as well, and whether the policy could have a knock-on effect on the other British territories and dependencies?

Mr Hague: He delivered the speech as Prime Minister of the UK and as leader of the Conservative Party of the United Kingdom and therefore was speaking for the whole of the United Kingdom. The UK’s relationship with the EU has complex effects on overseas territories. Those effects would flow from whatever decision we made here in the United Kingdom about our future in the European Union. Certainly the Scottish dimension is very important. I know this is something the Committee is looking at separately. Of course, there is to be a referendum in Scotland in any case on the question of independence. I suppose, therefore, you could argue that the people of Scotland will have, in effect, two referendums on their membership of the EU because voting to leave the United Kingdom would almost certainly have the effect of leaving the European Union as well.

Q164 Andrew Rosindell: Will the people of Gibraltar have the right to vote in the European referendum as well?

Mr Hague: The normal rules of referendums apply as things stand. They, of course, vote in European elections but not in a general election. There would be the opportunity to amend those rules relating to a referendum before we arrive at the referendum.

Q165 Andrew Rosindell: You intend to do that, Foreign Secretary?

Mr Hague: I am happy, Mr Chairman, to look at suggestions which, I am sure, Mr Rosindell will be making.

Chair: He has never been slow at that.

Q166 Sir Menzies Campbell: Referendums are a bit like London buses: you can’t get one for a moment and then suddenly two come along at the same time. I want to go back to the point raised by Andrew Rosindell about other relationships. In Munich at the weekend there was a lot of speculation both inside and outside the conference about a free trade area relationship between the EU and North America. Is that something which the British Government is anxious to pursue at the moment?

Mr Hague: Yes, and we expect shortly the report of the high-level panel convened between the EU and the United States on this subject. It is something I discussed on my visit to Washington last week. It is firmly on our agenda for initial talks with Secretary Kerry, as it has been between the Prime Minister and President Obama. This is part of our enthusiasm and the very hard work of our officials in post around the world of implementing more free trade agreements around the world. Two years ago we concluded the one with South Korea. We have now reached political agreement on a free trade agreement with Singapore. We are close to concluding an agreement with Canada. It is estimated that an EU-United States free trade agreement could add 2% to 3% to GDP on both sides of the Atlantic. Tariff barriers are not high, but non-tariff barriers are substantial, and removing those would have a very positive economic effect. This is actually a large part of our work and emphasis at the moment.

Q167 Sir Menzies Campbell: Is that discussion between the EU and the United States rather than between the British Government and the United States?

Mr Hague: The negotiation of such an agreement is between the EU and the United States. Trade, in this respect, is a competence of the European Union. The political impetus to get it going, to generate enthusiasm for it, to explain the case for it and to persuade the United States that it would be good for them as well-national governments have to play a big role in that, and we are doing so in the UK.

Sir Jon Cunliffe: It will be on the agenda for the European Council on Friday morning, and the aim will be to push it even further and faster.

Q168 Mark Hendrick: Foreign Secretary, if the Prime Minister had secured his requested safeguards at the December 2011 European Council and the fiscal compact had been enacted in amendments to the EU treaties, would that have triggered a referendum under the European Union Act 2011?

Mr Hague: Since the fiscal compact relates to responsibilities in the eurozone countries, it should not have implied any transfer of power or competence to the rest of the European Union. However, that is not just for Governments to define. It is open to judicial review and it is up to Parliament to agree or not. That would be my assessment.

Q169 Mark Hendrick: In an EU treaty approval referendum held under the terms of the 2011 Act, what would a no vote mean?

Mr Hague: There are a variety of issues under the 2011 Act on which a referendum can be held. It could be a new treaty that transfers some new power or competence to the EU. There is also the use of certain provisions incorporated into the treaties by the Lisbon treaty-some of the passerelle clauses-which could be used without a new treaty under the provisions of Lisbon to transfer further powers to the EU, which can trigger a referendum under the 2011 Act.

In any of those things, a no vote would mean that the United Kingdom did not agree-it either did not ratify a treaty in the first instance or would not cast its vote in favour of the use of a passerelle in the second case.

Q170 Mark Hendrick: Does that not mean, possibly, that the UK would be out of the EU?

Mr Hague: No. People might argue-it depends on the political debate at the time, of course-that a no vote in a referendum on any individual issue raises that question, but it would not mean that in itself.

Q171 Mark Hendrick: So you are saying that the status quo would be an option, even though all the other countries had ratified that treaty?

Mr Hague: Yes, of course. Treaties require unanimity and cannot come into force without the agreement of all the Member States. As the Committee knows, there have been ‘no’ votes in other countries in referendums on treaty changes. There was a no vote in France and the Netherlands on the so-called European constitution.

Q172 Mark Hendrick: The question was asked again and they said yes.

Mr Hague: In France they decided not to ask the question again on something very similar called the Lisbon Treaty, and in Ireland they asked the question again and got a different answer. I would not volunteer to be the Minister who asked the British people the same question again.

Q173 Mark Hendrick: The legislation that you talked about for a post-2015 Conservative Government would introduce the in/out concept. Would it amend or repeal the 2011 Act, or neither?

Mr Hague: It would add to the 2011 Act, which I am pleased to say now has cross-party support and I hope, therefore, has entered into the unwritten constitution of the United Kingdom. I hope that the 2011 Act will remain in force for the long term before, and indeed after, an in/out referendum, provided that the result of that referendum was to stay in the European Union. It is our assumption in the Conservative party-and this is a Conservative party proposal-that the 2011 Act would remain after such a referendum.

Q174 Mark Hendrick: Given that the 2011 Act is fairly recent, and we are just at the beginning of 2013, why has the Prime Minister seen fit to introduce a referendum on a treaty that may or may not come after the next general election and may involve transfers of powers to the UK, rather than from the UK?

Mr Hague: It is a time of fairly momentous change in the European Union-almost in any month, let alone any year. There is a major crisis, as I described earlier, and as the Prime Minister described in his speech, in terms of the eurozone, and Europe’s competitiveness and democratic legitimacy. That has to be addressed.

We cannot say that the issue was addressed in its entirety by the 2011 Act because the 2011 Act dealt with a different thing. It dealt specifically with the concern that Mr Rosindell just raised-that a whole series of treaties have been passed without the British people ever having their say. This proposal deals with what happens in the future, and how we will shape and lead the debate in Europe and succeed in winning democratic consent for that.

Q175 Sir Menzies Campbell: The terms of the 2011 Act are to the effect that if there is any transfer of power from Westminster to Brussels, that would trigger a referendum. Is there any risk that that statutory provision might have to be invoked at the same time as the proposal about an in/out referendum? Assuming a negotiation, the view was taken by the Conservative Government that in return for what might be described as concessions there are some powers they are willing to transfer. Would that trigger the statutory obligation in the 2011 Act or could the whole thing be put into one package? Or might we, in the worst-case scenario, find ourselves with two referendums?

Mr Hague: That would be for our successors in the next Parliament to determine. The common sense basis would be to consider a new settlement between the EU and the UK in the round, in a single referendum with a single vote. Of course, that is entirely for the next Parliament to determine.

Q176 Sir John Stanley: Foreign Secretary, before you and your fellow Ministers made the policy decision to have an in/out referendum in five years’ time, did you carry out an assessment of the inescapable business investment blight that such an announcement would create?

Mr Hague: As I said before, it is a Conservative party commitment, not a coalition commitment or a Government responsibility. Our view, based on talking to many international businesses, is that it does not create a blight. In fact, we argue that, if anything, there will be less uncertainty with this approach, compared with the approach of never ruling out a referendum, but not having one in the meantime.

This is a way of confronting the situation and settling the debate. Certainly, when I was talking to some major investors in this country and in the United States last week, I did not detect any change in their plans or any blighting from what we have proposed, which is, in any case, dependent on a range of factors: the business environment, the labour market and corporate taxation. It depends on quite a lot of things.

Q177 Sir John Stanley: Foreign Secretary, what you just said to the Committee is in direct contradiction with the reported comments of one of the most successful and experienced British businessmen, Sir Martin Sorrell. The day after the announcement was made, he said this: "[Our] clients are worried. It’s this uncertainty. It’s very simple-let’s say you build a factory in the UK. The gestation period is two or three years. You’ve got your factory up and running and suddenly the UK pulls out. You’ve got tariffs, you’ve got trade barriers. Suddenly you’re outside Europe. That will either suspend decisions or will move them elsewhere."

That is a very significant statement. I would suggest that that is mirrored by many other people in senior positions with decision-making capability about future investment in the UK. If that is the risk, how can this policy possibly be squared with the Government’s supposed priority of achieving economic growth?

Mr Hague: There are many different quotes from business leaders. There are ones from business organisations representing thousands of businesses rather than one business, including, for instance, the director general of the Institute of Directors, who says: "The British public, and many of our members, are sceptical about many of the institutions and practices of the EU. We need to put their doubts to rest." The CBI director general said: "The Prime Minister rightly recognises the benefits of retaining membership of what must be a reformed EU and the CBI will work closely with government to get the best deal for Britain." The head of the British Chambers of Commerce said that "the Prime Minister’s determination to negotiate a new settlement for Britain is the right course of action." I do not think individual voices have the same weight as these huge business organisations.

Q178 Sir John Stanley: Yes, Foreign Secretary, but you are bringing together two completely separate issues. One is the issue of renegotiating for better terms, which is unanimously agreed with and supported in the business community; the other is the quite separate issue of having stated that there is going to be an in-or-out referendum in five years’ time. That is a quite separate issue and raises quite different issues for the business community.

Mr Hague: Those issues go together, of course, because any new settlement requires democratic consent. That is our view. In this country, given the failure to hold a referendum on a whole series of previous treaties, I do not think that we could countenance, in our democracy, having a new settlement with the European Union without democratic consent-or, indeed, not having a new settlement without democratic consent. This has to be faced.

One can argue, of course, on any basis, that any democratic uncertainty is something that disturbs businesses. You could argue that about a general election, but that does not stop us having them. Equally, we need to hold a referendum on the European Union, and many of the business organisations that I have quoted are supportive of that.

We receive, and there is every sign that we are continuing to receive-it has not changed in the past few weeks-a huge proportion of the foreign direct investment that comes into the European Union.

Q179 Sir John Stanley: Foreign Secretary, do you accept that there is a fundamental difference between asking the British people whether or not they are happy with a new deal with Europe and asking them whether they want to stay in Europe or to come out? Are they not fundamentally different, and is it not the case that what is being promised by the Conservative leadership is an in-or-out referendum?

Mr Hague: It would be an in-or-out referendum, but on the basis of an improved settlement with the European Union. In our view, that is the time to ask that question. Some people would argue that we should ask that question now-Mr Baron has probably just been arguing that we should ask that question now.

Mr Baron: Legislation in.

Mr Hague: Our argument for asking it in the future is that the changes taking place in Europe now are so fundamental-as a result of the eurozone crisis, the relationship between eurozone countries and other countries is changing in important ways-and that the opportunity to improve the UK’s relationship with the European Union is there, for all the reasons that I have described, but we should ask the in-or-out question at a later stage, when we have a better idea of both those things. That is why those things are linked.

Q180 Mark Hendrick: The FCO has been trying to encourage more British nationals to pursue careers in EU institutions. Why should a young British person go to the considerable effort of learning languages and getting an EU-qualifying exam if there is a risk to his or her eligibility for a job in the institutions altogether? For that matter, why should anybody now bother trying to become an MEP?

Mr Hague: There are many parts to that question. The European Parliament has considerable power. I just mentioned how, a few hours ago, they voted on the fisheries policy, sharing competence with the European Council for the first time on fisheries. Their powers have been extended-at the same time as their reputation and standing have fallen, on most surveys of opinion, but there is an important job to be done in the European Parliament. There is an important job to be done in the European institutions.

The Prime Minister set out the case, in his speech, to improve the UK’s relationship with the EU and to improve the whole position of the EU in the world-remember, he was including the whole European Union in the reforms that he was advocating, so that the EU can succeed and Britain can succeed within it and so that he can argue in the future, in such a referendum, for Britain to stay in the European Union. So I don’t think it should mean that people do not contemplate a career in the European Union. Otherwise, one can make the same argument about any general election, as to why people should ever pursue careers in any organisations that might change as Governments change.

Q181 Mark Hendrick: Civil servants will still be there in the next British Government, whether it is a Labour or Conservative Government. In the EU though, is it not the case that Britain’s withdrawing would have huge implications for staffing from the UK?

Mr Hague: Yes, it would, but our intention is that we are going to improve our settlement in the European Union and campaign to keep Britain in the European Union. I am pleased to say we are achieving an increase in the number of people going into the European institutions, including at the junior levels, as well as important positions within the European External Action Service. I don’t expect that to change as a result of the Prime Minister’s speech.

Mark Hendrick: Sir Jon, have you detected any uncertainty, or people being a bit unnerved by the Prime Minister’s speech in UKREP?

Sir Jon Cunliffe: On the question of young British people looking at careers in the European institutions, the numbers who have become interested and applied have been going up in recent years because we have been making a very substantial effort for that to happen, and we have seen no sign of that changing.

Q182 Mark Hendrick: Finally, the possibility of an in/out referendum in 2015 could affect the Government’s ability to help secure a favourable portfolio for a UK Commissioner. Is that not a concern as well?

Mr Hague: Our ability to negotiate and succeed in the European Union depends on many factors. One is our ability to make alliances on particular subjects; the Committee will have observed in the course of its inquiry how we have done that on the multi-annual financial framework. Of course, we did that on the change in the rules to the European Banking Authority that I have just described. We do it on a daily basis on a vast range of subjects. As I mentioned, I attended the Foreign Affairs Council of the EU last Thursday in Brussels. There we are dealing with huge questions, such as policy towards Syria, the Iranian nuclear programme, and the EU military training mission to Mali. I did not detect any change in our ability to get our way, or difficulties on other subjects, as a result of our declaration about a referendum in the future. We are a major player in the European Union and we make our alliances on a vast range of subjects. I do not believe our ability to do that will be diminished.

Q183 Mark Hendrick: You are saying, then, that the Prime Minister’s speech has not got other European leaders or our partners in Europe worried at all.

Mr Hague: I am saying that they want to work with the United Kingdom. That is what so many of them said. The French Government, which clearly has very different views about the future development of Europe, has said very clearly that they want to keep the United Kingdom in the European Union. Now that is very much the thrust of the comments of the German Government. I will not go through all the lists of Ministers and political parties and media organisations around Europe, but they are all here, who have expressed either some understanding or some sympathy with the Prime Minister’s speech, or certainly expressed the hope that these sorts of reforms and changes will take place for the benefit of the whole EU. The idea that there is a wall of hostility to the ideas that we have put forward, I think would be mistaken.

Mark Hendrick: We’ll see.

Q184 Mike Gapes: Foreign Secretary, you conceded that the Bloomberg speech was a hybrid, as you put it-some might say a curate’s egg-part governmental and part party political. Was it postponed from 2012 to 2013 for governmental or party political reasons?

Mr Hague: By the way, I wasn’t conceding a hybrid speech; that was an inaccurate parliamentary remark about it, I think. Equally, I am not going to concede any postponement, because we did not fix any date in 2012 for the speech and then postpone it.

Q185 Mike Gapes: It was talked about in the media for months that it was going to be before the end of the year.

Mr Hague: I am not responsible for everything the media say-or, thankfully, for very much of it. As the Committee will understand, we have quite a lot of things going on, and therefore the Prime Minister gave this speech when there was a suitable gap between other events.

Q186 Mike Gapes: Did you expect to benefit from a poll surge and winning back support from UKIP as a result of that speech?

Mr Hague: This is a speech about the whole future of Europe and the future of the UK. It doesn’t bear any necessary relation to daily or weekly movements <?oasys [pc10p0] ?>in opinion polls in the UK. In the Conservative party, we will be very proud and clear about making this case at the next general election, and I think it will be an important part of our case, but polls go up and down. Personally, I never show that much interest in them.

Q187 Mike Gapes: Okay, we’ll see. Why did the Prime Minister set the deadline of November 2017 for negotiating the new settlement and holding this in/out referendum?

Mr Hague: Clearly, there has to be some time scale for this. Not everybody who says they might support a referendum has a time scale, but then there are major problems with endless uncertainty about it. November ’17 is halfway through the next Parliament. It is important, as people consider in a general election what Government they want, for people to have a reasonable idea of the time scale on which these things will take place. The European Commission talked about floating ideas about changes in the European Union around the time of the European elections next year. I referred earlier to the Commission blueprint and the Four Presidents report, which called for major treaty change in the coming years, meaning in the next few years. If you think about it, there is a window between those elections in 2014 and the French and German national elections in 2017, which is really the window in which such treaty change would be logically discussed.

Q188 Mike Gapes: Clearly, if there is to be a negotiation, it is going to take time. Isn’t there a case, and would the Government support the idea, that you start talking about this treaty amendment process before the 2015 General Election, perhaps after the appointment of the new European Commission, which I understand is in October 2014? You would get a year’s more negotiation, so you could make sure you got your 2017 deadline.

Mr Hague: If you look at the time scales for treaty changes on the Nice, Amsterdam and Lisbon treaties, they always measured within-I am speaking off the cuff here-less than a year and a half or so, from beginning to completion. Some of them were less than a year. That is the normal time scale for treaty change. We welcome the idea that ideas about treaty change can be discussed from now on. We are putting our ideas. We are in favour of treaty change. We are at the stage, where the Prime Minister is setting out these principles, of launching the discussion-launching the debate-in Europe. The time to turn that into specific items for negotiation is clearly to be judged depending on when that debate reaches the right point. It is also a commitment for the Conservative party for after the next general election.

Q189 Mike Gapes: So it is not anything to do with the fact that you would not be able to get coalition agreement to start that negotiation before the general election.

Mr Hague: On any treaty change that begins before the general election, we will seek to proceed with coalition agreement.

Q190 Mike Gapes: That is not what I asked.

Mr Hague: It is part of what you asked. The other part of what you asked, on the time scale for these things, is that the likely fulcrum of debate about treaty change is in the 2015 to 2017 period, which happens to coincide with the British people being able to say in a general election what approach they would like.

Q191 Mike Gapes: The UK is going to take over the rotating presidency of the Council of Ministers on 1 July 2017. Can we assume that the Prime Minister would wish to hold any in/out referendum before we take over that rotating presidency, rather than during it?

Mr Hague: The timing of the referendum will depend, of course, on when negotiations are completed. Therefore, the Prime Minister has made a commitment about the first half of the Parliament, which does not exclude the referendum being earlier than the second half of 2017.

Q192 Mike Gapes: So it could be easier to have the referendum before we take over the presidency so that the Prime Minister can triumphantly say, "We have had the referendum, we have won and now we have a lovely presidency," rather than having a presidency that is overshadowed by, "Is he going to stay in or leave? What are the British people going to vote?"

Mr Hague: That could happen, but I do not want to say that we are jumping at that particular scenario.

Q193 Mike Gapes: Have you thought about it?

Mr Hague: It will depend on the timing of the negotiations. Therefore, yes, a referendum could be held before the British presidency in the second half of 2017, but I would not exclude a referendum being held during the presidency. That would make for a particularly memorable presidency, of course.

Q194 Mike Gapes: It would indeed. Can I take you back to the matter that was referred to earlier: walking away from the Council in December 2011? It has been put to us that, actually, the best chance of negotiating an EU treaty amendment in Britain’s interest was at that point, when other countries wanted something from a new treaty. Tactically, by walking away, the opportunity has now gone because a structure has been established outside the treaties. How do you respond to that?

Mr Hague: There are two points I would make in response. One is that we did not walk away. We vetoed it as a European treaty, so it is not part of the EU treaties, but we certainly did not walk away from the meeting, which the Prime Minister attended throughout and, indeed, as I remember it, he and I were in the building well after many others had left. The United Kingdom did not walk away, but we ensured that the fiscal compact treaty is not part of the EU treaties as it stands today.

On the question of whether there was an opportunity for a bigger negotiation, the Committee will recall that we did put forward in those negotiations certain requests for safeguarding the single market, particularly in financial services, and other countries were not prepared to agree to those requests as part of the negotiation on the fiscal compact treaty, which is why it went ahead with a British veto. From that, it seems highly unlikely that they would have agreed to something more ambitious than those requirements.

Q195 Mike Gapes: We went to Germany, France and elsewhere to have meetings with other people in the past few months. It is quite clear that the enthusiasm in some European Union countries for major treaty change was stronger a year and a half or two years ago than it is now. And it is clear that we may well be in a position where, as Mr Van Rompuy said recently, the European Union is not going to have a significant treaty change in the foreseeable future. Wouldn’t it have been better to come forward with the changes that you want at a time when there was more enthusiasm, rather than having a situation where you may find that other countries say, "We are not interested in this," and you won’t get what you want anyway?

Mr Hague: Again, there are two points on that. First, I reiterate my last point in the previous answer. Since those countries at that time-in relation to the fiscal compact treaty-were not prepared to agree to what we regarded as a quite modest request, it is unlikely that they would have agreed to changes encompassing all the principles that the Prime Minister set out at that moment. More importantly, enthusiasm for treaty changes in the EU is not on a straight-line trajectory. It will vary from one month to another. Often it changes in proportion to the extent of perceived crisis in the eurozone.

In addition to that consideration, there are ideas set out in the Four Presidents report and the Commission blueprint that involve treaty change. Added to that, we have to have regard to how frequently treaty change has been contemplated in the EU over recent years. All of those point to the opportunity for treaty change, but the opportunity to bring about the sorts of changes that the Prime Minister was talking about was not there in December 2011.

Q196 Mike Gapes: A final question. Is the EU Act that we have adopted in this country one of the factors that makes other leading member states wary of going into an amendment to the EU treaties, on the basis that there is a risk that there would then be a referendum that would reject it and stop the process?

Mr Hague: It is a democratic constraint on treaty change, but we are not the only country.

Q197 Mike Gapes: You accept that it is a possibility.

Mr Hague: It makes treaty change in this country, and several other countries, which already have requirements for referendums on treaty changes, subject to democratic consent. We are all democratically elected politicians. We do not run away from democratic verdicts.

Q198 Mike Gapes: Democratic consent can also come through parliamentary democracy.

Mr Hague: It can, but in the case of the European Union, that parliamentary democracy has been unusually unresponsive to public concern.

Mike Gapes: We will have to differ on that.

Q199 Sir Menzies Campbell: I think we are right that until now in the history of the EC, and indeed the EU, no country has created an in/out referendum. That being so, we have no precedent in relation to what I understand to be Conservative Party policy. What is your assessment of the influence that the United Kingdom has now that the decision has been announced? Will it serve to weaken British influence in Brussels or will it serve to enhance it?

Mr Hague: I want to make the case-I believe this to be true, looking at some of the comments around Europe-that it can enhance our influence. It would be too early to dispassionately make a judgment about that. I argued a moment ago in terms of foreign affairs deliberations that it certainly does not reduce our influence. If you look at some of the comments from around Europe, in Die Welt, for instance, on the day of the Prime Minister’s speech, they were writing: "Our Continent needs a rethink...In view of the excessive bureaucracy, unscrupulous debt-making, lack of transparency and democracy...What is needed today is a German-British axis." The scope is there for Britain to lead with ideas. There are many such quotations. I do not want to go through them all. We have the opportunity, which the Prime Minister is taking, to lead and shape this debate.

Q200 Sir Menzies Campbell: But that is all about reform and about Britain remaining in. In these comments, including the one from Angela Merkel that you referred to a moment or two ago, the assumption was that Britain would stay in rather than walk out.

Mr Hague: What is also reflected in those comments is that so many European leaders say that they want Britain to stay in the European Union.

Q201 Sir Menzies Campbell: I do not think there is any doubt about that.

Mr Hague: It is very clear. It is always there. It is there in Chancellor Merkel’s remark-not only in her public comments, but in her private comments. This is very much her position and passionate belief. We do not sacrifice our influence by raising legitimate questions and by saying that the people of Britain will be allowed to decide. People then want to work with us to make a success of the European Union and Britain’s role within it. We should not be afraid of that.

Q202 Sir Menzies Campbell: There is universal acceptance not just in Europe, but elsewhere; for example, President Obama. Joe Biden was making a speech at the weekend. It is perfectly clear that the United States sees its interest as best reflected by Britain being within the European Union and exercising influence within the European Union. Is not the risk, if you pose an alternative, that the influence we have both in Brussels and, indeed, in Washington will be diminished if people think there is a genuine prospect that we will come out?

Mr Hague: There are two parts in the answer to that question. First, for all the reasons I have set out, leading the debate and advocating the necessary changes can enhance influence rather than reduce it. In any case, I do not think we can argue that allowing democracy to happen is an unacceptable risk. Otherwise, there are all kinds of things that we would never ask people or Parliament about. We have reached the point in the United Kingdom when democratic consent has been greatly weakened for the European Union. We have to recognise that, and deal with it. We have to do that, whatever the consequences. It is right to hold a referendum, but I don’t think in any case that it diminishes our influence in the EU or with the United States. Again, I have not detected any sign of that in all the discussions I have had with the US Administration in recent days.

Q203 Sir Menzies Campbell: What work have you done on the consequences of Britain coming out?

Mr Hague: That will be the debate of the referendum, subject to holding the referendum in 2017, or whenever it can be held. That will be what the debate will be about.

Q204 Sir Menzies Campbell: Surely some consideration has been given in the Foreign Office as to what the consequences would be for Great Britain were there to be a vote in favour of coming out.

Mr Hague: The job of the Foreign Office is to work on those priorities I was talking about earlier: the agreed programme of the Coalition Government. It is a full programme of work on Europe, as my colleagues and officials will testify. Perhaps I should let them testify on some of these questions.

Sir Menzies Campbell: I don’t think that any of us doubt it.

Mr Hague: It is very full, but that is their job. The judgment about the consequences of leaving the European Union is for political debate in the future at the time of our referendum. Of course, the Prime Minister addressed this in part in his speech when he gave a brief analysis of the Norwegian relationship and the Swiss relationship with the European Union.

Q205 Sir Menzies Campbell: He dismissed them.

Mr Hague: He pointed out the disadvantages of those relationships. He made clear in his speech why he would like to be able to argue for Britain staying in the European Union on the basis of a new settlement. Of course, in all the references that he made to the single market and the advantages of being part of the single market, he is also pointing to the disadvantages of any separation from that. Such considerations run through the Prime Minister’s speech, but an analysis of the merits of being in or out of the European Union on an improved basis is for the political debate, for the political parties and for all concerned to present to the people in a referendum.

Q206 Sir Menzies Campbell: Not the responsibility of the present Government.

Mr Hague: The present Government are proceeding with the present Government’s policies. The commitment to a referendum is for a future Government.

Q207 Sir Menzies Campbell: But that does not include any examination of the economic or political consequences of an "out" answer in any future referendum.

Mr Hague: The very hard-working and dutiful officials of the Government will analyse what we ask them to analyse, but I very much ask them to continue on this work of free trade set in the Multi-annual Financial Framework, making Europe more competitive. That’s their job.

Q208 Sir Menzies Campbell: We are all in favour of that, but is the answer to my question, "Yes"? No such work considering the implications of Britain’s withdrawal from the European Union is being carried out at the moment.

Mr Hague: We are not doing a preparatory exercise at this moment for withdrawing from the European Union. The Government are engaged on a lot of things. The Conservative party is presenting its proposals for the next election.

Sir Menzies Campbell: Thank you.

Q209 Mr Ainsworth: So is it the job of the civil service to analyse what you want them to analyse, and only what you want them to analyse, and you do not want our vetoing, preventing, or discouraging any analysis of the consequences of our withdrawal from the European Union?

Mr Hague: One thing to add on this question and Sir Ming’s questions-I should have mentioned this-is that we are also currently engaged in a huge analysis, the balance of competences review, which is in the first of four semesters and is analysing in enormous detail the role and effect of EU competence across every area of our national life. That will come to a conclusion in 2014 and will help to inform the debate. That is the right analysis to be conducting.

Q210 Mr Ainsworth: That is not the question that I or Sir Menzies Campbell were asking. Effectively, you are preventing, discouraging or refusing an analysis being done of the consequences of our withdrawal.

Mr Hague: It is open to anybody to conduct such analysis-a Committee, a think-tank-

Q211 Mr Ainsworth: But not the civil service.

Mr Hague: The job of the civil service is to work on the agreed priorities of the Government, and that is what they are doing.

Q212 Mr Ainsworth: Let’s talk about the eurozone. The inevitability of some of the measures that are going to be taken by the eurozone will lead to a convergence of interests, and potentially to its members seeing themselves as a bloc. There will therefore be two different views on the most important aspects of the European Union. Those who are in the eurozone will see the currency union as the most important thing, and the countries outside it as being an unfortunate occurrence. Those who are outside it will see the single market as the most important thing and the fact that some countries have chosen to go further as an addition. Are you beginning to see the consequences of the development of the eurozone bloc now, and how do you expect that development to affect the way you negotiate in Europe?

Mr Hague: In a moment, I will ask Sir Jon to add to this, because he has so much daily experience of those negotiations, but there are several things to say before that. First, there is a vigorous debate within the eurozone about what these changes mean for the relationship of the eurozone countries to each other, before we even get to their relationship with those who are not in the eurozone. There are many different views about that. Of course, the choices are for them to make. In my view, there are painful choices to be made between democratic accountability and sovereignty in their own countries and being able to deal together with some of the challenges of the eurozone. Only they can make those decisions.

That has not made them, in general, caucus on a wide range of other issues in a way that changes their relationship on, say, foreign policy. Again, this is an easier thing for me to refer to because this is the part of the European Council that I always attend-if someone arrived to observe the meetings of the Foreign Affairs Council without prior knowledge, it would not be possible to determine who was in the eurozone and who was not, in terms of what our policies are on Syria, Iran, the Middle East peace process or any other global issue.

So it is primarily in the financial area that the eurozone’s relationship with the rest of the European Union has changed to some extent and would change most quickly. That is why we have particularly emphasised the negotiation of safeguards for the single market in that area, such as the ones I mentioned on the European Banking Authority. I think there is a statistic-officials may know the precise percentage better than me-about the number of votes in the European Council on which the UK has faced a eurozone bloc, but it is a figure below 20%, in the order of 15%. Jon or Simon, do you want to add to this?

Sir Jon Cunliffe: As the Foreign Secretary said, we can see the dimensions or axes on which the eurozone might integrate-fiscal, economic, financial and perhaps political. But if you look at the outcome of the European Councils, it is very uncertain how far and how fast they will go and in what order; there is still a lot of agreement to be worked out between the euro countries themselves. It is not as if there is a joint picture, plan or road map at the moment. Those details are being worked out, which is what makes the future so uncertain.

In most areas, the alliances that countries make across different dossiers do not reflect the eurozone. Across the single market, some of the alliances can be very strange, but in agriculture, fisheries, single market, foreign policy and justice the alliances are very different. They are very dossier-specific. But the countries that normally group around what I call the northern economic liberal alliance look to the UK, Sweden, Denmark-all of them non-eurozone countries-to be part of those alliances when they come to single-market issues such as trade. There is no evidence of caucusing around that. Indeed, from the start of the euro, the evidence has been that those countries very much want non-euro countries of similar mind in the discussions, because it adds weight-particularly the UK, because we are a large and influential member state.

In specific areas, though-banking union is one-the euro countries were coming together to create a new institution within the ECB to do something that was being done individually. Of course, there the issues of block voting or caucusing arose by virtue of the nature of the proposal, and that could happen again. However, generally speaking one is not seeing that at the moment. One has to wait to see how their integration develops to know how much we will see it in future.

Q213 Mr Ainsworth: So the changes that the Government are seeking are brought about not by the threat of the inevitable integration of the European Union, but rather by the opportunity that that presents to get what you wanted in terms of your vision in any case.

Mr Hague: There is a threat. So far it has surfaced only in the way that we have described, but of course there could be much more far-reaching changes in the eurozone, when they have resolved their own debates, that present, for instance, a greater threat of caucusing within the EU on a wider range of issues.

Of course there is an opportunity, but there is also a threat. The thing I want to emphasise is that the changes in the eurozone-the crisis in the eurozone-are only one of the reasons why we need the approach that the Prime Minister has set out. In or out of the eurozone, there is a fundamental issue of competitiveness, which means we really have to drive the single market and conclude more free trade agreements.

There is also the issue of democratic legitimacy and accountability, which means that we have to enhance the role of national Parliaments and make sure that powers can go back to nation states. So the crisis in the eurozone is one of the factors driving the approach that the Prime Minister has set out, but only one of them.

Q214 Mr Ainsworth: On the banking union set-up and the arrangement that you got this December, did you learn the lessons from the year before? You were able to come back this time and say that we had something that potentially protects us, albeit that the thing might change. Whereas the year before you found yourself pretty isolated and exercised a veto, but nobody really knows what you vetoed.

Mr Hague: We know what we vetoed-the fiscal compact treaty. But there is an important difference, which was the lead-up to the proposals. These proposals were clearer for a longer time-what we were dealing with in the proposed changes to the European Banking Authority.

The proposals that became a fiscal compact treaty were produced only in the hours before that particular European Council began in December 2011. Clearly, it was easier in the circumstances in December 2012, on banking union, to form alliances and make the case for amendments to proposals that others were flagging up well in advance. We certainly did make those alliances, very effectively, with countries inside and outside the eurozone-with Germany, the Netherlands, Ireland, Austria, Sweden, Poland, Bulgaria, the Czech Republic-so, straddling the eurozone.

Q215 Mr Ainsworth: This double simple majority arrangement-do you think it will stand the test of time? You’ve just said that although it’s not clear and there’s no agreement as to what the developments will be within the eurozone, there are bound to be developments that potentially provide a threat. If eurozone members repeatedly want one thing and are then being prevented by the periphery-to use that term-from doing it, there’s going to be an enormous growing tension, isn’t there?

Mr Hague: There could be, yes, and it’s important to recognise, as Sir Jon has just been underlining, the uncertainty about the future in this regard. That means we have to build in as many safeguards as possible. In addition to the voting system safeguard, we have sought and secured other safeguards: for instance, the European Central Bank will be subject to an obligation to ensure that no action, proposal or policy that it pursues shall "directly or indirectly, discriminate against any Member State…as a venue for the provision of banking or financial services in any currency." That is in article 1 of the ECB regulation.

Could there be pressure to change some of these things in future? Yes. The voting arrangements, for instance, are meant to be reviewed by the Commission and the Council if there are four or fewer non-participating member states. Of course, their concern is that once you go to a very small number and a simple majority is required of those who are outside, you have created a new veto for the United Kingdom. Again, that means we may have to renew the debate at that time. But I think the arrangement we’ve arrived at so far is exactly what we want in these circumstances, and we have set, through this successful negotiation, a very good precedent for the future-that when the European Union has to make an arrangement dealing with the issues of the eurozone, it is right for it to include in its own institutional arrangements the rights and interests of those not in the eurozone. That is a very important precedent.

Q216 Rory Stewart: Foreign Secretary, how many of your ambassadors warned you that the European Union is unlikely to allow any significant concessions to the United Kingdom?

Mr Hague: I don’t think any individual ambassador would in any case be in a position to assess that. Our ambassadors are very good, I have to say, at working on winning the kind of arrangement I have just been talking about and getting the concessions we need on one subject after another. It’s a very "can do" attitude and I admire them for it. On all the issues we’ve been debating, I cannot recall any occasion when they’ve come back and said, "No, no-we just can’t do this at all."

Q217 Rory Stewart: Help me to understand the hypothetical case. There is a possibility that the European Union will be reluctant to return quite as many powers to Britain as Britain wants. Some of my constituents, for example, would like to be able to say, "Okay, maybe we’re not going to get much back, but can we at least have a position of, ‘This far and no further. We’re going to draw a line in the sand’?" Is it credible within the European Union to have that sort of position, or is it a dynamic thing with its own momentum that for ever integrates? Is Britain ever able to halt it?

Mr Hague: It is important for us to be able to halt integration when we believe it is not in our political or economic interests, or to be able to stand aside from it, because that’s what we’ve done in not joining the eurozone, for instance. As regards treaty change, as we were discussing earlier, it is something to which the Act of 2011 now makes an enormous difference. Such change, in so far as it transfers any additional powers or competences, is subject to democratic controls through Parliament and a referendum. Of course, there are other ways in which the European Union’s institutions sometimes extend their powers and reach, by changes in procedure and the judicial creep that can come from the European Court of Justice. So it may well be that these are important things to address in making sure that Europe is flexible, competitive and has democratic accountability as part of that new settlement. But we are not at the stage of being able to go beyond the principles that the Prime Minister has set out. That is for a later stage.

Q218 Rory Stewart: Just to push that a little more, would it be even hypothetically plausible for you to issue instructions to officials essentially to stick their heels in the ground and say, "This far and no further. We may not be able to get anything back, but we don’t want to get any deeper into this thing"? Is that a remotely plausible view?

Mr Hague: We do that in many ways. We are constantly, in posts around the world, never mind in the European Union, very much alert for competence creep, as it is called. The European Union is serious about its treaties and so are we. The powers conferred on the European Union are set out in the treaties and do not go beyond the treaties. So we vigorously-and generally successfully-contest efforts, for instance in multilateral organisations and sometimes by the European Commission, to take over any of the responsibilities of Member States. That is an example, but it is true of our policies as a whole. We always have regard in all negotiations to ensuring that there is no change of competence without a new treaty discussion or without the approval of Parliament.

Q219 Rory Stewart: To turn it around, as you think about what a negotiation might look like, do you have any sense of what the real red lines of the other Member States might be? What would be the point at which a Member State might reasonably turn round and say: "Forget it. We’d love to have Britain in the European Union, but that is too much. That is too far"?

Mr Hague: They vary enormously. That is what I would say. First of all, those red lines are not currently defined, because the whole process of further treaty change has yet to begin. Secondly, red lines often move, even though they are meant to be red, including in European negotiations. As I pointed out earlier, there is a lot of support for the kind of rethinking and new thinking that the Prime Minister is presenting to the European Union. I do not think that any country takes the position that they have such a red line that they want Britain to leave the European Union.

Q220 Rory Stewart: One of the challenges seems to be around the whole idea of the single market. We talk about the single market and some people in Britain see it as a WTO free trade area or think about it in terms of tariff barriers. Perhaps there are people in the French political establishment who see a single market in terms of harmonisation of currency and tax. What do you mean when you talk about the single market? Does it include the free movement of people or social employment legislation?

Mr Hague: The provision of free movement is very important in the success of the European Union. It means free movement of capital and labour as well as of goods and services.

The way I see it, there is much more to be done in several areas, particularly in services and the so-called digital single market. One of our main priorities in the coming years, agreed across the coalition-and, I hope, agreed across the whole of British politics-is that we want more consistent implementation of the services directive and further liberalisation of services and trade across EU borders. We want the completion of the single market for boosting cross-border e-commerce and to make sure that EU rules do not limit growth by placing unnecessary burdens on businesses. One of the things we have secured in recent negotiations is the exemption of very small businesses from new regulations.

Those are the sorts of priorities at the moment, so it is not just about tariffs, but about making it easier to do business in many different ways.

Q221 Rory Stewart: Just to pin you down on free movement of people and social employment legislation, do you see the single market as including Romanians or Turks if they come to Britain? Do you think having uniform social employment legislation is important for the market to stop, for example, social dumping?

Mr Hague: The free movement of workers is very important, but of course in my view and that of our party, that does not require anything like the harmonisation or uniformity of social and employment laws that some people wish for, or indeed the uniformity that comes from some provisions, such as the working time directive, being brought in by the back door. We do not believe that a single market requires such things to be imposed in a uniform way. In my opinion, there are ways in which the EU has gone too far.

Q222 Rory Stewart: What is the positive vision the Government have for the European Union? We hear a lot of quite negative arguments, which seem to be slightly pessimistic and to say that the problem with leaving the European Union is that we are going to end up poorer-our trade and our investment will be affected. It is a bit as though we are somebody in a bad marriage, who is not really in love but feels that if they left they might lose the house. Where is the positive vision? Where is the real love for the project that we are trying to express?

Mr Hague: The positive vision is there in the Prime Minister’s speech, and I warmly refer the Committee to my own speech of 23 October in Berlin.

Chair: We were there at the time.

Mr Hague: You were in Berlin, but I do not think you were in the actual premises where I delivered the speech, and you might therefore still need to read it.

It goes beyond free trade. The opportunity for employment and prosperity that the single market brings is very important to us, but it is more than that. After all, we make an impact on world affairs when we impose the same sanctions as each other on Iran, or in stopping purchases of Syrian crude oil, or in favouring a peace process in the Middle East.

We can help countries across North Africa by having a coherent policy together on how we are going to work with them economically and politically. We can make sure, as the Prime Minister referred to in his speech, that we are nation states co-operating, supporting European values and European civilisation in the world.

So in our view, there is much more to it than a free trade area, but nevertheless it has to work in a way that is consistent with the prosperity of the people of those countries. It concerns their being able to keep up in the global economic race, with democratic accountability and decisions being made at the right level.

Those are all things we have to get right, despite all the many merits of nation states co-operating. The Prime Minister set out that view of co-operating nation states in that framework as an alternative to the ever closer union that has for so long been an article of faith in the European Union. I think that is the right way to think about it.

Mr Baron: Foreign Secretary, just to put you gently right, I was not advocating a referendum now.

Mr Hague: I understand that very well.

Mr Baron: I was suggesting we move legislation forward to take it beyond the realm of party politics.

Mr Hague: Yes.

Q223 Mr Baron: I want to bring us back to the business about the chances of the Prime Minister succeeding in-how can I put it-his struggle with the Gordian knot of federalism that exists. On our visits to the European capitals, the direction of travel was all one way. The solution to the crisis was more Europe, with closer economic and political integration. So we wish the Prime Minister well in his negotiations.

We also met officials in Brussels who said that, whatever the short-term successes and whatever the short-term political manoeuvres, in the longer term there would be a eurozone core heading more towards fiscal union to make monetary union work and for political and economic integration. There would then be a very small outer core within the EU-in other words, us and perhaps one or two more in a very exclusive club, and that would not be feasible in the longer term. That is what has been described to us. What are your comments on that? How would you refute that argument?

Mr Hague: The argument begs many questions; that is the first thing to say. First of all, there is the assumption that those outside the eurozone will only be very small in number. There are 10 of them at the moment. Although there are not many countries that have the opt-out legally from the obligation to join the eurozone, there are many others that are either not in any position to do so or not willing to in the near or foreseeable future. So I think the assumption that those outside the eurozone are just reduced to a very small number may now be a rather out-of-date assumption, proceeding along the tramlines of the thinking of 10 years ago rather than now, in light of the financial and eurozone crises.

Secondly, as the world has changed over the last decade, the kind of arguments that the Prime Minister has been advancing-for Europe to take urgent action to be more competitive and flexible-are gaining ground all the time. They have had a good reception across many countries.

I entirely understand that the Committee will have heard many things in European capitals that say that everything goes in one direction, and it is towards greater integration. But there are some very supportive comments, as the general secretary of the German CSU said: "Whoever condemns wholesale Cameron’s idea for a national referendum on Europe fans distrust towards Europe, as if Europe must hide away from people".

On the need for reform, the leader of the Dutch governing liberal party, VVD, said that Cameron had hit a nerve and named many things that the VVD is for: strengthening the single market, no ever closer union and no super-state. "Great!" he said, and added that you can characterise Cameron’s speech as an extended version of the Europe passage in the Dutch coalition agreement.

It does depend on which capitals, which people and which parties you speak to. Both those quotations are from governing parties inside eurozone countries.

Mr Baron: Can I come back, Foreign Secretary? We have heard lots of quotes on both sides.

Mr Hague: Of course.

Q224 Mr Baron: Can I just bring us back to the Government’s actual negotiating position? What approaches are taken to forge alliances? We have not always been good as a country at doing that in the past. Blame it on under-representation in the EU institutions or whatever, but we need to be better at it.

To offer a glimmer of optimism, you did see, with regards to the banking union at the end of last year, our success there, which suggests that there may be more support there than we originally envisaged. Can you flesh that out a little bit? How are we going to go about constructing the alliances needed to achieve the goals that we want?

Mr Hague: This is a very important point. We have intensified our efforts to build what really has to be a network of overlapping alliances. Of course, those alliances are different on each subject. As Sir Jon has mentioned, you can think of a kind of northern, liberal-"liberal" in the economic sense-group of nations, but even they will differ among themselves on various questions.

On the banking union, I listed earlier some of the countries with whom we forged an alliance on the voting arrangements to conclude that negotiation successfully. The Committee can see that on the multiannual financial framework negotiations in the November Council, we worked closely with Germany, the Netherlands, Sweden and Denmark.

There are other issues, for instance pursuing Europe’s common foreign and security policy on things such as what is happening now in Mali, with the EU military training mission, where France is our closest partner-or we are their closest partner in what they are doing there.

We gave, I would say, over the last couple of years, much increased attention to the smaller states of the EU, not only through the activities of our very good embassies, but through Ministers. The Minister for Europe, David Lidington, is the first Europe Minister ever to have been to all the states-to every capital in the European Union; in fact, he is now well on his way on a second lap. Nobody has done that before since the European Union was enlarged.

We spend a great deal of time with the Foreign Ministers of smaller European states when they come to the UK. We are very conscious of the need to build alliances on each subject, and we will be on the approach to future treaty negotiations.

Q225 Mr Baron: The Prime Minister-rightly or wrongly, intentionally or not-has created the impression that at the end of the renegotiation, whatever that may involve, he will be, if he is Prime Minister, supporting the "in" campaign. I put it to you, Foreign Secretary, that we need greater clarity as to where our red lines are as a Government. What would turn the Prime Minister away from that position when it came to renegotiation? Where is that red line with regards to success or failure from the Government’s point of view?

Mr Hague: It is too early to speak of red lines. We have launched a debate, a discussion, on the basis of the principles that the Prime Minister has set out. We are not at the stage of a detailed negotiation, which is more the time for red lines.

Q226 Mr Baron: We must have an idea of what we want to renegotiate and what we want to claw back-I hope that we have some idea. You would not go into a negotiation without an idea.

Mr Hague: We are not, as of today, going into that negotiation. As of today, we are going into the multiannual financial framework negotiations. Of course, in social negotiations, we have our red lines. It is important to note, however, that in most successful negotiations, such as the ones that I have been talking about, we do not publish our red lines. That does not necessarily help bring about a successful negotiation.

I am not sure at what stage we will be able to answer that question in detail. The first part of your question was about what would turn the Prime Minister away. We will all have to use our judgment at the time. We have said-he has said and I have said-that our plan is to improve the relationship with the European Union and be able to campaign in a referendum for Britain to stay within it. Of course we will use our judgment at the time.

Q227 Mr Baron: What happens if negotiations hit a brick wall?

Mr Hague: Well, then we will certainly have to use our judgment at the time. We can only state, as in so many areas of policy, what our intended policy is. That is true for all political parties when setting out an approach to Government in the next Parliament.

Q228 Mr Baron: Finally, Foreign Secretary, in any renegotiation of the UK’s position, will we be seeking certain safeguards involving movement of some single market items from QMV to unanimous decision-making? There is a general feeling that the single market, which was a laudable aim, has still not been achieved in many areas, and that would help.

Mr Hague: Our main aim, as I was describing it in relation to the digital market and the services directive, is to deepen the single market and to drive it further in many areas. In many areas, that would of course conflict with going away from these particular provisions from QMV to unanimity. I am not setting out now, as I said in an earlier answer, a detailed approach to negotiations. That can only come at a later stage, so I do not want to exclude anything at this stage.

Q229 Sir John Stanley: Foreign Secretary, are you satisfied legally-I stress "legally"-that it is open to the British Government to go to our fellow EU Member States and say that we want to carry out a fundamental renegotiation of the terms of our membership of the EU, our "new deal" with the EU as the Government term it, without first having given notice, under article 50 of the treaty, that we wish to leave the EU?

Mr Hague: Whatever we have to do legally, we will do. Clearly, most of the discussion we have been having today is in the context of treaty change in different ways in the European Union. Some treaty changes are needed by other members of the European Union. We are not the only people looking for treaty change. Whatever we need to do legally in order to carry out the political programme that we have put forward for the Conservative Party or then to carry forward any governmental responsibilities, we will do.

Q230 Sir John Stanley: Foreign Secretary, I have asked you about a key legal point. You have not been able to answer that question precisely. I can quite understand that. Could we please have the answer to my question in writing subsequently?

Mr Hague: I am happy to elaborate in an answer in writing, but this is a question for the future. Giving any notice about anything does not arise at the moment, but we will implement any legal responsibilities, of course, in order to carry out our manifesto commitment if we are elected at the next election. I am happy to elaborate on that.

Q231 Sir John Stanley: Thank you. I am asking you formally if you could give the answer to the Committee as to whether, under the terms of the existing treaty, if the UK wishes to carry out a substantive negotiation of the terms of its treaty membership it first has to give notice that it intends to leave the EU under article 50. Thank you.

Mr Hague: We will send you some formal advice.

Q232 Sir John Stanley: Thank you. The second question I want to put to you is this. As you know, we have travelled to most of the major capitals in Europe. I would say that the broad view that we have had is that, happily as far as I am concerned, our fellow EU member states would like us to remain a member state; but, I would say unanimously, it has been said to us that although they will try to be accommodating to a limited degree to the UK’s demands, there is absolutely no prospect of the UK being able to cherry-pick the acquis, to have the EU treaty à la carte. Do you agree that is the case? If so, why are the Government holding out expectations that a substantial renegotiation of the terms of our membership-having the EU à la carte-is a viable policy option?

Mr Hague: On the à la carte question, the European Union is already a restaurant where people eat their dishes in many different combinations, as we know, with some countries in the eurozone and some out, some in the Schengen arrangements and some out. We have the major advance recently of agreeing the patent court, but that was by 25 countries not 27. The justice and home affairs arrangements apply in a different way to Denmark, Ireland and the UK. It is already quite a complex mixture. It depends how people define à la carte, but clearly dishes are eaten in many different combinations, if we want to think of it as a menu. That is already the case.

It is also the case that treaty changes have happened in recent years that were not contemplated only a few years ago. That is how rapidly the European scene is changing. Many of the factors that I was describing earlier will only intensify the pressures on European competitiveness. Pressures will only intensify. On current trends the problem of democratic legitimacy in the EU will only intensify over the coming years. Therefore I don’t think we should be held back from putting the case for what is fundamentally and essentially in the interests of this country and the whole of the EU, just because some people, but not everyone across the EU, say that they won’t necessarily want to go along with it.

Q233 Sir John Stanley: Foreign Secretary, you would agree that it is not going to come down to some or other. You will agree, surely, that the only way in which the treaty changes that the Government want and most of us here would want to see carried out that would improve the relationship of the EU and the UK can only be achieved by the unanimous agreement of all EU member states.

Mr Hague: Treaty changes only come through unanimous agreement; that is right. There are, of course, treaty changes sought by other countries that require our participation in an unanimous agreement. There are many things that have already happened. We can look most usefully at recent examples, as we have done during this Committee session, such as negotiations on the banking union arrangements: those required unanimous agreement, but they have been successfully concluded to safeguard the interests of the UK, in a totally new way that nobody would have contemplated just a few years ago.

Q234 Chair: Foreign Secretary, you will be aware that the Fresh Start group produced a manifesto for change and set out what it called "a new vision for the UK in Europe". You wrote the foreword for it and described it as a "well-researched and well-considered document full of powerful ideas for Britain’s future in Europe". You then went on to say that "many of the proposals are already Government policy, some could well become future Government or Conservative Party policy and some may require further thought" which phrase could be described as covering all the bases.

Mr Hague: Correct.

Q235 Chair: But on the last phrase-"some may require further thought"-could you give us a steer towards a document you had in mind when you wrote that phrase?

Mr Hague: The covering of all bases is so effective that it is also not specifically attached to any specific proposal.

Mike Gapes: Just as well.

Mr Hague: Having just been accused of cherry-picking, I am not going to pick the individual ones. Clearly there are suggestions in there about deepening and furthering the single market which are very much in line with what I have just been describing of the thrust of Government policy, but there are others that fall into more of the category that Mr Baron has been asking about-specific items that would need to be negotiated in the future in treaty changes, and those we have not yet committed ourselves to as a Government; they fall into the category of further thought or possibly future policy, but I do not want to give you a checklist against each item in that very good and thoughtful report.

Q236 Chair: But you did write the foreword for it, so I presume that you have had a good look at some of these.

Mr Hague: I absolutely have had a good look, and those general categorisations are absolutely true.

Q237 Chair: So I can’t tempt you on the views of the group on the common agricultural policy, for example?

Mr Hague: I am happy to give my views on the common agricultural policy, but I am really not going to go through every proposal and say which of those three categories it falls into.

Chair: I wasn’t going to ask you to do that, I was just going to pick out one or two.

Q238 Mr Baron: Foreign Secretary, you have correctly said that by planning to hold this referendum, you would be strengthening your negotiating hand when it came to looking at powers to repatriate. Would not the hand be strengthened even more if the legislation for the referendum was brought in to this Parliament? What is the downside of doing that? If we are serious about renegotiating Britain’s position in the EU, we all know any Prime Minister coming in would find it very difficult-not impossible-to repeal a popular piece of legislation, so why not bring that legislation into this Parliament? I grant you that that is not in the coalition agreement, but then neither was same-sex marriage.

Mr Hague: It is not in the coalition agreement, and the coalition agreement does have a section dealing with Europe and our European policy. Of course, it is different from any conscience or free vote issue in that, of course, to pass it through the House of Commons-to pass it rather than just vote on it; for the Government to put it forward and for it to be passed through Parliament-would require coalition support. That part of the Prime Minister’s speech, the commitment to a referendum, is a Conservative party proposal not a coalition proposal. It is open to our colleagues in the coalition to favour the same policy if they wish to, or to the Opposition to favour the same policy if they wish. I think the flaw as things stand in the argument that Mr Baron puts is that there is no majority committed to pass it through the current Parliament.

Q239 Mr Baron: I take your point about the coalition Liberal Democrats perhaps not supporting it, but there are many on both sides of the House who do support this, so the support may be there-the numbers may be there to actually pass it. Now, if you cannot put it through, then there is no downside in many respects, so I still have not heard a good reason not to bring that legislation forward.

Mr Hague: This is a political debate. I saw Mr Gapes shaking his head when Mr Baron was asserting that it could be passed through Parliament, and that only illustrates the point. I cannot see that that majority exists at this moment.

Q240 Rory Stewart: If I could first pick up on the idea of the new settlement that you might be offering to the British people. Is it always going to be a new settlement within the framework of the current European Union, or is there a hypothetical possibility that you would offer to the British people something slightly different from the current arrangements-bringing in Norway and Turkey, or reconfigured in some way to take in a new US-EU free trade agreement?

Mr Hague: The conclusion of free trade agreements is something that we want the European Union to do and for us to participate in.

Q241 Rory Stewart: Sorry, I confused you. I meant in the referendum in 2017-the thing that you offer the people. Could it be something distinct from the current framework of the EU? Could it be some imaginative thing that brought in other players and repositioned Britain in some sort of new relationship to the European Union?

Mr Hague: Again, what we have set out at the moment are principles. It is very much part of our argument that the European Union is changing in important ways, and indeed that the flexibility for some countries to participate in some arrangements while others do not participate in them is likely to get greater, and that is a positively desirable thing, on the whole. Given what would otherwise be the immense strains on the European Union of a one-size-fits-all policy across the board, that is a desirable development.

The European Union will keep evolving. It should also be a European Union with many more members in future. We think it is vital to Europe’s future for the countries of the western Balkans to be able to join the EU, and we in this country are strong champions of Turkey joining the EU. I do not think that those things change the EU’s fundamental nature, but they will require its continuing reform. The European Union in 2025 may look very different in its structures of power and in its geographic expanse, and hopefully it will look quite different in its ability to compete and its democratic accountability from how it does today.

Q242 Rory Stewart: Specifically on 2017, are you ruling out the possibility that you might, for example, present Britain as part of a single market tier with Norway and Switzerland? Is that completely ruled out?

Mr Hague: We have not ruled anything out. As I was discussing with Sir Menzies, the Prime Minister’s speech set out the disadvantages of those things. There is no single market tier in existence. The arrangements that apply for Norway and Switzerland would have certain additional disadvantages in respect of the United Kingdom. You were asking me earlier to set out the other attributes of the European Union that we believe could be successful. They go beyond the single market. There isn’t a totally different structure or a totally different basis to the European Union that we are setting out here; we are setting out principles of reform to the European Union that would allow us to recommend to the British people that we stay within it.

Q243 Rory Stewart: Do you feel that you are raising the right expectations among British voters? How will you explain to British voters what they are likely to get out of this? Is there a danger that British voters are expecting that they are going to get back a huge amount more than we are ever plausibly going to be able to offer? How are you doing to deal with that? How are you going to discuss it so that we do not end up with a situation where when the referendum comes, they think, "Gosh, is that all?"

Mr Hague: What they think at the time will be up to them, but I do not think we are raising the wrong expectations. We are setting out why Europe needs reform and what principles that reform should be based on. We are not able, nor would it be wise at this moment, to set out a negotiating shopping list, so we are not raising any expectation that anything that could appear on that shopping list will be agreed or not agreed, at this moment. We are not at that stage; we are at the stage of launching the debate. I think people welcome that debate and they welcome, on the whole, the knowledge that they will be able to cast a vote in the future. I do not think we have set any unrealistic expectations going in what we have said so far.

Q244 Rory Stewart: When you have got your new proposal together, what sort of evidence would you use to determine in your own mind whether this is likely to win the support of the British voter? You have worked out a deal and you have looked at it, and before you present it to a referendum in 2017, what sort of evidence, what sort of criteria, would you address to work out whether it is the kind of thing that is likely to be acceptable?

Mr Hague: I think it will be whether we can say that the European Union of the future will be more democratically accountable; that power will be able to flow to nation states in some instances, not just towards the centre; that it is being operated fairly to all concerned, including those outside certain structures such as the eurozone; and that we have won the ability to do what we need to do to allow us to compete in the most intensively competitive global economic environment; and that there is the flexibility for the EU to be able to evolve properly in the future. If we can say those things, then we will be in a good position with the British people and will have done a great service to this country.

Q245 Mr Ainsworth: Let me take you back to just after the Prime Minister’s speech, when he walked into Prime Minister’s Questions last Wednesday and was cheered widely by his own side. I talked to one or two Conservative Back Benchers just after that, and the general view was summed up by one of them, who said that you would now get a 10-point jump in the opinion polls and the Labour Party would have to change its position. None of those political considerations were in your mind, though, or in the Prime Minister’s mind when he made the speech; it was just about protecting Britain’s interests in Europe.

Mr Hague: It is hard to have totally out of one’s mind the Labour Party changing its position as this happens on such a regular basis on this issue-that is a matter for Mr Ainsworth and his colleagues rather than for me-but I believe very strongly that the policy we set out, the changes we set out, are in the interests of the EU and the United Kingdom. I am no great aficionado of opinion polls-

Mr Ainsworth: Did you get a 10-point jump?

Mr Hague: I couldn’t honestly tell you. These things jump around all the time. These need not be the considerations of the Foreign Office, and I am sure would not be the considerations of the Committee in writing their report, Mr Chairman.

Chair: Of course not.

Q246 Mr Baron: If the EU did not exist would you create it?

Mr Hague: You can tell at this point, Mr Chairman, that we have had two hours of questions. I would not create it exactly as it is today. I would want it to look more like the answer I just gave to Mr Stewart in its attributes, but I would not be opposed to the creation of something that allowed European countries to work together in all the ways I have described they should be able to work together.

Q247 Chair: A couple of serious questions from me to close, Foreign Secretary. Do you see a role for national Parliaments in a restructured Europe?

Mr Hague: Yes-a much stronger role. Obviously parliamentary views on this are particularly relevant and important. I think strengthening democratic accountability through national Parliaments is very important.

Q248 Chair: What have you got in mind?

Mr Hague: This is for us all to develop but, for instance, we have the yellow card system, the orange card system, and these are not much used in Parliaments around the EU. I think many Parliaments would welcome a strengthening of that system. It is important to look at ways in which national parliamentarians can be more readily involved in European affairs. As the European Parliament has taken on more power, ironically, people around Europe have felt more distant from European institutions. The prime focus of democratic accountability remains the national Parliament-of every country, actually, not just of the United Kingdom-so we need to find a stronger role for national parliamentarians in the affairs of the EU. Those are the directions that we should go in.

Q249 Chair: If by 2015, no treaty negotiations have been initiated, would you initiate treaty negotiations after 2015 if you form the Government?

Mr Hague: The Prime Minister said in his speech that while there is a widespread expectation and advocacy of treaty change, if no other treaty change arose in the coming years, then we would embark on our own bilateral negotiation.

Chair: Thank you. That is very helpful indeed. Thank you very much, Foreign Secretary, and thank you, Sir Jon, Mr Manley. We much appreciate you taking the time to come to see us.

Mr Hague: Thank you.

Prepared 10th June 2013