George Osborne hints at British referendum on Europe

By James Kirkup and Richard Alleyne

Last Updated: 4:04PM BST 07/06/2012

George Osborne has hinted at a British referendum on Europe, saying any “reshaped” UK relationship with EU would have to be put to British voters for approval.

The Chancellor spoke as eurozone leaders debate moves towards a deeper political union in response to the crisis affecting the single currency.

Conservative MPs believe that the crisis will mean changes in the way the European Union works, changes that should trigger a referendum in the UK.

The Coalition has promised that any move to transfer more power from Westminster to Brussels will be put to a referendum.

In a BBC Radio Four interview, Mr Osborne was asked whether a “reshaped” British relationship with the EU should be put to voters.

He replied: “A reshaped relationship with Europe would imply, would involve, a transfer of sovereignty or powers from the UK to Brussels.”

David Cameron pledged that he will not ask British taxpayers to underwrite the debts of ailing banks in Greece and Spain.

Mr Cameron was speaking in Berlin ahead of talks about the eurozone crisis with German Chancellor Angela Merkel.

“I can understand why eurozone countries may want to look at elements of banking union,” he said.

“Because we are not in the single currency, we won’t take part in the profound elements of that banking union.

“I wouldn’t ask British taxpayers to stand behind the Greek or Spanish deposits.”

Mr Osborne then pointed out that the Coalition has set out its position on a referendum, passing a law promising a popular vote on any transfer of power.

He said: “I think we have a very clear safeguard in the system now, thanks to this Government, which is, if there is any transfer of power from this country, transfer of competence or transfer of sovereignty from this country to the European Union then there will be a referendum.”

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He added: “People did not really notice the passage of this law about a year ago, but I think it’s one of the most significant things this Government has done.”

Mr Osborne’s emphasis on the referendum law and his hint of a popular vote will fuel speculation that he is pushing the Conservative Party for a more sceptical position on Europe.

The Daily Telegraph last week reported that Mr Osborne’s colleagues say he is encouraging an internal Conservative debate about Europe to help offset the harm done to his reputation by a string of Budget U-turns.

The Chancellor urged the continent to build up greater fiscal union including a common insurance scheme to help ailing banks such as those in Spain.

But he said Britain would not be part of it – and that before he consented to allowing the move he would want safeguards to protect the financial services sector – Britain’s largest industry.

He said: “We want the euro to work but there will have to be safeguards for Britain’s most important industry, its largest private employer.”

He told the Radio 4 Today programme that there is “no way” that Britain is going to be part of any Eurozone banking union – but urged them to set one up.

The Chancellor is determined to protect the interests of the City of London, the financial hub that provides a significant share of the Government’s tax revenues.

Mr Osborne said any significant steps towards common bank depositor insurance in the Eurozone would require a treaty change, which in turn would need British consent.

He was speaking hours before Prime Minister David Cameron was due to discuss the euro zone crisis with German Chancellor Angela Merkel in Berlin.

Britain is in an awkward position in its dealings with its fellow European Union members.

It can only lobby and advise on the euro but the fate of the British economy is closely linked to what goes on in the single currency bloc.

But the Chancellor said the country was right to have opted out of joining the currency.

“Conservatives can take some satisfaction that we did foresee this problem,” he said.

“But we can take no satisfaction that failure to solve the problem is causing enormous damage to the British economy and continues to do so.”

He said that swift action was needed to solve the current Spanish banking problem but this was just the beginning.

“What’s clear is … Spain need to restructure their banking system, they need resources to do that,” he said.

“How exactly that is done … must be a matter for the Spanish government and the euro zone,” said Mr Osborne.

“When they created the rather clumsily titled EFSF, this euro zone bail-out fund, one of the things it was able to do and its successor, the equally clumsily called ESM, what these funds are able to do is support euro zone banking systems.

“So we need to make sure that the mechanisms already put in place can be activated.

“The banks have been one of the weak links in all of this and the euro zone have tolerated weak, undercapitalised banks for too long.

“Britain is facing one of the most challenging economic times in modern history.”

Paul Champion

📱: 07540 704920

Twitter: @blogapprentice
Skype: paulchampion31

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