Until yesterday, the issue was whether to support a referendum on the new EU constitution. I am by no means a Eurosceptic but was feeling myself drawn to the argument that, if half the people of Europe were to have a referendum, then why not Britain? On top of this, I believe that the European elite in their enthusiasm for ever-greater integration, which drives inexorably towards a superstate, is dividing itself from the people. I was coming round to the case for a referendum because the elite need a shake and because we need a much more thorough debate on what the European Union is for.

And then, suddenly, briefings — clearly authorised at the highest level — suggest that there may not be agreement on a new EU constitution and that British support cannot be taken for granted. It seems that Gordon Brown has got his way again. It may well be that the new stance is part of a careful pre-election repositioning, but it also reflects that Tony Blair is driven more by posture than consideration of the crucial details of proposed EU powers.

The European project is in increasing trouble, so what is going on? The small countries are increasingly worried that the big powers — particularly France and Germany — are determined to dominate and that the new constitutional arrangements will marginalise them. France and Germany have also breached the discipline on public borrowing and spending that is meant to underpin the euro, making the Netherlands, Austria and Finland fearful that all euroland economies will pay the price in higher inflation and interest rates. On top of this, the euro economies are doing badly — slow to climb out of recession and suffering from poor growth, largely the result of the deflationary bias of the European Central Bank and the Stability and Growth Pact.

The referendum on the euro in Sweden showed that even with all the major parties in support, the people could not be persuaded. Germans are talking nostalgically about the mark and even the French Government is doubting whether it could win a referendum on the proposed constitution. There are serious problems of fraud in the Commission; and Mr Brown has rightly started to argue that there is too much regulation coming out of Brussels and that a firm line should be drawn that prevents any moves to integrate tax systems or social security.

All of this comes at a time when the European Union has had one of its finest hours, acting as a beacon of democracy and tolerance to the Balkans, helping them to overcome their history of ethnic hatred. And Turkey — at these times of real danger of a growing divide between the Muslim and Western worlds — is keen to reform to join the EU and with it bring a resolution of the longstanding dispute in Cyprus. Despite all this, the people of Europe are going off the European project.

The conclusion I draw is that we need much more than new constitutional arrangements in Europe. The debate in Britain has been painted far too much as a battle between Little Englanders and the rest. But the reality is that pro-Europeans are driving a project that leads inevitably to a superstate, which most of us don’t want. But those who value a single market and oppose complete integration lack a coherent analysis of the proper role of the EU, and thus constantly end up on the back foot.

But the EU is an irrelevannce to the major issues of our time. If we achieve a successful WTO trade round and international agreements on investment and competition, then the significance of the single market will begin to erode. Environmental agreements are made globally and multilaterally. The performance of the EU at the trade talks in Cancún makes me hanker for a renationalisation of trade negotiating authority. If we are to make progress in reducing poverty for the 2.8 billion people who live on less than the €2.2 a day we spend on each European cow, then we must cut out the EU because its record is shamefully ineffective and there is no need for both national and European development programmes.

We need better ways of dealing with crises such as the Russian, Asian and Argentine currency collapses, but that requires a more effective International Monetary Fund (IMF). If we are to agree on new international humanitarian laws to assist in the overthrow of cruel dictators, it is through the UN that we must agree. And there is no one in France or Britain willing to give up his seat in a reformed Security Council to the EU, or allow the EU to represent us in the IMF or the World Bank.

We have reached a point when we need a new rationale for the EU. There is increasing agreement that we need more decentralisation and stronger local government in our own overcentralised island, and this should be complemented by a commitment to review all EU powers — strip out all the unnecessary regulation and test every EU power against the principle of subsidiarity. The future I see is an EU slimmed down to run the single market; and a Commission revamped with efficient and fraud-free financial management systems. The euro will stand or fall on the quality of the economic management that underpins it and that is urgently in need of improvement. The aspiration to a common foreign and security policy is increasingly unrealistic after the disagreements on Iraq. And unless we are aiming for a superstate, co-operation on foreign policy should be confined to informal consultation.

Multilateralism means nations agreeing basic rules to manage globalisation. Decentralisation and subsidiarity mean much more discretion and authority allocated to our cities and surrounding regions. If this is the broad direction in which we want to go, the space for the EU is likely to wither.

The author is the former International Development Secretary

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