Professor Jonathan Faull:

Thank you very much Chairman and good morning. It is a great honour for me to be here. I have a great deal of admiration for the work of the joint committee and the report it issued in June which has been studied very carefully. We are well aware of the considerable importance that Ireland attaches to these issues.

Where do we stand? The European Commission's view is, uncontroversially, that we want the United Kingdom to remain a member of the European Union. We believe that is best for the European Union and we believe that it is also best for the United Kingdom itself. We are, therefore, working to help respond to the concerns expressed by Prime Minister Cameron in his recent letter to the President of the European Council, Mr. Donald Tusk, and we are heavily engaged now, as the Chairman said, in a very serious process of discussions. We have recently completed a round of individual meetings with each of the other 27 member states, including of course this one and will have to come to a view pretty soon – in the next few days I think – as to whether the President of the European Council considers that there is sufficient hope for a satisfactory conclusion to a discussion in the European Council in December to schedule such a discussion in the European Council in December. That is only a few days away and, as I shall illustrate in a few minutes, there are still considerable difficulties around some of the issues under discussion. A European Council meeting is scheduled in December and the next one scheduled after that will be in February.

It is hoped that if it is not possible to reach final decisions in December then the period up to February will be used to resolve outstanding differences and the Council could reach its conclusions in February. When the British referendum takes place is, of course, a matter for the British Government. We do not know when that will happen. The Act providing for the referendum is still making its way through the British Parliament. All we can say is that we know, as does everyone else, that it has to take place by the end of 2017 but we do not know the exact date.

The implications for Ireland are considerable and the recent very good report on the matter raises a number of important issues in that regard. This is widely understood in Brussels and in all of the other member states. The outcome of the referendum will be an answer to the question, "Do you want to remain in the European Union?" and if the United Kingdom remains in the EU, as we hope will be the case, then the implications for Ireland are positive. Based on my understanding of the Irish position, the status quowill prevail and whatever reforms have been agreed between now and the referendum in the context of the British re-negotiations, the reformed European Union which the United Kingdom will have voted to remain in will not be in any way objectionable to Ireland.

If, however, the United Kingdom votes to leave the EU, then we are in completely uncharted waters. This has never happened before and nobody knows the outcome of the negotiations, which would certainly follow a decision by a member state to leave the EU. Of course, we are aware of the particular concerns of Ireland in that regard but I do not wish to speculate about any of the details because I am unable to do so. We do not know how the United Kingdom's Government, the governments of the other 27 member states and the institutions of the European Union would set about crafting new relationships in that unfortunate eventuality. The voice of Ireland is being heard in London, Belfast, Cardiff and Edinburgh too. We have every reason to believe that the other European capitals are also well aware of the particular implications for this country of this debate because of Britain and Ireland's shared history and the existence of the land border between Ireland and Northern Ireland.

The British Prime Minister has set out in his letter four categories of issues that he wishes to be resolved. They are the relationship between the euro area countries and the non-euro area countries, sovereignty, competitiveness and welfare. I will take them one by one and try to explain how we see things developing. The relationship between the euro area countries and the non-euro area countries is one which has come to the fore, for obvious reasons, in the discussions on measures in response to the financial and economic crisis. In the building, for example, of the banking union, we have had to face what are often difficult, technical, political and legal issues about how we create mechanisms for banking union countries, which at present are just the euro area countries - other countries may join the banking union later - on the one hand, and those countries which retain their own national currencies on the other hand. We have found solutions throughout the difficult discussions on the banking union, for example, on reassuring the non-euro area countries that their interests will not be harmed by discrimination on grounds of location or currency and on the difficult technical issue of how we use the EU budget as a whole to deal with euro area -specific issues.

We have found solutions to those problems and it is not particularly difficult to distil them down into principles which can give the necessary reassurances to both sides that there is no reason why the banking union in the euro area cannot co-exist with the wider single market. The countries not using the common currency, the euro, are in different categories. There are those countries which are preparing to join the euro or who want to join the euro as soon as they can and then there are two countries with rather different opt-outs, Denmark and the United Kingdom. The latter says that its Government's intention is not to join the euro or the banking union. We must look at all of those rather complex relationships and make the necessary arrangements so that all of the member states, whatever their status, feel comfortable in this new developing world.

On the question of sovereignty, there are two main issues under discussion. One is the notion of ever closer union among the peoples of Europe, which is an expression found in today's EU treaties and which goes all the way back to the very first treaty of the European Economic Community, EEC, the Treaty of Rome. Indeed, it is to be found in the treaties of accession of new member states, including the United Kingdom, when they joined the European Union. That expression has always been understood generally as not having any particular legal effect in its own right, but as expressing an aspiration of co-operation among the peoples of Europe but not integration among governments and states of Europe. However, it has come to mean, in the British political debate, something rather different. I do not know how it is understood here but I hear from other member states that what is seen as an aspiration about co-operation between peoples is somehow understood differently in the UK, where it is interpreted as symbolising a move towards further integration. If that is true, and I have no reason to doubt the people who are telling us that, then as a matter of fact, it is understood in different ways in different places and that must be addressed. I hope that will be possible.

The second sovereignty issue, one no doubt close to the hearts of the members of this committee, as parliamentarians, is the role of national parliaments in the decision making processes of the EU. As the committee will know, over the last few years in successive amendments, national parliaments have taken on a greater role in considering European Union business. My understanding is that the British Government would like to go a step further and give a further enhanced role to national parliaments, particularly in respect of subsidiarity issues.

The idea is that if a number of national parliaments object to a particular proposal on the grounds of subsidiarity, something should happen. What that "something" is would be a matter for debate. Should it be stopped, for example, should further consideration be given and what further process should take place after such an event? That is a matter for further discussion and it is fair to say the United Kingdom was not alone in thinking that national parliaments could play a greater role without, of course, in any way undermining the particular institutional role of the European Parliament.

The third basket of issues concerns competitiveness and what the British Government wants to see. Prime Minister Cameron's letter sets this out. It indicates the British Government wants to see a greater focus on efforts to boost competitiveness, growth and employment creation in the European Union. That is a very widely shared view and something that the European Commission believes is already happening. There is no doubt it could be done even more effectively than it is now and what we are doing must be explained very clearly. The new Commission under President Jean-Claude Juncker has made it clear that it wants to concentrate on the essential matters; we say "big on the big things and small on the small things". It is about doing everything we can to get growth and jobs back into the European economy by focusing on the various tools at our disposal, making the Single Market a reality and making good, effective and fair trade agreements. It is generally about taking measures to ensure that our companies, particularly the small and medium-sized companies sector, will not be overly burdened by regulation and are enabled to become more competitive.

The fourth issue and no doubt the most controversial in our discussion so far is what the British Prime Minister's letter calls immigration and we think of as raising issues of free movement and the relationship between free movement and welfare systems between member states of the European Union. As is well known, the United Kingdom - although not alone in this - has seen a large and essentially unpredicted influx of people from other member states in the past decade or so. The British Government has identified certain incentives that it believes may be acting as an artificial pull factor for such an influx of workers using their free movement rights as citizens of the European Union. The British Government wants to alter the incentive effect that some aspects of its social security system seem to create. It is controversial because the mechanism identified both in the Conservative Party's manifesto before the last general election and in Mr. Cameron's letter is a four-year delay in eligibility for certain in-work social security benefits. There is the challenge of how to reconcile that sort of measure with the fundamental principle that in the European Union, workers should not be discriminated against on grounds of nationality within our Single Market. I do not hide from the committee that this is not easy and it is controversial; unsurprisingly, it is the issue that many other national delegations raised with us when we met. I hope our colleagues in London are working very hard to try to find solutions. It is the most difficult technical, legal and, perhaps, political example of the problems we face.

I hope all of this will be resolved. The European Council is the forum in which this will be decided, so the Heads of State or Government of our member states will come together in a summit and reach decisions that will enable Mr. Cameron to go home and start the campaign for the referendum. That will take place and we hope it will have a positive outcome.