Eurosceptic Tories have 'fantastical idea of UK’s future outside EU'

Pro-European Conservatives have launched a fightback against the Eurosceptics who dominate their party, accusing them of peddling a “fantasy” vision of a prosperous Britain outside the EU.

Ministers who support Britain’s continued membership of the 27-nation bloc are alarmed that Cabinet members including Michael Gove, the Education Secretary, and Owen Paterson, the Environment Secretary, have raised the prospect of enjoying close trade links with the EU after leaving the club.

Damian Green, the Policing Minister and a leading Tory moderate, warned last night that the UK would lose job-creating investment by countries like China and India it if quit the EU and would not be able to negotiate good trade deals for British companies.

In a speech to the Bright Blue group of Tory modernisers, he said: “There is a fantastic vision of an EU which remains a single market, including the UK, but which in all other respects allows the UK to be outside. This is a fantastic vision precisely because it is a fantasy.”

Mr Green concluded: “The EU is imperfect, irritating, and needs to change badly. There are a number of areas where this Government is fighting to achieve this change. Staying in and fighting is the best way to meet our economic needs.”

At a two-day summit of EU leaders in Brussels starting tomorrow, David Cameron will approve a road map for greater integration inside the 17-strong eurozone in the hope that it helps to resolve its long-running crisis. It would give the European Commission greater influence over national budgets and create a separate “euro area budget”, and could require a new EU treaty by 2014.

The talks on “fiscal and economic union” would give Mr Cameron the opportunity to renegotiate the terms of Britain’s EU membership, as the new treaty would need approval by all 27 members.

The Prime Minister has delayed a long-awaited speech on the UK’s relationship with Europe until the new year because of other commitments next week. He is expected to use it to promise Tory Eurosceptics a referendum on the outcome of the treaty negotiations, but not until after the 2015 general election.

Mr Cameron insists that he supports the UK remaining in the EU but does not support the status quo. His referendum pledge may not satisfy Tory Europhobes demanding a simple “in or out” vote. Boris Johnson, the Mayor of London, told the BBC’s Newsnight programme last night that the “Europe question” was “do you want to be in it, or not?”

At tomorrow's summit, the Prime Minister will warn that plans for a banking union inside the eurozone should not undermine the City of London. He is worried that the 17 euro nations will vote as a bloc on the European Banking Authority, which sets the rules for banks across the EU. The dispute is seen as the first test of how the 10 non-euro members including Britain will preserve the single market when the 17 in the eurozone forge closer links.