LONDON SWIA 2AA

THE PRIME MINISTER 10 November 2015

Doug/J)

A NEW SETTLEMENT FOR THE UNITED KINGDOM IN A
REFORMED EUROPEAN UNION

Thank you for inviting me to write setting out the areas where I am seeking
reforms to address the concerns of the British people over our membership of
the European Union.

As you said, the purpose of this letter is not to describe the precise means, or
detailed legal proposals, for bringing the reforms we seek into effect. That is a
matter for the negotiation, not least as there may, in each case, be different ways
of achieving the same result.

I am grateful for the technical discussions that have taken place over the last
few months and, as we move to the formal stage of negotiations, I welcome this
opportunity to explain why these changes are needed and how I believe they can
bene?t all Member States. I am also making a speech today to update the
British people on the process for the negotiation and how I intend to address
their concerns.

I have been encouraged in many of my conversations with my fellow Heads of
Government in recent months that there is wide understanding of the concerns
that I have raised, and of the case for reforms that would bene?t the European
Union as a whole. I particularly appreciate your own personal support
throughout.

The European Union has a long history of respecting the differences of its many
Member States and of working to overcome challenges in a way that works for
the whole European Union. For example, with the protocols and other
instruments agreed for Denmark and Ireland, the EU was able to arrive at a
settlement, which worked for each country and did not disadvantage other
Member States.

Our concerns really boil down to one word: ?exibility. And it is in this spirit
that I set out the four main areas where the United Kingdom is seeking reform.

Proposals for reform
1. Economic Governance

There are today effectively two sorts of members of the European Union. There
are Euro members and non-Euro members. As set out in Protocol 15, the
United Kingdom has a permanent opt-out from the Eurozone. Other countries
will in due course join the Euro. But, for now, there are nine of us outside; and
it matters to all of us that the Eurozone succeeds.

So we do not want to stand in the way of measures Eurozone countries decide to
take to secure the long-term future of their currency. But we want to make sure
that these changes will respect the integrity of the Single Market, and the
legitimate interests of non-Euro members.

I am con?dent we can achieve an agreement here that works for everyone.
Britain is not seeking a new opt-out for the UK in this area we have the
opt?out from the single currency we need. Nor are we looking for a veto over
what is done in the Eurozone. What we seek are legally binding principles that
safeguard the operation of the Union for all 28 Member States and a safeguard
mechanism to ensure these principles are respected and enforced.

These principles should include recognition that:

- The EU has more than one currency.

- There should be no discrimination and no disadvantage for any business
on the basis of the currency of their country.

- The integrity of the Single Market must be protected.

- Any changes the Eurozone decides to make, such as the creation of a
banking union, must be voluntary for non-Euro countries, never
compulsory.

- Taxpayers in non-Euro countries should never be ?nancially liable for
operations to support the Eurozone as a currency.

- Just as ?nancial stability and supervision has become a key area of

competence for Eurozone institutions like the ECB, so ?nancial stability
and supervision is a key area of competence for national institutions like
the Bank of England for non-Euro members.

- And any issues that affect all Member States must be discussed and
decided by all Member States.

2. Competitiveness

People across Europe want the European Union to help generate growth and
jobs. The United Kingdom has always been a champion of making Europe
more competitive.

So the United Kingdom welcomes the current European Commission?s focus on
supporting economic growth and scaling back unnecessary legislation. This has
included some important measures that British businesses have called for, such
as the further steps towards a single digital market, which could add 3 per cent
to EU and a Capital Markets Union, which will help get ?nance to
entrepreneurs and growing businesses.

The United Kingdom also welcomes the new trade strategy published last
month, re?ecting an agenda we have been advocating for years and including
pursuing potentially massive trade deals with America, China, Japan and
ASEAN.

But with the best will in the world, we would all acknowledge that the EU can
go much further. In particular, for all we have achieved in stemming the ?ow of
new regulations, the burden from existing regulation is still too high. So the
United Kingdom would like to see a target to cut the total burden on business.

The EU should also do more to ful?l its commitment to the free ?ow of capital,
goods and services. The United Kingdom believes we should bring together all
the different proposals, promises and agreements on the Single Market, on
trade, and on cutting regulation into a clear long-term commitment to boost the
competitiveness and productivity of the European Union and to drive growth
and jobs for all.

3. Sovereignty

As you know, questions of sovereignty have been central to the debate about the
European Union in Britain for many years. I have three proposals in this area.

First, I want to end Britain?s obligation to work towards an ?ever closer union?
as set out in the Treaty. It is very important to make clear that this commitment
will no longer apply to the United Kingdom. I want to do this in a formal,
legally-binding and irreversible way.

Second, while the European Parliament plays an important role, I want to
enhance the role of national parliaments, by proposing a new arrangement
where groups of national parliaments, acting together, can stop unwanted
legislative proposals. The precise threshold of national parliaments required
will be a matter for the negotiation.

Third, I want to see the commitments to subsidiarity fully implemented,
with clear proposals to achieve that. As the Dutch have said, the ambition
should be ?Europe where necessary, national where possible?.

In addition, the UK will need con?rmation that the EU institutions will fully
respect the purpose behind the JHA Protocols in any future proposals dealing
with Justice and Home Affairs matters, in particular to preserve the ability
to choose to participate. National Security is and must remain the sole
responsibility of Member States, while recognising the bene?ts of working
together on issues that affect the security of us all.

4. Immigration

The UK believes in an open economy. But we have got to be able to cope with
all the pressures that free movement can bring on our schools, our hospitals
and our public services. Right now, the pressures are too great.

The issue is one of scale and speed. Unlike some other Member States,
Britain?s population is already expanding. Our population is set to reach over
70 million in the next decades and we are forecast to become the most populous
country in the EU by 2050. At the same time, our net migration is running at
over 300,000 a year. That is not sustainable. We have taken lots of steps to
control immigration from outside the EU. But we need to be able to exert
greater control on arrivals from inside the EU too.

Britain has always been an open, trading nation, and we do not want to change
that. But we do want to ?nd arrangements to allow a Member State like the UK
to restore a sense of fairness to our immigration system and to reduce the
current very high level of population ?ows from within the EU into the UK.
These have been unplanned and are much higher than forecast far higher than
anything the founding fathers ever envisaged. These very substantial
?ows of population have, of course, also had a signi?cant impact on a number
of Member States, many of whose most highly quali?ed citizens have departed
en masse. So this is a shared challenge.

We need to ensure that when new countries are admitted to the EU in the future,
free movement will not apply to those new members until their economies have
converged much more closely with existing Member States.

We also need to crack down on the abuse of free movement, an issue on which I
have found wide support in my discussions with colleagues. This includes
tougher and longer re-entry bans for fraudsters and people who collude in sham
marriages. It means addressing the fact that it is easier for an EU citizen to
bring a non-EU spouse to Britain than it is for a British citizen to do the same.
It means stronger powers to deport criminals and stop them coming back, as
well as preventing entry in the ?rst place. And it means addressing ECJ
judgments that have widened the scope of free movement in a way that has
made it more dif?cult to tackle this kind of abuse.

But we need to go further to reduce the numbers coming here. As I have said
previously, we can reduce the ?ow of people coming from within the EU by
reducing the draw that our welfare system can exert across Europe. So we have
proposed that people coming to Britain from the EU must live here and
contribute for four years before they qualify for in-work bene?ts or social
housing. And that we should end the practice of sending child bene?t overseas.

I understand how dif?cult some of these issues are for other Member States and
I look forward to discussing these proposals further so we can ?nd a solution
that deals with this issue.

NEXT STEPS

As we agreed, the details of the reforms in each area are a matter for the
negotiation itself. But I hope that this letter can provide a clear basis for
reaching an agreement that would, of course, need to be legally-binding and
irreversible and where necessary have force in the Treaties.

I look forward to a substantive discussion at the December European Council.
It remains my aim to conclude an agreement at the earliest opportunity, but the
priority is to get the substance right.

I believe that reform in these areas would address the concerns and
provide a fresh and lasting settlement for our membership of the
European Union. Furthermore, I believe such reform is both reasonable and in
the wider interests of the European Union as a whole.

The United Kingdom is the second largest economy, the ?fth biggest in
the world. We bring an enormous contribution political, economic, ?nancial
to the European Union. If we are able to reach an agreement, it will show the
world that, amongst the many more dif?cult issues it faces, the European Union
is ?exible enough to accommodate the concerns of its members.

I hope and believe that together we can reach agreement on each of these four
areas. If we can, I am ready to campaign with all my heart and soul to keep
Britain inside a reformed European Union that continues to enhance the
prosperity and security of all its Member States.

I look forward to discussing this with you and colleagues further in the weeks
ahead.

I am copying this letter to the President of the European Commission, the
President of the European Parliament and all Heads of State and Government in

the European Council.

I ..
1

His Excellency Mr Donald Tusk