Foreign Secretary William Hague sets out plan for Britain to claw back powers from the European Union

The Conservatives today began the process of trying to claw back powers to Britain from the European Union in another step towards a referendum on the terms of the UK’s membership.

William Hague, the Foreign Secretary, announced that the balance of power between London and Brussels in 32 policy areas will be reviewed to see “what that means for Britain and our national interest.” The first six areas will be the single market; taxation; animal welfare and food safety; health; overseas aid and foreign policy.

Although Eurosceptic Conservative MPs hope the review will pave the way for some powers to be handed back to Britain, early progress looks unlikely. Mr Hague admitted the exercise would not be completed before the autumn of 2014, adding: “The review will not produce specific policy recommendations.”

The Liberal Democrats are happy for a decision-making “audit” to take place but blocked the idea of drawing up a shopping list of powers to be repatriated. They believe such demands would be dismissed by other EU members.

Instead, the Tories’ demands are expected to feature in the party’s manifesto at the 2015 election. They would form the basis of a “new settlement” with Europe David Cameron would seek if his party won a majority. The demands would be tabled during discussions on a new EU treaty to entrench fiscal union among the 17 eurozone members, with the results of Britain’s renegotiation put to the country in a referendum.

Speaking in Berlin today, Mr Hague was at odds with his German hosts, who want closer integration. The Foreign Secretary said: “The eurozone countries must do what they must to resolve the crisis, but the way forward for the EU as a whole is not more centralization and uniformity but of flexibility and variable geometry…..There are obvious issues for countries not in the eurozone, for whom it will never be acceptable to have a situation in which the eurozone acts as a bloc in a way that determines the outcomes before the others have even met.”

But Guido Westerwelle, the German Foreign Minister, told the same conference the 27-nation EU, not just the 17-strong eurozone, must deepen its co-operation. ”It is well known that diamonds are only formed under great pressure. And apparently good political solutions also need extreme pressure,” he said. “The pressure stemming from the current problems must now be put to use.“

Britain is seen as the main stumbling block to a deal on the EU budget for 2014-20 at a crucial summit next month. Mr Cameron will argue for a real terms freeze, limiting spending to about Euros 900bn over the seven-year period, but Germany is prepared to allow the ceiling to rise to about Euros 956bn. The European Commission wants to spend more than Euros 1 trillion.

At today’s Cabinet meeting, Nick Clegg backed Mr Cameron’s stance, saying the Government should stand up for the British taxpayer. At a time when national governments were tightening their belts, the EU should not be seeking an above-inflation budget increase, he said.