By George Parker, Political Editor

William Hague, the British foreign secretary, wants to launch a comprehensive audit of the impact of Europan Union law on Britain this summer, an exercise that could fuel a Conservativedrive to repatriate powers from Brussels.

The huge Whitehall study comes at a time when David Cameron is trying to devise a new relationship between Britain and the rest of Europe, starting on Thursday at a European summit in Brussels.

Mr Cameron will tell European colleagues he wants to “safeguard” Britain’s position in the single market as eurozone leaders discuss much closer fiscal and political union based on the 17-member single currency area.

But many Conservatives want to go further and hope that a future Tory government will renegotiate a new membership deal with the EU – including the repatriation of powers from Brussels – and put the package to a referendum.

Pressure is building from Conservative activists and Tory MPs for Britain to use the turmoil in the eurozone to detach Britain from the rest of the EU, reclaiming powers in areas such as employment law, police co-operation and regional policy.

In that context, Mr Hague’s enthusiasm for a Whitehall audit of the application of EU law in Britain is politically extremely sensitive.

Nick Clegg, Liberal Democrat deputy prime minister, fears the exercise might be a distraction from the crisis facing Europe and wants to keep it low key.

Some Lib Dems fear it might also be seen in other European capitals and Washington as a sign that Britain wants to move further from the EU mainstream.

The proposed study of the “balance of the EU’s existing competences” is contained in the coalition agreement, and Mr Hague wants to get on with it this summer. But Mr Clegg has yet to sign off on the scope and timing of the exercise.

Government officials said they hoped to announce “further details soon”. It is expected that civil servants will be asked to do analytical work on the impact of EU law, without making recommendations on what powers should be returned.

Andrea Leadsom, a Conservative MP, said Britain needed a “shopping list” of powers it wants returned from Brussels and said the planned audit of EU powers was “a completely worthwhile exercise”.

Officials close to Mr Cameron insist the prime minister is not about to start a fight to reclaim powers from Brussels any time soon and will certainly not make it his price for supporting eurozone moves towards closer fiscal and political union.

Indeed Mr Cameron’s coalition agreement with Mr Clegg’s pro-European Liberal Democrats makes it extremely unlikely that any moves be made before the planned 2015 general election.

CONTENTIOUS ISSUES UP FOR EXAMINATION
JUSTICE AND POLICING

More than 100 Tory MPs demanded this year Britain should pull out from 130 EU crime and policing rules, such as the European Arrest Warrant. However police and security services say such measures help to stop terrorists and cross-border crime. Tory MPs say Britain could pick and choose which measures to adopt.

EMPLOYMENT/SOCIAL LAW

Includes the working time directive, which limits workplace hours on health and safety grounds, and measures to regulate temporary agency workers. Long seen by Conservatives as an infringement of Britain’s liberal labour market; one area where the Tories could make common ground with the Lib Dems.

REGIONAL POLICY

One of the big questions asked by critics of the EU is why does Brussels take billions of pounds from Britain only to recycle that money to help depressed regions of the UK? Cornwall, Merseyside and the Northern Ireland peace process have all benefited, but could the money be better spent by Whitehall?

FINANCIAL SERVICES

The planned creation of a eurozone “banking union” has raised questions about whether the new arrangement might discriminate against the City. David Cameron wants “safeguards” but this is one area where EU power is unlikely to be challenged: the City generally loves the single market.

Allies of George Osborne hint that the next Tory manifesto could promise a European referendum, probably based on the terms of a renegotiated settlement with the EU.

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