Michael Howard has warned that the debate about the proposed EU constitution extends far beyond the issue of sovereignty.

Pointing to current developments in Europe, the Tory leader said the discussion should centre on the kind of Europe its people wants.

Addressing the Institute of Directors, Howard was making the case for a "free market approach to Europe".

"Consider what is happening in the European Union as we speak," he said.

"Chancellor Schroeder is reported in the Financial Times to have said that the low tax rates of eastern Europe were 'not the way forward'.

"Instead of facing up to the challenge of global competition, Europe's leading member states are trying to threaten and cajole new members into adopting the EU's expensive social model as soon as possible," he added.

New members

The Tory leader also warned that the new member states should not be forced into rigid structures.

"Tax harmonisation, by which Europe means high tax rates for all, is firmly on the agenda. This isn't a free market approach to Europe. It's a fortress Europe approach. And it's wrong."

And he warned that the prime minister must vigorously defend Britain's opt-outs.

"At the same time the European Commission is currently reviewing Britain's remaining opt-out from the Working Time Directive," Howard told business chiefs.

"Like you, I am hugely concerned by this. At the very least it will include more form filling and record keeping. At most, it will add huge burdens to British business.

"And of course, there is the prospect of the European constitution, which should worry every British business here today."

Howard warned that the opposition would campaign hard against the constitution.
 
"I am delighted that the constitution is now being debated with such passion and vigour. The domestic debate reflects the importance of this European initiative," he said.

"Don't for a moment imagine that the European constitution is an esoteric issue about sovereignty. It will have a profound practical impact on your business.

"The constitution, for example, incorporates the Charter of Fundamental Rights. The rights under the Charter are loosely drafted.

"They include the right to strike, the right to so-called social protection, and the right for workers to have information and consultation within business.

"It will be up to the European court exactly what these rights mean in practice. And if past experience is anything to go by, they will lead to yet more burdens on business - burdens British politicians would be powerless to stop."