DH: Obviously I'm all in favour of governments clearing obstacles out of the way. Still, it's worth noting that the sectors you've just mentioned have managed to become successful without government help — in some cases, indeed, in defiance of state intervention. Think of the way in which private schools, to which the last government was no friend, have marketed themselves globally and built franchises across Asia. Many of our universities are doing similar things. Of the three sectors that Nick identifies, financial services is overwhelmingly the biggest generator of revenue. But look at what's happening to the City: it's being asphyxiated by regulation, both from Whitehall and from Brussels. Instead of every bright and ambitious foreign financier wanting to work in London, we now see people leaving for Geneva, for Singapore, for Shanghai. Why? 

Well, it's not one single measure, it's a number of things: the bank levy, the new top-rate tax, the duties on non-doms and, above all, the shift in regulatory power to Brussels. The EU has just created three new invigilatory authorities to cover banking, pensions, equity and insurance. All right, their remit is initially limited, which is how the EU usually works. But, over time, they will do what all bureaucracies do and expand their terms of reference. Supervisory control will shift from our own regulators to officials who, in many cases, bear no goodwill either to the City of London or to the capitalist system. Which neatly brings me back to where I started: the contradiction between the excellent things which the coalition is doing in a domestic context and its failure to extend its logic to the EU. I've been very pleasantly surprised by how much David Cameron has achieved in his first seven months: deficit reduction, education reform, shifting people from welfare dependency into productive work. And I've been especially impressed by some of the coalition's constitutional reforms: fewer MPs, lower ministerial pay, open primaries, recall mechanisms, referendums. 

But there comes a moment when what you're doing at home runs up against the constraints of EU membership. You can't push jurisdiction downwards in the United Kingdom and, simultaneously, upwards in the EU. You can't be for referendums in general, but against the one referendum that everyone wants. You can't shift power from unelected functionaries to elected representatives while at the same time empowering the Eurocrats. You can't ask your domestic departments to make, on average, a 19 per cent budget reduction while increasing your contribution to the EU budget by 60 per cent. The City is a neat illustration of how Brussels controls essentially internal matters. People think of the EU as something that happens across the Channel: doubtless expensive and disagreeable, but hardly immediate. In fact, it curls its tendrils into almost every cranny of our national life. No government can carry through the programme it would ideally have wanted as long as it recognises the primacy of EU law. That, ultimately, is why we need to settle the question of Britain's membership.