JUST WHEN it seemed ‘Europe’ was fading as a defining issue in British politics, EU Commission president Jose Manuel Barroso has relit the fuse. His speech last week calling on the European Union to turn itself into a “federation” could be seen as a long-delayed recognition of political reality: the relentless economic drive towards ever closer integration as a means of avoiding a break-up of the single currency project brings to the fore the most toxic word in UK-EU relations: federalism.

Yet a federal Europe is what successive Conservative and Labour leaderships have sworn they would never accept. And this reluctance is now broadly shared across the electorates of the EU - Germany in particular having turned notably Euro-sceptic in the past two years. So the traditional attempt to portray UK Euro-sceptics as being “alone in Europe” or “out on the fringe of mainstream politics” is no longer credible, to the extent that it ever was.

“Europe” is once more set to divide Westminster, only this time the voters, saturated for the past three years with the Euro crisis, failed Euro summits, bond market panics, bail-outs, tottering banks, riots and ever tighter austerity regimes in Spain, Italy and Greece, must be even more sceptical of further integration with the EU. Indeed the debate has now moved towards broad support for re-negotiation of our EU membership.

Battle lines are already forming over what form this will take, and how far a UK government would be allowed to alter our terms of membership. Euro-sceptic veterans are doubtful that much of substance would really change while others believe an opportunity now presents itself for repatriating powers to the UK, particularly in the fields of workplace regulation.

For example, the UKIP MEP Nikki Sinclaire has launched a campaign to challenge Prime Minister David Cameron to call an In-Out referendum by 2014. If she succeeds this could turn out to be quite a busy year at the polls, what with one thing and another.

In truth, there is little prospect of any such referendum being held this side of a Westminster general election, due to be held in 2015. But with a new treaty in the offing, an EU referendum of some sort is more likely than not. But what sort?

How ironic that the possibilities opened up by renegotiation have barely been discussed in the independence debate in Scotland. Indeed, the ‘Yes’ campaign happily asserts that our EU membership would be automatically rolled over in the event of independence and we would not need to open negotiations to reapply. Looking at the wide range of powers that have passed to the European Commission, it is quite astonishing that Scotland’s “independence” party has adopted such an unquestioning, carte blanche EU stance. It is surely with Brussels as well as Westminster that negotiations should begin in the event of an independence vote. If the SNP is opposed to membership of a federal Britain, what is it that makes membership of a federal EU so much more acceptable?

Barroso went on in his speech to confirm that the European Commission will begin work on a new EU treaty and the creation of what will in effect be a federal structure - though critics noted little by way of democratic checks and balances we normally associate with a federal structure.

Within the Conservative Party there are already some powerful ideological currents pulling in different directions. There is the Fresh Start Group comprising around a hundred Tory backbenchers. It has been engaged in establishing a wish-list of repatriated powers flowing from re-negotiation, covering not only labour market regulation but also regional policy, social policy and farming issues.

Equally challenging from an SNP perspective is how the Westminster parliament could be re-organised so as to give more careful and critical scrutiny of EU legislation. A similar tightening of legislative scrutiny should surely also be on the agenda of the Scottish Parliament in the event of an independence vote. Should there not be a special question time for EU matters, along with stronger scrutiny of EU directives that tend to be accepted on the nod?

The Fresh Start group can count on some support within the coalition Cabinet – Foreign Secretary William Hague, for example. But it would be a mistake to assume that this approach unites all Conservative backbenchers. Some are double sceptics – not only sceptical of the benefits of EU membership but sceptical also of attempts to renegotiate a better deal. There is a real and deep division between, broadly, the new young-ish Tory modernisers who believe a deal can be done, and the old guard “they fought at Bruges” double-sceptics such as Bill Cash who doubt that the European Commission would be prepared to concede to UK demands. Trying to get the Commission to ditch the doctrine of acquits communitaire (once power is established it is not given back) is impossible because it lies at the very centre of the EU’s purpose and mission.

In any event, Brussels has always been deeply opposed to countries taking the approach of “Europe a la carte” and that opposition will have been mightily re-inforced by the Euro-crisis.

And all this is highly sensitive for a Tory party that is trailing at the polls and with UKIP candidates likely to make capital out of the federalist ambitions of the new Treaty. The “Better Off Out” group would like the referendum question to be, not “do you agree with the new membership terms as negotiated?” but a direct “in-out” question. Doubtless some will soon be arguing for a double question on the ballot paper.

Oh dear. Sound familiar?