The top British diplomat, speaking Tuesday at the Korber Foundation Conference in Berlin, said that while Britain wants to continue to play a leading role in the EU, "public disillusionment with the European Union in Britain is the deepest it has ever been.
"People feel that in too many ways the EU is something that is done to them, not something over which they have a say," Hague said, voicing a deepening strain of euroscepticism among British ministers as Brussels looks to raise a $1.3 trillion, seven-year budget from its 27 member nations.
The foreign minister, who also announced a broad policy review of relations with the European Union to examine Britain's "national interests," said ratification of the Lisbon Treaty without a public referendum in 2009 was a turning point in fueling the disillusionment Britons felt.
Critics such as the Conservative Party contended the treaty, which ended Britain's right to veto new EU rules in more than 40 policy areas, reduced its sovereignty, while supporters backed it as necessary allow Europe operate more efficiently and better defend common economic interests.
The treaty was backed by British Prime Minister Gordon Brown's Labor Party government but opposed by Hague, who was the shadow foreign minister. He called its ratification "a bad day for British democracy."
British Prime Minister David Cameron, then Conservative Party opposition leader, vowed to renegotiate parts of Britain's EU membership, especially in social and employment laws, and to have referendums on future EU measures deemed to cede more power to Brussels.
"People feel that the EU is a one way process, a great machine that sucks up decision-making from national parliaments to the European level until everything is decided by the EU," Hague said in Berlin Tuesday. "That needs to change. If we cannot show that decision making can flow back to national parliaments, then the system will become democratically unsustainable."
Hague said the review of the EU-British relationship would cover 32 policy areas but admitted the process probably wouldn't be completed before late 2014, The Independent reported.
He also flatly rejected the idea of joining a pan-European banking union being developed by the 17 members of the eurozone in a bid to solve to the European sovereign debt crisis.
"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," he said.
The European Union's proposed budget of $1.3 trillion is a 6.8 percent jump from the current levels and has been opposed by Cameron, who instead will be seeking a rise no larger than inflation at a key EU meeting next month.
"Britain is the second largest net contributor after Germany but we are having to reduce spending at home on every single area other than health and international development," Hague said. "In that context people simply do not understand why there should massive increases in the EU budget when all EU countries are trying to balance the books at home."