EU: Recent Developments

Lord Hannay of Chiswick Excerpts

Thursday 16th February 2012 Lords Chamber

[Lord Hannay of Chiswick]

My Lords, it is a pleasure to follow the noble Lord, Lord Judd. We are both on the same committee and discuss many EU matters in great amity. However, I have to say that I do not follow him on the financial transaction tax.

I make no apologies for focusing the major part of my contribution to today’s long overdue debate on the economic and financial travails of the eurozone, particularly those aspects of the crisis that directly concern this country. This long-running saga still has far to go and, however it ends, will have profound effects on all members of the European Union, not just on the members of the eurozone. That basic reality has been grasped from the outset by the Government. I pay tribute to the firm and repeated conclusion of the Prime Minister and the Chancellor of the Exchequer that it is in Britain’s national interest that the eurozone should surmount this crisis; and to their rejection of the view, expressed on the wilder shores of their own Back Benches in another place, that we could regard the disintegration of the eurozone with equanimity, or even with glee.

A second reality, which the Government have been less willing to grasp, is that as a non-participant in the eurozone—in saying that I do not intend to stray into a discussion of the pros and cons of our joining the euro at the outset—our views on the handling of the crisis are neither particularly welcome nor at all influential. There is a lesson to be learnt from this about the consequences of being absent and our subsequent marginalisation in the decision-making processes of the European Union.

That lesson leads me directly to the events of last December’s European Council and the serious error of judgment that was made on that occasion. It is first necessary to dissipate some of the myths that have accumulated around that meeting and which now, like layers of varnish on an old master’s painting, obscure the picture beneath. I fear that several more layers of varnish went on in the introductory statement of the noble Lord, Lord Howell.

Myth No. 1 was propagated by the Prime Minister himself when, in his Statement to Parliament after the December Council, he said that he had refused his signature on changes to the treaty. No such signature was proposed in Brussels on 9 December; there was no text to sign. The past two months have been taken up by negotiating a text, which is to be signed next month by 25 of the 27 member states, with Britain a mere observer of the process. Why the Prime Minister rejected the tried and trusted precedent set by the noble Baroness, Lady Thatcher, in the context of both the Single European Act and the Maastricht treaty—the practice of participating in negotiations to ensure that British interests were safeguarded, while keeping in reserve the right to refuse to sign if they were not—remains a complete mystery to me.

Myth No. 2 is that there was a veto at all on 9 December. All that happened was that the other member states, whose determination to move ahead was not in doubt well before that meeting, felt compelled to use an entirely predictable procedural bypass to achieve their objective of strengthening the fiscal disciplines attached to eurozone membership. Incidentally, the Government have said that they strongly support that objective and believe that it is entirely logical and reasonable.

Myth No. 3 is that the treaty to be signed in March is in some way objectionable to the United Kingdom, thus justifying our refusal to sign it. On three successive occasions I have asked three separate Ministers—the Leader of the House, the noble Lord, Lord Howell, and the noble Lord, Lord Sassoon—to state what provisions in the treaty are objectionable to the United Kingdom and on three occasions—alas, a little bit like St Peter—they have each refused to answer. I scored a fourth one last night with an official from the Foreign Office who the noble Lord, Lord Howell, very kindly brought along to brief Members of the House before today’s debate, and who spent a very long time failing to answer that question for the fourth time. I think it is reasonable to draw the conclusion that the honest answer to the question is none. That is not a surprise really since the main safeguards we needed were to ensure that the treaty’s objectives did not have any mandatory effect on non-eurozone members such as the UK unless and until they decided to join the eurozone; and, secondly, that single market issues will continue to be decided inside the normal EU treaty procedures. They are now there, enshrined on the face of the treaty.

[Lord Howell of Guildford]

I know we have been told not to interrupt each others’ speeches, and I apologise for doing so, but I think that the noble Lord is confusing varnish with lacquer. Layers of lacquer improve an object rather than destroy it or obscure it. In my opening speech I set out four very detailed areas in which—as the Chancellor made clear to the Treasury Committee subsequently—the safeguards were not available, and were not going to be available had this been a European Union treaty. If we had signed it, or gone ahead with the agreement that night, it would have become a European Union treaty. That would have changed the nature of the European Union. We did not want that. We do not want to be part of a fiscal union. We do not particularly want to be part of a political union. Therefore, we stood outside, and the remaining signatories have to work out intergovernmentally how they will solve their problem. I see no difficulty with that and I cannot understand why the noble Lord, with his considerable experience and brilliant mind, if I may say so, cannot get hold of this basic, simple, central fact.

[Lord Hannay of Chiswick]

I am very grateful to the noble Lord for having, after two and a half months, actually managed to extract an answer to some questions that I have been asking. The answer is, alas, unconvincing because it does not relate to the text of the treaty that is going to be signed in March; it relates to the wonderful Cheshire cat smile protocol which we are not allowed to see, which the Prime Minister put forward on 9 December, and which there seems to be a singular lack of enthusiasm for communicating to Parliament, despite Parliament’s role in scrutinising matters which are liable to become EU law, which was obviously the intention of the Government. Naturally I respect what the noble Lord said about the reasons relating to the protocol, but they do not relate to the treaty. However, I move away from that.

Myth No. 4 is that, in some mysterious way, the events of 9 December have strengthened the British Government’s hand in negotiating single market legislation regulating the financial services industry. The Government’s refusal to share with Parliament the text of the proposals they put forward on 9 December in that respect means that we cannot judge their value. What we do know is that they were rejected by all other member states. The situation with regard to financial services regulation thus remains exactly as it was on the day before the December Council. That, too, seems to be the view taken by the City in the briefing that the City Remembrancer has sent, I think, to all Members of this House, and which I received yesterday.

Myth No. 5 is that the treaty somehow makes improper use of the EU’s institutions, in particular the Commission and the Court of Justice. Fortunately, the Government have decided not to pursue that legal will o’ the wisp for the moment. If we really have ended up somewhere where it is not in Britain’s national interest to be, as I believe is the case, on the outside looking in as decisions that could have a considerable impact on this country’s economy are taken what is to be done? The simplest answer would be to sign the treaty, but I have no illusion that the Government are currently prepared to run the gauntlet of their rebellious Eurosceptic Back-Benchers. Alternatively, the Government could, if and when this treaty enters into force following ratification by 12 of the eurozone countries, give serious and constructive consideration to triggering the provisions of Article 16 of the new treaty, which envisage it being brought within the EU treaty structure. That is the course that follows the logic of the conclusions of the report that your Lordships’ EU Select Committee has made to the House, and I hope that the Minister who is to reply—and I am not asking for an immediate response—will recognise that and reflect carefully on it.

It may not be surprising that the eurozone crisis has dominated all other policy aspects at recent meetings of the European Council and seems set to continue to do so, but it obscures the fact that events in the world outside the EU continue to occur at a dizzying rate. The EU is now far too important an international player to be able to take time out from those events. Nor has it been doing so, and the Minister very reasonably brought us up to date on a number of the things that the EU has been doing. Recent decisions to tighten economic sanctions against Iran and Syria, and contemplating relaxing such sanctions following the welcome easing of repression in Burma, are all decisions of considerable significance and are welcome. They underline how much more effectively the EU can work in the foreign and security policy field when its members act together. The admission of Croatia in 2013 is a reminder, too, of the unfinished business of further enlargement, which holds the key to the stability of the Balkans and the eastern Mediterranean.

I conclude my remarks with a plea to the Government to put more effort and eloquence into promoting a positive agenda for the European Union. If Britain has plenty of positive ideas in addition to those that I have already mentioned, as I believe it does—such as completing the single market in services, energy and the digital industry, pushing ahead with negotiations for freer and fairer international trade, supporting the Arab spring and strengthening the EU’s strategic partnerships with the main emerging powers, such as China, India, Indonesia, Brazil and Mexico—the Government should surely be speaking out about these ideas, loud and clear. They should do it not only outside this country but inside it, where so much that is negative about the EU dominates the public commentary. Above all, the three main parties that support our EU membership should be finding ways of articulating the fundamental political and economic case in terms that update for a modern audience but do not supersede the arguments that led us to join the EU 40 years ago—I pay tribute the noble Lord, Lord Bates, who reminded us that those early arguments on the foundation of the European Union have not lost their value—and which were endorsed in the 1975 referendum by a two-to-one majority.