European Union (Referendum) Bill

Debate between Lord Kerr of Kinlochard and Lord Giddens

Friday 24th January 2014 Lords Chamber

[Lord Giddens (Lab)]

My Lords, I follow up on the comment that the noble and learned Baroness has just made. I speak in this debate as an academic more than as a Labour Party member. If the UK were to leave the European Union, it would be a really wrenching process of readjustment. When a country is contemplating such a profound and consequential decision, it is crucial that the question chosen in the referendum should be as clear and impartial as possible. For that reason I think we should have some academic discussion of it, because, as has been said, questions are crucial in a referendum.

The report of the Electoral Commission is sound, sensible and well researched. For maximum clarity it makes absolute sense to have the formula proposed in this amendment, which is endorsed by the commission. Contrary to all kinds of political babble, I would hope that most Members of the House will support the amendment because it is in the interests of the country. It is not a party-political issue. It is in the interests of the country, if we have a referendum on a decision crucial to the future of the country, that the question asked is impartial and proper.

[Lord Kerr of Kinlochard (CB)]

My Lords, I speak in support of the amendment in the name of the noble Lord, Lord Armstrong. I have a dog point—but the noble Lord, Lord Armstrong, made it himself. I would put it in a slightly different form. I would say, “Why have a watchdog and ignore its barking?”.

I also have a tartan point—but the noble Lord, Lord Forsyth of Drumlean, made it himself. When Mr Salmond put forward his question for the Scottish referendum, loud were our complaints and strong were our strictures, particularly from the former Secretaries of State for Scotland. Their wizened locks shook. In the case of the noble Lord, Lord Forsyth, his head shook. Loud was our condemnation of Mr Salmond for ignoring the advice of the Electoral Commission. What happened? He listened to us, or he listened to the Electoral Commission, and he changed his question. He did as the House of Lords encouraged him to do. That seems to be quite a relevant precedent.

My third point you could call cui bono. I disagree with the noble Lords, Lord Grenfell and Lord Lipsey. They say that the question in the Bill—the slanted question—was written by Conservative Central Office. However, we know from the Second Reading debate that that is not true, because we were told then that the form of the question that the Tea Party in the other place has chosen to put in the Bill was not the one it was given by the Conservative Party hierarchy. The Conservative Party hierarchy provided a question very like the one proposed by my noble friend Lord Armstrong of Ilminster in the amendment before the House.

You have to say, “cui bono”. There will be people in this House who think that it is a very good idea to have a slanted question because they are not seeking a referendum; they are seeking a referendum that says we leave the European Union. Those on the other side who are thinking of opposing the amendment of my noble friend Lord Armstrong—and I hope they are very few—should reflect that this is not what the Conservative Party sought. This is a question that is not accidentally defective but deliberately defective. I support my noble friend’s amendment.

EU: Energy Infrastructure (EUC Report)

Debate between Lord Kerr of Kinlochard and Lord Giddens

Monday 29th July 2013 Grand Committee

[Lord Kerr of Kinlochard]

My Lords, I need to mention that I am on the boards of a mining company that digs up coal and uranium and a power company that sells gas and electricity, and I was on the board of an oil and gas company.

I wish I could say it is a pleasure to follow the noble Baroness, Lady Parminter, but I would be lying because her expertise shows up mine, which does not match my stated interests. I greatly enjoyed this report and I am grateful to the committee for producing it and to the noble Lord, Lord Carter, for his masterly introduction. I am also grateful to the Government for what seems to be a rather thorough and clear response, which helps our discussion.

I am particularly grateful to the noble Baroness, Lady Rawlings, for she is, I think, apart from me, the only non-member of this committee who is speaking in this debate. I approached it with tremendous trepidation, surrounded by all this expertise, experience and knowledge. She of course sailed straight in with style, panache and daring, so I am following in the wake of her battleship.

I want to say something in general about energy policy, then concentrate on five points in the report, and then come on to shale gas and comment on what the noble Lord, Lord Giddens, said. My general point is that if the three aims of energy policy are to cut costs, cut emissions and keep the lights on, the country seems to be doing quite well on the second, rather badly on the first—partly because we are setting the pace in Europe on the second—and risking serious trouble on the third, as far as I can see and as far as Ofgem seems to be telling us, because of lack of investment.

I have to admit that I am not convinced that the Energy Bill, on which the Grand Committee is working so hard, will change the picture much. It seems to maintain the current balance between the three objectives and is a bit of slow-burner, with capacity payments—whether or not they are a good thing—not coming in for another five years. Nor do I believe that achievable changes in EU energy policy would make a great difference either, although some of those proposed by the committee make obvious good sense; for example, it is clear that the ETS badly needs reform and that the most obvious reform is the backloading of the auction of allowances, which I really hope will be agreed second time round.

However, there is not a great deal that the EU can do given that the treaty makes it clear that each country’s national energy mix is a matter for it alone. Like the committee, I think that there could be rather greater stress on interconnection in energy grids and energy pipelines, for oil as well as for gas and electricity—the report is curiously silent about oil, which is likely to remain the principal transport fuel for Europe for some considerable time to come. If you look at countries such as Bulgaria, which, as the report points out, is still 100% dependent on Russia for its gas, and the Baltic states, where most links still run back to old Soviet suppliers, it is clear that interconnection should be a priority. It increases competition, reduces costs and volatility, and increases security, in political as well as security terms, if you look at things from Vilnius, Tallinn or Riga.

I hope that the Commission will not stop trying to encourage member states to overcome their reluctance to accept common carrier obligations. Europe’s fractured energy market would be much more efficient if pipelines and grids were subject to the same sort of rules as apply in the UK domestic market or in the EU transport market.

In general, however, I would not want the Commission to be too ambitious this year. The committee is rather more expansive, and the points that I shall now make on the report are where I think it is asking either for a little too much or for the wrong thing. Sometimes, its enthusiasm has run away with it. I give five examples: first, paragraph 54 recommends that the Commission should require member states to submit obligatory annual reports on national energy policies and should assess those reports for the compatibility of such policies with the EU’s state aid rules.

It would be very good if the EU did have a single market in energy rather than 27, as the noble Lord, Lord Whitty, pointed out, but it does not. If energy were widely traded across national frontiers, it would be reasonable—indeed, essential—to apply the competition rules assessing the fairness of national support schemes, but I am not sure that member states, including the UK, are quite ready now for the Commission to step in. For example, with regard to the announcement last month that the strike price for offshore wind in the UK might be as high as £155 per megawatt hour, would we want the Commission to tell us that that was potentially a breach of European competition rules?

The point is that it is no accident that the treaty says what it says now, which results from a long process of negotiation and is as far as the member states were prepared to go. They have not conferred on the Commission the power to run a real energy market. I therefore agree with the Government’s rather guarded response to this recommendation, and I think that the Commission is quite right to be pretty reticent about applying the rigour of state aid rules in the energy sector.

[Lord Giddens]

I thank the noble Lord for giving way. There is an interesting discussion to be had about having a parallel to the European semester in energy. The European semester appears to have achieved quite a large rate of acceptance, obviously because it originated in the eurozone, but it is not completely implausible to suppose that you could have some kind of analogue to that which would be to everyone’s benefit, precisely because we are, or we want to be, using interdependent energy, and it would make sense to get the same kind of information-sharing that the European economic semester provides.

[Lord Kerr of Kinlochard]

I entirely agree with the noble Lord. An exchange of ideas of the kind that the noble Lord, Lord Maclennan, was talking about, would be highly desirable and moderately helpful. However, the committee’s report talks about the application of the state aid rules. We are moving on from something like the European semester on economic policy to something like the entity talked about in the French-German paper at the end of May, which would have fiscal rules enforceable with sanction powers. That is not likely to happen in the short term, but I do not think that full application of the rigour of state aid rules is either necessary or desirable at the present stage of the development of EU energy policy.

Paragraph 98 deals with nuclear power. The Commission is trenchantly urged by the committee to address outstanding issues, particularly liability, waste and, again, state aid. Why? Is it plausible that the Commission could find a solution that would satisfy the nuclear French and the now anti-nuclear Germans? What are we supposed to do? I do not understand the purpose. Do we need a single common answer? Provided that safety rules and high safety standards are enforced across the whole of the Union so that safety is assured—remember that the closure of their Chernobyl-style plants was a precondition for accession countries joining the European Union—subsidiarity should apply. I do not see why there need be an EU regime for waste or a particular EU level of liability rules, let alone state aid rules. I note that the Government’s response passes over this recommendation in silence. I find that silence sensible and eloquent.

On the subject of border taxes, I know that what we are talking about are global border taxes, but that seems like the argument that a financial transaction tax would be fine if it was global, when we know that it is not going to be. Paragraph 133 talks about the idea that imports from countries with low energy costs and environmental policies that we deem inadequate should be subject to an import tax in order to reduce carbon leakage. The Commission opposed this, citing huge administrative complexity. I agree, and I would also cite higher costs for our businesses and consumers, the certainty of retaliation against our exports and the probability that the precedent would prove interesting to those on the French left, for example, who regularly call for restrictions on imports from countries where labour costs are low.

Financial Transaction Tax: European Union Report

Debate between Lord Kerr of Kinlochard and Lord Giddens

Wednesday 11th July 2012 Grand Committee

[Lord Kerr of Kinlochard]

My Lords, the national debate on the Commission’s proposal operated at a lower level of academic rigour than what we have just heard from the noble Lord, Lord Giddens. I thought that three myths infected the national debate. First, there was the myth that this was an EU tax, in the sense that it was a tax the proceeds of which would be used to help fund the EU budget. That was widely believed in this country and is completely untrue. There was a gleam in the Commission’s eye but it is clear from the preparatory text and the background that the proposal itself was for a series of national taxes collected by national tax authorities and going into national budgets. That myth produced a very adverse reaction in this country.

The second myth produced a strongly positive reaction. That was the Robin Hood myth: that it was to be a hypothecated tax, which was to be used for international development or to combat climate change. This was completely untrue and it was a bit implausible that at a time of concern about deficits, to put it mildly, Governments would be so altruistic. Anyway, no Government said that they would and the Commission did not propose that they should.

The third myth produced a strongly negative reaction in this country. It was the myth—fed a bit, I fear, by government—that the FTT proposal was a dagger aimed at the heart of London and that it was a malicious proposal from a malign commissioner and designed deliberately to damage the City. Usually, the Commissioner was said to be Barnier, although in fact he was not the commissioner involved at all. This was completely untrue but it was encouraged a bit—possibly because the more ferocious the dragon looks, the more valorous St George must be when he slays it. There was absolutely no doubt that we could slay this dragon whenever we chose, because unanimity is required for tax proposals.

I disagree slightly with the noble Lord, Lord Giddens, on his criticism: “Some FTTs could be quite good, so why were we so against an FTT?”. The members of the committee—I was lucky enough to serve under the noble Lord, Lord Harrison and we were unanimous in producing this report—were not attempting to argue that all FTTs are by definition bad; what we were unanimous about was that this proposal, this FTT, was unwise and unworkable, for reasons that are, to be fair, set out in some detail in the report.

The motivation of the proposal was none of those in our midst; it was, I think, a general wish to see the financial sector contribute in part to the cost of the crisis that it had caused and a particular wish to discourage high-frequency trading as inherently evil. I do not want to cross swords with the noble Lord, Lord Giddens, on high-frequency trading and whether it is indeed inherently evil. I do not think the committee reached a view on that. In fact, I do not think we attempted to reach a view on that issue in this report.

[Lord Giddens]

The report quotes someone from the Treasury who says that it is not harmful and it appears to endorse that. It is just an opinion from someone in the Treasury.

[Lord Kerr of Kinlochard]

I do not think we addressed the issue of whether high-frequency trading is or is not a good thing in this report, but there is no doubt that in the Commission’s mind it is a bad thing and that one of the purposes of this tax is to reduce it.

As the noble Baroness, Lady Randerson, said, the proposal was extremely oddly timed. I do not need to repeat the argument she made so eloquently. Setting out deliberately to reduce EU GDP by, it says, 0.5% seems an odd thing to do at a time of sharp recession. I think that 0.5% seriously underestimates the effect on GDP because the relocation effect was not taken into account in that part of the calculation.

Where are we now? First, I would like to consider whether St George fought well. I fear that I am in the school of the noble Lord, Lord Hannay, on this. I do not think we fought terribly well. I think the arguments we should have used were European Union arguments: arguments about the possibility of having one great financial market between the Asian market and the American market; arguments about London being the candidate; or arguments about damage to London being damage to the EU. I find such arguments play pretty well in many parts of Europe, although not in all. The best argument against a financial transaction tax that we should have used was the EU argument. Instead, we tended to wave the Union Jack, invoke Dunkirk, denounce Barnier and then, on 9 December, tried to make a UK opt-out from an FTT that the others could have if they wanted, a carve-out for us, a condition for our agreement to their move to the fiscal union to which we were urging them to move. It struck me as a really odd position to have got ourselves into.

However, that is all in the past. What do we do now? The dragon is not dead. I can reassure the noble Lord, Lord Giddens, on that. The dragon is alive and well. The noble Lord, Lord Hannay, has read out the European Council conclusions. Since the proposal would not be adopted EU-wide, several member states would instead seek to bring it in among themselves under the enhanced co-operation procedures—that is Article 20 of TEU and Article 329 of TFEU. So the Commission will produce a new proposal, presumably very similar to the one it produced for the Council as a whole. Those who wish to introduce such taxes will aim to agree a common scheme, and they have set themselves a target of the end of the year.

Should we mind? If they succeed, will they just damage themselves? Will the London market benefit at the expense of Paris and Frankfurt and anybody else who joins in? Should we, in the Prime Minister’s phrase, simply roll out the red carpet and cheer? I do not think so. Although our report was written some time ago, the Select Committee thought not. We noted that if the situation, which is now foreseen by the European Council, came about, UK financial institutions entering into transactions with institutions in FTT levying states would still be liable for the tax and if financial institutions from FTT levying states conducted transactions between themselves but in the City of London, they would be liable for the tax. In both cases, it would be for the UK authorities, HMRC, to collect the tax and forward it to the appropriate national fiscal authorities. We did not much like the sound of that. We would land the costs of collecting the tax but no revenue from it and, more seriously, the relocation effect would still be real. There would be a deterrent to transactions here and hence damage to the City. That is why, in our report, we said:

“We urge the Government to work to ensure that UK financial institutions are not damaged, and that UK tax authorities’ workload is not increased, by an FTT introduced by certain EU Member States”.

That seems to me to be the key message we should still be conveying to the Government. It was a point not really addressed, as the noble Lord, Lord Harrison, has noted in the reply we had from the Financial Secretary to the Treasury. In particular, he did not address our concern at the UK having to collect in London a tax from which we would not benefit. I hope the Minister will deal with that point more substantively tonight.

Is the die cast? Are we now out of the game? Is it all over? Can we go home? No. Under the enhanced co-operation procedures which they intend to use we have a seat in the room. Only those proposing to introduce the tax will have a vote but everybody will be entitled to speak and if we want to we can seek to influence what we do. In my view, provided we make EU arguments, not exclusively UK ones, they are likely to listen because the health of the City, as a lot of them recognise, matters to them too. We need to be there, sounding constructive, influencing the debate. I hope the Minister will assure us that is what the Government intend to do as this enhanced co-operation is pursued. I really hope we do not just climb onto our charger and ride off.

I have one additional point. Under Article 20 we do not have to leave the others to devise the tax without any advice from the representatives of the biggest financial market. As the others, possibly a slightly different group of others, go ahead with trying to work out some form of banking union, and they are proposing to do that under Article 127, precisely the same arguments apply. Article 127 is the Council as a whole. We would not be able to vote but we would be able to speak. We could be there. We cannot be the banking capital of Europe and let a negotiation about a banking union in Europe go on without our being there. You have to be in to win. We have got to be there.

The other day, Mats Persson of the Open Europe think tank—who is slightly more Eurosceptic than me and whom I would not normally cite—said of the risk of a eurozone banking union that it,

“is probably necessary in the long term, but is also a potential minefield for the UK. First, will it create barriers to UK financial firms doing business in the eurozone in turn fragmenting the single market? Secondly, will supervision spill over to regulation, with the eurozone effectively writing the rules for all 27 countries?”.

These are extremely good questions and the only way of making sure that the answers the European Union comes up with are the right ones is for us to be active participants. I was worried by the Prime Minister’s delight that he had he managed to strike out from the European Council conclusions all references to a common supervisory structure. They pop up in the eurozone annexe to the conclusions but they are to be discussed and negotiated in full Council with everybody there. I really hope we will occupy our seat and use it well.