European Union: Negotiations (European Union Committee Report)

Debate between Lord Kerr of Kinlochard and Lord Lamont of Lerwick

Monday 16th March 2020 Lords Chamber

[Lord Kerr of Kinlochard]

I bow to the noble Lord’s experience in financial matters. I usually find the usual channels as baffling as the Sibyl of Cumae, but on this occasion we have to congratulate them on arranging such a prompt debate on the Select Committee report. We must also congratulate the noble Earl, Lord Kinnoull, on producing such an excellent, analytical, factual report—a good trigger for the first test of what we mean by Section 29 of the Withdrawal Act. I declare an interest: I sit on his committee, which is why I suck up to him.

As he spelled out, the report brings out the striking contrast between the detailed negotiating mandate put forward by the 27 and the terse assertions of the Government’s White Paper. Of course, these are only opening positions but the gap is quite wide, particularly in the four areas where it seems to have arisen because our Government’s position has changed.

On architecture, we no longer believe in an overriding institutional framework, which is what we agreed to in the joint political declaration of 19 October. Instead, we now want only a free trade agreement

“supported by a range of other international agreements, all with their own appropriate and precedented governance arrangements”—

all, presumably, with different governance arrangements.

The EU mandate sticks with what the political declaration said, and still wants “an overarching institutional framework”. I suspect that this reflects the EU’s unhappy experience with Switzerland and the unsatisfactory multiplicity of separate EU-Swiss agreements. We were one of many member states to agree that the Swiss experiment should never be repeated. I expect the others still feel the same.

Secondly, on the level playing field, as the noble Lord, Lord Hannay, reminded us, we agreed in October that:

“Given the Union and the UK’s geographic proximity and economic interdependence, the future relationship must ensure open and fair competition, encompassing robust commitment to a level playing field”.


That is still in the EU mandate, but it seems that we have changed our minds on that too. We now say that we will not agree to any obligations for our laws to be aligned with the EU’s. That could have consequences. In October, we agreed that the “precise nature of” level playing field

“commitments should be commensurate with the scope and depth of the future relationship”.

That works both ways. If we will not provide convincing assurances on competition and the other topics, any free trade agreement is likely to be rather shallow and narrow in scope.

Thirdly, in October we wanted “ambitious, close and lasting co-operation” on foreign policy, sanctions, security and defence. The EU mandate now covers the same ground in broadly the same terms, but our White Paper is completely silent on the subject. I note that, according to the press, we have rejected the Commission’s idea that one of the negotiating groups working to Mr Frost and Monsieur Barnier should cover external relations topics. I am not clear why our position has changed. Perhaps the Minister could tell us.

Finally, the White Paper robustly rejects the idea of any role for the Court of Justice. Mr Gove, giving evidence last Wednesday to Mr Benn’s committee in the other place, spelled out that this extended to any organisation—say, REACH, the chemicals regulator or the European arrest warrant—that was under CJEU jurisdiction. This, too, would seem to indicate a preference for narrowing the scope of any eventual agreement.

I draw two observations from those four facts. First, I am not sure that our continental friends will fully understand that the election has changed everything, as the Prime Minister, Mr Gove and Mr Frost have maintained in their recent speeches. October’s joint political declaration is not, of course, a legally binding text, as the noble Baroness, Lady Noakes, reminded us—I was delighted to hear something I could agree with—but it is an international agreement. It is not legally binding—it is not part of the treaty—but it was an agreement that emerged from a negotiation involving mutual compromise.

I do not think it follows from Mr Johnson’s election victory that his 27 colleagues will accept that the balance of the declaration can now somehow be changed, with the UK cherry-picking the bits we like best and dropping the other bits, and their having to acquiesce. The thesis seems to be that the political situation in the UK is now different, so we can just pick and choose the bits we like. Perhaps the foreigners may accept that; I am not sure.

Secondly, on the other hand, it must be true that by aiming low and going for a narrow agreement and a more distant relationship with continental Europe, we increase the chances of getting something agreed by the end of the year. If it does not extend beyond trade in goods, as seems plausible on the basis of the opening position, it probably will not need national ratification in 27 capitals with the delays that inevitably entails. I thought it rash of Mr Johnson to rule out any extension to the negotiation period—perhaps coronavirus will now change his mind—but I am not one of the those who argue that it is impossible to secure a deal by December. I am certain that, if the Prime Minister sticks to his timetable and to the brusque autarkic assertions of his White Paper, the best we can get will be a narrow deal, a shallow deal and a very bad deal—but if that is what we want, I think it is possible.

However, there is a wild card and I turn to it now. It is Northern Ireland and the 131 pages of the protocol on Ireland and Northern Ireland in the withdrawal treaty, which has been in force since 31 January. In Brussels and among the 27, one today detects a growing suspicion that we are not terribly keen to implement the protocol. In Brussels, that is understandably taken rather seriously. The protocol is part of the treaty, and it is legally binding. Were we seen to be resiling from it, the consequences would be grave. I would certainly expect the EU to break off negotiations on the further treaty. I would assume that the nightmare of a hard border in Ireland would be back and the Good Friday agreement in grave danger. The noble Lord, Lord Hain, has drawn attention to the United States repercussions of that.

Of course, it seems wild and outlandish to suggest that this country would ever resile from a treaty obligation, an obligation we have only just taken on, on the last day of January. I hope that the suspicions of Brussels are misplaced, but we are currently not trusted over there, as the noble Baroness, Lady Ludford, explained. The Minister has made clear more than once in the House that he believes that the Government will fulfil their legal obligations, and I believe him, but there is a new Attorney-General, who may be more malleable than the previous one.

Why is trust evaporating in Brussels? The issue is the frontier in the Irish Sea and the suspicions spring from what the Government say and from what they do or do not do. First, let us look at the words. Mr Johnson and his new Secretary of State still seem in denial about what the protocol means for trade between Northern Ireland and Great Britain. Under Article 5 of the protocol from 1 January, we will be obliged to collect on the EU’s behalf EU customs duties on goods moving from Great Britain to Northern Ireland, except for those goods on which the UK and EU agree there is no risk of them moving into the Republic. We agreed that; that is what the treaty says. In Article 6 of the protocol we also agreed that the EU customs code and hence EU export checks will apply to goods moving from Northern Ireland to Great Britain, although with controls at ports and airports minimised to the extent possible. We agreed that; that is what the treaty says. In Article 12 we agreed to give the EU the right to monitor and supervise these two-way frontier arrangements. We agreed that. It is in the treaty.

As long ago as 21 October, the then Secretary of State for Exiting the EU, Mr Barclay, confirmed to the Select Committee chaired by my noble friend Lord Kinnoull that there would be two-way checks, but the Prime Minister continues to deny it and, unlike his predecessor, Mr Smith, so now does Mr Brandon Lewis, the new Secretary of State for Northern Ireland. In this context, the White Paper’s flat rejection of any role for CJEU jurisdiction in this country starts to look, in Brussels’ eyes, very sinister. Seventy-five pages of the protocol consist of long lists of single market laws that will apply in Northern Ireland and will be under CJEU jurisdiction.

Did the drafters of the White Paper just forget about Northern Ireland? Or, as some in Brussels fear, are the Government hoping to forget about the protocol? Giving evidence to Mr Benn’s committee in the other place last week, Mr Gove refused to confirm the description of the Irish Sea frontier, which the Government themselves set out in their explanatory document on the EU (Withdrawal Agreement) Bill, published on 21 October. He brushed questions aside, saying that they were a matter for the Joint Committee set up under the protocol, which will, I understand, finally meet at the end of this month. But the Joint Committee’s task, as spelled out in the treaty, is to agree how to implement the provisions of the protocol. It cannot change them—and we have signed up to them.

So much for the words—it is the deeds that worry me most. The Select Committee, visiting Belfast on 25 February, could find no evidence of any central or devolved government action to prepare to implement the protocol. The business community was equally unsighted, and suggested that with five months gone and only eight to go, it would be a “herculean” task to get workable frontier arrangements up and running. I think “herculean” is Hibernian for “impossible”.

We were told that no one from HMRC, which will be responsible for the two-way customs border in the Irish Sea, had, as of 25 February, given the business community of Northern Ireland any indication of what to expect or how best to prepare for it. We were told that 2,500 trucks cross the Irish Sea within the UK every day—850,000 a year—and that for GB-NI movements, 45 questions would probably have to be asked about every consignment. We were told that for NI-GB movements there might be 31 questions, if the precedent of the EU’s Ukrainian-Polish frontier were followed.

I find all this acutely disturbing—indeed, shocking. I can think of few greater infringements of national sovereignty than a foreign-supervised frontier inside our United Kingdom. I am not surprised that Mrs May—and Mr Johnson, before he got to No. 10—ruled it out as something no UK Prime Minister could possibly accept. But he did accept it: it is in an international treaty, and we do not break treaties.

The Government in Dublin are well aware that we are dragging our feet. So, too, is the Commission, whose members have been in Belfast to find out. No wonder there are suspicions in Brussels. If we walk away from the treaty we signed, there will not be another to sign. The worst of all possible worlds would be to leave the people of Northern Ireland in limbo and in the dark, puzzled by the words being uttered and totally unbriefed on the necessary deeds.

I would be grateful if the Minister could confirm that it is not our Government’s intention to seek to reopen or reinterpret Articles 5, 6 and 12 of the Irish protocol, and tell us when the people of Northern Ireland will be informed—ideally, consulted—about the preparations they should make for their resultant new trade frontier with the rest of this kingdom.

[Lord Lamont of Lerwick (Con)]

I do not disagree with everything the noble Lord has said in his formidable speech, but is there not one scenario that he has not covered? If there is a free trade agreement, will not a large part of the protocol fade into it?

[Lord Kerr of Kinlochard]

Yes, I think that is true. The checks would then become much less onerous—but they would still be required. The EU would still be required to collect data on its exports, which means that there would still be checks on Northern Ireland-GB trade, and in the other direction there would still have to be VAT checks, phytosanitary checks and rules of origin checks, even if the customs checks were reduced to near zero.

The noble Lord is right: it is perfectly true that, if there is a comprehensive free trade agreement, checks will be less onerous, but they will still have to happen in both directions. I support both the Motions on the Order Paper. I also support the amendment in the name of the noble Baroness, Lady Hayter. The Minister will note how supportive I am being today.

Brexit: Withdrawal Agreement and Political Declaration

Debate between Lord Kerr of Kinlochard and Lord Lamont of Lerwick

Wednesday 9th January 2019 Lords Chamber

[Lord Lamont of Lerwick (Con)]

Would the noble Lord comment on Article 24 of the GATT agreement?

[Lord Kerr of Kinlochard]

Indeed, if there was a free-trade arrangement, then of course none of what I have said applies. However, I thought the essence of “no deal” was that there would be no deal. Those who advocate no deal and living by WTO rules should be honest about what these rules mean. The noble Lord, Lord Hain, was absolutely right in his description: no deal would be a disaster, and a managed no deal is a mirage.

The second development I want to mention is the Court of Justice’s finding on 10 December, which confirmed that we have an absolute right unilaterally to take back Mrs May’s letter and that this would bring the withdrawal process to an immediate end. The only stipulations are that the two-year period, or any extension of it, must not have expired; that our decision must involve a democratic process, not just an executive act—in other words, Parliament must have voted for revocation; and that the decision must be unequivocal and unconditional, which I assume means we could not withdraw the letter and resubmit it the following day. We could not just do so as a stratagem to reset the clock, undercutting both the two-year limit and the specific provision in Article 50 for securing extensions.

I was not surprised by the court’s ruling, although I admit that I was a little relieved. Had the court reached a different view my credibility might have dropped a little bit, since I have spoken on the subject once or twice before. But my relief must have been trivial compared with that of the Dantons and Marats of the Government Back Bench, who have argued regularly in the House—and a couple of them in the columns of the London Times—that revocation would entail a negotiation. They have warned us down the years that we would lose the Thatcher rebate, or be forced into Schengen or the euro. They must have been hugely reassured that the court confirmed that there would be no negotiation. The terms of our membership would not change and could not be changed to our disadvantage.

This establishes that the country has a third option. We do not have to settle for the Hobson’s choice of the May deal or no deal. There is the option of keeping the deal that we have, secured and improved by successive Governments. Public opinion polls, as the noble Lord, Lord Newby, said, consistently show that that is the will of the people. The margin for months has been 8%. Interestingly, it rises to 16% if you ask people to compare the May deal and staying in, and to 26% if you ask people to compare no deal and staying in. Now that people have the facts and know that we cannot have our cake and eat it—that unicorns do not exist—they can make an informed choice. It is pretty clear what that is.

Of course, putting the question to the country would require an extension of the Article 50 period, but I have yet to meet anyone in Brussels who thinks that an extension for that purpose would be refused. Brexit, though worst for us, is bad for everybody. I would expect objections if we were seeking an extension purely to permit further posturing and prevarication, or further efforts to get the 27 to agree a legally binding text contradicting the legally binding treaty. But an extension to permit consulting the country would be easily obtained. Though, like the noble and learned Lord, Lord Hope, I do not relish the prospect of a second referendum, it seems it is now clearly the least worst option on the table.

I support the Motion in the name of the noble Baroness the Leader of the Opposition. I hope that the Opposition will soon be able to return the favour and support a people’s vote as a responsible way to resolve the deadlock in the other place.

European Union Referendum (Date of Referendum etc.) Regulations 2016

Debate between Lord Kerr of Kinlochard and Lord Lamont of Lerwick

Wednesday 2nd March 2016 Lords Chamber

[Lord Lamont of Lerwick]

My Lords, I am delighted to follow the noble Lord, Lord Kerr. We worked together extremely closely in Brussels. He was never my Private Secretary, and I think I am a bit relieved that he was not. We were on the same side—at least I think we were, most of the time. I always used to rely on the noble Lord, Lord Kerr, to tell me what the mind-set was of those against whom I was negotiating and he had very good judgment. However, I was rather surprised today when he whispered in my ear, “I am very pleased you haven’t made up your mind about whether we should remain in the European Union”.

He had a bit of a point in that I have found this quite a difficult decision. Some people may not believe that, but it is a very momentous decision. It is a great change in British policy over 40 years and, of course, it is an extremely difficult decision to be in argument with colleagues and close friends.

I have never before argued that we should leave the European Union. I have been accused of arguing that. I know that one should never refer to one’s own speeches, but in 1994 I made a speech in which I was accused of advocating withdrawal. What I actually said in 1994—and it caused a bit of a storm at the time—was that the EU was becoming such a political union that the time would come when we would have to choose between being part of that political union or going on our own way. I think that was, probably quite by chance, what happened subsequently. Europe integrated more and more and had a different vision of its future from what we had.

Taking a longer view of our relationship with Europe; it has never been a comfortable one. It has been awkward all along. We had to get out of Schengen; it was not comfortable for us. We had to get out of the single currency; it did not fit our ambitions for Europe. Our great contribution to Europe was supposed to be the single market and the acceptance of qualified majority voting. Well, yes, up to a point, although there has been an awful lot of argument over whether Lady Thatcher would have been in favour of remaining in the EU or coming out. The one thing I do know about Mrs Thatcher is that she bitterly regretted the introduction of qualified majority voting. She felt she was misled and that it was a great step in the wrong direction.

Some people think we have not been constructive enough in our attitude to Europe. I know Tony Blair would not object to my revealing a private conversation. I remember having a conversation with him on a train going to Darlington. We were discussing his approach to Europe. He said, “The answer to Europe is to be constructive. Get in there, be positive, agree with them and they will all come round to our way of thinking”. I am afraid I said to him, “I have seen that movie several times and it always had the same ending”. It did not work for Tony Blair either.

We have heard today arguments about the pooling of sovereignty—there is nothing at stake, it is just the pooling of sovereignty and this is very similar to NATO. NATO is a military alliance, which is quite different from transferring law-making powers to a body whose law is superior to your own domestic law. Not for nothing did Elmar Brok, a leading member of the European Parliament and a close ally of Mrs Merkel, describe the European Union as “a state under construction”.

I think many people have become disillusioned in Britain because of the sleight of hand with which that objective has been concealed; the way in which the constitutional treaty became the treaty of Lisbon; the way in which countries have been asked to vote several times when they voted the wrong way in referenda. It is for all those reasons that disillusionment has set in in Britain. Many people such as myself believe that it would be far better to have a relationship based on economics alone.

Many people have argued in this debate that for us to sell to the single market of Europe we have to be part of it. I put it to the noble Lord, Lord Mandelson—I agree I did not put it very well or clearly but I think it is an important point—that the United States has Europe as its main trading partner. Since 2011, the United States has sold more in goods than the UK has. It is not a member and it does not have any say in the rules, but it does not find that a huge obstacle. Services are also extremely important, because people say the future is services. They say that the British economy is strong in services and indeed it is, but the United States exported to the European Union over $200 billion worth of services whereas the United Kingdom only exported less than £100 million of services. That, I suggest, makes a very strong dent in the argument. The noble Baroness, Lady Smith of Basildon, can deal with that in her reply. She did not reply very well before, but we will listen to her when she replies to that argument.

My noble friends Lady Byford and Lord Tugendhat asked the question that is asked all the time. They say that we who are sympathetic to departure from the EU never spell out the exact terms on which we would have a trade relationship with Europe. I am not sure exactly what detail they want us to go into. Obviously nobody can say what the tariff on this or that, on shoes or clothes, will be. The question ought to be: is there a deal available or is there not? Is there a negotiated free trade deal available or not? My noble friend Lord Howard quoted what Jacques Delors said—that the British are probably interested only in an economic relationship with the European Union and, therefore, if they wish to leave, we should give them an economic relationship and a free trade area.

[Lord Kerr of Kinlochard]

I must counter the noble Lord. I think that the quotation by the noble Lord, Lord Howard, was completely accurate. What Delors said was that you can have an EEA, which is what the Norwegians have, or you can have a free trade agreement, which is what a lot of countries round the world have, but you cannot have access to the single market.

[Lord Lamont of Lerwick]

That was not what Delors said at all. I am sure that my noble friend Lord Howard will not mind me revealing that he took the quotation from material that I supplied to him. That was not remotely what Delors said. I further inform the noble Lord, Lord Kerr, if I may, that Jacques Delors said it several years ago, and, much more recently, Mr Schauble, the German Finance Minister, and, I believe, the Economic Minister of Germany, both stated that a free trade agreement with Britain would be not just desirable but, from a German point of view, necessary. That is a very important point. However, my noble friend Lord Garel-Jones poured cold water on the argument that it matters enormously to the people in Europe to have an agreement. It matters to them as much as it matters to us. It is not a question of surpluses or deficits; the German manufacturers want to know exactly on what terms they could sell into the UK market just as we would need to know on what terms we could sell into the German market. It is a question of mutual need.

European Union Referendum Bill

Debate between Lord Kerr of Kinlochard and Lord Lamont of Lerwick

Wednesday 4th November 2015 Lords Chamber

[Lord Kerr of Kinlochard]

My Lords, I speak to Amendment 55, which stands in my name. It seems to me that the problem that we are facing comes from the very wide language of the PPERA, which clearly was not intended to deal with the problem that I am drawing attention to. No Minister or servant of the Crown can publish any information which deals with any of the issues raised by the question during the 28 days—and “publish” is defined very widely as making,

“available to the public at large, or any section of the public, in whatever form and by whatever means”.

My worry is whether that might prove obstructive to the conduct of government business in Brussels. Ministers will continue to go there, European Union committees and the Council will continue to meet, and the myriad working groups will continue their work. It seems to me that it would be possible to construe that everything said—such as a document or briefing note passed to Members of the European Parliament, a document sent to the Commission or a pleading before the court—could be said to be relevant to the issue of the question of the referendum and could be caught by this 28-day ban.

I am sure that that was nobody’s intention, and I quite understand why the Minister does not wish to go back and reopen the language that we are confronted with. I am sure that people such as Mr Bernard Jenkin, who spoke on the purdah issue in the Commons, had no intention of making it impossible for the Government to carry out their business in Brussels. These are honourable people making a completely different point.

I am puzzled by the noble Baroness saying that she is confident that the Government would have a sufficient defence if challenged during the 28-day period. I am concerned about that. It seems to me that a judicial review—a challenge in court—could be disruptive to business, even if that challenge was successfully resisted in court. It seems to me that the possibility of the challenge might be an inhibition on our people in Brussels who are working in the national interest, doing the job they are meant to do. I am therefore very puzzled by what I think I heard the noble Baroness say—that she did not envisage making any regulations on this issue. I do not know whether we can be sure. If I were the Permanent Representative, I would be very uncertain whether I would be able to do what I am paid to do with the threat of legal challenge.

I may be exaggerating the problem but it is certainly a real one. Mr Lidington, Minister of State in the Foreign Office, told the European Union Committee in evidence in July that Section 125 of the PPERA would make it,

“very difficult if not impossible for us to undertake a whole range of routine EU business in the four weeks leading up to the referendum date”.

I admit that Mr Lidington said that in the context of the presidency. The hypothetical question was: “Suppose that the referendum date and the 28 days fell within the second half of 2017, during the UK presidency of the EU”. He was talking about how very difficult if not impossible it would be to undertake a whole range of routine EU business as the presidency. However, it seems to me that if it would be difficult to advance and defend the EU interest, as the presidency is meant to do, it would be just as difficult to advance and defend the UK interest, which is the daily business of our representatives in Brussels.

[Lord Lamont of Lerwick]

I am listening very carefully to what the noble Lord is saying—and of course he has huge knowledge of this—but Section 125 refers to “promotional material”. That is what it talks about. It says that it specifically excludes material which is requested by a member of the public. If the Scotch Whisky Association or somebody wanted a particular copy of something that had been discussed, they would still be able to do that. What this prohibits is promotional material. Surely that is wholly right—that promotional material should not be allowed in this way.

[Lord Kerr of Kinlochard]

If the noble Lord is right, I am delighted. If the meaning of Section 125 of the PPERA is that only material of a particular kind defined as “promotional” is caught, my problem is much smaller; in fact; it disappears. But it seems to me that the language of the Act says that any Minister of the Crown, government department or local authority may not “publish”, which,

“means make available to the public at large, or any section of the public, in whatever form and by whatever means”—

for 28 days, any material bearing on the issue that is in the question. If that is to be the case, then for 28 days we are going to be saying, “Stop the world while we consider whether we want to get off”. I worry that the answer to that is to say, “Don’t be silly; we would defend ourselves in court”. The atmosphere might be quite febrile. There might be legal challenges brought. I think there would be a considerable inhibition on the public service doing its job.

I ask the Minister to look at my amendment, which would not require the making of any regulations. It would simply create a small carve-out, an exemption, for the normal business of the Government with the European Union, in and with the Council, with the Commission, with the Court and with the Parliament. It seems to me that that is much safer ground on which to rest than the thought of defending challenges in court. I am quite sure that when they drafted the PPERA nobody intended Section 125 to have effect on the pursuit of government interests and policies abroad. I am sure that that was not what they had in mind. I am sure that nobody in the other place, in the great debates that took place there over purdah, had it in mind to make it more difficult for the Government to defend the national interest in Brussels. I would argue for my amendment as the simplest way in which to deal with that problem.

Genuine Economic and Monetary Union (EUC Report)

Debate between Lord Kerr of Kinlochard and Lord Lamont of Lerwick

Wednesday 2nd July 2014 Grand Committee

[Lord Kerr of Kinlochard (CB)]

My Lords, it was a pleasure to take part in the work that led to this report. It was very enjoyable, largely because of the exemplary patience displayed by our chairman, the noble Lord, Lord Harrison, which produced a unanimous report, and because of the diligence of our clerk, Mr Stoner, who is extremely good at marshalling our arguments with rigour and, sometimes, imagination.

I take two texts for my sermon—I have a Scottish Presbyterian background. My first text comes from the Book of Job—that is, the Treasury. The Government’s response to our report states that,

“the government is clear that we are not joining the Euro”.

Yes, I think we got that. It goes on:

“Therefore it is right that we have said from the outset that we will not take part in measures designed to support full economic and monetary union”.

Yes, we have got that. It goes on:

“The Government has been clear that it will not participate in the Banking Union”.

There is a false logic there. It is perfectly possible that the banking union—although the impetus for it arose from the crisis in the eurozone—could be a good thing, irrespective of whether one was a member of the eurozone. Indeed, I notice that, of all the non-eurozone member states who are negotiating the texts of banking union, only the British and the Swedes are negotiating not on the basis that they intend to join.

If I were to dare to part company with the noble Lord, Lord Lamont of Lerwick, I would say that there was a moment in his speech when I thought that he was slipping into the error of equating banking union with economic and monetary union. As he rightly pointed out, our report, although entitled Genuine Economic and Monetary Union, was largely about banking union, because that was the key subject on the agenda. I would argue that it is not necessarily the case that non-members of the eurozone should decide that they have no intention of becoming members of the banking union.

On that, I would say that the committee was in a state of intelligent schizophrenia. It is intelligent because it is an extremely intelligent committee; it is schizophrenic because we all agree—the Government are of the same view—that the creation of an effective banking union, reducing the risks of future crises and making them easier to manage when they arise, is a good thing. We all agree with that. We on the committee felt, however, that it was hard not to acknowledge that the UK’s non-participation in banking union could have a deleterious effect on the City of London’s position as the transaction capital of Europe and one of the great three global financial centres. We felt that it was possible, over time, that that position could be eroded by non-participation in the structures of banking union. That is the point brought out in the passage of the report cited by the noble Lord, Lord Liddle, where we state, at paragraph 227:

“The Government may be ill-advised to assert that Banking Union is the sole province of the single currency for all time. It would be wise not to close the door on the possibility of some level of participation in Banking Union in the future, in particular as a means of further promoting and shaping the Single Market in Financial Services and the UK’s position within it”.

That is my view. However, I recognise that I will not persuade Job in the Treasury of that today and, perhaps, not for some considerable time.

[Lord Lamont of Lerwick]

Does the noble Lord remember that the Book of Job says, I forget in which exact chapter:

“There is a path that no fowl knoweth, and which the eye of the vulture hath not seen”?

[Lord Kerr of Kinlochard]

I cannot say that I think of that every morning as I arrive, but I will bear the noble Lord’s words in mind.

I want to make five minor topical, practical points arising from the report. First, in strict logic, the position that the Government take up—that banking union is nothing to do with us but is a matter for eurozone countries—could mean that the Government do not object to the proposal, much discussed in Brussels at the moment, that the heavily overloaded Commission’s single market directorate-general should be split, with banking and financial legislation moving to the financial directorate-general, the primary concern of which is of course for the health of the euro, leaving the single market directorate-general handling the classic single market agenda. That would be disastrous, from a number of points of view, not least from the point of view of UK interests. The British Bankers’ Association states:

“It is of utmost importance to maintain the structure of the relevant Commission services dealing with financial services so that their work is permeated with the priority of preserving the single market focus. We suggest that the UK Government should proactively defend the unity of DG MARKT and oppose any plan to move financial services out of it. It would be a mistake to move the work e.g. to DG ECFIN which has quite different priorities”.

I strongly agree and I hope that the Minister will be able to reassure us that we shall—to the extent that our current influence allows—work to ensure that that does not happen.

In my view, it is highly desirable and important that the current head of the single market directorate-general, the most senior of that very small and dwindling band of British personnel in the Commission, should stay where he is. I strongly agree with what has been said already today about the need to reinforce that. Retaining the unicity of the director-general is much more important than who is the single market commissioner—the issue that dominates the headlines. What matters is that it is the director-general and that he covers all the work that is of interest to the City of London.

My second point is also quite topical. I hope that the Government will, to the extent that their current influence allows, seek to discourage a second suggestion much debated in Brussels now, which is that the next finance commissioner should also be the next president of the Eurogroup, replacing Mr Dijsselbloem, the Dutch Finance Minister, when his term ends next summer. Combining the two jobs would be a prescription for serious schizophrenia, with a real risk that eurozone concerns might override single market integrity. This is not a moot point in the US sense. In our report we use “moot point” in the British sense, which means it is a key issue. In America, a moot point is a point so boring and irrelevant that it is worth discussing only in a moot court—a fine example of the difference between the two languages, as is “tabled”. If we said that our report had been tabled, people in Congress would say, “Oh, bad luck”, because it means shelved in America.

The moot point is that we have seen two recent examples of just what I am worried about—eurozone concerns overriding single market integrity. In the Cyprus crisis, when the eurozone imposed capital controls, that was a fundamental strike—which may have been necessary in the crisis—against a fundamental principle of the single market. It affected non-eurozone citizens. A British citizen with money in Cyprus could not move his money because of capital controls introduced by the eurozone. The result was that the case was quite rightly taken by the British Government to the Court of Justice against the ECB for its attempt to argue that clearing systems trading euro-denominated paper must be within the eurozone. That, too, is a clear breach of the single market and I applaud the Government for contesting it. It would be dangerous to see the two jobs of presidency of the Eurogroup and finance commissioner in the Commission combined. That may be difficult to prevent, given diminished influence, but I urge the Government to have a go.

European Union (Referendum) Bill

Debate between Lord Kerr of Kinlochard and Lord Lamont of Lerwick

Friday 31st January 2014 Lords Chamber

[Lord Kerr of Kinlochard (CB)]

My Lords, I strongly support Amendment 50A from the noble Lord, Lord Turnbull. It is most unusual for the Foreign Office to be in agreement with the Cabinet Office and the Treasury, but in this case it is. The Diplomatic Service is a separate service and takes no instructions from the Civil Service, so these arguments are my own.

I do not support the menu of amendments offered by my fellow countryman, the noble Lord, Lord Foulkes of Cumnock—there is a big difference between them and the amendment offered by the noble Lord, Lord Turnbull, supported by the noble Lords, Lord Grenfell, Lord Shipley and Lord Anderson. The assessments called for by the noble Lord, Lord Foulkes, are descriptive. They are describing potential scenarios. The assessment called for by the noble Lord, Lord Turnbull, would be normative because it would be authoritative and be describing the situation we would be in if we went out through the door. If we left the tent, like Captain Oates, we might be out for some considerable time. We might find it cold out there. I think the country would wish to be told. I accept that the process of establishing an authoritative statement of what life would be like outside might take time—Article 50 of the treaty of Lisbon talks about seceding from the European Union being a two-year process—but this would be before that. This would be before the referendum. This would be the assessment that the country would need so it could weigh up the case for and against staying in or going out.

I believe it would be important not just to set out what the Government hoped, felt and wanted but what they believed was negotiable. There would have to be some process of discussion with other countries and principally with our partners in the European Union, which we would be considering leaving. That process would take time. This point is very relevant to the amendment on questions of timing which—encouraged by the noble Lord, Lord Cormack—I withdrew last week. We will be coming back to that on Report.

[Lord Lamont of Lerwick (Con)]

My Lords, I totally agree with the noble Lord that if there were to be a referendum the British public would be entitled to information about the consequences and the mechanism. However, that is completely different; the mechanism is a subsequent step to the referendum. All this Bill does is to establish that there will be a referendum. The point the noble Lord, Lord Turnbull, made when he drew the analogy with the Scottish debate yesterday seems to me not to be correct. We had a Bill about the referendum. The criticism about the lack of information came afterwards. The mechanism was quite separate. Although all the points the noble Lord is making might be correct, they are not for this stage. This stage is just about the referendum.

[Lord Kerr of Kinlochard]

Precisely the same argument could be applied to the second of the amendments we made last week. The House did not buy the argument last week and the noble Lord, Lord Cormack, was good enough to say today that, in his view, both the amendments laid last week were improvements to the Bill and did not impair it. If we are passing a Bill on this referendum it is very important that we do not pass a defective Bill that omits important elements. Nobody in this House has proposed an amendment to Clause 1(1), which says that there shall be a referendum. In my view, this House is trying to do its job and get right the conditions and rules for that referendum, which is a point that we will need to come back to and which has been raised by several noble Lords this morning. We will have to come back to how the referendum will be conducted and—the point I am concerned about, for reasons well explained in the first leader in this morning’s Financial Times—the timing of the referendum.

I believe that the crucial thing about the assessment called for by the noble Lord, Lord Turnbull—who is completely right—is that it would have to be authoritative. It would be wholly irresponsible to produce for the country a prospectus based on conjecture. If the country chose to leave the tent and found outside a landscape different from the one that it had expected and a climate much colder, the Government who did that would never be forgiven.

I hope all shades of opinion in the House will understand that the amendment from the noble Lord, Lord Turnbull, is precisely in the category that the noble Lord, Lord Cormack, was talking about—amendments that genuinely improve the Bill. In my view—on the Cross Bench one speaks only for oneself—this would be a genuine improvement and I urge the House to support it.

European Union Bill

Debate between Lord Kerr of Kinlochard and Lord Lamont of Lerwick

Monday 9th May 2011 Lords Chamber

[Lord Kerr of Kinlochard]

I thank the noble Lord, Lord Pearson. Unless I misheard again, the noble Lord did not end his remarks with a question, so I am not going to respond except to say that the Strasbourg court is, of course, elected by parliamentarians. I do not think that the Strasbourg court has anything to do with this discussion, which is about the European Court of Justice, but I am grateful for the words of apology from the noble Lord.

I turn to Amendment 30. Here in Clause 6 we are in a different part of the forest. We have abandoned treaty land and treaty amendment by any form, and now we are into decisions of various kinds and the mandatory referendum requirements for those decisions. By definition we have therefore left coalition agreement territory because we are not talking about treaties any more. We are now dealing with the 56 categories of decision on which a mandatory referendum could overturn an Act of Parliament. As the noble Lord, Lord Goodhart, pointed out at the start of the Committee, that would be unprecedented. These referenda are entirely unnecessary because a Government, if they wished, could always choose to say no in the Council. The law requiring referenda is particularly unnecessary because, as the noble Baroness, Lady Brinton, pointed out during the third day of debate, not having a reference in the Bill to a particular requirement for a referendum does not mean that a Government could not, on the day, choose to say that they wanted to have one. All this does is tie the Government’s hands, which of course some would want to do.

Why have we got into this curious mess in these extraordinarily detailed thickets—and we have not yet looked at Schedule 1 where mandatory requirements are to be imposed? I can think of only two rationales. The first was the one that the noble Lord, Lord Lamont of Lerwick, talked about in a different context during the third Committee day. It might be called the Odysseus rationale. We would have a British Minister, let us say the noble Lord, Lord Howell of Guildford, sailing past Brussels and insisting that he be tied to the mast so that he cannot be lured by the siren voices with their seductive song. He wants to be able to say, “Look, guys, I have nothing against what you are saying, but I can’t possibly agree with you. If I did, we would have to have a referendum back home”. It is the wax in the ears and tied to the mast provision—the Odysseus provision. I think that it is very pusillanimous. I would have found it very hard to brief Mrs Thatcher, as Prime Minister, on this point. Mrs Thatcher thought that if you disagreed with something, you disagreed with it. You said no. You did not say, “I am terribly sorry. There is nothing much we can do about this because we would have to have a referendum and we do not want one”.

It is insulting to our negotiating partners to turn up tied to the mast. They expect to do serious business, but the Brits cannot do so because of this Act on the statute book. The Brits therefore cannot take part in negotiations. It will feed the temptation and tendency for people to do things in smaller groups without consulting us because we are such a bore.

[Lord Lamont of Lerwick]

I am most grateful to the noble Lord for giving way. According to his argument, Ministers will be put in a position where they have to say, “I cannot agree because we will have to have a referendum”. Why is he assuming that a referendum cannot be won? Why is it not possible for a Minister to say, “I agree to the draft decision. We will put it to the people and we hope and intend to win”?

[Lord Kerr of Kinlochard]

That is a fair question in relation to, say, the euro, which is the subject of Amendment 30. If we were to decide that we wished to join the euro, it would be totally reasonable for the Minister—I would like to see the noble Lord, Lord Lamont, in this role—to say to his ECOFIN colleagues, “We would now like to join the euro, but this is a big one and I am afraid that we will have to have a referendum on the issue”.