European Union Bill

Lord Lawson of Blaby Excerpts

Monday 13th June 2011 Lords Chamber

[Lord Lawson of Blaby]

Will my—

[Lord Howe of Aberavon]

Not at this point, in the middle of a sentence, although I have often given way to my noble friend in circumstances like this.

The news that we were joining the system reached me in rather a remarkable way. In my role as Leader of the Commons, on that day it was my job to go to Balmoral with a number of ministerial colleagues for a formal meeting for which I was Lord President of the Council. When I arrived in the presence of Her Majesty, before having a chance to talk to anybody else, her first question to me was, “What do you think of the news today, Sir Geoffrey?” I said, “What news, your Majesty?” She said, “Haven’t you heard?” I had not, indeed, but we had joined the European monetary system on that day. Although my private office in London had tried to get the message to me before I met Her Majesty, that had failed. So I found the whole thing embarrassing—but I was in a way a pioneer, because I first commended it to the other place as long ago as when I was Shadow Chancellor, on 29 November 1978. So I am quite impatient to see it fulfilled, as long as it is fulfilled on the right terms at the right time, but fortunately that is not for me to decide.

I see my noble friend is looking anxious. I have said all I need to say—

[Lord Lawson of Blaby]

I am sure that the whole House is fascinated by my noble friend’s trip down memory lane. I share a number of those memories with him, including sharing the noble Lord, Lord Kerr, as principal private secretary when I was Chancellor of the Exchequer. He was the first of a number of principal private secretaries whom I had as Chancellor, because I was there for quite a time. They were all good in different ways, but none of them was anything like as Machiavellian as the noble Lord, Lord Kerr. That makes one wonder what he is really up to with this amendment.

This trip down memory lane, fascinating as it was, is about the exchange rate mechanism of the European monetary system, which is a currency arrangement. This debate is about abandoning your own currency. There is absolutely no similarity whatever. So although I say with great respect and affection for my noble friend that what he said was of interest, it has absolutely no relevance to the amendment that we are discussing.

[Lord Howe of Aberavon]

With great respect to my noble friend, who always has a more ruthless and intellectual analysis of these questions than I do, it is broadly speaking the same thing. It was important, while that was the question, whether or not we joined the monetary exchange system; it is even more important whether we join the euro. Either way, we have reached the point where there has been a general acceptance of the need for a referendum on our accession to that currency. That arises not within the context of this Bill or this debate alone but has been on the agenda for a long time. The only question that we are actually debating now is the rather technical one of when precisely it should be required in the context.

I see my noble friend Lord Howell looking at me. When I reflect on his wisdom over many years, I am sure when he comes to wind up that he will recognise that is the flavour of the decision. Perhaps he is not winding up—he may be too nervous to handle this issue.

I am more than content to follow the wisdom and enlightenment of that splendid retired principal private secretary sitting over there. It was quite fun when we were together and I was presiding over the realignment of the European monetary system. It was quite nerve-wracking. We had one marvellously exciting day when it was agreed between the Germans and the French that there should be a 9 per cent realignment between those two currencies—2 per cent up and 7 down, or 3 per cent and 6 per cent down. That question, unhappily, for the first and only time, ran into a time when the currency markets were open on a Monday morning. That was our only failure. Apart from that, I am confident to give my backing to the noble Lord, Lord Kerr of—I can never remember the other half.

--- Later in debate ---

[Lord Wallace of Saltaire]

My Lords, no Parliament can bind its successors. That is one of the principles of parliamentary sovereignty. I am grateful to the noble Lord, Lord Kerr of Kinlochard, for following up the previous Committee discussion with his letter of 19 May, in which he outlined his concerns in more detail: namely, that Clause 6(5)(e) of the Bill might be legally defective. We have therefore taken careful legal advice. The Government have now been able to reply to that letter and a copy has been sent to those of your Lordships who participated in the Committee debates. A copy of the letter has also been deposited in the Library of the House. On the basis of that legal advice, I hope to reassure your Lordships that we do not judge there to be a risk of more than one referendum on the euro being required and that the provision does what we and noble Lords on all sides of your Lordships’ House intend it to do.

Unlike other member states, the UK is not under an obligation to adopt the euro. Protocol 15 of the consolidated treaty begins with the clear statement that the United Kingdom,

“shall not be obliged or committed to adopt the euro without a separate decision to do so by its government and Parliament”.

That protocol, which needs to be read alongside Article 140 in the British case, sets out in detail the steps that must be satisfied before the UK could adopt the euro. Paragraph 9 of the protocol states that after the UK has notified,

“the Council … of its intention to adopt the euro”,

as its currency,

“decisions in accordance with the procedure laid down in Article 140(1) and (2)”,

of the TFEU must first be taken, to which protocol 13 is also relevant.

The process starts in practice by examining convergence criteria as set out in Article 140(2). That is bound to happen before the UK formally notifies, even if it is not part of the formal procedure. It might be helpful to consider what needs to be done following notification of our intention to join the euro. It is not a matter of negotiating terms of entry but of economic criteria being satisfied in terms of the treaty. The final step of the process is to take a decision in accordance with the procedure laid down in Article 140(3) of the TFEU. Paragraph 9(c) of Protocol 15 commits the Council,

“in accordance with the procedure laid down in Article 140(3)”,

to “take all other necessary” measures to enable the UK “to adopt the euro”.

Clause 6(5)(e) is designed to catch this final step in the process, thus ensuring that as much of the complex detail as possible is available to Parliament and the public in deciding whether to join, while giving the Government of the day the flexibility to set the timetable for when to seek approval from Parliament and the British people. If I may say so, the noble Lord, Lord Kerr, might almost be old enough to remember the first applications for Britain to join what was then the European Economic Community. Before formal application was made, a number of informal negotiations established the terms for potential negotiation. We envisage something of that in this situation. It will allow the Government to seek a referendum when sufficient detail is known about the circumstances and conditions of entry, but will allow the UK to seek approval from the people before the exact point at which the exchange rate between the euro and the pound would be set. We all recognise that the exact exchange rate will have to be set at the end of the process to avoid market turmoil and speculation against the rates declared.

In contrast, the amendment proposed by the noble Lord would require the referendum to be held and approval given before the UK could notify the EU that it intended to adopt the euro. The Bill nevertheless allows for matters to be arranged in this way if the Government so wished, again providing the degree of flexibility which noble Lords, including the noble Lord, Lord Kerr, have so often called for on this Bill. It would be open to the Government of the day to undertake negotiations with the EU in line with paragraph 9 of the protocol before the UK issued its notification. This would allow draft decisions under Article 140(3) on the rate at which the euro would be substituted for sterling and other measures necessary for its introduction to be prepared—with perhaps a range of rates being negotiated—before notifying our final intention to join the euro.

On that basis, I do not consider that the Bill would lead to what we all view as an unwelcome situation in which two referendums would have to be held on the euro: the first on the UK notifying that it wished to join; the second in a rushed weekend on determining the specific question of the exact rate at which the euro is to be exchanged for the pound. Instead, it is possible under the Bill for the Government to submit the question of adopting the euro to a single referendum.

[Lord Lawson of Blaby]

My noble friend mentioned the lawyers early on and I am quite sure that the lawyers worked this out. To me, this is too redolent of lawyers. The practicalities might in fact tell the other way. The noble Lord, Lord Kerr, for whom I have a high regard as I indicated earlier, has raised a point that at least merits further thought and discussion. Quite apart from the problems that might or might not occur on the currency markets, it would be very confusing to the British people if there were no referendum on the principle of joining the euro at the first stage, when the Government of the day had decided that.

My noble friend the Minister said that this can be played either way, early or late, but we cannot know what a future Government might do. They might decide to play it late, which would not be desirable. It would be most undesirable for, and, as I say, very confusing to, the people, who would not quite understand why it was happening in that way. It might therefore be sensible if the noble Lord, Lord Kerr, could be persuaded to withdraw his amendment on an undertaking by the Government that they will give this matter further thought. That would be the right way forward.

[Lord Wallace of Saltaire]

I am very happy to give an assurance that the Government will look at this further, but we have consulted—we are dealing with legislation, so it is entirely appropriate to consult—lawyers on the implications of that legislation. The process is long by which what necessarily begins with informal exploration becomes formal notification, then, under the terms of Article 140(2), as the noble Lord, Lord Kerr, will know, entails a degree of negotiation on how far the UK meets the convergence criteria and then moves towards the final negotiation in Article 43. What we provide for under the existing arrangement is a degree of flexibility over at what stage in that process the Government put the—