European Council: December Meeting

Lord Liddle Excerpts

Monday 3rd December 2012 Lords Chamber

Asked By

[Lord Liddle]

To ask Her Majesty’s Government what are their priorities for the December meeting of the European Council.

[The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi)]

My Lords, the December European Council will cover economic policy, including economic and monetary union and banking union, as well as defence enlargement and foreign policy. The UK will seek to ensure the integrity of the single market in relation to banking union and economic and monetary union. We will press for further progress on growth and work to ensure that the defence strategy reflects UK priorities. Enlargement is dependent on the December General Affairs Council.

[Lord Liddle]

I thank the noble Baroness for her Answer. Why have the British Government adopted a completely different approach to a banking union from that of a fellow euro-out, Sweden, which is run, we are told, by David Cameron’s favourite conservative European Prime Minister? Sweden has engaged with the negotiations on a banking union, whereas Britain appears to be trying to reintroduce, for the first time since the introduction of the single market, some kind of veto on financial services legislation. Does the noble Baroness think that that strategy is likely to meet with more success than it did in the negotiations on the fiscal treaty last December, or are the Government once again shouting from the sidelines to try to appease the unappeasable?

[Baroness Warsi]

The Government’s strategy on this matter is one that reflects the best interests of Britain. I am sure that noble Lords on the other side of the House agree that it is important that when the Prime Minister goes to Europe, he acts in the best interests of this country and negotiates on the basis of that strategy. The UK does not use the euro, and we have been clear that the UK will not be part of any banking union or fall under the jurisdiction of the ECB. However, that does not mean that we do not continue to push for further liberalisation of the single market.

EU: United Kingdom

Lord Liddle Excerpts

Monday 26th November 2012 Lords Chamber

[Baroness Warsi]

I agree with the noble Lord, democratic legitimacy within the EU is absolutely crucial. A number of polls have shown a fall in contentment about being close to the decision-making within Europe. The noble Lord raises important points and this is why we must continue to play our role within Europe, continue to reform Europe and continue to make it relevant for today’s economies.

[Lord Liddle]

My Lords—

[Lord Pearson of Rannoch]

My Lords—

[The Chancellor of the Duchy of Lancaster (Lord Strathclyde)]

My Lords, we have time. Perhaps we should hear the noble Lord, Lord Liddle, and then the noble Lord, Lord Pearson?

[Lord Liddle]

My Lords, all sides of this House want to see a very strong relationship with Germany and regard it as one of our leading partners in a European Union in which we want to play a leading role. However, does the Minister seriously believe that our ability to be taken seriously by Germany is enhanced by all the talk of renegotiation, looser relationships and referenda—maybe now two referenda, one before and one after the general election? When will the Government put a stop to this nonsense on their own Back Benches?

[Baroness Warsi]

My Lords, I do not believe the Government should ever step away from acting in what is Britain’s national interest. It is important that the UK sets out very clearly, with its German counterparts or any other member state within the EU, those areas on which we agree. With Germany we agree on the need for further competitiveness, the need to further the single market and the need for more free trade agreements. However, the coalition Government must also be bold and brave enough clearly and loudly to set out Britain’s national interest within the EU.

Cyprus

Lord Liddle Excerpts

Tuesday 23rd October 2012 Grand Committee

[Lord Liddle]

My Lords, we should thank the noble Lord, Lord Sharkey, for posing this Question, which allows us to have this debate. Many noble Lords have spoken with great passion about the intractable problems and multiple injustices of the island of Cyprus. The Government should listen hard to what has been said. For my part, the Cyprus issue is a 21st-century equivalent of what Lord Palmerston quipped about the Schleswig-Holstein question: “Only three people understood it; the prince consort who is dead; the German professor who is mad; and me, who has forgotten all about it.”. I am afraid that this issue is of such complexity that that is what it is like.

When Labour was in government and I was in No. 10, we tried to resolve this complexity by sending for the noble Lord, Lord Hannay, who tried to negotiate a deal. Indeed, he made quite a lot of progress and it is a great pity he is not here to bring his wisdom to this debate.

Our options are limited. What happened in 2004 was a tragedy but we were acting under a threat of Greece vetoing the major enlargement of the European Union and one had to make a realpolitik choice in truth about what was the best thing to do, which was very difficult. What can be done now? What does the Minister think that we can do, as Britain, as a guarantor power in trying to promote reconciliation on the island? Given our history, we have a special responsibility and we should exercise it.

More than that, I have always thought that the solution to the Cyprus problem was part of a wider solution to the relations between Greece and Turkey, and the whole situation in the eastern Mediterranean. It is very important that, as committed members of the EU, we are trying to proceed with Turkish membership. That is what will give us quite a lot of leverage in order to get a solution to this problem.

In terms of Greece and Cyprus, and the economic difficulties that Greece is presently in, if things go wrong there, this will make the situation in that part of the world much worse. We have to exercise our best endeavours to make sure that we do not have an economic collapse that leads to a return to extreme nationalism in that part of the world. I fear for the consequences were that to happen. We look forward very much to hearing the reply of the noble Baroness, Lady Warsi, to this excellent debate.

Court of Justice of the European Union

Lord Liddle Excerpts

Monday 23rd July 2012 Lords Chamber

[Lord Liddle]

My Lords, we had an excellent debate on this subject last October on the equally excellent report of the committee chaired by the noble Lord, Lord Bowness, on the European Court of Justice. I think that many noble Lords tonight share a certain disappointment that we are only being asked to give our approval to a rather modest proposal by comparison with the reforms that were set out then. On the modest proposal, we think it right that it needs to be approved by Parliament. This is one aspect of the European Union Act 2011 of which the Opposition approve—greater parliamentary control, but not multiple referenda.

Secondly, this is a welcome step forward, so we support it. As the very talented Europe Minister in the other place, Mr David Lidington, pointed out,

“justice delayed is justice denied”.—[Official Report, Commons, 12/7/12; col. 504.]

We fully agree with that principle. However, it is clearly not a full solution to the problem, or anything like it. The Government accept the case that more needs to be done. The Minister in the other place pointed to the 18% increase in workload of the Court in the past four years. Then there is the fact that with enlargement, which by increasing the number of judges originally eased the problem, more cases arose from its being a much bigger Community. With the communitisation of justice and home affairs, the workload has increased even further.

The argument that reform is needed is unanswerable. It cannot be in the UK’s national interest that the body that is the arbiter of the single market should be gummed up, as was said in the other place. I would like to hear from the Minister tonight that despite this modest reform Britain will continue; we will not regard it as enough but continue to be a persistent advocate of further improvement and measures to tackle the workload problem in the Court. I was encouraged by what the noble Lord, Lord Howell, said about the Government working to find an effective solution. This will almost certainly involve the appointment of extra judges to the General Court. The noble Lord, Lord Williamson, may be right that whether the number is 12 needs to be looked at more closely. Around the House we would like to hear from the Government tonight that they agree with the proposition that more judges need to be appointed to the General Court.

I recognise that there is a very legitimate point about cost, efficiency and value for money. I am very sorry that I had to pop out when the noble Lord, Lord Marks, spoke, but I heard him make the point that the cost of the ECJ was about 0.15% of the EU budget. It is a very small amount of money and it seems that the gain would be very considerable from our national perspective. So I do not think that cost should be a barrier to what we regard as a change. Of course, we have to seek efficiencies and I am sure that we should be doing that. Although the language regime may not result in delays, it certainly adds to the costs of the Court, so we should be advocates of change there.

On this side of the House we share the concerns expressed by many Members, initially by my noble friend Lord Anderson of Swansea, that what is preventing the Government from taking this issue forward is the pressure from Members in another place who basically do not like Europe and do not want to see it working properly. I was as appalled as many Members were when reading the Commons Hansard, although the criticism comes much better from someone like the noble Lord, Lord Bowness, than it does from me. I was appalled by what the Member for North East Somerset, Jacob Rees-Mogg, said. He is regarded as one of the brightest and best of the new intake in terms of his intellectual and speaking abilities, but I refer noble Lords to the language that he used about the Court, saying that it is,

“not a proper, honest, decent court”.—[Official Report, Commons, 12/7/12; col. 510.]

He said that it was a “rotten court”. This displays an extreme and ignorant point of view, and the Government in their own interests must make it clear that they will not allow a common-sense solution to these problems to be blocked by that kind of attitude in another place.

We look forward to the friends of the presidency report by the end of the year and we would like the Minister’s assurance that the Government will vigorously rebut the ill informed criticisms that stand in the way of a proper solution to this problem.

British Council: Funding

Lord Liddle Excerpts

Thursday 19th July 2012 Lords Chamber

[Lord Liddle]

My Lords, this short debate has involved many excellent speeches and I only wish that the whole Cabinet and the mandarins of the Treasury were here to listen to it. It was opened by my noble friend Lord Bach with the unique moral authority that he conveys in this House. Personally, I am proud of the fact that in happier economic times the previous Government were able to expand the work of the British Council because it is vital as a jewel of British influence, as many have said, an instrument of soft power, a celebration of British diversity and a multiplier of the creative strengths that are so important to our economic future.

However, we all accept that we live in difficult economic times, and the British Council has responded with boldness that is typical of the kind of leadership that my noble friend Lord Kinnock has offered—boldness in terms of facing adversity. The only point that I would make relates to the fear that my noble friend Lord Judd expressed. Yes, a mixed-economy model is a very good thing for the British Council, but it must never become a privatised model. If there is a privatised model, the British Council will not be, as my noble friend Lord Judd said, where it needs to be. It will not be offering opportunities to the people who need them.

It is said that we face a period of prolonged austerity, and that may be the case. The assurance that I seek from the noble Lord, Lord Howell, is this simple one: that the present Government do not see the British Council as a frill that can be cut in the future but as an essential investment in our future. That is what it has been and that is how it should be. I hope that the noble Lord will be able to assure us on that.

UK Industry: International Competitiveness

Lord Liddle Excerpts

Thursday 5th July 2012 Lords Chamber

[Lord Liddle]

My Lords, it is a great pleasure to follow the noble Lord, Lord Jenkin of Roding, in his introduction to this debate. He brings to the subject much ministerial and business expertise, and it is greatly to his credit that he has shown a sustained interest in these questions throughout his public life. He said a lot about export promotion with which I agree. We probably share an analysis of the British competitiveness problem, which is that it is a complete myth that we are a post-industrial nation. We have many highly competitive businesses; the challenge we face is that we do not have enough of them. We need far more and the question is how we get far more. I shall focus my remarks on how the public policy framework can help, and also talk briefly about the questions of the exchange rate and our commitment to Europe and the single market, which is of central importance to this area.

On the kind of supply-side policies needed, again, I suspect that there is a wide measure of consensus in this House. I picked up on some remarks of my great and noble friend Lord Mandelson, based on his ministerial experience in the previous Government. Speaking to one of the excellent meetings of the All-Party Parliamentary Group on Rebalancing the British Economy, interestingly, he praised some of the record of Conservative Governments in the 1980s in promoting aerospace, biotech, pharma and Japanese inward investment in the car industry, which we often forget. He then talked about our increasing love affair, as a nation, with financial services. He said nothing against financial services, but noted that this love affair became a mindless infatuation, since when all we have seen are what he described as “peashooter initiatives” to deal with the need for rebalancing our economy back to production. The question is how we can transform this succession of peashooter initiatives into what the Prime Minister would doubtless describe as a big bazooka.

There is a range of things that the Government could do, building on what the Labour Government tried to do towards the end of their term, particularly in 2010. There is the expansion of technology transfer institutions, the Hauser report, and the need to improve our record in Britain in transforming our excellent, world-class research into commercially successful innovation, which we are not nearly so good at. There is a need for public intervention to provide finance for growing small and medium-sized firms. This is an imperative in today’s environment, in which the banking system is not able to fulfil its proper function: we need a British investment bank. We need a proper infrastructure plan. The Government have made nods in this direction, but they are having difficulty in mobilising the pension funds and private finance that they had hoped for. The truth is that, unless the Government offer guarantees that limit the risks for such investors, we are not likely to get private money into public infrastructure in a big way.

We need to do more on skills. We know that employers, of their own initiative, will not raise skill levels: there is a market failure here. The Government are trying to expand apprenticeships, but their record is very mixed and there is great debate about whether the expansion is a genuine expansion of real apprenticeships that lead to opportunities for technician training going right up the skill ladder. That is what we need and I wonder whether we are getting it. We need action to improve the quality of management. Here is a tremendous role for the post-1992 universities—of one of which, the University of Cumbria, I am director. We need the universities to engage with businesses in raising the quality of management and their workforces. We need to build on our public strengths, which have important competition advantages and where the public role is absolutely crucial, such as the universities in attracting students from overseas, our medicine and our culture.

I am not arguing for big government in order to address these questions, but you must have active government. You particularly have to have an active Government with a strategic sense of how they will develop the sectors where we have the best chance of being competitive. This is particularly important in public procurement. You cannot just have centralised government. You must have effective machinery for action at regional and local level. This is where the decision to abolish the regional development agencies was destructive. In my own area, Cumbria, there is now no effective machinery for promoting regional economic development.

I, for one, look forward to the review by the noble Lord, Lord Heseltine, of the growth agenda. At the moment, for all the talk, I see little sign of the Government upgrading their efforts beyond what my noble friend Lord Mandelson described as these “pea-shooter initiatives”. Indeed, to make a slightly political point, I am bemused about the debate in the other place on growth, which all seems to be about deregulation and tax cuts. No one wants regulation for its own sake. No one believes in taxes for their own sake. But the problems of the British economy do not lie in a lack of flexibility in the labour markets, or in taxation being too high. We have a more flexible labour market, in many respects, than the United States. I find all this talk about the Beecroft report totally bemusing. It is a sub-Thatcherite agenda of deregulation, which is the wrong strategy for the British economy. We have to compete on the basis of skill. We cannot compete on the basis of deregulation. We need a national consensus on the kind of industrial policy we are going to need. It is depressing that we are still a long way from that.

I have just a few remarks to make on the exchange rate and Europe. On the exchange rate, the Government should be thinking about why the devaluation that we saw in 2008 has done so little to improve our trade balance and industrial performance. What conclusions do we draw from this? One conclusion is that the exchange rate does not matter very much in the modern world, with the integration of global supply chains and all the rest. That would be an error. One of the mistakes that we made over the past 20 years was treating the exchange rate as a residual. The exchange rate went up a great deal at the end of the 1990s. The pressure of a high exchange rate was one of the reasons why our manufacturing had problems over the past decade. Although this was good for productivity—the productivity numbers went up a lot—it squeezed the size of the sector more than it should have been squeezed. So the post-1992 framework of our economic policy will have to be rethought anyway in the light of the crisis. We should be thinking about whether we can give a more central role to exchange rate stability in the management of the economy, and how we would go about that. Are the Government thinking on these lines?

On Europe, all this chatter about an in/out referendum might well have serious economic consequences, which no one seems to take into account in the rather heated political debate. How would British business feel, including the people who have invested in Britain, if we were no longer part of the EU, or if we remained in the European Economic Area with no say in shaping the rules of EU governance? Do we seriously think that if there was a prospect of Britain coming out of an active and central role in the European Union that inward investors would continue to look at investment in the UK?

[Lord De Mauley]

My Lords—

[Lord Liddle]

I have 12 minutes.

I am not trying to make a political point. However, the question of Britain’s role in Europe cannot be decided on the basis of party-political positioning, or of populism and ignorance. We need business to take an active role in this debate. What I would like to hear from the Government is what they are doing to consult business about its view about Britain’s role in the European Union in future, and what the real costs of playing around with our economic future might be. This raises very serious issues for the future of growth and jobs in Britain.

European Union (Approval of Treaty Amendment Decision) Bill [HL]

Lord Liddle Excerpts

Wednesday 4th July 2012 Lords Chamber

[Lord Owen]

I do not wish to detain the House but, on the point that I raised on Report, the Minister with his customary kindness and courtesy has written me a letter. As I understand it, on that point, there will be no obstacle. In some circumstances, when there might be a crisis in the eurozone, the procedures adopted will allow the Government to use the unanimous procedures for amendment, which were part of the Lisbon treaty, in the European Council and to bring the matter to this House to declare that the amendments regarding a transfer of power are not significant in relation to the UK, while simultaneously, saying that there would be a referendum in this country to deal with other wider measures.

[Lord Liddle]

My Lords, I say on behalf of the Opposition that it is very necessary that the Bill should pass. It is more necessary in the light of the deepening of the euro crisis and last week’s European Council meeting, at which the role of the ESM was strengthened in both its ability to recapitalise the banks directly, which is the key to restructuring the banking system, and its ability to buy bonds where countries that are complying with their obligations are under pressure. Therefore, this facilitating measure is very necessary.

My fear about the question of a referendum, which was raised by the noble Lord, Lord Owen, is that when the Bill goes to the other place, many Back-Benchers who do not share his political views may use the opportunity of the Bill to make the case for holding a referendum on British membership of the European Union very soon. From the Opposition’s perspective, at this moment, this is a complete distraction. It is no answer to the economic problems on which this country should be focusing and no substitute for an effective policy on the European Union.

Those who demand a referendum do not even know what they are asking for a referendum on. They say that they joined a Europe that was in favour of free trade, but even on that question they are not clear about whether they want to take Britain out of the EU, so that we would then face protectionist barriers, or whether we would then be in the European Economic Area, where we would be bound by the rules but would still contribute to the budget. This is a complete distraction because of confusion and we should not go down this road. We want effective action from the Government to protect Britain’s interests in the light of the necessary measures to strengthen the eurozone. However, at the moment, we do not see in Brussels a Government who are engaging with and getting inside the discussions; they want to be outside, which is a disaster for the UK national interest.

[Lord Foulkes of Cumnock]

Does the Minister recall the Committee stage of the Bill, when we debated several amendments tabled by a diligent Back-Bencher? If he recalls that, and the time that was taken over very careful and correct scrutiny of the Bill, will he confirm that those amendments and many more could have been tabled on Report and at Third Reading? Will he draw to the attention of the Leader of the House that if he and the Government continue in the way that they are, there might not just be one awkward Back-Bencher on one Bill but many awkward Back-Benchers on many Bills?

Falkland Islands

Lord Liddle Excerpts

Wednesday 13th June 2012 Lords Chamber

[Lord Liddle]

My Lords, I thank Minister for repeating the Statement made in the other place earlier today. The first duty of the Opposition on the 30th anniversary, tomorrow, of the liberation of the Falklands is to pay tribute to the British forces who served there and particularly to the 255 British service personnel who lost their lives. For our part, we express deep gratitude for their service.

The principle for which they then fought was the right of self-determination, which is enshrined in the United Nations charter. It is why today we back the right of the Falkland islanders to reaffirm that principle, that right of self-determination, and why a proposal for a referendum appears to the Opposition to be a reasonable response on their part to the very regrettable misrepresentations and provocations from the Argentine Government. For our part, we want good relations with Argentina and good relations between Argentina and the Falkland Islands. That is the best basis for a happy, secure and prosperous future all round.

A decade or so ago, it seemed as though much democratic progress was being made in Argentina. In my capacity as chair of the think tank Policy Network, I remember a progressive governance conference where we welcomed the late President Kirchner alongside President Lula and President Lagos. The hope was that Argentina was joining a democratic and progressive family. We are very concerned about the stepping up of Argentina’s rhetoric on the Falklands issue and about whether it is part of a wider campaign by an Administration who are facing very difficult domestic problems. It is a pattern that we have seen before in Argentina, a country that has great resources and fine people but, too often, dysfunctional politics and policies.

The Falkland Islanders are not alone in having difficulties with the Argentine Government. Spain has been incensed by Argentina’s forcible nationalisation of the Spanish stake in its oil company. We welcome the robust response not only from the Spanish Government but by our noble friend Lady Ashton, in her capacity as EU foreign policy representative, against what Argentina has done in this case. This is the kind of international support that we need to mobilise on the question of the Falklands. Can the Minister indicate what discussions have taken place with Spain and our other EU partners as to how we can get a more sensible attitude from the Argentinian authorities? Has the Foreign Office had discussions with my noble friend Lady Ashton, not just about the Spanish episode but also about the current Falklands situation?

More widely, what efforts are the Government making to establish good relations in Latin America? It is now a key British interest, given that this is one of the areas of spectacular economic growth in the world and an area where Britain has a lot of historic links. How are we planning to leverage up our relationships with other South American countries in order to isolate Argentina in the stance that it is taking on the Falklands?

The final point is our concern as to whether the Government are sending the wrong signals to the Argentinians. Many of us remember the Franks report and what happened 30-odd years ago, and how the then Prime Minister, the late Lord Callaghan, insisted on keeping a patrol vessel down in the south Atlantic despite the economic difficulties that Britain was suffering. However, the Conservative Government under the noble Baroness, Lady Thatcher, then withdrew that vessel. That was taken as a signal by the Argentinians that we were no longer that bothered. Are we sending a similar signal today, when we have decided that our aircraft carriers should no longer carry aircraft? That seems to me to be a relevant point to ask Her Majesty’s Government.

We want better relations to be established with Argentina, and between Argentina and the Falkland Islands, without conflict. In order to achieve that, the British Government have to have a strategy. I hope that the Minister can give us a glimpse of what it is.

European Union (Approval of Treaty Amendment Decision) Bill [HL]

Lord Liddle Excerpts

Wednesday 13th June 2012 Lords Chamber

[Lord Stoddart of Swindon]

My Lords, I must confess that when I saw these amendments in the name of the noble Lord, Lord Foulkes, I thought that we had a convert. However, my hopes were dashed by his speech this afternoon. It appears that he tabled these amendments as it enabled him to make the speech—it is a very nice way of doing it—that he could not make when we debated this matter on Second Reading. He has a point. The implications of this Bill are much further ranging than has been related to the House. I shall quote from the Times on 11 May this year, which will support the case—or non-case—that the noble Lord made:

“There are two issues with this EU treaty change that could cause big problems: first, it allows the eurozone to integrate further with consequences for UK interests; second, the quid pro quo guarantee that the UK won’t be forced to contribute to euro bailouts in future may not be legally binding”.

So there is some support in that article for the view that perhaps this Bill is much more important and far-ranging than some of us had believed. I and other people considered whether this Bill could be amended and I came to the conclusion that it was best left to the House of Commons. However, we have an amendment here which I believe should be supported. The Bill is very important indeed, particularly in the light of what is happening at present. The problems of the eurozone and the European Union itself are leading to demands for further integration. Even today, the President of the European Commission, Mr Barroso, is outlining plans to the European Parliament for a European banking union, which would affect not only the eurozone but the whole of the European Union.

Angela Merkel, for example, believes that the answer to the problem is not less but more Europe, politically, financially and economically. This Bill facilitates what these people are thinking. The Bill is much more important than we previously believed and the House should be grateful to the noble Lord, Lord Foulkes. I should really describe him as my noble friend, because we have been around a long time and embarked on many debates. Usually, we have been on the same side. Paradoxically, according to the wording of the amendment we are still on the same side, but perhaps if he puts it to a vote we shall be in opposite Lobbies. We shall see. In the mean time, if he puts it to the vote, I shall support him.

[Lord Liddle]

My Lords, I had better explain briefly the opposition Front Bench position on this amendment and some of the speeches we have heard. It was a great pity that my noble friend Lord Foulkes could not make Second Reading, because he would have made a strong pro-European speech in that debate. He was right that my noble friend Lord Radice made an excellent speech as well. However, from our perspective I do not think that we can support the thrust of his amendment. I see the logic of his position. In the European Union Act, which we debated over many hours last year, we got ourselves in a situation where, if it was decided to establish a European office of paperclips, we would have to have a referendum on it, because it would involve a transfer of sovereignty to Brussels.

For our part, we believe that referenda should take place only on issues of major constitutional significance, as the Lords Constitution Committee recommended, and that we should be consistent with that principle. As far as the Labour position in the Commons is concerned—and I say this with some trepidation because my dear noble friend Lord McAvoy has a great record as a party loyalist and defender of party discipline in the other place—the shadow Foreign Secretary, Douglas Alexander, in the Commons debate last autumn on the question of a referendum, said:

“I urge opposition to the motion because I do not believe that Britain’s national interest would be served by spending the coming months and years debating the case for Britain leaving the world’s largest single market”.—[Official Report, Commons, 24/10/11; col. 60.]

The leader of the Labour Party made it clear only last week or the week before that Labour’s position had not changed from that view in the mean time.

That is where we stand. The EU Act is a contradictory piece of legislation. The measure is not defined under the terms of that Act as a transfer of powers to Brussels, and we therefore do not have a referendum—but there is no point in reiterating our debates on that Act. Our view is that this is an emergency situation in Europe; the stability mechanism is a necessary part of tackling the problems of the eurozone, which is very much in the British national interest. Therefore, this legislation should go through in the speediest possible time.

[The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford)]

My Lords, we all admire the lone role that the noble Lord, Lord Foulkes, has cast for himself in bringing forward these amendments, and his boldness in bringing forward an amendment with which he does not, in fact, agree. This is bravery on a high scale in this debating Chamber.

The amendment, as he pointed out, seeks to insert into the Bill a requirement for a favourable vote in a national referendum before the UK could approve the European Council decision amending Article 136 of the Treaty on the Functioning of the European Union. The European Council decision amends Article 136 of the TFEU. It was adopted in accordance with the simplified revision procedure in Article 48(6) of the Treaty on European Union. The decision added a paragraph to Article 136 which confirms that EU members whose currency is the euro may establish a financial stability mechanism. The provisions of Article 136 and the proposed new paragraph apply only—I repeat, only—to member states whose currency is the euro. They do not, therefore, apply to the United Kingdom.

The Bill is required under Section 3 of the 2011 Act, to which the noble Lord, Lord Liddle, referred, to give parliamentary approval to the decision. The other two requirements of that Act were, as noble Lords will recall, a statement by the Minister giving his opinion as to whether a referendum is required—I will come to the remarks of the noble Lord, Lord Foulkes, on that in a moment—and compliance with the so-called referendum condition, exemption condition or significance condition which we debated when we considered that Bill some time ago.

The 2011 Act makes it clear that decisions adopted under Article 48(6) of the TEU are not subject to a referendum under that Act if its provisions do not apply to the United Kingdom. The 2011 Act, to which the noble Lord, Lord Foulkes, rightly drew attention, provides:

“A treaty or Article 48(6) decision does not fall within this section merely”—

I come to that word—

“because it involves ... the making of any provision that applies only to member States other than the United Kingdom”.

The “merely” is intended to indicate that other conditions are also taken into account—for example, the exemption condition or the significance condition. It is not only the fact that it does not apply to the United Kingdom and is outside the application of the United Kingdom; it involves other conditions as well. The decision amending Article 136 therefore clearly falls within the exemption set out in Section 4(4)(b) of the 2011 Act.

The noble Lord, Lord Liddle, raised again the doubts of his own party and colleagues about that Act, which was vigorously debated. I do not think that it would be in order to debate the Act again, although I am always happy to reopen these great issues. I happen to think that it was an immensely important Act which has been a considerable reinforcement to the concerns of the British people that there will be no further transfer of competence to the European Union without a referendum. It is an important safeguard, and my right honourable and noble friends have drawn attention to its importance.

The Government have been clear that a referendum is not required under the 2011 Act right from the very beginning. On 13 October 2011, the Foreign Secretary laid a Statement before Parliament in accordance with Section 5 of the Act, in which he confirmed that in his opinion a referendum was not required under the Act. The Statement was open to judicial review but, as my right honourable friend pointed out, in the intervening eight months, no one has sought to challenge it in the courts. The noble Lord, Lord Stoddart, whose position is consistent and which he has put with admirable consistency over the years, said that in his view there was some practical implication of transfer of competence— although he did not put it in quite those words. But no judicial review to make that point has been launched. The noble Lord referred to the aspect, to which I will refer again in a moment, that in exchange for this going forward, the British liability to be exposed under the European financial stability mechanism is released, and the mechanism falls and is no longer in use. The noble Lord, Lord Stoddart, was concerned that that was just a political decision and not enshrined in law. He is perfectly correct, but it is a decision by all 27 members, and it is a firm commitment. To unravel the whole of that would be to throw the entire arrangement of the EFSM into complete chaos. It would be a total reversal of a firm commitment made in good faith by 27 members. We believe that it is a substantial and supported condition.

European Union (Approval of Treaty Amendment Decision) Bill [HL]

Lord Liddle Excerpts

Wednesday 23rd May 2012 Lords Chamber

[Lord Liddle]

My Lords, this is a small Bill consisting of two clauses but, as we have heard in this excellent debate, it is about the huge topic of the future of the euro. As the noble Lord, Lord Howell, explained to us with his usual clarity, the Bill is an enabling measure. We are legislating here not on the substance of the European stability mechanism but only on the enabling treaty change to allow it to happen. Labour recognises the need for this enabling measure. As the noble Lord, Lord Lamont, said, it is already priced into the markets. No one should kid themselves that the establishment of the European stability mechanism is a sufficient response to the crisis that we have now. There is an enormous crisis in Greece and a growing calamity of collective austerity. To that extent but not much more, I agree with my noble friend Lord Reid.

My noble friend Lord Giddens said that he had had enough of talking about being on the edge of precipices. Perhaps I may say what I think is at stake here. At stake is a crisis that threatens the success of the post-war settlement that we have seen in Europe and the stability and prosperity that the European Union has brought to Europe. That is what is at stake in this crisis. I disagree profoundly with the noble Lord, Lord Flight, and his parallel with the gold standard. The difference between the European Union and the gold standard is that it is a political union, and politics can do something about it. If leadership is shown we can avert a crisis that threatens to break up the post-war settlement.

What we need, as the noble Lord, Lord Hannay, said, is a bit more solidarity and a bit less emphasis on limited liability. How should we go about trying to save the situation? First, the firewall needs to be a lot bigger in scale and more flexible in operation. The existence of the stability mechanism cannot be a substitute for a central bank. The central bank must be willing and prepared to intervene decisively in the bond markets to stem self-fulfilling speculation and panic. I do not think that we will get eurobonds at this stage; I do not think that the Germans will agree to eurobonds until there is established a European fiscal authority. However, we could have a more flexible stability mechanism.

Secondly, the stability mechanism should be preparing now to act quickly on recapitalising the banks in Europe on a pan-eurozone basis. If responsibility for sorting out the banks remains with the national countries—the sovereigns—the problems of countries such as Spain can only get worse because sorting out the banks increases the fiscal problem; dealing with the fiscal problem involves a squeeze that makes austerity more severe; and the impact of this fiscal squeeze on growth ultimately also deepens the problems of bad loans and zombie banks. We have to deal with this on a pan-European level and the ESM is the body to do it.

Thirdly, we need a more balanced strategy—not choosing growth over austerity but a balanced strategy. François Hollande’s victory has changed the political weather in Europe. There is a growth plan under preparation in Brussels. We have heard about it in our debate—unspent structural funds to be used better, recapitalisation of the European investment bank and an experiment in project bonds. Put with that, the noble Lord, Lord Davies of Stamford, talked about the need for structural reforms and the need to revive the single market which Prime Minister Monti is so behind. That is a credible package. They are welcome initiatives but from our side we not think that they are enough. For one thing, their impact would take too long to work. Infrastructure schemes and renewable energy projects are rarely ready to go. Southern Europe needs stimulus to growth now.

[Lord Davies of Stamford]

I am grateful to my noble friend for giving way. He will be aware that in Greece the motorway building programme was stopped midstream because of the bailout conditions. Those projects are shovel ready—a lot of work has been done on them and they are all ready to go. Some financing there could affect demand very rapidly.

[Lord Liddle]

The noble Lord, Lord Davies, is absolutely right. In addition to infrastructure, I think that we need a more moderate pace of deficit reduction. The Commission argues that the fiscal compact gives you all the flexibility that you need in a crisis situation. That should be done. Secondly, we should be mobilising the structural funds to tackle the employment issues, particularly the fact that in countries such as Greece and Spain, getting on for half of young people are out of work which is completely unsustainable socially and politically. It is also the case that a major competitive weakness of southern Europe is the low skills level of its workforce. That must be addressed from Europe through the structural funds—a crash programme of social investment in human capital.

Thirdly, the eurozone needs more balance between the strong and the weak in the urgent competitiveness adjustments that it must make. Stronger countries such as Germany have room for manoeuvre. Noble Lords talked about higher wages for German workers, which are certainly affordable. German wages have gone up very little despite the country’s enormous export success. I am glad that there is now a consensus between the Social Democrats and Christian Democrats on the introduction of a national minimum wage. Germany would have to tolerate only a bit more inflation to help the south, which is suffering debt-trapped deflation. That would enable the ECB to meet and maintain its target level of inflation of around 2% across the whole eurozone.

Our hope is that the political ramifications of the Hollande victory will result in a wider and bolder set of actions to build a stronger firewall, recapitalise the banks, adjust the pace of deficit reduction, offer immediate help on jobs and increase demand in countries with surpluses. That will not get us out of the need to make harsh adjustments. However, if we continue with collective austerity it will lead to collective suicide.

What is the coalition’s view? Is it still backing Mrs Merkel’s priority of fiscal austerity, which has been its policy at home for the past two years? Or is it undergoing a latter-day Keynesian conversion to the need for growth in Europe? If the eurozone can have a plan B, can we not have one at home? That is what we need. It is very odd for a Eurosceptic Conservative Party to argue that it is all right to have additional public borrowing through the EIB and project bonds at European level, but that of course it would be a complete disaster to tolerate any flexibility in the public borrowing of the UK. I find this an amusing contradiction in the present situation.

That confusion and contradiction, with a sharp eye for public relations, have been characteristic of the Government’s conduct of their European policy. As the noble Lord, Lord Williamson, said, they treat the eurozone as a convenient whipping boy to cover their own failures. As we know, last year growth in the eurozone was higher than in the UK. I am interpreting what the noble Lord, Lord Williamson, said.

[Lord Williamson of Horton]

It was a rather broad interpretation: the size of the Atlantic.

[Lord Liddle]

I apologise to the noble Lord, but the point is surely valid. Growth last year in the eurozone was twice that in the UK. Therefore, to blame the eurozone for the present double dip is nonsense.

The big point that the Eurosceptics fail to understand is that we cannot avoid the consequences of the euro by being out of it. In or out, our future is deeply affected because of our exports and the interlinking of our financial system. As Robert Chote said, if Greece exits, who knows what will happen? We may never in the foreseeable future recover the level of output that we had in 2008. A policy of splendid isolation from the continent was never realistic for Britain, but in the world of globalisation and economic integration it does not work at all.

Nor is our isolation very splendid. We are losing influence and clout in Europe to a dangerous degree. I will give one telling illustration. The Prime Minister claimed that the reason he used the veto and walked out of the December European meeting was that his partners would not accept a set of proposals that he tabled at 2 am in order to protect the City of London. A couple of weeks ago, on the capital requirements directive, the Chancellor, George Osborne, and the British for the first time found themselves outvoted by 26 to one at ECOFIN on a key question of financial regulation. The Chancellor has now recognised that he has to go along with the majority. That is not an effective use of the British veto. It just shows how influence is draining away from us at the moment.

[Lord Flight]

I was under the impression that the Chancellor had eventually obtained agreement to his point, which was that there could be some flexibility in the capital ratio of banks, with a view to the UK being rather more demanding than the rest of the EU.

--- Later in debate ---

[Lord Liddle]

I am sure that that is the Chancellor’s interpretation.

I recognise that there are some distinguished Members of this House who are long-term supporters of British membership of the European Union, but never believed that the euro could be made to work. We had wonderful speeches from the noble Lords, Lord Lamont and Lord Lawson, but I do not agree with what the noble Lord, Lord Lawson, said. He said that monetary union will work only if you have what the Germans call the coronation theory—the customs union first, the political union and then the monetary union to crown it.

I recognise that the euro was set up on a flawed basis. I thought that as the problems occurred they would be addressed incrementally and that reforms would be introduced that would make the system work. The trouble is that we have had a cushy decade of total complacency—it was a cushy decade for the UK as much as it was for the eurozone—in which the impetus for reform was completely lost. Short of federal union, if the eurozone took the kind of steps that Labour is advocating now it would have a viable future.

[Lord Reid of Cardowan]

Would my noble colleague consider that perhaps the problem was not complacency but precisely the assumptions that he has outlined to us: that as problems arose, incrementally we would go towards a central state in Europe and no one would ask the peoples of the nations of Europe? That is precisely the problem because what is being suggested now is one of these huge incremental steps. I promise him that there will be a reaction of nationalism in Europe because it will require not only centralisation but the imposition of austerity from the centre. We will create the very conditions that caused such resentment in Germany in the 1920s and 1930s.

[Lord Liddle]

I have the greatest respect for my noble friend Lord Reid, and in my life I have learnt an awful lot from him. However, his assumption that the only alternative to where we are now is a central state is fallacious. What have been lacking in the past 10 years are the incremental reforms of the kind that I have outlined that would have made the euro work.

I have gone on too long. I believe the consequences of a euro break-up, which some noble Lords seem to want to will on, would be horrendous. Eurosceptics make a fundamental mistake in thinking that for a country such as Greece, exit from the euro would solve its problems. A lot of British people think that it would be a classic devaluation, rather like our exit from the ERM in 1992. It would be nothing like that. Ordinary people’s savings would be wiped out as the Greek banks collapsed. There would be severe additional spending cuts, because with all borrowing cut off the Government would be unable to finance the deficit. They would have to cut welfare benefits and public pay. The new currency would plummet in value because there would be no private inflows of capital to sustain the balance of payments. It would be an economic disaster zone.

There would be huge social tensions between the better-off, who had already got their money out of the country, and the wage earners, the poor and the unemployed, who would have to live on the devalued drachma. We would see—here I agree with my noble friend Lord Anderson—the emergence of a failed state on Europe’s south-eastern flank, with incalculable consequences for relationships with Cyprus, Turkey and the rest of the Balkans. As my noble friend Lord Reid knows well, this is a part of the world on which we have spent blood and treasure over the past two decades to try to stabilise. Kick the Greeks out of the euro, and what are we going to do about stability in the Balkans? It is just too awful to contemplate. That is why the euro must, and can, be saved—if we adopt the right policies to do so.

The noble Lord, Lord Dobbs, spoke eloquently about his lessons of history. My lesson would be that a Greek exit would be followed by competitive devaluation, protectionism, a run on other countries, terrible contagion problems and an outbreak of nationalism. Conceivably, it could return Europe to the inter-war years, so I want Britain to play a constructive, committed and engaged role in trying to make this thing work, not a carping, hectoring and lecturing one. We need a rescue, we need the ESM, and that is why we need this Bill.