EUC Report: Economic Governance

Lord Marlesford Excerpts

Thursday 16th June 2011 Lords Chamber

[Lord Marlesford]

The noble Lord, Lord Harrison, had a very steady hand as the crisis migrated through Sub-Committee A, and we are grateful to him for that. Both the euro and the euro area are in crisis; they are both in a critical condition and need intensive care. The euro is, in my view, wildly overvalued and several of the member states are, as we know, on the brink of default. The European Central Bank is so loaded up with toxic debt that it is in danger. The Irish Finance Minister, Noonan, recently asked the IMF to get a haircut for the AngloIrish debt; that would not be very wise or safe for the ECB.

What I find astonishing is the undertaking given at Seoul at the G20 by several Finance Ministers, including my right honourable friend George Osborne, that there would be a guarantee of European sovereign debt up to 2013. We asked a number of our witnesses about it, and no one was able to spell that out. I really think that the Minister has a wonderful opportunity to enlighten us in that regard. Given that Her Majesty's Government are a part of it, we should know exactly what the commitment means and how it would work. Nobody appears to know.

The Government are absolutely right to say that the UK will not sign up to the EU permanent crisis mechanism. I congratulate the Government on setting up the Financial Policy Committee, with its twin remits: first, to reduce systemic risks and, secondly, to enhance the resilience of the UK financial system. Systemic risks, of course, cover both the fault lines in the financial system infrastructure and the cyclical threats from unsustainable levels of leverage, debt or credit growth. That is our solution and we are in that playing an important part in dealing with further threats to this country.

As so often, the EU's reach is greater than its grasp and Mr Trichet’s proposal for a European ministry of finance is such an example. He said that,

“a ministry of finance … would exert direct responsibilities in at least three domains: first, the surveillance of both fiscal policies and competitiveness policies, as well as the direct responsibilities mentioned earlier as regards countries in a ‘second stage’ inside the euro area; second, all the typical responsibilities of the executive branches as regards the union’s integrated financial sector, so as to accompany the full integration of financial services; and third, the representation of the union”—

the EU—

“confederation in international financial institutions”.

Personally, I do not think that really is a runner—certainly not as far as the UK is concerned. However, Mr Trichet is perfectly logical and having identified the fundamental flaw in the concept of the euro, he is sensibly putting forward what could help.

Personally, I believe what should happen is that individual euro countries should be enabled to leave the euro area without having to leave the EU but should be able to continue to use the euro, if they wish. It would probably be sensible for them to do so. Nobody is going to be prepared to buy recreated Mickey Mouse currencies. Finally, if China and the US, particularly China, are to be the world's economic locomotives we have to try to see that northern Europe, at least, can prosper and sustain those unfortunate countries in the south, which are going to suffer greatly from the inevitable deflation.

EU: Budget

Lord Marlesford Excerpts

Thursday 28th April 2011 Lords Chamber

[Lord Hamilton of Epsom]

My Lords—

[Lord Marlesford]

My Lords, did not my noble friend’s earlier answer, when he described how information was not available, give a bit of a clue as to one way in which we can make progress? Would it not be much more satisfactory if there were full details of any failure properly to account for national expenditures in the EU budget? In that way we would at least know who was not doing things properly, by how much and when, and that shaming could have some role in getting people to behave better.

[Lord Sassoon]

Again, I completely agree. That is precisely why the other two of the three key points made in the joint statement at the February ECOFIN were about greater member state responsibility for items of expenditure and greater transparency. Therefore, I think that we have already identified the three key areas where improvement needs to be made and needs to be made quickly.

Finance (No. 2) Bill

Lord Marlesford Excerpts

Monday 22nd November 2010 Lords Chamber

[Lord Sassoon]

My Lords, as I said, a Question has been tabled and I shall answer it then. I have already referred the House to the two meanings in the Oxford English Dictionary first edition of 1888, which I think explains it very well. We had a reference to PIMCO earlier in the debate from my noble friend Lord Ryder of Wensum. I refer the noble Lord to the comments of the founder of PIMCO a few months before the election when he talked about the toxic pile. He may or may not have been front-running a position, but when the largest bondholder in the world talks about UK debt in toxic terms, the point is well understood. The critical question that arises from all of this—

[Lord Marlesford]

My Lords, perhaps I may help my noble friend by giving an example of a very dangerous toxic situation that was certainly inherited from the previous Government and of which the noble Lord, Lord Myners, is extremely aware: that is, the level of credit card debt in this country on which interest is being paid—I am not talking about the ordinary stuff that we pay off each month. That has not decreased. According to the Bank of England’s September figures, the level of credit that has been overrun is currently at £58 billion and interest is being paid at more than 15 per cent, which is £9 billion of interest due each year. The noble Lord, Lord Myners, was kind enough to write to all the banks asking them for details of what value they had on their books. Only one answered, and that was Barclays Bank—and I felt that it prevaricated in its answer. Does my noble friend agree that that is an example of the reservoir of potential toxicity that can make people very apprehensive about the fundamentals of Britain's economic situation?

[Lord Sassoon]

I am grateful to my noble friend Lord Marlesford for pointing that out; I absolutely agree. Any country that has total debt—he is talking about wider debt—of 400 per cent of GDP, as this country has, is indeed skating on very thin ice.

Comprehensive Spending Review

Lord Marlesford Excerpts

Monday 1st November 2010 Lords Chamber

[Lord Marlesford]

I was brought up on the great Kalecki and my recollection of one of his fundamental theses was that the only rescue and hope for capitalism was armament and war. That has not been proved true.

[Lord Peston]

That is not true—that was not his view. What is interesting, if I may give a lecture on the history of economics, is that we can distinguish Kalecki from Keynes, although Kalecki made the great mistake of publishing in Polish and therefore was never fully appreciated. Keynes was attacked, particularly by the American right, for being left wing, but he really believed that capitalism could be saved and advocated his policy so that we could go back to capitalist free enterprise. Kalecki believed that the ideology of capitalists was such that they would prefer to destroy the system rather than to allow Governments to intervene to save it. I am glad that the noble Lord is aware of Kalecki; the sadness is that his name still rarely appears in any of the economic textbooks.

I refer again to the problem of what we should be doing. The noble Lord, Lord Sassoon, said that none of us was telling him what he ought to do. I shall not send him a bill when I do tell him. I am a Back-Bencher so I speak only for myself. The first thing that I would do to save money, after what one of our major newspapers called the fiasco of the defence review, is to redo that review and realise that our whole future on the defence side depends on conventional weapons. We should announce immediately that we have no intention of wasting any money on the renewal of Trident; our nuclear deterrent is not a deterrent, because no one can tell us whom it deters and, in any case, it is not independent. What this country needs is a much improved set of conventional armed forces. The Government should go back and think about that.

My second recommendation to the Government is to abolish immediately the raising of VAT at the beginning of next year. It is the last thing that the economy needs. I speak only for myself; I have no idea whether others are deeply committed to raising VAT. My view is that abolishing the increase is the stimulus that the economy needs.

Thirdly, the Prime Minister, instead of looking for headlines in his attack on the European Community by telling us that he is a Eurosceptic, should realise that the biggest waste of money in the whole of Europe is the common agricultural policy. If he had any backbone, he would seek a row with the Europeans to abolish that policy. That would save us enormously more money than the trivial sums that we are talking about.

EU: Economic Governance

Lord Marlesford Excerpts

Wednesday 27th October 2010 Lords Chamber

[Lord Sassoon]

Indeed, my Lords, that is the position. It is worth reminding ourselves that since my noble friend Lady Thatcher won that rebate at Fontainebleau it has saved Britain £88 billion. That is what tough negotiations in Europe achieved. The previous Government agreed to significant changes to those arrangements, which mean that the abatement has come down very significantly. However, my right honourable friend the Chancellor said after the ECOFIN meeting on 8 September that we will make it clear from the start that:

“We are not going to give way on the rebate. No doubt others will want to put it into the mix but they’ll be wasting their time. People better know that at the beginning of the process or they are certainly going to discover it at the end”.

Noble Lords can see that my right honourable friend the Chancellor will be in the robust tradition set for us by my noble friend Lady Thatcher on these matters.

[Lord Marlesford]

My Lords—

[Lord Liddle]

My Lords—

--- Later in debate ---

[Lord Marlesford]

Does Britain have the power to veto any increase in the EU budget?

[Lord Sassoon]

My Lords, as I understand it, the financial framework and perspective have to be agreed unanimously. Discussions are starting on the framework that will cover the years 2014 to 2021.