Convergence Programme
Debate between Lord Pearson of Rannoch and Lord Newby(10 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Newby (LD)
My Lords, I welcome this opportunity to discuss the information that will be provided to the Commission this year under Section 5 of the European Communities (Amendment) Act 1993.
As in previous years, the Government inform the Commission on the UK’s economic and budgetary position in line with our commitments under the EU stability and growth pact. The Government plan to submit their convergence programme by 30 April, with the approval of both Houses. The convergence programme explains the Government’s medium-term fiscal policies as set out in the 2013 Autumn Statement and Budget 2014, and includes the OBR forecast. As such it is drawn entirely from previously published documents that have been presented to Parliament.
With the Budget on 19 March this year and the Easter Recess timings as they are, I appreciate that the timetable for this debate has been particularly tight. Against this backdrop, the Treasury has made every effort to provide early copies of the convergence programme document in advance of the debate today, and did so last Thursday. The document makes clear that this year’s Budget reinforces the Government’s determination to return the UK to prosperity and reiterates the Government’s number one priority—tackling the deficit.
Stability or convergence programmes form part of the European semester, which provides a broad framework for the co-ordination of the monitoring and surveillance of member states’ fiscal and economic policies, including necessary structural reforms across the EU. The positive value of the European semester is that it is a useful means to encourage other member states to grip the urgent growth challenge across the EU.
The Budget 2014 set out the Government’s assessment of the UK’s medium-term economic and budgetary position. In 2010 we set out clear, credible and specific medium-term consolidation plans to return the public finances to a sustainable path. Our plan makes clear that we will fix the economy and deal with the deficit, cut tax to encourage investment, back businesses, control welfare and invest in skills. We put that plan in place and adhered to it, and we are delivering results with it. The Government’s fiscal strategy has restored fiscal credibility, allowing activist monetary policy and the automatic stabilisers to support the economy and ensure that the burden is shared fairly across society. This long-term economic plan has protected the economy through a period of global uncertainty and has provided the foundations for the UK’s economic recovery, which is now well established.
Since last year, economic growth has exceeded forecasts and has been balanced across the main sectors of the economy, inflation is below target, and the deficit has been reduced year on year. Over 1.5 million private sector jobs have been created and employment is at record levels. Interest rates are at near record lows, helping to keep costs down for families and businesses. The Government are also making significant progress in reversing the unprecedented rise in borrowing between 2007-08 and 2009-10. The deficit has been cut by one-third as a percentage of GDP over three years and is projected to have fallen by a half as a percentage of GDP by 2014-15. The OBR has also forecast public sector net borrowing to reach a small surplus in 2018-19, and has judged that the Government remain on track to meet the fiscal mandate one year early. While the OBR forecast that the underlying structural deficit is falling, it is doing so no faster than was previously forecast, despite higher growth. The persistence of this structural challenge supports the Government’s argument that economic growth alone cannot be relied upon to eliminate a structural deficit, and while we are meeting the supplementary debt target one year late as before, the OBR has revised down national debt in every year of the forecast.
This year’s Budget is fiscally neutral despite lower borrowing across the forecast period, with an overall reduction in tax funded by a reduction in spending. The OBR has revised the UK’s growth forecasts upwards, as has the IMF, and they are now among the highest, if not the highest, in the developed world. However, as the Chancellor has said, the job is not yet done, and the same is true for the rest of the EU. Without sustainable economic growth, the EU will be unable to repay its debts, create jobs or maintain its standard of living. Much of the answer to these problems lies in national level reforms such as creating flexible labour markets. Clearly, the European semester has a key role to play in encouraging member states to make ambitious reform commitments, and the UK has an interest in making these reforms happen. However, an ambitious EU-level reform agenda is also a key part of this equation and an essential counterpart to national level reforms. Recent European Councils have underscored the strong commitment of Heads of State or Governments to supporting growth and competitiveness, and I know that the Prime Minister has been driving forward this agenda along with leaders from a substantial group of like-minded member states.
As I reminded the House a year ago, deploying EU-level policies in support of economic growth, such as the single market, regulatory reform and EU-level free trade agreements, can achieve maximum growth impact at the least cost. The need to address Europe’s growth challenge comprehensively by tackling overall low productivity, lack of economic dynamism and flexibility is more pressing than ever before, and it is in our interests to make urgent progress. That is why the UK will continue to push this agenda at the highest levels and encourage the new Commission to take structural reforms seriously. I am today requesting that, in line with Section 5 of the European Communities (Amendment) Act 1993, this House approves the economic and budgetary assessment that forms the basis of the convergence programme. Following the House’s approval of the assessment, the Government will submit the convergence programme to the European Commission. It will make its recommendations to all EU member states in early June. These recommendations will then be considered by the ECOFIN Council on 20 June and agreed by Heads of State or Governments at the European Council on 26 and 27 June.
To reiterate, the convergence programme contains no new information, only information that has previously been presented to Parliament—information from the OBR’s economic and fiscal outlook and from the Budget, which sets out the Government’s strategy to return the UK to sustainable growth. I commend the assessment to the House.
Lord Pearson of Rannoch (UKIP)
My Lords, can the noble Lord remind the House of what exactly is the UK’s convergence programme? With what is the United Kingdom economy supposed to be converging, and why? As we are never going to join the euro, are we not wasting time? While I am at it, could the noble Lord remind us what is the European semester? But above all, why do we go on submitting the state of our economy to an institution which has not had its own accounts signed off, even by its own internal auditors, for the past 18 years? By its own estimation, at least £120 billion per annum goes walkabout and in each of its institutions the Mafia is rife and active.
In short, what is the point of this debate and, more generally, what is the point now of the European Union at all?
Lord Pearson of Rannoch
Before the Minister replies, perhaps I may say that I support the noble Lord, Lord Tunnicliffe. He is of course right that the whole process in the Maastricht treaty was, I am afraid, waved through by the Conservative Government under Mr John Major when, if your Lordships remember, he was winning game, set and match. I am grateful to the Minister for his answer, but I would still like to press him on why the United Kingdom has to take part in this demeaning and absurd process. I understand that it might be useful for the countries which have unfortunately joined the extremely destructive process of the euro and everything that goes with that, but why should we, if indeed our economy is recovering in the way that the Government claim, have to go cap in hand to Brussels and discuss with them anything that we want to do, especially as we are, luckily, thanks to the Treasury, not in the euro?
Lord Newby
My Lords, perhaps I may deal with the point made by the noble Lord, Lord Tunnicliffe. Obviously, the Motion that we are debating today stems from Maastricht, but the codification of how it was to be done is to be found in Articles 121 and 126 of the Lisbon treaty—I am sorry that I do not have them before me to read out to the House.
The noble Lord, Lord Pearson, describes the process of submitting the forecasts as “demeaning”. Certainly, there is nothing demeaning about the state of the British economy. We are very happy to send the forecasts to anybody. However, as I said, just as we depend in no small measure on the economic success of the rest of the EU, so the rest of the EU, as he is very fond of reminding the House, depends on our economic success. We are part of a single market and, again as the noble Lord often reminds the House, we contribute to a budget one of the main purposes of which is to promote growth across the EU. So it is only sensible that the EU as a whole looks at how Governments are meeting their commitments by running a successful, stable and growing economy.
The noble Lord, Lord Tunnicliffe, raised some pretty familiar criticisms of the state of the economy. I always find it slightly amusing when members of the Labour Party, which consistently wanted to spend more at every point during this Parliament, object to the fact that the deficit is higher than it might be. If they had spent £12 billion a year by cutting VAT, as they proposed, the accumulated deficit would by now almost certainly have been greater. It is bizarre for the Labour Party, which has been pushing for higher expenditure—that would necessarily mean a bigger deficit, certainly over the period we are discussing—to upbraid us for following a policy that allowed the economic stabilisers to work and ensured that we did not have further cuts in the face of the European crisis. We allowed the stabilisers to operate in a way that minimises the impact of the crisis on employment—and on growth—and formed the basis for the creation of 1.73 million additional private sector jobs during the course of this Parliament.
The noble Lord says that we have done nothing to get young people back into work. I remind him that youth unemployment fell by 29,000 in the quarter, in the three months to January, and by 81,000 in the year. Excluding people in full-time education, there was a decline of 16,000 in the number of 16 to 24 year-olds who were unemployed over the quarter. The youth claimant count has fallen for 21 consecutive months. On the latest figures, the reduction in the youth claimant count is falling at the fastest pace since 1997. The number of those claiming for more than one year has fallen for the 15th consecutive month, down by 2,300 on the month to 53,400. Youth employment in the quarter rose by 43,000, which is an extremely significant number. Those 43,000 young people who now have a job who did not before would find it extremely difficult to recognise the Opposition’s description of what is happening to the economy.
I absolutely understand the noble Lord’s criticism that some people have suffered in their standard of living. Sadly, that is what happens to some people during a recession. However, I remind him that the Government have taken a wide range of steps to mitigate that fall. Of course, the increase in the income tax allowance to £10,000 is the single most significant one, but I also remind him of the freeze on fuel duty. On jobs, I remind him of the £2,000 national insurance allowance, which will make it easier for small businesses, in particular, to retain or take on additional staff.
The noble Lord also criticised the Government on the basis that the recovery was unbalanced. He will know that manufacturing output was up last year. The forward surveys of manufacturing are more positive than they have been for many years. He will probably be aware that the figures from the RAC, I think, yesterday suggested that in the past month, the area with the highest growth rate in permanent placements was the north. He will also be aware of today’s figures showing that the balance of payments on the latest deficit is down, so we do not have unbalanced growth. Every sector of the economy is growing. Forward forecasts in services and manufacturing are at record levels; in some cases, they are higher than ever before. So the prospect for the period ahead is of not just growth but a greater degree of balance in growth than we have seen for a considerable time.
Ultimately, such sustainable growth is the only way for both the UK and EU member states to pay down their debts and exit what has been, by common consent, a very difficult economic period. The UK is leading the EU growth agenda and making the case for ambitious EU reform. On that basis, I am pleased to commend the Motion to the House.
EU: Money-laundering Directive
Debate between Lord Pearson of Rannoch and Lord Newby(10 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Newby (LD)
My Lords, I thank the noble Lord, Lord Willoughby de Broke, for introducing this debate and all noble Lords for their contributions. I will try to answer some of the broad concerns expressed and lay out the steps that the Government are taking to ensure the effective and proportionate treatment of trusts under the fourth money-laundering directive.
Proposals for the directive are aimed at improving the transparency over who owns and controls companies and legal arrangements, such as trusts. The World Bank estimates that between 2% and 5% of global GDP is subject to money laundering, with some estimates showing that global illicit outflows from developing countries dwarf the amount that they receive in official development assistance. Furthermore, the UN Office on Drugs and Crime estimates that less than 1% of that is currently being seized or frozen. Tackling these illicit flows was therefore a key priority for the UK’s presidency of the G8 last year. As the Prime Minister said at the October 2013 Open Government Partnership summit,
“transparency needs to extend beyond the public sector and into the private sector ... but there are also many wider benefits to making this information available to everyone. It’s better for businesses here ... developing countries ... and ... the more eyes that look at this information the more accurate it will be”.
That is why the UK has committed to establishing the world’s first publicly accessible registry of company beneficial ownership.
The EU’s fourth money-laundering directive is an opportunity to build on that momentum. The directive seeks to implement the revised standards of the Financial Action Task Force and the European Commission’s review of the implementation of the third money-laundering directive. We are committed to ensuring that the directive implements the FATF standards in full. As the Prime Minister wrote to European Heads of Government last year, our first collective step should be to mandate public central registries of company beneficial ownership as the benchmark for transparency of ownership and control. At the same time, the UK recognises that it is equally vital to prevent the potential misuse of trusts and similar legal arrangements.
The FATF sets the global standards to improve the transparency of the beneficial ownership of corporate and legal entities, including companies, and legal arrangements such as trusts. In setting those standards, the FATF recognises that preventing the misuse of trusts is critical but also explicitly recognises that trusts are different from companies. In particular, it is vital to understand that, unlike companies, common law trusts, such as those established under English and Welsh law, are not created by the state. Furthermore, trusts, unlike companies, are used for a range of purposes, such as benevolence, inheritance, protecting vulnerable people and family support. As such, the implications for privacy are far greater, and trusts therefore warrant different treatment.
Measures placed on trusts must therefore be different from those that apply for companies in order to be proportionate and effective. The Government support a mandatory requirement for trustees to know the beneficial ownership of their trusts. That, together with tax reporting to HMRC, to which the noble Lord, Lord Willoughby de Broke, referred, and future automatic exchange of tax information agreements, will offer more transparency on trusts than ever before. In particular, through automatic exchange agreements, financial institutions will report information to national tax authorities on trusts holding accounts with them where the beneficiary is a resident of a partner jurisdiction. That information is then automatically shared with the partner jurisdiction. There are already 44 signatories to this international standard on automatic exchange, which creates a web of information exchange that will provide greater transparency on trusts than ever before.
This approach provides a proportional and effective means of enhancing transparency on trusts holding financial assets, given that they pose the greatest money- laundering risk. The Government oppose the mandatory registration requirement for trusts, which, together with the creation of central registries of trusts, was recently adopted as the European Parliament’s position on the directive. Given the transparency afforded by automatic transfer of information agreements, we consider registration of trusts to be a disproportionate approach and, in particular, one which undermines the common-law basis of trusts in the UK. As such, we continue to work with other member states, civil society and the private sector to ensure effective treatment of trusts.
Beneficial ownership has proved to be the most contentious issue in discussions over the fourth money-laundering directive. We are under no illusions about the challenges ahead. Following agreement between member states, negotiations to reach a mutually agreed final text with the European Parliament are likely to be challenging, given the position adopted by MEPs, as has been described. I assume that among the small minority of those who voted against this directive was a full turnout of the British UKIP contingent.
What happens next is that we are working with the Council presidency and other member states to agree a compromise that would limit the scope of obligations on trusts to those holding financial assets, which the UK would satisfy through existing reporting obligations for trusts holding financial assets, domestic reporting requirements and automatic exchange of tax information agreements. Such a compromise would complement the UK’s advocacy of ambitious action on company beneficial ownership. Of course, such an approach would exclude, for example, wills from the implementation of the directive, as wills do not form that category of trust.
Negotiations are ongoing, and we expect the Greek presidency to seek agreement among member states over the next few months. The subsequent Italian presidency would then seek the conclusion of the directive during the second half of 2014, in co-operation with the European Parliament. In answer to the noble Lord, Lord Pearson of Rannoch, the decision in the Council will be by qualified majority vote.
A number of questions were asked of me—
Lord Pearson of Rannoch
Before the Minister leaves that point, it might be a good place to press him on the famous doctrine of subsidiarity. In view of the difference between our system and the other systems in Europe, would it not be a good idea to use subsidiarity?
Lord Newby
My Lords, the approach I set out would mean that we would have a different way of reporting the majority of trusts. Therefore, there would not be a common system across the EU. The Government’s view is that it is very important that, across all the EU, there is a requirement for both companies and trusts to be more transparently described than they are at the moment. That is why we put a huge amount of effort into pursuing the concept of the mandatory requirement on beneficial ownership of companies. We want to ensure that, as far as possible, information about trusts that could be problematic for money-laundering purposes will be more generally available. Our proposals would do that in respect of the UK without having a full mandatory register in the same way as we propose for companies. We accept that there is a difference in nature between the two, but we think we can have the best of both worlds by having that difference of approach between them.
In response to the question from my noble friend Lord Dykes, trusts would not become default alternatives to companies because there are the requirements to report financial information to HMRC and to pay tax where appropriate and also for the automatic exchange of information where the beneficiary is a foreign national.
EU: UK Contribution
Debate between Lord Pearson of Rannoch and Lord Newby(10 years, 6 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Pearson of Rannoch (UKIP)
Does the Minister agree with two things about the net payment to Brussels of £12.2 billion for the past year alone? First, that it equates to the £30,000 per annum salaries of 1,100 nurses, policemen or any other public servant per day. Secondly, that there is no such thing as EU aid to us, because for every £1 they now send us back we have sent them £2.56.
Lord Newby
My Lords, I am not going to get into a statistical analysis with the noble Lord, but I revert to my earlier point. Our membership of the EU brings with it a whole raft of benefits which do not simply relate to the EU budget. One area of expenditure that we incurred some time ago was dealing with a war in the Balkans, which cost this country more than £1 billion. Since the Balkan wars finished, Croatia has joined the EU and other Balkan states will join. We will not fight other Balkan wars. That does not fit into the noble Lord’s narrow formula.
Banking: Regulation
Debate between Lord Pearson of Rannoch and Lord Newby(10 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Newby
My Lords, as my colleague the Financial Secretary has made clear in another place, there are some aspects of the commission’s views on the speed and timing of ring-fencing that the Government are going to look at further and revisit when the issue comes back to your Lordships’ House. We have Second Reading of the Bill on 24 July, and my noble friend Lord Deighton will look forward to telling the House more about the provisions of the Bill at that point.
Lord Pearson of Rannoch
My Lords, is the Minister aware that his answer to the noble Lord, Lord Lawson, does not quite stack up in view of Written Answers from the previous Government on 21 July 2009, at col. 365 of the Official Report, which confirmed that they had passed overall supervision of our banks and financial institutions to Brussels? Given that the EU has not had its own accounts signed off for 17 years, and given that it deeply dislikes the City of London, was this wise and how do we get out of it?
Lord Newby
My Lords, the basic assertion that the noble Lord makes, that the Government are unable to put in place a satisfactory regulatory framework for banks in the UK, is, frankly, simply not true. We have taken a wide range of measures to strengthen the regulatory structure and the provisions with regard to remuneration and capital, and in all those areas what we have done is compatible with what has been happening at EU level.
G8: Eurozone and UK Growth
Debate between Lord Pearson of Rannoch and Lord Newby(10 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Newby
My Lords, the Government support the efforts being made within the eurozone to develop closer economic co-ordination and they obviously also support some of the measures announced at the last EU summit, which will, to a limited extent, support the combating of youth unemployment.
Lord Pearson of Rannoch
My Lords, on the other hand, is not the only hope for economic growth to get our political class and its over-regulation off the backs of our productive industry and commerce? Therefore, are not the expressions “economic growth” and “eurozone” a contradiction in terms?
EU: Eurozone Financial Transaction Tax
Debate between Lord Pearson of Rannoch and Lord Newby(11 years, 2 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Newby
My Lords, we are engaged in discussions on this tax as it could have significant impacts not just on the City but across the EU. While the Government are not opposed in principle to a global FTT, with the lack of consensus on such a thing and faced with a proposal which we think could be damaging not just to the UK but to Europe as a whole, we are rather sceptical about it.
Lord Pearson of Rannoch
How do New York and other financial centres react to the international reach of this particular piece of EU lunacy?
Banking: Regulation
Debate between Lord Pearson of Rannoch and Lord Newby(11 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Newby
Yes, my Lords, I agree. Basel is indeed that number of pages, while I think that the Dodd-Frank Act in the States is more than 2,000 pages and is so complicated that there are real questions about whether the institutions will ever be able to implement it. Getting back to what I was saying about banking reform here, one of the key reasons for having a ring-fence is to have a simpler structure under which the retail bank is segregated from the more complicated and casino elements of the system. We think that that will bring benefits for consumers as well as bringing greater stability to the system as a whole.
Lord Pearson of Rannoch
My Lords, are the Government aware of the previous Government’s Written Answer of 21 July 2009 to the effect that the overall supervision of our entire financial industry, including our banking industry, had already been handed over to Brussels, leaving the Government here with only day-to-day control? Does it therefore really matter much what the Government come up with here?
Lord Newby
My Lords, I am afraid that I was not aware of that comment by the previous Administration and I do not recognise it as a reflection of the way that we run our banking system.
European Council Decision: EUC Report
Debate between Lord Pearson of Rannoch and Lord Newby(13 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Newby
My Lords, it is always a great pleasure to follow the noble Lord, Lord Pearson of Rannoch, because I always think that debates in your Lordships' House are much better when we are not all agreeing with each other. He wants the euro to fail. We on these Benches want it to succeed, and therefore we support the Motion before us this evening. Without having a huge discussion on the history of the euro, it is perhaps worth reminding ourselves that the euro has survived the worst financial crisis certainly in our lifetimes, and has survived many naysayers over the past two or three years who very confidently and regularly predicted that it was about to collapse. It is quite clear that the euro is not going to collapse and that the eurozone is going to continue. Indeed, it is likely to be strengthened as a result of the decisions which are currently being finalised.
It is one of the long-standing features of our view of the EU and the euro that at every point they were about to collapse and, indeed, that the European venture was about to stall, and at every point it has moved forward in its peculiar but almost inevitable way. There was a typical example of this attitude just last week when the FT, reporting on the eurozone summit on this mechanism, had as its headline “Leaders cut surprise deal on key reforms”. The history of European development has been leaders predictably cutting surprise deals when nearing a deadline, which is exactly what has happened here.
I do not intend to attempt to dissect the speech of the noble Lord, Lord Pearson, in great detail, but I point out to him that member states are not donating anything to anyone via this mechanism. The Irish are paying 6 per cent on these loans and are grumbling mightily about them, so just as the British Government are getting a good return on the loans that they are making, member states that are making loans under this mechanism will be getting a pretty good return.
Lord Pearson of Rannoch
My Lords, I did not suggest that this Government were donating to any other member state through this mechanism; I merely pointed out that we donate generally to the coffers of the European Union—to the tune this year of £17.6 billion gross and £8.3 billion net. That is net cash that we are sending to Brussels and that goes down the drain there—a figure, I might say, that we are struggling to cut from our own public expenditure.
Lord Newby
My Lords, I apologise to the noble Lord. I misheard him. I distinctly wrote down that he said that a donation was involved in this process.
My one question to the Minister springs from my concern about the way in which the eurozone is developing, which is simply that the UK’s role in relation to it is extremely strange. We are obviously not part of it, so we are not in many of the meetings. Yet from time to time we are allowed to have a say. What worries me is that with the passage of time that say gets less and less over a whole raft of economic decisions across the EU. In the current exercise, we were allowed to help in the design of the ESM, which presumably means that Treasury officials went to meetings to talk about how it was going to work. What worries me is that, once it is established, those Treasury officials will be told that they have been extremely helpful, that their advice has been most valuable and that they can now go back to London and let the rest of the eurozone implement the policy. As the noble Lord, Lord Lamont, has pointed out, there are a whole raft of secondary consequences for the competitiveness pact, which will undoubtedly have an impact on the UK and on which, as far as I understand it, we will have no say at all in the future.
Will the Minister explain whether, once the ESM is established, there will be any further role for the UK Government and their officials in the design of the conditions that might be required or suggested from time to time to apply in particular cases when member states are being bailed out? These changes could be extremely worrying, not necessarily because they or the conditions are bad in themselves but because, although we are affected by them, we will have had no say in the way in which they are put together.
Loans to Ireland Bill
Debate between Lord Pearson of Rannoch and Lord Newby(13 years, 4 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Newby
I thank the Minister for his very clear introduction to the debate. I was slightly concerned, however, that he did not refer the House with the degree of attention that it may deserve to paragraph 21 of the Explanatory Notes, which deals with the compatibility with the European Convention on Human Rights. I was tempted to ask him whether the law officers had been consulted before the Chancellor of the Exchequer made the statement that,
“pursuant to section 19 of the Human Rights Act 1998 … the Bill is compatible with the Convention rights”.
As this is the first time that we have debated the Bill, the Minister has not had the chance to give any undertaking to speak to the law officers, and it would be invidious to ask him to do so. However, one hopes that that will not be necessary.
Was there any alternative to the loan and the Bill? As the noble Lord, Lord Liddle, has explained, there was not. If the EU had not intervened in the dramatic way in which it did, it is almost certain that Ireland would have had to default and leave the euro. That would have been bad not only for the eurozone but for the UK. It would have been bad for the UK for trade reasons—I shall come back to the point made by the noble Lord, Lord Pearson, a bit later in my speech—as we have a large volume of exports to Ireland. Indeed, 40 per cent of Northern Ireland’s exports go to the Republic. I am sure that the noble Lord, Lord Bew, will expand on that point.
The prospect of Northern Ireland, as a depressed region of the United Kingdom, suffering significantly as the result of a major crisis in the Republic would have had not just a severe impact on Northern Ireland but, obviously, a severe knock-on effect here, including to the public finances. We would have had, in effect, to have filled in some of the hole that would have been knocked in the Northern Ireland economy. Such a crisis would also have been bad for the UK because of the exposure of UK banks. Again, as the noble Lord, Lord Liddle, pointed out, the Bank of England has set out starkly the scale of that issue. A default would have led to instability in sovereign debt markets more generally and could have increased the costs of UK government borrowing.
That does not necessarily mean that we agree with absolutely everything that is being done to restructure the Irish banking system. The arguments for establishing the National Asset Management Agency can be made either way. Effectively nationalising all the risks taken by all the Irish banks raises moral-hazard issues, which we have sought to avoid to a considerable extent in the United Kingdom.
Another issue is whether, even with all this activity, we will have been successful in stabilising the Irish economy. To pose the question that Martin Wolf posed in the Financial Times recently, the question is not whether the Irish banking sector is too big to fail but whether it is too big to save. Hopefully, the answer is that the Irish banking sector can be saved as—heaven knows—it is not lacking resources. The amount that has gone in both from the Irish Government and, via them, from the EU is now considerable.
It would have been irresponsible for the UK not to participate in the Irish bailout, but the Irish problem is not the only issue facing the eurozone. There are broader issues that relate to Greece, Portugal and now Spain and Italy. Given that we are outside the eurozone, it is a logical if inglorious position for us not to commit to taking part in any further bailouts of other member states.
When contemplating this debate, I cast my mind back to the debates that we had a decade ago on whether Britain should join the euro subsequent to, as many noble Lords will remember, the famous five tests. I am pleased to see the noble Lord, Lord Morris, in his place. Uniquely in my hearing, he was able to make a joke—which at least I laughed at at the time—about whether we should join the euro. At a TUC summer reception, he said that, having been asked by the then Chancellor, Gordon Brown, what he thought about the five tests, he had replied, “Well, we’ve won one, we’ve lost one, we’ve drawn one, but I think we might win the series in Sydney”. A decade on, a lot has changed both in cricket and in our perceptions of the euro.
At that time, many of us on these Benches supported Britain’s attempts to join the euro. One of the joys of doing a considerable amount of work with Charles Kennedy, as I was doing then, was that we were summoned from time to time to see the Prime Minister for an uplifting talk on matters of common interest and concern, of which the euro was one. At that point, Charles Kennedy was keen to press the case for British membership of the euro on a Prime Minister who was keen but extremely nervous about that prospect. Indeed, he said at the time that he would like to join the euro but he thought that it was impossible to beat both public opinion and the popular press—he could beat one, he thought, but not both—so he did not attempt it. As a result, we are now in a situation in which nobody seriously thinks that we should join the euro in the foreseeable future. Although it is inconceivable—for the reasons given by Tony Blair among many other reasons—that we should join the euro at this point, some of us at least are not absolutely convinced that we took the right decision a decade ago.
However, if I were to dilate on that argument and those tests, I would no doubt keep your Lordships here all evening. I know how much Members—particularly those opposite—hate overlong speeches. The noble Lord, Lord Hunt, is clearly already extremely impatient with me, and I can understand why that might be the case.
Even though we are agreed that we should not join the euro, two interlinked questions need to be considered—we cannot amend the Bill, and it would be foolish to attempt to do so—in this discussion on the Bill, which gives us an opportunity to range slightly wider. Realistically, what should our role be in terms of ensuring financial stability within Europe? And what should the eurozone do now? As I say, the two issues are inextricably linked, but the first principle should surely be to support eurozone members in doing whatever they agree is prudent to strengthen the working of the eurozone. For example, it would surely be perverse and ridiculous if the Government committed themselves to having a referendum on changes to the EU treaties that eurozone members decided were necessary to allow eurozone members to support each other more effectively. Can the Minister assure us that, as a non-eurozone member, we will wave through any proposed changes to the EU treaties without requiring a referendum in the United Kingdom?
As the noble Lord, Lord Liddle, has pointed out, the Chancellor is more generally in an extremely odd position when considering the development of the eurozone. The eurozone’s success or failure is obviously of crucial importance to the future of the British economy, as has been exemplified by the situation in Ireland. However, as the noble Lord pointed out, there are three reasons why the success or failure of the euro and the eurozone is important to us. The first of those reasons, to which he referred—and on which he was challenged by the noble Lord, Lord Pearson of Rannoch—relates to trade. It seems to me bizarre and sad that we export more to Ireland than to the BRICs combined. However, that may be a slightly misleading figure, as I suspect that the figure includes all the re-exports of goods that come from the rest of the world to Ireland via the UK. For example, I suspect that goods that are shipped from France to Ireland by road through the UK count as UK exports to Ireland. I may be wrong on that, but that may slightly inflate the figure. Even if that is not the case, the figure is still very high.
However, if one wants suddenly to change gear completely and export significantly greater amounts to the BRICs, the problem is that, frankly, that is easier said than done. It is not easy for a small business suddenly to decide to sell its products in China or Brazil, given the problems of language and distance. Therefore, even with the best will in the world, it would take a while before we could re-orientate our trade significantly away from the eurozone, particularly given that our strength rests in exports of services, many of which are easier to export to the eurozone than to the BRICs. That is particularly the case in countries where there are institutional barriers to exports of services. It is not simply that a lawyer or accountant seeking to open an office in India has their work cut out for them but that they cannot do it. Therefore, it would be an extremely difficult challenge for the UK simply to do a handbrake turn and suddenly start newly exporting huge quantities of goods to the BRICs. Therefore, we need the eurozone to do well, because that is where many of our exporters already have links and where, as we grow, they could develop those links significantly more.
Lord Pearson of Rannoch
My Lords, of course I admit that our trade with the eurozone is important, but is the noble Lord aware that our trade with the rest of the world—both inwards and outwards—is in fact increasing very much faster than that with the eurozone? Surely that points the way to the future rather than to the past.
Lord Newby
My Lords, the fact that such trade may be increasing more quickly is not surprising for two reasons. First, it is increasing from a smaller base, so it is easier to achieve a higher percentage increase. Secondly, most of those economies are growing more quickly than the eurozone, so you are feeding into a more buoyant economy. I completely accept that, but my point was slightly different. Incidentally, another problem about exporting to some of those other countries is that the newly passed Bribery Act is making many companies, not least small-to-medium-sized companies, very wary about their ability to export to China or India, for example, because they fear—sometimes rightly and sometimes, no doubt, incorrectly—that they may be faced with business practices there which they need to follow in order to gain access to a market but which they would not have to follow in the eurozone. In the medium term, I am extremely optimistic about the prospects for exports to the BRICs, but in the short term, given that we are starting from a relatively low base, it is a forlorn hope to think that the BRICs can solve our export problems.
Lord Newby
Well, as I am sure the noble Lord is learning, we do things differently in your Lordships' House. I realise that I must make progress.
Lord Pearson of Rannoch
Even in your Lordships' House, I believe that I am right in saying that the Companion suggests that Second Reading speeches should be curtailed to some 15 minutes. We are now in the 17th minute of the noble Lord's peroration.
Lord Newby
My Lords, I am extremely grateful to the noble Lord for making that point. He will be aware that I have been interrupted on a number of occasions. However, I am well aware of the conventions of the House and will happily draw my speech to a conclusion by saying, as I said at the beginning, that we support the Bill.