European Union Membership (Economic Implications) Bill [HL]

Lord Sassoon Excerpts

Friday 25th November 2011 Lords Chamber

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, I start by congratulating the noble Lord, Lord Pearson of Rannoch, on getting this debate today. I disagree with the noble Lord, Lord Davies of Oldham. It is quite right that we should be debating Europe at this very difficult and challenging time. I also thank all noble Lords for what has turned out to be a valuable and thought-provoking debate. Having said that, I make it clear at the beginning that the Government have significant reservations about the Bill that we are debating today.

I am between the rock of noble Lords wanting to move on to complete two other significant Private Member’s Bills’ Second Readings today and the hard place of doing justice to what has been a very stimulating debate. The noble Lord, Lord Davies of Oldham, has already pointed out my problem, and I am grateful to him for not adding to it. I thought that the string of questions was about to come, but it did not and I am grateful for that.

As we are all aware, these are extremely dangerous times for the global economy. The crisis in the euro area continues to undermine markets across the world, the UK included. As my right honourable friend the Chancellor has said, resolving the euro area crisis would be the biggest single boost to the UK economy this autumn.

As well as resolving the immediate crisis, Europe faces significant challenges that go to the very core of its raison d’être. What is the EU’s purpose in an open and competitive global economy? What do we need to change for it to meet that vision? We are right to ask these questions, but we will be heard and make a difference only so long as we are a core member of the EU, and we will make sure under this Government that our voice is heard in Europe, exactly as it has been heard most recently on the negotiations for the EU 2012 budget. I remind my noble friends Lord Liverpool and Lord Stevens of Ludgate of what we have done to peg back the proposed increase successfully, resisting proposals for inflation-busting increases. But of course I agree with my noble friend Lord Stevens that much more needs to be done and that there needs to be real budgetary restraint by the Commission for the next few years. We have saved €12 billion against the ceiling that was there in the 2005 financial perspective, but there is much more.

While we are on this topic, I would say to the noble Lords, Lord Pearson of Rannoch and Lord Willoughby de Broke, that I do not recognise the numbers that they were quoting. The net contribution of the UK to the EU in 2010-11 is estimated at £7.6 billion, up from £4.7 billion in 2009-10, but of course the reason for that increase is because of the give-away that the last Government gave on the UK’s abatement. Having stepped up very significantly to the new level, the OBR’s figures are that the numbers now remain broadly level over the next few years.

As well as financial discipline, it is equally important that Europe pursues an ambitious agenda for growth.

[Lord Pearson of Rannoch]

For clarity’s sake I should say, following on from what the Minister has just said about our gross and net contributions, that he is talking about the Treasury figures. The figures that we gave are from the pink book and include all our contributions to the European venture, whether they go through the Treasury or not, such as the DfID budget. So I am afraid that our figures are the correct figures.

[Lord Sassoon]

My Lords, I was quoting the figures of the independent Office for Budget Responsibility, not the Treasury’s own figures, but let us turn to the more important issue: that Europe must pursue an ambitious agenda for growth. In the single market, I believe that we have one of the most powerful tools to ensure strong, sustainable and balanced growth not only across the EU but for the UK. The noble Lord, Lord Watson of Invergowrie, quoted all the figures that Ministers would customarily quote, so I am very grateful to him for helping me out. I will simply emphasise that this is a market worth €12 trillion and home to 500 million consumers.

Despite what the single market has achieved to date, however, so much more can still be done, so in answer to noble Lords, including my noble friend Lady Noakes, who rightly argue that we need assessment for well informed debate, I should say that I agree up to a point. When it comes to the forward-looking challenges as to how we are going to get the most out of the single market, yes, we need the analysis. That is why, for example, in February this year BIS published a significant study into the effects of completing the single market and the 7 per cent increase in UK GDP that could be achieved if we press forward with that project. A truly free and open single market in services and the creation of a digital single market could add as much as €800 billion to EU GDP.

In answer to the second and third so-called misconceptions mentioned by the noble Lord, Lord Pearson of Rannoch—I do not shy away from those but am very happy to address all four of them head on—I believe that it is only by being in the EU that we will drive forward the benefits of the single market and capture the very significant gains that remain out there. There is a lot to be done and it is very frustrating that things do not move forward, but it is easy to say that we can be outside it and somehow get all those benefits. If the market is to be driven forward we need to be there, at the table. We can unlock a further €60 billion of benefits to the EU from world trade through completion of EU free-trade agreements with key markets such as India, Canada and Singapore. Again, I do not agree with the noble Lord about what we could achieve in these areas if we simply had our own seat at the WTO. Just as we are doing here in the UK, we have to drive down the regulatory burdens and costs of doing business across the EU—something that was identified by a number of noble Lords in this debate.

Finally, in response to these questions of whether we could be outside it and have the benefit of the free market, the comparison that the noble Lord, Lord Stoddart of Swindon, made with Norway, for example, is simply wrong. I am grateful to the noble Lord, Lord Lea of Crondall, who has already addressed that point. Norway is a small country blessed with huge oil and gas reserves, which is what makes it principally different from countries such as the UK. We cannot simply therefore step somehow magically into their shoes. I also say to the noble Lord, Lord Stoddart of Swindon, that while overall we have to fight to increase our share of world trade and our exports, a trade deficit, taken narrowly, is not in itself a bad thing. We have to recognise the benefits of trade to both sides, and therefore cannot simply dismiss the benefits that we have from EU trade by saying that we have a deficit.

The question about the benefits of going forward but nevertheless improving the EU market is precisely why my right honourable friend the Prime Minister secured a commitment for an EU growth test: to filter out EU legislation that is harmful to growth and jobs. The Commission’s proposed financial transaction tax is one such example. The European Commission itself expects that such a tax could reduce EU GDP by as much as 3.4 per cent or €422 billion—madness. More than that, as my right honourable friend the Chancellor has said it is “a bullet aimed”, squarely,

“at the heart of London”.

I say to my noble friends Lord Ahmad of Wimbledon and Lord Liverpool that the financial transaction tax requires unanimity to go forward, and that it will not get UK support. However, just as we have done and will do on directives in financial services and on the EU budget, we will continue through the current crisis to defend the full range of Britain’s interests in Europe.

Having picked up some of the important general themes that noble Lords have raised in this debate, I shall turn briefly to one or two questions about the analysis here. I certainly agree with my noble friends Lord Risby and Lady Falkner of Margravine and the self-styled noble and maverick Lord, Lord Desai, that this all goes much wider than some narrow cost-benefit analysis. Once we start this discussion, such an analysis is important but not nearly sufficient. I also agree with my noble friend Lady Falkner that there is plenty of material out there; it is not that the debate cannot be informed by a whole range of credible and indeed less credible commentators. In 2010 the Treasury reviewed that literature, which is available on the Treasury website, so we do not shy away from looking at the issue from time to time. There was also the 2005 study, which again is available on the Treasury website. I hope that it is of some reassurance to the noble Lords, Lord Bilimoria and Lord Empey, that we at the Treasury do not spend our time doing these studies on a daily basis—I hope they would expect us to be getting with doing some more valuable work with our time—but from time to time we look at what the outside experts are coming up with.

We should remind ourselves that, in addition to the costs and benefits of the EU, we as a nation risk downplaying our prospects at every turn. It is important to recognise, for example, that in the World Bank’s ease of business rankings the UK has got back into the top 10 and is now ranked seventh. That is critical. So I believe that Britain is well placed. We have lot to do internally in the UK, of course, and I have no doubt that there will be more discussion about that next week. As I said, the EU has much more to do with our active and positive participation.

I take the points made by the two noble Lord Davieses who have spoken in this debate about the location of manufacturing and the benefits that we get from it. I agree. On other issues of trade and investment, my noble friend Lord Ryder of Wensum referred to recent remarks by the chairman of the Chinese sovereign wealth fund, the CIC, on the eurozone. That gives me an opportunity to remind the House that the same chairman of the CIC was here two weeks ago with a very large delegation of Chinese officials and businesses, looking at the opportunities in UK infrastructure. While others have to go to Beijing begging for bailouts, we are very pleased to receive delegations here to look at opportunities in the UK. That is the context in which we should see this debate.

The noble Lord, Lord Kakkar, referred to another area of great strength for the UK: our world-beating excellence in clinical research. He made some telling points but, on the broad point about working time regulations, I stress that the Government are committed to the view that working people should decide the hours that they work, and we will continue to make that abundantly clear to the European Commission.

I did not get many questions directly, but a point was specifically addressed to me by my noble friend Lord Stevens of Ludgate about the UK’s exposure to losses of the ECB. I can confirm that net losses or profits are allocated to euro-area national banks and that non-euro-area national banks, such as the Bank of England, do not receive profits or losses from the ECB. The UK makes a contribution to the capital of the ECB but that is simply in relation to the bank’s running costs.

Finally, we had two interesting and remarkable contributions at the end from a more historical perspective from the noble Lord, Lord Gilbert, and my noble friend Lord Cormack. I merely say that, of those two contributions, I was rather attracted by and appreciate that of my noble friend and his important reminder of the insights that the late Lord Dahrendorf brought to these discussions and to the country more broadly.

In brief conclusion, let me be absolutely clear that the Government believe that leaving the EU is not remotely in our national interest. Standing on the outside, we would still be subject to the rules made in Brussels on the single market but powerless to influence them. Rest assured that rules written without us will not generally be in the UK’s national interest. We have always been the driving force for open markets and free trade in the EU, and that is a role that we will continue to fulfil to ensure that the UK’s voice is still heard and the UK’s interests are protected.