EU: Economy

Debate between Lord Sassoon and Lord Reid of Cardowan

Wednesday 2nd November 2011 Lords Chamber

[Lord Sassoon]

My Lords, without wishing to encourage a huge rush of additional speakers, we already have a decent number of very interested and expert noble Lords down for a debate on Europe tomorrow. Indeed, this House is taking the matter very seriously.

[Lord Reid of Cardowan]

My Lords, is it not obvious to all but the most blinkered zealot that, whether the Greeks default or not, in the medium to long term the only prospect of survival for the eurozone—even that is not guaranteed—is with such a centralisation of political and fiscal ancillary powers that we would effectively have created qualitatively two different European structures? Will the Government enlighten us on what contingency planning they are making for the day that will inevitably come when that decision or those decisions have to be made?

[Lord Sassoon]

My Lords, I do not accept the very simplistic idea that we are headed for a two-speed Europe. There is already a variable geometry in Europe in other areas apart from the euro, such as justice and home affairs, where there are different arrangements for certain member states. The critical lesson out of all this is that the UK must stick to its own fiscal deficit reduction policies because it is those which are giving us the benefit of 10-year interest rates today at 2.2 per cent, whereas countries such as Italy, which had interest rates very similar to ours before the financial crisis, have interest rates not at 2.2 per cent but at 6.2 per cent. So we must stick to keeping our own house in order.

Eurozone Crisis

Debate between Lord Sassoon and Lord Reid of Cardowan

Thursday 27th October 2011 Lords Chamber

[Lord Sassoon]

My Lords, first, I shall try to clear up what I think is a small confusion in relation to what the IMF can or cannot do under its own rules and what we would be prepared to be part of or not part of. Of course, the IMF is involved directly in the Greek package, as it is with two other packages within the eurozone. So three programmes out of the 53 in which the IMF is currently involved are indeed eurozone ones and that is perfectly proper and we support the IMF’s commitment in adjustment programmes of that kind. We would not support the IMF participating in some special purpose vehicle fund, but I do not believe that it has the ability to do that anyway and the UK certainly will not be involved in that. If China and other countries want to be involved, that is fine and that is their decision, but we will not be involved and we will not support any IMF involvement in that route. We will support the IMF's involvement in country adjustment programmes, such as it has done throughout its history. That is what the IMF is there for. There may be some confusion on that.

On tax co-ordination, first, the UK Government stick strictly to their position that we believe that taxation is, and should remain, a matter of national competency. It is up to the eurozone if it wants to propose some different arrangements within the eurozone consistent with the need for greater fiscal co-ordination in it. On the one specific proposal that has come forward so far—the financial transaction tax—first, we have said that there may be some basis for such a tax but only where it is globally applicable because if it is applied in Europe it will simply drive business away from Europe and, critically, away from the City of London, and that makes no sense. Secondly, in bringing forward that proposal the Commission was completely clear that the article under which it comes forward is one on which unanimity is required and therefore QMV could not force us into it.

[Lord Reid of Cardowan]

My Lords, I do not in any way want to belittle any of the efforts that have been made, but does the Minister accept that over the past 24 hours in Europe we have been arguing over the size of the sticking plaster on a corpse that has an underlying chronic problem? Did he not indicate the nature of that problem when he said that the eurozone will work only if the countries in it approximate towards relative competitiveness? Is not the key problem that that should have preceded the onset of a single currency? The delusion that you could politically impose a single currency on such variegated competitive levels inside 17 countries was always bound to end with the chronic problem that we are facing. In view of that, what is the strategic thinking of the Government? Do they now maintain that the present membership of the euro is an inviolate and irreducible minimum? If they do, do they therefore accept that it can exist only with the concentration of ever closer political and fiscal union inside the eurozone? Can the Minister explain how support for ever closer political and fiscal union inside the eurozone accords with the Government’s view of opposition to ever closer political union within the wider 27? If not a contradiction, is there not at least a very difficult paradox underlying the strategic position in which the Government now find themselves?

[Lord Sassoon]

First, it is probably not productive to rake over too much of the history of this. An awful lot of those who advocated the creation of the euro and the UK’s participation in it have been proved completely wrong by the way that events have unfolded over recent years. Therefore, arguing about whether competitiveness should have come before or after the creation of the euro is more for historians. That is why it was in my right honourable friend the Chancellor’s Statement that the competitiveness of the euro-periphery countries, vis-à-vis Germany as the benchmark of economic and industrial efficiency in Europe, is a critical issue that has to be addressed; and that the second dimension is the competitiveness of the EU as a whole in a global economy. I completely agree with the noble Lord that this has to be central to the solution going forward.

As to who should or should not be in the euro and what the size of it should be, that is for the euro to work out. The Government have no view on whether euro membership is inviolable. We simply say that that is a matter for the eurozone. What we want to see is these issues of competitiveness within and without the eurozone very high on the agenda. As far as dealing with internal competitiveness is concerned, that inevitably means a degree of closer fiscal co-ordination, the inevitability of transfer payments between members and all the logic that flows from that.

The competitiveness of the EU27 and the outward-facing euro are completely different matters that do not require similar questions of political union. We have a very good paradigm in which the EU27 can co-operate. It is just a matter of them focusing on the structural, market, competition and financial regulation issues, none of which requires any closer political union. They are technocratic, single-market trade and economic issues.

Savings Accounts and Health in Pregnancy Grant Bill

Debate between Lord Sassoon and Lord Reid of Cardowan

Tuesday 7th December 2010 Lords Chamber

[Lord Sassoon]

My Lords, I do not think that we should stray into a constitutional debate this afternoon. The point that I wanted to make was that this Bill was certified by Mr Speaker and that it was not a certification that we should be challenging. As far as I am aware, the Bill was dealt with in another place exactly as other money Bills have been, and the suggestion that there has been some improper behaviour by the Government on this matter, or that somehow there was something different—

[Lord Reid of Cardowan]

I do not think that anyone is suggesting that there has been improper conduct. We did not stray into this territory—the Minister led us there by describing in some detail the process. If he is now saying that he does not know what the process was, will he indicate to us whether his original statement was accurate or an assumption on his part?

[Lord Sassoon]

My Lords, as I said before, I have given a description of the process and indicated that there was no question that the Government in any way behaved in some out of the ordinary way with this Bill, as has been hinted at. I really think that—

Ireland: Financial Assistance

Debate between Lord Sassoon and Lord Reid of Cardowan

Monday 22nd November 2010 Lords Chamber

[Lord Reid of Cardowan]

My Lords, I thank the noble Lord for repeating the Statement. I wholeheartedly believe that the Minister and the Government are correct to extend their assistance and solidarity to Ireland at this time, not least because of our closeness as neighbours and trading partners and because of our mutual interests on the island of Ireland itself. It is understandable that the noble Lord and the Government maintained their silence on discussions up to an appropriate point.

Will the Minister ensure that, while everyone understands that extended assistance of this nature will require discipline and considerable restraint on the part of the Irish, the British Government will never lose sight of the fact that ultimately it will be growth that will take Ireland and many other nations out of the position in which they find themselves? Therefore, any constraints placed on the Irish as a condition of the loans and the assistance that we give them should not, if we can help it, constrain that growth to the detriment of Ireland's success.

[Lord Sassoon]

I am grateful to the noble Lord for his remarks. It is important to remember that the IMF is very much involved in the negotiation of the terms of the loan and brings to the party very considerable experience of putting together loan conditions in similar situations. From its previous experience, it will be well seized of the need to see the Irish economy—along with other economies that have this problem—growing in future.