Brexit and the EU Budget (EUC Report)

Debate between Lord Thomas of Gresford and Lord Butler of Brockwell

Thursday 6th April 2017 Lords Chamber

[Lord Butler of Brockwell (CB)]

My Lords, the members of the sub-committee which produced this report have perhaps been blowing their own trumpets. However, in this case we are justified in doing so because, under the skilful chairmanship of the noble Baroness, Lady Falkner, this report is a good example of the service which your Lordships’ House can perform for Parliament and the country as a whole.

As the exposition of the noble Baroness, Lady Falkner, made clear, the report covers two principal aspects. First, it describes and seeks to quantify the elements of the EU’s budgeting arrangements which may contribute to a claim on the UK for a payment or payments from the UK after we leave the EU. Secondly, it seeks to establish the legal position of the UK’s liability for such payments. Those legal aspects were discussed in the contributions of the noble Lords, Lord Davies of Stamford and Lord Thomas of Gresford, and I am not going to dwell on them.

It is fair to say that it surprised Members of the Committee —it certainly surprised me—to hear the legal advice that, in the absence of an agreement, the EU will have no means of enforcing any financial liability against the United Kingdom. I note that if the advice is correct, however, the phrase “a divorce settlement” is misleading. In a divorce a court determines the liabilities of the parties and has the means to enforce that determination. In this case the legal advice is that in the absence of an agreement to the contrary, the jurisdiction of the ECJ ends on our departure. Again, I do not want to dwell on the legal aspects. I have used the phrase, as have others, “in the absence of an agreement”, and I emphasise it. Of course we want an agreement. We have much to gain by getting one and a great deal to lose by not doing so. It is important to note, as the noble Lord, Lord De Mauley, said, that in the aspect of finance it is the EU which will lose in the absence of an agreement. Since the UK’s gross contribution is currently one-eighth of the EU’s annual budget, there is much at stake here, so no wonder it wants to make progress on this issue before discussing the other aspects of our future relationship.

Both sides should want a reasonable agreement on this issue. What should a reasonable agreement look like from the UK’s point of view? The Government have said, I believe rightly, that the UK would,

“continue to honour our international commitments and follow international law”.

The Chancellor of the Exchequer has said something similar about meeting our obligations. Monsieur Barnier is quoted today as emphasising the importance of an agreement to the EU, although he has quoted an exit payment approaching a figure of £60 billion. The report seeks to identify and discuss the main elements, and like the noble Lord, Lord Thomas of Gresford, I should like to take them in turn.

First, as the noble Lord, Lord Thomas, pointed out, the UK will be leaving the EU some 19 months before the end of the current multiannual financial framework. That framework sets a ceiling on the EU’s expenditure. It is not a commitment to expenditure. The UK was a party to it but it does not commit us to spending up to the ceiling which we agreed in that negotiation. If the UK’s gross budget contribution of 12.5% ends in March 2019 it will leave a big hole in the EU’s spending plans, and if instead of ending its contribution on departure the United Kingdom were to continue its budget contribution until the end of the current period of the framework, the committee calculates that that might cost the UK some £15 billion. But as I have pointed out, the MFF sets a ceiling; it is not a commitment to spend, and here I differ from the noble Lord, Lord Thomas.

The commitment to spend is set by the annual budget—

[Lord Thomas of Gresford]

My Lords, with respect, I suggested not that we were committed to pay under the multiannual financial framework, but that we are committed to spend on the budgets which rely on the MFF in order to come to a conclusion of what can be spent.

[Lord Butler of Brockwell]

I accept that but the point is, as the noble Lord has said, that the budgets for the periods after we leave have not yet been set so we are not committed to them. The annual budget for 2019 and 2020 has not been set, so I regard any claim on the UK in respect of those years as weak. As paragraph 46 of the report points out, this view seems to be shared by the German Finance Minister, Wolfgang Schäuble, who has said that it will be necessary to negotiate a new MFF on the assumption that the UK contribution ceases in 2019—when we depart from the EU. Continuation of the UK’s payment under a multilateral financial framework that continues after we have left is not in fairness a strong claim on the UK.

The second element of a possible EU claim is the commitments made in budgets to which the UK has been a party, which will remain to be paid after March 2019—the so-called reste à liquider, or remainder to be liquidated. Like others, I regard this claim as stronger. There is probably no legal obligation to make these payments after the UK has left the EU, but it may be argued that there is a moral obligation since the commitments were entered upon and budgeted for while the UK was a member.

The EU estimate of the commitments that will be outstanding at the end of 2020 is £254 billion. We do not have an estimate for the outstanding commitments at the end of March 2019, but since commitments contracted for but not paid tend to diminish as the MFF wears on, the figure at the end of March 2019 for outstanding commitments may be higher. However, as has been pointed out, some of these may never materialise. Moreover, some commitments are to the UK itself. These should be netted off, after which the UK share of commitments to other partners is unlikely to amount to more than £10 billion. If the UK were to agree to meet these it would be sensible to do so not in a lump sum but over the next few years as the commitments materialise.

It is right to add that the respected Brussels think tank the Bruegel Institute produces a much larger figure for commitment outstanding, including a large element under the heading, “significant legal commitments”. These are commitments pledged in legal terms but not yet budgeted for. Since they are expected to be budgeted only over a long period, they are not included in the EU’s balance sheet nor in the reste à liquider. In this case it seems difficult to argue that the UK has any liability for these unbudgeted items after leaving the EU.

Thirdly, there is the possibility of a claim based on pension liabilities for past or present employees of the EU or its institutions. Here I agree with the noble Lord, Lord Thomas of Gresford, that this is a weak basis for a claim. UK nationals constitute some 4% of EU staff at present and have never been more than 8%. The Commission currently estimates its actuarial liability for future pensions at €63.8 billion. However, pensions are paid out of each year’s budget. Employees make a one-third contribution to them. Like the noble Lord’s, my view is that, on leaving the EU, the UK has no greater liability to contribute to the annual pension bill that someone leaving a club would have to contribute to the pensions of past and present employees. The nationality of these employees is immaterial. Even if the UK were to make an exit contribution based on the proportion of UK nationals employed, and if the EU’s calculation of a total actuarial ability of €63.8 billion is right—the Bruegel Institute puts it much lower than that—it would not amount to more than a handful of billion euros.

Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015

Debate between Lord Thomas of Gresford and Lord Butler of Brockwell

Monday 26th October 2015 Lords Chamber

[Lord Butler of Brockwell (CB)]

My Lords, I shall try to put my points briefly. I do not want anything that I say to be taken as implying a lack of sympathy with the concerns of those who have spoken about the effects of the Government’s policy. Like other Peers, I have had moving emails from many such people who expect to lose benefits through the statutory instrument. However, I want to confine myself to the constitutional issue. I usually agree with the noble Baroness, Lady Thomas, about statutory instruments. As has been pointed out, it is a very rare event that the Government are defeated on a statutory instrument; it has happened only five times since the war, but that does not mean that the House could not do it. But there is a combination here, because this is a statutory instrument about a budgetary matter central to the Government’s fiscal policy; it is that combination that is unprecedented, which is why it would be beyond the House’s constitutional powers to defeat the Government today.

[Lord Thomas of Gresford (LD)]

Would the noble Lord wish to amend the Companion to the Standing Orders and guide to the Proceedings of the House of Lords? It states:

“The House has resolved ‘That this House affirms its unfettered freedom to vote on any subordinate legislation submitted for its consideration’”.

Is this not subordinate legislation submitted for our consideration?

[Lord Butler of Brockwell]

What I am saying is that the combination of the convention about statutory instruments and the fiscal significance of this one is what makes it special.

--- Later in debate ---

[Lord Thomas of Gresford]

Any!

[Lord Butler of Brockwell]

Any—but not since 1911 have a Government been challenged on a matter of this sort, which establishes what the constitutional conventions of the House of Lords are. In that respect—

Counter-Terrorism and Security Bill

Debate between Lord Thomas of Gresford and Lord Butler of Brockwell

Wednesday 4th February 2015 Lords Chamber

[Lord Thomas of Gresford]

My Lords, I will not follow my noble friend Lady Hamwee and the noble Baroness, Lady O’Loan, on Amendment 16A but will turn to Amendments 18 and 19 in this group.

The Minister may recall that in Committee I asked what the Privacy and Civil Liberties Oversight Board was for and I think that Amendment 19, particularly in paragraph (b), is a rather elegant solution to the question I posed in that, obviously, the board will be chaired by the independent reviewer and he can decide in which direction he wishes to take the board and to what degree it should cover the ground that he feels to be necessary. I welcome Amendments 18 and 19 and thank the Government for thinking again on these issues.

There is only one outstanding issue—the degree to which the board would have access to sensitive material. That will have to await another day when, no doubt, the independent reviewer will be able to transfer to the Minister concerned at the appropriate time the degree to which he feels the board requires access and is inhibited by the fact that it does not see the same papers as he will see. The board would clearly be much more efficient if it was cleared for security purposes to the same degree as the independent reviewer.

The issue in Committee was whether the board was for oversight or support. That question has been soundly answered. Clearly the board is there to support the independent reviewer and I am grateful to the Minister for making that clear.

[Lord Butler of Brockwell (CB)]

My Lords, I too am grateful for the consideration that the Government have given to this matter and, in particular, to the powers of the independent reviewer. I am also grateful to the Minister for the frankness of his speech and for the way he has reported the reactions of the independent reviewer, which are obviously not an absolutely wholehearted welcome. I think it is excellent that the powers have been extended in the way that they have been.

I have an open mind on the amendment of the noble Baronesses, Lady Hamwee, Lady O’Loan and Lady Ludford. I think that it would be good if the independent reviewer had the power—not the sole responsibility—to look at any provision of immigration and nationality law to the extent that it is used for counterterrorism purposes. That is clearly within his remit. The Minister himself said that it might very well be that Mr Anderson will be asked to be the person to report on the operation of the closed procedures in Part 2 of the Justice and Security Act. Therefore, I am rather sympathetic to those amendments and I do not think it would be very difficult for the Government to accept them.

However, I am sympathetic to the Government’s wish not to have too much duplication in this area. As a member of the Intelligence and Security Committee, which also roams over this area, I would like to say that we, too, have no problem with Mr Anderson. His co-operation with us is very good. We have no difficulty with the fact that we are looking at things which he is also looking at.

On his reservation about access to secret material, I am afraid that this intensifies my concerns about the very existence of the Privacy and Civil Liberties Board. I think it is an improvement that Mr Anderson is to be consulted on and will have influence over the appointment of the members of the board and that it is there to support him. He has asked that he should have a written assurance that he should have access to all the secret material that he wants. I am sure that the Government would not have the slightest difficulty in giving Mr Anderson that assurance. But it complicates his relationship with the board, because, as the noble Lord has just said, the Government might well have reservations about that very secret material—the freedom to have the most secret material there is extended to the members of the board. I think that may be unnecessary. Clearly it would be difficult for Mr Anderson if he has access to material and the board has not.

All this leaves me with doubts about the utility of the board. I am glad that it is there to support Mr Anderson. I know that he needs more support. In responding to this, can the Minister say whether it is intended that the secretariat of the board should be the extra support that Mr Anderson needs? I do think that he needs extra support, but I would like to see the support there without the existence of the board, the utility of which I greatly doubt.

Justice and Security Bill [HL]

Debate between Lord Thomas of Gresford and Lord Butler of Brockwell

Monday 9th July 2012 Lords Chamber

[Lord Thomas of Gresford]

As the noble Lord, Lord Henley, was speaking I wondered whether the word, “proper” is supposed to mean “contrary to convention”. It would be impossible to have a convention across all departments where there are Select Committees so it was conventional in one department to release this information but it might be conventional in another to release more or less. It would be almost impossible to get a standard of disclosure of information across the board which it is proper to disclose. I am very grateful for what the Minister has said on that issue.

[Lord Butler of Brockwell]

I am grateful to the Minister for saying that he will, with counsel, look at the drafting of this again, because it is clear from the contributions that were made to the debate that many of us do not understand entirely what is meant. I do, indeed, remember the Osmotherley Rules very well. I did not draft them myself—not surprisingly they were drafted by an official called Edward Osmotherley—but I do remember invoking them before Select Committees on various occasions and I do recognise as valid categories the categories that the Minister has mentioned. However, I think that the noble Lords, Lord Lester and Lord Thomas, have a good point when they say that, as drafted, this appears to be entirely subjective on the part of the Minister and the Minister, under this power, would be able to withhold anything which in his opinion was not proper. The Osmotherley Rules were instructions from Ministers to officials, but were, I think, generally accepted by Select Committees—not always; they were sometimes challenged—and were certainly the rules by which officials were guided. They were known and became accepted. The way that this is drafted introduces a more subjective element.

On the basis that the Minister has said he will look at the drafting and also that he assured the House that it is intended that the Minister will use this discretion sparingly, I beg leave to withdraw the amendment.