Euro Area

William Cash Excerpts

Tuesday 21st July 2015 Westminster Hall

[John Redwood]

Indeed. After I secured the debate, no less a figure than the President of the French Republic made an important speech saying that the recommendations of the five presidents of the European Union do not go far enough. I thought theirs was a blockbuster recipe for pretty comprehensive union, but the President of France has said that he would like them to go further and faster. He would like to supplant the current European Parliament, or put alongside it a euro area parliament, to provide some democratic accountability to the increasingly large and important decisions that the Eurogroup makes.

[Sir William Cash (Stone) (Con)]

Will my right hon. Friend also note that, according to the press release I have here, President Hollande said that the eurozone needed a specific budget as well as its own government and parliament? In other words, they are going for political union or bust in the eurozone.

[John Redwood]

My hon. Friend is exactly right. The President of France has gone even further than the five presidents. I will briefly highlight what is in the rather lengthy and important report, because it has escaped most comment and attention in the United Kingdom. The five presidents say:

“For all economies to be permanently better off inside the euro area, they also need to be able to share the impact of shocks through risk-sharing within the EMU. In the short term, this risk-sharing can be achieved through integrated financial and capital markets”.

That is pretty comprehensive union, which they call “private risk-sharing”. Those markets would be

“combined with the necessary common backstops, i.e. a last-resort financial safety net”—

presumably that is public finance. They continue:

“In the medium term, as economic structures converge…public risk-sharing should be enhanced through a mechanism of fiscal stabilisation for the euro area as a whole.”

That is rather wordy and slightly opaque, but I think the meaning is clear. The five presidents have recognised that to have a successful single currency, taxpayer money needs to be standing behind the financial institutions—the banks and others—and the states involved in that financial union. That is exactly the issue that the tragedy of Greece has highlighted.

Euro banknotes have no symbols of French or German taxpayers in the way that our banknotes have the Queen as a representation of the full power of the sovereign in Parliament and the revenues going into the Treasury. Euro banknotes do not have that, for the good reason that the symbols could not be agreed and there was a bit of reluctance to put the full power of taxpayers behind the banknote. They have a misleading symbol on them: the European Union flag. One has to ask why that is, when the United Kingdom—the largest country in the “outs”—has made clear that we have no wish to put any taxpayer money or finance behind the euro, because it is not our project and we are not part of it. That illustrates a much bigger problem that the eurozone is grappling with: who stands behind its banks? Who stands behind the member states when they get into financial difficulties? That problem has come out in the Greek struggle.

The five presidents go on to say:

“Progress must happen on four fronts: first, towards a genuine Economic Union…Second, towards a Financial Union that guarantees the integrity of our currency across the Monetary Union and increases risk-sharing…This means completing the Banking Union and accelerating the Capital Markets Union. Third, towards a Fiscal Union that delivers both fiscal sustainability and fiscal stabilisation”—

that means sharing tax revenues, basically—and

“finally, towards a Political Union that provides the foundation for all of the above through genuine democratic accountability”.

They go on to say that there will have to be a lot more common decision making or shared sovereignty, although I would call that the gift of sovereignty to a higher body. They say that

“this would require Member States to accept increasingly joint decision-making on elements of their respective national budgets and economic policies. Upon completion of a successful process of economic convergence and financial integration, this would pave the way for some degree of public risk sharing”—

that is, countries using other people’s taxes to sort out their own problems—

“which would at the same time have to be accompanied by stronger democratic participation”.

[John Redwood]

I hope that it would be the United States of Euroland, but my hon. Friend is right. I hope that the Minister will say that we will not be part of it and that a plan exists to negotiate a new relationship for the United Kingdom. We will clearly need such a relationship, because no party in this House wants the UK to risk-share on that basis, putting in British taxpayer money to help Greece, Portugal or whoever is in trouble due to the euro.

The five presidents want a euro area system of competitiveness authorities that will try and create commonality of policy and outturn across the Union. They claim to have largely achieved the goal of bank supervision with the setting up of the single supervisory mechanism, but the single resolution mechanism is not fully implemented, and they want to complete a financial union, launching a common deposit insurance scheme and a full capital markets union. They want to get on with those immediately and not await treaty change, which they will need for some of their other proposals.

The five presidents ultimately want a single European capital markets supervisor, which would have great implications for the City of London and the conduct of our markets and our regulatory system were we to take part. They say that

“regulation creates incentives to risk-pooling and risk-sharing and ensures that all financial institutions have sufficient risk management structures in place and remain prudentially sound.”

Even more importantly, they go on to say, referring to the capital markets union:

“Taxation can also play an important role in terms of providing a neutral treatment for different but comparable activities and investments across jurisdictions.”

Will the United Kingdom be able to opt out of this capital markets union? If we sign up to it, does that mean that we would have to accept common European taxation on this rather important business interest for the UK?

Last, but by no means least, the report contains a heading referring to a euro-area treasury, under which it states:

“The Stability and Growth Pact remains the anchor for fiscal stability and confidence in the respect of our fiscal rules. In addition, a genuine Fiscal Union will require more joint decision-making on fiscal policy”—

in other words, a euro-area treasury.

[Sir William Cash]

My right hon. Friend knows this, but there is benefit in getting it on the record. The Germans and the French broke the stability and growth pact three years in succession with impunity when it suited them. On the question of how far our Government would go in accepting the proposals, does he agree that the creation of a eurozone is only a de facto organisation and not a legal one? We are caught up in this. When the fiscal compact was proposed, our Prime Minister, having listened to us, decided that he would veto. Would we not want him to veto all this as well and to make it clear that that is the case now?

[John Redwood]

My hon. Friend is right to draw attention to the legal complexities that the euro area and the EU face. He is right that there is no formal, treaty-backed legal entity of the euro in full. There is the relatively informal euro-group of Ministers, who meet monthly just before the full economic affairs council, to settle euro business.

The process has gone a bit further, because of course there is a separate legal entity called the European stability mechanism, which is a formal entity for bailing out or offering loans to euro states in need of additional money. It is currently the object of the entreaties of the Greek state as the Hellenic Republic seeks a long-term loan to replace the short-term loan that the European financial stabilisation mechanism has just provided to see it through July. Greece is currently in negotiation over €86 billion—Germany would like it to be less—of possible money from the ESM. There is a legal structure to do some of the financing but, as my hon. Friend rightly says, they probably need treaty modification and a firm legal basis for the euro. In recognition of that, the five presidents suggest that they may need to move towards having an elected-President of the eurozone, which I imagine would have full legal authority and would therefore give personality to the zone as a legal entity and which would make things easier from their point of view.

I am conscious that several colleagues have turned up to join in this debate and, with your permission Sir David, I would like to see whether they can be accommodated, so I will move rapidly on to my questions to the Minister. It seems that much of what the five presidents want is perfectly reasonable in the context of people who have set up a currency that does not yet have a country to love it or back it. They desperately need to make a lot of progress to create a political union, to create a flow of tax revenues and to provide the financial solidity that a main currency usually has, so I can see their agenda. We have already heard the French President say this week, “Let’s go further and faster”, so we know the direction of travel.

Will my hon. Friend reassure us that the UK could not conceivably travel that route? Having made the crucial decision not to join the euro, the British people and Parliament are not going to want to go down the route of political union. Will he also say where the British Government will now stand on the challenge or opportunity of full banking and capital markets union? There would be great hazards in the UK signing up to the full banking and capital markets union, because that would, by implication, drag us into the financing of the euro area and involve us in decisions that it would properly want to make for itself, as we are not a full member. I would be grateful to hear the latest Government thinking on how we can have our own independent markets but co-operate with and work alongside the euro area as it creates its capital markets union.

It seems to me that there will definitely have to be treaty change. The five presidents are suggesting that they can get by without treaty change until 2017, after which they will need it. From the UK’s point of view, that is an inconvenient date, because we would like treaty change as a result of our renegotiations. As the gap between the likely date of our referendum and the date for the euro area considering treaty changes is quite narrow, might one part of our renegotiation be to say to our partners in Europe, “As you need treaty changes quite soon and we would like them now, let’s bring the thing together”? Is it not the case that the treaty changes we need relate not only to the fact that the EU already has more power then we would like over aspects of our lives, but to the fact that it is about to take a lot more power to consolidate the euro? That is a step that we could not conceivably take.

The detailed issues under all that relate to who is responsible for recapitalising failing banks—for example, who is going to recapitalise the Greek banks? Are we fully insulated from all that? Are we now happy that the formulation from the European financial stabilisation mechanism is watertight so that there is no recourse to British taxpayers in the temporary loan to Greece? Can we ensure that all future bailout loans and other advances to euro states come entirely from euro funding and not from EU legal structures, which have added complications? Can we urge the euro area to ensure that it completes its banking arrangements as quickly as possible? It would be much to the convenience of not merely the Greeks but everyone else who needs to deal with Greece that its banks do not shut down for several weeks and can reopen, as they have done partially today, with a full service, so that they can be a proper part of the European market and the world economy.

This is a great opportunity for the UK from which the Prime Minister should take heart. I admire the honesty of the five presidents coming out with all this now, despite the Greek crisis and the knowledge that the UK wishes to negotiate a new relationship. I think it makes things much easier for us, and we should share that fact with the British public, which is what I am trying to do in my modest way today. We must say that there is a big plot afoot—a wild ride to political union that is not something to which the UK can sign up. We should not get in their way, but the price of our happy consent to their new arrangements must be a new set of arrangements for us to get back powers that insulate us from all this. We need to try to find a way to work alongside the euro without being part of it.

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[Sir William Cash (Stone) (Con)]

It is a great pleasure to serve under your chairmanship, Sir David. Perhaps I should put on the record the fact that this morning I was re-elected as Chairman of the European Scrutiny Committee.

In a nutshell, everything that my right hon. Friend the Member for Wokingham (John Redwood) said is completely true. The current situation represents both a massive challenge and an opportunity for the Government. On a number of occasions, when the Prime Minister has been confronted with such difficult, challenging questions, he has decided to do the right thing. This debate, however, demonstrates that there is another new opportunity because of the disarray in the European Union.

The question of the relationship between the eurozone and the rest of the EU provides us with an opportunity, in particular given what President Hollande has said about wanting a eurozone budget, Government and Parliament, as I said in my intervention. That is completely inconceivable for the United Kingdom, the Government and our Parliament. We would be driven inexorably into all the nooks and crannies of those arrangements, because we are bound to be affected by them, as we already have been in the crisis that has engulfed Europe for the past five or six years and that I believe has been apparent since the Maastricht treaty in 1990.

The question of what President Hollande said a few days ago is important. In my judgment, what is significant is that he has a real problem with Germany—I will come on to Germany—because the question for France is one of sovereignty and the question for Germany is one of sharing the risk. That will present a significant problem between France and Germany, which is why Angela Merkel and President Hollande clearly had severe differences of opinion. This is a moment when it is imperative for the British Government to make their position clear. With France and Germany at loggerheads over the question of sovereignty and sharing economic risk, we have a classic Waterloo moment, when we should simply go straight through with our cavalry and say through the Financial Secretary to the Treasury and the Prime Minister what we will not have, that we want clarity and that this is not the time for fudge. This is the time for decisive action and to make it clear what we cannot possibly accept.

Other matters to be looked at include the purposes that lie behind what Wolfgang Schäuble has been edging and pushing, nudging and driving, during the Greek crisis. My right hon. Friend the Member for Wokingham and I each wrote essays in a recent book called “Visions of Europe II”, following on from “Visions of Europe”, which came out in 1993 and in which I quoted myself. I said, I hope not immodestly, that

“the answer to the German question lies primarily in Germany itself”,

but to

“hand her the key to the legal structure of Europe with a majority voting system gravitating around alliances dependent on Germany simply hands to”

Germany

“legitimate power on a plate.”

We can say that that is exactly what has happened since I wrote those words in 1990.

Furthermore, because I wanted to be positive, I wrote:

“Britain wants to work together with Germany in a fair and balanced relationship, based on free trade, co-operation and democratic principles. She does not want to be forced into a legal structure dominated by Germany. Plans for a united Europe stray into the darkest political territory, and must be firmly rejected.”

That was in 1990, and here we are now.

I added that

“if Germany needs to be contained, the Germans must do it themselves…now is the time for the Germans to prove themselves”—

I am afraid that they have. Given the treatment of Greece, irrespective of whether there was culpability on the part of the Greeks, the really big landscape—the manner in which the whole European project has been driven forward since Maastricht—the really big landscape—the manner in which the whole European project has been driven forward since Maastricht—is that the Germans are now in control of the eurozone. No one doubts that. I have a whole stack of cuttings here, from Germany, including from Bild, and from French newspapers. I do not have time to go through them all, but every single newspaper throughout the whole of Europe—rather curiously, there was a fairly muted response from the British press—has made the assumption that it is now effectively a German eurozone, if not a German Europe.

It is not in our interests to allow that, or to allow ourselves to be affected by this situation. We will be driven into the second tier of a two-tier Europe. The eurozone is part of the over-arching legal framework of the EU as a whole, of which we are a part. That is what is driving us towards the exit of the European Union.

[John Redwood]

I wonder, Sir David, whether, if my hon. Friend agrees, it might be helpful to know how many colleagues would like to speak, so they can all have a fair amount of time.

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[Sir William Cash]

On that point, I will sit down so that others can have their shot. I simply wanted to get that point about Germany across.

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[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Thank you, Sir David, for your chairmanship. I congratulate the right hon. Member for Wokingham (John Redwood) on securing the debate. It is a particular pleasure to end the term by debating some of these issues with my old friends on the Government Benches.

The right hon. Member for Wokingham chose his usual neutral language to describe the report of the five presidents as a plot to take us on a wild ride to a European superstate. I want briefly to discuss the report and pose two questions, not so much directly to the Minister but for consideration in the debate. First, is what the report outlines a threat to the UK, and secondly, will the measures in it happen? Let me elaborate on both of those points for a couple of minutes.

Of course, it is timely to be discussing how the eurozone moves forward in the wake of what we have seen in Greece in recent weeks, but it is also instructive, as has been said, that throughout all the difficulties, and even in the wake of the referendum that was held a couple of weeks ago in Greece, a majority of people both on the yes side and on the no side wanted to stay in the euro and the eurozone. That was not a referendum about breaking with the European Union.

The discussion about how the eurozone moves forward and tries to resolve some of the difficulties—weaknesses, one might say—in its architecture that have been exposed by the crisis is not a plot. It is not surprising that this discussion is happening. Indeed, the Chancellor of the Exchequer himself has said time after time that members of the eurozone will inevitably come closer together in the wake of the crisis and what it has exposed. The report does set out major changes—I will not detail them all, because the right hon. Member for Wokingham set them out—such as convergence, mutualisation, risk sharing and so on, but it is not a plot, and the direction of travel it sets out for the eurozone is not surprising in the wake of the crisis. As I said, the question for us is whether it is a threat. Surely it is in our interests that the eurozone sorts itself out, eases the unemployment that Members have referred to, secures better economic growth and becomes a stronger trading partner for our exporters and businesses. In fact, whether we were inside or outside the European Union, it would be in our interests for the eurozone to resolve its economic difficulties.

[Sir William Cash]

Will the right hon. Gentleman give way?

[Mr McFadden]

I would love to give way to the hon. Gentleman, and I do not want to be discourteous to him, but I have only a couple of minutes, so I ask him to forgive me for not giving way to him today.

The right hon. Member for Wokingham and many others Members who have spoken in the debate have used language about seeing all this as a dastardly plot and a threat to the UK. I will not comment on each of the specific items in the five presidents report, but I argue that in a general sense, it is in our interests for the eurozone to sort itself out economically and become a stronger trading partner for the British economy. I do not see this as a zero-sum game in which a stronger eurozone is somehow a threat to the UK—not given that we have been a member of the EU for 40 years and it is our biggest trading partner, our biggest source of exports and the source of half our inward investment. However, continued economic weakness in the eurozone and a failure to resolve the problems that have been exposed in recent years would certainly not be in our interests. I therefore take a different view from the right hon. Gentleman.

The second point, which is related to whether the report represents a threat, is that although most of the report concentrates on the eurozone, some of the measures apply to all 28 member states. An example is the capital markets union, to which the right hon. Gentleman referred. That is being governed by Lord Hill, our own Commissioner and his party colleague. The UK is the member state with the strongest financial sector, and it has a world-class cluster of associated services such as accountancy, so that poses opportunities for the UK, not just challenges. We must not see everything that happens as a threat.

Let me move on to my second question—whether all this will happen. To an extent, I echo the question that the hon. Member for Stone (Sir William Cash) asked. Germany may well resist mutualisation because it involves taking on risk in other states, and other countries may resist subscribing to common rules. Although the five presidents report has a grand title, I suspect that the issues that it raises will be debated for some time to come, and it is not at all certain yet that everything it sets out will happen.

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[Mr Gauke]

The logic of the position—this point was made by numerous right hon. and hon. Members before the formation of the euro—is that if there is a currency union, certain other things flow from it. Indeed, we are seeing the consequences of that. In a way, it is the background to the five presidents report. It is part of an ongoing process to identify the next steps to better governance in the euro area. There is a clear appetite for reform demonstrated by the process, which echoes the conversations that the Prime Minister and Chancellor have had in their bilateral discussions. The Government have submitted two written contributions to the five presidents’ process. We note the report’s proposals and have set out its content and implications in an explanatory memorandum. Therefore the Government do not currently plan to issue a further formal response. However, although the report’s focus is on the euro area, many issues it covers affect the interests of all member states. The UK will therefore remain fully engaged in discussions in this area.

So far, other member states have expressed a range of views on the report’s proposals. It is worth nothing that these reviews have been mixed. As I said, it is in our interests that the euro is a successful, strong currency area, so we do not want to stand in the way of the euro area resolving its difficulties. However, we will not let integration of the euro area jeopardise the integrity of the single market or in any way disadvantage the UK. The Government are pushing for further reform to improve the single market, focusing on the digital single market; further liberalisation of sector-specific services; and better regulation for small and medium-sized enterprises.

In return for supporting the euro area’s efforts to stabilise its economy, we want a settlement between the UK and the euro area that protects the single market, that is stable and fair and that lasts. This is in the interests of everyone—it is the basis for stable and sustainable governance of a reformed and prosperous EU—and is one of the UK’s important objectives in its renegotiation with the EU.

It has been 40 years since the British people last had a say on our EU membership. The organisation has changed vastly since then and it is time that we addressed this matter. The British public are clear that they are not happy with the status quo. My right hon. Friend the Prime Minister is determined to address those concerns. He has already talked about four areas where he wants change: sovereignty, competitiveness, immigration and fairness. For example, ever-closer union—a theme that runs through the five presidents report, to some extent—may be right for others, but it is not right for Britain, and change should include increasing economic competitiveness to create jobs and growth for hard-working families, and reforming welfare to reduce the incentives that have led to mass immigration from Europe. Those things are important to us. These reforms will improve fairness, which cuts to the heart of today’s debate: protecting Britain’s interests outside the euro. They will also improve the EU’s effectiveness as a whole. We want a dynamic, competitive, outward-focused Europe, delivering prosperity and security for the benefit of every country in the EU, with the UK playing its role.

[Sir William Cash]

In a nutshell, on current account transactions, the UK runs a deficit with the other 27 member states of well over £60 billion a year. Germany, on the other hand, runs a surplus in the same year. How on earth can we continue on that basis?

[Mr Gauke]

In the time available, I will not attempt to address that point in great detail. I hope my hon. Friend will forgive me.

A key part of the UK’s response to the five presidents’ process was the need to focus reforms, as well as the work of the institutions that the presidents represent, on the important priorities of delivering jobs, growth and stability to the European economy. Working alongside national Parliaments to drive competitiveness and streamline costly processes should be at the heart of the EU’s mission. That will be the foundation of public support and legitimacy for the EU.

Efforts to improve competitiveness go hand in hand with improving our own productivity. We support the euro area in sorting out its own problems so it can function more effectively. We will not allow further integration of the euro area to jeopardise the integrity of the single market, or in any way disadvantage euro-out countries like the UK.

Greece

William Cash Excerpts

Monday 6th July 2015 Commons Chamber

[Mr Osborne]

What I should say, without going into too much detail, is that we have a number of contingency plans. We just hope we do not have to put them into operation.

[Sir William Cash (Stone) (Con)]

Does my right hon. Friend agree that although Greece bears responsibility, there is also the intensely political German question? Statements by the Germans recently seem increasingly self-righteous about compliance with European rules, when they themselves have been in defiance of the stability and growth pact for many years and the surplus rules. There is also the question of their over-lending to Greece, against the background of their export policy and currency manoeuvres. Does my right hon. Friend recall that in 1953, under the London debt agreement, Germany received £86 billion of debt, and does he agree that they might well be rather more generous in their attitude towards debt relief in respect of the Greek people?

[Mr Osborne]

We should understand that of course the German Government, and therefore the German people, are one of the largest creditors and therefore take a close interest in developments in Greece. Under the terms of an application for a new programme from the European stability mechanism, that requires a vote in the Bundestag, so there are clearly some key German political issues here. Where I agree with my hon. Friend is on the observation he makes about the stability and growth pact. One can argue that many of the problems that the eurozone has encountered in recent years were because of the lax interpretation of the rules, not least by France and Germany, over a decade ago. To be fair to the German Government and others, they have tried to strengthen those rules in recent years.

European Union (Finance) Bill

William Cash Excerpts

Tuesday 23rd June 2015 Commons Chamber

[Sir William Cash (Stone) (Con)]

Will the Minister give way?

[Mr Gauke]

I will certainly give way, before I deal with the new clauses.

[Sir William Cash]

I am happy to wait if the Minister wishes to deal with the new clauses. I will come back at that point.

[Mr Gauke]

I am grateful to my hon. Friend. New clauses 1, 2 and 3 and amendment 1, all tabled by the hon. Member for Worsley and Eccles South (Barbara Keeley), would require the Treasury to undertake a series of actions prior to the Act coming into force. New clause 1 would require the Treasury to inform both Houses that it has formally requested a review by the European Commission into alternative ways of running the EU budget and a comparative analysis of commitments and payments as the basis for appropriations for the budget. New clause 2 would require the Treasury to request a fundamental review by the Council of Ministers of EU budget priorities, waste and inefficiency. New clause 3 asks for the Chancellor to issue an invitation to the Commission to provide further details of the draft budget to scrutiny Committees. Amendment 1 would delete subsection (3) of clause 2, which would mean that the Act would not come into force until 14 days after the conditions specified in each new clause were met.

We recognise the concerns underlying the amendments. Nevertheless, the hon. Lady will recall that the Bill relates exclusively to the financing of the EU budget, while the amendments relate to the separate, although equally important, issue of EU budget expenditure. On that basis alone, we reject them.

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[Sir William Cash]

On the reference in new clause 3 to

“the relevant European affairs select committee in each House of Parliament”

as my hon. Friend knows, the European Scrutiny Committee always goes through all the budgets, makes reports regularly and has the power to invite anybody, including officials from the European Commission. In addition, it receives explanatory memorandums from the Government—in fact, from the Minister himself. I would like to make some further remarks about this later, but I agree very much with what he says in rejecting the Opposition’s proposals.

[Mr Gauke]

I am grateful to my hon. Friend for those remarks. Let me come straight to new clause 3, as he has raised that point.

Along with many across Europe, we share the concern that lies behind new clause 3 that the EU is not sufficiently accountable to EU citizens. Hon. Members will need no reminding that the Prime Minister has already made it clear that strengthening the role of national Parliaments is a central tenet of his reform programme. Within the existing legal framework, the Government already take the role of national Parliaments in scrutinising EU proposals very seriously. That is why, when the European Parliament requested the formation of a high-level group on own resources to review the EU financing system, we insisted that national Parliaments, as well as the European institutions, were given a voice as part of the consultation. We therefore amended the joint declaration on the formation of the group explicitly to take account of input from national Parliaments.

We do all we can to ensure the transparent and effective scrutiny of each year’s annual budget negotiations. An explanatory memorandum is deposited as soon as possible after the publication of the draft EU budget each year. That is followed by debates in both Houses and regular ministerial updates at significant stages of the negotiation process.

We are committed to working with both scrutiny Committees to make this process as efficient and effective as possible for all parties. However, we believe that requiring the Government to write to invited officials to appear before the scrutiny Committees would add little to the scrutiny process and would be a very peculiar precedent, for all the reasons set out by my hon. Friend the Member for Stone (Sir William Cash). It would add little because the Committees can, and have, invited officials to appear before them. For example, in June 2014, Nadia Calvino, the Director-General of the European Commission budget, gave evidence to the Lords EU Economic and Financial Affairs Sub-Committee.

It really should not be the place of Government to determine who the scrutiny Committees should see. It is for the Committees of both Houses to decide for themselves who should appear before them and when. It would be a peculiar precedent for the Executive to begin to interfere with that freedom, no matter how benign the initial intention.

[Mr Gauke]

I will return to that point. My remarks, when the hon. Lady intervened, were in respect of new clause 3 and the European Scrutiny Committee. I have been very clear that it would be a curious thing to do to place this in legislation and for the Executive to take that role upon themselves. I very much echo the remarks made on that by my hon. Friend the Member for Stone.

[Sir William Cash]

Let me add one further point before I deal with the matter in substance. The European Scrutiny Committee’s most recent report, which in this respect has been accepted by the Government, recommended that each Committee, including the Treasury Committee, establish a rapporteur to consider these questions. We could effectively work with the Treasury Committee to ensure, if necessary, that there would be an even deeper examination of the Treasury aspects.

[Mr Gauke]

We obviously welcome scrutiny in this area. If the European Scrutiny Committee or other Committees seek the Government’s support, for example, in bringing over Commission officials to give evidence, the Government would of course gladly support them. Let me offer that hand of co-operation if I may, but I do not see a strong case for placing this within the legislation. Indeed, I would go further and say that it would be inappropriate for us to do so. That deals with new clause 3.

We do not believe that the proposal, which would require the Government to write to various European institutions to invite them to undertake a review of one or other aspect of the EU budget, would really add to the work that the Government have undertaken and continue to undertake to improve the expenditure of the EU budget.

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[Mr Gauke]

Some progress has been made since then. The Commission has improved its transparency record, partly thanks to the Government’s ongoing work. In particular, it released a payments plan containing much more detail on payment forecasts. I accept that we can go further, and that UK citizens expect more, but requiring the Government to write a letter inviting officials to attend Select Committee meetings will not really deliver that. What is required is constant vigilance and discipline. We have shown that, and it is delivering results.

[Sir William Cash]

Earlier, the hon. Member for Worsley raised the question of how the proposals for budget reduction came about. As I am sure the Minister remembers only too well, I was one of the so-called rebels, although actually we were not really rebels at all: all that we were doing was asking the Government to listen, which is exactly what happened, because our amendments were accepted. The then Financial Secretary to the Treasury—or perhaps the Economic Secretary—paid tribute to us for having presented the proposals, and everything was hunky-dory.

[Mr Gauke]

I am grateful for the constructive tone that my hon. Friend brings to the debate; he has a history of so doing. He has argued for greater efficiency and transparency in the expenditure of the European Union for many years, and I am grateful to him for that.

I should also point out that we are providing technical assistance to the Commission as it considers all the options for enhancing performance on the budget. We are sharing our expertise in areas such as value for money, spending area objectives and improving budgetary performance—for example by removing adverse incentives and improving accountability and transparency.

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[Mr Gauke]

Yes; my right hon. Friend makes an important point about the euro area. No doubt he will have heard the speech delivered by my right hon. Friend the Chancellor of the Exchequer at the Mansion House a couple of weeks ago, in which he made it clear that one of our priorities in the UK’s negotiations ahead of any referendum will be to ensure that the “euro-outs”—the European Union member states that are not in the eurozone—are properly protected and do not find themselves disadvantaged by the eurozone countries working together to the disadvantage of the “euro-outs”. That is a real priority for the United Kingdom.

[Sir William Cash]

I am sure that my hon. Friend appreciates the difficulties inherent in this matter. It is all very well to want to disaggregate the eurozone from the non-euro member states, but the reality is that we are all part of the same European Union. Any attempt to make a change of this kind would involve a fundamental change to our relationship with the EU and would therefore require a treaty change by any reasonable standards. Does he appreciate how serious the position would be if we neither sought nor achieved that objective?

[Mr Gauke]

It is important that we meet that objective.

On the subject of the report, I would make the point that we benefit from the single market and do not want to stand in the way of the eurozone resolving its difficulties, but we will not let the integration of the eurozone jeopardise the integrity of the single market or disadvantage the United Kingdom in any way. That is one the important objectives in our negotiation with the European Union, and it is exactly the point that the Chancellor of the Exchequer was making in his Mansion House speech. My hon. Friend the Member for Stone (Sir William Cash) and my right hon. Friend the Member for Wokingham (John Redwood) are right to raise the importance of this point, which we fully recognise.

--- Later in debate ---

[Barbara Keeley]

I think the hon. Gentleman will see when we come to the vote that we do have support.

Our new clause 3 would also improve accountability and transparency by inviting EU budget representatives to appear before the European Scrutiny Committees in this House and the other place each year before the EU budgets are negotiated. I appreciate the points made by Conservative Members that of course there should be no interference with the work of the European Scrutiny Committee in this House, but what we have tried to do in these new clauses is send the strongest statement we can send and give the strongest possible support to all those in this House who want to see these important aspects of value for money and budgetary control put in place.

[Sir William Cash]

I am sure the hon. Lady would appreciate the fact that the European Scrutiny Committee functions by virtue of the Standing Orders of the House of Commons. Leaving aside the merits of this proposal, if there were to be a stream of requirements imposed by Parliament on the manner in which the European Scrutiny Committee, an all-party Committee containing many Labour Members, were to conduct its business, the life of the Committee would be made pretty intolerable and its purpose would probably be undermined.

[Barbara Keeley]

I very much take that point on board.

New clause 1 requests a review by the European Commission of the basis of appropriations for the European Union budget and a study of whether alternative arrangements might offer improved value and enhanced budgetary control. On Second Reading, I highlighted a concern about the growing gap between the ceiling on spending commitments and the ceiling on payments. That gap, as agreed in the settlement of February 2013, is between €960 billion on commitments and €908 billion on payments. As I pointed out in the earlier debate, that gap has crept up from an average of 2.6% to the current 5.4%, and it is projected to rise to 5.7% in the period from 2014 to 2020. We must now seriously question whether that gap is manageable.

The Commission describes the system as follows:

“Commitments are tomorrow’s payments, and payments are yesterday’s commitments. Commitments are planned future payments whereas payments are legal obligations from the past…if every year the increase in commitments is much higher than that in payments you end up promising many partners to pay their future bills but find yourself unable to pay those bills when they arrive years later.

This is what has been happening over the last years: as many commitments were made years ago for projects that are being completed now”.

That is a key issue with the drive to smaller EU budgets, yet, as the Commission says,

“many bills related to projects remain unpaid and have to be rolled over to the following year. This leaves no choice to the Commission but to call for increases in payments.”

--- Later in debate ---

[Barbara Keeley]

The more reviews that we carry out of those priorities, the more that we develop our understanding of where the money is going. Earlier, the hon. Member for Boston and Skegness (Matt Warman) called for these matters to be discussed in a language that his constituents could understand, and I do not think that they are discussed in such a way. Having ploughed through very many debates and very many documents in relation to the Bill, I do not think that those matters are understood. The hon. Gentleman is quite right.

The Economic Secretary to the Treasury said she accepted that expenditure on the CAP is

“still too high both in absolute terms and as a proportion of the overall budget.”—[Official Report, 11 June 2015; Vol. 596, c. 1426.]

If that is what the Treasury team currently feel—that it is still too high, both in absolute terms and as a proportion of the overall budget—what are we doing to understand that better, to review it and to change it?

It is my assertion that previous reviews have not led to the level of reform that we want to achieve. It was our purpose in tabling new clause 2 to keep focus on that vital issue. When most member states are finding it necessary to make very difficult decisions—clearly, we are in that position ourselves—about their own budgets and spending, the European Union must ensure that expenditure is efficient and focused on addressing the major concerns that member states face. As my hon. Friend the Member for Nottingham East (Chris Leslie) said in the October 2012 debate:

“The next seven years of the EU budget should prioritise jobs, growth, infrastructure and practical programmes that rejuvenate fragile economies.”

As I mentioned on Second Reading, this is much needed when we still have 735,000 16 to 24-year-olds in the UK looking for work. That should be our focus—those young people.

We need a better balance of funding and we need the European Union to provide a better framework and strategy to achieve growth and jobs. Looking deeper into the detail, and the spending commitment to the EU’s smart and inclusive growth priority, only a quarter of that is spent on competitiveness for jobs and growth, and three quarters on the EU’s cohesion policies, including structural funds. It probably is not appropriate today to open up further debate about the use of structural funds. That is often discussed when we are discussing EU finance, but as my hon. Friend also said:

“Savings can be made on aspects of EU structural funds that…are too often committed in a haphazard manner and depend on outdated commitments rather than future priorities. Unless structural funds contribute to positive economic development, they cannot be justified.”—[Official Report, 31 October 2012; Vol. 552, c. 304.]

The Opposition say strongly that the proportion of the EU’s smart and inclusive growth expenditure that goes towards securing competitiveness for jobs and growth is too small. That important area of spending accounts for around a quarter of the EU budget in 2014, but that rises to only 27% across the whole six-year period.

[Sir William Cash]

Does the hon. Lady appreciate that much of what she says in terms of generalities is understandable, and is reflected very much in European Commission documents, which I have been looking at for the last 30 years, one way and another, on the European Scrutiny Committee, but that the inherent problem is the fact that every time there is a need to argue for jobs and growth, the answer from the European Commission is to give more subsidies, more bail-outs, and more cohesion and structural funds, when actually what is needed is deregulation and to provide people with a means of increasing productivity and jobs and to deal with youth unemployment?

[Barbara Keeley]

I hesitate to say that I think we agree on this point, but I think we do. [Interruption.] All right, then: we enthusiastically agree on this point. It is very clear indeed that, particularly with youth unemployment, we have a serious problem. It is a problem throughout the EU. We must spend more on that and we must find a way of doing so. Although the Minister spoke at great length, he did not tell us at any point what the difference would be between the ongoing review in the EU and the existing commitments. We want to send a very strong message. Until the Bill is passed, it is our last chance for a considerable period to make these points strongly to the EU, and we believe that we should do so.

--- Later in debate ---

[Barbara Keeley]

That is strange, but I cannot answer for the Minister. He may want to intervene for himself now or at some later point.

I have emphasised jobs and growth, but this EU budget priority also includes policies and programmes to promote vital areas of research and innovation—infrastructure, education, training and enterprise development. My hon. Friend the Member for Sheffield Central (Paul Blomfield) has been a staunch advocate of the importance of EU funding for research and development in the UK. In 2012 he said:

“The more the EU invests in research and innovation, the more the UK benefits, because the quality, breadth and depth of UK research puts us in a position whereby we gain disproportionately from European research programmes.”—[Official Report, 31 October 2012; Vol. 552, c. 292.]

It is self-evident that competitiveness for jobs and growth should be more of a priority, but also that we would benefit more if the priorities were switched to increase funding for research and innovation.

Serious consideration of reform of the EU’s spending priorities is needed if we are to use the EU budget, as the Opposition believe we should, as a mechanism to promote future jobs and growth in the UK and other member states. We can only get that change of spending priorities if we keep a focus on the balance between competing priorities and continue to drive down wasteful and inefficient spending.

Much was said on Second Reading, as I am sure the Minister recalls, about what hon. Members consider to be wasteful and inefficient spending. Some Members might cover that again today, but we have already talked about staffing costs and administration costs, and the costs of the move between Brussels and Strasbourg. Other items of waste and inefficiency can also be drawn to the Minister’s attention.

We have already discussed new clause 3, and I do not need to keep on emphasising this, but in tabling it we did not in any way want to disturb the balance between the Government and the scrutiny Committees. I hope that hon. Members accept that. However, points have been raised in previous debates on why we need that relentless scrutiny. My hon. Friend the Member for Nottingham East said in the debate on the multi-annual financial framework that we need

“a relentless focus on the justification behind detailed expenditure.”—[Official Report, 31 October 2012; Vol. 552, c. 304.]

The Financial Secretary to the Treasury said on Second Reading:

“Many in Europe agree with us that the EU is too uncompetitive, too democratically unaccountable and too inflexible to the concerns of citizens in its member states.”—[Official Report, 11 June 2015; Vol. 596, c. 1389.]

That is a very poor situation that we find ourselves in.

[Sir William Cash]

The hon. Lady referred to the need for relentless scrutiny. I have a thought in my mind that maybe some people think that the European Scrutiny Committee, at least over the last five years, has indeed been relentless in its scrutiny, and that goes for all members of the Committee, which has produced many unanimous reports. Is she effectively prepared not to press her amendment because of the problem I gave about the constant stream of legislative requirements that might interfere with our status as a European Committee?

[Barbara Keeley]

Indeed, we could do that. We would definitely want to press the other new clauses, but there was no intention to upset that balance. It has been suggested that the Minister could solve these matters by giving some kind of undertaking on the matters raised in our new clauses. We do not resile from the position that we want to send out the strongest possible message from this House that we are serious about scrutiny. The European Scrutiny Committee is of course relentless in its focus on those matters, and so too must the House be relentless. Doubtless we will have many more reports and reviews.

When in opposition, the Minister was part of the team that tabled an amendment to get a report, as I mentioned earlier. It was not agreed to at the time, but the Commission review went ahead anyway. The results of that report, which was published in 2010, were interesting. Its main finding—it was a very substantial finding—was that the current rules for the EU budget make it slow to react to unforeseen events, while too many complexities hinder its efficiency and transparency.

This is a week of tumultuous events for the European Union. The situation we find ourselves in with the EU budget, with its complexity, its slowness to react, the difficulty in balancing priorities and the fact that it does not represent the priorities that we think are important, means that it is clear to all—there is often broad agreement on this in the House, and I am sure that there will be today—that it is past the time when it needs to change.

Our remaining amendments would assist in ensuring that reports are made to the House on value for money, budgetary control and, importantly, budget priorities and waste and inefficiency. I commend them to the Committee.

[Sir William Cash]

I have already said much of what I need to say on new clause 3, which is my main concern today, so I will make only a few points. Basically, new clause 3 is inappropriate. The European Scrutiny Committee does its job relentlessly, as the shadow Minister has just indicated, so there is no need for the new clause. We can invite officials to it if we wish to, and we do on occasion, but we are perpetually scrutinising the budget and recommending matters for consideration on the Floor of the House.

Imposing on the European Scrutiny Committee legislative functions that would be monitored by other Government Departments could cause enormous difficulty by interfering with its Standing Orders functions. Under the Standing Orders, the Committee has to form a judgment on what is of political and legal importance. We can invite European Commission budget representatives to see us, and indeed we can also recommend to the Treasury Committee, for example, that it might wish to do the same, so we already have various means at our disposal.

It is not necessary for me to repeat the points that I have already made in interventions. I am grateful to the shadow Minister for agreeing not to press new clause 3 and putting that on the record, so that in future nobody else is tempted to impose on the European Scrutiny Committee, or indeed on any Select Committee, legislative requirements that might in one way or another interfere with their discretionary judgments under the Standing Orders.

[Barbara Keeley]

I hope that the hon. Gentleman will accept my assurance that we have no intention of doing that, but I also hope that he will agree that it is important to send out the strongest possible message that we are focusing on these matters relentlessly throughout the House, and that the European Scrutiny Committee will continue its excellent work.

[Sir William Cash]

I am extremely grateful to the hon. Lady. I hope that she will not mind my mentioning the fact that she is sitting in glorious isolation on the Opposition Front Bench, and with nobody behind her, other than my friend the hon. Member for Luton North (Kelvin Hopkins), who is not known to be enthusiastic about all matters European. Perhaps the relentless scrutiny to which she refers could be improved by having a few more Labour Members here to support her.

[Alex Salmond]

It is a great pleasure to follow what must be the briefest speech I have ever heard from the hon. Member for Stone (Sir William Cash) on this subject—it is wonderful to see him able once again to stand in his place today.

Let me turn to the question of EU finance and agriculture. I know that agriculture is not a subject that much concerns the Conservative party; the Tory party these days is much more likely to be concerned with asset stripping, rather than agricultural production, and with financial derivatives, rather than agricultural crops—that is what gets its pulse moving.

I was concerned when the hon. Member for Worsley and Eccles South (Barbara Keeley) said that far too much of the European Union budget was consumed by the common agricultural policy. The fundamental reason for that—we did not hear this simple point from the Government Benches—is that the common agricultural policy is one of the few policies that financially is effectively under the competence of the European Union. If the European Union had competence over health, for example—I doubt that there is much support for that, from me or anyone else in the House—its agricultural budget would be totally dwarfed by what it spent on health. The dominance of the agricultural budget is a factor of its being one of the European Union’s relatively few common policies.

Of course, it is possible to argue that there should not be direct farm payments. Indeed, that was the argument that the right hon. Member for North Shropshire (Mr Paterson) took into the CAP negotiations. He started from the position that the UK Government, without much opposition from Members from rural constituencies in the Conservative interest, thought that there should not be direct farm payments, and he found himself in a minority of one in the negotiations; his position was not supported by any other member state. It was therefore decided that we were to continue with farm payments. Therefore, if we have a common agricultural policy, and it is a substantial part of the European Union’s budget, it is reasonably important to ensure that our share of the agricultural budget as component nations in these islands is fair and competitive, because our agricultural production has to compete in that common market with that in other member states.

Does the Minister really think that the share allocated to UK agriculture, and to Scottish agriculture in particular, can be counted as a considerable achievement, as he claimed in his opening remarks? Let us remind ourselves of some of the facts. Under pillar one of the CAP budget, it was agreed that the lowest that any member state should receive in support was €196 per hectare. It was agreed in negotiations that each country in the original 15 would work to that minimum. Scotland receives substantially less than that—just over half of that payment per hectare. That is going to cost Scottish agriculture about £1 billion in the period to 2019.

European Union Referendum Bill

William Cash Excerpts

Tuesday 16th June 2015 Commons Chamber

[Sir William Cash (Stone) (Con)]

I shall speak from a standing position.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

May I suggest that perhaps the hon. Gentleman ought to take a seat? The last thing that I want him to do is get himself into difficulty, and take too much out of himself. Please, Sir William, do whatever you feel is necessary,

[Sir William Cash]

I will sit down then. I am sorry to have to make my speech in this way, but I have been in hospital for the last four days.

Our problem is this: the situation in which we now find ourselves is not necessary. I speak more in sorrow than in anger, because I have spoken to the Minister for Europe, and we had a good discussion, as we always do. I was also grateful to him for saying in a letter that he was himself grateful for the constructive way in which concerns had been raised. It must be said, however, that the Government have not allayed those concerns, and that is the real point. I shall try to explain why, but let me first congratulate the Government on having listened. They listened over the question of having a referendum at all, they listened over the question of whether we should veto the fiscal compact, and they listened over the reduction in the budget. Those are all positive steps.

Having given the matter as much thought as I could—admittedly, I had an opportunity to do so from my hospital bed—I have to say that, in this instance, I am convinced that the Government are taking a step in the wrong direction. However—I ask Ministers to listen, if they would be kind enough to do so—it is possible for them to retrieve the situation so that there need not be a vote against.

Ultimately, what is raised is a question of trust. There are extremely strong reasons for the provisions in section 125 of the Political Parties, Elections and Referendums Act 2000, but we have heard very little about those provisions. Let me briefly explain them, so that people will know what we are about to repeal. Most might assume that, given the momentous and historic nature of the EU referendum, what is good enough for a Scottish referendum, a referendum on the alternative vote, and a Welsh referendum—all of which have taken place under Conservative-led Governments in the last few years—ought to be applicable to a referendum that goes to the heart of how we are governed and who governs us.

However, it is not just about trust. We do not know what the outcome of the promised discussions and consultations will be, but we do know that conducting a referendum in a manner that is unfair on the voters is an extremely retrograde step in the kind of democracy that we uphold. The provisions in the 2000 Act were introduced for very sound reasons. I applaud the then Government for that, and, even at this late stage, I appeal to the present Government to think again.

Incidentally, this has absolutely nothing to do with Maastricht or anything like that. There was a rebellion then because we did not have a referendum. On this occasion, we merely wish to ensure that the voters are given a fair choice. That must be one of our prime duties, because we are sent here as representatives of those people. If the Bill is passed, we shall have made a decision to transfer back to those people, by means of an Act of Parliament, the right to make their own decision. Therefore, they will have an absolute right to know that the way the referendum is conducted will in no way be canted or manipulated, whether for yes or no. Taking this out and then asking us to consider on the basis of consultations yet to come seems to me quite bizarre, because if the Government were good enough to accept my amendment 11—I am grateful for the support of many Members on both sides of the House on that—nothing would change in terms of the referendum. It is not going to take place in any immediate future. All we will be doing is re-securing the status quo so that we will then have the restrictions set out in section 125. I will come on to that section in a moment, and demonstrate what we would actually be repealing this evening. This is not just a Eurosceptic argument. This is not about a Eurosceptic position, in essence. It may be that we would prefer to ensure there is a fair vote, but the real question is about our democracy. That, to me, is the main question.

[Alex Salmond]

But does not the experience of the Scottish referendum tell the House that not only should the protections that are in statute not be removed from this Bill and that the hon. Gentleman’s amendment 11 should be carried, but that there needs to be an enforcement mechanism to make sure the purdah period is applied and adhered to by Government Ministers and civil servants?

[Sir William Cash]

I very much agree, and it may be of interest to Members, if they have not already noticed, that the Electoral Commission has examined not only the Bill but my amendments, and has stated:

“The Commission is therefore generally supportive of proposals to reinstate restrictions on the publication of promotional material by central and local government in the run-up to the poll.”

Even after Second Reading, the Electoral Commission—which is, after all, charged with these duties—has concluded it would be important to retain these restrictions. Some adjustments may need to be made in due course, but we should secure the status quo, then have the discussions, and then have the vote on Report. That would be the right way round.

[Mr Kenneth Clarke]

How far does my hon. Friend want to take this? In a general election, the whole government machinery closes down for four weeks and studies the potential future of alternative political masters and waits to see what the political policy of the new Government will be. In this case, however, the Government at the time of the referendum will be the Government for the next several years, and the Government, as a Government, will have been involved in producing the terms that are part of the referendum. Does my hon. Friend intend that no Minister can act as a Minister, as could be the case if we strictly applied purdah, or take advice for all those weeks on anything that might pertain to an issue in the referendum? Is the Prime Minister going to be prevented from expressing a view? Surely some compromise that is a modification of purdah is required—

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

Order. The right hon. and learned Gentleman has been here longer than most Members, and he should know that interventions must be short, especially if he wants to make a speech later.

[Sir William Cash]

I seem to have spurred my right hon. and learned Friend to a passionate pursuit of his arguments, because he does not want what I am proposing at all. The fact is that the Electoral Commission says the proposal to remove section 125

“could mean that governments and others will be free to spend unlimited amounts of public funds promoting an outcome at the referendum right up until polling day.”

It goes on to say:

“In the Commission’s view, there is a risk that the use of significant amounts of public money for promotional activity could give an unfair advantage to one side of the argument. Unlimited government spending would also undermine the principle of having spending limits for registered campaigns.”

We have already heard about the interference in the Scottish referendum, and what the right hon. Member for Gordon (Alex Salmond) said is completely right.

[Mr Chope]

Does my hon. Friend agree that it is ironic that the section 125 provisions were adopted by the Venice Commission in the following year and are now universal best practice, and that the Venice Commission has endorsed the fact that there should be a prohibition on Government expenditure in the four weeks of the referendum campaign?

[Sir William Cash]

That is absolutely right. I was going to refer to that, but I am grateful to my hon. Friend for making the point.

I want to refer to what section 125 actually does say, because the proposal is to remove that tonight, in the face of our opposition. The explanatory notes accompanying the Bill state what they do:

“These Explanatory Notes have been prepared by the Foreign and Commonwealth Office…to help inform debate”

and

“in order to assist the reader of the Bill”.

However, paragraph 52 of the notes gives no explanation and simply says:

“Paragraph 25 provides that section 125 of the 2000 Act does not apply for the purposes of this referendum”,

and then mentions a consequential amendment. There is no explanation at all. That itself is a reason for our being concerned about the way this is being done.

I want to return to the question of what we are repealing. What is in the 2000 Act is very sound. It refers to

“any material which—

(a) provides general information about a referendum to which this Part applies;

(b) deals with any of the issues raised by any question on which such a referendum is being held;

(c) puts any arguments for or against any particular answer to any such question; or

(d) is designed to encourage voting at such a referendum.”

It is very comprehensive.

[Mike Wood (Dudley South) (Con)]

Does my hon. Friend share my concerns that the provisions of section 125 would allow the European Commission to make statements and publish material affecting a referendum on Britain’s membership of the EU, but would prevent British Ministers or Departments from publishing material to correct or counter such a publication?

[Sir William Cash]

Very simply, any suggestion that the European Commission or the EU should be involved in this process is the subject of another amendment I have tabled, and nor should they be allowed to make any provision by way of financing. We can debate that later.

On whether contradiction might be created in respect of the position of Government Ministers in this country, my flow has been slightly diverted by my hon. Friend’s perfectly understandable intervention, but the fact is that Ministers and the civil service are in a position under the purdah rules such that they would not be able to use the machinery of government. In relation to the EU, which I know a little bit about, the machinery of government is extensive, but there are methods that could be applied, with a sensible degree of amendment, to ensure that the restrictions on the matters to which I have referred are complied with, because this is what we are talking about; it is not some generalised assumption that Ministers are going to wander on to completely different paths.

Section 125 lists the material I have already referred to—

“general information about a referendum…any of the issues raised by any question…any arguments for or against any particular answer to any such question”

and questions

“designed to designed to encourage voting”,—

and it states that none of that material

“shall be published during the relevant period by or on behalf of—

(a) any Minister of the Crown, government department or local authority”.

It could not be clearer; it could not be more sensible, more sound or more comprehensive.

[John Redwood (Wokingham) (Con)]

Would my hon. Friend like to confirm that it is a principle of fairness in all British elections and referendums that individuals—Ministers as well—participate on whichever side they wish under a single campaign, for yes or for no, which has proper controls over expenditure and publications? Does he also acknowledge that there cannot be a third category of intervention by the Government, because that would break the normal rules of campaign funding and control?

[Sir William Cash]

I completely agree with my right hon. Friend.

[Mr Jenkin]

The Government argue—I think we have to accept their argument—that these detailed and broad restrictions are too prescriptive and that they would not be able to carry on with the normal course of government, as my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) has explained. Does my hon. Friend not agree that there would be too much interference in the normal conduct of government?

[Sir William Cash]

I just do not think that makes sense. The bottom line is that we are now so invading the ability of the voters in the referendum to make a free and fair choice, by canting the process and taking all the things to which I have just referred out of the equation, that we could seriously undermine the whole democratic process with respect to referendums. This is simply not a tenable position. If it was good enough for the Scottish and the Welsh, why is it not good enough for the referendum on the EU, which will go even further towards infringing—as we would put it—the role of this Parliament and our democratic freedoms?

I also want to discuss what publishing means. Section 125 of the 2000 Act is very general on this point, and this is what hon. Members are being asked to repeal this afternoon. It states:

“‘publish’ means make available to the public at large, or any section of the public, in whatever form and by whatever means”,

and the relevant period

“means the period of 28 days ending with the date of the poll.”

There are profound reasons for maintaining the status quo at this stage and for retaining the restriction, because once it has been repealed, we would then have to reinvent the wheel, as it were, on Report. That could open a huge can of worms for the Government. The question is: what would the Government not be restrained from doing, compared with some of the things that it is currently stated they would be restrained from doing?

The Minister for Europe has sent us a letter today, 16 June, in which he says:

“It is our clear intention, through the Bill, to provide a straightforward, fair and effective framework for the referendum.”

I have to say to him that I must cast some doubt on that in relation to the questions that are being raised. He goes on to say that it would be “inappropriate” to

“prevent Ministers from effectively conducting the significant amounts of ordinary day-to-day business between the Government and the EU that will necessarily continue during the pre-poll period.”

I have been Chairman of the European Scrutiny Committee for five years, and I just do not recognise this at all. There are things that go on in the monumental amount of material that comes in from the European Union, but in my judgment there is no suggestion that anything of this nature would be affected by retaining section 125. The section was applied during the Scottish referendum, which had a European dimension. The same applied to the Welsh Assembly. If it was all right for Ministers to continue to make statements in those circumstances, we should keep section 125 and do as the Foreign Secretary suggested during the Second Reading debate. The Minister for Europe’s letter states:

“The Foreign Secretary said during the debate that the Government will exercise proper restraint to ensure a balanced debate during the campaign.”

This is the moment to ensure that we get this right by keeping the restriction for the time being, having discussions and coming back with specific proposals on Report, on which we can then vote.

I acknowledge that the Minister for Europe has conceded that we have more than a reasonable case. His letter goes on:

“Working out a system that will reassure colleagues and voters that the referendum is a fair fight, yet will preserve the Government’s ability to act in the national interest is not straightforward.”

Well, it would be very straightforward if we kept section 125. He adds:

“It is important that it is legally clear and robust.”

It would make things very unclear and very unrobust if we were to remove the provisions in section 125, which are based on common sense and fairness and on giving voters a proper opportunity to make a fair choice.

[Mike Gapes (Ilford South) (Lab/Co-op)]

I rise to speak in support of amendments 49 and 50, which have been tabled in my name, and to give my support to amendment 54, which was introduced by my right hon. Friend the Member for Wolverhampton South East (Mr McFadden).

The Bill proposes that the referendum be held by 31 December 2017. That is in line with what the Prime Minister proposed in his Bloomberg speech in January 2013. I often wondered why 31 December 2017 had been chosen. I assumed that it was an arbitrary date midway through a Parliament elected in May 2015. In the last Parliament, when the former Foreign Secretary, William Hague, was questioned by the Foreign Affairs Committee, it seemed to come as a surprise to him when we pointed out that under the rotating presidency of the Council of Ministers the United Kingdom’s presidency would begin in July 2017. I do not know whether that had been taken into consideration when the Government produced their original proposal, but it will clearly be a major complicating factor.

We are debating the period of purdah. Just imagine what would happen if there were a meeting of the Council of Ministers in September 2017 and the referendum were to be held within 28 days of that meeting, in the October. What would Ministers be able to do or say during that period? Those Council of Ministers meetings have to be convened and chaired by the appropriate representative of the rotating six-month presidency, and there would have to be a British Minister present to represent the interests of the UK Government. What could those Ministers and their officials say and do during that period? There would be enormous complications if the Bill were to lead to a referendum being held in the last few months of 2017.

Under the constitution of the Federal Republic of Germany, there is a defined period within which the next German election will be held. It has to be held on 27 August 2017 at the earliest, and at the latest on 22 October 2017. One can imagine Chancellor Merkel, Mr Sigmar Gabriel, Mr Frank-Walter Steinmeier, Mr Wolfgang Schäuble and all the other senior figures on both sides of the German coalition being somewhat exercised and diverted from considering matters to do with the possible negotiated terms, or the nature of the negotiation, if we had not yet set the date for our referendum.

It seems, therefore, that any referendum held in the second half of 2017 would have major problems. Amendment 49 recognises that, and provides that the referendum in this country should be held before 1 July 2017—before the United Kingdom takes over the rotating presidency of the Council of Ministers and before the German election campaign. We might bring it forward to the first half of 2017, but I suspect that when the Prime Minister came up with his proposal in his Bloomberg speech he had not considered the election cycle in France. The first round of the presidential election has to be held in April 2017 and the second round in May. We could face trouble with the renegotiations in France if we were to have the referendum later in 2017.

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[Mr Clarke]

Which is why I believe that the parliamentary system of democracy is so very good. A representative body of people elected from time to time have continuous responsibility for step-by-step decisions, and eventually they have to face the consequences of their decisions and can be removed. But we are already going wide of the amendments.

[Sir William Cash]

Will my right hon. and learned Friend give way?

[Mr Clarke]

I am delighted to see that my hon. Friend the Member for Stone (Sir William Cash) is able to stand when he feels passionately on the subject. I am sympathetic to the problems he has had, and I am glad that he was able to speak from a sedentary position, which I had never seen before. I will finish making my point before I give way.

I hold my hon. Friend and those who agree with him in the highest possible regard. We in the Conservative party have to be careful that we do not repeat the folly of Harold Wilson and tear our party apart in the course of a referendum campaign. After quite a few decades of this battle, I continue to be on excellent personal terms with those of my hon. Friends with whom I disagree. It is best that we proceed by putting forward our respective views of the public interest. We must certainly not divide the strong purpose of the Government, who have been so recently elected with the support of the whole Conservative party.

[Sir William Cash]

Will my right hon. and learned Friend allow me?

[Mr Clarke]

Let me make a little more progress. I hope that my hon. Friend’s constraint will stop him leaping up too frequently; I will give way in due course.

I do not believe that there is any bad faith anywhere. Everyone wants those who campaign and the public to feel that the referendum has been conducted with absolute fairness. I am surprised, therefore, that, in these opening days of the European referendum process, so much passion is being excited by procedural issues. I will not describe them as footnotes, but, although they are important, none of them will make the faintest difference to the result on the day of the referendum. If we asked most of our masters—the public—whether purdah was followed properly during the campaign, they would not have the first idea what we were talking about. So my first plea is for a sense of proportion.

My plea to my right hon. Friend the Minister—I do not think I need to make it because I have seen the letter, which did not get to me either; I have just been shown it—is to live up to his undertakings. It is right to bend over backwards to reassure my right hon. and hon. Friends that there is no conspiracy, that they must not leap into paranoia, and that the intention is to hold a referendum in which the British public will be able to reach a view on balanced presentations. It seems to me that Ministers have started doing this straight away. I got the impression from the Second Reading debate that my right hon. Friends on the Front Bench were as surprised as I was at the sudden excitement about the rules in what should have been a fairly routine Bill paving the way for the referendum.

[Mr Clarke]

I will give way in a moment.

The Prime Minister has announced that he will suspend the rules of collective responsibility and that members of the Government will be able to campaign on whichever side they choose. We now have the letter giving an undertaking that the Government will depart from section 129. People seem to think that there is something magic about 5 May 2016, so we will not hold the referendum on that date. I have sympathy with Ministers; they are being derided. The moment they make concessions to all these impassioned pleas, they suffer the fate of all Ministers and are immediately accused of a humiliating U-turn and held up for ridicule.

Some of my right hon. and hon. Friends and perhaps others in the Scottish National party are difficult to calm down and reassure. I ask them to accept, as I accept, that every effort is being and should be made to satisfy fears about the propriety of the campaigning period.

[Sir William Cash]

My right hon. and learned Friend’s rather Hush Puppy approach—saying that there is really nothing much that we need worry about, and that Parliament is far better at doing this than the people—seems somewhat dangerous and disrespectful of the voters. We have had a lot of referendums over the years. He says that purdah would not make a difference anyway. Does he think that the Electoral Commission is wrong when it says that disapplying section 125 of the 2000 Act would enable the Government to spend unlimited sums of money?

[Mr Clarke]

I once gave evidence to an inquiry chaired by Sir Nigel Wicks into the workings of the Electoral Commission, and my recommendation was that it should be abolished as a useless quango, but that is a wider issue.

Of course we have had referendums, but my hon. Friend has never accepted the result of any referendum if he disagreed with it—for the sound reason, for which I respect him, that he has strong personal principles and convictions. I took part in the referendum 40 years ago. No serious Member of Parliament on either side of the argument changed their beliefs one jot the day after the result of the poll was announced. Tony Benn, who was personally responsible for floating this innovation in British politics, was one of the first to start demanding that we left the European Community within a few weeks of the announcement of the result. The Labour party was committed to leaving the EU by the time we got to the 1983 election, having shed a high proportion of its members to the Social Democratic party. My hon. Friend the Member for Stone and I agree that we must not repeat the mistakes of the past.

[Sir William Cash]

Will my right hon. and learned Friend give way?

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[The Temporary Chair]

Amendment 11 comes later in the proceedings. Whether or not that is the subject of a Division will be a matter for whoever is in the Chair later in the day. My expectation is that there will be a Division, but that is a matter for the Chairman at the time.

[Sir William Cash]

My view about the clause is that we have managed to have a wide-ranging debate. In the interests of brevity, I do not think much needs to be said on the subject. We really ought to get on to other matters, including the question of European Union financing. I have no further comments to make on clause stand part.

[Sir Edward Leigh]

(Gainsborough) (Con) rose—

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[Sir Edward Leigh]

I do not want us to repeat yesterday’s debate, but we all know that there was a shift in public opinion following the Scottish referendum, so we have to be careful.

The UK is lucky not to suffer from the money-infused politics of the United States, where power goes to the highest bidder or spender. As we all know, it is virtually impossible to have a serious intention of becoming President without access to millions of pounds of spending or unless your name is Bush or Clinton. We do not want to replicate that situation here. British voters are very resistant to such a culture. We have been brought up in our constituencies knowing there is fairness and that all sides roughly spend the same.

[Sir William Cash]

Has my hon. Friend noticed my own amendment about restricting the money that will surely come from the EU and European Commission? They are described by the Electoral Commission as foreign sources, but they are not. Are they not actually part and parcel of what applies to us under the European Communities Act 1972?

[Sir Edward Leigh]

It would be ironic if the European Commission were a major player—but actually why should it not be? It is entitled to its point of view and to put its case. It has massive resources, however, to which we have contributed greatly, as my hon. Friend says. Nobody minds the Commission having a point of view, but we know what it will be, and we do not want its spending to come on top of all the rest, as it would create a sense of unfairness.

The official yes side in the AV referendum spent £3,436,000, and the official no side spent £2,595,000, so although the no side was outspent, spending was broadly not too dissimilar and fairly low, and voters still rejected the proposal. That is fair enough. Although the yes side spent a bit more, the arguments were well put. We all understood the arguments and there was broad acceptance of the result. There was no backlash and people felt the whole thing was fair, and in any event the result was clear: two thirds voted no.

Now, let us consider other referendums that I do not think have been conducted as fairly as our AV referendum. In 2008, voters in Ireland rejected the Lisbon treaty, only effectively to be told they must vote again, until the “correct result” could be obtained. The behaviour of the pro-EU side in the subsequent 2009 referendum campaign has resulted in several legal challenges in Ireland. One campaigning group even offered Irish citizens resident on the continent free Ryanair flights home, provided they canvassed for a yes vote. Before Lisbon, Irish voters also rejected the treaty of Nice in a 2001 referendum, but the Government pushed through a law on the last day before the Irish Parliament broke up for Christmas to remove the responsibility of the Referendum Commission to ensure that voters were informed of arguments on both sides in a balanced way. There is a great deal of unhappiness about that in Ireland. I should have thought that the yes campaigners could have won anyway.

We want to ensure that when it comes to our own referendum it is clear to everyone that there has been fairness. In the case of other EU referendums, when the stakes have been incredibly high and when it has been possible for huge amounts of money to be spent, there have been allegations of dirty tricks. We do not want that to happen in our own country. Our Government must show that they will insist on a free, fair, balanced and clean referendum, with equitable arrangements for all sides. As we know, a large proportion of the populace is already somewhat disengaged from and disenchanted with politics, and allowing such an overspend by one side would only deepen those feelings. It would reinforce the idea that the deck is stacked and the game is rigged.

Members in all parts of the House are profoundly aware of how difficult it can be to engage ordinary people in the political process. Too often, we meet with responses such as “What is the point?”, “It will not change anything”, “It is all fixed anyway”, and “If voting changed anything, they would abolish it.” We reject that, as politicians and as people who value debate in the House of Commons. We want the referendum to be fair. However, the mindset of many people out there must be acknowledged and challenged.

Public confidence in our parliamentary democracy is a matter of grave concern, and this referendum is a crucial turning point. The very fact that it is taking place is testimony to the Prime Minister’s having kept his word, and that has meant a great deal in the context of restoring confidence in the whole EU debate and in our democracy. As I have said several times, and as everyone knows, no one under the age of 55 has yet had a chance to vote yes or no in a referendum such as this. There is now a great opportunity for a really good debate, and for both sides to be given broadly equal funding to enable them to put their arguments.

Finally, let me say to the Minister that more needs to be done. The Government need to ensure that this problem is addressed.

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[Alex Salmond]

The hon. Gentleman should be aware that there is a Jacobite white rose. I have always had the hon. Gentleman down for a Jacobin rather than a Jacobite, but there is also the MacDiarmid rose in the poem:

“The rose of all the world is not for me

I want for my part

Only the little white rose of Scotland

That smells sharp and sweet - and breaks the heart.”

SNP Members were adorned by the MacDiarmid rose during the Queen’s Speech.

The point about spending limits is well made. Fairness in terms of spending capacity is one important part of elections and referendums. There is an enforcement mechanism—some may say that it is not always used as rigorously as it could be—for election or referendum spending rules and there are severe penalties for breaching them. There is no such effective mechanism for breaches of purdah or when Ministers or civil servants go clearly outside the purdah rules. I commend to the hon. Gentleman the new clauses, which we will vote on later, which would introduce exactly such an enforcement mechanism to ensure fairness not just in our debates but in a referendum.

[Sir William Cash]

The civil service code does not impose any restriction on civil servants as far as I am told. That would definitely have to be dealt with, as the right hon. Gentleman suggests.

[Alex Salmond]

I am delighted to have given way to the hon. Gentleman, who is in a sedentary position. His colleague the hon. Member for Harwich and North Essex (Mr Jenkin), whose Committee’s report condemned the activities of Sir Nicholas Macpherson a few months ago, has alluded to exactly why that should be done. The hon. Member for Stone is right and I commend him to look at our new clauses 3 and 4, which seek to set out what the rules should be and to provide an enforcement mechanism to make sure that they are adhered to.

You have been patient, Sir Roger, and I know that a number of other hon. and right hon. Members wish to speak. I say to the Government that this debate has already flung up a range of issues. There are severe deficiencies in the Bill, although we certainly welcome the concession on the timing of the referendum, whether that happened as a result of listening or of panic. However, there are other areas on which the Government have not yet convinced me as a pro-European or, I suspect, some of their colleagues who take a different view on the European referendum. The joint view that we hold, as far as is possible, is that we would like to see a referendum that is conducted in a proper and fair manner.

[Sir William Cash]

I am going to speak to my amendment 9, which is a simple amendment with very important consequences and implications. It would ensure that the referendum period lasts for at least 16 weeks.

Under the Political Parties, Elections and Referendums Act 2000, there is a maximum six-week period for potential lead campaigners to apply and be appointed, followed by a minimum four-week period before the poll. However, the Electoral Commission, drawing on its experience of regulating the rules for the Scottish independence referendum in 2014, has concluded that an alternative approach is needed to the timetable for appointing lead campaigners. The amendment recommends that, should the legislative timetable allow for it, the appointment should take place shortly before rather than during the first six weeks of the referendum period.

The effect would be to provide clarity at an earlier stage for voters and campaigners, and to ensure that the lead campaigners were in place shortly before the majority of the regulatory controls come into force. I cannot think of anything much more important than people knowing who is running which organisations. That would therefore allow for a shorter total duration of the subsequent referendum period—for example, a designation period of six weeks—with a subsequent 10-week regulated campaign period.

This is a massively important referendum and it is pretty astonishing that there is a vacuum on this subject. This is an extremely important amendment. The Minister for Europe is not in his place, but one of the senior Whips is, which is no substitute—

[The Parliamentary Secretary, Cabinet Office (John Penrose)]

I am the Minister responsible for constitutional reform.

[Sir William Cash]

I do beg my hon. Friend’s pardon. He was a Whip a short time ago, but he has now been promoted, on which I congratulate him. I hope he will pass back the message that we really must have a substantive response to this question.

Furthermore, the amendment will extend the minimum referendum period to 16 weeks, thus providing for a minimum 10-week post-appointment period. I am glad to say that the Electoral Commission supports my amendment; indeed, it supports the majority of my amendments. It says that extending the period to 16 weeks

“would go some way to giving designated lead campaign groups the time needed to get their messages to voters, including to plan and effectively use free mailing and TV broadcasts.”

As a matter of fairness—that hallowed expression—I cannot think of anything more important.

[Mr Jenkin]

I commend my hon. Friend’s amendment, to which I have added my name, but does that not presuppose that the Government will conclude the negotiations and report them to the House well before the 16-week period kicks in, and that it is not legitimate for them then to use the Government’s machinery to explain the deal that they have reached through the purdah period and the 16-week period up to polling day? Does that not suggest that the Government will try to pull a fast one? Would it not be better if they made it clear now that they are going to conclude the deal long before the referendum is called so that there can be a proper and dispassionate debate about it?

[Sir William Cash]

I very much agree with my hon. Friend and I will go further and say that in the period between now and Report there will be substantial issues of this kind that we will need to dig into. There are references to counsel’s opinion on the purdah period and views that have been expressed by the Electoral Commission. We had a Bill before us without our having any idea of the outcome of the negotiations. This is not a satisfactory way to proceed.

As one who spent 25 years in very senior practice as a constitutional and administrative lawyer dealing with matters such as the dispute between Canada and Quebec, I can only say that counsel’s opinion is not the basis on which to make political decisions. We as lawyers may be very good at coming up with legal answers, but when I get my hands on that counsel’s opinion, as eventually we did on the Iraq opinion, there will be quite a lot of question marks. As my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) said in an earlier intervention, the Government can take their counsel’s opinion; we will take ours.

That is the position on that important amendment. The Electoral Commission supports the principle behind it. Will the Minister be good enough to give us a substantive reply and support amendment 9? I might not hold my breath about that.

The other amendment in my name, amendment 10—again, I am grateful for the support of hon. Members who have signed it—would ensure that no funds or support provided directly or indirectly by European Union bodies have a bearing on the outcome of the referendum. Is there any conceivable basis on which the Committee of the whole House would think a proper and fair referendum could be conducted if the entire resources of the European Commission and the European Union can be deployed in order to support a yes vote in the United Kingdom? By the way, there is no chance whatever that those bodies will not use all that money. They may have problems with Greece and they do not want a Grexit, but that pales into insignificance.

This is a very important proposal. The Electoral Commission takes the view that it already has controls on direct and indirect sources of campaign funding. Before I come to that, I refer to the situation as it applied in Ireland. I have spoken, debated and been at mass meetings when campaigners have been good enough to invite me in the run-up to referendums in France, Ireland, Denmark—all over Europe. There one sees the power of the state, pouring money down the throats of voters, and the machinery that underpins the yes campaign. I have come across some figures suggesting that in the second Irish referendum the amount of money deployed by the yes campaign after the machinery was geared up was around 15 times the amount available to the no campaign. That shows the scale of the problem.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I wonder whether the hon. Gentleman’s concern is partly due to the behaviour of José Manuel Barroso, the former President of the European Commission, during the Scottish referendum, and whether that model is what he envisages seeing, in amplification, in the European referendum.

[Sir William Cash]

It certainly is. I have heard over and over again in this debate claims that, “We all want fairness. We all want transparency. We all want to be sure that the British people are treated fairly.” The fact is that with European Union money there is not the slightest chance of that happening, and the purdah arrangements, by bringing the civil service into the equation, will have exactly the same negative effect.

[Mr MacNeil]

By extension, the logical conclusion of what the hon. Gentleman has just said is that the Scottish people were not treated fairly last September.

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[Sir William Cash]

The hon. Gentleman is seeking to draw me down that path, but I have been in this place for 31 years and will not buy that one. I am very glad that we got the vote we did last September, but that does not prevent me from being critical of the manner in which the procedures were followed.

I want to say something else. We have mentioned Mr Barroso. Here we are in the Westminster Parliament, described as the mother of Parliaments, and yesterday the celebrations for the Magna Carta were seen all over the world. The fact is that the traditions of those two things are illuminated around the world. We have fought in two world wars, against unprovoked aggression, and through our Parliament—through Churchill in this Parliament—we managed to save not just the United Kingdom, but Europe. They managed to drop a bomb on this place on my first birthday. Indeed, on the day I was born Hitler invaded Holland and France and Churchill became Prime Minister, but that is another story. The fact is that we have played a massive part in relation to democracy. What really worries me is that allowing the European Union to use its financial resources to manipulate the system is very dangerous.

According to the Electoral Commission, a central principle of its regulatory regime is to ensure—this is important—

“that foreign sources of funding do not have an undue influence on our democratic process.”

As hon. Members know, I have an eagle eye for the danger points. The Electoral Commission states that the 2000 Act, which sets out that regulatory regime,

“already provides that referendum campaigners are only able to accept donations over £500 from certain ‘permissible’ sources. In general, the permissibility rules provide that funding can only be accepted by referendum campaigners from certain UK-based sources. There are also rules and offences related to using permissible donors as agents to circumvent the rules.”

The Electoral Commission therefore put in place its regulatory arrangements. What it goes on to say is extremely important, and I still believe that my amendment would achieve this, because it uses the words “directly” and “indirectly” when talking about moneys, resources or support from any source within the European Union. The Electoral Commission states:

“It is important that the legislation is clear about those organisations that can and cannot participate in the referendum. The Commission’s view—

wait for it—

is that the European Commission does not fall within the list of bodies that can register as a campaigner or donate to other referendum campaigners. This amendment is therefore unnecessary.”

However, the analysis that I have provided shows the reach of the tentacles of the European Union, driven by Mr Barroso and his successors—Mr Juncker and all the others. We must never forget that Mr Barroso has said that the European Parliament, and only the European Parliament, is the Parliament for the European Union. He and his successors do not believe in this Parliament. There is a lot of talk now about national Parliaments, but his comments are on the record.

The Electoral Commission’s view is that the European Commission does not fall within the list of bodies that can register as campaigners. We should look into that carefully, because if the Electoral Commission were wrong, the European Commission might manage to worm its way in, on the scale that it has at its disposal, and subsidise the yes vote. I understand that that happened in Ireland, not to mention other countries throughout the European Union.

The Prime Minister has said that we can find an answer to the problems inherent in the purdah question. The Government acknowledge that there are problems with section 125 of the 2000 Act, but they say that they will get around them. That would include dealing with the civil service, but we must remember that the civil service includes permanent representatives. Members who are new to the House may not know about COREPER, the Committee of Permanent Representatives, which is the most powerful body in the European Union bar none, because it stitches up deals between all the member states. As Chairman of the European Scrutiny Committee, I took evidence from our chief representative on that body. I emphasise to the Committee that the evaporation of section 125, combined with the monetary intrusion of the European Union, represents a monumental challenge to our democratic system.

[Mr Jenkin]

My hon. Friend is explaining coherently how even though the European Commission does not consider itself to be a permitted participant or a permitted donor in a UK referendum campaign, its ability to fund bodies that will be participants or campaigners is unlimited. What about the Brussels-backed CBI, which has already received funds from the European Union, presumably to promote the EU? What is to prevent the CBI from receiving further funds? What restrictions will the Bill place on the CBI’s ability to receive such funds if it wants to donate to other campaigns?

[Sir William Cash]

This is vital territory. In a nutshell, we will have to get it right. Opening the floodgates on that money would be devastating, especially if it were to be employed alongside the lifting of the restrictions in section 125, which would bring the whole panoply of the civil service into play. That would be a nightmare scenario, but it is a genuine possibility. I am not convinced that the European Union is not a foreign source, although I will look into that. We passed an Act of Parliament, the European Communities Act 1972, under which we absorbed into our legislation all the treaties and all the functions of the bodies in the European Union. Because they became part of our constitutional settlement—for the time being, I trust—I believe that it would be an uncertain, if not a dangerous, assumption to make that the European Union and the European Commission would not be construed as being based in the United Kingdom as well as in all the other EU countries, in other words, as not being a foreign source. This matter will have to be looked at very carefully. I shall consult and confer with my colleagues as to what we do about these amendments.

[Mr MacNeil]

Part of the difficulty that the UK has is the way that countries such as Ireland, Cyprus and Malta are to be treated. We also have the Foreign and Commonwealth Office; we do not consider Commonwealth citizens to be foreign but do consider some European Union citizens to be foreign. The Foreign and Commonwealth Office itself is anomalous because the Irish Republic is neither in the Commonwealth nor is it considered legally foreign in the United Kingdom. The United Kingdom’s own mess is contributing to some of the arguments that the hon. Gentleman is making.

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[Sir William Cash]

I respond merely by saying that there are those who once described the Foreign Office as the Common and Foreignwealth Office, but that is another story.

[Mark Spencer (Sherwood) (Con)]

Will my hon. Friend help me to understand his amendment 10? It appears to bar people who want to engage in the process by donating to the in or out campaign from doing so because of their business interests. For example, a large agricultural company that was receiving basic payment scheme money from the European Union would not be able to donate to an in or out campaign because it was getting that assistance. The same could be said for many industrial companies that may receive grants to extend their factories, or other such support mechanisms.

[Sir William Cash]

It is a question of the manner in which the funds or support are provided. As far as I am concerned, the framework of amendment 10 is to do with campaign funding and donations. The interstices and tentacles of the European Union are so extensive that we will keep bumping into these problems. The scale of the moneys in question is so huge that we have to be sure about this. The determination of the European Union bodies to keep Britain in the European Union is such that they will stop at nothing to use every means that they legally can to ensure that the money goes where they want it for the yes campaign.

I will confer with my colleagues on what we do about amendments 9 and 10.

[Peter Grant (Glenrothes) (SNP)]

It is a great pleasure to follow the hon. Member for Stone (Sir William Cash). I associate myself entirely with the comments made earlier in welcoming him to this debate. I will often disagree with what he says, but I am delighted to see someone who goes to such efforts to express in this Chamber views that are very clearly and sincerely held. I always think that a sincere political opponent is the kind of opponent one likes to have a debate with.

I want to focus on amendments 53 and 32. I have some sympathy with the intention behind amendment 53, but from my experience of the referendum in Scotland last year, I suggest that the last thing anybody should want to do is to artificially restrict or control the number of individuals in organisations who can play their own small but important part in what should be a celebration of grassroots democracy if we get it right; it could be something very different if we get it wrong.

The Scottish independence referendum was the biggest celebration of grassroots democracy that I have ever seen or expect to see. That was partly because neither the political parties nor anyone else tried to artificially control who was and was not allowed to take part. I am sure that on a number of occasions the SNP’s lawyers were quite pleased that they were not in control of some of the things that were happening. That is what made it so much fun, that is what gave us a record-breaking turnout, and that is why public engagement in politics in Scotland is still at a much higher level than it was just a few years ago.

I caution the hon. Member for Gainsborough (Sir Edward Leigh) to be careful about artificially restricting this debate to the great and the good and suchlike. A lot of wee people out there have something important to say, and a lot of smaller organisations will have an important part to play, on both sides of the question. We should encourage them to have their say rather than artificially restrict them.

It is interesting to hear so many Conservative MPs complaining that they might get outspent in an election campaign; in almost 30 years of party politics, I do not often remember Conservatives complaining that an election was not fair if one party was being massively funded by big business and was able to outspend all the other parties combined by a factor of five or 10.

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[Mr Rees-Mogg]

No, I am afraid that I fundamentally disagree with my hon. Friend. There are stages in this process. That is what the Bill and the Minister’s letter are trying to get at. The Government will have their renegotiation and then come back with a package saying it is a triumph, whatever is in the package. It might have three loaves and two fishes, or it might give us complete control of our own destiny—whichever it is, the Government will say it is a triumph. That will be the Government’s answer, and they can tell the electorate what they have managed to do. From then on, however, it will become a matter of straightforward politics whether someone believes the Government and agrees with what they have done. I approve of the adversarial system in this country. We do not develop our arguments and get to the answer we want by getting authoritative documents from the Government. Actually, such documents always contain a bias. It might not be obvious on first reading, but, reading through the detail, one will see the way the Government want people to go, and that will bolster the position they have set for themselves.

[Sir William Cash]

I might be corrected by SNP Members, but, as I understand it, the Electoral Commission put out leaflets during the Scottish referendum campaign agreed between the yes and no campaigns. Even if that did not happen, it might be a way of dealing with the situation. The no and yes campaigns could exchange information and come up with a bottom line, and then that line could be taken and put as a fair choice.

[Mr Rees-Mogg]

I certainly see no impropriety in that. In the London mayoral campaigns, the views of all the candidates are circulated in a single booklet. That is not improper. Perhaps, however, I am more of a believer in capitalism, in respect of elections as well as the economic structures of the country. I believe that people should campaign for what they want, and should put their own arguments rather than thinking that they could be better put—or even well put—by a nominally independent third party, least of all the Government.

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[Mr Rees-Mogg]

That is a very important point, which may be worth discussing when we debate other amendments. Ultimately, the Government must accept the will of the people—that is what we all believe in, and that is why we are all here—but they must deal with that fairly.

There is also the question of where the Government should proceed from here. There seems to be a wide consensus that paragraph 15 of schedule 1 is deeply unsatisfactory, and that the removal of the issue of purdah was simply a mistake. I am willing to trust the Government, so I accept that it was an honest mistake, and not a mistake that was made in an attempt to fiddle the referendum result. I believe that partly because I am a simple fellow who is very trusting of the Government, but also because trying to fiddle the result will damage whichever side wishes to do it.

The British electorate will not have the wool pulled over their eyes. If little bits of legislation are squirreled away into the Bill to make things easier for one side or the other, those of us who are on the other side will campaign on that basis. We will say, “Look, we need to act against this, because people are trying to fiddle us over what is happening.” There is a wonderfully contrary spirit among the British people, who will not be cowed by those who try to trick them.

[Sir William Cash]

The explanatory notes relating to section 125 of the 2000 Act were so explanatory that a line and a half said simply, “This is what we are going to do.” For practical purposes, I do not think that my hon. Friend would be entirely right in thinking that the Government got there by mistake, particularly as they had taken counsel’s opinion, which we are determined to ferret out.

[Mr Rees-Mogg]

I do not know too much about ferreting, or indeed about counsel’s opinion, but my hon. Friend knows only too well that explanatory notes are anything but explanatory. They consist of a complicated a set of notes which, when read carefully in conjunction with a Bill, can shed some light, but I do not think that anyone expects them to be like the Book of Revelation, revealing everything that one could possibly want to know about a Bill. They require Members of Parliament to look diligently at what underlies them.

The Government must examine clause 3 very carefully. They have given undertakings to do so over the next few months, but they need to come back with something that is just as rigorous as what is there already.

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[Mr Rees-Mogg]

I entirely agree with my hon. Friend and that point has been made by my hon. Friend the Member for Stone. An uncharacteristically weak argument must have been given to the Minister for Europe to read out—he could not have made so poor an argument himself—when he said that if the negotiations have finished it would be very difficult for the Government not to be able to explain them immediately before the election. It cannot be that we will have the referendum two weeks after the negotiations have been concluded. That would be preposterous. There has to be a considerable period of time beforehand, so that what has happened can be understood, debated and campaigned upon. That must mean a period of a minimum of 28 days, as currently set out, but realistically we are going to need three months at the end of the negotiations before we can move straight to the referendum.

[Sir William Cash]

My hon. Friend is developing an excellent argument, which perhaps brings out the fact that the amendment I have tabled specifies, fully supported by the Electoral Commission, at least a 16-week referendum period, and then it describes how it should be conducted.

[Mr Rees-Mogg]

I am well aware of my hon. Friend’s amendment, and I think the Government need to be thinking along those lines. I am going to support the Government this evening; I am not going to vote with my friends in the SNP on this occasion, or indeed with my hon. Friend the Member for Stone, which is more of a break with the habits of a lifetime. There is an important “but”, and I think other hon. Members on the Government Benches share my view: because the Government have made a mistake at this stage, they now need to come back with something better than we would have needed had they not made this mistake. Therefore, the Government’s position of purdah must be a stricter one than they might have been able to get away with had they simply amended the existing restrictions rather than taking them all away and having a completely clean base from which they could have done anything.

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[John Redwood]

Indeed. I am speaking to amendment 10 tabled by my hon. Friend the Member for Stone (Sir William Cash), who seeks to clarify this point and prevent the use or abuse of EU money. I hope that the Minister will respond and that he will have his own proposals on Report. The Electoral Commission has given exceedingly good advice across the board on this referendum. It seemed to suggest that it would not be right for the EU to give money for the campaign, and it would be nice to have a reassurance that the Government share that view and accept the advice of that august body, which is there to guide us.

There is an additional issue with EU money, to which some colleagues have referred. What do we do about the EU money that is routed to bodies or organisations within the UK that choose to make a donation to a referendum campaign? That is another difficulty. As I understand it, such a donation would be perfectly legal because the organisation giving the money would be able to say that it had other sources of money and it was not a direct gift of EU money to the referendum campaign. Such a body may be swayed by the fact that it had had generous access to EU moneys in the past. While one would hope that none of them were donating for that reason, people would suspect that a body in receipt of substantial EU moneys in the normal course of business that saw fit to give money to the campaign to stay in would hope that the EU would be better disposed to it when it put in its next application for money.

[Sir William Cash]

I do not know whether my right hon. Friend was here when we were debating part of this, but the Electoral Commission’s position is that a central principle of the regulatory regime that it supervises is that foreign sources of funding should not have undue influence on our democratic process. It has come to the conclusion that the European Commission does not fall within the list of bodies that can register as a campaigner. Does my right hon. Friend agree that we have to get to the bottom of that? It is highly arguable that the European constitutional arrangements are effectively embedded in our own constitutional arrangements by virtue of sections 2 and 3 of the European Communities Act 1972. We need to get this right.

[John Redwood]

I was present to hear my hon. Friend speak to his amendment, and I am aware of the legal minefield that the provision could represent. That is why I worded my remarks cautiously—I said that I thought it was the view of the Electoral Commission that it would not be appropriate for the EU to spend money on the campaign. As he reminds us, it has made a clear statement about being a principal donor to the campaign, but there are other ways in which it could help, and it might argue that it was a domestic institution for these purposes. It might say that the EU’s writ runs within the UK. There is an office of the EU in London; it might try and route it through the London office. We need to say that that would be unwise. The Minister may think that it is illegal or that it should be impeded in some way. We need clear guidance from the Minister.

I return to the issue of indirect funding of the campaign by grant-in-aid to organisations that are helped or partially funded by the EU. Of course, it is a matter for the referendum campaign to argue over the rights and wrongs of EU funding. I am sure the no campaign will want to say that the money we send to Brussels and which it gives back to our organisations could be given to them directly by the United Kingdom Government if Brussels were not in the way. It could be pointed out that the £11 billion we send to Brussels in tax revenue is spent outside the UK, so, were we to leave, that money would be available for either tax cuts or extra spending in the United Kingdom.

That would be a matter of debate in the referendum, but an issue for the Bill relates to the legality, morality and political wisdom and judgment regarding the point at which an organisation becomes so dependent on EU funding that it has a very strong interest in it. Restrictions or limitations—or at least a declaration of interest—might need to be made if such a body decides to become involved in the referendum campaign. It would be wise to let people know of such a clear financial interest if the body played an important part in the yes campaign.

[Sir William Cash]

Does my right hon. Friend think it would be possible to have a register of interests? Then, when companies go on the BBC and say, “We don’t want the United Kingdom to leave the EU,” we would know where their money comes from, what their actual policy is and the extent to which they are dominated by the EU system.

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[John Penrose]

I will happily produce a d-minus election schedule. What I will not be able to do, because it has less to do with the Bill, is to say when negotiations might be complete. However, we will be able to work back and produce a schedule that indicates how the process could and should look.

[Sir William Cash]

The direction of travel is good, because we are interested entirely and exclusively in one thing: not the views of Members of Parliament, but that the choice before the voters is fair. As the Minister knows, the Electoral Commission has supported my proposal. Will he re-engage with me if he has discussions with the Electoral Commission on his new proposal, so that we know which track the commission is going down and what its response is?

[John Penrose]

I am happy to confirm that we have had discussions with the Electoral Commission—I am sure they will continue—about early or pre-designation, which will be an essential part of the alternative that I am suggesting to the hon. Gentleman. That will ensure that the 10-week official referendum period is not eaten into, leaving too short a time for a proper airing of the issues. I know that he is concerned about that.

While I am sure that the recent general election campaign was fascinating in all possible respects to everybody in this Chamber, it is possible, given that it started rather earlier than normal because of the Fixed-term Parliaments Act 2011, that in the minds of one or two of our constituents it might have dragged a bit by the end. I am sure we all had cases of knocking on doors when we were out canvassing during the campaign and people saying, “Oh God, I wish the whole thing was all over.” We need to take care not to go to the other extreme—I know that my hon. Friend is not suggesting this—of having an election campaign that is too long. We are already beginning the referendum campaign—it is clearly starting to gear up—and we need to be careful about going too far the other way.

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My hon. Friend talked about some of the organisations that are allowed to donate. There are very great existing protections to stop external non-British interventions in British elections of all kinds, including this one.

[Sir William Cash]

The Electoral Commission’s view is that the European Union does not come within these parameters, but will my hon. Friend share with us the legal advice that the Foreign Office is getting? I think he can take it, though, that we shall be looking at this ourselves, because it is so important in terms of the volume and disproportionateness of the funds that will be available. As my right hon. Friend the Member for Wokingham (John Redwood) said, it is half our money anyway.

[John Penrose]

My hon. Friend is absolutely right—it is half our money.

I have here the schedule of those who are eligible to donate to the permitted participants under the Act. It is all about UK-based organisations of one kind or another, be they third sector or private sector. Nothing anywhere would allow an organisation like the EU to get involved. The established protections have applied to British elections for quite a few years, and relatively successfully. I do not think that people feel there has been undue influence from organisations abroad in previous elections. The only changes we are making to those protections are, in effect, to make sure that Gibraltarian organisations can, if necessary, be part of the campaign actively or through donations.

My hon. Friend is aware—he mentioned it, as did a number of other colleagues—that the amendment as currently drafted probably has some rather serious technical flaws. He acknowledged that when he was talking about its underlying principles. Those flaws would, in particular, prevent a number of legitimate potential participants in the campaign from participating. For example, any farmer who had received payments under the common agricultural policy would potentially be excluded, as would any firm that had done business on the basis of trading with the European Union Commission. Civil engineering firms that have built roads in France, or indeed in this country, that have been paid for, even in part, by our money routed via the EU, would find themselves caught. In addition, the amendment does not have a time limit, so it would not only apply to the past couple of years but could affect anybody who has ever had any of this money since the EU was first started. Of course, that would be incredibly wide-ranging and could count out some entirely legitimate campaigning organisations or people who wanted to be involved.

Strong protections are in place, and we would need to be careful about the issue raised by the amendment.

[Sir William Cash]

rose—

[John Penrose]

I was about to move on, but my hon. Friend wants to make one final point.

[Sir William Cash]

The BBC, of course, has been receiving money from the European Union, so my hon. Friend is right that I am concerned about that point.

[John Penrose]

My hon. Friend has confirmed my view, and I am sure that we will continue these discussions.

I move on to amendment 53, tabled by my hon. Friend the Member for Gainsborough. I think his intention is to ensure equal force of arms on both sides of the debate. I was starting from a slightly different presumption: I think that both sides will be pretty well funded—there are well funded and strong views on both sides. There is no tradition in this country of overall, global limits on total campaign spending. As colleagues, including my right hon. Friend the Member for Wokingham, have mentioned, there are individual limits on constituency spends and national limits on individual political party spends. However, there is no overall global limit on the total amount that can be put behind a movement or campaign because other third party campaigning organisations, even after the closer regulation following the Transparency of Lobbying, Non-party Campaigning and Trade Union Administration Act 2014, can also contribute to the campaign behind a particular cause. As there is no limit to the number of organisations that can contribute, there is de facto no overall limit on the total that can be spent.

Opposition colleagues may dislike this example, but it may have resonance on the Government Benches. It is possible and entirely legal, under the right conditions, for trade unions to contribute to and campaign strongly in elections. There are constraints on what they can do, but it is entirely open to one union or 10 to contribute. If 10 contribute, the money that unions could spend goes up by a factor of 10. There is no overall global limit on the amount of money that traditionally can be spent in British elections, although there have been individual limits in specific constituencies.

I caution my hon. Friend a little. The hon. Member for Glenrothes rightly pointed out that people get enthused, excited and involved in political debate at different points and in different ways. If a campaign on either side captures the popular imagination and engages people, people who were not involved at the start can decide to become involved part of the way through. My hon. Friend’s amendment would limit the number of people to only those who were organised and enrolled at the start; once the maximum number had been reached, the gates would close and no one else could enrol.

It is an entirely unworthy thought, I know, but the Chief Whip and I suggest that one side could grab all the slots of eligible campaigners on the other side and then do absolutely nothing with those slots. That would effectively kibosh the other side. I understand my hon. Friend’s attempt to equalise force of arms, but I am afraid that things will not work as he has described. The amendment would also run counter to some deep-rooted, fundamental principles about how British democracy has worked.