European Council

Anne Main Excerpts

Thursday 8th December 2011 Westminster Hall

[Mr Cash]

I am not going to take an intervention, because otherwise we will be here all afternoon—we are going to be anyway. I simply make the point that the leader of the Liberal Democrats has been quite specific in saying that there should not be any repatriation.

Within the electorates of individual countries, decisions can be taken to improve economic performance, develop small and medium-sized businesses and remove burdens on business, but that is not the European method. We may be driven into the formula of the notwithstanding arrangements, which was endorsed by the European Scrutiny Committee report on sovereignty and Parliament, because if the situation is so critical, we may have to override European regulation. However, the European method has locked people, by unanimous decisions, into a European system that cannot be changed, other than by renegotiation, which is almost impossible, or by a notwithstanding arrangement of the kind I have mentioned. Such oppressive regulations and rules are based on theoretical assumptions, as with the Lisbon agenda and the 2020 agenda, which have failed. The result is no growth.

We need to move away from centralisation and integration and back to decision making by Parliaments in the United Kingdom and elsewhere on behalf of the electorates of every country, and also into an association of nation states by co-operating. The other alternative is not to remain a member of the European Union at all. We are reaching that kind of critical point. We may not have got there yet, but we are getting to it.

Effectively, there would have to be a European Free Trade Association-type arrangement, with countries co-operating for free trade, competitiveness and growth, as my hon. Friend the Member for Basildon and Billericay (Mr Baron) so rightly said. However, that arrangement would also have to be based on democratic consent and not exclusively on majority block voting arrangements. That would provide free choice in the marketplace and at the ballot box.

That is the route to solving the problem, not imposing economic prescriptions and rules that have already been broken in the past—invariably—and that will not be observed in the future, because we are dealing with people and not economic or theoretical machines. That is fundamentally the difference between the British approach, which favours freedom of choice, and the eurocratic and—I say this with respect—the Germanic approach, which is rule-based and completely different.

This week’s meeting presents the Prime Minister with a historic moment, given the scale of the crisis, and it is essential that he takes the right path. We cannot have a fiscal union and be within the same treaty; that is a contradiction within itself. It is not a neat Russian doll; it is angular and impossible. Actually, it will not fit. A treaty within a treaty is a house divided against itself and because both are built on sand the result of going down this route will be even greater chaos, whether there are 17 or 27 countries involved. That is the problem and the European Court of Justice simply will not be able to deal with the overarching contradiction that those two competing arrangements provide.

Whether it is the eurozone 17 or the eurozone 27 that we are dealing with, the Prime Minister must recognise that the intentions expressed by the Germans and the French are to pursue a model that is entirely unsuited to the UK and that will create a fundamental change in the relationship between the EU and the UK. As I have said already, countries in the non-eurozone will vote for fiscal union, and that will be disastrous, not only with respect to the single market and how it affects the City of London but with respect to EU directives. I have looked at those directives, but I do not have time to go through all of them now. I simply say that there are literally hundreds, if not thousands, of directives in other areas of the treaty. For example, I have mentioned transport, but other areas include communications and energy—the list is endless. I have the list; in fact, the Library has provided it for me. It shows all those areas that are decided by qualified majority voting and the few areas that are decided by unanimity. The fiscal solidarity within the 17—or within the 27, if that is the way it goes—will use that QMV in all the areas, because that will be the new deal. So we are really in grave peril for those reasons.

I believe that the creation of another treaty within the framework of the existing treaties will deliberately target, for example, the City of London, and that is not just accidental. I remember saying before Mr Nicolas Sarkozy was elected—I say this with some respect to him—that he might prove to be a very dangerous president of France, and from our point of view that has been proved to be the case, much as I think he is looking after French interests. I cannot complain about that; we cannot try to defend our own interests and then say that the French should not look after themselves. The problem is the unreality—the Alice in Wonderland world—in which we are now living, where the French are allowed to renegotiate and throw down the gauntlet to us about what they want, but we are supposed to acquiesce and do nothing much about that. That is why this debate is so important and should be taking place on the Floor of the House.

The critical voting block against the UK will be extremely important. In fact, at the moment it is 213 votes to 130 between the eurozone 17 and ourselves. If it turns out that there is a eurozone 27, there will still be all the economic critical mass and consequently there will still be a voting arrangement against us. For that reason, we are in serious difficulties. Therefore I say that it is an illusion to imagine that that critical mass will not exist.

We also have to repatriate, although I have said repeatedly for months now—if not years—that the fundamental change in the relationship between the UK and the EU is the key question, because when we have got that right we can also address the question of repatriation. As my right hon. Friend the Prime Minister said in 2005 in the Centre for Policy Studies lecture, it is imperative that we repatriate social and employment laws.

Then there is the question of our current account deficit with the EU, which is minus £51 billion. That is up by something of the order of £35 billion or £40 billion in one year alone, and yet our trading surplus with the rest of the world is £15 billion. In other words, there is nothing wrong with our competitiveness; it is just that we cannot be competitive inside the European framework. Therefore we must deal with that issue too.

Effectively, that means that we must re-gear our relationships as a matter of fundamental foreign policy and economic policy. The Foreign Office and the Treasury, through No. 10, must re-gear our relationships with the rest of the world: with the Commonwealth countries, including India; with the United States, of course, which is not part of the Commonwealth and which must be addressed in its own right; and with all the other countries, including Malaysia, South Africa and other African countries, and south-east Asian countries. All those countries offer huge opportunities and many of them operate on the basis of British commercial law and British contracts, adapted indigenously to provide the basis of their legal system and constitutional arrangements. We can be enormously optimistic about the future if we go down that route, not abandoning our trade with the EU, but ensuring that we get a proper balance in our relationship with the EU and putting the emphasis in the right place.

We are told that 3 million jobs are at stake in our trading relationships with the EU. Nobody is suggesting that we would not continue to trade with the EU, but the problem is that the other EU countries have no growth and our trading generates a deficit.

This issue is not just a technical question about Schengen, or otherwise; we must concentrate on the bigger landscape, which is the failure of the European project. It is also about our democracy and the individual electors who voted us into Parliament on the clear understanding that we would protect their interests. That is why a veto is necessary unless a renegotiation of our fundamental relationship with the EU, along the lines that I have described, is achieved, as well as the protection of our democratic interests and the rights of our constituents.

That is also why a referendum is required. The idea being peddled that a referendum is not required—leaving aside the issue of timing—because of the coalition agreement is wholly misleading. The coalition agreement is not law, and even section 4 of the European Union Act 2011, which I sought to remove from the original Bill by an amendment that was rejected by the Government, is not definitive in excluding a referendum where a new treaty or series of legal devices that have been put together has the effect of merely appearing to make provision for member states other than the UK. That is a matter of legal interpretation and we are by no means finished with it; indeed, I have a Bill coming forward in January that has been signed up to by six Chairmen of Select Committees and that will make that clear. But the important thing is that we engage in this debate.

The assumption that is being made at the moment—that we are unable to have a referendum because of section 4 of the 2011 Act—is wholly misleading. The constitutional position for a referendum, let alone the political and economic situation, is not clear-cut by any means, and it cannot override the fundamental principle, as set out in 1975 when a referendum was conducted, because the renegotiations in this instance involve a fundamental change in the overall relationship between the UK and the EU. A referendum is required, quite simply because the current proposals vitally affect the people of the UK. We must have a referendum—it is a matter of principle, honour and trust.

[Mrs Anne Main (in the Chair)]

Order. Before I call Mr David Nuttall to speak, I will point out that there are three other Members who have attended the debate and who would also like to speak. I will be calling for winding-up speeches from about 5.10 pm. I call Mr David Nuttall to speak, and there are three other colleagues who may wish to catch my eye after him.

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[Mark Reckless (Rochester and Strood) (Con)]

I pay tribute to my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), who is not currently in his seat. I first met him 18 years ago as a UK economist for Warburgs, where we argued for Britain staying out of the euro. Warburgs invited my hon. Friend, who was then a new MP, to address a lunch of clients. He explained that we would be better off outside the euro. When a client asked, “But wouldn’t that push up gilt yields, and wouldn’t there be a risk premium for being out of the euro?”, he said, “No. There would be more risk inside the euro. If we stayed out of the euro, in due course, gilt yields would fall below those of German bunds.” That has now happened, and I pay tribute to him for his perspicacity on that issue.

My hon. Friend quoted from a TaxPayers Alliance piece that I found very helpful. It refers to a paper from 2004, which says that we should

“Change our relationship with the EU so that crucial powers are brought back”

and

“take back powers over trade, work and civil rights.”

It states that the British people believe that:

“Giving away power in the hope of influencing the EU has been tried for decades and the EU just gets more power over British life and uses it badly. We should be taking back power, not handing more over.”

Who was the author? My right hon. Friend the Member for Witney (Mr Cameron). Yet, going into the summit this weekend, we now hear that we can ask for only so much back—perhaps not much at all—because our priority must be to save the euro. Then we are told, rather contradictorily, that we cannot ask for too much back, because if we do, they will do it as 17 rather than 27. It cannot be both. In the short term, the only institution that can keep the euro ticking over—I fear it will be no more than that—is the European Central Bank, by printing money and buying Italian and Spanish bonds. Everything else is mood music for German public opinion, but what about our public opinion?

If the euro is to continue, the fundamental issue is competitiveness. Within the euro, the only way to deal with Germany’s overvaluation on competitiveness—it is 30% or 40% better than Italy or Spain, perhaps even more compared with Greece—is to have a significant and sustained period of inflation within Germany. If Germany will not accept that, the only way that peripheral Europe can be priced back into competitiveness with Germany is by a break-up of the euro. I believe that it would be better for that to happen sooner rather than later. It is 18 months since we saw that Greece could not pay its debts, yet it has been patched up, and we now risk throwing good money after bad to keep things going, when it is the euro that is preventing growth in Europe.

I do not dispute that a break-up of the euro will be damaging in the short term, but within two or three years, I believe that growth within Europe will be stronger after a return to national currencies than if we try to keep the euro going. My hon. Friend the Member for Stone (Mr Cash) discussed Germany repatriating its profits. The individual German company can repatriate profits, but Germany as a whole cannot, because Germany has used the euro as the latest manifestation of a system—it started with Bretton Woods, then the snake, then the exchange rate mechanism—to keep its currency artificially low, so that it exports vastly more than it imports. As a result, Germany must recycle its assets into sub-prime US mortgages or Greek Government debt. Only after Germany stops depressing its currency through that system will we come back into balance, and countries such as Greece, Portugal, Spain and Italy will be able once more to compete with Germany. We should focus on that during the summit.

The Prime Minister is going to the summit, and we will see what powers, if any, he seeks to bring back, but it is clear that there has been a fundamental change in the UK-EU relationship. Page 63 of the Liberal Democrat manifesto said that in such circumstances, there should be a referendum of the British people to decide whether we should stay in on those terms or whether, as I would like, we should again be an independent country trading with Europe but governing ourselves.

[Mrs Anne Main (in the Chair)]

I have a correction. I will call the Opposition Front-Bench spokesperson at 5.12 pm.

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[Mr Jenkin]

rose—

[Mrs Anne Main (in the Chair)]

Order. Before the hon. Gentleman speaks, may I ask the hon. Lady to address the debate through the Chair? I have never been to an EU summit and have certainly never given away any powers.

[Mr Jenkin]

I remind the hon. Lady that, after the collapse of the European constitution, Tony Blair went to the European Parliament and said that the trumpets were outside the walls of Jericho and asked whether anybody was listening. Nobody was listening and we got the Lisbon treaty instead. There is no evidence that any Labour Prime Minister had any influence over the general direction of the European Union any more than we do now.