EUC Report: Economic Governance

Baroness Hooper Excerpts

Thursday 16th June 2011 Lords Chamber

[Baroness Hooper]

My Lords, this is an important report and I take this opportunity to congratulate the noble Lord, Lord Harrison, on the way in which he has both shepherded his sub-committee into preparing it and set the scene in opening the debate today. Although he covered the ground thoroughly, I will emphasise two points.

First, standing outside the euro area, as the United Kingdom does, gave the sub-committee an interesting opportunity to view the issues raised in the Commission’s proposals in a rather objective way, while realising and acknowledging that we are not an island alone unto ourselves. That the UK’s financial investment sector had and has substantial investments in the euro area means that we are directly affected by whatever goes on there—that is apart from the fact that some 60 per cent of UK trade is within the European Union. The state of the economies of those trading partners has a direct impact. We need to be fully aware of and involved in all European Union policy developments in the area. In all fairness, this and the United Kingdom’s undoubted expertise in the financial sector have been acknowledged and welcomed. Not one witness who gave evidence to us suggested that we were in any way interfering in eurozone business.

Secondly, the report refers to the deepening problems and evolving policy responses. In the few short months since its publication, it is quite clear that things have moved on. The contagion theory has been proved. Ireland and Portugal have joined Greece in asking for help. We are looking at a moving target at the same time as trying to find ways to prevent any of this happening again in the future. Those who believe in the inevitability of the business cycle may well be proved right. This is unlikely to be the last report on the subject.

The main question I wish to ask the Minister relates to institutional reform. The sub-committee’s recommendation and the Government’s response indicate that, whatever happens in terms of strengthening and reinforcing institutions, we do not want any new institutions. I understand that there are some quite tricky negotiations going on between the Council and the European Parliament before next week’s 20 June meeting. This results from the European Parliament’s wish for a greater role in fiscal and macroeconomic surveillance, the right to call Governments to account and its support for the use of reverse-majority voting. Can the Minister confirm what, if any, objections the Government have to the European Parliament’s proposals? Is he concerned that the United Kingdom Government could be more sidelined as a result?

As has been said, in general our report broadly supports the six main proposals before us from the European Union. There can be no doubt that things will continue to change, that there will be more use of financial regulation in a more proactive way in future, or that there needs to be more co-ordination between monetary and financial policy. Although our report was published in March, today has turned out to be appropriate for our debate. Not only do we just precede the ECOFIN meeting next week but also we follow the Chancellor’s Mansion House speech last night. Today also sees the first meetings of the Bank of England’s new committee charged with spotting signs of danger in advance—just the sort of thing that we are talking about. I trust that the evidence collected for our report as well as the conclusions that we have drawn will make a useful contribution to their tasks.