European Affairs

Baroness Stuart of Edgbaston Excerpts

Thursday 3rd June 2010 Commons Chamber

[Mr Hague]

I am grateful to the right hon. Gentleman for his intervention. The role that we played together on the leather and footwear industries all-party group 20 years ago will for ever be somewhere in the recesses of my mind. I am very grateful for that reminder; the memory has just been retrieved from somewhere. He is absolutely right: there is a strong cross-party commitment on EU enlargement, to which I want to turn later in my speech. I want to talk specifically about Croatia later. He used an important phrase about countries joining when they have met the conditions. It is important that they meet the conditions for membership, rather than the conditions being changed to suit a particular country. I very much agree with what he said.

It is also our intention to approach European issues in a more coherent way across Whitehall than has sometimes been the case. In the three weeks for which I have held the office of Foreign Secretary, it has been apparent to my colleagues and me that under the previous Government, Departments could have worked together better, particularly more strategically. That point might also be relevant to previous Governments, and we intend to put it right. We are establishing a new Cabinet Committee on European affairs that I will chair, with the Secretary of State for Energy and Climate Change as the deputy chair. [Interruption.] It is another example of a good coalition in practice.

That Committee will allow the new Government to take a more holistic approach to EU issues than was sometimes the case in the past, and I hope it will achieve better results for Britain. We must ensure that we are always ahead of the game in Brussels, unlike the previous Government, of whom that could not always be said; the position in which they left us in relation to the hedge funds directive is a particular example. In doing so, we will be aided by achieving a more collegiate feeling in a two-party Cabinet than in the previous Cabinet of one party.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

I welcome the Foreign Secretary to his post and remind him that I still owe him the proceeds of a wager, when I said that his party would not leave the European conservative grouping, which, of course, it did. I have proved to be wrong on occasions. Returning to his point about greater co-ordination, will he say how he will arrive at a view about whether the Government agree with the proposals for a new European single credit agency operator? Will he explain how that will work?

[Mr Hague]

I am grateful to the hon. Lady for reminding me of our wager. Without giving too much away, I should say that I am looking forward to drinking with her the proceeds that she owes me. The wager was made on the understanding that I would join her so that we could consume the proceeds together. I am looking forward to doing that. [Interruption.] No, it is not beer on this occasion; it is something that we will drink together.

She asked how we would arrive at the decision. Well, that is exactly what the new European Affairs Committee of the Cabinet is there to do, supported by officials from both the Foreign Office and the Cabinet Office. There will be greater Foreign Office involvement and co-ordination of European affairs than has been the case for a long time. That is part of the more central role in government for the Foreign Office that I have always envisaged and am trying to bring about. That Committee will examine such issues, including the one to which the hon. Lady referred.

--- Later in debate ---

[David Miliband]

My hon. Friend makes an important point. I want to refer back to the exchange between my hon. Friend the Member for Wolverhampton North East (Emma Reynolds) and the Foreign Secretary. It is not often that he is stalled in his stride, but my hon. Friend managed to stall him by pointing out that his new-found enthusiasm for referendums on any transfer of competence, however small, stands in stark contrast to his loyal vote for the Maastricht treaty under his then Government. It also stands in stark contrast to all those Conservative Members who were in the House during the passage of the Single European Act and who loyally stuck to British parliamentary convention. That is, that we are a parliamentary democracy and that when there are fundamental transfers of power around the euro, for example, there should, of course, be a referendum, as all parties have agreed. It is the job of this Parliament, however, to scrutinise, debate and to vote on any other matters.

Although I shall not devote a long section of my speech to this subject today, we look forward to long debates about how the Foreign Secretary will justify spending £80 million to £100 million on referendums, for example, on a change in the organisation of the pension committee of the European Parliament, which is one consequence of the new-found policy adopted by the Government. We will have particular fun in asking the hon. Member for Bermondsey and Old Southwark (Simon Hughes), who has long stood for a high degree of European integration, to explain why that is a good use of taxpayers’ money.

[Ms Gisela Stuart]

Will my right hon. Friend give way?

[David Miliband]

My comrade friend from Birmingham, Edgbaston is always too tempting for me not to give way to her.

[Ms Stuart]

Although this grieves me, let me put on the record that when it comes to referendums, all three parties have nothing to be proud of. We all went into the 2005 election promising one: Conservative Members kept saying “Oh, well, if it is passed, we cannot have one”, but they could perfectly well have had one; the Lib-Dems said, “Oh, we change the question; it should be in or out”; while we said that the document was different from the treaty. None of us came out of this with glory, and I think that we should recognise it.

[David Miliband]

I want to put on record the fact that my hon. Friend did cover herself with glory in respect of the consistency of the positions she took on European issues and—[Interruption.] I have to say to the Foreign Secretary that we have been working on that through separate channels. My hon. Friend achieved a remarkable result in the general election and her result was testimony to what independent-minded and strong constituency MPs can achieve in this country. I am very pleased that she will be applying her independent mind not only to everything that I say, but to everything that the Government say on European issues as well, pointing out the inconsistencies as they develop.

Many of our European partners will be looking forward to the appearance of the Prime Minister at the new European Council. They will be scratching their heads about some of the policies that the new Government will develop. It is not that they find coalition Governments alien—there are, of course, coalition Governments all over Europe—but they often assume that members of the Government will agree with each other on key foreign policy issues. The other leaders will know that the Conservative party has spent a large part of the last decade campaigning to “save the pound”, as they would put it, and that the Liberal Democrats have been campaigning for the last 10 years to ditch the pound. That is why the Foreign Secretary said that there was no more “fanatically federalist party” in Britain than the Liberal Democrats. That was before his new-found enthusiasm for their support on the Government Benches.

--- Later in debate ---

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

It is a great pleasure to follow the maiden speech of the hon. Member for Wyre Forest (Mark Garnier), not least because I still fondly remember having a photograph taken in 1997 with David Lock, the then Labour Member for Wyre Forest. We all had red balloons and we travelled down to Westminster together. I am glad to say that, apart from David Lock, all of those in the photograph are still in the House. I wish the hon. Gentleman well. I am sure that people in his local carpet industry would have had one or two things to say if it had been forced to “go metric” on the weaving shuttles; I am sure that he will have one or two particular points that he wishes to bring to the House.

I wanted to speak today because Europe is facing a political and economic crisis which, although it has been brewing for a considerable time, is, in some ways, being denied both here and abroad. It is a political elite that is in denial, and in some sense that does not surprise me, because I still bear the scars of spending 18 months in Brussels attempting to write a European constitution. The democratic mandate was ignored then, too, and a political elite essentially rode roughshod over the wishes of the electorate.

Frankly, no party here has much to be proud of on the issue of referendums, nor do the Governments in the countries across Europe whose people said no when asked—and were simply ignored, as happened in Holland and France. Ireland’s people were simply asked twice; they were asked until they came up with the right answer. So there is something wrong going on in the house of Europe, and at the moment, that shows itself in terms of economics and the single currency.

Those who have warned against some of the problems of the single currency take little pleasure in being tempted to say, “I told you so”. People need to face up to what is happening at the moment, because this is not a question of one member of the eurozone having a financial crisis from which they can simply be bailed out. A bail-out is not the answer to the problem, nor is it in the current treaty provisions. The central issue in Greece is not associated with the pubic finances, although those are a problem. The real question is what happens when a country in the current monetary union loses competitiveness and cannot regain it. In essence, we are asking Greece to implement what amounts to two thirds of a traditional IMF package, which usually involves raising taxes and cutting public expenditure. However, the third and crucial element that always comes with recovery is depreciation of the currency, and that adjustment is not happening.

What the European monetary union calls “internal depreciation” has to replace a currency depreciation, but that is nothing other than a polite phrase for debt deflation. The programme currently recommended for Greece will crush output and increase both unemployment and private sector default. It will reduce Government revenues still further, and make public sector default and national bankruptcy even more likely.

Some people in countries such as Germany think that every country in Europe should behave like the Germans. As someone born in that country, I think that that is a perfectly reasonable expectation—but it is not the answer, as we cannot answer our economic problems by requiring every country to run a trade surplus. To be fair to Germany, it got out of its own economic crisis of the late 1990s and the first years of this century only at the expense of some of the other countries in the EMU.

So what are we going to do? Two solutions offer themselves. One is to transfer funds from countries with a current account surplus—in effect, those in the German bloc—but that assumes that a one-off payment is the answer. It is not. What is really required are year-on-year transfers, equivalent to what West Germany paid to the old East Germany. Let us be clear about this, however. Just for Greece, such a year-on-year transfer would amount to something like €35 billion to €40 billion a year. If we were talking about the default for Spain and Portugal, we would be looking at something like €100 billion a year, and that would wreck not only the German economy but its public finances as well.

The second solution would involve a massive devaluation of the euro.

[Michael Connarty]

I hope that my hon. Friend does not mind me intervening, but it seems that, having put down a set of rails, she is going to go all the way along until she crashes. Is there not a possibility that the fundamental flaws lie in how the failed economies acted? For example, Spain and Portugal put money into infrastructure and not education, with the result that people left school and built houses instead of educating themselves and creating a new economy. In Greece, the question centres on how much of the tax take that is due has been paid. Should we not concentrate on changing those economies so that they are stronger? Should we not use the 2020 strategy to rebuild growing economies, and not just bail them out?

[Ms Stuart]

That is a perfectly fair point, but there are two problems. The first goes back to the claim that we would have trade surpluses if only every country were like Germany, but things do not work that way. The second problem is how such a strategy would be policed.

There is a third difficulty, too. Every successful single currency requires significant transfers from the centre to deal with asymmetric economic shocks, and those transfers would be of the order of between 20% and 30% of the overall tax take. In Europe, that would require a European economic and political Government. The approach could not work in any other way, because we cannot expect countries to behave like that in the absence of any mechanisms for policing or transfer that would compensate them for their loss of competitiveness.

The problem in Greece is that it could become competitive again by devaluing its currency, but it is not allowed to do so. As a result, the approach outlined by my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty) does not address the problem.

[Kelvin Hopkins]

Exactly.

[Ms Stuart]

Thank you.

The second solution is a massive devaluation of the euro—a devaluation that some people say would have to amount to something like 50 cents against the dollar. A small devaluation would not be enough for Greece, and a large devaluation would be disastrous for the other countries in the EMU. For a country like Germany, a small devaluation would help competiveness, but a large devaluation would lead to incredibly high inflation that would ruin the economy again.

Again, what should we do? There is a least bad solution, although it is not a happy one. People argue that Greece should leave the euro, but I think that the least bad solution would be for the German bloc to leave the euro. That would, in a sense, allow for competitiveness to develop. Germany’s banks would still have to recapitalise, but it would be less costly to do this directly than it would be to do it indirectly by trying to rescue Greece.

The simple truth is that neither the eurozone countries nor any countries around the eurozone will get out of this mess without some very serious decisions being made, and there will be consequences for us all. As I understand it, the Prime Minister says that it is in Britain’s interests for there to be a stable and strong euro. If he says that out of diplomatic politeness, I understand and accept that, but with the current structure there is no way that he can have a stable euro and a strong euro. It will be weak in its basic economic fundamentals, and that is what has been wrong with something that was driven by political will but underpinned by excessively bad economics. The euro has always been a political project, and people keep assuming that given sufficient determination by the politicians, this structure will work. But it is fundamentally flawed.

It is then argued that the answer is more central control from Brussels, with its already incredible intrusion into countries’ sovereignty. Look at what has been happening to Greece, and what has been happening to Spanish Ministers and what they were told to do. Essentially, Brussels is now running Greece as if it were a protectorate. Is that the answer? I do not think it is. I do not think it is acceptable. That is the real difficulty—that nobody is facing up to the fact that the structure is so fundamentally economically flawed that it will not work.

That is why, when the Foreign Secretary and the Prime Minister go for the first time to European Union meetings in their new roles, I urge them to stop using phrases such as “having to protect our negotiating capital.” I think they have to face the fact that that is simply a polite phrase for not being prepared to say no when on occasions you need to say no. Again I have seen it, and the Foreign Secretary himself acknowledged that once people join the Government again, the tones get slightly softened. When a problem arises, the Brits will, as always, within a few hours say, “I’m sure there’s a way through this,” encouraged by our very able diplomats—who, I remind the House, are always in government, irrespective of which side of the House hon. Members are sitting, so it is in their interests to find these rather smooth solutions.

We are coming to a point where, to get out of serious economic difficulties, Britain will have, on occasions, to say no. When it comes to threats to our financial industries and our financial sector, it is no good protecting our negotiating capital. It is time to say no, just as the French would say no if we attacked their wine industry, or the Germans if we attacked their car industry. The price that will have to be paid if we do not become competitive again, if we do not protect our own currency, will not be paid by Members in the House, or by the Commission in Brussels. The political elite and the nomenklatura are always protected. The price will be paid by the old and the young, by the people who have no jobs, the people who lose their savings and the people who lose their pensions. The political elite have not been prepared to listen to them. It has been driving through a political project that was underpinned by bad economics. I hope that the people on the Government Benches will now show that when in government, they are able to act with the mettle that they pretended to have when they were in opposition.

--- Later in debate ---

[Ms Gisela Stuart]

The hon. Gentleman is a former Member of the European Parliament and before he gets too sanctimonious, I remind him that during the Convention on the Future of Europe the European Parliament refused to agree on one seat because the default position in the treaty is that the Parliament sits in Strasbourg. Without French agreement, it would have had to give up its seat in Brussels.

[Chris Heaton-Harris]

There are many other examples, from debates held over the years in all institutions in Europe—and from debates that I have read in this House—of wonderful ideas on what we could do with the buildings of Strasbourg or Brussels. The fact is that we are talking about a huge, expensive white elephant that the people of Britain think is yet another waste of taxpayers’ money.

I know that this will not make my hon. Friend the Minister particularly popular when he is in negotiations on the other side of the channel, but I just ask him to mention, every now and again when the French delegation gets a bit excited about reformulation of the common agricultural policy or something else—the French get excited about all sorts of things—that we have been very generous in allowing them to maintain the seat of the European Parliament in Strasbourg, because it is unpalatable to most of our electorates.

I wish my hon. Friend the greatest of luck in his new role. There are great difficulties across the continent at the moment. There is the crisis of the huge debt that many countries have, and the incongruous way in which that debt may have to be serviced by other members of the eurozone—I like to think that it would not be serviced by British taxpayers. There are other pressures, too. The hon. Member for Bassetlaw (John Mann) made the point that we cannot have British jobs for British workers, and talked about the pressures that future accessions might bring. I know from my time in the European Parliament, and from going round schools in what was my region and is now my constituency, how deeply unpopular among the British people the possible accession of Turkey could be. If we press forward with it, we will have a great deal of work to do in explaining to our electorate that it is the right thing for Britain and British workers.

--- Later in debate ---

[Chris Bryant]

I am glad that my hon. Friend is piping up, because we always have Private Frazer, “We’re doomed, Captain Mainwaring! We’re doomed!”, and he is always played by my hon. Friend.

Then, of course, we always have someone who is immensely sanctimonious—[Interruption.] And lo and behold, the hon. Member for Bermondsey and Old Southwark (Simon Hughes) has arrived in the Chamber. Such sanctimony, I hope, will be a thing of the past from the Liberal Democrats. If there is one thing that they must have learned on becoming members of the coalition, it is that sanctimony must be a thing of the past for the Liberal Democrats. I can see that several Conservatives who were Members in the previous Parliament agree, and the hon. Gentleman is surely the vicar from “Dad’s Army”.

At this point I should like to welcome the Minister for Europe, the hon. Member for Aylesbury (Mr Lidington) to his post. He is a splendid man; I know him well; and he has very good intentions. Again, doubtless, he is about to show us that he has ludicrous politics, but he is a nice man. He is sometimes perhaps a little too precise in his politics, and that might render him the verger from “Dad’s Army”, who was just always a little too precise for his own good. However, the hon. Gentleman is an extremely intelligent man, who I think has led the most winning teams on “University Challenge”, and we look forward to his intelligence, which I am sure he will deploy throughout Europe over the coming months.

We heard a great number of maiden speeches, and that makes this debate rather different from any other, because remarkably few Members said anything about Europe. But, that is in the way of things, and there have been some excellent speeches. It is a shame—

[Ms Gisela Stuart]

Will my hon. Friend give way?

[Chris Bryant]

Yes, of course.

[Ms Stuart]

I was just wondering: is there any room for women in “Dad’s Army”?

[Chris Bryant]

I was about to make exactly that point. It is so rare for my hon. Friend to help me in any debates on Europe, but it is a great pleasure. It might just be a facet of today’s debate, but, as I was just about to say, it is an enormous shame that, while we have had several maiden speeches from women Opposition Members, we did not have a single one from a woman Government Member. I do not want to make a big partisan point about that, but we must achieve a House that is more representative of the whole of Britain.

There have been some excellent speeches. The hon. Member for Wyre Forest (Mark Garnier)—

--- Later in debate ---

[The Minister for Europe (Mr David Lidington)]

I thank the hon. Member for Rhondda (Chris Bryant) for his welcome to me on my first appearance in my new ministerial capacity in a European Union debate. If he looks at the repeated comments of my right hon. Friend the Foreign Secretary in opposition and since we came to office, he will see that, although we have said that we hope for a better relationship with Russia than has been the case in recent years, we do not regard it as something to be entered into lightly. We certainly expect Russia to abide by her international obligations, and events such as the occupation of territory, which is legitimately part of Georgia, are unacceptable. We are all too aware of the implications of the Litvinenko case and Moscow’s refusal so far to respond. Although our approach to Moscow will be positive—we hope for Russia’s co-operation on important global issues, such as counter-terrorist efforts and countering the threat of nuclear proliferation from Iran and other countries—it will also be cautious.

The hon. Gentleman will be all too aware of the complexities of the dispute in Cyprus, but the Government are intent on being energetic in supporting the relevant parties in seeking an agreement leading to the reunification of the island. That would be the best thing for both communities.

[Ms Gisela Stuart]

What is the British Government’s position if the United Nations says that Cyprus is a European problem and we need to sort it out?

[Mr Lidington]

With respect to the hon. Lady, we are not in that position yet. Talks have resumed between the Government in Nicosia and the representatives of the Turkish Cypriots, and I greatly hope that they have a more positive outcome than has been the case in the past couple of years.

I am with the hon. Member for Rhondda on Macedonia. It is important that we get a resolution to the dispute between Skopje and Athens. From our point of view, the sooner that Macedonia can be seen to be clearly on the path towards full EU membership, the better.

The hon. Gentleman needs to be careful when giving lectures about referendums and seeking popular consent. It is fair knockabout for him to say when responding to the hon. Member for Glasgow South West (Mr Davidson) that he detected some illogicality in the Government’s approach. There is complete logic in his approach to referendums: he does not want any, in any shape or form, on anything to do with the European Union’s future powers. That makes his position different from that which the two coalition parties have adopted and embodied in their agreement. We believe that power resides ultimately with the people, who should have the final say on any further initiative to transfer powers from the House and the British Government to Brussels.