European Union (Approval of Treaty Amendment Decision) Bill [Lords]

Bernard Jenkin Excerpts

Monday 3rd September 2012 Commons Chamber

[Mr Hague]

Different solutions can be advocated and the hon. Gentleman is advocating what he thinks would help as a solution. However, the point that he and I have to bear in mind is that those countries—their national Parliaments and democratically elected Governments—wish to stay in the eurozone. That position is different from the one that he and I have always taken on the United Kingdom, but that is their wish. Therefore in practice we are dealing with that situation. We want those countries to succeed in stabilising the eurozone.

Let us take the worst-case scenario—the hon. Gentleman’s assumption that the measure would pour good money after bad. What we are ensuring is that money from the United Kingdom taxpayer is not going after other money, good or bad, giving assistance to eurozone countries. The Bill provides solely for the parliamentary approval of an amendment to article 136 of the treaty on the functioning of the European Union, which makes it clear that the eurozone member states may, by means of a separate intergovernmental agreement, establish a financial assistance mechanism—the European stability mechanism, or ESM—without acting in contravention of their obligations as member states of the EU.

As the House will know, this is not the first time that this treaty amendment has been considered and approved by Parliament. Before the Prime Minister agreed to the treaty amendment decision in March last year, a motion in favour of the draft decision was passed by both Houses under the provisions of the previous legislation—the European Union (Amendment) Act 2008. Before our Act of last year, that was all the parliamentary scrutiny and control required for the Government to agree to a change in the EU treaties under the simplified revision procedure.

In our view, those provisions were grossly inadequate, so at that time my right hon. Friend the Minister for Europe committed us to bringing the decision before the House again under the more stringent parliamentary scrutiny of what was then the European Union Bill. Indeed, we introduced an amendment to that Bill, now section 5(6), to enable the treaty change to be subject to the Bill’s provisions once it entered into force. That Bill has become the European Union Act 2011 and any use of the simplified revision procedure now requires an Act of Parliament for ratification. That is why this Bill is being presented to the House.

Having gained the approval of Parliament in March last year, the Prime Minister formally agreed to the decision at the following European Council. The decision must now be ratified by all 27 member states before the amendment to article 136 can enter into force. Eighteen member states have now done so. The target date for entry into force, as set out in the European Council decision, is 1 January 2013.

The scrutiny process under the European Union Act 2011 began in October last year, just under two months after its relevant provisions came into force, when I laid a statement before Parliament, to which my hon. Friend the Member for Stone (Mr Cash) has referred, under the provisions of section 5 of the 2011 Act. I set out in that statement why the decision does not trigger the requirements for a referendum set down in the European Union Act 2011.

The proposed amendment to article 136 applies only to member states whose currency is the euro. Consequently, it does not transfer further competence or power to the EU from the UK. The opinion set out in the statement was open to judicial review, but in the intervening 11 months no one has sought to challenge it in the courts. To ensure timely ratification of the decision, which is strongly in our country’s interests for reasons that I will now come to, the Bill was introduced in the Lords, where it was passed without amendment. Should the Commons now grant its approval, the Government intend to ratify the treaty amendment by the end of this year.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

Is this really such a big change in the scrutiny of how these things are done? Since we joined the European Union, has there ever been an amendment to the European treaty that did not require an Act of Parliament?

[Mr Hague]

Without the Act that we passed, the change that we are debating would not have required an Act of Parliament. Therefore anything similar achieved under a simplified revision procedure would also fall into that category.

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[Mr Hague]

No, it is not. The decision relates to a treaty being created for the eurozone countries. In conjunction with that and at the same time, as is reflected in the fourth recital, the Prime Minister secured agreement at the December 2010 European Council that article 122 would not be used. That is absolutely clear. If my hon. Friend wants to argue that we should have a referendum on our not being liable for eurozone bail-outs any more, he can do so, but I will not agree. That is not the kind of thing that we had in mind when we passed the European Union Act 2011; nor would it do any good to the good name of referendums.

[Mr Jenkin]

My right hon. Friend is in something of a Catch-22, which he is skilfully trying to obscure from us. If the article basis for the May 2010 mechanism was illegal or questionable, why do we need this legislation to get out of it and why did we not challenge it? If it was not illegal, why is it necessary to amend the treaty to legalise a different mechanism? The very fact that the European Commission and the other member states have agreed to the treaty amendment, which effectively does away with the no bail-out clause that was so central to the passage of the Maastricht treaty, means that they admit implicitly that the original mechanism had an illegal treaty base.

[Mr Hague]

I do not agree with my hon. Friend. The reason we do not challenge that and want to proceed with the process is that we have secured something very important in parallel with it that is potentially enormously beneficial to this country and its taxpayers.

[Mr Jenkin]

Which is what?

[Mr Hague]

I can go over that again. It is that article 122 will no longer be used for eurozone bail-outs. It may be my hon. Friend who faces a Catch-22 here, because he just cannot bear the idea that a Bill that says “European something” on it might be good for the country. This Bill is good for the country. Even those of us, like him and me, who are very sceptical about many aspects of the European Union have to admit that securing an agreement that means that we are no longer liable for eurozone bail-outs and that does not harm the country in any other way is, in the words of our noble Friend Lord Flight in the other place, a “no-brainer” to support. That is why I hope that the House will support the Bill.

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[Mr Alexander]

I can assure the hon. Gentleman that if I were to draw up a list of what is damaging the economy of the United Kingdom at the moment, many items would stand above a recognition that the single market has provided British businesses with European markets constituting 500 million consumers. It would be perverse logic to suggest, at a time when we are struggling to secure growth in the British economy, that it would be to the advantage of British exporters or British businesses more generally to shrink the UK’s home single market from 500 million consumers to just 60 million.

A mechanism with sufficient firepower to restructure and recapitalise weak banks, and to bail out Governments who can temporarily no longer access the bond markets to finance their borrowing and debt, is a necessary part of bringing stability back to the eurozone, and a permanent bail-out fund is one key part of making that happen. However, the burden of responsibility for delivering that growth and prosperity must be taken by eurozone members themselves. In the establishment of the ESM, the European Council is making it clear that ultimate responsibility for ensuring the overall stability of the euro area rests with eurozone members. It will be a fund by the eurozone for the eurozone. That is clearly in the UK’s national interest, and we will not vote against a Bill that will allow the ESM to be established.

[Mr Jenkin]

Why, then, was the previous Government’s parting act to agree that the UK should be liable under the stability mechanism that they approved?

[Mr Alexander]

The hon. Gentleman is right to recognise the timing of that in the final days of our time in office, but the other significant event that was happening then was the real prospect of the eurozone collapsing completely. He might welcome that, but the Opposition certainly would not. That was why the Chancellor of the Exchequer of the outgoing Government made genuine efforts to consult the potential incoming Finance Minister, who is now the Chancellor of the Exchequer. That matter is discussed in the explanatory memorandum on European Union legislation dated 15 July, in which the then Economic Secretary to the Treasury, now the Transport Secretary, stated:

“The Government regrets that the Scrutiny Committees did not have time to consider this document before it was agreed at Council. It should be noted that whilst agreement on behalf of the UK was given by the previous administration, cross-party consensus had been gained.”

If the hon. Gentleman is concerned that the outgoing Chancellor reached the wrong decision, he might like to put that point directly to the current Chancellor.

Let me be absolutely clear that our support for the Bill does not equate to unqualified confidence in the ESM or in the current package of eurozone policies of which it forms but one part. We have concerns about both the restrictive terms of the fiscal compact that eurozone members have negotiated to establish the ESM and the manner in which it is currently envisaged that the ESM will be operationalised. The Opposition are certainly under no illusion that the ESM in itself will resolve the eurozone crisis. Much more will be required to do so than is included in this two-clause enabling Bill. The establishment of the ESM represents but one part of a broader package of measures and reforms that members of the euro must adopt to deliver stability successfully and bring greater prosperity to the eurozone in future.

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[Mr Denis MacShane (Rotherham) (Lab)]

It is always a pleasure to follow the hon. Member for Stone (Mr Cash). He is the Private Frazer of our European debates. For nearly 20 years I have been listening to him saying, “We’re doomed! We’re doomed!”, “There’s no hope at all”, “Europe is schizophrenic”, “Europe is extreme”, or, “Europe is locked in riots and difficulties.”

That is a good description, frankly, of our country. It is only 12 or 13 months ago that London was set ablaze for three days. The state completely lost control of the streets, and the rioting, looting and burning spread to other cities. We are now the recession queen of Europe. It seems that we are in a triple-dip recession. While the hon. Gentleman complains about the threat of inflation and the printing of money, we are the great printers of bank notes—it is known as quantitative easing—and we are printing them as fast as we can, just as the United States is. By comparison, the European Union is relatively restrained. It has been our banks—some nationalised still, some still in private hands—that have been going to the European Central Bank to avail themselves of cheap-cost euros, to the tune of several billion. My point remains, as always, that we are all in this together.

I am not sure whether the hon. Member for Stone is quoted in Bundestag speeches as Eurosceptics there look for a friendly British voice to pray in aid, just as he assiduously reads The Economist and the Financial Times. Indeed, in the many friendly debates that I have had with him, both in this House and outside, he always has a quotation to sustain his case. However, as somebody who reads the German press a little bit, let me gently say to him that there are quotations and opinions like that bubbling up every day, just as there are in this country. The broad thrust of German economic policy is for stability and open markets. The notion that Europe’s currencies and Europe’s trade should be balkanised is of no advantage to the German economy at all. Far from creating an über-Germanised Europe, Mrs Merkel and the Social Democratic party—I was with some of its leaders at the weekend at a congress in South Africa—are very conscious of the fact that they carry a heavy responsibility. Part of the reason is that they took some tough decisions at the beginning of this century—to hold down wages, recapitalise industry, and transfer a lot of technology offshore to Poland and integrate the new EU member states into the broader German economic zone—while we, sadly, were over-fetishising banks. Now Britain is associated with LIBOR, the collapse of other banks and the great problem of illegal trading in offshore money in Mexico.

We really ought occasionally to put a mirror in front of our noses before we patronise and condescend to other countries. We have always lent money to countries in need. We poured money into Greece in the 1940s after the war and in the 1950s to stabilise it. We did so again at the beginning of the 1960s, when there was a great deal of turbulence in connection with the end of British rule in Cyprus. That has always been a British tradition. Quite intelligently, we prefer to use our treasure rather than shed our blood when things break down in Europe.

We are out of the current arrangement—this kitty of €500 billion. As the Foreign Secretary said—I could not find much to disagree with in his speech, and I am sure that the Bill will receive its Second Reading—we are not directly concerned. However, he went to such great pains to point that out that I thought he was over-striving for effect. Indeed, the hon. Member for Stone is absolutely right on one point: the so-called euro referendum Act, which the Foreign Secretary prayed in aid, is a piece of completely phoney jiggery-pokery. It gives the Secretary of State the sole, exclusive right to say whether there has been a significant transfer of competences or sovereignty to the wider Europe Union. If he alone decides that, he triggers a referendum; if he does not, as with this Bill, there will be no referendum. This is not about a referendum lock or allowing the British people or Parliament to have greater scrutiny or a greater say over European affairs; it is a completely cynical piece of legislation, which frankly is irrelevant to the broader European debate.

[Mr Jenkin]

Does the right hon. Gentleman not think that there is an inconsistency in saying that we do not want a referendum on this issue, yet vetoing the fiscal union treaty in December? We are effectively consenting to the process of fiscal union by allowing the treaty amendment to go through almost on the nod, effectively abolishing the no bail-out clause, which will be the foundation of fiscal union.

[Mr MacShane]

The hon. Gentleman makes a fair point. The Prime Minister found himself, through no fault of his own—inexperience, 2.30 in the morning, exhaustion—thinking that he was speaking for half of Europe, but at the end only the Hungarians were left. We created a British-Hungarian empire overnight, and even they peeled off in the end. It was deeply embarrassing. I do not think the Prime Minister actually understood how European decision making works or how to present our case effectively. That is part of the price that the Government pay for opting out of any political engagement with European partners. Working in the European context is a learning curve. It is about building relationships, networking, trading, and give and take. At times, certainly, it is about stamping our foot and not allowing something to go through. Indeed, I was a witness to all sorts of European countries and leaders doing that when I was Minister for Europe. However, in this case the Prime Minister found himself not so much naked in the conference chamber as utterly alone, without anybody else in the slightest bit interested in anything the United Kingdom had to say.

As a result, we will now move forward to a new treaty—the hon. Member for Stone is absolutely right about that. The German Government are quite determined. I was talking to a senior associate of François Hollande over the weekend, and the French now accept that quite soon we will be moving to a serious banking union—a serious treaty—that will do for banking what the Coal and Steel Community did in 1950 and what subsequent treaties did, in placing under broad supranational supervision a good and important chunk of the European economy. There is a huge debate about how far that process should go. Should it, for example, include the small regional banks and savings banks—the cajas, as they are called in Spain? Should banks be closed down, as happens quite regularly in the United States? When banks there are no longer able to stand on their own two feet, they are not bailed out—they are closed down.

Some supranational authority is now being created, however, and the British banking and financial system will not be able to operate wholly independently of that authority, because banking systems are permanently intertwined. Anyone walking through the streets of Madrid, Munich or Geneva will see British high street names such as Lloyds and Barclays operating there. Those banks will come under the control of any banking union. The more we pretend to ourselves that we can stay out of that arrangement, the less influence and say we will have over the new rules as they come into being. That is what really worries me. The notion that expelling Greece from the eurozone and re-drachmatising, if that is the right word, the Greek economy—I always prefer to use a Greek term, so I prefer “grexodus” to “grexit”—will somehow save the British bacon is just foolish.

The hon. Member for Stone is fond of citing YouGov polling in Germany. I did not know that YouGov—“Anything you want, guv”—was now a polling company in Germany as well. If we look at the Irish vote on the referendum to accept quite onerous conditions, we can see that they voted by 60% to 40% to stay in the euro, and any Greek polling will show a massive majority—up to 80%—in favour of staying in the eurozone. Those countries are mature enough to realise that it is their internal policies, not the existence of a currency, that lie at the heart of their economic difficulties. For example, there was no housing boom in the Netherlands, which had low-interest euros to play with, just as the Spanish and the Irish did. Why not? Because people in the Netherlands have to put between 5% and 10% down before they can buy a house or a flat there. In other words, economic, administrative and political decisions could be, and are being, taken in all the countries concerned.

However, it is quite right to criticise those countries, and especially the accounting in Greece, where the shipping industry and the Greek Orthodox Church—the country’s biggest land and property owner—pay no tax. Greece spends twice the share of its gross domestic product as we or the Turks do on defence, rather than ensuring a clean taxation system. This moment of truth is, very painfully, forcing those countries to take new directions and new decisions, yet paradoxically, if for some reason the euro were to dissolve into drachmas, pesetas and lira, that would take all the pressure off the political and administrative classes in those countries to take new decisions.

Yes, there will be enhanced supervision of those countries’ economies and budgets, but that also happened after the war as a result of the Marshall plan. Along with the credit from the United States came the Marshall planners—technocrats who sat in ministries to ensure that, in accordance with the broad remit of the plan, there was no improper abuse of the credit lines that the United States was providing.

My plea is rather more philosophical. I feel sorry for the Foreign Secretary—who is not in his place— because he has consistently championed out-and-out Euroscepticism. He has encouraged all the false hopes. Let us remember his famous statement before the 2001 election, when he warned the British people that if they voted Labour, Britain would become a foreign land. That was about as sensible as the earlier remark made by the right hon. Member for Wokingham (Mr Redwood) that signing the treaty of Amsterdam would mean the abolition of Britain. We have constantly been told by leaders of the Conservative party that being in Europe was bad for us. The hon. Member for Stone presents the most brutalist version of Conservative party thinking, but he is swimming in the same sea as many members of the Cabinet. He is simply rather more honest in describing the endgame that he wants to see.

I am fundamentally opposed to that aim; I do not want to see the eurozone break up. The entire western liberal market-economic world is going through a great crisis, as evidenced by problems in America and China, but there is a wider crisis, as evidenced by the difficulties in India, Russia, China and even Brazil, whose economy is now slowing down. How we get out of that is a huge challenge for all of us, but it is naive in the extreme to suggest that dissolving the eurozone would present a magic solution that would instantly liberate productivity, growth and employment and ensure the disappearance of extremist parties so that all the nation states could enter into a happy-clappy relationship.

This debate signals the firing of the first serious shot in what will be a much greater debate in our nation. The €500 billion in the kitty to bail out distressed countries sounds like a lot of money, but it is actually very small beer. We are going to have to take much bigger decisions about the future of Europe.

Over the summer, I was concerned to see a lot articles in the European press saying that Britain was about to withdraw from Europe. The language of repatriation and referendums was being used and, for the first time, a British Prime Minister said that he had no problem with linking the word “referendum” with Europe. He might not have any such problem, but neither Lady Thatcher nor any other British Prime Minister has used that language since Britain joined the EEC in 1973. Those headlines were appearing all over Europe, however, and the Minister for Europe, the right hon. Member for Aylesbury (Mr Lidington) had to be rushed out to comment on them. I was leafing through my copy of Le Monde one day and I was surprised to see his by-line in it; I thought I had an exclusive franchise to write in that newspaper. He said that Britain was not going to leave Europe, and that we were very committed to the EU. I have not brought the article with me, so I cannot read it out. Dagens Nyheter in Sweden said the same thing.

The Government went into total panic mode as they realised that a lot of people in Europe thought that the hon. Member for Stone spoke for the Conservative party, and that we were on our way out—[Interruption.] I hear cheers and “Hear, hear” from the Government Back Benches. I am delighted that we now seem to have buried the proposals for boundary changes, so that all those right hon. and hon. Gentlemen can perhaps be returned to the House at the next election. They will then have to make big decisions, however, on whether Britain should remain part of this thing or not. We are approaching a fundamental turning point in our nation’s life. I remain firmly committed to our staying a partner of the other countries in Europe, although I agree that there are huge problems to be resolved, and I agree with a lot of the reform agenda that is advanced by right hon. and hon. Members on both sides of the House.

The Bill gives the first flavour of the much greater debate that is about to come, but the Conservative party seems wholly ill-prepared for the seriousness of some of the decisions that we are going to have to take in the next two or three years. I am confident that, with greater study and work, our eminent shadow Europe Minister and the Labour party will become fully prepared to take part in that debate, but I fear that the possibility not just of a “grexodus” but of a British exit is now seriously on the table. We would be foolish if we did not accept that Britain could now be on the point of taking a fundamental decision that would significantly alter the nature of our lives and our nation.

[George Eustice (Camborne and Redruth) (Con)]

I should start by saying that I agree with much of the analysis of my hon. Friend the Member for Stone (Mr Cash) about what is wrong with the euro and how we got to this situation. However, I disagree strongly with his conclusions about this Bill, because I think it is relatively uncontroversial. As the Foreign Secretary pointed out earlier, the new European stability mechanism is certainly an improvement on the European financial stabilisation mechanism that went before it. Under that previous arrangement, Britain was liable for some 15% of the liability, which could have been a bill of up to £9 billion, whereas the new ESM means that Britain will not be taking on any future liabilities. So, first and foremost, this is a step forward.

Secondly, we must bear in mind that the Bill is not about the establishment of the ESM itself; it is simply about the amendment to article 136. This is just about clarifying the legal basis on which the ESM is set up, and discussion is taking place about whether that even needs to happen, as my hon. Friend the Member for Stone pointed out. This has already been happening under article 122, and it is apparent that it is mainly a concern of the German constitutional court that has prompted this change. The one thing I would say is that if other European countries or all 27 member states are going to acknowledge the concerns of one member state—Germany—by amending the article to reflect its needs, I look forward to the day when that will be reciprocated. I look forward to those moments when Britain is in a minority of one in having concerns about some things European and that, too, is respected by the other member states.

[Mr Jenkin]

I cannot quite believe what I am hearing, because a criticism that my hon. Friend and I have regularly made of the European Union is that what we are categorically assured will not happen then happens, and when we amend the treaty just to tidy up the wording, that makes it more explicit that it was always intended to happen in the first place. May I just read to him what the no-bail-out article actually says? It says:

“A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State”.

That is what the treaty says now and he is supporting, by a sort of sleight of hand, that being negated and set aside simply because it has already happened illegally. Is that not the grandmother’s footsteps of European integration that he and I have always railed against?

[George Eustice]

I would simply say to my hon. Friend that Britain is not bound by the ESM; it is very clear that only eurozone member states will be affected. Is it proportionate for us to stand in the way of those countries that are wrestling with and trying to decide what is going to happen with the euro? Is it proportionate for us to block that particular tweak to that treaty? I just do not feel that it is. I agree with him in that I want renegotiation and I want it, at some future point, to be put to a referendum. However, we need to pick our battles and pick our moments, and I think it is wrong to nit-pick over what I would regard as a small change.

[George Eustice]

My hon. Friend makes a point that I was going to deal with. I simply return to what my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) said, as I do not think that by blocking this Bill we are going to stop the ESM. Other countries will continue, because they have decided that they need to do so to try to save the euro.

We also need to give the Government and the Prime Minister credit when they achieve things and make progress. My hon. Friend the Member for Stone and I would like to see faster progress made and a renegotiation sooner rather than later, but we should give the Government credit where they safeguard British interests and improve on the situation we inherited. We should not blame our own Government for the mistakes the previous Labour Government made. They engaged in sloppy negotiation, and, as a result, we ended up with the former arrangements in the EFSM. The situation has now been improved with the ESM and we should support that.

[Mr Jenkin]

Where is the consistency in the Prime Minister’s vetoing fiscal union at 27 in December last year and now implicitly consenting to it by scrapping the no bail-out article? Should we not be extracting a real concession? Should we not be getting the concessions we really want? Should we not be using this opportunity as a fulcrum for renegotiation? Is this not the moment—when these countries want fiscal union to support monetary union—to say, “This is what we want to pull back in return”? Instead, we are just giving this away, and for what?

[George Eustice]

I think that there is a big difference between the fiscal compact that we vetoed last December and this particular one. Again, this comes back to the point about what is proportionate. By vetoing that fiscal compact, Britain was sending a clear signal that we were not going to be part of a wider decision at an EU level for those types of fiscal integration, because we were not affected. That approach was absolutely right on a number of levels. First, it showed that Britain was serious and that, on these issues, when we said we were going to do something, we meant it and we were ready to use a veto. That will help us when it comes to budget negotiations.

Secondly, by vetoing that particular treaty at an EU level, the Government managed to limit its scope, because it was, thus, necessarily just about the eurozone members and it cannot affect the UK. Had we signed up to that particular treaty, we would have faced all sorts of threats and demands, and people trying to put other agendas on the table. We would have had months and months of wrestling over things we did not want, before we would probably finally have had to veto it in any case, so I think that we did the right thing. However, I am just not convinced that such an approach is right in this instance, for the reasons I have set out. As I say, I think it would be disproportionate, as the ESM is not going to affect the UK; there is nothing that will expose us to future liabilities. Would it be right for us to stand in the way of countries that think that it is the right thing to do? There is a question of whether it is the right thing, but would it be right for us to stand in their way?