European Institutions

Bob Stewart Excerpts

Wednesday 7th September 2011 Westminster Hall

[The Minister for Europe (Mr David Lidington)]

This is the second day in succession that I have had the pleasure of serving under your chairmanship, Dr McCrea. I congratulate my hon. Friend the Member for Witham (Priti Patel) on securing this debate. I am certainly aware of her long-standing interest in the European Union and European institutions. As she rightly said, it would be good to have more opportunities to discuss such issues, and I would welcome the prospect of many more Members taking part in those debates. It is a pity that, often, only a number of committed aficionados attend European debates. I would like the issues to be debated more generally. As she rightly said, the decisions that British Ministers negotiate at European level have a direct and, in many cases, significant impact on the lives of the people whom we represent.

I listened carefully to the points that my hon. Friend raised and I agree that the European institutions that she mentioned have many shortcomings that, coupled with the previous Government’s reluctance to involve the people in important decisions about the European Union, have led to a growing sense of disconnection between the British electorate and the European institutions. I assure her that this Government are committed to addressing that disconnection and the issues underlying it.

[Bob Stewart (Beckenham) (Con)]

In that case, can the Minister assure us that any new European Union treaties will be put to a referendum of the people, as will any new measures, particularly fiscal ones?

[Mr Lidington]

I am grateful to my hon. Friend for raising a subject to which I was planning to come in the next stage of my remarks. The Government are intent on working hard within Europe to deliver the kind of Europe that suits British interests and the British people, in the knowledge that we now have, for the first time, a proper guarantee that, if it is ever proposed to pass new competencies or powers from this country to Brussels, the British people will get a vote in a referendum. That guarantee is provided by the European Union Act 2011, which recently came into force. For the first time, British voters will have their rightful say over any further expansion of EU powers. I believe that that will put our participation in the EU on a sturdier and more democratic footing. If a new treaty amendment or a brand-new treaty were to be introduced that involved the transfer of further competencies or powers from this country to the European Union, that treaty or amendment would be caught by our new Act of Parliament, and a referendum would be required subsequent to primary legislation here so that the British people would have the final say over whether those powers were transferred to Brussels.

[Mr Lidington]

As the right hon. Gentleman says, the Act is not a panacea, and I have never claimed that it would be. It does not address the repatriation of powers. That was not its purpose. Under the coalition agreement, the Government are committed to examining the existing balance of competencies and what they mean for Britain, and we continue to consider that issue. I appreciate that both he and my hon. Friend the Member for Witham would have liked the coalition agreement to commit us to returning important powers from the EU to the United Kingdom. During the 2010 general election, I stood on and campaigned for exactly the same manifesto as my hon. Friend did. I do not resile from anything to which I committed myself then, but we must abide by the political reality of the outcome of that election, which the British people delivered. The coalition agreement forms the basis for this Government’s policy.

My hon. Friend argued that ongoing negotiations on EU reform could be an opportunity to deliver a new EU agenda. The current problems in the eurozone were predictable—and, indeed, predicted, not least by British Conservatives—but that does not change the fact that, although we seek to expand British trade with the world’s emerging powers, 40% of it is still with the countries of the eurozone, so it is in our national interests that the eurozone countries prosper and find a way through their difficulties.

The economic logic of a monetary union, as British Conservatives have argued frequently, is greater fiscal and economic union, and we see some signs that the eurozone countries are moving in that direction. If they wish to do so, we should not stand in the way of their progress. If, at some stage in the future, moves towards greater fiscal union among the eurozone countries lead to a treaty, there will be an opportunity for the United Kingdom to ask, “What is in our national interest?” That is the approach that we took on the treaty change to establish a European stability mechanism for eurozone members. As the Prime Minister said, Britain would benefit from taking some powers back from Brussels. However, I caution my hon. Friend that although events are fast-moving and predictions risky, there is no sign of an immediate move towards such a treaty change. Treaty change is neither easy nor straightforward, and the eurozone countries know that, whatever the position in the United Kingdom, several countries, including the Netherlands, Denmark and Slovakia, have provision in their constitutional arrangements for referendums in some circumstances, so it would be a complicated matter. For that reason, I do not think that there is pressure at the moment to go down that road.

My hon. Friend raised more general points about the future of the eurozone. Although the Franco-German proposals appear to be a step in the right direction, we must consider the detail carefully. She is absolutely right that we should not let ourselves be sucked into the deeper fiscal integration on which the eurozone appears to be embarking. That is important to the Government.

On financial transaction taxes, clearly, unless such taxes applied to all financial centres globally, we would see a relocation of trading from centres where taxes apply to centres where they do not. Therefore, a financial transaction tax that applied only to European Union countries would be extraordinarily damaging for every financial centre in the EU, including the City of London. The Government are taking an active role in international discussions exploring financial sector taxation. The Chancellor of the Exchequer has made it clear on many occasions that he thinks that the idea of an EU-only financial transaction tax would be profoundly counter-productive and unwelcome.

My hon. Friend mentioned budgetary discipline and financial efficiency in Europe. Both are cornerstones of the Government’s policy towards the European Union. We want all institutions to ensure that their spending and activity produce genuine benefits for our citizens. We are taking firm action on the 2012 EU budget. Of course, the annual budgets of the European Union are ultimately determined by qualified majority voting. We do not have a right of veto. Although the current proposal for an increase of about 2% is greater than the British Government would have wished, it is still roughly equivalent to a real-terms freeze in that budget, and it is significantly less than the Commission’s original proposal of 4.9%. I also note that it is almost €8 billion less than the budget ceiling for 2011, which was agreed by the previous Labour Government in 2005. We will continue to work with other like-minded countries to get the very best deal possible for the taxpayer. I shall embark on a further stage of that work when I go to Brussels next Monday for the General Affairs Council.

[Bob Stewart]

Is it possible that we could just say, “No, we are not giving you that money”? We know that that would break a treaty, but surely we are not alone in Europe in that respect. Would not one option for us to think about be for Britain to say no, as Margaret Thatcher did?

[Mr Lidington]

However tempting my hon. Friend’s suggestion might be, the problem with unilateral action is that it can so easily be used to justify unilateral action by others that would be profoundly detrimental to our national interest. Aspects of the European Union—most obviously the single market, the creation of Margaret Thatcher’s Conservative Government—have benefited the prosperity of and employment among British citizens. They have helped attract vast foreign direct investment to these shores. Other European countries have, at times, fumed and sworn at the fact that the single market meant that they had to dismantle protectionist barriers. However frustrating some aspects of the way in which the EU is organised may be, and however we might aspire to see changes in those structures, I caution my hon. Friend against unilateral action, because that could set a damaging precedent.

We in this Government believe that tax policy is for member states to determine at national level. The Commission has proposed certain new EU taxes. We think that those would introduce additional burdens and damage European—not just British—competitiveness. The United Kingdom will oppose any such new EU taxes.

If we look beyond the annual 2012 budget to the next, probably seven-year, financial perspective, where unanimity rather than qualified majority voting applies, we will see that the Prime Minister has stated jointly with his EU counterparts that the maximum acceptable expenditure increase is a real freeze in payments and that that should be year on year from the actual level of payments in 2013, not from the level of commitment, which is usually above the level of the money actually paid out.

I also assure my hon. Friends that the Government will certainly defend the United Kingdom rebate, which remains fully justified owing to expenditure distortions in the EU budget. We should not cease to remind the British people of the fact that the increases in our direct contributions, to which my hon. Friend the Member for Beckenham has referred, are the product of the shoddy budgetary deal negotiated by our predecessors, Mr Blair and the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), when they were in office.