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

David Lidington Excerpts

Monday 3rd September 2012 Commons Chamber

[Mr Cash]

My hon. Friend and others have pursued that relentlessly and still have no real answers. The truth of the matter is that a number of things were done at or around that time that many people now rather regret—let us put it that way. The fact that the EFSM is now described as “not needed” is disingenuous because people know perfectly well that it was illegal. That is not just my opinion—I make this comment to the hon. Member for Cheltenham (Martin Horwood)—but the one reached by members of the European Scrutiny Committee as a whole in the light of what we heard.

[The Minister for Europe (Mr David Lidington)]

May I make a plea to my hon. Friend and to my hon. Friend the Member for Rochester and Strood (Mark Reckless)? It is one thing to criticise Ministers or Government policy on the European Union, but will they please not direct criticism directly at named officials, who serve Labour, Conservative and Liberal Democrat Ministers loyally and to the best of their ability in the impartial tradition of the British civil service?

[Mr Cash]

I am delighted that my right hon. Friend makes that point and I endorse it as a general principle, but instances occur periodically that require a certain amount of investigation and analysis. I did not entirely endorse the remarks made by my hon. Friend the Member for Rochester and Strood (Mark Reckless) in as many words, but I agree with him—and with others—that, at the time in question, decisions were taken that people now regret. I am glad that we have moved on from article 122 to the present European stability mechanism.

--- Later in debate ---

[The Minister for Europe (Mr David Lidington)]

I start by thanking all right hon. and hon. Members who have taken part in the debate. To the hon. Member for Wolverhampton North East (Emma Reynolds) I say that I will be happy to send her a copy of an article that I published in The Sun on Sunday earlier this year, which set out in good, plain English the case that I have consistently made for a constructive, critical and engaged approach by the United Kingdom in the European Union.

As several hon. Members have said—especially my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg)—it is important to note that we are debating this initiative to change the European Union treaties in the context of a debate on primary legislation. In an earlier intervention, my hon. Friend the Member for Rochester and Strood (Mark Reckless) questioned whether the European Union Act 2011 had made any difference. He was correct to state that in the case of treaty changes that were agreed before 2008, treaty amendments could be approved here only through primary legislation, but in 2008 the law was changed. At the same time as the Lisbon treaty was being taken through by the then Government, they provided in section 6(1)(a) of the European Union (Amendment) Act 2008 that all that would be needed henceforward to approve the use of the simplified revision procedure would be for each House of Parliament to approve a Government motion without amendment.

As my hon. Friend the Member for North East Somerset pointed out with characteristic acuity, there is a considerable difference between the kind of detailed examination and debate that takes place on the Floor of the House during the various stages of proceedings on primary legislation and the brief 90-minute or two-hour debate on a motion tabled under the provisions of the 2008 legislation. I would hope that my right hon. and hon. Friends, whatever our differences on one or two other matters to do with the EU, would acknowledge that the 2011 Act has made an important and significant difference in restoring the central role of Parliament and, in particular, the Chamber of the House of Commons, as the place where things as important and significant as European treaty amendments can be considered in full. The disgrace is that the 2008 legislation sought to take those powers away from Parliament in the first place.

Before moving to the content of the Bill, I want briefly to respond to some of the points made by hon. Members during the debate. I turn first, of course, to my hon. Friend the Member for Stone (Mr Cash). The hon. Member for Wolverhampton North East said that she had returned from the summer break feeling invigorated and ready for the European fray once again. I have descended from the mountains of Snowdonia full of enthusiasm and relish to debate with my hon. Friend once again. I agreed with a fair measure of his analysis, and I think that most of those who contributed to this debate, from whatever party, agreed that the euro was created without sufficient thought being given to ensuring the stability of the single currency area, given that there was not the degree of fiscal, economic and political integration normally expected in a currency area.

My hon. Friend the Member for Stone warned in stark terms that the current eurozone crisis contained not only profound economic risks but significant—he would probably say dangerous—political challenges, and he has been consistent in arguing those points. I am one of those survivors on the Government Benches who has vivid memories of his contributions at 5 o’clock in the morning during proceedings on the Maastricht legislation in 1992-93. I agree that the crisis facing the euro presents the eurozone countries with important political as well as economic challenges. If it is agreed to centralise or co-ordinate decisions on some of the fundamentals of economic policy, it also has to be decided how those decisions, which are so important to the citizens of the countries concerned, are to be made democratically accountable. There is, then, a political, as well as an economic challenge, for our friends and neighbours in the eurozone.

It would be foolish, however, for British politicians to assume that the leaders and voters in other EU member states will necessarily respond to those political challenges in the same way as the UK electorate might be expected to do. Each European country has its own historical experience and economic and geographical particularities to take into account.

Let me take, for example, the conversations I had with members of the Governments of the three Baltic republics during my visits there. One of the things that they were keen to make clear to me was that although they certainly valued and cherished their hard won independence—the reclamation of their freedom—they also saw the integration of the European Union not as a threat, but as a way to entrench their European and democratic identity, so that never again could they be pulled back towards an eastern alignment or towards Russian influence, which they still feared, for understandable historical reasons.

Let us take Germany, which is a very different case. Where I parted company with my hon. Friend the Member for Stone was when he spoke of Germany. I do not think it was his intention, but some of the phrases he used came across in such a way as to present Germany as somehow having sinister intentions towards the rest of Europe. However, whenever one speaks to German politicians, from whichever political party they come, what one finds striking is that they see support for European integration as a means of providing reassurance to their neighbours that Germany is not going to go off on some nationalist course again; that France, the Netherlands and other countries that were occupied by Germany in the mid-20th century would see Germany’s commitment to European institutions and European methods of governance as a reassurance to them, not a threat.

[Mr Cash]

If I may make just a short observation about my right hon. Friend’s remarks, it is, fundamentally, that in my judgment Germany is very concerned about government by rule, whereas we in the United Kingdom are much more concerned about government by consent. The fundamental problem is one of democracy, as illustrated by the fact that about 99% of the Bundestag agreed to all the arrangements, yet we know from opinion polls what percentage of the German people take a different view. It is that dichotomy which causes concern, and there are other factors in relation to Angela Merkel’s agenda.

[Mr Lidington]

I do not want to get drawn into a detailed debate about a comparative political analysis between the British and German approaches. Let me say briefly to my hon. Friend, first, that when Germany looks at her history, she has good reasons for looking to firm rules and strong institutions, such as the constitutional court. Secondly, it is not completely unknown for the House of Commons to vote by a large majority in favour of something that every opinion poll tells it the majority of the British public opposes, so I do not think we should get too hung up on there being some vast difference in democratic interpretation between the two nations.

[Dr Julian Lewis (New Forest East) (Con)]

Can my right hon. Friend explain to me and the House what exactly senior Ministers mean when they talk about the remorseless logic of fiscal integration? Do they mean that it will lead inevitably to political integration, and if they do, is it no longer the case that we regard the emergence of a single power on the continent of Europe as fundamentally not in the UK’s national interest?

[Mr Lidington]

What it means is that we accept that, as Conservative politicians have argued since the euro was created, for a single currency zone to operate successfully over a number of different national economies there would need to be a measure of fiscal and economic integration, so that those economic differences can be managed successfully and in a stable fashion in that currency union. It is for the countries of the eurozone to work out exactly which economic and political measures will be right for their particular circumstances.

[George Eustice]

The Minister makes an important point about the remorseless logic. Does he not agree that one of the big problems with the way in which the European Union has developed is that it tends to introduce half-baked ideas, knowing full well that it will have to come back, several years down the line, with further measures that will mean further integration? Does he agree that we need to break that logic in some way and do what people really want, rather than creating a crisis that fuels more integration, which nobody wants?

[Mr Lidington]

Ultimately, it has to be for the electorate in each country to decide on the extent to which they want to take part in integration. My experience over the past two years of talking to Government leaders and other politicians in the other 26 countries, as well as following—as far as one can—the movement of opinion among the public in those countries, tells me that there is a greater level of support or toleration for Europe’s political and economic integration than there tends to be in the UK. I am generalising, of course, and there are significant differences among the 26 countries, but the historical experience of the United Kingdom in the 20th century differs from that of much of continental Europe, which helps to explain the difference in political attitudes towards European integration.

Various hon. Friends have raised a number of points during the debate, to which I wish to respond. My hon. Friends the Members for Stone and for Rochester and Strood both asked why the measure that we are debating today should be exempt from the requirement in the European Union Act 2011 for a referendum. The Act requires a referendum to be held when European Union treaties are changed in such a way as to create a transfer of competence or power from the United Kingdom to the European Union. The plain fact is that, as my hon. Friends the Members for Stroud (Neil Carmichael) and for North East Somerset pointed out, this measure does not transfer any such power or competence from this country to the institutions of the European Union. It does not even apply to the United Kingdom.

The amendment that we are debating is an amendment to article 136 of the treaty on the functioning of the European Union, which is the first article under chapter 4 of that treaty. That chapter is entitled “Provisions specific to Member States whose currency is the euro”. So, in that important legal treaty sense, this measure does not apply to the United Kingdom, although our ratification is needed to bring it into effect. Because it does not apply to us and does not transfer power or competence, there is no requirement for a referendum.

[Mr Cash]

rose—

[Mark Reckless]

rose—

[Mr Lidington]

My two hon. Friends have made other related comments, to which I would like to reply first. If they then wish to intervene on me, I will give way.

My hon. Friend the Member for Stone and the right hon. Member for Rotherham (Mr MacShane) said that the referendum pledge in the 2011 Act was meaningless because my right hon. Friend the Foreign Secretary could, in effect, decide on a whim whether a referendum was needed or not. They made reference to the requirement in the Act for the Secretary of State to make and publish a decision on whether a referendum was required. Those fears are wide of the mark, however. The Secretary of State is not permitted to act on a whim; he has to act in accordance with the law, and it is the 2011 Act that sets out in some detail precisely when a referendum is required. In making the statement to Parliament, the Secretary of State must say whether the referendum is or is not required under the terms of the Act.

My hon. Friend the Member for Rochester and Strood, in asking why no referendum was required in this case, pointed to what he saw as a contradiction in the Government’s approach. I need to divide my response to him into two parts. Paragraph 3 of the recitals or preamble to the decision of 25 March 2011 formally recalls the previous decision by the European Council that article 122(2) would no longer be needed and “should not be used”. The text of the decision comes after paragraph 6 of the recitals and is introduced by the words “has adopted this decision:”. The text of the amendment to the treaties is what is being ratified by this Bill. So the 2011 Act bites on the amendment to the treaties, which is the narrow addition to article 136 of the treaty on the functioning of the European Union. This measure would attract a referendum if it included one or more of the elements listed in sections 4(1) to 4(3) of the 2011 Act. Those subsections, which provide quite a long list, define what we mean by a transfer of competence or powers. This treaty amendment does not include any of those elements that require a referendum, so we do not require a referendum in this case.

[Mr Cash]

I appreciate that my right hon. Friend is in a labyrinth and that it will take more than the minotaur to get him out of it. The problem is that, as the Bill’s explanatory notes clearly state, the exemption condition, which is what we are talking about,

“is met if the Act”—

the Bill, as enacted—

“providing for the approval of the decision states that the decision does not fall within section 4 of the Act.”

The bottom line is that the Government’s ultimate defence that they have got the process right is that under the Act the very decision that is taken is endorsed by Parliament when it passes the Bill; it is not about whether or not the provisions have been complied with. Clause 1(3) states that the

“decision does not fall within section 4 of the European Union Act 2011”.

In other words, we are being told, “Do not argue with me Back Benchers, because in this Act, when it goes through, that is final.” That is the bottom line of this provision.

[Mr Lidington]

That part of the Bill is included because it is a requirement of the 2011 Act that we bring this to Parliament to ask it to ratify formally the Government’s judgment as to whether or not a referendum is required. However, that judgment by the Government—that opinion embodied in the statement by my right hon. Friend the Foreign Secretary—followed a very careful analysis of the treaty amendment in the light of the provisions of the 2011 Act. Obviously I regret bitterly that I have clearly been unsuccessful in playing the role of Ariadne to guide my hon. Friend out of a labyrinth, but I somewhat suspect that he is not that keen to extract himself from it. The one thing he has not challenged me on is whether the treaty amendment contains any of the transfers of power or competence to the European Union from the United Kingdom specified in sections 4(1) to 4(3) of the 2011 Act. I am sure that we will have the delightful opportunity of pursuing those points further in Committee.

[Mark Reckless]

Will the Minister give way?

[Mr Lidington]

I will give way once more, but I do not want to pre-empt our discussions in Committee.

[Mark Reckless]

My concern is that in the statement provided to the House under section 5, the ministerial team has relied on section 4(4)(b), which states that a referendum will not happen when a treaty or article 48(6) decision applies only to member states other than the United Kingdom. The whole debate has relied on recitals from within that article 48(6) decision, saying that the provision gets us out of article 122 and that we will not have to contribute to further bail-outs. Surely the Government cannot have it both ways.

[Mr Lidington]

My hon. Friend is eliding two things. We have before us and are seeking to ratify through this Bill a treaty amendment. It relates to article 136, which applies only to those countries whose currency is the euro. Therefore, by definition, unless the United Kingdom were to join the euro, which would in itself require a referendum under the 2011 Act, it cannot apply to us. Alongside that treaty amendment, my right hon. Friend the Prime Minister successfully, and after a lot of hard work, negotiated agreement from all Heads of State and Government in the European Union that when the ESM comes into force, any future liabilities of the United Kingdom to bail out eurozone countries under the EFSM will be extinguished. That is a very significant gain for the British national interest and I hope that on reflection my hon. Friend the Member for Rochester and Strood will recognise it as such.

As I have said, in return for agreeing this treaty amendment, the Prime Minister secured agreement at the European Council that once the ESM is set up, article 122(2) of the treaty on the functioning of the European Union should no longer be used to safeguard the stability of the euro area as a whole. Our liability for future euro area financial assistance programmes under the EU budget will be removed and that is directly in the UK’s national interest. As my hon. Friend the Member for Camborne and Redruth (George Eustice) said, this gain for our interests should be considered as proportionate to the scope of the treaty change that we are considering, which is narrow and specific in what it seeks to achieve. We should also not ignore the fact that the ESM will provide the euro area with a permanent financial assistance mechanism to assist euro area member states in financial difficulty. We all share the enormous concern over the ongoing crisis in the eurozone and the chilling effect that it is having on our economy.

A stable eurozone is in the interests of the United Kingdom. We rely on those 17 countries for more than 40% of our trade, but that is only part of the picture. Confidence and stability in the eurozone are in our national interests and the resolution of the debt crisis in the eurozone would be the biggest single boost to business confidence that could happen in the British economy. That is precisely why the eurozone countries say that they need the ESM and why it is important to ensure, through all 27 member states ratifying the treaty amendment, that there is no room for doubt about that amendment’s and therefore the ESM’s compatibility with the European Union treaties.

We are not in the euro and the United Kingdom will not take part in the ESM, but it would harm our interests to stand in the way of the eurozone’s efforts to set it up and help sort out this crisis, a point made very strongly by my hon. Friend the Member for Stroud. No one is under any illusion that the European stability mechanism will be some silver bullet that will solve the eurozone’s problems overnight, but it is a step in the right direction.

When the right hon. Member for Paisley and Renfrewshire South (Mr Alexander), the shadow Foreign Secretary, spoke, he treated us to a lecture about the alleged failures of the Government’s economic policy. No Minister would stand at the Dispatch Box and say anything other than that the United Kingdom’s economic problems are deep seated and that they have been aggravated by the crisis in the eurozone, but what surprised me—perhaps I am insufficiently cynical—was the fact that there was not one word of regret from the right hon. Gentleman, let alone a morsel of contrition, for the contribution made by his Government to the economic woes from which the United Kingdom now suffers.

Some European comparisons are really quite interesting in this context. A number of hon. Members commented on the fact that some European Union countries have been more successful in recent years than the United Kingdom or the majority of EU member states have been, but it is telling to consider the contrast. Germany was paying down its debts when the Labour party was piling up the deficit here and maxing out the United Kingdom’s credit card. In the 10 years from 1997, Germany had annual growth in industrial production of 3% or more a year, while average growth in the United Kingdom over that period struggled to get above 0.2% annually. In the first decade of the 21st century, Germany maintained its share of world exports while the United Kingdom’s share almost halved thanks to the disastrous economic stewardship of the right hon. Gentleman and the Labour party.

The European Union, including the United Kingdom, needs a relentless focus on competitiveness and growth through deepening the European single market; building a single market in the digital economy, energy and services; cutting the costs of European regulation on businesses, especially small enterprises; and agreeing more free trade deals with Canada, Singapore, Japan, the United States of America and other regions of the world.

The legislation before us is one step forward, but it is only part of the strategy for renewing economic growth and competitiveness in the United Kingdom and in Europe as a whole. The Government will continue to pursue that strategy with vigour, energy and determination.

Question put and agreed to.

Bill accordingly read a Second time.

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

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the European Union (Approval of Treaty Amendment Decision) Bill [Lords]:

Committal

1. The Bill shall be committed to a Committee of the whole House.

Proceedings in Committee, on Consideration and Third Reading

2. Proceedings in Committee, any proceedings on Consideration and proceedings on Third Reading shall be taken in two days in accordance with the following provisions of this Order.

3. Proceedings in Committee and any proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the second day.

4. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

Programming committee

5. Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee of the whole House, to any proceedings on consideration or to proceedings on Third Reading.

Other proceedings

6. Any other proceedings on the Bill (including any proceedings on consideration of any message from the Lords) may be programmed.—(James Duddridge.)

Question agreed to.