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

David Nuttall Excerpts

Monday 3rd September 2012 Commons Chamber

[Mr Hague]

Yes, other Parliaments are doing that in their own various ways. My point is that the reason this requires the full examination and passing of a Bill is the passage through this House of the European Union Act 2011, which the right hon. Gentleman probably opposed if he voted on it. A much briefer procedure was required under the European Union (Amendment) Act 2008, which he supported. Parliamentary scrutiny has been enhanced by the recent change, and I am merely establishing that point. [Interruption.] Labour Members are reminding me that they did not vote against the EU Act 2011—although they were probably unable to vote for it. Having taken so many positions on the holding of a referendum, they decided not to have a position at all.

As the House will remember, the background to the ESM is that in response to the first Greek crisis, the previous Government, in their very last days, agreed to the establishment of two emergency instruments to respond to financial crises. The first is the European financial stability facility, an emergency facility established intergovernmentally by euro area member states. It has been used to provide loans to euro area member states in financial difficulty. The UK is not a member of that facility and has no exposure to financial assistance provided by it. The EFSF will operate alongside the ESM up until its wind-down by the end of June next year. The second is the European financial stabilisation mechanism, or EFSM. This allows the Council to agree by qualified majority a Commission proposal to provide assistance using money raised on the financial markets, backed by the EU budget. It has been used for assistance to Portugal and the Republic of Ireland, for which we also contributed a bilateral loan.

In the new Government, we have never thought that that was a satisfactory state of affairs. It was a questionable use of article 122 of the treaty on the functioning of the European Union. An inability to access the markets because of the unsustainability of public finances is not a natural disaster, and it is hard to argue that it is an exceptional occurrence beyond a country’s control, and those were meant to be the criteria for the use of article 122. When qualified majority voting was introduced into the provision under the Nice treaty, we warned the then Government of the risk, and that warning was dismissed. The amendment to article 136 gave us the opportunity to deal with the problem, and we took that opportunity. Britain is not in the euro, we are not going to join the euro, and we should have no liability for bailing out eurozone countries.

On coming to office, therefore, the Government found established a mechanism which enabled the Council of Ministers to decide by qualified majority voting to allow the European Commission to raise funds on the capital markets guaranteed by the headroom in the EU budget—about €60 billion—for loans to eurozone countries. We must grant that thus far this has not cost the British taxpayer a penny. The money is borrowed from the markets by the European Commission against the headroom in the EU budget. It must be granted that these are only contingent liabilities that would be called on only if Portugal or the Republic of Ireland defaulted on their loan obligations. However, it is still not right that a country outside the euro should be obliged to assume contingent liabilities for matters that are clearly the responsibility of countries that are in the euro. That is why this Government were determined to bring the situation to an end, and we have succeeded in our goal. That is a good example of this Government repairing the damage caused by the last one.

[Mr David Nuttall (Bury North) (Con)]

I am extremely grateful to my right hon. Friend for giving way, because we have come to the crux of the matter. Will he please confirm that if the Bill goes through and reaches the statute book, this country will have no further liability whatsoever under the European financial stabilisation mechanism and will not be called on to contribute any further?

[Mr Hague]

That is what has been agreed. I am going to examine, in what my hon. Friend or other hon. Members might find painstaking detail—[Interruption.] Actually, I can see that some of my hon. Friends will not find it painstaking. I will go through this in detail to give full, frank and maximum assurance to my hon. Friend and others.

Not only does the new mechanism, the ESM, which is limited to eurozone countries, supersede the EFSM; crucially, the decision that the Bill approves and which is being ratified by all other EU countries reflects in its recitals, or preamble, an agreement that article 122

“will no longer be needed for such purposes”,

The Heads of State or Government have therefore agreed that it should not be used for such purposes. Therefore, when this decision is ratified, our liability for future euro area financial assistance programmes under the EU budget will be removed. That is a great gain for British taxpayers and, because it fetters the use of article 122, a shift of a power from the European Union to the United Kingdom.