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

Denis MacShane Excerpts

Monday 10th September 2012 Commons Chamber

[Mr Denis MacShane (Rotherham) (Lab)]

Not yet!

[Keith Vaz]

Certainly since my right hon. Friend the Member for Rotherham (Mr MacShane) held the post.

I should have had this point clarified on Second Reading. Will the Minister confirm that none of the funds that we are talking about will in any way affect the ability of the European Union to support new member countries such as Croatia? Will he clarify that this matter is completely separate from and has nothing to do with enlargement?

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[Mr John Baron (Basildon and Billericay) (Con)]

I stand briefly to question my right hon. Friend the Minister—I, too, welcome him back to his post—on whether he believes that the European stability mechanism risks prolonging the agony of the eurozone crisis. Although we are not members of the ESM, is it drawing us in yet further and adversely affecting us as a result? The eurozone crisis was caused by excessive debt—that is well established; it was Governments borrowing beyond their means. Being built on debt, we all accept that we cannot borrow our way out of this problem and crisis, yet numerous summits have basically moved debt around the system and between banks or Governments and, quite rightly, the markets are getting tired of that.

I suggest to the Minister that the best solution to the problem is economic growth, and to grow our way out of the problem for the sake of all eurozone countries and the EU as a whole. Where are the measures to encourage greater competitiveness? Where are the supply-side reforms? They are simply not there. I therefore put it to the Minister that he should consider whether the ESM prolongs the agony and delays the inevitable, and whether our interests, as such, are being adversely affected by the position we are taking on this treaty change.

[Mr MacShane]

If I may, I will try to speak to the clause. I might make other comments on Third Reading, but I hope not to detain us long. What is extraordinary about this clause is its sheer impertinence. Our Eurosceptic friends in the Conservative party are for ever telling us that we do not want Europe interfering in our affairs. The proposed legislation, however, says that we should wait until every other national Parliament has made up its mind—

“laid an order certifying that the constitutional requirements of all the members states of the EU have been complied with.”

What business or right is it of this Committee to demand that the constitutional requirements of every other sovereign nation state be met before we make up our minds, and until

“all the related and legal challenges have been disposed of”?

Let us imagine each of the other 26 fellow EU member states adopting the same clause and waiting for their Parliament to ratify the ESM treaty and all legal challenges to be completed.

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

Order. The right hon. Gentleman is talking about amendment 1 as opposed to clause 1.

[Mr MacShane]

As ever, Mr Evans, you are right. I will not repeat my speech but I think the Committee has got the point.

[Keith Vaz]

I, too, wish to be brief, and my point arises from the comments made by the hon. Member for Basildon and Billericay (Mr Baron). I hope that the Bill will proceed, because I support the Government’s proposals, and the hon. Gentleman may know that the Home Affairs Committee has written on a number of occasions about the problems facing countries such as Greece in dealing with migration. Will the Home Affairs Committee have any say or be able to make suggestions about how funds will be deployed under the European stability mechanism? If we feel that not enough attention is being paid to the borders of Greece and Turkey because they do not have sufficient funds, will we be able to make such comments? I gather from the Minister that we cannot be part of the process but will we, at the very least, be able to comment on how the funds are to be spent?

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[Mr Clappison]

I am sorry. It was the EFSM—the European financial stabilisation mechanism. That is different from the EFSF. Britain had liability under one of the two measures agreed in May 2010; it was the EFSM, not the EFSF.

I do not want to make many further points about this matter, because we went into it in the previous debate, but it was agreed in May 2010 that, under the EFSM, this country would have liability in relation to the eurozone which would have resulted in British taxpayers having to fork out with no prospect of Britain receiving any benefit from the EFSM because it was not a eurozone member. [Interruption.] If the hon. Member for Cheltenham can just contain his enthusiasm, he will see the point that I am trying to make on the timetable for all these measures to take effect. That is what the amendment relates to. He will know that there is agreement that, as soon as the European stability mechanism is in force, Britain will no longer have any such liability. It is not yet in force, however, and there are important issues regarding the timing of these events. That is what the amendment deals with. The Bill will come into force on the day it receives Royal Assent.

[Mr MacShane]

If, as seems possible, Ireland were again to find itself in the terrible trouble that it did two years ago, would the hon. Gentleman support help being given by Her Majesty’s Treasury to try to stabilise Ireland, as we did very generously—led by the Prime Minister—in 2010, or is he against any help being given to any other European country?

[Mr Clappison]

The main problem affecting the eurozone is the existence of the euro itself. It is the euro that is causing the loss of competitiveness across Europe, inflicting misery on the southern European states and, indeed, all the countries that have had to apply for a bail-out. The right hon. Gentleman must put his hands up and say that he has consistently argued in favour of British membership of the euro. He must take his share of the responsibility. How these matters are to be mitigated is a different matter, but I believe that the ultimate solution will involve a reconfiguration of the eurozone itself. [Interruption.] The right hon. Gentleman says he thinks that that is a slur on his character. He will have a chance to put that right in due course, but as I understand it, he is still in favour, in principle, of British membership of the euro, as, I think, are members of his Front Bench, although they do not tell us exactly when that should take place. But this is going wider than the matter in hand, and I should like to return to amendment 1.

On the day on which the Bill is passed, the European stability mechanism might not yet have come into force. Its ratification has been held up in at least two member states, with significant challenges having been mounted in their constitutional courts, and there is a possibility of challenges in other member states as well. We know that such a challenge is before the constitutional courts in Ireland, as well as in Germany, where important hearings are to take place later this week.

It is significant that the need to satisfy German constitutional concerns seems to have been one of the reasons for proposing the amendment to article 136 of the treaty in the first place, in order to shore up the legal position of the European financial stabilisation mechanism when there was doubt about whether it was actually needed. That amendment to the European treaty, which was introduced through the simplified revision mechanism, served to shore up the treaty and give legal comfort to the German constitutional court, among others.

I should like to ask the Minister some specific questions, and I would be grateful if he dealt with them in his usual able and comprehensive way. Will he tell us, in the light of those factors, whether Britain will remain liable for any new commitments entered into under the original EFSM, which we entered into in May 2010, until the European stability mechanism takes effect after the ratification procedures have been completed by all the member states? Will that be the case, and even though this Bill might have come into force in the meantime, will we nevertheless retain liability under the EFSM—the original EFSM—until the ESM comes into force? What will be the position if the ESM does not come into force as a result of ratification problems? In that case, could we still have liabilities—new liabilities—under the EFSM? Will the Minister say a few words, too, about existing liabilities under the EFSM? As I have already said, I believe the Prime Minister got a good deal for Britain in the original negotiations, but what is the position on existing liabilities under the EFSM? Will the Minister quantify for us what the Government view as possible future liabilities under the terms of the EFSM?

The Minister will understand a wish for us to have as much detail and certainty as possible in respect of the legal and financial arrangements of the European Union, the institutions of which—including the European Court—have shown themselves to be somewhat flexible in the past, if not completely elastic in their legal interpretations, particularly of treaties. No better example of such flexibility can there be than the so-called legal justification for the EFSM in the first place. As the Minister will recall, this was article 122, which allows financial assistance to be given to a member state facing difficulties

“caused by natural disasters or exceptional occurrences beyond its control”.

As I have already indicated in response to interventions, I believe that the current crisis affecting Europe—the European debt crisis—is not an act of God, but an act of man in the shape of human fallibility over the European single currency. The Government are right to restrict our liability for this, but I would like Ministers to go further in their analysis of the problems. I understand the diplomatic reasons that might restrain them from doing so, but I have heard the incantation so many times before—that “a stable eurozone is in the interests of the United Kingdom”. We hear it all the time. It is inherent in the structure of the eurozone that we see the problems arising throughout Europe today, and that incantation is really quite meaningless and bears no relation to the problems that Europe faces. The truth remains that the euro lies at the root of the economic problems presently ravaging Europe and of all the misery caused throughout Europe but particularly in the southern European countries in the shape of very high levels of unemployment, debt and uncertainty, which is ravaging the prospects of a generation. It is the euro and the political ambitions that lie behind it—ambitions for a centralised, unified European state—that lie at the very root of these problems.

[Mr MacShane]

In responding to how the hon. Member for Hertsmere (Mr Clappison) has introduced his amendment, one might as well say that the pound is the fault and the root cause of all our problems. In my Rotherham constituency, 25% of young people are without work. There is economic and social misery there, but do I attribute it to the fact that we have a certain currency? The notion that a currency causes bad Government policy is absurd.

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

Argument by analogy is never terribly wise, but when the analogy is between a single currency across different countries with different economies and a single currency such as the pound that applies within a single country with a single economy, that analogy is not only false, but completely risible.

[Mr MacShane]

I have respect and affection for the hon. Gentleman, but he might as well have said that when the US and Canadian dollar was the same, one country’s economic difficulties were caused by having the same currency when their social, taxation and economic policies were completely different. The same applies to when Britain’s pound and the pound of Ireland were exactly the same currency.

When I went on holiday to Ireland as a small boy, we took our English sixpences, threepenny bits and half crowns, and the currency was exactly the same there. It is the decisions of individual countries that decide their economic future, not the currencies that they choose. There are many, many countries using the euro that we might be advised to copy in terms of economic output, exports, social investment and long-term strategic thinking, and many of those countries are governed by parties of the centre right—Conservative parties— although, of course, the Conservative party here has broken all political links with its sister parties in Europe.

[Kelvin Hopkins]

I am astonished that my right hon. Friend should say that the value of a country’s currency is not important. If that is so, why did Britain recover after 1931 only by coming off the gold standard? We devalued our currency in 1949 and in 1967, we allowed for a big depreciation after the crisis of the early 1980s, and after the collapse of the exchange rate mechanism we recovered simply because we devalued our currency substantially to bring it into line with the needs of our economy.

[Mr MacShane]

I do not know whether my hon. Friend has spent much time holidaying in Europe in recent years, but there has been a substantial devaluation of the English pound against the euro since, roughly, 2008, and what have we seen? A recovery in Britain? An increase in exports? A decrease in imports? An increase in the creation of firms and jobs? In fact, we have seen the very opposite. My hon. Friend is right historically—he is always right historically—but I prefer to live today rather than in history.

The main problem with the amendment is that it is a wrecking amendment, and I hope that when the Minister replies he will have the honesty to say so, although the amendment was tabled by his hon. Friend the Member for Hertsmere. The notion that nothing can be ratified until every other country has ratified it and disposed of putative legal challenges is a circle that can never be broken. If the same rule were adopted by even one other EU member state, nothing could be ratified until we had agreed to ratify it, and we could not agree to ratify it until other Parliaments had done so.

Not only are we, as usual, condescendingly and patronisingly lecturing other Parliaments on what their constitutional settlements should be, but this is nothing short of a wrecking amendment, and I wish that Conservative Members would have the intellectual honesty to say so.

[Martin Horwood]

It is generally a pleasure to follow the right hon. Member for Rotherham (Mr MacShane) in European debates, as he and I share a broad enthusiasm for the European Union and its development. However, I think that on this occasion he is being a little unkind to our hon. Friends on the Conservative Benches. I do not think that this is a wrecking amendment; I think that it asks legitimate questions about the timing of the transfer between the European financial stability facility and the European financial stabilisation mechanism and the new European sustainability mechanism—although I think that by demonstrating that we know the difference between the EFSF, the EFSM and the ESM, we are probably all showing that we need to get out more.

The right hon. Gentleman asked whether the old EFSM, which made Britain liable for the financial bail-outs, could be brought back. That is an interesting question, and I too would like to hear the Minister answer it. I assume that a vote by the Council, probably with unanimity, would be required to bring the EFSM back into operation, given that the Council voted to end it, or at least not to involve it in any new bail-outs. If that is the case, I think that it would reassure Conservative Members considerably to know that the EFSM is, in effect, dead and buried, at least in respect of new bail-outs.

There are two problems with the amendment. The right hon. Member for Rotherham pointed out one of them in what was a rather pre-emptive intervention. This amendment ties the triggering of United Kingdom legislation to actions of other countries—to events in Berlin, Dublin or the European Court, for instance. That is a strange principle for Members who have generally been rather keen to emphasise the unique sovereignty and independence of the United Kingdom Parliament to be trying to introduce into a British Bill. It raises a constitutional question, too: should we be putting clauses into British legislation that are entirely dependent on events in other countries?

The second problem is the political roundabout problem. If other countries follow our example and make their ratification of the treaty dependent on others finishing their processes, we will be like cars at a roundabout, with everybody waiting for everybody else to go, and the whole process will completely logjam. I am not sure whether that is what was intended, but it would make the amendment something of a wrecking amendment, in practice if not in theory. I think this is an impractical amendment—albeit perhaps a well-meaning one, which has produced an at least mildly illuminating debate.

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[Emma Reynolds]

It is regrettable that, in a way, we are a test case for the detrimental effect of severe austerity. Since we left government, the economy has slipped back into recession and we have seen high unemployment, including an unemployment crisis among young people. My hon. Friend is right that unfortunately Europe is looking to the UK to see what it should not do in its economic policy. I am glad that there has been a shift, to a certain extent, within the European Council, in that member states on the centre left, such as the French Government, are now arguing for growth and job creation, not austerity alone. His suggestion is critical.

[Mr MacShane]

Are not the IMF and World Bank loans, to which Britain fully subscribes—we will be subscribing absolutely nothing to the ESM—also worthy of scrutiny? Would it not be a good idea to extend this concept and invite the Chancellor of the Exchequer to present to Parliament an annual review of all IMF and World Bank loans, the conditionality of which has a huge impact on the British economy and worldwide developments? I am interested in this notion that we are now advancing, which I fully support, that Parliament should debate all the external loans and financial instruments that Britain provides to help other economies get going, as well as those in Europe to which we do not subscribe a penny.

[Emma Reynolds]

My right hon. Friend makes a good suggestion, but I would not want to comment in too much detail on other external loans, given the remit of the debate. I am sure, however, that those on the Treasury Bench will have heard his suggestion.

In either scenario—whether best or worst case with regard to the operation of the ESM—it would be reasonable and enhance scrutiny in this House and the other place were the Chancellor to provide an annual report of the economic effects on the UK, as set out in new clause 1.

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[Wayne David]

I simply do not agree, and there are plenty of academics and learned people who do not agree either. Most importantly of all, plenty of workers and employers in my constituency do not believe it. As I said, I am not suggesting for one moment that the EU and the eurozone are particularly popular with people—they are not, and I fully understand why not—but in the end people are concerned about their livelihoods and their prosperity, which depend on jobs. That is why it is important for this country to do everything we can to ensure that the eurozone is helped to get over its present difficulties and made prosperous once again.

[Mr MacShane]

Does my hon. Friend accept that we do not have to go to Asia, for example, to see devaluation before our very eyes, because the British pound has been substantially devalued in the last four years, and it has led to a massive loss of jobs, employment and growth, and has brought in a recession? Perhaps devaluation and a sensible Government can help, but devaluation and this Government are a recipe for disaster.

[Wayne David]

Yes, I agree. If we take the argument of the devaluers to the extreme, having competitive devaluation among different states on the continent of Europe is indeed a recipe for disaster. It is a mistake to believe that, because devaluation might have helped one country in one particular circumstance, we can extrapolate beyond that and assume that devaluation is a recipe for everyone.

I have generally supported the ESM, because I think it is necessary and will make a huge contribution—not an exclusive one by any means, but a huge one—to helping the eurozone in its current difficulties. I am not suggesting for one moment, however, that the EU has everything worked out perfectly, so far as the ESM is concerned. What is needed is an ongoing review, and flexibility is required so that the good things are built on and the not-so-good things altered. That is why new clauses 1 and 2 are so important.

I recently read with great interest an excellent research paper produced by the House of Commons Library, which succinctly summarised a number of the reservations that people have about the ESM; it is quite right that people should have some reservations about it, so let me mention a few of them.

The first relates to the amount of €500 billion being made available for lending capacity. A number of people have suggested that, given how the crisis might develop, that amount could be too small, so we need to contemplate a larger amount in future. That applies particularly if it is not just Greece and Portugal that experience difficulties and if things become more problematic in Spain or even in Italy. In those circumstances, it might be necessary to consider having a facility much greater than the currently envisaged €500 billion.

The second reservation by those concerned about the ESM is, as we touched on earlier, the fact that it is but one of a number of different initiatives designed to help the eurozone. We are particularly aware of the initiatives, perhaps belated, of the European Central Bank and of the desire to intervene in the bond markets. That is one of the terms of reference and intentions of this facility as well. We thus need to ensure that there is complete complementarity, no duplication of effort and no contradiction in these different facilities; everybody must be pulling in the right direction. Co-ordination with other lending institutions and with other bodies and initiatives is very important indeed. Linked to the size of the €500 billion facility is the fact that some people believe that in a worst-case scenario, the rescue funds would be insufficient and would run out of money. It is therefore necessary to have an ongoing review of whether that is likely to happen or not.

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[Jacob Rees-Mogg]

The hon. Gentleman is confusing two completely different things. One is placing an obligation on Her Majesty’s Government, and the other is expressing an opinion.

I might wish to give advice to the central bank of China. I might wish to say that it was about time that it cut its interest rates—which I think it should—and used its reserve requirements for the banks. It has been putting the rates up, and it is about time that they came down. I think that China needs a monetary boost. But are the Chinese Government listening, and have they the slightest interest in my opinion of their monetary policy? I very much doubt it. [Hon. Members: “Of course!”] Hon. Members flatter me again, but I fear that even the Chinese ambassador, most assiduous gentleman though he is, will not report the opinions of the House of Commons on China’s monetary policy. I fear that even if the Foreign Office, our most esteemed and distinguished Foreign Office, that Rolls-Royce Department—possibly a Rolls-Royce made rather more recently, in the 1970s, with a little bit of engine trouble and a little bit of oil leakage, but none the less with very fine leather inside and looking very nice—sent a message to China saying what its monetary policy should be, the Chinese would not take any notice, and the same applies to the new clause. This is not our business; it is a matter for the eurozone countries. We specifically excluded ourselves, and then the Opposition came up with this wonderful wheeze.

I suppose that that is admirable, in a way. The Opposition have to think something up. As Disraeli said, the job of the Opposition is to oppose. All the finest socialist brains in England were sitting around discussing how to amend a Bill consisting of a handful of clauses saying nothing much except that Her Majesty’s Government would be saved from further liability for the euro. “What shall we do? What bold step of policy shall we take? How shall we strive to convince our electors that there will be a new dawn, the new Jerusalem that the socialists are always looking for? We must ask the Chancellor of the Exchequer for a report that is so hard-hitting, forceful and solid that it constitutes a new policy.”

[Mr MacShane]

rose—

[Jacob Rees-Mogg]

The right hon. Member for Rotherham (Mr MacShane) looks as if he wishes to intervene, and I will of course give way to him.

[Mr MacShane]

I assume that this will only be reported in Hansard, and will thus remain a state secret. The hon. Gentleman is pretty much making my speech for me.

That said, I think that the Chinese should listen to the hon. Gentleman. I think that the clatter of chopsticks in North East Somerset should be heard in Beijing when it comes to policy. It should also be noted that we do about £48 billion-worth of trade a year with the other EU member states, and what they do matters to us. The notion that if we do not sign the treaty the continent will be cut off has been a traditional approach throughout the ages of the Tory isolationists of whom he is the most wondrous representative in today’s House.