European Council

Edward Leigh Excerpts

Thursday 26th January 2012 Commons Chamber

[Mike Gapes]

I will make some progress first.

As a result of the European Union Act 2011, the Prime Minister has boxed himself into a position in which there must be no potential for a referendum in this country. As he was trying to assuage his 81 Europhobic Back Benchers, he took the easy option of making a political decision rather than one in the national interest, which would have been to remain in the negotiations and to carry on trying to influence the outcome. As a result, when discussions conclude on the arrangements, if they are based on the fourth draft agreement—I quote the House of Commons Library Paper—

“the Heads of State or Government of contracting parties whose currency is not the euro who have ratified this Treaty and have declared their intention to be bound by some of its provisions”

would be invited

“to a meeting of the Euro Summit”.

However, those who did not agree to the intention to be bound by the provisions and were not participating would have no automatic right to attend. The Library paper states:

“This would appear to exclude the UK as a non-Euro, but crucially also a non-contracting State.”

There is a potential, therefore, for us no longer to be in the room, even as an observer, because of our misguided decision in December to walk away from the process.

[Mr Edward Leigh (Gainsborough) (Con)]

Is the hon. Gentleman seriously suggesting that it is wrong not to be in a room that is about as robust as a sinking Italian cruise liner?

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[Martin Horwood]

I shall not be drawn into that. Critically, it is for the eurozone countries to address the crisis in the eurozone. The right hon. Gentleman highlights the important point that just by drawing up a treaty the eurozone countries do not solve some of the rather fundamental problems in the eurozone. In fact, the situation in Greece is becoming increasingly serious and it needs to be urgently addressed—that is even more the case now than in recent months.

The importance of the main business of the summit must not be neglected. Britain’s re-engagement in European affairs is critical and it must be pushed forward. There have already been some successes. My right hon. Friend the Secretary of State for Business, Innovation and Skills helped to create the like-minded growth group, which has pushed forward ideas such as lifting onerous accounting rules from the smallest businesses in this country. I think the group has helped to create a shift in Commission attitudes on the smallest businesses to the point where it has committed to review all existing EU legislation to look for other opportunities to lift onerous regulation from such businesses and to screen new legislation to see whether, wherever possible, the smallest businesses can be excluded. That is exactly the kind of agenda we should be pushing in Europe.

[Mr Leigh]

I want to make an intervention that the hon. Gentleman and I can both agree with. Does he agree with the point I have been making consistently at business questions that this debate is so important that in future we should have it in Government time, for a whole afternoon, with the Foreign Secretary or the Prime Minister here so that we can ask them detailed questions?

[Martin Horwood]

I think that is right, although the point I am making is that the jobs and prosperity agenda should be the focus of such debates. If possible, we should get away from the obsession with structures and treaties. The British Government should be pushing the jobs and prosperity agenda at the summit. I have suggested some areas for deregulation and the European Liberal leaders forum drew up a long list of legislation that should be reviewed for possible reform. It included the working time regulations, the temporary agency workers directive, the control of vibration at work regulations, fixed-term employees regulations, part-time workers regulations, control of noise at work regulations, road transport working time regulations and the transnational information and consultation of employees regulations.

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

This debate is being conducted between some right hon. and hon. Members with an extraordinary air of complacency and myopia. The European Union is on the edge of the most appalling crisis—a self-inflicted crisis that many of us predicted when the euro was first conceived in the early 1990s and is now being fuelled by blindness and denial. The fundamental problem is that the euro cannot work—it cannot succeed. There are fundamental structural flaws that are destined to cause the euro eventually to fly apart into separate currencies. I do not want the euro to fail, but the fact remains that the crisis will go on and on until it does fail, so we should start to ask ourselves whether it is, in fact, in our interests that it be resolved quickly and in an orderly fashion, instead of waiting for the markets to do their work.

The fundamental structural problem is that the different national components of the euro represent very different economies, with different surpluses and deficits. The 2010 figures for trade in goods in the eurozone, provided by the Library, show that Germany has a surplus in exports to the other eurostates of €43.4 billion. Other countries have very large deficits: France’s is 4%, Greece’s 6% and Portugal’s 9%. Unless there is a system of fiscal transfers permanently operating to compensate for those surpluses and deficits, the European economies will become ever more out of balance. The debt problem has been greatly exacerbated by artificially low interest rates in countries that were used to much higher interest rates and therefore borrowed vast sums.

[Mr Leigh]

Is it in our interests that the other countries succeed in creating fiscal and monetary union? We will be excluded from a massive monetary union, which historically—for centuries—we have tried to avoid. Or is it in our interests that the euro gradually breaks up in a reasonably orderly way?

[Mr Jenkin]

I do not subscribe to the view that British foreign policy should be constantly to try to divide and rule on the continent. Actually, I think it would be in our interests if the euro succeeded with a democratic settlement in the European Union, but for the euro to succeed with 17 nations the institutions would be required to take on much more power, to accumulate much more taxation and to distribute money much more than they do now. I put it to the House that because there is a democratic deficit in the EU, which everyone acknowledges, the institutions lack the legitimacy and the authority to be able to impose their will across the democratic nations of the EU. There is a fundamental lack of consent to what would be required to impose the necessary discipline.

The problem with the fiscal union treaty is that it is a case of Germany trying to write German rules for the whole eurozone. That will not work—it cannot be sustained—and the result will be the break-up of the euro, so we had better start planning for that eventuality now. There are three things we should do, the first of which is to have a plan and not pretend that a break-up will not happen. I accept the suggestion made by my right hon. Friend the Member for Wokingham (Mr Redwood) that the plan should be made in secret, but there should be a plan and the IMF should be its guardian. Secondly, the plan should be clear on what liabilities will be denominated in what currencies as each country comes out of the euro—easy for sovereign debt and very complicated for commercial paper, but it has to be done. Thirdly, the G20 must be ready to provide the liquidity needed to deal with the defaults that will occur as each country comes out of the euro—massive defaults that will require massive central Government printing of money to recapitalise the European banking system.

That can be done and it has to be done. My right hon. Friend the Prime Minister was absolutely right to veto the treaty on 9 December. He knows there can be no going back on that decision, because to do so would leave him a position where he might as well have not vetoed the treaty, and then where would we be?

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[The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Alistair Burt)]

I thank the hon. Member for Wolverhampton North East (Emma Reynolds) for her remarks and all colleagues for taking part in this important debate. I thank the Backbench Business Committee for finding the time for this debate on next Monday’s informal Council. We know that there are many calls on the time it has available to allocate, but as it now holds the time previously assigned for European affairs debates, I am pleased that it found time for this debate.

[Mr Leigh]

It is fantastic that my hon. Friend is here and we greatly respect him, but will he take back to the Foreign Secretary the clearly expressed wish of Members on both sides of the House that we should have a full afternoon of debate in which he is present before any future European summits?

[Alistair Burt]

I thank my hon. Friend for his generous remarks. As he knows, occasionally colleagues cannot be where they would like to be because of other business, but I have heard what colleagues have said. My hon. Friend the Member for Gainsborough (Mr Leigh) expresses an interest in how the House scrutinises European business, and I will certainly take back to the Minister for Europe and the Foreign Secretary what colleagues have said. I would like to underline the effort and valuable work of my hon. Friend the Member for Stone (Mr Cash) and the European Scrutiny Committee.