European Council

Emma Reynolds Excerpts

Thursday 8th December 2011 Westminster Hall

[Mr Leigh]

To be frank, I do not think that that is a serious point. Everybody knows that the hon. Gentleman is trying to tilt at windmills. Things are getting worse, because the United Kingdom’s level of influence on new financial rules has decreased. Regulation is now geared less towards financial services growth, and more towards curtailing the financial market economy. The perception in many continental capitals—there may be a reason for this—is that the so-called Anglo Saxon light-touch capitalism needs to be reined in. In the past, EU politicians and policy makers generally, but not always, felt constrained from imposing financial regulation on the UK, but that has now ceased to be the case. I agree that United Kingdom regulation has moved from the light-touch concept, but its new focus on regulatory judgment looks set to clash with the prevailing rules-based culture at the EU. In addition, the eurozone crisis is increasingly likely to create exceptional needs and political incentives for the euro countries to act in the interests of their own eurozone of 10.

I believe that all those reasons—the new emphasis on qualified majority voting, our inability to use our veto in this marketplace, and the increasing tendency of the European Union to want to interfere in the financial marketplace—are as big a threat to the main motivator of our economy as anything that we have seen in history. What do we do about it? I think that this is a decisive moment for the Prime Minister. He has to say in the conference that he is not prepared to sign any treaty unless he receives cast-iron guarantees that our financial sector will be set free from interference. If he does not get such cast-iron guarantees, I believe that he must be prepared to veto any treaty. If he is then told that the 10 will go ahead and create their own treaty, he must declare that illegal. Although that may sound like a very dramatic thing to do, I have read in today’s papers that German commentators are already talking about even the threat of our Prime Minister standing up for British national interests as being “obnoxious,” but that is precisely what all European countries do. The first lesson of history, as I have said, is the overwhelming imperative on behalf of successive British Governments over the centuries to protect our commercial interests. The second lesson of history is that all Governments in Europe act in their own financial interest—all are determined by their own history.

We need not say much about recent German history, but we know that there is an imperative throughout German history to extend their marketplaces, particularly into the east in the Balkans. We know that there is an imperative on behalf of French Governments to hug Germany close, so the French President and German Chancellor will be acting entirely in their own national interest, which is what we demand of our Prime Minister.

I hope I will be forgiven for saying this, but we have had enough of spin and of reading about British Prime Ministers who, over the past 20 or 30 years, have said in the days preceding a summit that they will stand up for British national interests and ensure that they are protected, only to come back with a Chamberlain-esque piece of paper, saying, “I have negotiated very hard, got an opt-out from this and that, and succeeded in standing up for British interests,” when such guarantees are not worth the piece of paper they are written on. I suspect that agreements have already been made among the sherpas and the miners, and that our Prime Minister will be offered something, but that will not be enough unless it includes cast-iron guarantees that we can all accept and that protect our vital national interests, particularly those in relation to our financial sector.

[Emma Reynolds (Wolverhampton North East) (Lab)]

Does the hon. Gentleman agree that it is not in our national interest that the Government are deeply divided on the issue, and that the Prime Minister is therefore weak and isolated in the European Union and less able to negotiate the sorts of things demanded by the hon. Gentleman?

[Mr Leigh]

What is in our national interest—we see it in this Chamber today—is that patriotic Members of Parliament are prepared to speak up for the vital national interest. By speaking out this afternoon, we are actually supporting the Prime Minister in his negotiating stance, because I believe that we stand for what the British people want.

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[Andrea Leadsom]

I have not seen the poll—I have been looking forward to seeing it—and I am not surprised by what my hon. Friend says. Although, as I have said, the treaties are all about expanding markets, growth and opportunities, some of the unintended consequences of EU policies have been the complete opposite of that, and never more so than in financial services. I think that a deliberate attempt has been made to reduce financial services activity in the eurozone.

Financial services should be the top priority for the Prime Minister. He has been clear about drawing a marker in the sand to the effect that Britain wants a secure legal agreement that, in the event that financial services legislation is against Britain’s best interest, we can prevent it from being imposed on us.

[Emma Reynolds]

The hon. Lady is making an eloquent speech. Does she support our idea that, to protect financial services and decisions on the internal market, the Prime Minister should call for all non-euro member states—the 10—to be observers at the euro group meetings that will be held so regularly?

[Andrea Leadsom]

Any attempt that the non-eurozone members make to protect their interests is important, but perhaps an even better way to do it would be to ensure that, if any vote is passed under QMV by the eurozone bloc, there should also be a supporting vote under QMV on the part of the out-group of 10, at a very minimum, to ensure that the in-group could not ride roughshod over the out-group.

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[Martin Horwood]

I congratulate the hon. Gentleman on his qualifications.

Apart from the eurozone, the other key issue that will be discussed at the summit is, of course, the accession of Croatia. We very much look forward to the accession of Croatia, which is a brilliant example of the transformative process of applying for membership of the European Union. Croatia has managed to address so many issues relating to its judiciary, economy and the reform of its political processes. That is an example that should be followed by other candidate countries looking to accede to the Union. It is inspiring to remember that in the area of Europe most recently torn apart by war, those in the Balkans still see European Union membership as something that helps to guarantee future peace. That is one of the founding principles of the European Union and one that we should not lose sight of in the current melee over the eurozone and possible treaty reforms.

The third, and obviously the most important, issue that the Council has to address is the crisis in the eurozone. Here, I think, we are on common ground in realising that the threat of a disorderly collapse in the eurozone is of enormous importance to this country. If the eurozone goes down, it will do considerable damage to the entire world economy, let alone to the British economy. It should be our No. 1 national priority at the Council to advance the process of securing the future of the eurozone, however it happens to proceed. That the eurozone countries have not yet agreed the treaty process or the rules that ought to surround it is a matter of enormous frustration and anxiety. It reflects badly on the leaders of those countries that they have not yet come to such an agreement.

The second clear national priority has to be to defend Britain’s interests in the process, which is rightly the instinct of the Prime Minister at the Council. To come with a list of unrealistic demands that would hamper and threaten the whole process of resolving the crisis, however, would be spectacularly reckless and playing politics with Britain’s national interest. I apologise to the thinly attended Labour Benches, but I am afraid that as a country we are still deep in the process of cleaning up the mess left to us by the previous Government. Our economy remains in a fragile position, which is possibly more fragile than we had expected at this stage.

[Emma Reynolds]

When the Labour party left government, the economy was growing. The policies of this Government have choked off the recovery.

[Martin Horwood]

The economy is still growing, actually, but that is a debate for another day. The voters made up their mind about who was responsible for the economic mess that we found ourselves in.

We are still in a vulnerable position, and all colleagues need to be able to go back to their constituencies, to look pensioners, small business people and others in the face and to say that we are doing everything that we can to speed a resolution of the crisis and that we are not throwing spanners in the works.

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[Mr Cash]

I agree. People were not listening back in the days of Maastricht and they are not listening now. That is the problem. I give special thanks to my hon. Friend the Member for Harwich and North Essex not only for this debate but for the consistency that he has shown since the days of the Maastricht rebellion, which I had the honour to lead all those years ago and of which he was a very important member. He was a new Member of the House and he understood the position immediately, as did my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) and a number of others who have remained in the House.

This is not only an historic question but a national question. The now absent hon. Member for Luton North (Kelvin Hopkins) mentioned Peter Shore and Bryan Gould. When I set up the Maastricht referendum campaign, it was hon. Members on the other side of the House, such as Peter Shore and Bryan Gould, who joined me in that campaign. We presented a petition, which many people may recall, of well over 500,000 signatures; in fact, we reckon that we got 700,000 signatures all told. The petition was deposited, calling for a referendum on the Maastricht treaty. I was delighted that my right hon. Friend the Prime Minister said only a couple of weeks ago that there should have been a referendum on that treaty. As one who was very deeply engaged in the whole of that process, from beginning to end—much to the dismay of those who have now, in my opinion, lost the argument—I believe that the necessity of knowing the views of the British people remains implicitly entrenched in the arrangements that are now coming forward and that therefore a referendum is essential.

I should now like to move on to the present time. I want to address the question facing us today in terms of the broad landscape. I wrote a pamphlet that was published in effect in this very room when we had a conference between the leading Eurosceptics and the leading Europhiles. It involved Charles Grant of the Centre for European Reform, Roland Rudd of Business for New Europe and a galaxy of others. Both sides regarded it as essential that we should get together and properly debate the questions on both sides of the argument with many of the best people from the two sides of the debate. In that pamphlet, I set out details that I will not go into today, but I say to those who are interested and who read the transcript of these proceedings that it is available. Indeed, the Prime Minister has written to me, saying that it is a substantial document and effectively, therefore, it has to be answered. He has said as much to me, and it does have to be answered. I assume that my right hon. Friend the Minister for Europe will do so in due course.

This is an historic turning point for both the country and the Conservative party. The dream of ever-closer union and, indeed, political and economic union has failed, and the root of that trouble is the fantasy world, which has persisted for so many decades, of trying to create economic and political union among so many diverse countries with diverse cultures, diverse economies and diverse democratic traditions.

Only today I witnessed Mr Barroso on the television screens berating everyone in the most dictatorial language. He was saying that everyone had to come together for the sake of saving this project. They themselves are responsible for having created it and they are now attempting to save it, despite the fact that the causes of the present discontent come from the creation of this project in the first place by the very people who are now berating everyone else.

I will go further and refer to two documents that I have just obtained. One is dated 6 December. It is Mr Van Rompuy’s document, entitled “Towards a stronger economic Union”. There is not one word about democracy anywhere in that document—the word “democracy” does not appear. Similarly, in the letter written to the President of the European Council—Mr Van Rompuy, no less—by Mr Sarkozy and Angela Merkel, there is not a single reference to the democratic question. There is not one iota, not one jot of a reference to democracy in either of those documents, yet they are demanding that this failed project be continued with greater—deeper—integration. All the mistakes that have been made in the past are being reinforced in the new arrangement, which clearly will not work. It did not work before and it will not work now. It is a tragedy— I say that—that we are in the current position. I trust that the Prime Minister will address that during the next 48 hours.

This is not some theoretical experiment. It is about the daily lives of the British people and about our democratic traditions and economic performance. The idea that a fiscal union of 17 would be stable is simply and emphatically wrong. It will concentrate and increase the dangers of centralisation and will be fundamentally unstable. Germany will not be able to bail out the other countries, and it is a complete strategic failure for people, including the coalition Government, to think that it can.

Germany of course wants to preserve the euro, because it is doing so well out of it. One has only to consider the foreign direct investment by the Germans in other countries, the extent to which those countries are in effect economic satellites of Germany and the fact that the structural funds—I have the figures from the Library—are so incredibly important in generating investment backed by German contracts in those other countries, from which they then repatriate the profits. This is actually a German economic hegemony. Equally, I do not think that the Germans are inherently hostile about this. I say what I say without any hostile spirit, but I do say that we have to be realistic. We are desperately at risk. The British nation is in peril under these arrangements.

Furthermore, the impact of this economic conglomeration in the hands of one country in particular has led not only, in effect, to the dismissal of two Prime Ministers, whatever their merits or demerits, but to the voting arrangements, which follow from the qualified majority voting system. I am talking about the number of votes that are available to Germany when it wants to pursue a policy, because of its influence and, in effect, its control over the countries in question, which are dependent on it. That is the case not only in the eurozone of 17, but in so many of the other countries, including— I say this without any disrespect for them, because I love these countries—Poland and Denmark. Then of course there are Bulgaria, Romania, the Baltic states, Hungary and so on. The truth is that that is inherently in German national interests. Indeed, we have to look only at what Chancellor Kohl had to say in the 1990s, which I have included in a pamphlet that I wrote, called “It’s the EU, stupid”, to see the political determination behind Germany’s desire to ensure that the euro survives. Angela Merkel is now using that very language in the same context.

I do not blame the Germans. I have said in this Chamber that I recognise the fact that to a great extent they have shown their commercial nous—they have taken advantage of the system to ensure that they get the best out of it. The organisation is not a European union, but effectively a greater Germany.

We, above all other countries in Europe, ought to recognise that we should defend our own interests—not, as I said, in a hostile manner, but in a realistic and down-to-earth manner. We ought to get across the message that there should be, inherent in the proposed arrangements, a fundamental change in our relationship with the European Union. We and, if I may say so, the Prime Minister, have an absolute duty to protect the national interest that he says he wants to protect; to ensure that there is fundamental reform in the European Union, which he called for at the Mansion house the other day, to generate the growth that we need, with our 40% of trade with the Union and to guarantee that we are not drawn into an arrangement by which, through a majority block vote, we are consistently outvoted and become completely and utterly controlled by the system. It just does not make sense, and I believe that the system will not work.

It needs to be pointed out that not only is voting power naturally going to Germany, with its economic investments—it is doing extremely well out of the system—but Germany believes that it can require countries to obey rules. That is a much deeper question, a matter of attitude. We cannot require countries to obey rules just because we prescribe them. That is where I think the whole philosophy and the attitudes in the Eurocracy and in Germany go wrong. As we have heard, the Germans themselves have not obeyed the rules on the stability and growth pact when it suited them not to. An inherent dishonesty lies at the heart of the arrangements: someone disobeys the rules when it suits them, but insists that the rules be obeyed when they can benefit out of those rules. That cannot be right.

Countries are made up of individuals and individual companies, which have their own ideas as to how they should be democratically governed. Those ideas do not by any means fit within the rules prescribed from above or the conditions that are imposed. The Eurocrats, Germany and those who go with it on the matter simply do not understand that the lack of democracy is a fundamental flaw in the entire European project.

[Emma Reynolds]

Is the hon. Gentleman not a little unfair in singling out Germany? Germany is obviously the largest country to have done quite well out of the euro, but other eurozone countries in the group of healthy economies are doing pretty well economically. It is slightly unfair of him to single out Germany.

[Mr Cash]

I do not think it is. If the hon. Lady investigates, as I have, German FDI into the other countries, and then looks at the countries that are growing, she will see that there is a correlation with the amount of money that the Germans have provided. I give them credit for doing so on good investment projects, but some of them have been bad, as in Greece. The growth in some of the countries is buttressed and underpinned by German investment. That is the problem.

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[Emma Reynolds (Wolverhampton North East) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Main, and I congratulate the hon. Member for Harwich and North Essex (Mr Jenkin). We might not agree on all the detail in relation to this debate, but I agree with him that the seriousness of the situation calls for time in this Chamber to discuss the European summit. The pre-summit dinner is only a couple of hours away, but it would also have been useful if the Prime Minister had been invited to last night’s dinner organised by the centre-right European People’s party, at which Chancellor Merkel, President Sarkozy, President Barroso and many other centre-right leaders—unfortunately, most European Union countries have centre-right Governments—were present. Unlike his centre-right equivalents, however, the Prime Minister was not invited, which is a shame.

[Mr Jenkin]

May I point out that if we had a Labour Prime Minister, he would not have been invited either?

[Emma Reynolds]

The hon. Gentleman makes a valid point. When we were in government in 1999, 11 out of 15 Governments were on the centre-left and we attended such meetings, which proved very useful indeed.

I respectfully beg to differ with those hon. Members who have said that the Prime Minister has a strong hand in the negotiations. Last Friday, the Prime Minister was relegated to a quick sandwich lunch with President Sarkozy in Paris, without the inclusion of even a press conference in the programme. The French press hardly noticed that he was there. Given that we are one of the largest economies in the European Union and used to be at the heart of its decision-making, it is incredible just how isolated this Government have made the UK. Today’s New York Times leads with an article that says that the UK is merely a “bystander” at this European Union summit. That is not in the national interest.

The past few days have served to remind us how the Conservative party likes to debate the European Union and of—perhaps this is a point of nostalgia for some—the long, tortuous and, in some cases, destructive history of the division in the Conservative party on the EU. It is worth remembering the context of the Prime Minister’s current position and the labyrinthine trajectory he took to get there. In his bid to secure his party’s leadership while in opposition, he promised to withdraw his MEPs from the centre-right European People’s party, but they still sit in the European Parliament with the same group, which the Deputy Prime Minister has called

“nutters, anti-Semites, people who deny climate change exists and homophobes”.

After becoming the then leader of the Opposition, the Prime Minister told his party to stop “banging on about Europe”, because he hoped that the issue could be put to one side and ignored. How wrong he was.

I say to this Government that, for a year, they ignored the impending crisis in the eurozone. It was only recently that they stopped being asleep at the wheel and woke up to the seriousness of the situation. Six weeks ago, we saw the unedifying spectacle of nearly half of Conservative Back Benchers defying the Prime Minister’s three-line Whip and voting for a referendum on our membership of the European Union. During that same debate six weeks ago, the Prime Minister said that he wanted to repatriate powers from the European Union. He reiterated that demand last month at the lord mayor’s banquet and declared himself a sceptic who wanted a European Union that was a network, not a bloc, while in the same breath extolling the benefits of our membership and demanding a say at the top table.

[Mr Baron]

It is rich for the hon. Lady to criticise the Prime Minister, because when her party was in government, it not only sacrificed the rebate that had been negotiated, but oversaw the transfer of swathes of power to Brussels. The list of measures that she is highlighting runs very shallow with those who remember when her party was in government.

[Emma Reynolds]

I say to the hon. Gentleman that, when my party was in government, we were not isolated in the European Union. The previous two Prime Ministers had a good relationship with both the French President and the German Chancellor, and such a relationship is very important to our national interest.

[Martin Horwood]

Will the hon. Lady therefore congratulate the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey) on his co-operative approach to lifting onerous accounting rules for the smallest businesses? Her Government did not manage to achieve that co-operative approach.

[Emma Reynolds]

I agree that a co-operative approach is needed and that we need to constructively engage with our European partners. When you go to a European summit, you get what you want not by banging on the table, but by the power of your ideas and the strength of your alliances. [Interruption.] Government Members may laugh, but my right hon. Friends the Members for Kirkcaldy and Cowdenbeath (Mr Brown) and for Edinburgh South West (Mr Darling) showed at the London G20 summit in 2009 just what you can achieve by the power of your ideas and the strength of your alliances.

[Mr Jenkin]

rose—

[Mr Jenkin]

I remind the hon. Lady that, after the collapse of the European constitution, Tony Blair went to the European Parliament and said that the trumpets were outside the walls of Jericho and asked whether anybody was listening. Nobody was listening and we got the Lisbon treaty instead. There is no evidence that any Labour Prime Minister had any influence over the general direction of the European Union any more than we do now.

[Emma Reynolds]

I disagree entirely. When our party was in government, we were at the centre of European decision-making, and the truth is that we are not any more.

Six weeks ago the Prime Minister demanded repatriation of powers, yet yesterday, in a 1,000-word article in The Times, in which he set out his position for the European summit, he did not mention repatriation once. We agree that the priority should be given to providing a lasting solution to the eurozone crisis, because we think it is in the national interest, but we also say that Britain should have a strong voice in these negotiations. Unfortunately, because the Prime Minister has tried to face two ways on the issue—on the one hand placating his Eurosceptic Back Benchers and some members of his Cabinet, and, on the other, trying to have a realistic negotiating position with our European partners—the risk is that he will not deliver on either of those objectives. Whereas many Conservative Back Benchers demand repatriation, a split has emerged, not only in the coalition, but in the Conservative party, over the past few days.

[Kate Hoey]

Will my hon. Friend give way?

[Emma Reynolds]

I will not, because I do not have much time. The Deputy Prime Minister has said that attempting repatriation would be economic suicide, and the Mayor of London and two Cabinet members—the Secretaries of State for Work and Pensions and for Northern Ireland—say that the treaty change would inevitably lead to a referendum, whereas the rest of the Government seem to be saying something quite different.

The fact that the Prime Minister is leading a divided party while negotiating on Europe is very much weakening his hand. By facing two ways, the Prime Minister’s position and the negotiating position of our Government are both confused and confusing. It is no wonder that our European partners are not entirely sure where the Prime Minister stands. It is clearly not in our national interest to have that weak voice and to stand on the sidelines. Splendid isolation is really not that splendid. The fact that we are in the slow lane of a two-speed Europe might chime well to the Eurosceptic ear, but, essentially, it could mean that other member states will take decisions that affect us without our being at the table.

I say to the hon. Member for Bury North (Mr Nuttall) that it is wrong to assume that eurozone members all agree on which direction they want to take regarding better economic co-ordination, because the French Gaullois tradition is an intergovernmental one that is very hostile and suspicious of supranational institutions. There are disagreements within the eurozone countries. We should not just assume that France and Germany agree on these issues.

If the eurozone crisis continues to deepen, it will have serious implications for jobs, businesses and banks in the UK. Our economy is closely entwined with the other 26 members of the European Union, and more than half our trade goes to those countries. Our banks are also extensively linked and exposed to eurozone banks, so it is clearly in the national interest for a solution to be found at the summit. Labour Members want the Government to push for a greater and more decisive role for the European Central Bank and a credible crisis fund with, of course, built-in conditionality. The so-called six-pack package goes a long way to creating credible rules and procedures to enforce those rules, but it is clear that a solution must also be found to tackle the balance of payments and trade imbalances, which several hon. Members have mentioned, between the different eurozone member states. It is also very important to enhance the competitiveness of the weaker economies.

In winding up, I would like quickly to ask the Minister a couple of questions. Why did the Prime Minister promise repatriation of powers six weeks ago and then suddenly drop those demands yesterday? What resources in the Foreign and Commonwealth Office were given to working through options on repatriation, or was that always a matter of rhetoric rather than something really considered in the corridors of King Charles street? Why have the Government been so complacent about the emergence of a two-speed or multi-speed Europe, and what specific reassurances are the Government asking for with regard to the City and the single market? Are the Government seeking, for example, an emergency brake to be extended to the area of financial services? Finally, are the Government hopeful of a fairly rapid treaty change, and what are the risks to the UK and the rest of the EU of a prolonged process of treaty change and ratification?

In conclusion, we want to see the eurozone succeed, because it is clearly in the national interest that a solution is reached. It is not in the national interest to engage in “I told you so” arguments or schadenfreude, nor is it in the national interest for the governing party and the coalition to be so divided on this issue. Our European partners are left scratching their heads about what the Government’s position really is. The Prime Minister should never have promised repatriation of powers, if it was never his intention to deliver on that promise. His promise has entrenched and deepened divisions in his party, as we saw today and yesterday at Prime Minister’s questions.

That is no way to negotiate with our European partners. Our country demands and deserves better leadership, and only then will the Government be in a position to effectively pursue the national interest and start being part of the solution rather than part of the problem. Division, isolation and weakness are, in fact, a betrayal of the national interest. My concern is that the Prime Minister will not be able to deliver on even the modest demands that he has set out because of his isolation.