EU-UK Relationship (Reform)

Emma Reynolds Excerpts

Tuesday 18th September 2012 Westminster Hall

[Andrea Leadsom]

I almost entirely agree with my hon. Friend. I favour the idea of reform followed by referendum, but I think the reform is absolutely key and the poll survey shows that the British public think so, too. If the public saw reform, they would be content to remain a part of the EU.

What happens next is about politics, not economics. According to Eurostat, at the end of the first quarter of 2012, euro-area Government debt stood at 88.2% of euro-area GDP. On the other hand US national debt is more than 100% of GDP and in Britain it is 86.4% of GDP. My point is that if all euro-area debt were to be consolidated, the position within the eurozone in terms of consolidated debt would be no worse than either the UK or the US. This is about politics, not economics. It is about the extent to which eurozone members are prepared to underwrite one another’s debt. Politicians must make up their minds what they are going to do about the crisis.

Let me quickly run through where the big eurozone countries stand on debt pooling. Germany is firmly opposed to eurobonds at this stage, but supports greater central oversight of national budgets within the eurozone as a way to export German fiscal discipline.

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

I congratulate the hon. Lady on securing this important debate. Does she recognise that the second largest party in Germany, the Social Democratic party, is in favour of eurobonds? The position of the German Government might well change after the federal election to be held at this time next year.

[Andrea Leadsom]

The beauty of democracy is that it is not over until it is over. It is important to think about who is in power now and not who might be in power in the future. In June, Angela Merkel said:

“I don’t see total debt liability as long as I live.”

She also said:

“Apart from the fact that instruments like eurobonds, eurobills, debt redemption schemes and much more are not compatible with the constitution in Germany, I consider them wrong and counterproductive.”

Angela Merkel has been clear on the fact that she does not believe that debt pooling is the way forward. That does not mean that Germany is opposed to eurobonds in principle; but from Berlin’s point of view, a full fiscal union must be established first. German Finance Minister Wolfgang Schäuble put it very clearly when he said:

“We have to be sure that a common fiscal policy would be irreversible and well coordinated. There will be no jointly guaranteed bonds without a common fiscal policy.”

Italy’s Prime Minister Mario Monti, who is a technocratic, not a democratically elected leader, has said that his position is quite similar to that of Germany in that he believes that central oversight of national budgets is a necessary precondition to eurobonds.

In Spain, the centre-right Government are keen on introducing eurobonds in the next few years and seem to be ready to accept losses of budgetary sovereignty to achieve that. Mariano Rajoy has proposed a three-stage path towards debt pooling: in 2013-14, eurozone countries should adopt measures to meet the fiscal and economic convergence criteria imposed by the European Council; in 2015-16, a European fiscal authority should be created that would oversee national budgets; and in 2017-18, when fiscal targets would be imposed on the eurozone in its entirety, full eurobonds could be issued.

France has not made its position entirely clear. It tends to favour more solidarity immediately and fiscal union later down the track, but in the name of Franco-German solidarity, it seems to have dropped the idea of Eurobonds, at least for the moment.

Most importantly, what about the UK? At the Lord Mayor of London’s banquet, the Prime Minister called for a looser EU

“with the flexibility of a network, not the rigidity of a bloc.”

That is an important indicator of where the UK stands. It is important to recognise that the EU is already multi-layered.

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[Andrea Leadsom]

I absolutely agree with my hon. Friend; he makes a very good point. That was never more true than in relation to the working time directive. Having recently carried out an inquiry with all the royal colleges, I know that the evidence is overwhelming that the training of doctors is suffering seriously as a result of the negotiated on-call hours, which the last Government presided over and allowed to happen, to the detriment of our NHS. They should be ashamed of that.

[Emma Reynolds]

I am sure it was not deliberate, but that is not exactly an accurate account of what happened. We negotiated an individual opt-out, which this country retains. The European Court of Justice interpreted the rules on doctors’ on-call hours in a way that we felt was against our national interest, so we were then trying to negotiate whether being on-call constituted working time. It was no fault of our Government.

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

It is a great pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for South Northamptonshire (Andrea Leadsom) on securing today’s debate. I also congratulate the Minister on his appointment. I did not realise that we would have such an early opportunity to debate such an important issue.

The hon. Lady’s debate concerns the reform of the relationship between the UK and the EU, but it is worth mentioning briefly that we are against the nuclear option of reform: leaving the EU, as some Government Members have called for. We Opposition Members believe that the UK should remain in the EU. We reject many of the arguments advanced by hon. Members today, saying that it would be in the UK’s national interest either to leave the EU or reduce our relationship to one based on trade.

[Mr Bone]

I am grateful that the shadow Minister is so honest and courageous so early on in her speech. She has made a clear pledge that the Labour party will definitely never give this country an in/out referendum.

[Emma Reynolds]

I did no such thing. Perhaps if he listened a little more attentively to what I said, the hon. Gentleman would not make such pointless interventions.

The EU remains the largest and richest single market in the world and accounts for more than half of our total exports. We export more to the German Länder of North Rhine-Westphalia than to China and India combined. We do more trade with Ireland than with the so-called BRICs—Brazil, Russia, India and China—put together. Without our exports to the EU and the rest of the world, the British economy would have gone back into recession a year ago.

[Dr Julian Lewis]

Given the hon. Lady’s typically robust response to my hon. Friend the Member for Wellingborough (Mr Bone), are we to take it that the Labour party is not ruling out giving an in/out referendum to the British public?

[Emma Reynolds]

The hon. Gentleman seems to understand me better than the hon. Member for Wellingborough (Mr. Bone). Our position is that a referendum at this time would be a distraction from the Government’s priority of getting the economy back on track. The question about what our relationship with the EU will become is open now, given the nature of Mr Barroso’s speech last week, mentioned by the hon. Member for Stone (Mr Cash). We will see how that relationship develops in terms of what kind of political and fiscal union the eurozone states want to form.

[Mr Cash]

Does the hon. Lady recognise that the timetable has been accelerated by that speech and those who thought that it might be better to keep the matter open, including the Prime Minister, are now effectively finding that time has overtaken them—or soon will.

[Emma Reynolds]

The hon. Gentleman makes an interesting point. It is not yet clear at what point the European Commission, the German Government or other Governments will want to put treaty change on the table.

[Mr Cash]

It is. He said so.

[Emma Reynolds]

In his speech, Mr Barroso mentions putting that treaty change on the table before the 2014 European parliamentary elections—I have read his speech closely—but it is still unclear whether that will happen in time for those elections. There will be a report by Herman Van Rompuy to the Council in December, which will be an important time for our Government to start to have a policy on the European Union. I shall come on to that.

Many of the hon. Members present who argue for withdrawal offer a false choice between trade with emerging markets and EU membership. They say, “Remain in the EU, or trade with the likes of China, India, Brazil and Russia.” We must of course improve our export performance to the rest of the world, but we will not build real export success if we start by cutting ourselves off from our largest existing market and our largest collective negotiating tool. The EU provides the collective political weight that we need to maximise our influence in negotiations. Hon. Members need not take that from me, they can take it from the Europe Minister, as set out in written evidence to the Foreign Affairs Committee as recently as May of this year, when he said:

“On trade, one voice representing half a billion consumers is heard more loudly in Beijing, Delhi and Moscow, than 27 separate ones.”

British businesses, workers and consumers will see the benefit of EU free trade agreements, such as the recent FTA with South Korea, which is worth £500 million to UK exporters, or the potential future agreements with the US, Canada, Singapore and India.

[Mr Laurence Robertson]

When will that happen? I take a deep interest in Irish politics, and we export more to Ireland’s 4.5 million people than we do to more than a third of the world’s population in those emerging markets. We keep hearing how good it will be, but when will it happen?

[Emma Reynolds]

That question might be more appropriate for the Foreign Office Minister. The point that I am making, if the hon. Gentleman will listen, is that it is more likely that we will be able to prise open markets and change the rules of the game on intellectual property rights and other issues if we are part of the collective weight of the European Union. China, with 1.3 billion people, has much more interest in forming a trading relationship with a European Union representing 500 million consumers than with a single country within that Union.

[Alec Shelbrooke]

I am listening carefully to what the hon. Lady said about being in Europe to negotiate such trade terms. Will she clarify whether that means that we should have much further integration to open up those markets?

[Emma Reynolds]

That was not my point. We have much more influence and weight in international trade negotiations acting as part of the European Union than we do alone. I now want to make some progress.

Our membership of the European Union is also vital to attracting foreign direct investment. I want to agree with one point made by the hon. Member for South Northamptonshire, which is that it would not be in our national interest to be in the position of Norway. A recent report by some Norwegian academics pinpoints a democratic deficit in Norway’s relationship with the EU, because the country is bound by the single market’s rules, regulations and laws, over which it has no say. If we were to put ourselves in that position, it would not be in our national interest, so I agree with the hon. Lady on that.

We are in favour of our membership, but we are not defenders of the status quo. We would like to see a Europe that is more outward looking, that is stronger in the world, that is—crucially, at the moment—better able to deal with the eurozone crisis and that reforms some of its internal policies. We would like to see the multi-annual financial framework more focused on growth and job creation, a reform of the common agricultural policy and, crucially, a completion of the single market in services. The only way to achieve such reform, however, is to have influence in the EU and not to be stranded on the sidelines.

Regrettably, as a result of the Prime Minister’s walk-out at the European summit in December, our stock in Europe sits at an all-time low. [Hon. Members: “ Rubbish.”] If hon. Members visited European capitals and discussed with other politicians the stock of UK influence, they would have a pretty bad surprise. Negative tactics such as vetoes and empty chairs are instruments of last resort; they are open to member states and we should be prepared to consider their use in defence of a vital national interest, but in December no vital national interest was defended. The Prime Minister’s protocol on financial services was rejected as a retreat from existing single market rules, and the rest of Europe simply carried on without us. The Prime Minister’s action therefore incurred a loss of influence for no tangible gain. Ironically, as a result of what he did in December, the Government are more reliant on an institution that many Conservative Members love to hate, the European Commission, which we must now depend on to protect the single market and its integrity.

[Andrea Leadsom]

I have to disagree completely with the hon. Lady. The Prime Minister’s use of the veto, far from giving us less influence in Europe, had the opposite effect. What was astonishing was the complete wall of ambassadors and others from the European Union coming to see many of those known to be interested in the EU to find out what the problem is, what was going on and what it is exactly that Britain wants. So she is completely wrong—what the Prime Minister did was a wake-up call and definitely in the interests not only of the City but of Britain.

[Mr Philip Hollobone (in the Chair)]

Order. Before the hon. Member for Wolverhampton North East (Emma Reynolds) responds, she needs to think about bringing her remarks to a close. She has about two minutes left.

[Emma Reynolds]

I could not disagree with the hon. Lady more—I have made that clear.

Today’s debate is reminiscent of the 1990s: the divisions of the Tory party have not yet healed. We have seen three different positions on the Government side: no change and stay in; stay in and argue for repatriation and renegotiation; and to get out. The Conservative party is utterly divided. As long as the Government put the party interest before the national interest our stock in Europe will remain low and our ability to argue for reform will remain incredibly limited. It is regrettable that the Government are divided at home and weak in Europe, and that they are therefore incapable of being a strong and effective voice for reform in Europe.

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[Mark Simmonds]

It is clear that the UK’s agenda and priorities—I hope to come to them in a moment—are about driving global competitiveness and economic growth to alleviate some of the problems that are prevalent in the eurozone. That includes further trading with the eurozone and—my hon. Friend the Member for Mid Norfolk (George Freeman), who is no longer in his place, made this key point—not just with the eurozone, but further afield. This debate is extremely timely, and provides an early opportunity to discuss the issues. It is clear that events in the eurozone will have wide-ranging implications, and its ultimate shape is unknown and uncertain. The Prime Minister made it clear on the Floor of the House in June that as Europe changes to meet the current challenges, our relationship with it may also change. It is vital for Britain’s national interest, and for the European Union’s strength and prosperity, that we meet those challenges.

The coalition agreement that was set out at the beginning of this Parliament stated that the UK should be a positive participant in the European Union, working with our partners to ensure that all European nations are equipped to face the challenges of the 21st century, by far the most important of which is global competitiveness. I am the first to acknowledge that there is still much more to do to restore growth, both inside and outside the eurozone. The Government remain vigorously committed to developing the European single market, to smarter and less costly EU regulation, and to more free trade between Europe and the rest of the world. We need a Europe that delivers prosperity, job and wealth creation, and security, and a Europe that is more outward-looking, more dynamic and more competitive on the global stage.

[Emma Reynolds]

Would the Government not have more authority and influence when talking about growth in other European countries if we had growth here in the UK?

[Mark Simmonds]

The hon. Lady makes an interesting point. It is vital in a globalising world to remain on the competitive side of the line. The reforms that this Government have put in place since the May 2010 election will make a significant contribution to that. They include making our tax system the most competitive in the G20, making the UK the best place in Europe to start, to finance and to develop a business, encouraging investment and exports as a route to balancing the economy after the shambolic economic mess that the Labour Government left to the coalition Government, and creating a more educated work force. Over time, those changes will deliver economic growth.

Aligned with that, the single market is a significant driving force for prosperity. That is why we will continue with an ambitious programme of deepening the single market while seeking to reduce unnecessary burdens. The single market supports UK jobs, prosperity and growth through increased trade and, vitally, helps the UK to attract inward investment from inside and outside Europe. We want the single market to continue to encourage competition and innovation throughout Europe, to help to increase productivity in the UK, and to bring down prices for consumers so that UK businesses can benefit from a single regulatory regime, simplifying regulation, liberalising services and developing a single digital market that will bring benefits to the UK.

Our national interests, our influence and our values are all advanced internationally through the co-operation of states. However, as many hon. Members have rightly said, there is no doubt that the EU requires reform, and we certainly do not agree with everything the EU does. It is absolutely clear that reform is required now more than ever. In our view, the UK should champion growth and the single market, and take the opportunity to shape Britain’s relationship with Europe in a way that advances our national interest in free trade, open markets and co-operation.

We have led the debate on reducing the burden of EU regulation on business, and securing agreement on a breakthrough step to exempt micro-businesses from new EU proposals, but clearly more needs to be done. We have secured agreement on a unitary patent after 23 years of EU negotiation. Amid all that change, my right hon. Friend the Foreign Secretary announced an analysis of the balance of competences between member states and the EU. That vital review will be an audit of what the EU does and how it affects us in the United Kingdom. It will look at where competences lie, how they are used, whether exclusive, shared or supporting, and what is important for our national interest. The process will begin in the autumn, and I urge all right hon. and hon. Members to participate.