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

George Eustice Excerpts

Monday 3rd September 2012 Commons Chamber

[George Eustice (Camborne and Redruth) (Con)]

I should start by saying that I agree with much of the analysis of my hon. Friend the Member for Stone (Mr Cash) about what is wrong with the euro and how we got to this situation. However, I disagree strongly with his conclusions about this Bill, because I think it is relatively uncontroversial. As the Foreign Secretary pointed out earlier, the new European stability mechanism is certainly an improvement on the European financial stabilisation mechanism that went before it. Under that previous arrangement, Britain was liable for some 15% of the liability, which could have been a bill of up to £9 billion, whereas the new ESM means that Britain will not be taking on any future liabilities. So, first and foremost, this is a step forward.

Secondly, we must bear in mind that the Bill is not about the establishment of the ESM itself; it is simply about the amendment to article 136. This is just about clarifying the legal basis on which the ESM is set up, and discussion is taking place about whether that even needs to happen, as my hon. Friend the Member for Stone pointed out. This has already been happening under article 122, and it is apparent that it is mainly a concern of the German constitutional court that has prompted this change. The one thing I would say is that if other European countries or all 27 member states are going to acknowledge the concerns of one member state—Germany—by amending the article to reflect its needs, I look forward to the day when that will be reciprocated. I look forward to those moments when Britain is in a minority of one in having concerns about some things European and that, too, is respected by the other member states.

[Mr Jenkin]

I cannot quite believe what I am hearing, because a criticism that my hon. Friend and I have regularly made of the European Union is that what we are categorically assured will not happen then happens, and when we amend the treaty just to tidy up the wording, that makes it more explicit that it was always intended to happen in the first place. May I just read to him what the no-bail-out article actually says? It says:

“A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State”.

That is what the treaty says now and he is supporting, by a sort of sleight of hand, that being negated and set aside simply because it has already happened illegally. Is that not the grandmother’s footsteps of European integration that he and I have always railed against?

[George Eustice]

I would simply say to my hon. Friend that Britain is not bound by the ESM; it is very clear that only eurozone member states will be affected. Is it proportionate for us to stand in the way of those countries that are wrestling with and trying to decide what is going to happen with the euro? Is it proportionate for us to block that particular tweak to that treaty? I just do not feel that it is. I agree with him in that I want renegotiation and I want it, at some future point, to be put to a referendum. However, we need to pick our battles and pick our moments, and I think it is wrong to nit-pick over what I would regard as a small change.

[Mr Cash]

My hon. Friend was kind enough to say that he agreed with my general analysis of the problems that have led, through the treaties, to the difficulties that the European Union as a whole now represents. That explains why giving more money to this particular fund and doing it in this manner is likely to exacerbate the deep black hole that has already been created. It affects us because we trade so much with the European Union.

[George Eustice]

My hon. Friend makes a point that I was going to deal with. I simply return to what my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) said, as I do not think that by blocking this Bill we are going to stop the ESM. Other countries will continue, because they have decided that they need to do so to try to save the euro.

We also need to give the Government and the Prime Minister credit when they achieve things and make progress. My hon. Friend the Member for Stone and I would like to see faster progress made and a renegotiation sooner rather than later, but we should give the Government credit where they safeguard British interests and improve on the situation we inherited. We should not blame our own Government for the mistakes the previous Labour Government made. They engaged in sloppy negotiation, and, as a result, we ended up with the former arrangements in the EFSM. The situation has now been improved with the ESM and we should support that.

[Mr Jenkin]

Where is the consistency in the Prime Minister’s vetoing fiscal union at 27 in December last year and now implicitly consenting to it by scrapping the no bail-out article? Should we not be extracting a real concession? Should we not be getting the concessions we really want? Should we not be using this opportunity as a fulcrum for renegotiation? Is this not the moment—when these countries want fiscal union to support monetary union—to say, “This is what we want to pull back in return”? Instead, we are just giving this away, and for what?

[George Eustice]

I think that there is a big difference between the fiscal compact that we vetoed last December and this particular one. Again, this comes back to the point about what is proportionate. By vetoing that fiscal compact, Britain was sending a clear signal that we were not going to be part of a wider decision at an EU level for those types of fiscal integration, because we were not affected. That approach was absolutely right on a number of levels. First, it showed that Britain was serious and that, on these issues, when we said we were going to do something, we meant it and we were ready to use a veto. That will help us when it comes to budget negotiations.

Secondly, by vetoing that particular treaty at an EU level, the Government managed to limit its scope, because it was, thus, necessarily just about the eurozone members and it cannot affect the UK. Had we signed up to that particular treaty, we would have faced all sorts of threats and demands, and people trying to put other agendas on the table. We would have had months and months of wrestling over things we did not want, before we would probably finally have had to veto it in any case, so I think that we did the right thing. However, I am just not convinced that such an approach is right in this instance, for the reasons I have set out. As I say, I think it would be disproportionate, as the ESM is not going to affect the UK; there is nothing that will expose us to future liabilities. Would it be right for us to stand in the way of countries that think that it is the right thing to do? There is a question of whether it is the right thing, but would it be right for us to stand in their way?

[Mark Reckless]

My hon. Friend refers to our having vetoed the fiscal compact, but is it not going ahead? Are we not acquiescing in the use of the European institutions to enforce it, just as proposed? How does that increase our credibility in budget negotiations?

[George Eustice]

I would hope that my hon. Friend agrees that it was right to use the veto. We need a bit of a culture change in the Foreign Office, as has been alluded to. Historically, there has been too much of a sense that we need to have a seat at the table at all costs. That has been a mistake, it has been the wrong approach and using the veto in that instance was right. I return to what I said about a veto not being proportionate in this case. As I said, my conclusion is probably and, given the subject, extraordinarily, closer to that of the hon. Member for Cheltenham (Martin Horwood)—this is a step forward from the position that we inherited from Labour and we should recognise that.

It is encouraging that the European Union Act 2011 has had an effect for the first time, as the proposal we are dealing with requires an Act of Parliament. My hon. Friend the Member for Stone made some comments about that legislation, but again we need to give credit where credit is due. It is a major step forward, as it puts the UK on a similar footing to countries such as Ireland and Denmark, in that it will trigger a referendum automatically where there are any transfers of power. None of the Maastricht, Nice and Amsterdam treaties would have been able to go through without triggering a referendum. Perhaps Conservative Members are sometimes guilty of underestimating the significance of that, because it is a major step forward and likely to force what my hon. Friend and I want, which is, at some point, a proper renegotiation of Britain’s relationship with Europe and a new settlement. I say that for the simple reason that other countries are pulling in a direction that we will not follow and the British public’s chance for the first time to say, “We will not follow” will force a new settlement and the sorts of negotiations that we want but that have eluded us for far too long.

[Mr Cash]

I might have agreed with my hon. Friend that the general sense of direction would lead to the conclusions he has drawn, but is he not conscious of the fact that Angela Merkel is now proposing a new union treaty—full political union and all the panoply that goes with that—which is likely to come forward in December?

[George Eustice]

It may come forward, but there will be better opportunities than this Bill to pick the moment to have that negotiation. This is not the Bill or the issue on which to say to other European countries, “Unless you give us a full-scale renegotiation, we are going to veto the proposal.” It is disproportionate to take that approach in this instance.

So much for the areas on which we disagree. I want to come on to some of the areas on which we are probably in agreement and to echo some of the points made. There is a big question about whether the ESM will be a solution to the crisis, or even part of one, and there is also doubt about whether there is any solution to the crisis gripping the eurozone. Although, as the Foreign Secretary said earlier, the polls in all the countries in the euro consistently show their wanting to stay in the currency, in reality they do not want to take the decisions or accept what the euro inevitably entails. That is where the real problem lies.

Let us consider Germany, for example. It is undoubtedly benefiting at the moment, almost freeloading on the other member states and enjoying a lower exchange rate than it would have if it had its own independent currency. The Germans have kidded themselves into believing that it is all down to German ingenuity and marvellous engineering, and granted they have made some improvements in their labour market and sorted out some of the structural problems in their economy in the past decade, but German industry is undoubtedly benefiting significantly from having a lower exchange rate than it would otherwise have. Meanwhile, countries such as Greece and Spain do not want to do what the euro entails in terms of fiscal discipline and so on. They have spent, borrowed a fortune and shown a complete lack of prudence over the past 10 years. Although such countries say that they want the euro, they do not want what the euro means, which is a real problem.

We should not stop member states trying to save the euro. If they want to save it and want to make that attempt, let us let them do it. I think the most likely scenario, however, is that the euro will be partially broken up and some member states will be allowed to leave it. Although I can understand that the Government would not want to entertain any such talk or to spook the markets by commenting on that idea—I do not expect the Minister will do so when he wraps up the debate—I hope that they are developing some serious contingency plans for handling a break-up of the euro, whether it is orderly or disorderly. Despite all the rhetoric when the euro was introduced about its ending volatility and being all about stability and stable growth, we might find that the conditions for stability and stable growth are best created by floating exchange rates, which can help countries adapt to shocks to their economies and changes in the world economy as well as to transition when things go wrong.

I was in the anti-euro no campaign and worked for it for four years, and I remember that a decade ago, when that debate was going on, many people who are now on the Opposition Benches—the right hon. Member for Rotherham (Mr MacShane), who is no longer in his seat, was one of them—accused us Eurosceptics of putting our heads in the sand and of saying, “Stop the world, I want to get off.” Who are the people who have their heads in the sand today? Who is in denial about the realities, particularly the financial realities, of the world in which we live? The fact is that the euro was an incredibly stupid idea. It was introduced only through a triumph of political belligerence on the part of people such as Chancellor Kohl and François Mitterrand over economic reasoning.

Economists at the time pointed out all of the problems that have come home to roost. They warned that there was a lack of convergence and that that was not just about the cyclical convergence of one’s economy and the levels of growth but, more fundamentally, about structural convergence, the make-up of one’s industries and the differences between economies. They were ignored. They warned that we would get asymmetric shocks to the world economy that would hit some countries worse than others, which would cause tensions in the euro, but they were ignored. They warned that to work properly the euro would require fiscal union and fiscal integration, that it would require very painful long-term adjustments in the absence of an exchange rate that could help people through those adjustments, that countries on the periphery would face prolonged periods of high unemployment and would be forced to cut wages, and that we would have to accept large migrations of people within the European Union from deprived areas to areas that were succeeding under the euro. Those warnings have all come true, but they were all dismissed at the time.

The final thing that everybody pointed out when the euro was debated was that we needed political union to make the euro a success, so that there was clarity in decision making. That has been proved right, too, because despite the warning from those on the pro-euro side that we would not have a seat at the table, all we have at the moment is 17 member states around a table squabbling and unable to reach a clear and coherent decision. That is one reason the euro continues to limp forward.

We need to learn the lessons. Why were all those economists ignored? Why was there so much mindless, blind faith in the idea that the euro was somehow historically inevitable? We still see that from some Members on the pro-euro side. The lesson we must learn is that nothing is inevitable. It is not inevitable that the euro will survive, but nor is it inevitable that it will collapse. The idea of ever closer union is certainly not inevitable any more and it is not inevitable that Britain will always be alone as the only country on the outside talking sense. I think it is quite likely that we will gain allies and that our ideas will start to gain traction.

There was a failure under the previous Labour Government and the truth about new Labour is that an unquestioning pro-Europeanism was almost an article of faith. Anti-Europeanism was blamed for the fact that they were not elected during the 1980s and that association was targeted at people such as my hon. Friend the Member for Luton North (Kelvin Hopkins), with whom I have campaigned on this issue many times. That perspective on Europe was very unquestioning and unprincipled. It was simply a political line to take, with no intellectual rigour, and it led to Tony Blair and the previous Labour Government simply going with the flow on whatever emerged on the European agenda.

This Government have made a very good start. The European Union Act 2011 was much more significant than many people on the Government Benches give it credit for, but we need to develop it and to build on what has been achieved to forge a new doctrine for the future of the European Union. That doctrine must end the dogma of ever closer union and encourage the idea of a multi-tier Europe—a pick-and-choose Europe where countries are able to adopt the policies they want and withdraw from those that they do not like and do not work for them. Too often in the past, we faced the problem of people saying that we would not have enough allies to make a point because there were not enough countries to support us. We need to leave such attitudes behind, because unless we begin the debate now we will never end up in the right place. We should be articulating a proactive vision of an alternative European Union, which does not require deeper integration in one direction.

[Mark Reckless]

My hon. Friend says that unless we begin the debate now, we will not end up in the right place. Has not the debate been going on for more than 20 years? Is not a decision needed to give the British people a vote on whether or not we stay part of it?

[George Eustice]

My hon. Friend knows that my position on a referendum is that there should be one, but that it should be after a renegotiation, not before. I do not agree that we should have an in-or-out referendum on the European Union at this point. I think that we should negotiate new terms with Europe and then put them to the country in a referendum, because that is what the majority of people in this country would support and want. In having a referendum, we must not deny the majority of people in this country the choices they would make.

I agree with my hon. Friend that many of us have been having such a debate, but that position was not adopted by the previous Labour Government, for the reasons I have just explained. Their policy was to go with the flow and they simply took a line that meant accepting all things European as a political doctrine rather than holding any kind of coherent, rigorous view about what the European Union should become. We must get over the weakness and insecurity of the obsession with having a seat around the table and instead start to articulate some clear ideas about what we want the European Union to look like in the future. We should be clear that it is our European Union, too, and that we do not care whether we are in a minority initially in making some of those arguments.

--- Later in debate ---

[Mr Lidington]

What it means is that we accept that, as Conservative politicians have argued since the euro was created, for a single currency zone to operate successfully over a number of different national economies there would need to be a measure of fiscal and economic integration, so that those economic differences can be managed successfully and in a stable fashion in that currency union. It is for the countries of the eurozone to work out exactly which economic and political measures will be right for their particular circumstances.

[George Eustice]

The Minister makes an important point about the remorseless logic. Does he not agree that one of the big problems with the way in which the European Union has developed is that it tends to introduce half-baked ideas, knowing full well that it will have to come back, several years down the line, with further measures that will mean further integration? Does he agree that we need to break that logic in some way and do what people really want, rather than creating a crisis that fuels more integration, which nobody wants?

[Mr Lidington]

Ultimately, it has to be for the electorate in each country to decide on the extent to which they want to take part in integration. My experience over the past two years of talking to Government leaders and other politicians in the other 26 countries, as well as following—as far as one can—the movement of opinion among the public in those countries, tells me that there is a greater level of support or toleration for Europe’s political and economic integration than there tends to be in the UK. I am generalising, of course, and there are significant differences among the 26 countries, but the historical experience of the United Kingdom in the 20th century differs from that of much of continental Europe, which helps to explain the difference in political attitudes towards European integration.

Various hon. Friends have raised a number of points during the debate, to which I wish to respond. My hon. Friends the Members for Stone and for Rochester and Strood both asked why the measure that we are debating today should be exempt from the requirement in the European Union Act 2011 for a referendum. The Act requires a referendum to be held when European Union treaties are changed in such a way as to create a transfer of competence or power from the United Kingdom to the European Union. The plain fact is that, as my hon. Friends the Members for Stroud (Neil Carmichael) and for North East Somerset pointed out, this measure does not transfer any such power or competence from this country to the institutions of the European Union. It does not even apply to the United Kingdom.

The amendment that we are debating is an amendment to article 136 of the treaty on the functioning of the European Union, which is the first article under chapter 4 of that treaty. That chapter is entitled “Provisions specific to Member States whose currency is the euro”. So, in that important legal treaty sense, this measure does not apply to the United Kingdom, although our ratification is needed to bring it into effect. Because it does not apply to us and does not transfer power or competence, there is no requirement for a referendum.