European Council

Lord Hunt of Kings Heath Excerpts

Monday 20th December 2010 Lords Chamber

[Lord Hunt of Kings Heath]

My Lords, I am most grateful to the noble Lord, Lord Strathclyde, for repeating the Statement made by his right honourable friend the Prime Minister in another place. There are three issues that I would like to ask him about. The first is the agreement on the European budget, the second is treaty change, and the third is the wider but most fundamental question of European growth.

I turn first to the European budget. I welcome the call for restraint in the years ahead. On the budget for this year, the Prime Minister applauded the outcome because, as he said, it avoided the ultimate sin of European negotiations: that of simply splitting the difference between positions. I would remind the noble Lord, Lord Strathclyde, that the Prime Minister originally wanted a freeze on the budget while the European Parliament wanted a 5.9 per cent increase, and the Prime Minister was still arguing for that days before the last European Council in October. Perhaps the noble Lord, Lord Strathclyde, can tell the House what the figure is that splits the difference between 0 per cent and 5.9 per cent. By my reckoning, it is somewhere around 2.9 per cent, which is the outcome we actually ended up with. So, after the Government’s rhetoric, where have we ended up? We have ended up by splitting the difference.

We welcome the Prime Minister’s support for the treaty change agreed at the Council. It is right that the eurozone replaces its ad hoc agreements with a more permanent mechanism. But why does the Prime Minister have to go through such hoops to justify accepting this fairly minor change? He is, after all, showing a sensible piece of what one might call Europragmatism. Of course, the problem for the Government is that before the election, the Prime Minister claimed not to be a Europragmatist but the great Eurosceptic, which is more rhetoric. He promised that if there was any chance for a reopening of the treaty and a referendum on Lisbon, he personally would make it happen. The Foreign Secretary has admitted that the treaty offers a pretext for a referendum, but that it would be absurd to use it to try to derail the whole of Lisbon. Indeed, the Prime Minister also used to say that he would take the first opportunity he needed to repatriate powers over employment and social legislation to Britain, but again, he has not. It would be helpful to the House, and probably more helpful for the noble Lord’s own Back-Benchers, to explain why these pre-election commitments have been abandoned.

I turn to the third and most important issue, that of the European economy. The agreement on a permanent crisis mechanism for the eurozone after 2013 does not address the challenges that Europe’s economy faces at the moment. Does the noble Lord, Lord Strathclyde, agree that eurozone members themselves should do more to promote stability in the eurozone before 2013, and does he also agree that we need European action to promote growth for there to be any chance of serious export growth for the UK? The Prime Minister’s plans, with VAT set to rise and spending cuts kicking in, rely on an extra £100 billion of exports over five years, and over 50 per cent of our exports are made to Europe. But the noble Lord, Lord Strathclyde, will be aware that European Commission forecasts show slowing growth within the EU next year. Does he accept that the Government need to do more to work with colleagues in Europe to improve the prospects for growth?

First, the Prime Minister should argue that all countries engaging in fiscal consolidation, including Germany and the UK, should do so at a pace that supports economic growth both domestically and across Europe as a whole. Secondly, he should ensure that those countries facing problems, including Ireland, are not locked into repeated rounds of austerity with higher taxes and lower spending, hitting the growth those countries need to pay down their debts and recover. Thirdly, he should make sure that Europe’s voice in the G20 argues for a growth-oriented strategy. Indeed, I would say to the noble Lord, Lord Strathclyde, that given the nature of this Statement, many people will wonder whether the Government see any connection between their own optimistic forecasts for exports and the summit that the Prime Minister attended at the weekend.

The Government’s approach regarding Europe reflects their wider domestic approach. They think that you can reduce an economic policy to a pure deficit reduction policy with no focus on growth and jobs. In 2011, the Government need to start engaging in a growth agenda for Europe and Britain that can help us here at home.