Genuine Economic and Monetary Union (EUC Report)

Debate between Lord Lamont of Lerwick and Lord Kerr of Kinlochard

Wednesday 2nd July 2014 Grand Committee

[Lord Kerr of Kinlochard (CB)]

My Lords, it was a pleasure to take part in the work that led to this report. It was very enjoyable, largely because of the exemplary patience displayed by our chairman, the noble Lord, Lord Harrison, which produced a unanimous report, and because of the diligence of our clerk, Mr Stoner, who is extremely good at marshalling our arguments with rigour and, sometimes, imagination.

I take two texts for my sermon—I have a Scottish Presbyterian background. My first text comes from the Book of Job—that is, the Treasury. The Government’s response to our report states that,

“the government is clear that we are not joining the Euro”.

Yes, I think we got that. It goes on:

“Therefore it is right that we have said from the outset that we will not take part in measures designed to support full economic and monetary union”.

Yes, we have got that. It goes on:

“The Government has been clear that it will not participate in the Banking Union”.

There is a false logic there. It is perfectly possible that the banking union—although the impetus for it arose from the crisis in the eurozone—could be a good thing, irrespective of whether one was a member of the eurozone. Indeed, I notice that, of all the non-eurozone member states who are negotiating the texts of banking union, only the British and the Swedes are negotiating not on the basis that they intend to join.

If I were to dare to part company with the noble Lord, Lord Lamont of Lerwick, I would say that there was a moment in his speech when I thought that he was slipping into the error of equating banking union with economic and monetary union. As he rightly pointed out, our report, although entitled Genuine Economic and Monetary Union, was largely about banking union, because that was the key subject on the agenda. I would argue that it is not necessarily the case that non-members of the eurozone should decide that they have no intention of becoming members of the banking union.

On that, I would say that the committee was in a state of intelligent schizophrenia. It is intelligent because it is an extremely intelligent committee; it is schizophrenic because we all agree—the Government are of the same view—that the creation of an effective banking union, reducing the risks of future crises and making them easier to manage when they arise, is a good thing. We all agree with that. We on the committee felt, however, that it was hard not to acknowledge that the UK’s non-participation in banking union could have a deleterious effect on the City of London’s position as the transaction capital of Europe and one of the great three global financial centres. We felt that it was possible, over time, that that position could be eroded by non-participation in the structures of banking union. That is the point brought out in the passage of the report cited by the noble Lord, Lord Liddle, where we state, at paragraph 227:

“The Government may be ill-advised to assert that Banking Union is the sole province of the single currency for all time. It would be wise not to close the door on the possibility of some level of participation in Banking Union in the future, in particular as a means of further promoting and shaping the Single Market in Financial Services and the UK’s position within it”.

That is my view. However, I recognise that I will not persuade Job in the Treasury of that today and, perhaps, not for some considerable time.

[Lord Lamont of Lerwick]

Does the noble Lord remember that the Book of Job says, I forget in which exact chapter:

“There is a path that no fowl knoweth, and which the eye of the vulture hath not seen”?

[Lord Kerr of Kinlochard]

I cannot say that I think of that every morning as I arrive, but I will bear the noble Lord’s words in mind.

I want to make five minor topical, practical points arising from the report. First, in strict logic, the position that the Government take up—that banking union is nothing to do with us but is a matter for eurozone countries—could mean that the Government do not object to the proposal, much discussed in Brussels at the moment, that the heavily overloaded Commission’s single market directorate-general should be split, with banking and financial legislation moving to the financial directorate-general, the primary concern of which is of course for the health of the euro, leaving the single market directorate-general handling the classic single market agenda. That would be disastrous, from a number of points of view, not least from the point of view of UK interests. The British Bankers’ Association states:

“It is of utmost importance to maintain the structure of the relevant Commission services dealing with financial services so that their work is permeated with the priority of preserving the single market focus. We suggest that the UK Government should proactively defend the unity of DG MARKT and oppose any plan to move financial services out of it. It would be a mistake to move the work e.g. to DG ECFIN which has quite different priorities”.

I strongly agree and I hope that the Minister will be able to reassure us that we shall—to the extent that our current influence allows—work to ensure that that does not happen.

In my view, it is highly desirable and important that the current head of the single market directorate-general, the most senior of that very small and dwindling band of British personnel in the Commission, should stay where he is. I strongly agree with what has been said already today about the need to reinforce that. Retaining the unicity of the director-general is much more important than who is the single market commissioner—the issue that dominates the headlines. What matters is that it is the director-general and that he covers all the work that is of interest to the City of London.

My second point is also quite topical. I hope that the Government will, to the extent that their current influence allows, seek to discourage a second suggestion much debated in Brussels now, which is that the next finance commissioner should also be the next president of the Eurogroup, replacing Mr Dijsselbloem, the Dutch Finance Minister, when his term ends next summer. Combining the two jobs would be a prescription for serious schizophrenia, with a real risk that eurozone concerns might override single market integrity. This is not a moot point in the US sense. In our report we use “moot point” in the British sense, which means it is a key issue. In America, a moot point is a point so boring and irrelevant that it is worth discussing only in a moot court—a fine example of the difference between the two languages, as is “tabled”. If we said that our report had been tabled, people in Congress would say, “Oh, bad luck”, because it means shelved in America.

The moot point is that we have seen two recent examples of just what I am worried about—eurozone concerns overriding single market integrity. In the Cyprus crisis, when the eurozone imposed capital controls, that was a fundamental strike—which may have been necessary in the crisis—against a fundamental principle of the single market. It affected non-eurozone citizens. A British citizen with money in Cyprus could not move his money because of capital controls introduced by the eurozone. The result was that the case was quite rightly taken by the British Government to the Court of Justice against the ECB for its attempt to argue that clearing systems trading euro-denominated paper must be within the eurozone. That, too, is a clear breach of the single market and I applaud the Government for contesting it. It would be dangerous to see the two jobs of presidency of the Eurogroup and finance commissioner in the Commission combined. That may be difficult to prevent, given diminished influence, but I urge the Government to have a go.

European Union (Referendum) Bill

Debate between Lord Lamont of Lerwick and Lord Kerr of Kinlochard

Friday 31st January 2014 Lords Chamber

[Lord Kerr of Kinlochard (CB)]

My Lords, I strongly support Amendment 50A from the noble Lord, Lord Turnbull. It is most unusual for the Foreign Office to be in agreement with the Cabinet Office and the Treasury, but in this case it is. The Diplomatic Service is a separate service and takes no instructions from the Civil Service, so these arguments are my own.

I do not support the menu of amendments offered by my fellow countryman, the noble Lord, Lord Foulkes of Cumnock—there is a big difference between them and the amendment offered by the noble Lord, Lord Turnbull, supported by the noble Lords, Lord Grenfell, Lord Shipley and Lord Anderson. The assessments called for by the noble Lord, Lord Foulkes, are descriptive. They are describing potential scenarios. The assessment called for by the noble Lord, Lord Turnbull, would be normative because it would be authoritative and be describing the situation we would be in if we went out through the door. If we left the tent, like Captain Oates, we might be out for some considerable time. We might find it cold out there. I think the country would wish to be told. I accept that the process of establishing an authoritative statement of what life would be like outside might take time—Article 50 of the treaty of Lisbon talks about seceding from the European Union being a two-year process—but this would be before that. This would be before the referendum. This would be the assessment that the country would need so it could weigh up the case for and against staying in or going out.

I believe it would be important not just to set out what the Government hoped, felt and wanted but what they believed was negotiable. There would have to be some process of discussion with other countries and principally with our partners in the European Union, which we would be considering leaving. That process would take time. This point is very relevant to the amendment on questions of timing which—encouraged by the noble Lord, Lord Cormack—I withdrew last week. We will be coming back to that on Report.

[Lord Lamont of Lerwick (Con)]

My Lords, I totally agree with the noble Lord that if there were to be a referendum the British public would be entitled to information about the consequences and the mechanism. However, that is completely different; the mechanism is a subsequent step to the referendum. All this Bill does is to establish that there will be a referendum. The point the noble Lord, Lord Turnbull, made when he drew the analogy with the Scottish debate yesterday seems to me not to be correct. We had a Bill about the referendum. The criticism about the lack of information came afterwards. The mechanism was quite separate. Although all the points the noble Lord is making might be correct, they are not for this stage. This stage is just about the referendum.

[Lord Kerr of Kinlochard]

Precisely the same argument could be applied to the second of the amendments we made last week. The House did not buy the argument last week and the noble Lord, Lord Cormack, was good enough to say today that, in his view, both the amendments laid last week were improvements to the Bill and did not impair it. If we are passing a Bill on this referendum it is very important that we do not pass a defective Bill that omits important elements. Nobody in this House has proposed an amendment to Clause 1(1), which says that there shall be a referendum. In my view, this House is trying to do its job and get right the conditions and rules for that referendum, which is a point that we will need to come back to and which has been raised by several noble Lords this morning. We will have to come back to how the referendum will be conducted and—the point I am concerned about, for reasons well explained in the first leader in this morning’s Financial Times—the timing of the referendum.

I believe that the crucial thing about the assessment called for by the noble Lord, Lord Turnbull—who is completely right—is that it would have to be authoritative. It would be wholly irresponsible to produce for the country a prospectus based on conjecture. If the country chose to leave the tent and found outside a landscape different from the one that it had expected and a climate much colder, the Government who did that would never be forgiven.

I hope all shades of opinion in the House will understand that the amendment from the noble Lord, Lord Turnbull, is precisely in the category that the noble Lord, Lord Cormack, was talking about—amendments that genuinely improve the Bill. In my view—on the Cross Bench one speaks only for oneself—this would be a genuine improvement and I urge the House to support it.

European Union Bill

Debate between Lord Lamont of Lerwick and Lord Kerr of Kinlochard

Monday 9th May 2011 Lords Chamber

[Lord Kerr of Kinlochard]

I thank the noble Lord, Lord Pearson. Unless I misheard again, the noble Lord did not end his remarks with a question, so I am not going to respond except to say that the Strasbourg court is, of course, elected by parliamentarians. I do not think that the Strasbourg court has anything to do with this discussion, which is about the European Court of Justice, but I am grateful for the words of apology from the noble Lord.

I turn to Amendment 30. Here in Clause 6 we are in a different part of the forest. We have abandoned treaty land and treaty amendment by any form, and now we are into decisions of various kinds and the mandatory referendum requirements for those decisions. By definition we have therefore left coalition agreement territory because we are not talking about treaties any more. We are now dealing with the 56 categories of decision on which a mandatory referendum could overturn an Act of Parliament. As the noble Lord, Lord Goodhart, pointed out at the start of the Committee, that would be unprecedented. These referenda are entirely unnecessary because a Government, if they wished, could always choose to say no in the Council. The law requiring referenda is particularly unnecessary because, as the noble Baroness, Lady Brinton, pointed out during the third day of debate, not having a reference in the Bill to a particular requirement for a referendum does not mean that a Government could not, on the day, choose to say that they wanted to have one. All this does is tie the Government’s hands, which of course some would want to do.

Why have we got into this curious mess in these extraordinarily detailed thickets—and we have not yet looked at Schedule 1 where mandatory requirements are to be imposed? I can think of only two rationales. The first was the one that the noble Lord, Lord Lamont of Lerwick, talked about in a different context during the third Committee day. It might be called the Odysseus rationale. We would have a British Minister, let us say the noble Lord, Lord Howell of Guildford, sailing past Brussels and insisting that he be tied to the mast so that he cannot be lured by the siren voices with their seductive song. He wants to be able to say, “Look, guys, I have nothing against what you are saying, but I can’t possibly agree with you. If I did, we would have to have a referendum back home”. It is the wax in the ears and tied to the mast provision—the Odysseus provision. I think that it is very pusillanimous. I would have found it very hard to brief Mrs Thatcher, as Prime Minister, on this point. Mrs Thatcher thought that if you disagreed with something, you disagreed with it. You said no. You did not say, “I am terribly sorry. There is nothing much we can do about this because we would have to have a referendum and we do not want one”.

It is insulting to our negotiating partners to turn up tied to the mast. They expect to do serious business, but the Brits cannot do so because of this Act on the statute book. The Brits therefore cannot take part in negotiations. It will feed the temptation and tendency for people to do things in smaller groups without consulting us because we are such a bore.

[Lord Lamont of Lerwick]

I am most grateful to the noble Lord for giving way. According to his argument, Ministers will be put in a position where they have to say, “I cannot agree because we will have to have a referendum”. Why is he assuming that a referendum cannot be won? Why is it not possible for a Minister to say, “I agree to the draft decision. We will put it to the people and we hope and intend to win”?

[Lord Kerr of Kinlochard]

That is a fair question in relation to, say, the euro, which is the subject of Amendment 30. If we were to decide that we wished to join the euro, it would be totally reasonable for the Minister—I would like to see the noble Lord, Lord Lamont, in this role—to say to his ECOFIN colleagues, “We would now like to join the euro, but this is a big one and I am afraid that we will have to have a referendum on the issue”.