EU: European Financial Stabilisation Mechanism

Lord Sassoon Excerpts

Thursday 31st March 2011 Lords Chamber

[Lord McAvoy]

To ask Her Majesty’s Government what discussions took place between the then Chancellor of the Exchequer, Mr Alistair Darling, and his successor, Mr George Osborne, before the decision was taken to join the European Financial Stabilisation Mechanism on 9 May 2010.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the European financial stability mechanism was created following agreement by a qualified majority of member states at ECOFIN on 9 May 2010. All contact between the Treasury and the then opposition parties in that period followed the agreed Cabinet Office guidelines for the 2010 general election. Both my right honourable friend the Chancellor and the previous Chancellor set out their accounts of the discussions in their written evidence to the Political and Constitutional Reform Committee.

[Lord McAvoy]

My Lords, I thank the Minister for his Answer. Which of the two following positions is correct—David Cameron saying that George Osborne objected to joining the mechanism or Treasury Minister Justine Greening, who signed the document, saying that cross-party consensus had been gained?

[Lord Sassoon]

My Lords, they are both correct. It may be helpful if I explain the situation a bit further. The discussion on which there was consensus concerned the process that would apply at the ECOFIN meeting on 9 May. There was no consensus on the question of the underlying policy matter. As my right honourable friend the Chancellor said in his written evidence to the Political and Constitutional Reform Committee:

“The purpose of the phone call was not to reach agreement, but for Mr Darling to consult me on the course of action he proposed. Given he was still Chancellor of the Exchequer at that point, representing the UK in a dynamic negotiating environment, it was for him to reach decisions. He did this, aware of my views”.

That is the evidence of my right honourable friend the Chancellor.

[Lord Lawson of Blaby]

My Lords, can my noble friend confirm that, whatever precisely may have happened on that regrettable occasion in the recent past, so far as the future is concerned there is firm agreement between us and the European Union that, when the present mechanism is replaced by a new mechanism in a couple of years’ time, we shall not be part of or bound by that new mechanism?

[Lord Sassoon]

My Lords, I am grateful to my noble friend Lord Lawson of Blaby, who, as is customary, brings us back to what is really important. I can absolutely confirm what he says. At the European Council on 17 December 2010, this Government did what the previous Government failed to do, which was to get agreement that there would be an amendment to the treaty that would achieve a permanent mechanism to be established by the member states of the euro area to safeguard the financial stability of the euro area as a whole. Therefore, it is indeed correct that, as of 2013 at the latest, the United Kingdom, being outside the euro area, will not be part of this mechanism. That is the critical point, which I can confirm.

[Lord Davies of Oldham]

My Lords, I agree that this is an important point of public policy. However, it should be appreciated that there is a significant matter at stake, because my right honourable friend Alistair Darling appears to have been accused by the Prime Minister of acting out of faith as far as the present Government are concerned. The document signed by Justine Greening, the Economic Secretary and therefore answerable to the Chancellor, related to the legislation. It is headed “Explanatory Memorandum on European Union Legislation” and the last paragraph is as follows:

“It should be noted that whilst agreement on behalf of the UK was given by the previous administration, cross-party consensus had been gained”.

Is an apology not due to my right honourable friend, who acted entirely properly and consistently with this note?

[Lord Sassoon]

No, my Lords. No apology is due. I have already tried to make it clear, but let me make it absolutely clear again. Consensus was reached on the process by which the ECOFIN qualified majority voting meeting would take place. That, as has also been made completely clear, is quite a separate matter from my right honourable friend the Chancellor making clear his position on the underlying policy matter. The two matters are distinct. The decision on the policy matter was for the then Chancellor, Mr Alistair Darling. He was the Chancellor at the time and he took the decision.

[Lord Newby]

In view of the stress tests on the Irish banks that were recently announced, will the Minister confirm that any further support that the Irish banks might need via European mechanism facilities that are already in place will not require any additional funding from the European financial stability mechanism?

[Lord Sassoon]

I am grateful to my noble friend Lord Newby for again bringing us back to important current matters. The results of the Irish banks’ stress tests, as I understand it, will be released by the Central Bank of Ireland at 4.30 this afternoon, so it would be inappropriate to comment on them. Of course, the Irish authorities have consulted Her Majesty’s Treasury, the Bank of England and the FSA about the impact of bank restructuring, and the Government expect that the forthcoming announcement will remain in line with the broad principles of the support package provided to Ireland. I would just add that the Government have made clear their commitment to ensure that the Northern Ireland banking sector continues fully to meet the needs of businesses and consumers in Northern Ireland.

[Lord Pearson of Rannoch]

In view of what the noble Lord has said, whatever Mr Darling and Mr Osborne may have said to each other is entirely irrelevant because the Commission had the nerve to bring forward the mechanism under a clause in the treaty—in fact, the clause is to allow member nations to help one another in natural disasters—which is decided by majority voting in the Council. Therefore, the British Government had no hope of avoiding our 14 per cent share of £50 billion, which we can ill afford at the moment.

[Lord Sassoon]

My Lords, without rerunning previous discussions with the noble Lord, Lord Pearson of Rannoch, on the precise interpretation of the articles, the critical thing is that under the agreement reached at the European Council on 17 December, and very much led by my right honourable friend the Prime Minister, it is clear that Article 122(2) of the treaty will no longer be needed for purposes of support in this form. Without debating what has happened in the past, let me just say that my right honourable friend at the European Council has secured complete clarity for the future.