European Council Decision: EUC Report

Lord Stoddart of Swindon Excerpts

Monday 21st March 2011 Lords Chamber

[Lord Newby]

My Lords, I apologise to the noble Lord. I misheard him. I distinctly wrote down that he said that a donation was involved in this process.

My one question to the Minister springs from my concern about the way in which the eurozone is developing, which is simply that the UK’s role in relation to it is extremely strange. We are obviously not part of it, so we are not in many of the meetings. Yet from time to time we are allowed to have a say. What worries me is that with the passage of time that say gets less and less over a whole raft of economic decisions across the EU. In the current exercise, we were allowed to help in the design of the ESM, which presumably means that Treasury officials went to meetings to talk about how it was going to work. What worries me is that, once it is established, those Treasury officials will be told that they have been extremely helpful, that their advice has been most valuable and that they can now go back to London and let the rest of the eurozone implement the policy. As the noble Lord, Lord Lamont, has pointed out, there are a whole raft of secondary consequences for the competitiveness pact, which will undoubtedly have an impact on the UK and on which, as far as I understand it, we will have no say at all in the future.

Will the Minister explain whether, once the ESM is established, there will be any further role for the UK Government and their officials in the design of the conditions that might be required or suggested from time to time to apply in particular cases when member states are being bailed out? These changes could be extremely worrying, not necessarily because they or the conditions are bad in themselves but because, although we are affected by them, we will have had no say in the way in which they are put together.

[Lord Stoddart of Swindon]

I suppose I could just say that I agree with everything that the noble Lord, Lord Pearson, has said and sit down, but I will not do that.

I thank the noble Lord, Lord Howell, for explaining very complicated legislation to us. I think I understand it a bit better now that he has explained it. Nevertheless, I believe that it is a serious matter that we are discussing. I think I am right in saying that, during debates on the Lisbon treaty, the then Official Opposition considered Article 48(6)to be an unnecessary and perhaps dangerous measure that could be used to extend European Union power without proper parliamentary scrutiny. I feel that that was their position at the time. Now, even though they have been in power for only 10 months, they are using this provision to extend the power of the eurozone. I do not know what has happened. Perhaps the Liberal part of the coalition is having more influence than it should.

There has not been an IGC, which has been pointed out already. The Motion received only one and a half hour’s debate in the House of Commons and a dinner hour debate in this House. We are not really having the sort of discussion that we should have before the Prime Minister goes to Europe to make a decision. It may be that we will have further discussions in due course but this Motion is to give the Prime Minister the power to act under Article 48(6). It is the first time that that has been done and it is therefore a serious matter. Although we are not at present members of the eurozone and ESM will not affect us, it will nevertheless become part of the European Union’s powers across the board. If this country should join the eurozone, this provision would automatically apply to us. That surely is right. If it is not right, perhaps the noble Lord will say that it is not right and why it is not right.

Furthermore, this first use of the simplified revision procedures is likely to be the thin end of the wedge. This will not be the first time that it will be used. Once a provision is used, it sets a precedent and it will be much easier to use it on other occasions in the future. It is claimed that when the European Union Bill, which we will discuss tomorrow, becomes law, it will prevent Article 48(6) from being misused. But can we be certain of that? Will the noble Lord say that there will never be any conditions under which Article 48(6) cannot be used without parliamentary procedure or perhaps even a referendum? Since the measure has to be agreed by a unanimous vote, the United Kingdom at present has a veto.

During the election, the Conservatives said that they wanted to repatriate to this country a range of measures which they believed were inimical to the best interests of the United Kingdom. Why then are the Government not using this factor—the fact that they have a veto over this provision being discussed tonight—to renegotiate parts of the treaties which are inimical to British interests, especially those relating to industry and commerce? I am also puzzled as to why the eurozone nations cannot agree a system of control that does not involve a treaty change. Is it perhaps because Germany wishes to use this procedure to strengthen its position as leader of the European Union?

The Government state that maintaining the eurozone as a stable and fully functioning entity is in the United Kingdom’s interest and the European Union Committee endorses that view. I do not believe that that is necessarily so. I am not at all sure that the eurozone is necessary for this country to prosper. Indeed, I could probably, if there was time, produce an argument to show that the eurozone works against this country’s interests. It should be no part of this country’s policy to maintain the eurozone in being no matter what the circumstances are.

Let us not forget that the experience of the eurozone so far has not been a happy one. At least four of its members are in dire financial and economic trouble, needing massive tranches—that is what this debate is about—of bail-out money. Interest rates in the eurozone have been kept at an artificially high rate, thus resulting in lower growth in many of its member states and very high unemployment. That is something this country should deplore, wherever it occurs.

Being in the eurozone does not affect our trade in the way that the Minister outlined. The fact is that we are in Europe and we are part of the single market, and whether the eurozone exists or not, the single market will still be there, as it was there before we joined the eurozone. What I believe is that being within the European Union and within the single market in fact damages our ability to export to the much wider world than the European Union represents. Already we see the Chinese and the Indians making great inroads into markets in Africa and elsewhere which, untrammelled by the European Union, this country could be exploiting. I have some doubts about this measure, although I suppose it is going to go through. But I hope that the assurances which have been given by the Minister will be carried out.

[Lord Liddle]

This debate has been a curious experience for me because, having listened to the contributions of the noble Lords, Lord Pearson of Rannoch and Lord Stoddart of Swindon, I am perhaps a much stronger supporter of what the Government are doing than I think I ought to be. I believe that the Government are right to support this measure and I think that both noble Lords are completely wrong in thinking that somehow it would be in the British national interest to pull the house of the euro down, causing currency chaos and economic disruption on a huge scale in order to pursue their own hatred and fanaticism in their opposition to the European Union.

[Lord Stoddart of Swindon]

My suggestion was not that we should pull the eurozone down but that it is not necessary for us to take these measures to bolster the eurozone at all.

[Lord Liddle]

Of course I accept what the noble Lord says, but the implication was that the euro would come tumbling down, and I think that the economic consequences for us, with our trade and economic links to Europe, would be very serious. Further, the instability that would be created by a German mark soaring and a Greek drachma plunging would be too horrendous to contemplate.

What I want to do in my brief remarks is to declare that I support what is being proposed, but with two qualifications. First, what we have seen tonight is an excellent example of parliamentary accountability. This motion has been put to the House and, before it is approved by the European Council, we have an opportunity to say whether we agree with it or not. If I may anticipate the debate tomorrow on the EU Bill, this is in sharp contrast to what will be proposed under the new arrangements. What we are going to have there is a requirement for the Government somehow to argue that, under the proposed criteria, a referendum would not be justified for this measure. I am totally opposed to multiple referenda and will be arguing that tomorrow, but on the basis that the Government are arguing, it seems extraordinary to suggest that what we have before us with the European stability mechanism is somehow not a big extension of competence and is not significant. It is extremely significant.

Indeed, I would argue that what is happening in the eurozone at the moment is as significant a development for the strengthening of its governance as we have had since the establishment of the single currency and the single market in the 1980s. It is a far more significant development than the Treaty of Lisbon or the constitutional treaty that preceded it. It is for European integration very significant.

One cannot argue that this is of no relevance to Britain. For one thing, the ESM will be one pillar of a new regime of economic governance that includes macroeconomic surveillance and a competiveness pact. I do not argue that these measures are perfect; in fact, they are far less than ideal and this should be very much work in progress. However, integration of economic governance is certainly proceeding.

The Government make the crucial error of thinking of this question in terms of a transfer of power to Brussels from the United Kingdom. They argue that, because Britain is not in the eurozone, there is no transfer of power. However, what in fact is going on within the whole of the European Union at the moment is a very big shift in the balance of power, with the likely creation of a eurozone bloc that has a much bigger influence on the economic policies of the whole of the EU. It is about this important change in the balance of power that we should really be concerned, instead of going on about transfers of power.

Perhaps I may cite one example that is directly related to the subject of the ESM: the issue of financial regulation. If we have a sovereign debt crisis in a eurozone member country and it is necessary for there to be a restructuring of the debt, it will logically lead to problems in the banks which own the bonds that have lost much of their face value. That will in turn require new rules on the capital adequacy of banks and on banking mergers. If there are to be in future stages restructurings of Greek and Irish sovereign debt, there will also be grave consequences for financial regulation and the banking system. We are exposing ourselves to real loss of influence on these matters, because it will be a eurozone bloc that decides in terms of its own interests what those regulations should be. We will turn up at the Council of Finance Ministers with that decision in practice having been taken, with majority voting there in the Council of Finance Ministers, and with very little opportunity for us to influence it. When one thinks that the City of London is one of our key interests, one realises that this is quite a serious threat to us.

Of course, the new regime is not ideal and it is work in progress—I dare say that my noble friend Lord Eatwell will say something about this. My strong view is that if something is not ideal we should use our maximum influence to try to change it. Obviously, there is no immediate prospect of us joining the euro and becoming part of the ESM, but we should try to involve ourselves intimately in the discussions that are taking place. I am worried that the Government, as far as I can see, are not doing that. Mrs Merkel, as I understand it, made an offer to the British Government whereby they could be part of the competitiveness pact that she was trying to negotiate. Apparently the British Government have said that they do not wish to be part of that pact, whereas Poland, which is equally not a member of the euro area, is anxious not to be excluded from these decisions on economic governance questions which go wider than the eurozone.

There is a significant problem here for the United Kingdom and the Government ought to recognise this. They should also recognise that something of fundamental importance to our economic future and, indeed, to our sovereignty is happening here.