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

Lord Williamson of Horton Excerpts

Wednesday 23rd May 2012 Lords Chamber

[Lord Williamson of Horton]

My Lords, as is always my practice when I see “European Union” on the Order Paper, I declare my interest. I spent the greater part of my career in United Kingdom public service on European affairs, and a smaller part of my career in the European Commission, and I have pensions from my work.

Before coming briefly to the purpose of the Bill—namely, the approval of an EU decision to amend Article 136 of the Treaty on the Functioning of the European Union, which applies only to member states whose currency is the euro—I will stress that the decision of the member states of the euro area to replace the two temporary decisions taken to confront the sovereign debt crisis with a permanent European stability mechanism is a good one. Strangely, the text of the decision does not appear in the Bill. However, indefatigable readers of government documents—of whom I am one—will find it in paragraph 7 of the Explanatory Notes, which carries the exact text of the decision about which we are talking.

The mechanism is extremely important and has been widely discussed. However, it will not be sufficient to recreate a stable situation in the euro area, as we can see not only from the situation of Greece but from the sovereign bond markets and, most recently, from the new and correct pressure for a growth pact or specific measures directed to growth. The emphasis on growth is right. However, to avoid overdosing the euro with tales of woe it is perhaps worth recalling that in 2011, 12 member states in the euro area had a growth rate equal to or higher than that of the UK, and that the eurozone grew twice as fast as the UK.

Now the situation is serious. The noble Lord, Lord Giddens, used the same phrase in two debates. He said that we were on the edge of a precipice. It was an important reminder, but of course we do not have to fall over a precipice when we are on the edge. That is what we and the euro area must think more about. We must see whether the existence, in some form or within very strict rules, of a lender of last resort, which understandably is ruled out by Germany at present, will ultimately be possible. That might be bolstered by measures such as the project bonds, which are a good idea.

We discussed these matters a number of times. We discussed them in relation to the gracious Speech, and recently in relation to the European Union Committee report. We are now discussing them again, and the Government are replying through three Ministers: the noble Lords, Lord Sassoon and Lord Astor of Hever, and the noble Lord who is replying today. Therefore, we have made a small contribution to joined-up government.

I turn now to the Bill. In a recent debate the noble Lord, Lord Phillips of Sudbury, reminded us that we put on the statute book 12,000 to 15,000 pages of law per year, while removing only 2,000 to 3,000 pages. It is therefore a real pleasure to have before us today a commendably short Bill of two clauses totalling 164 words, which makes it a great deal easier to deal with. I find it quite easy to deal with the Bill.

The European Union Act, which was passed in the previous Session, established the important requirement that any transfer of powers or competencies to the European Union would require a referendum of the British people, but a small number of tightly defined exceptions were included in the Act. One was the approval of the accession of a new member state. That does not apply to this Bill but later, according to the gracious Speech, we expect to be asked to approve the accession of Croatia. What does apply to this Bill is that where a decision does not apply to the United Kingdom, its approval can be confirmed by the Minister and no referendum is required.

The proposed amendment of Article 136 of the Treaty on the Functioning of the European Union with regard to the stability mechanism for member states whose currency is the euro clearly meets this criterion as we are, happily, not in the euro. The Bill complies exactly with Section 4(4)(b) of the European Union Act which we passed in the previous Session. For all those reasons, I can agree to the Bill.

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[Lord Liddle]

The noble Lord, Lord Davies, is absolutely right. In addition to infrastructure, I think that we need a more moderate pace of deficit reduction. The Commission argues that the fiscal compact gives you all the flexibility that you need in a crisis situation. That should be done. Secondly, we should be mobilising the structural funds to tackle the employment issues, particularly the fact that in countries such as Greece and Spain, getting on for half of young people are out of work which is completely unsustainable socially and politically. It is also the case that a major competitive weakness of southern Europe is the low skills level of its workforce. That must be addressed from Europe through the structural funds—a crash programme of social investment in human capital.

Thirdly, the eurozone needs more balance between the strong and the weak in the urgent competitiveness adjustments that it must make. Stronger countries such as Germany have room for manoeuvre. Noble Lords talked about higher wages for German workers, which are certainly affordable. German wages have gone up very little despite the country’s enormous export success. I am glad that there is now a consensus between the Social Democrats and Christian Democrats on the introduction of a national minimum wage. Germany would have to tolerate only a bit more inflation to help the south, which is suffering debt-trapped deflation. That would enable the ECB to meet and maintain its target level of inflation of around 2% across the whole eurozone.

Our hope is that the political ramifications of the Hollande victory will result in a wider and bolder set of actions to build a stronger firewall, recapitalise the banks, adjust the pace of deficit reduction, offer immediate help on jobs and increase demand in countries with surpluses. That will not get us out of the need to make harsh adjustments. However, if we continue with collective austerity it will lead to collective suicide.

What is the coalition’s view? Is it still backing Mrs Merkel’s priority of fiscal austerity, which has been its policy at home for the past two years? Or is it undergoing a latter-day Keynesian conversion to the need for growth in Europe? If the eurozone can have a plan B, can we not have one at home? That is what we need. It is very odd for a Eurosceptic Conservative Party to argue that it is all right to have additional public borrowing through the EIB and project bonds at European level, but that of course it would be a complete disaster to tolerate any flexibility in the public borrowing of the UK. I find this an amusing contradiction in the present situation.

That confusion and contradiction, with a sharp eye for public relations, have been characteristic of the Government’s conduct of their European policy. As the noble Lord, Lord Williamson, said, they treat the eurozone as a convenient whipping boy to cover their own failures. As we know, last year growth in the eurozone was higher than in the UK. I am interpreting what the noble Lord, Lord Williamson, said.

[Lord Williamson of Horton]

It was a rather broad interpretation: the size of the Atlantic.

[Lord Liddle]

I apologise to the noble Lord, but the point is surely valid. Growth last year in the eurozone was twice that in the UK. Therefore, to blame the eurozone for the present double dip is nonsense.

The big point that the Eurosceptics fail to understand is that we cannot avoid the consequences of the euro by being out of it. In or out, our future is deeply affected because of our exports and the interlinking of our financial system. As Robert Chote said, if Greece exits, who knows what will happen? We may never in the foreseeable future recover the level of output that we had in 2008. A policy of splendid isolation from the continent was never realistic for Britain, but in the world of globalisation and economic integration it does not work at all.

Nor is our isolation very splendid. We are losing influence and clout in Europe to a dangerous degree. I will give one telling illustration. The Prime Minister claimed that the reason he used the veto and walked out of the December European meeting was that his partners would not accept a set of proposals that he tabled at 2 am in order to protect the City of London. A couple of weeks ago, on the capital requirements directive, the Chancellor, George Osborne, and the British for the first time found themselves outvoted by 26 to one at ECOFIN on a key question of financial regulation. The Chancellor has now recognised that he has to go along with the majority. That is not an effective use of the British veto. It just shows how influence is draining away from us at the moment.