Treaty on Stability, Co-ordination and Governance

Mark Reckless Excerpts

Wednesday 29th February 2012 Commons Chamber

[Emma Reynolds]

A disorderly default by any member of the eurozone could have disastrous implications for that country and knock-on effects for the rest of the EU. There would be a contagion effect that the hon. Gentleman would be naive to think would not take place.

We are right to stress that the response by the Government and centre-right Governments across the EU to the eurozone crisis has been economically inadequate, and any worsening of the crisis will have a devastating impact on our economies. Although we welcome the fact that in January the European Council spoke about the need for growth and jobs in order to ensure the recovery of the eurozone, we are concerned that this is merely an add-on to the current deal rather than an integral part of it. In the light of that, will the Europe Minister comment on the position of the French Socialist presidential candidate, who is visiting the UK today and urging EU member states to reopen the treaty to include more commitments to growth and jobs?

I will cite the words of one Member of the House who seems to share our deep scepticism about the consequence and cause of the Prime Minister’s diplomatic defeatism last December—the Deputy Prime Minister. Earlier this month, he explained:

“The language gets confusing. Veto suggests something was stopped.”

The phantom veto of December has now been exposed. He also said that over time the treaty would

“be folded into the existing EU treaties so you don’t get a permanent two parallel treaties working separately from each other…We all see this as a temporary arrangement rather than one which creates a permanent breach at the heart of the EU.”

According to him, the Prime Minister’s walkout in December was a temporary arrangement.

The crux of the issue was eloquently and pithily expressed by the hon. Member for Rochester and Strood (Mark Reckless) the day after the 30 January European Council, when he asked the Prime Minister:

“Will the Prime Minister explain what it is that he has vetoed?”—[Official Report, 31 January 2012; Vol. 539, c. 687.]

Nothing, it seems. The Government Back Benchers who gave the Prime Minister a hero’s welcome in December have now realised that he did not prevent anything from happening. We said at the time that his walkout was not an expression of the bulldog spirit but a form of diplomatic defeatism.

[Mark Reckless (Rochester and Strood) (Con)]

Is the hon. Lady aware of one thing that the Prime Minister seems to have achieved with this veto—as it has been described? In Ireland, the Irish Attorney-General has said that the fact that the compact is outside the EU treaties has influenced the advice that Ireland needs a referendum.

[Emma Reynolds]

That suggests that the Prime Minister’s influence is greater than it is. It is up to the Irish people to decide whether to accept the treaty, whether within the European treaties or outside.

Despite the penny dropping with everyone else, the Prime Minister resolutely clings to his phantom veto. At the press conference after the January European Council, he said:

“There isn’t an EU treaty because I vetoed it; it doesn’t exist.”

That flies in the face of the evidence. The European treaty involves 25 out of 27 of the member states. It involves the European Commission and the European Court of Justice. It sounds like a European treaty; it walks like a European treaty; it clearly is a European treaty. The Deputy Prime Minister is at pains to describe this situation as temporary, but in truth he was powerless to prevent the Prime Minister from putting the Conservative party interest above the national interest, as it was reported he was advised to do by the Foreign Secretary.

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[Mr MacShane]

If the hon. Gentleman will forgive me, I want to give time to other colleagues and do not want to take up my full time.

I should inform the House that I might not be here for the wind-ups, because I have to go and hear Monsieur François Hollande speak at King’s college London. I am excited about meeting Monsieur Hollande, this socialist who is proposing to increase the income tax on people earning €150,000 to 45%—in other words, lower than the business-crushing tax rate that the present Chancellor of the Exchequer imposes on higher earnings. Of course, Monsieur Hollande is not proposing to rip off the epaulettes or the légion d’honneur from bankers he does not like—as our Prime Minister did with Sir Fred Goodwin—nor is he proposing retrospectively to deny bankers their bonuses or to introduce retrospective tax legislation on what bankers earn. We have the most anti-banking Prime Minister in the history of Great Britain. As a low-tax socialist, I will be glad to be at the college listening to Monsieur Hollande, who seems to have a much more moderate and pragmatic policy.

I would be interested to hear from the hon. Member for Stone, who has left his place, why exactly the Royal Bank of Scotland—partly owned by us—and HSBC are running to the European taxpayer, in the form of the European Central Bank, to ask for cheap loans. Why on earth should the European taxpayer bail out appallingly badly run, inefficient British banks that do not lend their money, but continue to try to pad out their bonuses and salaries? I certainly do not object to their doing so; indeed, I hope that the European taxpayer will show some generosity.

[Mark Reckless]

The right hon. Gentleman is commenting about two banks, which he has given as an example, but as for HSBC at least—a large international bank with interests throughout the world, particularly in Asia—the UK is only a modest part of its operations. Frankly, his comments are unjustified in that respect. What is the objection to those banks accessing liquidity ECB support on the same terms as anyone else, and why should they not do so?

[Mr MacShane]

Because of the breathtaking hypocrisy of the Conservative party, in that when action is needed to allow HSBC and RBS—British firms—to continue functioning and operating in a Europe that needs to keep its head above water, and which therefore might need some help from the IMF, all we hear from the Conservatives is that we should not be part of it. However, what is sauce for the RBS and HSBC goose—going and asking for euro taxpayer handouts—has to be sauce for the UK gander. We are all in this together.

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[Mark Reckless (Rochester and Strood) (Con)]

This debate is not just about legality; it is about how we best protect our interests, which are best served by having a strong and vibrant growing European economy. Currently, we do not have that, and the reason we do not have it is the euro. The idea that the solution to that is more euro is no more credible than the Opposition’s suggestion that the solution to a crisis caused by borrowing is more borrowing. If we are to protect our interests, we need to know where those interests are, to be modest and to recognise that our influence on these matters is limited. I believe Greece would be far better off if it were to leave the euro, default, devalue and price its way back into the market. We could encourage our constituents once more to go on holiday in Greece and it would recover in a way that it cannot if it stays within the euro. However, that is a decision for the Greek people and is one over which we have precious little influence.

I shall concentrate on Ireland. Yesterday, the Taoiseach announced there would be a referendum in the Republic to reaffirm, or otherwise, the country’s commitment to the euro. Ireland faces a fork in the road and has three potential choices: to stick with the euro and the programmes being imposed on it; to reinvent its own currency; or to re-establish a relationship with the pound sterling. In December 2010, I commissioned an opinion poll across the Republic of Ireland by a company called RedC, which interviewed a representative sample of 1,000 Irish people, somewhat more than a third of whom agreed that in light of the financial crisis they would support Ireland’s leaving the euro and re-establishing a link with the pound sterling. Earlier, we heard from the Prime Minister that while the eurozone says, “We will only support the Irish people if they vote as we tell them to,” the UK will support the Irish people whatever choice they make in this referendum on their future.

We in this country have very clear interests in Ireland. Last year, we were exporting more to Ireland than to all the BRIC countries—Brazil, Russia, India and China—but that has now changed and we now export 8% to the BRIC countries but only 4.5% to Ireland. That is because the Irish economy has contracted so much that there has been a significant negative impact on the UK, and particularly on Northern Ireland, in terms of our exports. Irish migration has turned from a net migration from this country into Ireland to a very strong migration the other way. That is something we have allowed for many years. I should declare an interest because my mother came to this country from Ireland as a 17-year-old nurse. If the euro prevents Ireland from creating jobs for its young people, we will create those jobs and they will come here and continue to be welcome, but would it not be better if Ireland had a monetary policy more suited to its needs?

The euro is destabilising the Irish economy, and it will do that again, just as it has already done, at great economic cost to Ireland and some economic cost to the UK. In addition, the bail-out we are told that Ireland is getting is a bail-out not of the Irish people but of the European banks. The current position is that the European Central Bank has extended—in my view extremely unwisely—very large sums of money to the Irish banking system, ostensibly as liquidity support, initially for the short term but increasingly for three years, at very low interest rates. The Irish bail-out replaces that credit with official credit that the Irish taxpayers, not just the Irish banks, will have to pay back. Instead of the European Central Bank supplying all the credit, which it is, realistically, unlikely to get back, that credit is being displaced by taxpayer financing from the EU, the eurozone, the International Monetary Fund and, indeed, this country. The Irish people will have to pay that back instead of the European Central Bank suffering the losses it deserves for causing this crisis in Ireland and for having very unwisely extended credit.

Ireland faces a choice: whether to stick with that system, grind further into poverty and give control, in this Carolingian settlement, to France and Germany to lord it over them, or to reinstate its own currency. Were it to do that, it would need capital controls, otherwise there would be capital flight, and it would not have access to overseas capital. It would need to pay the difference between its spending and tax by printing its own money, there would be significant devaluation and probably quite a lot of inflation, and in the short term there would be very severe uncertainty. None the less, that would be better for Ireland than sticking with the current European programme.

Instead, the other option, which, when I question the Chancellor and the Prime Minister, at least appears to be on the table, is re-establishing the old link that Ireland had with sterling within a single currency area. I am talking about a common currency area that makes some sense for similar economies with similar housing markets, in which the interest rate does not lead to the boom-and-bust cycle that the euro that has been applied to the Irish economy so inevitably does. Instead of relying on official European credit with all the terms, conditions and subjugation that involves, and instead of cutting the country off entirely from overseas credit for a period with all the risks that entails, the Irish economy could look to the UK private sector, much as, to a degree, it is now doing, certainly in terms of the property market, to give the support and credit that the Irish banking system cannot provide itself.

When we look at our interests—we have the Royal Bank of Scotland and the Ulster bank—we see that UK banks have already written off or taken impairments for £40 billion-worth of loans to the Irish economy, but the Bank of Ireland, despite negative equity of perhaps £15 billion in respect of its Irish property loans, has taken only a £1 billion impairment. Very few Irish people have had their homes repossessed, and there has just been a carrying on, with massive negative equity and with the interest just about being paid. That cannot be sustained in the long term, and this country should stand ready to support a recovery in Ireland by sharing our currency if necessary, in our own interests, in Irish interests and in Europe’s interests.

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[Neil Carmichael (Stroud) (Con)]

Thank you, Mr Deputy Speaker, for allowing me to contribute to this important debate. I have listened carefully to a large number of speeches, many of which have raised interesting points, including that of my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg). I recognise that there are issues relating to the legality of the proposed treaty, but it is important to stress that this is not an EU treaty. That is the key point and the one on which our case must rest; otherwise, we will get terribly confused. The second key point about the treaty is that it includes not only all members of the eurozone, but aspirant members. However, it does not include us as we are neither members nor aspirant members of the eurozone.

[Mark Reckless]

My hon. Friend suggests that there might be confusion and asserts clearly that the treaty is not an EU treaty, but surely if it was an international treaty it would be in international public law and subject to the jurisdiction, such as the states agree, of the International Court of Justice at The Hague. However, it is actually being implemented through the European Commission and will be subject to the European Court of Justice, both of which are creatures of European Union law.

[Neil Carmichael]

I thank my hon. Friend for his intervention. That does not alter the fact that it is not an EU treaty, and that is the point. The Commission might well take a view on these matters, and that brings me to another key point. It is in our nation’s interests to ensure that the treaty works in protecting the euro in the long run. We do not want the euro to fail, because that would badly affect our economy. It is important that we continue a dialogue with the process but are not actually involved in it. It seems to me that what we have secured through the veto and our continued resistance to being a part of the treaty is essentially an overview on proceedings to ensure that the EU positions are safeguarded, because in so doing we will protect our interests and those of the overall single market.

It is important to note the comments of the US Secretary of State, Hilary Clinton, who noted that the United States was concerned not about our failure to be part of the treaty, but about whether the treaty itself would succeed in its principal mission of enhancing the position of the euro. That is a clear expression of the American Government’s position, and it is consistent with our position because we, too, recognise that that is a fundamental priority. I am not often asked by constituents whether the treaty is an EU treaty or some other kind of treaty; what they are worried about are the economic circumstances in which they live, and that is what we have to start talking about.

Although I welcome the debate, I am disappointed that it was secured only as a result of Standing Order No. 24, and that for that reason we had less than 24 hours to consider it, but it is also necessarily important to talk about what will happen at the European Council, which is almost immediate. At that Council we need to drill down on the key issue of what we need to do to ensure that growth comes to Europe and to Britain.

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[Mrs Main]

No; the hon. Gentleman has made many speeches and many interventions, and I am sure that as the lone representative of the Liberal Democrats today he has had more than his fair share of the debate. I shall not take interventions from him.

I am extremely concerned that we will find ourselves dancing on the head of the same pin as we did in the previous Parliament. The hon. Gentleman was a Member then, so he will remember the Liberal Democrats saying, “We need to have a full EU in/out vote on this, and we will give you a genuine vote,” whereas the Conservatives, in opposition at the time, said that we needed to have a vote because there was a treaty. We were assured, “Oh, no, no, it is not a treaty. It is just something we don’t need to have a referendum on.” Such dancing on the head of a pin is what most of us on the more Eurosceptic side of our party find worrying about this particular treaty-that-is-not-a-treaty, into which we supposedly do not need to have any form of input.

[Mark Reckless]

Does my hon. Friend accept that the difference between our commitment to a referendum on the Lisbon treaty and the Liberal Democrat commitment to an in/out referendum is that theirs is still possible?

[Mrs Main]

I thank my hon. Friend for that intervention. As we know, Liberal Democrats tend to change their minds, so they can always change their minds and retain that possibility. He is absolutely right—