European Council

Martin Horwood Excerpts

Thursday 8th December 2011 Westminster Hall

[Mr Edward Leigh (Gainsborough) (Con)]

It is a pleasure to serve under your chairmanship, Mr Turner. We are all grateful to my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) for the way he has introduced the debate. I do not intend to weary the Chamber with his level of forensic detail. He has made the case, and I subscribe entirely to what he said.

I want to talk about the broad picture, in historical terms, because I think we lose track of history. We are on the cusp of a truly momentous moment in our country, which could reorder our entire relationship with history. I regret that economics is now considered to be the only science that politicians of note should understand, because history is just as important. The fact is that for 300 years this country had one historical imperative, and that historical imperative is born of the fact that we are a maritime and a trading nation. We have strained every sinew and have fought momentous wars to ensure that there is no conglomeration of power on the continent that could either exclude us from continental markets or have an effect on our trade, particularly our maritime trade.

It is a shame that, in our schools—I know quite a lot about education, because I follow what my children are learning—little knowledge is bred into our children about our own history. There is far too much emphasis on 20th century history and Hitler and Stalin, but our history is far longer than that. Virtually everything that we have undertaken for these 400 years has been to ensure that we retain our independence as a trading and maritime nation. In the 16th century, we were prepared to go to war against Spain because they were affecting our trade. We also did so in the 17th century with the Dutch; in the 18th and early 19th centuries with the French; and in the 20th century with the Germans. All along, I believe that, although we have stood on great principles—that is certainly true of 1914 and 1939—our prime motivation has been to retain our independence.

What we are seeing now is a truly frightening conglomeration of power on the continent. If the German Chancellor and the French President succeed in creating fiscal and monetary union tomorrow, we will voluntarily exclude ourselves. Do not think for a moment that this conglomeration of power would not have a decisive and dramatic effect on us. The United Kingdom accounts for 36% of the European Union’s wholesale finance industry and a 61% share of the EU’s net exports of international transactions in financial services. However, under new voting rules that will come into force in 2014, it will possess only 12% of the votes in the Council of Ministers, and 10% of the votes in the European Parliament. In contrast, France accounts for 20% of the EU’s market in agriculture, but enjoys a veto over the EU’s long-term budget and therefore retains substantial control over the sizeable EU subsidies received by its farmers. An express train is coming in the direction of the City of London.

[Martin Horwood (Cheltenham) (LD)]

On that basis, would the hon. Gentleman support a massive increase in Greece’s voting power over maritime matters, since it is a massive contributor to the European maritime economy?

[Mr Leigh]

To be frank, I do not think that that is a serious point. Everybody knows that the hon. Gentleman is trying to tilt at windmills. Things are getting worse, because the United Kingdom’s level of influence on new financial rules has decreased. Regulation is now geared less towards financial services growth, and more towards curtailing the financial market economy. The perception in many continental capitals—there may be a reason for this—is that the so-called Anglo Saxon light-touch capitalism needs to be reined in. In the past, EU politicians and policy makers generally, but not always, felt constrained from imposing financial regulation on the UK, but that has now ceased to be the case. I agree that United Kingdom regulation has moved from the light-touch concept, but its new focus on regulatory judgment looks set to clash with the prevailing rules-based culture at the EU. In addition, the eurozone crisis is increasingly likely to create exceptional needs and political incentives for the euro countries to act in the interests of their own eurozone of 10.

I believe that all those reasons—the new emphasis on qualified majority voting, our inability to use our veto in this marketplace, and the increasing tendency of the European Union to want to interfere in the financial marketplace—are as big a threat to the main motivator of our economy as anything that we have seen in history. What do we do about it? I think that this is a decisive moment for the Prime Minister. He has to say in the conference that he is not prepared to sign any treaty unless he receives cast-iron guarantees that our financial sector will be set free from interference. If he does not get such cast-iron guarantees, I believe that he must be prepared to veto any treaty. If he is then told that the 10 will go ahead and create their own treaty, he must declare that illegal. Although that may sound like a very dramatic thing to do, I have read in today’s papers that German commentators are already talking about even the threat of our Prime Minister standing up for British national interests as being “obnoxious,” but that is precisely what all European countries do. The first lesson of history, as I have said, is the overwhelming imperative on behalf of successive British Governments over the centuries to protect our commercial interests. The second lesson of history is that all Governments in Europe act in their own financial interest—all are determined by their own history.

We need not say much about recent German history, but we know that there is an imperative throughout German history to extend their marketplaces, particularly into the east in the Balkans. We know that there is an imperative on behalf of French Governments to hug Germany close, so the French President and German Chancellor will be acting entirely in their own national interest, which is what we demand of our Prime Minister.

I hope I will be forgiven for saying this, but we have had enough of spin and of reading about British Prime Ministers who, over the past 20 or 30 years, have said in the days preceding a summit that they will stand up for British national interests and ensure that they are protected, only to come back with a Chamberlain-esque piece of paper, saying, “I have negotiated very hard, got an opt-out from this and that, and succeeded in standing up for British interests,” when such guarantees are not worth the piece of paper they are written on. I suspect that agreements have already been made among the sherpas and the miners, and that our Prime Minister will be offered something, but that will not be enough unless it includes cast-iron guarantees that we can all accept and that protect our vital national interests, particularly those in relation to our financial sector.

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[Martin Horwood (Cheltenham) (LD)]

I start the Liberal Democrat contribution to the debate. This may alarm the hon. Member for Harwich and North Essex (Mr Jenkin), but I am going to agree with him about something. This debate should have taken place on the Floor of the House. As the hon. Member for South Northamptonshire (Andrea Leadsom) has just pointed out, we need to reform how we scrutinise European affairs in this Parliament. It is not adequate. In fact, I have already made a contribution to the discussions on scrutiny by suggesting to Ministers that we involve departmental and other Select Committees in scrutinising forthcoming European legislation, as she has just suggested. I strongly welcome that suggestion.

[Mr Cash]

As Chair of the Committee in question, I assure the hon. Gentleman that we frequently have arrangements whereby we refer particular directives and regulations to departmental Select Committees. Sometimes they do not actually look at them, despite the fact that we have asked them to do so. We also asked the Government, on behalf of the European Scrutiny Committee unanimously, for a full three-hour debate on the Floor of the House, of the kind that is taking place here, and it was refused. That is the state of play. That comes largely from the fact that we are in a coalition.

[Martin Horwood]

I do not think that it comes from the fact that we are in a coalition. I do not want to risk my Liberal Democrat credentials by agreeing with the hon. Member for Stone (Mr Cash) as well, but I think that this issue is worthy of a debate on the Floor of the House. I know that his Committee refers matters for scrutiny to departmental Select Committees, and it is not good enough if those Committees are not prepared to scrutinise those matters. They have the expertise and the Committee experts who can make a serious contribution to the scrutiny process. I restrain myself from suggesting that that might remove the necessity for the European Scrutiny Committee, but the point is that we need wider and deeper discussion of European matters in this Parliament, and I entirely agree with that.

One of the healthy things about being in a coalition is that we can bring different points of view on issues such as Europe, as well as others, to the table without actually having to conceal them and pretend to be coming from exactly the same place, which the previous Government had to do. None the less, it is slightly frustrating. I thought that we had settled quite a lot of the issues that are being debated at the moment. When we discussed at inordinate length the European Union Act 2011, which has already been passed, we spent countless hours debating when to hold a referendum and when to look at renegotiation of powers. We came to a conclusion and a settled view, as a coalition and as a Parliament, which was pretty clear. It represented something of a compromise between the Liberal Democrat and the natural Conservative positions, which seemed quite acceptable: a treaty change should be subject to an Act of Parliament, but if that treaty change involves a fundamental and significant shift in powers from the British to the European level of government, then that should be automatically subject to a referendum. Yet now, only a matter of months later, this whole issue seems to have been reopened. That is a problem, because it makes it more difficult—let us put it no more strongly than that—for Ministers to negotiate with confidence, knowing what position they are representing back in this country. We are not so much sending them naked into the debating chamber, as sending them so wrapped up in unrealistic expectations that they cannot move, which is a problem.

Ministers need to focus on the issues at hand in the Council, which are threefold. The eurozone is not the only issue, because there are two other important topics for discussion. On energy, if I can put it in the language of this debate, I speak from a nuclear-sceptic point of view. There is the welcome process of independent scrutiny, at European level, of the safety of European nuclear programmes. In the wake of the Fukushima disaster, which will potentially cost the Japanese economy hundreds of billions of pounds, it is incredibly important that the process is ongoing and rigorous. If I have a concern that I would like to be raised at the European Council, it is that the Commission report makes the case for tighter safety rules but does so in a limited way, even though it concedes that many of the regulations that were already in force before the Fukushima disaster in March are still not being applied throughout the European Union. Some states, including the UK, Poland, Slovakia and Belgium, have not updated national legislation in line with a European directive from 2009. At present, there are no common safety standards or criteria for nuclear power plants across the European Union. [Interruption.] The hon. Member for North Wiltshire (Mr Gray) says, from a sedentary position, “Good.” He may have a lot of confidence in British nuclear safety regimes. I hope he has exactly the same confidence in Polish safety regimes and in the safety regimes of other European nations. The bad news for him, I am afraid, is that radioactivity, as we found out after Chernobyl, is no respecter of national boundaries.

[Mr Gray]

Does the hon. Gentleman recall that Chernobyl is in fact in Russia?

[Martin Horwood]

It is not, actually; it is in Ukraine. It was in the Soviet Union at the time, but the point is that it is only quite recently that some farms in Wales have had all restrictions lifted as a result of the radioactivity that swept right across Europe. The point is that the wider we can spread safety regulations on this the better. The European Union is an important vehicle for doing that. I hope that that message about a tighter safety remit and tighter safety monitoring regime has been well taken.

[Mr Jenkin]

Will the hon. Gentleman give way?

[Martin Horwood]

Is this on the subject of nuclear energy? Oh, okay.

[Mr Jenkin]

We have one of the best nuclear inspectorate and safety regimes in the world, if not the best. Is the hon. Gentleman seriously saying that he would prefer nuclear inspections to be run by the people who could not even get their accounts audited for the past 15 years, and who gave us the common agricultural policy and the common fisheries policy? Does he not see that these multinational European bodies are grossly inefficient and hopelessly unaccountable, which is why the British people have had enough of them?

[Martin Horwood]

Well, no, in short. If the hon. Gentleman has such enormous confidence in Britain’s safety regime, then he should be trying to export those safety standards to the rest of Europe. I cannot see how he can possibly conceive of a better vehicle for doing that than the European Union. Is he seriously going to approach 27 different European nations and try to encourage them to adopt our safety standards, or is he going to use the vehicle of—

[Mr Jenkin]

rose—

[Martin Horwood]

No, we need to move on from safety regimes. Is the hon. Gentleman seriously suggesting that that will be a more effective approach than trying to reach a common position across the European Union?

[Steve Baker (Wycombe) (Con)]

I am a chartered aerospace engineer who has a friend who is a chartered aerospace engineer working in the nuclear industry, and we agree that nuclear industry standards are quite poor. When I was a kid, the Eurofighter Typhoon was flying quite successfully as the EAP, with just British Aerospace backing it. What slowed that project down was making it pan-European. I do not share his optimism about the idea of pan-European technical standards, which is not borne out.

[Martin Horwood]

I congratulate the hon. Gentleman on his qualifications.

Apart from the eurozone, the other key issue that will be discussed at the summit is, of course, the accession of Croatia. We very much look forward to the accession of Croatia, which is a brilliant example of the transformative process of applying for membership of the European Union. Croatia has managed to address so many issues relating to its judiciary, economy and the reform of its political processes. That is an example that should be followed by other candidate countries looking to accede to the Union. It is inspiring to remember that in the area of Europe most recently torn apart by war, those in the Balkans still see European Union membership as something that helps to guarantee future peace. That is one of the founding principles of the European Union and one that we should not lose sight of in the current melee over the eurozone and possible treaty reforms.

The third, and obviously the most important, issue that the Council has to address is the crisis in the eurozone. Here, I think, we are on common ground in realising that the threat of a disorderly collapse in the eurozone is of enormous importance to this country. If the eurozone goes down, it will do considerable damage to the entire world economy, let alone to the British economy. It should be our No. 1 national priority at the Council to advance the process of securing the future of the eurozone, however it happens to proceed. That the eurozone countries have not yet agreed the treaty process or the rules that ought to surround it is a matter of enormous frustration and anxiety. It reflects badly on the leaders of those countries that they have not yet come to such an agreement.

The second clear national priority has to be to defend Britain’s interests in the process, which is rightly the instinct of the Prime Minister at the Council. To come with a list of unrealistic demands that would hamper and threaten the whole process of resolving the crisis, however, would be spectacularly reckless and playing politics with Britain’s national interest. I apologise to the thinly attended Labour Benches, but I am afraid that as a country we are still deep in the process of cleaning up the mess left to us by the previous Government. Our economy remains in a fragile position, which is possibly more fragile than we had expected at this stage.

[Emma Reynolds]

When the Labour party left government, the economy was growing. The policies of this Government have choked off the recovery.

[Martin Horwood]

The economy is still growing, actually, but that is a debate for another day. The voters made up their mind about who was responsible for the economic mess that we found ourselves in.

We are still in a vulnerable position, and all colleagues need to be able to go back to their constituencies, to look pensioners, small business people and others in the face and to say that we are doing everything that we can to speed a resolution of the crisis and that we are not throwing spanners in the works.

[Mr Cash]

Does the hon. Gentleman not agree that it is extremely unwise to make assumptions about the existing arrangements? They include so much over-regulation, centralisation and deprivation of oxygen for small and medium-sized businesses not only in this country but in the European Union that, precisely because there is no growth there—for all those reasons and some others—it is impossible for us to grow, what with the 40% of trade that we have with those other countries. Solving the causes of the failure of the European Union is so necessary.

[Martin Horwood]

The hon. Gentleman makes a rather interesting point about regulation of the smallest businesses, because we have a rather good case study. The Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), has been active in going to other European Ministers, in particular those with a similar outlook on economic policy, and taking a collaborative, positive and co-operative approach to reach agreement that we should lift onerous accounting rules from the smallest businesses, not only in this country but throughout Europe. [Interruption.] It might be a small concession, but it was progress through a collaborative process that has lifted some of the burden of European regulation from businesses in the UK. There will be other examples of what Members may call repatriation, if they want. In fisheries policy, we are likely to see the movement of powers over fisheries from the European level to national and regional levels in future. So it is possible to achieve change without a confrontational attitude and, as in both those cases, without treaty change.

As I have said, to defend Britain’s interests during the whole process is important. One of the ways to do so is to prevent marginalisation, which is a real danger. To an extent, I share some of the anxieties expressed by Conservative Members—it could happen that we might be excluded from the core of decision making in Europe—and I would not be happy with the Labour party’s approach that we should be observers to the process. I want us to be participants. We must ensure that Britain plays a central role in whatever new structures emerge from the crisis, and we need to be able to discuss and debate with the members of the eurozone how their economies move forward. As EU members, we will always have more say in the process than we would do if we committed the ultimate act of economic suicide and left the European Union, as some hon. Members might want. The risk, however, is that some marginalisation is possible, although we increase the risk of that if we roll up at European Councils with a list of unrealistic demands and throw a spanner in the work of resolving possibly the biggest crisis to have faced continental Europe for decades. That does not do us much good.

[Mr Nuttall]

Will my hon. Friend give way?

[Martin Horwood]

I will give one example. The hon. Member for South Northamptonshire (Andrea Leadsom) mentioned clearing house regulations. Since that dealt with transactions governing euros, how would we have influenced that legislation had we been outside the European Union? We might have found that by leaving the European Union we had excluded ourselves from such decision making and enabled the EU to take precisely that kind of decision, to the immediate detriment of the British economy and the status of the City of London, which is a European asset as well as a British asset.

[Andrea Leadsom]

Specifically, that would not have happened. It is only because the UK is in the EU that the EU can require London clearing houses to go under this type of legislation. If we were not part of the EU, it would not affect us.

[Martin Horwood]

I hesitate to challenge an expert in her own field, but we might find that the kind of interests that we are able to defend in economic policy, and financial policy specifically, within the European Union would not be so easily defended if we were outside the EU. It is one thing for Norway or Lichtenstein to be allowed access to European markets and to gain the benefits of the European economic area, because they do not pose much of a threat to Germany, France or the other EU economies. It would be different if an economy the size of Britain’s was taking advantage of such a situation or trying to mould the rules to our own advantage. It is critically important to the City of London that we retain our membership of the EU.

[Mr Stewart Jackson]

The hon. Gentleman makes a number of assumptions about the likely ramifications of our leaving the European Union. Was that the basis on which he offered the voters of Cheltenham at the last general election a Liberal Democrat policy prospectus that included an in/out referendum? Yet, in the face of massive and irrevocable constitutional change today, he has resiled from that undertaking to his own electors.

[Martin Horwood]

I have resiled from no undertaking whatever. There is a great habit of selective quotation of the Liberal Democrat manifesto. The whole sentence said that we would offer an in/out referendum at a time of a fundamental shift in the relationship between Britain and Europe. That is why we supported a referendum at the time of the Lisbon treaty—I am not sure which way the hon. Gentleman voted on that, but I do not remember many Conservative Members coming into the Lobby beside us. Incidentally, we also supported a referendum at the time of Maastricht, and did not succeed then, either. If there is another fundamental shift in Britain’s relationship with Europe, I fully expect us to support a referendum at that point.

[Mr Jenkin]

Is the hon. Gentleman merely another of those politicians who only promises a referendum when he knows that he cannot deliver it?

[Martin Horwood]

That is a lovely rhetorical line, but that accusation has been levelled at the Liberal Democrats on many fronts, and yet we find ourselves in government and sticking to the letter and the spirit of our manifesto on a whole range of issues. [Interruption.] I opposed the increase in tuition fees and think that we ought to have stuck to that policy, too. We have, however, certainly delivered on the pupil premium and a whole range of things, such as taking many of the lowest paid out of taxation altogether or developing the green economy, and we will stick to our pledge on the European Union as well, which is to act responsibly and to propose referendums when it is appropriate, which will involve a wholesale examination of the relationship of nation states to the European Union. That is not happening at the moment, because we are looking at an economic crisis in which the eurozone countries face a fundamental question about control of fiscal discipline. Germany, quite reasonably, is saying that, in return for any shift towards, for instance, the European Central Bank acting as a lender of last resort, some process of fiscal discipline that is rather stronger than the one that has operated inside the eurozone until now must be enforced. The other member countries, however, retain the choice whether to submit to that fiscal discipline or to plan some different future for themselves.

[Mr Nuttall]

On a specific point about the proposals that the Franco-German axis has come up with, is it not the case that if the eurozone had stuck to the rules that already govern it, it would not be in the mess that it is in today? It is in a mess, because no one was enforcing the rules.

[Martin Horwood]

I surprise myself again by finding myself in agreement with that statement. I completely agree with it. That was one of the weaknesses of the euro’s establishment and the stability mechanism surrounding it. It is precisely the sort of weakness that the eurozone countries must now address, and I think they clearly understand that, too. I suspect that some member Governments—Greece may be one—deeply regret having entered such a relaxed arrangement without the sort of fiscal discipline that was needed to make it work. That is probably common ground among people of all parties in many different countries.

The important message for Ministers going to the European Council and for the Prime Minister is that British national interests are at stake in the process, but that we can serve them best by acting positively and collaboratively and by taking an approach based on co-operation, not confrontation. As I have said, it is not always necessary to confront people to achieve shifts in responsibility to national level—we have seen that with regard to small businesses, and we may see it with regard to fisheries—and we must develop that sort of grown-up approach to EU politics, not a constant obsessive, confrontational attitude.

When it comes to talking about the Prime Minister’s position being comparable with that of Neville Chamberlain, and therefore implying that in some way our European partners are comparable to the Nazis—[Interruption.] I am sorry, but if the Prime Minister is Neville Chamberlain, who is he getting the piece of paper from? Such language in this debate has been deeply offensive. It is unworthy of this Parliament; it is unworthy of the Conservative party; it is profoundly insulting to the Prime Minister; and it is exactly the sort of xenophobic rhetoric that risks discrediting this country and deeply damaging our national interests.

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[Martin Horwood]

The hon. Gentleman is making an interesting speech. If he was Nicolas Sarkozy—if he can imagine that—exposed as his economy is to Greek debt in particular, what would he do, if he is so critical of the proposed arrangements?

[Mr Cash]

First, there is a strong case for getting out of the euro, because that would enable countries to—[Interruption.] It is described as irrevocable, but I have news for the hon. Member for Cheltenham (Martin Horwood): treaties and laws have been passed for not generations but centuries, and there are more treaties and international relationships that have been reviewed and changed than he might have had hot breakfasts. When those things do not work, there is a good starting point for reviewing them. That is what we are doing now.

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[Mr Cash]

We must understand that countries need investment. Therefore, in a sense, I am not critical about it. However, I know that the consequences of that are the reasons behind the problems presented to the Prime Minister tonight. There are dilemmas in the matter. I am not just being generous-minded; I understand that there is a triangulation, which is a problem.

I regard the Prime Minister to be, as it were, standing alone at the moment in a quadrangle that is surrounded by four 40 foot-high walls. On one side, he has the Euro-elite—Angela Merkel and Nicolas Sarkozy—and the Eurocracy. Another wall is the fact that he has to reduce the deficit, which he cannot do without growth, and he cannot increase growth without a viable European Union. Another wall is the Conservative party, not only in Parliament but in the constituencies, and the country at large. The final wall—I pay my respects to the hon. Member for Cheltenham—is the coalition and its ideas on the matter, which preclude repatriation and renegotiation—[Interruption.] The hon. Gentleman may say that, but we had it quite clearly stated.

[Martin Horwood]

Will the hon. Gentleman give way?

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[Emma Reynolds]

I say to the hon. Gentleman that, when my party was in government, we were not isolated in the European Union. The previous two Prime Ministers had a good relationship with both the French President and the German Chancellor, and such a relationship is very important to our national interest.

[Martin Horwood]

Will the hon. Lady therefore congratulate the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey) on his co-operative approach to lifting onerous accounting rules for the smallest businesses? Her Government did not manage to achieve that co-operative approach.

[Emma Reynolds]

I agree that a co-operative approach is needed and that we need to constructively engage with our European partners. When you go to a European summit, you get what you want not by banging on the table, but by the power of your ideas and the strength of your alliances. [Interruption.] Government Members may laugh, but my right hon. Friends the Members for Kirkcaldy and Cowdenbeath (Mr Brown) and for Edinburgh South West (Mr Darling) showed at the London G20 summit in 2009 just what you can achieve by the power of your ideas and the strength of your alliances.