European Council

Martin Horwood Excerpts

Thursday 26th January 2012 Commons Chamber

[Mr William Cash (Stone) (Con)]

I am grateful to the Backbench Business Committee and its Chairman for arranging this debate. I am sorry that the Government did not take note of the unanimous view of the European Scrutiny Committee that such a debate should be held in Government time. However, we now have this opportunity to air our views before the Prime Minister goes to the summit. He is to be congratulated on his use of the veto, which I am bound to say I was glad about because I had suggested its use in my pamphlet “It’s the EU, Stupid”, and in other discussions.

The proposal for fiscal union vitally affects our national interests and our democracy; it is not just about the single market and the City, essential though those matters are. As I said to the Foreign Secretary the other day, once we have crossed the Rubicon we cannot cross it again, and it is imperative that there should be no backsliding at the summit on 30 January. I totally repudiate the attitude of the Deputy Prime Minister that the non-EU treaty of the 26 should eventually be folded into the EU treaties. The Liberal Democrats are an obstruction to our vital national interests. A house divided against itself will fall, and the situation will be worse still if it is built on sand. There are now two Europes, both built on sand, and the situation is not only precarious but dangerous.

What is the root cause of the European crisis? It is not merely a eurozone crisis; it is a crisis of the European Union as a whole. Europe is being destroyed on the altar of ideology. The existing treaties, which cover 70% of our legislation here in the UK, have failed and are the root cause of the crisis in Europe.

[Martin Horwood (Cheltenham) (LD)]

In the light of the hon. Gentleman’s attack on the role of the Liberal Democrats in all this, would he accept that the Deputy Prime Minister’s hosting of the recent summit of European Liberal leaders—including two Prime Ministers, six Deputy Prime Ministers and five European Commissioners —to try to bring together a bilateral plan to support jobs, growth and prosperity across Europe was a positive step?

[Mr Cash]

We are all in favour of growth, but unfortunately the European treaties themselves work against that aim because of the degree of overregulation, and many other matters that I shall come to in a moment.

The lack of growth is contaminating the UK economy. Elsewhere in Europe it is creating civil disorder, with youth unemployment of up to 45% in Greece and Spain, and 30% in Italy. The present European Union is completely undemocratic, and the existing treaties should be sent to a convention so that all the member states could have the opportunity to face one another and decide what kind of Europe they want. In the past, when referendums have been held in France, Holland, Ireland and Denmark, the no vote has been overturned by bribing and threatening the electorate. That kind of behaviour, combined with economic and political crisis, creates a fertile breeding ground for the far right, as I predicted as far back as 1990.

There is no growth in Europe, except in Germany. We cannot grow from a stagnant Europe, and the coalition cannot achieve its main objective of reducing the deficit and achieving growth so long as this paralysis continues. The remedy of the Eurocrats—and, indeed, the leaders of European Government and the Liberal Democrat leadership in this country—is a fatal obstruction to our present and future economic success.

The approach adopted by the Prime Minister today at Davos reflects the view that I expressed in my pamphlet “It’s the EU, Stupid” and the growth paper that has been circulated to all Members of Parliament and the Lords and others, as well as in my remarks to the Minister of State, Cabinet Office, which is that we need to refocus our trade towards the rest of the world and not rely on the fact that we have 40% to 50% of our trade with the EU to provide the mainspring of our economic future.

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[Martin Horwood (Cheltenham) (LD)]

First, I congratulate the Backbench Business Committee on selecting this topic for debate, although on this occasion I agree with the hon. Member for Stone (Mr Cash) that it might have been better to debate this issue in Government time as it is critical for this country.

While I am on the theme of congratulations, let me congratulate Sharon Bowles, MEP, on her recent re-election as chair of the economic and monetary affairs committee of the European Parliament. She was once voted one of the top 10 economic regulators in the world and she has presided over innovations such as the attempt to introduce regulation on bankers’ bonuses that would prevent someone like Fred the Shred from ever again walking away with a huge bonus from a failing bank. For that alone she deserves congratulation and I am pleased to see her retaining her place as one of the most influential Liberal Democrats in Europe.

I repeat my earlier congratulations to the Deputy Prime Minister on convening the European Liberal leaders forum on issues relating specifically to this debate in London on 9 January. The forum agreed a programme of reform and competitiveness for Europe that would probably unite Conservative and Liberal Democrat Members of this House at least. That is a good example of how to build alliances across Europe and engage with Europe in a proactive way.

It is good to see Britain at the table for the summit. Clearly, there is the main summit, which is supposed to be focusing on prosperity and growth, but there is also the rather important sideshow of the 26 making further progress towards the fiscal compact, which is critical for Britain, and I am very pleased that the Government have made sure that Britain is an active participant in the process, albeit with observer status. I know that Ministers have been active behind the scenes getting Britain involved in the process and making sure, for instance, that the fiscal compact treaty does not spill over into areas outside its proper remit, such as the construction of the single market. As Liberal Democrats have pointed out, that is one of the risks of our relatively isolated situation in Europe.

[Mr Redwood]

Does the hon. Gentleman think that at this point the power to fine Greece and then fining her would cut the Greek deficit?

[Martin Horwood]

I shall not be drawn into that. Critically, it is for the eurozone countries to address the crisis in the eurozone. The right hon. Gentleman highlights the important point that just by drawing up a treaty the eurozone countries do not solve some of the rather fundamental problems in the eurozone. In fact, the situation in Greece is becoming increasingly serious and it needs to be urgently addressed—that is even more the case now than in recent months.

The importance of the main business of the summit must not be neglected. Britain’s re-engagement in European affairs is critical and it must be pushed forward. There have already been some successes. My right hon. Friend the Secretary of State for Business, Innovation and Skills helped to create the like-minded growth group, which has pushed forward ideas such as lifting onerous accounting rules from the smallest businesses in this country. I think the group has helped to create a shift in Commission attitudes on the smallest businesses to the point where it has committed to review all existing EU legislation to look for other opportunities to lift onerous regulation from such businesses and to screen new legislation to see whether, wherever possible, the smallest businesses can be excluded. That is exactly the kind of agenda we should be pushing in Europe.

[Mr Leigh]

I want to make an intervention that the hon. Gentleman and I can both agree with. Does he agree with the point I have been making consistently at business questions that this debate is so important that in future we should have it in Government time, for a whole afternoon, with the Foreign Secretary or the Prime Minister here so that we can ask them detailed questions?

[Martin Horwood]

I think that is right, although the point I am making is that the jobs and prosperity agenda should be the focus of such debates. If possible, we should get away from the obsession with structures and treaties. The British Government should be pushing the jobs and prosperity agenda at the summit. I have suggested some areas for deregulation and the European Liberal leaders forum drew up a long list of legislation that should be reviewed for possible reform. It included the working time regulations, the temporary agency workers directive, the control of vibration at work regulations, fixed-term employees regulations, part-time workers regulations, control of noise at work regulations, road transport working time regulations and the transnational information and consultation of employees regulations.

[Bob Stewart (Beckenham) (Con)]

Scrap them.

[Martin Horwood]

I am not at all in favour of scrapping health and safety regulations or those designed to protect workers. They are extremely important. The point is not even necessarily to weaken health and safety and workers regulations in Europe, but to see whether they can be made more flexible and be applied more flexibly domestically. That is another area where the British agenda should be pushed.

There are signs that European Governments are increasingly seeing things our way; it is not just the 15 members of the like-minded growth group. Italy has traditionally been more renowned for a protectionist stance in Europe and has at times had a less than impressive record on implementing single market legislation, but it is now actively implementing measures to liberalise great swathes of its economy and is actively pushing a single market agenda in Brussels that is directly comparable to ours. Spain, under the new Government led by Señor Rajoy, is also moving to undertake major structural reforms domestically and is shifting its position in Europe accordingly. Ministers must build on such possible alliances, which seem to be growing stronger all the time.

There are other things that I probably do not have time to cover in great detail. In terms of promoting jobs and prosperity, it is important to push for the completion of the single market, particularly in the digital and services sectors. External trade is equally important. This morning, I was in a Committee that voted on a new framework agreement that included free trade with South Korea. It could soon be extended to Ukraine and possibly a range of other countries. That is the kind of thing that will drive jobs and prosperity in Europe, not an overly obsessive attitude to EU treaties and institutions.

[Several hon. Members]

rose—

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[Mr John Redwood (Wokingham) (Con)]

I rise to support the Prime Minister. I think he had no alternative but to say no to a very unsatisfactory deal and to a totally inappropriate proposed measure at that Council. Nor do I think he has lost Britain influence by doing it; I think he has won Britain influence by doing it. We learned subsequently that several non-euro member states could not go along with the draft any more than the United Kingdom could. We also learned subsequently that France, Germany and others are now beating a path to the United Kingdom Foreign Office door, trying to get us back on board, trying to woo us because we had the courage to say no.

We meet today because we wish to influence our Government in what they are doing at yet another important European summit. The European Central Bank has bought the Europeans a little time by printing and lending unprecedented sums of money to a very weak European banking system, but those meeting would be wise to understand that that has only bought a little time; it has not solved the underlying problem. Indeed, there are two underlying problems. There is the inability of the southern countries to compete with Germany at the fixed exchange rate within the euro, making them poor and giving them large balance of payments deficits which they have trouble financing; and there is the big problem of the southern states’ debt getting ever bigger. As their economies are malfunctioning, because so many people are out of work and because they cannot price themselves back into jobs, their debts and deficits go on soaring, and now in three cases member states of the euro area cannot finance those deficits in the normal way and have to be on life support from the EU and the IMF.

[Martin Horwood]

On the subject of the right hon. Gentleman’s support for the Prime Minister, will he join me in welcoming the Prime Minister’s remarks this morning in Davos, when he said,

“Let me be clear. To those who think that not signing the treaty means Britain is somehow walking away from Europe let me tell you, nothing could be further from the truth”?

[Mr Redwood]

Of course the Prime Minister is right that we are in the European Union and all the time we remain in it we have to use our membership as best we can to protect the interests of the British people.

The main purpose of the summit must be to try to deliver greater prosperity and some growth and some hope to the peoples of Europe, because their hope has been depressed and their prosperity is being destroyed by a system that cannot conceivably work. The euro area is now locked into a system of mutually assured deflation, a mad policy, and the more those countries’ economies decline, the more the deficits go up, the more they have to cut. They cannot get themselves out by monetary means, in the way that the United Kingdom and the United States can, by creating more money in their system, and they cannot get out by having a competitive exchange rate.

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[Emma Reynolds (Wolverhampton North East) (Lab)]

The debate comes at a crucial time for the eurozone and the wider European Union. Last month’s European Council could and should have taken the vital decisions needed to stabilise the eurozone and boost growth and jobs in the EU, but it failed to do so. Monday’s European Council is a vital chance to make up for previous lost opportunities, but I fear that the Prime Minister’s diminished position in Europe has jeopardised the Government’s ability to achieve and influence that. His walk-out at the previous European Council was a spectacular failure to engage with our European partners. We have a world-class diplomatic service, but the Prime Minister refused to use the talent, professionalism and experience of the Foreign Office and opted instead to let the Treasury run our foreign policy. He decided that keeping his Back Benchers happy was more important than helping our main export market resolve the eurozone crisis. He in fact followed the advice of the Foreign Secretary who, according to various reports, before the last European Council told him:

“If it is a choice between keeping the euro together or keeping the Conservative party together, it is in the national interest to keep the Conservative party together.”

That is the only thing that the Prime Minister did achieve, because he did not stop anything happening. His diplomatic defeatism was accurately summed up by the Deputy Prime Minister earlier this month, when he said:

“The language gets confusing. Veto suggests something was stopped. It was not stopped.”

I could not agree more.

[Martin Horwood]

The hon. Lady makes some of the points that I made several months ago and that other hon. Members sympathetic to the pro-European cause made at the time of the summit. Surely we have now moved on. The Prime Minister, in his remarks today at Davos, quite clearly stated:

“It fundamentally reflects our national interest to be part of the single market on our doorstep and we have intention of walking away. So let me be clear: we want Europe to be a success.”

The process of re-engagement is under way.