Court of Auditors 2009 Report
William Cash Excerpts(13 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Justine Greening
Yes, I do. The Government thought it totally unacceptable that EU officials received a 3.7% pay rise when our Government had to propose a pay freeze for public sector workers. We are not the only member state taking difficult decisions such as that. The debate the hon. Gentleman is referring to is the one we have already actively engaged in, which is about not only the level of the EU budget, but what we spend that money on and ensuring it is spent on the right things that deliver the right priorities for people on the ground, whichever member state they are in.
We are about to engage in a debate, which is important for the longer term, on how we change that mix of investment to make it more significant. It is called the debate on the financial perspective, and the hon. Gentleman will be aware that that relates to the seven-year plan, whereas early last year we debated the budget for 2011. We have a chance to have that more fundamental debate about how we spend money within Europe. The Government are keen to lead that debate at EU level.
Mr William Cash (Stone) (Con)
My hon. Friend—a member of the coalition Government—knows that I am one of her greatest fans. Having said that, is she aware, as I know she will be, that the irregularities by Bulgaria and Romania in relation to pre-accession funds amount to 81% of all the cases, and that there is also this yawning hole concerning cohesion funds? Really, this is totally unacceptable. I have been involved in such debates for 26 years. Nothing has changed.
Justine Greening
My hon. Friend is right to raise that issue, for lots of different reasons. Two spring to mind. The first is the macro level of the argument, which is that new members joined the EU during the ’80s. Those member states got cohesion funds to help to develop their economies. There is a question as to the effectiveness of that spend. We are about to embark on investment in a new group of countries that are coming in. The assumption about and the argument made for the accession countries is opening up markets, but we need to see those economies develop for that business model of the EU to work.
My hon. Friend will be pleased to hear that yesterday I met the Bulgarian Minister who oversees the EU funds in Bulgaria. His entire job is administering those funds. He has been in place for about a year. For the reasons that my hon. Friend mentions, I was keen to talk to the Minister about Bulgaria’s perspective. He made the point, which I thought was right, that in the past people said to countries like Bulgaria, “You’re not spending the money that we are giving you.” His point was that those countries are keen to have it spent effectively, because that is in their interest.
Clearly, countries such as Bulgaria are at an early stage of putting in place the structures and processes. The Minister talked to me about the work that they are starting to do at national level and at regional level to enable better financial management of EU funds. That is a move in the right direction. The question for other member states is what we can do at pan-EU level to make that easier. We should get rid of unnecessary complexity and consider what we can do to help those member states to get along the road to stronger financial management faster. I believe they want to do so.
States such as Bulgaria understand that it is important for their relationship with other EU member states to be seen to be stronger financial controllers of the money that they are getting. They understand why that is important, not only in the medium or long term, but in the short term. The challenge for us is to ensure that we improve the framework within which they are working, and transparency is part of that.
I am aware that I have taken several interventions. In part, that is forcing me to jump to bits of my speech that I will come to shortly anyway. Perhaps I can make a little progress and talk to the House about what I think we need to do, some of the steps that we are taking, and what a better system of financial management at EU level would look like. I shall begin with a little more background to the European Court of Auditors report and go on to the discharge negotiation, of which this debate is an important part—in other words, how we get those accounts signed off.
On the report, it is fair to say that there are some improvements. We have had a positive statement of assurance on the reliability of the EU’s accounts, but as we can see and as we have already discussed tonight, everybody agrees that much more needs to be done. The pace of change is too slow, and we see no discernible trend in the right direction. We want to see financial management clearly supporting and controlling spend by the EU.
I shall set out the steps that the coalition has already taken to drive through improvements since we took office in May. It is worth reminding the House that the European Court of Auditors report relates to 2009, prior to the time that the coalition Government were in office. In October, when I was in Brussels having some of my meetings in relation to the EU budget, I took the opportunity to meet the Commissioner in charge of financial management in the EU, Commissioner Šemeta, to talk about our concerns and some of our ideas, and to push the case for transparency and sound financial management. I believe the Commissioner was receptive, and I think he understood that in his role, that needs to be a more fundamental priority than it has been for Commissioners in his position in the past. Since then, we have had a firm but constructive line throughout the negotiations among the member states. Let us not forget that they are responsible for management of 80% of EU funds spent.
The Government and other like-minded member states have pushed for concrete processes in several areas. First, at the pan-European level we must have further simplification of what are excessively complex rules that often hinder, rather than help, strong decision making that drives strong value for taxpayers’ money. We must push EU-level auditing toward a more risk-based and proportionate system. Simply checking through receipts in member states that are randomly selected really will not work in future. We need to move towards a system where the European Court of Auditors operates a risk-based approach, where the focus is on member states for which there seems to be evidence of poorer and weaker financial management, and where we understand exactly where the management is breaking down in those processes and control systems. We are keen to ensure that what we do at the level of the European Court of Auditors is done more effectively than it has been in the past, and I plan to meet the European Court of Auditors to discuss those issues.
We are also encouraging member states to take greater responsibility for the funds that they implement, which, as I have said, is the vast majority of the budget. In practice, that means that we are lobbying for member states’ annual summaries to be upgraded and published. The UK is currently one of only four member states that publish the sort of consolidated statement that we are debating today. We want more transparency, which we think will drive better financial management; it is not the only consideration, but a key one. The Government have pursued that agenda at the domestic level because we think that it is worth while, so we are pursuing it at the EU level. We need those annual summaries to be published and to contain more meaningful information so that people can use and interpret them.
Justine Greening
We are doing slightly more than talking a good talk. I share my hon. Friend’s concern that one key thing driving the budget up was the previous Government’s disastrous approach to negotiating the common agricultural policy, which saw us give away a huge chunk of our abatement and, over this Parliament, will cost the British taxpayer about £10 billion. That is totally unacceptable. He says that it is important we bear down on excesses, and I agree. That is one reason why we led the debate to stop the European Parliament’s proposal for a 6% rise in spending. We achieved that, and we are now trying to ensure that, when we go into the longer-term debate about the financial perspective over the next seven years, which starts in 2014, we begin to see real-terms reductions. Countries such as France and Germany are backing us up on that, and those are the first steps towards delivering what we want.
My hon. Friend is right that we need to go beyond words and start delivering, and that is absolutely what we want to do. For tonight, the key aspect is how we can ensure that, when we have “decisioned” the funds, the final building block, which is about financial management, is delivered professionally, robustly and with an integrity that companies would recognise. We have to move towards a better system than the one we have picked up.
We are also keen to see some quickly taken measures and short-term gains, such as a one-stop shop that provides better information to those member states implementing EU funds, and a published scorecard of recovery orders against member states. That sort of transparency will start to change the culture, but we have to question how we have reached the position of poor financial management in which we find ourselves. The answer is partly down to culture, which has to change and improve at the EU and member state levels.
Sound financial management is critical, and it brings us closer to our overarching aim, which is a budget that delivers value for money for British and EU citizens. As I am trying to get over, that is not a negative agenda, because securing better value for money is a positive thing to do. It is what we are doing; it is what taxpayers want to see us doing; and it is what all member states should want to do themselves. We believe that we have a positive agenda, and it is not just about picking or prioritising the right objectives. Last year, our excellent debate in the House about the EU budget was a good chance for Members to discuss those objectives. We should return to that over the coming months, but critically we have to ensure that, when we have “decisioned” EU money, it is spent and implemented effectively.
As I said, only yesterday I met Mr Donchev, the Bulgarian Minister overseeing the administration of EU funds in Bulgaria. I am pleased that alongside such meetings, including the meeting that I plan to have with the European Court of Auditors, and the work that we are doing with the European Commission and MEPs in the European Parliament, there is a sense that people are receptive to the need to improve financial management and want to see that happen.
I am keen and grateful for this House’s support for the Government in pursuing that agenda, because that is vital. It was important that we could go into the negotiations saying that as a Parliament we stood behind the motion on bearing down on the EU economy and our decision that a 6% rise was unacceptable. We can learn lessons from that. We as a Parliament need to stick together and show solidarity in tackling these issues. That is one step that we must take.
Even my hon. Friend the Member for Stone (Mr Cash), in his role as Chairman of the European Scrutiny Committee, has a role to play, together with his fellow-chairmen of scrutiny committees across Europe, in pushing this sort of issue to the top of the agenda. We have to be prepared to say in all channels that we must get an EU budget that becomes affordable, that is spent on the right priorities, and that is managed in the right way. His role is also vital in being able to back up some Governments while perhaps pressing those for whom this has been less of a priority to put it further up their list of priorities in future.
Mr Cash
This is not in any sense directed at my hon. Friend personally, but one of the big problems in implementing the Lisbon treaty is the increased functions of the EU. Increasing functions increases expenditure, and increasing expenditure has tended to increase the amount of irregularities. I am sure she will understand my concern about the manner in which we are Europeanising not only our own domestic economy, with European economic governance and all the other things that go with it, but inviting ourselves into the arena of a black hole where other member states do not understand the rules and do not much care about them either.
Justine Greening
My hon. Friend will know that Conservative Members, in particular, had a range of concerns about the Lisbon agenda.
Justine Greening
Let me pick my words more carefully. My hon. Friend is right that Conservative Members had deep concerns about the content of the Lisbon treaty at the time. That is one reason why, as a party, we pushed to have a referendum before going into and signing off on the Lisbon treaty. It is a matter of deep regret that the previous Government chose not to give the British people their chance to have a say on the changes that were proposed via the Lisbon treaty.
The challenge in my role is to ensure that, in terms of where we are today, I stand up for our interests in Britain. One way we need to do that as a Government is to tackle some of the fundamental weaknesses in how the EU works, but my particular concern is financial management, not only at the EU level but at the member state level as funds are spent.
I am sure that other Members will rightly want to have their say on this, so before I finish let me quickly turn to the issue of fraud, which is of great concern to the Government and to hon. Members. I want to be absolutely clear that of course any level of fraud is completely unacceptable. We fully support the work of the Commission and of the European anti-fraud office, OLAF. I am pleased that the European Court of Auditors reports very low levels of fraud in the UK. In 2009, we had a rate of just 0.19 of 1% of spending, but it is still too high. The Government and I will focus on that as we look at how we can tackle this problem. We are therefore deeply concerned that, according to the latest OLAF report, the level of fraud seems to be increasing at the European Union level.
It would be wise for me to point out that the Commission’s figures have to be interpreted with care. As we know, fraud and irregularities are not the same thing. Irregularities make up the bulk of the available figures. To my mind, irregularities are also a serious concern, because they are payments that have been made outside the rules. We should not find that acceptable. The figures quoted by OLAF for suspected fraud are increasing. It is not possible to say that fraud is increasing, but there are indications that that may be the case. Even an increase in suspected fraud is unacceptable. The best way to tackle fraud, irregularities, waste and the lack of priorities is ultimately to have better systems, financial processes and financial controls, and a better regime for financial management in the first place.
Mr William Cash (Stone) (Con)
I do not need to speak for very long on this matter, for the simple reason that I have been making the same speech about different auditors’ reports for the last 26 years. I am afraid that nothing much has changed. The Economic Secretary is a very dedicated Minister and I have great enthusiasm for what she seeks to achieve. She puts the best possible face on the situation, but unfortunately nothing changes: plus ça change.
The reality is that the British taxpayer is, as the Minister has rightly admitted, under severe duress. We are having to cut back and implement austerity measures, but at the same time this report—which, for the 16th consecutive year, has not been signed off—demonstrates that there are serious errors and mistakes in the system. Those errors consist not merely in the manner in which the accounts have been presented, or in the fact that irregularities and fraud have been identified, but in the very system that has been created. Because of the nature of the problem and its range—and the fact that the documents relating to this debate run to 1,035 pages—it is impossible in 90 minutes to do more than give a general survey of where the whole problem lies.
I mentioned Bulgaria and Romania. The European Scrutiny Committee said that it was inappropriate for them to be brought into the accession procedure when they were, for all the reasons that we identified, which included the fraud that exists in those two countries. I am glad that the Economic Secretary has had a meeting with the Minister responsible for audit in Bulgaria, but I have to say that I do not think that the culture in that country will change very much because of a meeting. The cohesion funds—from the figures that I have already given—are clearly exploited and seriously misused. They represent a significant proportion of the problem. We have a serious problem that is deeply entrenched in the system.
As the Minister knows well, I proposed that we should not only reject the proposals put before us in a debate some months ago, but reject the increase in the budget, and I am glad that the House agreed to do just that. But that is only one side of the equation. The other is the vast sum of money being allocated for the purpose of running this failing European Union. I do not ask the Minister to agree with me on that point, because it would be politically incorrect to do so, but the reality is that it is a failing system. However, I do not need to rehearse the arguments that I have already given for why that is.
One of the elements at the heart of that is the responsibilities of what is called OLAF, the European anti-fraud office. I would like to refer to OLAF’s mission statement, which is on page 729 of this mammoth bundle of motion documents. I can barely hold it up, actually—but fortunately, my wrists are quite strong. The mission statement says:
“The mission of the European Anti-Fraud Office…is to protect the financial interests of the European Union, to fight fraud, corruption and any other irregular activity”.
Hon. Members should note the last words, especially when people talk about actual proven fraud. And by the way, with regard to the cohesion funds, the documents that the European Scrutiny Committee has examined note that the survey in question is only a sample survey—that is something that always fills me with considerable reservations—not a full audit of the kind that one might have expected from the National Audit Office. Indeed, I would go further and say that if we made it Government policy to insist that no standards lower than those of the NAO and the Comptroller and Auditor General should be applied to the European Union, we would really be getting somewhere. Frankly, if the NAO had the opportunity to have a go at these 1,035 pages, plus all the supporting documents, or if it had the opportunity at least to get entrenched in the system, as I have said many times in the past that it should, so that NAO standards and principles were applied to those audited accounts, we might just begin to see some relationship between costs and benefits.
The reality, however, is that vast sums of money—our net contributions and all the rest of it—are poured into that black hole, and it does not work. I am not going to enlarge on all the reasons, which worry me, for our slow economic growth, which in my opinion have something to do with the fact that what we have out there is a dead parrot. The European Union is a system that is incapable of growth—indeed, growth is liable to decrease, compared with that in China, India and the rest—and on top of all that, we have the problems of audit and irregularities that the report demonstrates.
The statement on OLAF’s mandate says:
“In pursuing this mission in an accountable, transparent and cost-effective manner, OLAF aims to provide a quality service to the citizens of Europe.”
OLAF’s mandate covers
“all EU expenditure and part of the revenue side of the budget. It includes the general budget, budgets administered by the Union or on its behalf, certain funds not covered by the budget but administered by EU agencies”—
perhaps that includes the External Action Service, which I hope we will look at in due course—
“and extends to all measures affecting the Union’s assets.”
That is a very big remit, and I have my reservations about that state of affairs.
The statement continues:
“OLAF’s status is hybrid in nature. It is part of the Commission”.
Would we have much confidence in the NAO if it were part of the Government? I very much doubt it. OLAF is supposed to be responsible for
“developing and monitoring the implementation of the EU’s anti-fraud policies. However it has a measure of budgetary and administrative autonomy, which reinforces the total independence with which OLAF conducts investigations.”
Mr Nuttall
Does my hon. Friend agree that one of the problems is that it apparently takes 25 months on average—more than two years—for OLAF to conduct its investigations, and that only 56% of cases have led to follow-up action?
Mr Cash
That is the problem. It is easy for us in this House to make scattergun criticisms of bureaucrats, civil servants and the rest of it, but the real problem is that if something does not work, we have to mend it—and there is no evidence of that happening.
I had an exchange with Lord Kinnock when he was responsible for these matters, and set up the new OLAF arrangements. He got a bit shirty with me in a Select Committee some years ago. People like Marta Andreasen were thrown out, and even before then, there was another chap whose name I cannot remember—
Mr Cash
Exactly. The trouble is that the moment anyone starts to get to grips with what is going on, the steel shutters come down and people are thrown out of the European institutional arrangements simply for asking questions that would be regarded as completely normal in any proper democratic system. That is the essence of the problem.
As I have said, I could enlarge at great length on the contents of these 1,035 pages, and every word would be entirely relevant because they are so important. Huge sums of taxpayers’ money and resources are being churned into this failing quagmire. This is not just the ranting of a Eurosceptic; it is the reality of what affects the daily lives of the people of this country, and we seem to be prepared to go along with it.
Mr Davidson
Does the hon. Gentleman accept that part of the difficulty of conveying these issues to the electorate is that the sums involved are so enormous? It is difficult for people to understand sums of £10 million here and £100 million there. As the Chair of the European Scrutiny Committee, would he consider undertaking a piece of work that looked at the value for money provided by a European operation in this country? An example would be the European schools, some of which are situated here. Why does not he compare the cost of a European school with the cost of a normal school? It would make sense to people if they could see the extravagance that the European Union applies in such circumstances. That would bring it all home to people far more than any number of quotations involving zillions.
Mr Cash
I rather agree. It would be very nice for me to be able to make a comparison between the different kinds of school systems, but this is not only about schools; it is about everything that moves. The reality is that this all-pervasive, all-encompassing ectoplasm has managed to work its way into every nook and cranny of our lives. It slips under doors and through windows, and it is absorbing us to the point at which we are being totally Europeanised. Within that framework, our taxpayers’ money is being absorbed into the bloodstream of the European Union, and the monitoring and accounting are inadequate, which is what this European Court of Auditors report is all about.
Mr Davidson
I was making a much more specific point a moment ago. I was referring not to schools in Europe in general but to the schools that are run by or on behalf of the European institutions themselves, of which there is at least one in the United Kingdom. A comparison of that school with a similar-sized school elsewhere in the UK would be enormously informative to parents and everyone else. Such an exercise would help to overcome the difficulties that we have in explaining the magnitude of the sums involved.
Mr Cash
I certainly agree with the hon. Gentleman’s concern. If he would like to write to me about it, I would be more than happy to take the matter up in the European Scrutiny Committee if we have an opportunity to do so. We are going through a process of reinvigorated European scrutiny, as I hope he has noticed, and we are determined to get to the bottom of certain issues. This is one of them.
I do not want to take up too much time, because many others want to speak. I will simply make the general point that this is a failing system with a failed accountancy system, and the taxpayer is being badly affected by the way in which these matters are being conducted. There are always paragons of virtue, but this system falls so far below the threshold of what is required that the whole thing needs shaking up. In a nutshell, I would like to see principles of the same kind that apply to the National Audit Office applied to the European Union, so that the people there can be roasted when they get it wrong.
Loans to Ireland Bill
William Cash Excerpts(13 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to discuss the following:
Amendment 7, page 1, line 7, at end insert—
‘(3A) Any loans made under this Act, and any repayment of principal or payment of interest received thereunder, shall be denominated in sterling.’.
Amendment 4, page 1, leave out lines 8 to 18.
Amendment 6, page 1, line 18, at end insert—
‘(7A) Before determining the interest to be charged on any payments under this Act, the Treasury must specify the rate of interest by order; and the Treasury may not make such an order unless—
(a) the House of Commons has determined by resolution the rate of interest to be charged; and
(b) the order provides for that specified rate to be charged.’.
Amendment 8, page 1, line 20, at end insert—
‘(8A) All loans made under this Act shall be repaid by 8 December 2040.’.
Amendment 10, page 1, line 20, at end insert—
‘(8A) Before any loan or binding offer of a loan is made, or guarantee given, under this section, the relevant agreement must be laid before, and approved by a resolution of, the House of Commons.’.
Clause stand part.
Mr Cash
I have just abstained on Second Reading for one simple reason. I had intended to vote for it, but I remain gravely dissatisfied by the answer that I received from the Chancellor regarding the increase in the amount specified in clause 1. I do not want in any way to misrepresent what he said, but as I understood it, it was that that was all right because it was about exchange rates. However, anybody who examines clause 1 carefully will notice that subsection (4) states:
“The Treasury may by order made by statutory instrument substitute a greater amount for the amount for the time being specified in subsection (3)”,
which is £3.25 billion.
The next two provisions simply determine whether any increase will be subject to affirmative or negative resolution. An order would be made under the negative resolution only if the increase is to do with exchange rates, but I can see nothing to say that an increase under subsection (4) would be affected by subsequent provisions. I was bound to take great exception to that. It is a serious matter, because we simply do not know what the greater amount would be. We are totally exposed, subject only to affirmative resolution, which cannot be amended. Such a measure would simply go through on a whipped vote, just as the rest of the Bill doubtless will. That is why I abstained on Second Reading.
Amendment 3 addresses the definition of “Irish loan”. I was staggered when I looked carefully at the Bill, because clause 1(2) states that “Irish loan” means simply
“a loan to Ireland by the United Kingdom.”
The background is the recent debates on economic governance, and the origins of the European financial stability mechanism and the alternative eurozone facility, which as someone pointed out is as much as €440 billion, which is easily enough to cope with the Irish situation. There is a very close interconnect at all points between the so-called bilateral loan proposed in the Bill and the mechanism that I described.
The difficulty is that there is an overall determination to do as much as possible by way of integrating with Europe when it is quite obvious to anybody that this is the time for us not only to step back, but to desegregate from the European venture. I believe very strongly that the technique that is consistently employed in all spheres of activity is to say, “We don’t like what goes on in the EU, but we can just go along with it. Alternatively, to satisfy the Eurosceptics or Eurorealists, as they prefer to be called, we can make parallel arrangements along the lines of what we would have done if we were in the eurozone.”
The research paper helpfully supplied by the Library states:
“It is worth noting that the bilateral element”—
assuming that that is what the Bill is—
“of the UK’s support is broadly equivalent to what the UK would have provided if it were part of the eurozone-only EFSF.”
In other words, we would have provided the loan anyway. The Minister may well say that that is not his intention, but that is what Library researchers believe, and they are often right.
Mr Redwood
A portion of the total loan package is contingent money for Irish banks—they may or may not need it. Is my hon. Friend worried that they could come back for even more, and that clause 1(4) could allow an extension of our loan for Irish banks?
Mr Cash
Yes I am. Treasury civil servants are exceedingly clever and may know of pitfalls, but they might not fully explain them to Ministers. Of course, the Minister takes ultimate responsibility, but the question is: what is the effect on the daily lives of the people whom we represent? That is the issue on which we have to concentrate.
Under the circumstances, I am extremely dubious about the way in which the whole thing has been put together. In particular, I would mention what I will call the mechanism, as compared with the facility. I had an exchange earlier about the mechanism with the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), who said, “This is all going to be done by qualified majority voting.” However, that is not the case. Within the mechanism as it is set out, the request comes from the member state; it is only the final arrangement that requires qualified majority voting. Indeed, the EU sent in the European Central Bank and the International Monetary Fund in flagrant contradiction of the provisions of article 3 of the regulation in question.
In fact, the EU was operating the provision as if it were already law, when it was not. That it is typical of the European Union. It keeps on telling us about the rule of law, but when it suits, it completely ignores the law. What happened was unlawful. I also believe that it was unlawful in respect of article 122, which was the legal basis used to create the mechanism. I do not need to go into detail, but article 122 concerns natural disasters, energy supply and things of that kind. Anyone who looks at article 3, article 122 and the other provisions that they mention would reasonably conclude that they should not be used for the purposes of sorting out an unmitigated mess that was created by banks, as well as by the Government of Ireland and other parts of the European Union. Therefore, I am afraid that the answer that I received from the former Chancellor—that there really was no alternative to what was done, because such decisions are reached by qualified majority voting—does not stack up. If what happened was unlawful, it should have been resisted and, because of the consequences, it should, if necessary, have been taken to the European Court.
Mr Redwood
My hon. Friend has great legal expertise. I understand that the European Union is trying to negotiate an amendment to article 122 of the treaty in order to put the matter beyond doubt. Would that be retrospective, or could that undermine the current position?
Mr Cash
That is a very good question. I doubt very much whether an attempt to make the provision retrospective would remedy the mischief.
I am afraid that the question of illegality taints the Government’s position as well, and I shall explain why—the Minister will know all the detail, because I think that he was the Minister responsible. There is provision for the European Scrutiny Committee under Standing Order No. 143 regarding scrutiny and scrutiny reserves. It so happens that the European Scrutiny Committee was not set up until November—a few weeks ago. However, I have here a table setting out the dates that shows that the date of deposit was 25 May 2010. The decision was taken on 9 May at ECOFIN, which happened to be 48 hours before the coalition was pushed through. In the case of ECOFIN’s decision on the financial stability mechanism, the table states unequivocally that there was an override of both the European Scrutiny Committee and the Lords. On both counts, the then Government and the current Government breached the scrutiny arrangements. Indeed, it is quite extraordinary that the explanatory memorandum that accompanies the documents in question, and which should have been presented much earlier, was presented on 15 July. I know that the Minister will not dispute that, because it comes from Government documents. There is a serious worry about the manner in which this matter has been manipulated.
Just before the proceedings began, we were presented with another document, which reinforces my concern. If my amendment 3 were accepted, the Bill would read: “In this Act, ‘Irish loan’ means a loan to Ireland by the United Kingdom other than a loan by virtue of any provision by or under the European Communities Act 1972.” I am very familiar with the way in which interweaving goes on, not only as Chairman of the European Scrutiny Committee but because, for the past 26 years, I have watched this process of integration and the manner in which, by extremely clever and adroit manoeuvring, we get further and further integrated into these arrangements. The mechanism is an open-ended invitation until 2013, as I ascertained during an exchange with the Chancellor of the Exchequer. Until 2013, we are stuck with the present arrangements.
I am sometimes a bit of a Cassandra, in that I make prophecies—more like predictions—about certain events, find out that I was right and then find out that nobody took any notice until they had happened. On this occasion, I am going to say that it is extremely likely that, if Portugal gets into really deep trouble—and perhaps Spain, too—that will happen before 2013. If this greater amount is interwoven into the stabilisation mechanism, or even if it is not, the mechanism itself will entrap us in the arrangements which, although not yet permanent, will go on until 2013.
I also think that the Government are struggling a bit in relation to article 122, under which this measure was introduced—unlawfully, in my opinion—because the Commissioner responsible, a Mr Sefcovic, has stated that the Commission is still considering whether to use article 136 or article 122. Against that background, the Van Rompuy Committee is sitting and might already have concluded that it would be appropriate to have a permanent mechanism in place only under article 136, and therefore only by reference to the eurozone. That would be a plus, but it would not alter the fact that, between now and 2013, we are at risk.
I am concerned about the deficient wording in clause 1(2), because not excluding what might be done under the European Union effectively leaves it open to the European Union’s continuing to weave its way into the arrangements, despite the fact that they are described as a bilateral loan. Some people might say, “Ah, but you have to understand that when the explanatory notes talk about a bilateral loan, they mean that.” It does not say that in the Bill, however. Furthermore, we have had some unpleasant experiences with explanatory notes in the European Scrutiny Committee recently, as anyone who wants to read the report that we have just issued will see. The explanatory notes in question were positively misleading, and distorted the legal position. That is a matter that we will be pursuing in Committee, when we ask whether parliamentary sovereignty or judicial supremacy should prevail. I do not need to go into the detail of that now, but the fact that a bilateral loan is mentioned in the explanatory notes has been severely vitiated by our experience of the explanatory notes to the European Union Bill.
Mr Cash
I happen to agree with that, which is why I did not vote against the Bill, but I must say that this is not a matter of merely academic interest, because the consequence that I mentioned at the beginning of my speech, which led me to abstain, is that there is no restriction on the greater amount. I wait with enormous interest to hear whether the Minister will differ from the Chancellor of the Exchequer on that, but when it is an open-ended provision for a greater amount, I would like to know what that greater amount’s limit would be.
In the context of the interlocking aspect to which I have just referred, I remain deeply concerned that the amount could be greater, and that this matter could get caught up in the complicated ongoing negotiations—I recognise that the Chancellor and his Ministers have had some very complicated negotiations. I remain worried about the direction in which we seem to be going, therefore. It would be so simple for the Government to give me either a direct assurance, which I would regard as a second-tier response, or a specific agreement to accept my amendment just to get me off their back. I would regard such an agreement as a useful way of dealing with the situation, but I bet I do not get that.
Mr Dodds
We will listen with interest to what the Minister has to say, but, just to be clear, is the hon. Gentleman’s argument that the greater amount under clause 1(4) could be used to increase not only the amount of the loan to the Irish Republic, but interweaved with the financial stability mechanism to provide money for other countries? Is that his argument, or is it specifically about the loan to the Irish Republic?
Mr Cash
The provision appears to apply to the Irish component, but because of the implications of what I am saying and the interlocking aspects in the kaleidoscope, it is extremely difficult to work out exactly what is intended by such opaque words. What I am asking for is very modest: simply the removal of all doubt by making it clear that any such loan would be
“other than a loan by virtue of any provision by or under the European Communities Act 1972.”
If all doubt were to be removed in that way, it would be the end of the story and there would be no problem, so why not do it? I look forward to the Minister’s response.
Another issue arises under paragraph 6 of the summary of key terms document. The paragraph covers events of default, and sub-paragraph (h) states that one event of default will be
“the Borrower”—
Ireland—
“not being or ceasing to be a member of the European Union”.
Why would such a provision be wanted if it were not integral to the fact that Ireland is a member of the European Union? I do not think I need to advance the case any further as it is very simple: if we would exclude Ireland from the arrangements by virtue of its ceasing to be, or not being, a member of the EU, that must have special significance, otherwise it would not be stated. That is another exceedingly worrying feature.
Paragraph 8 refers to the governing law, and it states:
“The credit agreement and any non-contractual obligations arising out of or in connection with it will be governed by English law.”
Paragraph 9 is on enforcement, and the document’s authors have clearly thought a lot about this matter, and the more they think about it the more worried I get, because they are transposing their thinking into the provisions of the Bill and this document:
“The English courts will have exclusive jurisdiction in relation to any dispute including a dispute relating to non-contractual obligations arising out of or in connection with the credit agreement.”
That gets to the heart of the problem, because anything that within law is under the jurisdiction of the European Union and within the framework of the European Court under the European Communities Act 1972 cannot be excluded from that jurisdiction by such words in a document of this kind that is “for information purposes”—hence our European Scrutiny Committee report on the relationship between parliamentary sovereignty and the judiciary. Therefore, merely writing in such a document that something will be governed by English law and that the English courts will have exclusive jurisdiction in relation to any dispute is not worth the paper it is written on.
If it is within the European Union legal framework, that means the European Court will get its hands on it. It may be that if there was a dispute or default or any of the other difficulties that could arise from the agreement in the Bill as enacted—as I rather suppose it will be—that will in no way alter the fact that ultimately, as long as parliamentary sovereignty prevails in the light of the European Communities Act, the Supreme Court will not prevent it from falling within the framework of the European Court of Justice.
Of course, it would be open to any future parliamentary Bill to try to unravel the arrangement, but what a pity it would be if we found that the fast-track arrangements we are experiencing today led us to the situation that I have described, simply because we were not prepared to listen to the argument that could resolve the problem by excluding the European jurisdiction. The legal advisers, the Treasury officials and the Minister may well be wrong. If they are wrong, we are in deep trouble. If they are doubtful, perhaps they could listen to those of us who have been proved right on a number of past occasions.
These are my final words—not from Cassandra, but from me. When things go wrong, it is much better to have taken advice beforehand and keep ahead of the curve, rather than allowing the curve to catch up with us.
Kelvin Hopkins (Luton North) (Lab)
It is a pleasure to follow the hon. Member for Stone (Mr Cash); I very much agree with what he has been saying. He is clearly much more erudite on these matters than me, but I understand what he is saying—that today, we are making to our closest friendly neighbour country a bilateral loan which has nothing to do with the European Union and which is not part of the panoply of EU arrangements. I am happy to go along with such an arrangement.
The right hon. Member for Wokingham (Mr Redwood) has said many times that, if there are problems in the eurozone with the eurozone, they should be sorted out by the eurozone, not by countries outside the eurozone. I agree with him very strongly. This is a country that is our closest neighbour, with which we have deep, long historical relations—very friendly relations now, we are pleased to say. Indeed, I have many Irish constituents who are concerned about their country. We are making a friendly gesture to a neighbouring country—our nearest friendly neighbour—that happens to be in the eurozone, which we happen not to be.
We do not want to be in a situation where, if another country gets into difficulty, it says, “You made a loan to Ireland—you can make a loan to another country in the eurozone.” That would not be acceptable.
Mark Durkan
On amendment 3, tabled by the hon. Member for Stone (Mr Cash), the amendment of itself does not preclude the fear that he and my hon. Friend the Member for Luton North (Kelvin Hopkins) have that at some point in the future there might be a loans to Spain Bill, a loans to Portugal Bill or something similar. The amendment would not preclude the possibility of any other such bilateral loans being arranged in future. I do not believe that the amendment, which is commended to us in those terms, will serve the purpose for which it was tabled.
Mark Durkan
I know that the hon. Gentleman made that point, too, and I want to turn to it. He carefully quoted and referred to a number of points in the loan agreement, which was made available at the start of the debate. The summary of key terms refers to a number of matters, and the hon. Member for Stone seemed to say that those references alone mean that the bilateral loan is being interweaved with the wider EU and IMF support packages to Ireland. However, hon. Members should bear in mind a point that the Chancellor made on Second Reading—that one advantage of the bilateral loan arrangement is the place that it gives the UK at the table when it comes to arranging and overseeing the restructuring plan that is to take place in relation to the Irish banking sector.
The key terms include, under the heading “Other Terms”, at paragraph 1(d):
“no amendments to the facilities provided by the IMF, European Financial Stability Mechanism, the European Financial Stability Fund or Sovereign bilateral lenders or to the Memoranda of Understanding that would have a material adverse effect on the Borrower’s ability to restore its capacity to access the capital markets.”
Given that the purpose of the loan arrangement is to make sure that Ireland can go to the bond markets on its own as soon as possible and get money at competitive rates, it is clearly in the House’s interests, as the UK will be providing this loan, to make sure that the loan terms are protected against any undue terms coming from the other loans being made available in this context.
Several hon. Members have mentioned the role of the European Central Bank. We can look at the history of this situation and question the role of the ECB on a number of occasions. First, it kept interest rates very low—at times against the express wish and request of the Irish Finance Minister—which helped to contribute to the problem. Secondly, as many hon. Members have mentioned, there is the open-ended nature of the Irish Government’s guarantee to the banks. Again, the ECB seems to have been the primary body urging a guarantee of that extent. Thirdly, there is the whole issue of the need for the bail-out and the creation of circumstances in which the Irish Government have had to seek it. Again, many people have questions about the precise role and performance of the European Central Bank in all that. Hon. Members have asked serious questions about the ECB, and we know that a much bigger loan facility is being granted through the EU and the IMF, so surely the House will want to know that the terms of the bilateral loan and its operation will not jeopardise the interests or purposes for which it is being made available. It therefore makes sense for the key terms that are summarised in the document to refer to the restructuring plan that is to be undertaken in relation to the banks.
The document makes it clear that “conditions precedent” will include “finalisation by the Borrower”—namely Ireland—
“after consultation with the Lender, of a restructuring plan in relation to its banking sector with the IMF, European Commission and European Central Bank”.
That is not the interweaving that the hon. Member for Stone has discussed, but a sensible, diligent precaution on the part of the House in providing for money to be borrowed. The “Other Terms” also include at paragraph 1(c):
“no amendments to the Restructuring Plan that would have a material adverse financial impact on the UK operations of Anglo Irish Bank, Allied Irish Banks and Bank of Ireland”.
Again, it makes absolute sense for the House and the Government, who are responsible to it, to make clear cross-reference to what else is happening under the restructuring plan and to what other lenders might urge in relation to other parts of the plan in terms of key interests that the House needs to protect, including those of the banking sector in Northern Ireland and the contribution of the Irish banks to the wider UK economy.
Mr Hoban
Amendment 3, which my hon. Friend the Member for Stone (Mr Cash) moved by, would ensure that the Bill did not apply to any loan made by the United Kingdom to Ireland under the European Communities Act 1972. Let me give him a second-tier assurance that the Bill applies only to the UK’s bilateral loan to Ireland. Any EU loan made to Ireland through the financial stability mechanism would not be a loan from the UK to Ireland and would not be subject to the Bill.
There is no interweaving or interlocking, and therefore the amendment is unnecessary. My hon. Friend referred to paragraph 6(h) of the loan agreement. I am sure he will understand that the funding Ireland gets is dependent on it being a member of both the International Monetary Fund and the European Union. If it were no longer a member, it would no longer receive the funding and therefore there would be a problem. Amendment 4 would remove the power to increase the cap on the loan and adjust the cap for exchange rate fluctuations. I hope that the comments made by my right hon. Friend the Chancellor remove the need for anyone to push that amendment further.
Amendment 6 would require the interest rate on the loan to be approved by Parliament. That is not appropriate. The interest rate for each tranche of the lending to Ireland will be a fixed rate that is set by adding a margin of 2.29% to the sterling seven-and-a-half-year swap rate at the time that the disbursement is made. That is set out in the loan agreement and gives certainty to us and to the Irish Government, who would want to have certainty when accepting and voting on this package.
My hon. Friend the Member for Clacton (Mr Carswell) said that the amendment would enable the loan interest rate to be reduced. It could also lead to the loan interest rate being increased to the detriment of the Irish Government and their economic recovery. It is important that there is a clear, definitive statement about what the rate is. We have published the summary of key terms of the loan agreement to help colleagues understand what the rate is and how it will be set. The rate is set with the Republic and within the range of interest rates agreed with other multilateral bodies. It would be a big mistake and irresponsible of the Labour party to vote for amendment 6, because it would create uncertainty and instability where we want certainty and stability for the Irish Government. I question whether what the amendment proposes is the right thing to do. The loan rate is agreed and clear, and it is in the summary of key credit terms. The Irish Government have signed off on those key terms. That is the rate they are expecting to get. Amendment 6 would create unnecessary uncertainty and I therefore ask my hon. Friend to withdraw it.
Mr Cash
For the time being, I have decided against pressing amendment 3 to a Division.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 6, page 1, line 18, at end insert—
‘(7A) Before determining the interest to be charged on any payments under this Act, the Treasury must specify the rate of interest by order; and the Treasury may not make such an order unless—
(a) the House of Commons has determined by resolution the rate of interest to be charged; and
(b) the order provides for that specified rate to be charged.’.—(Mr Carswell.)
Question put, That the amendment be made.
Chris Leslie
I thank the hon. Gentleman. Just at what I thought was my moment of great glee, he took it away from me. Nevertheless, I will take some satisfaction from what the Government have decided.
I was trying to listen carefully to the Minister’s statement on amendment 2. As a lone traveller trying to amend the legislation, I might have misread the wording of clause 2, but I still do not quite understand the sequences of subsection (4), which states:
“No report is required to be prepared or laid in relation to a period if—
(a) no payments…are made…
(b) no sums…are received in the period, and
(c) no amount of principal or interest in respect of an Irish loan is outstanding at the end”.
I could not see any circumstances where paragraphs (a), (b) and (c) would simultaneously apply. For example, if no amount of principal or interest were outstanding, how could there be any circumstances where, under paragraph (a), payments had been made or, under paragraph (b), sums had been received? Surely if no report is required when no amounts are outstanding, the conditions under subsections (4)(a) and (b) are redundant. Looking at the drafting of subsection (4), it would be easy to imagine the parliamentary counsel becoming entangled in an arcane discourse on ontological logic. There are several twists to the double negatives set out in the drafting.
As a layman reading subsection (4), I could not see why paragraphs (a) and (b) were necessary, when they must be concurrent with subsection (4)(c), given that (4)(c) states that there is nothing left owing, according to my reading of it. If each of the three paragraphs were alternatives, or contrasting, perhaps using the words “either” or “or”, that might make sense. They are conjoined, however, by the non-contrasting linkage “and”, suggesting that each of the three conditions must be fulfilled simultaneously, and I am not quite sure that I follow that. Perhaps the Minister needs to walk me through it one more time. I do not wish to press this matter to a vote, because I am sure that there is a higher drafting power at work here, but as I read it, I could not see any circumstances in which paragraph (c) would be true simultaneously with paragraphs (a) and (b).
In general terms the reports will be important, not least because we need to see the terms of the loan that the people of Ireland will have to repay, as well as the amounts of money that the British people will have in return for adding to our national debt. There is a whole series of other questions to which I would eventually like answers. For example, what is the aggregate amount of interest that we expect to be paid by the Irish Government, and what is the impact for us in this country?
As I have said, it is a shame that the summary of the terms of the credit facility was deposited only at the eleventh hour, and I hope that we will have another opportunity to scrutinise it at another time. For the time being, however, that was the purpose of amendment 1, and I am grateful to the Minister for his acceptance of the first amendment that we tabled.
Mr Cash
I have much the same curiosity as the hon. Member for Nottingham East (Chris Leslie). I was a bit puzzled by the drafting of this provision, and I wanted to find out what the Minister had in mind. I am not sure that he has left me any more satisfied than I was when I started out, however, because my experience over the past 26 years of the dogged fashion in which Ministers operate is that they just say, “We’re not going to make the amendment.” They do not usually explain the position satisfactorily either.
Having said that, it seems to me that if there is nothing to report, we should just not bother with the reports. Subsections (1), (2) and (3) will be necessary. It is possible that, in due course, the concerns that I raised on an earlier amendment might need to be included in the report. That was the case, for example, in relation to the reports on the Maastricht convergence criteria, despite all the footling remarks that were made during the debate on Maastricht, when we were assured that this, that and the other would not happen. When we came to the convergence reports, and got into the whole business of the golden rule, the stability and growth pact and all the other shenanigans and wriggling, we were proved right over and over again.
Chris Leslie
I just want to pick up the hon. Gentleman’s point that if there is nothing to report, there is no need to have any reports. I believe that it would be of interest to the House if, even when no payments were made, a report were still produced to set out that fact. That might seem a small point but, for example, in the unlikely event that default became an eventuality, the lack of a payment being received might be of interest. That was also part of the rationale behind deleting subsection 4(a) and (b).
Mr Cash
I think I might agree with that too, but I think that is catered for by subsection (3)(a), which says that each report must include details of
“any payments made by the Treasury”.
One could have said, “payments, if any,” but for practical purposes I think subsections (1), (2) and (3) would be sufficient. I am not particularly fussed about it; I just wanted to table a probing amendment. I got the usual stonewalling operation from the Minister. I have got used to it over the years; it makes no difference to me and it makes no difference to him.
Mr Hoban
I think the hon. Member for Foyle (Mark Durkan) has a second career beckoning as a parliamentary draftsman. He has summed up the situation exceptionally well.
In subsection (4) all three paragraphs—(a), (b) and (c)—have to apply if no report is to be published. If amendment 2 were made, removing paragraphs (a) and (b), payments could have been made in the period but they would not be reported if there was no balance outstanding at the end. Therefore we must ensure that all three are true before we allow no report to be published. I hope that provides clarification.
I hope I am not seen by my hon. Friend the Member for Stone (Mr Cash) as someone who seeks to stonewall his inquiries, but having imposed a duty on the Treasury to report, it is right that that duty be extinguished when the loans are repaid; otherwise someone will say, “Yes, the loans have been repaid, but your Act requires you to make those reports.” It is right that the duty to report is extinguished when the loan has been repaid, and that is simply the purpose of—
Mr Cash
Perhaps a little bit of irritation, which is not usual in my case, is beginning to burgeon, because a number of questions that I tabled weeks ago about the legal advice regarding the stabilisation mechanism still have not been answered, and when I use the word “stonewall” I mean just that. When I do not get an answer, and I am told that I will get the answer as soon as possible but I still do not get it, and I have to put in a reminder but I still do not get it, there is something going on; I know that. They do not want to disclose the legal advice; they do not want even to disclose whether in fact it was given, or when it was given. I would like to know the answer to those questions because as Chairman of the European Scrutiny Committee—
The Second Deputy Chairman
Order. This is an intervention. It is a very long intervention. The hon. Gentleman has clarified what he meant by stonewalling, but perhaps we might leave the considerations about the European Scrutiny Committee for another day, because it is not particularly relevant to the amendment that we are discussing now.
Mr Cash
I, too, hope that this Bill succeeds, because it is important to help Ireland. I would like to see Ireland as part of a new configuration of the European Union, rejoining this country on a different footing from the arrangements that currently prevail in the European Union. The European Union is increasingly in its death throes and I hope that this does not lead to an implosion. We have seen riots in the streets here in the United Kingdom, in Greece, in Portugal and in Italy—there were riots in Rome only yesterday. The situation is extremely grave and a lot of it results from the very point made by the hon. Member for Nottingham East (Chris Leslie) about growth. The plain fact is that under the current arrangements there is no growth. Until powers are repatriated we will not get the sort of oxygen into the small business community that will be able to fill the gap between the requirements of the Irish economy and those of the UK economy.
In the meantime, we are considerably exposed to the indebtedness of the Irish banks. The amount that we have made available, small as it is comparatively but great as it is from the point of view of the British taxpayer, has been justified, but that is without prejudice to my concerns. They are that the former Chancellor of the Exchequer’s explanation of how the financial stability mechanism came to be put through remains unsatisfactory. He could have referred the whole question to the European Court, because this was unlawful and remains so. I sent a note to the Chancellor of the Exchequer on this very question as he was going off to an ECOFIN meeting. I regret to say that the explanatory memorandum produced by the Government on 27 July—perhaps it was 25 July —endorsed the decision taken by the former Government, and that speaks for itself.
I am also deeply worried about this business of the “greater amount” under the provisions that we have already discussed because, irrespective of what the Chancellor said about the exchange rate, the reality is that the amount of the increase is simply a matter of whether or not it is carried by the affirmative resolution. It is only when the exchange rate issue comes into play and we are therefore just dealing with a fluctuation in the amounts to be made available that we revert to using the negative resolution. Therefore, the Bill still provides that this “greater amount” is an open-ended commitment, and I hope that the Government will keep this closely under surveillance. I have heard nothing from the Front Benchers to dissuade me from that view.
Finally, we need to deal with the question of the Euro-ectoplasm and the way in which the kaleidoscope of European legislation in conjunction with all the other arrangements that have been made parallel to this so-called “bilateral loan” weave together, because there is a serious risk that the European jurisdiction applies here. I did not press my amendment to a Division for reasons relating to another vote that did not, in fact, transpire along the lines anticipated.
Be that as it may, the Bill is understandable from the point of view of the Irish economy. However, the Irish Government and the Irish banking system have to take the blame for allowing their economy to get so far out of kilter, and that point needs to be made on the Floor of this House. We are helping them, but we are doing so without prejudice to the fact that they got themselves into the same kind of mess as the Labour Government did on our economy. This is not a day for excuses or congratulation; it is a day for a bit of sober reflection. If people spend what they have not got, they end up with it catching up with them. There is a great deal to be said for prudence, but not of the former Prime Minister’s kind.
Loans to Ireland Bill
William Cash Excerpts(13 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
I said in an earlier statement to the House that I was seeking to do that, and I had hoped that hon. Members were paying attention to what I said at the time.
The legislation that we shall pass today will allow the UK to be ready in the new year to meet its commitments to one of our closest international partners. As has been noted, the legislation before the House is narrow in scope—it is explicitly a Loans to Ireland Bill—but it is still enabling legislation. It sits alongside the actual loan agreement, which sets out in detail what we will offer Ireland. To ensure that Members have as much information as possible available to them for today’s discussion, a summary of the key terms of the loan agreement, which was agreed with the Irish Government only this morning, has been available in the Vote Office for more than an hour now.
Mr Osborne
If my hon. Friend will allow me, I will make a bit of progress and then of course take some further interventions.
In my remarks today, I intend to address both the substance of the legislation and the loan agreement, but before that let me briefly say something about how we got here. Over the course of this year, it became increasingly clear that the situation in the Irish economy was unsustainable. Their sovereign debt markets had effectively closed and had little prospect of re-opening. Ireland’s market interest rates had risen to record levels, and Irish banks had become almost wholly reliant on central bank funding to maintain their operations, with no obvious prospect that that was going to change. This situation simply could not go on. We had been monitoring the situation for many months and had engaged in confidential discussions with our partners in the G7 and at ECOFIN about possible solutions.
Over the weekend of 20 November, Ireland’s Prime Minister made a formal request for international financial assistance. The UK, alongside the International Monetary Fund, the EU, the eurozone and some other member states—Sweden and Denmark—made an agreement in principle to take part in putting together an assistance package for Ireland. Since then, the various interested parties have been working round the clock with the Irish authorities to put together a package. Officials from the British Treasury have been in Dublin in recent days ensuring that our interests and concerns were represented, and I want to thank them for their hard work. At the end of November, Ireland agreed with the IMF and the EU a three-year financial assistance package worth €85 billion.
Mr Cash
The document to which my right hon. Friend just referred is “for information purposes only” and is clearly not intended to be construed as part and parcel of the Bill. So can he explain why in the document the “conditions precedent” to the arrangements interweave the so-called “bilateral loan” with the European financial stability mechanism, and why an attempt is then made to bypass that by referring to the “Governing law” as “English law”?
Mr Osborne
I am going to discuss some of the conditions attached to the loan. The particular condition that my hon. Friend refers to ensures that the UK is protected if other parties to this international agreement change their arrangement with Ireland in some way that materially affects our ability to be repaid. That condition gives us an ability at that point to step in.
Mr Osborne
I know that my hon. Friend is assiduous on these points, but I think that on this occasion he is not correct. This is simply a fall-back mechanism for us to say that if Ireland in some way renegotiates its loan from the eurozone, from the EU or from the IMF, it is a condition of our loan to Ireland that we can step in at that point and examine our situation. That protects the British taxpayer and has absolutely nothing to do with European law or anything else; it is simply there to make sure that other parties to this international agreement must have due regard to what they are doing, and how that might have an impact on the ability of the British taxpayer to be repaid.
Mr Osborne
My hon. Friend is pre-empting my speech. I shall get on and explain exactly what those two subsections mean.
As I said, there is no expectation that we will have to make further loans to Ireland in the future. Subsection (4) is intended to prevent an increase in the size of the loan, unless an order is made by statutory instrument, but because the loan is denominated in sterling, a mechanism is needed to accommodate potential changes in the exchange rate in the period between the publication of the Bill and the signing of the loan agreement—that answers my hon. Friend’s point—which could happen in a matter of days. This is not about the exchange rate risk over the coming years—that risk is borne by Ireland—but merely a mechanism to deal with the fact that we are publishing the Bill before we sign the loan agreement, for the reasons that I set out earlier.
The Bill allows the Treasury, under subsections (5) to (7), to make an order once the Bill is in force to increase the limit, as long as that is done solely to take account of exchange rate fluctuations between now and 30 days after Royal Assent, without further Parliamentary procedure.
Mr Cash
I am sure that my right hon. Friend will understand my saying that it would have been so much simpler if what he has just said had been specified in the Bill, instead of a blanket wording referring to substituting a greater amount. We would have then known that that was only intended to allow a margin of error depending on currency fluctuations. Subsection (4) is absolutely clear that there is no restriction.
Mr Osborne
My hon. Friend will be very focused on what I am about to say, so if he does not mind I shall make a little progress, and then I shall be happy to take an intervention.
Let me turn briefly to the arrangements for a permanent stability mechanism for eurozone economies. The European Council this week is expected to discuss the matter. Both the Prime Minister and I are very clear that when it comes to putting in place a permanent mechanism, the UK is not part of the eurozone and so will not be part of that mechanism. The president of the euro group has accepted that the UK will not be part of the permanent stability mechanism, and that the European financial stability mechanism, which the previous Government agreed in May and of which we are part, will cease to exist when that permanent eurozone mechanism is put in place.
We will seek to bring to an end the use of the mechanism established in May for the resolution of sovereign debt problems. It was established under article 122 of the Lisbon treaty and originally intended to provide support for member states following natural disasters. European Finance Ministers, including my predecessor, chose to apply that article in May to deal with the eurozone crisis at that time, but that temporary solution should not become a permanent way of doing things, and the time has now come for the eurozone to put in place its own mechanism for dealing with the imbalances in the eurozone. That needs to be part of a comprehensive solution whereby countries address their own problems more decisively, including in their banking systems. We in Britain have shown the way.
Mr Osborne
My hon. Friend makes a very good point. There was a debate—it was pretty widely reported, so I am not betraying anything that was not read by everyone throughout the world—about whether to address the solvency issues, and whether there should be a contribution—or a haircut, to use the jargon—from senior debt holders in the banks or, indeed, sovereign debt holders. The international community’s view, with which we absolutely agree, is that such a contribution risked a very serious contagion that might spread through many different banking systems, not just those of the countries to which my hon. Friend refers. So the decision was taken not to require a private sector bail-in from senior debt holders in the banks or, indeed, sovereign debt holders.
As part of a comprehensive solution, the eurozone needs to come to a rapid conclusion about its mechanism, draw a distinction, as it has sought to, between existing debt and potential future-issued debt, create a credible mechanism and work out how a single currency zone that does not have a single fiscal policy or a political union will deal with its imbalances.
Mr Osborne
I see the speed with which my hon. Friend leaps to his feet at that point, but I shall take his intervention in a moment.
The eurozone needs to address that situation, and we need to ensure that it gets it right, because that is absolutely in our interests. Individual countries also need to address their problems. Portugal has a long-standing problem with its economic productivity, which the Portuguese Government are determined to address. The Irish banking system has caused enormous problems for the Irish Government, who are now addressing that. In a bipartisan debate, this is a slightly partisan point, but I think that the UK has demonstrated over the past six months that, by its own efforts, a country can earn market credibility, improve its credit rating and improve international confidence in its economy. We need the eurozone to sort out its mechanism, but individual countries in Europe also need to take decisive steps to deal with the particular problems that their economies face. Let me give way to my hon. Friend the Member for Stone (Mr Cash), and then I must conclude to allow others to speak.
Mr Cash
I have put a number of questions, as yet unanswered, to my right hon. Friend on that very issue, but I am glad that he has given, at any rate, a partial answer to one of them. The mechanism’s transfer from what appears to be an unlawful basis in article 122 of the Lisbon treaty to the new proposals under article 136 will involve only the eurozone and represent an important step in the right direction. Does my right hon. Friend not accept, however, that much could happen over the next two or three years, between now and 2013, while the mechanism in which my right hon. Friend’s predecessor engaged, and which I believe to be unlawful, continues? We could be locked into a Portuguese or a Spanish black hole. We do not know yet, but there is a danger.
Mr Osborne
First, I am dealing with the situation as I found it, and as I found it we were committed to that mechanism under qualified majority voting, but I am trying to extricate us from that. Secondly, the permanent arrangements might come into play sooner than 2013. That is a subject for discussion at the European Council, and, certainly as far as we are concerned, the sooner we get on with it, the better. I am doing everything I can to ensure that the UK is extricated from the commitment that was entered into, and we are making good progress.
Mr Cash
When the shadow Chancellor says, as the Chancellor said, that the process was triggered by a qualified majority vote, I am sure that he would agree that that is not strictly true, because it resulted from a request by a member state. The final solution or arrangements are made by virtue of a qualified majority vote at the end. That is a qualification, but it does not alter the fact that, on the basis it was explained to us, article 122 was almost certainly unlawful and the use of article 136 would have been a better route. However, we appear to be entrapped into article 122 for the current purposes.
Alan Johnson
I believe that the hon. Gentleman will seek to address that in his amendment to clause 3, which we will discuss later. On the specific issue, there is no doubt that the mechanism was decided by qualified majority voting. All 27 European member states were part of that. I know from experience of negotiating in Europe over many years that it is a pretty turgid process and one has to be on one’s toes. My right hon. Friend the Member for Edinburgh South West can speak for himself, but I think he got a very good deal for this country on Greece.
The Chancellor must take responsibility for the deal that he has negotiated and not try spuriously to blame his predecessor, as he did again in his evidence to the Treasury Select Committee on 8 December. He had a choice about whether the UK should contribute to the Irish rescue plan. In principle, he has made the right choice, but before us today is a hastily drawn-up Bill that does not set out the terms of the loan, the interest rate or the repayment schedule. Colleagues from all parties will want to explore and probe those matters in Committee, and we particularly want to get to our amendments on clause 2, so a goodly proportion of the time available to us this afternoon may be better spent on that. It is therefore not my intention to detain the House for long on Second Reading.
Alan Johnson
No, I will not give way—perhaps later.
I am also curious about the following piece of distorted logic. In the Treasury Committee, the Chancellor said that it was okay to set austerity aside in order to make a loan to Ireland because of the promise of repayment. He said that this loan “adds to our debt” but
“We’re getting back a very important asset which is a commitment from the Irish government to pay us back with interest.”
What puzzles me is which part of that definition of a sensible loan did not apply to Sheffield Forgemasters. [Hon. Members: “Oh.”] I am sorry that Government. Members groan about British manufacturing industry. My right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) raised this issue during the Chancellor’s statement on 22 November. Why does the Chancellor agree a huge loan to Ireland on the basis he cited but reject a modest £80 million that would be paid back with interest and boost the opportunity of British manufacturers to have a substantial stake in the civil nuclear energy supply chain, which is currently dominated by overseas companies? At a time when we are looking for jobs and growth, the logic of that escapes me.
My third concern is the prospect of each eurozone country being bailed out as its economy falls into crisis without addressing the root causes of the continent’s problems.
Mr Cash
Is the shadow Chancellor aware that serious discussions are going on about increasing the €400 billion facility, and probably doubling it? In response to my hon. Friend the Member for Kettering (Mr Hollobone), is not the whole European Union, not to mention the world at large, confronting a very dangerous and difficult situation?
Alan Johnson
Yes, but that is a matter for the eurozone. If the Chancellor is right in his prediction that perhaps this can ensure that we come out of the €60 billion mechanism, the facility and the other moneys, then fine, but as we are making a big contribution—more than we would have done had we paid the amount that a eurozone country would have paid to rescue Ireland—we must be in a position to influence this debate.
Mr Andrew Tyrie (Chichester) (Con)
Until the shadow Chancellor’s last few words, I was looking forward to saying that I agree with just about everything that has been said from both Front Benches. None the less, there is a good deal of cross-party consensus about what is being discussed.
The Chancellor is faced with a difficult situation: a regional currency crisis that is largely not of his making, a close neighbour with strong historical ties in the eye of the storm and an inherited financial commitment to assistance at the European level.
The Treasury Committee took advantage of the Chancellor’s appearance before us last week to cross-examine him on these matters in some detail. That appearance, his speech today and particularly the terms sheet, which we have just received, have given us a good deal of information, and I am grateful to him. I am relieved, according to that information, that any increase in the loan, which is permitted by the legislation, will be debated on the Floor of the House.
We now know the price of the loan for the first time, broadly speaking. It looks sensible, although I notice that it can be varied under the enabling legislation. As my hon. Friend the Member for Rochester and Strood (Mark Reckless) has pointed out, we have discovered from the terms sheet that the loan is junior in the debt hierarchy to support through the EU mechanism. It would be useful if the Minister, in the winding-up speech, told us whether the Irish can repay the loan early without penalty. I do not think that that is what is stated in paragraph 5(c) of “Other Terms” in the loan agreement—I have obviously had very little time to read it—but there is also a reference to “exceptions” in the bracketed part of the sentence.
A number of hon. Members and I would like to know whether the Government have considered purchasing assets held by the National Asset Management Agency, as an alternative to part or all of the loan.
As far as I know, this bilateral loan has no direct precedent. The UK has gone further than was needed to fulfil its legal obligations. The Chancellor made a strong and persuasive case, which was supported by the Opposition. However, I think that that decision needs close scrutiny, as does the decision, which straddled the previous Government’s tenure, that left the UK with extra contingent liabilities as a result of the mechanism. We may have been put in the unsatisfactory position of making EU budget payments to bail out the eurozone, even though we are not a member of it.
It is important to bear in mind that demand for a bail-out originated not with a request from Ireland, but from the fear among eurozone members of contagion spreading from Ireland to Portugal and Spain. Most hon. Members agree that bailing out the eurozone is primarily its business and not ours. It is true that the collapse of the zone would generate shockwaves throughout the region, and possibly the world. However, the eurozone does have the capacity to bail out weaker members and, to the extent that the stability of the whole financial system is at stake, our contribution should usually be made via the International Monetary Fund. It is for those reasons that I was relieved when the Chancellor confirmed before the Select Committee that the legislation will be unique to Ireland and does not contain enabling powers for further bilateral eurozone bail-outs.
Mr Tyrie
I appreciate that. The Chancellor has referred to 2013 on a number of occasions, and my hon. Friend has referred to the possible unlawfulness of the mechanism on a number of occasions, including in private discussions.
This is a crisis of the eurozone, for which UK taxpayers are footing part of the bill. The UK will have to engage with members of the eurozone to limit the damage now and to construct something better for the future. I will touch on a few of those points in the moments that remain. I recognise that the problems to which I refer may be intractable. First, as the Chancellor has said, the senior creditors have been exempted from a haircut. The Chancellor told us that this was because of the risk of contagion. He is probably right, but the resulting moral hazard is large and will have to be addressed.
The second issue that I wish to raise, which naturally none of the authorities wants to talk about, is the fact that even the measures for Ireland and for Greece may not prevent default. The crisis may be one of solvency, not liquidity. That has a bearing on the lender of last resort provisions for the eurozone. It is possible that a sovereign default could trigger a banking crisis and even failure in parts of the eurozone, because banks hold a large amount of sovereign debt on their balance sheets. Such a bank failure could be highly toxic.
It is worth bearing in mind that the great depression of the 1930s was triggered as much by bank failures after 1931 as it was by the stock market collapse of 1929. I do not want to play the role of Cassandra, but I plead that contingency planning at European level be done now for the risk of such a bank failure. On the basis of the eurozone’s responses to the crisis so far, I am not optimistic that that planning is being done. The eurozone is fearful of leaks, and those doing the work would be terrified of that possibility. I have no doubt that that would inhibit their work. In addition, pessimism on such issues in European circles does not exactly make such work a career-enhancing prospect for the eurocrats who would have to do it. Let us just hope that they are doing that work.
The third problem that I wish to refer to—I shall leave it at that given the time available—is the long-term future of the eurozone itself in a world in which the bond markets have discovered that the no bail-out clause is toothless. I should say at this point that I have never opposed the eurozone on ideological grounds or on grounds of principle, but I have been wary on practical grounds, particularly the ground that the no bail-out clause may turn out to have no clothes. That is exactly what has happened.
Mr Darling
The circumstances in which Ireland finds itself are complex, but there is no doubt that one problem is that a common interest rate right across Europe is perhaps inappropriate for an economy that is rapidly investing in an asset bubble. However, I do not have the same phobia about the euro that many Conservative Members still have, 20 years on.
Mr Cash
I am extremely grateful. Did the right hon. Gentleman take legal advice on whether, as I said at the time, the use of the financial stability mechanism was an unlawful deal? Article 122 of the treaty on the functioning of the European Union deals with natural disasters, energy supplies and so on, and it has absolutely nothing to do with financial mistakes or misjudgments. Really, the whole thing should never have gone through, and he should have repudiated it on those grounds.
Mr Darling
Yes, but as I said earlier, because of QMV, the deal would have gone through anyway. I also do not agree with the hon. Gentleman’s analysis or that the legal position was that clear-cut.
Chris Leslie (Nottingham East) (Lab/Co-op)
Let me say on behalf of Her Majesty’s Opposition that we welcome the debate, in which plenty of views have been expressed from different parts of the Chamber on what is an incredibly important matter. Many Members in all parts of the House—including my right hon. Friend the Member for Edinburgh South West (Mr Darling), the former Chancellor of the Exchequer, and the hon. Member for Chichester (Mr Tyrie), the Chairman of the Treasury Committee—have voiced, perfectly reasonably, their anxieties about the loan to Ireland.
Clearly these are troubled times for the world economy and for the eurozone, and we must sincerely hope that we will not find ourselves here again. The Opposition recognise that there are interdependencies between Britain and the Irish nation in respect of economic trade, direct relationships between our banks and financial investments across Ireland. Moreover, it is our only land-bordered nation state. We therefore have a duty to support the principle and spirit of the legislation, because a failing Irish economy would create harm here in the United Kingdom.
Chris Leslie
I think we shall have to take the issues as they come before us. I understand the hon. Gentleman’s anxieties, but, on balance, given the choices that we face, we consider it incumbent on us, as a responsible Opposition, to support the Government on Second Reading.
Let me make a couple of points—briefly, because I am conscious of the time and the need for us to debate the amendments, not least those that I have tabled in respect of clause 2.
The events in Ireland remind us starkly of the principal facts that Ministers have, I am afraid, preferred to hide hitherto. First, the credit crunch was a worldwide, international crisis, not simply something in the United Kingdom. Secondly, the failures of banks that gambled excessively not just with our money but with the money of the Irish people and others are at the root of our present predicament.
The Chancellor of the Exchequer has done well in spinning the line that it was all the fault of my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), the former Prime Minister—that he was somehow personally responsible for single-handedly causing the credit crunch in the UK before jetting off to Washington and starting the banking collapse there, then flying to Ireland via Spain, Portugal, Greece and the rest of the developed world, spreading banking catastrophe from continent to continent. However, the Bill—perhaps uncomfortably for the Chancellor—reminds us of the ridiculousness of the coalition’s revisionism, and reminds us that the rewriting of history can occur only if we believe in the gullibility of the public, as I suspect the Chancellor does. Although the Government think that may be able to fool all of the people all of the time, the truth is now overwhelmingly obvious, and proves beyond doubt that the greed of profiteering bankers has required the poor, beleaguered taxpayer, here as well as across Ireland and Europe, to bail them out of the mess that they created.
I am afraid that we heard no apology in the Chancellor’s hour-long, technical speech, and no expression of regret in respect of his free-market deregulatory exaltations of the “shining example” shown by the Irish economy. Perhaps that was an error, but sadly he did not acknowledge it. We are not convinced, either, that the Chancellor stands chastened or reflective in regard to his ill-judged comments about the Irish economic miracle”. Perhaps even we could have expected him to have some conception of the risks posed by the simple “austerity at all costs” principle underpinning his economic policies, but that was not there either.
Fundamentally, the problem is this: if the Chancellor of the Exchequer does not understand the causes of the deficit, he is certainly not the right person to fix it. My constituents, like those of the hon. Member for Wellingborough (Mr Bone), find it difficult to understand how, given that we were supposedly on the brink of bankruptcy, we can find £3.2 billion for the Irish loan, but nothing for Sheffield Forgemasters.
Sadly, however, we must recognise that the measures before us today are a result of the fragility of the worldwide economy. We hope that, eventually, the Chancellor and the Prime Minister will step up and show a little more leadership, especially in Europe, rather than using bail-outs and loans as sticking plaster. We hope that they will pay more attention to the root causes of what is happening to the economy, and will recognise that we cannot just cross our fingers and pretend that collective austerity will do the trick in all cases. My right hon. Friend the Member for Edinburgh South West is absolutely spot on when he talks about the inadequacy of that proposition. How will the European Union regain the market’s confidence in a longer-term trajectory back to stronger revenues and economies? Where are the growth strategies to build longer-term prosperity?
We have to accept, however, that the case for the loan to Ireland outweighs the case against it. There are risks that need dealing with, including the risk of contagion throughout the eurozone bond market. The ongoing crisis risks shrinking our export market potential in the long run, and as a consequence that risks creating losses for banks in the UK—banks of course that we own. So on balance and for those reasons, we do not oppose the Bill at this time, but in the time remaining we hope to scrutinise the detail in Committee.
Finance Ministers’ Meeting (Ireland)
William Cash Excerpts(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Speaker
Order. There is much interest and little time, so in questions and answers alike I require brevity.
Mr William Cash (Stone) (Con)
The €440 billion eurozone facility can be used without infringing either UK liability or sovereignty. The Darling guarantee mechanism with qualified majority voting involves, unnecessarily, both UK liability and sovereignty. Where it is in our national interest and we can afford it, why not provide a UK-Irish but non-EU loan?
European Union Economic Governance
William Cash Excerpts(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr Mark Hoban)
I beg to move,
That this House takes note of European Union Documents (a) 9433/10, Commission Communication on reinforcing economic policy co-ordination, (b) 11807/10, Commission Communication on enhancing economic policy co-ordination for stability, growth and jobs – tools for stronger EU economic governance, (c) 14496/10, Proposal for a Council Regulation (EU) amending Regulation (EC) No. 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure, (d) 14497/10, Proposal for a Council Directive on requirements for budgetary frameworks of the Member States, (e) 14498/10, Proposal for a Regulation of the European Parliament and of the Council on the effective enforcement of budgetary surveillance in the euro area, (f) 14512/10, Proposal for a Regulation of the European Parliament and of the Council on enforcement measures to correct excessive macroeconomic imbalances in the euro area, (g) 14515/10, Proposal for a Regulation of the European Parliament and of the Council on the prevention and correction of macroeconomic imbalances, and (h) 14520/10, Proposal for a Regulation of the15 European Parliament and of the Council amending Regulation (EC) No. 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and co-ordination of economic policies; notes the Report from the Task Force on Economic Governance in the European Union; notes with approval that budgetary and fiscal information will continue to be presented to Parliament before being given to EU20 institutions; and approves the Government’s position, as endorsed by the Task Force that any sanctions proposed should not apply to the United Kingdom in consideration of Protocol 15 of the Treaty on the Functioning of the EU.
I welcome the opportunity to set out the Government’s position on the Commission documents to be debated this evening and our broader position on the co-ordination of economic policy in the EU. As right hon. and hon. Friends will be aware, the European Council last month agreed the report of the EU Economic Governance Task Force chaired by Herman Van Rompuy, and we support its work and conclusions, none of which encroaches on Parliament’s economic sovereignty. I want to be clear about that so that there can be no confusion about our position.
Let me deal first with surveillance. Macro-economic surveillance examines the budget plans of member states, and has been around for more than a decade. There is nothing new in that, and a number of international bodies do the same, such as the OECD and the International Monetary Fund. Does the fact that the EU is doing so mean that we will be subject to sanctions? No, it does not, because under protocol 15 of the existing treaty, sanctions do not apply to us.
Mr William Cash (Stone) (Con)
Is my hon. Friend aware that the same Mr Van Rompuy has today issued a vicious attack on Eurosceptics throughout Europe, saying that what they argued amounts to a national lie?
Mr Hoban
I have not seen Mr Van Rompuy’s comments. As hon. Members will recognise, I have been rather tied up in the Chamber for most of this afternoon.
Let me continue to make the Government’s position clear. Will we have to present our Budget to Europe before we present it to the House? No. Will we have to give Europe access to information for budgetary surveillance that is not similarly shared with organisations such as the IMF, or that is not publicly available on the internet? Again, the answer is no. Will powers over our Budget be transferred from Westminster to Brussels? Again, the answer is no.
Mr Hoban
I simply do not take the view that giving the Commission more information is going to be a problem. This goes back to the intervention by my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), who asked whether there is to be an increase in EU jurisdiction as a result of this measure. No, there is not. All that the EU will do is make recommendations, but they will not bind us or be imposed on us. We can simply ignore them. There will be no increase in EU jurisdiction as a consequence of this measure.
Mr Cash
The explanatory memorandum dealing with the jurisdictional question, which was supplied to the European Scrutiny Committee on 23 October, states, under the heading “Impact on United Kingdom Law”:
“The Regulations once adopted would be ‘binding in their entirety and directly applicable in all Member States’. However, in accordance with Article 1 of the proposed Regulation, the Regulation on enforcement measures will apply (only) to the Member States whose currency is the euro.”
That is made absolutely clear by the Minister’s own document that he supplied to the Committee.
Mr William Cash (Stone) (Con)
This debate and the Minister’s remarks remind me of what Alice said in “Through the Looking-Glass”, when she referred to Humpty Dumpty and his rather scornful tone:
“‘When I use a word,’ Humpty Dumpty said…‘it means just what I choose it to mean—neither more nor less.’
‘The question is,’ said Alice, ‘whether you CAN make words mean so many different things.’
‘The question is,’ said Humpty Dumpty, ‘which is to be master—that’s all.’”
That is the essence of the question of European economic governance. We have been told that it is good for us, that it does not affect us and that it does not make a difference. However much one gets into the interpretation of those words, the European Scrutiny Committee’s report makes it clear that there are significant differences, in aggregate, between different parts of the regulations and directives. If the proposal is accepted by the Government, they will effectively cross the Rubicon and similarly, by acquiescing in ever-greater European governance over our economy, they will significantly undermine our ability to govern ourselves. We need less Europe, not more.
The proposals extend to the United Kingdom, as a member of the European Union, thereby raising questions of sovereignty. Under the aegis of the forthcoming Bill on the European Union, my Committee will hold an inquiry so that we can sort out once and for all whether it is the House of Commons, Parliament and that sovereignty which governs the country, or whether it is the European Union. Under Standing Orders, the Committee’s duty is to report to the House, not to the Government, on matters that we regard as requiring debate by reason of their legal or political importance. The scrutiny reserve remains in place until the debate has taken place, and thereafter Ministers can, and no doubt will, vote and/or agree the proposals, but may continue negotiations.
I was glad that the Minister’s explanatory memorandum stated specifically, on several vital matters, that the Government would
“seek to ensure in negotiations”
that matters of concern would be improved. In doing so, the memorandum by definition conceded that these issues have not been resolved entirely, that negotiations could improve them, that they do make a difference to the United Kingdom, its Government and its Parliament and that they have to be remedied. As Chairman of the Committee, I have placed in the Library a note in my name on all these matters, so anyone who wishes to look at them may do so.
I was puzzled by the Prime Minister’s response to a question that I asked during his statement to the House on the outcome of the European Council meeting. He accepted that the matter was complex and required a greater opportunity for exchange of opinions and explanation, but he also said:
“This is not a new framework.”—[Official Report, 1 November 2010; Vol. 517, c. 614.]
I find that extremely puzzling, however one construes it, given the evidence before us and the specific reference to a new surveillance framework in the taskforce report and in the presidency conclusions that he signed off. The truth is that the Commission intends to exert peer pressure on all member states of the European Union. The taskforce report of 21 October preceded documents being placed in the Library, following an urgent question I asked, emblazoned with the word “limité”, which means very restricted circulation. They included a letter of 9 July from the Chancellor of the Exchequer to other member states. It might be thought that there was every reason to present those documents to the European Scrutiny Committee, even if they were not specifically depositable. The Committee does not operate by website.
A substantial question on whether the UK is affected has been dealt with in a note that I received from the Library, from which I shall quote, on increased macroeconomic surveillance. It says:
“It is proposed that a greater role is played by the Commission in macroeconomic surveillance. This surveillance mechanism would be distinct from that currently taking place under the SGP”—
the stability and growth pact—
“because it is non-fiscal in nature; it will focus on countries’ broader macroeconomic positions in relation to the rest of the EU.”
The note goes on:
“The idea of deeper macroeconomic surveillance was put forward in March this year as part of the…Europe 2020 proposals”,
which were, of course, under the previous Government. The note continues:
“As originally envisaged, the deeper surveillance framework would apply only to the euro area countries; however, the Commission proposals of 30th June”—
after the general election—
“and the Task Force Report of 21st October”
both apply to “all Member States”. That is a matter of considerable concern. Why have the coalition Government agreed to extend the framework to all the member states, whereas the previous Government appear to have confined it exclusively to the euro area? As my hon. Friend the Member for Hertsmere (Mr Clappison) said, the taskforce recommends deeper macroeconomic surveillance, with the introduction of a new mechanism underpinned by a new legal framework based on article 121. The Minister’s explanatory memorandum specifically refers to the legal impact and therefore the jurisdiction of these matters, as I have already mentioned, which clearly shows that there is a legal impact on the UK. Therefore, by definition, the proposed mechanism affects the UK and hands over jurisdiction in these matters to the European Court of Justice for interpretation and construction.
Furthermore, it is possible, and even likely, that the stricter reporting requirements will apply to the United Kingdom under the macroeconomic surveillance proposals, particularly if the UK were placed in an excessive imbalance position. We have always conceded, right from the beginning, way back to the time of the Maastricht rebellion, that there would be no sanctions because of the opt-out that we achieved. The fact that the Government continuously state that it is a victory not to have had sanctions imposed is merely a statement of the obvious. I go further. I would be grateful if someone could tell me which member states have ever paid any fines or had any sanctions imposed upon them under any of these arrangements. The answer is none, and there are those who argue that there never will be.
We are in a difficult situation with regard to how we will vote on the motion. Serious questions arise, and I was concerned when I read the letter and the appended document from the Chancellor of the Exchequer, which I had to extract by way of an urgent question, for which I was most grateful, Mr Speaker. In that, there is a description of economic governance, the words of which would not be easily understood. It states:
“Democratic legitimacy is vital to everything that the EU does, and Ministers need to be accountable both to other Member States and to their electorate.”
I find that a new and strange doctrine, and a rather dangerous one. I had no idea that Ministers were accountable to other EU member states. It is conceded, and I agree, that the United Kingdom Budget will be presented first to the UK Parliament, but the essence of the problem is that in the compilation and the construction of the Budget, a series of data and statistical information would have to be provided. That in itself creates the framework that constricts our ability within our parliamentary process to act on our own terms and in line with the principles that underpin our parliamentary Government—that matters of taxation and spending and the formulation of them depend upon the House of Commons, not upon the European Union.
Given the significance that has been attached to these ideas, they represent a drift and an acceptance of European economic government through the surveillance framework by increasing the powers available to the Commission. This does not in any way alter the degree of intrusion into the construction of our Budget before it is presented to Parliament. One of the most difficult aspects is that far from our having a need for much less European economic governance, we are having more. As we move further forward and become more absorbed into this arrangement, we have to ask what is actually happening in the EU itself. As one of the other national European scrutiny committee chairmen said to Mr Van Rompuy when I was in Brussels the other day, “Will the European Union go bankrupt if we refuse to obey your rules?” Other member states are beginning to get the message, which is why I think Mr Van Rompuy issued that assault on Euroscepticism throughout Europe. He is getting the message that people in national Parliaments are not prepared to accept, for example, the fact that their economies have failed because of the EU’s refusal to deregulate and repatriate. I mention in brief the Deputy Prime Minister’s remarks on that subject, because he clearly stated that there would be no repatriation, despite what my right hon. Friend the Prime Minister asserted in his speech to the Centre for Policy Studies in 2005.
We need to generate enterprise for small and medium-sized businesses. There is the failure of the Lisbon agenda, massive unemployment, of more than 20% in some countries, riots, protests and a sense of failure, despair and democratic hopelessness. This is reflected—
Mr Speaker
Order. The hon. Gentleman is straying very considerably wide of the matters under discussion. I know that he is a sensitive fellow and will be aware of the significant number of other Members who wish to contribute, so I feel sure that, in bringing his remarks to a fairly early close, he will focus on the matters that are before us, rather than those that are not.
Mr Cash
I entirely accept that and will bring my remarks immediately to a conclusion.
Rules and regulations will not turn the European Union into a thriving economy with which we trade. It is said that 50% of our trade is with the European Union, and that the proposals before us are necessary to achieve stability in the European Union. The crucial point is that, underneath all those rules and regulations and the determination to achieve European economic governance, we are going the wrong way, not the right way. The measures do affect us. We need more enterprise, more small businesses, more deregulation and repatriation. I am not surprised, therefore that in a recent opinion poll 80% of people said that they wanted the repatriation of powers from the European Union.
We are being more and more absorbed by a failed European Union. Under this coalition, roadblocks are being put up to prevent us from sorting that out, and the new surveillance framework is part of the problem, not the solution. I shall vote against the motion.
Economic Governance (EU)
William Cash Excerpts(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr William Cash (Stone) (Con)
(Urgent Question): I have an urgent question for the Prime Minister, which is being answered in the name of the Chancellor of the Exchequer, as to what negotiating position the Government intend to adopt on the conclusion of the taskforce on strengthening economic governance in the European Union that was presented to the European Council on 21 October with the claim that the endorsement—[Interruption.]
Mr Speaker
Order. First, I appeal to right hon. and hon. Members who are leaving the Chamber to do so quickly and quietly. Secondly, may I say to the hon. Member for Stone (Mr Cash), who has 26 years’ experience in the House, that this is not the point at which he is supposed to dilate? He will have his opportunity. He has said what the substance of the matter is, and we look forward to the Minister responding.
Mr Speaker
Order. The hon. Gentleman must not get too excited: he will have his opportunity. I have granted him his chance, and he should not worry: we will come to him in due course.
The Financial Secretary to the Treasury (Mr Mark Hoban)
I am very grateful for the opportunity to update the House on the conclusion of the taskforce on strengthening the economic governance of the European Union, and to report on the UK’s position on the taskforce. In particular, I wish to restate that the UK is exempt from the current and future sanctions regime.
Heads of State and Heads of Government commissioned the President of the European Council, Herman Van Rompuy, to produce a report on EU economic governance and report back to the October Economic Council. Mr Van Rompuy chaired a taskforce meeting consisting of EU Finance Ministers, and the Chancellor represented the UK on the taskforce. The report has been agreed by the taskforce, and the European Council is expected to endorse it tomorrow. Copies of the report, along with the Chancellor’s submission to the taskforce, have been placed in the Library of the House this morning.
The report concludes that the EU should take steps to reinforce fiscal discipline and that the euro area in particular must face tougher surveillance of its fiscal policies, with sanctions for non-compliance with the pact where appropriate. It also recommends measures to improve EU-level co-ordination of macro-economic policies. That will ensure that any harmful macro-economic imbalances between member states can be identified and corrective action taken. Finally, the report notes that there should be a permanent crisis resolution mechanism for the euro area. The UK supports its conclusions.
A strong and stable euro area is firmly in the UK’s own economic interests, given the high level of UK exports to those countries and our close economic ties. In the years before the crisis, fiscal discipline was absent, and not just in states in the eurozone. High levels of debt have exacerbated the problems that some member states face during the economic downturn. The taskforce recommends that there should be greater focus on member states’ public debt levels in future, and the Government agree with that approach.
I am pleased to note that the report explicitly states that sanctions cannot be applied to the UK under the stability and growth pact. Domestic fiscal frameworks play a crucial role in ensuring that member states act responsibly. EU surveillance is useful, but as the House knows, national Parliaments and national institutions must hold Governments to account for their economic and budgetary policies.
Let us be absolutely clear: yes, we want to see a strong and stable eurozone. That is in our interests just as much as those of our neighbours. The UK has led the way on economic governance. Multi-year budgets and independent statistics and forecasting have already been introduced, and we have a clear fiscal mandate to eliminate our structural deficit. We are leading the eurozone, and our high standards have already received international endorsement. We will examine any proposals to help the eurozone overcome its problems.
However, as the Prime Minister has just said, we will not agree to any changes to EU treaties that move more powers from this country to the EU. The UK’s exemption from the sanctions proposal will be explicit, and there will be no shift of sovereignty from Westminster to Brussels. The report makes that clear, agreeing that
“strengthened enforcement measures need to be implemented for all EU Member States, except the UK as a consequence of Protocol 15 of the Treaty”.
While we are looking at problems in the EU, I should like to say that we have serious concerns about the proposed size of the 2011 EU budget. I was shocked to see that on the day of the spending review, the vast majority of Labour MEPs voted against a freeze in the EU budget. When countries across Europe are taking tough decisions to put their public finances in order, it would be wrong—unjust, even—to have a 6% rise in next year’s EU budget, as has been suggested. We cannot accept that and will fight it hard. We are protecting British interests in the EU and doing what is right for our country and our people, and the Prime Minister will update the House next week.
Mr Cash
I am most grateful. Unfortunately, the explanation that we have just heard from the Minister does not answer all the questions that arise in this matter. In particular, the Chancellor of the Exchequer was on the taskforce, and the Council’s recommendation is that these moves should strengthen economic governance
“in the EU and the euro area”,
in other words not excluding the UK,
“and can be implemented within the existing Treaties.”
I am grateful to the Minister for agreeing, as I suggested, that he should place in the Library a copy of the taskforce report and the Chancellor’s submission to the taskforce on 9 July, so that everybody can read them.
The point remains that the six regulations and directives that the European Scrutiny Committee will consider this afternoon are still on the table. Mr Van Rompuy indicated yesterday at a meeting of COSAC—the chairmen of European scrutiny committees—which I attended, that there are uncertainties about the legal position. I think I am getting his words correct and that he said that the situation did not totally respect all the traditional rules of the European Union. Mr Van Rompuy also called for agreement because, he said, people are our citizens and not just voters.
Given that there are now six legislative proposals—it is claimed that they are based on the existing treaty, but we cannot assume that they are—and that the ESC will consider them today, and that they appear to carry forward in part the Van Rompuy recommendations, what requires a new treaty?
The treaty will affect the UK and our sovereign Parliament in respect of its control over UK fiscal policy, tax and economic governance, including the question of the rebate. We are glad to hear that the Government reject the increase proposed by the European Parliament, but will the Minister reply to this simple question: will the Government veto the treaty, and if not, will they guarantee that, in accordance with the wishes of the voters in the United Kingdom, we have a referendum on that issue?
Mr Hoban
I am grateful to my hon. Friend for raising those points. May I just advise him that the final meeting of the taskforce took place on 18 October? I attended that taskforce, as did my right hon. Friend the Chancellor. We ensured that the language in the taskforce report guaranteed that sanctions would not apply to the UK. Paragraph 18 of the taskforce report refers
“to the specific situation of the UK in relation to Protocol 15 of the Treaties.”
In addition, paragraph 4 states that the measures set out in the taskforce report can be implemented through
“EU secondary legislation…within the existing legal framework of the European Union”,
so nothing in the report requires a treaty change. I am aware that France and Germany have suggested that there may be treaty changes, but we have yet to see the details of such proposals, which would be made to the European Council at the weekend.
Draft EU Budget 2011
William Cash Excerpts(13 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr William Cash (Stone) (Con)
We heard a very interesting and comprehensive analysis from the Minister, and I intend to press my amendment (a) to a vote. I agree very much with the sentiments that lie behind the amendment tabled by my hon. Friend the Member for Clacton (Mr Carswell). I wish only that, before tabling it, he had had a word with me about its wording, because I suspect that we would then have been able to arrive at an agreement. For some reason that completely escapes me, however, he decided to go ahead with his wording.
I went ahead with my amendment, because I have to recognise that the Government are about to engage in some incredibly important negotiations. They have to achieve a blocking minority, which I shall explain in a moment. That is not just a technical question, but a question of whether the Government can, first, get enough people to vote on the conciliation agreement, assuming that we reach such a point, and then achieve a blocking minority so that the Commission has to propose a new budget. That is what we are fighting for.
Mr Denis MacShane (Rotherham) (Lab)
Does the hon. Gentleman agree that to secure such leverage in the conciliation process, it is not helpful if the main Government party is in alliance with those whom the Deputy Prime Minister calls nutters, homophobes and anti-Semites from extreme fringe parties in east Europe, and not in the same family as Mrs Merkel, Mr Sarkozy and other centre-right leaders?
Mr Speaker
Order. May I gently say, with reference to the right hon. Gentleman’s intervention, and as an encouragement and a cautionary note to the hon. Member for Stone (Mr Cash), that I know the hon. Gentleman’s response will very much focus on matters relating to the European budget?
Mr Cash
It will, indeed. I shall make no response to that absurd intervention.
We must achieve our objectives, which are not only to prevent any increase in the budget, but to reduce it. I say that to my hon. Friends as one who, I think, can undoubtedly claim to have fought these battles relentlessly, persistently and consistently for the best part of 25 years—and, if I may say so, with some degree of success in establishing the parameters within which we are now able to address the European issue. In a moment I shall mention what happened at the European Scrutiny Committee this afternoon, merely to illustrate the progress that we have already made in the few weeks that I have had the honour of being the Committee’s Chairman. The whole process has to be conducted in an effective and orderly manner. Otherwise, it plays into the hands of those such as the right hon. Member for Rotherham (Mr MacShane), who want to pretend that somehow there is no justification for our adopting the position that we need to adopt. Tortuous and tedious as it is, the most important thing is to get it right. We have to get the blocking minority if we want to move from wanting to stop the increase to achieving the reduction that follows from it. Let us be responsible about this.
I do not have the slightest objection to the sentiments that lie behind the other amendment. It bothers me, however, that we have two amendments that appear to compete with one another, but in fact convey the same ideas, yet one is orderly while the other is disorderly. I leave it at that; it is for my hon. Friends to judge.
Mr Geoffrey Cox (Torridge and West Devon) (Con)
Does my hon. Friend accept that Mr Speaker has already said that the amendment in the name of my hon. Friend the Member for Clacton (Mr Carswell) is in order; that there is nothing inherently unlawful about it; that there is no reason, based on either law or principle, why Members of this House should not vote for it; and that it is therefore perfectly in order?
Mr Cash
When I say that the amendment is disorderly, I mean that it would, in my judgment, make it more difficult for us to achieve our objectives. I was not referring to it as being disorderly within the framework of the procedures of the House. I make that distinction very clear.
Our net contribution to the European Union is rising from £6.4 billion this year to £8.3 billion in 2011-12 and £10.3 billion in 2015, and our gross contribution is rising from £14 billion to £19 billion. The Budgets Committee is placing a demand on member states to open negotiations on new own resources; the hon. Member for Birmingham, Edgbaston (Ms Stuart) says that that is a
“full part of the overall agreement on the 2011 budget”.
It is reported in the Financial Times that MEPs are even considering an amendment to
“open the way to establish a European tax, making the institutions less reliant on contributions from national governments.”
On top of the budget, the European Parliament is shortly expected to vote on proposals to extend maternity rights to 20 weeks at full pay, which will cost the British Government an extra £2.5 billion a year.
It will be well understood in the House that I am gravely concerned about the developments in this direction. I merely want to be sure that the Government, as well as being able to negotiate this particular, rather difficult round, are able to get stuck into reducing not only the budget itself but the functions that lead to that budget, because the two run together—it is like Parkinson’s law.
Mr Bone
My hon. Friend is making a powerful speech on something about which he knows more than anybody else in the House. His amendment would freeze the budget, while the other amendment calls for a reduction. That may be difficult to achieve, but would it not be helpful, rather than a hindrance to the Minister, as she flies off tomorrow, to know that a certain number of Members want a cut?
Mr Cash
That has to be a judgment for Members in deciding which way they will vote on these amendments. In my view, because of the complexity of this problem and the uncertainties about whether we will be able to achieve a blocking minority in the Council of Ministers—I shall explain the procedure in a minute—we must do nothing that would play into the hands of the Eurofanatics in some of the other member states who want to go down the same route as the European Parliament by endorsing this increase and increasing the budget resources, which is what they are intent on doing in the wake of the Lisbon treaty. That is the problem. It is a matter of judgment, but it is also one of analysis, which is why I take the position that I do.
I may say that I had no discussions whatever with the Government on this issue. I simply tabled my amendment last night because it struck me that in the light of the discussions in the European Parliament—and not in light of the amendment tabled by my hon. Friend the Member for Clacton, which I had not seen—the European Parliament was being thoroughly irresponsible, or at any rate the Budgets Committee was. We have yet to discover whether the European Parliament will persist in the same view.
On top of the proposal for the European budget, there is one to extend maternity rights. It is now clear that it is intended to have a £3 billion increase in the European budget for that reason. The 27 member states will be snubbed if the European Parliament votes in line with the European Commission’s proposal. Recent increases do not include the already agreed, and grossly extravagant, €1 billion increase in the European budget for 2010, which was caused largely by the Lisbon treaty.
On the subject of austerity and responsible measures, according to Government figures the collective budget deficit of the EU’s 27 member states will reach the staggering sum of €868 billion this year, which is more than 7% of the bloc’s gross domestic product. That, of course, is because the European financial crisis is real. One need only look at the countries otherwise known as PIGS—Portugal, Italy, Greece and Spain—not to mention France, which must be included in a lot of the analysis, to see the real implications of that for the individual lives of voters in this country. The governing economic and financial framework established by the EU must be not only revised but radically curtailed.
The budget increase also relates to the extensive bureaucracy that we are having to pay for, such as the European External Action Service, as my right hon. Friend the Member for Wokingham (Mr Redwood) rightly pointed out. Members, including me, raised the gravest objections to the proposals for that body that were made a few weeks ago.
While Westminster and Whitehall, and the country at large, are quite rightly being asked to make savings, what is happening in Brussels? The European Parliament adopted a resolution on 18 May proposing a budget of €1.707 billion, which is a 5.5% increase on the amended 2010 budget and represents 20.28% of the EU’s administration budget.
Kwasi Kwarteng (Spelthorne) (Con)
Many Conservative Members would broadly agree with my hon. Friend’s sentiments; I do not believe there is much division among us on the matter. What practical steps does he think Her Majesty’s Government can take to stop the grotesque expansion in the budget?
Mr Cash
The budget is part and parcel of the issue of parliamentary sovereignty, which I shall come on to in a moment. If we are to act properly and responsibly in our own Parliament, we shall have to deal with this Parliament’s relationship with the EU as a whole. If we get that right, we can proceed in an orderly manner to the questions that we must ask in the political environment that we now experience. That will ensure that we are not subject to further increases in European functions or to the assertions of the European Court and other European institutions on the sovereignty of this House.
Robert Halfon
Although I accept what my hon. Friend says, does he not agree that by the time all that has been done, the budget increase will have gone through?
Mr Cash
With great respect to my hon. Friend, with whom I have had many useful discussions on this matter over the years, I do not agree for the reason that I have already given. It all depends on whether, as a result of the forthcoming negotiations, we achieve a blocking minority in the vote on the conciliation agreement. That agreement has not yet been mentioned, but regrettably it is integral to the procedures that we now face.
I fear that there might be a slight misunderstanding, because I suspect that all Members on the Government side of the House—or even all those in the Chamber—and many people in the Conservative party and the country at large, would agree with both amendments. The distinction I am drawing between them is simply that in the real world we must address such matters in a certain fashion. I do not want to advance my amendment simply because it is mine. It will not do any good if we go too far in merely expressing a sentiment with which everyone agrees, if the consequence of doing so is a counter-productive result. That is why I am taking the position outlined in amendment (a). I urge my hon. Friends—not for my sake, but simply for the sake of ensuring that we get things right—to support it.
Mark Tami (Alyn and Deeside) (Lab)
The hon. Gentleman is part of a coalition Government—or at least part of a coalition. What discussions has he had with his Lib Dem colleagues on the grand plan that he is setting out to skewer the EU budget?
Mr Cash
As a matter of fact, it is pretty obvious that I am not a member of the coalition Government, so let us dispense with that idea straight away. In my votes over the past few weeks, I have probably demonstrated that I have certain reservations about the situation, but I am not going further down that path now.
If the European Parliament is allowed to get away with this, it will add fuel to fire of the riots and demonstrations that are already sweeping many cities in different countries throughout Europe. Those countries face problems of immigration, economic stress and high unemployment, and wilfully to attempt to increase the EU budget when the whole thing needs to be rejected is, to my mind, irresponsible. If the EU Parliament persists, it cannot be regarded as a serious and responsible Parliament. That is my concern.
Michael Connarty
I am grateful to my ESC colleague, who is now Chair of the Committee. I do not disagree with his facts and many of his criticisms are fundamental to the approach of the European Commission compared with that of the UK Government and this Parliament, particularly on the proposal for a tax. However, on trying to achieve a blocking minority, would it not be better in fact to support the Government’s proposal than to take an absolutist approach such as the one he proposes in amendment (a) and, quite frankly, the one that is proposed in amendment (b)?
Mr Cash
Mine is not an absolutist position in the sense in which the hon. Gentleman puts it. My amendment (a) says that an increase is simply not justifiable. What is justifiable could also be described as what is fair and right. I have just described what I suspect will happen throughout Europe if people continue to increase the budget irrespective not only of our spending review, but of the crisis in Greece and of the situations in other member states, including very high levels of unemployment, the rise of nationalism that goes with that, and the populism that will emerge from those who want to agitate and create trouble. We want a stable Europe and a stable United Kingdom, which is precisely why I take the view that we need to act responsibly and ensure that the UK Government have every opportunity to achieve their objectives. I assure the House that nobody can accuse me of being in any way reluctant to speak my mind on matters relating to the EU, and I am sure that no one would presume to do so.
Mr Dodds
I commend the hon. Gentleman for his long years of campaigning on this issue and his work as Chairman of the ESC. Given the provocative behaviour of the European Parliament and its attitude to a budget increase, which he outlined, should this House not put down an equally strong marker by strengthening the Minister’s negotiating hand and saying, “Far from increasing or freezing the budget, we want a reduction”?
Mr Cash
I do not want to enter into an unnecessary altercation about this with my hon. Friend the Member for Clacton, but if the wording had been put to me, I would have included the words “and if the European Parliament and its committee persist in the behaviour that they are now engaged in, we would have to call for a reduction in the budget.” It would be on that basis, not on the basis of requiring the Government to respond when they are in the process of negotiations. Perhaps the distinction comes at that point, although I agree with my hon. Friend’s sentiments.
Mr Cash
No, I have heard enough from the right hon. Gentleman. All he does is repeat his old mantras—[Interruption.] I do not accept that: I simply need to get to the next point that I wish to make about the procedure that is to be followed.
It is clear in the light of the current state of affairs that the Government should adopt my amendment and reject the increase. The European Parliament, in the current austerity conditions, is wilfully affecting the economies of the 27 member states, and of the United Kingdom in particular. My European Scrutiny Committee has today agreed to have a full inquiry reaffirming the sovereignty of the United Kingdom Parliament in relation to the assertions of the European Court of Justice on such matters. The Government have agreed to the Committee’s demand for pre-legislative scrutiny, and I am happy to announce that the Minister for Europe will give evidence in public on these critical matters—and that will have an impact on the issues that we are discussing in this debate—as will other experts on the compatibility of Britain’s membership of the European Union with the doctrine of parliamentary sovereignty in the light of the European Union’s own assertions that the parliamentary sovereignty of this Parliament has been overtaken.
The Government have announced that they will introduce a clause to address the question of parliamentary sovereignty, but our Committee will examine the implications of this in the light of the declaration of primacy of European law by the European Court of Justice and as contained in the Lisbon treaty. All these matters require the closest analysis for the sake of our democracy and the electors of the United Kingdom on questions relating to taxation, spending, the European budget, our contributions and all the functions of the European Union. We have an absolute requirement to get this right and we will have a full examination of the issue of parliamentary sovereignty, including the subject matter of this debate.
Mr Philip Hollobone (Kettering) (Con)
Does my hon. Friend believe that it would have been helpful if the Minister for Europe had been in his place for this debate?
Mr Cash
It is always helpful when the Minister for Europe is present, and I endorse my hon. Friend’s view. However, the Economic Secretary has set out the Government’s view and their determination to get the negotiations right. They will have to succeed in that aim, because there is a huge amount at stake.
The Commission submitted its draft budget to the Council of Ministers and the European Parliament, but the Council rejected the Commission’s proposals by qualified majority vote. The proposals then passed to the European Parliament. In the next few days, it is expected that the European Parliament will adopt the amendments to increase the budget and forward the amended draft to the Council of Ministers and the Commission. The European Parliament and the Council will then convene a conciliation committee to seek to resolve their differences, if any. It is essential that the Government negotiate a blocking minority of 91 within the Council of Ministers to stop the increase at that point. The decisions will be taken by a majority of 14 out of 27 MEPs on that conciliation committee, together with a majority of the 27 member states on the Council of Ministers. That is why it is vital that the Government have the strongest possible mandate to negotiate a blocking minority to determine whether there is agreement in the conciliation committee on the joint text—as I am sure is the intention. If both the MEPs and the Council of Ministers, through their respective procedures, reject the joint text, or if one rejects it and the other fails to take a decision—this point is crucial, and that is why this is such a delicate matter—the European Commission is bound to propose and submit a new budget that will deal with the problem properly.
That is why I take the position that I do in my amendment. I am in no way detracting from the sentiments expressed by my hon. Friend the Member for Clacton. I absolutely endorse those objectives; indeed, I have advocated them repeatedly—relentlessly—over the past 20 years. However, there comes a moment in the tide of man, as they say, when it is essential to get the responsible procedures working in an orderly manner. I do not in any way want to find the Government’s position compromised by a vote that could take place this evening, the effect of which would be to put the Government position into reverse.
We are at a crucial moment. I very much respect my hon. Friend’s objectives, but in this context it is important to get things right. On this occasion, I would strongly urge my hon. Friends to accept my amendment and allow the Government to proceed on that basis, rather than on the basis of something based on a hypothesis.
Mr Davidson
Now that the hon. Gentleman has withdrawn his remark, I shall not respond to it.
The point about the External Action Service has already been made, but I was astonished at the time of its creation that so many otherwise sensible people believed that it would result in no net growth in expenditure. Of course it was going to, and it was always intended that it would do so. It is interesting that those who wish to be deceived are deceived, including by promises from the European Union to moderate or reduce expenditure. That is simply a fig leaf. Those who accept such promises choose to do so, and then pretend to be astonished when it turns out that the situation is different. The idea that the Lisbon treaty is not the constitution is simply laughable, and only those who wish to be deceived by that twisting of words are so deceived.
Mr Cash
Does the hon. Gentleman agree that the root of the problem is not only the EU budget, but EU functions, which were greatly increased by the Lisbon treaty? The ESC agreed this afternoon that we will examine fully the question of parliamentary sovereignty as against European functions. Does he also agree that a precondition of reducing EU functions is asserting UK sovereignty, and requiring the judiciary to give effect to Westminster legislation and to override European legislation as and when necessary?
Mr Davidson
I accept that. It is enormously helpful that the ESC, of which the hon. Gentleman is Chair, will pursue that course of action. I only hope that the Committee does not take too long.
Mr Davidson
That is very welcome indeed. Pursuing that sooner rather than later is welcome.
The point about the External Action Service is not only that it costs more money, but that it is invidious. The desire of the EU is that it should be a state and that the EAS should be an embassy. I note that the EU has just taken over enormous premises in central London. Those will be nothing other than a centre for pro-EU propaganda and an attempt to intervene directly in British politics and British political affairs in a way that we would not tolerate from any country—I almost said “any other country.” We would not allow the Austrians, the Australians, the Canadians or anybody else to have a propaganda outfit in this country that spent enormous amounts to intervene directly in British politics, yet we are prepared to allow the EU to do so. In my view, its wings ought to be clipped.
The hon. Member for Daventry (Chris Heaton-Harris), who I believe has left the Chamber, commented on the extent to which we reflect our constituents’ anxiety about EU spending. I think that he was wrong, because we do not accurately reflect those. The balance of this debate is clearly in favour of constraints on EU spending, and that reflects the balance of opinion among the public, but I fear that the vote will not reflect that because vast numbers of Conservative MPs will be driven like sheep into the Lobby to support the Government and oppose any proposal to restrict the expenditure of the EU.
I hope that we will be able to return to the discussion of a referendum. It is correct for Conservative Members to point to the Labour Government’s failure to honour their commitment to a referendum on the constitution, but I point to the Conservatives’ failure to do the same. Given that next year Europe intends to re-examine its budget and the common agricultural policy, we should start by saying that that major revision should be put to the British people in a referendum, to determine whether they are prepared to accept the new financial arrangement, which will represent—I hope—a considerable break with what has happened in the past. Of course, it may not break with the past, but it would strengthen the Government’s hand enormously if we made it clear that they were prepared to take any new financial settlement with Europe, achieved after a long period of debate, to the country for resolution.
In the meantime, I support the proposals that urge a reduction in the EU’s expenditure, and I hope that we will not discover that a majority of Conservative Members oppose those proposals.
Economic Affairs and Work and Pensions
William Cash Excerpts(14 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Darling
No, I am not going to give way. I want to draw attention to one of the biggest problems that I see in the future. I know that Governments in countries right across the world have to get their borrowing down and reduce their deficits. However, I am particularly worried that, if we do not have some countervailing pressure to support growth and measures to get growth in our economy, we run the risk of having many years of it merely bumping along the bottom, sometimes growing and sometimes not. That will inevitably mean that we will have higher unemployment and that aspirations and sentiment will be affected.
I see that especially in the EU at the present time. The EUROSTAT figures published last Friday went almost unreported in this country, but what is worrying is that we see that Germany’s growth in the first quarter of this year was 0.2%. We see France’s at 0.1%. We see Greece not surprisingly, back in recession. We know that Spain has unemployment of more than 20%. I am glad that the Chancellor enjoys going to ECOFIN so much, and long may he enjoy that. I am fascinated that the Conservatives now find so much succour in Europe. All I can say to him is that I worry that rather too many finance Ministries, yes want to get their deficit down, but are not concentrating on the structural reforms that are necessary within the EU or on measures to achieve growth in the future. That is a real threat.
It worries me that the present Administration here in the United Kingdom also fall into that camp. It is interesting that in the past six months the Prime Minister has made only one speech on growth. It flickered into life in November just before the CBI conference last year. We do not hear what measures the Government intend to put in place to get the rebalancing of the economy that we want to see—measures to encourage private sector investment to come back. It is not coming back yet in sufficient volume to take the place of the public sector investment that the Chancellor wants to take away. We have to have a clear, strategic look at this to make sure that we can get growth in this country as well as in the EU, which after all is our major export market.
Mr Darling
I knew that if I mentioned Europe this would happen, as sure as night follows day.
Mr Cash
I do not want to disappoint the shadow Chancellor, but I am much more interested in the reasons why, when he was Chancellor—despite the tissue of self-justification that we have just heard—he was never prepared to refer to the true level of debt. He said that no Conservative raised it, but a number of us raised the true level of debt from 2008 onwards. Does he deny that the true level, according to the Office for National Statistics, is £3.1 trillion and not the amount that he has been describing over the past few months?
Mr Darling
When comparing the judgments that we make about what is necessary fiscally, I do not think that bringing on to the main balance sheet PFI, Network Rail and everything else particularly helps. However, if that is the course of action that he has managed to persuade the Chancellor to take, we will look with great interest at the Budget in a couple of weeks. I just do not think that it is a particularly accurate or informative way of looking at the accounts. I have said that before to the hon. Gentleman.