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Treaty of Lisbon (No. 4)

Volume 471: debated on Wednesday 6 February 2008

Question again proposed.

I am grateful to follow the hon. Member for Hertsmere (Mr. Clappison), who made a sound and strong speech.

We have heard some great names thrown around the Chamber, such as Mr. Giscard d’Estaing, President Sarkozy and Baroness Thatcher; indeed, we have even gone as far back as the rebate, which she negotiated after 1979. However, I should point out to the hon. Gentleman that it was Jim Callaghan who first raised the rebate when he was Prime Minister in 1978. It was not Lady Thatcher alone who secured it; rather, it was already a Government policy to get some rebate back.

There is a paradox in the Conservatives’ policy on Europe. The one thing that they should support is the single market, because a free trade area is what they essentially believe in, yet they walk away from it. The hon. Member for Hertsmere touched on that when he talked about supranationality, but I should remind him that from 1957 the goal of the European Union, as it now is, has been ever closer union. The Union is a political space, an economic space and a geographic space—it is all three, together as one. Today we are debating the economic space proposed by the Lisbon treaty and the essence of the Common Market, or the single or internal market, as it is now called.

We have, rightly, been given quite some time to deal with the motion, to which the amendment standing in the name of the right hon. Member for Richmond, Yorks (Mr. Hague) has been moved. We have heard interventions from the hon. Members for Forest of Dean (Mr. Harper) and for Hertsmere and my right hon. Friend the Member for Leicester, West (Ms Hewitt), as well as a speech by the hon. Member for Runnymede and Weybridge (Mr. Hammond). It is as well that we use this time to lay to rest the issue of the protocol—that is, the idea that we moved away from having undistorted competition in the new amending treaty.

It is a surprise that the Conservatives complained about the constitutional treaty—they say that it is not defunct, but what we are dealing with now—because the phrase “free and undistorted competition” was in fact contained in article 3 of the now defunct treaty. When the constitutional treaty was abandoned, so was that article. The protocol is indeed legally binding, as my right hon. Friend said last week, quoting the Law Society. The internal market, as set out in article 2 of the treaty on European Union, includes a system ensuring that competition is not distorted. We can go as far back as the European Coal and Steel Community or the treaty of Rome, whose essence was the idea that the great nation states of Europe would never fight again, because trade would prevent them.

The hon. Gentleman is saying that the Lisbon treaty is somewhat worse than the original constitution, on which he promised his constituents a referendum. How can he, as a man of integrity whom I greatly respect, justify not fulfilling his promise when he is now offering them something even worse?

I have the same respect for the right hon. Gentleman, as he will know. We go back a long way and I always congratulate him on his Europeanism, with his house in France. It is very nice of him to be so European and to have a domicile in France as well as one here.

I shall not try to quote Shakespeare again—you did not want me to do so last week, Mr. Deputy Speaker—but there are so many arguments that could be made on the Single European Act and the single market, yet they are not made, even by the hon. Member for Runnymede and Weybridge or the right hon. Gentleman. However, I would like what we mean when we talk about this legally binding protocol to be put on the record at least once, properly and coherently, because there are those in this country who follow our debates in Hansard. The former Prime Minister, Tony Blair, said:

“There was also a discussion at the Council about competition. The treaties have always made it clear that competition in the internal market should not be distorted. The now defunct constitutional treaty’s objectives would have included new wording about “free and undistorted competition”. When the treaty was set aside, that provision was lost, but we agreed on a new and legally binding protocol to be annexed to the treaties, which reaffirms the commitment to ensuring that competition is not distorted, and the other references to competition in the existing treaties will remain: for example, articles 4, 27, 34, 81 to 89, 96, 98, 105 and 157 from the European Community treaty. The legal position in relation to competition therefore remains unchanged.”—[Official Report, 25 June 2007; Vol. 462, c. 22.]

Should not the removal of undistorted competition be welcomed, when we know that it is combined with the victory on the services directive, which has protected fundamental services such as the health and other social services in this and other countries? It is about competition, but with a realistic assessment of the needs of countries to have fundamental social services.

I am grateful to my hon. Friend. Competition is in the interests of the consumer, the producer and the wider European Union of some 570 million citizens. There are benefits, as my hon. Friend the Member for Llanelli (Nia Griffith) mentioned earlier, from one end of the Union to the other. My hon. Friend the Member for Linlithgow and East Falkirk (Mr. Connarty) also anticipated my comments on financial services.

One would imagine that the Conservative party, which believes in free trade, believes in the extension of the financial services directive. One would think that Conservatives welcome the fact that the City of London, the greatest financial city in the world, will be able to march into Paris, Frankfurt, Milan and extend the wonderful financial services of our country. Yet the hon. Member for Castle Point (Bob Spink), who is no longer in his place, and Conservative Members more widely look on the financial services directive as though it were some element of protectionism. They do not want qualified majority voting on financial services because they believe that if we have it, we will lose again. In fact, that is contrary to what the Conservative party believes in—or should believe in. That takes us back to the point made by my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson), who wondered what the present Conservative party was all about. Does it ever look itself in the mirror or think about what it is saying about business men, industry and the City of London? That is a conundrum that no Labour Member is able to fathom.

I will take note of your counsel, Mr. Deputy Speaker, because I know that other Members want to speak. The internal market and the Lisbon agenda are not perfect. The hon. Member for Runnymede and Weybridge was absolutely right to say that it has taken us 50 years to get where we are; the internal market is not complete and it needs structural reform. We need more competition and more flexibility, leading to better jobs. We need less protection, more growth and employment, improved productivity and enhanced competitiveness, which are all linked to social provision. Economists and the hon. Member for Runnymede and Weybridge might lament the slow pace of implementation of the Lisbon agenda, but they should take into account the fact that net profits of the Union’s top 300 quoted companies rose 56 per cent. between 2000 and 2004. The return on equity, furthermore, was 14.8 per cent.

The truth about this European Union of ours and the Lisbon agenda is contrary to what the Conservatives suggest. We, as Great Britain and the United Kingdom, are here within the Union to give leadership. We need to send out the message from this House of Commons that the single market and the Lisbon agenda will give us a strong economy, leading to prosperity—a prosperity that also enables social provision.

The Union’s economic strength is the single market. As member states’ activities converge, enacting their own structural reforms, so the well-being of EU citizens will be advanced, strengthening the concept of interdependence and assuring the future of all our generations to come. That is the message—the positive message of the Lisbon agenda and the positive message of our Government—that this House should send out. That is how we will lead the debate through the amending treaty and back into the councils of Europe.

It is useful to remind ourselves of why we are discussing a European treaty plain and simple, and not a treaty on the European constitution. The reason is that the people of France and the Netherlands said no. One of the main things that they said no to was a vision of Europe in which public services were privatised and the social gains of the past 50 years were sacrificed in order to secure the economic gains from the single market, which we have heard so much about in this debate.

That is not the realm of a Eurosceptic fantasist. After all, the Secretary of State said that removing barriers to competition was the fundamental task of the European Union. As for the Commission, it began with the network industries—the utilities in energy and telecommunications—but it has already moved on. Only last week, the third postal services directive was agreed, which will almost certainly mean the end of a publicly owned postal service in small European states such as Luxembourg, and could spell the end of the Post Office in this country.

In the neo-liberal newspeak of the European Commission, privatisation is known as liberalisation, which sounds much more benevolent, and public services—far too value-laden a term—are known as services of general economic interest. I do not think that many people would rush to the barricades to defend SGEIs, as the technocrats call them. People did take to the streets, however, against the Commission’s directive on opening public services to competition—the controversial Bolkestein directive—which was part of the reason why the constitution was sunk.

In some ways, the treaty represents progress. There is recognition of public opposition to the further extension of the single market into the public realm. For the first time in the history of the EU, a specific protocol is devoted to services of general interest. My core contention, however—and here I very much agree with the contribution of the right hon. Member for Holborn and St. Pancras (Frank Dobson)—is that the treaty’s provisions are, unfortunately, insufficient to provide us with the necessary legal safeguards against further incursions by the Commission and extension of the single market model into the realm of publicly run, managed and financed services.

The key problem with the protocol is that it does not define the distinction between services of non-economic general interest and services of general economic interest. I will not detain the House on that matter, but that is part of the problem leading to legal uncertainty. What is the legal position of public services as a result of the treaty?

All the evidence is that the Commission takes an expansive line on the definition of the role of competition policy with regard to public services. Only last month, Jörgen Holmquist, the Commission’s director general for the internal market and services, said at a conference that in his view, everything apart from the police, the justice system and social security could be marketised. He saw many advantages in promoting that through the Commission’s policies.

As the right hon. Member for Holborn and St. Pancras said, the best example is the Kyprianou directive on health care, which sought to introduce a form of health tourism. Superficially, it might seem to the hon. Member for Twickenham (Dr. Cable) and the right hon. Member for Suffolk, Coastal (Mr. Gummer) that that has some advantages for individuals in the short term. But we should think of the disadvantages. How can one plan a publicly run, publicly owned health system, and manage resources and work force requirements, if the level of operations that will need to be financed—and the financial cost incurred by poorer countries’ health systems in making reimbursement for operations in higher-cost countries—is unclear?

The Commission has dropped the Kyprianou directive, which was supposed to be published on 19 December. The speculation in the European Parliament is that the Commission wanted to avoid the publication of a controversial directive while member states were ratifying the treaty. This is what one socialist MEP—who led the opposition to the Bolkestein directive—had to say about the Commission:

“They're afraid of the reactions and of the consequences as long as the new reform treaty remains to be ratified by all member states…This is typical of this Europe: keep everyone sweet until the ink is dry on all of the signatures and then get on with far-reaching measures which have long been planned.”

That view has been echoed by the president of the Party of European Socialists, of which the Labour party is a member. The directive has been pulled by the Commission. It may be published after ratification, or even after the European parliamentary elections in 2009, because the Commission is worried about the public reaction.

That worry about the extension of the single market model is not confined to health care. It is happening in other areas as well. In July 2005, the Commission wrote to the Dutch Government informing them—a directly elected Government—that their system of social housing was not compatible with the single market, in order to compel housing associations to sell their empty properties. As a result, the highly successful Dutch housing association model, which mixes social housing with private rented accommodation, is unlikely to survive. Now the European Property Federation has complained to the Commission about municipal housing in Sweden, and it is only a matter of time before the same complaints are made here.

As it stands, the treaty does not provide sufficient legal certainty about the special position of public services. Given past experience, it can therefore be expected that the Commission and the Court will continue to interpret the treaty in a manner that is slanted towards the opening up of more and more public services to competition.

The hon. Gentleman is making a strong case, but he ignores the detail of the protocol. Article 1 clearly states that

“services of general economic interest”

will be organised

“as closely as possible to the needs of the users”.

That, combined with the victory won on the services directive in the Parliament since the constitution—thanks to the work of Arlene McCarthy, a Labour MEP—has changed the environment in which the provision will be interpreted. Surely the hon. Gentleman should give credit where it is due, and recognise the progress that has been made.

I said that some progress had been made, in the addition of the protocol as a result of political pressure—not least from the Dutch Government—following the Altmark decision in the European Court of Justice, which gave rise to the Commission’s letter. Nevertheless, the Party of European Socialists group in the European Parliament is very worried about the draft Kyprianou directive.

The central point that I am making, which has been made by public services trade unions and other stakeholders, is that we have no legal certainty because there is no definition in the protocol. Unfortunately, when there has been tension between the rights of subsidiarity and the Commission’s right to remove what it sees as impediments to the four freedoms and to free competition, free competition has always won. That has always been the default position of the Commission and the Court.

We need certainty. The Commission and the Court should not be allowed to override the health, education and housing policies of directly elected Governments, whether they are member states’ Governments, devolved Administrations or local authorities. This is a constitutional issue, which is why we cannot support the Government’s motion, and why we uphold the right of the people of this country to a referendum on the treaty.

On a point of order, Mr. Deputy Speaker. This is a very short debate, lasting only three hours, and already the Front Benchers have taken up nearly one and a half hours of it. A three-hour debate on amendments to the European Union (Amendment) Bill will follow, and Front Benchers will have opportunities to speak on those. In those circumstances, I ask whether the debate can continue without the Front-Bench spokesmen. If a procedure can be invoked for that purpose, I should like to move the appropriate motion. Is there such a procedure?

All that the hon. Gentleman is seeking to do is take up even more time. I think that we should proceed in the normal way.

I thank the hon. Member for Leyton and Wanstead (Harry Cohen) for highlighting how extraordinary it is that we have so little time to debate this Bill in the required detail.

I thought there might just possibly be some degree of consensus in the debate on the single market. There is a specific question within the governing party as to whether the Government support the directive on cross-border health care—a point raised by the right hon. Member for Holborn and St. Pancras (Frank Dobson)—and we look forward to hearing their views on that, but on the general issue of the single market, consensus could be found if we were to look for it, although after a slightly snippy contribution from the Secretary of State I am not sure that we found it this afternoon.

Those of us who are somewhat sceptical about some aspects of the European Union welcome the idea of trade; we want to bring down barriers and we are against protectionism. That point of view has been there from the very beginning when the UK joined the Common Market, as my hon. Friend the Member for Hertsmere (Mr. Clappison) pointed out. There is also a recognition by those on the Government Benches and others who tend to be more sympathetic to the European Union that not everything is going quite as well as it might be in this regard. The Government’s own assessment of the single market, published a year or so ago, said that

“the rate of progress—in terms of strengthening and deepening the Single Market—has slowed down in recent years.”

There is a recognition on all sides that too much regulation is coming from the EU and that that is damaging the competitiveness of Europe as a whole and the single market, and in particular that it is causing difficulties with job creation. The Minister for Europe made a point last night about there being 92 million economically inactive citizens of the EU; moreover, EU growth is slower than that of the US and our unemployment is higher. As the Prime Minister said when he was Chancellor,

“we cannot claim today’s European social model is fair or effective when there are 20 million people unemployed and nearly half of them for more than a year.”

If the hon. Gentleman’s party were to seek to renegotiate the treaty, given the importance of preventing unfair competition through the exploitation of workers, would it feel that any provisions should be introduced on a Europe-wide basis to allow free competition and ensure that there was not unfair competition because of exploitation?

The point I am making is that the current balance is not quite right and that regulation is too heavy-handed. Ministers share that point of view, although I am unsure whether the hon. Lady does. Given the consensus we have on wishing to bring down trade barriers and on the regulatory burdens in the EU being too high, we must examine how the treaty performs in addressing those problems—and it clearly fails.

The heart of the matter is the issue that my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) and other Members have raised: the dropping of the objective of free and undistorted competition from the objectives of the EU. That is important. That was a concession made by Tony Blair to the French President, shortly before President Sarkozy became the leading supporter of Mr. Blair’s campaign to become president of Europe, but the Government argue that it does not really matter, as it is all in a protocol. What that point of view fails to appreciate is that European Court of Justice interpretations of the provisions of treaties tend to place greater weight on the preamble and the early articles. Evidence to support that comes from Professor Alan Riley of the City university in London, who wrote for the Centre of Policy Studies:

“No mere protocol can achieve the same interpretative status as the preamble and the first few articles”,

and he supports that assertion with a long list of examples from case law.

Antonio Bavasso, visiting professor of competition law at University college London and a partner with Allen and Overy, said the following about the changes as a consequence of this deal:

“the political significance of the change cannot be overstated…The foundations of competition enforcement are now weaker.”

Both those independent experts make the argument that the change will weaken what we see as our objective—free and undistorted competition. I know that many Labour Members do not support that view.

I do not have much time, but I shall briefly give way to the hon. Gentleman. Does he support free and undistorted competition?

I have said that I want free and open competition, but I do not like the word “distorted”. Were not the Maastricht treaty’s provisions on monetary union and the UK opt-out contained in a protocol, which has protected us all these years?

The difficulty that Labour Members have when they make that argument is that the European Court of Justice will sometimes have to balance two conflicting objectives. If an objective is in the early articles to the treaty or in its preamble, that gives it greater weight than if it were in a protocol. This situation is completely different from the one in respect of monetary union.

Professor Alan Riley makes three important points about the consequence of the downgrading of competition. This is not just a nebulous concept, because he gives three examples. He says that this change will make it easier to expand the scope for lawful state aid and to permit merger clearance on broader industrial policy grounds, and that it will weaken pressure for market liberalisation. That is, of course, the Sarkozy agenda.

When President Sarkozy secured the downgrading of competition, he said:

“We have obtained a major reorientation of the objectives of the Union”.

That is the key point. He continued:

“The word protection is no longer taboo.”

He also described competition as a “dogma”.

I hope that my hon. Friend will forgive me for not giving way. I need to complete one or two remarks.

President Sarkozy has said that a competition policy could emerge

“that will favour the emergence of European champions”.

He is cutting something of a dash on the world scene at the moment, and is emerging as a dominant figure in European politics. I am afraid that he is showing no enthusiasm for the Anglo-Saxon model—despite a lot of enthusiasm for a Franco-Italian model. His view is wrong in terms of the best interests of the European Union, and it is certainly wrong in terms of the benefit of the United Kingdom.

If the treaty had been in our interests and if it had been achieving our objectives, what would it have looked like? Such a treaty would have included provisions to bolster competition, not weaken it. Where are the Lisbon treaty’s provisions to enable member states, not just the Commission, to propose the scrapping of unnecessary regulation? Such provisions do not exist. The treaty moves us away from the Anglo-Saxon model towards a more interventionist model. Its framework encourages more regulation, not less. Its objectives encourage more protectionism, not less. It is a reorientation of the EU away from the economic policies that create jobs and wealth, and towards the short-term protectionism that most people in this House oppose.

I am delighted to fulfil my regular slot winding up our short debate. [Hon. Members: “Too short”] I hear from a sedentary position that it is too short, but what we have done today is take advice from the Conservative Opposition’s amendment to the programme motion. We thus allowed three hours for the themed debated and three hours in which to consider amendments. The format of our debate is therefore exactly as the Conservative Opposition wished.

May I also bring to the House’s attention the fact that since I last had the opportunity to fill this slot, Slovenia, Romania and Malta have ratified the Lisbon treaty? I ask the House to celebrate that. The news will doubtless cause great rejoicing throughout this Chamber and across this nation.

I also welcome the hon. Member for South-West Hertfordshire (Mr. Gauke) to the debate. He had his first opportunity to speak in one of the themed debates in this European treaty process. I think the House would accept that he made his case in a thoughtful and occasionally humorous way. I look forward to hearing from him again as the Bill goes through the House.

We also had the opportunity to hear from several of my right hon. and hon. Friends, including my right hon. Friend the Member for Holborn and St. Pancras (Frank Dobson) and my hon. Friends the Members for Llanelli (Nia Griffith), for Newcastle upon Tyne, North (Mr. Henderson) and for Middlesbrough (Sir Stuart Bell). If time allows, I will respond to the points that they made.

It has been said before, and I shall say so again clearly today, that the European Union helps to make the United Kingdom stronger, safer and better off. However, as I said last night, while the single market has been a remarkable success for the European Union and the United Kingdom, there are still too many people who are not benefiting from the economic growth and prosperity that the single market has brought us. There are 15 million Europeans without the basic literacy skills that they need to compete with the rising global economies. When we conclude the process on the Lisbon treaty, we should apply our political attention and determination to the Lisbon agenda for jobs and growth.

We have not heard one word about China or India in the course of the debate so far. How can we compete, and reverse the decline in our market share internationally, if we have a European Union that is locked into the over-regulation and increasing protectionism that will prevent us from competing and engaging in the globalised economy?

I hope that the hon. Gentleman does not mind my saying that I agree with the basic premise of some of his comments. There is an old stereotype of China and India that claims that their role in the global market is to compete at the bottom end. That is the old economic reality and is no longer relevant. Research spending in China is set to catch up with the EU by 2010 and is growing by 20 per cent. a year. When it comes to economic growth, it has taken China 10 years to achieve what Japan took 35 years to achieve. While we agree on some of the analysis underpinning the debate, we often come to different conclusions. The conclusion of the Government is that the evidence makes the case for being more effective through the European Union, as a group of 27 sovereign nations working together where they can in the largest rules-based market in human history.

My hon. Friend mentioned that there are parts of Europe that have not benefited as much as they should from being a member of the EU. The Government introduced objective 1 funding for Wales and other areas of the UK. Why does my hon. Friend think that the Conservatives, when they were in government, failed to apply for objective 1 funding, especially given that they had a pit closure programme, they were running down steel mills, and seaside towns were left to dangle in the wind?

My hon. Friend talks with great experience in such matters and the issue of the previous Government’s record on objective 1 deserves greater focus on another occasion. In recent years, the growth in the labour market in the UK has been in areas that have previously seen endemic and generational unemployment. There is still much more to do, but the improvement has been seen in the most difficult, disadvantaged parts of the UK, many of them represented by my right hon. and hon. Friends. Many of our constituents now compete in a genuine global labour market, and this is the first generation for whom that is the case.

My hon. Friend will have listened to the debate and will be aware of the concerns that have been raised by some hon. Members about the impact of the single market on public services. He will have heard reference to the protocol on services of general interest that was negotiated. In my constituency, we have lifeline ferry services provided by CalMac—Caledonian MacBrayne. The previous Scottish Executive spent more than £17 million on a tendering exercise that resulted in CalMac keeping the tender. Will that exercise now be required, in his view, under the protocol?

I am well aware of the ferries in my hon. Friend’s constituency. I look forward to travelling on one to the Isle of Arran this Sunday with my family. I shall discuss that matter with the ferry crew and others this Sunday. The protocol makes it clear for the first time that the provisions of the treaty do not affect in any way the competence of member states to provide, commission and organise non-economic services of general interest. I look forward to continuing that conversation with my hon. Friend.

Let me turn to the point on health made by my right hon. Friend the Member for Holborn and St. Pancras. Maastricht introduced competence on public health, of course, and the treaty makes it clearer than ever before that member states remain solely responsible for organising, delivering, and making decisions about the allocation of resources to their health systems. I look forward to continuing the dialogue with my right hon. Friend. Article 2 says that individual states should organise and deliver the health systems that I have mentioned. The words used are new in the Lisbon treaty and helpfully clarify that the allocation of resources in public health systems is for member states to decide.

Let me turn to the subject of competition, which exercised Conservative Members at great length.

Is the Minister telling us that the Lisbon treaty sets aside the ECJ’s Watts decision? If it does, I would welcome it.

The Lisbon treaty makes a stronger, clearer statement than ever before about the role of national Governments in organising the resources and funding of their national health services. We will discuss the issues in greater detail as the Bill goes through Parliament.

On competition, the protocol has the same legal weight as other treaty texts. The Law Society, of which the hon. Member for South-West Hertfordshire is a member, said that

“a Protocol records that the EU’s internal market includes a system which ensures that competition is undistorted. This does not change the current legal position”.

The hon. Gentleman is a member of the Law Society; I suggest that he should pay more attention to his own organisation’s reflections on the issues.

This afternoon, the statements from the Opposition have made the situation very clear. My hon. Friend the Member for Newcastle upon Tyne, North said that they have only one ally across Europe. Unusually, he is wrong. I met the Deputy Prime Minister from the ODS in the Czech Republic, Mr. Vondra, and he is strongly supportive of the Lisbon treaty. Conservative Members have had two weeks to name a single conservative party anywhere in Europe that supports their rejection of the treaty, and so far they have been unable to do so.

Question put, That the amendment be made:—

It being more than three hours after the commencement of proceedings on the motion, Mr. Deputy Speaker put forthwith the Main Question, pursuant to Order [28 January]:


That this House approves the Government’s policy towards the Treaty of Lisbon in respect of provisions concerning the single market.