My Lords, with the leave of the House, I will repeat a Statement made by my right honourable friend the Prime Minister in another place, entitled “European Council”.

“With permission, Mr Speaker, I would like to make a Statement on the European Council held in Brussels last Thursday and Friday, which I attended with my right honourable friend the Foreign Secretary and which focused on the intensive economic co-operation needed within Europe and across the world as we follow through the agreements made at the London G20 summit and ensure the co-operation needed in economic and environmental policies.

The Council expressed its determination to continue playing a leading role at the global level, and called on its international partners to implement fully the commitments made at the London G20 summit: in particular, by providing additional resources to international financial institutions and accelerating the reform of the financial and regulatory framework. Member states have already stated their readiness to provide fast temporary support up to a total of €75 billion. The Council also concluded that member states stand ready to take their share of further financing needs agreed by the London summit.

For many months, the UK Government have rightly been at the forefront of proposals to strengthen international regulation. That is why we have taken forward Lord Turner’s report. Radical proposals for the reform of regulation were a key outcome of our G20 summit in London in April. With so much of Britain’s financial sector’s activities linked to Europe and the rest of the world, and with cross-border investments between the UK and the rest of Europe alone amounting to more than €250 billion every year, Britain needs greater European as well as wider international cross-border supervision.

So in line with the recommendations of the reports from Lord Turner and de Larosière, the Council agreed the principles on which a new international framework for the regulation and supervision of financial services in Europe would be delivered: first, the better early warning of financial sector risks through the creation of a new European Systemic Risk Board to complement the work of the IMF and the Financial Stability Board and to help to identify problems early and thus prevent future crises from developing; secondly, and as proposed by the review from Lord Turner—which was itself welcomed by most people in this House—agreement to develop a strengthened and more detailed set of European rules for the single market in financial services, measures to raise the quality and consistency of supervision across Europe, to ensure that common rules are enforced, and to improve co-ordination between national supervisors, and measures for mediation between the supervisors of institutions with operations in more than one member state; and, thirdly, a clear commitment from the Council, which,

“stresses that decisions taken by the European Supervisory Authorities should not impinge in any way on the fiscal responsibilities of Member States”.

The principles agreed at the Council provide the foundation for a new financial supervisory architecture, with the aim of protecting our financial systems from future risks and helping to ensure that the international regulatory failures of the past will not be repeated.

The G20 decided that countries should take similar action on economic policies in what is recognised by the leader of the Opposition as a Europe-wide recession. While the Council acknowledged that the co-ordinated measures taken so far in support of the banking sector and the wider real economy,

“have been successful in preventing financial meltdown and in beginning to restore the prospects for real growth”,

the Council also emphasised the,

“imperative for the EU to continue to develop and implement the measures required to respond to the crisis”.

While it is absolutely right that we maintain our commitment to medium-term fiscal sustainability, it is equally vital, as the Council reiterated, that we remain determined,

“to do what is necessary to restore jobs and growth”.

Recognising the worldwide nature of the financial crisis and that around 1 billion people face poverty, malnutrition and hunger, the European Council also decided that countries should continue to pursue together the millennium development goals and co-operate on the environment.

On climate change, the Council agreed:

“The time has now come for the international community to make the commitments needed to limit global warming to under 2°C”,

and that a coherent response to the challenges posed by both climate change and the economic and financial crisis would, by enabling the move to a low-carbon economy, offer new opportunities for jobs and growth. The Council repeated its call for all parties to co-operate in reaching an ambitious and comprehensive agreement in Copenhagen later this year and to accelerate the pace of negotiations at forthcoming high level international meetings, including the G8 and the Major Economies Forum next month.

The Council agreed that both developed and developing countries should contribute finance in the fight against climate change and that such global burden sharing should be strictly on the basis of two principles: the ability to pay and the scale of emissions.

When the Council met in December, we agreed that we would seek to provide the legal assurances that Ireland needed to move forward on the Lisbon treaty—on taxation, defence, the right to life, education and the family. However, we were equally clear that, in doing so, there could be no change or amendment to the treaty, only clarification of what it will and will not do. That is exactly the purpose of the guarantees that the Council has agreed for Ireland. To be absolutely clear, the Heads of State or Government have declared:

“the Protocol will in no way alter the relationship between the EU and its Member States. The sole purpose of the Protocol will be to give full Treaty status to the clarifications set out in the Decision to meet the concerns of the Irish people. The Protocol will clarify but not change either the content or the application of the Treaty of Lisbon”.

Its content is fully compatible with the treaty of Lisbon and will not necessitate any re-ratification of that treaty. Those guarantees will be set out in a protocol only at the time of the next accession treaty. This will be specific to Irish concerns. Its status will be no different from our own protocols and will be subject to ratification in this House.

On Burma, the Council marked the 64th birthday of Aung San Suu Kyi by expressing its deep concern at her continued imprisonment, as the Burmese regime still pursues its absurd and contemptible sham trial. The Council called for her “immediate and unconditional release” and agreed that if this does not happen, Europe,

“will respond with additional targeted measures”,

against the Burmese regime. It is absolutely right that we stand ready to step up sanctions. We will also work with Asia to further increase international pressure and I hope that the Secretary-General Ban Ki-Moon will be able to visit Burma soon.

On Iran, the Council,

“stressed that the outcome of the Iranian elections should reflect the aspirations and choices of the people of Iran”.

The onus is on Iran to show the Iranian people that recent elections have been credible and that the repression and curtailment of democratic rights that we have seen in the last few days will cease. We, too, have an expectation of Iran; that it meets its obligations as a member of the international community. I hope that Iran will respond to our efforts to achieve a genuine dialogue.

It is therefore with regret that I should inform the House that Iran yesterday took the unjustified step of expelling two British diplomats over allegations which are absolutely without foundation. In response to this action, we informed the Iranian ambassador earlier today that we would expel two Iranian diplomats from their embassy in London. I am disappointed that Iran placed us in this position, but we will continue to seek good relations with Iran and to call for the regime to respect the human rights and democratic freedoms of the Iranian people.

The Council unanimously agreed that it intends to nominate José Manuel Barroso to lead the next European Commission and, as we look forward to the next five years, this Council has put in place the building blocks for the Europe of the future. It is by co-operating on the basis of our interdependence that we achieve more. By engaging and working in partnership with Europe, and globally, we take forwards our commitments from the G20 in April. By putting Britain at the heart of Europe—not on the sidelines, with Europe's single market worth over £10 trillion—we in Britain can responsibly deliver security, new jobs, prosperity and a strong future for all our people. I commend this Statement to the House”.

My Lords, that concludes the Statement.

My Lords, I thank the noble Baroness for repeating the Statement. I shall begin by exploring some of the foreign policy issues discussed. Were there discussions in Brussels about the strategic aims of action in Afghanistan? The summit conclusions call for Afghan election candidates this August to produce manifestos. Worthy though it is, door-to-door leafleting is rather more perilous in parts of Afghanistan than some parties in Brussels may realise. Will the noble Baroness tell the House of any additional troop commitments made by member states?

On Pakistan, we welcome financial assistance for displaced people. We also note the warm words about possible reconstruction aid. Is the noble Baroness able to give any details on that? Has any progress been made towards a free trade accord between the EU and Pakistan?

Finally, the decision on how Iran is governed is a matter for the Iranian people. But does the noble Baroness agree that when we say “the Iranian people” we mean the people, not those who carry guns? The summit was trenchant in its condemnation of violence against protesters and journalists. In view of the singling out of Britain, quite absurdly, as a promoter of violence in Iran, was any solidarity expressed with the UK? If so, what practical form will that take? We support the measured but firm response of the Government to these provocations. The summit declaration is vague on Iran's nuclear programme, which is surely an extremely dangerous issue of foreign and security policy. Did the Prime Minister argue that, if Iran does not negotiate, Europe must consider sanctions? If so, what was the response to that, given the major trade links with Iran of some member states?

On the economy, the Council reiterated,

“its strong commitment to sound public finances”.

Did the Prime Minister have his fingers crossed behind his back when he signed up to that? Will the noble Baroness confirm that, after 12 years of a Labour Government, Britain now has the highest youth unemployment in Europe? Will she also confirm that Britain is heading for the biggest deficit in the G20? Were Mrs Merkel and other leaders queuing up for a teach-in on the so-called British miracle?

Despite the errors of recent years, no sector is more important to the British economy than finance. I declare an interest as a director of companies regulated by the FSA. Does the noble Baroness agree that no other EU member state has comparable skills in or reliance on this sector? We on this side welcomed the assurances given by the Prime Minister on the nature of proposed EU financial regulation. On 9 June in the Financial Times the noble Lord, Lord Myners, said,

“national supervision must be pre-eminent”.

The Prime Minister told Parliament that he did not want any new body to have powers over national supervisors. So why does the communiqué say that the decision-making powers of the European System of Financial Supervisors will be “binding”? Why did President Sarkozy say that Mr Brown had performed a sea-change? Take my word for it, that is French for a U-turn.

Is it not the case that, as President Sarkozy also boasted, new EU institutions end up doing much more than foreseen? What assurances can the noble Baroness give Parliament on the record that the City of London was wrong to warn that we now have,

“a situation where binding arbitration dictated by Brussels could overrule the UK’s FSA”?

The City has precious few friends in other EU states and many envious rivals. It would be a disaster to find national control ceded in a core area of national competitiveness.

Finally, we go from a worrying sea-change to the shabby stitch-up on the Lisbon treaty. The presidency boasted that the deal reached,

“will not lead to a re-opening of ratification”.

It declared:

“This is a major success and good news for the whole of Europe”.

We hear daily lectures about the need for engagement with the people, for constitutional renewal and for modernisation. What could be more divorced from the people, more old fashioned in its top-down view of what the people can be allowed to do, and more redolent of the old, broken way of doing things in Europe than this collective boast that denying most of Europe a vote and forcing those who do not vote as they are told is a “major success” for Europe?

The presidency declares that the decision on Ireland is a legally binding decision of the Heads of State. But how is it legally binding and, if it is, why is it not being brought to this Parliament? Indeed, why is it not being put to the British people? Why are the Irish people being forced to give their view twice when the British people have not been asked for their view once? The Prime Minister seems to be assuming that when the next accession treaty comes before Parliament—in this case for Croatia—those promised guarantees for the Irish, at present without any legal validity whatever, will at that point be metamorphosed into full legal changes in the Lisbon treaty and that it will all go through on the nod, along with the accession provisions. It is as if the Irish pumpkin is going to be turned into a golden Lisbon coach.

However, that is a very bold assumption. Many people will see it as another attempted sleight of hand to avoid parliamentary or public approval for a thoroughly unpopular policy. The Irish people are being given alterations to the negotiated package while the British people are told they have to swallow it whole and have no say in any of it.

I wonder where constitutional renewal is in this. Four years ago, at the last general election, the party opposite and the Liberal Democrats gave the British people a solemn pledge in their manifestos that they would allow the British people a say on the Lisbon treaty in a referendum. They did so, of course, for the cynical reason that they wanted to stifle public debate on the future course of Europe at that general election. They gave their word, and then they broke their word. That was an act of dishonour by the leaders of those parties that nothing can erase. We will never renew politics unless we redeem that honour, so I say to my friend, the noble Lord, Lord McNally, and those on the Liberal Democrat Benches that they may howl to the moon about what they call establishment parties; but in Europe they are the establishment—a closed establishment—which is deaf to the desire of people to be heard and blind to the immense challenges of the 21st century that call for a new, less introverted Europe which is ready to renew and reform itself. You cannot pose as democrats and renewers at home and be gainsayers abroad.

My Lords, for the first five minutes of the response of the noble Lord, Lord Strathclyde, I was thinking, “My goodness, Tom is becoming a real statesman”, and then in the last two minutes he slipped into some old bad habits. If one is talking about honour, I say that it is dishonourable to fight a European election campaign with the body language and every statement putting forward an anti-Europe position—indeed, a “withdraw from Europe” position—but with fingers crossed behind the back and actually meaning, “We would stay in Europe anyway”. I do not need lectures from the Tory Front Bench about honour.

In terms of being part of the European establishment, the Liberal Democrats certainly are in this respect: we are now part of a group in Europe far larger than the rag, tag and bob-tail group that the Conservatives have associated themselves with in the European Parliament. Therefore, to any outside interest groups that want Britain’s interests defended within Europe and their views put forward in the European Parliament with some idea of their being listened to, I say that I would have thought the Liberal Democrats were a better channel now than the Conservatives with their other fringe friends.

As far as the Statement is concerned, the noble Lord, Lord Strathclyde, was quite right to congratulate the Government on their measured but correct response to Iran; I associate myself with that. The accusations of the Iranian Government are quite absurd and it is pleasing to see yet another dictatorship in trouble blaming the BBC for its troubles. It sounds to me like the BBC World Service is carrying on its historic mission of telling the truth to oppressed peoples, and we congratulate it on this.

On the financial issues, the noble Lord, Lord Strathclyde, has drawn attention to something that has been worrying me. I was at a briefing this morning on what the Americans are doing about financial regulation. It is important, and the Prime Minister is to be congratulated on the co-ordination that he has achieved internationally, but it seems that we are now getting three different levels of approach to regulation from the United States, the European Commission and the UK. That does not augur well for the future of a global response to financial regulation. A worry has been expressed by the City of London that it will be overregulated by a commission that does not have either the same experience or the same priorities as we do in keeping London as a major world financial centre.

On climate change, we all welcome the new sense of urgency but, again, I saw a programme the other day about the Obama Administration’s investment in the new technologies that will be needed to reach climate change objectives, and I wonder where in Britain—indeed in Europe, but certainly in Britain—are the new industries being brought forward to meet that demand. Will we find that, to meet those objectives, we have to import technologies from the United States and other parts of Europe, or indeed from China?

On Ireland, I think the truth is that the Irish people will be looking again in a colder, harsher world than when they made their first decision and this time they will not have the help of an expatriate millionaire to influence their decision. I hope that we can move on quickly to the ratification of the Lisbon treaty so that Europe can get on with its real business of economic recovery, the challenge of climate change and the war against organised crime and terrorism. That is the real agenda, and I hope that the Government ignore the Conservative Party playing party games and keep to that agenda.

My Lords, both noble Lords have mentioned the European mainstream. As a member of this Government, I am proud to be part of the mainstream of the European Union, and in that mainstream I would include the Party of European Socialists, the European People’s Party and the European Democratic Party. I would not include the “rag, tag and bobtail” parties, as the noble Lord, Lord McNally, called the loose grouping that the Conservative Party now forms part of. As part of that mainstream we can influence debate and, more importantly, decisions, and it is vital that our country remains part of it.

The noble Lord, Lord McNally, spoke quite properly of Afghanistan. The Council delivered political backing at the highest level for a substantial EU contribution in support of the elections, among other priorities. It has committed €35 million to the elections and it is planning to send an elections observation mission to help to ensure their credibility. That is nothing to do with putting things through doors in Afghanistan; it is about real help to ensure that the elections are properly managed. As I understand it, though, the summit did not speak of troops in any form.

On Pakistan, the summit established a long-term strategic partnership to tackle issues of violent extremism, security and democratic governance, and the key outcomes included a comprehensive trade package and €129 million in additional funding, including €72 million for humanitarian assistance. I am not sure what the comprehensive trade package actually included, but I will come back to the noble Lord in writing.

I am grateful to both noble Lords for their support for the action that the Government have taken in relation to Iran. The noble Lord, Lord Strathclyde, asked whether the situation there changed our approach to engagement over the nuclear issue. The implications are not yet clear but there are serious matters, particularly the nuclear issue, that will have to be addressed very soon. An invitation has been made to Iran and there is a genuine opportunity for it to engage constructively with the E3+3.

Both noble Lords are rightly concerned about financial issues. The Government have not performed a U-turn on financial regulations. From the beginning we accepted the broad thrust of La Rosiere’s proposals, but we were concerned about the detail. We believe that the framework is now in place and that important changes were brought about at the summit as a result of the Government’s negotiations. The UK supports improved co-ordination between national supervisors. Mediation clearly has a role to play where there are disagreements to be resolved between home and host supervisors, as in the case of Icesave. Both the JEC conclusions and ECOFIN of 9 June made clear that any mediation will not impinge on national fiscal accountability. We regarded that as a key issue, and it has been agreed by the summit.

The noble Lord, Lord McNally, suggested that there would be too many approaches to regulation and that the City would be overregulated. I agree with the comments of the noble Lord, Lord Strathclyde, about the pre-eminence of the City and its importance not just to the people of this country but to the world. The EU proposals on financial regulations follow and take full account of the London and Washington summit conclusions. The Commission will publish legislative proposals this autumn, and the Government will continue to represent fully the special position held by the City as a global financial centre.

I wholeheartedly agree with the noble Lord, Lord McNally; now that the issue of the Irish referendum has been considered by the summit, I hope that, whatever the result, the European Union can move on to the real agenda that it should be addressing, including climate change. There is a referendum in Ireland because that is what the Government of Ireland wish, not because it has been imposed by the EU. It is entirely up to the people of Ireland. The protocol will be legally binding when ratified. Ratification will take place following a debate in this House and the other House at the same time as the next accession to the European Parliament is considered in both Houses. That will be the accession of either Croatia, or possibly Iceland. The Government are not trying to stifle discussion on the protocol in this House. It will take place as a matter of course.

Finally, in response to the noble Lord, Lord McNally, my noble friend Lord Drayson is actively engaged in ensuring that the new industries are there, the training is taking place, the investment is being made, so that the people of this country can benefit from the new industries, when and as necessary.

My Lords, at the time of the Irish no vote in the referendum, a senior official in Brussels told me that if referenda had been held across Europe, at least seven nations, including France and Germany, would have voted no. When is Europe going to address its democratic deficit?

My Lords, that was the view of one official. I respect that official’s views, but I am sure there are many different views across the European Union. The democratic deficit is constantly addressed; we have a European Parliament that is democratically elected. I am sad, like other Members of this House, that so few people bother, as it were, to vote in European elections, but we do have a democratically elected European Parliament. That is what ensures that there is no democratic deficit.

My Lords, is not the opposition Front Bench’s discomfiture about the Irish protocol due to the fact that it is likely to have shot the Conservative Party’s fox and it is now going to be up the creek without a paddle?

On the economic side, is it not now as plain as a pikestaff that there is no such thing as a totally independent economic state? Does my noble friend agree that the Government’s pragmatic approach is well illustrated by page 7 of the Council’s statement dealing with the new European systemic risk board, of which the UK will be fully a part? The members of the General Council of the European Central Bank will elect the chair of the board and the ECB will have the lead role in implementation. This is surely an historic event.

My Lords, the issue of the ECB, to which my noble friend alludes, is a testament to the way in which the Government are part of the mainstream. Before this summit and before ECOFIN, it was not going to be the General Council of the ECB that elected the president of this new supervisory body; it was just going to be the European Central Bank. We wanted to widen this election to ensure that we had a voice and to ensure that the City of London, through the British Government, had a voice. It is a testament to the fact that we, the British Government, are in the mainstream of the European Union.

My Lords, we welcome the Statement’s discussion of the establishment of the election observer group for Afghanistan. That is very good news indeed. Will it be a comprehensive and numerically strong group whose security is properly guaranteed while it deploys in Afghanistan? The confidence-building that the group will bring about will be enormously important in elections that are going to be, I hope, more peaceful in outcome than what we have seen in Iran.

My other question is about Pakistan. It is not entirely clear to me what the position is following the noble Baroness’s response to the noble Lord, Lord Strathclyde, about the additional €120 million funding. Traditionally, the EU’s aid to Afghanistan has been appallingly meagre. In 2002 to 2006, it provided only €125 million in aid. Will the amounts that she has mentioned take the form of aid or some other kind of assistance?

Finally, in our deliberations in the European Council, will we put forward the idea that the EU should appoint a very senior regional envoy to Afghanistan and Pakistan who can work alongside Richard Holbrooke, the US special envoy to the region, so that we can bring a bit more gravitas and clout to that region?

My Lords, I regret that I will have to write to the noble Baroness on all three of the points she mentioned. I agree that EU aid to Pakistan has been meagre in the past, but I think that the new allocation of money at this summit will redress the situation somewhat. However, I shall certainly come back to her on Afghanistan and on a regional envoy to the region.

My Lords, I trust the noble Baroness will not mind if I suggest that she was perhaps a little disingenuous when she suggested that the European Parliament carries any form of democratic legitimacy. After all, the majority of law which is now imposed on this country is proposed in secret by the European Commission and passed in secret by the Council, and this Parliament can do nothing about it.

As to the Statement itself, perhaps I may put two questions to the noble Baroness. First, on the new European supervisory powers over our financial services, will the Financial Services Authority be supreme in those areas or will the new EU bodies be supreme? It really does not help to be told in the Statement that there will be no fiscal change, because if these new European regulations drive our leading City practitioners overseas, surely that will have a devastating effect on our financial and therefore fiscal position. Therefore, can she confirm who will be the boss in future—the British Government and the City of London or this new financial supervisory set-up?

Finally, perhaps I may remind the noble Baroness of the words of Mr Jens-Peter Bonde, the leading Danish politician, who has said that all the guarantees given to Denmark when Denmark was forced to vote again on the Maastricht treaty have been broken. All those guarantees have been broken. So, really, it comes down to the question of what is the status of this protocol. Let us suppose that there is not a treaty of accession for Croatia. Where will Ireland be left then? Surely the most monstrous deception is being practised on the Irish people and I very much regret that the British Government have gone along with it.

My Lords, on democratic deficits, I respectfully point out that 80 per cent of European legislation, I think, is now made by co-decision. As the noble Lord well knows, co-decision means that it is agreed not only by the European Parliament, in which we have democratically elected representatives, but by the European Council, which is made up of members of this Government. So there is a very strong democratic element in the way in which European laws are made. The European Commission only proposes.

As for the views of Jens-Peter Bonde, I have long known Mr Bonde and his anti-European views. However, he has always sent his children to a European school in Brussels. I think that that is an interesting point, since there seems to be something to do with the European Union that he likes. I note his views on Denmark but I have more trust in Europe and the institutions of the European Union than he does.

I do not think that there has been any kind of monstrous—I cannot recall the word that the noble Lord used.

Conspiracy.

I do not think that there has been any conspiracy against the people of Ireland. It is the Government of Ireland who wanted this to happen. If it is the Government of Ireland, then it is for us as partners in the European Union to assist them. That is exactly what we were doing.

I will read out the notes that I have on supervision. I will also get back to the noble Lord in writing and put a copy in the Library. It is clear that the heads of the Council agreed to limit the scope of the binding mediation powers of the new European authorities to two areas. First, they will ensure that the rules are followed and that Community law is implemented and enforced. This strengthens the working of the single market, which is a key priority for industry. Secondly, they will deal with disagreements between home and host state supervisors. This will improve single-market protections for cross-border banking, in particular where the UK is a host to branches of banks supervised elsewhere.

The Government are confident that this will not harm the City of London. The Government, in common with all Members of this House, want to safeguard the future of the City of London for the benefit of the people of this country.

My Lords, as a former Member of the European Parliament, I find it disheartening that at each election there is a further drop in participation. We must face the truth that the European Parliament has the support of just over 40 per cent of the electorate in Europe—less in the United Kingdom. It has no democratic mandate, and the public in Europe do not identify with the European Parliament or with MEPs. Is it not time that we gave consideration to maintaining a European Union run by the European Commission alongside a Council of Ministers who would be responsible to their national parliaments?

My Lords, I agree with the noble Lord’s concern about the decline in the number of people voting in European elections. This is a very serious matter. I also agree that the public do not identify either with the European Parliament or with other European institutions. I do not, however, agree with the remedy that he suggests. I am sure that many noble Lords will share the concerns expressed and it is up to all of us to try to remedy the situation. We have another five years to do that. Let us hope that at the next European Parliament elections, more than 50 per cent of the electorate will vote.

My Lords, many of us agree strongly that a coherent, transparent single market in financial services in Europe will do a great deal to benefit London, provided that the rules are developed strongly in a global context and recognise the position of London. Does my noble friend recognise that the proposals by the Commission in the draft directive on alternative investment fund managers do not greatly strengthen one’s confidence that that perspective is always at the forefront of the Commission’s mind?

On the question of fiscal responsibility, I welcome the statement in the presidency conclusions that fiscal responsibility remains firmly with member states. However, looking carefully at the conclusions, it is also clear that squaring the circle of a firm supervisory power in Europe with the fiscal responsibility of member states is not easy. Does the noble Baroness also recognise that paragraph 22 of the presidency conclusions asks the Commission to come up with proposals on how to square that circle? In other words, they may say the words, but they do not know how to do it.

Finally, given that the Commission makes it clear that it will bring forward legislative proposals by early autumn, when do the Government intend to set out their thinking on how to square the circle and achieve the objective of a clear, coherent single market in financial services consonant with maintaining fiscal responsibility? This House and the House of Commons could well not be sitting for a lot of that time. When are the Government going to make clear their thinking on this?

My Lords, in response to my noble friend’s concern about the alternative investment fund managers directive, I should say that government Ministers have been in close negotiations over this directive at every stage and will remain so. We are in constant dialogue with stakeholders in the UK, our colleagues in the Commission and other EU member states to ensure a good outcome. Of course, I recognise my noble friend’s concern.

As for squaring the circle, yes, the Commission will bring forward proposals in the autumn and its clear remit is to square the circle, though it is never easy. I also recognise the need for the Government to bring forward their own views in the proposals that they will make to the Commission, and the fact that we will be in recess in September. I will certainly come back to my noble friend and all noble Lords on that, because the Government may be able to make their views known in July before the Recess.

My Lords, would the noble Baroness not agree that, from the debate that we seem to have had this afternoon about democratic deficiencies, one aspect of democracy is that there is no absolute form of it; and that what seems appropriate in one member state may be deemed inappropriate in another? Would she also not agree that in this country we would deeply resent other member states trying to tell us how to run our democratic institutions?

My Lords, yes, it is very difficult to have common views expressed across 27 member states. It is, in many ways, extraordinary that the European Union exists. I also agree with the noble Lord that we would not wish other member states to tell us what to do. That is precisely why we are not telling Ireland what to do, if that is what the noble Lord is referring to in any way. It is up to the Government of Ireland to decide whether they wish to hold a referendum, and that is what they have decided to do.

My Lords, first, the noble Baroness the Leader of the House, in her reply to the noble Lord, Lord Pearson, pointed out that 80 per cent of decisions were made by co-decision with the European Parliament. I would point out that even if the British Members voted as a group, they could always be outvoted by over seven to one. Decisions that might be inimical to this country’s best interests could be passed, irrespective of the views of the British Government or the British people.

Secondly, I noted the reply of the noble Baroness to the noble Lord, Lord Woolmer. Has she seen that in this morning’s Daily Telegraph, Stuart Fraser, the chairman of the City of London Corporation’s policy and resources committee, said:

“We have lost the broader argument about ceding control of UK rules to the EU, though we are happy that some concessions have been made”.

He went on:

“We now still have a situation where binding arbitration dictated by Brussels could overrule the UK’s Financial Services Authority”.

That is in direct opposition to what the noble Baroness and the Government believe. I would like to know whether the corporation has been consulting and whether the Government will listen to any representations that it might make.

I have one more question. The Commission believes that these changes can be brought in under Article 95 of the EC treaty on the approximation of laws to operate the single market. Is that so, or will Parliament have to ratify—and first discuss—the proposals, and then ratify any treaty that may be needed to bring these proposals into effect?

My Lords, I understand the noble Lord’s point about co-decision and the fact that the will of the British Government and, perhaps, British Members of the European Parliament will not necessarily be in the majority in any co-decision procedure, but that is what the European Union is all about. I do not deny that.

As for the views of the chair of the City of London quoted from the Daily Telegraph, I have not read the article. I am confident that the Government will have consulted many stakeholders in the City of London, that they will continue to do so and they will listen and act in the City of London’s best interests.

On the last point, I believe the noble Lord referred to the protocol that results from the agreement this weekend at the Council.

My Lords, I was referring to the new proposals for regulation of financial institutions. I may be wrong, but I understand that the Commission believes that the measures can be brought in without any treaty organisation or any new treaties being brought forward, in which case they would come into operation without the agreement of the British Parliament.

My Lords, as I understand it, these were “normal” proposals from the European Commission. They will be discussed and legislated on in the normal way and they will not require any treaty amendment in any shape or form. If I am wrong on that point, I will certainly come back to the noble Lord.