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EU Council

Volume 734: debated on Tuesday 31 January 2012


My Lords, it may now be a convenient moment for me to repeat a Statement made by the Prime Minister earlier this afternoon on the European Council. The Statement goes as follows:

“With permission, I would like to make a Statement on yesterday’s informal European Council. Countries right across Europe need bold action to recover their economic dynamism, to get to grips with their debts and to secure growth and jobs for the future, and that was rightly the focus of this Council.

First, we agreed important measures needed to restore Europe’s competitiveness. Next we discussed the separate intergovernmental treaty on fiscal discipline in the eurozone. Finally, we issued a statement on Iran, Syria and Burma. Let me take each in turn.

Britain’s agenda in Europe is to promote growth, competitiveness and jobs. We have repeatedly said that the best way that the EU can drive growth and create jobs is to complete the single market; to establish trade deals with the fastest growing parts of the world; and to cut the regulatory burdens on business. At this Council, we made important progress on all these issues. We agreed to establish a fully functioning single market in services, where there are still 4,700 professions across Europe to which access is regulated by government; and, in digital, where there are over a dozen separate copyright regimes in what should be one single market, we will take action to secure what should be a fast-growing area right across Europe. Together, these changes in services and digital alone could add more than 6 per cent to EU GDP within 10 years.

We also agreed to complete the energy single market, which has the potential to cut costs for businesses and consumers across Europe. On free trade, we said that:

‘2012 should be a decisive year to move ahead on trade agreements with major partners’,

such as Japan, India, Canada and the United States, and on regulation we agreed a growth test to ensure,

‘that all actions at the European Union level fully support … growth and job creation’.

We also agreed to reduce regulatory burdens, especially for SMEs and microenterprises, and to complete a patent package to support innovation. This has been discussed in Europe for well over a decade and, finally, we are making decisive progress.

Next, on the eurozone, we want the eurozone to sort out its problems. They are having a chilling effect on our own economy and tackling them is one of the best ways in which we can help secure growth, both here in Britain and right across Europe. As I have repeatedly said, short-term steps must be taken—and taken properly. There was the so-called October package. Europe’s banks must be recapitalised properly. The uncertainty in Greece must be brought decisively to an end, and the firewall needs to be big enough to deal with the full scale of the crisis and the potential contagion. In the longer term, proper fiscal discipline in the eurozone is clearly an important part of the solution, and something that Britain recognises is necessary.

The question has never been about whether there should be greater fiscal discipline in the eurozone but rather how it should be achieved. I went to the European Council last December prepared to agree a treaty of all 27 countries, but only if there were proper safeguards for Britain. I did not get those safeguards, so I vetoed the treaty. As a result, eurozone countries and others are now making separate arrangements outside the EU treaties for strengthening budgetary discipline, including ensuring that there are much tougher rules on deficits. So, at this Council, 25 EU member states agreed a new treaty outside of the European Union. Britain and the Czech Republic have not signed up, and we will not be taking part.

Let me deal directly with the issue of the institutions. The new agreement sets out roles for the European Commission and the European Court of Justice. While some of those roles are already permitted through existing treaties, there are legal questions about what is planned. As I said, it is in Britain’s interests that the eurozone sorts out its problems. It is also in our interests that the new agreement outside the EU is restricted to issues of fiscal union and does not encroach on the single market. The new intergovernmental agreement is absolutely explicit and clear that it cannot encroach on the competencies of the European Union and that they must not take measures that in any way undermine the EU single market. Nevertheless, I made it clear that we will watch this closely and if necessary, we will take action—including legal action—if our national interests are threatened by the misuse of the institutions.

The principle that the EU institutions should act only with the explicit authorisation of all member states remains, so let me be clear: this is a treaty outside the EU. We are not signing it, we are not ratifying it, we are not part of it and it places no obligations on the United Kingdom. It does not have the force of EU law for us, nor does it have the force of EU law for the EU institutions or for the countries that have signed it, and there will be no inner group of European countries distorting the single market from inside the EU treaty. That is the fundamental protection we secured with our veto in December, and that protection remains.

Finally, we also made an important statement on developments in Iran, Burma and Syria. Britain has played a leading role in getting Europe to act together on each of these areas. On Iran, last week all EU countries agreed an unprecedented oil embargo, which shows our determination to keep up the pressure on the regime to turn away from any plans to develop nuclear weapons.

In Burma, Aung Sang Suu Kyi has for years been an inspiration to her people and the world. Britain has supported her at every stage and been at the forefront of EU sanctions. Now there are signs of a new moment of opportunity for democracy and we should be prepared to relax these sanctions, but only in stages and in response to reforms. When I spoke to Aung Sang Suu Kyi on Saturday, she emphasised the importance of credible and free by-elections in April. I assure the House that we will be watching them very closely.

On Syria, the Council condemned the continuing violence and repression of the Syrian people. Reports suggest that more than 60 people were killed on the streets of Syria last week alone. In total, more than 5,000 people have been killed, 400 children murdered and tens of thousands of people detained. Today the Foreign Secretary is in New York to support the Arab League’s call for Security Council action condemning the repression and supporting a transition of power. All 27 EU members backed that call for UN action, and if the violence does not end we agreed that we will tighten EU sanctions further. Our message is clear: we will stand with the Syrian people. It is time for all members of the UN Security Council to live up to their responsibilities instead of shielding those who have blood on their hands. The killing must stop and President Assad must stand aside.

In conclusion, Mr Speaker, this was an important Council for Britain. On competitiveness, the single market and trade, Britain is setting the agenda. On action to face down dictators and dangerous regimes in Iran and Syria, Britain is leading the way, and by saying no to a new EU treaty we have protected Britain’s interests. I commend this Statement to the House”.

My Lords, I am grateful to the noble Lord the Leader of the House for repeating the Statement made by his right honourable friend the Prime Minister in another place.

First, I associate these Benches with the remarks made about Iran, Syria and Burma. On these issues there has been a bipartisan approach and the Government have our full support in the efforts that they are making. However, in relation to the European Union, I am bound to say that I am perplexed. Last month when the Prime Minister came back from Brussels he said, to the dismay of these Benches, that his veto included a veto on the use of EU institutions. That position was reiterated by the Chancellor the day after the summit when he said,

“If we had signed this treaty … we would have found the full force of … the European Court, the European Commission, all these institutions enforcing those treaties, using that opportunity to undermine Britain’s interests … We were not prepared to let that happen”.

Indeed, the Welfare Secretary made the same points this weekend. Yet it is clear from today’s Statement that the European institutions will fulfil their usual role in relation what I would call a new treaty, and the buildings of the European institutions will be used. How can the Prime Minister possibly argue one month that something is a great threat to the national interest and the next that it is a matter of relatively minor significance on which Britain can reserve its position? I well understand that some people may be confused or even dismayed by this turnaround. However, on these Benches we are glad.

I am also perplexed that today the Prime Minister talks of a treaty, yet yesterday he said at the press conference:

“There isn’t a Brussels EU treaty; it doesn’t exist, I vetoed it”.

Yet to my mind it seems to have all the attributes of a treaty. I understand that the Foreign Office made extensive diplomatic efforts to persuade other euro-outs not to sign. Fleetingly it seemed that the Poles might lead a significant number in not joining up, but at the end of the day the only country to put itself in the same isolated and powerless position as ourselves is the Czech Republic. Is the Leader of the House satisfied with this abject failure of diplomacy?

It would also seem that no protections have been secured for Britain. The Government say that protections have been secured about discussions on the single market, but what are those protections? What has happened to the list that the Prime Minister circulated at 2 am at the previous European Council? Was this a serious effort to protect UK national interests or a flimsy excuse for not signing the treaty because ratification would have caused aggro and difficulties in the other place?

The treaty says that,

“the Contracting Parties … take the necessary actions and measures in all the domains which are essential to the good functioning of the euro area”.

Then it goes on to list them: fostering competitiveness; promoting employment; and reinforcing financial stability. They sound like single market issues to me. Can the Leader confirm whether the UK will have observer status at the regular meetings of the 25 so that we know what is going on and whether or not the single market is being discussed? If we do not have observer status, who is going to protect the British national interest at these meetings? Who is going to ensure that deals are not made to undermine the single market? I suspect that it will be officials from the European Commission—the much maligned Brussels bureaucrats. I wonder whether the Leader might not think it ironic that the European Commission—for which I once proudly worked but from which I do not receive a pension—will be this Government’s greatest ally in defending and improving the single market?

There are now growing fears that the scale of austerity required under the compact will not work. The rating agency Standard & Poor’s said that,

“a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating”.

In particular, Article 4 demands that countries reduce their debt levels at such a rate that it will make it very hard for them to grow their economies. Does the noble Lord believe that the economic strategy in the fiscal compact will work? Perhaps he thinks it will because it is a mirror image of the Government’s own policies, but I suggest that those policies are not working.

Yesterday’s summit was supposed to tackle youth unemployment. I wonder what solutions the Government suggested in the light of experience in this country where long-term youth unemployment has doubled over the past year. Will the Government be applying to the European Social Fund for the extra money for apprenticeships, support schemes for young business starters and entrepreneurs that is now to be made available? Will they be applying for the new European Investment Bank support for SMEs and infrastructure? Or, by not signing the treaty, have the Government cut Britain off from the extra help that unemployed young people and SMEs need?

On these Benches, we believe that the summit was bad for Britain, for our businesses, for jobs and for families. There is still no solution to the problems of growth in Europe. The Prime Minister’s veto that never was has been exposed and Britain now has less influence in the European Union than we have had for a generation. Britain deserves better.

My Lords, I wholly understand why the noble Baroness has to trot out this stuff, which she no doubt gets from the shadow Cabinet, but it is far removed from reality. I very much welcome her own welcome and support for our position and indeed Europe’s position on Syria, Iran and Burma, but when it comes to the eurozone intergovernmental treaty, she has a fundamental misunderstanding of what has been going on over the past couple of months. What we were seeking to defend in the December European Council were British interests, and that is what we did by vetoing a treaty which we believe would fundamentally impact British interests in a negative way. This treaty does not because we are wholly in favour of the countries of the eurozone, and others, sorting out their own fiscal problems, and have supported them in creating this intergovernmental treaty. Therefore, I do not regard it as a failure of diplomacy at all. Indeed, Article 2 of this treaty demonstrates that the treaty shall not encroach upon the competences of the European Union. That is an important safeguard for us.

The noble Baroness asked about the economic strategy and the fiscal compact and whether or not it will work. Most international commentators now agree—and have done so for some time—with the position that the United Kingdom Government have taken over the past 20 months of austerity. It is true that the countries of the eurozone are now seeing that that is the sensible way forward and believe that you cannot buy your way out of a debt crisis. The fact that the informal council spent so much time talking about the growth strategy, about employment, about exports and about completing trade rounds is an indication that throughout Europe we share similar problems, including those of youth unemployment. However, if you look at the forecast that is being made by most international commentators, you will see that Britain, which has had to take the worst of the medicine first, is in the best position for long-term growth. It would be good if the noble Baroness and her party could support us in that.

Does my noble friend agree that, whereas, of course, the Government were fully entitled to decline to sign the new treaty, it was also very wise not to try to deny the use of the European Union institutions to those countries that chose to sign the treaty? To attempt to do so would have been to risk the use against us of qualified majority voting as the normal legislative tool in areas of vital importance to us, such as financial services, to our great detriment?

My Lords, it is always nice to welcome a question from my noble friend on this matter. On this occasion, we chose to reserve our position on the treaty, at least in part, because we recognise that there are problems within the eurozone that need to be tackled. We believe that we are using that reservation to watch the operation of the treaty closely and, if necessary, we will be able to take action if our national interests are threatened. However, the principle that EU institutions can be used only when there is permission from all 27 member states has been safeguarded. Of course, we have a number of legal concerns on the use of the institutions but we do not want to hold up the eurozone doing what is necessary to solve the crisis, as long as it does not damage our national interests.

My Lords, first, in the Statement there is the intention finally to close these free trade agreements with countries such as India. The UK India Business Council, of which I am president, has been asking for this EU-India treaty for years now. Do the Government honestly think that, with the present crisis, it is realistic to be able to conclude such treaties at this time? Secondly, the Government keep talking about wanting fiscal discipline to sort out the eurozone crisis. Can the Government get real? In the growth and stability pact there was no discipline; even Germany did not fulfil the requirements to join the euro when it did so. When are the Government ever going to be able to impose fiscal discipline when there is no sovereign union throughout the united states of Europe? There will never be a united states of Europe. Do the Government think that the Greek crisis will just go away? If Greece defaults, will there be contagion throughout Europe? Are we prepared for that contagion?

My Lords, the noble Lord asks me a load of questions at the end of his intervention which are not my or the Government’s responsibility. They are very difficult questions to answer. We all have to hope that the steps that the eurozone countries are taking are the right ones to prevent the contagion of which he speaks. We hope that they have done that. People like me, who rather oppose a single currency, have pointed out these problems for many years. It is hard to see how a currency union can work without greater political and fiscal union. It may well be that the countries of the eurozone are heading in that direction.

On the noble Lord's first question about international treaties between the EU and other countries, including India, it is, at least in part, because of the state that we find ourselves in and the lack of moving forward on the Doha trade round that I feel confident that the statement made yesterday in Brussels is heading in the right direction. There is a lot of political force behind it and I am sure that the whole House will welcome this strong declaration of coming forward with a long-term treaty between the EU and India.

My Lords, does the noble Lord agree that the tone of the Statement, which I am grateful to him for repeating, was rather arrogant when it spoke about Britain “setting the agenda” and “leading the way”? That is the sort of leadership that this country can well do without—isolating ourselves from the mainstream of Europe. Will the Leader of the House also acknowledge that although he spoke about defending our interests, there is a lot to learn from Mrs Thatcher? She never sought to defend our interests by leaving a Council meeting and walking out. The way she defended our interests was to stay and fight for them. I have a specific question to the Minister. When he talks in the Statement about a fully functioning single market in services, is that supposed to include financial services?

Very much so, my Lords. We want to see the completion of a single market and the digital economy. It is not arrogant to say that the United Kingdom has been at the forefront of the growth agenda. It is Britain that has been pointing out the dangers of overcentralisation, overbureaucratising, and overexpensive institutions that militate against the interests of the free market that will in the long term provide the jobs we need, not just in this country but throughout Europe.

My Lords, is my noble friend aware that the Prime Minister is absolutely right not to join the proposed new treaty and to distinguish it from the existing treaty? Is he not also right to say that it is essential for the eurozone to sort out its problems? The problem with doing that has been that it has confused the debt problem with the exchange rate problem. The reality as far as Greece, for example, is concerned is that it is inconceivable that it will become competitive at the present exchange rate, however much it is bailed out. There is therefore no way that these matters will be solved until certainly Greece, and perhaps others—one must hope not—leave the eurozone. It is crucial that if they do so, the period of transition should be as brief as possible. The difficulty is that we do not have available in terms of notes and coins a currency that will enable such countries to leave, quite apart from the dreadful problems there will be in the transition over the need to impose exchange controls, which one must doubt the Greek Government’s ability to do. Until that side of things is sorted out, no amount of bailout or fiscal co-ordination will solve the problems of the eurozone.

My Lords, I welcome my noble friend’s words on the principle of the position we took yesterday at the informal Council. As to what he said about the desirability of the eurozone solving its problems, I completely agree and that is very much one of the reasons why what happened yesterday happened. However, some of my noble friend’s analysis is not really a matter for me or the British Government, although we wish the euro well. These matters will no doubt be taken up within the eurozone. There are real challenges for countries such as Greece and, within the eurozone, the balance of trade between different countries. They have chosen a route along which they wish to try to solve this matter, and we should wish them well in their attempt to do so.

Shall we hear from the Cross Benches and then Labour? We have not yet heard from the Liberal Democrats. We may go around the Benches and there is plenty of time.

I join the noble Lord, Lord Brittan, in saying that the Prime Minister was extremely well advised not to contest the use of the institutions in the context of this intergovernmental agreement. I would only add, gently, that you cannot reserve your position on a decision that you are not a party to.

Can the Minister now answer a question that I have been asking with a certain persistence without getting any answers: what provisions in the intergovernmental agreement are objectionable to the British Government? He has just spoken warmly about Article 2, and I imagine that he could speak quite warmly about most of the other articles, so why are we not joining the agreement? It is a little difficult to understand. Perhaps the Prime Minister let the cat out of the bag when, with a look of some relief on his face—at least it looked like that on my television set—he said, “Nothing to sign. Nothing to ratify”—and, he might have added, “Nothing to make me run the gauntlet of my Back-Benchers”.

My Lords, if those were his motivations, there would be nothing wrong in that. In fact, the Prime Minister made it entirely clear in response to questions and in his Statement on the December Council that his only aim was to preserve British interests. At the December Council, he asked for certain safeguards and those safeguards were not offered. Hence, we have got to the current position.

As the noble Lord knows extremely well, we have a number of legal concerns about the treaty, particularly on the use of the EU institutions, but, as I said, it is in our national interest for the eurozone to solve its problems. That is why we are reserving our position. I know that the noble Lord, Lord Hannay, asks my noble friend Lord Howell questions from time to time. He will have an opportunity to have another go in a couple of weeks’ time, when we are having an all-day debate on the European Union.

We will be watching developments very carefully over the next few weeks and months, and if there is any sign that they will encroach, particularly on the single market, we will seek to take appropriate action.

My Lords, it is at least reassuring that the Prime Minister now appears to be conducting our diplomacy in the EU in a cool, calm and reasoned fashion, although it is very worrying that we shall not, apparently, even be in the room as observers when the 25 meet regularly from now on.

However, I sincerely congratulate the Government on their contribution to the achievement of the single market conclusions of the Council, particularly in relation to energy. I hope that there will be follow-through and implementation.

If Greece defaults, which it may, there may be contagion. If there is contagion, there would be a very serious banking crisis. In those circumstances, it would be extremely expensive for us to bail out our banks. Would it not be much cheaper now to make a more modest contribution to the new financial stability fund, the IMF or otherwise to the firewall which we keep nagging our European partners that they should be putting together without us, up to now, being willing to contribute at all?

My Lords, it is not my role, nor that of the Government, nor is it appropriate to speculate on the position of Greece. Greece has to make its own decisions on that question. Our view is that it is important that all parties should stick to the deal agreed in October and that all the elements of that package, including the PSI, are finalised and implemented without further delay. We are not contributing directly to more bailouts of the eurozone, as the noble Lord knows. One thing that we agreed earlier through the new ESM is that we are extracting the United Kingdom from having to pay for eurozone bailouts in future. IMF payments are of course an entirely different matter, but we believe that the IMF is there to lend support to a country, not to a currency.

My Lords, this is one Statement on which the Prime Minister and the coalition Government should be congratulated. There is total agreement on matters relating to the agenda on jobs and growth. Does the Leader agree that now that we are winning the argument we should be looking to work very closely with our allies, including Italy and Spain, to spell out a truly ambitious and far-reaching plan for delivering jobs and growth from now through to 2015?

My Lords, if I may say so, that was an entirely sensible and constructive question from my noble friend Lord Dholakia. We believe that the statement made by the European Union yesterday was an important signal about a change of direction in trying to create a proper market for jobs, services and growth. Of course, we will be working with our allies—not just with the European Commission but with countries such as France, Spain and Italy—so that we can all learn from each other what works, particularly with regard to apprenticeships, and in the long term that will benefit us all.

My Lords, three or four times this afternoon in making his Statement the noble Lord has referred to the fact that at the December meeting the Prime Minister was forced to cast his veto because he did not get the safeguards that he required to protect British interests. The difficulty is that the Government will not tell us what safeguards he was demanding and, until we know that, we cannot tell whether the veto was sensible. Perhaps the noble Lord could draw the veil a little this afternoon. There seems to be an atmosphere of reflective penance on the part of the government Benches today. Can he tell us what safeguards the Prime Minister was demanding that he did not get, as a result of which he felt obliged to cast the veto?

My Lords, it is always beguiling to be asked questions by the noble Lord, Lord Richard, in that manner. The events of the December Council were in fact quite a while ago and I do not have a list of all the great safeguards that we wanted.

However, basically we wanted to protect the single market. We also wanted to make sure that we were safeguarded from a financial transaction tax that would have an unfair bearing on Britain within Europe. Unless it was applied on a global scale, we were not going to support it. The noble Lord shakes his head as though I have not been helpful but, if not to safeguard British interests, why else would the Prime Minister have vetoed it?

My Lords, I want to follow the point made by the noble Lord, Lord Dholakia, in reference to competition. Is not this Council statement just a rehash of the European agenda, which was such a notable failure? Does the Minister agree that, as usual, it is all words and no action? Do not figures of 23 million unemployed in the European Union and 51 per cent youth unemployment in Spain show that the European Union is a total failure for its citizens? Would it not be much better to leave before we get sucked even further into the euro mire?

My Lords, the views of the noble Lord, Lord Willoughby de Broke, on this are extremely well known. He believes that there should be a referendum in the United Kingdom about leaving the EU or that the United Kingdom should just leave the European Union as soon as possible. That view is not shared by this Government. We think that in the past the EU has gone in the wrong direction but we are hopeful. The noble Lord may not have read the European Commission’s statement but I hope that he will take the opportunity to do so. I am glad to see he is indicating that he has read it. I think he should be heartened by much of what was said in it about growth, jobs, deregulation and single markets, which will aid prosperity in the long term.

My Lords, my noble friend the Leader of the House has made reference to implementing as soon as possible the matters agreed last October. However, is that realistic? Last October, there was reference to agreeing a private sector reduction of Greek bonds by 50 per cent. There has been no agreement, and apparently officials are now looking for a reduction in value of 70 per cent, although the chance of there being agreement on that is minimal. Other institutions talk about firewalls and contagion. The EFSF was created but has turned out to be a complete damp squib. There is now talk of bringing forward the next measure but it is similar in character and is also likely to be ineffective. I appreciate that my noble friend has to be diplomatic but is not the reality that that agenda and those agreements are not going to work with regard to Greece? As my noble friend Lord Higgins said, Greece will have to leave. The euro has been a failure as far as it and other countries are concerned, and the sooner the people who are trying to give that leadership to Europe get their heads round that, the better.

My Lords, it is not just diplomatic to say that these are issues that Greece and the other countries of the eurozone need to sort out; it is common sense. My noble friend's gloomy view may come to pass, but we should all fear that. There is a chilling effect on the economy already because of the crisis in the eurozone, and it would be considerably worse if there was a real banking problem in the whole of the eurozone and the whole of Europe, which would leak into us. Therefore, we urge the countries of the eurozone to solve their problem. With the intergovernmental treaty, we have given them the best opportunity to do so.