Clause 1: Approval of EU decision relating to stability mechanism
1: Clause 1, page 1, line 10, leave out subsection (3) and insert—
“(3) That decision is subject to the referendum condition, within the meaning of section 3 of the European Union Act 2011, being satisfied.”
My Lords, as Members of this House will know, the Queen’s Speech was made here on 9 May and the Second Reading of the Bill came rather quickly after it on 23 May. Therefore, a number of Members who have taken a notable interest in the European Union over several years were unable to change engagements that had already been made to be here and participate at Second Reading. I was certainly one of them. However, I read the proceedings on the Bill and there was one speech with which I concur absolutely—that of my noble friend Lord Radice. Everything that he said was what I would have said, although he put it rather more eloquently, lucidly and intellectually than I could have.
Several issues that need to be explored arose from consideration of the Bill at Second Reading. Therefore, I tabled two or three amendments, thinking that they would appear on a long Marshalled List. Imagine my surprise when I found that they were the only amendments to the Bill that had been tabled. I wondered what had happened to the usual suspects, notably the UKIP Members, who are never usually at a loss to table reams of amendments and suggestions, and to participate at great length. This could not be more in the mainstream of some of their thinking. However, not only have they not tabled amendments; they are not even here to participate in the debate. I must say that I find that rather strange.
This first amendment proposes that there should be a referendum on the treaty in the United Kingdom. Let me make it absolutely clear that this is a probing amendment—I do not actually agree with it. I put it in to enable a debate to take place, and to contrast the areas in which there will or will not be a referendum because of the provisions of the European Union Act 2011 on this issue. Under Section 4 of that Act there are 13 instances—and we discussed this during the proceedings on that Bill—where referenda would be necessary. The whole of the electorate would be asked to go out to the ballot boxes to cast a ballot on—let us take Section 4(1)(m)—
“any amendment of any of the provisions specified in subsection (3) that removes or amends the provision enabling a member of the Council, in relation to a draft legislative act, to ensure the suspension of the ordinary legislative procedure”.
If that was to happen, we would have a referendum on it. Can you imagine people flocking to the polling stations to take part in that? Yet we have something in this Bill which is a major and very substantive change—as was said in important speeches by former Chancellors at Second Reading—and there is no provision for a referendum. I am not saying that there should be; I am against referenda on all these things. I want to contrast the fact that we would have referenda on all these minor matters but not on this. It seems strange.
I then looked specifically at the basis on which the Government are arguing that there should not be a referendum. The Minister said at Second Reading that the Foreign Secretary had indicated that,
“in his opinion a referendum is not required to give parliamentary approval. … it does not transfer further competence or power to the European Union from the United Kingdom. The statement was open to judicial review, but in the intervening eight months no one has sought to challenge it in the courts”.—[Official Report, 23/5/12; col. 802.]
I went back to the Act again to find out why he had given this opinion. Section 2(3) says:
“The exemption condition is that the Act providing for the approval of the treaty states that the treaty does not fall within section 4”.
We therefore look at Section 4, “Cases where treaty or Article 48(6) decision attracts a referendum”, which includes the 13 that I mentioned earlier. Then, that section says:
“A treaty … does not fall within this section merely because it involves one or more of the following”,
and the second of the following three is,
“the making of any provision that applies only to member States other than the United Kingdom”.
That would seem to me to be open to argument. The inclusion of “merely” implies that there should be something else—that there should be another factor involved in the decision on whether or not there should be a referendum.
I am, therefore, at a loss to understand why this is the case. I hope that the Minister will try further to explain this to the House, as he did briefly at Second Reading, and to convince us that although a referendum would be necessary in all these 13 tiny little areas it would not be necessary in this particular one. I beg to move.
My Lords, I wish to speak briefly on this issue. My noble friend Lord Foulkes—he may not be my noble friend when I have finished speaking, but there we are—said that he agreed with every word that our noble friend Lord Radice said on Second Reading. I wish to put on record that I did not agree with a single word that my noble friend Lord Radice said in that debate, as he well knows, as the notion that the European Union is some sort of holy grail does not accord with me at all. The speech that most appealed to me in that Second Reading debate was that of the noble Lord, Lord Lamont of Lerwick. Although I do not endorse every single word that he said, nevertheless he very much captured the latent suspicion—however, that may be too strong a word—of the British people towards the European Union.
Naturally, as a loyal party man, I will not support the call for a referendum, which is the basis of this amendment, as that is not Labour Party policy. However, your Lordships’ House would do well to take note of the deep feelings of many people in the United Kingdom against further encroachment into their lives by the European Union. I know that the relevant “holy grail” stipulates that we should all be so-called good Europeans and sign up to everything that comes from Brussels, or wherever else in Europe that the European Union happens to be meeting. However, I take the opposite point of view. I am no history graduate in this regard but, as far as I recall, the 1975 referendum—I was involved in that referendum campaign—sold the European Union to the British people as an economic union and an economic set of circumstances which would help us to retain, or in some cases regain, our place in the industrialised world. However, the giant bureaucracy in Brussels and Strasbourg has encroached on our lives bit by bit. In my opinion that is the main reason why many people in the United Kingdom feel strongly that there should be a referendum.
As I say, unlike my noble friend Lord Foulkes, I do not support the call for a referendum but I would like to take a few more minutes to explain why many people feel that there should be one on anything to do with the European Union. I know that noble Lords dotted all over your Lordships’ House take the exact opposite view and will make faces at me as they walk out of the Chamber because I am saying these things.
Strathclyde council has a better record of administration than the European Union. I assure my noble friend that it is one of the best administrative councils in the history of Europe as well as being one of the biggest. I declare an interest as a former member of that council although I was not involved in its financial affairs.
In short, there is a certain amount of arrogance—I do not mean this in a hostile way—on the part of pro-European Union people as regards further encroachment on the British way of life and the concept that the intellectual giants are the people who have thought out everything to do with the European Union and its encroachments. That is not the case and those people do not represent the views of the British people. The view of the British people is best represented by those who say, “This far and no further”. Although I do not support the call for a referendum, it is useful for this House to hear a dissident voice on this side of the Chamber. We certainly should be very careful as regards further encroachment.
My Lords, I must confess that when I saw these amendments in the name of the noble Lord, Lord Foulkes, I thought that we had a convert. However, my hopes were dashed by his speech this afternoon. It appears that he tabled these amendments as it enabled him to make the speech—it is a very nice way of doing it—that he could not make when we debated this matter on Second Reading. He has a point. The implications of this Bill are much further ranging than has been related to the House. I shall quote from the Times on 11 May this year, which will support the case—or non-case—that the noble Lord made:
“There are two issues with this EU treaty change that could cause big problems: first, it allows the eurozone to integrate further with consequences for UK interests; second, the quid pro quo guarantee that the UK won’t be forced to contribute to euro bailouts in future may not be legally binding”.
So there is some support in that article for the view that perhaps this Bill is much more important and far-ranging than some of us had believed. I and other people considered whether this Bill could be amended and I came to the conclusion that it was best left to the House of Commons. However, we have an amendment here which I believe should be supported. The Bill is very important indeed, particularly in the light of what is happening at present. The problems of the eurozone and the European Union itself are leading to demands for further integration. Even today, the President of the European Commission, Mr Barroso, is outlining plans to the European Parliament for a European banking union, which would affect not only the eurozone but the whole of the European Union.
Angela Merkel, for example, believes that the answer to the problem is not less but more Europe, politically, financially and economically. This Bill facilitates what these people are thinking. The Bill is much more important than we previously believed and the House should be grateful to the noble Lord, Lord Foulkes. I should really describe him as my noble friend, because we have been around a long time and embarked on many debates. Usually, we have been on the same side. Paradoxically, according to the wording of the amendment we are still on the same side, but perhaps if he puts it to a vote we shall be in opposite Lobbies. We shall see. In the mean time, if he puts it to the vote, I shall support him.
My Lords, I had better explain briefly the opposition Front Bench position on this amendment and some of the speeches we have heard. It was a great pity that my noble friend Lord Foulkes could not make Second Reading, because he would have made a strong pro-European speech in that debate. He was right that my noble friend Lord Radice made an excellent speech as well. However, from our perspective I do not think that we can support the thrust of his amendment. I see the logic of his position. In the European Union Act, which we debated over many hours last year, we got ourselves in a situation where, if it was decided to establish a European office of paperclips, we would have to have a referendum on it, because it would involve a transfer of sovereignty to Brussels.
For our part, we believe that referenda should take place only on issues of major constitutional significance, as the Lords Constitution Committee recommended, and that we should be consistent with that principle. As far as the Labour position in the Commons is concerned—and I say this with some trepidation because my dear noble friend Lord McAvoy has a great record as a party loyalist and defender of party discipline in the other place—the shadow Foreign Secretary, Douglas Alexander, in the Commons debate last autumn on the question of a referendum, said:
“I urge opposition to the motion because I do not believe that Britain’s national interest would be served by spending the coming months and years debating the case for Britain leaving the world’s largest single market”.—[Official Report, Commons, 24/10/11; col. 60.]
The leader of the Labour Party made it clear only last week or the week before that Labour’s position had not changed from that view in the mean time.
That is where we stand. The EU Act is a contradictory piece of legislation. The measure is not defined under the terms of that Act as a transfer of powers to Brussels, and we therefore do not have a referendum—but there is no point in reiterating our debates on that Act. Our view is that this is an emergency situation in Europe; the stability mechanism is a necessary part of tackling the problems of the eurozone, which is very much in the British national interest. Therefore, this legislation should go through in the speediest possible time.
My Lords, we all admire the lone role that the noble Lord, Lord Foulkes, has cast for himself in bringing forward these amendments, and his boldness in bringing forward an amendment with which he does not, in fact, agree. This is bravery on a high scale in this debating Chamber.
The amendment, as he pointed out, seeks to insert into the Bill a requirement for a favourable vote in a national referendum before the UK could approve the European Council decision amending Article 136 of the Treaty on the Functioning of the European Union. The European Council decision amends Article 136 of the TFEU. It was adopted in accordance with the simplified revision procedure in Article 48(6) of the Treaty on European Union. The decision added a paragraph to Article 136 which confirms that EU members whose currency is the euro may establish a financial stability mechanism. The provisions of Article 136 and the proposed new paragraph apply only—I repeat, only—to member states whose currency is the euro. They do not, therefore, apply to the United Kingdom.
The Bill is required under Section 3 of the 2011 Act, to which the noble Lord, Lord Liddle, referred, to give parliamentary approval to the decision. The other two requirements of that Act were, as noble Lords will recall, a statement by the Minister giving his opinion as to whether a referendum is required—I will come to the remarks of the noble Lord, Lord Foulkes, on that in a moment—and compliance with the so-called referendum condition, exemption condition or significance condition which we debated when we considered that Bill some time ago.
The 2011 Act makes it clear that decisions adopted under Article 48(6) of the TEU are not subject to a referendum under that Act if its provisions do not apply to the United Kingdom. The 2011 Act, to which the noble Lord, Lord Foulkes, rightly drew attention, provides:
“A treaty or Article 48(6) decision does not fall within this section merely”—
I come to that word—
“because it involves ... the making of any provision that applies only to member States other than the United Kingdom”.
The “merely” is intended to indicate that other conditions are also taken into account—for example, the exemption condition or the significance condition. It is not only the fact that it does not apply to the United Kingdom and is outside the application of the United Kingdom; it involves other conditions as well. The decision amending Article 136 therefore clearly falls within the exemption set out in Section 4(4)(b) of the 2011 Act.
The noble Lord, Lord Liddle, raised again the doubts of his own party and colleagues about that Act, which was vigorously debated. I do not think that it would be in order to debate the Act again, although I am always happy to reopen these great issues. I happen to think that it was an immensely important Act which has been a considerable reinforcement to the concerns of the British people that there will be no further transfer of competence to the European Union without a referendum. It is an important safeguard, and my right honourable and noble friends have drawn attention to its importance.
The Government have been clear that a referendum is not required under the 2011 Act right from the very beginning. On 13 October 2011, the Foreign Secretary laid a Statement before Parliament in accordance with Section 5 of the Act, in which he confirmed that in his opinion a referendum was not required under the Act. The Statement was open to judicial review but, as my right honourable friend pointed out, in the intervening eight months, no one has sought to challenge it in the courts. The noble Lord, Lord Stoddart, whose position is consistent and which he has put with admirable consistency over the years, said that in his view there was some practical implication of transfer of competence— although he did not put it in quite those words. But no judicial review to make that point has been launched. The noble Lord referred to the aspect, to which I will refer again in a moment, that in exchange for this going forward, the British liability to be exposed under the European financial stability mechanism is released, and the mechanism falls and is no longer in use. The noble Lord, Lord Stoddart, was concerned that that was just a political decision and not enshrined in law. He is perfectly correct, but it is a decision by all 27 members, and it is a firm commitment. To unravel the whole of that would be to throw the entire arrangement of the EFSM into complete chaos. It would be a total reversal of a firm commitment made in good faith by 27 members. We believe that it is a substantial and supported condition.
I am most obliged to the Minister. Can he deal with the point that I made concerning the article in the Times? I have given it to Hansard so I cannot quote from it again. The Times queried whether the European Court of Justice could interpret our passing of this Bill as an agreement to future financing within the European stability mechanism. The point being made by the Times was that perhaps the European Court could interpret what we are doing as being consistent with having to make future contributions.
The European Court proceeds in ways which some of us do not always understand, but it is required to interpret the law. There is no issue with the European financial stability mechanism in the way that the noble Lord, Lord Stoddart, said. When this Bill is passed—I can boldly say when—and the amendment of Article 136 is ratified by all 27 member states, that will be the law, and the Court will interpret it. I do not see how the noble Lord could argue that this political decision, which is immensely valuable to the United Kingdom, could be somehow embroiled in the legal interpretations of the Court. I do not see how it comes into the interpretations of the law as embodied in the treaties.
When we debated the provisions of the EU Bill, as it then was, in this House last year, many Members were concerned that we might be bringing referenda into disrepute by requiring them for small changes to EU treaties and by being explicit about when a referendum was and was not required. Indeed, the noble Lord, Lord Liddle, made a proposition that something to do with paper clips, I think it was, could cause a referendum.
I spent a lot of time at this Dispatch Box explaining why we felt the provisions for referenda were not trivial. I explained that one of the reasons the European Union Bill was so long was so that it could be crystal clear about when a referendum was not required, and why issues which appeared small in the schedules to some of your Lordships were in fact the core of red-line considerations involving transfers of competence which we believed were not desirable and would certainly require a referendum.
The way in which the European Union Act 2011 applies to the treaty change we are considering today is clear. The provisions of this decision, amending Article 136 of the TFEU, do not apply to the United Kingdom, so the decision simply does not attract a referendum. What is more, there is no transfer of competence or power from the UK to the EU involved. The noble Lord, Lord Stoddart may feel that that is questionable; if that was his determined view and he thought he could mobilise the evidence for it, there would have been an opportunity for a judicial review, but no such review was brought forward.
The amendment to Article 136 simply recognises the ability of eurozone member states to establish a permanent stability mechanism—the European stability mechanism—by means of an intergovernmental agreement. The ESM is established by an agreement. This is not the ESM treaty. This is a treaty merely noting the amendment to the existing treaties, to Article 136.
I have listened very carefully, and I enjoyed the speech of the noble Lord, Lord McAvoy, for which I am grateful. I hear the views of the noble Lord, Lord Liddle—who is a considerable expert on these things—that his party does not stand against this Bill, but believes it will make a contribution. We can have a debate on what sort of contribution it makes to a rapidly changing scene where there are many issues that cannot be resolved at this stage, but holding a referendum on this decision would contradict the clear provisions of the European Union Act 2011. It would introduce confusion about the circumstances in which a referendum would be required in the UK, and that is, to my mind, the reason, above all, why it should be—and, I hope, will be—resisted by your Lordships’ House.
My Lords, while I agree with the Minister that I enjoyed the speech of my noble friend, Lord McAvoy, I can honestly say that it did not contain any words with which I agreed. I was very pleased that my noble friend from the Front Bench gave what might almost be described as a muffled, mild rebuke to my noble friend Lord McAvoy about the importance of loyalty. I think that my noble friend is only too aware of that, because he has managed to follow the party line on many occasions when he did not agree with it, and has been an inspiration to all of us.
I am sorry to disappoint my noble friend—because he is my friend—Lord Stoddart. We are not on the same Benches now, but we were for many years and we agreed on almost everything except Europe. I agreed with everything that my noble friend on the Front Bench said, including his remarks quoting our shadow Foreign Secretary and our party leader on the question of a wider referendum. It would be unnecessary and wasteful. It is not covered in the amendment and not something that I dealt with, but I will say that I agreed with my noble friend completely.
If I had not already intended not to press my amendment, the speeches of the Minister and my noble friend Lord Liddle would have convinced me. Therefore, I beg leave to withdraw the amendment.
Amendment 1 withdrawn.
Debate on whether Clause 1 should stand part of the Bill.
My Lords, I will not detain the House on this for more than a couple of minutes. As I found out, trying to devise amendments for the Bill is not easy. It is very tightly drawn and cleverly done by the usual draftspersons. At Second Reading, the noble Lord, Lord Howell of Guildford, said in relation to the ESM:
“The intention is that it will replace both the EFSM and EFSF”.—[Official Report, 23/5/12; col. 802.]
I wanted to devise an amendment that would make that clear. It would have said that by agreeing to the ESM we would have replaced the EFSM and the EFSF. However, I was told that that was not competent within the terms of reference of the Bill. I wonder whether the Minister—this is the only point I shall raise on the clause stand part debate—will give an assurance that it is the understanding of Her Majesty’s Government that those two mechanisms will be replaced. There is a tendency in my beloved European Union to keep things going when they are not necessary—actually, there is such a tendency in successive Governments. I hope that we will have a clear assurance on that.
My Lords, briefly, I will give a clear assurance that it is our intention to replace the EFSM and the European Financial Stability Facility. That has been the aim all along. The Bill does not do either of those things but merely amends Article 136. However, those intentions were stated absolutely clearly and supported by all members of the European Community. That is what is proposed.
Clause 1 agreed.
Clause 2 : Extent, commencement and short title
2: Clause 2, page 1, line 14, at beginning insert “Subject to subsection (2A),”
My Lords, it was a wise and appropriate suggestion by the Government to group Amendments 2, 3 and 4 together. Amendment 2 would insert,
“Subject to subsection (2A)”.
New subsection (2A) is proposed in Amendment 4. Amendment 3 changes the date to 1 January 2013—again, in order to enable a debate to take place on that.
The amendment is based on the assumption that the Act can come into effect only if the member states of the eurozone are those that existed when the treaty was agreed. Obviously, as we heard at Second Reading, this raises the question of Greece. If Greece was to have withdrawn or in some other way removed itself, or have been removed, from the eurozone, the treaty would not take effect—or, at least, the Bill would not take effect—and our agreement to the treaty would not take effect.
I wish to say a few words about the wider issue that was raised at Second Reading. I am glad that the noble Lord, Lord Sassoon, is in his place because I find annoying the constant referrals to the markets and how they must be satisfied. It is as if the markets were inanimate objects or deities that need to be worshipped—and I am pleased that the right reverend Prelate is in his place. It is as if they are superhuman, but they are not; they are controlled by human beings. It is important not to give so much credence to the markets. We keep hearing statements such as fishermen have to understand and accept all the conditions of the sea because we cannot control the sea—even the right reverend Prelate will agree to that—and we cannot control the wind, but there can be some human influence on and control of the markets through government, intergovernmental organisations and intergovernmental agreements.
I have raised previously, and I raise again, the question of credit rating agencies. The noble Lord, Lord Sassoon, is well aware of my concern on this issue. However, I wish first to make a confession. I confessed in a previous debate on Scotland that I had become an accidental Member of the Scottish Parliament because of the strange electoral system. I now confess that I have become an accidental currency speculator. A few years ago I transferred some sterling to a bank account in France at a rate of €1.50 to the pound. The exchange rate is now €1.20 to the pound. Therefore, if I was to transfer the money back to sterling I would make a very substantial profit. I am therefore potentially —not actually—a currency speculator. I could make money by doing nothing. It would take no effort on my part to transfer the money over and, because of the movement in the exchange rate, I would make money.
That would be after a few years and it is a relatively small amount of money, but the real currency speculators could do it in an instant and it could involve millions and sometimes billions—or trillions, as my noble friend Lord Radice, is saying—of pounds. By speculating that the currency rate is going to change, they can make almost overnight thousands or even millions of pounds. Sometimes they can make money without owning or possessing the currency they transfer. They gamble that when the money comes back having increased in value, they will be able to repay the money they speculated with and hang on to the profit. Of course, if they lose, who bails them out? They do not bail themselves out; they come to the Government.
That is one example but there are many others. The whole system is dependent upon these people—they have so much power over it—and I believe that individual Governments and intergovernmental bodies such as the European Union should have much more control over them. I want to mention briefly an example which I gave previously—that of the credit rating agencies. In my view, the credit rating agencies played a central part in the euro crisis. If one thinks about it, the Greek Government—and other Governments such as that of Ireland—have to pay more for the money that they borrow because of the speculation taking place. Who is making money out of it? Someone is making money out of it. The extra money and extra interest that they are paying does not go into thin air—it goes to the speculators. I think that it was a Conservative Minister who once described them as spivs and speculators.
Let us take Moody’s as one example, although there are also Standard & Poor’s and Fitch. Moody’s, an American-based private company, recently made a statement about the United Kingdom and it can take it upon itself to rate not just other companies but sovereign countries too. As a result, the sovereign countries have to pay more for their borrowing. Therefore, the credit rating agencies helped to bring on the crisis. Look at who owns Moody’s and at who might benefit as a result of that speculation— it is Berkshire Hathaway, Capital World Investors, ValueAct Capital, Vanguard Group. The companies which own these credit rating agencies benefit by the decisions and the announcements made to downgrade the country concerned. It is, really, outrageous that this should happen.
My Lords, I see some puzzled faces around the Chamber and I think that others agree with me that this is rather wide of the amendment under discussion. Perhaps I may remind the noble Lord that we are at the Committee stage when we should address directly the amendments concerned.
I have noticed that the noble Lord, Lord Wallace of Saltaire, has been up on his feet regularly in recent days and weeks keeping colleagues in order, so I know that he is not picking on me in any way. I accept that I had moved just a little wide of the amendment.
I was trying to say that if Greece were no longer a member of the eurozone, having been forced out because of all these speculators, the question would arise whether the treaty should go ahead as originally planned. That is the amendment and that is a valid point. People are concerned that countries such as Greece, Ireland and now Spain, which are in difficulties and suffering, might have to leave the eurozone because of the speculation taking place. If those countries were no longer members of the eurozone, why should a treaty which was drawn up at a time when they were members continue on that basis? I beg to move.
I wonder whether the noble Lord, Lord Foulkes, would reconsider his suggestion that Greece might be forced to leave the eurozone purely because of the action of the speculators. Is the real reason why Greece is in trouble not because it has been spending money it does not have, it has been borrowing money that it cannot pay back, and it is basically bust?
My Lords, I was interested to hear the noble Lord, Lord Foulkes, recount how he was accidentally drawn into the adventure of currency speculation. I hope that that is all in order, and I am sure that it is. However, having heard my noble friend Lord Sassoon say earlier, rightly and correctly, that he was not prepared to be drawn by the noble Lord into a discussion of Rangers’ tax affairs, I have equally to recognise that I am not prepared to be drawn into a discussion about the noble Lord’s own tax affairs either.
The purpose of these amendments is, first and obviously, to delay the entry into force of this Act until January of next year. Secondly, they would stop the Act coming into force at all if the membership of the euro area were to change between now and 1 January 2013. This Bill gives parliamentary approval to a European Council decision amending Article 136, as I am afraid I repeated ad nauseam in my earlier comments. This, in Her Majesty’s Government’s view, is firmly in the UK’s best interests. Once the European stability mechanism is established, the UK will not be exposed to any future programmes of financial assistance for the eurozone through the EU budget, specifically through the European financial stability mechanism. The mechanism will contribute to helping our neighbours in the eurozone in the continuing search for financial stability in the currency area. Delaying the coming into force of this Bill until 1 January is therefore not in our interests. It would create uncertainty about the UK’s intentions in relation to ratification of the decision.
In turn, as a knock-on effect, a delay would destabilise the European stability mechanism, which may or may not come into use in the times ahead depending on what occurs. It is not for me to speculate on any of the points that have been raised about whether there will be exits from the eurozone or whether there will be banking unions, insurance unions, fiscal pacts and so on. This move on the part of the House and this Parliament is intended to be a contribution to a very complex jigsaw of requirements. If the Bill were not to come into force at all, that would be even more damaging to what is without doubt a very difficult and challenging situation with many complex and component parts to it, which is what the eurozone states are presently confronting. I am sure that noble Lords will appreciate that it would not be appropriate for me to speculate further on that aspect of what is going to happen. However, what is certain is that, regardless of whether there is a change in member states whose currency is the euro, having a permanent stability mechanism, which is the decision of the eurozone states, is essential for those that remain.
If the Bill were not to be enacted and come into force, the UK would not be able to ratify the treaty change —the Article 136 amendment—and that amendment would not be able to enter into force. This instrument is the change that will provide eurozone members with the legal certainty they want in relation to the ESM, and it is very much in our interests that that at least should be in place.
We want the euro to sort out its problems, of course, as a strong and stable euro area is in the UK’s national interests because of our close economic links. I think that everyone realises that now. Setting up a permanent stability mechanism is part of the solution to the current crisis and this Bill confirms the ability of eurozone members to do that. Failing to approve or delaying the approval of the treaty amendment decision would further contribute to instability across the eurozone, of which there is plenty around already, and have a negative impact on the UK economy. As my right honourable friends the Prime Minister, the Foreign and Commonwealth Secretary and the Chancellor have all repeatedly made clear, a stable eurozone is directly in the UK’s interests. It is a major market for our trade, and some would argue that its stability is key to unlocking the prospects for recovery and expansion in all the European and, indeed, global economies, and certainly including this one. Accepting these amendments would risk undermining that prospect of stability and growth further.
In addition, in exchange for agreeing to the Article 136 treaty change, there is the secured agreement that the EFSF and the EFSM will be replaced, about which I gave assurances to your Lordships’ House only a few minutes ago; and Article 122(2) of the TFEU, the basis for rules establishing the EFSM, will no longer be needed for the purpose of safeguarding the financial stability of the euro area as a whole. Failure to approve the Article 136 treaty change decision would put that agreement at risk straightaway, and the Prime Minister would not fulfil a commitment that he made at the March 2011 European Council—a commitment that was made after both Houses voted in favour of a Motion to approve the draft decision.
I sympathise with the noble Lord’s desire to have greater certainty about the future of the eurozone before supporting the Bill—we would all like to see greater certainty in what is undoubtedly a very chilling situation which is having an impact on nations and economies not merely in the European region but far outside it as well, as world leaders have observed in trenchant terms. It is precisely to try to meet some of that uncertainty, as far as we can from outside the eurozone, that this Bill is necessary.
This treaty change is firmly in the UK’s national interests. These amendments risk undermining them and the steps towards financial stability that the eurozone so very badly needs to take, and that is why they should be resisted.
My Lords, I just want to make two points in reply; first, to the noble Lord, Lord Brabazon, after his interesting—almost astonishing—intervention about Greece. I do not think I said that the increased interest rates were the only reason that Greece is in difficulties. Although one can of course argue that the Greeks have been living beyond their means, for the past few years pressure has been put on them to get their budget into balance and they have been doing that. However, if at the same time the money that they have to borrow costs them more and more because of higher interest rates, it will make it more and more difficult for them to balance the books and meet their obligations. If the noble Lord, Lord Brabazon, had a mortgage on his house and was just managing to survive paying the mortgage at a certain interest rate, he would find it much more difficult if the building society unilaterally doubled or trebled the rate. So I hope that he will accept that, although it is not the only factor, it is an exacerbating factor that makes it more difficult for Greece to balance its books effectively.
I agree very much with what the Minister said about the importance of the stability of the eurozone. That is very, very important, not just from the point of view of the eurozone itself but for us in the United Kingdom. People who foolishly wish the break-up or fragmentation of the eurozone, or the falling-out of any one country, are doing this country—and our economy—a disservice. That is very clear in what President Obama and others have said as well. The continuation and the stability of the eurozone are very important indeed, as the Minister said. Because he argued that my amendments might create some problems in relation to that, and because he argued so powerfully in favour of giving as much stability to the eurozone as possible, I am happy to withdraw my amendment.
Amendment 2 withdrawn.
Amendments 3 and 4 not moved.
Clause 2 agreed.
Bill reported without amendment.