European Union (Approval of Treaty Amendment Decision) Bill [Lords]
(Limited Text - Ministerial Extracts only)
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The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
I beg to move, That the Bill be now read a Second time.
As the House will know, the reason for the treaty change that the Bill approves is the crisis in the eurozone. That crisis was predictable and, in fact, predicted by some present in the House. The existence of monetary union without fiscal or economic union has led to severe economic strains in a number of eurozone countries and permitted the build-up of excessive debts by some members to an unsustainable level.
I have always opposed Britain’s membership of the euro, as Opposition Members will no doubt recall, not only because of the single currency’s flawed design, but because of the limitations that it would impose on our national democracy. I think that there is now near-national consensus that we are better off with our own currency; I say “near” because the Leader of the Opposition has said that Britain could join the euro if he were Prime Minister for long enough—a pretty good reason for not allowing him to become Prime Minister at all.
None the less, there are solid majorities in every national Parliament in the eurozone that wish to retain their membership of the single currency and see it restored to stability. They have their reasons for that, and we should respect them. Obviously, it is also crucially in our interests for the eurozone crisis to be resolved. As the—
Mr Hague
It is a little early, even for my hon. Friend. In a few paragraphs, I will of course give way to him—probably more than once, I should imagine.
The Governor of the Bank of England has said that the crisis is casting a black cloud of uncertainty over our economy. Eurozone countries could take a number of measures to bring about a resolution, and the decision about which are the right ones is for them. One measure that has been decided is the European stability mechanism, a permanent financial assistance mechanism established by the eurozone for the eurozone, to help eurozone countries that get into difficulties. The amendment to article 136 of the treaty on the functioning of the European Union confirms the ability of the eurozone countries to do that. The simple purpose of the Bill is to approve that decision.
Mr Cash
I am most grateful to the Foreign Secretary. Why in his own judgment and opinion is he prepared to invoke the exemption arrangements, the effect of which is to say that the matter does not really affect United Kingdom businesses, as was set out in the explanatory notes to the European Union Act 2011? Plainly, the implosion in Europe does affect us, and this failed attempt to put a sticking plaster on an increasingly impossible situation is simply making the position worse.
Mr Hague
Clearly, the economic crisis in the eurozone—“implosion”, as my hon. Friend terms it—affects us enormously, but so do many other things in the world such as the deficit of the United States and the economic policies of China. What we are dealing with is the approval of one change to article 136—a change that concerns eurozone countries and gives certainty to the creation of a treaty purely for those countries. It has an additional benefit for the United Kingdom, to which I shall come in the course of my speech.
I do not pretend for a moment that the ratification of the decision or the establishment of the ESM alone will solve the eurozone crisis. As the present situation shows, many other things are needed for that solution. For the long term, sustainable public finances and globally competitive economies in all the eurozone’s member states are needed. Those tasks are vital not just for eurozone countries to succeed but for the United Kingdom as well, and are at the heart of this Government’s programme.
Kelvin Hopkins (Luton North) (Lab)
I thank the Foreign Secretary for giving way. He has talked about resolving the eurozone crisis, but the measure will just pour good money after bad. Will not the ultimate resolution of the eurozone crisis come only when certain countries are allowed to leave the eurozone, recreate their own currencies and expand their economies again?
Mr Hague
Different solutions can be advocated and the hon. Gentleman is advocating what he thinks would help as a solution. However, the point that he and I have to bear in mind is that those countries—their national Parliaments and democratically elected Governments—wish to stay in the eurozone. That position is different from the one that he and I have always taken on the United Kingdom, but that is their wish. Therefore in practice we are dealing with that situation. We want those countries to succeed in stabilising the eurozone.
Let us take the worst-case scenario—the hon. Gentleman’s assumption that the measure would pour good money after bad. What we are ensuring is that money from the United Kingdom taxpayer is not going after other money, good or bad, giving assistance to eurozone countries. The Bill provides solely for the parliamentary approval of an amendment to article 136 of the treaty on the functioning of the European Union, which makes it clear that the eurozone member states may, by means of a separate intergovernmental agreement, establish a financial assistance mechanism—the European stability mechanism, or ESM—without acting in contravention of their obligations as member states of the EU.
As the House will know, this is not the first time that this treaty amendment has been considered and approved by Parliament. Before the Prime Minister agreed to the treaty amendment decision in March last year, a motion in favour of the draft decision was passed by both Houses under the provisions of the previous legislation—the European Union (Amendment) Act 2008. Before our Act of last year, that was all the parliamentary scrutiny and control required for the Government to agree to a change in the EU treaties under the simplified revision procedure.
In our view, those provisions were grossly inadequate, so at that time my right hon. Friend the Minister for Europe committed us to bringing the decision before the House again under the more stringent parliamentary scrutiny of what was then the European Union Bill. Indeed, we introduced an amendment to that Bill, now section 5(6), to enable the treaty change to be subject to the Bill’s provisions once it entered into force. That Bill has become the European Union Act 2011 and any use of the simplified revision procedure now requires an Act of Parliament for ratification. That is why this Bill is being presented to the House.
Having gained the approval of Parliament in March last year, the Prime Minister formally agreed to the decision at the following European Council. The decision must now be ratified by all 27 member states before the amendment to article 136 can enter into force. Eighteen member states have now done so. The target date for entry into force, as set out in the European Council decision, is 1 January 2013.
The scrutiny process under the European Union Act 2011 began in October last year, just under two months after its relevant provisions came into force, when I laid a statement before Parliament, to which my hon. Friend the Member for Stone (Mr Cash) has referred, under the provisions of section 5 of the 2011 Act. I set out in that statement why the decision does not trigger the requirements for a referendum set down in the European Union Act 2011.
The proposed amendment to article 136 applies only to member states whose currency is the euro. Consequently, it does not transfer further competence or power to the EU from the UK. The opinion set out in the statement was open to judicial review, but in the intervening 11 months no one has sought to challenge it in the courts. To ensure timely ratification of the decision, which is strongly in our country’s interests for reasons that I will now come to, the Bill was introduced in the Lords, where it was passed without amendment. Should the Commons now grant its approval, the Government intend to ratify the treaty amendment by the end of this year.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
Is this really such a big change in the scrutiny of how these things are done? Since we joined the European Union, has there ever been an amendment to the European treaty that did not require an Act of Parliament?
Mark Reckless (Rochester and Strood) (Con)
Surely my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) was saying that throughout the history of the European Union every treaty amendment has required an Act of this House, so what we are doing today is no different from what has been done in the past.
Mr Hague
Yes, but in the past we did not always have the simplified revision procedure and the provisions of the Lisbon treaty that most Government Members—or rather most of us in the Conservative part of the coalition—opposed when the legislation was passing through this House. Even without this change in scrutiny, there would now be far greater scope for treaty changes without the passage of an Act of Parliament.
Mr MacShane
The Foreign Secretary’s two colleagues have made important points. This treaty requires ratification by the Parliaments of the eurozone and it is going through that parliamentary ratification. The notion that it could simply have been nodded through as a statutory instrument is silly. It is quite an important treaty, and this Parliament is right to be adopting it tonight; other Parliaments are doing likewise.
Mr Hague
Yes, other Parliaments are doing that in their own various ways. My point is that the reason this requires the full examination and passing of a Bill is the passage through this House of the European Union Act 2011, which the right hon. Gentleman probably opposed if he voted on it. A much briefer procedure was required under the European Union (Amendment) Act 2008, which he supported. Parliamentary scrutiny has been enhanced by the recent change, and I am merely establishing that point. [Interruption.] Labour Members are reminding me that they did not vote against the EU Act 2011—although they were probably unable to vote for it. Having taken so many positions on the holding of a referendum, they decided not to have a position at all.
As the House will remember, the background to the ESM is that in response to the first Greek crisis, the previous Government, in their very last days, agreed to the establishment of two emergency instruments to respond to financial crises. The first is the European financial stability facility, an emergency facility established intergovernmentally by euro area member states. It has been used to provide loans to euro area member states in financial difficulty. The UK is not a member of that facility and has no exposure to financial assistance provided by it. The EFSF will operate alongside the ESM up until its wind-down by the end of June next year. The second is the European financial stabilisation mechanism, or EFSM. This allows the Council to agree by qualified majority a Commission proposal to provide assistance using money raised on the financial markets, backed by the EU budget. It has been used for assistance to Portugal and the Republic of Ireland, for which we also contributed a bilateral loan.
In the new Government, we have never thought that that was a satisfactory state of affairs. It was a questionable use of article 122 of the treaty on the functioning of the European Union. An inability to access the markets because of the unsustainability of public finances is not a natural disaster, and it is hard to argue that it is an exceptional occurrence beyond a country’s control, and those were meant to be the criteria for the use of article 122. When qualified majority voting was introduced into the provision under the Nice treaty, we warned the then Government of the risk, and that warning was dismissed. The amendment to article 136 gave us the opportunity to deal with the problem, and we took that opportunity. Britain is not in the euro, we are not going to join the euro, and we should have no liability for bailing out eurozone countries.
On coming to office, therefore, the Government found established a mechanism which enabled the Council of Ministers to decide by qualified majority voting to allow the European Commission to raise funds on the capital markets guaranteed by the headroom in the EU budget—about €60 billion—for loans to eurozone countries. We must grant that thus far this has not cost the British taxpayer a penny. The money is borrowed from the markets by the European Commission against the headroom in the EU budget. It must be granted that these are only contingent liabilities that would be called on only if Portugal or the Republic of Ireland defaulted on their loan obligations. However, it is still not right that a country outside the euro should be obliged to assume contingent liabilities for matters that are clearly the responsibility of countries that are in the euro. That is why this Government were determined to bring the situation to an end, and we have succeeded in our goal. That is a good example of this Government repairing the damage caused by the last one.
Mr David Nuttall (Bury North) (Con)
I am extremely grateful to my right hon. Friend for giving way, because we have come to the crux of the matter. Will he please confirm that if the Bill goes through and reaches the statute book, this country will have no further liability whatsoever under the European financial stabilisation mechanism and will not be called on to contribute any further?
Mr Hague
That is what has been agreed. I am going to examine, in what my hon. Friend or other hon. Members might find painstaking detail—[Interruption.] Actually, I can see that some of my hon. Friends will not find it painstaking. I will go through this in detail to give full, frank and maximum assurance to my hon. Friend and others.
Not only does the new mechanism, the ESM, which is limited to eurozone countries, supersede the EFSM; crucially, the decision that the Bill approves and which is being ratified by all other EU countries reflects in its recitals, or preamble, an agreement that article 122
“will no longer be needed for such purposes”,
The Heads of State or Government have therefore agreed that it should not be used for such purposes. Therefore, when this decision is ratified, our liability for future euro area financial assistance programmes under the EU budget will be removed. That is a great gain for British taxpayers and, because it fetters the use of article 122, a shift of a power from the European Union to the United Kingdom.
Mr Hague
No, I am going to explain quite a bit of this, and then I will give way to my hon. Friend again.
The House will want to know how our contingent liability under the EFSM is being brought to an end and—this was the question asked by my hon. Friend the Member for Bury North (Mr Nuttall)—how sure a protection we have against any future use. First, when eurozone member states agreed to bring forward the introduction of the ESM at the ECOFIN meeting on 23 January this year, the Chancellor won agreement from his fellow Finance Ministers that the EFSM would not make any new commitment as soon as the ESM comes into force, which we expect to happen this autumn when the German ratification process is complete. That is an important political agreement. Secondly, there is the decision that we are approving in the Bill and which all our European partners have agreed to ratify by the end of this year. The fourth recital to the decision reflects the agreement reached in the European Council to close off the future use of the EFSM or any such mechanism under paragraph (2) of article 122. As I have said, we expect every country to have ratified the decision by the end of this year.
Those present who are cynical about the ways of the European Union—and there are such people here; in many respects I share a lot of their cynicism—may ask what would happen if, notwithstanding the decision, the Commission made a proposal to reactivate the EFSM or something like it. First, that would be a breach of a political agreement unanimously reached in the European Council, recorded in the Council conclusions, and reflected in the preamble to a decision unanimously agreed at the European Council and soon, we expect, to be ratified unanimously by all EU countries under their respective constitutional requirements. If, despite all that—this is an extreme hypothesis—the Commission made such a proposal and somehow received a qualified majority, the British Government would of course challenge any such measure before the European Court of Justice, citing the agreement of all EU member states in the European Council and the fourth recital to the decision in support of the argument that any such measure would be in breach of the clear intention of all EU member states and that article 122 would no longer be needed and should not be used for this purpose. Those would be very strong arguments indeed. That is the protection that we have secured against any future obligation to participate in bail-outs, and it is a good one.
Mark Reckless
Is there not a fundamental inconsistency in the Foreign Secretary’s position? On the one hand, he says that ratifying the European Council decision of 25 March 2011, which amends article 136, will affect only member states in the eurozone and not the UK, and that he therefore does not need a referendum. He then goes on to say, “Ah, look at recital (4) within the decision. That will mean that the mechanism cannot be used to impose costs on the United Kingdom in future.” That is surely a fundamental inconsistency.
Mr Hague
No, it is not. The decision relates to a treaty being created for the eurozone countries. In conjunction with that and at the same time, as is reflected in the fourth recital, the Prime Minister secured agreement at the December 2010 European Council that article 122 would not be used. That is absolutely clear. If my hon. Friend wants to argue that we should have a referendum on our not being liable for eurozone bail-outs any more, he can do so, but I will not agree. That is not the kind of thing that we had in mind when we passed the European Union Act 2011; nor would it do any good to the good name of referendums.
Mr Jenkin
My right hon. Friend is in something of a Catch-22, which he is skilfully trying to obscure from us. If the article basis for the May 2010 mechanism was illegal or questionable, why do we need this legislation to get out of it and why did we not challenge it? If it was not illegal, why is it necessary to amend the treaty to legalise a different mechanism? The very fact that the European Commission and the other member states have agreed to the treaty amendment, which effectively does away with the no bail-out clause that was so central to the passage of the Maastricht treaty, means that they admit implicitly that the original mechanism had an illegal treaty base.
Mr Hague
I can go over that again. It is that article 122 will no longer be used for eurozone bail-outs. It may be my hon. Friend who faces a Catch-22 here, because he just cannot bear the idea that a Bill that says “European something” on it might be good for the country. This Bill is good for the country. Even those of us, like him and me, who are very sceptical about many aspects of the European Union have to admit that securing an agreement that means that we are no longer liable for eurozone bail-outs and that does not harm the country in any other way is, in the words of our noble Friend Lord Flight in the other place, a “no-brainer” to support. That is why I hope that the House will support the Bill.
Mr Hague
No, I will not give way any further. [Interruption.] The right hon. Member for Rotherham (Mr MacShane) will never see me go native on European subjects.
The ESM is being set up under an intergovernmental treaty that was signed on 2 February by the eurozone member states. That treaty is now being ratified by those 17 member states. It will come into force as soon as euro area member states representing 90% of the capital commitments to the fund have ratified the intergovernmental treaty.
The treaty amendment that Parliament is being asked to approve in the Bill does not establish the ESM. Our clear view—this is part of the answer to my hon. Friend the Member for Harwich and North Essex (Mr Jenkin)—is that the treaty amendment is not legally required to set up the ESM. Eurozone member states, in particular Germany, want the legal certainty that the amendment provides, partly because of article 125, which is the no bail-out provision that he talked about. The UK, of course, will not ratify the ESM treaty because it has not signed up to the intergovernmental agreement, is not part of the eurozone and is not going to be part of the eurozone. The intensification of the crisis led eurozone member states to agree to bring forward the introduction of the ESM to this year. Their position has not changed the timing of the ratification.
Members may also be aware that a legal challenge to the validity of the decision amending article 136 is currently being considered by the European Court of Justice. The Irish Supreme Court is seeking a ruling on whether it is valid, whether the ESM treaty is compatible with EU law, and whether eurozone member states can establish the ESM before the article 136 decision enters into force.
We are wholly satisfied that the decision is valid from a legal perspective, but it is absolutely right that the Irish Supreme Court seeks the ruling of the European Court of Justice, particularly because Ireland is a member of the eurozone and a signatory to the ESM treaty. We do not expect the ECJ to find against the decision in any way, but should it find the decision invalid or the ESM incompatible with EU law, there would need to be a new ratification process. A failure to approve the decision would, naturally, have an unfortunate effect on our trading partners in the eurozone by undermining certainty about the legal validity of their firewall, and it would leave unratified the decision, the importance of whose recitals to us I have explained. That would be unfortunate from our point of view.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
Will my right hon. Friend the Foreign Secretary give way?
Mr Hague
No, I am concluding my speech.
The UK will no longer be exposed to any future programmes of financial assistance for the eurozone through the EU budget. The Bill will help our friends and neighbours in the eurozone, whom we wish to see prosper, in their search for financial stability in their currency area. This House has already agreed, under previous provisions, to the Prime Minister signing the treaty amendment. I hope that its merits mean that it will be approved again under the new and vastly more rigorous provisions that we have put in place. I commend the Second Reading of the Bill to the House.
Mr Cash
My hon. Friend and others have pursued that relentlessly and still have no real answers. The truth of the matter is that a number of things were done at or around that time that many people now rather regret—let us put it that way. The fact that the EFSM is now described as “not needed” is disingenuous because people know perfectly well that it was illegal. That is not just my opinion—I make this comment to the hon. Member for Cheltenham (Martin Horwood)—but the one reached by members of the European Scrutiny Committee as a whole in the light of what we heard.
The Minister for Europe (Mr David Lidington)
May I make a plea to my hon. Friend and to my hon. Friend the Member for Rochester and Strood (Mark Reckless)? It is one thing to criticise Ministers or Government policy on the European Union, but will they please not direct criticism directly at named officials, who serve Labour, Conservative and Liberal Democrat Ministers loyally and to the best of their ability in the impartial tradition of the British civil service?
Mr Cash
I am delighted that my right hon. Friend makes that point and I endorse it as a general principle, but instances occur periodically that require a certain amount of investigation and analysis. I did not entirely endorse the remarks made by my hon. Friend the Member for Rochester and Strood (Mark Reckless) in as many words, but I agree with him—and with others—that, at the time in question, decisions were taken that people now regret. I am glad that we have moved on from article 122 to the present European stability mechanism.
The Minister for Europe (Mr David Lidington)
I start by thanking all right hon. and hon. Members who have taken part in the debate. To the hon. Member for Wolverhampton North East (Emma Reynolds) I say that I will be happy to send her a copy of an article that I published in The Sun on Sunday earlier this year, which set out in good, plain English the case that I have consistently made for a constructive, critical and engaged approach by the United Kingdom in the European Union.
As several hon. Members have said—especially my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg)—it is important to note that we are debating this initiative to change the European Union treaties in the context of a debate on primary legislation. In an earlier intervention, my hon. Friend the Member for Rochester and Strood (Mark Reckless) questioned whether the European Union Act 2011 had made any difference. He was correct to state that in the case of treaty changes that were agreed before 2008, treaty amendments could be approved here only through primary legislation, but in 2008 the law was changed. At the same time as the Lisbon treaty was being taken through by the then Government, they provided in section 6(1)(a) of the European Union (Amendment) Act 2008 that all that would be needed henceforward to approve the use of the simplified revision procedure would be for each House of Parliament to approve a Government motion without amendment.
As my hon. Friend the Member for North East Somerset pointed out with characteristic acuity, there is a considerable difference between the kind of detailed examination and debate that takes place on the Floor of the House during the various stages of proceedings on primary legislation and the brief 90-minute or two-hour debate on a motion tabled under the provisions of the 2008 legislation. I would hope that my right hon. and hon. Friends, whatever our differences on one or two other matters to do with the EU, would acknowledge that the 2011 Act has made an important and significant difference in restoring the central role of Parliament and, in particular, the Chamber of the House of Commons, as the place where things as important and significant as European treaty amendments can be considered in full. The disgrace is that the 2008 legislation sought to take those powers away from Parliament in the first place.
Before moving to the content of the Bill, I want briefly to respond to some of the points made by hon. Members during the debate. I turn first, of course, to my hon. Friend the Member for Stone (Mr Cash). The hon. Member for Wolverhampton North East said that she had returned from the summer break feeling invigorated and ready for the European fray once again. I have descended from the mountains of Snowdonia full of enthusiasm and relish to debate with my hon. Friend once again. I agreed with a fair measure of his analysis, and I think that most of those who contributed to this debate, from whatever party, agreed that the euro was created without sufficient thought being given to ensuring the stability of the single currency area, given that there was not the degree of fiscal, economic and political integration normally expected in a currency area.
My hon. Friend the Member for Stone warned in stark terms that the current eurozone crisis contained not only profound economic risks but significant—he would probably say dangerous—political challenges, and he has been consistent in arguing those points. I am one of those survivors on the Government Benches who has vivid memories of his contributions at 5 o’clock in the morning during proceedings on the Maastricht legislation in 1992-93. I agree that the crisis facing the euro presents the eurozone countries with important political as well as economic challenges. If it is agreed to centralise or co-ordinate decisions on some of the fundamentals of economic policy, it also has to be decided how those decisions, which are so important to the citizens of the countries concerned, are to be made democratically accountable. There is, then, a political, as well as an economic challenge, for our friends and neighbours in the eurozone.
It would be foolish, however, for British politicians to assume that the leaders and voters in other EU member states will necessarily respond to those political challenges in the same way as the UK electorate might be expected to do. Each European country has its own historical experience and economic and geographical particularities to take into account.
Let me take, for example, the conversations I had with members of the Governments of the three Baltic republics during my visits there. One of the things that they were keen to make clear to me was that although they certainly valued and cherished their hard won independence—the reclamation of their freedom—they also saw the integration of the European Union not as a threat, but as a way to entrench their European and democratic identity, so that never again could they be pulled back towards an eastern alignment or towards Russian influence, which they still feared, for understandable historical reasons.
Let us take Germany, which is a very different case. Where I parted company with my hon. Friend the Member for Stone was when he spoke of Germany. I do not think it was his intention, but some of the phrases he used came across in such a way as to present Germany as somehow having sinister intentions towards the rest of Europe. However, whenever one speaks to German politicians, from whichever political party they come, what one finds striking is that they see support for European integration as a means of providing reassurance to their neighbours that Germany is not going to go off on some nationalist course again; that France, the Netherlands and other countries that were occupied by Germany in the mid-20th century would see Germany’s commitment to European institutions and European methods of governance as a reassurance to them, not a threat.
Mr Cash
If I may make just a short observation about my right hon. Friend’s remarks, it is, fundamentally, that in my judgment Germany is very concerned about government by rule, whereas we in the United Kingdom are much more concerned about government by consent. The fundamental problem is one of democracy, as illustrated by the fact that about 99% of the Bundestag agreed to all the arrangements, yet we know from opinion polls what percentage of the German people take a different view. It is that dichotomy which causes concern, and there are other factors in relation to Angela Merkel’s agenda.
Mr Lidington
I do not want to get drawn into a detailed debate about a comparative political analysis between the British and German approaches. Let me say briefly to my hon. Friend, first, that when Germany looks at her history, she has good reasons for looking to firm rules and strong institutions, such as the constitutional court. Secondly, it is not completely unknown for the House of Commons to vote by a large majority in favour of something that every opinion poll tells it the majority of the British public opposes, so I do not think we should get too hung up on there being some vast difference in democratic interpretation between the two nations.
Dr Julian Lewis (New Forest East) (Con)
Can my right hon. Friend explain to me and the House what exactly senior Ministers mean when they talk about the remorseless logic of fiscal integration? Do they mean that it will lead inevitably to political integration, and if they do, is it no longer the case that we regard the emergence of a single power on the continent of Europe as fundamentally not in the UK’s national interest?
Mr Lidington
What it means is that we accept that, as Conservative politicians have argued since the euro was created, for a single currency zone to operate successfully over a number of different national economies there would need to be a measure of fiscal and economic integration, so that those economic differences can be managed successfully and in a stable fashion in that currency union. It is for the countries of the eurozone to work out exactly which economic and political measures will be right for their particular circumstances.
George Eustice
The Minister makes an important point about the remorseless logic. Does he not agree that one of the big problems with the way in which the European Union has developed is that it tends to introduce half-baked ideas, knowing full well that it will have to come back, several years down the line, with further measures that will mean further integration? Does he agree that we need to break that logic in some way and do what people really want, rather than creating a crisis that fuels more integration, which nobody wants?
Mr Lidington
Ultimately, it has to be for the electorate in each country to decide on the extent to which they want to take part in integration. My experience over the past two years of talking to Government leaders and other politicians in the other 26 countries, as well as following—as far as one can—the movement of opinion among the public in those countries, tells me that there is a greater level of support or toleration for Europe’s political and economic integration than there tends to be in the UK. I am generalising, of course, and there are significant differences among the 26 countries, but the historical experience of the United Kingdom in the 20th century differs from that of much of continental Europe, which helps to explain the difference in political attitudes towards European integration.
Various hon. Friends have raised a number of points during the debate, to which I wish to respond. My hon. Friends the Members for Stone and for Rochester and Strood both asked why the measure that we are debating today should be exempt from the requirement in the European Union Act 2011 for a referendum. The Act requires a referendum to be held when European Union treaties are changed in such a way as to create a transfer of competence or power from the United Kingdom to the European Union. The plain fact is that, as my hon. Friends the Members for Stroud (Neil Carmichael) and for North East Somerset pointed out, this measure does not transfer any such power or competence from this country to the institutions of the European Union. It does not even apply to the United Kingdom.
The amendment that we are debating is an amendment to article 136 of the treaty on the functioning of the European Union, which is the first article under chapter 4 of that treaty. That chapter is entitled “Provisions specific to Member States whose currency is the euro”. So, in that important legal treaty sense, this measure does not apply to the United Kingdom, although our ratification is needed to bring it into effect. Because it does not apply to us and does not transfer power or competence, there is no requirement for a referendum.
Mr Lidington
My two hon. Friends have made other related comments, to which I would like to reply first. If they then wish to intervene on me, I will give way.
My hon. Friend the Member for Stone and the right hon. Member for Rotherham (Mr MacShane) said that the referendum pledge in the 2011 Act was meaningless because my right hon. Friend the Foreign Secretary could, in effect, decide on a whim whether a referendum was needed or not. They made reference to the requirement in the Act for the Secretary of State to make and publish a decision on whether a referendum was required. Those fears are wide of the mark, however. The Secretary of State is not permitted to act on a whim; he has to act in accordance with the law, and it is the 2011 Act that sets out in some detail precisely when a referendum is required. In making the statement to Parliament, the Secretary of State must say whether the referendum is or is not required under the terms of the Act.
My hon. Friend the Member for Rochester and Strood, in asking why no referendum was required in this case, pointed to what he saw as a contradiction in the Government’s approach. I need to divide my response to him into two parts. Paragraph 3 of the recitals or preamble to the decision of 25 March 2011 formally recalls the previous decision by the European Council that article 122(2) would no longer be needed and “should not be used”. The text of the decision comes after paragraph 6 of the recitals and is introduced by the words “has adopted this decision:”. The text of the amendment to the treaties is what is being ratified by this Bill. So the 2011 Act bites on the amendment to the treaties, which is the narrow addition to article 136 of the treaty on the functioning of the European Union. This measure would attract a referendum if it included one or more of the elements listed in sections 4(1) to 4(3) of the 2011 Act. Those subsections, which provide quite a long list, define what we mean by a transfer of competence or powers. This treaty amendment does not include any of those elements that require a referendum, so we do not require a referendum in this case.
Mr Cash
I appreciate that my right hon. Friend is in a labyrinth and that it will take more than the minotaur to get him out of it. The problem is that, as the Bill’s explanatory notes clearly state, the exemption condition, which is what we are talking about,
“is met if the Act”—
the Bill, as enacted—
“providing for the approval of the decision states that the decision does not fall within section 4 of the Act.”
The bottom line is that the Government’s ultimate defence that they have got the process right is that under the Act the very decision that is taken is endorsed by Parliament when it passes the Bill; it is not about whether or not the provisions have been complied with. Clause 1(3) states that the
“decision does not fall within section 4 of the European Union Act 2011”.
In other words, we are being told, “Do not argue with me Back Benchers, because in this Act, when it goes through, that is final.” That is the bottom line of this provision.
Mr Lidington
That part of the Bill is included because it is a requirement of the 2011 Act that we bring this to Parliament to ask it to ratify formally the Government’s judgment as to whether or not a referendum is required. However, that judgment by the Government—that opinion embodied in the statement by my right hon. Friend the Foreign Secretary—followed a very careful analysis of the treaty amendment in the light of the provisions of the 2011 Act. Obviously I regret bitterly that I have clearly been unsuccessful in playing the role of Ariadne to guide my hon. Friend out of a labyrinth, but I somewhat suspect that he is not that keen to extract himself from it. The one thing he has not challenged me on is whether the treaty amendment contains any of the transfers of power or competence to the European Union from the United Kingdom specified in sections 4(1) to 4(3) of the 2011 Act. I am sure that we will have the delightful opportunity of pursuing those points further in Committee.
Mr Lidington
I will give way once more, but I do not want to pre-empt our discussions in Committee.
Mark Reckless
My concern is that in the statement provided to the House under section 5, the ministerial team has relied on section 4(4)(b), which states that a referendum will not happen when a treaty or article 48(6) decision applies only to member states other than the United Kingdom. The whole debate has relied on recitals from within that article 48(6) decision, saying that the provision gets us out of article 122 and that we will not have to contribute to further bail-outs. Surely the Government cannot have it both ways.
Mr Lidington
My hon. Friend is eliding two things. We have before us and are seeking to ratify through this Bill a treaty amendment. It relates to article 136, which applies only to those countries whose currency is the euro. Therefore, by definition, unless the United Kingdom were to join the euro, which would in itself require a referendum under the 2011 Act, it cannot apply to us. Alongside that treaty amendment, my right hon. Friend the Prime Minister successfully, and after a lot of hard work, negotiated agreement from all Heads of State and Government in the European Union that when the ESM comes into force, any future liabilities of the United Kingdom to bail out eurozone countries under the EFSM will be extinguished. That is a very significant gain for the British national interest and I hope that on reflection my hon. Friend the Member for Rochester and Strood will recognise it as such.
As I have said, in return for agreeing this treaty amendment, the Prime Minister secured agreement at the European Council that once the ESM is set up, article 122(2) of the treaty on the functioning of the European Union should no longer be used to safeguard the stability of the euro area as a whole. Our liability for future euro area financial assistance programmes under the EU budget will be removed and that is directly in the UK’s national interest. As my hon. Friend the Member for Camborne and Redruth (George Eustice) said, this gain for our interests should be considered as proportionate to the scope of the treaty change that we are considering, which is narrow and specific in what it seeks to achieve. We should also not ignore the fact that the ESM will provide the euro area with a permanent financial assistance mechanism to assist euro area member states in financial difficulty. We all share the enormous concern over the ongoing crisis in the eurozone and the chilling effect that it is having on our economy.
A stable eurozone is in the interests of the United Kingdom. We rely on those 17 countries for more than 40% of our trade, but that is only part of the picture. Confidence and stability in the eurozone are in our national interests and the resolution of the debt crisis in the eurozone would be the biggest single boost to business confidence that could happen in the British economy. That is precisely why the eurozone countries say that they need the ESM and why it is important to ensure, through all 27 member states ratifying the treaty amendment, that there is no room for doubt about that amendment’s and therefore the ESM’s compatibility with the European Union treaties.
We are not in the euro and the United Kingdom will not take part in the ESM, but it would harm our interests to stand in the way of the eurozone’s efforts to set it up and help sort out this crisis, a point made very strongly by my hon. Friend the Member for Stroud. No one is under any illusion that the European stability mechanism will be some silver bullet that will solve the eurozone’s problems overnight, but it is a step in the right direction.
When the right hon. Member for Paisley and Renfrewshire South (Mr Alexander), the shadow Foreign Secretary, spoke, he treated us to a lecture about the alleged failures of the Government’s economic policy. No Minister would stand at the Dispatch Box and say anything other than that the United Kingdom’s economic problems are deep seated and that they have been aggravated by the crisis in the eurozone, but what surprised me—perhaps I am insufficiently cynical—was the fact that there was not one word of regret from the right hon. Gentleman, let alone a morsel of contrition, for the contribution made by his Government to the economic woes from which the United Kingdom now suffers.
Some European comparisons are really quite interesting in this context. A number of hon. Members commented on the fact that some European Union countries have been more successful in recent years than the United Kingdom or the majority of EU member states have been, but it is telling to consider the contrast. Germany was paying down its debts when the Labour party was piling up the deficit here and maxing out the United Kingdom’s credit card. In the 10 years from 1997, Germany had annual growth in industrial production of 3% or more a year, while average growth in the United Kingdom over that period struggled to get above 0.2% annually. In the first decade of the 21st century, Germany maintained its share of world exports while the United Kingdom’s share almost halved thanks to the disastrous economic stewardship of the right hon. Gentleman and the Labour party.
The European Union, including the United Kingdom, needs a relentless focus on competitiveness and growth through deepening the European single market; building a single market in the digital economy, energy and services; cutting the costs of European regulation on businesses, especially small enterprises; and agreeing more free trade deals with Canada, Singapore, Japan, the United States of America and other regions of the world.
The legislation before us is one step forward, but it is only part of the strategy for renewing economic growth and competitiveness in the United Kingdom and in Europe as a whole. The Government will continue to pursue that strategy with vigour, energy and determination.
Question put and agreed to.
Bill accordingly read a Second time.
European Union (Approval of Treaty Amendment Decision) Bill [Lords] (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the European Union (Approval of Treaty Amendment Decision) Bill [Lords]:
Committal
1. The Bill shall be committed to a Committee of the whole House.
Proceedings in Committee, on Consideration and Third Reading
2. Proceedings in Committee, any proceedings on Consideration and proceedings on Third Reading shall be taken in two days in accordance with the following provisions of this Order.
3. Proceedings in Committee and any proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the second day.
4. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
Programming committee
5. Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee of the whole House, to any proceedings on consideration or to proceedings on Third Reading.
Other proceedings
6. Any other proceedings on the Bill (including any proceedings on consideration of any message from the Lords) may be programmed.—(James Duddridge.)
Question agreed to.