China: High-level Talks

Lord Davidson of Glen Clova Excerpts

Thursday 22nd June 2023 Lords Chamber

Asked by

[Lord Davidson of Glen Clova]

To ask His Majesty’s Government, following the high-level talks between the Governments of China and the United States on 18 and 19 June at which both sides agreed to “effectively manage differences and advance dialogue, exchanges and co-operation”, whether they propose to undertake a similar process.

[The Minister of State, Foreign, Commonwealth and Development Office (Lord Goldsmith of Richmond Park) (Con)]

My Lords, as set out in the Integrated Review Refresh, China represents an epoch-defining challenge for the UK. China is becoming more authoritarian at home and more aggressive overseas. China is also a permanent member of the UN Security Council, is the world’s second-largest economy, and has an impact on many global issues of importance to the UK. The IRR makes it clear that we will engage with China where it is in our interest to do so, ensuring that we always put our national security first.

[Lord Davidson of Glen Clova (Lab)]

I thank the Minister for his Answer. What is the current state of play in relation to bilateral dialogue between China and the UK?

[Lord Goldsmith of Richmond Park (Con)]

Dialogue is ongoing. The Foreign Secretary is looking right now at options for a potential visit to Beijing in the coming months—details and dates are not yet confirmed. He spoke to his counterpart, Qin Gang, on 20 February, and met him at the G20 in March. He met the Chinese director of the Office of the Central Commission for Foreign Affairs, Wang Yi, at the Munich Security Conference in February, and met the vice-president, Han Zheng, on 5 May. The nature of our relationship with China is very much set out in the integrated review and involves practical and pragmatic discussions.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Davidson of Glen Clova Excerpts

Committee: 4th sitting (Hansard): House of Lords
Tuesday 12th December 2017 Lords Chamber

[Lord Beith (LD)]

My Lords, I add to my noble friend’s wise reference to the Constitution Committee the fact that the committee also pointed out that there is ample precedent for the sort of amendment that is being discussed here. For example, certain statutory instruments made under the Legislative and Regulatory Reform Act 2006 and the Public Bodies Act 2011 have comparable provisions, and there seems no reason why the committee’s advice should not be taken in this case.

[Lord Davidson of Glen Clova (Lab)]

My Lords, this amendment is a useful reminder that the Brexit process needs to reflect the devolved nature of the United Kingdom. I take this opportunity of looking at this amendment to make certain observations more broadly and, indeed, to go back to the previous group where the Minister referred to a UK property register. He will be aware—and if he is not aware, he will no doubt be told by those sitting beside him—that the United Kingdom property register covers the whole United Kingdom via three separate registers. Indeed, two of those registers come from jurisdictions which voted by a majority to remain in the EU. Plainly the Minister does not intend to give ammunition to those who wish to withdraw from the UK. This Bill, and this part, are aimed at enabling withdrawal from the EU. That is one objective. There is a body of people who will find ground for complaint in more or less anything that in some way does not take account of the separate nature of various bits of the United Kingdom. With that small warning, I commend this amendment, and leave it at that.

[Lord Ahmad of Wimbledon]

My Lords, the Bill provides powers to be used in pursuit of the UK’s foreign policy and to ensure our national security. Under the UK’s constitutional settlement, these matters are reserved to Westminster. This Bill is accordingly one that is so reserved.

The amendment would, in effect, give the devolved Administrations the right to veto legislation related to UK foreign and security policy. This is contrary to the devolution settlement between Westminster and the devolved legislatures. Devolved legislatures do not have any right to veto measures where they relate to matters of foreign and security policy, including decisions of the UN Security Council. Any such amendments can arise only as the consequence of the sanctions themselves. Their primary purposes will always be a reserved matter.

I reassure noble Lords that during the preparation of the Bill the devolved Administrations were fully consulted on this point and they have not disagreed with our assessment that the Bill is reserved. The amendment would rewrite the devolution settlement, and I am sure that was not the intention behind it.

On the observation and implementation of international obligations within the competence of the devolved Administrations, while they have the power to legislate to implement measures required as a result of international obligations entered into by the UK, that does not provide them with any right to veto UK measures for the purposes of foreign and security policy, including measures negotiated and agreed by the UK in the UN. As I have already said, we have consulted extensively with the devolved Administrations on this very point and they have not disagreed with the Government’s assessment.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Davidson of Glen Clova Excerpts

Committee: 3rd sitting (Hansard - continued): House of Lords
Wednesday 6th December 2017 Lords Chamber

[Lord Naseby]

My Lords, I shall speak to Amendment 69K, which contains a new clause that I believe would meet a need arising from an apparent money laundering loophole to do with Companies House. Before I get on to it, I thank the Minister and particularly his staff for the consultation periods that were made available to Members of your Lordships’ House; they were extremely well run. I have also had correspondence with his office and I found it extremely helpful, so I put on record my personal thanks.

There are two ways of registering a company in this country, either directly through Companies House or via a company formation agent. Currently, 40% of all companies are incorporated through Companies House. As we probably all know, in July this year the fourth EU anti-money laundering directive came into force. It required considerable change for company formation agents in that they now had to take out enhanced due diligence checks when registering a company. Obviously this increased their workload and indeed the cost considerably, but nevertheless it was to the credit of the industry that it welcomed the changes that came with the directive.

However, under current provisions, fraudsters can still register a business direct with Companies House, either on paper or via the GOV.UK website, and, through that, avoid all the checks now required when company formation agents carry out exactly the same process. My understanding of the rationale behind this is that Companies House is not a business provider, but instead is fulfilling a statutory duty just to register businesses and issue incorporation certificates. Legally, Companies House has to accept in good faith all documents sent to it, and has no statutory power whatever to verify or validate the information contained in them. It can act only within the parameters of the Companies Act, and it has no investigatory powers under that legislation.

In reality, that means that for just £12 someone can set up a company using entirely false details without having to go through any verification checks on beneficial ownership, and with limited checks on registered directors. Individuals who have been involved in money laundering, who have convictions or who have been disbarred as owners in other jurisdictions can therefore gain access to UK companies through Companies House. This loophole cannot be justified; by incorporating at Companies House, fraudsters are able to create the illusion of their company being financially secure and sustainable. That leaves British business, consumers and taxpayers open to abuse through fraud or money laundering.

The organisation Transparency International reports that in the UK last year 251,628 UK companies were created with no checks being made on the person setting up the company or their source of wealth. A further TI report found that there were hundreds of British shell companies implicated, in its judgment, in nearly £80 billion of money laundering. The report goes on to say:

“The fact that a large proportion of firms are incorporated directly through Companies House and undergo no due diligence checks creates a significant money laundering risk to the UK framework”.


That lack of checks and balances harms Britain’s reputation as a leading place to do business, and in my judgment it is essential that that reputation is protected in the lead-up to Brexit. To protect businesses, taxpayers, and the UK’s reputation, it is essential that this loophole is closed.

I do not necessarily expect the Minister to take the precise wording in my amendment. It was written largely by myself with the help of the Public Bill Office, so in a sense it is a probing amendment, but I believe it is one with such depth of information that I would be enormously surprised if Her Majesty’s Government did not respond to it and come back with something similar on Report.

[Lord Davidson of Glen Clova (Lab)]

My Lords, the Opposition are sympathetic to many of the points that have been made, and I single out Amendment 69H. The capacity to carry out UK company formation from outside the UK is a real lacuna in the current money laundering regime. Monitoring within the UK is difficult enough, as is evidenced by the use of, for example, Scottish limited partnerships in Russian and former eastern-bloc bank fraud and money laundering of gigantic proportions. This vulnerability is of course magnified when the company information provider eludes the UK’s money laundering oversight.

Amendment 69J provides, we respectfully suggest, a useful additional hurdle for any prospective money launderer to negotiate. While the provision of the requisite materials for opening a bank account no doubt seems irksome to many, it none the less provides an additional external check on the background of those seeking to operate via a UK company.

The amendment of the noble Lord, Lord Naseby, offers a clear and useful mechanism for combating money laundering and I share his observation that it would be surprising if the Government did not support this measure with considerable force.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, there are two issues here. The first is to make sure that money laundering checks are carried out somewhere in the chain. There could be various mechanisms to do so, some of which are suggested in the amendments. Then there is the issue of how Companies House itself will get the money to conduct the checks. That is the point of the provision in Amendment 69L for a mechanism to levy a fee. Obviously, there could be other mechanisms. As to Amendment 69J, if there is no bank account, the fee could be levied at that point. Ways in which to tighten up and get the money are the objectives of this family of amendments.

China: Investment into the United Kingdom

Lord Davidson of Glen Clova Excerpts

Wednesday 7th May 2014 Grand Committee

[Lord Davidson of Glen Clova (Lab)]

From this side, we certainly welcome this debate. As the noble Lord, Lord Wei, observed, this issue is important for the future of the UK economy. The APPG is to be commended for producing this useful report, but the question is what Her Majesty’s Government will do about its recommendations—a matter that the noble Lord put pointedly to the Minister. The answer is not unimportant.

The report commends a strategic approach but any strategy requires sound content, otherwise it becomes mere public relations. There is much good work in the report but in this intervention I will focus on where more effort is required. That should not be taken in any way as a criticism of this report.

Let me begin with some general observations on the UK’s approach to date. Having, for example, the Prime Minister take an assortment of business people to China is no doubt well intentioned but it is hardly a strategy. If it is ill thought out, with no clear plan of what is to be achieved, it can easily create a wrong impression—an impression that perhaps our Prime Minister is being somewhat transactional. That is not a good outcome.

Furthermore, warm words of welcome to Chinese investors that are matched by an obstructive visa regime can be very unhelpful. The noble Lord, Lord Cotter, has given an example of that. Let me give another one. Last autumn, a Chinese ministerial party—I repeat, a ministerial party—seeking to visit the UK was held up in Beijing. Their flight slipped by while they were waiting for their visas to be produced by the UK Border Agency. If ministerial parties are treated in that way, it is hardly the right message to be sending to investors from China. I immediately accept that there have been some improvements on the past, but compared with France we lag way behind. If anything, there seems to be an unwillingness to match welcoming words with action. This does not go unnoticed by Chinese investors.

Having the UK welcome Chinese infrastructure investment is all very commendable, but unless there is effective follow up, initiatives may run into the sand. If due diligence on prospective investors is not carried out, one runs the risk of embarrassing failures, and there is no point rolling out a red carpet to Chinese investors if we ignore our domestic requirements, such as planning, consultation with potentially affected communities and due process, that can subsequently produce obstacles and upset the project. That can risk creating an impression of insincerity on the UK side. A focus on outcomes is essential to build good relationships. An intelligent focus is even better.

Turning to the report’s recommendations, I offer one caveat. It suggests we should,

“encourage the creation of more NGO trade promotion bodies”.

I respectfully suggest that this should be treated with caution. One criticism that has been voiced on a number of occasions by Chinese interlocutors is that there are already too many UK bodies speaking with too many different agendas in seeking a relationship with China. Focus on clear messages may be a better way forward. That may not require more trade promotion bodies for China, just greater clarity.

The report importantly refers to financial services. It identifies progress by London as an offshore renminbi centre. Renminbi settlement and clearing house developments are clearly positive, although they have not gone the full way as yet. More effort is plainly required. Singapore recently surpassed London in renminbi business. Paris, Frankfurt and Luxembourg all have ambitions to be renminbi centres. Her Majesty’s Government should take the initiative now. They should consider a currency swap—a real one, this time, not simply an emergency backstop—that creates liquidity on the market now. Another initiative might be purchasing renminbi for UK reserves. Her Majesty’s Treasury could do that, and it would be a step forward. The Bank of England says that it is not for it to decide this issue and that it is for the Treasury to decide. If the Treasury wants to make imaginative steps forward in our relationship with China, adding renminbi to the UK reserves would be a very substantial step. I commend that to the Minister, at least for consideration, although possibly it does not fall within his responsibilities. Many good speeches have been made on the theme of London as an offshore renminbi centre and some real progress has been made, but London has to regain its momentum to improve renminbi liquidity in the London market to make London in reality the—not a—major offshore renminbi centre.

The report refers to sector strategies, which is very welcome as it appears to be recognising a need for industrial policy, but there needs to be a certain coherence in it. Chinese equity purchase and M&A in the UK have been referred to. They have been welcomed in the UK. The noble Baroness, Lady Falkner, referred to this as an area where problems might arise, but plainly there is a tremendous opportunity for UK and Chinese business to go into partnership in these areas. However, as the noble Baroness pointed out, we must be astute to the possibility of Pfizer-type issues arising. Ed Miliband and, indeed, the noble Lord, Lord Heseltine, have made useful contributions to this issue and it appears that the Government have been listening to some extent, after something of a false start on this issue. As the noble Baroness pointed out, not every sale of a UK company to an overseas acquirer will be in the UK’s best interests.

The report correctly recognises the importance of sectors in manufacturing and services, and HMG can have a role in dealing with this. The needless damage of putting the UK’s EU membership into play may not be wise. Placing a question mark over the UK’s success in the automotive sector, based, as it is, in the UK as a platform for the EU market, is not constructive. The Minister will no doubt appreciate that the current Government continually making noises about splitting away from the EU is not an attractive invitation for Chinese direct investment in the UK to Chinese automotive manufacturers and others.

China is serious about outgoing investment, and we need to match its seriousness of intent. There are limits to government action, of course, but relations with China are an area par excellence where Her Majesty’s Government should be able to make a real contribution. This is vouched by the success of government efforts by Germany, Sweden, France and others in engaging with China, both politically and economically.

Everyone by now says relationships are key in China. The noble Lord, Lord Wei, directly recognises this. A rapid turnover of Ministers with the China portfolio is not a help—unless, of course, the Minister is not up to the job. However, there is also an issue in relation to civil servants. The approach to rotation of officials can be counterproductive: the despatch of personnel without sophisticated language skills to China can be less than ideal and the removal of real experts for personnel policy reasons is actively damaging.

There is a need for Ministers and officials, as well as businesses, to understand the very different Chinese culture. There is a need to build expertise on what may now be the world’s largest economy. Only knowledge and understanding of China will build a fruitful relationship. If the UK does not get serious, we will be an also-ran in what the Prime Minister calls the “global race”. However, if we work at building the relationship, the UK can indeed be, as the report aims for it to be, the favourite place for China to invest.

[The Minister of State, Department for Business, Innovation and Skills & Foreign and Commonwealth Office (Lord Livingston of Parkhead) (Con)]

My Lords, I am pleased that we still have some of the Scottish contingent in for the debate. I start by thanking my noble friend Lord Wei for initiating this important debate and for the report from the All-Party Parliamentary Group for East Asian Business. China’s rise is indeed an opportunity, not just for the UK but for China, and I very much believe that this will be the decade of the Asian multinational. Our two Premiers described our two countries as “partners for growth” and we have seen notable progress in Chinese investment into the UK.

The noble and learned Lord, Lord Davidson of Glen Cova, raised a number of questions about the UK’s performance in relation to trade with China. I regret that some of the statements are perhaps a little out of date: our performance has certainly been weak historically but we are now making significant progress. Initial results for 2013-14 show a substantial increase in the level of inward investment from China. As my noble friend Lord Wei said, this is across a number of sectors, from property investment to infrastructure, manufacturing and nuclear, to name but a few. Announcements in press releases indicate commitments of upwards of £8 billion—a very substantial increase on past experience.

This growth reflects the efforts not only of the Government but of many groups and individuals including the APPG. It also reflects the success of government policy in making the UK an attractive place for businesses to establish themselves, to invest and to grow. However, I fully accept that there is clearly still much to do. The report highlights a number of areas, and I would like to address some of the particular points made in it.

The report recommended that we should provide additional regional support for inward Chinese investment. I should stress that the policy we operate, which I think has operated for some time, is based on the UK-first principle, where we try to attract inward investment to the UK and then spend time with the potential investor showing them regions that may be suitable for that type of investment. That said, we are doubling the number of partnership managers to work alongside local enterprise partnerships and enterprise zones to assist them in attracting inward investment. UKTI will continue to work with bodies to improve the local proposition, based around a region’s particular capabilities. We welcome, for instance, initiatives such as the Manchester-China Forum, championed by my noble friend Lord Wei, to promote regional co-operation and relationships.

UKTI does not typically recruit advisers with specific language skills but those with sector skills. However, we have in place sector specialists who are bilingual. In addition, we use the resources of UKTI in individual countries and have a large number of advisers in China as well as, of course, the FCO network. They assist with inward investment opportunities and marketing.

The report also recommends that the Government work together with NGOs to encourage inward investment and market the UK. I take the point that there are a number of these NGOs but the Government certainly work with a wide range of organisations, such as the China-Britain Business Council, the CEC—which was mentioned earlier—the 48 Group Club, UK-China CEO Dialogue and, of course, the APPG. I also recognise and welcome the point made about the diaspora community. As a Government, and as part of our trade effort, we should be seeking to use diaspora communities far more widely, in relation to trade not just with China but with a number of other countries.

Noble Lords, including my noble friend Lord Cotter, also raised issues of immigration policy. I have heard many of the same concerns directly. Although there are definitely issues, some of it is also perception. I will set out a few facts. First, the UK has more visa application centres in China than in any other country and 96% of Chinese visa applications are approved. The UK issued a third more visas to Chinese citizens in 2013 than we did in 2012, so we are making progress. There was a 9% increase in the number of study-related visas.

[Lord Davidson of Glen Clova]

I wonder whether the Minister could focus not so much on the numbers of visas, but on the problems that the visa process creates: delay and complexity. That is what sends the message that you, the Chinese investor, are not welcome.

[Lord Livingston of Parkhead]

My very next words were going to be that the average time to process a visa is seven working days. Of course, there will be more difficult cases, but we also have a three-day to five-day priority service available. The Prime Minister, during his well thought through trip to China, announced that we would be trialling a 24-hour service this year. That received a standing ovation in the room he was in.

[Lord Davidson of Glen Clova]

The Minister did say that I was out of date, but possibly he did not necessarily mean that in relation to visas. Only last week I had a party of Chinese investors saying that they were having considerable problems with delays in getting visas. These are people who wish to invest in the United Kingdom but are experiencing delays. Perhaps the information that the Minister is obtaining is out of date.

[Lord Livingston of Parkhead]

I am sure that if the noble Lord would provide me with some details of that particular party, we can look into what their challenges were. We are trying hard to make the process of applying for a UK visa easier. We have a pilot scheme allowing selected travel agents to make offline applications for tour groups using the same forms that are used for Schengen—with a small additional form—so that people do not have to enter the same information twice. We also have a select business scheme to provide key businesses wanting to invest in the UK with special services. There are currently around 140 members. The Home Secretary has announced the launch of the GREAT Club, an invitation-only account management service for the very highest-level investors.

I recognise that there are issues in relation to graduates. All graduates have a four-month period in which to apply for a graduate-level job, which allows skilled, well paid graduates to stay in the UK. I accept that the situation is not perfect. Significantly, we talk with the Home Office about how we can improve perception and what we can do around both policy and process. However, the situation has improved significantly. From talking to Chinese businessmen, which I do regularly, I know that they recognise some of that improvement. However, there is still more work to do.

I now turn to taxation. A competitive and clear tax regime has a role to play in attracting inward investment and is seen as a UK strength. I know the policy recommendation was that HMRC should translate its guidance into Mandarin, but it is not HMRC’s policy to translate tax returns into foreign languages, partly due to costs but also for reasons of equality of treatment. Having been a tax accountant in the long-distant past, I can confirm that nuances of languages can be very difficult at times, although there is of course an opportunity for professional services to advise on these issues. I will pass the comments regarding foreign languages on to HMRC, but it is not an issue that I have had raised directly by inward investors.

I welcome the comments from noble Lords on the importance of setting up as an offshore RMB centre. Over the past few years, we have made a lot of progress in changing some of the regulations and policy and in giving encouragement. We can debate whether London is a leading offshore RMB centre, but many would say it is the leading centre. We have certainly seen progress, but we know that there is more to do and we will be looking for further—

[Lord Davidson of Glen Clova]

The Minister indicated I was out of date. He was perhaps not referring to the surpassing of London by Singapore as an RMB trading centre, which was noted at the end of February. Perhaps he would care to comment on that.

[Lord Livingston of Parkhead]

In currency trading, there are different time zones. I was a spot trader once upon a time in my life and used to take over from Singapore. We shall see how the figures on RMB trading come out for the full year. The UK has established a very strong presence in RMB, which is as a result of the Government’s policies and the changes they have made.

UKTI has created a number of sector organisations focusing on increased investment in areas such as automotive, life sciences, financial services, offshore wind, regeneration and innovation. They will help individual sectors and investment, not just from China but from other countries. They are not aimed just at China, but we think these sectors are important to show expertise in individual areas. In addition, we have a specialised group aimed at regeneration opportunities: RIO. This has been particularly attractive to Chinese investors and provides a pan-UK list of opportunities for regeneration in every region around the UK. RIO not only presents a playbook of opportunities but will guide potential investors through some of the barriers rightly raised by the noble and learned Lord, Lord Davidson.

This Government has a strong focus on building relationships with China. There have been numerous trade and ministerial visits, which are well thought out and well appreciated by the Chinese hosts. The highlight was the Prime Minister’s visit with the biggest business delegation ever assembled. More than half the companies that went on that were small companies. One of the important agreements signed during that visit was with the National Development and Reform Commission, to enhance trade and investment between the UK and China. As a result, and with the support of the British embassy in Beijing, the NDRC has launched the Chinese Enterprises Investment Guide to the UK, which is the first guide that it has published written for Chinese companies looking to invest in another country.

I shall pick up some points raised by the noble Baroness, Lady Falkner. The UK is proud of its position as an open economy, which we think has benefited the UK. It has created millions of jobs. When we talk about overseas investment, we have to look at JLR as an example of an acquisition that has helped the UK immensely and created value added and jobs. It is far less about the nationality of the company involved than its quality. We have public interest tests, particularly related to security, a key area which the noble Baroness raised, and areas such as media plurality. It is important that we look at the context of how much we have benefited. The UK will continue to position itself as open and to consider some of the challenges. I remind noble Lords that when we talk about AstraZeneca, Astra was a Swedish company; when we talk about GlaxoSmithKline, Smith, Kline & Co. was from Philadelphia. When we talk about openness, we have to remember that it is a two-way street.

The noble Baroness referred to diversifying into China too much. The challenge we have today is that we are not diversified enough. The EU has 45% of our trade and the US is our largest single market. It is this Government’s aim that the fast-growing markets should represent a larger proportion of our trade. The EU-China trade talks are just one of many trade talks. There are trade agreements being made and discussions going on with Japan, India, Singapore and the USA. We have recently concluded talks at the political level with Canada and we are discussing EPAs with many countries around the world. There is of course the Bali WTO agreement. This country is championing free trade around the world and will continue to do that on a plurilateral and multilateral basis, as well as on a WTO basis.

In conclusion, the UK has been very successful at attracting inward investment—we must remember that we are the number one in Europe for inward investment. It is the aim of this Government to improve our position in gaining inward investment from high-growth economies where historically we have not been successful, and of course China is number one in that list. We made significant progress in 2013 with multibillion pound investment across a range of sectors. We agree with the report that there is more to do, and we will do more. I thank all noble Lords who have spoken today for attending and for their interest in this subject. We have considered the report in detail and will continue to look at its recommendations. We will continue to engage strongly with government and non-government organisations in the UK and in China to make further progress and to make the UK the most attractive and successful investment destination for China in Europe.

EU: Recent Developments

Lord Davidson of Glen Clova Excerpts

Thursday 16th February 2012 Lords Chamber

[Lord Davidson of Glen Clova]

My Lords, I thank the Minister for his very clear tour d’horizon of recent EU developments and empathise with his struggling with his brief.

There is growing concern, not only on this side of the House, that the UK's policy and strategy towards the EU are both unclear and risk being misguided. Recent events in the eurozone, particularly the moves towards the so-called fiscal pact and the UK's apparent isolation from the mainstream of EU decisions and discussions, suggest a worrying lack of grip in the Government.

Plainly, given the importance of the UK’s trade with the eurozone and the anxieties expressed in the US, China and elsewhere about the negative consequences for global growth of the euro crisis, there is a real cause for concern. The choice by the UK to retain sterling and not to adopt the euro does not leave us unaffected by what happens to the economies of our EU trading partners. Only the most blinkered Eurosceptic draws anything positive from the current crisis. One is reminded that the enthusiasm shown in certain quarters when the UK left the ERM was short-lived and that the consequences of financial storms are rarely of general benefit. It would obviously be unwise were the Government deliberately to extract themselves from discussions affecting matters of direct interest to the UK.

Where the direction of our fellow EU members’ policy appears to be leading towards unsound outcomes, the Government should of course step in to seek to persuade, warn and advise. The proposed fiscal pact within the EU member states is a good example of where government must make clear the UK’s position. Procyclical fiscal austerity, subjected to legal compulsitors to be applied across the EU—the UK and the Czech Republic excepted—may seem to many in the UK an unbalanced approach to recovering eurozone stability.

Absent some collective responsibility for member state debts buttressed by support from the European Central bank, it is not perhaps obvious how long-term eurozone stability will be achieved. Even the capacity to oblige member states to adhere to the pact may seem doubtful. But what is the UK's position regarding the fiscal pact?

Reports suggest that the UK's position at the December 2011 summit was somehow to win protections for city institutions from EU regulation and transaction taxes. It goes almost without saying that the UK benefits in many ways from being the global financial centre and that states view this pre-eminence with some jealousy. It goes without saying that the Government should strive to protect this status where they can from competitive incursions. It has, however, proved difficult to identify what protections were won for the UK's financial institutions by Her Majesty's Government's approach in December last year. If there were any, it would be useful to hear what they might be and how they are thought to operate.

Is there a government policy to oppose the fiscal pact from a stance that the pact is unwise and unrealistic, or has it been decided to stand on the sidelines? Where the pact is to be enforced, apparently, by resort to EU institutions and in particular the European Court of Justice, do the Government propose to take legal action, as the Prime Minister appeared to suggest, or has the prospect of such action now been abandoned?

It was certainly somewhat puzzling how it was that the Prime Minister envisaged the United Kingdom might enjoin the European Court of Justice from deciding issues relative to euro policy that came before that court. Some clarity would be welcome. The Minister said that the United Kingdom would insist, watch closely and take action regarding the possible use of EU institutions. What form would the proposed action take?

Much attention over the past few months has naturally been directed towards the position of Greece and the associated negotiations. To a degree, the exposure of the UK to Greek difficulties is limited and may not seem immediate to our interests. In another part of the eurozone, however, the UK's interests are direct and substantial. In that context, I am referring to the Irish economy, which the Minister referred to.

Proportionately, for the UK both by virtue of bank lending and trade, Ireland is fairly significant. As is entirely clear, Ireland, the eurozone member state with which we are perhaps most closely linked economically, faces difficult and possibly intractable problems. Will the Minister assure the House that appropriate measures are being taken to monitor the UK's financial institutions’ vulnerability to the Irish economy? Are there contingency plans in the event that the position deteriorates? Is the proposed fiscal pact likely to increase or decrease that vulnerability?

I now turn to a greater long-term question that is emerging from Her Majesty's Government's approach to EU relationships. It concerns the strategy—

[Lord King of Bridgwater]

In these extremely difficult negotiations with Greece, in which people presumably outside Greece are commenting on what the retirement age, the pension age and perhaps the minimum wage should be in Greece, it now becomes apparent that for the fiscal pact to mean anything at all and effect proper budget discipline, it will be considerably more obtrusive, and maybe in certain cases more draconian, than has been appreciated by many of the countries that are presently agreeing to go along with it. Does the noble and learned Lord have any view of how many in the final analysis are likely to sign up to the form of fiscal pact that is becoming increasingly evident as the discussions with Greece continue?

[Lord Davidson of Glen Clova]

The noble Lord raises an interesting point. In this sense, one has a negotiation from which the UK eventually excluded itself. The noble Lord correctly identified the capacity for change in the fiscal pact. Would it not have been better for the UK to have remained within that negotiation, given the somewhat protean nature of this apparent fiscal pact? The question I am putting to the Minister is: what, precisely, is the UK’s position in relation to this? However, I return to the greater long-term question—

[Lord Tebbit]

I am waiting for the noble and learned Lord to give us a precise description of his party’s policies towards this pact. Is it his party’s policy that we should see Greece destroyed in the way that it is being currently and that outsiders should take over in respect of the issues my noble friend Lord King just described? At the beginning of his speech, the noble and learned Lord referred to “blinkered Eurosceptics”. Some of us were not so blinkered that we could not see this coming 10 or 20 years ago.

--- Later in debate ---

[Lord Davidson of Glen Clova]

I remind the noble Lord that the reference to blinkers was to those who drew something positive from the difficulties in which the eurozone now finds itself. I take it he puts himself in that particular position. However, in relation to—

[Lord Tebbit]

The noble and learned Lord suggests that I find something satisfactory in these difficulties. I do not. However, the sooner they are resolved by Greece leaving the euro, the sooner Greece will be able to conduct its own affairs and get back on its feet. That probably applies to Spain and Portugal as well.

[Baroness Garden of Frognal]

My Lords, given the length of this debate, it is not customary for quite so many interventions to take place during speeches. It might perhaps enable the debate to be more effective if noble Lords are not interrupted quite so frequently.

[Lord Davidson of Glen Clova]

I am much obliged. I was interested in the lists of people who were to be expelled from the EU that the noble Lord was perhaps hinting at. I return to what I describe as the greater long-term question, which is emerging from the Government’s approach to EU relationships. The point I am trying to make concerns the strategy that the UK will adopt in promoting its position in the world, which is perhaps the greater question.

It has been the foundation of the UK’s foreign policy over recent decades that we maintain good and strong relationships with both our EU partners and the United States. The emphasis has varied from time to time with the attendant tensions, but on balance our positioning has at least to a degree been within our control. However, major global shifts are under way. With the so-called pivot—the United States moving away from Europe and towards Asia-Pacific—our relationship in that direction may become less close. The rise of the economies of China, India, South Africa, South Korea, Brazil and Indonesia inevitably reduces the UK’s relative economic standing in the world. At such a juncture it would seem that the UK’s relationship with our EU partners must objectively become of greater importance. The UK’s capacity to pursue its interests increasingly depends on being part of the world’s richest market—the European Union. Being an influential and effective partner of our fellow EU member states is the best route to being a persuasive interlocutor in international affairs both within the EU and externally.

There is a danger that the UK is becoming of declining relevance to a US turning towards Asia. As we face the rise of the new economies, the importance of the UK to world trade declines relatively. Were we then to become less involved in the EU, and take the role of bystander, the relevance of the UK would diminish. A reduced engagement with the EU would leave the UK further away from influencing decision-making within the world’s richest market.

It therefore follows that, whether by accident or by design, the UK being isolated at the December 2011 EU summit was, objectively, a foreign policy failure. Were such a policy direction to become entrenched—with talk of repatriation and so on—leading to the UK becoming a semi-detached member of the EU, may I take it the Minister would regard such an outcome as retrograde and inimical to the UK’s interests?

More significantly, perhaps, where do the Government see the position of the UK strategically in the light of changes in US priorities, the rise of new economies and events in the EU and the eurozone? What is the strategic vision of Her Majesty’s Government for the UK’s relationship with the EU? It is necessary to ask this as recent events leave no great clarity and give rise to some concern.