EU: Reform

Debate between Lord Davies of Stamford and Lord Vinson

Thursday 9th January 2014 Lords Chamber

[Lord Davies of Stamford (Lab)]

My Lords, I thank the noble Lord, Lord Dykes, and I am sure that the whole House is grateful to him for giving us the opportunity this afternoon to debate this important matter.

There has been a striking change, at least in the tactics and rhetoric of the Government on this issue over the past year or so; that is of course very welcome. I am sure that noble friends of mine will accuse me of being very naive if I place too much reliance on this, but I speak this afternoon on the basis that that change is genuine, that the Government are acting in good faith and to encourage them along that path. It is not impossible that there is a large element of genuineness about the government rethink. A year or two ago, the Government were adopting an extremely confrontational stance towards our partners in the European Union, vociferously demanding all sorts of concessions, exemptions, derogations and repatriations, and occasionally laying on some histrionics, such as walk-outs and so forth, in order to appease pressure from the Cashites in the Tory party and UKIP. It was a deplorable spectacle.

I have heard the noble Baroness, Lady Warsi, say on several occasions that the Government now take the line that they are committed to our membership of the European Union and simply want to be a member of a reformed European Union in the future. Of course, I welcome that very significant change. The change may be a genuine one for two very good reasons. One is that the Government—and the world—have clearly seen that the tactics they were adopting previously were pretty counterproductive and unintelligent, and they have drawn the sensible conclusion from that. The second thing is that they were forced to look into the abyss: into what would actually happen if we left the European Union. I know that they have had some very frank advice on that—franker in private than in public, of course—from bodies such as the CBI, the Corporation of the City of London, the Engineering Employers Federation, and from a number of Japanese and American multinationals and others as well. Therefore they have had to confront the alternative, which has been a salutary process.

In that spirit, therefore, I will not attack the Government this afternoon but will try to be helpful and suggest ways in which we can make a success of those discussions. We on this side of the House, and I think the whole country, want to see reform in a positive sense. Any human institution can always be improved and reformed, and the more important that institution, the more important it is that it is improved and reformed by each generation. Therefore we should be committed to that process in principle. I will suggest one or two bases on which the Government might decide what are the sensible initiatives to take and what the less productive course to take might be in the months and years ahead, as discussions continue with our partners.

The first thing I urge on the Government is always to focus on the substance, not on the symbolism. Always go for the content, not the colour of the wrapping on the package. We should have absolutely no more farces such as those we had with the Justice and Home Affairs opt-out, where the Government opted out of a whole series of measures and then wanted to opt right back into them, because on the substance they were very necessary and in the national interest. That was a deplorable and ludicrous exercise, and it was quite obvious that the Government were pirouetting around in order to appease their own extremists and to head off pressure from UKIP. That was not a very edifying episode at all. I hope that the Government will learn the right lessons from that in future and that they will always focus on the reality and the substance, and be pragmatic.

Being pragmatic, my second point is that it would be sensible to take up issues where we have a particular credibility and, obviously, where our national interest is directly engaged. The obvious selection is the single market. We have a natural credibility on the single market as after all, we took the decisive initiatives to push it through in the 1992 programme and so forth, which we should not allow our partners to forget. We have not completed the single market—there is some important work to be done. I hope that as a result of this discussion on the reform of the EU we will be able to make some concrete progress there.

One thing that cries out to be resolved is the services issue—we must have a proper services directive. Of course, we have a services directive, but we all know that that is inadequate. It was much better than what we had before and was a considerable achievement in itself, and we all know that you can only move human institutions along at a certain pace. However, now is the time to try to achieve a real services directive so that we have a single market in services that is comparable to the one that we have had successfully for a long time in goods.

Last time round we found that the French and the Germans were the greatest obstacle to that, but it is possible that the Germans will now be less opposed. That is partially because their economy is doing so well and unemployment is falling in Germany, so they are less frightened perhaps by the prospect of Polish plumbers coming across the frontier to work in Berlin—that was one of the many issues that arose last time—and also because the Germans have got into the habit of lecturing everybody else about deregulation, so they may be more open to deregulatory arguments themselves. Therefore I put it to the Government that a good proposal would be to invest a certain amount of capital in services and to develop, I hope, a certain amount of momentum for that.

Secondly, on energy, I am never quite sure whether I agree with the noble Lord, Lord Howell, or not, because he says one thing at one moment, and something that sounds slightly contradictory in the next sentence. However I agree with some of what he said about energy policy. Energy policy is an area where we need to complete the single market—there is no question about that at all. We do not have a single market in the retail sector in energy, and that, after 20 years of the single market, is quite disgraceful. We should do something about that. We have had partially state-owned monopolies in France—they are not entirely nationalised, of course—and “monopolies” is the word. In the terms of the domestic market, they are holding up progress on this, very much to the detriment of the interests of French consumers, as much as anyone else. We should deal with that, and now is the time to do it. I think that we would have a lot of support in taking up that issue.

My third piece of advice to the Government is the kind of advice that I would give to anyone who felt that they wanted to slightly change their image in a particular context—that is, to surprise people positively, and come up with something that results in the continentals saying, “Good Lord, the British really have changed”, which would establish a certain credibility for what we say about being pragmatic. If we are genuinely pragmatic and open-minded and believe in European reform, clearly there will be cases when the competences of the Union should be extended to resolve a particular problem, because that is the right way in which to do it. There may be other cases, of course, which I would recognise, whereby under the subsidiarity rule it would make pragmatic sense to repatriate certain functions.

[Lord Vinson (Con)]

What powers have ever been repatriated under the subsidiarity rules?

[Lord Davies of Stamford]

I have yet to be convinced, to be honest, that any powers need to be repatriated—and I have looked at the suggestions that have been made on fish and overseas aid, and so forth. It has always seemed to me that there was a very good argument for not repatriating; in fact, in many cases, we might want to go further into integration. But we can have that discussion another time. I am certainly open-minded and could be persuaded that there are situations in which we should repatriate powers, and I hope that the Government and the noble Lord are open-minded and could be persuaded that there are cases when, in fact, the European Union is in the best position in the interests of all its members to have the necessary jurisdiction to resolve the problem.

One area where that is certainly true is with banking union. I have heard no good reason at all why we should not be members of the banking union, and it is extremely dangerous that we are not. We think that we are being very clever in negotiating the double lock, but that works only if there are four member states remaining outside the banking union. If you look at the matter purely objectively, you can see that there is every interest in our being a part of it, and it is extremely dangerous to fragment a supervisory regime or bank resolution regime. It is not something that can possibly be in the country’s interest.

Since time is short, I shall make a final suggestion, which is one that I made before to the noble Lord, Lord Newby. The Government—and I congratulate them on this—have come round to the arguments of many of us over quite a long time that we need to do something about the scandal of payday loans and loan sharks. I see that the Minister is nodding to me, and I understand that the Government have instructed the FCA to come up with an interest rate or cost limit on those payday loans. I congratulate them on doing that. When that has been done in the United States and individual states of the Union—and the Minister will be familiar with this argument, because those opposed to it have always come up with it—it has always been ineffective, because lenders have come in from other states. This is an obvious area in which, if we are to have effective regulation, we need to have it on an EU-wide basis. I put it to the Minister a few weeks ago that it would be worth taking the matter up with Brussels to see if the Commission might be minded to produce a regulation or directive, and whether our partners would agree that this would be a sensible move to take. Now that I have put the issue in public to both the Treasury and the Foreign Office, I would be grateful to the Minister when she responds to this debate, or subsequently in writing, leaving a copy in the Library of the House, if she would let me know whether my arguments have been considered and what the Government’s conclusions are.