European Union: United Kingdom Membership

Lord Flight Excerpts

Monday 23rd May 2016 Lords Chamber

[Baroness Anelay of St Johns]

The noble Lord is right and he speaks from practical and detailed experience.

[Lord Flight (Con)]

My Lords, has the Minister seen the Brexit film, which stars a number of Members of this House? If not, I suggest that she might find it interesting to watch.

[Baroness Anelay of St Johns]

I find lots of things interesting, my Lords.

European Union Referendum Bill

Lord Flight Excerpts

Tuesday 1st December 2015 Lords Chamber

[Lord Flight (Con)]

My Lords, how will these measures deal with contributions from overseas? This might not be a big issue, but obviously there is the thought that there may be significant contributions from the EU itself.

[Baroness Anelay of St Johns]

My Lords, I am particularly grateful for the intervention of the noble Lord, Lord Kerr of Kinlochard, because it encapsulated the issue. The noble Lord, Lord Jay, is content that we have gone as far as a government amendment, or indeed any amendment, can go—I think that is the point—within the statutory system. The Electoral Commission in its briefing, to which the noble Baroness, Lady Ludford, referred, is saying that, beyond legislation, there is the whole issue of people behaving properly. Clearly, we want to ensure that those people who are receiving donations carry out their best efforts to ensure that they come from a source from which they should receive them. But also there are those issues that I mentioned in opening, such as the fact that some people who are receiving donations will not know at that stage that later on they will want to register to be a permitted participant. Therefore, we have to be cautious not to overload them with regulation, because they cannot guess what they are going to do as the sums of money rise and how they will feel as their activity increases. The noble Lord, Lord Kerr of Kinlochard, encapsulated that position very well.

My noble friend Lord Flight asked about overseas moneys. I referred during my presentation of the amendment to how that might be affected. I made it very clear in earlier stages of this Bill how money from overseas may be part and parcel of permitted donations. I do not think that it would be appropriate for me at Third Reading to go through the detail of that again, but perhaps it would be right for me to respond to my noble friend by making it clear that we have always set out that permitted participants cannot accept donations of more than £500 from the EU institutions, as these are not eligible donors under PPERA. With companies based in Europe, as long as a campaigner does not spend any other money campaigning during the referendum period, it would be possible for campaigners to receive up to £10,000 from a foreign company and use it to campaign. That is a necessary function of proportionate controls on low-spending campaigners. I went into this in some detail in Committee, so I shall not try to do so now. It is important that we have transparency in all these matters, and that is exactly what we have tried to put at the heart of this group of amendments.

European Union Referendum Bill

Lord Flight Excerpts

Wednesday 4th November 2015 Lords Chamber

[Lord Davies of Stamford]

That is an extraordinary question to ask me. I am the living embodiment of the fact that one can change one’s mind. I believe that Mr Corbyn has, in the light of events, learned wisdom which he did not possess 10 or 20 years ago. I assure the noble Lord that that wisdom consists in supporting—I repeat, supporting—our membership of the European Union. That is the official position of the Labour Party and will, of course, remain so.

[Lord Flight (Con)]

The noble Lord must be aware that a large number of members of the Labour Party—among those who are left—happen to have views about EU membership which are not that supportive. Although the Labour politicians at Westminster may or may not have strong views, they control the spend and the members of the Labour Party are not going to be very happy if the party spends all their money campaigning in a direction which they may not support.

[Lord Davies of Stamford]

I do not think that the noble Lord is a great expert on the views of the Labour Party. I would be delighted to take him to some party meetings in Lincolnshire where he would find enormous support for our membership of the European Union from people in all walks of life. The fact remains that the Labour Party supports our Members of Parliament in the other place who, by an overwhelming majority, have voted, and will continue to vote for our policy of believing that it is fundamentally in this country’s interests to remain part of the European Union.

I must move on to speak to Amendment 58. If there is a discordant element in my sudden change of subject, I say, in anticipation of someone rising to complain, that I am not responsible for the grouping of amendments.

--- Later in debate ---

[Lord Tebbit]

I am terribly sorry, but I am afraid that the noble Lord misunderstands it. When the Prime Minister negotiates he speaks for the Government as a whole, but his evaluation of whether the negotiation is sufficiently good for us to remain in the European Union is another matter.

There will be views and views within the Cabinet—we are pretty sure about that. It is highly likely, is it not? We would have to have a leaflet that said, “The position of the majority of the Cabinet”—or the majority of Ministers, perhaps. I do not know whether it would include PPSs and all sorts of other people. Perhaps we could add in the spads, I do not know. However, it would have to say that there are others who take a different view. It is total nonsense. It is the product of a mindset that wants to set the thing up to be biased in one direction time and time again. Lord knows that the Bill as drafted is bad enough, but it would be a darned sight worse if we were to accept the amendment from the noble Lord, Lord Davies.

[Lord Flight]

My Lords, I campaigned in the 1975 referendum to stay in the Common Market. To criticise the precedent, I well remember that we thought we had been rather clever because we had the establishment onside and we had 2:1 of the brochures sent to people. The whole objective was to marginalise the campaign of those who were not in favour of staying in. It was, in essence, a scheme to rig the whole vote.

[Lord Hamilton of Epsom (Con)]

I very much agree with my noble friend Lord Flight. Just because Harold Wilson rigged the 1975 referendum so that my noble friend Lord Forsyth and I—and indeed my noble friend Lord Flight—were conned into supporting staying in the EU, is that a reason for rigging this one? That is the question we have to ask.

The House will have noticed Amendment 40 in my name. Even my closest friends advise me that this amendment is rubbish. All I say to my noble friend the Minister is that I will not press my amendment. She will not have to spend any time telling the House that my amendment is rubbish because I agree with that anyway.

United Nations High Commissioner for Human Rights

Lord Flight Excerpts

Monday 16th December 2013 Lords Chamber

[Baroness Warsi]

As it stands, the timetable is that the public consultation will be held around February and March next year. That will be followed by some targeted sector-specific engagement with groups that need familiarisation with the new legislation, including certain employers, public authorities and the judiciary. It is anticipated that the legislation will come into force in October 2015, but I am quite happy to take back the noble Baroness’s comments to the Minister who deals with equality issues.

[Lord Flight (Con)]

My Lords, freedom of religious belief is becoming a bigger issue, sadly, around the world. What are the UK Government doing in terms of working, particularly with the Human Rights Commission, to promote freedom of religious belief?

[Baroness Warsi]

My noble friend will of course be aware that freedom of religion and belief is one of the six priorities for the Foreign and Commonwealth Office. Indeed, it is a personal priority of mine and something into which we have put additional resources and energy since my appointment at the Foreign Office. We are dealing with this matter on a number of levels through both the Human Rights Commission and our support for Resolution 16/18, which determined, among other things, tolerance towards minority religions. We have also instigated and chair a political track to this process. The first meeting was held at the beginning of this year and the second at the UN General Assembly in New York in September. We are proposing that a conference on freedom of religion and belief should be held in the United Kingdom next year.

Russian Federation: Council of Europe

Lord Flight Excerpts

Tuesday 30th October 2012 Lords Chamber

[Baroness Warsi]

I do not know whether I can comment on that particular matter, but the noble Lord will be aware that we have a number of delegates who form part of the Parliamentary Assembly of the Council of Europe. They are not an extension of the Government; indeed, they have quite independent views. It is a matter for the Government to lay out their position, but that is not something that we can force upon those members.

[Lord Flight]

My Lords, I understand that this lengthy report, covering a period of seven years, has findings positive and negative, but in particular expresses concerns about changes in law this year that will inhibit democratic development in Russia. Do the Government take the view that the recommendation should have been adopted—the reason for it not being adopted still seems somewhat unclear—and, in the absence of an adopted recommendation, is Russia left free to avoid responsibility for its obligations as a Council of Europe member state?

[Baroness Warsi]

My Lords, we believe that the recommendation should have been passed, not to chastise Russia for its human rights record but to help to improve human rights protections within that country, as we would do for any Council of Europe member state. It is unfortunate that in this particular matter the procedural points became the focus of the debate rather than the real substance that was in the report. It is essential that every member of the Council of Europe, including Russia, respects the obligations and commitments that it signed up to on joining the organisation, whether or not there is a recommendation.

UK Industry: International Competitiveness

Lord Flight Excerpts

Thursday 5th July 2012 Lords Chamber

[Lord Flight]

My Lords, I congratulate the noble Lord, Lord Jenkin, on introducing this debate and on raising a mixture of extremely important issues. I am particularly pleased that the noble Lord, Lord Green, will respond and I look forward to hearing what he has to say on the excellent work that he has been doing globetrotting and promoting Britain. His was a very important appointment by the coalition Government.

My interests are those declared in the register. Some of those companies are significant exporters of services. To me, services and manufactured goods are all the same pot. Quite where the division lies, I am not quite sure. Is software a manufactured item or a service?

It is clear that we are doing okay and have more to offer in the life sciences—as the noble Lord, Lord Kakkar, pointed out—in the software industries, in business services, in quality goods and services, and in education both in this country and about the world.

We have not done too badly in continuing to attract inward investment. It is particularly interesting that we are one of the most successful car manufacturers in the EU—I believe that car exports have risen to their highest ever level quite recently. We can make good cars here at competitive prices if the management is up to managing it properly.

It is true that sterling was overvalued for too long and that devaluation has made it more competitive, but it has arguably not made it competitive enough. Unlike Germany, I think that, broadly, the exchange rate should be used to adjust for differences in competitiveness rather to than to put countries through the agony of internal devaluations that wreck their economies.

The noble Lord, Lord Jenkin, mentioned one of the Bank of England’s usual understatements. To me, the economic facts of life are very simple: if this economy is going to pick up and grow, it can do it only through rising exports and capital investment. There is little or no scope for growth to continue to come from rising consumption. We had nearly 20 years of living above our means and of growth based on rising consumption and financed by debt and selling the family silver. We had a massive cumulative balance of payments deficit—to use old-fashioned language. That has come to an end. If we are going to grow, we have to export more. No range of government measures will achieve higher growth unless they achieve higher exports. While I remain a strong supporter of the Anglo-Saxon model, its one weakness is that it leads to the savings rate being far too low, with investment being far too low as a result. It is clear that Germany’s success, apart from its organisational brilliance, has been the amount of its capital investment in modern industry.

However, there is huge opportunity, as I and others have variously described it. The fast-growing economies, the BRICs, are the ones that have the potential to import more. As others have mentioned, we have the blessing of our own particular club in the form of the Commonwealth, which is now, collectively, a fast-growing part of the world and one that has language, culture and businesses practices in common with us. In my experience, it is only too happy to do business with us as far as there is scope. It has been a mistake to concentrate on the EU as our main export market. Our exports to the EU are shrinking as a percentage of our overall exports and, sadly, it is clear that EU is going to be a very flat, depressed economic area for several years to come as it sorts out the currency problem one way or the other. It is crucial, therefore, that we go for the new economies.

I met an individual who runs the Azerbaijan society in the UK. He mentioned that it was unfortunate that Germany had sent its President there but that we had not sent anyone. I needless to say wrote to the noble Lord, Lord Green. Even in Azerbaijan, there is considerable scope to add to our involvement in the oil industry. There is also interest in our education institutions and in our quality goods. What Azerbaijan really wants is a lift in its relationships with the UK.

I shall focus briefly on what I will call our quality goods and services. I am very interested to see that Hamleys is going to go international. It is a fantastic brand name; it is the best toy shop in the country. There are masses of scope for internationalising that. Even Fortnum and Mason is going to do the same thing. I sat back and thought, “Well, Burberry started it. Think of all the fantastic British brands for which there is much greater potential now that there are parts of the world that can afford these things, potentially more than we can ourselves”.

I broadly praise the Government’s efforts. I was very pleased that the Prime Minister shot off to India. India is my pet project. The scope to export to it and to do a great deal more business with it is huge. India, as the Prime Minister of India keeps saying whenever he comes back to Cambridge, would like a special relationship with this country. Well, I would like a special relationship with India.

However you call it, “City” is now a bad word—even worse than “politicians”. I use the phrase “business services”. Our overall business service exports run at £60 billion to £70 billion a year. They are not just financial products and services; they are lawyers and consultants. There is substantial scope about the world, as the rest of the world grows faster and advances, for our business services.

Some negative issues were raised by the noble Baroness, Lady Nicholson. The London Chamber of Commerce has raised the problems of visas and passports. I have had letters from friends in Hong Kong and Sri Lanka complaining that they now have to send their applications back to London. As a result of a rather foolish economy being made by the Foreign Office, the places where they had them processed locally are being closed down, which is causing them a nightmare—others have referred to that. We have to make it easy for businessmen around the world who want to come here to do some business to get their visas or, if they are Hong Kong passport-holders, to get their passports renewed. We simply have to sort out the ridiculous situation of the excessive queues that people have to face after landing at our airports. I am not going to cast blame, but it seems ridiculous that that should have been allowed to happen. It is depressing to note that the destinations served out of Heathrow have reduced by about 50 over the past decade. We clearly need to have the best European hub available as fast as possible. UK passenger duty is far too high. It makes it uncompetitive from a holiday perspective.

There are issues to be addressed, but we should look to British history. We were the first great exporters. What was the East India Company about? It was about trading with the whole of Asia. What did it do? It stimulated manufacturing here. Britons went about the world when it was often highly dangerous and the ship they were on might have found itself embarking on warfare with the Portuguese, but we went about and built a commercial empire that became a physical empire. We have it in our history and in our national character to be about the world doing things. I see a lot of that now reviving. At least half of my son’s generation is somewhere else in the world—maybe in Shanghai or America—busily doing things that ultimately involve British exports increasing.

Towards that end I am very keen on the new technical colleges. A friend of mine has a business that has a unique niche in producing aircraft safety devices down in the depths of Hereford. With 95% exports, it is a hugely successful business. It has grown because Hereford has always had a good technical college and he could get the people he needed trained there in a way that was required for the business. I greatly welcome the expansion of all that.

I congratulate the Foreign Office, as others have, on its much improved services on the ground. However, 18 months ago I went to the Expo in Shanghai. There was a fantastic Italian exhibition of goods and services. You wanted to buy the lot. And what did we have? We had some clever cut-glass work of art and no mention of our goods and services. I wrote to the Foreign Secretary William Hague after he had just arrived to say that this seemed daft and I got a letter back saying that it had won some award as a work of modern art. I thought it was a classic example of how not to be promoting this country’s exports.

We have a great history and we have great potential. We want more young people to get into their planes and to go about the world and do things. I have always thought that in today’s world JCB is a wonderful model of what this country can be about successfully. Let us have many more of those.

European Union (Approval of Treaty Amendment Decision) Bill [HL]

Lord Flight Excerpts

Wednesday 23rd May 2012 Lords Chamber

[Lord Flight]

My Lords, the Bill looks to me to be essentially a no-brainer that commands the support of those on all sides. It is necessary to understand what it is all about and what the European institutions do. I am particularly concerned about what Britain’s liabilities, and potential liabilities, might be.

It seems to me that we are facilitating a quid pro quo deal. Germany needs the amendment to Article 136 for its participation in the February intergovernmental treaty obligation to be considered legitimate by Germany’s Federal Constitutional Court. The Prime Minister believes that once Article 136 is amended, any further liability that we have under the initial financial stability mechanism will cease. The issue arises whether this matter would invoke a referendum under the terms of last year’s European Union Bill. However, the Foreign Secretary has confirmed that no powers are transferred, so that is not the case.

As I understand it, this issue arose during the interregnum period after Labour lost the 2010 general election and Chancellor Darling was still the interregnum Chancellor, as it were, when he committed the UK to supporting the initial European financial stability mechanism fund. I say candidly that this was a mistake and that the establishment of the fund was highly questionable. It was set up under Article 122, which provides relief in the event of natural disasters occurring, not relief for Governments who are having problems raising money. The fund was able to provide support worth €60 billion, of which €48.5 billion was committed to Ireland and Portugal. Some €11.5 billion remains unused, of which Britain’s liability is 15%—a total of €1.34 billion. That liability is supposed to end once the formalities of amending Article 136 are completed, and all 28 EU members are signed up to that.

The mechanism of facilities under this fund has been that the European Commission borrows from the capital markets against the contingent liabilities of EU members to provide the finances. I ask the Minister whether members have actually paid up, or whether the Commission has paid but has not yet collected the money owed by the various members. I ask that in particular because my understanding of the arrangements is that the liabilities of members are joint and several. That is to say that if, by the time they have to pay, some members are unable to pay or are insolvent, their liabilities are transferred to members that remain solvent. That is somewhat like the last-man-standing rule applying to pension funds. There is therefore a question as to whether the UK has a material contingent liability relating to the initial fund.

Somewhat like the noble Lord, Lord Lamont, my first question on investigating this territory was to ask: what are the catches and the potential weaknesses in what seemed like a win-win proposal? The second point is that it is not at all clear when or if Britain’s legal liability in relation to the outstanding balance of €11.5 billion comes to an end. It was a political deal that there would be no further drawings under the initial fund, and I think there is agreement that the fund is capped once Article 136 is duly implemented. It is not clear when that is going to happen. It is supposed to happen in July, but it may not be until January, by which time it is entirely possible that further developments will overtake the situation.

Subsequently, as noble Lords will be aware, the 17 eurozone members set up the European finance and stability facility in May 2010, but Britain is not part of it. The facility borrows capital from the markets, again backed by eurozone member guarantees, and pulls together total commitments of €400 billion, of which some €188 billion is already committed—€144 billion to Greece, with the balance going to Ireland and Portugal. I am clear that Britain has no direct liability relating to this fund, which is then to be rolled over into the new European stability mechanism, the establishment of which the Bill relates to, because amendments to Article 136 are required.

The amount to be rolled over from the second fund is therefore of the order of €220 billion, which is part of the €700 billion that the new ESM is providing as its firewall. This, again, is to be funded, I understand, by a mixture of paid-in and callable capital. I would be interested to hear from the Minister whether liabilities in relation to that mechanism are also joint and several, as I presume they are. I make the point alluded to by other noble Lords that if you continue on the joint and several liabilities front, the potential bill building up for Germany gets larger every day.

Considering all that, it looks as though the UK’s position on potential liabilities is reasonable, but I am interested to know what other potential hidden catches there are. I have already made the point about whether our liabilities under the first fund can increase if other members are unable to honour their commitments. Given the history of the EU, I am also cautious about dealing with the potential reinterpretation of treaties that are signed. We have the immediate example of Article 122, which was used to establish the first fund when it was actually intended to relieve natural disasters.

I have already referred to liabilities in relation to the first fund but, as I understand it, there are two other major areas of potential liability. I believe that the ECB can call on up to €50 billion of foreign reserves held by the Bank of England, and, more fundamentally, I believe that the EIB can call on members for financial support, should it, for example, sustain significant losses on loans made to Governments in trouble. I believe that the maximum UK commitment here is €35.7 billion. Strangely, this is 39.6% of the total that all members would need to contribute, but we are shareholders to the tune of only 16%, so I am not quite clear why we have that greater liability. In short, I ask the Minister what the UK’s total contingent liabilities are in relation to the eurozone. I think it is important that the House has the accurate figures.

I close by commenting that I agreed with virtually every word that the noble Lord, Lord Lawson, said. I think that his analysis was absolutely accurate and correct. It also seemed to illustrate that this situation is just like that of the gold standard in the early 1930s. Then, everyone was terrified, believing that you could not come off the gold standard or the whole world would come to an end. The gold standard did the same as the euro; it stopped countries in real trouble being able to devalue and get their economies going again on a competitive basis. When everyone had given up the gold standard, people said, “Why did we regard it as a religion for so long? We have been afforded relief at last”. Although I appreciate that the break-up of the euro, which is inevitable, will bring pain—and the pain may be worse because of the EU’s failure to organise an orderly break-up—within a given period, once it has happened, people will again say, “Why on earth did we stick with this currency, which prevented us from devaluing and has driven our economy into the dirt?”. It is absolutely clear that the economies of southern Europe need major currency devaluation.

--- Later in debate ---

[Lord Liddle]

I apologise to the noble Lord, but the point is surely valid. Growth last year in the eurozone was twice that in the UK. Therefore, to blame the eurozone for the present double dip is nonsense.

The big point that the Eurosceptics fail to understand is that we cannot avoid the consequences of the euro by being out of it. In or out, our future is deeply affected because of our exports and the interlinking of our financial system. As Robert Chote said, if Greece exits, who knows what will happen? We may never in the foreseeable future recover the level of output that we had in 2008. A policy of splendid isolation from the continent was never realistic for Britain, but in the world of globalisation and economic integration it does not work at all.

Nor is our isolation very splendid. We are losing influence and clout in Europe to a dangerous degree. I will give one telling illustration. The Prime Minister claimed that the reason he used the veto and walked out of the December European meeting was that his partners would not accept a set of proposals that he tabled at 2 am in order to protect the City of London. A couple of weeks ago, on the capital requirements directive, the Chancellor, George Osborne, and the British for the first time found themselves outvoted by 26 to one at ECOFIN on a key question of financial regulation. The Chancellor has now recognised that he has to go along with the majority. That is not an effective use of the British veto. It just shows how influence is draining away from us at the moment.

[Lord Flight]

I was under the impression that the Chancellor had eventually obtained agreement to his point, which was that there could be some flexibility in the capital ratio of banks, with a view to the UK being rather more demanding than the rest of the EU.

Queen’s Speech

Lord Flight Excerpts

Thursday 17th May 2012 Lords Chamber

[Lord Flight]

My Lords, towards the end of the gracious Speech there are the somewhat opaque words:

“My Government will build strategic partnerships with the emerging powers”.

I would have liked that to refer specifically to our friends in the Commonwealth, but I was very heartened by what the noble Lord, Lord Howell, had to say in his excellent opening speech. To me it is particularly relevant in the face of the likely impending break-up of the eurozone and the impact that that is likely to have on European economies and our relations. The immediate and most important foreign affairs issue is what is happening on the continent. There is the obvious fight to the death between economic and market forces and political commitment, where the lessons of history tell us that major economic forces tend to prevail. There is the obvious point that many have made before—that for disparate economies to share a currency is extremely difficult at the best of times. Indeed, I was surprised to see an article arguing that the Commonwealth was likely to be a more successful group of economies to share a currency than the EU countries.

Everyone knows that if you are going to share a currency you have to have transfer payments from the more successful to the less successful. It boils down to whether Germany is willing to make the necessary transfer payments on a regular basis to the uncompetitive economies, which would amount to some 35% per annum of German GDP. That seems pretty unlikely. We live at present with the likely impending default and exit from the euro of Greece. I expect that a firewall will probably prevail in the near term to protect Spain, Portugal and Italy, but that does not address the fundamental problem of lack of competitiveness. These economies cannot recover and grow, and they cannot put their public finances right, if they are 35% uncompetitive against the successful parts of Europe. The issue is whether the break-up will be chaotic or orderly. We all hope that it will be orderly but, whatever, there would be economic pain in the short term, although once the necessary devaluations have occurred and these currencies are competitive again, do not understate their ability to bounce back within two or three years.

What British foreign policy needs to focus on right now is what our attitude is towards the EU in the wake of these likely events. What will be happening is centrifugal forces. The nation states of Europe with their own currencies and central banks returned will need to follow economic policies appropriate to their circumstances. Some may even need to impose capital controls. The EU, which has been centralising for 40 years and trying to move towards a single political unit, is suddenly going to be pulled in the other direction. What is our view towards this? What would be our view if there were an attempt to leap towards political union? I very much doubt it, but that obviously could be one reaction.

What the UK has always wanted to see is an area of free trade and co-operation, achieving consensus, not enforcing policies but moulding more and more European co-operation together over time—but naturally and not coming by command from the centre. It will also need a much cheaper EU. I checked with the Treasury, because I could not believe a report in the newspapers that in 2013-14 Britain’s net contributions to the EU would be £31.3 billion. The Treasury confirmed that figure to me. I thought that it was still only £12 billion or £13 billion. It is not a sum of money that this country can afford. But, more than that, I cannot see that Italy and Spain, the countries that are going to be experiencing problems with the euro, will be willing to make large financial contributions to a massive EU structure. We may not necessarily say it in public, but this country needs to think about the political implications of the euro imploding and what policies it will adopt in that event.

For some time the EU clearly has not been the engine of growth that people thought it would be when we first applied to join it way back in the 1960s and 1970s. It has turned out to be a relatively failed economic region. I go back to where I started. We need quickly to develop effective commercial and investment relations with the emerging BRIC economies, in particular with the Commonwealth economies. As I have pointed out before, my particular plea is for a much closer relationship between this country and India—politically, economically and potentially even defence-wise. The University of Cambridge will tell you that the only two countries that matter in terms of our universities and their quality of students are America and India. The Prime Minister of India has virtually indicated that he would like to see a special relationship being established for top postgraduate students coming to this country, which would enable a lot of the hassle of the visa process to be handled in a friendlier fashion.

I can think of other areas where there is considerable scope for special relationships between this country and India. We are all aware that certain problems need to be resolved but I do not think that they are insoluble. The Indian community is a successful and dynamic part of this country and there is a great deal of sympathy between the people of India and the people of Britain. It is time to galvanise that while not ignoring the other members of the Commonwealth. Important things are going on in Africa and in the older members of the Commonwealth, particularly Canada, where there is much scope for this country to find commercial partners.

There is a nice commitment in the gracious Speech. I know that the noble Lord, Lord Green, is travelling the world doing his best to generate trade deals on the ground, but more needs to be done in terms of political initiatives. We need to face up to the fact that the Europe that will emerge on the back of what is likely to happen to the euro will not be a great economic engine for this country.

EU: Recent Developments

Lord Flight Excerpts

Thursday 16th February 2012 Lords Chamber

[Lord Flight]

My Lords, a noble Lord in this debate and yesterday referred to Britain’s exports to the EU representing approximately 50 per cent of our exports. As many noble Lords may be aware, subsequent research on this figure finds that some 10 per cent of those are merely in transit, largely through Holland, to other parts of the world, and that the more accurate figure is some 40 per cent of our exports.

Perhaps I may appear rather aggressive in saying that the Prime Minister should at least have criticised, if not opposed, the December fiscal compact essentially because it was not about fiscal integration; it was about a framework and enforcement machinery for brutal and self-defeating internal devaluation measures, where the economies in trouble need growth and not to be ground into the dirt.

The key features of fiscal integration, as evidenced by the United States of America, are a single borrower, a central bank that can if necessary print money and buy government bonds, and, above all, transfer payments from the more prosperous to the less prosperous, keeping the less prosperous afloat. Within America, they amount to some 30 per cent of federal tax revenues to this day.

Germany, not surprisingly, has opposed all three key aspects of fiscal integration, largely because the estimates are that the transfer payments would need to be as large as some 35 per cent of German GDP, which is clearly impossible. But the failure is to face up to the conclusion of that: that is, there is really only one way of addressing the problems without imposing enormous hardship on millions of people, which is a currency reorganisation within the eurozone. I perceive what is being proposed and demanded of Greece as smacking of President Hoover in the 1930s, leading to the depression in America, and smacking of those Gold Standard bigots in Europe in the early 1930s having a similar effect on European economies then. The fact is that Greece has been in major recession for four years; its economy is downward-spiralling; and, very clearly, it is going to be vulnerable to political revolt, we hope through the ballot box. The words of Keynes, applied to the German reparation agreement at the end of the First World War, are appropriate: what is being looked for is,

“insincere acceptance of impossible conditions”.

This approach is not only economically mistaken but, in reality, unlikely to work, not just as regards Greece but other countries—it will be like the growth and stability pact. Back in 1953, when the then West was required to bail out Germany, which could not afford to service its debts, a very generous deal was provided—a 50 per cent debt cancellation and a five-year interest moratorium—and it was well understood that it was necessary to give the German economy the oxygen to rebuild and grow. As the noble Lord, Lord Radice, pointed out, these problems are not soluble unless countries can grow their tax revenues. I would have thought that if poor old Adenauer was still around today, he would not make the disastrous mistakes made by the present German Administration, which in effect repeat the very reparations-type of approach that caused so much trouble in Germany after the Great War. Let us look at what is happening: the whole claim of the European Union was that it would get rid of nasty nationalism. Well, many countries in Europe are coming to take a very critical view towards Germany bossing them around and, not surprisingly, many Germans are pretty critical of having to pay up and bail everybody out. So the flames of nationalism are being stirred rather unpleasantly, as others have pointed out.

I am surprised that many whom I would describe as less capitalist than me in my economic views seem entirely happy to see thousands of people thrown out of work and thousands beggared purely in the name of having to maintain the euro unchanged rather than follow the sensible remedy of currency reorganisation. It will clearly be Portugal next and Spain, potentially, after that—Spain already has 23 per cent unemployment and 48.7 per cent youth unemployment.

Germany has subtly “done a China”. She has made herself super competitive within Europe when, if you like, the more pleasure-loving south was getting on with its usual practices and unit labour costs were rising. Germany since 2003 has cut unit labour costs by some 12 per cent. So there is about a 30 per cent competitiveness gap between Germany and its affiliated economies and the south. That is just too large to be able to be addressed by an internal devaluation programme. It is not surprising that we see Germany having had the best figures for years for job growth while southern Europe now has spiralling unemployment.

It is odds-on that Greece and Portugal will exit from the euro relatively soon. I would make the point made by others that, although there will be immediate pain, the process needs to be well planned and organised. Beyond immediate pain, there is the prospect of strong economic recovery, as Argentina has experienced as a result of going through a similar mechanism.

The ECB is financing banks to give them a large interest margin when they buy the debt particularly of southern European economies, which should keep the debt issue afloat in Italy and Spain for some time, but there remains a competitiveness problem with both economies. Unless the ECB’s action is used to buy time in which a sensible European currency reorganisation is planned, it will simply worsen the banking problems when things eventually blow up. I have suggested on previous occasions that there is an obvious case for a strong currency for northern Europe and a weak currency bloc for southern Europe. We do not necessarily have to go back to historic currencies.

This needs planning now. Indeed, it should have been planned a year ago when it was blindingly obvious that the inherent problems of the euro were coming to light. But there is a bigger issue to which many noble Lords have referred, including the noble Lord, Lord Howell, and indeed the noble Lord, Lord Mandelson, which is that the world is a hugely changed place. We have huge success and competition from what are widely known as the BRICs and it is very clear that most of Europe and the UK are no longer attractive places in which to do business. The public sectors are way too big, regulation is wildly excessive and tax rates are far too high.

The diagnosis of that has to be that radical reform is needed across Europe and in the UK if we are to compete effectively with the new economies going forward. We are not going to get anywhere merely remaining uncompetitive and unattractive. A major ingredient preventing those reforms is of course the EU itself and its excessive detailed regulation. We heard today an interesting comment that the success in this country of the life science industries is being threatened by EU regulation. It is not just in that area that, I am afraid, EU regulation imported and often enhanced here makes this country uncompetitive.

The task of any responsible Government of the UK, whatever their political hue, over the next few years will be either to change and reform the EU enormously to make it into a vital economic unit and not a stagnant one or to find measures to extract the UK from the various aspects of its regulatory and other regimes which are damaging our economy. In particular, they are a major threat to our biggest industry; the financial services industry.

Commonwealth Parliamentary Association

Lord Flight Excerpts

Thursday 8th September 2011 Lords Chamber

[Lord Flight]

My Lords, first, I would like to add my own tribute to Her Majesty the Queen who, it seems to me, has done more than anybody else over the last 50 years to keep the Commonwealth together and to provide a wonderful focus of leadership. I also congratulate the noble Baroness, Lady Hooper, on her excellent speech and for bringing this debate, which I think is particularly important at this time.

The Commonwealth is clearly the most international association in the world. On the one hand, it reflects 400 years of British history, engaging with the other parts of the world, but I think it should also be a much more important force in the future. I have always regretted the fact that 100 years ago Britain lost the opportunity that was sought by quite a lot of politicians to create a federal structure.

Britain is privileged to be at the centre of the Commonwealth but, as has been alluded to, should be careful not to be patronising in its attitude. I remember and was extremely embarrassed by the shoddy treatment that particularly Australia and New Zealand received in the 1970s in the wake of unrealistic expectations of EU membership. I remind the House that last time round, in the early 1930s, when Governments and central banks in Europe and America messed up their economies, the UK was able to recover very strongly in the second half of the decade, with the highest growth rates of the 20th century, on the back of a great strengthening of Commonwealth trade and indeed domestically of housebuilding.

I am very pleased that the Government have upgraded the importance of the relationship with the Commonwealth—indeed, it should have been upgraded long ago—and have commissioned a new Commonwealth strategy paper. I understand that the FCO has trebled the size of its Commonwealth Unit. To me, the Commonwealth’s economic and political co-operation and influence are still extremely underdeveloped, and a much greater development would actually be appropriate to the global world we are now in, where the relationships—trading, commercial and even political— between mature economies and new, fast-growing economies is ever more important.

My great interest—indeed, I made my maiden speech on the subject—is India, where I worked in the 1970s, a country for which I have huge love and affection. I have long taken the view that the UK and India in particular represent virtually the perfect relationship between mature and new, growing economies. I also lived in Hong Kong. Noble Lords have referred to Ireland, but I have always hoped that a way could be found for Hong Kong to become some kind of member of the Commonwealth. There is of course the sovereignty issue, but all things are possible and Hong Kong has been perhaps the greatest economic success of all the economies that grew and arose from British connections in the past.

The Commonwealth is not just about the amazing ties of history and culture and personal and family relationships but about what can be achieved with much more important political and economic co-operation in the future. I believe Commonwealth trade could grow from $3 trillion to $10 trillion within five years without that much difficulty. Reference has been made to the fact that the combined GDP has doubled in the last 20 years and could well double again in the next 10 or 15 years. The share of world GDP that the Commonwealth represents is in the course of growing by 15 per cent through to 2015. There has been a massive increase in what one might call middle-class consumers, and not just in India. There are some 1 billion in the Commonwealth as a whole, and, as mentioned, the Commonwealth represents over 30 per cent of the world’s population. This is a huge club that I think is being underexploited politically and economically. I would like to see completely free trade within the Commonwealth, as within the EU. It is potentially just as important to the British economy as is the EU.

Finally—reference has been made to this—it is important that the Commonwealth addresses some of the problems. We have heard the story of the Methodist Church in Fiji. We all know about the problems of Zimbabwe. There should be a mechanism for the enforcement of law and, with reference to the comments made by the noble Baroness, Lady Flather, there should be some machinery to address corruption. Britain has just passed its anti-bribery legislation. It would be inappropriate and meaningless if that influence did not go international. I hope that the Government’s commitment is very much in earnest, and in the difficult times in which we live I believe that the UK is extremely fortunate in having its Commonwealth relationship, which could be of enormous economic help over the next few years.