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

David Lidington Excerpts

Monday 10th September 2012 Commons Chamber

[The Minister for Europe (Mr David Lidington)]

Clause 1 sets out the purpose of the Bill and why legislation is required. It is required by section 3 of the European Union Act 2011, under which primary legislation must be passed to confirm parliamentary approval of certain European Council decisions. The provisions of section 3 relate to Council decisions made under article 48(6) of the treaty on European Union, and the reason for that provision in the Act was that such decisions allow for the revision of European Union treaties. The procedure under article 48(6) is known as the simplified revision procedure. In taking through the 2011 Act, the Government enhanced the role of Parliament in the approval of any such revision of the European Union treaties. The Bill marks the first use of those new provisions.

The purpose of the Bill, as set out in subsection (2), is to approve the

“European Council decision of 25 March 2011 amending Article 136 of the Treaty on the Functioning of the European Union”.

That decision seeks to add a new paragraph to article 136, which recognises that EU member states whose currency is the euro—I stress that the proposed new paragraph applies only to eurozone members—may establish a financial stability mechanism. In other words, it confirms that the eurozone member states can set up a permanent stability mechanism to support fellow eurozone members that are in financial difficulty.

[Wayne David (Caerphilly) (Lab)]

The former Financial Secretary to the Treasury, the hon. Member for Fareham (Mr Hoban), stated in evidence to the European Scrutiny Committee that

“we do not believe that it is legally necessary for the Article 136 change to be made before the ESM comes into force. It is desirable, but I do not think that it is necessary.”

Have the Government changed their position since that statement, or was the Financial Secretary wrong?

[Mr Lidington]

It has been our position since the proposal was first made in autumn 2010 that such an amendment of article 136 would give eurozone member states firmer constitutional and legal certainty than if they simply proceeded to establish the permanent stability mechanism without recourse to such a treaty amendment.

[Keith Vaz (Leicester East) (Lab)]

I congratulate the Minister on surviving the reshuffle. He is well on his way to being the longest serving Minister for Europe for some time.

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[Keith Vaz]

Certainly since my right hon. Friend the Member for Rotherham (Mr MacShane) held the post.

I should have had this point clarified on Second Reading. Will the Minister confirm that none of the funds that we are talking about will in any way affect the ability of the European Union to support new member countries such as Croatia? Will he clarify that this matter is completely separate from and has nothing to do with enlargement?

[Mr Lidington]

Yes, I give the right hon. Gentleman that firm assurance. This is nothing to do with enlargement. In effect, the treaty amendment provides a bridging clause between the existing European Union treaties and the separate intergovernmental European stability mechanism treaty that is being reached by the 17 members of the eurozone. It is that intergovernmental treaty that will set out in detail how the stability mechanism for the eurozone will operate.

[Mr Peter Bone (Wellingborough) (Con)]

I welcome the Minister back to the Dispatch Box. He has been helpful on occasions—[Laughter]—on rare occasions.

What I do not understand—this goes to the heart of the matter—is why, if there is an intergovernmental treaty that has nothing to do with the European Union, that we have had nothing to do with and that the Prime Minister wants nothing to do with, we have to be part of amending the EU treaties. We have been told that it has nothing to do with the EU.

[Mr Lidington]

First, I thank my hon. Friend for being so kind as to say that I am helpful to him on certain rare occasions. I am delighted to be able to return the compliment to him in similar measure.

The answer to my hon. Friend is that the proposal to amend article 136 of the treaty on the functioning of the European Union would change one of the treaties of the European Union. As I am sure he realises, any amendment to the treaty on European Union or the treaty on the functioning of the European Union requires the unanimous agreement of the member states of the European Union through the national ratification process of each member state. The rule that everybody has to ratify treaty changes according to their respective constitutional arrangements still applies even if a change to the treaties excludes one or more countries. Theoretically, there could be an amendment to the European treaties that applied to only one country. That is not too fanciful a hypothesis, because there are protocols to the treaties that apply to only one or two member states, but each none the less has to be approved and ratified by all 27 existing European Union member states. We are simply following proper constitutional and legal procedure.

[Wayne David]

Will the Minister give way?

[Mr Lidington]

I will let the hon. Gentleman come in again, but then I want to make some progress.

[Wayne David]

The Minister is very kind. I am pleased that he has been reappointed. It is good to have a sensible Europe Minister—relatively sensible, anyhow—in place.

May I go back to the point about when the Government established their position? I notice that the former Financial Secretary gave his evidence to the European Scrutiny Committee relatively recently, in March. Is the Minister for Europe right or was the former Financial Secretary right?

[Mr Lidington]

I simply refer the hon. Gentleman to what I said in response to his earlier intervention. The amendment to article 136 will provide our friends and partners who are members of the eurozone with the additional certainty that they have sought ever since the proposal for a treaty change was first made in the autumn of 2010. He is searching for plots and mysteries where none exists. Over the past two and a half years, in every conversation that I have had with my opposite numbers from the eurozone member states, they have been anxious to find out what position the British Government were taking on the treaty amendment and keen that we should be committed to ratifying it, having agreed to it last year.

[Mr James Clappison (Hertsmere) (Con)]

I, too, am pleased to see my right hon. Friend still in his post. There are undoubtedly Euro-plots, but this is not one of them. As a member of the European Scrutiny Committee, I understood the former Financial Secretary to be talking about the European Union’s view of the legal position, not the British Government’s view. It was the EU’s view that the change was required. It was not the British Government’s responsibility. I think the hon. Member for Caerphilly (Wayne David) is a little confused about that.

[Mr Lidington]

I am grateful to my hon. Friend for that clarification.

Clause 1(3) fulfils the requirements of the European Union Act 2011 relating to the referendum lock. It demonstrates compliance with the condition in that Act that exempts the approval of certain European Council decisions from the requirement to hold a referendum. Section 3(1) provides that a Minister may not confirm the approval of a decision made under article 48(6) of the treaty on European Union unless three requirements have been met: first, that a statement has been laid under section 5 of the Act; secondly, that the decision has been approved by Act of Parliament; and thirdly, that the referendum condition, the exemption condition or the significance condition has been met.

The 2011 Act provides that a decision under article 48(6) is not subject to a referendum if its provisions apply only to member states other than the United Kingdom, and that is the case here. The decision amending article 136 applies only to member states whose currency is the euro, and therefore not to the United Kingdom. It therefore falls within the exemption provided for in section 4(4)(b) of the Act. My right hon. Friend the Foreign Secretary laid a statement before Parliament under section 5 on 13 October 2011 stating that in his opinion the decision amending article 136 fell within the exemption in section 4(4)(b) and therefore did not attract a referendum. To comply fully with the exemption condition, the Bill includes the provision in clause 1(3) stating that the decision does not fall within section 4 of the 2011 Act. I commend the clause to the Committee.

[Mr John Baron (Basildon and Billericay) (Con)]

I stand briefly to question my right hon. Friend the Minister—I, too, welcome him back to his post—on whether he believes that the European stability mechanism risks prolonging the agony of the eurozone crisis. Although we are not members of the ESM, is it drawing us in yet further and adversely affecting us as a result? The eurozone crisis was caused by excessive debt—that is well established; it was Governments borrowing beyond their means. Being built on debt, we all accept that we cannot borrow our way out of this problem and crisis, yet numerous summits have basically moved debt around the system and between banks or Governments and, quite rightly, the markets are getting tired of that.

I suggest to the Minister that the best solution to the problem is economic growth, and to grow our way out of the problem for the sake of all eurozone countries and the EU as a whole. Where are the measures to encourage greater competitiveness? Where are the supply-side reforms? They are simply not there. I therefore put it to the Minister that he should consider whether the ESM prolongs the agony and delays the inevitable, and whether our interests, as such, are being adversely affected by the position we are taking on this treaty change.

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[Emma Reynolds (Wolverhampton North East) (Lab)]

It is a great pleasure, as ever, to debate with the Europe Minister.

As my right hon. Friend the shadow Chancellor and I explained on Second Reading, we are in favour of the Bill and clause 1 specifically, which provides for article 136 of the treaty on the functioning of the European Union to be amended to allow the eurozone to set up a bail-out fund—to be financed and operated by the eurozone—to support eurozone countries when they need it.

The permanent bail-out fund, whose establishment was agreed by EU leaders at the European Council in March 2011, will replace the two existing temporary funds. The Opposition have concerns on conditionality, which I will go into in some detail later, but we believe that the ESM will enhance the stability of the eurozone if it is used appropriately. Given that our economy is so closely connected to eurozone economies through both trade and the exposure of our banks, we believe it is in the UK’s national interest that the fund is allowed to be set up.

[Mr Lidington]

I rise to respond briefly to the points that have been made. I am grateful to the hon. Member for Wolverhampton North East (Emma Reynolds) for her support for clause 1 and I shall respond to the points to which the right hon. Member for Rotherham (Mr MacShane) alluded when we debate amendment 1.

I should tell the right hon. Member for Leicester East (Keith Vaz) that the purpose of the ESM is not to provide an addition to structural and cohesion funds or any of the spending instruments to help with any problem, including Frontex, which rightly concerns him. The ESM is a way of providing a firewall or bail-out facility for a eurozone economy that might run into serious economic problems and have difficulty financing itself.

The direct answer to the right hon. Gentleman on the UK opinion is that we are not a member of the euro and have no intention of joining it, and therefore would not qualify for membership of the ESM. However, there are plenty of ways in which British Ministers and officials, both bilaterally with our fellow member states and at EU gatherings, can make constructive and informed suggestions and have good ideas. It is important that we acknowledge that the eurozone countries are potentially putting their taxpayers’ money on the line in the stability mechanism. Therefore, any suggestions that we might choose to make in future need to take account of that very important truth.

My hon. Friend the Member for Basildon and Billericay (Mr Baron) will forgive me if I do not follow him by giving a detailed analysis of the origins of the eurozone crisis. There are a number of different reasons behind it. In some countries, the problem is public sector debt, but in other stricken countries, the banking system is at the root of the difficulties.

However, I should take my hon. Friend up on his point about economic growth. He was right that the Bill is not the answer to Europe’s economic problems. I have said repeatedly—and, much more importantly, my right hon. Friends the Prime Minister, the Chancellor and the Foreign Secretary have said repeatedly—that the salvation for Europe must lie in its restoring competitiveness and economic growth, and above all in its becoming competitive in a world in which economic power and influence is shifting dramatically to Asia and Latin America. The inventiveness of European nations can stand them in good stead, but we need the right policies at both national and European level to restore competitiveness. I ask my hon. Friend to take note of the European Council commitments made in the March and May summits which, in terms, called for the further development of the single market, and in particular the creation of a single market for the digital economy, and for deregulation measures.

Last year, the Government achieved something of a breakthrough—a new precedent was set—in the European agreement to spare micro-businesses from future European regulations. We are taking that campaign forward with like-minded member states to get Europe collectively to address the burden and complexity of regulation imposed on businesses large and small at an EU level, just as we are committed to reducing the costs and complexity to business of regulation here in the UK.

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[Emma Reynolds]

When EU leaders agreed to set up the permanent bail-out fund, the ESM, the intention was to introduce it earlier this year. Regrettably, the original date has been delayed owing to the constitutional issues mentioned by the hon. Member for Hertsmere (Mr Clappison), such as the court cases going on in Ireland and Germany. I agree with him to the extent that he raised some important issues about the EFSF and the EFSM on which I look forward to the Minister’s response. However, while it is important that those constitutional issues are ironed out, they should not in themselves delay the UK’s ratification of the treaty change. As the hon. Member for Cheltenham (Martin Horwood) suggested, if each member state were to delay their ratification in order to wait for the ratification of the next member state, we would have a mass stalemate. Ultimately, that would produce an inertia that perhaps the supporters of the amendment would like to produce—but I will not make any judgment on that. I do not want to intrude on the private grief of Conservative Back Benchers and the Minister, but there seems to be a contradiction between saying on the one hand that the Government got a good deal while on the other arguing for a delay. I am sure that the Minister will tackle that.

On the ESM and more widely, it is regrettable that there have been several delays and that there has been a lack of political leadership and inertia and inaction at a European level which has served to deepen the eurozone crisis. As my hon. Friend the Member for Caerphilly (Wayne David) set out, we believe that the stability of the eurozone is in the UK’s national interest and that the ESM will, if used appropriately, contribute to that stability. Any further delay, such as that proposed by the amendment, would act manifestly against that stability and our national interest. It is complacent to suggest that we should not ratify the Bill, so we oppose the amendment.

[Mr Lidington]

The purpose of the amendment, which was moved with characteristic courtesy and understanding of the issues by my hon. Friend the Member for Hertsmere (Mr Clappison), is to delay the coming into force of the Bill until the constitutional requirements of all EU member states have been complied with and all related legal challenges have been disposed of. I am grateful to him for saying that this a probing amendment, intended to examine various issues connected with the Bill, and that he does not intend to press it to a Division. I am happy to accept that his points are significant and worthy of debate.

It is the Government’s view that to accept the amendment and the consequent delay in the ratification of the change to article 136 would harm the interests of the United Kingdom. It would also not achieve the purpose lying behind the amendment. I will respond in detail to the points that my hon. Friend and others have made.

As my right hon. Friend the Foreign Secretary and I both stated on Second Reading, the decision to amend article 136 is in the interests of the United Kingdom. It benefits the UK in two ways. First, the Prime Minister has secured agreement that once the decision enters into force and the ESM is established, no further commitments will be made under the European financial stabilisation mechanism, which is the mechanism under which the United Kingdom has contingent liability.

Secondly, the Bill and the creation of the ESM serve the interests of the United Kingdom because they will provide euro area member states with a permanent financial assistance mechanism to assist in their quest for stability. My right hon. Friend the Prime Minister has talked frequently about the need for the eurozone countries to put in place an effective and credible firewall. The creation of the ESM is a significant step by the eurozone countries in the direction that my right hon. Friend and this Government have been advocating. We therefore believe that it is in the interests of this country that this treaty change is ratified and the ESM set up as soon as possible.

[Mr Love]

Does the Minister also accept that it is to the benefit of this country that we seem to have a better, more partnership-type relationship with the rest of Europe, and that passing the Bill will assist in that process?

[Mr Lidington]

I think that is true. As I said in an intervention, I am by no means an uncritical admirer of everything that the European Union does or of every aspect of how it is constructed, but whatever the aspirations of any individual Member of this House with regard to the United Kingdom’s relationship with our nearest neighbours and most significant trading partners—the other members of the EU—we are more likely to achieve our national objectives if we conduct ourselves in a way that involves a grown-up appreciation that those other countries also have legitimate interests. If we ask them, rightly, to take account of our interests, it matters that, where we can, we respond sympathetically when they identify vital interests of their own as being at stake.

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[Mr Clappison]

I am grateful to my right hon. Friend for his careful answers to my questions. I am grateful to him for giving the figures confirming that the majority of the contingent liabilities that could have been allocated under the EFSM have indeed been allocated, and that we already have a significant liability. However, I do not think he has quite answered one of my questions—he may be coming to it. If the ESM is not ratified, or until it is ratified, could we be liable for new liabilities entered into under the EFSM out of the remaining unallocated portion? If so, would that come about as a result of qualified majority voting or would it require unanimity?

[Mr Lidington]

The legal position is that yes, that is possible, and it would be by qualified majority voting. That flows from the decision taken on the final day of the last Government’s time in office. It may be some reassurance to my hon. Friend, though, if I say that the EFSM has tended not to feature in the discussions over the past year. The discussion has been very much about the EFSF, which can draw on a much larger sum and can therefore command much more credibility with the markets.

I say to those of my hon. Friends, and Opposition Members, who have been extremely critical of the European Union, that I have found that there is an understanding in other member states, whether among Heads of Government, Finance Ministers or Europe Ministers, that the EFSM is a sensitive and delicate subject for the United Kingdom and particularly for the House. I do not get the impression that our European Union colleagues want to push us into a corner for the sake of it. What they hope for, and reasonably so, is our co-operation, not in sacrificing our vital interests but in helping them solve the existential financial and economic crisis that the single currency area faces.

[Mr Baron]

My right hon. Friend rightly referred to the fact that the ESM is much larger than its predecessor. Will he therefore address the questions that I put to him about the weakness of the fundamental design of the ESM? By agreeing to it, we are signing up to a system that has many flaws. Does he recognise those flaws, and if not, why not?

[Mr Lidington]

I think my hon. Friend is trying to draw me into writing my own blueprint for a permanent European stability mechanism. I will not be tempted on this occasion, because it would be pretty extraordinary if British Ministers were to start laying down the law in public about the design and scope of a mechanism to which we have chosen not to be a party and into which we do not propose to put a penny of our taxpayers’ money. We should not give such lectures to countries that have decided to put their taxpayers’ money on the line, because they will have to deal with any political reaction among their own electorates. As a democratic House, we need in this instance to respect the sovereign, democratic decisions of the eurozone member states.

[Mr Love]

rose—

[Wayne David]

rose—

[Mr Lidington]

I want to make progress.

There would be an irony to accepting the amendment. I will not use the type of language used by the right hon. Member for Rotherham (Mr MacShane), but it would be a bit odd if we passed an amendment that constrained the freedom of the House of Commons to ratify a treaty that the Government had agreed to. It would have the consequence of allowing the German constitutional court, the European Court of Justice or other courts to determine when our legislation, which we judge to be definitely in the interests of the UK, should come into force. I do not think that delaying this legislation would serve any purpose or help our national interests, and it may do some harm. I therefore hope that my hon. Friend the Member for Hertsmere will be willing to withdraw his amendment.

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[Mr Clappison]

My hon. Friend makes a good point. The point I was making is that in many respects we cannot, because they are above and beyond the control of our electorate. That has always been the problem with the European Union. Some in Europe sought to impose their project without bothering to take account of the views of the electorate. That problem lies at the heart of the matters we are discussing today and is one of the reasons we are afflicted by the eurozone. It is time people began to listen and reflect on what electorates have to say and on the lamentable economic consequences of the euro. However, as I indicated I would, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Mr Lidington]

Clause 2 simply declares that the Bill extends to the whole of the United Kingdom and will come into force on the day on which it is passed, and gives its title.

Question put and agreed to.

Clause 2 ordered to stand part of the Bill.

New Clause 1

Impact of the European Stability Mechanism on the UK

‘The Chancellor of the Exchequer shall make a report to Parliament within one year of the Act coming into force and annually thereafter setting out an assessment of the impact of the European Stability Mechanism on the risks to the interests and obligations of the United Kingdom from eurozone instability.’.—(Emma Reynolds.)

Brought up, and read the First time.

[Emma Reynolds]

I beg to move, That the clause be read a Second time.

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[Geraint Davies]

The hon. Member for North East Somerset (Jacob Rees-Mogg) has just given us a diatribe in support of laissez-faire economics and casting Britain adrift, and the idea that whatever happens in terms of the ESM will not have any impact on British trade and jobs, which it clearly will.

Like you, Mr Benton, I am a member of the Council of Europe, and we both take very seriously the issue of Europe and our economic, political and social relationships with it. The Welsh Affairs Committee recently visited Brussels to talk to Commissioners, MEPs and others about the prospects for Europe. As we all know, the big debate there, as here, is to do with the challenge of finding the right balance between encouraging growth and making cuts in order to get us back on track. There are very different views in Europe—as there are, of course, across the Committee—about the need to get growth on track, rather than to crush it through excessive austerity measures. The setting up of the ESM will be critical, as will the terms of reference and the details of how it operates.

As to the ESM providing targeted support for Greece and others, the latest debate in Europe is about the interest rate to be applied and the period over which it will be repaid. Those are the two crucial issues for Greece, alongside the question of where the money will be targeted. Instead of being directed towards paying down existing debt, if the money were targeted on solar forests in Greece to provide energy to sell to Europe, on a railway network that supported a more effective tourist industry or on providing universal broadband for Greece to link up to the world, that would provide tools for growth rather than a hammer to hit across the heads of the worst-affected Greek people.

The way in which the ESM operates, its terms of reference, how it impacts on ailing countries and their sovereign debt and its relationship with our country all have major implications for our national interest. I am amazed that those on the other side of the debate—they say they are eurosceptics, but perhaps they should be members of the UK Independence party—deny that there are any implications for our national and economic interests and the jobs of local people in having these proposed reports, and in ensuring they are not merely produced annually, but updated more often.

There is a big difference between what happened in the 1930s, when France, one of the possible locomotives of growth, did not take the opportunity to provide it and instead allowed soaring unemployment in Germany—the rest is history—and what happened in 2008, when we faced a potential depression and Obama and Brown put in place a fiscal stimulus to keep growth going. Recently, we been facing the prospect of a new winter of austerity, but people have at last woken up, and it has now been recognised that the ESM and the fiscal stimulus are about getting Europe back on track, and thereby also securing our own positive future and destiny.

I therefore make no apology for supporting these two modest new clauses, and I hope they will enjoy support across the Committee.

[Mr Lidington]

New clause 1 would require the Government to report annually to Parliament on the impact of the ESM on the UK economy. As the Committee will no doubt be aware by now, the Chancellor already reports regularly to Parliament on Britain’s economic performance through the Budget and the autumn statement. In addition, the Government regularly publish details on our financial relationships with the International Monetary Fund and the European Union and on our bilateral loan to Ireland. As my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) so brilliantly pointed out, placing an additional reporting burden on the UK Government in respect of information that will largely be in the public domain has no apparent gains and serves no purpose.

The other new clause proposes that the Government report on the impact of the ESM on the economic performance of the EU. I hope that Members would agree that it would not be appropriate for the UK to produce reports on the economic policy and performance of our European neighbours. I can guess what the reaction would be in this place if we were to hear about a debate in the Bundestag or the Greek Parliament about the economic policy of the UK; I can envisage the angry points of order, the protests to Mr Speaker, the early-day motions and the requests to invoke Standing Order No. 20.

The new clause is not needed. The Chancellor has regularly updated the House throughout this crisis, including on developments in the euro-area assistance programmes and on negotiations over the ESM. Furthermore, the Opposition have overlooked the fact that the Commission already annually produces a report on the borrowing and lending activities of the EU, including under the different financial assistance mechanisms. The Government, under the normal scrutiny system, produce an explanatory memorandum for Parliament that summarises the report. That is sent to the European Scrutiny Committee, which, as with any such memorandum, has the option to refer the report for debate. It is also within the remit of the Treasury Committee to launch an inquiry into it, or for the Backbench Business Committee to schedule a debate.

These new clauses would create an unnecessary and burdensome obligation, with no clear benefit. As my hon. Friend the Member for Cheltenham (Martin Horwood) said, they would merely serve to tie up civil service resources in order to report on a mechanism that the UK is not even a part of, and has no intention whatever of joining.

An analogy with the Schengen agreement can be drawn. We are not a part of that, and the Government do not publish an annual report on it to Parliament. Of course, however, Home Office and Justice Ministers will answer questions and hold themselves to account if there are any important developments in that agreement that affect this country. In the event of there being any justice and home affairs measures into which the UK Government might choose to opt, the normal scrutiny system would apply, with the possibility of debates being held either in the ESC or on the Floor of the House.

The Bill is concerned only with approval of the decision amending article 136 of the treaty on the functioning of the European Union, and not with the ESM. These new clauses are therefore wide of the mark. In fact, the only reason I can conceive of as to why Parliament might wish to accept such a reporting requirement is if we were planning to be part of the ESM, which, of course, would in turn mean we were planning to be part of the euro. The logic of the Opposition new clauses is that they still have in mind that prospect for this country.

Of course, as we know, the weasel words have already been employed. In this Bill’s Second Reading a week ago, the shadow Foreign Secretary, the right hon. Member for Paisley and Renfrewshire South (Mr Alexander), was challenged as to the prospect of the UK entering the euro, and he said there was no immediate prospect of that happening. We know, too, that when the Leader of the Opposition was pressed on this same matter, he said that whether or not the United Kingdom were to join the euro would be a matter of how long he were to remain as Prime Minister.

Not only did we hear from my hon. Friend the Member for North East Somerset a clear and devastating exposition of why the Opposition new clauses are completely otiose, but we can see in the Opposition’s decision to bring such new clauses before the Committee this evening some hint of the policy yearning which dare not speak its name: they still cherish that lingering dream of taking this country into the euro one day. The Committee should have nothing whatever to do with these new clauses, and we should reject them.

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Although the ECB policy has been adopted, there remains the prospect that it cannot be implemented without stringent austerity conditions because of the tie-in to the operation of the ESM. It is therefore imperative that the ESM remains under close scrutiny by our Government and by Members of this House and the other place. With more than 50% of our export trade going to the wider European Union, we are affected significantly by decisions taken on the ESM. For that reason, we believe that a routine annual process for monitoring developments in the EU economy is of great importance. We believe that new clause 3 would allow that to happen.

[Mr Lidington]

New clause 3 would require the Chancellor of the Exchequer to make a report to Parliament, within a year of the Act coming into force and annually thereafter, setting out an assessment of the impact of the ESM on the EU’s economic performance. To some extent that touches on issues similar to those we addressed when debating the Opposition’s previous two new clauses.

My argument to the Committee is that the requirement the Opposition are seeking to impose on the Government is simply unnecessary and otiose. The ESM treaty—the intergovernmental treaty among the 17 eurozone member states—requires the publication of annual accounts, so we fully expect information on the financial assistance that will be provided by the ESM to be made publicly available. That would be done in the same way that information on the use of the EFSF and its financial assistance programmes is currently made available on a public website. Furthermore, every EU member state is already required, as part of the assessment known as the European semester, to submit annually to the Commission a report on its own economic plans and performance. Therefore, the information that the Opposition are seeking will be in the public domain anyway.

We seem once again to have a proposal that would create an unnecessary reporting obligation and use civil service time in the UK on a mechanism of which the UK is not part. Parliament, through its Select Committees, the scrutiny system and the powers of the Backbench Business Committee, will continue to have plenty of opportunity to require Ministers to come to the House to be held to account for Europe’s economic performance and the United Kingdom’s place in shaping the EU’s economic policies. We do not need the new clause to give Parliament those powers. I hope that the Opposition, on reflection, will choose to withdraw the motion.

[Emma Reynolds]

The objective of new clause 3, as I have set out, is for the Government to monitor closely and assess the impact of the European stability mechanism on the wider economy of the European Union. Our economy is closely connected to the other 26 economies of the EU, with regard to both trade and, crucially, our banking sector. Our banks are heavily exposed to developments in the financial sectors of the other member states. It is therefore important that the Government allow the House to scrutinise the impact of the ESM, as well as their own decisions on the level of influence they choose to have on these discussions, even though we are not a member of the eurozone. It is not our policy that we should join the euro, just to clarify that for the Minister once more. Even though that remains the case, as a big member state in the European Union we should have a significant voice in all its developments, including the conditionality imposed on eurozone member states that seek support from the European stability mechanism.

Such matters may not be our primary responsibility as a non-eurozone member state, but we would nevertheless like the Government to be less isolated and to have more influence on the discussions about conditionality, because, as I set out earlier, we have reservations about the harsh austerity that is being imposed on Greece and other member states and that will probably be attached to support from this fund as well as previous mechanisms. It is for that reason that we tabled new clause 3. We believe that it is important that the Chancellor of the Exchequer monitors these developments closely and gives this House the opportunity to comment on and debate them.

Question put, That the clause be read a Second time.

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[Mr Lidington]

I beg to move, That the Bill be now read the Third time.

I want to begin, as is customary, by thanking those right hon. and hon. Members who have taken part in debates on the Bill. Even though it contained just two clauses, many Members have raised a number of interesting and controversial points about the context and impact of the European Council decision that the Bill seeks to approve. I am delighted that the Bill stimulated such parliamentary interest. It is difficult to single out any one Member—I apologise to any whom I do not mention—but I want to place on record my thanks to my hon. Friend the Member for Stone (Mr Cash) and the European Scrutiny Committee. The whole House has benefited from his knowledge and his long held and principled approach to these matters. Although the Government do not always take the same view as he and his fellow Committee members on every point that they raise, the Committee has fulfilled its role commendably.

On the Opposition Front Bench, the right hon. Member for Paisley and Renfrewshire South (Mr Alexander) and the hon. Member for Wolverhampton North East (Emma Reynolds) clearly articulated the Opposition’s position on a number of matters and indicated their support for the Bill, for which I am grateful.

My hon. Friends the Members for Harwich and North Essex (Mr Jenkin), for Camborne and Redruth (George Eustice), for North East Somerset (Jacob Rees-Mogg), for Stroud (Neil Carmichael), for Hertsmere (Mr Clappison), for Rochester and Strood (Mark Reckless), for Basildon and Billericay (Mr Baron) and for Peterborough (Mr Jackson) have all played a part in debates on the Bill. I value the intelligence and thoughtfulness that they have brought to those debates. I also pay tribute to my hon. Friend the Member for Cheltenham (Martin Horwood), who ably represented his party and powerfully made the case for the Bill from a perspective slightly different from that of some of my party colleagues.

I turn to Opposition Members. I thank the hon. Members for East Kilbride, Strathaven and Lesmahagow (Mr McCann), for Swansea West (Geraint Davies) and for Caerphilly (Wayne David). I also thank the hon. Member for Luton North (Kelvin Hopkins), without whom no debate on these matters could be complete. I also put on the record my gratitude for the outstanding work done by officials, at both the Foreign and Commonwealth Office and the Treasury, in putting together this legislation.

As was set out on Second Reading, the purpose of the Bill is simple and straightforward. It provides solely for the parliamentary approval of an amendment to article 136 of the treaty on the functioning of the European Union. That proposed treaty amendment makes it clear that eurozone member states may establish a financial assistance mechanism—the European stability mechanism, or ESM. In other words, it says that the eurozone can support fellow eurozone members in financial difficulty without contravening their obligations under the EU treaties.

Although article 136 applies only to member states whose currency is the euro, and therefore not to the United Kingdom, it is in our interests to ratify the European Council decision to amend it for two reasons. The first is that the ESM will play an important role, providing the eurozone with a permanent financial assistance mechanism to assist eurozone member states in financial difficulty. It will help eurozone countries work towards stability. Stability in the eurozone is crucial to our own stability in the UK. Although I accept all the points made in our debates about the measure not being a panacea and the European Union needing to do many things to make itself much more competitive and to stimulate economic growth in today’s rapidly changing global economy, the Government believe that the measure is one significant step towards helping stability in the eurozone, which will assist the United Kingdom’s economy.

Secondly, the passage of the treaty amendment will bring a direct benefit to the United Kingdom and our national interest. My right hon. Friend the Prime Minister secured an important agreement alongside the treaty amendment. In future, the UK will not be liable through the EU budget for any future eurozone bail-outs under the EU budget once the ESM comes into force.

The treaty amendment was considered by Parliament before the Prime Minister agreed to the treaty amendment decision back in March 2011; at that time, we handled the decision under the provisions of the previous legislation, the European Union (Amendment) Act 2008. At the time, I committed to bring the decision before the House a second time, under the more stringent parliamentary scrutiny of what was then the European Union Bill and is now the European Union Act 2011.

The Bill has been introduced to gain parliamentary approval to enable the UK to complete its ratification process for the treaty amendment through primary legislation, which enables Members of both Houses to debate in detail the implications of the treaty amendment in a way that was not possible under the 2008 legislation, which made provision only for a time-limited debate on a motion before each House.

The treaty amendment is due to enter into force on 1 January 2013, subject to ratification by all member states. Parliament’s approval of the Bill will take us one step closer to ensuring that that happens. It is important that we do not put any artificial obstacles in the way of that happening.

Members have examined and challenged both the brief content of the Bill and the wider impact of agreeing to the treaty amendment decision, as was our intention when we introduced the European Union Act 2011. Although we have heard a broad range of views on the rights and wrongs of the eurozone, on the EU and on the UK’s place in Europe, one thing that has found general agreement on both sides of the House is that approving this Bill makes sense. Agreeing to the treaty amendment is in our best interests because it will extinguish our future exposure to liabilities under the European financial stability mechanism. For those reasons, I hope that the House will give the Bill a Third Reading this evening.