European Union Economic Governance

Mark Hendrick Excerpts

Wednesday 10th November 2010 Commons Chamber

[Mark Hendrick (Preston) (Lab/Co-op)]

rose—

[Mr Redwood]

rose—

[Mr Hoban]

I should like to make a bit more progress on this point.

It is right that we should co-operate with this process, but our co-operation should be consistent with the fiscal sovereignty of the UK. The information that we provide to assist with the surveillance will always be information that has been made available to this House before it is passed to the Commission. Everything that the Commission gets will have been in the public domain, to the extent that a member of the public will have been able to unearth the same data using Google, albeit with less efficiency.

[Mark Hendrick]

The information might be available elsewhere, but the Minister will know that, as a result of the proposed new regulation Com. (2010)526, there will be an obligation for the UK to provide far more information than it has done in the past. There may not be penalties involved, and we may well run up budget deficits or levels of debt that were unacceptable to the Commission—I am sure we can do that—but the point is that this country will be obliged to provide far more information formally to the Commission than it has in the past. In my view, that constitutes a degree of transfer of power to the Commission.

[Mr Hoban]

Let me repeat that this involves information that is already out there in the public domain. It is information that will already have been made available through, for example, the House of Commons Library, the Budget documents, the Red Book or the Green Book. It is information that is already out there, so I do not believe that supplying it will be a problem.

[Mark Hendrick]

The point is not that the information will have been made available elsewhere; it is that there will be an obligation on the Government themselves to make it available. If the Commission wanted to go out and find it elsewhere, I am sure that it would do so, but there will now be a new obligation on the Government, as a result of a new treaty, to give it information that they were not previously required to give.

[Mr Hoban]

I simply do not take the view that giving the Commission more information is going to be a problem. This goes back to the intervention by my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), who asked whether there is to be an increase in EU jurisdiction as a result of this measure. No, there is not. All that the EU will do is make recommendations, but they will not bind us or be imposed on us. We can simply ignore them. There will be no increase in EU jurisdiction as a consequence of this measure.

--- Later in debate ---

[Chris Leslie]

Well, my point is that it may or may not be a sensible move—as a pro-European I think benefit could come from it—but what is important is that we get clarity from the Government about what exactly is on the table. If there are to be treaty changes and other new regulations, the Minister has to be straight about that with the country and the House. The latest sanctions in the framework—in terms of interest bearing deposits, non-interest bearing deposits and eventual fines—may not apply to the UK, but there is a first phase to that process which is the application of standards and assessments of our economic and fiscal position, and that will apply to the UK. The motion seeks approval for the Government’s position that any sanctions should not apply to the UK because of our euro opt-out, but there are developments here that strengthen the role of the EU in respect of our economic policy, and while that may be a good thing, some Members of this House would be wary of it.

There are also wider implications for our economy and our growth trajectory. For example, I am particularly intrigued by the German argument that bondholders should have greater liability—such as in the form of interest payment holidays, or bond value haircuts, as they are known—for potential future eurozone bail-outs. The implications for UK banks and bondholders could be significant if they are embroiled to a larger extent in the crisis management mechanism. UK banks hold particularly high proportions of Irish and Spanish liabilities. A recent Bank for International Settlements report found that 22% of Irish bonds and 11% of Spanish bonds are in UK hands. There has been much discussion of whether City investors are therefore subject to higher risk, or whether the markets have already priced that in. Either way, there are indirect implications for British investors. Moreover, the new suite of policy changes affecting eurozone economic governance will not just be on paper; the changes will bite in the real economies in each of the eurozone countries and could have a bearing on their own internal growth and investment plans.

[Mark Hendrick]

My hon. Friend hits the nail on the head. While the UK may not be signed up to the stability and growth pact and we may not be subject to EU deficit procedures, stability and growth in the eurozone are very important to the British economy. Moreover, the way in which the Government are dealing with our deficit will put British growth at risk, and that is part and parcel of how we interact with the other economies in Europe.

[Chris Leslie]

My hon. Friend makes a strong point. If fiscal policies across the eurozone are simultaneously shifted towards a marginally more deflationary stance as a result of the new policy framework that we are debating tonight, the resulting contraction in economic activity and consumer spending could impact on the sale of British goods and services in those countries. In other words, the eurozone—which, as we know, is by far the UK’s largest trading partner, accounting for more than 50% of our exports—could face economic challenges and, in turn, it is likely that UK companies will face problems exporting to those markets. Add to that the G20 discussions on international currency issues and an influx of capital to the eurozone following worries over the dollar and the Chinese renminbi and we can imagine a relative appreciation of the euro afflicting our exporters still further. We will have to see how that latter issue pans out in particular, but this is of significance to the UK.

--- Later in debate ---

[Chris Leslie]

As I see it, it is difficult to know yet what propositions are before us. I want to hear the Minister’s answers to our questions and we will make up our minds then. The substance of the regulations and the eventual treaty changes might be beneficial, but we also have to wait and see what President Van Rompuy proposes in his eventual treaty amendment and what emerges from the December Council meeting. We are not at the end of a process; we are in it. There are further propositions to be put on the table.

[Mark Hendrick]

One regulation that might well be on the table is for any member state of the European Union, within or outside the eurozone, that has a debt level of greater than 60% of GDP to reduce that debt at a rate of at least 5% per annum. That could well be a regulation that the Government sign up to, even though they might not be subject to penalties if they do not keep to it.

[Chris Leslie]

Indeed. There could be significant direct policy changes as regards transfers of policy and also indirect economic impacts on the UK. We have to see more detail about what will emerge from those who are in the driving seat—unfortunately, that does not seem to be either our Chancellor or our Prime Minister.