EU-UK Relationship (Reform)

William Cash Excerpts

Tuesday 18th September 2012 Westminster Hall

[Andrea Leadsom]

I am grateful to my hon. Friend and am delighted that he will be getting involved with the Fresh Start project himself. He is absolutely right. Is it not interesting that it is since this Government came into office that exports to China, Brazil and India have radically increased in percentage terms from the incredibly low level under the Labour Government, who preferred to create non-jobs in the public sector rather than real jobs in the private sector?

I want to run through a few ideas that have come out of the Fresh Start project and suggest them to the Government for serious consideration. There is no doubt that we have not only the opportunity, but the absolute need to get in there and make British interests very clear, long before the next European parliamentary elections in 2014.

Let me quickly run through some of the green options, which are things that we could be doing ourselves but are not doing at the moment. The UK is a significant member of the EU—one of the big three—and has worked with a number of allies to develop its vision of a free-trading, economically liberal EU. The UK has been enormously successful in achieving its strategic aims of enlargement and deepening of the single market. At the time of crisis in the eurozone, it is key that the UK sets out the vision of the EU that it wants and develops alliances in that direction. It is essential to set out a vision for a free-trade area that is globally competitive and determined to advance in the markets outside the EU and not just within it.

We could improve the scrutiny of EU legislation, including pre-legislative scrutiny. I welcome the European Scrutiny Committee’s inquiry into that and the work of the Hansard Society in looking at much more parliamentary scrutiny, including having specific EU questions, not just FCO questions, and having a Europe Department rather than just a Europe Minister in the FCO.

We should certainly look at pre-legislative scrutiny where, as in Denmark, Parliament gives authority to Ministers before they go to negotiate on our behalf, instead of them coming back to us with something that is almost done that we just need to rubber-stamp at the eleventh hour. There are good examples of where good pre-legislative scrutiny has made a big difference, such as the proposed ban on the short selling of equities. Owing to the excellent work of Members of the European Parliament, that was reduced to a ban on the short selling of sovereign debt only. That was a massive saving grace to liquidity and free financial markets.

Better Brits in Brussels is an important issue. We have 12% of the EU’s population, but now only 4% of Commission staff. That has been allowed to slide abysmally. We have not done enough to allow our brightest and best young people to obtain the language skills they need to pass the European Commission test. I am delighted that the Government have restarted the European fast stream. That is an important move on which we should absolutely spend our time. When we visit MEPs and Commissioners in Brussels, we find that they have all gone native; they even speak with a sort of weird part French, part German, part English accent—if there is such a thing. They lose track of whom they represent. What we need is British people in the Commission representing British interests.

We want to remove gold-plating in social and employment laws as soon as possible. We have interpreted some EU directives in a hard and fast way, not least on the opt-out for doctors. As I understand it, in all too many cases, we offer doctors a contract for up to 48 hours a week, and then invite them to opt out of working only 48 hours a week. That is not exactly a terribly tempting offer. We need to look seriously at gold-plating.

We support deregulation at the EU level. The EU has agreed in principle to subsidiarisation for micro-businesses. It is not an EU competence to delve into micro-businesses if they are British-only businesses. They should not be subject to EU regulation, and we should be pressing as hard as we can to exempt British micro-businesses from any EU intervention whatsoever.

Finally, Britain could be using the European Court of Justice to our own ends far more than we are to challenge EU proposals. An example of a good decision by this Government to challenge the European Union is our challenge of the European Central Bank’s proposal that clearing houses with more than 5% of turnover in euros should be based in the eurozone. That is blatantly stealing Britain’s business in a lucrative area, and we are absolutely right to be challenging that decision at the ECJ. We ought to take those opportunities more often.

Those are just some of the green options for reform that Britain could be doing much more on. Other areas require us to get far more sleeves rolled up and people wading in, and I want to cover two. I recognise that a lot of hon. Members want to speak, so I will hurry up. The greatest of those areas is to achieve a rolling opt-in and opt-out of EU policies. There is no doubt that there will be a fiscal union—[Interruption.] Opposition Members laugh. They are not even prepared to listen, which I find astonishing. They should care that the British public have had enough of their ever closer part in the European Union. It is absolutely astonishing.

We should look at whether, for those who are not part of the fiscal union, we could have some sort of rolling opt-in and opt-out of EU policies. The logistics could be incredibly complicated, but when Governments change, policies are often completely changed. It is ridiculous to have an EU where something decided 35 years ago has never changed and a member cannot opt out of it. It would be far better for the countries that do not intend to be part of a federal Europe if they could opt out. When Governments change, they could have a window of opportunity to decide on which policies they want to remain a part of, and which areas of EU jurisdiction they want to remove themselves from. That is entirely possible. That would give the European Commission something else to do, so it can pay itself even more and employ even more staff, so it should be delighted at the prospect.

Perhaps the most logical major reform of all is to repatriate structural funds. We are in the middle of negotiations for the next multi-annual financial framework, which will determine the EU’s budget strategy from 2014 to 2021. The negotiations are subject to national veto, and so offer a huge opportunity to the UK to seek restraint and sensible reform that will better serve the British taxpayer. Perhaps the best example of that is to repatriate the local bit of EU structural funds.

From 2007 to 2013, provision for EU spending on the structural funds amounts to some €280 billion, which is about 30% of the total EU budget. During that period, the UK will make a net contribution to the structural funds of some £21 billion; that is the UK’s contribution after taking into account the money it receives from the structural funds. We pay £30 billion, and we get £9 billion back after the money is converted into euros, administered and 140,000 full-time equivalent European staff have decided which UK regions should benefit. In fact, under the European definition of UK regions, only two, west Wales and Cornwall, are net recipients of structural funds. All the other regions are paying significantly more for every £1 they get back in structural funds, which is a completely ridiculous state of affairs. Additionally, the European Union determines the allocation, not the British Government.

Spending plans are based on EU regions that simply do not fit economic and political realities. There is a top-down structure in which all spending plans require the approval of the European Commission and must comply with EU guidelines. So structural spending completely frustrates local innovation,

No rigorous performance criteria link disbursement of funds to clear results. The think-tank Open Europe finds no conclusive evidence that structural funds have had a positive overall impact on growth, jobs and regional convergence in the EU. The rules on the administration of the funds are excessively bureaucratic. For wealthier member states, including Britain, the funds completely irrationally recycle large amounts of money, via Brussels, not only within the same country, but within the same regions. The UK could negotiate the repatriation of regional spending to richer member states, focusing the structural funds solely on poorer EU countries, which would reduce the total EU budget for the next multi-annual financial framework by some 15%.

[Mr William Cash (Stone) (Con)]

I am listening to my hon. Friend with great interest. So far, she has not mentioned Mr Barroso’s speech of a couple of days ago. I wonder whether she appreciates that, however sensible her ideas may be on lists of functions and attitudes, the European Union does not have the slightest intention of entering any negotiations in that direction. That is the problem. I agree with most of what she says as a matter of aspiration, but the problem is we are not dealing with a European Union that is remotely on the same page.

[Andrea Leadsom]

My hon. Friend makes an interesting point, but he contradicts what my hon. Friend the Member for Northampton South (Mr Binley) said, which is that the EU will not allow us just to walk away, because the EU needs us more than we need it.

There is an opportunity for reform. There is no doubt that, as a non-eurozone member, we will not be subject to the calls for ever greater union. The absolute burden is for us to define what we want that renegotiation to look like. If we do nothing because we are afraid the EU will not listen to us, we will get nothing. We would then end up in a position in which we are either in or out. Having a good go at reform is the way forward, whether we succeed or fail; doing nothing would not be in Britain’s best interest.

Richer member states are perfectly capable of funding their own regional policy and determining which regions should benefit from structural funds. If we were to repatriate those local structural funds to richer member states, we would end up with a 15% headline cut in the multi-annual financial framework for the next period and every one of those richer member states, bar five, would receive a significant reduction in contributions, which is a win-win and something we ought to look to other member states to support.

There are so many areas of reform that would be in Britain’s better interest. I could go on and on, because the opportunities are widespread and the need for reform is urgent. The Prime Minister has prioritised seeking safeguards for financial services, which is Britain’s most important industry, employing more than 1 million people and generating more than 10% of our tax take every year.

Another key area is the social and working time directive. Do we want our 1 million young people currently not in employment, education or training to get jobs, or de we want to prioritise rights for existing workers? Those are the choices that we have to make, and the social and working time directive is undoubtedly hampering the opportunities for young people to get work.

Do we want more and more EU regulation that affects small and micro-businesses? Do we want to see the training of young doctors in the NHS hampered by EU regulation of on-call hours? The Fresh Start project has raised, researched and sought to answer those questions. By Christmas, we will have produced a short and punchy manifesto for change that will be a shopping list of reforms across all EU policy areas, including business, immigration, justice, agriculture, energy and many others. I know Front Benchers are keen to see reform, and I sincerely hope they will accept and adopt as Government policy the work of such a large group of Conservative colleagues.

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[Mr William Cash (Stone) (Con)]

My appeal is for all the Eurosceptic movements—the Euro-realists—to join together. The situation has now become critical. The Barroso speech sets out an agenda of more integration and a federal Europe, and we are now confronted by the reality that they are not listening to us. They did not listen to us on Maastricht—it was our own Government who did not listen to us then. Fortunately, the Prime Minister himself has now said that he thought there should have been a referendum on that treaty, and that that would have sorted the matter out there and then. However, we are where we are. I am not seeking confrontation; I am seeking solutions. The situation is far too grave for us to be in a state of difficulty due to personalities or whatever else: we have to unite around certain central principles.

I welcome the speech by my hon. Friend the Member for South Northamptonshire (Andrea Leadsom). She knows that I believe—I said so in an intervention—that time has run out. In the Liaison Committee the other day, my right hon. Friend the Prime Minister said that he agreed with me that the situation in Europe was now unacceptable. I used the word “untenable”, but we came to an agreement. I suggested that we should have a convention so that we could get ahead of the curve and provide our basis, based on the principle of consent—on the fact that the people of this country, and for that matter the people of other countries, should decide, not the Euro elite and not the Governments who created this failed project, this undemocratic situation that has been allowed to develop. We need to get together. He said that that was a perfectly reasonable suggestion and that conversations were taking place in Europe. Unfortunately, the reality is that they have now been overtaken by the Barroso agenda. I fear that my right hon. Friend is, if I may say bluntly, in a contradiction: on the one hand, he says that it is unacceptable, but on the other hand he says we will not leave the European Union.

This kind of negotiation, or renegotiation, involves asking such fundamental questions about our relationship that other member states will not accept them. When they do not, our option will be clear: however much we might not want to, we will have to leave the European Union if that is the position that we have arrived at. The Barroso speech indicates that we are on a different page, so I call for urgency. We should have a referendum before the next general election. We should create the circumstances in which we are able to ask the British people, “What kind of Europe do you want?”

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[Emma Reynolds]

The hon. Gentleman seems to understand me better than the hon. Member for Wellingborough (Mr. Bone). Our position is that a referendum at this time would be a distraction from the Government’s priority of getting the economy back on track. The question about what our relationship with the EU will become is open now, given the nature of Mr Barroso’s speech last week, mentioned by the hon. Member for Stone (Mr Cash). We will see how that relationship develops in terms of what kind of political and fiscal union the eurozone states want to form.

[Mr Cash]

Does the hon. Lady recognise that the timetable has been accelerated by that speech and those who thought that it might be better to keep the matter open, including the Prime Minister, are now effectively finding that time has overtaken them—or soon will.

[Emma Reynolds]

The hon. Gentleman makes an interesting point. It is not yet clear at what point the European Commission, the German Government or other Governments will want to put treaty change on the table.

[Mr Cash]

It is. He said so.

[Emma Reynolds]

In his speech, Mr Barroso mentions putting that treaty change on the table before the 2014 European parliamentary elections—I have read his speech closely—but it is still unclear whether that will happen in time for those elections. There will be a report by Herman Van Rompuy to the Council in December, which will be an important time for our Government to start to have a policy on the European Union. I shall come on to that.

Many of the hon. Members present who argue for withdrawal offer a false choice between trade with emerging markets and EU membership. They say, “Remain in the EU, or trade with the likes of China, India, Brazil and Russia.” We must of course improve our export performance to the rest of the world, but we will not build real export success if we start by cutting ourselves off from our largest existing market and our largest collective negotiating tool. The EU provides the collective political weight that we need to maximise our influence in negotiations. Hon. Members need not take that from me, they can take it from the Europe Minister, as set out in written evidence to the Foreign Affairs Committee as recently as May of this year, when he said:

“On trade, one voice representing half a billion consumers is heard more loudly in Beijing, Delhi and Moscow, than 27 separate ones.”

British businesses, workers and consumers will see the benefit of EU free trade agreements, such as the recent FTA with South Korea, which is worth £500 million to UK exporters, or the potential future agreements with the US, Canada, Singapore and India.

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[The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mark Simmonds)]

I am delighted to see you in the Chair this morning, Mr Hollobone. I am sorry that the Minister for Europe, my right hon. Friend the Member for Aylesbury (Mr Lidington), could not be present this morning. He very much wanted to participate in this important debate, but I was enthused to understand that I would be responding within my first 10 days in my new ministerial role.

I congratulate my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) on securing the debate and on the articulate, intelligent and comprehensive way in which she introduced it. I thank all colleagues who have participated, many of whom fall into the category of what I call distinguished and principled colleagues. In the time available, I am afraid that I will not be able to answer all the specific questions.

I also want to put on the record the Government’s thanks to my hon. Friends the Members for South Northamptonshire, for Daventry (Chris Heaton-Harris), for Truro and Falmouth (Sarah Newton) and for Camborne and Redruth (George Eustice), who deserve enormous credit for the valuable, significant and serious work of the Fresh Start group. I hope that my hon. Friends and others will continue to engage with such a vital issue, in particular as we analyse the balance of competences in a process that my right hon. Friend the Foreign Secretary announced just before the summer recess and about which I intend to say more later.

[Mr Cash]

One fundamental competence that I hope my hon. Friend agrees needs to be reviewed is whether the British people are able to govern themselves by their own consent in general elections. Does he not agree that that is the most fundamental democratic question that needs to be addressed on the European issue?

[Mark Simmonds]

My hon. Friend will not be surprised to hear that I will not answer that question directly this morning. I urge him and others, however, to engage positively and constructively with the forensic analysis of the balance of competences, which will feed into a national debate about the relationship that we should have with the European Union.

I want to be up front in ensuring that all hon. Members understand that the Government have been absolutely clear that there should be no further transfer of competence or powers from the UK to the EU over the course of the Parliament. That is in stark contrast with the Labour Government’s record. They were clearly wrong to sign the Lisbon treaty without consulting British voters in any way. They were quite wrong to give away £7 billion of our rebate and to get nothing in return, and they were quite wrong to drop out of our opt-out from the social chapter, which means that employment laws are decided in Brussels, not here.

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[Mark Simmonds]

I am grateful to my hon. Friend for that intervention. I confirm that the Prime Minister met my hon. Friend the Member for Basildon and Billericay (Mr Baron) on 9 July to discuss the contents of the letter, and I understand that a formal reply will be sent to him shortly.

We have pressed for an open trading agenda that presents real opportunities and allows us to benefit from investment in the UK. Our commitment to free trade is why the UK is still the leading destination for foreign investment into Europe.

[Mr Cash]

Will the Minister give way?

[Mark Simmonds]

Perhaps my hon. Friend will bear with me. I am coming to a conclusion, but I will be happy to discuss with him afterwards the point he wants to make. I am running out of time, and I want to make a couple of key points.

The UK has been leading the way in trying to facilitate free trade negotiations and agreements, and it has done so successfully with South Korea. It is leading the drive for such agreements with Japan, Singapore, the USA and Canada.

My hon. Friend the Member for Stone (Mr Cash) referred to the Barroso speech. I confirm that we are looking closely at its contents. We agree with some of the President’s analysis of the EU’s financial problems, such as the unsustainable levels of debt, the lack of competitiveness and some irresponsible behaviour in financial institutions, but the direction of travel is not always one that the UK wishes to take.

In conclusion, the immediate priority must be to restore market confidence, to drive growth, to negotiate more trade agreements, to open up new markets, and to create wealth and jobs through competitiveness, innovation and liberalisation.