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The Government have consistently claimed that the substantial difference between the ill-fated constitution and the Lisbon treaty rules out the requirement for a referendum. Luckily, both documents are readily available in the Vote Office, so it is possible to waste a few hours searching for any disparities. Alternatively, one could simply review the work of the European Scrutiny Committee, which simply states baldly that the two documents are “substantially equivalent”. I was
going to have some fun pointing out the equivalences in more detail, but in the area of energy, the real significance lies in what has been sneaked into the Lisbon treaty that was not in the constitution. What we see are not substantial revisions but additional provisions. Thus the only respect in which it is not the same is where it has been made much worse.
For example, in article 122 of the constitution that I have in front of me, we read:
“Without prejudice to any other provisions provided for in this Treaty, the Council, acting by a qualified majority on a proposal from the Commission, may decide upon the measures appropriate to the economic situation, in particular if severe difficulties arise in the supply of certain products”.
In article 100, “acting by qualified majority” becomes
“in a spirit of solidarity”.
Article 100 also adds the coda
“notably in the area of energy”,
by which the drafters almost certainly mean primarily in the area of energy.
Let us return to the phrase “spirit of solidarity”, which also appears in new article 176A. Again, let us make the terms absolutely clear to the House. That provision mandates the Council to redistribute energy across the bloc during times of crisis. A gas dispute in Bavaria could ultimately lead to gas rationing in Birmingham. If there is an interruption in the supplies from the Gulf, the Commission can override our contracts. It can cut off our supplies from Milford Haven and send them to Ingolstadt, or divert our liquefied natural gas from the Isle of Grain to Novo Mesto. [Interruption.] The Minister may mock, but the point is not ridiculous because the words of the treaty are what matters.
Mr. Henderson: Does not the hon. Gentleman accept that the positive contribution of the European Union means that, if there is a shortage of gas or other form of energy in Birmingham, it might be helpful to have a little assistance from Bavaria? The point of the treaty is to create a climate in which it is easier for Europe to share its burdens and difficulties, which will thus improve the welfare of us all in Europe.
Alan Duncan: Perhaps I am one of the few hon. Members who can say that I worked for many years in the energy markets. Our confidence should lie in properly working, liberal energy markets, not in intergovernmental decisions about changing the patters of supply. I therefore disagree with the hon. Gentleman—
Alan Duncan: The hon. Gentleman wishes to accuse me of casuistry and I am happy for him to attempt to do so.
Rob Marris:
Of course, it is casuistry when the hon. Gentleman talks about, on the one hand, the normal functioning of energy markets—in which I am well aware that he worked for many years—and on the
other, a potential crisis in the European Union. He should not compare apples with oranges; it is misleading.
Alan Duncan: I do not accept that it is misleading. Energy markets are capable of far more than the hon. Gentleman appreciates.
Mr. Lilley: My hon. Friend, as an expert in energy, will recall that there was an energy crisis in Europe in 1972. Ted Heath, the then Prime Minister, summoned the chief executives and chairmen of Shell and BP and ordered them to divert supplies of oil from the rest of Europe to this country. They pointed out to him that, under the existing commercial law of this country, he could not so order, and that he would have to change the law. Such situations happen. Circumstances can arise in which a country would like to retain control of its resources but a higher authority might want to distribute them more widely. Surely the treaty gives power to the European Union to distribute those resources more widely when we might want to keep them to ourselves.
Alan Duncan: My right hon. Friend makes a serious point. The UK could refuse to abide by the article and break what is described as the “spirit of solidarity”. However, if the member state that requires assistance decides to take the matter to the European Court of Justice, which rules in its favour, the Council is obliged, under the article, to comply with the ruling. That would tie the UK in knots. Perhaps the UK wishes to abide by those rules, but it is unacceptable for the Government to bind the British people into such articles without first putting them to the public vote. To do otherwise is political cowardice and a breach of trust, given the Labour party’s manifesto commitment.
Mr. Ian Taylor: The complexity of our debate shows the difficulty of putting the matter to a referendum. However, leaving that aside, does not my hon. Friend understand that the solidarity article makes huge sense for British national interest? By 2020, we will import more gas than we have indigenously. We already have an interconnector with France, which means—thank goodness—that we can tap into French, mainly nuclear-powered energy. Most of the pipelines do not start but end here. There is a vast need to ensure that no other member of the European Union holds us hostage. That is what solidarity is about and why the treaty is so beneficial.
Alan Duncan: That is what the EU is trying to do at the moment, but, ultimately, the treaty gives more power to intervene on private contracts in a commercial setting. That could cause no end of upheaval in the efficient workings of the energy markets.
Mr. Harper: My hon. Friend the Member for Esher and Walton (Mr. Taylor) appeared to say that, if we did not adopt the article, there was a risk at some point in the future of our European partners withholding energy supplies from us and holding us to ransom. I find that incredible, given all the positive things that we say about our European partners and the spirit of solidarity in which we work with them.
Alan Duncan: My hon. Friend is being ingenious and allows me to move on to the next part of my remarks.
The Government say that the treaty would better equip the EU to tackle the twin challenges of energy security and climate change. They claim that it will drive forward a liberalised European energy market, benefiting not only British consumers but British companies that wish to gain a foothold in the region. We agree with them about the necessity of freeing up Europe’s energy market and the impact of driving down prices and empowering our companies, but we profoundly disagree that that cannot be achieved through current or proposed EU legislation.
It is ironic that the Government once presented the case for which I am now arguing. We are in an absurd situation, in which the Secretary of State has just eloquently defended a position against which his colleagues lobbied only a year or so ago. During the negotiations on the constitution, the former Minister for Europe desperately argued against including article 176A, stating that it was “unnecessary” because
“all aspects of energy policy are effectively covered elsewhere in the Treaty, e.g. single market, environment”.
That is correct. However, he went on to register his “detailed concerns” on the text, which, he said,
“we consider may have the unintended effect of changing the boundaries of EU competence and the types of measure which will be subject to unanimity”.
Those comments are significant. They are not light concerns about single words, the colour of the ink or the commissioners’ handwriting. They are “detailed concerns” about the ethic of the article. Yet we are replaying that message to a Government who have suddenly developed a case of selective memory failure. If the then Minister for Europe was worried at the time, we are much more worried to find that the Government comprehensively failed to delete the article and now compound their failure in that duty by refusing to trust people’s judgment in a referendum, which they promised.
We should have significant concerns about today’s European market. France is dominated by EDF; Germany has been carved up by RWE, Eon, Vattenfall and ENBW, which own about three quarters of production and distribution capacities. Breaking the link between generators and grid operators would be an important component of the quest for liberalisation, giving European consumers more choice about their supplier and enabling our industrial leaders to grab a piece of the huge market. There are 20 million consumers in the UK who are supplied by French or German-owned companies, yet, across the channel, not a single French or German consumer is supplied by a UK-owned supplier.
We support the measures that the Commission unveiled in September. Those measures are already possible under existing powers—the amended treaty is unnecessary to achieve them. Liberalisation is by far the most effective tool for maintaining a secure supply throughout the EU because it delivers increased diversity of routes, companies, corporate strategies and risk profiles. Liberalisation sends a powerful message to EU suppliers that, in the long term, they will profit more from an open and transparent market than from
relying on a national or regional champion. The latter is the stuff of old bloc politics and we are now in a different world.
Mr. Clappison: Does my hon. Friend believe that the removal of the phrase “free competition”, which he mentioned earlier, from the treaty at the behest of the French Government will assist or not assist the quest for liberalisation?
Alan Duncan: My hon. Friend makes a point that I shall tackle shortly. Clearly, in our opinion, it would not assist the quest.
Here in the UK, despite liberalising some time ago, we still suffer from being Europe’s last-resort gas bank. Continental suppliers buy gas from our market when they need it but they do not always sell it back to us when we need it. That partly accounts for why consumers felt the pinch in 2005 and 2006. Since 1 October, even though energy prices have risen by an average of 15 per cent., the interconnector pipe with Belgium has consistently exported more gas from us than it has imported. However, because of the total lack of transparency in our ability to scrutinise how, when and where gas flows around the region, UK suppliers have been hard pressed to respond.
The Government have pointed to article 176A in the treaty and to the provisions on the functioning of the energy market and promoting the interconnection of energy networks as providing two important spurs to action. However, as the Government made clear in the original negotiations—and as we have repeated here—existing treaties already give the Commission the powers that it requires.
For example, article 154 of the Maastricht treaty states that the European Community has the power
“to promote the interconnection and interoperability of national networks”
“within the framework of a system of open and competitive markets”.
Article 155 of the same treaty enables the Community to legislate to “ensure the interoperability” of networks, and there is no individual member state veto to slow the pace of market reform. Equally, the Commission has powers on the liberalisation of services, as provided for by article 49 of the Maastricht treaty, which states that
“restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended”.
Energy is given specific precedence, as article 52 states that
“priority shall as a general rule be given to those services which directly affect production costs”.
Finally, of course, the central foundation for action depends on the creation and maintenance of the internal market, under article 95 of Maastricht.
The treaty of Lisbon makes no change of substance to that. Instead, the one new thing in the latest treaty is the explicit provision allowing the Union to pass laws on security of energy supply. We should be in no doubt about the seriousness of such proposals. We may not
like the way the current European market operates and we may wish to use any and all opportunities to push for greater honesty in European markets; but the one thing that the Union does not need is greater institutional and centralised powers to create that.
The existence of the provisions on energy, despite the Government’s best attempts to erase them, casts a strange light on the debate that we had here last week on the Energy Bill. We said then that there was a somewhat dated feeling to the Government’s renewables proposals, because we knew that the Commission would publish our targets for 2020 the very next day, as indeed it did. For renewables to achieve that 15 per cent. energy share in Britain’s fuel mix, we felt that a more radical approach would be required from the Government. In a post-ratification world, the Energy Bill will not just look old-fashioned; it will be almost redundant. The treaty gives the EU a legal personality, empowering the Commission to contract on behalf of member states, which will enhance its power to conclude agreements on their behalf.
However, our greatest concern is that the Government have not thought through the new energy articles’ effects, given the long-standing EU legal principle of implied competence. As the House will know, those powers were first acknowledged in the case of Commission v. Council, also known as ERTA, in 1971, in which the European Court of Justice held that
“each time the Community...adopts provisions laying down common rules, the Member States no longer have the right, acting individually or even collectively, to undertake obligations with third countries which affect those rules”
In other words, the ruling gives the power significantly to override bilateral arrangements. According to the court,
“when such common rules come into being, the Community alone is in a position to assume and carry out contractual obligations towards third countries affecting the whole sphere of application of the Community legal system”.
In support of its findings, the court also invoked member states’ obligation of loyal co-operation under the then article 5 EC—now article 10 EC—which allowed it to conclude that
“to the extent to which Community rules are promulgated for the attainment of the objectives of the Treaty, the Member States cannot, outside the framework of the Community institutions, assume obligations which might affect those rules or alter their scope”.
It might be deemed unfair to have national contracts. We might have the sight, for instance, of the Commissioner for Trade visiting countries in central Asia to broker gas deals, putting the Union at odds with the fine threads of bilateral relationships that have been painstakingly woven through years of commercial and political contact. Ministers have failed to explain whether that energy article and the body of legislation that would undoubtedly flow from it would prevent the UK from concluding energy agreements with third countries, as we have already done with Norway.
The Secretary of State has argued as a passionate pro-European today and on other occasions, saying that we cannot hope to deal with the massive environmental challenges on our own, in isolation in
Europe, and by “sniping from the sidelines”, as he put it. Indeed, today he used the phrase “10 years of isolation”, “separateness” or something like that—his exact words can be seen in the record. Just to be clear, there is nothing in what we have said that compromises our ability to work multilaterally to combat, for instance, climate change. Quite the contrary: Britain under the Conservatives will work constantly and closely with the Union to help ensure that we drive down our emissions across the region and to shore up our security of supply.
We are happy that the Union’s emissions trading scheme has created a framework for a carbon price. The framework is currently not as effective as it could be, but at least the architecture is in place. We still think that an effective underpinning of the EU emissions trading scheme by a carbon tax may be the best way of stabilising the price of carbon, or at least underpinning it, thereby maintaining investor confidence in both nuclear and renewable over the long term. However, the treaty could throw our ability to act independently into difficulty, if under the disguise of “shared competence” the Commission assumed powers over energy taxation, using it as a bridge for greater authority over fiscal matters.
Before finishing, I should like to return to the deletion of that key phrase “undistorted competition”, which my hon. Friend the Member for Hertsmere (Mr. Clappison) mentioned earlier.
Mr. Hutton: As I understand it, the hon. Gentleman’s argument is based on a lot of ifs, buts and maybes. Perhaps it would help if I clarified one point to which he has mistakenly alluded a number of times in his speech. The measures under article 176A, to which the right hon. and learned Member for Rushcliffe (Mr. Clarke) has referred, that maintain full member state control over the exploitation of national energy resources would have primacy over any power under qualified majority voting to maintain the functioning of the market. The hon. Gentleman has not addressed that and has failed to acknowledge the status of article 176. In relation to his point about implied competence, I take it from what he has said that the future of any renegotiation of our membership of the European Union under a possible Conservative Government would depend upon those fundamentals being renegotiated as well. How does he think that will allow him to work more closely with the European Union on energy liberalisation in future?
Alan Duncan: The reference to “resources” refers to such things as oil and gas within the sovereign boundaries of a country. That is completely different from any reference to, and control of, supply.
Mr. Hutton: Let me again quote to the hon. Gentleman the article that the right hon. and learned Member for Rushcliffe cited:
“Such measures shall not affect a Member State’s right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply”.
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