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6 Feb 2008 : Column 996

The Government recognise the need for improved access to capital, lower prices for businesses and consumers, and the liberalisation of the network industries if we are to compete effectively internationally. The Department estimates that liberalisation of the network industries alone could add 1.7 per cent. to Europe’s gross domestic product. We urgently need a more efficient, competitive and integrated market, but the chances of achieving that are receding as this treaty takes form.

Mr. Hutton: I hope that hon. Gentleman will turn his attention to the following point, which I was trying to make in my speech. One of the changes made by the Lisbon treaty is to move the single market provisions into that treaty; future proposals will be made under the provisions that we are debating today. I understand that his party’s position is not to accept the validity of the Lisbon treaty, even if it is ratified by this House. How, then, will he react to future proposals to improve the single market made under the Lisbon treaty? He says that improving that market is his objective, but clearly he will not be in a position to accept any such proposal, will he?

Mr. Hammond: I remind the right hon. Gentleman that his party was committed to demonstrating the legitimacy of the Lisbon treaty—the constitutional treaty—by putting it to a referendum of the British people. He has resiled from that commitment, and I believe that the Government will pay a high price for doing so when the electors eventually get their opportunity to vote.

The fact is that protectionism is alive and well across the EU. Whether we are talking about French yoghurt, Spanish electricity, Austrian steel or Italian banks, EU Governments are doing their utmost to protect their prized domestic industries from the threat of foreign competitors, predators and Anglo-Saxon liberalisers, including the right hon. Gentleman. It was Charlie McCreevy who said what we all know:

Never has the tension between the need for free and undistorted competition in markets and the EU’s social, cultural and political aspirations been clearer. Never was there a greater need for a clear recognition that without the prosperity that a single, open and competitive market can deliver, the other aspirations will remain just that. Never was the need for the concept of competitive markets to be at the heart of the European Union greater than it is now, when it is being relegated to the margins. What the EU needs right now is a strengthening, not a weakening, of its focus on competition at the heart of everything it does.

Several hon. Members rose

Mr. Hammond: I shall give way to the hon. Member for Wolverhampton, South-West (Rob Marris) because of his persistence.

Rob Marris: I am grateful for the hon. Gentleman’s usual generosity. I want open competitive markets, but I object to the use of the word “undistorted” because it denotes that a state of perfect competition can be reached: it cannot. He talks about unfettered markets
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and so on, but I want markets with certain fetters. I want fetters so that we do not send schoolboys up chimneys to clean them and so that we do not have unguarded machinery at work. I want people to have that kind of social protection. I find the concept of undistorted competition ridiculous on the grounds of both economics and social protection. I want open and competitive markets, but “undistorted” is a nonsense word.

Mr. Hammond: The word is “undistorted”, not “unfettered”, and I am coming to the political signals sent out by the treaty on the role of competition in shaping the EU. After 50 years with a clause enshrined at the front of the treaty relating to “undistorted competition”, we still do not have anything like it. What kind of signal is the Secretary of State sending by relegating that provision to a protocol? [ Interruption. ] Well, the term used is “competition without distortion”.

The signals that are being sent are deliberate and strong, and they strike at the heart of the cause of free and open markets and thus at the interests of the United Kingdom. The high-profile removal of the reference in the draft constitution to

was the first blow. The replacement of the existing treaty wording, setting as an objective for the EU the promotion of

by the new objective stating that the EU shall work for

was a second, representing a significant dilution of the free market agenda. The controversial concept of a “social market economy” makes its way into an EU treaty for the first time. We are seeing the elimination of competition as an end in itself. The relegation of any reference to

found in article 3 of the existing treaty, to a protocol is a third blow.

The revised Treaty on the Functioning of the European Union gives exclusive competence to the EU for

The EU itself will be left to judge how much competition is necessary to achieve the objective of

That is a recipe for conflict, fudge and fiddle, if ever there was one. The Government argued vigorously against exclusive competence, but again they were defeated.

By these steps, an unambiguous political signal has been sent: the aim of competition per se is relegated, and competition as an idea is subordinated to other objectives of the Union. That is a clear and humiliating defeat for the Anglo-Saxon liberal approach to the marketplace that Governments of both persuasions in this country have advanced for a political generation.

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Mr. Simon: The hon. Gentleman has made it clear that he is strongly in favour of a high degree of competition. The Secretary of State explained to him that the treaty brings the development of the single market, the furthering of competition and the effective working of the single market into the treaty. The hon. Gentleman remains committed to abrogating that treaty in all circumstances. How does he then propose to develop that market in practice, rather than in purely rhetorical terms?

Mr. Hammond: We have heard from the hon. Gentleman and from the Secretary of State what the Government think. They can argue until they are blue in the face that all of this is of no great significance, but that view is not widely shared, especially by those who have fought long and hard to downgrade the competition provisions. They believe that they have won a great political victory.

For example, President Sarkozy, magnanimous as ever in victory, has said:

In other words, he foresees a market managed by political deals. That is not a model of European collaboration that will bring prosperity to the British people, and ultimately it is will not bring prosperity to the French people, either.

The Commission gains a raft of new powers to act unilaterally—for example, to enact regulations relating to agreements between undertakings, to regulate permitted state aid and to rule on the legality of national restrictions on movements of capital. The internal market becomes a shared competence, which under a new definition means that member states will not be able to legislate at all in a space where the EU has legislated. They will be unable to legislate in a way that conflicts with the EU, and that would include legislation to address matters of temporary national interest, or to supplement EU law. Britain’s veto over regulations on the establishment of self-employed professionals is scrapped. The European Parliament gains vetoes over liberalisation of services and capital movements. International trade becomes an exclusive competence of the EU as far as it is defined by treaty provisions. In all those areas the UK Government fought to hold the line or secure exceptions. In every area they lost the battle, and now they seek to argue that nothing has changed.

How the Commission and the Parliament will use their new powers is an open question. It is possibly the understatement of the decade to say that it is by no means obvious that they will use them to promote free competition. I, for one, suspect that President Sarkozy’s vision of an industrial policy of “picking champions” will have an irresistible appeal in Brussels.

What is clear is that at the end of the process a strong political signal has been delivered and the EU’s approach to the development of the single market will change. It will be more interventionist, less focused on free and open competition and more focused on picking winners, imposing strategies and enforcing other EU social objectives through the regulation and manipulation of the marketplace. Only a rejection of this treaty by the British people in a referendum can now reverse that momentum.

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Finally, I turn to the legal implications of the changes to the treaty and the impact that they will have on EU jurisprudence. The Secretary of State said that there were none, and that nothing would change. But there are serious concerns that the changes to the treaty will undermine the political and constitutional support for anti-trust action by the EU and will inevitably have an impact on the ECJ’s interpretation of EU law. It is true that the protocol has the same legal force as the treaty itself, but the Vienna Convention on the Law of Treaties emphasises the importance of objective and purpose as a guide to the interpretation of treaties.

The ECJ has developed a “purposive interpretation” tradition to deal with conflicts. In other words, it considers the objectives and purposes of the Union in deciding which of the conflicting arguments should be given greater weight. In relation to how the Court conducts itself, it is a simple matter of fact that no mere protocol can achieve the same interpretative status as an article of principle or an objective in the treaty itself.

Mr. Hutton: The hon. Gentleman asserts that as a fact. Can he point me to a decision of the European Court that confirms that?

Mr. Hammond: I had not intended to cite specific decisions, but it appears that I will have to. A 1999 decision in the Albany International case shows how fatal the relegation of this issue to the protocol will be— [ Interruption. ] Of course that decision was not about a protocol, because the provision was not in a protocol then. In that judgment, the ECJ noted that article 3 of the EU treaty required both


It set to work to resolve the conflict on the explicit basis that both were objectives of the Union as set out in the article 3 of the treaty. Now one of those objectives will be removed from the opening articles of the treaty and put in a protocol on page 199. The Secretary of State wants us to believe that the ECJ will give the same weight to the statement in a protocol to the treaty as it gave to it when set out in leading articles of the treaty.

Mr. Hutton: Only 10 minutes ago, the hon. Gentleman accepted that the protocol had exactly the same effect as any provision of the treaty.

Mr. Hammond: A protocol does have the same legal status as the rest of the treaty. My point is that in pursuing the purposive interpretation tradition, the ECJ will look at the purposes and objectives of the Union, as set out in the preamble and the leading clauses of the treaty. I do not believe that the Secretary of State, who I believe is a lawyer by training, finds that concept as difficult as he is making out. Time will tell. We will see how the ECJ interprets decisions in the future in the light of the changes in the treaty. I hope that the Secretary of State will have the good grace, in due course, to come back to the House and accept that there was rather more to the changes in the treaty than the cosmetic effects that he has sought to set out today.

The Commission has based its attack on illegal state aid on article 3, paragraph 1(g), read in conjunction with article 10 of the EU treaty. The Court has held that provision elsewhere in the treaty must be interpreted by
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reference to the purposes expressed in article 3, concluding that public subsidies, whether or not they are apparently sanctioned elsewhere, are illegal if they distort competition, because that is the objective set out in article 3. There is a concern that the ECJ may find it difficult even to maintain the current position on state aid set out in existing case law, because it is all built on article 3, paragraph 1(g), of the treaty as it stands.

That was clearly in Sarkozy’s mind when he said that the final form of the treaty

Some member states—no names, no pack drill—that fought for these changes have made no secret of the fact that they will seek to use them to expand the scope for legal state aid on social and social market grounds, to permit mergers on industrial policy grounds and to resist pressures for market liberalisation, particularly in energy and network services. I bet that there are people on the Government Benches who would welcome all those things.

It remains to be seen how precisely the changes to the treaty in the area of competition policy will be interpreted and used in practice by the Court, the Commission, the European Parliament and the member states. However, I can say this with some degree of certainty: the Government’s suggestion that nothing has changed is dangerously complacent and out of line with expert opinion and with the views of most of our European partners.

Let me quote Sarkozy again:

The Government have allowed themselves to be outmanoeuvred, outwitted and out-negotiated. After 50 years, the pursuit of a single, open competitive market has been relegated to the back burner and subordinated to the other objectives of the Union. The one undisputed success of the EU is now at risk, and with it the Union’s already dubious place in the sentiments of the British people. At a time when Europe needs to become more competitive, more liberalised and more open to the world, it is set to become less competitive, more inward-looking and more protectionist. To their enduring shame, the Government have acquiesced in that process, knowing that it was wrong and that it was neither in Britain’s interest nor in Europe’s interest.

The Government’s policy in respect of the treaty and its impact on the single market is not merely incompetent and complacent, it is contemptible and duplicitous. I urge my hon. Friends to support the amendment.

Several hon. Members rose

Mr. Deputy Speaker Order. I remind the House that Mr. Speaker has placed an eight-minute limit on Back-Bench speeches, which applies from now.

2.44 pm

Frank Dobson (Holborn and St. Pancras) (Lab): I confess that I approach this matter from the opposite end of the spectrum to the hon. Member for Runnymede and Weybridge (Mr. Hammond). A major part of my
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job as an MP is to try to promote prosperity and fairness in our society and, as a Labour MP, to protect and enhance the interests of the worst-off people in my constituency and in the country as a whole. In that respect, I welcome our Labour Government’s acceptance of the social chapter.

I am extremely concerned about recent developments in the EU, and in particular about the application of fair and open competition in the internal market to health care. The EU treaty as it stands states that on health:

It goes on:

The Lisbon treaty updates that, I suppose, and states:

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