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“Mr. Putin’s boasts about Moscow as a new global financial centre and the rouble as a coming international reserve currency have become a sad joke.”
Since that time, the Russian stock market has fallen much further, with the Moscow RTS index standing today at 632 points, which is down from more than 1,800 on the day of the invasion.
Importantly, foreign capital had already started to flow out of Russia before the credit crunch had an impact on financial markets. The Financial Times estimated that foreign investors pulled out £32.6 billion between 8 August and 19 September. Moreover, when the crisis in the financial markets truly arrived some weeks later, trading on the Russian stock exchange had to be suspended on several occasions, partly because so much foreign capital was being withdrawn from the country. Russia will pay a price economically for its actions in Georgia. With the economic downturn and falling oil and commodity prices, Russia’s actions in Georgia mask important weaknesses that Russia might now need international co-operation to help it to alleviate.
We wish to have a positive relationship with Russia. There are many potential areas of mutual interest. Russia needs a market for its oil and gas. It also needs investment, not least in its oil and gas industries. Russia surely does not wish to see the proliferation of weapons of mass destruction in the middle east and elsewhere. In all these areas, Russia and the west need each other’s co-operation. We hope that Russia will come to realise that, and will act accordingly.
We debated economic matters today and a number of references were made to suggestions that some in government now advocate our membership of the single currency, the euro.
David Taylor: Will the hon. Gentleman give way on that?
Mr. Francois: I will do so briefly, as I have little time left.
David Taylor: Was the hon. Gentleman as disappointed as I was by the robust terms that the Foreign Secretary used about the long-term ambition to enter the eurozone, when the euro has so markedly failed on growth, on inflation, on unemployment and on its use as a reserve currency, compared with the pre-euro currencies in those eurozone countries and with the performance of sterling and other currencies worldwide? Surely it is a failed currency in that respect, notwithstanding the fact that in recent months the pound has come down very significantly against it.
Mr. Francois: Although I am tight for time, I am delighted that I took that very pertinent intervention. I shall not attempt to compete with my right hon. Friend the shadow Foreign Secretary in defending sterling, as there could be copyright issues there. All I will do is ask the Minister to clarify the exact position of Her Majesty’s Government on the euro and to make it clear which Ministers, if any, were talking to President Barroso about the possibility of giving up the pound.
That brings me neatly on to the Lisbon treaty, which a number of Members mentioned this evening, including my hon. Friends the Members for Stone and for Ribble Valley (Mr. Evans). Thanks to the assiduous research of my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), we have at our disposal an English translation of the draft conclusions of the forthcoming EU summit. Interestingly, under the heading “Lisbon Treaty”, there are only two letters—PM. I find it amazing that Lord Mandelson manages to get into just about everything to do with Europe at the moment. He somehow appears to have snuck into the draft conclusions of the European summit.
In our last debate on Europe, I had the pleasure of congratulating the Irish first on being allowed a referendum and then on having the courage to vote no in that plebiscite. Unfortunately, as some predicted at the time, they were not to be allowed to get away with that show of blatant democracy. The chair of the European Parliament’s constitutional committee, Mr. Leinen, said recently:
“A second No would be a No, and then of course you could forget about the Treaty. But a first No is volatile, let’s say, because it’s not a clear No against Europe. Here you have a diffuse coalition of Nos. We respect it, but we have to respect as well the Yes of the other member states.”
In other words, when it comes to European integration, a yes means yes and a no also means yes. However, there are some senior people in Ireland who have begun to realise that the Irish people should be listened to. Ireland’s own EU commissioner, Charlie McCreevy said:
“The Irish people said No—and that decision has to be respected by our European partners as well... Over 53 per cent. of the Irish electorate turned out, and a considerable segment of them were people who hadn’t voted in the 2007 Irish General Election. So therefore, people did take the issue very seriously. That has to be respected.”
The Irish, however, are not being respected by the British Government, and if the British Government will not respect the outcome of a democratic referendum in Ireland, that should come as no real surprise, because the Government have gone to incredible lengths to deny the British people a vote of their own. As you will recall, Mr. Speaker, all parties, including the Liberal Democrats, promised a referendum on the EU constitution, which is, in effect, the present Lisbon treaty. Of those, the Conservative party is the only one to keep its promise and vote in the House for a referendum. It would be utterly undemocratic of Gordon Brown to insist that the Irish people must vote twice, while denying the British people the chance to—
Mr. Speaker: Order. The hon. Member must refer to the right hon. Gentleman as the Prime Minister.
Mr. Francois: Mr. Speaker, it would be utterly undemocratic of the Prime Minister to say that the Irish people should be allowed to vote twice while the British people have not been allowed to vote even once. Ultimately, democratic institutions can survive only with the consent of the people, and this is not the way to go about fostering such consent. It is, if anything, quite the opposite. The Prime Minister should not participate in any attempts, either overt or covert, to bully the Irish people to vote again on a matter on which they have already expressed a very clear opinion in a free and fair referendum. Throughout the Lisbon treaty debates in the House, we consistently argued that we should restore faith in politics and we should let the people decide. That remains our view.
9.45 pm
The Minister for Europe (Caroline Flint): I thank the House for a lively and interesting debate in which we heard 10 speeches from Back Benchers and three from Front Benchers. Apart from the hon. Member for Stone (Mr. Cash), every speaker seemed to be asking the European Union to do more rather than less.
It has become clear to me, especially during the two months for which I have had this job, that if the European Union did not exist, we would need to invent it. The current financial crisis has demonstrated that over and above what a national state can do, there is sometimes a need to work across countries. The EU provides one vehicle for that. However, on another level—the global level—it will give us greater strength, as 27 member states, to fight our corner on the changes that must be made globally to ensure as far as possible that the present financial situation can never arise again.
I believe it has been vital to Britain’s national interests that the Government have engaged constructively in Europe for the last 11 years. By doing so, we have secured the influence necessary to ensure that the EU delivers for British families and businesses. I pay tribute to the civil servants who work as United Kingdom representatives to Brussels—they are known as UKRep—and to our staff in embassy posts around the world, but particularly within the European Union and in the wider Europe. I commend the role that they play in representing our interests and, when Members of both Houses visit their countries, giving them constructive
opportunities to find out more. I also commend the British Council, for which I have some ministerial responsibility.
I believe there is a consensus around the world that we need concerted action to tackle the current global problems, and I believe—as I have said—that, now more than ever, the EU has a vital role to play in the global action that we need. It is vital that we see strong support for a co-ordinated EU action at the Council. The European Commission’s European economic recovery plan shows that the Government were right, and are right, to take bold action in the pre-Budget report. I am thinking particularly of measures such as the temporary lowering of VAT and the front-loading of public capital expenditure, as well as support for small businesses. The Government also welcome the Commission’s moves towards fostering a low-carbon economy.
The Commission has made it clear that the economic recovery plan offers a menu of options. I have visited countries in the European Union over the past eight weeks, and it was clear to me that the circumstances that they faced were not exactly the same. In some countries the banking situation is not as difficult or challenging as it is here or elsewhere, while others have problems in terms of exports and a tightening of credit. However, everyone in all the countries that I visited was worried about the impact on jobs and family livelihoods. Like the Prime Minister, Chancellor Merkel welcomed the economic recovery plan, and I can assure the House that we continue to co-operate closely with our German colleagues and others throughout the EU.
It was suggested during the debate that our VAT action was wrong. I reject that suggestion. It is a measure that we can implement rapidly; it will have an immediate impact on purchasing decisions of both firms and individuals; and it is reversible. But I do not need to give it my support to convince the House. I look to the right hon. and learned Member for Rushcliffe (Mr. Clarke), who said in The Times:
“If it's possible to afford a fiscal stimulus I would go for VAT because the only case for a fiscal stimulus is to stimulate spending and consumer demand, so the tax on spending is the one to go for. But it should be temporary.”
I think that our actions are fully in line with the comments of the right hon. and learned Gentleman—whose comments on this issue we always welcome—and with the views of the European Union more generally. I understand that the right hon. and learned Gentleman is among the minority of Conservative Members who happen to be in favour of it.
Let me make it absolutely clear that we have no plans to join the euro. The Government are focused on doing all that they can to support British families and British businesses through the downturn. The five tests still apply, and will continue to constitute the standard by which the Chancellor and Her Majesty’s Treasury consider the question of eurozone membership. In the event of a future assessment supporting UK entry to the euro, the decision will be made only if the Government and Parliament agree that it would be in the UK’s best interests. The UK would then join the euro if the public voted yes in a referendum. I have no idea which, if any, Ministers have been speaking to Commissioner Barroso on this matter.
It was also suggested that somehow we had let France off the hook on common agricultural policy reform. I can assure the House that no one has been let off the hook, least of all France. An increasing number of member states support our vision for CAP reform, and I am sure we will come back to that in 2009 as we look forward beyond the current situation that we are having to deal with, to what further reforms we should make to the EU budget.
I was pleased to hear that there was a general consensus across the House in support of the climate change package. Alongside security of the energy supply line to the EU, it is important that we get this right at the Council later this week. It is an opportunity to demonstrate to our citizens, and to President-elect Obama and the rest of the world, that we in the continent of Europe take the dangers of climate change seriously and that we know that the costs of not acting will only increase. This is important for our planet, but it is also important to offer consumers more choice—and more choice at an affordable price. If the EU wants to continue driving the climate change agenda and to demonstrate its commitment to a low-carbon future, it is crucial that we agree an ambitious 2020 package at the Council. Failure to do so would seriously damage EU credibility, but it would also cost us more in the long run if we missed this opportunity at this time. It is clear to me and to others in the Government that the economic downturn is not a reason to lower our ambitions. If we do not take action urgently, climate change will have a far greater economic impact than the financial crisis.
My right hon. Friend the Member for Leicester, West (Ms Hewitt) asked about the earmarking of auction revenue. I am afraid to have to say to her that the Government oppose proposals for earmarking revenues generated from auctioning because this would cut across an important budgetary principle and would not respect subsidiarity in the division of competences between the EC and member states. We also believe it is an inefficient means of determining public expenditure. Having said that, this does not mean the UK is against financing international climate action. We are ambitious that member states prepare for Copenhagen by showing how an international climate agreement can be financed.
There were a number of references in the debate to the European Union’s contribution to our security and defence. The EU is uniquely placed to respond to a number of different crises as they present themselves, through civilian experts, development budgets, economic and diplomatic instruments, trade, policing and military capabilities. As my right hon. Friend the Foreign Secretary said at the start of the debate, it is clear that we have support from our American colleagues. President Bush said:
“Building a strong NATO Alliance also requires a strong European defence capacity.”
I have no reason to believe that that will not also be the view of President-elect Obama.
At the end of 2008, the EU provided 3,000 civilians—more than 130 British nationals—across 10 civilian missions. We should applaud the contribution of those people from different walks of life, who make a real difference to our peace and security. Questions were raised about some of the missions. The right hon. Member for Richmond, Yorks (Mr. Hague) asked about EULEX and how it might work in respect of police
officers in the Serbian enclaves. My understanding is that the mission began deployment through the whole of Kosovo today and initial reports from the mission on the ground are that it has been well received by Serbian police officers. As the right hon. Gentleman is aware, EULEX is designed to be a single rule of law mission covering the whole of Kosovo and we will continue to encourage that, and we hope it takes place and continues to be successful.
There have been a number of references to the situation regarding Russia and Georgia. The hon. Member for Spelthorne (Mr. Wilshire) made a thoughtful contribution on that. He reflected on how difficult these situations are, and on how difficult it can be to arrive at some of the truths about what took place and who has been party to different activities. We have been clear that Russian actions in Georgia were disproportionate and unjustified—we made that clear at the highest levels—but also Georgia’s military steps on 7 August were perhaps not completely wise or considered in this situation. We also made it clear that we support the EU decision to support an impartial, independent investigation into the conflict. That should look at issues around human rights violations and at whoever has committed them being held responsible for them.
The hon. Member for Spelthorne also raised the issue of the role of the EU monitors, and other hon. Members contributed to the discussion. The EU monitors are playing an important role in ensuring that the ceasefire is upheld in South Ossetia. The EU and the Organisation for Security and Co-operation in Europe continue to press for their monitors to have access to South Ossetia. By issuing passports in South Ossetia and Abkhazia, Russia is violating Georgian sovereignty. We support Georgia’s sovereignty, which has been reaffirmed by several UN resolutions, and we should remind ourselves and others that Russia has signed up to those.
On Bosnia and Herzegovina, as the hon. Member for Rayleigh (Mr. Francois) will know, my right hon. Friend the Secretary of State, and his Czech counterpart, wrote to all leaders in the EU, and he recently visited both Bosnia and Herzegovina and Serbia. We take this matter very seriously; I met the High Representative in London at the previous General Affairs and External Relations Council meeting, and, in fact, he travelled with my right hon. Friend back to Bosnia. We welcome the extension of the UN mandate of the EU force in Bosnia, and any decision on a future reduction of the force should take into account the political situation on the ground in Bosnia.
The hon. Member for Kingston and Surbiton (Mr. Davey) asked some questions about the Democratic Republic of the Congo. We welcome and support the political process, including the dialogue between the DRC and Rwanda. As hon. Members will be aware, the UK co-sponsored the UN Security Council resolution calling for a 3,000-strong reinforcement of the United Nations mission in the Democratic Republic of the Congo, and we encourage countries to offer troops for that purpose. That is certainly what the countries that he mentioned could do if they wanted to offer some military capacity. The EU is considering how to respond to Ban Ki-moon’s recent letter, and we obviously take a keen interest in the difficulties in that part of the world.
A number of speeches were made about enlargement. On the whole, I think that enlargement is a European Union success story, and it is one of the few areas on which there is agreement across the House. As the comments made by a number of hon. Members made clear, enlargement also has to come with change in the countries with which we are working. Before I came to this post, I had started as a Minister in the Home Office, where I had responsibility for reducing organised crime and I held the international and European brief. It is therefore interesting to visit some of the countries that I visited five years ago to see what progress has been made and what further progress needs to be made; on the whole, I think that EU membership has been good.
My right hon. Friend the Member for Cynon Valley (Ann Clwyd) made a speech about the people who are affected by the policies that we undertake through the European Union and through our engagement with countries on the wider continent of Europe. I shall be visiting Ankara next week, and I assure her and other hon. Members that the UK should be not only a champion of Turkey and its journey to enlargement, but a strong friend. Strong friends can sometimes tell their friends when things are not going as well as they should be and when matters need to be put right. On that and other matters, I shall continue to take that approach with Turkey and our other friends in Europe.
The hon. Member for Enfield, Southgate (Mr. Burrowes) mentioned Cyprus, which I was pleased to have visited in my first week. We will stand by ready to do anything we can to support the process, but there needs to be an
agreement by Cypriots for Cypriots. Again, we shall ask Turkey to support the negotiations as they are taken forward.
On the Lisbon treaty, what is clear is that the Irish people have spoken and their views must be respected. I reject the idea that I, other Ministers or any other member of this Government are bullying the Irish in any way. We will hear at the Council this week what Brian Cowen has to say. [ Interruption. ] The treaty in fact strengthens the principle of subsidiarity and gives a greater say to Parliaments. One thing that we must do is ensure that we can move forward, and we do not support a re-opening of the treaty.
In the few seconds that I have left, I wish to say that I agree with what hon. Members said about Strasbourg; I think that the arrangements are a massive waste of time and money, and we will continue to push the case for reform in that area.
Finally, I wish to say that a united European position can shape a global response to the most pressing of the current global challenges. My hon. Friend the Member for North-East Derbyshire (Natascha Engel) made a speech to counter the cynicism of those who find any excuse to damn whatever happens in the European Union. The fact is that, like many institutions, the European Union does not always get it right. I do not think it is our task to get people to love the European Union, but we must get them to understand and provide an input into what added value as an institution it can provide. Being at the heart of Europe gives the UK greater global influence and the best chance to deliver—
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