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16 Jun 2009 : Column 184

David Miliband: It certainly is not schadenfreude; we should be careful about that in these circumstances. Germany is the world’s second largest export economy, and it has therefore suffered from the drop in global trade and the collapse of demand in some parts of the world. That is why German gross domestic product looks likely to fall by about 6 per cent. As we discussed in this debate in December, the German fiscal stimulus as a share of GDP is actually larger than ours, so we should be careful not to believe that some of the alleged divisions are as great as they are said to be.

Lembit Öpik (Montgomeryshire) (LD): The right hon. Gentleman has made an important point about exports and imports. Germany is quite dependent on the automotive industry, as are we. Will he address that question specifically with his German and other counterparts? Many of the job losses in my area have been a direct result of job losses in the supply chain for the automotive industry, and I have no doubt that Germany and other countries will have a strategic interest in working collectively to restart the supply chain for the automotive industry and to boost sales.

David Miliband: The hon. Gentleman makes an important point about the headline figures on jobs in the car industry, which often neglect to show the effect on jobs in the supply chain. I am sure that that issue will be discussed on Thursday and Friday.

The second economic priority is to take preliminary decisions on the supervision and regulation of the financial sector. Regulation means setting the rules; supervision means checking that they are implemented properly. This requires the right balance of national and international powers. The Government have already made it clear that the de Larosière report and subsequent Commission proposals are a good starting point. There is much that we welcome, particularly in regard to improvement in regulatory standards and supervisory co-operation, and the establishment of a new European body—the European systemic risk board—to monitor emerging systemic risks.

Mr. David Heathcoat-Amory (Wells) (Con): Does the Foreign Secretary accept that the United Kingdom faces some extremely unwelcome proposals on financial and banking regulation? The Minister responsible in what was then the Department for Business, Enterprise and Regulatory Reform, the hon. Member for Dudley, South (Ian Pearson), has written to the European Scrutiny Committee to say that we are now isolated on those measures. Will the Foreign Secretary confirm that we face being outvoted on these unwelcome and damaging proposals, which will regulate the City of London in a way that Parliament and the British Government do not want?

David Miliband: I do not accept that we are isolated, certainly not on the basis of the discussion that I had at the European General Affairs Council yesterday. There might be some confusion in the right hon. Gentleman’s mind. What I am talking about here are the de Larosière regulatory and supervisory proposals. There are separate proposals in respect of so-called hedge funds, which are being discussed on a different track and will not be discussed this week. They are at a rather more preliminary stage.

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It might help the House if I just make the following point about the balance between international and national regulation and supervision. Improved regulation is essential if we are to keep up with the increased dynamism of international capital markets. That means introducing improved regulatory standards across Europe—an agreed rule book for financial regulation. However, this Government believe that micro-prudential supervision—in other words, supervision of individual companies—must remain at nation state level.

Mr. Adrian Bailey (West Bromwich, West) (Lab/Co-op): Does my right hon. Friend agree that, in relation to the European economic recovery package, Britain has already shown that if we use the right arguments and they are ably prosecuted, Europe will follow suit, and that that principle is likely to prevail on regulation and supervision as well?

David Miliband: My hon. Friend makes a good point. It is important not to believe the fallacy that is sometimes promoted in some quarters—namely, that it is Britain against the rest. There is a recognition across Europe of the need to improve regulation and supervision, for example, and Britain is in good company in regard to the arguments that we are making. I very much hope that the proposals that are discussed on Thursday and finally adopted on Friday will recognise the need for a balance between the national and the international level, because that is very important.

Mr. Edward Davey (Kingston and Surbiton) (LD) rose—

Mr. William Cash (Stone) (Con) rose—

David Miliband: I give way to the hon. Member for Kingston and Surbiton (Mr. Davey).

Mr. Davey: Will the right hon. Gentleman explain why the British Government are so against the proposals from the European Commission on the regulation of hedge funds and private equity? Surely there is a debate to be had about greater transparency and capital adequacy in those organisations; and if we have learned anything from the recent problems in the City, it is surely that there is a case for good regulation to make those markets work more effectively.

David Miliband: I hope I do not disappoint the hon. Gentleman if I say that the Government also believe that whereas the old debate was about having more or less regulation, the debate we should have is about the details of the regulation that is needed. We think it is right, for example, to look at how to improve the regulation of the so-called hedge funds that the hon. Gentleman mentioned, but the details must be got right, and we are at a preliminary stage of discussions about hedge funds. Many detailed arguments, for example about funds coming from outside the European Union, need properly to be taken into account in the development of any detailed regulatory proposals. That has not yet happened, so that is what we will try to ensure over the rest of this year.

Mr. Cash: As the Foreign Secretary knows, President Barroso has made the EU’s position crystal clear, as he strongly believes that all these matters should be enveloped within the EU legislative structure. On 27 February, I
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wrote a letter to the Financial Times, saying that we have to insist on the supremacy of Westminster legislation in accordance with the formula I put forward, of which the right hon. Gentleman is well aware—namely, that we would override any such European legislation if it were in our vital national interest to do so. Does he agree that, otherwise, through majority voting and co-decision, we will end up with the supremacy of this House being overridden? Does he accept that the formula I have suggested is the only way around the problem; otherwise we will be subjected to the European Court of Justice rather than to the democratic decision of the people of this country?

David Miliband: I think we will come to that a little later. I can assure the hon. Gentleman, however, that there will be no majority voting at the European Council this week, that the proposals that we make will not represent Britain acting on its own and that we will be able to exercise our own democratic rights in a way that I think he would approve of.

The second issue concerns climate change. It is vital that the EU continues to show leadership in achieving an ambitious global deal at the Copenhagen summit in December, and this Council provides an opportunity to push things forward. The green revolution is not just about avoiding devastating damage to our planet; it is also about avoiding another commodity price spike, which would be a major impediment to economic recovery. With the oil price now having hit the $70 a barrel mark, there is a real fear that, unchecked, it could choke off growth, just as we are working so hard to try to restore it. So tackling climate change is not a distraction from economic recovery, but a contribution to it.

The Council must therefore build on the agreements reached in March and indicate its willingness to contribute financially to help secure an ambitious deal at Copenhagen, because we are now firmly on the path towards that December conference. The EU needs to reaffirm its leadership in advance of the Major Economies Forum in July—given new momentum by the new American Administration—at which questions concerning developed country financing towards mitigation, adaptation, technology support and capacity building will be a top priority.

At their dinner on Thursday night, Heads of Government are expected to discuss the nomination of the next Commission President, which I hope is a matter of interest to the hon. Member for Stone (Mr. Cash)— [Interruption. ] I was not thinking of putting him forward as a nominee, I am sorry to say; I just thought I would get his attention, as I did not want him to doze off at this point and I had a nasty feeling that he might.

From the UK perspective, and certainly from the Government’s perspective, Mr. Barroso has been an excellent President, who has prioritised economic reform and better regulation, and pressed for EU leadership on climate change. So we fully support Mr Barroso’s decision to run for a second term, and will continue to work with him to ensure the EU delivers on the UK’s agenda for an outward-facing, globally competitive Europe.

Another pressing issue for the Council is illegal migration across the Mediterranean.

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): Before my right hon. Friend moves on to looking towards the autumn and the new Commission President, will he
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say something about how the British Government intend to work with the two new British National party MEPs in the new European Parliament?

David Miliband: There is a minimal level of service that is the entitlement of all Members of the European Parliament, and that minimal level of service will be provided, but we will not go beyond it.

Mr. Nigel Evans (Ribble Valley) (Con): Following the crushing defeats experienced by the Government on 7 June, when the results of the European elections placed Labour even below the United Kingdom Independence party, what moral authority do they consider that they have to discuss any issue on behalf of the people of this country?

David Miliband: I am sure I do not need to remind the hon. Gentleman that general elections are the way in which we decide the Government of this country. He will not have that long to wait—a maximum of 11 months, according to any timetable—and I suggest that he contain his enthusiasm. [Interruption.] That is very unlikely, says my hon. Friend the Under-Secretary of State from a sedentary position.

Ms Angela C. Smith (Sheffield, Hillsborough) (Lab): We are currently witnessing the passing on of many members of the generations who saw Europe torn apart 70 years ago, and who worked so hard to put Europe back together. Do we not all have a responsibility to ensure that the pro-European message—that Britain needs to be engaged in Europe—is delivered over and over again?

David Miliband: I certainly agree with that. As I shall make clear later, I think it incumbent on those of us who did lose the elections not only to try to understand why, but to stick to what we believe and try to advocate it with full passion and drive. I think that that is what my hon. Friend meant. [Interruption.] Let me say to the hon. Member for Ribble Valley (Mr. Evans) that it is not a matter of blaming the electorate; it is a matter of saying that we should stand up for what we believe in, and then allow the electorate to make their choice.

Mr. Evans: They did make their choice.

David Miliband: They did, and for the next five years they will have the MEPs for whom they voted. That is the way in which the system works.

Mr. Bernard Jenkin (North Essex) (Con) rose—

Mr. Ian Davidson (Glasgow, South-West) (Lab/Co-op) rose—

David Miliband: I am blessed with too many interventions.

Mr. Jenkin: While the Foreign Secretary reflects on the fact that if he walks down the street he is unlikely to meet more than one in 20 who voted Labour in the European elections, may I ask to what he ascribes the declining turnouts in European elections? Why are all
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the people of Europe more and more disillusioned about participating in elections to the European Parliament? Is it because they are feeling more and more disconnected from institutions which are taking more and more of their power?

David Miliband: The answer to that question is that the European Union has spent the last seven or eight years debating institutional questions which people do not feel have addressed their concerns, and the sooner it puts such institutional navel-gazing behind it, the better.

Let me point out to Opposition Members who are nodding and agreeing that they want to put institutional sclerosis behind them that the proposals that they are advocating are designed precisely to introduce yet another decade of institutional navel-gazing. I suggest that if they are serious about wanting to allow the European Union to address the real issues, they should understand that it is a major mistake to try to unpick the Lisbon treaty after it has been passed in the House of Commons. We shall have to wait and see what happens in the Irish referendum, although I shall have some words to say about that later.

Mr. Davidson rose—

David Miliband: I am happy to allow my hon. Friend to intervene, but I must then make some progress.

Mr. Davidson: Does the Secretary of State believe that the results of the European elections were a ringing endorsement of Government policy, and does that Government policy remain “no compromise with the electorate”?

David Miliband: As my hon. Friend knows, the answer to both those questions is no. The old saying “no compromise with the electorate” goes back a long way in the labour movement.

Let me say a little about migration before discussing the external relations agenda. A pressing issue for the Council is illegal migration across the Mediterranean. It is right that we work with our EU partners to strengthen the border, help transit countries to control migration, and enforce our rules by returning illegal immigrants to their countries of origin. We support measures to increase the effectiveness of Frontex, the EU external borders agency which co-ordinates the operational activities of member states to strengthen the security and surveillance of the land, sea and air borders of the Schengen area.

At the General Affairs Council yesterday, I discussed the three external relations priorities for the Council: Burma, the middle east peace process, and Afghanistan and Pakistan. With Aung San Suu Kyi’s trial continuing in Rangoon and the verdict seemingly a foregone conclusion, this Council provides an opportunity for a high-profile message of support for her.

Secondly, the EU will also want to send a clear message of support for President Obama’s determination to achieve a lasting peace in the middle east. The British Government’s position is clear: we support a two-state solution based on 1967 borders, with Jerusalem as the capital of both Israel and Palestine and a fair settlement for refugees. Without a decisive drive to peace, there will be a drift towards more conflict. The EU role, as a member of the Quartet, is important. I would highlight
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the importance of funding the institutions, both economic and security, of a Palestinian state, and providing political impetus for Israelis and Arabs to make the necessary compromises for peace. There is also a vital regional element. Israel needs security from Arabs, not just from Palestinians. Palestinians need support from Arab states, not just land from Israel. The EU needs to make its economic, political and diplomatic relations with the whole region count.

We will also, no doubt, watch carefully the emerging situation in Iran. I am sure that the whole House will deplore the loss of life yesterday. The General Affairs Council adopted conclusions yesterday, but as events overnight show, the situation is moving fast, and we will take stock on Thursday evening.

Sir Malcolm Rifkind (Kensington and Chelsea) (Con): The EU has in the past adopted a quite successful common position with regard to dialogue with Iran. Does the Foreign Secretary agree that the prospects for a meaningful dialogue with Iran by either the EU or the United States are pretty grim, however, if the Iranian authorities do not show respect for what is clearly the will of the Iranian people in determining their future Government?

David Miliband: It certainly is for the Iranian people to choose their own Government, and for that to be done in a way that respects their wishes. We should allow the inquiry or investigation that has been established by the so-called Guardian Council to proceed. The right hon. and learned Gentleman will know very well that for some in Tehran the temptation to blame everything on perfidious foreigners is great, so I think it is very important that while we continue to deplore the loss of life, we insist that it is for the Iranians to choose their Government. Whoever the Iranian Government are, however, they have a responsibility to engage with the rest of the world in a way that promotes stability, as well as asserting their own rights.

Mike Gapes (Ilford, South) (Lab/Co-op): On the middle east peace process, does the Foreign Secretary agree that there is a need not just for a grudging statement from the Israeli Prime Minister about a two-state solution, but for concrete measures that will make an agreement possible, and that Israel therefore needs to stop—totally stop—the expansion and enlargement of the settlements? Will the Government hold urgent discussions in the near future with the United States as to a way forward, to exert the maximum possible diplomatic pressure to get a solution to this matter?

David Miliband: As my hon. Friend knows, it is certainly the position of the UK Government that settlement activity needs to be frozen, including natural growth, which is, of course, a commitment of the road map. In respect of engagement with the United States, I spoke yesterday to Secretary Clinton and former Senator Mitchell, and I think that the US role will be absolutely critical. However, I would also say that it is not just a matter of applying “pressure”; I think that the European support for Palestinian institutions is going to be important, and I also believe that there are responsibilities on the Arab states to think through how they will achieve the goals of the Arab peace initiative and how they will operationalise the very important vision set out in that. The EU can play a role in that regard, too.

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