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Mr. Redwood: I am grateful to the shadow Foreign Secretary for giving way. Will he use this opportunity to send a message to countries that have not yet ratified the Lisbon treaty? The message is that a future Conservative Government would hold an immediate referendum, and that the British people would be very likely to veto the treaty for themso countries should hang on and not ratify, to give us the chance to do what they want us to do.
Mr. Hague: Those countries must make their own decisions; it is not for us to dictate to them what their decision must be. However, my right hon. Friend is correct in his description of the situation. The Lisbon treaty referendum, which all parties promised at the last general election, will certainly be implemented if the treaty remains unratified and is still on the table at the time of the next general election.
Mr. Davidson: As the right hon. Gentleman is aware, I am and was in favour of a referendum. However, unless I am mistaken, he is being delightfully vague about what his party would do if the Lisbon treaty had been ratified and there were a Conservative Government. Would a Conservative Government hold a referendum in Britain if the Lisbon treaty had been ratified throughout the EUyes or no? Many people who voted UKIP in the elections, not to mention many others, would very much like to hear the answer.
Mr. Hague: The hon. Gentleman will recall that we were being asked that question a year ago, on the grounds that that situation was, apparently, about to come about because the opinion polls in Ireland showed that the Irish people would approve the treaty. If what the hon. Gentleman has mentioned comes to pass, we will set out in our general election manifesto how we will proceed. [Interruption.] The Foreign Secretary laughs, but I suspect that he, as an enthusiast for the Lisbon treaty and for all the institutional changes that it brings, cannot say how he intends to proceed if the Lisbon treaty is not ratified. In that sense, we all face the hypothetical questions of the future which will soon be determined by whether the treaty is ratified or not.
Mr. Hague: It is simply that we have not ruled that in or out. That is the correct position when faced with that hypothesis. There is no doubt whatever about what will happen if the Lisbon treaty is unratified and still on the table. Who knows whether that situation will come to pass?
Mr. Gummer: Did my right hon. Friend notice that not a single Member from the Labour party cried that there would not be a Conservative Government after the next election? They have all accepted that that is what will happen.
Mr. Hague: My right hon. Friend may be pleased to know that I did notice that, but I have noticed that for a good year or so in these debates, as Labour Members morale has steadily sunk loweralthough not quite as low as their partys election results last week.
I was talking about the European Commission. Not all its legislative agenda has been wise; it is not coherent to seek to cut the costs of regulation on business on the one hand and then raise them by putting up the cost of employing temporary workers. The agency workers directive was rightly opposed by the Government until, in one of too many instances of their flaccid defence of British interest, that resistance was abandoned. That emphasises how important it is for us to restore our national control over social and employment legislation so that once again decisions on how best to help our families and businesses can be made here in Britaina policy that today again received the support of the CBI.
Most important of all, the Commission has stood against those who have called for protectionisma brave position that was not helped by the Prime Ministers ill-advised use of the slogan, British jobs for British workers. If Mr. Barroso is to be reappointed, I hope that the British Government will seek assurances that he will not be diverted from the course that he has set on free market issues over the past five years, that that will be reflected in the composition of the next Commission overall, and that the Government will urge that this recommendation is made now rather than drifting on until October.
The Foreign Secretary referred to the discussion of new financial regulations in the context of this weekends summit. The alternative investment fund managers directive and the proposals on EU financial services supervision could have a most serious effect on Britains financial services industry, as one or two colleagues, including my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), said. The truth is that we have reason to be extremely concerned about how this legislation is shaping up and how the Government are handling the issue. There is not so much any fundamental difference of principle between those on the two Front Benches as a concern about how well the Government are pursuing the British national interest in these matters. There is a widespread belief that the Government have taken their eye off the ball, and it is now very important that Ministers focus on this.
In the draft Council conclusions, there is a great deal of language about the need for rapid progress and legislation as soon as possible, but it is surely far more important that we get the regulations right than that we get them quickly. Otherwise, we risk making the same mistake at European level that the United States made with the Sarbanes-Oxley Act. Instead of rushing into ill-considered regulation, we should be facing the immediate challenge of rebuilding confidence in European banks.
Even within the Commission grave concerns are privately expressed about the lack of proper consultation and of a thorough regulatory impact on the proposed fund
managers directive. That point has been powerfully reinforced this week by the Lords EU Committee report into the future of EU financial regulation, which concluded that
the desire for speedy action must not come at the expense of thorough consultation, impact assessment and risk analysis by the Commission in line with their own Better Regulation principles.
After months in which Treasury Ministers have been absent from the European debate, although they are part of a Government who always lecture us on taking part in European discussions, we welcome the news that at last Lord Myners is to visit Sweden to discuss these issues with the incoming presidency. We hope that at the Council the Government will ensure that the final language reflects Britains interests.
The establishment of a European systemic risk board is to be strongly welcomed; we support better analysis of the macro-prudential risks. However, decisions on what action should be taken in response to the risks that the board identifies are taken by national Governments, not by the EU. The board must embrace the whole EU, so it would clearly be inappropriate for it to be chaired by the president of the European Central Bank.
Mr. Heathcoat-Amory: I think that I can help my right hon. Friend and the House, because we have the draft conclusions, although we did not obtain them from the Government: we had to obtain them from the Danish Parliament website. It is clear that the Council has already decided to go well beyond macro-supervision by regulating alternative investment funds, undertaking micro-prudential supervision, and setting up a European system of financial supervisors going way beyond what my right hon. Friend suggests. We are really up against it. We are already isolated, and it is apparent from the conclusions already published that the Government have already given in.
Mr. Hague: I suspect that there is a great deal of truth in what my right hon. Friend says. In fact, there clearly is, because he reads from the proposed conclusions. I was about to come to his point about the proposed European system of financial supervisors, which should supplement and strengthen, rather than seek to replace, the role of national supervisors. That is a point of great importance for the Financial Services Authority.
Proposals to give the three authorities proposed in the de Larosière report legally binding powers over national supervisors would represent a significant transfer of power from member states to the European Union, in an area in which Britain has a great deal at stake and the dangers are more apparent than the advantages. Moreover, as the Institute of Directors has pointed out today, the distinction that the Government seem to be seeking to draw between financial supervision and regulation in the proposed system is very dubious.
We want the Government to ensure that the Council makes no hasty decisions on the Commissions communication of last month until the proposals have been properly thought through. As the Lords Committee said,
thorough and careful debate of the alternatives is more important than speed of decision on the outcome.
Given how closely these matters touch on a crucial pillar of the British economy, we would expect the Government to discuss them with EU partners and the
President of the Commission. We would expect them to advocate our national interest with the necessary firmness, not just meekly give in as my right hon. Friend the Member for Wells described, so that there was no doubt about the importance that Britain attaches to the issue.
Mr. Davey: I have a lot of agreement with the right hon. Gentleman, particularly about the need for greater consultation on these matters. Will he explain the general Conservative position? Does the Conservative party support greater co-ordination between nation states on financial regulation, given some of the problems that we have seen in the past two years?
Mr. Hague: We certainly support greater co-ordination, but we do not want to see the end of national supervision and regulation. It is strategically and economically important for this country to be able to continue that. It is possible to get the balance right, but the evidence is mounting that it is going wrong in the negotiations that are now taking place.
Mr. Bailey: I thank the right hon. Gentleman. It is generous of him to give way at this stage in his speech. May I bring to his attention the comments made by the Minister in the other place, Lord Myners, when interviewed by the European Scrutiny Committee? They are broadly in line with the demands that he makes. When asked about national supervisory powers, Lord Myners said that
we are not content with the suggested powers for EU authorities to change national supervisory decisions through binding mediation. We think that this, again, cuts across the basic principle of vesting supervision in national authorities where it is linked to fiscal accountability and responsibility.
Mr. Hague: As I mentioned a few moments ago, I do not believe that there is a huge difference of opinion on that between the Government and Opposition Front-Bench teams, and perhaps not even with the Liberal Democrats. We are questioning the Governments effectiveness and firmness in pursuing the objectives that the hon. Gentleman talks about. The Government are fond of telling us that it is very important to be engaged in Europe and not to be at its margins, but over the past few months it seems that Treasury Ministers have been at the margins of Europe and have not been sufficiently well engaged to protect the British national interest in this crucial area. The debate is about the effectiveness of Government action within Europe rather than about British objectives.
I thank the right hon. Gentleman. Would he go further and say that rather than being at the margins, the British Government have been in the
lead in having common sense in their macro-economic policies and method of dealing with the recession, and that we have done rather better than the eurozone in those matters? Will he confirm what I believe is the sensible view: that we should stay well clear of the eurozone and keep control of macro-economic policy?
Mr. Hague: The hon. Gentleman will know that I will go part way with him on that. Of course we should stay well clear of the eurozone, but I am not going to hazard a guess at the relative severity of the recession in different countries. I suspect that all of us who are suspicious of economic forecasts would do well to avoid such predictions.
There is one more subject that I wish to raise, and I shall try to do so very briefly. I know that the Foreign Secretary is extremely concerned about it, but he did not mention it in his remarks. It is the position in the western Balkans, and I make no apology for taking a few minutes at the end of my speech to raise the matter.
Although Bosnia and Herzegovina signed a stabilisation and association agreement with the EU in 2008, the country seems to be stuck. Important conditions go unfulfilled, few laws are passed, the central institutions are undermined and movement towards the EU is barely discernible. The entity of Republic Srpska continues to unravel some hard-won gains, including reforms required by the EU. Last month, the Republic Srpska Parliament voted to transfer all 68 state powers to entity levels, meaning that that part of Bosnia would no longer be bound by laws passed in the countrys capital. The High Representative in Bosnia has called for the decision to be revoked, but last week, Republic Srpska pressed ahead none the less, reversing the principal achievements in the past 14 years of the international communitys efforts in Bosnia without a single cry of protest, as far as I could detect, from European capitals.
We are greatly concerned that the framework that helped Bosnia make remarkable progress since the end of the war in 1995 is being gradually dismantled. The office of High Representative is expected to close in October. The use of Bonn powers has become unpopular in EU capitals. There is a desire for transfer of power to an EU mission, perhaps prematurely. We hope that the Government will agree with us and make it clear to other European countries that the international High Representative in Bosnia must have rock solid support from the EU and the rest of the international community as he addresses the problems, even if he deems that circumstances require him to exercise his Bonn powers.
The lack of progress in Bosnia in the past three years has been accompanied by the downsizing of EUFORs deterrent capacity. As that trend continues, there are reports, about which Ministers may want to comment, of plans for EUFOR to relinquish its UN chapter VII authority, which we do not believe is justified. I hope that the Government agree that the international executive powers in Bosnia need to be retained for some time, along with a credible enforcement capability, as well as external guarantees for security and the rule of lawin particular the international judges and prosecutors, who are mentoring the fragile state institutions there.
Is not it also the case that stopping the backsliding in Bosnia will require sustained, high-level US involvement? I hope that the Foreign Secretary will pursue with his US counterparts the idea of a new US special envoy to Bosnia to prevent such backsliding. Continued efforts
should also be made through the International Criminal Tribunal for the Former Yugoslavia to achieve justice for victims of war crimes and crimes against humanity.
Mr. MacShane: I am grateful for that part of the right hon. Gentlemans speech. It is a substantive, major contribution and he is absolutely right. May I put it gently to him that the Conservative party continually condemns EU common foreign and security policy and EUFOR, and makes remarks about exactly the work that he mentioned, which undermine it? One cannot be so hostile to the European Union then demand that it become stronger and more authoritative in the western Balkans. I ask not that the right hon. Gentleman make one of his Oxford Union replies to me, but that he reflects on the contradiction between his hostility to Europes common foreign and security policy interventions and the passionate and powerful plea that he has just made at the Dispatch Box.
Mr. Hague: The right hon. Gentleman and I differ in our philosophy of Europe. I see no contradiction between the positions that the Conservative party advocates and wanting a strong EU role in the affairs that I am considering. I have always been comfortable with the EUs taking a leading role on the Balkansalthough I think that that works effectively only when there is strong US leadership on the Balkans; that is why I put that point to the Foreign Secretary.
Since the right hon. Member for Rotherham (Mr. MacShane) effectively agrees with my point, although he doubts my wider analysis, I hope that he also agrees about the important role that Serbia can and should play. Serbia is a European country and should be encouraged on its road to join the EU. We should welcome steps by the Serbian Government to improve their co-operation with the ICTY. However, only when Mladic and Hadzic are in The Hague can we speak about Serbias full co-operation with the ICTY. Only then should we support the coming into force of Serbias interim stabilisation and association agreement.
I understand the argument that imposing such conditions makes it difficult for the reformist Government in Belgrade to withstand nationalist forces, but what stands between Serbia and the EU is not our insistence on full co-operation with the ICTY, but two alleged war criminals, whose extradition Serbia needs to facilitate. I therefore hope that the British Government will stand with the Belgian and Dutch Governments and be firm about that in EU discussions. Perhaps Ministers will be able to comment on that at the end of the debate.
I have taken up a large amount of the Houses time, albeit with a huge number of interventions. There is clearly a wide range of issues that the EU summit should consider this week, including Iran, Pakistan, Burma and the Balkans, and I have not even mentioned Georgia, which I had hoped to. All are major foreign policy issues that would benefit from a cohesive and, in the main, a more robust approach from the European Union, of whichjust so the right hon. Member for Rotherham is in no doubtwe are fully in favour.
We hope that the Government will do everything possible to work hard on those causes. However, we also hope that they will bring about a speedy decision on the Commission presidency, that they will mount a stronger,
albeit belated defence of the national interest in financial regulation and supervision, and that Ministers who have spent too long defending themselves against each other in recent weeks will be vigilant in defending British national interests at this weeks meeting of the European Council.
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