My Committee, the European Scrutiny Committee, will be investigating all these matters with the assistance of evidence from witnesses from all sides of the equation. There is a further problem of whether the treaty to establish the European stability mechanism can come into force before the amendment to the Lisbon treaty, so that member states could allow such a treaty, given that the United Kingdom has not yet ratified it. I would be grateful if the Minister would answer these questions
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when he responds to the debate; I hope that he is listening to what I am saying. We urgently need to know whether the Government have received the fifth, and presumably final, draft. If not, will he tell us when they will, and when it will be sent to the European Scrutiny Committee?
With regard to article 13, will the UK Parliament be involved in the proposed inter-parliamentary conference? If so, will the European Scrutiny Committee be invited to attend? At present no one knows how that arrangement will work in practice—there are serious question marks over the agreement—but we know that it will be determined by German demands and conditions. I do not blame Germany for its pride and defence of its own national interests, but I do not believe that we the UK should pay one penny to provide funds for an EU bail-out which, if it were done within the European Union itself, would be blatantly unlawful.
Mme Lagarde, who is now head of the International Monetary Fund, openly admitted in September 2010 that to save the euro,
“we violated all the rules”.
It is ironic that she should now be in charge of a further attempt to bypass the rules. That is outrageous, and I am glad that America has quite rightly said that it believes that Europe should sort out its own mess. However, that will be achieved through policies for genuine growth, and not through bail-outs with fictitious money and a refusal to face up to Euro-reality.
We now live in peaceful democratic times, and we must therefore insist on our Westminster democracy as the basis for protecting our national interest. Let us therefore get down to the business of letting the British people have their say, and of saving the United Kingdom from impending disaster and the European Union from itself. We must turn our eyes to the sunlit uplands of enterprise and international trade, earn our way in the world by our own efforts and re-create the foundations of true independence of action and prosperity for our own country.
Mr Gareth Thomas (Harrow West) (Lab/Co-op): On a point of order, Mr Speaker. I apologise for interrupting the debate, but my attention has been drawn to media reports about the future of RAF Northolt, which is next to my constituency. Apparently, there might be Government plans to develop RAF Northolt as an alternative to the Boris island airport, or as a satellite terminal for Heathrow. That is potentially of huge concern to my constituents, and I wonder whether you have received a statement from the Government setting out their real thinking.
Mr Speaker: I have received no indication from the Government of their intentions on this matter, but I have a hunch that the hon. Gentleman will pursue the issue doggedly and tenaciously.
12.30 pm
Mike Gapes (Ilford South) (Lab/Co-op):
The decision by the Prime Minister to walk away from potential agreement at the European Council in December is a disaster for our country and for its long-term influence
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in the European Union. No previous Conservative Prime Minister, whether John Major or Baroness Thatcher, had taken such an approach, and we are about to see the consequences of the current Prime Minister’s decision in the developments going on in the European Union this week. ECOFIN met this week to consider the fourth draft of the agreement—on which the House of Commons Library has produced a helpful note—for the proposed inter-governmental arrangement on the future of the eurozone. That fourth draft agreement made some progress at this week’s meeting, but two issues were left for the bigger meeting that will take place in the next few days: further discussion about qualified majority voting and debt and deficit criteria; and the attendance of non-eurozone member states at the summit.
Kelvin Hopkins: I must say that I find my hon. Friend’s speech somewhat astonishing in blaming Britain for the problems in the eurozone. The problem, as the Father of the House said at Prime Minister’s questions yesterday, is that the Germans are refusing to bail out the weaker members.
Mike Gapes: If my hon. Friend looks at Hansard, he will see that I was not blaming Britain for the problems in the eurozone, but saying correctly that our influence in the European Union will be reduced because of the misguided tactics adopted by the Prime Minister.
Mr John Redwood (Wokingham) (Con): Will the hon. Gentleman give way?
Mike Gapes: I will make some progress first.
As a result of the European Union Act 2011, the Prime Minister has boxed himself into a position in which there must be no potential for a referendum in this country. As he was trying to assuage his 81 Europhobic Back Benchers, he took the easy option of making a political decision rather than one in the national interest, which would have been to remain in the negotiations and to carry on trying to influence the outcome. As a result, when discussions conclude on the arrangements, if they are based on the fourth draft agreement—I quote the House of Commons Library Paper—
“the Heads of State or Government of contracting parties whose currency is not the euro who have ratified this Treaty and have declared their intention to be bound by some of its provisions”
“to a meeting of the Euro Summit”.
However, those who did not agree to the intention to be bound by the provisions and were not participating would have no automatic right to attend. The Library paper states:
“This would appear to exclude the UK as a non-Euro, but crucially also a non-contracting State.”
There is a potential, therefore, for us no longer to be in the room, even as an observer, because of our misguided decision in December to walk away from the process.
Mr Edward Leigh (Gainsborough) (Con): Is the hon. Gentleman seriously suggesting that it is wrong not to be in a room that is about as robust as a sinking Italian cruise liner?
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Mike Gapes: I suspect that when the eurozone finally resolves the crisis, whether this week, which is doubtful, or on 1 and 2 March, which might be more likely, and when the 20 or so countries—perhaps 25 or 26, depending on how many of the existing 17 euro countries and the others eventually sign up to the package—agree to abide by the provisions, our influence will cease to be as strong as it has been. As a result, one other thing will develop: the pre-meeting discussions that take place within the European People’s party network, the conservative group that dominates the politics of the European Union—the right of centre, not the left of centre, are in control in the EU—the Sarkozy-Merkel meetings, or meetings involving Poland and the new right-wing Government in Spain, will not include the UK. When the bigger countries pre-cook the agendas, we will not be there and we will not be heard. That is potentially very dangerous.
Mr Redwood: Does the hon. Gentleman not understand that one has to pay to play? If we were in the room, the other countries would expect us to divvy up, as they are short of money.
Mike Gapes: More than half our trade is with the European Union. Our companies, and the future of the City of London and its relationship with the eurozone economy, are greatly affected by what happens in Europe. Those who want to move out to the middle of the Atlantic or who believe that somehow we can reinvigorate the Commonwealth and go back to imperial preference, are not living in the real world for the British economy. Our national interest is to have prosperity and success. As the Chancellor of the Exchequer has made clear, it is in Britain’s national interest for the eurozone to succeed and for the current crisis to be resolved. Clearly, Conservative Members do not agree with the Chancellor’s words. They wish to see the eurozone fail—[Hon. Members: “Rubbish!”] Well, the hon. Member for Gainsborough (Mr Leigh) seemed to say that. If he disagrees, he can intervene again. They want to see the eurozone fail because they believe that somehow that will be in the national interest of this country. It will not.
Mike Gapes: I have no time left.
It is time that the country looked to its long-term national interests, as opposed to the short-term party interests of this dysfunctional coalition. Those long-term national interests are in working consistently and positively in Europe, and recognising that we have potential allies in Europe. However, our misguided negotiating tactics have forced those potential allies away from us. This is the most self-defeating, insane strategy. It is not in our long-term national interests, and it is a shame for our country.
12.38 pm
Damian Collins (Folkestone and Hythe) (Con):
Following the remarks of the hon. Member for Ilford South (Mike Gapes), it should be stated clearly that we can never have a negotiating position, in any area of life, let alone in a European Council meeting, if we are never prepared to say no and walk away from the table. Otherwise, people will believe that we will always capitulate, and
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that nothing we say is worth listening to. That must be one lesson that we take from the European Council in December.
Whatever view hon. Members hold about that Council and the decisions that were taken, we cannot doubt that the European Union is at a fundamental crossroads at which it must confront a number of serious issues that affect all European Union citizens. As the financial crisis has made plain, the European Union—its treaties and economic and monetary union—has not made Europe stronger; indeed, its weaknesses have been made all the more clear. Currency union has not made countries such as Greece, Portugal and Spain competitive with countries such as Germany. In some ways, it has exacerbated their weaknesses. Currency union has made it easier for countries such as Germany to export at low cost across the countries of Europe and has held back the march of competitiveness that should have come in some of the weaker countries.
The mechanisms of stability and convergence created at Maastricht to try to bring economies closer together have, over the years, been undermined by member states and have not been followed. If they had, perhaps the crisis would not have been as great as it is. We are where we are, however, and the challenge for Europe is now a test of nerve— whether it will plough on in the same old way or whether it is serious about embracing change and leading in a fundamentally new direction towards a Europe that is more competitive and open, which embraces the world rather than seeking to pull in on itself.
Kelvin Hopkins: Does the hon. Gentleman agree that if European Union member states had their own currencies and could adjust them to the appropriate parities for their economies, they would all be more able to reflate and we could have better growth and prosperity for everyone?
Damian Collins: The hon. Gentleman makes a good point and I am sure that citizens in Greece, Portugal, Italy and Spain will be asking in whose interest is the survival of the euro as it stands. They will be able to see that it is in the interests of the Germans and some of the stronger economies, as they have an artificially low currency that makes it easier for them to export across Europe. I am sure that is one reason that the German economy has continued to do well. Those citizens will also ask, however, what is in it for them and whether they—and Europe—would be better off in the long run if countries with weaker economies and bigger problems with debt were able to reach a much more sustainable level for their currency.
Chris Bryant (Rhondda) (Lab): In actual fact, in countries such as Spain and Greece there is no such campaign to leave the euro—any campaign, such as it is, is very minor. The vast majority of people accept that the euro is there to stay and they want to make it work.
To return to the hon. Gentleman’s earlier point about the stability and growth pact, the only way that it could have worked would have been if the European Union had had power to enforce audit on countries and to enforce the rules. That is an argument for more Europe, not for less.
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Damian Collins: The problem with the stability rules has been that when there should have been interventions or challenges the opportunity has been ducked. That has allowed countries to fudge the rules, has made a shambles of the stability pact and has undoubtedly led to the crisis we face now. It demonstrates something that many hon. Members have known for a very long time: this was primarily a political project and the objective was to get as many countries in as possible and to keep them in whatever the cost, even if the cost was to the member states.
The other point made by the hon. Member for Rhondda (Chris Bryant) was about the concern in member states about whether staying in the euro is good for them or not. Since the December Council we have seen a greater understanding of what staying in the euro will mean. In effect, as my hon. Friend the Member for Stone (Mr Cash) said in his speech, it will mean that the European Commission will decide on budgets for member states, on debt levels and on spending and will enforce measures through the European Court to correct those states if they do not comply. The price of continued membership of the eurozone will then look increasingly high. I believe that might lead some countries to question whether to stay in—or, perhaps, the markets will make that decision for them. No doubt the events of the next few months will give us a good idea of how that will play out.
The challenge is for Europe not to continue as a fortress Europe, but, instead, to be a market Europe that looks to open itself up to the world. That is the best thing for its competitiveness and prosperity and for the future of all its citizens.
This month, the European Council published “The European Council in 2011” , which looks back at the previous year. The President of the Council, Mr Van Rompuy, said that
“we can draw confidence from the political will we mustered in the past year”.
I am glad that one person in Europe draws confidence from the political will mustered by the European Council, because I think most people see a failure of leadership and a great deal of concern about the effectiveness of that body to lead in the future.
In the same chapter of the book, which is entitled “The road ahead”, Mr Van Rompuy goes on to say:
“The key for the future is to harness the forces of change.”
I believe that is right: Europe needs to harness the forces of change. That requires a change of direction, however, rather than acceleration down the old worn path, which is where it is heading.
The document also states that the level of economic integration—in effect, the creation of a common economic policy—will remain high on the agenda for the European Council this year. It states:
“‘Member States shall regard their economic policies as a matter of common concern’. In 2012, we will further examine a deepening of our economic union, a subject on which I will report to the March European Council.”
“We must demonstrate that the euro is more than a currency: an irreversible project, a common destiny.”
That underlines the concerns that many of us have had for some time that the leaders of the European Council
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and leaders in Europe have been blinded by the political objectives behind the euro to whether it is truly sustainable for those countries.
Hon. Members have already remarked that trade is an important part of our membership of the European Union and that half of our trade is with the EU. That is true, but UK trade figures for the past 10 years show that the growth comes from trade not with the member states of the European Union but with the emerging consumer markets around the world, in Brazil, Russia, China and India. That is common in countries such as Germany, too, because as the world economy grows and there are more consumers, we need to be in the market competing for their goods and services.
Mr Redwood: Does my hon. Friend recognise that because of the Rotterdam entrepot effect of goods going through that port to other parts of the world and because of large service exports to non-EU countries, the true figure is under a third? It is nowhere near half.
Damian Collins: I thank my right hon. Friend for that important contribution. It follows my point that the future of our trade and growth will increasingly lie beyond the borders of the EU and not solely within it. That should not make us any less European; we must simply recognise that the world economy is growing, that it is growing outside the EU and that those economies are increasingly competitive. They have more consumers with more money in their pockets and more demand for the products we can sell. Our challenge, and that for Europe, is to make ourselves open to those markets. Rather than having European rules and regulations, particularly on social and environmental law, that seek to add costs and make us less competitive, we should review them and consider whether they are truly fit for the modern world in which we live. That would give us the chance to compete in this more competitive and growing global economy.
That is the crisis that Europe faces as it reaches its crossroads. Its rules and regulations have created a union that is less competitive than it should be and more weighed down with debt. Currency union has not supported the weaker countries but has emboldened and added weight to the strength of those already strong economies, such as Germany. Those fundamental issues must be addressed as Europe faces its crisis. I believe that they are the issues that the Council must tackle. It will require a more flexible and open Europe in which, I believe, the UK can act as a fellow traveller, setting the course of direction. We must be very clear that if Europe will not move and will not change, we cannot afford to be held back by it.
12.46 pm
Mr Denis MacShane (Rotherham) (Lab): It is a pleasure to follow the speech of the hon. Member for Folkestone and Hythe (Damian Collins), which was measured and considered. He will forgive me if I do not embrace his term “fellow traveller” as Britain’s destiny in the coming years, as those of us who know our history do not really like that language.
I was rather worried when the hon. Gentleman said that “the markets will make that decision for them”, “them” being the people. I rather hope that at some stage we might have some recognition from the Conservative party that markets should be the servants of the people, not their masters.
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Damian Collins: The point I was making was that the markets will make the decision for the European Council members and for the Governments and that if they do not act, they will be forced out.
Mr MacShane: I am very happy to hear the hon. Gentleman gloss over his speech, but that is the point I was making.
I am all for exporting to the BRICs, but their growth rates are slowing. India is talking about a return to “Hindu economic growth” and China might go as low as 8% or 7%, which is a real worry for the Chinese authorities. The same is the case in Brazil—[ Interruption. ] Hon. Members say that that is not bad and, of course, I would love a 7% growth rate for my own country, and I shall come to that. However, rapidly developing countries throughout history have had very high growth rates when peasants and others move from the fields and core industries are developed, but the plain fact is that we export more to Ireland than to all the BRICs combined. Belgium exports more to India than we do. The absurd notion that Brazil, India or Russia, run by kleptocrats, are an alternative to the mature, balanced, middle-class consumer economies of the European Union is not right.
Mr Redwood: Does not the hon. Gentleman understand that the markets that feed and clothe him are the people? The markets we are talking about today are his pension savings, his other savings and those of millions of other people who are trying to protect themselves from the euro disaster.
Mr MacShane: I do not really want to get into a debate about the markets as I am also pro-market, but the markets are also Mr Hester, the hedge fund billionaires and the donors to the Conservative party who make a fortune out of speculation and who have so increased inequalities in the past 30 years that we now have a generalised social crisis that might cause severe dislocation.
I do not share the cataclysmic views that some have about what the Prime Minister did on 9 December. I think he was ill-advised, that he allowed the Treasury to run the negotiations and that the key decision was taken at a time—2.30 am—when no sane person should take a decision. None the less, the plain fact is that across the rest of the European Union there is a sense that Britain does not want to engage or be fully part of the EU. Last week, at a conference with the former French Defence Minister who negotiated the French side of the French-British defence treaty of 2010, I was surprised to hear his extraordinary, virulent attack on what one could call “Albion perfide” and how Britain was no longer a defence player with France, was not prepared to co-operate and was doing all it could, he said, to sabotage the good effects that the treaty would have. That is the reputation we have and that worries me.
It also worries me to hear reports that one of the new intake on the Government Benches, whom I shall not name, said in a conference over the weekend that it would have been impossible to have been selected as a Conservative candidate in recent years—or, indeed, to be a Conservative MP—without showing the most strident Euroscepticism. [
Interruption.
] Well, if there is an exception that proves the rule and if the hon. Member for South
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Swindon (Mr Buckland) is about to make a pro-European speech I shall welcome that. None the less, that is the impression in this country.
Jacob Rees-Mogg (North East Somerset) (Con): Will the right hon. Gentleman give way?
Mr MacShane: I have given way to two Europhobes, and I think three would be too many. It is a real worry when one party, the governing party of our country, is so monolithic—without internal debate, internal division or much internal discussion. [ Interruption. ] I look forward to hearing the speech of the hon. Member for North Wiltshire (Mr Gray) when he makes it.
Then we have the fundamental problem that this Government and the ruling elites of the European Union are at one. Mr Sarkozy, Mrs Merkel, Mr Van Rompuy, Mr Barroso, Mr Rajoy, Mr Berlusconi and Mr Monti are all applying the 1930s austerity recession approach of making the poor pay and protecting the rich, which is the official policy of Her Majesty’s Government. I do not understand why there is any debate or division at all because for the first time those the other major European Union capitals and the Brussels institutions are on the same wavelength as Her Majesty’s Government. That is why there has to be some policy for growth, as people are pointing out again and again. Mrs Lagarde and Mr Soros have pointed that out and Mr Obama is seeking to achieve it.
Government Members are correct to suggest that not only the European project but the entire western, democratic, liberal, rule-of-law, market economy project is under threat because of a generalised crisis based on inequality and the giving of too much power to money and too little power to people. The answer to that must be forms of solidarity. In 1942, at the height of the war, before we had won El Alamein or turned any corner, Winston Churchill sent a Cabinet memorandum to his colleagues saying, “Hard as it may be to say at this time, I think we should start considering the possibility of a council of Europe for after the war. We need to move towards a united states of Europe where all may travel and trade freely. I think we should conduct studies about how to have economic unity.” How extraordinary that at the height of the war—that was not the Zurich speech—Winston Churchill had that vision for what we have half-achieved, perhaps, in my lifetime and certainly in recent years.
That is also why Mrs Thatcher, our then Prime Minister, after pushing through the Single European Act—the biggest transfer of sovereignty ever in British history—supported the arrival of Jacques Delors as President of the Commission. In 1984, our contribution to the EC budget was £656 million, but by 1990 she had increased it to £2.54 billion, quadrupling Britain’s solidarity budget to the then European Community. When asked about that in the House of Commons, she said that of course we should help our poor friends in Portugal and Greece and also implicitly in Ireland and Spain. She was absolutely right. That is why we set up the International Monetary Fund after the war—precisely to deal with imbalances, crises, sudden recessions and, yes, Government incompetences that produce the kind of problems that Greece and some other countries are facing. It is quite preposterous to say that Britain will renege on its obligations to the IMF. I was happy to vote with the Government
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on this in the last Division and I certainly hope that Opposition Front Benchers are not going to play the Eurosceptic card on the IMF question if the matter comes back to the House.
Finally, what do we have today? We have the surreal sight of a British Prime Minister in Davos not enjoying himself on the slopes but lecturing other European leaders on what they should do. What example is he citing—£1 trillion-worth of debt, recession economics, mounting unemployment or mounting poverty? There are mounting concerns all over the world, as the Chinese told the Chancellor of the Exchequer when he was in Beijing recently, about whether Britain is serious about marginalising itself in Europe and not helping to support Europeans with problems through the IMF. If it is, China cannot be interested in Britain because it is not interested in an isolated, protectionist Britain.
We are taking huge risks with our economy and our nation by promoting these new, protectionist, isolationist politics. It is bad enough that we have to live with 1930s, Treasury-driven economics, but it will be a disaster if Britain continues to have the reputation it has sadly earned internationally as a country that wants to turn its back on Europe and that seriously believes its future could lie only in competing with Belgium for exports to India. This is a turning point for our nation. We either break out of this isolationist, protectionist logjam and work in solidarity with the countries of Europe that are growing and creating jobs and that have much better public finances than we have, or we pretend, in our own little sinking ship, that everything is for the best and this is the best of all possible worlds.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. We are in a very serious position with a lot of Members wishing to speak. I am going to have reduce the time limit to five minutes, and even with that limit not all Members will get in if people intervene.
12.57 pm
Martin Horwood (Cheltenham) (LD): First, I congratulate the Backbench Business Committee on selecting this topic for debate, although on this occasion I agree with the hon. Member for Stone (Mr Cash) that it might have been better to debate this issue in Government time as it is critical for this country.
While I am on the theme of congratulations, let me congratulate Sharon Bowles, MEP, on her recent re-election as chair of the economic and monetary affairs committee of the European Parliament. She was once voted one of the top 10 economic regulators in the world and she has presided over innovations such as the attempt to introduce regulation on bankers’ bonuses that would prevent someone like Fred the Shred from ever again walking away with a huge bonus from a failing bank. For that alone she deserves congratulation and I am pleased to see her retaining her place as one of the most influential Liberal Democrats in Europe.
I repeat my earlier congratulations to the Deputy Prime Minister on convening the European Liberal leaders forum on issues relating specifically to this
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debate in London on 9 January. The forum agreed a programme of reform and competitiveness for Europe that would probably unite Conservative and Liberal Democrat Members of this House at least. That is a good example of how to build alliances across Europe and engage with Europe in a proactive way.
It is good to see Britain at the table for the summit. Clearly, there is the main summit, which is supposed to be focusing on prosperity and growth, but there is also the rather important sideshow of the 26 making further progress towards the fiscal compact, which is critical for Britain, and I am very pleased that the Government have made sure that Britain is an active participant in the process, albeit with observer status. I know that Ministers have been active behind the scenes getting Britain involved in the process and making sure, for instance, that the fiscal compact treaty does not spill over into areas outside its proper remit, such as the construction of the single market. As Liberal Democrats have pointed out, that is one of the risks of our relatively isolated situation in Europe.
Mr Redwood: Does the hon. Gentleman think that at this point the power to fine Greece and then fining her would cut the Greek deficit?
Martin Horwood: I shall not be drawn into that. Critically, it is for the eurozone countries to address the crisis in the eurozone. The right hon. Gentleman highlights the important point that just by drawing up a treaty the eurozone countries do not solve some of the rather fundamental problems in the eurozone. In fact, the situation in Greece is becoming increasingly serious and it needs to be urgently addressed—that is even more the case now than in recent months.
The importance of the main business of the summit must not be neglected. Britain’s re-engagement in European affairs is critical and it must be pushed forward. There have already been some successes. My right hon. Friend the Secretary of State for Business, Innovation and Skills helped to create the like-minded growth group, which has pushed forward ideas such as lifting onerous accounting rules from the smallest businesses in this country. I think the group has helped to create a shift in Commission attitudes on the smallest businesses to the point where it has committed to review all existing EU legislation to look for other opportunities to lift onerous regulation from such businesses and to screen new legislation to see whether, wherever possible, the smallest businesses can be excluded. That is exactly the kind of agenda we should be pushing in Europe.
Mr Leigh: I want to make an intervention that the hon. Gentleman and I can both agree with. Does he agree with the point I have been making consistently at business questions that this debate is so important that in future we should have it in Government time, for a whole afternoon, with the Foreign Secretary or the Prime Minister here so that we can ask them detailed questions?
Martin Horwood:
I think that is right, although the point I am making is that the jobs and prosperity agenda should be the focus of such debates. If possible, we should get away from the obsession with structures and treaties. The British Government should be pushing
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the jobs and prosperity agenda at the summit. I have suggested some areas for deregulation and the European Liberal leaders forum drew up a long list of legislation that should be reviewed for possible reform. It included the working time regulations, the temporary agency workers directive, the control of vibration at work regulations, fixed-term employees regulations, part-time workers regulations, control of noise at work regulations, road transport working time regulations and the transnational information and consultation of employees regulations.
Bob Stewart (Beckenham) (Con): Scrap them.
Martin Horwood: I am not at all in favour of scrapping health and safety regulations or those designed to protect workers. They are extremely important. The point is not even necessarily to weaken health and safety and workers regulations in Europe, but to see whether they can be made more flexible and be applied more flexibly domestically. That is another area where the British agenda should be pushed.
There are signs that European Governments are increasingly seeing things our way; it is not just the 15 members of the like-minded growth group. Italy has traditionally been more renowned for a protectionist stance in Europe and has at times had a less than impressive record on implementing single market legislation, but it is now actively implementing measures to liberalise great swathes of its economy and is actively pushing a single market agenda in Brussels that is directly comparable to ours. Spain, under the new Government led by Señor Rajoy, is also moving to undertake major structural reforms domestically and is shifting its position in Europe accordingly. Ministers must build on such possible alliances, which seem to be growing stronger all the time.
There are other things that I probably do not have time to cover in great detail. In terms of promoting jobs and prosperity, it is important to push for the completion of the single market, particularly in the digital and services sectors. External trade is equally important. This morning, I was in a Committee that voted on a new framework agreement that included free trade with South Korea. It could soon be extended to Ukraine and possibly a range of other countries. That is the kind of thing that will drive jobs and prosperity in Europe, not an overly obsessive attitude to EU treaties and institutions.
Mr Deputy Speaker (Mr Lindsay Hoyle): I call Chris Bryant.
1.4 pm
Chris Bryant (Rhondda) (Lab): Thank you very much, Mr Deputy Speaker. I thought you were about to call somebody more senior.
I agree with the hon. Members who said it is a shame that the debate has had to rely on the kindness of the Backbench Business Committee. When I was Minister for Europe it was an important part of our mandate that before we went to a European Council we had to turn up in the House, in Government time, to answer a debate, even if it meant inconvenience for Ministers. It is a terrible shame that the Foreign Secretary is not here. I respect enormously the Under-Secretary of State for
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Foreign and Commonwealth Affairs, the hon. Member for North East Bedfordshire (Alistair Burt), and I saw him assert that he is pro-European, which is great, but it is wrong that the Foreign Secretary is not with us.
I want to raise two issues that are not on the Council agenda but should be. The first is Cyprus. For far too long, the European Union has had within it a divided country, with a divided capital city. It affects many people in the UK; there are strong Cypriot communities in Cardiff and elsewhere in the country. The real problems faced by the Cypriot economy could be resolved easily if one were to overcome the political problems, because Turkey is the fastest growing economy on the borders of Europe. I hope that the Foreign Secretary and the Prime Minister will make it clear that we want progress in Cyprus, and this is no bad time for it, when Greece is trying to resolve some of its own economic problems.
The other foreign policy issue that should be on the agenda is Russia. The elections just before Christmas were a complete and utter farce. In a vast majority of areas, they were corrupt, as every organisation sent to monitor the elections made clear. Absolutely nothing has been done. There have been many warm words from Mr Putin and Mr Medvedev, yet there has been no action. We still have no resolution of the cases of Mr Khodorkovsky and Mr Platon Lebedev, both of whom are purely prisoners of conscience, and not tax evaders. There is also the case of Sergei Magnitsky who worked for a British company.
The British Government should make it absolutely clear that Europe will manage to improve its business with Russia only when corruption is rooted out in Russia. That will not happen if country after country tries to make its own sordid little deals; it will only happen if the whole of the European Union acts in concert and in union to make it clear that Russia has to clean up its act.
I believe in more Europe rather than less Europe. I say that unambiguously. I said to the hon. Member for Folkestone and Hythe (Damian Collins) that enforced audit would have meant that we did not get into the hole we are in, and there are other areas. The United Kingdom was wrong when we decided to go our own way, with Ireland, saying that there were to be no transitional arrangements with regard to people from the new member states working in the UK. One of the reasons why so many people came here was that every other country in the EU was going down a different route. It would have made far more sense if there had been a single European decision on that policy area.
Mr MacShane: At a conference last week, the German film-maker, Volker Schlöndorff said how much he wished that 1 million-plus Poles had gone to Germany and learned German and then gone home imbued with German ideas, language and contacts to build a closer relationship between Poland and Germany. We have made 1 million-plus Polish friends because of our policy; it has been good for Poland and good for us.
Chris Bryant:
I hope we have made a lot of Polish friends. When I was a curate in High Wycombe, we had a long-standing Polish community there, many of whom fled German ideas about Polish people from the 1930s and 1940s. But I still think it would have been better for us if there had been a whole-European decision. We
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underestimated the number of Polish people who would come to the United Kingdom and that was a mistake for our economy.
Anyone from Brazil, China, Russia or India—or, for that matter, Mexico or Turkey—would say that they are all interested in trying to do business with one set of rules in Europe, not 27, on the size of plugs, on electricity, and on many other elements. I believe it is in our interests that we should strive ever more for the extension of the single market, so that we can do better out of the growing economies of the world; otherwise, our future will be on the sidelines, not at the heart, of the world’s history.
I have anxieties about the Government’s attitude on these issues. I know the Prime Minister tries to show a little bit of leg to Conservative Back Benchers and then to his European allies. There is a little bit of leg being shown here, there and everywhere. But the truth is that we need British businesses to be far more courageous about doing business in Europe; they should not just sally forth and speak louder—shout in more grammatically incorrect English than they would to their children—in the belief that they will get a contract. We must have more ambition when it comes to Europe.
I would say to those who said earlier that they praised the Prime Minister before Christmas that—leaving aside my opinion that it is giving the Prime Minister that dangerous element of messianism, which is always worrying for a Prime Minister—the child who has stormed off to his bedroom is rarely the person in the family who wins the argument.
1.11 pm
Mr John Redwood (Wokingham) (Con): I rise to support the Prime Minister. I think he had no alternative but to say no to a very unsatisfactory deal and to a totally inappropriate proposed measure at that Council. Nor do I think he has lost Britain influence by doing it; I think he has won Britain influence by doing it. We learned subsequently that several non-euro member states could not go along with the draft any more than the United Kingdom could. We also learned subsequently that France, Germany and others are now beating a path to the United Kingdom Foreign Office door, trying to get us back on board, trying to woo us because we had the courage to say no.
We meet today because we wish to influence our Government in what they are doing at yet another important European summit. The European Central Bank has bought the Europeans a little time by printing and lending unprecedented sums of money to a very weak European banking system, but those meeting would be wise to understand that that has only bought a little time; it has not solved the underlying problem. Indeed, there are two underlying problems. There is the inability of the southern countries to compete with Germany at the fixed exchange rate within the euro, making them poor and giving them large balance of payments deficits which they have trouble financing; and there is the big problem of the southern states’ debt getting ever bigger. As their economies are malfunctioning, because so many people are out of work and because they cannot price themselves back into jobs, their debts
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and deficits go on soaring, and now in three cases member states of the euro area cannot finance those deficits in the normal way and have to be on life support from the EU and the IMF.
Martin Horwood: On the subject of the right hon. Gentleman’s support for the Prime Minister, will he join me in welcoming the Prime Minister’s remarks this morning in Davos, when he said,
“Let me be clear. To those who think that not signing the treaty means Britain is somehow walking away from Europe let me tell you, nothing could be further from the truth”?
Mr Redwood: Of course the Prime Minister is right that we are in the European Union and all the time we remain in it we have to use our membership as best we can to protect the interests of the British people.
The main purpose of the summit must be to try to deliver greater prosperity and some growth and some hope to the peoples of Europe, because their hope has been depressed and their prosperity is being destroyed by a system that cannot conceivably work. The euro area is now locked into a system of mutually assured deflation, a mad policy, and the more those countries’ economies decline, the more the deficits go up, the more they have to cut. They cannot get themselves out by monetary means, in the way that the United Kingdom and the United States can, by creating more money in their system, and they cannot get out by having a competitive exchange rate.
Mr Redwood: I am sure that was the point that the hon. Gentleman wanted to make.
Mike Gapes: If the right hon. Gentleman is so against the austerity deflation policies in the eurozone, why is he supporting the austerity policies of his own Government?
Mr Redwood: As I just explained, it is totally different if a country has its own currency and can use monetary mechanisms to try to grow its way out of the problems, and can establish an exchange rate that allows it to export its way out of the problems, which is exactly what these countries have to do, yet are unable to do because they are locked in.
Mr Redwood: I have no more injury time available, so I need to develop my argument rapidly.
If those countries are to have some hope of prosperity, they need to solve the two underlying problems. It is obvious to most external observers that the way to solve the problem of competitiveness quickly is to devalue. Normally, an IMF programme for a country in trouble not only asks it to cut its budget deficit and reduce its excess public spending, but suggests that it devalue its currency and move to a looser monetary policy domestically, so that there can be private sector-led growth, export-led growth—the kind of thing it needs to get out of its disastrous position. That is exactly what those countries are unable to do. That is why the IMF should not lend a country such as Greece a single euro or a single dollar. Greece is to the euro area as California is to the dollar
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area: it is not an independent sovereign state, and it cannot do two of the three things that a country needs to do to get back into growth and prosperity, because it cannot devalue and it cannot create enough credit and money within its own system.
We need to give honest advice to our partners and colleagues in the eurozone, around the European conference table—in private, not in public—that the only way forward, the only way to resolve the crisis for those countries that can no longer borrow in the marketplace at sensible rates of interest, is to have an orderly way of letting them out as quickly as possible, so that they can re-establish their own currency, their own looser and appropriate monetary policy and their own banking policy, and offer some hope to their subject peoples.
I am very worried that this is not only an economic crisis, a banking crisis, and a currency crisis, but also now a crisis of democracy. The challenge, in countries such as Greece and Spain, is how the Governments manage to get buy-in to the policy of deflation and cuts with everything that is the only offering from the euro scheme and the euro system. We see in some of these countries now that the electorates do not choose the Government; the European Union’s senior players choose the Government. We see in some of these countries that the electorate change the Government but they do not change the policy. The new Government have to pledge to follow exactly the same policy, which does not work, in order to get elected and to be acceptable to the European Union, in order to carry on drawing down the subsidies and loans from within the European Union that have to be on offer to try to make the system operate to some extent.
I hope that the British Government will adopt the following position. I hope that they will say in public, whenever asked about the euro, that the British Government have no intention of providing any running commentary on the euro whatever or of saying anything that makes the position of the euro worse, but will always give good, strong, independent advice in private. That should be the public position. It is too dangerous to say things. Most of the things that politicians say about bond markets and currency crises make the position worse, so the United Kingdom would be well advised to have a simple formula, which all Ministers use, that we are providing no commentary on the euro and we wish the euro members well in sorting it all out.
In private, we are important allies and partners of the euro area and the British Government need to give honest advice to try to get our continent out of this mess. I do not believe there is a single fix that can solve that problem for all the countries currently in the euro. Many of them went into the euro with inflation rates that were too high, with state deficits and debts that were too high, and with currencies that were not in line with the German currency. It was a huge error. The founders of the euro knew that there had to be very strict requirements; they broke them from day one.
It will not solve the problem to sign up to some new constitutional pact that says that a country down on its luck, unable to borrow money, running out of cash, will be fined. Who will pay the fine? The answer is that the fine would have to be lent to the country in trouble by the very people who are fining it. It is so preposterous that I find it very difficult to believe that serious people can sit round a table, negotiating such an instrument.
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They should cast aside the draft instrument. It is irrelevant; it cannot work. They should sit down in private and work out how to get non-competitive countries out of this mess before even more damage is done to their economies and their democracies.
1.19 pm
Keith Vaz (Leicester East) (Lab): It is always a pleasure to follow the right hon. Member for Wokingham (Mr Redwood) who, in his 25 years in this House, has always been strong and consistent in his criticisms of the European Union.
I add my voice to all those who have spoken in favour of there always being a senior Minister at the Dispatch Box to introduce a debate such as this. When the right hon. Gentleman was a Secretary of State, the Minister for Europe in that Government wound up the debate, which would have been started by the Foreign Secretary, and when I and then my hon. Friend the Member for Rhondda (Chris Bryant) served as Minister for Europe, this debate was considered an important opportunity—perhaps the only opportunity—for Back Benchers to influence the Government as the Prime Minister, the Foreign Secretary and the Minister for Europe went to European summits. I therefore hope the first message the Government will take from the debate is the unity of opinion in the House—I have not heard a single opposing voice—that this should be a debate in Government time, with Members not limited to five minutes in which to state their views.
My second point is to ask the Minister to tell us when he winds up what has happened to the Lisbon strategy. It was agreed at the Lisbon summit in 2000 as part of the Lisbon agenda, developed over 10 years and adopted very recently with a set of five headline benchmarks. Does that strategy still exist, given the eurozone crisis? Are the Government still committed to delivering in those five areas—employment, investment in research and development, education, poverty and greenhouse gas emissions—which were set at the first ever summit to benchmark EU economic policy? Are we on track to do so? I get the feeling from discussions that I have had and from the responses to questions I put to Ministers, including the Prime Minister when he returned from the last summit, that although there is an intention to support the Lisbon strategy, it is certainly not high up on the Government’s agenda. I think that, given that this informal meeting is about growth and jobs, it is extremely important that we have benchmarks for the EU.
My third point is about EU enlargement, of which I am a great supporter. It has been of great benefit not only to the eastern European countries that have joined but to our country in particular. Croatia is due to join in July 2013. The EU has given Croatia €150 million to support its entry, and it will give another €150 million this year and €95 million next year. Will the Minister tell us whether that is the final figure; whether there will be any increase or, because of the euro crisis, any decrease in the amount we give Croatia; and whether that will continue after Croatia joins the EU?
This is a very short debate and we have to make very short speeches, but if those three points can be conveyed to the Prime Minister when he attends the summit and if the Minister can indicate the Government’s position when he winds up, I am happy to conclude my remarks now.
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Mr Deputy Speaker (Mr Lindsay Hoyle): Before calling the next speaker, let me say that, ideally, I will call the first Front-Bench speaker at 28 minutes past 1. I call Bernard Jenkin.
1.23 pm
Mr Bernard Jenkin (Harwich and North Essex) (Con): This debate is being conducted between some right hon. and hon. Members with an extraordinary air of complacency and myopia. The European Union is on the edge of the most appalling crisis—a self-inflicted crisis that many of us predicted when the euro was first conceived in the early 1990s and is now being fuelled by blindness and denial. The fundamental problem is that the euro cannot work—it cannot succeed. There are fundamental structural flaws that are destined to cause the euro eventually to fly apart into separate currencies. I do not want the euro to fail, but the fact remains that the crisis will go on and on until it does fail, so we should start to ask ourselves whether it is, in fact, in our interests that it be resolved quickly and in an orderly fashion, instead of waiting for the markets to do their work.
The fundamental structural problem is that the different national components of the euro represent very different economies, with different surpluses and deficits. The 2010 figures for trade in goods in the eurozone, provided by the Library, show that Germany has a surplus in exports to the other eurostates of €43.4 billion. Other countries have very large deficits: France’s is 4%, Greece’s 6% and Portugal’s 9%. Unless there is a system of fiscal transfers permanently operating to compensate for those surpluses and deficits, the European economies will become ever more out of balance. The debt problem has been greatly exacerbated by artificially low interest rates in countries that were used to much higher interest rates and therefore borrowed vast sums.
Mr Leigh: Is it in our interests that the other countries succeed in creating fiscal and monetary union? We will be excluded from a massive monetary union, which historically—for centuries—we have tried to avoid. Or is it in our interests that the euro gradually breaks up in a reasonably orderly way?
Mr Jenkin: I do not subscribe to the view that British foreign policy should be constantly to try to divide and rule on the continent. Actually, I think it would be in our interests if the euro succeeded with a democratic settlement in the European Union, but for the euro to succeed with 17 nations the institutions would be required to take on much more power, to accumulate much more taxation and to distribute money much more than they do now. I put it to the House that because there is a democratic deficit in the EU, which everyone acknowledges, the institutions lack the legitimacy and the authority to be able to impose their will across the democratic nations of the EU. There is a fundamental lack of consent to what would be required to impose the necessary discipline.
The problem with the fiscal union treaty is that it is a case of Germany trying to write German rules for the whole eurozone. That will not work—it cannot be sustained—and the result will be the break-up of the euro, so we had better start planning for that eventuality
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now. There are three things we should do, the first of which is to have a plan and not pretend that a break-up will not happen. I accept the suggestion made by my right hon. Friend the Member for Wokingham (Mr Redwood) that the plan should be made in secret, but there should be a plan and the IMF should be its guardian. Secondly, the plan should be clear on what liabilities will be denominated in what currencies as each country comes out of the euro—easy for sovereign debt and very complicated for commercial paper, but it has to be done. Thirdly, the G20 must be ready to provide the liquidity needed to deal with the defaults that will occur as each country comes out of the euro—massive defaults that will require massive central Government printing of money to recapitalise the European banking system.
That can be done and it has to be done. My right hon. Friend the Prime Minister was absolutely right to veto the treaty on 9 December. He knows there can be no going back on that decision, because to do so would leave him a position where he might as well have not vetoed the treaty, and then where would we be?
1.29 pm
Emma Reynolds (Wolverhampton North East) (Lab): The debate comes at a crucial time for the eurozone and the wider European Union. Last month’s European Council could and should have taken the vital decisions needed to stabilise the eurozone and boost growth and jobs in the EU, but it failed to do so. Monday’s European Council is a vital chance to make up for previous lost opportunities, but I fear that the Prime Minister’s diminished position in Europe has jeopardised the Government’s ability to achieve and influence that. His walk-out at the previous European Council was a spectacular failure to engage with our European partners. We have a world-class diplomatic service, but the Prime Minister refused to use the talent, professionalism and experience of the Foreign Office and opted instead to let the Treasury run our foreign policy. He decided that keeping his Back Benchers happy was more important than helping our main export market resolve the eurozone crisis. He in fact followed the advice of the Foreign Secretary who, according to various reports, before the last European Council told him:
“If it is a choice between keeping the euro together or keeping the Conservative party together, it is in the national interest to keep the Conservative party together.”
That is the only thing that the Prime Minister did achieve, because he did not stop anything happening. His diplomatic defeatism was accurately summed up by the Deputy Prime Minister earlier this month, when he said:
“The language gets confusing. Veto suggests something was stopped. It was not stopped.”
Martin Horwood: The hon. Lady makes some of the points that I made several months ago and that other hon. Members sympathetic to the pro-European cause made at the time of the summit. Surely we have now moved on. The Prime Minister, in his remarks today at Davos, quite clearly stated:
“It fundamentally reflects our national interest to be part of the single market on our doorstep and we have intention of walking away. So let me be clear: we want Europe to be a success.”
The process of re-engagement is under way.
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Emma Reynolds: The process of re-engagement might be under way, but the Prime Minister’s decision to walk out of a summit that did not have a text to it has undermined our influence in the EU. His spectacular mishandling bought him short-term political respite from the pressure of his Back Benchers, but they will always want more, and we heard that in today’s debate.
Mr MacShane: May I pray in aid the Deputy Prime Minister, who said that the Conservative party in the European Parliament is now allied with “nutters, anti-Semites and homophobes”? The right hon. Gentleman has not resiled from that. That is walking away from Europe. As long as the Conservative party is in alliance with those weirdos, it loses a good part of the political traction that it should have in Europe.
Emma Reynolds: My right hon. Friend makes a valid point. If the Prime Minister had not pulled his MEPs from the mainstream centre right in the European Parliament when he was Leader of the Opposition, he would have found that he had much more influence before the summit, because he would have been in Marseille for the European People’s party meeting in preparation for the European Council summit.
It is of real concern to the Opposition that by isolating the UK the Government have lost influence with our European partners and could lose influence over the single market. Deeper fiscal integration by the eurozone countries does not necessarily lead to the development of separate trade policies or separate decisions on the single market, but that could come about if the UK continues to lose influence.
I understand that the Polish Government are now seeking to secure a seat at the frequent eurozone summits—a logical negotiating position. If they are successful, they would then have a voice, even if they did not have vote, at eurozone summits. As it stands, our Government will be barred from such meetings, leaving the UK without a vote and without a voice, unable to guard against eurozone Heads of State and Government straying into areas of decision making that are relevant to the EU of 27.
Mr Redwood: Will the hon. Lady bring us up to date with Labour’s thinking on any vote that we might face in this House on money for the IMF to lend on to euroland countries in trouble?
Emma Reynolds: As the right hon. Gentleman knows, the Opposition voted against the IMF contribution last time. I think that he might have been in the Lobby with us. We think that the European central bank should be the lender of last resort and that IMF money should concentrate on countries with severe economic problems outside the eurozone.
The Prime Minister’s walk-out also resulted in risks to foreign direct investment. Businesses investing from the US and Asia have chosen the UK for their operations because it gives them access to European markets. But if the UK’s position in the single market were in doubt, foreign direct investment would also be under threat. Moreover, as the Deputy Prime Minister rightly said on the Sunday after the December Council, if the UK stands tall in Brussels, we stand tall in Washington. It is also true that if we stand tall in Brussels, we also stand
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tall in Beijing and the other major emerging economies. With economic power moving south and east, to countries the size of continents, it is nostalgic longing for the empire to think that the UK can go it alone. It was the Minister for Europe, in a recent Opposition day debate, who said that
“without the size of the EU behind us, the United Kingdom on its own is unlikely to be able to secure the same deep and ambitious free trade deals with other regions or trading countries around the world.”—[Official Report, 13 December 2011; Vol. 537, c. 724.]
Mr Cash: Will the hon. Lady give way?
Emma Reynolds: I will in a minute.
The task of Monday’s European Council is both urgent and long term—urgent in that it must address the lack of confidence in European markets, but alongside that the EU must enhance the resilience and capacity of the single market to get back to a sustainable footing in the long term.
We welcome the intention to focus on jobs and growth on Monday, as well as agreeing a fiscal compact. We would prefer the Government, rather than merely commentating on the outcome of the European Council, to be setting the agenda. We hope that their failure in diplomacy will not involve a failure of policy and economics. After all, in the coalition agreement, the Tories and the Liberal Democrats stated that Britain should play a leading role in the EU. The Prime Minister clearly did not have that in mind in December.
Mr Cash: Will the hon. Lady give way?
Emma Reynolds: When the Minister replies, will he clarify one issue? The Deputy Prime Minister has been organising his own meetings, and in some cases he seems to be running his own parallel foreign policy. While it is right for the Government to be building bridges, it is disappointing that the Deputy Prime Minister has thus far chosen not to report the outcome of the meetings to Parliament. Would the Minister therefore confirm whether the Deputy Prime Minister was speaking for the Government when, at the recent European Liberal forum, he said that:
“We believe—
“should, over time, be folded into the existing EU treaties so you don’t get a permanent two parallel treaties working separately from each other”?
At next Monday’s European Council, the British Government at least have observer status, but that is thanks to Chancellor Merkel and Prime Minister Monti, who want the UK back in the room. They see the UK as a leading member state, advocating an extension of the internal market. It is testament to past British diplomacy and previous Governments that many other member states share the view that, with Britain isolated and excluded from these talks, the push for further liberalisation and reform becomes harder.
Mr Cash: Will the hon. Lady give way?
Emma Reynolds: The hon. Gentleman is frustrated, but he will understand that because interventions eat into my time I will continue.
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Britain’s standing in the world—economically and politically—must be reinforced and strengthened, not weakened. The resolution of the eurozone crisis is manifestly in our national interest. It is also in the national interest for the UK to be at the heart of the EU, a large member state with an open economy, arguing for and securing an extension of the single market, arguing for and securing reform of the EU. The UK now needs to regain that position and start rebuilding bridges.
On Monday the Prime Minister should seek to undo the damage caused by what he did in December, diminishing our standing in Europe and the world. It might not please his Back Benchers, but it would be of benefit to businesses, jobs and employees throughout the country. The Prime Minister must start to put the national interest before his party’s interest.
1.38 pm
The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Alistair Burt): I thank the hon. Member for Wolverhampton North East (Emma Reynolds) for her remarks and all colleagues for taking part in this important debate. I thank the Backbench Business Committee for finding the time for this debate on next Monday’s informal Council. We know that there are many calls on the time it has available to allocate, but as it now holds the time previously assigned for European affairs debates, I am pleased that it found time for this debate.
Mr Leigh: It is fantastic that my hon. Friend is here and we greatly respect him, but will he take back to the Foreign Secretary the clearly expressed wish of Members on both sides of the House that we should have a full afternoon of debate in which he is present before any future European summits?
Alistair Burt: I thank my hon. Friend for his generous remarks. As he knows, occasionally colleagues cannot be where they would like to be because of other business, but I have heard what colleagues have said. My hon. Friend the Member for Gainsborough (Mr Leigh) expresses an interest in how the House scrutinises European business, and I will certainly take back to the Minister for Europe and the Foreign Secretary what colleagues have said. I would like to underline the effort and valuable work of my hon. Friend the Member for Stone (Mr Cash) and the European Scrutiny Committee.
Chris Bryant: Will the Minister give way?
Alistair Burt: No, because I might take another intervention on something else. Time is limited and I cannot do justice to everyone.
On Tuesday the International Monetary Fund published its world economic outlook. It revised down its global growth forecasts, mainly because of developments in the eurozone. It now expects the eurozone to enter a recession in 2012, with GDP falling by 0.5%. Those of us outside the eurozone are not immune from that. The ongoing sovereign debt crisis is having a chilling effect on our economy, too. Like my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), I do not want to see the euro fail.
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The eurozone needs to find a credible and sustainable solution to the debt crisis. Beyond that, there is a challenge for all 27 EU member states to release the brakes on growth to generate wealth, jobs and enterprise, and that was very much the focus of the speech made by my hon. Friend the Member for Folkestone and Hythe (Damian Collins).
Mr Robert Buckland (South Swindon) (Con): On the point of improved opportunities for the single market, will my hon. Friend ensure that the Government take a clear message to the Council that work on improved tariff reform between the UK and Japan is vital for the British motor industry, particularly Honda in Swindon, which is a Japanese company based in the UK?
Alistair Burt: I can make no stronger a case for Honda in Swindon than my hon. Friend has made. He is absolutely right to focus on competitiveness, growth and the agenda that my right hon. Friend the Foreign Secretary will take forward there. I appreciate his comments. This informal European Council will rightly focus on growth and competitiveness, and it is vital that it makes progress ahead of the March European Council, which will also focus on growth.
The UK has played, and will continue to play, a strong and positive role in the EU as we and our European partners face the most pressing task of tackling our shared economic challenges. We are leading the arguments for growth and others continue to look to us for leadership. We have spearheaded the work of 16 member states, some inside the eurozone and some outside, in pressing for reforms to support growth. Together we have over the past year secured positive conclusions from European Councils that reflect our priorities. Action is now being taken, as shown by the Commission agreeing to exempt micro-businesses from EU regulation unless a clear case can be made for their inclusion.
Our diplomatic efforts to build alliances for growth continue in the European Council. The UK has agreed growth priorities for the informal Council with the Netherlands, Sweden, Finland, Ireland and Estonia, which will cover: completing the single market; reducing the regulatory burden; what member states should do to improve labour markets; and reaffirming the importance of the external dimension of the single market.
My right hon. Friend the Prime Minister also spoke to the German Chancellor, Angela Merkel, at the weekend to discuss our shared priorities. They agreed that the steps we should take to strengthen growth and fight unemployment, particularly youth unemployment, in Europe will form the focus of the informal Council on Monday. A number of right hon. and hon. Members spoke about our engagement with Europe. The Prime Minister was very clear today when talking about engagement, as my hon. Friend the Member for Cheltenham (Martin Horwood) made clear. In response to the question the right hon. Member for Leicester East (Keith Vaz) asked on Lisbon, I can tell him that the Prime Minister today said in Davos:
“For all the talk, the Lisbon Strategy has failed to deliver the structural reforms we need.”
It has largely been replaced by Europe 2020, which includes the sorts of benchmark the right hon. Gentleman referred to. The fact remains that we need to be bolder
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in the structural reforms we pursue to promote growth. The Prime Minister also said:
“Britain has been arguing for a pro-business agenda in Europe… Over the last year we have spearheaded work with 15 other member states across the EU... This weekend Chancellor Merkel joined me in calling for a package of deregulation and liberalisation policies… But we need to be bolder still. Here’s the checklist: all proposed EU measures tested for their impact on growth; a target to reduce the overall burden of EU regulation; and a new proportionality test to prevent needless barriers to trade in services and slash the number of regulated professions in Europe. Together with our international partners, we also need to take decisive action to get trade moving.”
That is what the EU needs, and that is what the informal Council will concentrate on.
Mr Cash: Will my hon. Friend give way?
Alistair Burt: I have only three minutes remaining, but I will take one further intervention, because my hon. Friend deserves it; we have discussed these matters on many occasions.
Mr Cash: Did the Prime Minister agree with Angela Merkel when she said:
“We will have to get used to the fact that the European Commission… will become more and more like a government”?
Alistair Burt: Alas, I have not had the opportunity to test that quote with my right hon. Friend the Prime Minister, but I will do so as soon as I have the opportunity.
A number of Members, including the hon. Members for Ilford South (Mike Gapes), for Rhondda (Chris Bryant) and for Wolverhampton North East (Emma Reynolds) and the right hon. Member for Rotherham (Mr MacShane), spoke about engagement in Europe. We are engaged. As my hon. Friend the Member for Cheltenham said, the Deputy Prime Minister hosted a meeting of various liberal European Prime Ministers, Commissioners, Deputy Prime Ministers and Foreign Ministers on 9 January to set out the British vision of greater competitiveness and growth across the European Union, because austerity alone will not fix the eurozone
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or the European economies. We have to combine fiscal discipline with a plan for more jobs and more growth, and the Deputy Prime Minister was right to say it.
As for lack of engagement and isolation, I am astonished that the presumption of the hon. Member for Wolverhampton North East in bringing to the House a challenge to the Government when the Opposition’s position is distinctly unclear. We will continue to work hard with our many allies in Europe to advance our interests. It is not isolation; it is defending the national interest. We differ from others in that we are not in the euro and do not want to join. We will not proceed with plans for fiscal consolidation if we feel that we are not protected. We will continue to work hard to advance our interests. One thing that would have made Britain weaker was coming home with a treaty change and no safeguards.
If the Opposition want to criticise the Government’s policy, they need to say what they would have done in office, but last month in the space of 10 days they had three different positions: first they refused to say what they would do, then they said that they would have vetoed the treaty, and then they said they would not have done so. They would have some credibility if they had a policy, and a bit of consistency would help.
This useful debate has concentrated not only on engagement and the like, but on the prospects for next Monday. The UK has an ambitious agenda for growth in Europe, and it is one we share with many like-minded states across Europe. It is also an agenda on which we have made much progress already throughout the last year. We will continue to ensure that we put our national interests first and to have a policy from a united party in relation to the UK interests in Europe. We will continue to look for partners who will share that interest, and at the moment the EU is calling for growth, competitiveness and more jobs.
1.48 pm
One and a half hours having elapsed since the commencement of proceedings, the motion lapsed (Standing Order No.24).
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Strategic Defence and Security Review
[Relevant documents: First Report from the Defence Committee, The Strategic Defence and Security Review, HC 345, and the Government response, HC 638; and Sixth Report from the Defence Committee, The Strategic Defence and Security Review and the National Security Strategy, HC 761, and the Government response, HC 1639. ]
1.48 pm
Mr James Arbuthnot (North East Hampshire) (Con): I beg to move,
That this House has considered the matter of progress on defence reform and the Strategic Defence and Security Review.
I begin by welcoming the Secretary of State to the first full debate on defence in which he has taken part as Secretary of State. In the short couple of months in which he has been in post, he has really impressed the Defence Committee, and me. I have formed an extremely high opinion of him as Secretary of State. I am perfectly well aware that he will be thinking at the moment, “If only I could say the same of him,” but I hope that during the course of the debate we will get to the bottom of some of the issues we face. I also welcome the very fact that we are having the debate, and thank the Backbench Business Committee for at last finding a day on which we can discuss one of the most important issues in the world, and the most important issue of government.
Mr James Gray (North Wiltshire) (Con): I, too, welcome the fact that the Backbench Business Committee has found time for this debate, but does my right hon. Friend not agree that defence should be a matter not for that Committee but for Her Majesty’s Government? This issue should be debated in Government time, not in Backbench Business Committee time.
Mr Arbuthnot: I would hope that this issue could be debated both in Back-Bench time and in Government time, because of its central importance, but as the Committee will see, the pressure on speaking opportunities this afternoon is heavy, so there is a time limit even though there will not be a vote at the end. I hope that that means that we will have further such debates.
Dr Andrew Murrison (South West Wiltshire) (Con): I accept everything that my right hon. Friend says about the pressure on time today, but does he observe that very little of that pressure is likely to come from Opposition Members, among whom there is a desultory turnout for such an important debate?
Mr Arbuthnot: At the moment the Opposition Benches do look rather empty, but let us hope that things will change.
I should like to examine what is different about the United Kingdom. Our role in the world is unlike that of any other. The quality of our armed forces is, I believe, second to none, and that comes mostly from the training that they receive, from the structure of the armed forces and from the fact that they work together in regiments and in units to fight, not actually for their country, and
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certainly not to fight for their politicians, but to fight for each other—so we must be very careful indeed before we tamper with that structure.
We should give thanks, however, to those men and women who lay their lives on the line and are prepared to sacrifice everything they have and everything they are in defence of this country. We are incredibly well served. We need to treat those people well, and I shall return to that point later in my speech, although I shall try not to take too long, as there is such pressure on time.
The UK is different, too, because we are prepared to put our people where our rhetoric is: we are prepared to fight when force is needed. In spite of that, we are seen as a force for good, and in that respect I draw one comparison with one other country: Germany. Germany is doing really valuable work in Afghanistan, and it is led by German politicians often in defiance, almost, of the beliefs and values that, largely at our instigation, have grown up in Germany since the second world war. When one goes to Germany and asks, “Why can you not contribute more to NATO operations?” one finds that they say, “Well, you’ve always been telling us not to fight; you’ve got to make your minds up.” We are gradually getting there, and in Afghanistan we are seeing a really valuable contribution.
I want, nevertheless, to read out a quotation from May 2010:
“In my estimation…we—including society as a whole—are coming to the general understanding that, given this strong focus and corresponding dependency on exports, a country of our size needs to be aware that where called for or in an emergency, military deployment, too, is necessary if we are to protect our interests such as ensuring free trade routes or preventing regional instabilities which are also certain to negatively impact our ability to safeguard trade, jobs and income. All of this should be discussed and I think the path we are on is not so bad.”
That is not an unexceptionable thing to say, but it was said by the President of Germany in an interview in May 2010, and because of those words he was forced to resign as President. That is a real issue. Britain is one of the few countries in Europe which is really prepared to put its forces where its rhetoric is, and we should be praised for that.
We have a history of involvement with most of the world. At one stage or another we have owned most of it, and many borders over which we now see disputes are probably our fault. Nevertheless, as a result of those historical issues we have, throughout the world, relationships that we need to preserve and that those parts of the world want us to preserve. We also have a history that is born out of our prosperity, and our armed forces have a real role to play in that.
Owing to all that uniqueness, that difference between the United Kingdom and others, our alliances and our position in huge alliances, we have huge ambitions to match that history, but what we do not have any more, to match our lofty ambitions, is the resources required to back them up. There is a clear contradiction between what the Government said in the strategic defence and security review about rejecting the shrinkage of UK influence throughout the world, and the reduction of the money that we spend on the Ministry of Defence and the Foreign and Commonwealth Office. We may well have to reduce the money that we spend on those Departments, but our ambitions should be reduced to match it. We now spend less on the Foreign Office than on the winter fuel allowance. That is a striking statistic.
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I have no objection to this Government and this country being committed to hitting the target of spending 0.7% of gross domestic product on international development; I am proud, actually, of that ambition, that aim and that goal, because our role of defending our interests extends to, for example, preserving the stability of countries such as Pakistan and Afghanistan, and our international aid effort is important in that. In that respect, however, I ask one brief question: why is the stabilisation unit being withdrawn from Afghanistan in 2014? Although I took some time to come around to any agreement with the idea, I fully understand that our combat troops should be removed from Afghanistan by the end of 2014, but the stabilisation unit is precisely the reverse of combat troops. The current expectation is that 25% should be withdrawn this year, 25% next year and the rest by the end of 2014. The Government should reconsider that.
Equally, I have no objection to defence having to bear its brunt of deficit reduction. When, as in the past day or two, we hear that our debts are now £1 trillion, we have no choice, and let us remember that the greatest weapon—the greatest defence—a country can have is a strong economy. Indeed, we should not object to the fact that defence has to play its part in trying to produce that strong economy, but to pretend that while we reduce our defence resources we can be as strong in terms of our armed forces as we were before is wrong.
On the Defence Committee’s role, I return to the issue of treating the armed forces fairly, touching briefly on the little local difficulty that was produced by our report this week on the Ministry of Defence’s annual report and accounts. It is of course regrettable that for five years running the MOD’s report and accounts have been qualified, and it would be nice to have a true and fair view of what it has to spend and what its assets are, but the point that has obviously hit the headlines is the impression of unfairness created by compulsory redundancies among the armed forces but not among civilian personnel.
We have asked, therefore, for a compelling and persuasive reason why the one should be so and the other should not. If the answer is, “So many redundancies have been applied for in the civilian services of the Ministry of Defence,” perhaps that is because morale in that area is so low. If that is the answer, it is an issue that my right hon. Friend the Secretary of State really needs to address. If the answer is, as the permanent secretary told us, that civilians are flexibly employable whereas the military is not, that too is something that the Secretary of State needs to address. However, I do not believe that to be the right answer. I have heard the Secretary of State ask what else we could have done. I am afraid that four reasons for the disparity have now been explained to the Defence Committee, and without knowing the real reasons we cannot help to find an answer. We have, at least, highlighted the issue.
The relationship between my right hon. Friend and me, and the Defence Committee and the Ministry, is not cosy—quite right, too; it should not be. Nor should it be a relationship of antagonism and a feeling of “They are the enemy”. We do not regard the Ministry of Defence as the enemy, and we hope that we can move to a position in which the Ministry does not regard us as the enemy.
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The Secretary of State for Defence (Mr Philip Hammond) rose—
Mr Arbuthnot: I can quite see my right hon. Friend answering, “Well, this is a funny way to go about it,” but I will give way to him none the less.
Mr Hammond: I am tempted to say that it is even a grotesque way, Mr Deputy Speaker. In the spirit of my right hon. Friend’s remarks, perhaps I can try to help him. I understand his concern about the voluntary and compulsory redundancy numbers, but the simple fact is that we have set out a trajectory of headcount reduction among the civilian employees of the MOD and among the armed forces. At each tranche we have called for volunteers, and enough volunteers from the civilian population have come forward for no compulsory redundancies to be required. There has been an insufficient number of volunteers from the military population so, regrettably, compulsory redundancies have been required. I do not rule out the possibility that compulsory redundancies will be required among the civilian work force in future.
Mr Arbuthnot: My right hon. Friend is, as always, helpful. I hope that he will now address the issue on which there is some dispute of fact—whether those in the military on whom compulsory redundancy is imposed are allowed to offer themselves for retraining; we have heard variously both that they are and that they are not. That is an important issue.
I now turn to the strategic defence and security review—although I do not want to take too much longer because a large number of people would like to speak. One of the main aims of the Defence Committee is to see how the next strategic defence and security review, in whatever year it will be—2014, 2015, 2016; we do not yet know—can be better than the last one. Our criticisms of the last one included the fact that it was rushed to fit in with the comprehensive spending review, and was therefore undertaken without sufficient consultation with academia, industry, Parliament or the country. I heard my right hon. Friend the Prime Minister say that taking longer over decisions does not necessarily make them better, and that is true, but having proper full discussion in the country before such decisions are made would make them more informed.
Thomas Docherty (Dunfermline and West Fife) (Lab): Does the Chairman of the Defence Committee agree that there was insufficient consultation with our closest allies about the implications of the SDSR?
Mr Arbuthnot: Yes, I do. Embarrassingly, I was fully consulted by the French Government on the introduction of their “livre blanc”, and I felt honoured, but I have no impression that the chairmen of the Assemblée Nationale or Senate committees were similarly involved in the discussion of our strategic defence and security review. That is one example of how, although Anglo-French co-operation is very good, it could still work a bit better.
There was no sense in the strategic defence and security review of a discussion of what sort of country we wanted to be, and the threats that we were facing, followed by a decision about how we were going to face
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those threats. Instead, there was a feeling of, “This is what we can afford, so these are the threats against which we will defend ourselves,” whatever those threats turn out to be.
For example, we now have six Type 45 destroyers. Why is six the right number? The original number was going to be 12, then it was cut to eight and then to six. When I was a Defence Minister we used to say that the right number of major ships was about 50. Why is it that now about 19 can defend our interests around the globe? However powerful a Type 45 destroyer is, it can only be in one place at any given time. There is also a concern about a loss of contingent capability. We always get wrong our predictions about the wars that the country will face, so we must be able to address unpredictable concerns that may arise.
However, there are many things to praise in the SDSR. The cyber-strategy, very welcomingly, refocuses the Ministry of Defence, other parts of the Government and industry on future issues. It is partly to welcome that that the Defence Committee is doing a series of inquiries into the cyber-threats that we face.
Lord Levene’s determined look at reforming the Ministry of Defence is radical. A number of my right hon. and hon. Friends, and other right hon. and hon. Members, feel that in some respects his work may be too radical or going in the wrong direction, but the Defence Committee will look at that issue, too. Bernard Gray’s focus on changing defence procurement already looks extremely promising; the Defence Committee has always been extremely impressed when he has appeared in front of us.
I shall end as I began. In the interests of mending fences, I wish to repeat, with praise, what the Secretary of State said to the Committee in December:
“If there is one clear lesson, it is that we have to move away from managing this business for cash to managing it for value, and that is the transition process that we are now into.”
As I said at the time, if my right hon. Friend can achieve that, he will turn out to have been a great Secretary of State.
Mr Deputy Speaker (Mr Lindsay Hoyle): I remind hon. Members that there is an eight-minute limit on speeches.
2.7 pm
Mr Nicholas Brown (Newcastle upon Tyne East) (Lab): It is a pleasure to follow the Chairman of the Select Committee in this debate. I wholeheartedly identify myself and my constituents with his tribute to our serving personnel; that issue would never divide us.
I also want to take up the theme that the right hon. Gentleman began and place these matters in the context of the public expenditure circumstances that face our country. But before I do so, I, too, would like to welcome the Secretary of State to his new responsibilities. I am pleased that he is here, taking an interest in this Back-Bench debate, and I wish him well in the difficult duties that he has in these strained circumstances.
I want us to look again at the case for Britain’s independent nuclear deterrent. I know that that will probably not be popular on either side of the House;
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others can make their points as the debate progresses. Given the current circumstances, it is time to consider the question again. The Government projects a total cost of £15 billion to £20 billion for the Trident successor programme. Independent research has suggested that the total cost would come in at three or four times that figure and our past experience with such big defence programmes suggests something similar.
Dr Julian Lewis (New Forest East) (Con) rose—
Mr Brown: I remember giving way to the hon. Gentleman the last time I spoke in a debate of this character, back in 2007. I bet his intervention is about the same point.
Dr Lewis: Conservative Members are nothing but consistent on this issue. I remind the right hon. Gentleman that the Polaris fleet and the Trident submarines came into service on time and within budget.
Mr Brown: The hon. Gentleman presumably hopes that that will be the case in the future. However, I challenge him to point to any other defence programme from which he could extrapolate that conclusion. I know that he follows these matters with care, but I cannot think of another programme. He is right to point out the special cases of those procurements in the past, but I am not reassured that they will be repeated in the future. In any event, that point is not at the heart of my case. No matter how one looks at it, this is a very large sum of money to spend. My point is that we should look carefully at whether we should spend it.
The maingate decision on final renewal has been pushed back until after the next general election. The cost of that is said to be an additional £1.5 billion to refurbish and prolong the lifespan of the existing fleet. Parliamentary answers from Defence Ministers show that upwards of £2 billion has already been spent on preparatory work for the manufacture of the new submarines.
The Government clearly intend to press ahead with Trident renewal. In my opinion, they should seek explicit parliamentary authority for doing so. The failure to hold a vote in Parliament on the renewal of our independent nuclear deterrent is because of the inability to reconcile different views in the coalition. The question that faces us is whether an independent nuclear deterrent is a good use of such a large sum of public money in the present circumstances. The arguments, which were never that strong, are now moving away from Trident renewal.
Dan Byles (North Warwickshire) (Con): I am listening with great interest. Does the right hon. Gentleman not agree that a long-term strategic decision, such as the replacement of our nuclear deterrent, should not be taken in the context of the current short-term economic conditions?
Mr Brown: I will come on to deal with that precise point. I have no quarrel with the hon. Gentleman for making it.
The current Trident system relies heavily on US logistical, capacity, technological and military know-how. It is nearly impossible to imagine any circumstances in which we would launch a nuclear attack, much less that we would do so independently of the Americans. Likewise,
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were Britain to be attacked by a nuclear power, the terms of our membership of NATO would require a joint response by all members, including the US.
Mr Bernard Jenkin (Harwich and North Essex) (Con): Will the right hon. Gentleman give way?
Mr Brown: I cannot give way because of the rules on these things.
NATO is a mutual defence pact. It is a fundamental strength that its armoury includes the nuclear capability of the US. There has always been a question over why Britain needs to duplicate NATO’s nuclear capability, rather than more usefully supplement its conventional capacity.
When I first entered Parliament in 1983, I resisted joining the Campaign for Nuclear Disarmament. I did not support our decision to go ahead with an independent submarine-based system of our own. However, I did support Britain’s membership of NATO, which CND did not. At the time, that was regarded in the Labour party as a very establishment and right-wing position. It is a small irony of Labour politics that the same position is today seen as very left-wing.
When the decision was taken to adopt the Trident system in the early 1980s, there was an understanding that in exchange for non-proliferation by the non-nuclear powers, there would be restraint by the existing nuclear powers, in particular the US and Russia, when it came to further weapons development and upgrades. That idea was enshrined in article VI of the nuclear non-proliferation treaty. It can be argued that that has been more honoured in the breach by countries that did not possess a nuclear capability, but that do now. The underlying principle, however, seems to me still to be sound.
The large financial outlay that the Government are committed to in planning to replace our independent deterrent could be better spent in a number of ways. During the economic boom, I argued that we ought to better equip our troops, invest in the specialist field of anti-terrorism capability in line with the real threats that we face, and supplement our existing overseas aid budget. We now face new threats. To take one example, the money that we spend on Trident could be used to bring down substantially the tuition fees of every student. I think that cutting a generation adrift from higher education poses a bigger threat to our nation than the idea that a foreign power with nuclear weaponry would uniquely threaten to use it against us, and not the rest of NATO, and would somehow be able to disapply NATO’s founding terms. The real nuclear dangers of the future come from rogue states and terrorism. The possession of an independent nuclear deterrent does not make us safer. A better investment would be in anti-terrorism capabilities.
Three main arguments are put forward by proponents of Trident replacement. The first is that it is the best weapon that money can buy. The second is that it guarantees a seat on the United Nations Security Council. The final argument is that it contributes to our ability to punch above our weight in the world. I argue that it is not much of a weapon if the circumstances in which it may be used cannot be envisaged. Fundamental reform of the United Nations Security Council is long overdue
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and the difficulty, as we all know, is getting agreement on what that reform should be. I also think that other countries might like us more if we stopped punching above our weight in the world. We might be better thought of by the international community if we settled for being the medium-sized European nation state that we are, rather than the imperial power that we used to be.
We have a choice as a country: do we want to continue to drift into spending billions of pounds on supplementing a nuclear capability that we already possess through NATO or do we want to spend that money on tackling the problems that Britain actually faces in squeezed economic times? Surely we should resolve this issue now with a vote in this Parliament.
2.16 pm
Mr Julian Brazier (Canterbury) (Con): I will not respond to the right hon. Member for Newcastle upon Tyne East (Mr Brown), because I am confident that one or two of my hon. Friends will do so. Instead, I will talk for a few minutes about defence procurement.
Twenty-five years ago, I was responsible for carrying out a survey with three colleagues as a management consultant to compare the procurement systems in seven western powers. It is depressing, a quarter of a century on, how little things have moved on from the issues at that time. I remain convinced, as I was at the end of that process, that Britain is about average or a little above average, and not as inefficient as it is presented to be by some commentators.
I share the view of the Chairman of the Defence Committee that Bernard Gray is exactly the right man in the right job and that his report is excellent. I am deeply concerned that much of Lord Levene’s report will undermine some of Bernard Gray’s best and most important ideas, much as I respect the noble Lord and the work that he did in procurement at about the time I was a consultant.
There is time to touch briefly on only four points, of which two relate to the procurement function and two to the Ministry of Defence. My first point is that Bernard Gray is absolutely right to point to weaknesses in the contract staff, who are grossly underqualified for the job of stacking up against the highly competent lawyers employed by the other side. In project after project, we have found ourselves badly damaged by the small print.
My second point is about project managers. Gray, Levene and everybody else who has looked at this matter have concluded that we need more continuity in project managers and that they need to be professionally trained. Nevertheless, we are out of line with most other countries in concluding that project managers should be civilians. The most efficient procurers in the world remain, in my view, the Swedes. Their project managers are overwhelmingly military. They are in post typically for four to five years and they are properly trained before they become project managers. The problem, particularly on the army side where there are large numbers of comparatively cheap interlocking projects, is that if civilians are in charge of the projects, as in France, one ends up with lots of detailed user-problems that would have become obvious earlier if they had been before a military project manager. That is why
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France, despite spending far more on research and development than any other continental country, does not have a particularly good record on land vehicles.
My third point goes more to the heart of the distinction—in my mind, anyway—between Levene and Gray. The heart of Gray’s report—perhaps his single most important recommendation—is at point 4 in his summary, where he says that we must
“Clarify roles and create a real customer-supplier relationship between the capability sponsor (MoD centre)”—
—this is a distinction that we, alone in the whole world, developed before the second world war—
“and project delivery (DE&S)”.
He goes on to stress that the Deputy Chief of the Defence Staff (Capability) is the man who has to drive this. In contrast, Peter Levene suggests that DCDS (Capability) should be merged with one, or possibly two, other functions out of a long list—that it should be downgraded—instead of having, as Gray recommends, one board whose secretariat and day-to-day policing should be provided by DCDS (Capability) to oversee the process. In Levene’s structure we would end up with a complete muddle, with, in effect, four different bodies considering these matters—the new Defence Board, which is all-civilian except for the Chief of the Defence Staff, and the three armed forces themselves. That would take us halfway back to pre-1936.
Bob Stewart (Beckenham) (Con): If the move is to make the CDS the commander-in-chief, and therefore in charge of the Army, with the same going for the other two services, surely it is proper that such people are represented on the Defence Board, if not particularly within the Ministry of Defence?
Mr Brazier: I thoroughly agree with my hon. Friend. I was about to come to that as my fourth and final point, but let me first finish my remarks on capabilities.
There is a very important reason, which Bernard Gray fingers exactly in his original report, for having a proper supplier-customer relationship. In the second world war, the Luftwaffe had a much more powerful research and development and industrial base, but the RAF, because it had a separate capabilities group, was able to make sure that all the pieces interacted so that we did not have problems with fighters that could not talk to bombers, and so on.
The A300M is a modern example of where that structure has broken down because—Gray criticises this—the capabilities staff have got weaker, and they will get a lot weaker still if the Levene recommendations are adopted. This aircraft is being bought for the Air Force—I have huge respect for Air Transport Command because of the brilliant work it has done in Afghanistan—but the user is the Army. Bizarrely, we have managed to arrive at a point where we are choosing to buy an aeroplane that is much more expensive than its tried and tested competitor, the Hercules, on the grounds that it can carry one armoured vehicle per aircraft whereas the Hercules cannot. If asked, the Army would say that armoured vehicles usually go by sea—it has C17s if it has to move them by air—and that it could not afford most of the armoured vehicles it wanted
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anyway. A strong central capabilities directorate would probably have been able to get a grip on that. Furthermore, the problem is as much in the detail as in the big picture.
That brings me to my fourth and last point, which was anticipated by my hon. Friend the Member for Beckenham (Bob Stewart). Some countries, particularly on the continent, do not allow executives on to their company boards; we would say that their company boards are all non-executive. Putting those countries to one side, in all my years as a consultant—I worked on all six continents—I never came across a successful company anywhere in which the heads of the main operating divisions were not on the main board. Peter Levene’s recommendation that the individual chiefs of staff should not sit on the Defence Board is bizarre. If one puts that alongside my third point about capabilities, with the greater powers that the individual services are going to take back from the centre to monitor projects, one can see that it is a recipe for increased in-fighting and for a reduction in interoperability. That is a big step away from joined-up defence.
I should like to end on a more positive note. With Bernard Gray, who is probably the best informed and best equipped man in the country, being put in charge of procurement, there is a fair chance that he will manage to overcome many of these problems. Certainly, under his leadership the performance of the procurement function itself will move from being a little above average internationally to being among the best. However, if we simply implement at the centre the Levene reforms as they are constituted—I have mentioned two of the weaknesses, and I could go into some of the others in detail—there is a risk that, in this area and in several others, we may undermine long-term defence planning.
2.25 pm
Mrs Madeleine Moon (Bridgend) (Lab): I fear that the strategic defence and security review was a cost-cutting exercise rather than an exercise that focused particularly on the defence needs of this country. As those who know me are aware, I have a particular worry about maritime patrol capability.
Following the decision to scrap the Nimrod MRA4, we have been left with no maritime patrol capability. The £6 billion Nimrod fleet is now ancient history and resting in a scrap yard somewhere. I do not want to spend any time discussing that again, but I want to consider where we stand without the capability that it would have provided. The former Secretary of State for Defence, the right hon. Member for North Somerset (Dr Fox), summed up the problem in his infamous letter to the Prime Minister:
“Deletion of the Nimrod MR4 will limit our ability to deploy maritime forces rapidly into high-threat areas, increase the risk to the Deterrent, compromise maritime CT (counter terrorism), remove long range search and rescue, and delete one element of our Falklands reinforcement plan.”
I want to examine each aspect of that assertion—first, the rapid deployment of the maritime forces into high-threat areas. The maritime patrol aircraft is there to protect our nuclear deterrent. In mid-December, The Scotsman reported that a Type 42 destroyer had to be dispatched when a Royal Navy battlegroup appeared off the coast of Scotland. [Hon. Members: “Russian navy battlegroup”] I am sorry—I meant a Russian navy battlegroup. Did I say “Royal Navy”? That is a real Freudian slip—I do
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apologise. Clearly, my meetings with Alex Salmond have left things in my brain that I should not have brought forward. A Russian navy battlegroup appeared off the coast of Scotland, as have a number of Russian submarines. In addition, Russia is building a new fleet of submarines. In the past a Nimrod would have been dispatched to keep a watchful, discreet eye. Instead, we sent a Type 42 destroyer. Without the MPA, we do not know who is out there or what risks we face.
Scotland is a part of what we should consider our back door—the high north. We spend very little time focusing on that region, but we ignore it at our peril. We tend to forget that we are a northern European country, and that the high north is growing in significance. Without a comprehensive maritime patrol capability, we cannot address the strategic and economic importance of the high north. As the ice melts in the Arctic ocean, the 160 billion barrels of oil that are assessed as being in that region are becoming more accessible. No one dreamed of those sea routes being opened up, or of the 40-day saving on travel made possible by the Suez canal being available for our shipping lanes. Without the MPA, we cannot keep an eye on those shipping lanes to watch for military deployments or respond to any disasters, whether they are environmental, security-related or human.
Mr Arbuthnot: I am grateful to the hon. Lady for giving way and particularly for the extraordinarily good work that she does on the Defence Committee, including in drawing our attention to issues such as the high north. In the comments that she just made, was she also making a comment about some of the possible implications of Scottish independence?
Mrs Moon: It is vital that the House addresses the issue of defence in relation to Scottish independence. I hope that, with the Chairman’s agreement, the Defence Committee will include it in our future programme. It is a matter of grave importance to the security and defence of the United Kingdom, and we should take it extremely seriously.
I turn to maritime counter-terrorism. On a visit to Northwood, information was given to me that having one Nimrod, a maritime patrol aircraft, was the equivalent to having 12 ships. We have only 19 ships, and we no longer have MPA capability. We have the increasing problem of countering piracy, which is a form of criminal maritime terrorism. Naval command said last year that 83 warships were needed to ensure a one-hour response time to merchant ships attacked in the high-risk area, yet in October only 18 vessels were deployed. The area of risk is huge—2.5 million square miles—and over the next 20 years, the volume of trade going by sea will increase by 50% and Navy cover will drop by 30%. Tracking rogue ships over such a wide area needs maritime patrol capability, which we do not have.
Counter-piracy operations conducted through NATO and through EU NAVFOR—Naval Force Somalia—rely on the resources provided by members. The availability of MPA fluctuates according to demands elsewhere, and operations in Libya meant that those limited resources were diverted. We face increasing numbers of attacks in the Indian ocean, the strait of Hormuz and now off the west coast of Africa.
Our reliance on the sea is enormous. In 2010, 35% of our total natural gas imports arrived by sea. By 2020, 70% will be imported in that way. Some $952 billion of
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trade a year passes through the Suez canal, and piracy costs the international economy between $4 billion and $7 billion a year. Those figures are being passed on to taxpayers through the rising cost of the goods transported through the region.
There are huge problems with the proposal to post armed guards on merchant ships. I have particular concerns about the rules that would be needed to govern the licensing of firearms on UK-flagged vessels, and about what would happen to the pirates who were captured. Kenya is no longer willing to help. How will pirates be transported to third countries for trial, and what will the legal position be of both the pirates and the maritime security company that transports them there? Are we in danger of giving rise to the issue of rendition?
I turn to our long-term search and rescue obligations. In 2010 our Nimrods were called out between 30 and 40 times to assist with search and rescue. We have an international responsibility for search and rescue covering 1.2 million nautical miles, but in a collection of letters in The Daily Telegraph in 2010, one writer said:
“I advise mariners to avoid requiring rescue more than 250 miles from shore.”
Without a maritime patrol capability, our capacity to rescue our seafarers is removed.
I wish briefly to consider the Falklands. I remind the House that when the invasion started on 31 March 1982, a Nimrod arrived at Ascension island on 6 April. A battle group of Harriers did not arrive until 1 May. That maritime patrol capability gives us the flexibility that we need, and it is a matter of great urgency that the House is advised on when it will be restored.
2.34 pm
The Secretary of State for Defence (Mr Philip Hammond): Let me begin by paying tribute to Signaller Ian Sartorius-Jones of 20th Armoured Brigade Headquarters and Signal Squadron, who died on operations in Afghanistan on 24 January. Our thoughts at this difficult time are with his family and friends. All of us in this House are acutely conscious of the sacrifices being made in Afghanistan on a daily basis by the men and women of our armed forces. The experience of my first 100 days as Secretary of State for Defence has only reinforced my admiration for their selflessness, dedication and bravery, as well as for the commitment and professionalism of the civilians who support them. They are rightly a source of great pride to the nation.
I congratulate my right hon. Friend the Member for North East Hampshire (Mr Arbuthnot) on securing this debate on behalf of the Select Committee on Defence, and on his speech, most of which I wholeheartedly agreed with. I am delighted to have the opportunity to address the House on the defence reform programme that I have inherited, on my approach to it, and on how I will take forward the delivery of the defence outputs required under the strategic defence and security review.
Mr Gray: Does my right hon. Friend remember—perhaps he would do so nostalgically—the days when we had at least three debates annually on defence on a Government motion in Government time? Does he agree that this should be a Government debate rather than a Back-Bench one?
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Mr Hammond: My hon. Friend will know that the Government took a decision to give a large slug of parliamentary time to the Backbench Business Committee, to be allocated according to the priorities that Back Benchers identify. That was a bold decision for a Government to take. The result is that we have that defence debate today. I hope the Committee notes, as my right hon. Friend the Member for North East Hampshire said, the strong attendance, and that that will mean we have more defence debates on Thursday afternoons in future.
I am delighted also to have the opportunity to address the House—I have said that once so I will not say it again.
Mr Jim Murphy (East Renfrewshire) (Lab): It was pretty good.
Today’s debate is about the reform of defence. That reform is for a purpose. Sometimes, amid the minutiae of budgets and organisational structures, we need to take care not to lose sight of that purpose: the defence of this nation and our dependent territories against those who threaten our security and our national interest.
The challenge we face is to deliver that defence on a sustainable basis within a resource envelope that the country can afford. That challenge must be set in the context of the fiscal and economic circumstances, as other Members have noted. History tells us that, without a strong economy and sound public finances, it is impossible to sustain in the long term the military capability required to project power and maintain defence. The debt crisis is therefore a strategic threat to the future security of our nation and to the security of the west. Restoring sound public finances is a defence imperative as well as an economic one, and defence must make its contribution to delivering them.
James Morris (Halesowen and Rowley Regis) (Con): Does the Secretary of State agree that, in times of economic austerity, it is important that we develop collaboration with our NATO allies to enhance capabilities, so that we can engage with allies to combat some of the threats that we face?
Mr Hammond: My hon. Friend is absolutely right. Part of the answer to the questions raised by the hon. Member for Bridgend (Mrs Moon) is collaboration with NATO allies. They can share assets that they have and that we do not have, and we can reinforce their capabilities in other areas. The smart defence agenda is an important one—it involves collaboration among NATO allies in procurement to ensure that we get the best defence effect we can get with the limited budgets available.
As I have said, defence must make its contribution to delivering sound public finances, so even if the defence programme that we inherited had been in good shape, the spending review and the SDSR would have had to find savings to contribute to overall deficit reduction. However, the defence programme that the Government inherited was very far from being in good shape. At its heart, it had a £38 billion black hole filled with procurement projects that were at best hopelessly over budget and out of control, and at worst pure fantasy. They were
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projects announced by politicians—actually, mainly one politician—without any budget cover or prospect of ever being delivered, in a programme that had no proper contingency, no effective recognition of risk, and no provision for the “conspiracy of optimism” that was evident in MOD equipment cost estimates. The support programme systematically underprovided for the proper maintenance and sustainment of the equipment that was already in service. In short, Mr Deputy Speaker, it was a shambles.
Hugh Bayley (York Central) (Lab): Will the Secretary of State give way?
Mr Hammond: I will give way to the hon. Gentleman, who will perhaps explain his way out of that.
Hugh Bayley: Were the capital programmes that the right hon. Gentleman’s Government inherited supported or opposed by the chiefs of staff at the time?
Mr Hammond: I am obviously not privy to the advice given to Ministers in the previous Government by their defence advisers, nor should I be, but if the previous Government were succumbing to recommendations from the defence chiefs, they were doing them no favours by pretending that they could deliver equipment programmes for which there were no funding lines or budget cover, and when there was no prospect of their materialising.
John Woodcock (Barrow and Furness) (Lab/Co-op) rose —
Mr Hammond: I am going to make some progress.
Does it matter that Labour’s programme was stuffed full of projects that would never and could never be delivered? I would argue that it did matter, because so long as the fantasy persisted, the doctrine and philosophy of our armed forces—[ Interruption. ] If the hon. Member for North Durham (Mr Jones) listens, he might understand the point being made. So long as the fantasy persisted, the doctrine and philosophy of our armed forces were built around the notion of those platforms being delivered, when what the forces really need is a realistic programme that we can deliver and that they can have confidence in, so that they can start rethinking their doctrine and operating philosophy for the future around the platforms and capabilities that we will have.
John Woodcock: To aid this debate, could the Secretary of State just remind the House whether his party in opposition argued for a smaller or larger Army than the then Government were prepared to support?
Mr Hammond: What I say to the hon. Gentleman is that we face the situation that we face. We came into office with a massive deficit, which we inherited from the previous Government, and as I shall argue, we have taken the tough decisions that, frankly, the previous Government shirked over the last few years, thereby doing the armed forces and the country no favours.
By 2010, Britain’s armed forces had endured a decade of high-tempo operations without a formal defence review and were faced with a period of acute fiscal pressure. The case for reform to ensure that the armed forces were restructured and re-equipped to protect our
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national security against the threats that we would face, within a budget that the nation could sustain, was unanswerable. Tough decisions were necessary to deal with problems on the scale of the inherited defence deficit, and this Government took them. I am clear, as the Prime Minister and my predecessor have been, that whatever the pain, our first duty is to put our armed forces on a sustainable basis by restructuring them for the future and putting the budgets that sustain them on a stable footing. As the SDSR acknowledged, the process of transitioning to Future Force 2020 will require us to take some calculated and carefully managed risks against certain capabilities, most prominent among which are wide-area maritime surveillance, to which the hon. Member for Bridgend referred, and carrier strike.
I regret in particular the cuts in personnel that are required to deliver that rebalancing and make the armed forces sustainable. However, in case any confusion has been created over the last few days, let me clear up one point. The headcount of military personnel will have been reduced by around 18% by 2020 compared with the 2010 baseline. That is in contrast to a 38% reduction in civilian headcount. Regrettably, some of that reduction will have to be achieved by redundancy. Where that is necessary, every opportunity is being given, and will continue to be given, for military personnel at risk of redundancy to retrain for alternative roles of which there are shortages in the armed forces.
I heard the comments of my right hon. Friend the Member for North East Hampshire earlier. Following the publication of the Select Committee’s report, I have asked for a specific briefing on the point that he raised. I would be happy to share that with him after the debate—[ Interruption. ] I will share it with the right hon. Member for East Renfrewshire (Mr Murphy) as well, if he wishes. It includes a list of the shortage trades for which suitably qualified individuals who are facing redundancy are invited to apply.
Damian Collins (Folkestone and Hythe) (Con): The large number of redundancies in the Gurkhas has inevitably caused concern among them and in my constituency. Will the Secretary of State give me a commitment that the Gurkhas will remain a unique and important part of the British armed forces?
Mr Hammond: The Gurkhas remain a very important part of the British armed forces. I think that my hon. Friend understands exactly the problem that we face in regard to Gurkha numbers. Their terms of service were changed as a result of decisions made by the courts and the campaigning pressure that was placed on the previous Government. That means that most Gurkhas have elected to extend their service to 22 years. Consequently, the numbers of Gurkhas in service are projected to be above the levels needed to sustain the two brigades that we wish to sustain. That has given rise to a larger number of Gurkha redundancies than we would have expected to see. That is regrettable but, I am afraid, inevitable.
We are making tough decisions to tackle the massive deficit left by the previous Government and the unfunded defence programme. If those decisions had been easy or popular, you can bet your life that the Labour Government would have taken them years ago. They did not do so, however, and it now falls to the coalition to do the right
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thing in the long-term national interest. Translating the strategic prescriptions of the SDSR into decisive actions was always going to be a process rather than an event. Turning the corner on a decade of mismanagement will take time and determination.
To shine a bit of light into the end of the tunnel, the Government announced in July 2011 that the MOD could plan on the budget allocated to defence equipment and equipment support increasing by 1% a year in real terms between 2015 and 2020. That amounts to more than £3 billion of new money over the period. Importantly, that commitment was renewed by the Chief Secretary to the Treasury after the autumn statement. That will enable investment in a number of programmes, including the procurement of new Chinook helicopters, the refurbishment of the Army’s Warrior fleet, the procurement of the Rivet Joint, or Airseeker, intelligence and surveillance aircraft, and the development of the global combat ship.
The MOD is currently undertaking its annual budget setting process, which is known as the planning round. I am personally engaged in that process, and I am increasingly confident that we are close to achieving a sustainable and balanced defence budget for the first time in a decade or more. That would be an immense achievement, and would allow us to plan with confidence and to spend well over £150 billion on new equipment and equipment support over the next decade, as well as delivering the force restructuring and rebasing that we have announced. A turnaround on that scale requires a major cultural shift. Defence must change the way in which it does things and the way in which it addresses problems. It must challenge the received wisdom around the doctrines used to deliver defence tasks and around the management of defence itself.
Last month, the Government published the first annual report on the SDSR, which set out in full the progress that is being made. Let me address a couple of salient areas of what the MOD calls “transforming defence”—that is, the journey from the mess that we inherited towards achieving a sustainable, capable, coherent and adaptable force, built on balanced budgets and disciplined processes, by 2020. As I have said, I am clear that the Ministry of Defence must balance its budget. I am equally clear that it does not exist to balance its budget; it exists to deliver effective defence within a sustainable budget envelope.
Sir Bob Russell (Colchester) (LD): Will the Secretary of State give way?
Mr Hammond: I cannot resist taking one last intervention.
Sir Bob Russell: Does the Secretary of State accept that morale is very important, and if our soldiers, sailors and air personnel and their families are given accommodation that is not fit for purpose, that does nothing to help the Government’s objectives?