1.35 pm

Andrea Leadsom (South Northamptonshire) (Con): I find the Opposition’s stance rather astonishing, because it focuses only on micro-details and fails to address the big picture. As an eternal optimist, I feel that the big picture—the opportunity for Britain—has rarely been better, because real change is in the air. As a banker by background, I have very real concerns about the prospects for the euro’s survival, and I think that the European Central Bank’s long-term repo arrangements will not endure beyond the first roll-over and may well collapse long before then. But regardless of the outcome for the euro in the short to medium term, there is no doubt that change is in the air.

I should mention to the shadow Minister that, as I am sure she realises, the treaty is not an EU treaty but a fiscal compact treaty that does not include all the EU member states. She did not seem to make that clear. The fiscal compact treaty will create a euro summit for those who are part of the eurozone and those who have ratified that treaty. The euro summit will consider things such as competition and structures, and inevitably will, therefore, be a forum for caucusing. That is almost inevitable. So change is in the air.

I take great pleasure in the fact that, because change is in the air, there is the opportunity for change for Britain too. The prospect is no longer of a two-speed Europe but of a multi-tier Europe—in respect not just of those in the eurozone and those outside it but of those in the Schengen arrangement and those outside it, and of those great fishing nations interested only in the common fishing area and those who wish to be excluded from it. A multi-tier Europe in which member states can pursue their own particular interests but join together in areas of common cause is the opportunity facing us.

I am delighted with everything I hear from our Government about our approach to that. We should welcome and support those in the eurozone area who wish to work more closely together on further fiscal integration to support their currency, and we should also be pressing for change in the best interests of Britain. In that context, I want briefly to mention the work of more than 120 Conservative Back Benchers in forming the Fresh Start project. I pay tribute to my hon. Friends the Members for Daventry (Chris Heaton-Harris) and for Camborne and Redruth (George Eustice). The three of us, together, have been pulling together an enormous project that looks at every single policy area

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under the EU and attempts to determine where it acts in Britain’s interests, where it goes against Britain’s interests and what the options are for change. To my knowledge, such work has not been done for a good long time. It was astonishing that the shadow Minister could not come up with any detail, but could only nit-pick at what the Prime Minister has been doing.

I also pay tribute to the hon. Member for Dunfermline and West Fife (Thomas Docherty), who sits on the shadow Minister’s side of the House and who has become co-chair with me of an all-party group. That group has seen significant engagement from both sides of the House in the interests of EU reform and what could be a better deal for Britain.

Emma Reynolds: I would like to make it clear to the hon. Lady, who is making an eloquent speech, that the Opposition are in favour of European reform, but not the same kind that she is. For example, we are not in favour of repatriating European social policy, and we also think that, even were it desirable, it would be a pretty unrealistic aim.

Andrea Leadsom: I am glad that the hon. Lady made that intervention, because I can assure her that the all-party group on European reform, with which her hon. Friend the Member for Dunfermline and West Fife other Labour Members, Government Members and Members across the House are closely involved, is investigating the options for change. It is not a campaign group but an investigative group. It is a disappointment to me and to others that the hon. Lady has not engaged in that debate, because we have turned up some extremely interesting facts.

As the devil in the EU is in the detail, I would like briefly to mention three areas. The first is financial services. Before the financial crisis, the single market for financial services was a very good thing. It significantly added to British GDP, as well as the GDP of Germany, France and Italy. All the change at EU level was about creating a better single market, including in UCITS—undertakings for collective investment in transferable securities, the most successful financial services export from the UK ever.

Financial services had great legislation; however, since the financial crisis the EU has turned to stopping, slowing down, preventing and shutting down financial services, almost in a sort of act of revenge against the bankers. Indeed, I have heard many EU politicians talking about how City-style financial services are to blame for the problems they have found themselves facing. However, that is simply not true, and our Prime Minister did absolutely the right thing for British businesses and the British economy by standing up for financial services and seeking the safeguards that would enable us to protect the industry, which employs a total of nearly 2 million people in this country and contributes 11% of our GDP on an ongoing basis. He therefore did absolutely the right thing, entirely contrary to what the shadow Minister suggested.

Secondly, the shadow Minister mentioned social policy and the working time directive, and said that the all-party Fresh Start group would repatriate those powers. Not true: we are looking at what the options for change are. She will know, as do many people, that trainee doctors in the NHS are severely hampered. In fact, a coroner in

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the west country recently attributed the death of one elderly gentleman to the working time directive, which had meant that not enough doctors were on call and that the two doctors on duty were seeing 300 to 400 patients between them. Change is therefore vital.

My third and final point is about structural funds, where we now have a genuine opportunity. Back in 2003, the hon. Lady’s Government’s policy was to repatriate the local element of structural funds. In Britain we have been contributing €33 billion to structural funds over the past seven years. Some €9 billion comes back to the UK, but that is decided by the EU. What on earth is the point of that? We can decide best where to allocate that €9 billion. Interestingly, some of our poorest regions are net contributors to structural funds, not net beneficiaries, so the potential for reform is massive.

Bob Stewart: Does that mean that we can change quite easily without any further ado, simply by adopting my hon. Friend’s suggestions?

Andrea Leadsom: All the changes that the all-party group is investigating would require negotiation. Some things are more complicated than others, although we are setting everything out in the research that we are undertaking. [ Interruption. ] I have been asked to finish, so I will.

My two final points are these. For far too long we have tried to avoid the EU and not engage with it, so the other thing that the Government are doing that I welcome is engaging far more and far better with EU policy making at all levels. My second point is about better EU scrutiny in Parliament. We have been rather bad at that in the past, so I am glad that the Minister for Europe will be doing far more of it in future.

Several hon. Members rose

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I know that this is an important debate and that everyone wants to get in, but we have so many speakers that I am going to have to impose a seven-minute time limit. However, even then it will be very tight, so if Members could save some time and ease up on the interventions, that would be helpful.

1.43 pm

Mr Denis MacShane (Rotherham) (Lab): I will do my best, Mr Deputy Speaker.

I do not really disagree with some of the points that the hon. Member for South Northamptonshire (Andrea Leadsom) has just made, but to achieve her aims she will have to find allies. The difficulty is that the Conservative party is perceived as profoundly hostile to European co-operation. It is allied with some very odd gentlemen in the European Parliament, as we know, and it sits with the Russians at the Council of Europe. We represent a democratic political organisation in this Parliament, and we cannot achieve co-operation at a supra-parliamentary level by just telling people what we want and expecting everybody else to agree. Therefore, there has to be a new approach to Europe.

I congratulate the hon. Member for Stone (Mr Cash) on securing this debate under Standing Order No. 24. It is absolutely outrageous that we do not have proper debates on Europe in Government time. Indeed, I am sorry that the Leader of the House is not here—I have

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made that point to his face; I am not saying anything behind his back. It is unfair to ask the Backbench Business Committee, which is generous on a number of issues.

Mr Bone: The right hon. Gentleman is making a fair point. The Backbench Business Committee is not given the time in advance to plan any of these debates, so he is absolutely right.

Mr MacShane: And it is not as if this place is crammed full of legislation, is it, Mr Deputy Speaker? I really wish that the Government would stop continually hiding behind the Backbench Business Committee’s existence to deny their allocation of time for what are important debates.

The hon. Member for Stone made the interesting observation that the EU institutions could not be used for just a group of EU member states, but of course that is nonsense. They are used if there are rows over Schengen, which does not include us, or if there are rows over fisheries policy, which on the whole does not involve Austria, Hungary or other land-locked nations. Also, there have always been groups or clusters of EU member states with particular concerns which the European institutions have to have some regard for.

Bob Stewart: Will the right hon. Gentleman give way?

Mr MacShane: If the hon. Gentleman will forgive me, I want to give time to other colleagues and do not want to take up my full time.

I should inform the House that I might not be here for the wind-ups, because I have to go and hear Monsieur François Hollande speak at King’s college London. I am excited about meeting Monsieur Hollande, this socialist who is proposing to increase the income tax on people earning €150,000 to 45%—in other words, lower than the business-crushing tax rate that the present Chancellor of the Exchequer imposes on higher earnings. Of course, Monsieur Hollande is not proposing to rip off the epaulettes or the légion d’honneur from bankers he does not like—as our Prime Minister did with Sir Fred Goodwin—nor is he proposing retrospectively to deny bankers their bonuses or to introduce retrospective tax legislation on what bankers earn. We have the most anti-banking Prime Minister in the history of Great Britain. As a low-tax socialist, I will be glad to be at the college listening to Monsieur Hollande, who seems to have a much more moderate and pragmatic policy.

I would be interested to hear from the hon. Member for Stone, who has left his place, why exactly the Royal Bank of Scotland—partly owned by us—and HSBC are running to the European taxpayer, in the form of the European Central Bank, to ask for cheap loans. Why on earth should the European taxpayer bail out appallingly badly run, inefficient British banks that do not lend their money, but continue to try to pad out their bonuses and salaries? I certainly do not object to their doing so; indeed, I hope that the European taxpayer will show some generosity.

Mark Reckless: The right hon. Gentleman is commenting about two banks, which he has given as an example, but as for HSBC at least—a large international bank with interests throughout the world, particularly in Asia—the

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UK is only a modest part of its operations. Frankly, his comments are unjustified in that respect. What is the objection to those banks accessing liquidity ECB support on the same terms as anyone else, and why should they not do so?

Mr MacShane: Because of the breathtaking hypocrisy of the Conservative party, in that when action is needed to allow HSBC and RBS—British firms—to continue functioning and operating in a Europe that needs to keep its head above water, and which therefore might need some help from the IMF, all we hear from the Conservatives is that we should not be part of it. However, what is sauce for the RBS and HSBC goose—going and asking for euro taxpayer handouts—has to be sauce for the UK gander. We are all in this together.

Jacob Rees-Mogg (North East Somerset) (Con): Will the right hon. Gentleman give way?

Mr MacShane: Although I will lose time, I will give way—it is the hon. Gentleman, for heaven’s sake.

Jacob Rees-Mogg: I am grateful to the right hon. Gentleman; I will be very brief. RBS has business in Ireland. It is lending against its loans in Ireland, which are in euros and are therefore a matter for the eurozone. Of course it ought to be able to get money from the ECB on that basis.

Mr MacShane: And 50% of our exports go to the eurozone; therefore, it makes sense for us to help the eurozone stay alive. However, that will be difficult, because in our broad economic and fiscal policy we are more European than the Europeans. We are implementing anti-growth, deflationary, 1930s-type policies that Herbert Hoover or Heinrich Brüning would have instantly recognised. That is why unemployment is going up, why job creation is falling and why growth is flatlining. The paradox is that we need new policies for Europe, but they are not on offer from this Government, this Chancellor or this Prime Minister, who is entirely on the same wavelength as Chancellor Merkel, President Sarkozy and all the others who are currently pursuing job-killing, growth-crushing, deflationary, austerity, Treasury-driven financial and fiscal policies in Europe. I am surprised that we have not heard the terms “Camkozy” or “Merclegg”, because there is undoubtedly very little difference between the right-wing Conservative policy of our political leaders and that of the politicians controlling the big continental countries.

Let us be clear: the Commission is not involved in this. The European technocracy and bureaucrats are not involved in this; they are utterly sidelined. This is about the raw politics of anger in Germany against Greece, and the raw politics in Greece against Germany. It is also about the raw politics of the Conservative party in this House, some of whose members rightly feel that all the pledges made by their leader, now the Prime Minister, on referendums, renegotiation and repatriation have not in any way been delivered. That is what is causing upset and concern in the House of Commons. I am sure that it was also raw politics in Ireland that led the Taoiseach to agree to the referendum there. We know that Monsieur Hollande has said that, if elected, he will renegotiate the treaty. We also know that Mr Rajoy, the

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new conservative leader in Spain, has said that he will not implement a Merkozy-type dose, because Spain could not take it.

We need a new approach in Europe, and in this country. I would have no problem if, after 15 years of wallowing in Euroscepticism, the Conservative party rejoined the real European world. I would like to see Conservative MEPs sitting with other centre-right MEPs, precisely to create the links that the hon. Member for South Northamptonshire mentioned. We need more engagement, and not in order to join some Euro-federalist nirvana—that is not on offer at the moment. We are living in not a two-tiered Europe but a multi-tiered Europe, and we have to be part of it. We are not at the moment, but I hope that the Government can change their course before it is too late.

1.51 pm

Martin Horwood (Cheltenham) (LD): It is always a pleasure to follow the right hon. Member for Rotherham (Mr MacShane) in debates on Europe. He is the authentic voice of Euro-enthusiasm on the Labour Benches—[ Interruption. ] He is one of the authentic voices. I could not, however, work out from listening to his speech whether he was in favour of the treaty or not.

It is also traditional to congratulate the hon. Member who secured a debate such as this, but in this case I think that the hon. Member for Stone (Mr Cash) has missed the point on a colossal—almost historic—scale. There are questions of legality and politics around the treaty, but they are dwarfed by the really big issue, which is the future of the European economy. The treaty represents a sincere and concerted attempt to make that future stronger, safer and more prosperous. We can argue about its chances of success, but I think that the hon. Gentleman is trying to have his cake—perhaps I should say “gâteau”—and eat it. He is calling on European economies to practise fiscal responsibility without the treaty, while simultaneously criticising them for not sticking to the previous, more flexible, regime. I do not think that he can have it both ways.

That is in stark contrast to the letter written by the Prime Minister and 11 other Heads of Government in the run-up to the summit, which tried to address the real issue of promoting prosperity in Europe. It talked about completing the single market in service markets and promoting the digital economy, as well as

“providing a secure and affordable system for cross-border on-line payments, establishing on-line dispute resolution mechanisms for cross-border on-line transactions”.

It also proposed promoting an “internal market in energy” and “energy interconnection”, as well as a

“commitment to innovation by establishing the European Research Area, creating the best possible environment for entrepreneurs and innovators to commercialise their ideas”.

That is exactly the agenda that should be dominating our discussion of the summit. We should be talking about how we are going to get the whole of the European economy back on track towards creating jobs and sustainable prosperity.

We have to ask ourselves: what is the real threat to the UK’s national interests? Is it really the use of EU institutions by fiscal compact countries? Could that not be interpreted as a connection that will strengthen the interests of the 28, relative to the fiscal compact countries?

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That connection, and the involvement of the Commission, will mean that at least one institution will have to uphold proper adherence to the European Union treaties and the safeguards in the fiscal compact treaty.

Is there any threat to the single market, which is one of Britain’s primary interests in all this, given the safeguards that we have succeeded in inserting into the treaty by having a seat at the table and being part of the discussions that led to the drafting of the treaty, despite not being a signatory to it? That is in contrast to the view expressed by the hon. Member for Wolverhampton North East (Emma Reynolds), who is no longer in her place. I believe that that was a positive step by the Government, and a positive example of the re-engagement that we have seen since December.

Mr MacShane: Does the hon. Gentleman still share the view of his leader, now the Deputy Prime Minister, that the Conservative party’s colleagues in the European Parliament are “nutters”, “anti-Semites” and “homophobes”?

Martin Horwood: I think that the right hon. Gentleman is misquoting the Deputy Prime Minister, who was referring to the other parties that are members of that group. I obviously have a great deal of sympathy with that point of view, but I can assure the right hon. Gentleman that our leader was not accusing Conservative MEPs of that.

What is the most serious threat to the UK’s national interests? Is it the use of the EU institutions? Is there a threat to the single market, given the safeguards that have now been inserted into the treaty? I would say not. The most serious threat to the UK’s national interests is the most serious economic crisis in Europe’s post-war history. It is a real and present danger to British jobs, British prosperity and British companies. Why would we now throw a spanner into the works of the only vehicle with a chance of bringing that crisis under control? To use the term used by the hon. Member for Stone, I think that such an idea reveals something about his own pursuit of ideology, rather than any real defence of the UK’s national interests. For that reason, I think that he might even be losing sympathy among his Conservative colleagues for what must now count as the political equivalent of antisocial behaviour in continuing to be completely obsessed by the legal minutiae and institutional details, rather than the really big picture that is facing Europe and Britain within the European economy.

Graham Stringer (Blackley and Broughton) (Lab): The hon. Gentleman said that he was going to make a really big point, but I do not think that he is doing so. The really big point is surely that Europe cannot grow while policies for competitive deflation are in place. They involve either one country, Greece, which is bankrupt and will never be able to pay its debts, or four countries. That situation is never going to lead to a stable Europe that can grow and with which we can trade. Is not that the really big point? Would not we all be better off if Greece left the euro in as stable a way as possible?

Martin Horwood: The hon. Gentleman has raised some of the issues that we should be debating, although they are not the subject of the motion, which is about legal compliance. There are issues about whether the

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compact will work and whether it will do enough to stimulate growth, and the Prime Minister and the other Heads of Government have addressed them in their letter, and in the agenda for growth, jobs and sustainable prosperity that they are pursuing. I think that that addresses the hon. Gentleman’s question.

Those questions about the economic situation are what we should actually be debating here, and there is an argument for reinstituting regular debates in advance of European Councils. It is unsatisfactory that we have ended up debating this matter with less than a day’s notice and with very little preparation, at the very last minute before the European Council. There is also an argument for a thorough revision of the whole scrutiny procedure for European legislation in this place. With all due respect, I think that the European Scrutiny Committee keeps bringing us back to discuss the technicalities, yet we never seem to have debates on the substance of issues such as the fundamental economic questions and the structure of the European economy, as the hon. Member for Blackley and Broughton (Graham Stringer) has just pointed out.

Mr James Clappison (Hertsmere) (Con): Will the hon. Gentleman give way?

Martin Horwood: I will not give way again, because I will not get any more time and the Deputy Speaker has instructed us to be brief.

Where is the report from the European Scrutiny Committee on the economics of this matter—and where, come to that, is the report from the Treasury Committee on the economic aspects? We must address these issues in revising the way in which the House of Commons scrutinises European affairs; we need to take a step up and get away from this constant obsession with legal technicalities and the minutiae of organisational details. We need to get away, too, from Eurosceptic obsessions that see conspiracies everywhere to try to undermine British sovereignty, and to get on to the real issues of how to promote jobs and prosperity in Europe as a whole. That is the mission that the Prime Minister with the other 11 Heads of Government has set out in the letter. I think that is exactly the right agenda, and it is in stark contrast to some of the suggestions made in today’s debate.

2 pm

Chris Bryant (Rhondda) (Lab): It is a delight to follow the hon. Member for Cheltenham (Martin Horwood), even though we were in English classes together at school and I still bear grudges about that. He was broadly right in his analysis—I appreciate that my right hon. Friend the Member for Warley (Mr Spellar) will worry that I am praising a Liberal Democrat—and I agree with him. I agree, too, with all those who said that it is a shame that we had to use the Standing Order No. 24 procedure to secure a debate on one of the biggest issues affecting parliamentary sovereignty, our economic future and our relationship with some of our biggest allies in Europe. In addition, we do not usually get to hear enough from the Minister for Europe.

If the Government take away one thing from today’s debate, I hope it is the fact that we need properly

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structured debates before European Council meetings, so that they have a strong mandate from us and we are able to inform what they take to the meetings.

It is a shame that the hon. Member for South Northamptonshire (Andrea Leadsom) is no longer in her place. I gather she is often referred to nowadays as the new iron lady—although I do not know who will get an Oscar for playing her in the future. I profoundly disagree with her that a multi-tier Europe is a good idea. During my four and a half seconds as Minister for Europe the BRIC economies—Brazil, Russia, India and China, and for that matter, Mexico—repeatedly told me, “It is essential that we know that we are dealing with a single market.” If we decide to cut up the single market, with lots of different tiers of different elements of legislative proposals, it will do us damage with the growing economies of the world. China is not interested in dealing with 27 different countries in Europe; it is interested in doing business in Europe. If it is going to be more difficult to do business in Europe, it will do business elsewhere—and we will have cut off our nose to spite our face.

I wholeheartedly agree with the hon. Member for Stone (Mr Cash) about the danger of technocratic Governments being imposed on other European countries. There has always been an element of democratic deficit within the European Union. In a sense, it is almost inevitable—unless we choose to elect a single President and Government of Europe, to which I would be wholeheartedly opposed because I do not think that there is a single people of Europe. That is why we will always have a strange mixture of elected Governments in member states working alongside a European Commission and a European Parliament. It will never be perfect, but I would say that this House is not perfect in different regards either. The historical process of parliamentary democratic reform in this country has always been a matter of trying to improve on what we had last year—not some golden ideal, but improving on what we had and have last year and this year.

Of course there need to be changes in Europe, but if the economic solutions effectively being enforced on some European countries have so little support within those countries, there is a danger not only that the individual Governments will face riots and significant civil disturbance, but that the whole European Union could face big problems.

I agree with the hon. Member for Stone in his analysis of Germany, too. That country has tended to suggest to the world that it is paying for rescuing the countries in trouble. That is far from the truth. The honest truth is that Germany is making an awful lot of money out of the present arrangements and intends to make even more money out of the arrangements on the table in the near future. We sometimes need to push back to the Germans and say, “Actually, you need to be little bit more honest about exactly where your economic and financial interests lie in all of this.”

The broad position is that there are two choices. We can try to make the euro work because the UK believes that if it were to fall apart it would lead to significant dangers, particularly given that we are the banker and the financial powerhouse of Europe. I believe that that is the right approach for us. There were problems with the initial creation of the euro, particularly when there was no enforced audit, and countries could simply

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make up the numbers, sometimes even employing extremely expensive accountants to help them to do so. Some big countries in the EU wanted to turn a blind eye to it because they themselves worried about the enforcement of the stability and growth pact, so they allowed some countries to do that. It is important that we rectify some of those inherent problems in the creation of the euro, which is why, broadly speaking, advancing towards some kind of fiscal union, as adumbrated in the treaty, is the right direction for us to take, although there might be some details about which I would be worried.

There is an alternative route, however, which is essentially to dismantle the euro. I know that some Conservative Members believe, for perfectly legitimate reasons, that that is the right course to take. They believe that we cannot have a single currency with a single interest rate for the very different labour markets across the whole of the EU. I just think that that they are wrong on that. I believe, and I suspect I will be proved right, that not a single country will leave the euro this year or next year; in fact, a couple more might join it.

There were problems with the UK veto exercised before Christmas. It has, to coin a term, left us with a Bulgarian muddle. In truth, we have neither an EU treaty nor a not-EU treaty; we have a sort of European treaty that is a halfway house with legal dubiety at its centre. That is where the hon. Member for Stone is absolutely right. I think it would have been better if we had stayed at the table and made sure that we had an EU treaty that was right for Britain. I disagree with those who say that this is a question of more Europe or less Europe—

Martin Horwood: Will the hon. Gentleman give way?

Chris Bryant: I cannot; I have all of one second—I am finished.

2.7 pm

Mr John Redwood (Wokingham) (Con): This debate is about the future of democracy itself. There can be no more important issue. We are considering a draft treaty that presumes to take substantial powers of decision over how much a country can spend, how much a country can tax and how much a country can borrow from the democratic choices of the member state to a centrally imposed system, which it is hoped will make the euro work better. This matter is of vital importance to the United Kingdom because we wish our neighbours to live in democratic prosperity for their own sakes, because we wish to trade with them successfully and because we wish to make sure that there is no danger whatever that our cherished freedoms and independence as a member state that has deliberately kept out of the euro could in any way be damaged by this treaty, which presumes to use European Union institutions to enforce a non-European institution will.

The peoples of western Europe are right to be mightily worried about the bad state of health of their respective democracies where they have adopted the euro. We see daily on our televisions or hear reported on our radios dreadful scenes from Greece, Spain and Italy, which are struggling with the common economic discipline and policy being imposed today. The German-led new treaty says that such discipline is not strong enough, that there

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needs to be more mutually assured deflation and that there needs to be a madness imposed on these countries to try to see whether the euro will work.

Ministers rightly say that they must not say anything in public or be seen to do anything in public that makes the difficulties of the euro area worse. I fully endorse that approach. They should never normally comment on the euro, because it is too dangerous, it is too difficult and it is up to those in the euro to say what they wish about how their currency is developing. But how it develops is of grave interest to us, so I urge my right hon. Friend the Prime Minister to ensure that, in private, when he is round the table, as he will be, with all the other leaders and with a right to a view, he speaks truth to their impotence. He should say to those assembled leaders struggling to get a grip on their recalcitrant economies and some stability into their very unstable currency, “This is not working.” He should tell them that, in truth, the treaty before us this afternoon cannot conceivably make the euro work. Other things can help to ease the pain of the euro, and in another debate we could discuss many other policies that could pull off the trick of getting many countries through and the euro out the other side, but this treaty is not the way to do it.

This treaty is deeply offensive to many democratic peoples in the countries of western Europe that will face it. It reinforces a German view of how to make the economies of western Europe work that clearly is not working. If part of the medicine for a country that has borrowed too much is to spend less and borrow less in the public sector—that can be the right approach, and I can think of countries where that could apply—at the same time a series of policies have to be adopted to promote growth in the private sector, so that there is some hope, there are some new jobs and there could be new tax revenue coming in.

Where the EU is proposing tax rises, it needs tax reductions on enterprise, business and success. Where it is proposing a bigger monetary straitjacket, it needs monetary ease. It is now creating a very big monetary easing across the eurozone as a whole by tipping trillions of printed money into the system to try to make it work, but that new money cannot possibly help Greece or Portugal, because they have frozen and damaged banks, they are under the austerity cosh, and representatives of the European Union are going in and treating them as if they are damaged economies that cannot conceivably pull through.

The euro scheme is damaging the confidence that Greece and Portugal need in order to see light at the end of the tunnel; it is putting people off investing there. Why would someone go to Greece to invest through euros, if they think that it may be driven out of the currency and forced into a big devaluation? Why would they seek to do business in Greece when the banks are frozen and they are not benefiting from the liquidity injection that is helping the corporate bond market and the Government bond market, temporarily, in Italy and in Spain?

Above all, our Prime Minister has to secure and protect the British interest. We in this House should be very proud of what our predecessors created, obtaining control over how much is raised in taxation, how much is spent and how much this country borrows and prints. We are rightly out of the euro, because those in it cannot conceivably maintain democratic control over

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those issues. I am grateful to my hon. Friend the Member for Stone (Mr Cash) for raising this issue today before the summit, but we are worried that—inadvertently, I am sure—the Government might get us dragged into much greater supervision of our economy by the European Union, in a way that signs us up to the very mad policies that we are rightly warning them cannot conceivably work.

Europe is at risk: jobs are being destroyed; economies are being gravely damaged; the people are on the streets; and the main political parties in these European countries are signing up to exactly same policy, so even where a general election takes place the popular will is thwarted, as people do not have a proper choice if they stick to the main parties. In one or two countries Governments are even being changed by the European elite without a single vote being cast and without the democratic view of the people and their parties being consulted. Surely everyone in this House is ashamed of that. Surely we all unite in saying that the thing that brings us together is our belief in the power of the ballot box, the voice of the elected representative and the right of people to choose and to say that a policy is failing. We are told by the European establishment that only its policy can work. There is no evidence whatsoever that the policy is working, but there is massive evidence of the damage it is doing.

Several hon. Members rose

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. Eight speakers wish to speak and the Minister would like 15 minutes in which to wind up, so it would be helpful if Members tried to be generous to others.

2.14 pm

Mr James Clappison (Hertsmere) (Con): It is a great pleasure to follow my right hon. Friend the Member for Wokingham (Mr Redwood), and I strongly endorse the sentiments he uttered throughout his speech, including those at the end. I warmly congratulate my hon. Friend the Member for Stone (Mr Cash) on securing this debate.

I heard the comments made by the hon. Member for Cheltenham (Martin Horwood), who speaks for the Liberal Democrats on Europe and does so consistently. He suggested that my hon. Friend is being technical or difficult in raising these matters for debate, but he had the House’s support for an emergency debate. My memory of events in this House goes back a long time, and I recall that similar comments were made when my hon. Friend was raising concerns about the Maastricht treaty and about the single European currency. Yet a very wide body of opinion in this House now suggests that the Maastricht treaty should never have been signed and that the single European currency is not a self-evident good. The hon. Member for Cheltenham would do well to remember that. When my hon. Friend the Member for Stone rings the alarm bells, we should all prepare to man the barricades.

Mrs Anne Main (St Albans) (Con): Does my hon. Friend agree that mission creep over the years means that we are right to be sceptical now?

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Mr Clappison: My hon. Friend is absolutely right, and the apposite point is that this treaty is a new form of mission creep by the European Union. We need to be clear that something new and important is happening in the European Union, as has been suggested by learned legal opinion submitted to the European Scrutiny Committee. We have seen in the past, under our European Union treaty obligations, that notwithstanding the promises made to us, there has been a massive erosion of the United Kingdom veto and a substantial extension of EU competences—but at least we have always known that that has been done within the framework of the treaties themselves and that we have conferred power on the EU within that framework.

We are now dealing with something novel, because when hon. Members come to look at this agreement in detail they will find that it is not within the framework of the EU treaties; it is a separate international agreement that deals with how the European Union might act. Although it is said to be an international agreement, it is not an EU treaty and it will not describe itself as such, but the EU runs through it like a golden thread. It is as if the EU has come up against an obstacle in proper legal procedure and just decided to ignore proper legal procedure and go its own way; it has looked at the rulebook, the rulebook was not convenient for it and so it has torn up the rulebook and drawn up a new set of rules. The way in which it may act within that new set of rules could have substantial implications for our country. I hasten to add that our Government have taken the right course so far in dealing with that.

Martin Horwood: The moment had almost passed, but the question I was going to ask was: if the hon. Gentleman is questioning even back to Maastricht, does he still support the single market, which Conservatives would surely see as one of the greatest achievements the European Union has delivered?

Mr Clappison: With the Single European Act, we had a single market established before the Maastricht treaty. I do not have time, in the seven minutes available, to go over the whole Maastricht treaty, but a very wide body of opinion now suggests that it should never have been signed—I have heard that said from the Government Front Bench. All the safeguards that were put in place have turned to dust. Let us bring things a little more up to date. The hon. Gentleman will recall that his party was so upset about the signing of the Lisbon treaty that it wanted a referendum on getting out of the EU altogether, and Liberal Democrat Members walked out of the House.

The hon. Member for Rhondda (Chris Bryant), who is no longer in his place, made some apposite points, as did the right hon. Member for Rotherham (Mr MacShane), although he was completely wrong. He asked what was wrong with groups of states coming together within the European Union to do something where not all member states are participating, as in the case of the Schengen agreement and many other things. That comes back to my main point, because that was all being done within the framework of a treaty. A completely different treaty is being set up now, but it is one within which member states are still co-operating and operating within the framework of the European Union, using the EU institutions, as we

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know. It was apparently drawn up by the European legal service, the European Commission has a central role in it, the European Commission is mentioned in the whole of the preamble and throughout every article, and the final decision-making body with arbitration powers over this is the European Court of Justice.

Bob Stewart rose

Mr Clappison: I will give way to my hon. Friend at the end, if I may, because I need to make one or two other points before then.

I would respectfully draw to the attention of the Minister the fact that although we are rightly not a part of this treaty, it brings about some fundamental innovations in decision making among EU member states. In particular, I refer to articles 7 and 8. My hon. Friend the Member for Stone rightly referred to the coercive powers being taken by the European Union, and I urge my right hon. and hon. Friends to consider just how coercive those powers are and to try to ensure that they are never brought to bear against this country. No pressure should be put on us to submit.

There is a body of opinion in the EU that wants to make this country submit to the EU deficit procedure and we have, unfortunately, entered into some commitments on that. We must keep out of those commitments because they run completely counter to the principles of democracy both in the individual member states and in the EU. Under article 7—let us remember that this is not an EU treaty and is outside the EU—when the Commission is of the opinion that a country is in breach of the deficit procedure, it brings the matter before the other member states and unless there is a qualified majority vote against taking the decision that the commission wants to take, the matter must be treated as a breach and the offending country will be hauled before the European Court of Justice. This is a very significant procedural development.

We are familiar with how we used to have a veto in European Union matters. It goes back to 1975 and we were promised when we joined the European Union that we would always have a veto. That was eroded and we agreed to abide by the qualified majority vote for more and more things, particularly in the single market, but at least it was a qualified majority vote and a qualified majority of states had to be in favour of a measure before it could take effect and legally bind this country. Under the new EU method of decision making, the Commission gets its way unless there is a qualified majority vote against what it wants to do. There could be a clear but simple majority of EU member states against the Commission’s finding a member state in breach, but it will still legally be necessary for the country to be considered to be in breach and hauled before the European Court of Justice even though a majority of EU states were against that course of action, and despite what individual electors in the countries concerned might want. There could scarcely be anything more coercive than that.

My hon. Friend the Member for Stone is right to ring the alarm bells. This is a new procedure—it is very new—and it is taking EU integration to a completely different level.

Martin Horwood: Will the hon. Gentleman give way?

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Mr Clappison: I have given way to the hon. Gentleman once and I am afraid I am not going to go back to all the treaties—Lisbon, Maastricht, Amsterdam— we have had in the past. He has had his chance to have his say.

I warn right hon. and hon. Members to look at the detail of the treaty. It is new and very important and is worrying in the context of what is taking place in Europe, particularly as regards the lack of democratic control that countries now have over their decision making and over very important fiscal and economic matters that go to the heart of democracy. I urge colleagues and my colleagues on the Front Bench to be vigilant. The Government took the right decision in vetoing the treaty—we had the right to do so, it was in our interests to do so and we should never have considered being part of such a framework.

My right hon. and hon. Friends have been right to reserve the Government’s position, as they have through the letter that has communicated the Prime Minister’s view through Jon Cunliffe to the European Council. We reserve our position on the use of EU institutions, which we are entitled to do, and there should be no criticism of the Government—the Opposition are being very opportunist if they try to make something out of it—but, in its typical way, the EU has taken no notice. We should take no notice of the EU, however, and we should insist on the strict letter of what we are entitled to under the treaty provisions and be extremely vigilant to ensure that there is not, to use the words of my hon. Friend the Member for St Albans (Mrs Main), any further mission creep by the EU. We should ensure that we have no part in these matters. We are not part of the euro and we should be very careful to ensure that the EU does not try to extend the scope of what it is trying to do over this country. If it does, it will be at the expense of democracy and of this House. We have seen far too much of that already in my time in the House, and we need to be vigilant and to stand firm against these very worrying new legal developments in the EU.

2.23 pm

Mr Peter Bone (Wellingborough) (Con): It is a great pleasure to follow my hon. Friend the Member for Hertsmere (Mr Clappison) and I agree with every word he said. I shall try to discuss some different issues in my speech.

Let me start by congratulating my hon. Friend the Member for Stone (Mr Cash) on achieving a debate under Standing Order No. 24. I want to comment first on its parliamentary significance. This is only the second time in my parliamentary career that I can remember such a debate being granted, and the first was on the phone hacking scandal. This shows the importance that Mr Speaker gives to the matter. More than 100 Members rose in the Chamber when he agreed to the debate and they were not just from one side of the House, but from both, and they were not just from the Conservative and Labour parties, as all the Democratic Unionist party members were here. It was a very significant show that this House wanted to discuss its views in advance of the European summit and that Members wanted to get their message across to Ministers. I hope that when the Minister sums up, he will be in receiving rather than transmitting mode. That is why this debate is important—

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Ministers should know what the House is thinking before they go to Europe to debate the issue and, if necessary, cast any votes.

I want to return to the question of the procedure that has led to the mess we find ourselves in today.

Graham Stringer: The hon. Gentleman is making a point that has previously been made in this debate in slightly different ways, which is that there should be more opportunities for this House to say to the Government what position they should take before they go into European negotiations. Does he agree that such debates should not only be reinstated but be on votable and amendable motions?

Mr Bone: The hon. Gentleman is psychic, because that was the very point I wanted to come on to. It is ridiculous that we are not having such debates and it is even more ridiculous to suggest that they should be scheduled by the Backbench Business Committee. Everyone knows that the Backbench Business Committee is supposed to get 35 days a year, but that has not happened in this double Session of Parliament. I am very pleased to see the Leader of the House pay close attention to the debate and it would help the House enormously if the Committee had the days marked in advance. If that were the case, perhaps the Backbench Business Committee could put on such debates, because we would at least know in advance that we had the days. We did not have a day before the summit on which we could have scheduled this debate. That is not the issue, however. This debate should not be put on by the Backbench Business Committee but by the Government, and it should be on an amendable motion rather than a “take note” motion. I agree entirely with that point.

Let me briefly mention the veto. The Prime Minister rightly vetoed the EU treaty, and no one can pretend that this is an EU treaty—it clearly is not, because we vetoed it. It is also clear that the Prime Minister and the Government believed that the EU institutions could not be used.

Mr John Spellar (Warley) (Lab) rose

Mr Bone: I shall give way in a moment. As on any other occasion when the EU is defeated, the EU has ignored that and carried on as if the rules were not there.

Mr Spellar: I think that the hon. Gentleman might just have answered my question. He was stridently asserting that the Prime Minister had asserted his veto, and I wanted to know what he had vetoed and what effect it had had.

Mr Bone: I do not honestly believe that the right hon. Gentleman, who has sat all through this debate, could possibly not understand what the veto is about. The Prime Minister quite clearly vetoed the treaty so it could not be an EU treaty. That is what happened. That is why the British people were 100% behind the Prime Minister and why coalition Members—or at least the Conservative coalition Members—were wholly supportive of him. He had a better reception for that veto than for any other of the very good things he has done as Prime Minister.

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The next issue is whether the treaty will work. I am sorry that the hon. Member for Rhondda (Chris Bryant) is not in his place, but he made a very good point when he said that there were two ways of looking at this matter. One was that we could create this European political and economic union dominated by Germany and that the euro would work. I do not think there is any chance of that system working and it would actually result in the greatest political unrest in Europe since the second world war.

Bob Stewart: It looks to me very much as if we would have a centralised economy commanded by Germany. If there were any chance of it working, it would be brought down by the fact that the people of Europe—the people most affected by it—would reject it. There would be a total rebellion by the people of those countries.

Mr Bone: It is very appropriate that my hon. Friend in particular made that point. What we would see is extreme nationalism. We would have extreme nationalists saying, “This is the fourth reich,” and all that that would mean. I am talking not just about little political demonstrations on squares outside Parliaments; it would overturn democratically elected Governments. That is why the solution that the hon. Member for Rhondda suggested would not work.

The solution to this problem is to allow countries to leave the euro in an orderly way. Greece, Spain and Portugal at least would come out of it and would then be able to do what every other country has done in the past when it has had an economic problem—devalue its currency and set its own interest rates. There would then be some hope for growth in the future. The idea that we will permanently have regions of Europe that will always be depressed and have the most horrible austerity funded by German taxpayers is beyond belief. I have a feeling that the good and the great of Europe have a policy at the moment of hoping that something will turn up. It is like borrowing more and more on one’s credit card hoping that one’s Euro lottery ticket will come up. It will never come up. What they have to do is deal with the problem now. That will not be pain-free but it will result in a Europe that will begin to grow again. That would be not only in our interests but in the interests of other individual countries.

Probably the main point I want to address is whether we as a nation are being a good Samaritan. It seems to me that we are not, although we see the problem. We did not go into the euro because we always thought that we could not put different countries with different political structures into one economic area with one interest rate and one currency and expect it to work. We said that was wrong, and that has proved to be the case. What we are doing at the moment—this is where the good Samaritan point comes in—is walking by on the other side of the road. We can see what has happened and that something is seriously wrong—that someone is seriously sick—but are we prepared to risk being unpopular and say something about it? If we were a real friend and a real good Samaritan we would say, “You’ve got this wrong and the way to fix it is not to carry on but to stop, think of the problem and solve it by having an orderly reduction in euroland.” That is where we are letting down not only ourselves but other countries in Europe. I urge the Minister not to walk by on the other side of the road but to be a good Samaritan.

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2.32 pm

Mark Reckless (Rochester and Strood) (Con): This debate is not just about legality; it is about how we best protect our interests, which are best served by having a strong and vibrant growing European economy. Currently, we do not have that, and the reason we do not have it is the euro. The idea that the solution to that is more euro is no more credible than the Opposition’s suggestion that the solution to a crisis caused by borrowing is more borrowing. If we are to protect our interests, we need to know where those interests are, to be modest and to recognise that our influence on these matters is limited. I believe Greece would be far better off if it were to leave the euro, default, devalue and price its way back into the market. We could encourage our constituents once more to go on holiday in Greece and it would recover in a way that it cannot if it stays within the euro. However, that is a decision for the Greek people and is one over which we have precious little influence.

I shall concentrate on Ireland. Yesterday, the Taoiseach announced there would be a referendum in the Republic to reaffirm, or otherwise, the country’s commitment to the euro. Ireland faces a fork in the road and has three potential choices: to stick with the euro and the programmes being imposed on it; to reinvent its own currency; or to re-establish a relationship with the pound sterling. In December 2010, I commissioned an opinion poll across the Republic of Ireland by a company called RedC, which interviewed a representative sample of 1,000 Irish people, somewhat more than a third of whom agreed that in light of the financial crisis they would support Ireland’s leaving the euro and re-establishing a link with the pound sterling. Earlier, we heard from the Prime Minister that while the eurozone says, “We will only support the Irish people if they vote as we tell them to,” the UK will support the Irish people whatever choice they make in this referendum on their future.

We in this country have very clear interests in Ireland. Last year, we were exporting more to Ireland than to all the BRIC countries—Brazil, Russia, India and China—but that has now changed and we now export 8% to the BRIC countries but only 4.5% to Ireland. That is because the Irish economy has contracted so much that there has been a significant negative impact on the UK, and particularly on Northern Ireland, in terms of our exports. Irish migration has turned from a net migration from this country into Ireland to a very strong migration the other way. That is something we have allowed for many years. I should declare an interest because my mother came to this country from Ireland as a 17-year-old nurse. If the euro prevents Ireland from creating jobs for its young people, we will create those jobs and they will come here and continue to be welcome, but would it not be better if Ireland had a monetary policy more suited to its needs?

The euro is destabilising the Irish economy, and it will do that again, just as it has already done, at great economic cost to Ireland and some economic cost to the UK. In addition, the bail-out we are told that Ireland is getting is a bail-out not of the Irish people but of the European banks. The current position is that the European Central Bank has extended—in my view extremely unwisely—very large sums of money to the Irish banking system, ostensibly as liquidity support, initially for the short term but increasingly for three years, at very low interest rates. The Irish bail-out

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replaces that credit with official credit that the Irish taxpayers, not just the Irish banks, will have to pay back. Instead of the European Central Bank supplying all the credit, which it is, realistically, unlikely to get back, that credit is being displaced by taxpayer financing from the EU, the eurozone, the International Monetary Fund and, indeed, this country. The Irish people will have to pay that back instead of the European Central Bank suffering the losses it deserves for causing this crisis in Ireland and for having very unwisely extended credit.

Ireland faces a choice: whether to stick with that system, grind further into poverty and give control, in this Carolingian settlement, to France and Germany to lord it over them, or to reinstate its own currency. Were it to do that, it would need capital controls, otherwise there would be capital flight, and it would not have access to overseas capital. It would need to pay the difference between its spending and tax by printing its own money, there would be significant devaluation and probably quite a lot of inflation, and in the short term there would be very severe uncertainty. None the less, that would be better for Ireland than sticking with the current European programme.

Instead, the other option, which, when I question the Chancellor and the Prime Minister, at least appears to be on the table, is re-establishing the old link that Ireland had with sterling within a single currency area. I am talking about a common currency area that makes some sense for similar economies with similar housing markets, in which the interest rate does not lead to the boom-and-bust cycle that the euro that has been applied to the Irish economy so inevitably does. Instead of relying on official European credit with all the terms, conditions and subjugation that involves, and instead of cutting the country off entirely from overseas credit for a period with all the risks that entails, the Irish economy could look to the UK private sector, much as, to a degree, it is now doing, certainly in terms of the property market, to give the support and credit that the Irish banking system cannot provide itself.

When we look at our interests—we have the Royal Bank of Scotland and the Ulster bank—we see that UK banks have already written off or taken impairments for £40 billion-worth of loans to the Irish economy, but the Bank of Ireland, despite negative equity of perhaps £15 billion in respect of its Irish property loans, has taken only a £1 billion impairment. Very few Irish people have had their homes repossessed, and there has just been a carrying on, with massive negative equity and with the interest just about being paid. That cannot be sustained in the long term, and this country should stand ready to support a recovery in Ireland by sharing our currency if necessary, in our own interests, in Irish interests and in Europe’s interests.

2.39 pm

Mr Robert Buckland (South Swindon) (Con): It is a pleasure to participate in this welcome debate, which, as my hon. Friend the Member for Stone (Mr Cash) said, allows for the expression of a wider spectrum of the opinions in the House on matters germane to the European Union and the crisis in the eurozone, and I am grateful to him for securing it. I reiterate a point that I made to him in an intervention, and that needs to be underlined today: it is incumbent on both Houses to raise their

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game when it comes to the scrutiny of European legislation in its various forms, and to raise their game significantly when it comes to debates about thematic developments in the European Union.

The European Scrutiny Committee, which my hon. Friend chairs, does an admirable amount of work, but its limited remit, as I think he would concede, does not allow it to go as far as he and others would perhaps like in looking at some of the thematic issues raised today. That is why I strongly believe that it is the role of subject Select Committees, at a far earlier stage, to do the work of scrutiny, examination and report. That would add to the quality of debate on the detail of European policy.

I am a member of the Justice Committee, and together with other members, I recently paid a most instructive visit to Brussels. We met the Vice-President of the Commission who has overall responsibility for justice and home affairs, and we met other members of the directorate-general. Frankly, it was instructive, because it became blindingly clear to me and my colleagues that we as domestic parliamentarians need to have an input into the detail of proposed regulations at a far earlier stage. I am thinking particularly of the justice and home affairs pillar; by 2014, we have to have considered whether we opt into the entire mechanism, or stay out and perhaps adopt some of the regulations that we have chosen to opt into thus far. That is important work that we are missing.

The Liaison Committee has met my right hon. Friend the Minister for Europe, and I know that the Government are keen for Parliament to take a far more proactive role. I am glad that they take that view, and I look to the Liaison Committee and the Chairs on it to take up the cudgels, or the baton, and get that scrutiny right.

Far too often in debates about the European Union—I speak as a lawyer with 20 years’ professional experience—we end up talking about the legalistic aspect of Europe, and we forget that Europe is nothing without its people. I have the honour of representing a constituency in Swindon that has many links with the European Union. We have many major manufacturers, including car manufacturers such as Honda, which exports 50% of its vehicles to the 27. We have a number of other international companies that export widely to the European Union. Our links and trade with Europe are vital.

I yield to no one in my enthusiasm for widening trade with the BRIC countries—Brazil, Russia, India and China—and the wider world. That agenda is something that we all agree on, but we have to accept the reality of Britain. The reality is that the EU—the 27—is still our major trading partner. Any scintilla of schadenfreude, or a wish that the eurozone would break up, is dangerous. It suggests that somehow we are not linked at all with the affairs of the EU—that it is a faraway place of which we know little. I think of Neville Chamberlain when I say that, and I resent bitterly the suggestion that those of us who favour positive engagement in Europe are the heirs of appeasement—far from it. We are fully engaged with the affairs of Europe. The lesson from history is that when Britain disengages, we end up having to go in to sort the mess out, and I for one am not prepared to take that path.

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Richard Drax (South Dorset) (Con): Does my hon. Friend not accept that all of us in this country want to trade with Europe? There is no question about that. There is no “little island” mentality. We want to be part of, and trade with, Europe; we just do not want to be told what to do by Europe, and we want our own currency. It is not a matter of “little Britain”. We do not want to get out; we want to trade with Europe—that is it.

Mr Buckland: I do not disagree. My hon. Friend the Member for South Northamptonshire (Andrea Leadsom) made a powerful point about variable geometry; we should use Europe in our national interests, and work with it where appropriate. My hon. Friend the Member for South Dorset (Richard Drax) is absolutely right about trade and the single market, which was, let us face it, a British invention. Lord Cockfield did a huge amount of work to make sure that that aspiration became a reality, and my hon. Friend is right to emphasise the issue. As for not being told what to do, again he makes a fair point. I do not accept that, at any stage, the British Government, or the people of this country, should be put in a position in which they end up doing something against their will. That is why I supported the Bill on European referendums, now the European Union Act 2011, why I agree with the mechanism that the Government proposed, and why I was happy to speak in support of that Bill on Second Reading and at other stages.

To come back to the reality of the debate about Europe, we are talking about real jobs. We should be talking about trade, widening the single market, the digital economy and the energy market—all things that form the subject matter of a very helpful letter, signed by the Prime Minister and 11 other Heads of Government on 20 February, which set out a plan for growth. That should be at the core of negotiations at the European Council. That should be the agenda, because that is the agenda that is relevant to my constituents and the wider country. It would be wholly ridiculous for me, an elected representative of Swindon, to say to my Honda workers, “What we need is more arcane debate about the legality of Europe,” when what they want to hear is debate and discussion about how we can grow the economies of Europe and expand the growth agenda. That is what I call on Ministers to do.

Mr Cash rose—

Mr Buckland: I shall take an intervention from my hon. Friend, as he was good enough to allow me to intervene on him.

Mr Cash: I entirely agree with my hon. Friend, and it has been, in a way, my political life’s work to try to draw attention to the effect that this legal framework has on our daily lives, but it is absolutely unacceptable to suggest that we can make any changes of the kind that he would prefer to make, in order to benefit his constituents or mine, without having regard to the legal constraints imposed on us as a result of treaties.

Mr Buckland: I yield to no one in my respect for my hon. Friend, and he and I have had many conversations on these issues, but we cannot get away from the point that the European Union is an exercise of political will first and foremost. It is the political will of its members

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that drives the future course of the European Union. I accept that we all work within a legal framework, but let us be clear about where we are. The 25 have agreed to sign a treaty that is not an EU treaty. If there is to be any proposed fold-in in five years, the British veto will apply. We have the right to say no, and that is an important point that we need to underline.

Jacob Rees-Mogg rose—

Mr Buckland: I shall take an intervention from my very good and honourable Friend.

Jacob Rees-Mogg: I am grateful to my hon. Friend for giving way. We may not have the ability to say no, because the issue may qualify for enhanced co-operation in five years’ time.

Mr Buckland: As a lawyer, I love a legal debate, and bearing in mind what has been said and the aspirations signed up to by the 25, I think there is a very strong case for saying that when the five-year period comes to an end in 2021 or ’22, we will still be in a good position, bearing in mind the clear political will that the Prime Minister has shown by his refusal to participate, and to allow the United Kingdom to participate. That is a very clear statement of intent, and I would be happy to argue the case on that point in five years’ time, just as I am happy, and happy for the British Government, to argue the case about some of the articles in the fiscal compact. Where there is reference to the European Court of Justice, it is incumbent on the Government to argue the point, and to make it clear that we wish the compact to be entirely outwith the institutions of the EU.

Those are matters of legal debate. I do not accept that they are now set in stone, or in some way unarguable or unimpeachable. Let us bear in mind what happened in the economic crisis of 2008, when member states cast to the four winds rules that we all thought immutable. We need to remind ourselves at all times that the institution is an exercise of political will or it is nothing. That is why clear expressions of political will, such as the one that we heard from the Prime Minister in December, are the right approach. I welcome the debate, and I thank my hon. Friends for taking part.

2.49 pm

Jacob Rees-Mogg (North East Somerset) (Con): May I join in the congratulations to my hon. Friend the Member for Stone (Mr Cash) on getting this crucial debate, and say how shocked I am by my hon. Friends the Members for South Swindon (Mr Buckland) and for Cheltenham (Martin Horwood) for their view that the legality does not desperately matter and it is all about politics? This is a novel and somewhat eccentric view for parliamentarians to take, when the heart of the matter is the law and the detail of the law. Without the rule of law, what we are doing here ends up being a waste of time.

Mr Buckland rose

Jacob Rees-Mogg: My hon. Friend is bursting to intervene, so I happily give way to him.

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Mr Buckland: As I said, as a lawyer I realise that although the law is not irrelevant—of course it is not—political will often takes precedence, as we have seen in the history of the development of the EU. Surely my hon. Friend can accept that.

Jacob Rees-Mogg: I am afraid to say that I disagree with my hon. and almost learned Friend. Law is the foundation of what politicians do, and politicians use their political will through the law. Indeed, they have the ability through Parliament to change the law, but they cannot just ignore it.

That is why I want to come on to Sir Jon Cunliffe’s important letter. He makes two significant points. First, he notes that

“the EU institutions must only be used outside the EU Treaties with the consent of all Member States, and must respect the EU Treaties.”

In response to a question at a meeting of the European Scrutiny Committee last week from my hon. Friend the Member for Hertsmere (Mr Clappison), the Minister for Europe—who, if I may say so, was extremely helpful at the evidence session—said when asked whether permission had been given by the Government for the EU treaties to be used:

“No, we have not been asked so to do.”

It ought to be of grave concern to the House and to the country that the member states of the European Union, excluding us and the Czech Republic, have decided to proceed with a treaty without establishing that they are following the correct legal forms.

Mr Cash: My hon. Friend may be interested to know that yesterday in the European Parliament, which I attended as Chairman of the European Scrutiny Committee, in a dialogue between MEPs and MPs, one of the French representatives said from the platform to the chairman that she did not think it appropriate for me to be able to make certain comments because the United Kingdom Parliament and the United Kingdom were not part of the eurozone. My hon. Friend might find that rather extraordinary.

Jacob Rees-Mogg: Indeed, but one never knows what people might say in relation to the European Union.

As I was saying, it is a shocking state of affairs that our partners in Europe should want to proceed with a treaty without even bothering to go through the proper forms to ensure that that treaty is lawful under EU law. They have not even asked the question. It may be that they know what the answer will be, but if they do, they are one up on most Members of Parliament.

The other point raised in Sir Jon Cunliffe’s letter is that

“we must reserve our position on the proposed treaty and its use of the institutions”.

This, again, is very important because what we are trying to find out is whether the Government are reserving their position on the current legality of the treaty, or how the treaty will be used in practice. If it is the former—if the Government are concerned about the current legality of the treaty—it is important that they act now to establish their concern and to have a judgment from the European Court of Justice, rather than waiting. If the Government wait, as my hon. Friend the Member

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for Stone said earlier, he who is silent is seen to consent, and we will find that we have allowed the treaty to be implemented and we will have lost our ability to have recourse—

Martin Horwood rose—

Jacob Rees-Mogg: It is a particular honour to give way to my hon. Friend the Member for Cheltenham.

Martin Horwood: It is an equal pleasure to intervene on my hon. Friend. I am grateful to him for allowing me to do so. Does he accept that by reserving their position, the British Government may gain something of a tactical advantage by perhaps retaining the ability to challenge any future perceived breach of this treaty and therefore encouraging compliance with the European Union treaties?

Jacob Rees-Mogg: I am afraid I do not agree with my hon. Friend because a key part of the treaty may already be in breach of European Union law. I refer hon. Members to article 8, which states:

“If the European Commission, after having given the Contracting Party concerned the opportunity to submit its observations, concludes in its report that such Contracting Party has failed to comply with Article 3(2), the matter will be brought to the Court of Justice of the European Union by one or more Contracting Parties.”

What that says is that the European Commission may end up enforcing requirements under the stability pact in direct contradiction of TFEU—the treaty on the functioning of the European Union—126(10). We discussed this at length in the European Scrutiny Committee and the Foreign Office’s wise legal counsel, Mr Ivan Smyth, gave us a very helpful answer—that in treaty terms, “will” is not an obligation, and if it were an obligation, the wording would have to be stronger than “will”.

It seems to me that that is a pretty narrow basis for maintaining the legality of what the treaty requires the Commission to do. Let us bear in mind that under the treaty law, the European Commission does not have the authority to enforce the requirements of the stability pact on member states; under this treaty it does not quite have that authority directly, but it is so close to doing so that it would not make any difference at all.

A further aspect of the treaty concerns me. Article 16 says that the treaty will be rolled into the TFEU within five years, so it will become part of the whole package of European Union law within five years. It is currently thought, though others may think differently, that it would not have been possible for this treaty to be brought in under enhanced co-operation. However, there is a school of thought that maintains that the European Stability Mechanism treaty which is awaiting ratification by Parliament would allow enhanced co-operation to be used, in which case this treaty could be rolled into the European Union’s treaties without the say-so of the House, under enhanced co-operation. We should be deeply concerned about that, not least—going back to article 8—because it refers to how countries may be fined. Let us bear in mind that the treaty is supposed to be all about the eurozone member states, and is nothing to do with non-eurozone members and nothing at all to

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do with the United Kingdom because we are not a signatory and it is not yet part of the TFEU. But if that is the case, why does it say

“The amounts imposed on a Contracting Party whose currency is the euro”—

that is, a fine of up to 0.1% of GDP—

“shall be payable to the European Stability Mechanism. In other cases, payments shall be made to the general budget of the European Union”?

We have here a treaty that is making provision for fining non-euro members for their budgets, even potentially ones that have not signed up to the original treaty if it is rolled in within five years, as the treaty itself requires. That is why this debate is so important to establish the legality and see whether we can at this early stage stop this treaty—a genuine veto, rather than a soggy veto—or whether we will find that by doing nothing now, by being friendly, kind and generous to our neighbours, we do not really help them with the economic situation that they face. I agree with those who say it would be better for some countries to default and devalue. We will instead find that by being silent, we have consented to a treaty that is against our fundamental national interests.

2.58 pm

Neil Carmichael (Stroud) (Con): Thank you, Mr Deputy Speaker, for allowing me to contribute to this important debate. I have listened carefully to a large number of speeches, many of which have raised interesting points, including that of my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg). I recognise that there are issues relating to the legality of the proposed treaty, but it is important to stress that this is not an EU treaty. That is the key point and the one on which our case must rest; otherwise, we will get terribly confused. The second key point about the treaty is that it includes not only all members of the eurozone, but aspirant members. However, it does not include us as we are neither members nor aspirant members of the eurozone.

Mark Reckless: My hon. Friend suggests that there might be confusion and asserts clearly that the treaty is not an EU treaty, but surely if it was an international treaty it would be in international public law and subject to the jurisdiction, such as the states agree, of the International Court of Justice at The Hague. However, it is actually being implemented through the European Commission and will be subject to the European Court of Justice, both of which are creatures of European Union law.

Neil Carmichael: I thank my hon. Friend for his intervention. That does not alter the fact that it is not an EU treaty, and that is the point. The Commission might well take a view on these matters, and that brings me to another key point. It is in our nation’s interests to ensure that the treaty works in protecting the euro in the long run. We do not want the euro to fail, because that would badly affect our economy. It is important that we continue a dialogue with the process but are not actually involved in it. It seems to me that what we have secured through the veto and our continued resistance to being a part of the treaty is essentially an overview on proceedings to ensure that the EU positions are safeguarded, because in so doing we will protect our interests and those of the overall single market.

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It is important to note the comments of the US Secretary of State, Hilary Clinton, who noted that the United States was concerned not about our failure to be part of the treaty, but about whether the treaty itself would succeed in its principal mission of enhancing the position of the euro. That is a clear expression of the American Government’s position, and it is consistent with our position because we, too, recognise that that is a fundamental priority. I am not often asked by constituents whether the treaty is an EU treaty or some other kind of treaty; what they are worried about are the economic circumstances in which they live, and that is what we have to start talking about.

Although I welcome the debate, I am disappointed that it was secured only as a result of Standing Order No. 24, and that for that reason we had less than 24 hours to consider it, but it is also necessarily important to talk about what will happen at the European Council, which is almost immediate. At that Council we need to drill down on the key issue of what we need to do to ensure that growth comes to Europe and to Britain.

Mr Buckland: On that point, should not priority be given to tackling the tariff barriers and, indeed, non-tariff barriers that often exist between the EU and countries such as Japan and other major competitors, which are a real block to more effective trade?

Neil Carmichael: My hon. Friend is absolutely right, and I thank him for that intervention. It is crystal clear that we need to engage properly with the large economies, such as those of Japan, China and the US, because they understand that we are talking about a European dimension. He has hit the nail on the head in that regard. It is critical that we look outward for trade opportunities and inward to ensure that we are internally competitive. That means that the single market needs to be further upgraded and that the energy market needs to be made into a European market, because until it is we will continue to suffer from price variance and supply problems. If Members want to know about that, then rather than worrying too much about what is happening in Europe with regard to policy, they should just ask their constituents, who will tell them that they want more stable and lower energy prices, and the way to achieve that is by developing an energy market.

To do all those things, Britain must be a key player in the European Union, and the Government are rightly ensuring that we are. We have to be there in order to develop bilateral relationship and to be part of the leadership of the European Union, so it is right and proper that we show a responsible attitude to the way in which the treaty we are talking about unfolds. If we are seen to object to any measure intended to protect the euro or to deliberately obstruct the measure they wish to introduce, we are at risk of taking some blame for something that we do not want to happen in the first place. Therefore, it is in our interests to start co-operating with those nation states that are considering the treaty. That is why we should be sensible about the use of the EU institutions.

At the beginning of this whole process, immediately after the veto, I said that we should consider the questions relating to the use of the EU institutions. There are two good reasons for allowing the use of the EU institutions: first, to secure our reputation as a country that is

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involved, engaged and ready to contribute to the future of the EU; and secondly, to ensure that we can easily observe what is going on, because we have a clear and obvious interest in making sure that the EU treaties, such as the Lisbon treaty, are enforced and maintained as part of the governance of the EU. That is how we will be able to check the legality of the treaty we are talking about today. We will do that not by complaining about it or chucking grenades into the process, but by allowing it to happen and ensuring that we keep an eye on what is happening. That is the Government’s key objective and I am pleased to note that that is what the Government are doing.

I will end with the points that are really important to my constituents. In my constituency we need jobs, growth and investment. There are firms in my constituency that depend on European markets and that are part of significant and complicated supply chains stretching across Europe. We need to think about the importance of those supply chains to our economy and ensure that we encourage investment across Europe and between nation states where appropriate. The critical issue is to move the terms of debate away from the questions of treaties and so on and towards what we actually want the EU to do and how we express this country’s objectives for the EU. The electorate are much more impressed if we talk about economic growth, because that is one of their priorities, as it is ours. It is also a question of labour mobility, because when people are thinking about moving jobs they appreciate a flexible labour market, and one of the things the European Council should focus on in the coming days is labour mobility and youth employment. I note that that is on the agenda, and rightly so, and think that the electorate and the House will welcome it when the results are announced.

3.8 pm

Mrs Anne Main (St Albans) (Con): Thank you, Mr Deputy Speaker, for allowing me to speak in the debate. I have to leave at 3.30 pm, as I have advised you, but I have been here for the entire debate. I am pleased to follow my hon. Friend the Member for Stroud (Neil Carmichael) but must say that I disagree with just about every word that he said. I congratulate my hon. Friend the Member for Stone (Mr Cash) on securing the debate, but as my hon. Friend the Member for Stroud observed, we have had only a day’s notice of it. That was because my hon. Friend the Member for Stone was so fleet-footed and secured it through Standing Order No. 24. Should we not have had that emergency measure, we would have had no discussion whatsoever.

My hon. Friend the Member for Stroud said that we had not had enough time to contemplate the matter, but we should contemplate the impact of this form of legislation even if we do not get debates on it. My hon. Friend the Member for Stone and my hon. Friend the Member for Hertsmere (Mr Clappison), who is not here at the moment, have spent many long years studying the implications of what goes on in Europe for our economy and our legislature. It is extremely important that we do so. This is not about navel gazing.

I was somewhat disappointed in my hon. Friend the Member for South Swindon (Mr Buckland), who seemed to feel that by studying the matter we are somehow being disloyal. It is not disloyalty. We are doing just service to our constituents, because although there may

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be the political will or ambition in Europe, the impact will be very much on us as a democratically elected Parliament. I, like many other colleagues, have been extremely disappointed by the mission creep throughout Europe, which has in effect led to imposition on a democratic country—such as Greece—by people who were never elected by that country but who now make decisions about it.

Mr Buckland: I am grateful to my hon. Friend for allowing me to correct a misapprehension. I apologise if I created the impression to which she refers, because it was not my intention at all. I think that we are all patriots in this House—we should be—and that although we may agree on the ends, we may differ on the means by which we achieve them. I should not for a moment question my hon. Friend’s integrity or her sincere devotion to her country.

Mrs Main: I thank my hon. Friend for that intervention, and I end this part of the debate on that conciliatory note.

I have sincere concerns, however, that the mission creep that I mentioned in an intervention has led us to the point at which a democratic country can have something imposed upon it, leading to riots and civil unrest, because it is not willing to take the necessary pain that the EU must inflict on it. Although we are not today debating whether Greece should leave the EU, we all should heed the warning that when Greece signed up to being a full member of the EU it did not sign up to have something imposed upon it, as it has had.

Martin Horwood: Will the hon. Lady give way?

Mrs Main: No; the hon. Gentleman has made many speeches and many interventions, and I am sure that as the lone representative of the Liberal Democrats today he has had more than his fair share of the debate. I shall not take interventions from him.

I am extremely concerned that we will find ourselves dancing on the head of the same pin as we did in the previous Parliament. The hon. Gentleman was a Member then, so he will remember the Liberal Democrats saying, “We need to have a full EU in/out vote on this, and we will give you a genuine vote,” whereas the Conservatives, in opposition at the time, said that we needed to have a vote because there was a treaty. We were assured, “Oh, no, no, it is not a treaty. It is just something we don’t need to have a referendum on.” Such dancing on the head of a pin is what most of us on the more Eurosceptic side of our party find worrying about this particular treaty-that-is-not-a-treaty, into which we supposedly do not need to have any form of input.

Mark Reckless: Does my hon. Friend accept that the difference between our commitment to a referendum on the Lisbon treaty and the Liberal Democrat commitment to an in/out referendum is that theirs is still possible?

Mrs Main: I thank my hon. Friend for that intervention. As we know, Liberal Democrats tend to change their minds, so they can always change their minds and retain that possibility. He is absolutely right—

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Martin Horwood: Will the hon. Lady give way, as she is attacking us directly?

Mrs Main: I am not attacking any Liberal Democrat; I am just saying that they are quite within their rights to change their minds, and have been known to do so.

Martin Horwood: Will the hon. Lady give way?

Mrs Main: No, I am not giving way to the hon. Gentleman. I have made my views clear about why I will not. He has had plenty of opportunity.

I am extremely concerned also that the package under discussion could be incorporated into EU law within five years, because this situation is very much like our bleating about the Lisbon treaty, when we kept saying, “It does have a big effect, it does have a big effect,” and we were constantly told that it did not. The treaty under discussion has a potentially big effect, and that is why I offer encouragement to the Minister, which I am sure he has been offered by many hon. Members today, including my hon. Friend the Member for South Swindon (Mr Buckland). The Minister has the huge support of the House and the political will of this Parliament, and the Prime Minister had the support of the majority of the House in using the veto. He had robust support, which I believe he has also among the public, for exercising the veto, but, despite the fact that we are not ultimately part of the process, what we do not want is to become a part of it because of mission creep.

So I say to the Minister, who is going along to discuss those matters, that we could be affected by them, despite the fact that they are not designed to affect us. They are designed to affect those countries that are happily allowing themselves to be influenced in that way, but my fear is that, like all the other treaties that have come our way over the years, including Maastricht, ultimately five years down the line, when this one is incorporated, we will somehow feel its chilling effects.

I felt the need to jump up and down when my hon. Friend the Member for South Swindon said, “What does the EU make us do that we don’t wish to do?” Well, I should like to deport Abu Qatada, but I cannot. I should like not to be fined or pursued in the European Court of Justice for trying to introduce a means of not allowing people who have never paid into our benefits pot to claim—a habitual residence test—which was overturned on the ground that we were somehow being discriminatory. Those are just two examples of our regularly being made to feel that we must do something, and, what is more, the European courts now have a punitive nature, whereby they routinely fine countries that are non-compliant and say, “If you don’t do so we will place people in your country to deliver whatever we want delivered.”

The European courts are intent on getting their own way, and they have found a new method of getting around the rather difficult matter of our veto. They have decided to ignore us, inasmuch as they have said, “This agreement isn’t to do with you,” but ultimately it will be because we will feel its effects. So I encourage the Minister to go along to the discussions with a truly sceptical mind, based on his long and distinguished career in the House, during which time he has seen these arguments made again and again, and seen how in reality the situation has translated into something very different further down the line.

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3.16 pm

Stephen Phillips (Sleaford and North Hykeham) (Con): I rise not to detain the House, as I know that the Minister will shortly be on his feet, subject to other contributions, but because it seems to me, having listened to the majority of speeches in the debate, that the issue under discussion is extraordinarily important—so important, in fact, that I am disappointed not to see more Members on the Opposition Benches.

Be that as it may, and given that the Minister will, on behalf of the Government, shortly respond to the debate, I think it important that he give a direct response to three points that I have listened to during our proceedings. First, there is the point, which my hon. Friend the Member for Wellingborough (Mr Bone) made so ably, about the procedure by which the matter has come before the House. We are fortunate indeed that Mr Speaker yesterday acceded to the request from my hon. Friend the Member for Stone (Mr Cash), whom I too congratulate on securing this debate under Standing Order No. 24. It is perfectly right that he should have sought that liberty and, therefore, that we debate the matter today.

But for the fleet-footedness, as another hon. Member described it, of my hon. Friend, there would have been no opportunity for the House to discuss the matter before the end of the week, when the treaty will be signed by those who choose to do so. Given its provisions, to which I shall turn in due course, that would have been a matter of very grave concern not just to those of us on the European Scrutiny Committee, who look at such matters with great interest and, I hope, care, but to the whole House, albeit that it would have been in ignorance of some points that have been made about the importance of precisely what is going on.

It is a great shame in those circumstances that Government time was not scheduled in advance of the end of this week for the debate to take place. Although I know that it is not directly my right hon. Friend the Minister’s responsibility, I have no doubt that he, who will answer for the Government, has discussed the matter with the Leader of the House, and it is perfectly appropriate that the House be told why no debate was scheduled in Government time. That is the first point that he must answer.

The second point concerns the legality of using the European Union’s institutions in the context of the treaty to which those 25 countries will become signatories. We know, because the Prime Minister has told us, that the Government have their own concerns about whether it is appropriate that EU institutions be used outside the framework of the treaties that already exist for the governance of the European Union.

I understand and accept—the Government are entirely right—that there must be a degree of pragmatism in relation to the aims of the treaty, which we hope will succeed in stabilising the euro, although many Government Members, many Opposition Members, I suspect, and, indeed, many people in the country are concerned that it is just yet another piece of paper, and that all we are doing is putting off the evil day when the euro finally unravels and countries such as Greece, Portugal, Cyprus and perhaps even Italy have to drop out.

Let us assume in favour of those who have put the treaty together and framed its provisions and that it stands some chance of making things better in the eurozone. As my hon. Friend the Member for Stroud

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(Neil Carmichael) indicated, that is important to all our constituents, because we all want to be able to trade with a successful eurozone. Let us therefore make that assumption in favour of the treaty and those who have framed it.

Even in those circumstances, there still exists the problem of the legality of the use of the institutions of the European Union. I hope that my right hon. Friend the Minister will make it absolutely clear to the House, and through the House to the British public and our partners in Europe, that the Government will not countenance anything that not only damages this country and its interests but is unlawful under the treaties to which we have already subscribed. That is the second point with which he must deal.

The third point is the most important. The treaty is potentially the thin end of a very large wedge. Other Members have alluded to the fact that when the European Union and the faceless bureaucrats in Brussels do not get their own way, they simply look for a solution that is not necessarily lawful but is at least pragmatic, to ensure that what happens is precisely what they want, rather than what the people of Europe want. That has been the hallmark of European governance since the EU was established, and certainly since the Maastricht treaty. We see it very clearly in this case.

My right hon. Friend the Prime Minister was absolutely right to veto the suggestion of any further European treaty that would have damaged the interests of this country and the City of London. When Opposition Front Benchers ask, “What was vetoed?”, as they did earlier in the debate, I say that it is very clear. It was a further European Union treaty that this House does not want and that, more importantly, the people of this country do not want. It would have been damaging to the interests of Britain and all our constituents. It would have been extraordinarily straightforward for the Leader of the Opposition to stand behind the Prime Minister, but he chose not to do so. Perhaps he is fearful of Europe, and perhaps the fact that none of his Back Benchers and almost nobody from the Labour party is here for the debate indicates that Labour is perfectly willing to see imposed upon the British people the same sort of treaty that it gave us in Lisbon without a referendum, having promised one in the first place.

Emma Reynolds: Can the hon. and learned Gentleman explain to the House what in the fiscal compact treaty would have applied to the UK, and therefore why the Prime Minister felt the need to veto it?

Stephen Phillips: If the hon. Lady had actually read the fiscal compact treaty, and if she had been here when my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) made his speech—I do not think she was—she would know that article 8 of the treaty provided for penalties in relation to countries that are not eurozone members. She would also know that article 16 required the treaty to be rolled into the treaty on the functioning of the European Union within the next five years. That is the thin end of a wedge and indicates clearly to me and other members of the European Scrutiny Committee that in the current case it is possibly being contemplated that the provisions of the treaty will in due course become binding on the United

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Kingdom, notwithstanding the fact that the UK is not a member of the eurozone. That is the direct answer to her question.

When the Leader of the Opposition says that he would have negotiated further on the treaty, Conservative Members are entitled to ask with whom he would have negotiated. The negotiations had come to an end. Is the hon. Lady saying that the Leader of the Opposition would have negotiated with himself? The Opposition need to stop opposing just for the sake of opposition, and instead stand behind the Prime Minister and his veto and behind debates such as this. With that said, I hope that the—

Mr Deputy Speaker (Mr Lindsay Hoyle): Order.

I have three speakers still to call, and we have 10 minutes before the wind-ups.

3.24 pm

Mr Christopher Chope (Christchurch) (Con): It is a pleasure to be able to participate briefly in this very important debate and to follow my hon. and learned Friend the Member for Sleaford and North Hykeham (Stephen Phillips). I congratulate and thank him, the Chairman of the European Scrutiny Committee and all its other members for putting the spotlight on this important issue.

My hon. and learned Friend said that the UK Government must make it clear that they will not countenance anything unlawful. The question is whether anything in the treaty is unlawful, and that is where the rule of law comes in. My understanding is that one of the most important elements of the rule of law is that the law should be clear and easily understood; otherwise, it is very difficult for people to know whether they are complying with it. Over the years, ambiguity has been the hallmark of the laws that the EU and the European Court of Justice have gradually developed, which have been against this country’s best interests.

What is in the treaty is very unclear, as my noble Friend Lord Howell, the Foreign Office Minister, made apparent when he said in the other place:

“There has been much comment about the use of the European Union institutions, and I want to come to that. The new agreement sets out limited roles…The legal implications are complicated and hinge upon how the agreement is implemented. It is for this reason that we have reserved our position.”—[Official Report, House of Lords, 16 February 2012; Vol. 735, c. 936.]

As my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) asked, what is the point in reserving our position? If we remain silent, it could be interpreted as an estoppel or a consent to what is going on.

Why are not the Government asking the European Court of Justice to interpret the treaty now? The ECJ will have a role in interpreting the arrangements for the European Union’s accession to the European convention on human rights. If it can do that, why cannot it examine the treaty? We would then know exactly what it thought about the legality or otherwise of the treaty. If we wait for it to interpret the treaty, we will find that it does so in a purposive manner, in accordance with the principle that it is right and proper for the EU to have

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more and more power. Why do we not get a proper and authoritative interpretation of the treaty now, before we proceed?

If one needed any ammunition to support the principle that the treaty is ambiguous, one would need look no further than the opinion of the Council of Ministers. Four questions are asked in it and the answers are set out, and they confirm that it is incredibly ambiguous.

3.27 pm

Richard Drax (South Dorset) (Con): I pay tribute to my hon. Friend the Member for Stone (Mr Cash) for securing the debate. He stands up for everything in which I and a lot of Members on both sides of the House believe.

I simply do not understand why we all look at this huge abyss, this black hole, this legal and financial federalist nightmare, yet go on pouring billions of euros into it in the hope that it will somehow recover. It will not. The political elite in the entire eurozone are betraying the very people they say they represent.

We are going to have tears over this. We have, unfortunately, already had riots in Greece: God forbid that we have riots in this country one day when the people wake up to realise that we have been, dare I say it, disingenuous—I will not say untruthful because I am not allowed to use that word in this House—to our electorate. We have to be truthful, and we have to base our politics on common sense and the law. I want us to have jobs, growth, wealth and mobility, but we will not get them under the current EU federalist state. We must renegotiate and start talking. I urge those on the Front Bench, please, for our party and our country, to say at the meeting, “Enough is enough: let’s sit down and find a more common-sense approach for the future.”

3.29 pm

Laura Sandys (South Thanet) (Con): I am sorry that my hon. Friend the Member for South Dorset (Richard Drax) is going to be crying over the treaty. His constituents will be worried about this, as we all are, but it is not only about the treaty, because that is merely the result of a major crisis. In debates in this House, we often express concern, in many respects, about many countries, whether they be Somalia, India, or the economies of the far east. Those economies impact on this country. It is crucial that whatever emerges from the way in which the EU implements the treaty serves our national interest by ensuring our greater economic security.

I share Members’ fears about whether the treaty will deliver the right result. Over the past 18 months, we have watched the economic meltdown across Europe being met with inactivity and summit after summit, as Ministers from all over Europe have come together but there has been no endgame, no result, and no agreement. This comes extremely late in the game. That means that whatever is done will cost Europe—the eurozone—a lot more money than if the situation had been addressed 18 months ago. This is not a day when Europe is shining in its glory. This has come too late, in a crisis, and as a result Europe has cost itself more money.

It is not in our interests to be part of the treaty, but it must be in our interests to support Europe in sorting out its own economic situation. I worry whether it will be successful, but very much hope that it will be. I know,

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however, that we are in a better position than we were before the Prime Minister went off to Brussels to veto the treaty. The veto is in place protecting the UK from the treaty, and we are giving our support in ensuring that the European economies get their act together.

3.32 pm

The Minister for Europe (Mr David Lidington): I thank my hon. Friend the Member for Stone (Mr Cash) and all hon. Members who have taken part in the debate. I am conscious that in the limited time available I am unlikely to be able to do justice to all the various and detailed questions that have been asked. As my hon. Friend said, I gave evidence on this subject to the European Scrutiny Committee for nearly two hours last Thursday. I am not sure whether the transcript is yet available on the Committee’s website, but if Members wish to explore these matters further, I refer them to the detailed answers that I attempted to give to my hon. Friend and other members of the Committee.

I take very seriously the comments made by a large number of hon. Members about the importance of scrutiny. I completely agree with those who have said that while the European Scrutiny Committee does an excellent job within its prescribed terms of reference, which are confined to looking at documents as they come from the EU institutions, there is a powerful case for what one might term more upstream engagement by Parliament in examining the strategic direction of European policy before it takes the form of specific items of European legislation. Some, at least, of the Chairs of the departmental Select Committees are interested in pursuing that further, and I very much hope that they will feel encouraged to do so.

In response to my hon. and learned Friend the Member for Sleaford and North Hykeham (Stephen Phillips) and others who asked about having debates before European Councils, I can only repeat what has been said before from this Dispatch Box: it was an explicit part of Tony Wright’s report, which led to the creation of the Backbench Business Committee, that such debates should be among those for which responsibility was transferred from the Government to the Backbench Business Committee, to be dealt with in the time that was allocated to that Committee.

Mr Bone rose

Mr Lidington: I will not give way, but I take seriously the point that my hon. Friend the Member for Wellingborough (Mr Bone) made about the Backbench Business Committee wanting to have predictable times at which it can schedule such debates. The Leader of the House was listening carefully when he made his remarks and, I am sure, will be attentive to that particular point. I draw my hon. Friend’s attention to the fact that a review of the procedures suggested by the Wright Committee is due in the near future.

I did not agree with my hon. Friend the Member for Stone when he laid strictures on individual EU countries. Greece and Italy may do things differently from how politics is done here, but everything that has happened in those countries so far has been within the bounds of their constitutions. The legislation that the Governments of those countries take through has to be enacted by the democratically elected Parliaments.

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My hon. Friend the Member for Stone was right to point to what I believe to be a genuine, underlying tension in European affairs at the moment between two important pressures. The first is the economic logic, which prescribes that if we had a single currency, interest rate and monetary policy, logically we would have to move towards greater fiscal integration. That, after all, is one reason why I and most members of my party opposed the United Kingdom entering the euro. We felt that that was the inherent logic of the project. Against that, there is the political challenge, which is whether, if there is to be greater fiscal integration among countries that share a single currency, there is a sufficient sense of common political identity, not just for the Governments of those countries, but for their voters, that they can accept major decisions in economic policy being taken at, and democratic accountability being transferred to, the European institutional level, rather than being based solely at national level.

Mr Baron: My right hon. Friend is well respected in his post. Can he highlight the concrete and substantive guarantees that will exist to prevent the two-tier Europe that is being created through the establishment of the fiscal compact from acting against the best interests of this country?

Mr Lidington: There are two parts to my answer. First, the action that the Prime Minister took in December ensured that what other countries chose freely to do, through sovereign decisions, will not be binding on the UK through European law. Secondly, as a number of my hon. Friends have said, the Government are determined to work actively with other members of the European Union in pursuit of common interests. Although this might not give the assurance that can be given by a rule book, the culture that I see at work in the European Union week by week is one in which countries come to the table with interests and views of their own. Countries do not act as a predictable bloc or cohesive caucus because they happen to belong to the euro. There are eurozone countries lined up with us to support budgetary discipline. Other eurozone countries—largely net recipients—want to see a greater EU budget. There are also euro-outs that are net recipients and that want to see a bigger European budget. The way in which countries line up on particular issues does not follow logically from where they stand in relation to the fiscal compact or from whether they are members of the eurozone.

Several hon. Members rose

Mr Lidington: I will not give way again, because I have limited time and there are a lot of points to which I wish to respond.

I will not dwell on what happened in December because I want to get on to what hon. Members asked me this afternoon. However, I draw the House’s attention to the fact that my right hon. Friends the Foreign Secretary and the Chancellor of the Exchequer have now sent detailed accounts of the approach to the December European Council meeting and the events that took place shortly afterwards to my hon. Friends the Members for Croydon South (Richard Ottaway) and for Chichester (Mr Tyrie) in their capacities as Chairs respectively of the Foreign Affairs Committee and the Treasury Committee. Those letters have been

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copied to my hon. Friend the Member for Stone and are already available on the websites of the Foreign Affairs and Treasury Committees. I am making arrangements for them to be placed in the Library today.

The Prime Minister’s decision in December ensured that the treaty, to which 25 countries subscribed, was “outside” the European Union. As my right hon. Friend told the House in January,

“we are not part of it and it places no obligations on the UK. It does not have the force of EU law for us, nor does it for the EU institutions or for the countries that have signed it”.—[Official Report, 31 January 2012; Vol. 539, c. 678.]

I want to deal with some of the points that my hon. Friends the Members for North East Somerset (Jacob Rees-Mogg) and for Hertsmere (Mr Clappison) made. The treaty does not govern how the European Union shall act. It imposes certain obligations on the contracting states, which are linked to the EU. However, in so far as it refers to EU treaties, it makes it clear that they and their rules have primacy and apply in any circumstance where there might be overlap or apparent contradiction.

My hon. Friend the Member for North East Somerset asked about the prospect of non-eurozone members being fined under the fiscal compact. If a non-eurozone member state has ratified the treaty, until it joins the euro, it can decide which parts of titles III and IV of the compact apply to it. Once that country joins the euro, the whole fiscal compact applies to it. The fiscal compact rule in article 3(2) and the jurisdiction of the Court under article 8 fall within title III, so pending membership of the euro, the non-euro countries can choose whether they wish to be bound by those aspects of the compact. A member state, whether in the euro or not, can be fined only once it has ratified the fiscal compact through its national means.

My hon. Friend also asked about the risk of the treaty somehow being imposed on us in the next five years by underhand means.

Jacob Rees-Mogg: I want to clarify the point that I was trying to make. The treaty might possibly come in through enhanced co-operation, so although it would not formally be imposed on us, it would reach the status of an EU treaty if the current treaty that we are in the process of ratifying is ratified.

Mr Lidington: I do not know whether we will have time to explore that this afternoon. I may write to my hon. Friend setting out the answer in greater detail, but I do not believe that his fears are justified. Treaty change can take place only under the procedures for treaty change in the treaty on European union and the treaty on the functioning of the European Union. It cannot take place under enhanced co-operation, which can, in any case, bind only those countries that choose to participate in it. That is clear in the treaties.

The role given to the European Court in the compact in relation to the balanced budget rule—and, indeed, the imposition of that rule—could not be introduced under enhanced co-operation. Although the compact declares that it has the objective of being incorporated in the EU treaties in five years, that is only an aspiration, not a given. Any changes to the EU treaties would have to be agreed by all 27 member states, using the procedures under the EU treaties themselves for treaty amendment.

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Change cannot be made through the EFSM treaty, which is to be signed intergovernmentally by the eurozone members only.

Stephen Phillips: Will the Minister give way?

Mr Lidington: Forgive me, but I will not because I want to press on and try to answer more of the questions asked during the debate.

It is a fact that the compact says that it is a treaty that shall be applied in conformity with the obligations set out in the EU treaties. The declared intent of the signatories is that they shall act at all times in accordance with EU law.

It is a matter of legal fact that the primacy of EU law laid down in the EU treaties is not and cannot be affected by the drafting of an intergovernmental treaty. Article 2 of the compact explicitly states that if there is any conflict or overlap, the EU treaties will prevail. In any case, even if that phrase were absent from article 2, it would be against EU law for EU member states to enter into any kind of international agreement that contradicts the EU treaties and EU law.

However, it is also true that elements of the fiscal compact give us serious concern. Our concerns relate to certain tasks accorded to the European Commission and the European Court of Justice. I set out our concerns in greater detail in my evidence to the European Scrutiny Committee last Thursday. In fairness, it is worth alluding to the fact that others who gave evidence to the Committee—I am thinking of Professor Dougan, of Martin Howe, who is by no means a euro-enthusiast, and of the Council Legal Service written evidence to the Committee—presented a different interpretation and argued that article 273 of the EU treaties could be interpreted as justifying what was set out on the use of the institutions under the fiscal compact.

The concern of the British Government is that the example set under the compact for the EU institutions, the role and functions of which are determined by treaties agreed by all 27 member states, could be used in future either to set unwelcome precedents or to impinge on the integrity of EU law and the arrangements set out in the EU treaties. That is why we have reserved our legal position. That in turn means that we are vigilant and ready to act, including by taking legal action in the European Court of Justice, if we believe that the EU institutions are being used in a way that is contrary to the provisions of the EU treaties and that harms our national interest.

The Prime Minister made clear at the informal January European Council that the EU institutions can be used outside the EU treaties only with the consent of all member states. He also said that the treaty should not undermine the operation of the single market or otherwise infringe on areas of policy that are properly for discussion by all member states in the EU context. That position was repeated in writing by Sir Jon Cunliffe, our permanent representative to the EU, on 22 February. I deposited that letter in the Library of the House on the same day.

The actions the Government have taken in respect of the compact have been informed by advice from across Government. I will not be drawn into a detailed discussion of what the Government’s legal analysis says, not least because reserving our position means that we might at

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some stage wish to go down the path of legal action. I do not want to say anything that might prejudice or reveal a position that we might take in court in such circumstances.

I am sure most hon. Members realise how foolish it would be to speak in such a fashion, but I am confident that reserving our position is the best way of protecting UK interests. It enables our partners to undertake economic and political tasks that we hope will help to stabilise the eurozone while preserving our right to take legal action should that become necessary.

The problem all our economies face in Europe is a lack of growth. That growth will not come from increased Government spending, nor will it come from consumer spending funded by increased private indebtedness; it can come only from structural reform and a growth in trade, both within Europe and beyond. My right hon. Friend the Member for Wokingham (Mr Redwood), and my hon. Friends the Members for South Swindon (Mr Buckland), for Cheltenham (Martin Horwood) and for Stroud (Neil Carmichael), spoke strongly in the interests of their constituents when they urged the Government to press forward with an innovative and assertive agenda for economic reform and growth in Europe. We are working with our partners to do that, as was evidenced by the letter to which the Prime Minister added his signature to those of 11 other Heads of Government, and for which Bulgaria, Slovenia, Portugal and Lithuania have voiced support. The Government intend to be active in promoting our economic interests in Europe and the wider world, and I commend our approach to the House.

3.49 pm

Mr Cash: Undue delay in reserving our position on the necessity of getting concrete guarantees and an answer to the question of whether we will go to the European Court of Justice over this matter is no substitute for action. We must take action now because the advice from the legal adviser states:

“within five years…when this happens”.

His assumption is that this will happen within five years. We must take action now. We cannot allow delay to trump the necessity of getting this right. It is essential that we move, and move now. I shall speak to the Prime Minister about this shortly. I seriously hope that the Attorney-General will take the necessary action and advise accordingly so that the Cabinet is fully apprised of the fact that this is not a lawful treaty.

3.51 pm

Three hours having elapsed since the start of proceedings, the motion lapsed (Standing Order No. 24).

The Leader of the House of Commons (Sir George Young): On a point of order, Mr Deputy Speaker. Owing to the debate under Standing Order 24 that has just ended, the time available for the debate on the Water Industry (Financial Assistance) Bill has been reduced. It is therefore the Government’s intention, if necessary, to make more time available to complete the debate that is about to commence at a later date. I will give more details in the business statement tomorrow.

Mr Deputy Speaker (Mr Nigel Evans): I am grateful to the Leader of the House for that clarification.

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Water Industry (Financial Assistance) Bill

[Relevant documents: The First Report from the Environment, Food and Rural Affairs Committee, Future Flood and Water Management Legislation, HC 522, the Fourth Report from the Committee, the draft National Policy Statement on Waste Water, HC 736, and the Government’s responses thereto .]

Second Reading

3.51 pm

The Secretary of State for Environment, Food and Rural Affairs (Mrs Caroline Spelman): I beg to move, That the Bill be now read a Second time.

In December, the Government published “Water for Life”. The White Paper set out many of the challenges facing the water sector. These challenges are not just about how much water we have available now and in the future; they range from the environmental impact of water management to the means by which we deal with waste water and, not least, the issue of affordability.

There have been dramatic improvements in the health of many of our rivers, but more needs to be done. The House will recall that the Government have invested £92 million to improve our rivers and waterways. Despite that, however, over-abstraction and pollution of our rivers, lakes and streams means that only a quarter of our water bodies are fully functioning ecosystems. The water and sewerage sectors have, though, made significant progress. More than £90 billion has been invested in the 22 years since privatisation to reduce the water industry’s impact on the natural environment and to continue to deliver high-quality drinking water while keeping water bills generally affordable.

It is also worth noting that last year, despite the driest spring on record, there were no hosepipe bans, which was testament to the 36% reduction in leakage achieved by the industry since privatisation.

Mr Tobias Ellwood (Bournemouth East) (Con): I do not want my right hon. Friend to digress too far from her speech. She mentioned hosepipe bans last year, but there are likely to be bans this summer owing to the lack of rainfall now. Has any thought been given to the long term and to providing a national grid for water so that we can share the water supply up and down the country?

Mrs Spelman: Thought has been given to that. We had a drought summit last week, and I have said publicly that hosepipe bans are more likely this year because we have had our second dry winter. The important point, however, is local connectivity. That is the key. Water companies explained to us at the summit how they are connecting to their neighbours. It is important for the House to know that transporting water over a significant distance is prohibitively expensive. The idea of building a pipeline to transport water from the north-west, which pleasantly has it in abundance, to the south-east, which traditionally does not, might sound attractive, but it is prohibitively expensive. However, local connectivity produces, in essence, a virtual national grid.

Today, our reward for all that investment is world-class drinking water and a cleaner environment. Water supplies are also safer, better and more secure than ever before. Water and sewerage services also remain relatively inexpensive compared with other household bills, and

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are good value for money. The average bill stands at just over £1 a day. At the same time, water companies are investing £22 billion over the current five-year price round in mains replacement, flood resilience, river improvements and better water quality in 55 wetlands and bathing areas.

However, a minority of customers struggle to pay their water charges, either because they are on low incomes or because they live in areas where bills are higher than average. In fact, 23% of household customers across England and Wales spend more than 3% of their disposable income on water and sewerage charges. We now want to start tackling that problem. The Water Industry (Financial Assistance) Bill will allow us to provide support to keep bills down in the south-west and to reduce the risk of future infrastructure developments, such as the Thames tunnel super-sewer, raising bills disproportionately. Clause 1 creates a general power to enable the Government to make a payment to water companies for the purpose of reducing charges payable by customers. The only circumstances under which we currently envisage using that general power is in support of South West Water customers. We believe that the circumstances they face are exceptional.

Anna Walker’s review of charging for household water and sewerage services, which was commissioned under the previous Government, identified why households in the south-west face the highest water bills in the country. At privatisation, South West Water had the lowest regulatory asset base per property. Since then, the company has had to invest around £2 billion to raise the standard of its infrastructure to the same level as the rest of the country. With comparatively fewer customers, the cost of new investment per property has been higher there than anywhere else. The benefits of that investment include improved water quality, reduced leakage, cleaner beaches and better bathing water quality, as enjoyed by the south-west’s many visitors. However, the costs have been borne solely by South West Water customers, whose bills have risen as a result. I would like to pay tribute today to hon. Members past and present in all parts of the House who have devoted years to raising the profile of this historic unfairness on behalf of their constituents.

Steve McCabe (Birmingham, Selly Oak) (Lab): Does the Secretary of State accept that average water bills across the country are set to rise by almost 6% in April and that this Bill will do nothing to help the vast majority of people, who have seen their incomes cut or frozen? Why should water companies not have to tighten their belts like everybody else?

Mrs Spelman: I can give the hon. Gentleman the assurance that water companies are indeed tightening their belts like everybody else. The rise that he described is the one set out by the economic regulator Ofwat, as an indicator of the overall level of inflation, which has not a little to do with the economic mess that we inherited from the previous Administration. However, the important point for the hon. Gentleman is this. He and I share the use of Severn Trent Water’s services, and companies such as ours will be able to introduce a company social tariff, which would assist the most

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vulnerable in the water area where we reside. Indeed, it would be open to every company to do so, and we have published a consultation about the company social tariff.

Andrew George (St Ives) (LD): Let me congratulate my right hon. Friend on bringing forward this measure and remind her of the cross-party nature of the origins of the Bill and the fact that we have been working towards it across all parties for many years, including under the previous Administration, and not only following the Anna Walker review, as there has clearly been every intention of addressing what has been a clear historic unfairness for South West Water customers.

Mrs Spelman: My hon. Friend is quite right. Indeed, I look across the Chamber to the right hon. Member for Exeter (Mr Bradshaw) as a demonstration of the cross-party consensus that existed, which I have acknowledged. The diligence with which south-west constituency Members raised awareness of this historic unfairness is the reason our Government have sought, finally, to do something about it and stop turning a deaf ear to families struggling with that historic legacy, which is what had happened for too long.

There are limits to the help that we can give, because of the vast economic deficit that we inherited. However, we believe that the Government should help to correct the historic inequity that has left water bills in the south-west so markedly out of kilter with those elsewhere in the country. We have therefore committed to funding South West Water to enable it to cut bills by £50 a year for all household customers. The payments will start in April next year and will be maintained to the end of the next spending review period. The £50 reduction will be transparent on customers’ bills and, contrary to the impression that might have been gained, will not provide any sort of benefit to South West Water. It will simply be passported straight through to the householder, who will receive that money in full.

We take pride in helping hard-pressed families in the south-west, but we recognise that the challenge of helping vulnerable customers with water affordability problems is a different and more general problem that can be felt in households anywhere in the country, as the hon. Member for Birmingham, Selly Oak (Steve McCabe) suggested. As constituency MPs, we all know the families that we are talking about. That is why our water White Paper has set out definitively the dual approach that we are taking to tackling affordability issues. First, we are taking measures now to enable water companies to introduce social tariffs and to tackle bad debt. Secondly, over the longer term, we are introducing a package of reforms to increase competition and innovation in the industry that will help to keep bills down and improve customer service.