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20 May 2008 : Column 1353

Lord Hamilton of Epsom:My Lords, are the Government not concerned about the amount of CO2 created in the production of biofuels? They have the advantage of being renewable, but their production creates a lot of CO2.

Lord Bassam of Brighton: My Lords, that is another good point in the debate. There are good biofuels and bad biofuels. That is why we should be led by the science, to ensure that we have a sustainable feedstock, that we source from sustainable sources and that the technology used to create the biofuel does not create more of a problem than that which it is intended to solve.

Lord Lawson of Blaby: My Lords, is the Minister aware that, given that the enormous subsidisation and production of biofuels has made a considerable contribution to the current food shortage and the high price of food is causing great problems in many parts of the developing world, the United Nations food rapporteur has called for an immediate five-year moratorium on the production of all biofuels? Do the Government consider that they and the European Union should perhaps rethink and that this moratorium could be a good idea?

Lord Bassam of Brighton: My Lords, the Government recognise that there is an issue here. We do not want to see the sourcing of material that creates or adds to the problem of world food shortages. That is why we have adopted a cautious approach and why we have asked Eddie Gallagher of the Renewable Fuels Agency to conduct his current review, so that we get our policy on the right side of the line. These are complex issues with regard to food shortages and we do not want to end up creating a problem. We recognise that there is an issue with world poverty.

Viscount Simon: My Lords, is my noble friend aware that a few thousand vehicles have broken down after using biofuels because their fuel lines and filters became clogged?

Lord Bassam of Brighton: My Lords, I was not aware that that was a major problem. I know that one of our local bus companies runs on chip fat and I do not think that the proprietor of that company has experienced any great difficulties.

Baroness Byford: My Lords, how confident is the Minister about getting in enough biofuels to honour our commitment when, as he said, we are currently producing only 1 per cent of our needs? If the biofuels are to be imported, how can he guarantee that they will come from a sustainable source?

Lord Bassam of Brighton: My Lords, before the certificates can be claimed there is a process which ensures that suppliers guarantee that the sources used are sustainable. However, we recognise that it is an issue, which is why we have instituted the Gallagher review. The obligation to hit 5 per cent by 2010 represents approximately 2.5 billion litres of biofuel. It is expected that that will be supplied from a mixture of domestic

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and imported feedstocks. We need to get the balance right, which is why we are asking the key questions on sustainability.

Lord Pearson of Rannoch: My Lords, what leeway do the Government have as they maintain their cautious approach and review this matter? Surely, as usual, it is imposed by Brussels and they have not much room for manoeuvre.

Lord Bassam of Brighton: My Lords, we adopt our own policy on this. Our approach is guided by international conventions but we are adopting this precautionary approach. We are not being led by the nose by Brussels. I do not accept that point.

Bank of England: Inflation Target

2.59 pm

Lord Bilimoria asked Her Majesty’s Government:

Lord Davies of Oldham: My Lords, the Bank of England Act 1998 sets the objective for the Bank in relation to monetary policy, which is to maintain price stability and, subject to that, support the economic policy of Her Majesty’s Government, including their objectives for growth and employment. Price stability is the MPC’s primary objective and an essential precondition for economic growth and so must be achieved first and foremost if economic stability is to be assured.

Lord Bilimoria: My Lords, I thank the Minister for that reply. We all appreciate the fact that the Monetary Policy Committee controlled inflation in what the governor referred to as the “nice decade”. Does the Minister agree that now, with inflation rising at its fastest rate in six years and the economy cooling seriously, the Government are stuck between—if your Lordships will pardon the pun—a rock and a hard place? Does he agree that one of the advantages of being outside the euro is that we can set our own interest rates, but what is the point if we do not have the flexibility? How do the Government expect the Governor of the Bank of England to be able to stimulate economic growth if he has his hands tied behind his back?

Lord Davies of Oldham: My Lords, as I indicated in my Answer, in order to guarantee stability, inflation needs to be controlled. That is the basis on which investment leads to economic growth. The noble Lord is right to say that we are moving into a difficult period, whose duration we are not sure of. The Bank of England has a clear target, which is a signal of its objective and what it will seek to achieve with regard to inflation. That helps the wider economy in the decisions that are taken.

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Lord Peston: My Lords, I accept that you would not make the Monetary Policy Committee independent if you did not want it to be independent but, none the less, is there not a serious problem? You do not have to be very clever or artful to bring inflation down if that is your target. The Tories demonstrated this marvellously in the early 1980s, when they came to power and doubled the unemployment rate, which they got to over 10 per cent and kept at a high rate for many years. The trick is not just to destroy inflation. Is not the test of your ability improvement in the real economy? Is the Minister aware that some of us, listening to the Governor of the Bank of England, are terrified of the lack of interest in the real economy, as it affects us now and in the near future?

Lord Davies of Oldham: My Lords, the credit crunch is producing a crisis in the financial sector that is probably the greatest since the depression. Therefore, there are implications for the real economy. My noble friend will appreciate that this economy is still growing and that the forecast, even in this most difficult of circumstances, is that it will continue to grow when other economies are not able to do so. That growth guarantees that we will not fall into the same trap as the previous Administration, which was to control inflation through high unemployment.

Baroness Noakes: My Lords, the Question refers to constraints on the MPC. Does the Minister think that the fiscal loosening, caused by the Government giving a £2.7 billion bribe to the electorate of Crewe last week, will help or hinder the MPC when it next decides on interest rates?

Lord Davies of Oldham: My Lords, the resources that were made available last week were to rectify a fault that had been identified and clearly recognised. They also have the benefit of being fair to the low-paid and of assisting purchasing power in the economy. That does not alter the fact that the Bank of England’s objective, as indicated in the original Question, is to return to target as rapidly as possible.

Lord Newby: My Lords, does not the fact that inflation is more than 2 per cent and rising, yet the Bank of England has made it clear as far as it can that it has no intention of raising interest rates at this point, demonstrate that the Bank is taking full account of the effect of interest rates on unemployment and growth and is therefore interpreting its mandate with considerable flexibility?

Lord Davies of Oldham: My Lords, that is certainly the case. If the Bank of England had different objectives, it would have a different strategy for interest rates. The Bank’s primary objective relates to inflation but I reiterate that its objective is also to pursue a strategy that increases economic growth and helps the economy. It is obviously working in difficult parameters at the present time, but that does not alter the fact that we should have confidence that the strategy it is pursuing is accurate.

Lord Lea of Crondall: My Lords, my noble friend may recall that some 25 years ago the Government of the day sent the retail prices index into exile because they did not like the inclusion of the housing component,

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which they thought was just a proxy for interest rates. Now that we have the paradox that house prices may be coming down while other inflation is going up, would it not be useful for the Bank of England to do an objective study of the pros and cons of different measures of inflation, so that we have our eye on a target that may be more relevant on occasion to the cyclical position of the economy?

Lord Davies of Oldham: My Lords, there are several proposals relating to increases in the cost of living, but the Bank of England operates against the position of the CPI, which is the internationally recognised inflation rate. It is against that that its performance stands against all other comparisons.

European Union (Amendment) Bill

3.07 pm

The Lord President of the Council (Baroness Ashton of Upholland): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved accordingly, and, on Question, Motion agreed to.

House in Committee accordingly.

[The LORD SPEAKER in the Chair.]

Clause 6 [Parliamentary control of decisions]:

[Amendments Nos. 145 to 147 not moved.]

[Amendment No. 148 had been withdrawn from the Marshalled List.]

[Amendments Nos. 149 to 151 not moved.]

[Amendments Nos. 151A to 153 had been withdrawn from the Marshalled List.]

Clause 6 agreed to.

[Amendments Nos. 154 and 155 not moved.]

[Amendment No. 156 had been withdrawn from the Marshalled List.]

[Amendments Nos. 157 to 159 not moved.]

[Amendment No. 160 had been retabled as Amendment No. 160B.]

Lord Goodlad moved Amendment No. 160A:

(a) Article 3 of the Protocol on the Position of the United Kingdom and Ireland in respect of the area of freedom, security and justice, as amended and renamed by the Treaty of Lisbon, permitting a notification of the wish to take part in the adoption and application of a proposed measure pursuant to Title V of Part 3 of the Treaty on the Functioning of the European Union,(b) Article 4 of that Protocol, permitting a notification of the wish to accept a measure adopted pursuant to Title V of Part 3 of the Treaty on the Functioning of the European Union,

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(c) Article 4 of the Protocol on the Schengen acquis integrated into the framework of the European Union, as amended by the Treaty of Lisbon, permitting a request to take part in some or all of that acquis,(d) Article 10(5) of the Protocol on Transitional Provisions annexed to the Treaty of Lisbon, permitting a notification of the wish to participate in acts which have ceased to apply to the United Kingdom pursuant to Article 10(4) of that Protocol.(a) in each House of Parliament a Minister of the Crown moves a motion that the House approves Her Majesty’s Government’s intention to commit the United Kingdom to new obligations, or to alter the obligations of the United Kingdom, and(b) each House agrees to the motion without amendment.

The noble Lord said: Amendment No. 160A stands in my name and those of the noble and learned Lord, Lord Morris of Aberavon, and the noble Lord, Lord Rowlands. The report on the Bill by your Lordships’ Select Committee on the Constitution, published on 28 March, concluded that,

It is a matter for regret that the Government have failed to provide their response to the report before Committee stage, as was indicated, although I appreciate the pressure on officials.

The committee recommended that the Government obtain approval from both Houses of Parliament before using opt-ins or opt-outs in any policy area. It believed that it would be consistent with the Bill’s policy to require parliamentary approval of the use of the simplified revision procedure and passerelles. In the area of freedom, security and justice, issues of criminal law and policing are being brought into Title V of the treaty on the functioning of the European Union—an innovation that Dr Valsamis Mitsilegas of Queen Mary’s College told your Lordships’ committee in evidence amounted to fundamental constitutional change.

This amendment includes all possible opt-ins under the proposed new arrangements. The opt-ins are set out in the following parts of the Lisbon treaty: Article 3 of the protocol on the position of the United Kingdom and Ireland in respect of the area of freedom, security and justice; Article 4 of that protocol; Article 4 of the protocol on the Schengen acquis integrated into the framework of the European Union; and Article 10(5) of the protocol on transitional provisions. It will later be open to your Lordships to consider scrutiny of the potentially much less controversial opt-outs under Article 5(2) of the Schengen Protocol and Article 10(4) of the protocol on transitional provisions.

In parenthesis, in my view it is of great importance to public confidence in our relationship with the European Union that actions such as opting into any part of such fundamental constitutional change are properly approved by Parliament. We have seen quite

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enough feeling in the country that things have been done without enough parliamentary approval or people understanding what is going on.

Your Lordships’ European Union Committee, under the chairmanship of the noble Lord, Lord Grenfell, emphasised the importance of ensuring that all opt-in decisions are subject to systematic parliamentary scrutiny, and cautioned that the Government must maintain a proper balance between liberty and security. It took evidence from the noble Baroness the Leader of the House on 13 May on the question of parliamentary scrutiny of possible future opt-ins. I shall not delay your Lordships this afternoon by reiterating the points that were made. Suffice it to say that, in her letter to the noble Lord, Lord Grenfell, on 29 April—which she kindly copied to me—the Minister described “the Government’s overriding priority” to ensure that, under the Lisbon treaty, the United Kingdom can continue to benefit from valuable JHA co-operation. In my view, this is going to have to be matched by an equally overriding priority of parliamentary scrutiny of possible future opt-ins.

The notion that government could take decisions on changes to law, particularly criminal law, on the basis of material not in the public or parliamentary domains may be acceptable to officials, but it will not be acceptable to Parliament. A system of parliamentary controls of individual opt-in decisions need not impede our ability to participate fully in the JHA co-operation. Brussels—I use the word to cover everything that happens there—is fully conscious of our parliamentary timetable, and the likelihood of some ambush being mounted on us by our European partners on the eve of the Summer Recess is frankly negligible if not inconceivable. Our own system of parliamentary business management is admirably flexible—see Northern Rock as a recent example—and these are not going to be frequent occurrences. There is no reason whatever, if the Government of the day have the political will, why an affirmative resolution could not be debated by both Houses within three months. In the Republic of Ireland, both houses approve or disapprove opt-ins as soon as a proposal is published.

Moreover—a point not mentioned in the Minister’s letter to which I have referred—Article 4 of the protocol on the position of the United Kingdom and Ireland in the area of freedom, security and justice allows member states to opt into measures at any time after they have been adopted. So the United Kingdom would not be blocked from such initiatives if for any reason parliamentary approval was not achieved within the three-month period, although it is conceivable—but highly unlikely—that the British and Irish negotiating hand might be marginally affected in such very unlikely circumstances.

It is inconceivable that the noble Baroness the Leader of the House is unaware of the seriousness with which noble Lords regard this matter. Before we return to it on Report, let us hope that some of the Government’s advisers attain the same level of enlightenment; may the truth be seen by many. Lines in the sand may be washed away by the tides of history but they should not be washed away by the tides of bureaucracy—nor should public confidence. I beg to move.

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3.15 pm

Lord Morris of Aberavon: I support the amendment moved by the noble Lord, Lord Goodlad. He has set out the case for parliamentary scrutiny and I would find it very odd if this Chamber did not provide the machinery for appropriate parliamentary scrutiny of very important decisions. The noble Lord, Lord Grenfell, who chairs the Select Committee of the European Union, very appropriately wrote,

He promises in his letter—since that time he has heard evidence from the noble Baroness—to consider whether the scrutiny offered is adequate. He underlines the need to know what the Government’s thinking is and, secondly, what parliamentary control should be available so that we can be sure that we are moving in the right direction.

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