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“The events of the past few days have demonstrated that we need urgently to deploy in eastern Europe and emerging markets the IMF’s facilities and resources to the fullest extent—and also the resources of the multilateral development banks—to prevent capital flight, to engage in and support countercyclical policies and to finance domestic growth where exports have declined and capital has flown outwards. We need urgently to consider creating a new IMF facility for emerging economies in the current crisis. Rescuing eastern European countries is particularly urgent and I have asked the European Bank for Reconstruction and Development, the European Investment Bank and the World Bank to consider what they can do immediately.

“The Council also discussed in detail how each of our economies was being affected by the global economic downturn that started in America. Had we not acted to stabilise the banking system, the effect on households and businesses would have been even more severe; but, notwithstanding the action that has been taken, the world is facing a severe global economic downturn, with negative growth already seen in France, Germany and Italy this year and in the US last year. The UK cannot insulate itself from this global downturn, but with interest rates low and falling and inflation expected to come down over the next year, our underlying economic indicators are stronger than at any other previous downturn. Debt has been considerably lower than a decade ago, and lower than all G7 countries except Canada, enabling the Government to increase borrowing at the right time to support the economy. The Government will do whatever it takes for mortgage-holders, for small firms and for employees to help families and business through what will undoubtedly be a difficult period ahead. We will bring the same focus and determination to the task of protecting jobs, homes and small business as we did to avert the threatened meltdown of the financial system.

“That will be the central mission of the Government over the coming weeks and months, and I welcome the support, in the national interest, of all prepared to give that support.

“The Council also reached important conclusions on energy and climate change; on Russia and Georgia; and on the European Pact on Immigration and Asylum. Next year in Copenhagen, the world has an historic opportunity to secure prosperity for generations ahead with international action on climate change. While there are those who will seek to use current global financial problems as an excuse to pull back from change, to pull up the drawbridge and renege on our commitments, in fact it is now more essential than ever before to push forwards with our ambitious agenda on energy security and climate change. As the Stern report showed, weak or delayed action will cost us all more in the years to come, both financially and economically. The Council reaffirmed its commitment to reach agreement by December on its energy and climate change package for 2020. We made clear the importance in doing so of achieving a fair balance, with all member states accepting new commitments; that there must

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be flexibility for member states to meet targets in the most cost-effective way; and that Europe's package must send the strongest possible signal to encourage the rest of the world to aim high at the Copenhagen summit next year.

“As last week's Statement from my right honourable friend the Secretary of State for Energy and Climate Change made clear, the Government are committed to the most ambitious targets, cutting greenhouse gas emissions by 80 per cent by the middle of this century, not just for the future of our environment, but as a crucial part of our strategy for energy security. But we cannot fulfil our aspirations for climate change without nuclear power and European and international co-operation. That is why we will fully engage with the European Union on the environment and not pursue a policy based on unilateralism and detachment. Faced with historically high and volatile oil prices, it is more essential than ever before that we act to end our dependency on oil.

“The Council looked for greater diversification of energy sources, the completion of fully functioning EU energy markets and improved critical energy infrastructure—for example, in the southern corridor. Our London energy meeting in December will seek to drive forward progress in the critical dialogue between oil-producing and oil-consuming nations. Today, I would urge OPEC at its meeting on Friday to work through dialogue with consumer countries to stabilise the energy market as a whole.

“The Council has expressed its grave concern over Russia's actions in Georgia and called on all sides to implement in full the six-point plan agreed with European leaders. The Council therefore welcomed the withdrawal of Russian troops as an essential additional step in the implementation of the agreements of 12 August and 8 September, and the launching in Geneva of the international discussions provided for by those agreements. The Council and Commission will continue to make a full in-depth evaluation of relations with Russia ahead of the EU/Russia summit in Nice next month. The Council also resolved to continue to support its eastern neighbours in their efforts to achieve democracy and economic modernisation, and to consider a future EU eastern partnership.

“Finally, the Council considered the European pact on immigration and asylum, underlining the importance of ensuring coherence between Union policies, including free movement. Britain and Europe benefit economically from free movement, but free movement cannot be an unfettered right. It must bring with it clear responsibilities, with failure to meet them carrying clear consequences, including, where appropriate, the loss of that right entirely. I discussed this point in further detail with a number of European leaders in the margins of the Council, building considerable support across member states and agreement to look further at the responsibilities associated with free movement where crimes are committed by EU residents in the EU, but outside their country of origin, and to return to this issue in December.

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“This summit showed that in facing global challenges, whether the credit crunch, climate change or energy security, we succeed best not in isolation but in co-operation, not with unilateralism and separation from our European neighbours, but in active partnership with them. That is why our policy will rightly remain one of being fully engaged at the centre of Europe, and I commend the Statement to the House”.

My Lords, that concludes the Statement.

3.52 pm

Lord Strathclyde: My Lords, I thank the noble Baroness the Leader of the House for repeating the Prime Minister’s Statement and warmly welcome her to the duty of repeating these important Statements.

Nearly 500 noble Lords voted in a Division on the Lisbon treaty this summer, which was a record for the reformed House of Lords. I do not see them all here today, but these are matters of great interest to the House, and I think I speak for the whole House in saying how much we appreciate reports from the noble Baroness and her predecessors on EU summits.

I much regret that there was not more concrete progress on climate change, but is it not inevitable that world recession will cause some countries to reassess their shorter-term priorities? The UK Government have reasserted immensely tough unilateral targets on this important policy, but can the noble Baroness explain how it is that Mr Miliband's part of the Government is trying to restrain hydrocarbon use, while the Prime Minister is campaigning for lower prices that will promote its use? In the context of the Prime Minister's call for lower petrol prices, have the Cabinet given any consideration to cutting fuel duty, or is it simply a combination of policy incoherence and political spin?

Reinforced as her Benches are by the noble Lord, Lord Mandelson, does the noble Baroness share my disappointment that there was no commitment to restarting international trade negotiations, to which the noble Lord devoted so much time, sadly all in vain?

We hear that the Chancellor of the Exchequer has been reading up on the history of the great depression. Well, that should cheer the country up. Was not one of the abiding lessons of that time that protectionism was a disastrous factor in exacerbating recession or what is now called contraction?

Much consideration at the summit was given to energy security, but is that not precisely the sort of question that we should have been tackling more than a decade ago? Can the noble Baroness place a report in the House on the EU's current estimate of the percentage of future EU energy need that will be sourced from Russia?

There was also much talk of immigration. That, too, I may venture to say, was hopelessly belated. The Council agreed a high-sounding new EU pact, including joint consular services, joint border guards, sharing asylum seekers and a single asylum procedure. However, can the noble Baroness assure the House that the Government will agree to nothing in these discussions,

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now or ever, that will detract from the UK Government's absolute right to limit non-EU entry into this country based on our national need and not on other nations' problems?

In the closing paragraphs of the Statement, the Prime Minister mentioned,

Why did the Prime Minister refer to that? Is this a new initiative being taken forward by the Council of Ministers? Can the noble Baroness put any flesh on those bones?

While rightly deploring the Russian invasion of Georgia, the communiqué was a little light on solutions. There is talk of a full, in-depth re-evaluation, but such diplomatic flannel seems to cover divergence in opinion in Europe on whether to do deals with Russia or to take a firm line with Russia. Where do the UK Government stand? Fudged lowest common denominator policies will not deflect those ready for violent breaches of international law. Is it not essential that we have the highest common clarity in the face of this indefensible action?

Will the noble Baroness lay in the Library of the House a summary of the report of the Taoiseach on the situation following the rejection of the Lisbon treaty? The communiqué talks about “resolving the situation”. Does that mean making the Irish people vote a second time? Do the UK Government support that policy of, “We’ll only listen if you tell us what we want to hear?” Would it not be a disgrace to force the Irish people to vote twice when the British people have not been allowed to vote once on this treaty?

On the financial crisis, to which the Lisbon treaty was utterly irrelevant, I reaffirm our support for coherent action. However, nothing can hide the fact that many of the economic problems facing this country are home grown. Talk of being the “saviour of the world” may sound as hollow and hubristic as recession bites as does “ending boom and bust”. I agree with the Prime Minister that there is a need to strengthen the IMF early warning system, but is not the real question what we do in response to warnings? Eighteen months ago the IMF warned the UK about fast rising household debt, vulnerable financial institutions and potentially illiquid instruments and exposure to risk. I think we all recognise these words and their effects, yet why did not the Government respond to those warnings and fix the roof when the sun was shining?

International co-operation is vital on this subject, but no substitute for effective domestic action. The City of London remains uniquely important to our economy. There is simply no parallel in most other EU member states. So will the Government resist robustly efforts to create a single European supervision of the City? Is not one of the lessons of recent weeks not that we need a Bank of Europe regulating the City, but that it was a catastrophic error to take the supervisory role away from the Bank of England in the first place?

The Prime Minister asked for confidence in the future, but how can we have confidence in the future when we have Labour’s past record to look at? Figures now show that Britain has borrowed £38 billion in the first half of the year. We are heading for our worst ever Budget deficit. What benefit is the backslapping

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of the Prime Minister in Brussels to those in the real economy outside the summit chamber who now face lay-offs, repossessions, joblessness, collapsing incomes in retirement and lost business livelihoods, not due to the world outside but to 11 years of spend, borrow and waste economics, for which the answer proposed is yet more borrowing?

Finally, can the noble Baroness confirm that the usual channels have agreed, in principle at least, that there should be a debate to discuss the global financial situation and that the Government are seeking to find a date? We very much hope that an announcement on that will be made fairly soon.

3.58 pm

Lord McNally: My Lords, I start where the noble Lord, Lord Strathclyde, ended. We on these Benches would also welcome an early statement on a full debate. Given the galaxy of talent on all Benches, I suspect that we might need more than one day’s debate. The sooner that is held, the better.

The Prime Minister’s Statement saved the best till last, saying that,

How very true. I wish only that the Prime Minister had been whispering that in the then Prime Minister’s ear in 1997 and 1998, and had not waited for more than a decade to learn that truth.

As for the reference to the Lisbon treaty, I can say only that I suspect that the majority in favour of the Lisbon treaty would be even larger if the vote were held today. One of the things that has certainly been shown over the past few tumultuous weeks is that, like the old insurance advert, having the strength of the EU around us is certainly to be valued. It is right to pay tribute to President Sarkozy who, in this EU presidency, has shown great leadership that has been much to the benefit of all the members of the EU. I sometimes think that the Prime Minister would do well to remember the old Harry Truman dictum; not, “The buck stops here”, although it certainly does, but, “It is amazing what you can accomplish if you do not care who gets the credit”.

Perhaps the noble Baroness can say whether the Government feel that there are any implications for Britain of being outside the eurozone deliberations. Is she not concerned that some of the key discussions and decisions made about Europe’s position will be made with us sitting outside, waiting for those decisions to be arrived at? As for the rest of what was a very full economic Statement, responded to with a very full dissociation—we are back in the old ping-pong politics in this term—by the Conservative party, the best thing is for us to have a full debate in the House. I say to the Government that they should remember that we are the Liberal Democrats and we are here to help them.

The summit was originally going to be on energy and climate change, although naturally the economic situation dominated. One thing crossed my mind on hearing what the Prime Minister said. I saw a photograph in one of the Sunday newspapers of a new wind turbine being built, with a man in white overalls

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working on the turbine. Underneath, the caption said, “Turbines for the British wind turbine industry being made in Germany”. What initiatives do the Government have, particularly as we move into a recession, for creating green jobs for a green economy? That is one of the real opportunities that we have, which may have been neglected while eyes were on other things.

On relations with Russia, I am a little worried whether sometimes the rhetoric about firmness with Russia and some of the other Cold War mark 2 stuff that we hear on the right of both British and American politics is really thought through. Of course, we must be firm with Russia, but we also must engage in a realistic dialogue with it. I hope that will be our role in terms of the Nice summit, rather than encouraging some eastern European countries to get into positions that are beyond their capabilities and beyond our capabilities. Did the discussion also relate to how to get China and India into these discussions? I share with the noble Lord, Lord Strathclyde, an interest in whether there will be a real attempt to get the Doha round moving again, possibly with an initiative once it is clear who the new American president is going to be.

Finally, what is meant by the EU right of entry not being unfettered? Have the Government something in mind about the movement of EU citizens in present circumstances? What underlies the whole Statement is the value to Britain of being at the heart of Europe, as the Prime Minister has, at long last, concluded, because it is in that dialogue with Europe and the United States—and with the emerging economies—that the real solution to the world’s economic problems will be found. If the Chancellor of the Exchequer is reading books, I recommend the new biography of John Maynard Keynes, which is an excellent read.

4.05 pm

Baroness Royall of Blaisdon: My Lords, I am grateful to both noble Lords for their support on the wider Statement and their welcome for the fact that such Statements are repeated in this House. As the noble Lord, Lord Strathclyde, said, there is here a great deal of interest in these issues and concern about the future.

I am also grateful for the support of both noble Lords for the economic measures that have been taken by the Prime Minister in this country, in the European Union and in the wider world. However, I refute one thing said by the noble Lord, Lord Strathclyde, in relation to fixing the roof while the sun was shining. We did fix the roof when the sun was shining; we did invest in education; we did invest in training, in apprenticeships and new hospitals; we did create jobs. That will ensure that we are in a good position as we face the economic downturn.

The noble Lord, Lord Strathclyde, asked about the migration pact. I reassure him that it allows us to continue with our points-based system and to meet the future needs of this country.

The noble Lord, Lord McNally, raised a point about the euro-zone. It was instructive to see the Prime Minister in Paris last weekend with the euro-zone heads of state and government. I would imagine that

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as the economic crisis unfolds there will be more and more situations in which the Prime Minister works with his colleagues in the euro-group.

The noble Lord, Lord Strathclyde, asked about the Lisbon treaty and the position of the Irish. I do not know if it will be possible to place a copy of Taoiseach’s statement in the Library. I do not know whether it exists in writing. If it does, I will certainly put it in the Library. However, it is absolutely right that the heads of state and government should have briefly addressed this issue and they will come back to it with a deeper reflection when they meet in December.

Both noble Lords were interested in the aspects of criminality and freedom of movement. The Prime Minister strongly feels that we need to ensure that the minority of people who abuse free movement to undertake serious criminal activity are prevented from doing so. That does not mean that we will cut down on freedom of movement; it means merely that we want to underline the importance of maintaining free movement rights for the majority of law-abiding EEA citizens, but we want to deal with citizens who abuse the trust of other citizens in the European Union.

The noble Lord, Lord Strathclyde, spoke about EU supervision. He said that it was important that we in the UK should be able to supervise our own financial markets. I can assure the noble Lord that our proposals, for example, for supervisory colleges allow national accountability to remain. We want to ensure that there are better information flows between the different regulators, so that they can see the wider picture, but it is very important that our national accountability should remain.

On Russia, the Council agreed that the time is not right for a decision on resuming talks on a new partnership agreement with Russia because we need to take the decision in the round, considering Russia's engagement in the Geneva talks and the findings of the EU-Russia audit. But we should not be signalling that Russian withdrawal from the security zone is all that is required of them. We shall look at this again in December when the EU-Russia summit has taken place.

On climate change, delay is simply not an option. We recognise the challenge of implementing the package at EU-level. We are working very closely with the presidency to ensure that we show global leadership in the EU because it is very important to reach a resolution in December so that we can take the leadership in Copenhagen next December. That will not be easy and we shall be working with those Governments who have serious reservations about the issue at the moment.

The noble Lord, Lord Strathclyde, suggested that there is a problem in my right honourable friend Ed Miliband seeking to reduce carbon while the Prime Minister is talking about the need to ensure that petrol prices go down. I do not think that there is a problem there at all. Fuel duty has been frozen this year, but we recognise, as we did with our European colleagues, that it is absolutely necessary to take action to reduce carbon emissions at UK, EU and international levels.

We should look at the point raised by the noble Lord, Lord McNally, about the manufacturing of wind turbines, but the September 2008 manufacturing strategy announced how the Office for Nuclear

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Development will assist the development of the supply chain. Obviously, we have to consider that in the context of the renewable supply chain as well as the nuclear supply chain.

I am delighted that both noble Lords recognise the importance of this country being at the heart of Europe. I am glad that all three parties, and Members all around the House, recognise that need.

4.12 pm

Lord Ryder of Wensum: My Lords, in view of the fact that the Government’s public spending figures, published today, are the worst on record—in other words, the worst since 1946—and in view of the fact that our public borrowing is now the worst in western Europe, what success did the Prime Minister have with his colleagues in persuading them to go down the same path as him?

Baroness Royall of Blaisdon: My Lords, it is clear from all the discussions that took place before the Council and at the Council that the plan devised by the Prime Minister, with the Chancellor and other colleagues, to recapitalise banks and so on, to bring stability to the financial system, is now being followed in the European Union and around the world. Of course, we should also recognise that the problems in the financial sector and in the real economy are inextricably linked. We have to find a solution to the financial crisis so that we can ensure that the real economy thrives.

Lord Hannay of Chiswick: My Lords, I believe the Minister agrees that the tone of all three statements from the Front Benches in this House are among the most positive that we have heard after a European Council for a very long time. That is to be welcomed. Long may it continue.

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