Examination of Witnesses (Questions 20
- 35)
MONDAY 21 JANUARY 2008
Angela Eagle MP, Mr Peter Curwen, Mr Andrew Olive
and Mr Stuart Glassborow
Q20 Lord Trimble:
Turning to the procedure with regard to the budget, I understand
the concept of "compulsory expenditure" has now disappeared
and I am curious about the likely consequences of that. You mentioned
earlier the way in which the European Parliament regularly supports
increased expenditure and is likely to continue to do so. I cannot
think of any situation where the European Parliament is likely
to be in favour of reducing expenditure. Is this not going to
increase the possibility of the European Parliament suggesting
more expenditure and create problems in terms of the upper limit?
Could it also have the interesting effect that the European Parliament,
if you hold down on the limit, might be displaced sideways and,
as most Members of the European Parliament represent urban areas
rather than rural areas, this could result in some pressure on
the CAP, could it not?
Angela Eagle: Certainly on CAP we hope we will
be able to renegotiate the way the CAP works in the EU Budget
Review. We have published quite radical approaches to how we want
to see that work. If you asked me even to bet, I would think pressure
on the European Union CAP budget is more likely to come from issues
of reform in that process than from the European Parliament because
the way that the Common Agricultural Policy budget is decided
is really hardwired into the Treaty. It is not subject very easily
to changes that the European Parliament can effect simply because
of the way that agricultural support works. It is connected to
food prices, and whether support needs to be given or not rather
depends on what is happening to food prices, whether they are
going up or down, so that hardwiring is something that has always
ensured that the Common Agricultural Policy remains a massive
42 per cent, I think, of the EU budget. That is one thing to say.
Q21 Lord Trimble:
I was not trying to defend CAP, by the way.
Angela Eagle: There are fewer and fewer people
who do and that encourages us all. On the abolition of the distinction
between compulsory and non-compulsory expenditure, we think that
is a good thing simply because it means that the Council of Ministers
also can have a view of the non-compulsory expenditure which is,
of course, a growing part of the budget. Abolishing the distinction
means that all the institutions can look across the piece of the
budget rather than having their scrutiny confined artificially
to one bit of it and we think that is the right way to go.
Q22 Lord Giddens:
The Eurogroup has now got formal recognition, something which
did not exist before. Can you confirm that is a purely formal
thing with no implications for expanded powers?
Angela Eagle: Actually, the Eurogroup obviously
is mentioned in a Protocol to the Treaty but I do not regard that
as formal recognition. I think it is informal recognition because
the Protocol actually says that the Eurogroup is an informal grouping
and it sets out what it should talk about. In an odd way we see
that as emphasising its informal nature—
Q23 Lord Giddens:
Downgrading it.
Angela Eagle: —and narrowing its scope
for mission creep.
Q24 Lord Giddens:
Do you think that might be wishful thinking?
Angela Eagle: Time will tell, but I do not think
we are too worried. We are confident in our ability to discuss
the things that need to be discussed under the Treaty in Ecofin.
We see that there is a good reason for those who are in the single
currency meeting to talk about some of the implications of that
before or after Ecofin and we are fairly relaxed about that.
Q25 Lord Giddens:
So you do not think it has bleak implications for the UK by giving
greater confidence to the Eurozone members?
Angela Eagle: No. All legislative decisions
which would impact on those who are out of the euro and issues
affecting the European Union in its 27 Member States are discussed
in the relevant formation of the Council and Ecofin. I hope that
members of the Eurogroup are not intimidated or worried by the
fact that we are in the G7, the G8 or the Commonwealth.
Lord Giddens: Thank you.
Q26 Lord Steinberg:
Minister, can I talk to you about relationships between those
governments that are inside the euro and those that are outside.
Usually when one talks about relationships it is generally a question
of either money, trade or both. As we have got quite a number
of countries inside the Eurozone, some of whom have got quite
weak economies and outside the Eurozone we have a strong economy
here in the United Kingdom, how are those going to relate to one
another?
Angela Eagle: Certainly there is now a majority
of EU States in the Eurogroup and I think Slovakia is expected
to join next. Again, we do not have an issue with this since we
manage in Ecofin itself to deal with the issues on economics that
we deal with at EU level and obviously there is the Growth and
Stability Pact and increasingly issues of climate change and issues
which have economic implications. We do not see a problem with
the Eurogroup existing or meeting. We have not discovered that
there are any disadvantages to not being at that group. I suppose
there is always the question that they might meet early caucus
and try to bounce, but we are confident enough in the way that
we handle ourselves as negotiators in Ecofin itself that we can
look after our own economic wellbeing and our own economic interests
within Ecofin itself. We are relaxed about it.
Q27 Lord Steinberg:
That is now, but what about the future because undoubtedly weak
economies generally stay weak for a much longer time and strong
economies stay strong. We have now got something new happening
and that is the euro is so much stronger and has become stronger
and stronger against the pound. There is obviously going to be
some strain, is there not, on the relationship between them? If
you say that you do not see any signs of that now, I am suggesting
to you that they may be below the surface but they are going to
appear.
Angela Eagle: I think our job as 27 Members
of the European Union, one of the reasons why the European Union
exists, is to help spread economic stability and prosperity and
to help make Europe able to renew its economic relevance to the
world and strengthen it. Some of that is to do with how we engage
together in the European market, which is the third largest in
the world after China and India in population terms, how we can
reform our own economic institutions, make the single market work
more efficiently so we can do more trade with each other, and
actually help to make those weaker economies stronger. I do not
see that there is too much of an issue of principle in how you
do that whether you are in the euro and are part of the single
currency or not. Clearly there are changes and differences in
how interest rates are set but there is no reason why the main
work we have to do in the Lisbon process, rather than the Lisbon
Treaty, should not go on whether you are in or out.
Q28 Lord Steinberg:
You suddenly relegated the United States when you mentioned India
and China.
Angela Eagle: As individual Member States we
have to relate to our other trading partners. We also have to
relate to the other major economic powers in the world. The point
of the European Union and some of the value added of the European
Union is how it reforms the market in Europe so that we can strengthen
our own economies and help each other grow and prosper. When we
look at the achievements that have been made, particularly with
enlargement in stabilising and modernising often weak economies,
we have a good record to talk about there.
Q29 Lord Steinberg:
Just one final point, if I may. It has become more noticeable
in recent years that swings are occurring in reserve currencies
and undoubtedly the dollar has become a lot weaker and the euro
has become a lot stronger. Have you any comment to make on how
that might affect relationships?
Angela Eagle: As a Treasury Minister I am not
going to comment on relative currency strengths or weaknesses,
and you would not expect me to. We are all economists and we can
see what effect that might have and work it out for ourselves,
but I am not going to pontificate about it today.
Q30 Lord Trimble:
Minister, you were very confident about good relationships within
the European Union and you talked about promoting stability and
all the rest of it, but one of the consequences of the United
Kingdom being outside the euro is in the last couple of months
the pound has devalued against the euro by a percentage equivalent
to Harold Wilson's devaluation. That might enhance our competitiveness
with regard to countries inside the euro and it might result,
surely, in there being some resentment among those countries at
our ability to do this while they are stuck with that particular
rate and they cannot respond to our competitive devaluation.
Angela Eagle: The currency is floating free
so there has not been any decision to devalue competitively or
otherwise. The values of currencies are actually decided by market
decision and that is what has happened. Therefore, it would be
rather narrow minded, and I do not think we have come across it,
for there to be resentment in what world markets have decided
to do to our various currencies. We have to concentrate on what
we can affect directly and that is how we can make the single
market work more effectively, how we can trade with each other
and how we also interact with the emerging economies, particularly
of the east as well as our old trading partner across the Atlantic.
Chairman: This is, of course, taking
us a bit outside the ambit of the Treaty as you suggest, Minister.
Can I drag us back to the Treaty and the Eurogroup?
Q31 Lord Kerr of Kinlochard:
I am tempted to follow Lord Trimble. The scale of the devaluation
of sterling against the euro is quite sizeable now, on a par with
the early 1990s devaluation. One of the effects of that was a
degree of jealousy at the greater competitiveness of British business
and accusations of social dumping against the British in 1993
and 1994. It seems to me not implausible that what Lord Trimble
speculated about might happen. Perhaps it would not be sufficient
to say the market has decided the rate: people might say that
interest rates are set by Central Banks, and have some effect
on what the market decides to do. Has that phenomenon started?
Have we started to see criticism? I would have thought there was
a risk that if it has not started it will start. But I agree with
you, Minister, I think Ecofin is the right place to deal with
it and the fact of the existence of the Eurogroup is neither here
nor there to this.
Angela Eagle: It has not started to date and
clearly we will have to see what happens with various currency
movements and valuations or revaluations of the euro and other
currencies, not only our own. Clearly we have to focus on the
things that we can affect properly. Those that are in the euro
have made a decision to go in, the institution that sets their
interest rate is the European Central Bank, there are ways that
they can discuss and, in fact, the head of the Central Bank comes
to Ecofin and probably pops into the Eurogroup occasionally, I
would have thought, so these discussions can be had. The most
important thing is to concentrate on what we can affect and that
is widening and deepening the Lisbon process, seeing whether we
can make our markets more effective so that we can try to focus
on achieving higher rates of prosperity for the citizens of Europe.
Q32 Lord Giddens:
I cannot quite see what the Lisbon process has got to do with
that actually because it does seem to me that there is a clear
sign here that the Eurozone has an identity and it has a kind
of legal personality, if you like, and the proportion of states
in the Eurozone is set to grow. I find it a bit too relaxed to
say you are relaxed about it because I would say it is something
that should be kept under pretty close scrutiny. You can think
of other scenarios beside the ones which Lord Trimble and the
noble Lord Kerr mentioned which could rebound either to the advantage
or disadvantage of the British because the British will become
more and more isolated as more Member States join up with the
euro. I find it a bit odd to say that you are just relaxed about
it.
Angela Eagle: We always keep our own options
with respect to whether we should join the euro or not under review.
We have five tests. We have work that is being done to deal with
some of the issues that were identified in 2003 as being barriers
to us considering joining the single currency and that work is
ongoing. Clearly all of these things are kept under review. It
is purely speculative but if we were to see some emergence of
hostility or resentment or our own isolation because we are not
in the single currency then we would think of ways to engage and
deal with that, but we have not seen the emergence of any such
resentment at the moment. We continue to keep all of our options
on joining the euro under review and there is not a lot of sense
in my saying much more at this juncture because until we are faced
with a particular situation it is all speculation. All I could
say is that the close working that we have come to expect in Ecofin
continues and that has helped us deal with a lot of economically
challenging situations and I am sure we will be able to deal with
any that come up in the future.
Q33 Lord Giddens:
I do not want to keep you here indefinitely but I was not asking
about whether the UK would join the euro, I take it for granted
it will not join the euro in the near future, but you can see
an implicit power system potentially emerging which the new clauses
might add some strength to and, therefore, you can see certain
things which you should be worried about rather than saying you
are relaxed.
Angela Eagle: I would like to emphasise again
that the mentioning of the Eurogroup in a Protocol explicitly
says it is an informal grouping and the Treaty makes no change
at all to the fact that all of the issues economic, financial
services, economic reform and otherwise, which affect the 27 Member
States are decided in Ecofin where we have a presence. It is unlikely
that there will be any further changes to the Treaty for quite
a long time, so I think we are in an institutionally stable position
where the Eurogroup is recognised but stated to be informal, it
is no more than any other corpus in that sense that anyone is
entitled to create. I think we just have to be confident in our
own negotiating efforts and our own position to expect that on
many occasions we will be able to get what we want out of Ecofin
meetings. Our record here is good, UKREP and the representatives
that we have in the European Union are amongst the best, I would
trust them very much, and that is why I was saying that we are
relaxed and confident that we can still argue our corner in Europe
whether the Eurogroup exists informally or not.
Q34 Chairman:
I think what we were picking away at, Minister, was were you feeling
paranoid about the Eurogroup and clearly not.
Angela Eagle: No, we are not feeling paranoid.
Q35 Chairman:
That does not of itself change anything. Colleagues, we have kept
the Minister for quite a long time. Have I managed to suppress
anybody's question and, if so, would you like to ask it? Minister,
do you or your officials have anything that has not been said
that you would like to say?
Angela Eagle: No, only should you think of any
questions after we have all gone please feel free to contact us
with them and we will do our best to be as helpful as we can.
Chairman: Thank you very much, Minister.
Thank you very much for coming, it has been most helpful. Thank
you all.
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