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Finally, we go from a worrying sea-change to the shabby stitch-up on the Lisbon treaty. The presidency boasted that the deal reached,

It declared:

“This is a major success and good news for the whole of Europe”.

We hear daily lectures about the need for engagement with the people, for constitutional renewal and for modernisation. What could be more divorced from the people, more old fashioned in its top-down view of what the people can be allowed to do, and more redolent of the old, broken way of doing things in Europe than this collective boast that denying most of Europe a vote and forcing those who do not vote as they are told is a “major success” for Europe?

The presidency declares that the decision on Ireland is a legally binding decision of the Heads of State. But how is it legally binding and, if it is, why is it not being brought to this Parliament? Indeed, why is it not being put to the British people? Why are the Irish people being forced to give their view twice when the British

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people have not been asked for their view once? The Prime Minister seems to be assuming that when the next accession treaty comes before Parliament—in this case for Croatia—those promised guarantees for the Irish, at present without any legal validity whatever, will at that point be metamorphosed into full legal changes in the Lisbon treaty and that it will all go through on the nod, along with the accession provisions. It is as if the Irish pumpkin is going to be turned into a golden Lisbon coach.

However, that is a very bold assumption. Many people will see it as another attempted sleight of hand to avoid parliamentary or public approval for a thoroughly unpopular policy. The Irish people are being given alterations to the negotiated package while the British people are told they have to swallow it whole and have no say in any of it.

I wonder where constitutional renewal is in this. Four years ago, at the last general election, the party opposite and the Liberal Democrats gave the British people a solemn pledge in their manifestos that they would allow the British people a say on the Lisbon treaty in a referendum. They did so, of course, for the cynical reason that they wanted to stifle public debate on the future course of Europe at that general election. They gave their word, and then they broke their word. That was an act of dishonour by the leaders of those parties that nothing can erase. We will never renew politics unless we redeem that honour, so I say to my friend, the noble Lord, Lord McNally, and those on the Liberal Democrat Benches that they may howl to the moon about what they call establishment parties; but in Europe they are the establishment—a closed establishment—which is deaf to the desire of people to be heard and blind to the immense challenges of the 21st century that call for a new, less introverted Europe which is ready to renew and reform itself. You cannot pose as democrats and renewers at home and be gainsayers abroad.

4.24 pm

Lord McNally: My Lords, for the first five minutes of the response of the noble Lord, Lord Strathclyde, I was thinking, “My goodness, Tom is becoming a real statesman”, and then in the last two minutes he slipped into some old bad habits. If one is talking about honour, I say that it is dishonourable to fight a European election campaign with the body language and every statement putting forward an anti-Europe position—indeed, a “withdraw from Europe” position—but with fingers crossed behind the back and actually meaning, “We would stay in Europe anyway”. I do not need lectures from the Tory Front Bench about honour.

In terms of being part of the European establishment, the Liberal Democrats certainly are in this respect: we are now part of a group in Europe far larger than the rag, tag and bob-tail group that the Conservatives have associated themselves with in the European Parliament. Therefore, to any outside interest groups that want Britain’s interests defended within Europe and their views put forward in the European Parliament with some idea of their being listened to, I say that I would have thought the Liberal Democrats were a better channel now than the Conservatives with their other fringe friends.

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As far as the Statement is concerned, the noble Lord, Lord Strathclyde, was quite right to congratulate the Government on their measured but correct response to Iran; I associate myself with that. The accusations of the Iranian Government are quite absurd and it is pleasing to see yet another dictatorship in trouble blaming the BBC for its troubles. It sounds to me like the BBC World Service is carrying on its historic mission of telling the truth to oppressed peoples, and we congratulate it on this.

On the financial issues, the noble Lord, Lord Strathclyde, has drawn attention to something that has been worrying me. I was at a briefing this morning on what the Americans are doing about financial regulation. It is important, and the Prime Minister is to be congratulated on the co-ordination that he has achieved internationally, but it seems that we are now getting three different levels of approach to regulation from the United States, the European Commission and the UK. That does not augur well for the future of a global response to financial regulation. A worry has been expressed by the City of London that it will be overregulated by a commission that does not have either the same experience or the same priorities as we do in keeping London as a major world financial centre.

On climate change, we all welcome the new sense of urgency but, again, I saw a programme the other day about the Obama Administration’s investment in the new technologies that will be needed to reach climate change objectives, and I wonder where in Britain—indeed in Europe, but certainly in Britain—are the new industries being brought forward to meet that demand. Will we find that, to meet those objectives, we have to import technologies from the United States and other parts of Europe, or indeed from China?

On Ireland, I think the truth is that the Irish people will be looking again in a colder, harsher world than when they made their first decision and this time they will not have the help of an expatriate millionaire to influence their decision. I hope that we can move on quickly to the ratification of the Lisbon treaty so that Europe can get on with its real business of economic recovery, the challenge of climate change and the war against organised crime and terrorism. That is the real agenda, and I hope that the Government ignore the Conservative Party playing party games and keep to that agenda.

4.30 pm

Baroness Royall of Blaisdon: My Lords, both noble Lords have mentioned the European mainstream. As a member of this Government, I am proud to be part of the mainstream of the European Union, and in that mainstream I would include the Party of European Socialists, the European People’s Party and the European Democratic Party. I would not include the “rag, tag and bobtail” parties, as the noble Lord, Lord McNally, called the loose grouping that the Conservative Party now forms part of. As part of that mainstream we can influence debate and, more importantly, decisions, and it is vital that our country remains part of it.

The noble Lord, Lord McNally, spoke quite properly of Afghanistan. The Council delivered political backing at the highest level for a substantial EU contribution

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in support of the elections, among other priorities. It has committed €35 million to the elections and it is planning to send an elections observation mission to help to ensure their credibility. That is nothing to do with putting things through doors in Afghanistan; it is about real help to ensure that the elections are properly managed. As I understand it, though, the summit did not speak of troops in any form.

On Pakistan, the summit established a long-term strategic partnership to tackle issues of violent extremism, security and democratic governance, and the key outcomes included a comprehensive trade package and €129 million in additional funding, including €72 million for humanitarian assistance. I am not sure what the comprehensive trade package actually included, but I will come back to the noble Lord in writing.

I am grateful to both noble Lords for their support for the action that the Government have taken in relation to Iran. The noble Lord, Lord Strathclyde, asked whether the situation there changed our approach to engagement over the nuclear issue. The implications are not yet clear but there are serious matters, particularly the nuclear issue, that will have to be addressed very soon. An invitation has been made to Iran and there is a genuine opportunity for it to engage constructively with the E3+3.

Both noble Lords are rightly concerned about financial issues. The Government have not performed a U-turn on financial regulations. From the beginning we accepted the broad thrust of La Rosiere’s proposals, but we were concerned about the detail. We believe that the framework is now in place and that important changes were brought about at the summit as a result of the Government’s negotiations. The UK supports improved co-ordination between national supervisors. Mediation clearly has a role to play where there are disagreements to be resolved between home and host supervisors, as in the case of Icesave. Both the JEC conclusions and ECOFIN of 9 June made clear that any mediation will not impinge on national fiscal accountability. We regarded that as a key issue, and it has been agreed by the summit.

The noble Lord, Lord McNally, suggested that there would be too many approaches to regulation and that the City would be overregulated. I agree with the comments of the noble Lord, Lord Strathclyde, about the pre-eminence of the City and its importance not just to the people of this country but to the world. The EU proposals on financial regulations follow and take full account of the London and Washington summit conclusions. The Commission will publish legislative proposals this autumn, and the Government will continue to represent fully the special position held by the City as a global financial centre.

I wholeheartedly agree with the noble Lord, Lord McNally; now that the issue of the Irish referendum has been considered by the summit, I hope that, whatever the result, the European Union can move on to the real agenda that it should be addressing, including climate change. There is a referendum in Ireland because that is what the Government of Ireland wish, not because it has been imposed by the EU. It is entirely up to the people of Ireland. The protocol will be legally binding when ratified. Ratification will take

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place following a debate in this House and the other House at the same time as the next accession to the European Parliament is considered in both Houses. That will be the accession of either Croatia, or possibly Iceland. The Government are not trying to stifle discussion on the protocol in this House. It will take place as a matter of course.

Finally, in response to the noble Lord, Lord McNally, my noble friend Lord Drayson is actively engaged in ensuring that the new industries are there, the training is taking place, the investment is being made, so that the people of this country can benefit from the new industries, when and as necessary.

4.35 pm

Lord Hamilton of Epsom: My Lords, at the time of the Irish no vote in the referendum, a senior official in Brussels told me that if referenda had been held across Europe, at least seven nations, including France and Germany, would have voted no. When is Europe going to address its democratic deficit?

Baroness Royall of Blaisdon: My Lords, that was the view of one official. I respect that official’s views, but I am sure there are many different views across the European Union. The democratic deficit is constantly addressed; we have a European Parliament that is democratically elected. I am sad, like other Members of this House, that so few people bother, as it were, to vote in European elections, but we do have a democratically elected European Parliament. That is what ensures that there is no democratic deficit.

Lord Lea of Crondall: My Lords, is not the opposition Front Bench’s discomfiture about the Irish protocol due to the fact that it is likely to have shot the Conservative Party’s fox and it is now going to be up the creek without a paddle?

On the economic side, is it not now as plain as a pikestaff that there is no such thing as a totally independent economic state? Does my noble friend agree that the Government’s pragmatic approach is well illustrated by page 7 of the Council’s statement dealing with the new European systemic risk board, of which the UK will be fully a part? The members of the General Council of the European Central Bank will elect the chair of the board and the ECB will have the lead role in implementation. This is surely an historic event.

Baroness Royall of Blaisdon: My Lords, the issue of the ECB, to which my noble friend alludes, is a testament to the way in which the Government are part of the mainstream. Before this summit and before ECOFIN, it was not going to be the General Council of the ECB that elected the president of this new supervisory body; it was just going to be the European Central Bank. We wanted to widen this election to ensure that we had a voice and to ensure that the City of London, through the British Government, had a voice. It is a testament to the fact that we, the British Government, are in the mainstream of the European Union.

Baroness Falkner of Margravine: My Lords, we welcome the Statement’s discussion of the establishment of the election observer group for Afghanistan. That is very good news indeed. Will it be a comprehensive

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and numerically strong group whose security is properly guaranteed while it deploys in Afghanistan? The confidence-building that the group will bring about will be enormously important in elections that are going to be, I hope, more peaceful in outcome than what we have seen in Iran.

My other question is about Pakistan. It is not entirely clear to me what the position is following the noble Baroness’s response to the noble Lord, Lord Strathclyde, about the additional €120 million funding. Traditionally, the EU’s aid to Afghanistan has been appallingly meagre. In 2002 to 2006, it provided only €125 million in aid. Will the amounts that she has mentioned take the form of aid or some other kind of assistance?

Finally, in our deliberations in the European Council, will we put forward the idea that the EU should appoint a very senior regional envoy to Afghanistan and Pakistan who can work alongside Richard Holbrooke, the US special envoy to the region, so that we can bring a bit more gravitas and clout to that region?

Baroness Royall of Blaisdon: My Lords, I regret that I will have to write to the noble Baroness on all three of the points she mentioned. I agree that EU aid to Pakistan has been meagre in the past, but I think that the new allocation of money at this summit will redress the situation somewhat. However, I shall certainly come back to her on Afghanistan and on a regional envoy to the region.

Lord Pearson of Rannoch: My Lords, I trust the noble Baroness will not mind if I suggest that she was perhaps a little disingenuous when she suggested that the European Parliament carries any form of democratic legitimacy. After all, the majority of law which is now imposed on this country is proposed in secret by the European Commission and passed in secret by the Council, and this Parliament can do nothing about it.

As to the Statement itself, perhaps I may put two questions to the noble Baroness. First, on the new European supervisory powers over our financial services, will the Financial Services Authority be supreme in those areas or will the new EU bodies be supreme? It really does not help to be told in the Statement that there will be no fiscal change, because if these new European regulations drive our leading City practitioners overseas, surely that will have a devastating effect on our financial and therefore fiscal position. Therefore, can she confirm who will be the boss in future—the British Government and the City of London or this new financial supervisory set-up?

Finally, perhaps I may remind the noble Baroness of the words of Mr Jens-Peter Bonde, the leading Danish politician, who has said that all the guarantees given to Denmark when Denmark was forced to vote again on the Maastricht treaty have been broken. All those guarantees have been broken. So, really, it comes down to the question of what is the status of this protocol. Let us suppose that there is not a treaty of accession for Croatia. Where will Ireland be left then? Surely the most monstrous deception is being practised on the Irish people and I very much regret that the British Government have gone along with it.

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Baroness Royall of Blaisdon: My Lords, on democratic deficits, I respectfully point out that 80 per cent of European legislation, I think, is now made by co-decision. As the noble Lord well knows, co-decision means that it is agreed not only by the European Parliament, in which we have democratically elected representatives, but by the European Council, which is made up of members of this Government. So there is a very strong democratic element in the way in which European laws are made. The European Commission only proposes.

As for the views of Jens-Peter Bonde, I have long known Mr Bonde and his anti-European views. However, he has always sent his children to a European school in Brussels. I think that that is an interesting point, since there seems to be something to do with the European Union that he likes. I note his views on Denmark but I have more trust in Europe and the institutions of the European Union than he does.

I do not think that there has been any kind of monstrous—I cannot recall the word that the noble Lord used.

A noble Lord: Conspiracy.

Baroness Royall of Blaisdon: I do not think that there has been any conspiracy against the people of Ireland. It is the Government of Ireland who wanted this to happen. If it is the Government of Ireland, then it is for us as partners in the European Union to assist them. That is exactly what we were doing.

I will read out the notes that I have on supervision. I will also get back to the noble Lord in writing and put a copy in the Library. It is clear that the heads of the Council agreed to limit the scope of the binding mediation powers of the new European authorities to two areas. First, they will ensure that the rules are followed and that Community law is implemented and enforced. This strengthens the working of the single market, which is a key priority for industry. Secondly, they will deal with disagreements between home and host state supervisors. This will improve single-market protections for cross-border banking, in particular where the UK is a host to branches of banks supervised elsewhere.

The Government are confident that this will not harm the City of London. The Government, in common with all Members of this House, want to safeguard the future of the City of London for the benefit of the people of this country.

Lord Kilclooney: My Lords, as a former Member of the European Parliament, I find it disheartening that at each election there is a further drop in participation. We must face the truth that the European Parliament has the support of just over 40 per cent of the electorate in Europe—less in the United Kingdom. It has no democratic mandate, and the public in Europe do not identify with the European Parliament or with MEPs. Is it not time that we gave consideration to maintaining a European Union run by the European Commission alongside a Council of Ministers who would be responsible to their national parliaments?

Baroness Royall of Blaisdon: My Lords, I agree with the noble Lord’s concern about the decline in the number of people voting in European elections. This

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is a very serious matter. I also agree that the public do not identify either with the European Parliament or with other European institutions. I do not, however, agree with the remedy that he suggests. I am sure that many noble Lords will share the concerns expressed and it is up to all of us to try to remedy the situation. We have another five years to do that. Let us hope that at the next European Parliament elections, more than 50 per cent of the electorate will vote.

Lord Woolmer of Leeds: My Lords, many of us agree strongly that a coherent, transparent single market in financial services in Europe will do a great deal to benefit London, provided that the rules are developed strongly in a global context and recognise the position of London. Does my noble friend recognise that the proposals by the Commission in the draft directive on alternative investment fund managers do not greatly strengthen one’s confidence that that perspective is always at the forefront of the Commission’s mind?

On the question of fiscal responsibility, I welcome the statement in the presidency conclusions that fiscal responsibility remains firmly with member states. However, looking carefully at the conclusions, it is also clear that squaring the circle of a firm supervisory power in Europe with the fiscal responsibility of member states is not easy. Does the noble Baroness also recognise that paragraph 22 of the presidency conclusions asks the Commission to come up with proposals on how to square that circle? In other words, they may say the words, but they do not know how to do it.

Finally, given that the Commission makes it clear that it will bring forward legislative proposals by early autumn, when do the Government intend to set out their thinking on how to square the circle and achieve the objective of a clear, coherent single market in financial services consonant with maintaining fiscal responsibility? This House and the House of Commons could well not be sitting for a lot of that time. When are the Government going to make clear their thinking on this?

Baroness Royall of Blaisdon: My Lords, in response to my noble friend’s concern about the alternative investment fund managers directive, I should say that government Ministers have been in close negotiations over this directive at every stage and will remain so. We are in constant dialogue with stakeholders in the UK, our colleagues in the Commission and other EU member states to ensure a good outcome. Of course, I recognise my noble friend’s concern.

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