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In the absence of any persuasive arguments for a five-year term, this flaw is toxic. It is particularly toxic because of the process by which this Bill has been brought before Parliament and the damaging perception that this has created the motivation behind the selection of five years as the fixed term for Parliament. Due process and perceptions of motivation matter especially for constitutional legislation because they can create public trust in the integrity of our constitutional arrangements or they can destroy it. A constitution which does not command the trust and respect of the citizens it serves is a constitution without value.

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So what has been the process for this Bill? There has been no manifesto commitment to its key detail or any compelling argument for it. There has not been a Green Paper, a White Paper or public consultation. The process has consisted simply of ramming this hastily and poorly drafted Bill through Parliament as quickly as the business managers can get it through. This creates a perception which has been widely voiced. I am very grateful to my noble and learned friend Lord Falconer for telling the House about the account given in Mr David Laws' history of the formation of the coalition agreement. I am sure that Mr Laws did not wish to be quite as unhelpful to his colleagues who remain in government as he has turned out to be. Nevertheless, the citizen might legitimately ask, "Why did the Government suddenly abandon a historic Liberal Democrat commitment to a fixed four-year term?". Why would two parties which are locked in an uneasy embrace, trying to find a way to govern together that does not lead to an electoral annihilation for one or other or both of them, suddenly decide to extend the fixed term to five years?

My noble and learned friend Lord Falconer's quote from Mr George Osborne tells us everything that we need to know about this. The Government have yet to come up with one good argument about why the motivation for this move to a five-year term is nothing more than the search for short-term, partisan, political advantage, seeking to stay in power, locked together, for as long as they possibly can. Sadly-I say sadly because I know that many Members on the Liberal Democrat Benches have long and honourable histories of espousing constitutional reform-this sort of short-term partisan manoeuvring is coming to characterise this Government's constitutional legislation. It injects poison into the system. It creates suspicion where there should be trust and volatility where there should be stability. This really is no way to legislate for constitutional matters.

Accepting this amendment would help to neutralise this poison, but I fear that the Minister-characteristically amiably, no doubt-will try to find reasons for resisting it. I fear that the Government will ignore the reservations, which we have heard over and over again in this debate, which has gone on now for nearly one and a half hours, just as they have ignored all the other doubts about their constitutional legislation, and that they will just whip this Bill through. Despite that, I hope that the noble and learned Lord who moved this amendment will test the opinion of the House on the matter, if not now then at Report. This House should do its constitutional duty whatever view Ministers take of theirs.

Lord Dobbs: This House pursues this discussion with considerable passion and at times almost with an element of ferocity, which is how it should be. But I have to admit that it has left me rather confused. I have done my best to follow the arguments. Should it be four years or five years? Should it be three years and 10 months or some other figure? Statistics have been hurled around this House and given a mythical, almost mystical, significance and, at times, even an ethical significance. Some say that "this figure is right

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and that figure is wrong", and not just wrong but downright wicked. It is enough to make a young chap giddy.

For better or worse, as a party official and a prime ministerial adviser, I was involved with the process of helping to choose one or two election dates in the 1880s and 90s.

Noble Lords: You said the 1880s.

5.45 pm

Lord Dobbs: Did I? My memory does not go back quite that far but I thank noble Lords. I can confirm that there was nothing mythical or mystical about it and least of all could the process be described as ethical. There is only one reason why Prime Ministers choose this or that election date and that is because he or she thinks that the chosen date gives them the best possible chance of winning. For a party leader, elections are rather like the gunfight of the OK Corral. There is no future for the loser; they are likely to be dragged out of the arena feet first and never seen again. Prime Ministers sweat over these decisions-even the fragrant ones.

We keep hearing that four years is best. The question remains: why have Prime Ministers so often chosen to hold an election after just four years? The answer is very simple. Except in the most extreme circumstances they do not go earlier because there is nothing to be gained: they will only be accused of cutting and running. They do not often carry on beyond four years for fear of running foul of events or the economy or the private excesses of some wayward Cabinet Minister. I am afraid that these decisions have nothing to do with the astrological significance of the figures four or five. It has simply been a matter of self-preservation.

The noble and learned Lord, Lord Falconer, spoke about the natural rhythms. I think that in a previous debate we heard someone refer to the natural biorhythms of the British constitution, a point picked up in the Select Committee report. I admire the noble and learned Lord almost beyond expression. His knowledge of our constitution is profound but I fear that his romantic nature might have led him astray on this one. In my less than humble experience-Conservative chiefs of staff do not usually do humble or, if they do, they do not tend to survive-it has nothing to do with biorhythms: it is simply the uncertainty of that fifth year that leads Prime Ministers to opt for four-nothing else. But remove that uncertainty, as this Bill does, and I suspect that we will find that Prime Ministers are more than delighted to soldier on to the end with absolutely no complaint. They will carry on in Downing Street, their biorhythms entirely undisturbed. After all, Prime Ministers love office. They never know when to give up. They hang on as long as possible, and almost always too long, leaving their fingernails in the Downing Street carpet as they say goodbye.

Another argument, which was picked up by the noble and learned Lord, Lord Falconer, and the noble Lord, Lord Martin, is that somehow a fifth year is always unsatisfactory; that for some metaphysical reason the Government will run out of steam after four years. We have heard of the term, the lame duck-the least

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glorious of years-but it is only the uncertainty that causes distraction, which is what this Bill does away with. Give a Prime Minister a certain election date and, instead of confusion, there will be a reasoned, possibly somewhat reckless, campaign of tax cuts, heady promises and kissed constituency babies-in other words, business as usual.

Of course, another argument has been put forward; namely, that a five-year term deprives the electors of a more frequent choice than four years. The logic of that is, of course, indisputable. But, if the noble Lord will forgive me, it is also absurd. Follow that logic and we would end up with elections every three years or two years or perhaps every year. Looking at the US congressional system where politicians are constantly campaigning, I am inclined to suggest that there is no obvious connection between more frequent elections on the one hand and better government on the other. Above all else, it is better government that we should be seeking.

There is no democratic deficit of the sort suggested by the noble and learned Lord, Lord Lloyd of Berwick, and the noble Lord, Lord Grocott. There is no shortage of elections. We have more elections for more Parliaments than at any time in our history. But whether all those elections and elected politicians have given us better government I suspect is a matter to be discussed on another day.

The crucial point is this: should it be four years, should it be five, or three point something or other? Having dismissed the relevance of so many statistics, let me offer a few of my own. Looking back over the last eight elections, which takes us back an entire generation or more to the dark days of 1974, the average lifespan of a Parliament has been nearly four and a half years. To me that is just as legitimate as the figure which is so often quoted, that of three years and 10 months. But we are told that four years is what the people demand. If that is the case, where is the surge of public indignation, the outrage that our biorhythms have been disturbed and the voters left short-changed by four-and-a-half year or five-year parliaments? The argument about four years and only four years simply will not wash.

To garble the phrase, there are exaggerations, irrelevancies and political evidence. We have heard plenty of all three in this debate. If we are looking for a norm, it is four and a half years, not three years and 10 months, at least in our recent history. What should we read into that? Precisely nothing. Except that in every one of the last eight elections, the Prime Minister chose a polling date that was thought to be in his or her interest. It is self-interest, not the national interest, and there is no magic in a term of four years. That is because, of course, Prime Ministers have a terrible habit of stumbling to the conclusion that they are the national interest, and that is what lies behind these statistics, nothing more. Statistics will not resolve this issue for us; it is up to us.

Lord Bach: I am grateful to the noble Lord for giving way. He has mentioned the last eight elections. I may be slow in my arithmetic, but I think that would take us to 1979 as the first one he has chosen since there have been eight elections since then. I think he

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said that in the last eight elections, the Prime Minister has always chosen the date for his own benefit. I do not think that that is something James Callaghan could be accused of.

Lord Dobbs: I think it takes us back to 1974. I well remember Lord Callaghan, as he became. Indeed, he first introduced me to this House by giving me tea here. I owe him a great deal and I have the most profound respect for him. But I am surprised that the noble Lord should quote 1979 as being the pinnacle of constitutional principle. It was sheer self-interest based on the opinion polls, like it was for all other Prime Ministers.

Lord Falconer of Thoroton: I may be wrong, but my recollection is that Mr Callaghan went to the country because of a Motion of no confidence passed in the House of Commons. To describe him as choosing an election date seems, if I may say so, a little misplaced.

Lord Dobbs: The noble and learned Lord misunderstands me. The election date that he was going to choose was in the previous October, and that is where he got it wrong. In his own self-interest, he thought that he should soldier on, despite the evidence. Let me not be distracted, but I am surprised that the noble and learned Lord remembers 1978 and 1979 so fondly. I have to say that it is not an example that I would wish to follow.

Statistics will not resolve this issue. In the decision over whether it should be four years or five, I find myself, rather oddly, agreeing with the Deputy Prime Minister who, in a celebrated quote of his when asked if he thought 12 months here or there mattered very much, replied, "No, I do". I think that he summed up the situation admirably. So let us have five years. I do not know if it is a matter of principle, as my noble friend Lord Marks says-I probably would not go that far-or of sheer practicality, but it is as close to the norm as four years. If any of the political parties find it somehow offensive, they are entirely at liberty to change it. All they have to do is to win an election, and because of this Bill they will have the immense benefit of knowing precisely when that election will be held.

Even taking the extreme position of supposing that every Parliament runs its full term, a premise that personally I doubt very much, surely extending the average length of a Parliament from the present four-and-a-half years to five does no great disservice to our constitution, and by enhancing the possibility of sensible, long-term government, it offers considerable benefits in compensation.

Lord Desai: My Lords, I have a brief point to make, but first I agree with the noble Lord who has just spoken that you cannot compare the frequency of Parliaments under a fixed-term arrangement with the frequency of Parliaments under a variable-term arrangement. They are not comparable things. I would also say to the noble Lord, Lord Marks, who expressed his distress that a Government would have only two

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years to legislate, not three, that if he had been in Parliament as long as I have, he would pray for fewer Bills to come from a Government rather than more. So I do not think that the quality of a Government is measured by the number of Bills they introduce; I think exactly the reverse.

I have one anxiety, which I shall explain. This Bill does not actually fix the term at five years, but at five years and two months. There is a distinct possibility that, again and again, a Prime Minister would be able to breach the standard convention that a term of five years is the limit. That is a fundamental part of our constitution. This Bill breaches that by allowing, in Clause 1(5), for an extra two months. We ought to take this very seriously. Prime Ministers can find good excuses to delay elections. As has been pointed out, if they see better a better chance two months hence, they will find a way of waiting. I do not care how long this goes on for-whether it goes on for 10-and-a-half years-but we should take the breach of a very fundamental political principle seriously. The advantage of my noble and learned friend's amendment is that, even if a Prime Minister uses the two-month option, we would never breach the five-year rule. That is a telling argument in favour of the amendment.

Lord Rennard: My Lords, in 2005, together with my noble friend Lord Razzall, I was responsible for the Liberal Democrat general election campaign. The manifesto for that campaign contained a commitment to fixed-term Parliaments and specified terms of four years. Obviously I have changed my mind, and I should like to give the Committee three good reasons why I have done so. However, before I do that, I would point out to some noble Lords opposite that only last year they fought a general election on a manifesto promising that, if re-elected to government, the party would legislate for fixed-term Parliaments. The party has still not said how it would have legislated to "ensure" that there would be fixed-term Parliaments, and made no mention whatever of what the term of those fixed-term Parliaments would be. If the case for four years rather than five years was so absolutely clear cut, as suggested by some noble Lords opposite, I wonder why it was not included in the Labour Party manifesto of only last year.

The first reason why I think I have changed my mind is through simply looking at the balance of a five-year term for a Parliament and how much of that time might be spent governing or how much doing anything else. My noble friend Lord Marks of Henley-on-Thames referred to the case for more pre-legislative scrutiny. I feel quite strongly that in the circumstances we have in this year in this Parliament, our legislation would be rather better if there was more draft legislation and more pre-legislative scrutiny, and I hope that when fixed terms of five years become the norm, there will be more of a case for such scrutiny in the first year of a Parliament, which would be good for the governance of the country.

Lord Falconer of Thoroton: Knowing that this Parliament is going to last for five years, surely there is time for pre-legislative scrutiny of this Bill. Why does the noble Lord not support that position in relation to this Bill?

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Lord Rennard: In this Bill, we do not necessarily know whether we will have five-year terms or not. If the noble and learned Lord has his way, we will have four-year terms, not five years.

Lord Falconer of Thoroton: Am I given to understand that the reason for not giving this Bill any pre-legislative scrutiny is fear that it may not get through?

Lord Rennard: No, indeed. There are many things that require considerable scrutiny. But it seems to me that the actual principle of a fixed-term Parliament has been considered a number of times in a number of ways. I happen to think, for the reasons I am trying to advance, that five years is more logical. The first reason is that the first year of a Parliament would, more normally in the future, provide more time for draft legislation and pre-legislative scrutiny. As we all know, the last year of a Parliament tends to be given over to government campaigns rather than legislation. If we had only four years and the first year was dominated more by pre-legislative scrutiny and the last year dominated more by campaigning, only two years of government out of the four would be effective. That, as my noble friend Lord Marks of Henley-on-Thames said, is the problem with the US system. There, the period is four years, but everybody knows that in the first two years the President governs and then, after the mid-term elections, the second two years are all about campaigning for re-election.

There are two other points which are quite significant. They have not been made in this debate and some noble Lords opposite may wish to address them.

6 pm

Lord Wills: Before the noble Lord finishes telling us why he changed his mind, perhaps I may point out that all the considerations in favour of a five-year term that he is now advancing, and the issues that he has brought into play, have been well known for many years-in fact, all the years during which he was in favour of a four-year fixed term. Can he tell us now precisely why he changed his mind?

Lord Rennard: The first reason is one about which the noble Lord, Lord Wills, should know a great deal. I pay great tribute to him as a genuine constitutional reformer. He was responsible in the previous Parliament and in the previous Government for changing significantly some of the rules on party political expenditure. Noble Lords opposite shared my concern throughout much of the 13 years and the three Parliaments of the previous Government about the lack of a level playing field in this country in party financing, which gave too much opportunity to extremely wealthy individuals to influence an election, particularly in constituencies, in the immediate run-up to it. The noble Lord, Lord Wills, introduced legislation in the previous Parliament which provided for control of that expenditure after four years and seven months of a Parliament. There would be no controls before that; they would apply only after four years, seven months. I opposed that legislation on the ground that it would work logically only if you had a five-year fixed-term Parliament.

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Noble Lords opposite had no answer to that point, but decided that four years, seven months was how it should be. So, now, our legislation to regulate party political expenditure is entirely dependent on there being a five-year fixed-term Parliament and on those controls coming in after four years and seven months through to the 60th month of the Parliament, and no other period.

Lord Tyler: I wonder whether my noble friend recalls that not only the noble Lord, Lord Wills, but all his political colleagues in another place promoted that legislation in terms precisely of the Political Parties, Elections and Referendums Act and the control of the expenditure of political parties. Why have the noble Lord and all his colleagues changed their minds? I notice that the noble Lord, Lord Bach, is back in his usual place. Perhaps he would like to explain why he has changed his mind, having teased my noble friend on this point.

Lord Rennard: My Lords, I am sure that noble Lords opposite will have an opportunity to explain their points. Perhaps I may briefly explain the third reason for my having decided that five years is better than four years. It is again a question of consistency. We agreed relatively recently and after lengthy debate-the longest that we have had in the time that I have been here-on the system for parliamentary boundary reviews. It has been established that there will be five-year reviews of constituency boundaries. It would be madness to say that one should redraw the constituency boundaries every five years but then not to have general elections every five years. To have a general election every four years but to redraw the boundaries every fifth year would put the two processes completely and quite unfairly out of sync. On that basis, I decided that five years rather than four was more logical and more democratic.

Baroness Farrington of Ribbleton: Would the noble Lord, Lord Rennard, care to comment on the fact that the first reason he gave for changing his mind applied before he espoused and promoted his manifesto for the election? Between his saying, "Vote Liberal Democrat; we're in favour of four years" and reaching the conclusion that it should be five years, the people went and voted thinking that it was four. The noble Lord knew about the legislation that had been passed by the previous Government. I see a pattern however. I am grateful to him for his comment on five-yearly parliamentary boundary reviews and I shall go away and think about that very seriously.

Lord Rennard: I thank the noble Baroness, particularly for her latter point. In response to her first point, about how I should have known all this before 2005, I say very honestly that if all of us ignored all the evidence and all that we had learnt during the past six years, this place would be a poorer place and our legislation the poorer for it. I have reflected over the six years and have been convinced by many people that there should more pre-legislative scrutiny and more draft legislation. In 2005, I did not feel so

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strongly about that. Some of the more recent evidence points me in the direction of being strongly in favour of five-year, rather than four-year, fixed-term Parliaments.

Lord Howarth of Newport: My Lords, if we are to have a fixed-term Parliament, and I believe that we should not, we will do less damage if we fix it at four years rather than at five. I rather agree with the noble and learned Lord, Lord Lloyd of Berwick, and with my noble friend Lord Wills that there is little advantage to be gained when we are considering how to reform our own constitution, which has grown out of our distinctive political and constitutional tradition, in looking over the way to see how such matters are organised in other countries. I do not think that when de Tocqueville engaged in such an exercise he was intellectually desperate; it was quite a fruitful exercise. It is worth noting that there is no advanced country with which we can sensibly be compared that fixes the terms of its Parliament for as long a period as five years. France has a fixed term of five years, but it has presidential government; Italy has a fixed term of five years, but Italy is a byword for governmental instability; Malta and Luxembourg have fixed five-year terms, but we cannot sensibly compare ourselves to them. I do not think that there is an advanced democracy abroad which sets the term of its Parliament at five years which should encourage us. If we look inwards at our own affairs, we should remind ourselves that the terms of the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly are set at four years. It is therefore incumbent upon the Government to explain why they have taken such an eccentric view. It is all the more so because setting the term at five years, notwithstanding what the noble Lord, Lord Marks of Henley-on-Thames, said, seems to be at odds with the principles that the Liberal Democrats have professed.

If we fix the term of Parliament, for whatever duration, we insulate Members of Parliament and, significantly, Ministers from public opinion. The longer the term, the worse that effect; the shorter the term, the more accountability and democratic engagement are brought into play. In the light of all the professions that the Deputy Prime Minister has made about the whole thrust of the constitutional reforms being brought forward by the coalition Government being to improve accountability and democratic engagement, it seems very odd that they should have decided on five years rather than four. It was Mr Mark Harper, the Parliamentary Under-Secretary, when he was giving evidence to your Lordships Select Committee on the Constitution, who used the phrase, "it is an issue of judgment". It should not perhaps surprise us very much that the judgment that the Government took was that which best suited the political interest of the coalition parties. I hope that the noble and learned Lord, Lord Wallace of Tankerness, will be able to persuade us that the Government have some better reason.

Lord Butler of Brockwell: My Lords, I decided to intervene briefly in this debate because I felt that the arguments advanced by my noble friend Lord Armstrong at Second Reading had not been given voice and

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because he was not in his place. He now is in his place and I think that he could put them a lot better than I can. They have been referred to, but I should like to reinforce them.

Like other noble Lords, I do not like this Bill. It is an unnecessary Bill. As the noble Lord, Lord Cormack, said, if the Government had wanted to commit themselves to a five-year Parliament, they could have done that under the old legislation. For that reason, as the noble Lord, Lord Grocott, said, this is not a Bill that binds the present Government so much as it does future Governments. There has been a lot of speculation in the debate about the Government's motives for what they have done. I do not want to enter into that, because I agree with the noble and learned Lord, Lord Falconer, that what this House should do is decide on principle what is better for the country. On that issue, I come down in favour of the view expressed by my noble friend Lord Armstrong at Second Reading. I do so for a reason which I am sure will be dismissed as a Sir Humphrey-esque argument, as a bureaucrat's argument, but I am not ashamed of that. Those of us who have seen government from the inside-the noble Lord, Lord Dobbs, made this point, rather unexpectedly from my point of view, but from a political perspective-have reason to put to the House that too frequent elections are not good for the government of the country. Terrible things are done in the lead-up to a general election. Decisions are put off or are made in budgets which are designed to attract voters and are not in the interests of the country. For example, it will be in your Lordships' memory that the Personal Care at Home Bill, which was introduced by the previous Government before the general election, was a blatant piece of electioneering. I made the point then that, in the economic conditions of the country, it was irresponsible to the highest degree. So to have elections more often than we need to have is not in the best interests of government.

Some people may say that I am against democracy, but that would be unfair. Of course there have to be elections. However, if there is a choice between every four years or five years, I would argue in favour of a five-year term.

Lord Lloyd of Berwick: Can the noble Lord comment on the point that all the experts who gave evidence, both in the House of Lords committee and in the House of Commons, came down in favour of four years? These were experts on our constitution, both in law and in practice.

Lord Butler of Brockwell: I should like to comment on that because the experts were, for the most part, either politicians or distinguished academics; they were not people who had seen government from the inside. That is why I am anxious to express this alternative point of view.

Lord Falconer of Thoroton: First, a number of the politicians had been Ministers. Does the noble Lord regard that as government from the inside-or were they kept from the inside by Sir Humphrey on a regular basis? Secondly, on the basis of the argument

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he has made, if the noble Lord was given a choice between five and six years, I assume he would choose six years because there would be even less wearisome elections then.

Lord Butler of Brockwell: The noble and learned Lord tempts me.

Lord Falconer of Thoroton: Please be tempted.

Lord Butler of Brockwell: A balance has to be struck and I would strike it at five years.

On the previous day in Committee, the noble Lord, Lord Grocott, urged a referendum on the question of the day of the week that polling should take place. In his speech today, he did not urge a referendum on going to a four-year term, which is a greater constitutional change than a change in the day of the week for voting.

Lord Grocott: My Lords, it is precisely the same issue. This is about whether the election should be every four years or five years-I am happy to accept that there may be failings in the wording of the amendment-but the principle is exactly the same: it is to enable the electorate to choose between whether the term of a Parliament should be five years or four years.

Lord Butler of Brockwell: I take it that, if the amendment is passed, the noble Lord would also want a referendum on the question of whether a fixed-term Parliament should be for four or five years.

Lord Grocott: Yes.

Lord Butler of Brockwell: Thank you. That makes my point. It has been argued that the merit of a four-year term is that it gives the electorate more ability to hold the Government to account because they can do so more frequently. People like us and experts on government argue about what is good for the people and what the people want. If this was put to a referendum, I doubt whether there would be popular support for four-year rather than five-year terms. Elections are not very popular in this country; people do not like having their television dominated by politics for five or six weeks at a time. One of the arguments in favour of a four-year term is that we are giving the public what we think they ought to want, but I doubt they want it themselves.

6.15 pm

The Advocate-General for Scotland (Lord Wallace of Tankerness): My Lords, I thank the noble and learned Lord, Lord Falconer of Thoroton, for introducing the amendment. It has given rise to considerable debate in all parts of the House and a number of important and interesting arguments have been put for and against. The duration of the parliamentary term proposed in the Bill has been discussed not only at Second Reading but in some of the earlier amendments we debated on the first day in Committee. It has also been debated in

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the other place where, it is worth noting, amendments similar to those tabled by the noble and learned Lord were debated and rejected.

On the debates in the other place, I should indicate to the noble Lord, Lord Wills-who, at one point, suggested that the business managers were ramming the Bill through-that the Bill was introduced on 22 July 2010; it had its Second Reading in the other place on 13 September; it had two and a half days in Committee in November and December; Report and Third Reading were on 18 January; and it was introduced into this House on 19 January. We are now on the second day in Committee on 21 March and, with the best will in the world, we would be unlikely to reach Third Reading of the Bill before the Easter Recess. That does not sound like ramming a Bill through. I shall come later to the point the noble Lord made about the partisan nature of the Bill, which I strongly reject.

The noble and learned Lord, Lord Falconer, suggested that I had indicated that the issue of four or five years was one of high principle, and I am grateful to the noble and learned Lord, Lord Lloyd of Berwick, for quoting what I did say. I indicated that I did not believe there was a right or wrong answer. I think that there is a matter of important principle in terms of a general constitutional reform package. I have always strongly believed in the argument for a fixed-term Parliament, and I thought that the Labour Party supported that argument as well at the last general election.

The noble and learned Lord, Lord Falconer, went on to say that he considered this a matter of high principle, although many of us are waiting to hear exactly what that principle is. I did not discern it in any of his remarks. He put forward arguments on the basis of practicality and why he felt four years was better than five. The noble and learned Lord, Lord Lloyd of Berwick, cited a number of academics and politicians who had given evidence to that effect as well. However, my noble friend Lord Rennard quite properly pointed out that the legislation on candidate expenses which the noble Lord, Lord Wills, took through the other place under the previous Government-which, I assume, the noble Lord, Lord Bach, was responsible for in this House-presumed that there would be a five-year Parliament. Indeed, that legislation would have been otiose if there was a four-year Parliament. No doubt we could amend that legislation but it is an insight to what the Labour Party was thinking at the time. Therefore, to elevate this to a matter of high principle is overegging the cake.

However, it is a matter of principle that the constitutional reform that the Government are working hard to achieve should have a framework for strong and stable government that can deliver results to the electorate. This Bill and a fixed five-year term would help to ensure that.

Perhaps I can now address some of the issues and explain why a five-year term would be beneficial. The current constitutional position is that any Government who retain the confidence of the other House may, if they wish, stay in office for a full five-year term. We should not kid ourselves that curtailing the length of

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time would be a significant change beyond simply the important change to fixed terms. On the point raised by the noble Lord, Lord Desai, that the Bill made provision for five years and two months, that would be the case only if an order was brought forward in unusual circumstances-for example, if there was an outbreak of foot and mouth-and it would require a resolution of both Houses of Parliament to be implemented. Amendments will be introduced later-this evening, I hope-which will require the Prime Minister to give an explanation to both Houses as to why he or she was doing this. In fact, a Parliament need not be dissolved until five years after it is called but it is certainly possible under our existing constitutional arrangements to go beyond the five years. Under the Bill, unless there is the exceptional circumstance to which I referred, it would not be possible to go beyond five years. I understand the noble Lord's concern but hope that he, on listening to the later debate when this comes up, will be reassured on that point.

I take the stricture of my noble friend Lord Dobbs about the dangers of trading figures. It is the case that most Parliaments since the Second World War, some 10 out of 17, have lasted at least four years. Three of the last five have lasted almost five years. Some have pointed to examples of Parliaments that have lasted closer to four rather than five, making the argument that four is somehow the norm and five is only for Governments who are clinging on to power. Yet, as was well put by my noble friend Lord Marks, those who point to the examples where the fifth year has been, if one wished to use the term, a lame duck almost make the point. These arose because the Prime Minister of the day looked at the runes, did the calculation and estimated that it would not be worth going to the electorate because he was probably not going to win. The very nature of the Government being in that position means that they are almost inevitably limping into their fifth year. That is a different situation from Governments knowing that there is a five-year fixed term and having to plan accordingly.

The noble and learned Lord also mentioned what Mr Asquith said back in February 1911. We could have a legitimate debate on what Mr Asquith was actually saying. He is quoted in the Official Report as saying that reducing the Parliament from seven years, as it previously was, to five would,

He clearly did not say that the term would be for four years but that the practical legislative working term would be for four years. That is an important point and one I will pick up later in light of the comments made at Second Reading by the noble Lord, Lord Armstrong of Ilminster. As I said, the fact that an election is called before the end of the fifth year of a term has often been cited as the Prime Minister of the day seeking to give his or her party a political advantage. The noble Lord, Lord Martin, gave examples where a Prime Minister has exercised that power and it has not come off. It is fair to say that those Prime Ministers were mightily surprised and upset by that. They could not have foreseen it: it was their wrong judgment. That

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cannot get away from the fact that that is what they were trying to do. My noble friend Lord Dobbs made it clear from his inside track that that is precisely what Prime Ministers try to do in those circumstances.

At Second Reading, the noble Lord, Lord Armstrong of Ilminster, said-although I accept that he indicated his objection to fixed-term Parliaments as a whole-that there are merits, if you are having fixed-term Parliaments, to a term of five rather than four years. The noble Lord, Lord Butler of Brockwell, made the same point today. I remind the House what the noble Lord, Lord Armstrong, said:

"If legislation were to set a fixed term of, let us say, four years, that period would be reduced to more like three years. That would not leave enough room for sensible policy-making and good parliamentary debate before the imminence of the forthcoming election began to cast its distorting shadow. So I hope that, if this Bill becomes law, the fixed term will be five years, as is proposed in the Bill, and not some shorter term".-[Official Report, 1/3/11; col. 971.]

That echoes the point made by Mr Asquith about what would practicably be the working life of the Parliament. Many commentators-politicians and the public-would argue that Governments can be too short term in their planning and decision-making, a point made by the noble Lord, Lord Butler. Many major decisions and investments often take a significant time for their consequences to appear. We want-I hope there is a consensus in the country that people also want-to encourage future Governments to take that longer-term view rather than always to be looking for the short-term advantage, be that from being able to pick the date of the election or shortening the length of the Parliament.

Lord Wills: The noble and learned Lord said earlier that he was not quite sure what the high principles were that are at stake here. He has just set out one of them-the interest of stability and good government. The noble Lord, Lord Butler, also made the case for this. Against that has to be traded the principle of accountability, which has informed a lot of the remarks on this side of the House. The noble and learned Lord has just referred to what the British public might want. The noble Lord, Lord Butler, also referred to this. Why precisely have the Government taken so few steps to consult the British public on this? There is no Green Paper or White Paper as far as I am aware, and no going out to the country to ask the British people how they think these respective principles of accountability and stability should be weighed in the Bill. Why have the Government not done this?

Lord Wallace of Tankerness: I take seriously the issue that somehow democratic accountability is being reduced. The noble Lord, Lord Grocott, made the point in speaking to his amendment on the first day of Committee-the noble and learned Lord, Lord Falconer of Thoroton, also expressed this view-that if we had had fixed-term, five-year Parliaments there would have been a reduced number of elections. I cannot accept that that automatically follows. Taking up the point of democratic accountability, the noble Lord, Lord Grocott, cannot ignore the possibility-or, more, the probability-that there would have been Parliaments that did not

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run their full term of five years. Perhaps February 1974 would have been an example, or October 1974, or the 1951 election.

My noble friend Lord Marks of Henley-on-Thames also indicated that it is important to put the ducks-as they were described by the noble Lord, Lord Grocott-in perspective. It is almost inevitable that during the past 65 years some Parliaments would not run their full course. You cannot say that every Parliament would automatically run the five years. Indeed, that is why we have the provisions in Clause 2 of the Bill.

Baroness Armstrong of Hill Top: The Minister seems to be making some of the points that I know colleagues have been anxious about. Governments and Parliament have to respond to what is going on in the outside world and with the electorate, so it is difficult to be absolutely precise in legislation as to when things should happen and be rigid about that. That is the objection of many people to the Bill. In a constitution which has evolved and which develops, the Government are trying to bring absolute certainty, when democracy does not bring certainty and should not be expected to. That is why we are having such interesting times in the Middle East at the moment.

Lord Wallace of Tankerness: The noble Baroness's final point is a huge leap. As I explained at Second Reading-as did the noble Baroness, Lady Jay of Paddington-there is a spectrum between the complete flexibility that you have under the present system, which is subject to a maximum term, and the system in, I think, Norway, where there are quite rigid terms in which there is no way out if anything happens. There was a consensus that if we moved to fixed-term Parliaments, as I believe is right and as is proposed by the Bill, there should nevertheless be a mechanism to call an early election if certain circumstances arose. There was some degree of consensus on that. When we come to Clause 2, we will debate those mechanisms. I merely observe that the Constitution Committee thought that the mechanisms were fit for purpose in terms of what we are dealing with.

Baroness Farrington of Ribbleton: We have heard in this debate references to all former Prime Ministers using their judgment in their own party-political interests and that of their own futures. How do I explain to people outside that the present Prime Minister and Deputy Prime Minister, arriving on the figure of five years, were not doing the same thing?

6.30 pm

Lord Wallace of Tankerness: My Lords, I think that one can readily do so, because five years was what this Parliament was elected for. If this legislation gets through, the Prime Minister will not be able to substitute another date or another judgment, unless there are other issues. He has put that date so far away that he cannot be accused of using it-

Noble Lords: Oh!

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Lord Wallace of Tankerness: Well, he can be accused, because noble Lords opposite will accuse him. But any reasonable person would see that, in setting the basis for a fixed-term Parliament, one could not take account five years out of the possible political vicissitudes, waves and currents in the intervening five years. If this Bill becomes law, the Prime Minister will be locked in, as will any other Prime Minister in future.

I was going to make this point later, but this is an opportune time to make it. I thought that a large part of the noble and learned Lord's argument was that this measure is the glue that holds the coalition together. However, unless I am mistaken-and I stand to be corrected if I am-the terms of his amendment would still leave standing the election to take place on 7 May 2015. The noble and learned Lord shakes his head.

Lord Falconer of Thoroton: I want to correct that, because it is certainly not my intention, which is to have four years, four years, four years and so on. It is certainly not to have five years and then four years. There may be an issue with the drafting, but this is intended to set four years as the term, so be under no illusion.

Lord Wallace of Tankerness: I am grateful for that clarification because I had interpreted his amendment as leaving 7 May 2015 to stand and that thereafter there would be four years. I am grateful to hear the noble and learned Lord say that that was not the intention, because that was going to be the answer that I gave to my noble friend Lord Cormack. I accept that it may well be an error in the drafting.

The point that I would make is that this Parliament was elected for a maximum of five years, so in moving to a fixed-term Parliament regime we are embodying that in the Bill-and then thereafter also to have five years. That is the point that I make to the noble Lord, Lord Butler. Of course it is right and it goes without saying that no Parliament can bind its successor. The noble Lord and others say that there is no need for this legislation, but what we are seeking to do is to have fixed-term Parliaments on into the future. Other Parliaments can repeal that, but obviously it would take primary legislation to repeal a system of fixed-term Parliaments. I would very much hope that, having established the principle of fixed-term Parliaments, in the same way as we have fixed terms for devolved Assemblies, for local government and for the European Parliament, fixed terms would become the norm.

I take the point made by my noble friends Lord Marks and Lord Rennard with regard to pre-legislative scrutiny. I have been at the receiving end of many complaints about the lack of such scrutiny. There is an issue about the first year of a Government, because when they come into office they want to get on and start dealing with things. One can readily imagine the criticism that would come from the Opposition if a Government were not doing anything. However, there has been a move over the years to having more pre-legislative scrutiny, which has the effect of increasing the workload on both Houses. It is not fanciful to imagine that, following the election in 2015, a Government of whatever colour will not be able to commence their

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first Session of legislation with more substantive Bills until there has been a considerable amount of pre-legislative scrutiny. So we are talking about the beginning of 2016 as the time when some key pieces of legislation are introduced, having properly been looked at beforehand.

The final year, whether the term is four years or five years, is always going to be one when those seeking re-election look to their constituencies. That would reduce by some way the effective time for legislation by a Government. My noble friend Lord Norton made the point in one of our debates on the first day in Committee that Governments might run out of steam in the fifth year. Allowing for pre-legislative scrutiny and knowing that there will be five years allows for the legislative programme to be planned more effectively. The fifth year, particularly if it is a full year, not one starting at the end of November with a wash-up in the middle of March, would then be used much more effectively.

I defer to the huge experience of the noble Lord, Lord Martin, as he was Speaker of the other place and has an understanding of the parliamentary process. However, the final year, be it the fifth or the fourth year, would inevitably be one when the shadow of the coming election loomed. I also point out that my understanding is-although I may be corrected-that now Thursday debates in the other place are very often chosen by a Back-Bench Committee and that the Government have given power to the Back-Bench Committee to determine the subject matter for debate. I would be interested to know how many Divisions there have been on Thursdays in the first Session of a Parliament, as the noble Lord made the point about how few there were in the fifth Session. That is another measure that this Government have taken to put more power in the hands of Parliament rather than the Executive.

Lord Martin of Springburn: I cannot speak for what is going on in the other place at the moment. However, if my memory serves me correctly, the Minister followed Jo Grimond into the House of Commons in 1983, so he will appreciate as a former Scottish Member that on a Thursday there were votes more often than not, because we had to take the sleeper home. The other thing is that the Minister has had more experience of four-year Parliaments than five-year ones. In the last Session of a five-year Parliament, there were no votes whatever on the Floor of the House of Commons on a Thursday. That is what happened in the last Session of Parliament before the general election-there were no votes at all. The Minister has never had the experience of when that was the case.

Lord Wallace of Tankerness: I agree that it was never my experience. One thing that I am glad that I do not have responsibility for is how Parliament under the last Government was arranged in its final year. The point that I was making was that I believe that, be the term four or five years, the final year will be taken forward under the looming election. If one goes to four years and one has pre-legislative scrutiny, that cuts down the effective time for the Government to introduce their measures, let alone for their measures to be judged.

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Lord Foulkes of Cumnock: My Lords-

Lord Wallace of Tankerness: The noble Lord was not in the Chamber for the whole debate. He knows that I normally give way. Perhaps I can just-

Lord Foulkes of Cumnock: The Minister is having difficulty finding his place. I am only trying to help him.

Lord Wallace of Tankerness: The noble Lord is always trying to help. I cannot remember who it was in the last debate-it may have been my noble friend Lord Brooke-who said that one should always beware of the help that comes from certain quarters.

One treats with caution foreign comparisons because, as the noble Lord, Lord Howarth, said, there are different circumstances. However, noble Lords mentioned the fact that there are fixed terms of four years in the United States. I happened to note, reading a copy of the Economist from earlier this month, some comment that for the Republican Party people have not yet been clearly identified as taking part in the primaries. That is just two years and two months since the inauguration of President Obama. It is in order for a Government who receive a mandate to be able to fulfil their programme over a planned period and I believe that five years is more likely to assist that than four years.

Lord Foulkes of Cumnock: That was not very convincing.

Lord Wallace of Tankerness: The noble Lord, Lord Foulkes, will get an opportunity in future to intervene. I am sure that he will make a speech on another set of amendments, to which I shall be more than happy to reply.

At the moment, we have a system that allows up to a maximum of five years. In fact, three of the past five Parliaments have gone for five years. To remove that possibility requires a more compelling argument than we have heard. To move for four years would leave the effective working life of a Parliament and a Government sufficiently curtailed that they would not be able to implement their manifesto provisions. Therefore, I ask the House to support the idea of a five-year fixed term and ask the noble and learned Lord in those circumstances to withdraw his amendment.

Lord Falconer of Thoroton: My Lords, I will of course withdraw my amendment at the end of the debate because the purpose of debate at this stage was in order to probe and examine the arguments. The noble and learned Lord's speech was well delivered but disappointing because it ultimately did not address the central argument being put against him: that the effect is to change our constitution, where there is a five-year maximum but the norm is around four years, to one where the norm becomes five years save in exceptional circumstances.

What everyone around the House was asking him was: why are you making this change if we have to make the judgment on what is in the best interests of

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good governance in this country? The Minister never answered that question at all but it is at the heart of the debate. This is not a party-political point. The reason that the noble and learned Lord cannot answer the question is that good old Mr Laws, in order to make it clear that the record should not be perverted in any way, has explained why it is five years. I do not know why the noble and learned Lord, who is an honourable man, is weaving and dodging on this. Just say, "They wouldn't do a deal with us unless we agreed five years". Do not try and make it something that it is not.

One of the other things that emerged so strongly from this very powerful debate was the sense that the more one talked about it, the more this House felt uneasy about being locked into this straitjacket that the Bill brings. I am in favour of fixed-term Parliaments, in the sense that I can see it to be appropriate that Parliament should in some way endorse what the Prime Minister has decided about an election. However, the Government are saying, "You have to choose between five years and four years". I detected a real sense of unease around the House on this, but the Government are putting it that we have got to make this choice. Therefore, looking at the arguments, let us see which the best choice is. The noble and learned Lord himself said what the reason is that the Government are doing this.

Now, I cannot find my note. That would give my noble friend Lord Foulkes an opportunity to ask me a question, but I do not think that he wants to ask me any questions. I am sorry about that.

Lord Foulkes of Cumnock: My noble and learned friend is aware that I have just spent the last year of a four-year term in the Scottish Parliament. We happen to have been legislating right up to the very last day of that Parliament. There has been none of the kind of lassitude, or the feeling that the noble and learned Lord, Lord Wallace, described as an end-of-term-what word I am I looking for?

Lord Howarth of Newport: Fatigue.

Lord Foulkes of Cumnock: There has been none of that fatigue in that Parliament, which has been legislating right up to the wire, and no lame dog-

Noble Lords: Lame duck!

Lord Foulkes of Cumnock: Yes, I mean lame duck; I knew I would get it eventually. I can tell my noble and learned friend Lord Falconer that one of the architects of the four-year fixed-term Parliament in Scotland was the noble and learned Lord, Lord Wallace of Tankerness.

Lord Falconer of Thoroton: How grateful I am for all that. I know that the Minister will have listened to it all.

To go back to my point, the noble and learned Lord is making us choose between five and four years, but the arguments that his Government put forward are

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all on the accountability side. That is what makes the case being advanced so absurd. Again, in the evidence that the Deputy Prime Minister gave to the examination of the Bill, he said in justifying it that,

How could he have been trying to justify the Bill as giving more accountability in a process that left the electorate with less ability to get rid of Governments, because there would be fewer general elections? What is so odd about the Government's position is that they rely upon accountability and then propose something that produces less of it.

6.45 pm

We heard a number of very impressive speeches. I particularly mention the speech that the noble and learned Lord, Lord Lloyd of Berwick, made. He went through the evidence and, with respect to everyone else, demolished the case in favour of a norm of five years. By my calculations there were five speeches, apart from that of the Minister, in favour of five years. I include in them that of the noble Lord, Lord Cormack, who I detected was in fact in favour of four years but said it should be five years for the first term. I respectfully suggest that we should not listen to his extremely well put siren song. To paraphrase the noble Lord, Lord Cormack, he was saying that we will just have to succumb to this awful argument that is being advanced. He is not nodding but I feel a sense coming across the Room on that. Do not be persuaded by that argument; if five years is wrong for the future, it is certainly wrong for the present.

The noble Lord, Lord Marks, described it as a point of principle. I remind noble Lords that the point he referred to was not on whether we should have fixed terms but on whether they should be of five years. To quote David Laws again, he says that Andrew Stunell,

a point of principle lost in a second. What will their point of principle be tomorrow on it? I would not rely heavily on it.

Lord Marks of Henley-on-Thames: Is the noble and learned Lord, Lord Falconer, not prepared to concede that it may just be that, in spite of the frivolous tones in which he dismisses the arguments, my right honourable friend Mr Osborne may just have been right?

Lord Falconer of Thoroton: He might have been, but I would not rely on anybody whose point of principle-this one was adopted for years by the Liberal Democrats-evaporates in the course of one sentence in a negotiation. Say that it is a compromise or a deal done to benefit the country, but do not say that it is a point of principle which switched in the course of negotiations. That is the weakness of the argument, in my respectful submission, that the noble Lord, Lord Marks of Henley-on-Thames, was making.

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The noble Lord, Lord Dobbs, made an impressive speech. I have never heard statistics more blatantly abused than by him. Perhaps I might draw attention to two particular points. First, he chose his starting point as October 1974 to ignore the February to October 1974 point, as he explained. Secondly, the difficulty with the fact that there was one election where the date was forced upon the Prime Minister by a Motion of no confidence was simply obliterated from his mind completely, so that he focused only on 1978. What he said was accurate in that, obviously, in choosing the date that they have for elections Prime Ministers are motivated by the chances of winning. That is the basic reason why one has a fixed-term Parliament but it does not really assist in determining between four and five years.

The speech made by the noble Lord, Lord Butler of Brockwell, was the most admirable. I say that genuinely, having worked with him. He was the Cabinet Secretary in 1997 when we took power and, having seen the talent of the noble Lord, I can genuinely understand how he would find the elected politicians quite wearisome to start with, particularly when they come into power with no experience of any sort of government. If I were him, I would have the least often elections as possible but, as people have made the point, this debate is just as much about accountability as about stable government. The reason that the Bill is being brought forward-this is the Government's defence-is because the public are fed up with the politicians and want more accountability and more mechanisms to have control over them. The idea that you do that by extending the length of a Parliament, which is the effect of this, seems, with the greatest respect, to be nonsense. Nothing could be better designed to reduce confidence in government than the disingenuous explanations that have been put forward for the Fixed-term Parliaments Bill in the course of this debate. I will withdraw my amendment, but it will be back. I beg leave to withdraw the amendment.

Lord Butler of Brockwell: Before the noble and learned Lord sits down, since he had a go at me, can he quote one piece of evidence that the public generally want four-year elections?

Lord Falconer of Thoroton: Can the noble Lord quote one bit of evidence in favour of five years? I suspect that the public have no view on whether it should be four years or five; it is for us to judge.

Lord Lloyd of Berwick: I shall answer on the noble and learned Lord's behalf. The evidence given to the Power commission was clearly in favour of more elections rather than fewer, not more than four years apart.

The Deputy Chairman of Committees (Baroness Pitkeathley): My Lords, I remind you that the amendment is being withdrawn.

Amendment 11 withdrawn.

Amendments 12 and 13 not moved.

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Amendment 14

Moved by Lord Howarth of Newport

14: Clause 1, page 1, line 8, at end insert "except if an early parliamentary general election has occurred under section 2"

Lord Howarth of Newport: My Lords, the effect of my amendment would be to remove the provision for "resetting the clock", as the phrase goes. If the amendment were incorporated into the Bill, and were there to be an early general election under either of the two provisions in Clause 2, that early general election would not be followed by a new full fixed term of the subsequent Parliament. Only the balance of the term left over from the previous Parliament would be served by the new Parliament, and a general election would take place at the end of five years-or, if at Report we adopt a four-year fixed term, at the end of four years-as established before the early general election took place.

The provision for resetting the clock is an important element in the Bill and we should have the opportunity to think about it in Committee. I understand that in Sweden, if an early general election is called, the electoral cycle none the less remains unaltered; they have the provision that I am proposing in the Bill. Of course, Parliament legislated that there should be four-year fixed terms for the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly. That legislation provides for the possibility of an exceptional early election but does not provide that the clock is reset in Scotland, Wales or Northern Ireland, and one might say that sauce for the goose should be sauce for the gander.

If we are to have fixed-term Parliaments, why do we not have genuine fixed terms? That would enable the benefit of the discipline of fixed terms to be fully experienced and everyone would know where they stood. It would remove the incentive for a Government to contrive an early general election by, for example, engineering a vote of no confidence in themselves. The requirement would be less significant if in due course the House approves one of the amendments that provides that only the Leader of the Opposition may table a Motion of no confidence, but without that amendment we must recognise that there is a possibility, and it could be an attractive one, for the Government to engineer such a Motion in order to achieve an early general election. It would discourage the parties from colluding to take advantage of the two-thirds provision for an early general election, and would lead to the benefits of full five-year terms being more surely secured, as no doubt the noble Lords, Lord Armstrong of Ilminster and Lord Butler of Brockwell, would wish. It would keep the rhythm of the boundary reviews in sync with the electoral cycle, the importance of which the noble Lord, Lord Rennard, stressed in our previous debate.

When Mr Harper, the Minister, gave evidence to your Lordships' Constitution Committee, he was rather equivocal on this point-he simply said that it was a judgment issue whether or not the provision for resetting the clock should be built into the legislation. He said,

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that is, the right decision. Once again, as with the issue of judgment as to whether the fixed term should be for four years or five, the coalition's judgments just happen to favour its own interests in staying in office. Again, I ask the Minister whether the Government have any better reason for having incorporated the provision for resetting the clock in the event of an exceptional early general election.

Lord Wallace of Tankerness: My Lords, I thank the noble Lord, Lord Howarth, for the amendment. I was initially puzzled about its effect, which would be that it would provide that the next scheduled election was not held following an early general election under Clause 2. This gives me an opportunity to say something about subsections (3) and (4), as he has indicated that with this amendment he is seeking to ensure that the clock is not reset. His closing remarks indicated that this is a matter not of high principle but of judgment.

Subsections (3) and (4) of the clause provide that, where an early election occurs, the polling date for the next election will be the first Thursday in May in the fifth year of Parliament, unless the early election falls on a date before the first Thursday in May, in which case the length of the ensuing Parliament will be calculated as four years from the next first Thursday in May. That will deliver certainty as to when the next election will be, but-this is a crucial point-it also gives the incoming Government as close to a five-year term as possible. It eliminates the need for the electorate to return to the polls in quick succession, as the clock is effectively reset.

The Constitution Committee examined this aspect of the Bill. In its report it concluded that if there is an early general election, a Government elected at that poll should have a full term, or as near a full term as possible, in which to develop their policies and take their legislative programme through Parliament.

Some noble Lords may nevertheless have the concerns expressed by the noble Lord about the term of the Parliament after an early election. I know that some consider that it would be preferable for an early election not to affect the date of the ordinarily scheduled election, but that could well mean that a Parliament was given only a relatively short period of time. It may be that a Government would be elected with a substantial majority, and it would be difficult to explain to an electorate in these circumstances why it would be necessary to return so quickly when it might appear that a Government had been elected relatively recently with a mandate. They might be surprised and somewhat confused by that approach.

Not to allow an incoming Government to serve a full term would lead to a system with potentially two types of Government: those entitled to a full term to implement their policies, and those who would have to make do with the time left to them before the next scheduled election. That could also alter the nature of the elections themselves. Why should the mandate provided at one election be any different from the mandate provided at another?

I note the points made about the devolved Administrations in both Scotland and Wales. There is a difference; I think that the Northern Ireland Assembly

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is much more akin to what is proposed in the Bill. It is also the case that, given the proportional systems that are in place for elections to the Scottish Parliament and the Welsh Assembly, it is unlikely that you are going to get a Government elected with a large single-party mandate. If a party had not been elected with such a mandate, people would not think it so odd that it did not have a full term.

We gave consideration to this matter, but the balance comes down in favour of resetting the clock. I am grateful to the noble Lord for his amendment. It has been an opportunity for us to air this important aspect of the Bill. I hope that he will agree that there is merit in resetting the clock and, on that basis, will withdraw his amendment.

Lord Howarth of Newport: I am grateful to the Minister for explaining the Government's case slightly more fully than the debate at Second Reading gave him the opportunity to do. After all the excitement of the previous debate, the House has not been particularly zestful about embarking on an exhaustive debate on this topic, but this provision in the Bill is significant and it is right that the House has received the explanation that the Minister has given.

If my amendments were incorporated, however, they would provide greater certainty. The Minister seemed to suggest that there would be greater certainty if we had a resetting of the clock. There would be greater certainty about the duration of a Parliament if we did not have that provision, but I do not want to quibble. I also accept his point about proportional representation making a difference. I am grateful to him for correcting my appreciation of the position in Northern Ireland.

I agree that, on balance, it is better to include the provision to reset the clock. One could make a reasonable case for not including that provision, or for not applying it, if the early general election were to occur in the first half of a fixed term of Parliament. It might be accepted that, if there was more than half of the fixed term still to go, it would be sufficient and the benefits of discouraging early elections would be felt. However, I certainly agree that if there were an early general election later in the Parliament, it would not make sense not to start a new fixed term. If we were to elect a new Government, they would need a decent span of time in which to govern. I also do not think that the need to have two general elections in rapid succession would be well received by voters if this was the only reason why there had to be another election. I am glad that we have been able to look at this issue and beg leave to withdraw the amendment.

Amendment 14 withdrawn.

7 pm

Amendment 14A

Moved by Baroness Hayter of Kentish Town

14A: Clause 1, page 1, line 8, at end insert "unless this date coincides with an election to a reformed House of Lords"

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Baroness Hayter of Kentish Town: My Lords, this amendment would mean that an election to the other place could not take place on the same day as an election to this House. The Political and Constitutional Reform Committee in the other place suggested that the Fixed-term Parliaments Bill should be discussed with the draft Bill on reforming the House of Lords so that the two fundamental constitutional issues could be considered alongside each other. Indeed, that somewhat wise committee noted:

"Elections to a reformed House of Lords may well prove a further complicating element".

Let us pause for a moment to see what considerations and complications might arise. There are two assumptions. The first is that the elections to the other place and to your Lordships' reformed House would take place on the same day. If that is the correct assumption, I assume that the elections to this House would also be for the same five-year fixed term-if that, rather than a term of four years, is accepted. One has to assume that the term would be shortened should an election be triggered in the other House. In the mean time, what should happen? Will Members of this House be able to resign, for example, to fight a seat in the Commons? Maybe they will be able to resign from this House, having been elected here, for any other reasons via-presumably-the equivalent of the Chiltern Hundreds. If so, what if the following by-elections to this House changed the composition of this House so that the Government in the Commons could no longer get their programme through this House but were unable to call an election in the other place because that is not allowed for in this Bill?

The second assumption is that elections to the two Houses would take place on different days. It is interesting then to ask the question: for how long would Members elected to this House sit and would that be for a fixed term, regardless of what elections were to take place in the other place? What will be the gap between the general elections in which people are elected to the two Houses? On the assumption that they are held on different days, halfway through a Commons parliamentary term your Lordships' House could change hands so that there was stalemate, but with the upper House perhaps claiming the legitimacy of a fresh mandate and-if elected by proportional representation-a more representative mandate. If this House claimed a fresh mandate in light of current affairs, where would that leave the Commons-unable to challenge it or to refresh itself by virtue of a new election and mandate? Could the equivalent of a no-confidence vote in this House then trigger a response in the other House, to enable it to call an election?

It is worth recalling that our Select Committee on the Constitution noted that, in regard to the triggering of an early general election for the Commons, the Bill should contain a form of safety valve in case the Government lost,

However, either of those, should they happen, might be felt most quickly in your Lordships' House-should an election here come swiftly after, or even during, such a crisis-and change its composition so that this House felt it more truly reflected the current views of

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voters. The new elected House might then almost make things ungovernable if it felt that it had to restrain the Commons from action that the electorate had demonstrated would displease it.

These are exactly the sort of questions that will in due course be debated with regard to the plans for this Chamber. However, it seems odd that we will entrench the date for the elections to one part of Parliament without any reference to elections to the other part. Perhaps, therefore, at the very least, the Minister will simply clarify whether the first tranche of the elections to this place is also envisaged for 7 May 2015, and the next tranche for May 2020. If not, what are the ideas about the harmony of the two Chambers, given the provisions of the Bill? I beg to move.

Lord Cormack: My Lords, the noble Baroness has done us a real favour in introducing her amendment. It is a mischievous one, as she knows, but she has brought before us a subject that may come again. Personally, I hope it does not. As one who believes strongly in the virtue and value of a non-elected second Chamber, I hope that this Chamber will not be abolished and replaced by another. The noble Baroness has indicated the sort of things that could happen if there were two elected Chambers. There is the challenge over which is the more legitimate, and the challenge as to whether you can possibly-even though you may wish to-retain the supremacy of the other place if a second Chamber here is elected. Many of us believe that you cannot. Many of us believe that it is far simpler, better and less ambiguous to have one mandate held by one House, rather than a mandate divided between two.

It will be interesting to see whether my noble and learned friend the Minister can give us some of the answers that the noble Baroness sought. He ought to reflect, as should others in government, on the wise words of Ernest Bevin, one of the greatest Foreign Secretaries that our country has had in the past century. Talking of some political problem, he said:

"If you open that Pandora's box, you never know what Trojan horses will jump out".

I urge the wisdom of those words on my noble and learned friend before he replies.

Lord Falconer of Thoroton: I agree with the noble Lord, Lord Cormack: we are grateful to my noble friend Lady Hayter for raising these issues. It is important to emphasise that the Government have put forward these proposals for constitutional reform so that they are all part of a package. The three parts of the package are the Parliamentary Voting System and Constituencies Bill, the Fixed-term Parliaments Bill and the House of Lords Reform Bill. It is important for the noble and learned Lord to give at least some answers to what my noble friend Lady Hayter has said, but there is a more important underlying point. At Second Reading, the noble Lord, Lord Rennard, said to my noble friend Lord Rooker, "Oh, you can't say that, because we voted for the Parliamentary Voting System and Constituencies Bill on the basis that it is a five-year fixed term". I very much hope that we will not hear any more of that sort of talk from the Government, because they were given the opportunity to put the Fixed-term Parliaments Bill together-

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Lord Rennard: My Lords-

Lord Falconer of Thoroton: I am not going to give way, if you do not mind. As I say, the Government were given the opportunity to put these things together but they did not take it. It seems to me that the consequence of not taking that opportunity is that when Parliament debates these issues again on the Fixed-term Parliaments Bill or on Lords reform, we will not regard ourselves as bound by the previous decisions that have been made-for example, we might conclude that four years was better than five for a fixed-term Parliament-because the Government explicitly refused the opportunity to put these constitutional reforms together despite the fact that they were urged to do so not just by the Opposition but by the cross-party constitutional committees in both Houses of Parliament.

I shall be interested to hear the noble and learned Lord's view on how we deal with possible inconsistencies between one of the Government's constitutional reform package Bills and another. Presumably, that is done by amending the later Bill when we see what the right answer is. I now give way to the noble Lord, Lord Rennard.

Lord Rennard: I wonder whether the noble and learned Lord is being consistent in his arguments. There seemed to be a lot of criticism of the fact that in previous legislation two items were put together-the voting referendum and the constituency boundaries. Now he is suggesting that the third item-this Bill-and House of Lords reform should all be put in the same package. I do not understand his argument. I was simply suggesting that when we have decided things we should try to be consistent about them.

Lord Falconer of Thoroton: As regards the AV referendum and the parliamentary boundaries, we saw what was proposed in relation to both of those. The issue was whether they both needed to be included in one Bill. We knew what the proposals were.

7.15 pm

Lord Wallace of Tankerness: My Lords, I thank the noble Baroness, Lady Hayter, for this interesting amendment, which has given rise to a number of interesting questions. As the Committee well knows, a cross-party committee has been considering reform of this House and the Government intend to publish a draft Bill shortly. I could not possibly comment on what will be in that draft Bill as it will be subject to pre-legislative scrutiny. We hope that that will be done by a Joint Committee of both Houses. I am sure that some of the important issues which the noble Baroness raised will be brought before that Joint Committee. My noble friend the Leader of the House answered questions on some of the issues she raised regarding the relative standing of both Houses last week, if not the week before. However, I do not think that it is appropriate to deal with them in the context of this Bill.

Lord Bach: The noble and learned Lord says that that draft Bill will be subject to pre-legislative scrutiny. That is great to hear, but why was that not the case with this Bill?

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Lord Wallace of Tankerness: My Lords, we have gone down that path many times and have indicated that we intended this should be a first-term Bill. I have made it very clear on a number of occasions when this has been raised that we believed it was important that at a very early point in this Parliament we should establish that it would run to a particular fixed date, and that we wanted to ensure the principle of fixed-term Parliaments. However, no one can say that there has not been ample opportunity, in the length of time which I described in responding to an earlier amendment, for both Houses to have plenty of opportunity to look at a relatively short Bill.

Lord Cormack: My noble and learned friend talked about the scrutiny committee of both Houses. Can he give an absolute assurance that on that committee there will be Members who do not believe in a fully or partially elected House so that it can reflect the wide range of opinions in both Houses of Parliament?

Lord Wallace of Tankerness: My Lords, I am in no way trying to dismiss the suggestion that my noble friend makes. I am not in a position to indicate how that committee will be established. No doubt there will be nomination procedures from both Houses. I suspect that it would be rather odd if a contrary view or two was not expressed on it, but I am not in a position to indicate that ahead of the Bill being published. I assure the Committee that the timings of elections to the reformed second Chamber has been considered carefully by the Government and the proposals will be in the draft Bill.

I certainly take my noble friend's point that, having spent most of the time on the Parliamentary Voting System and Constituencies Bill listening to the Opposition saying that the Bill should be split, it is somewhat intriguing then to be told that not only should it be split but that two other Bills should be added on to it. I do not think that the experience of the CRAG Bill in the previous Parliament, where numerous constitutional principles were put together under the one heading of a constitutional reform Bill, was necessarily the most satisfactory experience.

The noble Baroness mentioned entrenching the election date for one House while the other was pending. At least it will be known when this Bill has got on to the statute book what Parliament has agreed with regard to a fixed-term election. If this Bill had not come forward and we did not have fixed-term Parliaments, an election to the other place could have happened at any time. The potential for some of the confusion and concerns to which the noble Baroness referred would have been multiplied many times over if it was proposed that this House should have a fixed term while the other place could have elections as and when the Prime Minister of the day thought best to call them. Therefore, when the Joint Committee of both Houses considers the draft Bill, it will do so in the knowledge of what Parliament has passed in the context of fixed-term Parliaments. This Bill deals with dates of the general election to the other place. These should be set before we consider the dates of elections to the reformed

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second Chamber. There will be ample opportunity to discuss elections to this Chamber when the Bill is published in draft form and, I suspect, plenty of further opportunities to discuss it when the reality of the Bill comes before the other place and your Lordships' House. I invite the noble Baroness to withdraw the amendment.

Baroness Hayter of Kentish Town: I thank the Minister and the other speakers for their contributions. The Minister said that it was an interesting amendment, rather like the Chinese proverb, "May you live in interesting times". I am not sure about the noble Lord, Lord Cormack, calling it mischievous. It was seriously meant because it is about a package of reforms, as my noble and learned friend said. I do not think that means putting them in one Bill but rather having a real idea of where we are taking our constitution before we tackle any one bit of it, so that we see it in the round. Nevertheless, given the comments that have been made, I beg leave to withdraw the amendment.

Amendment 14A withdrawn.

Amendment 15

Moved by Lord Grocott

15: Clause 1, page 1, line 8, at end insert-

"( ) Each five-year parliament shall include a minimum of five parliamentary sessions."

Lord Grocott: My Lords, I am very conscious of the fact that we probably have only about 10 minutes before we ought to break for dinner. These things fall as they do, but I hope that I may be presumptuous enough to suggest that this is an important amendment. It is a simple one and says straightforwardly that if we are to go down the road of fixed-term Parliaments over five years-I am opposed to that-there is a very strong case indeed for saying that there should be annual Sessions of Parliament, and that it should not be within the remit of government, having fixed the Parliament, then to be allowed absolute flexibility over the length of Sessions.

I perhaps would not have thought it necessary to put this amendment down and in effect legislate for the Session of a Parliament were it not for the very bad experience of the current practice whereby, to my amazement, last September the Government announced that the first Session of this Parliament would last for two years. So far as I know, this was done without any consultation, although the noble and learned Lord, Lord Wallace, can correct me on that. That was an extraordinary unilateral decision to make. The only defences of it that I have heard are, "This is the first Session, so we have a lot to do", or the rather feeble defence that it is only five months longer than the first Sessions of Parliament have often been in the past. Speaking as a former Chief Whip, I can say only that if you had said to me, "It is only five months", five months longer for a Session of Parliament for any Government is absolute gold dust. It is a discipline on Governments who are putting in their legislative

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programme to do that within a 12-month period. I remind the House of the current situation before I explain why it is essential, when faced with this fixed-term Parliament, that we legislate to ensure that Sessions are at least annual.

At present, Governments normally decide around September each year-perhaps a little earlier-the date of the Queen's Speech. I do not know the details of the negotiations between No. 10 and the palace, but I know, as the Committee knows, that we all understand that normally there will be a Queen's Speech in November each year. Occasionally, it has drifted into December. That is excepting the Queen's Speeches that come after general elections, which can come at any time-although they cannot come at any time if the Bill becomes an Act. We know that Governments work within a parameter, which is usually some time in November. There is the usual argy-bargy whereby if a Queen's Speech comes too early, it is because the Government do not have enough legislation and are running out of steam; or if the Queen's Speech comes too late it is because the Government have lost control of their legislative programme. However, the parameter means that there is a discipline that gives a big advantage to the Opposition-because parliamentary time is valuable, as we know only too well-and the Government really have to get their act together, manage their programme, and finish it within the 12-month period. To extend unilaterally the normal length of a Session is an abuse and is certainly to the massive advantage of the Government.

I do not know whether I should say this in anger or in envy, because anyone involved in managing a Government's legislative programme every year has the nightmare period of October and early November when you are trying to fit a quart into a pint pot, you know that you have to do it and that you have to observe the conventional gaps between the stages of Bills-or at least you used to have to observe them; this Government do not have a good record on that aspect of our constitution. However, you know that there is a discipline within which you have to work. Moreover, both Houses-the Commons and the Lords-have recognised this process as important. Both Houses have procedures to enable Bills to be carried over. We have all been familiar with the debates that allow, in exceptional circumstances, individual Bills to follow a recognised constitutional procedure-if I may put it as grandly as that. Motions have to be passed and so on. There is a recognition that either House of Parliament can breach the annual sessional understanding only if the Government obey certain rules in relation to individual Bills and do not do that as regards their overall programme.

I do not know whether I should be angry or envious about the fact that the Government have unilaterally given us a two-year Session. I just wish that I had thought of it. When we were in government I wish that I could have thought, "Blimey, I don't need to worry about getting these Bills through in 12 months; let's just postpone the Queen's Speech for another year or however long-whenever it is convenient to the Government to decide when the Queen's Speech should take place". Given that we have had all this hyperbole from the noble and learned Lord, Lord Wallace, and

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others-not very convincingly-about the Government or the Prime Minister giving away power regarding fixed-term Parliaments, I hope that he will acknowledge, if he believes that argument, that they should give away the power of unilaterally being able to decide when a new Session of Parliament should begin.

By having this two-year Session, the Government have breached an important convention of both Houses. It is reasonable for those of us who are concerned about this to say that we now need to enshrine the proposal in my amendment in legislation. I cannot think of any good argument against, if you know when general elections are going to be, why you should not also determine when the Sessions should be. I beg to move.

Lord Cormack: My Lords, briefly, I agree with what the noble Lord, Lord Grocott, said. I very much hope that my noble and learned friend will be positive in response. There is nothing that we can do about this extended Session. It will last until May next year. I regret that. Sessions should last as near as possible for a year, and if we are to move to fixed-term Parliaments, the obvious thing is to have the state opening for each Session in the May of each year. I hope that my noble and learned friend will give me some comfort when he responds.

Lord McAvoy: My Lords, I rise briefly in support of the principle in my noble friend's amendment, because it would bring a discipline into what has happened ever since this Government took power, which has been the continual tampering with the constitution for petty party-political advantage. That is a fact of life. I do not like to be provocative, but I am trying to find the words that would best describe this matter. I have mulled over words such as "sleazy", but if I continued, my words would probably be unparliamentary, and I would not wish to be responsible for any more damage to the office furniture. However, as a former business manager in the Commons, I consider that we are dealing with a completely foolhardy approach to the constitution. We have conventions here, but ever since the advent of this coalition, particularly for the party advantage of one of the partners in the coalition, the majority party opposite is being driven along to stay in power. Precedents are being set that are damaging to the conventions of this House, the other House and the constitution. I appeal to Conservative Members of the coalition, such as the noble Lord, Lord Cormack, whose comments are welcome, that it is past the time that they should put a stop to the roughshod treatment of the constitution.

Lord Falconer of Thoroton: My Lords, I support what my noble friend Lord McAvoy said; I support the amendment of my noble friend Lord Grocott; and I support the approach taken by the noble Lord, Lord Cormack. It is worrying when everyone who knows anything about this says-and I do not include myself; I refer to three distinguished ex-Members of the other place-that the effect of there being no control over the Government on how long a Session lasts means that they can play fast and loose with however long it takes them to get the legislation that they want through

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Parliament. That weakens the power of Parliament. A lot of the constitutional rhetoric of this Government was on strengthening the power of Parliament.

I wish to ask a specific question, because it would appear that the Government understood this position on 25 May 2010, when the Deputy Leader of the House of Commons said in relation to the Bill:

"There is a strong case for pre-legislative scrutiny, but I do not want to extend the consideration of this legislation into the following Session, because that would not be appropriate".-[Official Report, Commons, 25/4/10; col. 152.]

He understood the importance of Sessions. He said that on 25 May 2010. Happily for him, on 13 September 2010, the Session was then extended until May 2012, thereby getting rid of the one problem that stood in the way of pre-legislative scrutiny. Can the noble and learned Lord specifically answer as to why the Deputy Leader of the House broke that promise? "Promise" may be overstating it. Perhaps the noble and learned Lord should characterise what the Deputy Leader meant. Was it wild musing as to what might happen? Why did he not go ahead with what he had said?

7.30 pm

Lord Wallace of Tankerness: My Lords, I thank the noble Lord, Lord Grocott, for his amendment, which would provide for a minimum of five parliamentary Sessions in every five-year Parliament. I have a lot of sympathy with the spirit of what is proposed, but I will explain why I do not think that it should be enshrined in statute. I accept that having five annual Sessions in a five-year Parliament makes considerable sense. Indeed, under this Bill is it likely that the Parliament elected in 2015 will have five Sessions. The only reason that this Parliament is likely to have four-I will deal with this in more detail in a moment-is the transition to fixed terms and spring state openings. It would not be appropriate to put the amendment into statute; the current arrangements should remain. As the noble Lord, Lord Grocott, recognised, even if the Bill did not exist, it would still be possible to change the length of a Session.

I will answer the point made by the noble and learned Lord, Lord Falconer. It was very obvious that the decision to move to spring 2012 was not taken in the early days of this Government. By the time the announcement was made in September, the Bill had already been published. I cannot remember the exact date; it must have been around the time the Bill got its Second Reading. I am being told that in fact it was the same day. That might explain why the Bill did not have pre-legislative scrutiny. I know that I have not answered this point to the satisfaction of the Opposition, who will come back to it time and time again. However, we wished to have this Bill in the first term. It was not in order to get this Bill through that we decided to extend the Session. It is very clear that the reason for the extension was that we wished to move to an annual Queen's Speech in May and therefore an adjustment was required.

We could have reduced the length of this Session, but to have done so half way through would have caused a number of difficulties. That is why it was decided, as a one-off, to extend this Session until

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spring 2012. There is nothing sinister in that. Most of our legislation would have been passed in any event. The noble Lord, Lord Grocott, indicated that there is provision for carry-over. I pause to reflect that the fact that this Session is longer may bring a ray of hope-with reference to the previous debate, I believe that hope was the last thing to come out of Pandora's box-to Members whose Private Members' Bills are so often frustrated because there are not enough Fridays in the Session to get them through. To suggest that this is a sinister plot on the part of the Executive is grossly misplaced. The purpose is to get into a position where we can have annual Sessions that begin in May. It will be our intention thereafter to have Sessions that run from spring to spring.

It is not appropriate to enshrine this in statute because there may be a case where, if the Bill is enacted, an incumbent Government lost a vote of no confidence and a new Government was formed within 14 days. It is possible in such a scenario that it would be felt that the Session should come to an end and that there should be a new Queen's Speech. Nobody would think that that would be unreasonable in the circumstances. It might be very difficult then to fit in five Sessions. That is why it is better not to stipulate in statute that there should be five Sessions in any one Parliament. A Session might begin after an election in February and come to an end in May, which would not make much sense. It would have to be brought artificially to an end to ensure that the requirement of five Sessions was met.

Having annual May-to-May Sessions will ensure that the final Session of the Parliament is more likely to be much more meaningful and worth while than one which, for example, begins in late November and lasts until the wash-up in late March. The noble Baroness, Lady Armstrong, says, "We'll see", but nothing could be less exciting or satisfying than what we experienced in the wash-up last year when we tried to deal with so many Bills that had barely got anywhere. Parts of the Constitutional Reform and Governance Bill, which had had only a Second Reading in this House, were passed with only the briefest scrutiny. It had some pre-legislative scrutiny, but no scrutiny in this House. I hope that noble Lords would agree that at the end of the day actual legislative scrutiny is more important than pre-legislative scrutiny.

Lord Bach: It is best to have both; I quite agree. That Bill had enormous pre-legislative scrutiny, but should have had more legislative scrutiny. There, I have said it. Now perhaps the noble and learned Lord will admit that his Government, too, are in error. More importantly, they are passing legislation now, so they should learn from any mistakes that we may have made.

Lord Wallace of Tankerness: This legislation is having ample legislative scrutiny and I suspect that in times to come we will move towards having much more pre-legislative scrutiny. That is why I argue for five-year fixed terms; there will be more opportunity for pre-legislative scrutiny as well as legislative scrutiny. I

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simply make the point that to truncate one Session into two or three months would not be sensible. Future Sessions will last for only 12 months. What is happening in this Session is a one-off adjustment so we can get into the pattern of spring to spring Sessions that would fit the election timetable of fixed-term Parliaments with elections in May. For these reasons, I invite the noble Lord to withdraw his amendment.

Lord Grocott: My Lords, I do not know whether the noble and learned Lord, Lord Wallace, is getting tired or whether I am. He has ample reason for getting tired because he has been heroic as the only Minister dealing with this vital constitutional Bill. However, I simply did not understand what he said. We had a general election in May last year and he said that in order to adjust to the situation where we know the date of the next general election, which will be five years from last May, the length of this Session of Parliament had to be adjusted to accommodate that. I do not understand that argument.

Lord Wallace of Tankerness: I am grateful to the noble Lord for giving me an opportunity to explain it. It was clear from the comments made by the Deputy Leader of the other place in May of last year that the decision to extend the Session to spring 2012 was not made in the early days. The working assumption was that we would go forward as we normally do after an election in May and have the first Session running through to the following October or November. It is not giving away any state secrets to say that that was the assumption. We then considered whether it was better to move to a situation where, if we were going to have fixed-term Parliaments, the Sessions should run annually, May to May. An announcement was made in September, which would normally have been between a third and half way through the Session. There was an option to truncate the Session about now, but it was thought that the best thing to do was to go to next year. There is nothing sinister in that; we were totally open. However, this is a one-off change and from next year, Sessions will go from May to May. That is the right way to proceed. I hope the noble Lord will accept that there was nothing sinister in this, but that it was an adjustment made in-year, given that the original expectation was to go through until the autumn of this year.

Lord Grocott: I am not saying that it is sinister; I am just saying that it is illogical. If the Government decided in those five days in May that there were to be five-year fixed-term Parliaments, why was it not plain as a pikestaff that in normal circumstances that would mean five annual Sessions? No adjustment was required. A year would take you to the following May, then the May after that and so on. I do not need to go through it. With respect, it seems obvious to everyone in the House apart from the Minister that that is the logic of a five-year Parliament.

I am very grateful to noble Lords for their contributions, which have been 100 per cent on the side of those who agree with the amendment.

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Lord Wallace of Tankerness: We did not, in those five days in May, think about moving from one year to one year to one year. That is the simple answer and I hope that the noble Lord will accept it at face value.

Lord Grocott: Of course I accept that and I shall not labour it further if the Minister assures me that the coalition was not going to tamper with that aspect of our constitution. However, I emphasise the sheer inconsistency of rejecting this amendment when the whole rationale-if there is one, although I doubt it as every day passes-of the Government's comprehensive constitutional reform programme is to provide a degree of predictability and take away powers from the Executive. My amendment simply tests the Government's sincerity and commitment to that by requiring them to correct their very inadequate and unsatisfactory decision unilaterally to make it much easier for the Government to legislate.

I fear that there is a tendency by the Minister-it is understandable when you are taking a complicated and important Bill such as this through the House on your own-to assume that, if any amendment is put down, particularly by the opposition Benches, the duty of the people in the Box is to find reasons for saying no to it. If the Minister were to put a cold towel over his head and think in as dispassionate a way as he is allowed-I do not mean "allowed" in any sense other than that this Government seem to be totally locked into their constitutional reform programmes, which do not seem to be thought out in a coherent way-he would come to the conclusion that, once the deal had been sealed between the Prime Minister and the Deputy Prime Minister, there would be no flexibility on that Bench to make any adjustments whatever.

Before I beg leave to withdraw the amendment, perhaps I may appeal to the Minister to tell those of a higher pay grade that this really is a sensible proposal, which, so far as we have tested the opinion of the Committee, has 100 per cent support from everyone but the Government, and that, if they are to be consistent in their principles, about which, as I said, I am not thrilled, they really ought to see the logic and sense of having fixed annual Sessions within five-year fixed Parliaments. With that, I beg leave to withdraw the amendment.

Amendment 15 withdrawn.

Amendments 16 and 17 not moved.

House resumed. Committee to begin again not before 8.43 pm.

European Council Decision: EUC Report

Copy of the Report

Motion to Approve

7.43 pm

Moved By Lord Howell of Guildford

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, this Motion is a necessary part of the process leading to a treaty change required by the member states of the European Union in the eurozone. I shall explain the purpose of, and need for, the Motion in detail in a moment. However, at the outset I observe that it is very much in the United Kingdom's national interest that this House, under the terms of the European Union (Amendment) Act 2008, which we all recall, should approve this Motion without amendment so that the Prime Minister may support the adoption of the draft European Council decision to amend Article 136 of the Treaty on the Functioning of the European Union at the European Council meeting scheduled for 24 and 25 March.

As the Leader of the House made clear in his Statement following the December European Council, no one should doubt that stability in the eurozone is important for the United Kingdom. A large proportion of our trade is with the eurozone and London is Europe's international financial centre. It is because of this interrelationship that the UK's financial institutions and companies, both big and small, have huge exposure to the banks and businesses based throughout the eurozone. Worsening stability is therefore a real threat to the UK economy, as I am sure all your Lordships appreciate.

In explaining the background, I begin by reminding the House of the conclusion drawn on this proposed treaty change by the European Union Sub-Committee on Economic and Financial Affairs and International Trade at its meeting on 1 February. In his letter to the Minister for Europe, the chairman of the Select Committee on the European Union said:

"We fully support your view that it is in the UK's interest to support a stable and prosperous Eurozone. Given that this Treaty amendment would not apply to, or have any financial risks for, the UK, we support your intention to vote in favour of this amendment. We have agreed to clear this document from scrutiny".

From that background quotation I move to the reason why are we having this short debate this evening. First, Section 6 of the European Union (Amendment) Act, arising of course from the Lisbon treaty, requires that when a draft decision under the simplified revision procedure-that is, Article 48(6) of the treaty-is proposed, a Minister must introduce a Motion and have it passed by both Houses without amendment before the Prime Minister can signal his agreement to the adoption of that draft decision at a subsequent European Council. Secondly, if the House approves this Motion, it authorises the Prime Minister to agree to this draft decision and this draft decision alone at the European Council. Should there be any amendment to the draft decision at the European Council, the Prime Minister could not agree to it at the European Council without first coming back to another place and this House for additional approval. Therefore, the draft decision referred to in this Motion will be the

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version that is agreed at the European Council. There can be no other without the further approval of this House in a further debate such as the one that we are having tonight.

If the draft decision is adopted by the European Council under Article 48(6), all 27 member states must then also approve the treaty change in accordance with their respective constitutional requirements before the decision can enter into force. This means that the treaty amendment itself will not come into effect until the UK and all other member states approve or ratify the adopted decision.

However, if the European Union Bill, which has just been introduced to this House and will have its Second Reading tomorrow, becomes law, this treaty change will also be subject to Parliament's approval by Act before the UK can ratify it. We have made it clear that we shall proceed in accordance with the provisions of that Bill. In other words, there will be a full further opportunity for your Lordships to debate this matter when the treaty change comes forward in due course for ratification, which under our new procedures will require the full processes of primary legislation. That is an important change from the position in the past.

I turn to how the proposed treaty change came about. As your Lordships will know, it originates from the need for a permanent mechanism to be established by the member states of the euro area to safeguard the financial stability of the euro area as a whole. That is an obvious need. In May last year, the European Union established two emergency instruments to respond to financial crises. The first is the European financial stability facility. This is a temporary facility established intergovernmentally by euro area member states to provide loans to euro area member states in difficulty. It is a limited fund and is due to end in June 2013. The second is the European financial stability mechanism, which the coalition Government, of whom I am a member, inherited from the previous Government. Under this mechanism, the Council can agree, by qualified majority, to the Commission providing assistance using money raised on the financial markets, backed by the EU budget. It therefore creates an indirect liability for the United Kingdom. That is a very important point.

Against the backdrop of continued uncertainty in financial markets, the members of the European Council agreed in December to amend Article 136 of the Treaty of the Functioning of the European Union to provide that member states of the eurozone may establish a permanent stability mechanism. This mechanism, the European stability mechanism or ESM, will provide a necessary means for dealing with cases that pose a risk to the financial stability of the euro area as a whole, so it is important to us given the extent of our trade with it. This is what we are dealing with tonight.

The details of how the ESM will operate are being discussed in Brussels. In accordance with the conclusions of the December European Council, member states whose currency is not the euro can be involved, on a voluntary basis, in finalising work on the design of the ESM, which will be established by intergovernmental arrangement among the eurozone member states. My

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colleagues at the Treasury are responsible for overseeing the UK input to these discussions.

I stress that although we are involved on a voluntary basis in the design of the mechanism-it is very much in our interest to be so-we cannot and will not be part of it. In fact, we could not be part of it unless we joined the euro area. As the whole House is aware, this Government will not join the euro and, if the EU Bill becomes law, any future Government who wished to do so could join only with parliamentary approval by Act of Parliament and the British people's approval by referendum. I should like to reassure your Lordships that the proposed treaty change does not and will not transfer any competence or power from the United Kingdom to the European Union. As I said, this treaty change is in our national interests. Instability in the eurozone has direct implications for the UK and all the other economies in the single market and beyond.

On top of that, the Prime Minster negotiated successfully two important objectives. First, as the conclusions of the December European Council confirm-that is the so-called recitals-once the ESM is established to safeguard the stability of the euro area, Article 122(2), on which basis the old EFSM was established, will no longer be used for such purposes. Our liability for helping to bail out the euro area through European Union borrowing backed by the EU budget will cease. It is crucial to our interests that it does cease. Secondly, securing a tight budget for the future is our highest priority. At the last two European Councils, Britain led an alliance of member states in limiting the 2011 EU budget increase to 2.91 per cent, as your Lordships have already discussed and debated in this House. In moving forward, working alongside key partners such as France, Germany, the Netherlands and Finland, we are committed to a real-terms freeze in the EU budget from 2014 to 2020 and we have written to the President of the European Commission setting out our position.

Without this Motion this evening, the consequences would be serious and damaging for Britain. The Prime Minster would not be able to signal his support for the draft decision at the March European Council next week and the decision then could not be adopted, as like all other treaty changes it requires unanimity. This means that, if it failed, Britain would remain indirectly liable for eurozone bailouts through the EFSM, as it would not have been replaced by the ESM. By supporting the adoption of this treaty change at the March European Council, the UK will be supporting the members of the eurozone to establish a permanent mechanism, which will make clear the responsibilities of all the members of the eurozone to each other and to the overall stability of the euro area.

That means that we will ensure that our current indirect liability for eurozone bailouts comes to an end in 2013. As this new mechanism is established using the treaty provisions specific to members of the euro area, it will not apply to non-euro area member states and cannot confer any obligations on them. I hope that I have provided your Lordships with an explanation of the mechanisms, which I agree are not simple, and the purposes for passing this Motion tonight. I beg to move.

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Lord Harrison: My Lords, the importance of this debate is that the decisions will be made by the European Council at the end of this week, on 24 and 25 March. I speak as the chair of the Economic and Financial Affairs and International Trade Sub-Committee, which has had correspondence with the Government on this. The matter has also gone to your Lordships' European Union Select Committee for scrutiny. It was thought appropriate in the light of the importance of this debate that this report should be provided on amending Article 136 of the Treaty of the Functioning of the European Union in order to help colleagues to come to a decision.

The noble Lord has rightly pointed out the origins of the problem and the creation of a response to the financial crisis brought about by our Greek colleagues. That relates to the establishment of the European financial stability facility, which is agreed by member states within the eurozone, and the EFSM, the separate mechanism that draws on the European Union budget and, therefore, involves the United Kingdom.

As the Minister said, the matter was raised under Article 122(2) of the European Union treaty, which points out that, in exceptional circumstances that are beyond the control of any one member state, action can be taken to help out that member state. We wrote to the Government and asked whether they felt that that conflicted with Article 125, which is the no-bailout clause, but the Government replied to us insisting that the EFSM provided loans not bailouts and that, therefore, there is a distinction. Incidentally, we have also drawn on the report, which we hope will be cleared by the Select Committee tomorrow, on EU economic governance. Within that report we interviewed many experts on these matters in looking at the basis for the decisions made. There is agreement that this was the right and proper way forward.

We arrive at a situation where a new permanent crisis mechanism has to be created at the end of 2013 when the mechanism and the facility are abandoned. On 16 and 17 December 2010, the European Council decided on the new mechanism, which is to be called the European stability mechanism. It is also the case that Article 122(2), the exceptional circumstances clause, is no longer to be used. Instead-I think that it is true to say that there was pressure from Chancellor Merkel of Germany, who wanted not to fall foul of the German constitutional court-there was insistence on having a treaty change and hence an amendment to Article 136 as printed in the document that we have submitted and which is being proposed now. The process is that, under Article 48(6) of the European Union treaty, amendments to part 3 of the Treaty of the Functioning of the European Union, which includes Article 136, the subject of the debate this evening, can be appropriate. Therefore, as the Minister has explained, we have the simplified revision procedure as the mechanism for achieving that. Perhaps we should say that this is the first use of that procedure.

8 pm

The amendment was agreed in the European Council. The effect of the simplified procedure is that an intergovernmental conference, a convention of national

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parliaments or a convention of Governments, the European Parliament and the European Central Bank is not convened. Instead, it requires that the European Parliament and the Commission are consulted and that, because of the exceptional circumstances, the European Central Bank is also consulted. As the Minister explained, that has to be ratified by all member states. Hence we have a separate Motion in each House.

Mention has been made of tomorrow's Second Reading of the EU Bill. It is perhaps unusual for us to look prospectively as far as it touches on this matter, but it is probably right to do so. We have to attain parliamentary approval for voting on treaty amendments. Then we have to ask whether a referendum to be ratified by the British people would follow. We think that the amendment of Article 136 does not fall foul of that provision, under Clause 4. The Government, as is their obligation, have stated that it does not apply. The Government's Explanatory Memorandum also points out that the new mechanism will not apply to non-euro states. The amendment does not involve an increase of the European Union's competences, as we understand it. The amendment therefore provides for action solely in the euro area. The mechanism is set up by euro members and hence separates the United Kingdom from involvement.

It is a matter of urgency to support the setting up of the European stability mechanism, which must be ratified by all member states. The Prime Minister and the Foreign Secretary both said at the outset of their tenure that the viability and support of the euro was important for Britain's financial future. That, too, must be underlined. I hope that the short document produced by the European Union Select Committee, on advice from Sub-Committee A, has been useful for this debate.

Lord Lamont of Lerwick: My Lords, I thank my right honourable friend for introducing the measure before the House. I accept 100 per cent that the provisions do not apply to us. I entirely support the Government's attitude that they should not in any way obstruct the setting up of the ESM. I thank the noble Lord, Lord Harrison, for the helpful report published by the Select Committee. I just have two brief questions for my right honourable friend.

Noble Lords: Noble friend.

Lord Lamont of Lerwick: My noble friend, my right honourable and noble friend, as he always is and always will be.

As the noble Lord, Lord Harrison, mentioned, at paragraph 6 of the report the Select Committee commented-admittedly, it was talking about the EFSM rather than the ESM-that it did not conflict with the no-bailout provisions in the original Maastricht treaty, now incorporated in the TFEU. Of course, I know only what I read in the report about how it was argued by witnesses before the committee that that did not constitute a bailout because the EFSM did not assume responsibility for the debts. The same arguments must arise with the ESM.

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Does the Minister seriously, with a straight face, believe that that does not constitute an infringement of the "no bailout" provisions? It seems extraordinary to say that just because loans are being extended, if there is a rescheduling of debts, that does not constitute a bailout. I do not think that that is what the Germans had in mind at the time, when they argued against bailouts and for a "no bailout" provision in the Maastricht Treaty. Bear in mind that the new facility, the ESM, will, like the EFSM, issue securities which will be guaranteed by the member Governments of the EU. I know that this is a sideshow for our Government, but it is extraordinary to describe that as not conflicting with the "no bailout" provisions.

The second question I want to ask my right honourable and noble friend is more directly germane to the UK. When the German Government agreed to support the ESM, part of the package they insisted on, from what I read in the newspapers, was something called the competitiveness pact, which covered a whole range of policies including: the indexation of wages as applied to countries such as Belgium; the retirement age; and having a uniform system of corporate tax. All that was put forward as part of a quid pro quo that the German Government wanted in exchange for agreeing to the ESM, to which there was some resistance on the part of the German public.

As my right honourable and noble friend may have noticed, fears have been raised in the Economist magazine that those provisions could have an impact wider than the eurozone and might affect us and other non-euro members of the EU. I entirely support the Government's policy of allowing what is happening with the establishment of the ESM to go ahead; for us to have nothing to do with it but to allow it to go ahead; but I am concerned by the points made by the Economist about how that could spill over into measures that would have an effect on competition and the competitiveness of the rest of the EU. The magazine argued that the competitiveness of the whole might be undermined by protectionist measures taken under the rubric of the competitiveness pact. I hope that my right honourable and noble friend follows my point. I would like to be assured that that is not the case. I would like to be told how the competitiveness pact will be given legislative effect and how we will ensure that it does not have adverse repercussions on us, and other countries not in the eurozone.

Lord Pearson of Rannoch: My Lords, it will come as no surprise to your Lordships that I rise to speak against the Motion. The heart of the Government's case is that it is in our national interest to help the countries in the eurozone, so we should not withhold our consent to the proposed European stability mechanism. To justify that, the Government even trot out the tired old propaganda about half of our trade being with the eurozone, which is irrelevant nonsense, as I have often pointed out.

The Government are really asking us to agree that the euro should be propped up, which is a very different and risky thing to do. I say that because the euro is so badly designed that it may be un-prop-up-able, certainly in the long term, probably in the medium term and

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possibly, if one looks at what is happening now in Portugal-not to mention Greece, Ireland, Italy and perhaps Spain-in the short term. The euro's main design faults, as some of us have been trying to point out since before it was born, are that it is a currency area without a federal budget. There is no mechanism for sending support from rich areas in the zone to the poor areas. Its different economies also suffer from a single interest rate and exchange rate with the results we are already seeing in the countries I have mentioned.

The Government's answer to that in this Motion tonight seems to be that there is nothing to worry about because this new ESM means that the poor old Germans will pay and so will the French, the Dutch and the other countries that already donate to keep the whole unfortunate project of European integration afloat. The question is: will they? For how long? How much? Even if the cosy European political class thinks it is all a splendid idea, what about real people? What about the massive public protests in Portugal over the weekend and those we have seen in Greece? What about Marine Le Pen in France? Indeed, what about UKIP in the recent Barnsley by-election? [Laughter.] Well, I had to put that plug in.

What about another thing? This is a question to the Minister. What about the vote in the German Bundestag last Thursday, when five out of the six main parties gave their consent to the ESM but only with some strings attached? I know this is only a European Parliament, which is made irrelevant, as we know, under the project of European integration. It is not the European Union, but nevertheless, those strings are important. They included strengthening the stability and growth pact, guaranteeing the independence of the European Central Bank, guaranteeing that the EMS would be activated only in emergency cases, a restructuring procedure that would include private creditors and a guarantee that the eurozone would not turn into a transfer union. This last string looks something like shutting the stable door to me, but perhaps the Minister will care to opine. Does the ESM in effect set up a transfer union in clear breach of Article 125 or does it not?

The noble Lord, Lord Harrison, agreed with the Government that it does not breach Article 125, so perhaps it is worth putting on the record, very briefly, the key part of Article 125, which states:

"The Union shall not be shall be liable for or assume the commitments of central governments ... A Member State shall not be liable for or assume the commitments of central governments".

I agree with my noble friend-if I may call him that-Lord Lamont. Of course this does that. At the very least, even for Article 122, so roundly abused just before the present Government came to power, which was designed to help out with natural disasters and things like that, surely a loan which is not repaid becomes a commitment. Here with this ESM, we are in the clearest possible terms breaching Article 125. I would like the Minister to tell us: are we are helping to setting up a transfer union or are we not?

The Bundestag's third condition-that the ESM should be used only in emergency cases-also looks a bit optimistic. It reflects the proposed additional paragraph to Article 136 which states that the ESM will be

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activated only if it is indispensable to save the stability of the euro as a whole. I think the Minister told us that this detail has not yet been worked out. We are voting for something that we do not know how it will work. Can he tell us who or what will decide when the use of the ESM has become indispensable? Will it be the Council, in which we sit, and if so will we have a vote, or will it be the Commission and/or the central bank? Will the IMF be involved, which again concerns us? In short, can the Minister tell us how the new European stability mechanism will be activated?

8.15 pm

To conclude, I submit that it is really not in this country's interest to prop up the euro. The quicker it disintegrates the better, with countries that cannot afford to be part of it going back to their national currencies. Only then will they be able to start trading their way out of the colossal debts into which the euro and the project of European integration have led them. Mr Van Rompuy has just said that the EU will collapse if the euro fails. I fear he may be wrong and that the juggernaut of European integration could continue without the euro and would indeed do so, but if he turns out to be right, what a pleasant prospect greets us: no Commission, no Committee of Permanent Representatives, no Council of Ministers, no European Court of so-called Justice, no EU Parliament, none of the colossal fraud, waste and overregulation which weigh us down at home and in our competition and trade with the rest of the world. We would be left with a Europe of democratic nations freely trading and collaborating. It is to those sunlit uplands that the Government should be leading this country and the rest of Europe. That is where the national interest lies, not in this grubby instrument of doubtful legality.

Lord Newby: My Lords, it is always a great pleasure to follow the noble Lord, Lord Pearson of Rannoch, because I always think that debates in your Lordships' House are much better when we are not all agreeing with each other. He wants the euro to fail. We on these Benches want it to succeed, and therefore we support the Motion before us this evening. Without having a huge discussion on the history of the euro, it is perhaps worth reminding ourselves that the euro has survived the worst financial crisis certainly in our lifetimes, and has survived many naysayers over the past two or three years who very confidently and regularly predicted that it was about to collapse. It is quite clear that the euro is not going to collapse and that the eurozone is going to continue. Indeed, it is likely to be strengthened as a result of the decisions which are currently being finalised.

It is one of the long-standing features of our view of the EU and the euro that at every point they were about to collapse and, indeed, that the European venture was about to stall, and at every point it has moved forward in its peculiar but almost inevitable way. There was a typical example of this attitude just last week when the FT, reporting on the eurozone summit on this mechanism, had as its headline "Leaders cut surprise deal on key reforms". The history of European development has been leaders predictably cutting surprise deals when nearing a deadline, which is exactly what has happened here.

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I do not intend to attempt to dissect the speech of the noble Lord, Lord Pearson, in great detail, but I point out to him that member states are not donating anything to anyone via this mechanism. The Irish are paying 6 per cent on these loans and are grumbling mightily about them, so just as the British Government are getting a good return on the loans that they are making, member states that are making loans under this mechanism will be getting a pretty good return.

Lord Pearson of Rannoch: My Lords, I did not suggest that this Government were donating to any other member state through this mechanism; I merely pointed out that we donate generally to the coffers of the European Union-to the tune this year of £17.6 billion gross and £8.3 billion net. That is net cash that we are sending to Brussels and that goes down the drain there-a figure, I might say, that we are struggling to cut from our own public expenditure.

Lord Newby: My Lords, I apologise to the noble Lord. I misheard him. I distinctly wrote down that he said that a donation was involved in this process.

My one question to the Minister springs from my concern about the way in which the eurozone is developing, which is simply that the UK's role in relation to it is extremely strange. We are obviously not part of it, so we are not in many of the meetings. Yet from time to time we are allowed to have a say. What worries me is that with the passage of time that say gets less and less over a whole raft of economic decisions across the EU. In the current exercise, we were allowed to help in the design of the ESM, which presumably means that Treasury officials went to meetings to talk about how it was going to work. What worries me is that, once it is established, those Treasury officials will be told that they have been extremely helpful, that their advice has been most valuable and that they can now go back to London and let the rest of the eurozone implement the policy. As the noble Lord, Lord Lamont, has pointed out, there are a whole raft of secondary consequences for the competitiveness pact, which will undoubtedly have an impact on the UK and on which, as far as I understand it, we will have no say at all in the future.

Will the Minister explain whether, once the ESM is established, there will be any further role for the UK Government and their officials in the design of the conditions that might be required or suggested from time to time to apply in particular cases when member states are being bailed out? These changes could be extremely worrying, not necessarily because they or the conditions are bad in themselves but because, although we are affected by them, we will have had no say in the way in which they are put together.

Lord Stoddart of Swindon: I suppose I could just say that I agree with everything that the noble Lord, Lord Pearson, has said and sit down, but I will not do that.

I thank the noble Lord, Lord Howell, for explaining very complicated legislation to us. I think I understand it a bit better now that he has explained it. Nevertheless, I believe that it is a serious matter that we are discussing.

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I think I am right in saying that, during debates on the Lisbon treaty, the then Official Opposition considered Article 48(6)to be an unnecessary and perhaps dangerous measure that could be used to extend European Union power without proper parliamentary scrutiny. I feel that that was their position at the time. Now, even though they have been in power for only 10 months, they are using this provision to extend the power of the eurozone. I do not know what has happened. Perhaps the Liberal part of the coalition is having more influence than it should.

There has not been an IGC, which has been pointed out already. The Motion received only one and a half hour's debate in the House of Commons and a dinner hour debate in this House. We are not really having the sort of discussion that we should have before the Prime Minister goes to Europe to make a decision. It may be that we will have further discussions in due course but this Motion is to give the Prime Minister the power to act under Article 48(6). It is the first time that that has been done and it is therefore a serious matter. Although we are not at present members of the eurozone and ESM will not affect us, it will nevertheless become part of the European Union's powers across the board. If this country should join the eurozone, this provision would automatically apply to us. That surely is right. If it is not right, perhaps the noble Lord will say that it is not right and why it is not right.

Furthermore, this first use of the simplified revision procedures is likely to be the thin end of the wedge. This will not be the first time that it will be used. Once a provision is used, it sets a precedent and it will be much easier to use it on other occasions in the future. It is claimed that when the European Union Bill, which we will discuss tomorrow, becomes law, it will prevent Article 48(6) from being misused. But can we be certain of that? Will the noble Lord say that there will never be any conditions under which Article 48(6) cannot be used without parliamentary procedure or perhaps even a referendum? Since the measure has to be agreed by a unanimous vote, the United Kingdom at present has a veto.

During the election, the Conservatives said that they wanted to repatriate to this country a range of measures which they believed were inimical to the best interests of the United Kingdom. Why then are the Government not using this factor-the fact that they have a veto over this provision being discussed tonight-to renegotiate parts of the treaties which are inimical to British interests, especially those relating to industry and commerce? I am also puzzled as to why the eurozone nations cannot agree a system of control that does not involve a treaty change. Is it perhaps because Germany wishes to use this procedure to strengthen its position as leader of the European Union?

The Government state that maintaining the eurozone as a stable and fully functioning entity is in the United Kingdom's interest and the European Union Committee endorses that view. I do not believe that that is necessarily so. I am not at all sure that the eurozone is necessary for this country to prosper. Indeed, I could probably, if there was time, produce an argument to show that the eurozone works against this country's interests. It should

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be no part of this country's policy to maintain the eurozone in being no matter what the circumstances are.

Let us not forget that the experience of the eurozone so far has not been a happy one. At least four of its members are in dire financial and economic trouble, needing massive tranches-that is what this debate is about-of bail-out money. Interest rates in the eurozone have been kept at an artificially high rate, thus resulting in lower growth in many of its member states and very high unemployment. That is something this country should deplore, wherever it occurs.

Being in the eurozone does not affect our trade in the way that the Minister outlined. The fact is that we are in Europe and we are part of the single market, and whether the eurozone exists or not, the single market will still be there, as it was there before we joined the eurozone. What I believe is that being within the European Union and within the single market in fact damages our ability to export to the much wider world than the European Union represents. Already we see the Chinese and the Indians making great inroads into markets in Africa and elsewhere which, untrammelled by the European Union, this country could be exploiting. I have some doubts about this measure, although I suppose it is going to go through. But I hope that the assurances which have been given by the Minister will be carried out.

8.30 pm

Lord Liddle: This debate has been a curious experience for me because, having listened to the contributions of the noble Lords, Lord Pearson of Rannoch and Lord Stoddart of Swindon, I am perhaps a much stronger supporter of what the Government are doing than I think I ought to be. I believe that the Government are right to support this measure and I think that both noble Lords are completely wrong in thinking that somehow it would be in the British national interest to pull the house of the euro down, causing currency chaos and economic disruption on a huge scale in order to pursue their own hatred and fanaticism in their opposition to the European Union.

Lord Stoddart of Swindon: My suggestion was not that we should pull the eurozone down but that it is not necessary for us to take these measures to bolster the eurozone at all.

Lord Liddle: Of course I accept what the noble Lord says, but the implication was that the euro would come tumbling down, and I think that the economic consequences for us, with our trade and economic links to Europe, would be very serious. Further, the instability that would be created by a German mark soaring and a Greek drachma plunging would be too horrendous to contemplate.

What I want to do in my brief remarks is to declare that I support what is being proposed, but with two qualifications. First, what we have seen tonight is an excellent example of parliamentary accountability. This motion has been put to the House and, before it is approved by the European Council, we have an

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opportunity to say whether we agree with it or not. If I may anticipate the debate tomorrow on the EU Bill, this is in sharp contrast to what will be proposed under the new arrangements. What we are going to have there is a requirement for the Government somehow to argue that, under the proposed criteria, a referendum would not be justified for this measure. I am totally opposed to multiple referenda and will be arguing that tomorrow, but on the basis that the Government are arguing, it seems extraordinary to suggest that what we have before us with the European stability mechanism is somehow not a big extension of competence and is not significant. It is extremely significant.

Indeed, I would argue that what is happening in the eurozone at the moment is as significant a development for the strengthening of its governance as we have had since the establishment of the single currency and the single market in the 1980s. It is a far more significant development than the Treaty of Lisbon or the constitutional treaty that preceded it. It is for European integration very significant.

One cannot argue that this is of no relevance to Britain. For one thing, the ESM will be one pillar of a new regime of economic governance that includes macroeconomic surveillance and a competiveness pact. I do not argue that these measures are perfect; in fact, they are far less than ideal and this should be very much work in progress. However, integration of economic governance is certainly proceeding.

The Government make the crucial error of thinking of this question in terms of a transfer of power to Brussels from the United Kingdom. They argue that, because Britain is not in the eurozone, there is no transfer of power. However, what in fact is going on within the whole of the European Union at the moment is a very big shift in the balance of power, with the likely creation of a eurozone bloc that has a much bigger influence on the economic policies of the whole of the EU. It is about this important change in the balance of power that we should really be concerned, instead of going on about transfers of power.

Perhaps I may cite one example that is directly related to the subject of the ESM: the issue of financial regulation. If we have a sovereign debt crisis in a eurozone member country and it is necessary for there to be a restructuring of the debt, it will logically lead to problems in the banks which own the bonds that have lost much of their face value. That will in turn require new rules on the capital adequacy of banks and on banking mergers. If there are to be in future stages restructurings of Greek and Irish sovereign debt, there will also be grave consequences for financial regulation and the banking system. We are exposing ourselves to real loss of influence on these matters, because it will be a eurozone bloc that decides in terms of its own interests what those regulations should be. We will turn up at the Council of Finance Ministers with that decision in practice having been taken, with majority voting there in the Council of Finance Ministers, and with very little opportunity for us to influence it. When one thinks that the City of London is one of our key interests, one realises that this is quite a serious threat to us.

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Of course, the new regime is not ideal and it is work in progress-I dare say that my noble friend Lord Eatwell will say something about this. My strong view is that if something is not ideal we should use our maximum influence to try to change it. Obviously, there is no immediate prospect of us joining the euro and becoming part of the ESM, but we should try to involve ourselves intimately in the discussions that are taking place. I am worried that the Government, as far as I can see, are not doing that. Mrs Merkel, as I understand it, made an offer to the British Government whereby they could be part of the competitiveness pact that she was trying to negotiate. Apparently the British Government have said that they do not wish to be part of that pact, whereas Poland, which is equally not a member of the euro area, is anxious not to be excluded from these decisions on economic governance questions which go wider than the eurozone.

There is a significant problem here for the United Kingdom and the Government ought to recognise this. They should also recognise that something of fundamental importance to our economic future and, indeed, to our sovereignty is happening here.

Lord Eatwell: My Lords, as noble Lords will be aware, this is the first time that a Motion of this sort has been debated in your Lordships' House. We are, as the noble Lord, Lord Stoddart, said, creating a precedent, although I am not entirely clear how long the precedent will last with respect to the discussion that we will have tomorrow. However, it clearly is important that we should define the criterion that we ought to apply to our assessment of the Motion.

The Government's Explanatory Memorandum suggests that they have clearly applied the criterion of the "UK national interest". In support of this Motion to give the green light to the establishment of the ESM, the memorandum states emphatically:

"We therefore support this draft proposal to amend the Treaty to make clear that the euro area Member States can establish a permanent ESM. The UK will directly benefit"-

directly benefit-

The noble Lord, Lord Howell, repeated at some length the idea that this is directly in Britain's benefit. Indeed, so important is the ESM deemed to be to the UK that, as the Explanatory Memorandum tells us, and as the Minister confirmed, the Chancellor of the Exchequer eagerly proposed UK participation in the design of the mechanism-participation which has apparently taken place.

This repeated emphasis on the importance of the ESM to the UK and of UK participation in the design process sits rather uncomfortably with the other theme of the Explanatory Memorandum:

"The ESM established by the proposed treaty change will be set up by the euro area countries for euro area countries with no financial liability on the non-euro area Member States or the EU budget. There are therefore no direct financial implications associated with agreeing the draft decisions to amend the TFEU to establish the ESM".

So on the one hand we have a direct benefit, but on the other hand there are no direct financial implications.

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It is, of course, entirely possible to hold these seemingly contradictory positions at the same time. For example, the policies of the United States Government have a direct economic impact on the UK, and yet we have no responsibility for their financial implications. However, the key difference here is that we do have a direct responsibility-we have actually participated in the design of this mechanism. This Government have both a primary and a secondary responsibility for the mechanism agreed: primarily because we participated in its design; and secondarily because, as has frequently been acknowledged, the performance of the ESM is of direct national interest to the UK.

In his introduction the Minister told us nothing whatever about the ESM itself. It really is essential that, when he sums up, he remedy that failure and answer some of the pertinent questions about the impact of the ESM on the UK. He quoted my noble friend Lord Harrison, saying that we should support a stable and prosperous eurozone, which of course we should; but when my noble friend wrote that letter in February he could not have known what we know now. In the early hours of the morning of Saturday, 13 March, eurozone leaders reached agreement on the structure of the ESM, to be ratified by the European Council this week. The assessment of whether the agreement of 13 March is or is not in the best interests of the UK is the key issue and it should be based on one clear criterion: will it work? That is the fundamental question, which the Minister has not even bothered to address this evening.

8.45 pm

The purpose of the ESM is to provide a mechanism for managing debt crises within the eurozone. There is no doubt that that would be a good thing, in the words of 1066 And All That. There are two ways of managing a debt crisis: either by a bailout-the provision of funds or guarantees; or by restructuring-or, to give it its proper name, default. The crucial factor in the design of the ESM which distinguishes it from previous mechanisms is that it provides a mechanism for default-something essentially impossible today without falling foul of the German constitutional court, since Germany, under current mechanisms, would have to make good on the guarantees that it has provided. The default mechanism works by making the loans and guarantees made by the ESM senior to those made by all other investors in euro-country bonds. So the private investors are at risk, but the ESM is at far less risk.

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