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House of Lords

Monday, 17 December 2012.

2.30 pm

Prayers—read by the Lord Bishop of Lichfield.

NHS: Research and Development


2.36 pm

Asked by Baroness Gardner of Parkes

To ask Her Majesty’s Government what proportion of funding allocated by the National Health Service for research and development at major teaching hospitals is provided to (1) the researchers themselves, and (2) administrators of funding.

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, the National Institute for Health Research awards funding transparently and competitively for research of high scientific quality that has relevance to the NHS and represents value for money. We therefore expect that the maximum is spent on research rather than on administrative overheads. Trusts with teaching hospitals received a total of £500 million from the NIHR in 2011-12.

Baroness Gardner of Parkes: I appreciate that funds go directly to the researchers from the body that the Minister mentioned and from the Medical Research Council. What I am concerned about is that I am told by those working, and possibly doing research, in these teaching hospitals that the bulk of the money is paid to the person doing the governance of research and development, and not a penny of that money is actually going to the researchers, who are funded in the way that the Minister has said. Ever since 2006, when that was set up, there has been a great growth of these people doing nothing but checking on the work of the real researchers.

Earl Howe: My Lords, every NHS trust or foundation trust has to oversee the governance of the research taking place within it. That is an inescapable part of the process. I do not think there is any confusion in anyone’s mind between support for research governance and the actual research itself, which is done by academics and clinicians working in academic and clinical departments. It is up to each trust to determine how its budget for research is allocated, but I can reassure my noble friend that the money is getting to where it needs to go.

Lord Winston: My Lords, would the Minister agree that since Sally Davies took charge of how research is done within trusts, there has been a significant improvement in insuring that more of this money actually goes to serious translational research, which is an area that the health service really needs to concentrate on? I hope that the Minister will agree that that job has been done rather effectively.

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Earl Howe: I do agree with the noble Lord. Before the creation of the NIHR, research allocations to NHS hospitals were made essentially on a historical basis, with no assessment of quality or value and no ability for the funding to move in response to competition. The NIHR undoubtedly changed all that. The NHS funding for research is now awarded transparently and competitively and robust systems are in place to ensure that it is used only to support research rather than being diverted for other purposes.

Lord Patel: Does the Minister agree that the biomedical research centres established by NIHR funding are more likely to develop and deliver on the Government’s innovation strategy in health science and on the life sciences strategy?

Earl Howe: I agree with the noble Lord. The Government are providing a record £800 million over five years for NIHR biomedical research centres and units as from April of this year. The centres are based within the most outstanding NHS and university partnerships in the country; they are leaders in scientific translation; and they will play an integral part in the life sciences strategy which the Government published last year.

Lord Ribeiro: My Lords, may I declare an interest as a surgeon and say that surgical research attracts less than 2% of the total funding that goes into research? There may be those in this House who feel that surgeons just cut and do not actually do an awful lot of laboratory work, but the truth is that research is an integral part of surgery. We are there to bring translational research from the lab to the patient and to produce results, particularly in the field of cancer. I would therefore be grateful if my noble friend could assure me that there will be much greater emphasis on providing support for surgery?

Earl Howe: I agree with my noble friend about the importance of surgical research. The NIHR funds extensive research in surgery across a wide range of funding streams. The most recent estimate of its spend on directly funded research relating to surgery was £7.3 million, but that is a rather historic figure which goes back to 2009-10. In February this year, the NIHR issued a call for research on the evaluation of technology-driven implanted or implantable medical devices and decisions will be made on that next March. Twenty million pounds has been invested in the NIHR Surgical Reconstruction and Microbiology Research Centre, which is an initiative between my department, the Ministry of Defence, the University Hospitals Birmingham NHS Foundation Trust and the University of Birmingham. I hope that my noble friend will agree that that is a positive development.

Lord Davies of Coity: My Lords, the Minister said very clearly in his Answer to the first Question that it was a matter of “value for money”. Is there not a danger that the Government will cost the exercise at the expense of the care that should be had by patients in this country?

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Earl Howe: No, my Lords. The very point that I made to the noble Lord, Lord Winston, was that by the creation of the National Institute for Health Research, we were avoiding the very thing which used to happen in the past. Now, we can be quite certain that research money from the NIHR will be used to support research and not be diverted into other places.

Lord Stoneham of Droxford: My Lords, we welcome the greater emphasis that the Government are giving to NHS research and the commitment to the National Institute for Health Research. However, there is an acute shortage of clinical academics who are both medics and front-line researchers. What steps are the Government taking to rectify this situation so that we can get better links between research and patient outcomes?

Earl Howe: I share the concern of my noble friend, although he will be pleased, I am sure, to know that through its integrated academic training programme, the NIHR has taken a lead in reversing the decline that we have seen in recent years in clinical academic careers. Around 250 NIHR academic clinical fellowships and 100 NIHR clinical lectureships are now available annually for medics, which is good news. I also think that intercalated degrees play a very important part in developing the next generation of clinical academics, as does the INSPIRE programme from the Academy of Medical Sciences.

Baroness Masham of Ilton: My Lords, does the Minister agree that some exciting research is being done, such as that which treated a paralysed dachshund with stem cells and enabled it to walk?

Earl Howe: The noble Baroness is absolutely correct. Some exciting research is going on in the field of regenerative medicine and the NIHR has a funding stream to support that.

Magna Carta: 800th Anniversary


2.45 pm

Asked by Lord Mitchell

To ask Her Majesty’s Government what plans they have to commemorate the 800th anniversary of the sealing of Magna Carta on 18 June 2015.

Lord Mitchell: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I confess to an error I made, because the date should be 15 June, not 18 June.

The Minister of State, Ministry of Justice (Lord McNally): My Lords, I understand there are a lot of anniversaries in 2015. We plan to celebrate the 800th anniversary of the sealing of Magna Carta in June 2015. Work is being co-ordinated by the Magna Carta 800th Committee of the Magna Carta Trust, an independent organisation chaired by Sir Robert Worcester. I keep in close contact with the trust and its plans.

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Lord Mitchell: My Lords, I thank the Minister for that reply. Some interesting things are happening, but maybe we can do even better. The late Lord Denning called the Magna Carta,

“the greatest constitutional document of all time—the foundation of the freedom of the individual against the arbitrary authority of the despot”.

The great charter is the very essence of what we are as a people. Its octocentenary should be celebrated with all pomp and international ceremony. I have a suggestion for the Government. Why not exhibit all four remaining original documents in one location? It would be the first time that they have come together since they were sealed at Runnymede in 1215. Maybe that location should be here, in Westminster Hall. Why not invite the world to London to celebrate this magnificent anniversary and all it stands for?

Lord McNally: My Lords, I am sure that Sir Robert welcomes all suggestions. That sounds like a very good one. In addition, a lot of work is being done, not least by the towns and cities of the United Kingdom which have historic relations with the Magna Carta, and in other parts of the Commonwealth and English-speaking world. The noble Lord is right: the 800th anniversary will be a great celebration and work is well under way to make it so.

Lord Howell of Guildford: My Lords, is the Minister aware that at about the same time or maybe sooner, what might be called a maxima carta will be signed and sealed, upholding the rights of 2 billion citizens across the entire Commonwealth network? Will he ensure that when it is signed, quite shortly, it also gets appropriate commemoration and possibly full approval and validation in this House?

Lord McNally: Again, I sincerely hope so. I also know that the Magna Carta committee is determined that the celebration of the 800th anniversary will be a Commonwealth celebration, since Magna Carta means so much to so many Commonwealth countries.

The Lord Bishop of Lichfield: My Lords, as Archbishop Stephen Langton largely wrote the Magna Carta, and as the freedom of the church to serve the nation is such a prominent theme in the great charter, will the Government approach the right reverend Prelates Archbishops of Canterbury and York to see how church and state might work happily together on this important anniversary?

Lord McNally: Most certainly. However, as a resident of St Albans, I understand that the Magna Carta was much drafted in the Abbey of St Albans. One of the advantages of the charter may be illustrated by the fact that celebrations are planned in St Albans, Bury St Edmunds, London, Canterbury, Oxford, Hereford, Salisbury and Durham. It seems to have been a rather peripatetic document, with quite a few claims to authorship. However, I am absolutely sure that preparations to be part of the celebrations are already well in hand in Lincoln and Salisbury, led by the cathedrals in those two great cities.

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Baroness Ramsay of Cartvale: My Lords, does the Minister agree that it might be appropriate if this House cleaned the figures of the signatories to the Magna Carta? That would be a nice gesture, would it not?

Lord McNally: For one minute, I thought that I was going to be dragged into Scottish politics. My brief tells me that Scotland did not sign the Magna Carta—neither did King John, before anyone corrects me on that. Every time we have this Question on the Order Paper, another good suggestion comes forward. I must say that the suggestion of the cleaning is an excellent one.

Lord Elystan-Morgan: My Lords, does the Minister accept that although, at the request of King John, three months after the sealing of Magna Carta, the charter was annulled by His Holiness the Pope, it nevertheless remains one of the most noble documents of human history, representing as it does the interface between principle and power and, indeed, the challenge of the rule of law to raw authority; and that, in that respect, it has much in common with the European Convention for the Protection of Human Rights?

Lord McNally: I like the definition of the late Lord Bingham, which was that the great thing about Magna Carta was not so much the absolute political detail—yes, it was repealed about three months afterwards—but that it remained part of the DNA of this country for 800 years. People know what we mean by Magna Carta. When Eleanor Roosevelt announced the UN Declaration of Human Rights, she said that it was a Magna Carta for all mankind, and “all mankind” did not need a translation; she knew what it meant. I share the views of the noble Lord about the European Convention on Human Rights.

Democratic Republic of Congo


2.52 pm

Asked by Lord McConnell of Glenscorrodale

To ask Her Majesty’s Government what action they will take bilaterally with the government of the Democratic Republic of the Congo, Rwanda and Uganda, and as a member of the United Nations Security Council, to encourage a long-term solution to the conflict in eastern Democratic Republic of the Congo.

The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi): My Lords, the UK remains deeply concerned about the situation in eastern DRC. To work for a sustainable peace in eastern DRC, we will build on the Prime Minister’s and Minister for Africa’s contact with the presidents and other leaders of Rwanda, the DRC and Uganda to promote dialogue. We will seek ways to support regional efforts to resolve the crisis, both bilaterally and with key partners, and we will work with partners in the UN and the EU to drive forward action to help to build long-term stability and prosperity in eastern DRC.

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Lord McConnell of Glenscorrodale: My Lords, as I tabled this Question, the international conference of the Great Lakes, all 11 member states, endorsed the moves toward peace talks and the need for a regional solution. Unfortunately, those peace talks look to be stalling and there are already many tensions that could result in the violence starting all over again in an area where, despite the DRC being one of the richest countries in the world, it is 187th out of 187 countries in the UN development index.

Will the Government insist in every discussion in the international institutions—the EU, the UN and elsewhere—in their role as a key leader of international donors, and, critically, in the bilateral discussions that we have with every country in the region, on a regional solution that does not just allocate blame where it is deserved but looks to involve everyone in a long-term, peaceful approach that can deliver real change in the eastern DRC and across the region for the future?

Baroness Warsi: The noble Lord makes extremely important points and comes to this matter with great expertise, having served as the Prime Minister’s special representative on conflict resolution and having had a great deal of involvement in the region. He will be aware that the Minister for Africa took part in an emergency visit to the region at the end of November. He visited Uganda, Rwanda and the DRC. He met with the presidents and foreign ministers of all those countries and was there the day before the Great Lakes conference. The noble Lord will be aware that this conflict has been going on for many years, but we continue to push, both bilaterally and in wider fora, the need for a peaceful settlement.

Lord Chidgey: What was the Government’s reaction to President Museveni’s comments to SADC that the MONUSCO peacekeepers were merely military tourists in the DRC, given that this country contributes $60 million a year to the upkeep of that mission? Will the Government continue to press in the Security Council for MONUSCO’s mandate to be uprated from being mere peacekeepers to peacemakers, with all the resources that are needed to deter the criminal elements of the M23 and their Rwandan backers?

Baroness Warsi: My noble friend is aware that MONUSCO’s mandate does not permit it to engage in more than a supportive role at this stage. However, I take his concerns on board. He is right that there are 19,000 MONUSCO troops in the area and the UK has committed £69 million to those troops this year. He will also be aware that the deputy force commander of MONUSCO is a Brit, who will continue to ensure that it is as effective as it can be with a correct mandate.

Baroness Kinnock of Holyhead: My Lords, does the Minister agree that if the violence rape and humanitarian crisis in the DRC are to end, it is essential that international and regional partners, which have been discussed during this Question, move away from what I can only call a reliance on short-term fixes? Does she further agree that, in order to achieve durable solutions, the UN Secretary-General should appoint a special envoy to engage with Kinshasa, regional Governments and civil society, and especially with the women of eastern DRC?

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Baroness Warsi: The noble Baroness makes important points. I, too, am familiar with the great challenges in the region, especially around the issue of rape and sexual conflict. In fact, the Foreign Secretary’s initiative is to focus on that region as one of his department’s main areas. However, the noble Baroness will also be aware that this matter has been ongoing for many years, despite many initiatives, and continues to be a great challenge for the international community. A United Nations Special Envoy is something we have been calling for.

Lord Avebury: My Lords, the Minister did not answer my noble friend’s question about the mandate of MONUSCO and enabling it to take a proactive role in solving conflicts in eastern DRC. Could she now address that point?

Baroness Warsi: My noble friend is aware that some commentators have been critical of the UN peacekeeping force, which they felt did not fight to protect Goma. However, I go back to MONUSCO’s first priority, which is the protection of civilians. It is mandated to support the DRC army. If the mandate is to change then that is something we will have to go back to, but I will take back the comments that my noble friend makes.

Baroness Royall of Blaisdon: The Minister and my noble friend mentioned the sexual and domestic violence that is taking place in the region. What are the Government are doing to try to ensure that women in the region are properly involved in both peacekeeping and peacemaking initiatives?

Baroness Warsi: My Lords, sexual violence in that region has been of the most horrific kind. It is why the Foreign Secretary, in relation to a specific initiative, has focused on working on sexual violence being used as a weapon of war. The noble Baroness will be aware that up to now there has been a culture of impunity in relation to these matters; they are just seen as a by-product of these conflicts. We try as far as possible to ensure that women are a part of all the interactions that we have with the region.

Health: Hearing Loss


2.58 pm

Asked by Baroness Wilkins

To ask Her Majesty’s Government what plans they have to introduce a screening programme for hearing loss for those over the age of 65.

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, the United Kingdom National Screening Committee, UKNSC, advises Ministers and the National Health Service in all four United Kingdom countries about all aspects of screening policy. The UKNSC reviewed the evidence for screening for adult hearing loss in 2009 and recommended that there was currently insufficient evidence to warrant a screening

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programme. In line with its three-yearly review policy, the UKNSC is currently reviewing the evidence for screening for adult hearing loss.

Baroness Wilkins: I thank the Minister for that reply. He will be aware of the huge level of undiagnosed hearing loss in the UK and the impact this can have on other conditions. It is estimated that at least 4 million people who need a hearing aid do not have one. Not only does unaddressed hearing loss increase social isolation and depression, but there is increasing evidence that there is a link to dementia. People with mild hearing loss have nearly double the chance of developing dementia. Given that there is an average 10-year delay between someone identifying that they have a problem and seeking help, will the Government take early action to ensure that hearing loss is addressed early by introducing a screening programme?

Earl Howe: My Lords, the noble Baroness’s comments relating to the features that can often accompany hearing loss, such as depression and other forms of mental illness, are absolutely to the point and I recognise all that she said in that area. The national screening committee had a number of reasons for feeling that a universal screening programme would not be appropriate. First, it was not clear to it what the test should be. Secondly, it was unclear about what agreed time or schedule there should be for doing the testing. Thirdly, it felt that if there were a realistic proposal for screening, there should be randomised trials of screening beforehand. However, it is reviewing its decision of three years ago and we will have to await the results of that.

Baroness Bakewell: My Lords, the Minister referred to the screening authority, which recommends screening for many different ailments. Is he aware that screening notification, which goes out to all eligible citizens, stops at the age of 70 whereas it is necessary to be screened for many of these ailments after 70? Indeed, when you are over 70 you need reminding more often than when you are younger.

Earl Howe: My Lords, that is why we are sure that it is for general practitioners to prompt their patients, when appropriate, on having an audiology assessment. The noble Baroness is right that people need prompting but there is more than one way of doing that.

Baroness Howe of Idlicote: My Lords, as someone who has had hearing problems since the birth of our children—a hearing loss which is now being considerably worsened by my own ageing process—I know how important it is to persevere with actually using hearing aids, once the right ones have been agreed with a specialist. I very much hope that the national screening committee will agree to my noble friend’s suggestion that there should be a definite age, with a follow-up to the screening. What plans does it have to help those who have hearing aids assessed for them to persevere with the use of those aids, since that is absolutely vital to their well-being in the future?

Earl Howe: The noble Baroness is quite right. Clinicians have found very often that patients who receive hearing aids decide, for one reason or another, not to use them. That is of course very serious; it is a waste of resources but, perhaps more importantly, it is potentially

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damaging to or indeed dangerous for the patient. Compliance is undoubtedly an issue. In the end, however, nobody can be forced to wear hearing aids but, once again, we believe that there is a role for audiology specialists and general practitioners in encouraging the proper use of hearing aids.

Lord Trefgarne: My Lords, is my noble friend aware that of all the soldiers who went south to the Falkland Islands in 1982, approximately one-third came back with permanent hearing damage? Will he ensure that the arrangements he has described will fully take into account the needs of that group of people?

Earl Howe: My Lords, I am grateful to my noble friend for raising a very important issue about war veterans. My department is doing a lot of work in this area. I will write to him if I have anything more specific.

Lord Collins of Highbury: My Lords, I note what the Minister said in terms of the previous review but we now have an increase in retirement age and people are working longer. Hearing loss is not simply a personal health issue; it also becomes a bigger public health issue and a health and safety issue. Can the Minister therefore better understand the importance of national screening?

Earl Howe: My Lords, the Government fully recognise that hearing loss is not just a health issue. For example, it can lead to isolation and loss of independence; it can impact on education and employment; and it can impact in the various ways mentioned by the noble Baroness, Lady Wilkins, in her earlier question. We believe that health outcomes for people with hearing loss should be among the best in the world. To achieve that it is necessary to think and act differently. Therefore, we are developing a cross-government strategy to maximise the current effort to prevent hearing loss and to support those suffering from it. In particular, that will focus on identifying the potential better to join up services provided by the different agencies.

Lord McColl of Dulwich: We have a generation of deaf people in this country produced by loud noise and music. What about preventing it in the first place?

Earl Howe: My Lords, I am sure the Health and Safety Executive will take my noble friend’s comments to heart.

Baroness Tyler of Enfield: My Lords, given the prevalence of hearing loss among our ageing population, will the Minister say what is being done to ensure that hearing loss is being effectively managed in residential care homes for the elderly? What steps are the Government taking to work with the regulator to ensure that providers are being held accountable for responding to the needs of people with hearing loss?

Earl Howe: My noble friend raises a very important point about care homes. There have been considerable improvements in services for people with hearing loss over recent years. The waiting times for assessment and treatment for hearing problems in adults have been considerably reduced. The health and social care

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reforms provide opportunities to improve services further. For example, two-thirds of PCT clusters have chosen adult community hearing assessment services as a priority area in which to extend patient choice of provider. We expect that work to continue when CCGs take over.

Charging Orders (Orders for Sale: Financial Thresholds) Regulations 2012

Motion to Refer to Grand Committee

3.07 pm

Moved By Lord McNally

That the draft regulations be referred to a Grand Committee.

Motion agreed.

Financial Restrictions (Iran) Order 2012

Motion to Approve

3.07 pm

Moved By Lord Newby

That the order laid before the House on 21 November be approved.

Relevant document: 12th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 11 December.

Motion agreed.

Animals (Scientific Procedures) Act 1986 Amendment Regulations 2012

Motion to Approve

3.07 pm

Moved By Lord Taylor of Holbeach

That the draft regulations laid before the House on 29 October be approved.

Relevant documents: 12th Report from the Joint Committee on Statutory Instruments, 14th Report from the Secondary Legislation Scrutiny Committee, considered in Grand Committee on 13 December.

Motion agreed.

Caravan Sites Bill [HL]

Third Reading

3.08 pm

Bill passed and sent to the Commons.

Statute Law (Repeals) Bill [HL]

Third Reading

3.09 pm

Bill passed and sent to the Commons.

17 Dec 2012 : Column 1341

Public Bodies (Abolition of the Railway Heritage Committee) Order 2013

Public Bodies (Abolition of the Railway Heritage Committee) Order 2013 10th Report from the Joint Committee on Statutory Instrument15th Report from the Secondary Legislation Scrutiny Committee

Motion to Approve

3.09 pm

Moved By Earl Attlee

That the draft order laid before the House on 29 October be approved.

Relevant documents: 10th Report from the Joint Committee on Statutory Instruments, 15th Report from the Secondary Legislation Scrutiny Committee.

Earl Attlee: My Lords, I welcome the opportunity to say a few words in prime time about the draft order to abolish the Railway Heritage Committee and transfer its functions to the board of trustees of the Science Museum. The need for the order arose from the Public Bodies Act taken through your Lordships’ House by my noble friend Lord Taylor of Holbeach.

First, the Government fully recognise the valuable work that the RHC has carried out over a number of years in indentifying and designating railway artefacts and records of historical significance so that they can be preserved for future generations. During its life, the RHC has designated more than 1,300 artefacts and many thousands of important historical documents, including the Brunel drawings of the Great Western Railway, the collection of British Transport Films, paintings by Terence Cuneo, coaches from the Royal Train, a travelling Post Office sorting van and the GNER archive.

Apart from its secretary, the members of the RHC are unpaid, giving their time free of charge. Their passion and enthusiasm are noteworthy, providing a good example of the volunteering spirit that is so vital in preserving this country’s rich railway heritage. As your Lordships will be aware, the Government were originally minded to abolish the designation function along with the RHC on the basis that no equivalent protection exists for other transport sectors. However, the Government do listen and were persuaded of the unique position that railways play in this country’s heritage and, as a result, agreed to the suggestion of the noble Lord, Lord Faulkner, during the legislative passage of the Public Bodies Act that the RHC’s designation function should not be lost but instead transferred to the board of trustees of the Science Museum.

There are many benefits to that approach, not least of which will be the streamlining of the process by transferring it to a larger group, the Science Museum Group, where economies of scale can be utilised by employing resources across a wider range of duties. The Government carried out a targeted six-week consultation which revealed that, although there was significant support for the RHC, the majority of respondents appeared to be pleased with the proposal to maintain the designation function and transfer it to the board of trustees of the Science Museum. Many recognised the need for rationalisation of the functions or expressed a view that the exercise of the designation function is more important than the vehicle through which it is delivered. There was strong support for the board of trustees of the Science Museum being ideally placed to take on the role in future, especially if it

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appoints external panel members to ensure that there is no conflict of interest between it carrying out the designation function and its role as a governing body of the National Railway Museum.

The Government are determined to reduce unnecessary bureaucracy, overheads and management layers wherever possible, and believe that this is a good example of where these objectives can be achieved. The RHC’s main committee and three sub-committees will be replaced by a railway heritage designation advisory body with a chair and around 10 members, a number of which will be drawn from the RHC to ensure a smooth transition of expertise. I am pleased to report that a shadow version of this advisory board has already been set up, with its first meeting having taken place on 22 November. Also, once the designation functions have been transferred to the board of trustees of the Science Museum, they will be governed by the provisions of the National Heritage Act 1983, which should allow the board of trustees greater flexibility to create a more efficient organisation.

The cost of running the RHC is currently about £100,000 a year, which would be largely reduced and absorbed within the existing budget of the Science Museum Group. The back-office functions will be more streamlined, as they will be absorbed within the existing structure of the Science Museum Group. It is anticipated that the appointment of the external, non-Science Museum Group members to the advisory board will negate any potential conflict of interest between the board of trustees of the Science Museum carrying out the designation function and its role as the governing body of the National Railway Museum. We are confident that this will ensure that the National Railway Museum does not receive unfair preference. I understand that most members of the new advisory group will be external to the Science Museum Group and will include representation from Scotland and Wales.

3.15 pm

We are aware from the consultation and other entreaties—including the amendment of the noble Lord, Lord Faulkner, to today’s Motion—that there is some appetite to extend the scope of the designation function to members of industry who are not currently within the scope, and to introduce some further simplification of the process. The Government looked at this matter very carefully but there were a number of reasons why we were not able to use this order to bring additional bodies within scope, including the fact that an order under the Public Bodies Act 2011 is subject to an affirmative procedure, whereas an order to extend the scope of the designation powers would have to be made under the Railway Heritage Act 1996, which would be subject to a negative resolution procedure. Also, it is not possible to combine in a single statutory instrument provisions that are subject to different parliamentary procedures. An extension to the scope of the powers could therefore be achieved only through an additional SI, which would undoubtedly have put at risk the target date of April 2013 for the transfer of powers to the Science Museum Group, which I am sure noble Lords would not wish to do. It would also have been necessary to give further consideration to the bodies to be included with a new consultation and

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to consider whether further changes could be made to the procedures under the Railway Heritage Act in order to reduce the burdens on industry, as was suggested by one of those consulted in this year’s consultation.

The Department for Culture, Media and Sport, the government department responsible for the Science Museum Group, will carry out a review within three years in order to establish whether further bodies or classes of bodies should be included within the scope of the Railway Heritage Act 1996 and whether the burden on bodies as a result of the exercise of the designation function can be reduced. Until then, there is nothing to prevent interested parties reaching voluntary agreements. For example, I understand that Transport for London will be co-operating with the Science Museum Group to establish voluntary arrangements to ensure that London Underground’s rich heritage is preserved for future generations.

In conclusion, the Government are confident that the transfer of the designation power to the Science Museum Group will streamline the process by including it in a larger group where economies of scale can be identified and future efficiencies realised. As a result, we are confident that the preservation of an important part of our nation’s heritage will be secured for future generations. I beg to move.

Amendment to the Motion

Moved by Lord Faulkner of Worcester

As an amendment to the above Motion, at end insert, “but that this House, whilst welcoming the Government’s acceptance that the heritage of Britain’s railways is sufficiently special to justify the continuation of the Railway Heritage Committee’s powers of designation and their transfer to the Trustees of the Science Museum Group, regrets that the opportunity was not taken to bring within scope those railway organisations wishing to be covered by the new designation arrangements”.

Lord Faulkner of Worcester: My Lords, I congratulate the Minister on the way in which he has introduced the debate and set out the proposed new arrangements, and I thank him for the kind comments he made about me. I shall reciprocate by saying some nice things about him and two of his ministerial colleagues in a moment.

I start by declaring some relevant interests, all of them unpaid. Until 2009, I was chair of the Railway Heritage Committee. I am president of the Heritage Railway Association and I am a trustee of the Science Museum Group and serve as chair of the newly-established Railway Heritage Designation Advisory Board, to which the Minister referred. I am also an officer of both the rail and heritage rail all-party groups. As the Minister said, the order provides for the statutory designation powers of the Railway Heritage Committee to pass to the Science Museum next year, assuming of course that this House and another place pass this order.

This has been a bit of a tortuous journey, but it is one which I hope will have a happy ending. It started badly. The first anyone knew of the Government’s intention to abolish the Railway Heritage Committee

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came in a leak to the

Daily Telegraph

on 23 September 2010, which listed all the public bodies down for abolition. This was followed on 14 October by a statement from the Department for Transport saying:

“The Government believes that the RHC cannot be justified as no equivalent protection applies to the heritage of any other transport sector”,

and that the RHC will therefore be abolished. That was it. There was no consultation whatever leading up to that decision, but this was followed by a huge outcry in the specialist press and in the heritage world, and scores of letters were written to Ministers and MPs asking the Government to think again. Interestingly this unease appeared to be shared by no less a person than the Prime Minister. Writing to one of his constituents on 25 October, Mr Cameron said:

“I understand the significant role railways have played and continue to play in the life of the nation. I also recognise the value of preserving evidence significant to our railways heritage”.

The continuation of statutory powers of designation is of particular importance to the heritage railway movement. This covers around 111 working heritage railways and tramways, as well as 60 steam museum sites. There are more than 399 stations on these lines—more than on the Underground network—and there is a fleet of around 800 preserved steam locomotives. Artefacts that are designated, and thus preserved, often find a new life on the heritage railways, and that brings many benefits to local communities and to local employment, skills training and tourism.

The Railway Heritage Committee’s existence and operation stemmed from three distinct Acts of Parliament, two of them passed by Conservative Governments and one by the recent Labour Government, each supported by all political parties. The Railways Act 1993 set up the Railway Heritage Committee at the time of the railways privatisation. The Railway Heritage Act 1996 brought artefacts and records that had passed into the private sector back into the scope of the committee after attempts by Ministers to set up a voluntary scheme was seen to be unsuccessful. That is a point that we need to bear in mind when we hear about voluntary arrangements in future. The Railways Act 2005 conferred NDPB status on the committee following the demise of the Strategic Rail Authority, and the 2005 Act also brought military railways owned by the Ministry of Defence within its scope.

The principle that the nation’s railway heritage is worth preserving goes back a long way. At the time of the railways nationalisation in 1948, the big four private railway companies were meticulous in passing over their principal heritage items to the newly established British Railways. Section 144 of the Transport Act 1968 transferred responsibility for the British Railways Board’s historical artefacts and certain of its records to the Department of Education and Science, and in 1975 the National Railway Museum was established in York. Had the abolition of the RHC gone through as originally intended, much of that good work would have been lost. Not only would nothing of significance to the nation’s railway history have been preserved in future but all 1,300 artefacts and thousands of important historical documents previously designated would have had to be de-designated, with many of them being put at risk.

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Fortunately, it was possible to discuss these matters sensibly with Ministers, and I am happy to praise the noble Lord, Lord Taylor of Holbeach—I am pleased to see him in his place—who sought me out after the Second Reading debate on the Public Bodies Bill, and also Theresa Villiers, the then Minister of State for Transport. I should also mention in dispatches the noble Earl, Lord Attlee, whose role in this was also extremely helpful. Quite quickly, we were able to agree an alternative way forward which retained the statutory powers of designation by transferring them to the trustees at the Science Museum, and this is provided for in this order.

There is, however, one aspect of the new arrangements which is not entirely satisfactory and it is the reason I am moving this amendment to the Motion. This is the question of scope. The list of organisations covered by the statutory powers of designation does not adequately cover the modern railway industry. The previous Government recognised this when my noble friend Lord Adonis was Secretary of State. In 2008 and 2009, the DfT carried out an extensive consultation exercise to gauge the degree of support for extending the scope of the RHC following changes in the structure of the railway industry since 1996. There was virtually unanimous support for this proposition. Indeed, Transport for London specifically asked that London’s Underground railways should come within the committee’s scope, as did, perhaps surprisingly, the railway trade unions, which, whatever their discontent with the privatised industry, very much saw themselves as part of the railway family. As a result, a new statutory instrument was drafted and circulated in 2010 but, sadly, was never tabled following the change of Government.

Reverting to where we are today, the Minister has referred to the consultation on the new arrangements that the department undertook earlier this year. This produced almost unanimous support for retaining the powers of designation and transferring them to the Science Museum. One reason why there is so much support within the railway industry for the RHC is that it has always worked happily with the industry and with the grain of the industry. The industry members see it as a helpful partner which not only relieves them of much of the burden of worrying about preservation matters but complements their own very serious commitment to railway heritage.

Writing to Theresa Villiers on 1 August this year, Peter Hendy, the Commissioner for Transport for London, repeated that TfL would welcome inclusion under the scope of the new designation arrangements. He said that he made this point for a number of reasons. I received his permission this morning to quote directly from his letter, which states:

“First it demonstrates the strength of commitment we in TfL have towards our unique railway heritage, and our determination that nothing of significance to the nation’s railway story should be lost. Secondly, bringing TfL within scope would solve an anomaly, in that some of TfL’s operations, having formerly being British Rail services, are in-scope—for example, London Overground—whilst the Underground is not. Thirdly, not being in-scope adds to our regulatory burden, because management time has to be expended unnecessarily on dealing with requests from members of the public—especially railway enthusiasts—to

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preserve artefacts, when it would be much more efficient and cost-effective to refer such demands to an independent body possessing statutory powers, able to judge objectively what is important”.

These seem to be pretty compelling arguments. They were good enough to persuade Mrs Villiers repeatedly to ask her officials to come up with a formula which would achieve what Mr Hendy and the rest of us wanted. The noble Earl, Lord Attlee, was not unsympathetic either in conversations with my noble friend Lord Davies of Oldham and me.

The legal advice seemed to rest on the fact that to extend scope required a negative statutory instrument, while the abolition of the RHC had to be done by affirmative order. However, bearing in mind that a draft SI had already been prepared in 2010 to achieve exactly what is needed now, it seems to be a pretty feeble reason for not taking the steps before the designation powers transferred to the Science Museum. Mrs Villiers never sent a reply to Peter Hendy or me because she was promoted in the government reshuffle on 4 September. Instead, it seems that within hours letters were put in front of the new Ministers saying, effectively, “Nothing doing on the scope issue”, and they were signed by Simon Burns and Stephen Hammond and sent to Peter Hendy and me.

We are advised to rely on voluntary agreements with organisations wishing to come within scope. The advisory board which I am chairing at the Science Museum will do its best to come up with a suitable short-term solution. However, the Minister knows very well that this cannot be permanent and that a new SI will be needed before long. This amendment to the Motion is about a missed opportunity to get this right from the start. However, I stress that the decision to retain the RHC’s existing powers of designation is warmly welcomed, and I thank the noble Earl for his part in achieving it. I beg to move.

Lord Bradshaw: My Lords, I will add to what the noble Lord, Lord Faulkner, has said. I have a feeling that many people might think that we are interested only in collecting engine numbers, steam trains and old things. I was present at the National Railway Heritage Awards last week, and among the winners were some remarkable feats of engineering and advanced technology. These included the repainting of the Forth Bridge in such a way that it should not need doing for 25 years, and the magnificent fourth span at Paddington station which pushed technology a long way. I also mention that much of this work is supported by the industry itself and by a huge number of volunteers. It pushes science and preservation forward and, because of the attractiveness of a lot of this to tourists and our own people going about the country, it is worth preserving for reasons other than sheer nostalgia.

3.30 pm

Lord Grocott: My Lords, I will take the opportunity first and foremost to congratulate my noble friend Lord Faulkner on his unremitting commitment to this subject, on his many years of service on the committee and on the relentless way in which he has turned the issue around. I am sure that the Government must regret publishing their long list of bodies to be abolished,

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only to discover a little late in the day that many of them were doing incredibly useful work that was much valued not just by the people directly involved but by the community at large. That is the point I will make about railway heritage. As the noble Lord, Lord Bradshaw, said, the issue is important not just to those of us—of whom I am not ashamed to acknowledge that I am one—who are rail enthusiasts. The income of several generations of my family depended on the rail industry, but the importance of the work of this committee goes much wider.

There can be few countries worldwide where one cannot find examples of British railway engineering. We not only invented the railways but in many countries of the world built them, along with the locomotives that ran on them. I will mention the railways of Paraguay and Zambia because I have seen them. Companies from Birmingham, Wolverhampton, Glasgow and Manchester make the equipment that built their locomotives and that maintains their railways. I do not want to indulge in hyperbole but I imagine that there are few countries in the world where there is no British railway engineering. This is an achievement we should celebrate. It is a national issue, rather than one simply for people interested in railway heritage.

Perhaps I may be forgiven for being slightly parochial in drawing the attention of the House to Coalbrookdale in the Ironbridge Gorge, Telford, the birthplace of the Industrial Revolution. It was the marriage of Richard Trevithick and the Coalbrookdale Company that produced the steam locomotive that ran on iron rails in the first decade of the 19th century. There is a replica in the Ironbridge Gorge Museum. The tradition that it celebrates is a wonderful example of something that is of tremendous interest—I repeat—to many more people than simply those who are interested in railways. Half a million people visit the Ironbridge Gorge Museum every year.

I conclude by saying that it is not just history that we should celebrate. The rail heritage industry—perhaps it is not so much an industry as a movement—is of real relevance to our economy today. Engineering activities are taking place in a number of centres that are keeping skills going that otherwise would be lost. Locomotives are being built at Boston Lodge in north Wales, and there are engineering apprenticeships at Crewe that even today are keeping going skills that might otherwise be lost. That is of tremendous importance. Finally, the subject is of great importance to the tourism industry. Members of the other place who have a heritage railway in their constituency know that it attracts visitors and brings strength to the economy.

My noble friend has embarked on a noble exercise to ensure that the committee’s functions are maintained. As this is an amicable debate I will not introduce a sour note, but perhaps I may send a gentle and friendly memo to this Government and to what I hope will be the subsequent Labour Government, suggesting that before they abolish something they should check whether it is doing something useful.

Lord Berkeley: My Lords, I add my congratulations to my noble friend Lord Faulkner. He has worked tirelessly on railway heritage. If it was not for him, we would now be in a complete mess. I was very surprised

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to hear the Minister say that the Railway Heritage Committee was a good example of voluntary work that has now been moved to the Science Museum. He said that it had had a bit of administrative support from the Science Museum before, or that it now has it. I cannot see what the difference is between them. It is moving the deckchairs for the sake of it. I suspect that it will cost more and do exactly the same thing; where is the benefit? My noble friend Lord Grocott talked about old steam engines. A month ago I went round the National Railway Museum in New Delhi, where most of the engines, as he said, were built in this country—largely in Glasgow—and they were very fine. I hope that this tradition continues. Of course, they now build very good engines of their own in India.

Having listened to the Minister’s explanation, which I believe lasted a good seven minutes, and to the story that my noble friend Lord Faulkner told about the work that he had to do just to move things across to the Science Museum, I am afraid that my only conclusion is: thank God he was there to do it. It will be fine in the future when the next Labour Government make things better, but this is a classic case of dogma ruling brain when it started. As my noble friend Lord Grocott said, I hope that it is not repeated.

Lord Snape: My Lords, I, too, join in the general chorus of discontent about the actions of the Government today. I support my noble friend Lord Faulkner and agree with his very able speech about the need to care for railway artefacts and his description of the work that the Railway Heritage Committee has done over the years. I have no personal interests to declare except that in the 1980s, along with the late Robert Adley, I served on the advisory committee to the Railway Heritage Committee, which was newly formed at that time. The work that it has done over the years is enormously commendable.

Some of the reminiscences—if I may put it like that—of my noble friend Lord Grocott apply to railway installations all over the world. However, there are many such installations still in the United Kingdom, which the Railway Heritage Committee would have been interested in seeing properly preserved. I do not suggest for a moment that transferring these matters to the Science Museum will necessarily adversely affect the future of railway heritage. However, I am conscious, as your Lordships will be conscious, that the Science Museum has lots of other things with which to concern itself. The great thing about the Railway Heritage Committee is precisely that it was concerned about our railway heritage, and worked to preserve that which we still enjoy at present and which future generations should also enjoy. I deplore and regret any diminution of that concern for our railway heritage as a result of this order.

I suspect, as did my noble friend Lord Grocott, that some civil servant somewhere drew up a list of quangos to be abolished and this one found itself on there. Even at this late hour, I urge the Government to think again. As a railwayman myself, and the son of a railwayman, I feel strongly about our railway heritage. I have bored your Lordships previously with stories about my own railway career. I point out that there are still artefacts—they can still be regarded as such—in

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use on the present-day modern railway which are well worth preserving. I am not sure I would have the ability, or that the Science Museum would have the time or patience, to listen to the case for preserving them. For example, there are signal boxes in the Stockport area, where I spent the early part of my career, which were built by the London and North Western Railway in the 1880s, and which still signal trains today. Do I approach the Science Museum when eventually those signal boxes are abolished, to say that these are part of our railway heritage, and ought to be kept?

I might say in passing that, although those of us who travel regularly on the west coast main line are familiar with the litany of equipment failures—“failure of lineside equipment” seems to be the stock response to any delays—that does not happen in the Stockport area. Thanks to the London and North Western Railway, which installed those signal boxes in 1888, they still do not have any problems, all these years later, in passing Pendolino trains through the town of Stockport. If we are properly to preserve that sort of railway heritage, we might need a wider scope than saying, “We will leave these matters to the Science Museum”.

So I ask, even at this late hour, for the Minister to reflect again. The abolition of quangos is not necessarily a bad thing, but the old proverb about babies and bath water certainly applies in this particular case.

Lord Cormack: My Lords, as president of the All-Party Parliamentary Arts and Heritage Group I would like to add one brief comment. First, I pay tribute to the noble Lord, Lord Faulkner, for what he has done. Secondly, it is self-evident that the work of this committee must carry on. It is often better to allow a group of enthusiasts, who are totally dedicated to a specific thing, to carry on rather than have it subsumed within a larger organisation. I have seen this happen with the subsuming of the Historical Manuscripts Commission, on which I sat for almost 25 years, into National Archives. Although I pay tribute to what National Archives seeks to do, the specialist knowledge and specific determination that were embodied in the commission have largely gone.

When there are relatively small and perhaps even obscure groups doing a very good job, it is a pity to sweep them away in the name of quango-clearing. This was not a costly quango: it was a body of dedicated enthusiasts doing a good job.

Lord Davies of Oldham: My Lords—

Earl Attlee: My Lords—

Lord Davies of Oldham: My Lords, I am somewhat surprised that the Minister did not think that there would be a view from the opposition Front Bench on this issue, particularly given the Government’s record in handling this matter. Speeches from both sides of the House have clearly stated the advantages of preserving volunteers and their work, the spirit that they bring to that work and their achievements, which are on record. When they swept this particular element of largely volunteer work and constructive work by communities, the Government were seeking to establish the great society.

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Noble Lords: The big society.

Lord Davies of Oldham: The big society. I am not quite sure where the big society has gone in the mean time but this particular legislation, the Public Bodies Bill, was about reducing contributions to the so-called big society. It engaged in a whole plethora of activities people who were knowledgeable, committed and able to do their work well because of their enthusiasm.

Of course the Public Bodies Bill did not go through this House unscathed, and I make no apologies for the fact that the Front Bench had inevitably to identify a large number of public bodies that were being swept away. After all, basically each government department had to produce a sacrificial list for the Government to show that it was playing its part in getting rid of public bodies. We were bound to concentrate on the big issues. When this Bill was abolishing the chief coroner, for instance, we sharply debated that dimension of the Bill, and we did the same when the Agricultural Wages Board was abolished. One can understand that an organisation such as the Railway Heritage Society, which was receiving only £100,000 in support for all its work, was bound to come lower on the order of priorities as far as our general concerns for the welfare of society were concerned.

3.45 pm

Thanks to my noble friend Lord Faulkner, the Government have a real case to answer today. I very much approve the extent to which the Government have been persuaded to move. As my noble friend indicated in his speech, under their designated position the movement by the Government is so marginal that it is leaving out very important parts of our railway inheritance, and that will be at a potential cost to us all.

I thank my noble friends who have spoken about the railway industry. As we are all too well aware, interest in railway history is particularly pronounced. The National Railway Museum at York is one of the most successful institutions in the country. York is a very fine city but it makes no bones about the fact that one of its greatest tourist attractions is the museum.

Railways clearly engage the interest of the public. There is one major railway TV programme on at the present time, which consists of three episodes about the historic nature of our railways on a major channel. Even Michael Portillo has moved on from politics to show his enthusiasm for bringing Bradshaw’s up-to-date with his “Great British Railway Journeys”. In doing so, he identifies changes over the historical period that have occurred as far as those railway journeys are concerned.

Lord Snape: Would my noble friend accept that Michael Portillo, who became Minister of State in the Department of Transport with very much a right-wing image, with a brief at the time to close the Settle and Carlisle line, spent a bit of time with railway men, went to see it for himself, became the more humane character that he is today and saved the Settle and Carlisle line as a result?

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Lord Davies of Oldham: I am grateful to my noble friend, but he will forgive me if I feel that the challenges that we ought to put down today are not to former members of the Cabinet but to Ministers who speak in this House on behalf of members of the Cabinet still exercising power at present. The Minister should recognise that the contributions today have shown how necessary it was for him to make the shift that has been made regarding the original intention of abolition, and not to care little about what happens subsequently. It is quite clear that the Government have understood that necessary work needs to go on, but my noble friend Lord Faulkner has identified where they are still falling short of giving a guarantee that this work will be carried out as thoroughly as it has been done in the past. I hope, therefore, that the Minister will give some clear answers to my noble friend, because the anxieties of the House are manifest.

Earl Attlee: My Lords, I am grateful for the kind words from the noble Lord, Lord Faulkner of Worcester. Noble Lords supporting him seemed to be a bit more strident than the noble Lord himself. As your Lordships will be aware, I am also very keen on the preservation of our country’s transport heritage, particularly road transport vehicles. Sadly, I do not have enough time to get involved with railway preservation. However, no one should underestimate the sterling work of the noble Lord, Lord Faulkner. You can have thousands of volunteers on the ground, as referred to by the noble Lord, Lord Davies of Oldham, but you need the support of people such as the noble Lord to skilfully interface with central government.

In moving his amendment, the noble Lord talked about the scope of the order. The noble Lord will know that Ministers gave very careful consideration to these matters but, for the reasons outlined in my opening remarks, it was not possible to accede to his request. However, we recognise that the structure of the rail industry has changed in recent years, and indeed a number of respondents to the consultation indicated that they should be included in the scope of the designation powers.

Wider changes to the way in which the designation process operates, which would require changes to the 1996 Act, would also be beyond the scope of what can be done in relation to the RHC under the Public Bodies Act. The Department for Culture, Media and Sport will carry out a review within three years, after the designation function has transferred to the board of trustees of the Science Museum, in order to establish whether further bodies, or classes of bodies, should be included within the scope of the 1996 Act and whether the burden on bodies, as a result of the exercise of the designation function, can be reduced.

The noble Lord referred to the problem of well meaning members of the public and the benefits of having the RHC, or an equivalent, to determine these designation matters. I agree entirely. The noble Lord, Lord Grocott, with whom I have never debated before, spoke about the work and the need for the designation function. He is quite right—that is why I was able to persuade my right honourable friend the Secretary of State to retain the designation function.

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The noble Lord, Lord Snape, made a great speech but seemed to have missed the point that his noble friend had saved the designation function. It will carry on, as requested by my noble friend Lord Cormack. The noble Lord, Lord Berkeley, asked what the difference was between the RHC and the Science Museum Group. It is not just about the costs but about improving efficiency and effectiveness.

I hope that the noble Lord, Lord Faulkner of Worcester, will feel free to withdraw his amendment and that the House will agree my order.

Lord Faulkner of Worcester: My Lords, it has been a very interesting debate and I thank every noble Lord who has taken part in it. In all parts of the Chamber, there have been impressive demonstrations of support for the work of the Railway Heritage Committee, for the cause of railway heritage as a whole and, indeed, for the role of our railways in our society. I thank every noble Lord who has participated.

As I shall be playing a part in the work of the Science Museum advisory board, I hope very much that I will be able to satisfy the noble Lord, Lord Cormack, and my noble friend Lord Snape that in future we will do as good a job as the Railway Heritage Committee has done. I am particularly pleased that there has been such praise for the work of the Railway Heritage Committee, which I have not been a part of for the past three years. I am sure that the members of that committee will be very gratified that there is such support for the work that they have done and that their efforts are being appreciated. I have to tell noble Lords that back in 2010 they did not feel that they were being appreciated and it appeared that the committee was being abolished almost by a stroke of the pen.

My noble friend Lord Snape referred to the sterling work by Mr Michael Portillo in saving the Settle to Carlisle line. If he is interested, and if I might be allowed a small commercial, your Lordships will find in the Library a book, of which I am the co-author, that was published last week called Holding the Line: How Britain’s RailwaysWere Saved, in which the saving of the Settle to Carlisle line is described in some detail.

Lord Snape: Can my noble friend assure me that I get a mention? Otherwise I will not read it.

Lord Faulkner of Worcester: The noble Lord, Lord Snape, has a very good mention in it, which I hope that he will appreciate; not least because he was the source of information that has subsequently appeared in it.

The Minister has asked me not to press my amendment. I am getting pressure from behind me to do that but, in view of the fact that the Government have moved a very considerable distance, and I certainly do not want to fall out with the Minister, who has been extraordinarily helpful, as has his colleague the noble Lord, Lord Taylor of Holbeach, I do not intend to press it this afternoon. I will read very carefully what the Minister has said about the review to be conducted by the DCMS within three years; that is the first time that we have heard that. We will study those words very carefully,

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and if this can lead to a future new statutory instrument, then that will solve the problem. It is a missed opportunity but it is a great deal better than where we were in 2010. I beg leave to withdraw.

Amendment to the Motion withdrawn.

Motion agreed.

EU Council


3.55 pm

The Chancellor of the Duchy of Lancaster (Lord Strathclyde): My Lords, this may be a convenient moment to repeat the Statement that was made in another place by my right honourable friend the Prime Minister a few moments ago on the European Council. The Statement is as follows.

“I am sure that the whole House will join me in sending our deepest sympathies to President Obama and the American people, following the desperately tragic shootings in Connecticut on Friday. Our hearts go out to the families and friends of all those involved.

Last week’s European Council discussed further economic and monetary integration for the eurozone. It endorsed new safeguards that will protect the interests of those countries outside the eurozone. It also reached new conclusions on our response to the crisis in Syria, and there were discussions on growth and defence. This was the seventh European Council of the year. It was in no way a landmark Council, so let me address these points briefly.

First, on the eurozone, the problems of the eurozone are driving heated discussions between its members and leading to potentially significant changes inside the European Union. There are calls from some for greater solidarity and burden-sharing, and from others insistence on tough rules for fiscal discipline. These arguments raise far-reaching questions of national sovereignty, and it is yet to be determined how far or fast the changes will go, but it seems likely that we will see a process of some further integration for members of the eurozone.

Britain will not join the single currency; nor will we join the deeper integration now being contemplated. But these changes driven by the eurozone will alter the European Union for all of us, so they need to be done in the right way. That should mean flexibility over how Europe develops to accommodate the interests of all member states: those inside the euro, those which might one day join and those, like Britain, which are outside and have no intention of joining.

It also means that as eurozone members make the changes they need, so we in the UK will have the ability to argue for the changes that we need in our relationship with a changing European Union to get the best possible deal for the British people. The banking union, elements of which were agreed last week, is a good example of this. A single currency needs a single system for supervising banks, so Britain supported the first steps that were agreed towards a banking union. But in return, we—and others—demanded proper safeguards for countries that stay outside the new arrangements. So the Council agreed a new voting

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system, which means that the eurozone cannot impose rules on the countries outside the euro area, like Britain, without our agreement. There is also an explicit clause that says that no action by the European Central Bank should directly or indirectly discriminate against those countries outside a banking union. This is vital for our financial services industry, which must continue to be able to provide financial products in any currency. The Bank of England and the ECB will have a statutory memorandum of understanding that will ensure that they work co-operatively and openly to supervise cross-border banks. These safeguards set an important new precedent in terms of giving rights to countries that choose to stay outside the euro.

In winning this argument we have demonstrated how a change necessary for the eurozone can lead to a change for countries outside the eurozone, which can help us to safeguard the things that matter to us in Britain, in particular the integrity of the single market. As the eurozone makes further changes, I will seek every opportunity to get the best deal for Britain and for the single market as a whole.

On growth and competitiveness, this year we have already secured a proper plan with dates and actions for completing the single market in services, energy and digital; a commitment to exempt small businesses from new regulation; the establishment of a European patent court with key offices in London, which will save businesses millions of pounds; a new free trade agreement with Singapore; and the launch of negotiations on a free trade agreement with Japan that could increase EU GDP by €43 billion a year. The conclusions from this Council have the additional benefit of referring to Commission plans to “scrap” some of its own,

“regulations that are no longer of use”.

On defence, we are clear that NATO is the cornerstone of our defence, and EU co-operation should avoid costly new bureaucracy and institution-building. We will never support a European army. The focus of the Council conclusions is entirely consistent with this, referring to practical co-operation to tackle conflict and instability in places such as Kosovo and the Horn of Africa. In addition, the conclusions welcome proposals to open up closed defence markets in Europe, which will be to Britain’s benefit.

I turn finally to Syria. As a result of Assad’s brutality, a humanitarian crisis is unfolding in Syria on our watch, with more than 40,000 dead and millions in need of urgent assistance as a hard winter approaches. There is a moral imperative to act, and Britain is doing so as the second largest donor in terms of humanitarian aid. But there is also a strategic imperative. Syria is attracting and empowering a new cohort of al-Qaeda-linked extremists. There is a growing risk of instability spreading to Syria’s neighbours and a risk of drawing regional powers into direct conflict, so we cannot go on as we are. The Council was clear, as Britain has been for many months, that Assad’s regime is illegitimate. It committed to work for a future for Syria that is democratic and inclusive, with full support for human rights and minorities. We will continue to encourage political transition from the top and to support the opposition, who are attempting to force a transition from below. This will include looking at the arms

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embargo. The conclusions make it clear that we must now explore all options to help the opposition and to enable greater support for the protection of civilians.

So, progress on Syria, our objective on banking union secured, and the principle established that changes in the eurozone require safeguards for those outside. I commend this Statement to the House”.

My Lords, that concludes the Statement.

4.02 pm

Baroness Royall of Blaisdon: My Lords, I join the Leader of the House and the Prime Minister in sending deepest condolences to President Obama and the people of the United States. The Connecticut shooting was an appalling tragedy, and all the families affected are in our thoughts as they cope with their loss and grief.

I am grateful to the Leader of the House for repeating the Statement on the European Council given to the other place by the Prime Minister. I shall touch upon three main areas: Syria, banking union and the wider context of treaty change.

Let me associate these Benches with the concern expressed in the Statement about the ongoing loss of life in Syria. The international community must continue to work together to end these atrocities immediately and speak with one voice in favour of a transition to a new Government. The noble Lord mentioned the arms embargo while also noting that Syria is attracting,

“a new cohort of Al Qaeda-linked extremists”.

In that context, are the Government urging the EU to end its arms embargo or merely to amend its terms? Do the Government recognise the dangers inherent in this?

We welcome the agreement on the next steps on banking union. It is right for the European Central Bank to have a supervisory role in the eurozone. However, does the Leader agree that the most important issue is not who supervises which banks, but who takes responsibility for bailing out failing banks in the euro area? That is what will deliver the firewall that we need between bank and sovereign risk. Did the Government make the case for urgency on this matter at the Council?

It is good that progress was made to protect the integrity of the single market. Was there discussion at the Council of how the new system will cope in the event of changing circumstances; for example, if more countries join the banking union and, in particular, if EU members currently outside the eurozone join the banking union and the “out” group shrinks to three or four member states?

Beyond questions of banking, is not the real issue for Europe the failure to deliver a plan for growth? The Minister mentioned a list of disparate steps, but on a real comprehensive plan for growth, we saw no progress, just as we saw no progress on wider eurozone political and economic integration. All the Council did was set a timetable—June 2013—to set a timetable.

For some considerable time we have been promised a long-awaited speech on Europe by the Prime Minister. We are now told it is being delayed again—that is three times. First it was set for the Conservative Party’s autumn conference, but we understand the FCO intervened. Then it was set for before the EU budget

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negotiations and now we hear that he has delayed it again, this time until the new year. In the absence of the Prime Minister’s speech, will the Leader of the House answer three simple questions?

First, the Foreign Secretary has said about an in/out referendum,

“this proposition is the wrong question at the wrong time … It would create additional economic uncertainty in this country at a difficult economic time”.

We agree with the Foreign Secretary. Does the Conservative Party? Secondly, the Prime Minister said last week:

“I don’t want Britain to leave the European Union”.

We agree with the Prime Minister, but why does he let member after member of his Cabinet brief that they are open to leaving the EU, including most recently the Education Secretary? Thirdly, British business is deeply concerned that the drift in the noble Lord's party and the direction of its policy mean that we are sleepwalking towards exit. We share that deep concern. Do the Government? The repeated postponement of the Prime Minister’s speech catches the point about the Government—at least the Conservative part of the coalition—on Europe. They are caught between the national interest for staying in and the Conservative Party, so many of whom want out. Britain deserves better.

Lord Strathclyde: My Lords, I thank the noble Baroness for what she said at the start of her speech, joining us—as I am sure the whole House does—in sending our deepest condolences after the horrors and tragedy that occurred in America. Our hearts must go out to these families and to the nation as a whole. As for the questions that the noble Baroness raised about Syria, particularly the arms embargo, I am glad to say that we think it is right to look at the arms embargo and seek to amend its terms. It is right to keep the embargo against the regime. We will see how matters unfold over the next few weeks and months, and join our colleagues and partners in the EU and beyond in making sure that we come to the right decisions on this question.

The key to the noble Baroness’s speech was what happened at the European Council, particularly on banking union and the future relationship between this Government and the EU. The most important aspect of the banking union is that there has been a big breakthrough: non-eurozone members will have a say on eurozone rules that could affect them. Before this council, many people said that we would not achieve that. As for the important question about changing circumstances, we have agreed that there should be a review of the decision rules when the number of non-participating members reaches four. That could be some time away. Subsequently we have ensured that this review will report to the European Council, where the decision about what to do next will be taken by consensus.

The noble Baroness asked what we were doing about growth. It will not be news to this House that all countries in Europe have immense fiscal challenges and we must focus on what can help best. We believe that some of the changes that we have effected over the past two and a half years, on international trade deals, deregulation and completing the single market

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are not designed just to help us here in Britain, but also the rest of Europe. There is good news on some of this; at least in the United Kingdom. There are more people working in the private sector than ever before and the number of those claiming the main out-of-work benefits has fallen by almost 200,000. That is all a step in the right direction.

The noble Baroness went on to ask three simple questions—she might have thought that they were simple, but they raise important issues for the future. On the question of an in/out referendum and what the Foreign Secretary has said, I do not think that any of that creates a great deal of uncertainty. It is an issue that is live in the country today. People are asking about it. I very much believe that neither option—in or out—is the right question to ask. Europe is in a state of flux. Enormous changes are going on as a result of the eurozone that will give us and people who think like us an opportunity to look ahead and gently to forge a Europe that will serve all the people of Europe in future.

The noble Baroness also most unfairly criticised the Prime Minister and the Government for not doing what British business wanted us to do. She felt that we are drifting towards the EU exit and that British business was uncomfortable with that. I do not accept either premise. We are not drifting to an exit from the EU; therefore, British business is not concerned about that. British business is concerned about increased regulation, centralisation and bureaucracy. Those are all things that we can agree on. The noble Baroness shakes her head, but when you talk to British businesses, those are the things that they are concerned about. They do not believe for one moment that we are about to leave the EU; and nor are we.

4.11 pm

Baroness Falkner of Margravine: My Lords, can my noble friend tell us about the discussions on Syria and, in particular, whether the United Kingdom has changed its position on lifting the arms embargo and is thinking of starting to get involved in arming either side of the conflict, not least the new coalition?

Apropos the European Council conclusions, the Leader of the House told us that the Bank of England and the European Central Bank are to have a statutory memorandum of understanding detailing their relationship. Can he tell the House a little more about what that will contain in terms of its legal underpinnings and when that might come about?

Lord Strathclyde: My Lords, those are two useful questions. First, on Syria, we are all deeply concerned by the escalation of violence and its increasing impact on the wider region. We very much welcome the increased support for the national coalition following the Friends of Syria meeting in Marrakech on 12 December 2012, and we are working with others in the international community, including within the EU, to seek an end to the violence and a political solution to the crisis. On sanctions, we have led the way in introducing EU measures against the Syrian regime. The latest round, the 19th, was adopted on 15 October, and we successfully

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negotiated a three-month rollover of the EU sanctions measures, including the arms embargo, last month. However, there is a fast-changing situation in Syria, and we need to keep it constantly under review.

My noble friend asked a second question about the banking union, the role of the relationship between the Bank of England and the ECB and, in particular, the role of the memorandum of understanding. I confirm to my noble friend that there is a statutory requirement in ECB regulations to have an MoU between the ECB and the Bank of England that secures co-ordination of supervision of cross-border banks and activities. There is no deadline for the MoU to be signed, but ideally it should be in place before the single supervisory mechanism kicks in, which should be by June 2014.

Lord Harrison: My Lords, through the Leader of the House, I thank the Financial Secretary, Mr Clark, for keeping my committee, which concerns itself with EU economic and financial affairs, alert to what was going on last week, both on the publication of our report of the emerging conclusions—published early to help the Government—and in the aftermath, when he reported back through me to Sub-Committee A of the Select Committee chaired by the noble Lord, Lord Boswell.

However, there are residual questions which we will test in the early months of next year, including with the Financial Secretary. With regard to the MoU, I would like the Leader of the House to take back to his colleagues a better and more profound scrutiny of the position the United Kingdom finds itself in, as countries begin to enter the European banking union, so that the protection of those who are the current “outs”—although many want to join the European banking union in a way that the United Kingdom does not—is not compromised by endorsing the supervisory board which reports to the governing body of the European Central Bank. That may imply, ultimately, treaty change. Would he be alert to that?

I have another question. The single market is the butt of what we are attempting to do in this country to protect the UK’s interest. Will he listen to the voices outside, and from British business, who say that financial services in particular, but the single market as a whole, are imperilled by our standing outside this close integration?

Lord Strathclyde: My Lords, I have yet to meet many businesspeople who think that it was wrong for us not to join the euro when it was created. Many businesses—in fact, all—that I meet are very keen on the single market and on how it operates. The Council has safeguarded the interest of British business and the City in particular. We believe that those safeguards are extremely important. The noble Lord, Lord Harrison, mentioned the distinguished report from the committee that he chairs. It is a valuable and important report. There is a lot of it; it will require digesting by the Government. However, there are some useful pointers here. On the parts of his questions to do with treaty change, which I will not answer in detail now, these are exactly the kinds of issue we will need to consider before coming up with conclusions.

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Lord Williamson of Horton: My Lords, the monitoring and supervision of the large banks within the eurozone is coming in the so-called European banking union. It is obviously imperative that the group of 17 eurozone members cannot take over, in effect, the European Banking Authority which sets standards for the 27. In order to avoid that and to protect the EBA from risk, will the noble Lord comment on how watertight is the proposed requirement that there must be a simple majority of states, both in the eurozone and outside it?

Lord Strathclyde: My Lords, the noble Lord, Lord Williamson of Horton, asks a straight question: how watertight is the agreement on the requirement to have a majority? If I may mix my metaphors, the agreement that was struck in this council is absolutely rock hard. I do not think that I can put it more strongly than that.

Lord Davies of Stamford: My Lords, can the noble Lord go a bit further into banking unions? A banking union must contain two things. One is a supervisory regime, and it is clear what has been agreed there; it is perfectly satisfactory. However, it must also contain provisions for bank resolution. Can the noble Lord tell us in greater detail how this will work? In particular, if the ECB has to bail out an institution in the future to prevent a systemic threat, where will the requisite funds come from and what arrangements have already been made to ensure that those funds will be available on the day they are required?

Lord Strathclyde: My Lords, that is a good question but I will not be tempted to get into the details of this, because they have not been finally agreed within the eurozone. Final conclusions on that will need to be come to over the course of the next few months.

Lord Stoddart of Swindon: My Lords, first, I wonder whether the noble Lord has seen a report that the Bundesbank’s lawyers have found that the eurozone banking union lacks a sustainable legal basis and that there is a lack of clarity over the new safeguard powers. Is he able to comment on that? It is a very serious statement. Secondly, on page 4 the Prime Minister says:

“We will never support a European army”,

but we have an Air Force and a Navy as well, so presumably the “army” also includes those two forces. Perhaps the wording ought to be reconsidered in future. Thirdly, on Syria, I find it very worrying that the Government are urging that the arms embargo should be lifted by the European Union. Arms mean more deaths, surely. Will the Government not embark upon a peace process rather than a war process, given the support of some elements in Syria which are nasty, vicious and should not be supported?

Lord Strathclyde: My Lords, on the question of the Bundesbank and its lawyers’ view of the safeguards, the noble Lord has an advantage over me. I have not seen that but perhaps I could ask my officials to look into it and I will send him a letter. As far as I am concerned, when the Prime Minister said that Britain will not join a European army, he meant the European armed forces. Why do I say that with such confidence? Because I know that what he believes in is co-operation

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between our nations and their armed forces, which we have done very successfully, particularly with the French, and no doubt that will continue. On Syria, I agree with the noble Lord that it would be premature to lift the arms embargo but it is also right to keep it under review, and that is what we are doing.

Baroness Quin: My Lords, in the Statement there was a phrase to the effect that we will never be part of a European army, but was there a serious proposal at the summit to create such a European army? If not, why was it felt that that statement needed to be included?

Lord Strathclyde: No, my Lords, there was not a firm proposal that there should be a European army but there was an early discussion about a series of councils that will take place next year to discuss common defence and security policy. It is important for the Prime Minister to lay out his position as early as possible. After all, if he does not, that is how rumours start—such as the one propagated just now by the noble Lord, Lord Stoddart, who also gave me an opportunity to put the record straight.

Lord Kerr of Kinlochard: My Lords, will the noble Lord revert to the question of the noble Lord, Lord Williamson, and his own exegesis of the sentence in the Council conclusions that says,

“the Council agreed a new voting system which means the Eurozone can not impose rules on the countries outside the Euro area”?

Does he agree that that sentence means that the Council agreed a new voting system for the EBA, not for the Council? Does he agree that that voting system depends on there being four non-members of the European single supervisory mechanism for its survival?

Lord Strathclyde: Yes, my Lords, the noble Lord has made an important clarification. I hope that nothing I have said has given the impression that I did not think that is what it meant—I am glad to have the noble Lord’s confirmation of that. It is absolutely right that those are the two locks. It is the first time that we have been able to get agreement that any changes require the agreement of a majority of those countries that are not in the eurozone.

Lord Anderson of Swansea: My Lords, there were discussions at the Council on a potential free-trade agreement between the European Union and Japan. The noble Lord the Leader of the House will be aware that in parallel there are discussions between the United States and Japan. What, if anything, was said about the third part of the triangle—a free-trade agreement between the European Union and the United States?

Lord Strathclyde: My Lords, there is nothing I can add to what I have already said. However, being a believer in free trade. which I think the noble Lord is too, we should very much welcome the agreement between the EU and Japan. If the United States and Japan can make a similar agreement and commitment to free trade then that is a very good thing, and in the long term we should look to furthering free-trade agreements between the EU and the USA.

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Lord Pearson of Rannoch: My Lords, the Statement brings us the surprising news that the Commission has promised to scrap some of its own regulations that are no longer of use. What is the anticipated timescale and volume of this exercise? Are the Government confident that Brussels is acting in good faith when it makes this promise? What legal mechanisms will function at the national level? Will the Government have any input into this process? Above all, will the Government keep noble Lords up to date as these regulations are scrapped?

Lord Strathclyde: My Lords, the noble Lord, Lord Pearson of Rannoch, is entirely right to raise this issue. The best way of keeping both the Government and the European Commission up to the mark is for the noble Lord, as I know he will, to constantly ask questions about how it is going. He asked about timing. I do not think there is a timescale for it. The important change is that in the Council’s conclusions there was an absolute recognition that there are some unnecessary regulations that are no longer needed and need to be scrapped. The noble Lord, Lord Pearson, his friends and many others in the House may start proposing which ones they should be, in which case they should write directly to the Commission.

Baroness Wheatcroft: My Lords, the creation of an EU bank regulator, of which the UK will be independent, is certainly good news. Can my noble friend say something about the position of the UK operations of EU banks? Will there be pressure for them to be subsidiaries, rather than just operating branches, so that the Bank of England can more closely regulate them?

Lord Strathclyde: My Lords, I do not have the immediate answer to that question. It raises all sorts of questions about the relationship between bank branches in the United Kingdom and their parent companies in the EU, most notably those headquartered in eurozone areas. I am not sure if there is a definite answer at this stage, but if there is I will let the noble Baroness know.

Lord McConnell of Glenscorrodale: My Lords, I was disappointed the Prime Minister chose to be so negative and parochial in his Statement today about what is actually quite a positive statement on the common security and defence policy in the conclusions of the European Council meeting. The European Council meeting talked about enhancing and strengthening the common security and defence policy—one that was begun under a Conservative Government in the UK and has been maintained under Governments of all colours since.

I was also a bit disappointed that the conclusions, in talking, rightly, about the comprehensive approach to security, did not mention development alongside the importance of crisis management and stabilisation. I wonder if, in the discussions that will take place over the next 12 months, the UK Government will ensure that the important role of development alongside diplomacy and defence is recognised as we work towards refreshing this CSDP in December 2013.

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Lord Strathclyde: My Lords, I do not share the view that the noble Lord has propounded that my right honourable friend the Prime Minister’s Statement was negative on this matter. There are many people in this country who will regard the British Prime Minister saying that we will not join a European army as an extremely good and positive thing. I would have liked to have seen the noble Lord agree with that.

However, on the common security and defence policy, of course we are fully behind proposals to increase our international security. As I said to the noble Lord, Lord Stoddart of Swindon, a few moments ago, our policy is based very much on international co-operation. NATO is the cornerstone of our defence process, but we also have bilateral relationships with individual countries that are to the benefit of us all.

I cannot believe that the noble Lord, with all his experience, knowledge and background in development, particularly development in Africa, would think that this Government would ever shirk from talking about their development record, most notably the record amounts of money that we now spend, and focus extremely effectively, in the parts of the world with greatest need. That is something that the Government are very proud of. I am sure that future Councils will refer to development whenever they get around to discussing it.

Lord Howarth of Newport: My Lords, has it not been a cardinal principle of British foreign policy for hundreds of years to maintain our influence with powers on the Continent of Europe the policies of which are crucial to our interests? The Statement spoke somewhat vaguely about safeguards; the noble Lord has declined to be drawn on details. Will he explain to the House how, as European Council follows European Council, and as those countries that manage to survive as members of the eurozone continue to deepen their fiscal and political integration, the Government’s engagement with those core European powers, which will be concerting their polices to powerful effect, can be increasingly other than tangential?

Lord Strathclyde: My Lords, perhaps there is a philosophical gap between the noble Lord and the Government on this issue. We completely support the idea of a banking union within the eurozone; it is key to the eurozone succeeding in the longer term, and we have long supported it. At the same time, we wanted to have safeguards within the single market—which I know that the noble Lord supports—to ensure that there was non-discrimination. In the communiqué, we have an absolute commitment to non-discrimination within the single market for countries that are outside the eurozone.

I am bound to say, despite the rhetoric that sometimes comes from opponents of this Government’s policy on Europe, that this European Council—the last of seven of this year—has been a resounding success. I very much hope that it will set a good pattern for the course of the next few months.

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Business of the House

4.32 pm

Lord Wallace of Saltaire: My Lords, 34 speakers have signed up for the European Union debate today. If Back-Bench contributions are kept to around seven minutes each, it would allow the Question for Short Debate to start at around 9 pm and for the House to rise at the target rising time of 10 pm.

Lord Stoddart of Swindon: I am most disappointed by that statement. We are discussing some very important matters. To expect Members to confine their remarks to seven minutes and to expect the House to finish by 10 pm, when, since we had a relevant debate, we have had two Bills and the developments in the EU over the past six months at least, is, quite frankly, a disgrace. I was minded to oppose these matters being discussed, but I know that I would be defeated and would therefore be wasting the time of all those speakers, including myself, who wish to speak in the debate. Having made my view known, I assure the House that I will not abide by the seven-minute suggestion when I speak third-to-last tonight.

Lord Wallace of Saltaire: My Lords, I recall many years ago interrupting the late Lord Shore as he got into his 26th minute in one debate. I trust the noble Lord will be more modest in his approach.

European Union: Recent Developments

Motion to Take Note

4.35 pm

Moved By Baroness Warsi

That this House takes note of recent developments in the European Union.

The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi): My Lords, I am looking forward to a very long afternoon and evening. We are here to discuss recent developments in the EU, a topic which is never far from the headlines and is of significant interest to Members of this House.

My right honourable friend the Prime Minister and my noble friend Lord Strathclyde have just provided a full and informative report, to this House and the other place, of some of the most recent developments in last week’s European Council. I am also pleased to bring two Bills before the House this afternoon. The provisions in both Bills are technical in nature but will, in their own way, play an important role in the future shape of the EU.

The first is the European Union (Croatian Accession and Irish Protocol) Bill which provides for the necessary parliamentary approval to allow the UK to ratify Croatia’s accession to the EU and the transitional immigration controls to be applied post accession. The Bill also provides for approval of a protocol on the concerns of the Irish people which is to be added to the EU treaties. I introduce the second on behalf of my noble friend Lord McNally: the European Union (Approvals) Bill simply provides for parliamentary

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approval of three draft EU decisions. I will return to the two Bills in some detail later. Members of this House will no doubt wish to discuss areas of their own particular interest during the debate. If noble Lords will permit me, I will use the two EU Bills, which represent just a few of the recent developments in the EU, as a starting point for the debate.

Membership of the EU has brought, and continues to bring, real benefits to the UK. Enlargement and the establishment of the single market are two of the EU’s greatest achievements. The single market is the largest market in the world with more than 500 million consumers and 21 million companies. It has opened up prosperity and opportunity to hundreds of millions of people. The challenge we face now is to maintain those benefits in the face of global financial challenges.

The European Union, alongside NATO, is an instrument of peace and reconciliation that has helped to spread and entrench democracy and the rule of law across Europe, and has helped to make armed conflict between its members unthinkable. This has recently been recognised with the award of the Nobel Peace Prize. That is why we support further conditions-based enlargement. Croatia’s accession will further demonstrate the transformative power of enlargement, marking a historical moment, with the joining of the first of the western Balkan countries involved in the wars of the 1990s.

We recognise that the EU needs to do better in much of what it does and that people across Europe want more of a say in how the EU does its business. The House of Lords EU Select Committee has done a great deal in examining the work of the EU. I am grateful to the committee for its ongoing scrutiny of EU decision-making. Most notably in the context of the accession Bill, I welcome its current inquiry on EU enlargement.

When they came into office, this Government committed to give Parliament a greater say in the EU decision-making process. In order to do that, we introduced the European Union Act 2011, which puts Parliament at the heart of the process. That is why we have these two Bills before the House today, both of which have been introduced under the provisions of the European Union Act 2011.

The European Union (Croatian Accession and Irish Protocol) Bill provides for parliamentary approval of the Croatian accession treaty and of the Irish protocol, which is to be added to the EU treaties. The Bill also provides an enabling power to allow transitional immigration controls to be applied on Croatian workers exercising their right to free movement.

Croatia is expected to join the EU on 1 July 2013. Meanwhile, we expect Croatia to sustain the momentum of six years of significant reform, particularly on judiciary and fundamental rights issues, so that it meets fully all EU requirements by the time of accession. Croatia’s accession will represent the achievement of a historic goal, not only for Croatia but for the EU. Croatia’s accession will set the bar for other countries of the region in pursuing their own European future and demonstrate clearly what can be achieved in the region.

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The enlargement process continues to evolve with each accession and Croatia has faced the toughest negotiations yet. It was the first to negotiate under the new Chapter 23 that deals with the judiciary and fundamental rights, rightly putting the emphasis of the accession negotiations on the rule of law. It is the first to make full use of opening and closing benchmarks within the negotiations of each chapter to ensure results before chapters were closed. It is the first to experience pre-accession monitoring, a process designed to ensure that it is ready in full before it accedes. Croatia will join the EU better prepared than any previous candidate has been.

Croatia has already largely met the strict pre-accession criteria. It has made significant progress in tackling corruption and organised crime and in protecting fundamental rights, as recognised in the two most recent Commission monitoring reports. It has also made considerable progress in dealing with the legacy of the Balkans wars in areas such as war-crimes trials and refugee returns, and it continues to tackle these challenges.

Croatia’s full co-operation with the International Criminal Tribunal for the former Yugoslavia was a requirement for closure of Chapter 23. This will continue to be assessed as part of the Commission’s monitoring up until the date of accession. However, let me be clear: while the Commission’s monitoring helpfully identifies these outstanding issues, it also states clearly that it expects Croatia to be ready on time. This is an assessment that we share.

With its modest population of some 4.4 million people, the potential impact of Croatian migration is relatively small, but the UK remains vigilant to that impact. Furthermore, we have not identified any victims of trafficking from Croatia in the UK. In the US State Department Trafficking in Persons Report 2011, which ranks countries in terms of their capacity to tackle trafficking and protect victims, Croatia was designated as a tier 1 country alongside the UK. As a safeguard, the Government will be putting measures in place to minimise any possible impact of opening the British labour market to workers from Croatia. I can assure noble Lords that the Government are committed to applying appropriate controls on the free movement of Croatian workers in order to safeguard the UK labour market.

The accession treaty sets out the framework within which member states may apply transitional immigration controls to Croatian nationals who wish to work in their country. This Bill transposes the legal framework for transitional immigration controls in the accession treaty into UK law. The Home Office will bring secondary legislation before this House in order to apply those controls under UK law. The intention is to retain the current immigration controls applied to Croatian nationals for a transitional period following accession. The Home Office has published details of the proposed transitional controls in a statement of intent. All the necessary legislation will be in place when Croatia joins the EU.

Lord Davies of Stamford: My Lords, can the noble Baroness tell the House what the transitional period is proposed to be?

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Baroness Warsi: My Lords, it is anticipated that the transitional period could be up to seven years, but I am sure that the details of that will come out during further debate this afternoon.

The Bill also deals with the Irish protocol. This is, in effect, a clarification of Ireland’s understanding of certain aspects of the EU treaties in relation to its constitution. It does not change the content or application of the treaties. The Irish protocol is important to the Irish as it will enshrine in EU law the legal guarantees given to Ireland by EU member state Heads of State or Government. It was agreed as a condition of Ireland’s ratification of the Lisbon treaty.

The protocol confirms that neither the European Charter of Fundamental Rights nor the freedom, security and justice provisions of the Lisbon treaty affects the application of the Irish constitution on the right to life, the protection of the family and the protection of rights in respect of education. The protocol also confirms that the Lisbon treaty does not make any change, for any member state, to the extent or operation of the competence of the EU in relation to taxation. Furthermore, it confirms that none of the provisions of the Lisbon treaty affects or prejudices Ireland’s traditional policy of military neutrality. It also sets out clarifications in relation to a number of specific defence-related matters.

The protocol must now be ratified by all 27 member states before it can enter into force. Here in the UK, approval of the protocol requires primary legislation; thus, provisions to do just that have been included in this Bill.

The second Bill is the European Union (Approvals) Bill, which provides for parliamentary approval of three draft EU decisions: first, the proposal to give legal effect to the electronic version of the Official Journal of the European Union; secondly, the five-year work programme—the multiannual framework—of the EU fundamental rights agency; and, thirdly, the draft European Council decision to maintain the number of EU Commissioners at the equivalent of one per member state. Parliament must grant its approval before the UK may agree to the decisions in Brussels.

Looking at these matters in turn, I will give a brief outline of the proposal on the electronic version of the Official Journal of the European Union. This is the gazette of record for the EU, which is published every working day. It records the decisions made by and the legislative acts of the EU institutions. The electronic official journal has existed in parallel with the print version for some years. However, a European Court of Justice judgment found that only the printed version of the official journal is authentic. EU legislation is therefore necessary to give the electronic version legal effect.

I turn now to the work programme of the fundamental rights agency. The agency was established in 2007, and its role is to support the European institutions and member states, when they are acting within the scope of EU law, to take measures and actions which respect fundamental rights. It also has a role in communicating about, and raising awareness of, fundamental rights. The agency’s work is regulated by a five-year work programme which sets out the thematic areas of the

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agency’s activity. These must include the fight against racism, xenophobia and related intolerance and be in line with the European Union’s current priorities. The agency’s first, and current, work programme covers the period from 2007 to 2012 and will expire at the end of this year. In December 2011, the Commission brought forward a proposal for a new work programme to cover the period from 2013 to 2017. The themes set out in the work programme very much continue the themes of the current one. Although there are some adjustments in the terminology between the two work plans, the changes will not alter the work that the agency has been doing. Nor will they change the role or functions of the agency.

Finally, I turn to the draft European Council decision to maintain the number of EU commissioners at the equivalent of one per member state. The EU Commission currently comprises 27 commissioners, one from each member state. The Lisbon treaty provides for a reduction by one-third in the size of the Commission from 1 November 2014. However, the treaty also allows the European Council to alter the number of commissioners, subject to unanimous agreement. The proposed reduction in the size of the Commission, and the subsequent loss of a guaranteed commissioner, emerged as a concern of the Irish during the ratification of the Lisbon treaty. In order to secure Ireland’s ratification of the treaty, it was agreed that a decision would be taken to maintain the number of EU commissioners at the equivalent of one per member state. From our perspective, this decision will ensure the retention of a UK commissioner, and will mean that a UK voice continues to be heard within the Commission.

In conclusion, the Government remain committed to being a key player in the EU. Our relationship with the EU is not, however, an unquestioning one. We need to protect UK interests while supporting our neighbours and allies across the continent to achieve their own aims. The Government have set out the steps that they are taking to assess the UK’s relationship with the EU. We have also put in place legislation to ensure that Parliament has its say in decisions that will shape the EU. That is why I have brought the two Bills before this House today. The content of the Bills will have a limited impact on the UK in comparison to the greater benefits they will bring to other member states, both existing and future, and to the EU as a whole. They are, however, in the interests of the UK, which is why the Government give them their whole-hearted support. I beg to move.

4.48 pm

Lord Liddle: My Lords, first, let me make it clear that the Opposition support the two Bills that have their Second Readings today. We do not intend to move any amendments either in Committee or on Report. I hope that the Government regard this approach as constructive. I have two brief points on the Bills. The European Union (Approvals) Bill points to one of the areas where the previous Labour Government fought hard to achieve reform but failed to succeed—to reduce the size of the European Commission. I understand why, in a Union dominated by the large member states, every member state wants to keep its own Commissioner. However, this is neither efficient—in terms of the

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transaction of the Commission’s business—nor is it a proper understanding of the role of the Commission, which is to speak for the interests of the Union as a whole, not the interests of individual member states. I am sure that debate on this issue will return in future. Secondly, on the Croatian accession Bill, it is worth remembering that, for all its tribulations, this is a European Union that many millions of people still want to join. Those who want to leave should take note of that.

This has been an opportunity for the noble Baroness, Lady Warsi, to present her first tour d’horizon of the state of the Union. I agreed with many of the positive things that she said but would have liked to hear more. The big question that she has not answered is: what is the Government’s policy for the future of Europe? In his Daily Telegraph article of 1 July this year, the Prime Minister wrote of the need for a fresh settlement with fresh consent. He wrote that,

“far from there being too little Europe, there is too much of it”,

and argued that:

“Whole swathes of legislation covering social issues, working time and home affairs should … be scrapped”.

To advance this agenda he wrote of opportunities to come in future—probably future treaties—where we will be able to take forward our interests. His fresh settlement would require the full-hearted consent of the people. In a statement of ringing clarity, he wrote that for him the words “referendum” and “Europe” went together—whatever that means.

It is our first duty as the Opposition to clarify what the Government’s policy on Europe is and, when we have done that, to say what we think of it. What is the nature of the new settlement that the Conservative Party is seeking? How radical a change is the Prime Minister seeking to make? One relatively modest interpretation of the Prime Minister’s statements is that he is seeking to exercise our justice and home affairs opt-out and to reintroduce an equivalent of the Social Chapter opt-out that John Major negotiated at Maastricht, extended to cover the health and safety measures that provide the legal basis for the working time directive. Is that the minimum change or the maximum change that the Government would like to see? We on this side of the House are clear that even if it were to be the maximum, we would have very grave reservations about it. According to police and intelligence chiefs, the exercise of the general JHA opt-out would be damaging to Britain’s security. As the European Commissioner responsible recently pointed out, there is absolutely no guarantee that Britain could opt back in to individual measures.

On the social opt-outs, is it the Government’s aim that directives such as those on parental leave, agency workers, information and consultation would no longer apply in the UK? Do the Government object to every single aspect of the working time directive—for example, minimum holiday entitlements—or simply to the 48-hour maximum working week provision? What other health and safety measures does the Prime Minister find objectionable? Is it proposed that, should the opt-out be achieved, equivalent domestic legislation would be introduced? Or is the government and Conservative position that all the social protections that the EU

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presently offers working people are an unnecessary burden on business that, in order for Britain to succeed in what they call the “global race”, must now be scrapped? I will happily give way if the noble Baroness would like to clarify the Government’s position, but I suspect that she will not. However, does she agree that the people of this country, many of whom work very hard with very basic protections, have an entitlement to know what her party’s policy is?

Other Conservatives go much further. Boris Johnson, the Mayor of London, talks of a Europe pared down to the single market. What would a Europe pared down to the single market look like? As the Prime Minister said, the single market is much more than simply a free trade area. It includes the removal of barriers that exist behind borders, as well as the removal of tariffs and quotas. That requires common regulatory standards, without which there can be no free flow of goods and services in the market that accounts for roughly half our trade. Can we be clear about this? If the Prime Minister accepts that the single market amounts to more than simply the absence of tariffs and quotas at the border, does he accept the necessity for common regulatory standards that cover issues such as consumer rights, environmental standards, health and safety rules under which goods can be made and services offered, drug testing, food safety, packaging, and waste disposal? Would a Europe pared down to the single market still include these protections? What is the answer?

We are not saying that the way the EU presently makes laws and regulations is perfect. The acquis of European legislation needs constant review. In my view, this should be done independently. In managing the single market the Commission should give greater weight to the economic effects of national differences in regulation and not pursue harmonisation for its own sake. However, this is an agenda for the whole EU, not one that seeks special opt-outs for Britain and a so-called “renegotiated relationship”. Frankly, that agenda is unnegotiable. Will Ministers tell us how we can expect to maintain access to the single market and negotiate an à la carte Europe at the same time?

We must look at realities. If Peugeot and Fiat already have difficulty competing with Volkswagen, which they do, why should national Governments agree to arrangements that in their mindset would allow British-based manufacturers to scrap regulation, cut costs and gain an unfair competitive advantage? On the continent they already think that because we are outside the euro we have enjoyed an unfair advantage as a result of sterling depreciation. Can the Minister not see that what is being suggested would be completely unacceptable to our partners?

Nor, in our view, is this argument right in principle. It is neither wise nor legitimate. Who in this Chamber seriously believes that a credible growth strategy for Britain in this global race can be pursued on the basis of cheap labour, bad safety standards and environmentally shoddy goods? We need to take the high road to competiveness. If the Germans, Dutch and Swedes can compete successfully in global markets on the basis of high European standards of regulation, why cannot the British do so as well?

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This policy has high risks. The very mention of renegotiation and an in-out referendum will deter inward investors, perhaps from China and India, who are looking to the UK as a long-term basis for their operations in Europe. If the renegotiation fails—because, as any objective person must assume, its objectives are essentially unattainable—Britain will quickly move down a slippery slope towards exit.

Britain’s policy for the future of Europe should be based on reform, not renegotiation. Yes to a reformed EU budget, yes to a reformed Commission, yes to a reformed law-making process with reviews of the acquis and to a bigger role for national Parliaments. Most of all, yes to a Europe with the collective means to pursue a reformed economic policy that replaces collective austerity with investment in the future, and to a Europe that is strong enough to represent our values and interests in a world where Britain on its own will have progressively less clout and leverage.

On 10 December the EU received the Nobel Peace Prize in Oslo. Most of the leaders of Europe attended; shamefully, Britain’s did not. I end by quoting something that President Van Rompuy, president of the European Council, said on that day because it is relevant to Britain. He said:

“When prosperity and employment, the bedrock of our societies, appear threatened, it is natural to see a hardening of hearts, the narrowing of interests, even the return of long-forgotten fault-lines and stereotypes. For some, not only joint decisions, but the very fact of deciding jointly, may come into doubt. And while we must keep a sense of proportion—even such tensions don't take us back to the darkness of the past—the test Europe is currently facing is real … We answer with our deeds, confident we will succeed. We are working very hard to overcome the difficulties, to restore growth and jobs. There is of course sheer necessity. But there is more that guides us: the will to remain masters of our own destiny, a sense of togetherness, and in a way, speaking to us from the centuries, the idea of Europa itself. The presence of so many European leaders here today underlines our common conviction: that we will come out of this together, and stronger. Strong enough in the world to defend our interests and promote our values. We all work to leave a better Europe for the children of today and those of tomorrow. So that, later, others might turn and judge: that generation, ours, preserved the promise of Europe”.

That is a promise many of us in this House will fight to our last breath to keep.

5.01 pm

Baroness Falkner of Margravine: My Lords, I support the European Union (Croatian Accession and Irish Protocol) Bill, which is anticipated to be uncontroversial and a welcome measure of the progress made by Croatia in getting to this point.

The past few years have seen a consolidation of democratic norms and political stability in that country. My only concern is about the rule of law and the backlog in dealing with cases related to war crimes, but I note that the Government remain confident that this will be resolved by the expected accession date.

On the Irish protocol, again there is nothing exceptional about this being given legal form through attachment to the treaty on the European Union and the treaty on the functioning of the European Union. What is nevertheless alarming, however, is that some Members in the other place believe that the negotiation of the Irish protocol somehow serves as a model for what

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the UK might wish to do in future. They do not seem to notice that its extremely limited guarantees, as they see them, are in no way comparable to what they might wish to seek in a much changed EU after 2008, when that protocol was negotiated.

I am pleased to have an opportunity to discuss developments in the EU, particularly as there have been significant changes since our debate in February this year. Two of those developments stand out. There has been progress within the eurozone countries in reducing debts and stabilising the banking systems. The architecture of a new regulatory regime is emerging, as we have just heard in the Statement on the European Council, albeit very slowly indeed.

The other development has been here in this country—the speed with which we have embarked on a new tone in the debate about our relationship with the European Union. We now have a situation where opinion polling on the EU, always a minority interest in the past, is carried out regularly in our media and shows significant support for a referendum on Britain’s relationship with the EU. That is a marked change over the past decade.

I do not find this particularly surprising. Developments in the eurozone are bound to impact on our own calculations. When 17 or a smaller number of countries move to a full fiscal and budgetary union with strong political underpinnings, it is inevitable that we will be affected. For an outward-looking, open-trading nation such as Britain, if there is a fundamental change to the architecture governing finance, capital, investment and labour, we certainly have skin in that fight.

A cursory glance at the figures reveals a lot. Since the 1980s, the UK’s bilateral trade with EU members has more than trebled. More than 45% of UK exports are to the EU. The single market, one of the more remarkable achievements of the past few decades, has given us access to a market of more than 500 million consumers. The UK attracts one-fifth of all foreign direct investment in Europe—mainly because of our membership, one assumes. While these arguments about protecting our national interests are familiar to all those across the House who clearly see what is at stake in the calls for an “in or out” referendum, I will explain where the opponents of proactive participation are coming from.

We have on the one hand those who believe that they are enhancing the UK’s negotiating position by threatening a referendum. In their book is the naive proposition that other European countries will be so cowed by the mere prospect of the UK departing that they will put up no resistance whatever in granting the UK exceptions, and that will undermine their own countries’ interests. Hence these people strike impossible bargaining positions and votes in the other place, confident that triangulation will work. This is a cynical and dangerous game and prone to failure, which is why it is so sad to see the Labour Party on the Benches opposite legitimising that position in the other place as recently as the Budget negotiations.

The second group are those who genuinely believe that we should leave the EU, and that the consequences will merely place us alongside Norway or Switzerland. This group are not just naïve; they are simply deluded.

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To posit an equivalence with Norway, which rides on its massive US $600 billion sovereign wealth fund and vast reserves of oil and gas, which protect a population the size of Scotland, is simply not to understand the challenges that this country faces.

Lord Willoughby de Broke: Most of us who want to leave do not equate our position with Norway, or indeed with Switzerland. We believe that we want to run our own affairs independently, so please let us not run the canard of being like Norway or Switzerland. That is not the case for those of us who want out.

Baroness Falkner of Margravine: The noble Lord cannot have been listening very carefully. If he had been, he would have noticed that I did not name any particular players in this regard. They come from all sides.

Norway’s membership of EFTA and the EEA is about as close to the EU as it is possible to be without actually belonging. It is bound by most EU rules and regulations and pays a significant amount into EU coffers. Norway depends on other countries to fight its corner, not least on Britain and Sweden. As the Economist describes the relationship:

“It would be as though Britain maintained a golden fax machine linked to Brussels, which cost billions of pounds a year to run and from which regulations issued ceaselessly”.

Indeed, the Norwegian Government have carried out its own assessment, which found:

“As a result Norway has implemented nearly three quarters of all EU legislation, 99.6% of all single market legislation (some 1,700 EU directives), and is ranked 4th best performing country”.

That also includes the working time directive, the supposed cause of so much frustration in the UK.

The Swiss model would probably not be available, as the EU would be unlikely to extend EFTA privileges to as large and significant a country as the UK without requiring convergence across a range of areas. Switzerland is implementing most EU financial services legislation to avoid being locked out of the single market. With 50% of British trade within the EU, and single-market access so essential for attracting foreign investment, the UK would end up in the same position: implementing EU laws but with no say over them. No British votes, no British Commissioner, no British MEPs—a substantial democratic deficit.

It is instructive that even Open Europe, whose lack of enthusiasm for the EU is well known, has found that:

“EU membership remains the best option for the UK.”

All the alternatives come with major drawbacks and would all, except the WTO option, require negotiation with the agreement of the other member states, which would come with unpredictable political and economic risks. This means that negotiating a new UK relationship with Europe outside the EU treaties—that is, leaving the EU—would present similar difficulties as renegotiating membership terms while remaining a member of the EU.

The position of both camps, along with elements of the Labour Party, assumes that there is the possibility of cherry picking items for removal from the UK’s obligations. This unilateralism is wrong-headed and was clearly identified as such by Mr Damian Green just last week, when he said:

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“There is a fantastic vision of an EU which remains a single market, including the UK, but which in all other respects allows the UK to be outside … This is a fantastic vision precisely because it is a fantasy. What is in this for those on the other side of the negotiation?”.

If one read the French, Italian or indeed the Polish newspapers, one would find that the answer to Mr Green’s question might be, “Nothing”, accompanied with the word “Goodbye”.

If ever there was a time for serious reflection and for all political sides to weigh carefully where these calls will take us, it is now. We need to be clear-headed about a call for a referendum, which, if necessary at all, will be so only after a future treaty change that significantly shifts competences to the EU institutions at some date in the future. An abstract discussion on whether Britain is in or out does service neither to democracy nor to the national interest. One can either be clear that there is something substantive on the table, with readily understood pros and cons, or one can play the Alex Salmond card, which is to act first and fill in the blanks later, with resulting confusion and obfuscation.

For our part, the Liberal Democrats are entirely clear. In the coalition agreement, we have agreed to hold a referendum only when there is a treaty change. However, we are clear too that the United Kingdom’s best interests lie in being an active participant in the EU, being at the table, championing our cause, making common cause with others who are like-minded, building alliances where we can and standing firm when we must—well grounded, secure and well placed in the club of 27.

5.12 pm

Lord Williamson of Horton: My Lords, I declare an interest in that I spent a good part of my career in the British public service on European affairs and some part of it in the European Commission. I am sure that the Minister will agree with me that the wisdom of ancient China sometimes has a lesson for us today. For example, on the current soul-searching about the economic state of the eurozone, I have in mind the phrase in the Tao Te Ching, written many centuries ago:

“I let go of economics, and people become prosperous”.

Of course, I shall say a little about the economics of the eurozone and about the course that, in my view, the United Kingdom should steer in consequence. However, I also want to let go a little of economics and say something about other developments in the European Union, which risk being forgotten but which can help people to become prosperous.

I begin with the economic situation in the EU. It is always important to keep in mind that the EU is the world’s largest single market and is an economic zone larger than that of the USA and Japan combined, with a total GDP of around £11 trillion. This single market of 500 million people—I am very glad to see that it is about to be increased, by the Bill that is before us today on the accession of Croatia, to over 500 million, which I very much support—provides a relatively level playing field for British business to trade in without customs duties and tariffs and with a

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common set of rules that avoids 27 different sets of regulations in the member states. Of course, if the UK had a different relationship with the rest of the EU, the single market would not vanish away. But what we should do now is to clock up the single market on the plus side of membership and ensure that any future developments, particularly in the area of financial services, remain open and favourable to the UK and, importantly, that we maintain the capacity to influence them.

I am always amazed how quickly people have forgotten what trade and travel was like before UK membership of the EU. In that protectionist world, now long since vanished, when I was first living on the continent, a kind friend sent me an English cheese. However, by the time I had got through all the hurdles to get it out of customs, it had gone completely bad. That was a mouldy cheese and a mouldy system, but the introduction of the single market was marked by the biggest bonfire of forms and regulations in European history.

Now in the eurozone we have the inflexibility of the single currency and, at the same time, the two principal problems damaging the economic performance of the euro member states. First, there is the continuing fallout of the great big recession made in the USA, which brought down important banks and financial institutions or made it necessary for Governments, including our Government, to bail them out with public money. At the heart of all this was the taking of excessive risks by the private sector—for example, sub-prime mortgages in the US, but actually far more widely than that—notably excessive optimism regarding demand for new housing, so clearly visible on the ground in Spain today. This is, of course, the origin of the recuperative measures under way in both the UK and the eurozone, including more effective measures against risk and greater monitoring of banks and other financial institutions. As we have heard from the latest European Council, our situation now, as a non-member of the eurozone, is that we do not participate in the so-called banking union, but there will still be some consequences. This remains important for us, particularly the need to ensure that the voting rules in the European Banking Authority give us adequate protection. I assume that branches of British banks in the eurozone, if large enough, would be covered by the banking union.

The proposals for safeguarding banks in the Commission’s document of June 2012 seem quite straightforward and in some respects reflect our own banking legislation. These proposals cover the power to plan for, and preferably prevent, the possible failure of a financial institution, including the drafting in, if necessary, of a special manager. That has been dealt with at this most recent European Council and I believe that it is going to go forward. The second half of the document deals with insolvency and resolution powers, including, if necessary, a bail-in—that is, a requirement on bond holders to take a loss on their investment—in order to keep a financial institution solvent. That remains to be dealt with, and it will be important for us outside the banking union still to have that under sufficient scrutiny.

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For some eurozone member states, the “banking element” is the dominant part of the current economic problems. For example, in the Republic of Ireland, one of our most important commercial partners, the cost of the bailout of Anglo Irish Bank is, I believe, broadly equivalent to the bailout funds received from outside the country. I remain quite optimistic about the greater “safety first” in banking and the gradual elimination of the overhang of toxic lending, and that it will be successfully achieved in both the UK and the eurozone.

The second element of the eurozone problem is more intractable. This is the overhang of excessive public debt and continuing public deficits in many EU member states. Of course, public expenditure has to come down in most EU countries, but in the mean time public debt, much of it predating the euro, has to be financed; hence the crux of the immediate problem. I love Greece dearly, but it is a tiny part of the EU economy and I will not mention it again today. If, however, there was a crisis—not the current half-crisis but a real crisis—in the larger member states, Italy and Spain, that would be serious. Evidently a guarantee given by the eurozone as a whole to the lender of last resort, presumably the ECB, would be a solution, once again demonstrating that the EU is ruled not by bureaucrats but by independent sovereign states, but that has been ruled out by Germany and some other member states.

However, the ECB has made real progress in recent weeks in restoring some confidence to these markets. The interest rate on Italian 10-year bonds, even after the reappearance of Mr Berlusconi in the political field, still remains close to an eight-month low of about 4.8%, which is sustainable. We have to accept that the correction of past overexpenditure—debt-financed—on public account will take time. Efforts should be made to stimulate growth in the eurozone as in the UK, but I am not unduly optimistic.

So what course should the UK be on? Clearly we need to maintain the advantages provided by the single market, not just in the narrow sense but also, for example, in relation to reductions in the cost of air travel, mobile communications, patents and so on. It is also evident that, given the current state of British public opinion and in the light of our correct decision not to participate in the euro, we have to look for opting out of most of the financial measures being proposed or implemented for the eurozone. We should not elevate this to a theological argument. The EU is a living organism and there are already a good number of opt-outs and not only for the UK. For example, I am glad to see in the European Union (Approvals) Bill before us today a decision to continue with one Commissioner per member state. That is perhaps not a very good decision, but it was originally foreseen to reduce the number. That was not acceptable to the Republic of Ireland, hence the Bill before us today demonstrating that point.

Leaving aside economics for a moment, it is important to remember that changes that have taken place in the EU in recent years are extremely favourable. Working and travelling abroad have been made immeasurably easier and 1.6 million Britons live in the EU outside

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the UK. Other changes include the mutual recognition of qualifications, no visas for three months, and the common EU driving licence and EU health insurance. Telecom monopolies have been abolished. The cost of 10-minute calls has gone down by 74% and the price of texts from 25p to 9p. All these things need to be quoted, for we have to think a bit about ordinary people in this debate as well as businesses, bankers and summit meetings.

5.21 pm

Lord Howell of Guildford: My Lords, it is a pleasure to follow the noble Lord, Lord Williamson, who understands the complexity of the matters that we are addressing better than most.

In my view, to handle the European Union issue successfully in the light of current developments, our policy framers and advisers, and their critics, need a new mindset. Compiling a wish list of things that we want to grab back from the EU, and then trying to negotiate to stay in the single market, which some less experienced MPs and others seem to think we should be doing, will lead nowhere. We have been round this course before and in the end it does not work. The case needs to be made for greater differentiation within the European Union and this should be put forward as a positive policy for the EU as a whole rather than as a form of special pleading for UK “exceptionalism”.

As the ongoing budget saga has confirmed, we are not alone in wanting new directions for the European Union. We do have allies, both among member state Governments and, I suspect, even more among member state peoples, as recent German popular support for a different Europe has indicated. The isolation or marginalisation argument that we hear so much of is complete nonsense.

A successful approach requires a challenge at its roots to the outdated 20th-century integrationist philosophy inside the EU, commonly called “more Europe”. This challenge should be in the interests of Europe as a whole, not just the British, and, if properly formulated, will have many allies around the Union. The old “more Europe” doctrine is still being attempted with the fiscal pact, as we have already heard today. Time will show that this, too, will no longer work, not least because of the huge and still growing divergences between eurozone economies within the eurozone.

To make the case effectively and profoundly for an alternative path or model for the EU, we need to draw on disciplines far outside the normal confines of diplomacy. Scientists tell us every day that this is now an age not of centralism, top-down plans and blueprints but of self-assembly, self-replication and legitimacy built from the bottom up. The same applies, I suspect, between peoples. As the Prime Minister put it a year or so ago, in today’s world, we need,

“the flexibility of a network, not the rigidity of a bloc”.

As I have said, the key concept that we need in establishing the relationship between member states and the EU institutions is differentiation. The treaties invite us to think of powers and competences in chunks and groups which are frankly out of date. Areas such as social policy and employment policy are 20th-century categories. In today’s world, they can be far more

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separated and disaggregated in deciding which functions should be of common concern, which should rest at national level—where the subsidiarity concept can be effectively applied, which it has not been in the past —and which should be tackled at a far-wider-than- Europe level. The same could apply to agriculture and environmental policies, which nowadays break down into all sorts of new categories.