European Union Economic Governance

Support and Protection for Elderly People and Adults at Risk of Abuse – in the House of Commons at 5:02 pm on 10th November 2010.

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Votes in this debate

  • Division number 115
    A majority of MPs voted to approve the Government's position that any sanctions proposed by the EU in relation to economic governance do not apply to the UK.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury 5:03 pm, 10th November 2010

I beg to move,

That this House
takes note of European Union Documents (a) 9433/10, Commission Communication on reinforcing economic policy co-ordination, (b) 11807/10, Commission Communication on enhancing economic policy co-ordination for stability, growth and jobs - tools for stronger EU economic governance, (c) 14496/10, Proposal for a Council Regulation (EU) amending Regulation (EC) No. 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure, (d) 14497/10, Proposal for a Council Directive on requirements for budgetary frameworks of the Member States, (e) 14498/10, Proposal for a Regulation of the European Parliament and of the Council on the effective enforcement of budgetary surveillance in the euro area, (f) 14512/10, Proposal for a Regulation of the European Parliament and of the Council on enforcement measures to correct excessive macroeconomic imbalances in the euro area, (g) 14515/10, Proposal for a Regulation of the European Parliament and of the Council on the prevention and correction of macroeconomic imbalances, and (h) 14520/10, Proposal for a Regulation of the15 European Parliament and of the Council amending Regulation (EC) No. 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and co-ordination of economic policies;
notes the Report from the Task Force on Economic Governance in the European Union;
notes with approval that budgetary and fiscal information will continue to be presented to Parliament before being given to EU20 institutions;
and approves the Government's position, as endorsed by the Task Force that any sanctions proposed should not apply to the United Kingdom in consideration of Protocol 15 of the Treaty on the Functioning of the EU.

I welcome the opportunity to set out the Government's position on the Commission documents to be debated this evening and our broader position on the co-ordination of economic policy in the EU. As right hon. and hon. Friends will be aware, the European Council last month agreed the report of the EU Economic Governance Task Force chaired by Herman Van Rompuy, and we support its work and conclusions, none of which encroaches on Parliament's economic sovereignty. I want to be clear about that so that there can be no confusion about our position.

Let me deal first with surveillance. Macro-economic surveillance examines the budget plans of member states, and has been around for more than a decade. There is nothing new in that, and a number of international bodies do the same, such as the OECD and the International Monetary Fund. Does the fact that the EU is doing so mean that we will be subject to sanctions? No, it does not, because under protocol 15 of the existing treaty, sanctions do not apply to us.

Photo of Bill Cash Bill Cash Chair, European Scrutiny Committee, Chair, European Scrutiny Committee

Is my hon. Friend aware that the same Mr Van Rompuy has today issued a vicious attack on Eurosceptics throughout Europe, saying that what they argued amounts to a national lie?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I have not seen Mr Van Rompuy's comments. As hon. Members will recognise, I have been rather tied up in the Chamber for most of this afternoon.

Let me continue to make the Government's position clear. Will we have to present our Budget to Europe before we present it to the House? No. Will we have to give Europe access to information for budgetary surveillance that is not similarly shared with organisations such as the IMF, or that is not publicly available on the internet? Again, the answer is no. Will powers over our Budget be transferred from Westminster to Brussels? Again, the answer is no.

Photo of Philip Davies Philip Davies Conservative, Shipley

Does my hon. Friend understand that many people have lost confidence in assurances given whenever a new European treaty is discussed that there will be no loss of sovereignty? Ever since we went into the Common Market, the British public have been told at every stage along the way, "Actually, we're not giving up any sovereignty. This new treaty doesn't give anything away," but people have found time and again that these treaties have done just that. Does my hon. Friend understand people's concerns that although the powers in question do not apply to the UK at the moment, they may well do so in future, as the European Union is clearly looking at extending sanctions to non-eurozone countries as well?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

Nothing in the documents before us today does what my hon. Friend suggests. People should listen and read the documents to which we have subscribed, and understand how firm and robust the Government have been in defending our economic sovereignty.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

But does Mr Van Rompuy's report not suggest that there should be a binding minimum set of requirements for national fiscal frameworks that would apply to all member states?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I think my hon. Friend is reading an earlier draft of the report, because we amended that language at the latest ECOFIN. I will come to this point in a minute, but we believe that fiscal frameworks should be political agreements and should not be driven by directives or regulations.

Photo of John Redwood John Redwood Conservative, Wokingham

Will the Minister please confirm that the directive on budgetary frameworks for all member states will apply to the United Kingdom, that the second regulation on budgetary surveillance for all member states applies to the United Kingdom, and that the regulation for enforcement for all member states also applies to the United Kingdom? There are twin proposals in each case, some of which apply only to euro members and some of which affect all member states. Surely the Minister must confirm that that is a massive extension of European economic government, and the UK has to comply with a lot of it.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

There is nothing new in the macro-economic surveillance processes outlined in the document and, as I have said, we are exempt from the sanctions regime that the Commission and others have proposed, which applies only to eurozone countries. Let me now make some progress.

We need to recognise that there are lessons to be learned from the economic crisis, but one lesson that stands out that is relevant to the debate this evening and to the documents is that in an open, global economy, no economy exists in isolation. The failures of economic policy in one country can be exported to other nations, and the imbalances in one economy can have an impact on others. Imbalances such as excessive domestic demand and growth can lead to asset bubbles, an over-reliance on exports or divergence in competition across countries. It is in all our interests to improve co-ordination and co-operation in policy making, to tackle those imbalances and increase the resilience and strength of the global economy.

However, in our view, increasing co-ordination and co-operation has to be consistent with national sovereignty and the accountability of Parliament. It is those principles that frame our response to the documents and our response to the global economic crisis. There is an intense global debate about those topics in the G20, the IMF and the OECD, and in Europe. We take part in those debates because, as an open economy, we have a strong interest in economic stability. We are acutely aware that imbalances and problems in one economy can have a spill-over effect in another.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Is the Financial Secretary saying that the taskforce document that I have, dated 21 October, has been rewritten? It concludes:

"Endorsement by the European Council of the recommendations in the present report will contribute to strengthening economic governance in the EU".

It clearly says "in the EU" as a whole.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

But the sanctions regime relates only to eurozone countries, and no sanctions can be imposed on the UK. All that the document is referring to is continuation of the macro-economic surveillance that has been taking place over the past 10 years.

Photo of James Clappison James Clappison Conservative, Hertsmere

My hon. Friend is making his case persuasively, but will he assist me? The same document from Mr Van Rompuy, dated 21 October-I take it that that is the latest report-clearly states in paragraph 34:

"The Task Force recommends deeper macro-economic surveillance with the introduction of a new mechanism underpinned by a new legal framework based on Article 121" of the treaty on the functioning of the European Union alongside the stability and growth pact

"applying to all EU Member States".

Perhaps my hon. Friend will help the House by telling us a little about that.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I know that that paragraph has caused some interest, but many people stop reading after

"by a new legal framework".

I am grateful that my hon. Friend did not fall into that trap. The provision is based on existing treaties, and it is about macro-economic surveillance. A number of organisations conduct macro-economic surveillance of the UK economy, and there is nothing new in that.

Photo of Michael Connarty Michael Connarty Labour, Linlithgow and East Falkirk

I hope that the Financial Secretary realises that we are here to support him in a sensible approach to economic surveillance. Does it not seem rather silly for people to say that a country that is in partnership with many other countries should not be interested if any of those countries are profligate? Clearly, good surveillance and good economic policies throughout the partnership are good for the UK.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

The hon. Gentleman makes an important point, and I am about to come to that, so his intervention is timely. Given the degree of integration of the European economy, it is in our national interest to support work that looks at the causes of instability and to have in place action to help to tackle them. Over the summer, there have been two parallel processes in Europe. The Commission has its own work stream, which is summarised in the documents before us. However, member states have participated in a separate strand of work on the co-ordination of economic policies under the chairmanship of Herman Van Rompuy. Many of the issues covered are the same, but there are essential differences between the two streams. The Commission's documents detail solutions, and the Van Rompuy work reflects the political agreements reached between member states. The next step is to bring the Commission's proposals into line with the taskforce's recommendations.

I shall deal in more detail with three aspects of the taskforce's work.

Photo of Bernard Jenkin Bernard Jenkin Chair, Public Administration Committee

Is my hon. Friend giving an assurance that not only are there no sanctions-we understand that-but there is absolutely no increase in EU jurisdiction over the British Budget-making process?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

No, there is not, and I shall come to that in more detail. As far as I am aware, there is no difference in the power that the House has to set the Budget for the United Kingdom.

Photo of Bernard Jenkin Bernard Jenkin Chair, Public Administration Committee

I am sorry, but I must insist on the Minister giving way again. Is there any increase in EU jurisdiction over the British Budget-making process as a result of these arrangements? Yes or no?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I do not believe that there is.

Let me deal with the three aspects. In every international economic debate, the issue of increased co-operation and co-ordination arises. At last month's G20 Finance Ministers conference, the focus was on exchange rates and current account surpluses. At the IMF annual meeting in early October, there was considerable debate about tackling deficits. Those discussions of macro-economic policy are not a new feature of the crisis. For example, since its inception, the IMF has undertaken regular reviews under article 4 of macro-economic policies and made recommendations on policy response, but they are not binding. The EU has had similar procedures in place for a decade. It is in all our interests for there to be economic stability in Europe, and the process needs to be strengthened. What we are doing is simply renewing the existing framework in the light of the economic crisis and updating that tools that we have, to ensure that we can do what we need to do. The measure will broaden the scope of surveillance, but, as far as the UK is concerned, it will not weaken the sovereignty of this Parliament.

Risks to stability often flow from imbalances in the economy, and it is important to look at factors such as current account balances, labour market flexibility and competitiveness across the European Union and to be able to identify problems that could undermine stability. Macro-economic surveillance has an important role to play as an early-warning system.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I should like to make a bit more progress on this point.

It is right that we should co-operate with this process, but our co-operation should be consistent with the fiscal sovereignty of the UK. The information that we provide to assist with the surveillance will always be information that has been made available to this House before it is passed to the Commission. Everything that the Commission gets will have been in the public domain, to the extent that a member of the public will have been able to unearth the same data using Google, albeit with less efficiency.

Photo of Mark Hendrick Mark Hendrick Opposition Assistant Whip (Commons)

The information might be available elsewhere, but the Minister will know that, as a result of the proposed new regulation Com. (2010)526, there will be an obligation for the UK to provide far more information than it has done in the past. There may not be penalties involved, and we may well run up budget deficits or levels of debt that were unacceptable to the Commission-I am sure we can do that-but the point is that this country will be obliged to provide far more information formally to the Commission than it has in the past. In my view, that constitutes a degree of transfer of power to the Commission.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

Let me repeat that this involves information that is already out there in the public domain. It is information that will already have been made available through, for example, the House of Commons Library, the Budget documents, the Red Book or the Green Book. It is information that is already out there, so I do not believe that supplying it will be a problem.

Photo of Mark Hendrick Mark Hendrick Opposition Assistant Whip (Commons)

The point is not that the information will have been made available elsewhere; it is that there will be an obligation on the Government themselves to make it available. If the Commission wanted to go out and find it elsewhere, I am sure that it would do so, but there will now be a new obligation on the Government, as a result of a new treaty, to give it information that they were not previously required to give.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I simply do not take the view that giving the Commission more information is going to be a problem. This goes back to the intervention by my hon. Friend Mr Jenkin, who asked whether there is to be an increase in EU jurisdiction as a result of this measure. No, there is not. All that the EU will do is make recommendations, but they will not bind us or be imposed on us. We can simply ignore them. There will be no increase in EU jurisdiction as a consequence of this measure.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I am being bombarded by requests to give way. I shall give way first to my hon. Friend Mr Cash.

Photo of Bill Cash Bill Cash Chair, European Scrutiny Committee, Chair, European Scrutiny Committee

The explanatory memorandum dealing with the jurisdictional question, which was supplied to the European Scrutiny Committee on 23 October, states, under the heading "Impact on United Kingdom Law":

"The Regulations once adopted would be 'binding in their entirety and directly applicable in all Member States'. However, in accordance with Article 1 of the proposed Regulation, the Regulation on enforcement measures will apply (only) to the Member States whose currency is the euro."

That is made absolutely clear by the Minister's own document that he supplied to the Committee.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

Hon. Members should think about this carefully. All that we are doing is providing more information to the Commission, and it is information that is already in the public domain and that has already been presented to Parliament.

Photo of John Redwood John Redwood Conservative, Wokingham

Will the Minister confirm that there are two big new regulations that relate directly to the United Kingdom? One relates to budgetary surveillance on all member states, and the other relates to enforcement against "macro-economic imbalances", as the Commission so elegantly describes them. These are new powers in new regulations. Why are the Government consenting to them?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

The enforcement point does not apply to the United Kingdom as a consequence of protocol 15 of the existing treaty framework, because we have opted out of that part. My right hon. Friend is knowledgeable about these things, and he will recognise that the Commission makes proposals, and that ECOFIN and the European Council have set out a clear policy framework on this, as reflected in the conclusions of the Van Rompuy taskforce, which make it very clear that sanctions do not apply in the UK.

Several hon. Members:

rose -

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

Let me make some more progress; otherwise, hon. Members will not have the opportunity to participate in the debate. Let me continue for a few more moments.

Many organisations and individuals, including the IMF and the OECD, scrutinise our economy and our budgets. Many make recommendations or, as happened recently, praise our fiscal consolidation plans. We have nothing to hide from any of these bodies that want to look at what we announce to Parliament or at the economic figures published through the Office for National Statistics or through Departments. It is our decision whether or not we listen to their advice. The UK will continue to prepare its Budget independently; others can make recommendations about it, but, crucially, we are under no obligation to take action and, by virtue of our opt-out, we are not subject to sanctions. Any recommendations, as with those made by any other body, will remain just that. It will be down to the Treasury and Parliament, not to the EU, to construct our Budget.

Photo of Sylvia Hermon Sylvia Hermon Independent, North Down

I am enormously grateful to the Minister for taking my intervention. As Mr Cash said, these regulations are entirely binding on the United Kingdom. Can the Minister assure us that, if the Government decline to give the information requested under these regulations, the European Commission will not take enforcement proceedings against the UK Government for not complying with them?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I do not see the point of not sending information that is already in the public domain. Why would we be so churlish as not to send out stuff that could be got from Google or from the Library or by tabling a written question to the Prime Minister?

Photo of Andrew Percy Andrew Percy Conservative, Brigg and Goole

I am getting a little confused. If the information is already in the public domain and any organisation can find it, and if we do not have to listen to any recommendations made, what is the point of our agreeing to this?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

Given that the process is very straightforward, I begin to wonder why it is causing so much excitement. The reality is that the information is already available and the recommendations do not apply to us. The enforcement mechanism applies to eurozone states; they are subject to sanctions, but we have a carve-out from that because of protocol 15.

Photo of Michael Connarty Michael Connarty Labour, Linlithgow and East Falkirk

May I suggest to the Minister that one of the attractions of the new procedure is that every country in Europe will have to carry this out? They would find out well before any crisis-as we saw in Greece, for example-that they were in trouble. It is a little bit of information to give and a lot to get back. I think that the "Euro-loony party" contingent should leave the Conservative party, so that people with some common sense can deal with Europe sensibly.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I am not going to go down that route, but it is important that information be available. Over the course of the financial crisis-not just in the EU, but globally-we have seen the importance of understanding structural imbalances and their impact on other economies. This is an important strand of debate and it will be continued when the G20 meets later this week. It was certainly an important strand in the G20 Finance Ministers' meeting last month, and, indeed, in the IMF's annual meeting in October. There is nothing new in discussing these issues.

There is an existing mechanism for surveillance in place through the broad economic policy guidelines, but the warning mechanism has been used only twice: it was used for Ireland in 2001, and Greece received a warning in February this year. An improved mechanism would help towards achieving greater economic stability and it is particularly important for the eurozone, where the effects of imbalances and instability have a greater impact on its members, as has been apparent in recent months. That is why eurozone member states support a sanctions regime, penalising eurozone members whose economic policies undermine the stability of the currency and the eurozone economy. The sanctions do not apply to us, as I have said. I give way-

Photo of John Bercow John Bercow Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Speaker of the House of Commons, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Speaker's Committee on the Electoral Commission

Order. Before the hon. Gentleman intervenes, I note that the Minister has been on his feet for 21 minutes and has attended most assiduously to a number of interventions, and that is perfectly in order. However, I emphasise that there is an hour and a half for this debate, and a substantial number of Back-Bench Members have indicated to me that they wish to speak. It would be a very sad and unsatisfactory state of affairs if contributions from those on the Front Bench were to exceed in total those from Back Benchers. On that basis, I feel sure that the Minister, who is an adroit fellow, will be bringing his remarks to a close ere long.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I thank you, Mr Speaker, for that encouragement and guidance, and I apologise for being generous in taking interventions. Let me make rapid progress.

On the issue of sanctions, the same principle applies for those eurozone countries that are in breach of the stability and growth pact excess deficit procedures. In the run-up to the crisis, there was a lack of fiscal discipline, for those inside and outside the euro. Despite the existence of the stability and growth pact and the excess deficit procedure, the eurozone was still undermined by a failure to exert fiscal discipline, and a number of member states in the eurozone have to take tough action to tackle the deficit.

To avoid a recurrence, the Commission and member states in the eurozone have sought to reduce the discretion on the application of the sanction process. The position reached by eurozone countries is set out in the taskforce report. Again, it is worth reminding the House that the sanctions regime does not apply to the UK by virtue of protocol 15 of the current treaty.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I will not give way. I listen carefully to the guidance of Mr Speaker.

To secure fiscal discipline, strong fiscal frameworks are required, as our experience in recent years demonstrates. The fiscal rules developed by the previous Government failed, because their flawed design and remarkable flexibility meant that, despite the rules being met, this country still ended up with a financial crisis. A strong fiscal framework is necessary if we are to have strong public finances. We have shown leadership on that, for example in creating the Office for Budget Responsibility, which has been welcomed by the IMF and the European Commission. Our reforms meet the highest possible standards, and we support responsible fiscal rules at home and abroad. We have achieved that through the mandate the Chancellor set in his emergency Budget.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

Although strong fiscal frameworks are vital, we also believe that fiscal sovereignty is crucial, and that is why the frameworks-the mandates, mechanisms and institutions-should be decided by national Governments and not by European legislation. That position is reflected in the taskforce report, and it is the position that we will adopt in discussions with the Commission.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

We have protected the sovereignty of the House on fiscal matters, and our position on EU economic governance is clear. We need better macro-economic surveillance and fiscal frameworks, because stable and sustainable economic growth across Europe is in the long-term interest of this country. However, that should not be at the cost of our fiscal and economic sovereignty. The Van Rompuy taskforce updates and strengthens the existing framework. On surveillance, therefore, the taskforce recognises, with explicit references to protocol 15, that the UK's opt-outs mean that we are not subject to the sanctions regime.

Fiscal frameworks should be stronger, but should not be dictated by Europe. It is the history of this House to defend fiercely our fiscal sovereignty. Through the agreement reached, the Government have achieved that. No sanctions will be imposed on Britain, and we will be free to set the right fiscal policies for our country's needs.

Several hon. Members:

rose -

Photo of Mark Reckless Mark Reckless Conservative, Rochester and Strood

On a point of order, Mr Speaker. Did not the Minister agree to take an intervention, before the intervention from the Chair?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 5:29 pm, 10th November 2010

Thank you very much, Mr Speaker.

Lurking on the future business section of the Order Paper for some weeks has been a motion for the House to note the European Union taskforce report on European economic governance. Although that gestation period seems to have been overtaken by the events that have transpired following the European Council, it is a pity that an urgent question from Mr Cash was required before light began to be shed on any of the details being considered by the real power brokers in Europe. Our Prime Minister was clearly left on the sidelines in many of the discussions. If I were generous, I might say that that was fair enough, given that we are outside the eurozone. However, the European Council meeting at the end of October showed clearly that the Germans and the French are very much in the driving seat, leaving the Prime Minister with a few scraps to hold aloft as pseudo-trophies in the European Union budget discussions while clearly being unsure how to cope with the prospect of a new treaty being dropped in his lap.

Photo of Mark Reckless Mark Reckless Conservative, Rochester and Strood

As the Front Benches appear to be in agreement on this issue, may I ask the hon. Gentleman a question? Surely the point is that, as he said, France and Germany, which are in the eurozone, need something from us. We had a veto, yet we agreed to this notwithstanding the veto. The 2.9% had already been agreed by the Council. We had a veto on the Next Perspective. What do we get in return?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I shall deal with the nature of the changes in a moment-and there are changes. It would be a bit disingenuous to suggest that nothing is changing in this regard.

From our point of view, eurozone stability and a sensible crisis mechanism are worthwhile, and it is clearly in our national interest to engage strongly in discussions and reforms that promote economic stability across Europe. We will support sensible changes that benefit the United Kingdom. The core idea of improving the rescue mechanisms for eurozone countries facing severe economic difficulties makes logical sense, and it is also wise to find a permanent footing on which to base any new rules rather than relying on temporary arrangements that might either expire or be subject to legal challenge. However, the Prime Minister and the Government are protesting just a little too much that this is entirely a matter for the eurozone, and absolutely nothing to do with us. In fact, there are indirect implications for our economy because of changes that might affect economic growth in the eurozone, as well as direct policy implications that could change the way in which we operate in the United Kingdom.

Photo of Jim Cunningham Jim Cunningham Labour, Coventry South

My hon. Friend will recall that the previous Prime Minister and his Government drew up five economic tests. Had it not been for him, we would not be debating the motion today, because we would be part of the eurozone.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

It was certainly worth punctuating the debate with that point, which my hon. Friend made forcefully and well.

Photo of Edward Leigh Edward Leigh Conservative, Gainsborough

Will the hon. Gentleman now kindly respond to the intervention from my hon. Friend Mark Reckless? Is the Labour party prepared ever to fight for a repatriation of powers, and would it be prepared to use the veto that it has used for the purposes of this measure as a bargaining chip to gain that repatriation of powers?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Our perspective is clearly different from that of the hon. Gentleman. I want to consider what is on the table. There are details still to come when the European Council meets in December, and we shall have to look at those proposals then. It seems to me that there is a case to be made for some sort of objective analysis of just what transfers of policy may or may not be involved in the proposals that are before us today.

Photo of Philip Davies Philip Davies Conservative, Shipley

Does the hon. Gentleman think it makes sense for an organisation whose accounts have not been signed off by auditors for 16 consecutive years to be given more powers over economic and financial governance?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

The hon. Gentleman has made his point in his own inimitable way, but I do not want to be diverted from the substance of what is before us. There is a substantial proposition on the table, and I think it is important for all Members to understand it. The detail that will eventually emerge from the final taskforce report is important, and it would be useful if the Minister could deal with some of the question marks that hang over some of the detail, to which Members have already alluded.

For example, a series of new fiscal disciplines-as they are called-will be pursued across the European Union but, of course, largely for eurozone countries; yet the adoption of enforcement measures will apparently be subject to the negative qualified majority voting procedure. That presumably means that the United Kingdom will take part in any of those decisions. If that is so, can the Minister say how we will inform our policy position if we are involved in votes on enforcement measures? While we may not have a vetoing power here, our role could be strategically significant.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

My hon. Friend is using terms like "largely" and "presumably". These are not definite enough for me. Please will he be firmer and clearer in what he is saying?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I wish I could be firmer and clearer, but we are dealing with a malleable set of proposals. The bundle of directives keeps changing, moving and morphing from phase to phase, and the directives will clearly go into a different phase when the European Council meets in December, but we can discern the rough direction of travel, and many Members will take a firm view on that.

The Minister talked about the sanctions. Yes, it is the case that they may not apply to the UK because of our opt-out from the euro, but the range of non-binding standards and early warning requirements in the event of significant deviation from the adjustment path apparently would apply to the UK; I should be grateful if the Minister would confirm that that is the case. Even if the UK is to be subject only to such commentaries, public observations or other non-binding standards, the Minister should tell the House how they would work and what the implications for us would be. Clearly, what the taskforce report calls the new reputational and political measures will be phased in progressively, but is it correct to read the proposals as also applying to the UK? In other words, is it not true that we will be subject to reporting requirements, potential formal reporting to the European Council in certain circumstances and enhanced surveillance-whatever "enhanced" may mean-if the situation dictates? Is it not also true that we will be subject to onsite monitoring from a mission of the EC-which I thought was curious, and which certainly might be of interest to some Conservative Members-and possible publication in the public domain of these reports and surveillance? Will the proposed regulations to strengthen the audit powers of Eurostat also apply to the UK, and what are the anticipated compliance costs of those changes for the UK and the Treasury? If we fail to comply with the proposed requirements, is it not the case that sanctions could be applied to the UK?

Photo of John Redwood John Redwood Conservative, Wokingham

If this House and a properly elected British Government have chosen a certain course of action on the deficit or the balance of payments-or on whatever-how does it help to have the EU marking the homework, condemning it and using moral suasion to say that this House is wrong?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Well, my point is that it may or may not be a sensible move-and as a pro-European I think benefit could come from it-but what is important is that we get clarity from the Government about what exactly is on the table. If there are to be treaty changes and other new regulations, the Minister has to be straight about that with the country and the House. The latest sanctions in the framework-in terms of interest bearing deposits, non-interest bearing deposits and eventual fines-may not apply to the UK, but there is a first phase to that process which is the application of standards and assessments of our economic and fiscal position, and that will apply to the UK. The motion seeks approval for the Government's position that any sanctions should not apply to the UK because of our euro opt-out, but there are developments here that strengthen the role of the EU in respect of our economic policy, and while that may be a good thing, some Members of this House would be wary of it.

There are also wider implications for our economy and our growth trajectory. For example, I am particularly intrigued by the German argument that bondholders should have greater liability-such as in the form of interest payment holidays, or bond value haircuts, as they are known-for potential future eurozone bail-outs. The implications for UK banks and bondholders could be significant if they are embroiled to a larger extent in the crisis management mechanism. UK banks hold particularly high proportions of Irish and Spanish liabilities. A recent Bank for International Settlements report found that 22% of Irish bonds and 11% of Spanish bonds are in UK hands. There has been much discussion of whether City investors are therefore subject to higher risk, or whether the markets have already priced that in. Either way, there are indirect implications for British investors. Moreover, the new suite of policy changes affecting eurozone economic governance will not just be on paper; the changes will bite in the real economies in each of the eurozone countries and could have a bearing on their own internal growth and investment plans.

Photo of Mark Hendrick Mark Hendrick Opposition Assistant Whip (Commons)

My hon. Friend hits the nail on the head. While the UK may not be signed up to the stability and growth pact and we may not be subject to EU deficit procedures, stability and growth in the eurozone are very important to the British economy. Moreover, the way in which the Government are dealing with our deficit will put British growth at risk, and that is part and parcel of how we interact with the other economies in Europe.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

My hon. Friend makes a strong point. If fiscal policies across the eurozone are simultaneously shifted towards a marginally more deflationary stance as a result of the new policy framework that we are debating tonight, the resulting contraction in economic activity and consumer spending could impact on the sale of British goods and services in those countries. In other words, the eurozone-which, as we know, is by far the UK's largest trading partner, accounting for more than 50% of our exports-could face economic challenges and, in turn, it is likely that UK companies will face problems exporting to those markets. Add to that the G20 discussions on international currency issues and an influx of capital to the eurozone following worries over the dollar and the Chinese renminbi and we can imagine a relative appreciation of the euro afflicting our exporters still further. We will have to see how that latter issue pans out in particular, but this is of significance to the UK.

Photo of Bernard Jenkin Bernard Jenkin Chair, Public Administration Committee

Is the hon. Gentleman arguing that somehow these arrangements will give us more influence and more control over the economies of other member states? On that basis, should we therefore not be seeking to enter into arrangements of the same sort with, say, the United States, so that we can control its deficit? The US deficit will have far more effect on our economy than any individual deficit in any individual member state of the EU.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Those of us in opposition are merely asking questions and scrutinising what is on the table, but we are trying to find out what will be the impact on the UK. Ministers are arguing, "Don't worry, absolutely nothing changes and there is no impact whatever." As far as I can see, there are strands and suggestions that there will be an impact, both direct and indirect. In that respect, although we might have different views, there might be a point on which we can agree.

If the eurozone deflation and the shrinkage of European economic markets affect our exports, that matters, because the Treasury has depended on them so greatly. The June Budget and the spending review were predicated on a return to strong economic growth here in the UK, based principally on higher business investment and strong export growth. The Office for Budget Responsibility analysis shows that the cuts imposed because of the Chancellor's austerity programme and his overly speedy deficit reduction strategy will see private consumption shrink rapidly and Government consumption doing the same.

Cuts in domestic expenditure will hit growth-that much is clear-but the Chancellor has bet the shop on the countervailing growth in trade and business investment. The Treasury states clearly that it needs £100 billion of growth in exports and business investment, yet the last time we saw such a massive rate of growth for exports was in 1974 and we achieved that rate of improvement in business investment only in 2005, but the Chancellor's sums depend on the UK achieving both those record levels in each of the next three years-a very tall order indeed, equivalent to tripling our exports to the US and seeing our exports to China grow 20 times or to India 40 times.

Clearly, our reliance on the eurozone's appetite for our exports is central to the Chancellor's strategy, so there are implications for British fiscal policy here.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I thank my hon. Friend for giving way yet again. He focuses on trade, but it is in trade that we have our worst possible relationship with the rest of the EU. We have a gigantic trade deficit. We buy billions more from them every month than they do from us. The only advantage we have had in the last year or two is that we have depreciated the pound relative to the euro and we have started to see a slight improvement in our trade balance with the EU.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

If we see growth dented here in the UK because those ripples flow from the eurozone-changes as a result, perhaps, of the measures we are debating-we could see further implications for spending cuts here in the UK in respect of vital public services and more austerity when perhaps stimulus would be the order of the day. However, there is a balance of risks here and it is clearly important for fiscal discipline to be exercised, but responsibly so. We have argued for a sensitive and measured approach to deficit reduction in this country, rather than the doctrinaire approach of steep and swift cuts favoured by the parties whose Members sit on the Government Benches.

I am glad to note the ironic analysis of the Minister in the explanatory memorandum that was referred to, which he signed last week. He said that he believed

"that the main consideration should be whether a Member State's debt is on a downward trajectory, rather than the specific pace of annual debt reduction".

He also said that the numerical pace should remain

"only as an indicative benchmark...that...is not used as a concrete rule by which Member States' debt reduction plans are judged."

How right he is-if only he applied such pragmatic sense to our economy and public services in the UK, too.

Photo of Claire Perry Claire Perry Conservative, Devizes

I am enjoying the hon. Gentleman's measured canter around the potential risks associated with this legislation and I am also entertained to hear the words "stability and growth" coming from the Opposition Benches-something that perhaps they did not achieve towards the end of their time in office. However-perhaps I am front-running his conclusion-is he going to vote for or against the legislation tonight?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

As I see it, it is difficult to know yet what propositions are before us. I want to hear the Minister's answers to our questions and we will make up our minds then. The substance of the regulations and the eventual treaty changes might be beneficial, but we also have to wait and see what President Van Rompuy proposes in his eventual treaty amendment and what emerges from the December Council meeting. We are not at the end of a process; we are in it. There are further propositions to be put on the table.

Photo of Mark Hendrick Mark Hendrick Opposition Assistant Whip (Commons)

One regulation that might well be on the table is for any member state of the European Union, within or outside the eurozone, that has a debt level of greater than 60% of GDP to reduce that debt at a rate of at least 5% per annum. That could well be a regulation that the Government sign up to, even though they might not be subject to penalties if they do not keep to it.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Indeed. There could be significant direct policy changes as regards transfers of policy and also indirect economic impacts on the UK. We have to see more detail about what will emerge from those who are in the driving seat-unfortunately, that does not seem to be either our Chancellor or our Prime Minister.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I want to make a bit of progress-but it is too tempting.

Photo of Matthew Hancock Matthew Hancock Conservative, West Suffolk

I am extremely grateful. The Minister made a clear statement that this House, under this Government, will retain fiscal sovereignty. Would the hon. Gentleman?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

We take the view, as we always have, that where it was in the British interest to co-operate with our European colleagues, we would do so. The hon. Gentleman's continuing loyalty to the Chancellor is laudable-he has a record of that-but I am not sure that he has convinced the colleagues on his own side. The coalition remains precarious on Europe, straddling so many major divisions on how to proceed. It is little wonder that the Prime Minister is on the margins of these discussions in Europe when he is buffeted between the margins of his own Government. He is caught somewhere between the pro-European enthusiasms of the Deputy Prime Minister-at least, that used to be his position before the general election, and I am not quite sure what his position is now-and the anti-European Union noises from a sizeable chunk of his party. Will the Prime Minister persuade his colleagues that any treaty should not require a referendum? We shall have to wait and see. Although the Government might be concentrating on papering over the cracks in the coalition, the Opposition will monitor closely the impact of these changes on exports, growth, jobs and the prosperity of this country. Those are the issues that matter to our constituents and they are our priorities.

Several hon. Members:

rose -

Photo of Bill Cash Bill Cash Chair, European Scrutiny Committee, Chair, European Scrutiny Committee 5:48 pm, 10th November 2010

This debate and the Minister's remarks remind me of what Alice said in "Through the Looking-Glass", when she referred to Humpty Dumpty and his rather scornful tone:

"'When I use a word,' Humpty Dumpty said...'it means just what I choose it to mean-neither more nor less.'

'The question is,' said Alice, 'whether you CAN make words mean so many different things.'

'The question is,' said Humpty Dumpty, 'which is to be master-that's all.'"

That is the essence of the question of European economic governance. We have been told that it is good for us, that it does not affect us and that it does not make a difference. However much one gets into the interpretation of those words, the European Scrutiny Committee's report makes it clear that there are significant differences, in aggregate, between different parts of the regulations and directives. If the proposal is accepted by the Government, they will effectively cross the Rubicon and similarly, by acquiescing in ever-greater European governance over our economy, they will significantly undermine our ability to govern ourselves. We need less Europe, not more.

The proposals extend to the United Kingdom, as a member of the European Union, thereby raising questions of sovereignty. Under the aegis of the forthcoming Bill on the European Union, my Committee will hold an inquiry so that we can sort out once and for all whether it is the House of Commons, Parliament and that sovereignty which governs the country, or whether it is the European Union. Under Standing Orders, the Committee's duty is to report to the House, not to the Government, on matters that we regard as requiring debate by reason of their legal or political importance. The scrutiny reserve remains in place until the debate has taken place, and thereafter Ministers can, and no doubt will, vote and/or agree the proposals, but may continue negotiations.

I was glad that the Minister's explanatory memorandum stated specifically, on several vital matters, that the Government would

"seek to ensure in negotiations" that matters of concern would be improved. In doing so, the memorandum by definition conceded that these issues have not been resolved entirely, that negotiations could improve them, that they do make a difference to the United Kingdom, its Government and its Parliament and that they have to be remedied. As Chairman of the Committee, I have placed in the Library a note in my name on all these matters, so anyone who wishes to look at them may do so.

I was puzzled by the Prime Minister's response to a question that I asked during his statement to the House on the outcome of the European Council meeting. He accepted that the matter was complex and required a greater opportunity for exchange of opinions and explanation, but he also said:

"This is not a new framework."-[ Hansard, 1 November 2010; Vol. 517, c. 614.]

I find that extremely puzzling, however one construes it, given the evidence before us and the specific reference to a new surveillance framework in the taskforce report and in the presidency conclusions that he signed off. The truth is that the Commission intends to exert peer pressure on all member states of the European Union. The taskforce report of 21 October preceded documents being placed in the Library, following an urgent question I asked, emblazoned with the word "limité", which means very restricted circulation. They included a letter of 9 July from the Chancellor of the Exchequer to other member states. It might be thought that there was every reason to present those documents to the European Scrutiny Committee, even if they were not specifically depositable. The Committee does not operate by website.

A substantial question on whether the UK is affected has been dealt with in a note that I received from the Library, from which I shall quote, on increased macroeconomic surveillance. It says:

"It is proposed that a greater role is played by the Commission in macroeconomic surveillance. This surveillance mechanism would be distinct from that currently taking place under the SGP"- the stability and growth pact-

"because it is non-fiscal in nature; it will focus on countries' broader macroeconomic positions in relation to the rest of the EU."

The note goes on:

"The idea of deeper macroeconomic surveillance was put forward in March this year as part of the...Europe 2020 proposals", which were, of course, under the previous Government. The note continues:

"As originally envisaged, the deeper surveillance framework would apply only to the euro area countries; however, the Commission proposals of 30(th) June"- after the general election-

"and the Task Force Report of 21(st) October" both apply to "all Member States". That is a matter of considerable concern. Why have the coalition Government agreed to extend the framework to all the member states, whereas the previous Government appear to have confined it exclusively to the euro area? As my hon. Friend Mr Clappison said, the taskforce recommends deeper macroeconomic surveillance, with the introduction of a new mechanism underpinned by a new legal framework based on article 121. The Minister's explanatory memorandum specifically refers to the legal impact and therefore the jurisdiction of these matters, as I have already mentioned, which clearly shows that there is a legal impact on the UK. Therefore, by definition, the proposed mechanism affects the UK and hands over jurisdiction in these matters to the European Court of Justice for interpretation and construction.

Furthermore, it is possible, and even likely, that the stricter reporting requirements will apply to the United Kingdom under the macroeconomic surveillance proposals, particularly if the UK were placed in an excessive imbalance position. We have always conceded, right from the beginning, way back to the time of the Maastricht rebellion, that there would be no sanctions because of the opt-out that we achieved. The fact that the Government continuously state that it is a victory not to have had sanctions imposed is merely a statement of the obvious. I go further. I would be grateful if someone could tell me which member states have ever paid any fines or had any sanctions imposed upon them under any of these arrangements. The answer is none, and there are those who argue that there never will be.

We are in a difficult situation with regard to how we will vote on the motion. Serious questions arise, and I was concerned when I read the letter and the appended document from the Chancellor of the Exchequer, which I had to extract by way of an urgent question, for which I was most grateful, Mr Speaker. In that, there is a description of economic governance, the words of which would not be easily understood. It states:

"Democratic legitimacy is vital to everything that the EU does, and Ministers need to be accountable both to other Member States and to their electorate."

I find that a new and strange doctrine, and a rather dangerous one. I had no idea that Ministers were accountable to other EU member states. It is conceded, and I agree, that the United Kingdom Budget will be presented first to the UK Parliament, but the essence of the problem is that in the compilation and the construction of the Budget, a series of data and statistical information would have to be provided. That in itself creates the framework that constricts our ability within our parliamentary process to act on our own terms and in line with the principles that underpin our parliamentary Government-that matters of taxation and spending and the formulation of them depend upon the House of Commons, not upon the European Union.

Given the significance that has been attached to these ideas, they represent a drift and an acceptance of European economic government through the surveillance framework by increasing the powers available to the Commission. This does not in any way alter the degree of intrusion into the construction of our Budget before it is presented to Parliament. One of the most difficult aspects is that far from our having a need for much less European economic governance, we are having more. As we move further forward and become more absorbed into this arrangement, we have to ask what is actually happening in the EU itself. As one of the other national European scrutiny committee chairmen said to Mr Van Rompuy when I was in Brussels the other day, "Will the European Union go bankrupt if we refuse to obey your rules?" Other member states are beginning to get the message, which is why I think Mr Van Rompuy issued that assault on Euroscepticism throughout Europe. He is getting the message that people in national Parliaments are not prepared to accept, for example, the fact that their economies have failed because of the EU's refusal to deregulate and repatriate. I mention in brief the Deputy Prime Minister's remarks on that subject, because he clearly stated that there would be no repatriation, despite what my right hon. Friend the Prime Minister asserted in his speech to the Centre for Policy Studies in 2005.

We need to generate enterprise for small and medium-sized businesses. There is the failure of the Lisbon agenda, massive unemployment, of more than 20% in some countries, riots, protests and a sense of failure, despair and democratic hopelessness. This is reflected-

Photo of John Bercow John Bercow Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Speaker of the House of Commons, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Speaker's Committee on the Electoral Commission

Order. The hon. Gentleman is straying very considerably wide of the matters under discussion. I know that he is a sensitive fellow and will be aware of the significant number of other Members who wish to contribute, so I feel sure that, in bringing his remarks to a fairly early close, he will focus on the matters that are before us, rather than those that are not.

Photo of Bill Cash Bill Cash Chair, European Scrutiny Committee, Chair, European Scrutiny Committee

I entirely accept that and will bring my remarks immediately to a conclusion.

Rules and regulations will not turn the European Union into a thriving economy with which we trade. It is said that 50% of our trade is with the European Union, and that the proposals before us are necessary to achieve stability in the European Union. The crucial point is that, underneath all those rules and regulations and the determination to achieve European economic governance, we are going the wrong way, not the right way. The measures do affect us. We need more enterprise, more small businesses, more deregulation and repatriation. I am not surprised, therefore that in a recent opinion poll 80% of people said that they wanted the repatriation of powers from the European Union.

We are being more and more absorbed by a failed European Union. Under this coalition, roadblocks are being put up to prevent us from sorting that out, and the new surveillance framework is part of the problem, not the solution. I shall vote against the motion.

Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby 6:02 pm, 10th November 2010

I shall join the hon. and long-winded Member for Stone (Mr Cash) in the Lobby tonight, because, whatever our Front Benchers say, there is enough lead in my pencil to realise that the proposals should be opposed, and that the Government's long-winded motion is unacceptable. The measures will impose additional obligations on the United Kingdom, but I shall not go into them, because my hon. Friend Chris Leslie made the main point. It is a question not so much of the obligations, but of the economic effects of the measures on European markets.

Even if, as the Minister said, the measures are enforced only on eurozone states, they will still have an economic effect on us, because when discipline is tightened in the eurozone, there is eurozone deflation. That is already in progress. It was built into the exchange rate mechanism, and it is now built into the euro, because Germany has abnormally low inflation. Germany has a marvellous co-operative arrangement with the unions and with industry. It has heavy investment, powerful producers and abnormally low inflation, but because all the other eurozone states, which have customarily had higher inflation, wage inflation and costs, are involved in the same currency, they are forced to deflate to German levels. In other words, the euro is a deflationary mechanism that forces other nations down to the abnormally low rate of inflation in Germany, and that has consequences. They are all increasing unemployment, cutting public spending and deflating their economies, and therefore the demand for Germany's powerful exports falls.

Our exports are also affected. We now need a period of export-led growth, having not had that and having built up an enormous deficit in the European Economic Community. The 25% devaluation that we have experienced because of the previous Prime Minister's wisdom in keeping us out of the euro allows us to take the adjustments on the exchanges, which Greece and the other countries cannot do, but we are not getting the benefit of that because of the deflation in European markets. Deflation has been forced on Greece, Portugal, Italy, Spain and Ireland, which are all very seriously deflated. Demand in Europe is therefore cut, and it will be cut further if these measures are introduced. We need export-led growth and we are not getting it. That is my main argument; I will be very brief.

I am frightened that the Minister's approach, and the approach involved in the motion, means that on another issue we will fudge, not fight. Fudge is built into this Government because it is a coalition between the Liberal Democrats, who are Euro-daft, and my friends and allies the serried ranks on the Conservative Benches, whom I hope to join in the Lobby. There is a built-in tendency to fudge that we have already seen in the approach to the European budget, where without opposing, fighting or contesting it, we have agreed a 2.9% increase which will mean an increase of £440 million in our contribution to £7 billion next year. This country can ill afford that when we are cutting public services. I want to avoid the tendency to fudge that is built into this Government and to encourage them, by our votes tonight, instead to fight on these issues.

Photo of James Clappison James Clappison Conservative, Hertsmere 6:06 pm, 10th November 2010

Let me begin by congratulating my hon. Friend the Minister on his very full opening speech. I want to say a few words about one or two things that perhaps did not creep into his remarks.

I should like to pay a compliment to the President of the European Union; I suppose that he does not often get that in this place. The words in his report are very clear about what he was trying to do-to put in place a new mechanism. That is what he was charged with doing by the European Council, and that is indeed what he did. It will be no surprise that the President of the European Union should seek to discharge that duty by putting in place a whole raft of new measures giving new powers and responsibilities to the European Commission.

The Minister helpfully set out those new powers in the Government's explanatory memorandum. That makes it clear that the European Commission, whether we say that it has new responsibilities, new roles or new powers, is going to be very busy giving a good going over to this country's economic performance, reaching public judgments that could well have an effect on our economic reputation. It sets a scoreboard for how well the country is doing, and judges the country by that scoreboard. It carries out reviews and investigations and sends delegations, and if the country in question is not responding appropriately, the Commission has the power to recommend to the Council that that country be placed in the excessive imbalances procedure-something that I think the Minister did not have quite enough time to mention.

Whether one regards that as a sanction depends on an interesting choice of language. In my previous career as a member of the Bar, I never thought to console a prisoner who had just been sentenced to immediate custody by saying to him, "Well, at least you didn't get a fine." The excessive imbalances procedure could well be borne in mind by those who frame economic policy and wish to avoid such a consequence. Other Members will have far more experience of financial services and the markets than me, but I do not think that anybody in the markets would be dancing with glee at the news that the country was just about to be placed under such a procedure. This is all down to the very wide range of new responsibilities of the European Commission, which is being allocated a much more intrusive role by this document.

The alternative argument is that it is a good thing that this is happening; we heard shades of that from the Labour Front Bench. However, how much confidence can we place in the economic management and judgment of the European Commission, considering matters starting with its rather cavalier treatment of recommendations for the European budget in the current economic circumstances, and going all the way back to the fudged criteria for European economic and monetary union?

Even if one does have great confidence in the European Commission, there are bigger questions that should loom in all our minds. To whom is it accountable? Can we ask it questions? Can we hold it to account in this House, and who does hold it to account? What can the man in the street, the voter, do if he is not happy with the economic criteria that it has fashioned for this country?

Ministers should be very careful indeed about the responsibilities that are allocated to the European Commission. I know that there is a choice of language and a judgment to be made, but after looking through the long list of new responsibilities that have been given to the Commission, I think we should be very careful. We have heard talk of surveillance and informal discussions, but Ministers should remember that not all that long ago, justice and home affairs, and the common foreign and security policy, were said to be matters on which Ministers would simply carry out informal discussions between themselves. It was said that they would never come within the purview of European institutions. Today, of course, justice and home affairs are very much within the grasp of European law makers and the European Union, and we now have a European Foreign Minister and a European diplomatic service. Not that long ago, those things were the subject of informal discussions.

We should be very careful indeed before setting foot down this path. We should consider the matter carefully this evening and face up to the enormity of the responsibilities that we are placing upon the European Commission.

Photo of Michael Connarty Michael Connarty Labour, Linlithgow and East Falkirk 6:11 pm, 10th November 2010

First, I wish to put on record what we are supposed to be debating, because Members have wandered all over the place. We are debating a series of six documents sent to the Government by the European Scrutiny Committee, on which the Government have now taken a position. Four are about the stability and growth pact-our Committee reference numbers for them are 32036, 32043, 32044 and 32047. The other two relate to the excessive imbalances procedure-documents 32045 and 32046.

In the main, those documents make no difference whatever to procedures that the UK has to carry out. However, a lot of heat has been made about the fact that they affect other countries, and that if the conspiracy theory of Mr Clappison is borne out, they may affect our Government, who will have to give up their fiscal veto. The same was said in the exchanges on the recent urgent question asked by Mr Cash. However, we are quite clearly protected in the Lisbon treaty and do not have to go down that road.

The documents will not have any effect on us, because we are not a member of the eurozone. They can be read in detail, and Members will find that the coercive measures set out in them do not relate to anyone outside the eurozone. The Government's position is therefore to note the documents.

On 27 October, the Government made their position clear in response to the hon. Gentleman's urgent question. The Financial Secretary quoted the report of the taskforce on strengthening economic governance in the EU, which has been referred to today as though it were a conspiracy document. It states that

"strengthened enforcement measures need to be implemented for all EU Member States, except the UK as a consequence of protocol 15 of the Treaty".

That is quite clear. The hon. Gentleman reiterated that

"we will not agree to any changes to EU treaties that move more powers from this country to the EU. The UK's exemption from the sanctions proposal will be explicit, and there will be no shift of sovereignty from Westminster to Brussels."-[ Hansard, 27 October 2010; Vol. 517, c. 319.]

It is important that we are clear about what we are trying to do.

We should be sensible in our debates, and I say to Members to whom the EU is anathema, or who are Eurosceptic to a great degree, that they should not diminish what they have to say about important matters relating to the Government's position on the EU by arguing that somehow we are selling out if we do what is asked in document 32047, which is about the surveillance mechanism in the reporting regime. If we do not know what 26 of the 27 countries are doing in their budgets, we must agree on a proposal for everyone to put in information, so that both we and the Commission know what other Governments are doing. If we had done that we would have known how badly Greece's economy was faring when it was suddenly found not to be putting accurate figures in to the European Commission.

Photo of Bernard Jenkin Bernard Jenkin Chair, Public Administration Committee

Just for the convenience of the House, will the hon. Gentleman explain why the numbers of the documents that he has read out do not correspond with the numbers in the Government's motion, because those are the documents that we are scrutinising?

Photo of Michael Connarty Michael Connarty Labour, Linlithgow and East Falkirk

The Government use the nomenclature of the EC reference and I am giving the Committee reference. When people want to find things, it is much easier to look at what the European Scrutiny Committee does under its numbers than to try to find it in EU documentation. They are, in fact, the same documents.

There is a very good advert on television-"Calm down, dear, it's only an advert." To people who try to say that this motion is a major sell-out by the Government, I say, "Calm down, dear, it's only an information exchange." Frankly, if there is a vote tonight, I will be voting with the Government. I will not be voting for any of the absurd amendments that have been tabled. The Government are doing the right thing. I am not out to score points on behalf of my party against another party. Our relationship with the other 27 countries with which we do most of our trade is far too serious for that. We must not kid people. The hon. Member for Hertsmere, with whom I sit in the European Scrutiny Committee, did not complete his quote from paragraph 34, page 8 of the taskforce report, which said:

"taking into account the specificity of the euro area."

Paragraph 35 talks about the Commission conducting in-depth analysis and surveillance missions

"in liaison with the ECB for euro area...states."

It is quite clear that these documents are about the eurozone. I know that there are problems in the eurozone, but when signing up to the euro one takes on such responsibilities.

Photo of Michael Connarty Michael Connarty Labour, Linlithgow and East Falkirk

Given that we are trying to let people speak, I will not give way.

Let us be sensible. To give and exchange information is sensible, as is surveillance. Without any wish to criticise anyone in this or the previous Government, I say that when comments were being made about our imbalances, perhaps our Government should have listened, and then we would not be living in such straitened times.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden 6:17 pm, 10th November 2010

The question that this House must face is this: do these measures and the possible treaty change that they presage constitute a threat to the sovereignty of this country or an opportunity for us to regain a little sovereignty? If the measures envisage a substantive transfer of sovereignty, restricting our fiscal and economic freedom, then the issue is clear: we should veto them or seek a full exemption from them. If the Government were to contemplate accepting them without a full exemption, there would have to be a referendum. Indeed, the very prospect of a referendum would be enough to gain us full exemption. My hon. Friends have concerns, which I fully understand and respect, that although limited to giving information and possibly signing up to targets that we could not be compelled to meet, these measures may be the thin end of a Trojan horse-if I may mix my metaphors.

We have seen in the past how wording that has been glossed over has led to the transfer of powers. So far, I am not persuaded that the measures and what is envisaged in the treaty changes would result in a substantial transfer of sovereignty. However, I shall listen closely, and advise others to inspect thoroughly and scrutinise deeply. If at the end of the day we are signing up just to the sort of surveillance that we already receive from the IMF, that would not worry me too much. Indeed, then I would say to myself, "This is an opportunity." If the measures solely concern the members of the eurozone, but none the less require our assent before they can go ahead, we should say to them, "We will let you do to yourselves what you want. We will give you the necessary approval, if in return you let us do some things that we want to do, which won't concern you, by repatriating some powers."

We on the Conservative Benches were elected on a manifesto that said:

"We will work to bring back key powers over legal rights, criminal justice and social and employment legislation to the UK."

We have a target, and this is an opportunity, so we should seize it. However, we are, of course, a coalition Government, so we should seek modest returns of powers that are compatible with the objectives of the whole coalition. Liberal Members in the west country expressed their hope for a return of powers over fisheries; indeed, they stood at the election on it. Fisheries are not a big issue in my inland constituency, but I would be prepared to work with those Members for a return of powers.

However, the coalition agreement is quite specific. It says not only that we will

"ensure that there is no further transfer of sovereignty or powers over the course of the next Parliament," but that we will

"examine the balance of the EU's existing competences and will, in particular, work to limit the application of the Working Time Directive in the United Kingdom."

I therefore have a simple question for the Minister, which I hope he will answer in the affirmative in his winding-up speech. Will we be using this opportunity both to meet the objectives laid out clearly in the coalition agreement and, in return for our consent to such measures, to seek to limit the application of the working time directive to the United Kingdom?

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North 6:22 pm, 10th November 2010

I shall speak briefly, but it is important for the House to know that there are also Members on the Opposition Benches who will be voting against the Government motion, and on similar grounds to do with the implicit transfer of sovereignty in the Commission's initiative. I congratulate the Chair of the European Scrutiny Committee, Mr Cash, on ensuring that the House is fully aware of the concern about such matters and on the fact that we are having this debate, as it is largely down to him.

There is serious confusion about the wording of the documents. The terms "all member states", "eurozone states" and "non-eurozone states except the UK" are used at different points throughout. It would be simpler if only the term "eurozone states" was used throughout, so that we could be absolutely clear that the provisions apply only to the eurozone states. In the first draft regulation-on the preventive arm of the stability and growth pact, as it is called-reference is made to all member states. In the second draft regulation-on what is known as the excessive deficit procedure-reference is made to all member states, but a little later it refers in two places to the eurozone. The third draft regulation talks about eurozone states. The two further regulations, on macro-economic imbalances, refer to member states-not "all member states"-or, alternatively, to eurozone member states, but right at the end there is a reference to non-eurozone member states except the UK. I want to be clear that the provisions apply to the eurozone, not to the United Kingdom, so that we can know precisely where we stand on sovereignty over our own economy.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

I, too, had to read the documents several times before I began to understand what was being proposed, but is not the simple distinction that the information-sharing provisions apply to all EU member states, whereas the sanctions under the stability and growth pact apply only to eurozone members?

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

The Minister himself said that any information about the economy that was needed could be found by googling it, and there is also the Library note on economic indicators, which I use regularly. All the information is there-for example, in the Budget statements and so on-and we do not need to provide much more than that. There is masses of public information. We do not need to have it in regulations. It can be provided as a matter of course. We must put down a marker for the European Union saying that we will not go this far, and that we do not want changes that show political creep or gradual encroachment of the European Union into British sovereignty over our own economy, going beyond the treaties.

I agree with my hon. Friend Austin Mitchell about the nonsense of the eurozone and the economic arrangements that it entails. There is a reference to "surveillance of macroeconomic imbalances", but the trade imbalance that I focused on earlier in the debate is serious. We have a massive trade deficit with the rest of the European Union, particularly Germany, which sustains a massive trade surplus. Will the European Union focus on that imbalance?

In 1944, Keynes said that countries running massive trade surpluses should be required to appreciate their currencies to bring them into line. Will that be suggested to Germany? That cannot happen because Germany is in the eurozone, and all those other countries that cannot compete and cannot inflate at a greater rate are having severe difficulties, which are becoming worse year by year. Will that imbalance be addressed? When it is, I will start to take the European Union a little more seriously on economic matters.

I have probably said enough. I intend to vote against the motion, and I hope that the Government will challenge the European Union to make the wording of its documentation right and acceptable to the United Kingdom.

Several hon. Members:

rose -

Photo of Douglas Carswell Douglas Carswell Conservative, Clacton 6:26 pm, 10th November 2010

I shall be brief, and I shall vote against the motion. The House is being asked to endorse an agreement that would strengthen European Union economic governance. It is not in dispute that the new measures would give EU institutions, the Commission and the Council greater powers. What is in dispute is, first, the extent to which such changes would involve the United Kingdom, and whether the new arrangements would apply only to the 16 members of the eurozone, or to all 27 member states, including Britain.

The second point of contention is the extent to which Britain is now subject to EU oversight when we set our own Budget. Having gone to Brussels promising not to give away so much of our money, Ministers seem to have returned having given Brussels the right to have a say in how we spend the rest of our Budget.

No one was more heartened than I to hear the Prime Minister tell the House back in June that any new deal with the EU

"should not interfere with national competencies".

He also said:

"On budget surveillance, let me be clear: the UK Budget will be shown to this House first and not to the Commission...co-ordination and consultation, yes; clearance, no, never."-[ Hansard, 21 June 2010; Vol. 512, c. 35.]

Such assurances were welcome, yet within a couple of weeks we heard Olli Rehn, the Economic and Monetary Policy Commissioner, spell out the details. He said:

"All member states would submit their fiscal programmes at the same time in April to allow the Council to issue country specific policy guidelines".

Is it any wonder that when the Chancellor appeared before the Treasury Select Committee he was able to reveal the date of the next Budget? It is now part of a timetable set in Brussels.

Ministers have claimed that the level of disclosure is nothing new, and that it is no more than what a think-tank might find out about UK fiscal policy via Google. Indeed, but think-tanks do not have the power to issue guidelines, and they cannot pass legislation on the basis of the analysis that they then make.

Ministers are keen to tell us that as a result of the new arrangements Britain would not at this time be subject to sanctions. To the best of my knowledge, no one is suggesting otherwise. The issue at stake is not whether the new EU regulations apply sanctions to the UK, but whether, from now on, the EU has the right to make laws on UK fiscal policy in the first place.

At his press conference on 17 June, the Prime Minister assured us that because we are outside the eurozone our opt-outs would be safeguarded. He talked of Van Rompuy's efforts to "strengthen Eurozone governance arrangements". He referred to the eurozone, not the EU. Since then, the talk has been not of eurozone economic governance arrangements, but of EU governance arrangements. Within a couple of weeks of the Prime Minister's assurances, talk shifted from measures that would affect just the 16 eurozone members to measures that would apply to all 27 member states, including Britain.

Angela Merkel made it clear that economic governance should apply to all EU states, not just the eurozone. Barroso declared with reference to economic governance:

"Europe must show it is more than 27 different national solutions".

He said 27, not 16. It is clear that his intention is that the new arrangements apply to the UK. Van Rompuy went out of his way to warn against creating what he called "dividing lines" between 27 member states and 16 eurozone countries. What were clear assurances to be welcomed and embraced in early summer had, by the onset of autumn, become dividing lines to be done away with.

Paragraph 34 of the Van Rompuy report states that there will be a new legal framework

"applying to all EU Member States".

Can the Minister explain what part of "all" excludes Britain? Regardless of paragraphs 35 and 39, or reference to protocol 15 of any treaty, such wording creates ambivalence at the very least. It suggests that EU institutions will now be able to legislate in areas of UK national competence in which they could not previously legislate. Has the precedent now been set? Is the field occupied? Is not the stage set for the day when some other Minister returns from Brussels to explain to the House how we have been sadly outvoted?

So who is right? Ministers who assure us, or Eurocrats who do not? How can we explain the differences between Ministers' assurances and what lies in the small print of what is before the House today? At best, this can be explained by sloppy drafting by officials, but if that is the case, why are we employing sloppy drafters to negotiate matters of such fundamental importance? Are those officials the ones on whom we will depend to turn the contents of the Van Rompuy report into the treaty changes? I cannot support the motion, as it will mean a further transfer of powers from this country to Brussels. I urge colleagues to oppose it.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury 6:30 pm, 10th November 2010

I have listened carefully to hon. Members' concerns tonight, and I want to state yet again that the proposals from the Van Rompuy taskforce strengthen an existing framework, crucially without encroaching on fiscal and economic sovereignty. There is much more work to be done on this, but let me assure my right hon. and hon. Friends that the Government are committed to securing the best outcome from the proposals, to defending Britain's interests and to protecting this Parliament's right to set and scrutinise our fiscal policy. Anything less would not be acceptable.

I shall deal with some of the issues that have been raised in the debate. Does the fact that the EU, along with other organisations, undertakes surveillance mean that we will be subject to sanctions? No, it does not. Does the measure mean that we will need to follow any of the recommendations made? No. Will we have to present our Budget to Europe before we present it to this House? No. Will we have to give the EU information that has not been presented to this House first? No. Will the provision of information erode our sovereignty? No. Perhaps more importantly, will any powers over our Budget be transferred from Westminster to Brussels? Again, no. I hope that I have been clear and explicit on those points, and it is for those reasons that I ask Members to support the motion tonight.

Question put.

The House divided: Ayes 296, Noes 40.

Division number 115 European Union Economic Governance

A majority of MPs voted to approve the Government's position that any sanctions proposed by the EU in relation to economic governance do not apply to the UK.

Aye: 296 MPs

No: 40 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Absent: 309 MPs

Absents: A-Z by last name

Question accordingly agreed to.

Resolved,

That this House takes note of European Union Documents (a) 9433/10, Commission Communication on reinforcing economic policy co-ordination, (b) 11807/10, Commission Communication on enhancing economic policy co-ordination for stability, growth and jobs - tools for stronger EU economic governance, (c) 14496/10, Proposal for a Council Regulation (EU) amending Regulation (EC) No. 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure, (d) 14497/10, Proposal for a Council Directive on requirements for budgetary frameworks of the Member States, (e) 14498/10, Proposal for a Regulation of the European Parliament and of the Council on the effective enforcement of budgetary surveillance in the euro area, (f) 14512/10, Proposal for a Regulation of the European Parliament and of the Council on enforcement measures to correct excessive macroeconomic imbalances in the euro area, (g) 14515/10, Proposal for a Regulation of the European Parliament and of the Council on the prevention and correction of macroeconomic imbalances, and (h) 14520/10, Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No. 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and co-ordination of economic policies; notes the Report from the Task Force on Economic Governance in the European Union; notes with approval that budgetary and fiscal information will continue to be presented to Parliament before being given to EU institutions; and approves the Government's position, as endorsed by the Task Force that any sanctions proposed should not apply to the United Kingdom in consideration of Protocol 15 of the Treaty on the Functioning of the EU.