‘The Chancellor of the Exchequer shall make a report to Parliament within one year of the Act coming into force and annually thereafter setting out an assessment of the impact of the European Stability Mechanism on the risks to the interests and obligations of the United Kingdom from eurozone instability.’.—(Emma Reynolds.)
Brought up, and read the First time.
‘The Secretary of State shall, whenever a loan is made to a beneficiary Member State by virtue of the decision in section 1(2), lay before Parliament a report setting out the nature and terms of the use of the European Stability Mechanism and its potential effect, both direct and indirect, on the interests and obligations of the United Kingdom.’.
It is a pleasure to serve under your chairmanship, Mr Benton. We are seeking to add two new clauses to the Bill to underline the importance of the European stability mechanism to the British economy. New clause 1 would require the Chancellor of the Exchequer to provide an annual assessment of the impact of the ESM on the British economy. For instance, in the best case scenario we would hope that if ESM funds were needed and used appropriately, they would enhance the stability of the specific member state they were put in place to support, and therefore also have a positive effect on our economy.
We have some concerns about the conditionality of the ESM, for example if the conditions attached to granting ESM support are too harsh. It would, therefore, be beneficial to have an assessment of the impact of that austerity on the eurozone member state in question and—importantly for new clause 1—of the knock-on effect on the eurozone more widely, and on the British economy. Given that 40% of British exports go to the eurozone, and that our financial sectors and banks are closely connected, it is important that the Government provide systematic assessments of the operation of the ESM and its impact on our economy.
New clause 2 would introduce a specific and timely requirement for an analysis of each instance of ESM activity, without having to wait for the Chancellor’s annual report that is provided for in new clause 1. For example, if the ESM is triggered to provide support for Spain, Italy, Ireland or Greece, there will be varying levels of economic impact on UK trade and growth. An analysis of the downstream impact that each instance of ESM activity might have on the UK would give Members of this House and the other place, as well as the public, a clearer sense of the nature of the conditions imposed and the indirect impact of the ESM’s operation on our economic prospects.
The ESM conditions are to be detailed in a memorandum of understanding between the European Commission and beneficiary member states that will outline specific economic policy and fiscal adjustment conditions. The Committee should be informed of those conditions, and should have the opportunity to debate and scrutinise whether they are fair and reasonable, and whether Ministers should make their own representations on the nature of those terms and conditions.
It is imperative that any conditions imposed are not detrimental to the fragile recovery of the economy of the member state in question, and that any effects of those conditions do not have an indirect negative impact on our economy.
Regrettably, the Government have isolated themselves to such an extent that they might be unable to exert the requisite leverage in debates on conditionality. Nevertheless, the Europe Minister is conducting a charm offensive—he has written various articles, including one written in beautiful French for Le Monde and one written in Swedish for a Swedish newspaper—with the intention of rebuilding bridges with our European partners.
The Opposition applaud the Minister for that initiative —Conservative Back Benchers might not applaud him, but we do not want to intrude on private grief by going through the differences of opinion between those on the Treasury Bench and Conservative Back Benchers who do not agree with them—but we fear that the charm offensive might be too little, too late. We wish the Minister the best in his endeavours.
It is important that the Minister speaks seriously to his European counterparts in his charm offensive about the role that austerity can play in depressing the eurozone economy to our detriment. Is it not critical that the Minister speaks up for growth strategies so that Europe can grow and we can grow off the back of that?
I could not agree with my hon. Friend more and I recommend that the Minister takes his advice. The Government would have more authority to speak to our European partners about the importance of European growth if our economy were growing, but unfortunately it is not—it is one of two G20 economies to be back in recession, which is a great shame. That unfortunately diminishes the authority of our Government’s voice in proposing the useful measures that my hon. Friend suggests.
I mentioned the Minister using his multilingualism to build bridges with our European partners, which the Opposition believe is essential. Even if it runs against the wishes of Conservative Back Benchers who are nervous about the Government’s continued commitment to European membership, the Minister is right to reassure our European partners that our place is firmly in the EU.
On dialogue, which I agree is extremely important, our dialogue with Ireland, which has the same language, is vital. Will my hon. Friend speculate on what would happen to our good relationship with Ireland if the closeness of our two economies were not fully realised? What detrimental impact beyond the economic could that have on our long-term relations with Ireland?
Our relationship with the Republic of Ireland, which is incredibly important, is testament to the temporary mechanisms put in place in May 2010, which had cross-party agreement. Conservative Members like to tell Labour Members that the mechanisms were agreed unilaterally, but there is proof in a note by the former Economic Secretary—she is now Secretary of State for International Development—of cross-party agreement on setting up the EFSM at a time when the eurozone looked like it might collapse. The EFSM has been incredibly important to Ireland’s recovery, so much so that Ireland has been able to sell Government bonds on the international markets again since July this year.
Have the Government not recognised that? They were critical of the previous Government’s decision, but subsequently gave a substantial loan to Ireland because of its critical position in relation to the British economy?
I could not agree more with my hon. Friend. There were some naysayers on the Government Benches who thought the Government were wrong to give a bilateral loan to Ireland, but Opposition Members agreed with the Government, because our economies and financial systems are so closely intertwined. It was therefore incredibly important to make that bilateral loan to Ireland. As I said to my hon. Friend Wayne David, it pleases all hon. Members that Ireland’s economy looks like it is getting back on track. That is important for the Irish people—our neighbours—but, given the close links between our economies, it is also important for people in our country.
Given the Minister’s fantastic charm initiative, we hope the Government are in a better position to influence conditionality on the use of ESM funds, as I have suggested. The Opposition do not believe that harsh conditions would be in our interests or the interests of the member state to which support is given.
Both new clauses call for reports to be made to Parliament. There is a strong case to be made for in-depth reports to be debated on the Floor of the House, but there is also room for debate in Committees, and particularly the European Scrutiny Committee. Does she envisage that the debate should be conducted not just on the Floor of the House, but elsewhere?
I agree with my hon. Friend. New clause 1 would mean an annual report by the Chancellor on the economic impact to the UK economy of the operation of the ESM, and new clause 2 would mean the Foreign Secretary submits a report when a loan is made. As my hon. Friend suggests, the reports would be discussed not only on the Floor of the House and the other place, but in the European Scrutiny Committee and other Committees that deem them important.
The success of the ESM is in our national interest. If it is used effectively and appropriately, it could have a positive effect on our economy as well as on the member states to which it gives support. However, what if the ESM’s conditionality is misguided and imposes austere measures?
On conditionality, there is currently a discussion on easing the conditions of receiving support from the European Central Bank. Would my hon. Friend welcome Government support for such easing? Will she go further, and suggest that it could spark growth in the southern European economies?
Conditionality should not be too severe. The ECB’s initiative to buy Government bonds, which was announced by Mario Draghi last week, would be linked to support provided by the ESM. That is why it is vital that the reports asked for in the new clauses are made to Parliament—there is an interaction between the ESM and the initiatives announced by the ECB last week.
That is important. The situation is volatile, nobody knows with any certainty what will happen next, and the interrelationship and co-ordination between different financial instruments—the ECB bond market initiative has a relationship with the ESM facility—are important. That makes a regular, ongoing review to find out how compatible they are in practice all the more important.
I agree with my hon. Friend. The new clauses would introduce annual systematic assessments of the impact on our economy of the ESM and, in specific cases, of loans granted by the ESM. As he suggests, that is becoming ever more important, given the complicated interaction with the ECB’s other initiatives. If ESM conditionality is too harsh, we fear that it could have a detrimental effect not only on the member state to which the support is being granted but indirectly on our own economy, and could shrink the eurozone economy.
It is regrettable that, in a way, we are a test case for the detrimental effect of severe austerity. Since we left government, the economy has slipped back into recession and we have seen high unemployment, including an unemployment crisis among young people. My hon. Friend is right that unfortunately Europe is looking to the UK to see what it should not do in its economic policy. I am glad that there has been a shift, to a certain extent, within the European Council, in that member states on the centre left, such as the French Government, are now arguing for growth and job creation, not austerity alone. His suggestion is critical.
Are not the IMF and World Bank loans, to which Britain fully subscribes—we will be subscribing absolutely nothing to the ESM—also worthy of scrutiny? Would it not be a good idea to extend this concept and invite the Chancellor of the Exchequer to present to Parliament an annual review of all IMF and World Bank loans, the conditionality of which has a huge impact on the British economy and worldwide developments? I am interested in this notion that we are now advancing, which I fully support, that Parliament should debate all the external loans and financial instruments that Britain provides to help other economies get going, as well as those in Europe to which we do not subscribe a penny.
My right hon. Friend makes a good suggestion, but I would not want to comment in too much detail on other external loans, given the remit of the debate. I am sure, however, that the Treasury Bench will have heard his suggestion.
In either scenario—whether best or worst case with regard to the operation of the ESM—it would be reasonable and enhance scrutiny in this House and the other place were the Chancellor to provide an annual report of the economic effects on the UK, as set out in new clause 1.
That would be important, but, for reasons I have set out, I fear that the Government’s voice and influence will not be as strong as it should be on these matters, because unfortunately they have chosen, through their actions, to isolate themselves—I think of the walkout at the European Council meeting last December and the Prime Minister winding up the French President by telling him, for some reason, that he would roll out the red carpet for French taxpayers. I am not clear why he thought that that would be in the national interest, given that he had already refused to see the French President earlier in the year. For all those reasons, it is clear that the Government place much more importance on keeping their party together—the Conservative party—than on the British national interest. Regrettably, therefore, our influence over ESM conditionality is severely weakened.
It is nice that the hon. Gentleman has made a late entrance but, had he been here from the start, he would have known that the Opposition are not in favour of the Government paying into the ESM. He was not here when I mentioned it, so I shall say again that in May 2010 the then Economic Secretary, the now International Development Secretary, admitted that there was cross-party consensus that if the eurozone collapsed, we would have to agree to the emergency measures drawn up at the last Council, when the then Labour Chancellor, in the interim period after the election, was still in place. So there was cross-party agreement—I can show him the documentary evidence, if he wants to see it.
There is one important element of the ESM with which I am not familiar—I frankly admit—and that is the degree of private sector involvement. In this respect, the IMF is an example of good practice, but given that I and—I suspect—many other Members are not familiar with this element, an effective annual report would be crucial.
I agree that it would be important. It is not clear when the ESM will be introduced—the constitutional court in Germany will rule on Wednesday —or what the significance or extent of the interaction with the private sector will be. It is important for those reasons as well, therefore, that the Chancellor and the Foreign Secretary produce reports in the way suggested by the new clauses. It would enhance the scrutiny of these important subjects in the House and the other place and make it clearer to the general public exactly how the ESM will operate and how its operations will affect the British economy.
I will not trouble the House for long. It is sometimes tempting with a simple Bill to think of things to put in amendments to provoke debate—it can be helpful—and asking someone to make a report is always quite a good one, but we need to be a little careful with civil servants’ time. To ask the Treasury to make a report to Parliament annually on
“the impact of the European Stability Mechanism on the risks to the interests and obligations of the United Kingdom from eurozone instability”,
and to ask the Foreign and Commonwealth Office
“whenever a loan is made” to report on the
“potential effect, both direct and indirect, on the interests and obligations of the United Kingdom”,
will involve days and days of civil service time.
No, I will not. I am not going to take up a lot more of the Committee’s time.
The proposals are superfluous, given that we endlessly debate the impact of the eurozone and of the various bits of European constitutional and financial architecture on the United Kingdom and its economy. We also endlessly debate the individual bail-outs, and there are always statements to the House on such matters. If these reports were produced by the Treasury and the Foreign Office, I suspect that Her Majesty’s Opposition would disagree with them anyway. There will be plenty of opportunity to question Ministers on what they think of the indirect or direct implications of any bail-outs.
Technically, separating the indirect or direct impacts of the ESM from the impacts of previous bail-outs, from the existing EFSF or EFSM actions, from other initiatives by the ECB and the IMF and from the general operation of the eurozone economy would be an activity worthy of an academic PhD. Civil service time should not be taken up preparing reports to Parliament on the matter.
The proposals have provoked another interesting debate—we have had a lot of that this afternoon—but this is essentially a simple, straightforward, technical piece of legislation, and I urge Emma Reynolds to consider whether there is any value in pressing the new clause to a vote. I urge her to withdraw it.
I strongly support the new clause. We need to be frank and recognise that this legislation represents a new departure. Inevitably, therefore, we cannot assume that every dot and comma in the European stability mechanism will be absolutely correct, or that there will be no scope for change in the future. There might well be change, and who can tell, in this fast-moving situation, what the demands of the immediate future will be? It is therefore entirely sensible to call for full, comprehensive reports to be provided to the House on an annual basis.
My hon. Friend could well be right. Who knows? I would not be entirely surprised if that were the case. However, it is important that we rise above any internecine squabbles.
We are concerned about the well-being of the country, which is why it is important to conduct comprehensive reviews and to debate them on the Floor of the House. As was pointed out earlier, much of the legislation is of a technical—almost esoteric—nature, and the reports will need to go into some detail. It will therefore be insufficient simply to present them on the Floor of the House. They should also be debated by the European Scrutiny Committee, which is well led by Mr Cash. Surprisingly, he is not in the Chamber. This must be the first time in a long time that he has missed a European Union debate. I hope to goodness that he is not ill.
I absolutely agree with my hon. Friend.
This is an important matter, and it should be debated not only on the Floor of the House but by the European Scrutiny Committee. We should also encourage other Select Committees—the Treasury Committee in particular —to debate these issues. It is one of the weaknesses of the House that, all too often, we tend to put European issues into a neat compartment without fully appreciating the fact that they are cross-cutting, cross-departmental and cross-Committee in nature. If we are fully to appreciate their impact, and the need for them to be changed, we need to discuss them in a number of different Committees.
Does my hon. Friend agree that it is regrettable that the Liberal Democrats—who are now in government, not in opposition—should not want increased transparency and scrutiny of the effects of the ESM on our economy? Had they still been in opposition, I am sure that they would have been calling for that today.
I would like to put on the record, on behalf of the Liberal Democrats, my belief that this House should indeed carry out much more scrutiny of European affairs. I also agree with the hon. Gentleman that that should be done on a broader basis, and that the departmental Select Committees should be involved. Indeed, we have suggested as much in our submission to the current discussions on European scrutiny. I am not sure, however, that we need ever more reports being discussed in addition to all the legislation and everything else that we debate, interminably, on the Floor of the House. He cannot possibly argue that we do not spend enough time debating Europe in this Chamber, as we are doing now.
I do not want to labour this point. I welcome the Liberal Democrats’ desire for more transparency and scrutiny, but experience shows that, all too often, those words come to nothing unless there is a focus on something. The importance of the new clauses is that they would provide that “something” for the debate to focus on. Nothing concentrates the mind better than a report that has a distinct niche in the parliamentary calendar to enable that debate to take place.
This is not just a matter of having a focus for the debate. It is also a question of the sheer importance of these aspects of the European Union. Their influence on the eurozone and the British economy make it imperative that we hold such discussions.
My hon. Friend makes an extremely good point. We would not be holding a debate for the sake of it, and we are not talking about transparency for the sake of it. We are trying to underline the importance of the ESM, which is being developed for the first time. It is imperative that we have an ongoing debate.
Is my hon. Friend aware that, only last week, members of the Welsh Affairs Committee were in Brussels to talk to MEPs and Commissioners about this important issue? Does he agree that that is symptomatic of the enormous appetite for discussion on these strategic issues that have a direct impact on the economic future of Britain?
I was not aware that the Welsh Affairs Committee had been in Brussels, but that underlines my point that this issue is absolutely central to the European Union at the moment. Debates in Select Committees should not be confined to the European Scrutiny Committee; other Committees should debate these matters as well. I have to say that I would not immediately have thought of the Welsh Affairs Committee as an appropriate vehicle for that, but I imagine that much of the discussion in Brussels focused on how Wales would be impacted by the developments in the European Union.
As my hon. Friend has questioned the legitimacy of the Welsh Affairs Committee in that regard, I should make him aware that the Committee has recently published an excellent report on inward investment and prosperity in Wales. A key part of that economic activity involves inward investment from and trade with Europe. That is why we adopted a nationally based view—in regard to the nation of Wales—as opposed to the departmental silo-based views. We have a crucial locus on this matter.
I am pleased that my hon. Friend made that intervention, as it takes me neatly to my next point.
The ESM is important for all parts of the United Kingdom—including Wales—because it will help to ensure that the eurozone becomes a stable and attractive market to which we can take products made in our constituencies of Swansea, Caerphilly and elsewhere. That is central to the debate, and it concerns me greatly that some—although not all—Government Members actually want the eurozone to collapse. They want that outcome for a pathological, ideological reason, without realising the immediate material consequences that it would have for jobs in our constituencies.
I would classify myself as one of the people who does want the eurozone to collapse, because I think that only with the collapse of the euro can the economies of Europe begin to grow again. It was the same when the Asian crisis hit, and the economies that devalued were the ones that grew again fastest and soonest.
I simply do not agree, and there are plenty of academics and learned people who do not agree either. Most importantly of all, plenty of workers and employers in my constituency do not believe it. As I said, I am not suggesting for one moment that the EU and the eurozone are particularly popular with people—they are not, and I fully understand why not—but in the end people are concerned about their livelihood and their prosperity, which depend on jobs. That is why it is important for this country to do everything we can to ensure that the eurozone is helped to get over its present difficulties and made prosperous once again.
Does my hon. Friend accept that we do not have to go to Asia, for example, to see devaluation before our very eyes, because the British pound has been substantially devalued in the last four years, and it has led to a massive loss of jobs, employment and growth, and has brought in a recession? Perhaps devaluation and a sensible Government can help, but devaluation and this Government are a recipe for disaster.
Yes, I agree. If we take the argument of the devaluers to the extreme, having competitive devaluation among different states on the continent of Europe is indeed a recipe for disaster. It is a mistake to believe that, because devaluation might have helped one country in one particular circumstance, we can extrapolate beyond that and assume that devaluation is a recipe for everyone.
I have generally supported the ESM, because I think it is necessary and will make a huge contribution—not an exclusive one by any means, but a huge one—to helping the eurozone in its current difficulties. I am not suggesting for one moment, however, that the EU has everything worked out perfectly, so far as the ESM is concerned. What is needed is an ongoing review, and flexibility is required so that the good things are built on and the not-so-good things altered. That is why new clauses 1 and 2 are so important.
I recently read with great interest an excellent research paper produced by the House of Commons Library, which succinctly summarised a number of the reservations that people have about the ESM; it is quite right that people should have some reservations about it, so let me mention a few of them.
The first relates to the amount of €500 billion being made available for lending capacity. A number of people have suggested that, given how the crisis might develop, that amount could be too small, so we need to contemplate a larger amount in future. That applies particularly if it is not just Greece and Portugal that experience difficulties and if things become more problematic in Spain or even in Italy. In those circumstances, it might be necessary to consider having a facility much greater than the currently envisaged €500 billion.
The second reservation by those concerned about the ESM is, as we touched on earlier, the fact that it is but one of a number of different initiatives designed to help the eurozone. We are particularly aware of the initiatives, perhaps belated, of the European Central Bank and of the desire to intervene in the bond markets. That is one of the terms of reference and intentions of this facility as well. We thus need to ensure that there is complete complementarity, no duplication of effort and no contradiction in these different facilities; everybody must be pulling in the right direction. Co-ordination with other lending institutions and with other bodies and initiatives is very important indeed. Linked to the size of the €500 billion facility is the fact that some people believe that in a worst-case scenario, the rescue funds would be insufficient and would run out of money. It is therefore necessary to have an ongoing review of whether that is likely to happen or not.
Yes, that is an important point, and the role of the ECB is central. Many of us would like to see it being more proactive far sooner than it has been in the past, but its more assertive role could be critical in the future.
Another concern is the circularity of having the facility guaranteed by the same group of countries that might draw on the fund. For example, we all know that Italy’s situation could become difficult, yet Italy is a country that is, at the same time, ensuring that resources are going into the fund that it might itself be required to draw on. That strange relationship and potential incompatibility at the heart of the ESM needs to be thought about carefully. What is important is what is being established here and now. Nevertheless, as situations develop, it becomes all the more important to review the circumstances.
The credit rating of the ESM is another issue. We all know that certain countries, including a number of eurozone countries, have been downgraded in the not-too-distant past. That includes France, which came as a big surprise to many people. The EFSF has been downgraded, too, and we must be sure that that does not develop further with respect to the ESM.
My hon. Friend and Mr Baron have made the point that if some countries among a group are both taking and giving money at the same time, it amounts to a problem. What about a simple model of a credit union and a community, from which some people put money in and some take it out? What about a marketplace in which some countries put resources in so that other countries can consume their exports? Is that not part of a system for helping broader growth, which is not a problem at all?
My hon. Friend could well be right, and I hope that he is, but it is an issue that needs to be rationalised and thought through carefully. My feeling is that, at this stage of the ESM’s development, it has not been given serious thought. It may be necessary and desirable, but it must, as I say, be thought through carefully. It must not happen by accident, but by proper design. The fact that it is not in the design of the programme at the moment provides all the more reason to ensure that we have a proper review and some time for the objective to be explicitly stated.
My last point is about private sector involvement. It is assumed that we are talking about public money, which to a large extent we are, but there is also a role for private sector involvement, which will be done in accordance with good practice as established by the International Monetary Fund. That is welcome, but, again, it needs to be monitored carefully. If we need to enhance our programme or provide more stipulations, those things must be done.
I agree that the IMF is an example of good practice, and I think it laudable that the ESM is basing much of its operation on the way in which it has operated, successfully, for a number of years. Don’t get me wrong: I am not against private sector involvement—quite the opposite—but I think that clear terms of reference need to be established and monitored.
For that reason, and for all the other reasons that I have given, I think that both new clauses are eminently sensible. I think they will enhance both parliamentary democracy and the role of this Parliament. I also think that, ultimately, they will send our partners in Europe the extremely positive message that we are serious not only about establishing the ESM, but about ensuring that it works effectively well into the future.
I am all in favour of scrutiny. I am a member of the European Scrutiny Committee, and I am the greatest admirer in the House of my hon. Friend Mr Cash, who scrutinises with an eye like a hawk and ensures that every aspect of scrutiny is carried out to the fullest, most proper and deepest effect. However, I thought that the new clause might be an example of the socialist sense of humour, which involves tabling a motion that is completely and utterly meaningless and, indeed, the opposite of what the Bill is all about.
Perhaps the Members concerned did not listen to my right hon. Friend the Minister, who explained—beautifully, elegantly and with charm—what the Bill was all about. He also explained what the treaty was about, namely getting us out of responsibility and liability for the eurozone mess so that we would not have to pay to prop up the eurozone. The new clause proposes that the poor old Chancellor of the Exchequer, who has quite enough to do—for instance, he has a growth strategy to draw up, and his infrastructure Bill will be presented to us next week—must write a report on why a fund of which we are not part, and to which we do not contribute, has had an effect on the propping up the stability of the eurozone, which is a matter for the people—
I could not agree more with the hon. Gentleman. The Government need to cut through the dither, and the Chancellor needs to see to that as a matter of urgency. However, I do not really understand why the hon. Gentleman objects to the Treasury’s conducting an impact assessment of the operation of the European sustainability mechanism. He takes a great interest in European matters, and I find it surprising that he does not welcome further transparency and further scrutiny of such an important issue.
The hon. Lady flatters me. I do indeed take an interest in the issue.
It is extremely important for the Government to be scrutinised on what they do in terms of European policy, but I do not think that we should scrutinise Her Majesty’s Government in relation to what the Germans or the French do, because that is a matter for them. We are outside this mechanism. The whole point is that a new mechanism is being set up to ensure that there is no liability for the UK taxpayer. What is the Chancellor supposed to say? Must he send a letter to Parliament saying “Something over which I have no authority, something to which we have made no contribution, something which is not actually British in any sense, has worked”, or has not worked? We can read that for ourselves in the Financial Times, or in other reputable newspapers.
We really do not need the Chancellor to be bogged down in more bureaucracy. There is a difference between scrutiny and bureaucracy. Scrutiny is about challenging Her Majesty’s Government to ensure that the Government’s decisions are in the best interests of the British people. These decisions—the European stability mechanism decisions—will not be Government decisions in any sense once the treaty is passed, and once this Act is enforced. They will be decisions over which we will have no control, and that is the whole point. We do not want to have any control, because we are not part of the eurozone, and most sane and sensible people hope that we never will be. It is our aim and ambition to be out of the eurozone.
If we take the hon. Gentleman’s argument to its logical conclusion, we must assume that he is urging all Government Back Benchers not to call for countries that are in the eurozone to leave it.
The hon. Gentleman is confusing two completely different things. One is placing an obligation on Her Majesty’s Government, and the other is expressing an opinion.
I might wish to give advice to the central bank of China. I might wish to say that it was about time that it cut its interest rates—which I think it should—and used its reserve requirements for the banks. It has been putting the rates up, and it is about time that they came down. I think that China needs a monetary boost. But are the Chinese Government listening, and have they the slightest interest in my opinion of their monetary policy? I very much doubt it. [Hon. Members: “Of course!”] Hon. Members flatter me again, but I fear that even the Chinese ambassador, most assiduous gentleman though he is, will not report the opinions of the House of Commons on China’s monetary policy. I fear that even if the Foreign Office, our most esteemed and distinguished Foreign Office, that Rolls-Royce Department—possibly a Rolls-Royce made rather more recently, in the 1970s, with a little bit of engine trouble and a little bit of oil leakage, but none the less with very fine leather inside and looking very nice—sent a message to China saying what its monetary policy should be, the Chinese would not take any notice, and the same applies to the new clause. This is not our business; it is a matter for the eurozone countries. We specifically excluded ourselves, and then the Opposition came up with this wonderful wheeze.
I suppose that that is admirable, in a way. The Opposition have to think something up. As Disraeli said, the job of the Opposition is to oppose. All the finest socialist brains in England were sitting around discussing how to amend a Bill consisting of a handful of clauses saying nothing much except that Her Majesty’s Government would be saved from further liability for the euro. “What shall we do? What bold step of policy shall we take? How shall we strive to convince our electors that there will be a new dawn, the new Jerusalem that the socialists are always looking for? We must ask the Chancellor of the Exchequer for a report that is so hard-hitting, forceful and solid that it constitutes a new policy.”
I assume that this will only be reported in Hansard, and will thus remain a state secret. The hon. Gentleman is pretty much making my speech for me.
That said, I think that the Chinese should listen to the hon. Gentleman. I think that the clatter of chopsticks in north-east Somerset should be heard in Beijing when it comes to policy. It should also be noted that we do about £48 billion-worth of trade a year with the other EU member states, and what they do matters to us. The notion that if we do not sign the treaty the continent will be cut off has been a traditional approach throughout the ages of the Tory isolationists of whom he is the most wondrous representative in today’s House.
I am grateful to the right hon. Gentleman, but I must disappoint him. I support the treaty. For once when it comes to a European issue, I think that the Government have got it right, because what they are doing gets us out of the problem. That is the whole point. Once we have got ourselves out of the problem, how Europe deals with it and funds it is a matter for Europe. Yes, it is important that we trade with them, and yes, it is important for there to be stability within the eurozone—although I would prefer a new stability without a euro and with individual currencies, as I think that that would be a better and more prosperous stability—but a report by the Chancellor of the Exchequer to the House on the matter is not going to sell an extra widget to Belgium.
My hon. Friend is as eloquent as ever. Does he agree that, given the speed at which events unravel during the eurozone crisis, even if this were our business—which it is not—an annual report would be at best irrelevant?
My hon. Friend’s intervention is incredibly helpful, because it has reminded me of the one important point that I wanted to make in this little speech against the new clauses. Absolutely the only risk posed to us by the treaty is that it will not lead to repeal of the regulation setting up the EFSM, and that we will remain liable or another article 122 bail-out fund will come through. That is the only risk left to us, and if such a situation were to arise, the House would want to scrutinise it immediately, rather than wait for some pedestrian report to be delivered.
These new clauses are glorious in their way—glorious in their irrelevance and in their failing to appreciate what the whole point of the treaty is. They are a delightful effort to make sure that there is some debate, and they have given me an opportunity to speak when I had, for once, intended to be silent in a European debate. Because of their rank irrelevance, I could do nothing but speak out against them. I have every confidence that Her Majesty’s Government, with a careful operation by the Whips Office, will ensure that they are firmly defeated.
Jacob Rees-Mogg has just given us a diatribe in support of laissez-faire economics and casting Britain adrift, and the idea that whatever happens in terms of the ESM will not have any impact on British trade and jobs, which it clearly will.
Like you, Mr Benton, I am a member of the Council of Europe, and we both take very seriously the issue of Europe and our economic, political and social relationships with it. The Welsh Affairs Committee recently visited Brussels to talk to Commissioners, MEPs and others about the prospects for Europe. As we all know, the big debate there, as here, is to do with the challenge of finding the right balance between encouraging growth and making cuts in order to get us back on track. There are very different views in Europe—as there are, of course, across the Committee—about the need to get growth on track, rather than to crush it through excessive austerity measures. The setting up of the ESM will be critical, as will the terms of reference and the details of how it operates.
As to the ESM providing targeted support for Greece and others, the latest debate in Europe is about the interest rate to be applied and the period over which it will be repaid. Those are the two crucial issues for Greece, alongside the question of where the money will be targeted. Instead of being directed paying down existing debt, if the money were targeted on solar forests in Greece to provide energy to sell to Europe, on a railway network that supported a more effective tourist industry or on providing universal broadband for Greece to link up to the world, that would provide tools for growth rather than a hammer to hit across the heads of the worst-affected Greek people.
The way in which the ESM operates, its terms of reference, how it impacts on ailing countries and their sovereign debt and its relationship with our country all have major implications for our national interest. I am amazed that those on the other side of the debate—they say they are eurosceptics, but perhaps they should be members of the UK Independence party—deny that there are any implications for our national and economic interests and the jobs of local people in having these proposed reports, and in ensuring they are not merely produced annually, but updated more often.
There is a big difference between what happened in the 1930s, when France, one of the possible locomotives of growth, did not take the opportunity to provide it and instead allowed soaring unemployment in Germany—the rest is history—and what happened in 2008, when we faced a potential depression and Obama and Brown put in place fiscal stimulus to keep growth going. Recently, we been facing the prospect of a new winter of austerity, but people have at last woken up, and it has now been recognised that the ESM and the fiscal stimulus are about getting Europe back on track, and thereby also securing our own positive future and destiny.
I therefore make no apology for supporting these two modest new clauses, and I hope they will enjoy support across the Committee.
New clause 1 would require the Government to report annually to Parliament on the impact of the ESM on the UK economy. As the Committee will no doubt be aware by now, the Chancellor already reports regularly to Parliament on Britain’s economic performance through the Budget and the autumn statement. In addition, the Government regularly publish details on our financial relationships with the International Monetary Fund and the European Union and on our bilateral loan to Ireland. As my hon. Friend Jacob Rees-Mogg so brilliantly pointed out, placing an additional reporting burden on the UK Government in respect of information that will largely be in the public domain has no apparent gains and serves no purpose.
The other new clause proposes that the Government report on the impact of the ESM on the economic performance of the EU. I hope that Members would agree that it would not be appropriate for the UK to produce reports on the economic policy and performance of our European neighbours. I can guess what the reaction would be in this place if we were to hear about a debate in the Bundestag or the Greek Parliament about the economic policy of the UK; I can envisage the angry points of order, the protests to Mr Speaker, the early-day motions and the requests to invoke
The new clause is not needed. The Chancellor has regularly updated the House throughout this crisis, including on developments in the euro-area assistance programmes and on negotiations over the ESM. Furthermore, the Opposition have overlooked the fact that the Commission already annually produces a report on the borrowing and lending activities of the EU, including under the different financial assistance mechanisms. The Government, under the normal scrutiny system, produce an explanatory memorandum for Parliament that summarises the report. That is sent to the European Scrutiny Committee, which, as with any such memorandum, has the option to refer the report for debate. It is also within the remit of the Treasury Committee to launch an inquiry into it, or for the Backbench Business Committee to schedule a debate.
These new clauses would create an unnecessary and burdensome obligation, with no clear benefit. As my hon. Friend Martin Horwood said, they would merely serve to tie up civil service resources in order to report on a mechanism that the UK is not even a part of, and has no intention whatever of joining.
An analogy with the Schengen agreement can be drawn. We are not a part of that, and the Government do not publish an annual report on it to Parliament. Of course, however, Home Office and Justice Ministers will answer questions and hold themselves to account if there are any important developments in that agreement that affect this country. In the event of there being any justice and home affairs measures into which the UK Government might choose to opt, the normal scrutiny system would apply, with the possibility of debates being held either in the ESC or on the Floor of the House.
The Bill is concerned only with approval of the decision amending article 136 of the treaty on the functioning of the European Union, and not with the ESM. These new clauses are therefore wide of the mark. In fact, the only reason I can conceive of as to why Parliament might wish to accept such a reporting requirement is if we were planning to be part of the ESM, which, of course, would in turn mean we were planning to be part of the euro. The logic of the Opposition new clauses is that they still have in mind that prospect for this country.
Of course, as we know, the weasel words have already been employed. In this Bill’s Second Reading a week ago, the shadow Foreign Secretary, Mr Alexander, was challenged as to the prospect of the UK entering the euro, and he said there was no immediate prospect of that happening. We know, too, that when the Leader of the Opposition was pressed on this same matter, he said that whether or not the United Kingdom were to join the euro would be a matter of how long he were to remain as Prime Minister.
Not only did we hear from my hon. Friend the Member for North East Somerset a clear and devastating exposition of why the Opposition new clauses are completely otiose, but we can see in the Opposition’s decision to bring such new clauses before the Committee this evening some hint of the policy yearning which dare not speak its name: they still cherish that lingering dream of taking this country into the euro one day. The Committee should have nothing whatever to do with these new clauses, and we should reject them.
I remind the Minister for Europe that it was our Government who did not take this country into the euro, and that is a matter of fact, not opinion. I also remind him that as the shadow Foreign Secretary and I set out on Second Reading, and as I set out earlier today, we are in favour of the European stability mechanism precisely because it will be a bail-out fund operated by the eurozone for the eurozone and, crucially, financed by the eurozone.
Both new clauses introduce a requirement for the Government in the first instance to assess annually the ESM’s impact on the British economy and, in the second instance, to assess the impact on it of loans made by the ESM. I was disappointed and surprised to learn that Jacob Rees-Mogg does not share our desire for additional scrutiny of European matters. We look forward to his future speeches on Chinese monetary policy. He should not underestimate himself—I am sure there is a member of the Chinese Communist party listening carefully to what he is saying, even if they do not take the advice he is proffering.
The Opposition believe that it is incredibly important that the impact on our economy of the European stability mechanism be assessed, and that both new clauses would add to the scrutiny by this House, the other place and the greater public. For that reason, I would like to divide the Committee on new clause 1.