The noble Lord, Lord Marlesford, was quite right to start with a tribute to the noble Lord, Lord Harrison, the chairman of Sub-Committee A. As a fellow member of Sub-Committee A, I strongly endorse these plaudits.
I want to commend our little report and to put three questions arising from it to the Minister. The questions follow, quite neatly, the logic of the remarks of the noble Lord, Lord Newby.
The City of London, as one of the three great global financial markets, is recognised in most, though perhaps not all, EU capitals as a major EU asset. In most other EU capitals, with perhaps one significant exception, the health of the City is seen as important to the Union. The City's voice is being given due weight, so witnesses told the committee, as the EU's financial supervisory framework develops. This seems to be developing in ways in which the committee, certainly, and, we understood, the Government, supported. That was the message of the admirably clear and positive reply to the committee which the Financial Secretary sent on
The UK is playing a leading role in setting up the new structure, as one would expect, given the pre-eminence of the London market. Of course, qualified majority voting applies, so we cannot be sure of getting our own way on every issue, but so far, so good. The City is pretty relaxed, the committee's report is pretty reassuring and the Government's response is equally reassuring and supportive. So far so good, or so I thought. Here I come to my first question to the Government. Is it the case, as reported in the press, that one of the safeguards sought by the Prime Minister in the middle of the night of
The City of London has benefited enormously from Mrs Thatcher's success in securing qualified majority voting for the internal market in the Single European Act by persuading her colleagues in other European capitals, and, in particular, her colleague in a particular European capital, to drop the unanimity requirement for single market legislation-it had protected only protectionism. The City as a result grew much stronger, absolutely and relative to other EU markets, as a result of pan-European liberalisation made possible by the Single European Act. As a result, the whole EU economy became more competitive. The task is by no means yet complete, but there has been considerable net gain, and, in particular, a net gain for the UK as well as the EU. For that, we all owe a great debt to Mrs Thatcher.
Why would we want a carve-out now? Why would we want a return to unanimity, turning the clock back 25 years? Did we consider what use others, who are less keen than us on liberalisation, might make of the precedent that we were setting if we succeeded? Did we think we could maximise our chances of success by raising this arcane matter-if indeed we did, as I am asking a factual question-in the middle of the night with no prior warning or preparation of the ground? What were we on about, specifically with regard to the ESAs?
That is question one. Question two follows, and is pretty obvious. What is plan B? If, on the issue of the ESAs, there is a lurking threat, which the committee of the noble Lord, Lord Harrison, the witnesses who gave evidence to it and the Government, in their reply to the Select Committee, all failed to identify, and if the Government despair of finding sufficient allies to create a blocking minority to oppose this threat, how, following the failure of their proposal in the night of
My third question is much more general. We know that new treaty articles, the provisions of which would apply only to the eurozone member states, are now being drafted. We know that their aim is to reinforce budgetary discipline, enhance economic convergence and thereby improve financial stability. My understanding is that they will spell out that this closer co-operation among the 17, which would be meeting much more frequently, must not encroach on the competencies of the union of 27 or undermine the single market, and specifically spell out that EU law will take precedence over these new provisions. Furthermore, provided no one tries to stop it, the Commission will be present in the room to ensure that there is no encroachment on the rights and no conflict with the laws of the EU of 27, because that is of course the Commission's job as guardian of the treaties. Provided that no one tries to stop it, the Court of Justice will be watching to make sure that that is observed.
On the face of it, that is okay. Yet I am very uneasy. Eurozone meetings will be about financial stability. It seems implausible that they will not, in some informal way, touch on financial regulation and supervision, because they are, after all, the means by which financial stability is assured. The meetings will not of course reach decisions because the Commission, provided no one stops it from attending, will be there to ensure that no decisions are reached and to remind the 17 of the rules of the game. However, suppose that members reach an informal consensus on a regulatory or supervisory issue. For example, suppose the issue raised by the noble Lord, Lord Marlesford, the case for declaring an emergency and imposing bans on matters such as short selling, was discussed-and it is for the Council to define an emergency. Suppose that there is informal consensus that the Council should define an emergency and state that there is an emergency situation. It seems to be highly likely that the 17, having reached such an informal consensus, could find a qualified majority for it in the subsequent ECOFIN council-perhaps on the following day. Even if we strongly disagreed, even if the proposed decision was unwelcome to the City and even if the Government opposed it with all their customary eloquence in the Council the following day, the die would have been cast the night before. That is my worry.
To that extent, I understand why the Prime Minister wanted safeguards. I do not know what specifically he wanted-none of us does-and a number of us, including the noble Lord, Lord Lawson of Blaby, judging by his question before the Recess, are a little surprised about that. It surely would have been a normal courtesy to inform Parliament, and I rather think-although I will not say so in definitive terms in the presence of the noble Lord, Lord Roper, who is, as always, in his place-it may be a requirement for the scrutiny committees to be informed of a legislative proposal. However, so far, we have not been informed of what safeguards were sought. I am relying purely on press reports that one of them concerned the ESAs and the subject of our debate.
Nor do I begin to understand the tactics followed by the Government. Indeed, I find it hard to resist the unworthy suspicion that they may, for domestic reasons, have wanted to make impossible demands. That is quite unworthy, so I will not pursue it. I am anxious to be constructive. My final question is whether the Government will now adopt the course that seems to be the one most likely to provide the safeguard that the Prime Minister may have wanted, if I am right in defining the unease that may have led him to want safeguards. It is a course that would guarantee that the City's voice was always heard from the start of any relevant eurozone debate and before any unwelcome informal consensus of 17 could emerge.
I again urge the Government to reflect on Article 136, the first of the articles in that section of the TFEU that comes under the title:
"Provisions specific to member states whose currency is the euro".
Article 136 empowers the eurozone countries to consider and adopt measures applying only to them provided such measures are compatible with those adopted by the Union as a whole. It makes clear that all member states may participate in all such discussions, though of course only the eurozone member states may vote since the resultant measures will apply only to them.
My question to the Government is obvious. Does Article 136 not provide us with the precedent we need and the model we want? Is not the strongest safeguard we could have the right to be there, to be in the room, when-as I think they will-eurozone discussions stray informally on to matters which are, or should be, for the 27 members of the Union as a whole? Would not the best safeguard be to enshrine that right to be there by embedding the new articles in the existing treaties even though their provisions would apply only to the 17? There would of course be no question of triggering a referendum requirement under the European Union Act 2011 because no powers would have been transferred. Should we not be suggesting that the right course for all 27 countries is to expand the provisions of the title specific to member states whose currency is the euro, provided only that the crucial Article 136 survives?
Do the Government agree that this course would be likely, in practice, to be saleable? In my judgment it would be saleable, instantly, to most of our partners. It would be strongly supported by many of them, I know, precisely because so many of them see healthy competition and a strong City as important for the EU as a whole. I hope the noble Lord will ask Whitehall to reflect very carefully on this point and on Article 136. I do not press for an immediate answer now. I do not expect that. Indeed I would prefer a considered one and would be very happy if the noble Lord would agree to reflect and arrange a letter to come to me and to the rest of us taking part on this debate.
On a personal level, when I was lucky enough to be sent by Prime Minister Thatcher to Brussels as her negotiator, her parting instructions to me were quite simple and rather in line with the worried mother's instruction, "Go and find out what they are doing and tell them to stop it". I recall her explaining with some force why an empty chair policy is always wrong, and why we must always be there. I agree with her. It did not work for the French under de Gaulle. So I am very glad, as we were reassured at Questions this week, that we are participating in the discussions in Brussels, and not just as an observer but as a full participant. My concern is about the longer term and about the need to ensure that the outcome of these negotiations when it comes into force is not a two-tier Europe with the interests of the City and the country damaged by what happens in an inner tier from which we have excluded ourselves. I really think we should seek to avoid that outcome. I believe that outcome is still avoidable and I really hope that we are actively seeking in Brussels to ensure that it is avoided.