To ask Her Majesty's Government what representations they have made to members of the European Union to protect the British economy from the financial situation in the eurozone.The answer was bland, to put it mildly:
The Chancellor of the Exchequer and Treasury Ministers attend regular meetings of EU Ministers, including the Council of Economic and Finance Ministers-ECOFIN. These discussions cover a wide range of issues, including the ongoing situation in sovereign debt markets.Understandably, Lord Trimble was not satisfied and pursued the matter through two supplementary questions:
My Lords, I thank my noble friend for his Answer, and I draw attention to my entry in the register of interests. I have two points to raise with him. Funds have been established to try and help countries in the EU that are in difficulties, but one of the underlying causes of those difficulties is the loss of competitiveness. Is that likely to be solved before the money and time run out? If it is not solved by then, what then happens?Lord Sassoon's response, especially to the second point was not very reassuring.
Secondly, I draw my noble friend's attention to the alternative investment fund managers directive that is currently being imposed on us. The European Parliament estimated that that directive would cost the European Union as a whole roughly 0.2 per cent of its GDP, but, as most of the alternative investment funds are in the United Kingdom, the potential cost to us is much greater. Have the Government managed to draw any of this directive's teeth? If not, how much is it likely to cost the United Kingdom?
My Lords, I will deal first with the question of competitiveness. The UK Government, the European Council and the Union well recognise that competitiveness must be improved in parallel with steps that are being taken to deal with the immediate financial situation of a number of member states. I draw my noble friend's attention to the EU economic taskforce under the leadership of the President of the European Council, Herman Van Rompuy, which will report to the October Council. As well as dealing with crisis resolution matters, it has competitiveness indicators very much on its agenda. Indeed, it considers competitiveness absolutely in parallel with crisis resolution issues, as well as more broadly as part of the Europe 2020 exercise.A short window; final representations; the best deal - none of this fills anyone with any kind of certainty that the AIFM Directive will be anything but a catastrophe for the City. Indeed, those reforms that Lord Sassoon was appointed to supervise may well become unnecessary if the EU has its way - there will be no City to reform.
On the alternative investment fund managers directive, the European Council and the European Parliament have each taken positions that do not agree with each other, so the UK Government and the industry have a short window up to the end of July in which to make final representations and attempt to make sure that we get the best deal for what is a very important industry for the City of London out of this trialogue process.
Lord Pearson intervened with a question that followed up matters raised during a previous debate:
My Lords, does the noble Lord agree that a good way in which to protect the British economy would be to refuse to underwrite massive sums for Brussels, such as the £8 billion mentioned by his noble friend Lord De Mauley on 8 June, which are illegal under the treaties? How many billions are we going to be exposed to through the illegal breach of Article 125, which forbids member states to bail out others?Tut-tut, said the Minister, things are not as bad as all that. We may be handing money over but it is all completely legitimate. No rules are being broken.
I thank the noble Lord for his questions. First, to be clear, it is the view of the UK Government that no illegal action has been taken under Article 125 or any of the other relevant articles. On the UK's exposure, we have not as a country participated in the €440 billion special purpose vehicle for assistance. We do, however, participate in the €60 billion finance facility, which is available to any member state under Article 122.2 and which we think strikes an appropriate balance between the eurozone taking primary responsibility for stabilisation within the eurozone and the important part that we have to play as part of the wider EU 27. For completeness, we participate in the IMF standby facilities.Later in the afternoon came the statement about the European Council and its achievements, which, in the short term, have been minimal though the intention to strengthen economic governance will, if carried out, have a dire effect on all European economies, regardless of how they are performing at the moment.
During the subsequent debate Lord Pearson asked about the ever-present threat to make all governments submit budgets to the Commission (the decision on that will be taken in September):
Turning to the Statement, does the noble Lord agree that it really is beyond belief that the EU should presume to examine our Budgets before Parliament debates them when its own internal auditors have been unable to sign off its own accounts for the past 15 years? Can he comment on that? Will he also comment on Mr Van Rompuy saying last week that the Government's refusal to submit our Budget to Brussels is unfinished business? How will the Government react if they are outvoted on this in the autumn? Finally, and more widely, the Government's protestations of their innocence do not exactly chime with the wording of the Council's conclusions. I shall read three extremely briefly. First,It was while replying to this question that Lord Strathclyde explained that there really are no differences between Lord Pearson's views and HMG's, on some subjects, anyway.
"we fully agree on the urgent need to reinforce the coordination of our economic policies".
"All Member States are ready ... to take additional measures to accelerate fiscal consolidation".
"The crisis has revealed clear weaknesses in our economic governance, in particular as regards budgetary and broader macroecononmic surveillance. Reinforcing economic policy coordination therefore constitutes a crucial and urgent priority".
Which one is right-the Government's Statement or the Council's conclusions?
My Lords, the noble Lord, Lord Pearson of Rannoch, is right when he says it is beyond belief that the EU should wish to inspect our Budget before it is presented to Parliament. He is entirely right. In that there is not a cigarette paper of difference between him and the Prime Minister, or I suspect even the Opposition. We would all agree that the EU has no role and no place to look at our budgetary arrangements and, indeed, our parliamentary procedures. That position has been made entirely implicit in the Statement that I repeated a few minutes ago. It is not unfinished business; it is firmly finished business and we will be leaving it entirely the way that it is currently.So, have we just been given a cast-iron guarantee that the government will never allow the Budget to be vetted by the Commission before it is debated and decided by the House of Commons?
The noble Lord, Lord Pearson of Rannoch, made great play of looking at the conclusions and the Statement that we made. This is an old game to play and the noble Lord does it with great skill. I assure him that again there is no difference between the conclusions and the Statement that we made. They can live together entirely side by side and there is no difficulty for the Government.
Lord Stoddart of Swindon seemed doubtful:
I want to make two points. First, with regard to the reference to budget surveillance on page 4 of the Statement, this does not go far enough. It says that,In response, Lord Strathclyde seemed to agree even with Lord Stoddart without actually saying anything much:
"the UK Budget will be shown to this House first-and not to the Commission".
It is not a question of showing the Budget to the House; it is a question of the House of Commons agreeing the Budget before the Commission has its way. Surely that is right.
Secondly, why on earth do the Government continue to harp on about 40 per cent of our trade being with the European Union? The world is a much bigger place than that these days, so would it not be better if we expanded our trade with China, South America, India and indeed the Commonwealth, instead of concentrating on the backyard of Europe?
My Lords, on the question of the Budget, the noble Lord is in danger of tilting at windmills. We are not playing any verbal gymnastics that somehow when we say that it will be presented to Parliament first it means that round at the back door we are busily presenting it to the Commission. We are not. Tomorrow there will be a British Budget which will be presented to the British Parliament first. After it has been presented it will be a matter of public record and knowledge. I dare say that the Commission may be interested; it may indeed be very interested in looking at it before it is finally agreed by Parliament. Therefore, I do not think that there is a fundamental difference between the two of us on this issue.We have not sorted out the question of who will be making decisions on the post-September Budgets; neither has the Minister admitted that he was misleading the House with that figure of 40 per cent.
Neither, incidentally, is there about what the noble Lord Stoddart of Swindon, said about trade with the rest of the world. It is an important plank of British foreign policy to expand our trade beyond Europe. That is vital to our long-term prosperity and the creation of jobs in this country. We are using all the natural advantages that this country has built up over many decades-centuries even-with countries whose economies are growing extremely quickly. To ignore them would be an enormous mistake. So I hope that I can put a smile on the face of the noble Lord, Lord Stoddart, by saying that I very much agree with what he said.