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Queen's Speech

My Lords, I shall focus on what our approach should be to what is or should be going on in the European Union in the coming months. My task is rendered much easier by the fact that, as far as my general stance is concerned, I so completely agree with what my noble and learned friend Lord Howe of Aberavon said that I need say no more on that. I raise, first, the adequacy of the European Union’s response to the current global financial crisis. Euro-sceptics who are tempted to carp at that response should realise that their strong insistence that fiscal policy should remain overwhelmingly in the hands of member states inevitably means that a strong, single, common approach is virtually impossible. On the other hand, a co-ordinated policy applied in a flexible way by member states is desirable, feasible and wholly appropriate. That is what has been proposed by the Commission for consideration at next week’s European Council. The question on which this House could perhaps give its views, therefore, is whether Her Majesty’s Government should support that broad approach. A complex set of measures is proposed, amounting to a substantial fiscal boost. Since the publication of the Pre-Budget Report, the attractions of a give-now, repay-later policy have diminished under detailed scrutiny. That is largely because we have spent and borrowed so much in this country that the costs and risks of that type of policy are enormous. Consequently, the scope in this country for a responsible fiscal boost is limited. However, that is less true for countries which have pursued less profligate policies during the past few years. The attraction of what is proposed for the European Council is that it clearly recognises that what should be done by each member state must reflect the degree to which it has been fiscally responsible in the past. On the other hand, while allowing for that high degree of flexibility, the attractions of a common agreement that there should be a Europe-wide fiscal boost are considerable, and the description of the various instruments that might be used is constructive. For my part, having been Chief Secretary to the Treasury—working with my noble and learned friend Lord Howe of Aberavon—in the early 1980s, when we did not go down that path and successfully followed a different one, makes me extremely cautious about any fiscal boost. However, the circumstances differ today. First, the global situation is much more serious than in the early 1980s. Secondly, it makes a huge difference if what is done in broad terms, recognising the differences in scale and specific measures between different countries, is done right across Europe, and in the United States and China. It greatly increases the chance of it working and leads me to believe that the Government should next week give broad support to the proposal for a co-ordinated, not a common, European approach to the crisis. Some have asked whether that means that we should revisit the issue of Britain joining the euro. Most notably, the President of the European Commission, Mr Barroso, has raised this issue. I have always been in favour of Britain’s membership of the euro, but have to accept the political realities. The case for joining the euro certainly looks stronger today than it has in the recent past. One only has to think how Italy and Greece would be faring if they were not in the euro-zone. I suspect that the case will look even stronger in the next year or so, because, unfortunately, the IMF predicts that Britain will suffer a more severe recession than almost any other advanced, substantial-in-size western country. None the less, I do not think that the time is yet ripe to reopen the debate on the euro in this country, although it is getting much closer. I want to touch on two other European issues. The first relates to the Lisbon treaty, which will be a very actual question in the coming months. I shall not go into the arguments for and against. As I have said in this House, I am in favour of the treaty and do not share the view of my Front Bench. The question now is how to move forward in the face of the Irish vote. All the talk of bullying the Irish is nonsense. The Irish recognise that there is a problem and are seeking to face up to it constructively. Other countries and individuals are perfectly entitled to express their views—that is not bullying. However, it is becoming reasonably clear that what the Irish will suggest, probably next week, as the way forward is a declaration or protocol stating that the treaty does not impinge in any way on their desire to remain neutral, does not lead to any derogation from their sovereignty on tax matters and does not involve anything that undermines their position on abortion. All those are easy matters, because, although they were raised during the Irish referendum, none of them was threatened in the treaty. Therefore, to say that nothing in the treaty threatens them is no more than to repeat the obvious, although it was not obvious to the majority of the people in Ireland. It is also likely that the Irish Government will suggest reversing the decision, as can be done in the treaty, to reduce the number of European commissioners, so that Ireland will always continue to have a commissioner. I must admit that I had not realised when I was appointed to be one of the British commissioners that my presence in Brussels was quite such a precious national asset, but, in Ireland, that seems to be regarded as the case. The case for reducing the number of commissioners is strong and pretty obvious. Some years ago—quite a long time ago—I suggested dealing with the problem by having senior and junior commissioners, which I still think would be the right thing to do ultimately. But that cannot be done quickly. On balance, at least in the short term, the importance of getting the treaty ratified and moving away from consideration of constitutional issues is sufficiently great for it to be right to swallow the pill of leaving every member state with a commissioner if that is what it takes to resolve the log-jam. Finally, I shall say a word on European energy policy. I was recently a member of the Chatham House Commission on Europe after Fifty, which produced the report A British Agenda for Europe, which I can warmly recommend as I did not actually write it. The most far-reaching conclusions in the report relate to energy. I have always taken the totally pragmatic view on what Europe should and should not do collectively. I have suggested that Europe should be ready to hand back competences to the member states when the job has been done and it is no longer needed to act at European level. On the other hand, there are sometimes problems that can be resolved only by collective European action. If that is so, we as a pragmatic nation should not hesitate to favour such action, even if it means further pooling of sovereignty. If ever there was a subject to which that applies, it is the security of the supply of energy. Valiant efforts to achieve a common European approach on energy have, so far, been embryonic, to put it extremely politely. Third parties, such as Russia, have rather successfully played one European country off against the other. That is why it is worth giving serious consideration to the report’s proposal that: "““Britain should push for a more coordinated European energy strategy in order to be in a position to better handle Russia’s dominant position within European energy markets … The most important step in this regard is to create a more physically integrated EU energy market which would have the potential to lessen EU member states’ vulnerability to supply disruptions. Interlinked EU energy markets could also deliver significant efficiency gains, principally through greater interconnectivity of national electricity and gas grids and through increased use of gas storage””." The report goes on to make a strong case for establishing some form of European energy agency to help to implement the policies and, most controversially, says: "““Urgent consideration should be given to the idea of developing a common external energy policy in which the terms on which Russia and other energy providers secured access to EU markets would be negotiated centrally by the European Commission on a mandate from the member states and treating the EU market as a single whole.””" In other words, that would prevent Russia playing off one country against another. These are radical ideas, but they are not premature. I hope that they, too, will be given serious consideration in the coming months, as well as the other issues that I raised in my remarks.