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Prime Minister's statement on the European Council

"I am very clear that British taxpayers will not be guaranteeing any Eurozone banks"

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government


Mr Speaker, I am sure the whole House will be deeply saddened by the death of three British servicemen in Afghanistan yesterday.

These brave soldiers were demonstrating great courage to prevent Afghanistan once again becoming a haven for international terrorists and to keep us safe here in the UK.

The suspected perpetrator is in custody and we will do everything in our power, with the Afghan National Security Forces, to ensure that justice is done.  

This tragic incident again demonstrates the very real risks that our soldiers face  every day and we will learn all the lessons that arise from it.

I know that everyone in this House will want to send their support to our brave troops and their families at this difficult time.

Mr Speaker, Britain had three objectives at last week’s European Council.

First, for Eurozone members to take the urgent action needed to deal with the immediate crisis.

Second, to secure a comprehensive growth package firmly focused on Britain’s priorities.

And third, to send a clear message to the rest of Europe about what Britain expects from the budget negotiations to come.

Let me deal with each before turning to future policy and the government’s response to the banking scandal.


First, the Eurozone.

Britain has been clear that in the short term we want urgent action by Eurozone countries and authorities to defend their currency and deal with the instability.

And in the longer term, we recognise that the remorseless logic of a single currency means the Eurozone may need closer economic and fiscal integration.

Britain is not in the Euro and we are not going to join the Euro.

So we should neither pay for short term measures, nor take part in longer term integration.

At this Summit there was some progress.

On shorter term measures, Eurozone members agreed to use the bail out funds to support intervention in bond markets, to put Eurozone money directly into struggling banks and to ensure that official loans to Spanish banks wouldn’t be given preferential treatment over private sector loans.

Under the last government we could have been liable for financial support for these measures, as members of the EU bailout fund.

But this government has repatriated that power, so the British taxpayer is not involved.

On longer term issues, Eurozone members agreed important steps towards closer integration following a discussion of a report by the President of the European Council and others.

It is vital for Britain - and for the strength and prosperity of the whole European Union - that they do this in the right way.

I secured agreement that as this work goes ahead, the “unity and integrity of the single market” will be fully respected.

And on the specific proposal of a banking union, I ensured that Britain will not be part of any common deposit guarantees or under the jurisdiction of any single European financial supervisor.

I am very clear that British taxpayers will not be guaranteeing any Eurozone banks.

And I am equally clear that we need proper supervision of our banks but British banks will be supervised by the Bank of England, not the ECB.

The original draft of the Growth Compact included a whole section on Economic and Monetary Union which implied that a banking union might apply to all 27 countries.

A number of countries worked together to ensure that was removed.


Second, growth.

Mr Speaker, the growth programme includes commitments to deal with weak lending - including through an increase in funds for the European Investment Bank.

But alongside this are clear commitments to complete the single market in areas like services, energy and digital where Britain will be one of the prime beneficiaries.

And the agreed plan included dates and times by when these steps should be completed.

We also agreed to go ahead with the European patent court. 

Businesses have complained for decades that they needed 27 patents to protect their intellectual property.

This problem will now be solved.

In finalising the agreements, Britain had two objectives.

That the new patent should be redrafted so it was not snarled up in the processes of the European Court of Justice.

And that a significant part of the Court, covering pharmaceutical and life science industries, would be based in London.

I secured both.

This will mean millions of pounds and hundreds of jobs for Britain. 

EU budget 

Third, the EU budget.

Mr Speaker, we want a budget that is focused on growth not a focus on growth in the budget. 

EU members as a whole are €3.5 trillion more in debt now than when the last EU budget was negotiated and we have to face up to that tough reality with a rigorous approach to the next seven year budget.

I made clear that without the British rebate we would have the largest net contribution in the EU as a share of our national income.

It would be double that of France and almost one and a half times bigger than Germany.

So the British rebate is not up for renegotiation. It is fully justified.

Foreign policy

On foreign policy, the Council welcomed the EU oil embargo against Iran which came into force yesterday.

And on Syria we called for united action by the UN Security Council to add more robust and effective pressure on Assad’s regime, including the adoption of comprehensive sanctions.


Mr Speaker, Europe is changing rapidly and fundamentally.

And this presents real challenges for all countries.

Those inside the Eurozone have to face fundamental choices about whether to limit their national democracy and provide financial support to the weaker members.

And like others outside the Eurozone, in Britain we also face big choices too.

As Europe changes to meet the challenges of the Eurozone, so our relationship with Europe will change too.

There are those who argue for an in-out referendum now.

I don’t agree with that because I don’t believe leaving the EU would be best for Britain.

Nor do I believe that voting to preserve the exact status quo would be right either.

As I wrote yesterday, I don’t agree that the status quo is acceptable.

But just as I believe it would be wrong to have an immediate in-out referendum so it would also be wrong to rule out any type of referendum for the future.

The right path for Britain is this:

First, recognise that in the short term the priority for Europe is to deal with the instability and chaos.

Second, over time take the opportunities for Britain to shape its relationship with Europe in ways that advance our national interest in free trade, open markets and co-operation.

That should mean, as I argued yesterday, less Europe not more Europe. Less cost, less bureaucracy, less meddling in issues that belong to nation states.

Third, all party leaders will have to address this question.

But it follows from my argument that far from ruling out a referendum for the future as a fresh deal in Europe becomes clear, we should consider how best to get the full consent of the British people.


Finally, Mr Speaker, as I have said, as the Eurozone moves to a banking union we will ensure Britain can take responsibility for sorting out its own banking sector.

On the unfolding banking scandal here in the UK.

We need to take action right across the board.

Introducing the toughest and most transparent rules on pay and bonuses of any major financial centre in the world.

Increasing the taxes banks must pay.

Ensuring tough civil and criminal penalties for those who break the law.

And above all, clearing up the regulatory failure left by the last government.

The British people want to see two things.

That bankers who act improperly are punished.

And that we learn the broader lessons of what happened in this particular scandal.

On the first, the Serious Fraud Office are looking at whether there are any criminal prosecutions that can be brought, and they are using the full force of the law in dealing with this.

On the second, I want us to establish a full parliamentary committee of Inquiry involving both Houses chaired by the Chairman of the House of Commons Treasury Select Committee.

This Inquiry will take evidence under oath have full access to papers, officials and Ministers - including Ministers and Special advisers from the last government and it will be given, by the government, all the resources it needs to do its job properly.

Mr Speaker, the Chancellor will be making a full statement.

This is the right approach because it will be able to start immediately it will be accountable to this House and it will get to the truth quickly, so we can make sure this can never happen again.

And I commend this Statement to the House.

Published 2 July 2012