Read the statement
With Permission, Mr Speaker, I would like to make a Statement.
Mr Speaker, clearly the whole country has been focused this weekend on the terrorist threat and the Home Secretary will make a full statement after this.
But I want to put on record my thanks for all those involved in the international police and intelligence operation, whose efforts clearly prevented the terrorists from killing and maiming many innocent people, whether here or elsewhere in the world.
The fact that the device was being carried from Yemen to Qatar to the UAE to Germany to Britain on route to America, shows the interest of the whole world in coming together to deal with this.
And while we are rightly engaged in Afghanistan to deny the terrorists there the threat from the Arabian peninsula and from Yemen in particular, has grown. So as well as the immediate steps which the Home Secretary will outline it is clear that we must take every possible step to work with our partners in the Arab world to cut out the terrorist cancer that lurks in the Arabian peninsula.
Mr Speaker, let me turn to last week’s European Council.
This Council’s main business was going to be economic governance in the light of the serious problems the Eurozone has faced.
But I was clear that we could not talk about the need for fiscal rigour in the EU’s member states without also talking about the need for fiscal rigour in the EU Budget - both next year, and for the future.
So we ensured that the EU budget was also on the agenda.
Let me go through both issues.
First, the budget for 2011. From the outset in May, we wanted a freeze. We pressed for a freeze. In July, we voted for a freeze seeking to block the 2.9 per cent proposed by the Presidency.
Finland, Sweden, Denmark, the Netherlands, the Czech Republic and Austria all voted with us. Unfortunately, together we were just short of the numbers needed for a blocking minority. So in August, the Council agreed a 2.9 per cent increase.
Then in October it went to the European Parliament which voted for around a 6 per cent increase. This was the frankly outrageous proposal with which we were confronted at this European Council.
Now what normally happens in these situations is that you take the position of the EU council and the position of the EU Parliament and negotiate which ends in splitting the difference.
Indeed, that is precisely what happened last year.
So before the Council started we began building an alliance to take a difference approach and insist on 2.9 per cent.
I made phone calls to my counterparts in, Sweden, France and Germany amongst others and then continued to press the case during the Council. Twelve other Heads of Government agreed with me. We issued a joint letter which makes clear that a 6% increase is - and I quote - “especially unacceptable at a time when we are having to take difficult decisions at national level to control public expenditure”.
Furthermore, the joint letter goes on to say that “we are clear that we cannot accept any more than” the 2.9% increase being proposed by the Council.
Mr Speaker, let me explain what this means. Either the Council and Parliament now have to agree to 2.9 per cent or there will be deadlock, in which case the EU will have to live on a repeat of last year’s budget settlement handed out in twelfths over the next twelve months an outcome we’d be perfectly content with.
New principle for the EU Budget
Next Mr Speaker, and more importantly, Britain secured a significant break-through on a fundamental principle for the longer-term.
As well as the individual budget negotiations for 2011, 2012 and 2013, there is also a big negotiation about to happen for the future funding of the EU over the period between 2014 and 2020.
We clearly want to make sure all of these negotiations go the right way. And what we agreed at the Council was a big step forwards. The European Commission was wholly opposed to it.
But the Council agreed that - and I quote - “at the same time as fiscal discipline is reinforced in the European Union, it is essential that the European Union budget and the forthcoming multi-annual Financial Framework reflect the consolidation efforts being made by Member States to bring deficit and debt onto a more sustainable path.”
So from now on the EU budget must reflect what we are doing in our own countries. And it is quite apparent that almost every country in Europe is seeing very tough spending settlements.
And this new principle applies to the 2012 and 2013 budgets and the crucial 2014-2020 EU spending framework.
Just as countries have had to change their financial plans because of the crisis - so the EU must change is financial plans too.
Mr Speaker, if you look at the published Conclusions, language on the budget formed a very prominent part, even though it was never originally on the agenda.
I do think this is an important step forward.
In my discussion with Chancellor Merkel at the weekend, we agreed to take forward some joint work to bring some transparency to the EU budget.
Salaries, allowances, grants.
This work has just not been done properly.
It’s about time the citizens of the EU know what the EU spends it money on. This is the spotlight that needs to be shone. And that’s exactly what we are going to do.
On economic governance. There are two issues.
First there is Herman van Rompuy’s report from the Task Force on Economic Governance. This was set up after the Sovereign debt crisis. And my Rt Hon Friend, the Chancellor, and the Treasury have been fully involved.
Second there is the additional proposal made by the Germans and in principle agreed by the Council for a Treaty amendment focusing on putting the EU’s temporary bail-out mechanism onto a permanent basis.
Let me take each in turn.
On van Rompuy’s report, there are some sensible proposals. For example, the Eurozone clearly needs reinforced fiscal discipline to ensure its stability. And the crisis has shown that in a global economy you clearly need early warning about imbalances between different countries.
Let me be clear on one point about which there has been some debate: the question of surveillance. All Member States - including the UK - have participated in surveillance for more than a decade.
This is not a new framework. The report is clear the current framework remains broadly valid but needs to be applied in a better and more consistent way. The report does propose new sanctions but we have ensured that no sanctions - either existing or new - will apply to the UK.
The report could not be clearer. It says “strengthened enforcement measures need to be implemented for all EU Member States, except the UK as a consequence of Protocol 15 of the Treaty”.
That is our opt-out. It kept us out of the single currency. It kept us out of sanctions under the Maastricht Treaty. And we’ve ensured it keeps us out of any sanctions in the future.
Mr Speaker, in addition to the issue of sanctions, a number of concerns have been raised. Let me just address each of them head on.
First - will we have to present our budget to Europe before this House? No
Second - will we have to give Europe access to information for budgetary surveillance that isn’t similarly shared with organisations like the IMF or publicly available on the internet? No
Third - will powers over our budget be transferred from Westminster to Brussels. No
Turning to the proposal mentioned in the Council conclusions for limited treaty amendment. We have established that any possible future Treaty change, should it occur, would not affect the UK and I will not agree to it if it does.
The proposal to put the temporary bail-out mechanism on a permanent footing is important for the Eurozone. Eurozone stability is important for the UK; Nearly half our trade is with the Eurozone. London is Europe’s international financial centre.
Mr Speaker, let me be clear. Throughout this process I have been focused on our national interest. It is in our national interest that the Eurozone sorts itself out. It is in our national interest that Europe avoids being paralysed by another debt crisis as it was with Greece in May. And it’s absolutely in our national interest that Britain is not is drawn into having to help with any future bail out.
This is what we have secured.
Mr Speaker, let me briefly turn to the other business of the Council.
On the G20, the council discussed its priorities for the upcoming Summit in Seoul.
Again our interests are clear.
We are an open trading nation. We want progress on Doha. This has been going for nearly a decade. 2011 is the year when we must try and achieve a deal.
We believe the world has suffered from economic imbalances. We want countries with fiscal deficits to deal with them. And countries with trade surpluses over time to look at structural and currency reforms.
We recognise the importance of strengthening global financial stability - and that’s why we support the recent Basel agreement on stronger banking regulations.
And we want global institutions reformed to reflect the growth of emerging powers so we will see through the work my Rt Hon Friend, the Chancellor has led on reform of IMF votes and board seats.
Finally on Cancun, we are committed to making progress towards a legally binding UN agreement.
Mr Speaker, this Council demonstrates that it is perfectly possible to deliver for our national interest while protecting our national sovereignty.
Tomorrow, the British and French governments will sign new defence and security co-operation treaties which will be laid before Parliament in the usual way.
This follow the same principle.
So partnership - yes. But giving away sovereignty - no.
At this Council Britain helped Europe take the first vital steps in bringing its finances under control.
We prevented a crazy 6 per cent rise in the EU Budget next year. We made sure that the budget reflects domestic spending cuts in all future years. And we protected the UK taxpayer from having to bail out Eurozone countries who get themselves into trouble.
There is a long way to go. But we’ve made a strong start.
And I commend this statement to the House.