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European Council
3.32 pm
The Prime Minister (Mr. Gordon Brown): With permission, Mr. Speaker, I would like to make a statement about the European Council held in Brussels, which I attended with the Foreign Secretary on 13 and 14 March.
I begin with the most important concern that the Council addressed: the need to ensure that, faced with global financial turbulence and what the Council identified as a deteriorating global economic outlook, high global oil and commodity prices and volatility in exchange rates, we continue to do all we can, with co-ordinated action at European and global level, to maintain stability and growth.
All European member states agreed to measures for greater financial market transparency: first, prompt and full disclosure of exposures to structured products and off balance sheet activities; secondly, more rigour in credit ratings; thirdly, improvements in valuation standards, particularly for illiquid assets; and fourthly, a strengthening of risk management under the capital requirements directive.
Given the globally transmitted nature of the risks, it is clear that many of those recommendations—the changes to credit rating agency operations and assessments; risk management and disclosure by global financial institutions; changes to capital adequacy rules; and arrangements for valuing financial instruments—which have also been proposed as measures for change by the American Administration, can best be implemented at a global level.
And in welcoming that international dialogue as the first step in reform, I can tell the House that the Chancellor of the Exchequer is today writing to the G7, the International Monetary Fund and the Financial Stability Forum to call for agreements on co-ordinated international action on transparency and disclosure, better risk management and action on credit rating agencies to be agreed when the G7 and the IMF meet from 10 to 12 April.
In line with the approach of other major central banks, the Bank of England has this morning announced a further £5 billion liquidity support to financial institutions. And a new group has been set up to improve liquidity in the mortgage market.
At the European Council I made it clear that, while our economy is resilient and fundamentally strong, we will at all times remain vigilant and, especially at this time of global uncertainty, continue to take whatever action is necessary to maintain economic stability and growth.
The Council also discussed a new approach to the rising number and economic power of sovereign wealth funds. I strongly welcome the conclusions. Sovereign wealth funds are now worth $2 trillion, but may soon potentially be worth $10 trillion. Our new approach—calling for a voluntary code of conduct based on best practice, openness, transparency and corporate governance—is one that will enable funds to show that they are commercial in their operations.
The Council also discussed food and energy price inflation, and agreed further steps to monitor worldwide inflationary pressures. We agreed that the current global
financial turbulence was not a reason to postpone fundamental economic reforms that are essential to building a more competitive European economy. We agreed that we now press ahead with the liberalisation of markets and with new investment in knowledge and innovation. That includes further liberalisation in the energy, post and telecoms markets, which could generate up to 360,000 new jobs.
We discussed the need also for an economic reform strategy that looks beyond Lisbon—a comprehensive strategy to improve the business environment, strengthen relations with China and India, put our creative and knowledge industries at the forefront of the world economy, and make European universities leading global players, in particular through increasing their contacts with business. So the next stage of the Lisbon agenda will include a review of human capital and skills in Europe, and a renewed focus on competition policy in the single market.
The second major issue discussed by the Council was climate change, where it is essential that we achieve our ambition of a comprehensive post 2012 agreement to reduce greenhouse gas emissions and of Europe leading the world in a low-carbon economy.
In December, the European united front at the climate change negotiations in Bali played an important part in the historic breakthrough that agreed the need to make large cuts in emissions and achieve a new climate deal within two years. Only a common European approach—a Europe with Britain not at the margins but at the centre, leading the world—can ensure a global low-carbon economy founded on our proposal of a global carbon market.
Building on this commitment, the Council agreed an ambitious schedule for adopting a package of measures to cut emissions by 20 per cent. by 2020 or by 30 per cent. as part of an international agreement. The Council also agreed with the UK on the need for an effective EU emissions trading scheme to provide the incentives to drive carbon reductions in the most cost-effective way and for a cap on emissions set centrally, with a clear emissions reductions trajectory to give investors the predictability that they now need.
The Council also considered a report from the EU high representative on the security implications of climate change and, at our request, agreed to submit recommendations on follow-up action—including intensifying co-operation with countries outside Europe—by the end of the year.
Meeting the EU’s climate change targets requires not just action to reduce carbon emissions from energy suppliers and industry, but incentives to change individual behaviour. The Council will now invite the Commission, in bringing forward its legislative proposals on VAT rates, due in the summer, and working with member states, to examine areas where economic instruments, including VAT rates, can play a role in increasing the use of energy-efficient goods and energy-saving materials, from, as the UK has proposed, insulation and household materials to energy-efficient electrical goods, where VAT is cut.
The Council also agreed on the importance of achieving a fully functioning and joined-up internal energy market, as an essential condition for the secure, sustainable and competitive supply of energy across
Europe. We also committed to an energy agreement by June this year. It is clear that energy security is strengthened by a policy that takes a collective approach to third-country producers, notably Russia.
Europe can also play a part in ensuring stability beyond its borders. The Council agreed to build on existing co-operation to establish a “Union for the Mediterranean”, to promote security and stability in the wider region and to provide a framework for co-operation between the EU27 and other Mediterranean coastal states on political and security issues, as well as economic, social and cultural affairs. That new union will be launched during the French presidency in July this year.
We also agreed that international development issues and the achievement of the millennium development goals, as well as Europe’s continuing leadership as the biggest contributor of aid in the world, will be the subject of a major discussion at the European Council in June.
The outcome of the Council and the preparations that are being made for June affirm the conclusions of the debate that we have had in the House over the past nine weeks: they demonstrate that, with the completion of the Lisbon treaty, we now have an opportunity to move beyond institutional issues to create a more outward-looking, flexible and global Europe, and to address the challenges that matter most to the citizens of Europe.
With three quarters of a million businesses, 3.5 million jobs and 60 per cent. of British trade dependent on our relationship with Europe, we should do nothing to put the stability of that relationship at risk. It is only by working constructively and remaining fully engaged with our European partners that we properly address the challenges ahead.
As we prepare for the European Council in June and the French presidency later this year, our aim is that European countries working together can lead the way on climate change, on security, on international development and on the response to global financial turbulence. I will be discussing with President Sarkozy when he visits Britain next week how we can take all these challenges forward during the French presidency. I commend this statement to the House.
Mr. David Cameron (Witney) (Con):
I welcome the focus of this Council: global competitiveness, global poverty and global climate change. This is the right agenda. On climate change, the first thing that Governments should do is get their own house in order. The draft communiqué included specific targets to reduce energy use in Government buildings, offices and cars. Will the Prime Minister explain why those specific targets were removed from the final text agreed at the weekend? Looking at our own record here in the UK, does the Prime Minister accept that 14 Government Departments are less energy-efficient than they were eight years ago, and that 15 Government Departments have actually increased their carbon emissions during that time— [ Interruption. ] He asks what this has got to do with Europe. I think we should be leading by example. In a similar context, will he confirm that, despite the fine words in the Budget about plastic bags,
the Government have bought 1.2 million Whitehall-branded single-use plastic bags in the past two years?
The Prime Minister is right to say that the success of the emissions trading scheme is vital. Will he acknowledge, however, that the Lisbon treaty is completely irrelevant to making that happen? There are six words on climate change in the treaty and, as the House of Lords Committee pointed out last week, they have no legal significance. Is it not the case that we do not need a new constitution or a new treaty to deal with climate change at EU level?
Everyone will welcome the Prime Minister’s intention to use indirect taxes, including VAT, as incentives for green behaviour. That is something that we have put forward in our own quality of life policy group report. The Commission said that it had doubts about whether the proposal was workable. One EU diplomat said that the agreed wording was
“a polite way of saying no”,
“a way of saving face”.
In regard to the outcome that we all want, is the Prime Minister sure that he is right and that that EU diplomat was wrong?
On the economy, Ministers discussed the recent turbulence in the financial markets. Clearly, proper co-ordination by central banks is going to be essential. Will the Prime Minister guarantee that his approach of putting the Financial Services Authority, rather than the Bank of England, in the lead to rescue British banks in distress will not make the process more difficult?
The final communiqué from Brussels warns Governments across Europe about the dangers of high deficits. Will the Prime Minister confirm that Spain’s budget is in balance, and that Germany, the Netherlands, Denmark and Sweden all have budget surpluses, while Britain has the largest budget deficit in western Europe? Does he now regret the fact that we are the one country that failed to prepare for the downturn by putting money aside in the good years?
The other main issue for Europe to focus on is global poverty and the urgent need to make rapid progress on the Doha round. Will the Prime Minister tell us why the EU seems to be showing so little urgency in getting the deal moving again? The Commissioner in charge of those negotiations is Peter Mandelson. Whatever any of us may think of him, I have always had very helpful briefing from him on trade and, I have to say, on other issues, too— [ Laughter. ] The Leader of the House should not laugh; she might put herself in jeopardy. What matters is that there should be a clear decision on whether he is going to serve another term. It cannot be in anyone’s interests for the Commissioner’s future to be the subject of endless speculation. Will the Prime Minister tell us today whether Peter Mandelson is going to go on doing his job, or whether this decision is to be the subject of further dithering?
While Ministers were in Brussels, there was violence— [ Interruption. ] Look, I thought the boot boy had been told to calm down. I read in a Sunday newspaper that he was actually the soon-to-get-the-boot boy. Soon, he might have to go and sit in another part of the House. I see that the Prime Minister is
laughing. I think your career—you will be on the same conveyor belt as the Leader of the House.
While Ministers were meeting in Brussels, there was violence on the streets of Tibet. An EU statement on Tibet has been issued today, which I am sure the whole House will welcome. Britain rightly works closely with China and we very much welcome the way it has opened up its economy, but is it not vital that the Chinese Government understand that with the greater role they play in the world comes greater responsibility? Does the Prime Minister agree that the strong relationship we all want with China requires us to be candid and frank, even on issues where we disagree?
The Prime Minister: I will deal with each point, but is it not remarkable when 3.5 million jobs are dependent on our membership of the European Union and when European co-operation on the environment was crucial to what happened at Bali that the right hon. Gentleman can say so little about the advantages of co-operation in Europe, and that he should spend his time attacking the European Union rather than seeing the benefits in it?
The right hon. Gentleman says that the environment is nothing to do with the European reform treaty, but it is the first time we have set down as a strategic objective that the environment is an important issue and it is there in the treaty. All the other parties in Europe believe it is important that the environment be at the centre of Europe’s work and if I may say so, if we are going to lead the world on the environment, we will need to co-operate with our other European partners.
The right hon. Gentleman also raised the question of how we as a country are cutting emissions. We are one of the few countries meeting our Kyoto targets and we will continue to do so. One of the reasons why we are meeting them is that we implemented early on in our Government the climate change levy, which the Conservatives continue to oppose.
As far as the economy is concerned, I find it very strange for the right hon. Gentleman to be raising issues that compare us with the rest of Europe in terms of economic progress. We have lower inflation than the rest of Europe and we have a history of stability and growth. The right hon. Gentleman will find, during the course of this year, that the American deficit will be higher than the British one because people are taking the right action to deal with the global financial turbulence. I am sorry that the right hon. Gentleman has so little to say in support of the action that the European Union and, indeed, all international authorities are taking on the economic issues confronting them. If the Conservatives want to be a serious party, perhaps they could actually address the serious issues of economic progress.
As far as the issues about Tibet are concerned, the right hon. Gentleman is absolutely right that, while it was not discussed at the European Council, all of us are concerned about what is happening there. We have made our views known to the Chinese authority: we believe that there should be restraint and an end to violence; and we believe that there should be a dialogue between the different authorities, which should happen soon. It is very important to recognise that at this time the whole world is looking to China to see what the reaction will be.
The right hon. Gentleman also raised the issue of trade and may I say that we, too, have been pushing the rest of the world because we believe it important to use this window of opportunity to get a trade deal? That is why we are working as we are with the European Trade Commissioner and why it is essential to move other countries forward to see if we can get a deal.
One of the people who was at the European Council during the course of the weekend was the Czech Prime Minister. Until recently, he was the Conservative party’s only supporter in Europe. What he is saying now, however, is that failure to support the reform treaty will leave the Czechoslovakian people isolated in Europe. That is exactly what would happen to this country if we ever listened to Conservative advice.
Mr. Nick Clegg (Sheffield, Hallam) (LD): I am grateful to the Prime Minister for his statement. As European summits go, the conclusions were workmanlike, largely welcome, but fairly unremarkable. I wonder whether that is in part because of the issues that were omitted. Notwithstanding the Prime Minister’s words about Tibet today, will he explain why there was no discussion among EU Heads of State last week on Tibet? Does he not think that it is precisely the actions of the Chinese authorities in Tibet that should be the subject of discussion between European leaders?
I know that the Prime Minister is extraordinarily reluctant to do anything, it seems, to annoy the authorities in Beijing, but will he none the less confirm today that he will follow the lead of President George Bush and of Chancellor Angela Merkel and meet the Dalai Lama on his forthcoming visit to London to express solidarity with the Tibetan people? [Interruption.] As the Prime Minister knows, I have written to him about that on two occasions and still not had a clear answer— [Interruption.]
Mr. Speaker: Order. Allow the right hon. Gentleman to address the House. Not to do so is unfair.
Mr. Clegg: I congratulate the Prime Minister on inserting, at the last minute, a reference in the conclusions to his laudable aim of reducing VAT rates on environmentally friendly goods, but why did he apparently go about that in such a bizarre fashion? Why did he spring it on his colleagues—if reports are to be believed—at the last minute through a letter with President Sarkozy? Is that really the best way to show leadership and do business in the EU? My worry is that the manner in which the proposal was spun in the press had as much to do with obscuring the Government’s woeful record on the environment, compared with that of other EU countries.
We are now 25th—25th—out of the 27 EU member states on the use of renewables, and more than 25 per cent. of our carbon emissions come from our housing stock, compared with 5 per cent. in Sweden, which is a much colder country. We have a recycling rate well behind that of France, Germany, Spain and other countries. The go-ahead is being given to Kingsnorth power station—the first in a new generation of coal-fired power stations—without any effort being made to use carbon capture technology, and the go-ahead is being given to a third runway at Heathrow. The list goes on.
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