Treasury minister Mark Hoban insists the UK is exempt from the EU economic governance regime

By Jonathan Isaby

Further to my report earlier and that of Lee Rotherham on Monday about Herman Van Rompuy's Task Force on EU Economic Governance, Treasury MInister Mark Hoban came to the Commons this afternoon to answer an Urgent Question from Bill Cash on the issue.

Mr Hoban said:

"The report concludes that the EU should take steps to reinforce fiscal discipline and that the euro area in particular must face tougher surveillance of its fiscal policies, with sanctions for non-compliance with the pact where appropriate. It also recommends measures to improve EU-level co-ordination of macro-economic policies. That will ensure that any harmful macro-economic imbalances between member states can be identified and corrective action taken. Finally, the report notes that there should be a permanent crisis resolution mechanism for the euro area. The UK supports its conclusions.

"A strong and stable euro area is firmly in the UK’s own economic interests, given the high level of UK exports to those countries and our close economic ties. In the years before the crisis, fiscal discipline was absent, and not just in states in the eurozone. High levels of debt have exacerbated the problems that some member states face during the economic downturn. The taskforce recommends that there should be greater focus on member states’ public debt levels in future, and the Government agree with that approach.

"I am pleased to note that the report explicitly states that sanctions cannot be applied to the UK under the stability and growth pact. Domestic fiscal frameworks play a crucial role in ensuring that member states act responsibly. EU surveillance is useful, but as the House knows, national Parliaments and national institutions must hold Governments to account for their economic and budgetary policies."

"The UK’s exemption from the sanctions proposal will be explicit, and there will be no shift of sovereignty from Westminster to Brussels. The report makes that clear, agreeing that “strengthened enforcement measures need to be implemented for all EU Member States, except the UK as a consequence of Protocol 15 of the Treaty”.

Bill Cash was not persuaded by the minister's claim:

"Unfortunately, the explanation that we have just heard from the Minister does not answer all the questions that arise in this matter. In particular, the Chancellor of the Exchequer was on the taskforce, and the Council’s recommendation is that these moves should strengthen economic governance “in the EU and the euro area”, in other words not excluding the UK, “and can be implemented within the existing Treaties.”

But Mr Hoban re-iterated:

"The language in the taskforce report guaranteed that sanctions would not apply to the UK. Paragraph 18 of the taskforce report refers “to the specific situation of the UK in relation to Protocol 15 of the Treaties.” In addition, paragraph 4 states that the measures set out in the taskforce report can be implemented through “EU secondary legislation…within the existing legal framework of the European Union”, so nothing in the report requires a treaty change. I am aware that France and Germany have suggested that there may be treaty changes, but we have yet to see the details of such proposals, which would be made to the European Council at the weekend."

Putative treaty changes were also raised by Peter Lilley:

"Can the Minister confirm that even if the proposed treaty concerns only and exclusively the member states of the eurozone, it would still require the support of the British Government to go ahead? Can he assure me that that support will not be given without obtaining concessions in return, such as the return of powers to this country that were unnecessarily given? Can he assure me that we will not give that support without demanding a price? This is the ideal opportunity to obtain that price."

Mr Hoban replied:

"My right hon. Friend makes an important point, but I would point out to him that, at the moment, there are no proposed treaty changes on the table. That may happen at the European Council next weekend, and we should respond to those treaty changes as they arise. However, I go back to the comments that my right hon. Friend the Prime Minister made: we will not agree to any changes to EU treaties that move more powers from this country to the EU."

Further notes of scepticism were raised by several other Tory backbenchers:

Douglas Carswell: In June, Ministers made a big deal of the fact that the UK Budget would not need to be submitted to EU institutions before it was brought to the House of Commons. Will the Minister confirm that, in fact, the UK pre-Budget report data are part of the European semester process, and that, while we might be exempt from sanctions, we are part of that surveillance? Will he be honest and admit that we are part of the EU fiscal scrutiny process?

Mr Hoban: I believe that this Parliament should hear news about this country’s finances before the EU does. We have secured that situation and that was the right thing to do.

Jacob Rees-Mogg: The Minister has drawn our attention to paragraph 18 of the report. I am curious about paragraph 16, which refers to “New reputational and political measures”, including the threat of “enhanced surveillance”. Would the British fiscal position be subject to enhanced surveillance in certain circumstances, and what would that mean?

Mr Hoban: I take the view that the measures that my right hon. Friend the Chancellor has announced in relation to strengthening the fiscal framework, and the consolidation that he announced last week, will ensure that we will not be subject to any surveillance whatever.

Philip Davies: Whenever the Minister defends this country from a power grab and a cash grab by the European Union, he will have the enthusiastic support of Members on these Benches. Some of us are rather nervous, however, because when the Conservatives were in opposition, they opposed the European External Action Service, yet they sang its praises when introducing it in the House not long ago. They also opposed giving more money to the European Union, yet they recently rubber-stamped an increase through this House that had been agreed by the previous Government. Does the Minister agree that his Government should be judged on what they do, and not on what they say?

Mr Hoban: Absolutely. That is why I would encourage my hon. Friend to read this document. He will see the gains that we have managed to secure in Europe to defend our position.