During the third day of the committee stage of the EU Bill, on 25 January, (Decisions Requiring Approval by Act and by Refenrendum), Bill Cash made the following interventions:

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Mr MacShane: …To return to the Bill and the clause, I campaigned for many years in this House, on an all-party basis, for laws and measures to combat human trafficking. That cannot be done on the basis of a single decision of this House alone. In the last Parliament, it took a great deal of work by hon. Members on both sides of the House to persuade the then Prime Minister to first sign and then ratify the Council of Europe's convention on trafficking. The Home Office's view was that it did not want to be told by anyone-and this was the Council of Europe, not the European Union-what to do or to accept any obligations. Ministers and officials came up with argument after argument about why the Council of Europe convention should not be signed. I am glad to say that parliamentary pressure from both sides wore them down and the then Prime Minister, Tony Blair, signed and ratified it. It was an important step forward. As ever, it was not the final solution to that dark and wretched side of globalisation, but it was a step forward.

Similarly, the European public prosecutor's office might at some stage in the future be of importance to our country, to the Government, whatever their colour, and to the House. At the beginning of the previous decade, we heard exactly the same arguments against the European arrest warrant. People said that it was an intolerable interference in British sovereignty, with Brussels marching in to arrest anyone it wanted. By the time of 7/7, however, when one of the wanted suspects had fled to Rome, where the civil liberties lawyers, the judges, the left and the supporters of Islamism were wrapping their arms around him to protect him, the EAW had-thank goodness-become part of our law, having been adopted by the European Union, and so that gentleman was back on a plane to London before he could say "strong cappuccino".

Mr William Cash (Stone) (Con): Does the right hon. Gentleman recall the case of the person in Leek, Staffordshire whom it was proposed, under an arrest warrant, should be taken over to Italy, and who was convicted in his absence to 15 years, but who, thanks to the intervention of my hon. Friend the Member for Staffordshire Moorlands (Karen Bradley) and the Prime Minister, has been completely exonerated? He was not even within 1,000 miles of where the murder took place.

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Mr MacShane: I am sure that the hon. Gentleman will have a chance to make his point very shortly.

As Euro-realists, this Government have been-by my standards-responsible and helpful, shovelling out money to Ireland and working with Chancellor Merkel on serious treaty amendments that will increase economic surveillance of all the 27 member states, on foreign policy and on other issues. I really have no huge complaints to make about the Government at all. I say again, however, that it is inconceivable that any Minister of any Government in the future is going to come back from Brussels and say, "I've signed such a bad treaty. I'm not really sure about it. It is so significant in its alteration of the powers between the UK and the rest of the EU that I want it put to a referendum."

Mr Cash: The right hon. Gentleman is making a big show about all this. First, there was a referendum in 1975 under a Labour Government. Secondly, there was also a promise in the Labour manifesto about a referendum on the constitutional treaty. Thirdly, if the right hon. Gentleman had been here yesterday, he would have heard those on his own Front Bench proposing a mechanism to ensure that, in certain circumstances, there would be a referendum on all matters within the treaties. So, for practical purposes, he needs to ask himself whether the Labour party is now contradicting the position that he is adopting.

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Chris Heaton-Harris: … My main amendments are concerned with problems that I have identified in the justice and home affairs ratchet clauses or opt-ins. We saw an example here not long ago. Just after the general election, the United Kingdom had to decide whether to opt into the European investigation order. Many Members considered the way in which the legislation was scrutinised and enacted to be unsatisfactory. Along with others, I tabled an urgent question with the aim of establishing whether we were going to opt in.

I think that there is a better way of scrutinising important justice and home affairs matters. I appreciate that in that instance the general election and various recesses caused a problem, but nevertheless I am sure that this place can do a great deal better when it comes to scrutiny, and I believe that the Government can do a great deal better when it comes to enactment. I therefore very much welcome last week's written ministerial statement. Someone like me could pick a few holes in it-on dates and who has the first say, for example-but it is a massive step forward and I thank the Minister for it. I also welcome, as I said, the Government amendments in this area.

The Government have already opted in to the negotiations on the European investigation order, which allowed European police forces to insist that the British police put citizens in the UK under surveillance and grant access to their DNA. I suggest that that is quite a big deal to the United Kingdom. The way in which the EIO was put before the House-eventually, in an oral statement in July-was most unsatisfactory. The intention behind my amendments is to ensure parliamentary scrutiny of such matters.

Mr Cash: The investigation order has not yet been debated in the European Standing Committee, as far as I am aware, so we should bear it in mind that although the Minister made a statement-on 15 June, I think-it is none the less still subject to scrutiny.

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Emma Reynolds: That is certainly true, but I remind the hon. Gentleman that both the Single European Act and the Maastricht treaty involved a much greater transfers of powers than anything we have seen since and the Foreign Secretary voted against a referendum on such matters. Let us talk not only about consistency on this side, but about consistency by those on the Treasury Bench, too.

The Government have decided to opt in to eight pieces of justice and home affairs legislation since the general election. The hon. Member for Daventry has mentioned one of them-the European investigation order. The Opposition would have liked to have had a say on the Government's decision not to opt in to the EU directive to combat human trafficking. Indeed, we judge the Government's decision not to opt in to be a dereliction of duty as regards combating this modern form of slavery. I imagine that some Back Benchers sitting behind the Minister-as I have said, the hon. Member for Daventry has mentioned this-would have liked more time on the Floor of the House to discuss not only the European investigation order but the other seven measures that the Government opted into.

Another area that the Government have totally neglected to mention in the Bill is the wholesale transfer of the body of justice and home affairs legislation to the jurisdiction of the European Court of Justice. The decision that the Government have to take in 2014 either to opt in to the body of legislation in its entirety or not to do so was also referred to in the Minister's written ministerial statement last week, but it is not mentioned in the Bill and is surely of equivalent significance to many of the changes in clause 6. In fact, the Conservative party manifesto stated that the Conservatives wanted to repatriate powers in employment and social affairs and criminal justice.

In his ministerial written statement, the Minister said there would be a vote in the House on the decision in 2014-we welcome that. However, I am sure that some of his Back Benchers will tell him that it is his best chance to repatriate powers in the field of criminal justice. Such a move would be unilateral and could be carried out with relative ease. The Government will not be able to do the same in the field of employment and social affairs without the unanimous agreement of all the other 26 member states. Given that this is the Government's only chance to fulfil that manifesto commitment, are they minded to take up this opportunity? Are not these changes more important than those in clause 6?

Mr Cash: Perhaps the hon. Lady is getting to this point, but I should like to know whether the Opposition are going to push this issue to a vote, or at least encourage one.

Emma Reynolds: We are not in favour of repatriating power; I am simply pointing out that according to their manifesto, the Conservatives committed to doing so. Far be it from me to intrude on private grievances, but I am simply trying to point out that there may be disagreement on these issues between those on the Government Front and Back Benches.

Mr Cash: The hon. Lady has been talking with great eloquence about opt-ins and the number of opt-ins that have taken place and she has referred to the excellent amendments of my hon. Friend the Member for Daventry (Chris Heaton-Harris), which reflect the views of the European Scrutiny Committee. In the light of her eloquence and determination, and the expressions of support she has given to my hon. Friend and therefore to the Committee, I should like to know whether the Opposition would be interested in voting on these matters.

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Ian Lucas (Wrexham) (Lab): Does my hon. Friend remember the 1983 Labour general election manifesto? Emma Reynolds: I have read it, and it is unforgettable, but perhaps that is not for this debate. We have become more sensible since then. Mr Cash: The hon. Lady may not remember the precise terms of the 1983 Labour manifesto, but it was described as

"the longest suicide note in history".

On the treaties, the Maastricht treaty indeed represented a massive transfer of powers. As Professor Simon Hix confirmed, in his view it should have been subject to a referendum. There are very few on the Conservative Benches now who do not agree that we were right when we pressed for one at the time. However, the Lisbon treaty contains the ingredients of the Maastricht treaty. That is where the problem lies. A referendum was required on that because of the things that are now entrenched in the Lisbon treaty which come out of Maastricht, Amsterdam and Nice, plus all the add-ons that the Front-Bench team of the Labour party in government put through.

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Priti Patel: Those issues should be given proper and due consideration. As it stands, the Government and the devolved Administrations collectively exercise control and restrictions in our territorial waters up to the 6 nautical mile limit, and access is for British fishermen only. Access to our territorial waters between the 6 and 12 nautical mile limit is restricted to a handful of neighbouring countries. Those arrangements exist only by regulation, so at any time they could be amended by qualified majority voting and Britain could effectively lose control over access to its territorial waters within the 12 nautical mile limit of our shoreline.

The current regulation, passed in 2002, details the common fisheries policy arrangements for national territorial waters, and it expires at the end of 2012. As we know, the EU has plenty of flexibility to determine the future of our territorial waters, and I fundamentally believe that that is not in our national interest. The European Commission is, however, consulting on the post-2012 arrangements, and my significant concern is that through either that reform or future measures the majority of our European counterparts in the European Parliament or in the Council of Ministers will be able to determine the future of our territorial sovereignty.

I have been in touch with the Minister for Europe about the issue, and he has very kindly written to me to confirm that currently the Commission has no plans to change the arrangements, but I do not believe that we should leave it to chance, as it is simply not in our national interest to have other EU countries determining the future of access to our territorial waters.

Mr Cash: Will my hon. Friend bear it in mind that the infamous Merchant Shipping Act was taken through the House in 1988? It was struck down by the House of Lords for not being in compliance, it argued, with the European Communities Act 1972. I do not want to trespass too much on her speech, but I think she may appreciate that she is in what I would describe as extremely sensitive and, in my view, very sensible waters.

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Mr Cash: We are enjoying the hon. Gentleman's speech, but I thought I would mention that although he is right about what John Bright said-I have just finished writing a book about him-John Bright was defending democracy. Given the problem of the democratic deficit that we so often have, he would have been appalled at clause 18 and absolutely appalled at the manner in which power has been accumulated and moved away from the people of this country, particularly those who are less well off.

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Mr Cash: The hon. Gentleman refers to an amendment that I hope to address shortly. Part of my argument will be that that financial mechanism is unlawful. It was entered into by a former Chancellor of the Exchequer and endorsed by the coalition Government in circumstances that I shall describe. It is also still subject to scrutiny by the European Scrutiny Committee.

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Chris Bryant: … Obviously, a referendum would also incur significant costs. The Government are trying to argue that holding the alternative vote referendum on any day other than 5 May this year would cost some £30 million. I presume that any referendum under the amendment would also cost some £30 million, and I think that that is inappropriate. The clause refers to "a common EU defence", and although I do not want to hand over the setting up of a standing army to the European Union, I acknowledge that there is already a European army, because there are troops from member states acting in Kosovo-and they have done so in Bosnia-as well as Swiss troops under an EU banner. I am reluctant to say that a referendum would be needed on any aspect of a common defence policy, because that would be a mistake in our national security.

Mr Cash: The hon. Gentleman referred to the cost of a referendum, but my amendment provides that a referendum would be held on the mechanism if the decision involved £5 billion or more. That is a vast amount, and that is why it should not go off to Spain or Portugal. I shall explain why if I get the chance to speak.

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Neil Carmichael: My position is that neither of them needs to be supported. I believe that the present situation is perfectly acceptable, and we need to concentrate on the question of power and competence.

I turn now to the European financial stabilisation mechanisms, which are also very important. The critical point is that we are not in the euro, and that ECOFIN makes the decisions through the qualified majority voting procedure, so any attempt to make changes in that regard would not necessarily have the desired effect. We have no plans to join the euro. Amendment 8 would be necessary only if we decided to join it, which we certainly do not intend to do. I might add that this legislation will make it a necessity, for the first time, to have a referendum before we are able to join the euro. That is really useful.

Mr Cash: My hon. Friend is talking about my amendment, but I am afraid that he really does not seem to understand what it says. I say that with great respect. It has nothing to do with the euro; it relates to a financial mechanism that was brought in by the previous Chancellor of the Exchequer on 9 May last year and endorsed by our own Government. I can assure him that the amendment has nothing to do with the euro, so he can relax.

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Mike Gapes:… I begin by following up a comment of the hon. Member for Stroud (Neil Carmichael) when he said that the former Prime Minister had said, "They are our fish". One thing about fish is that they do not stay in one place; they can move. If they do not move, they may be over-fished, and there may be a need to have some kind of collective policy to protect "our fish". It is very easy to say that these are "our fish", but the fish might swim away and not come back another day.

Mr Cash: When fish are thrown overboard, they are dead; then they do tend to stay where they are.

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Mr Cash: As the hon. Gentleman knows, I tabled amendment 8. He has described the apparent tremendous advantages of the eurozone to us, and indeed the Government sometimes say much the same. The problem is that as a result of the failures of European economic governance and the failure to repatriate the regulations that are imposed, there is no growth in the EU as a whole. We are in the process of being enmeshed in an imploding European Union. So I do not entirely agree with the hon. Gentleman, although the reasons for my amendment are not directly connected with that.

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Mr Cash: Excellent amendments have been tabled by my hon. Friends the Members for Daventry (Chris Heaton-Harris), for Witham (Priti Patel) and for Hertsmere (Mr Clappison), and perhaps by others whom I have omitted to mention. There are quite a few amendments here which deal with matters raised by the European Scrutiny Committee, and which relate in particular to gaps-as we described them in our report-in the control mechanisms of part 1. Those matters, which have been discussed quite extensively, involve extensions of European Union competence in criminal law and procedure and in family law, opt-in decisions, and enhanced co-operation in internal passerelles. The amendments deal comprehensively with those issues, and in doing so demonstrate their necessity.

The proposal relating to criminal procedure has been raised by the European Scrutiny Committee in the past. In particular, the Committee has raised the issue of serious crime with a cross-border dimension. Despite denials over the past decade or so that there would be any serious engagement in the field of criminal law, there has been an increasing encroachment on it. There are serious problems, which are often procedural. We should also consider the manner in which criminal justice is activated and operated in other member states. We do not want to assume that everything that we do is perfect; indeed, we have plenty of evidence that it is not. However, there are certain basic principles that go to the heart of the manner in which trial by jury operates and the manner in which people are arrested. I could continue at great length.

Mr Clappison: My hon. Friend is making an extremely powerful speech about a very important point. He has referred to the rationale behind the proposals from the European Union, and has cited serious crime with a cross-border dimension. Can he confirm that when jurisdiction is given to the European Union through an opt-in, it applies not just to cross-border crime but to all criminal law, and brings all the criminal law in this country within the jurisdiction of the European Court of Justice and future proposals from the European Commission?

I do not wish to use the word "bogus" or the word "misleading", but the European Union's rationale is apt to mislead. The creation of a common European criminal justice system is profoundly significant.

Mr Cash: Indeed. I pay tribute to my hon. Friend, who, as a member of the European Scrutiny Committee, played an important role in the preparation of its report. As I am sure he will speak in the debate, and given his expertise as a member of the Select Committee on Home Affairs, I shall restrict my own remarks, and leave it to him to deal with these questions in his own time and his own way.

I simply make the point that these are well-founded concerns, and I can think of no reason on earth why the Minister would not want to accept these amendments. Perhaps he will, but while the Government have had regard to what the European Scrutiny Committee has said in a report that has been universally welcomed-by both Front-Bench teams and by all those with the competence to understand these matters-they have tended to ignore that almost entirely in considering our recommendations. I shall return to that issue later, but not today.

I turn to the reasons that we gave in the European Scrutiny Committee report regarding questions of criminal law:

"To be consistent with the extension of shared competence under clause 4"-

we debated that yesterday-

"the application of both of these provisions"-

the two provisions and the amendments relating to criminal procedure and serious crime-

"should be premised on a referendum and Act of Parliament, as in clause 6; not an affirmative vote before the Government's opt-in decision and an Act of Parliament before it agrees to the adoption of the legislation."

The fact that the report states that ought to be put on the record. Our view is that family law

"is…of similar if not greater importance to social or environmental policy and ought to come within clause 6, triggering a referendum as well as an Act."

We can see no reason for not doing all those things.

On opt-in decisions, I defer entirely to my hon. Friend the Member for Hertsmere. Our conclusion is that it

"would seem to us consistent with the aim of Part 1…for all opt-in decisions to be subject to formal Parliamentary approval."

My hon. Friend the Member for Witham referred to fishing, and there she was in sensitive and deep waters. She explained very well the six-mile limit, the fisheries limit of up to 12 miles, the 2002 regulation and the associated issues, but that does not alter the fact that this is a serious problem for the fishermen of the United Kingdom. In considering the idea that there should be any restriction of our sovereignty and territorial limits in these matters, we should remember that the entire fisheries policy, which we shall not debate in detail today, I can assure you, Mr Caton, is a complete travesty. There is no question about it: it constitutes the most monumental waste of good fish, which are thrown away and literally left to rot. It is pathetic, and I need say no more than that. That we should regain a degree of sovereignty and territorial competence in relation to fishing is to my mind a given.

Mr Redwood: My hon. Friend has made a very powerful comment. Many of us have felt for many years that the fisheries policy was a scandal. Successive Governments have said that they would do something about it; none have yet succeeded. Does this not show why we are also worried about the surrender of criminal justice powers? We are surrendering them to the very people who have made such a mess of our fisheries.

Mr Cash: Absolutely, and the same problem permeates so much of what goes on in the European Union. I am anxious not to get into discussing the merits of the European Union as a whole, and I shall certainly ensure that I keep to the amendments; but I entirely agree with my right hon. Friend. I will come on in a moment to the financial stability mechanism, and try to demonstrate exactly how wrong I think the hon. Member for Ilford South (Mike Gapes) is about the broad questions attached to it. I shall also deal with the mistaken remarks of the hon. Member for Rhondda (Chris Bryant) regarding the necessity for my amendments.

Before I deal with my amendments, I want to discuss the provisions relating to enhanced co-operation and internal passerelles. Our Committee recommended

"that a decision by the UK to enter enhanced cooperation where the voting procedure has been changed from unanimity to QMV be subject to a referendum lock."

To my mind, the very idea of such a change is enough to fill me with absolute horror. One aspect that has not been discussed at all during these proceedings is what is euphemistically and rather foolishly known as the ordinary legislative procedure, which I objected to all those years ago when discussing the Maastricht treaty, and which was then described as co-decision. Even in those days, it became apparent that it would be a severe invasion of the sovereignty of this House. Indeed, now we are faced with decisions that are virtually taken away from us by the use of this procedure. It would be invidious of me to go into all that now, but I want to place on the record that this is what is going on, and it is a very dangerous invasion.

My objections regarding sovereignty, which I expressed, I hope, with some clarity in my speech on clause 18, therefore also apply to the manner in which mechanisms in the Bill and mechanisms already provided for under treaties from Maastricht right the way through to Lisbon have, by their very nature, taken away from this House massive powers. People outside just do not know it, and I severely criticise those in the media who do not give enough attention to the extent to which representatives in their own Parliament are being inhibited in the democratic process of exercising the right to make decisions on behalf of those whom they represent. That is the essence of the problem.

I commend the speech made by Mr Speaker last week, in which he dealt with two vital matters: the sovereignty of this House and the reasons for it; and scrutiny, including of European business. I wonder whether the Government have really understood the perils to which they are subjecting the British people through the democratic deficit they are creating, despite the talk of a referendum. The Minister for Europe has already told us that the Bill's referendum provisions will not be implemented during this Parliament-heaven alone knows what will have happened between now and then anyway-and that includes the treaty arrangements that Monsieur Fillon is putting forward. We have got used to the whiff of grapeshot. We hear these things and he comes over, has a meeting with the Prime Minister and the Prime Minister has a press conference in which he does not rule out a treaty. He says that we will not be lured into the same arrangements as theirs, but my goodness, we will be locked into them sooner or later. The same applied to the Maastricht treaty and to the treaties of Amsterdam and Nice. Same old story, same old solution-but unfortunately, it is not a solution that is to the benefit of the people whom we represent in this House.

I am deeply worried about that. Of course, if we were told that the treaty was going to be vetoed, we would be extremely pleased, but we have not heard that. Some will say, "Oh, it's just speculation", but I am afraid that I do not think it is. The treaty deals with social policy, fiscal policy, political decision making and the whole question of economic governance. I therefore strongly recommend that the Government adopt the amendments I have mentioned. I leave it to those who have proposed them to decide whether they will press them to a vote.

On enhanced co-operation, I simply recommend that people read the evidence from Professor Dougan of Liverpool university. It is referred to in paragraphs 52 to 55 of our report. He cogently demonstrates the reasons and the necessity for the proposals in our report.

I shall now discuss my amendment 8, on which I need to set out a bit of the history attached to it, because the House of Commons and the people of this country are confronted by a strange situation. I am being given the opportunity to set this out with clarity, because neither this Government, nor the previous Government have done what they should have done at the appropriate time. The British taxpayer has thereby been unnecessarily exposed, and we are talking about billions and billions of taxpayers' money. I will explain why the amounts in question are as they are and how it happened. I ought also to add that this relates to the European financial stability mechanism, which was the mechanism that was partly used for the Irish bail-out. I need not go into the provisions of the Loans to Ireland Bill, because we dealt with that. This was a bilateral loan and that was my suggestion to the Chancellor when the matter first came up on the Floor of the House-perhaps it was a case of minds working alike. I can say only that I am glad that I at least got it on the record that we should opt for a bilateral loan, if anything, and if it were in our national interest. However, on 9 May, after the general election but before the coalition agreement was entered into, the previous Chancellor agreed at an extraordinary ECOFIN meeting that he would engage in this process. A discussion took place, and it is referred to in the explanatory memorandum supplied by the Government.  

The subject will be debated by European Committee B on 1 February-the Financial Secretary to the Treasury has come into the Chamber and I suspect that he will be answering that debate.

Mike Gapes: Just for the record, is it not a fact that the outgoing Chancellor would have consulted the then shadow Chancellor, who was about to become Chancellor, at that time? So rather than inadvertently giving the wrong impression, perhaps we should put it on the record that in that transition period it would have been necessary and proper for the previous Chancellor to be in discussion with his successor, so that there would be no ambiguity about what would happen.

Mr Cash: The hon. Gentleman is absolutely right on that important point, and I was immediately coming to it-I have in my hand the explanatory memorandum, to which I referred before he intervened, precisely for that purpose. It stands in the name of the Economic Secretary to the Treasury. A scrutiny matter is still outstanding, so paragraph 26 comes under the heading of "Other observations" and states:

"The Government regrets that the Scrutiny Committees"-

those of the Commons and the Lords-

"did not have time to consider this document before it was agreed at Council."

I can tell the House that that happened because we were in a caretaker period and the European Scrutiny Committee, as such, was not sitting in that interregnum. The memorandum continues:

"It should be noted that whilst agreement on behalf of the UK was given by the previous administration, cross-party consensus had been gained."

That is why I made the point that the responsibility lies with both this Government and the previous one.

Austin Mitchell (Great Grimsby) (Lab): I am following the discussion with great interest and some concern. As I understand it, we are talking about a decision that could have been taken, and was being taken, by a majority vote, and our outgoing Chancellor could not have stopped it anyway. Is that correct?

Mr Cash: People keep saying that, but let us examine the actual operation of the European financial stability mechanism. The final decision is taken under the regulations concerned-this is what happened in the context of Ireland-only after the request has been made by the member state. I do not know whether this is one of the reasons why the current Taoiseach-only for the time being, it appears-is in deep trouble, but that is possible. What I do know for certain is that the prescribed procedure laid down under the regulations made under article 122 of the treaty on the functioning of the European Union was infringed by the manner in which the International Monetary Fund, the European Central Bank and others moved into Dublin before a request had been made. As we can recall, the Irish Government were saying that they had not made a request and that they did not need the money. It is also true to say that Mr Socrates is saying much the same at the moment.

Austin Mitchell: The hon. Gentleman is being very patient with us and the serious explanation he is giving is well worth considering. I also understood that article 122 was intended to apply to a destabilisation of the euro because of some kind of natural disaster. The destabilisation that took place was caused by the inherent faults in the euro, so why has article 122 been extended to cover a destabilisation resulting from the cracks and failures of the euro itself, given that it should have applied only to natural disasters?

Mr Cash: The hon. Gentleman and I have engaged in debates on the European question since we first met. I have the greatest respect for him and he has hit the nail right on the head here, because this problem does not just arise because of our exposure to what happens in Portugal and Spain in the future; it also arises from the lack of a sound legal base for the decision taken in the first place by the outgoing Chancellor and endorsed subsequently by the incoming Chancellor. We know that there was a consensus and that an agreement was reached-that answers the question put by the hon. Member for Ilford South. I would not be going about this if I did not believe that substantial matters of principle and of huge cost to the taxpayer are involved.

Mr David: The hon. Gentleman has raised an extremely important point. I wish to emphasise that he is correct to say that there was a consensus between the outgoing Chancellor and the incoming Chancellor-proper discussions and consultation took place-but that was not the impression given to this House by the current Chancellor of the Exchequer.

Mr Cash: I was not necessarily here when an impression was being given one way or the other. What I do know is that I have an accurate record of what did take place. I also have with me an article from Monday 10 May containing what are clearly accurate descriptions of the position of the then Chancellor-I believe he was just still the Chancellor then, because the coalition agreement had not been entered into. I recall writing to the Prime Minister on that day, suggesting, among other things, that he should go for a minority Government. I also said that if he was determined to go down the route of a coalition, he should require the Liberal Democrats to abstain on any matters relating to Europe that came up. That possibly explains some of my concerns as matters have developed and more and more European decisions, roadblocks and other difficulties in respect of the decisions we took in our manifesto have emerged.

Austin Mitchell: I am grateful to the hon. Gentleman for giving way; he is very patient. I normally agree with his views, even though I usually express them in rather shorter compass. He still has not answered my question, however, about whether what was agreed at the meeting was a distortion of the original purpose of the machinery, which was intended for coping with natural disasters and should never have been extended to destabilisation and problems caused by the euro.

Mr Cash: Absolutely, and I shall elaborate on that very quickly. Article 122 concerns matters of emergency and natural disasters, and its use for the purposes of financial stability is clearly-as the European Scrutiny Committee has said-not based on a sound legal footing. That is the issue. I had made that point, but I am happy to repeat it. However, it goes further: because of the failure of the legal base, the whole deal is vitiated. That is the problem. The deal was done in an interregnum and by consensus between the two Chancellors, but it ends up being vitiated as a matter of law. That is very serious given that the whole deal is for €60 billion-£52 billion-but according to the right hon. Member for Edinburgh South West (Mr Darling), the United Kingdom is exposed to a risk of £8 billion.

Mr Redwood: Although we must ask the former Chancellor and the Chancellor to speak for themselves, as I understand it the former Chancellor quite properly consulted the then shadow Chancellor, who said, "You are the Chancellor"-he could not be sure at that point that he was about to become the Chancellor, because there was no coalition agreement-"and it is for you to make the decision." It is also fair to say that I do not think that the present Chancellor objected to the proposal or sought to block it. I think he felt that it was not his decision to make. It was not a co-decision; it was a decision by the former Chancellor, which the present Chancellor knew about.

Mr Cash: It was indeed. Furthermore, this is not just a bit of esoteric dancing on the head of a pin. The Select Committee on Political and Constitutional Reform has examined the matter and I happened to be watching its proceedings when there was a discussion involving Professor Hennessey and two other eminent professors, Professor Hazell and Professor McLean. My hon. Friend the hon. Member for Isle of Wight (Mr Turner) asked a perceptive question about the status of the arrangement in the context of the Cabinet manual, which, as we know, is now out in the open and being discussed by that Committee in relation to caretaker Governments. The conclusion was that it was within the province of the incoming Chancellor to enter into such a bilateral arrangement in that context, in which he made his decision based on the information he was given by the outgoing Chancellor. My right hon. Friend the Member for Wokingham (Mr Redwood) is right. The problem is that, if that was unlawful, there was no basis on which either of them should have come to that conclusion.

Mr Redwood: As I understand it, the current Chancellor refused to make a decision. It was not a co-decision. He did not object or support it, but said that it was for the outgoing Chancellor to make the decision. Of course, in practice, if he had not agreed he would have unscrambled it when he got into office, because he had the majority and the outgoing Chancellor did not.

Mr Cash: I am very happy for that matter to be looked into further. My right hon. Friend might well be right, but I have an article that quotes the outgoing Chancellor of the Exchequer on the BBC's "Today" programme, saying:

"Overall it is a very good deal for all of us in Europe but also for the wider world. It is"-

something for us "together". He also said:

"Our exposure for the additional amount of money could be £8 billion".

The article also states that he

"confirmed he had spoken to Shadow Chancellor George Osborne and Lib Dem Treasury spokesman Vince Cable about…responsibility for it"

and goes on to state:

"All three had agreed 'there was no way Britain was going to underwrite the euro'."

When he was pressed, he said:

"I am not going to disclose the conversations we had, because we had them on the basis that they were private and confidential."

The article goes on:

"A statement issued after the talks confirmed that the new fund placed the potential risk squarely with the eurozone."

That worries me. I do not know where that came from, because it most emphatically is not the case, as we are not part of the eurozone.

I hope that the Select Committee on the Treasury will look to considering all that. We are talking about substantial sums of money, about an interregnum period and about a rather unusual situation. We might be talking about errors of judgment involving considerable exposure for the taxpayer. For all those reasons, it is very important that we get to the bottom of this. We do not need to turn it into a witch hunt-I do not believe in those sort of things-but as regards scrutiny and accountability, this is an important matter that needs to be resolved properly and efficiently.

Proper answers need to be given, the Treasury needs to put forward the arguments that it presented and it should disclose the papers. We know perfectly well that, in the kerfuffle of 9 May and the days leading up to it, the then Chancellor might understandably have had a lot on his mind. In the circumstances, all sorts of things could have gone wrong. That is the moment, as I see it, when important strategic decisions involving enormous amounts of money and affecting the taxpayer on what I would term an unlawful basis-a basis that certainly is not legally sound-need to be considered very carefully.

It might not surprise some hon. Members that I tabled amendment 8. In all such circumstances, other than the situation vis-à-vis the Republic of Ireland, attention should be drawn to these matters, but under no circumstances whatsoever should we give money to Portugal or Spain when there is a facility, agreed at around the same time, for €400 billion to be available for the eurozone. Now a new arrangement has emerged which will be made available permanently after March 2013. If Portugal and Spain are going to go under, however, they will definitely go under before March 2013.

Mr Redwood: On the important point raised by the hon. Member for Great Grimsby (Austin Mitchell), is it not the case-my hon. Friend the Member for Stone (Mr Cash) would know-that the German Government are so worried about the legality of what was done under article 122 that they think we need a new treaty to cover that point?

Mr Cash: My hon. Friend is absolutely right. I have here an incredibly interesting article from this week's edition of Newsweek. It is headlined, "To Rule the Euro Zone". Hon. Members will know that I have tried to take a mild interest in European matters since I came to the House-I notice that one or two people are quite surprised-and I do so for good reasons. Indeed, in the first book I wrote on the subject, "Against a Federal Europe", I drew attention to what I then perceived to be a significant danger that Germany would take a disproportionate and predominant role in European affairs, for which I received a great deal of censorship and some abuse. It was suggested that I was talking about the Germans in rather disrespectful terms, which was quite untrue. However, the sub-heading to an extremely interesting article by Stefan Theil, dated 23 January 2011, reads:

"The unified currency was supposed to limit German power. Now the Germans are in charge-and no one is happy, not even the Germans."

The article merits careful reading.

Mr Clappison: I am listening to my hon. Friend with great interest. In his analysis, if the events that he predicts were actually to occur, how would they be covered by the Bill as it stands, without the benefit of his amendment, or would they not?

Mr Cash: The short answer is not at all-that is the problem. That is why I tabled the amendment. I am very sad that more people do not have the opportunity to listen to this, because we are talking about a grand total of £8 billion of British money, which is a vast amount given the austerity that is expected of people. After the Irish bail-out payment has been excluded from the same zone, there is also the completely unwarrantable notion to which the decision commits us, unless it is unlawful and is challenged. I invite the Government to challenge it in the European Court-that is the route they should be adopting. That is what I have recommended to the Chancellor. I said, "You must vote against this and challenge the legality of it." Whether or not he entered into some understanding at the time is a matter to be unravelled, but what is certain, to come back to the point made by the hon. Member for Great Grimsby (Austin Mitchell), is that the decision does not come within the framework of article 122-and the European Scrutiny Committee believes the same.

Austin Mitchell: I am puzzled, because the hon. Gentleman is attaching his faith to the €400 billion fund, which would mean that the new arrangement, which was agreed by the then Chancellor and the European Council on 9 May, would not be necessary. That is a puny fund compared with the scale of the problems. If Portugal goes and Spain follows, all that fund will be absorbed and will be necessary, and we will have to fall back on the provisions of article 122. The Irish loan has been portrayed by the hon. Gentleman and the Chancellor as a one-off loan between friends and business partners, but it must have been paid under the article 122 arrangement, so we have already sold the pass.

Mr Cash: The hon. Gentleman is not wrong to say that the situation has already taken place for Ireland, but that must be seen in light of what has yet to be established-whether or not it was lawful. More investigation is needed on whether that payment would ultimately be ultra vires, or beyond the law, and therefore reclaimable. I do not want to go too far down that route other than to say it needs to be looked into. Furthermore, the financial stability mechanism has not yet passed the scrutiny of the European Committee that is meeting on 1 February, so it is still subject to a decision of the House, although some might argue that the Rubicon has already been crossed.

Austin Mitchell: This is an important amendment for which I shall certainly vote, and I hope that the hon. Gentleman pushes it to a Division so that I have that opportunity. The legality of the decision and the use of article 122 in this way-for a purpose for which it was not intended-is subject to a decision by the European Court, which is a federal institution and always rules in favour of the federal side of the argument. So, I am afraid that his hope that the decision will be ruled illegal will not prevail.

Mr Cash: That is a general proposition with which one might agree in many instances, but analysis of the use of article 122 in this case, if it is examined as carefully as it should be, would give rise to so many uncertainties that the Court would have grave difficulty in trying to justify its use. However, that is looking to the future.

We are here in this House and I am suggesting, as is obvious from my amendment, that the provisions that should apply to the balance, beyond the Republic of Ireland, before any decision is taken to provide such facilities to Portugal and/or Spain, and/or any other country for that matter, should fall within clause 6. Let me remind the Committee that clause 6 says:

"A Minister of the Crown may not vote in favour of or otherwise support a decision to which this subsection applies"-

I have a special definition of "decision" for this purpose, in case the Minister wants to make a point about that later-

"unless…the draft decision is approved by Act of Parliament, and…the referendum condition is met."

There are substantial questions, and if the British people knew about this they would demand a referendum at least. It might be that an Act of Parliament is required in most unusual circumstances to rectify this situation, but all that is without prejudice to my general concern about the manner in which this has happened, the unlawfulness of the deal in the first place and the extent to which various Chancellors entered into the agreement. I understand how it could have happened; let us be sensible and practical. It was in the middle of the setting up of a coalition and huge discussions were going on in which the Chancellor-indeed the two Chancellors-must have been totally saturated in discussion. I can see how this could be slipped through. The Chancellor flew over to ECOFIN and made a decision; I do not want to criticise him, but his eye might not have been as firmly on the ball as one might normally expect.

On Second Reading of the Loans to Ireland Bill, I asked the previous Chancellor, the right hon. Member for Edinburgh South West he following: 

"Did the right hon. Gentleman take legal advice on whether, as I said at the time, the use of the financial stability mechanism was an unlawful deal? Article 122 of the treaty on the functioning of the European Union deals with natural disasters, energy supplies and so on, and it has absolutely nothing to do with financial mistakes or misjudgments. Really, the whole thing should never have gone through, and he should have repudiated it on those grounds."

He replied:

"Yes, but as I said earlier, because of QMV, the deal would have gone through anyway."

I do not think that issue alters the question of legality, because if the legal base is wrong, the QMV falls. The previous Chancellor went on:

"I also do not agree with the hon. Gentleman's analysis or"-

this is interesting-

"that the legal position was that clear-cut."-[ Official Report, 15 December 2010; Vol. 520, c. 955.]

I found that response interesting, because he knew there had been serious doubts about legality and he did not say that he took legal advice. Nor did he say whether any legal advice that was given-if any was given-assured him that what was decided was right. There is a powerful reason for this whole matter to be looked at properly. Our Committee has looked at it and we think that any other Committee that thinks it desirable to do the same should do so.

It is important to include this matter in the Bill by a vote today-both as a matter of principle and because it might otherwise look as though the Government seek somehow to cover it up. That would be disastrous for them, because this involves many billions of taxpayers' money in a time of austerity and difficulty, so it has to be sorted out. The matter has yet to go before the European Committee that I have mentioned on 1 February. No doubt the Minister and his colleagues are hoping that the scrutiny issue will have gone by then, that there will probably be no vote in the Committee and that the scrutiny reserve will be taken off. They may think they will get off scot-free, but I am afraid that my intervention in this debate might throw a spanner in the works, because the Committee now has notice of the points I have made. I hope I have made them in a temperate way with regard to the difficulties and decisions of the Chancellors in question. I do not want to engage in a witch hunt or to be unnecessarily difficult. It is a matter of accountability and of scrutiny. It is a matter of the Government coming clean about the whole situation, and of making certain that we deal with it properly.

I believe that it is down to the Government to go to the European Court by way of the equivalent of what we call an action for a declaration. Sometimes in the courts, when a difficult legal problem arises, one does not wait for someone else to act. One goes to the court for the equivalent of an action for a declaration. The Government could start the process in our own courts and put the question whether what was done was within the vires of article 122 or not. I do not believe it is, but it is incumbent on the Government to do that. In the meantime, for reasons other than the question of legality, I believe the issue is of such importance that it ought to be subjected to the provisions of clause 6, and should therefore be made subject to both an Act of Parliament and a referendum in these special circumstances.

…

Mr Cash: My hon. Friend the Member for Hertsmere is not only an expert on this matter, but knows what he is talking about. The reality is that every time one of those decisions is taken-I say this with great respect to the hon. Member for Cheltenham (Martin Horwood), when he starts talking about comparative advantage-it relates to people and justice. It is about whether they get a fair trial and matters of that kind, which are matters that his constituents would be concerned about. It is terribly important to remember that one paragraph of one of these directives, or even one line, is equivalent to an entire Act of Parliament that we might spend the best part of six months discussing in both Houses. Does my hon. Friend agree that under the proposals such matters will just go whistling through?

…

Austin Mitchell: … Under the old system, the inflation rates in France and Italy were higher than that in Germany, so they were constantly getting out of kilter and becoming uncompetitive. They constantly resorted to devaluing, which brought them back to a competitive level because it reduced their costs of production in terms of foreign currencies. There is a history of France and Italy devaluing. They cannot do that when they are in the euro. Mr Cash: Would the hon. Gentleman be interested to know that the Library has given me some figures showing that our balance of payments deficit with Germany was £12 billion in 2009? Heaven alone knows what it is now. Between 1999 and 2009 there was a deficit of £5 billion between the other 26 EU member states and ourselves, but we have a surplus of £11 billion with the rest of the world. His point is extremely sound-the EU is just not working.

…

Mr Cash: I add a point that I really ought to have made in my own contribution. When the European Council arrived at the new mechanism that it has just set up, which the Prime Minister announced the other day, it used the most extraordinary language. It used the expression that there was "no need" for the continuation of the mechanism that was set up last May. It is not anything to do with need, however; it is about the fact that they know perfectly well that it was unlawful.

…

Stephen Gilbert: It is a pleasure to have the opportunity to contribute to this debate. Anybody watching us must think that they have fallen through the looking glass. We are debating amendments to a Bill that prevents further transfer of power from the UK to the European level of government, in the context of a coalition that has said that it will allow no further significant transfers of power in the duration of its office, and yet Conservative and Labour Members are attacking the Bill while Liberal Democrat Members try to defend it.

Mr Cash: I cannot resist intervening. The hon. Gentleman knows perfectly well that the Minister for Europe has said that there is no chance or intention of holding a referendum under the proposals in this Bill until the next Parliament at the earliest-we are in dead parrot territory. The Minister will not deny that. The debate is about what is happening right now. Europe is in total chaos. Every country bar Germany is imploding, but the hon. Gentleman is carrying on as if everything is fine. Stephen Gilbert: I feel like I am entering into my own version of "Back to the Future" in debating the EU with the hon. Gentleman. The Government's position is quite clear. There will be no referendum over the next five years because there will be no significant transfer of power or competences. The Liberal Democrats welcome that, and I would have thought that he would too.

…

Mr Cash: Almost everything the hon. Gentleman says demonstrates the complete divergence of views between many Conservatives and many Liberal Democrats. Does he accept that a key problem facing the coalition Government is not only the integral federal views of the Liberal Democrats on matters relating to Europe, by which they are totally besotted, but the implementation of the Lisbon treaty? That is where the problem arises. People talk about transfers of power, but actually, the implementation of existing arrangements under the Lisbon treaty is causing so much difficulty-it is also an embarrassment to Opposition Front Benchers.

…

Mr Cash: On the question of human rights-of course, our manifesto committed us to the repeal of the Human Rights Act 1998-what makes the hon. Gentleman think that the people of the United Kingdom would have been that much worse off if the European Human Rights Act had never been passed? What makes him believe that the vast amounts of money going to all the lawyers in the human rights environment are doing the people of this country any great service?