European Union Bill

My Lords, no Parliament can bind its successors. That is one of the principles of parliamentary sovereignty. I am grateful to the noble Lord, Lord Kerr of Kinlochard, for following up the previous Committee discussion with his letter of 19 May, in which he outlined his concerns in more detail: namely, that Clause 6(5)(e) of the Bill might be legally defective. We have therefore taken careful legal advice. The Government have now been able to reply to that letter and a copy has been sent to those of your Lordships who participated in the Committee debates. A copy of the letter has also been deposited in the Library of the House. On the basis of that legal advice, I hope to reassure your Lordships that we do not judge there to be a risk of more than one referendum on the euro being required and that the provision does what we and noble Lords on all sides of your Lordships’ House intend it to do. Unlike other member states, the UK is not under an obligation to adopt the euro. Protocol 15 of the consolidated treaty begins with the clear statement that the United Kingdom, "““shall not be obliged or committed to adopt the euro without a separate decision to do so by its government and Parliament””." That protocol, which needs to be read alongside Article 140 in the British case, sets out in detail the steps that must be satisfied before the UK could adopt the euro. Paragraph 9 of the protocol states that after the UK has notified, "““the Council … of its intention to adopt the euro””," as its currency, "““decisions in accordance with the procedure laid down in Article 140(1) and (2)””," of the TFEU must first be taken, to which protocol 13 is also relevant. The process starts in practice by examining convergence criteria as set out in Article 140(2). That is bound to happen before the UK formally notifies, even if it is not part of the formal procedure. It might be helpful to consider what needs to be done following notification of our intention to join the euro. It is not a matter of negotiating terms of entry but of economic criteria being satisfied in terms of the treaty. The final step of the process is to take a decision in accordance with the procedure laid down in Article 140(3) of the TFEU. Paragraph 9(c) of Protocol 15 commits the Council, "““in accordance with the procedure laid down in Article 140(3)””," to ““take all other necessary”” measures to enable the UK ““to adopt the euro””. Clause 6(5)(e) is designed to catch this final step in the process, thus ensuring that as much of the complex detail as possible is available to Parliament and the public in deciding whether to join, while giving the Government of the day the flexibility to set the timetable for when to seek approval from Parliament and the British people. If I may say so, the noble Lord, Lord Kerr, might almost be old enough to remember the first applications for Britain to join what was then the European Economic Community. Before formal application was made, a number of informal negotiations established the terms for potential negotiation. We envisage something of that in this situation. It will allow the Government to seek a referendum when sufficient detail is known about the circumstances and conditions of entry, but will allow the UK to seek approval from the people before the exact point at which the exchange rate between the euro and the pound would be set. We all recognise that the exact exchange rate will have to be set at the end of the process to avoid market turmoil and speculation against the rates declared. In contrast, the amendment proposed by the noble Lord would require the referendum to be held and approval given before the UK could notify the EU that it intended to adopt the euro. The Bill nevertheless allows for matters to be arranged in this way if the Government so wished, again providing the degree of flexibility which noble Lords, including the noble Lord, Lord Kerr, have so often called for on this Bill. It would be open to the Government of the day to undertake negotiations with the EU in line with paragraph 9 of the protocol before the UK issued its notification. This would allow draft decisions under Article 140(3) on the rate at which the euro would be substituted for sterling and other measures necessary for its introduction to be prepared—with perhaps a range of rates being negotiated—before notifying our final intention to join the euro. On that basis, I do not consider that the Bill would lead to what we all view as an unwelcome situation in which two referendums would have to be held on the euro: the first on the UK notifying that it wished to join; the second in a rushed weekend on determining the specific question of the exact rate at which the euro is to be exchanged for the pound. Instead, it is possible under the Bill for the Government to submit the question of adopting the euro to a single referendum.