House of Commons Liaison Committee

Evidence from the Prime Minister

Oral Evidence

Tuesday 6 September 2011 Rt Hon David Cameron MP

Ordered by The House of Commons to be printed 6 September 2011

HC 608-iii Published on 18 October 2011 by authority of the House of Commons London: The Stationery Office Limited £5.50 cobber Pack: U PL: COE1 [SE] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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Tuesday 6 September 2011

Members present: Sir Alan Beith (Chair)

Mr Graham Allen Mr Bernard Jenkin Mr Kevin Barron Miss Anne McIntosh Mr William Cash John Thurso Geoffrey Clifton-Brown Mr Andrew Tyrie Mrs Louise Ellman Keith Vaz Dr Hywel Francis Mr John Whittingdale ______

Examination of Witness

Witness: Rt Hon David Cameron MP, Prime Minister, gave evidence.

Chair: Welcome, Prime Minister. In the course of the euro, but that our relationship with the eurozone these proceedings—in about half an hour—we matters. We want a eurozone that works and that anticipate a vote, and I will have to suspend the sitting functions—and that functions better than it does at the while that vote takes place. I intend to resume as soon moment. The Chancellor and I have both said that the as I have a quorum—plus yourself—so that we do not logic of monetary union is a greater fiscal union, and have to overrun by too much as a result of the vote. we see the eurozone countries moving in that This is the Liaison Committee’s third evidence session direction. Because we want a functioning eurozone, with the Prime Minister in this Parliament. It is the and it is not functioning well at the moment, I do not second in the format that we have agreed that we want believe that we should stand in the way of them to use, under which a smaller number of topics are making some progress—[Interruption.] I would love looked at in more detail. At our November sitting with to say, “Saved by the bell,” but we have only just you, we anticipate dealing with some of the social started. issues that arise from discussion of the riots, alongside Mr Cash: For whom the bell tolls. issues around your ideas about the big society. They Mr Cameron: I will be as quick as I can. seem to us to fit together, and we had already had it Sitting suspended for a Division in the House. in mind to explore that topic then. On resuming— I should also say that we are pleased that you have Chair: Thank you, colleagues. I call Mr Cash. given your response to the request that we made to assist the Public Accounts Committee and the National Audit Office with documents relating to the Q215 Mr Cash: Prime Minister, you were referring aircraft carrier contract. We do not need to ask any to the manner in which you allege that fiscal union questions about that because that is happily resolved. would improve stability in the eurozone itself and, by Today we are going to look at developments in Europe implication, the United Kingdom. I am bound to point and their implications for this country, and then out that our trade imbalance in one year between 2000 politics and the press, and I shall ask Mr Cash to open. and 2010 with the eurozone—the deficit—has gone up from minus £14 billion to minus £53 billion, so Q214 Mr Cash: Prime Minister, on fiscal union in there are strong reasons for doubting whether fiscal the eurozone, there are many—as you know, I am one union of the kind being created would necessarily of them—who feel that your policy on eurozone fiscal alter that position. arrangements is putting the United Kingdom in a very Why have you effectively ruled out, as it appears, a dangerous position. Why did you not announce to referendum on eurozone fiscal union and economic Parliament, or hold a debate on, your policy to governance—irrespective of the European Scrutiny promote fiscal integration in the eurozone before you Committee’s report—when, as you well know, these called Angela Merkel and Nicolas Sarkozy in mid- matters vitally affect and change the political, August? economic and constitutional relationship of the United Mr Cameron: First, let me explain that, of course, Kingdom with the European Union? That would be Britain is not in the euro. We are not planning to join the case whether it was done by treaty, European the euro. I have said that as long as I am Prime Council decision or any other legal instrument. In Minister, Britain will stay outside the euro. I do not other words, you are creating an extremely dangerous believe that Britain’s future is in the euro, but I do situation, in my judgment. May I ask why you will believe, as I have said many times, that our trading not give the British people the right to have their say? relationship with Europe is such—40% of our exports Mr Cameron: Let me try to answer that very directly. go to eurozone countries—that what happens in the The point is that the issue is for eurozone countries— eurozone matters to Britain. members of the euro—and a question of whether they To answer your question directly, I would say that if will have tighter arrangements between them to make you look at the statements that I have given in the eurozone work better. Of course, it will have an Parliament after the very many European Council effect on us, but the clear rule for a referendum, which meetings that I have been to, I think that I have is now set out in legislation, is whether we are progressively set out there that we are not going into transferring power from Britain to Brussels. On this, cobber Pack: U PL: COE1 [O] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP we would not be transferring power from Britain to planning, so there is a fundamental difference between Brussels—that is the first point. the two. The second point, as you say Bill, is that you may There is an important point on the issue of the treaty. well find that the steps that eurozone countries take There is obviously a small treaty change that has been are done outside the treaty and are intergovernmental. agreed within Europe, which is to set up a new The question for Britain is: what is in our national mechanism for bailing out eurozone countries that are interest? That is what I ask myself as Prime Minister. in trouble. What we have managed to secure via that I think it is in our national interest that the eurozone treaty change is to get Britain out of the current bail- works, and works better, because that is where many out mechanism from 2013. We have secured a good of our exports go, and it is in our interests that we price for that small treaty change going ahead, and it are removed from the danger of bailing out eurozone is in our national interest. countries, which we have done through my Let us be clear: no one in Europe at the moment is negotiations in Brussels. currently talking about a new major treaty to put in There is then a series of other national interests that place deeper fiscal union or changes in the eurozone. we must protect, such as are we making sure that the That may well happen in future—I don’t think we can eurozone countries will not caucus together and try to rule that out—and if it were to happen, there would decide things together, and then just drive them be consequences for Britain. Britain should think through at the level of the 27—the single market carefully about how to maximise our national interest level—which could be against Britain’s interest. My if that were to come about, but I think that it is some approach is: to think about this from Britain’s national way down the road. interest; to stay out of the euro; to help the eurozone to work better; to have a referendum if something Q218 Mr Cash: But you do accept that it does affect involves the transfer of powers, which this does not; us vitally, politically, constitutionally and and make sure that we are not involved in bail-outs. economically. That is something you accept. Mr Cameron: Of course, decisions other countries Q216 Mr Cash: But you explicitly ruled out the idea make affect Britain. Decisions America makes about of having a referendum in the very European Union its debt ceiling will affect Britain, but that does not mean we have a referendum on them. Act to which you have just referred by ensuring that there would be no referendum when, as you put it in section 4 of the Act, it affects the eurozone alone, or Q219 Chair: But you do not lecture the Americans just other member states. For practical purposes, you in quite the way you are lecturing the rest of Europe at the moment. The Chancellor this afternoon was rule that out. You are not actually giving the British making clear how vital it is to keep to the agreements people, in a matter of such vital economic, political that were reached in July. Are you trying to fill a and constitutional importance to them, the right to leadership gap at the moment? have their say. It leaves many people completely Mr Cameron: I certainly would not say that this was bewildered and extremely disturbed. an issue of lecturing anyone. I have a good and close Mr Cameron: I think people would like a referendum relationship with Chancellor Merkel in Germany and if there is a transfer of power from Britain to Brussels. President Sarkozy in France. It is in our interests that I do not think that that should happen without asking the eurozone recovers and works properly. When you the British public’s permission first—that is what the see what has happened in Greece, Spain, Portugal and referendum lock is all about. What the eurozone Ireland, it is clear that the arrangements are not countries may or may not do is have arrangements working properly. As a partner and friend of those between themselves that pool some of their countries, with an interest in a successful eurozone, sovereignty together. They are already doing that. To we should be making suggestions about how to try to say that you have to have a referendum in Britain help them with the work of making things function about something that other countries are doing and better. Clearly, with the agreements they have come going ahead with anyway would be a rather odd to over Greece, it is important that everyone fulfils approach. what they said they would do, because otherwise we will have more market uncertainty and more problems Q217 Mr Cash: But you are implying that there in the future. might not be a treaty. In today’s Financial Times, we have the German Federal Minister of Finance, Q220 Chair: But they are not doing that, are they? Wolfgang Schäuble, stating that “strengthening the Mr Cameron: They are not at the moment, and that architecture of the eurozone will need time” and is disturbing. “profound treaty changes”. He also says that it would be essential to have a “democratic mandate” and that Q221 Mr Cash: I have one other question I would that would legitimise this. If that is the attitude of the like you to answer. With respect to these bail-outs, German Federal Finance Minister, why can’t you see given the indications of the extent of the sovereign the picture as well? debt of the other countries in Europe, do you actually Mr Cameron: The difference between the German believe that Germany herself could ever find the Federal Finance Minister and me is that he wants to money to be able to pay for that? If the answer to that be in the euro and in a deeper fiscal union, and I do question is, “Well, we know they couldn’t,” and that not. He may well need greater democratic legitimacy it would create great political disturbance, as has been for what he is planning, but that is not what I am indicated to some extent by the German elections cobber Pack: U PL: COE1 [E] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP yesterday, do you not believe that that would, in itself, The second point is that if, at some stage in the future, create the kind of instability that we—or certainly moves towards greater fiscal union among the those of us who are against your policy on this— eurozone countries leads to a treaty, there would be regard it as essential to avoid? an opportunity for Britain— Mr Cameron: This is a very good question—and a Mr Cash: If. difficult one. Again, I start from the proposition of Mr Cameron: And it is a big if because, at the what is in Britain’s national interest. Obviously, the moment, the French, Germans and others do not want Treasury has done the analysis, and the Government to have a large treaty—you can understand why. At have sat, discussed, and thought about this. A the moment, they are trying to do things with a disorderly breakdown of the eurozone and disorderly mixture of working intergovernmentally and using debt defaults would be very damaging, not just to the some of the institutions of the EU. However, if that eurozone and continental European countries, but to was the case at that point, Britain would be able to the British economy, too. That is why I conclude that say, “What is in our national interest?” Obviously, the it is in our interest that the eurozone gets its act different parties in the coalition would possibly have together and works well. Therefore, it is in our interest a different view about what that might involve, but I to try and help them to do that, while protecting our have always said that I believe that Britain would other vital national interests—remaining outside the benefit from taking some powers back from Brussels euro, trying to stay out of European bail-outs and to Britain. There are some areas where the European making sure there is not caucusing at the eurozone Union is damaging, for instance in terms of the level. operating of a flexible market economy, and I think The broader point you are making—is there the that we might be able to make some progress in those political will in Europe to deal with these very deep areas. However, let me stress again that I think it is problems?—is a very real question. To make a single some way down the road before any treaty would be currency work, either you need all the countries to proposed. behave in a more Germanic-like way, in terms of fiscal responsibility and debt levels, or you need to have some way for transfers between countries. In America, Q223 Mr Cash: Would you repatriate the powers by for instance, if Texas has a good year, it pays more in using Westminster to override European legislation by tax and it gets less in public spending, but there is not using the notwithstanding formula, with which you that offsetting mechanism in the eurozone. You need are familiar? one of those two circumstances to come about. Mr Cameron: I am impressed that we have got We are all politicians. We can all make up our minds through 10 minutes without you mentioning about whether there is the political will in Europe to “notwithstanding”. The point I am making is that do either of those things but, nevertheless, I conclude when there is a treaty change, you have an opportunity it is in Britain’s interest at least to try to help our to put forward what you want in your country’s partners in Europe to sort out the eurozone, which national interest. I have done that once already, and I does have a big effect on us. would do it again in the future.

Q222 Mr Cash: There is one question with which I Q224 Mr Tyrie: While we are touching on the point would like to conclude. You gave an interview to The of what you would try and exact in return for a treaty Spectator in which you said “There will be change, could you tell us what you mean by a flexible opportunities for Britain to maximise what we want market economy? By that I mean which items of EU in terms of our engagement with Europe”. That policy do you think that we need to repatriate or sounds great, but how are you actually going to fundamentally alter to achieve a more flexible achieve that? When I put the question to you economy? immediately after the article appeared, you transferred Mr Cameron: One of the great successes—let’s look it to William Hague, who then transferred it to David at the positive side of the ledger—of the European Lidington. Effectively, if I may say, you ducked the Union has been the single market, which has opened question. You now have the opportunity to answer it. up an enormous market for our businesses. We want Mr Cameron: I am delighted to have the opportunity. to extend the single market into services and into Mr Cash: His answer was, “It’s the coalition energy—that should be one of our driving policy agreement that determines this.” You know perfectly agendas. There are some areas in which it has been well that Nick Clegg and the Liberal Democrats have extremely frustrating, such as with the working time themselves ruled out repatriation of powers and directive and areas that have come in under health and renegotiation, so what is your policy and how are you safety, but are not really health and safety but labour going to get there? laws. I have always felt that those would be better Mr Cameron: Let me not duck the question and I dealt with at the national level. shall give you as direct an answer as I can. I am not going to set out an agenda today. As I have The first point I would make is that for the first treaty said, there is some time to go before a treaty would change that has taken place since I have been Prime be proposed. Britain has some clear national interests Minister, Britain has exacted a price: the current bail- 1 that we need to defend. We have a flexible open- out mechanism, the EFSM, will no longer operate trading economy. We have a large and successful after 2013. We have therefore exacted a good British- financial services industry—other European countries interest price for a treaty change. do not and many of them are jealous of it. Those are 1 European Financial Stability Facility the sorts of issues that we should be looking at to cobber Pack: U PL: COE1 [O] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP ensure that we are defending the British national Q229 Mr Tyrie: Okay; a multi-character Europe. interest. You will be arguing for Europe developing on many fronts in different ways within one general broad Q225 Mr Tyrie: Prime Minister, four times you have treaty. said that we must have a eurozone that works. You Mr Cameron: That is what happens at the moment. have then begun to define what that might consist of: We are not in the Schengen agreement. Okay, it is either Germanic-style fiscal responsibility or fiscal not part of the European Union, but Libya has just transfers. Do you really think that it is conceivable demonstrated how central we are to NATO. We are that either of those can be imposed without a treaty not in the single currency, but we are one of the major change? proponents of the single market and its extension. Mr Cameron: The difficulty here is between what Sometimes, being outside something may mean that makes absolute logical and ideological sense and how you grow faster than being inside it, so I do not like Europe will probably approach the issue. If you were the speed analogy, but it could be a multi-character designing a single currency from scratch, you would Europe or flexible geometry or whatever you want to look at other single currencies and ask how they work. call it. You would see that there are fiscal transfers and what I mentioned about the United States. You would Q230 Mr Jenkin: There are moments in history design it in that way. That is obviously not how where there really needs to be some blunt speaking. Europe has progressed. I suspect that what we will The Maastricht treaty is proving to be a disaster, see is a mixture of moves: some bilateral agreements isn’t it? between Germany and France, and some form of euro- Mr Cameron: The Maastricht treaty that we signed— plus pact agreed within the Council of Ministers. We I do not want to go back over all the history—was will see other things like that, which will sometimes very different from the Maastricht treaty that others involve eurozone members surrendering some signed. sovereignty and flexibility and which will sometimes involve the better-off eurozone members pumping Q231 Mr Jenkin: But we could have vetoed this money into funds that can assist other countries. I disaster. suspect that what we will see in reality is an extension Mr Cameron: I was not even an MP at that stage. The of those things, rather than some great logical move point I make is this: our opt-out from the single forward. currency has been extremely robust.

Q226 Mr Tyrie: What we are getting to is a proposal Q232 Mr Jenkin: So you still defend the that if there is going to be a fiscal union, backed by Maastricht treaty? treaty change, you will want some kind of flexibility Mr Cameron: I do not want to go back over history. on labour laws, among other things. That seems to be I defend the fact that we are not a part of the single the clear message, although you don’t want to be currency and have the ability to stay out of the single precise. currency but within the single market. I think that we Mr Cameron: I don’t want to be too precise. defended Britain’s interests.

Q227 Mr Tyrie: But have I summarised correctly? Q233 Mr Jenkin: So the question is: what is in the Mr Cameron: I think that if we look to those things, national interest now? it leads to a safeguard for our own economic Mr Cameron: Yes. prosperity and health. I have been struck, over the past year, that there are risks to Britain from Europe in Q234 Mr Jenkin: Can you conceive of any sort of terms of European financial regulation, because, fiscal union that will actually hold the euro together unlike other European countries, we have a very large and succeed? financial services industry. We want to ensure that that Mr Cameron: I think you’ve got to start from the is secure, properly regulated and that our banks are proposition— not unsafe. Of course that is the case. We should not Mr Jenkin: It is a yes or no answer. be naive in Europe. There are many who would quite Mr Cameron: The answer to that is yes, I can see that. like to take a piece of our financial services industry. You have got to start from a proposition—members of We need to think about how best to defend that the eurozone have an enormous amount invested in national interest. We are a more open economy than the success of the single currency. The reason I did many; we are more flexible and more service- not want us to join the single currency is that I am orientated. We need to think about those things and enormously sceptical about it. I think different how we are affected. countries need different interest rates at different times. I think flexibility and monetary policy is Q228 Mr Tyrie: So you want not a two-speed important. I am not sure that it is an optimal currency Europe—not a Europe of the EU and the EU plus the area—I can get very boring about it if you want me eurozone—but a multi-speed Europe. Other countries to. Do not underestimate—I have seen this at first will have their own view of this, and we already have hand, sitting in those European Council meetings— some elements of a multi-speed Europe with the fact that eurozone members have an enormous Schengen and one or two other areas. amount committed to the success of the single Mr Cameron: I always take slight issue with the currency. They may not be racing towards a speed issue. completely logical answer to making it work better, cobber Pack: U PL: COE1 [E] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP but they want to make it work better, and I think they decisions here, we must do that—we have to accept, will probably do what it takes, albeit perhaps in fits as the previous Government accepted, that wealthier and starts, to make sure that it continues. countries will not do so well from EU structural funds.

Q235 Mr Jenkin: So the British Government are Q238 Mrs Ellman: But what are the Government backing the euro. doing now to try to ensure maximum benefits in 2014? Mr Cameron: The British Government are backing Are you envisaging an abrupt end to structural those countries that want to make the euro work funding? That isn’t what the regions of the UK are because that is in our interest—40% of our exports anticipating. go to eurozone countries; 50% of our exports go to Mr Cameron: First of all, I think we should be good European Union countries as a whole. A successful and effective, as the previous Government were and German, Spanish, French, Italian and Portuguese as we are, at actually accessing the funds to which we economy is in our interests. As I say, a cold look at are entitled. That is very important. One of the lessons the facts will demonstrate that a disorderly break-up of the eurozone crisis is that some of the less well-off of the eurozone and disorderly debt defaults would countries such as Greece have not been accessing have a very bad effect on the British economy. funds to which they are entitled, and that needs to change. To answer your question directly, we also Q236 Mr Jenkin: If the euro is going to fail, all the need to make sure that we have an active regional economists—people like Derek Scott and Tim policy ourselves. You have seen the regional growth Congdon—say that the default will be worse the fund that is up and running and working well, but I longer it carries on. Is that not rather like the ERM? do not think that regional policy should be just about We are getting ourselves trapped into backing a policy spending; it should also be about things like transport. that is bound to fail, and the longer it goes on, the worse it is going to be for the British economy. Why Q239 Mrs Ellman: But, Prime Minister, the regional don’t we call a halt now? growth fund, despite its name, is actually a central Mr Cameron: There are two answers to that. First, fund where decisions are made nationally about what unlike the exchange rate mechanism, we are not in the happens in regions and localities. Under the current euro, so we can talk fairly frankly about it—I think I programmes, the regional development agencies and have talked quite frankly about it. Secondly, what Government offices played a pivotal role in ensuring does “calling a halt” consist of? The fact is that that we accessed the maximum funding. Now they eurozone countries are battling very hard to make the have gone and what has followed is not seen to be euro—in which they have an enormous amount successful and, indeed, is deficient. Are you actually invested—work. Do you think Britain would be in a addressing that issue? better place just standing on the sidelines and Mr Cameron: I think the local enterprise partnerships repeatedly saying, “I told you so,” or would it be are successful and will be a great success, not least better—I would argue it is better—to try and be because— constructive and make useful points about things that eurozone countries can do to help make the euro Q240 Mrs Ellman: But they have no resources, and work? by definition, they are localised rather than looking in Let me make one quick point because it is important. a strategic way at things. In fact, you agreed with me It is not all about saying that you need greater fiscal about this when we discussed transport— co-ordination; it is also saying that you need more Mr Cameron: I think their localisation is their very flexible economies, to ensure that your labour markets advantage, because they have been formed by are flexible and that you need to make sure that your communities that want to come together and say, banks are properly capitalised—there is a whole series “This is the logical area for economic development,” of steps that all countries in Europe, including us, and they are capable of accessing funds, whether in need to take in order to make the European economy Europe or nationally. So I think you need to give the work better. local enterprise partnerships some time. I think they will be very effective. But the big-picture answer to Q237 Mrs Ellman: European structural funds have your question is that, as Europe enlarges and as we given great support to transport and to the economy keep control of the budget, inevitably the structural in more deprived areas of the country. Will that level funds will be focused on the poorer countries. of structural funding be continued post 2014? Mr Cameron: I am afraid the answer in the longer Q241 Mrs Ellman: You have not answered very run is that, as a relatively well-off country in Europe, clearly what you are trying to do from 2014 onwards we’re not going to be getting as much from structural in relation to European investment support for the funds. As you know, the way they work is that areas poorer parts of this country. You have spoken about are eligible if they have less than 75% of the European what you see as an inevitable movement, and the per capita average. Obviously, when you have previous Government have the same view, but what countries much poorer than us, such as Bulgaria and are you as Prime Minister doing to ensure that the Romania, in the European Union, some of whose regions and poorer areas of this country benefit to the regions have 30% of the EU per capita income, the maximum from European structural funds or a structural funds are likely to point in that direction. successor from that? If we want to keep control of the EU budget—and Mr Cameron: We will always work hard with the I profoundly believe that as we are making difficult bodies that are relevant—the local enterprise cobber Pack: U PL: COE1 [O] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP partnerships—to access the funds to which we are and everywhere else is above. Merseyside, for entitled. I think the British Government have always instance, has a GDP per capita of 81% of the EU been quite effective at that, at actually spotting the average. So I think that is the fundamental problem new programmes that are coming down the track—for we are going to have over the global picture about instance, the Leader Plus programme that came out of how much money there is to access from EU Europe—and accessing that funding. Also, we have to structural funds. have our own dedicated regional policy here in the UK—not just money, but things like high-speed rail. I Q244 John Thurso: What assessment has the was trying to answer the bigger picture, where I think, Government made of the impending crisis for banks inevitably, a lot of the European money will go to the in Europe and what that will mean for credit for less well-off countries. SMEs3 on the British high street? We could argue for a different approach if we wanted Mr Cameron: Two things. First, at the European to have a much larger European budget, but I think it level, we have been very much the ones who have would be very difficult to explain to people in this been pushing for credible stress tests, so that every country why spending at a European level was going country gets to grips with the need to put adequate up rapidly when spending in so many of our own capital into their banks, so that they are safe and Government Departments is going down. So we have resilient and can withstand further shocks in the formed a very strong alliance with other countries in eurozone or elsewhere. Secondly, back in the UK, we Europe to say that, across the period of the next have—very much at my instigation—this Merlin spending, spending should not be going up by more agreement with the banks, which was to set out targets than real terms. It is a real-terms freeze that we are for gross lending as a whole and also for gross lending shooting for. to SMEs. Six months on, the domestic picture is on target—ahead of target for overall lending and just Q242 Mrs Ellman: But the current omens are not below target for SME lending, and it has been useful. good, are they? You have mentioned the regional There is still a problem. We are all constituency MPs; growth fund. In fact, that has more than a third less we all get letters and people coming to our surgeries money than the regional development agencies that it not happy with the terms they are getting and not able replaced had, and the regional growth fund is expected to access finance. I am not pretending this issue is to do more things. So it is not a very good omen that sorted, but I think, in the UK, we have taken some the replacement has less funding, is it? quite concrete steps. Mr Cameron: I don’t think—this is where I am afraid we will probably disagree—the regional development Q245 John Thurso: Just to pick you up on that agencies were universally successful or popular. We point. The Bank of England figures are for net had a number of businesses complaining about the lending, and they would offer a very different picture. way they worked. They spent a huge amount of While gross lending looks fairly okay under Merlin, money on duplicated offices. I think one even had an it actually looks like quite a squeeze is going on with office on a beach in California. So an awful lot of net lending. Is that something the Government would money was wasted by regional development agencies. address? The LEPs are going to be more business-focused. Mr Cameron: We will certainly look at that. The They are going to be more locally led. As I say, they reason for looking at gross lending is that, if you are addressing specific areas where people have said, target net lending, obviously the banks can change the “This is the right area for economic development,” picture by the extent to which they are asking for often on a sub-regional level, and I think they can repayments. That is why we targeted it in the way be successful. we did.

Q243 Chair: I think, Prime Minister, you are going Q246 Miss McIntosh: Prime Minister, you have to have to go back and have a look at some aspects of stated many times, and again today, your opposition this in order to achieve your declared objective of to the Commission’s proposed increase in the EU making sure that we access funds that would be budget. Assuming that, through the strong alliance, available to this country for regional projects, because, you achieve the proposals for a limit on the EU of course, the staff who did it in the past have moved budget, what assurance can you give us that any from the development agencies to the Department for reduction in that budget, the largest proportion of Communities and Local Government, and the LEPs which—I think it is still 43%—goes on the common do not have the match-funding resources that the agricultural policy—will not disadvantage, or indeed previous development bodies had. I am not expecting harm, the UK farming sector? you to answer that question now, but I would very Mr Cameron: The first thing is we are having two much welcome it if, when you are back at No. 10, you different budget discussions. The first is on the budget have a look at the way it is working out in practice, for 2012, where we want to achieve somewhere near in the light of your stated objective. a real-terms freeze, and I think there is a prospect of Mr Cameron: I would be very happy to do that.2 doing that. We have built an alliance of countries that Just to give you the figures, there is now only one have written to the Commission saying that is what region in the UK that falls below 75% of the EU ought to happen. Within that budget, there is no reason average, and that is west Wales and the valleys at why any particular area of spending should be 71%. Cornwall and the Scilly Isles are exactly 75% disadvantaged. 2 See Ev 59 3 Small and medium-sized enterprises cobber Pack: U PL: COE1 [E] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

Ev 50 Liaison Committee: Evidence

6 September 2011 Rt Hon David Cameron MP

The second set of discussions is about what happens Mr Cameron: In some cases, it will be the same between 2014 and 2020—the next financial member states. When it comes to budget discipline, perspective. Again, we think there ought to be a real- there is quite a strong phalanx of countries—the terms freeze in payments. Obviously, there will then Dutch, the Danes, the Swedes, the Finns, the be a big discussion about how you divvy up the Germans, the British—who really have an interest in money between research funding, structural funds, trying to keep control of this EU budget, and I have agriculture and the like. As you know, Britain has worked very hard on that alliance. When it comes to always been for strong reform of the common an alliance on deregulation, it is often the same agricultural policy. Specifically, and you know a lot countries. Agricultural reform may be slightly more about this than I do, we want to try to reduce different. But also at the same time, I have tried to the payments available through pillar 1—the direct keep good and strong relations with the French and production subsidies—and to focus the money as we the Germans, because obviously as the biggest three spend it, on pillar 2 subsidies for the work that farmers countries in Europe, if we can reach agreement on do in terms of the environment. It is a multi-layered things, it helps to secure our interests. negotiation, and I have not done one of these before, so I will have to do a huge amount of homework, Q249 Miss McIntosh: Finally, you will accept that, because, at the same time, it is important that we if we don’t have friends and close allies among our protect the British abatement. The issue is how we European partners, we will not be able to deliver what balance the reforms we want to see in the CAP, the is in British’s best interests. overall fixing of the budget in a way the public can Mr Cameron: Absolutely. I know that the Chairman is have confidence in and the protection of the abatement interested in how the Prime Minister spends his time. I so that it is fair for Britain. have made six statements to Parliament on EU business. That must mean that I have had six Q247 Miss McIntosh: You touched on the fact that European Councils. A lot of time is spent in the there is potentially an increasing reliance on European Council. I sometimes feel the Justus Lipsius environmental payments through pillar 1 and pillar 2 building is my second home, not something I either in the next round of CAP reform. Are you concerned wanted or expected. I spend a lot of time building about potential conflict and tension at the heart of these European alliances. For instance, the Nordic- Government policy in striving for more environmental Baltic summit that we held in London was a good way concerns to be addressed through the CAP? However, of bringing together some of the northern European the Government also commissioned the Foresight members and the Baltic states and building alliances report looking at feeding the world, so to speak. Do with them. I think in terms of Britain’s role in Europe, yes, we are not involved in the single currency; we you recognise that there may be a conflict at the heart are not about to be. We are not joining Schengen; we of that? do not think that is the right approach to defend our Mr Cameron: I do. I have had this from my local borders. But we are a full player in the European farmers in west Oxfordshire, who are concerned about Union, working and building alliances to defend the this issue. I think—I am going to try to get them a national interest. I think that is what people would better answer than I was able to give them at Brize expect their Prime Minister to try to do. Norton village hall—we should be moving agricultural spending away from production subsidies, Q250 Geoffrey Clifton-Brown: Prime Minister, because they are market distorting and unfair, and for there is a danger that, in the medium to long term, the all the reasons we are familiar with. It is right that EU will become less competitive compared with more farmers are properly paid for the environmental vibrant parts of the world. Key to that is the burden improvements they make. In terms of addressing the of regulation. During the election and subsequently, problem of world food production and food security, you have been very keen that, domestically, we should we should recognise that farms are businesses like reduce regulation through mechanisms such as the other businesses; they have been affected by excessive one-in, one-out mechanism. How are you getting on regulation, excessive bureaucracy and the failure of persuading our EU partners that they need to reduce routes to market to work out for them. I would say the overall burden of EU regulation? that the other things we are doing across the economy Mr Cameron: We drafted a pamphlet called Let’s in the rural economy will help to increase production. Choose Growth, which is aimed at this whole issue of Prices also have hardened for farmers, and I think that trying to get Europe to move in a deregulatory is an encouraging signal for them as well. direction. We got a number of other European countries to sign up to it. I find it quite heartening Q248 Miss McIntosh: You will be aware that that obviously countries like Sweden and the Czech DEFRA is the first Department to look at reducing Republic—close allies—but also the Germans, the regulation across the piece, because there is a huge Dutch, the Danes, the Finns and the Baltic states of amount of burdens; as you said, farmers are individual Estonia, Latvia and Lithuania all very much agree businesses. You mentioned that there is a strong with us on this agenda and so we are pushing it alliance on the budget. In terms of simplifying and forward. We got some quite good language in a recent reforming the common agricultural policy, are you set of EU conclusions about exempting micro- looking towards the same member states to support businesses from regulation and such like. you on the budget as might be supporting you in One of the problems—I don’t want to single it out— simplifying and reforming the CAP? is that the European Commission’s approach to these cobber Pack: U PL: COE1 [O] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP issues of European growth is often to tell all the helpful. We have a close bilateral relationship with European countries what they ought to be doing, Turkey, and we should try to encourage Turkey not to rather than looking at the burden of EU regulation and give up on Europe because that would be tragic for saying, “Hold on, what could we as a Commission do Turkey and also for Europe. to reduce the burdens?” Sometimes the smaller member states that see the European Commission as Q255 Keith Vaz: One of the warning signs that the their great friend and defender do not really want to Select Committee identified in the report on the have a bit of a bust-up with it over this issue. But we enlargement of the European Union and Turkey need to get the European Commission to address its joining was the immigration and illegal activities that regulatory burden. To be fair to President Barroso, he seem to be occurring in Turkey and being transported is someone who has pioneered deregulation, and I into the rest of the EU. We went to the border between think we can get him to do more. Greece and Turkey. We saw people being held in appalling conditions. Some 100,000 illegal Q251 Geoffrey Clifton-Brown: They have a small immigrants were arrested on the borders of Greece, business Act, which is not an Act as such, but it is a and in a real sense, those are our borders. They are not signal that it has to take into account the regulatory necessarily our current borders; they are the borders of burden on small businesses, which is beginning to the EU. What are we doing as part of our relationship work. Do you think that principle could be expanded? with the rest of the EU to try to ensure that this illegal Mr Cameron: I think it could be. Part of the problem immigration is halted? The place of destination is not is—this is a very British view that we put—that we Athens. The place of destination is known as London, need to have the pressure coming from other member Paris and Amsterdam. states into the European Commission on exactly this Mr Cameron: That is a very good question. You have sort of issue. We need to encourage European studied this closely. It seems that we are trying to do businesses that are now feeling the weight of two things. We are trying to help improve the worth regulation. If you compare the sort of regulation that of Europe’s external borders through supporting we are having to deal with in Europe compared with organisations such as Frontex, but we are not in favour America, China or India, we are clearly on the wrong of giving up our own border controls or joining path. European businesses are waking up to this, and Schengen or supporting a common European asylum we need to encourage them to lobby their policy, because we think that we are better able to Governments and the European Commission as much do those things ourselves and that gives us greater as we do. safeguards. That is the right approach.

Q252 Keith Vaz: Prime Minister, you and your Q256 Keith Vaz: Do you think that the Schengen Government, like the previous Government, are firm arrangements should be suspended for those who are supporters of Turkey joining the European Union. Do part of Schengen to ensure that there are border you sense that there is antipathy towards Turkey checks and that people are checked before they get to joining on the part of some of our European the United Kingdom? colleagues? Mr Cameron: I think that is a matter for them. We Mr Cameron: Yes. are not in Schengen. I feel a bit of sympathy with those Schengen countries that were so worried that Q253 Keith Vaz: If the answer is yes, what is the they started to make checks and there was a huge row likely time scale? Is it going to be 15 years or more at the European Council about what was happening. than that? Again, that was one of the reasons that we did not Mr Cameron: I do not want to speculate. I am a join. supporter of Turkey joining the EU for all sorts of reasons. If you want a successful single market, it is Q257 Chair: One issue about enlargement is that a huge economy to join that market. If you want there is a tension, is there not, between your objectives Europe to be able to act as an organisation that for fiscal co-ordination and enlargement? Any country enhances democracy, the successful Turkish which now joins has to join the euro; it has no option. democracy belongs in Europe. If you want Europe to Mr Cameron: I am not sure, de facto, that that is the look east and south as well as inwards, it makes sense case. It is up to non-euro EU members to describe on those grounds. On all those grounds, it is very their own positions. There are countries not in the important. There is no doubt that some other European euro that are quite unlikely to join in the near future. countries are very opposed to full Turkish Obviously, we have a cast-iron opt-out, so we are not membership, so we have to keep making the under any pressure. arguments. Q258 Chair: New countries joining as a result of Q254 Keith Vaz: Is it France and Germany? enlargement, new to the EU, have to join the euro. Mr Cameron: France and Germany would be right up Mr Cameron: Yes, but they don’t have to straight there. There is no point denying that. One thing we away. If you look at the current euro-outs—it is for can do is positively involve Turkey in European and them to speak to their own policy—some of them will other initiatives. It was very good that Foreign be waiting quite a long time before they join the euro. Minister Davutoglu was at the recent European Foreign Ministers’ meeting. The role Turkey is Q259 Chair: And there’s one other thing that you playing in issues such as the Libya campaign is didn’t fully cover earlier on Europe: have you got a cobber Pack: U PL: COE1 [E] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP clear picture of the UK’s risks and obligations in the evidence is that it won’t work, as Europe has not been event of a sovereign debt default in the eurozone? working, and you will be faced with a very significant Mr Cameron: Yes. Obviously, the Treasury does a lot problem in the next few years. of contingency planning and preparatory work. I don’t Mr Cameron: With respect, we dealt with this earlier. think it is right to speculate about other countries and The fact is that if Britain was proposing to join the what might happen and the rest of it, but obviously euro, yes, you’d have to have a referendum. We’re the exposures are quite well known. It is right that not. This is about what euro countries decide to do, the Treasury thinks through the consequences of every and our interest is to try to help them make good eventuality, and that is how I was able to answer the decisions rather than bad decisions. I don’t think that questions from Bernard and William—we do believe involves us holding a referendum. that a disorderly break-up of the euro and debt default is much more serious for Britain than perhaps some Q262 Mr Whittingdale: Just before we leave people have previously thought. Europe, can I quickly come back to the question of Chair: A final question on this is from Mr Cash. enlargement? To what extent do you support the aspirations of some other countries to join the Q260 Mr Cash: Listening to you, Prime Minister, European Union, particularly Ukraine, and what can one is left rather with the impression that, yes, you we do to help them achieve that? have certain reservations about Europe, but there is Mr Cameron: I support a widening of the European something very far short of Eurorealism or Union; I always have. Obviously, to start with, the Euroscepticism. You are actually rather an countries of the western Balkans are clearly very enthusiast—are you not?—for the notion of keeping strong candidates, and I would like to see that happen. Europe together by the treaty through the European I don’t rule out Ukraine or other countries in future Communities Act. Would you contemplate the idea of joining. While I’m a practical sceptic about many of having a referendum for the British people on the the things that the European Union does, one thing is broader question of whether we should either leave or fairly undeniable: it has been quite a successful renegotiate? You’ve committed yourself to development policy, having countries wanting to join renegotiation in a sense, but if it does not work, where and taking steps to open up their economies, to does that leave you? improve their judicial systems, to get rid of corruption Mr Cameron: I would describe myself as a very and the rest of it. I think it has been successful with a practical Eurosceptic. I am sceptical about these grand whole slew of countries, and it can go on being schemes and utopian visions, but I know that Britain successful with other candidate countries in the future. has to be in there fighting for our interests. I think it I think that we can help them build up political is right that we stay outside the single currency and contacts and ensure there is a proper pathway between outside Schengen, but the single market is in our where they are now and membership application. interest, and that is largely why we’re there. I’ve a very practical approach to it. Q263 Mr Whittingdale: But they will only pursue On the issue of a referendum, I do not favour an in- that route if they believe that eventually it will lead out referendum, because I don’t actually think that is to membership. the question most people in Britain want answered— Mr Cameron: That’s right, and as I say, I think the it is about what sort of Europe. I think we should try wideners of Europe won the argument. There were to deliver the sort of Europe people want, but knowing people who wanted to keep it as quite a rich man’s that we’ve got, for the first time, a proper guarantee club. I think that argument has been lost. I think that that if there is a proposal to pass power from with Croatia coming in, in time, and Macedonia, Westminster to Brussels, the British public will get a Bosnia and so on, the wideners have won the vote in a referendum. I think one of the reasons why argument, and I would be in favour of that continuing people feel let down by these past treaties, whether to happen. Again, what is in our interest? We are a Maastricht, Amsterdam, Nice or Lisbon, is that people trading nation. We want access to the largest possible feel that powers of mine—belonging to the British market. We want to co-operate where there is political people—were passed to Europe without me being agreement and political will to tackle common asked in the first place. I think that is wrong and that is problems. That should be our approach in Europe, and why we now have a referendum lock in place, which I the more countries that come in to build that sort of think is a big breakthrough, and I hope it will cohere, Europe, the better it is from our prospective. whichever party is in power in future. Q264 Mr Whittingdale: May I move on to the Q261 Mr Cash: But, if I may say, with respect, that second topic that we want to address this afternoon? is the fatal mistake, Prime Minister, because what you When he left office, Tony Blair, in his sort of are doing is to put what could be just a minor transfer valedictory address, talked about the media as “a feral of competence or power on the one hand as justifying beast, just tearing people and reputations to bits”, and a referendum. When it comes to the massive question he went on to finish by saying that he believed that of setting up—by your own admission—promoting or the relationship between public life and media “is now urging the other member states to go ahead with fiscal damaged in a manner that requires repair”. Your union, which does have a profound impact on us immediate predecessor, Gordon Brown, a few weeks constitutionally, economically and politically, you ago talked about one media organisation as having then say, “Oh, well you can’t have a referendum for been “our greatest defence against the abuse of that, however much it affects you,” when all the power” and now becoming “an intolerable abuser of cobber Pack: U PL: COE1 [O] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP power.” Do you share the view that there is a as I say, looking back, it is possible to see now that fundamental problem now in relation to the power of there were regulatory issues. A good example is the the media in our society and that that has to be Information Commissioner’s report that Parliament as addressed? a whole, and senior politicians on all sides, just did Mr Cameron: I think the relationship between politics not take seriously enough, and that is a matter of and media needs resetting, and I think there is an regret. One of the things that is going to change— opportunity for this Parliament to do that. I think there obviously, I have now made public all the meetings is a need for better and more appropriate media that I have had, both official and private, with News regulation, partly because of abuses that have taken International and other journalists and media place. I have said to myself that I will try not to use organisations, and I think that is a good thing—people too excitable language about this issue, but clearly will in future be able to see how often you meet these there have been some bad cases of abuse by the people, where you meet them and all the rest of it. media, and there are things that need to be dealt with. They will hopefully see that it will be a more I think that politicians have not stepped up to the plate healthy relationship. to deal with that—for all the reasons that we know about. There is an opportunity now to deal with that. Q267 Mr Whittingdale: Obviously, we will await I do not think that we should use excitable language. Lord Justice Leveson’s conclusions, but you have said I think we should just let Judge Leveson get on with already that you have instituted a practice of his inquiry. We should think carefully about the right publication and transparency. Are you also—yourself forms of regulation and how we can have a free press and members of your Government—trying to keep a that does not fear power, can go where it chooses and slightly greater distance now from some of the leading dig up the things that it needs to dig up, but one that, media organisations? at the same time, obeys some rules and laws. I think Mr Cameron: Yes; I think that is right. I have been that is what we have to do. thinking about this for some time: how you can try to have a good relationship where you feel you can Q265 Mr Whittingdale: Were you surprised or communicate what you want to get across about your worried at the publication of the figures relating to the policies, your approach and the philosophy of the number of meetings that have taken place between senior members of the Government and executives of Government, without having a daily conversation. News International, and, indeed, senior members of That is one of the pressures in government; you have the Opposition and News International? to try to keep your eye on the medium term and the Mr Cameron: I wasn’t surprised, because obviously I long-term things that you want to do. Obviously, there was involved in a number of them myself. The truth is a daily battle to try and get your message across— is that politicians of all the main parties have spent we have a 24-hour media, and we have a very hungry quite a lot of time trying to win over editors, news agenda—but trying to have a bit more distance broadcasters and proprietors. One of the things that and to have a more professional relationship may be you do as an Opposition party is try to win the a good thing. I have said in Parliament that we are not support, because you want to communicate your all going to become monks and no one is going to talk message, and, as a Government, you go on doing that. to a journalist ever again, but I think we can try and I think what is clear is that the relationship became get the relationship on a better footing. too close in that the politicians were spending a lot of time trying to get their message across and win the Q268 Chair: Do you think bells failed to ring? Do support, but the issues of regulation were being put you think in your own conscience that there should on the back burner. have been moments when you thought, “This is a line This crisis and the appalling things that have that I shouldn’t be crossing. The nature of the happened give this Parliament—it is very much this relationship or the matters under discussion go beyond Parliament and not just this Government—an my trying to persuade an editor that my party’s policy opportunity to try and reset the clock and get this would be very good for the country, and my trying to relationship right. An independent inquiry is key to offer him something or accept his view on issues such that, because it is quite clear that, for all the good as regulation because that might influence him to be work—I am not just saying this to suck up to you— more favourable.”? 4 of the CMS Committee, it has not been enough to Mr Cameron: No, I don’t particularly think that. I spark the Government, either the previous one or the worked in the media industry for seven and a half one before that, to act, so this is our chance. years for an ITV company. I spent quite a lot of time thinking about media regulation and competition Q266 Mr Whittingdale: Do you feel that you regulation, and what worked and what did not. For personally became too close to leading executives of instance, I have always been a very big supporter of News International? the BBC. Funnily enough, if you work in ITV, you Mr Cameron: Yes, I think that in terms of spending a tend to be quite a supporter of a strong BBC because lot of time trying to win over, as I say, not just News you want to have a good, strong competitor. I have International—I have also met with editors of The always backed the licence fee; I have always backed Guardian, the proprietor of The Independent and the the BBC; and I have always thought the BBC could BBC. As leader of the Opposition and as Prime justify and go on having a licence fee. I would never Minister, you do want to get your message across; but, change my mind about that to curry favour with this 4 Culture, Media and Sport Committee newspaper or that editor, or whatever. cobber Pack: U PL: COE1 [E] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP

I think the failure came—whether it was CMS can remember plenty from the previous Government, Committee reports or the Information Commissioner as well as one or two difficulties under the present reports—where there were some lights flashing; I Government. Is there not a case for a review of how think those were the moments where Government, special advisers are appointed and how they are Opposition and Parliament more broadly needed to regulated? That is something my Select Committee is recognise that that was a problem that needed dealing considering. Would you welcome that? with. Funnily enough, when you look at this whole Mr Cameron: I’m very happy; that is exactly what area of super-injunctions, which I know you are your Committee is there for. It is there to look at those looking at separately, I have said the problem is that issues. I would make two points. There is a difference judges have been trying to write a privacy law because between Andy Coulson and some of the other special Parliament has not really opined about what it thinks advisers who have become famous, such as Damian is right and wrong. I think we need to do that. Perhaps McBride. Damian McBride became famous for Lord Justice Leveson’s investigation will help that to something he did in his job at No. 10, whereas Andy happen, and that will be a good thing. Coulson has become famous for something he did or did not do beforehand. Q269 Mr Jenkin: Much has been said and written In terms of an investigation into special advisers, the about Andy Coulson’s appointment to the rules have been considerably tightened, the Conservative party as director of communications, declaration of interests is clear and the transparency is and subsequently to No. 10. Do you think we are much greater. It has been suggested that there should learning something from all this, particularly from be scrutiny hearings for special advisers. I am not so his appointments? sure about that. We have introduced a lot of scrutiny Mr Cameron: Well, as I’ve said, with hindsight, if I hearings. Pre-appointment hearings. I cannot had known then all the things that I know now and all remember the term— the things that have happened, I would not have Mr Jenkin: Pre-appointment scrutiny. offered him the job and he would not have accepted Mr Cameron: Pre-appointment scrutiny. For civil it. As I said on 20 July, I am very sorry for all the servants who will run large budgets and important furore that this has caused. I would say again, though, organisations, it is right that your Committees and that no one is casting aspersions on the job he did, others do that. For special advisers, which are either as director of communications for the ministerial, political appointments, there might be a Conservative party, where he did a good job and did danger that pre-appointment hearings would divide it—I saw it first hand—in a good and fair way, or along political lines. indeed his work in No. 10 Downing Street. Clearly, there are lessons to learn, and I have said that with Q273 Mr Jenkin: There needs to be some way of hindsight things would have been different. preventing such accidents, and pre-appointment scrutiny might have led to the avoidance of several of Q270 Mr Jenkin: But doesn’t there need to be more those accidents. transparency about how independent an individual is Mr Cameron: Well, as I say, if you look at some of from their previous employer, and a clearer the special adviser issues under the previous understanding of what interests they should declare? Government, it was because of things they did while This all needs to be cleared up, doesn’t it? working for that Government. I am not sure that a Mr Cameron: I think special advisers now have, pre-appointment hearing would have solved that. Very compared with when I was a special adviser, a very clear ethics, accountability and rules are what are strict rule about declarations of interests. There is a needed, and I think we have those in place. proper register. I think that has been sorted out to a good degree, and this Government have added to it Q274 Keith Vaz: Prime Minister, you may not have with quite a lot of extra transparency and declared the been surprised at the meetings between News salaries and all the rest of it. International and members of the Government and, Severance payments, which I think you are hinting at, previously, members of the Opposition, but you must are a difficult area. When you employ someone, you have been surprised at the large number of meetings do not normally ask about severance payments from between the Metropolitan police and senior officials a previous job. Arguably, if you took someone’s at News International. It was something of a revolving severance payments into account and topped up their door. We know about Andy Coulson working for you. salary, they would then still be beholden to their Mr Miliband has a former News International former employer. employee working for him, but the commissioner took on Neil Wallis, a former deputy editor. Did it surprise Q271 Mr Jenkin: It is not just about what they have you that there was such a connection between the been paid; it is about the interests to which they might Metropolitan police and News International that 10 be beholden. out of 45 members of their press department were Mr Cameron: Absolutely. There is a system in former employees? government for special advisers to declare interests. Mr Cameron: I did not know about Mr Wallis, and I That has been brought in; it is quite right; and it needs did not know that figure of 10 out of 45, which is to happen. surprising. As I have said before, the police have to have a relationship with the press at a strategic level— Q272 Mr Jenkin: Finally, special advisers seem to it is perfectly fair for a police chief to try to explain cause quite a lot of controversy from time to time. We to newspapers their vision, what they are trying to do cobber Pack: U PL: COE1 [O] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP and the rest of it. They have to have a relationship at Q278 Mr Barron: Is it your intention to bring in a the top level and, clearly, they have to have a draft Bill in relation to parliamentary privilege? relationship with journalists, newspapers and radio Mr Cameron: Yes, I think we do need to look at that. stations to help them to solve crimes, but we have Your Committee has thrown up a number of issues. seen the development of some unhealthy relationships There have also been quite a lot of events. If you think between the police and the media, and it is those that of recent years, we have had the issues of Damian need to be dealt with. We should let Lord Justice Green’s office and of IPSA, and the problem of MPs Leveson, as well as your Committee, look at that area claiming privilege in court so as not to have to answer and make recommendations. for their expenses. There is also the problem, as I understand it, of what happens if someone does not Q275 Keith Vaz: And, as far as you are aware, all agree to appear in front of a Select Committee. We the relationships have been declared by yourself and can either throw them in jail or gently reprimand by everyone else. There have been no visits to the them, and there is the idea of having a slightly wider banks of the River Jordan for any christenings. range of penalties. I wish we could find a better word Mr Cameron: I am not, as far as I am aware, than “privilege”; it sounds as though we are trying to godfather to any media folk. set ourselves up as something special, which we I will go on checking to ensure that every meeting should not be. This is just a question of ensuring that has been covered. Other politicians have not done this Parliament can do its job properly and that we obey previously, but I have tried to set out not only the the rules like everybody else. public meetings—the official meetings, as it were, at No. 10 Downing street and the office meetings—but Q279 Mr Barron: In the coalition agreement of May the social meetings, too. Your office is not necessarily of last year, you said “We will prevent the possible controlling every part of your diary, so you cannot misuse of Parliamentary privilege by MPs accused of guarantee that you have those absolutely right. I have serious wrongdoing.” The Supreme Court judgment of tried to go back and remember as best I can so that 10 November last year made it clear that privilege was people get a full picture. not an issue that MPs—or ex-MPs, as they were in those circumstances—could hide behind in trying to Q276 Mr Barron: Just two quick questions, one of avoid the criminal law. What would be the intention which is about phone hacking. This time last year, the of a draft parliamentary privilege Bill? What do we Standards and Privileges Committee, on which I sit, mean by MPs accused of “serious wrongdoing”? was asked to look into the hacking of right hon. and Mr Cameron: I suppose—I might need to write to hon. Members’ phones. We came to the conclusion you about this5—that the point would be to put it that we are no different from any other citizen in the beyond doubt. I think that people were quite appalled UK and, indeed, that that is a crime. We also believed by the sight of MPs claiming that they had some sort that it should be dealt with in normal circumstances of privilege that meant that they were not subject to by the police and the courts. In view of the events of the criminal law like everybody else. The point of the the past few months, do you think that there is a place Bill—as I understand it, your Committee is going to for Parliament to have stronger powers to demand that come forward with a lot of ideas—would be to clear such investigations are done in a proper way? up that issue, and it would also look at other areas Mr Cameron: I think that I agree with your where Parliament needs to be strengthened in that conclusion that it is a crime against MPs, as it is respect. against anybody else. I am not sure I fully understand the question about whether you need different Q280 Mr Barron: I would have thought that the investigative powers. Do you want to explain that? Supreme Court had cleared up that issue by interpreting what we do and what the law is at the Q277 Mr Barron: How can we be sure that an moment. investigation that we expect has taken place, has taken Could I take you on to this? Because of recent events place? Maybe I could put it this way: it could both in this place and elsewhere, people who are able potentially be one of the recommendations in part 2 to stand up and speak protected by privilege have of the judicial inquiry you have now that the police exposed some wrongdoings, and they have not been would be answerable in some way for the fearful of action in the courts or anything else. investigations that they have done in relation to these Parliamentary privilege gives us the right, as elected matters. Would you be comfortable with that as Members in this place, to speak up on issues that may Prime Minister? be of great concern and could be closed down if we spoke up outside Parliament. Would you be Mr Cameron: I think that the police must be comfortable extending beyond what we have had in accountable for their investigations, and they need to the High Court judgment? be accountable to their police authorities. The Mr Cameron: If by that you mean would I be Metropolitan Police Authority, in this case, would be comfortable with changing the rules that might stop asking questions, and Keith Vaz’s Committee has Members of Parliament saying in Parliament what already been asking questions about how they are they feel is right to defend their constituents or undertaking operations. What has become clear, highlight wrongdoing, I would not be comfortable alongside the Leveson inquiry, is that the police with that. I don’t think that that is at issue here; I think investigation is now properly staffed, funded and it is the other issues I mentioned. That is why it is under way, and it will get to the bottom of what has happened. 5 See Ev 58 cobber Pack: U PL: COE1 [E] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP important to have a draft Bill. When anyone opens in the expenses era. Doesn’t all that—including this box, there are so many complicated and difficult hacking, privilege and many of those things—actually things to get right that we need a draft Bill on which have a root cause, which I would argue is the fact that we can spend a lot of time. I think that one of the the media ownership in this country is a gross problems with the IPSA legislation, which impinged distortion of the market and produces a lot of these on parliamentary privilege, was that it all happened symptomatic behaviours? very quickly and there wasn’t really the time to think Mr Cameron: I think that there are links, but there it through properly. are two issues that we need to address. One is the way in which the media are regulated. I think that the Q281 Mr Barron: A lot of things happened very PCC,6 which had improved its record over recent quickly—some for good reason—but the real point is years but clearly was not doing the job of addressing that you and I are elected Members of Parliament. abuses, needs to change. It is up to Leveson to decide Whatever role we play in this Parliament, we have the what he thinks is the right approach. I have talked right to stand up and speak out on behalf of about independent regulation rather than statutory constituents on other matters, and if the electorate regulation, and that is about trying to set standards and want to get rid of us at the next general election, they to police standards, and also to make it more painful, have the right to do so as well. Would you protect frankly, when you get it wrong. At the moment, if you that? get it wrong but the apology is tiny when the original Mr Cameron: Yes. article was huge, it is not very painful. There is that set of issues. Q282 Mr Jenkin: Just very briefly on the broader Clearly, the issues of media ownership are linked, question, the CMS Committee has to recall witnesses because of the point you make that if media because there is a question of whether they have told organisations become so powerful that it becomes the whole truth. Mr Vaz’s Home Affairs Committee difficult for politicians to discuss frankly some of has been very disappointed with the evidence received these regulatory issues, as we discussed earlier, there from Metropolitan police officers. There is the is a link. I think it is right that Lord Justice Leveson question you raise about the procedures for actually is also looking at whether we should have more summoning witnesses. Is there not a case for a review measures of plurality of media. of Select Committee powers, and would you support I add this note of caution, having spent a long time such a review of Select Committee powers and working in the media looking at this whole issue. If effectiveness? It is vital that we can do this job you try and pick a measure of plurality, you often find effectively, in a dignified way and with authority, that the BBC will fall foul of it because of its huge rather than with doubt about how we should do things coverage in terms of television and radio stations. and what is going to happen if we choose certain However, if you exclude the BBC from a measure of courses of action. plurality, what sort of measure is that? I am all for Mr Cameron: First, I hope the Government will get this to be looked at, but it is not going to be easy. some credit for the election of Select Committee Chairs. I think that that move was very important, and Q284 Mr Allen: We are obviously aware of it has already enhanced what Select Committees do Leveson’s inquiry and await its outcome with interest. and the standing that they have. Prime Minister, on a personal basis, do you see the Chair: That was before the election. possibility that our media could—and perhaps Mr Cameron: We have the draft privilege Bill coming should—be more diverse? That is in terms of your forward, which is an opportunity to address the issue role as chief executive, rather than awaiting of what happens when people refuse to attend a Select Leveson’s report. Committee as a witness. If the Liaison Committee— Mr Cameron: I definitely think it matters that there is the Chairs of all the Select Committees—wants to effective competition policy and a range of media come forward with further suggestions, I am very voices. That is why I am a big supporter of a strong happy to look at them. I think it would be good to get ITV, because in television news, which I think is to a position where there was confidence that Select hugely important in terms of how the media are Committee inquiries, in many cases, were the way of perceived and seen by people, it is important to have getting to the truth and the answer. You find in competition. I am a big fan of competition and a government that you get so many requests for a full plurality of voices. It is not always the case that the independent public inquiry. If we can strengthen the big and powerful are the ones breaking the rules. Select Committee system, there are definitely things Sometimes—I do not want to name too many that the Select Committees could do more of. names—it is others as well. There is a behaviour issue and a power issue. The power issue needs to be addressed through competition and, potentially, Q283 Mr Allen: Prime Minister, you may know that through plurality rules, and the behaviour issue needs I am rather interested in early intervention—in this to be addressed through regulation. context, tackling causes as well as symptoms. I think I think we need to be extremely careful as MPs—you that some lessons read across to media ownership. We mentioned the expenses issue in your question. If this have seen some of the symptoms: the corrupting is in any way seen as a sort of revenge for expenses, influence with executives for all political colours, and it would be a disaster for Parliament. The expenses the inhibiting, intimidating and chilling effect on scandal was just that—a scandal. We must not be seen Parliament itself with Members fearing the way in which they will be treated or reported, very obviously 6 Press Complaints Commission cobber Pack: U PL: COE1 [O] Processed: [17-10-2011 16:11] Job: 015233 Unit: PG01 Source: /MILES/PKU/INPUT/015233/015233_o001_th_A-LC 7 Sept 2011.xml

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6 September 2011 Rt Hon David Cameron MP to be gleeful in leaping on this opportunity to over- Parliament needs to fill the space with topical regulate the media. The media are a vital industry for questions and topical debates. That needs to happen. Britain and a very important part of our democracy. It would be naïve to think that somehow Parliament We want the media to be free, vigorous and able to can fulfil the instant comment; the role that the media uncover wrongdoing. There is a danger of the play in holding us to account will absolutely still be pendulum swinging too far the other way, and MPs there, and it is quite right that it should be. have a particular responsibility because, in the end, whatever Leveson comes up with, we will have to Q287 Dr Francis: Prime Minister, I would like to legislate and put it in place. ask you about privacy and the victims of gross media intrusion. Within the framework of the Human Rights Q285 Mr Allen: Would you in principle accept, if Act, how can we better protect and secure the human Leveson came up with such a proposal, that this rights of victims of gross media intrusion? should be in statute and would not be a self- Mr Cameron: I think that this goes to the question of regulatory system? how we regulate the media. As I have said, the Press Mr Cameron: Let’s wait and see. What you do not Complaints Commission improved its game, but not want is Government regulation of the media. We see enough, so that didn’t work. As a result, judges were that in other countries and it does not lead to a free writing privacy law using the Human Rights Act and media. What does not seem to have worked is self- super-injunctions, partly because Parliament had not regulation—journalists regulating journalists. You opined on what it thought was the right balance need an independence of regulation. That can, in my between freedom of expression, and privacy and view, be set up through statute, but it has got to be protection. I don’t think the answer is more judge- properly removed from the Government. People have made law. It is up to Lord Justice Leveson, but I think said to me that there are examples in the advertising the answer is to have a better regulatory system with industry where this works—I am glad to see that John a free and vibrant press, but when you make a Whittingdale is nodding. I am sure that the Committee mistake, you must print a proper apology, and there will have a look at this issue; who knows what answer must be proper rules about privacy and, for example, it may come up with? I am sure there are ways to protecting the innocent, children and so on. provide tougher independent regulation that is not Government controlled. Q288 Dr Francis: May I follow that up by asking you about balance? The Joint Committee on Privacy Q286 Mr Allen: And obviously you would not want and Injunctions will not report until February 2012. the independent regulation of IPSA—however much Will you give us more of your thoughts about the MPs want to wreak revenge on the media, that would shape and colour of that privacy law—you mentioned be too cruel. a privacy law earlier—that would enshrine and protect Perhaps more seriously, on a big principle and to victims’ human rights and the liberties of those follow on from Mr Jenkin’s point, there is the balance victims? of power. I do not think there was ever a halcyon, Mr Cameron: I think that we must let Lord Justice golden era of parliamentary power versus Executive Leveson do his work. There are various ways of trying power but, none the less, in the period when the to answer the question of how you get the right Government and the press grew closer, and the balance between freedom of expression and privacy. relationship was more corrupting or corruptible, there You could have stronger and better regulation—path was a sense that Parliament itself became a more 1. You could have a privacy law—path 2. You could junior partner. Is one of the things that could flow have a sort of tort of privacy, which I think the last from the problems that we have seen with media Conservative Government looked at. Personally, my regulation and media ownership a rebalancing of that view is that better independent regulation is the right relationship and a strengthening of Parliament? You way to secure a better balance between privacy and used the phrase earlier about the BBC being a strong freedom of expression. I hope we go down that path, competitor and therefore a strong partner. Do you see rather than the danger of politicians trying to write Parliament ultimately growing into that strong partner, a privacy law. However, we are all getting ahead of with members of the Government, of whatever ourselves: we have all failed, as it were, so an political complexion, taking less heed of what the independent inquiry will look at the area and make press and media say about them, and actually seeing suggestions. At that moment, I hope that politicians Parliament as more of a force and a check? will put aside party advantage and not have a bidding Chair: If we had a yes or no answer, that would war on who can have the most media-friendly answer enable me to give more time to Dr Francis, who has to the question. I hope that we can say, “It’s a good been waiting patiently. A yes would do nicely. report, so let’s take it forward and rebalance the Mr Cameron: What will strengthen Parliament is two relationship between the media and politics for the things. One is the Government, who have taken some good of the country.” big steps, such as with the election of Select Chair: Prime Minister, thank you. The Committee Committees and having a Backbench Business looks forward to seeing you again in November, when Committee. The Government have said—George we want to explore some of the social issues and your Young is a reforming Leader of the House of own ideas arising from the riots. Thank you very Commons—that we want a stronger Parliament, and much. cobber Pack: U PL: CWE1 [SE] Processed: [17-10-2011 16:12] Job: 015233 Unit: PG02

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Written evidence

Letter from the Chair of the Committee to the Prime Minister, dated 18 July 2011 At its meeting last week, the Liaison Committee discussed the Government’s unwillingness to give the National Audit Office access to National Security Council documents which the NAO considers necessary for it to assess the value for money of the decision to proceed with the procurement of the two aircraft carriers. Margaret Hodge raised this with you in the House, and the Liaison Committee attaches great importance to the work of the NAO and its access to relevant information. I hope that a way can be found of resolving this matter in the next few weeks, and that we will not need to raise it when you give evidence to us in September. If we have to do so, it would be in relation to the issues of disclosure, not the merits of the carrier decision. Alan Beith

Letter from the Prime Minister to the Rt Hon Alan Beith MP, dated 5 September 2011 Thank you for your letter dated 18 July about the decision not to provide National Security Council papers to the National Audit Office (NAO) during their recent Carrier Strike study. Recognising the strength of Parliamentary interest in this issue and the questions that have been raised about the decisions made, the Cabinet Secretary and I have decided to allow the NAO access to the relevant material from the papers on an exceptional basis. The Cabinet Office is seeking to make the necessary arrangements as soon as possible. My attached letter to Margaret Hodge and Andrew Tyrie explains the situation more fully. I trust that we will not need to discuss the matter in any depth when I give evidence to your Committee on wider issues on Tuesday. Rt Hon David Cameron MP Prime Minister

Letter from the Prime Minister to the Rt Hon Kevin Barron MP, dated 14 September 2011 I said that I would write following our exchange in the Liaison Committee on Tuesday 6 September. You asked about the intention behind introducing a draft Parliamentary Privilege Bill. Clearly the genesis of the commitment in the Coalition Agreement was that there was a widespread public revulsion at the notion that MPs should be able to avoid trial for criminal activities. In this instance, the fear turned out to be unfounded, but that does not mean we should not be looking at whether the balance is right in all cases between the necessary protection afforded by privilege, and the important principle that MPs and peers should be subject wherever possible to ordinary criminal and civil laws. An example of where the balance may not be right is the law on bribery, where the extent to which it is possible to bring successful prosecutions of MPs remains in some doubt. More generally, there has long been a case for looking at whether legislation on privilege is necessary. More than a decade has now passed since the Joint Committee on Parliamentary Privilege recommended the introduction of a Privilege Bill. In the absence of such a Bill, the last Government proposed piecemeal changes to privilege in areas such as bribery and in the establishment of IPSA, which I mentioned at the Liaison Committee. In each case, it was subsequently determined that piecemeal reform was not the way to go, and that changes to privilege should be looked at in the round. That is what we are now starting to do. At this stage, I cannot tell you what will and will not be in the draft Bill. But it is no secret what types of questions we are thinking about, because they are questions considered by the Joint Committee. That includes whether the Houses and their Committees have the right powers to do their jobs, the extent to which statute law applies on the parliamentary estate, whether the law on media reporting of defamatory statements in Parliament needs to be reformed, and potentially much else besides. I know for example that your Committee has been exercised about the question of what constitutes a contempt of Parliament, and that is definitely something that should be considered in the light of a draft Privilege Bill. I can also reassure you that the Bill is not motivated by any intention to seek to curtail MPs’ or peers’ ability to speak freely in Parliament on the issues that they see as important. Whatever conclusions we reach, let me assure you in the strongest terms that the House should be absolutely sure that the Government is not going to put forward anything on parliamentary privilege without proper consultation and involvement from Parliament. That will necessarily include both the Standards and Privileges Committee and the Liaison Committee, both of which have clear interests in ensuring we get this right. cobber Pack: U PL: CWE1 [O] Processed: [17-10-2011 16:12] Job: 015233 Unit: PG02

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I am copying this to Sir Alan Beith. Rt Hon David Cameron MP Prime Minister

Letter from the Prime Minister to the Rt Hon Sir Alan Beith MP, dated 13 October 2011 During my appearance before the Liaison Committee on 6 September, I said that I would write to the Committee about your question on structural funds (question 243). England’s European Regional Development Fund allocation (around £2.8 Billion for 2011–13) is not affected by the closure of the RDAs. The European Regional Development Fund teams within the RDAs transferred to DCLG in July but remain based in their localities around England to ensure smooth continued delivery of these programmes. European Regional Development Fund programmes within England have continued to operate throughout the transition period. Overall the European Regional Development Fund programme remains on target and around £1.2 Billion of the 2007–13 European Regional Development Fund programme remains to be committed to projects in England. BIS and DCLG are working with local European Regional Development Fund teams to unlock more funding for local priorities. Rt Hon David Cameron MP Prime Minister

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