14 March 2008
Transcript of the press conference the Prime Minister gave at the end of the EU Council meeting in Brussels.
Read the transcript
Prime Minister:
Thank you very much for joining us.
The European Council has met at a time of turbulence and uncertainty in the financial markets. There has been a deteriorating global economic outlook following the slowdown of activity in the United States, higher oil and commodity prices, and of course ongoing financial turbulence. It is all the more essential therefore that we press ahead with an agenda that is founded on stability and economic reform. So today the European Council agreed in our discussion on the economy, and in the communiqué which is now being issued, to identify action to remove the supply limitations that have contributed to the recent increases in oil, in commodity and in food prices, to enhance transparency for investors particularly in exposure to off balance sheet liabilities, to strengthen risk management in the financial sector, to strengthen international co-operation on financial crisis, to conduct a major review of progress on these issues by the end of April and we will also take forward these proposals at the next meeting of the European Council. We will continue to deepen and widen the internal market in pursuing our agenda of economic reform, and at all times we will maintain economic stability.
We discussed and approved recommendations about sovereign wealth funds. We support and welcome investment by sovereign wealth funds in our economy and in other economies and we welcome the Commission’s communication which sets out, in our view, the right approach. We should welcome investment from sovereign wealth funds in Europe. The key is of course that they operate in a transparent and open manner and that they demonstrate that they are commercial in their operations. Sovereign wealth funds have a constructive role to play in supporting financial markets at this difficult time. I have already made clear to the Chinese Government that we would welcome the first overseas office of the Chinese Sovereign Wealth Fund to be in London.
So, in all areas of this period of uncertainty and turbulence we will steer a course of stability through difficult times and I believe that because of the long-term decisions we in the British economy have taken we are well prepared and well placed to deal with the difficulties.
David Miliband and I were also part of the debate about climate change where David has played a leading role. The Commission has shown strong leadership also under President Barrosso. It is essential that we achieve our ambition of a global and comprehensive, post 2012, agreement on climate change. We also discussed the security implications of climate change and energy and we need to develop a better understanding of the implications of climate change for European foreign and security interests. The Council agreed with the United Kingdom that an effective European Union emissions trading scheme is the key to providing the right incentives to drive reductions in carbon in the most cost effective manner. We agreed there should be a central cap on emissions and a clear, long-term trajectory for reducing carbon. We called for a mechanism to ensure delivery of carbon storage and demonstration plants, and we also agreed that the Commission, in bringing forward its legislative proposals on VAT rates, due in the Summer of 2008, and working with member states should examine areas where economic instruments, including VAT rates, can have a role to play to increase the use of energy-efficient goods and energy-saving materials. I believe that that will start a debate in many member states about how, whether it be household goods, light bulbs for example, fridges, washing machines or whether it be in insulation materials there is a means by which we can incentivise consumer behaviour towards buying energy-efficient and environmentally friendly goods and services.
These are the main challenges that we addressed at the European Council in the last two days. I believe that we have made progress on the environment, we have got agreement on what we must do on the economy. I am particularly grateful to the European Council today for agreeing our proposals to have a review of the VAT rates. David and I will be very happy to answer any questions.
Question:
As you know, Prime Minister, you have to get the agreement of all the countries if you are going to lower the VAT rates. Was there any sign of that sort of support?
Prime Minister:
I think people have been persuaded by the argument that we should look at this very carefully. After all we set a number of regulations and standards to improve environmental sustainability. After all, also, different countries have got different tax rates to deal with issues relating to the environment. VAT is a uniquely European tax. Europe has now got an energy policy to cut carbon emissions. If whether it be fridges or household goods generally or whether it be the insulation materials that will make for more energy-efficient homes we can cut the rates of VAT, then I believe that would be a good thing for Europe. So the debate has started. We have got this review happening. I believe that is very substantial progress in only two days and over the next few months I think other countries will join the debate that France and Britain has already started in the last day.
Question:
There seems to be some controversy back in Britain about David Cameron’s decision to let ITN cameras into his family home, watch his kids have breakfast. I guess the accusation being he is using his children as political props. I wonder if you think that was appropriate behaviour by a politician and whether in the future you might do the same?
Prime Minister:
I am not going to get into what other people have done. I have made my views very clear in the past about how I will do things and I have been very grateful to the press for their co-operation in that.
Question:
Prime Minister, while you have been here there have been several developments in Parliament about MP’s expenses, the publication of the so-called "John Lewis List" and also the decision that MPs’ expenses over the past three years will be published following a freedom of information request. Do you welcome that and do you think now there is a need for a rebalancing between what MPs are paid as salary and what they claim or can claim as expenses?
Prime Minister:
Well I have called for far greater transparency in the way these things operate. I wrote to the Speaker over the last few weeks and asked him to conduct a very intensive review into what should be done. I don’t know about particular lists that have been issued today but what I would say is this, that the more open, the more transparent, the more we can provide the information to the public about how public money is spent, the better it is for all of us and I welcome all efforts to increase transparency in these areas.
Question:
Prime Minister it is usual for retiring Commissioners to be offered a seat in the House of Lords. Given what you said about Peter Mandelson yesterday, do you intend to offer him a seat in the House of Lords?
Prime Minister:
Well these are decisions for other days.
Question:
You referred to the European Commission statement on sovereign wealth funds. Are you happy with the final language in the Council conclusions? I think that earlier on, in one of the drafts, there was a reference to the possible use of legislation or EU instruments in this field. Is that something you are satisfied with?
Prime Minister:
Well, this is a voluntary code of conduct that sovereign wealth funds right across the world should be prepared to sign up to. It calls for greater transparency and openness in the way that funds operate, it calls on them to operate according to commercial principles. It is exactly the way that funds should operate if they are to be invited in and welcomed in all the countries that can benefit from their investment and I don’t think you will see any backing down in the Council conclusions. What people want is a voluntary code of conduct to work, all the sovereign wealth funds to sign up to it, there are now indications that they will do so. Look, we are in a period of global financial turbulence. This is probably one of the most uncertain periods for the financial communities over the last few years. There has of course been deteriorating information coming out from America in the last few weeks. We welcome the fact that investors are prepared to invest both in Britain and in the international economy. We should encourage that but of course it should be on commercial principles and it should be open and I think that is what you will find that the Council conclusions are saying.
Question:
Prime Minister, we haven’t seen the final language yet, but could you give us your views on whether you are satisfied with the final language on the problem of carbon leakage and energy intensive industries in Europe and what should happen and how quickly?
Prime Minister:
There is an issue about energy-intensive industries and there are naturally fears about what could happen to them in competition with other countries, but I think you will find when you see the communiqué that we hold firm, to first of all to the targets that we have set, secondly to the principle that Europe will take a lead in this matter, and thirdly that we will make a major contribution to making the Copenhagen negotiations a great success in the future. Europe has been the world leader, not in setting just targets on carbon reduction, but in promoting renewables and encouraging the changes in personal behaviour and company behaviour that are necessary to do this. And I think you will find that the communiqué reaffirms our intention to continue to lead, while recognising of course that there are issues that every year we have got to deal with. You will also find that on carbon capture and storage we are determined to move ahead on that, and as you know Britain wants to host one of the first carbon capture and storage plants and we hope that the Commission will come forward with incentives that will make it easier for countries who want to make this breakthrough in energy to happen.
Foreign Secretary:
Well, the communiqué also makes a point, at Gordon’s behest, that the best answer to the problem of "carbon leakage" is a global climate change deal in which all countries participate and I think that is a very important thing to keep in mind at this stage because the importance of the EU’s commitments last year were not just about what the EU was going to do inside the EU’s borders, it was also the lead it gave to the international negotiations and I think you have seen in the way that countries like China and Brazil participated in the Bali discussions last December in a different way than they had in previous years, that European Union leadership is stimulating a greater international drive towards the global agreement that is so important and I think that is an important part of the statement too.
Question:
Macedonia is faced with the possibility of not getting the invitation not only because of the … but also because of the government crisis. Is Albania going to be affected by this situation … and are you going to support an invitation for Albania?
Foreign Secretary:
I can deal with this by repeating two points that we made at the NATO meeting last week. First of all that there are clear technical criteria and it is important that those are applied in an independent and open way. Secondly, in respect of the main issue, we think it is important that both sides engage in the dialogue not least under the auspices of the Nimitz proposals in a serious and engaged way.
Question:
You have repeatedly stressed your concerns about the state of the global financial markets and there has been fresh turbulence this morning. How confident are you that the impact on the UK economy won’t be worse than predicted just days ago in the Budget?
Prime Minister:
There is no doubt that the situation in America has deteriorated in recent weeks, and there is no doubt also that the mood in Europe is never to be complacent but always to be vigilant about what is happening. I believe that because of the long-term decisions that we have taken, including the decisions taken by Alistair Darling in his Budget this week, that we are better placed to deal with turbulent events that are happening around the world, and my promise is that in everything that we do we will continue to steer a course of stability for the future. The decisions that we made at the European Council today reinforce what I think is a central lesson that people have learned from the last few months and that is that there has got to be transparency in the way that financial institutions operate particularly when they have previously had off balance sheet activities and where they are now writing off considerable assets. There has got to be transparency also in the way credit rating agencies operate, so that there is no conflict of interest. And I believe that the proposals that have come from the European Council today will make for greater stability in what is an unstable and uncertain set of times, but where we are determined by being vigilant to ensure that stability in our economy is being maintained.
Question:
(party political content)
Prime Minister:
I am looking for British policies that deal with British problems and of course you can learn from what is happening in other countries but I am looking at how we can improve the standards of living and the quality of life of British families. That is why in the Budget we raised Child Benefit, that is why there was a particular extra allowance for this year to deal with rising utility bills for all pensioner households in this country including an extra £100 for pensioner households over 80, and that is why the whole theme of the Budget was to help hard-working families in difficult times. We will continue to maintain the stability that gives us low inflation and low interest rates and therefore the chance for people to have rising employment in our economy.
Question:
Your comments, if you would Prime Minister, on the reports coming out of Tibet of riots in Lhasa.
Prime Minister:
Well we are very concerned about what is happening in Tibet. We have asked for more information about what is going on and we will keep this matter under review.
Foreign Secretary:
It is obviously right that the events reported, and the pictures that are emerging are of obvious concern. I think all European countries will be seeking clarification about what is actually happening on the ground. I think there are probably two important messages to go out. One is the need for restraint on all sides, but secondly that substantive dialogue is the only way forward. We obviously see that there are real strains there but they need to be addressed in a way that balances restraint and dialogue.
Question:
Prime Minister, do you agree on carbon leakage with the argument that unless there are guarantees for European heavy industry agreed quickly then they will potentially lose investment because of fears that there won’t be a global agreement?
Prime Minister:
Well obviously we have got to take seriously concerns that are expressed by industries within the European Union and the energy-intensive industries are obviously raising issues that have got to be dealt with, but I don’t think that we should allow things to stand in the way of getting the best possible international agreement that can cover the range of issues that we are debating at the moment and really the discussion at the Council today is to make sure that we can keep to our post-Kyoto ambitions, make sure that Europe continues to lead the way with the rest of the world and make sure also, as I have said earlier, that the Copenhagen Agreement can actually bind in all the other countries of the world. So I think you will find that every leader who was at the meeting today is determined that Europe continues to lead the way in seeking an agreement, and that that agreement should cover the major issues that we are concerned about.
Foreign Secretary:
Under the existing European Emissions Trading Scheme which covers about half of all European emissions, there is already scope for nation states in organising the ETS within their own countries to ensure that they recognise the different strains and stresses in different parts of the economy. But it is also important to say that the cap itself, and the declining trajectory of the cap that has been agreed is a driver of technological innovation, and in the end Europe’s economy is going to prosper on the back of technological innovation more than anything else.
Question:
On the Mediterranean Union what do you think is the value added of this new organisation and would Britain get to chair some of its meetings since part of its territory is in the Mediterranean?
Prime Minister:
The Mediterranean Union is a good idea because it takes forward the Barcelona Agreements and the Barcelona Process so it is moving to a higher level something that is already happening. It is also true to say that there are funds for investment that should increase the contact and communication and the trade between the different parts of the Mediterranean, and that is one of the purposes of intensifying this dialogue and I know that the French Presidency has proposals to have a meeting very soon that can move this forward. So we are wholly in support of it, we want obviously to be part of it, it includes all 27 members of the European Union, and you are right we have an interest in making it work.
Question:
Prime Minister, I wonder if you can confirm some reports today that Britain has confirmed that it will take the third tranche of Euro-fighter jets?
Prime Minister:
I don’t think I should confirm that until there is a formal announcement to that made.
Question:
[inaudible]
Prime Minister:
Well volatility in currency rates is something that obviously worries people and it is right that that is reflected in the communiqué that is going to be issued in a few minutes. As for the positive and direct changes that can be brought about, look, the issue now is, Europe has a common position, we want to see more transparency in the reporting and disclosure by the big financial institutions, indeed all financial institutions, that avoids the problem that we have had which is off balance sheet activities that have not been recorded. We want credit rating agencies, which at the moment seem to operate with potential conflicts of interest, to show that they are acting in a way that makes sure that everything is done in the most open and transparent way. And when write-offs are taking place, which is what is happening at the moment on a very large scale, we want that process to be independently validated in a way that people have more confidence and the greatest confidence, if you like, that everything is being done to make sure that stability in the economy can be enhanced. And these are the measures that the European Union are now proposing to the rest of the world. There will be a discussion in the G8 about these very things. I believe the rest of the world is either adopting these proposals or is ready to adopt similar proposals for transparency. So this is not an academic exercise. These are changes that can be brought about very quickly. There is a huge amount of support in the financial community for doing so, and the very instance we have given today of sovereign wealth funds shows that progress is being made by setting up a code of conduct, open and transparent reporting, commercial operations being required so that the voluntary code of conduct can work, and that is just another way that the international community is responding. I repeat, we have been in a deteriorating financial situation, we have a great deal of uncertainty and turbulence in the financial world, the important thing for us is that we steer that course of stability through what are hard and difficult times, and I believe that the decisions that we have taken including in the Budget make us better prepared to make sure that Britain can come through these difficult times.
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