Graham's blog entry 20 March 2008

Published on Thu 20th Mar 2008

This week the European Parliament is in recess. Next week, when most MEPs' children enjoy school holidays, we will be back at work. Wonderful planning!

The House of Lords has just published an excellent report entitled "The Treaty of Lisbon: an impact assessment" (HL paper 62-I). It comes in two thick volumes, the second being a collation of the evidence their Lordships took, but this should not put you off. Volume One is the clearest explanation I have seen, written in layman's terms of what the new Treaty would mean for the UK. As Gilbert and Sullivan observed, they may do nothing in particular but they do it VERY well! The report can be found online at http://tinyurl.com/22ny7c.

Allow me to mention just two matters this week. First, a victory for MEPs in scrutiny of the EU's spending. Second, reactions to my 'defence of global capitalism' in last week's newsletter.

MEPs on the EP's budgetary control committee, led by my excellent Dutch Liberal colleague Jan Mulder, scored an important victory this week with the Commission announcing, in a letter to leading members of the Committee, that it would agree to almost all their demands. They had threatened to suspend discharge of last year's accounts, again criticised by the EU auditors, unless the Commission took the action which Commissioners have long promised but which officials have hitherto frustrated. Suspension of discharge would have created a crisis just when the Commission President seeks nomination for a second term in office.

So the Commission will take legal action against Germany and Austria if they fail to file annual summaries showing how EU funds spent in their countries have been audited. Solicitors letters have already been sent to eight member states. The Commission will also provide to Parliament an assessment of the quality of these documents by member state and by policy area and will ensure that any undue payments are recovered. They have put in place a policy of suspending payments where weaknesses in financial control are detected (and have already applied it to some EU spending in Bulgaria). Finally, more information will be provided about how EU development funds are used, particularly where these are channelled through organisations such as the World Bank or the UN as part of wider, global efforts (e.g. In Iraq). What makes me proudest about all this is that Liberal Democrat priorities in Parliament have been recognised by the Commissioner in charge, anti-fraud Commissioner Siim Kallas, who is also a Liberal Democrat. He has done more to help the auditors sign off the EU's accounts in future than all his predecessors combined.

A number of readers reacted unfavourably to my exhortation last week to Lib Dems to be more bullish in our defence of global capitalism. I think the problem is that the term 'capitalism' has become infected with so many negative connotations. I am not naïve about the world we inhabit: its power structures overfeed the rich, deprive the poor (sometimes fatally) and damage the planet (perhaps irreparably). But I am ever more convinced that the market economy and the power of trade are the main tools we have to expand human happiness and to undermine oppressive governments. Of course there is a necessary role for government to intervene where markets fail or where market operators abuse their power; and we sorely need an effective way of permitting society to police this at global level. But whereas in 1990 only 20% of the world's people lived in economically open societies, today it is nine out of every ten. This is the most important change we need to understand to see what is happening. It has drawn developing countries into the global economy to the point where they now account for a third of world trade and are experiencing economic growth and poverty reduction on a scale never previously observed. Of course this exacerbates some social and many environmental challenges: it creates new risks, since integrated financial markets amplify volatility caused by bad lending practices. Where there are winners, there are also losers, as in the Victorian age of the UK's economic development: so in a global economy we need a new global social contract. But we must free our minds from the social democratic and social liberal shibboleths of the 1970s and 1980s and re-visit Adam Smith and John Stuart Mill to recognise the benefits of what is happening. And we must promote Europe's values across the world more actively to reconcile the competing demands of fairness and flexibility in what we once called 'the common good'.