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Earl Russell: My Lords, does that story indicate that the noble Lord's response was not memorable?

Lord Tebbit: My Lords, I think probably it was not a memorable response; it was a commonplace response to explain that it is possible to criticise the European Community and its policies without being devoted to the idea that Britain should leave it. Indeed, many of us believe that if the policies are not changed, the Community itself will disintegrate and we shall all leave the Community. That is why some of us argue so strongly against the policies of the day.

I should like to say to my noble friend Lady Elles that she is wrong in ascribing some of the inevitable increases in the costs of the European Community to the need to help our friends in central Europe. The most effective way to help our friends in central Europe is not to tax ourselves, but to open our borders to trade. The most effective way in which we can do that is to open the borders of the European Community to trade in agricultural produce. And the most effective way in

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which we can do that will be to end the common agricultural policy. That would not cost us money; it would save us money. We could reduce taxation by so doing.

My noble friend is quite correct in what she said in regard to fraud. Fraud will occur wherever there is the opportunity—sad but true. The answer is to go even further down the road than my noble friend Lord Cockfield suggested; that is, to end the spending. If we did not have a common agricultural policy; if we did not have CAP spending, there could be no fraud. That is the way forward. We must reduce spending and thereby reduce fraud rather than increase spending in order to reduce fraud.

I want to end by raising a more general point. Those of us, particularly those who have served in the other place, are well acquainted with some of its traditions of Supply Days —Supply Days? Yes—and consolidated fund debates. They are based upon a simple proposition that supply should not be granted until grievance has been redressed. That is why the Opposition have the privilege of their Supply Days. That is why the consolidated fund debates go on in this archaic, strange and arcane way, through the late nights just before every Recess.

No doubt in recent days noble Lords have been as disturbed as I to see the scenes of violence at Shoreham, where protesters sought to stop the export of live animals to the continent. I fancy that all of us here—certainly the great mass—would like to see that trade ended. Given the chance to express their feelings the British people would say that that trade should be ended. There is deep puzzlement among the British people as to why the Government do nothing. We know why they do nothing. They do not have the power to act. This Government, this Parliament, cannot act to redress that grievance. For that grievance to be redressed requires the agreement of the Germans, the Italians, the Dutch, the Belgians and the Spanish. How therefore do we justify the theory that grievances must be redressed before supply is authorised?

During the passage of the Maastricht Bill I warned in general terms that if the British people found that when they used the democratic system of voting they were still unable to change the law to redress their grievances, there would be serious consequences. We saw one of those serious consequences at Shoreham last week.

6.25 p.m.

Lord Monson: My Lords, perhaps we may first consider a few more facts and figures. I think your Lordships will find them interesting and significant. Depending on which government department statistics one trusts most, the United Kingdom's net contribution to the EC budget is set to rise by either 54.8 per cent. or 59.6 per cent. between 1993-94 and 1995-96. Even on the more conservative estimate, that means a rise in our contributions of almost 55 per cent. in only two years. We are assured that the position will then stabilise at that higher level. But Treasury forecasts have been proved to be wildly optimistic all too often in the past. The financial effect of that 55 per cent. increase is equivalent to 1.9p on income tax; in other words, other

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things being equal it will necessitate a rise in the standard rate from 25 per cent. to 27 per cent., less a minuscule adjustment in allowances.

Of course we know that the Government will do everything in their power to avoid a rise in the politically sensitive standard rate. The British taxpayer will certainly be hit in consequence of those increased contributions; but he or she will be hit in a more subtle and oblique fashion than a simple rise in the standard rate.

Let us examine some further figures and in doing so enlarge upon the statistics given a little while ago by the noble Lord, Lord Stoddart of Swindon. In 1993 every man, woman and child in Spain received approximately £11 from the British taxpayer—up from £8.37 in 1992. But that is dwarfed by the largesse directed towards the southern Irish. In 1993 every man, woman and child in the Irish Republic received just over £92 from the British taxpayer (that excludes the German and other taxpayers)—up from just over £70 in 1992. We do not receive much gratitude for all this. Both countries concerned continue to make territorial claims upon the United Kingdom or United Kingdom dependencies—increasingly so in the case of Spain in the matter of Gibraltar. But at least it can be argued that both those countries are rather less well off than we are, albeit only slightly so as I hope to demonstrate.

What a contrast to Luxembourg. According to the Financial Times of 30th December Luxembourg is now the richest country not only in the Community but in the entire world, in terms of purchasing power parity. Its citizens are 66.25 per cent. better off than ourselves, yet every man, woman and child in Luxembourg received £67 from the British taxpayer in 1993—up from just over £48 the previous year. What a scandal! I do not begrudge the people of Luxembourg their good fortune. But I do not see, and I do not think the British people as a whole see, why our taxpayers should help to top up their fortune.

People talk glibly of the "poor countries of the Community". Yet none of them are poor in an absolute sense. All are in the top quartile of countries in the world ranged by GDP per capita. The Spanish are now as rich as we were in 1982; the Irish are as rich as we were in 1978. Were we suffering in 1978 or 1982? Surely not. It is true that both Portugal and Greece are in turn less well off than are Spain and the Republic of Ireland. But the Greeks are as rich as we were in 1960 and the Portuguese as rich as we were towards the end of 1967. I cannot remember the swinging sixties in Britain as being a time of misery or deprivation.

Moreover, to try to make these countries better off by means of subsidy—in other words, by transfers from so-called "rich" countries to so-called "poor" countries—rather than via the operation of the free market, or the single market as applies in this case, is diametrically opposite to this Government's professed economic policy. It flies in the face of economic common sense. It is also politically objectionable and politically dangerous, as the noble Lord, Lord Beloff, and the noble Lord, Lord Kingsland, towards the end of his quite excellent maiden speech, pointed out. So these

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increased transfer payments are justified neither on the ground of morality nor, ultimately, on the ground of expediency.

We are all aware, of course, of the real reason—the unadmitted reason. Some of the recipient countries threatened to block the accession of new countries to the Community unless their handouts were increased. Blackmail, to be frank. I gladly exempt from these strictures Portugal, which has behaved in a thoroughly civilised fashion throughout. No, if there is money to spare in this time of severe economic constraint, which is doubtful, both morality and expediency dictate that it should go instead to genuinely poor but right-minded countries in Eastern Europe. One thinks of Poland, Hungary and the Czech Republic—perhaps Slovenia and just possibly Slovakia—which are finding the abrupt transition from crazy and distorted communist economics to a market economy extremely difficult, with the result that their electorates are turning nostalgically back to communism, albeit with a so-called human face. This presents real dangers to us and means certain misery for them should they by some misfortune succumb to the temptation to re-elect the communists under another guise. Yet not only are these countries not getting any significant aid—perhaps it is right that they should not—but, as the noble Lord, Lord Tebbit, pointed out, their manufacturing and agricultural exports to Western Europe are being blocked, mainly by the chronically protectionist French and by the increasingly protectionist Germans.

Having said that, no one will oppose the Second Reading of the Bill tonight. But I hope that the Government will be able to indicate that they will look sympathetically at the amendments to be moved tomorrow which are meant to be constructive ones to provide safeguards and which are in no sense intended to be wrecking amendments.

6.33 p.m.

Lord Buxton of Alsa: My Lords, I shall be brief as so many points have been made in all the excellent contributions to the debate. What is obvious by any normal standards, and business practices in particular, is that this payment should never have been made without conditions. I believe that the Prime Minister should have endeavoured to persuade all the member states to apply conditions to the increase and to make it absolutely clear to Brussels that not a penny more would be available until it was apparent that those conditions were being met. If the Government had been the board of a group or some substantial conglomerate they would have refused to commit any further funds to what is manifestly a dreadful investment: the general squandering of shareholders' funds. Politics are, of course, different from business, but the financial consequences are the same. The European Commission should in fact be running a business, not playing politics. Investment judgment is paramount.

It would be unhelpful in this debate to cite too many examples but I shall briefly cite two with which I am familiar. One case is a small charity with which I was connected but which I subsequently left. The charity had no prospects whatever of becoming viable yet by the

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visit of its secretary to one individual in Brussels it obtained nearly half a million pounds. Three years later, that charity still has no prospects of being viable and the half a million pounds of Commission funds was therefore money down the drain.

At the top end of the scale, as we know, billions of pounds are being spent in Spain and Greece. Spain, I understand, exceeds in EC funding all the other members put together. One result will be to destroy the traditional and viable way of life in remote rural areas, a factor in Spain in particular, which could be her greatest asset for tourism in future years and for ever more. Wetlands are being drained, uplands are being irrigated, cork oak forests are being cleared, vast motorway networks are criss-crossing the country and the scale of pointless development perplexes even its own citizens. The rain in Spain no longer falls mainly on the plains. Community cash is splashing around to erode a brittle but viable human environment. The ironic thing is that our own Government have recently abandoned their motorway network programme in this country—some may be relieved about that—yet our money, and the Commission's money, is now to be used for exactly the same ill-conceived motorway schemes in Spain.

Again, our forces and defence have been cut so that we can pay this huge sum into the bottomless pit. If a Conservative Government claim that they can no longer afford to defend our national interest, how can they afford to give money away to the Commission for bad investments? There will be no return on any of that expenditure. It is simply an exercise in economic theory by bureaucrats, lacking experience or competence in business or in agriculture—the fanciful delusions of Delors and his officials that, by extracting funds from the north and splashing them about in the south, some sort of political benefits will emerge to the benefit of Europe as a whole. That is not business; that is politics.

Taxpayers' money was never supposed to be used for political bribery; and it all points to the inevitable outcome that the EC will in due course become unviable, that the squandering of funds on socialist theory instead of carefully calculated investment principles must in the end lead to insolvency. It is quite extraordinary that a Conservative government are forcing this through without conditions and careful warnings. Not only should the United Kingdom have attached stringent conditions to this payment, but it should surely have been paid in tranches over a period, each tranche being released only if we are satisfied, and the other member states are satisfied, that the conditions are improving.

Insolvency is certain to follow on all fronts in the EC in due course. One is reminded of the endless unviable and foolhardy investments in the past by the Highlands and Islands Development Corporation. Living partly up there in the past, I was very familiar with it. Most of those schemes have been forgotten today but the money was frequently and usually money down the drain. Now, ironically, the Highlands and Islands Development Corporation is being rescued by the EC and the whole process is starting over again. It is all a question of whether it is a good investment. Usually, especially by

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bureaucrats at a distance, it is a bad investment. But primarily I recall the famous ground-nuts scheme, which some older noble Lords will remember, which had all the ingredients of incompetence, inexperience, discredited theory and reckless lack of financial prudence. It is certainly relevant in the case of Spain and Greece. Leaders of all parties who press for accepting increased funding of the Brussels financial dictatorship should do some homework on the facts about the ground-nuts scheme. Interpolated on the scale of Brussels, it will make their blood run cold.

Because government, unlike the private sector, can simply write off blunders, huge losses and financial disasters, that does not mean that the nation's contributions have not been lost forever. That cannot continue indefinitely. I therefore ask my noble friend the Minister to give a clear reply to this question: What contingency plans do the Government have, or are they working on, for the day when the Commission becomes insolvent and the member states can no longer afford to contribute? If member states are no longer able to pay subscriptions, what happens then? That day will come.

The Government are keen on the application of market forces and good commercial practices. But market forces would have required that this time no further funding was acceptable. The impression is inescapable, I regret to say, that the pressure about this payment was due to fear of offending major European partners. This is naive and ridiculous. If members of a family or business partners are either incurable bullies, devious self-seekers or just plain crooks, you do not appease, grovel or prostrate yourself. That way you get kicked even harder—it compounds the situation, particularly when they have a grudge against you anyway, earned over the past few centuries.

I am not being tactless. I have great friends and some cousins in Europe including some Bismarcks in Germany. They do not take offence when I say to them that their government machines are by tradition arrogant bullies; devious and treacherous in another case or just crooked in another. Most of them tend to agree. Noble Lords should not forget that Spain sided with the Nazis in the war. It is Spain that is now being given our fisheries at the expense of the British fishing fleet. Incidentally, it was a former Prime Minister—always, I regret to say, petulant and grumpy on the screen—who signed away our fisheries without explanation to the British public on what was happening.

One of the most disgraceful and humiliating episodes this century was the departure from office of my late friend—and the friend of so many of your Lordships—Nick Ridley. Here was a fine patriot and a great citizen, resigning as a Secretary of State for saying out loud what the majority of the British people were thinking and are thinking more and more every day. That was a terrible blot on our parliamentary record and a disgraceful British episode.

Chancellor Kohl is a very good German. Every day he tends to remind me more and more of Bismarck, manipulating the power balance in Europe so that Germany dominates the field. The only real difference is that Bismarck had the Prussian army and Kohl has

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the Bank. Good luck to him, but do not let us fool ourselves and cringe in his presence. Ingratiating ourselves and subservience will get us nowhere at all.

I read yesterday the staggering statement that in a circular the Foreign Secretary had said or claimed that,

    "the European Union has brought the priceless gift of nearly 50 years of peace".

As one, like many of your Lordships, who lost the first seven years of my working life in the forces in Africa, Burma and elsewhere, I am still clear myself that 50 years of peace was attained because we decisively won the war and obliterated that generation of Nazis and Fascists, and because ever since then we have been protected by NATO. The European Union was the child of that victory. If the Secretary of State believes what he said—the most outrageous perversion of history I ever recall—he will believe anything. Further, I regret to say that it may be difficult to believe everything that the FCO comes up with in future.

I conclude by saying that there was in fact no obligation to pay the increase either legally or on a point of honour. That is an academic point which has been dealt with already, particularly by the noble Lord, Lord Bruce of Donington. For example, if one orders a car the contract may be legally binding. But if before delivery one finds that it does not work and that there is corruption in the production or price, one would certainly not be liable in court. The claim that we had to pay because of a commitment is not true. The Government are simply compounding the fraud and the fatal flaws in the system and encouraging financial dictatorship in Brussels. We should have imposed conditions and paid in tranches.

Forcing through this undeserved increase has made a deep and unnerving impression on the public. Ministers may wonder what has happened to the "feel-good factor". Evidently they do not understand that the economy is not the only thing that matters in life. There are a number of things that make up the round of national well-being, including patriotism, national pride, a comforting sense of confidence in national ideals and confidence in our leaders.

Without those fine elements which have always made Britain great and which make every other nation tick, low inflation or the economy by themselves will not make anybody feel good. As a result of our automatic acceptance of this payment a deep sense of uncertainty and insecurity is found among all people I see or talk to, whether in cities or in the country, on trains or wherever. A deep sense of uncertainty and insecurity now prevails which the economy and low inflation will not of themselves sort out. The mounting belief that we have been sold down the river, that we are being kept in the dark, that we have to pay taxes to foreign officials to waste, and that we cannot be trusted like everyone else to express ourselves in a referendum, have done away with the "feel-good factor". And now today, of course, we can no longer believe what we are told in the interpretation of history. That is Euro-fanaticism gone mad.

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Whenever I attend debates on Europe in your Lordships' House I always feel that I have gone through the looking glass and live in a different world. I shall try to explain what I mean by saying that had 10,000 of the British public listened to this debate the loudest acclaim, and probably deafening, would have been for the noble Lord, Lord Bruce. There is something peculiar about Parliament at the present time that if one dares to criticise anything connected with Europe one is called names and dubbed a Euro-sceptic or whatever. Following the noble Lord, Lord Tebbit, perhaps I may say that I am not in favour of coming out of the European Union. I am in favour of trying to get the British public behind it, but we shall not do that by prostrating ourselves and being nervous, twitchy and terrified of telling people what we think of them.

6.47 p.m.

Lord Morris: My Lords, one of the advantages in speaking at the stage of the debate we call "just before the gap" is that having listened with great care and enormous patience—but today with the need for very little patience because it has been so fascinating a debate—to what other people have said, I can shorten my remarks. Invariably one has heard points one intended to make oneself explained so much better by others.

I return to a point made by my noble friend Lord Beloff, and, although viewing it from a totally different perspective, to what was said by my noble friend Lord Tebbit. This debate illustrates the extraordinary truth about what we choose to call "Europe". The reality of Europe is that it is a perception within our own hearts and minds. The interesting and key factor as to how I perceive Europe is not a narrow jurisprudential point, but a fundamental point in our total outlook.

The basic presumption in the Roman law countries—all the other member states of Europe other than Sweden—is a presumption of authority; namely that government are pro bono publico. There must be an authority and it is for the good of the people. The fundamental presumption of the United Kingdom, being a common law country, is a presumption of freedom. In the good old days, we used to remove the heads of those in any Executive who forgot that fundamental point. Unfortunately, things are not as simple these days.

However, it is important to note that even the most cursory reading of history tells us over and over again that all governments, whatever their political colour, are, generally speaking, nothing other than very bad news indeed for those whom they purport to serve, even when they do so with the very best will in the world. When one understands that, one immediately understands a remarkably brilliant book written by the noble Lord, Lord Cockfield, on his years as a commissioner in Europe. I have read the book, admittedly very quickly. Running through its entirety is the fundamental presumption that what the noble Lord was doing was a good thing. With the greatest respect to the noble Lord whom I admire enormously—I have told him this to his face—I think that he is fundamentally wrong in that

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regard. I am delighted that the noble Lord has just entered the Chamber as I have been referring to his contribution.

My main reason for concern is what is happening in the world today. Since the 1920s, the number of political entities in the world has increased exponentially. There is no question but that what is happening in Europe is an attempt to unify the whole of Europe. It is bound to fail, not for ideological reasons, but for technological reasons. Technology and the way we live, work and learn are changing fundamentally. We are at the beginning of the greatest industrial revolution the world has ever known. I shall not, however, expand upon that. I return to my original point, made also by my noble friends Lord Tebbit and Lord Beloff. There is a fundamental difference of outlook between the United Kingdom and other countries in Europe in terms of the way in which we perceive the role of government. That is one of the great difficulties.

As to the Bill itself, my noble friend Lord Tebbit mentioned that no argument had been given as to why the additional expenditure was needed. The reason, as my noble friend Lady Chalker knows perfectly well, is that in this regard your Lordships' House does not matter a jot. My noble friend recognises that fact, as does my right honourable friend the Prime Minister. When the Bill was passed in another place, I well remember the Prime Minister saying on the radio, "Now that that is all over..." The Government ignore this place —and for good constitutional reasons. This is a money Bill and there is very little that we can do about it. That is why no arguments have been put. I suspect that my noble friend thought that no arguments had been put in another place either. I think that that is absolutely correct.

It is far too late now for me to go banging on about the matter. I should very much like to participate in tomorrow's Committee stage because I believe that there are some fundamental points to be made. I hope that the Government will listen with care to what is said.

6.53 p.m.

Lord Dahrendorf: My Lords, it is perhaps a slightly more doubtful privilege to be the first to speak after the gap, but it is a privilege to be able to say that we have listened to an important debate. This has been a timely debate in which a number of memorable contributions have been made, not least the outstanding maiden speech of the noble Lord, Lord Kingsland, to which I shall refer later.

I shall inevitably stray a little from the scope of the specific Bill under consideration because the debate so strayed—and rightly. Pace the noble Lord, Lord Beloff, and others, one of our functions is to probe the legitimacy of what is being decided by reflecting views and by influencing views as possibly only this House can.

What we have seen today is that Europe has become a divisive issue. Even this little Bill has become a divisive issue. It is divisive not only within the Conservative Party—it is not for me to comment on that; no doubt the Government will do so—but more importantly perhaps it is divisive within the country and

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the issue is divisive also in every other European country. That is a fact that needs to be underlined. It is not just in this country that people are beginning to wonder what the European Community is about.

This is a time when those of us who believe that the European Union is necessary are forced by the nature of the debate to reconsider some of the basics. The Second Reading of this money Bill is one such occasion. If I may say so, I speak as a sceptical European. I am, I believe—at any rate, in another incarnation I was—the only European Commissioner to give rise to a motion of censure in the European Parliament when I publicly criticised both the common agricultural policy and the Commission itself. That motion was withdrawn only because, as many of your Lordships will have learned, the Parliament can ratify or consider a motion of censure against the entire Commission but not against individual Commissioners, so individual Commissioners sometimes get away with murder—or perhaps I should say, with lesser crimes.

Returning to the issue before us and to the questions that were raised by the noble Lords, Lord Bruce of Donington, Lord Stoddart of Swindon, Lord Moran, and others, we must ask what is the benefit of the European Community which is used to justify the increase in expenditure. Those here and elsewhere in Europe who see the benefit would cite a number of things. At the risk of incurring the wrath of the noble Lord, Lord Buxton, one such benefit would undoubtedly be, to put it in slightly different terms from those used by the noble Lord, the reversal of more than two centuries of European fratricide or at least making a contribution towards a reversal of those unhappy centuries.

A more specific example would be the single market. Incidentally, that is a difficult concept because the single market is in some ways two things at the same time. It is a step in the direction of establishing free trade everywhere, but it is also, let us face it, the creation of a privileged space for many of those who operate within it. As the pressures of globalisation increase, it may well be that the privileged space aspect is used more extensively than that of worldwide free trade.

Europe is also an attempt to co-operate in other important areas. I use the word "co-operate" advisedly because I think that it is entirely right that the second and third pillars of Maastricht should be intergovernmental rather than based on binding supranational decisions.

Then there is the curious fact that, in a world which has become confusing, people everywhere appear to have a tendency—incidentally, it is one that deep down I regret —to hold on to those who live in the same region. I do not like a world of regional blocks; I should prefer one in which there are world-wide rules by which we operate. However, the regional blocks are increasing in reality and on another occasion it might be interesting to look at the institutional consequences of even the North Atlantic Free Trade Association. There are such consequences, in particular in the dispute settlement field.

Therefore, it is that kind of argument that one would present as one reached the key question of whether the European Union does what it promises. I readily admit

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that a sceptical European such as myself does not find it easy to face a large audience and explain in detail what it does. Far too often one must apologise for the European Union if one identifies with it. It is a plain fact that many of the policies and practices of the Community are contrary to or not entirely in keeping with the basic intentions of this great historical attempt to bring together countries which fought each other not so long ago.

The fraud debate, which ran through our discussions today, is a perfectly appropriate example of the reasons why one must often apologise for the Community. I have no justification to offer. On the contrary, I share the views expressed by many about the whole range of issues such as fraud, mismanagement and irregularities. I feel strongly that we must tackle them.

I was most taken by the notion of the noble Lord, Lord Kingsland, that the thing to do is to remove opportunities for fraud rather than merely concentrating on exposing and penalising incidents of fraud and other misdemeanours of the past. I was also taken by the more specific idea put forward by the noble Lord, Lord Cockfield, of how one can remove some of the opportunities for fraud. Of course, his idea involves a fundamental change in the common agricultural policy even if it might not involve any immediate savings in the European budget. However, I suspect that the line at which he chose to hint is about the only one which promises success in the negotiations of the European Community, in particular if one does not start with the proportion of 49/51 but with a smaller proportion that must be borne by national budgets against the Community budget. I should wish to think further about that important proposal.

Perhaps other points could be made about improving the ways of the Community, but at this stage I wish to point out that the noble Lords, Lord Kingsland and Lord Cockfield, rendered the House a great service by pointing out what the dimension of the problem is and what it is not. I believe that sometimes we get the European issue out of proportion. The noble Lord, Lord Kingsland, said that more than 40 per cent. of GNP enters in one way or another the public sphere in this country but only 1 per cent. goes to the European Community. In other words, the relationship—and I suggest that it is a relationship of importance in the political universe in which we live—remains one which is, rightly, extremely heavily balanced in favour of action at the level at which elected parliaments and even your Lordships' House have the possibility of controlling expenditure.

Equally, I believe—and given my previous history I can imagine what some of your Lordships will say—that some of your Lordships are getting the role of the Commission out of proportion. The noble Lord, Lord Cockfield, made some highly relevant points in that connection. The Council of Ministers takes all the crucial decisions. If there is a criticism that I would have of the practices of the European Community it would be that often the Council of Ministers does not meet as such but meets as a council of civil servants. It is a council of civil servants which reaches agreements which often

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Ministers do not have time to look at in sufficient detail in order to introduce the element of parliamentary control that so many of us wish to see. I do not defend the Commission's misdemeanours and misdeeds. I have previously attacked the Commission precisely for not having a basis of legitimacy and suggested that it should at least be elected by the European Parliament. However, in this connection that is neither here nor there.

Underlying our discussions today is our picture of Europe which we follow and which leads us to say either yes or no to this Bill. I see Europe not as a state. With respect to the noble Lord, Lord Beloff, I do not see the institutions of the European Community as state-like. A Parliament which cannot raise revenue, a Commission which can make proposals but cannot take decisions and which in some ways is a Secretariat General and in others has a quasi parliamentary function, and a Council of Ministers whose members are nationally responsible do not make a state and should not. I see the European Community as an attempt at working more closely together in areas of common interest; an attempt on the part of diverse states. It is true that they are diverse not only in their present interest but also in their legal and political culture and therefore in the ways in which they tackle subjects.

My hope is that as regards institutions the 1996 conference will, above all, strengthen the role of national parliaments in the process of European decision-making and will thereby make it quite clear what the Union is and what it is not. That would be compatible with many of the ideas expressed today. I entirely share the view of my noble friend Lord Thomson of Monifieth, that what we want is opting in and not opting out. We want opting in with a clear notion of where we want this strange creature to go without exaggerating its dangers or its hopes. Like the noble Lord, Lord Kingsland, I believe that on the expenditure side there is much to criticise but it is just about right. In that spirit, I do not find it difficult to accept this Bill.

7.9 p.m.

Lord Eatwell: My Lords, we have had a wide-ranging debate of considerable passion and detailed technical argument. There have been wide, indeed fundamental, political disagreements; one might say "political clashes". I refer to the debate that took place on the other side of the House. There have been robust contributions from this side, too.

I believe that an unfortunate aspect of the debate has been the unpleasant degree of xenophobia displayed by some speakers. We have been told that the British are honest and upright and that foreigners are devious, dishonest and blackmailers to boot. We were even told that we have a greater tradition of democracy than the other member states. I believe that such statements are false and misleading and that they are profoundly insulting both to democratic governments and to millions of fine people throughout our Continent.

The majority of the Conservative Members who have spoken in the debate have vigorously attacked the Government. We even had the Prime Minister compared

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with King John and we have also heard the suggestion of a call for the king's head. So if the debate has revealed anything, it has revealed once more the very deep divisions and confusions in the Conservative Party's approach—I refrain from calling it a policy because the Government's utterances really do not merit being called a policy—to the institutions of the European Union: the institutions which derive their financial powers from the Bill before your Lordships' House today.

This country's economic interests were, I believe, broadly well served by the budgetary agreement reached in Edinburgh, which the Bill will implement. The noble Lord, Lord Tebbit, asked for some examples. The noble Lord, Lord Dahrendorf, covered some of the political issues. Perhaps I may refer to the narrowly economic issues. For example, the increase in resources which will now flow towards the transport sector and in particular towards the construction of trans-European networks are of enormous economic benefit to a country such as ours located on the western periphery of its most important market. Let us hope that the European transport policy will remedy the damage that has been done to our economy by this Government's ineptitude in relation to transport policy.

Our economic interests are served also by the expansion of the cohesion funds, boosting, as they do, the economic performance of important markets for British goods. For example, British industry has done very well indeed out of the growth of the Irish market in the past decade, a point which some noble Lords seem to miss.

On the issue of cohesion funds, the Government display their now traditional confusion. On the one hand, the Chancellor of the Exchequer seems to regard cohesion funds as a cost, as a bribe to persuade Spain, Greece and Portugal to—as he put it—"accept what we wanted". On the other hand the Chancellor declares himself eager to incorporate the eastern European economies into the European Union—a measure which will lead to a bigger increase in the cohesion funds than any seen up to now.

Our narrower economic interests are served by the change in the method of calculating our contribution to the European budget which is contained in the Bill. The shift towards greater reliance on GNP in calculating contributions is bound to benefit Britain since this country is now, thanks to the Government's economic policies, ranked 11th in GNP per head in a European Union of 15 members. Only Greece, Spain, Portugal and Ireland, as the noble Baroness, Lady Elles, pointed out have a lower GNP per head.

For all those reasons, even on narrow economic grounds, we can welcome the Edinburgh agreement and, indeed, welcome the Bill.

However, the entire issue of Britain's contribution to the European Union has been confused by the Treasury's now traditional bungling, in this case in respect to the size of Britain's contribution this year. Everyone knows that the annual contributions fluctuate considerably, primarily due to the timing of CAP payments, as the Minister pointed out. But how can the country have any confidence in a Chancellor of the

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Exchequer who admits that he "cannot remember" when he discovered that our contribution was to be £700 million more than expected?

Moreover, the Treasury has proved incapable of explaining why that £700 million increase has occurred. The noble Baroness suggested that that might be due to the timing of payments. She was wrong and the Treasury has already said that she was wrong because careful analysis shows that it is not a question of timing. Analysis revealed that the £700 million increase is primarily caused by an increase in our average annual contribution of about half a billion pounds a year, which will go on year after year. Why is that? If he answers no other question this evening, the noble Lord, Lord Henley, must answer that question. Why has the contribution increased?

Three themes have emerged in your Lordships' considerations of this Bill. First, there have been numerous references to the serious problem of fraudulent use of Community funds. Secondly, there has been an entirely appropriate debate over the broad uses to which funds are put, particularly with respect to expenditure on the common agricultural policy. Thirdly, there have been those who have argued against the whole principle of supporting a European budget at all.

The issue of fraud played an important part in the arguments of the noble Baroness, Lady Chalker, and the noble Lords, Lord Cockfield, Lord Moran and Lord Shaw of Northstead. Much of the discussion has focused on the recent report by the Court of Auditors, and upon the excellent report by the Select Committee of your Lordships' House. The level of fraud identified by the Court of Auditors is clearly totally unacceptable.

We have a right to expect that the British Government will take the lead in fighting fraudulent and financial mismanagement, and indeed there are many fine words spoken on that by everyone from the Prime Minister up. But do their actions match the words?

My noble friend Lord Richard pointed out that the Government have failed to utilise available European Union funds to fight fraud. Over the three years 1991-93 we have rejected £3.5 million that was on offer for that purpose. In those circumstances, how can we take seriously, their protestations of fraud fighting? Will the Minister tell the House why the Government did not ask for some of our own money back to fight fraud? Presumably the UK Government allocated resources to fighting fraud in 1991, the year in which we did not take up a penny of what was offered by the European Union. If so, who paid for those resources? It was the British taxpayer, who has had to pay twice over: once to the European Union, with money that we should have got back, and once to the Government for the resources that were actually used to fight fraud.

The noble Lord, Lord Henley, has denounced the very idea of using more resources for the fight against fraud as "socialism", something which, for reasons I cannot fathom, he appears to be against. I agree that socialists are committed to fighting the misuse of people's resources, even if the Government are not. That is why we argue that the Government should use the resources available to them to fight fraud. That is why we are persistently puzzled as to why, when they acknowledge

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that the responsibility for fighting fraud lies with the member states, they refuse to increase their own fraud fighting activities and they reject the proposal of your Lordships' Select Committee for an expert task force to tackle fraud.

The Government's casual attitude to the prevention of fraud —and let us remember that the third highest number of agricultural fraud cases occur in Britain—is simply a general reflection of their seemingly casual attitude towards monitoring and scrutiny of European Union affairs.

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