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Lord McIntosh of Haringey: My Lords, I know that this is a timed debate, but has the noble Lord never had to obtain a visa to go to Australia?

Lord Beloff: My Lords, I have not been to Australia since visas were brought in there, but it does not alter my case. I believe that there should be no visas either way within the Commonwealth.

There are many such instances which explain why there is a universal complaint—I know that the Labour Party is riding high at the moment, but even members of that party have complained—that the younger generation do not regard party politics as an interesting way of spending their time. The youngsters prefer single issue causes, whether it be animals, women or other issues. The reason is that political parties exist in order to man (or woman) our Parliament. If Parliament becomes a second-rate assembly merely registering what is done elsewhere, why should people take party politics seriously?

All noble Lords are agreed that we live in extremely difficult times. We have world challenges to face which are greater than those within the European Community. But if we are to face them, it is essential that we do not build up legends about ourselves or Europe. The noble Lord, Lord Hooson, said, on the basis of a conversation with a German informant a quarter of a century ago, that the common agricultural policy saved France and Italy from going communist. France and Italy were saved from going communist by the infusion of American financial aid long before the common agricultural policy was even dreamt of. In so far as it is desirable always to cushion the movement of people away from the land and into the cities—which is a world problem—that can be achieved, as it was in this country before we entered the Community, by the country's own financial compensatory mechanisms. The noble Lord, Lord Hooson, says that the common agricultural policy helps to put money—and I have seen them on the ground—in the pockets of part-time Bavarian farmers or the barons of the wheatlands of northern France. To put that against the absolute necessity of giving some feeling of confidence in Europe to our neighbours to the east seems to me one example —and I could give many

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others if this were not a timed debate—of where we are mythologising the Community. It is not the Community which has brought about peace in Western Europe. Peace in Western Europe came as a result of the experiences of war. That could have been done without M. Delors, without the European Court and without the Commission. It would have happened anyhow. The United States and Canada do not go to war or threaten to do so. They have no common political institutions. Let us look at things as they are and cease to build up myths about them.

7.6 p.m.

Baroness Rawlings: My Lords, your Lordships have so far had a comprehensive debate today with diverse contributions from several experts and a most moving speech from the right reverend Prelate the Bishop of Sheffield. It is a great honour to follow the noble Lord, Lord Beloff, who is always most entertaining and I should like to add my thanks to the noble Lord, Lord Jenkins of Hillhead, for initiating the debate.

The lack of serious debate before the previous Inter-Governmental Conference in Maastricht resulted in a great many misunderstandings and problems. I hope that this will not be the case with the 1996 Inter-Governmental Conference. We should not lose sight of the significance of the IGC and therefore not get sidetracked into other areas that are not and will not be on the agenda such as, in particular, economic and monetary union, as the noble Viscount, Lord Waverley, rightly said.

I wish to touch on just a few points without delving into too much detail. My aim today is simply to emphasise three areas which I hope will be seriously addressed in the months to come. I shall not venture into the sea of acronyms, of QMV, CFSP and WEU. These issues will all be discussed in great detail with our European Union partners, but this is neither the place nor the time for me to go into them.

The Inter-Governmental Conference will rightly consider the defence and security pillar of the treaty. The Cold War may be over. Nevertheless, we still live in a very fragile world. We cannot overlook the fact that Russia is still heavily armed and not perhaps the most stable of nations as it slowly moves from a command economy to the free market. The United States is ambivalent towards European defence. For several years now senators like Sam Nunn have lobbied for burden sharing. As we are aware, it is for Europe to take on more defence responsibilities herself. This pillar will be of paramount importance to preserve peace. We have now had 50 years of peace in western Europe, a longer period of peace than at any time in the past 120 years. Furthermore, the justice and home affairs pillar offers possibilities which will be developed and will be discussed at the Inter-Governmental Conference.

I shall just mention one of the worst scourges in today's world: drug abuse, responsible for so much crime in our society. This is a growing cancer which has always existed but never on such a horrific scale. It is a problem which, I am sure all noble Lords will agree, is impossible to solve in Britain alone. It can only be done

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in co-operation with other nations, working closely together. I urge the Minister, the noble Baroness, Lady Chalker, to keep this in mind. It is one of our greatest evils today.

In this connection I should like to raise a few fundamental questions with your Lordships. Where should the balance of power lie? Is the balance of power between governments and the European Union institutions satisfactory? Is the balance of power between governments and national parliaments satisfactory? I am certain though that closer co-operation between national parliaments and the European Parliament is essential. But how should it be structured?

As the discussion develops, it is vital that this time the general public should be accurately informed so that everybody can understand what is at stake. I have full confidence that our Government are putting together a robust set of practical proposals, in particular in these areas, and that they will play a positive role in the Inter-Governmental Conference. These proposals will be thoroughly thought through, the paramount concern being how to make the European Union function better, to the benefit of its citizens.

Let us not forget that Britain was the driving force behind the enlargement of the European Union to the east. With the fall of the Berlin Wall, the political agenda of Europe changed. Even though it will take time for the countries of central and eastern Europe to comply with the European Union's requirements, ultimately membership is their aim, and also ours.

The first step has been taken by members of these countries by means of the Europe agreements. For enlargement to succeed it will be necessary for the European Union itself to adapt its policies and institutions to accommodate the new members. That has been the case in the past. These changes will have to be carried through, and any arrangements decided in the Inter-Governmental Conference will have to work for a European Union of possibly more than 20 members.

Perhaps we should not lose sight of the original aims of the Community of peace and prosperity for all its citizens. Let us hope that these noble aims will be bolstered by the outcome of the 1996 Inter-Governmental Conference.

7.12 p.m.

Lord Desai: My Lords, there is a basic misunderstanding of the nature of the European Community. It is, of course, a customs union, a free trade area in one sense. It started as a customs union. It also started from the Coal and Steel Community, which is a dirigiste organisation. These two axes jointly constitute the basis of the European Union. Many people like one but not the other. For a long time the Labour Party did not like the customs union free trade aspect of the market, and M. Jacques Delors sold us the dirigiste angle, saying, "Come with us and we will give you good social and labour conditions".

The problem is that those two aspects come in a package. On the mainland of Europe, as the noble Lord, Lord Elis-Thomas, called it, there is no problem about

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this. But in Britain we have a problem, in that we like either one or the other. That will remain a problem. What it points to is a kind of dirigiste logic that was accepted—and not just in Europe. In the post-war period, that sort of logic was accepted here as well. It no longer is. People want much more democratic control over bureaucratic decisions. Therefore the democratic deficit in the European Community has to be addressed. First, as my noble friend Lord Bruce of Donington said, the European Commission has to be made properly subservient to the elected members, and be seen to be so. And secondly, as the noble Lord, Lord Ezra, said, a second (if I may use the word) federal chamber has to be added, where national parliaments are represented on a permanent basis, so that they know what the European Union is up to.

I believe that we are also all agreed that the common agricultural policy has to be reformed. If it is not reformed, the logic of expansion will become so expensive that it will not be possible let other countries into Europe. Even if the Community were not expanding eastwards, the common agricultural policy is an affront, not only to common sense but to good economic theory, and therefore it should go.

In the few minutes that I have, I want to concentrate on the question of monetary union and a single currency. I agree with the remarks of the noble Lord, Lord Roll. It is a mistake to think that convergence should come first and a single currency later. I have always held that this will be an extremely costly cart-and-horse idea.

Let me give an example. Within the UK there is a single currency, but there is no convergence. That is why we have inequalities in regional unemployment. If convergence did exist, the unemployment statistics would be uniform across the country. Most national economies have a single currency but they do not have convergence. We tackle the problem by other policies, such as regional policies. Therefore it must not be thought that convergence is required before a single currency is established. Indeed, a single currency may hasten convergence.

What will, however, happen, is that, because of the way in which conditions for convergence have been laid down, many countries will undergo an especially deflationary experience in order to get convergence. When convergence comes about and we have a single currency, a second dose of adjustment will have to be made as a result of the single currency. Therefore, the deflationary logic of a single currency will stay.

A single currency has the advantage that expansionary policy could be pursued. But that requires not just a single currency but a powerful single fiscal authority. Whether it follows logically or not, I do not care. But if you want to pursue Euro-Keynesian policies, you require a European-level state authority which can pursue Euro-Keynesian policies. Such policies do not come from scattered states which have sovereignty. I always thought, therefore, that the single currency experience was delayed far too long. I would have preferred a single currency now, and convergence later. I have said this before—but that is surely pure madness and we will not pursue it any further.

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Many noble Lords, and others outside this House, have tried to argue that there is something called real convergence that we ought to worry about, not just nominal convergence, and that we ought perhaps to wait until our productivity and unemployment are in line and all sorts of other indicators are in line. That is Utopia. As I said, there is no national economy which satisfies those conditions, and no European economy ever will.

However, it is possible to say that the nominal conditions that have been laid down are not appropriate. They do not make much economic sense. They are easier to check for. It is easier to satisfy yourself that the deficit is less than 3 per cent., that the debt/GDP ratio is whatever it is, or that the exchange rate has stayed in a certain band. But all these are nominal magnitudes which do not have any economic logic to them.

Let us take, for example, the deficit. We ought to have a clear interpretation that a deficit is a deficit only on revenue account and not on capital account in the budget. That has to be perfectly satisfied. It has to be said that this deficit should be over the cycle. These matters should be properly defined, perhaps at the IGC. Secondly, looking at the debt/GDP ratio, the debt should be net; it should be only that debt which has been incurred for revenue purposes and not for capital purposes. If there are assets to be offset against the debt, those assets should be netted out, and the debt/GDP ratio should be calculated net of the assets that a national economy possesses. Thirdly, in referring to exchange rate conversions, we ought to worry about real exchange rates and not nominal exchange rates. As it is, we have realised that nominal exchange rates can move in and out of the stable band before you know it. It is very easy to destabilise. I predict that if we said that we would have a single monetary authority on 1st January 1999, starting on 15th December 1998 the markets would go haywire and all conditions would be violated. That is exactly what will happen.

I think therefore that we ought to concentrate on real exchange rate movements. We should ask ourselves whether or not the real exchange rates of countries are reasonable. If real exchange rates are not in line, it is no use having nominal exchange rates in line, because they do not have much influence on the real economy. They only influence the speculators who are moving their money around.

If those three things are added, as it were as addenda or notes to the Maastricht Treaty—not as revisions of the treaty but interpretations of the treaty—then I believe that we can talk much more seriously about whether or not there is convergence. What has already happened, as some noble Lords have pointed out, is that the Netherlands, Germany, perhaps Belgium and Austria (certainly the Netherlands and Austria) are already in a de facto single currency regime. There is no doubt about that. Austria has been shadowing the deutschmark for many years, as has the Netherlands. Whether France and Belgium can get up to that level—Ireland as well—we do not know.

In a sense, everyone is becoming too excited about a single currency. The Maastricht Treaty states that if a country is not ready, it will not be allowed to join

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anyway. There is no problem of being forced to join if one is not eligible to join. If a country is eligible to join, I do not understand why it would not join. The only freedom that one has outside the single currency is the freedom to devalue. Over the past 50 years the British data show that depreciation of the pound, internally and against the deutschmark, has been horrendous. Nobody can tell me that the past 50 years of monetary sovereignty have been a great success in our economic life. We have wasted monetary sovereignty and it is about time that we had some sensible policies.

7.22 p.m.

Lord Harmar-Nicholls: My Lords, with tonight's list of speakers as long as it is, I know, coming in the last quarter of it, that all the technical details that could be said on this subject have already been said. I shall not attempt to add to that long list of advice about the technical side of the issue. I want to talk about tactics. My points, for what they are worth, are addressed to my own Front Bench. It is, of course, just my luck, that at the time when these pearls are to drop, the Minister is no longer in her seat. However, I have every confidence that my noble friend will pass on faithfully the points that I make. Still, that will be hearsay rather than direct evidence from the person presenting it.

Starting with the opening speech, most of the speeches that I heard were sermons. I have a high regard for the noble Lord, Lord Jenkins of Hillhead. He is one of the most experienced and knowledgeable Members in this House. I remember that he and Tony Crosland were the leading intellectuals who were so excellent at keeping the debates alive in the other place in 1948 to 1950. So I am speaking of an experienced operator. But tonight his contribution was something of a sermon rather than a speech. My noble friend, when she reads it, will see that that is what it is. There was not much content in it. Indeed, funnily enough, most of the other speeches were what I call sermons. In fact, the paradox is that the one speech that was not a sermon came from a professional sermoniser—the right reverend Prelate. He had his feet on the ground. It was a real speech and a genuine contribution. He matched my noble friend Lord Cockfield, who also always speaks in language that one can understand; the message that he puts over is always quite clear.

The tactics about which I shall speak have the following basis: whether we remain as the Government or some other party succeeds us in government—whatever will come after next year's conference—unless that party carries the nation with it, it will make no success of anything. The nation has to be behind the Government. It is clear to me that we have come so far in the progress toward a federal Europe mainly as a result of tactics which I personally have witnessed and in which, unfortunately, I have had to take part.

I remember the debate which decided the matter in October 1971. The Motion before the House was:

    "That this House approves Her Majesty's Government's decision of principle to join the European Communities on the basis of the arrangements which have been negotiated".

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On that Motion the vote was 356 in favour and 244 against. The 244 votes comprised mainly the socialist vote. In those days, their doubts about the absolute inviolability of the rightness of merging into Europe along those lines was not so keen as it seems to be today.

I wonder what caused that change. I am glad that the noble Lord, Lord Desai, reminded me of the occasion when Jacques Delors came to this country. The noble Lord said that M. Delors had pointed to all the advantages of the social sections and the improvements that they would bring. That was not my recollection of what happened. The Trades Union Congress invited Jacques Delors to speak at their annual conference but it was not on that kind of level. The information that I gathered at that time was that Jacques Delors, the French socialist, came to the annual meeting of the Trades Union Congress and made his view perfectly clear to his colleagues in the British socialist parties. He said, "You will never get your socialism in England through Westminster. There is a good chance of getting it through Europe". It was rather a coincidence that almost overnight, on the strength of that argument, the 244 socialist vote (which was on the record at the time that we agreed to go into Europe) was switched around. So I am not at all impressed with talk about the sudden belief that the change on the other side of the House has come as a result of all the wonderful things that would happen as a consequence of joining the EEC.

They want their socialism and I understand that. I want my capitalism because I believe that it is better for the people and the country if we follow what is known as capitalism. The other side think differently. That is what the great argument will be about for a long time to come.

The talk is that we ought to give more powers to the European Parliament. I am rather inclined to agree with the noble Lord, Lord Stoddart, that, if we really want this Union to work, it would be better if that were a nominated parliament rather than an elected one. My noble friend Lord Plumb and my noble friend Lady Hooper, who sat with me when I was elected to the European Parliament—I went there to try to find out what it was all about—will remember that the time I spent there trying to make a contribution was spent in attempting to persuade my Conservative colleagues in the European Parliament that their duty was to be there as British representatives in order to put the British point of view on the issues. However, a number of them had gone native—I suppose that that is the term to use. One was not communautaire if one did not think in those terms. I did not succeed with many of them.

How did the Members of Parliament, with all the dangers that showed themselves, allow that situation to come about in October 1971? I was an active member and think I understand who at that time was ambitious in politics. Within five years of being elected I had been made a Minister. I was a Minister for eight years. But I resigned as a Minister in 1961 when this move towards Europe came up again. I instinctively felt the dangers of it. Why did the Government win despite that feeling among many people? They won because they said, "Don't be afraid. We have the veto. Nothing can

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happen. We can stop everything". But the veto is hardly there anymore. The other member states now want majority voting and so the protection of the veto hardly exists. After Maastricht they have produced the new protection which is called subsidiarity. What does "subsidiarity" mean?

When my noble friend comes to reply—she is an outstanding Member of the Government—will she define what subsidiarity really means? Will it go the same way as the veto? Does it mean that individual nations can decide for themselves when they feel that their domestic problems are theirs and no one else's? We want no more double meanings. We want this nation to succeed and I want the Conservative Government to be the government that sponsors that success. They can do that only if they carry the nation with them. One cannot carry the nation if one has "clever-dick" excuses for moving in a direction in which one does not want to go.

7.31 p.m.

Baroness Hooper: My Lords, I can certainly confirm the description of my noble friend Lord Harmar-Nicholls of his role as a Member of the European Parliament, a role which he happily continues in your Lordships' House. What I am going to say will horrify him more than a little because I am speaking this evening both as a former Member of the European Parliament and also as a member of the parliamentary assembly of the Council of Europe. It is my fond wish that those two institutions should in the future—it will be the long-term future—merge and operate together so that we have a real and true Europe.

I realise that that issue is not a topic for the IGC agenda in 1996, but that goes for a number of matters that have been raised in the course of the debate today. I mention it in any event because it illustrates the fact that nothing stands still and that as soon as we reach agreement in one set of circumstances external changes occur. We are then faced with new challenges and new decisions have to be made.

As a further general comment perhaps I may say that the more I travel in those countries of central and eastern Europe which are already members of the Council of Europe and which aspire to membership of the European Union the more I realise that our culture, history and identity in this country are as much dependent on influences from central and eastern Europe as they currently are dependent on influences from the Celts, whose contribution was so well described by the noble Lord, Lord Elis-Thomas, many hours ago at the beginning of the debate. Indeed, in this context I very much liked the reference made by the right reverend Prelate the Bishop of Sheffield to St. Alcuin having a European mind. I believe that many Members of your Lordships' House who have spoken today have shown that they too have European minds.

What nearly everyone has agreed is that we should be positive and constructive. I certainly subscribe to that view and I was also pleased to hear my noble friend Lord Boardman pointing out that we have quite a good record in that respect. But let us not forget that the success of the Inter-Governmental Conference next year

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does not just depend on us and our attitude. Every member of the European Union will have to be positive in deeds as well as in words. So, instead of perhaps always being rather inward looking, let us concentrate on encouraging our fellow members as well as ourselves about the future of our participation in Europe.

In saying that, I agree with all those who have said that the continuing debate in the lead-up to the IGC is vital. My noble friend Lord Plumb referred to the international meetings and discussions in which he is currently involved and my noble friend Lord Shaw of Northstead referred to the work of the Reflection Group. I know that at a national level a number of preparatory measures are taking place, not least the setting up of a sub-committee of your Lordships' European Communities Committee. I can assure the noble Lord, Lord Stoddart of Swindon, that his hors d'oeuvre in the debate today will certainly be followed by a main course somewhat later in the year when no doubt we shall have the opportunity to debate the report of that sub-committee. I hope that this debate and others we may have will help to send out the right signals in order to prepare the right climate for a successful conference next year.

Some of today's debate has ranged considerably wider than the topics likely to be debated at the Inter-Governmental Conference. I was grateful at the outset to the noble Lord, Lord Richard, for bringing us down to earth by referring back to the source document, the Maastricht Treaty, and outlining the agenda that it spelt out. But we cannot expect at this stage—it is too early—to spell out in detail every single issue that will be examined at the conference. In saying that I certainly look forward to hearing my noble friend reply to today's debate. In spite of some of the criticisms that have been made it is entirely appropriate that her contribution should come at the end of the debate. Otherwise, we would have received the criticism that she was not prepared to answer and respond to comments that were made in the course of the debate.

Although anticipating her reply and the information that will bring us, I believe that the Government's agenda for the Inter-Governmental Conference is clear and positive. For example, in relation to subsidiarity, it has been spelt out time and again that we are in favour of seeing subsidiarity entrenched even further into the workings of the Community. In relation to a clearer definition of the roles of both the European Parliament and national parliaments, it is quite clear that the Government believe that the European Parliament certainly has the main role of focusing on scrutinising the Commission and holding it to account for its activities and spending but that nevertheless an important constitutional role remains to national parliaments to contribute to the democratic legitimacy of the European Union decision-making process.

The Government have made it quite clear that they agree with the remarks of the new President of the Commission, which were quoted by my noble friend Lord Plumb, that the Commission should do less but that what it does it should do better. The Government have always made it clear that enlargement is most important.

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Another issue is the strengthening of inter-governmental co-operation in the fields of foreign policy and defence. My right honourable friend the Secretary of State for Defence has made it perfectly clear on a number of occasions —I am aware of this as a member of the parliamentary assembly of the Western European Union—that in European defence it is the time for a practical step forward in accordance with what has been agreed at Maastricht and that the European allies should now extend their ability to make a contribution to international crisis resolution, to peacekeeping and to helping with specifically European concerns where NATO is not involved. I believe that is all very clear.

As a final comment as regards the general and positive approach as opposed to the positive detail of what is going to be discussed, I wish and hope in your Lordships' House in a debate of this kind that we shall not hear in future noble Lords talking about "Europe" and "us". By all means talk about "the rest of Europe" but please do not let us make that kind of differentiation because it is not a question of "them" and "us". I believe very firmly that we are part of them and they part of us.

7.40 p.m.

Lord Monson: My Lords, I entirely endorse the contention of the noble Lord, Lord Jenkins of Hillhead, that the United Kingdom should play a positive role at the 1996 Inter-Governmental Conference. That positive role in my view should be to articulate the feelings of the people of the European Community, as opposed to the aspirations of their elites. It is no good trying to influence or change their minds—at any rate the elites of the core countries of the Community, the original Six. For the most part, they are deeply, sincerely and passionately integrationist, federalist and intent on creating a United States of Europe as a rival to the United States of America and Japan, with a single foreign policy, a single army, navy and air force. To do them credit they have made that perfectly clear time and time again.

But most of the ordinary people of the Community do not want a single army, navy and air force; they do not want substantially greater integration, more bureaucracy or more probing into the nooks and crannies of everyday life by people living hundreds of miles away and speaking a different language both literally and metaphorically. The narrowness of the referendum results in France, Denmark, Finland and Sweden, despite the massive propaganda facilities and substantial financial resources available to modern governments and establishments, amply demonstrate that, as does the revelation that three-quarters of the German people now oppose a single currency.

That is understandable since there is no point in replacing the deutschmark with the ecu unless the latter is going to be potentially more inflationary than the deutschmark. With 15 nations having an input into the administration of the ecu, it is bound to be more inflationary. Despite the apparently cast-iron safeguards written into the Maastricht Treaty, one can be certain that the moment widespread civil disturbances break out in one or more Mediterranean countries in consequence

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of deflationary policies being pursued by the central bank, the purse-strings will be loosened, interest rates will be lowered and the ecu will be effectively devalued against the dollar, the mark and indeed the Swiss franc.

On the Continent, when rules and regulations which are apparently set in tablets of stone run up against realpolitik, one can bet that realpolitik will always win, as the abatement of the massive fines imposed on Spain and Italy for the overproduction of milk and the continuing illegal subsidy to Air France and other semi-nationalised French companies fully demonstrate.

There is no time to say more about the disadvantages of the single currency except to commend to your Lordships an excellent article by Mr. Tim Melville-Ross, the Director General of the Institute of Directors, in The Times yesterday. Even he does not give all the manifold arguments against, but he gives a good few of them.

Strictly speaking, the United Kingdom's role at the 1996 conference should be confined, first, to opposing any extension of majority voting, with the possible exception of voting which affects the future of the CAP—I believe that the noble Lord, Lord Jenkins, had a perfectly valid point in that regard. Next, the United Kingdom should urge much greater caution about a single currency as opposed to a common currency—otherwise known as the "hard ecu"—so well advocated by the noble Lord, Lord Boardman; oppose greater powers being granted to the European Parliament, inevitably at the expense of national parliaments; and oppose any moves towards a single foreign policy, or a single army, navy and air force.

But these are all defensive moves. What of more positive ones? When departing from the strict agenda, as people invariably do, the United Kingdom representatives should take every opportunity to extol the inspiring clarion cry sent out by the European Research Group in its recent pamphlet A Europe of Nations to which the Prime Minister contributed a foreword. The group's programme has been contributed to by political figures from no fewer than 20 European countries: all the 15 European Union countries with the exception of Austria, Greece and Luxembourg, together with representatives from the Czech Republic, Hungary, Iceland, Norway, Poland, Slovakia, Switzerland and Turkey. That is truly Europe, unlike the truncated EU version that dares to usurp the name.

It goes without saying that the contributors to this pamphlet are every bit as pro-European as the noble Lords, Lord Jenkins of Hillhead, Lord Howe, Lord Richard and others. It is simply that they take a different view of the way in which Europe should develop. Among their important recommendations are that the Visegrad countries should be admitted to the European Union by 1st January in the year 2000. Long before that we should have dismantled all the tariff and non-tariff barriers against the importation of agricultural and manufactured goods from those countries which are such a disgrace at the moment.

All power should be assumed to rest with national governments unless explicitly stated otherwise in the treaties. The ambiguous principle of subsidiarity should be codified and strengthened. The European

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Commission should be reduced to the role of a civil service carrying out the will of elected Ministers and lose the right to initiate legislation. The European Parliament should be prevented from competing for power with national parliaments and should focus simply on scrutinising the work of the Commission. The European Court of Justice should be strictly confined to a specific judicial role interpreting the plain text of the treaties. The doctrine of the acquis communautaire should be abandoned. Responsibility for agricultural policy should be returned to the member states. The WEU should be decoupled from the institutions of the European Union and remain purely under the control of its member governments.

I suggest that that is a programme to enthuse and inspire ordinary people throughout the Community. It is not a blueprint for a simple free-trade association so criticised by the noble Lord, Lord Cockfield, but rather a variant on l'Europe des patries aspired to by General de Gaulle. The fact that in the French presidential election race the federalist, M. Edouard Balladur, is losing ground to the Gaullist, M. Jacques Chirac, ably assisted as he is by the openly Euro-sceptical M. Philippe Séguin, is an encouraging straw in the wind.

The noble Lord, Lord Cockfield, has often quite rightly reminded us that the Treaty of Rome aims at an "ever closer union between the peoples of Europe". Indeed, but bureaucracy, enforced harmonisation and constant interference in the aforesaid nooks and crannies of everyday life have the opposite effect. They create hostility between peoples. Conservatives often talk about getting the state off people's backs. It is only by getting the potential superstate off the backs of the peoples of Europe that one will pave the way for genuine harmony between them.

7.49 p.m.

Lord Pearson of Rannoch: My Lords, the noble Lord, Lord Jenkins of Hillhead, to whom we are indebted for this debate, started his speech by regretting that the cross-party pro-European alliance which existed in the 1970s appears to have grown weak in recent years. I imagine that the last five hours will have done something to reassure him—were he to be in his seat—that that alliance is still very much alive, at least in your Lordships' House, although I would agree with him that it has grown weak. I believe that it has grown weak because its arguments have grown weak and out of touch and are now often reduced to slogans such as, "We must be at the heart of Europe"; "We attract inward investment because of our membership of the Union"—as opposed to the market; "We must get in wholeheartedly and influence things our way"; "We'll be left behind by France and Germany who are going ahead with the Union anyway and that would be a bad thing", and so on. I fear all these slogans strike me as tired and out of date. They might have been relevant to the Europe of the 1970s when Germany's economy was booming and ours was labouring under Socialism, but none of them is justifiable today.

Listening to the first 10 speeches this afternoon and to several other speeches later, it struck me again, as it struck me at the time of our debates on the Maastricht

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Treaty two years ago, that another alliance is at work in this country and in Europe. It is perhaps a somewhat subconscious alliance, but it consists of politicians and bureaucrats, and I fear that it has grown out of touch with the aspirations of the people.

I have to say that that alliance is very well represented in your Lordships' House. Indeed, the majority of speakers in today's debate made their careers in politics or the bureaucracy. We have been privileged to hear a number of politicians and bureaucrats who have been very influential in setting up the Europe which we see today, and it is absolutely understandable that they are reluctant objectively to see it as it has become, which is very different from what they hoped it would be. Of course, that is only to be expected from at least one former Foreign Secretary, a former Prime Minister and from several ex-Cabinet Ministers, former European Commissioners and MEPs. I suppose that it is a bit like looking at your own baby when it is born. You tend to find it difficult to recognise the warts and other distortions which may be apparent to other people less involved in its creation.

Be that as it may, I have been quite depressed this evening to see how their mood has developed since our Maastricht debates in 1993. They now seem to take our loss of sovereignty for granted. They no longer pretend that Article 3b of the Maastricht Treaty, the infamous subsidiarity clause, is a shield against the further plundering of that sovereignty, as we were constantly assured by the Government in 1993; and they view monetary union as the certain and final surrender of that sovereignty with equanimity.

Well, I have to tell them that many of us—indeed, a growing number of the people in this country and Europe; possibly now a majority—do not share those cosy and unreal feelings which seem to pervade the political and bureaucratic club. We who are not politicians and bureaucrats, we who have worked, and work, in the real world of commerce and industry are not cursed with having brought us to where we are now in Europe, and we wish to see the IGC deliver a substantial repatriation of powers to the nation states. The noble Lord, Lord Stoddart of Swindon, and the noble Lord, Lord Monson, have already enumerated some of the powers which we wish to see repatriated, and so I will not repeat them now.

But we certainly want to see subsidiarity mean something, which at the moment it does not, or, if it means anything it means the opposite of what the Government assured us it meant in 1993. It means that the Community decides what nation states will be allowed to decide.

If my noble friend on the Front Bench thinks I exaggerate, could she perhaps answer the questions I put to the Government on 24th November 1994, the last day of our debate on the gracious Speech? What has happened to the initiative, inspired by my right honourable friend the Prime Minister, to withdraw 25 per cent. of all Community legislation, which he has assured us was agreed at the Corfu conference, and how does that fit with the Community's determination to

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maintain its doctrine of the occupied field, whereby once it has acquired a power, it never gives it up? Is the acquis communautaire dead or alive?

Would my noble friend accept that the Commission's work programme for 1995 runs to 72 pages and that it only pays lip service to subsidiarity? Is she aware that M. Santer has admitted that there will be some 52 of what he calls "new priority legislative proposals"—or one a week? A "new priority legislative proposal" is roughly what should be the equivalent of a Bill in this country—except that we import so many of them by delegated legislation. Does my noble friend accept that EC directives and regulations rose from 1,602 in 1993 to 1,800 last year, of which the regulations—which do not have to be sanctioned by national parliaments—rose from 1,160 to 1,579? It is one of those regulations which threatens the UK glasshouse lettuce industry, which employs 12,000 people. It is the absurd, continuing so-called "fine-tuning" of the single market which threatens the survival of the London bus, and much else. For instance, we are soon to have a directive harmonising the construction of lifts. In this respect, perhaps I can repeat a request to my noble friend. Can I ask her to explain to the bureaucrats in Brussels that a level playing field and a market are a contradiction in terms?

As to monetary union, does my noble friend agree that eventual monetary union would be likely to lead to a harmonisation of interest rates and taxation, and inescapably to political union? Can I ask her and those who favour monetary union whether they have thought of an ever weaker ecu after such monetary union, dragged down against the currencies of the vibrant economies of the world by Europe's sluggish, bureaucratic and over-politicised regime? Is that a prospect that they have really examined objectively?

Finally, can I ask whether it is such a terrible crime at least to contemplate tearing up the Treaty of Rome and all its works? As the noble Lord, Lord Stoddart, suggested today, until we have an unbiased cost-benefit analysis of our present membership, it seems impossible to know how unwise that suggestion might be. That was another question that I put to the Government on 24th November—again I got no answer. Certainly, the Europhile slogan that we get our inward investment because of our membership of the Union does not bear examination. Most of our inward investment comes to us because we have access to the European market, because thanks to the policies of this Government we have good labour relations and low inflation, because we are not saddled with the ruinous social chapter, and because we speak English. I cannot believe that the prospect of our monetary and political union with our weaker brethren in Europe can be much encouragement to potential investors.

So, the key question becomes: would the French, the Germans and the others deny us access to the European market if we left the Union, bearing in mind that we trade in deficit with Europe and have done so for 20 years? It seems most unlikely, but I do not imagine it is a question which we have ever dared to examine dispassionately. May I suggest that it is time that we

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did so so, that we might discover the strength of our negotiating position, which I feel sure is much stronger than at the moment we dare to hope? Only then can we enter the IGC negotiations in a suitably objective and positive frame of mind. Unless we can persuade our partners to create an altogether less stultifying framework for the free nations of a prosperous Europe, we should be determined to leave the Union, especially if that means leaving the European economy stuck in the slow lane of world economies which it so richly deserves.

7.59 p.m.

Lord Thomson of Monifieth: My Lords, the noble Lord, Lord Pearson, ended the debate from the Back Benches opposite by making a clear case for what he described as "tearing up the Treaty of Rome". Whether that would constitute a positive approach for the Government at the IGC, as he seemed to believe, I am not so sure. However, I believe that I speak for all noble Lords who have spoken—even, I am sure, for the noble Lord, Lord Pearson—when I thank my noble friend Lord Jenkins of Hillhead for launching this debate and for devoting one of the rare Liberal Democrat days to discussing the need for Britain to play a positive role at the 1996 Inter-Governmental Conference.

Compared to some of the debates that we have had over the last year or two on these issues, which have very often been ill-attended—indeed I have often felt ill-represented in your Lordships' House—this debate has been extraordinarily well attended. There has been a wide variety of views and it is very clear that the great majority have supported the proposition of my noble friend that the Government should take a positive attitude when the IGC is called. Whether we are going to get a positive attitude from the noble Baroness the Minister this evening I am not so sure. I think I share the lack of optimism of the noble Lord, Lord Cockfield, on that matter. Regarding the question of whether the Government are at the heart of Europe, of course we all know that the noble Baroness's heart is in the right place but we shall wait to hear what she has to say to us tonight.

The noble Lords, Lord Pearson and Lord Beloff, both raised the point about the state of public opinion on the European Union in this country and they argued that it had turned pretty negative. The noble Lord, Lord Beloff, speculated why. I will give him one strong reason. During the 15 years this Government have been in office there has been a generally negative attitude from them over the possibilities of British membership of the Community—not totally and all the time but, generally speaking, over the whole of the last 15 years. I am bound to say that I think it has immensely damaged Britain's capacity to influence European developments in our own legitimate national interests, as well as depriving Europe of a positive British contribution.

With one or two notable exceptions, there has been no Cabinet leadership on the benefits of British membership of the Community. The minorities in Parliament, who have a principled view of a deep dislike of Britain being part of the European Community, have had a field day, attacking the Community all the time:

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sometimes over serious issues of sovereignty and the sharing of sovereignty and sometimes over the minutiae of the behaviour of the European Commission in the matter of such great issues as the curvature of cucumbers and similar matters.

There is always a need for constructive criticism of the European Community and of the Commission. I am not, as has been pointed out, a totally dispassionate witness in that capacity, but the Commission is like any other political and bureaucratic institution: it is fallible and it makes mistakes. What I think is important for people in this country and Members of your Lordships' House, in making a judgment about British interests in Europe, is a sense of proportion concerning these criticisms. For example, the level of Community fraud is obviously a crime and a scandal. The reports of your Lordships' Select Committee have made a notable contribution to getting the Community at last to take more effective action about this.

However, all Community public expenditure taken together—the CAP, the Cohesion and Structural Funds, the lot—amounts to 1.25 per cent. of the Community's GDP, compared to an average of about 50 per cent. of GDP accounted for by national government spending in Union countries, where there is ample scope, as we all know, for criticism of bureaucratic national practices. This must be seen in proportion against the fact that membership of the European Union has been the reason why Britain has attracted over 600,000 new jobs since 1979. Nearly half of all Japanese, American, Korean and foreign investment into the European Union comes to this country. London is a magnet for overseas banks. There are 520 banks from 76 countries, with the Deutchesbank just moving its foreign investment banking from Frankfurt to London. Someone told me recently that there are more German banks in London than in Frankfurt.

This inward direct investment and the outward flow of financial skills would both be seriously adversely affected if a single European currency were to emerge with Britain choosing to remain outside. Apart from the quantifiable economic benefits of British membership, there are the unquantifiable benefits of Britain playing the role it ought to play in making the Union an effective force for peace in an increasingly fragmented and fanatical European continent. We are, in fact, in danger of turning our backs on our history and leaving the leadership of the European continent to France and Germany while we become petulant spectators on the sidelines.

The Government appear to hope that major issues of change can be avoided by the IGC, but the Maastricht Treaty agenda itself includes important matters. As the noble Baroness, Lady Rawlings, pointed out, it includes the question of the future of the Western European Union and the development of effective foreign policy and defence arrangements. These are very big issues. I think she is perhaps optimistic in feeling that the issue of the timetable for economic monetary union will not come up, or that issues like enlargement and the massive unemployment that still remains in a Europe, where the

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recession is retreating, will not be issues raised at the IGC. Whatever the treaty says about the agenda, I think that member countries will bring their own agendas.

So what are the real options for Britain at the IGC and beyond? The Government's preferred option appears to be the claim that they can convert the rest of the Union to their concept of a minimalist Community, concentrating on international competitiveness—obviously very important—and on the expansion of the free trade concept to which the noble Lord, Lord Cockfield referred; also opting out of social policies and, I suppose, praying that a final decision on a single currency and economic monetary union may be delayed indefinitely. I prefer to call that not an option but a pathetic illusion. Sir Leon Brittan dismissed it in a sentence recently when he said in London:

    "Those who stubbornly believe that EMU is not going to happen are simply overlooking the level of commitment which exists in the rest of Europe".

The danger of the Government's present approach to the IGC, with their talk at times of vetoes, is that it would cast us in this country in the role of wreckers. We would be seen as preventing the majority in the European Union from moving forward to tackle the undoubtedly formidable problems of combining enlarged membership from east and central Europe with efficient and democratic decision making. As the noble Lord, Lord Cockfield, said, we would not in any case succeed. The only wrecking that would be done would be the wrecking of what remains of our influence among our partners on the mainland of Europe. In that situation, which I profoundly hope does not happen, the lesser evil would be to step aside and let those who want to move faster towards integration do so; but it would be a sad second-best action for Britain.

I hope that the Minister will allow me to say that I find a strange paradox in the behaviour of the Prime Minister. On Northern Ireland, Britain's other overshadowing problem, he has shown vision and determined courage; yet Ulster is an issue which arouses deep traditional fears among Conservatives and it also involves questions of sovereignty. Over Europe, if he had chosen to show the same leadership he could have put Britain truly at the heart of Europe. I hope it is not too late for a change of attitude on the part of the Prime Minister and the Government.

We are an island nation with a fortunate history, protected from foreign invasions. We have undoubtedly an insular psychology. The grand vision of a European union, with all that can mean in terms of peace and prosperity for the citizens of Europe, demands a high quality of leadership from governments in all the countries concerned. There are difficulties in all the countries, but this is particularly so in our country. I end by pleading with the Minister and, through her with the Government, to respond to the Motion moved by my noble friend and to make a positive contribution to the "Group for Reflection and to the IGC that follows it.

8.9 p.m.

Lord McIntosh of Haringey: My Lords, like other noble Lords, I am grateful to the noble Lord, Lord Jenkins of Hillhead, for raising this issue. I hope that he

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will be pleased at the quality of much of the debate that followed his speech. I was interested in the fact that he started by saying that this was not really an issue of party politics. To me, in the real world politics are party politics, and if this is not a political issue, I do not know what is. I hope that it does not mean that the noble Lord is pursuing his withdrawal from the arena of party politics. Joining the Liberal Democrats is of course a first step in that direction, but I hope that he will stay with us in party politics for some time to come. He has a lot yet to contribute.

I noticed also that neither his speech nor that of the noble Lord, Lord Thomson of Monifieth, mentioned what might be the view of the Liberal Democrat Party of the agenda for the IGC. I did not hear one suggestion from any Liberal Democrat speaker about their party's policies and the way in which they should be presented at the conference. Perhaps they will find some other opportunity to enlighten us, but in the world of party politics we expect—I shall attempt to provide it—not merely negative comments but some commitment to a policy position.

Nevertheless, it is clearly right that there should be an open debate before the IGC. We must be grateful to the noble Lord, Lord Jenkins, for opening that debate in your Lordships' House. It was notorious that before the Maastricht Summit public debate was very restricted indeed. Whether it was for the conspiratorial reasons which have been adduced by a number of noble Lords I rather doubt. But it is still a fact that there was not much public debate before Maastricht; and that many of the proposals at Maastricht came as a surprise to the ordinary people in Europe. As a result, the ratification of Maastricht was a very much more difficult process than it ought to have been.

The noble Lord, Lord Shaw of Northstead, rightly referred to the work of the Reflection Group which has been set up under the French presidency. I shall want to say a word or two about the contribution to that Reflection Group of the European socialist delegate, Elisabeth Guigou, but it is not just that; there will be more preparation. Under the Spanish presidency there will be an extra Council meeting in Majorca in September. We can expect a more serious attempt at wider debate, and that must be welcome.

Of course, we must be realistic about the scope of the IGC, because listening, as I have, to almost all of the speeches, I have heard many which are about issues that are very much wider than the treaty revision issues which will be coming before the IGC. I was surprised to find that so many Members on the Conservative Benches were anxious to have a re-run of the debacle which hit them in another place last Wednesday. I should have thought that they were so badly burnt then that they would not wish to go over that ground again. I was also a little disappointed to find a number of noble Lords wishing to go over the ground of the 1993 Maastricht ratification debates because the IGC's role is very much more limited, as has been suggested, and I cannot avoid repeating some of the valuable points made at the very beginning by my noble friend Lord Richard.

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Article A of Maastricht says that the purpose is ever closer union among the peoples of Europe. But then Article B, in specifying what should happen at the IGC, refers to improving the effectiveness of Community mechanisms and institutions. That is what the conference will be about, rather than some of the wider policy issues which have been referred to. Of course the Community mechanisms and institutions have a purpose. Their purpose—I summarise rather than expound—is to promote economic and social progress; and to promote economic and social cohesion. There is reference to the establishment of a European monetary union and possibly of a single currency. There is the whole issue which has not been referred to, interestingly, of the common foreign and security policies which are expected to lead to a common defence policy and possibly in the future to common defence. There is the issue of Union citizenship; there is the issue of close co-operation between member states—note that it is co-operation between member states—on justice and home affairs. And all of that is within the context of subsidiarity. That is what is set out in Article B of the Maastricht Treaty.

Article 189b goes a little further, because it refers to co-decision procedures, which I take to be jargon for talk about majority voting and unanimity. I want to come back to that issue also later. Finally, the first declaration refers to bringing energy, civil protection and tourism into Community competency.

Those are all important issues. The revision of the treaty to give effect to those objectives is not unimportant. But I suggest that much of the debate will be secondary to the two fundamental changes which are taking place in Europe which could blow away much of the discussion that will take place at the IGC.

The first, of course, is enlargement. What appears to be the case, almost without it being discussed as a matter of principle, is that we in Europe—I mean what the noble Lord, Lord Pearson, calls the elite as well as the people—have accepted and welcomed the idea of the enlargement of the European Community. The result of that is that we shall land up in 10 or 15 years with a Community of 27 members, rather like—I am sorry to see the noble Baroness, Lady Hooper, is not in her place—

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