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Lord Marlesford: My Lords, is the noble Lord not prepared to give his own party any credit for winning the election?

Lord Stoddart of Swindon: My Lords, indeed I am. My party, or at least my party leader, learnt that to bruit abroad his British patriotism was the way to win an election. He ruled out the possibility of a federal Europe and said that he was a British patriot. He hung the Union Jack behind him at every press conference and every meeting he attended. He spoke for Britain while the leader of the now Opposition havered about his commitment to Europe and his commitment to this country. If the former Prime Minister had wished to be, and set himself, at the heart of Britain instead of the heart of Europe he might indeed still be sitting on the Government Benches. However, I doubt whether that would be the case as there were other issues involved.

At the present time there are enormous dangers for Europe, and not only for Europe but also for the rest of the world, as we see the problems that this mad gallop

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towards a country called Europe is causing. It is causing political instability. We have seen the electoral backlash in France and indeed in our own country as they strain to meet the Maastricht criteria for the third stage of EMU. It is creating uncertainty in world markets. Indeed there is a danger of increased currency speculation, greater volatility in stock markets, loss of confidence worldwide and increasing dangers of a serious slump. That is what is happening at the present time and that is what does not seem to be understood.

In spite of that there are Conservatives calling in this Motion before us for European-wide action at the Amsterdam IGC. It seems to me that they still do not understand and they do not realise that it was the measures agreed at Maastricht on EMU that have caused mass unemployment throughout Europe and reduced prosperity in Europe. It seems to me that they now want to compound the disaster of Maastricht by urging more European action. They simply cannot get themselves out of the heart of Europe and put themselves--as I said earlier--at the heart of Britain. If they really believe that the IGC will agree measures to free up markets--as the Leader of the Opposition told us--and get rid of restrictive legislation, they are living in cloud-cuckoo-land. That simply is not on the agenda. The likely outcome of Amsterdam is an employment title leading to more bureaucracy, central control and additional costs loaded on to industry leading to loss of competitiveness and therefore destruction of jobs.

Noble Lords: Hear, hear!

Lord Stoddart of Swindon: My Lords, I am glad that some noble Lords say, "Hear, hear!". But they want more European action and that is the kind of action they will get at Amsterdam. It is about time they started learning. It is about time they started listening to me for a change. Of course the problems will be compounded in manufacturing industry. The only jobs that will be created by this Euro-wide action are more jobs for bureaucrats. If the new Government have any sense--I wish them well--and really mean to be friendly to business (not just big business and the multinationals but also small and medium-sized businesses) they will reject further interference through a new employment title.

Britain's long-term economic prosperity will be assured not through more integration but less. There is positive action the Government can take at Amsterdam to help to tackle unemployment. Here I find myself in agreement for a change with my noble friend Lord Barnett. He spoke about creative accounting, and said that he knew nothing about it. But I remember the time when he sold off 49 per cent. of BP--the first privatisation. That was a bit of creative accounting. However, I agree with him that we need to call for delay in agreeing to Britain going into a single currency. I should like the Government to rule it out for all time, but at this stage they could rule it out for the lifetime of this Parliament. That would have a great benefit: it would create a certain amount of stability in what has become a very unstable situation.

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If we wish to gain real employment in industry, the Government should refuse at Amsterdam to agree to any amendment to the treaty until all countries agree to a root and branch reform of the common agricultural policy. Let us stop up the £30 billion black hole of waste and over-production, reduce the environmental damage of extensive farming, open up world markets in food, and lower costs of food to consumers, thus reducing pressure on wages, reducing unit costs and making us more competitive in the world. Does anyone disagree with that? No, of course not, my Lords. That is one of the policies which I urge on my noble friends when they go to Amsterdam.

Furthermore, I believe that they should make good progress on fishing. They should again go for a root and branch amendment of the common fisheries policy to ensure that it is amended to give Britain back control over its fishing waters with a resultant boost to fishing jobs and economic gain to the economy generally.

I believe that the Government should also urge and support measures to cut the European Commission down to size. Indeed, they should prevent it from acting as though it were the government of Europe. I am sure that no one agrees that it should be the government of Europe. If anyone does, let him stand up and say so. But the Commission is acting more and more as though it were, and it should be put in its place.

The Government should not agree to any extension of the European Parliament's powers. It is about time they reined in the arrogant ambitions of the European Parliament to have a say not only in economic decisions but also in defence and foreign policy decisions.

That is my advice to my noble friends. I hope that they will listen to it rather more than the previous Government did. The Government know my views on Europe. Nevertheless, there is much that the Government can do in Europe by ensuring that British interests are put first, second and third, and are always paramount. I believe that if they do that they will have the continued support of the British people over a long period of time; and I wish them well at Amsterdam.

5.14 p.m.

Lord Beloff: My Lords, I hope that the House will forgive me if I am serious. This afternoon started with a Business Motion from the noble Lord the Lord Privy Seal that this debate should be limited to five hours. The number of speakers, and the admirable brevity of some speeches, mean that we have a good deal of time at our disposal and I am sorely tempted to revert to my normal habit of a 50-minute lecture. The noble Lord, Lord Wallace of Saltaire, will take this for granted if I hold him up a little while in pursuit of that.

I have sat through the whole of the debate, as the last Back-Bencher to speak, with increasing puzzlement. I was puzzled by the terms of the Motion; I am puzzled by the debate. What is to happen at Amsterdam on the 16th and 17th of this month is the consideration of a draft treaty--a treaty to be known, if it is agreed, as the Treaty of Amsterdam--which is to take the form of a revision of the Treaty of Maastricht, the Treaty of Rome and the other documents which make up the corpus of the organisation of the European Union.

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That draft treaty, we understand, has now been circulated and I have a feeling that the noble Lord the Lord Privy Seal has seen a copy. He cannot be behind a number of journalists who certainly have done so. But we have not had a text that we could debate, upon which to discuss how the Government might proceed in negotiation. We have had a number of leaks dealing with different topics in the vast array of issues which fall to be discussed.

It was because of that that early in our debate the noble Lord, Lord Barnett, said--and I see his point--that that issue pales before the problem of EMU; that all the other changes which might or might not be agreed to would be less important than whether or not we have a single currency. Therefore he devoted his speech to indicating what was happening about the single currency. But it is conceivable, since the single currency is part of the agreement reached at Maastricht, that the Treaty of Amsterdam might include a revision of those clauses. It would not be beyond the bounds of legality. But that is unlikely to be achieved in two days in Amsterdam.

The Motion suggests taking note of the desirability of certain approaches to the other economic aspects of these arrangements. The problem is who is to take note of them. We always "take note" in our Motions in this House. We sometimes mean that we should all take note, and sometimes that the Government should take note. But it is not much use our taking note of the desirability of measures for competition, or however one defines it, or of the Government embracing such ideas, unless there is a reasonable prospect of the countries with which we shall be negotiating being, if I may so put it, on the same wavelength--if there are still wavelengths in the digital world. I find it difficult to believe on recent evidence that that is so.

I am sorry that the noble Lord, Lord Taverne, is not in his place. I wished to refer in some detail to what he said. Basically he called our attention to the extreme differentiation between what we call continental Europe, the different countries within it--Rhineland Europe, however one defines it--and the different parts of those countries. When one talks of Germany, there is no lack of prosperity in Bavaria, but there are whole areas in northern Germany where the textile industry once provided employment and no longer does so since, as the noble Lord, Lord Taverne, pointed out, it has been cheaper to have those items manufactured in countries with lower labour costs.

Therefore it is extremely difficult to think of a set of policies that would have equal appeal throughout this number of countries and within many of these countries. Italy is perhaps an even better example than Germany. It has always been a problem of the European Community, now the European Union, that as soon as any attempt is made to devise common policies on a variety of issues we come up against the fundamental differences between their components. As was alluded to by the noble Lord, Lord Taverne, the United States' advantage is that in many respects it has a single national identity, and a greater readiness therefore in

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relation to labour or capital mobility than is easy to find in Europe or will remain easy to find in Europe whatever changes we make.

The other objective referred to of the revising conference in Amsterdam is to provide a means of expansion, of bringing other members into the Union, and to make the necessary administrative, political and financial arrangements that such expansion will demand. Again, I believe there may be under-estimation of the even greater difficulty in creating common policies which will confront an enlarged Union. I believe it was the noble Lord, Lord Barnett, who referred to the impact on Germany of the unification, of the financial problems created by having to sustain a very different level of productivity and a very different standard of living in a country suddenly under single government and inevitably adopting a single currency.

These are serious issues. It is not sufficient for the Government to enter negotiation with quite the optimism which Members of the Government sometimes show. I have no precise quotation with me; however, noble Lords will recognise the general thrust. One hears, for instance, the Foreign Secretary saying that we have a vision of a Europe of co-operating nation states and that we must be the leaders in Europe in order to have that vision adopted. I take that also to be in some respects the position of the Prime Minister.

But that assumes that people are capable of being persuaded. Evidence that that is the kind of Europe they want is, to say the least, somewhat sparse. For instance, it is generally recognised--various speakers referred to this point, including the noble Lord, Lord Barnett--that recent events in France and Germany, ending with last weekend's elections, make the 1999 date for the start of a single currency highly improbable. Yet when I listened to the French election results coming in and to various members of the French establishment giving their reactions, as people in this country do on the "Today" programme, there was not the slightest indication that they had taken this lesson to heart. One would have thought from hearing M. Jacques Attali and M. Francois Poncet (with whom the noble Lord, Lord Barnett will be familiar) that a single currency is totally unaffected by the result of the elections and by the change of government. The German elite is beginning to be a little more appreciative of realities, but there could be similar quotations from Germany. When we think of the huge gap between the reality of the economic situation and the objectives--perhaps in the long run the noble Lord, Lord Harris of High Cross, is right--of economic growth which will in the end determine what happens, there is bound to be a very considerable difficulty facing those who represent Her Majesty's Government at the Amsterdam conference.

I hope that the noble Lord the Lord Privy Seal, who must have seen the draft treaty, will tell us how our representatives are likely to approach, not the whole range of policies set out in what I understand is a thick document, but at least those of primary importance and those that relate specifically to the economy. Maintaining the relatively high level of the European standard of living at a time of global changes in the economy is bound to be extremely difficult. It is more

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difficult than the competitive position of individual countries within a relatively similar economic framework. It probably means a vast and continuing transfer from one branch of manufacturing or services to other branches, with enormous consequences for education and training.

If there was common agreement that that was what was necessary, the result of the French elections would have been different. The result suggests that at present the majority of the French population--and an election in Germany would not produce a very different result--still believe that by protection, by holding onto the--I shall not say acquis communautaire--acquis francais, they can continue to enjoy a standard of living well above that of much of the developing world and equivalent even to that of North America.

So long as that is the case, how do we negotiate? Is there anything we can do? I agree that we should not be triumphalist and wave a banner in relation to our own achievements since they themselves may come under pressure. But how can we persuade people whose view of the world is wholly different that our view is the one that is more likely to be correct? The Prime Minister was probably aware of that difficulty when he modestly demanded a tutorial from the noble Baroness, Lady Thatcher. I am sure that he profited by it. Let us hope that is true. I am sorry that the noble Baroness is not in her place to tell us what marks she awarded him on that encounter. I hope that he will not go to the conference with hopes which might be disappointed. So long as there is a fundamental difference of approach as between participation in the world economy and withdrawing on Europe, there are very difficult times ahead.

5.29 p.m.

Lord Desai: My Lords, with permission I wish to speak in the gap. I apologise for not putting my name down; I had a previous engagement and had thought I would not be present for the summing up at the end of the debate. However, since the debate has not been long I wish to speak briefly.

As I read the Motion, it is surprising that all one can say is that not much will be discussed at Amsterdam concerning jobs and prosperity throughout Europe. The only point at issue is the employment initiative. Even that initiative will be disagreed to not only by Her Majesty's Government but also Germany. So as regards the substantive Motion, we have nothing to discuss. Therefore, we have been discussing everything else: the single currency, which is not an issue. I should like to speak on it but in my four minutes I cannot do so and I am sure we shall have another debate. The single market is an important issue, as my noble friend Lady Ramsay pointed out. It is important to note that if we want a single market and labour mobility across Europe, as many of us do, we must have a common framework of some kind. We must have basic rules so that someone trained in Spain can practise in Germany, Greece or Sweden. If you say that you want a single market but do not want a framework, you are contradicting yourself. What we must do is to calm

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down about how good we are and how bad they are. We all agree on that. If we wish to create a single market we must ask what are the issues which affect the framework to be constructed for mobility of capital, labour, commodities and so on. Unfortunately, that vital issue has not so far been discussed and it is important. It leads to a certain set of rules which we must discuss.

I do not believe that the social chapter is part of that. The noble Lord, Lord Lloyd-Webber, in a brilliant maiden speech, gave us a nice account of what he knows best: the theatre industry in different countries. But with respect, the figures for employment and unemployment that he gave have little to do with the social chapter. However, they indicate that labour legislation in each country is different. The labour legislation in Germany requires different things from the labour legislation in France, Italy or the UK. They show that there is no uniformity of labour legislation across Europe, we do not have a single social chapter. What we have is different chapters.

My last point on the Motion before I sit down is that the European Union does not compete: different companies in countries of the European Union compete. If we want companies to compete, we must ask what is the minimum the European Union can do not to obstruct competitiveness but to enhance it as best it can. That may require us to agree to have labour market flexibility, differentially in different countries perhaps, but we must also agree that the safety net which we would all like to have may have to be different in different countries. The European Union is not yet ready to have a single uniform safety net across Europe because we do not yet have a single European economy. We have a cluster of economies. Therefore, the best thing to do is to choose the best, with as much subsidiarity as possible, and have the degree of uniformity that is essential for the single market.

5.34 p.m.

Lord Wallace of Saltaire: My Lords, this has been a puzzling debate because it has not been clear what was its purpose. I must admit that I am even more puzzled because I thought I had read the draft treaty. I went into our Library yesterday and asked for a copy of the draft treaty. They produced a December 1996 draft, a March 1997 draft and a document marked UKREP, United Kingdom Representation to Brussels, 16th May 1997. That seemed to me to be up to date with the latest Dutch presidency draft. I read through it as fast as I could, looking hard for all the social dimensions. As the noble Lord, Lord Desai, said, I found remarkably little.

There is a suggestion that we should add to the preamble that the promotion of employment is a good thing. I am sure that the noble Viscount, Lord Cranborne, would agree with that; indeed it is what his speech was about. But there is very little else about employment or the social chapter in the draft. There is a lot on Title VI, the third pillar, which worries me stiff. I hope that the Government are looking through it carefully and that they have read the Schengen acquis in detail, because I know that a number of senior officials in the British Government had not read the whole Schengen acquis in detail until recently.

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In this debate we could perhaps have been discussing the unresolved issues in the IGC. It would have been a worthwhile exercise. Perhaps as a contribution to open government, our new Government should have put that down as a Motion for debate because there are some important unresolved issues which we have not reached.

One of the things I found most frustrating about the last government was their deliberate avoidance of open debate in Britain. The last Foreign Secretary went round giving speeches about the important issues at stake in European integration, all of which he delivered in other countries. He did his best not to talk about them here. The misrepresentation of what is at stake in the treaty of Amsterdam, the current IGC, reached what was to me its height or depth in the article by John Redwood in The Times the other day. It suggested that this would be the end of Britain. Having read the draft treaty, I have to say there is not much in it. The representation by the last Government of it as a small adjustment, a 5,000-mile service, suggests that that is where we are heading.

Alternatively, the debate could have been about chasing the chimera of the social chapter which the Conservatives have been hunting ever since the last intergovernmental conference. I remember the stories of John Major as Prime Minister phoning Michael Howard as Secretary of State for Social Security several times during the last negotiations, the end game of the Maastricht discussions, just to make sure that the form of words for our opt out was acceptable to the hard-line Eurosceptics in the Government. They made as much as they could of the social chapter because it covered their retreat on a number of other issues: on the inclusion of defence in the Maastricht Treaty, on greater powers for the European Parliament which the noble Lord, Lord Stoddart, loves to hate and so on.

Alternatively, we could continue the ideological argument of Anglo-Saxons versus Rhinelanders or the pursuit of a completely deregulated world economy, which the noble Lord, Lord Harris of High Cross, was pursuing. One thing that I thought we had discovered in the past 15 years is that when you deregulate you have to impose new regulations. The question is: what new regulations do you impose and at which level of government--national, European, or global--do you impose them? The idea of a totally deregulated national or global economy is also a chimera.

However, we understand that the Anglo-Saxons are not themselves Anglo-Saxons, they are descended from Austrians; or perhaps they are descended from Austrians for whom the British economy in the 1920s (or was it the 1930s?) was the golden age from which we declined from 1945 onwards.

I have been puzzled over the past 15 years or more by the repeated need for free traders, the new Conservatives in this country, to denigrate the German economy. We are now witnessing the third attempt since 1979 to tell us all that the German economy is finished. I can remember in the early 1980s and the late 1980s long articles, even in the Financial Times, on why the German economy no longer worked. Spending time in Germany over the past few years, I have noticed on

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several occasions that, according to the laws of Anglo-Saxon economics, the German economy should not work. It is a standing insult to Anglo-Saxon economics, as taught in my institution and other British universities, that the German economy works at all. However, surprisingly it seems to. Worse than that, it carries on producing an export surplus, whereas the Anglo-Saxon economies work well for consumers but tend to run export deficits.

What is wrong with the German economy at present is that it has two major failures. The first is the impact of unification which for Chancellor Kohl was a great tactical success but an enormous strategic error. The second is the weakness of the German Government now in following through from where it started some years ago in the economic and industrial transition. It was clearly a mistake to fix the deutschmark to the ostmark at one to one and that had disastrous effects on the East German economy. It was clearly a mistake, though electorally very convenient for Chancellor Kohl, to promise that it would not cost any extra money and there was no need for higher taxes. We are aware, particularly in my party, that other parties are sometimes tempted to win elections by promising that no higher taxes need be levied and one can nevertheless find ways of spending extra money. So our own Government--the last Government or the present Government--are not in a very strong position to criticise.

We know that the German economy now needs to go through a number of genuine reforms. We also know that there are many people in Germany who argue that case. Those of your Lordships who were at the last Konigswintel Conference will remember Herr Biedenkopf giving an extremely bitter speech about the CDU in the West, which spends money subsidising miners in west Germany but is prepared to go on leaving people out of work so long as they are in east Germany. There are many critics within Germany whom we need to support.

We have also heard a certain amount about the French economy, which is also clearly in crisis, having failed to push through the logic of economic adjustment, privatisation and deregulation. It is a painful adjustment. I fear that with the new socialist government which has now arrived in France we are about to witness a repetition of what happened between 1981 and 1983. It took some time for a socialist government, once it had taken office, to recognise that there were no alternatives but to pursue a policy of economic adjustment and allow some of the old comfortable public service attitudes of the French elite to give way.

The third example quoted by the noble Viscount, Lord Cranborne, was Italy, where there has been a deep political block on economic change which, it seems to me, is now at last beginning to unblock. The Prodi Government is the most useful and progressive government in economic terms that there has been in Italy for the past 50 years. One could have added Belgium and Austria as corporatist states favouring a more protectionist Europe--five out of 15.

On the other side, one could have remarked on, as did my noble friend Lord Taverne, the Dutch example of an economy which has gone through a most remarkable

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transformation within the terms of the social chapter and the regulation of the European Community. One could also have noted that Ireland, Finland, Denmark and Sweden--a further four countries--are natural allies of the British Government in pushing for the kind of open completed single market, open to economic adjustment, that we need if we are willing to play constructive coalition politics in Europe and are confident therefore that we can find reliable allies.

Let me, like the noble Baroness, Lady Ramsay, come to some of the issues which are relevant to the Intergovernmental Conference and which, in the terms of this Motion, will help:

    "to enhance the ability of the European Union to compete economically worldwide and thereby lay the foundation for jobs and prosperity throughout Europe".
There seem to me to be four such issues.

The first is the issue of Community competence in international economic relations--the revision of Article 113. The last Government resisted the extension of Community competence on grounds of sovereignty. It seems to us within the Liberal Democrat Party that there are very strong arguments for widening Community competence in international economic negotiations to include all those issues covered by the World Trade Organisation, including services and intellectual property. Here again, I question one of the underlying assumptions in the opening speech of the noble Viscount, Lord Cranborne; namely, the assumption that somehow the Anglo-Saxons and everyone else are in favour of free trade and it is the Continentals who are protectionist. In fact, the United States and Japan--and, heaven knows, that large, new and emerging economy, China--have their own balance between wanting to have free markets and wanting to have protection. The reality is that we need to bargain hard with all those other major international economic players and that we will do better to use the European Union to bargain hard in favour of open markets and stronger rules for world trade than try to go it on our own.

For the past three or four years I have acted as an adviser to the Transatlantic Policy Network and been involved in the Transatlantic Business Dialogue with the Americans on how we design the rules for transatlantic free trade and, indeed, cope with creating new regulations to cover new areas of trade, such as biotechnology. A few weeks ago in Washington, I sat in on a discussion with a number of US Congressmen, most of them Republican. I distinctly remember one of them saying, "You have to understand that the American people are in favour of free trade provided they do not have to accept imports".

We must recognise that we have our free traders and our protectionists; they have their free traders and certainly have their protectionists. It helps occasionally on airlines, with telecommunications and with intellectual property to have the weight of the European Union behind us in bargaining with the United States in order to promote open markets, rather than to play old sovereignty against the European Community. I should very much like the noble Lord, Lord Richard, in his reply to answer that point.

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Secondly, there are the competition rules. I am sure noble Lords will have noted the story in the Financial Times about the German and the French Governments now asking for their own opt-outs from the competition laws in order to protect the public Landesbank in Germany and, in the French case, those public utilities of gas and electricity which are still under public control in France, which are now partly French-owned within Britain. There must be a majority to block those. There is a great deal of opposition in Germany and even some unhappiness in France. I hope that the British Government have that well in hand.

The third issue is the incorporation of Schengen. There is a whole range of complex issues which have not been resolved by the British Government managing to negotiate an opt-out. Schengen necessarily covers the movement of goods as well as people because people tend to move goods. We need some efficient and rapid border controls for those who have legal standing, not oppressive border controls of any sort; and we need to make sure that the weight of the Schengen acquis and the various contradictions between the Schengen acquis and the treaty are resolved in an efficient way. Incidentally, I have my own severe doubts about the accountability side of Schengen and the civil liberties issues involved with the whole third pillar, with which I am glad to see Sub-Committee F of this House will deal.

I touch very briefly on the fourth issue, which the noble Baroness, Lady Ramsay, has already mentioned and which is the question of enlargement. If we are talking about the promotion of prosperity and competition, pushing ahead with enlargement is by far the best way to promote greater growth and more rapid prosperity within the European economy. The most rapidly growing economy in Europe at present is the Polish. If we are able to incorporate those countries more rapidly and give them assistance, they will create new markets for us and we shall gain as they grow. Last week, I found it extremely distressing that the first time this year that any political leader gave us any sense of vision about how we could create a new European economy and new European order was when President Clinton told us what we should do. If our new Government is to provide some leadership in Europe, I hope that we shall shortly hear British Ministers themselves talking on that scale of language and having that scale of ideas.

There are other issues which are clearly still unresolved in the Intergovernmental Conference but I do not have time to touch on them at present. There is the whole question of accountability to national parliaments and to the European Parliament; the whole question of transparency, on which there has been some rather vague language in the draft treaty which I saw; the whole question of the reform of Community institutions; and--not really touched on--the reform of the Commission, which had we been a little less negative, we might ourselves have usefully been able to raise.

Perhaps I may just reply to the noble Lord, Lord Harris of High Cross, who followed the customary habit of criticising those Members of the House who

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used to be commissioners. The first usefully critical speech on the Commission that I ever heard was given in 1971 by the then commissioner Ralph Dahrendorf, who has remained one of its most trenchant critics ever since.

I do not recognise the image of a protectionist European Union and free trade Anglo-Saxons or proto-Austrians standing up together against it. We have a much more complex image which we must negotiate through the Intergovernmental Conference. I recognise the importance of the European Union as a vehicle for promoting global prosperity and open trade. I see the United Kingdom as playing an important, active and positive role in building coalitions rather than sulking in corners. My party will give this Government its critical, but not unquestioning support in so far as they assume a more active and positive role.

5.50 p.m.

Lord Moynihan: My Lords, I begin by congratulating my noble friend Lord Lloyd-Webber on a brilliant maiden speech in this House. His insight into the social chapter implications on pricing, taxes, employee legislation, even ticket pricing and labour, came from a great deal of personal experience. But content is one thing; delivery is another. Noble Lords who witnessed his eloquence this afternoon will remember for a long time an outstanding maiden speech.

I am tempted immediately to change places with my noble friend. This is my second speech in your Lordships' House and I can neither match the quality of delivery nor the content. Perhaps, therefore, I should quickly disappear to the Back Benches. At least this evening I shall attempt to raise some of the important issues that have been admirably debated in this House. I intend to concentrate on areas of the IGC which have the most economic impact and which therefore have the most effect on jobs and prosperity.

I start from the premise that, other than the issues of the extension of QMV and the powers of the European government machinery, much consensus exists on both sides of this House on key controversial issues--for example, the opposition to quota hopping and the retention of Britain's frontier controls. But one of the serious issues is the question of rhetoric versus substance. Earlier this afternoon in response to a Question in your Lordships' House on the legal personality for the Union, the Minister gave an interesting response which said, first, that the Government opposed it; he went on to state that the Government strongly opposed it but quickly added that of course everything was open to negotiation.

We need to see how tough the Government will be. It is important that we have the opportunity to consider in substantive discussion many of the issues that have been raised--thus the welcome afforded to my noble friend for raising this subject in your Lordships' House today. It is deeply sad that your Lordships' House, and indeed another place, has had no Statement on Noordwijk or debate on the implications of those discussions. That is unprecedented. I hope that we can conclude--perhaps we will learn from the Minister this

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evening--that the revised treaty agreed at Amsterdam should be less ambitious than the Europe federalists had hoped.

It was a privilege to hear the contribution of the noble Lord, Lord Barnett, to this debate. His brilliance, acerbic wit and incisive analysis were well-known to many of us in another place. However, it was interesting that he raised a subject which will be of key importance in Amsterdam. I say that because, though the EMU is not on the agenda, I predict that it will be impossible for politicians to resist raising it on that occasion in the light of recent developments.

When the matter is raised, I hope that Ministers and Prime Ministers will recognise that the words of the noble Lord, Lord Barnett, were exceptionally important and accurate in the context of the necessity of the delay which he proposed. We understand that emanating from No. 10 is an edict that discourages new or brilliant ideas coming from the Front Bench. I only hope that this is a way of the Government signalling--perhaps we shall hear in a moment--that they propose to take the lead on a proposed delay. If so, they will have support from many sides of this House, especially in the context of the noble Lord's comments that people would be stupid not to recognise that to push ahead at the wrong time, without sustainable economic convergence and without a key recognition that a "blind dash" to meet the Maastricht criteria would be unwise,

    "would help to destroy the European Union".

This debate is about competition. There is growing worldwide consensus that Britain leads Europe in terms of economic competitiveness, job creation and prosperity--an issue with which the noble Lord, Lord Desai, was in agreement. The CBI believes that the UK was the first to recognise the competitiveness and employment challenge in Europe,

    "and should be in a good position to influence the future shape and scope of a more competitive European Union".
That is where our role at the heart of Europe should lie. We all understand that competitiveness and job creation are two sides of the same coin. Job creation follows from competitiveness. Competitiveness is nurtured by creating the right climate for growth; encouraging enterprise; scrapping unnecessary regulation; keeping business costs low; and tackling fraud and waste. Our deregulated enterprise policies, combined with low taxation and low state spending, have transformed economic prospects in Britain. We now have one of the strongest economies in Europe as a result.

Compassion is shared throughout your Lordships' House for the merciless distress caused by unemployment. But the solution is in the model of the dynamic market, not in the French socialist model of public sector programmes and state intervention. I hope we have agreement that a prosperous and competitive Europe will be a flexible Europe which is outward looking, free trading and democratic. It will need to be fully accountable to accommodate the sheer diversity of all its member states. I hope it will be a Europe where any new European proposals will have to be open to all and agreed by all; a Europe which accepts that competition flourishes best in an atmosphere of

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European peace and intergovernmental co-operation; a Europe where supranational institutions act only when they can achieve more than member states acting individually and where the nation state is accepted as the bedrock of the European market. A rigid Europe where decision-making is centralised will severely hamper our global economic competitiveness. The ability of the European Union to compete economically is vital to Britain's interests as the economic benefits of Europe cannot be overstated.

Britain leads by attracting one third of all inward investment into the European Union and 40 per cent. of all investment from Japan and the United States. The positive effect of that can be seen in the increasing number of foreign companies which have relocated in Britain. For example, the favourable climate for inward investment enabled BMW to make a major £500 million commitment here. The praise of the noble Lord, Lord Taverne, for German exports was well placed; they have an excellent record. But no doubt the noble Lord, Lord Taverne, knows that Britain is the number one destination for German overseas investment.

If we are shy of boasting about our record, our partners in Europe will do it for us. Jacques Delors described this country as "an investor's paradise", while Hans-Olaf Henkel, President of the Federation of German Industries, blamed "excessively high" German labour costs for unemployment and praised Britain's policies for attracting investment. He said that,

    "Great Britain has become the most attractive location for investment in Europe. Although the German market is twice as large as the British, since 1985 foreigners have invested twice as much in Britain as Germany".

The reason for setting this backcloth is that I hope that the Government will lead on job creation. No one disputes the fact that one of Europe's greatest challenges is to cut unemployment and make its businesses competitive. The priority of the European Union must be to create the right conditions for employment and prosperity by completing the single market and working for further global trade liberalisation; not a fortress Europe, falsely protected by increased bureaucracy and state intervention. There is consensus, and rightly so, that unemployment has continued to remain high on the Continent because Europe does not have our flexible labour market, again a point well put by the noble Lord, Lord Lloyd-Webber. There is logic in this. If it costs more to employ and hiring and firing is made difficult, then employment will be damaged.

Britain has an outstanding record in Europe on creating jobs and our example could successfully be transferred to Europe. Since 1979, the UK economy has created as many jobs in the private sector as the whole of the rest of the European Union. We must continue to move forward with policies that enhance the competitiveness which creates jobs. This is no accident because the policies have been based on free trade and competition, reform of inflexible labour market regulations, the reduction of non-wage costs, investment in skills and sound macro-economics.

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Therefore, I believe that the role of the Government in any European negotiations is to protect and advance from this position. When Britain's interests are at stake, isolation in place of popularity is not a dirty word. It is artificial to draw a fault line between co-operation and integration on the one hand and isolationism and protectionism on the other. Indeed, the Government's right to opt in to the Schengen agreement demonstrates what is common sense--that sometimes Britain's geography, culture and traditions mean that our national interests differ from those of our European partners. But I hope that this common sense can be applied across the board. I urge the Government not to compromise British interests in their haste to sign up to the social chapter and support the proposed new employment chapter.

What worries me in those two contexts is the subtle salami-slicing of our current competitive position. Signing up to the social chapter jeopardises not only our economic success but the chance for our partners in Europe to compete competitively following our example. Some directives in the social chapter are covered by QMV (qualified majority voting) making it difficult to avoid legislation which could impose the high costs of the European social model on British businesses, because Britain would have no veto. Why open up the route to potentially damaging regulation on social security and social protection? Why rekindle employers' fears by putting an end to the flexible decentralised arrangements that have made the United Kingdom so attractive to international investors? Why, when unemployment is 7 per cent. and falling in Britain, but 10 per cent. and rising in many countries of Europe, threaten the very competitiveness and job prospects we have worked so hard to put in place?

In recent days, the Prime Minister has emphasised his admirable aspirations for European job creation and unburdened, deregulated labour markets which assist in the reduction of unemployment. He has downplayed the possibility that other countries may now try to use the social chapter to end so-called "social dumping" by countries which have lower non-wage costs, on the grounds that there is no appetite in Europe for "great rafts of additional legislation". But is it worth even taking the risk? The CBI issued a warning against the spectre of damaging labour practices. We would all suffer if damaging practices took on an unfortunate double meaning.

The second issue is the working time directive. The new treaty will not now recognise that our hard-won opt-out from the social chapter enabled us to be exempt from the working time directive. The working time directive will burden employers and cost jobs. It will not necessarily limit the working week to 48 hours. I genuinely fear that it will limit the working week to no hours for many people because there will be fewer jobs.

The Government support the proposed new employment chapter. But what benefit can Britain's signature on such a chapter bring to the people of Britain? I hope that we will not forget that although such treaties can create the right conditions for businesses to create jobs, treaties themselves only create jobs for treaty drafters. High or even full employment levels are the goal of every government. Physical enshrinement of

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this goal in treaty form has no positive effect, but it does have a negative effect of raising expectations without delivering a job. If raised expectations do not ring sufficient warning bells for a new government, the risk of the imposition of continental employment policies less successful than our own should do so, otherwise the brightly-feted new employment chapter could fast become the reviled unemployment chapter.

In conclusion, I want to concentrate on one point--the development of policies and the manner of the development of policies in this sector in recent weeks. The Prime Minister will have a hard enough job in Amsterdam negotiating for Britain on quota hopping and border controls. He talks of tough negotiations but I am worried that the Government may have broken the cardinal rule of negotiating by revealing a hand before the first round of cards has been dealt. For example, the Government have already proposed to extend qualified majority voting to four new important areas of policy--social, industrial, regional and environmental. Only two countries out of 15 put forward such specific proposals on the extension of qualified majority voting. The Prime Minister has talked of a "third way" between the European social democrat model of "worker participation" and the Anglo-Saxon model of free market capitalism. But the haste to support the employment chapter, and the end of the opt-out on the social chapter, belie the Government's words.

The Government say that they want an alliance of independent nations choosing to co-operate to achieve the goals they cannot achieve alone and that they oppose a European federal superstate. How do proposals to increase the powers of the European Parliament so that legislation currently decided by qualified majority voting by the Council of Ministers is subject to a simplified form of co-decision in the European Parliament enhance an alliance of independent nations? Every increase in the powers of the European Parliament by definition must reduce the powers of national parliaments, limiting democratic accountability and centralising more powers.

The Government have said that they want to make the Union more open, democratic and efficient. That is an admirable aim, but not if it is at the expense of democracy, efficiency and competition in our economy. The Government's rhetoric relies on talk of promoting employment and improving competitiveness, yet their actions speak louder than any rhetoric could. To date they have chosen to pursue policies which have distinctly failed to achieve these goals in Europe. It is certainly a fear that in their speed to integrate, the Government will concede in haste and repent at leisure.

As my noble friend Lord Marlesford eruditely said, the European Union should be a partnership of nations, with Britain at the heart of that partnership. The European Union is and has been a success story. The degree of co-operation in Europe today, from the fight against international crime and drugs to higher environmental standards, is extraordinary, unprecedented and praiseworthy in history. It is a partnership that is more than a free trade area, but must be less than a federal state. The European Union should

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do less as time goes on, but do it better. In this case, less will really mean more, because more trade, more jobs and more prosperity will flow.

I very much hope that the Minister will be able to respond to some of these points. There is no doubt about the depth of feeling and good wishes that go with the Minister and the Government to Amsterdam to obtain the best possible deal for Europe and to build on the unquestioned motivation and drive that the Government have displayed to date. Our top priority should be job creation and prosperity. If the Government want to benefit both the people of Britain and the people of the European Union, at the IGC they will work for a decentralised, deregulated and competitive Europe. I seriously hope that the creation of private sector jobs and prosperity will be the measure of this Government's true leadership in Europe, for which I wish them well.

6.10 p.m.

Lord Richard: My Lords, as is very often the case, your Lordships' debate today has been fascinating. We have heard various contributions from all sides of the House expressing all kinds of views. Before I begin answering the debate, perhaps I may first express my sincere congratulations to the noble Lord, Lord Lloyd-Webber. It is difficult to say "Lord Lloyd-Webber". I have the same trouble with saying "Lord Boyd-Carpenter". I express my sincere congratulations to the noble Lord, Lord Lloyd-Webber, on his speech. On 2nd May I wondered whether we would have the pleasure of listening to the noble Lord, Lord Lloyd-Webber, having regard to the result of the election, but we are delighted that he did not do what the newspapers reported: that he intended to emigrate. Not having emigrated, we were delighted to hear him this afternoon and we look forward very much to hearing him again in the near future. He spoke on a subject which he knew something about. That is one of the qualities of this House which is not always displayed in other debating chambers. On the whole, but not invariably, speakers in this House do have something to say and the noble Lord, Lord Lloyd-Webber, said something this afternoon.

I also congratulate the noble Lord, Lord Moynihan, on what I believe was his maiden speech from the Dispatch Box. I agreed with a large part of it and it seemed to me to be the pattern for the position of the Opposition in this debate. I listened to the noble Lord, Lord Moynihan, and his Leader the noble Viscount, Lord Cranborne, and I am not absolutely certain why we are having this debate at all. I share the puzzlement of the noble Lord, Lord Beloff. I think I can agree with the Motion which is before us. It calls for measures,

    "designed to enhance the ability of the European Union to compete economically worldwide"--
there is no problem there--

    "and thereby lay the foundation for jobs and prosperity throughout Europe".
I find no difficulty with that. The Motion then states,

    "and to move for Papers".
I have no difficulty with that either.

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As the debate progressed it became perfectly clear that we were going to have the kind of debate that the Government, as they then were, used to try to have when the Labour Party was in Opposition; that is, what the then Government thought Labour Party policy would be when we had won the election. If it had been a debate with old Conservative versus old Labour attitudes towards the European Community, I could have well understood the speech from the noble Viscount. But looking at what this Government have actually said and done in relation to the Community over the past four weeks, frankly, and with respect to the noble Viscount, I found his speech to be overblown and his concern somewhat synthetic.

Perhaps I may deal with two or three specific questions which I have been asked. My noble friend Lord Barnett asked me about EMU and whether it was going to be discussed at Amsterdam. Like the noble Lord, Lord Moynihan, I find it inconceivable that it will not be mentioned at some stage in the course of the discussions. He wanted to know the Government's position. My right honourable friend the Prime Minister answered a Question at Question Time in the other place. He told the Commons that we would keep our options open on whether the UK should join a single currency. He stressed,

    "We have made it clear ... that it is highly unlikely that Britain would want to join the first wave of monetary union. I ... also made it clear, as we have always said, that the criteria for monetary union should not be fiddled, fudged or botched in any way. If they are, the answer is not to delay--the answer is not to proceed".
That is the Government's position as expressed at 3.30 p.m. this afternoon.

The noble Lord, Lord Reay, asked a few specific questions which I would like to answer specifically right at the outset. He asked about the Government's attitude towards a Commission proposal (which I thought he believed was due to be published today) for obligatory workers' councils for all firms with more than 50 workers. If that is proposed today, the Government will obviously need to consider it very carefully indeed. Under the social chapter there is already provision for workers' councils for large firms with over 2,000 employees. We are doubtful whether it makes sense to legislate on this new measure at EU level. We believe that it should be left to member states to decide and, within that, it should be left to individual employers. It will clearly impose additional cost. That is the provisional view that the Government have on this matter, which I hope may be somewhat comforting to the noble Lord.

The second question the noble Lord asked was about quota-hopping and what we expected from the Amsterdam Summit. Negotiations in the IGC are still going on. The Government attach great importance to achieving progress on quota-hopping before the conclusion of the IGC. Therefore, we are looking actively at all the available options with the European Commission and the presidency. I am sure that the House would not expect me to disclose a greater part of one's negotiating hand. It has been a strange debate. On the one hand I have been told that we should be more

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open. Indeed, the noble Lord, Lord Moynihan, said that we have been too open and that we have disclosed too much. You are damned if you do and you are damned if you do not. I shall disclose as much as I believe it prudent to do.

Like many other speakers in this debate, I and the Government recognise that our future lies unequivocally in the European Union. That means that we shall play a central part in the Union's affairs. I believe that we have a clear view of Britain's interests in Europe. A month ago the Prime Minister outlined in Manchester the five key priorities for this Government. He also explained them to other European leaders in Noordwijk a little under two weeks ago. Perhaps I may set out those priorities as we see them. First, the position of the single market; secondly, enlargement to the east; thirdly, reform of the common agricultural policy; fourthly, major action against unemployment and for a flexible labour market; and, finally, real foreign policy co-operation.

That agenda is very largely shared by other governments in the Union. If I can use the analogy, the UK is now swimming in the European mainstream. That is a change. As far as we are concerned, the fresh start that we have initiated means no more posturing and confrontation for the sake of the posture; no more alienating partners for the sake of alienation; no harming of British interests for no conceivable, sensible purpose.

We are helping to shape the European agenda. We are going to use our presidency to push the European Union in a more competitive direction; for instance, to take firmer action against state aid which leads, as we know, to substantial competitive distortion. Our recent proposals to the IGC on fraud are setting the agenda now in financial management. The IGC, of course, is only one in a rolling programme of EU negotiations in which the Government will be pursuing those objectives. They also include EMU, future financing and enlargement.

As regards EMU, substantial convergence among the economies which take part is essential for its success. In principle it could have substantial benefits such as lower long-term interest rates, reduced speculation and transaction costs and, perhaps most important, greater stability. A single market may well work better if there were a single currency. The Government are quite determined to be at the centre of the debate ensuring that if EMU goes ahead it does so on a strong and sustainable basis.

We recognise that there are formidable obstacles in the way of Britain being in the first wave of membership if EMU takes place on 1st January 1999. In any case it is quite clear that the Cabinet, Parliament and the people will need to agree before the UK can join. It seems to me that what is missing on this whole issue is a real national debate about the economic effects of EMU, particularly on the prospects for growth and employment, to enable us to judge as objectively as we can whether EMU membership is in the national interests of the United Kingdom or not. On this important subject, we are not going to rule anything in

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and we are not going to rule anything out until those arguments have been debated and until we have considered them in full detail.

I turn now to enlargement. We believe that enlargement, as rapidly as is feasible, would strengthen the stability of the Union and prosperity among our neighbours. We believe that it would help to open up new markets and opportunities for British business and British citizens. Enlargement negotiations will start within six months of the end of the IGC. In the context of enlargement, as we said in our manifesto, we shall be pursuing reform of the common agricultural policy as an urgent priority. We have debated this previously and I remember saying then that if ever there was an occasion which would demand reform of the CAP, it would be enlargement of the Union into Eastern Europe and the incorporation into the Union of the agricultural sectors of some of those countries. The CAP could not cope with that and it therefore seems to me that enlargement and the reform of the CAP are, in many ways, linked. In the context of enlargement, we also want to look hard at the structural funds and at the ways in which they may be reformed.

I have said that various negotiations are to take place at the same time as the IGC. However, since the Motion and the debate are supposed to be about the IGC, perhaps I may now turn to it. The first challenge in Europe for the new Government will be to obtain a clear and satisfactory outcome of the IGC at Amsterdam. It is an opportunity to secure two broad goals, as my noble friend Lady Ramsay said: preparing EU institutions for enlargement and making Europe more relevant to ordinary people. That is important so that the vital objectives of securing enlargement and prosperity--increased prosperity, we hope, for this country--and democracy and transparency can be carried through. We have already taken the initiative in the IGC by tabling proposals to strengthen the fight against fraud. This House has urged that upon governments on many occasions. We seek also to increase transparency in the Union. At the same time, we have agreed to a wide range of IGC proposals on strengthening fundamental rights and on the environment.

We have also dropped some non-negotiable UK proposals on, for instance, the reform of the European Court of Justice. We are now back in the European mainstream, unlike the previous government, who, frankly, tied themselves into ideological knots and isolated us in Europe--very frequently to no purpose whatsoever.

As I said last month when I opened the debate on the gracious Speech in your Lordships' House, the UK Government have a positive agenda at the IGC. We do not see it as simply a 5,000 mile service of the treaty on European Union, as did the last government, and as was repeated today by the noble Lord, Lord Moynihan. We hope that we shall be able to complete the IGC at Amsterdam. In doing so, we shall of course pursue and defend our national interests. We shall achieve real benefits for British citizens rather than making us widely disliked for ideological Euro-scepticism that shrieked "No, no, no" rather than considering proposals on their merits. We are not going down that road.

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The main point which the noble Viscount made this afternoon related to the social chapter. He seems to believe that there is a contradiction between social protection and the creation of new jobs and rising prosperity. Looked at with any kind of historical perspective, that is, frankly, false. The most advanced countries in the world, including the United Kingdom, have significantly higher overall levels of employment, health and safety, and consumer protection than ever before. The UK now has higher standards than many of its competitors, including Asia and America, yet UK firms continue to win export markets. Higher standards that lead to higher skills and a stable framework can promote, not undermine, growth and competition.

In our view, it is dangerous to take a totally one-sided view of the labour market. We agree that businesses should not be weighed down with unnecessary red tape which can prevent them creating jobs, but it is equally important to empower employees so that they can realise their skills and potentials. That is the other side of the labour market. It involves providing a stable framework of minimum standards and interventions to improve skills. I conclude that we should do more--not less--to enhance the quality of UK products and the skills, training and employability of employees.

The social agreement has been the basis for two modest proposals to date, on parental leave and on works councils. There are no ogres in the pipeline (if I may mix two metaphors), although we will be on our guard to ensure they do not arise. Some of our EU partners may have excessive social costs--but that is a problem of their national arrangements not of Community or European Union agreements. By playing the UK's rightful role at the centre of EU debate, we can push the agenda in social affairs in our direction.

There have been two main attacks this afternoon on the social agreement. One came from the noble Lord, Lord Moynihan, who said, "You are taking a terrible risk and you must not take risks". Elevating stagnation to a test of government competence seems to be going a little far. The other attack came from the noble Lord, Lord Lloyd-Webber. With respect to the noble Lord, perhaps I may repeat what the noble Lord, Lord Wallace, said to him: his argument is not against the social chapter but against the domestic worker protection legislation of Germany, to take the case that he indicated.

The number of issues that it will be competent for the social chapter to deal with at European level is very much more limited than the scope or the number of measures with which a domestic government can deal in this area. Nobody is suggesting that we have opened the door to the mass importation of all the details of so-called "Continental" labour practices and labour laws into this country by signing up to the social chapter. I note that the noble Lord, Lord Moynihan, does not say that. He says that it is a risk; not that we have done it. There is a contradiction between those two arguments. As I have often said in your Lordships' House, the social chapter is actually a pretty mild and pallid document.

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I turn now to some of the other issues that will arise at the IGC and in Amsterdam. The problems of employment and labour market flexibility are bound to be addressed, as are the single market, enlargement and the Agenda 2000 reform agenda, which is mainly aiming at improving and modernising the Community's management of its resources. I do not want to weary your Lordships with a detailed account of each of those issues, but should like to say a word or two about at least two of them.

I turn first to the single market. The IGC is, of course, not the only issue which is being debated at the Amsterdam European Council in June. The meeting will also discuss the Commission's action plan for the single market. This proposes ways in which single market legislation can be better enforced and implemented across the European Union. It also proposes further ways in which the single market can be further improved. Completion of the single market is a top EU priority for this Government. It is good for competitiveness, good for business and, most importantly, improves the prospects for jobs and prosperity across the Union. We have set ourselves the target of completing the single market by the end of our Presidency of the European Union--in other words, by July next year.

There is a great deal still to be done. We have identified a number of areas for immediate action. We want to see better enforcement, and enactment into member states' laws, of the single market legislation which already exists. There is no point in agreeing to drop barriers to trade between member states if the legislation which ensures that is not effectively adopted and enforced in all member states. We want to see the existing rules simplified where that can be done without making them less effective. We need the minimum legislation that works--not legislation which ties up our businesses in red tape. Parallel with this, we want action to be taken against the unfair use of state aids that can distort competition. Major aids for rescue and restructuring can be particularly damaging; so can subsidy competition between member states for corporate investments. Finally, we want to see the single market improved in those areas where it has been previously neglected.

This evening we heard a good deal about the importance of competitiveness and that the policy of the Government may endanger competitiveness, or that at least it may not foster it. We support the proposals for a new employment chapter in the treaty. We believe that it responds to citizens' concerns about jobs and sets out a framework for co-ordinating employment policy with other member states where that is of benefit. The United Kingdom supports the German proposals to prevent the employment chapter from being used as a basis for extra EU spending or the movement of competence over employment policy to EU level. We also welcome language on employability and labour market flexibility in the new employment charter. The House will be aware that we support the inclusion of the social agreement in the treaty. That will allow us to play a

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central role in setting the European agenda for action on social policy as well as providing decent minimum standards across Europe.

We believe that competitiveness should be written into the treaty as one of the objectives of the Union. This will ensure that the various Union institutions--the Commission in framing proposals and making decisions, the Court in its rulings and the Council in its lawmaking and executive decision-making--take into account the impact of their decisions on competitiveness. We also believe that there should be a reform of infrastructure financing to allow a wider variety of public/private partnerships. The Government are committed to public/ private partnerships as key elements in implementing large-scale infrastructure projects both in the UK and throughout the rest of the European Union. For example, in the Intergovernmental Conference we are pressing for an amendment to Article 129C of the treaty, to make it clear that financial assistance from the Union's budget can be offered to trans-European networks.

As part of our drive to complete the single market we will work to try to eliminate unfair state aids. I make one point on state aids that perhaps I should have made earlier. They are particularly unfair to poorer member states which are unable to match the sums that are paid out by their richer neighbours. In line with this policy, in the IGC we will strongly oppose proposals to legitimate state aids in some areas where that may be a retrograde step. For example, in our view the proposal at the IGC to give blanket exemptions to services of public interest, or suggestions that state-owned bodies should be exempt from the requirements on state aid, risk undermining our reform agenda. We intend to resist them.

This is an answer to the question raised by the noble Lord, Lord Wallace. We support the extension of competence under external economic relations to intellectual property rights and services where this helps in the liberalisation of world trade. We believe that more liberal world trade will bring economic gains in the form of more competition and so lower prices for purchasers. It should bring more export markets to UK businesses. Therefore, we find it an attractive proposition. However, we will negotiate the extension of competence so that it is strictly defined to make sure that it does not spill over into taxation, prudential regulation or other international fora such as the IMF and the World Bank. The current presidency proposal broadly reflects that view, although we will be pushing to tighten up some of the wording. I hope that I have given at least the spirit of the Government's answer to the spirit of the noble Lord's question.

I hope that this has been a serious reply to what I thought would be a serious debate. I thought that it was worthwhile putting before the House in some detail the Government's approach to the IGC in a number of different areas. I resist the temptation to go down the well-worn political paths that have been followed in this House on Europe and debates certainly since I have been here over the past seven years. Having listened for many years to the noble Lord, Lord Beloff, my noble friend Lord Stoddart and various Euro-sceptics who are not here in person tonight but who are certainly here

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in spirit, I still do not understand why 14 of the 15 countries in the European Union are able to co-operate on what they perceive to be their common interests but the United Kingdom cannot. Ever since I became interested in a more united Europe that has always seemed to me to be a mystery. I can only say that this debate has done nothing to dispel that mystery.

6.35 p.m.

Viscount Cranborne: My Lords, I am extremely grateful to all those who have taken part in this debate. One of the agreeable aspects of your Lordships' House is that if your Lordships are disposed to go in for an early bath nothing will stop them from doing so. It is an agreeable change in your Lordships' House in debates of this kind that we do not find ourselves being delayed way beyond your Lordships' accustomed dinner hour.

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If this debate has been brief I am grateful that it has not lacked quality, particularly as regards the maiden speech of my noble friend Lord Lloyd-Webber.

I bite back my instant rejoinder. Perhaps the noble Lord the Leader of the House tempted me to make it when he said that he sat down still mystified by some of the opinions of your Lordships. I have always found that some of my thoughts have been clarified by listening to your Lordships in debate. I am sorry that the Leader of the House has not followed my example, but no doubt with practice he will do so. With the leave of the House, and with gratitude to those who have taken part in the proceedings this afternoon, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.

        House adjourned at twenty-three minutes before seven o'clock.

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