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Lord Tebbit: My Lords, does the noble Lord agree that it depends which way one defines the democratic electorate? If one's view is that there is a European state, then the European Parliament represents all the people of that state, so it would be a democratic move. But if one takes the view that there are sovereign states, as the noble Lord quite rightly says, it would be an anti-democratic move. Surely that is where we are today. We have to decide whether we want a European state--democratic, bureaucratic or any kind--or we want to remain with the union of sovereign states. It is the issue which can no longer be fudged.

Lord Stoddart of Swindon: My Lords, what the noble Lord says is absolutely correct.

Noble Lords: Oh!

Lord Stoddart of Swindon: My Lords, did the noble Lords on the Liberal Democrat Benches expect me to say anything different?

Noble Lords: No!

Lord Stoddart of Swindon: My Lords, as usual, the noble Lord, Lord Tebbit, is right on the ball. We have to make up our minds whether we are to remain a self-governing nation state or whether we shall be absorbed into a country called Europe. That is the decision we shall eventually have to take.

Lord Wallace of Saltaire: My Lords, will the noble Lord accept that we are not a nation state? The United Kingdom has never been a nation state. We are a united kingdom of several states. Under the noble Lord's own Government we are currently going through a set of constitutional reforms which will make us less a unitary state than we were.

Lord Stoddart of Swindon: My Lords, Wales has been part of the Union since 1536, I believe; and Scotland since 1707. That is a union which has stood the test of time. It has been extremely successful over a long period of time. I believe that it will continue to

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succeed provided it remains united as a united kingdom. That does not apply to what is an artificial union called the European Union.

Perhaps I may return to my speech. Fortunately Section 6 of the European Parliamentary Elections Act 1978 provides that no treaty which increases the powers of the European Parliament shall be ratified by the United Kingdom unless it has been approved by an Act of Parliament. In the light of that section of the 1978 Act, we shall be able to scrutinise Clause 2 of the Bill very closely indeed. Those who framed that clause of the 1978 Bill were far seeing and knew what the Euro-mongers would get up to once they achieved an elected assembly.

And of course there is the power of the President of the Commission to reject commissioners appointed by national governments. This will virtually give him the right to select his own cabinet--a precursor perhaps of the coming conversion of the Commission to the de facto European Government so desired by some member states, the Commission itself and the power hungry European Parliament.

All the proposals in the Amsterdam Treaty are of vital importance and will need to be examined in detail. The proposal for a common foreign and security policy, which hands more influence over foreign affairs to the European Council and the Commission, especially to the bureaucrats, will need to be closely scrutinised to see whether that will undermine the principle that the foreign policy of this country exists to promote British interests. I sincerely hope that that will not be undermined by anything in the treaty.

It will also be interesting to know what would be the effect on our policy in Iraq at present if the Amsterdam arrangements were now in place. We shall be able, I believe, to examine in some detail economic and monetary union, and the stability pact arrangements. It will give us the opportunity to probe the Government's real thinking on the subject of EMU third stage and a single currency. I trust that a Treasury spokesman will be made available to deal with that subject.

This Second Reading has shown that the provisions of the Amsterdam Treaty are not trivial but deal with matters of great moment for our country and people. This House must indeed do its duty well, and must consider, scrutinise and amend the Bill in such a way as to prevent yet further ceding of our sovereign powers to institutions alien to our traditional ways of self government and inimical to the best interests of the British people.

7.16 p.m.

Lord Beloff: My Lords, the noble Baroness, Lady Williams of Crosby, began her speech some time ago by criticising my raising in this House a matter of its internal constitutional arrangements. The fact that this is an important issue has just been agreed to by the noble Lord, Lord Stoddart of Swindon. I find it surprising that the noble Baroness should think that the House is wasting its time when it considers matters upon which it has, or could have, some influence and is not wasting its time when it is asked to listen for the umpteenth time,

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if I may say so, to the familiar litany of the quisling tendency in this House which goes by the curious name of Liberal Democrat since its adherents all seem to believe in an institution which is neither liberal nor democratic.

The debate has nevertheless been useful. We have heard some important contributions, notably--I do not always agree with him--from the noble Lord, Lord Cockfield. It is a fact that the Amsterdam affair was supposed to advance the cause of European enlargement; and it clearly failed to do anything of the kind, as the noble Lord, Lord Cockfield, pointed out, because it would have to make changes which individual governments were not prepared to make.

Similarly, we are told that there has been some advance towards a common foreign and security policy. When one looks at the record of the European Union in that area, one wonders that even its most devoted advocates in this House raise that issue. What constructive role did the European Union play in Bosnia? I shall not go into the less than constructive role of certain member states. What has it been able to do with regard to the appalling events going on in Algeria--a country which is close to many member states and which treats with the utmost contempt any idea that the European Union can have a say in whether those massacres continue? There is not the slightest evidence at present that the countries of Europe have such common views on major policies that any institutional way of creating a single policy would do any good at all.

I am tempted to go further. The most troubling effect of the Amsterdam Conference could be to make people realise that perhaps the whole European Union enterprise was an error based upon an inadequate comprehension of the nature of Europe and its countries; and the effort on the part of certain members of the continental elite to create a single European state (for that is what it has been)--of which the absurd suggestion of a common currency, which flies in the face of all economic argument, is just the latest phase--has now brought home the fact that if we are to achieve (here is the one point upon which surely all noble Lords are agreed) a Europe of countries co-operating with each other in a friendly fashion, stretching at least up to the frontier of the Russian empire, we will have to start all over again. We will have to drop the idea that there can be law-making institutions of the type described. We will have to say that for a long time to come countries will need, unless they make their own arrangements to the contrary, to control their economic destinies, including their currency, interest rates and so forth; and, alas, that they will have to continue--and this is a pity--to restrict to some extent the free movement of people, which in the last resort is what we should like to have. Is it likely that any of the continental countries would in fact welcome the kind of free movement that makes possible the American economy with a single currency and a single market? Why live in a world of illusions? Why not try to tackle matters about which something could be done?

I agree--as I must occasionally--with the noble Baroness, Lady Williams of Crosby, that we are considerably at fault, so far as I know, in our treatment of asylum seekers and refugees. But that is a matter to which the Government could give their own attention. They

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could put more civil servants on to dealing with that crucial issue rather than tangling them up in various European notions, experiments, review bodies and so forth. There are practical things which could be done and which a government could do but which are neglected because of the absurd belief that somehow or other a thing that has clearly gone wrong will suddenly be put right.

There has been talk of the European Parliament "filling the democratic deficit". What do people in this country think the European Parliament is? They know that it is a body which builds itself enormous and expensive palaces. Saddam Hussein has nothing on the European Parliament when it comes to architecture and comfort. They know that, for reasons of national state bargaining, it is compelled to take its circus once a month all the way from Brussels to Strasbourg and start all over again. People do not regard the European Parliament as a serious body capable of filling a democratic deficit. They know something about their own parliaments. They may think that they are good or bad, or that the wrong party is in power. But, fundamentally, nearly all member states (there are one or two exceptions) have serious democratic and liberal institutions. Let us build on those, and not be carried away by empty rhetoric.

That was fine when Jean Monnet was alive and Europe was finding some way out of the depths into which the Second World War had plunged it, but it is of no possible relevance to the kind of economy, society and countries that we now are. At least our debates on this minimal, rather than modest, treaty will give us a chance to examine some of these serious issues.

7.25 p.m.

Lord Desai: My Lords, it is always a pleasure to follow the noble Lord, Lord Beloff. I welcomed his constitutional intervention. It was good for us to stop and think about an appropriate response to this treaty. While I voted against the noble Lord's Motion, it was nevertheless good to have the issue discussed. It may also have a good unintended consequence. The only way for the Government to get out of the problem is for them immediately to promote my noble friend Lord Whitty to the status of Minister, because he alone can pilot this Bill through its Committee and Report stages. It was a particular pleasure to hear him introduce the Bill. I remember--although my noble friend may wish to forget--the day after the 1992 election when, at half-past four in the morning, we were wandering along some building on Millbank and we embraced each other in a forlorn way. At that time there was absolutely no hope. Little did we think that in a few years' time he would, quite properly and deservedly, be leading for the Government on such an important issue. I very much welcome his being there and arguing this case.

I am in the peculiar position of being neither a Euro-sceptic nor a satisfied enthusiast. I am a disappointed enthusiast. When the issue was under discussion in 1973, I was not in Parliament but was just an ordinary citizen. I had no doubt that Sir Edward Heath was fudging the issue. I clearly saw that. I was a

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federalist--perhaps even worse, a unitarian. I thought that we were entering Europe because within my lifetime there would be a European parliament, possibly with two chambers, that that European parliament would elect a cabinet and that that cabinet would run Europe. That is what I believed would happen. That is what I mean by a federal Europe; I have no other definitions. So it was a surprise to me to learn that people genuinely thought it to be a matter of a common market, a Europe of nation states with sovereignty and so on. I was young then. As I grow up, I become more disillusioned with the way in which the world fails to follow my instincts. I voted yes in the referendum. At the time I was in a small minority of pro-Europeans in the Labour Party.

The noble Lord, Lord Cockfield, is entirely correct. What happened was that, following the Single European Act, somehow the whole process got speeded up--quite unnecessarily so. The European Community is not yet a single market. Before it can become a single market--which should have been allowed to happen over more than just four or five years; merely to pass the laws takes more than four or five years, and more time is needed to create a single market--it started jumping onto the single currency bandwaggon. And before the single currency is even in operation, there is the question of enlargement. As I said, I am a disappointed enthusiast. Not much reference has been made to this, but the spectre which haunts this debate is the Edinburgh Summit. That summit stopped the federal European experiment in its tracks and it has never since gained momentum. I know that the noble Lord, Lord Tebbit, does not wish to take the credit for his government's achievement.

We are about to embark on a single currency. Let us for the time being suppose that it goes ahead. It is generally agreed that, if there is a single currency and different economies, what economists call asymmetric shocks will cost somebody a lot of money. Ideally that body should be the federal European Union budget. Here I agree with the noble Lord, Lord Tebbit: if you want a single currency, you should have a single state. There should be no messing about. People who used to be communautaire have taken the view that we should have a single currency, but with a ceiling on the budget of 1.27 per cent. I think it unlikely that the unspent part of the 1.27 per cent. could be devoted to enlargement. Countries have already said: "If you have unspent money, we want it back".

Since the Edinburgh Summit, major countries have behaved in a completely non-communautaire fashion. This train is not getting anywhere; it may yet do so, but at the moment it is not. The Amsterdam Treaty is a perfect example of that.

The noble Lord, Lord Russell-Johnston, gave a wonderful maiden speech, with much of which I agree. Like him, I am a purist, and I do not like what is going on. Perhaps the Union will never be as I should like it to be. But the Amsterdam Treaty was meant to solve a lot of problems. As the noble Lord, Lord Cockfield, said, the intergovernmental conference which preceded it utterly and completely failed; it did not solve a single problem that it was supposed to solve. Therefore

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enlargement looms. I am sure that noble Lords know my view on enlargement: I believe it is a disaster. But, if we are to have enlargement, there should long ago have been preparation in the form of institutional and budgetary changes and budgetary enlargement.

Here we have an experiment, which has unfortunately stalled, in which there are three problems: single market, single currency and enlargement. Individual, powerful countries are no longer behaving in a co-operative fashion with regard to those problems but in a divided fashion. For example, preparations to meet the convergence conditions of the Maastricht Treaty have been carried out by governments in beggar- my-neighbour separate economic deflationary policies. There has been no co-operation whatever between Germany, France and Italy about how they could together meet the convergence criteria. The result is that, as my noble friend Lord Bruce said, unemployment will grow. That is protectionist behaviour.

I should love to believe, as the noble Lords on the Liberal Democrat Benches believe, that the train is still moving happily towards its destination. I do not believe it is moving anywhere. However, perhaps to the annoyance of my noble friend Lord Stoddart of Swindon, I should welcome it if the European Parliament, such as it is, had more power. Again I agree with the noble Lord, Lord Tebbit. I believe that the European Parliament is a democratic institution. I would rather that the European Parliament should decide who the president of the Commission should be than have the bickering between members of the European Council or the Council of Europe. As we saw on the previous occasion, that does not produce the best president but the one who is least disliked, for completely dubious reasons. I should like the president of the Commission to be popularly elected--that might be rather fun--but with, as the noble Lord, Lord Garel-Jones, said, a second chamber which would represent national parliaments.

This is a modest and not very consequential treaty. Why do I think that? I remember the Second Reading debate on the Maastricht Treaty which ran to two days. I remember that at 1.30 in the morning the 124th speaker from the Back Benches--the noble Lord, Lord Tebbit--spoke. One hundred and fifty Members were in the Chamber. The Maastricht Treaty mattered. This treaty does not matter. However, let us wish it luck and get it out of the way so that we can turn our attention to something serious.

7.35 p.m.

Lord Howell of Guildford: My Lords, as I inflicted my views on the Amsterdam Treaty on your Lordships' House when we debated this rather uninspiring treaty on 28th July, I shall confine myself to three detailed points on the treaty and the legislation before us. I apologise that, for unavoidable reasons, I may not be present to hear all the speeches at the end of the debate.

The three issues I wish briefly to discuss are subsidiarity, to which the noble Lord, Lord Stoddart, referred; the stability pact, which was engineered at Amsterdam and is not strictly in the treaty or the Bill

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but lies behind both; and the question of common foreign and security policy, which seems to be in deep trouble at the moment.

On the subsidiarity issue, like the noble Lord, Lord Desai, I have a sense of disappointment. We were told at the time of Maastricht that this would be the great thing; that Maastricht was a turning point and from then on there would be an unravelling of the undue acquisition of central powers by the Community--in some cases, high officials admitted, unnecessary powers--and that there would be a process of unwinding these and in future directives examining them most carefully to see if they were necessary at all at Community level. As the noble Lord, Lord Stoddart, said, not very much has happened. Even before the Amsterdam Treaty only one directive, on the management of zoos, was examined to see whether it could be delegated back to the nation states, but that is about it. In this treaty and this Bill we see that, far from the whole subsidiarity idea being carried forward, it is undoubtedly, and to my great regret, carried back. In Protocol 30 to the treaty all kinds of new hedging conditions are laid down, almost as though the high officials concerned with drafting these treaties have discovered that, unless corralled, subsidiarity could, after all, be quite a dangerous instrument in taking power from the centre.

It may be said that those who believed that subsidiarity could deliver the goods were naive, too dutiful or too anxious to support the government of the day. I plead guilty to all three weaknesses at times. What I now read in Protocol 30 makes me realise that even what we have is being taken away. We are told in Protocol 30 that subsidiarity must not affect the acquis. All acquired powers cannot be unravelled even when the pattern of Europe changes, the Berlin wall falls and the world is completely different. The acquis is absolutely sacred and cannot be affected by subsidiarity. We are told that it must not affect the principles by which the Court of Justice chooses to uphold Community law. That is taking a huge sledgehammer to the subsidiarity belief in the hope that either as a legal principle or a political one--there is a debate as to which it is--some of the centralist tendencies of earlier years in the Community and the Union, when economies were totally differently structured and the behaviour of economies was different, could now be unwound in the new conditions of the information society which did not exist when the original institutions of the Community were fabricated.

We are told that subsidiarity must not call into question the powers of the European Community-- a second sledgehammer blow in the same place. It must not apply where the Community has exclusive competence. That means that at no point can one re-examine issues and question whether it would have been better if they had been handled at national and supranational level. The curtain is down on that as well. Subsidiarity is not to intrude ever again into those areas.

There are some mitigating sops to the subsidiarity case. It says in the protocol that care should be taken to respect well-established national arrangements. Some of us would argue that not enough care is taken. But that

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is the sad story of subsidiarity. Those who believe that it is a marvellous treaty and that subsidiarity is a good thing I am afraid are riding two horses travelling in opposite directions. The truth is that centralism rules in the protocol. I used to argue with my friends in the Labour Party--socialists--many of whom said that we could have socialism without state centralism, without state socialism; it could be done. I believe that it is possible to have good Europeanism without centralism. However, the people who put their signature to Protocol 30 do not believe that and did not like the tendency of those of us who were arguing the other way.

I want to say a word on the stability pact and monetary union. Again, it is not directly covered by the legislation before us but obviously lies at the heart of the debate. Amsterdam marks the final preparations for the third stage of EMU on 1st January 1999. There are a great many anxieties felt about that and I have many also.

I hear what my noble friend Lord Tebbit says about sovereignty. Of course he is right. It is absolute; either we have it or we do not, in the literal, fundamental sense. But operational sovereignty on the monetary front has been drifting away from independent nation states for years and the drift has now accelerated. If we put forward too much of an argument about sovereignty in relation to the monetary union issues, we shall get on to the wrong track. The operational sovereignty was taken away. From the days of the gold standard we have not had operational sovereignty in the monetary field.

The real problem with monetary union is that it will be impossible to guarantee the right exchange rates at the moment of freezing them on 1st January. No one has the least idea what the right rates will be for the three years ahead and it will be a dangerous time. There will be the task of managing 12 currencies--assuming that there are 11 members of the currency zone, which is not an optimal zone anyway--the euro being the new one. Huge technical monetary problems will arise. They may be boring and people may not want to understand them, but they will be extremely destabilising.

Given the obvious lack of convergence--except in the fudged Maastricht criteria sense--there will be immediate adverse consequences. We will not have to wait for the first big downturn in the European economies. The present recovery is faltering somewhat and the impact of the single currency problem over the next three years on the faltering European economies will be extremely serious. In my view the stability pact--desperate rearguard action by the Germans to try and plug the gap that they suddenly realised existed in the monetary union system--will be blown away by the fiscal expansion of governments determined to stay in office and not be thrown out by having to pursue policies of growing unpopularity with ever-rising unemployment.

We will debate that on another day. Let me turn to the common foreign and security policy. I want to say just a word or two on that. I hope to hear the speech of the noble Lord, Lord Wallace of Saltaire, who speaks with great authority on these matters and we heard a trailer of that. But these are my thoughts on the situation.

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This is an area where there is a major expansion of policy in Title 5 of the Treaty of Amsterdam. It goes into considerable detail. It is also an area where, in the past, the enthusiasts for pooling sovereignty made quite a splash. They have always said, "This is the area where we will create Europe as a bloc; it will be able to throw its weight around. This is the state of Europe in the new world of super powers and super blocs and this is the pool we want to be in". Almost a sea of solidarity was conjured up by the enthusiasts for a common foreign and security policy.

The treaty tries to reinforce the whole pattern, the whole framework of a common foreign and security policy. It requires members to refrain from actions which impair cohesiveness. It asks them to decide on common strategies. It insists that they ensure that national policies conform to common positions. It insists that common policy should embrace humanitarian, rescue tasks, peace-keeping and peace enforcement. The Bill is an extremely ambitious document and if one believed for a moment that any of those things could be delivered other than on paper, that would create a pooled entity--a powerful European bloc which would be a great force in the world.

That is the theory, but what is the practice? The practice is what we see before us and to what my noble friend referred. We only have to look over the past week or 10 days to see the reality. The practice is that, faced with a real issue of a humanitarian nature--what could be more humanitarian than trying to control a maniac in the Middle East with powers of anthrax spore?--faced with a major strategic issue of world stability, the whole thing falls apart. France goes in one direction; the Germans give grudging support from the sidelines; there is silent embarrassment from other members of the European Union; and the British go along strongly with the American stance. Indeed, the only robust support for the common policy that emerged is from the eastern European countries. They are not yet even members--Poland, Czechoslovakia and the gallant Baltic three. They uttered strong words saying that they are ready to support a serious common policy to deal with Saddam Hussein.

What has happened is not merely that common foreign and security policy has failed to deliver on this issue; it has done more than that. It has greatly damaged the credibility of the European Union as a force in foreign affairs. There are a number of issues where European Union countries can work well together and should do so in a trans-governmental setting. That is the way that they should and can operate effectively. However, if we build up this attempt to impose a common foreign policy on issues where there can be no common line or where, as soon as we get down to the realities, national interests intervene and divide, we end up with a worse situation than when we started. If we build up, then when there is failure everything is let down; discredit emerges; failure of diplomacy emerges and the world and Europe are set back by the over-ambitious attempt to create too much unity where none can exist.

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Common issues, yes; trans-governmental handling of those issues of an intense kind, certainly, all the time; but the attempt to supranationalise foreign policy was going to be a failure from the start. If pursued through this treaty and this Bill, it will lead to more failures, more damage and more disunity in Europe which deeply offends those of us who regard ourselves as good Europeans.

7.48 p.m.

Lord Taverne: My Lords, I had not intended to refer to the specific issues raised by the noble Lord, Lord Howell of Guildford. However, I want to take him up on what he said with regard to the period of difficulty in managing what he called 12 different currencies for the three years after 1st January 1999.

I agree that there is possibly some problem in relation to the period between May, when the announcement is made of what the currencies will be converted at, and 1st January 1999, but after 1st January 1999 the position will be the very opposite of the ERM. The noble Lord spoke of managing 12 different currencies. There will not be 12 different currencies. There will not be an exchange rate between the Deutschmark and the French franc; in fact, we will have one currency with different names in different countries. The European Central Bank will operate under a system which admittedly has the fairly unattractive name of "complete fungibility" so that all electronic and financial system transactions will be treated as though they were in euros. The problem therefore of managing the currencies within that period does not exist.

However, I want in the course of my remarks to return to what in some ways has been to many speakers the central issue of the debate. I refer to the question of sovereignty, which arouses many passions. I enjoyed the provocative remarks of the noble Lord, Lord Beloff, who is not now in his place. It certainly aroused him to passion, although he spoke with his usual courtesy, moderation and tolerance.

I want to look at sovereignty, particularly in relation to qualified majority voting. Qualified majority voting has been of enormous benefit to this country. We would never have got the single market without it; we would never have got agreement to the Uruguay Round without it; and we would have no chance of further reforming the common agricultural policy without it. Indeed, some useful reforms have been made entirely because of qualified majority voting. It is also central to enlargement.

Perhaps the strongest argument for qualified majority voting was, perhaps surprisingly, put by the noble Lord, Lord Moynihan, whose courtesy for remaining in his place throughout the debate I appreciate. He put the point extremely well. He said, "Look what happened when the question came up about the opt-in to Schengen? He said, "Monstrously, the Government did not favour qualified majority voting but allowed unanimity to prevail". He pointed to the obstacle which exists when one has unanimity--someone can exercise a veto, and the veto can be used as a bargaining point for all kinds of undesirable consequences. He argued

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that we must not allow Spain to have a veto. But what applies in the case of Schengen applies all the way round. If we have confidence in ourselves, we should be confident about qualified majority voting, because on nearly every occasion we have been in the majority.

Indeed, it was welcome to find that the United Kingdom supported the extension of qualified majority voting to a number of new areas. Perhaps the most important were the structure of research, development and employment. It is also reasonable that at this stage it should not be extended to matters like foreign policy and defence. I am somewhat sorry that the Government dug in their heels over immigration because in the long run it is certainly in our interests to have a common immigration policy. After all, if someone achieves residence through the local immigration policy of another country, he has a right to come to this country. If we have no say over other countries' immigration policies, we effectively abandon control over our own.

What is perhaps most noteworthy about the discussions on qualified majority voting at Amsterdam was the surprising attitude of the Germans. In the past Chancellor Kohl has been very much a strong advocate of a federal Europe. I am a great admirer of Chancellor Kohl. I am delighted that he is to be the first foreigner since Eisenhower to be given the keys to the City of London. That is a magnificent and imaginative gesture. He is the most anti-nationalist politician in Europe. He is determined to see that there should not be through German strength a German roof over Europe but a European roof over Germany. He is a man I much admire, although I would not go all the way with his aim of a federal Europe. While I have no objection to it in principle, it seems to me to be not practical politics.

The Germans took a surprising attitude. I quote from a very good book about the Amsterdam Treaty, which I commend to Members on the Conservative Benches, written by two very eminent Conservatives, Brendan Donnelly, MEP, and Anthony Teasdale. They describe very well what happened. They state:

    "The Germans, in a dramatic and last-minute volte face, decided to oppose QMV in environment, industry, free movement of persons, social security and culture, for example, because of resistance from the Laender... They also opposed the automatic use of QMV in the JHA [justice and home affairs] pillar, previously a firm Bonn goal. As one German participant wryly observed: 'one form of federalism took precedence over another'".

What we saw at Amsterdam was the high tide of federalism; or perhaps the noble Lord, Lord Desai, was right, and it was reached earlier at Edinburgh.

This is in some ways to be deplored because it makes enlargement more difficult. One will now need a new treaty to deal with the complex institutional questions bound up with enlargement. That will create considerable difficulties. But what it does mean is that it is the end of the idea of the threat of a superstate. Not only is the UK opposed to it; not only has France been opposed to it throughout; but now Germany has abandoned the aim. You can have qualified majority voting without a superstate but you certainly cannot have a superstate without qualified majority voting. You cannot have a superstate if the national veto is retained.

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The Germans actually argued at Amsterdam for the retention of the veto, a point that has not been noticed--or at least has been noticed, but not by many.

I wish to return to the question of more flexible integration. We have talked about a multi-speed Europe, a two-speed Europe, a Europe a la carte, and variable geometry. The issue now is one of flexible integration. In December 1995 Chancellor Kohl and President Chirac called for a new treaty clause to allow for greater flexibility. It was more or less accepted at Amsterdam that it should be decided on by qualified majority voting, but not if important and stated reasons of national policy were involved. So, on the face of it, again the veto applies. But no one seems quite clear how it will work out.

The test of this is the Euro-X committee, which is clearly an important committee. I think it is a desirable committee for the reasons given by the noble Lord, Lord Desai--one wants to see much better co-ordination of fiscal policy but one does not wish the whole of anti-inflation policy in Europe to be decided only by the bankers. I welcome the establishment of the Euro-X committee. But what is clear is that if some people want to go off to decide things on their own, they will do so. Although formally the decisions have to be taken by ECOFIN, in practice they will be decided by the Euro-X committee. The four non-member states of monetary union will have to accept what the others have decided. In effect, we will have flexible integration.

While we are outside monetary union we will suffer a major loss of sovereignty over issues of the greatest importance to us. The noble Lord, Lord Tebbit, and others who have spoken claim that they are concerned about sovereignty. What sovereignty means is having effective control over your own affairs. What in fact they are seeking to preserve is nothing less than a shadow and an illusion. The only way in which we will achieve sovereignty over the issues that really affect us is to find ourselves at the heart of Europe when the important decisions are taken.

7.57 p.m.

Lord Inglewood: My Lords, I remember when I was young that the villains of the political scene were the Gnomes of Zurich--nameless, rather unidentifiable people who were somehow conspiring to bring our country to its knees. Well, time passed and they did not seem really to have been quite the threat that they were portrayed to be at the time. But they seem now to have been superseded by the Brussels "federasts", who are closeted somewhere inside the Berlaymont building, waiting to take over this country and to subsume it in some single centralised European state.

On the occasions when I have been abroad to the various countries of the Community and to Brussels I have met some of these Euro-centralisers. But there really are not very many of them. The vast majority of citizens of European countries, like the citizens of this country, do not want a single European state. What they want to see is a political system that is based around the nation state but which operates within a transnational, or some type of supranational, system, which eliminates

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the intrusive and damaging effects of borders, barriers and restrictions that get in the way of improved communications, telecommunications and the mobility of goods, services, people and capital, all of which offer considerable opportunities, benefits and advantages to the citizens of this country and the other member states. The European Community is an effort to try to bring that about. I am clear in my mind that it is wrong to see it in terms of whether Europe is a state because I believe that it is sui generis; it is a unique political experiment. The debate we are having is about the detail of how one achieves all this.

It seems to me that this is an example of something which is happening much more widely around the globe. We are seeing the development and evolution of a new politico-diplomatic order which affects not only Europe but the whole of the globe. These changes are essentially systemic. They may be party political, but I do not believe they are inherently ideological.

Unlike a number of distinguished Members of your Lordships' House, I am neither a diplomat nor an historian. But I understand it is generally accepted that the story of classical diplomacy began in 1648 with the Treaty of Westphalia. The era that began then came to an end at the time of the First World War. Whether the war was the cause of that ending or whether it was merely symptomatic of the changes that caused it to happen, I do not want to speculate, although I suspect that it may have been the latter.

But what is clear is that, if one looks at the history of this century, there has been extraordinary instability and uncertainty about the rules that govern the relationships both between countries and between people doing business between countries across not only the countries of western Europe, but around the globe. As we know, a lot of blood has been spilled.

Obviously, one of the changes which we have seen is the development of the European Community and its subsequent evolution into the European Union. During the debate that we have in this and other countries about what is going on, I believe that insufficient attention is being paid to the effect of these systemic changes on the processes and responsibilities which remain member state competences and which at first sight are clearly, legally outside Community or Union competence.

I should like to give two examples. The first one was triggered by the distinguished maiden speech of my noble friend Lord Hurd of Westwell in the debate in this House not so long ago. He referred to the beginnings of co-operation in common, foreign and security policy going back to the days of European political co-operation. What was happening was that there were changes occurring informally outside the treaty in response to a perceived need by the participants in the negotiations.

Secondly, I should like to refer to my own experiences in the Legal Affairs Committee of the European Parliament, where I was the Conservative representative between 1989 and 1994. In the period prior to the Maastricht Treaty we devoted a great deal of our attention to the activities which are currently

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contained in the third pillar. I give one example. The reason was that, if one has a single market and if there is not a simple, user-friendly system to gain redress when something goes wrong with a transaction, the system is not serving the citizen and it is not being very user friendly.

I was very interested in some evidence given to Sub-committee F by Customs and Excise. It explained how, prior to the provisions of the Maastricht Treaty coming into effect, a series of provisions and arrangements had developed informally, which seamlessly transferred themselves into the formal procedures that were put in place once the treaty came into effect. In each of these instances the existence of the Community fundamentally affected the way that member states dealt with each other on business which was important to them and which was outside the scope of the treaties. Informal systems evolved. Unless one wants one's own country to be an international wallflower, it has to participate in them. What we have seen in this case is development from informal systems into the second and third pillars, which, while inter-governmental, are clearly very different from the inter-governmentalism of classical diplomacy.

I should now like to look forward to one further future example, and that is EMU. I do not want to offer any views about whether or not we should or might participate. I should merely like to point out that it seems that, whatever one's views about that aspect of the matter, there is more or less complete unanimity that whatever happens--if anything happens--it is going to affect this country very significantly.

From these examples I make two specific points and point out the relevance they might have to the consideration of this Bill. First, I do not find it surprising, if one thinks about it, that, just as the nation state evolved in the past, it is now evolving, and will continue to evolve, in the future. We must recognise that in considering what the future holds for us. Secondly, I am sure that saying no is no assurance of retaining the status quo.

We have heard it on a number of occasions this evening. It is said that the problem of the Community is that there is a lack of democracy. In the sense a democratic system is one where power is exercised legitimately, according to the strict tenets of representative democracy, the system we have is entirely legitimate, albeit in a number of respects unfamiliar to us because it is based on ways of doing things which are widespread and recognised elsewhere in other member states. I believe that the real problem is a lack of transparency and accountability. Again, I refer to the work that we have been doing on Sub-committee F. It is not at all easy to discover exactly what is going on under the third pillar and neither is it necessarily very easy to see who it is who is taking the various decisions.

We have heard reference to the European Parliament this evening and, en passant, to its building and architectural aspirations. One does not have to cross the Channel to see a Parliament building an expensive new building: one has only to cross the road. Perhaps

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the principal role of the European Parliament in the structure of the Community as a whole is to bring the Commission to account. There is no other institution in the system currently constituted to do that. Of course, it is easy to laugh at the European Parliament because it is very good at advertising some of its follies. But let us not forget that it actually contains a number of very eminent people who make a significant contribution to the good of all countries within the Community. In particular, it is its role as the scrutineer of the Commission that we should emphasise and encourage.

In his opening remarks, the noble Lord, Lord Whitty, referred to the reservations that we have on these Benches about signing up to the Social Chapter. I do not want to rehearse those again at this time of the evening. I merely ask the Minister if he can tell the House, in the context of social policy, whether there are any indicators or some kind of test that the Government will apply to determine what matters are properly dealt with at Community level and what matters ought properly to be left at member state level.

I believe that, in considering the way we respond both to the constitutional changes that we are seeing within the European Union and to the policies that may emerge from them, we must continue at all times to be realistic and pragmatic. We are living at a time of great change in the way the nations of the world and their citizens conduct business with each other. We must not be mesmerised by what was done in the past. Rather, we must try to build systems which will meet the aspirations of people in the 21st century instead of practices current in the 19th century. Those systems must serve the citizen and not the other way around.

Simply saying no cannot preserve the status quo. Saying no may be as emphatic a means of launching a policy as saying yes. If we do not really know for sure what to do, it does not automatically follow that the right response is to be negative. I believe, perhaps more than ever before, that we must keep in mind Bismarck's famous maxim, which was taken by that great Conservative Rab Butler, as the title for his autobiography; namely, "Politics is the art of the possible".

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