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Baroness Symons of Vernham Dean: The word used was not "desperate". That was not the word that my noble friend Lord Shore used, and it was not the description that I used back to him. The phrase was "last resort." I hope that I was able to indicate that these were not "last resort." They are built in to the process of establishing common strategies.

The noble Lord asked whether I could produce one example in all the treaties that showed the countries of Europe moving further apart and not coming closer together. I am sure that were I to say "no" or "yes" someone would prove that I am wrong. So I shall ask officials whether they can provide the noble Lord with the points that he wants.

I will say to the noble Lord, quite clearly, that there were those, when we were dealing with this latest treaty, who wanted closer integration between the EU and the WEU. The resistance to that was led by Her Majesty's Government. There were others who took part in that resistance but the resistance was led by Her Majesty's Government. So, although I know that I cannot reassure

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the noble Lord, I hope that I can assure him that we have been true to the Government's stated negotiating aims for Amsterdam.

Lord Moynihan: I congratulate the Minister and her civil servants on her response to the debate, and, above all, on her presence throughout the proceedings on Tuesday and this evening. She has tracked down both mice and mammoths with considerable deft ability and skill. We have had a comprehensive, valuable debate on the two issues--foreign policy and defence--which are of crucial importance in the context of the Bill.

I have no doubt that we will return to some of these issues on Report, especially since there are some explanations provided by the Minister which require further detailed attention. However, today, I thank her again and my noble friends and noble Lords for their valuable contributions. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 6 to 9M not moved.]

10.15 p.m.

The Deputy Chairman of Committees (Lord Ampthill): Amendment No. 10, Lord Shore?

Lord Shore of Stepney: Not moved.

The Deputy Chairman of Committees: Amendment No. 11, Lord Shore, not moved?

Lord Stoddart of Swindon: Order!

The Deputy Chairman of Committees: The noble Lord said "Not moved". Amendments Nos. 10 and 11 not moved, Lord Shore? Who wishes to move Amendment No. 10? The noble Lord, Lord Shore, did not move the amendment. The noble Lord, Lord Moynihan, wishes to move it.

Lord McIntosh of Haringey: Amendment No. 10 was not moved and the Deputy Chairman moved on to Amendment No. 11.

Lord Shore of Stepney moved Amendment No. 10:


Page 1, line 13, after ("2") insert (", other than paragraph 19 (Title VIa of the Treaty establishing the European Community (employment)),").

The noble Lord said: I thought that we were still dealing with foreign policy amendments. There were a very large number, not all of which were read. I had not realised that we had moved to the new group of amendments. I certainly do not withdraw them, and with your Lordships' agreement and consent I formally move the amendment standing in my name. I shall develop one or two observations about them, being most careful to scrutinise the clock in the remarks that I make. The amendments are important and relate to important subjects.

It is probably as well to comment on the background to the employment chapter, introduced into the Amsterdam Treaty, with which the amendments are

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concerned. Once again, one must return to the Maastricht Treaty. The reason why we have an employment chapter is because the gentlemen who got together and drafted the Maastricht Treaty, in their remote and bureaucratic way, forgot entirely about the subject of employment and about the effects of rising unemployment upon the peoples in the countries of the European Union.

Waking up rather late in the day, and much encouraged by the Swedish Government who had always attached great importance to employment, they set about creating the chapter on employment. Frankly, it is not easy to take it seriously because it is spatchcocked into a treaty which is totally overshadowed by commitments to economic and monetary union, a single currency, stable prices and so forth.

It is as well to recall at the beginning what happened in Europe during the lead-in period to the Amsterdam Treaty, in particular in respect of the events which are to take place in a few weeks time in this country when 11 nation states of the European Union will, with the support of the Commission and perhaps the EMI, claimed that they have qualified to meet the convergence criteria in the Maastricht Treaty.

The Committee should be aware that, in the effort to qualify for the single currency under the convergence criteria, most countries in Europe have had to sustain a policy of deflation in their economies for several years past. I do not say that on my own authority, as it were, but it is worth recalling what the IMF's world economic outlook, published a few months ago, stated about the principal European Continental economies. It stated:


    "The unsatisfactory economic performance of the three major economies--of Germany, France and Italy--cannot be blamed on the external environment. External markets have been expanding strongly and exports have been the main source of stimulus in recent years. But, the source of weakness has been internal and in fact"--

and these words must be carefully considered--


    "domestic demand has expanded by less than 1 per cent. a year in these three countries combined during the past five years".

As the growth of productive potential is in the order of 2.5 per cent. per annum in each of those countries, it is inevitable that unemployment will rise, and so it has done.

I should now document that. In the five years from 1992 to 1997 in France unemployment has risen from 2.5 million to nearly 3.2 million; in Germany, from 2.5 million to, according to Eurostat, 3.8 million, although I have heard figures much higher than that for Germany; and in Italy from 2 million to 2.7 million. Those are increases in unemployment of around 30 per cent., and perhaps higher in one of those cases.

There is not much dispute about what has happened. In particular, in order to reach the 3 per cent. of GDP borrowing requirement, most or all of those countries have raised taxes and cut public expenditure. Therefore, they have suffered a diminution of demand and have seen unemployment rise on a fairly large scale. They have not been able to do much more on the export front. They have not been able to increase greatly their exports

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because they have exchange rates which are fixed in the ERM in preparation for the other qualification for joining a single currency.

Until those constraints are eased upon the borrowing requirement and the creation of increased demand, unemployment will continue either at its present level or will increase in the years ahead. They have the knowledge now, or at least from the moment that the single currency comes into effect on 1st January next year, that if they fail in holding down the 3 per cent. GDP borrowing requirement or if they exceed it, they will be subject to fines under the miscalled stability and growth pact. Those countries will be very careful indeed not to expand demand and therefore not to incur those penalties.

That is a fairly unhappy background and environment in which this chapter, which is supposed to promote measures to increase employment and decrease unemployment, has been inserted. Let us for a moment consider the language used. It is all in Article 109, where the objectives are set out. It states that member states shall co-ordinate their actions; the Community shall contribute by encouraging co-operation between Member States; the objective of a high level of employment shall be taken into consideration in the formation of Community policies; the Council shall draw up guidelines which member states shall take account of; the Council, by qualified majority voting, may make recommendations; the Council may adopt incentive measures; the Council shall establish an employment committee with advisory status.

Compare that with the command language of the chapter on economic and monetary union and the quantified targets in the chapter and the protocol. The feebleness of this cosmetic aspect is then apparent to all.

I am fully aware that some attempt was made to give a little more credence to its content in the Luxembourg summit in November. But that really did nothing except to publish the guidelines, which are perfectly all right as far as they go in relation to increasing training and education and one or two other measures. The European Investment Bank is to create a new facility or to divert some of its resources to assisting small and medium-sized enterprises--the SMEs which we hear about so often. I have no objection to that. But the idea that that will make any serious impact upon the level of unemployment in Europe is absurd and we shall have to return to that matter and discuss it in considerable detail.

I have to keep my eye on the time in the presence of the Liberal Democrats, so I must move hastily on to the other group of amendments which deals with the social chapter. Of course, it is rather a separate subject; but, nevertheless, time is pressing and the social chapter has to be encountered. The whole issue of this chapter has always seemed to me to be utterly bogus and artificial. The reason it came to assume the prominence that it did in the last Parliament in the other place was because of the tacit agreement between the two Front Benches that, in the great debate on the Maastricht Treaty--where, of course, it begins--there should be no serious discussion on economic and monetary union and the single currency. To my certain knowledge, no debate took

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place on those matters until well after midnight during the Committee stage when, fortunately, the Press Galleries were empty and no one could overhear what was said.

Meanwhile, with a great flourish, as it were, of traditional antagonism, like champions charging in some contest, the Labour Front Bench denounced the Conservative Front Bench for not accepting and including the social chapter in the treaty, and, equally, the Conservatives emphatically said that it would be the destruction of the British economy if it were brought in. Of course, it is in fact a virtually empty vessel. Indeed, I believe that two measures were agreed in the social chapter, and one, if I remember correctly, was about paid paternity leave. As I said, it was a bogus contest on a bogus issue, and we should acknowledge that. In the Amsterdam Treaty, the new Labour Government brought the social chapter into the main body of the treaty, whereas previously it had been thrust into the appendices or protocols under the heading of the "social agreement".

Frankly, the provisions are nothing like as fearsome--and I say this particularly to Opposition Members of the Committee--as people have been led to believe. Most of the really important issues are deliberately excluded from it, like the level of wages. Other very important matters, like social security business, are wholly held within the need for unanimity. However, I have to tell my own Front Bench that there is the possibility that it can develop and there is also the distinct possibility that, in areas outside those that I have mentioned and which are listed in the treaty, they could be carried by qualified majority voting.

I do not think that the content of these agreements would give me any trouble, but the constitutional issue is whether we should allow the EU to legislate for social policy in this country. I say no, no, and no again to that proposition: these are matters which properly belong to this Parliament and not to the European Union. I simply conclude my remarks by recommending the amendments which are tabled in my name, especially those that ask for a proper annual report on developments under both these headings--not for the European Parliament but for this Parliament in Westminster. I beg to move.

10.30 p.m.

Lord Taverne: I start by congratulating the noble Lord, Lord Shore, on the brevity of his speech. I hope that I, too, shall be brief. I, too, will seek to deal with the employment and social aspects of the Amsterdam Treaty together. On this occasion, I agree with him that to some extent the importance of the Amsterdam Treaty has been greatly exaggerated. The importance of the social chapter has always been greatly exaggerated both for good and ill. It is not the great engine for social change which some have claimed it to be--and have supported it for that reason--nor is it the great threat which Members of the Opposition have often claimed that it is.

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It seems to me that the Amsterdam Treaty has certain provisions which are not dramatic but which are on the whole useful. Nothing is possible now as regards employment policy that was not possible before, but there has been a useful insistence on looking at the employment side to an extent which had not perhaps necessarily been in every government's mind before. We on these Benches welcomed the Government's signing up to the social chapter. That means that the social chapter is now a full part of the Maastricht Treaty provisions. Signing up gives us a voice and it gives us influence. Apart from that, the attractive side of the social chapter is that it seeks to present a common base for social rights. However, I do not think there is any ground at the moment for supposing that the social chapter will be a great threat to labour market flexibility. If one reads it together with the employment provisions of Amsterdam, there seems to be something of a move towards liberalisation and realism. The employment chapter which has now been added talks of a need for an,


    "adaptable work force and labour markets responsive to social change".

There was some difficulty over persuading the French to accept any degree of labour market flexibility, but they accepted that labour markets should be responsive to social change.

The references to employment have been coupled with competitiveness. Indeed, there seems to be a considerable move on the Continent now in many countries towards a greater degree of labour market flexibility. Part of the reason for the high unemployment figure--I agree again with the noble Lord, Lord Shore, on this--has been the deflationary policy particularly of the Bundesbank. This was the result of unification and the uncharacteristically unrealistic high wage claims made in Germany which led to the Bundesbank having to follow what it described as a punitive policy to maintain low inflation. This of course had its effects throughout Europe because of the influence of the Bundesbank.

As the OECD has pointed out, another reason for high unemployment in Europe has been the degree of rigidity in the labour markets. There are changes taking place. It is extremely significant, for example, that whereas wages in East Germany previously were some 90 per cent. of wages in West Germany on average, they are now some 70 per cent. So there is a considerable measure of wage flexibility now to be seen in Germany. There is also a determination to spread best practices which, again, is to be welcomed, and yet on the whole the principle of subsidiarity has been asserted. The main responsibility for high employment remains with the nation states.

However, as far as we are concerned, what is to be welcomed is the emphasis on co-ordinating employment policies and that this should now be part of the deliberate activity of the EU institutions. This, inevitably, is part of the greater emphasis on the role of ECOFIN. Indeed it has always seemed to me that with monetary union, the role of the so-called Euro X committee was going to assume vital significance. One does not wish the whole burden of containing inflation

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to rest entirely on the European Central Bank. If it rests on the central bank, as it rests on the Bundesbank in Germany, the result will be a deflationary policy. It is far healthier that there should be co-ordination of fiscal policies by the members of monetary union, and indeed the members of ECOFIN as a whole. That is one of the factors which the Amsterdam Treaty stresses. Anti-inflation policy is not just to be left to the central banks, or the European Central Bank. There is now a responsibility for Ministers to co-ordinate as closely as possible their various policies; and there is a responsibility on the European Commission also to seek to co-ordinate these policies. That co-operation on employment seems to us wholly beneficial. Although the steps which have been taken by the Amsterdam Treaty are limited, on the whole they seem to be beneficial steps. To that extent we welcome the treaty.


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