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Lord McNally: My Lords, would the noble Lord concede that in 1975 we voted to join an organisation whose first clause and objective was the ever-closer union of the European people? Why the Europhobes continue to claim that they were fooled in 1975 I fail to understand. What we were voting for was clear and the British people, by two to one, overwhelmingly voted, "Yes, please".

Lord Willoughby de Broke: My Lords, we can have different views on what they voted for. The question was whether we wanted to stay in the Common Market. However, let me move on. The Common Market is dead and buried. We are now in a rigid customs union called "the single market". We are facing strong pressure to abandon the pound and hand over control of our economic destiny to an unelected, supra-national organisation whose remit specifically excludes it from considering British interests.

From EMU inevitably flows political union and it is only in this country that the political flat-earthers have tried to deny that the sun rises in the east. Again, the noble Lord, Lord McNally, spoke of weasel words. I believe that we can debate the issue for as long as we like, but I have never heard anyone in favour of EMU either on these Benches, the Benches opposite or on the Liberal Democrat Benches make the inevitable corollary by saying, "Yes, I am in favour of EMU, but it means political union". If they would at least swallow that, we could really get into a proper debate.

I was pleased that the noble Lords, Lord Moran and Lord Monson, spotted Mr Solbes at it yesterday when he stated in the Daily Telegraph:

Do we accept that view or not? He is a commissioner, so he must know what he is talking about. Therefore, I agree with the noble Baroness, Lady Williams, that it does not make much sense to continue to have a semi-detached attitude to the European Union. She said

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that we should be pooling sovereignty and went on, perhaps inadvertently, to say that we would be sacrificing sovereignty and handing it over. I do not think that you can pool sovereignty. You can hand it over--you can sacrifice it--but I do not believe you can pool it.

It seems that if we vote for economic and monetary union, we shall be on an irreversible track towards political union. It is a track down which this Government seem to want to lead us, but they cannot quite do it because at the moment the voters will not have it. Therefore, I believe that we should be grateful not only to Commissioner Solbes but to my noble friend Lord Pearson for making the point so clearly that EMU means that, absolutely inevitably, political union will come in its train.

Therefore, I believe that if we are likely to be kicked out of the Union because our voters will not swallow economic and monetary union, surely it is at least sensible to look at the alternatives that may be available to us. That is all we are doing. The alternatives are what someone--I believe it was the noble Lord, Lord Moran, when he was in the Foreign Office--called "plan B". We are simply considering what plan B might be. When we do so, we may surprise ourselves because there is very little evidence to support the view that there is no alternative to EU membership.

In fact, I believe that Britain's interests are badly served by our membership of the European Union. Outside the euro, as we are now, we have a dynamic economy. I believe that everyone agrees with that. As my noble friend Lord Vivian said, we are now the fourth largest economy in the world, thanks largely, I believe, to the weakness of the euro. We are ranked eighth in the world in terms of global competitiveness. We are ranked eighth out of 59 nations by the World Economic Forum in terms of future economic growth. The closest EU economy is Denmark, which ranks 27th.

We are by far the preferred target for inward investment in the European Union. The noble Lord, Lord Hooson, says that inward investment to Ireland is increasing. That is a very good thing. If that increase were due to Ireland's membership of the European Union and EMU, it would be marvellous. We are outside EMU, and our investment amounts to more than half the total inward investment into the European Union. We should therefore ask ourselves why we are receiving this massive, lion's share in inward investment into the European Union. Is it because we are like the other economies? Or is it because we are different? It must be because we are different. If we were like them, we would not get the lion's share; it would be spread out around the other economies. However, it is not; it is coming to us. I believe that that is because we are outside the economic and monetary union. At present, we are not going to join the single currency and we have a very different economy. We have lower taxes, lower wage costs, more flexibility and we are--at least for the moment, but I do not know for how long--less tightly regulated.

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The unpalatable fact for the sack cloth and ashes brigade is that we are attracting this inward investment in spite of the fact that we are not in the euro, in spite of the fact that 70 per cent of the people of this country have already shown that they do not want the euro, and in spite of the fact that the head of the ECB has made it clear that the prospect of Britain joining the euro, even in the medium term, is about as likely as England winning a cricket match.

So much for inward investment. However, the story of our foreign direct investment is even more remarkable. As foreign investors, world-wide we are second only to the United States. We now generate more income from our foreign direct investment than we do from all our visible and invisible exports put together. Thirty-four per cent of our foreign direct investment is in the United States; 30 per cent is in the Commonwealth; and only 18 per cent in Europe.

Therefore, when it is clear that Britain is a major global trading investment nation, why do we believe that it is so important to converge at any cost with the outdated and failing continental model? The EU share of world trade has fallen 15 per cent over the past 10 years, the euro is falling, and job creation is falling. The only things in Euroland which are going up at the moment are taxes, unemployment and regulation. What magic is there in being at the heart of this sub-optimal performer, particularly when, as my noble friend Lord Pearson said, only 10 per cent of our gross domestic product is involved in export to Europe?

If the best comes to the best and we find it impossible to remain in the European Union for whatever reason, there will be very serious consequences, as has been pointed out. I can tell my noble friend Lord Pearson that we have some hard decisions to make. For example, we would have to decide our spending priorities for the £11 billion which we pay into the European budget. We would have to make serious decisions about the common agricultural policy and the common fisheries policy and how to spend the money that we would otherwise be giving to Europe. We shall be forced to consider how to shape our own farming, our own fisheries and our own environment. And, of course, we would have to endure the almost unbearable burden of controlling our own affairs without the benefit of those helpful directives from Brussels.

Who knows? With the information that the Bill would require the Government to gather, they may no longer consider that Britain's interests and destiny lie in Europe. There is a respectable precedent for that. After all, Mr Blair himself campaigned on a "Get out of Europe" ticket in 1983. He has changed his mind. John Maynard Keynes once said, when criticised for changing his mind, "When the facts change, I change my mind. What do you do?" Perhaps it is time for the Government to consider his words.

2.14 p.m.

Lord Sharman: My Lords, I welcome the opportunity to follow the noble Lord, Lord Willoughby de Broke, and perhaps help him a little in understanding some of the business views that he so graphically misrepresented.

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I am deeply concerned about the effect the Bill might have on business and the business community. The risks for business of withdrawal are very significant. Even the risks of a threat of withdrawal are very significant. For the past 30 years I have spent the best part of my career dealing with investment, both inward and outward, in many countries. There has been a trend that some people have described of late as "globalisation". That has been going on for some time. The result is that we see some very large corporate entities around the world, hugely powerful machines, and they will get bigger; they will not get smaller. We need large entities to control them. It is encouraging that at this stage in the development of society there is a general acceptance that it is business that creates the wealth and government that create the environment in which that wealth can be created.

I should like to begin by dealing with what I regard as the teenage love affair with NAFTA. There is a suggestion that membership of NAFTA is a viable alternative. First, those who are wedded to keeping the pound at all costs, whatever it may do to us, need to understand that NAFTA is essentially a single currency market. One will not be successful in a single currency market from the outside unless one joins that currency.

More than that, I should like to quote what Mr Workman of the United States Chamber of Commerce says:

    "If the UK pulled out of the EU, a lot of US investors would say, 'Have you been smoking funny tobacco? Why do you want to do that?' US investment in the UK would become less attractive because companies would not have preferential access to the European market. The UK would go from being a first tier player in capital markets to being a second tier player".

It is not just US business that is concerned. We should listen hard to those businessmen who are out in the market-place every day fighting to develop their businesses. One of the more successful in Britain is Sir Clive Thompson, president of the CBI, who says:

    "The European Union represents the world's largest consumer market. For any business looking to grow and expand in Europe it is essential that Britain remains a key player within the EU. In short, Britain should take a leading role in helping shape the way in which the European market develops".

I said that I wanted to concentrate on business and on the benefits of EU membership. I want to deal with businesses large and small. I also want to comment on telecoms and the development of e-commerce, web-based businesses and how I see them as important as well.

Whether we like it or not--and we can argue about the statistics--the European Union in business terms is our major trading partner. More important, it provides the largest access to the largest consumer market in the world, a market of over 370 million people. I stress that it is the aspect of a single market, not a free trade area, that is important, a single market operating within a set of rules.

It is true that foreign investment is responsible for over a million jobs. I do not think that anybody disputes that figure. We can argue about all sorts of other jobs, but certainly over a million jobs in the UK

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are dependent on foreign investment. The UK has been remarkably successful in attracting it. I have worked in that field for many years. One of the key marketing planks in attracting foreign investment into this country is access to the single European market. This country is seen to have the attractions of the English language and of what is often called the Anglo-Saxon model. But it is access to the single European market that is important.

It is worth listening to the chairman of the Japanese Chamber of Commerce and Industry (UK). He said:

    "Britain will be attractive to foreign investors for the foreseeable future because it is seen as a 'pre-in' country of the single currency, with a commitment to entry in principle".

I know that the issue of European monetary union raises the temperature and blood pressure of many people. But from a business perspective it is a critical factor in attracting investment into the UK.

Investment continues to be high, but I remind noble Lords that decisions about investment today were probably made two to three years ago. That is the time scale with which one deals when looking at inward foreign investment.

I underline also what my noble friend Lord Hooson said; namely, that the competitive nature of that market-place is changing. Whereas in the past Britain was able to promote itself as a home for foreign investment, as a key gateway to the European Union, the Irish Republic now promotes itself very actively as the only English-speaking territory of the Eurozone.

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