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Lord Pearson of Rannoch: My Lords, I am grateful to the Minister for giving way. There are two separate Bills. The first Bill to which she referred is still "in the queue" and probably will not go forward. However, it is the Bill we debated on 31st January 1997 in your Lordships' House when we passed it by 52 votes to 51 because its Second Reading was challenged. This Bill is an altogether more innocent creature. I believe it has produced the debate which we all wanted.

Baroness Scotland of Asthal : My Lords, we have all been delighted by its innocence so far and perhaps can see it for what it is.

For this Government, the question to be asked in this debate is: what would be in the best interests of the United Kingdom? The benefits of EU membership are evident. Many noble Lords have commented upon that. Put simply, we are convinced that membership is in our political and economic interests. To pretend anything else would be to make a historic miscalculation.

The European Union always has been, and must remain, more than just a free trade area. It is directly relevant to our prosperity and because of that is directly relevant to jobs. It improves the quality of life both here and abroad. It gives us peace and security and increases our influence on the world stage.

The scale of those benefits will increase still further in the enlarged union which we shall see in the next decade. The single market now comprises 372 million customers or 38 per cent of the world trade. It is based on fundamental principles of free movement of goods, services, people and capital. Fifty-eight per cent of UK trade in goods is with our EU partners. That business represents 3.5 million British jobs. The UK not only has access to the single market; it shapes it too. If we were to withdraw from the EU, the majority of the benefits that accrue would at least be severely curtailed and, in some cases, entirely removed.

The single market benefits customers as well as businesses. To give only two examples: it has helped to halve prices on European telephone calls and European flights. We have had mention of that today. Perhaps I may give one example. A flight to Rome in 1989 cost £222 but by 1999 it was reduced to £118.

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An EU, enlarged to include the 12 candidates currently in negotiations, will create the largest single market for trade and investment in the world, with a total population of over 480 million. Enlargement is opening up new markets for British business. Britain already exports over £3,000 million worth of goods and services to the first five applicants from central Europe.

Hundreds of thousands of jobs have been created by investments in companies that see Britain as the best gateway into the single market. The UK receives 27 per cent of all investment into the EU. There are 5,700 American and 1,000 Japanese companies based in the UK. In the past year alone, more than 44,000 new jobs have been created by foreign investment. These international companies are manufacturing from the UK for the whole of Europe, not only the UK market.

Perhaps of more specific interest to the noble Lord, Lord Pearson, are the particular benefits enjoyed by Scotland. Inward investment because of membership of the EU has caused the "Silicon Glen" phenomena. Scotland has only 1½ per cent of Europe's population, but it has 15 per cent of the total EU semi-conductor capacity. It provides 32 per cent of branded PCs in Europe, 65 per cent of Europe's automated teller machines, and 80 per cent of Europe's workstations. Let us be frank: withdrawal would decimate these markets. Is that really what noble Lords would like to see? Although we have talked about examination of withdrawal from Europe, it is important to acknowledge what lies behind such a removal. I believe that the noble Lord, Lord Pearson, was brave and candid enough to make that clear.

The EU has also opened up new opportunities for ordinary people to live, work, study and retire abroad. One hundred thousand British people now work across Europe, while 200,000 have retired to other EU countries. Without agreement between EU member states, this freedom would not be possible.

Free movement of goods legislation protects British producers. It stops other member states from preventing the import of British goods legally marketed or produced in the UK. Nor can other EU countries shut British firms out of public contracts. If they do, they can be taken to the European Court of Justice.

Some would argue that we could reap these benefits simply by concluding a free trade agreement with the rest of Europe. A number of noble Lords mentioned this in their contributions. The noble Lord, Lord Monson, asked specifically if we could continue to benefit from the EEA. We are not members of the EEA; we are members of the EU. That gives us greater and wider benefits. We might be able to join the EEA, but this would by no means be automatic. This is to miss the point completely. I agree with the noble Lord, Lord Hooson, when he said that we have tried free trade agreements in the past and they failed.

Our access to the single market would be guaranteed only for so long as it suited others to allow it. Noble Lords can be sure that if, for whatever reason, we enjoyed a significant competitive advantage, the

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EU would seek to restrict access. Moreover, we would have no say over how rules for the single market would develop. The interests of UK producers would no longer be protected and we would have a myriad of regulations growing up that discriminated against us.

There has been much merriment about the fact that it has taken almost 30 years to agree a chocolate directive. However, let us be absolutely clear: if we had been outside the EU, there would be have been a directive years ago, and it would have excluded UK products from the European market. So we must forget about the chimera of a free trade area. To suppose that we could negotiate terms to our advantage is nai ve in the extreme. The UK, a great trading nation, would be disengaging from the world's biggest market.

Our place in the EU is equally relevant to a wider interest in stability and security in Europe and beyond. I agree wholeheartedly with all that has been said by a number of noble Lords in that regard. For the past five decades, together with NATO, the EU has helped to ensure an unprecedented period of peace among the nations of Western Europe. As several noble Lords have pointed out, EU membership has made war between partners inconceivable. In 1998 Britain and France took the initiative to strengthen Europe's common defences in a way that also strengthens NATO. Member states are now looking at ways of enhancing their military capabilities against headline goals. That gives us an opportunity to allow Europe to act as a force for good in the world.

Today the EU is one of the most effective mechanisms for forming a common front against drugs and organised crime. To give an example of the success this is producing, £57 million of drugs were seized in Operation Harry, a joint operation with Belgium and the Netherlands in 1998. Only last week the Prime Minister put forward some ideas for a step change in the EU Action Against Drugs. It is increasingly clear that cross-border crime requires cross-border solutions.

Protecting the environment is another challenge that manifestly requires cross-border solutions. A series of EU action programmes gives Britain a cleaner environment, better air quality, cleaner beaches and wildlife protection. Over the next five years, emissions from cars, light vans and lorries will be substantially reduced, in some cases by over 70 per cent. With enlargement, EU programmes will extend to countries where previously we had no influence.

The common foreign and security policy offers an important additional dimension to the UK's foreign policy by ensuring that European partners pursue shared objectives. This led to the package of sanctions against Milosevic, including an oil embargo, which helped accelerate Belgrade's acceptance of the international community's demands on Kosovo.

Our own trading influence is enhanced by EU membership. Lome and EU/South Africa trade agreements are able to open the European market for Commonwealth countries, which would otherwise

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have faced protective barriers. We remember how passionately the noble and learned Lord, Lord Howe, dealt with that matter in his speech. It strengthened our position in trade negotiations. We are able to negotiate as a block on equal terms with, for example, the United States of America.

A number of noble Lords raised the issue of our relationship with our friends the Americans. Britain has close ties with America. But, as the Prime Minister pointed out a few weeks ago, America wants Britain to be a strong ally in a strong Europe. I was delighted to hear the poor Mr. Strobe Talbott quoted yet again. The stronger we are in Europe, the stronger our relationship with America.

Lord Boardman: My Lords, I am grateful to the noble Baroness for giving way. This Bill does not propose withdrawal from Europe. It seeks to set up an inquiry, for which much of the speech of the noble Baroness would be powerful evidence. Is she opposed to an inquiry into what the consequences may be?

Baroness Scotland of Asthal: My Lords, I make it plain that we are. If I can again adopt the words of the noble and learned Lord, Lord Howe--he said it so elegantly and eloquently--the Government are not minded to pursue a well-argued private prejudice. We have other things in which to invest money at this stage. We do not feel that investigation of this nature would be merited.

I recognise that many people sometimes feel a sense of frustration with the functioning of the EU and our relations with it. My noble friend Lord Bruce of Donington has been a champion of such concerns for many years, and his anxieties were echoed by other noble Lords--the noble Earl, Lord Liverpool, the noble Baroness, Lady Park of Monmouth, the noble Lords, Lord Moran, Lord Boardman, Lord Vivian and Lord Willoughby. However, I was rather alarmed to hear the slur on our cricketers. I believe that we have had a fine team in the past and can still win a few games.

Partly that concern reflects a justified dissatisfaction with specific policies, such as the common agricultural policy or the common fisheries policy. Partly it reflects anxiety at the direction the Union may take in the future. It also reflects unhappiness with the lack of effectiveness and efficiency demonstrated by the Union's key institutions.

The Government cannot and do not ignore such concerns. That is why we are actively working to improve the situation. Reform is necessary. It is being tackled by the parallel processes of non-treaty change and treaty change at the intergovernmental conference. We are playing a full role in support of both.

At the Lisbon European Council later this month we shall tackle economic reform. Britain is driving the debate, promoting economic dynamism and social justice. We have a chance to push our own goals--liberalisation, enforced by strong, independent institutions.

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It is appropriate that the first European Council of the new millennium will focus on jobs. This matches the priorities of our citizens. It is appropriate that we focus on it now because Europe is falling behind--the EU as a whole has created virtually no net jobs since 1990. Unemployment averages 10 per cent. That is unacceptable.

The EU faces challenges ahead. We must consider how to face a rapidly globalising world--a world increasingly based on innovation and knowledge, while retaining the essential features of our societies. I think that we can do that. But we shall have to adopt a new approach to building our economies so that we can provide full employment in Europe. If we do it correctly, Lisbon will be seen 10 years hence as the moment when Europe collectively decided to modernise to face the challenges of the new millennium.

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