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Baroness Hollis of Heigham: My Lords, I am again glad that noble Lords have welcomed the regulations. I am grateful to the noble Earl, Lord Russell, for giving me advance notice of the discrepancy between Regulations 14 and 19. I hope that I shall be able to give him a satisfactory answer.

I turn first to the queries raised by the noble Lord, Lord Higgins. He asked about the two sets of regulations; his surmise that different vires were involved was correct. He will not be surprised if I duck commenting on the comments of Judge Harris, for whom I have the highest regard although I do not agree with his views on every issue.

The noble Lord pressed me on the timetable. We expect the arrangements to last for some time—perhaps a year or more—but appeals in the longer term will go to a reformed tax appeals system. We hope to announce our propositions for the way forward in the next few months. I cannot be more precise than that; that is the timetable to which we are working.

The noble Lord asked about tax commissioners general and special. Neither of us has a bad memory but the precise detail of that also escaped me. I am assured in a note from the Box that we wrote to say—this is clearly in the folk memory—that appeals can go to either special or general commissioners, and an appellant has a right to elect to have his appeal heard by either general or special commissioners under Section 39(3) of the Tax Credits Act, which established this system. It is a matter of election.

The noble Lord asked about the memorandum and said that it was not particularly helpful. That may be right, but it should be added that that is not the first

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and last word on the subject. Full information on appeals and other processes and penalties will be made available to claimants. The substance of the point is that that must be in plain English and helpful and constructive; that must be achieved. We will discuss the necessary process with the appeals service and work with interested groups, such as CPAG, to ensure that claimants and tribunals get the facts that they need for hearings. The key facts involve issues such as the greater success rate that a company's oral hearings have over paper hearings. I shall ensure so far as I am able that the literature that goes to prospective appellants is of the sort that noble Lords and I would wish. I believe that that covers the questions raised by the noble Lord, Lord Higgins.

The noble Earl, Lord Russell, asked about the inconsistency between Regulations 14 and 19. Regulation 14, as he surmised, is about mental health issues. It involves the sort of evidence that would come from a person's GP or medical consultant. It might involve, for example, the information that someone has a terminal illness about which they may not know. It involves that and similar distressing circumstances. That would be assessed by someone on the appeal tribunal.

But Regulation 19 prescribes the manner in which expert assistance is to be provided to an appeal tribunal. Such expert assistance can be given only by a panel member. Therefore, on the one hand, outside information, which may be highly sensitive, is coming in, and, on the other, information is given by the panel member which must be shared with the appellant. To the best of my understanding, that appears to reconcile the concerns expressed by the noble Earl.

The final point raised by the noble Earl—a point raised also by the CPAG—concerned the apparent discrepancy between literature coming in and literature going out. I am sure that, from his own experience, the noble Earl will agree that a problem arises in relation to the department and the appeal service keeping track of dates. What we are doing—and our reason for doing it—is to ensure that the department and the appeal service know when a document is sent or received. They cannot ascertain when a claimant receives a document that they have sent; nor are they able accurately to ascertain when a document has been sent by a claimant. Those in the department can be clear when a document has arrived at the department and when it is sent out. As the noble Earl said, anything else is dependent on the vagaries of the post or on whether someone is away on holiday or away for a weekend and so on. Therefore, in this case, we must work with information which is solid and robust and which can stand up to further inspection.

Earl Russell: My Lords, I thought that that would be the Minister's answer. Will she square the circle between us by making the presumption rebuttable?

Baroness Hollis of Heigham: My Lords, I shall have to take advice on that and write to the noble Earl. However, we have discussed the matter with the Child

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Poverty Action Group. I am certainly willing to consider what the noble Earl said and I shall write to him to see whether there is any way that we can meet his queries. But, having for many years chaired a local authority housing committee where, before we had a formalised appeal system, a number of appeals related to housing benefit, ultimately I had to say that we had to go by the date of arrival and by the date when forms were sent out by the department simply because of the unexpected vagaries of people's existences. In order to be fair to claimants, we could not handle the system in any other way.

The important point is to ensure that the appeal times, and so on, are of a decent period and that late appeals can be accepted with good cause. As the noble Earl will understand, both those issues are embedded in the system. Therefore, I hope that the matter of posting dates, and so on, will not come between us. However, I shall write to the noble Earl on the issue of rebuttal.

I have done my best to answer the questions raised and I hope that, as a result, noble Lords will feel able to accept the regulations.

On Question, Motion agreed to.

Tax Credits (Appeals) (No. 2) Regulations 2002

Baroness Hollis of Heigham: My Lords, I have already spoken to these regulations. I beg to move.

Moved, That the draft regulations laid before the House on 28th November be approved [3rd Report from the Joint Committee].—(Baroness Hollis of Heigham.)

On Question, Motion agreed to.


8.28 p.m.

Lord Thomas of Swynnerton rose to ask Her Majesty's Government what plans they have to resolve the problem of Gibraltar.

The noble Lord said: My Lords, I have spent much of my life studying the history of Spain and, in consequence, have become very fond of its people, its country and its customs. Therefore, I feel a certain obligation to inspire a discussion as to what might be done to resolve a question which, as a Spanish Minister put it to me last year, is like a grain of irritating sand in the shoe of British/Spanish relations. Today, I would add that any mention of Spain should include a recognition of our horror at the ecological catastrophe which is currently engulfing Galicia, one of the most delightful parts of Spain—indeed, of Europe.

In a debate of this brevity, I have, perhaps fortunately, no time to recall much history or to dwell, for example, on how Gibraltar was conquered by us in 1704 in the war of the Spanish succession and retained

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by us at the Treaty of Utrecht; nor how, in the course of the Second World War, we built an airport on what, until then, many people thought had been considered neutral ground. Nor do I have time to recall how the Rock played a determining part in our old strategy guarding the route to India; nor, indeed, how, when that role disappeared in the 1960s, Spain brought pressure on us, hoping that we would surrender this last of European colonies as we had surrendered so many others, and how that very pressure led to the Gibraltar constitution of 1969 and to the growth of a new Gibraltarian self-assertiveness. Instead of history, let us talk of positive possibilities and positive ways ahead.

I think that all noble Lords, however they may judge the policy proposed, would allow that the Government, earlier this year—positively, as I saw it—came to look on Gibraltar as a problem to be resolved, not a redoubt to be defended.

I suggest that the first question we should ask is whether we could, perhaps, maintain the status quo. I do not believe that that is a long-term possibility if only because Gibraltar wants to participate fully in the European Union. To secure that, it would need Spanish goodwill. It would have to accept the modifications of the generous fiscal arrangements which years ago Britain made possible for its large number of companies which the Commission in Brussels, very properly, is now demanding. Gibraltar also wants to use Spanish airspace and Spanish territorial waters to deposit waste in Spain. Many Gibraltarians want to drive easily to their week-end homes in Sotogrande and elsewhere in southern Spain.

I repeat that Spanish goodwill which, to be realistic, will not be forthcoming without change, is necessary for Gibraltarians in the present circumstances. The old days, before the civil war perhaps, of friendships between the civil governors, or the Captain-General of Andalusia and the Governor or Gibraltar, joint master as he was at that time of the Calpe Hunt, would be very difficult to revive in modern Europe.

Gibraltar now also constitutes this irritant in the friendship between two great nations, which have many things in common in the European Union in particular, but also in the wider world: the close relations we have with our ex-colonies, now independent; our two unsinkable world languages; and a personal friendship which has been fostered very creatively by the Prime Minister and his Spanish opposite number.

What are the alternatives to the status quo? Independence? That does not seem to me a possibility. The Treaty of Utrecht, however tattered it sometimes seems to us, gave Spain a residual legal right of repossession if Britain were to abandon her interests, and Spain will not forget that.

Noble Lords should remember that Spain has a defence interest in Gibraltar because of its position and because of its proximity to Africa whence, as it is, thousands of would-be Moroccan immigrants to Spain arrive daily on rafts in the summer at beaches close to the Rock. Comparable entities, Liechtenstein

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or Monaco, for example, have a close relation with their larger neighbours. Surely that sort of relationship would not be very likely in the incidence of an independent Gibraltar achieved against the wishes of Spain.

There is then the idea of cession to Spain, either directly or through a lease of, say, 100 years. It may seem scandalous even to mention such an idea in this House, but I remind noble Lords that tens of thousands of British citizens live in Spain within an hour or so of the Rock of Gibraltar by road, and that at least 12 million citizens go to Spain for their holidays every year. None seems the worse for it. I have contemplated living in Spain myself.

In the 1960s I recall that a creative-minded sub-committee of the Labour party international department looked forward once to surrendering Gibraltar to a democratic Spain. Spain has now become a constitutional democratic state. Its king is admired wherever he goes. Spain is a member of the European Union and part of NATO. Actually, Spain would be obliged to defend Dover if it was attacked and Britain would be obliged to defend San Roque or Algeciras if they were to be attacked.

Affection, and, so far as I can see, admiration for Britain is widespread in Spain. In the event of such a cession, citizens of Gibraltar could certainly preserve their British nationality in all such circumstances. But I accept that an arrangement of that nature would not now be acceptable to Gibraltarians who have in their border crossings often seen the less agreeable face of Spanish officialdom.

Next I consider, but think I should discard as unrealistic, the suggestion of one sometime British ambassador to Madrid, Sir John Russell, who proposed a sale of Gibraltar to Spain in the 1960s, such as the sale of Florida, Louisiana and Alaska to the United States. I do not think that any noble Lord would entertain such a concept today.

I therefore return to the idea of dual sovereignty, which was advocated strongly by the Foreign Secretary last spring but which was rejected by the Gibraltarians in their referendum of last month. I think it a pity that they voted thus. A two-flag solution would surely recognise the reality that the Rock is geographically a part of Spain, even though it has been for so long politically and culturally attached to Britain. I urge the Gibraltarians in good time to think again. The benefits would be very great. Gibraltarians could negotiate, I think, almost any kind of autonomy with a dual sovereignty which they desired. They could preserve most of their economic privileges.

Britain could retain a residual strategic interest by, for example, maintaining a listening point, which, from statements made by the Secretary of State for Defence during the course of the summer, I gather is still important.

We might also be able to secure European support for a new university to be founded, say, at San Roque or Algeciras to serve Gibraltarians as well as the people of southern Andalusia. European institutions might establish themselves creatively on the Rock.

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With two famous and marvellous seas on either side, Gibraltar could become, at the least, a fine conference centre. The beautiful European flag, as I see it, with its golden stars, could share the honours with the British and the Spanish ones. Perhaps a NATO dimension could be added. Vast opportunities could open up were this to be accepted. And the grain of sand in the shoe of British/Spanish relations could thus be transformed, oyster-like, into a pearl.

8.39 p.m.

Lord Monson: My Lords, I listened with great interest to the noble Lord, Lord Thomas of Swynnerton, as I always do, and acknowledge his profound knowledge of Spain and all things Spanish, which I cannot remotely match. He put his argument seductively on the topic, as he always does. Perhaps I may briefly enlarge on his brief canter through the history of Gibraltar. I point out that Gibraltar has been under the Spanish crown for only 252 out of the past 1,300 years—less than 20 per cent of the time—which may or may not be relevant to the argument.

What galvanised me to speak was the noble Lord's use of the word "problem" to describe Gibraltar. If it is a problem—that is a big if—that is certainly not of Gibraltar's making, nor of this country's. In our lifetime, there have been many genuine territorial problems in various parts of the world, many of them arising from clashes of race, religion or culture within a particular geographical region.

As the debate started an hour and 28 minutes later than was forecast by the Whips' Office, I shall not go into the history of problems in Europe in the 1920s and 1930s, nor the holocaust in the Indian subcontinent following an over-hasty partition. However, in our time—during the past 40 years or so—there have been genuine problems in Quebec, Northern Ireland, the former Yugoslavia, Cyprus, Lebanon and Sri Lanka. Most urgent and topical is Israel, the West Bank and the Gaza Strip. Geographically rather nearer Gibraltar, it cannot be denied that, despite manifold concessions, for which it must be praised, Spain still has a serious Basque problem and many lives have been lost in consequence.

However, problems are not always inevitable. Alsace and Lorraine were not problems in 1940, nor were the Baltic states or the eastern part of the Alpes Maritimes, merely because Hitler, Stalin and Mussolini respectively wanted to get their hands on those areas. The Falklands were not a problem in 1982 when Galtieri wanted to grab them; nor was Kuwait 10 years later because Saddam Hussein wanted to annex it. In the extremely unlikely, indeed, virtually inconceivable event of Malaysia laying claim to Singapore—like Gibraltar, a tiny political entity lying at the southern tip of a large landmass, it would be an outrage but not a problem.

Lest I be accused of being anti-Spanish, which I am not, let me declare that neither Ceuta nor Melilla, both of which I have visited, can be seriously classified as genuine problems. Although in recent years, they have

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both acquired substantial Muslim minorities of up to 15 per cent, every indication is that nearly all the inhabitants—whether they be Spanish Christians, Sephardic Jews or Moroccan Muslims—are happy with the status quo, although the majority that favours it may not be quite as high as that in Gibraltar.

Like Gibraltar, neither territory possesses oil or other scarce mineral resources that their larger neighbours could lack, nor do any of them possess the only deep-water harbour in the western Mediterranean at the possible expense of their neighbours. In other words, in each case there are neither valid demographic nor valid material grounds for coveting one's neighbours' property.

It would be unfair simply to turn the tables and declare that there is no Gibraltar problem, only a Spanish problem. As a noble Lord pointed out during one of our debates on Gibraltar during the past year—it may have been the noble Lord, Lord Wallace of Saltaire, but I cannot swear to it—it is not really a Spanish problem but a Castilian problem. Most of the Andaluçians, Catalans, Galiçians and others are totally relaxed about Gibraltar.

It is a fallacy to imagine, as is sometimes claimed, that all those who pour across the Gibraltar frontier at weekends are British expatriates living on the Costa del Sol, desperate to stock up on jars of Marmite or bottles of HP sauce. In my experience, most of the shoppers are Spanish. Moreover, I have driven all over the provinces of Huelva and Malaga in an unmistakably British car with Gibraltar number-plates. Not once did anyone shake their fist or scowl. On the contrary, we met with nothing but sheer kindness and hospitality all round.

I spoke of a Castilian problem, but I suspect that it applies to no more than a small minority of Castilians. Certainly, most people whom one encounters in Madrid nowadays seem pleasantly devoid of nationalistic or militaristic sentiment. I guess that there is a small Castilian clique, not unlike the French enarques—although not necessarily in their politics—in that its members are small in number but powerful in influence. It hankers after the old days: hence the bullying.

Bullying there has certainly been, not only of the Gibraltarians but of the Portuguese. It is not generally known that TAP—otherwise known as Air Portugal—tried to set up a thrice-weekly service between Lisbon and Gibraltar and had acquired aircraft specifically for that route. That would have been of enormous material and psychological benefit to the Gibraltarians. When Madrid heard of it, it was enraged and made every sort of threat to the Portuguese, who ultimately caved in. The service was cancelled, not least because the Portuguese are constantly worried about threats to their water supply. Most of Portugal's great rivers such as the Minho, the Douro and what we call the Tagus have their source in the mountains of western Spain.

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All that bullying is not exactly communautaire. Indeed, it is wholly contrary to the spirit and probably the letter of what the European Union is supposed to be about. I hope that those responsible will think again, mainly because it is the right thing to do but also because, from a self-interested point of view, it makes sense. Only a lengthy and sustained period of civilised behaviour by successive Spanish governments towards Gibraltar will have any chance of persuading the Gibraltar electorate to change its mind.

I have one final point. Over the past six months or so, the Gibraltar Government's office in London has received an astonishing 750,000 messages of support from the British public, by letter, fax, phone and e-mail. That is heartening in itself and because it demonstrates that no British Government will now dare to sell Gibraltar down the river, if they wish to remain in office.

8.47 p.m.

Lord Moynihan: My Lords, I add my congratulations to the noble Lord, Lord Thomas of Swynnerton, on securing the debate.

More than a year ago, press reports began to suggest that the Government were prepared to consider sharing sovereignty over Gibraltar with Spain. Five months ago, in July, the Foreign Secretary confirmed that that principle had been agreed with Spain. I regret to say that, since then, the situation has gone from bad to worse. I would go so far as to say that, in their efforts to find a settlement for Gibraltar, the Government have, instead, scored a spectacular own goal. A settlement is further away than ever, and both Spain and Gibraltar are alienated.

We are all agreed on one thing: the ongoing dispute with Spain over the status of Gibraltar is in no one's interest. It is not in Britain's interest, not in Spain's interest and, least of all, in Gibraltar's interest. It is in the interest of everyone to find a comprehensive and permanent settlement. Such a settlement cannot be achieved without a constructive basis for talks with Spain. That was the rationale for the 1984 Brussels communique.

There must be something of the spirit that nothing can be agreed by any party until all is agreed by every party. The 30,000 inhabitants of Gibraltar cannot be left out of the loop in the wider interest of better relations with Spain. Yet, the Government seem, at best, to have found their views inconvenient and, at worst, to have disregarded them altogether. The starting-point for talks must be the consent of the people of Gibraltar. Without that, nothing can be achieved.

Your Lordships are well aware of the commitment made in the preamble to the 1969 constitution of Gibraltar. The Government have repeatedly insisted that there is no question of any change in sovereignty against the wishes of the people of Gibraltar. Yet, their actions belie their words. As a result, there has been much concern about what might or might not be agreed between the UK and Spain over the heads of

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the people of Gibraltar. As the excellent Foreign Affairs Committee report on Gibraltar published last month states:

    "The British Government risks giving the impression that it is more concerned to achieve an agreement with Spain, almost at any cost, than it is to ensure that the Government and people of Gibraltar support this agreement".

We all wish for the best possible relations with Spain. She is an important partner and an ally in so many areas—not least in the European Union and NATO. Yet we cannot sacrifice the interests and wishes of the people of Gibraltar to this wider goal. We cannot forget that for more than 30 years Spain has unreasonably discriminated and harassed Gibraltar through excessive border controls, air and maritime restrictions and limited telephone access. The people of Gibraltar are still beset by an unsubtle blend of obstruction, threats and restrictions contrived by Spain. Every day there is disruption—from long queues at the border to insufficient telephone lines and inadequate air services.

An end to Spain's sanctions against Gibraltar would be in the interests of the Gibraltarian people, but the Government's decision to discuss the concept of joint sovereignty with Spain has not secured this, even though one would expect that to be a minimum prerequisite of any negotiations which included sovereignty. Yet despite the relaunched Brussels process, good will from Spain in the form of concessions towards Gibraltar have been in short supply. Even the Minister for Europe recognises that, pointing out last month the need for, as he put it, a

    "little bit of TLC on the part of Madrid"

to calm things down.

The recent diplomatic spat over responsibility for the oil tanker "Prestige" demonstrates how low relations between Britain and Spain over Gibraltar have sunk this year. For example, the Government officially denied reports that the "Prestige" was heading for Gibraltar. But during the row, Loyola de Palacio, the EU's Spanish Transport Commissioner, remarkably and inexcusably was quoted in El Pais as stating:

    "In Gibraltar we see yet another case of tax evasion, smuggling and inappropriate behaviour".

Diplomacy is about straightforwardness as much as anything else. Straight talking is essential in the case of any country which thinks that it is entitled to some territory—for example, China and Taiwan, Argentina and the Falklands or Spain and Gibraltar.

It should be the goal of our diplomacy to impress on Spain that it will not get what it wants through the tactics of force, bullying and threats. From the days of Franco to today, in the single-minded pursuit of their claim to Gibraltar, successive Spanish governments have intermittently laid siege to the Rock with all the subtlety of a bar-room bully. That is in spite of the overwhelming evidence which points to the total failure of these tactics. It has long been obvious that if Spain wants Gibraltar, she must win the hearts and minds of the Gibraltarians. Yet the Spaniards are no nearer to capturing their hearts and minds today than

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they were 30 years ago and Gibraltar's 30,000 inhabitants are resolute in their desire to remain under British rule. Again, the Foreign Affairs Committee concluded in its report that without a prolonged period of wooing the people of Gibraltar, it is surely unrealistic of Spain to expect any change on their part.

However, the Government do not seem to have made that clear. Instead, they have allowed unfounded and unjustified Spanish allegations to go unrefuted. Will the Minister say why the Government have not rebutted such Spanish allegations of illegal practices, including smuggling, money-laundering and tax evasion promptly and decisively, including, for example, the Ruperez letter published by the Wall Street Journal in June?

Standing up for Gibraltar when members of the Spanish Government condemn her as an economic parasite and condemning flagrant breaches of the law by Spain would hardly be an irresponsible inflaming of the situation, but rather the Government taking the opportunity, quite rightly, to put the record straight.

I would like to ask the Minister a number of key questions. First, will she state clearly for the record the Government's policy on Gibraltar following last month's referendum? Will the Government continue talks on the principle of joint sovereignty under the Brussels process? After all, the Foreign Secretary said that the Government would,

    "continue to seek an agreement . . . but it must be one that is acceptable to the people of Gibraltar in a referendum".—[Official Report, Commons, 12/7/02; col. 1167.]

The people of Gibraltar have now held a referendum, yet the Government have effectively said that it does not count. I should like to know why. The argument that the referendum is valueless because there are, in the words of the Prime Minister,

    "no proposals on the table",

and there is nothing to vote on does not square with the Foreign Secretary's statement that,

    "After 12 months of negotiation, we and Spain are in broad agreement on many of the principles that should underpin a lasting settlement. They include the principles that Britain and Spain should share sovereignty over Gibraltar".—[Official Report, Commons, 12/7/02; col. 1166.]

The principle of joint sovereignty in itself is, to every man, woman and child in Gibraltar, a substantive proposal.

However, given that the Prime Minister has said that there are no proposals, can the Minister state clearly what has been agreed with Spain since the relaunch of the Brussels process? At minimum, as I understand it, the principle that Britain and Spain should share sovereignty over Gibraltar has been agreed, and it is that principle which the Gibraltarians have now rejected. Yet the Government will not accept that referendum as valid.

Can the Minister explain why the Government have been unwilling to allow the people of Gibraltar the chance to accept or reject the principle of joint sovereignty in a referendum? Is there some legal or technical reason why this referendum is flawed and

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cannot be accepted? In what way was it not a democratic vote used to express a democratic wish? The Minister for Europe has said that he wants to,

    "tackle the suggestion that we sought to dismiss the idea of the referendum out of hand or ignore it. I do not ignore any expression of the people's will".—[Official Report, Commons, 25/11/02; col. 141.]

So will the Government therefore accept the validity of the referendum?

Can the Minister clarify whether it is government policy that the British and Spanish Governments should be able to reach agreement on matters concerning Gibraltar with the endorsement of the Gibraltar Government? I say to the noble Lord, Lord Thomas of Swynnerton, that the "two flags, three voices" formula is meaningless if the Government of Gibraltar is granted a voice, only for it to carry no weight whatever. Can the Minister explain why, in the talks, a system could not be developed to allow Gibraltar to have even an internal veto within the British delegation in order to secure the Government of Gibraltar's attendance at the talks? Can she further say whether it was the case that the Gibraltar Government were allowed such a veto from 1996 to 2001 and why this is not possible now?

Does the Minister accept the conclusion of the Foreign Affairs Committee that it was,

    "politically impossible for the Gibraltar Government to participate in the Brussels Process talks without also having the power to limit the outcome of those talks"?

I do not think that the talks and the Brussels process should be permanently abandoned. Of course talks with Spain should and must continue. The only way to secure a more prosperous future for Gibraltar is through a negotiated resolution of the dispute with Spain on all issues. But the direction in which these particular talks have been going seems to hold little future. There have been calls for a period of reflection on how policy on Gibraltar should progress following the referendum, and I endorse those calls.

When talks reconvene they should be genuinely tripartite and on an agenda where agreement is possible, such as better access to the colony and improved communications. The thorny issue of sovereignty should be on the agenda only when all parties are willing to discuss it. It is essential to secure the agreement of the Gibraltarians prior to entering further talks with Spain and to secure a declaration which is accepted by all parties. Both the UK Government and the Spanish Government have a responsibility to prove to the people of Gibraltar that they have more to gain than to lose from this process.

9 p.m.

Lord Lea of Crondall: My Lords, speaking in the gap, I merely want to make two points about the general thrust of the interesting contribution by the noble Lord, Lord Thomas of Swynnerton. As all would surely agree, we should not be worrying about this question if it were a case of letting sleeping dogs lie. I am afraid that the dogs are hardly asleep; yet we find it very difficult to know how to make any progress.

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Perhaps I may take up the penultimate point made by the noble Lord, Lord Thomas—which will not be popular in all quarters but which is in a sense to do with the dilution of everyone's sovereignty in the European Union. I am not sure what the technical status of Gibraltar is vis-à-vis the European Union. What I do know is that many of the "hearts and minds" problems accurately identified by the noble Lord, Lord Moynihan, are problems that we all have—we have them in Belfast and we have them in Basingstoke—about our own sovereignty being diluted. Yet we talk as though undiluted sovereignty—"we are more loyal than you are" almost—has to be taken as a fixed thing. Therefore, the hearts and minds question arises.

I am reminded that in many parts of the European Union border areas there is a sort of "creep" of co-operation on many matters. This is relevant. I refer, for example, to the air traffic control problem, relations with the rest of Andalucia and so on. That "forward creep", although not very dramatic, should be related—in this respect I agree with the noble Lord, Lord Moynihan—in order to bring elements of the hearts and minds further forward.

9.2 p.m.

Lord Watson of Richmond: My Lords, in examining what has been described in this debate as the "problem of Gibraltar", I take the saga of the inappropriately named tanker "Prestige" as illustrative of two key aspects of the problem.

First, after disaster had struck the tanker—and because of the awful damage to the beauty of the Galician coast and to the livelihood of the area's fishermen—our real and deep sympathy went out to Spain. But after that disaster, the Spanish Government, unfortunately and inaccurately, sought to focus unique blame on Gibraltar—an error that was compounded by the over-emphatic European Commissioner to whom reference has been made.

The charge was that the "Prestige" called frequently at Gibraltar, where she had never been adequately examined. In the event, the truth is rather more complicated, as the press and our ambassador in Madrid have hastened to point out.

The "Prestige" has docked at Gibraltar only once in the past five years. In that time she has also docked at Algeciras and Las Palmas, as well as at Dunkirk, Wilhelmshaven, Cork, Rotterdam and many other continental ports, and was apparently headed for Singapore. "Gibraltar for orders" as a ship's destination does not necessarily signify that a ship will actually call there, as orders are often received while still at sea. In any case, as The Times pointed out in an editorial, pinning blame for a disaster that overtakes,

    "a Liberian tanker, registered in the Bahamas, managed in Greece, and chartered from Switzerland on behalf of a Russian oil trader",

is inherently tricky, and to attempt to the lay blame uniquely on Gibraltar is frankly "ludicrous".

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The attempt to do so, however, is sadly symptomatic of a great deal of what has been Spain's approach to the Gibraltar problem, and it is regrettable. It is the first aspect of the Gibraltar problem illustrated by the "Prestige" saga. So far, Spain has not succeeded in finding the language or the attitude to win the ears, let alone the hearts, of Gibraltarians. That is a great pity. Spain's rhetoric has rasped rather than reassured. So, too, in real terms, have actions over border-crossing arrangements, telecommunications, phone connections, air traffic and so forth.

Sadly, our own Government have made a poor situation apparently worse. Through ambiguity, intended or unintentional hilarity, and the suspicion at least of going behind or above the Gibraltarians themselves, the Government have agitated unease on the Rock. In another place, the new Minister for Europe produces what we in this House must all hope was a non sequitur. He said:

    "I want to do right by the people of Gibraltar".

He added immediately:

    "I seek no promotion to the Cabinet".

Why? Would an unwillingness to do right by the people of Gibraltar enhance his prospects of promotion to the Cabinet? One can only wonder and ponder.

Terry Waite, in an article last month on Gibraltar, wrote:

    "Gibraltar is an anomaly but, for all that, the inhabitants of the territory have a genuine and unique identity and are entitled to be listened to even though they may be few in number. The key to resolving the problem lies in taking the people of the Rock seriously".

That is the key—for Spain, Her Majesty's Government and us in this House. The near 99 per cent vote in the referendum was not eccentric. It was really important. I was interested to note that, following the referendum, the Minister for Europe in another place conceded for the Government:

    "We are not deaf or stupid and we have listened".

Good. That is necessary.

If the Government have agreed to listen to the Gibraltarians, so, too, should the Spanish Government. Gibraltarians, too, should listen and watch what is happening in the rest of Europe. I shall pick up a point made by several earlier contributors. What is happening in the rest of Europe is very significant for the future of Gibraltar and for the ultimate resolution of the so-called problem. It is hopeful. The old divisions in Europe between East and West are going, despite conflict and inherent animosity sometimes much greater and far sharper than in this case. There is a new propensity in Europe to open minds to new possibilities.

The future that matters surely is that of the younger generation of the Rock. They must have a future with, rather than against, their neighbours. The decision on the future of Gibraltar lies with Gibraltarians. That is their right. It is our obligation to safeguard it. I urge that, in making and taking their eventual decisions, Gibraltarians must consider the future as well as the past.

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I return to the ill-fated "Prestige", whose saga illustrates a second aspect. The Times has pointed out that the solution to preventing future disasters lies in a European Union package of measures to be introduced next year which will concentrate on more and older vulnerable ships and also express a determination to make it compulsory for oil to be transported only in double-hulled vessels, which is surely right. The solution to the problem of Gibraltar lies in co-operation.

Our questions for the Minister tonight must be not simply for a general reassurance that the verdict of the referendum will be listened to, that the wishes of the Gibraltarians will not be overridden and that there will not be any secret deal. I am sure that the Minister will be happy to give such assurances to the House. However, we are really seeking something further than that. We need to know whether, in their dialogue with the Government of Spain, the Government are able to ensure that the real physical problems of Gibraltar are addressed, that the issues that are seen and experienced as harassment are resolved, that the tenor of the dialogue is fundamentally changed, that the concerns of the small but distinctive population of Gibraltar are addressed and that therefore talk about the longer future of the Rock can take place in a different context and a different atmosphere. I urge and ask the Minister not simply to point us to the lessons to be learnt immediately from the events of the past two or three months, but to give a clear indication that the Government can capture the attention of the Government of Spain to address the problems that most agitate people on the Rock so that, these having been addressed, we can move forward in a different atmosphere.

9.12 p.m.

Lord Howell of Guildford: My Lords, this has been a useful short debate. Your Lordships will obviously be grateful to the noble Lord, Lord Thomas of Swynnerton, for initiating it. He said he was not going to go into history because of the time available. That is a pity, because the noble Lord is a historian of the first rank and I was half looking forward to a few adventures into history before we got on to the present or the future. However, I realise that the practicalities ruled that out.

The debate is useful because, by all accounts, the last debate on the subject in the other place was not a very fortunate affair and some very unhappy reports emanated from it. This has been an opportunity to see whether your Lordships are able to do better. The tone has been constructive, as it should be on this immensely difficult problem. Although the arguments for the status quo are put forward with respect and intensity, one has to accept that there are problems and it would be good to see a way forward.

I shall not follow the noble Lord, Lord Thomas. I am not tempted to look at various solutions or settlements, let alone deals. Although one certainly wants to do everything possible to ensure good

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relations between this country and a glorious country such as Spain, which we so much admire, the recent endeavours on the diplomatic side—particularly the endeavours of the British Government, I am afraid—have left such a cloud and a mist over the situation that it is very hard to see any way forward. I shall follow the path of methods and ways forward step by step. I cannot offer your Lordships a clear vision of how we get to the happier goal of good relations between ourselves and Spain and a contented Gibraltar that feels its voice has been heard and its views respected. I do not see how we can get there at the moment, but I shall examine a few aspects to see whether we can open one or two doors.

The first point is that the recent endeavours and the opening of the discussion—indeed, the opening of the negotiations, apparently—described by my noble friend Lord Moynihan are not actually a continuation of what we on this side understood to be the Brussels process. I know that Ministers have said from time to time, "The Conservative government started all this", first under my noble and learned friend Lord Howe and then under my noble friend Lord Hurd, "and we are continuing it". However, to me, one of the most important sentences in the Select Committee report which has been much quoted this evening is one which is not actually in black, but states:

    "The Foreign Secretary failed to point out the difference between the 1984 Brussels Process talks—when sovereignty was one of several subjects for 'discussion'—and the 2001 Brussels Process talks, when the principle of joint sovereignty was negotiated between Britain and Spain".

It is that word "negotiation" which comes zooming up into the scene that has been a cause of so much trouble.

The Select Committee goes on to make other points, some of which have been quoted by noble Lords. Like some noble Lords, the committee rejects the view that it was eccentric for the people of Gibraltar to hold their own referendum. It points out, as my noble friend Lord Moynihan has done, that the chances of progress without a prolonged period of wooing the people of Gibraltar is unrealistic. It says that the Government were wrong to negotiate joint sovereignty when they must have known that there was no prospect whatever that any agreement on the future of Gibraltar which included joint sovereignty could be made acceptable.

The committee says that it was politically impossible for the Gibraltar Government to participate in the Brussels process talks without also having the power to limit the outcome of those talks; that is the veto issue. It concludes that publicly questioning the probity of Gibraltar during the course of the relaunched process increased tensions and suspicions. It says that we have ended up with the worst of all worlds, and that the British Government now face an unenviable choice: to carry on with the negotiation in flat defiance of the view of the people of Gibraltar, or to withdraw from negotiations and offend Spain whose hopes had no doubt been raised that there was going to be some kind of deal.

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So that is the sad situation we have reached. Trying to be as objective as one can, it is very difficult to avoid the conclusion that this round of endeavours to meet a recognised problem has been very poorly handled. Looking back, it seems extraordinary that there was not the realisation that there had to be, to start with, a whole preliminary period of discussion fully involving the people of Gibraltar and bringing to them, and to the eyes of the Spanish Government, and to ourselves—we have to learn as well—the possibility that certain solutions could be achieved.

So what am I left with recommending? I think that one has simply to say to our good Spanish friends, partners, allies and fellow Europeans that the lesson is that kindly behaviour—being nice, if you like—and showing good will can pay dividends. If the past attitudes, which have appeared at times to be bullying, have been frustrating and have messed up people's lives at the frontiers and so on give way to a very positive and friendly approach, Spain may be surprised, we may be surprised, and the Gibraltarians themselves may be surprised at what can be achieved.

I confess that one is open to the accusation that this sounds a bit like Woodrow Wilson believing in the innate decency of human beings and nations and that, if only we had talks, all would be well. That is a bit naive. However, I cannot believe that there would not be dividends, at least in step one—I am not sure where this leads beyond step one—in the Spanish authorities determining as a clear act of policy to be supportive and to meet the immediate sores and irritations that antagonise the people of Gibraltar and make them so absolutely determined to reject any negotiations and not to participate in discussions on the terms offered.

I hope, therefore, that that policy can be put to bed and that it has finished. Frankly, it has done a lot of damage and has made matters worse. We must be constructive and now develop a new policy position with our Spanish and Gibraltarian friends. We must proceed on a tripartite basis and on the basis of discussions and not negotiations. We must realise that the attempt to negotiate in the way that that was done has reached a dead end. A new approach is needed, part of which comprises the two flags and three voices concept already mentioned and originally proposed, I believe, by my noble friend Lord Hurd. But that is not enough, as my noble friend Lord Moynihan said. We have to proceed on a basis that, if matters are to be agreed, they should be agreed by everyone and that nothing should be agreed on the side until everything has been agreed.

I agree with the noble Lord, Lord Watson, that the solution lies in co-operation. For partners and friends to co-operate requires a starting point of trust and good will. If there is not some basis of trust and good will established between Spain and Gibraltar, and if there is not some restoration of good faith between Gibraltar and London, which has been severely shaken by the negotiation attempts, there will be no

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progress at all. However, if there is a restoration of trust and good will, we can make progress and we can determine ways in which relations with Spain in this regard, which are very important to us, can be improved. I hope that the wishes of the people of Gibraltar can be respected and that a better future for them can be achieved. I cannot believe that it is beyond the wit of man to do that but I have to say that the attempts of the past few months have not made it any easier.

9.22 p.m.

Baroness Amos: My Lords, I am grateful to the noble Lord, Lord Thomas of Swynnerton, for initiating the debate. His knowledge and understanding of the Iberian peninsula and its history are well known in this House.

The noble Lord, Lord Thomas, set out the issues which face Gibraltar and need to be addressed. This debate is a clear sign of the concern felt in this House for the people of Gibraltar and for their future. That concern for a better future for the people of Gibraltar is something that we all share. It is precisely that desire to secure a stable and prosperous future for the people of Gibraltar that continues to drive this Government's policy.

The situation as it currently stands, with the continuation of a 300 year-old dispute, does not yet offer hope of that better future. To achieve this, it is not simply a matter of removing the every day disruption to the lives of people in Gibraltar, which has been mentioned by many noble Lords, be it border delays or restrictions on air services and telecommunications. There is also a need and an opportunity to promote a secure base for future economic development in Gibraltar and the surrounding region in such a way as to enable Gibraltar to realise fully its potential.

It was with this in mind that my right honourable friends the Prime Minister and the Foreign Secretary decided to relaunch the Brussels Process talks in July last year. In taking that decision, my right honourable friends recognised that the only way to secure a more prosperous future for Gibraltar was through a negotiated resolution of the dispute with Spain on all issues, including sovereignty. The process we are taking forward was launched in 1984.

The noble Lord, Lord Watson, pressed me to talk about the context of the discussions that we are having. We feel that it is in no one's interests for the dispute that has dragged on for 300 years to continue. It places unacceptable restrictions on the daily lives of the people of Gibraltar, and damages relations between Britain and Spain, both bilaterally and within the EU. We want to overcome the differences between the UK and Spain and build new, better and more modern relationships between Britain, Gibraltar and Spain for the new century.

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In relaunching the talks, the Government have made it absolutely clear that we will abide by the pledge given by Harold Wilson's government in 1969 that there would be no change in sovereignty without the consent of the people of Gibraltar. If we could reach agreement with Spain on a comprehensive settlement, the whole package would be put to the people of Gibraltar in a referendum and they would decide. We have made that absolutely clear. That is an assurance to the people of Gibraltar that Ministers, including my right honourable friend the Prime Minister, have made again and again. It is fully understood and accepted by the Chief Minister of Gibraltar, Peter Caruana, who confirmed in his New Year message this year that he believed,

    "that this assurance is totally reliable".

I believe that the noble Lord, Lord Moynihan, has forgotten that we were also clear from the start that we wanted the Chief Minister to be involved in the process so that Gibraltarians could help to shape it. That invitation remains open.

The history of the recent negotiations bears some repetition. As noble Lords are aware, three Brussels Process meetings took place in July 2001, November 2001 and February 2002. A further meeting was due to take place in July 2002 but, due to Cabinet changes in Spain, it did not. My right honourable friend the Foreign Secretary, conscious of his undertaking to keep Parliament informed of progress at every stage, made a Statement to another place on 12th July in which he reported on the progress of the talks and on our policy towards Gibraltar.

The noble Lord, Lord Howell, may recall that that Statement set out a number of principles that we believe should underpin a lasting settlement and on which we had reached broad agreement with Spain. This included the principle of joint sovereignty, which the noble Lord, Lord Thomas, set out in his speech, making reference to the benefits of that approach.

I remind noble Lords that there were other principles too: that Gibraltar should have more internal self-government; that it should retain its British traditions, customs and way of life; that Gibraltarians should retain the right to British nationality; that Gibraltar should be free to retain its institutions; and that Gibraltar could choose to participate fully in the EU single market and other arrangements. It also set out some important "red lines" on the need for a permanent settlement and for current arrangements for the British military facilities to continue. Again, it made it clear that any agreement must be acceptable to the people of Gibraltar in a referendum. The Statement also made it clear that no agreement had actually been reached and that there would be no such agreement unless Spain met those "red lines" in full. There were therefore no proposals to put to the people of Gibraltar, and that remains the position.

I should like to deal with the suggestion made by the noble Lord, Lord Moynihan, and others that we have sought to dismiss the idea of a referendum out of hand.

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That is not the case. The principle of consent by the people of Gibraltar is central to our approach. Our commitment is firm: that if we reach agreement on a comprehensive settlement, the whole package will be put to the people of Gibraltar in a referendum, and they will decide. But that does not mean that we have not listened to the views expressed on 7th November and in the run-up to the referendum, just as my right honourable friend the Foreign Secretary listened to the views of Gibraltarians when he visited in May; and we have taken note of them. All the parties—us, Spain and the people of Gibraltar—now need to reflect on the best way forward. We shall also, of course, reflect on the report published by the Foreign Affairs Committee on 7th November, which was mentioned by a number of noble Lords, and we will respond by the date given, which I believe is 7th January.

So, what is next? My right honourable friend the Prime Minister made clear in another place on 6th November that the process that we began of discussion with Spain and with the people in Gibraltar is right because it is in the interests of people in Britain, Spain and Gibraltar. Constructive dialogue, as has been said this evening, has to be the way ahead and we will continue to pursue that. In so doing, we do not now want to start ruling things in or out. That would not make sense at this time.

As many noble Lords will be aware, the Chief Minister of Gibraltar is also in favour of a dialogue with Spain and my honourable friend the Minister for Europe is looking forward to meeting him shortly in London for a first discussion. I know that he wants to hear the Chief Minister's views on how best to proceed.

The noble Lord, Lord Moynihan, mentioned the comments of my noble friend in an interview the day after the referendum, when he said that we also see a need for some tender loving care—TLC—from Madrid and the need to build mutual respect, confidence and trust. My noble friend Lord Lea mentioned the importance of hearts and minds and the noble Lord, Lord Howell, talked of the importance of a friendly approach.

Sadly, that is not something that we saw in the course of the "Prestige" disaster, which was mentioned by the noble Lords, Lord Moynihan and Lord Watson. Some in Spain tried to point the finger of blame at Gibraltar. We have made it clear to Madrid and the Commission that neither the UK nor Gibraltar was responsible for that terrible incident.

The noble Lord, Lord Monson, discussed support for the people of Gibraltar and the difficulty for any government seeking to sell Gibraltar down the river. Let me conclude by repeating that our aim remains a better future for Gibraltar and the resolution of the problems that it faces. We will continue our dialogue with Spain and Gibraltar to that end. There remain real issues that have to be discussed. The noble Lords, Lord Howell and Lord Moynihan, mentioned the issues raised in the report of the Foreign Affairs Committee. We will of course respond to those issues and I shall be happy to send a copy of our response to the noble Lords.

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The noble Lord, Lord Moynihan, asked what we were doing to counter the groundless allegations being made against Gibraltar. We will review seriously any inaccurate statements or allegations that damage Gibraltar. We look to correct any inaccuracies in public statements by Spanish Ministers or others in our contacts with the Spanish Government at various levels and through the press. We shall continue to do that.

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We should do no one a service by ignoring the issues that confront Gibraltar or simply hoping that they will disappear. They need to be tackled constructively. We will maintain our commitment that no deal will be imposed on the people of Gibraltar against their will. Ultimately, their future is for them to decide.

        House adjourned at twenty-six minutes before ten o'clock.

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