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Developments in the European Community

5.10 pm

The Minister of State, Foreign and Commonwealth Office (Mrs. Lynda Chalker) : I beg to move

That this House takes note of the White Paper, Developments in the European Community July-December 1988 (Cm. 641).

Mr. Speaker : I have selected the amendment in the name of the Leader of the Opposition. In view of the large number of right hon. and hon. Members who wish to participate in the debate, I intend to limit speeches to 10 minutes between 7 o'clock and 9 o'clock. I hope that right hon. and hon. Members on both Front Benches and others who may be called before that time will bear in mind the pressure to speak in this important debate.

Mrs. Chalker : It is right that this debate comes just two months after the publication of the White Paper. It is an understatement to say that there is very widespread interest in European issues at present. The debate is an important opportunity to look forward, and to reflect on the second six months of 1988.

My main purpose is to cover the elements of Community policy in the period under review--the White Paper, Cm. 641. The key themes for discussion in the weeks leading up to the Madrid European Council closely reflect the themes of the six-month review. We also have before us the first special report of the Select Committee on European Legislation of last year.

In 1988 we secured two major achievements. The first was a substantial reform of Community finances and the CAP in February. The second was real progress towards the completion of the single market programme.

The groundwork had been laid by previous Conservative Governments. In the 1960s Conservatives had the vision to see that Britain's future was as a member of the Community. Both in opposition and in government we worked to find a way to make a successful application. In the early 1970s those efforts proved successful.

In the 1980s the Government have pursued Britain's interests in the Community through a tough and realistic analysis of the options and opportunities. Our aim has been, and it continues to be, to ensure that the 1992 campaign, as The Economist put it on 6 May : "does to red tape and government controls, what Harry Houdini did to chains, straps and manacles".

In contrast to that excellent record, the Opposition have got failure down to a fine art. They failed to negotiate a single penny of refunds for Britain when they were in power. They have failed to devise a credible European policy--in fact they have changed their mind about membership five times at least--and while they are still arguing about which part of the 1960s baggage to dump the Community is striding confidently into the 1990s. It is small wonder that even the Socialist parties in Europe do not take Labour seriously. After all, it was the Labour leader who called the single market "an abdication of responsibility".

Labour chose an anti-marketeer as the leader of its MEPs in Strasbourg. He has admitted that many of their economic policies would be illegal under the treaty of

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Rome. Labour, if ever again in office, would face a stark choice : to abandon its economic policies or face expulsion from the Community.

By contrast, I have read with great interest some of the clearly expressed views of my right hon. Friend the Member for Henley (Mr. Heseltine). He makes a cogent case for commitment to Europe. Let me make it clear beyond anyone's contradiction that my right hon. Friend the Prime Minister and the whole Government have long held that same commitment. But those of us who are involved in the day-to-day work believe that we must adopt a twin-track policy, declaring our commitment and, at the same time, following a common sense approach. That is how we can best serve Britain's interests, and we intend to do that.

I and, I suspect, a good number in this House part company with my right hon. Friend the Member for Henley in his advocacy of a second chamber of the European Parliament. On the other hand, I share the concern of many right hon. and hon. Members who clearly agree with his view that the current arrangements for scrutinising European Community legislation in Westminster have not proved satisfactory.

Mr. Ron Leighton (Newham, North-East) : The right hon. Lady said that the Labour party has to make a choice, but do not we all have to make a choice? Either we have democratic parliamentary

self-government or we can have the treaty of Rome, but we cannot have both. Hon. Members from all parts of the House have to make that choice. The right hon. Lady has to make that choice.

Mrs. Chalker : The House has made that choice, and I understand that recently the Labour party has also made that choice. I am very worried that the hon. Gentleman may be out of kilter with his Front Bench, but that is not for the House to worry about, as it is a matter for him and for the Labour Front Bench.

Mr. Eric S. Heffer (Liverpool, Walton) : Is the right hon. Lady aware that the Labour party has not discussed membership of the European Community for a number of years? A committee has made those decisions, and the matter still has to be discussed at the Labour party conference. I hope that my right hon. Friend the Member for Chesterfield (Mr. Benn) will be called to speak this afternoon and will put a somewhat different case from that which has been developed by others.

No one should think that all Conservative Members are united on the question of the European Community. They are also divided because the nation is divided and we shall have to work out a solution that is satisfactory to the people. That discussion will continue for some considerable time.

Mrs. Chalker : Sometimes I think that the Labour party will never change. It is still the same dinosaur, the head not knowing what the tail is feeling. However, let me return to scrutiny.

Mr. Nicholas Budgen (Wolverhampton, South-West) : Will my right hon. Friend give way?

Mrs. Chalker : I should have thought that my hon. Friend would want me to talk about scrutiny.

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Mr. Budgen : No doubt my right hon. Friend will move on to that in a moment.

My right hon. Friend dismissed the suggestion of my right hon. Friend the Member for Henley (Mr. Heseltine) rather too quickly. Does she agree that, if not in the next few weeks, at some time in future, we are about to test the constitutional check on the Community of the European Court? At present that is a political court. It does not judge narrow laws by narrow criteria ; it applies political tests of policy. Is it not true that there is no need for a senate, because the EEC has something approaching a supreme court which fulfils more or less that function? When the British Government come to test the effect of the Community, as they are bound to do in future disputes, we shall find out how legal or political that court is.

Mrs. Chalker : I look forward to reading and hearing the results of cases taken to the European Court of Justice. On many occasions when we have had cause to raise with the Commission or with the European Court of Justice the rules that we have followed, they have been found to be absolutely legal and legitimate. I am sure that that will be the case in future.

Mr. Budgen : What about the tobacco directive?

Mrs. Chalker : I shall come to tobacco later, as my hon. Friend is obviously seized by the issue.

I return to what I believe to be the House's real anxiety about scrutiny. I recognise it, and some hon. Members will remember that I referred to it in some detail in a debate in March. I know that my right hon. Friend the Leader of the House has been working hard on this issue to try to help hon. Members to resolve matters so that we get a situation that is much more consistent with the views expressed by hon. Members.

Mr. Tony Benn (Chesterfield) : Before the right hon. Lady leaves that matter, will she confirm that the problem is not just one of scrutiny, because when she and other Ministers to go Brussels the decisions that they reach are reached under prerogative powers? That is to say that there is no obligation, requirement or precedent for the House of Commons to give judgment on treaty making. Every law, whether on smoking, workers' rights or health, is made under prerogative. That is the problem. The question is not only whether we are told what the Government will do, but how that ancient constitutional question which reopens controversies of the 17th century is to be dealt with so that hon. Members can control Ministers using Crown powers to make in secret laws that apply in this country.

Mrs. Chalker : I have heard the right hon. Gentleman on this issue on a number of occasions, and I have also heard some of his hon. Friends and some of mine speaking about it. It is right that the Leader of the House, in co-operation with the Scrutiny Committee, and the Procedure Committee, should be discussing these issues. It is not for me to say how we should resolve matters in the best interests of the necessary scrutiny that the House should undertake. It is right that the efforts being made by the Leader of the House should be strongly supported.

Mr. Leighton rose--

Mrs. Chalker : I shall not give way again. We were asked to be brief and I have allowed about five interventions in the first 12 minutes. Now I want to get on with the debate.

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Mr. Leighton : On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker (Sir Paul Dean) : Order. the Minister has made it quite clear that she is not giving way.

Mr. Leighton : On a point of order. Would it not help the debate if we could get a clear answer to an important constitutional point? My right hon. Friend--

Mr. Deputy Speaker : Order. That is not a point of order ; it is a point for debate.

Mrs. Chalker : I should like to return to the issue of scrutiny because it is important. The volume of work in Brussels has meant constant work for all of us, not least for the House. Single market measures have added to an already heavy legislative load. In 1988 we had a record number of debates on EC matters--39 debates on 109 documents. This year the pace has continued and, as hon. Members know only too well, we have had eight debates on 13 documents in the last fortnight.

I am aware that hon. Members consider these late-night debates to be a growing burden on the House. As most hon. Members know, my right hon. Friend the Lord President is looking at that matter because we want to improve the present system of EC legislation scrutiny. I look forward to hearing the comments of hon. Members on new ways of carrying out the scrutiny process.

In 1988 we saw excellent progress towards building the type of single market that is wanted by all the people of Europe. It is built on free market principles of encouraging enterprise, developing consumer choice and seeking higher growth. That is how we shall achieve greater prosperity for all in Britain and in the Community.

Mr. Tony Marlow (Northampton, North) : I am very pleased to hear that our right hon. Friend the Leader of the House is considering giving better powers of scrutiny to the House in some way or other. Could my right hon. Friend share with us at this early stage some of the ideas that are running through her mind so that we can get our minds working on similar lines?

Mrs. Chalker : I would be foolish in the extreme to share secrets with my hon. Friend the Member for Northampton, North (Mr. Marlow) because they would no longer remain secret. Views and ideas should be forwarded via the Leader of the House to the Scrutiny Committee and the Procedure Committee. I hope that my hon. Friend will do that. I should like to continue on the topic of the single market because that has been responsible for the main part of our work in the second half of last year and certainly forms a large part of the scrutiny that I have described. The treaty of Rome has always been a charter for economic liberalism. These policies are working well in the United Kingdom and now our partners want them to work throughout the European Community.

Last year we agreed nearly 100 single market measures. Fifty-four were achieved under the Greek presidency in the period under review in our debate. That means that we have agreed nearly half of the total from the Commission's White Paper. In short, there can be no turning back--a fact well recognised by the Heads of Government at the Hanover summit. The measures that we have agreed are opening markets and encouraging enterprise. Exchange controls will be abolished for most member states by 1990.

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Britain did it in 1979 and other partners are now following suit. Nine years later we and the Commission have had to persuade the remainder to do likewise. This step will bring considerable benefits to consumers, traders and the business community.

In 1988 we provided for the phasing out of lorry quotas. We abolished restrictions on non-life insurance and on the right of professionals to practise Communitywide. We adopted rules that will force liberalisation in public purchasing which accounts for no less than 15 per cent. of Community GDP. We adopted numerous constructive measures in the fields of financial services standards and food law. That is how committed Europeans work in practice, steadily advancing the ideals that they believe in.

Mr. Teddy Taylor (Southend, East) : My right hon. Friend has said something that is most worrying. Who has told her that there is liberalisation in non-life insurance? That is not the case. I have carefully read the directive on insurance companies. It is proposed that in six countries there will be an element of liberality on what are called large risks, which means that we might be able to insure the Eiffel Tower if the French would consider it. There is also what is called the "cunul" rule which was put in by the Commission. It says that if one state considers that it can offer the same service it has power not to let other states in. The Minister has said that liberalisation will come about and, of course, it would be wonderful if that were to happen, but I am afraid that whoever told her that there will be complete liberality on non-life insurance was talking a load of rubbish.

Mrs. Chalker : I do not like to say this to my hon. Friend, but I am afraid I must tell him that he has not got it quite right. I shall ask the expert on the subject, my hon. Friend the Under-Secretary of State, specifically to address that point in his winding-up speech because it obviously worries my hon. Friend the Member for Southend, East (Mr. Taylor).

Before my hon. Friend asked that question I was telling the House that we have been working steadily to advance the ideals in which we believe. But there are some genuine market needs that require other decisions. Competition policy must be enforced. We must tackle trade-distorting state aids. British policy has given a clear lead here. About one eightieth of our GDP goes in subsidies. Per employee, we give less subsidy than any other member state, and quite right too. The French, Germans and Italians all spend far too much. That distorts competition and damages Europe's ability to compete in the wider world.

The year 1988 was much more than a watershed in the single market. Its achievements were made possible only by the hard-fought deal that we secured at the Brussels European Council in February 1988. By the end of the year, we had clear evidence that those reforms were working. Agricultural expenditure was being brought firmly under control and intervention stocks were falling rapidly. The result is that agricultural spending is expected to be below the agreed ceiling in 1989. The February 1988 deal is bearing fruit.

As I said in our debate in March, many other things must be done as well. The problem of fraud is a serious budget challenge which requires serious action. That is why Britain took the initiative to put fraud high up the Community agenda. Our efforts have been instrumental in ensuring proper discussion of the annual report of the

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Court of Auditors by the Council of Economic and Finance Ministers. Such reports are helping to highlight the nature of fraud and the possible counter measures. Anti-fraud measures are now being built into agricultural regulations and into regulations governing payment of own resources.

Mr. Bowen Wells (Hertford and Stortford) : Before my right hon. Friend leaves the question of fraud, will she tell us whether she believes that fraud should be controlled by the Commission--which is not the case at the moment--or whether it should continue to be controlled by the nation states involved?

Mrs. Chalker : We must work out a way in which nation states are involved as well as the Commission. If one nation state is accusing another, we require the involvement of the Commission to resolve the problem. The Court of Auditors, which is already working so well, can help greatly to detect and deter fraud. That is what we are all about.

In the second half of 1988, Britain also secured a good deal from the structural funds. The United Kingdom has received more money from the European social fund than anyone else--both this year and last--totalling more than £400 million each year. We have also had particular success in obtaining funds from the European regional development fund for projects in Scotland, with more than £70 million for the Highlands and Islands integrated operation and more than £230 million for Strathclyde. We are now working hard on programmes for areas such as Merseyside, Manchester, Salford, Trafford, Tyne and Wear and Birmingham.

Although the 1992 process is going well, we must be alert to the risks to that process. In particular, we must fight any revival of the negative view in Europe that encourages the function of Governments to be one of interference and over-regulation. The success of the single market is based on deregulation, and so it must continue. However, there are some people in Europe, including some Opposition Members, who believe that the process requires new or detailed harmonised social legislation involving great grand schemes of social engineering. That leads to proposals such as that expounded by Commissioner Papandreou which would override differing national needs and practices. There is no case for Communitywide legislation requiring compulsory forms of worker participation. Such matters are best left to the market.

Of course, we want European action in some areas of social legislation. As the White Paper makes clear, last December we adopted an important framework regulation on health and safety at work. That must now be followed up with more detailed directives.

However, we must be selective. We shall fight hard against unnecessary social engineering. We see no need for the type of wide-ranging social charter that the Commission is now proposing. That would stifle the growth that will provide lasting jobs for Europe's unemployed. We shall therefore oppose it.

Mr. Edward Leigh (Gainsborough and Horncastle) : It is very important that we do not take a negative attitude on Europe. Will my right hon. Friend therefore confirm that no one, unless motivated by political malice, could

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accuse us of being negative about Europe if we argue for a genuinely free single market in which consumers are given the maximum opportunity to choose from competing systems of practice? That freedom of choice will be denied if Brussels insists on harmonising too many of those competing practices.

Mrs. Chalker : My hon. Friend has expressed a philosophy which I share with him.

I do not want there to be any doubt about what I am saying. There is a social dimension to Europe. It should involve the provision of training and retraining, the creation of new employment and securing further reductions in unemployment. However, that should come about as a result of deregulation and economic liberalisation. It should not occur as the result of forced decisions such as those we have heard mooted among some members of the Community. The social dimension must not involve the creation of new regulations which will hamper business.

Mr. Jonathan Aitken (Thanet, South) : I warmly welcome this part of the new twin-track foreign policy. I now understand that we are going to fight against the social charter and social engineering in Europe. Will my right hon. Friend give us chapter and verse about the legal basis on which we will veto or challenge and block, as my right hon. Friend the Prime Minister assured us that she would at Question Time this afternoon, the rest of the Community's apparent enthusiasm for the social charter? If we are going to exercise a veto, what is the legal basis for that action?

Mrs. Chalker : I will give my hon. Friend some information. Now that Commissioner Papandreou has spelt out her ideas and intentions in some detail, we have discovered that she wants a solemn declaration. That is not a proposal for legislation as such. Any solemn declaration requires consensus. My right hon. Friend the Prime Minister spelt out our view very clearly earlier this afternoon. We shall have to see how the Commission follows up that view. At the moment, we simply have newspaper reports of plans which would give us great doubts and cause us to fight such proposals were they to come forward in the form of a directive.

There is definitely a social dimension, as I have just explained. But the proposed charter would take us in one direction only ; it would create unemployment, not more jobs. That is why it is so clearly unacceptable to the Government.

Mr. Benn : The Minister spoke earlier about scrutiny by the House of Commons. Now she is talking about scrutiny by Ministers. Tory Back Benchers have questioned whether the Government are impotent to stop a charter because they have signed the Single European Act.

Mrs. Chalker : No.

Mr. Benn : Oh, yes. It is easy to repeat the rhetoric of Bruges. However, that rhetoric has no constitutional foundation, given the Single European Act. I shall be grateful if the Minister will tell us whether the British Government, let alone Members of Parliament, have any power to stop the charter if it emerges as an almost unanimously agreed directive.

Mr. John Butterfill (Bournemouth, West) rose --

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Mrs. Chalker : I have already explained that the idea of the social charter is that it is a solemn declaration. It is not in directive form. If it came forward as a directive, it would state whether it was subject to qualified majority voting or to unanimity. When we know the details, we will be able to decide exactly what we should do. I am not prepared to answer hypothetical questions when there are no directives relating to the solemn declaration outlined by Commissioner Papandreou.

Equally, I see no need for the Community to be involved in detailed areas of domestic policy such as classroom education.

Mr. Marlow : On a point of order, Mr. Speaker. Let me help my right hon. Friend. If she has not seen the charter, my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) has a copy.

Mr. Deputy Speaker : Order. That is not a point of order. This is a short debate and continuous interruptions prolong speeches.

Mrs. Chalker : As I said, we see no need for the Community to be involved in detailed areas of domestic policy such as classroom education or any of the other matters on which some commissioners seek to intervene. Decisions on such issues belong to national competence. That is in accordance with the treaty of Rome, and so it should remain.

On 17 April we had the publication of the Delors committee report on economic and monetary co-operation. That has also excited considerable interest. The committee was charged by all Heads of Government at the Hanover European Council in June 1988

"with the task of studying and proposing concrete stages leading towards economic and monetary union".

The Committee produced a thorough analysis. The report makes abundantly clear that economic and monetary union would take a very long time and require substantial treaty amendment. On the basis of the report, even the most ardent proponents would not claim that EMU was possible until well into next century, but it is not on the current agenda.

Many aspects of monetary co-operation are already on the agenda. Some have been there for many years. We can and should discuss them now. They include the financial aspects of completion of the single market such as capital liberalisation and improved economic and monetary co-operation.

In addition, we support other practical measures including the wider use of the privately traded ecu, and its use where appropriate in intervention ; and increased holdings of EC currencies in foreign exchange reserves.

That is a substantial programme of technical measures. The Community should now concentrate on such practical steps, on which the United Kingdom already has a fine record. Britain has led the way in abolishing capital controls. We led the way in issuing Treasury bills denominated and payable in ecu. We hold ecu and a variety of EC currencies in the reserves.

So the Government will press for a procedure for working out, in the Council of Economic and Finance Ministers and the monetary committee, how best to ensure that more of the right practical steps of co-operation are taken.

Let me say a brief word about the extra dimension of the EC's relating with its neighbours and trading partners.

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The Community must look beyond Europe, as we have always done. There must be no fortress Europe. As my right hon. Friend the Prime Minister said some time ago :

"the expansion of the world economy requires us to continue the process of removing barriers to trade. It would be a betrayal if, while breaking down constraints on trade within Europe, the Community were to erect greater external protection. We must ensure that our approach to world trade is consistent with the liberalisation we preach at home".

That message was well accepted by the whole Community. As the European Council said at Rhodes,

"the single market will not close in on itself".

The current GATT round gives the Community the chance to prove that it means what it says. In Britain, the Government intend to ensure that the reality reflects the rhetoric. The Uruguay round is crucial to the future of the world trading system. If it does not succeed, we shall all suffer.

The forthcoming European elections will give us a chance to hear what the people of Europe have to say on all those issues. They will also allow us to campaign on our European ideals and commitment. Our critics complain that we have joined the Community, but will not play by the rules. That is a travesty. Britain sticks to the rules and we work hard for British interests. Where we do not like the rules we seek to change them.

The Labour party plays only for its own electoral interests. That is why its approach to Europe is so different from the Government's. Our approach to Europe has an enormous advantage. It will be supported by the British people, as it always has been when Britain has a key role to play in the world. Every time that the British people have had to choose between success and failure over the last 10 years, they have chosen success.

I commend the motion to the House.

5.54 pm

Mr. George Robertson (Hamilton) : I beg to move, as an amendment to the Question, at the end to add :

regrets that the condition of the British economy after 10 years of this Government leaves this country grossly ill-prepared for the challenge of the Single European Market ; notes that Britain trails behind its main competitors in major social areas and that, in the light of the Single European Act enacted on a whipped vote and on a guillotine timetable set by the Government headed by the present Prime Minister, the level of accountability on decision-making to the House is totally inadequate ; and calls for an approach to the European Community which is based on co- operation on policies for growth, environmental and regional protection, the valued contribution of women, and the central ro le of a high standard social agenda.'.

It is interesting that this debate, so long delayed, was opened by the Minister of State. There were repeated rumours this week that the Foreign Secretary would open it. In view of the renewed interest in the subject in the country, and particularly in the Conservative party, one would have thought that the Foreign Secretary might have graced us with his presence this evening. The Foreign Secretary chose to make a major speech this week at the CBI dinner and he was interviewed from the radio car for the Radio 4 "Today" programme this morning. The only place that has not been graced with his presence as chief spokesman for the Government on this important matter is the House.

The Minister of State is assisted today not by her usual sidekick, the Paymaster General, who is also the chairman of the Tory party but is clearly being protected from his own troops this evening, but by another Postman Pat from

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the Department of Trade and Industry. In view of the importance of the issue, the House has been short-changed.

Mr. Ian Taylor (Esher) rose --

Mr. Robertson : I shall not give way to the hon. Gentleman. He has had a fair amount of air time this week on the radio in the family feud that has broken out inside the Conservative party, which we might come to at an appropriate time.

The Minister of State said that there is a new Conservative party policy on Europe. It is defined as being twin-track.

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