House of Commons Hansard Debates for 18 Dec 1991

Ms. Clare Short (Birmingham, Ladywood) : I want to use my 10 minutes to explain why I am one of those who voted firmly against our remaining members of the Common Market when we had the referendum, but now believe strongly that Britain's future lies in Europe and that we should try to shape the future of Europe. I do not

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do so for reasons of self-justification, but because much of the debate in this country has been full of confused language, misunderstandings of history and of post-imperial delusions of nationhood from the Tory party. That has confused the debate about what is really being constructed now--democratic and political institutions that are new in the history of the world.

My vote at the time of the referendum was fairly expensively well-informed because I was working in Whitehall and spent a week in Brussels being briefed about the institutions of the Common Market. As a civil servant, I behaved non-politically, although I have always held the political views that I hold today. I have, of course, modified the way in which I think that they should be applied in the light of the movement of history. However, as a socialist, I believe that it is our job to civilise the behaviour of wealth and capital so that it can be used to improve the quality of people's lives throughout the world. That is the job of politics. It is not to rip people's lives and countries apart, but to use democracy and politics to civilise the behaviour of wealth.

When I scrutinised the institutions of the Common Market at the time of the referendum, I saw that they were fixed for free marketeering. They excluded social regulation and entrenched the free market. Therefore, because I have always believed in the need for social regulation, I cast my vote in that referendum firmly and clearly against Britain's entry. I accept the consequence of that vote in which I held the minority view. As we live in a democratic nation, one cannot insist on a vote being retaken simply because one has lost. Those, however, were my reasons. I understood them and knew why I had taken that view.

I take a different view now because history has moved on. The confusion about Thatcherism, Reaganism and New Right monetarist projects is that they were part of that moving on of history and of the new movement of capital, but their proponents do not seem to understand their political consequences.

Under the right hon. Members for Finchley (Mrs. Thatcher) and for Chingford (Mr. Tebbit), the Tory party pressed forward with deregulation so that capital could flow across the world as it wished. The nation state lost its economic sovereignty. There was a massive, historic era shift. We are talking about a change in history that is as big as the shift from feudalism to the nation state. Given their record, I am sure that those right hon. Members would have fought today for feudalism. Funnily enough, however, they were part of the project that diminished the capacity of the nation state to be the unit of democratic organisation in the world by which humanity can try to civilise the behaviour of capital.

I now believe that the people of the world need political institutions that go beyond nation states to strengthen the behaviour of capital as it moves beyond the nation states. That is what is going on--not only in Europe, but in America, Canada and Mexico. Our sister party in Canada, which opposed the free market, has said, "We'll go with it, but with a social charter." It has said no to the free movement of capital without any regulation to take account of people, but has added, "Yes, we can see capital reorganising like that and, if there can be a political

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dimension of regulation for people, we'll go along with it." The same things are happening on the Pacific rim. That is where we are in history--we are in a new era.

I believe that I am representative of my party in holding those views and very much go along with the explanation that my right hon. Friend the Leader of the Opposition gave of our shift of view on this question-- [Laughter.] No, in my view this is a matter of the history of the world. We are in a new era and silly little men-- [Interruption.] Who is that silly little man?

Mr. Tony Banks : It is the hon. Member for Harrow, West (Mr. Hughes).

Ms. Short : The hon. Member for Harrow, West (Mr. Hughes) is giggling, but giggling about party-political matters is not to rise to the challenge of a shift in history. The hon. Gentleman simply wants to play silly little party-political games, which is what the leader of his party is doing, instead of talking seriously about what is happening to our nation, our future, our people and the people of Europe and of the world. I despise the tone that many, but not all, Tory Members have brought to the debate.

Like the leader of my party, I have changed my stance, because Europe has changed and allowed in the social dimension. It therefore reconnects to my original politics in that I want to regulate the behaviour of capital and to civilise it for people, and I believe that the nation state has lost the capacity to do that job. That is why I now say that we must embrace Europe. The social charter or the social chapter is at the heart of this issue for me, because, without it, we have only the free rip of capital.

Following our last appearance on "Question Time", the right hon. Member for Chingford and I had a conversation about this matter in which he said that he had changed his view for exactly the same reasons that I have changed mine. He was in favour of Europe in the days of the referendum because he believes in unregulated free markets and in the chance for capital to rip. He voted for Europe then, but is against it now because of social regulation. We agreed that both our views were consistent and that the reasons that I was against Community membership then but I am in favour of it now are exactly his reasons for holding the opposite view. I must advise the hon. Member for Harrow, West that this is not a matter of silly party- political games. It is about my serious political understanding of the way in which history is moving.

I am ashamed of our country advertising itself in Europe as the sweatshop of Europe. I am ashamed that that is the only level of civilisation to which we can aspire. I am angry because of what that offers my constituents for the future in terms of their quality of life and level of income. Members of the British Tory party are saying, "Mr. Delors has said that Japan will dump its capital in Britain because our labour will be cheap." But that means that our people will live badly, have low incomes and be less well educated and trained. That is the future that the British Tory party is offering the people of Britain. If I am ashamed, they should be deeply and utterly ashamed.

Furthermore, that view will not work, because a modern successful economy must have high levels of education, training and investment, and a co- operative and flexible work force. That is how we shall define the

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successful economies of the future. Sweatshop Britain is not only undesirable to live in ; it will fail economically, yet that is what the Tory party is offering the British people.

I share some of the fears of those who have been criticising some of the detailed terms of the treaty on economic and monetary union. In mainland Europe, there is a desperation about the destabilisation of Europe that we do not fully share. There is fear about Germany's economic might and about a reunited Germany. We must bear in mind the memories of those who were occupied by Germany during the second world war. There is also fear about instability in eastern Europe and about the possibility of Germany turning from western Europe and starting to look to eastern Europe for its political alliances. There is, therefore, a desperation about political union and about the need to tie in Germany.

The desperation about building a stable western Europe in the face of massive and dangerous instability in eastern Europe has led to a willingness to move towards economic and monetary union with such speed that it could be politically destructive. On that, I share the view of the right hon. Member for Chingford. If we opt for the stringent, deflationary conditions that are built into the Maastricht agreement, which allow room for flexibility in negotiations in the future, we could see a further rise in unemployment across Europe, and further rises in racist and fascist movements, making for a dangerous future.

Therefore, although my underlying analysis is that we should go with it and that further union is inevitable, it is a joke for the Tory party to play the game of pretending that it would opt out. If economic and monetary union is to happen--and for the reasons that I have tried briefly to adumbrate, I think that it might go more slowly than is being predicted-- Britain must be in or sterling and the City of London will be destroyed ; but Britain will be going in without being able to influence the shape of that union. Yet again, the Tory party is doing something that is massively destructive of the future of the British nation. Britain will take such union because we shall have to--otherwise our economy will go even further down the tubes than it has in the past 12 years.

I wish that we could elevate this debate in our country beyond party politics, because we are talking about the movement of history and about the quality of life of the people of our country and of the rest of Europe. We are talking about how Europe can use its influence to shape the future of the world. We are not talking only about eastern Europe. We must remember all the poverty on the toe of Europe, in north Africa, and that horrible mounting famine.

I hope that this will be a progressive Europe, which can take a progressive view of the debt crisis and the international movement of capital. Let me tell the hon. Member for Harrow, West that that is what we are talking about : we are not talking about silly party-political games.

7.59 pm

Mr. Michael Alison (Selby) : It is refreshing to hear the hon. Member for Birmingham, Ladywood (Ms. Short) make a virtue of the necessity of backing the new, expanding Europe, in the cause of more checks and balances.

I am delighted that my right hon. Friend the Prime Minister has emerged from the Maastricht negotiations as a dominant rather than a subordinate statesman,

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manifestly capable of shaping and correcting the Community's future course. I do not mean that as a conventional piece of Back-Bench party piety ; I am trying to emphasise the importance of strong national performances--or innings--by such people as my right hon. Friend. Europe is now evolving rapidly, and the British population are beginning to wonder just what their destiny is. In that context, my right hon. Friend's performance must have been immensely reassuring.

Perhaps for the first time, large sections of our population are beginning to realise how fundamental and far reaching were the changes in their destiny that were ushered in when we acceded to the Community treaties in 1972. Perhaps one of the most vivid demonstrations of the dawning realisation of what we have let ourselves in for is provided by something utterly prosaic, but almost universally experienced : Sunday opening by shops. I am sorry to move from the sublime to the almost ridiculous.

The Shops Bill, introduced in 1986 by my right hon. Friend the Member for Finchley (Mrs. Thatcher), provided for the complete deregulation of Sunday retail trading. The House, on the whole, did not care for the Bill, and--in one of the most vivid recent demonstrations of parliamentary sovereignty and supremacy--we threw it out. None the less, deregulation has now crept in, almost by a side wind ; ironically, it has done so along the lines originally proposed by my right hon. Friend the Member for Finchley. The alleged sovereignty and supremacy of Parliament has gone, not with a bang but with a whimper.

The reason lies in a combination of sections 2 and 30 of the European Communities Act, to which Britain acceded in 1972. That Act enshrined a principle described by my right hon. and learned Friend the Attorney- General last month, when he said :

"since 1972, directly enforceable Community law has taken precedence over domestic provisions and forms part of English law."--[ Official Report, 27 November 1991 ; Vol. 199, c. 914.]

Sunday trading has brought home to people the shape of the revolutionary new framework of life that is emerging from those earlier decisions. I, for one, do not complain about the changes ; nor, I suspect, will the millions of shoppers who, this Sunday, will quietly bless the European Court for their new-found freedom. Paradoxically, the further millions who, like me, regret the unregulated arrival of Sunday trading will look to the same European Court--perhaps by way of a different section of the legislation-- to tighten Sunday trading regulations in the future.

What emerges from the rather muddled Sunday-trading scene is the way in which public perception of the Community will develop. Provided that we maintain a tolerable degree of national identity and decision-making, the establishment of an external source of authority in the form of the European institutions to which we have voluntarily acceded--in particular, the European Court--will enhance the liberty of British subjects, and will increasingly be seen to do so. This is, in fact, a form of the separation of powers. That principle has always been one of the great avenues through which human freedom has advanced. To see the European institutions as alien, oppressive invaders, threatening our national rights and liberties, is to misrepresent them in a very superficial way. In truth, they have the potential to increase those rights and liberties. I believe, indeed, that popular perception is already moving firmly in that

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direction. The ready and instinctive way in which our constituents reach out for rulings from the European Court illustrates the way in which the man in the street benefits from the principle of the separation of powers, of which the Community treaties are a manifestation.

Mr. Spearing : Will the right hon. Gentleman give way?

Mr. Alison : I am afraid not ; I have only 10 minutes in which to speak.

The principle of the separation of powers, which is enshrined in what we are currently negotiating, gives real scope for not less but greater freedom. The key is to maintain a reasonable balance in the evolving pattern of the separation of powers between national and supranational institutions.

Personally, I am not haunted by the spectre of federalism--although mapping out a coherent pattern of identified and separated powers between a central and a peripheral body is precisely what federations must do. Clearly, the national spirit that still exists strongly in the ancient nation states of Europe will be a solid and effective counterweight to the powers that we voluntarily confer on the Commission. As many of my right hon. and hon. Friends have pointed out, the essence of the Prime Minister's triumph at Maastricht was the refinement of that notion of the separation of powers, in the explicit recognition and entrenching of the role of intergovernmental co-operative action as one of the two or three pillars on which the whole edifice of the European Community will be sustained. I am entirely persuaded that the principle of the separation of powers which we now see emerging in Europe will enhance the liberty of the subject. I believe that the notion of a federal

future--sometimes it is labelled "the United States of Europe"--is grossly misleading and unrealistic. We have nothing to fear. "The United States of Europe" conjures up a picture of the United States of America. The point about the federal system that exists there is the way in which, originally, a congeries of small, weak states combined to resist the depredations of a world suprapower, the British. Now, a dozen or so suprapowers--as the world outside may view the European states--are coming together to try to find a way not to erect more acres of white wooden crosses on the fields of Flanders ; and one way of doing that is to produce acres of prints and documents.

The coming together of great powers will not produce a counterpart of the United States of America. It will produce an entirely different animal. As the right hon. Member for Leeds, East (Mr. Healey) made clear in his eloquent speech, there are many heavy players in the team, who will not turn themselves into mere subordinates of an overriding Brussels bureaucracy. We have before us the prospect of a productive separation of powers, and of increased liberties for our people.

8.9 pm

Mr. John Hume (Foyle) : The voices that I have heard in the House today and in public in recent weeks opposing the evolution towards what I regard as inevitable--European unity--strike me as the voices of 19th century nationalism, and I do not think that history will be too kind to 19th century nationalism, which fuelled not only

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imperialism but two world wars. Few of the voices seem to draw attention to the Europe that European union is replacing. We should remember that the process began as far back as 1957, just after the second world war, with the first treaty of Rome.

To look at the Europe that is being replaced, let us cast our minds back to 50 years ago this very night--18 December 1941--when millions of people across Europe were being slaughtered for the second time in a century. If anyone had stood up in the House then and said that in 50 years' time we would be discussing European union with the Germans still being German, the French still being French and the English still being English, that person might have been locked up. Yet it has happened, and it is worth considering why it has happened, particularly for those of us who have to face conflict on our own streets. The reason is quite simple. We decided at last that the answer to difference is not conflict, confrontation or war, but respect and accommodation. Europe has built institutions which respect diversity and work on the common ground of economics : sweat has been spilt, not blood. Europe has grown steadily at its own speed over the past 20 years in the natural and inevitable process of European union.

One would imagine that anybody in the House would agree that it is worth paying a price for the rejection of the Europe of the past--the Europe of slaughter. Yet we do not have to pay a price because what we are doing is economically inevitable. We are interdependent and the world is a much smaller place today that it was 50, 100 or 200 years ago. Once upon a time we had city states, then we had nation states, and now we are moving inevitably towards a continental state. That inevitability is such that we should not be following the movement but leading it. We should want to be not just in the heart of it but at the head of it. We should be shaping it because it is such a powerful answer. Integration is economically essential if we are to survive in today's world.

Everybody knows, if he is being truthful, that we cannot have a single market without a single currency. The harmonisation process for the single currency has been going on since we joined the Common Market. Decimalisation was the first step in the harmonisation process. We then had economic and monetary union and now the move towards a single currency. Imagine what would happen if one of the most powerful states in the United States decided that it wanted to separate from the dollar and have its own currency. What would happen to the economy? It is inevitable that we shall join the single currency and I am disturbed by the fact that it is being held up by an internal party squabble. I have no doubt that after the next election the Government, whoever they may be, will commit us to joining the single currency. Let us be truthful.

The voices that oppose evolution towards European union also express worry about loss of identity. The right hon. Member for Chingford (Mr. Tebbit) boasted recently about the strength of his Essexness. Is he any less an Essex man because he is an Englishman? Will he be any less an Englishman because he is a European? It sounds like a contradiction but the essence of unity is, as we have all discovered, the acceptance of diversity. There is no stable, peaceful, democratic society in the world which does not accept diversity. The moment one refuses to accept diversity and pushes difference to the point of division, one

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is in straightforward conflict. The acceptance of diversity should reassure us all because the day that that principle is not accepted things will fall apart.

We should be asking about the best way, politically and democratically, to give expression to that principle. To my mind, there is no better way than a federal way. By federalism Europeans mean a Europe of the regions. The first sign of that is already in the Maastricht treaty, and some people did not even notice. It set up a committee of the regions. I predict that that committee will evolve in strength and influence and the federalism that will emerge will be a Europe of the regions.

I wish to deal with some of the practical points. Cohesion is a code word for equalising living standards between the richer and poorer regions. I am delighted that the structural funds are not only to continue but to be increased and that there will not only be fixed percentages from the centre to the poorer regions but that it will be modulated. The fact that fewer matching funds will be required should help the poorer regions to raise their living standards. From what I read, the cohesion fund, which is tied to transportation and the environment, will go to member states whose GNP is less than 90 per cent. of the Community average. Does the fund apply to the member states or to the regions? If It applies to the member states, it means that an objective No. 1 region such as Northern Ireland or some of the poorer regions of Britain such as the north-east and Scotland would not be included in the fund. That issue needs to be examined carefully. It is an important issue if cohesion is to have any meaning.

I see a positive sign for the last remaining area of conflict within western Europe--the area that I represent. "Remember 1690" is the great slogan of the hon. Member for Antrim, North (Rev. Ian Paisley), and it is one of the most long-lasting slogans in the politics of Northern Ireland. People tend to forget that the battle fought in 1690 was a European battle. The battle of the Boyne involved the Dutch and the Danes. The French were there on both sides, the Irish were on both sides and the English were there as well. The plantation of Ulster was England's reaction to the Irish chieftains' links with Spain. The Act of Union between England and Ireland in 1800 was England's reaction to the French invasion of Ireland in 1795 to link up with Irish republicans. In other words, the British presence in Ireland was a response to the fear that Ireland would be a back door for its European enemies. To this day, those who use guns and bombs on our streets say that their reason for doing so is that the British are in Ireland defending their own interests. All that has been changed by what is happening in Europe. Issues such as sovereignty and independence have changed their meaning. It is now pooled sovereignty and interdependence. Therefore, the reasons used by those people are now gone and we should never cease to tell them. There is a legacy which is that we have a divided people. Let us approach that division using the same principles as the peoples of Europe who slaughtered one another for centuries. Let us accept our differences. Let us not seek victory one over another but accommodate our differences and build institutions which respect the diversity in Ireland while allowing us to work on common ground. When the channel tunnel is built, the common ground--economics--will intensify because we shall be the only part of the new Europe without a land link with

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the rest. Let us work together. Let us spill our sweat and not our blood and grow together towards a new Ireland, in the same way as the Europeans grew together.

8.19 pm

Mr. Patrick Thompson (Norwich, North) : I listened with great interest to the hon. Member for Foyle (Mr. Hume). He said that the spirit of interdependence that underlay the formation of the European Community in the 1950s and 1960s is needed today to reduce conflict between countries and within communities. I had much sympathy with the human point that he made.

It is a pleasure for me to welcome the agreement that my right hon. Friend the Prime Minister succeeded in achieving at Maastricht. There is no doubt that the summit was a success for the Prime Minister and his team. That is recognised in the House and in the country at large.

There is not time--and anyway I am not qualified--to talk about the small print of the draft agreement. That is not my intention, but it is important to recognise that there are issues that we shall not have time to discuss this evening, such as more co-operation in Europe on research and on education and training. We might be able to debate those important issues in more detail another time. There is an important point that is worth making : the success that was achieved in the negotiations at Maastricht was a success for a Conservative Administration, and one of a series of successes for Conservative Administrations throughout the history of our dealings with the European Community.

I have been involved in active politics since the 1960s and early 1970s. I hope that this will not be regarded as a petty party-political point, but I find Labour's position on Europe totally extraordinary. We heard a good explanation of it from the hon. Member for Birmingham, Ladywood (Ms. Short), to whom I listened with much interest. She put the point well and explained Labour's conversion. I fully understand and appreciate the reasoning behind it and if there is time I shall refer to that again later, but surely it is a matter of fact and of record that if the Labour party had won the 1983 election--I first fought Norwich, North in 1983--it would have taken us out of the European Community and we would not have been negotiating at Maastricht. It is important to put that on the record, even though it has admitted that it has changed its mind.

Many of us who favour co-operation with the European Community welcome that change, but there is no way in which we can hide Labour's history. Nor can we hide the fact that it has changed its mind six times or more on its Community policy. Those facts are worth putting on the record.

I am trying to make the positive point that under a Conservative Government we signed the treaty of Rome, which I strongly supported at the time and still support, that under the Conservative Government led by my right hon. Friend the Member for Finchley (Mrs. Thatcher) we signed the Single European Act, and that under a Conservative Government we reached agreement at Maastricht. We should not hide that strong point in favour of this Administration.

Our attitudes to Europe are shaped by our personal experiences. I was brought up during the war and one's experience in war time is bound to influence one's attitudes to the continent of Europe and general events. I remember

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my first visit to Paris when I was 11 and doing my national service in Germany in my early twenties. During my time in Germany, I became convinced that the future of this country was bound with the future of Europe. Having listened to this evening's debate and the debate before the Maastricht negotiations, there is no doubt in my mind that that is the general view of the House, although it may not have been so strong about a year ago.

I was in Germany in 1957 when the discussion of Europe's future was at its height. I recall reading a book, which was published in 1966, written by Lord Gladwyn, in which he dealt with the problem that Britain had in the late 1950s and early 1960s of finding its identity. I shall quote briefly from what he said :

"The fact was, we were much more exhausted by our death struggle than we knew. The abrupt ending of Lend Lease in 1945 had shown up the extent of our economic weakness and the drain on our reserves that we had been obliged to make in order to keep ourselves alive. Our very victory too had been in some ways a disadvantage in that it did not compel us to reconstruct our factories, write off our debt, work like beavers and start again (as the Germans did) from scratch. The old habits therefore persisted. We tended to think that we had done so well--as we had--in the war that the world more or less owed us a living. This particular feeling was enhanced by the mere existence of the Commonwealth and Empire which Mr. Churchill said he had not been appointed the King's First Minister to liquidate. Yet this is what we had to do."

That shows why Europe is important to Britain's future and why I am delighted that the Prime Minister returned from Maastricht with a positive agreement. I am also delighted that there is more unanimity across the Floor of the Chamber on the future of Europe than there has been for some time. To that extent, despite what I said earlier, I welcome the apparent conversion of the Opposition on Europe. I should like to conclude by referring to points more concerned with East Anglia. Some time ago, I had the opportunity to read an article in "Anglia Business and Industry" written by Ron Carney. A survey was recently conducted of 1,000 companies in the United Kingdom and their attitude to Europe. Those companies could be divided into three groups--those that saw Europe as a challenge, those that saw it as a disaster and those that saw it as a non-event. I agree with the author of the article that the business men who fall into the last two categories are in for a great shock. The only way of regarding our future in Europe is as a challenge. That is the spirit in which the Government have approached Europe and the spirit in which the House is approaching it this evening.

About a year ago, my right hon. Friend the Member for Finchley opened a European information centre for East Anglia in the building of the Norwich and Norfolk chamber of commerce. I am told that inquiries from local business people in Norwich and Norfolk about the opportunities in Europe are increasing and that there is an ever-increasing list of opportunities for them to select from.

Mr. John Garrett (Norwich, South) : Will the hon. Gentleman give way?

Mr. Thompson : No, there is not time for me to give way. Without the time limit, I would have been glad to give way to my colleague from Norwich, South. I must respect the time constraint.

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Europe is an opportunity. My right hon. Friend the Prime Minister was right to set out his intention to negotiate at the heart of Europe. I understand that the Government achieved all the aims that they set out in the debate before the negotiations. I believe that, as a result, they will have the strong support of the House and of the people as we look to our future in Europe.

8.29 pm

Mr. Peter Shore (Bethnal Green and Stepney) : I do not share the enthusiasm of the hon. Member for Norwich, North (Mr. Thompson) for the results of the Maastricht negotiations. Indeed, for me the most remarkable and revealing fact of the whole Maastricht summit was the clear evidence that federalism is now the major issue in western Europe.

Mr. Tony Banks indicated assent.

Mr. Shore : My hon. Friend is nodding sagaciously because he is a recent convert to federalism and is delighted that that change has taken place. What was previously largely confined to the utterances of a minority in this country and in Europe has now become the open ambition not only of Mr. Delors but of Chancellor Kohl, of Prime Minister Andreotti, of Mr. Mitterrand and, indeed, of the Prime Ministers of Belgium and Holland. They have all sensed that and I acknowledge that some members of my party have also said so. It is crucial that we face the fact that federalism is the major issue. We can no longer bluff and say that it is perhaps a Europe de patrie or a Europe going in one direction towards ever-closer union. Those phrases are no longer appropriate and we are forced to face the major issue.

The facts are that the 11 member states--other than the United Kingdom--are now out to create a federal union and that Britain alone is reluctant to join in. That is one of the great facts that we have to face and with which we must deal. The fact that we are alone and were alone in resisting the federal impulse has led to some strange and inappropriate remarks about us such as, "Britain has been marginalised", "Britain is in the slow lane", and "Britain has been left behind". I do not accept that. There are those who think that democratic self-government is a value beyond price and is indeed the first freedom of any people. The United Kingdom's refusal to join the federal camp is a matter not for reproach but for congratulation. Unfortunately, however, the Government have not stopped the federal process --they have achieved only a British opt-out from the single currency and the European central bank which mark the third stage of economic and monetary union. For how long the opt-out will be sustained after the general election remains to be seen.

Meanwhile--and this point has not been sufficiently emphasised--the British economy is trapped by the combined effects of membership of the exchange rate mechanism and our acceptance of the first two stages of EMU. Those hon. Members--and I look especially at my Front Bench, but realise that not one of our economic spokesmen is there--who had looked for helpful changes in the final draft of the Maastricht treaty will have been disappointed. On that crucial matter--the control of so-called excessive deficits or the 3 per cent. rule which is in the treaty and which is designed to limit the borrowing power of future Governments--only a small element of flexibility has been introduced. We are now told that there

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can be a little leeway if borrowing has declined substantially and continuously and remains close to the 3 per cent. limit or, alternatively, if the excess is only

"exceptional and temporary and the deficit remains close to the 3 per cent. reference value".

Perhaps the House will be glad to know that from 1 January 1994 when the second stage of EMU begins--in two years--if our deficit exceeds 3 per cent. we shall not be fined or otherwise penalised as we would be in stage 3, but we shall have only to endure the Council making public its recommendation that we should reduce our borrowing requirement. Of course, the effect of such a public rebuke would be to undermine the standing and credit of any Government vis-a -vis the financial markets and a deliberate withdrawal of a triple A rating and of the seal of approval for good economic management. The effects of that could be very serious from 1 January 1994.

As for the independence of the central bank and the hope of greater powers that would be given to the ECOFIN Council, on which many of my hon. Friends have placed so much importance, nothing has changed. The only power that ECOFIN has is to decide the exchange rate of the ecu against non-European currencies. Beyond that, the European central bank remains wholly independent of democratic control. As my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said so eloquently and powerfully, control of the British economy is handed over to the European bank. I do not know how any hon. Members--but I refer especially to my hon. Friends--can look at themselves in the mirror and say, "I have denationalised the Bank of England and handed over all powers of economic management" and still hope to achieve for their people those things which we as a party were formed to try to create. I fear that it will lead our country and our party into great peril.

The treaty has enshrined deflation and entrenched price stability as the principal objective of economic policy. Everything else is subordinate to it. Every country in the Community--not only Britain--will be striving to prepare for the third stage of EMU. They will be seeking to converge and in order to do that--as we know--they must, first, not break through the 3 per cent. borrowing requirement. Secondly, they must remain within the 2.5 per cent. band of ERM and, thirdly, get down their lending rates to those of the three lowest countries in the Community. All of that requires enormous constraint and further cutbacks in the economies of the European countries involved. We shall have high and continuing short-term interest rates, high unemployment and shrinking industrial output. That is the price we shall pay for being a member of the deflationary club. That is not only my judgment but that of most economic commentators, including those as disparate in their economic thinking as William Rees-Mogg in The Independent on Monday and William Keegan in The Observer on Sunday. William Keegan wrote :

"Europe generally has high and rising unemployment yet the conditions for the approach to EMU are extremely deflationary, implying even more unemployment and possibly a lot more social unrest."

William Rees-Mogg wrote in The Independent :

"Maastricht is a deflationary currency agreement at a time of severe world recession that will either prove unworkable or catastrophic. It is the stupidest economic decision for the past 50 years."

The threat to European and world prosperity is, of course, the most important outcome of the Maastricht

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treaty. Frankly, in the scale of things, the opt-out from the social charter is of minor importance. I have every confidence that when the Labour party wins the next election within the next six months it will be able to introduce every bit of the social charter that it wishes and to introduce it about a year ahead of the coming into force of the treaty. I shall not weep for that--it is not the real heart of the matter.

The federalists have not only extended their role over the economic and social policy of the member states. They have--as the right hon. Member for Chingford (Mr. Tebbit) rightly said--established a very powerful bridgehead in the whole area of foreign policy, defence policy and home affairs with regard to immigration and asylum. The Prime Minister sought--and I am sure that Ministers from the Foreign Office would like to do the same--to draw a sharp distinction between agreements in the treaty of Rome and those in the intergovernmental arrangements. I fear that the distinction is not too strong. For example, I fear that the Commission has the right to take initiatives and to make proposals to the Council and to the heads of state. It is given the right to have continuing consultation in all that occurs under article I, and it also has other substantial powers. So here is a major problem. It will get worse and the House should face it. There will be further intergovernmental conferences in 1996, and sooner or later we shall have to face the problem : do we go into a federal union or do we say no? I very much hope that we shall have the will to say no.

8.39 pm

Sir David Mitchell (Hampshire, North-West) : If anyone had said a year ago that the United Kingdom could participate fully in shaping the design for a single currency and then be free to opt out, he probably would have been laughed at. Yet that is precisely what has been achieved. It is a remarkable tribute to the Prime Minister, the Foreign Secretary and the Chancellor of the Exchequer that they have achieved that. It has come not by chance, but by regular, careful, firm and friendly explanation of the United Kingdom's approach to such matters, and the exploration of the consequences of the various alternatives that have been offered.

The Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Watford (Mr. Garel-Jones), who I believe is to reply to the debate, must also take a good deal of credit for the success of the negotiations.

I shall make three points. First, the number of detailed regulations that apply throughout Europe are increasingly inappropriate on that basis. They are unsatisfactory because they are unable to take account of diversity, or of the differences not only in tradition but in practice between one part of the European Community and another.

I agree with the hon. Member for Foyle (Mr. Hume), who drew attention to the problem. The number of such regulations has increased, is increasing, and should be diminished. The inappropriateness of blanket regulations will become more apparent as the Community is enlarged.

I do not need to remind the House of some of the signs of that--such as the interventions over the route of United Kingdom motorways, the classification of carrots as fruit under the jam directive, the prawn- flavoured crisps fiasco and the environmental studies on the channel tunnel, some

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of which took place while I was Minister at the Department of Transport. There is even the introduction of the Euro- size condom, to which the Italians apparently object because it is too large. Those are merely illustrations of a range of detailed interventions. There is an increasing reaction against them--not only in this country. The La"nder in Germany are very much aware of the level of responsibility that they have within the German constitution for much of the detailed administration of their areas. They, too, feel that such a degree of detailed intervention from Brussels is eroding their responsibilities.

In France, we have seen the rise of Mr. Le Pen--not only on immigration issues but on what are broadly known as Poujadist issues. In rural areas of France people are becoming heartily fed up with detailed interference in the smaller business community. I do not speak of Paris--Paris is not France ; it is almost a separate place--but the people who are the backbone of rural France are thoroughly fed up.

Since in many areas people object to such detailed intervention, one asks oneself why we are subjected to excessively detailed regulations. The answer, I believe, is that there is genuine work for about six Commissioners in the European Community--on cross-border trade in goods and services, finance, people, pollution, and state subsidies. The trouble is that there are 17 Commissioners, each with an office and staff, and they have to justify themselves, so they churn out regulations of one sort or another to justify their existence. We should seek to reduce the number of Commissioners whenever the opportunity arises.

A valuable part of the answer has been brought back from Maastricht by our negotiators in the form of subsidiarity, and article 36, which says :

"In the areas which do not fall within its exclusive jurisdiction, the Community shall take action in accordance with the principle of subsidiarity only if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member States". That seems an important safeguard.

But this is only a battle won ; it is not the war. I am certain that we shall have to go on grinding away month after month, with Ministers doing battle on our behalf. In this case, the price of freedom is eternal vigilance, and if we do not keep that vigilance up, the nationhood of which we have every right to be proud will be at risk of being merged into a Euro -state. I urge Ministers to be alert for any infringement of article 36.

My second point concerns the social charter. The Commission's proposals would interfere in detailed working agreements on hours of work, night work, overtime, part-time work and other such matters. Many hon. Members have drawn attention to the damage that that would do to the United Kingdom, but I shall draw a different analogy. I shall draw attention to the damage that it would do to the ability of the smaller and poorer countries in Europe to raise their living standards. If they cannot do that by allowing anti-social hours, and so on, they will have to do it by subsidy and massive capital injections. Where will the money come from? Increasingly, it will come from the richest members of the Community-- principally Germany.

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He who pays the piper calls the tune, and in majority voting we shall find that the smaller and poorer countries within the Community will increasingly look to the Germans for guidance as to how they should vote. I say that not without some experience, having represented this country at the European Council of Transport Ministers. I would often say to my officials, "How will this go? Will we succeed in carrying our point?" The answer would often be, "It depends on the ringmaster", with a look at the German Transport Minister. One could see how the smaller countries were looking to him to find out how to vote, because they were financially beholden to the Germans in so many ways.

Mr. Brian Wilson (Cunninghame, North) : On a matter of balance, when the hon. Gentleman considers the German and the British railway systems, which would he prefer smaller European countries to take as a model?

Sir David Mitchell : That is wholly irrelevant, as we were then concerned with the extent to which finance was available for assistance for roads and communications in one way or another. In any case, the hon. Gentleman's slight on British Rail is not justified. It runs more trains at 100 miles per hour than German railways do. However I do not want to be diverted.

My third point is that the new powers of the European Court to ensure that countries abide by what they have agreed to are vital. In the past seven years, the United Kingdom has been taken to the court 20 times, Germany 49 times, France 82 times and Italy 157 times for non-compliance with rules to which they had agreed. It is important that the Court has the power to fine. I ask my hon. Friend the Minister to say when he winds up whether he believes that the fines will be sufficient to ensure that countries comply with the regulations to which they have agreed. Countries should be made to comply. The power to fine is important because it will have a "disinfectant" effect in ensuring that countries do not agree to decisions which they are not prepared to carry out.

8.49 pm

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