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the United Kingdom we have conceded the principle of proportional representation for European elections, in Northern Ireland. Why is that not being extended to other parts of the United Kingdom? I hope that the Chancellor will refer to that in his winding-up speech. The next intergovernmental conference in 1996 will discuss the Community's development to the end of the century and beyond. One suspects that many of the issues touched on by the Foreign Secretary will still be on the agenda then. Prior to any greater enlargement of the Community, and any IGC of the type that led to Maastricht, surely there is a case for a wider European convention to consider the democracy of Europe, the ‡enlargement of Europe, the development of a future foreign policy for Europe and all the rest. There should be a convention to attempt to bring policy closer to the peoples of Europe and perhaps to test any decisions that have been reached by a Europe-wide referendum.

On referendums, the Prime Minister has upped the temperature in the past week on securing the success of the Maastricht Bill. He is right to do so and I want the Bill to get through. However, in this House, perhaps as a result of parliamentary pressure exerted in another place, it may be politically unwise for the Government to set their faces completely against a referendum, if they want the Bill to get on to the statute book. It would be far better to concede a referendum than to lose the Bill, if the arithmetic proves to be that tight later this year.

Mr. George Robertson (Hamilton) rose --

Mr. Kennedy : Perhaps the hon. Gentleman will clarify Labour's policy on the matter and we shall find out exactly how tight the arithmetic will be.

Mr. Robertson : No, I am going to ask the hon. Gentleman to clarify one interesting issue. Last December, the Liberal Democrats were in favour of the social policy opt-out in the Maastricht treaty. In their general election manifesto, they said that they were against a social policy opt- out. Now they do not seem to have any views on the matter. In December, the leader of the Liberal Democrats called for a referendum ; in the general election manifesto, which was one of the longest and fanciest that the party has produced, there was not one word about a referendum. Here we are in July and they are again in favour of one. Why all that moving around in between?

Mr. Kennedy : I do not think that there has been as much movement as the hon. Gentleman suggests. If any hon. Member is interested, I believe that back copies of our manifesto are available and I may be able to get them at a knock down price.

Mr. Robert Hughes : You can get them all at bargain basement prices.

Mr. Kennedy : Knocked down, if not dragged out.

I referred earlier to our disappointment with the British opt-outs on monetary union and the social dimensions. We have also had reservations about aspects of those, which the hon. Member for Hamilton (Mr. Robertson) has heard our party leader express in this House and elsewhere. On his second point, it does not matter whether the referendum appeared in the manifesto, because we have always said that a post-legislative referendum on measures that involve constitutional change is the sensible course of action. That was the case in 1975, with the

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renegotiation of our original entry in to the then Common Market by the Labour Government, and on Welsh and Scottish devolution in 1979. That is an effective and sensible way forward.

If the Government are going to the edge--and the parliamentary arithmetic is tight--I hope that they will not go over the edge and take the Maastricht Bill with them, by resisting the case for a referendum, should it be tabled in an amendment.

The Foreign Secretary began by discussing the tragedy of Yugoslavia. Should I describe the right hon. Member for Guildford as the former Chairman of the Select Committee on Foreign Affairs?

Mr. James Wallace (Orkney and Shetland) : As the Chairman of the former Select Committee.

Mr. Kennedy : I thank my hon. Friend. The Chairman of the former Foreign Affairs Select Committee said that he would prefer Europe to develop its foreign policy through intergovernmental arrangements, rather than some super imposed blueprint. I hope that I do him justice by paraphrasing.

We cannot have it both ways. There is no point in railing about the perceived failings of a European response to an issue as important and far- reaching as Yugoslavia within the European perimeter of influence, while denying the institutional mechanisms of an emergent foreign policy that would assist this country and other European states to have a more collective and coherent response to such issues. That is why we believe that, ultimately, denial of the logic of more pooling of sovereignty and what follows from it, will be unsustainable.

We hope, therefore, that there will be political, social and economic progression for Europe and this country's role within it, during the next six months, along the lines that I sketched out. We hope that the Community continues to be a bulwark of prosperity and peace on this planet, and that the Europe which emerges by the end of the century will be fully liberal and fully democratic, as those are the best political traditions on which it should evolve.

6.26 pm

Mr. Michael Fabricant (Mid-Staffordshire) : I have the honour to address the House for the first time, and to represent the interests of the people of Mid-Staffordshire. I follow in the footsteps of two Members of Parliament. My immediate predecessor was Sylvia Heal, who sat on the Opposition Benches. She made history with the largest swing to the Labour party since the 1930s. Many people in the House and in the constituency found her a charming person. When she was elected, she said that it was the death knell of the poll tax, and she was right.

I also follow in the footsteps of John Heddle, a man whom many of us remember. He first entered the House in 1979, as the Member for Lichfield and Tamworth, and then became the first Member of Parliament for my constituency following the boundary changes in 1983. John Heddle was well loved in the House--I think on both sides--and he is certainly still loved in Mid-Staffordshire, and well remembered. His spirit lives on.

Mid-Staffordshire is an odd shaped constituency. It is approximately 34 miles long and four miles wide ; it follows the Trent valley ; and it is shaped rather like a fruit ; I like to refer to it as my very own banana republic. It starts

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with Lichfield in the south, which is a unique city in Great Britain. It is a popular tourist town and has a unique cathedral with three towers. I know that it is the only cathedral in the United Kingdom with three towers ; and the only other cathedral like it in the world is in Cologne. I believe that it is also unique in having two gold maces. Lichfield has spawned many famous sons--Dr. Johnson, David Garrick, and Erasmus Darwin.

Moving further north in my constituency, we come to the industrial towns of Rugeley and Armitage, which is famous in this place and throughout the world for its toilet ware. The market town of Stone is further north and serves many of the surrounding villages. Last Friday I went to a Petertide festival in my constituency in a little village called Hixton, where Britain's entry into Europe was being celebrated. I went into the church, and children from the local primary school were busy singing songs from different parts of Europe--from England, France, Germany, Portugal, Spain and Greece. In doing so they reflected the myriad different forms of culture and style that we enjoy as a part of Europe. I have, however, a great fear, a great apprehension, and I hope that my right hon. Friend the Chancellor of the Exchequer will be able to reassure me in winding up that we are not heading down a road towards a European super-state. Before I was elected to this place, I travelled the world selling radio studio systems and other electronics equipment ; I travelled extensively throughout Europe, Africa, the Far East and the Soviet Union. I was particularly interested in life in the former Soviet Union. There, despite all the power of the KGB, despite having a single language forced on its peoples, and despite having a single legal system, the country fell apart. We see as well what is happening in Yugoslavia, and even in Czechoslovakia, which has a democratic tradition ; there too the country is divided.

I believe that if we are heading, as I hope we are not, towards a European super-state, a political union, it is doomed to failure, whether it happens in one year, five years, 10 years or 50 years. I believe that a super-state would be intrinsically unstable and would explode at some time, at great cost to the peoples living in Europe. I congratulate my right hon. Friends on the introduction of the concept of subsidiarity in the Maastricht treaty. That concept is the very bedrock of our statehood and our sovereignty. I hope that my right hon. Friend will be able to reassure me that the bones of subsidiarity will be built upon and that before we adopt the Maastricht treaty, or any other similar treaty, there will be some form of codicil to the treaty--I do not know how it can be done--which will clearly define, not through examples, but legally, irrevocably and unambiguously, what we understand, and what I hope our 11 partners understand, to be the meaning of subsidiarity so that there can be no doubt. I believe that, if that could be done, there would be tremendous support for the treaty, with its additional codicil, from Members on both sides of the House.

I believe that the single market, too, is something that we must build upon, and that the considerable strengths, personality and ability of Jacques Delors should be directed to that particular sphere. I can tell the House from my own experience that it is easier to sell to countries such as Norway, Kenya or Indonesia, which are not members of the European community, than it is to sell into the

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European Community, because of the huge weight of paperwork that is still involved in selling from country to country. We must try to eradicate this.

We see European law regarding environmental protection coming into force and on the whole it seems to be rigorously enforced more or less equally throughout the 12 states. I am pleased to see my right hon. Friend the Chancellor of the Exchequer on the Front Bench, because there is also an imbalance caused by the fact that in some of the member states of the European Community there are subsidies in the form of tax breaks or grants to help companies get through the transition period, with the heavy costs that are involved in refurbishing their plants to meet environmental directives. I hope that we too can do something to assist our industry, to ensure that there is a level playing field.

I recognise that we have adopted the Single European Act. We are signatories, in effect, to the treaty of Rome. But it is my great hope that we will not become a lost, far-flung outpost of a new Roman empire.

6.36 pm

Mr. Peter Shore (Bethnal Green and Stepney) : It falls to me to be the first to congratulate the hon. Member for Mid-Staffordshire (Mr. Fabricant) on a truly admirable maiden speech. He has pleased the House, I believe, in many ways, but first because he has paid a very generous and well-deserved tribute to both his predecessors : to Sylvia Heal, for whom the Opposition in particular have affection and who I know is also greatly respected by the rest of the House ; and to John Heddle, her predecessor, who was a well-respected, well-liked Member of the House.

The hon. Gentleman has also done right by his constituency. He has paid a tribute to his constituents and illustrated the diversity of his constituency. Indeed, he has convinced me that it is indeed a unique place, not only because Lichfield produced Dr. Johnson and Garrick, but also because the hon. Gentleman witnessed there a celebration of the entry into Europe of the United Kingdom. That really was a unique occasion--certainly one that I have not come across in the whole of my political life.

The third thing on which I want to congratulate the hon. Gentleman is the seriousness of what he had to say to the Government about a European super- state. He is quite right to ask for reassurance that we are not heading in that direction, and he is absolutely correct when he says that the ultimate lunacy for this country would be to end up as an outpost of a new Roman empire. We are a country that has enjoyed its independence longer than any other country in Europe and we must maintain that independence until the end of time. I congratulate the hon. Gentleman and hope that we shall hear from him again on many occasions.

In the debate I have been struck by the optimism with which Government Members have looked upon the situation in the European Community as we take on their presidency. The right hon. Member for Guildford (Mr. Howell) was being very optimistic indeed when he spoke of the intellectual supremacy that the decentralisers had gained in the debate, and his vision of a future in which all

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centralising tendencies have been not only checked but reversed. I hope that that will prove to be so, but it is very premature to say that it has been achieved.

The Government have also been extremely optimistic about the major item on their agenda : the widening of the membership of the European Community. I believe that the Danish referendum has brought the European juggernaut to a stop. The Maastricht treaty cannot be enacted because under, article 236 of the treaty of Rome, any amendment to the Rome treaty requires unanimity. The precise words are that it can come into force only

"after being ratified by all the Member States in accordance with their respective constitutional requirements."

We know what the constitutional requirements are in the country of Denmark.

The Community's reaction--and I do not entirely exclude the Government from this, certainly at the highest levels--has been to try to circumvent the issue--my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman), the shadow Foreign Minister, used the rather vivid metaphor about messes on the pavement--to avoid and skirt round it altogether, or to pretend, as many in the rest of the Community do, that what happened in Denmark did not happen at all. I was worried by certain words in the Lisbon communique right at the beginning which touched on that very matter. It read : "the European Council underlines the importance of respecting the timetable laid down for ratification to ensure"

and then the words :

"in any case the entry into force of the Treaty as of January 1st 1993."

What do those words "in any case" mean--entry into force as of 1 January "in any case". That may be simply a slip, it may be bluff, or it may contain an implicit threat. I hope that it is not an implicit threat and I hope that we can have the Minister's complete assurance of that, emphasising what in part the Foreign Secretary said earlier--that the British Government have no intention whatever of seeking to circumvent article 236 of the Rome treaty and going ahead in some new way to try to achieve the goals of the Maastricht treaty, as it were without the Danes.

The Danes have also had the effect of greatly reducing the prospects of early enlargement. I know that informal negotiations can take place--that is obvious--but, as the presidency conclusion put it :

"the official negotiation will be opened immediately after the Treaty on European union is ratified and the agreement has been achieved on the Delors two package."

Both those things must be put into place before the formal negotations can take place and the desired enlargement will follow. We must recognise that enlargement may well have to wait a long time. The Danes are in no mood to change their minds. I had the opportunity of being in Copenhagen last weekend and talking to those who played some part in the referendum campaign. They told me, and I have no doubt that it is correct, that the latest polls in Denmark show that if there were to be a referendum now not just over 50 per cent. would vote no but 60 per cent. or more. There has already been a shift of opinion in favour of the position that has been taken up. That is interesting because it has occurred despite the many threats that were brought to bear against the Danes during the referendum campaign. They were threatened with a loss of jobs, their possible expulsion from the

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Community and the arresting of the flow of investment and subsidies under the CAP. Mr. Delors himself gave tongue to some of those threats about agricultural support and subsidies. All those threats were there, but they did not make the Danes vote yes.

Now that those threats have been shown to be bluff, I think that we shall find that the Danes will maintain their position, and maintain it strongly, for a considerable period ahead until some major changes have been made either to the treaty as it affects Denmark or in the treaty itself.

Mr. Tony Banks : My right hon. Friend has probably just answered the point, but I was about to ask him to recall the Foreign Secretary's words in opening the debate when he said that the Danish Government have asked for more time. For what does my right hon. Friend think that the Danish Government want more time?

Mr. Shore : I think that they are puzzled and perplexed about what they should do now. They cannot go back to their electorate and say that the electorate have got it wrong, that they miscounted or did not listen carefully enough to what Mr. Delors was saying. There must be some reason for having a second referendum. That reason must come from a carefully drawn Danish protocol which exempts them from those provisions in the Maastricht treaty to which they must object, or there must be some more general reconsideration of the Maastricht treaty.

It is no good us putting our heads in the sand and saying that all those things can be brought about quickly and that the process of the Community's enlargement can go full speed ahead. It cannot, for the reasons that I quoted. Maastricht must first be signed and ratified by all the countries, and that cannot take place for at least a year. If anyone is thinking of serving up again the European Communities (Amendment) Bill without the Danes having had a chance to reconsider their views, they are simply asking for trouble and they will be wasting the time of the House of Commons.

What the Danes have done is to give everyone in the Community, not just themselves, a chance to reconsider the Maastricht treaty and to think carefully about just what the governing elites have committed them to in the terms of the Maastricht treaty.

Is it not fascinating to see that in Germany the almost immediate reaction was that people started asking what German public opinion had to say? They have found out to their immense surprise that about 80 per cent. of the German people do not want to give up the deutschmark, and some of those will insist that their currency is not surrendered to the ecu and the EC.

I do not know whether France was contemplating a referendum, but it is interesting that, as soon as the Danish result was announced, Mr. Mitterrand decided that France had to have a referendum too. Although on current indications it appears that the French would say yes to the present treaty, there is a long time to go and Mr. Mitterrand, with all respect to him, is a somewhat diminishing asset in French politics.

In Britain, the Danish referendum has produced an extremely interesting result. In both our major parties--I am not sure about the Front-Bench spokesmen--there has been a major reconsideration of the wisdom of the positions that have been taken up. There has been an open debate. At last people are turning their minds to what is

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involved and whether it is harmful or beneficial to the British people. In the Conservative party, as we well know, only 22 Members voted against the European Communities (Amendment) Bill on Second Reading, but if that Second Reading had come after the Danish referendum, nearer 80 or 90 would have voted against it.

That changing opinion is going on dynamically within the two major political parties and in the country as a whole. The country is beginning to wake up. One of the great things about the Danes is that they made the treaty available to their people. It went to every household. They could read it and see what it was about, and that produced the resistance. They did not receive any encouragement from their press, television or radio, but they saw what the treaty implied for them and they were not going to have it. I have a strong feeling that, if we were to give our own people a fair summary of what is involved in the treaty, British opinion would be equally strongly opposed and a referendum would result in a no vote for the United Kingdom.

It is in the face of that change of opinion in Britain that the Government are seeking to persuade people on both sides of the House and everywhere else that the treaty does not do what it does but something very different ; that it is a treaty not about further centralisation but about decentralisation--stopping, reversing, the very process of which the country is afraid. I find that astonishing.

It is no use people saying, "If only you could leave out of consideration economic and monetary union, it is possible that there could be a trade-off between some functions reverting to nation states and others passing to the Community," because EMU is at the heart of the treaty. I refer to the transfer from the nation states of Europe of their decisive remaining powers over the conduct of their own economies to a European central bank, and the use of a single European currency.

All the powers that we used to exercise and exercise now to control our own exchange rate and interest rates, and even the basic Budget judgments of successive Chancellors as to the balance between expenditure, revenue, and public sector borrowing will go. In terms of centralised decision-making, it will be the greatest step forward since the Rome treaty was signed in 1957. It is the biggest change ever--and I understate the situation rather than overstate it. The Government are in some ways in a better position than my right hon. and hon. Friends. The Government can say, "We have not yet signed up to economic and monetary union. We have our opt-out clause." What worries me is that I do not think that they will operate it. My right hon. and hon. Friends are willing to see the transfer of crucial economic powers to a European central bank without exercising any political control, and the introduction of a single currency--and so deny themselves the remaining powers that might influence the level of unemployment in this country and many other things as well. They are prepared to give that up. I find that amazing.

I hope that that feeling will grow steadily on these Benches and that, when the time comes, we shall make known our feelings about the whole treaty. If the Bill ever reaches Third Reading, I have no doubt that, in all conscience, the Labour party must vote against it. When one examines the concept of subsidiarity, many people can mount a considerable exegesis against it. I will

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draw attention to some aspects that I find very odd, but, before I do so, I will quote one or two people whose opinions on article 3b should be taken seriously.

I read recently a publication published by the Society of Conservative Lawyers, "Europe and the Constitution after Maastricht". On subsidiarity, it concluded :

"The doctrine of subsidiarity is, without profound institutional reform or changes of attitude or both, virtually worthless as a protection against further unwanted expansion of the European laws and institutions into further aspects of our national life." That is not an isolated opinion. I am sure that other right hon. and hon. Members read the comment by Lord Mackenzie-Stuart, recently president of the European Court of Justice, that the treaty definition is

"a rich and prime example of gobbledegook embracing simultaneously two opposed concepts of subsidiarity. To regard the chosen formula as a constitutional safeguard shows great optimism."

That opinion must be taken seriously.

I quote also from today's edition of the Financial Times, which is usually fairly friendly to the Government--[ Hon. Members :-- "No."] It has much higher intellectual standards than are usually applied by newspapers loyal to the Government. That newspaper described article 3b as "an intellectual jellyfish". I would adopt much more moderate language. The definition is a constitutional placebo. It is meant to give people the illusion that they are being treated for a serious condition when all that they are getting is some pink medicine in a bottle. It will not achieve its aim of quelling the anxieties of the Danish people or those in Britain who oppose European centralism. Article 3b states that, in areas outside its exclusive competence, "the Community shall take action, in accordance with the principle of subsidiary, only if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of proposed action, be better achieved by the Community."

Sufficiently achieved or better achieved--it is pretty open. It is all a question of judgment, as it must be.

When I read those words, I wondered about defence procurement. Can the European fighter aircraft be sufficiently achieved by the member states, or could it be better achieved by the Community? If the latter, should we transfer defence procurement to Community level? What about defence generally? Is defence better achieved by a collective effort rather than by individual efforts being brought together?

Mr. Hurd : The right hon. Gentleman shows that he does not understand the point. Defence is not within the competence of the Community, and therefore the treaty's articles do not apply. That is made perfectly clear. The danger that the right hon. Gentleman suggests cannot arise.

Mr. Shore : I ask the right hon. Gentleman to think a little more carefully. I was speaking about defence procurement.

Mr. Hurd : And then about defence.

Mr. Shore : I went on in that way. I understand the right hon. Gentleman's pillars, and so on ; I am well instructed

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in these matters. I gave an illustration in terms of defence procurement, which I ask the right hon. Gentleman seriously to consider.

The crucial question about subsidiarity is who decides. Will it be the nation states or the union? We know that it will in the end be the European Court that decides--and it is part of the union's supranational machinery, I have little doubt which way its judgments will incline.

I would like the right to decide what is appropriate for my region and local area. Such matters are not for the Community but for the House to decide--freely, in debate. Implicit in the doctrine of subsidiarity is the higher tier of Euroepean government to which things will be transferred that are appropriate to that level--such as the single currency, a central bank, and so on.

The attempt to define subsidiarity will be abortive. It will be difficult to define that slippery word in any meaningful way. It would be better if the Government put more firmly and in a more central place on their agenda items with which they could conceivably make progress. I wholeheartedly welcome the successful completion of the Uruguay round, although we know perfectly well that one of the principal obstacles is to be found within the Community itself. It will take enormous effort to persuade certain nations to reach a reasonable compromise with other GATT members.

My right hon. Friends the shadow Chancellor and the Leader of the Opposition suggested, when responding to a recent statement by the Prime Minister, that we ought to pay more attention during our presidency of the Community to its main economic, social, and political problem. I refer to the mass unemployment that afflicts not only this country but virtually every member state except Germany. Let no one have any illusions about unemployment levels and the length of time that they have endured in France and Italy--which have benefited enormously from being ERM members for 10 years. Those countries have suffered. Germany is the country that has gained most.

What can we do? I am pretty certain that two factors are helping to make deflation worse. One is the fixed parities that we have under the ERM. It seems to me that there is no doubt that many countries in western Europe--I exclude Germany--would benefit enormously if they could lower their interest rates and provide their entrepreneurs with some prospect of success. But we cannot lower our interest rates because of the effect that that would have on our exchange rate parity. The Government know that, as all Opposition Members know it, or should know it. As we are members of the ERM and have a fixed parity, we cannot lower our interest rates. That is a major deflationary factor operating now, without any further progress into economic and monetary union.

That brings me to the second factor. We are in the first stage in economic and monetary union. Indeed, the second stage will begin on 1 January 1994. The objective throughout Europe is to achieve a degree of convergence, above all in interest rates and exchange rates, and steadfastness in the control of borrowing and the avoidance of an excessive deficit. That pressure is on now. Over the next few years, all of Europe, including Britain, will have cuts in public expenditure designed to bring us within the parameters of convergence set in the treaty. These are major problems. We face them now, and, in my

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view, we must think very seriously about what we are entering into--quite apart from that to which we have already committed ourselves in the ERM.

Surely there is a solution. Surely we ought to be helping to promote a currency realignment within the ERM. That would be of great benefit to Britain and to all the other countries in Europe, apart from Germany, which are suffering from deflation and high unemployment at present.

Those are the things which I urge upon the Chancellor of the Exchequer, whom I am glad to see on the Government Front Bench, and which I urge equally strongly upon Opposition Front-Bench Members, who, I know, want to do the best for the people of this country but, so far, have been sadly misled by the claims made on behalf of the authors of the Maastricht treaty.

Madam Deputy Speaker (Dame Janet Fookes) : Before calling the next hon. Member, may I remind the House that the 10-minute rule is now operating? As very many hon. Members wish to speak, it would be even more helpful if speeches were to take less than 10 minutes. 7.2 pm

Sir Peter Hordern (Horsham) : The right hon. Member for Bethnal Green and Stepney (Mr. Shore) has made many speeches on this subject, and on this occasion hon. Members listened to him with their usual attentiveness. His criticisms of the Maastricht treaty might well have been made in respect of every single process, and in every period, of the European Community. I have heard before from him many of his remarks. I heard what he said when the Single European Act came into force and what he said at the time of the referendum. But recently, because of the Maastricht treaty, there has been a change in the course of the debate. There is now concentration on subsidiarity--a question with which the right hon. Gentleman dealt at some length. My right hon. and hon. Friends will know that some months ago we were told that the course of the European Community could be likened to that of a train. We were told that we should be careful not to be left off it. I maintain that the progress is now more akin to that of a car. A number of people are warning us that a motor car is a very dangerous thing. They are right to warn us, but they should not do so by walking in front of the car and waving a red flag, or by wearing sandwich boards telling us that we should all repent while we can.

It is very important to be able to drive a motor car. We have been in the European Community for a very long time, and there are considerable benefits to be derived from membership. I believe that the argument should not be based entirely on constitutional matters. In this connection, it appears that the lawyers cannot agree with each other--but that is nothing new. We ought to accept that the Danes have done us a service. Of course, it is true that the Maastricht treaty itself has not changed, and that at the Second Reading stage the majority in favour of the treaty was very substantial. But there is no reason for not looking very carefully at the consequences of the treaty if and when it comes back for its Committee stage. During our presidency we shall have an opportunity to define very carefully the areas of subsidiarity. That would do more than anything else to settle the doubts and difficulties of many people. If Ministries, not only in this country but all over Europe, were instructed to find

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practical examples of the areas in which they believe national Governments would operate best, leaving other areas-- probably relatively few--in respect of which the Commission could operate that would be an advantage.

Moreover, it is not right to talk just about new forms of legislation. Existing European legislation too should be looked at with a view to seeing what could be done by national Governments rather than by the European Commission.

Mr. Cash : Will my hon. Friend give way?

Sir Peter Hordern : I know that my hon. Friend is anxious to interrupt, but I hope that he will forgive me if I do not give way. I want to make my speech as quickly as possible. This is one of the difficulties about the 10-minute rule. I will give way to my hon. Friend, but not just at the moment.

My right hon. and hon. Friends in the Government have a real opportunity, during the next few months, to spell out very carefully the points arising from subsidiarity. The views of the Society of Conservative Lawyers and of Mr. Martin Howe on the matter of subsidiarity have been mentioned. Having read what was said by Mr. Howe, I can say that his particular objection to a European central bank and a single currency is that they would represent a significant loss of sovereignty. I realise that this is a matter of deep concern to many hon. Members.

Somehow the impression has been given that a single currency and what is seen as a loss of sovereignty are entirely new. Let me remind the House that ever since the days of Robert Peel--for 150 years, since we first went on the gold standard--Parliament has willingly abandoned the sovereignty attached to our own money and co-ordinated it precisely with the value of gold. In effect, we were saying that the value of our currency was dictated by Californian, Australian and South African gold miners. And that was during the heyday of the Victorian empire. Nobody then criticised us for losing national sovereignty.

The right hon. Member for Bethnal Green and Stepney will know very well that, after the war, we were subscribers to the Bretton Woods agreement. The pound was indissolubly linked to the American dollar. That continued for very many years--indeed, until Harold Wilson's Government withdrew, and there was difficulty about devaluation. But that is a matter that I will not go into now. The point is that, during the period to which I referred, the pound was linked indissolubly to the United States dollar, and the value of the dollar was set by the Federal Reserve Board of the United States, which is entirely independent of the United States Government.

Mr. Iain Duncan-Smith (Chingford) : Does my hon. Friend agree that one of the great lessons to have been learnt from that system is that the collapse of the United States dollar's value gave rise to great strains, problems and tensions, not only for the United States but for the economies of all the other countries? We learned that a floating currency was essential.

Sir Peter Hordern : For a long time I would have agreed with my hon. Friend, but I regret to say that that is not the case now. Perhaps we chose to link ourselves with the wrong standard, although it worked very well for many years. Let me remind the House of what the conditions were during most of the post-war years. At that time inflation averaged about 3 per cent., and long-term interest

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rates were 5 per cent. As recently as 1963 a 20-year bond was yielding 5 per cent. That was the level at which people and Governments could safely borrow.

Of course there are disadvantages in being linked to a firm currency, and I do not deny that the German mark has a good deal more to say for itself than the American dollar. All I can say to those who talk of a loss of sovereignty, however, is that we have been at it for a long time in the past, and have done very well out of it. There is a great deal to be said for being able to engage in long-term borrowing at low interest rates. I consider the link with the European exchange rate mechanism very valuable, for reasons that have nothing to do with European-ness but everything to do with controlling inflation.

It is, of course, difficult to see how some of the criteria mentioned in the protocol for arriving at a single currency can be followed. There is, for instance, the idea that the financial deficit must not be more than 3 per cent. of gross domestic product : the Italian deficit is 11 or 12 per cent. and climbing, and for most of the time Italy has no Government. There is the idea of establishing a wider Community by including first the EFTA countries and then Hungary and Czechoslovakia, with their enormous deficits. It is hard to see how the timetable set out so clearly in the protocol can possibly be achieved.

My hon. Friend the Member for Stafford (Mr. Cash) said, "Ah, but it is in the treaty." I believe that that is the way in which constitutional lawyers think : they think that because a certain figure--3 per cent., for instance --is mentioned in the treaty, it must come about.

Mr. Cash : My hon. Friend has talked of sovereignty, but he has skated over the fact that, during the time to which he referred, we had a political system--which we want to retain--in which the ultimate decisions were made in the House, on behalf of the people of this country.

Sir Peter Hordern : I fear that my hon. Friend was not listening ; I suggest that he read Hansard. My point was that, when we were tied to the Federal Reserve Board of the United States, no one accused us of losing sovereignty. [Interruption.]

Madam Deputy Speaker : Order. I am sorry to interrupt the hon. Gentleman, but we cannot have an undercurrent of conversation while an hon. Member is addressing the House.

Sir Peter Hordern : I understand the concern that is felt about economic and social cohesion. I consider it much better to deal with such matters by means of investment than by means of transfers of taxpayers' money, and I note that the far east seems to have more cohesion at present than any other part of the world. The Japanese would never dream of handing over taxpayers' money to foreign countries throughout the far east, which is growing more rapidly than any other area. Instead, it invests massively in countries such as Thailand--

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