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Mr. Austin Mitchell (Great Grimsby) : My hon. Friend has listed the new requirements to be introduced into the treaty of Rome by the Maastricht treaty, which includes a high level of employment and of social protection, the raising of standards of living and quality of life and so on. All those are important objectives to which Opposition Members are strongly attached. But article 3a(2) states

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that the primary objective of economic policy is "to maintain price stability". That has never been an objective of the Labour party--nor, as far as I know, has it been the objective of any economic management in any country. [Hon. Members :--"Oh!"] That is stated as the primary objective.

The article then states that the other objectives are to be realised

"without prejudice to this objective".

In other words, the paramount requirement is price

stability--destructive though that is certain to be in terms of employment, jobs and economic growth.

Mr. Smith : I am pleased to hear my hon. Friend the Member for Great Grimsby (Mr. Mitchell) endorse the objectives of article 2, which seem to me to be good enough reason to support it. My hon. Friend referred to price stability. It would be interesting to hear his arguments in favour of price instability. I have yet to see the benefits of price instability to working people and, in particular, to pensioners. There is no merit in price instability. But I know what my hon. Friend was getting at. He sought to make the important point that we should be pursuing policies which, as a whole, promote full employment, prosperity and social justice, and that the goal of price stability should not be allowed to prejudice that.

Mr. Denzil Davies rose--

Mr. Corbyn rose--

Mr. Austin Mitchell rose--

Mr. Smith : I must make progress. I shall be happy to take further interventions later and I shall come on to refer to the details of article 3a, to which my hon. Friend the Member for Great Grimsby referred.

As I was saying, Britain would be far better off if the British Government put article 2 into effect and led forward the programme for concerted European recovery rather than obstructing it as they were doing before the Birmingham summit and at Edinburgh. Many of the problems surrounding the treaty--we acknowledge that there are problems--arise from the way in which the Government have approached the matter. As I have said before, they are like gatecrashers entering a party backwards and assuring all around them that they are just on the way out. Britain will have paid a double price for the opt-out from the social chapter : first, there is the price to British workers, who have been disgracefully deprived of the rights that will apply in all the other member states--something that we shall seek to put right in our debates on the social chapter--and, secondly, there is the price paid in terms of the negotiating capital used by the Government to achieve the opt-out, which could have been used instead to help put Britain into the first division in Europe rather than confining it to the second.

I am sure that my right hon. and hon. Friends will want to devote attention to other fears that have been expressed about the treaty--its problems and how they can be overcome--as well as its benefits. We have never made any secret of the fact that, in a number of respects, the present treaty is not the treaty that we would have sought to negotiate. It is, after all, the product of bargaining between the 12 Governments of the Community. At the time of negotiation, five of those Governments were Christian

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Democrat or Conservative, four were coalitions, one was Social Democrat identifying with the Liberals and only two were Democratic Socialist. It should therefore come as no surprise to anyone that we have a number of important concerns that we shall wish to express in subsequent debates.

But with all the talk of problems, let us not forget the enormous potential benefits that can be derived both from the provisions already contained in the Bill and from the amendments that we shall seek to introduce. It is little wonder that the public grow sceptical of politicians' approach to the Maastricht treaty when they hear only of problems and wrangling and not of the potential benefits. Those benefits are derived from two important principles which are close to the hearts of Labour Members. First, international co-operation is essential for securing and preserving peace ; and, secondly--this is inscribed on many of our trade union banners--unity is strength. By joining together in a union, we can secure social and economic progress which would not be achieved if we all stood apart. Those important principles are reflected in many of the provisions in the titles which are the subject of this debate.

When we examine the history of Europe and the state of the world, the value of such co-operation--rather than destructive nationalism--is more evident, whether through meditation on Remembrance day, by visits to graveyards in northern France or by seeing on television and elsewhere the appalling suffering of modern warfare.

Let none of us doubt the importance of building closer European co- operation. Let none of us forget that at the heart of the European project was the determination of European countries, especially France and Germany, never to go to war again. That is a noble aim and a worthy expression of our common humanity. Whatever the problems of Maastricht and whatever the difficulties and arguments that lie along the road to Europan union, let us not forget for one moment why it was well worth embarking on the journey in the first place.

Mr. Marlow : Government Ministers are saying that the treaty will not happen so we may as well vote for it. The hon. Gentleman is saying that if the treaty goes through we will get socialism in our time. I suggest that they are two fundamental reasons why all of my hon. Friends should vote against the damn thing.

5.30 pm

Mr. Smith : That is a matter for the hon. Member for Northampton, North (Mr. Marlow) and his hon. Friends. We have made no secret of the fact that the provisions of article 2 would stand proud in any Labour manifesto. That is why we are so strongly in favour of the principles.

Mr. Corbyn : I have listened with great care to what my hon. Friend has said about article 2 and its social objectives. Does he concede that the whole basis of the Maastricht treaty is the establishment of a European central bank which is staffed by bankers, independent of national Governments and national economic policies, and whose sole policy is the maintenance of price stability? That will undermine any social objective that any Labour Government in the United Kingdom--or any other Government-- would wish to carry out.

Does my hon. Friend recognise that the imposition of a bankers' Europe on the people of this continent will endanger the cause of socialism in the United Kingdom

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and in any other country?

Mr. Smith : It is a task of the Labour party, and Labour in government, to ensure that the process does not result in a bankers' Europe --that the concerns of bankers are not allowed to dominate the goals for social progress to which we all subscribe. Time and time again we have made it clear that we believe that decisions on such matters must be taken within a politically determined context. That presents a strong case for strengthening the role of ECOFIN in the Community.

Mr. Malcolm Chisholm (Edinburgh, Leith) : Does my hon. Friend accept that article 107 makes it absolutely clear that the European central bank will not take instructions from ECOFIN or any similar body?

On the point that article 2 would fit well in a Labour manifesto, article 2 explicitly says that it is subordinate to article 3. I wonder why my hon. Friend is focusing on article 2 rather than article 3. Article 3 makes it clear that the fundamental objective of economic policy is the control of inflation.

It was not fair for the hon. Gentleman to say, in response to my hon. Friend the Member for Great Grimsby (Mr. Mitchell), that everybody wants the control of inflation. Of course, we want the control of inflation. However, it has never been the primary objective of Labour's policy that the control of inflation should be the first objective of economic policy. Therefore, articles 2 and

Mr. Smith : The reason why I am placing such stress on article 2 is precisely that the preamble of the treaty sets as the task of the Community the provision of

"a high level of employment and of social protection, a raising of the standard of living and quality of life".

Through Government and European institutions, in common with our sister parties in the rest of the European Community, it is our task to ensure that the implementation of those goals takes precedence. For democratic socialists and for all of those whom we aspire to represent, there are important reasons for engaging positively in the Maastricht process.

In an increasingly international economy which has powerful transnational forces, intervention to ensure employment, better living standards, enhanced quality of life and fairness and a sustainable environment must be undertaken at the international level as well as closer to home. Participation in the European Community cannot be an add-on extra or an opt -out deduction, as the Government maintain. It is a necessary condition for economic and social progress.

With the advent of the single market and the growing integration of the European economy, the European level of economic management is essential if workers, communities and whole regions are not simply to be left at the mercy of unregulated market forces. As Labour has consistently stressed, the advent of the single market and the integration of the European Community must be accompanied by corresponding action at national and global levels. Britain will be better placed to achieve both if we work in co-operation with our European partners instead of seeking to do so in isolation.

Mr. Rowlands : An absolute condition in the process towards monetary union under the treaty is to introduce legislation to make independent our national bank. Does my hon. Friend support that principle?

Mr. Smith : If the treaty is carried, it is clear that such

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matters will have to be examined. We have already made it clear that there is a case for examining the separation of the regulatory functions of the Bank of England from the responsibility for monetary policy. Of course, if a European central bank is established, every member state will need to examine the relationships between their central bank and the European bank and between the central bank and their Governments. The Labour party has tabled a further amendment about the accountability of the Bank of England.

It is crucial that a central bank remain in public ownership. It must not pass into any form of private ownership, as some have suggested. The constitution and governing council of a central bank must fully represent industrial, regional and social needs and the policies which it pursues must be carried into effect in a politically accountable context and in ways for which the institution must be held to account.

Mr. Dalyell : I am mindful that the Lothian region, the Edinburgh area and the Linlithgow constituency have greatly benefited from the sensitive understanding given by the European Community to their regional issues. Linlithgow constituency Labour party unanimously passed a resolution on Sunday which urged me to do everything possible to get the Maastricht treaty through. There are two views and there should not be the misleading impression that all the arguments are just on one side as far as Back Benchers are concerned.

Mr. Smith : Many regions, especially the region to which my hon. Friend referred, have had cause to benefit from the way in which the European Community and some of its activities have given attention to the social and economic problems in the United Kingdom. The Government have not sought to address those social and economic problems. Indeed, their policies have aggravated the problems. My hon. Friend is also right about Labour party policy, which is that the Maastricht treaty is the best available vehicle before us for securing the closer political and economic co-operation in Europe to which the Labour party is committed.

Mr. Nicholas Winterton : The hon. Gentleman's position seems to be partial. I accept the sincerely held views of the hon. Member for Linlithgow (Mr. Dalyell), but is the Opposition spokesman saying that if the United Kingdom Government were disposed to do so, they could not do exactly what Europe has apparently done for Edinburgh and the Lothian and Linlithgow areas of Scotland? Is not the hon. Gentleman aware that Britain is a net contributor to the European budget and that we give far more money than we get back? If we had kept that money, some of it might well have been passed to not only the constituency of the hon. Member for Linlithgow, whose views I respect but disagree with, but perhaps to my constituency.

Mr. Smith : The hon. Gentleman effectively makes the point that the Government, of whose party he is a member, lack the political will to address the fundamental economic and social problems of Britain. That comes as no surprise. But is it not welcome that the European Community has at least been able to provide some assistance, as my hon. Friend said?

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Mr. Iain Duncan-Smith (Chingford) : Will the hon. Gentleman give way?

Mr. Smith : No. I must make some progress.

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

Mr. Smith : If my hon. Friend will allow me, I should like to make some progress. I trust that that will open up more time for Back Benchers who want to speak.

Some argue that much that I have advocated, such as the value of closer economic and political co-operation and gaining control of otherwise unregulated market forces, is good. They say that we need European co- operation and even European union, but that the titles in the Maastricht Bill offer no vehicle for achieving those goals. I do not dispute that those arguments are advanced with sincerity and integrity and deserve to be listened to with respect. However, I do not find them realistic, just as the Labour party conference did not find them realistic.

I do not see how we could build some theoretical European co-operation in the future by rejecting out of hand the practical European co-operation which is available now. When I hear arguments such as those of the hon. Member for Stafford (Mr. Cash), who said in the debate on 1 December that he favoured political co-operation within Europe and even that he had no difficulty with European union, it puts me in mind of those people--I am sure that my hon. Friends have encountered them--who say, "I am all in favour of trade unions in principle and would join the appropriate one if it was one that I liked, but I will not join the trade union my workmates are in because I do not like the rule book, the shop steward does things with which I disagree and I am not prepared to take collective action if I am outvoted."

Our position stands in stark contrast with that of the hon. Member for Stafford. He believes that the provisions of the Bill to give effect to the titles in the Maastrict treaty unreasonably limit the operation of the free market. We believe that they offer a framework which is essential if the single market is to be the servant, not the master, of workers throughout the Community. He and his friends believe that a free market in currencies is best for the economy. We believe in the principle of planned management of exchange rates. The hon. Member for Stafford believes that common funds which seek to redistribute resources to weaker regions of the Community damage the economy. We believe that they are desperately needed for economic regeneration, social justice and common welfare. He believes that it is centralist for the Community to agree standards for terms and conditions of employment. We believe that there will be exploitation if it does not do so.

Mr. Winnick : My hon. Friend will appreciate that some of the arguments that he has just advanced about economic co-operation were the basis for the clamour for us to join the exchange rate mechanism. We know what happened. I do not for one moment question my hon. Friend's genuine sincerity. I mean that. Obviously, there is a genuine difference of opinion. Why not on such an important issue? My hon. Friend talks about steps to reduce unemployment and all the rest. How on earth can that be justified bearing in mind article 104c, which places a strict limit of 3 per cent. of gross national product on public

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spending? Moreover, it sets out in considerable detail the penalties that will be inflicted on member countries if they go beyond that limit. Surely that will simply mean that public spending will be reduced, and further reduced in many cases.

Even under the Conservative Government public spending is, fortunately, higher than 3 per cent., at least at the moment. Surely an outright reactionary right-wing Government would use the 3 per cent. rule to justify further cutting public spending. They would turn round and say, "It is all in the treaty. We have no alternative." How could unemployment be reduced in those circumstances?

5.45 pm

Mr. Smith : I believe, and it was the view taken in the resolutions and documents passed by the Labour party conference, that within the framework provided by the treaty, it is precisely possible for us to take common action to tackle unemployment and the rundown of depressed regions as well as social inequality. But it is our task--I agree with my hon. Friend in this--to ensure that the Europe that we shape becomes an engine for economic growth, not an instrument for deflation.

My hon. Friend referred to the convergence criteria. I shall have more to say about those criteria towards the end of my speech. I hope that he will bear with me and allow me to make progress to that point.

Mr. Denzil Davies : Will my hon. Friend give way?

Mr. Smith : No. I should like to make progress.

I was contrasting our position with that of the hon. Member for Stafford. However, I agree with him about one thing. The debate about Maastricht and the level of public knowledge about what is involved has been distorted by the Government attempting to face both ways. They do one thing while pretending to do another. They claim that Maastricht is all about reaffirming the power of nation states when the treaty seeks to pool a measure of sovereignty.

The Government claim that subsidiarity applies to all Community activities when it is plain from the text of the treaty that it does not. They claim that the Prime Minister has won great victories in bringing Europe round to his view when all that he has succeeded in doing is to achieve opt-outs which would consign Britain to the second division.

We remember the Government's other claims. They said that the ERM was the cornerstone of Government economic policy. According to the Prime Minister, at least this year Britain will never have to take part in the ERM again. The Government said that the pound would replace the deutschmark as the strongest currency of Europe. They claimed that other European countries envied our economic miracle. With such a litany of contradiction, U-turns and doublespeak, no wonder that so many people are unsure of the treaty's purpose. Worst of all, at a time of devastating unemployment across the Community, the utter failure of the British presidency to place at the top of Europe's agenda the crying need for a co-ordinated programme for economic recovery was a dereliction of responsibility which not only failed to meet the economic and social

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needs of the people of Europe but was bound to make many doubt the relevance of the Community to their everyday lives.

Our key goals in discussing the amendments and issues before us are to improve the Bill ; to make it clear how Labour would want the treaty to operate in practice in the interest of the people of Britain and the people of Europe ; and to win the case for the inclusion of the social chapter so that Britain will benefit from the provisions for employment rights and partnership which other Community countries realise are essential for economic success in the single market, as well as for employees' well- being.

We seek to win genuine regional representation on the Committee of the Regions, recognising that subsidiarity should start at home ; to place economic policy within a framework of political accountability so that Community institutions and policy are the servant, not the master, of the people of Europe ; and to make European co-operation a vehicle for sustainable growth. We shall return to all those important matters in the debates on subsequent specific groups of amendments.

I should like to make a brief reference to article 138a and then make some general comments about the convergence criteria, to which I referred when my hon. Friend the Member for Walsall, North (Mr. Winnick) intervened.

Article 138a, raised in our probing amendment No. 20--which we shall not press to a vote--refers to political parties at the European level. Labour has consistently stressed the need for closer European integration being accompanied by measures to strengthen democracy and political accountability in the Community. That must mean an enhanced role for the European Parliament, as well as a more powerful role for bodies such as ECOFIN, to which I have referred. Also, it means that campaigning organisations, trade unions and business groups will build further on the considerable progress that they have already made to establish working European associations, making an invaluable contribution to the democratic process at the European level, as well as extending their formal involvement in Community decision-taking, for example, as partners in the social dialogue.

All that is to be welcomed and encouraged, but as article 138a recognises, political parties have an important role at European level to extend awareness of and participation in the European dimension of politics. I am pleased to be able to say that the Labour party has played a full role in that process, previously through the Confederation of European Socialist Parties and, since the Hague congress and declaration of 9 November last year, in the party of European Socialists which will be a force for stronger political co-operation in Europe.

Given the Government's support for article 138a in the treaty, I challenge the Minister to make clear whether the British Conservative party will carry that into effect by becoming a full member of the so-called European People's party, which supports the social chapter, or is there to be another cop-out and opt-out? I shall give way to the Minister if he wants to intervene.

Several Hon. Members rose--

Mr. Smith : I give way to my hon. Friend the Member for Newham, South (Mr. Spearing).

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Mr. Spearing : By and large, my hon. Friend has made a factual statement. Article 138a is an addition to the existing treaties. Why is it necessary? Surely the operation of parties, even on a European level through the confederation and in this country, is an established fact of democracy. Why does it have to be put in a treaty, which is a legal document relating to powers and finances?

Mr. Smith : Perhaps it is all about applying the Short principle on the European level--I do not know. I was referring to the fact that it is of value to reaffirm in the treaty the importance of political parties at a European level.

An important part of the co-operation and democratic accountability that we want to establish is the arrangements for ensuring that the House is fully involved in the consideration of European policy. We have tabled amendments to that end, in later groups.

In addition, as part of the group of amendments before us, my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) may seek to move new clause 10, standing in his name and that of other hon. Friends. The proposal to submit the reports to which it refers to this Parliament has much to commend it. Unless I hear compelling arguments to the contrary, I shall be inclined to support it. It is important that we consider convergence criteria in this general debate, not least because they have been interpreted in different ways in the wider public discussion. Some of those interpretations do not properly reflect the wording of the treaty and some of the political implications that have been imputed to the criteria would not serve the cause of co-ordinated economic recovery, which the Labour party believes should be top priority.

I am sure that the Minister will point out that Britain is not committed by the treaty to the third stage of economic and monetary union, but that begs as many questions as it answers. The key arguments on the criteria for convergence are, first, that the criteria are not blanket requirements. They are some aspects of economic performance which must be evaluated in determining how far the economies of various member states have converged before the establishment of economic and monetary union, and one set of considerations to evaluate comparative economic performance after such a union. The criteria are not cast in stone, which is just as well, given what has happened recently with the ERM.

Secondly, the articles that apply the criteria explicitly and rightly require them to take account of wider economic

considerations. For example, the article on Government deficits, to which some of my hon. Friends have referred, requires the Commission to take account of the extent of Government investment and expenditure and the medium-term economic and budgetary position of member states.

Thirdly, the protocol on convergence criteria requires the Council of Ministers to adopt appropriate provisions to lay down the details of those convergence criteria, which will then replace those set out in the protocol. Therefore, Governments would have the opportunity to make it clear--as we urge the British Government to make clear now--that the criteria should not be defined or deployed so as to implement monetarist policies, or to inhibit economic recovery in member states. What Labour has long said--and what the Government should be saying and should have said when they occupied the presidency--is that

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convergence should encompass the employment, industrial, investment and environmental measures essential for European economic recovery. What is more, the Government have a strong obligation to do just that. Article 102a of the treaty states :

"Member states shall conduct their economic policies with a view to contributing to the achievement of the objectives of the Community, as defined in Article 2."

To fulfil that requirement, and in the light of the extent of the recession, the consequences of rebuilding the economy of eastern Germany and the recent experience of the ERM, under the provisions in the treaty for redefining the convergence criteria, as well as under articles 102a and 103 on economic co-ordination, the Community will need to agree the most effective way to put progress towards economic and monetary union back on course. That should be accompanied by co-ordinated policies for jobs, investment, training and growth. Nothing in the treaty is a barrier to Britain adopting those policies ; it is the lack of political will on the part of the Conservative Government.

Several Hon. Members rose--

Mr. Smith : What is more, if Britain's voice is to be heard, it needs to be clear to our Community partners as well as in the House that our goal is to make European co-operation work in the interests of the people of Britain and of Europe, and not to sabotage it nor to wreck the treaty, which is the principal means to hand to give effect to that co- operation.

Mr. Austin Mitchell : Essentially my hon. Friend is saying that the treaty does not quite mean what it says and that under a Labour Government it will be interpreted differently, although I would prefer--to paraphrase Aneurin Bevan--not to look at his crystal balls, but to read the text of the treaty. Can he answer this question? In the view of the Opposition Front Bench, does title II require us to go back into the ERM as a precondition of doing any of those things? What is the position on that?

Mr. Smith : I have already made that clear. I was talking about the way in which the convergence criteria will need to be redefined. The treaty places obligations on member states and on the Community to implement economic policies that will realise the objectives in article 2.

On the exchange rate mechanism, we have never made any secret of the fact that our party is committed to the principle of managed exchange rates. We have also set out the way in which the management of exchange rates needs to be changed to combat speculators. 6 pm

Mr. Dykes rose--

Mr. Smith : I shall not give way as I am about to conclude. Within the framework provided by the treaty--I emphasise that it must include the social chapter--the Committee should make clear our commitment to work for the full application of the provisions in article 2. That would give expression to the policies agreed at the founding conference of the party of European Socialists at the Hague, when we declared :

"We maintain the ideal of a democratic Europe that is both open to its citizens and to the world ; a Europe that

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brings economic and social prosperity for all ; a Europe where solidarity between and within nations as well as between generations is a guiding principle."

It would also put into practice, for the benefit of the people of Europe, as of Britain, the policy passed overwhelmingly at the Labour party conference, which

"reaffirms Labour's vision of Europe with Britain's future at the heart of a European Community which is economically prosperous and which has high standards of social and environmental protection and citizens' rights believes that the Maastricht Treaty, while not perfect, is the best agreement that can currently be achieved." As we debate this group of general amendments and more specific amendments later we shall make clear our commitment to closer economic and political co-operation in Europe and how we believe that the Maastricht treaty should be implemented with the social chapter. That must happen if the treaty is to be a decisive step towards the economic and social progress that Europe needs and the Labour party wants to see.

Mr. Nicholas Brown (Newcastle upon Tyne, East) : On a point of order, Mr. Lofthouse, have you yet heard from the Government whether there will be a statement later tonight concerning the American attack on Iraq?

The First Deputy Chairman of Ways and Means ( Mr. Geoffrey Lofthouse ) : No. I call Mr. Garel-Jones

Mr. Garel-Jones : The amendment tabled by my hon. Friend the Member for Stafford (Mr. Cash)--

Sir Russell Johnston : On a point of order, Mr. Lofthouse. Is it not the normal convention in Committee, particularly when that stage is taken in the Chamber, for spokesmen on both Front Benches to give way freely? Otherwise, how can we have a proper dialogue?

The First Deputy Chairman : The hon. Gentleman has been here for a long time, and he knows that it is a matter for those speaking to decide whether to give way.

Mr. Rowlands : Further to that point of order, Mr. Lofthouse. I should like to refer to another convention that I thought was part and parcel of the Committee stage. I thought that Ministers did not reply to a debate in Committee before those who have tabled amendments selected with the main amendment have had an opportunity to speak. The second amendment, No. 323, in this group appears in the name of my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) and other hon. Friends, but we have not had an opportunity to speak to it. It now appears, however, that the Minister is about to speak. I ask the right hon. Gentleman through you, Mr. Lofthouse, to obey the normal conventions in Committee and to allow us to speak to our amendment before

The First Deputy Chairman : I know that the Chairman dealt with a similar point of order earlier when he called the hon. Member for Oxford, East (Mr. Smith) to speak on behalf of the Labour Front Bench.

Mr. John Butcher (Coventry, South-West) : Further to that point of order, Mr. Lofthouse. You will recall that, in the Committee sittings before Christmas, a great deal of anxiety was expressed because about 20 hon. Members who had hoped to catch the Chair's eye could not do so. That group included hon. Members from Northern Ireland, Wales and Scotland. It seemed that a gentlemen's convention had been violated.

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Fundamental questions were asked during those sittings. Normally, in Committee we follow an iterative process and such questions are answered. However, the closure was moved when a number of those fundamental questions had not been answered. I beg you, Mr. Lofthouse, to ensure that we now have a Committee debate in the truest sense of the word, so that we can proceed in good order and good-naturedly.

The First Deputy Chairman : I note the points that the hon. Gentleman has raised.

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