House of Commons Hansard Debates for 14 Jan 1993

Mr. Bill Walker : May I clarify a point? My hon. Friend was drawing the Reformation into his argument. What date was the Reformation in Britain?

Mr. Taylor : The Reformation took place before I entered Parliament. I shall not bandy points about the Reformation with my respected hon. Friend from Scotland because that would lead us into other difficulties, but it was a very long time ago.

If one considers the history of the Community since the mid-1950s, it is clear that all along we have been part of an economic and political community and that many of its objectives were to be attained by involving ourselves in institutional structures and political debate.

This group of amendments, which would wipe out the changes made at Maastricht, would still leave us with an intensely political community. We must ask ourselves whether that is an ideal situation, and the answer is no. In many cases, what people in this country determined had gone wrong since the Single European Act was passed was on the agenda for correction at Maastricht, and the British Government were able to put much of it right for themselves. For example, since I came to the House in 1987 there have been many late-night debates about the misuse of Community funds. One of the problems was that no one had sufficient clout or sufficient evidence to point the finger. One of the changes made in the Maastricht treaty is that the Court of Auditors is given institutional status, which is an extremely good thing. Also, the European Parliament is given greater powers of scrutiny of monetary

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and budgetary matters and can call the Commissioners to greater account. The Committee should welcome such developments.

Another objection that has been raised many times in the Committee is, "While we abide by the rules, chaps, the other lot don't." That is probably true, even though the rules by which we abide are often more onerous than those facing other countries because our civil servants have been particularly zealous in interpreting the rules in the first place. However, I shall leave that issue aside. The treaty negotiated at Maastricht involves a strengthening of the powers of the European Court of Justice. Before there is shock and horror at the fact that the European Court of Justice should be involved at all, let us be clear--my hon. Friend the Member for Suffolk, Central (Mr. Lord) should pay careful attention to this --that by joining the European Community on 1 January 1973 we effectively accepted the jurisdiction of the European Court of Justice. It is not a new concept which has suddenly emerged.

The new set of regulations and powers given to the Community to put the single market in place after the Single European Act did not entail a consequent increase in the powers of the European Court of Justice to ensure that the rules were applied by those who agreed them. I hope that the British public will become aware that it is in our interests to apply the Maastricht treaty provisions because they answer one of the great public concerns, which is, why do we appear to be at a disadvantage compared to many other countries ?

Mr. Richard Shepherd : There is no question but that the European Court of Justice existed in the 1970s, but one of the issues that concern some of us is that at that time its remit was strictly limited to the European Economic Community, but the change explicit in the treaty broadens the range of its jurisdiction. By removing the word "economic" we have given it a catholicity of ranges and remits. That is the fundamental difference which causes much anxiety to many Conservatives.

Mr. Taylor : If that were the case, I could understand such anxieties, but what my hon. Friend says is not technically correct. The European Court of Justice is given jurisdiction over everything in the treaty of Rome. Therefore, it is also given jurisdiction over everything that emerged from the Single European Act which is consolidated in the treaty of Rome. As I said, the Single European Act was not about a free trade area alone.

I understand my hon. Friend's concerns and there are issues over which I would not wish the European Court of Justice to have jurisdiction. If one reads the treaty of Maastricht, one finds that it does not have jurisdiction over the two new pillars being constructed on foreign and security policy and on matters of justice--to put it technically, those matters are not justiciable.

Sir Trevor Skeet (Bedfordshire, North) : There is a complete misconception here. The Commission can be given jurisdiction. Matters can be referred to the European Court of Justice. With regard to the misconceptions that are being put forward by the Government, I can give references. First, the Commission is fully associated under articles J.9 and K.4(2), and it can draft legislation under article K.3(2). Furthermore, any legislation may be

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implemented by special convention under article 100c. Therefore, my hon. Friend cannot say that these matters are beyond the jurisdiction of the court and the Commission.

Mr. Taylor : My hon. Friend has made an interesting point, but he will be aware that, with regard to the pillar to which I am referring, the Commission is involved. But the Commission does not have the power of initiation, and that makes a very big difference. My hon. Friend will know that the European political co-operation procedure for foreign policy that was established under the Single European Act involved the Commission. But the European Court of Justice does not have power to render the elements of those two pillars justiciable in the way that it does in the case of the treaties of Rome. That is why, during this Committee stage, we are not faced with those matters of foreign security policy and justice. Those matters are outwith the Bill because they do not make amendments to the treaty of Rome.

Mr. Iain Duncan-Smith (Chingford) : I am grateful to my hon. Friend for giving way as I realise that frequent breaks in a speech disturb its pattern. I must refer him back to the provisions relating to co-operation in the fields of justice and home affairs. Article K.9 is important as it says :

"The Council, acting unanimously on the initiative of the Commission or a Member State, may decide to apply Article 100c of the Treaty".

Article 100c is therefore brought into play. I do not wish to be pedantic ; I simply want to know what my hon. Friend thinks about that.

Mr. Taylor : My hon. Friend confirms my point. In respect of such matters, Governments make unanimous decisions in the Council.

Dame Elaine Kellett-Bowman (Lancaster) : It is opting in rather than opting out.

Mr. Taylor : My hon. Friend comes to my rescue technically. The reality, however, is that this is very different from the unquestioned nature of the power of the European Court of Justice under the treaties of Rome. The precise fact is that the Maastricht treaty has clearly separated the other two pillars. Only with unanimous support under article K.9, which has been cited, will reference to the European Court of Justice come into effect. All these things are important.

Sir Trevor Skeet : Will my hon. Friend give way?

Mr. Taylor : Interventions make the debate exciting from my point of view, but they may not please other Members who wish to speak. I shall very happily give way in a moment.

Let me put all of this in context. The treaty of Rome and the Single European Act--taken together, parts of the treaties of Rome--are, in effect, an expression of Britain's acceptance that it is a part of an economic and political community and that certain decisions are more in the interests of the British people if there is co-operation through the institutions of the Community, sometimes even with qualified majority voting.

Yesterday, my hon. Friend the Member for Worcestershire, South (Mr. Spicer) made the point that, because of the changes that might be made under

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economic and monetary union, we would see almost the end of Britain's nationhood. That, I think, is slightly over the top. In economic and monetary terms, Britain is a particularly exposed nation as it is heavily dependent on trading. For a very long time, this country has been buffeted by changes in other countries. Whether or not we are in the exchange rate mechanism, monetary policies set in other countries determine monetary policies in this country. We cannot be isolated. Indeed, that is why, after we left the exchange rate mechanism in September, the Chancellor of the Exchequer, quite rightly, continued to make it clear that British monetary policy could not ignore the monetary policies being set in other countries and, indeed, that he could not set British monetary policy without watching the effect on the exchange rate. He was not attempting to excuse what had happened with regard to the ERM ; he was simply recognising the facts.

It is very important to make the point that the Community itself has free movement of capital. No member country has the right to reimpose exchange controls. I accept that there have been breaches of this in the past few months. [Laughter.] Hon. Members should be cautious with their hilarity. Let them take note of how quickly the controls have been removed again. The reinstatement was temporary, and the controls were removed. Ireland is a notable example. We were the first to abolish exchange controls, and we want the Community to have no exchange controls. However, the very important consequence is that capital finds the home that it most wants to find. If any of our domestic policies are out of line with those of other member countries, capital will find a different home. That applies to industry and to investors in Government bonds. A Government with a very high deficit cannot ignore the fact that some of the deficit may have to be funded abroad. That is the situation in which we currently find ourselves.

7.15 pm

Mr. Jeremy Corbyn (Islington, North) : The hon. Member is presenting a very interesting defence of what I regard as a pretty indefensible position. Does not he accept that if the principle by which the European economic policy is to be run is that capital will find the home that is most suitable to it, any social policies relating to housing, unemployment- -or employment--and the environment are bound to take second place? Is not that at the very heart of this whole debate?

Mr. Taylor : I am very grateful to the hon. Member for his intervention. That is precisely the point I wish to make. The reality is that it is not a question whether we can isolate ourselves, whether we can protect British monetary policy, surrounding it with a barrier. The question is : what sorts of policies flow from the conclusion that we have to respect what other countries are doing? That leads to a series of political decisions. The hon. Member for Islington, North (Mr. Corbyn) and I will differ as to how to protect social, housing and other benefits. Those are matters that become a series of priorities in the domestic debate.

With regard to the point that I think is significant, the hon. Gentleman will not like what I have to say. Yesterday, his hon. Friend the Member for Oxford, East (Mr. Smith) did a few political contortions in an effort to make the best of what might be a bad job. The significant

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point is that the debate in the Community itself is political. Philosophies bring much to bear on the outcome even of negotiations on treaties. For example, it has not always been known to be strong Labour policy that the principle of an open-market economy, with free competition, should be enshrined in the treaty. But I am glad to say it is enshrined in article 3A because even socialist Governments, such as in France, have been strongly influenced by Conservative thinking over many years. They have been prepared to see right at the centre of the treaty statements with which Conservatives here strongly agree and which strengthen our desire to see the Maastricht treaty ratified as it enshrines many of the political values that we hold dear.

The European system of central banks and everything that flows from it have price stability as a principal tenet. Such things are acceptable to the Conservative party, but probably less acceptable to the Opposition. But that is party politics ; it is not a question that arises from whether or not we are in the Community. The reality is that countries that are interdependent with regard to monetary policy do not sit down and ignore what is going on, but get stuck in.

My hon. Friend the Member for Worcestershire, South spoke about the problems of sovereignty. The clever action taken over economic and monetary union was not that we negotiated ourselves an opt-out--I disagree with the Minister of State about the use of that phrase--but that we negotiated ourselves an opt-in. In the process, we maintain parliamentary sovereignty. It is important to remember in that respect that we have not bound a successor Parliament. Meanwhile, we have the right to examine the matter and to influence the institutions that will be set up, including their character and objectives.

I agree that, for those who want nothing to do with it, that is not much of a bonus. They might say, "We shall pack our bags and go home. We do not like this game." But those of us who recognise that we are totally interdependent in the Community--by the facts of the matter, many of which stem from the very action that hon. Members who are now against Maastricht support, including the 1992 programme and the single market--appreciate that we must influence the institutions. And in that process of influencing them, we must make sure that they have the right objectives, which is why I welcome many of the phrases that are used, such as "open market economy" and "free competition." Mr. Austin Mitchell rose --

Mr. Taylor : I give way to the hon. Gentleman because his tie is irresistible.

Mr. Mitchell : The hon. Gentleman's argument is jejune. There is a huge difference between being influenced by economic and monetary policies in other countries--we are influenced by them because we are part of the same world--and being required, even compelled, to maintain our exchange rate within 6 percentage points of DM2.95. Influence is inevitable, but compulsion to maintain relativity in exchange rates is a different matter. If the hon. Gentleman believes that we have influence because we are part of an institution, perhaps he will explain what influence we had on the reshaping, restructuring and realignment of the ERM by virtue of being a member of it.

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Mr. Taylor : We are not compelled to do anything in the ERM. It was a British Government decision--I supported it ; I am not fudging that--to enter and maintain that rate. We have discussed that subject at great length and I shall not today be deflected into discussing the rights and wrongs of German internal domestic policy, of which I have considerable criticisms, which I have aired to my German friends rather than simply in the House.

When we come to the third stage, the House will make its decision. Convergence is an important issue and many factors set out in the treaty about convergence do not make me feel uncomfortable. That does not mean that I would want us tomorrow to reduce our deficit to 3 per cent. of GDP. With that I would be uncomfortable. But I am not uncomfortable with the long-term objective, and no Government who, over a period--let us leave that undefined--believe in a balanced budget would feel uncomfortable with that.

That reinforces my argument because, given that we are interdependent in the Community--only in the Community is there the Single European Act consequence of the free movement of capital to which I referred-- convergence is a desirable objective. There are various means by which to create convergence, and we could discuss that at length, but, given that convergence is a desirable objective, I have no problem with it in relation to the treaty.

Mr. Knapman : My hon. Friend will agree that we Conservatives believe in market forces. Is he saying that there is a right rate for any market? If so, what is the right rate for the pound to the deutschmark at any time? If there is no right rate for a market, there is no right time to join an exchange rate mechanism, and the country cannot afford to go through that again.

Mr. Taylor : My hon. Friend and I have differed in many debates about the merits of managed currencies and exchange rate mechanisms. I suggest that it is inconceivable that, in a market with free flows of capital, there is no policy towards exchange rates. I fear that we must continue to differ.

Mr. Bernard Jenkin (Colchester, North) rose --

Mr. Taylor : My generosity in having given way will be criticised because of the length of my speech, so I hope that my hon. Friend will forgive me if I do not give way further.

The Maastricht treaty gives Britain many opportunities, the anticipation of some of which have appeared over the years on our party political agendas. For example, an aspect of the treaty is that we try to bring the whole workings of the Community closer to its citizens. We shall later have a chance to debate the technicalities of subsidiarity or minimum intervention, and I shall not deal with that now.

Let us not ignore the fact that there are several initiatives in the treaty for creating greater openness and accountability, for giving British citizens the ability to refer to an ombudsman cases of maladministration in the Community and the greater powers of the European Parliament. Also we should take into account the stress on national Parliaments. It is the first time that such an ability has arisen. It is up to the Committee to interpret it and I welcome its appearance in the treaty. We should be pleased at the inclusion of those matters and support them. They strengthen matters and I urge the Committee not to throw

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those gains away simply because a vociferous few here are concerned with the institutions which were set up in the 1950s and which we joined in the 1970s.

The Community will not remain static. The treaty that we are discussing has considerable benefits for Britain, not least the fact that the move to ever -closer union, to which we have been attached since the 1970s, can now be seen to take a wider route than it took previously, for there can now be an intergovernmental route to closer union. That is what the pillars are about on foreign policy and justice matters.

It has been shown in the treaties of Rome that the centralising instinct and inevitability that some people--I am not among them--wish to see in the Community have been arrested through the principle of subsidiarity. It is not a question whether on every issue we can define that down to the last dot and comma. The implication of what is on the face of the treaty means realistically that habits in the Community will change--they already are changing--and we have seen flesh being put on that principle at Birmingham and Edinburgh. The Maastricht treaty has many advantages for Britain in areas about which hon. Members rightly believe that we should take particular care. It avoids a pre-commitment at a future date to a single currency and economic and monetary union. The interest of the House is protected in the treaty. We shall have the opportunity to debate that later. As is stated in the Treasury memorandum in the appendix to the report of the Treasury and Civil Service Select Committee, we are not automatically bound to rejoin the ERM simply by ratifying the treaty.

I put my cards on the table. I believe that some form of ERM is inevitable. Constitutionally, the arguments of my hon. Friend the Member for Worcestershire, South on that issue do not hold water, and the Financial Secretary made that clear in the debate yesterday. I urge the House to address the treaty as part of what we are already committed to and as a measure that strengthens, rather than weakens, British interests, which does not undermine the position of the House, and which has advantages that we should do more to explain to the British people, who would then perhaps understand why we should be scrutinising the Bill rather than moving towards a referendum. The House is the right place in which to examine the Bill, and I hope that that will continue to be the case during the Committee stage. 7.30 pm

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney) : The hon. Member for Esher (Mr. Taylor) and I disagree about almost everything in economics and politics, but there is one aspect of his speech with which I agree. Rightly and properly, frankly and openly, the hon. Gentleman described the character of the treaty, and said that it represented his monetarist political values. I too have come to that conclusion, and that is why I oppose the monetarist nature of the convergence cum monetary union in the treaty.

The hon. Gentleman's speech was open and honest, and it showed the differences between us--the reasons why I shall not support the inclusion of title II. At the heart of the treaty, and at the heart of title II, lies monetary union--monetary union, moreover, of a particular character, which the hon. Member for Esher sensibly and openly described as taking a monetarist route.

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During the past day or so of debate, it has been said that at least the treaty provides enough flexibility, and enough of an alternative opportunity to pursue convergence and monetary union by other processes. In that connection, much has been said about the famous article 2. I do not need to dwell long on that, because my right hon. Friend the Member for Llanelli (Mr. Davies) gave us a useful critical and textual analysis of it. I shall be rather more generous than he was about article 2, because I recognise that some of its wording--the references to high employment, social cohesion, and the rest--means that its tone and character are--

Mr. Austin Mitchell : An improvement.

Mr. Rowlands : Yes, an improvement--although, as my right hon. Friend the Member for Llanelli said, even article 2 contains more than a germ of monetarist thinking.

I shall show that, unfortunately, from that point the quality of article 2 is somewhat demoted as the processes and nature of the draft monetary union are revealed to us. My hon. Friend the Member for Hartlepool (Mr. Mandelson) and, to a certain extent, my hon. Friend the Member for Oxford, East (Mr. Smith) said that there was a route to monetary union based on growth, investment and jobs, and that the terms of the treaty made it possible to hold those objectives as central.

I have to tell my hon. Friends that I do not believe that that is feasible in anything like the time scale envisaged for the treaty. Such concepts of growth, and convergence based on those sentiments, would require a continuous consistent economic policy to be followed by 12 democratically elected Governments over a considerable period. I have spent nearly 25 years in the House arguing for some convergence between my constituency and the United Kingdom average. One could have thought that convergence of the economies of regions and communities within one country would be a simple task compared with convergence involving 12 countries, but I have to report to the House that, according to the latest figures, which relate to 1991 or 1992, the county of Mid Glamorgan, part of which I represent, has only 72 per cent. of the United Kingdom GDP per head--and the ratio is getting worse. The figure has fallen from 79 per cent. to 72 per cent.

Even within the United Kingdom, I have seen no convergence between the community that I represent and the rest of the United Kingdom ; I have seen a divergence of economic success, wealth and performance--so I find it hard to believe in convergence. I may be unduly pessimistic, but I think that I am realistic in believing that convergence and monetary union are not likely to be achieved by the dream route, with investment and jobs at its centre, in anything like the time scale envisaged in the treaty.

Furthermore, that is not what is on offer in the treaty. Although article 2 sets an improved tone, after that its role is demoted both in the process of moving towards monetary union and in the final nature of the union achieved.

This is a Committee stage, and it is the Committee's task to analyse what is before it, both in the Bill and in the treaty. As the debate is about title II, I shall briefly take the Committee through what happens to the good sentiments

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of article 2 in the subsequent processes of title II--how it is valued, how it is eventually assessed, and its final role and function.

By article 3a, paragraph 3, there is a new set of criteria, and there are new guiding principles that will come into force. The language of the definition in paragraph 3 is interesting. I have learnt to read and understand the language of such documents, and I hope that I understand article 3a, paragraph 3, all too well. Article 3, paragraph 1, contains a reference to the contents of article 2 as generally a good thing, but by paragraph 3 the guiding principles that "shall entail compliance"--they are not simply principles to be generally promoted, or desirable objectives ; they have to be complied with--are a narrower band :

"stable prices, sound public finances and monetary conditions and a sustainable balance of payments."

During the speech of my hon. Friend the Member for Hartlepool yesterday, there were some interesting exchanges. My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) ever so gently suggested that the language of the treaty was

monetarist--possibly the language of the 1930s. He was accused of being a senior non-modernising member of the party, and his idea was dismissed.

Ironically, I had been sitting here wondering where I had already heard in a consistent form the language and principles of that paragraph--which are repeated throughout all the articles. I had just finished an interesting study and analysis of the way in which Whitehall handled the dreadful problems faced by my constituents in the 1930s, and when my right hon. Friend mentioned the 1930s it triggered off a connection with that research.

The language and principles of article 3a, paragraph 3, resembled the weekly and monthly statements of Chancellor of the Exchequer and Prime Minister Chamberlain, which rejected any form of public works or deficit financing on any scale for the salvation of communities such as Merthyr Tydfil. The language is not coded ; it is an openly described set of monetarist principles. By the time we reach article 3, it is those principles which have to be complied with. They are not simply promoted as desirable objectives ; they are the criteria which must bite.

By article 3, we have found out that the pleasures and joys of the sentiments behind article 2 have been put in a slightly different context, and now stand in a rather different relationship. As the hon. Member for Esher openly and honourably stated, that series of monetarist principles, which he thinks should be at the heart of the process towards monetary union, are statements of his political values.

Those monetarist principles left my constituency in the 1980s--as they left it in the 1930s--to suffer increasing unemployment. I do not intend to vote for a treaty and a process towards monetary union that enshrines those principles. I refuse to do so. I am sorry that some of my hon. Friends feel that they can manipulate that treaty and that process. I do not believe that we shall be able to do that. For 30 years, my predecessor and I have argued the case. We still find ourselves not converged but diverged in our economic activity, even compared to the level in the United Kingdom.

I do not believe that some of the desired objectives in article 2 will be carried through in the processes to achieve

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monetary union. Article 3a dilutes the sensible objectives of article 2. I tried to track the role of article 2 through the subsequent articles. In other words, I tried to track the general and desirable tasks in article 2 through the remainder of the articles to the point at which monetary union is achieved. I then looked at article 102a. Of course, that is where the cat is let out of the bag in terms of the function and role of article 2 in the process of monetary union.

We have all been taught to draft in different ways. Words are what we live with ; words are our trade. I had a fantastic schooling. I spent four and a half years inthe real school of drafting--indeed, in one of theultimate factories of drafting in which one does one's apprenticeship : the Foreign Office which does nothing but draft. By the time we reach article 102a on economic and monetary policy, the function and role of article 2, with its desirable objectives of cohesion and high employment, have been changed. Article 102a says : "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,"

It is simply "a view to contributing". If the drafting of that article is not a product of King Charles street, it should have been. If it was not a product of King Charles street, our continental friends have learnt the British art of drafting weasel words to cover the diminution of the importance of article 2 as part of the monetary process.

Although the desirable objective in article 2 is diminished in article 102a, the monetarist principles of article 3a3 are still there to be complied with. So the balance between the joys of article 2 and compliance with the monetary principles of article 3 are now carried through. One is "a view to contributing to", and the other is undoubtedly something which must be complied with or else.

Mr. Clive Betts (Sheffield, Attercliffe) : There are two ways to read the treaty. One way is to read it, as my hon. Friend has done, from the beginning--that may be the logical way to read through a treaty--and to say that article 3a changes the definition, especially from paragraph 1 to paragraph 3, where the stable price element is introduced, and then to read further and say that it is a matter of having regard to the words used.

If one reads the treaty backwards, looking at each of the minor elements with reference to article 2, which is the essential task of the Community, one can say that article 102a is a subsidiary of article 3a, because that is how it is written. One can also say that article 3 is a subsidiary of article 3a.

The First Deputy Chairman of Ways and Means (Mr. Geoffrey Lofthouse) : Order. While I have been in the Chamber and, indeed, while I have been watching the monitor during the debate, I have noticed that interventions seem to be very long. Some of them are tantamount to speeches, and I hope that the hon. Gentleman will bear that in mind.

Mr. Rowlands : I understand the point that my hon. Friend is making. Although it may occasionally be justified and useful to read a document backwards, I have not found that so. If I understand my hon. Friend's point,

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and if one looks at the structure of the treaty and the title, at the beginning there is a series of general statements, and then a series of processes is described in detail within a time scale. The series of processes then reach the point at which a group of states will have converged sufficiently to achieve monetary union. I do not think that hon. Members should read the treaty backwards. It must be read in a forward-looking way because the processes towards monetary union unfold in a series of articles which precede article 102a. The principles have been laid down in articles 2 and 3a. My argument is that, by the time one reads article 102a, the balance in the sentiment, tone, direction and objectives in article 2 have changed to a rather strict monetarist process. If I am allowed to continue, I shall show how that unfolds almost exclusively so. 7.45 pm

Mr. Marlow : In a broader context, has not the hon. Member for Sheffield, Attercliffe (Mr. Betts) hit the nail on the head when he says that there are many different ways of reading the treaty? That has enabled my hon. Friend the Member for Esher (Mr. Taylor) to plead for reassurances and tell the Committee how everything will be all right on the night, how none of our powers or our sovereignty will be undermined and how we will be strengthened. At the same time we will allow the commissioner and his friends, the Euro-fanatics, to take all powers from the House as time goes by. The institutions of Europe, the court and the Commission, will take those powers from us. Hon. Members can read the treaty two ways.

Mr. Rowlands : I do not agree that we can read the treaty two ways. It is very clear, and the hon. Member for Esher described it well. The treaty describes monetarist principles and the processes towards monetary union. Monetary union is the only principle of the treaty. I am simply saying that a number of my hon. Friends have argued about the value and importance of article 2 to defend the process. I am seeking to demonstate how article 2 is progressively devalued as the treaty describes the processes to reach the ultimate point at which the member states decide whether they have achieved a degree of convergence. In article 3, the Commission is given a new power--at least, I think that it is a new power.

We have talked a lot about subsidiarity. This morning, in the Select Committee on Foreign Affairs, the Minister of State and his officials admitted that the principles of subsidiarity cannot and do not apply in any shape or form to stage three of monetary union. In other words, the principle of subsidiarity, which is the central feature of the treaty and stage three of monetary union, will not apply. It is a centralising process, not a process which is subject to subsidiarity.

Mr. Garel-Jones : In the Select Committee this morning, the deputy legal adviser to the Foreign Office made it perfectly clear that article 3b did inform the whole treaty, despite what the hon. Gentleman says.

Mr. Rowlands : If I remember correctly--we will read the text-- evidence was previously given to us by professionals. I simply asked Mr. Jay whether subsidiarity would apply to the principles of monetary union in the stage three process, and I think he said no. It was only consistent with other evidence which we have taken.

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Mr. Jenkin : In a way, it does apply to monetary union because, by reason of the scale of effects, it is something which is better done at the centre. That demonstrates how subsidiarity can be as much a centralising concept as a decentralising one.

Mr. Rowlands : That is a perceptive point, because we speak of subsidiarity as a one-way process. As the hon. Gentleman rightly points out, it could be a two-way process. Whereas we talk a great deal about the potential decentralising of powers under the subsidiarity provisions of the treaty, alongside it is a hugely centralising process which is necessary to achieve monetary union. I hope that I am not vulgarising the exchange that we had in the Select Committee this morning. In the Select Committee, we talked about, dare I use the term, Mr. Delors's "little list" of devolved powers. We asked the Ministers who came before us to produce a little list of the new powers and responsibilities that the Commission will obtain under the treaty. Article 103 of title II includes, if not a new, an enhanced role for the Commission.

The Commission will almost have the power to play the role of a European International Monetary Fund. It will be in the job of multi-surveillance of every nation's economy and performance. That is the function that is provided in article 103. Rather than reducing the functions and roles of the Commission, the treaty enhances them. To borrow another phrase, the Commission will go into every nook and cranny of a nation's economic and monetary life. That is what is established in article 103.

The other interesting feature of the process of multi-surveillance is that the treaty does not contain a single reference to the Commission looking to see whether unemployment is increasing, whether there is any form of social cohesion and whether there is any real protection. The Commission's function of multi-surveillance in the process of monetary union has no meaning in respect of matters such as unemployment. The multi-surveillance function is already essentially monetarist.

Dr. Roger Berry (Kingswood) : Is my hon. Friend aware that the recent Treasury report on the conduct of economic policy, to which reference has already been made, says in paragraph 106, referring to Maastricht :

"A strategy for deficit reduction in the medium-term is required under the terms of the Maastricht treaty."?

It is difficult, if not impossible, to find in the report commitments to employment policy and growth as a result of Maastricht. The emphasis is on deficit reduction.

Mr. Rowlands : Absolutely so. That is why examination of the text does not justify the weight that some of my colleagues have put on article 2. Employment and growth are not the major aims which determine the nature of the process which will lead towards monetary union.

In article 103, the Commission is given the role of conducting multilateral surveillance of an individual nation's economy. It is little wonder that the Commission is willing to give up extra powers. It will have a full-time job involving itself in every nook and cranny of the economic life of nations.

Mr. George Robertson : Has my hon. Friend ever asked himself why, if the prescriptions which he says are the central feature of the treaty are so evil and unlikely to lead to growth and, according to his diagnosis, are likely to lead

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to a worse position, every socialist and social democratic party in Europe, and every trade union in Europe outside and within Britain, is in favour of the treaty?

Mr. Rowlands : Because these are matters of judgment. My judgment on reading the text of the treaty is clear, and it is evidently shared by all those who have spoken tonight. The running thesis of the treaty and the process of monetary union are based on narrow monetarist principles. I cannot answer my hon. Friend's question. My hon. Friend spends more time than me on the matter. He has not damaged my case. Others might not agree with me, but my hon. Friend has not taken me on about how I interpret the text. He has not told me that I am reading the treaty wrongly. If he thinks that I have got a point of fact wrong, he should tell me. He simply tells me that others have different views.

Let us examine the text. The text of article 104c on excessive deficits does not say that one reason why a country might have such a deficit is because it wishes to reduce unemployment. Article 2 does not deal with excessive deficits. By the time we reach excessive deficits in article 104c, it is clear that the route to monetary union is a monetarist one.

Mr. George Robertson : My hon. Friend the Member for Oxford, East (Mr. Smith) dealt with several of the points that my hon. Friend makes, countered them, and argued strongly with some of the interventions that were made. I simply ask my hon. Friend, in a shorthand form at this stage in the debate, to remember that it may not be the case that he is right and everyone else in the 12 European Community countries is wrong. It might be the other way round. I simply ask him to reflect on that.

Mr. Rowlands : I hope that my hon. Friend thinks that he might find himself in that position, too. I am defending my case and making my points based on the text before me. My hon. Friend has not once yet told me that I am reading the text wrongly. I cannot be responsible for the company he keeps : I can only say how I read and understand the text.

By the time I reach paragraph 2 of article 105 on monetary policy, I find no vestige of reference to article 2. My hon. Friend the Member for Hartlepool (Mr. Mandelson) said paragraph 1 contained a reference to article 2, but even he had to admit that the opening sentence of paragraph 1 of article 5 says that the primary objective of the European central bank is to maintain price stability. It is not to implement the objectives of article 2.

Again we have the words :

"with a view to contributing to the achievement of the objectives of Article 2."

Those are the weasel words about the good things in article 2 by the time we reach the functions and role of the European central bank.

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