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7.4 pm

Sir Cranley Onslow (Woking): I shall not follow the speech of the hon. Member for Clydesdale (Mr. Hood), even the parts of it that I understood, because I disagree with most of what I understood him to say. Specifically, I think that he was less than charitable. The best speech in the debate was made from the Government Front Bench, by the Prime Minister. It was straightforward and factual. It covered all the ground, and it should have given every possible reason for every hon. Member on the Conservative side of the House, or all hon. Members who ought to sit on the Conservative side of the House, to be in the Government Lobby tonight.

I shall not be unkind about the Leader of the Opposition, because his speech will no doubt look very good on television, but if one analyses it one will realise that it is most remarkable for the things that he did not say and the arguments that he left out. If I may make an argument that is perhaps new in the debate, a great many people in the country are sceptical about Europe. I am talking not about in the House but in the country as a whole. Some are very sceptical and some are mildly sceptical, but it does not follow that most people want us to leave the Union. Being sceptical about Europe is not the same as opposing Europe. We should clear the confusion about that.

If the Union cannot stand constructive criticism, there is something very wrong with it. If it cannot tackle fraud and cheating on the common agricultural policy and the common fisheries policy, there is something wrong with the Commission; we should never forget that. We should never forget, as participants in a national Government, that national Governments in the Union are giving illegal aid to their industry to the detriment of our industry. We should seek to ensure that that is put right.

I was especially glad to note the action that is being taken by the Department of Trade and Industry on the steel industry. The European steel industry is in a shambles. It is ironic that that should be so, because that was one of the original reasons why Europe combined.

Mr. Denis MacShane (Rotherham): Will the right hon. Gentleman give way?

Sir Cranley Onslow: No; I will not give way. I am sorry but I have no time.

The Department of Trade and Industry has found it necessary to set up a steel subsidies monitoring committee to gather information about illegal subsidies and to pass that on to the Commission for action. The Department, I understand, warned British contractors that if they buy steel from certain fabricators overseas, they need not necessarily expect that it will meet the tariff entry requirements, because it has been illegally subsidised by the Governments concerned.

That state of affairs is not confined to the steel industry. Anyone who takes an interest in the subsidy issue at Commission level will know that there have been good grounds for criticising the Governments of Italy and Spain for subsidising their aluminium industry and good grounds for criticising the Government of France for subsidising their aviation industry. Both of those ran clean counter to the letter and the spirit for which the Union is supposed to stand.

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I think that the scepticism about those subjects extends to others as well. Most people in this country are pretty sceptical about the European Parliament. I found it interesting that, just as the Leader of the Opposition said that the Union was important to our steel industry as long as the regulations were enforced, but did not say that they were not being enforced, he did not pay tribute to his socialist Members of the European Parliament for the work that they do to defend British interests in Strasbourg or Brussels; I have no evidence that they do anything to defend British interests. I am not surprised that people are sceptical about that.

We must recognise that there is a need for Europe to perform and to be judged by its performance, but that does not amount to a case for leaving and for turning our backs on Europe, which exists and in which we must live and fight for our own interests.

Scepticism in this country extends to scepticism about a single currency. The right hon. Member for Bethnal Green and Stepney (Mr. Shore)--I am glad to see him in his place--quoted at some length an admirable lecture given by the Governor of the Bank of England, but he did not complete the quotation by drawing on the last few paragraphs of the lecture, in which he said about monetary union: "it must be in the interests of the European Union as a whole that that decision is informed by a careful and dispassionate assessment of the economic arguments."

If that is scepticism--it is certainly not a full commitment in either direction--then it is shared by the Governor. He went on: "It is not a decision that can or should be taken now. We all have our work cut out to achieve economic and monetary stability, and to address the problem of structural unemployment within Europe, through our independent national efforts and through European co-operation . . . The important thing at this point . . . is that we all carry forward this work patiently and with an open mind." That indeed is the spirit in which the House should approach tonight's opportunist motion. It is not a motion tabled by people who are prepared to be patient or open-minded. The only thing that unites the Opposition is not Europe but a lust for power and for office. All their actions are conditioned by that. I believe that they will be disappointed. In the meantime, it is important for us to support to the hilt a Government who genuinely defend the national interests of this country. They work patiently and cautiously and keep their options open. The referendum option is an important one, and I am sure that the Prime Minister is right to keep it open. It is extremely important that we show our resolution and unity in the Lobby tonight by supporting the Government amendment.

7.11 pm

Mr. Derek Enright (Hemsworth): The right hon. Member for Sutton Coldfield (Sir N. Fowler) got just one thing right in his speech, which was that tonight's debate is about differing visions of Europe. The Opposition certainly have a distinct vision of Europe. Perhaps I may illustrate it by referring to shops. Do people want Flash Harry's cut-price shop, selling cheap goods of cheap quality, and giving no training to the staff; or do they want Marks and Spencer, selling quality goods, giving staff decent training, paying them decently, consulting

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them and giving them consideration when they have to be moved from one branch to another? That precisely illustrates the difference between us.

I should like to correct my hon. Friend the Member for Neath (Mr. Hain) and various Conservative Members about the social charter. I remind hon. Members of the Coal and Steel Community treaties. Fundamental to those treaties was the manner in which the workers of the European Community should be treated. The whole idea was to improve their treatment and raise their standard of living. The same idea is to be found in the EURATOM treaties, and it permeates the treaty of Rome, article 119 of which covers equal rights for women, and did so well before we started to do anything about them. Essentially, the European Union is about people and their welfare--not just the people of one small part of the Union, but all its people. We are concerned for other people just as much as we are concerned for ourselves. Unless we hold true to that ideal, we are finished as a nation.

This evening I have heard a series of thoroughly depressing speeches containing no vision for Europe and showing a fundamental misunderstanding of how it works. Hon. Members seem to have a misconception of how the Commission is controlled, and about what the European Parliament can and cannot do and does and does not do. Hon. Members share a misconception about Pauline Green, leader of the socialist group. She has worked extraordinarily well, drawing together a programme for all the peoples of Europe, including the people of this country. I have heard Ministers praising her efforts, and rightly so.

We seem to be hung up on the question of sovereignty. What on earth do we mean by sovereignty? It means giving people power over their own lives. That in turn means enacting, at the right level, legislation that defends people, that acts positively in their interests and that encourages them.

My constituents ask what happened to sovereignty when it came to pit closures. It was not the bureaucrats of Brussels who got rid of the pits; it was Whitehall and Westminster that infringed my constituents' sovereignty and deliberately stopped them having work. The result is that one in three men in the area is out of work and actively seeking work.

My constituency is a good example of the need for a social chapter. We used to have what were disgracefully referred to as women's jobs, because they paid enough only to supplement a wage. People work 40 hours for £100 or £120, but these salaries are no longer an adjunct to other people's wages; they are now the wages for whole families. What sort of pay is that on which to keep a family together? I applaud the idea of a minimum wage, which should apply across the European Union. The EU can ensure that we do not go in for competitive beggar-my-neighbour policies. Hugh Gaitskell's speech, which I saw on television that evening, contained a basic illogicality that depressed me enormously. He said that we could not wipe away a thousand years of history. That was an appalling statement, because it did not recognise the fluidity of history. It looked to the past, not to the future. It did not regard history as something to be built on and looked out from. The Government are falling into the same trap.

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We have to face up to the problem of monetary union which, for the first time, the Prime Minister mentioned this afternoon. My hon. Friend the Member for Clydesdale (Mr. Hood), the Chairman of the Select Committee on European Legislation, mentioned what I am about to say as well. It is clear to me, having talked to representatives from Germany, France and the Benelux countries, that they are looking to monetary union: it will come. It may not come in 1997 or in 1998, but it will come as soon as possible after that. The House should be in no doubt about that, and it will impinge on our sovereignty. Once a bloc of countries has entered into monetary union, the leeway that we shall enjoy to manage our own economy will be restricted. My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) said that our policy was one of full employment and that we could not achieve that under the terms of the Maastricht treaty. But we cannot have full employment by regarding ourselves as an island, putting a fence all round so that no longer do we consider ourselves part not only of the European economy but of the world economy.

Instead of pretending that we can solve problems within these islands, we must perform the much harder task--it is harder, let us not kid ourselves about that--of persuading our partners within the European Union that by bringing our policies together we can tackle the problem of unemployment. There is no lack of willingness on the continent to adopt such policies. It is Her Majesty's Government who have opposed every single proposal that has been made by the Commission with the support of the majority of the Council and who have blocked the really substantial measures.

Monetary union can and should help in that respect. It is what we use monetary union for that counts. No one can tell me that monetary union takes away our independence as we now know it.

Mr. Shore: Of course it does.

Mr. Enright: My right hon. Friend says, "Of course it does." Yet this weekend we have had an example of a young bit of a lad on almost the other side of the globe who can bring down a bank, ruin the value of the pound and send shivers throughout the entire world community. If that is some sort of sovereignty, I do not know what we are coming to.

We must be realistic about sovereignty. We must pool our sovereignty to obtain more power over ourselves. To do that, we have to know in what direction we are going, and that, I am afraid, is what the Prime Minister did not tell us today.

7.21 pm

Mr. Tim Renton (Mid-Sussex): The aim of the Opposition's motion today is purely party political. It is an attempt to create an unholy alliance between Labour, Liberal Democrats, Scottish nationalists, Ulster Unionists and those of my hon. Friends who wander in that nether world between heaven and hell, the Whipless ones, in the hope of embarrassing the Government and defeating them tonight. I am sure that, as some of my right hon. and hon. Friends have already said, the Opposition will be defeated in that aim and I hope that all Conservative Members will vote firmly in the No Lobby.

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My right hon. Friend the Prime Minister made a wise and balanced speech. One aspect of it on which I wish to concentrate in the few minutes available to me is his remark that Europe does not have just one agenda, and here I pick up the remarks of the hon. Member for Hemsworth (Mr. Enright). Of course, that is true. Germany has a different agenda from us. Its agenda is to maintain the strength of its currency and its fantastically strong record on low inflation and low interest rates. France, too, has a different agenda, which is to bind Germany into the European Union while Germany is still interested in being so bound and before, as could happen after unification, Germany turns its eye eastward and is not that interested in membership of the European Union.

We have a great challenge in that respect. How do we, as a wholehearted member of the European Union

"help to lay the foundations of an ever closer union among the peoples of Europe"?

Those words cause shivers of apprehension in some hon. Members on both sides of the House, but they are not new words. They appear in the original treaty of 1951. That original grand purpose, always undefined, has been reaffirmed many times. For example, article 1 of the Single European Act signed by my noble Friend Baroness Thatcher in 1986 has as its objective

"making concrete progress towards European unity."

Ever since 1973, the Conservative party has been a willing signatory to treaties that contain those words.

The free trade area is nearly complete and, as we look ahead to new challenges, there are great problems, which I fully understand, in working out how that ever closer union is to be achieved. But hon. Members should not think that that concept will go away, especially as we move from a European Union now of 15 countries to one of 20 or more as east European countries apply for membership.

Organisational changes are already required in the European Union. The roles, portfolios and numbers of the Commissioners need to be redefined; the rules about qualified majority voting need to be reconsidered. I am not one of those who in any way thinks that the present structures and administration of the Union are perfect, but we cannot and must not expect that 250 million of our European neighbours will turn their back on the concept of ever closer union just because some in Britain have momentary doubts, agonies and hesitations about it.

I have no doubt that the progressive solution will lie in what Churchill foresaw in 1950 when he referred in his book "Europe Unite" to

"some sacrifice or merger of national sovereignty"

along with the

"gradual assumption of that larger sovereignty by all nations concerned which can alone protect their diverse and distinctive customs and characteristics and their national traditions". What does that mean? It means that we all voluntarily give up some individual national sovereignty in order to play an effective part in a wider sovereign organisation of which we are part.

Up until now, we have pooled sovereignty over such matters as trade, agriculture, fisheries and the implementation of the single market programme in order to have more force in the world as a trading bloc, but we have kept it, for example, on tax harmonisation, foreign policy and defence.

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Those boundaries are bound to move as the European Union develops and I understand that over each move there will be fierce argument, but the moves will take place, and that is one reason why I regard it as essential for the issue of subsidiarity to be properly defined at the intergovernmental conference so that there is clarity between what does and does not lie within the competence of the European Union.

The main issue that lies immediately ahead, which has occupied the House much this afternoon, is that of a single currency. I fully agree with all of those, starting with the Prime Minister, who say that much rational discussion is obviously needed about how much control over monetary and fiscal policy should pass to centralised European authorities when a single currency is likely to happen. That discussion must take place before Parliament decides whether to join a single currency and whether at that time to recommend a referendum.

I disagree very much with the right hon. Member for Yeovil (Mr. Ashdown) over his wish to force the Prime Minister to take that decision now. It is much wiser to stand back and not take the decision but to wait until the arguments are better known. That may not be an exciting posture, but it is a sensible one. It is much better to do that than to take the wrong decision now.

My own judgment is that in about the year 2010 there will be only four major trading currencies--the yen, for Japan and the Pacific basin; the dollar, for north and south America; the Chinese currency unit, which would embrace mainland China, Taiwan and Hong Kong, and a European currency unit. Other minor currencies will continue in existence, such as the rouble, but they will be subject to the regular risk of devaluation.

Before then, Britain as a trading country and a financial centre will have joined the European currency unit with all that that implies of no risk of devaluation and therefore of low interest rates and low inflation and higher employment. We will join it because it will be self-evidently in our interests at that time. But it is not a decision for today.

I remind the House of two dates. First, it is the 21st anniversary of my election as a Member of Parliament. [Hon. Members:-- "Hear, hear."] I thank my hon. Friends for their support. I came to the House as a member of the Conservative party, which had just taken this country into the European Community, and ever since then, unlike the Labour party, we have been a lead player in the development of the European Economic Community, to the advantage of Britain. We have always believed in a powerful Britain at the heart of a powerful Europe. We believe in being a participant, not a spectator. I trust that that will remain a basic plank of the Conservative platform. Secondly, we are only two months away from the 50th anniversary of VE day. I remember that day very well. I remember the mixed feelings of triumph and relief. We have now had 50 years of peace in western Europe--a longer period of peace than at any time in the past 120 years. I believe strongly that the development of the European Union--its steady progress from a Coal and Steel Community to a European Economic Community and to the Union--has played a key part in bringing

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western European nations closer together in peace. I look to the European Union and to our active, positive membership of it, to give us peace for the next 50 years.

7.31 pm

Mr. Peter Mandelson (Hartlepool): I compliment the right hon. Member for Mid-Sussex (Mr. Renton). I agreed with much of what he said. I found his speech all the more welcome because it was in such stark contrast to the normal diet of speeches that we hear from many of his colleagues, which so often consist of false claims about the secret, socialist, centralising European agenda of the Labour party, coupled with attacks on wild, federalist ambitions across the channel, which only the Conservative party is capable of seeing off; about wicked continentals, in league with my colleagues in the Labour party, who, apparently, spend every waking hour dreaming up new ways of suborning the British way of life--one Aunt Sally heaped on another, for the Government to knock down.

It is quite clear to me why the Conservatives have had to construct such a ludicrous spectre on the continent. After all, they have made so many enemies of each other within their own party that the only way in which they are capable of coming together is by creating even bigger ones outside. Of course, it is very tempting to allow them to stew, to delude themselves, fighting one another, edging themselves steadily but surely out of office. But, in my view, the process in which they are engaged carries far too many dangers for our country for us simply to sit back and enjoy the spectacle of the Conservative party tearing itself apart, however enjoyable that is at one political level.

As I think the Prime Minister's speech revealed this afternoon, the Conservatives are incapable of uniting on anything other than platitudes, short-term postures and a postponement of every important decision that our country faces in relation to Europe. What, after all, were the Prime Minister's most frequently used words in his speech this afternoon? "Don't know"; "not yet"; "perhaps"; "maybe"; "wait and see". Why was that the theme of his speech? Because, on any long-term vision of Europe, the Tories have a fundamental, gut, irreconcilable divide between those who merely want the loosest possible European free-trading area and those who see Britain's economy, our trade, our defence, and foreign policy, intimately linked to Europe, and rightly so. That is why Government policy, as confirmed during the Prime Minister's speech this afternoon, is seemingly permanently on the fence, alternately paralysed or in retreat--never going forward, because looking ahead means falling out among themselves.

The Prime Minister is well practised now at looking both ways. Nothing in his Jekyll and Hyde performance this afternoon alters the fundamental reality of the divide in his own party. In my view, he has only himself to blame for that impasse. From the very moment he prevailed over his Maastricht rebels--thank God he did--in the summer of 1993, then inexplicably, to many of us, decided to cave in to them with his appeasing article in The Economist of that autumn, they knew full well that they had him on the run. He has been running ever since.

These are intolerable conditions in which to conduct Britain's European policy. We are heading, as the Prime Minister said, towards another European intergovernmental conference of great magnitude.

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Although it is likely to fall well short of being a Maastricht mark 2, for there seems to be no great appetite anywhere for any great integrationist leaps forward in Europe, the IGC is forming an extensive tidying-up and reforming agenda, which Britain must address seriously and play a full part in shaping, on the basis of a clear, coherent and, above all, consistent vision of where we want Europe to go and what we want our place in it to be. If we do not--if the IGC fails, from our point of view--it will harm Europe's ability to co-operate more effectively on matters that are of key national importance to Britain: our economy, foreign policy, defence, environmental protection and much else besides.

That is why the Tories' fight over Europe is so damaging to Britain. The Government are so hamstrung by their need to condemn everything that their own sceptics label "integrationist" that they cannot embrace the necessary moves towards greater co-operation which are in Britain's interests, and they cannot take proper and full advantage of what I believe is a more realistic and practical political mood throughout Europe. I do not believe that that is any way to serve Britain's interests. I say that not because the Labour party wants to put Europe first, as is often bayed by Conservative Members, but because Britain's interests can be put first only by fully co-operating in Europe.

Let me offer some examples of where I believe that greater European co- operation is signally in Britain's national interest. I believe that we need a strengthened single market and guaranteed British access to it, and that often requires a strong Commission to enforce the rules if that single market is to work properly. It also requires, from time to time, a speedy and effective European Court, to provide adjudications of disputes, to ensure that we and our British companies gain access to that market. It is in our interests for the European Union to pull its weight on trade, to liberalise in some areas and to combat dumping in others; yet, for some, that is just portrayed as the European Union throwing its weight around. We would benefit from common action, on unemployment and competitiveness, yet all we hear from Conservative Members is constant talk of deregulation, Government doing less. At the moment, there is even resistance among some to closer working among the police and judicial authorities. We would have much to gain from the formation of a Europol, yet for some that is too much like supranationalism. We need the decisions and actions taken through the common foreign and security policy better prepared and executed, and that will mean closer and stronger, not weaker, co-operation. As for defence, we need not only a bigger role for the Western European Union but moves to create common procurement procedures and greater burden sharing in defence expenditure.

Enlargement towards the east is in the interests of our peace and security; but does any hon. Member seriously doubt that it has implications for Europe's workings, the size of the Commission, the operation of the Council of Ministers and the performance of the European Parliament? Of course not. All that must change. Are we really going to block any extension of qualified majority voting, with small new members being given the same veto rights in the Union as Britain, Germany and France on matters of crucial importance to us? Of course not. All those matters must be on Britain's agenda; they are certainly on the Labour party's.

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There is, in fact, a big agenda for Britain to get right in time for the intergovernmental conference. We must identify the areas in which action is needed and the changes that we want, and frame proposals for the necessary reform. The Government must accept, however-- this is important--that we shall get nowhere with those proposals unless we are in a strong negotiating position. We shall succeed only if we have already won friends and influence in Europe, and have created such an atmosphere and commitment that our partners are anxious to reach agreement with us. That is what is missing now, and that is the crux of this debate. It is why the Government--

Mr. Deputy Speaker (Mr. Michael Morris): Order.

7.41 pm

Sir Peter Hordern (Horsham): About a fortnight ago, I feared that the single currency could be discussed only by consenting adults in private. I am pleased to note, however, that today hon. Members on both sides of the House have indulged in the practice. I was particularly interested by the way in which the Leader of the Opposition so clearly expressed himself to be in favour of a single currency.

I do not think that the hon. Member for Hartlepool (Mr. Mandelson) had any idea of the extent of the disagreement that emanated from the Labour Benches behind him. The idea that the Labour party is united on the single currency is absurd. I do not believe that the Leader of the Opposition himself has any notion of what being tied to a single currency really means, particularly in view of all that we know of past Labour Governments. I shall say more about that later. I welcomed the Prime Minister's approach. As he said, we must wait and see exactly what the conditions are- -and they certainly will not apply before the turn of the century--before deciding whether to join the single currency. However, I am not one of those who believe that monetary union necessarily leads to political union: it seems to me that political union means losing control of defence policy, foreign affairs policy and the budget.

Although we are making sensible arrangements in the Western European Union, we manifestly have our own defence policy. The same applies to foreign affairs--although we clearly could not have secured the terms and conditions that we managed to secure in the negotiations on the general agreement on tariffs and trade without the offices of the European Union. As for the European budget, it is controlled by the Council of Ministers, but it must be passed by national Parliaments--in particular, by the House of Commons. I therefore do not see why monetary union should necessarily lead to political union.

Indeed, it would be dangerous were monetary union to do so. It is important for democracy never to depart too far from its grass roots. Whatever may be said about democracy in the European Parliament, it evidently does not enjoy the sustained support of people in this country; we need only look at the turnout in European elections to see the truth of that. While national Governments retain a majority of support, it is clear that that is where power should reside. The single currency is, however, of constitutional importance, if only because the European central bank will have to manage a monetary policy. If we adopted a single currency, we would give up our right to devalue.

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That has been a precious right for past Labour Governments; it is absurd for Labour to lecture us about the benefits of a single currency, given their progress in that regard--rake's progress, I should say.

In 1974, the exchange rate was just over DM0.6 to the pound; only five years later, it was DM3.8 to the pound. The result of that slide in the value of sterling against all other currencies was that interest rates had to be significantly higher than they would otherwise have been. They were just below 15 per cent. in 1974, and finished at just below 15 per cent. in 1979, having risen to 18 per cent. at one stage. That is the price of a policy that allows the currency to devalue. Whatever we may think of the philosophical benefits of floating the pound, our experience is that it has always floated downwards.

That has consequences. In the case of medium or long-term loans, the market will insist that a higher rate of interest be applied to sterling securities because of the fear of devaluation. That is why our interest rate on loans for between 10 and 20 years is always at least 1.5 points higher than the deutschmark rate.

Arguments about whether we should join the single currency tend to be conducted in a vacuum. Now, in 1995, we are arguing about whether it is a good idea; but in 1999 at least three countries will qualify--Germany, France and the Netherlands. We currently have 40 per cent. of our visible trade with those countries, and the decision will therefore be extremely important. I believe that those countries will adopt a single currency. We shall not be able to avoid that; we shall not be able to opt out of it. The currency will be widely traded--probably more widely traded in the City than anywhere else in the European Union--and a great many businesses and people will want to deal in it.

There will be an obvious advantage in businesses doing so. The interest rate on the European currency will be significantly lower than that on sterling, making it extremely attractive to European businesses. It will not be a single currency at first, but it will be a very powerful common currency. We can no longer discuss the desirability of such a development in a vacuum; it is going to happen.

Whether the currency will spread more widely, and whether that is desirable, is another matter. We cannot possibly know until much nearer the time; but if, for example, the Greeks, Italians, Spaniards and Portuguese by some miracle qualified to join the European single currency on nominal terms, I would guess that the currency would be extremely unsafe, simply because the margins between employment levels in Spain are so different from those in Germany. I do not think that such a policy should commend itself to those countries, although of course it is entirely up to them. Whether we join a single currency must surely depend on the number of countries that join, and the terms and conditions operating at the time. As a common currency will be formed in any event, I think it likely that we shall join in due course, because it will probably be in our long-term interest to do so--particularly as the interest rate will be substantially lower than the sterling rate. The outlook for sterling in such circumstances, however, cannot be so strong. The currency will be not only weaker but less widely held than it is today. Consequently, the shifts of fortune, which are

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bound to occur, and the fluctuations in the value of sterling are likely to be much sharper even than they are today.

It will eventually be in our interests to join a single currency as long as it is confined, which I think it would be, to the stronger countries of the Union. It is important to retain control of the budget as at present and carry out the reforms which my right hon. Friend the Prime Minister spelt out in his speech. We should also try to extend Europe's boundaries. All those features work in our national interest.

Clearly, joining any monetary union must exert considerable financial discipline on this country of a kind that we have not experienced for many years. For 300 years we used a currency convertible to gold and for 20 years after the war we abided by the Bretton Woods agreement and were tied to the US dollar. That suited us very well. When I first came to the House- -I have been here a little longer than my right hon. Friend the Member for Mid-Sussex (Mr. Renton)--interest rates for Government borrowing were 4 per cent. for 20 years ahead. Low interest rates have much to commend them, and I hope that we can return to those conditions. However, it is rather too early now to say whether we shall be able to do that and it is much better to reserve judgment.

7.50 pm

Mr. Mike Gapes (Ilford, South): I get the impression that many Conservative Members are positioning themselves for the battle to come in six months, a year or two years. Many speeches seem to be shifting slightly towards a more sceptical position. I refer in particular to the speech by the right hon. Member for Guildford (Mr. Howell), who has become a Euro- sceptic. That is clearly a sign of the way that the wind is blowing for a party that faces defeat at the coming election.

I was with the right hon. Member for Guildford two weeks ago in Bonn with the Select Committee on Foreign Affairs. We also went to Rome in the course of an inquiry into these matters. I was struck by the clear, unanimous view in Germany, which was emphasised by Chancellor Kohl in all his public statements and by the Social Democratic party and even extended to the Greens, that Germany believes in European integration and not in the European Union as some kind of glorified, Thatcherite free market. It believes that the political side of the process is as important as the economic and monetary sides. We must recognise that now because when the single currency is established--not if, but when--it will undoubtedly be based on the German economy. As is the case today, Germany, with a population of 80 million people, will be the motor of the overall, integrated west European economy.

The right hon. Member for Horsham (Sir P. Hordern) spoke about the relationship between Germany, France and the Netherlands. It is clear that they will be in the new arrangement. One of the few things said by the Prime Minister with which I agreed was his allusion to the fact that it would cost us if we stayed out of a single currency. We should consider the problems that we would face with speculation, and people wanting to trade internationally and using the European currency rather than ours. For those of us who represent London constituencies with large numbers of people who work in banking and insurance in central London, that rings an alarm bell. If

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we are outside the system, there will be job consequences for my constituents and those of many other hon. Members.

The timetable for the intergovernmental conference has been mentioned. If I recollect correctly, the Prime Minister said that it would start 10 months from now. I was not aware that a firm date had been set for the start of the conference, so perhaps that is new information. I understood from the discussions that we had in Germany that the date was flexible. It might start in 1996 or it could be delayed until 1997 to make sure that the preparations are right. Perhaps in his winding-up speech the Foreign Secretary will clarify that.

Preparations for that conference are going ahead in other countries, on an agenda which is not the same as that of the British Government. Our Government's agenda is minimalist and it is one of stopping, restricting, pulling back and reducing. Other Governments recognise that they must take actions that will make the European Union successful. That includes going forward in some areas. Unfortunately, we heard little about that in the debate, but that is not surprising because we have a hamstrung, lame duck Government. The German agenda will be to keep the Bonn-Paris link central to the relationship. It will also concentrate on economic questions and on enlargement. For Germany, that cannot be done without democratic changes to make the European Union less remote and more accountable. The clear call from the European Parliament and from all those to whom I spoke in the German Parliament is for the question of the democratic deficit to be addressed. By that they do not mean some mythical repatriation of sovereignty to a centralised Westminster Government. They mean democratic accountability, with more power to national Parliaments and the European Parliament. That would do far more than spurious talk about referendums.

While I am on the subject of referendums, perhaps it would be appropriate to hear the words, generally wise, of the then deputy Prime Minister, Clement Attlee, in his letter to Prime Minister Churchill on 24 May 1945. He said:

"I could not consent to the introduction into our national life of a device so alien to all our traditions as the referendum which has only too often been the instrument of Nazism and Fascism." I accept that that is a strong statement, but Mr. Attlee had a point because Governments who write the question, control the expenditure and fix the terms of the debate can easily rig a referendum to get the result that they want. When the Conservative party calls for a referendum, which is probably inevitable, we should understand why it is doing so.

Sir Norman Fowler: You had one.

Mr. Gapes: I shall come to that in a minute.

We should understand that such a call is not for a democratic device, but for a device to maintain a Government who are in such desperate trouble that they can find no other way out. I tell the right hon. Member for Sutton Coldfield (Sir N. Fowler) that I voted no in 1975. I stand by what I did at that time, but the world has moved on.

People of my generation, those who were born after the second world war, must recognise that we are talking about a European Union that consists not of six or of nine but of 15 and potentially 20 or 25 states. We must recognise that it is not a free trade area, but a political

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and economic union, which we must build in co-operation with the rest of the peoples of Europe to establish peace, prosperity and an outward-looking Europe for the future.

7.59 pm

Mr. Charles Wardle (Bexhill and Battle): I am grateful for the opportunity in the time available to express my concern about the vulnerability of Britain's frontier controls under European Union law.

At the outset, I should like to make three things clear. First, there has never been any difference between my right hon. Friends and myself about the need to maintain our immigration controls. There is a fundamental difference between us, however, about our ability to keep those controls in place under EU law, as it now stands. Secondly, there is a highly topical element to my concern. The legal action in the European Court taken by the European Parliament against the Commission; the decision of the Schengen countries to begin dismantling their internal frontiers, thus leaving the United Kingdom increasingly isolated; the response of Mr. Santer to the court action; the National Audit Office report underlining the far greater effectiveness of our port of entry controls over the European style in- country enforcement measures; and the Flynn case now before the High Court, have all lent a fresh urgency to the problem. The immediacy of the need to act positively at this juncture is dictated by the Government's own call for an open debate on the agenda to be decided this summer for next year's IGC.

Thirdly, my underlying concern is that of someone who is in favour of a Europe in which the United Kingdom can compete and trade without hindrance, but not a Europe in which our quality of life is jeopardised by a provision in the treaty that we failed to tackle. The fundamental difference between the Government and myself has been about the legal status of the declaration negotiated at the time of the signing of the Single European Act in 1985. The Government have asserted time and again during the past decade that the 1985 declaration preserves the right of individual member states to retain their own frontier controls. I maintain that it does nothing of the kind; we need something in EU law that does.

The House will be aware that, in 1985, the Luxembourg IGC agreed the Single European Act, which inserted a new article 8a in the treaty of Rome, requiring an area without internal frontiers. At Luxembourg, the then Prime Minister was rightly concerned that that article would create a new Community objective of bringing an area without internal frontiers into effect with which the United Kingdom would, sooner or later, be forced to comply. Article 5 of the treaty--I believe that it has now been changed to article B--imposed a duty on member states to take measures to facilitate Community objectives, or otherwise face infraction proceedings by the Commission.

Advised by the Foreign Office, Margaret Thatcher, therefore, took two forms of evading action. First, she had added to article 8a the eight extra words:

"in accordance with the provisions of this Treaty"

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in the hope that that would limit its effect to EU citizens. It rapidly became clear that that advice did not limit the primary objective of the article. Her second tactic was, therefore, to negotiate a general declaration, which began:

"Nothing in these provisions shall affect the right of Member States to take such measures as they consider necessary for the purpose of controlling immigration from third countries." Indeed, the then Prime Minister told the House when we ratified the Single European Act that without that declaration, she would not have been prepared to sign the Act.

That view of the declaration as the British opt-out from article 8a was reasserted by two Home Secretaries--by my right hon. Friend, now the Foreign Secretary, at Madrid in 1989 and by my right hon. Friend, now Lord Waddington, in Naples in 1990. My right hon. Friend the Prime Minister has clearly accepted the same interpretation, because he has stuck consistently to the same line. In the House and elsewhere, he has continued to pray in aid the Luxembourg declaration. He did so again this afternoon. The declaration has therefore been accepted as a copper-bottomed opt-out, but the trouble is that it is nothing of the sort and it was never regarded as such by our European partners.

My right hon. and noble Friend, Baroness Thatcher, has said in her memoirs, in a chapter ironically entitled, "Jeux sans frontie res", that neither the Commission, the Council nor the European Court would be prepared in the long run to uphold what she had agreed in the declaration. So at some critical point, she concluded that the advice she had been given had been duff. My right hon. Friend the Member for Mole Valley (Mr. Baker) said in his recent autobiography that he was advised by Home Office officials, before Maastricht, that the declaration was worthless. He asked my right hon. Friends the Prime Minister and the Foreign Secretary to negotiate a proper opt-out. He has recently repeated that claim. Presumably he received the same advice that reportedly was given to my right hon. Friends before Maastricht, making it clear that the declaration did not constitute a derogation from article 8a.

As I have said, it is no secret among other member states that the declaration cannot deprive the now entitled article 7a of its practical effectiveness. That article establishes a clear and simple objective, which allows no margin of discretion, which is that passport controls exercised only on the occasion of crossing an internal frontier would be contrary to EU law. The Commission made that clear in its May 1992 paper addressed to the European Parliament.

It is also pointless to claim that our EU partners will consider that the declaration, which is not legally part of the treaty, will have any bearing on the objective clearly established by article 7a. Declarations are not part of the treaty texts; they are declarations of the conference representatives and are not, as the treaty texts are, the acts of the high contracting parties themselves. Declarations are not, as such, ratified in the same way as treaty texts.

There is no practical advantage either in reminding other member states of some sort of moral commitment to a declaration that has no legal force in a treaty. There can be no comfort either in Jacques Santer's hints that the Commission would somehow accommodate our concerns about our internal frontier controls, when he said in his

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