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Mr. Rifkind: The hon. Gentleman is correct to say that there are supranational institutions, as he described. The crucial factor in determining whether we have yet achieved a federal system is the amount of overall power that the supranational institutions have. If one considers the totality of decisions on the use of resources, for example, or on legislation, or on matters affecting the life of individual citizens, one finds that the use of only a small fraction of the resources raised in this country is at present determined by supranational institutions. One is entitled to make that point.

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

Mr. Rifkind: I will give way in a few moments, but I must make progress.

I now want to focus on the issues before Heads of Government at the Dublin European Council tomorrow and on Saturday. Aside from economic and monetary union, the IGC discussion at Dublin is likely to be the most substantive. Heads of Government confirmed at their meeting in October that the IGC should end at the Amsterdam European Council next June. We strongly support that goal. The IGC must swiftly complete its work so that Europe can concentrate on the real-world challenges of the coming years, and in particular on enlargement.

The Irish presidency's report on the state of the IGC negotiation is a sensible contribution to completing the process on time. It draws together into one document options that are on the table, including all the UK options. I emphasise that the presidency report is just that: a report. It is not a draft proposal for decision. Decisions are still six months away. Nothing can be agreed until everything is agreed, and that will be by unanimity. However, the report gives a snapshot of the scope of the conference, areas of emerging consensus, and areas in which either the work is not yet much advanced or it is already clear that there are major differences of approach.

Let me start with the positive side. The paper demonstrates that the UK's ideas are gaining ground in a number of areas, including subsidiarity, the role

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of national Parliaments, and practical improvements to the operation of the common foreign and security policy. The report also demonstrates that in many areas of institutional change in the European Community, the rhetoric employed by some of our partners has perhaps run ahead of the reality.

On the extension of qualified majority voting, for example, the presidency report is almost silent. It says somewhat disarmingly:

In these areas--and many others--good progress is being made, but the presidency report also reveals a number of areas where member states' positions remain far apart. I want to focus the rest of my remarks on some of the most important of these.

I begin with immigration, asylum and issues of free movement and frontiers. The presidency report brings into focus ambitions in some member states of which this House has been aware for many weeks and months from the IGC documents that we have regularly deposited as the negotiation has proceeded. Some partners would like to develop those issues as competences of the European Community, removing them from the scope of intergovernmental co-operation in the third pillar.

That, of course, is out of the question, and not just for the UK. The presidency report notes:

in the intergovernmental pillar.

The third pillar, which also includes the fight against international crime and drug trafficking, covers areas of national competence. That is why it was decided at Maastricht to develop those issues within a separate pillar of the treaty.

Sir Teddy Taylor (Southend, East): As the European Parliament has said clearly and specifically that it will take Britain to court over the issue of border controls in the event of our using the veto at Amsterdam, and since many of us have believed for years that the declaration of the Single European Act has no real validity in European law, what on earth would any British Government do if the European Court determined that our border controls had no legal basis?

Mr. Rifkind: The Government attach the same importance as my hon. Friend does to the absolute observance of the assurances that have been given with regard to frontiers. We believe that those assurances can be depended upon. We have not the slightest intention of conceding one inch with regard to the right of this Government and this Parliament to control frontiers. That is crucial to the United Kingdom's position.

We are keen to develop co-operation with our partners in these areas. We have put forward proposals in the IGC to improve the operation of the third pillar.

For issues as sensitive as these, however, it is a myth to suggest that Community decision-making could be effective. It would complicate and delay practical progress. The priority is to act. The decisions that I hope

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we can reach at Dublin on drugs and international crime are good examples of the action that we should be taking. We want Dublin to exercise real impact in these areas.

On frontiers, as I have stressed, our position could not be clearer: the United Kingdom will maintain its right to impose necessary controls. For an island--for these purposes the UK and Ireland operate as a single island within a common travel area--frontier controls are the best and least intrusive way to prevent illegal immigration. For partners with extensive and permeable land borders things might look different. They rely on identity cards, residence permits, registration with the police, and so on to maintain internal security. That is a sensible approach for them, but it is not an approach that would suit our geography or our traditions.

Our partners know that our position on this issue is unshakeable. There is an interesting acknowledgment of that on page 36 of the presidency report, where it is observed that, if the Schengen agreement was ever incorporated into the European Union, there would have to be "provision for opt-outs".

That leads naturally to the question of flexibility, which is perhaps the most far-reaching issue under discussion in the intergovernmental conference. The idea that it is perfectly healthy for some member states to integrate more closely or more quickly in certain areas, provided that all agree, was first developed by my right hon. Friend the Prime Minister. As the European Union enlarges, it must find better ways to accommodate the diversity of its membership. Not only is Britain a firm advocate of flexibility, but flexibility already exists in the treaty--for example, in the EMU arrangements, including Britain's EMU option, and in our social chapter opt-out.

Therefore, the discussion in the intergovernmental conference is not about whether to have flexible arrangements, but how flexibility should operate: whether it should continue to be negotiated case by case or whether there could be value in creating general mechanisms for flexibility within the treaty. There are dangers as well as potential benefits in that approach. We must avoid creating a process whereby vanguard groups establish joint practices and policies that all are expected to follow over time. We must ensure that flexibility cannot be used by others to escape the obligations of an open single market, a strong competition policy and a common commercial policy. Above all, we must ensure that, if groups in the Union want to make use of our common institutions for their own purposes, they have the agreement of all those with a stake in those institutions. If we do agree to new treaty language, the conditions must be tightly defined.

We have always believed that a common European foreign policy should respect the national interests of individual member states. A majority European foreign policy would in any case be weaker than a common policy to which all EU partners are fully committed. On the whole, the debate on the CFSP issue at the intergovernmental conference seems to be going in a welcome direction. The approach which the presidency has put forward as a basis for discussion in its draft paper retains unanimity for the adoption of joint actions and for all decisions with a security-defence dimension. It recognises that, even for other, less significant decisions, individual member states should retain a veto for stated reasons of national policy.

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In their recent joint letter, Chancellor Kohl and President Chirac also argued for the retention of unanimity for European Council decisions, for Council policy decisions and for all decisions on security and defence in general. They suggest majority voting only for implementation decisions, while recognising the difficulties of definition. We have said that we are prepared to look at ideas for differentiating between policy decisions and decisions on the modalities of their implementation--although we are not at all sure that it will be possible in practice to define such a distinction.

Obviously we shall have to discuss the issue further, but the fundamental point--that member states have national interests which cannot simply be overridden by majority voting in the European Union's foreign policy--is not now in dispute.

Mr. Robert Key (Salisbury): Can my right hon. and learned Friend say a little more about the statement in "The British Approach to the IGC":

I find that hard to understand. That is all very well if it is for the Governor of Hong Kong, but it would be more difficult for someone else in rotation.

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