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Mr. Desmond Swayne (New Forest, West): At the Committee's previous sitting, the hon. Member for Harlow (Mr. Rammell), who unfortunately is not in his place, suggested that the defeat that the Conservatives suffered on 1 May was a consequence of the events of September 1992, and our inability to control our interest rate in what he called

"a global international currency situation."--[Official Report, 27 November 1997; Vol. 301, c. 1169.]

In some respects, I agree with the hon. Gentleman, but I want Labour Members to consider what would have happened if, instead of entering an exchange rate mechanism, we had been bound into a full currency union, and therefore were unable to take the escape route that we took--unable to reduce interest rates and make the best of the remaining four to five years to bring about an astonishing recovery. Had that not been possible, what vengeance might the electorate have wreaked? Perhaps Labour Members might learn from that experience.

The hon. Member for Harlow went on to complain about the sentiments expressed by the Opposition, which he called "xenophobic rhetoric". I do not know how tightly one should define the word "xenophobic", but it was not my experience that the arguments advanced by Conservative Members were xenophobic in any sense. However, the hon. Gentleman is a reasonable man, and if he wishes to call such sentiment xenophobic, that is his right, although we would disagree.

The hon. Member for Harlow may not have realised how grave an accusation he made, as the treaty goes some way towards outlawing such sentiments. The hon. Gentleman may believe that the sentiments expressed were xenophobic, but I am sure that he would also believe that we have every right to express them. That is not a point of view consistent with the treaty. Labour Members should consider voting for amendment No. 65 on precisely that ground.

6.15 pm

Mr. Bercow: Does my hon. Friend recall that, when the hon. Member for Harlow (Mr. Rammell) was invited to cite a single example of a xenophobic statement during the Committee's deliberations, he could not produce an example?

Mr. Swayne: I thank my hon. Friend, as I had indeed forgotten that. It is pertinent that I should be reminded.

I draw the attention of the Committee to article 1 of the treaty, which replaces article B of the Maastricht treaty. It states:

"The Union shall set itself the following objectives:".

I draw particular attention to the fourth objective:

"To maintain and develop the Union as an area of freedom, security and justice, in which the free movement of persons is assured in conjunction with appropriate measures with respect to external border controls, asylum, immigration and the prevention and combating of crime."

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Attention has perhaps rightly focused on the abolition of border controls and the so-called flanking measures, whatever they might be. The United Kingdom, of course, has an opt-out, as is made clear in the protocols. Despite that, I find it difficult to believe that we will escape being drawn into some centralised process of interference in our administration of justice and law.

That is precisely because of further provisions. I draw the attention of the Committee to article K.1, which states:

"Without prejudice to the powers of the European Community, the Union's objective shall be to provide citizens with a high level of safety within an area of freedom, security and justice by developing common action among the Member States in the fields of police and judicial cooperation in criminal matters and by preventing and combating racism and xenophobia."

Now we realise the gravity of the accusation made by the hon. Member for Harlow. How long will it be before my hon. Friend the Member for Stone (Mr. Cash) is arraigned before some court for xenophobia? How long will the teaching of history in our schools be secure from those who would revise it and interfere with it to exclude xenophobic tendencies?

The most important question is what on earth that has to do with a treaty that deals with the development of Europe along the lines that the Government have suggested. Where is the need for common action among all the member states on such activity? Why is that not left to individual member states? What became of the principle of subsidiarity?

The answer is in the treaty. The fifth objective set out in article 1 makes it clear what the attitude to subsidiarity shall be henceforth. It will be

"to maintain in full the aquis communautaire and build on it with a view to considering to what extent the policies and forms of cooperation introduced by this Treaty may need to be revised".

That is as far as we seem to be able to go on subsidiarity.

We are talking not of bland statements or of flowery words. Instead, we are dealing with legal documents, which will be interpreted as such. They must, therefore, be tightly defined and coded.

There is a great danger that the treaty creates a means by which the European Court of Justice--certainly article K.2 is fully justiciable before the ECJ--can extend its jurisdiction into the administration of criminal and civil law in the United Kingdom. That is precisely the process that took place in the United States with the 14th amendment after the civil war, which required that the states give equal protection to citizens under the law. That was an entirely unobjectionable amendment, but it gave the federal supreme court the ability to exercise huge jurisdiction over state law. It led to a great advance in federal achievement in the United States. That is fine if one is looking for that sort of development in Europe.

The article calls for an area of freedom and justice that affords a high level of safety and protection to the citizen, and I fear that it will create the 14th amendment for the European Union. I urge the Committee to vote for amendment No. 65.

Mr. Howard Flight (Arundel and South Downs): The debate is important because it does not turn on a small, minor item that the approval of the treaty of Amsterdam represents. As my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) said, we are talking of a step down the path towards European integration.

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It is interesting that no one is clear about the form of political integration. Will it be the United States federal model or a relatively undemocratic model that is run by the Commission? As my right hon. and learned Friend suggested, will it be a new model that will activate the power of the European Parliament? It is clear that we have reached a significant stage.

The treaty provides for universal, including British, membership of the social charter. As my hon. Friend the Member for New Forest, West (Mr. Swayne) said, the extension of powers to the European Court of Justice gives the potential power of veto over United Kingdom criminal law as well as creating the framework for a European model of the United States supreme court. The harmonisation of civil law must mean for citizens of the United Kingdom the erosion of UK common law. The progressive framing of a common defence policy, wherever that leads, is, self-evidently about attempts to pull together European defence activities.

Included also is the introduction of citizenship of the Union. As we know, everything to which I have referred is accompanied by other outside measures involving tax harmonisation.

Right hon. and hon. Members may claim that the House of Commons has known that Britain embarked a long while ago on the course of integration into a European state of some sort, which must mean inevitably the ending of the nation state as we have known it. It is clear, however, that the nation has scant awareness of that process. That leads me to ask why there is hiding and deceit. Why is it pretended that the treaty represents a little something that does not matter much? Why is it that the newspapers and other sectors of the media do not more clearly bring to the attention of the British public the fact that we are faced with a sequential stage? I am understanding of those who wish that to be, but it is astonishing that the citizens of the United Kingdom do not understand that that is what it is all about and that that is the path down which we are going.

I warn the Government and others who wish to advance down the path to which I have referred that, because citizens do not understand and have not been fully educated, there will be a major nationalistic backlash, when they suddenly realise where the treaty is leading us. We shall then be locked up in xenophobia.

The provision for a single currency is crucial. The other issues on which I have touched can ultimately be abrogated by a future United Kingdom Government, but inclusion of sterling in a single currency would be much more difficult to reverse than other processes.

It is still a controversial issue with some that a single currency is clearly to be accompanied by the harmonisation of taxation. We are all to sign a code committing ourselves to such harmonisation and it is inconceivable for any major currency--a fiat paper currency--not to have the backing of some form of single state. It would be impossible ultimately to pledge the assets of such an area, or even to manage that currency in the event of a major crisis, without there being at the back of it the concept of a single sovereign state.

Cross-subsidies would not be possible to organise without central power in some form of a single state. The two issues to which I have referred go hand in hand.

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It is not a matter of Ireland having been able to have its punt managed in line with sterling in the past. After all, Ireland is a very small economy.

I wish to focus on the economic arguments. It is self-evident that a single currency means the loss of ability to manage our own interest rates. There will be the loss of an independent exchange rate. As I have said, powers will be lost to pursue tax policies and tax rates.

Let us think of an economy that is facing serious problems. Let us consider the problems that are likely to spread round the world because of what is going on in Asia. The individual Governments of the surviving nation states in Europe will have lost virtually any individual power to manage their own affairs. That seems likely to cause major political problems and major nationalistic reactions.

I move on to the case study analogy of united Germany. Much has been said about the reunification of Germany, but there are some crucial points to bear in mind. Two economies have been put together--east and west--with entirely different capital stocks, work habits and skills. The east of Germany has on average a productivity level that is about 35 per cent. below that of western Germany. The rate at which things started does not matter because that represented about the value of east German savings.

I predicted at the time that German firms would be looking to Czechia, Hungary and Poland for investment, not to eastern Germany. Indeed, they looked to Britain as well. What has happened to eastern Germany? The answer is virtually permanent stagnation. It cannot compete with economies with much cheaper currencies to the east. It cannot compete either with the superior west German economy. That is what is happening in one country with one language with a fair degree of labour mobility. At the same time there is a major fiscal burden on the west German economy in subsidising the east German economy.

My fear is that one can apply that case study Europewide. Anyone who believes that a single currency can be operated without an increase in cross-subsidisation is living in a world not of this planet. From where is the cross-subsidisation to be raised? Who will pay for it? Who will take the political decisions? I cannot see any Government winning an election here or in Germany on a ticket of putting up taxes to give greater cross-subsidisation to Italy, Spain, Greece, east Germany, or wherever. I fear that a substantial undemocratic element will be involved.

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