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Mrs. Ellman: Is the right hon. Gentleman suggesting that the major structural funds that are currently bringing employment to Liverpool, regenerating the city centre and giving support and skills to people in local communities constitute money that is being wasted, and money that his party would not wish to be spent?

Mr. Dorrell: I am crystal clear about the fact that the regeneration of Liverpool that has begun over the past 15 years is overwhelmingly a result of local initiatives on the ground: initiatives on the part of local business, focused on the development of the community, the infrastructure and the environment. It is not a result of blanket regional development funds. If such funds were the answer to the problem of high regional unemployment, we would have cracked that problem in the 1950s. The history of regional development, not only in Britain, but in every developed country--in European countries such as Germany, France, Italy and Spain--is that domestic Treasuries have scaled down such policies, because they know that they do not work; yet they persist in Brussels, as a kind of international social security budget.

Mr. Alan W. Williams (East Carmarthen and Dinefwr): Will the right hon. Gentleman give way?

Mr. Dorrell: No. I want to end my speech soon.

If the Government really want to stand four square for reform of Europe, the regional and structural funds are a natural target.

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The Foreign Secretary has said that the Government favour European reform, and those of us who are pro-Europe can say amen to that. I agree with the Foreign Secretary that we need an ambitious programme of reform in Europe; the problem is that I do not think that the Government have shown the beginning of an understanding of what is necessary for the delivery of such a programme.

I believe that Europe--the 15 existing states of the EU, and the applicant countries to the east--can be the new tiger economy of the early part of the next century. The Prime Minister regularly tells us that he admires many aspects of the American economy; let him learn some of the lessons of that economy, and apply them in Europe. If he does that, he will unleash the most powerful and successful economy in the world.

The time for reform is now, as the Foreign Secretary rightly says. Unfortunately, that is a challenge that the Government have funked so far.

6.57 pm

Mr. Mike Gapes (Ilford, South): I want to change the focus of the debate slightly. First, however, let me say that it is unfortunate that the shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), is not present. I understand that he tried to mislead the House by means of a point of order. I am afraid that the fact that Conservative Members do not even bother to stay to listen to a debate on which they have tried to intervene in such a fashion is a clear indication of the depths to which their party is sinking. As I understand it, the ECOFIN meeting had not agreed any directive relating to the withholding tax. No doubt the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for Gateshead, East and Washington, West (Ms Quin), will say more about that when she winds up the debate, but, as I have said, it is a shame that the shadow Chancellor is not here. No doubt we shall not see him again today.

The Foreign Secretary spoke of the need for Europe to develop its own defence capability and capacity, and a number of the documents made available to us by the Vote Office deal with defence policy. This is not the occasion for us to debate Kosovo, the reasons for our involvement there or the lessons to be learned, but wider issues are at stake relating to discussions now proceeding in the European Union and NATO about the European strategic and defence identity, and the proposed dissolution of the Western European Union.

I am not entirely convinced that the issues have yet been fully thought through. I say that in the light of what is clearly a divergence of opinion within the EU, and between the United States and Russia, about the future of European security in its widest sense.

Recently, I came across a quote from a poem written in 1918 by a Russian poet, Aleksandr Blok. It says:


The problem we face in Europe today is how to deal with Russia, which, despite its economic and political weakness, its bankruptcy and its governmental crises, is still a major, strategic nuclear power. I do not believe that

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any future European security and defence identity can be shaped--and certainly cannot have secure borders to its east--unless we have a proper relationship with Russia.

President Clinton, speaking recently to American war veterans about Kosovo, made clear his belief in the importance of a Russian political and military presence in any solution to the conflict. I welcome that. At the same time, a member of his Administration, his ambassador Mr. Verschbow, talked about NATO enlargement and the Baltic states. Referring to the NATO Washington summit, the official American embassy press release of 13 May said:


The interpretation of that statement in the three Baltic states and in Russia will be that the United States wants NATO enlargement to include those three Baltic states. That is all very well, but the Washington communique also referred to the discussions going on in the European Union and the Western European Union about the relationship between the European strategic and defence identity and NATO. I, therefore, think that it is worth spending some time considering that issue in some detail.

Nothing is more important to the stability of Europe today than that Russia maintains a relatively benign orientation and approach towards our security. If we were to return to the depths of a new cold war, it would cause serious problems for our economic and social goals, for the diversion of spending, for increased military budgets and for other matters, and it would have a political impact in Europe. It would not be in anyone's interests if that were to happen.

Recently, NATO was enlarged to take into membership the Czech Republic, Hungary and Poland, and it celebrated its 50th anniversary. Coincidentally, but undoubtedly unfortunately, within a day of those celebrations the air strikes against Yugoslavia began. The interpretation of that action and the way in which it is used by the nationalist and communist parties in the Duma, and by people who want to foster an aggressive, anti-NATO approach in Russia, is very unfortunate. If hon. Members think that I am exaggerating a little, they need only refer to the useful third report of the Select Committee on Defence, "The Future of NATO: The Washington Summit". The helpful appendix in the back includes the statement submitted by the Russian ambassador dated 26 November 1998--which is before the enlargement took place. He makes clear Russia's deep opposition. I shall quote two sentences, which is enough to give the flavour.


That was in November last year, and nothing that has happened in recent months, including the sacking of Mr. Primakov's Government and the internal crisis, gives rise to any optimism that the Russian mood has changed for the positive.

Mr. Ian Taylor (Esher and Walton): There is an additional problem with the Baltic states. I have yet to

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meet a NATO general who is convinced that we could secure the Baltic states from attack. That has a knock-on effect on the European Union. It would be inconceivable that the EU would expand into territory that it could not provide a security guarantee in some form.

Mr. Gapes: I am grateful for that intervention, as I shall deal with the EU and the European security and defence identity in a moment. Anyone who has been to Estonia, as I have, and has seen where Narva is in relation to St. Petersburg will know that these areas are very close, and it would take no more than a few minutes for troops to go from one side of the waters to the other.

In his opening remarks, my right hon. Friend the Foreign Secretary mentioned the complications for countries that are members of NATO but not members of the European Union. He did not mention countries that are members of the European Union but not members of NATO: specifically Sweden, Finland, Austria and Ireland. There has been a continuing debate among the neutral and non-aligned states in the EU about the relationship between the WEU, which they also do not belong to, and the EU. If the WEU is to be completely removed from the scene, and if the EU is to take on all the functions of the WEU, the nature of the EU will significantly change. It will change not only for potential applicant members in the future, but for some existing member states.

I have been a long-time supporter of NATO. I even wrote a pamphlet 10 years ago that was not popular with people in the peace movement at that time, in which I argued strongly for Britain to stay in NATO. I describe myself as a left-Atlanticist, and I still take that position. However, I believe that it is time for Europe to have a much stronger defence identity. It is time for us to be able to take action as Europeans together in our own continent without having to rely on the whims of Congressmen from Alaska or Nebraska. We must be able to do that, as Europeans, but we must do it sensitively and we must take account of the political sensitivities and realities of this continent and our neighbours.

The communique that came out of the NATO summit on the future strategic concept of the alliance said:


How is that appropriate relationship to be worked out? Difficulties have already been highlighted by other member states. Only a few days ago, the Foreign Minister of Sweden, Mr. von Sydow, made a speech to an important meeting of the WEU Council of Ministers. He made an important statement when he talked about the Petersburg tasks that are currently on the agenda and are undertaken by the WEU. He said:


    "We must not risk losing the current momentum in the debate by entering into the issue of common defence. Just to be clear: Sweden cannot accept that the mutual defence commitments of article V of the Modified Brussels Treaty be included in the EU."

That is the Swedish position. There are similar concerns in other countries.

I hope that our Government, while pushing for greater co-operation with France over the St. Malo declaration--which I support--and for greater co-operation with Germany, will retain their traditional close relationship with the Nordic countries, particularly their excellent relations with Sweden and Finland, so that, in establishing the European security and defence identity and a much

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stronger European voice within the Atlantic alliance,they do not risk making the position more difficult for existing EU members that are traditionally neutral and non-aligned, and do not, in effect, block future enlargement of the EU by other states.

On economic grounds--certainly Estonia is already there--there is no reason why the Baltic states should not be able to be involved in the European Union. The Finnish-Estonian linguistic relationship, the economic relations between countries from one side of the Baltic to the other and the good relations in the region, all point to the fact that there is a logic in having countries on both sides of the sea within the European Union.

That could help Russia economically. The European Union would be so close to the Russian market; Russian trade could go backwards and forwards into the EU. It would be a good way to build European security, but my worry is that, if we complicate the matter by getting into a discussion about defence, whereby the Russians fear that NATO's borders are being expanded to the borders of St. Petersburg, we will set back that economic development and non-military aspects of security.

It is important to recognise that, whatever the outcome of the current difficulties in the Balkans--the European Union clearly has an important role to play in the reconstruction programme and in building civil society, not just in Serbia, but in Croatia, Macedonia and other states in the Balkans--we need to move our focus a little further, to recognise that other potential areas of conflict border the continent of Europe, and that our relations with Russia, and future relations between all of Europe, east and west, remain vital to us all.


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