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Mr. Iain Duncan Smith (Chingford and Woodford Green): Inside NATO.

The Prime Minister: Inside NATO. In other words, he supports the European strategic defence initiative agreed by the Tories in 1996 at Berlin. Let me read out what the NATO summit of April 1999 said:

"We confirm that a stronger European role will help contribute to the vitality of our alliance for the 21st century."

The Deputy Secretary of State for the United States said:

"The US is for this. It is in our interests for Europe to be able to deal effectively".

The United States favours the European strategic defence initiative. Finally, let us hear what the hon. Member for Stratford-on-Avon (Mr. Maples)--the shadow Foreign Secretary--said in June:

"The relationship between British and French forces at an operational level is fantastic. It should be developed. We are the two most serious countries about defence in Europe . . . We need to do things together."--[Official Report, 10 June 1999; Vol. 332, c. 812.]

What has changed between then and now? Baroness Thatcher has brought the Tories to heel. All that the right hon. Member for Richmond, Yorks is doing in the name

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of strength is actually weakness. By choosing not to stand up to the ultra-Thatcherites who run his party, he has taken a party that used--no matter what one's politics--to be a serious party of government and turned it into the equivalent of a religious sect. It is that error of judgment from which all his errors stem--on the renegotiation of the treaty of Rome that would give us an exit route from the EU; on blocking enlargement; or on the absurd positions that he has taken on every policy that relates to Europe. [Interruption.]

Madam Speaker: Order. Those on the Opposition Front Bench should know better.

The Prime Minister: We shall carry on with our sensible, positive and constructive relationship with Europe. That does not mean, and never has meant, that we shall fail to defend the national interest, but it means that we shall be unyielding when we need to be--as with the withholding tax--shall look for agreement where we can find it, and shall always be persuasive and sensible in our attitudes.

There will be times when we are in dispute with Europe--that happens with all countries--but not every dispute has to be a crisis. The British rebate, negotiated at Berlin in March--and kept--is an example of that. The Leader of the Opposition told us that we would get rolled over at Berlin and that the rebate would go, but we came back with the rebate intact and with the best deal on structural and cohesion funds that this country has ever had--we did it without handbagging anybody. We did it by taking a sensible attitude.

There may be--indeed there are--parts of our media and of the Conservative party who have such a violent dislike of Europe that they will abuse it and exaggerate its weaknesses to an absurd degree, but we will not let them dictate the policy on Europe. The Tory party can give in to them, but we will not, because in the name of defending Britain's national interest, they betray Britain's national interest.

We heard what we expected from the Leader of the Opposition. When we analyse the details of the policies that he proposes, we find that they are far removed from support for this country; they are a mixture of extremism and opportunism. This country prefers grown-up, sensible government.

Mr. Charles Kennedy (Ross, Skye and Inverness, West): I begin with the closing theme of the comments of the Leader of the Conservative party--isolationism. The majority of Members would readily concur--whatever the gradation or the spectrum of their views on matters European--that the one matter that should remain profoundly isolated from engagement with Europe is the current stance of the British Conservative party, which is deeply against our national interest.

I welcome what was said and the steps that will be followed, as a result of the Helsinki summit, in respect of the Russian position. The Government deserve support, as do the efforts of the European Union. Does the Prime Minister concur that that matter is an important test of the EU's ability to manifest a more constructive and coherent foreign policy approach to such a significant neighbour as Russia, which currently is behaving in such an outrageous fashion over humanitarian issues?

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On defence, will the Prime Minister acknowledge that--despite all the hokum and nonsense about a European army--among those who take a more sensible and constructive interest in the matter, there will be a welcome for the modest but significant step towards the establishment of a European rapid reaction force? That is not least because it bolts us further into NATO and bolts a European component into NATO, which is essential for our long-term interest.

On the all-important issue of enlargement--especially in respect of Turkey--does the Prime Minister agree that a seminal decision was reached in principle in Helsinki? However, Europe must be emphatic that, while wanting to welcome Turkey into the European community of nations in due course, Turkey must respond by a significant improvement in its domestic human rights agenda. We should not lose sight of that simply because of the bigger and welcome aim of enlarging the union in that geographic direction.

As for our friends in France, the old alliance is under some strain at present--never mind relations between Mr. Jospin and the Prime Minister. The benefit of hindsight is a great thing. However, does the Prime Minister acknowledge, with hindsight, that, while dealing with the matter in the sane and sensible way that the Government have adopted during recent weeks, it might have been better to realise that the French could have reneged on the agreement that they appeared to have signed up to? In acknowledging that, we should not lose sight of the bigger truth: British beef exports are locked out of Commonwealth countries throughout the world. We are locked out of the United States. We have no legal recourse in any of these areas of the world.

The only reason that we have a legal recourse--it is not Britain versus France but the rest of Europe versus France in this matter--is that we are members of, and active participants in, the European Union. When the sceptics and the critics say that this is an argument for disengagement, there are those of us who will strongly make the case that it is an argument for more proactive engagement in Europe, and for using the mechanisms that Europe makes available to us to ensure that the undoubted unlawful activity of the French is brought to a speedy conclusion in due course and in our national interest.

Finally--[Hon. Members: "Come on."] I acknowledge that Conservative Members find this boring, because they are not interested in rational dialogue about Europe across the Floor of the House. Long may they remain bored and impotent on matters European.

On the issue of the withholding tax, the Prime Minister said, tellingly but not altogether revealingly:

"I have made it clear that we will not permit that".

What does that mean? Does that mean, as far as the eurobond market is concerned, that he will be willing to exercise a British veto, come Oporto in June? It would be helpful if he would clarify that issue.

Finally--

Mr. Eric Forth (Bromley and Chislehurst): That is the second "finally."

Mr. Kennedy: I am pleased that the right hon. Gentleman is subjecting my words to such minute textual analysis. It is better than can be said of what the right hon. Gentleman has to say in matters European where the rest of the House is involved.

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Will the Prime Minister none the less acknowledge that the mood music in terms of the summit was that Britain is clearly not playing the central leading role in Europe that it should? It cannot and it will not until Britain and the British Government are more unambiguous about our commitment to the single currency, and about being fully plugged into the European project as a whole.

The Prime Minister: On the right hon. Gentleman's final point, Britain was clearly playing a very central and leading role in the defence debate.

In relation to the euro, we have set out our position. In order for Britain to join the euro sensibly, the economic conditions must be met. Those conditions remain, and they are right and in this country's interests.

In respect of the right hon. Gentleman's comments on defence, we agree entirely that it is important to see the developments as an addition to our ability to affect issues in the right way. I know that some Conservatives have been saying, "Of course we want this, but only when it is within NATO." I do not think that they yet understand that this is actually building on the European security and defence initiative, so it is entirely consistent with NATO. Indeed, the force can be used by NATO, but it is then available to us to use it where the alliance

"as a whole is not engaged".

In other words, the alliance can decide that it will be engaged in a particular situation; but should, for example, America decide not to be engaged, we can have our own force in the limited tasks that are called Petersberg tasks--humanitarian, peacekeeping and peace intervention missions. Only a Conservative party utterly in thrall to the anti-Europeans could see that in a way that NATO does not see it, as was made clear by NATO's comments at the summit in April. [Interruption.] There was a shout about Strobe Talbott. In fact, he has given some very clear statements on it. He has said:

"It is in our interests for Europe to be able to deal effectively with challenges to European security well before they reach the threshold of triggering US combat involvement"--

not that it will make any difference to the Conservatives.

The right hon. Gentleman is right in what he says about enlargement. We have said that we very much welcome the fact that Turkey is a candidate country, but we have made it clear--and it is clear in the conclusions--that the Copenhagen criteria on human rights and democracy must be met before the accession negotiations get under way.

In respect of France, the right hon. Gentleman is also right. We are extremely disappointed at the French decision. That decision is wrong. It is wrong in law, and it is politically misguided and misjudged. However, it is important that we recognise that it is only because we are members of the European Union that we can sell beef in 13 of the 15 member states, that we are actually selling it now in five countries outside the European Union and that we are free to sell it outside the European Union. When we came to office, not merely was the beef ban in place in Europe, but we were banned from selling it in third countries as well--[Hon. Members: "By Europe."] I do not want to get into that internal row in the Conservative party about which side of the fence it is on. It is important--[Interruption.] We have done enough of that.

It is important that we continue to persuade countries. I wish to make one point again: British beef is the safest in the world because we sell only animals that are under

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30 months old and that were born after August 1996 when the new rules were implemented. They are the strictest rules on animal feeding anywhere in the world, and there has not been a single case of BSE in such an animal in this country. When other countries consider the incidence of BSE as a whole in this country, they fail to recognise that it occurs within older animals--the animals that we are not selling to other countries. I am afraid that we must recognise that we have a big job of persuading to do. Even when the beef ban is fully lifted, we shall still have to go out and really sell British beef. Of course, the righthon. Gentleman was right to point out that many Commonwealth countries and the United States of America have a ban in place on British beef.

In respect of the withholding tax, we have made it quite clear all the way through that we are prepared to use the veto if necessary. Countries such as Germany have perfectly legitimate concerns. They experience tax evasion on a significant scale because money simply goes across the border to countries where banking secrecy rules apply and where people can relieve themselves of their obligation to pay their proper tax in Germany. They want that stopped, and we are entirely sympathetic to that. However, as I have emphasised many times before, it must be done in such as way that it does not put at risk what is not just a major British and City of London interest, but a major European interest--namely, the eurobond market.

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