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The Prime Minister: No, I will not, for a simple reason. The implication of my right hon. Friend's question is that we have suddenly reached a point at which we should have no more qualified majority voting. In my view, that is not the right way to approach the issue. The way in which we should approach it is to say, "There are certain areas in which it is in our national interest to retain the veto, and there are certain areas, which we should judge on a case-by-case basis, in which it is in our interest to move to qualified majority voting."

For example, suppose that we were in the situation at the moment where we had unanimity rather than QMV for agricultural policy--in fact, because of what the Conservative party, which agreed to many, many items of QMV when it was in power, agreed, it is QMV for agricultural policy--that would be an area in which I would be saying that we need to move forward. We mentioned another a moment ago, in relation to the structural fund. Where is in this country's interest to unblock the veto of others.

When people use the word "veto", one would think that only Britain had the ability to veto something. What the veto means is that something is decided by unanimity. If the European Union is extended from 15 to 20, 25, 27 or 30, it means that a country the size of, say, Estonia, Lithuania or Slovakia could block essential British national interests using the unanimity rule. It is not our veto; it is simply a consequence of the unanimity rule enjoyed by everyone.

I think that the most sensible approach is to say, as the Conservative party used to when it was in office--or at least for several years of its time in office--that we judge it on a case-by-case basis. Such matters as defence, our border controls, tax, social security and treaty change must be agreed by unanimity.

One of the statements that I made during our Council meeting was an explanation of why issues of taxation--the levels at which taxes are set--are, in my view, matters of fundamental national sovereignty, which must be dealt with by national Governments and national Parliaments. But there are other areas in which that is not the case. I think that we judge it on a case-by-case basis.

Sir Peter Tapsell (Louth and Horncastle): When our Prime Minister comes back from an important international conference and clowns about at the Dispatch Box in reply to the Leader of the Opposition, as he did today, is it not a clear sign that he has a guilty conscience about the small print that is to follow in due course?

May I pursue the point raised by my right hon. Friend the Member for Bridgwater (Mr. King), a former Secretary of State for Defence? Why did the Prime Minister and his Defence Secretary repeatedly tell the House, and me personally, that France had no aim of creating a rapid reaction force separate from NATO in operational and planning matters, given that in the past two days President Chirac used exactly those words to describe the continuing aim of the French? Is it because the right hon. Gentleman was trying to conceal the reality from the House of Commons, or was he misled by President Chirac in his constituency pub?

The Prime Minister: As I just indicated in my reply to the right hon. Member for Bridgwater (Mr. King),

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I understand that the French come from a different perspective. The difference between us, on this issue and on many others, is that I believe that we should argue our case and make sure that we secure our objectives, which we have done. The hon. Gentleman cannot really argue against that when it is so clear in the presidency report that the red lines that we have put around this should be maintained.

If we do not engage at all in this debate on European defence, it will not stop the debate happening. The debate will happen; Britain will not participate. That, during the last and worst years of the Conservative Government, was their habitual way of conducting diplomacy. The result was that three and a half years ago this country was marginalised and without influence--and that is not in Britain's interest.

Mr. Tony Banks (West Ham): Does the Prime Minister not find it rather sad that the Leader of the Opposition clearly still prefers the handbag and the megaphone to constructive dialogue in Europe?

I congratulate my right hon. Friend on the outcome of the Nice summit. What discussions did he have with Gerhard Schroder on the preservation of the football transfer system, and what was their outcome?

The Prime Minister: The German Chancellor and I--and many others, certainly the main footballing nations--are wholly opposed to the Commission's proposals. I think that they are misguided and wrong, and we shall continue to make sure that we get them changed. The transfer fee system is central to the future of many clubs. We do not want smaller clubs, in particular, to go to the wall as a result of a misguided intervention.

Mr. John Redwood (Wokingham): Given that the common fisheries policy has decimated our fishing fleet and the Government do nothing about it, and given that the common agricultural policy has done so much damage to our farmers under the Government and they can do nothing about it, why has the Prime Minister given away our right to our own industry policy? Does he not fear that a common industry policy with our partners, with no veto for Britain, could do to British industry what his Government and their agricultural and fishing policies are doing to our fishing fleet and our farmers?

The Prime Minister: As ever, the right hon. Gentleman's opportunism is extraordinary. The fishing industry is in trouble because, as he well knows, there are problems with the amount of stocks in the sea. Everyone knows that that is true. That is why not merely our fishing industry but every fishing industry throughout Europe is in trouble.

Our farming industry faces two problems, which are not to do with the operation of CAP. They are, first, the strength of the pound vis-a-vis the euro. [Interruption.] There is a Pavlovian reaction to the mention of the word "euro." The second problem is that, in the aftermath of BSE, British farmers face very high regulatory burdens. The combination of those two things, plus a collapse in world commodity prices, has meant considerable difficulties for them. That is why their position has changed.

The right hon. Gentleman knows that. I know that. It is absurd to say that the difficulties should be blamed on Europe. They are caused by a combination of the

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circumstances that I have outlined. The answer is to do the things that we can do at a European level to help: for example, to ensure that the rules on BSE that affect our farmers are introduced throughout Europe. Again, that can be done only if other countries agree. Again, that is an argument for constructive negotiation in Europe, not withdrawal from Europe, which is his position.

Mr. Stuart Bell (Middlesbrough): Will the Prime Minister confirm that the concept of ever-closer union began with the treaty of Rome in 1957; was enhanced when we joined the single market, or the common market, under the right hon. Member for Old Bexley and Sidcup (Sir E. Heath); was enhanced further when Baroness Thatcher took us through the Single European Act in 1985; and was enhanced still further, under the treaty of Maastricht, by the right hon. Member for Huntingdon (Mr. Major)? Has not the Prime Minister done well at Nice on taxation, social security and the rapid reaction force through articulation and persuasion? Has he not impressed our partners in Europe with those tactics, rather than the obduracy or recalcitrance that we might have seen from the Opposition?

The Prime Minister: My hon. Friend is right to say that words about closer union were in virtually every European treaty that was signed by the Conservative party in all those years, but his other important point is that there is an argument about the nature of Europe. There are people who see the future of Europe as a federal superstate. I do not believe that they are in the majority; I think that they are in the minority. In either event, it is important for us to participate in that argument. We shall participate in it, advance and win our arguments. I am confident that we can.

Mr. John D. Taylor (Strangford): We on the Unionist Benches want enlargement of the European Union and greater co-operation, but we definitely do not want a federal Europe, or a movement towards a more integrated Europe. To that extent, I can welcome the Prime Minister's statement, but the detail will be in the Nice agreement.

Was the common agricultural policy discussed at all? It is fundamental to enlargement of the European Union. Was there any discussion of the size of the European Parliament--the number of Members of the European Parliament--and, if so, what was the outcome? It is not mentioned in the statement. Does the right hon. Gentleman agree that the Commission will be far too large and that the issue of the number of commissioners has been fudged in his statement?

The question of security causes anxiety to many of us in Europe. Will the Prime Minister explain why he prefers the United Kingdom to co-operate with neutral countries in a European force, rather than with European members of NATO?

The Prime Minister: The simple answer to the last point is that I do not. It is perfectly right that we co-operate with European partners that are members of NATO, as indeed we do. We are doing it now in Kosovo, in Bosnia and in many other parts of the world. All European defence does is give an additional string to our bow for limited operations--peacekeeping and

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humanitarian tasks--in which NATO does not want to become involved. Anyone who studies the history of Bosnia, particularly in the early 1990s, when the United States did not want to become involved, will find that Britain and France struggled in ad hoc co-operation to try to maintain the situation. Thousands of people died as a result. European defence is important as an additional string to our bow.

I emphasise again that--whatever the French position on these issues may be--it is not a standing army and every decision on every mission will be the subject of a national, sovereign decision. Therefore, if we did not wish to participate--even if we were part of European defence--we would not have to participate.

Although the decision on the Commission is a compromise, it is not quite as great a compromise as some people are implying in their comments. Eventually, the decision will be reviewed and the number will be brought back down.

The cap on the number of Members of the European Parliament has been extended by around 40, but that number will apply when the European Union comprises 27 members. I think that, in terms of the ratio of Members to population, the proportion is still relatively good. Therefore, although the cap has been extended, it has not been extended unduly.

The common agricultural policy was discussed at Nice. However, that is a policy matter, and changing policy is the way in which it will be reformed. At Nice, we were primarily discussing treaty change.

I agree with the right hon. Gentleman on his first point--that we want a Europe of nation states and not a federal superstate. I am wholly confident that that argument can be won. However, to win it, we have to engage in it.

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