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Noble Lords: Hear, hear!

Lord Jenkins of Hillhead: My own party has never had the temptation of behaving weakly in government. I should like to believe it would not, but it has never been put to quite the temptations which other parties have had. But let there be no doubt that this sort of weather-house attitude towards Europe, in which one figure representing the Conservative Party comes out and the other figure representing the Labour Party goes in, and vice versa, has steadily pushed us away from the centre of influence and decision-making. There have been few greater illusions than the view sedulously propagated that everything in Europe has recently been going our way.

Its only rival for illusion is the belief, a constant triumph of hope over reality, that the Franco-German partnership is always on the point of breaking up and that either country would much rather be allied with us than with the other. I have heard that not merely recently but going back to the Schmidt/Giscard partnership, and going back even before that to the Adenauer/de Gaulle partnership. On the contrary, in my view, despite certain natural strains, it is a relationship which has steadily deepened and in which there are now such vested interests involved on both sides that it transcends changes of personnel at the top. The tragedy of our British position is that we have allowed ourselves to become a rather sour observer of this remarkable partnership, which is Europe's greatest gain compared with the 75 years from 1870 to 1945, and that subconsciously we are always hoping, generally vainly, that it will fray.

The peripheral position to which we have reduced ourselves is plain for all to see. It showed itself, for instance, in the fact that Sir Leon Brittan, much the ablest available candidate, was not seriously considered for the Presidency of the Commission because of his nationality.

Noble Lords: Oh!

Lord Jenkins of Hillhead: My Lords, it was totally understandable. Why should a group of countries have someone from a country which they feel has a half commitment—half in, half out—and might be off at any possible moment? It was totally and wholly

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understandable. All that we could do was to play a charade between M. Dehaene and M. Santer, whose moment of glory in Mr. Major's eyes—the right man in the right place at the right time—was somewhat shortlived. As I have reason to know more directly than anyone else, Britishness was in no way a similar disqualification 18 years ago.

Then we had the Prime Minister's speech last week. That, also, I found yet another instructive aspect of last week's debate in another place. I thought he engaged with the subject more seriously and reflectively than perhaps has been his habit. He did indeed say some favourable things, and said them forcefully, about the Community, which made it a very exceptional speech. One could feel him almost arguing with himself in the course of the speech. And, on the whole, a politician arguing with himself is a more edifying spectacle than one arguing with his opponents. But when that has been said, I was struck and depressed by the totally reactive, as opposed to proactive role, which he assumed for this country, particularly in relation to the single currency, which was the subject to which he principally addressed himself: we will wait and we will see what Germany and France, attended by Benelux, decide to do and then we will react to that according to what at the time we judge to be in the best interests of the country.

This "attentiste" attitude has some advantages. It does not slam a door. It does not repeat the Prime Minister's unwise assumption of a short time ago that a single currency is a chimera. And it does not mount a ridiculous horse of monetary sovereignty, in a week when the activities of Mr. Leeson, following the somewhat different ones of Mr. Soros a couple of years ago, demonstrated the hollowness of a tight little island money entirely under its own control.

But this waiting attitude—see what France and Germany do —is totally incompatible with the view that Britain has a leadership role anywhere near the heart of Europe. It also shows an imperviousness to every lesson we ought to have learnt from our past experience. It was precisely this attitude which got us the worst of all worlds in our approach to the exchange rate mechanism. One of the recent weaknesses of the pro-Europeans is that we—and I deliberately say "we"—damn everything with faint praise and stress how moderate and reasonable and even half-hearted we are. As a result, increasingly, the best lack all conviction and the worst are full of passionate intensity. A ratchet effect goes on and the position of the Government, responding to the passionate intensity, becomes more and more hostile. Therefore, eschewing half-heartedness and looking at our ERM experience, I do not hesitate to say that our major mistake was being the only one of the nine members of the Community at that time which did not fully participate from the beginning.

That was a decision which cannot be laid at the door of the present Government. It was taken by the previous government a few months before Mrs. Thatcher came to office. And vividly do I recall my sense of disappointment—perhaps more sadness than surprise—when I realised that the European monetary system, inaugurated under a British President of the Commission,

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was to be without a full British participant. Thus was an important step taken on our journey to the periphery of Europe.

But the benefits of initial adhesion would not merely have been political and symbolic, important though those considerations can be. The object of foreign policy, after all, is to keep friends and win influence for British interests. The initial adherence would also have meant that we could have homed in on a correct and sustainable rate of exchange, rather like an artillery barrage ranging onto a target—an enterprise in which I have not engaged for approximately 50 years now.

In the early days of the European monetary system there were a great many fairly small adjustments of central rate which were all done without humiliation or upheaval. Eleven-and-a-half years later the position had become much less fluid and we lurched into the trauma of Black Wednesday without being able to get the rate right by trial and error. Moreover, from the beginning we would have avoided the wild exchange rate fluctuations of sterling of the early and mid-1980s when we varied for no rational cause between 1.07 dollars to the pound, and approximately 2.40 dollars to the pound, the plunges producing interest rate panics and the surges adding to the destruction of too much of British manufacturing industry. We would have had the ERM stability from the 1980s enjoyed by all the others under our belt before we came to face the much more turbulent climate of the early 1990s. As it was, we just joined for the crash.

It is not a bad idea to try to see things partly through other people's eyes as well as through our own. Furthermore, we gave a great deal of fuel to the thought that everything went well in Europe with the ERM until we came in and mucked it up not only for ourselves but for others as well. That history does not provide much encouragement for our applying the same recipe in the future.

The single currency apart, what are the other issues which will confront us at the IGC? Frankly, I would not expect the Inter-Governmental Conference to attempt a great leap forward: it is doubtfully well-timed for that. But there are certain clear British interests which we should have in mind and which, properly handled, would not only serve those British interests but could put us much nearer to the mainstream and not skulking in an isolated corner.

On the assumption that at any rate part of the Government really want us to stay in Europe and see "an ever closer union", to which we have committed ourselves over and over again, functioning efficiently and constructively, although certainly without seeking in any way to obliterate different national characteristics and certainly without seeking to obliterate equally a strong continuing role for national governments—in my view those fears have always been a complete illusion—on that assumption of wanting things to work well and constructively, two British policy objectives would probably command the nearest approach to widespread agreement in this country. The first is reform of the common agricultural policy and the second is further enlargement, particularly to the east, so as to fulfil Europe's duty to the lands and cities indisputably European which, as it were, emerged with their eyes

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blinking from 40 years of Iron Curtain oppression and which are now desperately short of security anchors, political support and a sense of international direction. Those two objectives are in fact clearly linked with each other, for without CAP reform, major enlargement is not possible. The Community simply could not afford to extend the CAP to the countrysides of Poland and Hungary in its present form.

But there is also a third, lurking British Government objective which is also a part of the nexus with the other two, but this time in a perverse way. That third objective at the back of the British Government's mind is to retain for each and every member a liberum veto and restrain or even eliminate qualified majority voting where it exists, to make qualification as high and as difficult to attain as possible.

Apart from the basic fact that a union of between 20 and 30 members will be frozen into immobility by such an approach, by a liberum veto, it is more specifically incompatible with the other two objectives. One will never reform the CAP under a unanimity rule, and without CAP reform we are blocked to the east. If the Government would face up to that dilemma, and also to the fact that it is no use complaining that Brussels is a remote bureaucracy unless you are prepared to bring it more under the control of the European Parliament and strengthen its links with national parliaments too, then Britain could have a constructive approach to the IGC which would win it more allies than it has seen for a very long time.

But that depends on the genuine desire to get the most out of British membership and to make things work. Alas, however, a note is increasingly struck not only on the Back Benches but to some extent in the Government itself, to which the only logical conclusion is that Britain should seek its destiny outside the Europe of the Community. If that is so, then for God's sake let it be clearly said. That would produce a cleaner and more honest argument. Nothing is worse than the desire to undermine and denigrate in every possible way without the courage of openly going to the conclusion. The core of the Government is in increasing danger of being pushed in that way, which is a recipe not only for minimising British influence but for making us disliked and distrusted as well as disregarded. Half in and half out is hopeless. But such is our store of old capital—moral and political capital—that with courage and commitment this country could still play a great role in Europe. My Lords, I beg to move for Papers.

3.29 p.m.

Lord Howe of Aberavon: My Lords, the noble Lord, Lord Jenkins of Hillhead, will not be surprised to learn that I find it difficult to follow him in the more partisan parts of his analysis, so I am glad to be able to congratulate him on his insight that his present party has never needed to abandon its self-righteousness on this issue. I am glad to be able to agree with him when he stresses the need for Britain to play a positive role at the IGC. I hope that the

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House will forgive me if an earlier commitment to give a lecture on this topic this evening prevents me from being here for the winding up of the debate today.

It is all too easy on this topic in this kind of debate to find ourselves not merely repeating each other, but repeating ourselves. Perhaps the House will therefore forgive me if I start with two texts from statesmen outside this House whom I have had the good fortune to meet in the past few weeks. The first is Kurt Biedenkopf, the Minister-President of Saxony, whom I met at a ceremony in Chemnitz last week. He said:

    "Before we give consideration to further institutional development, the tasks facing Europe need to be properly understood and clearly defined".

I think that that is a fundamental proposition. I do not mean to imply by that quotation that there is no need for the IGC to consider such questions as the mechanics of qualified majority voting or the size of the Commission, but those should, in my view, be subordinate to consideration of the basic strategic questions.

On that, I turn to my second witness, President Eduard Shevardnadze, whom I chaired when he spoke at Chatham House recently. He asked this telling question:

    "Why were the world community and Western nations in particular caught unprepared on the very threshold of this swift and consequently unmanageable transformation of the world"?

He spoke of having experienced for himself,

    "all the horrors and nightmares of enraged, aggressive separatism. No less ghastly than the brutalities of Hitler",

which pose a serious and continuing threat to the stability of our continent. That is why I agree with the noble Lord, Lord Jenkins, that the main task facing our European partners ahead of and beyond the IGC must surely be the evolution and implementation of a clear strategy for the rehabilitation of post-communist Europe.

I say that it is a task "for Europe" because we cannot necessarily expect American help or American leadership. Of course, we want that help—and I am sure that it will be forthcoming—but I do not believe that we can, or even need to, look to the United States to play the leading role in that task. I fancy—indeed, I fear—that the manifest reduction in the threat from the east may have done more than we know to weaken the magnetism that has drawn America towards Europe throughout the past half-century. We should not underestimate the gap that exists between Secretary of State Marshall and Speaker Gingrich, between President Truman and would-be president Dole. The United States was indeed the sponsor of the Marshall Plan for the rehabilitation of western Europe, and we should be eternally grateful for that leadership and generosity. That plan underlined our intercontinental interest in each other's security. That strategic truth has not altered.

But is it not now the time for Europe to take the lead? Is it not now the time for western Europe to take the lead in sponsoring the rehabilitation of eastern Europe—with, I emphasise, the help of the Americans—to ensure a much more closely co-ordinated economic and political strategy? Thus far, neither through the international financial institutions nor in any other partnership have we given sufficient effective, balanced guidance and support to the emerging countries of the east.

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In my judgment, our economic approach towards eastern Europe should, as former Prime Minister Carl Bildt recently suggested, take a much more positive view of the scope for active market building between both halves of the continent. If we are able to remove the rigidities which hamper our own development—I agree with the noble Lord that they include the common agricultural policy—even cautious estimates suggest that enlargement could bring substantial long-term advantages for the whole of Europe—east and west alike.

The first Cecchini Report gave political momentum to the freeing of markets in western Europe with the benefit of qualified majority voting. A second similar analysis, pursued with vigour, could spread that benign liberalising process across the entire continent.

I should like to say just a few words about the single currency. The Prime Minister was right to make plain in the debate last week that the options are, and must remain, open for us on that issue. Whatever view we take upon the outcome of that debate, it would surely be wrong for us to play no part in shaping the development of the argument. In my judgment, a single currency should remain a long-term goal. As even George Soros has acknowledged, this week's turbulence underlines the desirability of that objective—but it also underlines the difficulties. The case needs to be discussed in relation to what we are trying to achieve and not by reference to a rigid timetable. That was one point on which my noble friend Lady Thatcher and I were glad to find common ground in our reaction to the rigidities of the original Delors Report.

I repeat that EMU should be discussed in relation to what it is supposed to achieve and whether the conditions, especially on unemployment and structural change, yet make it achievable. The process should not be hastened at the risk of mistakes which could entail great political cost. It is in that context that I hope profoundly that our country will play at the IGC a role not of reluctance but of commitment.

Our future is not to be found by turning our backs upon our European partners or by seeking to promote some nationalistic resurrection of the past. A Norwegian journalist wrote recently:

    "Unlike the rest of Europe the British did not emerge humiliated from the War, but could—rightly—look back on 'their finest hour'. They have, strangely enough, kept a deeper dislike for their former German enemies than have the other West Europeans who experienced German soldiers on their soil".

I ask myself continuously: why should we alone be so reluctant to abandon the enmities and hostilities of the past? Has Europhobia in some form made us fearful even of the friendships of a wider world which all our partners are willing to embrace?

I return to Eduard Shevardnadze in London who asked:

    "Could it be that in the year of the 50th anniversary of victory over the greatest evil of the century, we would fall short of victory over the multiple new evils threatening us, with the restoration of walls which divide the world"?

Is it not ironic that it should have been a former member of the Soviet Politburo who spoke thus in London of the need today for something like Churchill's vision of a world community as a force for action?

With Kurt Biedenkopf in Chemnitz, Saxony, last Sunday, I listened to a deeply moving performance by Saxony's Robert Schumann Philharmonie and

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Manchester's Hallé Chorus and Boys' Choir of Benjamin Britten's "War Requiem". The stunned silence at the end of the performance suddenly exploded into a spontaneous standing ovation—far longer and far more spontaneous than any that has ever been achieved by any of my noble friends. If our peoples are capable of and, indeed, anxious for reconciliation and partnership of that quality, I pray with all my heart that our leaders can find the confidence and courage to achieve the same.

3.37 p.m.

Lord Richard: My Lords, I begin by expressing my gratitude to the noble Lord, Lord Jenkins of Hillhead, for initiating this debate. I cannot compete with the noble Lord when it comes to his magisterial and judgmental attitude towards the history of the past 30 or 40 years. I shall approach the debate with certain basic propositions which I should like to put before the House, some of which were considered by the noble Lord, Lord Jenkins, and at some of which the noble and learned Lord, Lord Howe, hinted.

However, before I do so, I should like to make one other comment by way of introduction. It is unfortunate that we are not being given a statement of government policy at the beginning of the debate. It would have been helpful if the Government had exposed some of their thinking early on in the debate so that the rest of us know the way in which their minds are supposed to work.

I should like to enumerate one or two basic propositions. Some are truisms, but the thing about truisms is that they are very frequently true. First, membership of the European Union is good for Britain. It is good for trade, good for investment and good for jobs—certainly when compared with any practical alternatives that may be on offer.

Secondly, the possibility of withdrawal from the Union is just not practical politics—leaving aside the question of the legalities. The issue of membership is settled and should be regarded as settled; it was settled in 1975 and British policy should be based upon that fact. Our future lies with our European partners. It is perhaps time that we started treating them as partners instead of regarding them with all the warmth and eager anticipation with which the east coast counties of this country regarded the approach of the Vikings.

Thirdly, in the future and particularly at the 1996 conference we must avoid the errors of the past in allowing Europe to develop in ways that we do not support and which are not in Britain's interest because we failed to play an active part in the negotiations. As a corollary, the other countries of the Union could well decide to move to greater unity without us. What of our opt-out then? In those circumstances it would not be an opt-out, but more of a lock-out.

We should also bear in mind that political union, federalism, or however one wishes to describe it, is not a practical proposition at the moment. As a country we should neither rule out the possibility of greater political integration, nor should we insist on it. That follows from what the noble Lord, Lord Jenkins, and the noble and learned Lord, Lord Howe of Aberavon, said.

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As to the supremacy of national sovereignty, let us meet that argument head on. The supremacy of national sovereignty as the guiding principle of political action is becoming increasingly difficult to sustain on the part of individual nations, as more and more issues come to be decided on an international rather than a national basis. Frankly the world is becoming too small to permit us to indulge too closely in that sort of luxury.

It follows that our political institutions are neither sacrosanct nor untouchable. It follows as well that the European institutions are not set in concrete either. Their powers, their composition and their relationship with each other are clearly flexible and are going to change: some indeed have changed already, witness, for example, the powers and the position of the Parliament. I am sure that as the Union gets larger and more countries become members, the institutions will have to be looked at afresh. I share the view of the noble and learned Lord, Lord Howe of Aberavon, on that point.

I think it is worth looking just for a moment at what the Maastricht Treaty says about this Inter-Governmental Conference in 1996. The treaty actually says that:

    "a conference of representatives of the governments of the Member States shall be convened in 1996 to examine those provisions of this Treaty for which revision is provided, in accordance with the objectives set out in Articles A and B."

If in turn we then look at Articles A and B, they set out the objectives of the Union itself. I concede that the wording may be somewhat sonorous, but the objectives are fairly clear. Article A establishes the Union itself and Article B sets out its objectives. So the aim of this conference is clear, at least on paper. It is to consider how much progress has been made in the areas covered in the treaty towards the fulfilment of the objectives of the European Union. So far, so clear; and that includes some pretty fundamental areas. These areas include monetary union and a single currency, a common foreign and security policy, let alone citizenship and subsidiarity. The potential agenda for the conference is vast.

I suspect, though, that when the conference actually takes place other things are bound to be talked about, particularly enlargement. Again, I share the view of the noble and learned Lord, Lord Howe, that if the 1996 conference can produce a concerted European strategy for expansion—by the inclusion of the east European countries —then it will be a success.

How are we to approach this conference? The question for Britain in many ways is not one of detail but one of attitude. Since the Government negotiated the treaty and accepted it in its present form, I assume that they agree with it. That may be naive, but it is an assumption I am prepared to make. In particular I assume that they are in favour of what the treaty refers to as

    "an ever-closer union among the peoples of Europe".

If they are in favour of that, I do wish that from time to time they might appear a little more enthusiastic about the process. The continual denigration in this country of Europe and all its works, sometimes even by Cabinet Ministers, is losing us status and influence in Europe. Our friends just do not know what to make of the current British position. Those who want to be kind to us assume that the Government's heart is broadly in the right place, as they would see it, but that for internal political reasons

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they have to behave as they do. Those who are less well disposed towards us take advantage of the present situation to foster mistrust of Britain's intentions. Frankly, it is a mess, and I have to say that it is a mess of the Government's own making.

The trouble is that one just does not know where the Government, and particularly the Prime Minister, actually stand. As I intimated at Question Time this afternoon, constructive ambiguity is one thing, but this continual balancing act is really quite another. Our policy towards Europe, whatever it may be, now looks as if it has been designed not with an eye to British interests but rather by what is thought to be in the interests of Conservative Party unity. I do not see how this can go on very much longer. Either the Government must be seen to be negotiating seriously in the direction that the Maastricht Treaty indicates, or they will have to make it clear that they are not prepared to see Europe move any further in that direction. What they cannot do is to say one thing and in fact mean another. What they cannot prevent is other countries moving in the very direction we have decided to avoid.

In so far as the 1996 conference will be concerned with EMU and a single currency, it would be absurd to rule out the possibility of a single currency now, as some would have us do. Does anybody seriously believe that, if conditions were right and there was the serious possibility of a single currency in 1999, the United Kingdom would be best advised to exercise its frankly meaningless opt-out and remain outside? I can imagine nothing more likely to put sterling under the most intense pressure than a decision by Britain to remain aloof. As for the effect on inward investment and jobs, I think it would be little short of catastrophic.

I have two brief pleas to make to the Government about the 1996 conference. First, we should go to the conference to try and make it a success; in other words, we should recognise that agreement is on the whole more desirable than failure, even if confrontation might help the internal politics of the Conservative Party. This time opt-outs will not do, and a statement in advance that we will veto any constitutional changes coming from the conference is frankly absurd.

Secondly, we should concentrate our efforts at the conference on two main objectives. One, which I share with the noble and learned Lord, Lord Howe, is enlargement, which I mentioned earlier. Next, we have to consider the way in which Europe is groping towards the establishment of a common foreign and security policy. We have never had one in Europe and we have never succeeded in speaking with one voice. At lunchtime today I reread the debates in another place on the Russian invasion of Czechoslovakia in 1968. I well remember it. The House was recalled and the then Mr. George Brown spoke from the Labour Back Benches and made one firm point. He said, "Europe has not been heard. Why? It has not been heard because it cannot speak with one voice".

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Until it can speak with one voice, we cannot expect to play the part in world affairs that, frankly, I am confident this country deserves.

3.48 p.m.

The Lord Bishop of Sheffield: My Lords, I speak very much in this debate as the man in the street and as a layman. Not only am I perhaps the only Bishop in the country, or perhaps in the world, who has no passport, but I remain a fairly unreconstructed English nationalist who occasionally murmurs to himself the scurrilous Flanders and Swann couplet:

    "The English, the English, the English are best!

    I wouldn't give tuppence for all of the rest!".

But worse than all that, I am a Northumbrian nationalist and it took me a long time to believe that there was life south of the Tyne; and I still doubt whether there is civilised life south of the Trent. Nonetheless, I grieve to see our reluctance to play a positive and active part in the life of Europe.

There are three things that I really should like to say to the politicians, to the Government and to those, whoever they may be, who will be taking part in the Inter-Governmental Conference. The first is to remember that we are Europeans in a Europe that goes beyond a European Union but has a common faith, a common history and a common background. That continuity with a remembered past, which will bind us together if we let it, is of vital importance.

I should like to give as mascots, as patrons, to our politicians two famous Englishmen—Alcuin and Boniface: Alcuin a Yorkshireman—a Yorkshireman through and through—born near Spurn Head, Helen Waddell tells us, although I am not sure that she is right, but near York certainly:

    "springing from the fields and rocks above Spurn Head, like a true Yorkshireman he could boldly withstand even an emperor".

He had a European mind, but knew his own as well and never lost his national identity.

To the great schoolmaster of York, the request to be the schoolmaster of Europe, made of him by Charlemagne, produced a positive response. So he left his native land, but never forgot it. The letters he wrote to his friends among the English remain significant, important and deeply moving. There was a loyalty to England that in no way weakened his loyalty to Europe. Again, Helen Waddell tells us:

    "They were men of vision, great statesmen, soldiers and scholars, often of approved sanctity like Alcuin and Paulinus, who spent their lives striving to build on the rubble of a shattered Roman Empire, the ideal commonwealth of the City of God on earth".

It is not an unworthy ambition to follow in those footsteps.

Similarly, Boniface—I cannot claim him as a Yorkshireman, he was a Devonian—had a total commitment to his brothers and sisters (his Saxon brothers and sisters in Europe) to share with them what he had come to learn not just of Christianity but of European civilisation. We do well to remember that the word "Anglo-Saxon" did not originally set us who spoke English against the rest of the world, but was to remind us of our bonds with the other Saxons—the German Saxons.

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We were the English Saxons, with a common race, a common inheritance, and, thanks to Boniface, and Willibald and others, soon to have a common faith.

That we remember those things is of great importance. Although we looked back at the troubled history of Europe with sadness, we rejoice to see within the European Union that what again Helen Waddell calls, "the undying quarrel for the Rhine", at least seems to have ended. I long for us to take up again our role as Europeans in Europe, remembering those great men and women from the past; remembering our history; and recognising that it is ultimately a European history, and not merely an English history.

Secondly, I want us to beware of the wrong sort of nationalism. I am a nationalist. I do not apologise for being a nationalist, but we do not have to go outside the British Isles to see the perils of a nationalism that is unable to see good in anyone but one's self. One does not need to go further than recent history in the Balkans, in the former Soviet Union, to see the terrible perils of a nationalism that says, "My country right or wrong". When I listened to our football supporters in Bruges, or Dublin, and just occasionally read the newspaper headlines—and, sadly, occasionally listen to our politicians—I believe that we are in terrible danger from the wrong sort of nationalism.

I want us to take into Europe our own nationalism—a consciousness of our individuality, and a consciousness of our individuality that makes us warm to the individuality of others, and, particularly at this time, warm to the individuality of those nations which have been put to the outskirts of Europe, and which it must be our calling—we who are a little bit on the outskirts of Europe ourselves—to remind them of our common concerns and our common interests. There is a concern for the east, for the Mediterranean, for which we in Britain should have a special calling. We should be ashamed of that yobbish nationalism which sometimes it is tempting to people, for their own purposes, to build upon. There is too much of it around. We want to fight against it. We raise it up at our peril.

Thirdly and lastly, we need to grasp the significance, or perhaps the lack of significance, of that philosophical fiction which we have come to call sovereignty. I know, of course, as a bishop, the 39 Articles. There we read:

    "The Kings Majesty hath the chief power in this Realm of England, and other his Dominions ... and is not, nor ought to be, subject to any foreign Jurisdiction".

King Canute was the first to discover the folly of that type of definition of "sovereignty". We now know that it cannot be like that. We have, for better or worse, taken the decisions that recognise that there is a variety of sovereignties. Somehow or other we hide from ourselves that that is so. We need to recognise the changed situation in which we find ourselves.

In my diocese of Sheffield there is the Dore Stone which recognises the moment when the Kingdom of Northumbria acknowledged that it was part of England—a decision that I do not believe it has ever regretted. It was not a humiliation for Northumberland to acknowledge the greater sovereignty of the Kings of Wessex. We have taken the same step already in our decisions on Europe, and yet somehow or other we pretend that we have not. We need to recognise the integrity and the importance of

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European institutions, European customs. Somehow, the claim to righteousness on our part—that no one is ever dishonest in England, but always dishonest in Europe; that our Parliament is always wise and the European Parliament always foolish; that our governments never do anything wrong, but the European governments are always doing things wrong—is not borne out by the facts. It does not help us to "make the best" of the profitable situation in which we find ourselves as part of a greater unit than we were before—a unit to which we come naturally by geography and history, and, I dare to say, by religion.

I long for us to be less afraid of Europe and more ready to give ourselves, as English or British nationalists, wholly to a way of living with our neighbours that recognises their distinctiveness and their individuality, but recognises too that we have a common inheritance and a common calling, and that we can do things so much better together than apart.

3.58 p.m.

Lord Elis-Thomas: My Lords, it is a particular pleasure for a mere Welsh nationalist to follow a Northumbrian English nationalist with whom I share a religious affiliation, and to follow three noble Lords with whom I also share a cultural nationality. I use those terms deliberately because those noble Lords have set to the debate a strong moral and practical tone. I welcome that warmly, because the debates that we have had in the United Kingdom on our relations with the mainland—that is how I choose to call it and will call it throughout my speech; indeed, as the people of Anglesey call the rest of Wales the mainland—have been bedevilled by a lack of conceptual understanding and the use of a completely inadequate, negative vocabulary.

Here I beg to switch the tone, perhaps, from what we have heard already about nationalism. We are now entering into a century—the 21st century—which it is hoped will be a century of post-nationalism; by which I mean that the ideology which combines the notion of identity with a notion of fictional political power has to be undermined. Because we have in the concept of the nation state mixed up the notions of political power with the notions of citizenship and identity, we have created for ourselves in the 20th century a monstrous century with over 100 million deaths, induced by the notion of nationality, nationalism and differences of identity. That relates to the whole issue of citizenship, federalism and subsidiarity.

In the remaining seven minutes I shall dwell only on the notion of subsidiarity. In the context of this debate that is the most misunderstood term in the United Kingdom. As the right reverend Prelate will know, subsidiarity derives from early 20th century Catholic moral and social theology. It is about powers not relating to particular classes or states but about powers being shared in relationships. That is where the concept arises. It was reinvented by the Christian Democrats and the Social Democrats, who were also within a similar Catholic moral milieu on mainland Europe. It was reinvented as a European concept precisely relating to the notion of shared levels of power.

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In the United Kingdom it is assumed that subsidiarity stops at Dover. Subsidiarity is assumed to be about the relationship between the European Parliament, the Commission, the Union, this House and another place. Subsidiarity is not only about that; it is about all levels of governmental relationships and all levels of political powers. Within the discourse of the Community and the Union, that is how it is used. There is subsidiarity in the relationship between the Union and the member states but there is also subsidiarity between member states and nations and regions within member states.

That is where the United Kingdom debate appears to be entirely predicated upon the notion of maintaining the idea of the United Kingdom as a unitary state. The attitude of the Conservative Government—and, indeed, the attitude of some noble Lords on the Labour Benches—towards the European Union is based upon their British state nationalism. I distinguish between that and our British nationality, European passports and the notion of a Welsh, Scottish and English cultural nationality.

It is important to make those distinctions because on mainland Europe the idea of affiliation simultaneously to different places and spaces and levels of government is not a problem. As the right reverend Prelate so clearly said, the affiliation of Northumberland to England meant that one could maintain both a Northumbrian and an English identity. Similarly, we in the United Kingdom need to construct the notion of a positive English nationality which does not become the English nationalism of our football hooligans. We need to construct a notion of English nationality that is not racist. We need to construct a notion of English nationality that is not nationalistic.

Some of us have laboured in different ways to construct the notion of a Welsh or a Scottish nationality that is not nationalistic. The whole issue on the island of Ireland is to do with the construction of a European notion of Irish co-operation that is not rooted in nationalistic traditions. The problem that we have is that England, because of its assimilation into the British state for which the Welsh Tudor dynasty must bear some responsibility, created a British form of nationalism which then became imperial. There was never an opportunity for a healthy English nation with its regions to develop.

The English are a supremely European nation. They could be nothing else in terms of their extraction, their relationship with the mainland and their culture. That is where in the past we in the United Kingdom have failed to understand our origins. Obviously, I speak as a Celt and in that sense the Celtic people are a submerged level of European identity and unity; pre-Roman and pre-Greek and everywhere dispersed. Those who are aware of the history will understand that the notion of being part of an identity that is not necessarily rooted in a single space or power is an important concept for our European future. After all, we were the people who believed in circles rather than straight lines. That kind of culture which believes in an encompassing circle is the one with which we must work within the emerging Europe.

I leave that Celtic whimsy and return to the IGC. Development in the context of the IGC will be incremental. It will be incremental for our other partners

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in the rest of Europe. But, within the United Kingdom, the time is approaching when we must face a crisis of identity; when we must reunderstand our national pasts. What is happening now on the island of Ireland may help us to do that. A government who can respond clearly to the feelings of Scotland, Wales and the English regions must be able to understand that the relationship between regions and nations within the UK is intimately linked with what is happening on mainland Europe, where a Europe of the regions is an emerging reality whether we like it or not. Jordi Pujol and other colleagues on mainland Europe will not go away. The Europe of the regions is the Europe of subsidiarity and the federalised future.

The problem that the United Kingdom has is that because it has developed as a unitary state it is unable to relate to those developments. The sooner that we are able within this House and another place to reject the discourse of British nationalism and to adopt a way of speaking about our identity which does not relate to the notion of one centre of political power or one form of identity, the sooner we shall be able to participate more positively in the construction of the European Union.

4.6 p.m.

Lord Cockfield: My Lords, I too am most grateful to the noble Lord, Lord Jenkins of Hillhead, for giving us the opportunity of debating these matters. I never thought that it would enable us also to debate Welsh nationalism. I have always taken the view that it is suicidal for an Englishman to become involved in matters affecting either the Welsh or the Scots. Therefore, I shall confine myself to the speech made by the noble Lord, Lord Jenkins, in introducing the subject. If the noble Lord really hopes that the Government will take what he described as a constructive approach to the Inter-Governmental Conference of 1996 he is an incurable optimist. But, of course, to be a member of the Liberal Democratic Party one needs to be an incurable optimist.

The problem with the debate in the form that it takes is that we shall have no government statement until the end of the debate when there is no opportunity for anyone to comment upon it. Whether that is because the Government have no policy, or that, if they have a policy, they are not prepared to reveal it, I am unable to say. However, the exchanges that took place today at Question Time suggested that the absence of a policy justifies the order that the debate is to take. So, as regards the Government's future intentions, we must proceed in darkness but we shall do our best.

I propose to speak only about one overarching issue. I do not propose to touch on any of the detailed matters which will go to the 1996 Inter-Governmental Conference. The issue about which I propose to speak briefly will ultimately determine the attitude that is taken on every single issue that comes before the conference. It is whether we are going forward or whether we wish to go back. Will there be further steps in the direction of European integration or are we to try to resile on the steps that have already been taken and go backwards?

I shall illustrate that point in two particular ways. There are some Ministers in the Government, and certainly many Members of another place on both sides of the Chamber, who believe that we ought to turn the European

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Union into some form of glorified free-trade area. That is complete and absolute nonsense and that is demonstrated conclusively if one looks at every single enlargement that has taken place in the Community since it was first established. When we first refused to join the Community—and we refused to join because at that time, no one was trying to keep us out —our reaction was to set up a rival organisation; that is, the European Free Trade Area. Within almost a matter of months, we scuppered our own creation and applied for membership of the European Community as it then was.

I shall not go through every single enlargement that has taken place since then, but the underlying trend is exactly the same. I shall take the latest enlargement which involved Finland, Sweden and Austria. They did not join the European Union in order to join a free trade area, glorified or not. They already had a free trade area and they had had that for many, many years in the form of EFTA—the European Free Trade Association. They had gone further than that. They had the European Economic Area which expanded the free trade relationship in a further direction. But that was not the limit of their ambitions. They felt that they had to join the European Union, and that they have done.

Let us look at the countries of central and eastern Europe which now wish to join the European Union. Why do they wish to join? Is it just to join a glorified free trade area? They could have had that anyway. They already have the European agreements and they could progress from those to the European Economic Area which still exists. But no, their ambition was to join the European Union. In other words, no country, including ourselves, which has joined the Community since it started ever set out to join what was merely a free trade area. The attempts to regress and turn the Union into a free trade area will not stand up to a moment's examination.

Then there is endless talk about a multi-speed Europe, a multi-tier Europe, about variable geometry and eccentric circles, about a Europe o la carte. That is all absolute nonsense and none of those will work. Of course you can have derogations. There have been derogations ever since the Community was founded, but the whole point of a derogation is that it is merely a breathing space that is given to people in order to enable them to catch up. All those other ideas are the creation of massive institutional arrangements in order to accommodate varying, disparate and conflicting views. As institutional creations, none of them will work.

However, something that will work is something like the relationship which existed between the European Union and the EFTA countries and then the European Economic Area. But the point to remember about that is that they are not differing degrees of membership of the Union. In fact, they are a relationship between two entirely different bodies.

The fact that has to be faced—we need to face it and it is no good pretending that it does not exist—is that there is a core of countries in the Union which are determined to go ahead in the direction of greater integration. They comprise at least Germany, France, Belgium, Holland and Luxembourg and they will no doubt be joined by others. There is no way at all that we shall be able to stop those

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countries going ahead in the direction of greater integration. It is no good talking about vetoes or blocking majorities or anything of that sort. The determination is there and it will be achieved.

We have to decide whether we are going to go along in the direction of greater integration, with all the opportunity of influencing that process and ensuring that our anxieties are taken fully into account and, in the end, being members of a cohesive whole, or whether we are going to marginalise ourselves and stand on one side. In that event, our influence, which is already gravely diminished, will be diminished even further.

From the point of view of the economic and political future and its future in terms of security and defence, I have no doubt whatever where the true judgment lies. I hope that the time will come when the Government in turn realise that that is the position.

4.15 p.m.

Lord Callaghan of Cardiff: My Lords, there has been a remarkable harmony of view in the speeches that we have heard so far and I agree with much that has been said by all noble Lords. But the time has surely come to disturb a little that harmony by asking where the biggest obstacle lies to the achievement of the sentiments that have been uttered on all sides of the House this afternoon. It lies fairly and squarely with the Cabinet and with the Conservative Party. Therefore, I intend to discuss one or two matters about the Conservative Party, and I hope that I shall not offend too much any tender consciences which there may be opposite.

The peseta and providence have jointly saved the Prime Minister for the time being from the critics who have been snapping at his heels for so long. But I forecast that the lull will not last. They will be at him again before long. The irreconcilables among them will not let go so long as he fails to meet their fundamental challenge as to where he stands on the issue of sovereignty.

The argument in the Conservative Party—and it is in the Conservative Party—is taking place on two different levels. First, the questions which the men of business, the trade unionists, the economists and the financiers ask are will monetary union and a single currency keep down inflation? Will they or will they not lower interest rates? Will they stimulate growth? Will they reduce unemployment? And, generally, will they assist their businesses? Those are the practical concerns of practical people who ask whether it will work.

The second argument is basically the position of so many members of the Cabinet—people like Mr. Aitken and Mr. Portillo, who is a young man in too much of a hurry—and Mr. Lamont, who is outside the Cabinet, supported by their Whip-less sceptics. They would hesitate for an eternity before they would surrender—I had better not say a gram—an ounce of British sovereignty. Where have they been all these years? Since World War II Britain has been giving up bits of sovereignty through trade agreements and in our defence arrangements and so on whenever we thought that it was in the interests of our people to do so; and so obviously have our partners who have entered into agreements with us. They too have given up bits of their sovereignty because it seemed to be in our joint interests to do so.

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Frenchmen and Germans have not found it difficult to combine a pride in their countries and different cultures with a strong sense of being European. In this country also I take the view that the growing experience of working with mainland European business men, with others in the professions and with skilled work people travelling in and out of Europe and working side by side has resulted in a growing understanding among the people of this country that we are no less English, Welsh or Scottish because we are also Europeans and that our national identity is no less strong because of that.

I wish that the Prime Minister would recognise that. I wish that he would say it clearly and take less notice of the sceptics. He would not ease his path with them, but he will not do that in any event. But he might be surprised by the strong favourable response which he would receive by giving a lead to our fellow countrymen. That would evoke support from a great many of us. I agree with the noble Lord, Lord Jenkins, that we should be reviving a positive approach among all of us who take that point of view.

Sooner or later, the Prime Minister will have to face the issue of sovereignty. The sooner he does so and says what I believe he really feels but is frightened to say at the moment, the sooner we can move ahead in that field.

The Conservative and Labour Parties are in agreement that Brussels should not become a superstate—nor that every form of economic and monetary union would lead to that. The Prime Minister is quite unconvincing when he pretends that a Labour Government would give everything away to Brussels. That certainly was not what we did. Giving an imitation of John Bull does not really suit his style; indeed, it is not in his character. It would be far better if he were to give that up.

A week ago I wrote some early notes for today's debate about monetary union. I included a paragraph that I should like to read to your Lordships. I wrote:

    "The real test is not whether some member states can fulfil the required criteria for monetary union at certain favourable moments in the ups and downs of the economic cycle, but whether they can sustain those conditions over a long period. That is when the test will come".

When I wrote that I did not know that Spain would illustrate my point so quickly by devaluing its currency only a few days later. I speak as one who came to the conclusion some years ago that a form of monetary and economic union would be beneficial to Europe's position in the world of the 21st century. But I make that assertion subject to two conditions: first, that the system is so well adjusted, and the exchange rates are properly fixed, that it is capable of being sustained for an indefinite period; and, secondly, that its terms will not inflict the hardship and social evil of large-scale continuing unemployment on any of the member states which join.

In a number of member states at this moment their high levels of unemployment are not due solely to the ups and downs of the economic cycle but to long-term and permanent changes in patterns of trade and production caused by differential wage costs and productivity levels and, to some extent, by the effects of removing barriers to trade. In other words, as the economists say—so I am told—it is structural and not cyclical unemployment. Those changes will lead to semi-permanent high levels of unemployment, with their social costs and consequences, in some

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of the member states unless mitigating action is taken to enable the displaced workforce to be re-employed. The first essential is a high level of education, with the flexibility which comes from that, and the retraining of those displaced, as well as sufficient capital investment in new industries and services to replace the old ones.

If that were to come about, Britain would need to be particularly careful not to repeat the error made when we entered the exchange rate mechanism a few years ago at the unrealistically high rate of 2.95 deutschmarks to the pound. Today's rate of 2.25 or 2.30 deutschmarks, or round about there, is more than 20 per cent. lower than the rate at which we entered. Owing to the vagaries of the market, I believe that it is a little too low at present. However, that emphasises both the fact that there are such vagaries in the market and the benefits that a fixed exchange rate would bring; but it must be at the right rate if and when such rates are fixed.

That will not happen in 1997. So let us put that to one side. An economic and monetary union will not take place at that time. It is difficult to forecast the future, but it may be—indeed, I think it will be—that in 1998 or 1999 (and we shall discuss such matters in 1998) that the economic skies will not be very much clearer than they are today. That is to say, there will continue to be high structural unemployment with member states at different stages in the economic cycle but with a nucleus of countries, with Germany as the anchor, whose economies will be durably convergent and capable of forming an economic and monetary union.

If that turns out to be so, the decision about the Union will then turn on the political will of the member states concerned and particularly on the political situation in Germany. Britain will have an option—thank goodness the Prime Minister negotiated that! I hope that we shall be able to exercise it in favour of joining if and when the time comes. But those who take my view must not allow the sceptics to make all the running in favour of a referendum. If there is at the time of decision a great difference of opinion in the country, we should be ready to put the issue to the people and fight it. I believe that we would win.

If we are to get the best result for Britain, we must apply our great technical skills to constructing a practical scheme that will not rely upon unrealistic assumptions and hopes. We are more likely to achieve that aim if our negotiators are believed by the other member states to be playing a constructive role in the discussions that take place at the IGC in 1996 with the intention of achieving a positive result.

That is not the position today. Instead, we have a paralysis at the centre of government on the matter—deciding only to be undecided, irresolute rather than resolute and positive only for inaction—deeply harmful to Britain's influence in the negotiations that lie ahead. The verdict that I have reached is that if we are to exercise the influence in Europe that our technical knowledge, our economic size, our history and our experience ought to command, it will require a different government than the present one.

4.25 p.m.

Lord Ezra: My Lords, it is a great honour to succeed the noble Lord, Lord Callaghan, in today's debate. The

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noble Lord always speak wisely and with great and eminent experience. We are debating a major issue introduced so effectively by my noble friend Lord Jenkins of Hillhead. It is both important and timely. I believe that the issue is a very simple one: would it be more in our national interest to take up a positive attitude at the Inter-Governmental Conference in 1996 or a negative attitude?

All those who have spoken so far have been in favour of a positive attitude. I share that view. I believe that that can be demonstrated by analysing the issues which are likely to be raised on that occasion. My noble friend and the noble and learned Lord, Lord Howe, referred to the importance that enlargement will take in those debates. I believe that that is likely to be almost the dominant subject. Enlargement, which has been supported continuously by all British Governments, will be one of the most important political and economic developments of our time, arising out of the removal of the Berlin Wall. We shall be responding to that issue. I very much hope that British contributions to that debate will be positive.

As my noble friend pointed out, it is quite clear that, if we are to achieve enlargement of possibly another 12 countries from central and eastern Europe (thus making the total membership of the Community 27) with the total population rising from 345 million to 480 million, there are many things in the existing Community that started with six members some 40 years ago which will have to be renegotiated and rediscussed.

As has already been mentioned, the prime issue in that respect is the common agricultural policy with which we were landed as a country because we were so unwise as to walk out of the Messina negotiations in 1955. Had we stayed there, we would have negotiated something quite different. As it was, when we subsequently joined the European Community in 1973 we were confronted with that policy. Now, 40 years later, we have a unique opportunity to get that situation corrected. I very much hope that we will receive confirmation from the Minister when she responds that the Government have worked out what they want to say on that very important issue. The European Union could not afford to apply the same system with agricultural policy if it were enlarged to the degree envisaged. I look forward to hearing the Minister's reply in that respect.

Apart from that, we have to complete the single market to ensure that new members come into a market which is highly developed. We have already made substantial moves in that direction. Indeed, the noble Lord, Lord Cockfield, whom we had the benefit of hearing a short while ago, played a crucial part in that process. However, there is more work to be done. There are some sectors, such as energy, transport and telecommunications, where access is still restricted. Here, also, I believe that Britain can play a positive role. I say that because we have moved forward in those areas in our own country and can offer to our friends in the Union ways in which this could be achieved. That is the second area in which I believe we can be positive.

As regards competition policy, it is in our interest that we have a fair, effective competition policy and that policy must have a Community imprint. There is no

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point in our working out our own competition policy for our own enterprises if every other country within the single market works out its own policy. There is a need for a common approach. One of the weaknesses in the European competition policy at the moment is the subsidies and state aids which some countries still provide to their enterprises. We have eliminated that in Britain; they have not. Here we can show the way. That is therefore a third way in which Britain can be positive to serve our interests and those of the Community.

As regards financial responsibility, we are continually urging the more effective use of the resources of the Community. We are also raising the question of the elimination of fraud. I do not think we can entirely blame the Commission for that. All member countries in one degree or another are responsible for some of the fraud that goes on. However, the Inter-Governmental Conference will be an opportunity for readdressing that question. I think that here, too, we can be positive.

I wish to touch next on social policy. This is rather more controversial. I feel that we made a mistake to opt out. The social chapter is a list of aspirations. So far, very little of those aspirations has been translated into practice. By opting out we have lost the opportunity of influencing the conversion of the aspirations into reality. I believe that there is an increasing recognition among our partners in the European Community that social charges have got out of hand and have to be reduced. In my opinion, we could have played a much more effective part in that debate had we not opted out. Nonetheless, I hope we can play some part in that issue.

Environmental policy is another major issue which arises, particularly when we are talking about bringing in the countries of central and eastern Europe where, for all sorts of reasons, their environmental policies have been lacking. We must work out ways in which European Union policies can be adapted to apply to countries which, for reasons they are probably not responsible for, have been unable to come up to our standards. That is another area in which we, with our notable achievements in environmental matters, can take a lead.

There will obviously have to be institutional changes as a result of the enlargement of the Community. The question of the Parliament has often been mentioned. I happen to believe that the role of the European Parliament should, if anything, be increased but there is a case for creating a second Chamber which could consist of, as has been suggested, people nominated from the existing parliaments in the member countries. In my opinion, the relationship between the national parliaments and the European Parliament is important. We must work closely together. I hope that some thought has been given to that.

Finally, I turn to the question of the single currency. I regret that this issue has been politicised at such an early stage. What we ought to be doing is seriously considering —as the noble Lord, Lord Callaghan, mentioned in the final part of his speech—the economic pros and cons. There is not the slightest doubt that we have already lost much control over monetary policy. In fact, in my opinion we lost most control over that on a precise day, 24th October 1979, when the noble Lord,

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Lord Howe, was Chancellor of the Exchequer, and exchange controls were abolished. I fully accept that that should have been done, but we have to recognise that as a result of that abolition, and with the free movement of currencies throughout the world which has multiplied since, any individual government's control of its currency is limited. The only way to cope with that massive surge of currency movements—we have seen that in recent days—is to form a larger group. The big advantage of a single currency would be in that connection. The disadvantage could be that we could lose control in changing our rates of interest. Those are the issues we should be addressing. To sum up: I believe we could play a positive role in this negotiation on all the issues that I have mentioned.

4.35 p.m.

Lord Barnett: My Lords, I am sorry that the noble Lord, Lord Tebbit, will not be speaking. I assume that I shall not now have 18 minutes rather than nine in which to speak! On the other hand, I am particularly sorry because I would have wanted to disagree with the noble Lord and at the same time say how nice a fellow he is even though he tries so hard to be so nasty at times.

In the short time at my disposal I propose to concentrate on EMU and the single currency. I make it clear that I am in favour of Britain being a part of economic and monetary union in principle. I shall make clear why I say "in principle". The argument about the loss of sovereignty, as my noble friend Lord Callaghan pointed out, is of course something of a nonsense. We are talking about pooling sovereignty with other sovereign states, not about the loss of sovereignty in that sense. I believe, with my noble friend Lord Richard, that it is absolutely vital that we are inside the Community, playing a large part at the core of the Community. If we are not, we will be outside and that would be a disaster for our industry and for investment in this country.

Unlike my noble friend Lord Callaghan, I regret the opt-out that the Government took on the Maastricht Treaty for three reasons. First, I believe it was unnecessary for few will be ready to do what we are discussing—as everyone has said—in the timescale envisaged. Secondly, we shall be excluded because of that—and have been already—from crucial decisions on EMI and the Central Bank. Thirdly, we shall be left on the sidelines if we are not careful rather than being at the heart of Europe where I wish to see us.

My criteria for joining EMU were set out clearly in the Maastricht Treaty. They were, first, a high degree of price stability and inflation close to the three best performers. This the Government claim to have achieved. Secondly, sustainability of the financial position which we have without an excessive deficit. Again, the Government claim to have achieved this. Thirdly, observance of normal fluctuation margins inside the exchange rate mechanism and two years without a devaluation. Again, the Government claim to have achieved that. I am happy to congratulate the Government on having achieved that. How long it will last is another matter, because the question really

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concerns the durability and sustainability of convergence. Those are the crucial issues and they are mentioned in paragraph 1 of Article 109J of the treaty.

That achievement of a high degree of sustainable convergence, to which my noble friend Lord Callaghan quite rightly referred, is vital because if we join in an economic and monetary union and do not have that sustainable convergence we are in serious trouble. However, I have other reservations beyond those which the Chancellor of the Exchequer set out. First of all, I have reservations as regards a high degree of sustainable convergence. Secondly, who on earth will assess that we and other member states have achieved that high degree of sustainable convergence? Apparently it is not to be the UK Treasury, which is perhaps as well. It will be the Council acting on reports by the Commission and the EMI not only on the criteria I have referred to but also taking account of the development of the ecu, the results of the integration of markets, the balance of payments on current account, unit labour costs and other price indicators. That is a somewhat difficult task for one country; for 15 or more, to put it mildly, it is even more difficult.

I turn next to the European Central Bank. As at present proposed, it is to be a wholly independent central bank. I know that some can see the advantage of that. But it takes out of the hands of mere politicians the idea of controlling inflation: that it should be in the hands of central bankers who know more about these things. With great respect to central bankers, I prefer some control by politicians, who at least have to be elected on a reasonably regular basis in a democracy, even though they may get it wrong from time to time. But we in this country have already sold the pass on an independent central bank. Our Chancellor has given the Governor of the Bank of England that power. There are monthly meetings and the minutes are published later. Being a naive sort of fellow, I assume that the Governor and the Chancellor do not severely massage the minutes. We therefore have, effectively, an independent UK central bank.

That brings me directly to the question of a single currency and my third reservation. It is not as to whether we should join. I believe that we must. It is as to how and when. The single currency issue has caused the greatest anger and emotion among those on what is called the Eurosceptic side. I cannot understand why that should be because it is not going to happen now; it is not even round the corner. I believe that we can ignore the present panic in relation to the deutschmark; that is a quite separate issue. I think that it was the noble Lord, Lord Cockfield, who asked why a Minister was not opening the debate. On this crucial issue at the centre of the arguments, a Minister can only say that the policy is to decide not to decide. I have a great affection, as she knows, for the noble Baroness, Lady Chalker. But she cannot say anything else on that aspect of the problem. She can only say that the Government's policy is to decide not to decide.

The single currency needs all those criteria to be met. Then by 1st July 1998—that is only three years away—by a qualified majority vote and taking account of the opinion of the European Parliament, the Council will

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decide which member states fulfil the necessary conditions. With great respect to the European Parliament and the Council, they, no more than any UK chancellor, in July 1998 will be in a position to decide on sustainability and durability of exchange rates and other factors. They will not be able to. It will not be possible in three years' time. It may be for Germany but not for many others. That argument certainly applies to the exchange rate problem. I agree with my noble friend Lord Callaghan and the Governor of the Bank of England that to lock into a fixed exchange rate when one does not have that sustainable convergence could be disastrous for any member state which did so. So it will be some time before we are in a position to join.

If and when we do decide, whether it be in three years, 10 years or whenever, the argument on the other side of the debate is that it is a major constitutional issue. In my view that is a bogus argument because in practice it is a purely economic and financial issue, as the Chancellor of the Exchequer has argued. The bogey put forward by the sceptics is quite wrong and should not be deployed. But if my reservations are met, and sustained and durable convergence can be obtained, then I am very much in favour of joining in a single currency and economic and monetary union. But that would be primarily on economic and financial grounds. At that stage—and it may be a long way ahead—we would no more be giving up our basic constitutional rights than would Germany, France or any other member state.

As I have argued before in your Lordships' House, to talk about a federal Europe is another bogey. The plain fact is that if we had the kind of federal Europe which is spoken of, member states would probably have greater subsidiarity than they now have. So that argument is another bogey which sceptics use against the Community and one with which I totally disagree.

In any event, for the reasons that I have given, the time when we shall be ready to join economic and monetary union and a single currency is way ahead. I doubt—and I regret it—that it can be achieved by 1st January 1999. But I hope that we shall be in a position to join. If we are in such a position, since I wish to play a positive role in the IGC next year—I refer to the terms of the Motion—I hope that we shall make the position crystal clear.

4.45 p.m.

Lord Boardman: My Lords, like other noble Lords, I welcome the opportunity that the noble Lord, Lord Jenkins of Hillhead, has given us to speak on this important subject. In some speeches there has been a suggestion that we have been playing a negative role in Europe to date. I remind noble Lords of the very positive things that have been achieved: the single market, attacks on fraud, and so on. I must confess that I was a little disturbed by what the noble Lord, Lord Callaghan of Cardiff, said, involving criticisms of the Prime Minister and the Conservative Party. It was implicit in his remarks that the Labour Party had been a consistent supporter of Europe. However, as we all know, no party has ever changed sides more on that specific subject than has the Labour Party. The noble Lord also suggested that business was critical of the

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stand now being taken by the Government. However, all the information that I have—I include information from a luncheon today at the CBI—is that business is strongly supportive of the line taken, and laid out in another place by the Prime Minister recently.

I shall have an opportunity to refer to the comments of the noble Lord, Lord Barnett, in a moment. However, I believe that there are areas in which we should play a positive role, and that we have a major contribution to make before the 1996 conference. We have already done a great deal of work on fraud. The Select Committee of this House has set up some clear guidance on things that should be done. There is some disappointment that they are not being done in the way that we suggested. But I believe that there is a positive role for the Government, and indeed by mechanisms such as the Select Committee of this House in that field during the time ahead.

My second point refers to the CAP. A number of noble Lords have referred to the unsatisfactory nature of the policy and how impossible it is to operate it at the same time as we seek to achieve enlargement. The two do not go together. I doubt whether it is possible to have a common policy which will cover such diverse agricultural regimes as Finland, Greece, Denmark and Portugal, for example. To achieve a common policy which suits all those member states seems extremely difficult. There was some tinkering with the policy in 1992, but it was only tinkering, which I do not believe will survive long, certainly with the growth of Europe which we hope and expect to achieve. Repatriation of the CAP would be a long step backwards. However, that may be the only alternative unless in the meantime we can produce some policy which fits those disparate agricultural regimes.

I turn to a subject which has been predominant in the debate: the single currency. I shall not enter into the arguments relating to why or why not a single currency is desirable. It has been debated fully. I strongly endorse the line that has been taken. It was set out clearly by the Prime Minister in a speech in another place recently. I believe that a single currency, monetary union, must lead to a degree of fiscal union. If one has a fiscal union, I find it difficult to envisage how one can avoid political union.

It may be many years before a decision has to be taken, but I believe that we should consider the alternatives. There is a role for a common or parallel currency which could serve many of the purposes that a single currency would achieve, without bringing with it the complications and downsides of a single currency.

One may well ask why we want a single currency. Some want it because they believe that it produces a certain political control. Putting that on one side, however, the answers given by most people to why we want a single currency are the following. Some people say, "If I am travelling abroad, I take £1,000 in my pocket. I start in London, I cross every frontier in Europe and come back with no money left, it has all gone on exchange controls". I am sure that noble Lords have heard that many times, but it is nonsense. Anyone going to Europe today need take no cash except perhaps tips for porters; otherwise one takes a credit card and

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Euro-cheques. Whether or not there is a single currency is therefore immaterial. There are those who want a single currency because it would assist trade. I agree, it would and to that extent it has some plusses. However, if today one accepts an order to supply goods to Hamburg for delivery in three months' time, it is possible and easy for the bank to arrange straight away for the money which will be received in sterling when the goods are delivered in three months' time. Banks now produce low value cross-border payments and I believe that that can be accelerated and made cheaper, and it should be done. It would avoid some of the difficulties which might otherwise exist.

Of course, there would be currency risks. We have seen what happened this week in Spain and Portugal. Thank goodness we are not in a single currency with them at this time. I suggest that in a common or parallel currency we should be able to protect ourselves against that type of risk with the hard ecu that was thought through some years ago. It was, I believe unfortunately, abandoned, but a type of hard ecu should be reconsidered as a common or parallel currency which could be introduced without our being forced into painful decisions, appearing to be reactive to a single currency. We would be proactive in suggesting an alternative which would serve the people of this country and business and industry well.

That course has many advantages. It would overcome the political, economic and practical difficulties of a single currency. It would enable the achievement of a desired objective to have a currency which is weighted so that a sudden change in one of the exchange rates would have a diluted effect on any transaction. It would leave everyone with the option of whether to use it. People could decide whether they want it, whether they prefer to deal in sterling or marks or to use what, for these purposes, I call the "hard ecu".

That policy could evolve into a single currency over time. If it did, it would only be because it was wanted and had been truly product-tested. It would have gone through all the processes and we would see how it operated and whether it worked. It would be a voluntary decision whether to use it. That would be a proactive way—to use the description of the noble Lord, Lord Jenkins of Hillhead—and we would not sit back waiting to say "no" to a single currency, if that were the decision. In the meantime, we would take a positive role in developing an alternative, if we pushed the suggestion forward, examining it to see whether it would serve Europe better than any of the other courses.

4.54 p.m.

Lord Roll of Ipsden: My Lords, I apologise to the House if, as seems likely, I have to absent myself before the end of the debate. I hope that the House will, as usual, be indulgent. With other speakers, I am deeply grateful to the noble Lord, Lord Jenkins of Hillhead, for having initiated the debate on a subject on which he speaks with great experience and authority. It comes soon after the debate in another place which was

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overshadowed in the public interest and in the effect it had on public opinion by the political arithmetic of the moment.

The House has the opportunity today—which it has already taken—to show once again that it can debate a serious subject seriously. There can be no doubt about the seriousness of the subject. The problem of our relations with our neighbours in Europe, of their aspiration for unity and our reaction to it has been fateful for 50 years. It is a fair guess that it will remain so for many years to come.

Recently, I have indulged in the liberal use of that freely available commodity, hindsight, to review some of our policies over the past 70 years, including our policy towards Europe, based on my experience. I am afraid that the list is pretty lamentable, whatever views one may take as to what should or should not be included. The uncertainties, hesitations, ambiguities and equivocation and often the downright hostility to what was going on on the continent rank high in the list of errors. Perhaps second to none, in view of the amplitude of the concerns it covers for our well being, is our policy towards Europe.

I said that I wanted to draw on my own experience. The Motion refers specifically to the negotiations which are to take place next year in the Inter-Governmental Conference. On that subject I shall say nothing except that I agree largely with what was said by the noble Lords, Lord Callaghan and Lord Barnett. I add one point which is often overlooked on monetary union. It is that closer monetary arrangements have a powerful influence in promoting economic convergence. The emphasis has been almost entirely the other way, yet not only can the opposite be demonstrated in economic theory, but the experience of the countries that belonged to the exchange rate mechanism before we joined it bears out that contention. That is something that should not be forgotten.

I had the privilege for over 20 years after the war of being much involved in European matters, in the inception and development of policy in Whitehall and in its execution by means of international negotiations. When I look back at my own experience, I am struck by two facts. One is that, despite the ravages of war which so impaired our strength, at that time we still had enormous assets at our disposal—military and strategic, diplomatic and political, even economic and financial and certainly intellectual and, above all, moral.

If we leave aside the special position of the two super powers, and if we look particularly at Europe, the sum total was infinitely greater than that of any other country at the time. It would have entitled us, had we so wished, to take the leadership in the European movement. Indeed, at that time, our liberated allies and our former enemies were thirsting for leadership and looked to this country for it. It was an opportunity which I am afraid we threw away.

Another point is that from that time on we carried with us an enormous amount of ideological baggage which prevented us from taking a simple, free and down-to-earth view of our interests in regard to the European movement. The components were many and varied. There were specific ones like a misguided belief

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in the durability and significance of the sterling area; a misguided belief in the durability and significance of many economic arrangements with the Commonwealth which proved to be evanescent. Above all, there was the fact that the view across the Atlantic seemed much more seductive than the view across the Channel. That was due to the half real, but also, alas, to the half illusory belief in the special relationship with the United States. We carried that through; in the Marshall Plan already those vociferous tendencies were present. We refused to join the Coal and Steel Community, maybe largely due to the nationalising proclivities of the Labour Government of the time. Certainly, some of us believed that the Treaty of Rome and the European Community were far too liberal. Others believed that they were far too dirigiste. Obviously, they could not be both at the same time.

At any rate, when we came to make the first attempt to join the EEC in the early 1960s, despite the vision of Harold Macmillan and the skill and determination of Edward Heath in one and a half years of negotiations, we failed. Of course the proximate cause of that failure was the veto of General de Gaulle. But that veto, in my view, was facilitated very greatly by the uncertainty of our own position at the time, whereby we had to address two very different audiences—our prospective partners in Brussels and public opinion at home—at one and the same time in two different voices. At any rate, in the end the General prevented us from joining.

While I am on the subject of the General, perhaps I may mention one point to which the noble Lord, Lord Callaghan, indirectly referred. I believe that everybody here is aware of the fact that nobody could have been more mindful of the interests of his country than was General de Gaulle. He had a most exalted view of the grandeur of France and of the overriding duty to safeguard her position. But he, too, in the end came to the view that that purpose was best achieved inside the Community rather than outside. It may well be that the prospective entry of a powerful newcomer was not at all welcome to him. I believe that he genuinely had an element in his make-up which convinced him of our "un-Europeanness", perhaps our "anti-Europeanness", at that time. At any rate, it was another 10 years before we joined the Community and started on the laborious way back to retrieve our position.

The next test came in 1979, when the Community instituted the European Monetary System, for which the noble Lord, Lord Jenkins, alongside Helmut Schmidt and Giscard d'Estaing, must take credit. When it came, we joined it—but even then, barely half-heartedly. We did not join its most important operational part, the exchange rate mechanism. Even then I thought that the grounds for that refusal were sophisticated, in the worst sense of that word. It was again over 10 years before we joined the ERM. When we joined, we did so—as the noble Lord, Lord Callaghan, has already pointed out—at far too high an exchange rate to the D-mark; and moreover, by all accounts, without adequate, perhaps without any, consultation with our partners. This was not merely a question of courtesy. In joining the

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exchange rate mechanism, we put our partners under certain specific financial obligations. That certainly required careful consultation on the terms of our joining.

However, we extolled both the exchange rate mechanism and our membership of it as the finest things that had happened since sliced bread. We maintained that position right up to the moment when we had to abandon the ERM. When we did so, we declared triumphantly the next day that we now had a fiercely competitive exchange rate. I know, as do many noble Lords, that economics is a many splendoured thing; but that sort of double talk really will not do.

Now we are faced with the prospect of the negotiations next year on the back of the Maastricht Treaty. All I can say is that there are several broad requirements if we are to make the negotiations successful. My remarks are very much along the lines of what the noble Lord, Lord Cockfield, has already said. We have the opportunity next year to retrieve a part—perhaps a large part—of the position that should rightly have been ours half a century ago. Whether we shall in fact do so, remains to be seen. We shall certainly not do so if we go into the negotiations with that curious inferiority complex that regards Brussels as an overwhelming bureaucracy. Of course it has those tendencies and, like all bureaucracies, it requires constant vigils. But the idea that it is a sort of malevolent monster—as I heard last week, when a Member of another place declared that to work constructively with Brussels means (if I may use her elegant turn of phrase) "rolling over on our backs with our legs in the air"—really is an absurdity. It is an affront to the loyal and capable people who represent us in all the institutions of Brussels. We must get rid of that attitude.

Furthermore, we must at last demonstrate—not on this or that particular issue, but right through the negotiations—that we believe what our neighbours on the Continent have believed for so long; namely, that the unity of Europe is an important objective and one that we hold dear. It had a powerful rebirth after the war, first, because of a determination that the fratricidal conflicts that had disgraced the century should never happen again, and, secondly, because of the belief that the world power map, economic and political, was radically changing and that the unity of Europe was a correct response.

If that was true then, what about the changes that have taken place more recently to which reference has been made? I refer to the collapse of the Soviet Union; the changes in central and eastern Europe; even the changes in that great power across the sea, the one remaining super-power, in its interests, its orientation, its foreign and economic policy and so on? Surely it is more true than ever that we must all hang together. Otherwise, most assuredly, we shall all hang separately. If we enter the negotiations in this way, we may retrieve some of our position. If we do not, I am afraid that, contrary to the wishes of the Prime Minister, who wants this country to be at the heart of Europe, we may well end

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up in a very different part of the anatomy. Moreover, we shall be making Europe all the poorer and all the less effective.

5.5 p.m.

Lord Gilmour of Craigmillar: My Lords, the noble Lord, Lord Callaghan, referred to the remarkable harmony of this debate and undertook to disrupt it. However, I do not believe that he really tried. I think we were all relying on my noble friend Lord Tebbit to do that without really trying. We certainly regret that he has been unable to do so. I have no such ambition. But I should like to look briefly at the reasons for the increased public hostility to Europe to which my right honourable friend the Prime Minister referred in the debate last week.

My right honourable friend Sir Edward Heath had no doubt at all about the reasons for that. He said flatly that nothing had been said in the past 15 years by the Government in favour of Europe; there had just been unjustified condemnation. I do not believe that my noble and learned friend Lord Howe, who made an admirable speech this afternoon, would quite go along with that; nor would I. But we would perhaps agree that there is a substantial amount of truth in it. Very often, the positive case for Europe has not been put, and that has had a considerably deleterious effect on public opinion.

A much more important influence on public opinion has been that of the British newspapers—if indeed they can properly be called either British or newspapers. We have had an almost continuous barrage of British, or rather English, nationalism. It is not the sort of English nationalism that was referred to so well by the right reverend Prelate, but a nationalism and anti-Europeanism on the part of the owners and editors and of some British politicians. Such people's nationalism is extremely selective. They do not turn a hair when great swathes of British industry are bought up by foreigners and come under foreign control, or when the same thing happens in the City. But they get extremely worked up when there is even a thought that British sovereignty, so-called, may be infringed; and when the European Court of Justice finds for a British subject against the British Government, they whip themselves into a frenzy of nationalist hysteria—always carefully failing to consider either the merits of the case or the fact that the British subject has won his case and has benefited.

As has already been said by the noble Lord, Lord Jenkins of Hillhead, and others, the most virulently nationalist of our newspapers are owned by foreigners. They are multinational corporations. That no doubt explains their benevolent attitude to foreign multinational corporations buying up British industry. So we have a press that is in large part foreign-owned, stoking up resentment against the foreign countries that are closest to us. Oddly enough, the multinational corporations do not seem to have realised that they are sawing off the branch on which they are sitting. If ever Britain does become the sort of stridently nationalist and unpleasantly xenophobic country that they seek to bring

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about, such a nationalist state would lose very little time in taking over and in seeing that our newspapers and television were owned by English nationalists.

In any case, the nationalism of our Euro-haters in the press, in parts of the Conservative Party, and indeed in the Cabinet, is, as I said, remarkably one-eyed. They are less concerned with real control over our affairs than with the trappings of sovereignty, of which the noble Lord, Lord Callaghan, and many others have spoken. So long as Britain retains its so-called parliamentary sovereignty—whatever that means in 1995—they are happy for everything else to be multinational or foreign controlled. In fact, as noble Lords will agree, no country today can be economically sovereign, not even the United States—certainly not Britain. Furthermore, I do not believe that our Euro-haters in the press and elsewhere are concerned with patriotism in the Burkean sense. As he put it:

    "to make us love our country, our country ought to be lovely".

Instead, they concentrate on abusing our foreign neighbours. The English football hooligans to whom the right reverend Prelate referred are a caricature of our Euro-haters; but the caricature is recognisable.

But in reality, the strident English nationalist and anti-European propaganda has much more to do with ideology than with patriotism. Over the past 15 or 16 years, we have become probably the most Right-wing country in western Europe. That is quite new in our history. I do not think that it has ever happened before. In consequence, we are out of step with our European partners who have kept to a sensibly centrist course. So the Far Right English nationalists look to the even more Right-wing United States, although the United States does not look to them or even at them. And they disapprove of our allegedly socialist and bureaucratic partners in Europe.

In consequence, they—and, I am afraid, sometimes even the Government—talk what to me seems an extravagant amount of nonsense about such matters as the social chapter. I hope that when my noble friend the Minister winds up, she will tell us which parts of the social chapter any reasonable, one-nation Tory could or should find objectionable. In any case, if the Government became a good deal less Right-wing, many of their difficulties would disappear and their position would be greatly strengthened both at home and in Europe.

I very much hope that the Government will play a positive role in the Inter-Governmental Conference and that on Europe it will also be more positive both in the country and the party. If they put the positive case for Europe, as my right honourable friends the Chancellor and the Foreign Secretary have recently done, they will soon find that public opinion will spring back to its customary position in the centre and away from where it is now and that British politics will become a great deal more healthy than they recently have been. But the Government must give a lead.

5.14 p.m.

Lord Clinton-Davis: My Lords, it is always refreshing to listen to and to follow the noble Lord, Lord

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Gilmour. The views that he has just expressed perhaps explain why he had certain difficulties with the former Prime Minister. They were views that I believe were well worth hearing.

I propose to put forward today from the Back Benches views which are personal to me about the Inter-Governmental Conference and certain proposals that I should like to see coming out of that particular deliberation. There is a story, which may be apocryphal—I know not—about Mr. Portillo (or perhaps it was Mr. Lilley). The Minister went to a press conference and a very penetrating journalist asked him, "Minister, why is it that you and so many of your colleagues are so hostile to the European Union? Is it ignorance or apathy?" The response was "I don't know and I don't care".

Unfortunately, it often seems like that. I do not see that that attitude can in the least help Britain to be at the heart of Europe, as so many of your Lordships so obviously wish. It was extraordinary that not so long ago the Prime Minister himself indicated in terms that he wanted to see progress stultified so far as the Inter-Governmental Conference was concerned. That was an extraordinary proposition in the light of the challenges facing the European Union in the years ahead, not least in terms of first deepening and then widening it. It is as though somehow or other the Government have lost confidence in their ability to persuade others in the European Union. I believe that, if we were seen to be more fully involved in the debates as full members of the European Union, our voice would not go unheeded.

There is an emphasis on the negative, the veto, the opposition to any extension of qualified majority voting and curbing the power of the European Court of Justice. Those are matters which arose at Question Time today and about which I sensed a certain degree of ambivalence on the part of the noble Baroness who replied. Nevertheless, Mr. Portillo has supported it. There is the whole question of the opt-outs, to which reference was made by the noble Lord, Lord Gilmour. The opt-outs have already cost us the possibility of siting the Central Bank in this country. That is a rather serious loss. But there is also the meaningless opt-out in relation to the social chapter. The Government's view is simply being ignored by the many conglomerates which have interests in this country and the rest of the European Union; and so social policy is being enacted in practical terms.

I believe that the Government are drowning in a mounting crescendo of contradictions. They welcomed qualified majority voting—quite rightly in my view—to facilitate the extension of the single market. They acquiesced in an extension of qualified majority voting so far as concerned the environmental chapter of the treaty, when they agreed to Maastricht. Now, when they proclaim their determination to secure substantial changes in the common agricultural policy, not least in terms of how that will apply to a widened Europe, they mount an onslaught on qualified majority voting, which is the only practicable means of achieving that and many other objectives. How do they contemplate widening the Community unless many of the institutional situations

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with which we are faced today are substantially reformed? That will require powerful and positive decisions to be made at the Inter-Governmental Conference.

I want to add some observations to the discussion that we had earlier today about the European Court of Justice. If the Government or any members of the Government are serious about curbing its powers by saying that politicians should be able to review or revoke decisions of the European Court of Justice by qualified majority voting at the Council of Ministers—which, in itself, is a contradiction in that sense, because here they are talking about an extension of qualified majority voting—it would deal a very severe blow to the rule of law on which the European Union has to be founded. It is quite wrong for Ministers even to contemplate that idea. As Dorothy Parker once said, in a totally different context, "I don't think that idea should be lightly tossed aside; it should be hurled aside with great force".

We have to ask how best we can protect British interests. As was said at the very beginning of the debate by the noble Lord, Lord Jenkins, and the Leader of the Opposition, it can only be done by our being a full member of the European Community and by adopting a starkly different position from that which the Government have opted to take on so many issues.

I want to refer next to the whole question of the democratic deficit. Not much has been said about that today but a great deal was said about it at the European summit. Many bold declarations were made about how it was necessary to introduce more transparency, particularly at the level of the Council of Ministers. Unfortunately, very little progress was made, but I noticed some very helpful support from the noble Lord, Lord Inglewood, in a rather different capacity. Not so long ago, in April 1994, he said:

    "The Council of Ministers is probably the only legislature in the free world that meets behind closed doors, and that state of affairs should not continue".

That is a pretty authoritative source, sitting where he does today. I hope that he continues to share that point of view and that he has some hope of influencing some of his colleagues in that regard.

What he had to say then is absolutely right. It is clear that decisions which are so central to the interests of the citizens of the Community should be divulged to them in a way that does not happen today. I wonder whether it would not be appropriate to enable the President of the European Parliament, or at a lower level the members of the relevant committees, to be present at meetings of Councils of Ministers. That might be a good way of ensuring that fairness should rule.

I also believe that the powers of the European Parliament need to be enhanced still further beyond the Maastricht Treaty. It is, after all, the only democratically elected institution. It should have the power to initiate legislative proposals where the Commission has failed or refused to do so over a period of years—it does not matter for how long—when the Parliament has requested that a particular proposal should be brought

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before the Commission. It should have the right to approve the nomination of the President of the European Commission.

Of all the policy areas which are undertaken by the European Union, and in particular the Commission, the environment is by far the most popular. That has been revealed in European poll after European poll. It is perhaps wrongly seen by so many people as a kind of court of appeal against the anti-environmental activities of member states. But, contrary to the view of the Foreign Secretary in his discredited "nooks and crannies" argument, I believe it is essential that when it comes to the question of implementation and enforcement of European Union environmental laws—there are far too many breaches—powers should be provided to the European Commission or the European Environmental Agency to enforce the laws along lines comparable to the enforcement of European Union competition law. There should be a small inspectorate and action against the undertaking and not simply against the member state which is in breach. There should be the imposition of a fine to stop the mischief in its tracks and the right of appeal to the European Court of Justice. I do not believe that the power which has been vested in the court by Maastricht is anything like sufficiently practicable. The taxpayer would pay if fines were levied against member states and certainly not the polluter.

Time demands that I finish and so I shall end on this note. I believe passionately that we have to play a real part in the development of the policies relating to the future of Europe. It has to be a more democratic, vibrant, purposeful and efficient Europe. It is essential that we should exercise our influence. Arguing for Britain and arguing for Europe are absolutely synonymous. That is my profound belief. I hope that it will be reflected in our attitude at the Inter-Governmental Conference.

5.24 p.m.

Lord Thomas of Swynnerton: My Lords, ghosts in this House, of whom there are many—in fact there may well be more than there are Members present —would remind us that Britain spent the last part of the 19th century not making up its mind satisfactorily over Ireland. It looks as if there is a danger that Britain may be condemned by historians for having made the same kind of mistake in relation to the end of the 20th century over Europe; because, as many noble Lords have pointed out, Britain's voyage to the heart of Europe has been one of the most round about journeys ever undertaken since Christian embarked on the Pilgrim's Progress. We now know, at the end of the 20th century, that good novels do not necessarily have to have a happy ending.

The European Union, as it is today, was conceived by Monsieur Monnet largely for three reasons: first, in order to achieve common economic policies which would avoid the catastrophes of 1914 and 1939; secondly, to try to achieve a European economy which would be a satisfactory challenge to any conceivable rival; and thirdly, to try to ensure that Europe's overall

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political interests were borne in mind in the destiny of the world. The first of those aims has been achieved; the last two, as yet not fully.

Behind all these policies was the sensation that the European nation state in the 1950s—even the largest European nation state—was not large enough to be effective, a point of view which most of our colleagues and partners on the European Continent now accept by second nature but which many members of our own population do not seem to have done. Of course, M. Monnet did conceive with his colleagues that, in the long run, they should try to achieve a United States of Europe—M. Monnet had an action committee for that purpose—but the fact is that neither he nor they ever sought to achieve a federal European state with a federal government, a federal civil service and a federal police.

On the contrary, they always conceived the present situation, which is that the directing body in Europe is the Council of Ministers, a group of individuals who are responsible to the nation states—their own nation states, their own parliaments and their own electorates. The absence of coercive power at the level of the Union, as we now call it, is the most remarkable, interesting and in some ways extraordinary aspect of this great political innovation. The nation states carry out what the Union decides. There are no Community agents to carry out those decisions. So how can there be a serious danger in what has been achieved up until now of a federal state, as so many Euro-sceptic members of the Conservative Party assume?

It is fair to say that this idea of shared sovereignty, so well described by the noble Lord, Lord Barnett, is a new one and something which is a challenge to classical ideas of political philosophy, but there is no reason why such innovations should frighten us.

There is of course the possibility that the functioning of the European institutions may seem not to be able to work in the end without the establishment of a federal state. I have often thought that myself. Certainly it is true that the area of competence between the state and the Community is not clearly defined, even after Maastricht which devoted so much attention to the idea of subsidiarity. Certainly the construction of a federal constitution would resolve more easily than any other solution the question of the democratic deficit, to which the noble Lord, Lord Clinton-Davis, referred. However, the probability is that the existing institutions, basing their legitimacy on the continuation of the nation state collaborating with other nation states as we now have, will be able to work quite satisfactorily for the foreseeable future.

I believe that the test is European Monetary Union. If Europe can achieve a common currency without a federal structure then surely it—we—can do anything. The question of whether to have a full federal structure can be delayed indefinitely and at least until such time as the maximum number of candidate states will have joined in something like the year 2020. That is the year when many of us in this House will look forward to repeating this debate and having a full and final discussion on the matter.

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All these innovations have sat ill to some extent with this country. Britain has felt ill at ease with these tremendous innovations. It is perfectly understandable why, in the 1950s, many felt that our nation state still with imperial power was adequate for our foreseeable needs. In 1995, however, it is much more difficult to understand why that attitude should survive. It certainly seems to have survived even though we are, if anything, more ill at ease with the European Community than at any previous time.

This is particularly a matter within the Conservative Party. It is a party where one Conservative hostile to the European Community can accuse another in favour of it of being "a Pétainist" adapting himself to the new European order, as one such person did to me only two nights ago. This mood derives not from national pride or even a memory of past greatness but from a new mood of provincial nationalism which is extremely destructive.

I wish to say two more things. First, I strongly believe that my noble friend Lord Cockfield was correct in saying that it is an illusion to suppose that we can return to something like a common market and a simple customs union between nation states after 40 years of European integration. Anyone who believes that is like someone coming into this House and supposing it to be primarily a cricket club. Anyone who believes that we should try to establish a customs union instead of what we have already should have the courage of his convictions and advocate, like Mr. Norman Lamont, full withdrawal.

Britain outside the European Community is not an impossible concept. Many of us would like to know more about what those who claim that as a possibility believe the outcome would be. At first sight it would appear to be a rather bleak and austere possibility. I wonder whether those who advocate such an eventuality would allow those of us who remain in this country in those circumstances to maintain ecu bank accounts.

5.34 p.m.

Lord Harris of High Cross: My Lords, I fear that I am rather ill-prepared to stem the tide of so far mostly uncritical Euro-enthusiasm. I am bolstered by the fact that further down the list of speakers there will be support coming to my help. We have missed the contribution of the noble Lord, Lord Tebbit.

I say that I am unprepared because I learnt of this debate only this morning. I have just returned from Italy where, some will be shocked to hear, at the invitation of the British Council I have taken part in a debate with an Italian, Professor Comba of Turin, on the issue of free trade and economic co-operation. I hardly dare hope that the remarks I draw from my paper will be as well received here. I was totally astonished. Older people in Italy drawn from the Oxford and Cambridge Society, among other exemplary bodies, acknowledged that Italian enthusiasm for Brussels had hitherto been due to total disillusion with their own political and economic muddles. They said that anything would be better than Rome. Older people in Italy regretted that younger Italians did not share that view. They were much closer

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to the Thatcher view. They described it as the Berlusconi and Antonio Martino view of the last government.

I was shocked to hear the noble Lord, Lord Thomas, speak about a "simple customs union" as though it were to be despised as a marginal addition to economic policy. On my argument the Treaty of Rome is based on the central idea of promoting the lasting peace of which we have heard, by replacing economic nationalism with a framework for a competitive common market. That was a central notion of the Treaty of Rome. I shall not provoke hostility by developing the theme that follows from that beyond saying that the case to economists was that in place of protectionism and autarky, which caused so much trouble before the war and which Adam Smith had denounced as mercantilism, the founders of the EC principally backed the notion of integration through economic trade and investment by removing tariffs and non-tariff barriers to the free movement of goods, services, capital and people.

When apologetic British spokesmen say that we are isolated or marginalised in Europe and the noble Lord, Lord Ezra, says that if we had been in it earlier we would apparently have refashioned the entire operation to our taste, they ignore the totally different tradition in political economy and economic philosophy on the Continent of Europe from that prevailing in this country. Classical liberalism never won the intellectual ascendancy on the Continent that it achieved in Britain during the 19th century. Apart from a few isolated economists such as Einaudi, Rueff, Erhard, Ropke and a few others, the prevailing philosophy owes much more to the intellectual tradition of Catholic social doctrine. That is closely linked with corporatism, which is a somewhat elusive concept. I argue that corporatism is redolent of the seven Cs, beginning with consensus and conformity, going on to co-operation and centralism, and then collectivism, carve-up and not forgetting corruption, and all the time increasing coercion. That is the corporatist tradition.

The impact of the Catholic social doctrine on the Continent has been reinforced by the way in which proportional representation has led to fragmentation of government support. It has enfeebled governments—and Italy is a classic case—where party apparatchiks become very powerful; there is a premium on coalition, compromise and backstage deals between political elites disregarding entirely public opinion and always favouring a consensus which has little merit necessarily to the balance of argument in the case.

In 1971, before the referendum, the Institute of Economic Affairs, in which I must declare an interest, having run it for some 30 years, produced a classic paper with a most important title, Rome or Brussels? It posed a real choice between the liberalism that was inherent in the Treaty of Rome and the burgeoning bureaucracy that was already visible in 1971 in Brussels. Since the 1980s, it has daily become more clear that the bureaucrats of Brussels have triumphed altogether over the Rome liberalisation.

This week, the same institute (without my wise guidance) produced a further paper, which I am allowed to advertise, called The Centralisation of Western

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Europe—not by what the noble Lord, Lord Gilmour, would call a "Euro-hater" or a "Euro-hooligan" but by one of the leading German economists, Professor Roland Vaubel. I advise your Lordships to watch Vaubel as a likely entrant in the next 10 or 15 years for a Nobel prize. Vaubel shows that instead of encouraging trade, integration, closer relationships and interrelationships through trade based on mutual recognition, whereby the products and standards that are acceptable within any member country can be exported freely throughout the whole Common Market, the Commission and its apparatchiks have exploited the plausible pretext of "harmonisation" and "level playing field" to set about flattening and homogenising the very differences in costs and qualities on which a large part of free trade fundamentally depends.

Helped by the Single European Act, which had the aim of completing the market by 1992—it is still, alas, incomplete—we had the great development of qualified majority voting which was necessary in place of the old veto. However, as a result—an unintended result—there has been a tidal wave of Brussels legislation. According to Vaubel, at the last count there were 24,000 regulations and 1,700 directives. He argues that despite recent talk of "subsidiarity", they are growing at the rate of 1,500 regulations and 120 directives per year.

What emerges from Vaubel's study, which is a very close and intricate economic analysis of the whole operation, is that there has been a tremendous development of lobbying. He reveals that there are now 3,000 lobby organisations and 10,000 lobbyists in Brussels. He quotes the calculation that 70 per cent. of Community legislation and subsidies is concerned with special interest groups, including the common agricultural policy. He explains that lobbyists find it easier to tackle the bureaucrats who enjoy enlarging their bureaux and who are not subject to the same restraint of democratic control as politicians, who can often tell a lobbyist on the make.

The noble Lord, Lord Gilmour, asked what was objectionable about the Social Charter. I probably have the time to answer that question for him. It is perfectly clear that when you introduce free trade in a Europe that has had a history of Colbert restrictionism over the decades you will have a varying impact on different parts of the market. Some countries will fare worse than others and their interests will be badly affected. The only solution to that is to develop a flexible labour market. That is a phrase that the Liberals find rather distasteful, but a flexible labour market has enabled the great countries of the Far East, such as Hong Kong, to adapt to changing opportunities and to shift resources, such as labour and capital, into industries where the prospects are better. Instead of that, the EEC backs the Social Charter. You even hear nominal Liberals like the noble Lord, Lord Ezra, asking what is wrong with it and saying that we should get in there.

For the information of the noble Lord, Lord Gilmour, among the aims of the Social Charter is the imposition of uniform requirements on all aspects of working conditions, including redundancy, maternity leave, pensions, social benefits, hours of work—and ultimately

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a European minimum wage. The protectionist intent of all that—not protecting standards, but protecting economies against the impact of change and trade from abroad—became clear in 1993 when M. Jacques Delors—happily departed to, I hope, more agreeable activities—launched the bizarre idea of incorporating into the GATT negotiations a "global Social Charter". The idea was to prevent European standards of living being undermined by what he called "social dumping" from low-wage Asian competitors. He had not looked closely enough to find that the effect of trade is always to tend to equalise standards of wages upwards, so that in Hong Kong we have seen people who were paid a handful of rice in my youth now enjoying wages and benefits that are at least on a par with the English standards.

Since the noble Lord, Lord Tebbit, has allowed us a little extra time, I must, I am afraid, deal with the question of nationalism, which is constantly being put forward. My argument in conclusion is that for Britain to play its most helpful role in Europe, it must stand by its guns and develop its different vision of Europe. That is a perfectly honourable position, as opposed to being in the middle with constant compromises being struck against the development of the free movement of goods and services and all the rest of it. There is nothing despicable about nationalism. It does not mean narrow chauvinism and the "trappings of sovereignty"—

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