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Lord Bruce of Donington: My Lords, I am sure that the noble Baroness would wish to be fair and to complete the trading picture by stating quite correctly that the deficit on visible trade with Europe over the past 10 years has amounted to £72.9 billion.

Baroness Chalker of Wallasey: My Lords, this country does not live by visible exports alone. It lives by invisibles too. The overall cost-benefit analysis, which is what I was being asked for at one point in the debate, must take into account visibles and invisibles.

It is against those benefits that we need to balance our net contribution to the budget. Britain and Germany used to be almost the only net contributors. Now Germany contributes almost five times as much as we do. France now makes a similar net contribution to ours. The Netherlands is not far behind. Italy, Sweden, Finland and Austria have all become net contributors too.

That development has brought a very welcome change in the attitude of member states to budgetary discipline and value for money. I say that because Britain has been fully involved in all those arguments in Europe and it has been winning them. The evidence is undoubted. The single market was largely a British crusade. There is now universal acceptance of Europe's historic responsibility to achieve EU enlargement to the east. Yet that was by no means accepted a few years ago. There is a new accent on competitiveness and free trade in the European Union which delivered a market-opening GATT deal in the teeth of French opposition. And there is greater concern—and not before time—about budget discipline, fraud and the mismanagement of funds.

As my noble friend Lord Plumb said, we should be extremely grateful to your Lordships' Select Committee for all the work that it has done to enhance proper control of what goes on in the Community. We are now starting to see the beginning of agricultural reform, although there is still a long way to go. Subsidiarity—and I shall return to that in a few moments for my noble friend Lord Harmar-Nicholls—is now part of Community life. The pillared structure of the Maastricht Treaty, which ensures that crucial areas remain for national co-operation and not for the Community, was a major setback for European integrationists and centralisers, and yet we drove it through. Above all, there is now general acceptance of the importance of respecting national identity and diversity within the Union, which must never develop into a federal superstate.

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A prominent European said only last year that only Great Britain had asked the real questions before Maastricht even if—and I agree with the noble Lord, Lord McIntosh—there was inadequate debate in the country as a whole. When one tried to debate the issues before Maastricht, many people simply were not interested. I can say that from my own direct experience. I addressed meeting after meeting and looked at many, many blank faces—and not because of what I said either.

But the same prominent European went on to say that the construction of Europe, without our questions, was virtually on auto-pilot. That was not my right honourable friend the Prime Minister; it was the former President of the Commission, Jacques Delors. He recognised the unique contribution which Britain had made and goes on making. We are not afraid to ask difficult questions of our partners about European construction and we shall continue to do so.

We are determined to play a positive role, but that does not mean that we have to go along with each and every suggestion that is made. I shall look at all the suggestions that have been made in this debate and in particular those to which I cannot refer in my winding up this evening.

The noble Lord, Lord Bruce of Donington, was quite right to say that the Commission must not get too big for its boots. The Council is the decision-making body. Subsidiarity is working well. It is reducing the Commission's inclination that it had in the past to become involved in the nooks and crannies of our lives. I can tell the noble Lord that progress is being made in relation to financial matters. The new budget Commissioner is now required to vet all proposals with budgetary implications before they are passed to the College of Commissioners. That is something for which the United Kingdom has pressed for some considerable time. Members of this House who were Members of the European Parliament have also pressed that issue.

The noble Lord, Lord Bruce of Donington, was right also to say that in the past the Commission produced too much legislation. The UK success at Maastricht in relation to subsidiarity has meant that the number of proposals for primary legislation has fallen significantly: 185 in 1990; 47 in 1994. There is still a problem with subsidiary legislation because changes have to be made, but even that is under clear scrutiny and will be reduced.

My noble friend Lord Shaw of Northstead made the point about fraud. Fraud against the Community budget and the continuing waste of Community resources are totally unacceptable. Much is now being done to address the problem. The Commission has reinforced substantially its anti-fraud work, but much more still needs to be done. Therefore, we persuaded our partners to agree a plan of action at the Essen European Council. That plan of action is now under way. We are determined to deal with fraud.

My noble friend Lord Shaw of Northstead was the first noble Lord to mention the Reflection Group. Perhaps I may spend a few moments dealing with that and institutional issues. Last week the Prime Minister

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made clear our approach: that the institutional balance between the parts of the Union should not be altered significantly. That is certainly our approach to the IGC. As I said, the Council must remain the primary decision-making institution of the Union but it must be strengthened, as my noble friend Lord Shaw said. The Commission must concentrate more on management and value for money and less on its legislative role. The key issues will be the proper implementation of legislation and effective action against fraud and waste. The noble Lords, Lord Bruce and Lord Desai, and my noble friend Lord Shaw mentioned that.

We see no case for giving the European Parliament significant new legislative powers. It must grow into the powers that it has already under the Single European Act and the Maastricht Treaty.

We believe too that national parliaments must be the primary focus of democratic legitimacy. As my noble friend Lord Shaw said, we should like to develop the role of national parliaments in European Union decision-making.

The Reflection Group will meet first on 2nd June in Messina and then regularly during the second half of this year. Its mandate is to look at the functioning of the treaty. No doubt it will suggest options for possible improvements. My honourable friend Mr. Davis will be working hard in that group on those issues and is also already discussing with colleagues how we can make the whole Community work better. That is exactly what we wish to do.

A number of your Lordships spoke of the European Court of Justice. As I said at Question Time earlier today, we need a strong court to enforce Community rules and obligations. There are aspects of the court's jurisprudence which cause us concern; in particular where judgments have had unforeseen or disproportionate financial implications for member states. Therefore, we are considering what proposals to make to address those concerns at the 1996 IGC. But we are not alone in that. Other nations also wish to make proposals and such proposals will be made in a positive manner.

However, we shall certainly not be seeking to emasculate the Court as some would obviously like. We need to be clear that the Court is there to ensure that others comply with their obligations. We must ensure that others keep to what is decided by the Council. The Court's role is to interpret and apply the treaties and EC legislation. There are a number of recent cases which show that the Court is now more sensitive to members' concerns—the World Trade Organisation ruling and the recent European Development Fund ruling are but examples of that process.

My noble friend Lady Rawlings, the noble Viscount, Lord Waverley and many other speakers spoke about the ERM and EMU. In another place on 1st March the Prime Minister set out our policy clearly and at some length. Therefore, I shall not repeat those points. However, perhaps I may emphasise the fact that there

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can be no intention of rejoining the ERM in the lifetime of this Parliament. I believe that we are all clear on that point.

At other times during our debate we went into the question of variable geometry, but the noble Lord, Lord Bruce of Donington, said that we would be wrong to talk in abstractions. Perhaps I may just explain to the noble Lord that "variable geometry" means a flexible Europe. More flexibility will obviously be essential to a Europe with more members. There is no way, without flexibility, that we could increase the number of members of the European Union to 20 or, indeed, beyond that number. Therefore, we must work for sensible flexibility in Europe.

My noble friend Lord Harmar-Nicholls, asked for a definition of "subsidiarity". We have discussed the matter on numerous occasions. It is defined very clearly in Article 3B of the Maastricht Treaty. That article was a considerable success for Britain. It says simply that the Community can only act if it has been given the power to do so and has genuine value to add over national action. Moreover, if it does act, then it should do so in the least intrusive way possible. I could speak more about subsidiarity and perhaps I shall need to do so in order to convince my noble friend. However, I should also like to tell my noble friend Lord Pearson that in the report to the Brussels European Council, the Commission said that it would propose the repeal of about 25 per cent. of all existing legislation. Some of that would be repealed for good, and some replaced with a smaller number of new proposals. That work is well under way. It certainly demonstrates that the acquis communautaire is not sacred, nor is it untouchable.

We all know that the European Union is facing unparalleled challenges over the coming period. Enlargement is vital to embed democracy and market structures in eastern and central Europe. NATO and the Western European Union must be adapted to the new tasks. We need to forge a new European Union relationship with Russia. Therefore, I beg that we do not become mesmerised by next year's Inter-Governmental Conference. It is still a year off. While we shall work away positively at it, as the noble Lord, Lord Jenkins of Hillhead, asked, and we shall play, as my noble friend Lord Oxfuird requested, a very constructive role, there is a great deal of other priority work to be done. In any case, we do not expect dramatic results from the 1996 process, nor should we encourage the speculation that great changes are in the wind.

Maastricht has barely had time to settle down and it is, by general consent in Europe, too soon for major new departures. There is certainly much useful work to be done; but it may not be as exciting as some noble Lords might wish, and others might fear. I believe that I can assure the noble Lord, Lord Jenkins of Hillhead, that we shall go into the IGC not only with a positive agenda but also with an absolute determination to improve the operation of the Maastricht Treaty and to build upon its flexible pillared structure.

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Our proposals will include the improvement of the Common Foreign and Security Policy. We shall step up the fight against organised crime and terrorism, especially in the field of drugs, to which my noble friend Lady Rawlings, referred.

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