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Lord Hamilton of Dalzell: My Lords, I apologise for interrupting my noble friend and thank him for allowing me to do so. Does my noble friend agree that the option will still exist if we join the single currency?

Lord Kingsland: My Lords, of course the option will still exist to come out, because the whole authority of the Community rests on the 1972 Act. Once you pull that away, the rest of the cards in the pack also fall away.

In conclusion, I should like to say something about the strategic picture in which to place our membership. When looking at the value of our membership of the European Community, it is very important to place the security aspect above all considerations. What is the biggest threat that this country could face in the future? To me it is this: it is the combination of the United States become isolationist again and Germany and Russia doing a new deal over eastern Europe--in exactly the same way as Molotov and Ribbentrop did over central and eastern Europe at the beginning of the Second World War. That is why what happens in central and eastern Europe is so crucial. We must find a way to organise the state system in central and eastern Europe which would prevent such a deal between Germany and Russia from happening again. If such a thing took place, the security of this nation would be in great peril. No one should be in any doubt about that.

With great respect to my noble friend Lord Pearson, I believe that he is making the same mistake--and I say this without any emotive intent--that Mr. Neville Chamberlain made in the late 1930s; and I am not talking about the word "appeasement". The great mistake that Mr. Chamberlain made about the security of this country was to think that what happened on the Continent of Europe did not matter to our security. We are in danger of making that mistake again if we draw back from intimate involvement. It is not a question of whether or not one is pro-European; it is a question of whether one is pro Britain's intimate involvement in

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establishing a secure Continent. That is the issue that we have to face, and we hear very little about it in our debates on the European Community.

It is my firm belief that it is only if Britain is involved in expanding the Community to central and eastern Europe and places that absolutely at the top of the agenda, way above the single currency, that we will persuade our colleagues on the Continent--namely, France and Germany--to follow that route. If we do not do so, I believe that we will face a very unhappy and dangerous future.

I believe that something of those thoughts can be put into the concept of flexibility which is being developed by my right honourable friend the Prime Minister. I should like to suggest one alteration. My right honourable friend is saying that flexibility is a good thing but we must have a veto if our colleagues want to go ahead faster than us. In the late 1940s, Mr. Winston Churchill took the opposite view. He had very mixed feelings about Britain's involvement in the Community itself. Indeed, depending on which speech one reads, one can either decide that he wanted to go in or stay out. However, that is not the point that I am trying to make. Mr. Churchill had absolutely no doubt at all about the importance of France and Germany becoming very close. That would not only prevent those two countries from going to war again, but it would also bind Germany into the West. That approach remains today, in my opinion, as important a foreign policy objective for this nation as it was for Mr. Churchill all those years ago.

Why I say that my right honourable friend the Prime Minister does not have flexibility quite right is this: we should be quite relaxed about France and Germany going ahead faster than us; that will not present a threat. The threat comes if Germany turns her attention elsewhere before we have expanded the Community to central and eastern Europe.

We should not in any way be a dog in the manger. It is all right for us not to want more Europe; but it is not all right for us not to want Europe to have more Europe. The Prime Minister's performance in the Maastricht negotiations was quite outstanding because he has won options for this country which suit us well. We can take them or not as we will. I share many of the views of my noble friend Lord Pearson about the single currency. I have always been a keen supporter of the gold standard. If the single currency were the image of the gold standard, I would be completely relaxed about it. I still think it is possible to shape it in that way. However, if I were a German, the last thing I would want would be the single currency, because Germany has built up a strong economy since the war based on the deutschmark and why should she give it up for something that is much less secure?

The single currency is a difficult issue. There is much to be said for hesitancy about it for economic reasons. However, we should not throw the thing over for ideological reasons. We had a successful single currency in this country from 1876 to 1914. I do not think any Member of your Lordships' House or of another place ever stood up, during those years, and said that that

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system threatened the sovereignty of this Parliament, or indeed of the nation. I think the matter needs looking at more objectively from a constitutional standpoint, even though, economically, I entirely accept the difficulties are profound. My right honourable friend the Prime Minister was quite right to take the position that he did in Maastricht.

I see that I have spoken for nearly 12 minutes and therefore I draw my remarks to a conclusion. I congratulate the noble Lord, Lord Pearson, on introducing his Bill--although I cannot, I fear, support it--because I think he has done something for Parliament. Let us keep these decisions for representative institutions because it is their task to shape our nation's future.

12.42 p.m.

Lord Moran: My Lords, we should be grateful to the noble Lord, Lord Pearson of Rannoch, for introducing this Bill as part of his unremitting efforts to alert us to the dangers we face from a tightly integrated Europe. It gives us a long overdue opportunity to debate the possibility of our seeking a new relationship with the European Union and restoring to Parliament the full control over our affairs of which it was deprived in 1972. For far too long this question has been dismissed as unmentionable.

Of course we need to be on good terms with other countries in western Europe. They are our near neighbours, our trade with them is large and important. We are Europeans, as they are. We should have the friendliest relations with them. But manifestly we do not. Our relationship with the other members of the European Union is one of constant friction, of row after row, of our constant isolation on issue after issue. We are continuously exasperated with them and they are continuously exasperated with us. Why is this? It is sometimes asserted--notably by the Opposition parties--that it is because of the obstinacy and obtuseness of the Government. I do not believe that. The causes are much deeper. Essentially it is because the aims and objectives of other EU member states (but not always their peoples) are fundamentally different from those of our Government. They want rapid progress towards a federal Europe and towards a single European country. Our aim, as set out in the White Paper on the Intergovernmental Conference, and most recently in the Foreign Secretary's article in The Times of 23rd January, is a partnership of nations, the grouping defined long ago by General de Gaulle as L'Europe des patries.

The reasons for this profound, and in my view unbridgeable, difference in approach lie in history. Many of the countries of the EU were overrun and occupied during the war. As a consequence, they lost confidence in the nation state and its capacity to safeguard the future of their peoples. Moreover, the problems in some western European countries, for example in Italy and Belgium, are so serious and intractable that their peoples have come to believe that they can only be solved in a wider European context.

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The case with us is different. Although some members of the political class undoubtedly shared the view that an independent Britain could not be made to work, their view has never been widely shared. We have not been successfully invaded or occupied since the Norman Conquest, and, although most people wish that we were better run, they have not lost confidence in Britain, nor do they want Britain to disappear. All the evidence is that they do not want to see us swallowed up in a European superstate.

The line taken in the White Paper, and in Mr. Rifkind's article, seems to me eminently reasonable. However, it runs contrary to the integrationist policies to which continental governments and the Commission are committed. Therefore I do not see that it stands any chance of acceptance by other governments. Mr. Rifkind says that there is a third way. I should like to think that he is right, but I cannot believe that he is. We are like a man going into a McDonald's and ordering a sole Colbert. It would be nice, but it is not available.

I have for a long time been concerned about the line taken by political parties in putting the problems to the British people. There has been a consistent failure to be honest with the public about what "building Europe" is. German leaders are far more candid. Our political leaders shy away from admitting that "ever closer union", as set out in the first paragraph of the Treaty of Rome, and in Article 1 of the Treaty of Maastricht--to both of which we subscribed--means just that; ever closer union. It can only mean steady, unfaltering progress towards a single Europe.

It is sometimes argued that the idea of a single European country is a fantasy. The Prime Minister said in another place on 29th June 1992, of what he called a "central European state",

    "We do not want it ... it is an unreal prospect--the stuff of nightmares for a few people".--[Official Report, 29/6/92; col. 592.]
My former colleague, Sir Nicholas Henderson, wrote in the Economist on 23rd November 1996,

    "The myth that the closer union desired by continental countries will amount to a United States of Europe ... should be exploded".
Yet the founding father of the European Union, Jean Monnet, who of all people may be presumed to have known what the enterprise is about, wrote in his memoirs,

    "We ... are heading for our objective, the United States of Europe; and for us ... there is no going back".
Jean Monnet was also founder of the action committee for the United States of Europe.

If there was ever any doubt about where Europe is going, it should have been removed by the Treaty of Maastricht. As some of us pointed out during the 1993 debates, it was a massive centralising measure. Yet it was forced through by the Government with ruthless Whipping in another place, and in this House the Whips ensured that a massive majority voted down the proposal of the noble Lord, Lord Blake, for a referendum. I still cannot understand how a government who oppose a federal European state and stand for a partnership of nations can have signed and commended to Parliament the Treaty of Maastricht. The whole burgeoning

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structure of the EU is directed towards creating a single country. Only a person with his head in the sand could think otherwise.

It has been sad to see on this--the greatest issue of the day--the lack of any official opposition in Parliament. Party leaders seem concerned only to suppress the doubts of their supporters. Mr. Major has not been successful at that, while Mr. Blair announces from Amsterdam that he will not tolerate dissent by Labour candidates. It has been left to the press and a few individuals in either House to provide the main criticism of what the politicians are doing. The BBC often seems inclined to follow the Liberal Democrat line.

It is however clear that people outside this House are increasingly uneasy. The Daily Telegraph poll published earlier this month showed that 38 per cent. wanted to leave the EU, 56 per cent. opposed a single currency and 69 per cent. opposed handing powers to a European central bank. What worries me is that the parties are not telling the people what the choices really are. They talk about what interests them--influence, the need for a seat at the table, though they are only offered a seat below the salt. They are not giving the people a chance to decide on the future of our country. I firmly believe that government should be on the basis of consent. On this great issue we do not have it.

Where then do we go from here? Staying as we are is not an option. "Ever closer union" is being achieved day after day by the ratchet, the one-way transfer of powers, the sacrosanct aquis, by steps Chancellor Kohl describes as "irreversible".

We have, I think, two choices: either co-operation in ever closer union and acceptance that we shall be dragged into a federal Europe, or a renegotiation of our entire relationship with the EU. Essentially I think that our policy should be, "Loosen up or leave".

Our present situation, which might be described as "pay and obey", is bad enough. The loss of substantial chunks of our independence since 1972, when the Acts of this Parliament became subordinate to European law, has only recently become clear to the people of this country, with the destruction of our fishing industry and the spectacle of the Minister of Agriculture going hat in hand to Brussels begging to be allowed to export gelatine and being turned down flat. There is, naturally, increasing irritation with the hectoring attitude of the Commission--M. Santer is no better disposed than M. Delors--and the criticisms of European leaders. I recently saw a briefing note distributed to MPs by the Commission's London office before the fisheries debate on 16th December in another place. It contained this paragraph:

    "Calls for Britain to declare a 200-mile exclusion zone are unrealistic. Such action would completely isolate Britain in Europe, close EU export markets to British fish and threaten other trading interests. It is unlikely that such a policy could be implemented without the use of physical force".
If when I was an ambassador I had used language like that in briefing local parliamentarians, I think that there would have been demands for my recall. I should be

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glad if the Minister, to whom I have given notice, would let me know how the Government have reacted to this extraordinary briefing.

We are all familiar with the bureaucratic nightmare of Brussels and the flood of regulations assiduously chronicled by Christopher Booker. Some time ago I stopped outside a bookshop in Wales and saw in the window a small card saying,

    "There are 56 words in the Lord's prayer, 297 in the Ten Commandments, 300 in the American Declaration of Independence and 29,911 in the EEC directive on the export of duck eggs".
We are familiar, too, with our wholly disproportionate budgetary contribution, with the waste, folly and fraud of the common agricultural policy and the failure and contradictions of the common fisheries policy.

The prospects are even worse--for VAT on food and children's clothes, for our having to provide huge sums to underwrite unfunded European countries' pensions, for the end of the pound sterling and the handing over of control of our economy to unelected central bankers in Frankfurt, and perhaps for a demand that our oil reserves be made, like our fisheries, a common resource.

It seems to me clear that we cannot go on as we are, locked into an irreconcilable conflict of aims which infuriates all sides and can lead nowhere. We must seek a new relationship, something that will rid us of the CAP and the CFP and the burden of our disproportionate contributions. There are of course aspects of the EU that we would want to preserve--for example, the single market and co-operation on environmental matters.

There are a number of alternatives. There is the European Economic Area to which Norway now belongs. That happy and prosperous country has joined the single market but is not involved in the CAP or CFP or bound by the Maastricht acquis or by European law. This seems to me almost exactly what we ourselves really want. Alternatively, there is the Swiss model of a free trade area, or the standard non-discriminatory most favoured nation relationship which covers current EU trade with the United States and Canada.

If we were outside, would that be a disaster? First, I do not believe that even an angry continent could or would simply put up the shutters against our exports. Self-interest is the most potent of all factors. They sell us more than we sell them. Then successive GATT rounds have reduced tariffs from the high levels at which they were when we joined the Community to an average of just over 3 per cent., and for many goods the levels are now zero. Any future trading relationship would have to take account of GATT and World Trade Organisation principles, notably non-discrimination and MFN status.

Despite the inept remarks of the chairman of Toyota--not echoed, I note, by spokesmen for Nissan and Honda--I believe that, as other Japanese business leaders have pointed out, investment depends on moderate wage levels, modest tax levels, political and social stability and honest public administration. The real threat to business might be the collapse of a single currency created by fudge.

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We should gain financially if we were out by being freed from making a budgetary contribution of some £3 billion a year and from paying our share of the CAP. We would have a small but prosperous fishing fleet operating within our 200 mile limit.

Above all, I believe that taking back control of our own affairs and being once more responsible for what we do might well give us an enormous shot in the arm, a great boost to national self-confidence, the sort of enthusiasm we saw briefly during the Falklands campaign when we were under the inspiring leadership of the noble Baroness, Lady Thatcher. It would be exciting, a challenge to our capabilities. I believe that our relationship with the principal countries of Europe could well be much better if we were outside the EU. We would once more take our natural place as both a European, Atlantic and world power. This would, I believe, be a far happier country.

It follows that we should take back our freedom of choice by repealing the European Communities Act 1972. To that end the preliminary steps proposed in this Bill are to be welcomed. It would be a signal that we meant business and the key to a better future for ourselves and our children.

12.56 p.m.

The Earl of Clanwilliam: My Lords, the noble Lord, Lord Moran, has done a remarkable hatchet job which I shall find hard to follow, but I shall try.

As my noble friend Lord Pearson said, his Bill is timely and, I believe, conforms in some respects to some of the opinions held by the party that we both support. It is also vital that the matter be thoroughly debated in Parliament for the benefit, among others, of other European Parliaments as well as our own people. I shall, therefore, vote for a Second Reading if it comes to a Division.

With reference to the amendment proposed by the noble Lord, Lord Taverne, I spoke in the previous debate that he initiated and referred in particular to the excellent security provided by NATO, and only by NATO, in the world of today. I spoke of the dangers of imposing currency regulation before political cohesion had been established; and of the dangers of political upheaval that would inevitably follow.

On that subject, perhaps I may refer noble Lords to the seminal speech of the noble Lord, Lord Dahrendorf, a Member from the Benches of the noble Lord, Lord Taverne, reported at col. 1451 of the Official Report of 24th July. The noble Lord spoke in the debate on the Select Committee on the European Communities and demonstrated clearly the dangers that would follow from the "ins" and "outs".

So much has been said already on this vexed question and there still remains today an enormous controversy among all those whose judgment I respect. Having listened to President Chirac in his speech to both Houses, and this week to the French Ambassador--whose name I cannot pronounce--at the recent Euro-Atlantic dinner, it is evident to me that the French and the Germans have their own agenda in the form of a treaty signed between them in 1963. I note that the

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noble Lord, Lord Bruce of Donington, wrote a pamphlet in 1962. Perhaps they were frightened by that pamphlet into forming a treaty for themselves.

It is clear that Paris will run Brussels, and Bonn and the Bundesbank will run Frankfurt and the euro. That leaves the UK with no substantive role in the EU. For whatever reason, perhaps our own naivety, and certainly through the single-minded determination of the German Chancellor and his major partners, we find ourselves side-lined in Europe.

We need to act to preserve a climate of benevolence between ourselves and the EU. Noble Lords have clearly pointed out that that is singularly lacking at the moment. Above all, we need to be disconnected from Europe before the member states finally and irrevocably sign up to a federal system. To establish our future in Europe on a sound footing and to meet the needs and aspirations of our country, we should negotiate a separate treaty, perhaps as a protocol to the 1963 treaty. Because France and Germany are the driving force, they are the ones who will control and administer the EU of the future.

We have been the upholders of international law in the past and the treaty which we signed, the Treaty of Rome, is not an international treaty but a local one. As regards ourselves, I believe that we have a separate agenda. We carry a different cultural instinct in the English-speaking world--the dreaded Anglo-Saxon world, if you will--and we are an island on the Continental shelf. But we are separated from Europe, as an observer and helper. We would fulfil that role with greater emphasis if we were separated from it politically.

We have a parliamentary democracy in which the Executive is constantly held in check by Parliament, as we know only too well, whereas France and Germany have republican democracies in which the presidential office is staffed by enarques or their like and they can govern by decree. Our styles are different, and our strategies have been different too. Indeed, it has been our tradition to keep Europe divided, but we must now recognise that that policy has been finessed by the Franco-German pact. So we must be pragmatic, we must treat with them.

Some of the terms that we should negotiate would include many which have already been mentioned: immediate access to and consideration of all Brussels edicts which should be put to our Parliament and implemented, after amendment if necessary. We would undertake to be no less environmentally communautaire than existing and future members and remain in the single market. We would withdraw our representative from the EU Court of Justice and our laws would be passed by Parliament and administered by our courts. We would agree a rate for the pound against the euro. In this way, the pound would relate to the hard euro reminiscent of the hard ecu first proposed by my right honourable friend the Prime Minister.

We would jointly undertake with the ECB not to devalue or revalue without discussion and then only in our joint interest. The Bank of England and the ECB would provide equal access to all financial document processing relating to the euro and pound sterling.

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We would remain in NATO and withdraw from any commitment to the WEU. References have been made to the importance of the WEU. I suggest that it is a vestigial operation and unlikely to be of any value. We would also withdraw from any proposed EU foreign policy co-ordination, except by special treaty.

We would continue to co-operate in building common defence equipment, ships and aircraft and to exercise jointly with other forces. We would commit our Armed Forces only independently, as now. We would look to see the continuation of the present close association between the UK and EU companies. We would assist in any way other European countries who wish to join the European Union, so long as they meet the complete convergence criteria.

We could be equally helpful to the EU by joining with them in arrangements with GATT. There is no reason why, if we were separated from Europe, we should not be able to co-operate equally with any part of the world in any requirement on trade.

We would look to see the continuation of the present close association between our own and European companies. We would negotiate to withdraw from the CAP and carefully renegotiate the common fisheries policy. That would be a nasty subject; it might infuse great rage in the Spaniards but we would have to do it. We would commit representatives to sit on any committees or bodies set up by the EU with their consent and without a vote. We would be in every way communautaire but would retain the final right of all decisions to our Parliament and courts. We would be free to exercise our worldwide cultural and economic contacts in the English-speaking world.

It may be a form of a la carte system, but we are about the only country that seems to have serious reservations about full membership of the EU. Everyone else appears to be scrambling to enter. Cynics would say that they are perhaps more anxious to receive the benefits than contribute to the costs. In that respect, it is better that we should be out.

Perhaps I may refer to a communique from the Free Monetary Council in Paris last November, following the call by President Giscard d'Estaing for the devaluation of the franc fort. Among other things it stated that the present arrangements for monetary union were unrealistic and dangerous; that the arbitrarily defined convergence criteria take no account of the real situation of European economies; and, given the fact that the ecu has been abandoned and that Frankfurt is to be the seat of the ECB, it is clear that the euro is nothing but an enlarged deutschmark. That came from the Council of Paris.

It is also the opinion of senior members of the City establishment, whom I hold in great regard, and also my own opinion that the single currency, if started on time, will collapse in some six or eight years through political upheaval. That will indeed be a grave outcome and will be far more dangerous to the peace of Europe than any expansionist enterprise by Germany that it is supposed the EU will contain.

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We must surely all be united in determining that our own Parliament is superior to Brussels. We are discussing the 1972 Act, and there is the taint of deception about that Bill. It is not what was said--perhaps it was glossed over--or, to be fair, what was ignored. The point is that we have now woken up to the hard fact that what was proposed as an aspiration in 1972 has become, as though at the stroke of midnight, the concrete proposal of today, in the face of the stated better judgment of our own Cabinet and Government. We are now at the point of decision.

The UK is a highly competitive enterprise economy and, if I may address my remarks to the noble Baroness, Lady Thatcher, it is largely due to her that we are so, despite the rising value of sterling. To maintain our position, won with such determination, we need more privatisation, less regulation, less spending, more savings and to keep inward investment flowing. All that will be lost to Brussels bureaucracy.

Let there be no doubt about it. If the single currency goes ahead under present prevailing circumstances, there will be a disaster of such proportions as we cannot now conceive. It would be inimical to our interests and a serious force for disruption. Imagine the cost to industry of changing over to the euro, to something which is virtually irreversible and at the same time totally unworkable. There will be a collapse of industry throughout Europe. Indeed, the concern is implicit in the terms of the Bill, which I support. I believe that it must be properly and immediately debated, and I look forward to the remarks of other noble Lords.

1.8 p.m.

Baroness Ramsay of Cartvale: My Lords, how depressing it is that of all the ways we could be discussing the future of our own country and the continent of which we are a part, we are doing so on the basis of the negative and retrograde proposal in this Bill. I am very grateful to the noble Lord, Lord Taverne, for his amendment, which I sincerely hope will be carried.

At this time, with ever-increasing interdependence economically and socially, with the necessity of regional and international co-operation in confronting transnational problems such as terrorism, drug trafficking, organised international crime, like money laundering, and with the foreign policy issues on our own continent requiring a regional response, it baffles understanding that it can be thought that Britain should leave the EU.

I agree with the leading European politicians who recently, in a variety of speeches, have said that we cannot preserve a national independence that we do not have. We already are deeply dependent on each other. We are dependent in every possible way: economically, politically, environmentally and in the fields of defence and security. What country can stand alone? Certainly none in Europe. Why should we want to do so when we can have more weight, power and effectiveness as a group? It seems incomprehensible that one has to rehearse all the advantages that come from being a member of the European Union when they appear so

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evident as to be taken for granted--except, I am afraid, by those who confirm the adage, "There are none so blind as those who will not see".

There are two main categories of rational argument as to why the Bill is profoundly misguided: the positive benefits to the UK in being in the EU and the dire consequences of being out. Let us look at just some of the concrete, practical and down to earth gains of being in.

The EU gives Britain a market of 360 million people and UK sales to the EU are three times greater than the combined exports to the United States, Japan, China, South East Asia and Hong Kong. In 1994 we sold more to France alone than to the whole of the Commonwealth, and more to Germany alone than to the United States. The single market led to a great reduction in red tape and to the scrapping of 10 million Customs forms a year for UK firms alone, saving them £135 million annually.

The EU's leverage in the World Trade Organisation negotiations provided in 1993 the best deal for decades, securing the largest tariff reductions in post-war history. The EU strength in the WTO negotiations is one of the reasons that other countries clamour to join the Union. The WTO is dominated by the strength of the United States, Japan and the EU.

Britain receives massive regional aid from the EU. Scotland alone has received £2.5 billion from the Regional Development Fund since its inception in 1975.

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