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Baroness Ramsay of Cartvale: My Lords, I thank my noble friend for giving way. Does he accept that when we spoke of a market of 360 million, that is a single market of which we are an integral part. It is as if we ourselves were part of the 360 million and that market. After that, we can trade with other parts of the world. One cannot compare being part of a single market of 360 million people with trading with other parts of the world as one British national entity.

Lord Stoddart of Swindon: My Lords, in fact of course the whole thing is a diversion, because what we did was to put our efforts into trading with a market which is building and manufacturing exactly the same goods as we are--the most difficult market in fact that we could develop. It has diverted us, as one of the leading trading countries in the world, from our real task of exporting to areas where our goods are in great demand, and which people would like to buy. That is the truth of the matter. We have been diverted from a real and good purpose.

When the 1972 Bill was being debated, we were told that there was no alternative--that Britain's future was in Europe--just as we are now being told by the political elite in Europe, including the elite in the UK, that there is no alternative to a single currency and further integration: indeed, no alternative to a country called Europe, to use the words of some German political leaders.

I remind noble Lords that it is just 24 years since we joined the Common Market. To hear some people speak, one would think that Britain had no existence before January 1973. Yet it was in Britain that modern democracy was shaped and moulded. It was here in Britain that the world's modern industrial system was ushered in through the Industrial Revolution. We won an empire, and voluntarily liquidated it. We have saved Europe and the world from a motley crowd of dictators

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on at least three major occasions in the past 200 years. Indeed, Britain has given self-government to all its former colonies; yet the people who supported that policy are the very ones who now deny that Britain can survive as an independent self-governing nation. What nonsense it is. What absurdity it is.

Why is it that what is good for our former colonies is no longer good for Britain? Let them tell us that. Of course conditions were different in 1972 and preceding years. One understands that. Our country was facing particularly serious difficulties--financially, economically, socially and politically. But instead of having the spirit to tackle those problems with courage and vigour, our then querulous, wimpish leaders took what they thought was the easy way out by imposing proper disciplines from without this country rather than from within it.

It was madness to impose long-term and far-reaching obligations on Britain just to deal with what was an internal and short-term problem. Let me put a test to noble Lords, especially noble Lords opposite. If the 1972 Bill containing the odious Clauses 2 and 3 were put before them today for the first time would they vote for it? Would they vote for the 1972 Bill today? Indeed, would the Government introduce such a Bill? Would they dare to introduce it? After all, they are promoting the successes of Britain not because we are members of the European Union but in spite of that fact.

The Government say that our economy is successful because it is not constrained by the incubus of the Social Chapter and is not constrained by over-regulation, sky-high wages, penal social costs and huge public debt. That is what the Government are saying, is it not? Am I right or am I telling lies? Is that not what the British Government are telling the British people at present?

Would they really bring forward a Bill which, in the long-term, could put at risk all those factors which they insist are the elements of long-term economic success for our country?

Above all, the Bill before us is about the restoration of parliamentary self-government. Those who wish to vote against that had better understand what they are doing: they will be voting against the restoration of parliamentary self-government and the restoration of the supremacy of Her Majesty's courts. It is an issue which transcends party politics. It is an issue which is neither Right nor Left in political terms. It is whether in the time ahead, we are to be a free people or slaves to a polyglot, supra-national empire.

2.22 p.m.

The Earl of Bradford: My Lords, like my good friend Mr. Bill Cash in another place, I voted in favour of staying in Europe in the last referendum for many seemingly sensible reasons. Apart from believing in the fine ideals and in banishing for ever the future prospect of another major war in Europe, we imagined that we would be part of a Community that believed in fair and unsubsidised competition, where all the complications and duties involved in transporting goods across internal boundaries would be done away with. We wanted to see

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a Community that would grow economically and ensure we had an enlarged European home market sufficiently big to compete effectively with the other large world powers.

We did not believe that we were voting to create a federal Europe, but a federation of sovereign states with a common goal. Instead what have we got? We have a Community of fudge, compromise and humbug, where we obey and apply the directives but are branded as the worst Europeans by those that bend the rules 180 degrees in their favour. We may have reduced the tariff barriers, but others have found effective ways of keeping our goods out, especially those from Japanese transplant companies, while we have enthusiastically opened our market to all.

We have privatised British Airways and British Steel and seen them grow into stronger companies, contributing to the Exchequer instead of being a burden on it. But we have come up against inefficient state owned competitors refusing to rationalise properly and receiving hidden, or more frequently open, handouts from their governments. Thanks to a combination of higher employer's contributions to taxes and the social chapter, we have witnessed the sad situation of once proud, high growth economies reduced to a position of stagnation, accompanied by unemployment rates that used only to grace certain southern European countries.

We have replaced an efficient system of support payments to farmers, which ensured during the post-war period that British agricultural production leapt both in terms of output and efficiency, by the inherently inefficient common agricultural policy which, despite attempts to modify and improve it, is still creating over-subsidised surpluses at huge cost to European consumers and taxpayers alike.

Two particular problems preoccupy my mind as we stand on the verge of European monetary union: first, the incredible fudges that are being carried out by various nations to meet the convergence criteria; and, secondly, the problems of unfunded pension provisions by certain countries. The various diverse means that countries are using to reduce their budget deficits vary from France taking over the future pension liabilities of France Telecom, thereby injecting a one-off surplus of £4.27 billion, to Italy's use of severance pay funds set aside by state companies pending privatisation, also releasing over £4 billion.

If the problem of unfunded pensions is provided for in calculating figures for overall national debt, neither France, nor Germany, nor Italy would qualify for EMU, as it would result in figures far higher than the 60 per cent. allowed for in the Maastricht criteria. The unfunded liabilities are calculated to be 69 per cent. of GDP in France, rising to 107 per cent. in Italy, with the overall largest loser being Germany, with a magnificent 122 per cent.

However, despite all the present problems in the EU that are leading to a clear call from many that, like Norway, we would be better off being out of it, I cannot agree with them. Surely we should be trying to reform the EU from within rather than from without, when we would actually stand no chance of achieving any

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changes. Europe is vital to us, representing around 44 per cent. of all our export earnings, and our membership has certainly helped Britain to reach the enviable position of attracting the major share of foreign inward investment in the EU. Surely that would be affected adversely if we leave, even if we did remain in the free trade area.

Instead we must use the intergovernmental conferences and force onto the agenda realistic discussions of the issue of monetary union. Surely if countries are made to realise the consequences of ignoring the fudges over the convergence criteria and the problems over unfunded pensions, and that these costs will inevitably come to roost on the holy and the unholy alike, how then can they truly support going ahead to disaster?

It is quite apparent now that if the German people were allowed an input on EMU through the holding of a referendum, they would not support a single currency, as they have started to realise that they would end up bailing out southern Europe for ever. The position in France is thought to be a similar one, as the policy of the franc fort has created enormous economic problems.

We must firmly push the suggestion that all the countries whose governments wish for monetary union should allow their citizens the chance to express their opinions through referenda, as, when all the major political parties support one view--as is the apparent case in Britain--what choice do people have? None of us, with the odd exception, wants the EU to fall apart, but surely that will be the inevitable outcome of the present rush. Would it not be sad if that original dream turns into a nightmare instead? That has so often been the fate of unnatural federal alliances. Look at what has happened to the USSR, Yugoslavia and Czechoslovakia. We must ensure that the members of the EU do not repeat their mistakes by making sure that our voice in Europe is the voice of reason and common sense, instead of just objection and protest.

2.30 p.m.

Lord Belhaven and Stenton: My Lords, in introducing the Bill, my noble friend Lord Pearson is addressing what is the most important question facing this country at the present time. I cannot help wondering whether that is why we are reduced to discussing it on a Friday!

Our forefathers in the 17th century had to address a similar question, which was the most fundamental of all: who rules the country and what is the foundation of the Government's sovereignty? At the conclusion of a period of civil war and turbulence on an unprecedented scale, it was determined that the country must be governed by consent and that the fountain of that consent would be Parliament. It was further concluded that the control of money was the foundation of sovereignty and that the money should be firmly under the control of Parliament. The exercise of arbitrary power by the Sovereign was to be ended for all time. The extension of the franchise to all the people took over 200 years after that time, but the principle has remained the same. That principle was finally ended by the Treaty on European Union called "Maastricht".

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The Sovereign no longer exercises arbitrary powers. That prerogative is now with the European Union, with its Commission and Council of Ministers. We are now to a large extent governed by decree. This arbitrary power is exercised not by our native Sovereign but by a group of bureaucrats in a foreign country.

The powers which the Commission already has might well be envied by Charles I. When and if there is a single European currency, he might certainly envy it. Already Ministers have been powerless in the BSE crisis, where, as I see it, our so-called partners seized the chance to attack and if possible to destroy our most efficient industry, agriculture. We are far better farmers than they are and far better beef producers, so we have been forced to slaughter thousands of healthy animals. Her Majesty's Government can do nothing about it, except to protest and say that it is outrageous, which it is.

In the past, and not so long ago, we had a British Commonwealth and our sister nations came to our aid when we were in trouble. In 1939 they declared war on our behalf, although most of them had no direct interest in our quarrel with Germany. We have new partners now and it seems to me that their reaction to the difficulties which this country faces is to take advantage of them and to make them worse.

The major countries with which we have been asked to merge have no record of political stability. France, Germany, Spain and Italy have all gone through periods of major turbulence in this century. France, our nearest neighbour, has had 10 constitutions since 1789-- I counted them several times. The process of unification between those countries may or may not help to make them more stable, but I suggest that, even for them, the pace of change at present has become too fast and may well end in disaster when the full implications of what is happening now are realised by their peoples. In my view, to be asked to pool our sovereignty with such unstable countries is foolish in the extreme.

I understand from this week's Spectator that there was a movement afoot in the Union to set up a commission on racism and xenophobia, which was happily vetoed by Her Majesty's Government. It is supposed by some Euro-enthusiasts that those of us who oppose the Union--those of us who will not in any circumstances stick European flags on our car windows--are xenophobic. Perhaps we would be suitably dealt with in re-education camps. But in the meantime I very much resent the charge of xenophobia.

As a Scot I cannot be a Little Englander, but I value the Union with England and think it preferable to a union with any other European country I can think of. I have a Polish wife; I have cousins who are half Chinese; and I have other cousins who are half Peruvian. My family therefore goes from China to Peru. I spent a very happy part of my childhood in France, which I loved and still love. Therefore, I do not believe that I can be accused of being xenophobic. The advantage of France is that it is French. I do not wish to become French or to live under the government of France. The same goes for Poland, China, Peru and the rest--vive la difference!

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I turn to an important point which was raised during Question Time last week by the noble Lord, Lord Richard. He asked why it was, if the European Union was such a bad idea, that all those countries in central and eastern Europe were hammering on the door to get in. Unhappily, he is not present in the Chamber but, if he reads Hansard, I can give him the answer. It is security against the resurgence of Russian expansionism. Last summer I spoke to a very pleasant young Russian who said to me, "Russian has no frontiers". My wife, who is Polish, took his meaning faster than I did! He was speaking perhaps half in jest, but, nonetheless, to those people who have been freed from Russian domination in the past eight years what he said was very significant.

Also, just over a year ago, I met a high official in the Bank of Poland and asked him what his views were on Poland's entry to the European Union. He answered that he would rather Poland was in NATO. I believe that that says it all. I take the view put forward by the noble Lord, Lord Bruce. These countries will not get in unless the CAP is reformed; but that is not going to happen. Therefore, with the possible exceptions of the Czech Republic and Slovenia, the countries in central and eastern Europe will go on hammering until they become tired of it. If they do get in, which is unlikely, they might find that they have exchanged one system of arbitrary rule for another and they may not enjoy it as much as most of them appear to believe they will.

The original idea of a common market was good, but, unhappily, we are not discussing that today. Therefore, I return to my noble friend's Bill that is before your Lordships. The question which my noble friend raises must be faced very soon. The impetus towards a totally federal Union is gathering force and is supported by the Commission and by the French and German Governments among others. The situation is extremely serious and it is going to become worse as the single currency gathers momentum. Very soon we shall have to decide whether this country is to be ruled by the decrees of the Commission and the Central Bank or by Parliament, as it has been these past 300 years. I believe that we throw away what our forefathers fought for at our peril.

A European federation is not a recipe for avoiding war, as some have said; indeed, it may well be the opposite. The European Parliament, whose buildings seem to have cost so much money, can never properly represent the people who elected it. With 13 or more languages, it simply cannot function as a parliament ought to do. This House would be reduced to bedlam by such a proliferation of tongues.

The frustration which will be caused by imposing the system which is being imposed on Europe--on the most argumentative and intelligent peoples in the world--could lead to explosions of terrible anger. I am doubtful that Britain can influence the European Union at this stage--we hear so much about that. If we were ever able to do it we should have done it long ago. I do not believe that the federalists in Europe will listen to us or that they will want to do so. I no longer accept the argument that we can influence the Union from within. Those days

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are gone and are unlikely to return. We must set a more sensible course for this country, or very soon we will not have a country left to argue about. I support my noble friend, and if it comes to a vote I shall be with him no matter how long it takes.

2.38 p.m.

The Earl of Carlisle: My Lords, it is a privilege and an honour for me to speak for the first time in one of your Lordships' debates. I, too, congratulate the noble Lord, Lord Pearson of Rannoch, on introducing the Bill. I do so for the following reasons. He allows us to put forward our views; he tests the strength and feeling of this ancient assembly; he enables us to hear from Her Majesty's Government what their policy is and what their policy is not; and he enables me to say that, however much I congratulate him on his sincerity, I am diametrically opposed to his views and to the views of his supporters.

When the Bill was introduced I went back to basics. I obtained a copy of the July 1971 White Paper, The United Kingdom and the European Communities. Paragraph 29 states:

    "Like any other treaty, the Treaty of Rome commits its signatories to support agreed aims: but the commitment represents the voluntary undertaking of a sovereign state to observe policies which it has helped to form".
Nothing has changed in the past 25 years. We are voluntary members of the European Union. We joined as a nation; we signed a treaty. When I was an undergraduate at Oxford University, my noble friend who, unfortunately, sits on the other side of the House--namely, Lord Dacre of Glanton--who I am proud and pleased to see is present in the Chamber--informed me that between 1933 and 1940 Hitler signed 23 treaties, and he tore up the lot. We know what the consequences were for our people and all the people of Europe. Let us never go down that path again.

I declare an interest: I live and work in eastern Europe, but the eastern Europeans call it "central Europe". I live in one of the three Baltic states--the free and independent republic of Estonia. I have worked for the British Council and in the National Defence and Public Service Academy of Tallinn. Estonians, like the other nine nations of central Europe, are hammering at the door of the Foreign Offices of western Europe demanding, asking and beseeching admittance into the European Union. They expect us--first, us--to assist them.

Next week a very high-powered delegation from Estonia will visit this country. I am very pleased to say that members of that delegation will be having lunch with the Secretary of State for Foreign Affairs in the other place. I hope that he will listen to them. Why are they coming here rather than Bonn, Paris or Rome? They are coming here because they trust us. They trust us because between 1918 and 1920 our nation, which had the largest and most powerful navy in the world, created through the skill of the servicemen and the prescience of Lloyd George (our last Liberal Prime Minister) the free and independent Baltic states. So they are coming here to say, thank you. They are coming to us because they admire our culture. Moreover, they are

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coming to us because they believe that we are a part of Europe. Are we going to tell them, "No we are not"? Are we going to tell them that we voted in the House of Lords that we want out? They represent but one country of the 10. Let us think very carefully before we vote for the noble Lord's Bill.

There is an ugly rumour sweeping through eastern Europe that our Foreign Office would sacrifice the interests of the smaller states in eastern Europe for better relations with Russia. I hope that the noble Lord on the Government Front Bench would dispel that rumour because it is dangerous and damaging. In 1938-39 the Prime Minister never went so far as to sacrifice the independence of the Baltic states to satiate Stalin's voracious appetite.

I shall not keep your Lordships much longer, but I wish to conclude with the following point. The Leader of the Government, the Prime Minister of England in another place, is the Member for Huntingdon. That constituency produced the Lord Protector who protected Britain and made his name resound throughout Europe. When this Bill reaches another place, I only hope that the right honourable Member for Huntingdon will stand up and state clearly where and how the Government stand on the future of Europe. If he does not do so, he will go down in history not like his great predecessor Cromwell, but like another predecessor and one who became Prime Minister 60 years ago. I refer to Neville Chamberlain. Please, my Lords, throw out this Bill.

2.46 p.m.

Lord Tebbit: My Lords, we have just heard a most interesting speech but one which has yet another interesting aspect to it. I believe it was that very rare creature the "semi-maiden", if I am not mistaken. I say that because I believe that the noble Earl has only spoken in this House before on a Starred Question, and that his speech today was his first contribution to a major debate. The noble Earl is, of course, to be congratulated on a speech which we all enjoyed enormously, even if we did not perhaps all agree with everything he said. In particular, I should say that I share his feelings towards the people of central Europe, as he properly described it, especially those in the Baltic Republics. However, it would be a tragedy if they found themselves losing their independence once again, this time by consent.

Speaking as a former Member of the other place, I occasionally find myself extremely depressed by the low standing into which the other place has fallen. I must say that I am encouraged by the fact that the public regard for this House seems to be steadily increasing at the same time. It is no wonder. For, today, we have already had a quite extraordinarily good debate on a matter of enormous importance. The other place does its best to be silent on these issues and, indeed, it now does its best to suppress such debate. Above all, I do not want to be partisan today but I wonder whether future Labour Peers will come here under an oath that they will only talk in this place in accordance with the wishes of the current leader of the Labour Party. That is what seems to be required of future Members of the other place who take the Labour Whip. I am disappointed that we have

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not heard today from the one group of usual suspects in such debates; namely, the former Commissioners. I suppose that at least shows that they have some discretion, even if not too much valour.

I believe that there is a sickness in our body politic. Indeed, I must say that I enjoyed the very good second-hand joke that the noble Lord, Lord Taverne, used in his speech about septicaemia in our body politic. Second-hand jokes are usually the best. However, that septicaemia is a parliamentary septicaemia: it is Brussels which is in the blood of this Parliament; and it is the European Union which is threatening this Parliament, as has already been said by so many noble Lords today.

In passing I would say to the noble Lord, Lord Taverne, that he should not make too much of the issue of Toyota. All of us who have been in this business for many years, particularly those of us who have spent much time in Brussels, know what is going on. The Toyota motor car company has a large factory in this country. Quite reasonably it expects to build its next one in either Spain or Germany. But it could not do so without an enormous subsidy because the costs of production are so high in those countries. It is now engaged in buttering up the Commission to get the clearance for the subsidy which it would need to be able to establish a factory in either Spain or Germany.

It has been a privilege for me today to have heard what I would regard as one of the finest speeches I have heard in my parliamentary career, and what undoubtedly will be the finest speech today. It was made, of course, by the noble Lord, Lord Stoddart of Swindon. I think he spoke for all of us. I am so glad that he made that distinction between socialism and corporatism, for we are not being threatened by socialism from Europe--not even they are that silly! It is corporatism which is the threat to us. We should all stand four square on one principle above all, to which the noble Lord alluded, and that is the principle that, whether we have a socialist government or a corporatist government, or a capitalist government, or a liberal government--that is unlikely as there are now no Liberals left in the Liberal party--is a matter solely and absolutely for the people who live in these islands and no one else. That is at the heart of this debate which my noble friend has introduced today.

My noble friend Lord Kingsland was slightly glib on the subject of sovereignty. Of course we are sovereign today in the sense that if we took through a Bill to repeal the 1972 Act we would be out of the European Union. If I may say so, that is slightly theoretical sovereignty in one way because, although we could do that, if we voted--not so much us, of course, because it is not our business; I refer to the other place--to reduce the rate of VAT on domestic heating to 4.5 per cent., we would all be hauled off to the European Court of Justice and it would be overruled. We are not even allowed to zero rate repairs on church buildings. It seems to me that there is a loss of sovereignty of some kind there. My noble friend is right in that we could fully regain our sovereignty by repealing the 1972 Act. We could do it by Act of Parliament. But by the time we had entered into a single currency, and by the time we had seen our gold and dollar reserves on the train going through the tunnel towards Frankfurt, could we still do it by an

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Act of Parliament, or at what stage down the road would it have to become an act of rebellion to regain our freedom? I am not sure about that.

If we should enact this Bill, it would not take us out of the European Community but it would bring about a crisis over Britain's membership. More than that, it would bring about a crisis over Europe's destination. That crisis would have to be resolved. Sooner or later a crisis, or perhaps more than one of that kind, will arise in the Community. That is because above all there is a headlong conflict over the shape, structure, purpose and the destination of the Union, and because the existing institutions which were designed by six member states cannot work in a management sense, let alone a political sense, for a Europe of 20 or more states. Indeed the proliferation of summits and IGCs suggests that already the basic structures of the Union are in some difficulty.

The problem of the shape or the destination of Europe is best illustrated by the views of two of Europe's leaders. These are the words of Chancellor Kohl on 3rd April 1992 in referring to the Maastricht Treaty,

    "The treaty about the European Union initiates a new decisive stage of the European unification which will create in a few years what the fathers of modern Europe dreamt of after the last war, the United States of Europe".
Noble Lords will notice that he did not refer to a union of sovereign nation states, nor even to a federal Europe. He referred to a United States of Europe. I do not rely upon press reports of the Chancellor's words but upon the press release from his own office. It was not widely published in English but it was available in German.

Further, there is the view of our own Prime Minister. On 1st March 1995, he referred in the other place to what he called,

    "The often unspoken fear of many people ... is that Europe might develop into a super-state".--[Official Report, Commons, 1/3/95; col. 1062.]
That may represent the fears of many people, but it is the aim of Chancellor Kohl. The Prime Minister went on to describe exactly that United States of Europe towards which Chancellor Kohl is working. The Prime Minister then said (at col. 1062) quite rightly in my view, that he would,

    "find such a Europe wholly unacceptable for this country ... if that were to be the future, it would not be a future that would be suitable for this country".

In short, the Prime Minister was saying that if it came to a choice between the ambitions of Chancellor Kohl to form a United States of Europe, and withdrawal from the European Union, the Prime Minister would choose withdrawal. That is the only natural and normal interpretation which can be placed upon his words. While in public the advocates of withdrawal deplore and denounce every step along the Maastricht road towards the United States of Europe, and while in public we are criticised, in private the extreme advocates of Europe hope that we shall succeed. I think that the creation of the USE would bring about a reform of the institutions of the European Union in one direction.

We know the views of M. Delors on this matter. He has a clear plan and it is similar to that of Chancellor Kohl. It was his proposal that the European Parliament

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should be the democratic organ; that the Commission should be the executive arm; and that the Council of Ministers should become a senate, which prompted my noble friend Lady Thatcher's most famous short speech, "No, no, no". That was not just a negative repeated three times for emphasis, but a no to each of M. Delors' three proposals.

Neither Chancellor Kohl nor M. Delors is stupid, nor should we treat them as bogeymen. They are serious politicians with a clear and unambiguous proposal for the future political structure of Europe. As ever with Continental schemes for European constitutions, their scheme can be made to look good on paper. They have had lots of practice at drawing up constitutions on the Continent of Europe. It would in theory deal with the acute problem of threatened paralysis in European decision making. At the heart of that problem--we Eurosceptics must recognise it--is, of course, the national veto. That is why it is so much under discussion today. How could the present system of governance of the European Union work if, say, Malta and Cyprus, let alone Latvia, Estonia and Lithuania, were members, all with a national veto? It simply would not work.

There are only three rational solutions to the problem. One is Chancellor Kohl's solution: the establishment of the United States of Europe. That at least in theory would work. It would work in practice until the revolution. The second solution is the complete break-up of the European Union. That would work too; the problem would disappear. There is a third: the abolition of the national veto except for treaty amendments other than, one would hope, the admission of new members.

The first solution is clearly unacceptable to this kingdom and probably to the people of Europe as a whole. The second, the complete disintegration of the European Union, would, I think, be a matter of real regret not only to most Europeans but this country too. I take the view of others in the debate who have said that it would be a great tragedy if relationships between members of the European Union were to be poisoned for ever by the dispute in which others wish to drag us in one direction and we wish to restrain them from going in the direction they wish to go.

The third solution, the option of abolition of the veto, would seem equally unacceptable. But there is a way in which it would be acceptable to me: that is if the jurisdiction of the European Union were to be restricted to those matters where the absence of a veto was acceptable. Broadly speaking, it seems to me that that would comprise matters vital to the operation of the single market. It was not, after all, the European Union that we joined; it was the European Common Market. That is where our interest lies.

Under that option there would be the exclusion of monetary or political union, and the exclusion of foreign, defence and justice policy from the jurisdiction of the European Union, to name but a few. Perhaps I may say this to my noble friend Lord Kingsland. Such a concept would not prevent member states from entering economic, monetary and political union of the kind that we have in the United Kingdom. Why should Belgium

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and Holland not enter a union if they wish? Why should not Germany and France enter a union if they wish? There is no reason at all. After all, we are members of the European Community as a union of England, Scotland, Wales and Northern Ireland. Those countries could well achieve their unions outside the Treaty of Rome. If there were to be a Franco-German republic, they would be a member of the European Community; they would have one seat at the table just as our union has; and the world would go on perfectly well.

There is an alternative way in which we can all achieve what we want within Europe--those countries their union and we our common market. They can give up their sovereignty to each other; we can retain ours and remain a self-governing parliamentary democracy. Sooner or later, decisions on these matters will have to be made. We cannot continue to procrastinate.

The history of the European Union to date has been like a rather long game of rugby. Occasionally the Kohl team sees the ball and makes an occasional brilliant run towards the goal. More often the ball is concealed or passed backwards from time to time, or disappears into a maul. The defenders of national sovereignty push one way, the advocates of the United States of Europe push the other, and year by year we who defend national sovereignty are pushed back closer to our 20 yard or 20 metre line (or whatever it is). It is time the ball was kicked long and hard the other way, preferably back into touch for a while, in order that we can think how we can save Europe from itself.

I am not one of those who think that it is any longer credible that we can persuade our partners to make Europe in our image. They do not wish to do that; they will not do that. We are in a minority, and that we have to accept. Nor do I think it proper that we should always be a brake on their progress as to what they want to do. Wisely or unwisely, our partners have an agenda. If we can devise a means by which they can satisfy the needs of their agenda, and we can satisfy the needs of ours, that is surely the right way to go.

If it were enacted, the Bill would create the crisis in Europe which is needed for the discussions to begin to make a serious effort to solve those problems. That is why I commend it to the House.

3.7 p.m.

Lord Willoughby de Broke: My Lords, I am grateful to my noble friend Citizen Pearson for introducing this important Bill. It is important because it is something of a milestone. Even four years ago, as he admitted, I guess that the Bill would have found little support in this House. Many of us hoped, even if we did not quite believe, that what we had signed up to in the Treaty of Accession and the Single European Act was a Europe of freely co-operating nation states within a true single market and a deregulated economy, with NATO as its ultimate defence.

That is light years away from the actuality, from where the past four years have brought us. The Maastricht Treaty was, I believe, the catalyst for change. The debates on that treaty in this House, and its painful passage through another place, sent out clear signals that

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we were signing up to a Europe that was very different, a Europe that was going to drag us in a direction which we might not wish to take, yet we would be powerless to stop that progress.

In the three-and-a-half years since Maastricht those fears have been confirmed. The ratchet effect of Euro legislation--the salami slices about which my noble friend Lord Tebbit warned us in those debates three years ago--has dragged us "irreversibly and irrevocably" (they are two key words in the Maastricht Treaty) towards a federal Europe.

We are told by those who should know better that, "Europe is moving our way", that no politician in Europe wants a federal Europe. But perhaps I may quote Chancellor Kohl speaking in 1990. He said:

    "We hold fast to our commitment to building a United States of Europe".
Perhaps I may cite the Prime Minister of Italy in an interview with Le Figaro in October 1996. He said:

    "The role of the IGC is to lay the foundation of a federal Europe".
The president of the Bundesbank has repeatedly and clearly stated that monetary union means political union. Perhaps they all had their fingers crossed.

My noble friend Lord Buxton mentioned sovereignty and the fact that we have been told that we must pool our sovereignty. I do not understand how one can pool sovereignty any more than one can pool virginity. One either has it or not. We have a European flag, a European anthem, a European citizenship, a European Court of Justice, the Commission, the European Parliament (if one can dignify it by that title), and, if any country except Luxembourg qualifies, probably a single European currency. What are these if not the trappings of a federal Europe? If something looks like a duck, walks like a duck and quacks like a duck--then it is a duck.

I support the Government in their attempts in the IGC. Their position is quite clear: that they are opposed to further political integration, that they want no increase in majority voting, that they wish to retain the veto, that they wish to curb the powers of the ECJ and the pretensions of the European Parliament, and that they want reform of the common agricultural policy and the common fisheries policy, which has been such a disaster to this country.

My noble friend Lord Bradford, who is not in his place at the moment, believes that we still have a chance. But sadly we shall not get anywhere with that agenda. It is totally at odds with the wishes of most other members of the European Union.

At least the Commission is refreshingly frank about the way forward. In its policy paper for 1997 it states:

    "The Commission intends to promote the dynamic interpretation of its right of initiative".
In other words, more of the same. It goes on:

    "Subsidiarity and proportionality must not be used as a pretext to call into question all that has been achieved and to return to the intergovernmental method which is neither efficient nor democratic".

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Am I alone in finding it rather strange that we should be lectured by the apparatchiks of the Commission on efficiency and democracy? Perhaps it is mere self-interest--more intergovernmentalism means less Commission.

It is time to stop burying our heads in the sand, time to stop pretending, against all the evidence, that Europe is moving our way. It is time to look coolly at our national interest and ask ourselves whether we want to be members of a federalist, centralist, over-regulated, subsidised and bureaucratic European Union run by a Brussels soviet, pushing policies that are making its members poorer not richer, putting them out of work not into work, and which is fast being left behind not only by America but by the countries of the Pacific rim? None of them, I may add, see the need either for central government or for a common currency. To go on as we are, pretending and hoping to be good Europeans, yet failing so miserably is, as was said of Austen Chamberlain,

    "Always playing the game and always losing".

The thought of walking out of Fortress Europe gives our Euro-enthusiast friends a fit of the vapours. I wonder why. Europe costs us dear. This year alone our contribution to the European Union budget will be £9.6 billion gross. That is about half our defence budget, to put it into perspective. The CAP costs each family in Britain £1,200 a year. Surely we could give half that away and still have some kind of agricultural policy which would reward the farmers and allow them to produce cheap food and have a £600 bonus per head for every family in the land. That must be a relatively attractive programme which the Government may think about.

Our annual trade deficit with Europe is about £10 billion a year, £90 billion over the past 10 years. In that context, I should like to nail just two of the misconceptions or imprecisions which have gained currency through repetition. They are, first, that 60 per cent. of our trade is done with the European Union. Wrong. Taking visibles into account, 57 per cent. of our trade is done outside the European Union. Secondly, there is the misconception that our exports to Germany are equal to those of the United States of America and Japan put together. Wrong again. According to the Central Statistical Office figures, total exports in 1995 to Germany were £32 million; to the USA and Japan combined £63 million. That is, therefore, nearly twice as much.

Finally, membership of the European Union costs us dear because only 10 per cent. of our total economic effort is directed towards Europe. Yet the cost of the single market regulations which have been so widely touted fall upon 100 per cent. of the British economy, 90 per cent. of which does not trade with Europe at all.

I much admired the speech of the noble Viscount, Lord Exmouth. He asked whether we were still a proud nation that can fulfil its own destiny. Surely we can stand on our own feet. I agree with the noble Lord, Lord Stoddart.

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Eighty per cent. of our foreign investment is already outside Europe. We are the only oil exporters in the European Union. We hold the key to the richest fishing grounds in Europe.

It is no good trying to make our flesh creep with threats of retaliation or sanctions of some kind if we dare to think of withdrawal. Why would our trading partners in the European Union put up trade barriers against us when the balance of trade is so strongly in their favour? By doing so they would damage their interests. That is hardly a likely scenario. As the noble Lord, Lord Moran, pointed out, there are perfectly good precedents in outside, loose relationships with Europe. He gave the examples of Norway and Switzerland, each of which has different arrangements with the European Union and both of which have access to the single market. Both remain free and successful.

The Bill of my noble friend Lord Pearson will give power back to Westminster. Like the noble Lord, Lord Stoddart, I too ask my noble friend on the Front Bench whether the Government would now introduce an Act such as the European Communities Act 1972. Would they do that now? That is a good question. As my noble friend Lord Pearson put it well in his article in The Times today, to enact the Bill would alter our relationship with Europe: we would be transformed from recalcitrant tenants into friendly neighbours. I strongly support the Bill and will vote against the amendment of the noble Lord, Lord Taverne.

3.16 p.m.

Lord Harris of High Cross: My Lords, in an idle moment in preparation for this debate, I found myself jotting down, almost at random, odd words, names and memories that suggested reasons for doubting the benefits of continued membership of the so-called European Community. It started with the "process". We did not join an institution: we have found out that we have joined a process. Starting from the Common Market, we get: EEC, EC, EU and now the chilling word "USE". Then come free trade, GATT, NAFTA, Hong Kong; or CAP, CFP, fraud, Fortress Europe, level playing field, acquis communautaire. How about democracy? MEPs, expenses, lobbying, Italian bidets, ruling elites, Delors, QMV, takeovers.

What became of mutual recognition--one of the great notions of bringing trade closer together? Instead we have harmonisation, metrication, condoms, buses, Bangemann, prawn-flavoured crisps, abattoirs, Air France. How about the famous opt-out? There is the social chapter, double-think, ECJ, 48-hour week, pensions. Those are my fragments and jottings. If they could be explained, each of them is a clue to another nail in the coffin of continued UK membership of the Union. They help to explain why, however much it tries, the United Kingdom can never penetrate to the heart of Europe.

Consider the fraud-ridden agricultural policy or the iniquitous fishing quotas and subsidies or the partisan Court of Justice, the cabalistic Commission, the high-handed ban on beef exports, the brazen proposal to commandeer all foreign exchange reserves.

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Taken separately, they may not be sufficient to drive us out. But, taken together, they can hardly be dismissed as aberrations, to be bargained away by endless point by point negotiation.

If we stand back and view the situation against the long, illiberal history of Europe, my scattered clues provide cumulative evidence in support of the conclusion of the noble Lord, Lord Tebbit, that there is a fundamental incompatibility between these free, democratic, outward-looking islands and the complacent, closed, corporatist Continental system. The United Kingdom's accession in 1973 can now be seen as an attempt to graft some practical common sense on to le grand projet. Alas, like many hopeful transplants, the operation has ended in rejection.

Britain's failure can certainly not be blamed on lack of trying. Indeed, at Maastricht, in return for dubious opt-outs and insertion of the meaningless word "subsidiarity", Mr. Major was forced to agree to nonsensical vapourings about "common citizenship", "reinforced cohesion" and:

    "common foreign and security policy ... which might in turn lead to common defence".
To our Continental partners NATO has become an Anglo-Saxon intrusion.

Britain's inability to penetrate to the heart of Europe is not due solely to a Franco-German monopoly of political initiative, about which I have spoken before. From the start, this European racket we now find was not only a post-war marriage of convenience between a guilty husband and a jealous wife but a compact to achieve French ends through the deployment of German muscle. More fundamentally, we are confronted by an economic, philosophical, Franco-German Maginot Line, which is the polar opposite of Adam Smith's liberal internationalism, which I uphold.

In Germany, we can detect the influence of intellectuals such as Hegel, Goethe and List, all of whom in various accents preached the often mystical primacy of state authority. That was brought home to me vividly at a recent conference in Vienna, where an old friend of mine, who is one of the most distinguished economists in Germany and whom I have known for 20 or 30 years, came up to me furtively to assure me that he still shared my opposition to EMU but could not say so in Germany for fear of being marginalised as unpatriotic. That fear was underlined by Herr Kohl's boast:

    "The future will belong to Germany when we build the house of Europe";
or his recent taunt that Margaret Thatcher could not accept:

    "Germany ending the century a winner and her own nation a loser".

French intellectuals, for their part, combine a worship of Cartesian rationalism with high-flown chauvinism. A classic example was displayed in a recent letter to Le Figaro, urging that the headquarters of the United Nations should move from New York to Paris because, the correspondent claimed, Paris is:

    "geographically, culturally, economically and politically at the centre of the world".

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Amid such familiar hostility from across the Channel, what are we to make of a former Foreign Secretary who touchingly proclaimed his faith as:

    "It is scarcely possible to see Europe as anything other than the necessary vehicle, the central fulcrum, the basic lever for Britain to exercise the influence which it wishes in the world"?
Tell that to the Marines!

Another gem of Euro-bunkum came from Sir Leon Brittan, who I am surprised to see is still speaking English. After Maastricht, he angrily threatened Euro-sceptics that voicing doubts about monetary union would seriously reduce the prospect of the Eurobank siting its headquarters in London. Tell that one to the Bundesbank!

It is not only the French and the Germans who look to the state for salvation. A few months ago, Mr. Flynn was interviewed by the BBC "Today" programme, following a case in Britain in which a policewoman had complained of over-enthusiastic advances from a male policeman. The Social Affairs Commissioner reduced the usually jocular John Humphreys almost to silence by solemnly proposing to consider inaugurating in Brussels a level playing field in sexual harassment.

The truth is that the Continent is pervaded by a totally distinct mindset. It exhibits a different concept of democracy, manipulated by ruling elites relying on phoney consensus but threatened periodically by social breakdown. In contrast, the UK relishes a more adversarial style but moderated by tolerance and its enviably long history of stability. To make matters worse, we have different legal systems. David Pannick, QC, and Fellow of All Souls has explained that:

    "Community law accords a lower priority to textual precision than English law".
He quoted the words of Sir Thomas Bingham:

    "The interpretation of Community law involves not the process familiar to common lawyers of laboriously extracting the meaning from the words used, but the more creative process of supplying flesh to a spare body and loosely constructed skeleton".
That has got the Union right. He went on to say that such broader interpretation is guided by:

    "a broader view of what the orderly development of the Community requires".
It is not quite saying that you make it up as you go along, but you keep injecting your own vision into your judgments. We have been warned!

In conclusion, as the noble Lord, Lord Tebbit, said, and I absolutely agree, we should let continental Europe go ahead and construct itself a political cage, if that is what it wishes. It would leave us, like most of the world, outside, to trade freely with them and with wider, more dynamic markets in the East as well as in the Americas. Above all, let us reassert confidence in our ability to build up a vigorous, flexible economy which can continue to adapt itself to ceaseless changes in products, processes, global trade and competition.

We should take heart. If Germany can square France and cook the books to impose a 1999 timetable for the euro, early failure and recriminations will assuredly follow.

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3.27 p.m.

Lord Hamilton of Dalzell: My Lords, I think that a majority at least on this side of the House agree--as the noble Lord, Lord Stoddart, said, the Government talk a great deal about it--that one of the main financial benefits that the United Kingdom derives from its membership of the European Union stems from its opt-outs from the Social Chapter and monetary union--a competitive and flexible labour market and a variable exchange rate. That is paramount in bringing in foreign investment. It seems to me a colossal irony that the one thing which recommends our membership of Europe is something for which we have opted out. In a sense it is giving us the ability to cheat. We are the only country allowed to run in the walking race.

However, if one wants to know the true implications of our membership of the Treaty of Rome, one has only to listen to my noble friend Lord Cockfield, who, I am sorry to say, is not in his place, to give us another go at it; or my right honourable friend Sir Edward Heath, the founding father of our membership, to learn how, having signed the Treaty of Rome, a process has been started which will relentlessly continue until full European Union has been attained.

Under the Treaty of Rome, everything, including the concept of the single market, because of the level playing field principle, which at present we claim to approve, has to be seen for what it is: an engine of unification. The concept of the level playing field is to remove differentials in working practices, wage rates, social security payments, health and safety, rates of VAT et al. How much longer will it be before unified tax is on the agenda and for how much longer will our opt-outs be tolerated?

On the assumption that free trade between the nations of Europe is obviously desirable, we allow this process of achieving it to trespass increasingly on the domain of sovereign governments and hence their electorates while its bureaucratic processes are, in practice, a travesty of free trade. Its destination has always been a single currency and that seems to be the sticking point. Regardless of what my noble friend Lord Kingsland says, it would lock us into the system. It is irrevocable, and the practical problems of extracting oneself would be immense. Regardless of what we thought at the time, this is what we signed up for and then agreed in the 1975 referendum and, accordingly, we are told there can be no turning back.

There has been much debate about whether the British people were misled in the referendum. I believe that question is interesting but irrelevant. In the first place, a vast number of new electors, too young at the time or even unborn, have joined the electoral role. They should not have views imposed upon them by previous generations. Also, an electorate can change its mind in the light of subsequent events. If that were not so, we would still be bound by nationalisation and other socialist policies inflicted upon us by governments after the war, mercifully now changed. They have even been abandoned by the parties opposite. What is so different about the Treaty of Rome that, after all this time, it should be treated as though it had been written on tablets of stone?

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If I was as determined as Chancellor Kohl--now in the twilight of his career--or the Commission witnessing the movement in public opinion in Europe, to make certain that the unification of Europe was established, I would do what they are doing now. I would hasten the imposition of a single currency with the object of locking the people of Europe into the system before any aspirations for self-determination could break out. They may not succeed. I hope they do not. It would be disastrous if a generation whose time is nearly passed was allowed to force its will upon the future so that it could not be changed. It would not be a recipe for political stability and the peace that it engenders. I pray that, at least, we are never part of it.

For those reasons, it is my belief that the Government's vision of a Europe of nation states, which in principle I support, will, inevitably, bring it into conflict with the Treaty of Rome. My noble friend's Bill may not find acceptance today in your Lordships' House, but I have no doubt that, one day, the electorate will find a way of demanding its reappearance.

3.32 p.m.

The Earl of Liverpool: My Lords, I should like to join with other noble Lords in congratulating my noble friend on introducing this Bill and for so clearly setting out its objectives. It seems to me that its main purpose, as has already been said, is to endeavour to restore power to politicians in this country, and that is devoutly to be wished. I am sorry that the noble Lord, Lord Taverne, moved his amendment. I believe that that will be seen, both in your Lordships' House and in the country, as an attempt to stifle a Bill on perhaps the most important issue affecting our lives today. When the time comes, as I suspect it will, I shall vote for my noble friend's Bill.

What is wrong with trying to maintain the principle for which I submit the vast majority of us thought we were voting in the 1975 referendum; namely, a partnership of trading nations in Europe? There are those who say that we were naive not to realise that a vote in favour at that referendum inevitably carried with it a sort of sub-agenda leading to monetary and political unification. But I have asked many friends and cannot find one who believes that that was the case at that time or thought that that was what they were voting for.

My noble friend Lord Braybrooke, in a powerful and moving speech, paid tribute to the countless thousands of our service men and women and our allies who gave their lives in the last two great wars defending our country and our freedom. My father was one of the many killed in action in the late summer of 1944 on the Italian front near Florence, so I and many other war babies who grew up never having known their father or mother are poignantly aware of the sacrifice our countrymen made.

What were they defending? I suggest that they were defending our right to self-determination; our democratic right to govern ourselves and make our own laws; and our right to maintain our long history of sovereignty. I believe that we are now at a turning point

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in our destiny. No one now denies that entering the EMU carries with it a political agenda which is both federalist and bureaucratic.

The scourge of the dreaded EC directives--which, for some strange reason I cannot quite understand, are so assiduously and zealously implemented by our own officials--will continue to wreak havoc with our right to govern ourselves. One only has to read the excellent book by Christopher Booker and Richard North entitled Castle of Lies--I was only able to buy it with difficulty and am pleased it is selling well; I suggest that it should be compulsory reading--to see endless examples of what I am talking about.

There is an interesting Labour poster which I have seen around London in the run-up to the election which reads something like, "£10.50 a week on food". But we all know that there is an upcoming directive that we will not be able to do much about which will put VAT on food, shoes and anything else which at the moment is zero rated. The Labour Party therefore has the message on the poster right--enough is enough--but they should be referring to the European Community, not the Conservative Party.

There are alternatives. The publication entitled Better Off Out by the highly respected Institute of Economic Affairs shows us the way. We must not allow ourselves to be frightened by warnings of dire consequences. In the early 1950s when the first steps on the road to a common market were taken, average tariffs stood at 40 per cent. and on some products were as high as 100 per cent. But that has all changed. Today tariffs stand at an average of a mere 3 per cent. and in some cases 0 per cent. Those figures are not likely to hold us back in securing an increasing market on the world stage.

There are many differing views about inward investment, so it would be wrong to rely too heavily on the warnings from Mr. Hiroshi Okuda of Toyota. With the indulgence of the House perhaps I can quote two other influential Japanese women. The first is Haruko Fukuda, deputy chairman of Nikko Europe. She says that investment from Japan and other Far Eastern countries to Britain were attracted by,

    "Lower costs of employment, a low level of corporate taxation, political and social stability, and comparatively honest public administration".
That is an important point. The second person is Noriko Hama of the Mitsubishi Research Institute who has been on record as saying,

    "Like it or not, the World is a more seamless and borderless place".
She goes on to say,

    "Britain's inability to become wholly European may count as its greatest asset where inward investment from Japan is concerned".
My noble friend Lord Tebbit gave an intriguing reason why Mr. Hiroshi Okuda made his remarks. So I do not think that we have too much to fear there. Franklin D. Roosevelt said in his inaugural speech to Congress, "We have nothing to fear but fear itself". I entirely agree with that.

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The protagonists for a fully integrated Europe say that we cannot afford to be out of Europe and that all sorts of terrible things will happen if we are. But will they, my Lords? Our net contribution to the EC each year--it depends on which figures one uses--is around £6 billion. That amounts to a burden of some £1,200 each year for every family of four. Just think of what we could do with that money if it did not have to leave these shores. My right honourable friend Norman Lamont has called the European Union yesterday's idea. I entirely agree with him, and many noble Lords have spoken in that vein today. It is a strange quirk of fate that later this year we shall be handing back Hong Kong, one of the must successful colonies ever known on this planet. This could be the crystallising moment when we pick ourselves up and go forward into the 21st century, with pride, walking tall and embracing our destiny.

3.40 p.m.

Lord Whitty: My Lords, despite many excellent and fascinating speeches, I have found this a deeply depressing occasion. I know it is a tradition in this House to give a Bill a Second Reading--as a new Member, I do not want to breach tradition too easily--but I find myself compelled to support the amendment of the noble Lord, Lord Taverne.

Over the past 18 months I have had the privilege of visiting every European Union country. Our many friends there--great Anglophiles--are bewildered by our attitude. They are disappointed by our performance, and that has culminated in total exasperation over the attitude of the British Government to the beef boycott. I have also travelled around Britain and have seen equal bewilderment. That is understandable. The noble Lord, Lord Moran, pointed out that politicians have not been honest with the people. That is probably true. Unfortunately, the politicians who wish to make a positive case for Europe have not been successful in doing so or have tried to repress it, while politicians who wish to make a case against Europe have exaggerated and distorted the facts. The vacuum that has been left by politicians has been filled by some of our more rabid media, particularly the Murdoch-owned press.

In so far as the eyes of Europe are on this debate-- I hope that they are not too closely on this debate because, in general, there is a great respect in Europe for the Select Committees of this House on European Affairs--they will be somewhat bewildered again. They will see the spectacle of the British aristocracy not only advocating the reversal of the Treaty of Rome but almost advocating the reversal of the Norman Conquest. I say that because the road down which the noble Lord, Lord Pearson, is asking us to go is not a reclamation of British history but a rejection of British history. For 900 years the ruling classes of England, and indeed of Scotland, have engaged themselves fully, negatively and positively, in European affairs. Even Henry VIII, who was mentioned at the beginning of the debate--he had a number of entanglements with Europe--a couple of years before he passed the Act of Supremacy declaring England as an empire was himself putting in a bid to be Holy Roman Emperor. He always was a bad loser.

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We have been involved with Europe dynastically, culturally and economically for centuries. There was a brief period when the balance of our economic fortune did not rest with Europe. It was a period perhaps of a century. But that began to end before the First World War. In 1913 our physical exports to Europe were 13 per cent. They are now 55 per cent.

I recognise that in this debate consistency has not necessarily been evident and has not necessarily been a virtue. Both political parties have changed their view from time to time over the past 30 years. I myself have been consistent. I voted yes in the referendum and I knew what I was voting for. I thought until today that my noble friend Lord Bruce had been equally consistent on the opposite side, but I learnt today that he wrote a pamphlet on a federal Europe in 1947. But the most glaring inconsistency is that of the Euro-sceptics within the Conservative Party. I noticed that the honourable Member for Stafford was standing at the Bar just now. Earlier this week, in a debate on Europe in another place, he explained his support for the Single European Act, and the majority voting which went with it, by the fact that that was concerned with trade. However, 80 per cent. of the regulations which are so castigated by the Euro-sceptics and so ridiculed by the tabloid press are concerned with the implementation of the single market. Everyone--even the noble Lord, Lord Tebbit, today--is in favour of the completion of the single market. One cannot have it both ways.

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