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The Earl of Onslow: My Lords, will the noble Lord clarify something for me? If the baby of the single currency can be perfectly formed, is the Labour Party in favour of it or not? I could also address this question to my own Front Bench; I suspect I shall get no answer from either of them.

Lord Haskel: My Lords, the Labour Party is united on the wait and see policy.

To protect our culture and way of life, the economy needs to grow. It needs to find more sources of revenue and more areas of activity, not fewer, which would be the result of withdrawing from the single market. For growth we need to look outwards. The noble Lord's Bill, and its supporters, look inwards to try to protect jobs and sovereignty. That is totally unrealistic. We gave up our economic sovereignty years ago. Our economic sovereignty is based on reaction to global markets, not controlling them. Our legal sovereignty is intact, as the noble Lord, Lord Kingsland, reminded us.

A few noble Lords have spoken about protecting employment. Do they not think that our partners in Europe also want to do that? Of course they do. The Commission has made employment a priority through a confidence pact. Sweden put forward proposals during the preparatory stages of the intergovernmental conference to make employment a priority goal for the European Union. Noble Lords may remember that the Irish Government put forward a similar treaty for discussion at the Dublin Summit in December; in effect, a kind of employment chapter.

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Lord Young of Graffham: My Lords, I remind the noble Lord that some 10 years ago when I was Employment Secretary, unemployment in Europe was 15 million and rising. The Commission at that time made employment a priority. Today, the figure is 18 million and rising--that is, 20 per cent. higher--but unemployment in the United Kingdom, which is free from many of these restrictions, has fallen by a third.

Lord Haskel: My Lords, I do not dispute the figures; what I suggest is that we and the rest of Europe are possibly at different stages of the economic cycle.

In some ways this employment chapter is a counterweight to the rather monetarist Maastricht criteria for EMU. Sadly, these items have hardly been debated, but this is not the time to go into the details of these proposals.

A cornerstone of the Government's economic policy is to encourage inward investment, and that has been successful. Much of this inward investment has occurred because we are the preferred gateway into the single market. My noble friend Lady Ramsay gave us the details. Were we to start to interfere with the basis of our relationship with this market--as would happen if the noble Lord's Bill became an Act--I have no doubt that much of that investment would dry up, in spite of the reassuring remarks of the noble Earl, Lord Liverpool. Forty per cent. of our manufactured exports are from these foreign-owned companies, and very welcome they are. The noble Lord, Lord Tebbit, spoke of subsidies. I believe that he was being rather selective. What about Jaguar? What about Ford? What about British Aerospace, which had to give some of the grants back?

I happen to think that we have been able to develop the single market, and will be able to continue to develop it, because all the countries involved have a similar view of citizenship. It is that view which has enabled industry and politics to work together. This is the basis of our common enterprise. The European institutions about which many noble Lords complained are the servants of this enterprise, not its masters.

Many noble Lords seem to think that it is the nation state that we have in common. Viewed from Europe, the concept of the nation state has caused two world wars and incalculable suffering--caused by the xenophobia which the noble Lord, Lord Belhaven, says does not exist. The noble Earl, Lord Liverpool, and the noble Lord, Lord Braybrooke, spoke of sacrifices in two world wars. I hope that the European Union will prevent the need for those sacrifices in future.

The single market and the concept of citizenship have got along very well together and that is the basis for our future prosperity and the protection of our culture and society. By extending those ideals to Central and Eastern Europe we shall prevent discord and disharmony there too, and help our security because what happens there affects us. The noble Lord, Lord Kingsland, reminded us of that.

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Trade has been, therefore, a successful instrument of policy, serving the national interest and at the same time adding to the well-being of the people throughout the European Union. This is the moral imperative. That is why we must stay in Europe and fight our corner. The noble Lord's Bill will put this into reverse. That is why it is dangerous and backward looking.

I turn for a moment to the Motion of the noble Lord, Lord Taverne. It is a well understood convention in your Lordships' House that at Second Reading of a private Member's Bill the official Labour spokesman refrains from expressing a party view. Nevertheless, it will be clear to the House where my feelings lie. I agree with the noble Lord, Lord Taverne, that we cannot unilaterally tear up a solemn international agreement. On the Labour Benches there is no Whip and the Labour Front Bench will abstain. However, I fully expect that on our Benches there will be those who will both support and oppose any vote which may take place.

5.47 p.m.

The Parliamentary Under-Secretary of State, Department of National Heritage (Lord Inglewood): My Lords, I have listened with great interest and attention to this long and important debate. Many views have been expressed and many points raised. I shall try to be brief and at the same time touch a number of the themes raised while spelling out the Government's position. There will be a number of smaller points to which I shall have to respond by letter to noble Lords. There seems to be some doubt as to whether the speech of the noble Earl, Lord Carlisle, is his maiden speech. However, he made one important point to which I wish to respond. The Government fully support the accession of the Baltic States to the European Union, and indeed of all applicant countries when they are ready. This process of enlargement is not dependent on the development of relations with Russia, although that is an important issue to us as well.

The Bill before us draws us to the very nub of the European debate. To repeal the provisions for enforcement of Community rights and obligations in this country would leave us in breach of our international obligations under the European Community treaties. In such circumstances we would have no choice but to withdraw from the EU.

The real issue then--I do not think that there is disagreement among your Lordships on this--is this country's membership of the European Union. The Government are clear that membership is in the national interest. First, it is directly relevant to our prosperity--no prosperity, no jobs. Membership of the single market widens opportunity for our companies and choice for our people. It is crucial to our huge success in attracting inward investment--40 per cent. of all United States and Japanese investment in Europe.

Our place in the EU is equally relevant to a wider interest in stability and security in Europe and beyond. For the past four decades, together with NATO, the European Union has helped ensure an unprecedented period of peace among the nations of western Europe. Today it is one of the most effective mechanisms in

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forming a common front against drugs and organised crime and for working together to clean our environment. The European Union always has been and must remain more than a mere free trade area.

I recognise that many people sometimes feel a sense of frustration at our dealings in the European Union. So do the Government. Partly this reflects a justified dissatisfaction with specific policies such as the agricultural policy or the common fisheries policy. Partly it reflects a deeper anxiety about the possible direction the Union might take in future.

We cannot and do not ignore such concerns. We continue to urge reform of policies to which we object, like those on agriculture and fish, and an end to restrictive practices. However, it is much easier to spin flowery rhetoric about the European Union's alleged deficiencies than it is to grapple with the detail, prior to achieving improvements in the national interest.

In the intergovernmental conference we are taking a clear and uncompromising line on issues such as more majority voting in the Council. We anticipate a tough negotiation. But the Government are clear that no case has been made for further harmonisation and any transfer of decision-making to Brussels.

So we must and shall continue to argue and work for the sort of European Union which we believe is right: a partnership between nation states, working together through agreed systems of decision-making where that brings real advantage. We seek an enlarged Union that is a foundation of peace, democracy, prosperity and the rule of law across our continent, and an open Union active in wider global co-operation.

As for trade, if we left the European Union, we would have to reach the best arrangement we could with our erstwhile and by then disaffected partners. A number of noble Lords find it attractive to pluck from the tree the various European policies which are obviously in our interests and to abandon the rest. But let us not be under any illusions about this. Quite apart from the acrimony such a divorce would generate, the World Trade Organisation's arrangements provide nothing like the same degree of open market access as the single market. I do not see much attraction in a free trade relationship that would leave us subject to the same European Union obligations as now but without the voice we now have in framing the rules--to coin a phrase, "obligation without representation".

The Common Market needs common rules with common European-wide institutions like the Commission and a strong and independent court to enforce them. Otherwise, it will dissolve into an anarchy of cheating. We know that the Court's functioning can and must be improved. That is why we have tabled proposals to that effect in the IGC.

In other areas as well, we continue to seek changes to rules where they are now deficient, as with the common agricultural policy. We continue to oppose new proposals that are not sensible. But accepting the obligations of co-operation does not and will not mean accepting every idea that may be put to us from Brussels or elsewhere in Europe. The difficulties or frustrations

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we may encounter in the European Union are entirely inadequate grounds to throw away the advantages and opportunities we gain from membership.

As I have already explained, the Government believe firmly that the European Union has been and remains an essential foundation of stability and prosperity in our continent, from which our own countries cannot be separated. Membership of the European Union, acceptance of the European Union's obligations, is not a matter of selling out our sovereignty. It is about co-operating with our partners to enable us collectively to pursue shared goals in a way and to an extent that we could not contemplate each on our own.

There are difficult decisions ahead for the European Union. Next year decisions must be made on moving to Stage 3 of economic and monetary union. Let us be clear: whether or not we take part in that process, a failed single currency would damage our own prosperity and interest. Just because we might not be directly involved does not mean that we would not be directly affected. We face equally fundamental challenges in preparing for enlargement to embrace the new democracies to the east. That is important, as my noble friend Lord Kingsland pointed out. This requires great effort on their part to prepare and hard choices on ours in respect of present policies. But enlargement is central to reuniting our continent and spreading and extending peace, prosperity, democracy and the rule of law. The nations of central and eastern Europe are in no doubt of that. And this work is, as the Government said in the Partnership of Nations White Paper last year:

    "at once an historic responsibility for Europe and a long-term British interest".

Economic and monetary union and European Union enlargement are of direct relevance and importance to the United Kingdom. We should be directly involved in the decisions taken on them.

Meanwhile, there is a real debate being held about Europe itself. What kind of Europe should we and our partners aim to build? In June, in Amsterdam, Europe's leaders will conclude the intergovernmental conference that is reviewing present European Union structures. We have a clear agenda for the Union. We want a Union that is outward-looking, free-trading, democratic and flexible; a Union that respects the diversity and promotes the enterprise of its peoples; a Union above all that embodies our vision of a partnership of nations.

People have sometimes scoffed at the idea that the European debate is going Britain's way. But in reality today's European Union bears the hallmark of our approach. After all, it is no longer based, even if it ever was, on the concept of a small core of countries moving inexorably ahead towards ever more centralisation, as if propelled by some kind of Marxist dialectic.

Today's European Union is a careful balance between subsidiarity, supranationalism and intergovernmentalism. Today's debate is about flexibility, to reconcile the legitimate wish of some to integrate more closely with the equally legitimate wish of others to rest where they are.

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Increasingly, Britain's approach is determining Europe's economic agenda. It is there in the single market, as my noble friend Lord Tebbit pointed out. It is there in the liberalising, positive role played by Europe in the world trade talks. Do not let us forget that there is no greater champion of that policy in the councils of the Community than this country. If we were not there, it does not necessarily follow that that free trade impetus would remain.

Is it not also striking that today countries across Europe are following a trail blazed by Britain throughout the 1980s and 1990s, much of it following the lead of my noble friend Lady Thatcher? I refer to the path of privatisation, deregulation and labour market reform. They are not doing it only because of EMU. They are doing it because they know that to succeed in a single market and an increasingly competitive global economy they have little choice.

I invite those who say that that is simply British propaganda to listen to the words of Ruud Lubbers, the former Dutch Prime Minister, who last April said:

    "France and Germany, the engines of Europe, had better realise how strong the development of the British economy has been ... the UK is reacting better to the globalisation of the economy than Germany or France. The UK has a tradition of open markets, a tradition which has become stronger since the 1980s".

Of course, some of our partners have a different concept of Europe. They press their vision as we do ours. This country's interest is not to withdraw from that debate. It is to continue to argue and work for the kind of Europe that is in the United Kingdom's interests and, we believe, in our partners' interests as well. We have argued successfully before. We can do so again now.

It is not the Government's practice to oppose Private Members' Bills at Second Reading in this House. Therefore, if a Division is called today, the Government will abstain.

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