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Pension Funds: Tax Credits

2.55 p.m.

Lord Dixon-Smith asked Her Majesty's Government:

Lord McIntosh of Haringey: My Lords, under existing Budget procedures it is not appropriate to consult. The ending of payable tax credits to pension funds announced in the Budget is part of the package of measures for reforming corporation tax to promote greater long-term investment. The effects upon local government pension funds were considered carefully before the final decisions were taken.

Lord Dixon-Smith: My Lords, is the noble Lord aware that for local authority pension funds, which already on average have a 15 per cent. actuarial deficit, the loss of income resulting from that decision will mean that at the next actuarial revaluation in 1999 contributions will have to rise by a sum equal to 3½ per cent. of relevant local government pay? Above the consequences of any non-ordinary revaluation, if the accumulated loss of income at that point is to be eliminated, it might be done by amortising it over 12 years--which is the way in which actuaries would tend to look at this question. Will the Government consider bringing forward the date of the actuarial revaluation in order to reduce that overall cost?

Lord McIntosh of Haringey: My Lords, in reply to the noble Lord's first question, he is correct to say

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that the 100 or so local authority pension funds are in deficit. My figure is by an average of 10 per cent. or £250 million a year. He forgets to mention that the deficit was caused very largely by the disaster of the poll tax and the previous government's encouragement of increased early retirement. Indeed, in 1990, the last government encouraged local authorities to reduce their contribution rate from 100 per cent. to 75 per cent. So we know where the blame lies for that.

The noble Lord's second question concerned the cost in terms of rates and council tax in the future. As he knows, the next valuation is due in March 1998 in England and Wales and in March 1999 in Scotland. We do not know what the valuation recommendations will be but certainly they will not come into force until the year 1999-2000. The Local Government Association has had our undertaking that any changes in contribution rates will be taken into account in determining the level of local authority provision.

Lord Mackay of Ardbrecknish: My Lords, is the noble Lord aware that the London Borough of Haringey, with which he has at least some kind of association, will find that there is an annual cost to its pension fund of between £800,000 and £1.7 million? That is just a small example of the total £5.4 billion that has been taken out. If the noble Lord believes that that does so much good to pension funds, would it not do double the amount of good to make the sum £10.8 billion?

Lord McIntosh of Haringey: My Lords, I do not know from where the noble Lord obtains his figures but he anticipates the valuation which will take place in March next year. He anticipates the conclusions that the actuaries may take on that valuation. I have already made clear that none of us knows the effect on council tax.

As for the noble Lord's more important question, the point needs to be made that the shift to longer-term investment from lower dividends, which is the whole thrust of that tax change, will result in improved company performance. It will therefore result in an increase in long-term share values and that will be to the benefit of local authority pension funds as well as other pension funds. Perhaps the noble Lord will bear in mind that only 60 per cent. of the investments of local authority pension funds are in equities and of that 60 per cent., 75 per cent. of the return is in capital growth rather than in dividends. So, he will see that the gearing is less damaging than is sometimes suggested.

Lord Boardman: My Lords, the noble Lord said that it was customary for there to be no consultation on Budget matters. But has it not been the practice for a long time for potential changes to taxation to be the subject of wide consultation, well in advance of the change? I do not say that is done as part of the Budget,

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but to find out what impact will occur if the Government decide to make changes. If that is not done, are not the Government travelling blind?

Lord McIntosh of Haringey: My Lords, the Government were obliged by the economic mismanagement of the previous government to bring in a Budget within barely two months of coming to power. Clearly, consultation of the wider kind referred to by the noble Lord, Lord Boardman, continues to take place, but not in the specific run-up to a Budget.

Lord Peyton of Yeovil: My Lords, is not the noble Lord making too much of the suggestion that the economy which the Government inherited is as weak as he describes? I wonder whether, in a year's time, when the noble Lord reads the answers he has given today, he will find them a little tinged with optimism.

Lord McIntosh of Haringey: My Lords, I am not accustomed to reading my own words unless I am forced to. If I am forced, I shall read only those words which relate to the original Question, which concerned local authority pension funds.

Lord Dixon-Smith: My Lords, is the noble Lord aware that the illustration that I gave as a possible outcome to this situation is based on what actuaries are likely to do, albeit one must acknowledge that no one can predict precisely what the situation might be in 1998 or 1999? That said, will the noble Lord accept that he is advancing a new departure for pension funds in general if he is advocating that capital gains or enhanced share growth will help the pensioners of local authority pension funds? The fiduciary duty of the trustees of those funds is to maximise the income of those funds in order to pay the pensions, and pensions are not paid out of capital.

Lord McIntosh of Haringey: My Lords, the noble Lord is right in regard to the fiduciary duty of pension fund managers. The point I was making was the wider point that increased investment by industry in the equities sector will not only increase the share values, but will also enable pay-outs from dividends to be greater in future years.

Lord Brabazon of Tara: My Lords, can the noble Lord explain how, if the economy was in such a mess when his Government inherited it on 1st May, in answer to a previous question he said that the vast majority of the rise in sterling happened under a Conservative government since last August? Weak economies do not have strong currencies.

Lord McIntosh of Haringey: My Lords, strong currencies may lead to weak economies, which was the thrust of the point made by the noble Lord, Lord Spens. Cannot we combine these questions and simply be asked a question every day in relation to how wonderful the last government were and how terrible this Government are rather than having the kind of boringly specific questions we hear at the moment?

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Chronically Sick and Disabled Persons (Amendment) Bill [H.L.]

3.3 p.m.

Lord Ashley of Stoke: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.

Moved, That the order of commitment be discharged.--(Lord Ashley of Stoke.)

On Question, Motion agreed to.

European Council, Amsterdam

3.4 p.m.

The Lord Privy Seal (Lord Richard): My Lords, I beg to move the Motion standing in my name on the Order Paper.

The House will know that, when in Opposition, I welcomed the opportunity to hold these debates on important European events. Now that we are in government I can assure your Lordships that I have lost none of my enthusiasm. I look forward to today's timely debate confident that it will be, as always, an enjoyable and stimulating occasion, particularly as we are to hear the maiden speech of the noble Lord, Lord Howell of Guildford. He knows a great deal about this topic and I am sure he will be extremely helpful in what he has to say.

Let me first step back a little and look at the genesis of the Amsterdam Treaty. It is the third in a series of treaties in recent years which have developed the EEC, then the EC, later the EU.

First, the single European Act laid the basis for the internal market. That involved a substantial extension of competence for the European Community, and a good deal of qualified majority voting. Then came Maastricht, which further extended Community competence and majority voting, set the foundations for economic and monetary union, created the European Union itself, and included co-operation in foreign and security policy and justice and home affairs in the treaties for the first time. The Maastricht Treaty contained the provision--Article N, second paragraph--which committed the member states to a further review of the treaties in 1996.

In fact, the process of reforming the treaties began over two years ago. In 1995 the member states set up a so-called Reflection Group to prepare the way for the full intergovernmental conference. The IGC itself duly began in Turin in March last year, and the process of negotiation dragged on for two full years. The process was marked by the clearly high ambitions for radical change to the structures of the European Union which emanated from some quarters inside the Union itself. The outcome is much more modest and much more sensible.

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Let me recall the Government's aims for this negotiation, as set out by my right honourable friend the Prime Minister on 18th June. They were:

    "to protect our essential interests over immigration, foreign policy, defence and a central role for Britain in Europe; to promote changes of real interest to the British people; and to move Europe on to a new positive agenda".

We also undertook to bring a fresh and constructive approach to Europe and to these negotiations. This we have done, and it is precisely because of that approach that we were able to deliver on these objectives.

In our brief exchange on these topics in the House last month, it became clear to me that there was a certain amount of confusion on the Benches opposite as to what the Amsterdam Treaty does and does not do. Let me try to help.

The treaty does, for the first time, give the United Kingdom clear and unequivocal legal security for our border controls. For us this was a considerable achievement. The treaty does introduce a new chapter on visa, asylum and immigration policy in the European Community pillar of the Union. We have succeeded in doing that in a way which preserves full autonomy for the UK over our own policies in these fields, and in a way compatible with the aspirations of our partners.

The treaty does not change the current intergovernmental nature of co-operation in areas such as the fight against crime and drugs. It does not remove the unanimity rule. And it does not give the European Court of Justice authority to decide on cases brought in UK courts in those areas. The treaty does, however, include a new employment chapter.

I recall that some concern was expressed last month that Europe was returning to what was described as an old-fashioned, corporatist approach. To make it quite clear, the treaty, at UK insistence, states that the Community's employment policy would focus in particular on,

    "promoting a skilled, trained and adaptable workforce and labour markets responsive to economic change".

The conclusions to the Amsterdam Council reaffirm the importance attached by the European Council to the promotion of,

    "a skilled and adaptable workforce and flexible labour markets responsive to economic change".

Finding a job and keeping a job is a priority for Europe's citizens. It is right that the treaty should recognise that.

The Amsterdam Treaty incorporates the social chapter, bringing to an end the UK's damaging opt-out. But the treaty does not extend qualified majority voting in the social chapter. We are confident of the Government's ability to negotiate successfully in Europe to ensure that any new legislation in the social field is compatible both with the establishment of sensitive common standards for working conditions and with economic effectiveness.

The treaty does address issues which matter to people. It introduces a new commitment to open decision-making and a public right of access to the documents of the institutions. I am sure this will be widely welcomed. It introduces new powers to combat

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fraud and waste by allowing the Council to take action by qualified majority to prevent and fight fraud against the Community budget and by strengthening the powers of the Court of Auditors to investigate the use of Community funds.

The principle of subsidiarity--ensuring that decisions are taken at the European level only when they provide real added value--is strengthened by the treaty. For the first time these procedures can be enforced by the European Court of Justice.

The treaty does introduce a new provision to allay any fears which the Maastricht Treaty may have raised--indeed, I heard them expressed in this House quite often when the treaty was going through--that Union citizenship might subsume national citizenship and erode national identities. The treaty makes clear that,

    "citizenship of the Community shall complement and not replace national citizenship".

Moving on, the treaty also includes a sensible extension of qualified majority voting. The extension is perhaps less significant than in the Single European Act and certainly less extensive than at Maastricht. But nonetheless the changes are valuable. They allow the Community to push through measures to combat fraud, as I have already mentioned, against what could be a recalcitrant minority; they allow majority voting to improve transparency, so that we can overcome unwelcome resistance towards making European Union business more open; and qualified majority voting in research will allow us to avoid negotiations which are in the UK's interests from being held up by one or two member states. So, overall, it is a small, useful, but limited extension.

The common foreign and security policy will remain intergovernmental, with key foreign policy decisions taken by unanimity. Qualified majority voting for implementation decisions will make that common foreign and security policy more effective. The treaty provides that any member state will be able to veto any such decision which it judges contrary to important national interests. The treaty also introduces a number of practical improvements to make common foreign and security policy more effective and credible. By way of example, these include the appointment of a High Representative to assist with the preparation and implementation of agreed policies under the direction of the Council itself.

On defence, also, we achieved an outcome which both protects our national interests and will improve European effectiveness. The UK has retained its veto over all decisions with defence implications. We also secured explicit recognition written into the treaty for the first time that NATO is the foundation of our and other allies' common defence.

Last month the noble Viscount the Leader of the Opposition asked whether the treaty spoke of "the objective" of integration of the Western European Union into the European Union. The Amsterdam Treaty does not do so. It refers to the "the possibility" of WEU integration into the Union,

    "should the European Council so decide".

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The theoretical possibility of EU and WEU merger has always existed. What is now made explicit in the treaty is that any such merger proposal requires a European Council decision by unanimity, and that any such decision would be recommended to member states for adoption,

    "in accordance with their respective constitutional requirements".

Here, and in most member states, this would mean approval by national Parliaments. We wish to see closer co-operation between the EU and WEU in European crisis management, but working together efficiently as separate organisations. At Amsterdam we successfully achieved a framework which will achieve this.

The Amsterdam Treaty also introduces new flexibility provisions to allow closer co-operation between groups of member states though under tightly defined circumstances. Again we have succeeded in fully protecting UK interests: there are safeguards which protect the single market and the interests of non-participants. It is made explicit that this new provision should be open to any member state which is willing and able to participate in an example of flexible co-operation. We have retained the veto in the form of an emergency brake mechanism, if I may use that phrase, which allows us to prevent a vote from even being taken if important national policy interests are at stake. It remains to be seen how much the new provisions will be used in practice. But in the terms agreed at Amsterdam they are entirely satisfactory, and represent a sensible accommodation between member states with different circumstances and aspirations.

The Amsterdam Treaty did not, unfortunately, reach agreement on reform of the European Commission or on reform of the voting system. That was a disappointing outcome for us. The Council was close to agreement, and perhaps with a little more time the deadlock might have been broken. But it was not to be. We did, however, secure a commitment in the treaty to press ahead with these reforms before enlargement takes place. The Commission President, M. Santer, has recently called for an early resolution of these outstanding issues. The United Kingdom welcomes this and stands ready to look actively for a solution.

Some commentators have argued that the Amsterdam Treaty has failed to prepare the Union for enlargement and has even put the process in danger. Events since the Council have shown that this is just wrong. The concern now, rightly, is for the future, for the debate has already moved on since Amsterdam. The Commission's Agenda 2000 proposals, produced right on time two weeks ago, open a new chapter in the history of the European Union. We have moved on to a new agenda based on the twin aims of enlargement and policy reform--key components in the new European agenda which the United Kingdom wants to advance.

Enlargement is a central objective for the United Kingdom and the European Union. We must grasp this historic opportunity to enhance security and prosperity throughout Europe. We welcome the Commission's clear recommendations on the candidates' readiness for membership. We should start negotiations with applicants who are ready. The Government look forward

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to agreement at Luxembourg later this year on opening negotiations during our United Kingdom presidency in the first half of 1998.

We also welcome the Commission's proposal that the budget should remain capped at 1.27 per cent. of Community GNP. In our view this should provide adequate funds for an effective Union. CAP reform is a top priority if enlargement is to be made affordable and successful. Reform makes sound economic sense: we want a competitive and viable European agriculture, friendly to the consumer, the producer and the environment. We acknowledge that the Commission's ideas will bring real benefits to consumers. But the United Kingdom will push hard for a still more radical strategy. At the same time we must see a reform of the structural and cohesion funds. As a Commissioner who was once responsible for one of the structural funds, the next sentence of my brief, which says that they must be made simpler, more effective and better targeted as well as taking account of future enlargement, I endorse wholeheartedly.

These negotiations will of course be taking place in the context of developments on economic and monetary union. The Government's position on this is well known and EMU was not a major topic at Amsterdam. Suffice it to report that the Council approved regulations on the stability pact, on the legal framework for the euro and on voluntary arrangements for relations between EU currencies of EMU participants and non-participants. It also approved the design of euro coins. My right honourable friend the Prime Minister made it clear that if EMU is to succeed, it must be based on sustainable convergence.

At Amsterdam this Government delivered where we said we would deliver. The Amsterdam Treaty is not the radical document which some of our partners wanted. But it is a good result for the United Kingdom and a good result for Europe. The result is workmanlike rather than theoretical; pragmatic, perhaps, rather than visionary. As such, it represents a sensible and important result to a long negotiating process. It points the European Union in the direction of enlargement. We believe that it helps to make it more fitted for that enlargement and for the challenges which undoubtedly lie ahead.

Moved, That this House take note of the conclusions of the Amsterdam European Council in June.-- (Lord Richard.)

3.20 p.m.

Viscount Cranborne: My Lords, may I say at the outset how much I am looking forward to the maiden speech of my noble friend Lord Howell whose expertise in these matters will add greatly to the quality and depth of our debates. May I also say how grateful I am to the Government in general and to the Lord Privy Seal in particular, for arranging this important debate. The European Union and the United Kingdom are, after all, becoming increasingly entwined. Although the Lord Privy Seal suggested in his remarks--and I believe I quote him accurately--that this treaty is

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sensible and modest (he may well be right in that), I cannot help feeling that any examination of the provisions of the treaty must drive one to the conclusion that the Treaty of Amsterdam represents a substantial further step towards European integration rather than the 5,000 mile service we had been promised. That not only worries those who want a Europe of nations, but sucks countries potentially into policies with which they may disagree and from which they may not be able to disentangle themselves.

Since what for me are the sad events of 1st May, I have twice drawn your Lordships' attention to my feelings about those who characterise my party as a party of Little Englanders. I have sought to show--I fear to closed ears--that the risk does not lie in that danger, but rather that it lies in the possibility, perhaps even the probability, that the path the European Union is taking will lead to all of us becoming ensnared in a union of Little Europeans, reacting defensively to an increasingly competitive outside world. For the instinctive reaction of those challenged by fast-moving forces, whether economic, cultural or, in a completely different sphere, military, is all too often self-protection. It is, if you like, a Maginot mentality. It is not a reaction that historically has been crowned with great success.

We know that in today's global economy the Maginot mentality works less well than ever. In various pronouncements since the election the Foreign Secretary has described today's global economy and its nature accurately and elegantly. As I have made clear to your Lordships before, I agree with his analysis. In the global market capital moves swiftly and is not much impeded by frontiers any more. Free traders now win in a world, much of whose growth comes from rapidly developing information-based technologies. Competitiveness has always been the secret of economic success, but today we gain it or lose it more swiftly than ever before. Flexibility is therefore as important a key as ever it was.

As I say, the Government's rhetoric has recognised this fact of life, and we learn from the President of the Board of Trade that she is doing something about that. She is setting up a task force to advise on the matter. I hope that the Government will forgive me if I am a little sceptical about her solution. It smacks of two things increasingly typical of the Government: another review and a corporatist approach redolent of the 1970s, which is something the noble Lord the Lord Privy Seal anticipated that I would say and I would not wish to disappoint him. Clearly, the Government still believe that it is governments and not business that create jobs.

It also seems to be deeply in tune with the spirit of Amsterdam, or much of it. If ever western Europe is to compete with the rest of the world, it will certainly need to continue to develop the single market, the great and lasting achievement of my noble friend Lord Cockfield. However, as important as the fact of the single market is its nature. It may establish a level playing field, but will that playing field be built so high that to conform to it we will all have to breathe air so thin that we will find it difficult to compete with other countries respiring at a lower level?

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To any dispassionate observer I would contend that we in Europe are in danger of just that. Just to take one example: the increases in QMV in the Amsterdam Treaty cover, as the Lord Privy Seal pointed out, areas such as the social chapter, the employment chapter, public health and research matters. In fact, the veto has also disappeared from a number of other areas to which, with your Lordships' permission, I will return shortly.

Our views are well known on the effects of such measures. They will ensure that less competitive member states use them to hold back more competitive partners on the grounds of unfairness. After all, the battleground is well-chosen. No one is against health, safety, employment or research--even me. The European convoy will thus be restricted to the slowest ship and never mind if other non-European convoys overtake us. The message seems to be that at least we will all fall behind together. At least there will be an equality of misery in Europe: little wealth creation and virtually no job creation. It reminds me very much of previous Labour governments' solutions by the back door.

Again, I must be fair to the Government. The Prime Minister has shown in the past that the prospect of what could be added to the provisions of the social chapter could harm our competitiveness. I ventured to remind the House the last time we discussed these matters that the Prime Minister himself admitted before the election that some of these areas subject to QMV in the social chapter would not be helpful to us in terms of job creation. The Lord Privy Seal, through lack of time, was unable to answer a question I put to him about this. However, with his usual courtesy, he gave me a very full answer to a letter I subsequently wrote to him.

Your Lordships may recall that I pointed out that the Government could not pick and choose which of the provisions of the social chapter, which were subject to QMV, we implemented; and that therefore the only way we could pick and choose--which seemed to be what the Prime Minister wanted to do--was to maintain our opt-out and pass those provisions with which the Government agreed through the British Parliament in parallel.

I was therefore interested in finding out how the Government proposed to pick and choose, as the Prime Minister promised, when the Government implemented their pledge to sign the social chapter. In his letter the noble Lord replied as follows:

    "... we have made it clear that we will retain the veto in areas such as social security and co-determination in the boardroom which are vital to competitiveness. Even where decisions are by QMV, it is our intention to ensure that issues of employability and competitiveness are taken into account by participating fully in negotiations on any future proposals for social legislation".

I believe that means that the Government will rely on their diplomatic skill and the goodwill of our partners to secure the pick-and-choose policies that we want. I yield to no one in my admiration for the diplomatic skills of the Foreign and Commonwealth Office. However, in view of the aspirations of those who wish to add substantially to the existing provisions of the social chapter, reliance on these two weapons hardly seems, with the greatest respect to the Lord Privy Seal, to be an adequate response.

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What has actually happened is one of two things, but I am not sure which. Either the Prime Minister has entered the bear pit of European negotiations, where quite rightly all member states negotiate to obtain maximum national advantage and, I am afraid, has been "rolled over", as the saying goes; or he has changed his mind and now wants to accept all the provisions of the social chapter, but fears to admit it.

Much the same seems to apply to the rest of the draft treaty and any peripheral discussions at the IGC. In spite of much huffing and puffing the Government brought back nothing on quota hopping, for instance. During the election the Labour Party agreed with us that we could only address quota hopping by changing the European treaties. But what have we got? Well, we have something concrete--we have a letter from the Commission confirming this country's right to issue licences requiring a proportion of fish to be landed here. I have to ask: what is new in that? That does not change the existing situation one jot or one tittle. It is a right which is, in any case, almost impossible to enforce.

Moving on rapidly to cover the Government's obvious embarrassment, perhaps even more worrying are the number of concessions that the Government have made in political areas which, at the very least, bring into question their commitment to a Europe of nations and which bring a united federated states of Europe much more clearly into view. No wonder the Liberals are so happy to take a first step towards merging with the Labour Party; the Prime Minister is beginning to realise their fondest ambitions even before that delightful arranged marriage has been consummated.

Let us consider a sample of what the treaty provides in this respect. It gives new powers of veto to the European Parliament in 23 new areas by extending co-decision-making. The European Parliament will therefore in those areas henceforward be able to veto measures agreed by the Council of Ministers, including, on employment, incentive measures; on social policy, equal opportunities; public health; transport policy; the social chapter and the environment. Despite what the Lord Privy Seal said, I wonder how much subsidiarity there is in practice here; there is certainly plenty of opportunity for European institutions to undermine the power of European nation states--and we can be sure that in future treaties there will be more to come.

And then there is the curious case of the "human rights" clause. The treaty allows the member states to rule by majority that a member state is guilty of "serious and persistent" violations of human rights. Once a member state is found guilty, the other member states may by QMV suspend its voting rights. It does not take a very great leap of the imagination to understand how easily this provision will be abused. The Minister without Portfolio must be envious and no doubt, since imitation is the sincerest form of flattery, it is only a matter of time before the Labour Party's awkward squad finds itself being disciplined under a similar set of rules.

There are other forums where nations which abuse human rights can be, and are, called to account. I contend that there can be no justification for requiring a country to be bound by decisions taken in its absence.

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The treaty under justice and home affairs is hardly much more encouraging. None of the last government's proposals for reform of the ECJ, for instance curtailing the effects of retrospective decision taking, seem to have been addressed. Indeed, when I asked the Lord Privy Seal about the failure to press this important point at Amsterdam, he replied, with his usual courtesy, that the idea,

    "met with minimal support in the Conference. We decided in this context not to pursue it".

That is a somewhat less-than-robust approach to negotiation and rather flies in the face of the assurances which the Lord Privy Seal gave us a moment ago. I must ask where the UK budget rebate--or our opt-out from the single currency--would be if a previous government, faced with "minimal support" had decided not to pursue them. I fear that we can be less than satisfied with that reply, no matter how courteous.

The treaty gives a new role to the ECJ, which is:

    "jurisdiction to give parliamentary ruling on the validity and interpretation of framework decisions".

That in itself sounds like a considerable extension of the ECJ's power.

Nonetheless, we must be generous. The only success that the Labour Government can realistically claim related to immigration, asylum and visas--and, my goodness, they certainly claimed a very great deal of credit for that. I am, of course, happy to welcome that success which means that we still have an opt-out from the new title that brings these matters under the jurisdiction of the Commission and the ECJ. I hope that that opt-out proves to be permanent. If I express doubts it is because the Labour Party stated in October 1995 (in a document entitled The Future of the European Union):

    "We reject permanent opt-out or 'variable geometry'".

It would be a pity indeed if it did not prove permanent since the Government would be throwing away yet another negotiating success of the last government. Indeed, we negotiated that success in March 1997, but if the Labour Government wish to claim credit for it, I am in a generous frame of mind and I am happy to allow them to do so.

Nowhere do my doubts about the treaty and the Government's claim for their negotiating performance surface more strongly than in the sections on defence and security policy. Let me confine myself to two matters only.

In general, the treaty encourages moves towards a European foreign policy based on more majority decision-making, with QMV extended to two new decision-making procedures: "Joint Actions Common Positions" and "Common Strategy". Now a member state can reject the adoption of any decision by QMV for

    "important and stated reasons of national policy".

Also, it introduces a new term "constructive abstention" (which I believe was a French invention) meaning that a country may opt out of CFSP decisions, but allows other states to go ahead. At the very least, this means a move away from common decision-making and any action would still be made in the name of the EU.

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But there is more, and I wonder if, when the Minister comes to reply, he could help me on this point. Article J.13 states:

    "When abstaining in a vote any member ... shall not be obliged to apply the decision, but shall accept that the decision commits the Union ... The member state concerned shall refrain from any action likely to conflict with or impede Union action based on that decision".

If the member state concerned felt strongly that such an action was against its national interests, it might not wish to comply with that last undertaking. It therefore sounds as though the EU under the treaty could prevent a member state acting in its own interests. Could the Minister tell us whether he agrees with that interpretation and, if he does, why the Government signed a treaty containing such a provision, and, if he does not, could he tell us what that provision does mean?

The second point on the CFSP is under the head of defence. The Lord Privy Seal kindly addressed himself to this and I am grateful for what he said about the veto. However, perhaps I may explore this a little further, albeit briefly. For the first time a new aspiration is included in the treaty at Article J.7, which states:

    "The union shall accordingly foster closer institutional relations with the WEU with a view to the possibility of the integration of the WEU into the Union".

The Lord Privy Seal said in this House on 18th June--he repeated it again today:

    "We see the role of the WEU in the future as it has been in the past. We do not see a defence role for the European Union".--[Official Report, 18/6/97; col. 1253.]

I am extremely grateful for that and for the fact that the Government have maintained the previous position. However, I wonder whether the Lord Privy Seal sees any inconsistency between his reply and Article J.7. If the spirit of the treaty is to be observed it is difficult to argue that a government who signed it did not envisage the possibility of such integration. How will the Government stick to the sentiments of the Lord Privy Seal's reply (and his sentiments expressed today) when confronted with such an aspiration which they have signed up to in the treaty?

I have attempted to pick out a number of examples from the treaty which seem to me to show that this treaty is anything but the 5,000 mile service it was advertised as. It seems to bear little relationship to the negotiating triumph the Prime Minister felt it to be on his return from Amsterdam. In his Statement to Parliament, he said--the Lord Privy Seal repeated these sentiments today:

    "We have proved to the people of Britain that we can get a better deal by being constructive".--[Official Report, Commons, 18/7/97; col. 316.]

There are some areas in this treaty with which we agree, notably the enlargement aspirations and the structural and cohesion funds, to which the Lord Privy Seal helpfully referred, but we have seen a substantial increase in the powers of European initiatives at the expense of individual nation states so that it will be increasingly difficult for a nation to opt out if it disagrees with the chances of success of a European

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policy. The one that I mind about most is the biggest economic problem confronting the European Union at the moment, which is unemployment.

The Government clearly intend to foist this substantial change on the British people without consulting them. I find it curious when we have a government who are wedded to the cause of referendums that they should deny us the opportunity to vote on a question which seems on closer examination, and despite their denials, to be rather more important for all of us than the election of a mayor for Greater London, whatever the aspirations of my noble friend Lord Archer might be.

If there 1is a referendum on the Amsterdam Treaty, the Government may even win it. The Government could then face their critics with some confidence; otherwise, when the implications of what they have signed away at Amsterdam become clearer, they will stand accused of smuggling yet further surrenders of sovereignty through the back door, and a number of us will never forgive them for it.

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