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Lord Grenfell: I am grateful to the noble Lord for giving way. I did not say that it would never be used.I said that it was the hope that it would never be used. But the fact that it can be used remains there.

Lord Stoddart of Swindon: So in actual fact it is a very considerable threat to the countries of the European Union. It is a real threat. At the time of the Maastricht discussions I said that if a country that was having difficulties and could not meet the criteria was then fined, its position would be made even worse. It would go on being fined, fined and fined until presumably its economy collapsed. That of course would be complete and utter nonsense. Indeed, as far as this country is

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concerned, it would be quite a considerable amount of money that we would pay--up to £3,500 million a year, or at least so long as we did not meet the criteria.

There is another problem. What if Parliament does not want to pay? Let us suppose Parliament says to the Government, "They have fined you but we are not going to raise the money for you to pay the fine". What will happen then? Will the European Commission send in the jack boots? What will happen? The system is not a good one and it is one which I regret.

The noble Lord, Lord Taverne, who for very good reasons has had to leave us, seemed to say that arguing against EMU was not quite right; that we are in the European Union and in it for a long period of time, and so what do we keep arguing about? But the fact is that in 1975, when we had a referendum on whether we should remain in Europe, EMU was ruled out. The Government themselves came forward and said there was a danger that we would have economic and monetary union but that they had negotiated it away because it would do damage to our economy and particularly to employment. It was ruled out, and so it is perfectly legitimate for people to argue that it should not be ruled in, not at least at this stage and until there has been another referendum.

We are told that we should not interfere with other people and that if they want to go in, let them go in. But at Maastricht we agreed a set of criteria on which they should go in and on which the economic and monetary union third stage together with a single currency should go ahead. Those criteria were very tough. If noble Lords will remember, everyone was talking tough at that time; the euro was going to be at least as strong as the deutschmark. Am I right, or am I wrong? Of course I am right. Everyone who has argued the point will know that. But what do we find? When we come to the 11th hour, a few weeks, as my noble friend says, before the decisions as to who is going to join are about to be made, what do we find? We find that the Maastricht criteria are not being adhered to and that there has been a lot of creative accounting. The French were able to sell their telecommunications system, the Italians have raised a one-off tax and the German Government wanted the Bundesbank to hand over its loot in order that they could meet the criteria. So there are lots of arguments as to why not only this country but other countries should not rush into it.

The noble Lord, Lord Howell, was right to urge caution. He made the point that it could be advantageous for us to remain out. So far, I have not heard the arguments made in favour of us going in at the first stage which would convince me that we should go in at this stage. My noble friend Lord Randall, who is not in his place, said that Parliament would look absurd if we passed this amendment. Parliament never looks absurd when it considers very closely and for a long time what it is doing. That is what Parliament is here for. If it is not in the country's interests that we should adopt the first stage of EMU and a single currency, then Parliament is the place where it should be discussed and Parliament should make the final decision together with the people of this country.

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My noble friend talked about stability. Everyone is talking about stability. But at the same time everyone is talking about markets. The Labour Party is now market based. I always thought that the prime factor about markets was their instability. The very notion of having a stable market nullifies the term. A market is where a willing seller sells to a willing buyer at the price the market will bear at that time. So there is no stability. I wish people would not talk about it when we are talking about markets.

We had some sort of stability with the gold standard way back in the dim and distant past. It has been forgotten that the gold standard was a rigid standard--a single currency if you like--and it caused economies to collapse throughout the world. Economies collapsed in this country, Germany and the United States, and that probably brought Hitler to power. Then there was the Bretton Woods agreement just after the war. That was supposed to bring stability of currencies. That agreement collapsed because it was unsustainable, because money is part of the market force as is everything else.

Then we had the ERM. The very same people who are now urging us into a single currency were the very ones who urged us into the ERM, with disastrous consequences for this country in the loss of jobs and businesses. So there are plenty of precedents that we should observe before we jump too quickly into a single currency.

Many who express doubts about EMU are described as ignoramuses. In fact, someone said that we were barking mad. I have been in politics a long time and I have a thick enough skin to absorb such barbs as that. So often in this matter of Europe the truth is stood on its head. It seems to me that those who wish to embark on an experiment which has never been tried before in history and which, if it fails, will cause economic and financial disaster not only in Europe, but throughout the world, are the real crazies. Let us make no mistake: it is an experiment and it could be a very dangerous one.

In my view, it will undermine Britain as a sovereign state because it abandons our currency and allows a foreign conglomerate to decide by majority voting our monetary and economic policy and because it is a policy which is irrevocable. The Maastricht treaty makes it perfectly clear that the policy is irrevocable and because of that it undermines the very basis of the British constitution. Indeed, if anyone had advocated that not so long ago, they would probably have been detained at Her Majesty's pleasure under Regulation 18B.

Yet, despite all those things, the Chancellor says that there is no constitutional bar to our going into a single currency. But I believe that there is such a bar and that is because Maastricht says that the change is irrevocable. It undermines the very basis of our constitution that one Parliament may not bind its successor.

I believe that the present squeeze on public expenditure has not so much to do with the domestic financial situation and economic position. It is not because we are short of money. In fact, money has been coming in faster than ever before, as far as one can see. The present squeeze is to do with meeting the

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convergence criteria for entry into a single currency. Single mothers, pensioners and others should bear that in mind.

The economic circumstances within the countries of Europe are so different that without a financial transfer mechanism through centralised taxing, which would be redistributive, EMU is bound to fail. It can do no other than fail. If we are prepared to tax and have a central distributive system, it might succeed, but if we do not have that, it is bound to fail because there will be no opportunity for the poorer countries, or those within the different cyclical economic positions, to adjust their currencies to take account of the situation. Therefore, those countries will stagnate, falling deeper and deeper into depression and then what will people do? They will riot in the streets because there is no mechanism to do other than that.

Unemployment rates are already dangerously high in many parts of Europe, including Germany, France and Spain. If monetary policy were tightened, those countries would find themselves in an even worse position. What suits one country does not suit another. If we have a rigid system without redistribution, then only disaster can follow.

I believe that far from going further into EMU, it would be better for us to co-operate with a much wider range of countries. We have our own Commonwealth. There is the United States and Canada and the whole wide world. Growth rates show quite clearly that Europe is stagnating while the United States and the United Kingdom itself are having higher growth rates than the rest of Europe.

Therefore, I believe that this amendment has been useful in providing the opportunity for the Committee further to discuss this matter. I sincerely hope that there will be other opportunities to discuss it because I believe that at this stage we should move with less haste than some of the countries of Europe want us to. We shall do far better to consider the matter at much greater leisure.

5.45 p.m.

Lord Pearson of Rannoch: There has been a common assumption running through the debate this evening in this Committee. It runs through the debate in the country at large. It is to the effect that we have an opt-out from EMU. So I am very grateful to the noble Lord, Lord Shore, for tabling this amendment and for moving it so ably. It allows me the opportunity to explain to the Committee and to the Government why, if EMU survives and if we stay in the European Union, we do not in fact have such an opt-out.

It is not surprising that this assumption is so widely held because the previous government claimed to have secured such an opt-out at Maastricht when they had not done so. However, I hope that the present Labour Government will not continue to pretend to the British people that we do indeed have an escape available from this ill-fated project when, unless it collapses, we do not.

I can only assume that the new Labour Government are acting in ignorance and that they will wish to put the matter straight before they allow the Treaty of

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Amsterdam to be ratified. The resulting negotiation would also afford the other European countries one last chance of avoiding the impending folly of EMU. I really hope that it is not too late for that.

In order to explain what I have just said, I fear that I must weary the Committee by descending into the detail of the treaty and placing on the record some of its depressing euro-speak. But the facts are very simple. Our so-called opt-out is contained in Protocol 25, as it has been renumbered at Amsterdam. Under paragraphs 3 to 9 of that protocol, a number of articles in the treaty will not apply to the United Kingdom if we continue to say that we do not want to move to the third and final stage of EMU. In particular, paragraph 8 of Protocol 25 lists 24 articles of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank which will not apply to the UK if we do not want to be full members of EMU. We are also spared other articles by Protocol 25.

However, at least six articles have been left in the treaty which have not been included in Protocol 25, so they still apply to us, even if we continue to want to opt out. Indeed, one only has to put on a wet towel and, after a good night's sleep, examine paragraph 5 of Article 1, which this amendment wisely seeks to exclude from the treaty, to see that this is likely to be so.

Extracting the relevant bits of paragraph 5, merely in order to spare your Lordships too much ennui from exposure to Euro-speak, that paragraph ordains as follows:

    "The Union"--

of which we remain part--

    "shall set itself the following objectives--to promote economic ... progress ... and to achieve balanced ... development, ... through the strengthening of economic ... cohesion and through the establishment of economic and monetary union"--

that is, of course, our old friend EMU--

    "ultimately including a single currency in accordance with the provisions of this Treaty".

Those not well versed in the malice of Euro-land might be tempted to think that there was no problem here that the provisions of the treaty give us an opt-out, and so none of the rest of paragraph 5 will apply to us. But an examination of the rest of the treaty reveals the other five articles, not included in our opt-out, require us to run our economy on strictly communautaire lines, and at least two of them eventually commit us to EMU itself. If we do not do so, Articles 226 to 229 of the treaty allow us to be taken to the Luxembourg Court for unlimited fines.

Before quoting to your Lordships the very minimum parts of the articles necessary for an understanding of this matter, I shall give your Lordships just one example of the way in which the quicksand of the Treaty of Rome, into which we have so foolishly strayed, actually works. Your Lordships will recall that the previous Conservative Government claimed to have won two opt-outs from the Maastricht Treaty. One was from EMU, which we are discussing now, and the other was from the social chapter. Some of us spent many hours in your Lordships' House in 1993 trying to persuade that government not to ratify that treaty, but to no avail.

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I know that the present Government have unfortunately now ratified the social chapter, but it is very instructive as to how our so called opt-out from EMU is likely to stand up in future, if we look back and see what happened to our opt-out from the social chapter.

As your Lordships will recall, our European partners got round that opt-out by bringing various harmonising social measures against us under other articles which are subject to the qualified majority vote and which we had accepted; for example, one measure, the Working Time Directive (or the "48-hour week" as it became known colloquially) was brought against us under the single market legislation.

This so surprised the Government that they appealed against its imposition to that engine of the treaty, the Luxembourg Court of so-called Justice. To give your Lordships the full flavour of the British Government's reaction to the Court's inevitable ruling against us, I can do no better than read your Lordships the letter sent on 12th November 1996 by the Prime Minister, my right honourable friend Mr. John Major, to M. Jacques Santer, the President of the European Commission. I quote:

    "Dear Jacques,

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