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The Earl of Longford: I do not think that anyone has ever dared to interrupt the noble Lord before but everything has to be done once. Is the noble Lord aware that when I was the Minister responsible for Germany 50 years ago the Germans were starving and, not long afterwards, the official view in the Treasury was that to tie ourselves to Europe would be to tie ourselves to a corpse? Does the noble Lord agree that the standard of living in Germany--in spite of recent troubles--is much higher than in this country?

Lord Bruce of Donington: I am sorry that I cannot answer the noble Earl as he did not articulate what he said sufficiently for me to hear him precisely. If he will try to use his nasal resonators, perhaps I can answer his question.

The Earl of Longford: I had better speak slowly. Is the noble Lord aware that when I was the Minister responsible for Germany 50 years ago, the Germans were starving, and that soon afterwards the official view in the Treasury was that to tie ourselves to Europe was to tie ourselves to a corpse? Does he not agree that the standard of living in Germany is still a good deal higher--in spite of recent difficulties--than it is here? How does he explain that?

Lord Bruce of Donington: Even conceding the point that the noble Earl makes that the standard of living in Germany is higher than our own--I gather that is a point that perhaps both the Government and the Opposition would wish to contest in view of their previous economic records--the noble Earl is probably equally aware that during his period of office as Minister responsible for Germany we in this country, at a time when we had suffered more than £7 billion--at 1945 prices--worth of damage and destruction, rationed bread in order to feed the starving Germans. He might also remember that.

Lord Pearson of Rannoch: I hope I may go a little further than the noble Lord, Lord Bruce of Donington, in his answer to the noble Earl, Lord Longford. I am not sure that the picture that the noble Earl paints is quite as rosy as he thinks. At the moment unemployment in Germany is 11.6 per cent. and in this country it is only 5 per cent. Surely that is a reasonable yardstick of the well-being and standard of living of a country.

Lord Bruce of Donington: I agree with the noble Lord as regards the principle but not with his figures. The rate there is a good deal higher than ours; but ours is a good deal higher than 5 per cent. It is more in the region of 7 to 8 per cent. according to the method that was adopted in the 1979 parliament and by the previous Labour Government. But it is still to some extent immaterial.

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One of the claims that is made for Maastricht--and which is still reiterated as being in operation--is the deregulation that was promised under the provisions of the original clause 3a which dealt with subsidiarity. The Committee may remember that Mr. Major returned waving a flag and saying that he had secured a degree of deregulation. I am not in possession of the current figures. I assume that they are in the possession of my noble friend on the Front Bench. However, I gather that the number of European regulations that have been repealed because of redundancy is small and is probably fewer than the number of fingers on one hand. So deregulation has been a complete farce.

Surely it is a little disingenuous to say that everything is going well within the European Community. That cannot possibly be so. If it were otherwise, the Government surely have a remedy within their hands. My noble friend has a remedy in his hands that the noble Lord, Lord Henley, declined when he was in government and was questioned by me upon the subject. If they are so sure that everything is going well and should continue to do so, why do they not publish a cost benefit analysis? It is quite easy. The noble Lord, Lord Henley, implied to me at the time that it was so obvious that the whole system was beneficial to the UK that any cost and benefit study would be redundant. If it is all that simple, it would not be difficult to publish the statistical justification, but that has not been done.

We must face the fact that the system is not working; that the system is not what we think it is, and that even though it is not working, we have to pretend that it is. This is not a satisfactory state for any government to be in. I do not have any particular prejudice against the system as such. The noble Lord, Lord Tugendhat, confirmed to the European Parliament that when there I had done my very best to further the interests of my country and of the Community. That is my position today. Nevertheless I think that we have to pause before we go further because as day follows night you cannot bring real convergence into all the countries concerned. You cannot by mathematical sleight of hand pretend that they all have converged when a good number of the so-called convergent countries do not converge at all.

It goes right to the root of the matter. Here we have an economic and monetary policy, determined by the Commission in conjunction with the European central bank, whose only virtue is that its representatives are bankers. They have no other qualifications. So far as I know they have no political qualifications. Yet we are going to insist upon our currency being aligned and lost within one single currency despite divergences which undoubtedly exist between each of the countries concerned, the nature of which will make themselves known within a very short time indeed.

Has not the time come to acknowledge that a democratic system has to be democratically constituted and democratically accountable? When we can reach that stage, the utmost collaboration between the member states of Europe is very desirable. It is a concept I have continually supported. But to pretend that non-democratic, appointed bodies, responsible to no one but themselves, can do that by diktat from on top, by a flood of regulations, some of which go into our law

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without even touching down in Parliament and often without the knowledge of the Government, cannot be the right way forward for the peoples of Europe and of Britain. Why should it be?

There is the argument that there can be a financial distribution out of the European budget, financed of course by ourselves to a large degree. We have a deficit of £3 billion at the moment, which seems to have escaped everyone's attention among other priorities. That simply would not work. One cannot have the strains of economies within their own boundaries proceeding at different rates according to different traditions and languages without contemplating considerable diversion of funds.

How will one contemplate that? Even at present there seems to be a complete disregard in this country and in Europe as to the nature and extent of fraud in Europe. The latest figure for the past year is £2.5 billion. It will probably be exceeded this year. These matters at present have no democratic accountability even in this country. If one reads the Commons Hansard, as I do on a daily basis, one finds that most European matters go through on the nod at about 10.30 p.m. There is no accountability even here.

I suggest that we should be a little more cautious in giving blanket approval to matters that are against the best traditions of our country and against the most favourable developments. We should not give up these things lightly. Least of all should we allow the powers of our Parliament, and for the time being the Government representing it, to be subordinate to people who are appointed and have no accountability to anyone.

7 p.m.

Lord Taverne: I apologised earlier for having to be absent. However, fortunately my noble friend Lady Williams has taken full notes.

First, I refer to the remarks made by the noble Lord, Lord Ashbourne, about the pensions issue. How often does one have to answer this hoary old canard? The provisions of the Treaty of Maastricht are absolutely clear. Article 104b states:

"A Member State shall not be liable for or assume the commitment of central governments ... of another Member State".

That is absolutely clear. Secondly, it is reinforced by the stability pact. It is then said that the countries will run into problems anyway. We were going to run into problems until the reforms of 1981. Why could we reform in a way which was rather harsh but was done nevertheless? Why could we get rid of our hidden liabilities without other European states being able to do so?

If one considers what has been done in other European countries, it is clear that this argument is a canard. The Germans have by their own laws to make sure that contributions match the benefits paid out. Of course those contributions are rising; they will have to change. The Germans are about to introduce a form of privately funded pensions. The French have made moves in this direction; they do not face a major problem until 2005. The Italians have made major

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reforms: the Amato reforms, the Dini reforms and the Prodi reforms. They have a long-term viable system in place. They face a short-term crisis which they are beginning to tackle under Mr. Prodi.

The Earl of Clanwilliam: Did the noble Lord say that the stability pact will be used to enforce proper arrangements for pensions?

Lord Taverne: The stability pact prevents one country having to bale out another country for its debts.

I turn next to an interesting speech made by the noble Lord, Lord Grantley. However, he made some strange statements. First, he said that no arguments had been advanced in favour of monetary union. There is a certain weariness about these debates. The arguments have been repeated time after time. We do not want to fight all these old battles. The noble Lord, Lord Peston, disposed in a refreshing manner of the argument about a natural single currency area. I thought that his speech was extremely refreshing. But when the noble Lord, Lord Grantley, said that no economic reasons were given by any other state, I wonder where he has been.

One regularly hears the arguments advanced that of course this will bring better investment because it will bring stability--stability of currencies. It is regarded as inevitable that if one has a single market one completes it by having a single currency. Those are economic arguments constantly advanced by other member states. To say that they never advance economic arguments is nonsense.

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