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House of Lords

Friday, 17th March 2000.

The House met at eleven of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.

Prayers--Read by the Lord Bishop of Hereford.

Business of the House: Consolidated Fund (No. 2) Bill

The Attorney-General (Lord Williams of Mostyn): My Lords, on behalf of my noble friend the Lord Privy Seal, I beg to move the Motion standing in her name on the Order Paper.

Moved, That Standing Order 46 (No two stages of a Bill to be taken on one day) be dispensed with to enable the remaining stages of the Consolidated Fund (No. 2) Bill to be taken on Monday next.--(Lord Williams of Mostyn.)

On Question, Motion agreed to.

European Union (Implications of Withdrawal) Bill [H.L.]

11.6 a.m.

Lord Pearson of Rannoch: My Lords, I beg to move that this Bill be now read a second time.

It is an enormous privilege to introduce this debate, in which so many distinguished speakers are to take part. But it is also a heavy responsibility, because millions of British people now want to leave the emerging superstate of the European Union and can find no voice to speak for them. They grow daily more frustrated as, without their consent, they see their hard-won independence being steadily devoured by the octopus in Brussels. Not only have they not given their consent; they have not even been consulted; and they have been manipulated and misled--a fact of which they are not yet fully aware.

I trust that it is common ground that there has been no serious national debate as to whether the United Kingdom should stay in the European Union, or whether it should leave. This Bill, if enacted, would stimulate such a debate, which I submit is long overdue.

The Bill may not be perfectly worded, but I trust its intentions are clear. It would require the Treasury to set up an independent committee of inquiry into what life might be like outside the European Union for our economy, defence and constitution. The committee would have to report by 1st November, so that its findings could receive some public attention and debate before the Government's final negotiations at the current Intergovernmental Conference and at the Nice summit in December.

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I have said that millions of British people now want to leave the European Union, and that they do so in the absence of any serious national debate as to whether we should stay in or get out.

To justify the first contention, that millions want to leave, I fear I have to rely on an analysis of recent opinion polls, however unreliable they may be and however much their results may depend on the questions asked.

There is only one pollster, MORI, which has asked the same question 20 times since 1977. That question is: "If there were a referendum now on whether Britain should stay in or get out of the European Union, how would you vote?". It may surprise noble Lords to learn that, in reply to this consistent question, the "get out" vote has not dropped below 41 per cent since 1987 and has averaged 46 per cent since 1977. The last poll, in October last year, gave 42 per cent "stay in" and 45 per cent "get out". I shall put a detailed analysis of all 20 polls in the Library.

There have, of course, been other polls. The Social Attitudes Survey last November found 53 per cent in favour of getting out; there was an ICM poll for the BBC in January; and Gallup's poll this week for the Daily Telegraph indicated 39 per cent in favour of either leaving or of staying in a less integrated Europe than now, with the EU amounting to little more than a free trade area.Of course I agree with noble Lords who may say that these are only opinion polls and cannot be relied upon. I merely claim that they show that a substantial proportion of the British people want either to withdraw from the European Union completely or to reduce our relationship with it to that of a free trade area, which comes to much the same thing.

The last serious debate about our relationship with the Treaty of Rome took place during the referendum campaign of 1975 when we voted to stay in what was then the Common Market--a very different animal from the European Union that we see before us today. Furthermore, in 1975 we were promised that we would suffer no loss of sovereignty if we did vote to stay in. The Labour Prime Minister, Harold Wilson, misled every household in the land by sending the following two statements through their letterboxes. First:

    "Through membership of the Market we are better able to advance and protect our national interests. This is the essence of sovereignty".

Secondly, and worse:

    "There was a threat to employment in Britain from the movement in the Common Market towards an economic and monetary union. This could have forced us to accept fixed exchange rates for the pound, restricting industrial growth and so putting jobs at risk. This threat has been removed".

We all know that that threat had not been removed, but the Prime Minister's assurance must have done quite a bit for the "yes" vote to stay in the Common Market. The "yes" campaign was very much better funded and organised than the "no" campaign.

It is here that the behaviour of the previous Conservative Prime Minister, Sir Edward Heath, and other leading Europhiles was very much more deceitful. We have just learnt from a chilling Radio 4

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programme, which went out at 8 p.m. on 3rd February this year, that, through their influence over the media, those Europhiles softened up and manipulated British public opinion in the early 1970s, before Sir Edward took us into the Community in 1972. He appears to have authorised the active support of the Foreign Office and, believe it or not, the "yes" campaign seems to have received substantial funding from the CIA, channelled through the European Movement. This funding supported, among much else, a series of breakfasts at the Connaught Hotel where the "yes" campaign was co-ordinated. Those breakfasts appear, for example, to have engineered the removal of Mr Jack De Manio from the "Today" programme because he was regarded as too Euro-sceptic.

In this context, it is interesting that still today our Government pretend that economic and monetary union is an economic project. Everybody else in Europe admits that it is a political project which is designed to cement the building of a superstate. That makes nonsense of the Chancellor's five economic tests and is misleading the people, perhaps--I do not know--intentionally. Just in case any noble Lord is about to accuse me of being a conspiracy theorist, I shall put the full text of the programme to which I have referred in your Lordships' Library. I would be happy to debate this disgraceful episode at greater length when noble Lords have had the opportunity to read it. In the meantime, I contend that the British people have been manipulated, misled, ignored and taken for granted as their politicians have foolishly led them into the quicksand of the Treaty of Rome. When government and opposition agree, the people are disfranchised. So it is a great credit to the British people that, despite being told by all three political parties and all our political media for 28 years that our growing subservience to Brussels is vital to the national interest, so many of them do not believe it and want to get out. The inquiry and national debate which this Bill would set in train would make sure that if we go on to further, and even full, integration with the EU, we would at least do so with our eyes open. I would hope, too, that even the most ardent Euro-enthusiasts would be so confident of their position that they would welcome such a debate and therefore support the Bill, but I fear that the next few hours may disappoint me.

I suppose that I should touch on some of the main Euro-realist arguments in favour of withdrawal which I hope the committee of inquiry will consider. Before I do so, let me reassure the House that we Euro-realists regard ourselves as good Europeans. One of our big problems is that the word "Europe" has become sharply ambiguous. It means both the continent of different nations and the emerging superstate. So, when a Euro-realist is rude about "Europe"--referring to a product of the treaty and Brussels--he is easily cast as Euro-phobic, a little Englander or a dangerous nationalist. So, let me at least be clear where I stand: I love Europe but I loathe and fear the Treaty of Rome and all its works.

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At its most simple, our position is that we believe the emerging EU superstate to be dangerous for peace in Europe, and negative for our prosperity.

Let me deal briefly with peace. I suppose that the most important claim made by the Euro-enthusiasts is that the EU is essential to keep the peace in Europe. We do not agree. We say, instead--and history bears us out--that, on the whole, democracies do not provoke wars, whereas forced or premature conglomerations of disparate nations often end in conflict, especially when the ties which bind them unnaturally together are loosened. We point to Yugoslavia, the Caucasus and much of Africa. So, we say that our vision of Europe's democracies retaining their identities and freely trading together under NATO is less likely to end in conflict than is an undemocratic EU superstate. We also note, for good measure, that the post-war ideas which inspired the Treaty of Rome--to stop Germany going to war again and to resist the growing menace of the Soviet Union--are now redundant. So, we believe that democracy and NATO are the guarantors of peace in Europe, not the power-crazed bureaucrats in Brussels.

More specifically, we do not like the fact that we do not have an independent foreign policy any more, because most of our decisions have to be cleared with 28 policy groups sitting in Brussels. And we fear that the new European defence initiative, or "army" as Mr Prodi insists it will be, will undermine NATO and encourage US isolationism. We regret that France seems driven to go on biting the hand that freed her and has therefore insisted that the new army should be capable of autonomous action outside NATO. I hope that other noble Lords far better qualified than me will expand on these defence issues.

As to the constitution, it is clear that we stand at another very important fork in the road to the European superstate. The Government intend to cede more of our power of veto at the IGC into which the defence initiative I have mentioned will probably be "folded".

But there are other areas where the octopus is gently putting its tentacles round our unsuspecting constitution. Our new regional development agencies encompass areas agreed in Brussels, and are the blueprint for the regional assemblies designed to make Westminster eventually redundant. The emerging EU legal system corpus juris threatens habeas corpus and trial by jury. The Charter of Fundamental Rights is the fledgling EU constitution, justiciable in the Luxembourg Court and designed to take precedence over all our legislation. There are nasty directives on the way which will put us straight about racial discrimination, and so on; the juggernaut rolls relentlessly on.

I said that our membership of the EU is also negative for our prosperity. The most worrying prospect here is that the Commission may start to bring forward tax harmonisation, which is Euro-speak for forcing up our taxes by as much as 25 per cent, if we were fully harmonised, as a single market measure. We have had a foretaste of this with the imposition of

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droit de suite--not quite a tax, just a little levy on modern art which, together with VAT imposed by Brussels, threatens our great international art market. We can also see the shape of things to come in the saga of the withholding tax, thoughtfully designed by the Commission and our good partners to drive our vitally important Eurobond market back to New York and Zu rich. So far, even our Euro-enthusiastic Government have said that they will veto this if necessary, which it can do because the Commission has proposed it as a tax measure, which of course it is. But if the Commission were to bring it forward as a single market measure it would be subject to the dreaded qualified majority vote and we could be forced to accept it anyway.

Generally speaking, the single market is not turning out to be the simple free market exercise that we thought it was when we signed the Single European Act in 1985. Its voting system is also being used against our mergers and acquisitions industry at the moment through the imposition of the Takeover Directive; and there are dozens of other British interests which have been threatened or damaged by the bureaucrats' harmonising craziness.

There is much misleading propaganda about our trading relationship with the single market. A wonderful example is to be found on page 6 of the Government's White Paper on the IGC, where Mr Keith Vaz, the Minister for Europe, says:

    "The Single Market allows our companies to operate in a home market of over 370 million people. Nearly 60 per cent of our trade is within the EU, and that business represents 3.5 million British jobs".

To demolish that statement entirely would take another whole day's debate in your Lordships' House. Today I only have time to place some doubt in your Lordships' minds. If we were to leave the EU and negotiate a bilateral free trade agreement with the single market we would be very much better off than we are at the moment. Switzerland has such an agreement, and exports more per capita to the EU than we do. Even Mexico has just concluded such an agreement. The EU trades in substantial surplus with us, which means that it has many more jobs dependent on its trade with us than we do on our trade with it. If we were to say that we wanted to leave the EU, it would actually want us to have a free trade agreement with it.

Even without such an agreement, Mr Vaz's statement is very misleading. At the moment the dues we pay to the EU outweigh the tariff advantages we get from the single market by about £2,000 million a year. So our present terms of access to Mr Vaz's home market are actually slightly negative. It simply is not true to say that 60 per cent of our trade is with the EU. What Mr Vaz means is that 58 per cent of our exports of goods goes to the EU, but goods now represent less than half our total exports. If services and income are taken into account, only some 40 per cent of our exports goes to the European Union, and they are declining and in deficit. Sixty per cent of our exports goes to the rest of the world, increasing and in surplus. But that is not the whole picture either, because Brussels' absurd diktats and over-regulation are

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visited upon the whole British population, and so the European content of our trade should be seen against our gross domestic product and not just our exports. Then we get the picture into perspective, which is that only some 9 per cent of our GDP is exported to the EU, some 11 per cent to the rest of the world, and the remaining 80 per cent stays right here in our domestic economy. So the mangy, corrupt, bureaucratic 9 per cent tail is wagging our healthy 91 per cent dog.

Mr Vaz and others are also very misleading when they suggest that we might lose 3.5 million jobs if we left the EU. Of course we would not. The trade would continue. It would be in the EU's interest for it to continue, and so would the jobs. If you do not believe that, perhaps I may suggest that you read the report by the respected National Institute of Economic and Social Research on the macroeconomic impact of British withdrawal from the European Union. The delightful thing about this report is that it was commissioned by the Government's Europhile front organisation, Britain in Europe, to which its findings must have come as a nasty shock. The NIESR estimates that only 2.7 million jobs are linked to exports to the European Union, and it states unequivocally that,

    "There is no reason to suppose many of these, if any, would be lost permanently if Britain were to leave the EU".

I will put a one-page summary of that in your Lordships' Library.

The Institute of Directors came out with an even more damning report about our commercial relationship with the European Union only yesterday. Quite simply, it puts the nett cost of our belonging to the European Union at a very conservative £15,000 million per year. If the UK were to join the euro, the costs could escalate colossally, perhaps reaching £50 billion per annum, equivalent to 6 per cent of our GDP or more than our entire NHS and personal social services budget. I can but recommend that noble Lords and the Government read this whole report, but I will put a two-page summary in your Lordships' Library.

It is interesting that in their recent book, Britain and Europe: Choices for Change, Messrs Minford and Jamieson reach the same devastating conclusions by different routes. I will put that in the Library, too, and will be happy to supply any noble Lord who wants one with a copy, free of charge.

Finally, there is research out today which shows that our membership of the European Union has little or nothing to do with inward investment. I will put a two-page summary of that in the Library as well.

So over recent years our Euro-realist camp has put out several well-researched analyses from respectable economists of our economic relationship with the European Union, all of which show that we could be very much better off outside the EU than in it. We have sent them to the Government. We even sent some of the earlier ones to the last government--such as Better off out by the Institute of Economic Affairs, and we never receive a reply. There is no disagreement, just silence. It is rather like pumping high velocity bullets into a sack of sand. There are just slogans from the

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other side, but no possibility of debate. Yet the Government say that they do want a debate on all these issues. If they are telling the truth, may I suggest that they support this helpful little Bill?

Moved, That the Bill be now read a second time.--(Lord Pearson of Rannoch.)

11.25 a.m.

Lord Harrison: My Lords, while welcoming the opportunity given by the noble Lord, Lord Pearson of Rannoch, to debate this issue, I believe that the supporters of the Bill are guilty of relegating Britain to the sin-bin of Europe. Withdrawal from the EU would condemn us to leaving the open playing field of the single European market to other players; to clapping from the sidelines when Team Europe scores a goal; and, after cooling our heels in the dug-out of history, returning to the fray only to find that the game and the goalposts have been moved on.

But enough of hyperbole, my Lords. Let me temper my rhetoric with some facts and analysis. According to this week's Gallup poll, fewer than one in five Britons favour retreating from the European Union. Most conclude that Britain's standard of living would fall. And, indeed, the public's perceptions are confirmed by the recent report already quoted by the noble Lord, Lord Pearson of Rannoch, drawn up by Pain and Young on behalf of the National Institute of Economic and Social Research. Although most of the 3.2 million jobs associated with Britain's engagement with the single European market would not be lost, the authors nevertheless claim--it was omitted by the noble Lord--that wages would be slashed to offset the deflationary shock of a 2 per cent cut in United Kingdom output as a consequence of withdrawal. And household consumption would tumble by a further 2.5 percentage points--hardly a ringing endorsement for withdrawal.

In the light of that analysis, I invite the sponsors of the Bill to respond to these questions. First, why is it that no one ever leaves the European Union? Indeed, countries only ever want to join. Queues longer than for the successful Dome line up to enter the tent of Europe. Everyone wants to join the party, except certain members of the party opposite. Everyone wants to bring a bottle, except those who have lost the bottle to fight Britain's corner in Europe. Do the sponsors believe all these EU countries are collectively mad, and that we alone are the rich repository of reason?

Secondly, who do we think Britain's friends will be outside on the doorstep? Who will take us in when we are in the cold? I hear siren voices opine that we should join NAFTA, hitching our fortunes to the Mexican economy among others--the noble Lord, Lord Pearson, has already shown today his admiration for the Mexican economy--or that we should aspire to "dollarise" our economy in the fashion proposed by Argentina last year. Indeed, the impetuous rush to become a client state of the USA proposed by some commentators has always struck me as an abject

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surrender of Britain's sovereignty and independence. Not only is the idea wrong-headed, it squarely contradicts American foreign policy which encourages Britain to be a full and athletic member of the European Union, not a non-combatant.

Paradoxically, rushing to America's side will hardly stave off our European Union destiny. The free trade area between the European Union and the USA which will be established in the next 20 years would find Britain re-entering the EU, brought in through the front door by our American allies. How ironic!

Perhaps the sponsors of the Bill harp back to colonial times and Commonwealth ties, failing to grasp that countries such as Australia can never be near neighbours, just good friends. Indeed, the very act of posing Britain's future as a choice between the EU, the United States and the Commonwealth marvellously misunderstands Britain's true interests. Blest as we are with a unique history and language, we are splendidly positioned when it comes to sticking British thumbs in global pies. Our membership of the EU, the Commonwealth and the special relationship with the States provides us with an unparalleled platform to promote Britain's interests. Let us play to our strengths, not highlight our hesitations.

Thirdly, why do the sponsors want to remove us from the world's biggest marketplace of 370 million consumers, soon to be 500 million strong when the applicant countries join? Why, as a nation of shopkeepers, do we want to shut up shop? The idea that we could withdraw from the EU without undermining our membership of the market is fanciful. Why do we, the most clubbable of nations, want to leave the club?

Some commentators dispute the importance of the single European market, as the noble Lord, Lord Pearson of Rannoch, did this morning, suggesting that Britain's trade with its neighbours is in deficit, in default and indefinite. But it matters little whether the percentage of trade is 47 per cent or 60 per cent; the European Union is our biggest trading post. After all, we trade more with Holland than with China. Our ambition should not be to rebalance the percentages, but to swell and grow our trade world-wide. And to fulfil that ambition, our active participation in the single market, the super market of Europe, provides the forcing house to make British business lean, mean and keen in all the other markets of the world. The European Union is the backyard of British business success.

Only this week, government patience and persistence paid off in securing the single market for Britain in the domains of artists' resale rights and family milk chocolate. Or let us take the car industry. Do our colleagues opposite really believe that in the midst of the current trials and tribulations withdrawal from the EU would enhance the prospects for Rover, Rolls-Royce or other automobile manufacturers sited here? Excluded from the market-place, we would decline into the makers of spare parts. We would become the wing-mirrors of Europe--always looking back, never forward. At present, of course, we are the

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wing makers of Europe. BAE's Airbus, whose wings are made in my home town of Chester, illustrates admirably European collaboration at its finest. Would that survive the flight from reality?

I make one further point in relation to the current interest in the success or otherwise of British industry. I wonder whether other noble Lords share my anxiety that Euro-scepticism is bad for British business. After all, if we constantly carp that Europe is a difficult place to do business, a market where only the Brits play to the rules, a region where they are adopting a new currency just to bamboozle the poor Brits, we cannot be surprised if the net effect of this pall of scepticism dilutes, diminishes and dampens the enthusiasm of any but the most assiduous British entrepreneur. If we remain semi-detached about Europe, can we blame our business people for staying in the suburbs, eschewing the centre of Europe and its single market? My Lords, loose talk costs jobs.

As the world's markets become global, so have regional groups sprouted--NAFTA, ASEAN, AFTA, Mercosur and the EU itself. Were we to secede, would Britain's voice be heard in these courts? Of course not. We throw away our friendships at peril.

Finally, the Bill's sponsors focus on Britain's security status as well as its economic well-being. Here, exit from the European Union would be problematic. It would certainly be deplored by our NATO partners. As the Prime Minister recently asserted, the European Union has already helped make Britain safer than at any time in our history. So familiar have we become with peace within the European Union borders that we are in danger of forgetting its source and inspiration; the European Union.

Withdrawal from the EU is not an option; it is an opt-out. It is an opt-out of responsibility that we owe to our continental partners, our Commonwealth colleagues, our transatlantic cousins and, most of all, to our own citizens who want and are getting a sensible nation sensibly led.

11.34 a.m.

Baroness Williams of Crosby: My Lords, I, too, thank the noble Lord, Lord Pearson of Rannoch, for having instituted the debate through the introduction of his Bill. There is one point--and it may be the only point--on which I agree with him. This country deserves to have the fullest possible debate about an issue that will affect its future more than anything else we discuss in Parliament. We on these Benches are delighted to see the noble Baroness, Lady Thatcher, in the Chamber. She brings both standing and honour to the debate. I may not agree with her on many issues, but I speak with respect.

I turn to the Bill and comment briefly on the proposed committee. The Bill is a recipe for what one might describe as "total stalemate". I am not against a committee to consider the implications of withdrawal. That will largely benefit those of us who strongly argue for staying in the EU. However, I fear that the Bill as it stands would introduce a procedure which could go no further.

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One of the points which the noble Lord, Lord Harrison, strongly underlined in his excellent speech--and I could not agree with him more--is that the issue is about whether the United Kingdom is part of a globalised world, influencing it, helping to lead it and bringing its best traditions to bear upon it. I fear that withdrawal from the EU would constitute a decision to stop the world and try to get off. It is wholly unrealistic in today's world--a world in which we see time and again countries agreeing to allow a part of their sovereignty to be pooled in an international body.

We frequently speak about the EU as though it were unique in that respect. But, unquestionably, some pooling of sovereignty is involved in NATO, an organisation which is supported by Members in all parts of the House. Unquestionably, a considerable sacrifice of sovereignty is involved in the World Trade Organisation, of which this country is a member and which many other countries seek to join. Unquestionably, there is some sacrifice of sovereignty in support for the International Criminal Court, which, as regards crimes against humanity, is set above all other national courts. And there is obviously some sacrifice of sovereignty in trying to establish a world of human rights, which I believe most Members of this House and of another place powerfully support. You cannot establish a world of law, human respect and civilisation unless you are prepared to accept the existence and strengthening of global institutions.

I turn to the specific issue of the EU. I want to pick up a comment made by the noble Lord, Lord Pearson of Rannoch, which I found utterly surprising. He said that the EU was dangerous for peace and went on to extol the importance of democracy. Let us be quite precise: the European Community and its successor, the European Union, has been one of the major forces for democratisation in Europe. Spain, Greece and Portugal were all dictatorships but entered the European Community specifically saying that they did so because they believed it would be a great support for democracy. Greece knew that it could join only if it got rid of the colonels--and it got rid of the colonels.

There is no question but that enlargement is about stabilising the fragile democracies of central and eastern Europe. As the noble Lord, Lord Harrison, so eloquently said, a queue of countries throughout central and eastern Europe is attempting to join the EU. In that queue are countries such as Russia and the Ukraine, each talking of its ultimate goal being to join the EU. How strange that, at a time when countries which desperately need stability and peace wish to join the Union, some in this country are talking about leaving it as if we somehow want to put our responsibility behind us and live in a world that has gone.

I turn from that to say a few words about the economic situation and perhaps to mention that the alternative offered to us--the North Atlantic Free Trade Association--is, of course, a single currency area. It has a currency called the dollar. Were we to join it, we would be in a single currency area just as

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certainly as we would in the European Union by voting for the euro. However, that sacrifice of sovereignty does not seem to trouble our Euro-sceptics.

Similarly, it does not seem to trouble our Euro-sceptics that some members of a body called the International Trade Commission have been sent to the UK by the United States Senate's finance committee to investigate whether or not Britain should join NAFTA and leave the European Union. Its terms of reference do not mention even a single basic truth: that to join NAFTA one has to leave the European Union. With great respect to the noble Lord, Lord Pearson of Rannoch, I have in front of me the statistics from the Office for National Statistics pink book for 1999, which gives the figure for the EU share of total trade in goods and services as 52.7 per cent against 15.5 per cent for the United States. The noble Lord, Lord Pearson of Rannoch, suddenly and rather unexpectedly threw investment into his equation, which, of course, made the figures look rather different from those broadly published by all official sources.

I say one other word about this because we on these Benches are not frightened of mentioning the euro. We believe that the euro would assist this country very greatly were we to join it by reducing interest rates and by bringing about stability of exchange rates. We do not fail to recognise that the over-valued pound, to which Euro-sceptics pay such colossal attention on a symbolic basis, goes a very long way to make the lives of British farmers and British manufacturing exporters increasingly difficult. Some of our firms simply cannot compete on the basis of the present level of sterling, which is itself a false level in terms of representing economic strength.

I turn to the economy. We now lecture the European Union about adopting a more flexible and more adaptable economy. Yes, those are the right words: more flexible and more adaptable. However, at the Lisbon summit at the weekend where we shall be lecturing other European countries about flexibility and adaptability, they will have some right to lecture us on two other aspects of our economy. The first is the major shortage of intermediate skills. In its study of the European economy, Business, Britain and Europe, Andersen Consulting points out as one of our greatest weaknesses the fact that our workforce has a consistently lower level of skills than almost all our European competitors.

The other great weakness to which it draws attention is that the productivity of the United Kingdom consistently remains below that of France and Germany. One never hears the Euro-sceptics mention that. They present Germany as a totally sclerotic, out-of-date, unfashionable economy, and France as a ludicrously state-controlled one. Again, it is worth pointing out that in both those countries productivity and the level of skills considerably exceed our own.

I conclude by looking at the broad argument about comparative models of society between what the right of the Conservative Party now refer to as the so-called "Anglo-Saxon model" by which they mean the United

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Kingdom and the United States, and, on the other hand, the depressed, gloomy, backward model of the European Union. Of course, there are ways in which the European Union should change and we should encourage it to do so.

Perhaps I may also point out that on a day when your Lordships debate this Bill, the Independent has published an article headed:

    "UK is now worst place in Europe to be growing up".

It points out that one in five children in the United States live in poverty compared to one in three in the United Kingdom, that our pensions represent one-third of average wages compared with 70 per cent in Germany and 50 per cent in France, and that the opportunities for children growing up in our society are less than in most other advanced European countries. On such a day, I believe that one should ask what kind of model we want. On these Benches we want a model of an efficient, free market economy, coupled with a society which is fair and just, which does not accept vast inequalities in opportunity and in social provision, and which we believe is very well represented by the European model.

I beg to say that we would have no objection to setting up a committee, but a very different one from that suggested by the noble Lord, Lord Pearson of Rannoch. As does the noble Lord, Lord Harrison, we believe that leaving the European Union would be an utter disaster for this country and would represent an attempt to escape from our future for the sake of our history.

11.45 a.m.

Lord Monson: My Lords, it is always daunting to follow the noble Baroness, Lady Williams of Crosby. I do not always agree with what she says and, for the most part, I did not on this occasion. However, she always says it quite brilliantly.

This is a modest Bill. If enacted, it would not in itself have any effect on Britain's external relations. Yet, at the same time, I submit that it is a vitally necessary Bill. It was revealed in the Daily Telegraph on Tuesday that the European Commission now tacitly regards joining EMU and adopting the euro as a compulsory component of EU membership. That was confirmed the following day by Commissioner Pedro Solbes, who told Danish journalists in Strasbourg that:

    "Part-time membership of the EU is not good enough",

and that:

    "In the longer term it's not possible to be in the Union and outside EMU".

Over the next two or three years, we can expect this particular gauntlet to be flung down with increasing frequency and decreasing dissimulation. That has profound implications for Britain, given that the British electorate seem fairly certain to reject scrapping the pound in the referendum which we have been promised. It would be totally irresponsible for any government to fail to make contingency plans in the event of such a rejection. However, it would be even more irresponsible, as well as thoroughly dishonest, to try to influence the result of the

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referendum by running a last minute scare campaign to try to panic the public into switching round and voting "yes". However, if this Bill is enacted, such a scare campaign could never succeed: the measured, balanced, undramatic truth would already be on record.

As the noble Lord, Lord Harrison, reminded us, polls consistently show that the British public do not want to join a single currency but they do want to stay in the EU. Why? Not because they approve of the EU's destruction of our fishing industry, the ruination of our dairy farmers, slaughter houses and the London art market or the constant interference in the nooks and crannies of our everyday life, as the noble Lord, Lord Hurd, put it so well when he was Minister in another place. No; it is because of a vague and unfocused fear of the consequences of regaining national independence--a fear which is cynically encouraged and fostered by the integrationists.

Two big lies are employed. The first is the one successfully employed in 1975: that withdrawal would lead to mass unemployment and poverty. Today, we are told that 3 million jobs depend on our remaining in "Europe", by which I believe is meant the EU. That is about as economical with the truth as it is possible to be. I believe that the true figure is approximately 15,000 jobs, but other noble Lords will doubtless return to that point. I give one small example: Norway and Switzerland export almost exactly the same proportion of their output to the other 14 EU countries as we do, yet, of course, neither of those two countries is within the Union.

The second and worse big lie is that only the EU saved us from a third world war, that the EEC, with NATO nowhere to be seen, saved western Europe from Soviet aggression, and that the success of the EU alone prevents democratic European countries invading one another today. What utter rubbish, and historically ignorant rubbish at that!

Historically, most wars are either conflicts between empires and grand alliances at one extreme or civil wars at the other extreme. Millions and millions of people have died horribly in civil wars all over the world in the 20th century. Wars between younger nation states, such as that between Iran and Iraq, are a relative rarity, and wars between middle-aged, middle-class democracies are almost non-existent.

Even 30 or 40 years ago, when western Europe was both younger statistically and less bourgeois than it is today, that still held good. What sort of conflict do the scaremongers envisage--a repetition of the Icelandic cod war, perhaps?

Let us take one specific example. There was considerable tension between Austria and Italy between 1956 and about 1963 over the alleged maltreatment of the German- speaking minority in Alto Aldige, otherwise known as the Su d Tirol. This led to fierce words and fierce actions: electricity pylons were blown up, and so on, and there were impassioned debates at the United Nations. The problem was solved by traditional, conventional, diplomacy with

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compromises made on both sides over a period of years, without any assistance from the embryonic EEC.

Incidentally, Gibraltar and the Gibraltarians are scarcely treated any better by Spain today than they were before Spain was admitted to the EEC. So much for the harmony and friendship that the organisation was meant to engender between its members!

While I am on the subject of the Iberian peninsula, may I tell the noble Baroness, Lady Williams, that democracy arrived in Portugal not because Portugal wanted to join the EEC, as it was then, but because the Portuguese were fed up with paying the massive costs of the wars in Angola and Mozambique, and overthrew the government for that reason. Similarly, Spain did not get rid of Franco over a longer period of time specifically because it wanted to join the EU. Greece may be different; I do not know about Greece. But certainly I think the noble Baroness has it slightly wrong with regard to the two Iberian countries.

There is one more Euro-myth that needs to be knocked on the head. It is not a big lie, because I think it arises from a genuine misapprehension. It concerns the common agricultural policy, recently described by one noble Lord, who is not in his place, Lord Inglewood--a distinguished MEP and by no means a Euro-sceptic--as notorious and an economic nonsense. The myth is that if the United Kingdom had joined the EEC at the outset, the CAP would have been utterly different, that far from being economic nonsense it would have been benign and economically prudent.

That is to misunderstand the whole purpose of the CAP. It had practically nothing to do with the attainment of agricultural efficiency. France's hidden agenda was to prevent its millions of peasant farmers becoming impoverished and bankrupt, being driven off their smallholdings and drifting, destitute and embittered, into the large cities, where they would have been easy recruits for the Communist Party, which at that time was extremely successful, attracting almost 40 per cent of the French vote.

In that objective the CAP was extremely successful. About 83 per cent of French farmers have indeed left the land, but they have done so over a 40-year period, giving plenty of time for those dispossessed to find jobs elsewhere. Meanwhile, the Communist vote in France was successfully contained. So the CAP was extremely successful from the French point of view. But this French imperative ensured that British interests could never have been accommodated.

I agree with the noble Baroness to this extent: there are advantages in being part of a larger grouping when, for example, negotiating trade agreements with the hard men of the United States. My ideal, the ideal of millions of people in this country and I suspect millions of ordinary people on the continent of Europe, as distinct from the continental establishments, is to remain in a looser, more relaxed, less interfering, less regulated, less control-freakish EU, with the frontiers of the iniquitous acquis communautaire rolled back. But if that ideal is

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frustrated by the unrepresentative continental elites, as one suspects it will be, and the UK decides that withdrawal is for us--not necessarily for the others--the least bad option, can the noble Baroness, Lady Scotland of Asthal, confirm in winding up that that will in no way affect our membership of the EEA, from which we shall continue to benefit for as long as we choose?

11.55 a.m.

Lord Howe of Aberavon: My Lords, I hope that I shall be forgiven if I start by apologising for the probability that I shall be unable to stay for the end of the debate, which seems likely to run for some time. I have to be on the Any Questions programme in Birmingham this evening, but I shall stay as long as I can.

It is a pleasure for me also to be speaking alongside my noble friend Lady Thatcher on an issue on which for 15 years we were together--if not always in close partnership, certainly in partnership. Our views may now have diverged rather further apart than they were then, but I nevertheless welcome the opportunity.

I proceed from that to question the wisdom of the proposal underlying the Bill, eloquently presented by my noble friend Lord Pearson of Rannoch, of investing even a modest amount of public money in the search for an objective conclusion within three or four months to an issue that has been the subject not of no debate, but of intense and active debate almost throughout my political life. The debate may never have matched our aspirations, but that it has taken place is beyond doubt.

I would argue against the wisdom of putting even a modest amount of public money into the pursuit of my noble friend's well argued private prejudice, because not one of the major parties in this country is not in favour of continued membership of the European Union. The Conservative Party may appeal to some people because it appears to stand for something different; the position of my party is "In Europe, but not run by Europe". We can argue about what "run by Europe" means, but "In Europe" is beyond doubt and has been reaffirmed many times by the leader of our party. We all agree on that, with the exception of the much smaller number on whose behalf my noble friend speaks.

The question is: Why are we in Europe, and why should we stay in Europe? Virtually everyone agrees that we need to be there, and benefit from being there because of the existence of the single market. If one looks at that for just one second, and goes back to the original structure of the union, one sees that, to make that market effective, it needs a set of common rules, commonly administered, and commonly adjudicated. I have quoted more than once in the House the Institute of International Freedom pamphlet, with an eloquent foreword by the noble Lord, Lord Harris of High Cross, setting out exactly why we need, in the view of that pamphlet, not just to have a legal system, but a stronger, more effective competition policy adjudicated upon by a more effective court.

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If one needs further evidence, one can look at the way in which the BSE argument has gone. People tend to overlook that, although British beef has been excluded from the European Union, it is the only part of the world in which we can reverse and redress that pattern. The last figure that I have is that 47 countries outside the European Union will not accept British beef. They include Canada, Australia, New Zealand, South Africa and the United States, in respect of which there is nothing that we can invoke. In the European Union, though the wheels of the law are grinding slowly, we have European Community law, with which 13 out of 15 member states are now complying, and with which Germany may well comply today. The pressure is on, and that is because we are part of a single enforceable market, which we cannot have elsewhere.

Moreover, it is a market in which we have ourselves deliberately extended our ability to influence the rules made there. When my noble friend Lady Thatcher and I committed ourselves in 1985 to the Single European Act, we did so in order to make the single market come into existence more quickly. We needed to extend majority voting to areas such as, for example, insurance, where other partners were not accepting the consequences. Of course, there was a hazard that in some areas it would not always work to our advantage. Let us look at the number of times in the last year, where records are available, that we were outvoted by qualified majority voting. In 1998 Italy was outvoted 13 times; the Netherlands were outvoted 15 times; Germany was outvoted 18 times; and we were outvoted only twice because we did not need to exercise our opposition. More often than not, we were on the side of the qualified majority which was prevailing. That is a sensible way to run it.

Other noble Lords have already mentioned the extent to which our membership of the Union is crucial to our influence on world trade policy. We exercise influence, not, perhaps, as much as we should like, in achieving a liberal trading policy for the European Union itself and in persuading our less liberal partners to accept our arguments in the direction of a free trade world. We are able to mobilise the authority of the group of countries which comprises the Union in curbing illiberalism in other countries. When my noble friend Lord Brittan was vice-president of the Union, he went many times, representing not just Europe but ourselves, to seek better results in the United States in relation to the trade negotiations then taking place.

We also respect our friendship and partnership with the United States, but there are occasions when we need to challenge its economic power. If one looks, for example, at the sanctions still being imposed in relation to European countries seeking to trade with Cuba, we had to challenge that legislation and we should not have been able to do that and secure the changes which we did had it not been for the support of a wider European Union.

And the same is true in relation to aid policies for ACP countries and the extent to which we have been able to argue, although not as successfully as I should like, for the banana producers of the Caribbean

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region. Our strength there was not sufficient. But our management of the ACP programme more widely has depended upon our membership of the European Union.

And so it is true in the broader foreign policy field as well. Noble Lords have already mentioned the case for enlargement and the case for consolidating democracy in the still emergent democracies of eastern and central Europe beyond what has already happened in the Iberian Peninsula. There too we benefit politically from our influence through the Union in that respect. If one looks at Russia as it is today, it may be too soon to reach the conclusion that our relations with that still large neighbour can safely be left to relations outside the European Union. We need to be able to mobilise the political influence of the European Union in presenting a sensible policy towards the difficult problems of the former Soviet Union.

Finally, on a wider scale, let us look at the Pacific and the relations between our European continent, the emerging economy of China and the existing economy of Japan. The most important observation that I have heard from any Japanese statesman was made to me by Prime Minister Kaifu some years ago when he said, "You must understand that Japan regards her relationship with Britain as the keystone of her relationship with the European arch". Our influence depends upon our participation in that organisation.

And so too likewise is the case in respect of the automobile industry. Despite the tragedy now likely to overtake Rover--what we used to call British Leyland--our car production is higher now than in any year since 1973 and it is reaching those levels because, thanks to the attractiveness of our economy to Japanese investors, we have been able to benefit from that inward investment. We are able to boast that Nissan in Sunderland is the most productive automobile plant in Europe. So in all those ways, we have greater influence for the benefit of the British people inside rather than outside.

One factor that I just touch on--I echo what the noble Baroness, Lady Williams said--is the issue of the euro. One of the hazards that has been threatening the prosperity of BMW's investment in Rover has certainly been the divergence in exchange rates since that time. Some people talk about control of one's currency as being the most sovereign aspect of a nation's self-governance. But my noble friend Lady Thatcher will remember that during our time together, the pound sterling fluctuated from about 2.45 against the dollar to near parity with the dollar. We could not buck the market in those days any more than we can now, and we suffered from that instability of our exchange rate with the rest of the world. We shall continue to do so in relation to Europe as long as we decline the opportunity of joining the euro.

Finally, if those are the advantages which we have gained from our membership of the European Union, what would be the message that it would give to the world and to our own people if we were to get up and quit, which is the objective of my noble friend's

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proposition? It would look like a withdrawal from all those areas in which Britain for centuries has sought to influence foreign, trade and economic policy around the world. It would not look like an enhancement and enlargement of our aspirations for the sake of this country. It would look like an abdication from the roles which we are well qualified to play--and better qualified to play within the European Union.

12.5 p.m.

Lord Bruce of Donington: My Lords, it is a great pleasure for me to follow the noble and learned Lord, Lord Howe of Aberavon. I venture to say that he is living in a different world from most of us. He is an optimist, and there can be no reproach for that. There is enough pessimism in the world, so his very upbeat address to us was extremely refreshing.

The whole trouble is that he assumed a priori that it was possible for any British government of any political persuasion to do what they want anyway. If the British Government had the power to do some of the things that have been talked about this morning, there would be very little problem for any of us, but the trouble is they do not have that power. The major part of decision-making in this country has now been abdicated to Brussels. The role that we can play is very limited indeed.

In due course, I hope to be able to persuade my noble friend Lord Harrison of some of the wisdom that I shall venture to inflict upon your Lordships, but in the meantime, we must deal with what we have. The debate last week proved beyond all reasonable doubt that the common agricultural policy, which is the largest budgetary item in the European budget of 1,801 pages, is no good.

I want to address myself to the practicalities of the situation. We can either go on bandying opinions as to who is responsible for what or we can do something about it. I have a few suggestions to make to your Lordships about the way in which we should proceed in the current circumstances.

The first thing we should do, which we can still do, is to repatriate the common agricultural policy into the United Kingdom and make the United Kingdom responsible for its own people. It must not do that without regard to our colleagues on the Continent, or our friends on the Continent, whoever they may be. I can envisage a repatriation of farm support to the United Kingdom. I can also envisage conversations taking place with our colleagues in the European Union as to the way in which we could possibly give them financial support if they would suffer unduly from our repatriation policy. After all, that would be consistent with the British attitude towards friends.

It is not as though we are without funds. Every year we pay £2 billion net into the European Union after taking into account all the receipts and taking fully into account our abatement. So if we are to ease the passage of transferring the common agricultural policy back to the United Kingdom--and I assure your Lordships that very few farmers will argue with me about that--we can do it in terms of the utmost

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friendship and co-operation with Europe. We are quite capable, out of the net sum which we already pay into Europe, to find the funds necessary for us to arrive at a fair settlement for what, after all, would be a rupture of policy. I consider that to be a practical proposition.

There are, of course, a number of other things we can do. We can stop completely the flood of regulations, directives, decisions and so on from the Commission itself. Let us not be under any illusion about the results of the plan. I have before me a document published by the European Scrutiny Committee of the other place, dated 9th March. That committee is thoroughly congested. It cannot deal with all the matters coming to it. Altogether, some 95 items which have already been considered by the committee require further information from the Government--information going back to questions raised by the committee from 1995-99, the overwhelming mass of which were from 1999. They have not yet been able to deal with them. That is not a sign of a smooth working machine.

But of course that is the oldest dodge in the world by unelected civil servants. My noble friend Lord Harrison will appreciate that if one wants to rule, one floods those ultimately responsible with documents one knows they will be unable to read. That is exactly what has happened in the United Kingdom. Regulation after regulation has come out of the unelected Commission. There is no sign of any abatement. But there is no sign either that Ministers--even the Ministers in my party, who are of course all geniuses--have mastered them either. They cannot; the flood is too great. The result is that the matter goes by default and regulation after regulation--including the treaty of 1972--goes straight into British law without any effective scrutiny by either this House or the other place in particular.

It is not generally realised that the European budget, which amounts to billions of pounds, at one time used to undergo scrutiny in the other place. It even used to receive constructive scrutiny--I often say more constructive scrutiny--in this House. What happened to the last budget? It received no scrutiny at all. It went through without any real debate. We are not talking of small sums, but of a budget to which, as I said, Britain contributes between £2 billion and £3 billion every year net after all receipts.

But the matter is even worse than that. Under whose control is the money when it is sent from this country? It is under the control of the Commission. I have not heard anyone this afternoon in favour of an abject subservience to the Commission in Brussels. I have not heard any reference to the inquiry into its activities last year. All that has passed away as though we are in the presence of a Commission governing Europe--and, to a large extent, ourselves--whose reputation lies in the dust as being corrupt to the core.

Do not let anyone doubt my sincerity. During the war I spent much of six years--a large portion of my adult life--in France to liberate people who behaved so disgracefully. But from the recent press reports outlining the activities of Herr Kohl and Monsieur

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Mitterrand, it is quite clear that not only have there been corrupt dealings by the Commission itself, but also by the French and German Governments in the way in which they have raised party funds.

Are we going to lie down and take that? I do not know what has happened to people in the United Kingdom, uttering pious platitudes concerning those very bodies, holding them up to be the last word in conventional wisdom. That is no good; it will not do. We are not in any hurry--the war took six years, after all--except that the Commission wants to railroad us into one impasse after another in order to increase its own power. It has done so by a progressive application of qualified majority voting. I always believed that co-operation between member states was an extremely good thing. Anyone who considers the problem of pollution in Europe as a whole knows perfectly well that such matters--there are many others--must be dealt with across all boundaries. There are many more issues: certain sections of transport, communications and so on. There is of course a role for the countries of Europe acting in concert by co-operation with one another, not by orders from the European Commission.

I do not know whether any of your Lordships followed the Maastricht Treaty negotiations. The then Prime Minister came back claiming that he had won game, set and match. It was only when we came to the Edinburgh conference which followed almost immediately thereafter that we knew exactly what the score was. In the communique inserted by the Commission itself--council communiques are probably all written by the Commission originally--appeared the following words:

    "In more general terms the Commission is intending to use its monopoly of the right of initiative by declining to accept requests made by the Council at informal meetings that it make proposals for Directives. In the same spirit it will be tougher about rejecting amendments proposed by the Council and Parliament that run counter to the proportionality rule or would unnecessarily complicate Directives or Recommendations that are in fact justified under the need-for-action criterion".

That is the Commission defying the Council of Ministers, largely unnoticed. Only people who read the documents knew that that communique existed. My noble friend Lord Harrison probably has not yet seen the document. I shall provide him with a copy. It shows the degree to which the Commission has taken control and intends to take even more control.

To be fair to the Government, the Cabinet Office has taken certain actions which have been extremely welcome to me. It has brought out The Guide to Better European Regulation. It has no reference number, so it is difficult to reorder, and no date. Nevertheless, I am persuaded that it is an authentic document. It tells civil servants the way in which they should go about dealing with proposed European legislation. I shall commend it to those of your Lordships who have a sense of humour. But since all of your Lordships have a sense of humour, I presume that the demand on the Printed Paper Office will be considerable. Noble Lords should read it. It advocates that in all cases where proposed regulations have an effect on the UK, civil servants should prepare a regulatory impact assessment.

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I believe there have been 64 so far. I do not know how many have been placed in the Library. All that the noble Lord, Lord Pearson of Rannoch, asks for is an impact assessment of the present situation. That should not be too much strain.

My time is up. I commend to my colleagues, as I have pleasure in commending to the House, a philosophical dictum pronounced by the leader of my party, whom I entirely support in this matter. At a meeting of the Scottish Parliament he enunciated the principle, with which I am in full agreement, that;

    "Scepticism is healthy. Cynicism is corrosive".

As regards my own part in this matter, I trust that your Lordships may be constrained to find that my leader and I are in complete accord on that philosophy.

12.21 p.m.

Lord Ezra: My Lords, in my contribution to this important debate, so vigorously introduced by the noble Lord, Lord Pearson of Rannoch, I wish to concentrate on the single market with particular regard to the ways in which it has developed over the years and the British contribution to that development. At the end of my remarks I shall compare the single market as it now exists with the proposal for a loose free-trade arrangement, such as proposed by certain noble Lords.

My connections with the European Union, as it is now known, go back a long way. I was a member of the UK delegation to the High Authority of the European Coal & Steel Community (ECSC) from 1952 to 1956. Subsequently, I was president of the Consultative Committee of the ECSC and, in later years, took part in many discussions on energy and industrial policy.

The single market as we now know it was originally set up under the terms of the Treaty of Paris 1951 and applied to coal and steel. It was a customs union. Within that customs union, the impediments, and particularly any tariffs affecting those products, were intended to be removed and a common external tariff established. That was broadened under the Treaty of Rome 1957 when the European Economic Community was set up and this concept was applied to all goods, services and the movement of people.

The first step was to establish the common external tariff and to remove internal tariffs. That was relatively easy to do. The external tariff around the single market has much diminished over the years as a result of world trade negotiations. What emerged, however, and has been much more difficult to deal with, in order to enable trade to move freely within the area--goods, services, people and capital--was the multiplicity of non-tariff barriers. As the tariff barriers were removed, the natural instinct of countries, which always tend to be protective of their own interests, was to establish non-tariff barriers. Those took a variety of forms: health regulations; standards regulations; technical regulations; statistical requirements and bureaucratic delays at frontiers. So, although the tariffs were removed, the trade was not moving very freely. That situation became increasingly apparent.

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In 1985 an important initiative was taken to prepare a White Paper which set out all the non-tariff impediments. The noble Lord, Lord Cockfield, as the Commissioner then responsible for trade, set that up and vigorously undertook the work. That was a major British contribution to the way in which the single market developed.

The problem about removing the non-tariff barriers was that with the unanimity rule, the right of veto, it was virtually impossible, on a large scale, to get countries to agree to eliminate the barriers which they had erected. That was the reason for the Single European Act; namely, to introduce in connection with the single market the qualified majority voting principle.

From that point on, progress was vigorous. The objective was to achieve all the detailed tasks set out in the report of the noble Lord, Lord Cockfield, by the end of 1992. By that date, about 90 per cent of the regulations had been passed by the European Council. What remained to be done was for those rules to be converted into state regulations: the transposition of the European regulations into state regulations. That was largely achieved by 1998.

We now have a situation in which, as a result of many years' effort, there is in the European Union a single market which goes beyond just the removal of tariff barriers, which have reduced in importance because of world trade negotiations. It has carefully analysed what other impediments to trade exist and progressively removed them. That is a unique development.

In the course of those developments, two areas of great importance were left out for special treatment; namely, telecommunications and energy. In the case of telecommunications, with the one exception of Britain, which had established an open market, the rest of the European Union had a closed market with national monopolies regulating the whole operation.

A consultative document was introduced in 1987 leading to effective deregulation by 1998. We now have a much freer telecommunications market within the European Union which coincidentally came about at the same time as the enormous development of the Internet. As a result of that, many cross-border mergers have been made. We now have, throughout the whole of that single market, a free, competitive market in telecommunications which is totally different from that which existed a few years ago.

As regards energy, particularly gas and electricity, apart from Britain the other markets were very much controlled by state monopolies. The British example led to a consultative document being prepared in each case and eventually the start of deregulation in the other member countries. Within the next few years, at least one-third of those markets will be deregulated. It has taken longer to get that moving than in the case of telecommunications, but as a result of the initial steps taken in both gas and electricity, it is generally felt that the process will move quicker than the legislation proposes.

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So we can see that the development of the concept of a single market, which was started by the elimination of tariff barriers, has led to the careful analysis of other ways in which trade can be impeded, has worked out a system--largely under British initiatives--which could eliminate those barriers and has tackled two prime areas where national monopolies prevented a free market; namely, telecommunications and energy.

I should like to compare this situation, in which British thought and British experience have played such a large part, with the concept of the loose, free trade area referred to by certain noble Lords as an alternative. Some 40 years ago, we had experience of a free trade area. That had to be abandoned because it was felt that the single market concept--the Common Market, as it was then known--tackled the problem of trade interchanges and the freedom of movement of capital and people more effectively. One by one, the members of EFTA joined the common market and the European Community, as they were then known.

I do not see how, as a nation, we could conceivably benefit from withdrawing from the single market, which is now a highly sophisticated market to which we have substantially contributed. It has reached down to the roots of how to secure really free trade between countries on a fair basis. We could not replace that with the kind of arrangement--the loose, free trade area--which we attempted some 40 years ago. That really would be putting the clock back.

12.31 p.m.

Baroness Park of Monmouth: My Lords, we owe much to my noble friend Lord Pearson of Rannoch for this timely debate. I should like to echo others in saying how very pleased I am to see that we have the noble Baroness, Lady Thatcher, with us today.

When President Coolidge was asked what he thought of sin, he replied, "I am against it". That is my position on the way the European Union operates today, though not the Union itself. I recognise that it is impossible for us to withdraw, but I believe that we should not go one step further towards integration and that we should use every effort to secure a serious increase in subsidiarity. Above all, we should resist being drawn into a supranational federal union, though we must go on being active members of the inter-governmental Union as it is today. It must not move further in the supranational direction.

What advantage is there in becoming neutered politically, as we should be if we joined the euro and gave up control over our own power to decide how to spend our money and what resources we need to commit to defence and foreign policy? I am concerned about the developing powers of the common foreign and security policy. It is a foreign policy based on the principle of the lowest common denominator and would not be of much use. I would not dream of discussing the details of foreign policy in the presence of my noble and learned friend Lord Howe of Aberavon, but it seems to me that foreign policy is

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essentially an individual, discrete affair, resting on good diplomacy, conducted largely in private and on good intelligence of the undisclosed intentions of the countries, friend or foe, with whom we must negotiate. That cannot be done in concert with 20 other countries whose vital national interests could be quite different.

Of course it is possible to reach common positions--though rather rarely--but it can often be against our national interest. Our recognition of Croatia, expressly to please the Germans and the EU, was a classic example which eventually led to the involvement of Europe in the Bosnian conflict. By our own national criteria for recognition, Croatia simply did not qualify.

If and when a referendum is held on joining the euro, it will be extremely important to have a balanced and well-researched statement on both the advantages and disadvantages. To that extent, I strongly support my noble friend Lord Pearson. But I do not believe that the alternatives for us are either to join the euro or to withdraw from the Union. We should spend the next two or three years exerting all the influence the Government claim we possess to secure more subsidiarity and more transparency and to stop the EU creating any more groups, common strategies, action plans, special programmes, bench-marking schemes, European social law, new paradigms and dimensions, high-level fora, monitoring panels and Cologne, Cardiff and now Lisbon processes. I entirely agree with the noble Lord who I still determinedly call "my noble friend", Lord Bruce of Donington.

Far from doing less and doing it better, every Council seems to create more new bodies and more tasks best left at national level. The members of the EU are, after all, very different peoples, and with enlargement there will be yet greater variation. The strength of the Union ought to lie in diversity, not uniformity.

However, others, including the noble Lord, Lord Bruce, have delivered devastating attacks on fiscal management, so I shall not say anything about that. Unfortunately, neither insistence on subsidiarity nor measures intended to ensure that our money is better spent will work unless there is adequate scrutiny by national parliaments. The sheer weight of paper coming out of Brussels has made it impossible to keep an effective check and, no doubt, to brief Ministers in time before they make disastrous decisions. This is another reason for telling the Commission that it must stop, consolidate and apply subsidiarity. Even a little benign neglect would be very welcome.

But my chief concern is the new defence initiative. It was agreed at Helsinki that by 2003 the member states should be able to deploy and sustain operations in peacekeeping, conflict prevention and crisis management in operations involving up to 60,000 men, all within 60 days and some much earlier. These operations are to be self-sustaining, with the necessary command, control and intelligence capabilities, logistics and, where necessary, naval and air support. All this has to be sustainable for at least a year, and there is to be capability in command and control,

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intelligence and strategic transport. There are plans for a European air transport command, strategic sea lift capacity, harmonisation of military requirements and the restructuring of European defence industries.

Decision-making will be by the Council. The objective is for the Union to have an autonomous capacity to take decisions and to launch and then conduct EU-led military operations in response to international crises. All these measures will be in support of the common foreign and security policy and will, it has been said, reinforce and extend the Union's comprehensive external role. As the first step, new political and military bodies are to be established within the Council--more committees!--to enable the Union to take decisions on operations and to ensure the necessary political control and strategic direction. The Union is to have decision-making autonomy, a standing political and security committee, a military committee and military staff. When the Union launches an operation, there will be--wait for this--an ad hoc committee of contributors who will be set up for the day-to-day conduct of the operation. I wonder how many of our soldiers are having nightmares at the thought of that idea. Meanwhile, there is to be an inventory of national and collective resources, a database on assets and capabilities, a study of targets, a co-ordinating mechanism and the setting up of a rapid reaction fund.

According to the Government, from the Secretary of State for Foreign Affairs no less, we are not setting up a standing European army or military organisation but merely mechanisms by which the EU, in crisis management, can call on assets which member states have committed to NATO. At the same time, we will not duplicate or decouple from NATO. I shall be interested to see how that will be managed.

The European nations are setting a target of being able to put a corps in the field in 60 days and to sustain it for a year. According to Mr Cook, it all depends on access to NATO and WEU assets, and no one is focusing on money for defence. The Secretary of State has said that there will be none for our own Armed Forces. The important thing, according to what he said, is not what you are putting in, but what you are getting out. That is an extraordinarily good description of the present Government's attitude to defence. On the same occasion he admitted that Her Majesty's Government might at any time simultaneously receive a request for men and resources for a UN operation anywhere in the world. We are committed to that through the UN Memorandum of Understanding.

If the objective of all this is to ensure that the European nations, as well as Britain and France, do their fair share in future crisis management--which, on the face of it, seems a very good idea--surely, since it is admitted that it is NATO assets which are to be used, we could have conducted an audit through NATO without any of the vast infrastructure now being set up. There could have been a separate arrangement to cover the non-NATO EU members, none of them large countries.

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Mr. Cook gave one most telling statistic. Although there were more than 2 million men and women in uniform in Europe at the time of Kosovo, it was a struggle to get 2 per cent of that figure into Kosovo--and, incidentally, 700,000 of the 2 million are conscripts and therefore wholly unsuitable and probably unavailable. We also know that without US strategic air lift (let alone air power), no one could get those famous EU troops, other than ours and perhaps the French, to any crisis area. Finally, what could suit the Russians better than to probe NATO, for instance on the Balkan states, just when our double-hatted troops are known to be drawn off and bogged down in some EU adventure being run by a committee?

We must never forget that the prime task of our forces is defence. We must do nothing to weaken NATO's power to deter. To open the possibility that NATO troops could be involved in this sort of ridiculous charade is extremely frightening and extremely irresponsible.

The truth is that the EU has conned us into allowing what it always intended; that is, autonomy for the Union in the field of foreign and defence policy on the pretext that an audit would produce--instead of the usual two admirals and a stretcher-bearer each from everyone but ourselves and the French--a real serious military force. Even if it did, it would soon disappear under the weight of the EU committees running the war. That is why we must call a halt to the Union's strategy of emasculating nationhood. If ever there were two areas for subsidiarity and nothing but, it is in defence and foreign policy and in their essential weapon of intelligence.

There is reference in the papers on the Lisbon Council and on Helsinki suggesting the possible need for treaty amendment. That is slipped in very much at the last in a quiet little paragraph. We should ensure that any such amendments are fully debated in both Houses before any commitment is made. What I greatly fear is that, although we retain a veto on defence, we shall be trapped for political reasons into committing our over-stretched and under-resourced troops to a hopelessly badly run EU enterprise. For that reason, though I fully accept that we are in the Union to stay, by God we have got to make it better.

12.42 p.m.

Lord Shore of Stepney: My Lords, I begin by saying how pleased I am to be able to follow such an excellent and perceptive speech. We have heard something which is well worth studying, and I am sure we all will when we read Hansard. Also, I congratulate the noble Lord, Lord Pearson, on giving us this opportunity for a wide-ranging debate.

My attitude is that I am not at present in withdrawal mode. At present I am in favour of a committee of distinguished, independent people looking at where we are as a country. Where are we going at the beginning of this new century in terms of maximising our influence in the world in relation to defence, diplomatic influence, foreign policy and economic prosperity, not forgetting the preservation of our

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democracy? All those matters should be studied. We should not exclude withdrawal from the European Union if that is thought to be the best way to proceed. However, I would not begin at that point.

We have a serious year ahead of us and it is helpful to have this debate at the beginning. Europe may look very different by the end of this year. The important issue of enlargement will arise. I have no doubt that applications will proceed and the whole nature of the European Union will be in for profound change. It will be faced with a challenge so great that it may not be able to meet it.

So far we have had what I can only describe as trivial debate in relation to enlargement, in the sense that the only thing that has been seriously considered is the possible enlargement of the first five. What happened at the last Heads of Government Council was that the five became 11. This year the European Union will be considering the application not of the five but of the 11. As the noble Baroness, Lady Williams, said of course others will come after, maybe even Russia itself; certainly the Ukraine; certainly the Caucasian CIS states; and certainly the remnants of old Yugoslavia. So we are not talking about an addition of five or six; not even of 11; but something of the order of 20. We must let that sink in and not allow the Government to bring forward the kind of trivial White Paper which they did on the IGC; one which looks at certain constitutional changes; which offers little niceties of touch such as perhaps sacrificing our second Commissioner or changing the weighted voting system in the Council of Ministers.

The real point of this issue is this. We have an opportunity of refashioning our relationships with Europe in a way that suits us and a large number of both applicants and members that we have not had before. We are uncomfortable in the European Union. We know that. Everyone who has had dealings with it has become increasingly aware that it does not quite fit us, perhaps because of our history and our connections way outside the European Continent. When I hear all this grovelling about what will happen to us, about shivering, shuddering Britain kept outside the European gate, I laugh. There are six continents in the world, not just one. We have now and always will have a considerable influence on the Continent across the Channel as long as we wish to exercise it. That should be the framework of thinking which should inform us.

Frankly, we have not begun to prepare for the enlargement process. We have not thought through the implications. To impose upon the applicant states the kind of rigidities which have developed over the past 20 years in Europe, including commitments to economic and monetary Union, is impossible. They cannot meet it. Because the costs are so great, they cannot even be included in the guaranteed prices of the common agricultural policy. We know that. Therefore, the whole approach has been dishonest and the costing in Agenda 2000 is irrelevant and absurd.

That is one point. The other is this. I am in favour of opening up trade with all those other countries and gradually incorporating as many of them as is possible,

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but the impact on existing members would be profoundly disquieting; and not merely the economic impact: the CAP would become impossible; the poor four would cease to be the poor four overnight. All those changes are bound to take place and the voting patterns would be intolerable. To be one of 21 or perhaps 30 states in the Council of Ministers having issues basic to our people and our democracy taken by majority vote is nonsense, and we know it is. We must make it clear that we will not have that.

When I say that it is a great opportunity, I mean just this. Two things have been absolutely fundamental to the whole post-war European drive. First, the federal dream of Mr. Monnet and the general loss of confidence in the nation state by the defeated, occupied, nearly ruined nations of Europe; secondly, the French national decision, both pre and post-De Gaulle, that it will create a cage for Germany so that it will never again be able to assault and defeat its neighbours. Those are the drives. It is fascinating that the Maastricht Treaty was preceded by, and, indeed, is largely the product of, the collapse of the Berlin Wall. The reunification of Germany sent a shudder through France in particular and in Brussels where Jacques Delors was ruling the roost. Kohl--the last German leader who had every reason to know about and to hate the past of his country--agreed with Mitterrand (perhaps, as we have heard, there was an exchange of other things as well) and with Delors to take this giant leap forward towards an integrated Europe. It was always there because that was part of the federal dream. That was what drove them forward.

I am sure that I do not just speak for myself when I say that, as far as we are concerned, if that is the will and the wish of the peoples of continental Europe, let them come together in however close an arrangement they wish to achieve. However, it is not the will and wish of the British people--we shall never accept this--who have their own history, dreams, connections and interests. However, we have the opportunity--goodness knows, the Amsterdam Treaty has given us this opportunity--of closer co-operation and flexibility. That is written into the treaty. Under that treaty some can go further forward than the rest, provided they do not damage the others. Let those who wish to do so use that provision and let us rejoice in that, but let us put these matters before our own people in a serious debate about how we can achieve at last satisfactory, permanent relations with our continental neighbours.

12.51 p.m.

Lord Moran: My Lords, I apologise to the Minister and to the House. I may have to leave before the end of the debate as I have a long-standing engagement in the country.

Determination to put all our eggs in the European basket may have unfortunate results. As I came in on the Tube this morning I could not help reflecting that if Rover, instead of selling out to BMW, had stuck to its highly successful association with Honda, drawing

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on the Japanese habit of taking the long view in business, it might have avoided the disaster we are witnessing today.

I welcome the Bill introduced by the noble Lord, Lord Pearson of Rannoch, and the eloquent and clear way in which he introduced it. Once again we have to thank him for giving us an opportunity to discuss one of the most important questions which face us--our relationship with the European Union.

This Bill, which requires an inquiry into the implications of our withdrawal from the European Union, is eminently sensible and, indeed, long overdue. My only feeling is that the Government ought to be doing such studies anyway without needing a Bill to prompt them to do so. Good staff work and administration require careful and thorough planning for all contingencies. My experience in the Foreign Office, now long ago, was that too often there was no plan B. Whatever ruled the roost, whether the Commonwealth or Europe, seemed to require total dedication. There was no fall-back position. I believe that that was, and always is, a mistake. We ought certainly to have a thorough study of the implications of withdrawal and of continued membership, and the studies should in due course be made public.

We need to know the full implications, not only of withdrawal, but of our being, in effect, ejected or asked to leave by the Commission and our partners. My noble friend Lord Monson referred to the remarks of Pedro Solbes, the commissioner in charge of economic and monetary union, that,

    "in the longer term it is not possible to be in the Union and outside EMU".

It sounded as though, if the referendum on joining the euro resulted in a no vote, Mr Solbes and his colleagues might actually welcome getting rid of the ugly duckling.

I am always uneasy when the three main political parties agree, so snuffing out any organised opposition or thorough scrutiny. This happened repeatedly on Northern Ireland, so that we had a deeply flawed Good Friday agreement, with more than 300 terrorists released but no matching concessions required from the IRA. On Europe, the parties all seem to agree that leaving the EU is unthinkable. But none of them has been able to suggest how we can effectively resist being dragged into a single European state, which our people clearly do not want, or how to secure a more satisfactory relationship with Europe.

The fact is that our membership brings us little in the way of real benefits and many serious disadvantages. Bashing Britain seems to be the preferred option for most of our partners and certainly for the Commission. Let us consider for a moment the issue of the withholding tax. We know that this proposal came about because the Germans were unable to tackle their own tax evaders. So a tax was devised which would do serious harm to the City of London and, if applied, drive valuable trade out of the EU altogether. It is a clearly idiotic idea, yet all our partners put great pressure on us to agree to it.

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In November, in the debate on the Address, I spoke of the outrageous attitude of the French Government in refusing to admit British beef after the EU and its scientific advisers had pronounced it safe. Four months on we are still no further on and the Germans have joined in, although it now looks as if they may be having second thoughts. Our beef farmers continue to suffer. I hope we can ensure that if we win the legal case, they can be given massive compensation by the French Government. Yesterday we learned that even when our partners do vote with us on a compromise, as they did over droit de suite, the Commission is still attempting to put a spoke in the wheel. Its animosity to this country is extraordinary.

Noble Lords may have seen in the January issue of the House Magazine an article by Mr Titford, a UK Independence Party MEP, who has joined the Budget Committee in Europe. His article was interesting against the background--as he points out--that,

    "the EU's auditors have refused to approve the EU's accounts for four years in a row".

He said of the Budget Committee:

    "The voting procedures are bizarre. Usually, our assistants are only able to provide us with details about what we are to vote on a mere hour before each session starts, having had to translate them from French! Then we are often asked to vote on more than 60 matters within an hour. On one recent occasion I had to vote on no fewer than 360 items in the space of two hours 15 minutes--a new record, I am told! Most MEPs tell me they have no idea what they are voting for".

I believe that that goes a long way to endorse what the noble Lord, Lord Bruce of Donington, has told us today and on many previous occasions.

Yet our membership of this extraordinarily unsatisfactory organisation is enormously costly. As the noble Lord, Lord Pearson of Rannoch, pointed out, the Institute of Directors has worked out that in financial terms the costs exceed the benefits by around £15 billion a year. Why, then, do the Eurofanatics, as I call them, who include notable figures in all the political parties, continue to bang the drum for European integration? It is mysterious. I suppose that politicians and civil servants have invested so much hope and belief in this project that they cannot bear to see it fail. Despite the disgrace of the last Commission, the vast incidence of fraud, the resolute determination not to reform the CAP and the insults and humiliations to which our country is routinely subjected, they support it doggedly through thick and thin.

They cannot even bring themselves to tell the plain truth about the manifest aim of the Commission and the governments of continental countries: to create one country composed of numerous regions--not nation states--with national governments reduced to ciphers, with its capital at Brussels and the highest possible degree of centralisation, harmonisation and bureaucratic interference.

There is of course the argument about inevitability, that it is hopeless to resist the advance of the juggernaut. But one can never tell. No one foresaw the sudden collapse of the regime in South Africa, or of the

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Soviet empire, or of the collapse of the previous Commission. All seemed rock solid. The great integration project may be similarly fragile.

In my time at the Foreign Office, the guiding principle that directed all my days was the protection of British interests. Nowadays, that seems to be a rather old-fashioned concept. The EU has done enormous damage to British interests and appears to go on trying to undermine them. One has to think only of the CAP, the common fisheries policy, the withholding tax and the absurd level of bureaucratic regulation. Those of your Lordships who farm will know of the amazing proliferation of instructions sent out by Brussels, MAFF being today little more than a post office. In our small herd of cattle, we have had, on Brussels' instructions, to replace all the ear tags in the cows three times in a very short space, at considerable expense.

Once before there was this sort of meddlesome interference in Europe in the bad old days of the 16th century papacy: the result was the Reformation. I think that we may have to part company with the European Union, especially if our people reject the abolition of the pound, as I hope they will. I repeat what I said in November. We should begin working out positive alternatives to membership of the single European state, preserving the common market but opting out of the common agricultural policy--here I agree entirely with the noble Lord, Lord Bruce of Donington--of the common fisheries policy, and of the jurisdiction of the Court. We should have no part in the drive to create a single state.

Although I have the greatest respect for the noble Baroness, Lady Park of Monmouth, I do not believe that it would be possible for us to prevent the drive towards a single state while remaining as we are as full members of the Union. I do not think that that would be practicable.

But a new relationship--perhaps not unlike those that Norway and Switzerland have at the moment with the European Union--could well result in a much better relationship with our European neighbours. I believe that such a course would be far more in tune with what our own people want and would be an exciting new chapter in our history.

1.2 p.m.

Lord McNally: My Lords, like all other participants, I very much welcome this debate. There is a certain warm glow of nostalgia about it. I think that I first heard the speech of the noble Lord, Lord Shore, nearly 40 years ago--like good wine, it has got better with age. However, I still maintain that his claim to have a finger on the pulse of British public opinion was wrong in the past and will be proved wrong in the future.

I am also pleased to see the noble Baroness, Lady Thatcher, in her seat. As the noble and learned Lord, Lord Howe, reminded us, our relations with Europe were more deeply cemented during her watch than even during the watch of Sir Edward Heath. There is a paradox here. We were reminded earlier in the week

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that the noble Baroness, when Minister of Education, abolished more grammar schools than any other Minister of Education. I am not making a cheap point; I make the point that office brings its own realities.

Opposition brings out the worst in politicians. Between 1966 and 1970, Labour would not take no for an answer; between 1970 and 1974, it was "No to Europe on Tory terms". Once back in office, it was able to recommend yes to a referendum; by 1981 it was arguing for withdrawal; and sometime during the 1980s--I can never pinpoint when--it returned to the European fold.

In the 50s the Conservative Party missed out on Messina--probably the biggest foreign policy mistake of the immediate post-war world--and then took us into Europe in 1973. It built on our membership in the 1980s and signed up for Maastricht. But now, in opposition, as again we have been reminded, it is "in Europe but not run by Europe". Successively in opposition, the main parties have chosen to appease their Eurosceptics with weasel words.

I very much welcome the honesty and openness of the noble Lord, Lord Pearson, in bringing forward this Bill and the way he has put it to us. It is honest in its ambitions--he wants us out of Europe. He argued with his usual charming combination of xenophobia, conspiracy theory and paranoia which have been a hallmark of his interventions. We have had the power-crazed bureaucrats, the CIA financing, the secret breakfasts and, in the end, who shot Jack de Mannio. All good stuff.

I cannot understand why the noble Lord did not complain about the massive campaign of disinformation on Europe which is currently being mounted by the foreign-owned British media. That is something that could well have been put in his lists of bogeymen and dangers.

When warning about the peace and prosperity that the noble Lord is so eager to demand, we have to pass over the fact--to put it at its most simple--that running parallel with this period of European co-operation and integration has been the most peaceful and prosperous period in European history. I do not claim that is all down to the European common market, but it is worth noting.

Basically, however, I agree with the noble Lord that we need a full, thorough and deep political debate. However, I do not think that this Bill provides the basis for it. I can tell him that a committee of inquiry such as he proposes will produce a split report. Why? QED this debate today. We can analyse and stack up figures as we may--goodness knows, he has now lodged so many papers in the Library that noble Lords have their reading for the Easter Recess already laid out for them--but this debate is like a science fiction programme I once saw which contained a time-warp television. In that programme, when one switched on the television one was back in whatever age one wanted to be in. It seems to me that the European debate--particularly in this House--is locked where it was when I first came into it in the early 60s, with a group of people arguing the "in" or "out" case. One

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still hears people saying, "I do not think we should join the Common Market", even when they are talking about the euro.

I looked today at a speech I made in March 1997--I am probably the only one of your Lordships who looks at my old speeches--and I said then:

    "I do not believe that the Conservative Party is now capable of making the decisions that need to be made in the national interest on Europe".

I went on to say:

    "Even more disturbing, I fear a failure of nerve by the Labour Party".

I think that is something which has worried me since the general election. Having gone into that election with very clear commitments on Europe, what we have had since are individual Ministers making carefully flagged-up pro-European speeches but no full-throttle campaign. The truth is that decisions on Europe have been put on the back burner in rather the same way as the future of British manufacturing industries. They have been sacrificed to that all-important objective, the second term.

Today's Bill is a distraction. I agree with the noble Lord, Lord Shore, that the Community is at a very important point of decision-making. The European Union has set itself tough targets. The launch of the euro and enlargement force challenges which are as great as any faced in Europe in half a century of co-operation; yet they are only part of the agenda for change. We on these Benches want change in Europe but this never-ending "in or out" debate debilitates the thrust for reform.

We believe that the commitment to enlargement is meaningless unless we envisage root-and-branch reform of the common agricultural policy. We cannot drive forward on economic and monetary union and ignore challenges such as organised crime, drug trafficking, terrorism and other issues covered by the Third Pillar of the Maastricht Treaty. There can be no single market that does not take account of trans-frontier issues threatening our environment.

Perhaps most importantly of all, Europe cannot continue to plan its foreign policy and its defence on the assumption that the United States will always pull our chestnuts out of the fire. I could not follow the logic of the noble Baroness, Lady Park of Monmouth. Is she really satisfied with the way that Europe responded to the disintegration of Yugoslavia? I thought that the hesitancy of political will--

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