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Lord Bruce of Donington: My Lords, before my noble friend sits down, will he give the House any information as to the detailed consideration of the new qualified majority rule? As my noble friend is well aware, QMV is applicable to the distribution as between member states and other interests on the sums made available ultimately by the Council itself. Is he satisfied that the existing qualified majority rules in

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regard to the distribution of funds provided to the European Community do not need some little improvement, which may take some time?

Lord Grenfell: My Lords, all I can say is that I have never been one to say that there is no room for improvement in any of the procedures used in the European Union on the subject of QMV and on the distribution of funds. Of course there is room for improvement.

11.40 a.m.

Lord Howe of Aberavon: My Lords, I suspect I am not the only Member of the House to have a sense of deja vu about more than one of the topics before us today. Another Danish referendum, for example, and I shall say something as to that later. I shall also speak to the items on the agenda of the IGC.

The first substantial IGC took place in 1985, when I and my noble friend Lady Thatcher, accompanied by the noble Lord, Lord Williamson, were hijacked by Messrs. Craxi and Andreotti into convening the first IGC. Astonishingly in retrospect, we completed the agenda of that IGC in Luxembourg within six months, in December 1985. Oddly enough even that far back--and this is my other example of deja vu--some items, described as "part of the Amsterdam left-overs", were already there, for my noble friend Lady Thatcher had circulated a document to her fellow heads of state. It was a document entitled Europe, the future and it expressed our willingness to concede our second commissioner as part of the reform of the entire structure. So the phrase "Amsterdam left-overs" substantially understates the antiquity of that item on the agenda.

The other point that one has noticed before, although it has not not yet been mentioned in this debate, is the continuing gap, not just in this country but throughout Europe, between rhetoric and reality--high flown rhetoric of the most high-falutin and frightening kind. I think that gap between rhetoric and reality goes a long way towards explaining the Danish vote. Happily--and totally unsurprisingly--there is no such gap in the report before the House; nor indeed in any of the reports produced by the House's committee and sub-committees on European matters. As someone who has always been a consumer rather than a producer of these splendid documents, I must pay the warmest possible tribute to the work done by colleagues and by the respective chairmen of the committee and sub-committees.

I well remember M. Jacques Delors, as he then was, saying to me that no other parliament, no other institution in the European Community, produced documents of the same quality, and that remains so.

The first illustration of the gap so far as this agenda is concerned is to be found in the discussion of the Charter of Fundamental Rights. I entirely agree with the noble Lord, Lord Tordoff--to whom I extend the warmest thanks for his contribution to this debate and elsewhere--that it would be a good thing if that plays no part in the agenda of the IGC.

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In that respect,I believe that we should make the institutions of the European Union subject to the Strasbourg European Convention on Human Rights in order to give us one single integrated legal code covering all these matters. The windy draughtsmanship of charter after charter--I refer, for example, to the Stuttgart Declaration, the so-called Genscher/Colombo Act of 1983--and other similar documents with aspirations and ambitions litter the community, causing confusion as to their enforceability and thus do no good. Charter-mongering, not just in this field, leads only to confusion.

The second example of the gap between rhetoric and reality is in relation to the Common European Strategic and Defence Policy--that is its new name, I believe. The sub-committee's recent report makes admirably clear the gap between the rhetoric and the reality. Thus "headline goals" (quite rightly described as headline goals) of 50,000 to 60,000 people available to deal with emergencies at short notice, are miles adrift from reality. The sub-committee has rightly emphasised the need for,

    "capabilities not institutions ... military capabilities not symbolism",

and at paragraph 103 it warns,

    "We cannot express too strongly our anxiety at the danger of the CESD turning into a damp squib and consequently into seriously deteriorating relations with the US".

It is not just across the Atlantic that the institutions of the European Union risk having their credibility put under threat.

Alas--and it is with regret that I have to say this to some of my colleagues on this side of the House--there are gaps between reality and rhetoric as well much closer to home and they have been perpetrated by members of my own Conservative Party. I never thought to read this comment from a respected commentator like Timothy Garton Ash writing in the Daily Telegraph on the latest Conservative Party policy document:

    "The whole thing is warped by an almost delusionist vision of our place in Europe and the world".

His comments are not unjustified because the text on this matter--and there is much that is good, as he recognises, in the rest of the document--highlights the prospect of:

    "a fully integrated superstate with nation states and the national veto disappearing".

It suggests that Britain is "drifting to its own destruction" because we are being:

    "Guided by people who believe that Britain cannot survive as an independent nation--and should instead become a small part of a regional bloc".

Who are these people who believe these things and who are meant to be guiding us? Are there any such people, for example, in France or Germany who share these beliefs and who are therefore joining together in treating France, Germany and Britain as "small parts of a regional bloc"? I have never met such people, either in this House or in another place, or even in

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Brussels or Paris. I am not surprised at, though regret very much, the comments of Timothy Garton Ash in what is otherwise a very respectable document.

It is exactly that kind of rhetoric that has so gravely misled the people of Denmark, and could so easily do the same here, with far more serious consequences for us. The Danish currency is already tied to the deutschmark. They think they can forgo influence over wider policy. Denmark has never had and could never hope to have the wider political influence which the European Union enables Britain to develop to our advantage.

If the "No" arguments, which we have heard in this country on that issue, prevailed, my real fear is that the pound sterling would become a "punch-ball" currency, tossed on the sea between the dollar and the euro. This goes back to the days when the noble Lord, Lord Lamont, and I were in government together and we saw the pound fall from approximately $2.45 to just above parity. That is the fate that I regard it as most important to avoid. There would also be the resultant diminution of our influence over foreign policy.

Nothing I have said implies that no change is required as regards the present European Union, still less that there is nothing wrong with the present Government's approach to the European Union. But the realistic prospects for the IGC have been well set out by the noble Lord, Lord Tordoff, and his committee, and it is essential for the IGC to complete the central business for which it has actually been convened: it is essential for enlargement to go ahead, for the credibility of the Union.

It would be misleading and mistaken, however much others might enjoy the distraction, for Nice to begin looking at other longer-term, wider issues. The noble Lord, Lord Grenfell, was right to say that those are matters not just for two or three years ahead but for many more years than that, after a widespread and serious debate.

On QMV we forget that since the Single European Act some 80 per cent of the decisions have been taken by qualified majority voting. The implication is that we should not be too frightened of it but equally that we should not be too anxious to extend it to other areas. The detailed approach now being applied by governments throughout the European Union, where it is thought that the prospect of "progress" is limited so far to one or two items out of 25, is the correct way to proceed.

Regarding the number of Commissioners per state, I agree with everything that the two noble Lords have said. I too should much prefer a smaller Commission: fewer than 20 if possible, but that may be a distant prospect and I regret that.

Regarding the reweighting of votes, again, the committee's analysis and conclusions cannot be faulted. On the whole I would be more prepared than the noble Lord, Lord Grenfell, to accept the change of simple reweighting, but he is right to draw attention to the Franco/German arguments on that topic.

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As regards enhanced co-operation, which hovers just beyond the agenda, many proposals have now been put forward. There has been a positive feast of rhetoric from almost every statesman one likes to name. M. Barnier seems to believe that we should move towards a destination of deeper integration throughout the larger Community across the board; that we can take a comprehensive federal advance to deeper integration in that way. I do not believe that that is either possible or desirable. On the other hand, Foreign Minister Fischer takes the opposite view and articulates more clearly than did President Chirac the pioneer in-group proposition to which they are both attached.

The odd thing is that, again, my own Conservative Party seems to join in the same chorus. My noble friend Lord Hurd, who is not here today, in a pamphlet recently produced for the Action Centre for Europe, points that out: that the Conservative Party proposals are, in a sense, facilitating the pioneer group approach. While Joschka Fischer wants to see the pioneer group steaming ahead, the Conservative Party risks making it easier for non-pioneers to fall behind, to lag behind, almost deliberately, on an increasingly selective basis, so that the pioneers will be less inhibited in their steaming ahead.

So, in my judgment, all three approaches would be bad for Europe, bad for Britain and bad for the European Union. The real risk is that they could lead to disintegration, rather than integration, not least, for example, in the field of defence where Britain is playing a crucially important role in trying to secure enhanced European co-operation and, where Britain has the largest interest, perhaps, in achieving that.

So all those changes, including, I fear, the approach within my own party's draft manifesto, risk diminishing, and not strengthening, the influence of Britain in the Union and, therefore, retarding our role in advancing our case.

Finally, I deal with the approach of Her Majesty's Government to the IGC. On the substance and the detail of the matter, I believe, as the committee does, that they are making broadly the right points and they must sustain their efforts to achieve the right result. But I am convinced that their efforts to persuade our colleagues in that direction are inhibited and hamstrung, and will remain so, by continued prevarication on their part over the firmness of this country's potential commitment to economic and monetary union.

I know that the noble Lord, Lord Owen, argues a selective case on that and seeks to be "yes" on the one hand and "no" on the other. I say no more about that except to express my belief that it is serious that so often his group seems to align itself on this issue with the more intemperate advocacy and rhetoric which actually jeopardises one half of his own case.

The truth is that common sense and history alike tell us that we cannot lead on the general front unless we are leading on one of the central propositions of the Union--the single currency--which would, as I believe, be in the interests of this country.

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The Government's response to that challenge is simply not robust enough. As the Danish referendum should surely underline, the Government must argue the case for the adoption of the single currency if that is indeed their belief. They have begun at least acknowledging that more clearly. So let them handle the nuts and bolts of the Nice IGC along the lines which the committee has analysed so clearly. But beyond that, let them summon up the courage to argue a more convincing case for the wider future in which they claim to believe.

11.53 a.m.

Lord Thomson of Monifieth: My Lords, I join with the noble and learned Lord, Lord Howe of Aberavon, in expressing gratitude to the noble Lord, Lord Tordoff, and his colleagues on the Select Committee, together with their staff, for a further admirable report. Over the years, those reports have always shown a high level of quality of information, thoughtfulness, and constructive recommendations. That is certainly true of the present report.

When the European Union faces enlargement, it faces, probably, the most difficult of the tasks that it has ever undertaken. It is an historic and massive challenge for both the member states and the applicants. The noble and learned Lord, Lord Howe, has commented perceptively on the gap between rhetoric and reality as an ongoing part of the European debate over the years. It takes many forms. In this particular case, for enlargement, it requires, paradoxically, that we maintain an inspiring vision of what role a united Europe of 27 countries could play for its citizens and in world affairs alongside the need for a stubborn step-by-step pragmatism about the immediate way forward at any stage. That was never truer than it is of the present situation, with the infamous Amsterdam triangle facing the Nice IGC. I noted the warning from our permanent representative in Brussels, Sir Stephen Wall, that a failure in those matters in Nice would cause a serious political crisis.

On the size of the Commission, I am not totally in step with the thinking and tone of the comments made by the Select Committee. From my own experience--although, goodness knows, that experience is almost prehistoric now--of service on the Commission, I do not believe that it is either practical or desirable to abandon the habit of each country having a Commissioner. After all, under present arrangements, the Commission still enjoys the sole power of initiative of policy proposals under the treaty. In those circumstances, I tend to agree with the description that appears somewhere in the report that having a Commissioner from each member state is not for the protection primarily of national interests but so that there is someone on the Commission who understands each national position in the College of Commissioners.

When I served on the Commission all those years ago, a nice euphemism was generally employed where you talked about "the country which I know best"

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when you wished to draw the attention of your colleagues to the fact that some of the proposals they were making were utter nonsense as far as the United Kingdom was concerned. As the Union enlarges, the smaller countries in particular will be at a disadvantage unless they feel that they are in that position. It is rather easy for the larger member states like ourselves nobly to say that we are ready to give up one of our Commissioners so long as we remain absolutely sure that we still have someone who will be in the college and able to talk about the country that he or she knows best.

But I very much agree with the committee that the corollary to having to resign oneself to a very large and cumbersome Commission is that there should be radical structural change in the internal workings of the Commission. The committee is absolutely right in the linked matter that it is essential to alter the balance of voting arrangements in the Council. For my part, I believe that it is right to say that there will be great advantage in maintaining the double-majority system to reflect the fact that we have a European Union which is a Union both of states and of peoples. That needs to go alongside a significant reweighting. The present pattern simply cannot be sustained very much longer, as the reports points out.

As a Scot, I was interested to read that the combined population of the three Baltic states is comparable with the total population of Scotland. Scotland has a population of 5 million or 6 million within a United Kingdom of around 50 million. It is really absurd that the combined votes of those three Baltic states, when they remain in the Union, should remain comparable to that of the United Kingdom.

Finally, at Nice, no doubt, there will be discussion of that new term of art, "enhanced flexibility". I say simply that I agree with the comment of the committee that there appears to be plenty of space for flexibility within the treaties as they stand. But I argue that as areas of enhanced flexibility develop, and develop they certainly will--the powerful euro 11 group is only an example of developments which lie ahead of us--it seems to me that it is in Britain's interest, as a major player in the European Union, to be inside and not outside those events of enhanced flexibility, shaping any enhancements to take account of our own interests.

That is why I believe that it would be foolish for us in this country to over-react to the negative result of the Danish referendum. We live in a world of global communications, but it seems to me to carry globalisation too far to argue that because the citizens of Denmark have said "No" to their government on this matter, Britain, with an economy that is 10 times the size of the Danish economy and with world-wide interests that are much greater and more varied than those of Denmark, should simply fall behind Denmark in this matter.

This morning I was astonished to hear Mr Portillo argue that, instead of seeking to be alongside France and Germany in the main European league, Britain, perhaps with Sweden, should be bidding proudly to

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lead a second division, along with Denmark. In the world that lies ahead of us, I believe that Britain has a duty to do better than that for its citizens.

I end by echoing the words of my colleague Andrew Duff, a Member of the European Parliament, who gave evidence to the Select Committee. He remarked that Britain is in danger of being marginalised at a critical juncture in European integration. He went on to say that,

    "the indecision over the single currency ... is increasingly thought of as a contributing factor for the euro's comparative weakness",

and is enfeebling British influence in the European Union.

The sooner Her Majesty's Government--I echo what the noble and learned Lord, Lord Howe, said--put their backs into convincing the British people that the euro will be good for the citizens of this country, the better it will be for this country.

12.2 p.m.

Lord Owen: My Lords, the Select Committee is to be congratulated on its report. It is extremely helpful to have this type of detailed analysis because the Inter-Governmental Conference in Nice is an extremely important one. First, it will have a considerable bearing on the pace of enlargement. I am frankly shocked by the delays in the enlargement process, particularly in relation to political matters over Poland, and, in fairness to the changes that they have made in their economy, to Hungary and the Czech Republic. Those three countries have come out of communism, made striking changes in democratic and market reforms, and to rebuff them continually risks a backlash in public opinion that we are beginning to see emerge already.

That is such a marked contrast to the way in which the Community of Nine faced up to the political need for speed in enlargement when Portugal, Spain and Greece came out of fascist dictatorships. One of the proudest moments in my life was when we had the presidency of the Council of Ministers for the first time and we took the key decisions to enlarge, and to enlarge at considerable speed, in the summer of 1977.

I believe that such constitutional issues are becoming of crucial importance. I shall not dwell on the Danish referendum. I am very pleased that the Danes have made that choice, but that is their choice; it is their democracy; and, in my view, they have made a perfectly valid distinction between committed membership of the European Union and a decision not to join the euro currency.

Many of their politicians have said that they will not be put into a cul-de-sac by saying never, but they want to retain their right to examine, not just the economic matters, but as we saw in the debate in Denmark, increasingly the political, democratic and constitutional implications of the euro. In this country we would be extremely foolish if we did not also examine those matters.

To take one major issue, personally I accept that we shall have to have one commissioner per country in the European Union. Eventually that will lead to a large

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Commission. I doubt that we shall be able to reduce the Commission to 20 from 30 plus, but if we could I would not object. We must now reweight the voting system and there will have to be compromises.

In the Select Committee examination there was no discussion of the extremely important defence implications inherent in the Treaty of Nice. I hope that this Select Committee or another one will examine that matter. How many Members of the House are aware that if the present Title V of the common foreign and security policy goes through, with the addition of this new element of defence policy for the first time, and if the language is not amended, we shall be giving the Commission and the European Parliament a locus on defence? That is a major constitutional decision. The St Malo agreement or declaration, which I supported, was meant to be purely inter-governmental. Unless we change the language of Article 21 of Title V there will be a responsibility on the Commission to report to the Parliament on all aspects of CFSP. That will include new military aspects and new functions in the military committee.

Over many months I have been in correspondence with the Prime Minister on this matter. He accepts that on purely military matters in the new military committee the Commission should not be there. It seems to me that the person who should report to the Parliament, in addition to the President of the Council, is the new high representative for CFSP, appointed by governments, who at present is Javier Solana. He is extremely well equipped to do that in view of his past experience and distinguished record as secretary-general of NATO. It would not be appropriate for the Commissioner of external affairs to make a report to Parliament on military matters in the new area of defence.

If we allow this, it will not be long before the European Parliament questions the inter-governmental nature of defence. That is the way in which the incrementalism of the constitutional creep in the European Union works. We must examine this issue with extreme care. We know that there are serious anxieties in the Congress, the Government and particularly in the military of the United States about the new European defence initiative.

I believe that, if properly and carefully judged and if examined in great detail, it can be a helpful addition to the common foreign and security policy and even a helpful addition to NATO when there are instances in the European sphere of influence where the United States does not want to commit itself to a military operation but is ready to use the resources of NATO to help EU countries. I am not against it in principle, but the Commission has absolutely no role in that at all. To allow it in through the back-door would be a classic mistake.

Already within the CFSP treaty there is language that military decisions are exempted from qualified majority voting, and quite rightly so. Also in this new area of military decision-making we have exempted it from the power of the Commission over financial arrangements. That has been done deliberately to try

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to ensure that this new area of defence is treated differently. In my judgment it certainly should not be allowed under the present Article 21 for the Commission to report to Parliament in this defence issue and for Parliament to have a locus on this matter. You cannot exclude the Commission from common foreign and security policy, which is predominantly inter-governmental, if for no other reason than that it has a locus on development policy. We all know how development policy and foreign policy can merge.

This is a substantive issue of extreme importance. If we get it wrong, we shall seriously threaten the credibility and the effectiveness of this new defence initiative.

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