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House of Lords

Friday, 27th June 2003.

The House met at eleven of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers—Read by the Lord Bishop of Peterborough.

Co-operatives and Community Benefit Societies Bill

Report received.

European Union (Implications of Withdrawal) Bill [HL]

11.6 a.m.

Lord Pearson of Rannoch: My Lords, I beg to move that this Bill be now read a second time. I start by thanking all noble Lords who are to speak today, a Friday in June, on the Second Reading of this simple but important Bill. A number of other noble Lords have asked me to say that they support the Bill but are not speaking because they are unable to be present or to stay until the end of the debate. They include the noble Lord, Lord Weatherill, a former Speaker of the House of Commons, my noble friend Lord Biffen, the noble Lord, Lord Chalfont, and my noble friends Lord Tebbit and Lord Waddington, all former Ministers of the Crown.

The Bill's object is clear. It requires the Government to set up an independent inquiry into what life might really be like outside the European Union, especially for our economy, defence and constitution. It requires the result to be made public, together with the financial cost of our membership of the EU.

I introduced a similar Bill three years ago. The strategy behind the Bill then was that the findings of its inquiry would have been available for public debate before the Government signed up to the Treaty of Nice. There can be little doubt that that would have been helpful, but its purpose has now become much more important; vital, in fact, to the national interest. It is to secure public enlightenment and debate before the Government sign up to the constitutional treaty which will emerge from M. Giscard d'Estaing's recent Convention on the Future of Europe and from the forthcoming intergovernmental conference.

I am aware that the Government pretend that that eventual treaty will merely be an exercise in tidying up the existing treaties, and that they will fully protect the national interest before they sign it. That, of course, is what British governments have always assured the British people about every new treaty since we first entered the clutches of the corrupt octopus in Brussels, some 30 years ago. But it has not been true in the past, and it will not be true this time. The truth is that the British people have been lied to and kept in the dark by our political establishment since the passing of the European Communities Act in 1972. The result is that

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our democracy has stealthily but steadily been removed from our control and passed to Brussels and Luxembourg. What do I mean by our democracy? I mean the right of the British people, earned with such great sacrifice over the centuries, to elect and dismiss those who make their laws. Much of that right has already been surrendered to Brussels, and most of what remains will follow with the signing of the next treaty, unless the people become aware of what is happening and manage to stop it.

So I think it is time to come clean with them, and explain how they were led, without their knowledge or consent, into their present predicament.

I start with the chilling words of Sections 2 and 3 of the European Communities Act 1972, which took us into what was then the European Economic Community.

    "All such rights, powers, liabilities obligations and restrictions from time to time created or arising by or under the Treaties . . . are without further enactment to be given legal effect . . . and be enforced, allowed and followed accordingly.

    Subject to Schedule 2 to this Act, at any time after its passing Her Majesty may by Order in Council, and any designated Minister or department may by regulations, make provision . . . for the purpose of implementing any Community obligation of the United Kingdom".

Section 3 reads as follows:

    "For the purposes of all legal proceedings, any question as to the meaning or effect of any of the Treaties, or as to the validity, meaning or effect of any Community instrument, shall be treated as a question of law (and, if not referred to the European Court, be for determination as such in accordance with the principles laid down by and any relevant decision of the European Court)".

What these words mean is that when the executive, or the government of the day, agrees or is outvoted on a new law in the Council of Ministers, the House of Commons and your Lordships' House must enact it. If we do not, Articles 226 to 229 of the Treaty Establishing the European Communities allow the Luxembourg Court to impose unlimited fines. That is why no law passed in Brussels has ever been successfully overturned by Parliament, which has therefore been a rubber-stamp for all EU legislation since 1972.

Our fish and agriculture were handed over to Brussels with the passing of the 1972 Act and have been the instruments of fraud and environmental disaster ever since. Our fishing industry has also been ruined in the process.

Quite how the Conservative Prime Minister, Mr Edward Heath, managed to assure us that no sovereignty was lost in that Act must presumably be a matter between him and his Maker.

Similar judgment has no doubt already been visited upon the late Harold Wilson who, as Labour Prime Minister, masterminded the next episode in this treacherous saga. This was the 1975 referendum, when we were deceived into voting to stay in what was then called the Common Market. Mr Wilson repeated the lie that no sovereignty was at stake, and then excelled himself by writing to every household in the land, promising that the danger of a European single

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currency, which he rightly described as a threat to employment and industrial growth, had been removed.

I do not know about your Lordships, but I voted to stay in the Common Market in 1975 without having the faintest idea of the wording of the 1972 Act, and thus the real meaning of what I was doing. I am sure that that applies to nearly everyone who voted to stay in. Furthermore, we know now that a massive campaign of distortion and propaganda was launched by the Foreign Office, the BBC and other elements of our Suez-inspired establishment. And so we were deceived, and we got it wrong.

Twelve years then passed before the Single European Act of 1987, which set up the single market. This introduced the infamous system of qualified majority voting, or QMV, whereby the Government can be outvoted in Brussels, but Parliament still has to rubber-stamp the resulting law. Twelve areas of policy, which had previously been under the control of Parliament, were passed to the control of Brussels. Alas, these included all of our industry and commerce, and other areas like the health and safety of workers and the European Regional Development Fund. The idea was that the new voting system would be to the advantage of the British economy. Tell that to our fishermen, to our art market, or to those who take herbal medicines, or to a whole host of other British interests.

Then, the pace of integration started to quicken with the Treaty on European Union, or Maastricht Treaty, of 1993. A massive 30 policy areas were ceded to QMV, and a further 15 to a new procedure called co-decision, which involves the European Parliament in decisions taken by the Council of Ministers, but which still removes the decision from the House of Commons and this place. Included in this little list was control of our environment, and everything that goes with that.

In 1999, we had the Treaty of Amsterdam, with 16 areas going to QMV and 23 to co-decision, and last year, in 2002, we were blessed with the Treaty of Nice, which siphoned off a further 43 areas to QMV and 16 to co-decision.

The result of these treaties so far is that the majority of our laws are now made in Brussels, with the House of Commons powerless to stop them.

What have we left? Well, we have kept control of our Armed Forces, judicial system, currency, and most of our health and education policies. It is generally believed that we have also kept control of our tax system, although there are clauses hidden in the treaties which make that doubtful, should Brussels opine that it needs to control our tax system for the benefit of the single market. Anyway, everything that remains is under threat from the Giscard proposals.

So that is where we stand today. This is not the time to debate the Giscard proposals in detail. Suffice it to say that they herald the final extinction of our democracy by giving the EU its own legal personality, superior to that of the nation states. National parliaments will on the whole only be able to make

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laws when the EU cannot be bothered. The corrupt bureaucracy, the Commission, will keep its monopoly to propose new legislation, and all the EU institutions will get more power than they have now. I know only one joke about the European Union: if it applied to itself for membership, it would not have chance. There is only one loser in the Giscard proposals, and it is of course the people, with their tiresome democracy.

But this Bill does not propose an inquiry to examine what life might be like after the eventual constitutional treaty comes into force, although its findings would of course greatly increase public understanding of what is at stake. The inquiry would amount to a cost-benefit analysis of our present relationship with the EU.

The last time this Bill was debated in your Lordships' House, I am afraid the Government simply refused to engage. The noble Baronesses, Lady Scotland of Asthal and Lady Ramsay of Cartvale, wriggled out of this normal duty in your Lordships' House by claiming that the benefits of our EU membership were so wondrous and obvious that there was no point in even contemplating life outside it, let alone in setting up an impartial inquiry to report the truth to the British people. It is a great honour that the noble Baroness, Lady Symons of Vernham Dean, is to answer for the Government, but I hope she is not going to try a similar wriggle.

Indeed, if she is going to say that the Government are not going to leap at the idea of setting up the inquiry proposed by this Bill, and I fear that may be her line, then it would be helpful to know what the case is for the UK to stay in the European Union. As far as I can see, it simply does not exist, whereas the case to leave is unanswerable and overwhelming. There is not time to rehearse all the arguments now—the inquiry should do that—but perhaps I may hit the two main ideas in the Europhile armoury firmly on the head before we go any further. These are that the EU is essential for peace, and good for trade. It is supposed to bring peace and prosperity.

The idea that the EU is good for our trade is supported by a much-repeated piece of nonsensical propaganda which goes as follows:

    "60 per cent of our trade, 3 million jobs, and access to the Single Market of 300 million people depend on our membership of the European Union".

What they mean by "trade" is "exports of manufactured goods", and even then the percentage is lower. But their statistics are meaningless, because none of our trade, jobs or access to the single market would be lost if we left the European Union. We would, of course, replace our membership of the European Union with a free trade agreement, such as Switzerland and even Mexico enjoy, and which the EU needs more than we do because they trade in surplus with us; we are their largest client. What is more, the EU's average external tariff is now down to around 1.6 per cent, so leaving is not such a big deal anyway. Your Lordships do not have to believe a rabid Eurosceptic such as myself on this fundamental flaw in the Europhile position. There are many detailed reports which bear me out, coming from such prestigious think-tanks as the International Trade Commission in

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Washington, and the Institute of Economic Affairs and the National Institute of Economic and Social Research over here.

Furthermore, since Brussels regulations apply to and strangle 100 per cent of our economy, the only statistic worth even considering is how much of our whole economy trades with the European Union. And here we come down with a bump to a mere 9 per cent, which, I repeat, would not be lost if we left the EU itself. About 11 per cent goes in trade with the rest of the world, and 80 per cent stays right here in the British economy. So 91 per cent of our economy is not involved with the single market at all; and yet, as I have said, it must obey all the lunatic regulations from Brussels. No wonder our small businesses—most of which trade within a radius of 60 miles of where they are based—are so fed up with our subservience to the dictates of the corrupt octopus; and do not let us forget that they are our economic seed-corn.

As I have said, there is not time today to put the whole economic case to leave the EU, but for those of your Lordships who have an open mind and who are interested, it can be found on the website of the think-tank set up by the noble Lords, Lord Harris of High Cross and Lord Stoddart of Swindon, at www.globalbritain.org. I am delighted that both noble Lords are due to speak today, and I look forward to their remarks with much pleasure.

And so, finally, to peace, and the idea that the EU has brought peace to the continent of Europe and will do so in future. It is this idea which lies at the deepest level in our debates about the European Union, and I accept that most Europhiles genuinely believe it; or, rather, is it that they feel it? I fear that it is a warm, happy, mushy feeling, and anyone who challenges it is immediately dismissed as a warmonger, a Europhobe, a dangerous nationalist or a xenophobe and so on.

So let me just repeat what I have said before, as calmly as I possibly can. The EU is a top-down amalgamation of different peoples, which has been put together without their consent, which patently lacks genuine democracy, and which is therefore much more likely to end in discord than in peace. Surely if Yugoslavia, Northern Ireland, Kashmir, the Transcaucasus, Gibraltar, the Falkland Islands and much of Africa teach us anything, they should teach us that. I cannot foresee the kind of disarray in which the European Union will eventually end, but the point of the Bill is to find out whether the United Kingdom needs to be part of it.

Perhaps I may repeat, too, that we Eurorealists love Europe just as much as the Europhiles. But our love may be more healthy because our vision is a Europe of democracies, trading freely together, collaborating when they want to, and linked through NATO. What we are phobic about and what we fear is the corrupt and undemocratic monster which is taking shape in Brussels.

In short, we fear that the EU may turn out to be a very dangerous idea. I do not need to tell your Lordships, of all people, of the damage that ideas can do when they become generally accepted but turn out

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to have been misguided. One thinks of slavery, of national socialism in Germany and of Communism. I do not know whether your Lordships remember the letter written to his fiancee by a young White Russian officer from the front against the Bolsheviks in 1918. It went as follows:

    "Oh my darling, please do not worry. In a few weeks I shall be home with you in Moscow, and we shall be married. These people are not very well armed, and their ideas are even worse".

A few days later he was killed, but he turned out to be right about the ideas which inspired Soviet Communism. It is just that it took 70 years and 60 million lives to prove his point.

So, I end with a simple challenge to the noble Baroness the Minister. The Government say that they want the fullest public debate about the proposed new EU constitution. Is that so? Have I got that right? Can she confirm that the Government really do want a debate? If that is so, how can the public decide whether they want the new constitution if they do not know what the alternatives are?

The Prime Minister seems convinced, perhaps by his own propaganda, that leaving the European Union would be akin to committing national suicide. Yet consistent opinion polls over many years show that a large proportion of the electorate do not agree with him. Only a fortnight ago, 92 per cent of the 13,542 people who called into a Jeremy Vine show voted to leave the European Union now. Whatever the accuracy of these polls—I accept that they are only polls—it is clear that many millions of British people do not agree with the Prime Minister. They believe that leaving the European Union and maintaining our trading arrangements with the single market would be liberating, refreshing, enriching and modern.

Who is right? Do the Government have the courage of their convictions? In which case, they must surely support the Bill. I look forward to the Minister's reply. I commend the Bill to the House.

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

11.24 a.m.

Baroness Cox: My Lords, I congratulate my noble friend Lord Pearson on introducing the Bill and on the characteristically comprehensive and robust way in which he opened the debate.

I should perhaps declare an indirect interest. My noble friend's charitable trust has given financial support for many years to my own charitable trust for the educational and humanitarian activities with which I am involved. However, I emphasise that that in no way affects my view of the issues confronting us today.

The Bill would help our compatriots to make up their minds about our country's involvement in the European Union. However, a snapshot of today's costs and benefits would not be enough. The committee of inquiry envisaged by the Bill would also need to look to the future. What will the EU look like in 10, 20, 30 or 50 years' time? What are its economic

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prospects? What are the implications for its geo-political position in the world? Will the EU be stronger and more influential in the world, or will it become marginalised and less able to influence the well-being of its own citizens? In a word, is the EU flourishing or is it beginning to show signs of decline?

Since I last spoke in your Lordships' House on this subject in January, four impeccably objective studies have been published. They go some way to answering those questions. But before bringing them to the attention of the House, perhaps I may refer to the comments by Dr Denis MacShane, MP, the current Minister with responsibility for Europe, in an interview with Le Figaro on 26th April this year:

    "today the European (EU 15) economy produces 20 per cent less than the US economy . . . according to economists at the Foreign Office, by 2010 the European economy will produce 40 per cent less than the US economy".

That, my Lords, is a very steep rate of decline over just the next seven years.

The first of the four studies to which I shall refer is the report of the House of Commons Treasury Select Committee on the UK and the euro, published on 7th May. In their evidence to the committee, two Cambridge academics, Ken Coutts and Professor Robert Rowthorn, one of whom advised the Treasury in its assessment of the five economic tests, asked:

    "How will Britain's trade patterns evolve in the coming decades? In particular, what will be the share of the eurozone in our trade in 20, 30, or even 50 years' time? The answers to these questions are inevitably speculative, but there is good reason to believe that the share of the eurozone in our trade will decline by a substantial amount . . . The share of the eurozone in Britain's trade has been falling since 1990. This decline reflects the rapid growth of our trade with countries outside the eurozone . . . It seems inevitable that the relative importance of the eurozone in our trade will decline considerably in the coming decades, despite any temporary boost that may arise from the eventual adhesion to the euro of new members such as Poland, Turkey and the Ukraine . . . If the share of the eurozone in our trade were to fall dramatically, to say 30 per cent, which is conceivable over the long term, there would be a case on stability grounds for remaining outside the euro".

Martin Taylor, chairman of WH Smith and Goldman Sachs Asset Management International, asked:

    "if the eurozone remains a stagnating zone, which I expect it to be, [businessmen] will say, 'Why tie ourselves more closely to a region which is bound to be a shrinking part of world trade in the next 50 years, because its relative population is falling, and which doesn't seem able to be dynamic and entrepreneurial?'"

Hamish McRae, of the Independent, looking at Britain and Germany, in his memorandum submitted to the Select Committee, argued:

    "Were the differences in economic performance between the UK and Germany evident for the past decade to persist, the UK would become a larger economy than Germany in about 20 years' time. Couple this with the different demographic trends in the UK and Germany and the cross-over might come sooner—some time between 2010 & 2020!".

The second report is the Treasury's massive assessment of the five economic tests, published just over two weeks ago. Among the many references to the

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decline in the euro-zone's importance relative to the British economy is this:

    "There are good reasons to think that the relative importance of the euro bloc will decline over time. Developing economies tend to grow faster than developed economies, and most are in the US dollar bloc. In addition, and notwithstanding recent developments, potential growth in the US itself is still thought to be higher than in Europe".

The third study to which I want to refer was published in May by an authoritative French think-tank—the Institut Francais des Relations Internationales. It was commissioned by and for the European Commission. It cannot therefore be accused of any anti-EU bias. Its title is World Trade in the 21st Century. It runs to 340 pages and covers the period to the year 2050. Its basic scenario, entitled "Europe: chronicle of a decline foretold", is that,

    "Even with enlargement to 30 members (the 15 present members, plus the ten official candidate countries, plus Romania & Bulgaria, plus three Balkan countries, but not Turkey) the EU's share of world GDP is forecast to almost halve, from 22 per cent in 2000 to 12 per cent in 2050 . . . NAFTA (the USA, Canada & Mexico) will retain their share of world GDP".

Under this scenario, says the report,

    "The Union will have an ever-decreasing influence on the course of globalisation: its chapter in history will draw to a slow but inexorable close".

The projected decline of EU 30 results from

    "an ever-expanding technology deficit"

vis-a-vis the US, and from its "entering a demographic winter". These phenomena exist already: the report merely extrapolates current trends in working population, labour productivity and production. Moreover, the assumptions relating to labour productivity growth "are already very optimistic".

Indeed, the report points out:

    "In the last 30 years the EU's export position has weakened in every region of the world except the former USSR and the developing countries bordering the Mediterranean".

There are many other equally bleak assessments of the EU's inexorable decline. The authors suggest—without much conviction—that there is a way in which the decline of the EU might be reversed. This consists of more or less merging the EU with the former USSR and the Islamic countries bordering the Mediterranean. On this vast, unstable and disparate entity, a Soviet-style command economy would be imposed—run, of course, by a strengthened European Commission. To those of us with first-hand experience of the benefits of Soviet economic management that prospect is somewhat alarming.

The fourth report also comes from France: a book published last week by Alain Cotta, a professor of economics and prolific author. His book is called Une Glorieuse Stagnation. Its analysis and conclusions are very similar to those of the first three reports I quoted. Its theme is that the coming decline of the continental EU is unavoidable—being largely due to demographics—and will be steep. Professor Cotta foresees, among other things, the collapse of not just the single currency but of the EU itself.

The harsh fact is that in the next 50 years the present 15-member EU will lose almost as much working- age population as the entire present working-age

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population of Germany. In contrast, the working- age populations of the UK and Ireland will grow. That is not a criticism of continental Europe, or of the EU. One might wish it to be otherwise. It is simply—however inconvenient, and however reluctant we are to contemplate it—a harsh fact.

Before I conclude, I wish to refer to a separate issue, raised in a remarkable speech by the right reverend Prelate the Bishop of St. Albans on 7th January this year in which he spoke of the spiritual and moral foundations of our European heritage. The values underpinning liberal democracy, which first flourished in Europe, are rooted in traditions born in ancient Greece and developed over the centuries in accordance with Judaeo-Christian values. Of course, there have been times when those principles were lost or perverted, as in the Dark Ages and during the Inquisition and tyrannies such as Nazi Germany or the Soviet Union. However, the basic commitment to fundamental human rights, as enshrined in the Universal Declaration of Human Rights, is directly and distinctively associated with the spiritual values of Europe's faith traditions.

It is not adequate to argue that respect for fundamental values and human rights, such as freedom, justice and equality, will somehow, inevitably, be preserved. There are other religious and secular ideological traditions which do not respect or enshrine these tenets. To leave a spiritual vacuum could allow for the emergence of belief systems incompatible with the principles of liberal democracy. That could be extremely dangerous.

We know that others, such as the Polish people, feel strongly on this issue. I quote some of the words of the right reverend Prelate the Bishop of St Albans, because he summarised the point more eloquently than I can.

    "There is a serious moral weakness in the underlying philosophy of the institutions. It is proving to be a serious weakness in what the Minister referred to as the European political architecture, because it wilfully denies the possibility of God. Therefore, it wilfully denies serious and long-held beliefs about human dignity and worth and purpose, that have helped to shape Europe for the best part of 2,000 years. It limits the vision of what it means to be a human being; and what it means to be a "human being in community". To set up a Europe based on that kind of narrowness of philosophy is to design potential failure into the system. Will the Minister assure this House that, for the sake of richness and diversity in Europe, the role of the churches and other religious communities in relation to European institutions and their political architecture will be given serious attention?. . . To want to be at the heart of Europe and yet, at the same time, to ignore the soul of Europe would be to make a profound mistake".—[Official Report, 7/1/03; col. 920.]

In conclusion, it behoves us to understand what is going on, and to ask why it is government policy to lock in the British people and the British economy to a sector of the world in steep decline. To many dispassionate observers who wish the EU well, such a policy seems not just irrational but highly irresponsible. This Bill, introduced so well by my noble friend, would start the process of questioning the wisdom of pursuing such a policy. I strongly commend it to your Lordships' House.

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11.36 a.m.

Lord Stoddart of Swindon: My Lords, I join the noble Baroness, Lady Cox, in thanking the noble Lord, Lord Pearson, for bringing the matter before us and for his persistence in ensuring that the House of Lords debates the alternative to membership of the European Union.

He was right to draw the attention of the House to the fact that only 9 per cent of our total economy is involved in the European Union. Why on earth must we have this quasi-government, shortly to be a total government, for 9 per cent of our trade? That point was well made.

The noble Lord was right, a few titters went around the House when he mentioned that when he was on the Jimmy Young show—which is now the Jeremy Vine show—some 92 per cent of callers said that they wished to withdraw from the EU. As it happens, I appeared on a programme on Sky television. I did not do as well as the noble Lord, Lord Pearson of Rannoch. I only got a result of 86 per cent who agreed with my point of view, but that is still a substantial number.

The House should also know that in recent public opinion polls over 50 per cent of the population would countenance withdrawal from the EU. It is a matter that should be discussed, because it is very much concerning the people of this country.

To have this discussion is, at this time, more important than ever, in the light of the Convention on the Future of Europe, and the new European constitution, which will hand over, as the noble Lord, Lord Pearson, said, even more powers to the European institutions. We should urgently re-evaluate the balance of advantage or disadvantage of remaining in the EU.

I simply cannot understand why the Government, and many others, resist such an evaluation and why they so savagely attack those who are sceptical of the benefits derived from being part of the EU, and who are fearful of the direction that it is taking, through the proposed EU constitution, towards a single European state.

The Prime Minister, Mr Blair, is becoming increasingly Orwellian in his pronouncements concerning the EU. I am afraid that newspeak is in vogue in Downing Street. Words mean what Mr Blair says they mean. Thus, we who wish Britain to remain a self-governing nation where Parliament is supreme, our institutions respected and where dismissing the Government can effectively change policy, not simply persons, are demonised as unpatriotic. I think that that is incredible, but that is what is being said.

When the Leader of the Opposition does the job he is paid for and raises legitimate concerns about the European Union and its future activities, he is accused of conspiring to get Britain out of the European Union. The truth is that the European Union is itself a conspiracy—a conspiracy to destroy the nations of Europe and to create a single European superpower.

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And I am afraid that Mr Blair is part of that conspiracy as he is enthusiastically going along with a new European construction.

We have, of course, some experience of conspiracy. Indeed, a recent article in the Daily Telegraph showed that Edward Heath had created a secret government propaganda unit to persuade the British people to accept the Common Market. Civil servants were engaged in a dirty tricks department of the Foreign Office to cover up the threat to sovereignty and to provide rapid rebuttal of anti-Common Market arguments.

The conspiracy comes in when the policy unit persuaded Gwyn Morgan, Labour's assistant general secretary, to reveal Harold Wilson's campaign plans and to leak a copy of a report on the issue by Labour's National Executive. That was a conspiracy if there ever was one because the policy of the Labour Party at that time was to withdraw from the European Union. So if anyone knows about conspiracy, it is the Europhiles and not those of us who simply want Britain to continue to govern itself.

My complaint against the Official Opposition is that it has not yet repented of getting us into the situation in the first place and has forgotten the central tenet of conservatism, which is to defend and uphold the British constitution and to maintain the independence of the realm and the sovereignty of the Queen in Parliament. It really is a bit much that I have to lecture the Conservatives on what conservatism is about, but I am afraid that I have to do it. If the Conservatives remembered that central tenet and promoted it, instead of retreating in confusion every time Blair or the tiny minority of Tory Europhiles say, "Boo, boo!", they might stand a chance of reconnecting with the voters and gaining their respect and perhaps even their votes at the next election.

I have said this before in the House, but I will repeat it. Whenever I and others have demanded a cost-benefit analysis of our membership of the EU, we have been told that the benefits are self-evident. The fact is that they are not self-evident, and you have only to speak to the British people to know that they can see no benefit at all. So they are not self-evident.

Let us take the UK contribution to the EU own resources. The gross contribution is around 10,000 million per annum and the net is around 3,800 million per annum. The public see no tangible benefit for that outlay and believe that the money would be better spent by the United Kingdom Government on improved pensions, better schools and better health rather than by the corrupt "octopus", I had better put in there, and fraud-ridden Commission in Brussels.

Of course the Europhiles say that this is a small price to pay for access to the single market. But even that is a myth. We have access to that market anyway, as the noble Lord, Lord Pearson, pointed out. Norway, Switzerland and the United States, all of whose economies are dynamic, while the EU's is moribund, are able to trade with the European Union. Indeed, according to Global Britain briefing paper 27—I must

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declare an interest as one of the founders of that organisation—which was based on figures from Eurostat, between 1992 and 2000, the United States increased its exports to the EU at twice the rate of France and Germany. So although the United States is not part of the single market, does not have a free-trade agreement and is therefore subject to the external tariff, and has a strong currency, it is performing twice as well as those major countries which are members of the EU. It seems therefore that far from doing better inside the single market, you do better outside.

Being a member of the EU is not therefore a necessary component of trading with it. That gives a lie to the tired old assertion that trade and jobs depend on membership of the European Union. Indeed, since 1973, the total UK deficit in trade in goods with the EU amounts to some 150 billion—150 billion—and that represents a great loss of manufacturing industry and jobs. Indeed, one of the main arguments put forward for joining the Common Market was to save manufacturing jobs and industry, but that has not transpired as manufacturing as a percentage of GDP has fallen from 32 per cent in 1973 to less than 19 per cent at present.

Trades union leaders such as Derek Simpson, the general secretary of AMICUS, should take these facts into account and reveal their policy of lining up with the trans-national corporations such as BP, Unilever and Ford in wanting to scrap the pound, the result of which would further impair the Government's ability to take action to stem the decline in manufacturing industry. They might also take note of a recent attack by the Secretary of State for Trade on the common agricultural policy, which she said adds 470 a year to every family's food bill. That puts pressure on wage costs and further disadvantages manufacturing industry as well as other industries.

An examination of all the elements of our continued membership of the EU is necessary. Surely we ought to examine the case for repatriating the CAP and we have not even done it in the new review that has been agreed. We ought also to take back under our own control our fishing waters instead of dismissing such possibilities as mad or disingenuous. Are we not entitled to challenge the view that outside the EU our influence as a country would be diminished when, as part of a union of 25 diverse countries, our influence on an increasing number of issues is likely to be rather less than 10 per cent?

That is a serious question, because as a fully independent nation with a great history and unrivalled experience in diplomacy, we are far more likely to influence world affairs than if we are a mere fraction of a regional grouping.

Finally, we need to consider the road ahead. Will scrapping the pound, for example, lead only to a marginal increase in growth and personal prosperity while incurring the huge penalty of losing overall control of economic policy? Last week, in an article, Anatole Kaletsky put the value of the loss of our sovereignty at about 1 a week and it simply is not worth it. Will it bring penalties to homeowners?

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Homeowners had better watch themselves because an inquiry is taking place which may bring penalties to them. There is already talk of a capital gains tax on owner-occupiers when they sell their house and an annual charge similar to the old Schedule A tax, plus VAT on new building. Those are all possibilities if we give up the pound.

What of the future of foreign policy and our Armed Forces? Will they become his or her presidency's foreign policy or his or her presidency's Armed Forces rather than Her Majesty's foreign policy and Armed Forces? I fear that they will.

Those and many more issues need to be examined. We cannot accept a position in which joining an organisation cannot be reviewed and, if necessary, reversed by withdrawal. With a new constitution in the offing, now seems to be the ideal time for such a review. The Bill of the noble Lord, Lord Pearson, gives noble Lords the opportunity to put that in hand. That is why I support the Bill unreservedly.

11.51 a.m.

Lord Harris of High Cross: My Lords, from the Cross Benches I thank the noble Lord, Lord Pearson, for the opportunity to debate these great issues. At the same time I pay a strong tribute to him for his consistency and courage in advancing robust views that have not always been received with the rapture, even the respect, that they deserve in this House.

For the life of me I cannot honestly see what objection there can be to an up-to-date, broad, cost-benefit assessment of membership of the European Union. Above all, when opinion is so widely polarised on the merits of being dragged further into the imbroglio of a new constitution, what are we to make of those who would obstruct an independent, fact-finding inquiry? The only reasoned objection to a similar Bill three years ago came from my old friend the noble and learned Lord, Lord Howe of Aberavon, who on this single issue I have renamed "Lord Howe of Aberration".

In Hansard on 17th March 2000 at col. 1819 he thought it a waste of resources. He said that all major parties favoured staying in the EU. But has he forgotten that all parties once favoured fixed exchange rates, an incomes policy, state industry and similar assorted mischief. Indeed it was with his help that all those consensus views were mercifully abandoned. Today opinion polls are also moving against the BBC orthodoxy on Europe.

Let me first acknowledge from the Cross Benches that the European project was a noble dream and early scored one signal achievement. In geopolitical terms it brought together the two great warring nations of Europe, France and Germany, in a way that could not have been expected after 1945. The analysis that follows summarises what I see as the decline from the European dream to the British, even, I would say, European nightmare.

Back in 1918, after the first defeat of Germany, the historic political rivalries were never healed. They were diverted into economic warfare, with beggar-my-neighbour trade restrictions, competitive exchange

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rate manipulations and so on. The wisdom of the founders of the Treaty of Rome was to grasp that economic disarmament, by removing tariff and non-tariff barriers to trade and investment, could lead to a new era of European prosperity and peace: prosperity, because free competition between countries offers the same advantages of efficiency and progress as it does within a country and peace because free trade strengthens fruitful interdependence and co-operation.

Only to that extent could the Common Market, as it was, claim a link with European peace, which of course has depended absolutely on American participation in NATO that was shunned by France, if I remember, and is now threatened by the expansion of the EU itself.

At the time of the accession of Britain to the European Union, the IEA sought to inform debate by inviting a strong European advocate, Russell Lewis, to write a Hobart Paper, which was published in 1971 with the striking title Rome or Brussels?. Presciently, the author predicted the conflict between the competitive model of Adam Smith and the bureaucratic control of Napoleon, typified by the scandal of the common agricultural policy.

Alas, the scales were tilted decisively in favour of Brussels and against Adam Smith in 1985 when the French manoeuvred Jacques Delors into the top job as president of the Commission. There were three problems. He was a stern trade union socialist; he was an earnest catholic corporatist and he was a very skilful French apparatchik. He forthwith exploited the Single European Act to launch a massive interventionist programme in the name of harmonisation, which distorted trade and production by specifying the precise shape, size, type and even packaging of acceptable products, thereby raising costs, curbing choice and diverting trade into less beneficial directions. His slogan of a "level playing field" when closely examined turns out to be a schoolboy howler of flat earth economics. In place of the mutual recognition of diverse national products, his Commission ruthlessly imposed uniformity, reached by a somewhat shady process of bargaining and double-dealing between rival lobbies.

In her volume entitled Stagecraft, the noble Baroness, Lady Thatcher, who is much in our thoughts today, revealed how she was misled into accepting the Single European Act as necessary for removing barriers to a competitive market. But there followed a ceaseless flood of complex regulations, including, my favourite, on the export of duck eggs, running to 30,000 words. Measures like the Working Time Directive were deviously proposed in relation to health and safety to dodge the attenuated veto after Maastricht and it was obligingly upheld by the partisan European Court of Justice.

In 1995 another IEA study was published by an austere German academic, Professor Vaubel, who revealed that Brussels had churned out 24,000 regulations and 1,700 directives. He estimated that 70 per cent of all Community legislation and subsidies

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related to special interest groups promoted by 3,000 lobby organisations in Brussels and 10,000 lobbyists. What were they up to? They were all seeking favours from the pampered apparatchiks with their own interest in extending their empires and protecting their well-paid jobs. The professor revealed that a recent advertisement for 400 job vacancies in Brussels attracted no fewer than 55,000 applications. Nice work, s'il vous plait!

Three conclusions would appear irrefutable. First, we have travelled a very long way from the free-trade vision of the Treaty of Rome. Secondly, no one—not the Prime Minister, not the president of the Commission, and not even the supremely self-confident commissar, Christopher Patten—can conceivably begin to comprehend the full range of EU activities—the so-called acquis communautaire. The third conclusion follows ineluctably: not even the most conscientious student of these matters can begin to put a reliable figure on the total cost.

There is certainly no lack of estimates, as we have heard and will no doubt hear more. The last Pink Book records direct payments to the EU and its institutions of a staggering 90 billion over 10 years. Allowing for receipts under CAP, regional and social support and so on, the annual cost to Britain appears to be running at 15 billion. The OECD has estimated the additional cost of CAP-inflated food prices at 9 billion a year, and a further 5 billion added by some authorities to cover the higher prices caused by so-called anti-dumping duties. Even after allowing for the "Thatcher rebate", which runs at about 3 billion a year, this total cost of 29 billion would devour almost 3 per cent of GDP. The cost of complying with the welter of social legislation has been further estimated by the Institute of Directors to add a further 9 billion a year to the price of British production at home and abroad.

So, we have the mind-numbing first approximation of 38 billion a year. Suppose such a figure were exaggerated and that it was only half: it would be 20 billion a year. The question is: what is the best independently computed estimate of the range of costs? I believe that for an answer we must follow something along the lines of the Bill proposed by the noble Lord, Lord Pearson.

12.2 p.m.

Lord Griffiths of Fforestfach: My Lords, we are all indebted today to my noble friend Lord Pearson for introducing the Bill into the House and for making such a strong opening statement in this Second Reading debate.

It is a great pleasure to follow four speakers who must be the most robust and engaging of Eurosceptics in your Lordships' House. However, I would wish to remind your Lordships that the Bill is important but nevertheless very modest in scope. It is not a proposal for Britain to withdraw from the European Union but a request for a serious study of the implications of withdrawal as one possible future option. Indeed, I would go further and say that the concepts of being in

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and withdrawal may be too simple; a spectrum and a whole set of alternatives would emerge from such a study.

The background to the debate is the explicit, determined and ever-increasing movement of federalism within the European Union. I voted for Britain to remain in the EEC, as it then was, and I should like to remind noble Lords of what Ted Heath, the Prime Minister, said at the time. He argued that entry was entirely an economic matter; that we would benefit from the gains from trade and from the dynamic effects which would come from being part of a larger market. He specifically stated:

    "There is no question of eroding any national sovereignty; there is no blueprint for a federal Europe. There are some in this country who fear that in going into Europe, we shall in some way sacrifice independence and sovereignty. These fears I need hardly say are completely unjustified".

That statement is now laughable and rightly ridiculed. However, I must ask: how many Ministers from these Benches as well as from the Benches Opposite have I heard say something similar over the years?

Since that time in one area after another we have seen sovereignty handed to Brussels. Most recently the proposals for a new European constitution, which have emerged from the Convention on the Future of Europe, transfer even greater powers to the EU at the expense of nation states. Indeed, they explicitly acknowledge federalism.

In particular, the proposals state that in a large number of areas from now on—if passed—there would be shared competence. What is shared competence? It would mean that the Union and member states have the power to legislate and adopt legally-binding Acts. But then the draft goes on to state:

    "The Member States shall exercise their competence only if and to the extent that the Union has not exercised its competence".

I always felt that one of the most attractive arguments from Brussels regarding the European Union was the concept of subsidiarity; it was one of its great virtues. The statement that I have just read out suggests that really it is a total sham. I refer your Lordships to the Prime Minister's speech in Cardiff in November 2002. When talking about the Commission he said:

    "We should strengthen the Commission to enable it better to carry out Europe's agenda . . . It is easy to knock the Commission . . . We should stand up for the Commission. In terms of the initiation of proposals and their implementation, I want to see both those roles strengthened".

I worked in No. 10 Downing Street as head of the Prime Minister's policy unit for five and-a-half years. People used to ask me: do you find that civil servants are biased? Somewhat surprisingly to some people who asked the question, I always said: no, I always found them very fair and that when asked by Ministers to do something they did it, except for one issue on which I felt there was a kind of party line, and that was the issue of the membership of the European Community and the European Union. There were only one or two senior civil servants, in what was the old Board of Trade, who felt that they could disagree and were slightly sceptical about the issue.

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From that background I want to suggest that whatever one's view of the relationship between Britain and Europe—whether or not one is a Eurosceptic—we should start from the common ground, and the matter of fact, that the European Union is moving in a federal direction. The implication of that is that there is less room for independent decision making in this country.

My next observation is that, as we move in this direction with less independence, there are three areas which raise great cause for concern. One is the economy. Here I would reinforce the views of my noble friend Lady Cox. First, we should accept that the European Union has made great progress in extending the single market. It deserves great tribute for that. Secondly, despite the many obstacles, it has succeeded in creating the euro. The question we must ask is: is that an economic bloc to which we want to be irrevocably tied? I think not, for the following four reasons.

First, key countries of the economic union are committed currently to such high public expenditures that their generational fiscal accounting is simply out of balance. This means that current fiscal policies in a number of countries is not sustainable without major additional sacrifices on the part of current or future generations. That means higher taxes or cuts in public expenditure. One then has issues such as raising the eligible age before pension and so on and the problems such as those experienced in France. So there is a degree of instability which arises from that.

Secondly, there is the issue of the euro-zone as a trade area. The share of the euro-zone in Britain's trade has fallen since 1990 and looks set to continue. Why is it set to continue? The reason is that the most dynamic areas of growth today and in the foreseeable future are in developing countries most of which are part of the US dollar bloc. For example, in the 1990s, China and India have grown on average by 8 per cent a year. If those countries carried on growing for 30, 40 or 50 years at even 5 per cent, their combined GDP would end up being four-and-a-half times that of the European Union.

Most people accept that in the developed world potential growth in the US is greater than in the European Union. That is because the US has a more competitive and flexible economy, less burdensome regulations and is more conducive to taking risks and creating wealth.

Thirdly, as we have heard, the demographics of the euro-zone mean that population looks as if it will fall. The result is that, relative to the world economy in the 21st century, the euro-zone is set to stagnate.

I was very surprised, on reading the appendix of evidence to the Select Committee in the other place on the UK and the euro, that nearly all the independent witnesses who gave evidence—from independent think tanks or universities—were very sceptical about the future of the euro-zone in the 21st century. The only supporters were pressure groups in favour of the euro.

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The argument for the euro is that transaction costs between euro-zone countries are lower; there is greater transparency, as you can now see what prices mean across euro-zone countries; and there is exchange-rate stability. However, the cost of joining the euro is that we would lose a key element of flexibility—the exchange rate—which is a very important dimension of dealing with unexpected changes in the world economy. If euro-zone trade is set to fall, the benefits of joining the euro are less important.

I am sure that, on turning on the evening news last night, I was as surprised as anyone to learn that there had been an agreement on agriculture. As the programme continued, I realised that the situation was far more complex. I still do not understand the asymmetry between what the French and the Spanish are going to do and what we want to do. I was slightly reassured by the leader in The Times this morning—I declare an interest as a director. It states:

    "Sacred Cows—Still free to roam the EU's subsidised pastures".

Until we see the detail, the CAP would generally be accepted as something of a monstrosity, as seen in other debates in this House, especially on the Doha development round and on developing countries.

In my judgment, all those elements add up to mean that being a member of the euro-bloc means playing, not in the premier league, but in the second division.

My second area of concern is the European social model. That approach is different from the one that this country has followed for the past 25 years. It is a co-operative vision of a stakeholder society in which individuals and families are protected from change and risk by government support. It is not a society to produce entrepreneurs, risk-takers and innovators; in other words, those who are the foundation for wealth creation. It thinks much more in terms of the community, the social, the collective, trade unions, large corporations and government, not individuals and their families.

In my dealings with the conservatives in Germany, the emphasis on Gemeinschaft as opposed to Gesellschaft is a sort of corporatism that we have not known in quite that way, certainly in Conservative circles in this country. The newly proposed treaty would incorporate the EU Charter of Fundamental Rights and give the European Court of Justice, if it so wished, enormous potential powers, in labour disputes and so on, which could make the matter worse.

The third area that has led me to be sceptical is defence. The noble Lord, Lord Harris, made the very good point that, when European institutions were started in the late 1940s and early 1950s, an element of peace came from the coming together of the French and the Germans of that generation, making it solid.

I was surprised a few years ago when I read in Foreign Affairs an article by a distinguished economist, Harvard professor Martin Feldstein. He argued that, with Europe creating its own identity symbolised by new money—the euro—it would be only a matter of time before it had its own army. He said that, because of Europe's different perception of

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threats and different foreign policy objectives from the US, they could well end up on different sides. Since then some European countries have made clear their wish for their own security and defence policy at the expense of NATO. Initially, it would be a vague European stand-alone command structure, with only a limited military capability. But, if it is created, I cannot see why and how it would not expand.

The run-up to the Iraq war was a turning point and, in a way, an insight into the future. France, in its disgraceful behaviour, showed its hand as to the kind of future it wants to see in that area of defence. If Britain were to be part of European defence in that way, it can only mean that it would be in rivalry with NATO.

Against the background of an ever-closer Union and the movement of federalism, it may be said that withdrawal is an unthinkable, nuclear option. However, over the past 30 years or so, I have been involved in policy changes that were unthinkable at the time. As an academic at the LSE in the late 1960s and early 1970s, I was involved in the debate on the growth of monetarism. The prevailing consensus was Keynesianism, and it was unthinkable that money was important. Members of your Lordships' House at the time, such as Lord Kaldor and Lord Balogh, argued that money was just a residual in the economy. It was a furious intellectual debate, but today the growth of monetarism has become accepted wisdom.

When privatisation was first mentioned, Amersham International was fine, selling shares in BP was fine and even British Steel was fine, but the idea that you could successfully privatise telecommunications, gas, electricity and water was unthinkable. Then there was the audacious idea of council house sales, hitting at the very base of the welfare state. There was also choice for parents and freedom for schools. I believe that we can think the unthinkable, we do have a veto, and we can be in the position of countries such as Norway, Mexico and Switzerland.

The Bill asks that the issues be looked at rationally. We need the arguments, the options and the numbers. The question to the Minister is not whether we should withdraw; it is whether we should have an informed debate. In our debate on British entry to the euro, the Treasury and other departments must have written hundreds of papers. Members of the Cabinet were required to read great volumes. However, this is a far greater issue. The Government are proud of their commitment to open government. This is a challenge to which they must rise. For the sake of the British people, let us have an informed debate that starts with the facts, that can remove prejudices, and in which the Chancellor, as the Bill suggests, sets up a committee of inquiry.

12.19 p.m.

Lord Monson: My Lords, it is a curious thing that the notion of an objective examination of the pros and cons of remaining in the European Union should be seen by many people as provocative, even outrageous.

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Such reactions would never be engendered by a similarly objective, no-holds-barred examination of, say, whether the judiciary should be totally reformed or whether our ancient universities should remain centres of excellence or lower their sights so as to appeal to the lowest common denominator.

Why should there be that feeling of outrage? It is, undoubtedly, because, for many, particularly those in the six original EEC member states—Germany, France, Italy and the Benelux countries—the EU has the status of a religion. To question its authority, its beneficence or its glory is sacrilegious. It is as if somebody in 16th-century Spain had cast doubt on the existence of the Virgin Mary or on the physical resurrection of Jesus. The comparison can be extended. Even when Euro-enthusiasts admit the existence of serious corruption and other grave faults in the EU, it is considered extremely bad form—almost treasonable—to hark upon them. Indeed, whistle blowers in the European Commission and other institutions of the Community have a terrible time, although, elsewhere, such whistle blowers are much admired.

There is a precedent for that state of affairs. Forty years ago, the United States media knew all about the bizarre sex life of President Kennedy. Yet, they remained mute, as, a quarter of a century earlier, the British media had stayed mute about the affair between the Prince of Wales and Mrs Wallis Simpson. Meanwhile, throughout the western world, not just Britain and America, the media played down what certain men of the cloth got up to with choirboys. In each of those cases, it was considered so vital to protect the reputation and dignity of, respectively, the American presidency, the British monarchy and the Church that honest inquiry and truth had to be suppressed. That is no longer the case—some might say, "More's the pity". The monarchy, the American presidency—to a lesser extent—and, most certainly, the Church, to say nothing of the judiciary, Parliament and so on, are criticised and lampooned without mercy. Even M Chirac's misdeeds are pilloried in France in a way in which M Mitterrand's never were. Uniquely, the European Union remains untouchable as a concept, cocooned from all criticism, at least on the Continent of Europe.

Why should that be so? I suspect that it is partly because Euro-idealists, some of whom actually believe their own propaganda, have successfully implanted fear deep in the continental psyche. The fear is based on the idea that only the EU—before it the EC and the EEC—has stood between us and mass starvation, mass unemployment and, probably, a third European war. On any calm, reasonable analysis, that is a preposterous claim, as the noble Lord, Lord Pearson of Rannoch, said. It is not unlike the claim made in earlier centuries that sick children would burn in hell if they died before they were baptised, which was believed with equal fervour.

Human beings, alas, are easily panicked. That is what makes it difficult for those of us who are pro-European in a true sense and positively favour a reasonable degree of co-operation with our

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neighbours, formalised by treaty, if genuine—only genuine—cross-border issues are at stake. The ordinary people of the Continent do not like EU interference in the nooks and crannies of their everyday life—to use the words of the noble Lord, Lord Hurd of Westwell—any more than we do. Two factors stop them from kicking up a fuss. The first is the deep-seated, mainly sub-conscious fear of which I spoke; and the second is the habit, mainly but not exclusively confined to the more southerly nations of the Community, of deigning to obey only the Euro laws that happen to suit. The contemptuous disregard of Community law by the French in the matter of British beef is a case in point.

The Prime Minister tried to reassure us on Monday by pointing out that,

    "the Union only has those powers that member states give it".—[Official Report, Commons, 23/6/03; col. 707.]

Indeed. What happens when member states realise that the ceding of certain powers to the Union was a big mistake and ask for those powers to be handed back? They are told to take a running jump, because of the infamous acquis communautaire. Two days ago, Signor Romano Prodi urged Britain to take a decision to,

    "swim in the European sea forever, and with deep intensity".

I am a bit puzzled about the "deep intensity", but Britain has always been happy to swim, metaphorically and often literally, in the Mediterranean, the Adriatic, the Baltic and the North Sea. The trouble is that Britain also wants the right to go on swimming in the Atlantic, the Pacific, the Indian Ocean and so on as well.

We are not inward-looking little Europeans who hanker after a re-constituted Holy Roman Empire. De Gaulle understood that. Perhaps his conclusion was, in retrospect, the right one. We are not at the heart of Europe geographically, and, mainly for that reason, we were not at the heart of Europe historically. I doubt that we can ever become so, psychologically. We look to the wider world.

Perhaps a graceful withdrawal from the fetters of the EU, while remaining a member of the European economic area, in company with Norway and Iceland, would be the happiest solution for ourselves and for the continentals. The noble Lord, Lord Griffiths of Fforestfach, said that we had a range of options to consider. That, I think, is my preferred one, although I could be wrong. Unfair competition from illegally subsidised continental steel mills, about which the noble Lord, Lord Hardy of Wath, so understandably complained in the debate on the steel industry two days ago, would be no worse than it is now. The illegal French refusal to recognise the qualifications of British ski instructors would be no worse than it is now. British families would no longer pay 470 a year extra because of EU taxes imposed on imported food, as the Department of Trade and Industry revealed on 5th June. Those are not my figures; they are the figures of the DTI. Our long-suffering and battered fishermen—those who survive—would no longer be sacrificed for the benefit of Spain.

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There are bound to be at least some adverse consequences. Perhaps the downside would be so great as to outweigh the benefits of simple EEA status. If that is a possibility, we should have detailed chapter and verse, so that we can make a judgment and re-formulate our opinions accordingly. There is nothing sacrilegious about going through the EU balance sheet with a fine-toothed comb. We will not be rent asunder by bolts of lightning, and the heavens will not cave in.

This short Bill, for which I warmly commend the noble Lord, Lord Pearson of Rannoch, presents us with an ideal opportunity. I suggest only that, given that 50 per cent of the areas to be examined set out in Clause 1(2) have nothing to do with economics, the Chancellor of the Exchequer is not the best person to appoint the committee. It is, perhaps, a job for a new model, non-political Lord Chancellor.

12.28 p.m.

Lord Willoughby de Broke: My Lords, we should all be grateful to my noble friend Lord Pearson of Rannoch for introducing the Bill at such an important time. It is important because the Convention on the Future of Europe has recently produced a blueprint for an EU constitution. As my noble friend Lord Griffiths of Fforestfach pointed out, we are about to embark on yet another exercise in handing over power or what EU apparatchiks like to call "competencies" in the hope that people will not notice that they are talking about power. That process will be sanctified in yet another of those interminable intergovernmental conferences, after which Parliament is presented with a binding constitutional treaty and required to ratify it in its entirety without the option of removing a line.

Before the Government commit the people of this country to such a constitution, the implications of which they know nothing, they must make a rational appraisal of the economic and political advantages and disadvantages of our continuing membership of the European Union. They have a duty to do that, if only because the draft constitution includes a provision for any member state to leave the Union if it so wishes. Article 46 in my copy of the draft constitution, which is probably out-dated, is a friendly little article. It simply states that,

    "a Member State which decides to withdraw shall notify the Council of its intention. Once that notification is given the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for withdrawal, taking account of the framework for its future relationship with the Union".

That article sets out a perfectly sensible and amicable way forward. I see nothing wrong with it. It acknowledges that there is life outside the Union for any member state that does not wish to go down the road of greater integration. Yet the mention of the shadow of the thought of leaving the Union has the Government behaving as though they had received an indecent proposal. It would be the end of the world as we know it. The moon would drip blood and we would be threatened by all sorts of unmentionable horrors, frightening things that go bump in the night, something nasty in the woodshed.

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Surely the Government are grown up enough to carry out a cost/benefit analysis of our membership of the EU without having a collective nervous breakdown. It is not good enough to wheel out the tired, empty banalities about "being at the heart of Europe", "our European destiny", or having "a voice at the top table". There is no vacancy at the heart of Europe. There never has been; France and Germany occupy that space. From a British point of view, what is the EU for? That is what we must ask ourselves. Do we benefit from our membership or not? If not, what should we do about it?

Let us look briefly at the balance sheet. My noble friend Lord Pearson has already dealt with employment, but it is worth underlining that there would be no, or very few, job losses if we left the EU. Well, there probably would be some among our MEPs and the Euro-apparat, but we could probably live with that. They could be redeployed in more worthwhile jobs. We run a massive trade balance of payments deficit with the EU. Is anyone seriously suggesting that Germany, France and other EU member states would stop exporting to one of their strongest markets if we left the EU? The idea is infantile. It would be totally counter-productive. Britain is economically vital to the other member states—more so than membership is vital to us.

As my noble friend also pointed out, only a small percentage of our economy is in any case involved with the EU, but 100 per cent of it is affected by single market regulations, which have become a nightmare for the small and medium-sized enterprises on which our economy depends. Those enterprises are, or should be, the expanders, the job-creators, but the thickets of red tape, the forests of futile directives and regulations from the EU are strangling them.

If the Minister does not believe me, she should listen to what the Confederation of British Industry and the Federation of Small Businesses have been trying to tell the Government for years. Or she could refer to her Answer to a written Question tabled by the noble Lord, Lord Stoddart, which revealed that so far as the Government can verify, 101,811 EU regulations had been enacted by August 2002. Those directives and regulations cover everything from abattoirs to zoos, passing through condoms, ladders and London buses.

In that cost/benefit exercise, we must not forget the common agricultural policy, which eats up almost half of the current EU budget. We have today had talk and news of reform of the CAP. At first glance, it looks like little more than a re-labelling exercise. It certainly does nothing to reduce the burden on British taxpayers. The CAP will cost as much; the money will simply be spent in a different way. We get a thoroughly bad deal out of the CAP; that will not change. We would be far better off running our own agriculture.

What of fisheries? We have no fishing industry to speak of any longer—the shameful result of Mr Heath and the Foreign Office concluding that British fisheries and fishermen were expendable. The common fisheries policy is as much of an economic, social and

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environmental disaster as the CAP. Of course, we pay through the nose for those failures through our contribution to the EU budget, which, since our entry into the EU in 1973, now exceeds 150 billion—money that would surely have been far better spent in this country rather than being channelled through Brussels and our getting a little bit back with EU regulations attached.

Like my noble friend Lord Pearson, I ask whether the EU social model is right for us. Like him, on the face of it I think that the answer must be no. In spite of—or, more likely, because of—the plethora of employment directives and health and safety directives, unemployment in the larger EU economies remains stubbornly high—far higher than in this country. That is what most concerns me about the EU: it does not seem to want to raise its own game, but rather to drag us down to its level. The structural changes needed in the EU are moving at a glacial pace. We are urged to harmonise with economies doing less well than us and with higher unemployment.

Finally, I turn briefly to foreign affairs. The common foreign and security policy was always pure illusion. The plan seems to be, "They supply the policies; we supply the troops". The war in Iraq has demonstrated beyond doubt—if there ever was one—that divisions among EU countries are deep and will long outlast the war. Suddenly, the need to be part of a strong EU looks terribly outdated. The EU is increasingly irrelevant, while Britain remains—at least for the moment—the fourth largest economy in the world and has more military power than the rest of the EU put together.

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