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The Lord Bishop of Portsmouth: My Lords, I can assure noble Lords that it is much nicer to be here.

The Earl of Sandwich: My Lords, the right reverend Prelate gave us the first signs of hope. He mentioned the new constitution, to which we should say, "So far, so good".

The noble Lord, Lord Elton, made a passionate speech in favour of an all-party approach to this problem, which needs addressing. He was the first to say that we are attempting something quite new and that failure would be catastrophic. I also point out to him that olive trees regenerate very quickly, even if they have been destroyed by the Taliban. Many thanks to other noble Lords whom I cannot mention individually.

Finally, I pay tribute to the Ministers in Afghanistan who are wrestling so hard on meagre resources. I would like to single out Anif Atmar, the Minister for rural reconstruction with whom the non-governmental organisations have developed a very good relationship. We should wish good luck to UNAMA, whose work under Reg Austin—the most experienced electoral officer in the UN—must be supported right up until the elections take place, which includes providing resources as well. We hope that the Minister has been fortified enough by this debate to face her Euro-critics in the forthcoming debate. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.

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European Union Membership

6.15 p.m.

Lord Pearson of Rannoch rose to call attention to the case for a cost-benefit analysis of the United Kingdom's membership of the European Union; and to move for Papers.

The noble Lord said: I am truly grateful to all noble Lords who are to speak today. The genesis of this debate goes back to the Second Reading of my European Union (Implications of Withdrawal) Bill on 27 June last year. That Bill called upon the Government to set up an independent inquiry into what life might really be like for the United Kingdom if we were to leave the European Union and continue our trading relationships with our good friends across the channel.

During the debate, the noble Lord, Lord Moran, floated the idea that, should the Government refuse to conduct such an inquiry—which they did—your Lordships should set up a Select Committee to do so. In that suggestion the noble Lord was later supported by 50 other Peers, who wrote in November to the Liaison Committee asking that such a Select Committee be appointed. Predictably, your Lordships' Liaison Committee turned the request down, using the intriguing excuse that such an inquiry would not be timely while the inter-governmental conference in Brussels was considering the proposed new EU constitution. The decision was upheld on 14 January this year in a vote, by 189 votes to 58, after an unsatisfactory debate when several noble Lords were unable to speak because of time constraints. I can only assume that so many noble Lords voted against a proposed inquiry because they were impressed by the fact that the Liaison Committee had agreed to set up a Select Committee to look into euthanasia, and our guidelines say that we should not have two ad hoc Select Committees at the same time. Either that, or one must begin to doubt the usefulness of your Lordships' House as the guardian of the British constitution.

Be that as it may, students of our relationship with the European Union should read our debate today in conjunction with debates on 14 January this year and 27 June last year. Anyone who does that will see that there is one constant and very disturbing thread running through those debates, and, indeed, other similar debates for at least the past six years. That thread is that the Government refuse to engage in genuine debate about our relationship with the European Union. They merely assert that our membership of the EU is so obviously beneficial that there is no point in even discussing what life might be like outside it. However, the Government produce no facts to support that contention. They rely instead on the shallowest of propaganda, none of which withstands rational scrutiny. I have no doubt that we shall hear more of this today, so perhaps I may go to meet some of it now and expose some of the presumed benefits of our EU membership for the fallacies that they undoubtedly are.

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Apart from the claim that the EU promotes peace, to which I shall return, perhaps the worst piece of pro-EU propaganda is that 60 per cent of our trade and 3.5 million jobs depend on our membership of the EU. The purpose of this propaganda is clearly to make the British people fear that it would be economic madness to leave the EU. I mentioned that deceit in our debate on 27 June and I regret to say that the Minister, who we are honoured and fortunate to have with us again today—especially on such a burdensome day for her—claimed (Hansard, col. 583) that the Government actually believed it. I will try to pin her down today with some very simple questions.

First, what evidence do the Government have that any trade or jobs would be lost if we left the European Union and maintained our trading relationships with the single market? Do the Government disagree with the analyses carried out by the US International Trade Commission in Washington, and by the National Institute for Economic and Social Research and the Institute of Economic Affairs over here to the effect that leaving the EU would at worst be trade-neutral? If the Government do disagree with these and other analyses, can they tell us why?

Secondly, given that we trade in deficit with the EU, can the Government produce any evidence as to why we should not continue to enjoy free trade with the single market—as do Switzerland and even Mexico—if we left the European Union itself?

Thirdly, what evidence do the Government have for another piece of Europhile propaganda regrettably, but I am sure innocently, repeated by the Minister on 27 June? She said:

    "Because Britain is a gateway to the European market, we, here in the United Kingdom, receive the largest share of foreign direct investment in the EU".—[Official Report, 27/7/03; col. 583.]

When the Minister comes to reply, I ask her to remember that the DTI regularly asks foreign investors why they invest in the UK, and publishes its answers in its White Papers on British competitiveness. Neither UK membership of the EU, nor access to the single market, appears in the 10 most frequently cited reasons for investing in the United Kingdom. Overseas investors say that they like our reliable and flexible workforce, our infrastructure, the absence of corruption, the English language, our business-friendly climate and our low taxes. In parenthesis, one might just wonder for how long foreign investors will see us as offering these advantages, as we become steadily more burdened with the EU's stifling labour and social costs. But the question I have to put to the Minister is, how do the Government justify their gateway theory? Surely it is absolute nonsense.

I would mention one more supposed benefit of our EU membership, again put forward by the Minister on 27 June at column 584 of the Official Report. She argued that if we were not in the EU we would still have to abide by EU rules if we wanted to trade with it, but we would not be able to influence the making of those rules.

So my fourth question to the noble Baroness is, so what? I accept that we would, of course, have to meet EU standards for the 9 per cent of our GDP that goes

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in exports to the European Union, just as we have to meet the requirements of other overseas markets which take 11 per cent of our GDP and just as the USA and others do when they export to the European Union. But would the Government be so good today as to admit—because it is a matter of fact—that Brussels' rules apply not only to the 9 per cent of our economy that trades with the EU, but also to the 11 per cent that trades with the rest of the world and to the 80 per cent that stays right here in our domestic economy? Will she agree that regulations made in Brussels apply to our whole economy, not just to the comparatively small proportion that trades with the European Union?

I hope that that deals with some of the main claimed economic benefits of our membership of the European Union. There is, of course, one more supposed benefit: that the EU promotes peace. I dealt with that one on 27 June and will not repeat now what I said then. I would, however, point out that many people in Europe seem to be starting to regard the EU's main purpose in life as being a counterbalance to the power of the United States of America, even to undermine her, our greatest ally. This development appears to be inspired largely by France, with her deep psychotic need to bite the hand that freed her in two world wars. Indeed, only yesterday the French defence minister, Michelle Alliot-Marie, boasted that the proposed EU battlegroups are another step towards a European megastate that will rival the Americans. Like many in your Lordship's House, I fear we go down that route at our peril.

So much for some of the supposed benefits of our membership of the EU. What about some of the costs?

The Trade Justice Movement, supported by CAFOD and Oxfam, estimates that UK consumers are paying over £20 a week in higher food prices and taxes to keep the EU's iniquitous common agricultural policy going. Assuming that there are 15 million consumers—or families of four—in the United Kingdom, that makes a staggering £15.6 billion per annum. The higher food prices largely fall as 5p on every pint of milk, 40p on every 60p bag of sugar and 3p on every loaf of bread. It would appear that they hit the poorest in our society hardest.

The Institute of Directors has estimated that EU over-regulation is costing our business some £9.6 billion per annum. The Government themselves estimate that £2 billion a year is going on the Working Time Directive alone. Over the past 10 years our average gross cash contribution to the corrupt octopus in Brussels has been running at £11 billion annually, of which they have been good enough to give back £7 billion on projects designed to enhance their wretched image, making our net cash payment £4 billion per annum.

The common fisheries policy has destroyed our fishing industry, which would otherwise be worth a conservative £1 billion a year to our economy. I could go on.

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There is also, for instance, the damage done to our modern art market and to dozens of other British interests. There is the incredible waste of time of our bureaucrats and politicians traipsing backwards and forwards to Brussels. The list is a long one.

Just the net figures I have mentioned add up to £30.2 billion a year. However, I am happy to settle for a conservative £25 billion as the wasted cost of our EU membership annually—or £68 million a day. That is the same as our entire defence budget. It is six times our railways budget, double our transport budget and half our education budget. One billion pounds trips very easily off the tongues of those of us who frequent Westminster, but to real people it is an awful lot of money. One thousand million pounds builds, equips and capitalises a decent-sized district hospital to run indefinitely.

So our membership of the EU is costing us the equivalent of 25 district hospitals every year—not a very good deal, one might think. The picture is just as crazy if one looks at some of the capital projects which our love affair with Brussels has cost us. There is the cool £18 billion so far on the useless Eurofighter. There is at least £48 billion on the unnecessary water directives. There was £8 billion on the foot and mouth saga. There is £6 billion for "Reach", the new chemicals directive, and another £6 billion for the waste electrical and electrical equipment directive. That adds up to a cosy £86 billion.

I am not saying that we would not have spent some money on some similar projects if we had not been forced into this huge expenditure by Brussels. So let us be generous and halve it. That still leaves us short of 43 new district hospitals on the capital account.

I imagine that that is enough about some of the economic costs of our EU membership. But the strongest case for a cost-benefit analysis comes from the damage already done to our democracy and what lies in store for what is left of it. By "democracy" I mean the right of the British people to elect and dismiss those who make their laws. The British people are not aware how much of their democracy—their sovereignty—has already been passed to Brussels. No one has told them how their new subservience works. They do not know that the corrupt EU bureaucracy, the Commission, has the monopoly of proposing new laws. They have not got the point that once the Government or executive have agreed or been outvoted on a new law in Brussels, the House of Commons and your Lordships' House must rubberstamp it on pain of unlimited fines in the Luxembourg so-called court. They are ignorant of the fact that this system, this abrogation of their democracy, already applies to our commerce and industry, to our social and labour policy, to our environment, fish and agriculture, and also to our foreign trade relations. Nor do they know that if we stay in the EU the ratchet can only grind towards ever greater integration and servitude.

They are perhaps rather more aware of the proposed EU constitution, which the Government are of course right to describe as a "tidying-up exercise". It will

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simply sweep most of the rest of our democracy under the Brussels carpet. A referendum on the eventual constitution might at last reveal the whole existing can of worms to the public, which one suspects is the real reason why the Government do not want to hold one. That is certainly the reason why the Government do not want to carry out an impartial cost-benefit analysis of our present membership. They are determined to continue to hide from the people the truth about the deceit that has been practised on them by their political classes for more than 30 years.

Anyone who doubts that such deceit has indeed been deliberately practised should read a brilliant new book by Christopher Booker and Richard North, The Great Deception, published by Continuum Books. Read that book, my Lords, and you will understand why the Government resist a cost-benefit analysis of our present membership of the European Union and also a referendum on an eventual constitution.

I put it to the Minister that the British people deserve better than this arrogant treatment. They are not so stupid. In constant opinion polls over many years, about 50 per cent of them already say that they would vote to leave the European Union if given the chance. But 84 per cent of them say that their politicians have not given them enough information to let them decide whether the UK should remain in the EU or not, which confirms what I said earlier. How right they are.

To conclude, by refusing a cost-benefit analysis of our membership of the European Union, the Government are guilty of arrogance, cowardice and deceit towards the British people. If the Government find that accusation somewhat harsh, there is only one way in which they can prove me wrong. They cannot continue to avoid the issue with flannel and transparent propaganda. They must conduct an open and impartial inquiry; they must trust the British people with the result. Only thus can they bring to an end the greatest deception ever practised on our nation. I beg to move for Papers.

6.30 p.m.

Lord Dubs: My Lords, I listened with interest to the noble Lord's speech. I can find one or two points on which I half agree with him and a great deal on which I disagree with him fundamentally. But I have to say that my main perception of his speech is that there appear to be two Europes: the Europe in which I live and the Europe in which he lives. They are so far apart that I do not see how we can inhabit the same territory.

About five years ago, I was invited by the British Council to attend a conference in Prague on the subject of European enlargement. That conference was attended by persons from many of the existing EU countries, as well as individuals from most of the 10 countries that are about to join Europe on 1 May. What struck me forcefully was that these people, who were mainly from countries that had been under communism, saw so much purpose in their countries joining the EU. It was felt that their main mission in

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life, as countries, was to become part of the EU and to come back to Europe. That enthusiasm and that wish to be part of the EU contrasts very sharply with the views that we have heard just now and which other critics of the EU purvey.

If so many people want to join the EU, how can it be the awful place that the noble Lord says that it is? That does not make any sense. Many of the arguments, although not all, would apply to the membership of other EU countries as well, yet they do not seem to have the sort of arguments and campaigning stance that the noble Lord has put forward.

I shall say something that the noble Lord will find even more contentious. Looking back over history, I believe that we shall be judged as a country as having made a big error in not having joined the European Iron and Steel Community way back in 1951. Had we done so, the EU would have been moulded much more in the way we would wish than some of its details are today. In other words, at the time we were the most powerful country in Europe; the Germans would have wanted a structure such as the EU set up because they would have wanted the credibility from becoming part of it; and the French were less forceful than we were. We made a mistake.

The reason why we were unable to join at the time was because we had not come to terms with the end of empire. We saw ourselves as an imperial power, and our interests stretched way beyond Europe to the far-flung parts of the world. I can understand why at the time it would have been difficult for any British government to say that we should join at the beginning, but it is a decision that has cost us dear with regard to a number of details of the EU.

The main detail is the common agricultural policy, on which I agree with the noble Lord. I am not happy about it for some of the reasons that he mentioned—because we support agriculture whose products are then sold in competition with the products of developing countries. I agree with the Trade Justice campaign. However, the CAP is already on its way to being changed, and the accession of the 10 countries will make it even more likely that the CAP will be changed further in the interests of this country and our agriculture.

I do not share the noble Lord's criticism of all things that come from Brussels—and he used some very strong language about it. I agree that some procedures in Brussels could be changed, and we are well on the way to doing that, if the decisions floated at the last IGC come to pass. With regard to joining the euro, I would argue that it is not a matter of whether we do so but when the time is most appropriate.

However, I do not agree with the noble Lord's condemnation of all the figures that show how much we benefit. The EU will contain 450 million people by May. I cannot easily say, "It doesn't matter, we can get all those benefits even if we are not members". Three million British jobs depend upon it. They may not all be lost if we were to leave the EU, but we might lose some of them. Fifty-five per cent of UK trade is with our EU partners; surely, that is pretty significant. I am

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not as confident as the noble Lord that there would be no change to our pattern of trade if we left the EU. The EU market is bigger than that of the United States and Japan combined. Our exports to the EU are three times greater than our exports to the United States. If the EU is as bad as the noble Lord says that it is, why have we managed such a big growth in exports to the EU? Why has not our trade to North America increased more?

The noble Lord said something about peace. I go along with John Hume, who said that the European Union was the longest and most successful peace process in world history. John Hume knows something about peace and peace processes, and I believe that he was right in what he said.

The EU gives us a chance to co-operate on security, anti-terrorist measures, difficulties with asylum and immigration policy and tackling international crime. We can deal with environmental issues together. The EU gives us in this country better opportunities for travel and for our students. It is very much in the interests of this country to be in the EU. We have more international influence through our membership of the EU than we would have if we were a small isolated country off the northern shores of Europe. Our sense of identity and Britishness has not in any way been weakened by membership of the EU. Other countries do not sense that, and I do not believe that it has any effect on us.

I welcome the enlargement of Europe. I welcome the fact that 10 countries that have given up communism are keen to join Europe and will do so on 1 May. I wish our industries and British industrialists were keener to invest in those countries; the Germans are doing far more in investment than we are, and we are losing out. There is an enormous opportunity there.

Finally, I have a vision of Europe in which the former communist countries and the western European countries are part of a greater endeavour. Yes, there are faults and weaknesses and there must be changes. However, I believe that it is a mission for peace and that we share our dedication to human rights, democracy and the freedom of the individual. Those values are important and they are what is driving other countries to join Europe. That is why I hope that we shall have none of the noble Lord's suggestions.

6.37 p.m.

Baroness Cox: My Lords, I rise to support the case for a cost-benefit analysis of our membership of the European Union put by my noble friend Lord Pearson of Rannoch. First, I declare an indirect interest. My noble friend's charitable trust has given financial support for many years to my own charitable trust for our educational and humanitarian activities. However, I trust that your Lordships would accept that that would not in any way influence my contribution to this debate or, indeed, to any debate.

I begin by referring briefly to two issues that I highlighted on 27 June, which are still cause for concern, and which support the case for a cost-benefit

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analysis of our membership of the EU. I spent much of my time in that debate identifying research demonstrating the EU's long-term and irreversible economic decline, partly due to demographic trends. Evidence has shown that the economic and demographic trends in the United Kingdom, the United States and the Far East are forecast to remain beneficial, while those in the EU suffer from a poor prognosis. Should we not undertake an assessment, at least, of whether we would do better to follow our economic fortunes with areas of the world with positive demographic and economic prognoses, rather than pool our future with Europe?

Tonight, I turn to the implications of those economic and demographic trends for two issues that concern me deeply: Britain's contribution to the economic development of less developed countries and our role in meeting humanitarian needs in crisis areas with maximum effectiveness. The Government's determination to stay in the EU without even contemplating a cost-benefit analysis seems hard to square with those concerns in at least two respects. First, one-third of our international aid budget—or some £600 million a year—is spent by the European Union. I am sure that the Minister is aware of criticisms levelled at the EU in many respects. By way of example I quote concerns from the House of Commons International Development Committee 8th report of October 2003. The first states:

    "EC Development Programmes funding, estimated at £865 million . . . [for] 2003–4, appears as a separate line with no objectives or targets indicated. For such a significant sum it is important for the Department and taxpayers to be clear whether and how this money delivers the government's development objectives".

The second concern states:

    "With more volatile exchange rates the £sterling equivalent of the Euro amount attributed to the UK can vary significantly year-on-year. Because the total DfID budget is set inclusive of the EU element, this means that adverse exchange rate movements have to be funded out of the remainder of the department's budget. This is essentially 'top-slicing' and reduces the resources the Department can direct to priority areas".

The third concern states:

    "The Department told us that whilst poverty reduction is now at the centre of EC policy, 'question marks remain as to how widely the policy has been applied' and that only 44% of EC funding has gone to low income countries in 2001. The EU's record in terms of the share of aid reserved for poor countries remains substantially worse than that of individual member states".

My final example of concern states:

    "The enlargement of the EU may pose a new challenge for achieving DfID's objectives. The accession countries have small aid programmes and also have understandable interests in their own immediate regions. DfID will have to find ways of ensuring that the accession of the 'ten' does not reinforce the tendency for the EU to focus on the 'near abroad' . . . In addition, we would like to see more information in the departmental report about how these funds are used, the framework for distributing EC development funds, current shortcomings and limitations in this, including in measuring aid outcomes and DfID's own efforts in this area".

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