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Lord Barnett: My Lords, before the noble Lord sits down, perhaps I can ask for clarification. I am sure the House will find his 16 points for a new proposed treaty very interesting. I found one aspect of it very interesting. He proposed to give more power back to the smaller states. Does he suggest that one should do away with qualified majority voting? If so, how would 25 or 27 states be able to work?

Lord Howell of Guildford: My Lords, I certainly believe that modification is necessary, but it has to be seen, as the Prime Minister is always reminding us, in a wider context of reform. I want to see more powers repatriated and a less ambitious and more practical European Union which it will be possible to administer, even with 25 states. I understand the problems raised by the noble Lord. They would have to be resolved very carefully. It is a matter of a change of emphasis so that we have a Europe less dominated by the big boys and more balanced in dealing with the fewer matters that I would like to see at the centre anyway.

4.35 pm

Lord Wallace of Saltaire: My Lords, I thank the noble Lord, Lord Howell, for his very kind words about my genial vituperation and assure him that I intend to maintain my geniality in this respect. I agree with many of his 16 points. I hope he will regard it as a compliment when I say that my overall approach to his speech is much the same as my approach to the constitutional treaty. I agree with much of it, although I have substantial hesitations about a number of matters—a bit of a curate's egg.
 
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I welcomed the opening speech of the Leader of the House and its strong emphasis that British foreign policy has to start with European co-operation. A strong place for Britain in Europe is the key to Britain's place in the world. Liberals, as a party and as a matter of philosophy, believe strongly in international co-operation as opposed to nationalist nostalgia or populist defence of sovereignty or subordination to American hegemony.

We live in Europe—it is part of our unavoidable geography—and we have to start by getting on with our neighbours and ensuring that our neighbourhood is peaceful. That does not mean that we deal simply with Europe. We and our neighbours must be concerned about how we spread the peace, security and democracy that we have, thankfully, achieved over the past 60 years, not only as we have done successfully across eastern Europe, but also, as we hope to do, across south-eastern Europe and further south and further east.

As the noble Baroness, Lady Amos, said, we have shared interests in the international rule of law, in the promotion of human rights, in global, economic and social development, in the prevention of climate change, in environmental sustainability, and in the combating of international crime, terror and the smuggling of drugs and people. None of those things can be done by Britain alone. On all of those issues, our closest partners are across the Channel and some of our most difficult negotiations are across the Atlantic. Therefore, we start by assuming that we have to make the best of European co-operation rather than the worst.

I much regret that our Government and the governments of other western European countries have made so little of the achievement of eastern enlargement so that in both the French and the Dutch referendums resistance to Poles, Czechs, Slovaks and others was part of the "no" campaign. The failure to explain the long-term advantages of eastern enlargement to European publics was one reason for the failure.

Further enlargement is an obligation, first, to the western Balkans and then to Bulgaria and Romania. Then we need to have a very careful debate about how much further we should go and when. In the past five years I have spent some time in Turkey. The Turks themselves are only just beginning to debate the implications of Turkish membership. Turkey's membership will be a very major step for us all. We have committed ourselves, and we should certainly not exclude Turkey, but we need to discuss the long-term implications with our publics, as well as with Turkey.

The noble Lord, Lord Kerr, who is unfortunately not here today, has spoken about the need also to commit ourselves to Ukrainian enlargement. I had lunch the other week with someone who said, "And Russia in time". After all, the population of Russia is shrinking and it will be smaller than the population of Turkey by the time it joins. We must think quite carefully about our neighbourhood and how best to stabilise it, and about the point at which we should offer being good neighbours with close relations with the European Union, rather than extending it further and further east until we reach Vladivostok.
 
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A number of institutional changes were clearly needed to cope with enlargement to a European Union of 25, soon to be 27, and then more. The Laeken declaration of the European Council in December 2001 set some of them out. In particular, it stressed the need to consider what powers should be returned from the European Union to national governments—the principle of subsidiarity; it asked for a short and simple text for the constitutional treaty; and it asked for a much stronger role for national parliaments. I have to say that the constitutional treaty that emerged did not fulfil all those requirements. Perhaps our two representatives on the convention who are going to speak in this debate will explain to us how we got from A, not to B, but to D or E when it came to it.

The treaty was far too long and complex. It has a number of proposals that are necessary and desirable and that will improve the efficiency of the European Union; for example, strengthening capabilities and foreign policy, simplified voting and a smaller and simpler Commission. In passing, I have to say that it is easy to over-emphasise the subtle distinctions of different forms of qualified majority voting. The Council of Ministers does not vote very much, and votes much more often on agricultural issues than on any other single subject. There was confusion over having both a new foreign minister and a president of the council. There was clear resistance to returning any powers to national governments within the convention. The restatement of the acquis, which is the lengthy Part 3 that has led to so much rubbishing of the treaty, was a clear mistake. There was a massive misreading by those within and around the convention of the popular acceptability of what they produced, for which the Commission, the European Parliament and what, for shorthand, I shall call the "francophone élites" must share some of the blame.

I share a good deal of Gisela Stuart's perspectives on the convention. It was captured by what I call the "Old Believers" in the European Union who believe in technocratic imposition from Brussels; that the people in the centre know best; that they are the enlightened fonctionnaires of Europe; that centralisation is the same as integration; and that the social partners—a single European social model—is what one imposes.

The noble Lord, Lord Howell, spoke a great deal about globalisation, and we have to realise that one cannot have globalisation without remote governance. We all share the problem that remote government is very hard to sell to our publics. Look at the United States, where every single presidential candidate runs against Washington because Washington represents remote government imposed upon Idaho, Texas, Arizona or wherever. We face a not dissimilar problem with Brussels. That is a problem that is going to grow under globalisation.

It was a mistake to focus on institutions so much and on strategic priorities so little. So the right course now is to focus on what strategic priorities we need for our enlarged European Union, not on further institutional reshaping, let alone on further institutional grand designs.
 
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As a number of people have said, there are a number of things that can and should be implemented. We should look at our own procedures as a national parliament and our Government should be more willing to discuss their approach to the European Union with their parliamentarians. We should build closer links with British Members of the European Parliament and overcome the last of the old legacy which meant that British Members of the European Parliament saw British Members of the British Parliament as rivals and vice versa. We need to do a lot more on the reform of the Commission, and we need to strengthen the effectiveness of the instruments we have in foreign policy and defence policy.

What should our strategic priorities be? I apologise that I do not have 16, but I have a few. Economic reform is clearly one of them. We have to go back to the Lisbon agenda and seek economic reform within a social market model. I welcome again what the noble Baroness the Leader of the House said on that. We are not attempting to sell the American economic model to our European partners. I slightly regret that the noble Baroness, Lady Amos, suggested in her speech that we are necessarily falling behind American economic growth. A number of good economists have pointed out that social choices are at stake in the different developments of the European and the United States socio-economic models. The surge of American economic growth has a great deal to do with the closing down of city centres and the opening up of shopping malls. That may not necessarily be the way that we want to go.

The Government need to adopt a different rhetoric and tone on the Lisbon agenda, and I am glad to see that the debate on the sort of economic and social changes needed is already beginning to open in France and Germany. French commentators cannot, in most cases, bring themselves to say that there is something to learn from the British model, but they are at least saying that there is something they can learn from the Danish model.

The stabilisation of the wider European region is clearly a major priority for those countries that have joined the European Union in the past two years and for those countries that remain outside it. Part of that stabilisation has to be continuing support for convergence and growth within the new members. We have to hope that rapid growth in Poland and elsewhere will help to lift the rest of the European economy.

We should talk much more about our shared contribution to world order and global governance within NATO, the G8, the United Nations and a range of other global agencies.

Then we should talk about a budget that reflects those priorities, rather than arguing simply about the budget itself. It is clear that in the immediate budget débâcle Britain was hijacked, in effect, by France and Luxembourg. It was an unnecessary row over something that did not have to be settled now. I regret that the Government did not use the phrase that the noble Lord, Lord Radice, told us about some weeks ago, which was that we should trade the British rebate against the French
 
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rebate. Those of us who have been around since the Hague summit in 1969, when the young Mr Chirac, then a French Minister, was involved in fixing the French rebate, can remember where that comes from.

We must recognise that so long as President Chirac is there, the appalling personal relations between the French head of state and the British head of government are something we will have to cope with. I regret to say that I think that in the development of that very poor relationship in recent years the fault has been much more on the French side than on the British.

There have been failures of leadership within most member governments. There have clearly been failures within the German and Italian Governments and, as I saw when looking at the end of the Dutch referendum campaign, also within the government of the Netherlands.

But there have also been failures within the British Government, since 1997, as well as since 1987. We have also failed to persuade and to create a consensus around a more constructive agenda. This Government have been dysfunctional in their handling of European issues, as well as in their handling of many other matters. There has been intermittent attention. The level of investment that our Prime Minister has put into building relations with each new American administration has been far higher than has been invested in building and maintaining relations with our French, German and other partners. There have been rapid changes of Ministers for Europe, most of whom have not had significant influence. I think that there have been seven of them, although in the Commons debate last week I noticed that Jimmy Hood said that he was not sure whether there had been eight or nine of them. We certainly hope that Douglas Alexander will be given full support and that he will stay in the post long enough to begin to gain a positive reputation abroad.

The tone and style of British government needs to change. An authoritarian executive used to lecturing the Opposition across the House of Commons tends to lecture its opponents, so to speak, abroad. We lay ourselves thus open to the caricature that we stand for free market Anglo-Saxon capitalism against a mythical single European social model.

I bitterly regret that we have weakened our relations with the Polish Government and that all the reports from Brussels suggest that the foreign press were deeply unsympathetic to the British perspective. That is because the Government have neglected the foreign press over the past eight years instead of cultivating them and helping to persuade them that the British perspective is positive for Europe—arrogance in lecturing continental governments contrasted with timidity in facing the British press.

Perhaps the other dimension of the failure of government policy is that the Government have failed to stand up to the Murdoch press, they have stifled Britain in Europe, they have failed to claim success for some of the great contributions we have made in
 
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Europe, including close Franco-British co-operation in defence, and have therefore left themselves in a very weak position. Any effective foreign policy must rest upon public understanding and public support at home.

So we have a hard task ahead and a delicate task during the British presidency. We face the French illusion that you can have political union without a single market and that the British are arguing for a single market without stronger political institutions. We face entrenched suspicion in the continental press as well as by too many of our political partners. But the effort has to be made in Britain's long-term national interests by this Prime Minister, or by his successor.

4.51 pm

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