---

Lord Lawson of Blaby: My Lords, I am very happy to follow the noble Lord, Lord Grenfell—not least because, like him, I now live half the time in this country and half the time in France.

All those of us who truly care about Europe should be immensely grateful and welcome the breath of fresh air and the dose of realism that the rejection of the constitutional treaty by the peoples of France and the Netherlands has brought about. The Government have
 
21 Jun 2005 : Column 1550
 
rightly said that there now needs to be a pause for reflection. I agree, but the pause needs to be prolonged and the reflection profound. Both are equally important.

Noble Lords will be well aware that the rationale of the European project has always been political, rather than economic. There is nothing wrong with that. That is all the more obvious today when the context for economics is so clearly global rather than regional. I agreed with much of the criticism made by the noble Lord, Lord Wallace, of the constitutional treaty, but I was astonished to hear him say that globalisation necessarily implied remote government. That is quite untrue. Globalisation does not mean global government.

After all, we have had globalisation before. We had it in the whole of the industrialised world in roughly the half century between the end of the American Civil War and the beginning of the First World War—just as intense globalisation as we have today. Governments were not conspicuously remote then and they do not need to be today. If they are, that is a problem that needs to be addressed.

Lord Wallace of Saltaire: My Lords, the noble Lord will remember the case of the Bank of Credit and Commerce International. International regulation goes with globalisation and sometimes gets rather complicated when, as with BCCI, for example, it is not quite clear in what country a private institution is based.

Lord Lawson of Blaby: My Lords, I do not want to go into the case of BCCI. I gave evidence to the committee of inquiry into BCCI. Everything I have to say is there. I do not think that that has anything whatever to do with the remoteness of government.

In the spirit of realism that is now abroad and that I hope will remain—it may not—let us clear the minor issues out of the way. First, it is no great crisis that no European budget has been agreed. It does not need to be at this point; one will be agreed in due course, in good time, I have no doubt. I should be very surprised if it were agreed during the forthcoming British presidency; we do not need to expend too much capital trying to secure it within that period when it does not need to be.

For reasons that the noble Lord, Lord Williamson, gave only yesterday, the so-called United Kingdom rebate is essentially a non-issue. If the reason that gave rise to the need for the rebate—the nature of the budget and the common agricultural policy—were to change, the rebate would automatically disappear without any action. It does not need negotiation or any special treaty amendment.

I say just two things about the rebate. First, it is a bit rich to be lectured and told that we should not have a British rebate because there should be a general corrective mechanism. When the government of which I was a member, led by my noble friend Lady Thatcher, who we are all so glad to see in her place today, embarked on a general corrective mechanism we were told by our partners, especially the French and the Germans, "No, there is no way you can have that. The only thing you can
 
21 Jun 2005 : Column 1551
 
have is something special to Britain". That, thanks to the negotiations that were pursued over several years and, at the end of the day, an understanding by our partners that if we did not get satisfaction, we would withhold our contributions, is how the rebate came to be.

However, there is one particular problem that I shall address later and that has been implicit in some remarks hitherto. I refer to the effect of the rebate mechanism on the accession countries of central Europe. Let us get it straight: all eight central European countries that have acceded to the European Union are all, rightly, beneficiaries from the budget. It is true that under the mechanism around 3 per cent of the net benefit—perhaps just under that—that those states get from the European budget disappears. It is only a little but Her Majesty's Government should perhaps try, quite outside the treaties and rebate mechanism, to make good that small amount. It might be a very sensible and correct thing to do.

Perhaps it does not need to be said but the common agricultural policy is an abomination; so, too, is the degree of agricultural protection in Japan and the United States—I have no wish to single out the European Union. It should be a major objective of British policy to work vigorously in so far as it can independently, but however it can within the framework of the World Trade Organisation, to get levels of agricultural protection wound down worldwide. That is very important.

The European Union Committee report, under the chairmanship of the noble Lord, Lord Radice, to which the noble Lord, Lord Grenfell, rightly referred, made the point that until protection is wound down agricultural support ought to be devolved back to the nation states. That should be done on grounds of subsidiarity, equity and commonsense. I am very sorry that Her Majesty's Government have not taken that recommendation on board and run with it. It is clearly the sensible approach, even though it may take a long time, as these things do. In the mean time, so-called reform of the common agricultural policy is neither here nor there. We have had reform after reform proclaimed as great but the problem is pretty well as big today as ever.

I also urge the Government during their presidency to drop the idea of making promotion of the so-called Lisbon reform agenda a main thrust. I believe that it is a profound mistake, not because I am against economic reform of the liberal-market kind; indeed, as someone who served in a government, led by the noble Baroness, Lady Thatcher, that engaged in the most thoroughgoing economic reform process of this kind that any European government has undertaken, it would be strange if I were opposed to it. The problem is not that it is not important, but the folly of pursuing it on the European level is that the overriding measures that need to be taken are the responsibility of member states not Europe. To promote economic reform in the name of Europe does not increase public acceptance of those reforms in Europe; it merely shifts odium for some of the uncomfortable things that must be done on to the idea of Europe. That is exactly what happened in France; it is very foolish. This must be dropped.
 
21 Jun 2005 : Column 1552
 

There are slightly different models of economic policy in different countries. If the French wish to accept the price of higher unemployment and the slightly lower rate of economic growth to pursue the more paternalistic and bureaucratic way in which they like to run things, with which they feel comfortable and are happy, they should be allowed to do so. We should not preach at them and lecture them; they are entitled to do that, it is their choice. Different countries should be allowed to pursue their own policies; I state emphatically that it should not be a European initiative and policy—it is counterproductive.

What is Europe really all about? Originally, it was about preserving the peace in Europe, essentially by placing Germany within a wider European structure so that there was no longer any danger from that quarter. Without being complacent, we can say that that objective has been achieved. Since then, there has been a new challenge, referred to already in this debate: assisting the countries of central and eastern Europe in their emancipation from the tyranny and burden of the Russian communist empire, and assisting them to make the transition to freedom and capitalism by again placing them in this European structure. That has been embarked on and I congratulate all those who have achieved what has been done so far. But it is far from complete; much more must be done. That should be the overriding priority of British policy, in this presidency and beyond. Facing up to that challenge and successfully dealing with it does not require any further deepening of the European Union or any further integration. Indeed, many of those countries are frightened of just that prospect. So it is high time that the federalist dream was explicitly abandoned—I stress the word "explicitly".

The message of the referenda, which was certainly apparent to me in France, was that one of the things that the ordinary people of Europe want most is a period of stability. They have had enough of change after change being imposed on them. No sooner is the ink dry on one treaty than another pops up. President Chirac did his best to get a "Yes" vote by undertaking on television not to resign if there were a "No" vote; nevertheless, he was unsuccessful. We must accept that, even after he has gone, there will always be tension between this country and France. For France, certainly the French elite, the overriding purpose of the European Union is to challenge what they see and fear as the political, economic, military and cultural hegemony of the United States, and they believe sincerely that that can be achieved only under French leadership. We do not share that perspective, and that is that. That difference will always be there; it cannot be papered over and we must live with it.

I believe that a prolonged period of stability can be achieved. The irony is that only when that period of stability has been achieved, and it is accepted that this is the destination of the journey that we embarked upon all those years back, can we sensibly contemplate a genuine European constitution—not the phoney so-called constitution that we were offered—in which each member state's responsibilities are clearly delineated and it is accepted that they will remain indefinitely the
 
21 Jun 2005 : Column 1553
 
responsibilities of European Union member states. Such a constitution could help to provide for the peoples of Europe the sense of stability in a turbulent world that they so clearly need.

5.19 pm

---