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Baroness Noakes: My Lords, it is a pleasure to follow the noble Lord, Lord Stoddart of Swindon, who has been a voice of reason on Europe's ills for so long. It is also a pleasure to take part in this important debate. I am especially proud that the majority of the contributions today have come from these Benches—I think that the noble Lord, Lord Stoddart, is spiritually on these Benches for this purpose. By comparison, there has been a great dearth of speakers behind the noble Baroness, Lady Amos, and I fear that she must have felt somewhat lonely—
Baroness Amos: My Lords, I assure the noble Baroness that I do not feel at all lonely, because the debate is entirely as I expected it to be.
Baroness Noakes: I am glad to hear that, my Lords.
My European credentials are weak compared with the vast majority of the speakers that we have heard today, so I shall concentrate on some territory that is slightly closer to my natural home: economics and finance. However, before that, I should like to reflect on the constitution, which is now in a state of limbo—it is in neither the land of the living nor of the dead. I do not regard it as satisfactory that in 2006 the constitution might be revived. That reminds me of cryonics, which is where foolish people have their bodies deep frozen in the hope that some new process or remedy will be found to give them new life in the future. What they do not realise is that even if that time ever arrives, the world itself will have moved on and they will be ill equipped for the future.
As we know, the constitution has been rejected by the French and the Dutch, and if people in many other countries were given the opportunity to have their say all the evidence is that they would reject it too. Noble Lords
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will be in no doubt about the result of a referendum in this country, had we been allowed to have one. So what sense is there is in preserving a constitution for possible future revival? It is clear that the constitution is not right for now and there is no reason to believe that lapse of time will make it any more fit for purpose.
Over the weekend, I was struck by several references to Europe's citizens. The press release from Mr Juncker on Friday stated:
Europe is not a nation. It does not have citizens. The constitution perpetuated the myth of European citizenship, but citizenship is allegiance to and protection by a country. UK citizens do not owe allegiance to Europe. If anything, they look to their own country for protection against interference by the EU.
I tell the noble Lord, Lord Maclennan of Rogart, that there is no European demos. I agree with my noble friend Lord Blackwell, who said that European democracy is a contradiction in terms. Those who use "European citizens" language betray their federalist aspirations. It has become clear that the vision of Europe as a nation state, which lay behind much of the constitution, is not shared by the people in Europe. Some member states and some members of the Commission are said to be plotting to implement as much of the constitution as possible by the back door, but the clear message is that there is no mandate for that.
So, as many people have said today, what we need is a complete rethink on Europe. We should rethink whether the direction of ever-closer union is any form of viable guiding principle for the way forward. There is another way, which is based on returning powers to member states and an EU that interferes less in the internal workings of member states. It is still based on a European Union, but a very different one from that laid out in the failed constitution. My noble friend Lord Howell gave us a good start with his 14-point action plan to plot a way forward to a new form of Europe.
Turning to economic matters, I say nothing about the budget and the rebate because, thus far, the Government's position has been admirable and I support it. However, I should like to say something about the euro. I praise the Government for their strength to date in keeping us out, although I regret that joining when the time is right is still their official position.
It is clear that the euro is unpopular with people in many of the countries on which it has been imposed. The noble Lord, Lord Stoddart, referred to that. There are stresses and strains within the euro-zone that may result in its breaking down. That is openly discussed not just in Italy and Germany but even in the French press.
I am ambivalent about the failure of the euro and it is not clear what the economic outcome would be if it did fail. Certainly there would be a period of confusion as some or all countries returned to their own currencies and monetary policies. That may well affect
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global growth in the short term, though given the sclerotic nature of the euro-zone economy as a whole, we should be wary of overstating this case. My cautious instincts say that Britain would be better served if the euro-zone struggled on and avoided the trauma of multiple divorce, but another part of me sees the euro project as a microcosm of all that is wrong at the heart of Europe. One size does not fit all in Europe and there is no point, over the long term, in pretending that it does.
The failure of the euro could underline what we need to do in the wider issues of Europe; namely, to look again at the underlying principles and create a new way forward based on recognising differences rather than trying to eliminate all natural variation. I bear no ill will to those countries currently imprisoned by economic and monetary union, but I can see positive advantages arising from their liberation.
The constitution as drafted would give the EU competence to co-ordinate the economic policies of member states. No one knew exactly what that meant, which was a worry in itself, but a reasonable interpretation would have been more European interference in the economic policies rather than less. Indeed, Nicolas Sarkozy declared that it was an,
I shall touch on just two aspects of that: regulation and tax.
Noble Lords will know that one of the biggest gripes of British business is that it is overly regulated. That is now not even disputed by the Government, as the Chancellor's recent conversion to the deregulatory cause shows. Over one-half of the UK's regulatory burden affecting business originates in Brussels, and that is the Chancellor's own calculation. What British business needs is less legislation in Brussels leading to less regulation from Europe. That is not better regulation, but positively less regulation. In itself that would not cure the regulatory disease affecting British business, but it could have a big impact. So we need to see a European Union that does less. The trajectory in the constitution was for Brussels to do more, and that is why the chief executives of most of the major companies in this country do not support it.
The constitution sought also to preserve the status quo in relation to taxation and, in particular, the national veto over direct tax matters. This was one of the Government's famous "red line" issues. But as the Government know, that red line was a complete illusion. For the past decade the European Court of Justice, under the guise of protecting fundamental freedoms—in particular the freedom of establishment—has been striking down national taxation legislation that it does not like. For many years the Commission has had direct tax harmonisation as one of its goals. By and large we had successfully fought it off, but now we have all but lost the battle.
In April the Advocate General gave his opinion on the Marks & Spencer group relief case. Most informed commentators expect that the Government will lose. By all accounts the Treasury will do so as well because for some time it has been holding discussions with tax
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experts in Britain. Now it has extended those discussions to officials in other countries about the way forward in the wake of such a decision. What is at stake is not the £30 million or so that Marks & Spencer hopes to gain, but as much as £20 billion lost tax revenue. Most UK companies have already lodged their tax repayment claims, as it is right for them to do. This individual case may well benefit much of British industry in the short term, but it does not benefit the country overall. It gives me little pleasure to think that the Chancellor will have an even bigger black hole to deal with because the real downside is that Britain's control over one of the key levers of our competitiveness will be largely dead.
Many countries in the EU see the internal market as one in which competitiveness between nations can be controlled or eliminated. Quite rightly that has not been our view. We want to be an economy of choice for inward investment through our own competitive advantage and taxation is a key element of that. Several of the accession countries are in that game too, for example through flat taxes, recently the subject of a debate secured by my noble friend Lord Patten. We need to change direction on taxation and reclaim national autonomy.
I hope that the Government will use their presidency to reverse the position on the constitution reached at last week's summit. They should take the opportunity to declare the constitution well and truly dead. Instead, I hope that they will promote a new vision of Europe as a community of nation states co-operating when they wish to in an open and flexible way. Nation states need to reassert control over their own economic destiny and be accountable to their own citizens for their success or failure in so doing.
If the Government allow the constitution to stay in the deep freeze, a later presidency is very likely to declare that it has found a new elixir which will breathe life into it. I hope that the Government will agree that a proper funeral service with the permanence of cremation should be arranged in the next six months. If we can put that behind us, we could then start to move forward towards a fundamental redefinition of our relationship with our European neighbours.
7.47 pm
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