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My mind has been set to the question of what competence really means. It is defined in the 10th EU Committee report, where there is an excellent piece on the whole issue of competences which answers most of the questions. It is clear that competence defines certain areas in which the EU institutions have conferred on them by member states the powers—if they were to use them and if the processes, whether vetoed, unanimous procedures or procedures that could not be vetoed, were launched—to make laws and regulations and interest themselves in these areas. I notice that in the excellent report from our committee, Professor Chalmers said that there was,

We are on the edge of a very fuzzy, permeable line. It is right that, as parliamentarians, we should seek to get a little more precision into the limits which ought to circumscribe the use of power by those who hold it.

Beyond that, I was pleased to hear the noble Baroness talk about the provisions for transferring back certain competences. She was asked which competences. She did not immediately have an answer from the past and, by definition, we obviously do not have an answer from the future yet. But that is the spirit. That is what many of us have been asking for all along—let us look in the 21st century at all the powers that piled up in the EU institutions during the 20th century. Let us re-examine them and see those that need unravelling, the acquis that needs unscrambling and the possibilities of decentralisation in an age of decentralisation, the reassertion of the democratic national parliaments as the anchor elements in the entire structure of the European Union. Let us look at those things, work on them and make suggestions about them.

None of these ideas seems to have come forward in the past few years—whether at the Hampton Court summit, which was supposed to be the great opportunity, or at other summits. However, it pleases me to hear this language raised. I am so pleased that, as long as my pleasure lasts, which may not be very long, beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5.15 pm

Lord Hunt of Wirral moved Amendment No. 29A:

“(i) Article 2, paragraph 12, inserted Article 2B TEC (TFEU), paragraph 1(b) providing for the establishing of competition rules necessary for the functioning of the internal market to be an area of exclusive competence of the European Union, unless arrangements have been made for the Secretary of State to report to Parliament each year on the operation and application of European Union competition policy according to the principle set out in the Protocol on the Internal Market and Competition; and(ii) ”

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The noble Lord said: I thought that it might be helpful to the Committee if, instead of moving a range of separate amendments all dealing with some aspects of the economic issues to which the Bill gives rise, I brought my 10 amendments together and spoke to them in the same group. I hope that that will be useful. In my zeal to do so, however, I should point out that the group includes Amendment No. 80, which unfortunately it should not, so I shall not speak to it. If other noble Lords agree, I will endeavour to do so later.

Amendments Nos. 29A and 29B are not wrecking amendments but follow very closely the arguments that were pursued in the other place, in particular those of Philip Hammond and Vince Cable on the alteration of the wording on competition. Amendment No. 32A deals with the internal market. We have the benefit of a European Union Select Committee report, The Single Market: Wallflower or Dancing Partner?, to which I shall refer in a moment. Amendment No. 39 deals with customs co-operation; Amendments Nos. 62 to 64 deal with state aid, competition and warnings on economic policy; Amendment No. 71 deals with common commercial policy; Amendment No. 72 deals with intellectual property and foreign direct investment; and Amendment No. 163 refers back to Amendments Nos. 29A and 29B.

I recall that, back in 2000, the Lisbon strategy set out its aim of making the European Union,

so it is a good moment to work out where we are today and what this treaty will do in taking us to that goal. I regret to say that, as we look across the European Union today, we find a shaky, diverse economy. The nation states in the eurozone, which are forced to have the same interest rates, are suffering to varying degrees from that situation. The Minister may seek to persuade us otherwise, but an immediate case cannot be evolved for the management of the economy to move to Brussels. Certainly so far as the treaty is concerned, there are signs that the nations that agreed to the treaty have decided to move in that direction.

What do I mean? I am talking about free trade and open markets. I have always regarded those markets as crucial to creating an outward-looking Europe that can compete on the global economic world stage. It is sad that, in the treaty, there is so little about the single market and helping us to achieve those open markets. There is plenty in the treaty about EU values, but nothing about what was, after all, a founding principle of the European Union.

In evidence to the European Union Select Committee, John Hutton admitted in his written submission on 17 December last year:

Let us ask the Government why, at such a crucial moment, there is no significant change. There was one significant change, which is known as the Sarkozy clause. The one good thing in the treaty—the clause allowing free and undistorted competition—was struck

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out as a result of Monsieur Sarkozy’s intervention. After his success, he commented:

He said:

He went on:

I hope that the Minister will explain why the Government agreed to that deletion. Peter Mandelson has already responded in strong terms. He said:

I agree with Mr Mandelson, but why don’t the Government?

Why are the objectives of full employment and social progress now going to have a higher legal status under European law than free competition? What has caused the Government to agree to this move? We need to know. I recall Commissioner Mario Monti, seen as one of the great prophets of competition, responding:

He continued:

Well, so I am and I think that the Minister has to give us an explanation.

I read in the press at the time that our Prime Minister, Gordon Brown, had “hit the roof” when he heard about the concession on the Sarkozy clause. The Sunday Times said that the Prime Minister “went ballistic” when he heard. From the plethora of memoirs at the moment, we are led to believe that that is a frequent occurrence. However, I am particularly concerned about this instance. If the Minister is going to tell us that very little has changed, why did the Prime Minister go ballistic?

There is so much else that I could deal with, but I want to try to conclude my remarks. However, I will say that, on this occasion, I am looking for support from my noble friend Lord Dykes, as much of what I have said was echoed in the other place by Vince Cable, who said that,

Sadly, his colleagues in this House did not table amendments. However, I have and these are those amendments. Vince Cable continued:

I look forward to hearing whether my noble friend Lord Dykes will support Vince Cable’s amendment. I am particularly attracted by Amendment No. 29B,

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which is not a wrecking amendment but merely states that the Secretary of State shall lay,

What could be less wrecking than that? All it requires is for the Government to focus on what they have done—or is it what they have not done? Perhaps they should have focused a little bit more on the effect of what has happened in the treaty.

The protocol, no doubt the Minister will say, should do much to reassure us. However, there has already been extensive debate in this House about the difference between what is in the protocol and what is in the treaty. I am concerned about the changes that have taken place. I hope that the Minister will explain why she supports them.

We also have the report of our European Union Committee on the single market. Much of what it says is very worrying. On page 19, paragraph 59 states:

On page 20, paragraph 71 continues:

We also need to hear from the Government about the effect on customs co-operation, state aid and common commercial policy. How will this affect our ability to continue to secure for our Commonwealth partners their rightful historic concessions? Over the years, these have slowly diminished in their effect, but they are still vital. We need to know what the Government will do under the new provisions to continue to secure them.

On Amendment No. 64, can the Government say who is going to define the warnings on economic policy? Who is going to be the arbiter? Who is going to set the benchmark against which nations will be judged? No doubt the Minister will seek to reassure us on intellectual property and foreign direct investment, too.

I hope that the Minister is happy that I should have brought together so many amendments in one debate. I hope that she will be able to respond to all the questions that I have raised and to all the amendments. I beg to move.

Lord Lamont of Lerwick: I support what my noble friend on the Front Bench has said. The Sarkozy amendment was widely seen as a strange development and all the more odd because the British Government appeared to go along with it. It was not only Peter Mandelson who spoke out against it; my noble friend Lord Brittan—with whom I do not always agree on

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European affairs, although he is a good friend of mine—also spoke out strongly against this change being allowed. It was also roundly and firmly condemned by the Financial Times, which, in general, is supportive of the Government’s policy.

The removal of the words to which my noble friend referred is seen as a big reversal for competition policy. As everyone in the Committee knows, it has always been an objective of French economic policy to get this power in Brussels modified so that the strain of French policy that has always favoured the backing of national champions could continue. Those of my noble friends and noble Lords opposite who heard the speech of President Sarkozy in the Royal Gallery will remember that when he spoke about competition he referred to it being accompanied by support for national champions.

In this country and in other parts of Europe, we have got used to there being a strong competition authority in Brussels to police the internal market and to ensure that there is no backsliding to the long-past, long-discredited era of subsidies and backing national champions. Alas, in recent years, there has been some evidence that Governments in Europe are increasingly resisting the powers of the Commission. Noble Lords may remember that, after the troubles at Société Générale, the French Minister of Finance declared that the French Government would not let the bank be taken over by another European bank or another bank from elsewhere. It was only when Brussels started making some noises that that was not within the power of the French Government that they decided to say that they had never said this at all. Similarly, there were instances in Spain where, in contested bids for companies in the energy sector, the Spanish Government indicated that they did not wish the full flow of market forces to have effect.

The amendment that my noble friend has put down is extremely important. These powers are needed more than ever today because of the way in which Europe has been slipping away from what we call the internal market, which is always said by the Government and others to be the great achievement of the European Union. Nobody would applaud the internal market more than me. However, I have heard it declared many times that the internal market has been completed, whereas it is never completed but goes on and on. Anybody who knows anything about takeovers in the financial sector with countries such as Germany knows that the internal market is not the reality that people always claim that it is. The removal of the powers at the centre of the European Union to police competition and to ensure the full play of market forces is extremely important. I put it to the Government that it is a most retrograde step that the treaty was altered in this way. I strongly support the amendment of my noble friend.

5.30 pm

Lord Pearson of Rannoch: I support these amendments generally, of course. I would like to underline a point made by the noble Lord, Lord Hunt, in introducing the amendments, which is the absurdity of the European Union’s aim to make the single market one of the most

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dynamic economies in the world. I have to ask the Minister whether she still believes that that is the vaguest of possibilities when we consider the emerging economies of China, India, Brazil, Russia and so on.

One has only to look at the European Union’s financial services action plan, a group of some 41 directives that appear to be aimed at making the City of London uncompetitive with the rest of the world. If that is not a deliberate aim, it will certainly be the effect. If the Minister and her advisers have not seen it, I suggest that they look at Open Europe’s analysis of the financial services action plan, Selling the City Short, which analyses all those directives: the market abuse directive, which we certainly do not need, as we can do it ourselves, the markets in financial instruments directive, the prospectus directive and so on. Open Europe, which we have prayed in aid before in these proceedings and on the whole found to be extremely accurate, estimates the cash cost of implementing these regulations at some £23 billion over the next three or four years. But it is the knock-on effect from this regulatory atmosphere that is already beginning to drive valuable businesses in the City overseas.

Through its competition policy and its economic policy generally, the European Union imposes the Franco-German social and labour model on the rest of us. This does not suit the United Kingdom; it suits us less than anyone else. As I have mentioned before, only some 10 per cent of our economy trades with the single market, another 10 per cent, roughly, trades with the world outside the single market and 80 per cent stays here in the domestic economy. That gives the lie to our Europhile friends who constantly tell us that, if we were not in the European Union, we would have to obey its regulations but we would not be able to take part in making them. The 9 or 10 per cent of our economy that trades with the European Union would indeed have to obey the rules set by the single market just as, if one is selling a motor car to the United States of America, it helps to put the steering wheel on the left. It is precisely that analogy.

The overregulation of the single market has been recognised by Competition Commissioner Verheugen, who, about a year ago, put the cost of EU regulation at some 6.5 per cent of GDP. That is a colossal figure and higher than figures that have been produced by various British analyses of our position in relation to the single market. It is not just the rabid Eurosceptics who are saying this. No less a body than the Conseil d’Analyse Economique, the top French economic think tank, which reports directly to the French Prime Minister, said some 18 months ago that the single market had done nothing for the French economy. It also said that the euro had done nothing positive for the French economy. It is true that this institute, having carried out this accurate analysis to say why the single market had done nothing for the French economy, went on to say that of course the answer is “more Europe”. It is at that point that we Eurosceptics part company.

In conclusion, it gives me great pleasure to agree with your Lordships’ Select Committee on the European Union when it says that the future of the single market appears at risk. I very much hope that it

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is and that we can get back to open free trade between consenting democracies as this unfortunate project of European Union crumbles over the years to come.

While I have the opportunity, I would like to say that I did not earlier in our proceedings “impugn the integrity” of our Select Committee on the European Union. I merely pointed out that, if 23 people out of 24 are on the whole passionately in favour of the project of European integration and only one is fairly strongly against it, it would not be human unless that committee produced a report that was favourable to such integration and not favourable in the other way. I hope that that does not impugn the integrity of anyone and I certainly would not want to impugn the integrity of its chairman, the noble Lord, Lord Grenfell, of whom I am extremely fond.

Lord Radice: I was not going to intervene in this debate but we have had very much one tone in it. I begin by congratulating the noble Lord, Lord Hunt, on a skilful speech in which he cleverly mentioned the key point—that there is a legally binding protocol—at only the very end. Everything that has been said would stand. It is perhaps a pity that we no longer have the wording about the free and undistorted competition as one of the constitutional treaty’s objectives. As the noble Lord, Lord Hunt said, and he is always an honest man, there is this legally binding protocol to the treaty of Lisbon which ensures that,

That is the key quote. The protocol says that the single EU market, which is a clear objective in Article 3 of the new treaty, includes a system ensuring undistorted competition. There are references to competition in the existing treaties, and they all remain in Articles 4, 27, 34, 81, 89, 91, 96, 98, 105 and 157. The idea that competition has somehow been wiped away from the whole of the European Union is way over the top, and is not true. When this legislation goes through, the legal position in relation to competition will remain unchanged.

Lord Pearson of Rannoch: Could the noble Lord explain the point of going through the exercise? It is exactly the same question that the noble Lord, Lord Forsyth, put earlier to the noble Lord, Lord Maclennan. What is the point of doing this if it does not make any difference? Is he sure, and can he assure the Committee, that when a case comes before the Court of Justice it will not use the fact that free and undistorted competition has been taken out of the main body of the treaty and put in a protocol at the back as an indication of intention for its judgment?

Lord Forsyth of Drumlean: If the noble Lord, Lord Radice, has finished, I was hoping to hear from the Liberal Benches; I thought we might hear a speech in support of their amendment. I support the amendment so ably moved by my noble friend Lord Hunt. I sat at his feet when he was Secretary of State working for these very objectives, to reduce regulation in the European Community and promote the open market. I sat in disbelief listening to the noble Lord, Lord Radice,

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trying to tell us that the declaration that has been taken out and replaced by a protocol means the same thing. It does not mean anything of the sort.

We need to be honest here and point out what is going on. Once again, just as we have a split personality in the Liberal party on the legal personality of the Community—the Liberals in the other place think one thing while the Liberals up here apparently think another—so we have a split view about the overall direction of the Community. I understood that the British position has always been that we want an open market, free of barriers to trade, that recognises that a policy of national champions will, in the end, make those so-called champions weaker and less able to create wealth and prosperity for the peoples of Europe.

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