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Lord Davies of Oldham: My Lords, the noble Lord will recognise the advantage of the CPI. It is an internationally registered measure of inflation, against a background where the economic resources of countries are directed towards housing and where families within those countries vary so enormously. Britain is atypical in that respect. We would not be adding to the general perspective on the successful conduct of the economy if we changed from the CPI as a measure of inflation rate.

Lord Snape: My Lords, arising from my noble friend’s eminently sensible replies to the previous two questions, does he agree that when a Labour Government increase interest rates three times in one day, end the day with a maximum interest rate of 15 per cent, as he rightly reminded us, and spend £14 billion of our reserves in a vain attempt to stay in the ERM, then and only then will we accept advice from the party opposite, particularly when it comes from Selsdon man?

Lord Davies of Oldham: My Lords, I have very little to add to that excellent contribution from my noble friend.

Lord Elton: My Lords, can the Minister remind us under which Labour Prime Minister’s aegis inflation rose to 25 per cent?

Lord Davies of Oldham: My Lords, that was more than 30 years ago and, of course, we have learnt the lessons from the past. We introduced the Bank of England Act, which gave us the machinery not only to implement action, but to achieve successful action following those lessons. That is why the British economy is in a position, as international authorities recognise, to withstand the current international difficulties more ably than perhaps any other economy in the G8.

Lord Howarth of Newport: My Lords—

Lord Newby: My Lords—

The Lord President of the Council (Baroness Ashton of Upholland): My Lords, it is the turn of the Liberal Democrats.

Lord Newby: My Lords, the Minister said that the CPI is a successful international index because it reflects housing conditions in other countries. Is not the principal remit of the Monetary Policy Committee to deal with inflation in this country, not the rest of Europe or anywhere else? Therefore, would it not be sensible that the definition of inflation that it took reflected housing conditions in this country rather than anywhere else?

Lord Davies of Oldham: No, my Lords, I did not suggest that the CPI reflected conditions anywhere else. I merely indicated why housing was not included in the CPI, the British index, in order that we should have an effective comparator with other countries. For the success of the economy, the management of the economy, and international and business confidence,

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it is important to have accurate comparators on the way in which economies are proving to be effective. The CPI is the internationally recognised comparator and Britain does very well against that comparison.

Lord Howarth of Newport: My Lords, I readily defer to the hard-won experience and wisdom of my noble friend Lord Barnett, but would not my noble friend be a little worried if, particularly in present circumstances, a signal were to be sent to the markets that the authorities in Britain are going to take an indulgent view of inflation? Would not that be followed in due course, ineluctably, by rising unemployment? Do we not need the Bank of England to continue as it has done under its existing remit to balance sensibly and sensitively restraint of inflation with restraint of unemployment?

Lord Davies of Oldham: My Lords, the governor of the Bank of England and the Monetary Policy Committee will follow the rubric established for them in the Bank of England Act. If it is necessary to write to the Chancellor, because for a short period inflation edges above 3 per cent, the governor will of course write accordingly. That would be proof of the fact that the governor knows his obligations and that we know the worth of the strategy which has been pursued over the past decade for the control of inflation.

Lord Forsyth of Drumlean: My Lords, is not one of the lessons we should learn from the past that people’s expectations of inflation are important in controlling it? Therefore, if the Government persist with a measure of inflation that does not carry public credibility, they will get into grave difficulty. Does the Minister not see that?

Lord Davies of Oldham: My Lords, that is an important consideration. We recognise that it is difficult to conceive of any index that accurately measures a larger number of households’ inflation rates. There is no doubt that, at a time of high increases in energy and food prices, family budgets are suffering. That does not alter the fact that, when it comes to the economic strategy that the Government should pursue for the benefit of the nation—particularly in keeping inflation under control in order that the high levels of employment we presently enjoy should continue—we need an index that is an international comparator and against which, I repeat, the United Kingdom economy does very well.

US Prison Ships

3.31 pm

Lord Wallace of Saltaire asked Her Majesty’s Government:

Lord Bach: My Lords, Her Majesty’s Government are not aware of any cases where British citizens have been held on US naval vessels since the start of operations in Iraq in 2003.



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Lord Wallace of Saltaire: My Lords, I find it astounding that Her Majesty’s Government can say only that they are “not aware” and cannot tell us what they know. We are constantly told that we are the closest ally of the United States, yet we are now, several years after the Iraq war, still uninformed as to whether British citizens have been held on US prison ships and whether American prison ships have been posted in UK territorial waters, for example off Diego Garcia. Can the Government now assure us that they will discover what the situation has been and publish it?

Lord Bach: My Lords, I hope that the House will understand that it is hard to prove a negative. The Government are not aware of any cases such as those referred to, but it is not possible to offer a categorical assurance that this has not happened without our knowledge. Of course, if noble Lords are aware of any British citizens who have been unlawfully held on a naval vessel by the United States, they should provide this information to the Government as a matter of urgency so that it can be investigated. The House will know that my right honourable friend the Foreign Secretary, following the declarations of 15 February and the Statement made in both Houses on 21 February, has written to the Secretary of State in the United States with a number of questions about these matters.

Baroness Williams of Crosby: My Lords, does the Minister agree that we have heard a series of rumours about extraordinary rendition ever since the war in Iraq began; that those rumours have, in turn, led to a series of Parliamentary Questions in both Chambers; that those Questions have mostly been met by Answers that were not complete; and that, to this day, none of us knows exactly what the situation is? May I therefore ask, first, whether we have any evidence that the United States ships used as prisons were either maintained or refuelled in Diego Garcia or its immediate territorial waters? Secondly, do we know whether there are manifests for such ships and, if there are, whether we have examined carefully such manifests for possible links to British citizens?

Lord Bach: My Lords, I agree with the noble Baroness that there have been stories around this issue for many years and many suggestions have been made. It was for that reason, among others, following what happened in February, that the Foreign Secretary wrote to Secretary Rice to clarify a number of specific issues. These included the question raised by the noble Baroness whether detainees were ever held on ships outside the territorial water of Diego Garcia but perhaps supplied from the island. There is, as yet, no response to that letter. There will be a response. I will tell the noble Baroness if and when a response comes.

Lord Judd: My Lords, does my noble friend agree that in the context of our special relationship with the United States it is crucial to take every opportunity to remind it that, if we are to contain radicalisation and the growth of extremism in Islamic and other communities, it is essential that all actions taken are transparently

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within the context of international law and that anything that is done should on no account be counterproductive in terms of driving people into the arms of extremists?

Lord Bach: My Lords, indeed, and that is what we say to our American friends. I reject any assertion that we can no longer trust the United States on these matters. My right honourable friend the Foreign Secretary made it absolutely clear on 21 February that we do not believe that we should conduct foreign policy with our most important bilateral partner on the basis of disbelief or a presumption of deceit. The US gave us its earlier assurances in good faith and we accepted those assurances and referred to them publicly in good faith. When the United States realised that a mistake had been made, it came to us directly, without delay.

Lord Hylton: My Lords, is it not highly unsatisfactory if, for example, Iraqi or Afghan citizens are held in legal black holes with little or no due process of law? Does this not put the lives of British soldiers at risk?

Lord Bach: My Lords, it is extremely unsatisfactory if that is what happens. The British Government’s policy is quite clear: we unreservedly condemn torture—what the noble Lord is suggesting is akin to torture—including any extraordinary rendition to torture. We have always condemned torture. The UK Government, including their intelligence and security agencies, never use torture for any purpose, including obtaining information, nor would we instigate action by others to do so. That is what we say to our friends and allies.

Earl Attlee: My Lords, can the Minister remind the House what the Geneva conventions say about holding POWs afloat as opposed to transporting them by ship?

Lord Bach: My Lords, I am afraid that I cannot tell the noble Earl what they say, but of course I will look up the information and write to him. However, I suspect that he probably knows the answer to the question that he has raised.

European Union (Amendment) Bill

3.37 pm

Report received.

Clause 2 [Addition to list of treaties]:

Lord Howell of Guildford moved Amendment No. 1:

“(i) Article 1, paragraph 30, inserted Article 13a TEU, paragraphs 1, 2 and 3, on the role of the High Representative in preparing the common foreign and security policy and the conduct of the common foreign and security policy, unless binding arrangements have been made for the Secretary of State to report to Parliament, at least annually following the coming into force of this Act, on his assessment of the objectives and conduct of the common European Union foreign policy in the preceding year; and(ii) ”

The noble Lord said: My Lords, although we spent quite some time looking at this Bill in some detail in Committee, it is inevitable that with such huge issues

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at stake and such a very wide coverage of our national life involved in a single piece of legislation, and indeed in a single treaty, many issues would remain to be covered more thoroughly and clarified. We now return to these at the Report stage, and may open up some new areas that were illuminated in Committee. The amendment is tabled in my name and that of my noble friend Lord Hunt of Wirral, and deals with aspects of our foreign policy and the common foreign and security policy. On the face of the Bill for all to see is the Government’s attempt to exclude the common foreign and security policy from both the treaty provisions and the extension of the Community’s powers; in effect, to ring-fence foreign policy. That is the clear aim and intention of the Bill following the negotiations on the treaty itself. Perhaps I may use the words of the noble Baroness, Lady Ashton, this is to keep foreign policy “intergovernmental and non-legislative”.

We debated that at length in Committee and it will not surprise noble Lords, particularly those opposite, to learn that some of us were not at all convinced that this is a watertight situation. We have always fully accepted the case for intergovernmental co-operation and sometimes intimate dovetailing on a range of foreign policy issues. During Committee we were treated to a superb speech by the noble Lord, Lord Ashdown, who is in his place. With his vast experience, he described what can and has been achieved by such co-operation. But we do not welcome the intrusion of majority voting and the removal of vetoes into various aspects of the conduct of our foreign policy: nor did the Government welcome them either; they strongly resisted them.

In Committee, I mentioned 10 areas in which we doubt whether the insulation procedure is working. I will not detain your Lordships with them again, aside from the self-amending provision in the treaty, which we will debate later, and the role of the European Court of Justice, under its new name the CJEU. I want to refer in particular to the European External Action Service, which is specified in paragraph 3 of 13A of the treaty and mentioned in our amendment, because in this area there seem to be many loose ends and uncertainty and we need to clear up matters.

When the idea was first put forward, the UK Government Minister responsible said firmly:

Now it seems that all that has gone and in the design of the new diplomatic service, the European External Action Service, which appears to be going ahead apace, although the treaty has not yet been fully ratified, the majority of votes will be shaping a number of aspects.

I must confess that although we have all tried to carry out research into a treaty that is known to be—it is labelled as—deliberately unintelligible, it is still a little mysterious. On 26 February my right honourable friend William Hague asked the Foreign Secretary what recent discussions he had had with his EU counterparts on the European External Action Service and whether any meetings on the organisation and

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funding of the EEAS had taken place. The Foreign Secretary in reply said that there had been no discussions at ministerial or working level on the detailed organisation funding and functioning of the EEAS. If that was true then—I am talking about late February—it is not true now. The noble Baroness spoke about the matter at col. 494 in Committee. She did not say—I am convinced that this is because she was not aware of it, otherwise she would have told us fully in her usual manner—that COREPER was about to hold two sessions at working level to decide the structure and modus operandi of the EEAS, including such matters as the setting up of embassies worldwide.

It seems that whatever was happening in February or a few weeks ago we are now in advanced discussions about the detailed organisation and functioning of the Europe-wide diplomatic service. That is the position now, and it requires our urgent attention. It is no surprise that the Foreign Affairs Committee in another place called for regular reports to be laid before Parliament on these discussions during the current year and that Parliament should be kept fully informed, which it does not seem to have been. This is all part of what has been called the hidden wiring of the treaty, which requires us to sign up in relation to issues that remain completely undecided or even unidentified. We therefore need as a start to see those COREPER discussion outcomes and for them to be published and laid in the Libraries of both Houses. I hope that the noble Baroness will tell us that that is possible.

Why are we focusing on this particularly? Because, in the words of the Government and of all those who follow these things, this is all absolutely central to the way in which our foreign policy will be handled and shaped by the new diplomatic corps. How will it work? We do not know. We have not been told and we have had no opportunity to contribute to the shaping so far of what is a key instrument in the determination of our foreign and international policies.

I suppose that one would worry a bit less if EU foreign policy had all along been an unalloyed success. That would be a little reassuring, and in some areas it has worked extremely well. However, that would still leave many questions about how the new diplomatic corps works, especially if it develops a life of its own as an unanchored and independent institution. But the objective reality is that EU foreign policy has not always been a success; in fact in some areas it has run into the gravest difficulties or never really got off the ground at all. As the Financial Times argued only a few days ago, during your Lordships' recess period:

It went on to argue that that was especially so when it comes to the rising power of Asia, which of course is where the centre of gravity of the whole world system is now moving. I suppose that that is not surprising when there are such numerous and different member state views of what foreign policy priorities should be. But that is the position. Therefore we need to proceed with great caution and great clarity before committing ourselves to these types of projects.

I do not want to go into the EU aid record in detail now, but there are people on all sides of your Lordships' House who recognise that it has certainly not been

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brilliant. I am far from convinced—I know that this is more controversial—that EU foreign policy will assist our national energy security. We need co-operation but I am not persuaded by those who make the facile jump between co-operation on interconnecters, nuclear power and so on—that is all technically correct—and saying that we therefore need a common energy policy underpinned by new regulations and legal provisions. It is a jump from hope to fantasy.

Behind these doubts lies a still bigger question: is the European Union today, in modern circumstances, still the best vehicle for carrying forward the central goals of our foreign policy? What are these goals? The Foreign Office occasionally issues magnificently glossy books, or annual reports, and this year it has abandoned the previous 10 goals and has four new ones. Mr Miliband has identified them as: counterterrorism and checking WMD proliferation—obviously, we are all in favour of that; preventing and resolving conflict worldwide—well, who could argue with that?; promoting a high-growth, low-carbon global economy—trickier I should have thought, but it sounds broadly right; and to develop as effective institutions the UN and the EU.


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