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House of Lords

Friday, 25 November 2011.

10 am

Prayers-read by the Lord Bishop of Edmundsbury and Ipswich.

Arrangement of Business


10.05 am

Lord Shutt of Greetland: My Lords, as noble Lords will be aware, it is a firm convention that the House rises at around 3 pm on Fridays. There are 42 speakers signed up to speak today. If Back-Bench contributions are kept to six minutes then all the Bills scheduled for today should be able to receive a Second Reading. I think that I ought to say just a little bit more. If those times are exceeded, it could prejudice the third Bill. Therefore it is important for all colleagues to stick to those times so that we can conclude by 3 pm and cope with the three Bills.

Lord Campbell-Savours: My Lords, would it not be wise for the noble Lord to intervene on the sixth minute to help the House?

Lord Shutt of Greetland: My Lords, I am very happy for either myself or the duty Whip to intervene if we find that there is transgression, but in the end it is up to noble Lords to be self-regulating and I hope that they will be.

Lord Pearson of Rannoch: My Lords, the noble Lord may not be aware that when my Bill was put down for Second Reading I informed the Whips Office that it had never run for less than four hours and that I rather doubted that it would in the present circumstances. In those circumstances, perhaps the noble Lord would agree that his strictures should be addressed not so much to us as to those who table our business.

Baroness Noakes: My Lords, initially a third Bill was not scheduled for today; it appeared rather late on the list. It has always been clear that the first Bill would attract a large number of speakers. I mean no disrespect to those proposing the second and third Bills today, but the first Bill deals with a matter of national importance and I do not believe that it would be right to restrict the speeches on it.

Lord Grocott: My Lords, I support the 3 pm finishing time, but why is the Deputy Chief Whip so ferocious about the finishing time today when we are on Back-Bench business when time and again during this Session on days that government business has been considered the agreed rising times have been exceeded with apparently relaxed views by the Government? There seem to be dual standards going on.

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Lord Shutt of Greetland: My Lords, perhaps we can deal with one thing at a time. Today is Friday and, as I understand it, there is a convention about rising at 3 pm. I think that the reason for that is that people want to know where they stand: they know what time their trains and aeroplanes leave and what time they hope to see the hills that the Bishop spoke about. Therefore I hope that we can stick to this time. People may well also have lined up evening engagements because they knew that the finishing time was 3 pm. I hope that we can proceed on this basis.

The noble Lord, Lord Pearson, mentioned another point. In organising the business there is a sense of taking account of the number of speakers lined up. If, ultimately, there is a late rush, these are the circumstances that we get into. I hope that we can proceed now with four hours and 50 minutes. That could diminish.

Lord Hughes of Woodside: I know that we want to get on with it but I want to draw the noble Lord's attention to the fact that the Bill of the noble Lord, Lord Steel of Aikwood, ran over by 20 minutes to accommodate him. Why can we not sit late to accommodate these Second Readings?

Lord Low of Dalston: My Lords, in the interests of not making things any worse than they already are, would it not make sense if we made immediate progress on the business in hand?

Noble Lords: Hear, hear!

European Union Membership (Economic Implications) Bill [HL]

European Union Membership (Economic Implications) Bill [HL]

Second Reading

10.10 am

Moved By Lord Pearson of Rannoch

Lord Pearson of Rannoch: My Lords, I am truly grateful to all noble Lords who are to speak today. This is not the first time that your Lordships have debated this or a similar Bill at Second Reading. We did so last some four and a half years ago, on 8 June 2007, and we had similar debates on 11 February 2004, 27 June 2003 and 17 March 2000. The series would not be complete without mentioning 31 January 1997, when your Lordships' House voted at Second Reading for a Bill that would have taken us out of the European Union altogether.

For more than 30 years, our political class has done its best not to talk about our membership of the EU. But the wheel of history turns and the question as to whether we should leave the European Union is now firmly back on the national agenda. But this Bill does not deal with that question-it is an altogether milder and more innocent little creature. It merely requires the Chancellor of the Exchequer to set up an impartial inquiry into the economic costs and benefits arising from our membership of the EU.

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As presently drafted, the Bill suggests that the committee of inquiry should consist of seven people: two who favour our staying in the EU, two who favour our leaving, two who have no firm view, and an independent chairman. The Bill excludes from the committee anyone who is or has been an MEP or who is or has been an employee of the EU or any of its institutions. The thinking behind those exclusions is that no one who is in the EU's pay or in receipt of an EU pension that they could lose if they went against the EU's interests should sit on the committee. But the wording of the Bill may be at fault here, because I now understand that MEPs do not receive such a pension, so perhaps their experience would be useful to the inquiry. The Bill could be amended in Committee, if your Lordships think fit; it could also be amended to extend the date by which the inquiry must report to the Chancellor beyond July 2012. Noble Lords may feel that that does not give it quite enough time. Be that as it may, the Bill requires the Chancellor to give the inquiry's report to the Comptroller and Auditor-General and lay it before Parliament with his views attached. The Bill goes no further than that. Of course I hope that the ensuing debates in your Lordships' House and the House of Commons would increase the public pressure for a referendum on our EU membership, but that remains to be seen. It will depend on what the inquiry comes up with. I submit that the cost-benefit analysis proposed by this Bill is long overdue, and that it is made even more urgent by the long-foretold crisis in the eurozone.

I dare to hope that the Government will support the Bill and that the Minister will not repeat the misconceptions that all Governments have steadfastly repeated in all our debates so far. Perhaps I could sum them up now and warn the Minister that I shall press him to justify them if he intones them yet again today.

The first is that a cost-benefit analysis is unnecessary because the advantages of our EU membership are so obvious that it would be a waste of time and money. On the money point, I note that the Stern report on climate change cost a little over £1 million. Surely that is a rather more complicated subject than the simple economic facts of our EU membership. So we are not talking about an expensive inquiry, especially when set against the colossal costs of our membership, to which I shall return.

The second misconception is to suggest that the 40 per cent of our exports that go to clients in the European Union, supporting some 3 million of our jobs, would all somehow be jeopardised if we left the political construct of the European Union. I can only assume that the bureaucrats who invented that one did so because they simply do not know how international business actually works. I repeat that nobody trades with the European Union, except perhaps the Mafia. We have hundreds of businesses exporting to clients who happen to be in EU countries, and there are hundreds of businesses in those countries exporting to us. This two-way traffic benefits from free trade, but none of it needs to be affected if we resile from the treaties of Rome. There are good commercial reasons for this. First, we have some 3 million jobs exporting to customers in EU countries, but there are 4.5 million

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jobs in those countries exporting to us. So collectively they need us more than we need them. We are, in fact, their largest client. So not even the Martians in Brussels would attempt any retaliation if we left the EU as such, and the Martians would face other realities if they tried anything so silly. The World Trade Organisation has brought the EU's average external tariff down to below 1 per cent and would also prevent any retaliation. The EU has free trade agreements with 63 countries worldwide and is negotiating a further 63-some 80 per cent of the countries in the world. So we, as its largest client, could have one too, as good or better than the one enjoyed by Switzerland, which is not in either the EU or the European Economic Area.

Switzerland is, of course, smaller than us, but its economy is very similar to ours and it exports three times more per capita to clients in the EU than we do. Looking at it the other way round, would the French stop selling us their wine or the Germans their cars just because we were no longer being bossed around by Brussels? Of course not.

The Government do not have to take my word for it. "Channel 4 News", in its "FactCheck" programme on 1 November, revealed that economists at Southbank University, who first estimated that 3 million jobs depended on our trade with Europe, never said that any would be lost if we left the EU. The programme ended with the following quote:

"According to the people who did the research, talk of mass redundancies if Mr Cameron goes for a European exit strategy is just scaremongering".

So please can we hear no more about 40 per cent of our trade and 3 million jobs being a reason to stay in the EU and not to have the inquiry proposed by this Bill?

The third misconception is that if we were no longer in the European Union our exporters to European markets would still have to obey all its rules and our Government would not take part in their making-and that this is somehow a frightening prospect. Those who peddle this one assume that we would stay in the European Economic Area, like Norway, which we would not. Our position would be like that of Switzerland, or better; we would have our own arrangements for free trade, free movement and so on. Our exporters to clients in the EU would of course have to meets its requirements, as do exporters from every other country on the planet which exports to the EU. That is really no big deal. But only 9 per cent of our GDP goes in exports to clients in the EU, while 11 per cent goes in trade with the rest of the world and 80 per cent stays right here in our domestic economy. So the 91 per cent or so of our economy which at the moment does not go in exports to clients to the EU would be set free from the heavy burdens imposed by Brussels. That begins to sound like quite a good deal to me. I will come to what those burdens might be, but conclude the third misconception by saying that I hope that the Minister will not repeat it today.

A fourth misconception was put forward by the noble Lord, Lord Howell, at Questions last Tuesday at col. 942, when he claimed that our influence in international trade bargaining is greater from within the EU than it would be if we had our own seat at the

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WTO. To answer this, I can do no better than to quote from a brilliant new publication by Civitas of Mr Ian Milne's Time to Say No. On page 15, he says:

"British influence at the WTO is sometimes claimed to be stronger as part of the EU Single Market than it would be if the UK spoke and negotiated for itself in WTO councils. That claim has validity only in so far as British commercial and geostrategical interests coincide with all or a majority of its EU partners-all 26 of them. When British interests do not so coincide-for example in the regulation of the City, or in agriculture and fishing-it follows that British influence is weaker than it would be if the UK were outside the EU and able to make its own decisions at the WTO. Since the structure and pattern of UK global trade is quite different from that of its EU partners, there is no a priori reason to suppose that, on balance, British interests and those of its EU partners coincide more often than they diverge".

The proposed inquiry would have to examine what I have called the four fundamental misconceptions about our economic relationship with Brussels and form its own opinion. I hope that it would also look at a number of very short briefing notes by Mr Ian Milne on the www.globalbritain.org website, which I have extolled before to your Lordships. I declare an interest as a founder and supporter of Global Britain. For instance, I hope that it would read briefing note No. 70, which shows how customs unions such as the EU have become redundant in the modern world; No. 68, which analyses The Non-existent "Benefits" of Belonging to the EU Single Market; No. 36, entitled Cherry-Picking, which analyses in two pages the differences between the European Free Trade Association, the European Economic Area and the Swiss-EU trading relationship; and No. 69, The Coming EU Demographic Winter. The last of those is rather like being shown the film "Titanic" before you had got on it, and gives another reason why so many of us want to get off. Dare I ask the Minister whether he or any of his officials have read these and other briefing notes on the Global Britain website; and if not, whether they will do so, and meet with Mr Milne if they disagree with any of them? I am of course happy to offer them lunch.

The inquiry will also have to examine the range of figures put forward by our Eurosceptic movement of the annual cost of our EU membership, mostly from EU overregulation. These, as summarised in Global Britain briefing note No. 65, average around 6 per cent of GDP, or £90 billion per annum-equivalent to £1,500 per person in this country. It is interesting that a similar figure was put forward by the European Commission in 2006 and that the highest estimate came from the Treasury itself in 2005, under the signature of a Mr Gordon Brown, entitled Global Europe: Full-employment Europe. The Treasury estimated the cost of our EU membership as follows: EU protectionism, 7 per cent of GDP; competition gap with the United States of America, 12 per cent of GDP; EU overregulation, 6 per cent of GDP-broadly in line with our Eurosceptic studies-and transatlantic barriers to trade, 3 per cent of GDP. Those four categories add up to 28 per cent of GDP. Mr Brown did not say whether there might be some degree of overlap in that but even if we are generous and divide it by four we still come to about 7 per cent of GDP, or around £100 billion a year today. Anyway, I suppose that the inquiry will want to interview Mr Brown and the officials who wrote this report.

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There are other areas which I hope it will examine. What, for instance, is the cost to our economy of the decimation of our fishing industry? Would it not be useful to have an accurate figure for the extra amount that each family in this country pays for the cost of food? That has been widely put at about £1,000 per annum per family, but the world price of sugar is now apparently higher than the EU cost. So there is no doubt that this figure fluctuates, but it would be useful to be clear about it.

By the time the inquiry reports we will have a better idea of whether we are going to get back the £12 billion that we have borrowed to bail out the euro-I fear not, but time will tell. Then there is a big one, and talk about being flogged by a dead horse: by the time the inquiry reports, the damage done to the City of London and our financial services elsewhere by Monsieur Barnier and his cronies in Brussels will be clearer than it is today. Is it not simply grotesque that an organisation which has not had its own accounts signed off by its internal auditors for 17 years, there being no external audit of how our funds are wasted, should now be telling us how to order our financial affairs? I think "grotesque" is accurate.

Finally, there is one area in which there is no room for doubt: the amount of cash that we send to Brussels every year. Please remember that our expenditure cuts last year came to some £6.2 billion. The Pink Book came out this week, revealing that we sent £18.5 billion gross to Brussels last year, of which it was pleased to give us back some £8 billion for projects designed to improve its image, such as agriculture and regional aid. That leaves a net cash contribution of some £10 billion-£10,340,000,000 to be precise-which comes to £28 million net cash every day, never to be seen again, with perhaps none of it spent in our national interest.

To put that figure into perspective, £28 million pays for the salaries of 940 nurses at £30,000 per annum each. So every day we throw away, thanks to our EU membership, 940 nurses-or policemen, or soldiers, or any other public servant you care to mention.

Yesterday in your Lordships' House we had a well-informed and moving debate on the latest report into the future of social care in this country: the care of our elderly, infirm and dying, and of our learning disabled. The report suggests that we should spend another £1.5 billion to meet our obligations to these most vulnerable people in our society, but the Government are not sure that we can afford it. Yet we are sending £10 billion in net cash to Brussels. It is against that sort of background that I suggest the inquiry envisaged by this Bill should be set, and I beg to move that this Bill be read a second time.

10.26 am

Baroness Noakes: My Lords, if I have a sense of déjà vu in approaching today's debate it is indeed because we have been here before, as the noble Lord, Lord Pearson, whom I still like to think of as my noble friend, has already reminded us. I supported his last Bill and I support him today. The previous debate on a Bill of his was handled by a Foreign Office spokesman and I am very pleased today that the Government

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have recognised that this Bill is, first and foremost, about the economic analysis of our membership of the EU. I look forward to my noble friend Lord Sassoon responding for the Government later. I hope that when my noble friend winds up, he will confirm that an understanding of the costs and benefits of our membership of the EU is crucial. It has to be in the public interest that the debate that is already happening about our future in the EU is well informed.

The noble Lord, Lord Pearson, has an immaculate sense of timing in bringing forward his Bill, with the turmoil that is happening in the eurozone. The eurozone is not the subject of this Bill, but it is inextricably linked with the EU. President Barroso has been telling us frequently that the euro is an essential part of EU membership. The euro was meant to be the crowning glory of the European project, but it is now threatening not only its own members, as Germany found out this week with a failed bond auction, but the rest of Europe, which includes us, and the global economy.

The euro was flawed at the outset. It was constructed on two downright lies: first, that the eurozone countries met certain economic tests; and, secondly, that their economies were genuinely convergent. The euro was then flawed in its operation. The European Central Bank delivered the German economic preference for low interest rates. Ireland and Spain have paid the penalty for this one-size-fits-all madness with property booms that have bust their economies, and now the euro is flawed in its inability to deal with failure. The foolish architects of the euro designed it with no emergency exits. Germany and France, as self-appointed guardians of the euro, are still ducking the real issues, and so the profligate, unreformed, book-fiddling Greece and Italy have nowhere to go and suffer the indignity of unelected officials now running their countries.

Fortunately, we have our opt-out. I have absolutely no doubt that our country would be in a very much worse economic position had we become a part of the eurozone. Even though we have kept out of the euro, there is still a centrifugal force in the EU that keeps sucking us in. Mr Blair saddled us with the Social Chapter. That, together with the inexhaustible stream of single market directives, has resulted in our businesses being weighed down by rules and regulations that choke the life out of them. We ceded significant powers when the Labour Government colluded with the rest of Europe and allowed the constitution to be dressed up as treaty changes, thus denying people a referendum, and I am not proud of my party's failure to rectify that. Brussels has used the recent financial crisis to pursue policies that are naked attempts to ruin the UK's successful financial services industry. Our Government have woken up to that, but it may be too late.

The noble Lord, Lord Pearson, has already explained the existing analysis of the costs and benefits of the UK's membership of the EU. Suffice it to say that the best the studies ever show is that the effects might be marginally positive, but most show the disbenefit rising to as much as a quarter, as the noble Lord pointed out. Since the trend in Europe is of an increase in regulation, the trend will be for that analysis to get worse over time for the UK.

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The main point for those of us on this side of the argument is that it is pretty clear that there is a cost of staying in the EU, that the cost is significant and that the benefits are limited. Those on the other side of the argument tend to avoid being drawn into the specifics of cost-benefit analysis. They tend to rest instead on rather broad, often irrelevant or incorrect, assertions of benefit, and the noble Lord, Lord Pearson, dealt with some of them. I very much regret that even Conservative Ministers in the coalition Government do this, although I hope my noble friend the Minister will not do so today.

I am not advocating today, as the noble Lord, Lord Pearson, is, that we withdraw immediately from economic membership. I note in passing that the committee that this Bill would set up is entitled a "committee of inquiry" into withdrawal from the EU, although it is very clear that the matters to be covered as set out in Clause 1 deal with the costs and benefits of membership, so I think that the noble Lord has indeed prejudged the outcome of the inquiry by calling it a withdrawal study. I would like to see whether there is any mileage in a Europe in which we can assert more positively the rights of nation states to run their own affairs. We have to be able to have less Europe in our daily lives, not more.

Until recently, I had some hope that a way could be found for the UK to participate in Europe on a more voluntary and less extensive basis. I still think that it is worth a try but I am becoming less optimistic. In particular, the turmoil in the eurozone has emphasised that if the euro survives-and that is now a big if-it seems likely to involve more central control within the eurozone. The prospect of caucusing within the eurozone will become a very real threat to our interests, and I firmly believe that we should remain outside that. So, ever closer union within the eurozone means ever more likely divorce from the EU for us. On this basis, it would be wise for the Government to prepare for all eventualities in our relationship with Europe. That is why I support the Bill.

Of course, there ought to be no need for the Bill. The Government are aware that the EU is not popular, that three-quarters of the population want a referendum on it and that over half think that we should withdraw. The debate is already out there and the Government should positively want to have good-quality information guiding that debate.

There are some things in the noble Lord's Bill that could be improved in Committee, but for today I hope that the House will give the Bill a Second Reading and that the Government will give it their full support.

10.34 am

Lord Davies of Stamford: My Lords, I congratulate the noble Lord, Lord Pearson, on bringing his Bill forward and on getting his Second Reading today. I disagree with him on European matters almost the whole time-I think that many of his arguments are very unconvincing and his plans for the future of this country would be disastrous-but nevertheless I genuinely admire his persistence and ingenuity in pushing his, to my mind, very misconceived views. That is what democracy is all about, and I hope that he will at least

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take that tribute. He will not get any more tributes from me in the course of my remarks; I thought that we had a series of unconvincing and indeed sometimes specious remarks from him, so I decided to throw away my originally conceived speech and spend my few minutes trying to set out where I think he has gone very badly wrong.

It was quite fatuous to suggest that the City of London was at threat from our membership of the European Union when the City's enormous international prosperity has coincided with our EU membership.

On fish, I have to say to the noble Lord that fish have an unfortunate habit of not recognising national frontiers. Therefore, if you share a continental shelf with other coastal states, you have to have agreements about fish, because if one of those states overfishes then everyone else's fishery is equally destroyed. If we left the European Union's common fisheries policy, the very next day we should have to set up some international agreement under which we established quotas, and in order to do that we would have to set up the scientific machinery to advise on what the quotas ought to be. In order to ensure that the quotas were effective we would have to set up some enforcement procedure and some penalties-in other words, we would have to recreate the Commission and the European Court of Justice and the whole structure relating to fish. It does not seem to be very intelligent to leave a union one day and the very next day to have to set the thing up again in a new fashion.

The noble Lord seemed to think that we could save a lot of money by leaving the common agricultural policy. He falls into two errors there. The first is the assumption that we ourselves would not wish to support our own agriculture, which is unlikely. If we did support it, we would have to deduct the costs of doing that from his proposed savings.

The second error is something I would like him to reflect on for even longer: if we had left the European Union but remained in the single market in some way, as Switzerland has done-I think that that is what he wants to do-we could not avoid accepting agricultural imports from other EU states. They would never agree, and never have done, to a single market involving purely manufactures and services and not agricultural products. Up to now they have set up commercial agreements with countries such as Switzerland and Norway that have a higher level of agricultural protection, so the problem has not arisen, but with us they insist on a free market in agricultural products. If we did not support our farmers and the continentals and the Irish went on with the CAP, we should find that our farmers were at an enormous competitive disadvantage. They would be completely undercut by competitive products from the EU where a large part of the fixed costs of farmers is being met by various forms of subsidy and payment. The noble Lord's formula there would lead the devastation of the British countryside.

The noble Lord mentioned a net cash figure of £10 billion. That is less that 1 per cent of GDP, which has always seemed to be to be a pretty small subscription for the enormous benefits of the single market, which

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I will come on to in a moment, and of our being at the decision-making centre of it. I have to tell the noble Lord that a lot of that money has to go to regions that are net beneficiaries. The country as a whole may pay out cash of £10 billion, but I am not sure that the part of Scotland that he lives in is not a net beneficiary-I suspect it is. Many other parts of the country would have to be compensated for the money that they were losing, so that would be a burden on, for example, the people of the south-east, who may think that at present they get the benefit of the £10 billion that he is talking about but they certainly would not. That, again, is very misconceived.

Even more importantly, some of that £10 billion goes to causes that surely we continue to want to support. Is the noble Lord suggesting that we should not be spending money on the neighbourhood policy and the stability of countries in north Africa and the former Soviet empire-Georgia and so forth? Does he want to cut that? If not, we have to pay that anyway. What about the EU's overseas aid policy? Presumably, if we pulled out of that budget, we would still want to spend that money on those poor countries, or is he suggesting that we should pull out from supporting starving countries like Ethiopia? It is a thoroughly flawed argument, if I may respectfully say so.

Finally, but very importantly, he misunderstands entirely the important distinction between current business flows, which we might be able to preserve through some trading agreement with the EU, and investment in new capacity and new job creation. For example, if you speak to the three Japanese automotive companies that set up in this country, they should not have dreamt of setting up here if we had not been part of the EU and indeed part of its decision-making structure. We were going to be involved in any discussions about the future of the car industry, health and safety, consumer protection measures, international trade measures, environmental measures or whatever it might be. He would find exactly the same if he were to speak to Tata, which now owns Jaguar Land Rover; it would not have dreamt of moving into this country if that had not been the case. Similarly, no one would dream of setting up in the pharmaceutical industry in this region of the world without being able to benefit from the one-stop registration policy that you get if you are part of the European Union. An enormous number of jobs depend on decisions that would not have been made if we had not been part of the European Union.

On the other side of the coin, it would be at zero. I challenge the noble Lord to cite a single case of someone who would have invested here if we had not been in the European Union but did not invest because we were. If only one job was created, that would be infinitely greater than zero-

Lord Pearson of Rannoch: My Lords-

Lord Davies of Stamford: I will give way to the noble Lord when I have finished my sentence, if I may. Even one job would be infinitely greater than zero, so if you have a balance on which there is a positive

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number on one side and zero on the other, the result that the noble Lord gets from his commission inquiry will be quite clear.

Lord Pearson of Rannoch: My Lords, I will come back to at least four of the noble Lord's points in my summing up. As he has challenged me on the question of investment in this country, is he aware that our UK Trade and Investment agency does not list our membership of the European Union among the eight top reasons for investing in this country? It is not mentioned at all.

Lord Davies of Stamford: If that is the best that the noble Lord can do by way of argument, to find a bureaucracy that does not mention the European Union in some handout, then I am even more confident of my position.

I do not want to take more than my fair share of the time. I have dealt with a number of the noble Lord's points. As he can see, I disagree with him profoundly on the arguments but he will be pleased that I do not disagree with him about the Bill. I think that it is an excellent idea, and am quite confident that any such inquiry would come to the conclusion that the facts would indicate.

10.41 am

Baroness Falkner of Margravine: My Lords, I, too, start by paying tribute to the noble Lord, Lord Pearson of Rannoch. He is indefatigable in pursuit of making our country think again about its role in the European Union. It is right that we periodically debate the big picture of our relations with our neighbours, our allies in our relationships with the rest of the world and, of course, our largest trading partners, the European Union.

The Bill is a modest measure on the face of it, but of course has profound implications. The committee that it calls for is intended to merely state the economic facts so presumably, and despite the lessons of the last few years in terms of the global economic crisis, we are still to have a blind faith in economists and economic theory as the basis for decisions which will have the most significant impact on our country's welfare for both our and future generations. That is quite astonishing.

I will return to the broader case in a few minutes. Let me concentrate narrowly on the measures in the Bill right now. The composition of the committee is rather fanciful: two members for; two against; and three neutral. One wonders which planet we will find the three neutrals from. The idea that we might be able to find persons of exceptional calibre-potentially economists, businesspeople, academics or lawyers-presumably of considerable sagacity and professional experience, who will have no opinion on the biggest single issue of their generation is slightly cloud-cuckoo-land, is it not?

The question also arises of the representation of the views of people from other nations on this committee. I appreciate that the United Kingdom Independence Party obtains a rather limited mandate in elections in three of the four nations of the United Kingdom. In Scotland, it obtained under 1 per cent of the vote, in Wales 2.3 per cent and in Northern Ireland just 0.6 per

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cent. It should infer from this showing that the views of these nations do not chime with its sentiments for withdrawal from the EU. I wonder if the noble Lord might be able tell us in his concluding remarks how the committee might reflect the views of people in Scotland, Wales and Northern Ireland on his proposals.

My final point on the Bill relates to the need for it in the first place. If a narrow cost-benefit analysis is what the noble Lord believes should form the basis of big strategic decisions that states make, then I fear that his interpretation of statecraft is rather different from that of these Benches. A fundamental of international relations over centuries has been the recognition that the national interest changes over time. It needs to account for a country's security needs, its geographical position in relation to its neighbours and, above all, its understanding of the world around it, against a backdrop of history. If all we need is a quantification of costs and benefits, we can obtain that in numerous library papers, think-tank reports and business analyses. We would not need a committee to tell us the answers. The noble Lord himself is prodigious in obtaining information on these matters at considerable effort and cost.

The evidence already tells us that the economic case is persuasive. The UK is part of the world's largest single market in GDP terms: some £10.5 trillion in 2009, with 500 million consumers interacting without tariffs. If the internal dynamics of so many people trading is not sufficient, it also attracts benefits in the form of investment flows into the UK. Half of the overall stock of foreign direct investments in the UK now comes from EU member states. This investment has been augmented through our membership by an increase in non-EU FDI as well. That has been growing since the implementation of the single market, probably as a consequence of our membership of the EU. If we look at the US share of inward investment stock-some 27 per cent of the total in 2007-it is estimated that a significant proportion of this has come here because we are a hub into EU markets.

The implications of withdrawal would immediately be felt in a drying up of external investment. Why would a large corporation wish to base itself in the UK, when Ireland offers a considerably lower corporate tax rate, where skills levels are at least equal if not superior, and where English is spoken as well? What of FDI from the EU itself? Those companies own £315 billion of stock in the UK, which is about 50 per cent of total UK inward stock. Would they still feel the climate was conducive to a presence in the UK if we were no longer part of a common standards and regulatory regime?

At the current time of such singular austerity, it is also surprising that UKIP appears unconcerned about the impact on employment. The House of Commons Library research papers estimate that 3.5 million jobs, 10 per cent of the UK's workforce, are linked to the export of goods or services to the EU. So UKIP's message would be that we must have our splendid sovereignty, and if all it gives us is an unemployment rate of some 20 per cent, well, that is no matter.

However, the case for sovereignty is also mistaken. It is collaboration with partners that UK companies want. Ask BAE Systems what European collaboration

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means for research, development and jobs. Would we have played a part in Airbus or the Eurofighter from our splendid isolation? EU membership gives us greater clout through collective action. In the geopolitical sphere, this becomes all the more important. Does the noble Lord believe that our membership of the UN Security Council would be sustainable today if we were not, with France, speaking for the EU? Could we have mounted the action in Libya without support from all the EU countries which worked alongside us? Could we take part in the quartet on Israel/Palestine if we were outside? Could we be part of the E3+3 negotiations on Iran without EU membership? Would we be capable of effective action on the environment without working through the EU, or have the clout to negotiate beneficial trade agreements on our own with some of the most important emerging economies outside the EU?

I could go on and on, but we will have considerable time when the Bill comes to Committee, so I will stop here. I look forward to pointing out the manifold benefits of our membership of the EU as we go on.

10.48 am

Lord Bilimoria: My Lords, we are caught between Utopian ideology and harsh reality which, throughout the eurozone crisis, has yielded to illogical, irrational arguments and behaviour. Just this week we have had President Barroso imploring Europe to unite. In a way, he is saying, "United we stand, divided we fall". We have a constant clamour for whether we should have an "in or out" referendum. We have the noble Lord, Lord Heseltine, saying that we will ultimately join the euro. One of the best decisions this country made was not to join the euro.

We have people calling for and predicting a two-track euro, with the inner core consisting of France, Germany and a few other countries, with an outer core of the PIGS et al, and then you have others saying that there will be a shrunken eurozone with the PIGS et al going back to their own currencies. Then you have those saying that the euro will disintegrate altogether, which would have a catastrophic domino effect around the world. Then you have everyone putting pressure on Germany to save the euro, including our own Prime Minister and Chancellor, while just this week the Bundesbank had to pick up 39 per cent of the German bond sale after commercial banks bought just €3.6 billion of it. What a lot of confidence we have in Germany. We have German Chancellor Angela Merkel saying that Germany would be prepared to give up a piece of national sovereignty in order to survive. Then she said:

"No one should take it for granted that there will be peace and affluence in Europe in the next half century ... If the euro fails, Europe fails".

We are just refusing to accept the elephant in the room. The European project, which has been so brilliant, and instrumental in keeping the peace and promoting free trade and the free movement of people between the countries of the European Union, has pushed the envelope too far with the creation of the euro. We talk about countries being run by technocrats, but to satisfy

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the Utopian dream of our Eurocrats-of creating a United States of Europe-we stand where we do today.

We may have a European Parliament but we do not have a federal Europe and we need to wake up to this. I have said from day one that the only way that the euro can work is for us to have complete political, fiscal and emotional union. That means being an India or a United States of America, which have true federal systems and where the centre is in control of currency, interest rates and national taxes. That is a fiscal union. Most importantly, the centre is responsible for the defence of the united federal country. A true fiscal union needs to have a central bank as a lender of last resort. The European Central Bank has shown itself to be completely powerless. It is the IMF that we must rely on, although the IMF showed itself to be useless in the financial crisis three years ago and needs to be reformed.

Being a federal system means a complete surrender of any sovereignty by the states that make up these countries. Can we realistically see that ever happening in Europe? If we are relying on political will to make this happen, we are fooling ourselves. With the euro, a one-size-fits-all approach cannot and does not work. You cannot have countries and economies as extreme as Germany and Greece under one exchange rate and one interest rate: they will never be in sync at any one time.

Now is not the time to get out of Europe. I am a supporter of Europe. Now is the perfect time for Britain to lead in restoring the European Union to what it should be: a trading bloc of goods and services, and of people with shared principles and values. However, even with those shared values, the European Union has lost the plot. Day after day we are being hampered by European regulations that are stifling our businesses and removing the flexibility of our labour force.

The noble Lord, Lord Pearson, suggests that a committee should be formed to perform a cost-benefit analysis of being in or out of Europe. Surely such a committee is unnecessary. Surely the Government carry out this cost-benefit analysis every single day. I am confident that the Minister, in his response, will give us this cost-benefit analysis in detail in this House today.

We have huge strengths in Britain. We are by far the most international country in Europe. We are looked upon as the gateway to Europe. That could be because we have London, the most global world city and the greatest of the great cities, because of our financial markets or because of the English language. We are not to be led by Germany and France. Kipling's words were:

"If you can keep your head when all about you are losing theirs".

In spite of our awful financial predicament, we have the confidence of the global financial community with our interest rate yields, which are better than Germany's, and our AAA rating.

Trying to keep the euro together in a shrunken eurozone, or trying to keep the whole project together, is just postponing the inevitable. Logically, the euro cannot work without full fiscal union and I cannot see

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that happening in Europe. Historically, it has never happened. We need to work towards an orderly, staged shrinking-and perhaps even eventual dismantling-of the euro and, most importantly, redrawing the European Union and going back to basics to make it what it is meant to be. We have to wake up; these are dangerous times. Even the Governor of the Bank of England is saying, "I don't know what's going to happen tomorrow". Will we go back to when Her Majesty the Queen, on a visit to the London School of Economics during the financial crisis, asked, "Why did nobody notice this?"?

To conclude, as a country, we are best when we are bold. That is the spirit of this country. Now is the time for Britain to take leadership. It was not many years ago that Britain was referred to as the sick man of Europe. Today we should be seen as the sensible man of Europe. The euro is not only underwater but dead in the water. I quote:

"The era of procrastination, of half-measures, or soothing and baffling expedients, of delays, is coming to its close. In its place we are entering a period of consequences".-[Official Report, Commons, 12/11/36; col. 1117.]

Those were the words of Winston Churchill in the House of Commons in 1936. We have to wake up and face the consequences.

10.55 am

Lord Ryder of Wensum: My Lords, I congratulate the noble Lord, Lord Pearson, on producing the Bill and, while quibbling with many of the details, I applaud the principle. For years, the noble Lord has displayed consistency over Europe, always coupled with courtesy and patience in your Lordships' House.

We require an audit of the costs and benefits of our place in the European Union. Europe is in economic chaos, chiefly of its own creation, as my noble friend Lady Noakes underlined in her forensic speech a few minutes ago. Almost 20 years ago, the Maastricht treaty was supposed to restrain public spending in member states. However, in no time Greece joined the eurozone under entirely false pretences as every member state ignored the Maastricht conditions. Before long even the Germans fractured the so-called stability pact. What was good for this core cat became better still for the peripheral PIGS. The European project may have appeared desirable, if not essential, at the outset, but it was always Utopian, as the noble Lord, Lord Bilimoria, has just reminded us. I have always shared Macaulay's view on Utopia. He said that he would prefer to own "an acre in Middlesex" than "a principality in Utopia".

In passing, I observe a slight Utopian resemblance between the European project and Marxism. When the failure of their creed is pointed out to Marxists, they invariably respond by claiming that it has never been tried in its correct form. The same excuse is offered by proponents of the European project. Day after day, as the project dithers to a halt, we hear that the absence of fiscal and even political union caused the eurozone breakdown. Now I read that even our Prime Minister and Chancellor are in favour of fiscal union. I wonder whether they know what it entails. Fiscal union requires a centralised treasury, shared tax

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and spending, common sovereign debt, huge transfers of cash from north to south and, of course, the ECB to act as lender of the last resort. I expect the Prime Minister and Chancellor are confusing fiscal union with what the Commission and Mrs Merkel call a stability union, whereby stronger discipline and convergence will be imposed in the European Union. They say that member states would be obliged to submit draft budgets to Brussels before they are introduced to sovereign Parliaments. This is part one of the plan to prolong the life of the eurozone. However it will not survive, if ever it exists, because the debt markets will behave like the currency market did over the narrow band exchange rate mechanism 19 years ago.

Other proponents of the euro, or the project, expect the IMF to act as the cavalry. They overlook the fact that IMF action is always locked into budget deficit reductions, monetary policy and interest rates. However, Greece cannot respond like a sovereign nation because it lacks powers over monetary policy and interest rates. Nor can Greece devalue its currency. Greece and Italy, as well as other countries, belong to the wrong currency. For them, austerity is insufficient. Devaluation is a necessity. Their currencies are misaligned by as much as 40 per cent. Nor can the structural imbalance be rectified by debt deflation, even if the Germans chose to reflate themselves. The Greeks and Italians should secede from the euro in a managed manner. The short-term shock to Europe will be better than the inevitable longer-term disaster.

Parents of the euro promised greater economic stability. How could this possibly be achieved when each economy, as has been underlined in the course of our debate, advances at a different rate and in a disparate direction? The euro has generated uncertainty and volatility, producing new and perilous-yes, perilous-divisions across the continent. There is no credible historical example of a currency union without political union and no precedent for a currency lacking a lender of last resort. The eurozone experiment resulted from political leaders failing to grasp the essence of economics. Now the greatest danger to the continent comes from quack potions designed to keep the euro alive. Better an orderly break-up now than a disorderly one later. No wonder the chairman of the China Investment Corporation refuses to offer assistance to the EU as long as it persists with the currency as well as outdated labour markets and welfare systems. It is against this background that the noble Lord, Lord Pearson, is entitled to demand answers to the question posed in his Bill. I go back, if I may, to Macaulay, who declared:

"A single breaker may recede; but the tide is coming in".

In time it will wash away the Utopian euro referred to by the noble Lord, Lord Bilimoria, and myself earlier in my speech.

11.01 am

Lord Empey: My Lords, since I came to your Lordships' House the issue that seems to get everybody's blood up more than anything else is Europe. It is hard to plot a middle course but it seems that we have not resolved the arguments of the 1970s, which continue apace. I have no doubt that after his gruelling visit to the Gulf

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states this week, the Minister looked forward to nothing as much as three or four hours of us going on about Europe. I knew that that would bring his week to a perfect end.

I hope that I will be able to stay for the wind-up but I should say at the outset that the European Union has benefited my region to an extent. Indeed, I pay tribute to it for the money it gave to the fund for the peace and reconciliation process in Northern Ireland. It gave that money on exceptional terms and it was greatly appreciated. However, I hear people continuously complaining about this or that European regulation, and in many cases rightly so. The question one has to ask is why and how these regulations and directives are being made. They are being made because the successive Governments we have sent to negotiate in Brussels have put their hands up for all these directives and regulations. The Commission does not manufacture them. It is taking these decisions because we have agreed in principle to allow it to do so. That is where I believe the core of the problem lies. We can demonise the Commission, and rightly so in many regards, but it is taking those decisions because we agreed to the treaties that allow it to do so. The Commission is not acting irregularly; it has the authority to take those decisions. That authority-in many cases, regrettably-has been given by successive Governments and Parliaments because we are in the European Union as the result of a referendum.

I agree with the noble Lord, Lord Bilimoria, that the essence of this Bill is about providing a cost-benefit analysis. Like him, I had assumed that that would be an ongoing piece of work. If you are a member of any organisation, whether that be a golf club or whatever, every year you weigh up the balances of remaining a member. I had assumed that the Government were doing that consistently. I have no doubt that the Minister will confirm that when he winds up. How did we get to the present position? The idea of a wide, powerful, large single market is very attractive; there are geopolitical, emotional and other good reasons for having it. I have no objection to any of those things but I increasingly object to the suffocation of our initiative and enterprise by a plethora of rules and regulations which are being imposed on us.

As regards the single currency, people are focusing on Germany. The Germans connived and conspired with the European Commission to fiddle the books when the euro was introduced. It was perfectly obvious to everybody that the Greek, and perhaps the Irish, Portuguese and Spanish economies, were not on a par with those of northern Europe, but the Germans fiddled the books for political reasons. That is what is poisoning the whole system, which is dominated not by economics but ultimately by the politics of a small elite who believe-they are perfectly entitled to do so-that we are aping the United States and effectively becoming a single state in all but name. That fiddling of the books by the Germans in particular has been done for political reasons. One hears Angela Merkel complaining but the fact is that she and her predecessors have created this situation even against the advice of their own central bank, which made it clear that the other economies were not at the stage of development that allowed them to have a single currency. I know

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from our neighbours in the Irish Republic that the single interest rate led it into the mess that it got into because it caused a flood of cheap money. The interest rate was kept low to allow the Germans to rebuild their industry and become more competitive but at the same time it destroyed the weaker economies that should not have been in the eurozone in the first place. We can see that the generally good idea of co-operation with one's neighbours, which I fully support, has become corrupted.

The whole question of investment has been raised by a number of noble Lords. I have tried to seek investment in other places. The single market is an attractive proposition but having the right labour force and cost base are far more attractive. However, our membership of the European Union pushes against us in those regards as it is raising our energy costs and other regulatory costs. Therefore, the costs and benefits are very hard to judge.

Trade imbalances are the other reason for this fundamental difficulty with the eurozone. If you keep on selling less than you are buying, sooner or later there is a problem. We have that problem now. We should be developing our economies and developing stronger relations with the Commonwealth, with its balance of developed and underdeveloped economies. We should be looking outwards and seeking trade in a much more aggressive manner. Despite our efforts in Iraq, we are already being outtraded by other countries which did not lift a finger to help it. The same will happen in Libya.

I hope that the Government will look more rigorously at how we can promote our trade because the fundamental imbalances in our trade are causing the instability in Europe. As long as you are a debtor, you will always find the person to whom you owe money will follow you up and demand proper payment in due course. I have little sympathy for the Germans because I believe that they have brought this on themselves; and brought it on us.

11.08 am

Lord Risby: My Lords, I add my warm congratulations to the noble Lord, Lord Pearson of Rannoch, on the sheer timeliness of this debate. Whatever one's view of the European Union is, as we survey it today it is certainly not a happy picture. We have a crisis of legitimacy; the rise of disconnect of the peoples of Europe from the institutions of the European Union; a collapse in economic growth, including now in Germany; a lack of competitiveness, big demographic challenges; high unemployment and high budget deficits and debts right across the European Union. I entirely agree with my noble friend Lord Ryder that it would appear that the euro is now fragmenting. I think that this is inevitable and, ultimately, desirable.

As we look at austerity in our own country, it is fair that any sizeable contribution by the British taxpayer to any external organisation should be looked at carefully. We also need to look at whether burdens on our businesses are generated from elsewhere, such as the European Union, or whether they are domestically generated or a mixture of both. That is certainly true, but it is also fair to say that in any objective assessment

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of our relationship with the European Union, we have to look at benefits that are difficult to quantify. For example, how do you measure freedom of movement or the mutual recognition of qualifications? Of course we need to co-operate in areas such as environmental protection, criminality, the drugs trade and money-laundering. It is difficult to quantify how the EU impacts on the life of this country in this regard, when also you consider these issues.

At another level, we need occasionally to take collective action. I have a particular interest in Syria. There is no doubt about it-EU-wide sanctions are an important force in trying to deal with the situation that is so tragically happening there. If we were doing that on an isolated basis, of course the impact would be much less. However, the Bill stresses economic implications and I simply point out that any overall assessment needs to look at non-financial aspects too.

Public opinion has quite rightly been enraged by the inability of the Court of Auditors to approve the EU accounts. The error is something like €4.6 billion. Indeed, it is the 17th year that the Court of Auditors has been unable to give an unqualified statement of assurance. Additionally, our net contribution to the European Union has trebled between 2008-09 and 2014-15 in a way that makes it difficult for many people to understand what the advantages of that process have been. A number of organisations have looked at the proportion of the cost of regulation from the EU that has impacted our businesses and they have concluded that it is substantial.

Any relationship between two countries, whether organisational, bilateral or multilateral, has to be based on a whole number of frankly unmeasurable criteria. This will include collective action on a global basis and co-operation in spheres that inevitably directly impact the well-being of individual EU states. However, there is another aspect. Are countries such as Switzerland or Norway, with populations that are smaller than Greater London, free of financial contributions and single market rules? They are not. Whether in consumer or environmental protection there is the internal market. If, for example, we were to seek membership of EFTA-we may not do so if we were to leave the European Union-would it necessarily accept us? The simple truth is that through our very long history and connection with the continent of Europe, this country has quite rightly been reluctant to be involved in European Affairs at different times. However, in the end, we cannot escape our geography and the links that bind us with our neighbours. Frankly, we cannot preclude or exclude ourselves. Of course, this does not stop us from fighting for our national interest in the European context. However, it would be unfortunate to believe that somehow we could wish away our geography and links.

I should like simply to end with two points. As we look at the EU and the turmoil today, it would be madness if we were to divorce ourselves from other major European countries when whatever happens will directly affect us. I am happy to say that that is not the view of the British Government because I believe

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that we are trying as hard as we can to be involved in trying to unpick the mess that the European Union has fallen into.

It was Willy Brandt who once said that politicians go into politics to resolve a given set of problems, but once those problems are resolved they fail to move on. That is the case with the European Union today. It is frozen in time and failing to adjust to the way that the world now operates. I do not know, as we enter into this very difficult time, whether we are in unknown unknown or known unknown territory, but it is vital that there is a new structure within the European Union; that may emerge out of the crisis that is happening now. It is important that we then try to draw the advantages of EU membership and reconnect the peoples of Europe with the lack of democratic underpinnings that exist. I believe, however, that that will be our role. What the peoples and markets of Europe and our country in particular are now saying is simply this: the European Union as presently constituted is past its sell-by date, but we should be there to influence the future.

11.15 am

Lord Desai: My Lords, let me first say that I very much compliment the noble Lord, Lord Pearson, on getting this Bill for Second Reading and, over the years, on pursuing what he strongly believes about the dubious case for being inside the European Union. He reminds me of my former noble friend Lord Bruce of Donington who used to go through every document published by the EU, and he knew more about auditing than anyone else that I can think of. I should also say that the noble Lord, Lord Pearson, is a great champion of liberty, because he is always championing the maverick and unpopular view. Given that we inhabit the same space on the Back Benches, which is for mavericks, I very much feel at one with him.

This Bill is not about whether the European Union is a good or bad thing. It is about whether we should have a commission to examine our case for it. Those who are very strongly in favour of the EU have nothing to fear because they should say, "Once and for all, we will establish the case for the European Union and send the Pearsons and the Stoddarts of this world far away into exile, and they will never again question our membership of the EU". Those on the other side say, "Once and for all, let us prove our case and we will show that the costs exceed the benefits of our membership, and that will settle the hash of those who support the Union". That is fine.

What has happened over the years is that many opinions have changed. My party used to be very anti the Common Market, as it used to be called. In the teeth of opposition, Harold Wilson managed a referendum-in which I voted yes, incidentally-but it was not until Jacques Delors came to the TUC meeting in 1988 and told us that the European Union would bring us back the trade union rights that Mrs Thatcher had taken away that we suddenly became pro-EU. I also noticed that on the Front Benches of all parties, perhaps with the exception of the Liberal Democrats, there are no giants in favour of the European Union. There is no longer Sir Edward Heath, Lord Jenkins or

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my late and lamented friend John Smith. They were doughty champions of and enthusiasts for the EU. My noble friend Lord Mandelson is the only one who is senior enough to claim that title now and that he is strongly and positively for the EU.

My opinion has changed. I used to be a federalist. I wanted a single market and a single currency in 1992-no questions asked. That might have been easier, but no-our views have changed. Some have gone from anti to for, and some have gone from for to anti, but the truth is that the general public and political mood is of sullen indifference. The Government may be doing a cost-benefit calculus every day, but we do not really want to admit to whether we should make the threshold decision of being in or out. We say, "We are in. Why bother? Just let it go along". That is not a healthy situation. If there was in this country a great enthusiasm for Europe, we would be clamouring to get into the euro. We are not. We would be strongly in favour of a closer political union. We are not. Nor are we strongly arguing-despite what every Conservative leader has said-in favour of breaking up the EU or making it more decentralised. Whatever we may say about getting our powers back from Brussels, no political leader has seriously put forward a scheme for getting us back to whatever the situation was in, say, 1975 or 1980. We are where we are by our own volition, as the noble Lord, Lord Empey, pointed out. We agreed to everything that has happened, but without enthusiasm. We agreed but said, "Why bother? Let it go. It is not worth questioning". Therefore, we have had this debate for 40 years and people have changed their views.

I would say one thing about the noble Lord's Bill. Like the noble Baroness, Lady Falkner, I do not know whether I would find two people for, two people against and three neutral people who could swear to me that they had always been for, against or neutral. The situation is important enough not to confine it to just seven members or to just the economic implications. I quite agree that there are other-strategic, geopolitical or whatever-implications. This is a big constitutional issue for the country. The Government should take it up and arrange for a proper, deep inquiry and, perhaps by 2013 or whichever year is the 40th anniversary of our passing the Bill to join, we will have a thorough and comprehensive report and we can ask ourselves whether it is worth staying in or leaving, what the different alternatives are, and what the different scenarios are, as people in business often say-being completely out, being in EFTA or being in the EEA. Let us see the full menu of costs and benefits, economic and otherwise. There are ways of doing that-it is not rocket science.

Let us not shy away from debate or inquiry. Let us not conclude that just because the noble Lord, Lord Pearson, is in a minority, he must be wrong. There is no proof as to which is wrong and which is right. I should love to see this committee set up; I should like to see what comes out at the end of the day about the costs and benefits of membership. Let us keep an open mind and go for knowledge rather than dogma.

11.21 am

Lord Willoughby de Broke: My Lords, I join other noble Lords in thanking my noble friend Lord Pearson for introducing this debate. This is the fourth such

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inquiry that he has asked for and it seems perfectly reasonable to ask the Government to take a dispassionate look at the costs of our membership of the EU. The noble Lord, Lord Desai, described my noble friend as a maverick; others have sometimes been less generous, but events have shown that my noble friend the maverick has been right and the purveyors of the nonsense about our destiny being in the EU have been comprehensively shown to be wrong.

The arguments that some of us have been making over the years about the financial costs to this country of our membership remain as valid as ever. There is our annual cash tribute of £18 billion gross a year, which my noble friend mentioned, and there is the common agricultural policy. If the noble Lord, Lord Davies, were in his place, I would say that of course we would support our farmers in Britain. We did so before we joined the EU and we will do so when we leave. What we will not be doing if we leave the CAP is to support French, Italian and Greek farmers as well, and we should not do so. The common fisheries disaster and all the regulations that the noble Baroness, Lady Noakes, talked about that are hamstringing the City were deliberately introduced by Mr Barnier and the Commission, probably at the instigation of the French and the Germans, who are jealous of the preponderance of the City of London. Those are enormously damaging.

I would add one other thing which no noble Lord has mentioned yet and that is the extraordinary folly of our emissions policy as part of our renewable energy policy. It has meant that we are building an extraordinary number of very inefficient windmills over some of the most beautiful parts of the country with no benefit at all other than to the manufacturer of those windmills and with a great disbenefit to the taxpayers of this country. That is an EU-proposed measure.

Lord Lea of Crondall: I am grateful to the noble Lord for giving way. Is he not aware that it was Britain that at every stage pushed for tighter and tighter EU targets? It was not the other way round.

Lord Willoughby de Broke: I am not sure that is right. The target of 20 per cent of our energy from renewable sources by 2020 is entirely an EU target, so I cannot agree with the noble Lord on that.

I think that the penny has finally begun to drop in the City of London, and I hope that it is indeed not too late for something to be grabbed back from all this. I wonder sometimes what UKREP is doing in Brussels. This tide of regulations, directives and thousands of rules seems to come almost entirely unamended, but UKREP is supposed to be looking after our interests in Brussels. I should like to find out whether that is what it is doing. I had a quick look at its website and saw that the EU flag was right at the top, with the Union Jack being almost invisible right at the bottom. I hope that that is not a sign of its priorities.

Leaving that aside, recent events have brought this whole debate into very sharp focus. The Government must recognise, however reluctantly, that we should stand back coolly and look at the economic benefits and disbenefits of our membership. Things have gone

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completely pear-shaped in the euro. What was supposed to be the cement is not even holding together the tottering edifice of the EU, which seems to be falling apart by the day. It is rather a cruel spectator sport to watch the daily news bulletins to see which domino is to fall next. All that the European politburo-the so-called élite-seem to be able to do is stand on one leg and sing "Ode to Joy". They do not seem to have an answer at all to what is happening. Surely we have now reached a tipping point. The Government must take up the challenge in this Bill and try to identify where our interests lie. As my noble friend said, it is no longer good enough to say that the benefits of our membership of the EU are self-evident. That is simply no longer the case.

Let us take a brief look at the economics. The euro, as the noble Lord, Lord Ryder, said, was always a badly flawed project. The eurozone has turned out to be an economic disaster for the weaker members. They can never compete with Germany in the same currency-there is no chance of that at all. Ireland, Greece, Portugal and Italy have gone down the pan and Spain seems to be on the brink. However, for them-this was presciently put by Mr William Hague-the euro is,

The euro has turned out to be an incendiary device-a weapon of mass economic destruction.

However, almost incredibly, there are still voices telling us that we should be in the euro. From a padded cell in Conservative Central Office just last week the noble Lord, Lord Heseltine, said that we should join the euro. Frankly, I suggest that they throw away the key. However, cheerleaders such as the noble Lord, Lord Heseltine, and others-of whom there are examples in this House-owe it to us to explain how a system that was supposed to engender prosperity and democracy has turned into the very opposite: a Caliban that is causing hatred and conflict, and turning people against their Governments and against each other. Already we have in Greece anti-German jokes, perhaps regrettably. When the EU economic task force imposed on Greece by the EU arrived, one Greek newspaper had the headline "The prison guards have arrived". Unfortunately and unluckily, the head of that task force was a German called Mr Horst Reichenbach, who was instantly dubbed "Mr Horst Thirdreichenbach" by the Greeks. That sort of thing may be amusing to read about but it is actually a disaster when it comes to democracy and co-operation between member states and democracy in those countries.

The fact is that the economic cost is enormous, as my noble friend and others have pointed out, but the political cost also has to be looked at in this context. Do we need to be part of an organisation that is not only an economic failure but a political failure as well? Do we want to be a member of an organisation that usurps elected leaders in member states? Do we want to be in an EU that is so terrified of having a referendum that it took the elected Prime Minister of Greece behind the bike shed wherever the meeting was and forced him to resign? Do we want to be part of an organisation that hand-picks the leaders of democratic

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countries-the ones who can be relied on to toe the line-never mind that Monti and Papademos were willing parties to both Italy's and Greece's accession to the euro? Their hands are not clean on this, yet they are the people who have been put in place by the European Union. Above all, the Government need to carry out this analysis to nail, once and for all, the threats that, by disengaging from the EU, Britain will somehow be left in the slow lane and will lose its place at the top table. That is what they like to tell us. If the food at the top table is rancid-

Baroness Stowell of Beeston: My Lords-

Lord Willoughby de Broke: I shall finish very shortly. I am going to finish my speech. This is an important debate, as the noble Baroness, Lady Noakes, said. I intend to finish my speech in a minute.

Baroness Stowell of Beeston: My Lords, I would like to make the point that I understand that different views were expressed at the start of the debate. The noble Lord, Lord Campbell-Savours, asked the government Whip to intervene when noble Lords had exceeded six minutes, and the noble Lord has exceeded eight minutes.

Lord Willoughby de Broke: Yes, I shall be as brief as I possibly can be, but this is an important subject. I am sorry, but I do not feel that there is a time constraint in a Second Reading debate.

I was saying that we should not be told that we are going to be in the slow lane or removed from the top table if we are out of the EU. The noble Lord, Lord Howell, is not in his place-

Lord Lea of Crondall: Is it acceptable for the noble Lord to carry on speaking after that very clear advice from the government Whip, and after the position was made clear right at the start of the debate in response to the question from my noble friend, Lord Campbell-Savours?

Lord Pearson of Rannoch: Unless the government Whip's advice is inadvisable.

Lord Willoughby de Broke: I shall finish now. The only club we need to be in is the world club and we are already members of that. The European dream has turned into a dangerous nightmare. We need to wake up.

11.31 am

The Earl of Liverpool: My Lords, in a typically powerful and persuasive opening speech, the noble Lord, Lord Pearson, referred to the fact that this is the fourth time that this Bill has come before your Lordships. The noble Lord has been steadfast in his advocacy of the need for what one might call a cost-benefit analysis of our membership of the EU, and a number of faithful foot soldiers in this House have followed him every step of the way. My family motto is "Be Steadfast" and I am proud to be one of those foot soldiers.

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Today, with a full blown euro crisis on our hands, a real prospect exists of a fragmentation of the eurozone. My noble friends Lady Noakes and Lord Ryder and others referred to that. Indeed, it was reported recently in one of the broadsheet papers that the Chancellor and the Treasury are so concerned that they have set up a committee to look at how we might best manage an orderly exit from the EU. I wonder whether the Minister can throw any light on that. It is an important question because, if that is indeed the case and the findings can be made public, much of the work that the noble Lord, Lord Pearson, envisages being carried out by the committee set up under his Bill will already have been done.

We have heard about the latest Pink Book figures and the £28 million leaving our shores every day. Our countrymen are growing restive and the situation is becoming indefensible in the teeth of this recession. There is now a real possibility that we may be called upon to part with many more billions to try to shore up the doomed euro. We have a duty to explain how we are getting value for money and, if a satisfactory and convincing explanation cannot be found, we should leave the project. That is what around 70 per cent of our population believe.

No one is able to say exactly what level of corruption exists within the EU. My noble friend Lord Risby mentioned, I think, £4.6 billion, but I have heard figures as high as £5 billion or even £6 billion. In any event, as we know, the EU has been unable to close off the accounts for the past 17 years. It seems unbelievable to me that we can keep pumping ever increasing amounts of taxpayers' money into this sadly corrupt organisation. One day, I believe that the newspapers will get on to the ever increasing gravy train of MEP and Commissioner salaries, pensions, housing and travel expenses. What effect that will have on an already sceptical British public remains to be seen. There will come a time when even the Europhiles will have to stop defending the indefensible.

On which note, I was very heartened to read Sir Max Hastings' recent Damascene conversion. As a self confessed pro-European all his adult life, he now admits that the EU is a disaster affecting every aspect of British life. In a full page article in the Daily Mail on 13 September this year, he said:

"The cost of Brussels has become insupportable. If we continue to burden employers and wealth generators, large and small, with its Utopian vision, only relentless decline can lie ahead".

He ends the article with these words:

with our EU partners,

He could also have included the Russians and Brazilians in their speedboats. Anyway, that is not a future I wish to see.

I believe that the real elephant in the room is the democratic deficit. Self-governance and retaining our sovereignty are now far-off dreams. If proof were needed of that, one need look no further than a recent

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report of a discussion said to have taken place between President Barroso and our Prime Minister when he was reported as saying that we must be prepared to agree to further federalist and fiscal integration within the EU or accept the imposition of a financial transaction tax which would have such a devastating effect on the City of London. Perhaps the Minister can either verify or refute that this ultimatum was given.

In any event, one has to ask how anyone can pretend that democracy is alive and well when some 72 per cent of our laws are imposed on us by directives and regulations emanating from non-elected Commissioners in Brussels. The argument that it is only by staying full members that we can have a seat at the top table and influence events just does not wash any more. We have tried and failed in that endeavour in the past, and qualified majority voting, among other things, ensures that we shall never achieve that dream however devoutly it may be wished.

There is an alternative. We could become like Norway and Switzerland, restoring our own democratic powers, regaining control of our borders and applying quotas. This could be achieved in a spirit of friendship and good neighbourliness; our trade would not suffer because their trade with us, as we have already heard, is greater than ours is with them, and neither party would wish to lose those markets. Our attractiveness to major international companies would, I believe, increase rather than diminish, and we could benefit by becoming, in effect, the Hong Kong of Europe. Of course there will be an initial upheaval but I believe that we would see in the years that follow a significant increase in jobs in this country. I do not think that that is as fanciful as it at first sounds.

In any event we need a reality check, and we need it now. I give my full support to this Bill. I hope that it will soon progress to its further stages in your Lordships' House.

11.38 am

Lord Stoddart of Swindon: My Lords, I join other noble Lords in thanking the noble Lord, Lord Pearson, for his persistence in bringing this Bill forward for discussion on Second Reading in this House. I have no doubt that many people have been coming up to him lately, as they have been to me, saying, "You know, you were right all along". The speeches that we have heard so far today-a balance of speeches anyway-have also tended to confirm that.

The noble Lord, Lord Desai, who is not in his place, suggested that the noble Lord, Lord Pearson, was in the minority, but I remind the House that recent opinion polls have shown quite clearly that the majority of the people wish and would be prepared to leave the European Union, and that 70 per cent of them would like a referendum on whether we are in or out, which has been denied to them. Of course the noble Lord, Lord Desai, was right that we should have a wide-ranging discussion on the whole issue. Reference was made to replies given to noble Lords, including me, that the benefits of the European Union are self-evident. Perhaps that should be turned around to show that the disbenefits of the European Union are self-evident.

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I would have liked to talk a great deal about trade, but unfortunately the time restriction precludes that. However, I point out that since 1973 we have traded in permanent deficit with Europe, and that the deficit at the moment is running at £38 billion a year. That represents a lot of lost jobs to people in this country; we should not forget that. If we need more jobs, we need to lift our trading eyes to the world of 7 billion people, not focus on the narrow confines of the centrist, declining and undemocratic European Union.

We continue to hear the old mantra that the UK should be in the European Union but not ruled by it. It is now becoming quite clear that the objective of the European Union and its leaders is to create a country called Europe in which nation states are marginalised, relegated to third-division status and ruled from Brussels by bureaucrats-I understand that they are now called technocrats. We cannot continue to belong to the EU and not be ruled by it.

Britain has been plagued by a succession of leaders who are faint-hearted and believe that Britain cannot exist as an independent, self-governing nation. They insist that outside the European Union we will be sidelined and miss the Euro train or ship. Even when they can see that we are heading for the buffers or the rocks, they persist in saying that it is in our interests to be there. The Prime Minister was at it again in his speech at the Lord Mayor's banquet, claiming to be a Eurosceptic. The sort of Europe he says he wants is not on the agenda and he should think about what he is saying. Nevertheless, he trotted out the old, tired mantra that outside the EU we would end up like Norway.

Let us have a look at Norway. I am most obliged to the Times for an article on Tuesday, 15 November on how the UK and Norway compare. Norway's unemployment rate is 3.2 per cent; the United Kingdom's is 7.8 per cent. Norway's household income is $32,400; the United Kingdom's is $28,600. Norway emits 0.19 kilograms of carbon per dollar of GDP; the United Kingdom emits 0.26 kilograms. Norway's national savings rate is 34.7 per cent; the United Kingdom's is 11.2 per cent. Norway's annual working hours are 1,407; the United Kingdom's are 1,646. What conclusion does the Times come to? If you want a good life, forget Britain and go to Norway.

Perhaps we should stop talking about how Britain would be sidelined outside the European Union. After all, inside it we have only 8.5 per cent of the vote-and Norway would have less than one per cent. What sort of influence is that? We would be far better off outside the European Union. We would be able to trade with the world, keep our own money that we are handing over every year to the extent of £10.3 billion and use it for the betterment of our own people.

11.45 am

Lord Kakkar: My Lords, I join other noble Lords in congratulating the noble Lord, Lord Pearson of Rannoch, on securing this important debate on the Second Reading of his Bill. I will confine my comments to the area of healthcare and the impact that the European Union is having on the delivery of healthcare and biomedical

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research in our country. I remind noble Lords of my interests as a practising surgeon, professor of surgery and active biomedical researcher.

I will concentrate on two areas: the European working time regulation and its impact on the training of young doctors and other healthcare professionals in our country; and the impact of the clinical trials and data protection directives on our ability to conduct high-quality clinical research. On the European working time regulation, there has been extensive review and discussion about its potential implications. Its purpose is well recognised, but the unintended consequences with regard to the practice of medicine are not always so well recognised.

If the working time regulation had provided demonstrable evidence of an improvement in clinical quality, the safety of patients and the training of our young doctors and other healthcare professionals, it would be a very reasonable regulation to adopt and apply to the practice of medicine in our country. However, there is little evidence that the regulation restricting hours of work to 48 per week and applying to medical practitioners in training has achieved those objectives.

Clearly there are differences between different disciplines in medicine. The craft disciplines of surgical practice such as my own require a high level of exposure to large numbers of cases in order to develop technical skills, and also a broad ongoing continuity of management of patients to develop the judgment necessary for ultimate independent consultant practice.

The Royal College of Surgeons has taken a keen interest in the potential impacts of the working time regulation on surgical training in our country. In 2010 it produced a report that looked at the potential cost implications of the application of the working time regulation with regard to surgical training. In the two years prior to the introduction of the working time regulation, it collected data using freedom of information requests that were responded to by 96 acute NHS trusts, and extrapolated the findings to the 160 acute trusts where surgical training takes place. It concluded that in the year of introduction of the working time regulation, expenditure on locum costs to cover rotas as a result of the regulation increased from some £540 million a year to £750 million-an increase of more than £200 million.

That was across the board. When the royal college looked at surgical locums, it concluded that costs increased from £170 million a year to £230 million-an extra £60 million spent on locums as a result of the application of the working time regulation restricting surgical trainees to working 48 hours a week. It also tried to determine the number of surgical hours lost per month as a result of the restriction to a 48-hour working week and concluded that some 400,000 surgical hours a month were lost as a result of the restriction. If we were paying this price for achieving an improvement in clinical care or in training, it might be completely justifiable. However, the Royal College of Surgeons and the Association of Surgeons in Training concluded that that was not the case.

The second area is the impact of European directives and regulations on the conduct of clinical research in our country. Twelve per cent of the global citations

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in clinical and healthcare research are of publications from United Kingdom institutions and nearly one-quarter of the 100 leading medicines in the world have been developed in our country. Biomedical research is therefore hugely important to our economy and in terms of what we can do for our own people as well as for others around the world. In January a working group at the Academy of Medical Sciences chaired by Sir Michael Rawlins published a report, entitled A new Pathway for the Regulation and Governance of Health Research,which looked at ways of ensuring that we remain competitive. It concluded that the European clinical research directive has had a detrimental impact on the conduct of clinical research in our country. The directive was introduced for good reasons-to improve ethical standards and to ensure consistency of data and, ultimately, to ensure that patients are strongly protected in all clinical research-but there have been unintended consequences which have made the approval of clinical trials much slower and the conduct of clinical trials less effective. It has also increased the cost of doing clinical trials, so much so that, in 2000, 6 per cent of all patients going into clinical trials globally came from our country while, by 2006, the number had fallen to only 2 per cent of patients going into clinical trials. That has a very serious impact on our ability to function in that area.

These conclusions were also confirmed by your Lordships' Science and Technology Committee in its second report for Session 2008-09, on genomic medicine, chaired by my noble friend Lord Patel. It also concluded that it would be important for Her Majesty's Government to review the working of the clinical trial directive and the data protection directive, which were having a detrimental impact on the conduct of clinical research in our country. I know that the Government are keenly aware of these important issues and that they are trying to address them. If a committee were established to look at the benefits and costs of our membership of European Union, consideration of the impact of European regulation on the conduct of research and the training of our doctors are important topics that should be considered.

11.53 am

Lord Ahmad of Wimbledon: My Lords, yet again the question of Europe is one which we find dominating headlines. Indeed, it is impacting daily lives and for this reason and others, I join in the chorus of approval and tributes being paid to the noble Lord, Lord Pearson of Rannoch, today. His timing of this debate is quite impeccable.

"What we should grasp, however, from the lessons of European history is that, first, there is nothing necessarily benevolent about programmes of European integration; second, the desire to achieve grand utopian plans often poses a grave threat to freedom; and third, European unity has been tried before, and the outcome was far from happy".

Those are the words of my noble friend Lady Thatcher.

We see the currency born of the European ideal today fighting for its mere survival and economies of Europe that led the world as proud nation states looking across the world, perhaps, to emerging and developing nations with envy at their growth rates and investment levels. Yet as turbulence grips Europe,

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Britain, as ever a proud nation in Europe, continues to play a pivotal role in seeking to provide assistance, guidance and, most importantly, leadership and financial contribution where and when it can. This is notwithstanding the backdrop of our own economic challenges on the domestic front. We are supporting neighbouring European economies to ensure our treaty commitments.

Therefore I find recent reports of warnings being issued by the President of the European Commission to my right honourable friend the Prime Minister to put the European ideal first and not to think of the UK, particularly with reference to the benefits of the vibrant City of London, quite frankly a ludicrous proposition. Indeed, I should perhaps declare an interest as someone who currently serves in the City of London. Does the President of the European Commission really believe that the argument that we shall be left behind will resonate with our Government and, more importantly, with the British people? It will not.

Economic and monetary union and the birth of the euro brought with them similar cries of: "a two-track Europe"; "Britain will no longer have influence", which many noble Lords have said; and "Frankfurt will become the economic capital of Europe". Has any of these propositions come true? No. We were right not to join the euro then, and we are right today to defend the City of London against prohibitive taxes for the benefit not only of the City and what it brings to Britain but of Europe as a whole.

Let me recount the time of the launch of the single currency. I remember talking about this. One concept that was often raised was how we remember who is going in and who is going out. If you throw Greece into the equation, a baffling acronym came about: PIGS. I say no more. Price stability was one qualifying criterion. Others were successful membership of the ERM, interest rate convergence and fiscal prudence-and let us look towards prudence. One of the criteria was a 60 per cent ratio of government debt to GDP. Was this strictly met? You need only look at Belgium at 122 per cent and Italy at 121 per cent. Those criteria were not strictly adhered to.

Then there was the cost of the introduction. One of the elements was fiscal policy spillovers. A European-wide interest rate would mean that EU countries would have to increase their intra-EU transfer payments to help others. How Greece would have loved no competitive devaluations in the current climate. These are no longer downside risks or doomsday scenarios; they are a living reality facing the single currency today. Monetary union without fiscal union was never going to be a sustainable proposition. That has proved correct. There are many in business and in public life now who rather than lecture the country should eat a bit of humble pie.

I turn briefly to the EU's proposed tax on the City of London. According to some reports it might mean that 80 per cent of the revenue would come from London. The director-general of the CBI said that it is,

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The City of London is our jewel in the crown. It has been a big asset for the UK and, indeed, for Europe. If we are asked to be good Europeans, should good European not defend what is good about Europe? The City of London is good about Europe. However, rather than be proud Europeans and proud of this European centre, officials in Brussels are seeking to price the City of London out of the market. It is therefore right that voices are raised and resistance is shown at these blatant attempts to target the heart of our economy.

We are a proud nation with a rich history and a country which has demonstrated on the world stage that it fights for freedom, democracy and the promotion of strong trade. Standing up for Britain does not mean that we are against Europe. The countries of Europe remain among our largest trading partners. However, it is right that we should stand against giving further powers away. I was therefore pleased to support the European Union Bill which passed through your Lordships' House earlier this year, because it called time on the juggernaut of European integration. We need to look at the virtues of a proposal before we forgo any national interests for some perceived general good as conceived by a Brussels bureaucrat. Indeed we need to repatriate powers as the Government are seeking to do. We have also found, perhaps, an unlikely ally in Chancellor Merkel, who only yesterday said that the new Commission proposals on eurozone countries submitting their budgets for approval to Brussels to solve the euro crisis are "extraordinarily inappropriate".

In conclusion, there should be a simple message to those who seek to move towards greater European political and economic union: you integrate further if you want to; our country is not for further integration. However, that should not mean that we are against Europe. It should be the Government's role to establish perhaps a third way in Europe where membership of the EU is not a journey to a federalist Europe, but one which seeks to establish the role of nation states in Europe where we stand and play our part as an independent country in Europe, not as a region of an integrated union.

11.59 am

Lord Lea of Crondall: My Lords, we are debating an interesting proposition, which is quite a good idea in some respects. But I suspect that the methodology would not be very straightforward and would itself become highly divisive. For example, many problems of quantification were illustrated in a point made a few minutes ago by the noble Lord, Lord Willoughby de Broke, who mentioned energy policy and the carbon tax regime. You can call it other names but essentially the EU has agreed that by 2020 it will collect €50 billion a year to hand over to the rest of the world in terms of adjustment finance. If our share is about 15 per cent that would come to €7.5 billion a year. In no way can that be charged against us in terms of "them costing us", because since 1992 at Rio de Janeiro we have been the "leader in Europe" in pressing for tighter and tighter targets. This reveals some of the ambiguities of what might come up in the methodology.

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Another question is how to add up apples and oranges in different sectors of the economy. The noble Lord, Lord Ahmad, has just said that the City of London is the jewel in the crown, to which I shall make two remarks. If we are the Hong Kong of Europe and that Hong Kong is the City of London-I doubt the logic of thinking that we will be in a stronger position to be the Hong Kong of Europe if we are not in Europe-what about the rest of our economy? How will we bring in the consequences for the rest of our economy if we measure the interests of the British economy only by the City of London, the jewel in the crown? I think that its role recently has been to lay hand grenades and not golden eggs. Therefore, there would be issues about methodology.

Many noble Lords have found it difficult to stick to the Bill before us. We have heard many speeches about the whole of the European exercise being a dead duck and that Britain should leave. I suppose that, if it is a dead duck and the whole thing has collapsed, there is no need to be in or out of it.

A totally separate question has been raised by noble Lords, including my noble friend Lord Stoddart, about public opinion. To think logically about this, if we believe in the impartiality of this review and it produces a positive answer in favour of staying in Europe, the job will be somehow-I know that I will be shot for saying this-to educate the British people and to find ways to ensure that they understand that the conclusions are positive. There cannot be the logic of the study suggested by the noble Lord, Lord Stoddart, without running the risk that it might produce an answer that some people do not like. But that is true of both sides. I suspect that we would find that, in the dynamics, this is a positive thing and that we have a problem with public understanding. But that is a separate question. One cannot then say, "But we ought to say no because of public opinion". We are a democracy and of course that is an important question. However, the methodology is not to do with public opinion per se. It purports to be to do with quantitative methodology.

In the two minutes remaining, I shall echo three points which have already been made. The noble Lord, Lord Empey, made the point that we have voted for things that have happened in Europe. The Commission is not a set of gauleiters: it is the Council of Ministers which seeks agreement. As we all know, there are different procedures, including codecision, the Parliament and so on. But we can see the fallacy in the idea that Monsieur Barroso can say something and Chancellor Merkel goes down on one bended knee by just looking at yesterday's newspapers.

We hear easy examples of countries which do splendidly without being in the EU. Switzerland and Norway are always cited. I want to spend at least 30 seconds on Norway. I have a great number of friends in Norway and I hope that they will not mind me saying that it is a sheikdom with democracy. In terms of the proportion of oil revenues to its national finances, it is not comparable at all with any other country in Europe. It has a huge sovereign fund, which is wonderfully administered and becomes a great contributor to aid to Africa, et cetera. The point that we really have to look at is that Germany is a successful economy: how they and not we?

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12.05 pm

Lord Watson of Invergowrie: My Lords, my noble friend Lord Desai mentioned the 1975 referendum on what was then the EEC. I voted no, against continued membership. Like many in the Labour Party, I was concerned at the restrictions that it might place on a future Labour Government introducing socialist policies, not least in the industrial sector. Of course, there was wide division in the party. But things have moved on. Were there to be a referendum tomorrow, I would vote yes to stay in and I would campaign strongly for that position.

I welcome the Bill introduced by the noble Lord, Lord Pearson. Indeed, I say "Bring it on" as regards the committee because, like my noble friend Lord Davies of Stamford, I am confident that the position of those in favour would prevail. However, I am slightly puzzled as to the wording of the Bill-not just the Title but also the Long Title, which refers to,

Clause 1 is entitled "Committee of Inquiry into withdrawal from the European Union". That will not come as a surprise to anyone who knows anything about the noble Lord, Lord Pearson, or UKIP. None the less, it is inconsistent.

I should like to say something about the way in which the European Union has developed over the years in terms of achieving its social agenda, particularly in terms of the high level of employment, social protection, improved living, working conditions and economic and social cohesion. The adoption of legislation setting minimum requirements has improved labour standards. It certainly strengthened workers' rights, which I say from my background in the trade union movement. It thus improved economic efficiency and, as such, is surely one of the European Union's main achievements in the field of social policy.

EU protection issues such as transfer of undertakings, part-time workers, fixed-term contracts and the working time directive, to which the noble Lord, Lord Kakkar, referred, have been resisted by UK Governments at one time or another. But those are rights that we would not enjoy in the UK were we not under the umbrella of the European Union. I regard that as a positive aspect of our membership.

Those who oppose EU legislation in these spheres-legislation that essentially aims to protect people's health and well-being-should consider that, apart from the suffering caused to individuals and their families, poor working conditions represent a huge cost for the EU economy. Originally, EC-as it was then-employment law was designed with the aim of ensuring that the creation of the single market did not lead to a lowering of labour standards or distortions in competition. Today, employment law also has a key role in ensuring that a high level of employment and sustained economic growth is accompanied by continuous improvement in the living and working conditions throughout the European Union. The coalition Government should bear that in mind, not least in respect of the proposals outlined by Mr Cable two days ago. Reducing protection for people at work will not save or create a single job. It is not employment law that is holding firms back: it is the tough economic

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climate and the problems many SMEs are still having in getting the banks to lend to them. Research from the OECD shows that there is no link between regulation and economic output. German employees have much more protection at work than ours, yet its economy is the strongest in Europe. I believe that the UK's best interests are served by playing as active a role as possible in the decisions which influence the future direction of the Union and its member states.

In respect of this Bill, many economic benefits of EU membership can be highlighted-this view is based not on my individual opinion but on figures produced by the coalition Government. The EU is a bigger trading area that the US and Japan combined and accounts for more than half of all UK trade in goods and services. According to an Answer given in July this year by the BIS Minister Ed Davey, 3.5 million jobs are reliant on the EU single market, which is one in 10 of all UK jobs. The latest available estimates show that the greater level of trade liberalisation achieved through the single market leaves EU countries to trade twice as much with each other as they would do otherwise. As a result, the single market has contributed to income gains in the UK between 2 per cent and 6 per cent; that is about 1,100 to 3,300 per year per British household. Again, those are figures quoted in an Answer by Mr Davey.

Another BIS Minister, Mark Prisk, also stated in an Answer this year that more than 50 per cent of foreign direct investment to the UK comes from other EU member states and is worth £350 billion a year to this country. This investment flows from our full access to the single market, because the level of trade liberalisation in the EU is unparalleled anywhere in the world.

EU competition and consumer rights laws have driven down prices, opened up markets for smaller businesses and boosted consumer protections. For example, thanks to the European Union, British families and businesses now enjoy vastly reduced mobile phone roaming charges, cheaper flights and proper compensation when flights are delayed or cancelled. In terms of global trade, the UK gets the best deal through the EU. The Union is a force multiplier for the UK, because this country contributes to common positions which then carry the weight of the world's largest trading bloc. For example, in 2003, the USA was forced to back off and lift tariffs on UK steel producers by the World Trade Organisation, which authorised the EU to impose countertariffs on US products if the USA ignored the WTO's ruling. The EU-South Korea Free Trade Agreement, the EU's first trade deal with an Asian country, came into operation in July this year and will be of great benefit to the EU as a whole and the UK in particular.

It should also be stated that British business supports our EU Membership: 74 per cent of business leaders polled by Business for New Europe and Ipsos MORI last year believed that the UK's withdrawal from the EU would be damaging compared to 22 per cent who did not. Every mainstream political party supports UK membership, with only UKIP and the BNP opposed.

Being either outside or on the periphery of the EU while other member states discuss the crucial issues and take the major decisions has never been a positive

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or even tenable position for the UK. Those who advocate either withdrawal or our retrenchment within a reformed EU need to work harder on overcoming this country's geographical relationship with Europe. No man or woman, it is said, is an island. It has never been more accurate to say that, in these critical economic times, no country is an island.

12.12 pm

Lord Stevens of Ludgate: My Lords, I, too, congratulate the noble Lord, Lord Pearson, on instigating today's debate. He is very persistent and continues to fight earnestly for what he truly believes in despite much opposition. I also agree with most of what the noble Lord, Lord Desai, and other speakers, said in that I think that we need to have a serious discussion about the broader aspects of the membership of the EU, apart from just cost-benefit analysis. The noble Lord, Lord Howell, said in a debate on the European Union (Implications of Withdrawal) Bill:

"The whole process of incorporating EU regulations and other burdens into our lives is sloppy, full of holes and should long since have been tightened up".-[Official Report, 8/6/07; col. 1359.]

I agree with these sentiments, but sadly we have not been able to make much progress.

Calls in the past for a cost-benefit analysis have always been brushed aside on the grounds that the net gains from our membership were so obvious that there was no need to quantify them. Recent developments must make even those so committed to the project feel uneasy. The reality is that Britain's membership of the EU is very costly and the benefits are becoming harder to see. The most transparent cost is our net budget contribution. Following the December 2005 Brussels summit at which the UK's rebate was significantly reduced, this has risen sharply. In addition, there are off-budget contributions; for example, projects such as the Galileo, which is now expected to cost the EU taxpayer up to €22 billion in the next 20 years. The net costs to Britain of the common agricultural policy and the common fisheries policy are estimated at £16 billion and £3 billion per annum respectively. More difficult to quantify are the costs of excessive regulation. But here perhaps the estimate produced in October 2005 by our previous Prime Minister when Chancellor, in a Treasury paper under his own signature, and as mentioned by the noble Lord, Lord Pearson, is well worth thinking about. I shall not repeat the figures.

The flood of new regulations from Brussels continues despite everything which the new coalition Government say they would like to stop. Now Brussels wants to tackle the big four auditing firms and suggests that large companies should have two firms of auditors. Would it not be better for its members to get their own accounts signed off with a clean audit first?

As we all know, the UK has serious budgetary problems and is seeking to cut expenditure. Indeed, all the countries in the EU have similar problems. It might be expected, therefore, that Brussels would share the pain experienced by its member states by cutting its expenditure and not increasing it. Its recent proposal to increase its budget by approximately 5.9 per cent is

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out of touch with all reality. Even though the increase had been reduced by Ministers, it just goes to show that they have no budgetary control.

I do not propose to spend much time on discussing where all the EU money goes; suffice it to say that a prime example of what appears to me as a lay man to be gross duplication and waste is the new foreign service. Its budget is 20 times the cost of the UK's Foreign Office and includes among other items £33 million for 150 bomb-proof limousines for all EU ambassadors. The number of staff employed by its quangos and committees alone has tripled during the past five years, amounting to a total cost of more than £2 billion in 2011. It has just opened a new £25 million office in London, and our Foreign Secretary has claimed that the UK Government have brought the EU budget under control. Perhaps the noble Lord, Lord Sassoon, could confirm in his reply that the UK has no liability for any losses incurred by the ECB, another potential burden on this country.

It is a shame that our Deputy Prime Minister has chosen to describe those who want treaty change as "populists, chauvinists and demagogues". I am afraid that I fit into that category. Surely those who do not want treaty change can raise the level of debate higher than this. However, we must be grateful to our Deputy Prime Minister for supplying us with the information that an extra £1 billion of government expenditure in the UK would create 200,000 to 300,000 jobs. By extrapolation-and perhaps this is unfair-expenditure of £15 billion, which is our gross contribution to the EU would create 3 million to 4 million jobs, matches both our annual contribution to Brussels and the mystical, unsubstantiated and inaccurate figure from the Government that 3 million jobs would be lost if the UK left the EU.

The UK exports less than 10 per cent of GDP in goods and services to the EU each year, yet, as has been said, the EU influences 100 per cent of the UK economy. British exports worldwide, outside the EU, are substantially more than those within it and are growing much faster.

If one turns to the longer term, one sees that the EU has a declining population whereas most of the countries in the rest of the world have rising populations, particularly the US, out largest country export market. The EU is forecast to lose 16 per cent of its current working population by 2050, more than the current working-age population of Germany. The US is to gain 17 per cent. Let us not forget that the Lisbon treaty obliges the EU to negotiate free trade agreements with a member state that wishes to withdraw. It already has free trade agreements with more 80 per cent of all member countries. Our Chancellor says that he is worried that if we do not fully participate in the bail-out negotiations, we could become a "second-tier ... state". Good. Then we can join the USA and the other 165 countries that are not members-China, India, Brazil to mention but three-and be free of the thousands of regulations that come from Brussels.

I am confident that a cost-benefit analysis will show -after all, we have it for other legislation-that the costs far outweigh the benefits. In addition, there is only one way to restore our nation status and sovereignty,

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and that is to renegotiate our relationship with the EU to achieve what many of us were led to believe; namely, that we entered into a free trade area and not a federal Union. I therefore support the excellent Bill of the noble Lord, Lord Pearson, as a major step in this direction.

12.20 pm

Lord Gilbert: My Lords, I was very taken by the mention made by the noble Lord, Lord Stevens, of bombproof limousines, although in this country they would be more suitably donated to elected politicians than to faceless bureaucrats, but the idea is one that might find a considerable welcome in the Government. Before I get down to my main remarks, I would like to say to noble Lords that I have based much of what I want to say on an article in the December issue of a magazine called Standpoint; it is by Mr Daniel Hannan, who happens to be the Conservative MEP for South East England. I also want to express my unreservedly warm welcome to this Bill from the noble Lord, Lord Pearson-I hope that I may call him my noble friend because I feel that he is. I congratulate him on his persistence. I am afraid that there is virtually nothing I want to say on the Bill because he said it all quite brilliantly earlier in his speech. His remarks were well researched, as they always are, and I also congratulate him on that. It is a treat to listen to him.

However, as several noble Lords have pointed out, our relations with the EU go far wider than economic questions. We have the common agricultural policy which, in my view, is wicked-I have chosen that word with care-because of what it has done to the developing countries of the world. We have the common fisheries policy which is disgusting because of what it has done to the oceans around these islands. Then we have the idiotic nonsense of the eurozone. There are some people, even in this House, who would like us to join up with the crew that brought us the common agricultural policy and the common fisheries policy and the eurozone in a common security and defence policy. Can you imagine having a common security and defence policy with people like that? It is absolutely ridiculous, for very good reasons.

Incidentally, I recall a phone call I received while I was working in New York in the early 1960s, although I cannot remember the exact date. Charles de Gaulle had vetoed our entry into what was then the Common Market. A friend at the British Consulate rang me to say, "John, have you heard the news? It is marvellous news". I said in reply, "I think it's marvellous news, but why do you think it's marvellous news, Richard? I thought that you were in favour of our joining the common market." He replied, "Yes, but don't you see, they will bringing us within six months the crown of Europe on a platter". That is what the Foreign Office thought about the EU, or the EC as it was in those days. How wrong they were.

Obviously I accept and endorse the motives behind the construction of all the European organisations and institutions because they are driven by very high-minded and fundamentally humane ideals, ones that are thoroughly decent. But we have to look beyond that. I was interested in the remarks of the noble Lord,

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Lord Risby, who I have not had the pleasure of hearing before. He pointed out that we have to take account of our geography because it is an important factor. The noble Lord is absolutely right, but for my money, our closest friends are not our nearest neighbours, with the possible exception of the Irish, as I have said before. The closest friends of this country are to be found in Australia, New Zealand, Canada and the United States, but not in other countries which I shall not name in this debate. It is perfectly obvious from the history of the last many centuries where our friends are.

I recall a debate in the Parliamentary Labour Party when I was quite a freshman. The late Roy Jenkins got up and with that ineffable trademark of his dismissing something as not worthy of consideration, he said, "I have never had much time for kith and kin in politics". When Roy Jenkins said that, I thought of a friend of mine called Doug Neill in Canada who lost three brothers on the same day at Dieppe. I have a lot of time for kith and kin in politics. I think we should be with our friends.

I do not take seriously the idiot gentleman-maybe he is not an idiot-who said the other day that very soon all of Europe will be speaking German. Obviously that was a metaphorical remark, but it is just as dangerous metaphorically as it is literally. That is what the EC is leading us towards today. I have one quotation from the article which came from Angela Merkel in October:

"Nobody should take for granted another 50 years of peace and prosperity in Europe".

They are not my words, but those of Angela Merkel. If she says that we cannot be assured of another 50 years of peace in Europe, I ask myself in which direction will the Bundeswehr be marching.

A noble Lord: Oh, come on.

Lord Gilbert: Well, she said it, not me. When you get the leaders of Europe using the sort of apocalyptic language which so offends my noble friend, I suggest that he should address himself to the people who use it, not me.

I have a solution for Europe. I think that the EU should have joined EFTA as a single unit. I would have been perfectly happy with that arrangement, so do not let anyone say that those of us who are against the construct of the EU are anti-European. Later on I would hope to see a widened EFTA expanded into a NAFTA. That is the way forward. But that is for the distant future. In the short run, what we need now is the sort of information that the noble Lord, Lord Pearson, is seeking in his Bill. I congratulate him and he will have my full support.

12.27 pm

Lord Cormack: My Lords, having listened to every word of the debate, I would just like to refer your Lordships' House to one point. I want to remind noble Lords of a very remarkable man, a friend of mine who was a distinguished Member of your Lordships' House until a couple of years ago-the late Lord Dahrendorf. It seemed to me that Lord Dahrendorf had it right. He was a visionary, a man who distributed

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literature against Hitler on the streets of Berlin, and who served Germany in Parliament and represented Germany in the Commission in Brussels. He then came here and, having taken British nationality-although he was still given the German Order of Merit-he served our country with vision and distinction. He warned this House and Europe in general of the folly of entering too prematurely into a single currency. He thought the whole idea was questionable because without political union, of which he was not in favour, you could not have a proper working single currency.

I do not go with the noble Lord, Lord Pearson, in wanting to pull out of Europe, but the lesson of today's debate is that we have to rethink our place within it. Those who are still peddling the single currency as a panacea have to realise that it has achieved far less than they thought it would. It has achieved about as much as Lord Dahrendorf thought it would when he warned that that way could lie disaster.

12.28 pm

Lord Davies of Oldham: My Lords, I, too, offer my congratulations to the noble Lord, Lord Pearson, on introducing his Bill and on opening the debate with his usual stirring speech. This has been a striking debate because, while on the whole cost-benefit analyses have played a relatively small part in our deliberations either in or out of Europe, they have been the burden of the majority of speeches. That is why, when the noble Lord is congratulated in some quarters on the timeliness of this debate, I am afraid I beg to differ. I cannot think of anything less timely than Britain beginning a potential process of long debate on whether we should continue as members of the European Community when the whole of the world is in such an intensive economic crisis.

We in Britain know the costs that are being borne by our people at the present time. We know about the increase in unemployment. We know about the reduction in services on which our people rely. Of course, our crisis looks relatively marginal compared with the crisis in the eurozone. I do not hold it against those who have long careers of criticism of the European Community to use the crisis in the eurozone to some advantage, particularly if they are in the position of being able to say, "We told you so". At the time, the Labour Government also said, "We told you so", because we made sure that we did not join the eurozone.

However, it is not just Europe: the United States economy is largely stalled. The one part of the world that is expressing itself in more positive terms in its economy is of course China, the other south-east Asian growing economies and India. When China is suggested as a possible solution to the problems of sovereign debt crisis in Europe, do we not learn the lessons of interdependence? Do we not appreciate that we are not going to solve these problems through unilateral action but by considerable international economic action to promote growth, develop jobs and stimulate demand?

We know that we cannot do this on our own. We know that we cannot do it readily if the European market stays as depressed as it is. Yet we have today a

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suggestion that we do a cost-benefit analysis on Europe. The noble Lord, Lord Bilimoria, suggested that the Treasury does this every day. The Minister will find the response to that particular point fairly straightforward. I am not so sure that the analysis is carried out in the Treasury every day in quite the comprehensive terms that the noble Lord, Lord Pearson, suggests. The Treasury should be engaged in rather more significant matters of reviving the British economy at the present time than that which is proposed in the Bill.

I had some sympathy with my noble friend Lord Lea when he asked about the methodology of the small group of carefully balanced individuals setting about their cost-benefit analysis. I appreciated rather more the contribution of the noble Lord, Lord Risby, who said that we cannot get away from our geography or avoid the consequences of the European crisis at the present time. That is why we should be directing ourselves towards new solutions to the situation.

As always, I have considerable sympathy for the Minister responding to a debate of this extent and complexity, to say nothing of passion. He will have noticed that the noble Lord, Lord Risby, is alone in being a Member from his own Benches who is not severely and totally critical of the market. The noble Lord demanded that the Minister get some pretty clear indication today that this cost-benefit analysis would bear some kind of fruit in Britain's future in Europe.

A cost-benefit analysis would certainly need to address itself to some rather tricky points. My noble friend Lord Davies of Stamford asked the obvious question of whether the Japanese motor companies would be in Britain if Britain were not part of the European Community. How does one set about counting the benefits derived from that analysis against the background where we all know where the British motor car industry was in the mid-1980s until the Japanese companies arrived here?

Surely what we need at this point of real crisis is not to cast uncertainty in Europe and uncertainty in the markets about where Britain would stand in relation to Europe. In this crisis, we do not need added uncertainty, certainly not one of such significance as this. Surely what we need are degrees of confidence. To cut ourselves off from a market of 500 million customers is scarcely conducive to international confidence. It would suggest that we had lost faith in Europe and it might even suggest that we had lost faith in our ability to compete with our European rivals.

It is clear that high-value services and highly skilled manufacturing need to be underwritten. I heard what the noble Lord, Lord Kakkar, said about the particular issues of the directives that he is concerned about. As ever, European directives certainly exercise our minds greatly in a whole range of areas, but the noble Lord would be the first to acknowledge that medical science is international in its research and international in its advances and that a great deal of that work depends on international co-operation of a high degree.

In addition to medicine, we can quote the issue that cropped up in this debate if only in passing: the whole issue of the environment. Britain has been in the lead in Europe in developing policies on the problems of

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our environment. We all know what the challenge is and we all know that significant costs are involved for industry and for householders as well as for the economy in coping with climate change. We also know the catastrophic consequences of us not acting. Yet Britain has been the lead in Europe on this project.

In Committee we will enjoy more fruitful debates on this Bill and analyse some of these issues with much closer scrutiny than we have been able to do in general terms today. However, although I will be only too happy to see the Bill get its Second Reading and I look forward to future exchanges, the real issues that face this country are not those of membership of the European community but more fundamental economic issues.

12.38 pm

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, I start by congratulating the noble Lord, Lord Pearson of Rannoch, on getting this debate today. I disagree with the noble Lord, Lord Davies of Oldham. It is quite right that we should be debating Europe at this very difficult and challenging time. I also thank all noble Lords for what has turned out to be a valuable and thought-provoking debate. Having said that, I make it clear at the beginning that the Government have significant reservations about the Bill that we are debating today.

I am between the rock of noble Lords wanting to move on to complete two other significant Private Member's Bills' Second Readings today and the hard place of doing justice to what has been a very stimulating debate. The noble Lord, Lord Davies of Oldham, has already pointed out my problem, and I am grateful to him for not adding to it. I thought that the string of questions was about to come, but it did not and I am grateful for that.

As we are all aware, these are extremely dangerous times for the global economy. The crisis in the euro area continues to undermine markets across the world, the UK included. As my right honourable friend the Chancellor has said, resolving the euro area crisis would be the biggest single boost to the UK economy this autumn.

As well as resolving the immediate crisis, Europe faces significant challenges that go to the very core of its raison d'être. What is the EU's purpose in an open and competitive global economy? What do we need to change for it to meet that vision? We are right to ask these questions, but we will be heard and make a difference only so long as we are a core member of the EU, and we will make sure under this Government that our voice is heard in Europe, exactly as it has been heard most recently on the negotiations for the EU 2012 budget. I remind my noble friends Lord Liverpool and Lord Stevens of Ludgate of what we have done to peg back the proposed increase successfully, resisting proposals for inflation-busting increases. But of course I agree with my noble friend Lord Stevens that much more needs to be done and that there needs to be real budgetary restraint by the Commission for the next few years. We have saved €12 billion against the ceiling that was there in the 2005 financial perspective, but there is much more.

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While we are on this topic, I would say to the noble Lords, Lord Pearson of Rannoch and Lord Willoughby de Broke, that I do not recognise the numbers that they were quoting. The net contribution of the UK to the EU in 2010-11 is estimated at £7.6 billion, up from £4.7 billion in 2009-10, but of course the reason for that increase is because of the give-away that the last Government gave on the UK's abatement. Having stepped up very significantly to the new level, the OBR's figures are that the numbers now remain broadly level over the next few years.

As well as financial discipline, it is equally important that Europe pursues an ambitious agenda for growth.

Lord Pearson of Rannoch: For clarity's sake I should say, following on from what the Minister has just said about our gross and net contributions, that he is talking about the Treasury figures. The figures that we gave are from the pink book and include all our contributions to the European venture, whether they go through the Treasury or not, such as the DfID budget. So I am afraid that our figures are the correct figures.

Lord Sassoon: My Lords, I was quoting the figures of the independent Office for Budget Responsibility, not the Treasury's own figures, but let us turn to the more important issue: that Europe must pursue an ambitious agenda for growth. In the single market, I believe that we have one of the most powerful tools to ensure strong, sustainable and balanced growth not only across the EU but for the UK. The noble Lord, Lord Watson of Invergowrie, quoted all the figures that Ministers would customarily quote, so I am very grateful to him for helping me out. I will simply emphasise that this is a market worth €12 trillion and home to 500 million consumers.

Despite what the single market has achieved to date, however, so much more can still be done, so in answer to noble Lords, including my noble friend Lady Noakes, who rightly argue that we need assessment for well informed debate, I should say that I agree up to a point. When it comes to the forward-looking challenges as to how we are going to get the most out of the single market, yes, we need the analysis. That is why, for example, in February this year BIS published a significant study into the effects of completing the single market and the 7 per cent increase in UK GDP that could be achieved if we press forward with that project. A truly free and open single market in services and the creation of a digital single market could add as much as €800 billion to EU GDP.

In answer to the second and third so-called misconceptions mentioned by the noble Lord, Lord Pearson of Rannoch-I do not shy away from those but am very happy to address all four of them head on-I believe that it is only by being in the EU that we will drive forward the benefits of the single market and capture the very significant gains that remain out there. There is a lot to be done and it is very frustrating that things do not move forward, but it is easy to say that we can be outside it and somehow get all those benefits. If the market is to be driven forward we need to be there, at the table. We can unlock a further

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€60 billion of benefits to the EU from world trade through completion of EU free-trade agreements with key markets such as India, Canada and Singapore. Again, I do not agree with the noble Lord about what we could achieve in these areas if we simply had our own seat at the WTO. Just as we are doing here in the UK, we have to drive down the regulatory burdens and costs of doing business across the EU-something that was identified by a number of noble Lords in this debate.

Finally, in response to these questions of whether we could be outside it and have the benefit of the free market, the comparison that the noble Lord, Lord Stoddart of Swindon, made with Norway, for example, is simply wrong. I am grateful to the noble Lord, Lord Lea of Crondall, who has already addressed that point. Norway is a small country blessed with huge oil and gas reserves, which is what makes it principally different from countries such as the UK. We cannot simply therefore step somehow magically into their shoes. I also say to the noble Lord, Lord Stoddart of Swindon, that while overall we have to fight to increase our share of world trade and our exports, a trade deficit, taken narrowly, is not in itself a bad thing. We have to recognise the benefits of trade to both sides, and therefore cannot simply dismiss the benefits that we have from EU trade by saying that we have a deficit.

The question about the benefits of going forward but nevertheless improving the EU market is precisely why my right honourable friend the Prime Minister secured a commitment for an EU growth test: to filter out EU legislation that is harmful to growth and jobs. The Commission's proposed financial transaction tax is one such example. The European Commission itself expects that such a tax could reduce EU GDP by as much as 3.4 per cent or €422 billion-madness. More than that, as my right honourable friend the Chancellor has said it is"a bullet aimed", squarely,

I say to my noble friends Lord Ahmad of Wimbledon and Lord Liverpool that the financial transaction tax requires unanimity to go forward, and that it will not get UK support. However, just as we have done and will do on directives in financial services and on the EU budget, we will continue through the current crisis to defend the full range of Britain's interests in Europe.

Having picked up some of the important general themes that noble Lords have raised in this debate, I shall turn briefly to one or two questions about the analysis here. I certainly agree with my noble friends Lord Risby and Lady Falkner of Margravine and the self-styled noble and maverick Lord, Lord Desai, that this all goes much wider than some narrow cost-benefit analysis. Once we start this discussion, such an analysis is important but not nearly sufficient. I also agree with my noble friend Lady Falkner that there is plenty of material out there; it is not that the debate cannot be informed by a whole range of credible and indeed less credible commentators. In 2010 the Treasury reviewed that literature, which is available on the Treasury website, so we do not shy away from looking at the issue from time to time. There was also the 2005 study, which

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again is available on the Treasury website. I hope that it is of some reassurance to the noble Lords, Lord Bilimoria and Lord Empey, that we at the Treasury do not spend our time doing these studies on a daily basis-I hope they would expect us to be getting with doing some more valuable work with our time-but from time to time we look at what the outside experts are coming up with.

We should remind ourselves that, in addition to the costs and benefits of the EU, we as a nation risk downplaying our prospects at every turn. It is important to recognise, for example, that in the World Bank's ease of business rankings the UK has got back into the top 10 and is now ranked seventh. That is critical. So I believe that Britain is well placed. We have lot to do internally in the UK, of course, and I have no doubt that there will be more discussion about that next week. As I said, the EU has much more to do with our active and positive participation.

I take the points made by the two noble Lord Davieses who have spoken in this debate about the location of manufacturing and the benefits that we get from it. I agree. On other issues of trade and investment, my noble friend Lord Ryder of Wensum referred to recent remarks by the chairman of the Chinese sovereign wealth fund, the CIC, on the eurozone. That gives me an opportunity to remind the House that the same chairman of the CIC was here two weeks ago with a very large delegation of Chinese officials and businesses, looking at the opportunities in UK infrastructure. While others have to go to Beijing begging for bailouts, we are very pleased to receive delegations here to look at opportunities in the UK. That is the context in which we should see this debate.

The noble Lord, Lord Kakkar, referred to another area of great strength for the UK: our world-beating excellence in clinical research. He made some telling points but, on the broad point about working time regulations, I stress that the Government are committed to the view that working people should decide the hours that they work, and we will continue to make that abundantly clear to the European Commission.

I did not get many questions directly, but a point was specifically addressed to me by my noble friend Lord Stevens of Ludgate about the UK's exposure to losses of the ECB. I can confirm that net losses or profits are allocated to euro-area national banks and that non-euro-area national banks, such as the Bank of England, do not receive profits or losses from the ECB. The UK makes a contribution to the capital of the ECB but that is simply in relation to the bank's running costs.

Finally, we had two interesting and remarkable contributions at the end from a more historical perspective from the noble Lord, Lord Gilbert, and my noble friend Lord Cormack. I merely say that, of those two contributions, I was rather attracted by and appreciate that of my noble friend and his important reminder of the insights that the late Lord Dahrendorf brought to these discussions and to the country more broadly.

In brief conclusion, let me be absolutely clear that the Government believe that leaving the EU is not remotely in our national interest. Standing on the outside, we would still be subject to the rules made in

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Brussels on the single market but powerless to influence them. Rest assured that rules written without us will not generally be in the UK's national interest. We have always been the driving force for open markets and free trade in the EU, and that is a role that we will continue to fulfil to ensure that the UK's voice is still heard and the UK's interests are protected.

12.56 pm

Lord Pearson of Rannoch: My Lords, I am grateful to all noble Lords who have spoken, I suppose especially to those who were nice about my persistence in this matter. I find that very agreeable, and I assure them that I will do my best to continue in that endeavour.

Briefly, I will pick up on the two speeches that were, perhaps, most critical of the Bill, by the noble Lord, Lord Davies of Stamford, and the noble Baroness, Lady Falkner. To the noble Lord I say that when he talks about fish not respecting national boundaries, it is a fact that before we joined the common fisheries policy, some 70 per cent of all the fish that swim in what are now EU waters did so in waters which were ours, and would be ours were we to leave the common fisheries policy. On the common agricultural policy, of course we are not suggesting that we will not continue to give aid to farmers. At the moment, the £3.4 billion that we give them annually comes out of the gross contribution to the budget of £18.5 billion, and not, as I think he may have suggested, out of the net £10 billion which we send in cash to Brussels.

The noble Baroness, Lady Falkner-the only contributor from the Liberal Democrat Benches, and very welcome for that-criticised the composition of the committee. I am quite open to agreeing with her on that. I do not think that it is impossible to find respectable people with no firm opinion as to whether we should stay in or leave the European Union. One would find quite a few of those on your Lordships' Cross Benches. As to the views of Scotland, Wales and Ireland, this would be a national study, which would be free to consider the separate positions of those countries. Then, I am afraid, the noble Baroness, made the mistake of confusing our membership of the European Union with our access to the single market. I suggest that we discuss this when she has had time to read what I have said in Hansard.

The noble Lord, Lord Desai, made the very good point that this Bill is perhaps too narrowly drawn, and what we want is not just an economic cost-benefit analysis but something much wider. I agree with him on that. Two of the earlier Bills that we discussed in recent years in fact went wider, and wanted to consider not only our economic costs and benefits but the effect of our EU membership on our constitution, defence and so on. So, I completely agree with that. I do not know whether the Bill is amendable, but, if it is not, no doubt we can try another one fairly soon.

I was grateful to the noble Lord, Lord Watson of Invergowrie, who put many interesting statistics before us. I think they came largely from the trade union movement and showed how positive our EU membership is in economic terms. That would have to be considered by the committee and looked at very closely. I agree with the noble Lord, Lord Lea of Crondall, that if the

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inquiry produced a report that showed how positive our membership was overall, that would be that and we would have to live with it.

Coming to the Front Bench speeches, there was a unanimity there from the political class against the Bill, which was not to be found in almost any of the other speeches. The noble Lord, Lord Davies of Oldham, said that this is completely the wrong time for this sort of Bill. Europe is in crisis and we must be good, lie down, get on with it and hope for the best, or words to that effect. The noble Lord, Lord Desai, said to me in an aside that may not find its way into Hansard, although I think it should, "Never fix a roof when it's raining". The noble Lord, Lord Davies, said that we need international action and cited the environment. He took the line that climate change or, as it used to be called, global warming is man-made. Quite a lot of us disagree with that.

The Minister also agreed that any Bill of this kind should go wider than a pure cost-benefit analysis. He said that it was an important Bill but not sufficient, and I am grateful for that. I think I have already put him straight on the gross and net contributions. We are working from the Pink Book, not the Treasury figures. I refer him in particular to table 9.2 on gross and net contributions in the Pink Book, which came out last Wednesday, some three months late-I do not quite know why.

A number of noble Lords said that we want to be like Norway. The noble Lord, Lord Sassoon, mentioned this. Well, we do not want to be like Norway. We would rather have the position of Switzerland.

I think the Minister agreed with the noble Lord, Lord Kakkar, about the working time directive and other European legislation that is damaging our National Health Service. He said that he would continue to press the Commission on this point. My final question to the Minister is: what is the point of the United Kingdom continuing to press the Commission on these and other burdens that come from Brussels? With 8 per cent of the votes in the Council, there is nothing that we can do to reverse them and we will not do so.

I conclude by thanking all noble Lords who have spoken. I beg to move that the Bill be read a second time.

Bill read a second time and committed to Committee of the Whole House.

Public Services (Social Value) Bill

First Reading

1.03 pm

The Bill was brought from the Commons, read a first time and ordered to be printed.

Arrangement of Business


1.04 pm

Lord Shutt of Greetland: My Lords, noble Lords who were here three hours ago will recall that I suggested that today we should have an advisory speaking time of six minutes. I am afraid that is still the case; indeed,

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it could do with being somewhat less. We are endeavouring to consider the two Bills today. I hope that if people can be succinct, they really will be. If we could get through so that we tackle the third of today's Bills by around 2.20 pm, we might still be able to get through. However, we will have to take a view sometime during the next Second Reading.

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