European Community (Developments)

HC Deb 11 June 1990 vol 174 cc20-107

[Relevant documents: European Community Document No. SEC(90)1, the Programme of the European Commission for 1990; Second report from the Foreign Affairs Committee on the Single European Act ( House of Commons Paper No. 82) and the observations by the Government on the report (Cm. 1077); Minutes of evidence taken by the Foreign Affairs Committee on 23 May 1990 ( House of Commons Paper No. 437-i).]

3.33 pm

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Douglas Hurd)

I beg to move, That this House takes note of the White Paper on Developments in the European Community (July-December 1989) (Cm. 1023). The diplomatic merry-go-round is gathering speed. Last week, NATO Foreign Ministers met in Scotland. Summit meetings have just taken place between American, British and Soviet leaders. In 14 days' time, the heads of Government of the European Community will meet in Dublin. Just before that meeting, Foreign Ministers of the allied powers and the two Germanies will meet in East Berlin. At the beginning of July, NATO heads of Government will meet in London. Less than a week later, the heads of Government of the major economic powers will meet in the United States. That is just June and July.

There is more to that than photographs and communiqués. Those meetings are not just part of the usual international round. We are trying to manage the enormous and welcome changes going on in the world. The old mould has broken, the new one not yet set. This debate is about the European Council, but we need to fit it into a wider view of Britain's interests.

Since Sir Winston Churchill's "iron curtain" speech, all our assumptions have had to be built on the fact of a divided Europe, with the free countries of the west facing countries in the east. Politically and economically, the eastern countries were under the control of the Soviet Union, and because of the nature of Soviet policy, they therefore represented a military and political threat to the free world.

The European Community has had a unique place in that post-war architecture. It achieved brilliantly its central purpose of making friends and allies out of former enemies. It was always a bridge from Europe to the wider world, including to the Communist bloc. It helped to achieve for its citizens a prosperity which set for the communist countries a comparison which they were found to fail—and did fail, in spectacular humiliation.

Much of our Community agenda was set in train long before the recent changes by which eastern Europe won its freedom, but we need now to take stock of what we are trying to achieve, see what adjustments we should make, and decide where the Community fits into the wider architecture of the new Europe. At the same time, in this debate we look back at the White Paper on Community developments under the French presidency. We have improved the format and hope to improve it yet again next time. We are also discussing the Commission's annual work programme, which the Scrutiny Select Committee recommended for debate today.

The background is that the European Community and NATO will continue to be the main pillars of our foreign policy. NATO will increasingly be about peace building, not just peace keeping, but its essential security role will remain at its core.

It would be irresponsible to argue that we do not need defence. We do, and that defence must be collective, but NATO will be one of the means of reaching out to the Soviet Union and the countries of eastern Europe as the become democracies and adapt their military structures. NATO, with a united Germany in it, will remain the guarantee of Europe's safety and one of the main means of binding the United States and Canada into Europe—which is in our interests as well as theirs.

In parallel, we shall see the increasing development of the Helsinki process—the conference on security and co-operation in Europe—not as a security organisation replacing NATO but as a partnership building confidence among 35 countries, many of which have been adversaries for the past 40 years.

Against that background, the European Community will become, if anything, even more important than now in the new scheme of things.

Mr. Dennis Skinner (Bolsover)

The EEC has been an unmitigated disaster.

Mr. Hurd

The hon. Gentleman has not read his party's policy document.

Mr. Skinner

I have. I voted against it.

Mr. Hurd

That is why it won—now I understand.

The new democracies of eastern Europe are enormously attracted by what we in the Community have to offer—free democracies, offering our citizens increasing prosperity through liberal economic policies, and concerted action to tackle common problems and a common system, based on a treaty binding that enterprise together. In looking westwards, they are looking first and foremost to the European Community for economic and political support.

In response, we are already devising new forms of association agreements with the countries of eastern Europe. Those agreements will increase in content as political and economic reform in those countries gathers strength. They may well one day lead to full membership of the Community. I would counsel against the argument that a larger Community would necessarily mean a more loosely structured Community.

The new entrants might well argue in favour of wider competence to the Community and closer integration. The example of Spain is worth pondering in that respect. However that argument turns out, I do not see that the Europe of 12 could shut the door of membership for any length of time against fully qualified European democracies, which are anxious to join, whether they are now members of EFTA, or are in the centre or east of Europe. Half of Europe is not the same as Europe and we should never claim otherwise.

Mr. Edward Leigh (Gainsborough and Horncastle)

Given that economies in the east of Europe are less sophisticated and more backward than our own, it would be a mistake if the European Community became such a close-knit club, with such high standards of entry, that the new countries, which we want to welcome into the democratic fold, were discouraged from joining.

Mr. Hurd

Membership of the Community requires an applicant to be a fully fledged democracy in political and economic terms. A country which relies on a high level of state subsidy and state aid is simply not qualified to enter the Community. Therefore, it will be a number of years before the newly fledged democracies of central and eastern Europe will be eligible. However, I agree that there should be no attempt to raise barriers to make their entry more difficult. I foresee that, when they are qualified. they will wish to apply. I do not think that there are grounds for keeping the door shut for a long time.

Dame Elaine Kellett-Bowman (Lancaster)

Does my right hon. Friend accept that we are eager for countries such as Hungary and Poland to come into the Community? Will he ensure that their entry does not push Turkey down the queue, as it has had a long-standing association with the Community?

Mr. Hurd

My hon. Friend raises an extremely relevant point, which shows that the problem of enlargement of the Community is not simple. I have stated our approach, which is not only sensible now but is what is likely to happen in the future.

Mr. Gerald Kaufman (Manchester, Gorton)

The hon. Member for Lancaster (Dame E. Kellett-Bowman) spoke about the potential accession of Turkey to the European Community. In their observations on the second report of the Select Committee on Foreign Affairs, presented to the House last month, the Government said with regard to accession of states into the Community that the criterion was that, under article 237, such a state should meet conditions of democracy and human rights. Therefore, will the Foreign Secretary state categorically that Turkey's standards of human rights, coupled with her continued illegal occupation of part of Cyprus, rule out her acceptance within the Community?

Mr. Hurd

In another statement, we have made our position clear. The whole Community has agreed that it should not consider any applications for full membership from countries outside until 1993. That covers the Austrian and Turkish applications, which are the two that the Community has had to date. After that, we shall need to consider, and we have told the Turkish Government that. Meanwhile, we are seeking to strengthen our Community relationship with Turkey by building up the content of the association agreement with that country.

We should take this opportunity to look at our Community—its strengths and weaknesses—as others see it. We are helped by the excellent and far-ranging report of the Select Committee on Foreign Affairs on the completion of the single market. There will always be some tension inside the Community between the Europe of phrases and the Europe of facts. We all belong to the political profession, so we cannot be entirely scornful of phrases and declarations, because they are the tools of our trade. Having said that, Conservative Members—and, I think, people in the country—have a strong preference for the Europe of facts. When the facts lag too far behind the phrases, the gap creates cynicism and the feeling of unreality, which of course gets worse if the facts begin not just to lag behind but to contradict the phrases used.

That is why, in our approach to the forthcoming summit at Dublin, we shall continue to stress what we believe are the two main elements today in this Europe of facts—by which I mean the need for Community decisions to complete the single market and the need for national legislation to carry into effect what the Community has decided. By concentrating on these tasks, we shall sweep away restrictions and give Europe an increased meaning in the life of the citizen.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

We all get carried away by these lovely Alice-in-Wonderland phrases about a greater Europe and a greater world, but does my right hon. Friend not agree that, if we are to get the Common Market right, whether in 1992 or at any other time, we ought to be talking not about who will be allowed to join but about who is to deal, as the Court of Auditors says, with the shambles of the fraud that is being perpetrated now? According to the Court of Auditors, European Community fraud amounts to £7 billion. Until we get rid of fraud, let us not use such grandiloquent phrases as "a greater Europe" and "a greater world". Let us at least ensure that it is honest.

Mr. Hurd

My hon. Friend is not a bad phrase-maker himself, so he should not scorn those phrases. However, he has put his finger on one point of fact to which I shall turn later.

We must make stronger progress on the single market this year, given the need to implement the programme by our target date of 1 January 1993. Some progress has been made recently by the Irish presidency—for example, on public procurement—but we are looking to the Dublin Council to add impetus to negotiations on transport and financial services. Air, shipping, road and rail links and insurance and investment services are all areas in which agreement would bring great benefits to both consumers and business. Progress in those areas is central to the success of the single market. We must not let the pace slacken.

It is not much good, however, the Community taking decisions which then simply gather dust in the pending trays of national bureaucracies and parliaments. The Community will be able to achieve its objectives only if its laws are effectively implemented and enforced. The United Kingdom has an excellent record on this, matched by very few others. At the end of June 1989, Italy had given effect to barely half the single market measures due for implementation, although I am encouraged that new arrangements for clearing the Italian backlog are now in hand. Last month, I wrote to Mr. Delors, the President of the Commission, to propose some ways in which we could extend the procedures for achieving the full implementation of Community law. I hope that that will bear fruit.

However, to report the failings will not alone provide the remedy. There is a good case for strengthening the role of both the Commission and the European Court of Justice over enforcement and compliance. We should discuss how that could be done. Can the European Court of Justice procedures be speeded up? Should the court have powers, like national courts, to impose penalties on persistent offenders, even if they are member states? These are matters which we shall raise in the present review of Community institutions.

To turn to the internal work of the Community, under the headings of political union and economic and monetary union, I believe that the discussion about political union is now in much clearer perspective than it used to be. The European Community has played an important part in overcoming national rivalries, but they still exist. The Community is the best available means of channelling those rivalries into effective co-operation in the common interest. We saw that last week, in the dramatic row over bovine spongiform encephalopathy. Without common rules, and a means to apply them, we could rapidly have found ourselves not in an immediate flare-up but in a long-running and deeply damaging trade war.

There is nothing new about angry trade disputes between Britain and France; our history is peppered with them. What is new, though still far from perfect, is a system for settling disputes promptly and fairly. We see the same in the single market and in competition policy. It is the existence of common rules, and a means of enforcing them, that can achieve fair trading conditions for each individual country of the Community and a better competitive position for the Community as a whole.

It is in this area that the Europe of phrase and rhetoric and the Europe of facts are most often in competition. Both have a place. Without phrases and speeches, we might never get beyond narrow nationalism, but it would be fatal to the Community to try to turn rhetoric into common policy without public consent or the practical mechanisms to make that work.

That is the heart of our approach to political economic and monetary union. That is why the Prime Minister at Dublin last time set out what political union does not mean. She guided the debate there and put her finger on a point which is increasingly accepted—that there is no credible set of ideas or constitutional rules which can be drawn up, adopted and called political union.

Mr. Kaufman

"Guided the debate"?

Mr. Hurd

In response to the sedentary intervention by the right hon. Member for Manchester, Gorton (Mr. Kaufman), the questions that my right hon. Friend the Prime Minister asked at Dublin are now questions that everyone has felt bound to answer in a way that has cleared up the debate and removed many of the anxieties in people's minds.

We will keep our separate Governments, our legal systems, our constitutions and our traditions. At the same time, we will hold more and more practical policies in common. That is not eroding sovereignty; it is using it. In 1985, in the debate on treaty change, the Community started with grandiose ideas but eventually agreed on limited change to achieve identifiable results. That is likely to happen again this time.

In some ways, the debate on economic and monetary union is similar. When those matters were debated in the House, there was a clear view on all sides that Parliament's control over the Administration was firmly based on its ability to control the Government's revenue-raising powers. There are many steps which we can take towards greater economic and monetary co-operation in Europe, but the House was clear in not accepting stage 3 of the Delors report on either political or practical grounds.

Hard practical work is now in hand in ECOFIN and in the Monetary Committee. My right hon. Friend the Chancellor is taking a full part in that and developing our ideas. Here, as in other fields, we have no intention of being bashful or negative. The House will again be debating EMU later this week in response to a private member's motion tabled by the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore).

It is not yet certain, but it seems likely, that the forthcoming summit in Dublin will decide to convene a second inter governmental conference, in addition to the one of EMU which has already been agreed, under the heading of political union. It is clear now, particularly as a result of the meeting of Foreign Ministers that I attended in Ireland three weeks ago, that the discussion on political union is about the balance between Community institutions and how their working can be improved.

Of course, any treaty changes can be agreed only by unanimity among the member states and after debate and ratification in the House. Throughout, we shall be seeking steps which will make the Community more effective and more relevant to the citizen. Before my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) shouts "fraud" again, I shall come to that in a moment.

We want a democratic accountability to be improved, political co-operation sanctioned and the principle of subsidiarity more rigorously applied.

Dr. Dafydd Elis Thomas (Meirionnydd Nant Conwy)

I have been following the Foreign Secretary's argument with great interest, and his emphasis on facts as opposed to phrases. Does he accept that, because of the emphasis which he and the Prime Minister are putting on facts, there is a danger that the United Kingdom's contribution to greater convergence may appear to be negative? Surely there is a Europe of process as well as a Europe of facts and a Europe of phrases.

Mr. Hurd

I agree with that. I believe that political union is a process by which the member states of the Community, without being forced, develop the habit of increasingly working together on subjects where common decisions are needed. I see political union as a process which leads in that direction. We intend to take, and are taking, a full part, week by week and meeting by meeting, in that process.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

Will the Secretary of State give way?

Mr. Hurd

I shall give way to the hon. Lady; then I wish to get on.

Mrs. Dunwoody

Surely consensus is not the same thing as accepting a move towards majority voting on matters of major importance? To do that would not be moving with the agreement of the peoples of Europe.

Mr. Hurd

That is why there is a carefully calculated mix between matters which need unanimity and those which can be settled by qualified majority voting.

Democratic control over the decision-making of the Council of Ministers is the proper preserve of national parliaments. That is increasingly accepted in the Community; the view that control should be strengthened is one of the interesting developments in the thinking of the Community in the past year or so. Last month, there was a conference in Cork attended by national scrutiny committee chairmen and the European Parliament to discuss exactly that issue. There will also be assizes of national parliaments in October to discuss the intergovernmental conference. That is a good move, and these are all welcome developments.

Here at Westminster, I hope that the House agrees that the Government have responded positively to the report of the Procedure Committee on scrutiny. We look forward to early implementation of many of its recommendations. Last year, there were 52 scrutiny debates—almost two a week while the House was sitting. In future, we shall try to ensure that such debates continue to take place early in the legislative process of the Community so that the Government can take full account of the views of the House in negotiation in Brussels.

The new Standing Committees that the Government have approved, which will take evidence from Ministers, will further strengthen that scrutiny. I hope that the effectiveness of Parliament's influence on Community legislation can also be increased by improving contacts between hon. Members of the House and Members of the European Parliament.

Here at Westminster, we are making a real and visible effort to improve parliamentary involvement in the Community's legislative process. I welcome that. I hope that other national parliaments will do likewise and that there will be more exchanges between national Parliaments on that shared aim.

Mr. Jonathan Aitken (Thanet, South)

My right hon. Friend referred to the 52 debates that have taken place on European Community documents and directives. Can he mention a single one in which the Government changed their position as a result of the views expressed in the House?

Mr. Hurd

Having taken part in such debates. I am sure that the Minister's view is often shaped—[HON. MEMBERS: "Oh!"] No, I mean that. Ministers' views are shaped and shifted by many angles of aproach as a result of such debates. That is what Parliament is about. One does not expect Ministers to do 180 deg turns in public, but one expects them—and this is what happens—to be influenced and to tell their officials as they leave the Box, "I do not want to go through that again." [Laughter.] That is what parliamentary coming and going is all about. My hon. Friend has been here long enough to have poked a few pins into people and had exactly that impact.

Mr. Peter Shore (Bethnal Green and Stepney)

rose——

Mr. Nigel Spearing (Newham, South)

rose——

Mr. Tam Dalyell (Linlithgow)

rose——

Mr. Hurd

I am creating more excitement than I intended. I intend to proceed. I shall finish the point about parliaments; then I shall give way to the right hon. Member for Bethnal Green and Stepney (Mr. Shore).

The European Parliament provides a second pillar of democratic accountability. Its role in the legislative process was significantly strengthened under the Single European Act. The new procedures are working well, and they provide the European Parliament with an important point of entry into Community legislation. We see no need for significant change again now.

Where we do see scope for progress is in improving the accountability of the Commission. National parliaments such as this House cannot keep watch over the Commission's day-to-day administration. I should like to see—this is where the emphasis which my hon. Friend the Member for Selly Oak placed on fraud comes in—repeated in Strasbourg the rigour of financial accountability that we have here. The Public Accounts Committee and National Audit Office here are excellent models. The Budgetary Control Committee of the European Parliament and the European Court of Auditors could do a comparable job, and we should give them the teeth to do so. The European Parliament should, for example, have the power to summon Commission officials. It should be given greater powers to check on fraud and value for money in Community spending.

Mr. Nicholas Budgen (Wolverhampton, South-West)

Will my right hon. Friend give way?

Mr Hurd

The taxpayer expects that scrutiny, and the Community should provide it. The history of Parliaments suggests that the role of watching and checking Executive action is not less, but more, important than the role of carrying through legislation, on which so much attention is focused.

Mr. Shore

I am all for the European Parliament bringing the Commission to heel, as far as that is possible. The Foreign Secretary spoke about increasing the effective scrutiny of this House over European Community decisions. How can effective scrutiny be undertaken if qualified—or rather, majority—voting is extended in the Council of Ministers, as it was during the Single European Act? Will he at least guarantee that Britain will not consider any further extension of majority voting in the Council of Ministers? It affects the essence of how we control our Ministers in this country.

Mr. Hurd

As the right hon. Gentleman is an enthusiast for the free market, he will agree that it would have been difficult to make as much progress as we have on the single market without qualified majority voting. If the Single European Act had not introduced qualified majority voting in this range of matters, the protectionist members of the Community, often a minority, could have blocked the measures for which the Commission, Britain and the more liberal members of the Community have been pressing. He is not wise to press me for that commitment.

Several Hon. Members

rose——

Mr. Hurd

I heard the voice of my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen).

Mr. Budgen

My right hon. Friend referred to the problem of Euro-fraud. Does he agree that year after year the Court of Auditors points to the most extensive and blatant fraud? Unless we have some form of Euro-police, which would be a complete affront to every nation state, this will go on and on. There is a clear sign that at least some of the countries of Europe know that it is going on, yet turn a blind eye to it.

Mr. Hurd

That is precisely why there is a strong case for strengthening the core of the Community and the effectiveness of the Court of Justice, the Court of Auditors and the Budgetary Control Committee, which together should be able to counter that tendency.

The debate about democratic accountability means, at root, satisfying the citizen. Several member states, including ourselves, have provided for recourse to an ombudsman. None of the national models may be found to make complete sense at Community level, because the procedural problems and constitutional arrangements are different, but it is worth looking to see whether the absence of any such arrangements at Community level may be worth remedying.

There is a case for examining with our partners whether some such institution or ombudsman might be set up as Community institutions are reformed. I do not know whether that would be feasible. I float the idea today. If a scheme could be worked out, it could be an important contribution towards making the Community more real for all our citizens.

At the same time, we need to look at the effectiveness of European political co-operation. As the House knows, this is the means by which the Twelve increasingly work together on foreign policy. We sometimes forget how impressive that co-operation can appear to people outside the Community. Recently, the Australian Foreign Minister told me that he saw it as one of the most important recent changes in international affairs.

Recently, in the middle east, I was struck by the stress which Arab leaders placed on the need for renewed action not by Britain or France, but by all the Twelve, in the Arab-Israeli dispute. The United States, as Mr. Baker has made clear, looks to European political co-operation to provide the means whereby the Americans can increasingly discuss problems, such as those in the middle east, with their main European allies. It is, indeed, happening at an increasing pace.

European political co-operation works by consensus, and should continue to do so. That does not, however, preclude national initiatives such as those recently taken by President Mitterrand and Chancellor Kohl on Lithuania. We should look at ways in which to strengthen the effectiveness of EPC by some reinforcement of its secretariat, by allowing EPC business to be discussed at regular foreign affairs councils and enhancing the way in which Community missions aboard can share tasks as well as services.

I do not see why there should not be experiments in producing reports among the Twelve on a particular event —for example, an election in a third country. I cannot see what would stand in the way of that type of co-operation. By such steady improvement in the habit of working together, we shall continue to increase the coherence and effectiveness of such European political co-operation.

The habit of working together is the core of the matter. There must be rules and institutions to embody it, but that habit, unforced and arrived at out of a shared sense of interest, is the vital heart of the Community. In the past 10 years, I have seen that habit grow and strengthen greatly.

Mr. Spearing

The co-operation and importance of national Parliaments, and the importance of co-operation within the Community, to which the right hon. Gentleman has just alluded, would receive universal approval. Earlier, he mentioned European political union, and said that the Government's approach to that lay in the balance of institutional power. Does he agree that the commitment to economic and monetary union, which the Government now hold, requires some form of central authority concerning economic and monetary policy? Of itself, that would constitute a political power, in the same way as the First Lord of the Treasury of this country inevitably became the Prime Minister.

Mr. Hurd

The House has debated that, and it will debate it again later this week. There is also a lively discussion in the Community about it. We have published our ideas about this, and we believe that it is possible to move towards the objectives of economic and monetary union without putting ourselves under a series of centralised institutions.

Mrs. Dunwoody

How?

Mr. Hurd

If the hon. Lady took the Treasury paper of last November from the Library, she would see how that is sketched—I say sketched, because my right hon. Friend the Chancellor is now in the process of setting out the ideas in greater depth. The hon. Lady will be able to study them as they develop.

We do not accept it as necessary to have a centralised and a necessarily bureaucratic and unaccountable system to achieve the objectives that led to the Delors report.

Mr. Dalyell

rose——

Mr. Bowen Wells (Hertford and Stortford)

rose——

Mr. Hurd

I am about to conclude, but I shall give way to my hon. Friend.

Mr. Wells

My right hon. Friend's positive approach to the intergovernmental conference and the planned meetings on it are welcome to the House and to Britain. Does my right hon. Friend agree that the real problem for European co-operation is that the meetings of the Council of Europe and the Council of Ministers are not held in public, and therefore we have a problem to ensure democratic accountability to national Parliaments as well as to the European Parliament? We need the control that my right hon. Friend has suggested, and accountability in all we do. At the IGC, we should suggest a second house of the European Parliament consisting of representatives of national parliaments to oversee the Council of Europe and the Council of Ministers.

Mr. Hurd

I am not sure that I am persuaded by that. My hon. Friend's first point has some validity, but the trouble about the Council of Ministers is that a lot of time is spent in negotiation, and if all those negotiations were in public it is unlikely that the Council would be successful. I do not think that my hon. Friend's solution would address that problem.

Mr. Dalyell

rose——

Mr. Hurd

I shall give way to the hon. Gentleman. I have never failed to do so, and I do not intend to start now.

Mr. Dalyell

Is the Foreign Secretary aware that I have in my hand a wad of letters from distinguished institutions in France, Germany and Denmark asking Britain to think again about what is happening in the natural history museum? We are talking about organising together on the basis of institutions. Will the Foreign Secretary ask someone from the Foreign Office to consider its interest in the matter, which is important for the third world countries because we are destroying what we in this country possibly do best? Will he get someone from the Foreign Office to give him a report on what is happening in south Kensington?

Mr. Hurd

I shall immediately comply with that. A natural sympathy with dinosaurs will impel me to do so, and I shall have no difficulty in meeting the hon. Gentleman's request. I shall let him know how I view the situation when I have been able to look into it.

I am sorry to have taken so long, and I shall now conclude my speech. If I am right in thinking that the habit of working together is the key to the Community's success, it means that we must exert ourselves against those who seek to measure progress by the number of centralised policies and centralised institutions, and the height of the barriers that separate the Community from the rest of the world.

Equally, we must show some self-confidence in these islands—which is not always true of commentators on the subject—in our concept of a Community working together with increasing effectiveness where common or co-ordinated policies are needed. That is a growing theme. However, we must also work with our like-minded friends and allies for a world in which the cause of economic and political democracy entrenches itself, develops and makes permanent its present success.

4.11 pm

Mr. Gerald Kaufman (Manchester, Gorton)

It is always a great pleasure to listen to the Foreign Secretary seeking—as he did this afternoon—to fit the Government's random and self-contradictory activities into the framework of what he claims to be a grand design. When one listens to the right hon. Gentleman doing that so persuasively, one must remember that he is a writer of fiction of high repute—what one might call the Jeffrey Archer of joined-up writing of the Conservative party.

As one listens to the right hon. Gentleman explaining how the Government are initiating this, starting that and collaborating with the other, it is difficult to reconcile that harmonious, well-composed picture with the extraordinary, self-contradictory activities in which the Government are often in a minority of one and over which the right hon. Gentleman has to preside. He wishes to carry into action what he says but is always hag-ridden by the Prime Minister, who will have been interested to hear his latest definition of the activities of the European Community and the United Kingdom's role in it—the habit of working together. She could start that in Cabinet before going on to deal with the NATO summit, Community summits, and so on.

The Foreign Secretary rightly spoke about changes in the international picture caused by the recent meetings of the Warsaw pact and NATO, and how, understandably, they fit into our relationship to the Community and other European countries in the conference on security and co-operation in Europe and other institutions. One would never have thought that this Government had fought a rearguard action in favour of the maintenance and modernisation of short-range nuclear weapons when every single member of the North Atlantic Treaty Organisation has dropped out of contention on this issue and when, in the end, President Bush announced that the United States was not going ahead with Lance modernisation a matter of days after the Prime Minister returned from Bermuda saying that she still supported their modernisation.

The right hon. Gentleman is absolutely right that NATO must reassess its role in the light of developments in eastern Europe. It must take into account what the Prime Minister herself called only the other day the ending of the threat from the Soviet Union, what President Bush has called the end of the cold war, what General Colin Powell, chairman of the United States joint chiefs of staff, Mr. Cheney, Mr. Baker and all sensible people haves analysed and described as a major change in the relationships of European countries. So it is proper to fit our relationship with the European Community into these changes.

The problem is that, just as the Government have no grand design for our relationship with our NATO allies or for trying to see a picture in which the spectrum of Europe stretches from Ireland through to Bucharest, so they seem to have no clear idea what they want to do in the Community.

Constructive progress has been made on some matters. One of them, to which the right hon. Gentleman may not —understandably—have had time to refer in a debate in which many right hon. and hon. Members want to speak, is aid from the Community to eastern Europe. I am sure that the right hon. Gentleman will agree that the Community is making good progress on aid, as are various countries, including the United Kingdom, bilaterally.

But I still think that it would be useful if the Community tried to work out a much more coherent and structured policy on aid for eastern European countries, taking into account the diversity of their problems and the fact that, unless we have such a structured policy, there is a real danger that the understandable enthusiasm for assisting development in eastern Europe as it becomes more democratic may remove attention from countries in the developing world in other continents. For them, aid is even more important than it is in eastern Europe, and there is great concern among non-governmental agencies that the concentration on eastern Europe may mean a diminution in aid for countries that are abjectly poverty-stricken.

I welcome the fact that the right hon. Gentleman referred to views, which the Community has held and developed over a number of years, on the middle east. I very much hope that the Community will take cognisance of the latest developments there, including what may be happening in Jerusalem today. Most right hon. and hon. Members looked forward to and welcomed the possibility of a peace Government formed in Israel by Mr. Peres and deeply regretted the fact that he was unable to obtain the majority that he needed and the mandate that he wanted to pursue talks under the Mubarak and Baker scheme.

If a Government are formed in Jerusalem today by Mr. Shamir, I hope that the Community will send out the message that we would view with great sadness and despondency a Government in Israel of the extreme right which would have as its major objective the planting of settlements in the occupied territories——

Mr. Hugh Dykes (Harrow, East)

rose——

Mr. Kaufman

I shall give way to the hon. Gentleman when I have finished my sentence.

Although Opposition Members—like, I am sure, the whole House—strongly welcome the decision of the Soviet Government to allow Jews from the Soviet Union to leave to settle in Israel, where they are already receiving a great welcome, the Community would not find satisfaction in any deliberate policy of a new Israel Government to settle Soviet Jews in the occupied territories.

Mr. Dykes

I am grateful to the right hon. Gentleman. Incidentally, if this does not embarrass him, I should like to congratulate him on his courageous role in advocating the argument for a peace settlement. Does he agree that, looking back on it as an objective document for a plan for peace in the middle east, which would have been both durable and successful, and relating it to the role of the Community, the Venice declaration still remains one of the best documents that has ever been writtten on the middle east peace plan, and shows once again that the Community and Europe as a whole—not just the United States—should have greater involvement in that process?

Mr. Kaufman

It was a useful contribution, but we have moved on from there, as has Israel. In Cairo only three weeks ago I had a discussion with Mr. Peres, the leader of the Israel Labour party, who, to my great sadness, is not the Prime Minister of that country today. He spoke about the need for dialogue and of the fact that Israel proper could contain all the Soviet immigrants who chose to go there without any need for them to be settled in the occupied territories.

Those are matters that it is proper for us to discuss in a debate on developments within the Community in the past six months. However, the Foreign Secretary placed what seemed to be the most positive, optimistic and almost joyful interpretation on the way in which we are approaching 1992. In a rare moment of unconscious candour, in their response last month to the second report of the Select Committee on Foreign Affairs, the Government said clearly, plainly and blankly that, with regard to the single market, the Government's priorities are in financial services, including insurance, and transport. That is how the Government see the single market—as a money-making concern for financial institutions that can cross frontiers, and almost as an adventure playground for the institutions. The Goverment have never seen 1992 in any more optimistic, forthcoming or enlightened way. That is one reason why, far from having established the habit of working together, which is what the Foreign Secretary claimed a few moments ago, as the Community moves towards 1992 the United Kingdom Government are isolated on issue after issue.

On the exchange rate mechanism, for example, we can all properly be extremely cautious about stages 2 and 3 of the Delors report. Opposition Members would certainly not accept a central bank without full political control of such an institution. However, the Government's approach to membership of the exchange rate mechanism changes from month to month. We all recall——

Mr. Phillip Oppenheim (Amber Valley)

I know that the Opposition are now committed to entering the ERM should they become the Government, but will the right hon. Gentleman explain how a Labour Government would maintain the parity of the pound within the ERM at the same time as, on the one hand, cutting interest rates and, on the other hand, massively increasing public spending?

Mr. Kaufman

As the Foreign Secretary pointed out, we shall debate that matter later in the week. The rate at which we enter the exchange rate mechanism is an extremely critical matter on which I shall certainly not expand this afternoon—[Interruption.] Certainly not.

What I will say is that while the Prime Minister, in that notorious interview with Mr. Walden, invented a new reason why we should not enter the exchange rate mechanism with each new reply that she gave him, she is [...]ging her tune. At the conference that she [...]ed recently in Scotland, the right hon. Lady seemed [...]saying that the Government were almost ready to [...]r the exchange rate mechanism because our cost of saving, which is one of the criteria that she laid down as having to be satisfactory before we could enter, is now approaching Community levels. She doctored the cost of living index so as to do that.

I am beginning to wonder whether the Prime Minister wishes to doctor the cost of living index so as to enter the exchange rate mechanism or whether she wished to enter the exchange rate mechanism so as to doctor the cost of living index, so that she can present a new facet of the Government's failure to the electorate. The Government are clearly unable to make up their mind about that, and it has led to the disposal of one Foreign Secretary and one Chancellor of the Exchequer in the past 12 months.

There is also the issue of the social charter. The former Foreign Secretary, now the Leader of the House, said only a little while ago: No-one doubts that there is a legitimate social dimension to 1992". The Prime Minister seems to doubt that. The way in which she and her acolytes block the social charter at meeting after meeting shows that, while they want the Community to be an adventure playground for financial services and financial manipulations across the frontiers of Europe, they do not want the protection for employed people that must be a parallel of any other development. Protection for employed people is vital in a Community without frontiers because otherwise, although financial services will do well, employed people in Britain, who already have some of the lowest standards in the Community, will be more and more seriously disadvantaged.

I am sure that, in his heart of hearts, the Foreign Secretary would like to adhere to the social charter.

Mr. Hurd

indicated dissent.

Mr. Kaufman

Perhaps, like his predecessor, the right hon. Gentleman thinks that it is a Marxist document. If so, perhaps he will provide me with what I often asked the former Foreign Secretary for—the references in "Das Kapital" to workers being represented on boards. The right hon. and learned Gentleman said that that was one of the most Marxist aspects of the social charter.

Mr. Spearing

Every Labour Member would endorse the need for greater protection of employed people in the circumstances of the single market. Are not these provisions similar to those in the treaty relating to the environment, which leave it open to national parliaments and Governments to introduce protections in their areas? Should not that also apply in respect of conditions of employment, so that any parliament or nation can make its own plans for the protection of its employed persons, as it can for any advantages that might accrue from the single market?

Mr. Kaufman

I would welcome any move by any parliament to enhance social protection of employed people in the way that my hon. Friend suggests. The problem is that for the past 11 years, Parliament has been eroding and destroying the conditions and protections of employed people. It would be useful if the Community could redress what has gone wrong under the Government's majority.

My hon. Friend anticipated another subject on to which I shall move immediately—the environment. The Foreign Secretary said that the Government established the habit of working together, but they have an unparalleled record in the Community of disobeying decisions made by the Community about the environment and of failing to obey Community directives. Again and again, Community standards for the environment are being flouted by the United Kingdom, which is being referred to repeatedly as the dirty man of Europe. Since my hon. Friend and I entered this place almost exactly 20 years ago——

Mr. Spearing

Next Monday.

Mr. Kaufman

Indeed. My hon. Friend and I will celebrate our 20th anniversary next Monday. Since he became a Member of this place, he has been especially active in protecting the environment generally, and water standards especially.

The Community has decided to apply to the European Court of Justice—the Foreign Secretary referred to this — on the standards of various beaches in Britain. The Commission has decided to apply to the court next month on matters such as the pollution of the Aire and Calder rivers and the failure to implement the directive on cadmium. The United Kingdom has filthy beaches and it is not meeting the Community's water standards. The Government have a literally filthy record on these vital matters.

The Minister of State, Foreign and Commonwealth Office (Mr. Francis Maude)

Does the right hon. Gentleman remember the announcement made by the Commissioner for environmental matters, Mt. Ripa de Meana, in Brussels in February, when he produced a league table of infractions on environmental matters? Far from Britain having an unparalleled bad record, we had one of the better records.

Mr. Kaufman

I shall come to the gentleman to whom the Minister referred in a moment. I have page upon page of statements, decisions and formal letters from the Commission all of which relate to the filthy state of our water and our beaches. The Minister cannot pretend that that is not so.

Only last week the United Kingdom blocked moves to deal with pollution, for which it was rebuked by Mr. Ripa de Meana, whom the Minister has quoted in aid. The Government went against what was being recommended by that gentleman and by the Prime Minister in one of her eloquent speeches in which she referred to global warming. The right hon. Lady has the habit of picking up an issue, playing with it for a few days, and then casting it aside like a toy of which she has grown weary. There was the litter that she scattered in St. James park, some of which she picked up. The House will remember her interest in football identity cards. She has now gone green.

The Foreign Secretary referred to his natural sympathy with dinosaurs, and at Bracknell the Prime Minister spoke with great enthusiasm about the fossils of serpents having been found in Britain and about the action needed to deal with the problem of global warming. From her scientific background she described graphically the way in which the earth is being endangered. Our climate is being endangered. Indeed, the entire ecology of the planet is endangered by global warming.

The Prime Minister said: we would be taking a great risk with future generations if, having received this early warning, we did nothing about it; or just took the attitude 'Well, it'll see me out.' It may see out the Prime Minister, but the problem remains of what she spoke specifically about on 25 May in Bracknell. She said: We must also take action on carbon dioxide emissions … Any target would have to be part of a wide international effort. She wanted a realistic international programme of action and an equally realistic time-table. Discharges of carbon dioxide and CFCs, if unabated, will go on accumulating in the atmosphere and cannot easily be reversed. Even the most urgent measures now cannot fully repair the damage of the past.

Mr. Roger Knapman (Stroud)

Will the right hon. Gentleman give way?

Mr. Kaufman

No. I was about to refer to Mr. Ripa de Meana, whom the Minister mentioned some moments ago.

At the meeting in Paris on 8 June, Britain was one of the countries that blocked moves by the Community to set the year 20000 as a deadline for stabilising carbon dioxide emissions. Britain said that it could not improve its commitment to stabilise the emissions at 1990 levels, by the year 2000.

However, the Community's Environment Commissioner, Carlo Ripa de Meana, urged adoption of the year 200 target date, reportedly hoping that it would bring pressure on the United States to follow suit.

The Prime Minister manages—if only briefly—to summon up enthusiasm for subjects of great importance. However, when it involves action in the Community, the United Kingdom blocks actions that other Community countries want to take to deal with the serious issue of global warming.

There is another issue on which the Government block or defy action, or defy or invent policy—or give reasons for changing policy that other Community countries want to keep. It is curious that, although the Foreign Secretary has been very active—although not in the way that we would have liked—he has not spoken about Community action on sanctions for South Africa. The Community has made a series of decisions on that important matter, including one in December 1989. It said that, for sanctions to be lifted, there must be evidence of "profound and irreversible changes".

What that meant was defined in the directive of 27 October 1986, which demanded concrete measures leading to the abolition of apartheid. Not one such concrete measure has been taken by the South African Government. We welcome the measures that have been taken: the partial lifting of the state of emergency, the release of Mr. Mandela—and some political prisoners—and the unbanning of certain organisations. However, none of those adds up to the conditions repeatedly laid down by the Community.

On 21 February, the Minister of State, Foreign and Commonwealth Office, the right hon. Member for Bristol, West (Mr. Waldegrave), said: For all practical purposes President de Klerk has taken the steps demanded by EC Foreign Ministers".—[Official Report, 21 February 1990; Vol. 167, c. 789.] That is extraordinary, as the directive referred to concrete measures leading to the abolition of ap [...] and those measures have not been taken. The Prime Minister's personal statement, mad [...] the former Foreign Secretary in Kuala Lumpur, listed [...] conditions for the raising of sanctions. The first was release of Nelson Mandela and all political prisoners". Mr. Mandela has been released, but not all political prisoners have been. The conditions also demanded the "unbanning of political organisations"—that has been done—and the "suspension of violence". However, violence by the South African Government continues in a way that we have repeatedly witnessed since Mr. Mandela's release. The conditions further demanded lifting the State of Emergency". But the state of emergency has not been fully lifted. Therefore, on the Prime Minister's personal criteria, sanctions imposed by the Community should be kept.

Mr. Hurd

The Government are not suggesting that sanctions should be lifted fully. The argument is for a step-by-step approach, which is finding increasing sympathy in the Community. Anyone who listened to President de Klerk when he visited Europe recently was deeply impressed by his irreversible approach to the dismantling of apartheid and the steps that he has taken in that direction. It is an overwhelming case for not the total, but the partial, lifting of sanctions.

Mr. Kaufman

It is interesting that the right hon. Gentleman, in his usual moderate and sensible tones, should say that no one is suggesting that sanctions should be lifted fully. He spoke about the need for partial, not full, lifting of sanctions. However, on 22 May the Prime Minister said: I believe that there is now no place for sanctions and that they are almost irrelevant."—[Official Report, 22 May 1990; Vol. 173, c. 167.] Once again, the Foreign Secretary has spoken in a relatively moderate way—although I do not agree fully with what he is advocating—but then in marches the Prime Minister, who contradicts the right hon. Gentleman and says that sanctions should be lifted immediately. The reveals the Government's hypocrisy of the issue.

The Government, far from establishing the habit of working together—which the right hon. Gentleman advocated—are doing the reverse. They are acting on their own and breaking the word of the Foreign Secretary, the previous Foreign Secretary and the Prime Minister—but they are fulfilling the intentions and the wishes of the Prime Minister, which is a very different matter. When the Government are alone, isolated and failing to co-operate with their partners, how can they claim any vision of what the Community should be?

The right hon. Gentleman spoke about democratisation, but it is not clear what sort of democratisation he favours. He commended the report of the Select Committee on Foreign Affairs, but he did not mention the Government response to the report of the Procedure Committee on European legislation, in which the Government agreed with the Committee's view not to recommend the establishment of a European Community Grand Committee. We continue to believe that there should be such a Grand Committee, and that policy was endorsed by the party conference last October. It said: some form of European Community Affairs Grand Committee, modelled on the Scottish Grand Committee"— I hope that it meets a great deal more frequently— should be established. This should enable backbench and frontbench MPs to discuss all aspects of European Community policy—not simply those emanating from the Commission or the Council. Ministers should be questiond by this committee. As the single market approaches, the House must have much greater opportunities to discuss the work of the Community if the Community is to be genuinely accountable to the House.

Sir Russell Johnston (Inverness, Nairn and Lochaber)

I counsel the right hon. Gentleman most seriously not to model anything on the Scottish Grand Committee.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

The hon. Gentleman is never there; he is always in Europe.

Mr. Kaufman

My hon. Friend has made a comment which I, as a non-Scotsman, would not dare make, but he always speaks the truth.

We believe in a more democratic Community, but not a Community that usurps the role of sovereign Parliaments. The policy document that we shall be submitting to our annual conference this autumn, as endorsed by the national executive committee last month, states: But the EC is not a unitary state and we do not believe that further progress towards European unity will, or should, lead to a European superstate. The European Parliament should therefore be given the powers it needs to complement —not to replace—national parliaments. What we want is democratic accountability at every level, and we do not have that in this House.

As well as the deepening of the Community as we approach 1992, there is also the widening of the Community. Again, the Government appear to speak with a forked tongue. Not long ago the Prime Minister said that she could not envisage the speedy entry of East Germany into the European Community, on the ground that it would not be acceptable quickly to have as a partner a nation that had been ruled for half a century by communists and fascists. However, in their response to the Select Committee on Foreign Affairs, the Government take a very different view and welcome the idea of a united Germany becoming a member of the European Community. Although the Community will have to allow for that in its approach to the matter, it is undeniable that a united Germany must be a member of the Community.

I am somewhat disturbed that the right hon. Gentleman appears to put on a par the applications for membership from Turkey and from Austria. Turkey's record on human rights is a disgrace. It invaded a member of the Commonwealth and still has occupying forces there. Austria is a well-developed socialist democracy with established democratic roots. Although we would have to wait until the single market had been completed in 1992 before considering early acceptance of new members, I hope that the Community will respond positively to Austria's application.

I very much hope that other countries that are neutral, either by constitution, treaty or policy—such as Switzerland and Sweden—will find it possible to consider application to the Community so that it can become much more of a European Community. That includes considering positively, when appropriate and when the necessary conditions have been met, applications from countries of the former Soviet bloc such as Czechoslovakia, whose well-conducted elections are very welcome. The way in which that country conducted its elections is a great tribute to its inherent strength and democracy, which have survived 40 years of communist domination.

We must realise that if we are to accept, as we very much want to, application for membership from neutral countries, we must rule out any possibility of the European Community taking on a defence or military role. We hope that the Government will stand firm on that—certainly a Labour Government will—first, because NATO already fulfils that role; secondly, because we do not need a new centre of military concentration in Europe apart from NATO; and, thirdly, because a military or defence role for the Community would rule out the possibility of Austria, Switzerland and Sweden becoming members and would arouse great suspicion in the Soviet Union if some former communist countries were to wish to join.

We believe that it is time for this country to have a coherent vision of the future of the Community. It must be a vision of 12 countries or more—however many join—maintaining, asserting and expressing their historic self-identities. That can be done without nonsense from the Prime Minister, when she talks about the Queen's sovereignty being in danger. That is a total absurdity that none of the five other monarchies in the Community has trifled with for internal, party political reasons.

The Community must be a body of 12 or more countries, as others join, which express their history and which are proud of their history, their individual forms of government, and their historic identities. In a future Community we must work together to advance our national interests, the interests of Europe and those of a much wider Europe, embracing east and west.

4.50 pm

Mr. David Howell (Guildford)

The Select Committee on Foreign Affairs will be grateful to my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs for his kind references to its recent report on the Single European Act. The report was not just about that Act, although the Committee concluded that it had a considerably greater institutional impact on the Community's development, and on Britain's place in it, than many prophesied or assured the House at the time.

The Committee also examined other major institutional pressures building up in the Community and the way in which they are now forcing themselves to the fore, demanding a complete reassessment of the Community both internally and externally in respect of its relations with the rest of the world—as well as a reappraisal of our national position within the European Community. It is the United Kingdom's responses to those enormous pressures and changes—which are fast building up, and have come to a head even since the report was published —that I want to address in three respects.

The first concerns German unification. The report is not about German unification but deals with its impact on the European Community—which we recognise will be considerable. It will also be very rapid. The view has been expressed that the German reunification process will proceed in an orderly way, perhaps fulfilled and completed next year, and synchronised with the question of the external security status of the greater united Germany in the new European architecture being resolved.

I do not think that any of that will work out. On the contrary, the full economic and monetary union of the two Germanies will take place in a few weeks' time, on 2 July. That will require not only changes involving the currency and the full circulation of the deutschmark through Eastern and Western Germany and the setting up of Bundesbank branches in the East German Lander, but a total submerging of East Germany's legal, technical, taxation and social systems, as well as of its governmental systems, into those of the Federal Republic.

We shall see not only economic and monetary union but a very rapid move beyond that, to full political union —possibly before the end of this year. It is certainly my impression, and that of some of my right hon. and hon. Friends who visited Bonn since writing the report, that Chancellor Kohl and the Bonn coalition are determined to achieve, in addition to economic union on 2 July, full political union of the greater Germany by Christmas—certainly before the current German Parliament ends on 13 January next year.

Any illusions that we may have that German unification will wait for our considerations of how to change and reform the Community, or until we work out how to achieve a wider security system in Europe that will keep the Soviets happy, should be dispelled. Things will not fall into a neat pattern in that way.

The process of German unification will place enormous stress on the Community, both internally and externally. The external strains are not really the main subject of the debate, although they have been touched on by my right hon. Friend the Secretary of State and by the right hon. Member for Manchester, Gorton (Mr. Kaufman). They raise the question of Mr. Gorbachev's position and that of Soviet troops in eastern Germany. There must be a connection between the Germans' desperate hurry to achieve full unification, and quickly, and the obvious inclination of the Moscow policy makers suddenly to discover all sorts of difficulties and reasons why they should delay withdrawing their troops from eastern Europe.

I do not want to spend too much time on that aspect, but my own view is that my right hon. Friend the Secretary of State and policy makers in the west should not spend too much time worrying about Mr. Gorbachev's position, and nor should they take too seriously his apparent attempt to bargain with his army of 320,000 people stranded in East Germany, together with about 180,000 Soviet dependents, in quite nice barracks there.

The question whether or not those forces should be withdrawn, and of whether or not that situation should be used by Mr. Gorbachev not merely for reforming NATO, as no doubt we want to do, but for changing NATO in ways that he wants, into an entirely different security structure, should not be taken at all seriously. Of course we want to reform NATO, but there is no hurry.

We should do that in our own way, in our own time, and not be fazed and compelled into a false timetable either by German impatience for unity—which is utterly understandable and will not stop or be resisted—or by Soviet propositions and fears that must be pacified and bought off by changes to NATO or even by huge bribes to finance the continuation of those unhappy troops in East Germany, or to finance their return to the Soviet Union if they are not to remain in East Germany.

Those are the external issues affecting the Community caused by the move to German reunification, and no doubt we shall debate them further in the months ahead. However, it would be sad if we found ourselves diluting NATO at the diktat of Soviet policy instead of reforming NATO in the way that we want, on the basis of its past success in protecting European peace.

The internal strains caused by East Germany joining fully the greater German republic and therefore automatically the treaty of Rome and the European Community will also be considerable. We can already see the first signs of those strains. They arise on the financial side, by virtue of the fact that East Germany is a bankrupt state and will require billions and billions of deutschmarks to get it up and running again. That will place an enormous strain on the German money supply, monetary system and budget. Some gargantuan figures have already been spelt out as to what the Federal Republic thinks it will have to find from extra borrowing and revenues to finance a reasonably smooth transition—although probably it will not be very smooth at all—from East Germany's rundown, centralised economy to it being a proper part of a free market economy.

The effect will be to place strain on the deutschmark, on the currencies of Europe, and on the European monetary system. Pressures may also come from the Bundesbank —I do not know whether they will be resisted—to raise German interest rates, without wanting all the other western countries to follow. There will also be pressures on German inflation generally.

After 2 July, we shall be heading for a period of considerable turbulence in the European monetary system. It is no surprise to me that the governor of the Bundesbank has been saying, in effect, "For heaven's sake, if we have this problem to handle in the next few months, we can do without the additional problem of sterling trying to join the exchange rate mechanism as well." He has said that more than once, and that worries me. I am one of those —not everyone is—who would like to see the pound have a context in the exchange rate mechanism and a proper policy for sterling that will give it some stability. There is a possibility that our opportunity to do that will slip by. We have taken no action so far.

Now I imagine that my right hon. Friend's plan is to get into the exchange rate mechanism. Then, when the delegates sit at the conference table at the proposed intergovernmental conference on monetary union in December, they will be able to say that we have reached stage 1 and are members of the ERM, and can therefore discuss further stages towards monetary union, why we do not agree with Delors stages 2 and 3 and some other ideas. I am concerned that their plan could be upset by the views that the governor of the Bundesbank is pressing, because he and the Germans will have different priorities during the next few months—to achieve German economic and monetary union in a stable and orderly fashion without creating too much inflationary pressure.

Mr. Budgen

If the Germans decided that they did not want us to join the exchange rate mechanism, would they have the right to refuse our application?

Mr. Howell

I do not think that the Germans have the right in law to refuse, but, as the governors and administrators of the largest currency in western Europe, they can organise matters to make it extremely difficult for sterling to join, and raise the risk of it doing so. However, it is right that no legal restraint can be applied to prevent us from joining.

We are debating European monetary union later and this is not the occasion for a technical analysis of developments within the ERM or monetary union. However, it is a fundamental political issue, so my hon. Friends and I on the Select Committee on Foreign Affairs felt that we should consider it. The central question that it raises is that, if we are to have anything like Delors stages 2 and 3 or some other organisation—the current proposal is a federal reserve institution or Eurofed—there will be a fundamental dilemma: independence or accountability. We point out that dilemma in paragraph 48 of the Select Committee report.

The idea that policy makers in Bonn, Paris, Rome or Madrid have a clear answer to that dilemma is thinly based. In discussions with policy makers in those capitals, we found that they were extremely vague about how the idea of independence, which was given so much prominence by the Bundesbank—which keeps emphasising the need for the new centralised institution to be independent of politicians—would be reconciled with the accountability of such a vastly powerful new institution, which would run the monetary policy of Europe, through the democratic forums of Europe.

No clear answer emerges. It is worth noting, as we survey the unfolding scene, that if Eurofed were to be structured in such a way that it was accountable to national Parliaments, the House would gain a vast amount of power. It is untrue to say that the House has ever had much say in monetary policy, the coin of the realm, or monetary issues down the centuries. There was no mention of it in the 1688 settlement. Parliament has little say in how central banks work, how much the Government borrow and how they issue money.

If the monetary authority of Europe is to be accountable by various means through national parliaments, it would be a major shift of power from the Executive to Parliament in this country. That huge constitutional issue has not yet been thoroughly debated. I do not think that some hon. Members have spotted it. Perhaps some of my right hon. Friends within the Executive have seen it coming, but it will come as a surprise to many people, and would not reduce the powers of Parliament but greatly increase them.

Mr. Wells

Does my right hon. Friend agree that the alternative, which is to leave the monetary union system entirely in the hands of the Bundesbank, as it is at present—unaccountable to anyone other than the German Parliament—would also be totally unacceptable?

Mr. Howell

It is a nice point that our monetary policy at present is not within the nation's control. We realised that when we fixed short-term interest rates. There are forces at work outside, one of which is the Bundesbank and the power of the deutschmark. Another force is international market pressure. Would monetary policy be more under our control if we were in a Eurofed of some sort? It is hard to say, but the proposition that we could stay as we are and allow the greater deutschmark zone to prevail is not attractive to me, and becomes less attractive if we consider the point that I was making earlier about the large size of the new greater Germany. It will be by far the greatest power within the European Community, and its currency will be even more powerful relative to that of other members than it is at present.

Change must come. I hope that my right hon. Friends will turn up at the intergovernmental conference scheduled for December with good ideas about how monetary union should be shaped. The whole House has accepted the point agreed with the Government that Delors stages two and three are not good enough. They are too like tram lines, they are unrealistic and do not reflect the needs and complexities of running monetary policy for a vast range of different economies throughout Europe. That is not on.

However, will the alternatives suggested by the Government so far—the paper on the evolution of economic and monetary policies, which contains the idea of competitive currencies—suffice? When the Committee tried out that idea on policy makers from Europe, we found polite interest but a general feeling that the idea was not good enough and that a more robust set of propositions were needed.

Mr. Dykes

Does my right hon. Friend agree that, as Mr. Delors and his colleagues on the committee were asked to produce plans, blueprints and ideas for all the stages until completion of monetary union, they can hardly be criticised for having made suggestions for stages 2 and 3? We do not have to regard those suggestions as a rigid mould. Indeed, Mr. Delors subsequently reaffirmed that all such issues can be negotiated anyway.

Mr. Howell

It is correct that the original Delors stages 1, 2 and 3 have now been replaced by more flexible and interesting ideas. This is an opportunity for my right hon. Friend the Chancellor and others to come forward with further propositions. It is valuable that we are now in a positive stance vis-a-vis monetary union. We must recall that it was not long ago that my right hon. Friends—some of them—were against monetary union on principle. They said that the whole idea, however it was defined, was bad. We have now moved to a different point, and are in favour of monetary union, but we want it achieved by sensible and practical means rather than by the instant creation of new institutions, which would not be able to do the job.

If such new structures for monetary union are t o come into being, in addition to setting out, from our own considerable experience, how best they might work, in relation to national monetary and budgetary policy-making which will have to continue to a considerable extent, we need to define the legal status of the new bodies. There needs to be a more constitutional approach to the construction of the new institutions proposed by the Euro-planners in Brussels, and a greater readiness to accept that such institutions can work effectively only if their legal status is established and rooted in the basic structure of the nation states that make up the European Community.

That is all that I want to say now on the issue, but we shall hear more about it as my right hon. Friend the Foreign Secretary prepares for the intergovernmental conference in December. I repeat that it will be important for Britain to put forward some new ideas. We shall no doubt have an opportunity to debate them later this week.

Our report touched on a third great issue. In the reply to our report, the Government itemised it as one of the six major issues with which the Community is now dealing. I refer to so-called political union. Here we are dealing with far vaguer terminology than when we were talking about monetary union. My right hon. Friend the Prime Minister was right to start the debate by asking what on earth people meant by political union. As soon as she asked that question it became clear that it meant different things to different people in the Community and that there were many opinions and no great agreement about how to bring about practical changes.

The Select Committee concluded that the near-obsession in some parts of the Community with the development, on a much deeper and quicker basis, towards full political union belonged to the Europe of phrases, not to the Europe of facts—to use the terminology of my right hon. Friend the Foreign Secretary. Our main concern, expressed in paragraph 51 of our report, is that if there are to be political developments, they should be detailed and practical—in that they should be addressed to the institutional weaknesses of the Community—and that they should not be governed by a sort of determination that says, "Don't bother us with details; we're heading towards a united states of Europe and we're not too concerned about the items in between." The Committee regards it as important to resist such determinism.

We should reject talk of a political union that implies that we are building a new, gigantic, pyramidical structure, with vast central institutions that will be in the senior category, with national parliaments and national institutions in the junior category, and that we are recreating, on the model of the United States of America —which may have been marvellous in the 18th and 19th centuries—a united states of Europe that is equally centralised, with both the weaknesses and the strengths, but particularly the weaknesses, of the USA system. Wise people, concerned with the 21st century, will try to resist such a political union of Europe. I hope that the Select Committee's report was able to suggest some reasons why they should resist it.

If we are to change the political institutions of Europe, we should think here, too, in constitutional, not bureaucratic terms. The accountability route—running from the European institutions back to the individual—is clear. As my right hon. Friend the Home Secretary and the right hon. Member for Gorton said, that is through national Parliaments working in partnership with the European Parliament. In that way the Community will be made more democratic and flexible and yet will maintain its openness and its ability in due course to embrace new countries, including Austria and the countries of eastern Europe as they bring their economies into the right shape and their price structures into a form that allows them to join a free market structure and the free market philosophy of the treaty of Rome.

Those are the three issues, out of many, to which I wanted to refer and that were raised in the Select Committee's report. Big moments of history are lying immediately ahead as we begin to cope with the new, gigantic, united Germany, right in the centre of Europe, and as we work out with it how it is to express its wish to support western values—as it constantly says it does—and to be part of the free market system by means of the European Community as well, I hope, to be part of the free world defence system, through the North Atlantic Treaty Alliance. That is what we want to see, and that is what we must work for.

My right hon. Friend has guided us through many shoals. He described with the greatest skill the many meetings that he has attended, and is about to attend. He will need all the support and good wishes of the House to see us through if we are to preserve our free institutions and make them adaptable to the totally new conditions of the larger Europe that lies ahead.

5.15 pm

Mr. Peter Shore (Bethnal Green and Stepney)

I agree in particular with the closing remarks of the right hon. Member for Guildford (Mr. Howell) and with what he said about the desirability of further enlargement of the Community and the importance of retaining, sustaining and reinforcing national parliamentry control.

In a debate of this kind, the temptation to cover almost every aspect is almost irresistible, but it is a temptation that I intend to resist. I shall concentrate on what I believe is the most important issue at present—economic and monetary union. I claim special attention for it because of its central position in current European Community discussions and for four additional reasons.

First, economic and monetary union marks a genuine new stage—a qualitative leap—in the European Community's development. Whereas it was just possible to consider European Community developments up to EMU as consistent with a Europe of independent sovereign states co-operating together—a Europe des patries, to use that old phrase—EMU clearly takes the process into the new realm of a supranational European union. As the report of the Select Committee on Foreign Affairs on 14 March 1990 said: The thrust towards European union is active and potent and is a major factor in all the proposals for the future development of the Community. The concluding paragraph of the report states: It is clear to us that the Community now developing is very different from the Community that the UK joined in the 1970s. That is the first reason why we should concentrate on the implications and the meaning of economic and monetary union.

My second reason is that EMU is, more than any other issue, splitting the United Kingdom from the rest of the European Community. It poses the most formidable problems for United Kingdom diplomacy and national policy, as I intend to develop later.

The third reason why we should concentrate on EMU is that the implementation of full economic and monetary union will bring about a further imbalance of power within the existing European Community, where present West German economic leadership will be followed by the economic dominance of a united Germany.

Fourthly, economic and monetary union will create a major new barrier between the European Community of the Twelve and European Free Trade Association and eastern European countries that could otherwise be brought into a wider European Community, which I believe is the wish of many hon. Members in all parts of the House. Both the House and the country should be clear about what is at stake in economic and monetary union.

First, the exchange rate for member states would be irrevocably fixed. National currencies would be replaced by a common European currency such as the ecu. It would no longer be possible to depreciate or devalue a currency, which is the only effective short-term remedy for restoring competitiveness with other stronger economies, for getting rid of an unacceptable trade balance and for maintaining employment.

Secondly, the Eurofed central bank would be set up to decide monetary polices, including interest rate and mortgage rate policies for the entire Community. The Bank of England would cease to be responsible to United Kingdom Ministers in the House; it would simply become the London branch of the Eurofed.

Thirdly, central control would be imposed upon the budget totals of member states; they would not be allowed to reflate or expand their economies by operating a budget deficit beyond the limits laid down by the Eurobankers and the Commission, nor would they be allowed to borrow through internal short-term financing or from other Community countries.

It would be difficult to overstate the importance of these proposals. The power over exchange rates, interest rates and the budget balance between expenditure, taxation and borrowing, all of which would be totally lost or severely circumscribed under the Delors plans for EMU, would deliver Britain bound hand and foot to the Euro decision makers. It would be handing over to the European Community the key decisions affecting the economic destiny of Britain and at the same time we should be stripping the Westminster Parliament of effective powers. Of equal if not greater importance, we should be accepting what would be an economic disaster for the British people. I shall develop that point in a moment.

Sir Russell Johnston

The right hon. Gentleman is quite accurate, but if Britain is being bound hand and foot, so equally are France, Italy, Spain and Germany. Are we not entering a common enterprise?

Mr. Shore

The hon. Gentleman is making a serious mistake. There is no question of Germany being delivered bound hand and foot, because Germany would be the principal beneficiary of what is proposed.

The heart of the matter is that there are major differences in the economic performance of member states. Like Japan, Germany has persistently out-performed other nations in productivity and efficiency, leading to a markedly higher growth rate and a markedly lower rate of inflation.

To remain competitive with Germany, all states have had to depreciate or devalue their currencies against the deutschmark, to a greater or lesser extent, not only in recent years but throughout the post-war period. As recently as 1985, the pound would buy DM3.9. Today, five years later, the pound will buy DM2.79. Through that depreciation, British exports to Germany are more than 25 per cent. cheaper than they were five years ago, while German exports to Britain are correspondingly dearer. If that exchange rate adjustment had not or could not have been made, British goods would be even more seriously priced out of the German market than they are today. Our trade deficit would be larger and unemployment in the United Kingdom would grow.

No one should have any doubt about the destructive effect of an uncompetitive exchange rate. In 1980 and 1981, when North sea oil came on stream and the world considered the pound to be a petro-currency, the Government allowed—or could not prevent—the exchange rate to rise by some 40 per cent. That was the principal cause of the disaster that then overtook British industry—the elimination of more than 20 per cent. of our manufacturing capacity and the horrific rise of unemployment to well over 3 million.

Permanently fixed exchange rates in the EMU would deprive member states of that necessary adjustment mechanism. Germany will continue to be relatively more efficient. German productivity, irrespective of relative wage claims in Britain and Germany, will continue to outstrip that of the United Kingdom for many years ahead. That is the fruit of the vast industrial investment, managerial skills and training that German industry has accumulated over many decades.

Other countries, if locked into the permanently fixed exchange rate mechanism, will be progressively weakened. Unemployment will grow as industries are forced to close, and we shall witness an ever-growing migration of unemployed people seeking work in Germany in the years ahead.

In our most recent debate on economic and monetary union on 2 November 1989, the Chancellor of the Exchequer told the House: Our position on stage 1 is clear and constructive, and we are committed to it, but we part company with the Delors recipe on the next steps. He went on specifically to reject the proposals for binding rules on national budgetary policy, quoting with approval the report of the Select Committee on the Treasury and Civil Service which stated: The power of the House of Commons over the centuries has depended fundamentally on the control of money, both taxation and expenditure. This would be jeopardised by the form of monetary union proposed by the Delors report which would involve central undemocratic direction from within Europe of domestic budgetary policies. The Chancellor went on to state this further objection: The Delors report's proposals on monetary union are unacceptable, for monetary policy is at the very heart of macroeconomic policy and the proposals in the report make no provision for accountability for monetary policy to national Governments or national Parliaments. Yet the electorate would still hold Governments and national authorities responsible for their economic well-being and rightly so."—[Official Report, 2 November 1989; Vol. 159, c. 490.] On 1 May, in her statement to the House following the one-day Dublin summit, the Prime Minister said: There will be fierce debate about economic and monetary union. Those debates will be fierce because from what we have seen of Delors stages 2 and 3, which have been rather general, we do not like or accept the idea of going to a single currency or locked currencies or the idea of a central bank, which would take powers away from this House, as was described in the Delors report."—[Official Report, 1 May 1990; Vol. 171, c. 914.] When the right hon. Member for Guildford said, as he was perfectly entitled to, that he believed that the Government were committed in principle to economic and monetary union, I found that difficult to reconcile with the words that I have just read. I believe that the Government are, rightly, committed to stage 1 of the Delors report and that they are trying desperately to find some way of appearing to be in favour of closer economic and monetary co-operation. Incidentally, the word "cooperation" was used in the Queen's Speech only a few months ago. They cannot and will not go ahead with the proposals for economic and monetary union which are at the heart of the Delors report and at the heart of any proposals for genuine monetary union. We cannot have monetary union without a fixed exchange rate. The Prime Minister has rejected it, and we all have to confront that, however difficult the confrontation may be.

Since last December's Strasbourg European Council meeting, there have been further meetings of Finance Ministers to discuss two Commission papers on economic and monetary union. Discussions there have centred on the degree of central control over member states' budget deficits and on the independence of the proposed Eurofed central bank. Those issues have yet to be decided, and on them the United Kingdom is not completely isolated. However, on the basic issues of permanently fixed exchange rates and the creation of the Eurofed central bank, the United Kingdom is entirely on its own.

There must be no weakening of the United Kingdom's stand on those issues. The House would like to hear from the Minister of State when he replies to the debate a further unequivocal reassurance that the Prime Minister's words, uttered as recently as 1 May, on permanently fixed exchange rates and a European central bank remain at the centre of Government policy. I hope that there will be no ambiguity or evasion, but a clear statement later today on those basic issues.

It would be of some help if an equal assurance were given by the Opposition Front-Bench team. I am aware of the reservations expressed by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), the shadow Chancellor, in the debate on 2 November. He said that he was not prepared to accept binding rules of budgetary or fiscal policy and that he was opposed to any system of central banks which would be independent of political control."[Official Report, 2 November 1989; Vol. 159, c. 502.] But, no doubt because of pressure of time, he did not spell out his position on permanently fixed exchange rates or a Eurofed central bank under political control. I hope that those omissions can be put right before the end of the debate. I look forward to the reply from the Opposition Front Bench spokesman tonight.

Assuming that we are given clear assurances from both Front-Bench teams on these vital matters, which I have fairly raised and put to them both this afternoon, I ask them to consider the implication on their resolve to join the exchange rate mechanism. We should be joining not only a fixed and adjustable exchange rate system, like the old International Monetary Fund, but a system that differs from the IMF in at least two crucial respects.

First, exchange rate depreciation would no longer be a national and unilateral decision but one that would be taken only with the agreement and approval of the other member states. That is a profound difference. Secondly, and most importantly, the ERM is universally regarded throughout the European Community as only the first step towards economic and monetary union. Therefore, those who advocate membership of the ERM should be prepared to place their total and public reserve on further commitments towards economic and monetary union.

Of course, it is true that the intergovernmental conference which is due to begin in December to implement the treaty changes necessary for the implementation of economic and monetary union, will need British agreement. But, as the Select Committee report rightly observed: The possibility has to be faced that the other 11 might establish procedures outside the EEC Treaties, albeit with considerable difficulties and some regret, which would enable them to go ahead with Stages II and III. They might establish procedures to enable them to go ahead without the participation of the United Kingdom. That prospect, however unwelcome, must be squarely faced. It is an issue on which we cannot afford to compromise.

I was encouraged and interested to read the speech on 5 June of the Secretary of State for Trade and Industry. He said, after a thoughtful survey in particular of the possibility that the European Community would be enlarged by the entry of east European countries: How far individual Member States wish to travel along the road of economic and monetary union would be for them to decide. Could there not be regional groupings within the overall Union, as we already have with Benelux or Schengen Group. France and Germany could form a closer alliance still if they wished. There could be currency agreements, either of the ERM type or full currency union as envisaged in current plans for economic and monetary union. Those who wish could form joint central banks and manage their currencies. But there should be no compulsion on others to join such arrangements". That was the major message that the Secretary of State conveyed.

We should continue to seek to persuade our colleagues in the European Communities—the Eleven—to abandon this ill advised and thoroughly dangerous project of economic and monetary union.

Mr. Dykes

Will the hon. Gentleman give way?

Mr. Shore

No, I am coming to the end of my speech.

What the Secretary of State for Trade and Industry said offers us a common sense and worthwhile alternative which I recommend not only to the Government but to the Opposition Front-Bench team.

5.34 pm

Mr. Ray Whitney (Wycombe)

With respect to the right hon. Member for Bethnal Green and Stepney (Mr. Shore), the picture that he painted of economic and monetary union and co-operation is both unnecessarily and unjustifiably pessimistic. First, it is unclear exactly what will be the result of the deliberations on European monetary union. The right hon. Gentleman set up what we might call Jacques Delors mark 1 and used it as his target. However, the windmill at which he was tilting may not be there as the deliberations proceed.

Secondly, the right hon. Gentleman does an injustice to other member states of the Community. As the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston), suggested, other member states have a similar interest to ours in seeking the right balance in what is undoubtedly the extremely daunting economic power of Germany. I have no reason to believe that the French, Italian or Spanish Governments are in any danger of falling into the traps that the right hon. Gentleman envisaged, any more than we are.

Thirdly, there was an underlying suggestion in the right hon. Gentleman's speech that the way out for a weak economy—not that ours is weak, but it could be if certain election results which the right hon. Gentleman desires were achieved—is constantly and forever devaluing its currency. The way out for an economy that is not competitive cannot be endless and constant devaluations, which seemed to be the underlying theme of the right hon. Gentleman's approach. Indeed, the experience of Germany shows that a strong economy makes a currency appreciate. That gives the lie to the right hon. Gentleman's proposition.

It is perfectly clear that this important debate takes place at a crucial time for Europe as a whole, as all hon. Members who have spoken so far have suggested. It could not he a more exciting and more challenging time. My contribution is to suggest to my right hon. Friends on the Front Bench that we must avoid some of the mistakes that we made in our dealings with Europe during the 18-month period which started with the speech of my right hon. Friend the Prime Minister at Bruges in September 1988.

As I have said on more than one occasion in this Chamber, the five principles enunciated in the Bruges speech were right, unexceptionable and unchallengeable. However, damage was done, in that forces were rekindled within my party, throughout the country and overseas which created an entirely negative perception of what the Government have achieved and continually seek to achieve in their relations with the European Community. It is important that those mistakes in presentation and attitude are not repeated, because they fundamentally damaged British interests.

We all know the difficulty of negotiating in a group, be it a group of 12 nations or 12 people on a parish council. There must be give and take, and gains and losses occur. We saw that only last week in the negotiations about BSE. As my right hon. Friend the Foreign Secretary said, those negotiations were an extremely good example of the benefits of the existence of the European Community to Britain. We must be constantly aware of our presentation and emphasise our positive assets. We must not lose the political ground which the Conservative party undoubtedly lost, for example, in the European election campaign. The results were there for all to see.

It has been galling for Tory Members who have consistently, although not universally, supported British membership of the European Community to find that some Labour Members now adopt the cloak and mantle of Europeanism. The right hon. Member for Bethnal Green and Stepney, who always speaks with complete sincerity and consistency, in contrast to the leadership of his party, represents the fundamental centre of gravity of the Labour party on European issues, rather than the right hon. Member for Manchester, Gorton (Mr. Kaufman).

In the past six months, I have been delighted to observe that the Government have begun to recover from what I would describe as mistaken tactics rather than a mistaken fundamental strategy, and to be seen to make a much more positive contribution, yet again, to the development of this extraordinary adventure—it is, indeed, a unique adventure —of the European Community.

We are faced with the problems of Germany. I say problems, much as I delight, as I am sure all right hon. and hon. Members do, in East Germany moving towards a democratic regime and combining with the Federal Republic into a united and whole Germany. My right hon. Friend the Member for Guildford (Mr. Howell) rightly examined the economic problems and pressures that that will create not only for the Federal Republic but for all in the European Community.

I am an optimist. Such is the challenge of the task and such the vitality and buoyancy of the Federal Republic's economy, whatever the figures, that it will cope in a way and at a speed which will surprise all of us, and perhaps even the Germans themselves. This massive state with huge economic power and great political potential challenges, creates problems for the other 11 member states, but we must and want to, live with it. I have no fears of a revival of Nazism or militarism or of challenges to the peace of Europe. Inevitably there is a challenge, but it provides us with a great opportunity.

I have had many opportunities to talk to French, Spanish and Italian colleagues regularly, and I have noted their recognition of the challenge and a change in attitude towards the United Kingdom. Without any concept of ganging up on the Germans, we should recognise that this kaleidoscope, having been shaken up, gives Britain an important role. France, in particular, looks to the British Government to play an extremely positive and constructive role in the new balance and I hope that we shall do so. I urge the Government not to be swept away by the personification of some issues. We grew keen on sticking pins into the effigy of Mr. Jacques Delors. I know from speaking to many Frenchmen that they would cheerfully stick even more pins into him. It is important to keep such matters in balance.

We face great challenges of political union. Who knows what that will mean? My right hon. Friend the Prime Minister was right to challenge that concept. I hope that she and the Government are encouraged that her challenge of the concept was picked up by our Community partners. They too are questioning and questing. There will be movement. Political co-operation has been developing for many years and is better recognised by those outside the Community than by those of us within it. We should rejoice in that. Further developments will flow from political co-operation. I do not know what they will be. I certainly would not look to a federalist solution; nor would any Frenchman, Spaniard or Italian. We are bound together increasingly, not only by economic forces but, more importantly, by communications and by social and cultural pressures. That is as most of us want it to be.

Mr. Dykes

Does my hon. Friend agree that the Italians are the exception? While I accept that no one has proposed federalism or a single Government entity in Brussels. the Italians, in their referendum last June which was connected to the European elections, voted overwhelmingly for European political union, leading to a united states of Europe.

Mr. Whitney

I am grateful to my hon. Friend for that correction. Perhaps what was presented to the Italians in the referendum was questionable, and when they get down to the small print during negotiations at the intergovernmental conference, something else will emerge. Whatever happens, it will happen stage by stage and it must be accepted by all Parliaments and all peoples. The same goes for European monetary union, which I dealt with earlier.

The evolution of the European Community is part of the great sweep of history. It has been given a surprising and a much stronger impetus than any of us could have expected by what is happening in eastern Europe. Well disposed as we are to the development of democracy and the establishment of constitutional government in eastern Europe, that cannot be used as a pretext for delaying what we in western Europe have set in hand. We must move on, because that is the nature of things.

The world is now divided basically into three huge groups; Japan and the Pacific rim, which is the first and most challenging, the Americas and western Europe. That will be the shape of the world for the next decade and the first half of the next century. It has nothing to do with eastern Europe or the Soviet Union. If we are to be part of that world, we must play an active, positive part in the European Community.

The vast majority of the British people recognise that instinctively. They do not make calculations about European monetary union and the exchange rate mechanism. Instinctively, they know that our destiny lies in making a positive contribution to Europe. It is up to this House to ensure that mechanisms are created so that we can put the will of our people into practice and exercise political and democratic control as the European Community expands.

5.48 pm

Sir Russell Johnston (Inverness, Nairn and Lochaber)

I shall come to federalism in a wee minute. I wish that people would stop talking about the German problem. It depends on what sort of German—socialist, Christian Democrat or Liberal—we are talking about. They have different answers and attitudes to the questions of Europe. In the end, it is a political rather than a nationalist answer that will carry the day, and thank goodness for that.

I agree entirely with the right hon. Member for Guildford (Mr. Howell) about the potential for increasing democratic involvement, if a relationship develops between the proposed Eurofed and the European Parliament. That would create a beneficial, almost novel situation for the United Kingdom. The idea that the House of Commons has control over the monetary system and policy and control over the budget is illusory. The Chancellor's claim in March that the European Community strictures on national budgetary policy would be an unacceptable loss of our sovereignty is poppycock. Governments have a certain control but we are not used to Parliaments exercising such control.

I am a federalist—I say that unabashedly—and the Liberal Democrats are federalists. That is a phrase and a fact.

Mr. Spearing

rose——

Sir Russell Johnston

I shall give way in a wee minute after I have said something about federalism and before the hon. Gentleman attacks what I say.

On Thursday and Friday the ELDR, the federal representative body of all Liberal parties in the European Community, met for its 13th congress in Shannon in the Republic of Ireland. It passed a long resolution on the consequences for the European Community of democratic development in central and eastern Europe. The sentiments expressed in that resolution are shared by the party of Hans Dietrich Genscher, by the party of Ellemann-Jensen of Denmark, the Italians and so on. Among other things, the resolution calls for a Political Union, that will enable the Community and its Institutions to respond efficiently to the demands of the new situation, and assuring unity and coherence in the Community's international actions It speaks of reinforcing the executive capacity of the European institutions and calls for the powers of the European Parliament to be increased … the deepening and acceleration of European and Monetary union … a truly proportional system of representative democracy". Please note. It also speaks of a bill of rights and says: the development of a social market economy is part of political freedom … a unified Germany in a united Federal Europe offers the surest way towards the goal of democracy and security". Those bits and pieces fit together, but that is not the approach of the Government as seen in the bland, blue document, "Developments in the European Community", which is so full of self-congratulation.

I shall not say too much about economic and monetary union, but it is important to refer to the Foreign Secretary's foreword to the White Paper, to which he referred again today, when he said: The government's opposition to Stages 2 and 3 of the Delors report was endorsed by all shades of opinion in the House of Commons. That is not the case, although it may he founded on the fact that during the debate on economic and monetary union in the House my hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) said: It does not follow from what I have said that I have to agree with every word written in the Delors report. He said that absolute fiscal harmonisation would not be a necessary condition of EMU any more than it is in the United States. He also said that he favoured a European central banking system on the lines proposed by Delors. He concluded: Hon. Members who have expressed doubts and tried to introduce fresh conditions want to protect the right of the British Government to devalue our currency"— that is what the right hon. Member for Bethnal Green and Stepney (Mr. Shore) wants—— and print more money. We could usefully accept curtailment of those freedoms in order to achieve stable currency, defeat inflation and provide a framework in which Britain can prosper.""—[Official Report, 2 November 1989; Vol. 159, c. 542.] To say that everyone agrees with the Government is not true. The Government have approached these matters in a negative way and they have no enthusiasm for a central bank, even if it was cited in London. They are also outright opposed to a common currency.

I am not an economist, but I do not understand why the United Kingdom alone of all the Twelve—not all of them are economically stronger than us—wants to oppose the central bank and a fixed exchange rate. I cannot accept that there is some intrinsic weakness in our country that makes it necessary for us to be different. I accept that the right hon. Member for Bethnal Green and Stepney has held his views for a long time, but I believe that they stem much more from his views on national sovereignty than from his views on economic theory.

Mr. Spearing

Does the hon. Gentleman recall the Rooker-Wise amendments? Even if the House does not have the powers over Government finance that he or others want, does not he remember the introduction of those amendments? Can he tell the House whether he favours any Government of this country, or any party aspiring to government, voluntarily handing over powers that the Government still retain through unanimity of the Council of Ministers by transferring to qualified majority voting? Is the hon. Gentleman's party in favour of expanding qualified majority voting, and if so, in what areas of national policy?

Sir Russell Johnston

I shall not try to tackle those questions in detail now. One swallow, rook or otherwise does not make a summer. Qualified majority voting will have to be extended slowly—there is no doubt about that. On 24 May I attended a conference organised by the Federal Trust. The Financial Secretary to the Treasury also attended and gave a speech that I did not hear. However I read his speech and it was rather extraordinary. He gave his reasons for not wishing to proceed apace with a common currency. He said that we should keep our own currency because it was a symbol of our authority. He also said that it was necessary to retain our currency to have the ability to issue money in order to act as lender of last resort to the banking system which requires government regulation to maintain its stability". British regulation must be better than any other regulation. He went on to say: For these reasons states have found the benefits of having their own currency exceed any possible disadvantages their citizens may face through not being able to do business in the same currency when they trade or travel abroad. The Financial Secretary advanced an extraordinary set of arguments. I should have thought that the common citizen who must change his money endlessly from pounds to deutschmarks, Belgian francs and guilders would take a different view.

We have delayed on ERM. Sir Leon Brittan was also present at the conference and I read the good speech that he made. I could quote much of it, as it is good stuff. Of France he said: Since joining the EMS … French inflation has fallen to an average of 2.9 per cent. over the last five years compared with 10.5 per cent. in the five years up to 1980 … This was not done by magic but by a combination of the correct domestic policies combined with the credibility of adherence to the narrow bands of the EMS … Ireland is a further interesting example because until the start of the EMS in 1979 … Irish inflation was always exactly the same as that in the United Kingdom. It is now 3 per cent. Irish growth this year will be 4.6 per cent. One should remember that Sir Leon speaks with the authority of a Commissioner in charge of such matters and his good reputation on economic and financial matters in the House. He said of Ireland: These results were achieved through acceptance of the disciplines of the EMS … When should the United Kingdom join the EMS exchange rate mechanism? Many of us would answer that question by saying: 'Some time ago!"' Sir Leon's view is different from that adopted by the Government. Their negative attitude covers this matter and imbues their approach to anything supranational. I wish that the Government could articulate their views more frankly as it would then be easier to get a grip of them. Sadly, their views are often cocooned in humbug. Let me give an example of that. Page 31 of our report states: The United Kingdom has been in the lead in encouraging better cooperation on cross-frontier issues among member states, One may think what one likes about the Schengen agreement, but one cannot say that if those countries are introducing such an agreement that allows free passage, we, who are not allowing free passage, are in the lead in encouraging better cooperation on cross-frontier issues". That is a contradiction. Who are the ones opposing the idea of a pensioner card to allow older people the same access to the same facilities throughout the Community? Britain is the one holding back such ideas.

Page 33 of the report mentions a directive concerning the labelling of tobacco products … standardized health warnings … a common position … tar yield". It does not say, "Of course, by the way, don't forget that Britain alone opposed all that." In answer to a question that I tabled, the Prime Minister said that it was a ridiculous idea. However, in the report it is all compounded, and there are many other large and small examples. The right hon. Member for Manchester, Gorton (Mr. Kaufman) spoke about the environmental issues.

The Government are not addressing the essential argument—or perhaps they are doing so, but are wriggling and not quite sure what to do. It is no use the Foreign Secretary going on about phrases and facts. What are the aims and objectives? That is a much better way of putting it. My objective could not be put better than by a quotation that I read in The Independent last Thursday, which stated: I have always been a convinced European federalist and I believe that over the passage of time we will arrive at a federalist solution to our problems. That was stated in 1969 by a certain Nicholas Ridley. I apologise because we are not allowed to use names, and I should have said that the Secretary of State for Trade and Industry made that statement. That was a prescient statement, and how right he was.

Monet knew from the start that there had to be supranational agencies in the Community, or it would not work—any more than the League of Nations or the Council of Europe is capable of resolving bitter disputes between countries. There are people who cling with an almost religious intensity to the idea of national sovereignty—no matter that the competitive aggression of the nation state is still seen as an inheritance that must be defended at whatever cost.

The preservation of British national sovereignty is no more than a cover-up for the defence of short-term governmental advantage. In Britain, sovereignty is defined in terms of the ideology of the Government of the day. The Government are absolute and unrepresentative in their majority.

The Financial Secretary to the Treasury also spoke about federalism. He made a wide-ranging speech. He said that there were two competing visions: first, what some call federalism, but what might more accurately be called Euro-nationalism. That was the speech of a senior Minister. He said that federalism involved transferring more and more powers to a European super state. The project appeals to those who wish to regain the power to control the economy.

What has been going on in Britain in these past few years? Have we seen more and more power handed out? In 1969—we are talking about when the present Secretary of State for Trade and Industry, then a Back Bencher, made the statement I quoted—the Maud commission on local government made a report, as did the Wheatley commission, on which I served. All the talk was of more power being handed from the centre to local government. Quite the opposite has happened. The Government cannot have it both ways. They cannot simultaneously say, "If we go into the European Community, we are losing democratic influence," and at the same time fight any reduction of central power in the United Kingdom.

A federal Europe means a division of powers and acceptance of the subsidiarity rule. There is a great fallacy in the position of the Government and those who support the idea that anything British is always better. That is no more true than it is of the French of Germans. In this small continent, which has such a destructive history, we are trying to produce a unified, representative political and economic structure in which we can pool our resources andof talents and provide some stability in the world system, where before we were so disruptive. We shall not do that if we follow the Government's approach.

The Foreign Secretary began by talking about the challenge of the changes in the east. There is no doubt that the more united the Community is, the more effectively it will be able to respond to, and deal with, the huge economic problems and nationalist strains that have been released as a consequence of the withdrawal of the Soviets. That will also mean giving aid not only to central Europe but to the Soviet Union, which is something that I have argued for in the Chamber and other places, since the beginning of the communist collapse. I am glad to see from today's press that those ideas are now taking concrete shape, and changing from phrases and hopes to facts.

6.5 pm

Mr. Hugh Dykes (Harrow, East)

I shall refer to the Select Committee's report and add my thanks and congratulations to its chairman, my right hon. Friend the Member for Guildford (Mr. Howell) and his colleagues for their excellent and thorough investigation. I agreed with the points he made in his speech about the various factors beginning to emerge.

I agree—it is only a guess, because, by definition, the future of these complicated developments is unascertainable—with my hon. Friend the Member for Wycombe (Mr. Whitney). We have a feeling—I am sure that we shall be the first to apologise if our prognosis turns out to be incorrect—that the strength of the German Federal Republic's economy is, and will be, so great that the difficulties that it will face in absorbing the East German economy will be considerably less than might be expected if one merely does the literal calculations. I agreed with my hon. Friend when he sounded pessimistic about that and pointed to the dangers of turbulence in the currency markets.

One factor that emerges from the one-deutschmark-to-one-ostmark unit exchange rate formula for a great number of the transactions that will take place and the general investment basis, is that there will automatically be a statistical upgrading of the East German economy. That means that it will be a less qualified applicant for all sorts of assistance than it would otherwise be, including assistance from the European Community budget—most of which, in net terms, emanates from the West German economy.

This is the hallmark of the concentration that we need. As the Foreign Secretary said, I hope that we shall show more self-confidence about such matters in this new era of unification and Community development. I hope that that strength can carry through to the weaker parts of the existing Community, let alone the new small, artificial addition of East Germany.

There were nervous expectations at the time about the Italian lira and, to a lesser extent, the French franc. Successive French Governments have always been nervous about the ability of the French franc to withstand the buffeting of external forces. They wanted to keep it, in the old days, as a small currency, albeit operating in the old French union territories. I remember a newspaper article stating that the Italian lira would be unable to stand entering the ERM of the EMS. However, the contrary has happened—not by accident although there is always an element of good fortune in such matters.

That policy has been run deliberately, despite the fact that the Italians have had a large, internal budget deficit, are always expressing their wish to try to do something about it, and are now beginning to do so, although in their coalition Government system it is difficult to get general agreement for action. The Italian lira has become at least a semi-strong currency; the French franc, contrary to pessimistic expectations, has become a strong currency; and the deutschmark has become a super-strong currency. There will be similar developments in respect of the Spanish peseta, which was also largely written down by the financial commentators when the initial negotiations for the transitional period of Spanish membership were taking place. The system will continue to be highly successful, so it is tragic, unexplained, strange and mystical that the United Kingdom is still not a member.

I say tragic, because we are ideally suited for membership, not because of the fears of our being, as an international currency, a counterweight or negative factor, but precisely because we are used to trading, manipulating and managing our currency in relation to international obligations. So not only technically but in terms of our traditional expertise in the form of the Bank of England, we would be a successful member of the system. Our membership is long overdue; the sooner it happens the better, so that we can begin to see its benefits.

The Italian rate of inflation has fallen from 20 to 6 per cent. in the same period as the decline in the French rate, which was mentioned earlier. That, too, was not an accident.

My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) intervened to ask the Foreign Secretary about fraud in the Community, and although our right hon. Friend said that he would allude to it later, he did not have time to do so. Unfortunately, I have outside engagements later in the debate, but if I could have been here I would have been fascinated to ask the Minister of State his view of his father's letter in The Daily Telegraph of some weeks ago, in which he gave us the outstanding geopolitical advice that the best way to be a successful member of the Community was to tell all foreigners to get stuffed——

Mr. Maude

indicated dissent.

Mr. Dykes

At any rate, he told some or most foreigners to get stuffed. I appreciate that my hon. Friend does not have direct responsibility for that letter, or indeed for The Daily Telegraph—mercifully, from his point of view—but it would have been interesting to hear his answer. Perhaps I could invite one of my hon. Friends to ask him this question latter in the debate.

I am glad that my hon. Friend the Minister, by a nod of the head, has agreed to deal with fraud later in the debate. It is an ideal subject about which to register our legitimate concern that, as soon as possible, through national authorities and their relevant agencies, the police, the Commission agencies and the Court of Auditors, work will he done in concert, powerfully and successfully, to overcome the problem. This is another perfect example of how otiose and old-fashioned is the mystical House of Commons tendency—as shown, for example, by the right hon. Member for Bethnal Green and Stepney (Mr. Shore), although not on this subject—to think that there is something sinister about what other countries are doing, and that we have a monopoly on virtue. The report by the Court of Auditors is crystal clear: all member states are equally at fault in being unable to deal with fraud. We remember the lovely old story of the Italian olive trees; we do not have such trees here, and I gather that the problem of that abuse has decreased, if not been overcome.

Now there are other aspects of fraud. For instance, there is the continuing disgrace of inadequate controls over cold storage contents. I have the greatest sympathy for the small number of hapless, underpaid officials who have to deal with these nightmare matters. They are confronted by sophisticated operators in all member states. The Court of Auditor's report emphasised that the court found difficulty in obtaining the relevant information, and if such control is to be successful, it is crucial that information from member states be forthcoming. The report said that it was not forthcoming from three states, and one of them, terrible to say, was the United Kingdom.

My hon. Friend the Minister must, as a Foreign Office Minister, cover every aspect of these matters; I shall read his comments in Hansard with care, because I should like to know whether the Court of Auditors and the Commission are still having difficulty in obtaining the necessary facts and figures from the Reading intervention agency and other elements of the control and dit system in the United Kingdom.

Mr. Christopher Gill (Ludlow)

Is my hon. Friend saying that he believes that, by increasing the number of inspectors, auditors and accountants, it will be possible to eliminate fraud, especially in respect of goods held in cold storage? Or will he concede that it is possible that the system is at fault and that it is a triumph of hope over experience to believe that fraud will be eliminated?

Mr. Dykes

I agree; "eliminate" is too strong a word, and it is true that aspects of the support system produce the problem of fraud. It is a matter of increasing the number of officials and the quality of the scientific control and auditing systems, and of increasing the penalties which, quite rightly, are national penalties, for criminal offences. The agricultural support system must also gradually be reduced to modest proportions. We must remember that there has already been considerable improvement, because surpluses of most of the products on the official list of supported items are now much fewer and there is no significant overall problem, save in respect of one or two items.

Mr. Knapman

The news is just coming through on the machine that spending by the EEC will rise by 13 per cent. to £53 billion next year and that a substantial extra amount for farmers is included in that figure.

Mr. Dykes

It is up to our right hon. Friend the Minister of Agriculture, Fisheries and Food to give us more details about that. I welcome the overall increase in the EC budget, as there are many areas of genuine new development that can be best taken care of in the more centralised EC budgetary system—which, despite this increase, still represents a modest proportion of total GNP and public spending in the Community.

Contrary to the rumours, I believe that, by and large, the ecu spent on desirable infrastructure and long-term development projects have been better spent under the Community budget than by most of the member states, in which money has probably been wasted on a greater scale.

I have cited fraud, with justification, as a classic example of a misunderstanding: my hon. Friend the Member for Selly Oak said that we cannot get the Community right until we deal with fraud. I hope that it does not seem condescending to point out that, with a modern and sophisticated view of the Community, that sounds the same as saying that the nation states should be abolished because we have not yet dealt with fraud in them —which is equally absurd. We must give the Commission, the Court of Auditors and all the other bodies the necessary powers to handle these matters on a European scale, if they involve European budgetary resources. National money is a matter of national fraud.

Political union has been mentioned again and again. I believe that that is closely linked with economic and monetary union, which in itself is a political matter and which I welcome strongly. We should consider the question of political union positively and enthusiastically, on the logical and understandable basis that we want to see what would come out of such a system—because no one yet knows. There is no harm or weakness in that position.

When the post-war Marshall plan and all the other schemes for post-war European recovery and co-operation were being devised, I do not remember anybody saying, "Every jot and tittle has not been worked out, so we cannot agree to it." Those plans proceeded very much along the lines of a grand design, beginning with the framework of an idea, with all the gaps and details being filled in later as the plan proceeded, usually successfully. I believe that the same thing will happen with political union.

The enthusiastic Italian federalists may well eventually want a single Government entity in Brussels. I do not pretend that that is the objective of most of the people with whom I have discussed these matters in most of the other member states, although there are exceptions. Enthusiastic Europhiles in Germany, France, Italy, Spain, this country, Holland and other member states will see political union as the implantation of additional powers for the European Parliament, plus that Parliament's ability to exercise the necessary accountability over the Commission, to which other hon. Members have referred. Understandably, although they must be defeated in this—I use the word "defeated" with some hesitation—other member Governments will regard the element that is necessary to complete that equation as the greater accountability and answerability of the Council of Ministers.

Although I entirely accept the Foreign Secretary's sensible recommendation that many of the negotiations covering various policies and legislative aspects must be private, if the member Governments in both the Council of Ministers and the European Council want to resist the idea of a greater federalist or quasi-federalist input, it is important that they should be positive about other aspects. I refer to the growing demands that have been made by the European Parliament, the national Parliaments and even the members of the Commission.

It is interesting to note that the Commission itself is now worried about its own powers being reduced if there is greater political union. It is therefore important for the member Governments to accede to the growing clamour and demands for the final stage of the legislative deliberations of the Council of Ministers. I am not talking about policy formation per se—especially in terms of the European Council, which cannot be legislative in that sense, although it is in danger of creeping into a quasi-legislative model—but of the final state of the acceptance, agreement and debate—whether the matter be decided by majority voting or unanimity, depending on the article—of the last legislative stage of a directive or regulation that is proposed by the Commission and sent to the Council of Ministers. That should happen in open public session.

The idea of a senate or second chamber has been promulgated in various places, including this country. If that were to develop into something not only elaborate, but open and understood by the electorate as well as by the politicians of the various national Parliaments, perhaps by gradual evolution it could become a second chamber or an upper house of a bicameral European Parliament. That would be a welcome development.

However, in this era of real political union, whatever the matrix in which that may be constructed—it is certainly a complex matter—any such intergovernmental conference would last a long time. If the member Governments believe that they can continue in the old way, at a time of growing demands from the European Parliament for a greater say in such matters, notwithstanding the weakness of the Single European Act, they must accede to the increasing demands for greater knowledge of what they decide in their complicated processes. I am not talking about the meetings of the Committee of Permanent Representatives or its officials and decisions; I am talking about the politicians who represent the various Councils and about the Council of Ministers itself and the way in which they should make their legislative decisions in future.

If they have the courage to adopt such a policy as soon as may be after the intergovernmental conference, we shall see the old phoney danger of super-federalism replaced by a much more rational structure, in which all citizens of Europe can play an equal part.

6.23 pm

Mr. Stuart Bell (Middlesbrough)

I am always intrigued when I follow the hon. Member for Harrow, East (Mr. Dykes) and am always filled with admiration for his fluency and his depth of knowledge of this subject. I was amused earlier when the Foreign Secretary spoke about stage 2 of Delors and monetary union, because when the right hon. Gentleman said that it would not happen, under his breath his hon. Friend the Member for Harrow, East said, "Not yet." That has been the story of the European Community over the years. There has been great opposition to a variety of projects, but they have all come about.

My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) touched on that point when he said that we have become a certain kind of Community that is developing and evolving, although it is not the kind of Community that we were hoping for some years ago. The hon. Member for Wycombe (Mr. Whitney) praised my right hon. Friend, and said that he was my party's centre of gravity on European Community matters. That provided much amusement for those of us who have long supported the European Community, notwithstanding the difficulties in our party and with the position that it has taken over the years.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) made an interesting speech, in which he referred to the federalist approach to Europe.

The right hon. Member for Guildford (Mr. Howell) spoke more than an element of the truth when he referred to the coming currency union in West Germany on 2 July between the deutschmark and the ostmark. It is clear from the White Paper that stage 1 of the so-called "monetary union", which comes into effect on 1 July, requires us all to be part of the exchange rate mechanism. An announcement may well be made on 1 July that will take the British people into the exchange rate mechanism in conjunction with the unification of the German currencies on the following day. I have no personal knowledge of that, but the right moment for bringing stage 1 into full effect may well be at the same time that the German currency is unified.

The hon. Member for Wycombe also said that he did not really believe that the Labour party had moved in the way in which it has, or that we now embrace the European concept more than we did. He was perfectly right to refer to the fact that, in 1983, we had a policy of pulling out of the European Community. However, we have moved from the stage when we said, "Stop the world, we want to get off," because we are now part of Europe and are determined to play our full part in the affairs of Europe. The policy document to which my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman) referred is, as he said, the document that will go to the party conference in the autumn and be accepted.

One facet of our policy is that we believe that membership of the European Community must become both deeper and wider. Tonight, we have heard talk of Austria and Switzerland joining. My right hon. Friend the Member for Bethnal Green and Stepney used a Gaullist phrase, "Europe des patries", and I remind the House that de Gaulle talked about a Europe from the Atlantic to the Urals. Perhaps that is what will happen gradually.

Earlier, when the Foreign Secretary referred to the extension of Europe, my hon. Friend the Member for Nottingham, North (Mr. Allen) said, "Why not Russia?" Indeed, why not the Russia of Boris Yeltsin? That idea shows the way in which we are seking to expand Europe on the grounds of a mixed economy. We do not want a state-directed or command economy Europe; nor do we want a fully capitalist or market economy Europe. We are looking towards a mixed economy Europe, in which people will have a say and be taken into account. We want a Europe that will build prosperity and remove the great disparities in wealth. The European Community must be a real community. It must be really European—and more than simply a single market.

I turn now to the social dimension. As has already been said, the White Paper lauds the present Government, giving them a sense not only of participating in Europe, but of leading Europe. As we all know, only one Government out of 12 opposed the social dimension—the Conservative Government of the United Kingdom. They do not believe that there should be a social dimension, such as a charter for workers' rights, running alongside the mixed economy. My right hon. Friend the Member for Gorton made it clear that, in meeting after meeting, the Prime Minister blocks this concept of a social dimension because she believes that the European Community is an adventure playground for financial services.

Mr. Oppenheim

Will the hon. Gentleman accept that, for many people, the objection is not so much to the measures themselves as to such measures being implemented before the economy and the productivity of industry can afford them? We are not against benefits, but we must have benefits that our industry can sustain. Will he also accept that it is not either/or—freer markets or more social benefits? Freer markets should provide more social benefits because more effective and productive industry will improve living standards for everyone.

Mr. Bell

I was under the impression that the Prime Minister was against the social dimension, because, having thrown out socialism by the front door, she did not want it to return through the back door. Throughout the development of the capitalist system, every benefit that has been achieved by those who work, by hand or by brain, has been achieved only through the use, authority and power of trade unions. No free market has ever, of its own will, delivered the goods for those who work in it, for the simple reason that, if it did, it would not make the profits it wants. Therefore, without the social dimension, there would not be the sharing and participation that we want.

My right hon. Friend the Member for Gorton said that the Government do not want protection for employed people. As the frontiers come down, the financial services sector will be untrammelled and unrestrained, while those who work by hand or brain will not have the framework to ensure them the fruits of their investment.

The European Community must be a real community for all Europeans and not just a single market. That gets back to the concept of the social dimension. It should be a European Community that strengthens its commitment to help the people in developing countries of the Third world. Therefore, I welcome the section of the report dealing with the fourth Lomé Convention and the financial package of 12 billion ecu over five years for those Lomé countries in Africa, the Caribbean and the Pacific.

The Labour party believes that the European Community should develop into a community that sets high environmental standards. The report gives the impression that we are leading the way on the environment. I was amused by the exchange between my right hon. Friend the Member for Gorton and the Minister of State, during which they traded quotes from the European Commission. As my right hon. Friend said, we are being treated as the dirty man of Europe. The White Paper has some positive aspects dealing with the environment, and we shall hold the Government to them.

Mr. Maude

Perhaps we can continue to trade quotations. I should be interested to know the hon. Gentleman's view of what the Commissioner said. He drew up a table of infractions against European Community directives and specifically criticised two countries—Italy and Belgium—for their appalling record on environmental matters. His figures showed clearly that the United Kingdom came out well in comparison.

Mr. Bell

I am sure that in certain areas we will come out well in comparison, but a chain is only as strong as its weakest link.

Mr. Maude

The hon. Gentleman said "in certain areas". This is an analysis of environmental measures across the whole board. If the hon. Gentleman wishes to contest the assessment made by the Commissioner, who has no vested interest in supporting the United Kingdom, he should do so, but he has no basis for contesting it.

Mr. Bell

I was referring to the exchange between the hon. Gentleman and my right hon. Friend the Member for Gorton and was about to talk on the miscreant litany of neglect in environmental matters. I can give two examples —water and beaches, one of which is before the European Court of Justice now. My right hon. Friend said in response to the Minister, that, when it comes to action in the Community, the United Kingdom blocks policies to deal with global warming that other Governments wish to take.

The hon. Gentleman was a little quick on his feet, because I was about to refer to those parts of the White Paper describing the Government's policy and actions. We shall be watching with interest the Government's progress in the Community on such aspects as health and safety at work and a vigorous environmental policy, which is referred to in the White Paper. It says that 1990 should see the establishment of a European environmental agency to act as a co-ordinating point for environmental information, in association with countries and institutions outside the Community. We welcome those aspects of the report and we look forward to following, with interest, the development of those policies.

I do not wish to dwell unduly on monetary union, a subject on which many hon. Members have spoken with great care, and which no doubt other hon. Members will speak about later. However, I shall refer to the document that the Government circulated among members of the Community entitled "An evolutionary approach to economic and monetary union".

Mr. Giles Radice (Durham, North)

A load of rubbish.

Mr. Bell

One does not need to dust off the crystal ball to see the truth of what has just been said by my hon. Friend the Member for Durham, North (Mr. Radice). Our colleagues in Europe are treating it as a load of rubbish as well. We have had no sight of this document since it was published.

The Labour party believes that there should be a programme, similar to the Marshall aid programme, for eastern European countries. I remember reading about Ernest Bevin listening to the radio one morning in 1940 and hearing Secretary of State Marshall setting out his ideas for Europe. Mr. Marshall simply had the idea, and Ernest Bevin converted that idea into a package that allowed Europe to develop economically and to become what it is today. The Labour party supports a new programme for eastern European countries so that their economies can be brought up from the ground and developed, and so that they also develop a democratic view which brings them closer to the western European concept.

We all know who Jean Monnet is, and that he is said to be the father of Europe. He once said that we are here not to coalesce states but to unite people. The new developments in Europe offer a prospect of uniting the peoples of Europe, bringing them all together in a system based on a mixed economy, democracy and the principle of accountability. We should develop towards such a Europe, whether it is federalist, united or "un Europe des patries"—however one wishes to describe it. Europe is developing itself. We shall see changes for the better and an extension of democracy and the mixed economy. All of us will be the better for it.

6.38 pm

Mr. Michael Knowles (Nottingham, East)

To follow what the hon. Member for Middlesbrough (Mr. Bell) said, perhaps I should point out that Jean Monnet's remarks were practically quoted in the preamble to the treaty of Rome. He said that the object was to produce an ever-closer union among the peoples of Europe.

I sometimes wonder, when we have these debates, whether those on the Government and Opposition Front Benches, and Back-Benchers as well, have even bothered to read the treaty of Rome or to study what went on at Messina, the objective that lay behind the treaty of Rome, and what has developed across the rest of western Europe, if not in this country. Hon. Members spoke of votes on development towards economic and monetary union ending up 11:1. All too often, it does end up that way, not because of this or any other Government but simply because of our history. The view in the House and our country is different because of what happened during the second world war, when everybody else lost. They were occupied by someone but we were not. At the end of the war, we fallaciously thought that we had won.

Unfortunately, the war had ruined the United Kingdom, but that was not realised. Over the years, politicians involved themselves in various dubious schemes to show that Britain was important. In effect, there were concentric rings. It was said that Europe was important because Britain was a member of it. The Commonwealth was important because Britain was in it. The British-American alliance was important because we were involved in it. It was said that all those involvements made the United Kingdom an extremely important country.

That was political babble talk, and time has shown it to be so. In the end power counts in politics, and power has flowed away from this country. Our power has been spent in a good cause in the defeat of Nazism during the second world war, and I do not regret the decision to fight that evil one jot or tittle. The reality has not been accepted thereafter, however, even though it has been dawning over the years. We did not want to participate in the talks on the European defence community, or those on the European Economic Community. We did everything that we could to thwart the EC by trying to found the free trade area. In the end, the Prime Minister of the day, my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath), led the country into Europe.

In a sense, most of the United Kingdom was fairly reluctant to enter Europe. It did not understand the politics underpinning the idea of the Community. Many Members of this place and many outside it still fail to understand that underpinning. We still have not succeeded in getting the message across.

I cannot better the remarks of my hon. Friend the Member for Harrow, East (Mr. Dykes) about the Court of Auditors. Its reports appear almost constantly and we debate them only once a year. It is part of the way in which we delude ourselves that hon. Members go through the reports and select for debate the fraud that has taken place in other countries. We talk about fraud in Italy and France, but there are just as many cases in the United Kingdom. Somehow instances of fraud in the United Kingdom are overlooked.

The Court of Auditors is getting more on top of the fraud problem, but it needs its own independent staff. It cannot depend on the staff in independent states to police their own people, and it is foolish to believe that such a system can operate effectively. We tend to think that fraud is what happens in other nation states whereas it is only bending the rules slightly in our own state to make sure that, patriotically or nationalistically, it gains an advantage. It seems that any fraud in one's own state is not viewed in the same light as that which is brought to bear on fraud in other states. The only way in which fraud can be policed properly throughout the Community is by the Court of Auditors having its own staff.

The terms used in these debates are always delicate. My right hon. Friend the Foreign Secretary talked about political union being a process, and that is true. The implication, however, is that it will go on and on. If that happens, what about federalism? That is what it will inevitably mean in the end. If political union is a process, we are seeing the transfer of power from this place to somewhere else. I am not against that per se, but if the transfer is to take place, I want power to be where there is democratic control. I do not want it disappearing into a European Council which is accountable to no one. I do not want deals to take place behind closed doors. I want public scrutiny.

My right hon. Friend the Foreign Secretary said that democratic control is the preserve of national Parliaments. When Ministers here and in other states talk about national parliamentary sovereignty, all too often they mean ministerial sovereignty. They are saying, in effect, "Now and again we might give the lads a glimpse of what is happening behind closed doors but basically measures will be pushed through with a suitably large parliamentary working majority. It is nobody's business but ours." That might be the unfair suspicion of a Back-Bench Member, but I think that it is shared by many in the 12 national Parliaments.

Mr. Maude

I have been listening carefully to my hon. Friend. I have some sympathy with what he says, but I think that he is being unfair. The House of Commons has developed a system of scrutiny that is much more advanced than the systems that prevail in most of the other states of the Community. I accept that the system is not as advanced as that in the Danish Parliament, but that system has certain difficulties associated with it. The House has submitted proposals, to which the Government have responded, for advancing the process of scrutiny. All Ministers who take part in these discussions regard our accountability to the House as extremely important and influential. Members of this place—my hon. Friend is foremost among them—have the ability to question Ministers and to hold them to account. That applies to the decisions that Ministers make and the positions that they occupy in the Council of Europe. That is what matters, and it is extremely effective.

That scrutiny and accountability is being developed increasingly in other national Parliaments. It is true of the Greek and Spanish Parliaments, the Bundestag and the National Assembly in Paris.

Mr. Knowles

I take my hon. Friend's argument seriously. I am a member of the Select Committee on European Legislation, but I would be kidding the House —I see the Chairman of the Select Committee, the hon. Member for Newham, South (Mr. Spearing), in his place —if I gave the House the impression that the Committee could operate a check and that through its reports the House really knew what the Government were doing in Brussels. The fact is that we respond to bits of paper.

My hon. Friend the Minister says that other Parliaments are copying us, but in some ways they are more advanced than us. For example, there are joint meetings of Members of the European Parliament and Members of the Bundestag. They consider specific reports on current action and discuss future strategy. They try to determine where Germany's interest lies one year or five years ahead. They discuss long-term possibilities. That does not happen during meetings of the Select Committee, nor does it happen on the Floor of the House. Perhaps responsibility rests with Ministers and civil servants, but we miss out badly.

Mr. Donald Anderson (Swansea, East)

Did the hon. Gentleman notice that the Foreign Secretary spoke eloquently in favour of improving the relationship between Members of this place and Members of the European Parliament? He was coy, however, about particulars that would improve the relationship.

Mr. Knowles

I shall not be trapped into agreeing with an Opposition Front-Bench spokesman.

Mr. Maude

I welcome the opportunity to expand a little. I entirely share the view of my right hon. Friend the Foreign Secretary. It is not for the Government to propound what the exact relationship should be: it is for Parliament to form its relationship with the European Parliament. To the extent that the House wishes to do that, the Government will support it wholeheartedly.

Mr. Knowles

rose——

Mr. Deputy Speaker (Mr. Harold Walker)

Order. I understand that the Minister will be seeking to catch the eye of the Chair to reply to the debate. Perhaps he will save one or two of his arguments for that occasion.

Mr. Knowles

Perhaps I am at fault, Mr. Deputy Speaker, for being too provocative and leading others on.

Again, I accept what my hon. Friend the Minister says. We all know the realities. We have danced a minuet in this place on the relationship with the European Parliament. If any Member of this place wants to telephone a Member of the European Parliament, or a member of the Commission, to talk about something that affects his constituency, he must pay for the call himself.

If, for example, the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) wishes to speak to someone in Edinburgh, which is about twice as far away as Brussels, the call will be paid for by the House, and rightly so. It is clear that we still do not have the right relationship. If a member of this place wishes to visit Edinburgh or Belfast, I would not say that no questions are asked but basically the visit is on. But try to visit Brussels or Strasbourg; that is very different. It is difficult to do so unless the Member is willing to pay the bill himself.

Sir Russell Johnston

Has the hon. Gentleman noticed that the reference in the report to the European Parliament consists of only three short paragraphs at the bottom of a page? It would appear that the only thing that it does is listen to Ministers.

Mr. Knowles

That is right.

The right hon. Member for Bethnal Green and Stepney (Mr. Shore) said that European monetary union could lay the foundation of a superstate. Basically, he is right. He saw the great drawback to that, which is that politicians would not have their hands on the printing presses to promote inflation. The people of Britain and France, who have the two most politically controlled central banks, might look with envy at developments affecting the Bundesbank and the Federal Reserve bank in the United States. They might see an advantage in wrenching our hands off the printing presses. We must not think that, because we want a bit of power, the people of this country will necessarily see it as in their interests. If we explained the arguments for trying to emulate the Bundesbank and Federal Reserve bank developments on a European scale, there would be positive arguments in favour of doing so and, I believe, strong support outside the House.

The right hon. Member for Bethnal Green and Stepney said that he suspected that the Government would accept stage I but would try to find ways to derail stages 2 and 3. He was in favour of that as a policy. His suspicions are, however, shared abroad, where people are expecting "the old British tactic". The old Gaullist suspicion of Britain is still there—the fear that we will go in with no real sympathy, and that at very opportunity we will try to slow things up, and derail and sidetrack proposals. Such views are not without reason, as, over the years, successive Governments—Conservative and Labour—have done that.

Enlargement is inevitable. I was interested in the comment by the right hon. Member for Manchester, Gorton (Mr. Kaufman), that Turkey's application for entry to the Community was probably still not eligible. I think that Turkey's entry will be 10 or 15 years ahead; it is, however, the one state with a promise of eventual entry written into its agreement with the Community. That is a good thing, as we need Turkey to reinforce the Community in the long term.

Mr. Anderson

If the hon. Gentleman recalls, my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman) said that the Foreign Secretary had put the claims of Turkey and Austria to membership on a par. The Foreign Secretary failed to appreciate that, given Austria's trading pattern and the fact that it is already being prepared for the time when the doors are open again after 1993, it is in a different position.

Mr. Knowles

The hon. Gentleman is right. Obviously, Austria is much more advanced industrially, as well a s in its political and human rights. Whereas Turkey's membership would not be appropriate for another 10 years, there are perhaps other countries in western Europe that could enter almost immediately.

Mr. Oppenheim

Is not the real reason for the campaign to prevent Turkey from entering the EC the fact that industrial interests, lobbies, trade unions and Opposition Members are terrified of cheap exports from Turkey, especially of textiles?

Mr. Knowles

That is true. An even greater fear is that of cheap labour across the Community. If my hon. Friend the Member for Amber Valley (Mr. Oppenheim) wants to argue that case on principle, he can also argue for dismantling all immigration controls. Good luck to him if he wants to take that on board; I would not care to do so!

Inevitably, enlargement will mean changes in the structure of the Community. Already the Commission is too large, but every nation state now wants at least its own commissioner. That is nonsense. What we need is a smaller working structure that will appoint the best commissioners. I do not care whether the commissioner is British, German, French or Dutch; whoever is the best man or woman for the job should be appointed. The idea that we must all have a national representative and that national Governments must appoint a commissioner—who will be independent of national Governments anyway—is nonsense. We must shrink the existing structure.

The idea that European Council meetings must be in secret should come to an end: it is indefensible. As far as I know, it is the only legislative body in the western world that meets in secret. The powers of the European Parliament should be enhanced.

There is a great deal of fear about the term "federalism", but we should not be frightened of it. The French make a case for it: they say that if we do not put some bounds round the rights of the European structures, in the end they will encroach on national Parliaments and Governments. They believe that federalism would defend national rights, and do not see it as an encroachment. That is surely a positive way to view the matter.

There was an ambulance strike in this country some months ago; it was debated by the European Parliament. The United States Congress could not possibly have debated an ambulance strike in Massachussets or Texas, because, as a federal structure, it has nothing to do with such matters. However, under the present European structure, there is no limit to how far the powers of the European institutions can be stretched. Before the end of the decade, we may adopt something like amendment 10 to the American constitution. That will reserve all further powers that are not handed over to the European structures for the states and for the people.

People will have to accustom themselves to a powerful Germany. Within four or five years, eastern Germany will have been modernised and integrated with western Germany. We shall then face the problem that has faced Europe for more than 100 years—that of the biggest, most powerful and most dynamic state in central Europe. Part of the argument about European integration has concerned the need to put some chains on the nation state. Although we think in terms of the German nation state, others might think in terms of the British nation state. We must face the fact that, eventually, Germany will be the biggest and most powerful state in the Community. There is no point in shilly-shallying about it.

In the Conservative party, the Bruges group has different policies towards the European Community, including the policy that dare not speak its name—withdrawal. I do not think that withdrawal is realistic, and I doubt whether anyone else involved in politics does either. We must face the truth—even if we British do not like it—that the Community was founded to curtail the power of the European nation state; that is its object. For the past 70 or 80 years, we have managed to reduce the continent that was the producer of most of the arts and science of the modern world to a slaughterhouse—an abattoir. The people of Europe do not want that again. The Community will widen and deepen to do the job for which it was founded, and I for one support it.

6.58 pm

Mr. Giles Radice (Durham, North)

I hope that I will not embarrass the hon. Member for Nottingham, East (Mr. Knowles) by saying how much I admired his speech. He put his case extremely well, and I agreed with most of what he said. I found his attitude towards accountability particularly interesting, and I shall refer to it again later.

The Foreign Secretary's foreword to the White Paper, his speech, and the excellent Foreign Affairs Select Committee report—on which I congratulate the Chairman —all rightly emphasise how radically the context in which we consider European Community affairs has been altered by the dramatic developments in eastern and central Europe in the past year. I make no apology for concentrating on those developments in the first part of my speech, before I then discuss how they affect the role of the EC.

All democrats rejoice at the democratic revolution in central and eastern Europe, of which the impeccably conducted Czechoslovakian elections are but the most recent manifestation. As I stood in Wenceslas square three weeks ago and saw the hoardings, lamp posts and shop windows festooned with the election posters of the 22 parties contesting the first free elections for more than 40 years, I understood something of Wordsworth's passionate response to the French revolution: Bliss was it in that dawn to be alive. Certainly, President Havel—[Interruption.] I did not continue that quotation because, unfortunately, the second line is no longer relevant. President Havel was right to say that yesterday's election result was a victory not only for Civic Forum but for all Czechoslovaks.

Whatever our delight with what is happening in central and eastern Europe, most of us feel some apprehension about the extent of the conceptual and strategic challenge that the changes present. After 40 years in which the shape and division of Europe have been more or less taken as given, all is now in flux. The sudden collapse of Soviet power and influence, triggered by Mr. Gorbachev's far-sighted and courageous refusal to use Russian troops to bolster Communist regimes in central and eastern Europe, has had radical consequences.

First, it has led to the emergence of an independent central and eastern Europe for the first time since the inter-war period. Secondly, it is leading to the unification of Germany—an objective for which western European leaders originally called, but which they never expected to happen. Last, but by no means least, it is undermining the old cold war assumptions and alliances. Last week saw the formal winding-up of the Warsaw pact as a working military alliance and the declaration by the NATO Foreign Ministers that the cold war is over and that NATO needs to develop a political dimension—all of which have implications for the EC.

The task facing European leaders is to fashion what amounts to nothing less than a new European settlement that will not only guarantee frontiers, but will create a framework that will provide stability, security and prosperity into the next century. In this difficult and delicate period, a special responsibility rests on European leaders. They must discard old habits and old assumptions and eschew short-term, partisan responses. Perhaps Mr. Kohl might have thought about that over the Oder-Neisse line. Indeed, when the Prime Minister was in the Soviet Union last week, perhaps she should not have said so publicly that she wanted to put new nuclear weapons in western Germany. It was not the most appropriate and tactful remark. Politicians must think imaginatively and, above all, they must think about the institutional framework of the new Europe—or the new European architecture, as the Foreign Secretary called it—and especially about the respective roles of NATO, the Conference on Security and Co-operation in Europe and, above all, the EC.

I want to say a few words about NATO and the CSCE, to which the Foreign Secretary also referred. There are those who believe that the EC should assume a security role. I do not share that view. It was once said of NATO that its original task was to keep the Russians out, to keep the Americans in and to keep the Germans down. In 1990, those objectives appear to be either out of date or in need of substantial modification.

First, the Russians are arguably no longer in a position to mount an offensive land attack in western Europe. Secondly, Germany is by far the most powerful nation in Europe, and it is becoming increasingly unenthusiastic about the permanent stationing of foreign troops—and especially nuclear weapons—on her soil. Thirdly, in the United States domestic and budgetary pressures are pushing the Congress and the President towards radical cuts in American forces stationed in Europe.

Does that mean that we should try to change NATO's role, or even to do away with it? It is pointless to dream up new tasks for NATO under the vague heading "political", whatever that may mean. It would be most unwise for NATO to become the policeman of eastern Europe, let alone the policeman of the remainder of the world, as the Prime Minister appeared to be implying last week. However, there remains a case for NATO to continue to exist, although at a much reduced level, if only to keep a minimum level of deterrence against unfavourable changes in the Soviet Union, and to ensure that any European settlement is underwritten by the United States. That is very important.

Pan-European security, especially the future security of eastern and central Europe, needs to be considered within the framework of the CSCE. What is needed is a new treaty, as the leaders of Europe have suggested, backed by existing CSCE countries, especially the United States and the Soviet Union, to endorse existing frontiers. We need mediating and conciliating machinery to deal with frontier or other disputes, especially those arising from minorities. We need a permanent secretariat, although not a European security force, be it provided by NATO or anyone else. That would not be either possible or acceptable. In any case, in the longer term—as has happened with EC countries—the best guarantee of peace and stability in eastern and central Europe is likely to be the development of lasting economic and cultural ties.

The role of the EC will be vital to the new European settlement. As I have already implied, I do not believe that the EC should become a super-state—certainly not in my political lifetime, or even in the lifetime of my children. Nor should it have a security function. A European defence community would not only exclude the United States: as my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman) pointed out, it would rule out Austria, Sweden and Switzerland from eventual membership of the EC. However, the European Community is, to a considerable extent, the motor of the new Europe.

If any hon. Member doubts that, he must think about the enormous economic power of the EEC; reflect on its renewed growth, especially during the past three years; remember that the EC was given the primary role in helping eastern Europe; go to Vienna, where the Austrian Government are applying for membership; or go to Prague, Budapest or Warsaw, where the new democratic Governments are turning to the EC first for association and, secondly, for eventual membership. My judgment is that, if the new European settlement is to be lasting, above all it needs to be underwritten by the economic and political dynamism of the European Community.

I strongly support the widening of the EC, as do many hon. Members. It must be prepared to reach out to eastern and central Europe, first in association agreements and secondly, in the course of time, in full membership where that is appropriate. In doing so, it must not exclude those EFTA countries such as Austria, Norway and others, all of which have long-standing democracies and developed economies. Many of them will wish to join before the end of the century. The new European settlement will need an open EC, but I do not believe that widening should be at the expense of deepening.

If the EC is to act as the economic and political motor of Europe, further integration will be required. The meshing of the European economies, which will be further stimulated by 1992, has already resulted in considerable economic and monetary co-ordination. Any right hon. and hon. Members doubting that should remember what happened when the Bundesbank raised interest rates last year. Other countries, including the United Kingdom, immediately followed—which showed just how strong is the economic and monetary co-ordination. We are already in a Bundesbank regime—a deutschmark currency area. The project for economic and monetary union, which will be discussed at the intergovernmental conference at the end of this year, is formal recognition of what has already occurred.

The case for greater co-ordination is strengthened, not weakened, by the challenge of eastern Europe. If we are to help eastern and central Europe, we must ensure that the Community is both dynamic and cohesive. Greater economic and monetary union is likely to strengthen rather than weaken the Community. On that, I disagree with my hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore). Later, I shall say more about Britain and economic and monetary union.

I agree with the hon. Member for Nottingham, East that a Community strengthened by greater economic and monetary co-ordination will need a more powerful political dimension—hence the case for more majority voting on issues such as the environment and social matters, and for a strengthened European Parliament, both of which are proposed in Labour's policy document.

There is a further argument for the deepening of the Community, and one which perhaps dare not speak its name. If there is fear of a unified Germany—although it is not one that I personally share—then the more Germany is bound by economic and political ties to its neighbours the better it will be for the rest of Europe.

I turn to the United Kingdom. The United Kingdom is a medium-sized European power. It still has a significant role to play, but that influence is best exercised in co-operation with its partners inside the European Community. It is essential that the United Kingdom plays a positive rather than negative role in the Community's development. It must put forward creative ideas, seek allies for them, and play a constructive part in the subsequent debate. That has seldom been the case under the present British Government. Consequently, British influence over European affairs has been diminished rather than increased over the past decade. I hope that Britain will be more effective in the debate on economic and political monetary union than it has been in the past.

I do not share all the fears of my right hon. Friend the Member for Bethnal Green and Stepney on economic and monetary union. I believe that he was in a sense tilting slightly at windmills, because he was putting up Delors mark 1, not Delors as defined by subsequent debates. As to devaluation, I do not believe that it is an end in itself. It may have some short-term uses, but we have seen the dangers of countries relying too much on devaluation. The problem is that it feeds through to inflation. There is a strong case for a more stable currency regime of a kind from which we would have benefited if it had been in force over the past 10 years.

The French experience shows that it is possible to be a member of the exchange rate mechanism, enjoy a low rate of inflation, and compete relatively successfully with the more powerful German economy. I notice that the French balance of payments deficit has fallen quite markedly over the past year. The French have been enjoying a decent rate of growth over the past three years. The blot on the horizon is their unemployment levels, although these are beginning to improve, whereas our own are beginning to increase. So we should not make as much of devaluation as does my right hon. Friend the Member for Bethnal Green and Stepney.

There is no reason why we should not enjoy freedom of budgetary manoeuvre within European monetary and economic union. There is no reason either why we should not have a European regional policy, which would partly have the effect of devaluation and would protect parts of the country against the kind of shock that one needs to inflict with devaluation in other circumstances. Again, my right hon. Friend did not make enough of that.

Also, my right hon. Friend the Member for Bethnal Green and Stepney assumed that Britain will enter into a fixed exchange rate regime for ever more straight away. We do not yet know the date for our entry into EMU, and there may be a much longer period of adjustment than that which my right hon. Friend assumed. Finally I do not find my right hon. Friend's alternative of a two-speed Europe very attractive. I do not want Britain to be left outside. We were left outside before, when we were excluded from the Community. We have been left outside the exchange rate mechanism, and that has not been a good thing.

It is essential that the Government play a constructive part in Europe, which will give us far more influence. Fortunately, there is every prospect that the next British Government will be a Labour Government, which will take a more positive and constructive line. That will be for the benefit not only of the United Kingdom but of the European Community as a whole.

7.16 pm

Mr. Nicholas Budgen (Wolverhampton, South-West)

I agree with the hon. Member for Durham, North (Mr. Radice) that the speech that must be answered in this debate is that of the right hon. Member for Bethnal Green and Stepney (Mr. Shore). However, both the hon. Member for Durham, North and his right hon. Friend have one characteristic in common. In loyalty, they gather around the Labour party's present commitment to enter the exchange rate mechanism. I am bound to say that I thought that the right hon. Member for Bethnal Green and Stepney damned it with the faintest of faint praise. The way in which he said that he would tolerate that development showed that he would just about vote for it if three of the four of the largest Labour Whips sat on him, pummelled him, swore at him, and reminded him of the many occasions on which Labour party members voted for things of which he was in favour but which they hated.

It would be ungracious of me not to express a few words of thanks to my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath). It is not often, when I intend to make a speech, that he goes to the trouble of trailing it the week before. I am most grateful to him for doing that. He recommended that a junior economist should have a word or two with me over the weekend. That did not happen.

My views—they may be mere prejudices—have mainly been arrived at from observing the way in which the economy works. My right hon. Friend the Member for Old Bexley and Sidcup has been among my most important tutors. Between 1972 and 1974, I observed his economic policies—it was a period that exerted an enormous influence on the rest of the 1970s. My hatred of inflation for its social evil and the political disturbance that it causes is based mainly on my observations of my right hon. Friend's economic policies between 1972 and 1974. I hope that he will forgive me if I have not had the interview with the junior economist that he suggested.

As regards the proposals, that seem to be abroad in my party, for going into the exchange rate mechanism—I address my remarks most of all to those hon. Members who believe that that would be a splendid wheeze, by which we might win the next general election—my prejudices are in favour of floating exchange rates, and attempting to reduce inflation by a progressive squeeze on the money supply, however it is defined. However, I accept that a measure that is designed to hold up the value of the pound may have some temporary advantage, in that while that certainly does not cure inflation, because it does not stop all prices rising, it prevents some prices from rising. It has much the same shocking and distorting effect as a prices and incomes policy when it is first introduced.

If the object of policy at any one time is to hold up the value of the pound, it is true—as we can observe from recent market sentiment—that if we announce that we are going into the exchange rate mechanism, it is probable that there will be an increase in the value of shares and that the pound will temporarily increase in value. That is a temporary advantage. We must ask ourselves whether a system by which we rig exchange rates is advantageous over all. Here I agree with much of what the right hon. Member for Bethnal Green and Stepney said. We can observe the truth of that by comparing two situations.

In the period between 1979 and 1981, as the right hon. Gentleman said, there was a squeeze on the money supply at first. It was not an entirely consistent squeeze, and not as harsh a squeeze as was predicted by the Government at the time. None the less it was a squeeze, and it was accompanied by a sharp increase in the value of the pound against other currencies. As a result, much of our manufacturing industry was squeezed out. The consequence was that the squeeze on the money supply, which was the important factor, was harsher than intended. The pound was freely floating and there was no way in which its value could be brought down.

Compare that time with the period since the middle of 1988 when a steady squeeze has been applied to the money supply—not a harsh or dramatic squeeze, and with none of the discontinuity that occurred in 1976, but none the less a squeeze. The social and political cries against that squeeze have been nothing like as great as they were between 1979 and 1981. That is because we have had a relatively free-floating pound, which has gone down in the past year by 8 per cent. against the trade-weighted index of other currencies. Yes, there has been a rise in unemployment. Sadly, it is probable that if we are going to squeeze inflation out, there may be a further rise in unemployment, but at least while the squeeze on the money supply continues, British industry can expand by exporting. That is the advantage, on occasion, of allowing the exchange rate to depreciate.

I am smiling to emphasise the way in which the Treasury keeps saying, in a macho way, "We won't allow devaluation." It is important to understand that there is a term of art involved here. A depreciation is something that is allowed by markets. However, devaluation is carried out by Government. Therefore, when the Chancellor says that there will be no devaluation, those who wrongly believe that the words "devaluation" and "depreciation" mean the same thing, conclude that there will be a massive attack on speculators. There will be no such thing. That shows the advantage of employing a large number of classicists in the Treasury. That is an example of the way in which a floating rate may assist a squeeze on the money supply.

We ought also to consider the way in which entry into the exchange rate mechanism may turn out to be inconsistent with the requirements of domestic policy. There are two good examples of that. The first is the period between 1987 and 1988, when, as everyone knows, we were an informal member of the exchange rate mechanism. At that time, the pound was rising inconveniently against the deutschmark and the only way to get it down to what was regarded by the then Chancellor as a satisfactory level, was by lowering interest rates. There is no secret about that.

The lowering of interest rates, it has been said, was caused principally as a response to the fall on the stock market, but long before that fall, and long after it became obvious that that fall would not be prolonged, it was stated that the reason why interest rates were kept too low was that it was considered necessary to hold the pound down against the deutschmark, and we are still suffering from that now.

Mr. Keith Mans (Wyre)

In view of the comment that he has just made, will my hon. Friend suggest to the House what would have been the effect on inflation today if we had joined the exchange rate mechanism in 1985?

Mr. Budgen

That would have depended entirely upon our domestic policy on the control of money supply. There are times when the requirements of rigging the exchange rate and the requirements of strengthening or loosening control on money supply, may go in the same direction. There may be other times when those objectives diverge. However, between 1987 and the middle of 1988 we had divergent objectives. Lower interest rates were being used to pull the pound down, but domestic conditions in this country—for example, house prices rose by between 20 and 30 per cent.—meant that the rate of growth was at an all-time high of 5 per cent., which in my opinion is completely unsustainable in our economy, and that showed that we ought to have had higher interest rates.

I use those two examples because the Treasury tells us that all the indicators for the increase in money supply are no longer reliable. Even so, those two external indicators clearly show that the economy was overheating in that period. Interest rates, however, came down and we are now suffering the consequences.

The same thing is happening now. The peseta has risen recently by about 3 per cent. In order to keep the peseta within the exchange rate mechanism, the great and the good of Europe are leaning on the Spanish authorities and telling them that they ought to reduce their interest rates. However, the Spanish economy is in exactly the same position as the British economy in 1987: asset prices are booming, inflation is coming down, growth is going like mad, Spanish wage costs are increasing and the Spaniards are considering ways of controlling credit, apart from increasing interest rates, thinking of ways to apply a prices and incomes policy and doing all the things that my right hon. Friend the Member for Old Bexley and Sidcup would consider to be a means not of halting inflation—he is not in favour of that—but of distorting inflation and presenting it in a more positive light.

Mr. David Howell

The Spanish economy is not in the same position as ours. The Spaniards have had a large budget deficit for years, whereas we have had a budget surplus in recent times and continue to have one. That is a fundamental and important difference.

Mr. Budgen

I respectfully disagree with my right hon. Friend. The question is not whether one had a budget deficit or a budget surplus. It is possible, as this country has demonstrated, to have a budget surplus and also to print money. I see the right hon. Member for Bethnal Green and Stepney nodding in agreement. It is also possible theoretically, as was demonstrated by the previous Labour Government, to have a large deficit but to cover it without printing money, provided interest rates are high enough. The fact that there is either a surplus or a deficit is irrelevant.

There are signs that the Spanish economy is overheating. I am not one of those who keep saying that everybody wants to halt inflation. I accept immediately that in this country most people like inflation but, unlike most people, the politicians keep saying that they intend to halt inflation. I am unusual in believing that, on the whole, the cant is right; it is just that politicians do not like to follow general observations and take measures to reduce inflation.

If the Spanish people wish a slight reduction in the future rate of inflation to take place, I assert that it will be necessary for them not to lower but to raise interest rates. That is one of the contradictions. Let me consider, however, for a moment what is regarded as the smart option. Those who believe that they can win the next general election by going into the exchange rate mechanism consider the smart option to be that, about a week before the Labour party conference, the Government should announce that they intend to enter the exchange rate mechanism, thus stealing the Labour party's clothes. The pound will certainly rise in value, in the short term there will be a great boom on the stock exchange and everybody will say, "The Tories are going to win the next general election."

Let me, however, deal with what may happen in later months. Let us assume, for the sake of argument, that the public opinion polls suggest a triumph for the Tories similar to the triumph that we enjoyed in the recent local elections. Let us further suppose that some world speculators begin to grow a little uneasy with the pound. If the pound drops in value just before the next election and if we persist in arguing that control of inflation must be achieved by keeping up the value of the pound, let us consider what happens then.

If the next election, for the sake of argument, were to take place in the spring of 1991, we have to remember that there has been some squeeze on money supply since the middle of 1988. By the middle of 1991, therefore, there will have been a long squeeze and it may not be necessary then to raise interest rates. We may, however, find in the period coming up to the general election that a certain course has to be followed. We can be sure that, if we enter the exchange rate mechanism just before the Labour party conference, it will not be put forward as something that might have a peripheral effect; it will not be put forward modestly as the least bad solution, in the circumstances. This will be the new solution. It will be similar to prices and incomes policies and all the other measures that are supposed to cure inflation and make life easier and better for the British people, the country going onward and upward for ever more.

In those circumstances, it will be difficult in the spring of 1991 to say to the people of Europe, "We were only in the snake for a couple of months in 1972. We have come into the exchange rate mechanism for three or four months but we are rather uncomfortable in it; we are not at all sure that it is anything like what it was cracked up to be, so we shall come out again." But we shall be unable to do that. If the pound starts to fall, we shall have to raise interest rates. We shall be hoist with our own petard. We may find that, rather than winning us the next election, that smart little ruse causes us to lose it.

That brings me to my final point, which, I regret to say, is the inconsistency of the argument advanced by the right hon. Member for Bethnal Green and Stepney. If we enter the exchange rate mechanism and currency speculators believe that there is no downside risk with the pound, they will accept a lower interest rate for their investment, but that is because they will believe that we shall be cajoled, through swimming along the stream of Euro-babble, into something that approaches Delors stages 2 and 3. When we say that we want to discuss Delors stages 2 and 3, it is thought that we are saying, "Provided you change some of the punctuation so that we can describe it as a great change of principle, all will be well." That is not, however, what is being said either by the British people or by the Prime Minister.

There are some essentials of stages 2 and 3 that very few hon. Members will accept. If the speculator is to be assuaged, he must be satisfied that this country is moving towards locked exchange rates. If we are moving towards locked exchange rates, we must be moving towards a common currency. If we are to have a common currency we must, at the very least, have a common monetary policy.

I agree that there can be some fudging about the institution that imposes the common monetary policy. We could have, rather than a single central bank, a system of co-ordination between national central banks. But we must have a common monetary policy.

It must be clear to anyone who has considered the details that the British have no intention whatever of entering a common monetary policy, of having permanently locked exchange rates or of agreeing to a single European currency. If that is so, the speculators' belief that there is no downside risk in the pound will be shown to be wrong, in which case the scenario that I put forward, that we might join the exchange rate mechanism with a great deal of froth and euphoria and that the speculators might then say, "My goodness, these Brits really are serious about having no intention of being carried along into Delors stages 2 and 3; they do not want a common currency," suggests that there is a downside risk.

If we accept anything approaching stages 2 and 3 with a common currency and common monetary policy, it will be extremely difficult for the present Government to present the necessary legislation to the House of Commons. Of course all politicians have to be prepared and able to eat a large number of their own words, but the Prime Minister has spoken about stages 2 and 3 in language reminiscent of that used by the right hon. Member for Bethnal Green and Stepney. There is not much room for fudging over the issues of sovereignty, a common monetary policy or a single currency.

So there must be a real risk that those who buy pounds in October will become disenchanted with them by next spring, in which case I say to my hon. Friends who consider it to be a wheeze that, if they think that they will be able to persuade the Government and the Prime Minister to accept stages 2 and 3, although they have said that they will never do so, I agree that that has happened before and that we who have tried to resist the embraces of Europe have usually lost, but if we lose on this occasion, there are an awful lot of words that we can call upon and it will be a most uncomfortable business if the Government have to present us with legislation demonstrating that they are in substance accepting stages 2 and 3.

I suggest to my hon. Friends who think that we can win the next election by joining the exchange rate mechanism that, if they do not want stages 2 and 3, the honourable thing would be to say that now and to say it in Europe and to let the people of Europe know. Unless we are prepared to concede ultimately by accepting stages 2 and 3, it would be not simply a con on the financial markets, but a serious con on the remaining 11 countries in Europe.

Mr. Spearing

I am sure that the entire House has been following closely the hon. Gentleman's most interesting speech. Debates at leisure allow such consideration to take place. However, does he agree that the matter is much more fundamental than an attractive or unattractive wheeze? The alternative to accepting stages 2 and 3 will be as my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) suggested: we shall be told by the rest of the EEC, "We will go it alone and you will be left out." In which case we shall be told by the City——

Mr. Radice

And by me.

Mr. Spearing

My hon. Friend says that we shall also be told by him. We shall be told that we cannot afford to do that for the sake of future prosperity, and that at some stage we shall have to join. Bearing in mind the fact that the intergovernmental conferences may continue into next year, is it not a possibility that if there is any eating of words, it will have to be after the next general election?

Mr. Budgen

Obviously, stages 2 and 3 require legislation. so I suppose that a cynic might say that, in two, three or four years' time, my right hon. Friend the Prime Minister may not be leading the Conservative party and that a new, more European and progressive leader might wish to take us into something approximating stages 2 and 3. Obviously that is a possibility, but I should have thought that every prominent politician in the Tory party has so far adopted the language of opposition to stages 2 and 3. The language of opposition is all in terms of the Bruges speech: sovereignty and fundamental opposition to a single currency and a common monetary policy. Whoever leads the Tory party in the next five or 10 years will have a most indigestible time if he or she comes to the House with suggestions based on Delors stages 2 and 3.

7.45 pm

Mr. Tam Dalyell (Linlithgow)

We have heard a number of extremely interesting speeches from my right hon. and hon. Friends and from Conservative Members. The barbed and witty speech of the hon. Member for Wolverhampton, South-West (Mr. Budgen) was certainly one of them.

The House will forgive me if I concentrate on one narrow issue in an attempt to nudge the Foreign Office some of the way into coming to believe that the situation that has developed at the natural history museum in south Kensington concerns the Foreign Office and our European policy.

I take as a text page 28 of the White Paper, which states, under the heading, "Research and Development": On 15 December the Research Council reached unanimous agreement on a new Framework Programme for 1990–94. The total level of funding agreed was 5.7 billion ecu". There follows a list of relevant figures. Among the matters on which there is to be concentration are the environment and life sciences and technology.

From the point of view of relevance, Mr. Deputy Speaker. I draw your attention to the fact that page 30 of the document contains a reference to access of information to the environment held by public authorities". Paragraph 7 of the explanatory memorandum on the European Community document states: Fifteen specific proposals foreseen in the research framework programme will be brought forward during the year. On the environment there will be further work to establish the European Environment Agency and a study of the possible harmonisation of environmental, economic and fiscal instruments. I say that specifically to place myself firmly in order.

When the Foreign Secretary kindly gave way to me earlier, I said that I had a wad of letters from Europe on the issue. The first is signed by Docteur Francis Petter of the Musée Nationale d'Histoire Naturelle. He says: Monsieur, J'ai été stupéfait d'apprendre que les responsables du Natural History Museum de Londres ont décidé la suppression de 60 postes et, parmi ceux-ci, de responsables des bases de données les plus prestigieuses au monde. Pendant toute ma carrière, ce sont les riches collections du British Museum de Londres que j'ai consultees presque chaque année"—

Mr. Deputy Speaker

Order. If I am not to rule the hon. Gentleman out of order on the points that he made earlier, I draw his attention to the rules of the House, which require speeches in the House to be made in English.

Mr. Dalyell

It seems that even in the European Community we require English speeches.

The French have all written in French so suffice it to say that such letters come not only from Dr. Petter but from the palaeontology museum in Paris to talk about the author's "inquietude" and "tristesse"—to translate that for the House, he spoke of his sadness.

Dr. G. de Beaumont, the curator of the museum in Geneva, wrote another letter. I shall not argue with you, Mr. Deputy Speaker, about whether I should quote the French, but it is all there and these letters will be given to the Foreign Office. From the geology museum, Dr. Marc Weidmann wrote in the most formidable terms.

One of the letters from France is in English, so I can quote it. Dr. Pascal Tassy said: What we read on the fate of the Natural History Museum is astonishing. As a palaeomammalogist who visited the Museum several times for research purposes, I cannot imagine the demise of the fossil mammal Section. This section has in charge a unique collection of fossil mammals which is part of the world heritage. That is a point that is repeatedly made in these letters. What we are talking about in South Kensington is the world heritage. The letter continues: My colleagues, A. Gentry, J. J. Hooker and A. Currant always helped me fruitfully, and, moreover this help was a scientific help. Collections can be properly curated only by competent scientists. Indeed, my colleagues in the palaeomammology section are highly rated at the international level. To stop research in the field of palaeomammology in the Natural History Museum will not only damage the cultural renown of the United Kingdom, but as a consequence, we, palaeontologists in the world will lack major scientific contributions … I understand that whole parts of the systematic research are planned to be cut down. This is unbelievable. To suppress natural history research in a Natural History Museum is nonsense. You will be glad to know, Mr. Deputy Speaker, that I shall not resort—even if you would let me—to German because the Germans have written in English. From the central museum there comes: Sehr Geehrter Herr Minister!

It is with great concern that I have learned of plans for the radical restructuring of the Natural History Museum. From the geological museum in Copenhagen comes a powerful letter: Since the British"— the House will be spared my best Danish— after the French, in the course of last century and the beginning of this on the basis of worldwide influence and contacts built up a bastion of knowledge, that is the British Museum, educated people in all countries have regarded it as one of the foci of Western culture. That is the strength of feeling expressed by our European partners. Representations have also been made by Spain and Italy. I ask the Foreign Secretary to honour his promise—I am sure that he will, because in all my experience of him, if he says in the House that he will do something, he does it—to appoint some, I hope fairly senior, thoughtful Foreign Office official, because I am an admirer of Foreign Office officials, to find out what assessment has been made of the drastic reduction in the heteroptera section of the natural history museum and the implications for work sponsored with British money by the Foreign Office in Surinam on shield bugs.

Shield bugs are devastating coconut plantations. The research is into the whole question of the transmission of disease, and coccid research is also being carried out—[Interruption.] If I may explain to the hon. Member for Dorset, North (Mr. Baker), this is all about mealy bugs and their agricultural implications for Nigeria, Ghana, Togo, Kenya, South Africa, Zaire, India, Guyana, Costa Rica—dare I mention the place tonight? [HON. MEMBERS: "What was the score?"] It was 1:0. Brazil and New Zealand may also be affected.

Through the Foreign Office, I wish to ask the Prime Minister whether, in the light of her speech of 22 March, primarily about global warming but also about the need for databases, what proposals the Government have to promote identification programmes for scientific and popular use, and the development and management of the European plants database, and the British plant database with reference to the work of Dr. Richard Pankhurst. Dr. Pankhurst is one of a number who will be declared redundant.

How can the Government talk about sensible contributions to the framework programme which is on the agenda for this debate when one of our major contributions is being dismantled? In particular, will the Foreign Office discuss with the Governments of France and Germany the taxonomic support for West German teams working in Malaysia and French teams working in Cameroon in the light of the drastic reductions at the natural history museum? That may be a question for the Foreign Office or for the Department of the Environment. One difficulty that the natural history museum has faced is that many Departments are involved. Where Departments can pass the buck, they are tempted to do so.

What assessment have the Government made for the policies on the environment of the drastic reduction of the aculeate hymenoptera section at the natural history museum? That section deals with wasps, bees and stinging ants. Again, it is a matter of considerable importance to the environment.

The next question may be for the Ministry of Agriculture, Fisheries and Food or for other Departments. What assessment have the Government made of the implications for agriculture of the drastic reductions in the homoptera section of the natural history museum and for fisheries in relation to their role as primary producers, on which ultimately all fisheries depend? That is the whole study of diatoms. Diatoms are absolutely crucial to the environment and to fisheries. Incidentally, they produce about one third of the oxygen in the world. Those who make speeches about green issues, global warming and environmental co-operation had better not be responsible for dismantling a unique facility such as that in south Kensington.

I ask Ministers—primarily Health Ministers—what assessment they have made of the effect of closing down the heteroptera subsection and, for instance, the redundancy of Mr. William Dolling of the natural history museum. That work relates to the discomfort and diseases caused by bed bugs and, indeed, other bugs which are vectors of disease with reference to—here the Foreign Office has a responsibility—British scientists' work. Most of the money for their work is Rockefeller-funded. What assessment has been made of the drastic reduction in the homoptera section of the natural history museum for agriculture and horticulture?

The whole scheme was worked out without consulting staff of the natural history museum below the rank of deputy keeper. It came out of the blue on 23 April 1990. I have it on the authority of Bill Brett and Mr. Finlay of the Institution of Professionals, Managers and Specialists that the professional associations and trade unions concerned were absolutely appalled that they were not consulted.

One of the hardest-hit sections of entomology is hymenoptera. All research on most of the aculeate forms will be stopped under the plan. The aculeate hymenoptera have stings and include ants, bees and stinging wasps. Research on ants would continue, but research on bees and stinging wasps would stop. Bees are the most important insect pollinators, and stinging wasps, which are the birds of prey of the insect world, are important predators. Therefore, both groups are of first-class environmental significance.

Three scientists in hymenoptera are at risk—Mick Day, Colin Vardy and George Else, the first two of whom are being told to leave the museum. At Question Time I raised the case of Michael Day, which is disgraceful. The way in which he heard the news of the axing of his job is ironic, considering that the plan is supposed to be conservation minded. He spent much of last year compiling an account of the situation of hymenoptera, in Europe, with particular reference to endangered species. He had just lectured on that work to a large audience at an international conference on conservation in Strasbourg in late April when he was told by telephone at his hotel that his job was to be axed. As a result of his efforts, EC money is being made available in several parts of Europe for study of the hymenoptera, but research on most of the aculeate hymenoptera at the natural history museum is to stop. It is a feature of the plan that the cuts do not relate to stated aims, even when the aims are the Prime Minister's.

Other hon. Members wish to speak, so I shall not abuse the time of the House. I hope that Foreign Office Ministers will keep their promise. There will be a cascade of questions, but at least a fortnight to answer them in. I am not asking for answers within 48 hours. I hope that the whole issue of the natural history museum will be properly discussed.

It is equally valid to say that the rain forest problems should he tackled on a European basis. I am pleased that the Select Committee on the Environment, under the leadership of the hon. Member for Hornsey and Wood Green (Sir H. Rossi) is to visit Brazil from 1 to 8 July. I am pleased that the distinguished Edinburgh scientist, Jim Ratta, has been appointed as its specialist adviser. I lay down the marker here and now that I hope that, between 8 and 20 July, or whenever the House rises for the summer, there will be an opportunity for the House to debate the Select Committee's report, because the matter is urgent. The rain forest too, should be dealt with on a European basis. I hope that I have made my point clearly.

8.3 pm

Mr. Roger Knapman (Stroud)

I hope that you will excuse me, Mr. Deputy Speaker, if I do not follow the hon. Member for Linlithgow (Mr. Dalyell) down that particular road, as they say.

I am grateful for the opportunity to speak in the debate. I did not realise entirely how important it was until I listened to the BBC "Nine O'Clock News" only last week and the reporter breathlessly told us that he was speaking from Brussels, "the capital" of Europe. Obviously, the developments in the European Community between July and December 1989 were extremely dramatic.

I too listened to the right hon. Member for Bethnal Green and Stepney (Mr. Shore) with considerable interest, particularly his remarks on the exchange rate mechanism. I am not an economist. Indeed, I cannot help my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) as I am not even a junior economist. I estimate that, of my 360 colleagues, probably 300 are, so no doubt he will receive ample help.

I can see that the exchange rate mechanism is good for exporters and the City. They want a stable exchange rate, in which case they should be able to have five-hour rather than three-hour luncheon breaks, because all they will then have to watch is interest rates. However, I wonder what the effect would be on those with small businesses such as garages and post office stores. They are not particularly interested in exporting, so they are not interested in the exchange rate, but they are extremely interested in interest rates.

If, as my hon. Friend the Member for Wolverhampton, South-West suggested, interest rates were to rise over a sustained period, I wonder how that would affect them. If, after so many centuries, we have suddenly found a complicated structure, the ERM, which defies the laws of supply and demand and means that we can have a stable exchange rate, why was it not thought of before?

I listened with considerable interest to the speeches of the right hon. Member for Manchester, Gorton (Mr. Kaufman) and the hon. Member for Middlesbrough (Mr. Bell). The Labour party's sudden interest in the environment is touching. However, the right hon. and hon. Gentlemen did not mention that not one prosecution was brought under the Control of Pollution Act 1974 while there was a Labour Government from 1974 to 1979. We can judge their deeds against their words this afternoon.

My few brief remarks will relate to the booklet "Developments in the European Community, July-December 1989." These booklets, which are produced every six months, remind me of end-of-term reports. If judgment were to be passed on us, it would be, "sound and steady work". The United Kingdom came first in one subject, or possibly first equal with Denmark, because we have listened to and applied more directives than any other country. That is good.

What is not being said in this end-of-term report is that some of our classmates, particularly Italy, do not seem to take the subject seriously. Even when the directives are being passed, it seems to have precious little intention of implementing them. I do not say that Italy shows bad judgment in that. I much prefer the approach of "When in Rome do as the Romans do" to the most recent directives, such as the one that suggests that, when pheasants are shot, they should be in a refrigerator before they hit the ground.

Over the past six months, our school activities have been disrupted by certain anti-social characters. Within a few weeks of the visit by Mr. Delors and other prominent socialists, no doubt at considerable public expense, to Dublin, with all their great designs and grand dreams, we have an about-turn and yet another awakening to their true position and their protectionist instincts, particularly those of the French about British beef. I imagine that most of my hon. Friends have no doubt that the French and West German Governments have contravened article 30 of the treaty of Rome. I hope that, in due course, we shall receive full compensation for our farmers, the meat trade and all who have an interest and who have made such horrendous financial losses in recent weeks, possibly of the order of £600,000 a week.

Although I congratulate my right hon. Friend the Minister of Agriculture, Fisheries and Food on the best possible deal that he could achieve in the circumstances, the problem arose because our partners were being unreasonable and were not acting in a communautaire fashion. A failure to reach agreement would have resulted in lengthy court action, and during that time there would have been no prospect of beef exports recommencing.

I was greatly reassured by the Bruges speech —the only sane voice on the European scene after some years. Equally, I was encouraged by the splendid speech of my right hon. Friend the Secretary of State for Trade and Industry only last week to the Bruges group—a group of seven sovereign nation states co-operating for mutual benefit. That definition is more or less the same as the words used by Mr. Yeltsin only last week to describe Russia. He said that he hoped that Russia could be a sovereign nation state—I am not sure how he worked that out—within a federation.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) preached the merits of federalism. There is an irony in the fact that, as Mr. Yeltsin is suggesting that he would like a sovereign nation state within a federation, we, who have just that—I hope we still do—are going the other way, into a federal system. It will be interesting to see who is proved right.

The fact that we are passing directives and being communautaire means that the Conservative party is the true party of Europe. Others have tried to purloin the title of "good European," but they mean that they favour a particular type of Europe. The Conservative party has a vision of a particular type of Europe. It may not be the kind favoured by our critics, but our vision of Europe is positive and forward-looking. I have a vision of a free Europe, free from restrictions on trade and restrictions on the individual imposed by the state. By Europe, I mean the continent of Europe rather than some small part of it.

Britain is at the forefront of pushing for freedom within the context of the European Community. The Government are committed to the principle of the European single market, not least because we have already passed so many of the provisions needed to implement it. Other member states give voice to the principle, but it strikes me that they are selective when it comes to practice.

Freedom should not be the exclusive preserve of some small club of European states; surely it should extend across the continent. We have always set our face against fortress Europe—the idea of freedom within insularity. The Conservative party has a clear guiding vision as to what should happen in Europe. That vision dictates a clear stance in relation to the developments now taking place in eastern Europe, which offer new opportunities.

For those who favour a bureaucratic, unified Europe of 12 states, the developments pose a particular dilemma. The developments in the Soviet Union and in eastern Europe are welcome, as they represent the collapse of Soviet hegemony and the fall of the iron curtain. Now that we see behind the curtain, we can also see the challenge ahead. For the countries of eastern Europe, the task of economic, political and social development is massive. The west must help, but in what form? Do we give charitable handouts or more substantive assistance to bring those countries within the economic framework of Europe? If the answer is to provide substantive assistance, how do we go about that?

For the little Europeans, those who want some integrated 124 member-state European Community, there is a problem. To exclude the east European states from membership of the Community encourages the perception as well as the actuality of a fortress Europe—a club of haves excluding the neighbouring have nots. My right hon. Friend the Secretary of State for Trade and Industry referred to pulling the drawbridge up on the ark. I am not too sure whether arks have drawbridges, but the analogy is right.

Associate membership of the Community would create a two-tier Europe—one of those who have and those who have not so much. To bring the eastern European states into membership of the EC would create a different Community that would not be recognisable to its founding fathers. Achieving economic integration would be a mammoth task and achieving political union would be impossible. That is near-impossible in the context of the existing Community, even though it is the direction in which some want to push it. To widen the European Community to encompass eastern Europe would kill the notion stone dead.

Although there may have been an outbreak of democracy in eastern Europe, there has not been an outbreak of liberal democracy. Old prejudices and identities are coming to the fore. Some of the new regimes may prove as oppressive to certain minorities as their predecessors. They are different in type and national character from the nations of western Europe, and forcing them into some common Community will not overcome the national and ethnic tensions that will mark eastern Europe for some time.

The Community, even based on the Single European Act, cannot be extended to encompass the states of eastern Europe, but nor can it continue in its present form, because eastern Europe must be taken into account. What is the way forward? The European Commission must complete the single market and, once that is achieved, it must start to reach accommodations with its neighbours in the east, expanding the boundaries of the free market ever outward.

In short, we must co-operate with our neighbours, but not integrate. As we expand the boundaries of the free market, so the nature of the European Community will change. The case for a bureaucratic, unified Community will be increasingly undermined and eventually destroyed. A bureaucratic Community in the heart of a free-market Europe will make no sense.

The way forward is a pan-European network based on co-operation, rather than a sub-European Community based on integration. That is the positive, visionary and European way forward. Those who hanker after a bureaucratic, integrated Community of 12 states are insular and time-bound Europeans. They no longer offer a vision of the future that encompasses what is truly Europe.

8.16 pm

Mr. Phillip Oppenheim (Amber Valley)

I am one of those Conservative Members who are delighted at the belated embrace of the European Community by Labour Members. We have heard few words against the EC during the debate. There is a danger, however, that late converts sometimes become fanatics. It is odd that the anti-European party of a few years ago now finds itself in the position of carping at the Government for not being European enough. If the Opposition are criticising the Government for not rushing headlong into monetary and political union, they should come clean with the electorate and say so. If they agree with the Government, however, they should stop carping and at least give the Government some support for their cautious policies.

Another area of confusion in the Opposition's policy on Europe relates to the social charter. Some Labour Members seem to suggest that we need the charter to compensate for the freer market after 1992. Surely the whole point of freer markets is that they enable an economy to work more efficiently and industry to be more productive. As a result, everyone benefits and living standards rise. Along with rising living standards, we can also, I hope, afford to pay for better standards at work.

In that respect, it is interesting that a recent report of the European Community suggests that the savings resulting from a totally free internal market—one that I suspect we shall never see—would be about £80 billion a year. That is a substantial gain. It is not just big business and financiers who stand to gain from the free market: it is everyone, because capital will work more efficiently, and productivity will rise, which will also allow wages to rise.

The Opposition are also confused about the ERM. What they have signally failed to spell out is exactly what the conditions of entry of ERM would be under a Labour Government. I repeat the question that I asked the right hon. Member for Manchester, Gorton (Mr. Kaufman) earlier: how would a Labour Government, if one ever came to power, hope to maintain the parity of the pound in the ERM if that Government were cutting interest rates and at the same time massively increasing public spending? I do not see how that equation can work out.

I now move to Euro-fanatics in general. One of the problems with Euro-enthusiasts is that they tend to be too uncritical about what the EC, particularly the Commission, does. They equate everything done in Brussels with goodness and light. They do not give Britain its due credit for all the good things that it has done in Europe. Not only are we way ahead in many of the 1992 directives, but many of the countries that often pose as great champions of European unity and greater co-operation and integration are the ones that are most protectionist when it comes to their own internal political interests.

The truck industry in Germany——

Mr. Gill

Is not the great political significance of last week's events, when our Agriculture Minister went to Brussels to fight our corner, that he brought Europe back from the brink of protectionism and defended the important principle of the free market?

Mr. Oppenheim

My hon. Friend unerringly goes to the nub of the issue. It would be nice to think that the Minister of Agriculture was defending the cause of the free market in Europe, and achieved a great victory. I think that it was one small but important victory towards securing a free market. However, as I develop my speech, it will be seen that the problem with Europe is that it is an extremely protectionist bloc of trading nations that not only protect their own national markets but are exclusive when it comes to the non-EC market. That is one of the biggest dangers with the EC at present.

Germany poses as the champion of the European cause and of greater co-operation and integration. However, when it came to liberalising the truck market in Germany to allow French, Belgian and British trucks to go freely into Germany, the Germans clammed up. Now, the Germans are effectively levying a £4,000-a-year road tax on foreign road hauliers that they do not levy on their own. The result is that lorries that are on average 30 per cent. empty criss-cross the borders of Europe, adding to congestion and pollution.

France is often hailed by the Opposition as one of the great leaders in the European movement. However, when a British airline—British Midland—wanted to fly reasonably freely with lower fares into Paris, the French put up their barriers and we had a great fight. I am pleased that the Government won that fight to allow British Midland to fly in.

Another example is telecommunications. Every other member of the European Community operates nationalistic procurement policies and major trade barriers in their internal telecommunications markets. At least we in Britain have some liberalisation and freedom in our telecommunications markets. However, it is almost impossible for British manufacturers to sell telecommunications equipment to France, Germany, Italy, Belgium or the Netherlands.

The Euro-enthusiasts sometimes talks as though entry into the ERM will be a panacea for our industry. It is worth reminding them that during the 1980s Britain out-performed almost every other European Community country. Whereas in the 1960s and 1970s we lagged behind our European neighbours in manufacturing output and productivity, in the 1980s, when they were in the ERM and we were not, our manufacturing output expanded faster than that of France, Germany, Italy, Holland and Belgium, and our productivity in manufacturing expanded even faster.

My key criticism of Euro-enthusiasts is that they are not critical enough of the faults of the European Community—particularly the Commission. An advertisement in the Financial Times 14 February stated: Dear Customer, We want to tell you that we care and to thank you for the way, year after year, you have responded with your trust and respect. WE will do anything for you. That is why we have made service our number one corporate priority. No task is too small. We want to dedicate it to you, as we have dedicated everything to you, because we love you, our customers. That sweet Valentine message was placed in the Financial Times by a Franco-Italian state-owned company called SGS Thomson. It was particularly nice of it to send such a Valentine message to its customers because three years of lobbying had just won that company major trade barriers against lower-cost, better-quality Japanese semiconductors, which means that European semiconductor users such as computer or consumer durable manufacturers have less choice of semiconductors and have to go to companies such as SGS Thomson for many of their requirements. Unfortunately, that is typical of the sort of protectionist barriers that the EC is, at an accelerating rate, raising against competition, particularly from Japan and eastern Asia.

I view the danger of the European Community turning into a protectionist bloc as one of the greatest perils that we face at present. It is moving towards the break-up of the world into three partly hostile trading blocs based round east Asia, north America and Europe. That contains some unpleasant echoes of the breaking up of the international trading order in the 1930s. In Europe, there has been a massive web of voluntary restraint agreements, quotas and tariffs, covering virtually everything imaginable. There is almost no product made outside the EC—from shoes to steel and from cars to ships—that is not covered by a web, a complex labyrinth, of trade restrictions.

The latest EC wheeze is to put an EC-wide "import quota" on cars from Japan after 1992. The supposedly liberal Commissioner, Andriessen, went to Tokyo recently and said that it was even proposed that cars made in Britain by Toyota, Nissan or Honda with an 80 per cent. EC content but made by a Japanese company, should be counted as Japanese. We do not say that cars that are made by American companies such as Ford and General Motors in Belgium, Spain, Germany or Britain are American, so why on earth should we say that cars made by a Japanese company in Britain are Japanese?

It is madness, but what lies behind it is heavy lobbying by the heavily protected European car industry—particularly companies such as Fiat and Renault. The net result of those efforts is that we shall almost certainly end up with stringent barriers against Japanese cars after 1992 that will not only compound the inefficiency of the European manufacturers that are already protected by national quotas, but will massively push up prices for consumers in the European market.

In Europe, because we spend so much time complaining about trade barriers from other countries, the Commission has generally found it distasteful to erect overt trade barriers. The chosen instrument for its protectionist fortress Europe policy involves anti-dumping duties. Regulation 2423/88 covers European policy on antidumping. Dumping is the practice of selling into an export market at a price lower than that charged in the home domestic market.

The problem with regulation 2423/88 is that it is so drawn up that it can find huge dumping margins even when foreign manufacturers are selling on their home markets at lower prices than they are in the export markets. Every objective observer who has looked into the regulation has agreed that it is grossly unfair. The most recent report on this was by the National Consumer Council.

There was also a report not long ago by the Royal Institute of International Affairs, written by Michael Davenport, a former senior economist at the EC Commission, so he should know. He said: Not only do the Community's rules overtly discriminate against foreign companies, but, in common with other import restraining measures, they ignore the damage inflicted by anti-dumping duties on the users of imported products. Instead of encouraging competition, as intended, antidumping action seems to be frustrating it. I shall not go into all the intricate detail of how the regulations are grossly unfair, since other hon. Members are waiting to speak, but a lawyer called Chris Norrell has done a great deal of work in this area and conclusively proved that the Community regulations are protectionist and slanted towards finding dumping margins even when they do not exist.

As further proof of the unfairness of these regulations, I point to Hong Kong. In theory, if a company engages in predatory trading practices or dumping, the idea is that it has a large protected home market on which it can charge high prices to subsidise its export prices, with the idea of driving other manufacturers out of business so that eventually the predatory company can reap monopoly profits. But how can a Hong Kong company do that?

Hong Kong is a relatively small market and almost all Hong Kong manufacturers export 80 or 90 per cent. of their production, so how can they be found to be dumping? Yet on numerous occasions under these Community regulations, Hong Kong manufacturers have been found to be dumping everything from textiles to video cassette tapes, and large duties have been levied on them as a result. That is a clear sign of the unfairness of the regulations, yet between 1980 and 1988 the Commission undertook no fewer than 357 anti-dumping investigations and took action in almost all of them—duties have been levied or the foreign manufacturer has had to undertake to raise his prices in the European market.

More and more, these anti-dumping actions are being taken against Japan and east Asia economies, and more and more they are being applied to high technology products such as photocopiers, computer printers and so on.

Sir Russell Johnston

Is the burden of the hon. Gentleman's argument that he thinks that the British Government have been less than active in objecting, on their own behalf as well as that of other countries, to restrictive trading by the European Community? Does the hon. Gentleman think that the British market should be more open to the products of the Japanese?

Mr. Oppenheim

On the second point, the hon. Gentleman is asking me whether I believe in free trade. The answer is that I do. Just because another nation is more advanced and more competitive than we are, that is not necessarily a reason to exclude its products. I shall answer the hon. Gentleman's first question about the British Government shortly.

I want to deal briefly with the photocopier market. In 1985, the Commission instigated an anti-dumping investigation at the behest of a small group of European manufacturers which had damaged themselves in the previous decade by producing poor-quality, overpriced products. The Japanese, by contrast, must be said to have produced high-quality products which they marketed aggressively; they were reliable, low-cost products that people wanted to buy. Yet the European companies complained to the European Commission, and as a result of the anti-dumping investigation, large dumping duties were imposed on the Japanese photocopier manufacturers.

Then the EC went further and decided to impose what are called "screwdriver duties" on Japanese-owned factories in Europe, under which factories owned by Japanese, Korean or Taiwanese companies on which anti-dumping duties had already been imposed, but which subsequently manufactured in Europe, had screwdriver anti-dumping duties levied, which meant that a product with 80 per cent. EC content could still have anti-dumping duties levied on it.

This is both unworkable and unfair, particularly in complex industries such as electronics. How does one determine the country of origin of something like a printed circuit board which has 10 or 20 different components from all over the world—components which might have been fabricated in different stages of their production in different countries? The idiocy of some of these rules means that Japanese-owned plants in the Community cannot buy components from factories that their own company owns in Japan, but their European competitors can buy components from those same factories.

The drift of my argument is that, behind these trade barriers—they do not receive much coverage in the press because they do not excite much political passion, but they are being rapidly erected—is industrial lobbying by large European companies such as Siemens, Olivetti, Thomson and Philips. They have all lobbied hard for many years for ever more protection at the expense of European consumers and for more and more subsidies from national Governments and the EC—which they have got. The hypocrisy of their position is that the same companies lobbying against what they call cheap dumped imports from Asian countries make huge quantities of their products in Asian factories that they own.

For instance, when European television manufacturers asked the Commission to impose anti-dumping duties on Korean television makers and included, by way of justifying statistics, the fact that imports of televisions from Asia had increased dramatically in recent years, a large percentage of that increase came from factories in Asia that they owned themselves. Needless to say, the Commission swallowed their case, hook line and sinker. It imposed anti-dumping duties on South Korean televisions, with the result that the Koreans are hamstrung when selling products in Europe, but Philips and other companies happily run large factories in Asia and import their products to Europe with no anti-dumping duties.

The benefits of hamstrung competition and of higher prices for the European industrial lobbyists which have so successfully had anti-dumping duties imposed on their east Asian rivals are obvious but, as with any form of protection, such advantages are likely to be only short-term. One of the dangers is that, if people are genuinely convinced that the Japanese and others have succeeded by unfairly dumping products on the European market, they may not realise that the real problem lies with European industry, so the motivation for industrial reform in Europe will become less urgent. So although the draftsmen, architects and masons of the Commission may genuinely believe that, by erecting what is sometimes called fortress Europe, they are helping European industry, in fact they are merely locking it into a high-cost, low-productivity, uncompetitive ghetto Europe.

The significance of the problem for Britain is that we pay a high price for these protectionist measures. I know that most hon. Members in this debate have gone for the broad, grandiose sweep of policy, but I do not apologise for homing in on one way in which the EC works. This is an area that the EC pretty well controls already—our trade policy. As a result, we are putting up more and more barriers, and British consumers are paying an ever heavier price. A recent National Consumer Council report said that the variety of anti-dumping duties on east Asian electronics products resulted in British consumers paying about 5 per cent. more for those products than they otherwise would have.

Unfortunately, because Brussels runs our trade policies, we have little control over them. Ministers are often unwilling to get involved in more fights with Brussels; quite often they are busy with a range of subjects, so even a liberal, free-market Government such as ours end up rubber-stamping most of these protectionist measures. But this example of how the EC operates should set alarm bells ringing in the Chamber. We already have little control over large areas run by the European Community—by a bureaucracy which is fairly unaccountable and which tends to be far more prone to follow lobbying by powerful pressure groups such as large European conglomerates like Siemens, Olivetti and Philips.

In the areas that the EC has taken over, such as trade, there is little power these days for Ministers, let alone for individual Members of Parliament. Is that what we really want? Surely there must come a point at which the advantages that we gain from co-operation within Europe, which I too want us to enjoy, are outweighed by the disadvantages of creating a large, unaccountable and bureaucratic structure where decisions are remote and individual Ministers and Members of Parliament—let alone our constituents—have virtually no influence, and where the people who really do have the influence are the powerful industrial lobbies which always seem to get their way in Brussels when they whinge about unfair competition, wanting more subsidies and yet more trade barriers. I believe that we are already close to the point at which the advantages of co-operation within the European Community are outweighed by the disadvantages.

8.40 pm

Mr. Bob Cryer (Bradford, South)

I shall be brief because other hon. Members wish to speak. I shall not follow the hon. Member for Amber Valley (Mr. Oppenheim) except to say that he seems to envisage a world in which free marketeering reigns supreme and the workers go to the wall. He can make that claim, as he has fairly comfortable personal circumstances. However, he should bear in mind the lack of trade union rights and of health and safety standards in countries such as Taiwan. The notion of a free market, with what is generally termed "a level playing field", is not always what it appears.

I remain an unremitting critic of the Common Market. The Labour party's shift from what was a reasonable and critical stance on this issue does not have my support. The EC has been a burden on our backs. Since 1979, this country has paid £10,000 million net of grants and rebates to the Common Market. I notice that, this year, the White Paper has abandoned the neat but informative table of net payments made to the Common Market. No doubt one of the Government's advisers, lavishly paid by the taxpayer, and seeking to improve the presentation, suggested that such information should be excluded because it is damaging.

At the moment, several local authorities are making supplications to the Common Market simply to get some of our money back. It would he more efficient if central Government paid that money direct to the local authorities rather than paying it to the Common Market so that it can make arbitrary decisions and so that local authorities can make expensive representations simply to get back a proportion of that money for much-needed transport infrastructure improvements and for the social needs of the regions.

The common agricultural policy is not at the forefront of discussions nowadays, but it still costs us nearly £20,000 million. It is still inefficient and it is still one of the major factors that has resulted in the pouring of huge quantities of nitrates on to our soil. It is still a potent source of pollution in Britain and in other countries. I am not saying that simply because concern about the environment is fashionable these days; I was saying it 10 years ago when the guaranteed intervention prices and the guaranteed purchasing of crops from farmers was leading to ever-more intensive farming, with ever-increasing quantities of fertilisers being poured on to our soil. The CAP is still costly and still damaging. It has not gone away. The Minister of Agriculture, Fisheries and Food is still arguing about free butter distribution in the United Kingdom, because there is so much butter that it is spreading everywhere. The notion that the EEC has been magically reformed is not true.

Some members of the Labour movement regard the social charter as a great step forward. It is a collection of generalised platitudes which, for example, do not provide civil servants with trade union rights. The social charter will not restore the jobs of the workers who were thrown out of GCHQ. It is claimed that health and safety legislation is being improved as a result of our membership of the Common Market and as a result of the Commission's concern for health and safety standards. That is simply not true. In fact, the reverse is the truth. Health and safety standards from our legislation are being eroded by the platitudinous generalisations of the health and safety proposals in directives from the Common Market.

To get round the provisions of the Health and Safety at Work, etc. Act 1974, which states that all regulations must aim at least to improve the existing standards, the Health and Safety Commission is now talking about a package of regulations that will repeal the absolute provisions of our existing legislation to ensure that we conform to the generalised "so far as reasonably practicable" terms that have been put forward in Common Market directives. As hon. Members will know, "so far as reasonably practicable" is a term of art which means that the fact that something is too costly is a defence and that in any subsequent action that arises from an accident to an employee, the employer can say that it was too costly to provide adequate safety measures.

Therefore, the health and safety provisions of the social charter do not represent a great step forward. They are a clever device by Jacques Delors to show some social concern, and even those provisions have been minimised over the past 12 months.

These days some Conservative Members criticise the Common Market. One or two have referred to the Bruges speech as a landmark of criticism when the Prime Minister stood up against the federalism of the Common Market. The truth is that, since her election in 1979, the Prime Minister has enmeshed us more deeply in the Common Market. It was the Prime Minister, in conjunction with the then Chancellor of the Exchequer, now the Leader of the House, who removed our derogation on the freedom of movement of capital within the Common Market. Immediately after taking office, that Chancellor removed the Treasury's power over the movement of capital—limited though it was. Some free marketeers would say that is perfectly proper, but the treaty of Rome gave us a derogation that allowed the United Kingdom Government —of whatever political complexion—some intervention in the money market.

Conservative Members cannot have it both ways. They cannot say that the Prime Minister is standing up to the Common Market when, on taking office, she removed an important derogation that had been negotiated with the Common Market, especially when that derogation had not been removed up to that point by Governments of either party.

The Prime Minister organised the Single European Act of 1986, which went through the House on a three-line Whip. Paragraph 8 of one of the reports produced by the Select Committee on Foreign Affairs makes it clear that the effect of the Single European Act has been to diminish, and in some cases to remove, member states' right of veto. That is not standing up to the Common Market; it is co-operating with it. That has been the effect of the Single European Act.

It was also the Prime Minister who signed the channel tunnel agreement. Inside the Common Market, the channel tunnel was not hailed as a transport development; it was hailed as a knot that would tie us more closely to the Common Market. It will be a costly venture, which will suck investment in the railway and transport infrastructure away from the regions, down to London and the south-east. It is typical of British Rail that its only investment in an inland port is in London rather than in Bradford, Leeds, Sheffield or anywhere in the north. It is developing a terminal in Willesden and facilities in Kent and the channel ports.

The Tories are pressing ahead with the removal of barriers, as the Foreign Secretary said. However, problems remain and the solutions are never made clear. Ministers always say that policies made in the Trevi group of EC Justice Ministers will protect us against the growth of drug trafficking, but we are never clear how that will be done. The Government say that they will remove the barriers but at the same time protect us against arms trafficking, of which we have had a recent and most dramatic example. If we did not have supervision at customs points and at points of entry, how could we receive information about guns made in Sheffield and elsewhere for export to Iraq? We are also concerned about the potential spread of rabies if we do not have sovereign scrutiny at our borders.

We are an island and have a sea around us. Sometimes that is an advantage and sometimes it is not. In case the Minister makes some off-hand remark about little Englanders not appreciating the advantages in the growth of a European entity and federal organisation, let me remind him that I am a long-standing advocate of international agreements such as the United Nations nuclear non-proliferation treaty. I went to the United Nations second special meeting on peace and disarmament in 1982. I want nations to work together, but to do so as independent sovereign states with a common policy in various sectors. The worst thing that can happen is for a centralised organisation to tell sovereign states what to do. That leads only to friction and antagonism, and we should not do it.

I emphasise what I have said before, and I hope that people outside take notice of this. There are stirrings. The Prime Minister is raising an issue, although she is doing it without any record of action. There is a strong and powerful move in the EEC for a federal union, in which places such as this will be demoted to the level of a town council.

Tory Members have called for a free market and even for all trade barriers to be removed to ensure that the treaty of Rome is properly and fully applied. The free market is a danger to workers. It implies a competition. The winners in such competitions are those who are successful and the losers are those who, for whatever reason, are unable to compete. The workers go to the wall. When Coloroll was taken over by a business man of the year, one of the new yuppie breed whom the Tories so admire, he made a number of fatal decisions, and now the company is in dire straits. Its workers, who have done nothing except increase productivity and maintain traditions of skill and ability, are wondering what will happen to them. That is the result of competition in a free market.

A Labour Government must be able to ensure that damage such as that, which is done not just to workers but to the economy, does not take place. A free market will not provide remedies to such problems and the Government have to be able to intervene either to support or, if necessary, regulate the flow of trade. It is only sensible for Governments to intervene in the marketplace to protect an industry and the jobs that go with it. Such a move would be difficult inside the Common Market, because the Commission would say that it was in breach of the treaty of Rome.

Sir Russell Johnston

The hon. Gentleman is attacking free competition. Does he agree that the countries of eastern Europe are not a recommendation for protected economies?

Mr. Cryer

That is a fashionable thing to say after the recent changes in eastern Europe, which are connected not only with the economy but with the lack of opportunity for the exchange of ideas and for discussion. There is no doubt that a wind of competition is blowing through some of those countries, and with it comes the creation of dole queues. In a few years, there will be a marked difference, because people do not like being put on to dole queues. There will be a reversal of the coin, with protests, demonstrations and outrage about the extent of unemployment. A free market economy is not a satisfactory solution in the way suggested by the hon. Gentleman's glib intervention.

In my constituency is a carpet factory owned by Coloroll that has always produced a high standard of output. Several hundred workers in it are apprehensive about their future. I hope that, as a good viable unit, it will be retained, but there is no guarantee. That is the position for workers who have been facing the effects of this enterprise culture. A centralised, decision-making economy with a fortress around it is not the solution. We must have a bit of both, but we must have a reserve position so that the Government can intervene. In the Common Market under the treaty of Rome, if it is applied, it would be difficult for a Government to intervene. That would be a handicap for a Labour Government concerned about maintaining our manufacturing industry, as we must.

This somewhat vague document has a table. The Government used to provide actual deficits, but now they have decided to show deficits in manufactures in percentage terms, because that glosses over the facts. From 1973, the balance of trade in manufactures between Britain and the European Community has gone inexorably upwards from 0.4 to 13.6 per cent. The Government say that the larger the deficit the more successful we are, because we are exporting more as they are exporting more to us. That logic is absurd. The Minister can tell us how we can eradicate that deficit. Will we be able to sell as many goods to them as they to us, and will our manufacturing industry be buoyant and confident, as it is not at the moment?

There has been much talk about the exchange rate mechanism as a magic cure for the problems of our exchange rate. We shall have a debate about this later in the week. Where we have had a fixed exchange rate, it has always been accompanied by a large-scale spread in unemployment—for example, in 1925 when we went on the gold standard. That is a warning. The Labour party is not the party of unemployment. Indeed, the very reverse is the truth.

If we wanted at any time to alter our rate of exchange, to whom would we apply within the exchange rate mechanism? The other Common Market countries are dominated by West Germany, which has a massive balance of trade surplus with us. Is it likely that in those circumstances a group of countries with a massive balance of trade surplus with us would be likely to agree to any alteration of exchange rate that would place us in a more competitive position? I think not. Our membership of the Common Market has been a burden. It has been a millstone round our neck throughout our membership, and it remains so.

8.59 pm

Mr. Christopher Gill (Ludlow)

In answer to a parliamentary question, my hon. Friend the Minister of State, Foreign and Commonwealth Office told me that the Government's objective is practical progress towards a robust and realistic form of economic and monetary union, with full regard to democratic accountability and the doctrine of subsidiarity."—[Official Report, 7 February 1990; Vol. 166, c. 688.] I have read carefully the documents before us to find any evidence of the principle of subsidiarity being applied. I draw the attention of my hon. Friend the Minister to paragraph 3.14, which refers to food law: The principles are designed to ensure as far as possible that a foodstuff lawfully produced and marketed in one member state should not be subject to marketing or import restrictions in another. That accords with the principle of subsidiarity.

Perhaps at this stage I should declare my interest in the meat trade. It is with regulations affecting minced beef, for example, or even the great British sausage, that we see the principle of subsidiarity being ignored. That worries me. If we are saying that we can accept so many tenets of the European Economic Community provided that the principle of subsidiarity is being maintained, why is the principle so often more honoured in the breach than the observance? We must ask ourselves where the evidence of subsidiarity working affectively exists. Where are the historical precedents?

Power and decision making are subsumed inevitably by the centre. That must be inevitable in any bureaucratic organisation, whether we are talking about Governments, Churches, nations or empires. I invite the House to speculate on who is to decide which matters should become subsidiary and which matters we should allow the lower orders to take control of. I suggest that the answer is——

Sir Russell Johnston

rose——

Mr. Gill

I see that the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) wishes to intervene. I shall give way to him in a moment. I wish only to add to my previous remarks that it is always the central authority which calls the shots, and that in practice it has little regard for the principle of subsidiarity.

Sir Russell Johnston

I suggest that the hon. Gentleman conveys his sentiments to Mr. Brian Mulroney of the Canadian federation. They will be of great comfort to him.

Mr. Gill

I thank the hon. Gentleman for that advice. I invite hon. Members to consider national examples of things that we and our constituents feel strongly—in some instances passionately—could be done by a parish council or a district council rather than by county councils or Government Departments. Each right hon. and hon. Member will have his own examples.

In my constituency, parish councils, town councils, district councils, county councils and myself are all in favour of a new bridge over the River Severn near to the historic bridge at Ironbridge. However, that is not to be. We must have a public inquiry into the matter. Imagine how that requirement would have affected the course of history if, in the 18th century, the great ironmasters could not have built their bridge without reference to a higher authority.

In saying these things, I am not alone. Boris Yeltsin is on record this week as saying, when asked what role he foresaw for the President of the Soviet Union: he should concern himself with defence, foreign policy and other nationwide programmes". On the basis of his dramatic experience in eastern Europe, he feels that enough is enough, and wishes to see institutions restored to a lower level of democratic decision making.

If we fail to understand and to manage the principle of subsidiarity, inevitably the bureaucracies will continue to burgeon. As we all know, once they are created it is difficult to get rid of them. There will be an insatiable appetite for cash, with the concomitant waste and fraud.

Page 14 of the report mentions "doubling of the funds for regional aid" in Delors stage 1. My hon. Friend the Member for Stroud (Mr. Knapman) mentioned in an earlier intervention that the Community budget is proposed to increase by 13 per cent. in the next year. We should beware the political damage that failing to manage subsidiarity would do the Conservative party. We run the risk of perpetuating many of the socialist principles to which we are opposed.

Structural funds may, by their very nature, contradict the principle of subsidiarity. It is clear from the papers before us that the decisions are made remotely and arbitrarily. Such funds may also be a negation of that most attractive and practical feature of the Community—the single, free market, with all the physical, technical and fiscal barriers removed. It is from that free market that Conservative Members believe that the benefits to all member nations of the Community will inevitably flow. I feel strongly that, with the United Kingdom's balance of payments deficit with the European Community at a record level, and given that we are a major contributor to the European Community budget, it is time for us to consider that charity begins at home.

I seldom agree with the hon. Member for Bradford, South (Mr. Cryer), but I agree that it might be a more economical, sensible and intelligible policy, instead of remitting money from this country to Brussels, to pay it from our national Exchequer to those who will be spending it in this country. There is much evidence of tax churning. I am fond of quoting the example of the roundabout on the A454 in my constituency, which proudly bears a placard reading Partly financed by the European Community". That says it all in terms of funding, and it also says a good deal about subsidiarity: again, it negates the principle of subsidiarity. The decisions are not being made in this country, but are being delegated to the European Community, and in many cases we are having to accept arbitrary decisions.

Whether we like it or not, we must ask why we—through the medium of the European Community structural funds—subsidise our competitors. Why do we remit moneys to Brussels that might, for example, be used to build an autostrada from Calabria across France to Calais to speed the cabbages on their way to Coventry, at a time when the industrialists of the west midlands have not the facility of an equal road transport network to the ports at Felixstowe and Southampton?

I venture to suggest that we are now facing a similar dilemma in our attitude to the channel tunnel. On the continent, great efforts are being made to improve the rail network to the channel tunnel, while we continue to argue the toss. There is a good case that any moneys that we have would be better spent at home on such projects rather than in the countries of southern Europe.

The new buzz word "subsidiarity" has sometimes been used quite irresponsibly. It has been used to legitimise some of the worst features of the European Community and to disguise some of them from the British electorate. In many ways, it is a deception. My right hon. and hon. Friends must beware of selling the pass. Subsidiarity could be the Trojan horse for a centralist Europe.

9.11 pm

Mr. Michael Irvine (Ipswich)

One of the most interesting and significant parts of the White Paper is that relating to the progress of the single European market. It is good to know that this country is leading the field in the table of measures adopted and that, behind Denmark, it is vying for second place with the Federal Republic of Germany and France as regards measures already implemented.

What angers me is the way in which our readiness to adopt, implement and comply with European directives is often overlooked by those who point the finger and accuse us of being bad Europeans, difficult partners and not having the European enterprise at heart. I was sorry to hear the right hon. Member for Manchester, Gorton (Mr. Kaufman) line up with them and accuse the Government of being far too often isolated on Community issues. It is often right to take an independent line. It is often right to ask awkward questions. The questions being asked by the Government about democratic accountability need to be addressed, not only by this House and by the other national Parliaments, but by the Community as a whole. The structures for democratic control and accountability are badly wanting.

My hon. Friend the Minister intervened to praise the quality of scrutiny by this House, but I thought that he was over-egging the pudding by a good margin. He said that our scrutiny was good and much more advanced than in most countries. My hon. Friend is entitled to his view, but I believe that the scrutiny of European legislation by this House is woefully inadequate, as regards both the hour at which we usually consider it and the quaint way in which we are invited to take note of EEC directives, all too often well after they have been decided by the Council of Ministers. I hope that the recommendations of the Select Committee on Procedure on scrutiny will be implemented speedily. Even if they are, I fear that there will still be a substantial democratic deficit.

My hon. Friend spoke also about the ability of the House to question Ministers and to hold them to account. He overlooks the fact that increasingly the situation arises of Ministers at the Dispatch Box saying, in relation to, say, fishing quotas, Sunday trading laws, seat-belt regulations for coaches, BSE, or VAT on commercial and industrial construction, "We do not like it. The situation is unsatisfactory. There is force in your criticisms—but our hands are tied." That is not what I call proper accountability.

What of the role of the House in decisions taken by the Council of Ministers? My right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs said in his opening speech that one important role of a national Parliament is to exercise democratic control over the Council of Ministers. He overlooks the fact that the Council meets behind closed doors and that the bargaining and making of compromises that goes on behind them is not open to the scrutiny of national Parliaments. My right hon. Friend also overlooks the fact that an increasing number of the Council's decisions are taken by majority voting. In relation to majority decisions, the democratic control of our Parliament at Westminster is non-existent.

It does not end there. There are other major flaws in the Community's structure of democratic control and accountability. Too much power is in the hands of the Commission in relation to its monopoly on the intiation of legislation. That co-exists with wholly inadequate machinery for policing and enforcing that legislation. In the face of such weaknesses and shortcomings in the system of democratic control, scrutiny and accountability, would not it be better for the countries of the Community to concentrate on dealing with them before rushing on to the ambitious and grandiose schemes that so bedazzle the Commission and some European politicians?

It seems sometimes that we are confronted by a helter-skelter dash towards the horizon, with unrealistic demands for a rush forward to full economic and monetary union coupled with high-flown talk about political union. That high-flown talk has dangers for the Community. If such a helter-skelter dash towards unreal goals is pursued, the Community will hit trouble. If it assumes control over vast areas of our economic, political and social life without proper systems of democratic control and accountability, it will lose touch with the people. Somewhere along that line, the raw nerve of British nationalism—and of other nationalisms, too—will be touched. That could all too easily damage the Community and put its development into reverse.

One need only look east to the Soviet Union to see just how rapidly a centrally controlled, over-bureaucratic and undemocratic union of nations can unravel—which is why I believe that the cautious and pragmatic approach of the British Government to Community issues is, by and large, wise and sensible. Better to be isolated but right, better to ask the awkward questions, and better to adopt a pragmatic attitude than rush forward heedless of the need for democratic scrutiny and accountability.

Our parliamentary traditions fit Britain particularly well for that sceptical but profoundly necessary role. It is a role that we should not be ashamed to undertake.

9.19 pm

Mr. George Robertson (Hamilton)

This has been an interesting and wide-ranging debate and it vindicates the decision that it should be an opportunity for looking forward, especially to the European Council meeting in a fortnight, as well as back to a period in the European Community's history which ended some six months ago. We have heard some remarkable speeches. My hon. Friend the Member for Durham, North (Mr. Radice) took a constructive role, and although I did not agree with everything that my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) said—we spar here and in other Rooms in the House—he made a valuable contribution to a debate which is only partially completed.

My hon. Friend the Member for Linlithgow (Mr. Dalyell) made a remarkable speech by any standards, which was fully within the rules of order, and was a test of the Hansard stenographers' skills which, if they passed, should be the subject of an award.

We look forward to the European Council meeting with interest and, no doubt, trepidation. Two items above all others will dominate that meeting. One is European monetary union and the other is the debate on political union, and the now virtual certainty that another intergovernmental conference on that subject will be set up. Hon. Members have mentioned that this evening.

The hon. Member for Wolverhampton, South-West (Mr. Budgen) gave us his usual entertaining, if dissident, view on the matter, which I am sure will have been listened to with the same care as he is always listened to.

Hon. Members who come to such debates have an eternal sense of déà vu. The right hon. Member for Guildford (Mr. Howell), the chairman of the Select Committee on Foreign Affairs, made his speech. The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) has made his speech so often that they gave him a knighthood for it. The world moves on—the Berlin wall has come down, democracy has come to most countries in eastern Europe—but sadly, we still seem to be making the same speeches. However, we move on to the Dublin summit. What is our stance on the great issues which will be the subject of decisions there?

Stage 1 of the Delors report, whatever we say about stages 2 and 3, which I shall come to in a minute, implies full membership of the existing exchange rate mechanism. The Government committed themselves at the Madrid summit, under the skilful tutelage of the then new Foreign Secretary, to full compliance with stage 1, a condition which has still not been satisfied. Perceptive people who read the press with great care will notice that a variety of personalities within the Government are slowly beginning to change the rules so that humble pie can be consumed in larger and larger quantities—to use the analogy of' the hon. Member for Wolverhampton, South-West.

Last week, the Chancellor of the Exchequer—the former Foreign Secretary—said that the yardstick for inflation would no longer be the retail price index, by which inflation has been measured for many years, but the underlying rate of inflation. We are beginning to realise that the measurement of inflation will be subjected to exactly the same test as the measurement of unemployment—during the 11 years of office of the present Government, its calculation has been changed 19 times. Of course, we shall not embark upon a process to prove that inflation is not 9.4 per cent., but is probably about 2 per cent., and should therefore be in the record books rather than the bank books. The tragedy is that it produces chaos in the City, which is in a permanent ferment as rumours about joining, not joining or being about to join the ERM, sweep in and out every second day, like garbage on the tide.

The Government display even more disarray over the question of political union or, as Mr. Jacques Delors redefined it, the political dimension of the Community. It is grandly known as European political union, but even that title appears to have disappeared at Foreign Ministers' meetings.

Last week, the Secretary of State for Trade and Industry took a little time off from supervising the economic miracle that we are experiencing to speak to the Bruges group. That group is an important component of the Conservative party, but clearly it is having a night out since all its leading personalities seem to have abandoned the debate. It is about the only thing that distinguishes this debate from most of the other Community debates. Perhaps the Secretary of State for Trade and Industry is addressing the Bruges group again tonight.

He said on that occasion that others should not be hustled at breakneck speed, let alone presented with a fait accompli and a direction in which they may not want to go—a direction which could be inward-looking and closed. He also said that how far individual member states wished to travel along the road of monetary and political union would be for them to decide. He articulated a two-speed Europe. The Secretary of State for Trade and Industry was, suitably, in the second-speed group.

It is sad that my right hon. Friend the Member for Bethnal Green and Stepney endorsed, even if it was only a limited endorsement, the views of the Secretary of State for Trade and Industry. On Friday night, the deputy Prime Minister and Lord President of the Council made a speech to an audience at the London School of Economics—one of the most appropriate audiences that one could find—and said, "We want to be inside, not outside." He also said that Britain did not want to be like Austria, in having frequently to respond to patterns set by the Twelve. A Sunday newspaper said, rightly, that that shows that there is a major split on a fundamental issue two weeks before the Dublin summit. It is a matter of acute importance inside the Cabinet. Is it the Secretary of State for Trade and Industry who speaks for the Government, or is it the former Foreign Secretary, now the deputy Prime Minister? I am sure that the public would like to know.

According to the Government's response to the report of the Select Committee on Foreign Affairs, they have no difficulty in contemplating a further round of institutional reform, which would have an effect similar to that of the Single European Act. They implied that they would put forward constructive proposals. We await them with great interest. There have been only a few hints so far, including making the European Parliament into a glorified Public Accounts Committee, strengthening the European Court of Justice and beginning a massive crackdown on fraud, as well as a crackdown on the European Commission. The Foreign Secretary referred to a crackdown on the European Commission only this afternoon.

Mr. Jacques Delors's term of office—Mr. Delors is as popular within the Conservative party as the deputy Prime Minister—finishes at the end of this year. It is up for renewal. I hope that the Minister of State will consult his boss before he responds to the debate and will tell us whether the British Government intend to vote for an extension of Mr. Delors' term of office. Many people, including Mr. Delors, would like an answer to that question.

These are all commendable suggestions and we agree with most of them, but they tinker with the problem and are an insufficient response to the drift away from accountability, political and economic, which has occurred as the Community has taken on more and more competences.

I venture to suggest that the package will be seen for what it is—simply a smooth cosmetic cover designed by the Foreign Secretary for a book entitled "No Way" written by the Prime Minister in her own blunt Bruges words. In contrast, the Labour party has set out its agenda for a deeper, wider, more accountable and more relevant Community. We strongly support enlargement of the Community to Austria, Norway, Switzerland and other countries. We believe in extending the majority voting in the Council of Ministers to environmental and social issues.

Mr. Spearing

My hon. Friend is referring to the Labour party document, "Looking to the Future". Does he agree that certain procedures have to be gone through before that document is distinctly party policy? It may be agreed, but it is not yet de jure.

Mr. Robertson

Neither my hon. Friend nor I are Members of the national executive committee, an exalted group of people. I understand that no vote has taken place on the measures to which I am referring, and although they clearly have to be passed at the annual Labour party conference in October, the sizeable majority that was achieved in favour of the entire document allows me to assume in the interim that they represent the views of the party. Unlike the Tory party, the Labour party votes on party policy.

We believe that the European Parliament's cooperative procedures should be extended and that the European Parliament, subject always to the final decision by the Council of Minister, should have powers to initiate legislation. We believe that the social charter is an essential practical part of concluding the single European market and that Europewide policies to protect the environment are urgent and necessary.

Mr. Budgen

Will the hon. Gentleman be good enough to tell the House whether the Labour party is excited by the progressive new proposals in the Delors report for a massive extension of the regional and social fund? There must be much for Labour in that.

Mr. Robertson

We believe that part of the development of the single European market must be a robust social and regional fund to provide a proper balance in the development of that market. It is no secret; it is in our document. All that the hon. Gentleman need do is purchase a copy and the answers will all be there.

We believe that real accountability in national Parliaments for EC decisions is a fundamental part of developing the Community and we must start here in the House. The feeble suggestions from the Government in response to the Procedure Committee go no way towards giving Parliament back the right to hold Ministers accountable. The hon. Member for Ipswich (Mr. Irvine) made a valuable point in drawing attention to the way in which power has been allowed to drift away from the House. I fear that the dilution of the Procedure Committee's own diluted recommendations will give precious little back to the House of Commons by way of holding Ministers of the Crown accountable for that huge area of policy.

Mr. Shore

It is not just a matter of the drifting away of power; it is the positive transfer of power and precisely what is centrally involved in the proposals for economic and monetary union. My hon. Friend has said a number of things that the Labour party apparently believes in, but will he make it plain that the Labour party does not accept or subscribe to any commitment to permanently fixed exchange rates between the pound and other currencies? Will he give me that reassurance?

Mr. Robertson

I refer my right hon. Friend to the document, "Looking to the Future", adopted by the Labour party national executive committee, which gives definitive answers to the points that he makes. It says: Given the effect of the Single Market, and Britain's likely participation in the ERM, closer co-operation on monetary policy between the EC countries is both inevitable and desirable. But we would oppose the proposals for an all-powerful, but unaccountable European Central Bank, as outlined in the Delors plan for Economic and Monetary Union—just as we would not advocate an independent Bank of England. As the central banks of the EC countries gain experience of working more closely together, with Britain as a full member of the ERM, it may be that the need for a new institution will emerge. But any new European system of central banks must be politically accountable. I can only say to my right hon. Friend——

Mr. Budgen

Will the hon. Gentleman give way?

Mr. Speaker

Order. The hon. Gentleman cannot intervene in the answer to an intervention.

Mr. Robertson

—that if he wants any expansion of that statement he should consult my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) who, I am sure, will be glad to give him whatever information he has.

The Government's policy, as outlined in the report to which I referred, contrasts with the positive programme put forward by the Labour party. The Government talk green but they sent the Secretary of State for the Environment to the Environment Council last week to weaken curbs on carbon dioxide. The Government preach that the single market, to quote the glossy documentation published by the Department of Employment, entitled "The United Kingdom in Europe: People, Jobs and Progress": is not a charter for business alone. It is for people, essential if their quality of life is to improve. The Government also say in response to the Select Committee on Foreign Affairs report: There should be fair competition and a level playing field across the Community (which requires proper enforcement). But at the same time they stubbornly and ideologically oppose the action programme and the social charter.

The Government's document also says: Training for skills and jobs is vital … we cannot afford our workforce to be undertrained and undereducated compared to our competitors. In that respect, I draw to your attention, Mr. Speaker, and that of the House, a speech by the hon. Member for Buckingham (Mr. Walden) which should be read by every Conservative Member of Parliament. I have chosen three quotations from it: We have a large and skilled army on the Rhine and an army of semi-literate unemployables at home. We have well-equipped forces to help us win wars which seem increasingly unlikely to happen, while we strive to win contracts with an under-skilled and under-educated workforce … When it comes to staffing our Embassies abroad, we are highly selective. Only the best will do. [Interruption.] I welcome the author, and take him back to his speech last Thursday when he said: In stalling our schoolrooms, we take on anyone who is willing to do the job … The Victorian staircase of the Foreign Office is expensively re-gilded to delight the eye of foreign Ambassadors, while our shabby schools are administered from a squalid sixties building on the wrong side of the river. Those are not the words of a Labour Member of Parliament but of the former Minister with responsibility for higher education in the Prime Minister's Government, and I pay tribute to what he said.

Mr. George Walden (Buckingham)

I apologise for coming in halfway through the hon. Gentleman's speech. I sense that he may be quoting me just a trifle out of context. At the end of my speech I made the important point—at least it seemed important to me—that I would not spend a single penny on the current education system without insisting on quality in return for every penny. That is the crucial difference between my position and that of the Labour party. It would throw money at the system for no quality in return.

Mr. Robertson

Clearly, the Prime Minister has shaken the hon. Gentleman warmly by the hand in recognition of his sympathetic views. He may choose to disagree about the prescription, but his diagnosis is in stark relief to the expensive, cosmetic propaganda of the Department of the Environment about the quality of our education and trained labour force. He is closer to the mark than the propaganda.

This is a stirring time for European unity. On a continent where the east has dramatically and fortuitously opened up after 40 years of sterile oppression, the Community is a role model of non-coercive economic and political co-operation. As such, it offers and must be allowed to offer, an example and an eventual home for those countries which have been brought back to democracy and a mixed economy by their people. The Community must develop in a balanced way, thinking of ecology as well as economy, of workers as well as business and of controls on speculation as well as freedom of movement for capital. It must be a Community concerned with the substance of that which concerns the citizens of Europe—their education, housing, jobs and environment —and not just with the constant creation of money and movement of business men.

Whether we like it or loathe it, whether we welcome it or revile it, many contemporary forces have become European by circumstance or by the decision of free people. It is our duty to ensure that the decisions which ensure from that reflect the will of our people and that democratic accountability follows the sharing of political power. If we do that in the European Community, it has a future of enormous potential.

9.41 pm

The Minister of State, Foreign and Commonwealth Office (Mr. Francis Maude)

This is the third of the traditional six-monthly debates on the European Community, in which I have had the pleasure of participating. I do not know whether that qualifies me as a veteran, but I certainly feel like one. I sympathise with hon. Members when they say that there tends to be a hint of déjà vu about these debates.

Our debate in November last year was perhaps rather special. It took place in the days immediately following the breaching of the Berlin wall. Several hon. Members ranged free and cast their mind into the past with a sense of history and into the future with a sense of prescience, which was illuminating for the House. Today we may have reverted to the more traditional pattern, but nevertheless, there have been some fascinating innovations. The speech of the hon. Member for Linlithgow (Mr. Dalyell) will live with us for some time. I hope that he will forgive me if I do not respond in detail to his remarks. They deserve a detailed response. I can reaffirm what my right hon. Friend the Foreign Secretary said at the outset: the hon. Gentleman shall have an answer, but not from me tonight. Certainly, his anxieties will be properly considered.

Another traditional and welcome feature was the distinguished and distinctive speech of my right hon. Friend the Member for Guildford (Mr. Howell). He speaks with the authority which he carries naturally and with the authority of the Chairman of the Foreign Affairs Select Committee, whose illuminating report we have before us. The right hon. Member for Bethnal Green and Stepney (Mr. Shore) argued intensely, with great knowledge and some wisdom. That, too, enlightened our debate. Further speeches were made by my hon. Friend the Member for Nottingham, East (Mr. Knowles), the hon. Member for Durham, North (Mr. Radice) and, most especially, by my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen). He argued persuasively that he did not need to be lectured to by a junior economist. In those circumstances I am sure that he will forgive a junior Minister for failing to lecture him as well.

My hon. Friend the Member for Amber Valley (Mr. Oppenheim) spoke powerfully about his concern at the way in which European Community trade policy sometimes operates. I assure him that the concerns that he has about the methodology applied in anti-dumping cases has been a matter of concern to us and we shall continue to raise them where appropriate. I can reassure my hon. Friend on some of the specific points that he raised. Considerable progress has been made on road haulage and qualified majority voting has enabled us to get some liberalising measures through against protectionist resistance by some of our partners.

My hon. Friend the Member for Wolverhampton, South-West and others talked about fraud, which must be a matter for continuing concern. The Court of Auditors' recent report was welcome, thorough and good. It is essential to combat waste and fraud involving Community money. For some time we have pressed for more effective anti-fraud measures. My hon. Friend the Member for Harrow, East (Mr. Dykes), who expressed to me his regret that he would be unable to remain for the entire debate, wondered whether my right hon. Friend the Foreign Secretary has dealt with fraud in his speech. My right hon. Friend urged an important institutional step, the strengthening of the capacity of the European Parliament in effect to enable its budgetary control committee to replicate our Public Accounts Committee, which is so effective.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) particularly raised the issue of cross-frontier co-operation. When one listens to him one occasionally gets the impression that he feels that it is wrong to resist any proposal that is made in Brussels. One gets the impression that he feels that as soon as a proposition is made by the European Commission, the other 11 member states immediately sign up and say, "Yes please, we must have that because it is European." I assure him that they do not. There are many lively discussions in Brussels and the number of times that we are isolated is small. We have extremely good arguments and we win most of them. The number of times that we are in the minority and are out-voted is tiny.

The hon. Gentleman queried our assertion that we have led in cross-frontier co-operation. Our role has been particularly effectively in, for example, the Trevi group on co-operation on police liaison and we chaired the expert working group on customs co-operation fighting to control drugs traffic. We have also introduced the single immigration channel for all EC nationals. That is a more forward step than those in many other member states and Heathrow airport is far quicker than Brussels.

They are important moves. Nothing dramatic and no great ideals have been expressed, but they are useful measures that make the lives of our citizens better in some relatively minor ways.

Mrs. Dunwoody

Last week in the debate on children I said that in 1992 there will be few restrictions on the admission of pornography that particularly affects children. It would not be helpful if the Government did not take an active part in forthcoming debates to ensure that our adequate Customs and Excise laws are not thrown over in some spurious attempt to create a European ideal.

Mr. Maude

The hon. Lady is right to point out that there will always be some matters that our citizens require us to take seriously, in terms of restricting access. The treaty of Rome gives us the power to restrict access for reasons of public morality and we shall certainly not hesitate to use it if appropriate. The hon. Lady says that we should be in there arguing our corner fiercely. I assure her that we shall, but sometimes one is faced by a dichotomy of argument. There are those who say that one must not resist measures and be an awkward member of the Community. The same people frequently say that one must not stand on the outside; one must be involved. Frankly, being involved quite often means arguing our corner fiercely and making our case heard.

Sir Russell Johnston

All that I said was that one could not at one and the same time claim to be in the lead on cross-frontier co-operation, when the Schengen agreement allows free access. That is a contradiction.

Mr. Maude

It is not a contradiction. Our citizens require sensible relaxations in frontier crossings to protect their interests and make their lives easier when crossing the frontiers, and to protect their safety. That is what we do. The hon. Gentleman must understand that the Schengen group, who were talking about land frontiers between them, are in a wholly different category from us and a number of others with similar concerns about such measures.

The issue of German unification was raised by several hon. Members. It is important that it should be fully considered by the Community in the coming months. It is important that there should be full assimilation and that European Community law should be applied to the German Democratic Republic as soon as possible. This morning I heard from the Minister for Economics of the GDR in Berlin that that was the intention of the GDR, which is good news.

Eastern Europe is another theme that floated through the debate. There is a sophisticated programme of support from the Community, with a range of trade and co-operation agreements being revitalised, and association agreements coming forward during the next few months to enrich the relationship between the reforming countries and the Community. Of particular significance to us is the decision to locate the European bank for reconstruction and development in London, thus decisively confirming London's position as the financial centre of Europe. It is important that, as the major source of finance, it should have—as its articles require—a heavy emphasis on the private sector. It is equally important that economic reforms in the countries that will benefit should proceed apace to allow free enterprise to bring the benefits that have been brought elsewhere.

Reference has been made to some of the countries of the European Free Trade Association. The House will know that discussions are proceeding to develop what has become known as the European economic area. We regard that as an important move that will create, if it succeeds, a single market of 360 million people, bigger than Japan and the United States combined. The achievement of that large area will be beneficial to us and the EFTA countries that sign the agreement. As is widely recognised by the EFTA countries, it could also be no more than an intermediate stage towards full accession as members. When talking to colleagues in Scandinavian countries recently, I found that there was a strong feeling that full application could be contemplated before long.

I do not think that there was any dissent among hon. Members that the Community should be ready to envisage a further widening and enlargement of the Community. It is difficult to contemplate that, at the end of this century, the Community will still be a Community of 12. When it started in the late 1950s the Community comprised no more than one third of Europe; it is now perhaps one half of Europe. None of us believes that its founders intended that it should remain so for ever. There is a strong belief that we should eventually move towards widening the community, but we must also deepen it, and do so quickly.

Much emphasis in the debate has been on economic and monetary union. I had the pleasure of winding up the full-day debate on that subject in November last year. I found it most interesting and enjoyable. I am pleased that on this occasion I can leave the pleasure of giving the Government's view to my hon. Friend the Financial Secretary to the Treasury, who will contribute to the debate on this subject on Friday.

Mr. Shore

The House will be very disappointed if the Minister does not address himself not to the technicalities of European monetary union but to the essential political objectives. Differing emphases have been expressed on the Government's commitment to economic and monetary union—particularly under stages 2 and 3—and I gave the Minister long notice of my direct question about it. Will he repeat the assurance given by the Prime Minister on 1 May, that we are and will remain opposed to locked, permanent exchange rates in EMU and equally opposed to the setting up of a central bank to control the monetary policies of the whole European Community? That is what the right hon. Lady told us on 1 May; I hope that the hon. Gentleman will endorse it tonight.

Mr. Maude

What was said by the Prime Minister five weeks ago certainly needs no reinforcing by me—[Interruption.] I have nothing to add to or subtract from what she said, but if the right hon. Gentleman wants to have another attempt, I invite him to come along on Friday and try with my hon. Friend the Financial Secretary to the Treasury.

Several hon. Members have spoken about what has become popularly known as political union. These debates about the future shape of the Community are wide ranging. None of us argues that the Community is perfect. It is a unique structure. It may not be a federal structure; it may not be a confederation. It is a model based on co-operation between nation states in which the right of decision making is ceded voluntarily. Further cessions of decision-making power cannot be forced, and when there is cession it can be revoked. Concessions on decision making have been made in the past out of hard-headed calculation of national interest, both by us and by other member states. I assure the House that subsequent decisions will be taken on the same basis. Treaty changes can be made only by unanimity and there can be no question of our being forced into changes to which we object.

The present debate, therefore, is not about radical restructuring: it is about practical changes to make the European Community more effective, and it includes the subject of subsidiarity, about which my hon. Friend the Member for Ludlow (Mr. Gill) spoke. He was right to say that it can be a snare and a delusion if it is not handled properly. We shall make sure that it is handled properly and used in a way that tends to decentralise decision making in the Community. My hon. Friend is right to say that it alerts us to the inherent tedency in organisations of this type for decision making to migrate to the centre. That must be resisted and what we propose will help to resist it.

There are some lessons for us to learn from what is happening in eastern and central Europe. There, we see countries that are rediscovering their nationhood—their sense of national identity. They are painfully and painstakingly developing autonomous national policies and rejecting centralised control, state intervention and the parasitic bureaucracies that have damaged them for so long.

The most important aspect of integration at the moment is the single market. I was sorry to hear the right hon. Member for Manchester, Gorton (Mr. Kaufman) sneering at it. That showed that the Labour party has never understood the single market—or markets in general. It has never liked or trusted them. When the right hon. Gentleman referred to our priorities and to those of the wider Community—financial services, insurance, transport—he called them an adventure playground for financial institutions. The fact that neither he nor the Labour party has understood is that markets do not exist to benefit producers; they are there to benefit consumers.

Airlines are not hurt by the present arrangements by which cartels keep air fares high. It is the customers—the passengers—who suffer. It is the constituents of Opposition Members and of my hon. Friends who suffer, and it is they whom we seek to benefit by driving through these improvements. Similarly, it is not the German insurance companies that are hurt by the German restrictions on where German customers can buy their policies; it is the citizens themselves. If we are serious about creating a citizens' Europe—a people's Europe—we must drive the single market forward and widen and open the market.

That is where the concept of a "social Europe" comes in. It is about increasing standards of living and increasing the prospects of our citizens. That is what we shall continue to argue for forthrightly and plainly and we are winning the argument. We have decisively changed the way in which the European Community is oriented. We shall continue to win those arguments.

Question put and agreed to.

Resolved, That this House takes note of the White Paper on Developments in the European Community (July—December 1989) (Cm. 1023).

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