HC Deb 02 July 1992 vol 210 cc976-1059

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Boswell.]

[Relevant documents: European Community Documents Nos. 10962/89 + ADD1, relating to Turkey's application for membership, 7867/91, relating to Austria's application for membership, 9497/91, relating to higher education in the Community, and the unnumbered Explanatory Memorandum submitted by the Foreign and Commonwealth Office on 28th February 1992, relating to the Commission's programme for 1992.]

Madam Speaker There is a great deal of interest in the debate so I have to limit speeches to 10 minutes between 7 pm and 9 pm. Would those who speak outside that time please exercise voluntary restraint in fairness to others?

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

Before I turn to the internal affairs of the Community, perhaps I could say something about the tragedy outside the Community's borders which, on present showing, is likely to take up more of the time of the Foreign Office during our presidency than any other single matter.

I am not particularly optimistic about the next six months in Yugoslavia. The way in which the country has disintegrated is clearly a disaster for its people. The peoples of Yugoslavia could not be held together by force, and the attempt to keep something together by consent was wrecked. The result is the unleashing of destructive hatred on a scale which will not be easily or quickly checked. It certainly cannot be halted from outside.

However, we must go on trying. I shall discuss the means of doing so in a moment. It would be wrong in my experience to suppose that this would best be done in the old-fashioned way, with Britain, France, Germany, Italy and so on choosing their clients and backing them against each other. It must be right to work out, through discussion and argument, the most concerted approach possible of the Twelve. That task falls to the presidency.

Yugoslavia had been teetering on the brink of crisis for some years before the unilateral declarations of independence a year ago by Slovenia and Croatia. That brought tension to a new pitch. Before last summer, it was my hope that the republics could establish new patterns of co-operation—a Yugoslavia by consent.

The ethnic picture is too complicated to allow a neat division of the territory. Almost one in five marriages are across ethnic lines. The republics are a mosaic of different groups. Towns, villages and even apartment blocks are mixed. The economies of the six republics are too closely intertwined to allow for a quick divorce. Their main lines of communication lie through each other's territories.

Although it was clearly right to hope for a Yugoslavia by consent, during last summer and autumn that hope faded. Still we sought a general settlement which dealt with the legitimate interests of all the peoples of Yugoslavia and did not single out particular cases. Then we said that, under certain conditions, we would recognise individual republics. In mid-January, the Twelve recognised Croatia and Slovenia. The timing will continue to be a matter of discussion. Some say that we acted too hastily. Most Opposition Members still hold that view. Some say that we did not act fast enough. Left to themselves, the Germans would have recognised them a good deal earlier than the British, and the French somewhat later.

Looking back, we see that there was never an ideal moment in the crisis when such action could have had a decisive influence on bringing about a painless peace. That has taught us a lesson that we must remember: we have to recognise the limits of what outsiders can do. Such developments do not yield too easily to external influences or logic, because history, hatred and revenge remain powerful. Local leaders do not respond readily, even to neighbours who are their nominal superiors. The brokering of agreements entails showing several awkward and reluctant people simultaneously that their interests will be best served by compromise.

We can have a part in trying to achieve such compromises. The two previous presidencies, the Dutch and the Portuguese, have followed a twin-track policy that we shall continue. The United Nations is responsible for peacekeeping. The Community has a general remit from the conference on security and co-operation in Europe to try to make peace.

We have a dual role as president of the Council of Ministers and a permanent member of the Security Council. I hope that that will make it a little easier to co-ordinate action between the United Nations and the EC—I was covering such matters at lunch with the Secretary-General of the United Nations in an attempt to do just that.

Mr. Tony Banks (Newham, North-West)

Is it not a great tragedy that it has taken the United States to send forces into the region, when that should have been a matter for the European Community? Surely, if the Serbian irregulars in the hills around Sarajevo start lobbing bombs and mortars into that city, we should give those irregulars an ultimatum: if they do not cease their action, Western European Union military forces under United Nations jurisdiction should be used to destroy the batteries in the hills around Sarajevo.

Mr. Hurd

I shall come to that issue, but it is much easier to propose such an operation than to carry it out, and a great deal easier to start it than to bring it to a successful end.

The Community has two main pieces of machinery available. The first is Lord Carrington's conference and its sub-committees, which we shall reinforce during our presidency. We owe a considerable debt to Lord Carrington, who has no personal motive in taking on the thankless task towards the end of his distinguished public career. He is flying to Sarajevo again tomorrow in another attempt to bring together and suggest solutions to leaders in that country.

The second piece of machinery, which is much less well know, is the EC monitoring Mission. In the coming weeks, I shall try to ensure that what it does is better understood, as its staff, who operate locally, are in many ways the unsung heroes of the conflict. They are young men and women who defuse local tensions and keep peace between villages in Croatia. The conference deals with large-scale political problems, and the monitors deal with the local, but potentially just as explosive, issues.

There has been considerable investment in both equipment and manpower. We now have 55 staff at the Mission, and 15 rank-and-file monitors who are retired service officers are on contract to the Foreign Office. There is also a 40-strong headquarters staff, of whom 10 are FCO officials and 30 are service officers. We have just appointed Mr. Ramsay Melhuish, formerly our ambassador in Bangkok, to lead the Mission, supported by General David Cranston. I hope that, as the House learns more of what those at the mission are doing on behalf of peace in Yugoslavia, it will give them increasing recognition and support in their difficult and dangerous work.

Mr. Robert N. Wareing (Liverpool, West Derby)

I accept what the Foreign Secretary says about Lord Carrington and the work of the monitors, some of whom I met in Croatia. I am disturbed that, during the six months of our presidency, there may well be a recurrence of violence in Croatia, not only in Bosnia-Herzegovina. It is essential that great pressure should be exerted on President Tudjman, as he does not have a good reputation, and the human rights record in Croatia is not strong. The people who live in Krajina, who are mainly Serbs, are denied Croatian citizenship. Although it is right to sanction Serbia, it is equally right to put the utmost possible pressure on the Croatians.

Mr. Hurd

I agree that it is certainly important to keep up the positive pressure on President Tudjman in Croatia.

Mr. David Winnick (Walsall, North)


Mr. Hurd

I shall give way to the hon. Gentleman, but then I should like to get on.

Mr. Winnick

To avoid any misunderstanding arising from the intervention by my hon. Friend the Member for Newham, North-West (Mr. Banks), is the Foreign Secretary aware that there is bound to be considerable support for the humanitarian measures that he mentioned, such as the airlift and monitoring, but there is no support in the House or in the country for military intervention on a large scale, or of any kind, with the possible repercussions of getting bogged down in a civil war? Can the Foreign Secretary assure the House that, if there is any question of such intervention during the long summer recess, the House will be recalled? The Government would need the authority of the House to follow that course, and I hope that they will not embark on it.

Mr. Hurd

The hon. Member's point has general support in the House. I have certainly found that to be the case in all the questions and supplementary questions that I have answered on the subject. I have no plans for, and I do not think that there is any likelihood of our wishing to propose, the intervention of British ground troops in a hostile situation.

The UN protection force is nearly fully deployed in its three areas of responsibility in Croatia, and, as the hon. Member for Walsall, North (Mr. Winnick) knows, it includes a British field ambulance team of nearly 300—men which is why I chose my words carefully—who are deployed there for medical help. UNPROFOR will shortly have a Canadian battalion at Sarajevo airport. It has done a good job of partially reopening the airport for relief supplies.

I have just checked and the latest situation gives some grounds for optimism. President Mitterrand's brave flight to the city has helped to create a chance, and the international community must now establish itself in charge of Sarajevo airport. Obviously control of the airport is vital if relief supplies are to get in.

I am sorry that the hon. Member for Workington (Mr. Campbell-Savours) should think that it is demeaning to the House if, as the Secretary of State responsible for overseas aid, I give the Government's views on such matters rather than my noble Friend Baroness Chalker, who is in charge of the Overseas Development Administration. Despite his disapproval, let me do so.

The humanitarian situation is our first concern. The UN High Commissioner for Refugees is establishing the needs of the Bosnians quickly and accurately. Now that the airport is temporarily open and in the hands of the UN, experts will be able to assess exactly what is needed and to order supplies such as baby foods, basic foodstuffs and medicines and distribute them through the four depots which have already been identified in the city centre.

As from today, our aircraft are taking part in the international effort under UN auspices. They held back at the specific request of the UN, which did not want a flow of unco-ordinated aircraft into the airport which was imperfectly controlled. For the moment that has been resolved and our Hercules planes are beginning to fly, first to Zagreb and then, as part of the co-ordinated effort, to Sarajevo. This is in addition to the £9.7 million that we British have provided, in different ways, for humanitarian relief in Yugoslavia.

Mr. D. N. Campbell-Savours (Workington)

May I clarify the position? None of us wants military intervention. Is the Foreign Secretary ruling out air cover for supplies provided to Sarajevo in Hercules transport planes which might be at risk?

Mr. Hurd

There are no plans for that, but that was not covered by my remarks, which were in answer to a question about ground troops. There is no plan for that because the humanitarian effort is unresisted. There is a certain amount of firing, but there are clearly no attacks on those bringing relief supplies or on the Canadians guarding the airport.

If that situation were to change, I am sure that the Security Council would want to consider the matter and perhaps consider a new resolution—but that is all ifs. At the moment the situation is as I have said.

What can we realistically hope to achieve in six months? In the best case, we could succeed during our presidency in bringing about a ceasefire which lasts in Bosnia, keeping the ceasefire in Croatia, reducing the tension in Kosovo, which I have not talked about but which one of my hon. Friends asked me about yesterday, brokering a settlement between the former Yugoslavia republic of Macedonia and Greece, and getting all the main parties closer to a general settlement. But, as I have said, I am not optimistic, because one can see further tragedies waiting to happen: renewed fighting in Croatia and Bosnia or an outbreak in Kosovo and continued deadlock elsewhere.

I do not believe—this is a point that I was going to make anyway—that the House would readily accept that it was right to send British troops to seek to settle by force any of these problems. The risk of that would be greater than the likely benefits. But, short of that, I am clear that we must do everything we can, and we will use all sensible means, to deal with this linked chain of crises, which is a nightmare to the peoples of Yugoslavia and a continuing reproach to Europe as a whole.

Mr. Tony Banks

Will the right hon. Gentleman give way?

Mr. Hurd

No, I will not give way to the hon. Gentleman again.

Mr. Banks


Madam Speaker

Order. The Foreign Secretary has said that he is not giving way.

Mr. Hurd

It follows from that that at all kinds of meetings in the next six months my colleagues and I will have to take the chair in discussions on Yugoslav matters. I would not be happy to do that unless I had been to the area. I have met, I suppose, most of the main protagonists in one way or another, but never in the country itself. So I intend—

Mr. Banks

On a point of order, Madam Speaker. The Secretary of State is in danger of misleading the House in respect of my comments.

Madam Speaker

Order. I do not think that we need to have any more of this this afternoon. What is the point of order for me?

Mr. Banks

The point of order is this, Madam Speaker. It has been suggested subsequently that I suggested that ground troops should be sent to that part of the old Yugoslavia around Sarajevo. I never suggested that. I referred to military forces—

Madam Speaker

Order. It seems to me that by using a point of order the hon. Gentleman has made it absolutely clear now what he did say.

Mr. Hurd

If I misunderstood what the hon. Gentleman was suggesting, I certainly apologise to him. His intervention enabled me to make the point that I wanted to make in any case.

As I was saying, because I feel that I need to have first-hand knowledge and feeling of what is going on, I plan to visit the area the week after next to get a first-hand impression of what is happening. I hope to go to as many of the Yugoslav republics as I can and also to Tirana, the capital of Albania.

There is one other international matter which will take up a good deal of time, I hope, in the first weeks of our presidency. It is the search for agreement in the Uruguay round of the general agreement on tariffs and trade. This is not just because the Uruguay round affects our own prosperity, but because it affects our ability and the ability of others to help the developing world, and it affects also their ability to help themselves.

We discuss so often in this House and in international meetings all kinds of schemes, often quite minor, to help the less well-off countries, but an agreement in the Uruguay round would dwarf all the other schemes which I have heard discussed this past year. There is an opportunity. If it is let slip, we do our own interests a disservice, but equally we do a disservice to the interests of those in the poorer parts of the world. We want to conclude the round quickly; we want to get to the finishing post, which I believe is within our reach.

We are to have a summit next week with the Group of Seven leaders at Munich. That offers us a chance to cover the last few yards. The key, as those who follow the matter know, is agreement between the European Community and the United States on a number of agriculture matters. The Community's agreement to reform the CAP may provide—could provide—the means of breakthrough. I am convinced that the remaining differences on agriculture between the EC and the United States could be resolved quickly. They are narrow in substance, because progress has been made, but they are of great political importance. That is the difficulty. But the difficulties are outweighed by the huge advantages to the whole trading world of an agreement.

At Lisbon last weekend the European Council instructed the Commission negotiators to reach an early agreement on agriculture with the United States. We welcome that. We are doing all that we can to support the Commission's efforts. We are in close touch with all our main GATT partners, including the United States.

Sir Teddy Taylor (Southend, East)

To avoid any misunderstanding, because the Government must know, are the CAP reforms likely to increase or decrease total public expenditure on agriculture within the EC?

Mr. Hurd

I do not think that they will yield any savings, but, by shifting the way in which agriculture is helped, they make it easier to reach a settlement in the GATT round, and that is the point that I am on at the moment.

Mr. Robert Hughes (Aberdeen, North)

I understand perfectly well why the Foreign Secretary has devoted a lengthy passage of his speech to Yugoslavia and I accept the importance of the GATT round, but he will not be surprised to hear that I am gravely disturbed that on external matters he has said not one word about the way in which the EC and the Foreign Ministers seek to deal with the situation in South Africa, which is equally grave. I hope that the right hon. Gentleman will say something on that before he sits down.

Mr. Hurd

I cannot deal with everything. I answered a question on South Africa at some length yesterday and the hon. Gentleman will have opportunities to press me on it if he so wishes. I would rather not be diverted on to that at present.

Mr. Tam Dalyell (Linlithgow)

Will the Foreign Secretary give way?

Mr. Hurd

No; I must get on.

Mr. Dalyell

It is not on Libya.

Mr. Hurd

I dare say that there are a number of other things that it is not on, but I shall still not give way to the hon. Gentleman, at least not for a bit. I shall give way later.

The House has had many opportunities recently, as I well know, to question Ministers about the consequences of the Danish referendum, on which I have nothing new to add today. We are in a period of pause. One uncertainty was removed by the Irish referendum and another will be settled one way or another by the French vote on 20 September. The third uncertainty is the position of the Danes.

The Danish Government cannot ratify the treaty because of the referendum result in Denmark, but neither have they told us that they will not ratify in future. Instead they hayed asked for time to consider their options. They have said that all options are open, and that is fair enough. We need to know in the autumn how they intend to proceed and how the rest of us might help. Denmark clearly cannot be coerced, nor can she be excluded. She is a member of the Community in good standing and she will take over the presidency from us on new year's day. When we know in the autumn how Denmark intends to proceed we can judge when it would be right to ask the House to proceed with the legislation needed to ratify the treaty here.

The Prime Minister has repeatedly stressed our support for the treaty that we negotiated in good faith. I am clear myself that our efforts to achieve the Community that we want, to which I am coming in a minute, need to build on ratification of the treaty rather than on its destruction.

Mrs. Margaret Ewing (Moray)

This is one of the fundamental points of how we progress post-Maastricht and post the Danish referendum. Is there any possibility whatever that the Government will be dropping the idea that there should be unanimity among all member states for the ratification process? Is the right hon. Gentleman setting a clear deadline for the middle of the autumn whereby Denmark will have to say whether it will remain a member of the Community?

Mr. Hurd

To answer the hon. Lady's second point, I am not going to be precise about timing. As to her first question, it is neither our wish not within our means to drop the requirement for unanimity in ratifying the Maastricht treaty.

The interest in Maastricht will not distract us from the rest of our programme. The completion of the single European market has long been the Government's objective, and we are nearly there. It is important to get the right single market. It must be liberal and open. Our future wealth depends on our manufacturing industries and services remaining internationally competitive. It must be right to build a home market for European firms that is larger than America and twice as large as Japan and Australasia.

The first task of our presidency is to complete as best we can the necessary legislation. There has been recent progress. The air liberalisation package agreed last week by my right hon. Friend the Secretary of State for Transport is a good one, but as one reaches the end of a process and tackles the last 10 per cent. of the single market, one reaches the most difficult issues.

We want agreement especially on road transport, energy, and medicines. We want to help to set the agenda for after 1992. The single market, once agreed, must work efficiently, and there must be effective enforcement. The key legislation must be implemented and enforced. That is why, at our suggestion, the Maastricht treaty gave the European Court of Justice the power, for the first time, to fine member states if they fail to implement the rules that they agreed.

The single market is something on which all 12 member states have basically agreed for years. The work has been in the detail. In the end there was a treaty which we all signed and which we have all, throughout the presidencies of all 12 member states, worked meticulously to implement.

In the next six months, three other matters will arise on which, in the past, Britain has pressed the Community particularly hard. At first, it was uphill on all three, but we now have strong allies. The flow of ideas is in our favour, and we can give each of the three a further push.

We want to enlarge the Community, we want the Community to practise the same self-restraint in spending that most national Governments how have to exercise, and we want to restrain the Commission's intrusiveness.

Britain has long stood for a wider Europe, starting with the EFTA countries—which will in any case be economically linked to the Community from the start of next year because of the successful negotiation of the European Economic Area. At Lisbon last weekend, we agreed that preparations for negotiations for the accession of the EFTA countries should go ahead under the British presidency. Austria, Sweden, Finalnd, and Switzerland have already applied, and Norway may follow in November. Those countries are applying to join the union set out in the Maastricht treaty.

Much preparation is needed. We must complete the mandates for the Commission to negotiate with those applicants. By the time of the European Council meeting in Edinburgh in December, we aim to have all those preparations in place—we were working that out with the Commissioner yesterday—so that negotiations can be launched as soon as future financing is settled and the Maastricht treaty is ratified. The aim is to complete negotiations during 1993 with a view to the countries that I named joining by 1995. That has for a long time been our preferred timetable. I agree that it is ambitious, but it is still realistic.

Mr. Dalyell

Has the right hon. Gentleman had time to consider the document published by the Royal Society for the Protection of Birds, "Greening Europe: the First Steps"? In particular, what consideration has been given to the EC's fifth environment action programme. "Towards Sustainability", and what progress is being made on reaching agreement and implementing it?

Mr. Hurd

If the hon. Gentleman had asked about Libya I might have replied, but I cannot reply in respect of the directive that he mentioned. However, as it is clearly an important matter, I shall write to him giving the information that we have.

We are not talking just about the EFTA countries. At Lisbon we also agreed on the importance of relations with Turkey. We have circulated to partners Britain's ideas on enhancing the relationship between the Community and Turkey. We want to discuss at the July meeting of the Foreign Affairs Council how the Community might take these ideas forward. Then we have the bids of two very friendly countries in the Mediterranean—Cyprus and Malta. Those bids have to be considered on their own merits, and we need to develop relations through the association agreements that we have. We expect the commission's opinion on Malta, and possibly its opinion on Cyprus, later this year. I am quite clear that, whatever the result of those opinions, the Community needs a new and closer relationship with Turkey, Malta and Cyprus —a relationship which does not close the door on eventual accession and which. meanwhile, strengthens the practical links.

Then there are the new democracies in central Europe. We should like the Community, by the turn of the century, to embrace those democracies also. The Community is a pole of attraction for all these countries, and at Lisbon the partners endorsed our view that the Community should continue to build its relationships, particularly with Poland, Hungary and Czechoslovakia. whether or not Czechoslovakia divides itself. Agreements with the countries that I have just mentioned have already been signed. They need to be carried through quickly and effectively, particularly the provisions on the liberalisation of trade. We want to conclude similar association agreements with Bulgaria and Romania. and we want to enhance trade and co-operation agreements with Russia and the other main states of the former Soviet Union.

Mr. Hugh Dykes (Harrow, East)

While I apologise for introducing yet another burdensome subject for an already overloaded presidency, may I ask my right hon. Friend whether, during this presidency or perhaps next year, we could make a start on the thorny subject of trying to reduce the number of working languages in the Community to three or four? This is especially important in view of the enlargement projects. I am aware of the enormous difficulties that will be involved, but we shall incur incredible expense if we do not broach the subject despite the huge problems there will be in getting agreement.

Mr. Hurd

My hon. Friend is quite right. The system is expensive and cumbersome, and will become more so. It would be a little difficult for the British—I must say "British"—whose language is spoken quite extensively by other people, to put forward that proposal. However, that did not deter the Daily Mail a few months ago. But experience will probably be more effective than would an initiative during our presidency.

There is a second stone that we have been pushing up the hill. Although it has been a rather painful process, we are now making progress with the objective. I shall not say a great deal about it as it falls into the domain of my right hon. Friend the Chancellor of the Exchequer, who will wind up the debate. I refer to future financing. The background has changed for the better. In the old days, whenever financial issues in the Community got difficult it was often suggested that the 12 Foreign Ministers should produce what was called a political solution. That meant a solution that excluded the Finance Ministers and involved spending money that they were reluctant to spend. That is no longer the mood of the Community. The politics of the political solution has changed. What was once regarded as the somewhat eccentric rigour of the British Treasury has become the conviction—indeed, the necessity— of many member states.

At Lisbon it was clear that many member states—not just us—are unhappy with the idea of large increases in Community spending at a time of economic retrenchment at home. We pointed out that unnecesary spending could make ratification of the treaty even more difficult. So, during our presidency, we shall be looking for an agreement which respects what was set out at Maastricht on a cohesion fund but which also respects budget discipline and the need for sound public finances. We have all made it clear to our partners that there can be no question of any reduction in the United Kingdom abatement, which has so far been worth more than 12 billion to this country. My right hon. Friend the Chancellor, when he replies this evening, will obviously develop these themes.

Finally, there is widespread interest throughout the Community, and certainly in this House, in the concept of subsidiarity or minimum interference. Let me say something about the background to this.

Mr. William Cash (Stamford)

Earlier this week the Prime Minister made reference to subsidiarity. He said that it was his intention, during the course of his presidency, to ensure, as regards the Community as whole, that we would do everything to bring that principle into reality in the working practices of the Community. Does my hon. Friend the Foreign Secretary intend to apply the principle to the central bank and all that goes with it? At the bottom of the process, at the level that is most important to the citizen, there is the exercise of the vote in the choice of a party at a general election. In effect, that would be taken away by the transfer of economic and social matters to central bankers. Can my right hon. Friend give us an assurance that he will see that that principle is applied to the central bank?

Mr. Hurd

The basic choice is a question of whether there is a single currency and a single bank If we have a single currency and a single bank on which everybody agrees, that will not be a question of subsidiarity. But neither this House nor this country has made that choice, such was the skill of the negotiations conducted by my right hon. Friend the Chancellor of the Exchequer.

Mr. Nicholas Budgen (Wolverhampton, South-West)

Will my right hon. Friend give way?

Mr. Hurd

No. I want to get on.

As my right hon. Friend the Member for Guildford (Mr. Howell) pointed out in his question to me yesterday, subsidiarity goes to the heart of how the Community exercises its authority. How does it get its authority? How and where should decisions be made? The Community is one based on law, and the treaty of Rome set the framework. We, the 12 Governments, take decisions in the Council of Ministers. The areas of policy where such decisions can be taken are set out in the treaty of Rome. That is what is meant by Community competence. Those areas can be extended, as they were in the Single European Act. Within those areas of Community competence, the Commission proposes the draft legislation.

Mr. Budgen

Will my right hon. Friend give way?

Mr. Hurd

I will give way to my hon. Friend if he contains himself for a minute or two.

The European Parliament has certain powers to propose amendments to draft legislation, and the Council of Ministers—the 12 Governments—takes the final decision. The Maastricht treaty added limited extensions to Community competence by adding new policy articles to the treaty of Rome. In many respects—perhaps most respects—these were a clarification or codification of existing practice. They showed where the boundaries lay.

But, in addition—and this for the first time—the treaty of Maastricht checked the growth of competence. It did so in two ways. First, it formalised, in the treaty framework, the legitimacy of intergovernmental co-operation between the 12 member states in certain crucial areas of policy—foreign policy, justice and home affairs. Secondly, it defined the limits of Community activity in some specific areas by precluding what it called harmonising measures, such as those that have caused so much difficulty and controversy in the past.

Mr. Budgen

I am sure my right hon. Friend knows that many of our right hon. and hon. Friends voted for the Second Reading of the Bill following the Prime Minister's assertion that he had obtained a legally binding text on subsidiarity. The impression was given that the intrusive powers of the Community had been driven back in a final and satisfactory way. We now find that a large number of distinguished legal academics say robustly either that it is gobbledegook or that it is wholly unenforceable and, therefore, that the basis upon which many people supported the Bill has turned out to be false.

Mr. Hurd

I am grateful to my hon. Friend for leading me neatly into the next part of my speech. In response to his importunities I gave way just a little too early. My answer to his question will come just a little late—in a minute or two.

The policies fall into three categories—those where the Community has no competence, some important ones of which are defined in the treaty of Maastricht; those where the Community has exclusive competence, such as the negotiations on the Uruguay round; and those of parallel competence, where both member states and the Community have a role to play. In that last area, a choice arises over and over again. Should the Community act, or the member states, when action is required? We must apply the principle of subsidiarity against the background of those three policy areas.

Article 3b defines subsidiarity. In its fully developed form, it applies in particular to areas of parallel competence, but it also has a general application, requiring all activity—including activity within the exclusive Community competence—to be governed by the necessity test: any action by the Community shall not go beyond what is necessary to achieve the objectives of the treaty.

My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) and my right hon. Friend the Prime Minister are right: the text is crucial. It will certainly be crucial once the treaty has been ratified, but even before that the principle can be put into practice. That is the importance of the conclusions reached at Lisbon, on which my right hon. Friend the Prime Minister reported to the House on Monday. The Heads of State and Government decided at Lisbon that now—before ratification, before there is a legal text—urgent work should be conducted in the Community institutions, particularly the Commission and the Council, to find procedural and practical steps with which to carry through the principle as soon as possible. They have been asked to report to the Edinburgh Council, where I hope that we can make some firm decisions.

At Lisbon, we also called for a review of existing Community legislation rather than a process of simply working out the right way to apply the principle for the future. We called for a retrospective application of the principle of minimum interference. That report will also be submitted to the European Council in December 1993.

The Cabinet discussed the work given to the Commission and the Council of Ministers with the full Commission in London yesterday. My right hon. Friend the Prime Minister gave the Commission a clear steer, emphasising that nothing would allay the fears of those who questioned the Community more successfully than an effective work programme this year to apply the principle of minimum interference, not just to future proposals, but to existing Community legislation—and to proposals that are in the pending trays, awaiting consideration by the Council. The Commission will be working urgently on that, and I am sure that it is a welcome step.

If the arrangements work as we intend them to, the effect of the principle will be felt not in judgments by the Court in three or four years' time, not in academic or legal argument, but in its practical application in the Community institutions day by day as decisions are proposed and made.

Sir Peter Tapsell (East Lindsey)

I am much reassured by what my right hon. Friend has said about subsidiarity, with which I am sure we all agree. If we could secure a greatly improved text of article 3b which would definitely be enforced by the Community, and which the European Court would not always define in a federal sense, we would be a long way towards achieving what everyone wants.

Let me, however, give my right hon. Friend an example of how the system works in practice. Only a few days ago, the Chancellor of the Exchequer—to his personal chagrin, I am sure—had to come back and report that we would lose the freedom to reduce our VAT rate below 15 per cent. That drives a coach and horses through the principle of subsidiarity: it will give Britain less control over its sales tax than is exercised by any state of the American Union. There is absolutely no reason why we should not be able to reduce our VAT rate. If the recession worsens, we may wish to do so in order to increase purchasing power and demand.

Mr. Deputy Speaker (Mr. Michael Morris)

Order. The purpose of an intervention is to ask a question, not to make a statement.

Mr. Hurd

I do not question your ruling, Mr. Deputy Speaker, but I expect that my right hon. Friend the Chancellor of the Exchequer will wish to deal at length with my hon. Friend's question when he winds up the debate. It illustrates an important point: in all kinds of matters, of which VAT is certainly one, there is a long history of Community discussion in the context of completing the single market. The issue has not sprung up suddenly in the past few weeks. As my hon. Friend knows, no conclusion has been reached; but I believe that the ideas advanced by my right hon. Friend the Chancellor, if they were finally accepted and agreed, would be very much in this country's interests.

Mrs. Edwina Currie (Derbyshire, South)

Does not the whole principle of subsidiarity rest on the ability of Parliaments, and indeed of Governments, to carry out their side of the work? Is that not shown crucially by their ability to implement their promises and to stick to the results of votes that have been held in Parliaments such as this?

Mr. Hurd

My hon. Friend has worked that point in very ingeniously, but it chimes appropriately with some of what my right hon. Friend the Prime Minister has been saying.

What we must do—and it is not entirely easy as we move from generalities to specifics—is work out what the Commission must do as a result of the conclusions reached at Lisbon. What we must do, in the interests of this country, is work out the areas in which action is needed at a European level—for example, in the completion of the single market—and then to ensure that that action is effective. There is no point in ineffective action at a European level. We must then distinguish between such action and acts of interference—whether on the part of Brussels or, consequentially, on the part of Whitehall—that are unnecessary to any substantial European or national interest.

We must identify the division between the subjects with which the Community has recently dealt before the Maastricht treaty comes into effect. We want the Community, the Commission and the Council to pull back from activities and proposals whose purposes could be handled equally well by member states.

When I look at my diary and those of my colleagues, I sometimes find the prospect of the next six months somewhat daunting. We face a huge array of summits and conferences in all parts of the world. That, however, is the least of the pressures that we shall experience. The world is in a disorderly state, and in problem after problem—from Yugoslavia to Russia, and from Russia to South Africa—the EC is expected to play a part for which its institutions and procedures are not yet fully equipped.

Within the Community, there is a huge volume of work to be transacted, but there is one strengthening and reassuring thought. The agenda that is before us for six months is composed, in large part, of issues in which this country strongly believes, such as enlargement, the reduction of interference, a prudent settlement of the Community's finances, a GATT settlement and completion of the single market. Those are not causes wished on us by others; they are causes in which we strongly believe and which, partly by coincidence, it now falls to us to implement. We shall do that with energy and persistence, supported—I hope and believe—by the great majority of the House.

4.58 pm
Mr. Gerald Kaufman (Manchester, Gorton)

The House will have listened attentively to what the Foreign Secretary said about Yugoslavia. He talked of a wish to avoid the attachment to senior or larger European Community members of clients states in the former Yugoslav area. I very much fear that that error has already been made, and that a number of its consequences have led it to tragedy. I believe, that it was a serious error for the Council of Ministers to allow itself to be dragged by Germany into making a date for recognition of the republics. The right hon. Gentleman said that that was subject to certain conditions, but Germany, in the interests of the client republics there, made it clear immediately that it had no intention of observing those conditions and would recognise, in any case. That whole process, following the December ministerial Council meeting, has been injurious to Yugoslavia.

The recognition of small, unviable states—unviable both economically and politically—by the European Community and the provision of the cachet of recognition by the European Community has, in my view, encouraged other republics in Yugoslavia to declare their independence. While I would not be so rash as to say that the tragedy of Bosnia-Herzegovina is a direct consequence of recognition, if that decision had not been made six months ago it is possible that Bosnia-Herzegovina would not have been so speedy and so confident in declaring her independence.

I very much hope that this process will be brought to, at any rate, a pause. The consequences of recognition of Macedonia in terms of relationships with both Greece and Bulgaria as well as with Albania could be very serious indeed. I hope that we have learnt some of the lessons from what I regard as a very serious error by the Community because of its failure to think through the concept of a common foreign policy, even though we on the Opposition Benches support the concept of a common foreign policy.

There are lessons to be learned. One lesson—I am glad that the Government have learnt it and I support what the right hon. Gentleman said both yesterday and today—is that military action is more easily entered into than got out of. When I was talking to the incoming Prime Minister of Israel and discussing with him the start of the six-day war—which, after six days, the Israelis won triumphantly—he said to me, "It is much easier to get into a war than to get out of it." At that time he had no idea that the war would last only six days. Going in with force on the ground, without having clear objectives, clear rules of engagement and a clear mandate from the United Nations Security Council, might do more harm than good to the people of the former Yugoslavia and would also place the lives of United Nations troops at risk. I do not see why that should be done, except in an inviolably good cause.

Secondly, sanctions should have been brought in sooner and been much more comprehensive. We advocated that. I am sorry that our advice was not followed.

Thirdly, I believe that the United Nations should have been involved much sooner. It is not that I in any way detract from the role of the European Community, nor do I detract from the praise that I have offered and that I continue to offer for the actions of Lord Carrington, but after the successful action that was undertaken under United Nations authority in driving Iraq out of Kuwait I believe that we ought to have built on the authority of the United Nations that was established at that time. Again I say that all action, whether it be European Community action, or Western European Union action, or action by individual countries, should be taken only under the specific authority of United Nations Security Council resolutions.

I very much hope that the Government will take seriously the proposal that has been made by Mr. Boutros-Ghali—it may be that the Foreign Secretary discussed it with him today—regarding a permanent United Nations structure for military intervention. We advocated that two years ago. Even though one has a proprietary interest in the proposal, I believe that if a United Nations structure for military intervention had been available when Yugoslavia began to break up, some of the tragedies that followed could have been avoided.

Mr. Roger Knapman (Stroud)

Will the right hon. Gentleman give way?

Mr. Kaufman

I hope that the hon. Gentleman will forgive me for not giving way. This exordium is in response to what was said by the Foreign Secretary. I should like to proceed with the main topic of the debate, having said what I wanted to say to the Foreign Secretary in, I hope, a constructive manner. Time is being lost. It is important that we should not wait for a further tragedy or for another international crisis before a permanent United Nations structure for military intervention is devised and set up in the way that Mr. Boutros-Ghali has sensibly proposed.

The subject of the debate—not that I in any way regret what the Foreign Secretary said about Yugoslavia—is the presidency of the European Community upon which this country embarked yesterday. The presidency gives to the country which holds it the opportunity to stamp its approach on the processes and policies of the Community. It provides the opportunity to advance its own national interest within the Community and to advance the interests of the Community as a whole.

The presidency is a rare opportunity. At present, it comes round only once every six years. Since almost certainly the Community will be enlarged by four new members, and possibly even more, during the next six years, it is likely that United Kingdom presidency will not recur until the end of the century. The presidency is, therefore, an occasion when the United Kingdom Government can propound its own vision of Europe and for Europe, but two obstacles impede a constructive presidency for the United Kingdom.

The first is the lack of a clear statement by the United Kingdom Government of what objectives they seek to attain during the presidency. Almost every day we seem to get a new and different statement from the Government of presidency objectives. In his concluding remarks the right hon. Gentleman gave us a list, some of which, although they have been mentioned here and there, have never been stated before as specific presidency objectives.

On 3 June the Foreign Secretary told us that the Government's priorities included completion of the single market, preparation for enlargement negotiations, finance negotiations and development of closer relations with eastern Europe and the former Soviet Union. Eight days later, on 11 June, the Chancellor of the Exchequer, in stating what he called the Government's key priorities, had dropped the development of relations with eastern Europe and added very specifically what he called working towards a conclusion on the Community's future financing. Good luck to him, if he can achieve that in the next six months. Eighteen days later, the Prime Minister on his return from Lisbon suggested that his eyes were set on enlargement and that the new apple of his eye was subsidiarity.

In the first half of June, the Prime Minister's two principal lieutenants could not spare even a word for subsidiarity when they were setting out what they called the Government's key priorities for the presidency, but now the Prime Minister cannot get enough of it. The problem is that he does not seem to know what it means. He cites and re-cites article 3b of the Maastricht treaty as though it were a mantra. The Foreign Secretary did the same today. But article 3b of the Maastricht treaty states only what the Community should not do. It does not state what member states should do.

The Prime Minister seems to imagine that subsidiarity stops short at national Government level and that there should be no decentralisation below the level of national Government. On Monday the Prime Minister denounced what he called the centralising trend which was evident … in the Single European Act.—[Official Report, 29 June 1992; Vol. 210, c. 596.] That terrible Single European Act! Is my memory playing tricks when I remember that that political equivalent of the black mass was guillotined with the enthusiastic support of the Prime Minister himself? He was an active acolyte in that act of desecration. The president prom at the Albert Hall on 6 September already includes the choral symphony. I recommend that the programme be augmented by another work by Beethoven, "The Overture for the Consecration of the House", or the reconsecration of the House. Although the Prime Minister now chants the litany of subsidiarity, he clearly has no idea what it means. The hon. Member for East Lindsey (Sir. P. Tapsell) made a pertinent intervention on the Foreign Secretary who, I am afraid, did not offer further illumination.

On Monday the Prime Minister said: Subsidiarity … means that the test should be that, if it cannot be done at the national level, perhaps it should be done at the European level. If it can be done best at the national level, it should be done at the national level."—[Official Report, 29 June 1992; Vol. 210, c. 589.] This week the Chancellor of the Exchequer provided an interesting example off the Government's view of what should be done at the European level rather than at the national level—the decision to accept the Community as the arbiter for levels of value added tax. The right hon. Gentleman could have vetoed that because the decision was not taken by a qualified majority vote. It had to be taken unanimously.

The Chancellor of the Exchequer (Mr. Norman Lamont)

The right hon. Gentleman says that I could have vetoed it, but I am sure that he is aware that no decision was taken. In the end, I was the only person to oppose the proposition, so perhaps he will withdraw what he has just said. Also, does he recognise that under article 99 of the treaty of Rome we are committed to the harmonisation of indirect taxes in as far as that is necessary for the internal market? That is something to which he and I, his party and mine, are committed whether he knows it or not—and I suspect that he does not.

Mr. Kaufman

I shall make two points in response to the Chancellor's characteristically courteous intervention. First, he has clearly accepted that subsidiarity is not available here. If subsidiarity is not available, his protesting about it this week seems a vain exercise. While it appears that it is inexorable and inevitable and while it appears, from his own words, that he would accept it, he also said that it did not really matter because we were not going to reduce VAT below 15 per cent. in any case. What we have here could not be said by even the most friendly observer of the Government to be a clear definition of subsidiarity in relation to the setting of tax levels.

Sir Teddy Taylor (Southend, East)


Mr. Kaufman

I give way to the hon. Gentleman. I have a feeling that he will make more trouble.

Sir Teddy Taylor

An unnecessary row is developing. Does the right hon. Gentleman recall that article 99 does not say that we are committed to harmonisation? It says that we are committed to harmonisation only in as far as it is necessary to complete the internal market. If the right hon. Gentleman reads Hansard, he will see that during discussions on the Bill we were told that it had no importance whatsoever because Britain did not take the view that the harmonisation of excise duties was necessary to complete the internal market. If he is in any doubt, I ask him please to read Hansard. Many hon. Members voted for the Single European Act—stupidly—because they did not know. They were told time and time again that it meant nothing at all.

Mr. Kaufman

There are two kinds of Member. The first is like the hon. Member for Southend, East (Sir T. Taylor) and the members of my party who opposed the bludgeoning through the House of the Single European Act. The second is like those in the Government who guillotined the Bill and now say that it is a piece of legislation which must be dumped as soon as possible in favour of subsidiarity, even though they cannot tell us what that is.

The Prime Minister does not seem to envisage or to understand that there are many occasions when action is most appropriate neither at the European level nor at the national level. Let me explain what I mean.

We all know that Lady Thatcher had the habit of carrying around her favourite texts which, at a moment's notice, she would whisk from her handbag—before she discovered the technological miracle of the compact disc. I offer the Prime Minister the free gift of a text to keep in his wallet next to his heart. It is a definition of true subsidiarity which reads: Decisions should be made at the level (European Community, national, regional or local) where the maximum democratic control and effectiveness is ensured. That is a proper definition of subsidiarity. It is the Labour party's definition of subsidiarity, and it was devised and drafted by my hon. Friend the Member for Hamilton (Mr. Robertson).

As for enlargement—

Mr. Cash

Will the right hon. Gentleman give way?

Mr. Kaufman

I shall proceed a little further.

The Prime Minister made it clear that, for the United Kingdom presidency ending on 31 December, enlargement is little more than an academic issue. Although the Foreign Secretary and the Chancellor have declared that enlargement is a key priority for the United Kingdom presidency, all that the Prime Minister could murmur on Monday was that during our presidency

unofficial discussions … can take place". Why? He went on to admit that the

formal accession of any new state could not take place until after the Maastricht treaty is ratified."—[Official Report, 29 June 1992; Vol. 210, c. 593.] The Secretary of State for National Heritage has circulated an attractive booklet listing the events in the United Kingdom presidency's European arts festival, which includes such delights as the Ashington Eurofest, an international festival of pavement art in Liverpool and a special European children's programme featuring Ooly McDooly. I suggest that some traditional British nursery rhymes should be added to the agenda. When the Prime Minister talks about the date of ratification of the Maastricht treaty, it is appropriate to quote 'When will that be'? say the bells of Stepney"— although I do not think that my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) is in a tearing hurry. The response is, of course, 'I'm sure I don't know', says the great bell of Bow. Nobody knows when the Maastricht treaty will be ratified.

Mr. Cash

In the light of the right hon. Gentleman's brilliant definition of subsidiarity on behalf of the Labour party, can he explain how it is that Labour would be able to implement or, if it were ever in government, to introduce, the notion of a central bank? Would that not be wholly inconsistent with the definition that he has just given?

Mr. Kaufman

That has nothing to do with it. This is one of the rare moments when I believe that the Foreign Secretary gave a satisfactory reply to an intervention on that subject. I support the Foreign Secretary in that reply, because I want to do him the maximum damage with his Back Benchers.

The other insuperable obstacle to a productive United Kingdom presidency, is, of course, the uncertain fate of the Maastricht treaty. At the end of the Lisbon summit, the participants issued their communique, the conclusions of the presidency. It is 49 pages long and includes a section headed "State of the Ratification Procedure on the Treaty on European Union". It is a happy section; it is pleased with itself. It states: The European Council welcomes the result of the Irish referendum. I am absolutely sure that there was another referendum, but the conclusions of the presidency—the document, the communique—does not refer to it in any way, and nor did the Prime Minister in his statement to the House on Monday. He came hack from Lisbon and made a statement to the House but did not so much as mention the Danish referendum.

The European summit and the United Kingdom Prime Minister may regard the Danish referendum as something nasty on the pavement that it is best to walk gingerly round, but walk round it as they may, there it still lies—although one would never guess that from the Prime Minister's post-summit publicity.

After the Maastricht treaty the Prime Minister's publicity machine said that he had won hands down—game, set and match. It was a triumph. I do not know how long this country can go on surviving triumphs of that sort. The House will be surprised to learn that after Lisbon the word from No. 10 was that that was "another triumph for Major". After the miracle of Maastricht came the Lisbon story.

Hon. Members in the age group to which the Foreign Secretary and I belong may remember that famous British musical, "The Lisbon Story", featuring the beautiful Pat Kirkwood, and the hit song from it—"Pedro the Fisherman": Pedro the fisherman was always whistling such a merry call, Girls who were passing by would hear him whistling by the harbour wall"— presumably, for this purpose the term "girls" includes noble baronesses. The Prime Minister can whistle as much as he likes hut, realistically, the tune cannot be very merry.

The programme for a promenade concert—it is on 14 August; get your tickets now—sums up the situation more accurately. That programme includes Mussorgsky's "Songs and Dances of Death", performed by the Danish national radio symphony orchestra.

Immediately after the Danish referendum the Government insisted that it would be business as usual for the European Communities (Amendment) Bill. The Foreign Secretary said that the Committee stage of the Bill would proceed. That afternoon the Committee stage was postponed—

Mr. Hurd

indicated assent.

Mr. Kaufman

I take great care to be accurate. I may have got it wrong last time, although I do not acknowledge that I did, but at least the Foreign Secretary admits that I have got it right this time—that is progress.

The Foreign Secretary said that it was made clear that afternoon, in a business statement that did not even mention the Bill, that its Committee stage would not proceed. We have not heard about it since.

This afternoon the Foreign Secretary said that we were in a period of pause. The right hon. Gentleman has a genius for turning understatement into an art form. No-one knows when the Committee stage will be resumed. The Prime Minister makes all kinds of noises about having given his word of honour, and being at the heart of Europe. But this week he has at long last publicly begun to come to terms with reality. Yesterday he said about the Bill: It would be desirable to finish it by the end of the year, but it is not essential. In the House on Monday, he was even more specific. He said: We must wait to see … what action the Danish Government take … explaining to us how they intend to proceed with the ratification of the treaty. Once the Danish Government do that, we will be in a position to proceed with the ratification here."—[Official Report, 29 June; Vol. 210, c. 586.] Even the Prime Minister now admits that it is pointless for the House to proceed with ratification until we can see a clear way forward from the Danish referendum. That is what Labour spokesmen have said ever since the referendum. The Bill is now inoperable, because so much of it refers to and requires participation by Denmark, and it would be improper to proceed with an inoperable Bill. That is why we have repeatedly asked for a report to the House on the situation following the Danish referendum, and why we have said that, if the Government do not show a clear way forward, yet still attempt to proceed with the Bill, we shall vote against any guillotine motion.

Mr. Patrick Cormack (Staffordshire, South)

The right hon. Gentleman is making an entertaining speech, but will he make it clear where the Opposition now stand on the Maastricht treaty? Does the right hon. Gentleman hope that it will be ratified, and that the Danes will have second thoughts? Does he hope that the French will support it? He must have a view.

Mr. Kaufman

We made it clear in the debate when the Bill was introduced that we support a great deal of what is in the treaty which the Bill seeks to ratify. However, we take serious exception to some parts of the treaty—including the protocol which excludes us from the social chapter, among other things. If we could secure a treaty that met all our aspirations we should readily support it. Unfortunately, that is not what is before the House at this stage.

Mr. John D. Taylor (Strangford)

We need further clarification of what the right hon. Gentleman has just said. He gave the House the impression that the Opposition would oppose the Bill if it were brought before the House again before Denmark made a decision. He then qualified that by saying that the Labour party would oppose the Bill only if a guillotine were presented. Which is it? Does the Labour party oppose the Bill in principle, or only if a guillotine is proposed?

Mr. Kaufman

There is a great deal of misapprehension, not about our attitude, which I shall state in the most specific terms, but about the parliamentary procedure before us. Unless the Government introduce the famous confidence motion that keeps being floated in and out of the No. 10 machine, there will be no voting for or against the Bill. If the Bill is resumed it will go into Committee. The Labour party will move a great many amendments in Committee, and we shall expect adequate time to be given to debate them. We shall decide our attitude to Third Reading on the basis of what is in the Bill after the Committee stage.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

Will the right hon. Gentleman give way?

Mr. Kaufman

No, I shall proceed now.

That is what the Committee stage is about—whether a Bill can be altered.

Our position is a great deal clearer than what the Government are telling us. They imply that there could be a painless—or even painful—formula that could solve the problem of the Bill for them. Soon after the referendum, the Foreign Office floated the idea that the United Kingdom presidency could patch things together with a protocol to the treaty. Clearly that had not been thought out, because when the Leader of the House, standing in for the Prime Minister, was questioned about the notion, he said that such a protocol was one of the possibilities which can clearly he considered, but without commitment at this stage. It was one among a range of others that can sensibly be considered in the uncertain circumtances".—[Official Report, 9 June; Vol. 209, c. 143.] There is a specific reply for us.

The possibility of the protocol was soon removed from sight, and as for that range of other possibilities to which the Leader of the House referred, nothing more was heard about them, whatever they may or may not have been—and a good thing too. This ailment cannot be cured by political quack medicine. It needs careful thought and sensible ideas.

There are ways of moving forward from the Danish referendum. Last week, the Danish Social Democratic party, which must play an indispensable role in any new moves for Danish ratification, advocated priorities including the strengthening of democracy and the promotion of employment and social justice. Such issues should be at the heart of the United Kingdom presidency. Sadly, they will not be. The Opposition believe that the objectives of the United Kingdom presidency should be enlargement and a much more specific effort to obtain agreement in principle on the admission of certain applicants. It is far too negative to say that enlargement should wait upon the ratification of Maastricht. Agreement in principle on admission of Sweden and Finland could well affect favourably the mood of the electorate of Denmark, who could see that their country would not be the lone Scandinavian country in the Community.

The Lisbon summit was far too negative on that subject and was even more unacceptably negative on the application of Cyprus. I am not satisfied with what the Foreign Secretary said today about that subject or with his ample references, once again, to the desirability of a stronger relationship with Turkey. It is quite wrong to say, as was said at the Lisbon summit, that consideration of the application by Cyprus must be postponed because the island is divided. That division exists because of an illegal occupation of part of Cyprus by Turkish forces. It is wrong to reward Turkey and penalise Cyprus because the latter is the victim of aggression by the former. The United Kingdom presidency should make it clear to Turkey that she will not be admitted to the Community as long as her troops are present in Cyprus against the will of the legal Government. It should proceed positively to consider the application by Cyprus for membership.

The United Kingdom presidency should make human rights a major theme of its term of office. The power and influence of the Community should be used to draw attention to and, where possible, remedy violations of human rights outside Europe—in Indonesia, Thailand, Burma and South Africa—and in Europe as well.

I should like an early declaration by the ministerial Council that no aid of any kind will be provided for Albania until that country ends the abomination of public hangings. Since the Secretary of State announced today that he will visit Tirana shortly, I hope that he will make clear to the regime our disgust at its barbaric public executions.

During the United Kingdom presidency, the Community should have, as a priority, agreement on positive policies for economic divergence—I mean convergence [[Interruption.]—I mean both divergence and convergence. It should have agreement on those policies to strengthen the regions and to assist in the structural change of industry and in easing the process of industrial change.

The United Kingdom presidency should co-ordinate policies to fight unemployment. The Prime Minister was pitiful on Monday when he implied that the unemployment problem in this country was not as intolerable as it might be because it was getting worse in Spain. The Foreign Secretary was even more complacent yesterday when he had the nerve to warn against what he called abandoning people who arc unemployed and looking for jobs"—[0fficial Report, I July 1992; Vol. 210, c. 838.] It is the Government who have abandoned such people. We want the Community to remedy that callous neglect.

We call upon the Government to give real meaning to the social dimension. The Prime Minister was at his most astounding on Monday when he said: we agree with the social dimension, but we do not agree with the social charter itself."—[Official Report, 29 June 1992; Vol. 210, c. 584.] That was like saying, "We agree with the principles of the ten commandments, but we can't go along with those niggling bits about not making graven images, honouring thy father and thy mother, and not coveting thy neighbour's house, or wife, or ox or ass." The Government are seen to be alone in believing that the single market must be an adventure playground for capital without providing the necessary protections for employed and unemployed people. The Government are alone in Europe in rejecting the social chapter and the social charter. That attitude must change.

I say to the Prime Minister and to the Foreign Secretary that this is the last speech that I shall make from the Front Bench. I do not begrudge the Government their election victories, but I cannot forgive them for what they are doing to the thousands of poor in my constituency and in many other parts of the country who eke out an existence in poor housing, who are poorly clothed and who are far too often poorly fed. They have children whom they love as much as any hon. Member on either side loves his or her children. Yet they are unable to bring up their children in decent circumstances, in a decent environment, with any hope for the future or any hope of a job when they leave school. In their thousands they are unemployed, suffering one of the worst unemployment rates in the country.

The poor have to go to the Department of Social Security offices to beg for help, for money for a second-hand mattress or a second-hand cooker and, mostly, they are turned away. They are rejected for income support and they are rejected for crisis loans. They are excluded from the Prime Minister's classless society because they are too poor to claim membership of any class at all.

I intend to devote my time in this Parliament to fighting for all my constituents, but above all for the excluded poor. One reason why I shall fight for the inclusion of the social chapter in the Maastricht treaty is that it goes beyond windy generalisations about being at the heart of Europe and could provide practical help in putting heart into my constituents who, God knows, need it and have earned it.

The United Kingdom presidency should not be about logos and clichés—it should be about people. It should be about the common humanity of all the people in all the countries of the European Community. That is what a Labour presidency would have been about and that is what the Labour party will never give up fighting for.

5.36 pm
Mr. David Howell (Guildford)

The right hon. Member for Manchester, Gorton (Mr. Kaufman) gets more and more entertaining as he gets demob happy and his party's position on this matter gets odder and odder and more and more confused. We have enjoyed some of his remarks, without agreeing with any of them. I salute his passing from his present position and look forward to him popping up in some other position in which he is rumoured to have an interest.

Those with longer memories will remember that the Maastricht treaty was born of a couple of intergovernmental conferences some two years ago, which the British Government did not like the idea of. However, there was nothing under the Community arrangements that we could use to stop them. We were severely criticised at the time and Britain was depicted as the laggard—the one against the I I, which all knew where they were going and where the intergovernmental conferences were taking us.

I propose to my right hon. Friends that we should use the presidency to turn the tables. We should take intellectual, philosophical and, in terms of ideas, total command of the future agenda of the Commuity. We should urge that, in due course, there should be another intergovernmental conference to begin to shape the kind of Europe that more and more people throughout Europe, including in this country, want to see—a Europe heading in a different direction from the one in which it appears to have gone in recent years.

I can suggest that proposal with confidence to my right hon. Friends because, as my right hon. Friend the Foreign Secretary said with great eloquence, the whole debate has changed, even in the past few months. We are no longer judged as insular, ostrich-like Britain which is sitting glued to the station platform while the great and stately train of European unification rolls out to distant destinations. A completely different picture is now emerging, just as a photograph in a dark room gradually takes form. We can see a pattern emerging that puts the development of Europe in a different context.

Instead of the decentralisers and those who are suspicious of too much unity and centralisation being the laggards, it is the centralisers who are the past and the decentralisers who are the futuure. That changes the context of the debate, because it is no longer fair or correct to suggest that those who held back from the higher flown rhetoric of Maastricht were lingering in the past while the centralisers were the future; it is now the other way round.

The old vocabulary about momentum; of not just ironing out the level playing field, but flattening every detail of the variety and diversity of the European Community to total billiard table smoothness; the calls for trains leaving stations, for social cohesion to the point of redistribution to the extent of destroying the wealth-creating momentum of Europe and the calls for superconvergence—they have all acquired a sepia tint. They have become the language of the past and my right hon. Friends deserve immense credit for spotting that before most people in Europe and, in their negotiations on the Maastricht treaty, for bringing out the trend for the future and rejecting the trend of the past.

If we apply the new template to the Maastricht treaty text as it is before us, with the derogations secured by my right hon. Friends, it is clear that parts belong to the centralist past. They are old-fashioned and contain the old-fashioned language. However, there are also parts that belong to a much more vigorous and diversified future They offer strength through diversity and diffusion. That strength will make Europe a far more effective force than the old centralising shibboleths and nostrums of the centralisers.

One example of that is the single currency, to which my right hon. Friends have not committed us. Another is the single central bank. A single currency may not be necessary for a single common market. Mr. Feldstein said in The Economist the other week that it might actually slow down and undermine the growth of trade and prosperity in the Community.

There has been discussion today about excise and sales taxes. My right hon. Friend the Chancellor of the Exchequer has taken a strong and determined stand about that. As my hon. Friend the Member for East Lindsey (Sir P. Tapsell) so characteristically and perceptively said, we need only consider the United States, which is the greatest, most successful and oldest single market in the world, to discover a vast variety of sales taxes and encouragement for people to trade across state borders and take advantage of the differences and variety in those taxes.

There has also been much talk about the single bank. The concept of a single, monolithic, physical institution running Europe's monetary policy is antique. Europe's monetary policy in future is bound to be multi-centred. A single bank does not belong to the modern world. I have the same doubts about the single passport, which, alas, has already been implemented and which has nothing to do with the Maastricht treaty.

It is not technically necessary to have the single burgundy passport for everyone, although the technicians tell us that it is. Electronics could cope with all control matters and we could retain separate documents that would give us more of a feeling of identity.

While we are considering the different aspects of the Maastricht treaty, we might question the repeated concept of the level playing field. Policing the single market is very important. Whatever some of my hon. Friends who are opposed to the Community and all its works say, such policing will require a good deal of political clout being delegated to the Community and its institutions. However, policing the single market to the point where obsessive economists begin to insist that to create a single market it is necessary to itemise everything down to the part of the year at which one may kill a magpie to stop it robbing birds' nests, or set vocational training or any other absurd detail, carries us well out of the realms of practical commerce end into the realms of economic levelling and ideology on a scale to which it would be right to call a halt.

That overkill brings the single market into disrepute. It is the role of responsible European policy makers—at the head of whom I place my right hon. Friends the Prime Minister, the Foreign Secretary and the Chancellor of the Exchequer—in the coming presidency to rescue Europe and the single market, which is a magnificent goal, from the Europhobes and the Euro-fanatics.

Mr. Giles Radice (Durham, North)

We have heard many fine words about decentralisation from the right hon. Gentleman. One would have no idea from what he said that the United Kingdom is the most centralised state in the European Community.

Mr. Howell

In respect of subsidiarity, that means that each country does things in a way that it believes best.

Mr. Derek Enright (Hemsworth)

Will the right hon. Gentleman give way?

Mr. Howell

No, I do not want to delay the House.

With regard to regionalisation, we must work out our own patterns for the future. They need not necessarily be the same as those occupied by the German Lander or the other provincial schemes elsewhere in Europe. Let us do our own thing in our own way. We should work out our own problems. I see no difficulty with that.

As I said, overkill on the scale that has confronted us brings the ideal of the single market into disrepute. There are those who argue—I hear them behind me now—that in the light of the present situation, the best course is to tear up the Maastricht treaty and start again. I agree that it makes no sense—my right hon. Friends recognise this very correctly—to press on immediately with the parliamentary process. We have had the Second Reading of the Bill associated with the treaty which, in effect, was a preliminary ratification. I am sure that my right hon. Friend the Prime Minister is right to say that we should wait and see how others handle the matter. I fully support that policy.

Given Britain's presidency and its towering position of intellectual strength—[Laughter.] Labour Members may laugh, but that is the laughter of the past. They are the people who want to centralise and control in the socialists' interests the affairs of this country from Brussels. That is not the pattern of Europe's future.

Given the powerful instruments that are built into the Maastricht treaty, it seems pointless to throw away Britain's hand when we hold the trumps. I believe that it would be wiser to concentrate on changing the whole tempo and vocabulary of the European process by setting out boldly both the new vision of a modern and enlarged Europe of nations and the path by which to attain it.

We need to promote a Europe of nation states. We need a positive plan of reform of the institutions and that lies in the future. We need to review the Commission's role. We need to list the functions to be returned to the nation states. That process of listing should be carried out by the nation states. In effect, and my right hon. Friend the Prime Minister was pointing rightly in that direction, a bonfire of regulations and directives—

Mr. Cash

And of vanities.

Mr. Howell

—indeed, and of vanities—so that we may give the Europe of the future consistency and strength instead of over-centralised fragility and brittleness. We need to redefine the philosophy of the single market. We do not need to flatten everything to create a single market. We need diversity and variety in taxation and many other things for a single market to work.

We must also redefine cohesion. It is not true that all aid creates development. Aid can stop development both within and outside of the Community. We should go all out for enlargement, and my right hon. Friend the Prime Minister said that is right. We should limit the ambitions of the budgeteers in Brussels. Perhaps my right hon. Friend the Chancellor will do that.

We should halt the potential merging of foreign policy into a common EC foreign policy. That is not a worthwhile ambition. There will be problems with joint declarations. We may make joint declarations with the rest of the Community, but in many other areas we will want to pursue with other interested powers—perhaps the United States in some cases or Germany and France in others—our own particular policy interests. That pillar of foreign policy co-operation must not be allowed to be merged into the trunk of the Community. There are tendencies at work that could easily do that and we must guard against them.

That is our agenda for the presidency. It not only deals with today's problems but captures the commanding heights of the ideas when we come to the next intergovernmental conference, because today's ideas shape tomorrow's decisions. If we want to win on those decisions, we must get on with this business now.

5.49 pm
Mr. John Morris (Aberavon)

No one should underestimate the opportunity that the British presidency provides for us. We can influence a wide range of subjects. The holder of the chair is an important cog in the machinery of the European Community. I am fairly sure that I am the only Opposition Member who has actually chaired a meeting of the Council of Ministers—the Employment and Social Committee. I fear that my tenure was of one session and one session alone, but my achievement was to get through the business at a reasonable hour—half-past 9, as against the expectation of an all-night sitting. My experience in the House considerably sharpened my mind.

The issue about which I wish to speak briefly is the real and perceived democratic deficit in the EC. The further one goes from Westminster or, more accurately, the further one goes from all of us who inhabit this Palace, the greater the distrust of the European Community. I suspect that it is the same in other countries. The cognoscenti, the mandarins and the mandarin class have always been in favour of the EC, but I suspect that people generally feel less sure. What has bedevilled popular support for the European Community is the impression that it is a meddler, and a meddler unnecessarily, and that, with its inflated bureaucracy, it has pursued uniformity for uniformity's sake and intruded into matters of minor importance when it was not necessary so to do.

I suspect that that feeling had a great influence on the referendum in Denmark. It did not do so in Ireland, obviously, because every man, woman and child there is a major beneficiary. It is almost like going to the opera at Covent Garden when a great part of the bill is met by the Treasury—in this case, the EC. Of course, the Danish referendum is a chance for all of us to stand back and take stock. The people of Denmark, outside the capital of Copenhagen, feared what they had seen, and they feared as much if not more the sounds then coming from the Commission. There has been a remarkable—a touch of democracy can be quite salutary—change in the tone of Mr. Delors since that fateful watershed. The truth is—we all accept it—that the treaty is juridically dead; it is in tatters until and unless there is popular approval in Denmark.

The lesson is that lectures on what is good for us by the great and good either in this country or elsewhere are not necessarily welcomed. Indeed, it is frequently the reverse—otherwise, we in this country might have been governed by a combination of civil service mandarins of Whitehall, heads of our great colleges, holders of the sees of Canterbury and York and, for good measure, the Moderator of the Church of Scotland. That is not how democracy should run.

During negotiations it looked as though the democratic deficit would be tackled by reducing the Commission's powers and by giving the European Parliament an enhanced role in the legislative process. That has not happened and there have not been many significant changes in the Commission's role. Article 8 of the treaty that set up the Commission states: It shall be the duty of the high authority to ensure that the objectives set out in this treaty are attained in accordance with the provisions thereof. Flowing from that are the treaty provisions for achieving and implementing that high aim.

I do not know of any organ of government in any democratic country that has been given so many powers to initiate and propose, an appointed, non-elected, almost faceless organ. I should like to know of a parallel. The inevitable result is that such an institution will gather a momentum of its own. It has done so, and it has sought to increase its influence. Each Commissioner in turn, with varying competence and success, has sought to put a stamp of significant change on his own period of office in his own sphere. That is a perfectly normal human aspiration—indeed, collectively it is the aim of the Commission. But is it necessary for the Commission to have such a life of its own? Is it because of that life of its own that it has meddled unnecessarily and certainly failed to capture greater public support in this country and elsewhere?

When the total membership was six, an additional engine of power in the centre may have been necessary, but now that we are part of a larger body—I hope that Her Majesty's Government will continue their campaign for enlargement, perhaps up to 20 members or so—more initiatives should come from the European Parliament and the Council of Minister, and the role of the Commission should be diminished. That is where the balance should be. Ministers, individually and collectively, are much more likely to be politically sensitive than appointees, however eminent. The greater the membership of the EC, the greater the need for political sensitivity, and that is why we should meet and tackle head-on the democratic deficit.

I regret that the European Parliament has not been given more powers. If being a Member of the European Parliament is to mean anything, it must be given those powers. If decisions in Brussels and Strasbourg are to be accepted, the institution of the European Parliament is ready at hand to provide the appearance, and, I hope, the substance, of popular support. It would then be much easier to accept whatever edict flows from Brussels or Strasbourg.

Against the background of Maastricht, of planned economic and monetary union—I for one have grave doubts about the speed and direction in which we are heading—there must be popular support. If people believe that there is popular support, they should be ready to put it to the test. I certainly would not dissent from having a referendum on the issue.

A common foreign and security policy would be light years from obtaining popular support. Some of our European partners did not come out well in the Gulf war. I remember the dilatory and unhelpful attitude of the Belgians in demanding their pound of flesh for ammunition; it left a sour taste. Also, the Foreign Minister of Luxembourg, no doubt an inestimable gentleman, strutting across the world's stage, speaking on behalf of Europe, certainly did not inspire confidence. I rushed to compare the size of the population of Luxembourg with some of the units of government in south Wales, and I thought that some of our civic leaders in the Principality might have done a better job. Certainly they would have had more democratic credibility.

The lesson is that Buggin's turn might be all right when we discuss technical matters, but in matters of earth-shattering importance it certainly does not go down well. If low intensity economic activity has already caused anxiety about the manner and extent of implementation, how much more anxiety will there be when one pauses to consider the canvas post-Maastricht?

The logic of subsidiarity necessitates a complete rethink of the role of the Commission. Is it necessary in its present form? How many of its responsibilities could be carried out by the Council of Ministers, its own semi-permanent national Ministers or our own civil service permanent representatives? Is it not time to consider that possibility? I believe that we should do so.

I was glad to hear some of the earlier comments in the debate. In our presidency we should ruthlessly examine each and every decision taken in the past by the Commission. I welcomed the suggestion that I heard just now of a bonfire. I would welcome a bonfire of the decisions of the past which were not strictly necessary to the well-being and good government of Europe. Any examination should be of not only future but past decisions. If the concept of subsidiarity is to mean anything, there should certainly be retrospective examination.

The philosophy for the future should be the minimum of centralisation in decision-making unless it is seen to carry public approval and the repatriation of a raft of activities which so far have been carried out in Brussels or Strasbourg. Subsidiarity will mean the transfer of power to the elected assemblies of Scotland and Wales in due course and to the organs of regional and local government in Britain. That would leave the Commission, or whatever body succeeded it, to concentrate on activities which are essential to the well-being and common good of all member states. The Commission will certainly undertake new activities, but it should become involved only in essential matters.

I am sick and tired of the criticism levelled at Britain whatever Government are in power. If we object to a proposal in Europe, it is said that we are anti-communautaire. That is nonsense. We have a national interest and a European interest. We are entitled to fight our corner without being regarded as anti-European. We can be as good Europeans as the next man in the next country and yet oppose a proposal. But that criticism is always thrown in our faces if we object to anything that is discussed in Europe. That was certainly my experience.

There are other matters in which we have a particular interest, but there is no time to go into them now. During our presidency we can wield a great deal of power. It is an important period in the life of Britain and of Europe. I hope that we can make real advances in repatriating so many decisions which have unnecessarily been taken at the centre when that was not in the interests of the well-being of Europe.

6.3 pm

Mr. Peter Brooke (City of London and Westminster, South)

The Venerable Bede, one of the ancestors of contemporary Europe, gave a vivid image of a bird's flight through the windows of a hall to illustrate the life of man. The European Community owes its origins to what happened in the middle of this century and I dare say that it will still be evolving in the middle of the next. Against that sweep of history, our current six-month presidency is as the flight of the bird to the Venerable Bede.

However, the century of building which I foreshadow is not unlike the building of that most European of institutions, a cathedral. Cathedrals grow sometimes slowly, sometimes fast. While under construction the ground site is often more of a builders' yard, rent with builders' language, than a place of God. Yet the purpose is always clear and the outcome is always remarkable.

In this building, whether of cathedrals or of Europe, nothing is more important than that the foundations should be sound. No national contribution to that aspect has been more important than that of Britain. The great Sam Rayburn of Texas once said that the three wisest words in the English language were, "Wait a minute." In the past 15 years, my noble Friend Baroness Thatcher has deserved well of all of us in Europe by reiterating those three words again and again. My right hon. Friends who are now in charge of decisions on Europe have been wholly faithful disciples to her in preventing the Euro-rhetoric of others from interrupting the soundness of the foundations that are needed.

In this brief speech, I wish to remark on a single chapel in the great cathedral. I confess instantly that I am motivated by constituency interest. In the six months of our presidency of the European Community, the Community is committed to resolving the location and site of the European monetary institute and the European central bank. It is a subject in which the City of London is profoundly and properly interested.

On 3 June my hon. Friend the Member for Hazel Grove (Sir T. Arnold) had an Adjournment debate to which my hon. Friend the Economic Secretary, who is present on the Treasury Bench, replied. My hon. Friend the Member for Hazel Grove rehearsed in splendid detail the scale of the dominance of the City of London as a financial centre over its continental rivals and on a global basis. Given that the facts and statistics are, in the words beloved of certain Departments, "on the record", I do not propose to reiterate them today, especially on an occasion when time is as gold dust. I remark in parentheses that gold dust is but one of the commodities in which the City provides Europe's dominant market.

I wish to use these few moments to remind the House of London's European pedigree. It goes through the Lombards, who gave us so much of our current banking language; through the Hanseatic League where the Hansards resident in the Steelyard on what is now Cannon Street station were otherwise known as Easterlings, a word thought to have given rise to sterling; through the first chartered company—not involved with the East Indies, the Levant, Africa, Hudson's Bay or the Falkland Islands—the Muscovy company; through the sacking of Antwerp in 1576 by the Duke of Parma, which gave us our first opportunity for entrepot and third-country trading; to the serried European names of London's merchant bankers such as Hambro, Lazard, Schroder, Rothschild, Kleinwort and Warburg.

Those cosmopolitan and maritime origins bred London's willingness to trade in all risks. It is that willingness which my hon. Friend the Member for Hazel Grove described so eloquently and so significantly on 3 June and which gave rise to London's supremacy in financial circles.

Of course, in the City of London we are, above all, realists. I realise that, although the technical arguments are strong, the decision might go against London on political grounds. In that case, it would be odd if the new institutions went to Germany, where the Bundesbank is so vehement in its rejection of political considerations and interference. There would be a particular retrograde disadvantage if the institutions went wholly to Germany. It would mean that German rather than English would become the language of operations. That suggests that the operating arm of the bank should be in London, not least because no EC institution is yet in London. Nothing would seem more suitable for London than a financial institution, especially one specifically dealing with financial operations and markets.

Against this background, Her Majesty's Government have an obvious and particular role to play during our presidency in determining the location of the European financial institutions along the lines which my hon. Friend the Economic Secretary so encouragingly described in the Adjournment debate on 3 June. That would be to the ultimate benefit of all the people of Europe. It should go without saying that the Corporation of the City of London and the City's other institutions will be happy to reciprocate that support by the amplest of co-operation.

6.9 pm

Mr. Charles Kennedy (Ross, Cromarty and Skye)

I shall not follow too directly the speech of the right hon. Member for City of London and Westminster, South (Mr. Brooke), but I think that it is significant that the case that he made so eloquently, with his characteristic use of vocabulary and imagery, has been all but lost, if not already lost, for this country. The technical and technological aspects of a central European bank have been lost, not just to London, but to other parts of the United Kingdom. I am thinking of Edinburgh and the "diversity"—to use the word of the right hon. Member for Guildford (Mr. Howell)—of practical banking arrange-ments that would go with the central European bank. The success of those diverse activities would spread to other parts of the United Kingdom

Perhaps it is a reflection of my political party background, but I tend to believe that every cloud has a silver lining. That being so, I hope that we can view the referendum in Denmark in that way. It has given everyone in the European Community time to pause and think, which must be a good thing. There is no doubt that the politicians and bureaucrats were running ahead of the citizens of the European Community in terms of the developments that were taking place. The problem is that the rallying cry now is "subsidiarity"—not the most potent of words around which to gain momentum. I think that the Foreign Secretary acknowledged that the other day.

The Government have adopted the correct political stance since the Danish referendum, and are continuing to do so. The British presidency will have to be cautious and painstaking, and the Prime Minister, Chancellor and Foreign Secretary are three individuals who are well equipped to take precisely such a detailed and sensible approach. We want to take Denmark with us if possible, not leave it isolated. I pay tribute to the fact that those three politicians have consistently stressed that.

However, there are uncertainties about the time scale, and they have not been helped by the Foreign Secretary's remarks today or the Prime Minister's remarks following the Lisbon summit at the weekend. He seemed to suggest —to use a phrase that he has hitherto used of Scotland and is now applying to Denmark—that the Government would take stock of the situation and decide by the end of the summer, at about the time the House returns from the recess. I notice that the Leader of the House is now in the Chamber.

It is not clear whether the Government will introduce a Bill to be discussed in Committee before the end of the year. One suspects that they are hanging back on that decision until they have seen what happens in the French referendum and events in Denmark are more clearly established, but the sense of uncertainty is unhelpful.

Similarly unhelpful were the comments of the right hon. Member for Manchester, Gorton (Mr. Kaufman) about what the Labour party might do as and when the Bill reappears. The Labour party's strategy was as clear as mud. We have substantial misgivings and disappointments about some aspects of the Maastricht treaty and would like it to have gone much further. However, when the Bill eventually comes before the House on Third Reading and the definitive vote is taken, we shall support it, as it is the best on offer. As believers in advancing towards a more integrated Community and, we hope, ultimately a more federal one, we think that the Bill offers the best prospect at present. I am sorry that the Labour party's views on that issue are not equally clear. Its attitude will not help the political process over the coming months.

Mr. Stephen Milligan (Eastleigh)

Will the hon. Gentleman explain why, talking of the Danish referendum, he said that politicians and bureaucrats were running ahead of the people, when his party advocates a more federal Europe and believes that the treaty should have gone further?

Mr. Kennedy

The hon. Gentleman will be aware that we are also advocating a referendum. Therefore, although we have a clear wish and intention on how we would like Europe to develop, and how we see this country's role in it, we believe that the question should ultimately be put to the people at the ballot box. We could then argue our case for this country; if we can persuade people to agree with us, so be it. Even if we do not succeed, it is healthier for Europe if the public are able to have a direct say on the subject.

I should like to return to the speech of the right hon. Member for Gorton, and perhaps the hon. Member for Hamilton (Mr. Robertson) will intervene. The time scale suggested by the right hon. Member for Gorton was unfortunate. I followed his speech with care until I heard the unmistakable sound of the clock striking 13. When he seemed to argue that, if Finland and Sweden entered the Community—presumably, by the end of the calendar year in time for a Hogmanay party—Denmark might be favourably disposed to ratify the Maastricht treaty early next year. I do not know how frenetic a pace of diplomatic activity the right hon. Gentleman thinks there will be over the next six months, but it is stretching credibility beyond all known bounds to suppose that Finland and Sweden will enter the Community within the next six months. I do not think that the Government are seriously exploring that option.

The Maastricht treaty follows logically from the Single European Act. That is why it is strange that the Joan of Arc cum rottweiler, who has been set loose in the House of Lords today, takes such exception to the treaty. She was the one who, as Head of Government, pushed the Bill through with a guillotine and a three-line Whip and curtailed discussion of it. If she is looking for someone to blame, she should look in the mirror.

Whatever the treaty's shortcomings, such as opt-out clauses and inadequate internal European democracy, if one takes the Thatcherite critique of bureaucracy in Europe—some of which I agree with—there is a logical corollary. The natural consequence is surely that more power should be given to the European Parliament to ensure more accountability. I do not think that it is more democratic to try to achieve that on an intergovernmental basis—the policy to which the Government presently adhere.

I hope that during the next six months sterling will come into the narrow band of the exchange rate mechanism. Perhaps in the autumn a White Paper will be presented on an independent Bank of England, and perhaps the single market will be completed to benefit this country, as well as our trading compatriots and competitors.

The Maastricht treaty is positive in that it establishes the basis of a common citizenship across Europe. When one considers the widening of Europe—the enlargement on which the Prime Minister places such stress—we see the problem that the Government created for themselves at the Lisbon summit on the issue of linked cohesion funds. That issue will not be finally settled until the Edinburgh summit at the end of the year.

The Government must acknowledge the suspicion of some of the other European countries that the British adherence to enlargement as a way forward is also because they view it as a braking mechanism to slow down the pace of existing Community integration, which is unfortunate. If the Government are serious about enlargement, they cannot continue to set their face against additional cohesion funds to make enlargement worth while and economically possible for the poorer states in the Community.

The Foreign Secretary touched on the issue of subsidiarity. As my right hon. Friend the Member for Yeovil (Mr. Ashdown) is saying somewhere else today, subsidiarity is the flip side of federalism. In a recent radio interview, the Foreign Secretary was decent enough to acknowledge that federalism means different things to different people in different parts of Europe. I bemoan the fact that, in this country, federalism has become associated with a mythical super-state in which Jacques Delors and various unaccountable bureaucrats impose foreign designs on Britain.

Our view of federalism is much more in line with mainstream European thinking —that federalism involves the very diversity of power and structures mentioned by the right hon. Member for Guildford. We would like it to go further. I do not understand how subsidiarity can stop at the English channel or how its logic can be denied within the United Kingdom, whether with regard to Northern Ireland, Wales, the regions of England or to Scotland, which is my concern, as the Minister will understand.

We want an end to existing divergence and the establishment of commonality throughout the Community with regard to the voting system that will be used for the next set of European elections, and I am sorry that the Foreign Secretary did not mention that. Within the United Kingdom we have conceded the principle of proportional representation for European elections, in Northern Ireland. Why is that not being extended to other parts of the United Kingdom? I hope that the Chancellor will refer to that in his winding-up speech.

The next intergovernmental conference in 1996 will discuss the Community's development to the end of the century and beyond. One suspects that many of the issues touched on by the Foreign Secretary will still be on the agenda then. Prior to any greater enlargement of the Community, and any IGC of the type that led to Maastricht, surely there is a case for a wider European convention to consider the democracy of Europe, the enlargement of Europe, the development of a future foreign policy for Europe and all the rest. There should be a convention to attempt to bring policy closer to the peoples of Europe and perhaps to test any decisions that have been reached by a Europe-wide referendum.

On referendums, the Prime Minister has upped the temperature in the past week on securing the success of the Maastricht Bill. He is right to do so and I want the Bill to get through. However, in this House, perhaps as a result of parliamentary pressure exerted in another place, it may be politically unwise for the Government to set their faces completely against a referendum, if they want the Bill to get on to the statute book. It would be far better to concede a referendum than to lose the Bill, if the arithmetic proves to be that tight later this year.

Mr. George Robertson (Hamilton)


Mr. Kennedy

Perhaps the hon. Gentleman will clarify Labour's policy on the matter and we shall find out exactly how tight the arithmetic will be.

Mr. Robertson

No, I am going to ask the hon. Gentleman to clarify one interesting issue. Last December, the Liberal Democrats were in favour of the social policy opt-out in the Maastricht treaty. In their general election manifesto, they said that they were against a social policy opt-out. Now they do not seem to have any views on the matter. In December, the leader of the Liberal Democrats called for a referendum; in the general election manifesto, which was one of the longest and fanciest that the party has produced, there was not one word about a referendum. Here we are in July and they are again in favour of one. Why all that moving around in between?

Mr. Kennedy

I do not think that there has been as much movement as the hon. Gentleman suggests. If any hon. Member is interested, I believe that back copies of our manifesto are available and I may be able to get them at a knock down price.

Mr. Robert Hughes

You can get them all at bargain basement prices.

Mr. Kennedy

Knocked down, if not dragged out.

I referred earlier to our disappointment with the British opt-outs on monetary union and the social dimensions. We have also had reservations about aspects of those, which the hon. Member for Hamilton (Mr. Robertson) has heard our party leader express in this House and elsewhere. On his second point, it does not matter whether the referendum appeared in the manifesto, because we have always said that a post-legislative referendum on measures that involve constitutional change is the sensible course of action. That was the case in 1975, with the renegotiation of our original entry in to the then Common Market by the Labour Government, and on Welsh and Scottish devolution in 1979. That is an effective and sensible way forward.

If the Government are going to the edge—and the parliamentary arithmetic is tight—I hope that they will not go over the edge and take the Maastricht Bill with them, by resisting the case for a referendum, should it be tabled in an amendment.

The Foreign Secretary began by discussing the tragedy of Yugoslavia. Should I describe the right hon. Member for Guildford as the former Chairman of the Select Committee on Foreign Affairs?

Mr. James Wallace (Orkney and Shetland)

As the Chairman of the former Select Committee.

Mr. Kennedy

I thank my hon. Friend. The Chairman of the former Foreign Affairs Select Committee said that he would prefer Europe to develop its foreign policy through intergovernmental arrangements, rather than some super imposed blueprint. I hope that I do him justice by paraphrasing.

We cannot have it both ways. There is no point in railing about the perceived failings of a European response to an issue as important and far-reaching as Yugoslavia within the European perimeter of influence, while denying the institutional mechanisms of an emergent foreign policy that would assist this country and other European states to have a more collective and coherent response to such issues. That is why we believe that, ultimately, denial of the logic of more pooling of sovereignty and what follows from it, will be unsustainable.

We hope, therefore, that there will be political, social and economic progression for Europe and this country's role within it, during the next six months, along the lines that I sketched out. We hope that the Community continues to be a bulwark of prosperity and peace on this planet, and that the Europe which emerges by the end of the century will be fully liberal and fully democratic, as those are the best political traditions on which it should evolve.

6.26 pm
Mr. Michael Fabricant (Mid-Staffordshire)

I have the honour to address the House for the first time, and to represent the interests of the people of Mid-Staffordshire. I follow in the footsteps of two Members of Parliament. My immediate predecessor was Sylvia Heal, who sat on the Opposition Benches. She made history with the largest swing to the Labour party since the 1930s. Many people in the House and in the constituency found her a charming person. When she was elected, she said that it was the death knell of the poll tax, and she was right.

I also follow in the footsteps of John Heddle, a man whom many of us remember. He first entered the House in 1979, as the Member for Lichfield and Tamworth, and then became the first Member of Parliament for my constituency following the boundary changes in 1983. John Heddle was well loved in the House—I think on both sides —and he is certainly still loved in Mid-Staffordshire, and well remembered. His spirit lives on.

Mid-Staffordshire is an odd shaped constituency. It is approximately 34 miles long and four miles wide; it follows the Trent valley; and it is shaped rather like a fruit; I like to refer to it as my very own banana republic. It starts with Lichfield in the south, which is a unique city in Great Britain. It is a popular tourist town and has a unique cathedral with three towers. I know that it is the only cathedral in the United Kingdom with three towers; and the only other cathedral like it in the world is in Cologne. I believe that it is also unique in having two gold maces. Lichfield has spawned many famous sons—Dr. Johnson, David Garrick, and Erasmus Darwin.

Moving further north in my constituency, we come to the industrial towns of Rugeley and Armitage, which is famous in this place and throughout the world for its toilet ware. The market town of Stone is further north and serves many of the surrounding villages.

Last Friday I went to a Petertide festival in my constituency in a little village called Hixton, where Britain's entry into Europe was being celebrated. I went into the church, and children from the local primary school were busy singing songs from different parts of Europe—from England, France, Germany, Portugal, Spain and Greece. In doing so they reflected the myriad different forms of culture and style that we enjoy as a part of Europe. I have, however, a great fear, a great apprehension, and I hope that my right hon. Friend the Chancellor of the Exchequer will be able to reassure me in winding up that we are not heading down a road towards a European super-state.

Before I was elected to this place, I travelled the world selling radio studio systems and other electronics equipment; I travelled extensively throughout Europe, Africa, the Far East and the Soviet Union. I was particularly interested in life in the former Soviet Union. There, despite all the power of the KGB, despite having a single language forced on its peoples, and despite having a single legal system, the country fell apart. We see as well what is happening in Yugoslavia, and even in Czechoslovakia, which has a democratic tradition; there too the country is divided.

I believe that if we are heading, as I hope we are not, towards a European super-state, a political union, it is doomed to failure, whether it happens in one year, five years, 10 years or 50 years. I believe that a super-state would be intrinsically unstable and would explode at some time, at great cost to the peoples living in Europe.

I congratulate my right hon. Friends on the introduction of the concept of subsidiarity in the Maastricht treaty. That concept is the very bedrock of our statehood and our sovereignty. I hope that my right hon. Friend will be able to reassure me that the bones of subsidiarity will be built upon and that before we adopt the Maastricht treaty, or any other similar treaty, there will be some form of codicil to the treaty—I do not know how it can be done—which will clearly define, not through examples, but legally, irrevocably and unambiguously, what we understand, and what I hope our 11 partners understand, to be the meaning of subsidiarity so that there can be no doubt. I believe that, if that could be done, there would be tremendous support for the treaty, with its additional codicil, from Members on both sides of the House.

I believe that the single market, too, is something that we must build upon, and that the considerable strengths, personality and ability of Jacques Delors should be directed to that particular sphere. I can tell the House from my own experience that it is easier to sell to countries such as Norway, Kenya or Indonesia, which are not members of the European community, than it is to sell into the European Community, because of the huge weight of paperwork that is still involved in selling from country to country. We must try to eradicate this.

We see European law regarding environmental protection coming into force and on the whole it seems to be rigorously enforced more or less equally throughout the 12 states. I am pleased to see my right hon. Friend the Chancellor of the Exchequer on the Front Bench, because there is also an imbalance caused by the fact that in some of the member states of the European Community there are subsidies in the form of tax breaks or grants to help companies get through the transition period, with the heavy costs that are involved in refurbishing their plants to meet environmental directives. I hope that we too can do something to assist our industry, to ensure that there is a level playing field.

I recognise that we have adopted the Single European Act. We are signatories, in effect, to the treaty of Rome. But it is my great hope that we will not become a lost, far-flung outpost of a new Roman empire.

6.36 pm
Mr. Peter Shore (Bethnal Green and Stepney)

It falls to me to be the first to congratulate the hon. Member for Mid-Staffordshire (Mr. Fabricant) on a truly admirable maiden speech. He has pleased the House, I believe, in many ways, but first because he has paid a very generous and well-deserved tribute to both his predecessors: to Sylvia Heal, for whom the Opposition in particular have affection and who I know is also greatly respected by the rest of the House; and to John Heddle, her predecessor, who was a well-respected, well-liked Member of the House.

The hon. Gentleman has also done right by his constituency. He has paid a tribute to his constituents and illustrated the diversity of his constituency. Indeed, he has convinced me that it is indeed a unique place, not only because Lichfield produced Dr. Johnson and Garrick, but also because the hon. Gentleman witnessed there a celebration of the entry into Europe of the United Kingdom. That really was a unique occasion—certainly one that I have not come across in the whole of my political life.

The third thing on which I want to congratulate the hon. Gentleman is the seriousness of what he had to say to the Government about a European super-state. He is quite right to ask for reassurance that we are not heading in that direction, and he is absolutely correct when he says that the ultimate lunacy for this country would be to end up as an outpost of a new Roman empire. We are a country that has enjoyed its independence longer than any other country in Europe and we must maintain that independence until the end of time.

I congratulate the hon. Gentleman and hope that we shall hear from him again on many occasions.

In the debate I have been struck by the optimism with which Government Members have looked upon the situation in the European Community as we take on their presidency. The right hon. Member for Guildford (Mr. Howell) was being very optimistic indeed when he spoke of the intellectual supremacy that the decentralisers had gained in the debate, and his vision of a future in which all centralising tendencies have been not only checked but reversed. I hope that that will prove to be so, but it is very premature to say that it has been achieved.

The Government have also been extremely optimistic about the major item on their agenda: the widening of the membership of the European Community. I believe that the Danish referendum has brought the European juggernaut to a stop. The Maastricht treaty cannot be enacted because under, article 236 of the treaty of Rome, any amendment to the Rome treaty requires unanimity.

The precise words are that it can come into force only after being ratified by all the Member States in accordance with their respective constitutional requirements. We know what the constitutional requirements are in the country of Denmark.

The Community's reaction—and I do not entirely exclude the Government from this, certainly at the highest levels—has been to try to circumvent the issue—my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman), the shadow Foreign Minister, used the rather vivid metaphor about messes on the pavement—to avoid and skirt round it altogether, or to pretend, as many in the rest of the Community do, that what happened in Denmark did not happen at all.

I was worried by certain words in the Lisbon communique right at the beginning which touched on that very matter. It read: the European Council underlines the importance of respecting the timetable laid down for ratification to ensure"— and then the words: in any case the entry into force of the Treaty as of January 1st 1993. What do those words "in any case" mean—entry into force as of 1 January "in any case". That may be simply a slip, it may be bluff, or it may contain an implicit threat. I hope that it is not an implicit threat and I hope that we can have the Minister's complete assurance of that, emphasizing what in part the Foreign Secretary said earlier—that the British Government have no intention whatever of seeking to circumvent article 236 of the Rome treaty and going ahead in some new way to try to achieve the goals of the Maastricht treaty, as it were without the Danes.

The Danes have also had the effect of greatly reducing the prospects of early enlargement. I know that informal negotiations can take place—that is obvious—but, as the presidency conclusion put it: the official negotiation will be opened immediately after the Treaty on European union is ratified and the agreement has been achieved on the Delors two package. Both those things must be put into place before the formal negotations can take place and the desired enlargement will follow.

We must recognise that enlargement may well have to wait a long time. The Danes are in no mood to change their minds. I had the opportunity of being in Copenhagen last weekend and talking to those who played some part in the referendum campaign. They told me, and I have no doubt that it is correct, that the latest polls in Denmark show that if there were to be a referendum now not just over 50 per cent. would vote no but 60 per cent. or more. There has already been a shift of opinion in favour of the position that has been taken up.

That is interesting because it has occurred despite the many threats that were brought to bear against the Danes during the referendum campaign. They were threatened with a loss of jobs, their possible expulsion from the Community and the arresting of the flow of investment and subsidies under the CAP. Mr. Delors himself gave tongue to some of those threats about agricultural support and subsidies. All those threats were there, but they did not make the Danes vote yes.

Now that those threats have been shown to be bluff, I think that we shall find that the Danes will maintain their position, and maintain it strongly, for a considerable period ahead until some major changes have been made either to the treaty as it affects Denmark or in the treaty itself.

Mr. Tony Banks

My right hon. Friend has probably just answered the point, but I was about to ask him to recall the Foreign Secretary's words in opening the debate when he said that the Danish Government have asked for more time. For what does my right hon. Friend think that the Danish Government want more time?

Mr. Shore

I think that they are puzzled and perplexed about what they should do now. They cannot go back to their electorate and say that the electorate have got it wrong, that they miscounted or did not listen carefully enough to what Mr. Delors was saying. There must be some reason for having a second referendum. That reason must come from a carefully drawn Danish protocol which exempts them from those provisions in the Maastricht treaty to which they must object, or there must be some more general reconsideration of the Maastricht treaty.

It is no good us putting our heads in the sand and saying that all those things can be brought about quickly and that the process of the Community's enlargement can go full speed ahead. It cannot, for the reasons that I quoted. Maastricht must first be signed and ratified by all the countries, and that cannot take place for at least a year. If anyone is thinking of serving up again the European Communities (Amendment) Bill without the Danes having had a chance to reconsider their views, they are simply asking for trouble and they will be wasting the time of the House of Commons.

What the Danes have done is to give everyone in the Community, not just themselves, a chance to reconsider the Maastricht treaty and to think carefully about just what the governing elites have committed them to in the terms of the Maastricht treaty.

Is it not fascinating to see that in Germany the almost immediate reaction was that people started asking what German public opinion had to say? They have found out to their immense surprise that about 80 per cent. of the German people do not want to give up the deutschmark, and some of those will insist that their currency is not surrendered to the ecu and the EC.

I do not know whether France was contemplating a referendum, but it is interesting that, as soon as the Danish result was announced, Mr. Mitterrand decided that France had to have a referendum too. Although on current indications it appears that the French would say yes to the present treaty, there is a long time to go and Mr. Mitterrand, with all respect to him, is a somewhat diminishing asset in French politics.

In Britain, the Danish referendum has produced an extremely interesting result. In both our major parties—I am not sure about the Front-Bench spokesmen—there has been a major reconsideration of the wisdom of the positions that have been taken up. There has been an open debate. At last people are turning their minds to what is involved and whether it is harmful or beneficial to the British people. In the Conservative party, as we well know, only 22 Members voted against the European Communities (Amendment) Bill on Second Reading, but if that Second Reading had come after the Danish referendum, nearer 80 or 90 would have voted against it.

That changing opinion is going on dynamically within the two major political parties and in the country as a whole. The country is beginning to wake up. One of the great things about the Danes is that they made the treaty available to their people. It went to every household. They could read it and see what it was about, and that produced the resistance. They did not receive any encouragement from their press, television or radio, but they saw what the treaty implied for them and they were not going to have it. I have a strong feeling that, if we were to give our own people a fair summary of what is involved in the treaty, British opinion would be equally strongly opposed and a referendum would result in a no vote for the United Kingdom.

It is in the face of that change of opinion in Britain that the Government are seeking to persuade people on both sides of the House and everywhere else that the treaty does not do what it does but something very different; that it is a treaty not about further centralisation but about decentralisation—stopping, reversing, the very process of which the country is afraid. I find that astonishing.

It is no use people saying, "If only you could leave out of consideration economic and monetary union, it is possible that there could be a trade-off between some functions reverting to nation states and others passing to the Community," because EMU is at the heart of the treaty. I refer to the transfer from the nation states of Europe of their decisive remaining powers over the conduct of their own economies to a European central bank, and the use of a single European currency.

All the powers that we used to exercise and exercise now to control our own exchange rate and interest rates, and even the basic Budget judgments of successive Chancellors as to the balance between expenditure, revenue, and public sector borrowing will go. In terms of centralised decision-making, it will be the greatest step forward since the Rome treaty was signed in 1957. It is the biggest change ever—and I understate the situation rather than overstate it.

The Government are in some ways in a better position than my right hon. and hon. Friends. The Government can say, "We have not yet signed up to economic and monetary union. We have our opt-out clause." What worries me is that I do not think that they will operate it. My right hon. and hon. Friends are willing to see the transfer of crucial economic powers to a European central bank without exercising any political control, and the introduction of a single currency—and so deny themselves the remaining powers that might influence the level of unemployment in this country and many other things as well. They are prepared to give that up. I find that amazing.

I hope that that feeling will grow steadily on these Benches and that, when the time comes, we shall make known our feelings about the whole treaty. If the Bill ever reaches Third Reading, I have no doubt that, in all conscience, the Labour party must vote against it.

When one examines the concept of subsidiarity, many people can mount a considerable exegesis against it. I will draw attention to some aspects that I find very odd, but. before I do so, I will quote one or two people whose opinions on article 3b should be taken seriously.

I read recently a publication published by the Society of Conservative Lawyers, "Europe and the Constitution after Maastricht". On subsidiarity, it concluded: The doctrine of subsidiarity is, without profound institutional reform or changes of attitude or both, virtually worthless as a protection against further unwanted expansion of the European laws and institutions into further aspects of our national life. That is not an isolated opinion. I am sure that other right hon. and hon. Members read the comment by Lord Mackenzie-Stuart, recently president of the European Court of Justice, that the treaty definition is a rich and prime example of gobbledegook embracing simultaneously two opposed concepts of subsidiarity. To regard the chosen formula as a constitutional safeguard shows great optimism. That opinion must be taken seriously.

I quote also from today's edition of the Financial Times, which is usually fairly friendly to the Government—[HON. MEMBERS: "No."] It has much higher intellectual standards than are usually applied by newspapers loyal to the Government. That newspaper described article 3b as "an intellectual jellyfish". I would adopt much more moderate language. The definition is a constitutional placebo. It is meant to give people the illusion that they are being treated for a serious condition when all that they are getting is some pink medicine in a bottle. It will not achieve its aim of quelling the anxieties of the Danish people or those in Britain who oppose European centralism.

Article 3b states that, in areas outside its exclusive competence, the Community shall take action, in accordance with the principle of subsidiary, only if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of proposed action, be better achieved by the Community. Sufficiently achieved or better achieved—it is pretty open. It is all a question of judgment, as it must be.

When I read those words, I wondered about defence procurement. Can the European fighter aircraft be sufficiently achieved by the member states, or could it be better achieved by the Community? If the latter, should we transfer defence procurement to Community level? What about defence generally? Is defence better achieved by a collective effort rather than by individual efforts being brought together?

Mr. Hurd

The right hon. Gentleman shows that he does not understand the point. Defence is not within the competence of the Community, and therefore the treaty's articles do not apply. That is made perfectly clear. The danger that the right hon. Gentleman suggests cannot arise.

Mr. Shore

I ask the right hon. Gentleman to think a little more carefully. I was speaking about defence procurement.

Mr. Hurd

And then about defence.

Mr. Shore

I went on in that way. I understand the right hon. Gentleman's pillars, and so on; I am well instructed in these matters. I gave an illustration in terms of defence procurement, which I ask the right hon. Gentleman seriously to consider.

The crucial question about subsidiarity is who decides. Will it be the nation states or the union? We know that it will in the end be the European Court that decides—and it is part of the union's supranational machinery, I have little doubt which way its judgments will incline.

I would like the right to decide what is appropriate for my region and local area. Such matters are not for the Community but for the House to decide—freely, in debate. Implicit in the doctrine of subsidiarity is the higher tier of Euroepean government to which things will be transferred that are appropriate to that level—such as the single currency. a central bank, and so on.

The attempt to define subsidiarity will be abortive. It will be difficult to define that slippery word in any meaningful way. It would be better if the Government put more firmly and in a more central place on their agenda items with which they could conceivably make progress. I wholeheartedly welcome the successful completion of the Uruguay round, although we know perfectly well that one of the principal obstacles is to be found within the Community itself. It will take enormous effort to persuade certain nations to reach a reasonable compromise with other GATT members.

My right hon. Friends the shadow Chancellor and the Leader of the Opposition suggested, when responding to a recent statement by the Prime Minister, that we ought to pay more attention during our presidency of the Community to its main economic, social, and political problem. I refer to the mass unemployment that afflicts not only this country but virtually every member state except Germany. Let no one have any illusions about unemployment levels and the length of time that they have endured in France and Italy—which have benefited enormously from being ERM members for 10 years. Those countries have suffered. Germany is the country that has gained most.

What can we do? I am pretty certain that two factors are helping to make deflation worse. One is the fixed parities that we have under the ERM. It seems to me that there is no doubt that many countries in western Europe —I exclude Germany—would benefit enormously if they could lower their interest rates and provide their entrepreneurs with some prospect of success. But we cannot lower our interest rates because of the effect that that would have on our exchange rate parity. The Government know that, as all Opposition Members know it, or should know it. As we are members of the ERM and have a fixed parity, we cannot lower our interest rates. That is a major deflationary factor operating now, without any further progress into economic and monetary union.

That brings me to the second factor. We are in the first stage in economic and monetary union. Indeed, the second stage will begin on 1 January 1994. The objective throughout Europe is to achieve a degree of convergence, above all in interest rates and exchange rates, and steadfastness in the control of borrowing and the avoidance of an excessive deficit. That pressure is on now. Over the next few years, all of Europe, including Britain, will have cuts in public expenditure designed to bring us within the parameters of convergence set in the treaty. These are major problems. We face them now, and. in my view, we must think very seriously about what we are entering into—quite apart from that to which we have already committed ourselves in the ERM.

Surely there is a solution. Surely we ought to be helping to promote a currency realignment within the ERM. That would be of great benefit to Britain and to all the other countries in Europe, apart from Germany, which are suffering from deflation and high unemployment at present.

Those are the things which I urge upon the Chancellor of the Exchequer, whom I am glad to see on the Government Front Bench, and which I urge equally strongly upon Opposition Front-Bench Members, who, I know, want to do the best for the people of this country but, so far, have been sadly misled by the claims made on behalf of the authors of the Maastricht treaty.

Madam Deputy Speaker(Dame Janet Fookes)

Before calling the next hon. Member, may I remind the House that the 10-minute rule is now operating? As very many hon. Members wish to speak, it would be even more helpful if speeches were to take less than 10 minutes.

7.2 pm

Sir Peter Hordern (Horsham)

The right hon. Member for Bethnal Green and Stepney (Mr. Shore) has made many speeches on this subject, and on this occasion hon. Members listened to him with their usual attentiveness. His criticisms of the Maastricht treaty might well have been made in respect of every single process, and in every period, of the European Community. I have heard before from him many of his remarks. I heard what he said when the Single European Act came into force and what he said at the time of the referendum.

But recently, because of the Maastricht treaty, there has been a change in the course of the debate. There is now concentration on subsidiarity—a question with which the right hon. Gentleman dealt at some length. My right hon. and hon. Friends will know that some months ago we were told that the course of the European Community could be likened to that of a train. We were told that we should be careful not to be left off it. I maintain that the progress is now more akin to that of a car. A number of people are warning us that a motor car is a very dangerous thing. They are right to warn us, but they should not do so by walking in front of the car and waving a red flag, or by wearing sandwich boards telling us that we should all repent while we can.

It is very important to be able to drive a motor car. We have been in the European Community for a very long time, and there are considerable benefits to be derived from membership. I believe that the argument should not be based entirely on constitutional matters. In this connection, it appears that the lawyers cannot agree with each other—but that is nothing new. We ought to accept that the Danes have done us a service. Of course, it is true that the Maastricht treaty itself has not changed, and that at the Second Reading stage the majority in favour of the treaty was very substantial. But there is no reason for not looking very carefully at the consequences of the treaty if and when it comes back for its Committee stage.

During our presidency we shall have an opportunity to define very carefully the areas of subsidiarity. That would do more than anything else to settle the doubts and difficulties of many people. If Ministries, not only in this country but all over Europe, were instructed to find practical examples of the areas in which they believe national Governments would operate best, leaving other areas—probably relatively few—in respect of which the Commission could operate that would be an advantage.

Moreover, it is not right to talk just about new forms of legislation. Existing European legislation too should be looked at with a view to seeing what could be done by national Governments rather than by the European Commission.

Mr. Cash

Will my hon. Friend give way?

Sir Peter Hordern

I know that my hon. Friend is anxious to interrupt, but I hope that he will forgive me if I do not give way. I want to make my speech as quickly as possible. This is one of the difficulties about the 10-minute rule. I will give way to my hon. Friend, but not just at the moment.

My right hon. and hon. Friends in the Government have a real opportunity, during the next few months, to spell out very carefully the points arising from subsidiarity. The views of the Society of Conservative Lawyers and of Mr. Martin Howe on the matter of subsidiarity have been mentioned. Having read what was said by Mr. Howe, I can say that his particular objection to a European central bank and a single currency is that they would represent a significant loss of sovereignty. I realise that this is a matter of deep concern to many hon. Members.

Somehow the impression has been given that a single currency and what is seen as a loss of sovereignty are entirely new. Let me remind the House that ever since the days of Robert Peel—for 150 years, since we first went on the gold standard—Parliament has willingly abandoned the sovereignty attached to our own money and co-ordinated it precisely with the value of gold. In effect. we were saying that the value of our currency was dictated by Californian, Australian and South African gold miners. And that was during the heyday of the Victorian empire. Nobody then criticised us for losing national sovereignty.

The right hon. Member for Bethnal Green and Stepney will know very well that, after the war, we were subscribers to the Bretton Woods agreement. The pound was indissolubly linked to the American dollar. That continued for very many years—indeed, until Harold Wilson's Government withdrew, and there was difficulty about devaluation. But that is a matter that I will not go into now. The point is that, during the period to which I referred, the pound was linked indissolubly to the United States dollar, and the value of the dollar was set by the Federal Reserve Board of the United States, which is entirely independent of the United States Government.

Mr. Lain Duncan-Smith (Chingford)

Does my hon. Friend agree that one of the great lessons to have been learnt from that system is that the collapse of the United States dollar's value gave rise to great strains, problems and tensions, not only for the United States but for the economies of all the other countries? We learned that a floating currency was essential.

Sir Peter Hordern: For a long time I would have agreed with my hon. Friend, but I regret to say that that is not the case now. Perhaps we chose to link ourselves with the wrong standard, although it worked very well for many years. Let me remind the House of what the conditions were during most of the post-war years. At that time inflation averaged about 3 per cent., and long-term interest rates were 5 per cent. As recently as 1963 a 20-year bond was yielding 5 per cent. That was the level at which people and Governments could safely borrow.

Of course there are disadvantages in being linked to a firm currency, and I do not deny that the German mark has a good deal more to say for itself than the American dollar. All I can say to those who talk of a loss of sovereignty, however, is that we have been at it for a long time in the past, and have done very well out of it. There is a great deal to be said for being able to engage in long-term borrowing at low interest rates. I consider the link with the European exchange rate mechanism very valuable, for reasons that have nothing to do with European-ness but everything to do with controlling inflation.

It is, of course, difficult to see how some of the criteria mentioned in the protocol for arriving at a single currency can be followed. There is, for instance, the idea that the financial deficit must not be more than 3 per cent. of gross domestic product: the Italian deficit is 11 or 12 per cent. and climbing, and for most of the time Italy has no Government. There is the idea of establishing a wider Community by including first the EFTA countries and then Hungary and Czechoslovakia, with their enormous deficits. It is hard to see how the timetable set out so clearly in the protocol can possibly be achieved.

My hon. Friend the Member for Stafford (Mr. Cash) said, "Ah, but it is in the treaty." I believe that that is the way in which constitutional lawyers think: they think that because a certain figure—3 per cent., for instance—is mentioned in the treaty, it must come about.

Mr. Cash

My hon. Friend has talked of sovereignty, but he has skated over the fact that, during the time to which he referred, we had a political system—which we want to retain—in which the ultimate decisions were made in the House, on behalf of the people of this country.

Sir Peter Hordern

I fear that my hon. Friend was not listening; I suggest that he read Hansard. My point was that, when we were tied to the Federal Reserve Board of the United States, no one accused us of losing sovereignty. [Interruption.]

Madam Deputy Speaker

Order. I am sorry to interrupt the hon. Gentleman, but we cannot have an undercurrent of conversation while an hon. Member is addressing the House.

Sir Peter Hordern

I understand the concern that is felt about economic and social cohesion. I consider it much better to deal with such matters by means of investment than by means of transfers of taxpayers' money, and I note that the far east seems to have more cohesion at present than any other part of the world. The Japanese would never dream of handing over taxpayers' money to foreign countries throughout the far east, which is growing more rapidly than any other area. Instead, it invests massively in countries such as Thailand—

Madam Deputy Speaker

Order. I am sorry, but the 10-minute rule must operate firmly.

7.12 pm
Mr. Mike O'Brien (Warwickshire, North)

I want to address two issues that were raised by the Foreign Secretary and my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman). The first is the situation in what was formerly Yugoslavia, and the approach of the EC and Britain to intervention there; the second is the question of ratification of the Maastrich treaty following the Danish referendum.

It was inevitable that the break-up of the Communist regimes in Yugoslavia and eastern Europe would lead to conflict. Too many people were going to find themselves inside borders that they rejected. The process of unravelling the problems of Communism may well take many decades; in the meantime, we shall undoubtedly witness much human suffering until the various communities have sorted out a relationship and borders within which they can live. It is right for the Government to be reluctant to intervene militarily in that process.

In the United States, the influential senator Richard Lugar, minority chair of the Senate Foreign Relations Committee, has called for force to be used in Bosnia. I understand that he discussed the matter with the Prime Minister recently and that the Prime Minister urged caution. The right hon. Gentleman was right to do so. Too often in the past, the Americans have sought to go in and impose a solution, and in Yugoslavia such action could be disastrous. Nevertheless, it is possible to foresee circumstances in which the level of killing will reach such a scale, and the abuse of human rights will become so awful, that some kind of intervention would be required.

I hope that—unlike his predecessor, who is now in another place—the Prime Minister will not feel obliged just to follow the United States. It must be clear to people in this country that, if we come under pressure in the next few months, we should not be involved in any intervention except under United Nations auspices—not the auspices of the Western European Union or the EC. Intervention must be for humanitarian and not political purposes; it must be restricted to the protection of life, rather than the imposing or deposing of any regime; any military intervention must be at the minimum level necessary to secure a limited humanitarian objective; and intervention should take place only after the failure of all other diplomatic methods.

Like many other British people, I know Yugoslavia only from visits to it—holidays, for instance. It is not "a small country, far away, of which we know little". Many British people will feel genuine concern for the suffering of people in towns such as Mostar, Sarajevo and Dubrovnik, and will know those places from personal experience. The United Nations may well need to take action at some stage. At that stage Britain should be supportive, but such action should be taken cautiously and with reluctance.

At a time when all eastern Europe is in flux, it is even more important for the countries of the European Community to provide a bulwark of stability and reassurance for those beyond their borders. That brings me to the second issue raised by the British presidency. Is the Maastricht treaty to be ratified before the end of the year, following the outcome of the Danish referendum?

The British presidency is in an embarrassing position: it will not be able to carry all members of the Government's party with it on ratification. That difficulty, however, is entirely of the Prime Minister's own making.

Opposition Members take a certain pleasure in observing the withdrawal of the European Communities (Amendment) Bill, and then seeing the Prime Minister threaten his own side with resignation if the Back Benches do not support him later in the year. It is significant that, when offered an opportunity in the House recently to say that that was not his position, the right hon. Gentleman did not take it.

Maastricht is such an important issue that it is incumbent on a national leader to prevent himself from getting into such a situation by ensuring that there is a broad national consensus in favour of his approach to such a crucial matter. There was potential for a statesman to see a broad consensus across party lines; after all, did not Labour fight the April election on a manifesto that was more pro-European than the Tory manifesto? We wanted Maastricht plus the social chapter. Instead of creating a consensus, however, the Prime Minister took a narrow view, which he outlined in the House on 20 May. He declared then that his Bill was based on Conservative principles.

That failure to reach out beyond the needs of the business community is the central failure of the Government's position. The Maastricht Bill had to be withdrawn because it went no further than the boundaries of the Conservative view of Europe, and the Government could not rely on securing the votes to ensure its passage. That is why Opposition Members who accept that the Maastricht treaty—as signed by the majority of European states—is worth while are unable to support the Bill that the Prime Minister seeks to take through Parliament That Bill leaves British workers with fewer rights than European workers. Perhaps inward investment will come to the United Kingdom because of a freer market, but the worst business men always create sweatshops and like less regulation. The best business men ensure that they provide good conditions on which to give workers a real investment in the future. Labour has decided not to vote for a sweatshop Britain. The social chapter opt-out means that that is what Britain could become. In our view, Europe must be more than a Europe of bankers and business men. It must be a Europe for working people, too.

At the centre of the European ideal must be the desire to reach out to everyone, to ordinary people, and to say to them, "You are part of this, too. The opportunities are yours and the benefits can be yours." It must not be a Europe for the few, in which the many benefit only from a trickle-down theory of economic prosperity. If we are serious about Europe, we must show that it reaches out, touches and benefits everyone directly by improving standards in the workplace.

The Prime Minister's Maastricht is therefore a polo mint treaty: the middle has been knocked out of it. The centre is missing. The social chapter was a way of making that agreement beneficial, in real terms, to everyone. That is why, as the Prime Minister struggles during the presidency to find a way out of the Maastricht dilemma, he should seek no succour from this side. The Prime Minister's view of Maastricht is too narrow and too mean for us to give him succour.

If the Maastricht Bill is not approved by the House by the end of the year, it will be the Prime Minister's fault. There need be no rush by the Opposition to set out our view on all the issues, such as a referendum. Let us wait and debate the issue. Let us watch the Prime Minister's discomfort. But let us be clear: Labour should not vote against Maastricht if the Danish problem can be resolved. The temptation to do so for tactical gain must be resisted.

Labour Members of Parliament were elected on a pro-European manifesto. To abstain because the Government's Bill is a narrow, mean document is one thing. To vote against a treaty that Labour could have supported by opting into the social chapter would be wrong, in the light of our manifesto commitment. It would raise the whole question of Labour's sincerity on Europe. It would also mean voting against some of the benefits that Maastricht still brings, despite the Government: majority voting in the Council of Ministers on various issues that could benefit British workers; increased democratic accountability through the European Parliament by its scrutiny of the budget and its approval of the President and the Commission. Labour would also lose the option of, perhaps, one day ensuring that the social chapter becomes law. We should also be voting against the principle, which I believe is important, of subsidiarity.

On Monday the Prime Minister committed the British presidency to defining what he called in the House the general principle of subsidiarity. Subsidiarity is now at the centre of what he will try to achieve during the next six months, but he should have found out what it means before he signed the treaty. His failure in negotiating the treaty was due to the fact that before he signed it he did not seem to know what subsidiarity meant, and now—

Madam Deputy Speaker

Order. I am afraid that the axe falls impartially on both sides of the House.

7.22 pm
Mr. James Hill (Southampton, Test)

I heard with horror in this Chamber a few weeks ago that we are going to have Delors for another two years. Knowing the man as I do and the work that he has done in Europe and knowing also that each Head of State elects his Own Commissioners and that there are 17 Commissioners, I ask, "Is there no talent there? Is there no contest at all?" Will Mr. Delors want another two years at the end of the next two years? I was amazed when I heard that Mr. Delors was our choice. I do not blame the Treasury Bench. It was a fait accompli in Lisbon. There was no other candidate for one of the supreme jobs in Europe. My protest goes no further. I know now that there has to be a pulling together behind the Prime Minister while we have the presidency of the European Community. [Interruption.]

Madam Deputy Speaker

Order. There is a hum of conversation again. Those who carry on conversations while they are seated may find that it is difficult to catch my eye at a later stage in the debate.

Mr. Hill

The rejection of the M aastricht treaty by the Danish people in their referendum—the shock waves went through Europe and, luckily, through Mr. Delors as well —has brought about what I believe to be an adequate breathing space. It gives us time to reflect on the nature of the Maastricht treaty. Since the treaty was put together by several committees, it must surely be possible to polish and enhance it between now and the end of the year. We must give the Danes room to manoeuvre and time to reconsider their rejection of the Maastricht treaty. If we do not do so, there will be disharmony in the Community.

The mood of most British people is that they do not want to be ruled by a higher, centralised authority. When I was a Member of the European Parliament, we had the most terrible arguments in 1973 over a common driving licence for a Community of, as it was then, nine. There has always been disagreement. That is the crux of the problem. Euro-sceptics will, I believe, support me when I say that people want decisions at that level to be made by their own national Parliaments.

The Prime Minister, the Chancellor of the Exchequer and the Foreign Secretary are going to have a very tough six months. The Edinburgh agenda will contain some very emotive issues. We are assured that Mr. Delors and this country are now on the same side. There is an amusing cartoon in the Evening Standard today. The Prime Minister and Mr. Delors are shown playing tennis on the same side of the net. That is impossible. There will be friction and increasing disagreement as Mr. Delors gets over the traumatic shock of the Danish referendum.

Urgent consideration must be given to five issues. First, there must be minimum interference by the Brussels Commission. Britain wants subsidiarity so that power can be retained by national Governments and not given to bureaucrats in Brussels. Secondly, we all want the single market to be completed. The Twelve are desperate to dismantle trade barriers by the end of the year. That is a worthwhile goal. Thirdly, there must be a refusal to sanction increased spending; agreement must be reached about funding and about providing aid for the poorer nations. Fourthly, we want the Community to be enlarged. Britain wants Sweden, Finland, Austria and Switzerland —all European Free Trade Association countries—to become members of the Community as soon as possible.

The Select Committee on the European Communities in the other place has published a report on enlargement of the Community. It refers to the fact that, of all the nations that have applied for membership of the Community, the first application was made by Turkey, with a population of nearly 57 million. The next is Austria, with almost 8 million people who want to join, and so it goes on. The difficulty is whether to have a Community full of wealthy nations or whether the wealthy nations should support the poorer nations. One must be explicit about that in enlarging the Community, because there are already problems.

There has already been a request from Portugal for a 30 per cent. increase in the budget. That has been pushed to one side for the moment, but it will always be there. As enlargement of the Community continues, more and more money will be needed to carry out what is necessary for regional planning and development, for the transport infrastructure, new ports and shipping. That must come if one brings in the smaller nations. The difficulty is that there are two or perhaps three nations which are in a position to pay more than their percentage. The ambition to enlarge has been a problem for many years. The ambition to enlarge the Community from nine to 12 was bad enough—it was enlarged from six to nine—and at least seven other countries now wish to join.

I am definitely opposed to a referendum. We are sent to the House to make decisions. It is terribly easy to get out of making decisions by calling for a referendum, but that is not the House's way. The difficulty facing my right hon. Friends the Prime Minister, the Chancellor and the Foreign Secretary is that the Maastricht treaty must survive in a way that allows the Danes to vote on a new treaty. The newspapers are querying whether the Danes, under their constitution, can go back on their decision, but I am sure that they will be able to do so if they are offered a new, polished treaty.

Another problem is that we are to have a single market at the end of the year. The other day I said that the Institute of Freight Forwarders would certainly need some assistance in the single market. Many other categories will need similar assistance. We do not live in a world which ignores its minorities, so I plead for that assistance.

7.31 pm
Mr. Denzil Davies (Llanelli)

The Prime Minister was recently reported as describing the European Commission —no doubt in a moment of frustration—as a "voracious super-state monster". It is not only the Commission but the very notion and institution of the union which makes it a voracious super-state monster. As the United Kingdom embarks on its rather brief presidency, with its round of dinners, cocktail parties, special neckties which, we read, are being distributed by the Foreign Office for participants and, no doubt, trips to Kew Gardens for the women, the monster devours on. At Maastricht it ate practically the whole of monetary policy and gobbled up fiscal policy and, indeed, most what is left of economic policy.

While the Prime Minister was swooning—and he is still swooning—over subsidiarity and while the Foreign Secretary assured European women that he, the Foreign Secretary, was no spiv—I must say the use of that word dates him—the poor Chancellor of the Exchequer, who has never shown great enthusiasm for the monster, had an arm chewed off—or, if it was not chewed off last week, certainly it will be next week when he agrees on behalf of the Government never again to reduce value added tax below 15 per cent.

For the past 20 years I have sat here and watched three Conservative Governments, led by the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), the Baroness and the present Prime Minister respectively, sign three treaties which have all nurtured and emboldened the monster of union. I suppose one could call the 1972 treaty of Rome "Jaws 1". The oddly named Single European Act 1986, which is a treaty not an Act, was "Jaws 2". We now have "Jaws 3"—the treaty of Maastricht. The job is almost finished. "Jaws 4" will not be long—in 1998 or 1999 we shall no doubt have the final European Act, and then we can all go home.

The characteristic of the Conservative party in relation to the three acts of union has been that of self-delusion, whether contrived, artificial or real. The treaty of Rome was marketed to the Conservative party as a measure which would rejuvenate the British economy, dish the socialists and the unions and put Britain at the head of Europe. The Baroness deluded herself that the Single European Act would unleash an army of entrepreneurs into the heart of a dirigiste continent, preaching and baptising as it went. Qualified majority voting was conveniently forgotten, ignored or not noticed.

As we have heard today, the present Prime Minister and the Foreign Secretary—since the Danish referendum the poor Foreign Secretary looks as if he is suffering from what I understand is now described as post-traumatic stress syndrome—are now deluding themselves that subsidiarity will be the great vehicle for stopping the monster gobbling more and more, despite the massive centralisation involved in economic and monetary union.

The Tory party's history has been one of self-delusion all along. As for my party, many of my right hon. and hon. Friends become zealots when faced with the monster. There are still some here—perhaps two or three—who were with the right hon. Member for Old Bexley and Sidcup when he started the long march towards European union in 1972. Indeed, I believe that two or three helped to hold up the standards of legions when it seemed that the official standard bearers found it rather difficult. Some other hon. Friends joined a bit later but now they are lustily marching with the legions, singing the old campaign songs as they go to the ultimate triumph at Brussels.

To assist the Prime Minister—I hope that it will not happen—and to help the standards of Maastricht would be a mistake for the Labour party. In my humble opinion —I say this with no malice or disrespect—to do so would mean the permanent abandoning of some of the fundamental beliefs and principles which have been the cornerstones of the Labour party's political philosophy.

The demands of Maastricht are very severe. Maastricht demands a central bank as the sole controller and arbiter of monetary policy. That has never been the Labour party's policy. Maastricht demands the pursuit of price stability which in the end can only mean nil inflation, at the expense of all other economic goals, including a reduction in unemployment. Again, I submit that that has never been my party's policy.

Maastricht demands restrictions on public expenditure way beyond the restrictions of good sense and good judgement because such restrictions are to be written into the rule of law and into a treaty. Again, that has never been the policy of the Labour party.

Finally, there are the regions. We Labour Members of Parliament mostly represent the old industrial areas of Britain—Wales, the North of England and Scotland.

Mr. Enright

And Yorkshire.

Mr. Davies

I include Yorkshire in the north of England, although if my hon. Friend the Member for Hemsworth (Mr. Enright) wishes me to do so I shall mention Yorkshire separately.

The old industrial areas of Britain are declining. To alleviate and ameliorate economic and monetary union those areas would need a massive transfer of funds from the centre, such as could be accommodated only by a European income tax and a European value added tax. That will not happen.

Under the Maastricht treaty the older industrial areas of Britain get nothing, not even from the social cohesion fund. There is a fund, but it is for the poorer areas of the Community such as Ireland, Spain, Portugal and Greece. There is nothing for areas of the Community such as Wales, Scotland, the north of England—and Yorkshire—which will suffer grievously from the concentration and centralisation of currency and of power over money. We get nothing, so even on the ground of regional policy I see no case for the Labour party to support the treaty.

To add insult to injury, we shall have to pay into the new social cohesion fund to assist Ireland and Spain. The people of the declining valleys of south Wales are generous, but they will be asked to contribute to a social fund for Spain, Portugal, Greece and Ireland. If our people are to be asked to contribute to alleviate poverty I would rather we helped to alleviate the real poverty in the world—in Ethiopia, for instance, and in Mozambique, Sudan and the other countries which are really suffering.

There is nothing in the Maastricht treaty that requires the Labour party to throw overboard the fundamental principles on which it is based. Maastricht is not worth it. Let us not help the Prime Minister to carry it through.

7.41 pm
Sir Teddy Taylor (Southend, East)

Despite the fact that I have only 10 minutes to speak, it would be wrong not to pay tribute to the superb maiden speech of my hon. Friend the Member for Mid-Staffordshire (Mr. Fabricant). Those of us who heard him know that he spoke not only with great sincerity but with great clarity. He did not use a note, and obviously felt things deeply. If I had to criticise that new hon. Member, it would be because he sought assurances.

The problem in all our European debates and discussions of the legislation has been that hon. Members have sought assurances and have been given them, the legislation has been passed, and then we have found to our horror that things are not exactly that they appeared to be.

The Single European Act provides many examples. People were told that there was not much in that measure: it was simply a move towards free trade. Yet now we find that there is a power to legislate by majority vote on a whole range of human activities. Time and again assurances have been given—on VAT, for example. I was astonished to hear the Chancellor of the Exchequer say earlier in the debate: we are committed to the harmonisation of indirect taxes in as far as that is necessary for the internal market. That is something to which he and I"— my right hon. Friend was talking to a Labour Member— his party and mine, are committed". Let us look back at what was said at the time. We were told, "Don't worry about it. We have a veto. We can stop anything that we want to stop. And we do not need to harmonise taxes to achieve the internal market." If anyone doubts that, he must look back and read what was said. Sadly, we are constantly being consoled with assurances and with little words. Remember all those words about fighting a federal Europe. Goodness knows what those words meant—a federal Europe would be far better than what we have now. Then there was all that nonesense about subsidiarity. We all know in our hearts that there is nothing in the legislation to achieve that. Subsidiarity is a form of words which every lawyer to whom I have spoken says means very little.

It is very important that over the next six months the Government have a duty to inform people, to tell them what the score is. The first thing to tell people is that Maastricht is not small stuff. The Bill is not a small Bill which will not affect people, and subsidiarity will not sort it all out. Maastricht is huge stuff. It is a huge surrender of sovereignty. I was amazed to hear my hon. Friend the Member for Horsham (Sir P. Hordern) say that the single currency was not bad because we used to have the gold standard, and was that not a good idea because it kept inflation down? Of course it did. We used to have Bretton Woods, so inflation was kept down.

I remind anyone who agrees with my hon. Friend that the gold standard brought certain problems of which we are aware, and I advise them to read the treaty. If people read it, they will realise that this will not be simply a question of a gold standard, to which we, as a democratic Government, try to adhere. The proposition is that a central bank will be appointed for eight years, and will not be subject to control by anybody. The Government are not even allowed to make representations to the central bank; nor are the trade unions or local authorities. The bank will run the show, and it will tell my hon. Friend the Member for Horsham and all our colleagues in government to stick to a particular borrowing requirement or a particular industry. If we do not do as we are told, we shall be fined as a nation—we shall be in a position more pathetic than that of the smallest rate-capped council.

I ask all hon. Members not to give the impression that Maastricht is small business. It is huge business. It means that our Treasury ceases to be effective. Effectively, all decisions on economic affairs will be transferred to the central bank.

Again, we have been given assurances, such as, "Isn't it great—Britain has not committed itself to a central currency?" We are supposed to rise up and cheer, to say, "Hooray! Isn't that great!" If we are tied to a single European currency by the narrow band of the exchange rate mechanism, what freedom shall we have? It will be the same silly freedom as was provided by the Scottish pound note. Where is the freedom of the Scottish Treasury? There is none. The idea is a load of rubbish. [Interruption.] Of course, it is lovely to have a Scottish pound note, and it is lovely to have lovely ladies from the Scottish National party here, such as the hon. Member for Moray (Mrs. Ewing), but the fact that Scotland has its own pound not does not mean that it runs its economy. I ask the Government to get the facts across to people, and to stop hiding them.

I do not say that in a narrow way. Let us consider the European legislation. It all pours through the House, and we cannot do anything about it. It used to be debated on the Floor of the House after 10 pm, and some Members used to talk about it and complain. That had to stop. European legislation was shoved down to the Standing Committees. We were told, "Don't worry. They will be broadly based Committees, and all strands of opinion will be represented. It will be lovely." In fact, Standing Committee A lasted for one year—and now look what has happened to it. All the Euro-sceptics are out. They have all been kicked out of the door—I am one of them. The Committee now consists of people who are basically of one point of view. I am sure that they are nice, genuine people who are kind to children and dogs—but that is not democracy. It is totally wrong.

The same applies to parliamentary questions—[Interruption.] My hon. Friend the Member for Hertford and Stortford (Mr. Wells) may consider this funny. If he does, I suggest that he goes to the Table Office tomorrow and asks what is the size of the current mountain of butter and beef. He will be told, "I am terribly sorry; you cannot ask that now." Let my hon. Friend ask what the deficit in trade with Europe is. He will be told, "I am terribly sorry; you cannot ask that now. You will find that in computers now." That is wrong, and contrary to every principle of democracy. Questions cannot be asked and laws cannot even be revealed. The Guardian reveals this morning that a massive important new step in immigration is being taken, but we shall not hear about it.

If we accept that Maastricht is a big thing, why cannot we ask the people of Britain? It is wrong that they are not being told. My hon. Friend the Member for Mid-Staffordshire asked the Government for an assurance that we were not moving into a single centralised Europe. I am sure that the Government will tell him, "Don't worry. We shall not move into a centralised European state." But under Maastricht there is to be a common European citizen. Every one of us and all our friends and neighbours will be citizens of a European union. All economic policy will come out of a central bank which nobody controls. There will be a massive transfer of extra powers to the European Community. If all that is to happen, we shall already have a centralised European state. People in Britain might want that, and if they want to vote yes that is fine. But if we force people into that state without consulting them and telling them all the implications, they will wake up at some stage and will be very angry.

I have listened to all the stuff about Yugoslavia and about how the EEC will make a positive contribution. I plead with people to consider Yugoslavia, the Soviet Union and other places where people have been forced together without being consulted, against their wishes. At some stage they get extremely angry.

I hope that, in the future, the Government will not be the mugs of Europe. Because we tend to be nice people, because we are mainly Conservatives, we tend to try to keep to the rules. I urge people to consider what has happened with the European fighter aircraft. In fairness to the EEC, that grand project was a matter between certain European states. It is a shame that the EFA was not an EEC project, because we could have kept on building those aircraft and shoved them into a food mountain under the common agricultural policy. Germany came to an agreement with us, but then pulled out because that was in the interests of Germany. Sadly, we sometimes forget that within the great EEC there is a need to look after ourselves.

I appeal to the Government and to the Chancellor, who I accept as one of the most decent chaps that I have ever met in politics. I am not saying that in a silly way; I believe it. Will the people of common sense in the Government please, please wake up while we still have the opportunity to do something about the economy? Our economy is bleeding to death. We have a massive public sector borrowing requirement—the biggest rate of borrowing that one could ever dream of. I am sorry that the Chancellor has to go to the market to borrow all that money. Our balance of payments is at a disastrous level and the level of unemployment is appalling.

I recognise those problems, all hon. Members do, but we do not want to talk about them because there is nothing we can do. We cannot reduce interest rates because of the wretched exchange rate mechanism. How is it logical for anyone to pretend that the currency is worth something which it is not worth? How can we then deprive ourselves of the opportunity to do anything about that? I accept that we should have a feeling of charity towards others, but such thinking is against common sense. It is against everything that the Conservative party stands for. It is also against everything that Labour stands for. I believe that all the parties should wake up.

7.51 pm
Mr. Mike Capes (Ilford, South)

I have listened with some interest to this debate, which is like so many that we have had on this issue. We must remember that there is a real world outside the House. It is a real world where the German economy is the dominant economy of Europe. We must recognise that international trade patterns are dominated by the development of large companies that move resources around the continent and the world.

From listening to some of today's speeches one might be tempted to think either that the EC does not exist or that it is about to be set up. One could be forgiven for thinking that this debate centres on whether Britain should be a member of the Community. I say that as someone who campaigned for the no vote in 1975. But we must recognise that the world has changed, that the Community consists of 12 countries, that it is a magnet to other countries in the east and that, potentially, it could consist of up to 25 countries. We must decide what is in Britain's best interest. Surely it is not in Britain's interest to pretend that we can opt out of international processes without damaging consequences for our economy.

I am critical of many aspects of the Maastricht treaty. If it had been negotiated by a Labour Government, it would have been far better. The Labour party would not have put before the House the Bill that has subsequently been withdrawn because the Maastricht treaty would have been better in the first place. My party would have presented not a Maastricht-minus Bill, but the full Maastricht Bill.

Many of my hon. Friends and I face a dilemma and I suspect that our voices are not as loud in the Chamber today as they are within our party. We do not want progress towards a social Europe, which would act as a counterbalance to the free market of the treaty of Rome and the Single European Act, to be stopped in its tracks. We want to continue that process to achieve a balance to counter the free market ideological approach that some Conservatives favour. That is why they favour the opt-out.

As the European Trade Union Confederation said in its statement after the Danish referendum, it is crucial that we do not stop the progress towards a social Europe. We must try to accelerate that process and strengthen the social and democratic aspects of the Community as a means of counterbalancing the free market process.

I do not agree very often with the Evening Standard, but today it called for the European Parliament to be given the right to initiate legislation to counterbalance the power of the Commission. We should consider such a proposal, because it is clear that we will be unable to have a truly democratic community if we simply leave decisions to the Commission and the Council of Ministers. It is clear from its new immigration proposals that that Council is quite happy to do things in secret.

We must use the democratic institutions of the Community. Our Parliament, the Parliaments of other member states and the European Parliament must work together to return power to the people. Our country has no written constitution, and it has no rules about spending and advertising on various campaigns. The real exponents of democracy are not those who call for a referendum, but those who believe in parliamentary control at appropriate levels. That means giving more powers to national Parliaments and the European Parliament so that the institutions of the Community and the Council of Ministers are subject to control.

It would be a terrible mistake if the Labour party supported a call for a referendum. My opposition to referendums rests on the view put forward by the best Prime Minister that we ever had this century. On 24 May 1945, when deputy Prime Minister, Clement Attlee wrote to Winston Churchill: I could not consent to the introduction into our national life of a device so alien to all our traditions as the referendum, which has only too often been the instrument of Nazism and Fascism". If one gives a Government the power to write the questions and set the rules, one knows what the answer will be. There might be a different outcome in countries such as Italy where citizens have initiative referendums, but that possibility is not open to us.

I suspect that the Conservatives will come up with the idea of a referendum to get out of their problems, because they know that they will be able to get the result that they want. Nevertheless, I do not think that anyone in the Opposition or anyone who believes in democracy should support such a device.

The way in which we, the Opposition, resolve our dilemma depends on the Bill that the Government produce. If they produce a Bill that is the full Maastricht treaty, I am sure that there will be a strong feeling of support for it among my hon. Friends, although, of course, we have some criticisms of it. If they produce another Maastricht-minus Bill, that could cause more difficulties for me and my hon. Friends. The Government must decide on the type of Bill that they want to introduce, but I do not believe that anyone should expect the Labour party to solve the Conservative party's internal problems. I, for one, will not go into the same Lobby as the racists and xenophobes of the Tory right wing, and nor will many of my hon. Friends.

We are presented with a great opportunity. My hon. Friend the Member for Durham, North (Mr. Radice) has written a perceptive book about the failure for many years of British politicians of all parties to seize the opportunities presented in Europe. If we take the wrong decisions during the six months of the British presidency and if we drag our feet and try to undermine the processes going on in Europe, we will be left behind once more. I have no doubt that the Franco-German economic and political co-operation linked to the Benelux countries and the countries of central and eastern Europe will continue. That process is inevitable. We have a choice: to be part of an alliance with the French, Italians and others to try to influence the current processes, or to become simply part of the deutschmark zone by default. That is our dilemma and our choice. I hope that we take the right decision.

7.59 pm
Mr. Bowen Wells (Hertford and Stortford)

As this is the first time that I have spoken in this Parliament and under your chairmanship, Mr. Deputy Speaker, may I congratulate you on your assumption to office? If you continue to chair our proceedings through the dinner hour and late at night, I fear that you will have to hear from me more often than you might choose.

I want to begin by referring to one or two points that have been made in the debate because they are points that I would otherwise have made in my speech. I agreed with the right hon. Member for Manchester, Gorton (Mr. Kaufman) when he said that the European Community made a serious mistake when it permitted the recognition of Slovenia and Croatia prior to their negotiating their way out of the state of Yugoslavia in a peaceful, sensible and orderly manner.

That card was given away by the Community's intergovernmental pillar on foreign affairs that is contained in the Maastricht treaty. When my right hon. Friend the Foreign Secretary appeared before the Select Committee on Foreign Affairs, he said that he had not wanted to break the unity of the European Community, even though he had given evidence earlier that he was not in favour of the recognition of Slovenia and Croatia, those two small, unviable and uneconomic republics. However, I severely disagreed with the rest of the speech by the right hon. Member for Gorton.

The right hon. Member for Bethnal Green and Stepney (Mr. Shore) made a rather optimistic speech. If I heard the right hon. Gentleman correctly, he seemed to believe that the Danish referendum had caused the juggernaut of Europe to stop. The Maastricht treaty was approved in the Folketing with 157 votes in favour and 22 against. In other words, the Parliament, the Government and the Social Democratic party in Denmark approved the treaty. However, the treaty was lost in the referendum when 50.7 per cent. said no and 49.3 per cent. said yes. I suggest to the right hon. Member for Bethnal Green and Stepney that that is a very narrow buffer for the juggernaut.

During our presidency of the Community, I believe that my right hon. Friends will explain and reinforce the ideas behind the Maastricht treaty which are essentially a major departure from earlier treaties. The treaty of Rome and the Single European Act were both highly centralising. The Single European Act introduced majority voting on many of the issues on which right hon. and hon. Members on both sides of the House had natural objections because they rolled over opinion in this country. They have introduced harmonisation of a very offensive and unnecessary nature.

Britain stood outside those two treaties. We were not part of the initial negotiations on the treaty of Rome. The noble Baroness Thatcher, who has just taken her seat in the other place, was particularly concerned with getting our money back in respect of the European Single Act. She agreed to the centralising and introduction of majority voting as a compromise. She was not in the middle of the negotiating procedures. She was outside, shouting and demanding.

That was not the right way to take care of Britain's vital interests. In that way, Britain's vital interests were very often ignored. By contrast, my right hon. Friends the Prime Minister, the Foreign Secretary, the Chancellor of the Exchequer and the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for Watford (Mr. Garel-Jones), decided in the negotiations on the Maastricht treaty that Britain's interests and concerns would be central to their negotiating tactics and achievements.

In my view, and in the view of the House on three different occasions, and amid much acclamation, my right hon. Friends achieved substantially what they set out to do. I pay tribute to their negotiating skill. Let us consider their achievements. They achieved a definition of subsidiarity which, I accept, may be defective. However, no such concept is contained in the treaty of Rome or the European Single Act. No matter how legally defective that subsidiarity clause is, it demonstrates the ideas shared by my hon. Friends the Members for Southend, East (Sir Teddy Taylor) and for Stafford (Mr. Cash). We do not want decisions to be taken in the centre of Europe unless they have to be for the benefit of the whole Community. We must build on that and we have an opportunity to do so. The Maastricht treaty contains provision for an intergovernmental conference on constitutional change in 1996.

We must build on the concepts of a more decentralised Europe and a Europe that takes account of subsidiarity. If that does not work, we must introduce more substantial definitions for what we mean. We should place institutional and constitutional blocks on the Community and particularly on the Commission to stop them acting when we do not want them to. There are obviously other opportunities.

However, if we reject the Maastricht treaty now, we will have to begin the negotiations all over again. We will undoubtedly face the serious federal instincts of many of our partners in Europe. Germany, France, Italy and Spain want a supranational Europe. They believe that the Maastricht treaty is a stepping stone to a federal Europe. If the intergovernmental pillars on defence, foreign and home affairs, which my right hon. Friends managed to have placed in the Maastricht treaty, work and are accountable and sensitive to the people and Parliaments of Europe, we can build on that experience and begin to decentralise even more. We will have shown a different way in Europe.

The countries of Europe are beginning to rethink the idea of a central Europe. They want a democratically-controlled Europe. They do not want a Europe which is a supranational state with no accountability, which is not enforced and which is not something with which people can identify. That is what my right hon. and hon. Friends have achieved in the negotiations. They have changed the climate of Europe in the treaty. It would be a major mistake if the Maastricht treaty were not ratified.

During the course of the six months of our presidency, I hope that my right hon. and hon. Friends will persuade the Community to ratify the treaty by explaining what subsidiarity means and taking certain enforcement measures. I hope that they will make it clear that the audit functions of the European institutions will be developed along the lines of our Audit Commission which reports to Parliament. That is what the Audit Commission in the European Community should do. It is now a European institution which eventually will have teeth. My hon. Friend the Member for Southend, East (Sir T. Taylor) and I have spent many hours late at night in this place commenting upon the Audit Commission's reports, but nothing is done. That is the problem. If we develop the progress that has been made by my right hon. and hon. Friends, we will be able to build the kind of Europe in which we can live—a democratic, accountable Europe in which the rule of law is paramount.

8.9 pm

Mr. Robert Hughes (Aberdeen, North)

I wish to impress on the Government the need to act decisively and with courage to deal with the situation in South Africa. Before I develop my remarks, I advise those who heard me described this morning on BBC radio as the former chairman of the Anti-Apartheid Movement that I remain the chairman of the Anti-Apartheid Movement aid wish to do so until the job is done.

Everyone who has been concerned with South African affairs has experienced a gamut of emotions since February 1990. When Nelson Mandela was released there was amazing joy and exuberance, first because it was right that he should be released, but, secondly and more important, because we believed that it heralded a new era in South African politics and its history, and that we would get negotiations and a move towards a peaceful settlement. None of us was idealistic or naive enough to believe that the process would not be difficult. We expected frustration.

I recall an early meeting with Nelson Mandela soon after he was released. He said, "Don't imagine for one moment that the path of negotiations will be smooth and downhill all the way. There will be times when we will be going uphill, there will be twists and turns, and there will be times when the process of negotiation will stall. but we have to reach a successful conclusion." If we have felt frustrated about the length of time that has been taken in negotiations, we can imagine the frustration of the dispossessed and the poor of South Africa when so little is changing but taking such a long time.

Another emotion that we experienced was anger— bitter anger at the violence that has been perpetrated in South Africa. One cannot imagine what the savagery has been like. I have seen it in Ndaleni, Natal, and it is dreadful. Everyone knows and believes that the violence can be stopped if there is sufficient will.

I make a direct call to Chief Buthelezi—"Call off the dogs of war of Inkatha." I also call on President de Klerk —"Get control of the police and security forces, because ample evidence exists that, at least at the minimum, there is complicity by the police and security forces." I have spoken to white South African Members of Parliament who have given me first-hand evidence of the police and security forces disarming township dwellers and the people living in squatter camps and then, an hour or so later, Inkatha Impis perpetrate the butchery. It has to stop.

If 70, 700, never mind 7,000, whites instead of blacks had been killed, there would have been action. The Prime Minister or the Foreign Secretary would have been offering troops to go and end the situation. There would have been outrage and clamour from the international community for it to be stopped. A black life is just as important as a white life. Unless we understand that and try to deal with it, the trust that is necessary for negotiations will not be forthcoming.

Some people have asked why the negotiations have been called off. The Foreign Secretary says that the differences are narrow but significant. They are narrow in mathematical terms. The African National Congress says that changing the constitution should be by a two thirds/one third majority. President de Klerk says that it should be a 75 per cent./25 per cent. majority. But it is not simply a mathematical formula. In every written constitution that I know, two thirds/one third is the norm.

Indeed, that is the way in which the old South African constitution could be changed, under the legacy of the Statute of Westminster laid down by this Parliament. If it was good enough then, it is good enough now.

For de Klerk to insist on 25 per cent. is to insist that he retains the white veto and control and power over events in South Africa. The ANC moved to 70 per cent./30 per cent. but still de Klerk would not move. If we are to have a decent future for South Africa, we must get it right and make sure that there is a proper democracy. That apparently is the position of the Government who agreed to the United Nations declaration on South Africa in respect of a one person, one vote democracy. The Government must stand by that.

When President de Klerk released prisoners—not all of them have been released, by the way—he said that he had not travelled on the road to Damascus and been converted: he was abandoning apartheid and its institutions because he knew that they were not working. That was because of external pressure. It is absolutely necessary that there is external pressure.

The European Council of Ministers agreed to consider the situation in South Africa. It agreed to send a mission composed of the Foreign Ministers of Denmark, Portugal and the United Kingdom to look at the situation. At Question Time yesterday, the Foreign Secretary told me that when the time is right we will send them. The time is now right to send them. The situation must be acted upon—President de Klerk is saying, "I shall accept an interim Government," which is one of the demands of the ANC, but he wants the interim Government to be in place before there are agreements about the election of a constituent assembly or elections for a proper Parliament. Those matters must be resolved if we are to proceed. It is absolutely no use the Foreign Secretary saying, "Let us wait."

There have been movements in South Africa because of external pressure. President de Klerk said so—he admitted it. We must maintain that external pressure. People from all parts of South Africa say that we must act if we are to achieve progress. Progress is essential. People say to me, "You cannot possibly ask for sanctions to be reimposed." We took them off too early. We tempted President de Klerk to believe that he could play it long. Leaving the violence aside, his strategy was to stretch out the process, to weaken the credibility of the ANC and to weaken its organisational ability in the hope that, having formed an electoral pact with Buthelezi and Inkatha, when the election finally came round he would have enough votes in the new Parliament still to control events. That has been his plan. It has been like stretching a piece of elastic—the more one stretches it, the thinner it becomes. President de Klerk must remember that the danger is that, if one stretches a piece of elastic too far, it snaps.

We are at a moment of extreme danger in a desperately difficult situation. Some of us have seen moments in history when failure to act properly has led to cataclysmic consequences. I give only two examples—I am sure that hon. Members could give many more. We should look at what happened in the Lebanon—a prosperous country, well thought of, economically successful, but now collapsed into total disaster. Also, there is the current tragedy which is unfolding in Yugoslavia. That country is slipping into a desperate situation. There are many other examples.

I have never been one who exaggerated, sought to play Cassandra or sought to look for trouble in South Africa. I certainly have no desire to be proved right, but we are at a desperate moment, almost looking into the abyss. I do not want to be proved right. Those of us who have been involved in South African affairs for many years love South Africa and the South African people much too much to ignore their desperate situation, but, if we do not act, disaster will face us.

Now is the time for the British Government to rally their courage and strength, rally the courage of the European Community, and rally the strength of the international community. We must act swiftly, decisively and with courage. If we fail, no one will like the circumstances. If we act well, we can act with great honour and produce a South Africa which is democratic, and free and one which we would wish to prosper.

8. 19 pm

Mr. William Cash (Stafford)

First, I wish to put it on the record that, despite what many have said about Churchill's comments about Europe, on 11 May 1953 in the House he said: Nor do we intend to be merged in a Federal European system."—[Official Report 11 May 1953; Vol. 515, c.891.] My opposition to the Maastricht treaty is based on three main points—its inherent contradictions, its undemocratic principles and the damage that it would do to British and European interests and stability in Europe and the world.

The first point is the inherent contradictions. It is claimed that the treaty will decentralise through the application of the principle of subsidiarity. We could avoid all the problems described by the former President of the European Court of Justice as "gobbledegook" and all the difficulties that we have gone into today, simply by setting out as we did in the Scottish Devolution Bill in 1978, a list of functions showing where the provisions of the treaty would apply.

The Minister of State, Foreign and Commonwealth Office (Mr. Tristan Carel-Jones)

I shall not detain my hon. Friend for long. Surely he accepts that article 3b of the treaty of Maastricht is not in the treaty of Rome, as amended by the Single European Act, which he supported.

Mr. Cash

Absolutely. I am delighted to tell my right hon. Friend that under no circumstances would I have supported that Act if it had included the subsidiarity provision. The concept is a deliberate attempt to confuse and obscure the provisions in the Maastricht treaty. What is more, no reputable legal opinion or authority says anything to the contrary.

Indeed, the provisions concentrate vital decisions on monetary and economic policy in the hands of the central bank within the context of the amendments to the treaty of Rome. Jurisdiction over the bank will be concentrated in the European Court of Justice. The Bank of International Settlements said only two weeks ago that the whole thing was completely hopeless. I am sure that my right hon. Friend the Minister is aware of that.

Furthermore, the common provisions set out in title 1 state specifically: The union shall he served by a single institutional framework … building upon the acquis communautaire. Those last words are extremely important to anyone who understands what is going on. That is reinforced by the preamble to the treaty, which confirms its objectives.

Yet another centralising feature of the treaty is the establishment of citizenship of the union. Unspecified duties are imposed on those citizens. My right hon. Friend, who is speaking to the Box, undoubtedly seeking advice, replied to a written answer only today. I asked what specific duties were to be imposed on the citizens of the union, including those in the United Kingdom, under the Maastricht treaty.

I received the most amazing reply only an hour ago. He said: The provisions … added to the treaty … which establish citizenship of the union refer to 'duties' imposed by the treaty of Rome, but do not themselves impose any specific duties. Here comes the crunch point. He said: The treaty of Rome in general, as amended by the Maastricht treaty, imposes no duties which do not flow from the direct effect of EC law. I put that on a par with the definition of subsidiarity.

The article on subsidiarity concedes the centralising effects of the treaty. As a French official said to The Independent only yesterday, subsidiarity is a federalist concept. That was reported in The Independent today. We know what will be within the exclusive competence of the Community because those matters are clearly set out in the proposed amendments to the treaty of Rome, including those which relate to the cental bank and citizenship of the union. It is therefore assumed that those matters can be better dealt with by the Community. So subsidiarity will apply only to the lesser functions of the Community. It will not apply to the vital and central functions mentioned in the treaty.

I do not understand why we have to be told that black is white when everything is in black and white in the treaty. We need do no more than look at the treaty. It may be argued that we have not yet accepted the provisions for creating a central bank through our own protocol, but we have accepted in another protocol that we will not veto those provisions. The movement to the third stage is "irreversible" and will come into effect irrevocably and irreversibly on 1 January 1999. By then, and probably by 1 January 1997, we must have decided whether we are in or out.

We have conceded the principle of economic and monetary union for the European Community as a whole and the legal framework which it prescribes. That is as much a political as an economic decision. It is a decision about the future government of the United Kingdom and the European Community.

Secondly, I object to the undemocratic nature of the decisions in the Maastricht treaty. We have had no White Paper. We have been given no reasons for the decisions. We did not have a free vote on Second Reading. Even in 1970 and 1972 we were given both reasons and a vote. That undemocratic nature, combined with the fundamental impact on our Parliament and, at the level closest to our voters and citizens, freedom to choose one's economic and social priorities at general elections and to express consent for the way in which one is governed, leads me to deny my support to the Maastricht treaty.

If we had a referendum we should put one main issue to the people of Britain. We should ask, "Do you want to govern yourselves?" It would be easy for my right hon. Friend the Minister to prepare a question about the Maastricht treaty. I do not suggest that my question uses the exact wording. But the essential nature of the question that must be put to the people would have to be by whom they wished to be governed.

The provisions on economic and monetary union are not so clear cut as many people seem to think. The central bankers would be unelected, independent and unaccount-able, all in the name of price stability. We can and should achieve price stability for ourselves in co-operation with our European partners, but no more than that. The central bankers could not guarantee that they would attain their objectives. If they failed, no one could turn them out, even though they may have created massive turmoil in Europe by the changes that they imposed through the powers given by the central banking mechanism and the constitution that they inherited. Our democracy is genuinely at stake in the treaty.

My third objection is the damage that the treaty will do. It is primarily based on thinking which stems from the cold war, the 1950s, the period before the unification of Germany. We need a policy for the 1990s and the next century. The treaty will not contain Germany. It will enhance Germany's dominance in Europe, which is already shown by the fact that 85 per cent. of foreign investment in eastern Europe is German. The trade balance is in Germany's favour throughout the region.

Countries with an adverse trade balance cannot reasonably be expected to vote against Germany. Half of all western credits to Russia are held by Germany. There is a long list of German assertiveness which has accumulated in the past few years. That is unhealthy and bad for Germany as well as for Europe. It is certainly bad for the United Kingdom. There is deep anxiety in British industry and the City about the exchange rate mechanism and the high interest rates that we carry in the wake of the deutschmark. All those issues are directly linked to Maastricht, which would make membership of the ERM a legal obligation. But the ERM is costing jobs and the position is getting worse.

The Single European Act is not the centralising measure that it is claimed to be. Many hon. Members who criticise it now voted rigorously for it. The problems arise from the Commission's misuse of the Single European Act. A serious omission at Maastricht was not to insist on procedures to nip that abuse in the bud. The playing field is increasingly not level. Greater attention must be given to the calls by British industry to stop the unfair subsidies and practices of which it complains. Those practices crucify our prospects for recovery and open us up to acquisitions without fair reciprocity.

The Delors 2 package derives directly from the competences granted under the Maastricht treaty. We can best defeat the Commission's call for more money and cohesion funds by rejecting the treaty. As well as the immigration proposals, the problems and contradictions inherent in them, and the simultaneous attempt to decentralise—so that we cannot square the circle—there is also the difficulty of foreign policy. The title on the foreign policy section is a prescription for confusion and uncertainty. The joint action plan and the European guidelines would lead to chaos that would prevent us from securing peace in the world.

8.30 pm
Miss Joan Lestor (Eccles)

I was a Euro-sceptic in the old days, but when the referendum confirmed Britain's wish to stay in Europe, there was one pro-European argument that appealed to me, and still does. If we widened Europe, people of different nationalities and ethnic backgrounds would come together, nationalism and national barriers would be broken down and the rise of xenophobia and racism in Europe would be avoided. That was the one good argument of the pro-Europeans, although it was never their main argument.

In the Labour party document "Opportunities for All" we stressed the need to amend the treaty of Rome to ensure that other countries in Europe followed the lead that we gave in the 1960s and introduced laws to outlaw racial discrimination in employment, housing and other sectors. That policy was part of our manifesto commitment during the last general election.

We could see—I understood clearly—the dangers of free movement of labour for nationals of each EC country. We still face that danger whatever happens to the Maastricht treaty. I know that the Commission for Racial Equality has corresponded with the Government on that subject and there seems to be confusion over whether the EC has competence to legislate on racial matters. If it does not, we must amend the treaty of Rome so that other countries at least abide by the basic discrimination laws in this country, which I wish to see enhanced, as does the Commission for Racial Equality. During our six-month presidency I would like this country to highlight that subject and begin to argue forcibly for change.

I believe that it is of paramount importance that young people in Europe have the same opportunities, whatever their colour, race or ethnic origin, otherwise the free movement of labour and opportunities for jobs becomes a myth. All of us who care about such issues have been alarmed at and despondent about the rise of xenophobia and racism in Europe. I do not want to exaggerate the problem as it does not exist in many parts of Europe, but we know what has been happening in France recently, and have seen the rise of racism in other parts of Europe.

I accept the argument that the wider Europe becomes, the fewer dangers there are, but unless we take action during our presidency to ensure that our regulations apply to other countries, the notion of the free movement of labour becomes a mockery. It is no good saying that that is a matter for individual countries. Residents in this country with different ethnic origins are at least protected in law. It is no good saying to them, particularly the young —we have many young black and white kids in this country who are already disillusioned because of unemployment—that they should go to Europe where they can find a job as there is free movement of labour, if they have no protection in law and the door is slammed in their face.

The treaty of Rome contains provisions for sexual equality—an issue that many of us have taken up over the years. However, it does not deal with racial equality. It may have been an omission when it was drafted or perhaps people did not foresee the changes that would take place in this country and in Europe. I urge the Prime Minister, the Foreign Secretary and the Chancellor of the Exchequer to take the issue seriously.

I have been told to make my speech in six minutes so I must be brief, and as I still have two weeks to go as a Front Bench spokeswoman, I shall be good and keep to the subject about which I care deeply. There is a problem involving third-country nationals. There are people in this country with the right to work here even though they are not EC nationals. Their position will be jeopardised unless the matter is sorted out and regulated in Europe. I believe that that issue is as important as any other in Europe.

Some of us who were unhappy about moves towards Europe accepted the argument that it was a means to attempt to ensure that people of different backgrounds, origins and colours could come together so that barriers were broken down, wars avoided and everyone worked in harmony to enhance Europe. Many changes have taken place in Europe since the treaty of Rome was signed. If the Government seriously want free mobility of labour and harmonisation, they must not take refuge in saying—as I know that they have—that it is a matter for each EC country to decide for itself. It is not. The laws of one EC country on nationalism, xenophobia and law, affect people in other countries. I hope that during their six-month presidency, the Government will take the matter seriously and take the lead on it, as this country took the lead in outlawing racial discrimination.

8.37 pm
Mr. James Paice (Cambridgeshire, South-East)

I have listened to almost all the debate and have been amazed by some of the comments I have heard. I can only assume that they were based on incredible naivety and idealism, not reality. We must recognise that we start from where we are, not where we might have been or where we might wish to have been. It is clear that a number of right hon. and hon. Members wished that we were starting from somewhere else, perhaps even outside the treaty of Rome.

During the past few years I have witnessed in amazement the surge towards centralism. The Commission has used—some would say abused—the concept of removing barriers as a way to intervene in the minutiae of life and to harmonise all that we do without questioning whether we need regulation. Therefore, I share concern at the direction in which Europe has moved.

My anxiety is reflected throughout my constituency, as I am sure it is throughout those of most hon. Members. Constituents are surprised to find that the EC is involved with the flavour of crisps or chips, and are equally amazed to find that EC law prevents us from taking certain action. Conversely, many people have recourse to EC law when they believe that our Government have not acted correctly.

When I was a member of the Select Committee on Employment I was astonished to hear Madam Papandreou say that she intended to use the majority voting procedures on health and safety provisions as a means of forcing through the social charter. That threat has now come to pass. The House must recognise that that happened due to insufficient control and accountability in the Commission over the past few years. Understandably, the Commission has taken every opportunity created by that vacuum to allow centralism to flourish. I dare say that, had they been Commissioners, the vast majority of hon. Members would have acted in precisely the same way. The vacuum was caused by the Single European Act and the original treaty, both of which failed adequately to ensure levels of accountability and responsibility, and created the opportunity for centralism to grow—the problem that we now face.

It is from that position that we now address the future. Those of my right hon. and hon. Friends who perversely applaud the Danes for saving the powers of the House would do well to remember that, in the absence of a Maastricht Bill, or until an alternative is found, we are left in the same position that has caused the problems of centralism during the past few years.

When my right hon. Friends face the challenge that they are embarking upon during our presidency of the Commission, they must tackle many issues, and I shall expand upon one of them—enlargement of the Community. I have always thought it wrong and an affront that we should take unto ourselves the term "European Community" while the majority of the continent of Europe is excluded from it. I look forward to the day when the rest of Scandinavia and the emerging democracies of central and eastern Europe join the Community. That day is still many years away for some of those countries, but we must ensure that we do not construct a framework which prevents or inhibits their accession when the opportunity arrives.

If and when the Community consists of 15, 20 or even more members, other factors will come into play. We shall have to reconsider the structure of the Community, and the role of majority voting.

As we have heard, the Maastricht treaty brought into being the concept of intergovernmental agreements—the pillar approach, which was pioneered by my right hon. Friend the Prime Minister. It also featured the decision by my right hon. Friend—and its acceptance by other member states—for the United Kingdom not to agree to the social chapter or to commit ourselves to European monetary union at this time. Those two features are important, not merely because of our stance, but because the principle that member states have the last word was accepted at Maastricht. I suggest that those will be essential features in an enlarged Community of 15, 20 or more members. Member states will not be committed to each and every policy action and it would not otherwise be possible for such a Europe to progress. The pillar approach is the only one which can encompass a Community representing the continent of Europe.

The Danish referendum has created a major challenge for my right hon. Friend the Prime Minister—I am sure that most of us have some sympathy with him—which he would rather not have had to face. There are many other important priorities for our presidency. However, the challenge does not create the opportunity to go back to square one, and anyone who believes that we can do so —as some of my hon. and right hon. Friends clearly do— shows little understanding of international negotiations. No one ever gets everything they want out of every negotiation. Clearly aspects of the Maastricht treaty are not as we would all wish. I am not happy about every aspect of it, but it would be living in cloud cuckoo land to believe that everything could be perfect.

The delay gives my right hon. Friend the Prime Minister the opportunity to amplify and clarify clauses in the treaty which give concern. For instance, it could amplify the meaning of the term "an ever closer union" in article A. Perhaps more significantly it could also amplify the subsequent statement, which has been given scant attention by critics of the treaty, in which decisions arc taken as closely as possible to the citizen. That is a clear indicator of the concept of subsidiarity. The new article 3b has been amply discussed, but we need to ensure that it is clearly understood and clarified.

Europewide decision making is essential in some areas of policy—for example, the environment. Aspects of the environment that know no national boundaries, such as air, river and sea pollution and global warming, require decisions to be taken at European level. Equally, it is totally absurd for decisions to be taken on local planning issues at European level—I cite the interference by the former Commissioner Ripa di Meana in our road programme as an example. We did not get it right with the M3 and we should have tunnelled under Twyford down, but it was for our Government to make that decision. It was not a matter for Europe and it is of no consequence to the rest of Europe.

Mr. Harry Barnes (Derbyshire, North-East)


Mr. Paice

I shall not give way as I have only one minute left.

There is much in the treaty that it would be crazy to lose and much more that would meet with the approval and fulfil the aspirations of our people, with amplification and clarification. We cannot expect the Danes to reverse their decision or to have another referendum without something substantive to cause it. At the very least we need a protocol and perhaps a redrafting, but renegotiation is not on.

I am convinced that the treaty of Maastricht is a turning point in the evolution of Europe. Its advances must not be lost. It is a move away from centralism and towards that Europe of many nations in which I believe. It is an opportunity for individual cultures to flower, strengthened by a clearly defined framework of co-operation and of tiered powers.

Let us not be under any illusions—I know that my right hon. Friend the Prime Minister is not: until we have Maastricht or an alternative, the Community will flounder, as it is now doing. In the coming months, it must be our prime consideration to ensure that we take the action necessary to ratify Maastricht or to provide an ideal alternative so that its advances are not lost.

8.45 pm
Mrs. Margaret Ewing (Moray)

I welcome the opportunity to make a brief speech in this important debate. Those hon. Members who have sat through the debate will perhaps be disappointed. Hon. Members who have stayed obviously have strong views on the issue, but I had hoped that more hon. Members would have stayed to listen to the arguments. I agree with the hon. Member for Cambridgeshire, South-East (Mr. Paice) that Maastricht is a significant aspect of what will happen to the United Kingdom and Europe.

I hope that there will be further debates and that hon. Members will not postpone the opportunity to speak until the Government have the confidence to bring the Maastricht Bill back to the House for a Committee stage, but will take other opportunities to debate where we are and where we are going.

I speak on behalf of two nationalist parties tonight— Plaid Cymru and the Scottish National party. It is important that hon. Members understand why nationalists view Europe as a way forward, while many in this Parliament, who represent what I would call the unionist parties, are frightened of Europe. My party fights under the flagship policy of independence in Europe, which was passed by a 9:1 majority at our annual conference. We have argued the case for an independent Scotland, within the European Community, because we believe that independence and sovereignty should be valued by every community and nation and that we can decide what to pool for the greater benefit of the European Community and of the world.

Sincerely, those people who say that Maastricht is a treaty too far are a generation too late. Young people who think of themselves as Scots, English, Welsh, Irish, French, German or whatever also think of themselves as Europeans. I regularly visit schools in my constituency. More than anything I am impressed by our youngsters' knowledge of the European Community and by the international dimension that they place on their lives. That should be nurtured by each and every one of us.

The European Community was formed to build bridges, to ensure peace and to ensure that there would he no more starvation. Okay, we have not achieved all those objectives—as yet, we are a poor framework of what could be achieved—but the principles which underpinned the founding of the Community should be valued.

I listened with much wry humour to those hon. Members who argue about sovereignty in this place. What kind of sovereignty are we arguing about at Westminster? Seventy-two Scottish Members represent Scottish constituencies, with their diverse problems, their very particular issues, which affect the daily lives of our constituents. We are told that this is the mother of Parliaments, the essence of democracy. Yet, if by some quirk of fate all 72 Scottish Members were to walk through the Division Lobby together, we could still be defeated. That is what happens in this Parliament.

I say to those who argue that this is the essence of democracy and Westminster is the mother of Parliaments that it fails very badly in representing the viewpoints of many of our constituents, our nations and the regions of England. I am one of the people who believe that if Scotland were to become a self-governing country it would trigger reform in this place which would benefit the regions of England, which suffer a great deal from centralisation.

Mr. Raymond S. Robertson (Aberdeen, South)


Mrs. Ewing

No. I appreciate that the hon. Gentleman has been in Committee—we are on the same Standing Committee—but I have a very short time in which to make my points.

As a graduate in history from two Scottish universities, I would say that we stand at a crossroads in defining where we want to go as individuals, as nation states, as regions. I believe that there are massive opportunities, but many people fail to recognise the historical significance of where we are.

Reference was made to the gold standard. I thought that that had been consigned to the economic dustbin. We have an opportunity to change the world, to change the Community of which we are a part. There is no rule of immutability in history and I believe that we are standing at a crossroads. Many people would wish to return to an imperialist tradition. They would prefer to see a wall built through the middle of Berlin; they would prefer to see an iron curtain still in existence. That was cosy and comfortable. They could live at ease with that situation.

We have a challenge before us to develop the European Community and we should meet it, each and every Member, instead of trying to retreat into the dark imperialist past.

Changes must come by consensus. The treaty of Rome made it clear that any major change must be agreed by everyone. It does not matter whether it is a nation of 5 million people or of 15 million people; everyone must be treated equally. I was pleased that the Foreign Secretary revealed that the principle of unanimity would not be ignored in the major changes. Article 236 of the original treaty laid down clear guidelines on which we should proceed at this stage. The views of the Danish people, the Irish people and the French people must all be taken into account and dealt with equally.

Hon. Members keep talking about referendums. You and I, Mr. Deputy Speaker, having been in the House for two or three decades—in my case, off and on—remember well the arguments about referendums in the 1970s. My problem is not that I am opposed to referendums in principle—indeed, my party has written into its constitutional policy the idea that referendums should be part and parcel of the democratic process in an independent Scotland—but that referendums seem to be seized upon by people because they think that they will get the answer that they want at any given stage. In other words, they represent a cynical approach to the issue of democracy.

I shall refer here to the words of another Margaret, who I gather is making a speech in another place today. Back in March 1975, looking at the issue of a referendum on the European treaties, she said that if we were to adopt referendums, that would mean going as far as having a written constitution, and obviously many hon. Members do not want a written constitution. If we are to have referendums, I believe that they should be part of a written constitution, that they should be held under clear guidelines and that they should not be able to be rigged in any way, be it through financial support or through the infamous 40 per cent. rule which we had in Scotland in 1979.

Just as a matter of interest, under the 40 per cent. rule Ireland would have said no to Maastricht, because only 39.4 per cent. of the Irish electorate said yes. Yet that has been heralded by the supporters of Europe as a major triumph. If there is to be a referendum on this matter, it must be held under very clear guidelines, it must be clearly understood by the people, they must know exactly what is happening and the questions that are being asked, and the fullest consultation must take place.

The Committee of the Regions is often held up as an example of subsidiarity. I say very clearly to those on the Government Front Bench that I do not see the Committee of the Regions as a substitute for a Scottish Parliament, with the rights of Scotland being equal to those of Denmark, Germany, France or any other nation state in the European Community. I do not believe that an advisory body with limited powers will in any way advance the cause of the Scottish people.

8.56 pm
Mr. Gerald Malone (Winchester)

I very much doubt whether it is possible to be a maiden voice in the House as I rise on this occasion to speak for the first time as the Member for Winchester. I hope that the House will indulge me if I say a word or two about my constituency, which is of course the ancient capital of England. It is a great privilege to represent it. It is a very popular seat. More Conservative candidates were contesting Winchester than, I believe, any other constituency in the country. I think that is some testimony to its popularity.

I will say no more of my predecessor than that he was a man who fought a good election campaign in Winchester at the last election and enjoyed a certain reputation both in the House and in the constituency. One of my other predecessors fought very hard on my behalf in Winchester. Some Members of the House will remember with great affection Rear-Admiral Sir Morgan Morgan-Giles. I would say to my right hon. and hon. Friends on the Front Bench that in the six months of our presidency of the Community they should perhaps bear in mind one of his maxims. I hope they will not mind if I quote it to them; it may well stand them in good stead. The rear-admiral was very well known for saying in Winchester and, I think, in the House: "Pro bono publico, no bloody panico." If my right hon. and hon. Friends can keep that maxim in mind through what may well be stormy days during the course of the next six months, it may be of some considerable benefit.

I believe that the Government face a great challenge, which they are taking on in their presidency from a great victory that they achieved in the course of the Maastricht treaty negotiations. The victory was essentially that, no matter what one may say about the details we have heard about in the House today and some of the probably genuine concerns about where Maastricht may lead us, it has made the Community a totally different place. We now see that there is a move away from centralisation. That is one of the most fundamentally important aspects of what has been negotiated. We see that subsidiarity is a doctrine that will get rid of one of the most terrible tendencies of the EC—to interfere in matters which were of no relevance to it.

Throughout the period of Britain's presidency, I hope that my right hon. and hon. Friends will bear in mind a number of important points. I was pleased to hear my right hon. Friend the Foreign Secretary begin his remarks today with the GATT round. It has been an astonishingly disappointing failure that we have not been able to reach agreement in the Uruguay round. We may go on as much as we like in this House and in Europe about helping the third world, aid budgets and matters of that sort, but if we refuse to give trade, giving aid is no use. I wish my right hon. and hon. Friends well in all their attempts, which I hope they will press hard, to secure a rapid result in the GATT round so that it produces not the sort of stalemate that we have now but real benefits.

There is a historic challenge that has not been mentioned in the debate but which I hold to be of great importance. There is a danger in the course of the next decade or so that the United States will disengage from Europe in a number of ways, not only in the formation of its foreign policy but in a practical way in its participation in the defence of Europe and in its treatment of the EC in trade matters. We have seen much of that risk in the present impasse over the GATT round.

I hope that some reassuring messages will go from our presidency to the United States in a number of ways. First, I hope that it will be made clear that experiments with French and German military corps being looked upon as the pillar of defence in Europe will gain no credibility. The real pillar of defence in Europe is NATO and will continue to be so. It has been French policy for decades to try to exclude the Americans from European defence in some shape or form. I hope that that will not be given truck and I hope that my right hon. and hon. Friends will give that clear message.

I also hope that my right hon. and hon. Friends will take into account a message that came from the Bank for International Settlements' report for 1992 which clearly showed that there is fear in the wider world that the sort of EC that we will continue to build will be inward looking. There is no point in dismantling internal trade barriers if the Community puts up external trade barriers and is seen as a trading bloc which will not negotiate or talk with other trading blocs throughout the world. That would be extremely damaging, and I hope that every effort will be made to make that message as clear as possible to the rest of the world community.

My right hon. Friend the Prime Minister made the message of Maastricht clear not only to Britain but to other European countries as well, where it was heard for the first time. I am not in the least surprised that the message that he put across during the negotiations is now being heard by the German, French and Danish publics. His message was one of a very different Europe from the one to which we were being pushed before we actively began to participate in the affairs of the EC.

It has taken a long time to turn that attitude round, but my right hon. Friend the Prime Minister has now managed to do that. He has managed to make it clear that this is a Europe that will concentrate on the essentials of European policy where it counts and will return to nation states areas of responsibility where it does not matter whether Brussels or anybody else in Europe has overall control.

I hope that, when my right hon. Friend replies, we will hear some examples of where subsidiarity may pay dividends. Let me suggest one case which is a constituency point. We have already heard from one of my hon. Friends about the environment and the M3, which is in my constituency. It is an outrage that the European Commission should think that it should have any view at all on a motorway in the heart of my constituency. It is absurd. It is as pointless as my having a view about what happens in an urban motorway system round Rome. It is irrelevant and it is something that we can now move away from.

Sir Ivan Lawrence (Burton)

But it does.

Mr. Malone

In the long term, it no longer will, because subsidiarity will clearly mean that decisions on matters of that kind will once again be the priority of this Government and will be dealt with exclusively in the House. I hope that my right hon. Friend the Chancellor will be able to reassure us on that when he replies and say that that will indeed be the case and give us some practical examples to flesh out a concept which has been challenged but which I believe will be much more acceptable once we can see some practical instances of the way in which it will apply.

I wish my right hon. Friend and his colleagues well in their presidency. They have a difficult task. I am sure that by the end of it they will have the treaty firmly back on the rails, and I am sure that the House will give it the endorsement that it already has. I see no reason why the views of the House should change. I am sure that when my right hon. Friend replies he will convince many of the sceptics here that the flesh of subsidiarity will be an important matter for the future.

9.4 pm

Mr. John Fraser (Norwood)

It is 25 years since I was last called to comment generally about Europe. As I know that my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) intends to rise at 10 minutes past 9 o'clock, I shall restrict my comments to two narrow points.

I negotiated a number of European directives, and I found that they all involved some standardisation, harmonisation, or uniformity. That did not give me any problems when I dealt with directives on equal pay, weights and measures, and mass redundancy.

Whatever we do, the Community will go on creating common standards and common rights. That is not something to which we should object. It is impossible to run a major trading system and assure workers of equal rights in different countries unless there is some standardisation.

Europe is capable of creating common rights and uniformity, and within the strength of that union it is then capable of creating diversity. The two can go hand in hand. The Community can demonstrate to eastern Europe that the European passport can also be the right to be different.

All the major world languages—French, Spanish, and English—are minority languages in Europe. We must develop a Community that pays greater attention to minority rights in terms of language, other forms of culture, scripts—be they roman or cyrillic—traditions, religions, and so on.

The Community must guarantee minority rights so that we will all feel more free. We ought to speak about the flowering not only of cultures of nation states but of the cultures of parts of nation states. That applies to this country as much to any other, and our example will make it easier for the countries of eastern Europe to enter the Community. It is, however, a pity that, as we have developed diversity within the Community, eastern European countries outside it felt the necessity to pull apart.

My second point concerns immigration. It is disgraceful that, in the last day or so, secret negotiations have been conducted between nation states on a common immigration policy. There may be a good reason for common rules covering the admission of new member states, particularly if there is to be free movement throughout the Community. However, it is scandalous that those proposals should not be made known to the House, other Parliaments within the Community, and the European Parliament.

The rights of migrant workers are in some cases farcical or disgraceful. If I wanted a wife to come to Britain from a country outside the Community, she would normally have no absolute right to do so unless she could pass the primary purpose rule. Nor would I normally have any absolute guarantee of gaining admission for my children.

I happen to have that right because my grandmother was born in Ireland and I am therefore an Irish citizen. If I were to register in the United Kingdom as an Irish citizen and exercised my Community rights, my wife, children, parents, and almost every other member of my family would be entitled to enter this country without let or hindrance. It cannot be right to have that differentiation and to demote the migration and immigration rights of people born in this country.

If there is to be an approximation of the rights of immigrants in the Community, let it be an approximation upwards rather than downwards. Let us have the proposals on the table, let us understand them, and let us work towards widening the rights of those who live and work in various parts of the Community as well as those who stay in one country. I am sure that the Home Secretary, like me, is surprised that these matters are secret as they are of enormous importance to many constituencies, particularly mine. I hope that we shall return to this matter on another occasion.

9.10 pm
Mr. John Smith (Monklands, East)

In this debate, which we have about every six months, we have an opportunity to review developments in the European Community on a wider front. The House is indebted to hon. Members on both sides who have drawn attention to a very large number of issues. It was wise of my hon. Friend the Member for Eccles (Miss Lestor) to draw attention to the problem of racism and its connection with unemployment, as it was wise of my hon. Friend the Member for Aberdeen, North (Mr. Hughes) to draw attention to the opportunities for the European Community to assist with regard to the situation in South Africa. We have also had the benefit of a maiden speech from the hon. Member for Mid-Staffordshire (Mr. Fabricant), who generously paid tribute to his predecessor, Sylvia Heal, who was the victor in that remarkable by-election. The hon. Gentleman revealed that he is a Russian speaker. No doubt we shall hear from him in foreign policy debates in the future.

This debate is given added relevance by the fact that it occurs right at the start of the British presidency. It is not surprising that quite a number of contributions have concentrated on what should occur during the period of the British presidency. It is right for the House to consider what the Government propose as the agenda for the presidency, as well as what the community needs at this stage in its development. In a number of important respects the Government's agenda and the needs of the Community do not coincide. I do not in any way dispute the importance of enlargement, or of subsidiarity, or of settling the budget, or of completing the single market process, or of seeking a much more co-ordinated approach to the alarming events in what was once Yugoslavia. It is not so much what is included that is significant as what has been left out.

The Government's complacency over the condition of the British economy seems to have led them to the view that achieving economic growth and much better levels of employment should not be a priority for the British presidency or for the Community as a whole. We in the Opposition profoundly disagree with their approach. Getting back on the road to economic growth, recovering from recession and tackling rising unemployment ought to be major priorities for the Community and should seem to be so by the country that holds the presidency.

I regret to say that what we have heard in this debate and in previous statements by the Prime Minister and his colleagues shows that the crucial importance of these economic issues is not grasped by the Government. It ought to be an employment and growth presidency.

Such objectives are vital to Britain—languishing as we are in a debilitating recession, and having the weakest economic performance in the whole Community. They are, of course, vital to the Community. If we do not achieve sustained growth and maintain high levels of employment, the success of the Community as a political, economic and social enterprise will inevitably be undermined. If the economic performances of member states differ widely, the tendency will be for the Community to fragment rather than join together.

Why, then, is it that the Government do not appreciate the significance of these issues? It may well be that their own disengagement from the problems of the British economy has led them to the erroneous belief that a similar stance is desirable at Community level. It may also be that their own embarrassment about the failure of their economic policy in Britain, and the continued nonappearance of the frequently promised economic recovery, has made them coy about adopting a more positive approach. They certainly have grounds for embarrassment about their economic policy.

Today's Financial Times contains an interesting article by Mr. Philip Stephens about attitudes to the economy among Ministers and other Conservative Members. Clearly, unease about the failure of Government economic policy is growing, not just in the country but in the ranks of the Conservative party. Mr. Stephens observes: Most Conservative MPs believed their pre-election claims that victory would provide the final ingredient for economic recovery. The writer does not state whether the Chancellor of the Exchequer was in that category; we shall leave that point aside for now, and the Chancellor can tell us himself when he winds up the debate.

Mr. Stephens goes on to analyse the situation thus: Three months on, they have become bemused and uneasy about the stubbornness of the recession. The anecdotal evidence in their constituencies—from bankruptcies, unemployment and house prices—confirms the aggregate indicators that have prompted the Treasury to scrap its forecast that the economy will grow this year … Suggestions that recession might yet turn into slump are no longer dismissed with quite such breezy confidence. The concern is shared in the highest reaches of the government. I dare say that that may even include the Chancellor of the Exchequer. 'Pretty awful' and 'dangerous' are just two of the grisly descriptions of the short-term economic outlook offered during the past few days by cabinet members. Mr. Philip Stephens is a journalist of some repute. Clearly, members of the Cabinet are unburdening themselves to him about what they consider to be the true position of the British economy, and clearly there is deep unease—as there ought to be —among Conservative Members. I am not surprised that such concerns exist, because they are corroborated by the facts. Britain suffered from the lowest economic growth in the entire economic Community in 1991, and it is forecast that it will occupy exactly the same lowly position in 1992. That is the OECD's assessment—revealed in its latest report, published on 21 June. The same report shows that we had the worst record for job creation in 1990 and 1991, and that the same is forecast for 1992.

As if that were not bad enough, ours was the worst investment performance in the entire Community in 1990 and 1991, and again the same is forecast for 1992. It is predicted that in 1992 investment will not increase, but will fall by 3.8 per cent. So much for the much talked about recovery from recession, which we were told would be the direct, inevitable result of a Conservative election victory.

As he contemplates those woeful circumstances, the Chancellor's mind may go back to his first significant statement as Chancellor of the Exchequer. In November 1990, he informed the Treasury and Civil Service Select Committee that the recession would be—I use his well-known words—"shallow" and "shortlived". [Interruption.] He said it, and I do not think that he is disposed to deny it.

Not long after that. warming to his theme, the Chancellor assured us that recovery would occur at the end of the first half of 1991. Not only would it be shallow and shortlived but it would be shortlived enough to have come to an end by the middle of 1991. Here we are, smack bang in the middle of 1992, one year later, and the Chancellor's promised recovery is as far away as ever.

I have little doubt that the manifest unease in his party will have been much increased among those who considered his speech to Surrey business men on 17 June, when he said: In two or three years time I believe that people will look hack and see that it was now, during this critical period, that the right decisions were taken. Some of course will think, given the Chancellor's record, that his powers of accurate economic prediction should not be overestimated. Others will, I think, shudder at the implication that recovery, already at least one year late, is not likely definitely to have occurred until at least two or three years from now.

The Government's failure to put growth on either the national or the Community agenda is in marked contrast to the approach being adopted by the United States to the Munich summit of the G7 that is to take place next week. Treasury Secretary Brady is reported, again in today's Financial Times, as having stated: A top priority for the United States … was to agree measures to strengthen global growth. He implied, said the Financial Times, that this was central to all else the G7 leaders might want to achieve. We're talking about a communique that is going back to the concept of a growing world. We are entitled to ask why the concept of a growing Europe is not included in the objectives of the British presidency when the importance of the issue is so clearly understood by other members of the G7.

Europe needs a strategy for growth and employment. In our view, the British Government should put on the agenda measures, on a Community wide basis, to encourage and stimulate investment, to enhance and expand training and to increase employment opportunities. They ought to be a central feature in the creation of the single market, which should be seen not just as an area of economic deregulation but as an engine of growth and better economic and social opportunity.

On investment and growth, the immediate problem that faces us is high levels of real interest rates throughout the Community, not least in this country. These have partly been caused by the costs of German reunification and the consequent policies adopted by the German Government. To overcome the inhibitions on investment and growth flowing from Germany's domestic economic situation, the Community should consider the strong case for co-ordinated interest rate cuts in every member state. To achieve that objective, the members of the exchange rate mechanism should consider, if it is necessary to do so, and upward revaluation of the deutschmark against all the other currencies.

Mr. Cash

Will the right hon. and learned Gentleman give way?

Mr. Smith

I am trying to develop my argument at this point, but I shall give way to the hon. Gentleman.

Mr. Cash

The right hon. and learned Gentleman is talking about interest rates and our linkage to the deutschmark. Does he think that we should suggest to Germany that it might like to increase its taxation in order to ensure that it provides the necessary money, or does he think that we might come out of the exchange rate mechanism?

Mr. Smith

There is a case for saying to the Germans that they might deal with the problem by increasing taxation rather than by having the tight monetary policy that they now follow. I hope, however, that the hon. Gentleman understands that the domestic implication is Conservative recognition of the case for higher levels of taxation. He ought to bear that in mind in his political approach to the issue.

It should be remembered that the exchange rate mechanism is a fixed but also an adjustable system and that a long time has passed since the last realignment in 1987.

It is worth considering whether the highly unusual circumstances of German unification and the impact which the Germans' restricted monetary policy has on the prospects of growth for the whole Community do not justify a concerted strategy to achieve lower interest rates which could involve some realignment of the currencies. Such a move may also be a necessary step to achieve the economic convergence which is so necessary for the long-term viability of the Community and any progress towards economic and monetary union.

Naturally, a substantial part of the debate has centred on the future of the Maastricht treaty following the negative result of the Danish referendum. I think it is significant that one of the key causes of concern about the treaty in Denmark has been the inadequency of the framework of democratic accountability in the treaty's proposals for economic and monetary union.

At Lisbon, the Danish Foreign Minister, Mr. Ellemann-Jensen, said: What we need is more democracy in the institutions, more open decision taking. That view has received consistent support from the Labour party in all its debates, pre- and post-Maastricht. We have consistently argued that the overall responsibility for economic policy must remain with elected Ministers, accountable to the European Parliament and their own national Parliaments. In particular, we have argued that ECOFIN—the Council of Economic and Finance Ministers—should have the determining role in the shaping and implementation of overall economic policy, including external exchange rate policy.

The proposed European central bank should be made more accountable to ECOFIN as part of that process, and the objectives of the bank should not be an exclusive concern with price stability but should embrace the wider economic objectives of the union as set out in article 2 of the treaty, which defines them as follows: sustainable non-inflationary growth respecting the environment, a high degree of convergence of economic performance, a high level of employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States. I am sure that the hon. Member for Stafford (Mr. Cash) does not agree about economic and social cohesion and solidarity among member states, but we regard it as one of the important purposes of the European Community, and it is extremely important that it is set out so clearly in article 2 of the treaty.

Therefore, we suggest that a useful initiative during the British presidency would be a better and clearer definition of the important role which ECOFIN must have to preserve democratic accountability and political control. In the intergovernmental conference discussions, the Government gave that aspect insufficient priority, but they have an opportunity in the next six months to put that right. There is concern not only in Denmark but throughout the Community that the democratic deficit needs to be tackled by more effective proposals.

It is not enough merely to stress subsidiarity, which is essentially about the level at which decisions are taken. There should also be concern about how the decisions are taken and, in particular, that they are subject to a framework of democratic accountability.

Mr. Peter Shore

I have followed very closely what my right hon. and learned Friend has been saying and I wholly endorse what he said about the need for any European central bank or monetary institutions to be subject to political control, but that is not in the treaty now, so what is his conclusion? Is this a treaty which can possibly be accepted by the Opposition without the essential safeguards which my right hon. and learned Friend has mentioned?

Mr. Smith

My right hon. Friend follows these matters extremely closely so he will know from my previous statements in the House that I said that I was not happy about the proposals for the European central bank and that I would prefer a more explicit framework of political control. He also knows that I have consistently argued that, if we strengthened ECOFIN and its relationship with the central bank, that would provide a way forward, in which we could achieve greater political control.

I regret that the Government did not pursue that goal, although the French Government did, during negotiations on the treaty. In that regard it is important to note that ECOFIN has control over the external exchange rate of a single currency. That is a step in the right direction. As we look to the future, I am trying to set out objectives for the way in which the EC is to develop in the context of a British presidency, which could have an influence in that direction.

The Government's strategy of concentrating on opt-outs in the intergovernmental conferences meant that less attention was given to those important issues of accountability. Another side effect—

Mr. Richard Shepherd (Aldridge-Brownhills)


Mr. Smith

Will the hon. Gentleman allow me to continue? I am short of time, and I have given an undertaking as to when I shall finish.

Another side effect of the opt-out strategy—[Interruption.] I hope that the Chancellor of the Exchequer does not find these matters too amusing; they are quite important. I wish that he had paid more attention to democratic accountability. It is not good enough to stroll along to the House of Commons, utter a few platitudes and giggle during Opposition speeches. We expect a little more from a Chancellor of the Exchequer in such a debate.

Sir Peter Tapsell


Mr. Smith

No, I must not give way.

A side effect of the opt-out strategy was to make it difficult to secure the location of the European monetary institute—the precursor of the central bank—for the United Kingdom. At Lisbon it looked as if Bonn were being favoured by many member states. I hope that the Chancellor of the Exchequer will take that matter seriously, and will tell us tonight what the Government strategy is for advancing the case for the bank to be located in one of the excellent sites in the United Kingdom. In particular, will he explain the impact of the opt-out on the United Kingdom's capacity to develop a convincing case? Has the Government's handling of the matter not placed a serious impediment in this country's way? The House will expect the Chancellor to address that issue when he replies to the debate.

The other opt-out concerns the social chapter. It is bad enough that Britain alone among the Twelve does not wish to recognise the social dimension which is essential to a balanced approach to the European Community. It is illuminating—but not, I am sorry to say, surprising—to discover that only one Council meeting on social affairs has been scheduled to take place—and that is near the end of the British presidency. The constant and dogmatic downgrading of social affairs damages our interests as well as those of the Community as a whole. The illusion persists in Conservative minds that Britain has not fallen behind the rest of the Community—but everyone else knows that we have.

After Maastricht, the German newspaper Die Welt observed of the British opt-out: it confirms that by comparison with other European industrial nations, Great Britain is a developing country in the fields of labour law, labour relations and social security". It is a great pity that we are now collecting such an unflattering identity among the other countries in the EC. So much for being at the heart of Europe.

There is no sense in seeking to attract investment on the basis of low wages and low skills, when investment in today's world seeks to combine with the high skills which create the productivity which produces higher growth, high wages and better living standards. I regret that, under an opt-out presidency, the next six months will not be noted for progress in social affairs.

We call upon the Government to adopt a more imaginative approach to the responsibilities of the presidency. We urge them to reconsider their failure to give prominence to economic growth and full employment. We urge them to give proper attention to the development of democratic accountability as one of the means of tackling the democratic deficit. Once again, we deplore their failure to recognise that, in rejecting the social chapter and the need for social responsibility to be a major feature of the Community, they are not serving either the interests of the people of this country or the wider needs of the Community.

9.34 pm
The Chancellor of the Exchequer (Mr. Norman Lamont)

This has been an excellent debate with some outstanding speeches from both sides of the House. As always, the right hon. Member for Bethnal Green and Stepney (Mr. Shore) made an outstanding contribution. His speeches do not always seem to go down so well with his right hon. and learned Friend the Member for Monklands, East (Mr. Smith), but we certainly appreciated it.

I also greatly appreciated the speech by my hon. Friend the Member for Southend, East (Sir T. Taylor). Although I did not agree with everything he said, I did not disagree with everything. I know that I speak for everyone who heard his speech when I say that it was remarkable. Everyone on the Conservative Benches warmly respects my hon. Friend for that speech.

We also had a remarkable speech from the hon. Member for Warwickshire, North (Mr. O'Brien), who said that he might support the Government.

Mr. Mike O'Brien

indicated dissent.

Mr. Lamont

Although the hon. Gentleman expressed a strong objection to what he considered to be the removal of the social element, he did say, despite the fact that he is shaking his head, that he thought that the Maastricht agreement represented a positive approach to Europe. He thought that that approach should be borne strongly in mind.

It is also a great pleasure to welcome my hon. Friend the Member for Winchester (Mr. Malone) back to the House and to hear him speak again. He reminded us about the dangers of centralisation and growing bureaucracy in the Community.

My hon. Friend the Member for Warwickshire also made a maiden speech—[HON. MEMBERS: "The hon. Member for Mid-Staffordshire"] I am entitled to be confused about the constituency of my hon. Friend the Member for Mid-Staffordshire (Mr. Fabricant) because he somewhat startled the House by referring to his constituency as his own banana republic. We were all delighted to listen to his speech and to note what he said about his constituency and the historic people who came from it, including Dr. Johnson.

In common with my hon. Friend the member for Winchester, my hon. Friend went out of his way to warn against what he saw as the dangers of centralisation. As the right hon. and learned Member for Monklands, East said, my hon. Friend drew on his knowledge of eastern Europe and the former Soviet Union. He warned us against pushing towards the unification of Europe more than common sense could bear.

My hon. Friend the Member for Mid-Staffordshire asked us to assure him that we did not foresee the Community developing into a super-state. My hon. Friend is well aware that my right hon. Friend the Prime Minister has said that we want to make absolutely certain that that is not the track on which Europe is destined to go.

The right hon. Member for Bethnal Green and Stepney referred to the unanimity requirement that attaches to the Maastricht treaty, its interaction with the treaty of Rome and the fact that amendments to that treaty can be made only by unanimity. He referred to article 236. I can assure him, as he requested, that we will not develop a strategy to get around the unanimity requirement. I hope that he will accept that.

My hon. Friend the Member for Southend, East referred to CAP reform and asked my right hon. Friend the Foreign Secretary about its costs. That reform will add to public expenditure costs in the United Kingdom, but within the Community the costs will be within the CAP guideline. Overall, the United Kingdom will benefit in resource terms, because, as my hon. Friend understands, two forms of subsidy are implicit in the CAP: one is the subsidy from the taxpayer, but the other is the subsidy obtained through the artificial hiking of prices. The reduction in prices will outweigh the extra public expenditure costs. Therefore, the United Kingdom will be a net beneficiary from the CAP reforms. There will be a net gain to the United Kingdom.

The hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) asked about the relationship between cohesion, ratification and enlargement. As he knows, although the link between cohesion and enlargement was not made in the Maastricht treaty, it was made at the time of the Maastricht meeting. The further link between enlargement and ratification was made in Lisbon. As the hon. Gentleman and the House will appreciate, the whole process of enlargement will take time. As my right hon. Friend the Foreign Secretary made clear, we have agreement in principle to enlargement. We will be preparing the ground in our presidency for enlargement by negotiations, which will begin next year. The agreement in principle, to which the right hon. Member for Manchester, Gorton (Mr. Kaufman) referred, was expressed at Lisbon.

Today's debate has provided a welcome chance to set out our priorities for our presidency of the Council. The result of the Danish referendum has sparked a vigorous debate across Europe. As my right hon. Friend the Member for Guildford (Mr. Howell) said, we have the chance now to influence that debate, because it has increased in intensity after what happened in Denmark. As we assume the chair and the presidency, we will have a unique opportunity to try to influence the debate.

This country last held the presidency in 1986. Our task then was to oversee the ratification of the Single European Act and to begin to implement the measures necessary for the single market. It now falls to us to see that programme through and to complete the single market on schedule at the end of 1992. We have the opportunity referred to by my right hon. Friend the Member for Guildford and my hon. Friend the Member for Winchester to see the Community moving in our direction—one where free trade is a reality within the Community and between the Community and the world outside. We want a Europe of open markets, not one of red tape and unnecessary bureaucracy. We want a Community that is ready to welcome all European states that meet the conditions of membership and one that is not just confined to being a rich man's club.

As my hon. Friend the Member for Winchester said, what is needed is a Community that does not interfere unnecessarily in the rights of member states to make their own laws and in the rights of peoples and businesses to live and work unhindered by petty regulations and meddling directives. That is why subsidiarity has assumed such importance in the debate and why it will be such a vital consideration.

In the next six months, our priorities will be to pave the way for the early enlargement of the Community; to work for a GATT settlement; to complete the single market; and to reach an agreement on future financing of the Community that contains the Community's spending within acceptable bounds.

The greatest contribution that we in this country have made to the Community is the single market programme. It has been estimated that, over the medium term, the single market could add up to more than 5 per cent. to Community output—some £150 billion—and could create up to 1.8 million jobs. I wish that the right hon. and learned Member for Monklands, East would realise that jobs are created not only by pumping up demand—something that he always wants to do—but by enlarging the single market, by increasing competition and by taking measures that increase the supply side of the European Community. Increasing the number of jobs in the Community involves that, and not just the matters referred to by the right hon. and learned Gentleman.

Mr. John Smith

Does the right hon. Gentleman think that the unemployment figures over the past period are a testimony to the success of Conservative economic policy on this matter?

Mr. Lamont

The right hon. and learned Gentleman talked about the effect of the election on recovery. We know what would have been the effect on the economy had the Labour party been elected. There would not have been the slightest prospect of recovery had the right hon. and learned Gentleman and his tax plans got into office.

On the single market, I wish to address a point that is of considerable concern to the House. However, before doing so, I emphasise that there is a risk that we take the single market for granted. We assume that all the work has been done and that it will simply happen on 1 January 1993. But that is not the case. Business in this country stands to gain enormously from the single market. If we fail to complete the task, this country will be the loser.

There is, of course, a link between the single market and the difficult and vexed question of majority voting in the Community. As my right hon. and noble Friend Baroness Thatcher found herself conceding at the time, it would be impossible for the Community to create a single market in Europe without some form of qualified majority voting. If we did not, the directives necessary to break down barriers and open up markets would inevitably be sabotaged by special interests. It has been only by majority voting that we have been able to make the progress that we made, but continued effort is needed, particularly on services.

A prime example of the opportunities available is the package that was secured by my right hon. Friend the Secretary of State for Transport, which will pave the way for the deregulation of air fares within Europe. For far too long, state airlines in Europe have been over-subsidised and ticket prices have been over-regulated. The introduction of competition should help to bring down prices, just as it has in the United States, where internal air fares are far cheaper than in Europe, and they should be much cheaper in Europe.

Equally important are financial services, securities, banking and insurance in respect of which this country is in the lead. We need to ensure that the single market is developed so that we can sell financial services right across Europe. That means setting some common standards across the Community for the protection of investors. But those regulations must not be too onerous or restrict the ability of firms to compete in world markets. At the Economic and Finance Council on Monday, we made major progress towards agreement on two important directives on investment services and capital adequacy. Those proposals would allow British securities and investment businesses to compete across the Community without imposing unacceptable new regulation. That would pave the way for the highly competitive British financial services industry to be able to expand across Europe.

Mr. Dykes

Does my right hon. Friend agree that the interesting point about those two directives was that they were agreed by majority voting, showing once again that, mostly, that mechanism is actually in the interests of this country, not against it?

Mr. Lamont

It was certainly in this country's interest in that particular instance; that is true.

My hon. Friend the Member for East Lindsey (Sir P. Tapsell) raised a point that is of concern to the House—the harmonisation of indirect taxes. Our stance has always been clear and has always been based firmly on the Single European Act. We are in favour of binding European law on matters of taxation only to the extent that that is necessary for the completion of the single market. As I explained when I intervened earlier, that attitude mirrors the wording that exists in article 90 of the treaty. However, I have to confess that I sometimes find it difficult to see what some Commission propoals for tax harmonisation actually have to do with the single market. I constantly remind my fellow Finance Ministers that the United States manages to have a very successful internal market with no centrally directed harmonisation of indirect taxes.

We have made some progress in convincing the rest of the community of the validity of that view. The original proposals by Lord Cockfield for tightly constrained harmonised VAT, harmonising the rates of VAT with maxima and minima, are long dead, thanks to British opposition.

Mr. Roger Knapman (Stroud)

Will my right hon. Friend give way?

Mr. Lamont

I shall give way in a minute, but I wish to make some more progress.

I assure the House that during our presidency I will continue to reject unnecessary and damaging proposals for the harmonisation of taxes. The right hon. Member for Gorton said that, on the minimum rate for VAT, I could have vetoed the proposals. He seemed to think that we had reached an agreement the other day. I vetoed the proposals that were made at that time. I am determined to preserve the right of Britain to keep our zero VAT rate. That right is currently fully protected by the sixth VAT directive. We shall not accept any proposal that calls it into question.

My hon. Friend the Member for Southend, East is worried about VAT, but I assure him that we are convinced that our legal position is watertight, notwith-standing the points that he made.

Mr. Knapman

Will my right hon. Friend give way?

Mr. Cash

Will my right hon. Friend give way?

Mr. Lamont

If I could make a little more progress, I shall give way later.

The draft VAT rates directive which was under discussion at ECOFIN earlier this week would not have affected our zero rates. Indeed, it would have reinforced our right to retain them after the abolition of fiscal controls at the border. However, it would have provided for a legally binding minimum standard rate. I repeat that that is a long way from the original Cockfield proposal for maxima and minima. The House will recall that we have already accepted minimum excise duty rates.

I remain highly sceptical about whether a minimum rate of VAT is necessary for the creation of the single market, but we must also take account of the views of other countries. I emphasise to my hon. Friends that other member states, especially those with large land boundaries, have real anxieties about the danger to their revenues from cross-border shopping in continental Europe. They fear that indirect tax rates will be forced downwards across Europe. jeopardising their fiscal positions and forcing up direct taxes.

No one in the House is more jealous of our fiscal prerogative than me. That is not merely because I am Chancellor of the Exchequer but because I am a Member of this House. However, VAT has long been subject to Community law. Its structure and coverage are already governed by directives of long standing. Indeed, in 1988 we were forced by the European Court of Justice to extend VAT to non-domestic construction, fuel, power and water. But the directive would not force us to increase any VAT rates.

We must recognise that there is a link between the completion of the single market—the abolition of border and customs controls—and agreement on tax. Other countries that are worried about their tax revenues are not prepared to agree to the completion of the single market without some agreement on indirect tax. It is in our interest that we reach agreements which will enable the single market to be completed and make possible the ending of fiscal controls at borders. It was with that objective firmly in mind that I was prepared to accept a compromise proposal of a binding VAT rate of 15 per cent. for four years. With a review after four years, that would have ensured that the rate was not set in stone for all time.

I remind my hon. Friend the Member for East Lindsey that our current VAT rate is 17.5 per cent., well above the proposed minimum. So it would not have been likely that our room for manoeuvre in tax policy in the next few years would be constrained. However, that was not enough for the Community and there was no agreement.

Throughout the discussions, I made it clear that it would be possible to agree to any VAT directive only if other essential United Kingdom concerns were met. We have interests in respect of alcoholic drinks and whisky in particular, as the right hon. and learned Member for Monklands, East knows. That is no personal reference. but the hon. and learned Gentleman has an interest of long standing in the industry near his constituency.

We have been anxious not to introduce a regime in the Community which forces other countries to increase excise duties on products produced in Britain. The House will understand that we must balance industrial interests with the principles of fiscal sovereignty that we wish to retain.

Sir Peter Tapsell

Will my right hon. Friend give way?

Mr. Cash

Will my right hon. Friend give way?

Mr. Lamont

I give way to my hon. Friend the Member for East Lindsey, because he raised the matter first.

Sir Peter Tapsell

I am grateful to my right hon. Friend for his full and clear response to my earlier question, and I fully accept everything that he said about VAT. However, if we lose some control of our indirect taxation yet have little room for manoeuvre on our exchange rate and interest rates, surely he and his successors as Chancellor of the Exchequer will become boxed in so that they have practically no room for manoeuvre. When we come to take a decision on single currency in 1996, we shall be told that it will make no difference as we will already have lost control of our economic affairs.

Mr. Lamont

As I explained, I do not think that it is realistic to think that VAT will fall to below 15 per cent. in the next three years. By stating that that would revert the decision for review—

Madam Speaker

Order. The House cannot hear the Chancellor if he does not speak into the microphone.

Mr. Lamont

I apologise, Madam Speaker.

I do not believe that that policy would seriously constrain our fiscal room for manoeuvre and I remain, as I always have been, firmly opposed to proposals for the harmonisation of other taxes. We must make judgments about what is necessary for the internal market —other countries will demand that. The discussion involved the very minimum. The House is in danger of forgetting that we have already accepted minimum rates across the range of excise duties. It forgets that a large number of indirect taxes—because of the treaty of Rome, the Single European Act and successive directives—have already been placed within Community law.

Mr. Cash

Will my right hon. Friend give way?

Mr. Lamont

Yes, but I hope that my hon. Friend will be briefer than he normally is.

Mr. Cash

In order to charge VAT, companies must be capable of being charged the amount of money due from them. Would it not be possible for my right hon. Friend to exert maximum influence on the Commission through the Department of Trade and Industry to ensure that we have a level playing field? Time and again in the past few days, company representatives have told me that they are having to operate on an uneven playing field. We must stop the subsidised goods coming from other countries that are damaging our industry.

Mr. Lamont

I entirely agree with my hon. Friend, but it is easier to make that point as a generalisation than to give specific examples. If my hon. Friend will give examples, I shall guarantee that they will be energetically investigated.

The other item that will be on the Finance Ministers' agenda in the next few months is future financing of the Community. The Commission originally proposed an increase in the own resources ceiling—the money that the Community is entitled to spend—from its current level of 1.2 per cent. to 1.37 per cent. of Community gross domestic produce. That may not sound like much, but it would mean an increase of about 30 per cent. in real terms —£14 billion—by 1997, compared to 1992. That would increase the United Kingdom's annual net contribution after abatement—British public spending—by about £1 billion a year in real terms.

When we consider what the Commission and the Community are saying to countries about convergence and how deficits throughout the Community must be reduced, it makes no sense for the Community to lecture countries on the need to control spending. I am sure that the right hon. Member for Bethnal Green and Stepney would agree with that. I know that he does not agree about the convergence criteria, but I am sure that he would acknowledge that it is inconsistent for the Community to tell countries to cut deficits and spending, while trying to impose more spending on individual countries through the needless and unnecessary expansion of the Community budget.

The guideline that already exists in the financial perspective provides for a substantial increase in expenditure. Community expenditure could grow by more than 3 per cent. a year. The Commission's proposals would imply a real growth of 5.5 per cent. a year, which is simply unacceptable. A clear majority of my Finance Ministers and colleagues agree with me and there was widespread recognition at the Lisbon council that the own resources ceiling would be adequate for at least the next two years.

If it is right to restrain public spending at home, it must be right not to let it run away in Europe. The European Commission should take a realistic view about spending in the Community. It is no use it giving lectures to Finance Ministers on the matter. Nor are we prepared to accept that the provisions contained in the Maastricht treaty imply the sort of increase in Community expenditure that the Commission has proposed.

Those are the priorities for the European presidency. I am sorry that the right hon. and learned Member for Monklands, East has told us that he wants a revaluation of the deutschmark. Before the election, he told us again and again that he did not want sterling to be devalued. He did not seem to have any policies, and he was firm about only that one thing. He would not argue that the pound should be devalued. In the Financial Times on 27 September 1991, he said: We regard it DM2.95— as an obligation which has been entered into which we will maintain. It is quite clear— It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put, pursuant to the Standing Order.

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