European Union

HC Deb 12 December 1996 vol 287 cc428-507

[Relevant documents: The White Paper on Developments in the European Union, January to June 1996 (Cm 3469); Presidency General Outline for a draft revision of the Treaties; The Commission's Work Programme for 1997: New Legislative Proposals (SEC(96)1819); The Commission's Work Programme for 1997: Political Priorities (COM(96)507); European Community Document No. 10867/96 on the introduction of the euro; European Community Document No. 10893/96 on reinforced convergence procedures and a new exchange rate mechanism; European Community Document No. 10892/96 on a stability pact for ensuring budgetary discipline in stage 3 of EMU; Second and Third Reports from the Select Committee on European Legislation of Session 1996–97 (HC 36-ii and 36-iii); Sixth Report from the Select Committee on European Legislation of Session 1996–97, European Documents on Economic and Monetary Union: the Scrutiny Process (HC 36-vi); Eighth Report from the Treasury Committee of Session 1995–96, The Prognosis for Stage Three of Economic and Monetary Union (HC 283-I and II); Minutes of Evidence taken before the Select Committee on European Legislation on 3rd December (HC 136-i); and Minutes of Evidence taken before the Foreign Affairs Committee on 5th and 9th December (HC 148-i and 148-ii).]

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

Madam Speaker

We now come to the second day of the debate on the European Union. I must let the House know that, again, speeches by Back Benchers will be limited to 10 minutes.

4.50 pm

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Malcolm Rifkind)

On this, the second day of our debate on the European Union, I wish to concentrate my remarks on the intergovernmental conference and the Dublin summit.

First, however, I will respond to certain remarks made by the President of the European Commission, who said the other day that the hour of truth was approaching when the United Kingdom would have to decide whether it believed in Europe as a free trade area or as a political union. Many hon. Members like to present the issue in equally Manichaean terms. It is reminiscent of choices that used to be urged upon British Governments: Commonwealth or Europe? America or Europe? Those have always been false choices because reality lies between such poles.

For Britain, the European Union is, and always was, more than a free trade area. For a start, the single market involves much more than the elimination of tariff barriers. That was the first and easiest step in its creation. It also needs rules to prevent non-tariff obstructions to trade, like the mediaeval rules on what could go into a pint of beer, which excluded British beers from Germany, or the rules on insurance policies, which eliminated competition, whether on price or product innovation, in much of the continental market.

All that involves supranational rules and supranational institutions, whether the Commission or the European Court, to enforce them. British consumers, workers and manufacturers have all benefited from those rules.

It is strongly in the British interest that the EU should have a common external trade policy. There is a persistent continental instinct, particularly in France, to put up trade barriers around a fortress Europe. Yet those instincts were faced down by the Commission, which negotiated a market-opening GATT deal on behalf of us all. That would not have been possible—nor would we have been able to protect British commercial interests as well as we did—without strong European institutions.

If a simple free trade area was such a splendid option, why has the European Free Trade Association collapsed? Why did Sweden, Finland and Austria so quickly abandon the European economic area, which came into force only in 1994, in favour of full membership of the EU? The answer is that, to secure tariff-free access to the European Community, they found themselves having to follow single market rules and regulations, including competition policy, over which they had no control or influence. That may be a sustainable position for Iceland, Norway or Liechtenstein, but I hardly think that it would befit a country of our size and history.

Mr. Alex Salmond (Banff and Buchan)

I agree with the Foreign Secretary that the European Union is and should be more than a free trade area, but may I bring him to the specifics of the intergovernmental conference? A few months ago, the Prime Minister told the fishing industry that resolution of the flags of convenience scandal was his first priority at the IGC. A few weeks ago, however, we were told that the 48-hour week had become the major priority. I wish to ask a simple question: if the Prime Minister succeeds in resolving the flags of convenience issue, will he still block agreement until he gets his way on the 48-hour issue?

Mr. Rifkind

We have spellt out a number of crucial objectives, of which the issue that interests the hon. Gentleman is one. It is not necessary to add to that now. We have said that those are crucial matters and the conference cannot come to a conclusion unless all members are satisfied with the outcome.

Even in the area of commerce, the EU is much more than a free trade area. But its benefits are also felt in many areas not directly related to the market, such as increasing co-operation in the fight against international crime, higher environmental standards and an increasingly confident European voice on the world stage. The common foreign and security policy does not replace national foreign policy, but complements it. That works to our advantage, as other European countries' views on many issues are very close to ours, and a common European policy where it applies can exert greater influence than the UK could achieve on its own.

Above all, the European Union is the basis on which we can consolidate democracy and prosperity across the whole of Europe, including our central European neighbours.

Opponents of British membership of the EU like to argue that we joined a mere common market that has insidiously developed a political agenda. That is nonsense. The European Union has always had a political as well as an economic purpose. Britain recognised that very clearly when we went in: indeed, it was a central consideration behind our application for membership.

Mr. William Cash (Stafford)

Yesterday, my right hon. and learned Friend the Chancellor of the Exchequer said that he had no objection in principle to the idea of a single currency. My right hon. and learned Friend the Foreign Secretary, in reply to me in the European Select Committee in February when I pressed him on economic and monetary union, said that he did not follow my point that it was a question of principle. Does my right hon. and learned Friend not accept that there is a basic and fundamental inconsistency in the views expressed on the question of principle by the Chancellor and by himself? Does he agree that that is causing a great deal of uncertainty and confusion, that the matter should be resolved, and that it should not be construed as dissembling?

Mr. Rifkind

I have no doubt whatever that the question of a single currency and the possible abolition of our national currency would be a great historic decision. It would probably be irreversible, so it is right that it should be addressed as one of the most important matters to be considered by a British Government for many years. I believe that every member of the Government believes that it is of crucial significance. It is therefore right to ensure that the issue is addressed with regard both to its economic implications and its wider consequences—the national decision making that we currently enjoy and the extent to which that might be diminished in the event of a single currency.

Mr. Norman Lamont (Kingston upon Thames)

I should like to return to what my right hon. and learned Friend was saying about the European Union's functions and ask him a question that an ambassador of this country asked me. He asked me to explain to him why it was necessary for the European Union to have more than 120 embassies—or "delegations" as they are called—around the world at a cost of £150 million per year. Is it really necessary, given the European Union's functions, to have that degree of representation?

Mr. Rifkind

I would not necessarily wish to defend the exact number as it currently applies, but the European Union has overseas aid programmes in many countries and needs to implement those programmes through local offices. It is also responsible for handling the external trade policies of all its member states. Those external trade negotiations cannot be conducted without a physical presence in countries such as Japan or many other countries with a crucial involvement in trade matters. So while I am not inclined to justify every area of expenditure or every office, I acknowledge that the European Union needs a significant number of overseas premises to conduct its proper business.

Several hon. Members

rose—

Mr. Rifkind

I realise that an awful lot of hon. Members wish to speak in this debate. Although I do not intend to give way to everyone who wishes to intervene, I shall try to be fair.

Mr. Christopher Gill (Ludlow)

Will my right hon. and learned Friend give way?

Mr. Rifkind

Not at this moment, but perhaps later.

If Europe is more than a free trade area, it is less than a federal state and must remain so. The bedrock of the European Union is the independent democratic nation state. The European Union derives its legitimacy and functions from the powers freely given to it by its members. It can flourish only as a partnership of nations.

The Government have a clear view of what the European Union is, and how it should develop. It is a partnership of nations reconciled after centuries of rivalry and conflict. Those nations have a strong sense of shared purpose and shared values; they have created a single market open internally, and open to the rest of the world; they are committed to maximum co-operation in foreign and security policy and in such issues as the fight against international crime; and they have joined forces in the common enterprise of the European Union while retaining the separate identities that give Europe its richness and character.

Overall, and in its historical context, the degree of co-operation in Europe today is extraordinary and unprecedented. The European Union has been the focus of that achievement, but the quest for ever more institutional integration puts all that at risk.

If an hour of truth is approaching, it is perhaps for the integrationists in Europe, who need to define the limits of their ambition. Where do they see the process that they promote finding its natural conclusion? At what point will dynamism in the EU be measured in the use that we make of the institutions that we have created, rather than in their endless modification? At what point will integrationists accept that deeper is not always and necessarily better?

All sides decry the term "super-state". Chancellor Kohl agrees that independent democratic states are at the heart of the European project. Amen to that; yet if the EU is to be the basis of lasting peace and prosperity in Europe, and if people—not just in the UK—are to be reassured that they are not in the belly of some infernal machine that is running out of control, they need to feel that there is some logical conclusion to the process of European integration, short of a super-state.

That is why all the member states need to think hard about the purposes and limits of integration.

Mr. Hugh Dykes (Harrow, East)

I am grateful to my right hon. and learned Friend for giving way at this stage, as he is giving a fair and objective description of what the European Union should mean in the future. Would it not be better for the British Government to avoid the use of the word "federal", as it is so misleading? Too many people fear that it means centralisation, whereas it has many different meanings in different countries. NATO was a federal treaty in every respect and all the way through its clauses. It would be much better to refer to the use of majority voting and greater integration to enable enlargement to take place. That is the aim of the process.

Mr. Rifkind

I strongly disagree with my hon. Friend. I do not believe that the term "federal" is inappropriate. Of course, if one starts with a single central state and then federalises, one is decentralising. However, that is not the starting point in Europe. The starting point is 15 independent nation states. If the attempt is to create a supranational institution with supranational authority at the expense of national Parliaments and national Governments, one is undoubtedly moving in a federal direction and, depending on the degree of integration that is conceded, one can end up with a federal state. Those who want that objective should not be so shy about using the term that properly describes their ambitions.

Mr. Nigel Spearing (Newham, South)

The right hon. and learned Gentleman said a few moments ago that the European Union was something less than a federal state, or words to that effect. Surely it is already something more. A federal state has a separation of powers, whereas we already have a single court, a single Council, a single Commission, a single Parliament, possibly a single currency and a single central bank, and perhaps a single representation abroad on a single commercial policy. Does that not mean that, far from being federal, the EU is already centralised?

The Chancellor of the Exchequer said yesterday that he wanted to know what his colleagues abroad thought. In effect, they are asking for a single institutional state that would leave no real power for a national Parliament such as ours.

Mr. Rifkind

The hon. Gentleman is correct to say that there are supranational institutions, as he described. The crucial factor in determining whether we have yet achieved a federal system is the amount of overall power that the supranational institutions have. If one considers the totality of decisions on the use of resources, for example, or on legislation, or on matters affecting the life of individual citizens, one finds that the use of only a small fraction of the resources raised in this country is at present determined by supranational institutions. One is entitled to make that point.

Mr. Bernard Jenkin (Colchester, North)

rose—

Mr. Rifkind

I will give way in a few moments, but I must make progress.

I now want to focus on the issues before Heads of Government at the Dublin European Council tomorrow and on Saturday. Aside from economic and monetary union, the IGC discussion at Dublin is likely to be the most substantive. Heads of Government confirmed at their meeting in October that the IGC should end at the Amsterdam European Council next June. We strongly support that goal. The IGC must swiftly complete its work so that Europe can concentrate on the real-world challenges of the coming years, and in particular on enlargement.

The Irish presidency's report on the state of the IGC negotiation is a sensible contribution to completing the process on time. It draws together into one document options that are on the table, including all the UK options. I emphasise that the presidency report is just that: a report. It is not a draft proposal for decision. Decisions are still six months away. Nothing can be agreed until everything is agreed, and that will be by unanimity. However, the report gives a snapshot of the scope of the conference, areas of emerging consensus, and areas in which either the work is not yet much advanced or it is already clear that there are major differences of approach.

Let me start with the positive side. The paper demonstrates that the UK's ideas are gaining ground in a number of areas, including subsidiarity, the role of national Parliaments, and practical improvements to the operation of the common foreign and security policy. The report also demonstrates that in many areas of institutional change in the European Community, the rhetoric employed by some of our partners has perhaps run ahead of the reality.

On the extension of qualified majority voting, for example, the presidency report is almost silent. It says somewhat disarmingly: Many Member States are at this stage reticent about showing their hands". In these areas—and many others—good progress is being made, but the presidency report also reveals a number of areas where member states' positions remain far apart. I want to focus the rest of my remarks on some of the most important of these.

I begin with immigration, asylum and issues of free movement and frontiers. The presidency report brings into focus ambitions in some member states of which this House has been aware for many weeks and months from the IGC documents that we have regularly deposited as the negotiation has proceeded. Some partners would like to develop those issues as competences of the European Community, removing them from the scope of intergovernmental co-operation in the third pillar.

That, of course, is out of the question, and not just for the UK. The presidency report notes: A number of Member States have indicated that they do not accept the transfer of any matter at present dealt with in the intergovernmental pillar.

The third pillar, which also includes the fight against international crime and drug trafficking, covers areas of national competence. That is why it was decided at Maastricht to develop those issues within a separate pillar of the treaty.

Sir Teddy Taylor (Southend, East)

As the European Parliament has said clearly and specifically that it will take Britain to court over the issue of border controls in the event of our using the veto at Amsterdam, and since many of us have believed for years that the declaration of the Single European Act has no real validity in European law, what on earth would any British Government do if the European Court determined that our border controls had no legal basis?

Mr. Rifkind

The Government attach the same importance as my hon. Friend does to the absolute observance of the assurances that have been given with regard to frontiers. We believe that those assurances can be depended upon. We have not the slightest intention of conceding one inch with regard to the right of this Government and this Parliament to control frontiers. That is crucial to the United Kingdom's position.

We are keen to develop co-operation with our partners in these areas. We have put forward proposals in the IGC to improve the operation of the third pillar.

For issues as sensitive as these, however, it is a myth to suggest that Community decision-making could be effective. It would complicate and delay practical progress. The priority is to act. The decisions that I hope we can reach at Dublin on drugs and international crime are good examples of the action that we should be taking. We want Dublin to exercise real impact in these areas.

On frontiers, as I have stressed, our position could not be clearer: the United Kingdom will maintain its right to impose necessary controls. For an island—for these purposes the UK and Ireland operate as a single island within a common travel area—frontier controls are the best and least intrusive way to prevent illegal immigration. For partners with extensive and permeable land borders things might look different. They rely on identity cards, residence permits, registration with the police, and so on to maintain internal security. That is a sensible approach for them, but it is not an approach that would suit our geography or our traditions.

Our partners know that our position on this issue is unshakeable. There is an interesting acknowledgment of that on page 36 of the presidency report, where it is observed that, if the Schengen agreement was ever incorporated into the European Union, there would have to be "provision for opt-outs".

That leads naturally to the question of flexibility, which is perhaps the most far-reaching issue under discussion in the intergovernmental conference. The idea that it is perfectly healthy for some member states to integrate more closely or more quickly in certain areas, provided that all agree, was first developed by my right hon. Friend the Prime Minister. As the European Union enlarges, it must find better ways to accommodate the diversity of its membership. Not only is Britain a firm advocate of flexibility, but flexibility already exists in the treaty—for example, in the EMU arrangements, including Britain's EMU option, and in our social chapter opt-out.

Therefore, the discussion in the intergovernmental conference is not about whether to have flexible arrangements, but how flexibility should operate: whether it should continue to be negotiated case by case or whether there could be value in creating general mechanisms for flexibility within the treaty. There are dangers as well as potential benefits in that approach. We must avoid creating a process whereby vanguard groups establish joint practices and policies that all are expected to follow over time. We must ensure that flexibility cannot be used by others to escape the obligations of an open single market, a strong competition policy and a common commercial policy. Above all, we must ensure that, if groups in the Union want to make use of our common institutions for their own purposes, they have the agreement of all those with a stake in those institutions. If we do agree to new treaty language, the conditions must be tightly defined.

We have always believed that a common European foreign policy should respect the national interests of individual member states. A majority European foreign policy would in any case be weaker than a common policy to which all EU partners are fully committed. On the whole, the debate on the CFSP issue at the intergovernmental conference seems to be going in a welcome direction. The approach which the presidency has put forward as a basis for discussion in its draft paper retains unanimity for the adoption of joint actions and for all decisions with a security-defence dimension. It recognises that, even for other, less significant decisions, individual member states should retain a veto for stated reasons of national policy.

In their recent joint letter, Chancellor Kohl and President Chirac also argued for the retention of unanimity for European Council decisions, for Council policy decisions and for all decisions on security and defence in general. They suggest majority voting only for implementation decisions, while recognising the difficulties of definition. We have said that we are prepared to look at ideas for differentiating between policy decisions and decisions on the modalities of their implementation—although we are not at all sure That it will be possible in practice to define such a distinction.

Obviously we shall have to discuss the issue further, but the fundamental point—that member states have national interests which cannot simply be overridden by majority voting in the European Union's foreign policy—is not now in dispute.

Mr. Robert Key (Salisbury)

Can my right hon. and learned Friend say a little more about the statement in "The British Approach to the IGC": In particular, we are ready to look at the idea of appointing a single figure to represent the foreign policy of the Union to the outside world for the CFSP"? I find that hard to understand. That is all very well if it is for the Governor of Hong Kong, but it would be more difficult for someone else in rotation.

Mr. Rifkind

There is a fundamental difference: the Governor of Hong Kong has executive responsibilities, and the person we are considering is a spokesperson who does not make policy. We already have a common foreign policy in a number of areas—for instance, our attitude towards the middle east, Russia and many other parts of the world where the interests of the United Kingdom, France, Germany and other western European countries are broadly the same. Therefore, co-ordination between the various member states is often required in order to present that policy properly on a day-to-day basis.

We are open to the suggestion that an official—I stress that it would be an official and not someone with a political background—should be given the responsibility of acting as spokesperson for the European Union in areas where the national Governments have determined a common foreign policy. I believe that that is a sensible and practical improvement that is fully consistent with retaining the clear obligation on national Governments to determine policy.

In the area of defence and security, the Government are strongly committed to effective European cooperation. Our objective is to enable Europeans to shoulder their responsibilities in a way that reinforces, rather than weakens, NATO and the transatlantic link. The United Kingdom is determined that the intergovernmental conference should not put that prospect at risk. That is why we continue to argue that a Western European Union that is subordinated to the European Union, or which discriminates against non-EU allies, could not deliver the real defence options that Europe needs.

The presidency report to Dublin admits that there are divisions on the issue and proposes what it calls a "middle way" to resolve them. It says that the European Union should avail itself of the Western European Union, but in commentary it freely confesses that that covers two alternative approaches. We have made it clear that it would not be acceptable for the WEU to be subordinated to the European Union. It is a separate organisation, with its own treaty base and a different membership. Those facts must be respected, and it is not an area in which we should tolerate ambiguity.

Mr. Terry Davis (Birmingham, Hodge Hill)

Before he leaves that point, will the Foreign Secretary address the question of accountability and control over the decisions taken by Ministers of the Council on defence matters? Do the British Government believe that control will still be exercised by national Parliaments, not only in those Parliaments but through delegations to the Western European Union Assembly? Therefore, the arrangement whereby the delegations are in turn responsible to their parties in Parliament would continue.

Mr. Rifkind

I believe that defence cannot be separated from the sovereignty of an independent country. Since we joined NATO, we have been willing to have common policies regarding collective security in Europe—and both the WEU and NATO are expressions of that willingness—but we have always emphasised the ultimate sovereignty of the Crown and Parliament regarding defence matters. Therefore, I do not envisage any significant changes in the areas to which the hon. Gentleman refers.

Mr. Dykes

My right hon. and learned Friend referred to the European co-ordination of foreign policy in the middle east. He has just returned from a successful visit to Israel and other countries. Will he confirm that the European Community and Union will take a much more profound interest in middle eastern matters in order to assist the peace process, notwithstanding the recent appointment of Madeleine Albright—which has caused some consternation in certain quarters—and the fact that the Americans do not seem able to do it on their own?

Mr. Rifkind

The international community must be very sensitive to the situation before it becomes involved in the complex issues of the middle east. There is a case for the western European countries and the United States working together to assist those who seek a successful outcome in the middle east peace process. However, I would have no time for any attempt by European countries to compete with the Americans in trying to influence the outcome. That would make an already incredibly difficult task even more complicated and, ultimately, would prove very divisive. Yes, the international community can help and I believe that western European countries and the United States can co-operate closely in assisting the process. That is the way in which I would take it forward.

There is a strong temptation, felt by a number of our partners and by the Labour party, to do something at the intergovernmental conference to show that Europe is active on the subject of employment. We all agree that creating jobs is one of the key challenges Europe now faces and that there is a role for Europe in creating the right conditions—for example, by completing the single market and working for further global trade liberalisation.

But what added value would there be in a new treaty chapter on employment, as suggested by several member states and supported by the Opposition? Commitments to high, or even full, employment might help the treaty drafters to feel good and compassionate, but they would raise expectations without delivering a single job. On the contrary, a requirement on member states to coordinate policies would risk the imposition on the United Kingdom of continental employment policies that have been manifestly less successful than our own. The Government are proud of their job creation record, and we will not put it at risk.

Like others, we have made a number of proposals in the IGC to meet particular national concerns. Following the judgment of the European Court of Justice on the working time directive, we will require treaty change to restore the position agreed at Maastricht on social policy. Others may want to concoct job-destroying social policies between themselves, but we shall not accept that they should be imposed on the United Kingdom. We have put forward proposals that would disapply the working time directive from the United Kingdom and would close off the possibility of using Community treaty articles to force social policy on the United Kingdom by the back door.

We have also made proposals to address the problem of quota hopping. The common fisheries policy established a system of national quotas to provide a secure benefit to national fishing communities. Quota hopping undermines that. A satisfactory solution in those two areas will be an indispensable part of any IGC outcome, from the United Kingdom point of view.

Mr. Gill

Does my right hon. and learned Friend appreciate that the question of quota hopping will exist only up to 2002? After 2002, when derogations concerning fishing disappear, the policy will be one of equal access to a common resource, and therefore the question of dealing with quota hoppers is purely a short-term palliative.

Mr. Rifkind

I appreciate that changes could take place in 2002. It will be for the European Union to negotiate whether alternative arrangements are appropriate, or whether they wish to confirm 2002 for the changes to which my hon. Friend refers.

There is much to be done if the IGC is to conclude by next June, but the work has been well launched, and we will continue to make a constructive contribution based on the approach set out in our IGC White Paper earlier this year: of a Union that develops as a partnership of nations, co-operating together in areas where action at a European level is needed, but proud of our cultural and political diversity and conscious of the limits of integration.

The role of the British Government in any European negotiation is to protect and to advance the British national interest. That is something that Conservatives have consistently done over the past 17 years. That approach has achieved significant benefits for the United Kingdom.

Mr. John Redwood (Wokingham)

I welcome my right hon. and learned Friend's support for independent democracies co-operating where we see cause. Does that not mean that we must say no to a European Court which regularly overrides Acts of Parliament, because an Act of Parliament is the ultimate expression of British democracy?

Mr. Rifkind

When we joined the European Union, Parliament said that it would accept the jurisdiction of the European Court in so far as the European Court interprets the treaty that provides for our membership. Therefore, the legal position is quite clear. If the European Court of Justice has before it matters of interpreting the treaty of Rome, which we signed and of which Parliament approved, it is able to indicate whether a member state is in breach of the treaty.

There are various ways in which the European Court has performed in recent years of which we strongly disapprove. As my right hon. Friend knows, we made a series of proposals to alter the way in which it functions, and I am pleased to say that the French Government have shown support for some of those proposals. Other Governments have also said that they are positively interested in looking at some of the ideas.

Mr. Alain Juppé, the French Prime Minister, made a powerful speech in Paris, in which he warned that the European Court was developing certain federal tendencies, and said that it was legitimate for that matter to be considered within the IGC. We welcome the fact that the French Prime Minister has acted in that way.

Mr. Bernard Jenkin

I am grateful to my right hon. and learned Friend for giving way and for acknowledging the federal character of European Community law. If we allow the European Community to take from us the right to mint our own coinage, so that a single currency becomes irrevocable and is imposed on this country by the decision of one Parliament—a decision that appears to be binding on its successors—have we not then crossed the threshold from being an independent sovereign state to being part of a federal Europe?

Mr. Rifkind

The European Union cannot take that right from us. What is possible, of course, is that this Parliament and the people of the United Kingdom, through a referendum, might one day provide the authority for such a change, but it is not something that can be taken from this country unless this country were expressly to give its consent. I think that that point has been fully clarified.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

Will the Foreign Secretary clarify further the point raised by the right hon. Member for Wokingham (Mr. Redwood) about the European Court? I am sure that the Foreign Secretary would not want to raise his right hon. Friend's hopes unnecessarily. Given the limited, and rather sensible, reforms that the Government propose to the ECJ, will the Foreign Secretary confirm that there is no question whatever of the British Government failing to send people from this country to the European Court to be active participants in its work and decision making? His right hon. Friend should not be left with the illusion that somehow we are about to disengage.

Mr. Rifkind

It is of great importance to have people of the highest legal calibre serving in the European Court of Justice. The present British judge, David Edward, is of a very high calibre indeed and serves this country extremely well. It is worth remembering that we have, as a country, won more cases in the European Court of Justice than we have lost, but that is not to say that we are not entitled to make criticism of the ways in which it sometimes performs. Where it acts in a way that we believe is over-political, or that is contrary to the interests of the United Kingdom, we shall draw attention to that point.

Mr. Cash

Will my right hon. and learned Friend give way?

Mr. Toby Jessel (Twickenham)

Will my right hon. and learned Friend give way?

Mr. Rifkind

I shall give way first to my hon. Friend the Member for Twickenham (Mr. Jessel).

Mr. Jessel

My right hon. and learned Friend used the words "over-political". Does that not mean that the European Court is not an ordinary traditional court of justice merely trying to act fairly and justly between litigants within the law as the United Kingdom knows it, but that it has a somewhat different agenda in that its terms of reference require it to advance the cause of European union? It is not, in that sense, a pure court of justice: it makes up the law as it goes along, and it goes beyond what is acceptable to people in this country.

Mr. Rifkind

My hon. Friend is certainly correct that in one crucial respect the European Court of Justice is unique: it does not, as an international court, simply determine the rights between Governments or states, but can intervene directly and create rights for individual citizens of member states. We cannot hide from the fact that the UK Parliament agreed to give it that power. When we joined the European Union, it was an existing power that the European Court of Justice had. It is not a power that has been imposed more recently.

Several hon. Members

rose—

Mr. Rifkind

I give way to my hon. Friend the Member for Stafford (Mr. Cash), but then I must make progress.

Mr. Cash

There was, of course, the European Communities Act 1972, but does my right hon. and learned Friend accept that since then we have been giving way more and more powers by successive treaties? The real point that we must address is that the European Court of Justice adjudicates over those functions, and the only way in which we can resolve that is by repatriating the powers that have been given away, which would deal with the very point causing so much concern—the political nature of the European Court of Justice. Repatriation—yes.

Mr. Rifkind

My hon. Friend grossly over-simplifies the situation, because he does not take into account the fact that if we—as a Government and a country—believe in the single market, it is necessary for that single market to be enforced, and that requires the European Court of Justice and the Commission to continue with many of the powers that they currently have.

Mr. Dykes

Will my right hon. and learned Friend give way?

Mr. Rifkind

No, I must make progress.

I have been referring to the achievements that have been realised over the past 17 years. In some areas, we have led the debate within the European Union; in others, where there was a specific British interest at stake, we stood out alone to protect that interest. The budget rebate, the social chapter opt-out, our opt-out of the Schengen agreement and our opt-out of the single currency give us the choice when the time comes to decide.

The Government believe in European co-operation, but not in ideologically motivated integration, which is the preserve of the European purist. Opposition Front Benchers have become instinctive integrationists. The whole purpose of the Leader of the Opposition's excursions abroad has been to reassure their socialist partners in Europe that a Labour Government would be more willing to deepen integration in a manner that we believe to be fundamentally against the British national interest. It is not just that the Leader of the Opposition talks about "never being isolated" in Europe. That phrase in itself is a massive hostage to fortune in the context of the hard, tough negotiations ahead. The Labour approach is as naive as it is potentially damaging to our interests.

There is a real fault line between ourselves and the Opposition on European policy. For their part, the presumption is for integration. For the Conservative party, the presumption is against integration unless we can be convinced that the national interest is served and that the benefits of greater integration would be sufficient for our quality of life and for employment that it would justify the loss of some national decision making.

Within weeks of the final possible date for a general election, the intergovernmental conference will conclude at Amsterdam. [Interruption.] The electorate will have to decide who they believe will better stand up for British interests at Amsterdam.

Madam Deputy Speaker (Dame Janet Fookes)

Order. I am tired of the running commentary coming from hon. Members on the Benches further from me. I should be grateful if they would keep quiet.

Mr. Rifkind

The differences between the two Front Benches and between the two parties are substantive and very real in the context of decisions at Amsterdam.

What weakens the United Kingdom's position in Europe is the possibility of an alternative Government who is committed to giving up many things from which we have fought hard to protect this country. We are guided by the national interest: the Opposition seem to be guided by what others in Europe want.

Labour has proposed to extend qualified majority voting to four new important areas of policy: social, industrial, environmental and regional. It is an extraordinary negotiating position to offer up major concessions to integration before the real work of the intergovernmental conference has even begun. It also displays a Labour naivety that has not been matched by European Governments.

Each member state was asked by the presidency to put forward ideas on where qualified majority voting should be extended, but only two countries out of 15 put forward specific proposals. Thus, in the game of poker that the Prime Minister talked about on Sunday in his television interview, Labour has already shown its hand. Its inexperience and folly are unmatched in Europe.

Labour would give up our opt-out on the social chapter. Despite Labour's attempts to reassure business, we all know that that would be a blank cheque to open up new routes to social regulation and integration, which would profoundly damage Britain's competitiveness and job prospects. It is truly a job-destroying chapter. How ludicrous it would be to sign away our competitive advantage at a time when unemployment is 7 per cent. and falling in the United Kingdom, and 10 per cent. or more and continuing to rise elsewhere in the European Union. There is a fundamental philosophical and political divide between us and the Opposition, in that they actively want to conform to a European social model that is shown, day by day, to be well past its sell-by date and damaging to Europe.

Similarly, Labour has fallen head over heels for writing an employment chapter into the treaty. It is no use the Labour party saying, "That would mean nothing, so don't worry because it's only warm words." That is dangerous enough in itself. Why raise people's expectations that the European Union has some magical wand to cure Europe's unemployment ills, when the policies currently being pursued under the social chapter are creating the opposite effect?

However innocuous the words, we are long enough in the tooth and wise enough to the realities of life to know that by proposing Community competence we would deprive Britain once again of taking decisions on what is a matter for this House and this Parliament. Not only would an employment chapter not create a single job: it has the potential to destroy many of them.

Labour want all legislation currently decided on by qualified majority in the Council of Ministers to be subject to a simplified form of co-decision in the European Parliament. Every increase in the powers of the European Parliament reduces, by definition, the powers of this Parliament. That would not enhance democratic accountability: it would merely centralise more powers, taking them out of the hands of the elected representatives of this House. It would be another step on the slippery slope which says that European centralisation should become the natural order of things.

An intriguing, growing divide is emerging between the Leader of the Opposition, his shadow Chancellor and his shadow Foreign Secretary. The Leader of the Opposition said boldly that he would never allow this country to be isolated". Yesterday, The Times reported the shadow Chancellor as saying: We are not afraid of isolation in Europe". Who are we to believe? Is the Leader of the Opposition isolated in his shadow Cabinet, even if not in Europe? Or does the soi-disant "Iron Chancellor" speak for Labour? We need to know.

Then again, the redoubtable shadow Chancellor rebukes the Prime Minister for daring to suggest that Labour would give up the veto. He protested on the "Today" programme: It has got to be made absolutely clear that any question of giving up the veto is a myth that is perpetuated by the Conservative Party. Well, if it is a myth, it is not being created by the Conservatives. It is a myth being spread in a most sinister fashion by the shadow Foreign Secretary.

Following the shadow Chancellor's protest, the shadow Foreign Secretary declared: If you want reform, frankly in many cases you do have to have majority voting". He confirmed that Labour would end the veto on social, regional, environmental and industrial policy. He stated quite boldly: There will have to be some majority votes against those individual nations that stand in the way". What if those individual nations included Britain? On that, there was a resounding silence.

The shadow Foreign Secretary and the shadow Chancellor should reconcile their differences. Perhaps we need a conciliation service. Alternatively, we could return to the device used during Harold Wilson's referendum on Europe, when Labour Cabinet Ministers were licensed to attack each other throughout the length and breadth of the country.

Yet another damning admission by Labour was its declaration that it rejected permanent opt-outs. That has alarming implications. It has revealed to every other European Government that the British budget rebate, the Schengen opt-out to protect our frontiers and the Maastricht single currency opt-out are just temporary aberrations to be abandoned by a Labour Government in due course.

The Opposition, through their inexperience and naivety, have become a menace to Britain. They are weakening Britain's position in these crucial negotiations by encouraging other Governments to wait until after our general election in the hope that some of their crucial negotiating objectives will then fall into their laps. They are a menace, and they need to be resisted. They need to get their act together and remember the national interest. It is the national interest that will be our guiding principle in the weeks and months ahead.

5.36 pm

Mr. Robin Cook (Livingston)

The European summit provides an opportunity for the nations of Europe to comment on the major issues facing Europe. Before I turn to the sore points that inflame passion in this Chamber, I shall address one of those major issues.

Hon. Members who were present six months ago, when we last debated European matters before a summit, will recall that I began by referring to events in the former Yugoslavia. Those events will be one of the international issues considered by the European summit in Dublin. They should be before that summit because of the current crisis of democratic rights in Serbia.

In the past month, President Milosevic has fallen down in three ways on his claim that Serbia aspires to being a European nation. Free elections were annulled because they were won by his opponents. The supreme court has been exposed as a puppet that rubber-stamps his decisions. The independent media have been suppressed because they suppressed his defence of the annulment of those elections.

I hope that right hon. and hon. Members will condemn those actions by President Milosevic. Far from making progress towards democracy, Serbia is sliding back into totalitarianism. If the European Union's aspirations for a common foreign and security policy mean anything, the European summit in Dublin must make a robust statement condemning those actions.

At Dayton, Milosevic gave an undertaking that he would observe democratic principles and human rights. In return, he received assurances of benefits, including trade with the European Union. This weekend he must be firmly told that the benefits of the Dayton process will come to him only if he fulfils the undertakings that he made. In his reply, will the Minister say what statement the United Kingdom would support in condemning those events in Serbia?

I have spoken for only two minutes, but that is quite long enough in bipartisan mode. Let us get down to the more enjoyable matters on which we disagree. I have to say to the Foreign Secretary that the fault line in the Chamber does not run along the table between us: it runs along the Bench behind him and his own Back Benches.

I was in wide agreement with an awful lot of what the Foreign Secretary said, until he pulled out the purple passage of his speech in which he rode off into the sunset. I particularly applaud his robust defence of why Britain's place is in Europe. I even found myself cheering him on when he batted down the Euro-sceptics on his own Back Benches. I certainly do not wish to undermine his courageous attempt to keep his party just about in touch with European reality. Therefore, rather than undermine him by agreeing with him, I felt that it might be helpful to his position in his party if I were to denounce him.

Let me begin by measuring the Foreign Secretary's policies in regard to the forthcoming summit against his performance at the last summit. Those of us who are addicted to these six-monthly debates will recall that the last speech that the Foreign Secretary made before a European summit was made before the Florence summit. The great majority of that speech was about BSE and beef. I think that my hon. Friends will have noticed that today we heard not a single word about BSE or beef. The Foreign Secretary may wish to forget about it, but, before we are swept into matters connected with the forthcoming summit, an interim assessment of how much was really achieved at Florence might be appropriate. The Prime Minister did, after all, claim that it was a triumph, and I think that the Foreign Secretary described it as a turning point.

In his statement to the House after Florence, the Prime Minister told us that by October two stages in the lifting of the beef ban would be completed, and that by November all five would be completed. I think that I carry hon. Members on both sides of the House with me when I say that it is now December: October and November have both passed. No stages in the lifting of the beef ban have been completed, to growing anger in the farming community. I understand that the good farmers of Cornwall have just petitioned the Dean of Truro to have a gargoyle of the Minister of Agriculture, Fisheries and Food added to Truro cathedral as a lasting monument to his contribution to the BSE crisis.

The Foreign Secretary was unable to join us when we debated what happened to the Florence agreement a month ago, but someone has to explain what went wrong after Florence. There is some explaining to do. In last month's debate, the Minister of Agriculture told us that the ban had remained in place because of opposition from European Governments who were "facing strong internal pressures". I remember our debate six months ago, before the Florence summit, and I remember the Foreign Secretary telling the House that any step towards lifting the ban does not need to go before any Ministers or any Government. — [Official Report, 20 June 1996; Vol. 279, c. 1028.] That was the agreement that he struck for Florence. How, then, can it be that we cannot get the ban lifted because of opposition from member Governments?

I do not believe for a moment that the Foreign Secretary would knowingly mislead the House. Did he therefore misunderstand the deal that he was about to sign at the Florence summit? If so, why should we feel any more confident about what he tells us that he will achieve at Dublin?

There is a wider lesson here, to inform our approach to the next summit. I know that the Conservatives like to believe that they can use Europe to demonstrate what strong men they are, but Florence demonstrated the reality—how poor they are at doing business with Europe. Standing on the sidelines, shouting through a megaphone about how much you disagree with everyone else, is not a posture of strength; on the contrary, it exposes how weak your bargaining position actually is. Yet, in truth, that is the way in which the Conservatives intend to approach tomorrow's summit.

The Foreign Secretary will go to Dublin as another incarnation of the "abominable no-man". He will go to object to a long list of measures that are before the intergovernmental conference. As he told the House, he will object to measures intended to simplify the procedures of the European Parliament—

Mr. Redwood

Will the right hon. Gentleman explain how he would get the beef ban lifted next week, if he is not in favour of what the Government have been doing?

Mr. Cook

The right hon. Gentleman is well aware that we debated the matter a month ago. From the Dispatch Box, I recounted the way in which the Labour party would have behaved differently in relation to the BSE crisis over an entire decade—starting back in 1980, when we would not have abandoned the regulations that we left in place and which the Conservative party threw out of the window.

I was about to deal with the objections that the Foreign Secretary will raise in Dublin. One concerns measures designed to simplify procedures in the European Parliament. I must tell the Foreign Secretary that I have tried very hard to understand those procedures. There are six different ways in which the European Parliament passes legislation, and I have never yet managed to understand the distinction between them—and I am fairly confident that, if I cannot understand them, few of my constituents have a clear grasp of them.

If we wish to have a functioning democracy, its procedures must be transparent and understandable. That is why I believe that it would be right to widen the role of co-decision in the European Parliament, and in directives. I have never understood the logic of Conservative Members who complain about what they see as damaging legislation from Brussels, but then object to the European Parliament's having more powers to scrutinise such legislation. Such powers would not be at the expense of our Parliament; they would give it greater power of scrutiny over Brussels—not the right to initiate more legislation, but another hurdle before the passing of legislation.

Mr. Rifkind

The right hon. Gentleman does not understand what he is saying. A power of co-decision is exactly that: it means that, instead of the Council of Ministers' having the sole right to determine legislation—Ministers who are answerable to their own Parliaments and their own electorates—the European Parliament's approval would also be required. If the right hon. Gentleman, in advocating more co-decision, is not even aware of what he is recommending, he really ought to do a little more homework.

Mr. Cook

The Foreign Secretary knows perfectly well that the only proposals for co-decision making are in cases in which the Council of Ministers acts by majority voting. If Conservative Members are constantly worried about Britain's being overruled in majority voting, why do they resist a second hurdle for the European Parliament—where Britain has more representation than it has in the Council of Europe in terms of the weighting of votes—in order to test legislation? I know that Conservative Members have immense difficulty in getting representatives of their party elected to the European Parliament, but that is not an excuse for stopping those who are elected to that Parliament to represent Britain doing a proper job.

Mr. Peter Shore (Bethnal Green and Stepney)

We have often heard references to the so-called democratic deficit in Europe, but surely this is not a simple matter of saying that what is passed by a majority in the European Parliament is legitimate just because a majority is there. Surely the fundamental distinction is that the "cracy" element of the word "democracy" implies the state, but the word "demos" implies a people. The truth is that there is no European people, in the sense that we would accept the legitimacy of majority decision making by a European Parliament.

Mr. Cook

No one is asking my right hon. Friend or anyone else to accept a decision simply on the basis of a majority in the European Parliament. What co-decision making would require is that any directive would have first to gain a majority in the Council of Ministers, and then to gain a majority in the European Parliament. If hon. Members wish to reduce the number of directives coming from Europe, the best way of doing so is to ensure that a double rather than a single majority is required.

Mr. John D. Taylor (Strangford)

Will the British people's wish for more powers in the European Parliament be measured by the turnout in today's by-election for that Parliament?

Mr. Cook

I am confident that that by-election will measure the British people's instinct in favour of a Labour representative in Strasbourg. I do not think that it will show the least scintilla of support for those Conservatives who wish to resist either the proper functions of the European Parliament or the advance of a Labour Government. I shall be extraordinarily surprised if any of the votes cast in Merseyside West give any comfort to those who come to the Chamber tonight to argue in favour of a different position on Europe.

The Foreign Secretary will go to Dublin, we understand, to object to powers relating to consumer protection. I gather that the one aspect of the European Union that Conservative Members support is the single market; yet, if we are to have a single market throughout Europe, what will be more important to the interests of the British people than ensuring high standards of consumer protection throughout that single market?

The Foreign Secretary will go to object to a new requirement in the treaty for non-discrimination against people with disabilities. He does not speak for anyone else in Britain on that. Hon. Members who have met members of organisations representing disabled people will know that every such organisation in Britain is in favour of a requirement that would oblige the Commission to have regard to the needs of disabled people when framing directives.

As he told the House, the Foreign Secretary will also go to object to an employment chapter. The employment chapter that will be proposed at Dublin is a modest, reasonable attempt to respond to what is certainly not a modest social problem—mass unemployment across Europe. It provides procedures by which other European Union policies can be assessed for their impact on employment. In fact, all it does is write into the treaty of the European Union the agreements on employment creation that, we understood, the Government agreed at the Essen summit, but now do not want turned into a treaty amendment.

As a result of the Maastricht treaty, the treaty of the European Union now contains precise targets on Government borrowing, national debt, interest rates and inflation. Why should not those demanding financial targets be balanced by a commitment to high employment? Why should we not take the measure to ensure that those monetary targets are not pursued at the expense of jobs?

Several hon. Members

rose—

Mr. Cook

I will give way to the hon. Member for Stafford (Mr. Cash), without whom a debate on Europe would be like "Hamlet" without the first grave-digger.

Mr. Cash

First, has not the right hon. Gentleman noticed that article 2 of the treaty already contains a commitment to employment, so why is he now trying to amplify what is already there? Secondly, has he not noticed that the social chapter has led German companies to flee Germany in their droves and relocate here? They are aware that the policies that are being pursued by him and his crowd behind him are creating unemployment on a massive scale, which is leading to riots and disorder in France and to a critical position in Germany? He should be thinking far more about the effect of his policies on the working people of this country.

Mr. Cook

The hon. Gentleman lives in pure fantasy land if he imagines that the strikes in France are directed against the social chapter. If he really wants to reflect on the relative flow of investment, I suggest that he should consider two pieces of news. The first is the interesting statement by the head of BMW that its decision to make a major £500 million investment in Britain had absolutely nothing to do with the social chapter, and that Britain would eventually join the standards of the social chapter.

Secondly, the hon. Gentleman should consider the flow of investment. If he does, he will find that, since the social chapter was implemented on the continent, there has been record investment by British businesses in the European nations that have signed the social chapter. If he wants to preen himself on the relative employment record of his Government, he could call on Ministers to publish the report that it is delaying and that was prepared by the Training and Enterprise Councils Secretariat, which says: Between 1980 and 1994"— I think that those years coincide with the Government's stewardship of our nation's economy— civilian employment grew by 1.7 per cent. in France, 5.2 per cent. in West Germany—but less than 0.1 per cent. in the UK. That is the truth of the comparison between the nations of Europe.

Mr. Edward Leigh (Gainsborough and Horncastle)

Will the right hon. Gentleman give way?

Mr. Cook

I will give way, but then I must move on to another matter.

Mr. Leigh

May I draw the right hon. Gentleman's attention to the convergence criteria? He will find in the documents provided to us by the Library that, in relation to general Government gross debt as a percentage of gross domestic product, only three out of the 15 nations pass: the percentage in Belgium is 130 per cent, for instance, and that in Italy is 123 per cent. In relation to general Government deficit as a percentage of GDP, only four pass. If it became clear in the next few months that most nations were not going to meet those criteria by any means, and if grotesque fudging and fiddling were going on, would a Labour Government—if there were one—rule out joining a single currency on those grounds?

Mr. Cook

We have repeatedly made it clear that we shall not join a single currency if there is grotesque fudging of the criteria anywhere. Those decisions can be taken only at the end of next year when we see the figures for next year, but if there is grotesque fudging, that plainly will not stand up to what we have promised the British people in our draft manifesto, which is a hard-headed assessment of the economic criteria for membership.

Finally on the issues that the Foreign Secretary goes to Dublin to object to, he goes famously to object to any extension of qualified majority voting—at any rate., that is what he says. I do not know whether my hon. Friends noticed the Prime Minister saying on Sunday that there might be something "hiding in the undergrowth" where QMV might be "worth while". I warn Conservative Members below the Gangway that, in that phrase, I detect the sound of the start of an equivocation.

The Minister of State, who is shaking his head, has thoroughly beaten about the bushes of the intergovernmental conference. There could be nothing hidden in the undergrowth on which he had not yet stubbed his toe. Does he know what the Prime Minister might have been talking about as a worthwhile extension of QMV? May I possibly help him and the Foreign Secretary in mentioning exactly one such worthwhile area, of which the Prime Minister might have been thinking?

The Danish Government have tabled a new proposal on fraud—

Sir Patrick Cormack (South Staffordshire)

Frog?

Mr. Cook

No, fraud. It would be distinctly anti-European to table a proposal on frog. I was about to say that fraud is a massive blot on the European Union's record, but, in view of that intervention, perhaps I should rephrase my sentence.

The European Union loses 1 million ecu a year on fraud, half of it through the wasteful common agricultural policy. The Danish Government have tabled proposals to tighten up on fraud. New article 209 in the treaty offers tougher steps and sanctions against member states that fail to take those tougher steps.

Those new measures would of course work on QMV. They must do so because if everyone has a veto no one would ever suffer a sanction. What are the Government going to do when they are faced with that proposal? Are they really going to fight for the right of Italy to veto sanctions against countries that are soft on fraud? Do they really think that they will be taken seriously in Europe if they dogmatically object to any extension of majority voting, even when, as in this case, it would he in Britain's interests?

Of course our partners may ask why they should take seriously the Conservative Government's negotiating position at the IGC when the Government have already said that, whatever the outcome, they will veto the lot at the next summit out of pique at having to accept the 48-hour directive. We know the Government's position on that. They do not accept that excessive working hours have any effect on health and safety. They have gone to extraordinary lengths to maintain that position. In April the Department of Health reprinted an entire leaflet entitled "Mental Health and Stress in the Workplace". The original, unpublished report contained the sentence: Research has shown that working more than 48 hours per week doubles the risk of coronary heart disease". The eventual published report had that sentence removed.

Sir Patrick Cormack

What about Members of Parliament?

Mr. Cook

Of course, our work is a pure delight.

Sir Peter Tapsell (East Lindsey)

If that report is accurate, is it not extraordinary that the right hon. Gentleman is not addressing an empty Chamber?

Mr. Cook

It is not a frivolous matter. The House of Commons has quite a record of coronary heart disease—so much so that, in 1978, when we were sitting longer hours than we do now, we specifically commissioned a study that documented that high incidence of coronary heart disease. This is not a laughing matter, but the point that the hon. Gentleman must answer is: if he is so robust in defending that proposition, why did the Department of Health go to the length of spending £1,500 on printing 5,000 such leaflets and then a further sum of public money on pulping every one of them to get rid of that single sentence? I will tell him why. It was because the Department and the Government do not want the public to know what they know—that excessive working hours are a health and safety matter.

Thanks to the changes in the labour laws under the Government, Britain has more people working more than 48 hours than the rest of Europe put together. Since the last general election, 500,000 more people in Britain are working more than 48 hours. Conservative Members keep telling us that they support "sovereignty". Real sovereignty is about giving people control over their own lives and the right to say no to excessive hours.

The fact is that 78 per cent. of the public agree with the proposition that people should not be forced to work more than 40 hours if they do not wish to do so, and 90 per cent. agree that there should as an entitlement be a minimum of three weeks' paid holiday. I cannot believe that Conservative Members would be so foolish as to fight the next general election insisting on longer hours and shorter paid holidays—although I go down on my knees every night and pray that they will.

Sir Timothy Sainsbury (Hove)

Did the right hon. Gentleman's survey of public opinion cover the percentage of the British people who wish Brussels to have the right to legislate against British laws on any health or social matter or on any matter affecting the workplace?

Mr. Cook

The right hon. Gentleman exemplifies the problem in the Tory party on this debate. It is not Brussels legislating on that matter, it is the Council of Ministers—in which the Government have played a full part. Ministers have subsequently come to the Dispatch Box to take pride in the fact that all their amendments to the directive were passed. In resisting the final outcome, the Government are representing not the wishes of the British people but the prejudices of Tory backwoodsmen.

The Government do not even represent the views of British personnel directors, one of whom recently wrote a letter to The Times stating that his company had used the directive as a framework for working practices, and that, consequently, it had improved output, achieved greater flexibility and reduced costs.

In all our history, the economic security and diplomatic future of Britain has never been more bound up in Europe, yet we are saddled with a Government whose Back Benchers seem to live in daily hope of more fog in the channel, cutting off the continent.

When commentators come to write about this Government's decline and fall, they will identify the Chancellor's speech yesterday to the House as the moment of truth. There was a revealing moment in his speech, when he mentioned the fact that 70 per cent. of the public support the Government's line on a single currency, and that comment was greeted with loud jeering on the Conservative Benches. How can any Government survive when their own Back Benchers think laughable the idea that the public support the Government line?

Sir Patrick Cormack

I seem to remember that, many years ago, when I was strongly in favour of Europe, the right hon. Gentleman took rather a different line. When was he converted to this passionate advocacy of the European cause?

Mr. Cook

I shall happily answer the hon. Gentleman: in 1984, when I was the Labour party's spokesman on Europe. I changed my position because, by then, we had had more than 10 years' membership of the European Union. We have now been a member for well over 20 years. I do not believe that there can be a future for Britain remaining as a member of a union that plays an increasingly larger role in our trade, our jobs and our economic future while we are constantly and simultaneously sulking, as if we wish that we were not a member. That provides us with the worst of all possible worlds.

In his speech yesterday, the Chancellor was jeered by his own side. It is no wonder that he has observed: There are sometimes parties that are simply not capable of being led. In case anyone was in any about which party he was talking about, up popped the hon. Member for Reigate (Sir G. Gardiner), who greeted Sunday's appeal for order by the Prime Minister with the characteristically generous response: "The strife goes on." That calls to mind the slogan of the Militant Tendency: Today the struggle, tomorrow the revolution. Only one year from now, Britain will hold the presidency of the European Union. How will a Conservative party that is constantly wishing to pick fights with Europe—with all the enthusiasm and venom with which they pick fights among themselves—possibly pose as the president of an institution that ever more of its members regard with fear and loathing? The Euro-sceptics would be as embarrassed as the rest us to find that they were the president of Europe. Their entire approach to Europe is to block agreements, to seek confrontation and to go out on a limb. If one is president of the European Union, one must try to achieve agreement, build consensus and find the pivotal point in a debate. Having to fulfil that role in Europe would appal Conservative Members.

I offer them comfort, because we intend to relieve them of that embarrassment. Before the next debate on a European summit, there will be a general election. Something will have gone sadly wrong with our constitution if that does not turn out to be true. I am aware that there is a widespread delusion among Conservative Members that they can escape the fate that awaits them in that election if they fight it not as the party standing against the Labour party but as the party standing against Europe, and that, if they spend the campaign talking solely about Europe, the electorate will forget that they are paying higher taxes for worse public services.

Perhaps I should leave them labouring under that delusion, but I want a fair fight at the general election. I want to tell them that they really should look at the opinion polls, which, for a year, have consistently shown that Labour has a 19-point lead in answer to the question: Which party better represents your views on Europe? The reason for that belief is that people want a Government who will do business with Europe and who will get a constructive deal for Britain out of Europe. They know that the Conservative Government have amply proved that they cannot do business in Europe, and that the Conservative party no longer even wants to cut a deal in Europe.

The Government's record on Europe of confrontation, failure and isolation will not provide the lifebelt that so many Tory Members imagine. It will be another deadweight, dragging them down in public opinion. When the electorate have the opportunity to express their verdict, the Conservatives' record on Europe will be another reason why they will conclude that the Conservative party cannot provide a competent Government for Britain and is not fit to represent Britain in Europe.

6.5 pm

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

It is always a pleasure to participate in a great debate with the shadow Foreign Secretary, whom I have never followed previously in a debate. One of the best things in life is surprises, and one of the pleasures of listening to the shadow Foreign Secretary is that one never knows quite what he will say, which is rather a change from many of my other colleagues in the House.

By chance, my family have been afforded a series of leper's squints at European evolution. My great-grandfather was chaplain to "Dear Vicky"—Queen Victoria's eldest daughter—who was married to Crown Prince Friedrich of Prussia. Family legend has it that, as his tour of duty came towards an end, she told my great grandfather that the Crown Prince and she were exercised about their son, Wilhelm, felt that he stood in need of a strong dose of English liberalism, and asked my great-grandfather if he would stay on to be his tutor.

My great-grandfather was determined, however, to return to London and declined the offer. But because the Almighty's powers include a sense of irony, my great-grandfather lived until 1916, and, in his declining years, he had to wonder whether the entire course of European history might have been different had the Kaiser passed through his hands. His brother-in-law—who was also the Liberal Member of Parliament for Wakefield, until he decided that he preferred Mr. Disraeli to Mr. Gladstone—was invited by the Hapsburgs, via the Bank of England, to save a bank in Vienna.

In my own—more modest—way, I was Financial Times correspondent in Switzerland, both when, in 1961, the Germans and the Dutch revalued upwards, and when my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) and the late Reginald Maudling broke the news to the European Free Trade Association that we would seek entry to the European Community. A decade later, when that ambition was consummated, I was living in Brussels. In a manner that echoed the Duchess of Richmond's ball before Waterloo, the Anglo-Belgian chamber of commerce, coincidentally, dined in tails the night before the European Communities Act 1972 passed the House by eight votes. In the 1980s, I served longer on the Community's Budget Council than any British Minister has done, continuously, since 1972.

Although Sicily was responsible for the only good joke about the single European market, no kinsman of mine, or myself, was present at Messina in 1955. That episode has a precise relation to this debate. In 1954, in an act that would reverse centuries of British policy, we committed four divisions to the continent, until 1998, as a powerful gesture to help lubricate the passage of the Brussels treaty.

The inability of Mendes-France to get the Brussels treaty through the French Assembly rendered that gesture nugatory, but it also affected our attitude at Messina the following year. When Spaak, who was, I think, in the chair, made it clear that only those who were serious about European development should remain at the table, we British—affected by our experience the year before and believing that further investment in the project would likewise be nugatory—chose to leave the table, thus condemning ourselves two decades later to a common agricultural policy over whose conception we had had no influence.

Not only do I have no difficulty in supporting the Government's policy over the single currency, I would find any alternative to the wait and see policy an offence against a central tenet of Conservative philosophy—that we should learn from the past. There was one further lesson from Messina. The Dutch, our principal allies among the original six nations that signed the treaty of Rome, sought to delay the treaty and their participation in it to bring us back on board. It was Suez that convinced the Dutch that the era of individual European nations enjoying true independence of action was over. That caused them to sign the treaty and, a fortiori, has a resonance today.

I have spoken of the past. I am more hesitant about speaking of the future. That hesitancy is born of that episode in the life of Anthony Eden's somewhat irascible father, who came down to breakfast one morning when it was sheeting with rain outside, tapped the barometer which was set at very fair and threw it through the french windows with the words, "Go out and see for your something self." My hesitation about the future is shared by many in the Union.

I have ventilated before in the House, in a European context, the metaphor of a cathedral. Cathedrals take varying times to build. Prague took 1,000 years: Durham took 40. Par for the course might be a century. We have so far had 38, with eight years in preparation. Within the century, as with cathedrals, building will sometimes go quickly, sometimes tardily. What is critical, as with cathedrals, is that the foundations are secure, and that includes the consent of the peoples of Europe. The problem, as with most cathedrals that take longer than Durham's 40 years, is that the ordinary people of Europe have never been given a clear and constant blueprint of what the eventual building is intended to look like. Philosophically, that should not concern a nation as pragmatic as the British, but changes of gear among our colleagues can alarm us, as the past few years have demonstrated.

We should be true to ourselves and recover our national self-confidence, as our current economic performance would justify. We are demonstrating—in a way, incidentally, that a Labour Government would jeopardise—that the welfare policies in the rest of the Union are inconsistent with global competition. If we believe in ourselves, we should be confident that our colleagues will be obliged to modify their policies to meet global competition, but we would be truer to ourselves, and incidentally to the interests of the cathedral, if—in Pitt's phrase at Guildhall in my constituency—we save Europe by our example. That line of argument carries over into the single currency. Of course I acknowledge, though the right hon. Member for Dunfermline, East (Mr. Brown) appeared not to do so on the "Today" programme earlier this week or in the House yesterday, that there is a major political dimension to that decision.

I have my own views on the decision that we shall eventually take, but at this juncture we need to shape our minds on the economic implications. In the City of London, which I have the privilege to represent, those implications are argued both ways. The Governor of the Bank of England has indicated the ability of the City to continue to prosper outside the single currency. For myself, the City's success, not just in the contemporary era but over the centuries, has lain in the way that it has capitalised on freedom and flexibility and the willingness to offer a price on any risk.

Thus the City's future depends on a continuation of that freedom and flexibility. The present continental instincts—which are misguided in other respects, as I have suggested—militate against freedom and flexibility. It is likely that our example will be needed in that regard too, which is an added reason for remaining in the negotiations.

The way in which global competition is increasing London's role is profoundly encouraging. When I lived in Brussels, a disproportionate number of multinational companies had set up their European headquarters there. My college at Oxford sent one in six of its graduates to India between 1878 and 1914. I felt in Brussels a quarter of century ago that the late 20th century equivalent of the empire, as an international destination for Britons, was the multinational company. Despite the reputation of perfidious Albion, we are trusted as individuals internationally, and our maritime past gives us a flexibility that is the hallmark I mentioned of the City's success. The shadow Foreign Secretary's speech reminded me of when I was on the Budget Council and we held the presidency of the Community. A German Social Democratic economic spokesman confided to me that he would be happy if the British held the presidency on a permanent basis.

As the world shrinks and the Japanese philosophy of treating the whole world as their economic oyster gains ground, we are seeing an increasing number of foreign companies, in finance as well as in industries as diverse as contracting and pharmaceuticals, putting not just their European headquarters but their world headquarters in London. A profound benefit to the building of the European cathedral will occur as European companies report back from the City that our emphasis on freedom and flexibility is superior to the continental preference. That freedom and flexibility is the more important because, in so many existing financial markets, electronics has taken over from human judgment, which makes those markets potentially much more mobile.

As a believer in the cathedral, not least for future generations, I hope that we shall not need at any stage to dismantle and rebuild. Our best contribution must be to remain true to ourselves and offer our experience and our current economic success as an example and a guide. Otherwise, we will run the risk of finding ourselves at what anyone who has ever sung "Abide with me" in French will recall is le dernier rendezvous.

6.15 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

The right hon. Member for City of London and Westminster, South (Mr. Brooke) referred to the pragmatism of the British, but that pragmatism seems to have deserted the Conservatives. We saw yesterday, and my right hon. Friend the Member for Livingston (Mr. Cook) referred to it today, the barracking of the Chancellor of the Exchequer—something I never expected to see.

It was astonishing because, in my political life, I was brought up to believe that the secret weapon of the Tories was loyalty. I now see that their loyalty was based on the absence of dogma. They subordinated all principles to that of retaining power and it was when they violated that approach, such as at the time of the corn laws, that they became divided and lost their power and influence. That is Margaret Thatcher's legacy. She gave dogma to the Conservative party, and the squabbling and the antagonisms are the inheritance that she has bequeathed to them. Following the Labour party's divisions over dogma 15 years ago, we now see the Tory version, which is likely to be fierce and long-lasting.

I am a pro-European, although I have certain reservations on economic and monetary union. I voted for entry into the Community against a three-line Whip, and I have never seen any reason to regret it. In this debate, we have heard from a number of Euro-sceptics. Engel, the confidant of Karl Marx, said that an agnostic is a shamefaced atheist, and Lord Roll said in another place that many a Euro-sceptic is probably a shamefaced anti-European. Many of them are against the European Community and several wish to withdraw from it. Their hostility has come to a head over the debates on EMU.

I suppose it is possible that, despite the enthusiasms from prominent players, EMU may be postponed, perhaps for some time. To my mind, that would be an adequate solution. The problems of convergence are bound up with the difficulties of nationalism, which are likely to continue for a number of years. It is a pity that the project is being rushed by Chancellor Kohl, who wants to see it in place before he goes. His time as Chancellor is coming to an end and he is in a hurry.

Although outside EMU we can still decide many things for ourselves, the area of independence is dwindling all the time. As examples of that, we have only to observe the effect of Alan Greenspan's decision last week, which brought turmoil to the City of London and many other parts of the world, and the effect of Bundesbank decisions. Can anyone believe that an EMU with Britain outside will not have an even greater effect upon our domestic economic and financial affairs?

My preferred solution is for there to be some delay in the implementation of EMU. There is more to be done in the matter of convergence, as my right hon. Friend the Member for Livingston said, and such a postponement may yet happen. But at this stage, we must assume that EMU will go ahead roughly as planned and roughly according to the timetable envisaged. In all of this, we must assess the level of uncertainty in what we propose, and I regard staying out of EMU as representing the greater risk. If we stay out and EMU is successful, it will be likely in some ways—some of them unknown at this stage—to discriminate against us. As we know, the absent are always in the wrong. Excluded from the inner councils, our weight will be diminished.

A real danger, as mentioned by the right hon. Member for City of London and Westminster, South, is a struggle between Frankfurt and London, and we should not take too much comfort from the expectation that all our skills will remain with us in such a contest.

Mr. Dykes

Will the right hon. Gentleman give way?

Mr. Sheldon

I am sorry, but I have only ten minutes.

We should not take too much comfort from the rules that we hope to establish. We must not depend on rules—which will not always help us—but on practice. Even if EMU is not successful—it is interesting to speculate on the mechanics for dealing with an unsuccessful EMU—we will gain no credit and no friends for any hostility that we may show.

The major question for Dublin, and beyond Dublin, should be whether the criteria for convergence will be firm. Will the criteria be tough in terms of admissions? If they are, the stability criteria will be less severe. If the criteria are firm and the admissions policy is tough, the stability criteria will be less severe. What steps can be taken to ensure that latecomers to EMU come in without discrimination? Ideally, there should be no disadvantage in late entry, providing that the conditions are met. In practice, the founders will have a greater influence on both the rules and the way in which they operate.

I am uneasy about establishing a rigid formula for stabilisation, convergence or any of the criteria that will decide important matters. If a country is in financial difficulties, it has the choice at present of raising interest rates, raising taxes or cutting expenditure. Under EMU, that range of choice—as well as devaluation—will not be available. The only choices available will be increasing taxes or reducing expenditure. What happens if convergence is not realised? What if a Government cannot politically increase taxes or reduce expenditure? What if they cannot do any of these things? In such circumstances, how real a discipline is a fine?

There are political problems, and there are things that the Government can and cannot do. It would be foolish to assume that all we need is to establish a rule that: will apply to bring countries into line. What happens if a Government face lorries and tractors on the roads, or even greater civil disturbance? In that connection, how real a discipline will a fine be? The political imperative may be much greater than the financial one. In any case, it is a peculiar comment to impose fines on a country that will not pay because it cannot pay.

We must accept that we cannot be too rigid. There are those who say that, once one starts easing the criteria, it will bring problems—particularly for the Germans, who will feel that they are exchanging their strong deutschmark for a weak euro. It is unlikely that the euro will be anything like as strong as the deutschmark, as too many countries are involved and there are too many problems. We must not be too rigid, and if that is the price for achieving EMU, the Germans may well have second thoughts about it.

Maastricht did not represent the end of nationalism, and we must allow for some of the practices, as well as the characteristics, of certain countries, which cannot be dismissed. We will not bring about social change in a year or two just because we have something called EMU. We must accommodate these matters and if that is the spirit in which the negotiations are conducted, EMU may well succeed. In our dealings with the Community, history is unswervingly against our claim to high statesmanship. So often we have assumed that that which we do not like will fail. Let us for once in our miserable experience in these matters assume that that which so many expect to fail may actually succeed.

6.24 pm

Mr. John Redwood (Wokingham)

The other day, I was speaking at the Henley management centre. Perhaps because it was near Henley, I was asked whether I was ever invited to speak in Europe, given my views. I was delighted to affirm that I received many invitations, including that one for that day in Henley. Here I am again, today—speaking in Europe. Britain must be proud that we are a part of Europe—but Europe is our continent, not our country. We believe, rightly, in a Europe of nations. I agree with M. Santer that we are fast approaching an important decision point for us and the other member states of the European Community.

We have the Chancellor Kohl version of how we should develop. Chancellor Kohl wishes to have ever deeper and wider integration, and he wishes to see ever more powers going to the centre. He is quite open in saying that he likes the German federal model, where there is strong central control but where the centre decides to devolve some of the powers and decisions to the lander, the individual regional parliaments. The authority for that system comes from the democratic authority of the German people, expressed through the German parliament.

That is why I believe that Britain must offer an alternative to Chancellor Kohl's vision. I believe that true democratic legitimacy will remain in Germany in the German Parliament, and will remain in Britain in the British Parliament. We therefore need a Europe of nations, because I do not believe that we are about to establish democratic legitimacy at the European level through the European Parliament, which would be the only democratic way of proceeding towards a more centralised or a federal state.

What need does a Europe of nations have of an anthem, a common passport, a common flag, a supreme court or all the other institutions that are clearly the institutions of a proto-state in the making? We must now put it clearly to the British people—the choice is there. It is said that it would be quite impossible for Britain to negotiate a common market but not common government. It is said that we would be isolated in Europe if we took the Government's view of a Europe of nations, developed it and thought it through for ourselves, and for the other member states who like our vision better than Chancellor Kohl's.

There are a lot of people in western Europe who share exactly our view. They want the European Community to add to the prosperity and happiness of the peoples of western Europe, and they wish us to co-operate and to find out whether there are things that Governments can better do together by their mutual agreement. But just as there are growing resentments in our country about the number of ways in which the European Court and the European institutions interfere in our democratic decisions, so there are tensions and disagreements visible in other member states of the Community about the interferences, and the consequences of those interferences, in their policies.

The biggest step towards federal union that is currently before us is the step to a single currency. It is wrong to suggest that no power would transfer from this country if we abolished the pound and joined a single currency. Of course it would. We know that the power to settle interest rates and to influence exchange rates would go from British institutions and from this Parliament to the institution of a central bank.

We know that there would have to be limits to the budget deficit that we would be allowed to pursue. People might say that we should never want a bigger budget deficit than that laid down in the treaty. None the less, the right to choose to have a bigger or smaller budget deficit would have been limited by that decision.

Of course, if we joined, soon afterwards we would be told that to make it really work one needed common taxation throughout the Union, and common financial and expenditure policies. People are already beginning to suggest that. In Brussels, they are saying today that we need to bring our value added tax rates together. They are saying that there should be a minimum and a maximum rate, and their intention would be to narrow the gap between the rates until there was a standard rate throughout the Community. They want us to impose VAT on the same items as other member countries.

We already see that they think that it would be unfair of the United Kingdom to get rid of capital taxes, because other countries in western Europe have them and we would obviously have an advantage if we got rid of them while they retained them. We might find that they would try to build that into the system, and that a limit would be placed on this Parliament removing or reducing capital taxes below a certain level.

People would soon discover that, as Chancellor Kohl said, with a single currency one would need a political union to have any chance of making it work. Let us be open in our debates about what is proposed, and be positive in suggesting an alternative that might be better.

The best parallel that I can draw for the single currency is with taking out a joint bank account. It would be extremely foolish to do so with someone that one did not know very well, or with a mere friend or neighbour. Normally, one would contemplate doing it only with someone with whom one had a very intimate relationship. That joint account can work only if the two or more parties have confidence in each other's actions and know how much money they are putting in and drawing out.

If we combined with other countries and had a single currency, it would be like having a joint bank account. Indeed, the deposit account part has to transfer to the central authorities. Our foreign exchange reserves would have to be taken to the central bank in Frankfurt and the deposit account would be controlled by that institution and would no longer be under the control of the British people through their Bank of England and this House, which has democratic control over British institutions.

The joint current account would be a little freer, but one would discover that there had to be strong controls over what was put in and taken out, because the consequence of one country borrowing would be to drive up the interest rates of the others. The consequence of one part of the union over-borrowing is to affect the creditworthiness and stature of the currency of the others. There is an optimum size for currency unions. A currency union stretching over France, Germany and Britain, given their different labour markets, the inflexibility between them and the different styles and histories of the countries, could not work as a practical proposition.

I trust that, in Dublin and beyond, our Government will represent a different view of Europe—not wishing to withdraw, not saying that we have no time for Europe and its institutions, but saying that we want those institutions to have limited powers over the peoples of western Europe, and that those limited powers should be used to promote jobs, prosperity and free trade, not to undermine those things.

The policies that are leading to monetary union are destroying jobs on the continent of Europe, and they need to be reversed. There is no need for all those people to be out of work in France, Italy and Germany. It is the direct result of exchange manipulation, and the interest rate and budget policies required under the Maastricht treaty. Those countries would be much better advised to take a leaf out of our book and to have floating exchange rates and interest rates that really work for their economies—policies that promote growth rather than stifle it.

On the other issues, I hope that the Government will demand a better deal on beef and fish. I hope that they will say that independent nations co-operating with one another cannot be answerable to a supreme court that overturns Acts of Parliament. Of course there needs to be a court to adjudicate trade disputes between parties, but it should have some limit on its power if it wishes to overturn sovereign decisions of sovereign Parliaments, solemnly expressed in the light of the treaty and the advice of the European institutions.

I hope that we will say that we want a clear opt-out on social and employment policy, which really works. I trust that we will be saying that, on matters of the European budget, we do not want any more money to pass to European institutions—certainly not before they have tightened up on fraud and waste, and probably never, because we find their present requirements high enough.

I do not believe that it is unrealistic to negotiate that agenda. We have vetoes over every treaty change that other members states wish to propose—over the regulations they need to develop their currency union. We should use those vetoes constructively, saying that we will not lift them so that they can progress in the way that they want until we, Britain, have got the satisfaction we deserve on the fish, beef, court and budget issues—things that matter very much to us.

We should go in there proud that we are the second biggest contributor financially to the Community, proud that we make a big contribution to western European defence, proud that we are a successful economy trading within the European Community and well beyond it, and proud that we are a global nation with global vision, capable of influencing around the world and trading—

Mr. Deputy Speaker (Sir Geoffrey Lofthouse)

Order. Time is up. I call Mr. Jimmy Hood.

6.35 pm

Mr. Jimmy Hood (Clydesdale)

It is good that we are finally having this debate on the Floor of the House. The Select Committee on European Legislation, which I chair, thought the matter important enough to recommend that the three European monetary union documents be debated on the Floor. It is not something we do lightly, but nevertheless that was our unanimous recommendation, and we were confident that the House would endorse it.

Unfortunately, the debate is not on a substantive and amendable motion as the Committee would have preferred, but I am not inclined to be too ungrateful to the Leader of the House. Indeed, in the Christmas spirit, I find myself somewhat sympathetic towards him and his right hon. Friend the Prime Minister, and perhaps even to the Chancellor, because it seems that, every time they see a light at the end of the tunnel, it turns out to be an on-coming Euro-sceptic train.

The Government's refusal to allow time for the House to debate the documents was bad politics. It was the bad judgment that flows from a Government who are directionless and void of a firm strategy other than to do anything to keep from self-destruction. The integrity of Parliament was in danger of being held up to ridicule. For that reason as much as for any other, my Committee was determined to fight so fiercely against the Government's refusal to sanction this debate. I should place on record my appreciation to all those hon. Members who supported my Committee by appending their names to our motion.

In the time available, I shall concentrate on three lessons of this whole affair. The first is the scrutiny process. The sixth report of my Committee, which was published on Monday, was listed on yesterday's Order Paper. It reminds the House of recommendations that we have made, which have been given a ringing endorsement by the present row.

I shall give two examples. First, we think that there should be a general agreement that, when the Select Committee recommends a debate on the Floor of the House, which we do sparingly, the Government should have to seek the House's approval before it can refer the matter to a Standing Committee. Secondly, we think that there is a strong argument—as the Chancellor's statements in this case have shown—for adapting the questions plus debate format of European Standing Committees to the Floor of the House procedure. I commend that report to the House.

In the summer, the Select Committee published a major report on all aspects of the scrutiny system—how it works, its strengths and weaknesses, and how it could be improved. We made a number of proposals to make it much more effective. The main thing that is wrong with the scrutiny system in the House is that it is not sufficiently well known by Members. The system provides endless opportunities for European issues to be examined in detail, both in the House and outside it, yet it is woefully under-used.

We do our job on the Scrutiny Committee every week, publishing our blue books of analysis and criticism, and we are right up to date: we were the first Select Committee to go on the Internet. If any hon. Members want to surf the Internet and find about European issues, they are welcome.

Scrutiny is not an end in itself. We are a bit of a burglar alarm: we can tell people when someone is trying to get into their bathroom window, but at that point it is up to hon. Members to do something about it. I hope that one positive result of the fuss of the past month will be to raise the profile of European scrutiny and to get people to use the process to its full potential. The report we published in July is an ideal handbook, and I recommend it to the House.

It is incumbent on me to assure the House that our scrutiny system compares well with those of other Parliaments in the Union. Some hold the Danish system up as the best, but I am not a convert to that view. It is fair to say that, had the Danes been dealing with those European monetary union documents, they would not have been able to have the reports that we had, or, indeed, to hold this debate on the Floor of the House.

The events of the past few weeks have hammered home the point that national Parliaments must have their own distinct voice in the Union. The European Parliament has a role to play, but it is a different role, and we should understand the difference. For two years, the Scrutiny Committee has been pressing for the role of national Parliaments to be enhanced. We have made a number of suggestions, some of which have fallen on deaf ears, but I hope that more ears will listen in the future.

A principal suggestion is that there should be a four-week notice period between all national Parliaments receiving the official text of any legislative or related proposal and the Council of Ministers being able to take a decision. Under our proposal, there would be time for scrutiny and debate, if necessary, in national Parliaments. We—and, more importantly, our constituents—would not be bounced as they have been in the past. I am glad to say that, in Dublin in October, at the Conference of European Affairs Committees, known as COSAC, we achieved unanimity in favour of our suggestion among the 25 committees attending.

Again, in the spirit of Christmas, I recognise the support that our proposal has had from both the Foreign Secretary and the Minister, who tabled the appropriate treaty amendment for the intergovernmental conference.

No decision taken by a British Government will be as important as the one on European monetary union and the single currency. The Chancellor was right yesterday when he pointed to the positive benefits of our membership, while others, most of them of his own party, are so hostile to Europe that they sometimes sound like, and appear to have much in common with, headless chickens.

It was sad that the Foreign Secretary, who spoke for 46 minutes today, spent 38 minutes trying to appease his party before he mentioned the Labour party. My right hon. Friend the shadow Chancellor made an outstanding contribution to the debate yesterday, as did my right hon. Friend the shadow Foreign Secretary today. My party is committed to Europe and to being at the heart of it. However, as both my right hon. Friends said, the convergence criteria must not and cannot be fudged. Real convergence of real economies will bring great benefits if the United Kingdom is involved.

If it is in our national interest to be in, and if our people would be better off in than out, the House will first take the decision to recommend that, and a referendum of the people will make the final decision. I only wish that those on the extreme nationalist wing of the argument would address our national interest instead of indulging in the depressing xenophobia that we have heard over the past few days.

I hope that the sound and fury of the past four weeks have taught us two useful lessons: the first about how we should deal with European matters now and in the future, and the second underlining the importance of national Governments in the process of European decision making. If we have achieved that, perhaps it has been worth while, but I suspect that nothing short of a general election and a new Government will resolve the matter.

6.45 pm

Sir Terence Higgins (Worthing)

It is a particular pleasure to follow the hon. Member for Clydesdale (Mr. Hood) and to congratulate him on the immense amount of hard work that he and the Select Committee on European Legislation do. He referred to the origins of this two-day debate, and I want to say a couple of things in that context.

The hon. Gentleman has a tremendous amount of work to do, and I am a little concerned by his 27th report, which refers to the suggestion that he might extend his operations into broader European matters than merely legislation. Such matters might more appropriately be dealt with by the Foreign Affairs Select Committee or, possibly, by a specific European committee. That is a matter that we will need to discuss.

At all events, it is clear that the current arrangements for scrutiny of European legislation, despite all the hon. Gentleman's efforts, are not satisfactory. It is right that he should act as a filter, but I think that the present system of European Standing Committees A and B does not work satisfactorily. I hope that, in the next Parliament, it will be possible to reconsider my suggestion that the departmental Select Committees with expertise in the area should have sub-committees of some of the members of the Committee concerned with the particular departmental matters and others from outside. Those sub-committees could then examine matters in greater depth, under the supervision, in effect, of the Scrutiny Committee.

I have a further procedural point regarding the 10-minute rule. We all understand why it is necessary to limit speeches to 10 minutes to allow more people to speak, but something extremely bad is happening to Front-Bench speeches. Ministers and shadow Ministers are giving way far too often—the old tradition was to give way once, twice or, at the outside, three times—with the result, both yesterday and today, that, while Front-Benchers have been on their feet, we have been engaging not in debate but in conversation. That is not good for the House.

I believe that the Government's policy, of first negotiating the opt-out from the single currency and then maintaining the option, is right. If we were to say at this stage whether we intended to join, that would seriously diminish our ability to negotiate, and that would be extremely bad, because we need to exercise our influence. I do not understand those of my right hon. and hon. Friends who want to take what I view as a premature decision on the issue, given that we have the opt-out, because that would reduce our ability to shape Europe in the way we would like.

I am even more puzzled by the way in which many of my colleagues are creating dissent to an extent that could well lead to the election of a Labour Government, which would have precisely the result that those who take the most sceptical attitude to Europe say they are most determined to prevent. That is an extremely important point.

We must consider what the Chancellor and the Prime Minister and the others involved in the negotiations ought to achieve. Much attention has been paid to the convergence criteria. There is already a great deal of fudge about them, not least in respect of the debt-GDP ratio, as well as the actual deficits. The Chancellor said yesterday that we must worry not only about the arithmetic but about whether there is genuine convergence. I do not believe that there is; nor do I believe that it can be achieved in the time scale that has been set. As I have stressed before, there will be a core currency, not a single currency. If countries go ahead without having had convergence over any length of time, the system will break down and they will have to consider how to get out of the core currency.

There will be a period in which the euro will operate alongside other currencies. That will be period of frightful trauma if countries have gone ahead without adequate convergence. Countries are seeking to achieve convergence by repressive measures. We have only to watch television to see people in various countries protesting about measures that are designed to enable them to enter a single currency. If those countries lock themselves into a core currency, the tensions will go on indefinitely. The strains will be such that those countries will not be able to maintain the currency. I hope that the Government will stress in the negotiations the problems of proceeding in that headlong way, which I believe will result in disaster.

It may be that the countries in a single currency will succeed in keeping it going, but if they do, the German idea that the euro will be as strong as the deutschmark is absurd; it clearly will not be. If we get what I have described previously as a camembert currency, with a soft centre, the euro will go down and we will be left with le pound fort. That may give cause for concern in respect of competitiveness, but it may also have advantages.

If countries go ahead with the single currency, there will be the question of the rate at which each country joins. There have been comparisons with the gold standard. We should remember what happened when Winston Churchill took us back on to the gold standard at the wrong rate. If countries go into the core currency at the wrong rate, it will cause serious problems. I hope that the Chancellor will bring home to our European partners the dangers of going ahead in the way they seem to be going.

The speech of the shadow Chancellor yesterday was deplorable. He was more concerned with rumours about conversations that might have happened in some café than with the substance of the issue. On the stability pact, the word "fines" did not once cross his lips.

I am seriously concerned about the matter. Historically, parliamentary democracy rests on the control of money: the right to raise taxes and control expenditure. While I do not accept all the arguments about a reduction in our sovereignty, I am worried about fines. They are a negation—a take-over—of sovereignty of a different order. We will have a supranational authority which automatically, or without our consent, could impose fines on us. Comparison has been made with German reparations after the first world war.

Mr. Dykes

Ridiculous.

Sir Terence Higgins

It is not ridiculous, in respect of either scale or effect. The difference is that, with reparations, the Germans borrowed to pay. With fines, we will not be allowed to borrow more, so the House will have no option but to raise taxes or cut expenditure. That strikes at the basis of Parliament. I therefore hope that, when my right hon. and learned Friend the Chancellor negotiates, he will accept that we should not go along with fines.

I fully accept that, if we are going ahead with the single currency, we will need some supervision, with good statistics and so on, but fines are a different matter. I realise that there is a danger that one country may borrow too much, but there will be strong pressure on it to put the matter right. We had a long period of currency stability under the Bretton Woods agreement, but no one suggested that the International Monetary Fund should impose fines. The system could work perfectly well without them.

In answer to my hon. Friend the Member for Harrow, East (Mr. Dykes), Mr. Kaletsky spelt out in an excellent article the possible extent of such fines. They are not out of line—

Mr. Deputy Speaker

Order.

Mr. Dykes

On a point of order, Mr. Deputy Speaker. I could not attend yesterday's debate, because I was visiting the European Parliament. I was given to understand by colleagues that yesterday's debate was to have been primarily on economic and monetary union and today's on the intergovernmental conference. I have a brilliant speech on the IGC lined up.

Mr. Deputy Speaker

There may have been a misunderstanding. Today's debate is about the European Union.

Mr. Andrew Mackinlay (Thurrock)

Further to that point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

There cannot be a further point of order because I have already ruled on the matter. Is this a different point of order?

Mr. Mackinlay

Yes. After tonight's debate, could you consider whether, when the Leader of the House announced the business last week, it was clearly stated that the IGC was to be the subject of debate today and EMU yesterday?

Mr. Deputy Speaker

I have already ruled on that. This debate is on the European Union. The hon. Gentleman said that he had a different point of order, which I allowed accordingly.

6.56 pm

Mr. Charles Kennedy (Ross, Cromarty and Skye)

The only matter that I want to clarify is whether those exchanges ate into my 10 minutes.

My hon. Friend the Member for Gordon (Mr. Bruce) spoke on economic and monetary union yesterday; shall talk about the intergovernmental conference. Like my hon. Friend in response to the Chancellor's remarks yesterday, I welcome the more robust pro-Europeanism expressed by the Foreign Secretary today. The Prime Minister also expressed it rather well in his television interview at the weekend.

The bad news for the Conservatives is that it is too little, too late. If they had shown firmer resolve at the top of the Government, they might not have got into the terrible quagmire that has developed since the Maastricht treaty, with the whipless Tories and so on. It is not merely a case of the tail wagging the dog; the tail has got bigger and bigger because those in charge of the animal have not imposed the necessary discipline.

The Foreign Secretary's comments on the IGC were strange, coming from a Conservative. He bewailed the tendency in Europe towards endless modification. I had always thought that one of the great tenets of British Conservatism was that our unwritten constitutional procedures gave us limitless scope for endless modification—not pulling the plant up by the roots to see how it was growing, but pruning and nurturing it in a conservative way. His complaints about modification in the context of the IGC are inconsistent with that view.

In the latter stages of his speech, the Foreign Secretary said that the differences among the Opposition were substantive and very real. He would have better addressed those remarks over his shoulder to his Back Benchers, where the fatal—from the point of view of the British Tory party—splits are all too evident.

One thing is coming through clearly as the IGC process continues: the underlying arrogance that we hear, particularly from Conservative Members with a certain cast of mind on matters European. They suggest that the process of negotiation involves the British explaining to everyone else in Europe—perhaps not even bothering to explain, but simply haranguing them—that we know best, that our procedures are unimpeachable and that if everyone else followed our lead they would get on much better.

Negotiation, by definition, involves give and take—meeting people halfway and accepting that other traditions and cultures can have a beneficial impact on ours, just as we like to believe that our cultures and traditions can have a worthwhile impact on others. The process of negotiation as conducted by the present Government is what Lord Carrington, in a different context several years ago, famously described as megaphone diplomacy.

I am glad that the right hon. Member for Wokingham (Mr. Redwood) is still in his place. I wish to pick up not so much what he said in the House tonight as what he said on the vexed issue of qualified majority voting, which goes to the heart of the intergovernmental process. The only surprise about the Government's White Paper "A Partnership of Nations", published earlier in the year, was that it did not have a question mark at the end of its title. Throughout their period of office, the Government have flagged up and welcomed the extension of QMV, particularly its role in delivering near completion of the single market.

In a review of a book co-written by Christopher Booker—a name to conjure with in this context—published some time ago in The Daily Telegraph, the right hon. Member for Wokingham wrote: We now need to try and make the single market a freer market: a market with fewer laws and more rights of access for our goods and services. We should also say that now that Europe's idea of a single market is completed, we should revert to voting on the basis of unanimity. His analysis is flawed and his prescription is wrong.

On the key subject of the utilities, is the right hon. Gentleman aware that, in June of this year, electricity liberalisation—something that the Government favour and that they say is in this country's vital national interest—passed through the Council of Ministers only because it was subject to QMV? The French were threatening to block liberalisation procedures. Gas liberalisation is another such case. I therefore disagree with the prescription suggested by the right hon. Gentleman; there is clearly a need for further QMV in more areas that suit Britain and suit the proper liberalisation of the single market.

Mr. Redwood

We should try to persuade our partners to agree to bring about the good news in their economies that we have brought about in ours with utility deregulation. We should not, however, have the right to make them do it under QMV. We would derive a great advantage under the system of unanimity, because our partners would not be able to impose on us rules and regulations that we do not like.

Mr. James Wallace (Orkney and Shetland)

What about the common fisheries policy?

Mr. Kennedy

My hon. Friend, who, for constituency reasons, speaks with more direct knowledge of such matters than perhaps anyone else in the House, asks how on earth we could achieve reform of the common fisheries policy if we were to take the "heads we win, tails you lose" approach of the right hon. Member for Wokingham.

The Conservatives' confusion over QMV is but a mirror image of what we hear from the top. When the Foreign Secretary appeared before the Select Committee on European Legislation on 13 February this year, he said: If there were an area of EU policy which could only be advanced through Majority Voting and which we were convinced would serve an important UK interest, then it would be foolish and illogical of us not to support Majority Voting in that area. What did the Minister of State who is handling the minutiae of the discussions say to the same Committee, as reported in the Financial Times in the past week? We will not accept any undermining or dilution of the veto in any circumstances". The Foreign Secretary says one thing and the Minister of State, who is handling the detail of the IGC, contradicts him. It is no wonder that the Conservative party is in such an abject mess.

There are areas where we should retain a national veto. I should have thought there were primarily four of them—budgetary and tax matters; constitutional issues, specifically treaty changes; the deployment of national forces; and social security and employment promotion measures in the context of the social chapter—but elsewhere, if we are to maintain the momentum of Europe, we must, in our own national interest, apply a sensible, qualified extension of majority voting in a pragmatic way.

It is a shame that we never hear from the Government any discussion at the IGC of proportional representation for the next diet of European elections. I pay tribute to our sister party, the FDP, in west Germany, and Werner Hoyer, who has raised the subject consistently.

We have heard a great deal lately about the most recent proposals for common borders policy that have emerged in the context of the IGC. That is a red rag to a bull for the Euro-sceptics, and there is much hysteria about it. The United Kingdom should, of course, retain domestic control over its borders until and unless there is a clear political, administrative and public acceptance of enhanced security for European frontiers as a whole. It would be wrong, however, to deny or decry the fact that there is much cross-border activity, such as anti-drug trafficking, on which it makes sense to have cross-border co-operation and co-ordination for the benefit of all citizens of the EU.

Whatever the outcome of the IGC—and the parallel, and probably slightly longer, discussions on EMU—one thing is clear from the division that was so graphically drawn yesterday: the Chancellor was supported by perhaps 20 per cent. of Conservative Back Benchers but, despite the detailed and principled policy differences, received pretty general acceptance and support for his position from the Opposition.

It is therefore clear that we cannot have a sane debate that reflects the realities of the European issue when the Government are caught in the headlights of their own divisions. That is why a referendum that flushes the argument out into the country will be both necessary and desirable. I believe that, in due course—as before—the voters of this country will use a referendum to commend the further sensible and progressive integration of Britain with the rest of Europe.

7.8 pm

Mr. John MacGregor (South Norfolk)

I agree almost totally with what my right hon. Friend the Member for Witney (Mr. Hurd) said yesterday and what Lord Owen said in a debate in the other place last week. I shall not repeat all their points. Like them, I have always been a passionate and convinced supporter of British membership of the European Union, and I remain so.

At the first national conference at which I spoke when I was a student, I proposed a resolution urging the Government of the day to join the original six and become an original member of the treaty of Rome but, like my two colleagues, I do not therefore embrace the concept of the single currency—certainly not at this stage of European development.

My right hon. and learned Friend the Chancellor put the economic advantages and disadvantages of the single currency concisely and impeccably yesterday, and made it clear that he is genuinely waiting to decide. I agree entirely with his analysis; I differ from him only in that I am more strongly persuaded of the disadvantages. At this moment—I stress, at this moment—I am opposed to British membership of the first phase of the single currency. The time to judge that matter properly and definitively will come later. I do not know exactly when that will be. I know what the timetable is at the moment, but I recall many European negotiations where the clock has been stopped and the timetable has moved backwards.

My inclination at present is to look to the disadvantages because I believe that the pressures for the single currency are pushing us too far, too fast, both politically and economically. I fear that it may bear the seeds of its own destruction—I follow a number of the comments of my right hon. Friend the Member for Worthing (Sir T. Higgins). I speak not merely of the fudging of the criteria before entry—which many of us are now noticing is happening in other countries—but of the likely impossibility of holding to those criteria later, depending on who initially enters the single monetary union.

Different economies are at substantially different levels of development and growth. There are different levels of inflation; different pressures on public expenditure and debt; different levels of, and pressures on, unemployment. The political pressures that some Governments may be unable to resist when holding to the criteria may mean that the criteria will be breached. Alternatively, there may have to be transfers of expenditure between different member states on a much greater scale than anything we have hitherto experienced. Real tensions could therefore build up if we move too far, too fast.

In the context of public expenditure, I want briefly to mention pensions. I share the concerns of many about the funding of our pensions in 10 to 20 years' time being in a much better state than those in most other European Union member states, with the possible exception of the Netherlands. I know that there are constraints—indeed sanctions—against the transfer of public expenditure from one country to another to fund the huge pension burden that many other member states will face in 10 to 15 years' time, but I was impressed by the Social Security Committee's report on the point. The response of the President of the European Commission was certainly not consoling.

We all know that, at a certain stage, pressures will become such that the pension burden may be funded from some central, European public expenditure pot or, indeed, from the central reserves. I am concerned about that, and think that we need much firmer sanctions and clear commitments to prevent it. There is also the problem of whether moving towards a single currency at this stage is compatible with the timetable of, and progress with the widening of, the EU, as well as a mass of other technical issues. For all those reasons, I am doubtful.

There is everything to be said for our participating fully and positively in the negotiations, as we have been doing. If the single currency goes ahead and breaks up, we would have made our case and be able to play a much more crucial part in putting the pieces together again. If it succeeds, against my expectations at the moment—I keep stressing that we do not know exactly what shape the final proposals for the single currency will be—and we decide to join later, which is an option that I am strongly in favour of keeping open, we will have helped to shape it.

I spent four years of my ministerial life negotiating on and trying to reform the common agricultural policy. I entirely agree with what my right hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) said about that, if we had been in on the early discussions of the CAP, we would have had nothing like the problems that we have had subsequently.

If there is a two-speed Europe as a result of some member states going ahead with the single currency and our not doing so, we will participate in shaping the kind of problems that will arise from a two-speed Europe. In that respect, I share the views expressed by my right hon. Friends the Members for Witney and for Wokingham. I do not agree with my right hon. Friend the Member for Wokingham on a number of the points that he made, but I agree with him that we are not alone in Europe in the kind of developments that we want. Indeed, I am much impressed by the number of German and French business men who keep urging us to maintain our position on the social chapter because they agree with it.

The position that I hold leads me, unlike some of my hon. Friends, to the view that we should in no way be shackling our Government in the present negotiations. I fear that some of the commitments and comments that have been made have had precisely that effect. I repeat that I genuinely believe that we cannot decide on a single currency now, because we do not know its final shape. I remain doubtful about whether we should join.

Above all, I should stress that to speak in this way is not to be a Euro-sceptic. To be cautious about a development that we genuinely think is taking place too far and too fast does not mean that we do not continue to want to be strong and committed members of the wider European Union. There is a world of difference between my position and those who are commonly described as Euro-sceptics.

I am glad that the Referendum party has been flushed out and forced to indicate what its question will be. It is quite clear from that question that it is advocating withdrawal from the European Union and joining a European free trade area of us and Switzerland—

Mr. Jessel

And Norway.

Mr. MacGregor

Perhaps Norway as well. That is a big deal for British business and the British economy. Some of my hon. Friends and others who carry on the debate in the media and elsewhere outside the House are being less than honest in making their points. In the final sentence of his speech yesterday, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) was honest; he faced up to the fact that the position that he holds will mean that, at some point, he will have to judge whether we should pull out of the European Union altogether. That was an honest position; I totally disagree with it, and profoundly do not join him on it.

For all the reasons that I have given, I believe that the Cabinet has got it right at the present time; it is right to suspend judgment until we see the final proposals; it is right to have a referendum if we decide to move ahead; and it is why the Cabinet should be supported.

7.14 pm

Mr. Nigel Spearing (Newham, South)

It has been interesting to witness the degree of caution that has developed in the past few days' debates. From the right hon. Member for Witney (Mr. Hurd), who spoke yesterday from a foreign policy point of view, northwards to the right hon. Member for South Norfolk (Mr. MacGregor) and southwards to the right hon. Member for Worthing (Sir T. Higgins) on the south coast, Members who might otherwise have been desperate to increase political union inside the European Community are now being rather cautious. The cause of that might be some disagreement on what is meant by political union.

Yesterday, the Chancellor of the Exchequer made some extraordinary statements. As we all know, he is a man with a most attractive means of presentation. I do not know whether anyone has analysed the construction of his sentences, the choice of his vocabulary or the quality of his voice, but I suspect that their combination not infrequently makes the implausible sound plausible and the plausible sound well founded, when often that is not so. My exchange with the Foreign Secretary at the beginning of today's debate shows that the Chancellor's speech yesterday was a very good example of, from some people's point of view, his best, and from the point of view of the best parliamentary debates, his worst.

The Chancellor said: we shall also have to consider not only the economic argument, but what EMU implies about the political future of the European Union. As I said several times already, I do not believe EMU will lead to a European super-state. If I did, I would not contemplate Britain joining it. However, we need to satisfy ourselves about the intentions of our EU partners. I shall comment on that in two parts. The first concerns the European super-state and the political future.

The right hon. Member for South Norfolk mentioned reserves. The calculation of pension liability, on which we happen to be well off when others are not, could include currency reserves as a whole throughout the economic area of a single currency and even, I take it, reserves in banks and institutions. The uncertainties are great. Are they not also specifically political?

How can the Chancellor talk about there being no possibility of a super-state when there will be a super-currency and a super-bank? How can that in any way not be super-political as well? I put that as an unsustainable proposition, not just to the House but to anybody who may be listening. When it comes from the lips of the Chancellor of the Exchequer, it sounds reasonable, but it is totally unreasonable. I put it to the Minister who will be winding up the debate that he cannot sustain that proposition either.

The Chancellor went a bit further when he said: we need to satisfy ourselves about the intentions of our EU partners."—[Official Report, 11 December 1996; Vol. 287. c. 295.] Did the Chancellor of the Exchequer not know what our EU partners' intentions of were? Did he not ask the Foreign Secretary?

Mr. Dykes

Are these rhetorical questions?

Mr. Spearing

The hon. Gentleman thinks that I am asking too many questions. I hope that the development of the argument disturbs him somewhat, but it gives me no cause for disturbance.

Did the Chancellor not ask anyone what our partners' intentions were? Did he not know about the solemn declaration of the European Union that was signed by Mrs. Thatcher in 1983? That was an intention of union, which must mean political union; it did not mean a football union or anything else.

Has the Chancellor forgotten the communiqué from the previous Dublin conference, on 25 and 26 June 1990? Paragraph 1 of that communiqué states that the European Council agreed to convene an intergovernmental Conference on Political Union; it reviewed the preparatory work for the intergovernmental Conference, already agreed, on Economic and Monetary Union; and fixed the opening dates for these two intergovernmental Conferences". In case they have forgotten, I remind the hon. Member for Harrow, East (Mr. Dykes) and others that when Baroness Thatcher, as Prime Minister, went to Madrid and agreed the famous Delors three-part proposals for economic and monetary union, two Select Committees of the House said that we should have a debate. The right hon. Member for Worthing was then Chairman of the Treasury and Civil Service Committee and I was Chairman of the EEC Legislation Committee, now chaired by my hon. Friend the Member for Clydesdale (Mr. Hood). Both Committees were unanimous in asking for a debate.

Did we get a debate? No, we did not. Baroness Thatcher went off and, in effect, gave her consent to an intergovernmental conference on monetary union to be held. She had no choice, in the circumstances. The same thing happened when she went to Dublin in 1990: she could not say no.

We now have the meshing together of political and monetary union, one impinging on the other. If that is not a super-state, I do not know what is. Whatever view hon. Members take of the advantages—or what they believe to be the advantages—or the disadvantages of the European single market, the union, or whatever one prefers to call it, it is a coming state.

Earlier, I disagreed with the Foreign Secretary about his use of the word "federal" which, as the hon. Member for Harrow, East knows, for the past 10 or 15 years I have repeatedly said is inconsistent and wrong. The European Union is the prototype of a unitary state. All the institutions of government are in place, ready to expand at the expense of national Parliaments.

Mr. Tony Banks (Newham, North-West)

indicated assent.

Mr. Spearing

I am glad to see that my hon. Friend the Member for Newham, North-West (Mr. Banks) agrees.

Every Member of the House should have an elementary knowledge of constitutional structures. There is a great difference between a unitary state and a federal state. The treaties of the European Union and its predecessor, the common market, are unique in that they have tried to impose an over-arching unitary state on independent and otherwise sovereign states.

That difference undergirds the misunderstandings that arise between the German use of the word "federal"—which guarantees a degree of distribution of power among the Lander, which are historic communities, building up to the Zollverein and their specific form of federation—and the use by Conservative Members and some Opposition Members of the word "federal" when they mean, "We fear a unitary state." That is fundamental to the mess that the Government have got themselves into, as have the European Movement and others.

Unemployment affects all members of the European citizenry, if I may so call it: we have been forced to be citizens of the treaty state because that is what it is, whether we like it or not, without consent—from democratic motion, so-called.

The shadow Foreign Secretary, my right hon. Friend the Member for Livingston (Mr. Cook), mentioned unemployment and said that words should be added to the treaty. He is right. One cannot create—except in bureaucracy to run conferences about unemployment—one extra job simply by writing it into the treaty. The treaty bears down hard and says that nothing can be done unless it is in the treaty; anything else is undemocratic. No political party can advocate anything that is not within the terms of the treaty, whether one likes those terms or not, whether it is capitalist or collectivist.

Any form of partnership between private and public enterprise—any subsidy, any matter of finance, any specification—must be within the terms of the treaty. That is undemocratic in itself, but the aspect that affects unemployment is that there is forced competition. Forced competition in a time of great advance and change means unemployment. That is what the treaty means, and we can do little about it, even by changing the terms of the treaty that is at fault.

7.25 pm

Sir Rhodes Boyson (Brent, North)

On 21 May 1992, I spoke on Second Reading of the European Communities (Amendment) Bill. I voted for Second Reading and against Third Reading. At that time I was worried about the agricultural policy, the single currency and all regulations from Europe. I am still worried about the single currency, and I am now worried about over-regulation, the opt-outs and how we should proceed.

The exchange rate mechanism did untold harm to this country. It put our prosperity back four years, increased unemployment and destroyed much of our reserves. To my mind, the single currency would repeat that. I do not support a single currency. Like the hon. Member for Newham, South (Mr. Spearing), I speak as a schoolmaster. A single currency is similar to a three-legged race, like those that are run in infants schools. People can run together, but if there is a three-legged race they all fall down because they run at different speeds. That is exactly what happens to economies, and they will never work any other way. I do not want the single currency.

I continue to be worried about the common agricultural policy, especially bearing in mind the harm that it has done to the third world. Third-world countries can no longer sell us their goods at the right price, and these days we have to give aid instead of trade, when trade is always better for those countries. I am still not happy about that.

Europe is becoming over-regulated. If the trend continues, it will become an over-regulated morass. There is every sign that, in terms of prosperity, growth in inward investment and trade, Europe is falling behind not just America and the far east but other parts of the world. Our exports to the far east have doubled proportionately compared with our exports to Europe. Similarly, the amount invested by British business men using their own money has decreased as a percentage of investment in Europe. When we entered the common market, 29 per cent. of our investment overseas was in Europe. The proportion has now dropped to 20 per cent. and those people are making decisions for their own firms.

I wonder whether we need Europe if we have GATT. If we do not have GATT, we must be in a geographical body. But if we have GATT and free trade, we can compete throughout the world. Thus, I believe that Europe is becoming an incubus on our economy.

Size does not really matter. The countries that have expanded most, economically, since the second world war are small countries, such as Taiwan, which was expelled from the United Nations. That small island, with a population of about a third of this country and with little agriculture, now has an economy almost equal to ours. The same applies to Hong Kong and Korea. If a country makes goods of the right quality, sells them at the right price and provides the right service, it will do well. If it does not, it will not. As they say, if you make a better mousetrap in the forests of Canada, the world will beat a path to your door.

We are not dependent on Europe. I do not say that we should come out of it: I simply say that it would not be a disadvantage if we were forced to do so because of other circumstances. Europe needs us more than we need Europe. Opposition Members do not have the same confidence in the people of Britain as I have. I am confident in this country. I do not speak as a little Englander. Those who want to keep us in Europe under any terms are little Englanders because they have no confidence in this country or in what we are doing. If one believes that this country can help other countries and provide a good standard of living, I do not see how we could improve matters.

I shall conclude because this is a short debate and many other hon. Members want to speak. Britain has always made goods well and has sold to the rest of the world. We are the same people as we were before, and so long as we have free trade, we have no need to be propped up in any other way. I am suspicious of a single currency and all that goes with it. It would be of no advantage to this country.

Those of us who are Euro-sceptics should not be called little Englanders: the little Englanders are those who do not believe that this country could cope without being linked with other countries. This country has the same enterprise and the same ability as we had in the past. I do not say for one minute that we should come out of Europe, but I do not fear the possibility.

7.31 pm

Mr. Donald Anderson (Swansea, East)

The right hon. Member for Brent, North (Sir R. Boyson) is an honest man and a Methodist, but he was only a step away from saying that he would favour withdrawal because he saw no serious disadvantages for our country in being outside the Community.

The right hon. Member for Wokingham (Mr. Redwood) put forward arguments in the same direction. He argued in an Anglo-centric way—I stress the "Anglo"—that Britain could recreate Europe in our image, and that, if we stood firm, if we were positive and proud, and if we set out our stall as we would want, our European partners would inevitably see the virtue of our position and follow us. That was the logic of the right hon. Gentleman's position.

Mr. Redwood

Will the hon. Gentleman give way?

Mr. Anderson

No, I must get on, because I have only 10 minutes.

The hon. Member for Stafford (Mr. Cash) spoke of repatriating elements within the competence of the European Court of Justice. In effect, part of the original treaty gave the European Court of Justice supervision and jurisdiction over a substantial part of our policy; hence, our laws within those areas will be subject to European laws. If one talks seriously about repatriating parts of the European Courts of Justice, one is only a step away from saying, "Let us withdraw from Europe and from that which our referendum agreed in 1975".

I find it puzzling that many of those who are most vocal in favour of a referendum because they think that it will decide the issue once and for all pay no heed to the decision made by our people in 1975. I therefore conclude that another referendum will not decide the issue, because people will go on arguing about it.

When our people made that decision in 1975, they voted not just for a static Europe—the Europe that existed in 1975 on the basis of the treaty of Rome and the common agricultural policy. As the right hon. Member for City of London and Westminster, South (Mr. Brooke) said so eloquently, we suffered from that because we were excluded, and we used that as a precedent, quite properly, for taking part in the current discussions on currency union. Our people voted not for a static Europe but for a dynamic Europe. In that treaty there is the ever closer union of the people of Europe, which implies evolution and development. That was starkly clear at the time of the decision in 1975.

Our partners in Europe must be amazed at the nature of the debate that we still have in this country. We still dither about our vocation and whether we are in or out. That is an absurd position. If we are to be a part of our natural region, and if we are to see where our trade flows have gone and how we can punch much harder in the world, we must be part of Europe. Would Scotch whisky manufacturers, for example, prefer to negotiate with the Japanese simply through our Trade Minister on our own as a single economy, or be part of a bloc that can negotiate hard?

Inward investment is another advantage. The Koreans and others come to this country not only because they see many natural advantages here but—the right hon. Member for Wokingham ignores this—because we are part of a wider market and a launching pad or springboard to a wider Europe. If we were outside Europe, it follows as night follows day that we would be less attractive to inward investment.

This is part of the agenda that those who still dither and pretend that little England can stand on its own ignore. Some of them claim that we could form a new European Free Trade Association. I wonder where those countries would come from. Some claim that there is an alternative economic arrangement, whereby perhaps we could talk to our American friends and form a north Atlantic free trade association. I have news for them: although, some 35 or 36 years ago, Senator Javits and others spoke about that, no lobby or serious group in the United States flirts with that idea now. It takes two to tango, and those who talk about a new EFTA or a NAFTA are indulging in the politics of illusion. That is the worst sort of illusion, which does severe damage to our country.

That is part of the burden that this country must bear, and it causes such astonishment to our partners. They are amazed that the debate on Europe in this country, particularly in the media, is so violent. It is astonishing that those with no stake in the United Kingdom—Sir James Goldsmith and Mr. Murdoch—seek, from their foreign vantage points, to influence the decision and to wallow in old illusions of sovereignty, or a populism that sells newspapers, which are irrelevant to our country.

I fully concede that there are major disadvantages, potential and actual, in a single currency. The right hon. Members for South Norfolk (Mr. MacGregor) and for Worthing (Sir T. Higgins) made those points well. As always, a balance must be struck. At the moment we see through a glass darkly. We do not know a number of different factors: membership; the convergence criteria; or the degree of fudge. Surely the sensible position, then, is to wait until many of those matters are clarified. Perhaps the nation will say that it makes sense to help in the formation of that currency, but our national interest will ensure that we are not and should not be part of the first wave. Ultimately, however, it would be absurd for us to marginalise ourselves and reduce our influence and punching power. That is an argument for wait and see. Surely that is the sensible position. We do not know so many of the intangibles.

Because of our experience in the City, we can play a major role in pointing out to the enthusiasts the problems that are likely to arise. I heartily accept the view of Chancellor Kohl as an old man in a hurry. Perhaps there is a strong argument for trying to curb some of the enthusiasm.

If there are problems, they may multiply and be exacerbated if the new members queuing to join the EU are admitted. It is odd that, as we dither on the edge, countries queue to join the EU because of the advantages that they see. The current proposition is that those countries would have to join the single currency immediately, which would create great complications.

To dither and to be divided, as the Government are, cannot be in the national interest that the Prime Minister claims to espouse. During Prime Minister's questions today, he was asked whether, if the conditions were right, he would recommend entry. He seemed to have great difficulty in answering that simple question. He had to look over his shoulder to see who was there and whether he was saying the right thing. The Chancellor yesterday was forthright and put forward the honest position. The Prime Minister could not even answer a simple question.

It is dishonest—the current word is "dissembling", which is rather Shakespearean—if one enters into negotiations with one's partners without being able to say plainly that one is negotiating on the assumption that if the conditions were right, one would enter. It is a great pity that there is such a division in the Conservative party. I accept, of course, that there are differing voices in the Labour party, but there is a fundamental difference—

Mr. Deputy Speaker

Order. Time is up.

7.41 pm

Sir Norman Fowler (Sutton Coldfield)

I take up a point made eloquently yesterday by the right hon. Member for Bethnal Green and Stepney (Mr. Shore). His speech disposed at a stroke of the notion that the Labour party is united on the European issue. We do not need such nonsense in the debate.

The right hon. Gentleman raised the fundamental question of who governs Britain. He cited the single currency and moves towards a common foreign policy as examples of the way in which power is passing. Tactfully, perhaps, he omitted to mention the most glaring example: social policy and, in particular, how the directive on working time—the 48-hour week—is being applied in the United Kingdom.

On other occasions we can debate which party is right on that subject. I was singularly unconvinced by the comments of the right hon. Member for Livingston (Mr. Cook). What concerns me, however, is not the argument, but the process. It is common ground that the two major parties are entirely divided on the issue. It is common ground that our opposition to the proposals was the opposition of the elected Government of the UK. It is common ground that at Brussels the Government have put their views forcefully and consistently against the working time proposals. When I was Employment Secretary, as my right hon. Friend the Member for Enfield, North (Mr. Eggar) may remember, I—and, I think, he—put the case strongly.

It is also common ground that if, God forbid, the Government were defeated at the next election or any other election, it would be open to Labour to introduce its proposals in legislation. There has not, however, been a change of Government. At Maastricht the Prime Minister negotiated an opt-out from the social chapter. As chairman of the Conservative committee on European affairs, I argued strongly for that.

To most people, that might have seemed the end of the matter, but the Commission went on as though nothing had happened. It had argued that working time was a health and safety issue. Did the Commission's position change in the light of the Maastricht opt-out? Not one jot. That was entirely contrary to the spirit of the opt-out agreed by elected Ministers. Appointed officials went smack against the declared policy of the elected Government of the UK. That is unacceptable.

The Commission argued that on a strict interpretation of a European law, its action was justified. Regrettably, the European Court upheld that view. The European Court did not, however, consider the fundamental question of whether it was right for labour law to be determined at national level or at the Brussels level. We have always argued for the national level.

There is a further aspect that I find objectionable. We are supposed to be members of a community—a union—of friendly parties working together, yet the very spirit of the Maastricht opt-out has been avoided. The message that has gone out has not been one of friendly co-operation. The message has been that, if one has discussions, one had better go armed with battalions of lawyers and sign nothing until weeks later, when every conceivable point has been covered. Above all, one should not rely on the spirit of any agreement.

Mr. Jessel

Will my right hon. Friend give way?

Sir Norman Fowler

I should love to give way, as my hon. Friend knows, but I cannot.

When Commissioner Flynn spoke about the working time directive, he said not that it was good for health and safety but that it was good for social Europe. One of the crassest statements ever made by a senior political figure was the statement by President Santer, who warned against a return to the Dickensian sweatshops of the 19th century". Working hours are not the only social issue. The issue of immigration control and frontier control is once more raising its head. Any change on that would be unacceptable to Parliament.

My views, like those of my right hon. Friend the Member for South Norfolk (Mr. MacGregor), are not the views of a long-term Euro-sceptic. I sometimes feel that, in my two years as party chairman, I spent most of my time in conflict with those who are regarded as Euro-sceptics. Nor am I particularly influenced by foreign-owned newspapers or foreign-based politicians. I am influenced by the way in which I see the views of middle England developing. I see a marked shift of opinion against the European Union. That must be recognised.

Politicians in other European countries may not appreciate the great resentment that has built up in Britain about the unnecessary interference in our affairs. Politicians in other European countries may not agree or even care, but they should understand what is happening. They should not believe for a moment that, if there were a change of Government, the public mood would change overnight. The public mood would not change.

We are reaching a critical stage in the debate on many European issues—the hour of truth, as my right hon. and learned Friend the Foreign Secretary called it. The real question now for the public is which party has the will, courage and determination to fight on these issues and to stand up for British interests. We know, because they say so, that the Opposition will abandon the social chapter opt-out and embrace the working time directive. We know that they live in fear of being in a minority of one in European debates. Labour was totally opposed to Europe at one stage, and it now exhibits the weakest characteristics of the European convert. The Conservatives want a Europe of the single market with maximum power devolved to individual nation states.

With humility, I say to my hon. Friends: we must decide whether we are content to carry on the internal debate or enter the real debate between the two sides in the House of Commons. The divisions on our Benches—I emphasise that they do not exist only on our Benches—will aid the election of a party whose Front Benchers adopt a view on Europe that is entirely alien from our own. We would not be easily forgiven if we allowed that to happen, as we would hand over control of British politics on Europe at a vital time in our national history.

7.50 pm

Mr. Ken Livingstone (Brent, East)

The current confusion in Britain arises partly from the fact that, for the best part of the past four years, the anti-European factions in British politics have made all the running. As the opinion polls have started to shift against the European project—the latest polls show a 50:50 split on the issue of remaining in Europe—those politicians who favour European union have kept their heads down rather than risk alienating marginal voters.

From the beginning, the European project was treated as the creation of a federal Europe—a united states of Europe. Its motive in the late 1940s and early 1950s was the desire to avoid another great European war. However, by the mid-1960s, that desire was no longer at the forefront of political thinking. Most people who now pursue the dream of a federal Europe—and I am one—see that as the only way in which Europe can defend its economic interests against the vast economic empire of the United States of America, which has created its own free trade association whereby it uses the mineral resources of Canada and the cheap labour pool of Mexico, and a much looser arrangement whereby Japan works with a succession of south-east Asian nations using their cheap labour.

We cannot avoid the fact that the rest of Europe will create a united states of Europe—although it may take a generation. The simple issue before the British people and the House is whether we wish to be part of it or whether we shall stand outside it. The creation of a united states of Europe is not a German plot: it is led by economic forces. We must create an economic bloc that is capable of fighting for markets and of challenging American interests around the globe. That desire is not fuelled simply by nationalism. The world economy has developed in such a way as to necessitate economic blocs the size of North America or Europe in order to generate the economic strength to operate in the global market.

For example, we can no longer choose between half a dozen competing car firms within one nation. With the technologies of the future, it will be hard to sustain more than one or two major competitors in any area. At present there is room in the world for only one microprocessor producer, the Intel Corporation. The Microsoft company predominates in the personal computer operating systems industry. The world is able to sustain only two large civilian aircraft producers: Boeing and European airbus. Economic forces are driving Europe to create a genuine economic bloc, and they will ensure that the process of European union goes ahead, whether we like it or not.

The British people have been lied to by successive British Governments, who have told them that European union was just about trade and not about creating a united states of Europe. They claimed that the reasons were simply economic, whereas European statesmen and women from the left and the right talked openly from the beginning about creating a united states of Europe. Britain faces a choice: there is no future for an advanced capitalist society such as ours outside the great trading blocs. If we are not part of the European bloc—where we could be equal leaders with France and Germany—we will have to play a completely subordinate role in a relationship with the United States of America or Japan, which is even less likely.

That is why the Conservative party is torn apart—it is not a question of the Conservatives not liking Germans. Running through the Conservative party is a strong commitment to a global leadership alliance with the United States, the origins of which date back to the second world war and to the alliance between Churchill and Roosevelt. A smaller split of that nature exists on the Labour Benches. I am struck by those Labour Members of Parliament who genuinely resist the European Movement—as opposed to those who have some doubts about the Maastricht treaty or the timing of monetary union. It is hard to find any Labour Members under the age of 60 who are anti the European project, but there is a small handful of Labour Members whose thinking was shaped by the second world war and events of that period. I cannot think of one hon. Member elected to the Labour Benches in the last three intakes who is genuinely anti-Europe. I do not wish to smear anyone or cast aspersions: that is the reality.

At Question Time on Tuesday the Prime Minister claimed that there were equal divisions on both sides of the House, but that is not so. I voted against the Maastricht treaty. I am in favour of a common currency, but I want to ensure that we get the timing right. The debate within the Labour party is about getting the timing right and not repeating the mistake made by the then Chancellor of the Exchequer, the present Prime Minister, who took us into the exchange rate mechanism at a grossly overvalued level and precipitated the worst recession since the 1930s, which wiped out 10 per cent. of our manufacturing industry. They are vital issues: we must get the timing and the exchange rate level right and so on.

I think that the Bundesbank established a series of economic policies and constrictions that had appalling consequences across Europe. It did not do so deliberately: it is not wicked. The ideologies that fuel the Bundesbank are the fear of inflation and the terror of recreating the circumstances of Weimar. That society saw the collapse of its financial policies open the way to Nazism, and I can understand how that has a strong effect on the formulation of fiscal and monetary policies.

The problem is that the tight economic policies that the Bundesbank imposes on Germany and which set the standard for the rest of Europe are creating long-standing resentment and social upheaval. We have seen unrest erupt on the streets of France and a pro-fascist party receive 25 per cent. of votes in Austrian elections. Europe should say to the Bundesbank, "Your policies are making the prospect of monetary union difficult and unworkable". Anyone who travels by train—when it is running—to Paris, walks into the first cafe and orders a coffee and a croissant which costs the equivalent of £5, will realise that the franc is grossly over-valued.

Monetary union must be based on realistic policies rather than over-inflated exchange rates. The franc is locked into the same nonsense that we were locked into on the exchange rate mechanism. It is causing high unemployment. I am concerned that the ham-fisted and bureaucratic way in which the Bundesbank has led Europe towards monetary union runs the risk of derailing the project and setting it back years. It is nonsense to talk about monetary union based on a fusion of the franc at its present level with the deutschmark. The franc must be devalued, and perhaps the project should be put back to 2002.

Britain will certainly need that extra time, as the shambles that we shall inherit next year will not be turned around in 18 months. By the end of a Labour Government's first term, the British economy could have reached the levels of investment and competitiveness that would allow us to be part of a monetary union without suffering dire consequences. That is the debate that we are having on this side of the House: it will not tear us apart, and it will not cause a split in the Labour party. It is a debate about technical issues. Therefore, it is nonsense to say that there is a split that runs through the parties, and this is of an equivalent nature.

I remember that, at the age of about 16—when I was not at all terribly interested in politics; I was trying to rake up newts from the pond most the time—the first political idea that ever appealed to me was when Macmillan applied to take Britain into the Common Market, as it then was. I remember being excited about that, because I do not feel anti-European.

I heard my hon. Friend the Member for Newham, South (Mr. Spearing) say that this is not about a unity of peoples but a unity of laws. That is not the case for my generation. I feel happy when I meet people in Madrid or Munich. I feel at home with Europeans of my generation. I do not feel that there is something that makes me different or sets me apart from them. I look forward to the day when we get a proper united states of Europe. I hope that we see it in my lifetime, but there is no way for Britain—

Mr. Deputy Speaker

Order. Time is up.

8 pm

Sir Michael Spicer (South Worcestershire)

I do not know whether the rest of the House was as struck as I was by the irony of hearing the hon. Member for Brent, East (Mr. Livingstone) giving a lecturette to us all on the wonders of capitalism. He was on a particularly weak point when he spoke about "big is beautiful". He might look at the recent history of IBM to clear up some of his misconceptions.

The Government's objective on Europe—a very admirable one—is to establish a close association of nation states, freely trading and associating on matters on which it is in their common interest so to do. The problem is that there are two obstacles in their way.

The first of these is the inexorable movement towards monetary union. Some people say that that is not there, particularly the Germans, but they will have a terrible shock when they read the treaty, as will their constitutional court when it looks at it more carefully; article 109j is absolutely clear; the single currency will be set up by, at the latest, 1 January 1999. That is one reason why some of us voted against the Maastricht treaty. What is more, article 109k says that the convergence rules can be bent by qualified majority voting to ensure that people can join the single currency, which they have to do by law unless the law is changed, on 1 January 1999.

Nor is it true that, by joining a single currency, one avoids the political association that goes with it. That is one of the extraordinary things that has been said in the past few days. It is quite clear that a single currency is bound to lead towards a single fiscal policy and a single taxation policy. It is not just a question of the stability pact, although that factor has emerged and shows that other things, in addition to monetary policy, are associated with a single currency.

If Europe has a single currency, it will mean a single price system, except for different cost structures for transportation or whatever, with different wages. For example, in Greece there would be German prices but Greek wages; in that case there would either be a revolution or there would be pressure for a massive transfer of resources from the north to the south. The introduction of single fiscal and taxation policies to go with a single currency policy will be inevitable; otherwise, the single currency will simply bust apart. That is sheer logic.

If Britain joins a single currency, it is inevitable that by law we go into something that is "irrevocable". That is the word that the Maastricht treaty uses. It means "for ever", which means that the essence of British democracy—the sovereignty of Parliament and the fact that no Parliament can bind any other Parliament—will be destroyed by the existence of that policy. To argue that somehow there is a remoteness, a separation, between a single currency and deep political matters to do with the federalism of Europe is disingenuous, to say the least.

The question arose in the past few weeks as to whether the British opt-out was foolproof. The House of Commons was at its best when it rumbled the possibility that Britain could be forced into the single currency, or something very similar, through the back door. Anybody who has studied the workings of the European Court and looked at the treaty will know that specific parts of the treaty give the Court total powers, under article 171, to impose fines—the issue in dispute a few days ago—where it considers that countries are operating outside the treaty.

In Roman law—a law that depends largely on political intent and relies on the preambles to the law—it is at least possible that the European Court would be able to argue that if Britain was not complying with the convergence conditions, which it would have to do, even if opted out, it was disobeying the law that had been laid down and should therefore be subject to fines. That was at least a possibility, and the House rumbled that. The matter has now—very satisfactorily, in my view—been delayed for resolution for at least six months. That is the way it should be.

The second obstacle in the way of the Government's proper objective of forming a closely associated group of nation states is the inexorable move of European law. As has been already been mentioned, this is based on certain principles—direct applicability, supremacy of European law, the ability of the Court to make its own laws, and the whole issue of acquis communautaire—most of which the Court has arrogated itself. My right hon. and learned Friend the Foreign Secretary said that this was laid down earlier on. It was not. In most cases, the Court has created for itself those important principles. If they are allowed to continue, into what Lord Denning called the tidal rush of European law, swamping our own law, the object of a closely associating group of sovereign nation states will be made impossible.

What do we do about all this? I do not believe that a Conservative Government will ever go into a single currency. I personally wish that they should not, and I wish therefore that they would say so. Failing that, I am personally interested in what has been reported to be going on at the moment in the Cabinet: that a paper is to be produced in the early new year, analysing the position on convergence and the conditions for it. I presume that, if the paper shows that the convergence conditions are not what they are thought to be, and that Britain could not under those circumstances join the single currency, we will say so.

The Conservative party would rally round very quickly if we interpreted that as saying that we will not go into the first wave of the single currency. That is a way through for us. I am very happy that my right hon. Friend the Secretary of State for Health—and others like him not noted as Euro-sceptics—is making the running on this matter. It is right that those who are not Euro-sceptics should make the running. I very much hope that they will, and that this matter will be consolidated into the policy that I have just indicated.

There is no question that what ultimately is required is serious amendment to the treaty of Rome. The question is whether that is possible, because it requires unanimity. The answer is possibly, because other countries also require changes to the treaty of Rome. They keep on jumping up and down, saying that they want to abolish the pillars on foreign and defence policy, that they want single borders. All these matters require changes to the treaty of Rome. They are the demanders in the matter.

Therefore, it is possible for the British Government to go with a set of equal demands for changes to the treaty of Rome, and to say, for example, "We will let you have your single foreign policy," whether it is to the French, Germans, Italians or whatever, "in return for which we want back our Parliament. We want a clear protection within the treaty that Parliament will be supreme over such matters as defence, foreign policy, the constitution, the economy and our borders." That is a package for which the British Government could ask; others are demanding treaty changes, in return for which we should be allowed treaty changes along the lines that we require.

Failing changes to the treaty of Rome, I submit that all the aspirations for the kind of Europe that we want would come to nought, for the reasons that I have given. If there is an inexorable, unstoppable move towards a federal united states of Europe, which the British people do not want—and what the vast majority of the Conservative party do not want—there will be an unstoppable move towards pressing for a renegotiation of our position with respect to the treaty and to the European Union. We cannot have it both ways. Either we believe in an association of sovereign states, or we accept what is really going on. That is the option that faces us, and we had better address it before it is too late and the option no longer exists.

8.10 pm

Mr. Terry Davis (Birmingham, Hodge Hill)

There are three big issues facing the European Union: the single currency, defence and enlargement. Before I comment on those, I want to comment on the more general issue, as exemplified by a statement that the Chancellor of the Exchequer made yesterday. He told the House: fewer and fewer people on the continent"— I would prefer to say "in Europe"— see economic and monetary union as a tool for political integration."—[Official Report, 11 December 1996; Vol. 287, c. 288.] The Chancellor has not been listening.

As a member of our delegation to the Council of Europe Assembly and the Assembly of the Western European Union for the past four years, I have listened to many Ministers, Prime Ministers and Heads of State, and I have talked with many Members of Parliament from the member countries of the European Union. I do not know whether fewer people are talking about economic and monetary union as a tool for political integration than were talking about it five years ago, but I am absolutely sure that the overwhelming majority of the Governments of the other member countries in the European Union, most of the political parties and probably most Members of Parliament in many of those countries see economic and monetary union as a tool of political integration. That is their aim, and it does us no service to disguise that fact.

We should have the honesty to face the facts. We may disagree about whether political union is a desirable aim, either in the short or the long term, but let us not kid ourselves or the people of this country by pretending that that is not the objective of economic and monetary union. That is the objective.

I can understand the attraction for any Government of a wait-and-see policy on the single currency in the run-up to a general election. However, I can see enough of the outline of this proposal for a single currency to make up my mind that I do not agree with it. I shall not rehearse the details: many of my hon. Friend have made specific points with which I agree.

What we mean by an independent central bank is that it will be independent of political control. Whatever criticisms we may have of the Chancellor's economic policies, the fact is that if we had had a totally independent Bank of England in recent months, we would have had higher interest rates.

I am in favour of a Labour Government having the ability to control interest rates and exchange rates, or at least to affect them. I recognise that, towards the end of the 20th century, there are limits on any Government's freedom of action, whether inside or outside a single currency, but if we are part of the single currency, we will lose all control of interest rates and exchange rates.

The Chancellor is right—although it is misleading—when he says that we would preserve the right to be responsible for taxation. Yes, we would have that right, just as the state of Arkansas, the province of Alberta or the state of Queensland has the right to taxation. There is no argument about that. What we will not have, however, is the ability to make decisions that affect interest rates and exchange rates.

That view is not as extreme as people pretend. If we are outside the single currency, we will not have complete freedom. If we are inside the single currency, we will not have total influence. We must decide whether we want some influence and very little freedom inside a single currency, or some freedom and very little influence outside it. I would choose freedom—not freedom for myself, but for a Labour Government to make decisions that affect the important aspects of economic policy.

On defence, there is no difference between the political parties, and very little dissent in the House. I think that we are all agreed—I have not heard anyone disagree—that defence should remain a national responsibility. That is expressed through our existing alliances in NATO and, more relevant in this context, in Western European Union.

I totally disagree with Ministers who say that the Labour party's position—which is identical to that of the Conservative party on defence—is responsible for weakening national interests. What is damaging the national interest is the constant reiteration by Ministers that people in other countries, if they only wait, will get an easier time from a Labour Government than they will get from a Conservative Government. That is weakening the national interest.

My right hon. and hon. Friends have made it clear time after time—as we have done in the WEU Assembly—that there is no difference between the main political parties on whether defence is an integral part of the European Union or remains a separate, national responsibility of national Governments who are responsible to national Parliaments, with those national Parliaments coming together to hammer out agreements through the Western European Union Assembly.

Indeed, at the Western European Union Assembly, not only did Conservative and Labour Members agree, when it came to the vote at the special session of that assembly, very few integrationists dissented from the proposal that the agreement of all 10 allied countries must be obtained. As some of us clearly would not agree to defence being part of the European Union, the others must wait and must accept that Britain is an integral part of the alliance. As we were not going to go along with integration into the EU, the most that the others can do is keep alive that dream for the future—and no more than that. If only Governments, including our own, would listen to the views of the representatives of national Parliaments, we would all get on much better.

The biggest issue of all is enlargement. It is depressing that little reference has been made to enlargement—some of my hon. Friends have mentioned it. Other countries want to join the European Union. Most hon. Members support applications for membership from countries such as Poland, Hungary, the Czech Republic and many others in central and eastern Europe.

I am worried about one aspect of the matter that has not been mentioned in the debate. In the discussions at the intergovernmental conference, the existing members of the club will take decisions about the future organisation of the European Union, and then say to applicant countries, "You join on these terms. We made up the rules without consulting or involving you, and if you want to join, that is the way it is going to be." That is how it will be not just on the single currency, but on other matters. If people were serious about enlargement, they would involve those countries in the discussions about the future architecture of Europe.

The European Union covers only a part of Europe: it is most of the countries of western Europe. We should recognise that other countries such as Poland, Hungary and the Czech Republic have an equal right to be involved in discussions, and that we are imposing on them a decision, an agreement and a treaty that has been made by the existing 15 members of the club. That is wrong. If we are serious about equality and the inclusion of those countries, we should include them at this stage.

Many people in the European Union do not want to include those countries, and will put obstacles in the way of enlargement. I have heard members of the European Parliament say that those countries are not ready and should not join in their own interests, because their industry is not yet equipped to cope with competition. The truth of the matter is that their agriculture is well equipped, but people in the existing member states want to keep them out because they are afraid of the competition for agricultural produce.

The most depressing aspect of the debate is the way in which many hon. Members have sought to polarise the argument, and turn it into a choice between integration on the one hand, and isolation on the other hand.

The fact is that many people such as myself, who do not agree with the idea of a single currency or with many other aspects of the European Union, are not isolationists. We reject the description "anti-Europe", and the allegaiton that we are hostile to Europe. There is a third option—co-operation and partnership. Eventually, co-operation and partnership may well lead to integration; the trouble at the moment is that Europe is dominated not by people under 60, as one of my hon. Friends suggested, but by people aged well over 60—people whose minds were set in concrete by the second world war—what several of my hon. Friends have called the "old men of Europe".

Mr. Deputy Speaker

Order. The hon. Gentleman's time is up.

8.20 pm

Sir Timothy Sainsbury (Hove)

If the debate has clone nothing else, it has reminded the House and, I hope, a wider audience of the extent of the differences of view about Europe on both sides of the House. The hon. Member for Birmingham, Hodge Hill (Mr. Davis), following the federalist views of the hon. Member for Brent, East (Mr. Livingstone), stretched the views of the Opposition quite extensively—but, of course, they were not the only ones to do that.

In Dublin, my right hon. Friends will discuss—both formally and informally—many issues relating to European Union activities from which we derive benefit. Issues such as combating international terrorism, drug smuggling and organised crime, and protecting the environment or even endangered species such as migratory birds, will be touched on, but I want to focus on matters in which I was particularly involved during my time as a Minister.

Two issues have an especially serious impact on our economy, and also on our influence in the world. The first has already been mentioned a number of times in the debate. Inward investment is a great British success story, and, if I may say so, a great Conservative success story. Some of us remember the opposition and reservations that Labour Members expressed in the early days of that success; it could be described as scepticism. When we debated the subject last week, my right hon. Friend the President of the Board of Trade clearly set out facts and figures showing the scale of our success. Most obvious and impressive was the creation of 800,000 jobs in the United Kingdom since 1979.

The full scale of the benefit that our economy derives from inward investment is often not fully appreciated. Those 800,000 jobs are clearly a big enough achievement in themselves, particularly as many of them are in development areas, but they are only the "direct" jobs. There are also the "indirect" jobs—the jobs that go with the suppliers of businesses that decide to locate here, and with the contractors who build and repair their premises. There is the advantage of the new technology that many inward investors have brought to us—and not only the new technology, but, in many instances, the new managment techniques, such as personnel management skills, that have proved so rewarding to many British businesses. Inward investors have made a major contribution to the raising of performance standards, and to improving the productivity of British industry as a whole.

The best example of that is, I think, the motor industry. In 1979, the Conservative Government inherited a motor industry that appeared to be in terminal decline: if any industry was ever a basket case, that was it. Our industrial relations reforms—again, opposed by the Labour party—opened the door to the inward investment that has transformed the motor industry, which is now one of the most successful and competitive not only in Europe but in the world.

I do not suggest that all that inward investment would disappear if we withdrew from the European Union. What I am saying is that every step that we take away from full and active membership weakens the attraction that the United Kingdom holds for inward investors, especially those—I can say from personal experience of responsibility for promoting inward investment that they constitute the majority—who come here because they want a base in the European Union: a manufacturing plant, perhaps, or a head office.

I remind the House, however, that those are not the only people who would be discouraged by our drawing back from whole-hearted commitment to the European Union. We would run a much larger risk if we weakened that commitment, and it would not be just a risk to our position as the most successful and the preferred location for inward investment. Every time a multinational company—a company operating in several European countries—had to make decisions such as inward investors make, involving where to site the plant to manufacture a new model, where to use new technology and where to develop new techniques, it would make the same assessment as those inward investors. In today's fast-moving industrial and commercial world, such decisions need to be made very frequently.

Many constituencies have inward investors. Surprisingly, my constituency has a major investor from Japan and another from the United States, but almost every constituency has employers who might relocate jobs elsewhere in the European Union if they felt that our commitment and involvement in the Union was diminishing or at risk. Those employers are the multinational companies, with plants in more than one state in the Union. We are fooling ourselves if we believe that withdrawing from active participation and full membership of the European Union would not dramatically affect our country's economic prospects. It would damage employment immediately, and would continue to damage it for a long time. We would put literally millions of jobs at risk—a risk that we should neither take nor underestimate.

A second issue that is of vital interest to our economy is one that frequently took me to Brussels during my ministerial career. I refer to international trade negotiations. As my right hon. and learned Friend the Foreign Secretary pointed out, we do not just have a single market from which we have removed all internal tariff barriers, as well as non-tariff barriers; we also have a single market that is open to the outside world. It is not "fortress Europe", but a single market with very low tariff barriers and the minimum of obstacles to trade from outside. That is greatly in our interest, given that we are a major trading nation—indeed, by some measures the major trading nation.

We have succeeded in rejecting protectionism, not just for ourselves—we could always have done that—but for the whole European Union, the world's largest trading bloc and our major trading partner. That is an outstanding example of Britain's success in influencing the Union in the British national interest. Negotiations to that end were not always easy. I recall that, on more than one occasion, it was 11 against one: the French were isolated. But we succeeded in persuading the European Union—our partners—to reject protectionism, and that led eventually to a pretty satisfactory settlement in Marrakesh which, in turn, led to the creation of the World Trade Organisation.

Our committed membership of the European Union has given us a strong voice in world trade negotiations. Only three parties matter in those negotiations: the European Union, Japan and the United States of America. If we were not playing an active part in the European Union, our voice would be small, single and largely neglected. We are not eligible to join other groups, whether it be Cairns or the Association of South-East Asian Nations.

People who think that we could succeed in those negotiations outside the European Union are deluding themselves.

Therefore, for trade, for inward investment and for so many other reasons, our membership is overwhelmingly in the national interest, but we shall not gain membership's full benefits if we stay on the EU's sidelines. We must show a willingness and a commitment to play a full and constructive part in the EU's affairs if we are to gain those benefits. If we do that, however, we shall continue to see the economic benefits. They will continue to grow. I therefore urge my right hon. Friends to negotiate with that end in mind, because it is jobs and our economy that are at stake.

8.30 pm

Mr. Tony Banks (Newham, North-West)

I entirely agree with the right hon. Member for Hove (Sir T. Sainsbury). It would be economic lunacy for us to contemplate the United Kingdom leaving the European Union. Many Conservative Members still seem to contemplate that, but they remind me in many ways of the famous weather report that said, "Fog in channel—continent cut off." They believe somehow that we could survive on our own, and that, by our leaving the EU, the EU would be the loser. That is not so, and more people are prepared to say that in the EU.

The right hon. Gentleman made great play about inward investment. Forty per cent. of inward investment into Europe comes into the United Kingdom—Ministers keep bragging about it—but I remind him that the statistics show that it was also 40 per cent. during the Attlee Governments of 1945 to 1951. He should also remember that, for every one pound of inward investment into Britain, there is £3 of outward investment. Where is that going? It is setting up competition elsewhere, so the Government should be careful before they start bragging about that set of statistics.

The Government should be worried about another statistic. Britain is bottom of the European league in terms of the percentage of gross domestic product we spend on investment. They should be concerned about that statistic, but undoubtedly they are not.

It was an amazing scene yesterday when the Chancellor of the Exchequer was at the Dispatch Box. It was the political equivalent of Landseer's "The Stag at Bay". I know that he is a rather portly stag, but rabid hounds were all around him—well, they were not all around him; they were all behind him.

I do not think anyone who has sat through various big debates in the House can recall quite as bloodthirsty a scene in terms of an attempt being made to rip one of the most senior Ministers to pieces. [Interruption.] I take the point. There is something very attractive about the Chancellor. He gives as good as he gets, but it was no stag party that we were watching yesterday.

Of course, the Chancellor found that there was more support for what he was saying from Labour Members than from Conservative Members. I do not suppose that that helped him much. I am sure that he would have preferred us to stand up and start having a go at him. It merely confirms some Conservative Members' suspicions when the Chancellor receives support from Labour Members. In fact, I heard some Conservative Members say to the Chancellor, "Why don't you join the Labour party?" Our party has been so thoroughly cleansed that it is fit, I am sure, for ex-Conservative Chancellors to join. Who knows, we might yet see him sitting with us, but there it is.

I go along with the Chancellor position's that to wait and see makes sense, which was endorsed by the Labour Front-Bench team, but only if it is a genuine position. Too many Conservative Members are paying lip service to that stand now, but frankly they would be better off being more honest and saying that, whatever the circumstances—convergence criteria or whatever—they do not want, will not go for and will not support the UK joining a single currency.

It is tempting for Labour Members just to sit back and watch the Conservative party rip itself to pieces over the issue, but we should not do that. That would provide short-term political gain for the Labour party, but the issue is far too important. The future of the UK in the EU is far too important for the issue to be left to a vicious dogfight among Conservative Members. We must play our part in the debate, in Parliament and outside.

What is fascinating is that the debate is far more within the parties than between the parties. That point has been made before, but we need to be aware of it. The Conservative party has real problems. The right hon. Member for Sutton Coldfield (Sir N. Fowler) said that the Labour party has its splits. He is absolutely wrong about that.

In the Conservative party, it seems to be a left-right split. I do not know all the Conservatives on both sides of the argument, but one does not often see or hear anyone who could be described as on the left of the Conservative party bitterly opposing further economic and monetary union. One does not find Euro-sceptics on the left wing of the Conservative party. [Interruption.] Perhaps there are one or two. The hon. Member for Twickenham (Mr. Jessel) is merely the exception that proves the rule. That is not the position in the Labour party. As my hon. Friend the Member for Brent, East (Mr. Livingstone) said, effectively the split was more generational than ideological.

I also notice that most of the Euro-sceptics, if not all, are also anti the Prime Minister. They have never really supported him, and they are using this issue as a way of getting at him. That is the way in which I observe the matter. Members can disagree. Increasingly, people outside observe it in that way, too.

Whatever one thinks, the public are seeing not the big issue of Britain's role and future in the European Union being debated, but the governing party ripping itself to pieces. That is looking good for the Labour party, but, as I have said before, we should not allow that to be the only way in which we let the debate proceed. The Labour party must join in.

The differences among Labour Members are not left-right differences or ideological differences, as the differences seem to be among Conservative Members, but genuine differences of opinion. People in the Campaign Group such as my hon. Friend the Member for Brent, East and myself disagree with other members of the Campaign Group—which incidentally, for Members who do not know, is laughingly referred to as the hard left group in the parliamentary Labour party—such as my hon. Friend the Member for Bolsover (Mr. Skinner) and my right hon. Friend the Member for Chesterfield (Mr. Benn), who are also on the left of the Labour party; so ours are differences of opinion. Conservative Members' differences involve ideological thoughts. They might laugh at that, but it is true, and they are destroying their own party. I do not mourn that, but it is worth putting it on the record.

It was disingenuous of the Chancellor to say in his speech that European monetary union will not lead to a political super-state. It might lead to such a state. A single currency will, however, undoubtedly lead to closer political union. The single currency issue is a political issue before it is an economic issue. Any number of Members have said, "Listen to what the politicians are saying in the EU. They are going for a federal Europe"—whatever the definition of federal is—but enough people want a united states of Europe.

I agree with the whole analysis of my hon. Friend the Member for Newham, South (Mr. Spearing), who drew attention to precisely that development, but I thoroughly disagree with his conclusion. Like my hon. Friend the Member for Brent, East, I want a united states of Europe, so we have an interesting division, even within the borough of Newham, but it is not a left-right issue, as it is on the Conservative Benches.

I want a united states of Europe because that is the most exciting prospect we have. I want a European Government and a European President, and I want them to be based in a European Parliament. We need to do many things to democratise the institutions, but I want those things because it seems that it has been given to this political generation, perhaps uniquely, to reconstruct Europe peacefully for the first time. We must seize that opportunity with both hands.

How could a single currency be so disastrous? How can I believe the tales of woe—told mostly by Conservative Members, but also by one or two Opposition Members—when so many British business men want a single currency? Do they want to destroy their businesses and bankrupt their companies? Why is the Trades Union Congress such an avid supporter of the single currency—because it wants more unemployment in this country? That is absolute nonsense. All those scare stories that are being spread about by the Euro-sceptics do not frighten me, and I do not think that they are frightening the electorate.

I should like the issue to be taken out to the electorate, and, so far as possible, debated dispassionately—rather than allowing it to continue as the basis for a dogfight among Tory Members.

8.39 pm

Mr. Tim Eggar (Enfield, North)

I much enjoyed the speech of the hon. Member for Newham, North-West (Mr. Banks), but I should tell him that the Olga Korbut award for the perfect Labour somersault will have to go to the hon. Member for Brent, East (Mr. Livingstone), who did it with slightly more panache.

It is with some relief that I can now say publicly what I have long felt privately on European issues. Within the Government, I think that I was unusual, if not unique, in giving no briefings and in joining no factions on European issues. I omitted to do so because I believe that the Conservative party has always been a pragmatic party. On that matter, I agree with the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). Such pragmatism has always been my party's strength, and I believe that we are a pragmatic party or we are nothing. My party has always encompassed a wide range of views, which are strongly and sincerely held, but there has also been a strong culture of tolerance and of courtesy to those with whom we disagree. That approach and that culture have always been to the benefit of our party and of our country.

Almost two years ago, I made a serious misjudgment. I failed to make it sufficiently clear to party managers that I simply could not accept a further erosion of what was then the Government's stance on Europe. Since then, I have seen the salami sliced to a point at which there is simply no sausage left. I feel rather strongly that my tolerance, and my loyalty to the Government and to my party, have been abused by some of my right hon. and hon. Friends. Some have been pursuing a factional agenda with a ruthlessness that would have done credit, in the early 1980s, to the hon. Members for Brent, East and for Newham, North-West.

I do not remember, however, any Labour Front-Bench spokesman being attacked quite so viciously, in public or in private, as my right hon. and learned Friend the Chancellor has been attacked. For a short time, I was the parliamentary private secretary to Sir Neil Marten. He was an arch-opponent of the European Economic Community, but I have no hesitation in saying that he would have been as shocked and as saddened as I was by yesterday's barracking of my right hon. and learned Friend.

I am sadder, I am wiser, and I blame myself, but we are where we are, and we are about to embark on a critical negotiation at the intergovernmental conference. In any negotiation, it is as well to try to understand the other parties' assumptions. Outside the United Kingdom, within the European Union, most politicians and most voters take it as axiomatic that the European Union is not only a political but an economic union. As my right hon. and learned Friend the Foreign Secretary said today, that is, after all, what the treaty of Rome states. Such a union is what we joined, and that is our partners' underlying assumption.

We must also appreciate that the United Kingdom has the most adversarial political system in the European Union. Most politicians in the EU assume that, if they are to be in government, they will be in government as part of a coalition. To most other EU politicians, and to their voters, compromise and negotiation are almost synonymous with the political process. We may not like that point of view, and we may find it alien to the conduct of our political process, but if we fail to appreciate those basic truths, we will not negotiate as effectively as we should.

The single currency is the main issue before us. I do not wish to detain the House with detailed arguments on it, but there are certain basic truths. The first is that the single currency will come. It may not come according to the current time scale, but come it will. We cannot ignore it, and we cannot simply wish it away. My position on the matter is fairly clear. I am predisposed to joining a single currency in the first wave, although, in that, I suspect that I differ from some of my right hon. and hon. Friends. I have read the speeches of my right hon. Friends the Members for Witney (Mr. Hurd) and for Guildford (Mr. Howell), and I completely share their view that we must be actively involved in the negotiations on the single currency because, in or out, we have a huge stake in making it credible.

To the surprise of some of my hon. Friends, I gladly signed the advertisement of the European Movement. I did so, and I have as big a stake as any other hon. Member—if not a bigger one—in ensuring that the convergence criteria are effective in getting right the details of the stability pact. I share the reservation of my right hon. Friend the Member for Worthing (Sir T. Higgins) about the concept of fines in a stability pact: there are very powerful political and economic argument against going down that route. We must be in there arguing, however, because that is the only way in which we can seize the opportunity of furthering our national interest through a stronger Europe.

A rather sad theme has recently emerged in Britain's approach to European Union matters. When we have come across an idea or an argument in the EU that we do not like, we start by ignoring it and pretending that it does not exist. As it gains credibility, we start to mock or abuse it or those who promote it. We react negatively. As the idea or approach becomes even better established, we claim that it will not work in practice. Very often we are right, because the details have not been thought through. The idea or argument may then be improved upon, largely because of our practical, constructive criticism. Instead of welcoming that change in stance, however, we find other practical grounds for opposing it. We then lose credibility, because those grounds are often unfounded, or less than well founded.

Consequently, we find ourselves faced with a very simple choice: do we agree or do we disagree? More often than not, we agree, and we go along with the directive or with the idea. We then end up with an approach that is less beneficial to our national interest than would have been achieved if we had taken a pro-active stance from the very beginning. I think it was Sir Leon Brittan who said some time ago that the United Kingdom would have more influence in the European Union if we only learnt to say, "Yes, but," rather than, "No, unless." The tone matters if we are to do what all of us want to do—to further our national interest in the context of a European union.

I have one final plea to my right hon. and hon. Friends. For goodness' sake give my right hon. Friend the Prime Minister and my right hon. and learned Friends the Chancellor and the Foreign Secretary the room to negotiate effectively on our behalf. It is a sad criticism of the state of my party on Europe that I have to make that plea, because it should be entirely self-evident.

8.49 pm

Mr. Andrew Mackinlay (Thurrock)

I am pleased to follow the right hon. Member for Enfield, North (Mr. Eggar), whose speech was frank and fair. In a 10-minute speech, it is difficult to do more than paint a broad canvas of one's views, and there will be other occasions for me to develop my ideas.

I see myself as a proud Brit, but I also unashamedly describe myself as a European. The two descriptions are wholly compatible and, indeed, statements of fact. I am therefore pleased to be able to participate in this debate and to say that I support the policy of my party leader, who has effectively set out a modern and realistic approach to what will be the next Government's attitude to the developments of the European Union. Of course, in reality, in supporting my leader—both he and the Prime Minister might not like what I am about to say—I am more or less supporting the view of the Prime Minister. If we put aside all the relatively detailed differences on the European Union that have been discussed in the past two days, there is general agreement between the occupants of the two Front Benches on the big issues, because there is a real world out there.

Whichever party is in office, it has a duty to be actively involved in the discussions at the intergovernmental conference about the future developments and institutions of the EU and in the debate on the formulation of economic and monetary union. It would be foolhardy in the extreme, not to say a reckless abdication of a British Government's duty, not to be in the discussions on how economic and monetary union should develop. It is the Government's duty to maximise the options of the Government and the British people on whether to enter a monetary union at some stage. It is foolish and reckless to suggest that we should say that we will have nothing to do with discussions on monetary union.

We have had an interesting debate—indeed, one of the best I have attended. I largely agreed with the right hon. Member for South Norfolk (Mr. MacGregor). If we put aside his ritualistic swipe at the social chapter, his comments were realistic and broadly reflected my opinion. I am a European and I believe in the European Union. I do not accept everything and I am cautious about some aspects, but to suggest that we can be anything other than part of the EU is ludicrous.

There is a degree of common sense across the political spectrum. The dangerous division is caused not by the handful of my colleagues who have consistently opposed Britain's membership of the EU, but by the substantial wedge of Conservative Members who snipe at our plenipotentiaries in Brussels, and their discussions at the intergovernmental conference and on monetary union. They are doing great harm to Britain's interests by undermining the views of the Chancellor of the Exchequer and the Prime Minister. Of course, the Foreign Secretary skated over that fact—skilfully: I give him full marks for that—but he cannot disguise the fact that he and his colleagues are disadvantaged, and their negotiating position impaired, by the great gulf that exists between Conservative Members.

I described myself earlier as a European. I think that the EU has been good for commerce, has increased job opportunities and is a guarantee for democracy and peace. The latter point should not be dismissed or minimised, and it is one of the reasons why I am keen to see the enlargement of the EU and why I want the IGC to be a success.

There must be agreement at the IGC before we can invite and welcome other countries into the European Union. I am especially keen that the Visegrad countries—Poland, Hungary, the Czech Republic, Slovenia and, perhaps, Slovakia—should have some reasonable expectation of admission to the European Union in the not too distant future. Other states may join later, but those countries should be in the first tranche. They now have robust democracies—certainly Poland, Hungary, Slovenia and the Czech Republic do—and they are entitled to join a free association of states. We must work towards the goal of finding institutional arrangements to allow those countries early entry, even if they face a long transitional period thereafter.

The Foreign Secretary referred to the fact that the idea of a flexible Europe is canvassed in the documents relating to the IGC. If we are to have enlargement, there will have to be some flexibility. That should be welcomed because, whether we have a Labour or a Conservative Government, the United Kingdom will wish to reserve to itself some matters that are coveted by the Euro-federalists.

A lot of rubbish is spoken about federalists, but I know of very few federalists in the House. The vast majority recognise that the EU is a unique political concept and institution, but there is not a word that describes it adequately. It is nonsense to suggest that, in my lifetime, we will see a United States of Europe comparable to the United States of America. The EU is a unique political animal, and we do not have an appropriate word for it, but there is no substantial party of federalists here who would bring us to some nightmare scenario such as is painted by those who are opposed to working in any way with colleagues and nation states elsewhere in Europe.

The issue of flexibility raises some problems—what might be called a European West Lothian question. If we have extensive flexibility, who is to decide what will be the subject of collective agreement and unanimity, and what will be a matter for the countries that have decided to exercise some flexibility? These are real and difficult questions that we ought to be debating. That European West Lothian question would apply to the Council of Ministers and the European Parliament.

The European Parliament is important, but its power can be exaggerated—by and large, by Members of the European Parliament. I do not set my face against allowing Members of the European Parliament to have more influence or initiative in what is called European legislation but, ultimately, these are matters for nation states to decide. I hesitate to suggest this, but we should examine the concept of a Bundesrat, whereby the Governments of the member states have an assembly. At present, we have permanent representatives in the EU and the Council of Ministers, but we need an assembly where politicians can meet, in public, with Hansard, to put the case of the European Governments, as distinct from the European Parliament. That would be worth while and democratic.

I would like to hear the Minister of State's views on the size of the European Parliament if enlargement occurs. The European Parliament is too big as it is, but it is clear that there will be problems if we cap or reduce its size when new members join the EU. What about representation for Luxembourg, for example? The Parliament is too big now, and needs to be capped.

The voting system—or, rather, the lack of one—is ludicrous. We need some parity across the EU, and I favour some proportionality. I believe that we must also look to the future of the Commission and the Council of Ministers. That is why I return to the idea that there should be an assembly where Governments are represented, but it should not be conducted behind closed doors.

I am pleased to have contributed to the debate. It is a pity that the Foreign Secretary is not now in attendance—

Mr. Deputy Speaker (Mr. Michael Morris)

Order.

9 pm

Sir Patrick Cormack (South Staffordshire)

I am delighted to follow the hon. Member for Thurrock (Mr. Mackinlay), who made some important points about enlargement. Clearly, if the European Union is to be enlarged, the present institutions—including the structural funds—will have to be looked at with great care. We cannot have a parliament with a thousand members, nor can we necessarily have Commissioners from every country. It would be sensible if, at the forthcoming intergovernmental conference, proper priority attention could be devoted to that, as I believe enlargement to be a far more important issue than the single currency.

I wholly and completely support the Government's line on the single currency, and I do so unashamedly and without reservation. It would be ludicrous for one of the major nations of the EU not to be deeply involved in the negotiations that are directed towards the evolution of a single currency. My personal preference is for a common currency, at least to start with. The Prime Minister's advocacy of the hard ecu some years ago had a great deal to commend it, and I hope that my hon. Friend the Minister of State will be able to devote some attention to this point when he replies to the debate. The whole idea of the hard ecu has been far too quickly abandoned. It would have been much more sensible to work first with a common currency before moving towards a single currency.

I repeat that it is palpably absurd not to be involved in the negotiations, and I deeply deplore and profoundly regret the way in which so many of my colleagues in the Conservative party frankly bayed at the Chancellor yesterday. It was an unprecedented experience, to which many hon. Members from all parties have referred. I felt not only ashamed, but deeply depressed. I still feel deeply depressed, because I was proud—and I am proud—to belong to a party that took our nation into the European Community, as it then was. I had my reservations in the early days, but I strongly supported my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) in his courageous decision.

If I can, in a brief speech, encapsulate it in one sentence, I supported my right hon. Friend's decision for this reason: if I am asked what my identity is—although I have Scottish roots—I say that I am English; if I am asked what my nationality is, I say that I am British; but my continent, my culture and my civilisation are European. We are part of the great tradition of western Christendom in Europe, and for us to cut ourselves off in any way would be quite absurd. I wish that all my colleagues who have their reservations would have the courage and the honesty that my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont)—indeed, my oldest friend in the House—showed yesterday when he faced up to the possibility of his views perhaps leading him to conclude that withdrawal was the right course. I believe that he is profoundly wrong, but at least he faced up to that issue.

Many of the so-called Euro-sceptics on the Conservative Benches are Europhobes masquerading as Euro-sceptics. To be honestly sceptical is in many ways to adopt a sensible pose, but to undermine, at every touch and turn, one's Government's attempts to fight for one's country's interests is wrong. It is also tearing apart a party that has always looked beyond these shores.

I hope that Opposition Members will forgive me for making this plea to my right hon. and hon. Friends. I would say to them, "Remember your roots." Remember what the Conservative party is and what it has stood for. Remember that the Conservative party is a national party or it is nothing, but, as Disraeli said in his great speech at Crystal Palace in 1872, I believe, the three great aims of the Tory party were to maintain the institutions of the country, to uphold the empire of England and to elevate the condition of the people. Of course, times have moved on, but he saw this country as part of a great community: the great community of which we are part today is Europe, and that does not involve any negation or surrender of sovereignty in the ultimate sense at all.

In the next century, which will be dominated by China as the greatest and most populous power, with the nations of the Pacific rim controlling economic power to a great degree, if we do not form part of a wider, cohesive and coherent Europe, we shall be selling the pass for future generations. We shall not be honest to those who come after us: we shall be inward looking, introspective and self-destructive. We have to be part—and a constructive part—of our continent, and that is what this is all about. For our party to put itself on the sidelines in these great debates is a political tragedy.

I remember the time when almost all the opposition to Europe came from the other side of the House. I welcome the conversion and the frank and honest answer to my intervention from the shadow Foreign Secretary this afternoon. Yes, he admitted that he had changed his mind. I believe that the change has gone too far and that the ready acceptance of the social chapter and all the other things that are so frequently recited, mantra-like, in this Chamber would do us little good. There are also, of course, deep divisions on the Opposition side of the House.

I welcome the consensus on the general acceptance of Europe, but I want to see the Conservative party in the driving seat. If and when the political pendulum ultimately swings and we find ourselves on the other side of the House at some stage, I still want us to be a coherent and a united party—a party that accepts its European destiny. These have been sad days for the Conservative party, but it is not too late for us to unite behind a policy which, after all, gives nothing away. All it says is that we want to be there, negotiating for our country when these great decisions are taken. That seems to be a sensible policy—a robust policy which not only can but should unite people in all parts of the country and all parts of the House.

It is sad that our Prime Minister, who is an exceptionally skilful negotiator, is going to Dublin tomorrow, together with our right hon. and learned Friends the Chancellor of the Exchequer and the Secretary of State for Foreign and Commonwealth Affairs, without the vociferously united backing of Conservative Members and, indeed, of Opposition Members too.

Mr. Mackinlay

He has mine.

Sir Patrick Cormack

I am delighted to hear that.

When our Prime Minister goes to any international council with bipartisan support, as we have seen with Northern Ireland and other issues, that strengthens not only his position but his resolve. I hope that it is not too late for this great party of ours to give the Prime Minister and the Government the support that they truly deserve, and for the Government and the Cabinet to adopt a far more united posture than in recent weeks and to stop leaks and divisive briefings, which have done nothing for the name of British democracy.

9.9 pm

Mr. Toby Jessel (Twickenham)

To me, the most chilling remarks in this debate came from the hon. Member for Brent, East (Mr. Livingstone), when he spoke of his dream of a federal united states of Europe. He once dominated a large political empire at the Greater London council. Now he seems to want the power to lie in Brussels or Strasbourg. It is worth asking why he wants it to be anywhere but in the Palace of Westminster.

I would answer the hon. Member for Newham, North-West (Mr. Banks) by saying that both the main parties are coalitions of opinion and always have been. Either we must have coalitions within great political parties or we must have coalitions between them. I believe that it is better to have a coalition within them, and that is how it has normally been.

The hon. Member for Swansea, East (Mr. Anderson) referred to the 1975 referendum under the last Labour Government on whether Britain should stay in the European Common Market—I believe that that is how most people thought of it at the time: they thought that it was mainly economic.

Since then, Mr. Delors said, "We are not in business, but in politics." I have been amazed that so many right hon. and hon. Members in this debate have viewed the question of the European currency not as a matter of principle but merely as a balance of economic advantages and disadvantages. Beyond doubt, it is a matter of principle. Whether our country is governed from outside is a constitutional question, and the European currency would undoubtedly affect that.

To illustrate, probably the biggest continuous political issue in the United Kingdom since the second world war has been how to steer the best course between inflation and unemployment. A single European currency means a single European bank and hence a single European rate of interest. A single currency would therefore drastically curtail Britain's control over interest rates, which, as my hon. Friend the Member for East Lindsey (Sir P. Tapsell) said in an excellent speech yesterday, are particularly important for us because owner-occupation of houses affects so much higher a proportion of people in this country than in continental countries, where a larger proportion of people live in rented houses and flats. Interest rates are hugely important to many of our householders, and the power to control them would pass to unelected foreign bank managers with their own agenda, not answerable to us and, so it seems, hardly answerable to anyone.

All through human history, peoples have cherished their freedom from being ruled from another country. The United States, India, Ireland or—at the time of the second world war—France and Russia, are but a few examples of countries that have been occupied or have been part of an empire controlled from another country. That is why the currency question is not a Mrs. Beeton matter—a mere question of management—but a Joan of Arc issue: an issue of principle.

Sovereignty can mean different things, but basically it has one of two meanings: either it means us being controlled by others or it means others being controlled by us. I do not mind at all whether we have any power over countries such as Italy, Spain, Greece and Portugal, but I mind very much indeed whether they have a share in governing us. I am totally against pooling our government with other countries. Our relationship with the European Union should be much more like that of Norway, which has a common market in industrial goods and financial services with the European Union, without the agricultural policy, the fisheries policy or any of the political overtones.

Many right hon. and hon. Members have used words such as "Europhobic". The hon. Member for North Durham (Mr. Radice) referred to "Europhobic ideologues" and xenophobia. The hon. Member for Clydesdale (Mr. Hood) talked of the anti-Europeans. The hon. Member for Ilford, South (Mr. Gapes) spoke of people who do not like foreigners. The right hon. Member for Livingston (Mr. Cook) referred to anti-Europeans. It is wrong for hon. Members to use such language. I for one have friends in most European countries, probably more so than most people. This is not about whom people like or dislike: it is a question of who rules.

Constitutions must reflect the public will, whether they are political unions or federations. The hon. Member for Thurrock (Mr. Mackinlay) said that the European Union was unique, but there are all sorts of federations and unions between countries, provinces and states. Other federations and unions around the world have been crumbling: the Soviet Union, Yugoslavia, Czechoslovakia. In the Commonwealth, there were problems with the Federation of the West Indies and the Central African Federation. There have been provincial problems in Quebec, Kashmir, Nigeria and many other places. Their constitutions, as with the internal constitutions of countries, must reflect the public will, or centrifugal forces will pull them apart.

I doubt whether British people will continue to accept all the European Court rulings. In the debate on Maastricht on 18 December 1991, almost five years ago, I said: The European Community, in clasping the member states … too closely is planting the seeds of its own destruction … It is only a matter of time before small national or nationalist parties spring up in Britain. To occupy their ground and to stop their advance, both the main parties will have to become less Euro-centred and more national again. I believe that that has begun to happen and that we have not seen the last of it. I continued: In the end, I believe that one party or another"— probably mine— will secure a majority in the House on the platform of flouting the European Community, its institutions and its courts. We shall then have a constitutional crisis, and it will be a question of who the army and the police obey. I would rather have a smaller constitutional crisis now than a big one later on."—[Official Report, 18 December 1991; Vol. 201, c. 384.] Nothing has happened in this debate to change any of the views that I have consistently held over 25 years.

Just over 25 years ago, in a debate on the principle of whether this country should join the European Common Market on 28 October 1971, the House resolved by 356 votes to 244 That this House approves Her Majesty's Government's decision of principle to join the European Communities on the basis of the arrangements which have been negotiated."—[Official Report, 28 October 1971; Vol. 823, c. 2217.] Thirty-nine Conservative and Unionist Members of Parliament voted against. Seven are still in the House. My hon. Friend the Member for Faversham (Sir R. Moate) was one and I am another. Of the other five, one is an Ulster Unionist. That was the view that I held then, and I have held it consistently.

The issue dogged the Parliament of 1970 to 1974 and I am afraid that it has dogged this one, too. There are, rightly, broad ranges of views within both parties, which is only to be expected. Whether or not one is in favour of closer European union is not a matter of party political doctrine. What makes one basically Conservative or basically Labour is one's view on a broad range of economic and other issues such as law and order, the monarchy and defence.

9.19 pm

Ms Joyce Quin (Gateshead, East)

This has been a good debate, in which many thoughtful and thought-provoking speeches obviously derived from strong and sincerely held convictions were made. I should like to think that the debate will be as fully reported as it deserves to be but, sadly, I fear that it will not be. Press and media interest in our Thursday evening activities on Adjournment motions is depressingly and discouragingly low.

My hon. Friend the Member for Clydesdale (Mr. Hood), who is Chairman of the Select Committee on European Legislation, rightly referred to the importance of scrutiny procedures in the House of Commons. I should like to pay tribute to him and his colleagues on the Select Committee for the work that they do. I know that many of us follow their work closely and find it extremely useful.

I very much agreed, as did other Labour Front Benchers, with the Select Committee's desire for the single currency documents to be fully debated on the Floor of the House. I know that the Committee has frequently been frustrated because its recommendations for debates on the Floor of the House have been ignored by the Government. The incident involving the single currency documents was not a one-off, but the culmination of several examples of the Government ignoring the Select Committee's recommendations.

We are having this debate on a motion for the Adjournment. A couple of weeks ago at business questions, the Leader of the House said that it had been the practice for some years to have such debates on a motion for the Adjournment. His interpretation was slightly imaginative as, two years ago, the Government changed their policy and introduced the Adjournment procedure for such debates. We know that two years ago the Government were so badly divided on such issues that they found it convenient to deal with them in that form.

I agree with the points made about improved scrutiny in the House of Commons. I endorse the comments of my right hon. Friend the Member for Livingston (Mr. Cook) about the importance of scrutiny work in the European Parliament as well as in the House of Commons. We believe that the two systems can work in a complementary way. We rejoice in the fact that the Labour party fully expects the number of its Members of the European Parliament to be swollen by the election today of the talented and well-respected Richard Corbett in Merseyside West.

In opening the debate, the Foreign Secretary said much with which I agreed. I particularly agreed with what he said about defence co-operation within the European Union and its limits and the need to retain the intergovernmental pillar structure for common foreign and security policy and for justice and home affairs issues.

I was glad that the Foreign Secretary reminded us of some of the history and background of the present situation. He also reminded us, as did many other hon. Members, including my hon. Friends the Members for Swansea, East (Mr. Anderson) and for Brent, East (Mr. Livingstone) and the right hon. Member for Enfield, North (Mr. Eggar), that what we joined in the 1970s was not simply an organisation that dealt with free trade but one with certain important political, economic and even social commitments.

In the 1970s the contrast was frequently made between the two choices: belonging to the European Economic Community, which represented some form of deeper co-operation, and belonging to EFTA, which was simply a free trade area. I am rather surprised that Sir James Goldsmith, who was around at the time, seems to be particularly guilty of rewriting history in that respect in the drafting of his referendum question.

Sir Patrick Cormack

He was guilty of rewriting other things as well.

Ms Quin

Indeed. Sir James Goldsmith seems to have conveniently forgotten the terms of the debate that most of us remember being held in the 1970s.

The terms of our entry into the European Economic Community in the 1970s are in danger of being rewritten, and the Government are in danger of rewriting the history of the European social dimension. The right hon. Member for Sutton Coldfield (Sir N. Fowler) seemed to be particularly guilty in that respect when he talked about the working time directive. I remind him that the legal base for that directive is the Single European Act 1986, which contained health and safety provisions and which was steam-rollered through the House of Commons. It also contained a massive extension of qualified majority voting and it was the responsibility of Baroness Thatcher and her Government. We need to remember these things.

The social opt-out that the Foreign Secretary and others in the Government secured in negotiating the Maastricht treaty does not destroy or nullify previous treaty bases on social policy. It is not a way of getting Britain out of all social obligations; it is a mechanism that allows the other countries to go ahead if they wish to do so. It does not undermine important commitments such as that in article 119 of the treaty of Rome, for example, relating to equal pay of men and women, which has been the basis of helpful European legislation. I stress that there has always been a social dimension.

The social chapter has also been mentioned—in intemperate terms by the Foreign Secretary in particular, who once again called it the "job-destroying social chapter". I am never sure which of the two modest measures—that on works councils or the voluntary agreement on parental leave—is responsible for destroying jobs. It seems to me that both help rather than hinder competitiveness.

I endorse what my right hon. Friend the Member for Livingston said about inward investors and why they chose our country. He quoted the example of BMW and I could also cite Siemens and Nissan in my part of the country, for whom the social chapter holds no terrors. Both have identified one of the important reasons why firms locate here: the English language. Not only do we allow access to the European market, which is tremendously important, but we have good links, which in no way I would want to undermine, with the English-speaking world. Those are important assets about which we ought to be pleased.

I agreed with much of the Foreign Secretary's speech, but his attack on Labour for being a pushover and a soft touch in Europe was particularly silly. I cannot think of any Governments in the European Union who unquestioningly sign directives proposed by the European Commission without examining the small print.

Before I entered the House, I was a Member of the European Parliament, which it was not always popular to admit. It was very much concerned with the examination of written texts—directives, draft directives and resolutions. I realised that one has to look at every written line and every clause in a resolution. One has to get down to clause 127(e) and ensure that one is not signing up to something that is not in one's interests. It is simply puerile and insulting to suggest that Labour would act otherwise in that respect.

I accept that there are differences of views on both sides of the House, as the debate has shown, but I must agree with the description of the different nature of divisions given by my hon. Friends the Members for Swansea, East, for Brent, East and for Durham, North (Mr. Radice). As European spokesperson for my party, I visit constituency Labour parties throughout the country, and I am always struck by the depth and extent of the constructive approach to Europe. Labour candidates in the forthcoming general election take a similar approach.

Mr. Donald Anderson

One crucial difference between us is not always mentioned: whereas the shadow Cabinet is united, the Cabinet is fundamentally split.

Ms Quin

Indeed. Yesterday, we witnessed some of the divisions between Ministers, especially when, in his closing speech, the Exchequer Secretary to the Treasury appeared directly to contradict what the Chancellor had said earlier.

Some Conservative Members' speeches showed how worried they are about the bitterness and deep divisions in the Conservative party. The regrettable barracking and heckling of the Chancellor yesterday has been mentioned by many Conservative Members—especially the right hon. Member for Enfield, North and the hon. Member for South Staffordshire (Sir P. Cormack)—in dramatic tones.

Obviously, there is great concern about what happened yesterday and the bitterness that those exchanges revealed. My hon. Friend the Member for Newham, North-West (Mr. Banks) mentioned that. My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said that it reminded him of some o f the turbulent times that the Labour party experienced in the early 1980s, which tempted me to add that at least we had the good grace to be in opposition during that time of turmoil and not inflict it on the country, as is happening at present.

Sir Patrick Cormack

You were deliberately in opposition, were you?

Mr. Mackinlay

Parties that are divided lose elections.

Ms Quin

We have learnt the lesson of history, as Conservative Members will realise when a Labour Government are elected in May.

Despite those divisions, it is possible, as my right hon. Friend the Member for Livingston said, that the Conservatives will be tempted to adopt a pseudo-patriotism and run an anti-Brussels general election campaign. I hope that they will not, not because I am fearful of that but because it would be a completely discreditable approach. It would work. As evidenced by the debate tonight, it might provoke some Tory pro-Europeans beyond endurance, and it would greatly alarm large sections of British industry, including some of the inward investors to whom reference has been made. That would not work with the British people.

I was heartened to read an opinion poll in The Daily Telegraph on 9 December, which showed a 37-point difference in positive support for Labour on the European issue. Whereas Labour apparently lagged 20 percentage points behind the Government on that issue in the 1992 general election campaign, it is now 17 points ahead. It was the biggest change recorded in that opinion poll.

We must not forget that the electorate are concerned about other important political issues. When I take part in European debates in the House and in Committee, sometimes I am half—only half—persuaded by hon. Members such as the hon. Members for Stafford (Mr. Cash) and for Billericay (Mrs. Gorman) that the country is up in arms about Europe and is demanding referendums every couple of minutes, yet my constituency mailbag seems to be full of cases about the Child Support Agency, the jobseeker's allowance or education, health and other issues. Fear of crime outweighs fear of Brussels by 1,000:1.

Labour, if in power at the time of the conclusion of the intergovernmental conference, will adopt a constructive approach but will not be a pushover. What will be our priorities? We shall adopt a positive approach to the employment chapter, as my right hon. Friend the Member for Livingston said. When that employment chapter was originally proposed by the Swedish Government, the British Government rubbished it and said that no one else wanted it. Now it appears that the majority of countries want it, and a Labour Government would enable that balance to be tipped decisively. We shall sign the social chapter, partly for the reason that I have given—that the social dimension has been part of the European process from the start. We shall urge the completion of the single market—I welcome what the Foreign Secretary said in that respect—in areas that will be important for British industry, such as telecommunications.

We shall take a constructive approach to environmental policy and to regional policy. We welcome the fact that so many of our local authorities have developed links with Brussels and are making their views felt as well as being the recipients of European regional aid.

We shall take a positive approach to intergovernmental co-operation on the common foreign and security policy. We should particularly like the foreign policy secretariat to analyse and evaluate trends in Europe so that we can get into conflict prevention and perhaps learn some of the lessons of Bosnia and, more recently and tragically, of Rwanda and Zaire.

Next year will be the European year against racism. A Labour Government would do their best to ensure that that was not simply a slogan but involved positive activities and programmes. We are keen that the European Union should work in an open and democratic way and we support various reforms of other Governments in that respect. If the institutions were more open, that would help greatly the cause that we all hold dear—giving the public as much information as possible about what is going on in the European Union.

I endorse the comments made by, among others, my hon. Friends the Members for Thurrock (Mr. Mackinlay) and for Birmingham, Hodge Hill (Mr. Davis) on the importance of enlargement. That issue has tended to be common ground among hon. Members on both sides of the House. It is an exciting prospect and we should try to enthuse the public about it. We are creating a new political, economic and cultural relationship with countries from which we were formerly separated by the iron curtain. That is an important and exciting opportunity that we should work towards.

We are also keen on reforming the common agricultural policy and I pay tribute to the work that the shadow Agriculture Minister has done in producing a document that gives details of the Labour party's approach to reforming the CAP. It also outlines the ideas that we would like to put to the intergovernmental conference. We would try to ensure a much better approach to agriculture in the future. We believe that the CAP should rely less on price support and should not get swallowed by fraud, but should help those in rural areas who need it. It should work much more fairly in terms of world markets and the agricultural needs of developing countries. We also want to reform the common fisheries policy.

The right hon. Member for City of London and Westminster, South (Mr. Brooke) talked about the frustration that Britain experienced through not having been a negotiator at the very beginning when the agriculture and, later, the fisheries policies were being decided. I endorse what he said. He made some telling points, which showed how difficult it is to try to reframe the rules if one is not part of the negotiation process from the outset.

Mr. Spearing

We were open to negotiation by the Conservative party and the right hon. Member for Old Bexley and Sidcup (Sir E. Heath) before we joined. Does my hon. Friend agree that, unhappily, despite the known characteristics of fishing as a competitive but hunting economy, the common fisheries policy has been disastrous for almost all concerned and it has not yet been resolved?

Ms Quin

One can make telling criticisms about the common fisheries policy. I tend to support the fish in that battle because they do not have much of an opportunity these days. Fish conservation is certainly vital.

Our constructive programme, which I have explained to the House this evening, is fully in line with the domestic policies that we shall put at the next election. If we argue for high environmental standards at home, we also argue for high environmental standards in the European Union. If we argue for good working conditions at home—as we do—we must argue for good working conditions in European discussions. If we are arguing for decentralisation and greater openness at home, we must also favour a decentralised and open system in the European Union.

With our constructive programme of European policies and its consistency with our domestic policies, we have every confidence that we can convince the electorate that, far from being a sell-out, our European policies are firmly in the interests of the British people and will give them a better deal from their EU membership than the deal given to them through the Government's ineffectiveness and marginalisation. Far from being intimidated by the European issues, we believe that they will be part of a winning platform of ideas that the British people will support.

Yesterday we were struck by the calls from Tory Members for their Chancellor to resign. I conclude by calling on the whole Government to resign—the sooner the better, so that British interests can be properly represented in the European Union.

9.40 pm

The Minister of State, Foreign and Commonwealth Office (Mr. David Davis)

Tomorrow the European Council will meet in Dublin and discuss the intergovernmental conference, enlargement and a number of other matters relating to the European Union.

As the hon. Member for Gateshead, East (Ms Quin) said, we have had an excellent debate today, much of it on monetary union. I know that I will disappoint several of my right hon. and hon. Friends when I tell them that of necessity I must focus on IGC matters. For a junior Foreign Office Minister to wander around the economic and monetary union debate is probably sufficiently hazardous to health to warrant a European directive against it.

I shall comment briefly on the excellent contributions to the debate. I was impressed by the powerful arguments of my hon. Friend the Member for South Staffordshire (Sir P. Cormack) on a hard ECU. I was much taken with the comments of my right hon. Friend the Member for Worthing (Sir T. Higgins) on the difficulties engendered by EMU. I know that my right hon. and learned Friend the Chancellor answered questions on that in yesterday's debate.

I was extremely impressed by the persuasive and forceful exposition from my right hon. Friend the Member for South Norfolk (Mr. MacGregor), who put the Government position and the reasons for the Government position in pursuit of the national interest as well as anyone could. I remind all those who spoke on the matter that the Chancellor said that the assessment of the national interest takes into account not just economic but constitutional matters, as all Conservative Members recognise.

Throughout the debate today and yesterday, I have been amazed by the hypocrisy of the Labour party, which voted against the EMU opt-out in the Maastricht treaty and since then has been hiding behind it. That sheds light on Labour's policies.

The Dublin discussions will engage on different visions of the future of Europe encompassed in the Irish presidency document on the IGC, which is tagged for today's debate. There can be no doubt that the debate is fundamental to the future of this country, the new democracies and the whole of Europe.

On one side is the centralising federalist vision, which seeks to arrogate power away from the nation state to the institutions of the union; which insists that, in the jargon, wider must mean deeper; which has led to a progressive loss of faith in the union by the peoples of the union. We reject that vision.

The British vision was set out in the White Paper, "A Partnership of Nations", presented to the House by my right hon. and learned Friend the Foreign Secretary. Britain's agenda for Europe concentrates on the real issues—job creation through competitiveness, encouraging enterprise, scrapping unnecessary regulations and making an effective effort to tackle the fraud and waste that damage public respect for the union. It concentrates on enhancing Europe's internal and external security through practical measures, rather than through doctrinal Euro-theology.

The key challenge facing the union is enlargement. It is probably the most important vocation for the EU in this half of the century. We have to do a great deal to prepare the Union for enlargement. That is, in part, what the intergovernmental conference is about: creating a Union that is capable of meeting the challenges of the accession of up to 13 new countries. However, the IGC will not be enough—arguably, it may not even be the most important issue in the context of enlargement. We shall also need policy reform—particularly of the common agricultural policy and the structural funds. I suspect that that will prove at least as difficult to conclude as the IGC, but just as important. Candidate countries also have much to do to prepare for accession.

Sir Roger Moate (Faversham)

My hon. Friend mentioned the difficulty of securing agricultural reform and the way that enlargement makes it fundamentally necessary. What is the mechanism for securing progress on reform of the common agricultural policy, as there seems to be a distinct lack of will in Europe to make any progress in that area?

Mr. Davis

The principal recipients will oppose reform. One of the important primary driving agents will be the timetable for the general agreement on tariffs and trade reforms at the turn of the century. The issue will be addressed in the next few years.

We need a flexible Europe that builds on intergovernmental structures instead of trying to dismantle them. We need a European Union that recognises that the structures that work well for a single market would not work for foreign security policy or for a number of other policies. The Prime Minister pioneered the concept of flexibility in his speech in Leiden more than two years ago—a proactive action which I am sure would please my right hon. Friend the Member for Enfield, North (Mr. Eggar). Since then, others have taken up the idea.

We do not agree with all subsequent proposals. Indeed, I am reminded of Ernest Bevin's comment: If you open that Pandora's box, you never know what Trojan horses will jump out. While I would not quite describe the Franco-German proposals as a Trojan horse, they clearly have a different aim from ours. Our view is straightforward: the Union has already developed flexibility in important areas, such as the social protocol, to which I shall return in a moment; the EMU, where Britain can exercise its opt out; and defence, where we are part of the inner majority and others are more reticent about their commitments.

We are faced with a choice that the hon. Member for Thurrock (Mr. Mackinlay) mentioned in his speech, which I enjoyed. We must choose either to introduce new treaty clauses to facilitate flexibility or to continue with ad hoc arrangements. If flexibility is not to prove divisive or to undermine the achievements that it is designed to accommodate, any new treaty language must be very clear. In the jargon that my right hon. Friend the Member for Wokingham (Mr. Redwood) and my right hon. and learned Friend the Chancellor have developed between them, it must be cast-iron and copper-bottomed.

If others wish to co-operate together outside the institutions—as with the Schengen agreement—that is fine. However, if a small group is to use the institutions and the budget—which are the common property of all member states—all should have a say about how it should be done. The United Kingdom will not allow others to use flexibility to circumvent the veto by the back door. Flexibility should not allow countries to form exclusive inner groups—arrangements should be open to all—and, importantly, it must not compel countries to join groups, even over time. In the jargon, the model is multi-track, not merely multi-speed.

I turn now to the IGC negotiations, and particularly the Irish presidency document outlining the options facing the Union. Over the years, many game-playing analogies have been drawn regarding the negotiation process in the IGC—some have likened it to poker and some to a 15-dimensional game of skill. In truth, its rules fall somewhere between chess and rugby league. To follow the chess analogy, the European Council tomorrow marks the mid-game of the IGC: it is complex and there are many tactical threads that make exact prediction difficult. However, we can see some clear lines developing.

A degree of consensus has grown around some major issues that we have championed. The hon. Member for Clydesdale (Mr. Hood) raised the question of national Parliaments. In the spirit of Christmas, I thank him and the European Legislation Committee for their good work in that area. One of the Government's main objectives at the IGC is to reinforce the role of national Parliaments, which are the source of the Union's democratic legitimacy. I will not outline again the details of those proposals, but I am confident that that section of the British proposal will form part of the revised treaty in June.

Britain also has a proposal for regular Council reports on the second and third pillars, which we shall pursue in the next few months.

Similarly, we have long argued for the entrenchment of subsidiarity in the treaty. Since the birth of article 3b at Maastricht, the principle has started to work. We want it to work better, and that is why we want to put a protocol into the treaty. I am confident that such a protocol will be attached to the treaty next June.

On common foreign and security policy, my right hon. and learned Friend the Foreign Secretary laid out our proposals in some detail. They have attracted a great deal of support. It is not quite unanimous. There is still some discussion to go, but proposals for improving the operation of CFSP are broadly accepted. Discussions are still under way about how we make decisions on CFSP. We regard unanimity as the only realistic basis for decision making in important policy.

Mr. Spearing

The Minister said "unanimity". In the draft treaty, it says unanimity as to permission for action. Do the Government believe that unanimity goes beyond that in terms of execution, particularly on matters such as rules of engagement, if peacekeeping gets hot?

Mr. Davis

The hon. Gentleman will forgive me if I do not get too drawn into what is still a hot negotiation, to use his term, but our position is fairly clear. The point of unanimity at the start of any policy discussion is that it gives the leverage required for the next step.

As for the so-called third pillar—justice and home affairs—we have argued, and will continue to argue, for the improved co-operation in the fight against drugs and international crime. The federalists—the centralisers—wanted to communitise some of these areas, arguing that the third pillar has not worked. That is simply not true. It is new, and much has been achieved in practical terms since its inception. There have been seven major conventions, three protocols and much useful co-operation between national law enforcement agencies.

To give an example, in 1995, Europol dealt with nearly 1,500 requests for information, and its action led to arrests and seizures in crimes as diverse as immigrant smuggling and drug trafficking. There is still scope for streamlining decision-making procedures in this area, but it must remain firmly intergovernmental.

Communitisation would not save a single life. Nor would it stop a single drugs trafficker. It would complicate and probably delay practical progress. How can it help the people of Europe to have every bogus asylum seeker thinking that he or she can appeal to the European Court of Justice? How does it improve the acceptability of those policies to give the Commission the monopoly of initiative in them? It cannot, of course. We must concentrate on the substance of third pillar co-operation; on practical improvements, not institutional change. Only in that way can we deliver results for the people of Europe.

My right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) raised some interesting points on employment, because the document contains a proposal for a chapter on employment. Some try to accuse the British Government of failing to pay proper regard to the importance of employment because we oppose treaty changes to bring in an employment chapter. Ironically, those same people are among those who want to impose the job-destroying social chapter on Britain.

The United Kingdom has an outstanding record in Europe on creating jobs, a point made by my right hon. Friends the Members for Wokingham and, indeed, for Hove (Sir T. Sainsbury) in his excellent speech. Since 1979, the United Kingdom has created as many jobs in the private sector as the whole of the rest of the European Union. That is no accident. It comes from an approach based on free trade and competition, reform of inflexible labour market regulations, reduction of non-wage costs, investment in skills and sound macro-economic policies.

That is also one reason why Britain is successful at attracting overseas investment. Britain accounts for a massively disproportionate share of inward investment in the European Union. We are also the number one destination for German overseas investment. We heard the point of view, represented by the Labour party, of one German business man. It might be a little more representative if I quote the president of the German equivalent of the CBI, Mr. Henkel, who has drawn attention on more than one occasion to the British Government's record—our success in dealing with unemployment, in reducing state interference, in privatisation, in reducing the state share of national income and in the low taxation of profits. He said: Great Britain has become the most attractive location for investment in Europe. Although the German market is twice as large as the British, since 1985 foreigners have invested 10 times as much in Britain as in Germany. The Government prefer to let results speak for themselves, but we are prepared to listen to the views of others. I listened very carefully to a speech on Europe that the French Prime Minister Alain Juppé made in the Assemblée Nationale at the end of November. He said: The spectacular results which the UK has obtained on employment are less the result of changes in her exchange rate… than of the structural reforms undertaken over the last 15 years. If one knew as much as one ought about the French tradition in these matters, one would know that that was an outstanding statement, and a compliment to our policies.

The results that Mr. Juppé was referring to were not achieved by writing empty words into the European treaty. Fine words in the treaty will not create a single job. Businesses create jobs. They would be able to create more of them if they were left to get on with it without bright new initiatives from Brussels.

As my right hon. Friend the Member for Sutton Coldfield pointed out, earlier this year the United Kingdom Government lost their case in the European Court against the application of the working time directive—the so-called 48-hour week. The directive was brought under article 118A, the health and safety article.

It is difficult to compare health and safety statistics between countries, because there are different definitions, and some countries are slow to produce the figures, but it is possible to make the important comparison of fatal accidents at work, which are measured in deaths per 100,000 employees. The latest comparisons show that the United Kingdom has about 1.4 deaths per 100,000 employees, whereas Germany has twice that number, France has three times and Spain has six times that number.

Britain can easily show that it takes safety at work at least as seriously as any other country in Europe. Any attempt by anybody else to change our laws had better be pretty well argued.

What does the European Court judgment say? In effect, it says that so-called health and safety legislation does not have to be based on scientific evidence. That is an open door to all those in Europe who would wrap labour law in bogus health and safety clothes, and who seek to impose competitive burdens on our industry, big or small. That is why we are demanding that the directive be disapplied to the United Kingdom, and even more important, that the loophole in our opt-out be shut once and for all.

The next six months—from Dublin to Amsterdam—will see some of the most important negotiations on the future of Europe since the treaty of Rome. Amsterdam will decide whether Europe stays a partnership of free nations, as we advocate, or whether a core group pushes ahead to further political union. The question for the British people will be who they can trust to stand up for Britain at Amsterdam.

The Government will continue arguing for a strong Europe that remains a Europe of nation states. We have shown that we are prepared to stand alone in defending Britain's interest, and have fought for our opt-outs. The Prime Minister has made it clear that if the rest of Europe goes federal, Britain under the Conservatives will not follow.

It is crystal clear why this country needs a Conservative Government fighting hard in the IGC for Britain's national interests. People should be in no doubt what the election of a Labour Government would mean. If there were a general election on 1 May, within six weeks there would be a summit at Amsterdam to finalise the new treaty. If there were a Labour Government, in those six weeks there would be a sell-out of Britain, and 17 years of Conservative achievement would be wiped out at a stroke.

Labour would unconditionally surrender the British veto in four important areas: regional, industrial, social and environmental policy. Labour would sign up to the madness of the social chapter and accept the working time directive, which would be a disaster for the British economy. Labour would back a new treaty chapter on employment, thus opening the door to more interference and regulation from Brussels. Labour would support an increase in the powers of the European Parliament at the expense of the House of Commons.

All that would be the consequence of the Labour Leader's fear of "being isolated" in Europe—a six-week sell-out; a six-week surrender.

The Labour party has no principle in European politics, other than the dubious principle of not being isolated. It stands for nothing—and those who stand for nothing will fall for anything. That is why, when we count what is at stake in Amsterdam, British people will decide that they cannot risk a Labour Government.

The federalists think that, if Europe does not go somewhere it will go nowhere, and that if it does not integrate it will disintegrate. That is the line that Labour is falling for. That is why we hear endlessly about catching buses, riding trains and missing boats: those are metaphors designed to serve a misconception. Unless we like the destination, we will not buy the ticket. The Labour party, however— It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.