European Union

HC Deb 04 December 1997 vol 302 cc513-69

[Relevant documents: Developments in the European Union, January-June 1997 (Cm 3802), the Commission's Work Programme for 1998, the Political Priorities (Com(97)517), the Commission's Work Programme for 1998, new Legislative Initiatives (Sec(97)1852), European Community Document No. 9984–97 "Agenda 2000"and minutes of evidence taken by the Foreign Affairs Committee on 1 December, HC 387.]

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

4.57 pm

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook)

Last week, on behalf of the Government and Britain, I visited three of the larger countries in central Europe that are seeking membership of the European Union: Hungary, Czech Republic and Poland. I commend a similar experience to Conservative Members, who bring to this debate doubts about Europe, suspicion of foreigners and anxiety to have as little as possible to do with either of them. If they visit the countries that are trying to enter the EU, they will find a consensus across the major political parties, which is in no doubt about the importance of the EU and shows a determination that their country will acquire full EU membership as soon as possible. Nor do politicians alone share that ambition. The people also share that ambition.

In the relatively intimate setting of this debate, I can risk sharing with the House the news that there was an internal split in the Foreign Office on the way to Poland on to what extent I should be frank with the Polish Government about the discriminatory duty that they apply to Scotch whisky. There was a strong view that we should tell it like it was and that such duty could not survive EU membership. There was a contrary view that that would compromise our attempt to establish warm friendship with the Polish Government. I finally decided that I had to tell it to them like it was and, if they wished to join the European Union, they had to drink whisky. Therefore, at a conference on Britain and Poland attended by 400 people, I took a deep breath and said that it was wholly unacceptable that a bottle of whisky should cost twice as much in Warsaw as in Prague.

I have to report to the House that the roof caved in under thunderous applause from all 400 present. It turned out to be the most popular statement that I made in my three days in central Europe. It underlined the fact that the ordinary people also see attractions for themselves in membership of the European Union, as workers who can export to it, as travellers who can move more freely across it and as consumers who will have easier access to the goods produced within it.

Britain has an opportunity in central Europe to strengthen our standing in Europe. English is by far the second most common language of those who live in those countries, easily eclipsing German. Older residents of those countries have memories of the historic role of Britain in defeating fascism. Indeed, the Foreign Minister of Poland recalled as a child demonstrating outside the British embassy in support of our decision to enter the war as a result of the invasion of Poland. The younger people of those countries have great enthusiasm for the authentic western culture that they identify in Britain.

Britain has a strategic opportunity, especially during our presidency, to emerge as a sponsor and a patron of membership of the European Union for those countries seeking to apply. However, one condition applies—those countries must be convinced that we want them as members of the European Union to strengthen it, not to dilute it. I allow that the previous Government supported enlargement of the European Union. Unfortunately, they took little trouble to disguise that they wanted those countries in as part of a looser, wider and weaker Europe. Those countries do not want a weaker Europe: they want to be members of a stronger Europe. That is what we want too, and that is why we give priority to enlargement.

We want a bigger, stronger Union with 100 million extra consumers, who will make even larger what is already the wealthiest single market in the world and give us a bigger voice in the world and in trade talks. A bigger, stronger Union will end the unacceptable model of a fortress Europe in which affluent countries are within and poorer countries are outside. That model is unacceptable and, as we are discovering, unsustainable, as organised crime, money laundering and drugs trafficking undermine the walls we build around the fortress.

It is because we want those countries to join, to create that stronger Union, that repeatedly those whom I met in central Europe welcomed the fact that Britain is now back in Europe, playing the part that they want us to play as a leading partner in Europe—with influence, not isolation in Brussels and with respect, not resentment in other member states.[Interruption.]

As usual, the hon. Member for South-West Devon (Mr. Streeter) is making boorish remarks from a sedentary position, but if he does not believe what I am saying he should read what the European papers say about the new Labour Government in Britain. Let us review what has been written in those papers in the past six months. Those six months began with the Amsterdam summit. At that summit, Britain retained the legal right to retain border controls; we stopped the merger of the Western European Union with the European Union and prevented the European Union from becoming a defence organisation; and we secured new treaty language on our priorities of employment, the environment and fraud against the Union. On the Monday after the summit,la Repubblica ran the headline "Britain 4—Continent 0".

The past six months have drawn to a close with the special jobs summit in Luxembourg. Britain secured at that summit guidelines that fully reflect our economic priorities of raising skills, improving the labour market and raising competitiveness. On the Monday after that summit,Le Monde ran an editorial under the headline "Tony Blair's summit".

I know that it is too much to hope that Conservative Members read the leading newspapers of Europe. Probably they are right in suspecting that they are written by foreigners. However, Conservative Members are alone in Europe in representing the outcome of those two major summits as defeats for Britain. I know that Tories are in opposition, but they claim to be the great backers of Britain and the British national interest. Therefore, it is odd that they persist in seeing failure for Britain where the rest of Europe sees success for Britain.

A spirit of reciprocity is appropriate in foreign relations and I hope that that spirit will inform this debate. If we review the events of the past six months, I hope that it is legitimate to roam over what they have meant for the debate on Europe in the Tory party. Those six months started with the general election and finished with the Winchester and Beckenham by-elections. In those six months, the Conservative party lost 21,000 electors in those two constituencies.

Mr. Nigel Evans (Ribble Valley)

You lost your deposit.

Mr. Cook

If the hon. Gentleman consults the results, he will find that we substantially increased our vote in Beckenham and reduced the Conservative majority. The magnificent response to the loss of 21,000 votes in the country by the leadership of the Conservatives was to dismiss one of the voters that they have at Westminster and to oblige the hon. Member for Leominster (Mr. Temple-Morris) to cross the Floor. We are grateful for the hon. Gentleman's presence and we appreciate the generosity of spirit with which the Conservatives have lent him to us.

Mr. Patrick Nicholls (Teignbridge)

You are welcome to him.

Mr. Cook

Such generosity of spirit is the hallmark of the modern Conservative party. Indeed, it has resulted in its support narrowing to the size of that of a sect, instead of a centre party, and is accurately reflected in the comments by the hon. Member for Teignbridge (Mr. Nicholls). We could probably have got by without the vote of the hon. Member for Leominster. We now have a majority of 177, but we could possibly have scraped through with the majority of 175 that we had before. However, the hon. Gentleman's dismissal has sent a signal to all the sane people in the centre of British politics—who share his moderate views on Europe and know that Britain must have sensible relations with its neighbours—that they are not welcome in the Tory party, as the hon. Member for Teignbridge made clear a moment ago. I offer those moderate people a message today—they are all welcome as supporters of new Labour and we invite them to support us in building a modern Britain and a people's Europe.

I am beginning to believe that some Conservative Members—possibly even the shadow Foreign Secretary—suspect that the majority of the population are on our side over Europe. The shadow Foreign Secretary spent the summer roaming the land and loudly demanding a referendum on the Amsterdam treaty. Now that the House has returned, the right hon. and learned Gentleman has tabled many questions to me, but he has not once asked me to put the Amsterdam treaty to the vote of the people in a referendum.

As amendments to the European Communities (Amendment) Bill poured in, we mounted a Howard watch. We scoured the amendments for one from him to require us to hold a referendum on the Amsterdam treaty. I have to tell the House that none has come in. The right hon. and learned Member for Folkestone and Hythe (Mr. Howard) is rescued from his indecision by the courage and vigour of the Euro-rebels on the Conservative Back Benches, who have tabled new clause 47 which calls for a referendum. Those hon. Members belong to the same party and share, as yet, the same Whip as the right hon. and learned Gentleman. Those colleagues deserve to know how much support they will get for their new clause and I hope that, when the right hon. and learned Gentleman responds to my speech, he will tell the House whether he will vote for a referendum and recommend it to all his colleagues. I hope that he will tell us whether Conservative Front Benchers have the courage to demand a referendum on the treaty. However, the reality is that the Conservative party is now terrified of another drubbing in any test of electoral opinion and does not dare risk a referendum that would expose it as split from top to bottom. As Lord Howe wrote last month, Europe now presents a crucial litmus test of the Conservatives' capacity to act as a serious alternative party of government. So far, he added, it looked like a test that they were determined to fail.

By contrast, this Government will pursue a European policy that is in the interests of the British nation. My right hon. Friend the Chancellor made it clear in his recent statement on a single currency that we will judge whether we are to join on the basis of a hard-headed assessment of what is in the economic interests of the British people.

We will assess that by the five tests that my right hon. Friend the Chancellor set out: whether there is sustainable convergence; whether the single currency has sufficient flexibility; what its effect will be on investment; what its impact will be on financial services; and whether it will be good for employment. It is right that we should assess whether we join the single currency on those tests, which are in the real interests of the British people, not by the prejudice and dogma that obsess the Conservative party.

Dr. Liam Fox (Woodspring)

Why do the five criteria that the Chancellor is using not include the vital criterion of the currency of denomination of trade? Is that unimportant? I should have thought that the currency in which we trade is a vital element in making objective decisions on economic and monetary union. The currency in which we trade is as important as whom we trade with.

Mr. Cook

The hon. Gentleman has a perfectly fair point, but it is adequately covered by our five points, particularly the test of whether the single currency will offer sufficient flexibility. If he looks at trade, he will see that the fact is that the majority of our visible trade goes to Europe.

Dr. Fox

Yes, visible trade.

Mr. Cook

We have been here before. If we include invisible trade, visible trade still accounts for 47 per cent.—not a pass mark, I grant you—of our trade. For the Conservatives to pretend that 47 per cent. of trade is meaningless and can be passed over demonstrates the extent to which they are out of touch with reality.

Mr. Christopher Gill (Ludlow)

Before the Foreign Secretary leaves his five tests—one of which is the effect of the single currency on unemployment—will he remind all his right hon. and hon. Friends of the effect on unemployment of fixed exchange rates in the past? Will he tell his supporters in the country that, when we joined the exchange rate mechanism in 1990, unemployment was at 1.67 million and rose to 2.85 million within 23 months?

If they do not believe that, will he remind them of what happened when we were on the gold standard between 1925 and 1931, when unemployment rose from 1.25 million to 2.9 million? Will he—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. Interventions must be brief, and not speeches.

Mr. Cook

Mr. Deputy Speaker, I would have been quite happy to let the hon. Member for Ludlow (Mr. Gill) continue, because he was referring to two miserable and unhappy experiences of two miserable and unhappy Conservative Governments, neither of which has any bearing on anything done by the present Government. Nor does a fixed exchange rate have anything to do with what one does within a single currency.

Mr. Gill

The right hon. Gentleman does not understand what he is doing.

Mr. Cook

I fully understand—the great shame is that the Government of whom the hon. Gentleman was a member did not understand what they were doing.

If, at a future stage, we should resolve to join a single currency, we will put that to a referendum of the British people and let them have the last veto. As my right hon. Friend the Chancellor has made clear, that is not likely to happen in the next six months, or even in the next four years. There is quite enough to occupy us in our European debates in the next six months.

In the foreground is next week's summit in Luxembourg. The key issue at the summit must be to obtain a mandate to take forward during the British presidency the Commission's proposals under Agenda 2000. What we require from the Luxembourg summit is a practical railway timetable towards enlargement which will enable the British presidency to start the train on 31 March.

Mr. Peter L. Pike (Burnley)

My right hon. Friend has talked about enlargement and the countries that are on the so-called fast track. Does he recognise that countries such as Romania are anxious—and have overwhelming public support—to get into the strong European Union to which he referred as soon as possible?

Mr. Cook

I very much understand that. We must be sensitive and recognise the strong ambitions in those countries not yet identified by the Commission as yet ready for negotiation. I am strongly of the view that the way forward towards enlargement is to commence detailed negotiations with those five central and eastern European countries, plus Cyprus, that have been identified by the Commission as ready for negotiation. Any other course would not be fair to those identified as ready for negotiation, as they would need to wait for others to catch up—a point strongly made to me when I visited the countries. Nor would it be fair to those countries that have been identified as not ready for negotiation, because membership of the EU will be a challenging and tough discipline.

We do not do any favours to countries that are not ready to withstand the market pressures of membership of the EU by prematurely bringing them in, with the disruption to their economies that that could entail. To be positive to my hon. Friend the Member for Burnley (Mr. Pike), we must make sure that the enlargement process is seen to be inclusive and that those countries such as Romania that look to Europe for membership are given every possible encouragement, incentive and assistance to tackle the obstacles that still stand between them and detailed negotiations.

That is why the Labour Government, during the British presidency, will wish to create a permanent European conference to bring together all the applicants—including those that have not set out on detailed negotiations—and to hold political dialogue with them. Such a conference must be one of substance; it cannot fall into the popular model of a not-very-good family photograph followed by a rather good lunch. It must have real business and substance to it.

There are issues that we could discuss with those countries—organised crime and the drugs trade are obvious and relevant topics. The issue of the environmental problems and the pollution which we share is another that we could address without getting into negotiations about accession. There may be areas of common foreign policy that we could explore with those that are not in the front rank for membership of the EU. We need to make sure that those countries are given a real sense of belonging and welcome to the European family of nations.

Mr. Nigel Evans (Ribble Valley)

The Foreign Secretary said that the European Union had to be inclusive. Will he say a few words about Cyprus, which is divided? I understand that that may not be a barrier to Cyprus entering the EU. If that is the case, what will be done to ensure that the population of the northern part of Cyprus will be consulted about joining the EU?

Mr. Cook

I am grateful to the hon. Gentleman for raising an important part of the enlargement debate. The Government strongly support the right of the Government of Cyprus to apply for membership. We recognise that Cyprus has done a large amount over the past three years to prepare itself for membership. Were it not for the division of the island, Cyprus would be a foremost candidate for membership. It would be immensely helpful to the debate if that division could be resolved within the context of the enlargement talks.

Enlargement may provide a catalyst to bring about the solution to the division of the island. Those who live in the northern occupied sector would benefit more than anybody else in Cyprus from membership of the EU, because their income is a quarter the level in the Greek Cypriot sector. However, if it is not possible to resolve the issue of the division of the island, it is the position of this Government that it would be unfair to the majority of the people of Cyprus if its Government were to be excluded because of the continuing division. I regret that the Turkish authorities in the northern sector have refused the recent approaches by Commissioner van den Broek to include them in the negotiating team from Cyprus. It would have been good both for the division of the island and the negotiation if they had taken up the offer.

Mr. John Bercow (Buckingham)

Will the right hon. Gentleman confirm that, if this country enters the single currency at some point, its democratically elected Government would be legally prohibited from making representations to the European central bank about its conduct of monetary policy and that a democratically elected Government who sought to do so would potentially be subject to fines?

Mr. Cook

I am not sure how that naturally arose from the discussion of Cyprus, but of course the principle established in the Maastricht treaty is that the central bank will be independent and will not be subject to political interference. In that regard, it will stand in relation to the Governments of the European Union in precisely the same way that the independent central banks of Germany and of other countries stand in relation to their Governments.

Enlargement is the prime objective that we seek to achieve at the Luxembourg summit. We must not be distracted from that No. 1 goal, but, if enlargement is to be a realistic prospect, other elements of the Agenda 2000 package must be supported and will need to be approved at Luxembourg. We will go to Luxembourg determined to maintain the budget ceiling of 1.27 per cent. of gross domestic product of the European Union. Britain comes 11 th in terms of per capita income in Europe and is the fifth largest net contributor, even after the rebate. It is plainly in our interest to maintain realism in the European budget.

Retaining that ceiling has consequences. Enlargement will cost money. The countries coming in are poorer than the present member states—typically, their income is one third that of member states. They will require some major industrial restructuring and economic recovery. If the European Union retains the same budget and if that budget is spent in more member states as we enlarge, it arithmetically follows that less will be spent among the existing member states. If we are not willing to face that, we should not pretend that we are serious about enlargement.

That is why we will seek a mandate from the Luxembourg summit to take forward the Commission proposals on reform of the common agricultural policy and of the structural funds, which together make up some three quarters of the European budget. In any event, reform of the CAP is long overdue. It cannot be sustainable to continue to spend 50 per cent. of Europe's budget on an industry in which 4 per cent. of the work force are employed.

It is especially important that we achieve such mandates at Luxembourg because the British presidency will start the work to carry them out. That offers Britain a rich and exciting opportunity. Next April, for instance, London will host the Asia-Europe summit, at which countries representing half the GDP of the entire globe will be present. It is a great opportunity to take further the co-operation for stable growth throughout the globe and to tackle the environmental issues that are of mutual concern throughout the globe. The summit is a great opportunity for Britain to show skill and imagination in brokering global agreements. At summits during its presidency, Britain will also represent Europe in dialogue with Latin America, the United States and Japan.

I am indebted to theDaily Express for revealing that a Liberal Democrat had tabled questions that revealed that I had spent more on foreign travel than any other Minister. I appreciate the newspaper's understanding remark that, as Foreign Secretary, I have at least some excuse for foreign travel, but I warn both the Daily Express and the Liberal Democrats that there will be even more excuses for foreign travel as we take over the EU presidency next year. I hope that the House will appreciate the validity of that.

The British presidency presents another opportunity much closer to home. It provides us with a clear opportunity to demonstrate that Europe can deliver on the concerns of our people. On jobs, at the Cardiff summit, we will review the action plans that will flow from the guidelines approved in Luxembourg. On the environment, we will take forward what action Europe needs to take to fulfil the commitments that we took to Kyoto. On crime and drugs, we will launch the customs convention and see through European initiatives to interdict the drugs trade in central Asia and in the Caribbean.

Tomorrow, my right hon. Friend the Prime Minister and I will launch the British presidency and reveal its themes and objectives. They will confirm that we have one clear determination during our presidency: to make Europe work for the people. That will be our contribution to building the Europe of the next century—a Europe that has learnt the lessons of this century.

Last week, I laid a wreath in the Warsaw ghetto at the site of the station from which tens of thousands of people went to their death. This week, I started a conference to establish the truth about the gold that was looted by the Nazis. Truth is the least that we owe in justice to the people who perished under Nazi persecution. Recording and remembering what happened in those atrocities are the best protections against them ever happening again in our continent.

Putting the record straight about what happened 50 years ago has proved challenging. It has reminded me of how different the world was only 50 years ago. While I was in Poland and in Prague in the Czech Republic, the Foreign Ministers of both countries welcomed the ethical dimension to Britain's foreign policy. They said that countries that have been the victim of realpolitik welcome a foreign policy that includes the values of human rights and democracy and is not based just on the interests of power politics.

Mr. David Heath (Somerton and Frome)

The Foreign Secretary knows that he has our full support with regard to several of the policies that he is pursuing. One of those is to establish the European code of conduct on the export of arms. Is he making substantial progress on that matter, particularly in discussions with the French? Does he agree that we cannot travel at the speed of the slowest member state? We need firm criteria and firm treaty obligations at the earliest possible opportunity.

Mr. Cook

The great majority of EU member states have spontaneously expressed interest in our code of conduct and are pressing us to bring forward our proposals. If possible, we should like to ensure that we have a common text with our French colleagues before we go before the EU because we are the two largest arms-producing and exporting nations, but I assure the hon. Gentleman that, during our presidency, that will definitely be taken before the Council and will undoubtedly have overwhelming backing.

I was reflecting on how much has changed in the past century. Fifty years ago, Germany and Italy were only just emerging from a war in which Britain and France had been their enemies. As recently as 20 years ago, Spain and Portugal were emerging from fascism. Only 10 years ago, Russia was regarded as a super-power and the countries that I visited were its colonies. I believe that the decades ahead will show change even greater than that which we have been experiencing in the latter part of this century. In the decades ahead, the peoples of Europe will become more cosmopolitan, travel more, work more in other people's countries and more often marry people from other European countries. They will expect their Governments to be as much at ease in dealing with foreign politicians as they will be in dealing with people from foreign countries.

Economic activity will increasingly transcend national boundaries. It will become more necessary for economic policy to be co-ordinated across those same national frontiers. Knowledge and information will be received as commonly through the fibre optic cable, the internet and e-mail as through the local evening paper. Political ideas and debate will belong not just to the domestic arena but to an international stage.

Britain needs a Government to prepare it for that modern world and to shape Britain's place in that Europe of the next century. Opposition Members, or at any rate those on the Opposition Front Bench, do not merely borrow their thinking on economic and social policy from the 1930s; they borrow a foreign policy to match from the same era—an era of splendid isolation, when Britain could stand alone. It is a fitting policy for a Conservative party that does not have a single sister party in the whole of Europe, but it is no service to Britain to offer it the policies of the mid-20th century for the world of the early 21st century.

Britain needs a Government who understand the modern world, who can command respect and influence in Europe and who can relate Britain to the world outside. That is what we offer Britain—a Government who offer active leadership in the world.[Interruption.] I must tell the hon. Member for Westbury (Mr. Faber), who has decided to grace us with his presence for this closing moment in my speech but feels that he fully understands all that has gone before, that, if he reflects on what Ministers are doing, he will understand what I am saying.

Yesterday, the Secretary of State for International Development signed the Ottawa treaty to ban land mines. It was the early change in British policy on land mines that made it possible for us to play a major part in drafting that treaty in Oslo. Tonight, the Deputy Prime Minister leaves for Kyoto to break the stalemate on climate change. Our ambitious target has made us a leading voice in the preparations for that conference.

Next week, the Prime Minister goes to the Luxembourg summit as a national leader who will get respect there because he commands a united party that understands the importance of co-operation within Europe. At Luxembourg, the Prime Minister can speak with a single, clear voice in place of the different, divided voices that we hear from the Opposition. That is the sound basis on which we look forward to the Luxembourg summit and that is what gives us confidence that in our British presidency we will make Europe work for the people.

5.31 pm

Mr. Michael Howard (Folkestone and Hythe)

Despite the opening and the peroration of the Foreign Secretary's speech, there was much in between with which we Opposition Members could agree. In particular, we agree that foreign policy ought to have an ethical dimension. The foreign policy of this country has had an ethical dimension under Governments of both political parties—not simply the previous Government, but other Governments too. The trouble with the Foreign Secretary's approach is that he does his case no good by misrepresenting the past and making false claims on behalf of the present Government.

The Prime Minister and the Foreign Secretary never tire of telling the House that the election of their Government has fostered what they describe as a new spirit of co-operation between Britain and her European partners. It is certainly true that they have given up a good deal, scrapping our opt-out from the social chapter, signing up to a new employment chapter and handing over more powers to the President of the European Commission. What have they gained in return? Let us examine the so-called leading role in Europe on which the Government preen themselves so often.

On 20 June, the Prime Minister went to Strasbourg to meet his European partners and President Yeltsin. All appeared to go well until it was announced that Germany, France and Russia intend to hold annual three-way summits to improve their relationship. Britain was left out in the cold.

This week, the Chancellor of the Exchequer went to Brussels to demand that Britain be allowed to join the so-called Euro X Committee. As hon. Members will be aware, that is the proposed committee of Finance Ministers from the states that intend to participate in economic and monetary union. By going to Brussels, the right hon. Gentleman gave the impression that he had already decided to join the single currency—a little presumptuous, since the people of this country have yet to give their verdict in the proposed referendum. Leaving that aside, what was the response of his fellow Finance Ministers? How did they respond to the Government's attitude of never being isolated in Europe? They made a few sarcastic comments, brushed the right hon. Gentleman aside and pushed ahead without him. It was a complete humiliation for the Government. So much for Labour's Euro-sycophancy buying British influence.

Yesterday, we obtained further details of the shabby trick at Amsterdam of which the Government were apparently the helpless victims. The extraordinary story of the Government's own allegations that they were duped at Amsterdam deserves much greater attention than it has so far received. It speaks volumes for the way in which decisions are apparently now taken by the European Union. If true, and I have no reason to doubt what the Government say, the issue should certainly be raised in Luxembourg next week.

The story begins with the Government's wholly creditable desire to put into satisfactory words the agreement reached by the previous Government to exclude the United Kingdom from the frontier provisions of the Amsterdam treaty. One of the key issues that had to be resolved was what would happen if the United Kingdom ever decided to take part in any of those arrangements. The Government wanted to be able to opt in without any country being able to block them, and they thought that that was what had been agreed. As the Prime Minister told the House on his return on 18 June: We have the power within the treaty to go into any of these areas"— that is, asylum and immigration— if we want to. If we do not want to, we need not, but if we do, no other country can block us going in."—[Official Report, 18 June 1997; Vol. 296, c. 319.] The right hon. Gentleman was wrong, but unwittingly so. He was telling the House what he genuinely thought he had achieved, but that was not the case at all.

The truth first came to light when the Foreign Secretary appeared before the Select Committee on Foreign Affairs on 4 November. In answer to the hon. Member for Thurrock (Mr. Mackinlay), to whom I pay tribute in his absence for his part in unearthing this sorry saga, the right hon. Gentleman was forced for the first time in public to concede that the opt-in to the Schengen acquis was subject to unanimity.

This may all sound a little technical, but it is vital. If, for example, a future British Government wanted to opt into the Schengen acquis, another member state could prevent them from doing so. If Spain, for example, wanted to extract concessions from us on Gibraltar, it could trade its veto for those concessions. That is often the way that business is concluded in the European Union. The Chief Minister of Gibraltar told the Foreign Affairs Select Committee of those concerns.

How did all this happen? According to the first account that the Foreign Secretary gave, there was "a misunderstanding". He told the Foreign Affairs Select Committee: our understanding of the discussions did not entirely tally with that of the Presidency. He explained that that was because our satisfaction with the note keeping of the Presidency was not as much as we would have wished it to be and there are different recollections as to what was actually said". That seemed bad enough, but worse was to come. At oral questions last week, the Foreign Secretary revealed a little more and alleged that Spain and the Dutch presidency had struck a deal changing the treaty after the negotiations had finished. He went on to explain that he knew nothing about the deal until the following week.

One would have thought that, on such an important issue and after such an unpleasant experience, he might have got his facts right, but no—as the Minister of State, the hon. Member for Newcastle upon Tyne, North (Mr. Henderson), was yesterday forced to admit—the deal was struck between Spain and the Dutch presidency not after the hearings had concluded but during the summit on the night of 16 and 17 June. Moreover, far from being left in the dark for a week as the Foreign Secretary had alleged, the Government knew what had happened the day after the summit was concluded on 19 June.

Mr. Robert Jackson (Wantage)

Will my right hon. and learned Friend give way?

Mr. Howard

If my hon. Friend will forgive me, I want to develop my argument before giving way.

In answer to my question as to whether there was any precedent for that sort of hole-in-the-corner, bilateral deal, the Minister of State said: At negotiations such as the IGC, it is not unusual for the Presidency to reach tentative understandings with a Member State on how to handle a point of key concern to them. But such understandings would normally be considered subsequently by the full meeting."—[Official Report, 2 December 1997; Vol. 302, c. 122.] I ask the House to consider the significance of this extraordinary saga. The Government's allegation is that the text of the treaty was changed, to the detriment of the United Kingdom, as a result of a private deal between two member states which was not communicated to the rest of the council. What sort of decision-making process is that? How can anyone have confidence in the integrity of the European Union if that sort of thing can happen? What do the Government intend to do about it? The Minister of State tells us that there is no precedent for this, and it certainly did not happen under the previous Government. What sort of precedent does it set for the future? Do the Government intend to raise this matter in Luxembourg? I look forward to the Minister's answers at the end of the debate.

These are not my allegations: they are the Government's allegations, set out in detail in Hansard. The whole shabby episode gives the lie in the most vivid terms to the Foreign Secretary's claims about the wonderful new spirit of co-operation that the election of the Labour Government is supposed to have created.

Mr. Jackson

I join my right hon. and learned Friend in hoping for a full explanation of what happened. The general point of principle is that opt-outs are not always cost-free, which is something that we should bear in mind when pursuing diplomacy in Europe in future.

Mr. Howard

Any decision involves a balance of advantage and disadvantage, and few courses of action are entirely free of disadvantage, as my hon. Friend knows.

Britain takes over the presidency of the European Union on new year's day. We shall judge the Government not by their rhetoric but by the results that they achieve. The Foreign Secretary has today set out some of his priorities for the next six months. The Labour Government, he says, want to further the cause of enlargement. We agree. He says that they want an outward-looking Europe. We agree. He says that they want a competitive Europe in which business can flourish, creating jobs for the millions of people who currently do not have them. We agree. He says that the Government want to protect the environment. We agree—but how far does the Government's record live up to its rhetoric?

Let us first take enlargement. It is the historic challenge facing our generation. That phrase, or variants of it, has been repeated so often that its impact has been blunted by over-use, but it is none the less true for all that. The peace and stability of both eastern and western Europe depend on healing the division that has scarred our continent for so long. It is also our moral duty to welcome back into the European family those states which, at Yalta, fell into the hands of an alien tyranny. For 45 years, sometimes in horrifying conditions, the peoples of eastern and central Europe managed to preserve their humanity and their European identity. In 1989, by their own courage and determination, the people of the eastern bloc threw off that alien tyranny.

In 1990, I visited the very countries that the Foreign Secretary has invited me to visit once again. The sense of release, freedom and liberty that then was so palpable in those countries had to be seen to be believed. We have an absolute obligation to extend Europe's embrace to those people today. If the Prime Minister's "people's Europe" means anything, it should mean bringing the people of Europe together once again. Enlargement to the east is in our own interests, too: the trade opportunities are immense, and failure to include our eastern neighbours would simply undermine their political stability and bolster the most reactionary and anti-democratic forces in their polities.

Politicians throughout the European Union pay lip service to those sentiments, but the will to act on them has, alas, been lacking. Every member state, as well as the European Commission, is nominally devoted to enlargement, but there appears to be little political will to tackle the difficult issues that must be addressed before enlargement can take place: reform of the common agricultural policy, lower external trade tariffs, the streamlining of bureaucracy, and changes to the structural funds, to name but a few. The gap between the rhetoric of certain European statesmen and their determination to resolve some of those issues is damaging Europe's credibility in the eyes of the world. Sometimes, the Foreign Secretary himself appears to recognise that—last week, he told a Hungarian audience: I do not believe in grand gestures. I believe in getting things done. But there are few signs that much will get done.

Last week and again today, without a shred of evidence to back up the claim, the Foreign Secretary said that the election of the Labour Government had brought new hope to applicant states. I suppose it sounded like a good soundbite at the time, but it is an extraordinary claim, given his party's record. No European Government did more to assist the liberation of the former communist countries than ours—it was a Conservative Government who stood firm in the face of the Soviet threat, while the Labour party was busy advocating unilateral nuclear disarmament, hoping that, by slinking weaponless from the world stage, Britain would cease to be a target. The truth is that Margaret Thatcher brought more hope to the people of eastern and central Europe than Labour ever did; yet the Labour Government now have the gall to pretend that they are the champion of the cause of eastern Europe.

Enlargement is possible only if the European Union changes the way in which it conducts its business. The common agricultural policy, which consumes a massive proportion of the European Union's budget, as the Foreign Secretary acknowledged, cannot be sustained in its current form with 20 members; nor is it realistic to expect applicant states to adopt in full an ever-expanding acquis communautaire. The more member states there are, the greater the flexibility we need within the European Union. Institutions and mechanisms designed in the 1950s for six similar western European states cannot effectively serve the new Europe in all its diversity. The fact is that the ambition to admit even the six states identified by the Commission for early membership is quite incompatible with the continuing centralisation of authority in Brussels.

The Amsterdam summit was an opportunity to put that right—to refashion Europe's institutions so as to make them appropriate to an enlarged Community. However, far from devolving powers, Amsterdam centralised them still further. It established common social and employment policies and widened the powers of the Commission and the scope of the European Court of Justice.

Amsterdam was a blow for enlargement on two counts: first, it failed to address the reforms needed to make enlargement possible and, secondly, it made enlargement more difficult by further deepening the Union. Despite all that, the Foreign Secretary persists in claiming that Amsterdam will make enlargement easier. I hope that the Minister of State will make some attempt to justify that claim later tonight. Perhaps he would do better to drop the subject altogether—it was, after all, the Prime Minister who admitted to the House that, at Amsterdam, not as much progress was made on enlargement as there might have been".—[Official Report, 18 June 1997; Vol. 296, c. 314.] The Government claim that they want the European Union to be outward looking and there are two practical ways in which to test their commitment on that issue. First, have they entrenched Europe's place as part of a wider western security system? Secondly, have they tackled the impediments to world trade and investment between the European Union and the rest of the world? On the first, the Government agreed at Amsterdam that the Union should… foster closer institutional relations with the Western European Union with a view to the possibility of the integration of the WEU into the Union. That would suggest bringing us closer to a common European defence than before.

If the Government believe that the European Union has specific defence interests, how exactly do they differ from those of NATO? If it does not, why can defence co-operation among the European allies not be pursued through existing NATO structures? Some have clear answers to those questions—they argue that the whole point is to enable the European Union to punch its weight against the Americans. That is the view expressed by the French Foreign Minister and by Chancellor Kohl. Do the Government share that view? If not, why did they accept further concessions to that view at Amsterdam?

On trade, perhaps the Foreign Secretary would tell the House what practical steps the Government are taking to ensure that the European Union does not retreat into protectionism. We on the Opposition Benches take great pride in our contribution to world trade liberalisation. Had it not been for the British Conservative Government, it is highly unlikely that the European Union would have agreed to the settlement reached at the final round of the general agreement on tariffs and trade. Where do the Labour Government stand on that issue? During the most recent European elections in 1994, the Labour party's manifesto stated: together we can face the economic challenge from both America and Asia …and act as a counterweight to the increasing power of international finance and the global activities of transnational companies". Has the Labour party changed its mind? If so, what practical steps do the Government plan to eliminate the remaining external European tariffs?

What steps will they take to reform the common agricultural policy? We used to hear a great deal about the reform of the CAP when the Labour party was in opposition. What will the Foreign Secretary do to counter the creeping anti-Americanism that is shared by so many of his European colleagues?

The Foreign Secretary was reported this morning as saying that the middle east peace process would be a top priority during the United Kingdom's presidency. The right hon. Gentleman made no mention of that this afternoon. Will he tell us a little more about how he intends to go about that? Will the Minister of State deal with that issue when he replies?

We are all agreed that job creation should be a priority for Britain's presidency. It is an area in which Europe has manifestly failed to deliver. Over the past 20 years the United States has created 36 million new jobs, of which 31 million were in the private sector. Over the same period only 8 million new jobs were created within the European Union, with no increase in private sector employment. There are now 20 million unemployed people on the continent of Europe.

European countries need to tackle head on the unpalatable truth that, unless they cut their social costs and free up labour markets, they will be out-priced and out-performed by the rest of the world, and unacceptable levels of unemployment will persist. Red tape and regulation are luxuries that Europe can no longer afford.

The Government pay lip service to the need for fewer burdens on business, increased labour market flexibility and reduced barriers to employment. However, one of their first acts in office was to sign up to the social chapter and to accept a new employment chapter into the relevant treaties. We are talking of measures that will increase social regulation, place further burdens on business and destroy jobs. Last week the President of the Board of Trade confirmed that the Government will introduce a statutory minimum wage. As the Deputy Prime Minister has admitted, "any silly fool" knows that it will cost jobs. How can the Government hope to influence the debate on this issue when they are in the process of adopting the European social model that has done so much to destroy jobs in Europe?

Will the Minister of State be able to tell us this evening exactly what proposals the Government intend to put forward during the British presidency that will help to deliver the flexible labour markets that his party now claims to support? How can the Government hope to prevent damaging proposals being foisted on Britain when so much social chapter legislation will be passed by the qualified majority vote? The hon. Gentleman was certainly unable to answer those questions yesterday.

In the first few months of next year, crucial decisions will be taken on the single currency. The Government have said that they are in favour of a single currency in principle, but that they want to see how it works in practice. The Chancellor of the Exchequer believes that Britain should be preparing to join early in the next Parliament. Yet even if the single currency starts on time, stage 3 will be fully complete only by the year 2002. Will the Minister explain how the Government plan to judge the success of the currency based on perhaps a year's operation? How can the Minister's party credibly be in favour of a single currency—which is for ever—but opposed to the temporary fixing of our exchange rate through the exchange rate mechanism?

Many European politicians speak openly of the need for fiscal union as well as monetary union. In other words, the wealthier countries in Europe would have to pay to help the poorer countries cope with a single currency. As the current president of the Bundesbank, Hans Tietmeyer, recently said: A European currency will lead to member nations transferring their sovereignty over financial and wage policy as well as in monetary affairs. It is an illusion to think that states can hold on to their autonomy over taxation policy. Do the Government agree? If not, why not?

Will the Minister explain why the Foreign Secretary told the House on 28 October that the Government would not be making "any application" for European Union money to promote the Euro when the Chancellor of the Exchequer had just done precisely that? If there is to be a "general information" campaign, will both sides of the argument be presented? Will we hear the case for and against economic and monetary union? Or will there merely be a propaganda campaign for a single currency?

It is a proud moment for a country to hold the presidency of the European Union, and we wish the Government well. We want to see progress made on enlargement, on jobs and on reform of the CAP. Tackling crime and environmental pollution should also be priorities. Thanks to the legacy of the Conservative Government, Britain can now hold its head high in Europe.

Mr. Robin Cook

Surely the right hon. and learned Gentleman will not move into his peroration without giving us his latest state of thinking on a referendum on the Amsterdam treaty. Will he now answer my question? Will he be recommending that his colleagues vote for new clause 47?

Mr. Howard

I note with great interest that the Foreign Secretary did not rise to intervene in my speech when I described the shabby trick perpetrated on his Government at Amsterdam. He did not seek to challenge one detail of the recital that I set out. The referendum is the Government's problem, not ours. It is the Government who are so keen on referendums. It is the Government who are holding referendums on Scottish devolution, Welsh devolution, regional devolution and on whether there should be a mayor and an authority for London. It is the Government who are so besotted with referendums.

Mr. Cook

The right hon. and learned Gentleman demanded a referendum as recently as October. When did he change his mind and why did he change it?

Mr. Howard

As I have said, it is the Government who are besotted with referendums. If the Government are so keen on them, the logic of their position is that they should hold one on Amsterdam.

I was dealing with job creation. We in this country have a higher proportion of working-age people in work than any other country in the EU. On the environment, thanks to the action of the Conservative Government, we are meeting our Rio target for cutting greenhouse gases. On law and order, we have seen crime fall every year for the past four years, to a greater extent than ever before.

Our vision for Europe—the Conservative vision—is of an outward-looking, flexible Europe. The nation state must remain the basic building block of the EU. People are naturally proud of their own countries and politicians who ignore that sense of pride do so at their peril. Trying to build new institutions or transferring wide-ranging powers from long-standing institutions to new ones will end in disaster if those new institutions do not have the wholehearted support of those whom they are supposed to serve. That is why we oppose the extra powers for the European Parliament and the extension of qualified majority voting as agreed at Amsterdam. It is also why we argued for reform of the European Court of Justice.

The Government have made an inauspicious start in their relations with the European Union. They have been cold-shouldered out of the Franco-German-Russian troika, blackballed from the Euro X Committee and duped over the opt-in to the Schengen acquis. It has been a sorry saga. The Conservative Government demonstrated that it is possible both to stand up for Britain's interests and to lead in Europe. The Conservative Government simultaneously fought for our rebate and created the single market. We obtained the opt-out on economic and monetary union that the Labour Government are using. We raised the standard for a dynamic, outward-looking, job-creating Europe. We shall continue to keep that standard held high in opposition, and we shall hold the Government to account.

5.59 pm

Mr. Denzil Davies (Llanelli)

My right hon. Friend the Foreign Secretary spoke eloquently about the need to ensure the enlargement of the European Union to bring in the countries of the former Soviet Union—the colonies, as he described them. We on the Government Benches do not begrudge him his travels to those countries to ensure that the principles of democracy are well founded and well established, but I could not help thinking—a little heretically, I have to say—that if we were not, member of the European Union, what would the Foreign and Commonwealth Office do, poor thing?

I shall concentrate my remarks on the budget. My right hon. Friend mentioned the budget and, quite properly, said that there have to be changes somewhere along the line. Chapter 3 of "Developments in the European Union" mentions the budget for the calendar year 1998 but does not mention—I make no criticism, as it had not been mentioned in previous years—Britain's net contribution. It is quite difficult to find out our net contribution in any particular year, because we still deal in fiscal years and "they over there" deal in calendar years, and because the payments coming in do not always immediately match the payments going out. It is not easy to forecast at the beginning of a year the projects that will be accepted and the payments that will come in.

I finally found some figures in the old-fashioned Red Book of the right hon. and learned Member for Rushcliffe (Mr. Clarke). I am not sure whether we still have a Red Book—I found two red and green books. The figures were merely forecasts, and perhaps this year has been a bit better because of money coming in as a result of the bovine spongiform encephalopathy problems—I do not know—but over the next three years our average net contribution will be about £2.5 billion. That has, more or less, been the average figure over the past few years. That is a lot of money. The result of 1 p on income tax is, I am told about £1.8 billion, so £2.5 billion every year comes close to 1½p.

Mr. Denis MacShane (Rotherham)

Is that all?

Mr. Davies

My hon. Friend asks, "Is that all?" but we shall argue next week about £400 million in respect of single-parent families. He might not think that £1.8 billion or £2.5 billion is much, but compared to the £400 million they are large sums of money. Over four years, that £2.5 billion amounts to £10 billion.

Some of us go back a long way in the House. Indeed, some of us were at the Treasury when the transitional period came to an end. In 1978–79, our contributions shot up. Eventually—it took three or four years—Mrs. Thatcher, with considerable political will, was able to obtain the Fontainebleau agreement. If it had not been for that agreement, our contributions would now be about £4 billion a year. I ask my hon. Friend the Minister a rhetorical question. What will happen to the Fontainebleau agreement as we move towards 1999 and 2000 and the restructuring of the budget? I am sure that my hon. Friend does not know, and I do not blame him for that.

My hon. Friend the Member for Rotherham (Mr. MacShane) might not think it a lot of money, but I found an article inThe Economist of 9 August 1997, entitled "Who pays most?" It includes a table for the calendar year 1995. The figures were taken from the Court of Auditors report. To show that I at least try to do my homework, I looked through the latest Court of Auditors report to see whether there was a similar table, but I did not get further than volume one. There might be a second volume, but I do not think that the hon. Member for West Dorset (Mr. Letwin), who has, perhaps, spent more time than I have studying this in the past few days, could find a similar table either.

Mr. Oliver Letwin (West Dorset)

It may interest the right hon. Gentleman to know that various members of European Standing Committee B asked for those figures precisely because they could not be found. The figures have not been released, despite the fact that four weeks have elapsed. I suspect that the right hon. Gentleman will agree that that suggests that the figures are rather worse.

Mr. Davies

Perhaps my hon. Friend the Minister can supply the hon. Gentleman with the figures when he replies to the debate.

The article shows that, in 1995, Germany contributed 140.2 per cent. of total net contributions to the European Union budget. The gross domestic product per person in Germany, as a percentage of the European Union average, was 106.7 per cent., whereas France's percentage of total net contributions was only 18 per cent.— its GDP, at 107.2 per cent., was higher than that of Germany. Italy did even better with a net contribution of 6.4 per cent. and a GDP of 101 per cent. Chancellor Kohl has every right to complain, as do we, because according to the table, we contributed 49.3 per cent of total net contributions. Almost half the net contributions to the budget came from Britain, whose GDP per person was 98.2 per cent.

I understand how the budget works—we have all looked at it in great deal detail, and the position might be different this year—but it is extraordinary that we were contributing almost half the net contributions, yet, as my right hon. Friend the Foreign Secretary said, we are well down the line in terms of GDP per person.

I could not help looking at the figures for Ireland. I do not want to inflame Welsh farmers and make them throw any more very delicious Tesco beefburgers into the waters of Holyhead harbour, Fishguard or anywhere else, so I shall mention this quietly, but Ireland's net contribution to the EU budget was minus 19.7 per cent. In 1995 its GDP per head as a percentage of the EU average was 85.3 per cent., which is the same as the GDP per person in Wales. In fact it is probably slightly higher than in Wales. One can understand why Welsh farmers feel aggrieved when their incomes are going down and they have to endure imports of Irish beef. Welsh farmers contribute—perhaps they do not pay as little tax these days as they would like—to the European Union, whereas Ireland receives so much money back. My right hon. Friend the Foreign Secretary well understands the problem, but we really must look at the figures.

It used to be said that these payments are for being members of the club. I have not heard the latest "clitch"—as Ernie Bevin used to describe it—recently, but the European Union used to be described as a club, and we had to pay a membership fee. Clearly some countries do not pay a membership fee; others pay a very large membership fee. That should be examined.

Local authorities and enterprise groups around the country set up projects so that we can get a bit of our own money back. I do not blame the Treasury for encouraging them to do so. Some very good projects are dreamed up. In a recent debate, hon. Members representing Liverpool were worried about the city losing its objective 1 status. I asked rhetorically, "How on earth did Liverpool obtain objective 1 status"? I am told that perhaps the right hon. Member for Henley (Mr. Heseltine) arranged it, but I do not know. Parts of south Wales are much poorer than Liverpool: it is not the poorest region, area or town in Britain. Large parts of south Wales are much poorer in terms of gross domestic product than Liverpool, but they do not have objective 1 status. I mention that en passant.

We are always looking for projects. Many of them do not stand up to proper economic analysis. It is nice to have the money, but I get the impression that many of these projects merely provide work therapy for the middle-class people who run the enterprise groups. They are earnest, energetic men and women, who go off to Brussels with large folders. They try to pretend that this money is beneficial to their areas: perhaps much of it is.

Mr. Gill

The right hon. Gentleman makes a very interesting point. Should not that money be spent in accordance with the wishes of the House? The right hon. Gentleman referred to our net contribution to Europe, but surely we should concentrate on our gross contribution. That huge amount of money goes beyond these shores, and other people decide how it should be spent. That money must be raised from the British taxpayer, not just the net amount.

Mr. Davies

I tried to find out what our gross contribution is, but I gave up, because I could not work it out, so I shall leave the point there. Perhaps the hon. Member for West Dorset, who is itching to intervene, could tell us?

Mr. Letwin

As always, I have followed the right hon. Gentleman's remarks with great interest. Is he aware of a further problem that is dawning? It relates to the point that he has just made. The Community's budget has traditionally been adjusted from year to year on the basis of expectation. We discovered from the Economic Secretary to the Treasury that it now lies about 40 per cent. above actual expenditure in the past year. If, in this coming year, the European Community spends up to the budget provided for 1997–98 in the preliminary draft budget and the draft budget, the net and the gross contributions to which the right hon. Gentleman and my hon. Friend the Member for Ludlow (Mr. Gill) referred would rise by 40 per cent.

Mr. Davies

Some years ago, the Treasury tried to explain to me about commitments and actual payments. In those days, the good old Treasury did not like this system. It did not like making commitments for future years: it likes to sow and reap in one year. The Treasury has been worn down, and has had to give in to this new fashion. I accept and understand the hon. Gentleman's point.

If we did not have to pay the £2.5 billion, there would be plenty of money for Liverpool. There would be no need to worry about losing objective 1 status, because the money would come from good, old-fashioned public expenditure.

That £2.5 billion is a charge on the Consolidated Fund, and we cannot do anything about it. All Chancellors and Chief Secretaries have to consider cutting public expenditure, but they cannot cut the £2.5 billion, because it is a charge on the Consolidated Fund. The Chancellor is keeping to the same control totals as the right hon. and learned Member for Rushcliffe. He has control over the vast range of public expenditure, but he has no control over our contribution to Europe: if the figure goes up, he can do nothing about it. It is a different type of payment.

During the debates on the treaty of Amsterdam, several hon. Members referred to qualified majority voting. As a matter of principle, I am not too happy about qualified majority voting. I take the old-fashioned view that international organisations should determine matters by consensus. We are told that, if there had not been qualified majority voting, the single market would not have been created. That is an a priori statement: I do not know how it can be proved. At the Uruguay round, a hundred countries were able to agree, not by qualified majority voting but by consensus, on the most major step forward in the freeing of international trade since the general agreement on tariffs and trade was established at the end of the second world war.

Britain could be outvoted on a matter involving expenditure. A few years ago, large sums of money were quite rightly spent on cleaning up our beaches and ensuring that our water was clean and fit to drink. Whether that expenditure was decided by qualified majority voting, I do not know. Britain could be in the minority on such a decision. That expenditure would become a charge on the Consolidated Fund. A future Chancellor could not take such expenditure into account when determining cuts in public expenditure. The area of public expenditure over which a Chancellor, and ultimately the House, has control would thereby be reduced. That is contrary to the democratic control that we like to think we have over expenditure.

We are a modernising Government: we are modernising the constitution, the welfare state and the electoral system. Let us have a bit of modernisation of the European Union. I know that it will be difficult.[Interruption.] The hon. Member for Hertford and Stortford (Mr. Wells) should not laugh, because this is a serious point, and I am sure that my right hon. and hon. Friends are taking it to heart. The Government's energy and desire for modernisation should be focused. It will be a hard battle. Baroness Thatcher managed it to some extent, but the Labour Government in 1978–79 failed because they lacked the political will at the top. If there is now the political will, we can modernise this wretched budget, so that we do not pay in any more than we take out.

6.17 pm

Dr. Liam Fox (Woodspring)

I think that hon. Members on both sides of the House can agree on two points. The level of debate in this country on the subject of Europe has been far too low. It has been conducted at the level of five-year-olds wearing pro-European and anti-European badges. There is far too little debate in the public domain, as reported from this House by members of the press who are again absent today. There is far too little debate about the substantive issues involved in these complex subjects.

For a few days, I tried to look at the newspapers objectively to see whether I, as a member of the public, could glean any understanding of the issues. I was fully aware of who was on what side, who the personalities were and who their opponents were, but I was totally incapable of deducing from the written press what issues divided the individuals. I am afraid that that has been one of the pitfalls in recent years. We should take the debate to the level of the contribution of my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard). The Conservative party will be leading the debate in the next four years or so, while we wait to return to government.

There is another debate that we should have: the debate that dare not speak its name. We should determine the parameters in our relationship with the European Union. Both the Conservative party and the Labour party are split on Europe: they are the only two parties that matter, because they are the only two parties that will govern this country. The split is not down the middle.

There are splits on the fringes of the parties. Some people say, "We must get out of Europe because it is foreign." Others say, "We must accept everything with a Euro prefix because it is necessarily wonderful." The vast majority of us are in the middle, and we consider objectively what is in Britain's interests. We do not engage in knee-jerk reactions, pro or anti. An institution can be only what we mould it to be. Therefore, we cannot accept the words of those who say, "We must get out of Europe because we do not like some things in it," nor can we say that we must stay in Europe at any price, irrespective of what Europe dishes up. Those are not rational positions for a Parliament which says that it governs in the interests of the British people.

We must be frank about the good features of Europe. The Foreign Secretary spoke about Europe's ability to take Spain, Greece and Portugal within a short time from military dictatorships to stable democracies. However, we must also be frank about Europe's bad features. In countries such as Spain, there is utterly unacceptable structural unemployment. More than a third of young people are out of work, and that is quite unacceptable. In terms of enlargement, we must accept all those arguments, because, if there is to be meaningful and successful enlargement, there must be fundamental policy changes in Europe, not least to the common agricultural policy, which would simply be incapable of sustaining the strains that would result from the increase in membership from eastern Europe.

There must also be a change in the culture of the European Union. A good example of how that culture must change came to my desk when I was a Foreign Office Minister in the previous Government. The Germans, the French and others were championing the newly emerging democracy of South Africa. They said, "We want to help. We want to do everything possible." Their first chance to help was to open European barriers to South African trade. They said, "Of course we can open them, but not to agricultural products." That was the one area in which we could have helped that emerging economy, but we were incapable of doing it because, despite all the rhetoric about the EU having an outward-looking foreign policy, when it came to challenging the interests of small French and German peasant farmers, the politicians could see no further than their next election. That is the fault line in the enlargement process.

The European Union's approach to the third world needs a great deal of looking at again. If we are serious about helping developing countries, the one action that we in Europe can take is to open our markets to their goods. There is no point people in Europe saying that they want to help while operating protectionist policies. As a free-trading country, Britain must take the lead on that. We need a new outward-looking Lome convention and a new African, Caribbean and Pacific arrangement, so that the ACP countries are dealt with on the basis of their economies and not their geographical locations. It is nonsense to treat a country with a single-commodity economy in the same way as one with a large complex economy and give them the same aid.

Britain can be proud of the quality of its aid. In my experience of dealing with that subject as a Minister, there is a great deal to be desired about the way in which the European Union manages its aid projects. There is a great deal more to be said for the cost-effective way in which we manage such projects than about the way in which they are managed through the EU. I hope that the Government will look again at the relationship between our bilateral and multilateral aid programmes, especially in terms of aid that goes through the EU and the quality of the aid that we can deliver relative to the size of our budget.

We have a pivotal role in Europe, because we are not just European—we have a wider perspective as a result of our history, our links with the United States and our membership of the Commonwealth. Those factors give us a different perspective from that of our European partners. In Europe, diversity is almost regarded as bad. We should be proud of the fact that we have a different perspective to bring to Europe. Perhaps the greatest feature that we can bring to it is that we are a free-trading nation.

I have great respect for the Foreign Secretary, but I was appalled when he tried to perpetrate the con that is so often perpetrated about the quantity of our trade and its relationship to Europe. He said that the majority of our trade was with Europe. It was only when he was pulled up about whether he was referring to visible trade that he gave way. For anyone to pretend in this nation in 1997 that our invisible trade is less important is utter nonsense. I think that it goes back to Labour's dislike of financial services and the City of London and to some of the basic character traits that no soundbite can quite excise. It shows that Labour is not as in tune with the importance of the City of London and our invisibles as it should be.

No matter how one looks at it, arithmetically, if 47 per cent. of our trade is with the European Union, 53 per cent. is with countries outside the EU. That means that it is far more important for us to have an outward-looking Europe and to move towards further trade liberalisation. We must take some matters on board. Since the beginning of the decade, only two countries in Europe have sustained their share of world trade. Italy has held its share, while Britain's share has marginally increased. Every other country in the EU has had a diminution in its share of world trade in this decade.

Why, oh why are the Government signing us up to the possibility of having legislation imposed upon us, when that legislation has led to the very Euro-sclerosis that has resulted in the other European countries losing their share of world trade? We have worked hard to deregulate our economy and to increase once again the proportion of world trade that we are able to call British. Why should we want to put ourselves at a positive trading disadvantage?

Mr. Bercow

Did my hon. Friend notice how the Foreign Secretary failed to respond to the point that in the United States between 1974 and 1994, some 31 million private sector jobs were created, whereas the figure in the European Union was nil? That is the comparison between the deregulated market in the United States and the over-regulated labour market in the European Union.

Dr. Fox

My hon. Friend makes an excellent point. Perhaps I may paraphrase what he said. The real people's Europe is the one in which people are working, not the one in which politicians get to fulfil the timetables of their political dreams. What we mean by a people's Europe is one in which prosperity and economic freedom are given to the people; not a Europe in which those who lead European political parties get to follow utterly false political timetables to bolster the political esteem in which they hold themselves rather than to help their nations.

One of the big problems is that Europe is driven by abstract political considerations. If Europe moves together at some time in the future, there may be arguments for structural economic change. But what if it does not? If we all move around more freely, learn to speak the same language, and have proper pension arrangements and genuine convergence, we can make appropriate arrangements. We do not close a hospital in the hope that people will get healthy next year. We wait to see what happens first.

What is currently happening in Europe is dangerous. I am not in any sense anti-European, but if the present process is driven too fast and too far, we risk losing all the good that Europe has done and which I mentioned earlier. There is a positive danger of driving Europe into a nationalist backlash, which will result in the resurrection of all the political traits that we sought to eliminate by having the European exercise in the first place. The Government are doing nothing to put the brakes on the current process: they are merely trying to gratify their own egos at European conferences.

Mr. Letwin

When the Foreign Secretary was speaking, there was an interesting example of precisely that problem. The Foreign Secretary systematically confused, did he not, the word "weaker" with the "word looser"? Is it not exactly part of our thesis that a looser union may be a stronger union and could be sustained?

Dr. Fox

The final part of my hon. Friend's intervention is exactly right: sustainability is the issue. There is no point in reaching a short-term solution that will enable pro-European Governments to rush to their electorates. What matters is that over the next 20 to 100 years we can create stable institutions. Just as there must be more flexibility in the wings of an aircraft as the aircraft gets bigger, so in Europe we shall fall out of the sky by trying to achieve too much, too fast.

We must accept that our European partners are not only partners; they are competitors on the world market. It gives me no great pleasure when a company locates in Germany or France, as opposed to the United Kingdom. I do not think, "Hurrah—more jobs have come to Europe." The job of the House is to defend British interests. I am not here to defend the economic interests of the electorate of Athens, South or Lisbon, West. Our job in this House is to do what is good for the British people. As long as we are competing, we must keep a competitive economy.

There is a fundamental difference of view between us—a free-trading nation—and some of our European competitors. Whereas we have always seen the European Union as a potential stepping stone to world trade liberalisation, there remain too many politicians on the European continent who see it as a means of protecting their own economies from the harsh economic winds that blow in a global economy.

We cannot be both a free-market Europe and a fortress Europe: only one of those views can prevail. We must ensure that a free, outward-looking Europe prevails. I have no great confidence at present that that view will prevail.

I look at the examples of how we have worked together in recent years, and I shudder at the prospect of EMU. One of the questions with which the Foreign Secretary did not deal adequately—I look to the Minister of State, Foreign and Commonwealth Office, the hon. Member for Newcastle upon Tyne, North (Mr. Henderson), to deal with the matter this evening—is the currency of denomination of trade.

When I was a Treasury Whip, and subsequently, I believed that there were figures held in the Treasury that were unhelpful to those who wanted to push forward the EMU agenda, so on 2 May, or as soon as I could, I used one of the few advantages that we have in opposition, to try to get the whole answer out of our former civil servants, rather than half the answer, which we knew previously. I started to ask questions about currency of denomination.

On 19 June, the Economic Secretary to the Treasury replied: The most recent official data on the currency of invoice of UK trade can be found in the Central Statistical Office's Business Bulletin, Issue 12/89 'Currency of Invoicing', published on the 15 December 1989. The currency of invoice of UK trade is one of many factors the Treasury considers in assessing the short-run impact of exchange rate changes on the economy."—[Official Report, 19 June 1997; Vol. 296, c. 268.] I was a little perplexed. If the Treasury was using that to measure the short-run impact on the economy, but had no information since 1989, what on earth was going on? Either the Treasury used eight-year-old statistics to try to monitor the present economy—unlikely—or the Treasury has been gathering such information, but has decided that it is probably in our interests as a Parliament not to know about it, because it might not suit the Treasury's agenda.

I tried and tried, and with the open government that we now have, I have almost got there after several months. In November I received an answer from the Economic Secretary, which states: Publication of regular data on currency of invoice ceased in 1988"— so the previous answer was wrong:—but the available evidence suggests that use of foreign currency is fairly stable over time."—[Official Report, 13 November 1997; Vol. 300, c. 625–26.] I am unable to get the data, but at least that one-sentence summary of the data shows where we were in 1989. The point is this: when a previous Chancellor followed the policy of shadowing the deutschmark, we were conducting intensive studies to show which currencies the UK traded in. The result was that at that time, with whichever trading partner and whichever goods we traded in, about 89 per cent. of our trade was done in sterling or in dollars. What proportion was done in deutschmarks? Four per cent. of our trade, and the Treasury says that that is stable over time.

That cannot provide an economic case for linking sterling with another continental European currency. If there is an economic case, it must surely be to link sterling with the dollar. If what the Treasury now tells us is true, we would merely substitute sterling-dollar volatility for euro-dollar volatility. Although the continental economies that trade in their own currencies would be protected from the uncertainties of interest rate changes, we would hand over a trading advantage while getting no advantage for ourselves.

I may be utterly naive, but I do not believe that we are here to provide our European competitors with a trading advantage. That may be helpful to the Prime Minister in gratifying his ego when he goes to shake hands with the masses on the continent of Europe, but our job is surely to protect the interests of those who take part in the British economy.

Mr. Gill

Would my hon. Friend be interested to know the answer that I received to a question only this week, when I asked what consideration the Treasury would give to linking sterling to the dollar? The Treasury's answer was,"None." Does that surprise my hon. Friend?

Dr. Fox

Frankly, I am surprised at any straight answers that come out of the Treasury. On that particular answer, it does not surprise me that the Treasury should say that. The essence of the argument is that EMU is not an economic case. It might be partly an economic case, but EMU is about politics. It is about whether we move to a united states of Europe.

If we have a single currency, we shall have a single issuing authority. If we have a single issuing authority, we shall have a single monetary policy. Sooner or later, we shall have a single fiscal policy, because the Commission will extend the current proposals on fiscal harmonisation, and we shall be in a united states of Europe.

I did not give up my relatively lucrative career as a GP to become a district councillor. I do not think that we should sit back while the argument is made about the diminution of our sovereignty economically and politically, and pretend that it is an economic argument.

Mr. Letwin

My hon. Friend suggests an extremely interesting line of argument. Does he agree that it could be taken one step further? It is a matter not merely of the trade weighting of our currency, which he so powerfully illustrates, but of convergence. If there is genuinely an argument for EMU in terms of economic convergence, does he agree that our convergence with the economy of the United States is at a far more advanced state of development than our convergence with the economies of continental Europe?

Dr. Fox

I am almost tempted to go down the line of debate that my hon. Friend suggests, but as he is far more expert in it than I am, I shall not do so, and also because I do not believe that we must link our currency to anything at all. I am quite happy for our currency to remain utterly unlinked. We have done dramatically well in the past decade using sterling in the current world trading environment.

For all the European dreams, oil will continue to be sold in dollars, and it does not matter how important Europe thinks it is. That is what the markets do. The commodities traded through the City of London will continue to be traded in dollars, because that is what the world does. It may be inconvenient for Europe to realise that it is not the centre of the world, and that what is said in Brussels will not be globally interpreted as the law.

There is a real world out there, and real markets that represent the cumulative economic activity of billions of people, and they are more important than what bureaucrats say in the European Union. We must understand that, because it will make the difference between our economic success in the future, and our economic failure.

Mr. Letwin

I am grateful to my hon. Friend; I shall not interrupt him again. I was by no means suggesting that we should link our economy to the dollar. Rather, I was using that as an illustration of his argument that EMU is a political project, not an economic one. Were it a purely economic argument, serious consideration would be given to the two possibilities. Because it is being undertaken for political reasons, only the possibility of EMU is being considered.

Dr. Fox

There might be a point in the future at which such was the economic convergence that we would have to consider whether the economic well-being of what existed in the real world outweighed the loss of political sovereignty, but we are not at that point now.

The project is being pushed too far, too fast, on a political timetable, not an economic timetable. That is where its weakness lies. It is not outward-looking. It pretends that Europe can do more in the world economy than it actually can.

My argument is not that Europe is foreign. My argument is that Europe is not foreign enough. It contemplates its own navel far too much, and looks to the outside world far too little. That is an inherent weakness in the European case. We need a Europe that looks outward, that is built on the nation state and that respects the nation state. I have no problem being Scottish and being British at the same time, and incidentally, representing a west country seat. At the same time, I am an unashamed Unionist. I have no problem being British and European, but I have no intention of ever being European first and British second. I am happy to co-operate with our European partners, to work with them and to share sovereignty when it is in our mutual interest to do so, but I do not want to be governed by them. Therein lies the difference.

New Labour talks about new influence, but we are sidelined and will continue to be sidelined. The people's party talks about a people's Europe, but it delivers a politician's jamboree. The Prime Minister talks about promoting Britain's interests, but he gratifies his own ego at the same time as providing us with a slow surrender. We have no confidence in the Government's ability to defend and promote our interests in Europe, but it gives us no pleasure that that is so.

6.40 pm

Mr. Peter Temple-Morris (Leominster)

I am pleased to be called in this debate, which is particularly appropriate for me. It is a sort of maiden speech mark II and it is many years since I made my first one. It is symbolic that I should follow three of what I would term Euro-sceptical speeches, albeit of varying intensity, and I would not say that I disagree with everything that was said in them.

It is symbolic, too, that I should follow the right hon. and learned Member for Folkestone and Hythe (Mr. Howard)—I am sorry that he has chosen to go for a breather, or wherever he has gone—because he has been a personal and family friend for 37 years. During that time, particularly the latter part of it—this is necessary background—he and I have parted political company increasingly generally, but particularly on Europe in recent years. That is sad. It happened when I sat on the same Benches as the right hon. and learned Gentleman, both in opposition and in government. What I am going to say now is nothing different from what I have already said from the Conservative Benches, and I am sure that everybody is all too familiar with my views.

What ran through my thoughts and emotions as I listened to the right hon. and learned Member for Folkestone and Hythe was that it is too distant a dream to believe that we could ever have a debate in the House, particularly between the two Front Benches, that is constructive about Europe; about Britain within Europe and advancing towards the leadership of Europe. I very much regret the fact that there is a gulf between the two major parties. I respect the strength of the views held by those who take a Euro-sceptic position—I have always respected their views and I have had many outings of various sorts with them over the years—but it is not healthy for British politics and it is not in the national interest.

This is obviously a bit of a personal statement. It is an opportunity for me to make a general speech about Europe. That is why I waited for this debate rather than indulging in debates in the Committee considering the European Communities (Amendment Bill), as that would have limited my comments. I value the opportunity to make this personal statement. I shall stick to Europe, but I shall include a little about what has happened to me in relation to recent events to do with the European Union.

I am sure that everyone will be relieved to know that my few words will not develop, in their motivation or intent, into any sort of attack on my former party. Obviously, there will be criticisms because, goodness knows, I made my views known when I was sitting with my former colleagues.

It is worth remarking that I have served in the House for nearly 24 years as a Conservative Member. Throughout that time, I have been a known and active pro-European. My views are the same now as they were when I first came to the Bar to take my seat. Goodness knows how many speeches I have made in the Chamber about Europe over the years, let alone the broadcasts I have made on virtually every aspect of the subject. One of the main things that brought me into British politics and into the Conservative party—I must emphasise that—was Britain's future within the European Union. Therefore, this is a sad speech for me.

I have dealt with my role in the Conservative party and with my increasing discomfort within it. I have not enjoyed, and have positively suffered over—this is a known fact and not a criticism—the fact that the Euro-sceptic drift of recent years has become increasingly pronounced. I believe that, during the previous Parliament, my right hon. Friend the Member for Huntingdon (Mr. Major)—I say this as a tribute to him—had a miserable time. In my estimation—there is a reasonable chance that he would agree with me—I think that he found the Conservative party virtually impossible to lead on European matters.

I believe fundamentally that the trend within the Conservative Government, and now the Conservative Opposition, is profoundly against the national interest. I believe that Britain belongs in Europe and should be a leader of Europe. We have a unique contribution to make, and I am delighted that we are now setting the stage for actively making that contribution.

I have been overtly in favour of a single currency in principle for many years. I said that on at least two occasions in the House while still belonging to the previous Government—I have held my view for a long time. I campaigned overtly in favour of a single currency in principle during the general election, and, for the first time, for obvious reasons, I had a personal election message on my election address, which was sent to all my electorate. I came out in favour of a single currency, in spite of all the clamour and drama that was going on with millionaires' money going around the place. I campaigned publicly in that way and I am pleased that I did so in view of what I have now felt obliged to do.

I have now come to the more recent run of events, but I cannot give the House the whole saga of what I have gone through. The culmination almost came some weeks ago when I was in Dublin with the Foreign Secretary. In fact, it did not come then; because of events, it took place just two weeks later.

I find totally unacceptable the shadow Cabinet decision of 23 October that, put simply, Britain should be outside a single currency for 10 years or at least the next Parliament. I am told that I had a freedom to express my views within the Conservative party—although the action towards me does not seem to suggest that—but I could not put myself forward as some sort of licensed dissenter. By standing as a Conservative candidate, I would be campaigning for a party to be elected to the Government of this country when it had views with which I was licensed to disagree. I cannot accept that shadow Cabinet decision in principle. It is totally the wrong decision.

The decision is that we should be outside a single currency for 10 years and then, apparently, we might be able to join after 11 years. The decision to be out for good and to be against a single currency in principle—I believe that many of my former hon. Friends think this anyway—is something which one could respect and with which one could disagree. Just clutching 10 years out of the air is politically irresponsible, because circumstances could change. If one is not against it in principle, it seems peculiarly foolish to set a time limit when circumstances might change. Within those 10 years, it may become manifestly in the national interest to join a single currency. If, by some accident of fate, we had a Conservative Government during that time, the country would be gravely disadvantaged.

Dr. Fox

The Government are preparing to enter the EMU after the next election without knowing what the risks might be. That system is unproven and there is no exit mechanism. Is that not an infinitely greater risk?

Mr. Temple-Morris

I will deal with the Chancellor's statement later in my speech, but I agree with it. As the hon. Gentleman knows, the grounds for joining were set out very thoroughly in the statement. Any delay in the matter, which may not be in the national interest, has very little to do with the Government and virtually everything to do with the legacy that they have inherited from the previous Government.

Mr. Robert Jackson (Wantage)

Is there really all that much difference between the Government's position—which is to hold a referendum in perhaps five or six years, after the next general election, and to join a year or so after that—and that of the Opposition?

Mr. Temple-Morris

There is every difference between the two positions, most especially because the Government have made a decision in favour, in principle, of a single currency. It is as simple as that. There is now—since day one after the general election—a totally different attitude in virtually every Government pronouncement on Europe, in marked contrast to the previous Government's constant hostility over things European large and small, which did this country absolutely no good. The previous Government's pronouncements were made for petty and party advantage, and their strategy did not work in the general election, which was the ultimate proof.

I have been obliged to state, because of interventions, that I can easily accept the Chancellor's statement of 27 October. I welcome a decision in favour in principle of a single currency. The decision is vital. I cannot understand how Conservative Members can say that—somehow, by using some miracle or conjurer's smoke—they are anywhere near the Government's position on the matter. Anyone who has listened to the early speeches in the debate, Front-Bench or Back-Bench, will be very clear about that.

The statement on the Government's position was pragmatic and sensible, and its timing was utterly understandable. As I began to say earlier in my speech, a referendum on joining is to be won. Anyone who believes in Britain's joining a single currency realises that rigorous terms will have to be met before we can do so, and that we will have to win that referendum.

Any fair observer will have to agree—it is widely acknowledged in the press—that the Government's inheritance has not been a good one. Years and years of constant Euro-bashing, which continues, has had its expected influence on the British public. Moreover, the Government's task has not been made any easier by large elements of the media, tabloid or broadsheet. The views of one or perhaps two newspapers almost make the Conservative party sound like Euro-enthusiasts, which is quite an achievement in this day and age.

The referendum is an important factor for the Government. I provide a case in point on a referendum, because of the considerable correspondence that has come my way over the past 10 days. My view—both personally and from the sensible contents of that correspondence and having talked to people in all walks of life—is that the British people are coming round sooner than expected on the European issue.

I accept entirely the pragmatic nature of the Chancellor's statement, but I am also a personal example. I think, and I hope, that the change in public opinion will accelerate. All I say to Ministers is to get us into that single currency as soon as is practicably possible. I have deliberately used the word "practicably"—because it is in the national interest for us to be in there sooner rather than later.

To escape the lock of my own position and of the single currency, I should like to make some general points on Europe. Although I will start with issues relevant to the single currency, I will not repeat myself. There are two additional points, one of which—the Euro X Committee—is extremely important and has already been dealt with partly in the debate. Unlike the right hon. and learned Member for Folkestone and Hythe, I welcome the Chancellor's attempts to get on the Committee. It was very much in the Government's and the nation's interests that he should try to get on it, and I hope that there will be a change of mind and that he will be able to do so. Goodness knows, however, it will not be an easy task because of the position on that issue with which the Government have been left.

I am not alone in thinking that it is inevitable that the X Committee will develop into a power centre with interests way beyond the affairs of bankers and currency dealers and that it is the beginning of an inner core or a first tier. As the committee will deal with the enormously important issue of the single currency and form an inner group that will meet in an only semi-institutional manner, in which national bonding will occur, it is but the beginning of something which will go far further. It is important to join the single currency so that we can be part of that committee and all the developments that will flow from it.

Another point to consider on economic and monetary union and the single currency is that our interim situation should be as short as possible. During the interim period, we will inevitably—the Governor of the Bank of England was talking about it only recently—be tied to decisions taken within the currency, even if we are outside it. The single market, for example, will ensure that that is so. It is not advantageous to the United Kingdom to be tied to decisions that we do not play an intimate part in formulating. Therefore, I hope that the interim period will be as short as possible.

All hon. Members know—I am sure that the Foreign Secretary, in his six months in office, has had abundant examples—that the common foreign and security policy is a very nationalistic issue. By no means, however, is the United Kingdom nationalistic in our foreign and defence interests. The policy is too important for this country to be left out of any developments that may, and eventually will, occur under it. It is in everyone's common interest to get together on the issue, simply because—it is common sense—the members of Europe have far more clout as a whole than does any individual member, however historic its world role may be.

In defence, we have already had an active and positive example of collective interest. We have worked bilaterally, most particularly with France. It is evident that European co-operation is necessary, and painfully evident that it is in our financial interests.

Flexibility, concentric circles, tiers—or whatever one calls it—will become inevitable within the existing, let alone a larger, Union. The temptation for our Government, or any Government, will be to be left behind by the excuse that any flexible system provides. As a general criterion, we must be active in any top tier of authority that will have serious effects and consequences for the British people. I believe that, as matters develop, there will be ever more tiers of authority. Such tiers will be positively encouraged by the doctrine of flexibility.

Britain is in Europe, and we will stay there. Thank goodness we have given up shouting from the sidelines. Under this Government—who are very much one of the principal reasons why I sit on the Government Benches—Britain can now begin steadily to return to the leading position in Europe that we should have firmly occupied many years ago.

6.58 pm

Mr. David Heath (Somerton and Frome)

It is a pleasure to speak in a debate in which most of the speeches have been constructive and lucid. After four debates on Europe in the House in one week, enthusiasm for speaking about Europe has not waned.

The Minister of State, Foreign and Commonwealth Office (Mr. Doug Henderson)

For some.

Mr. Heath

Yes, for some.

I tell Ministers and the Foreign Secretary, who has left the Chamber—

Mr. Robin Cook

I am here.

Mr. Heath

I beg the right hon. Gentleman's pardon.

I welcome the new sense of engagement that the new British Government have brought to Europe in recent months. We must play a full role in Europe and make Britain's voice heard in the councils of Europe.

I hope that, in doing so, Britain will not just adopt a comfortable position. A huge agenda has opened up in recent months since the conclusion of the Amsterdam summit. I trust that Britain will be asking some searching questions about current European structures and how they relate to ordinary citizens.

I do not begrudge the Foreign Secretary his peregrinations, the aim of which should be to improve Britain's influence and to make the ethical foreign policy of which he speaks better understood. There are a great many reforms of the EU which urgently need implementing. Indeed, we have reached the point where the institutions of Europe need a complete makeover if they are truly to reflect our chief objectives: openness, accountability, maximum efficiency and making subsidiarity more generally understood. Subsidiarity should mean decisions taken not just at the level of nation state but at the level of the regions, too.

Over the next few months, we shall be applying a number of tests to the Government's performance as they take up the UK presidency. I do not use the word "test" in a censorious fashion; we simply want to determine the progress that may or may not be made during the next six months. Equally, we do not intend to make impossible demands. We certainly do not go in for the collective amnesia that seems to have gripped some Tory Members, who forget that, during their 18 years of government, very little progress was made on several areas in dire need of improvement.

The first such area is employability and the single market. Britain must give a clear lead on deregulation, where progress seems to have stalled in telecoms, energy, air transport, pensions, banking, insurance and biotechnology. Deregulation of all these areas needs to be revitalised.

I should like there to be more cross-border training and mobility of training opportunity. There may be scope for a vocational training exchange programme, just as exchanges operate in higher education. Britain must be at the forefront of attempts to cut unnecessary labour on-costs, in the context of pragmatic labour laws that recognise that deregulation does not mean no regulation. We need progress on developing a European company statute as well. So the first test will be whether there is a substantial reduction in red tape—or at least a consensus on how that can be achieved in the next six months.

The second test concerns preparations for economic and monetary union. Setting aside my doubts about the geometric possibilities of sustainable convergence, it is still clear that Britain will have a key role, whether or not she is an early member, in establishing the ground rules on which monetary union will take place. We must act as an honest broker, insisting on strict adherence to the convergence criteria while not agreeing with some elements—Germany, for instance—that would seek to exclude the southern states almost on principle instead of on the economic facts.

We should press for a British seat on the Euro X Committee. Similarly, we should press for genuine accountability on the part of the European central bank. The first head of that bank is soon to be appointed. Let us have structures that make the bank accountable to someone—anyone—instead of leaving it to sit in splendid isolation. So our tests will include whether there will be a British seat on the Euro X Committee, and whether the central bank will be made more accountable.

My third area for discussion is sustainability and the environment. Britain has a good record of taking the lead in climate change measures—

Mr. Letwin

Does the hon. Gentleman accept that he is making a well-nigh impossible request of the type that he was earlier asking the Government to forswear? Would not the argument for a European central bank and EMU virtually collapse if the central bank were accountable to political forces in Europe and could thus distort interest rates in favour of one part of Europe or another? Is not the bank meant to be a far-seeing body entirely divorced from politics?

Mr. Heath

It is right that the bank should be independent of political pressures, but it should also be accountable for the exercising of its functions. It should report to the European Parliament or the Council of Ministers, or both, on the exercise of those functions and on the decisions that it takes.

To return to the environment, it is important to hold hard to the principle of the 15 per cent. cut in greenhouse gas emissions by 2010. Following the Kyoto conference, I believe that Britain should seek to establish a special conference of the European nations to determine how we can make practical advances towards that objective. We must take action to clean up the environment of the applicant countries of central and eastern Europe, which suffer terrible environmental degradation, and which will need help in the short term to bring them up to the standards of the best of the western European countries.

There must be progress on implementing the habitats directive, and a commitment to more renewable energy sources. The next test, therefore, will be whether the British Government, during their presidency, introduce a practical measure to bring about advances in sustainability.

A great deal of lip service is paid to cutting the costs of the EU, yet there is little activity—even though there are some obvious targets. At the risk of incurring the charge that I am asking for the impossible, I point out that certain questions need to be asked repeatedly. For instance, why does the EU continue to subsidise the growing of tobacco to the tune of £750 million? It is absurd that European taxpayers' money should be used to subsidise a crop whose use we want to reduce.

Why do we not try to end overpayments to cereals growers, who are over-compensated to the tune of £12 billion owing to a miscalculation of cereal prices? Savings of £1 billion are to be had there. I accept that it will not be easy, but it could be done in the common interest.

Although administration costs are sometimes exaggerated, it worries me that Commission staff are paid a 16 per cent. allowance for being based abroad, even though many of them are based in Brussels all their working lives. That alone costs £86 million a year; it could easily be negotiated on. I will not today go into the question of the European Parliament's dual seats, but I strongly believe that it should have a single site—a point to which we must return during discussion of the Amsterdam treaty.

As for cracking down on crime, I was accused in Committee this morning by the Minister of State, Foreign and Commonwealth Office, the hon. Member for Leeds, Central (Mr. Fatchett), of being a friend of international crime for daring to suggest that we in Britain might resent large-scale immunities for Europol officers when they are not granted to our own constabulary. I was surprised to receive scant support from the Conservative Front Bench. I thought that the Conservatives were interested in such issues. We must balance stronger international co-operation on crime with the rights of the individual, ensuring that civil liberties are maintained. Europol must be operational at the earliest opportunity, with those safeguards in place. We also need greater customs co-operation to reduce drug smuggling and the use of drugs.

I mentioned in an earlier intervention the importance that we attach to the European code of conduct on arms exports. We wish the Foreign Secretary well in his negotiations with other member countries on establishing that code. We should be considering other aspects of the arms trade and looking for an opening up of arms procurement. That would have two beneficial effects—cutting costs, and promoting the consolidation of the arms industry across Europe, which must be to the benefit of companies such Thomson Marconi in my constituency, which has already taken such a step to an extent in its co-operation with its French counterparts.

I agree with the hon. Member for Woodspring (Dr. Fox) about the need for a fair deal on trade and aid and for the liberalisation of trade between the European Union and the Lome countries. However, on farming and fishing perhaps we enter the sphere of the impossible.

We all agree that fundamental reform of the common agricultural policy is necessary. There is a blueprint for that in the Agenda 2000 document. The Government would do well to persuade partners to attach their names to the principles of that document. We also need the entire common fisheries policy replaced by a regionalised fisheries policy. We should look for the short-term savings to which I have referred in the agricultural policy so that we have the headroom in which to make progress.

Open and accountable European institutions are important to us. The Amsterdam treaty refers to open access to European Union documents in two years. Britain does not need to wait two years to promote that objective. There should be more transparency in the operation of the institutions. We should back the European ombudsman—an institution put in place by Maastricht which almost nobody knows about, partly because it is hidden in Strasbourg. It should have a Brussels base, it should co-operate with national ombudsmen and there should be greater public awareness of access to it. There should be better co-ordination among the Commission, the European Parliament and national Parliaments to ensure better scrutiny of European measures.

I do not want to repeat points made by other hon. Members about enlargement. It is incumbent on the British Government during their presidency to make every effort to accommodate and assist the negotiations of the applicant countries. That should go beyond the initial five plus one. It is equally important that the interests of the second tranche of applicant countries are properly catered for. We must provide a clear process and a clear timetable so that no one is under any illusions about where they stand and how to make progress towards their objective. We must also calculate the genuine costs of enlargement so that no one has any illusions about what is needed to provide for it.

The last in my compendium of tests is that the United Kingdom must be properly prepared. We need to enhance our arrangements for parliamentary scrutiny of measures that come from Europe. We must enhance our data protection arrangements to bring them up to the standard of the best in Europe. We must work with the European Court of Auditors to ensure direct connections with our excellent local and national auditing processes, so that European money is traceable from source to its final point of—hopes—productive use. That would set an example to other countries and encourage them to make the same arrangements available to the European Court of Auditors.

The Council of Ministers must also be more transparent to this House and to the other Parliaments of Europe. It is appropriate to ask Ministers to report fully, at the earliest opportunity after a meeting, on what they have done on behalf of the House and the British people.

I have listed 10 areas in which we can apply objective tests of the Government's progress during their presidency. We wish them well and hope that they will make progress in several of those areas. The responses of Ministers in recent months have given us reason to believe that they share several of our priorities to make the European Union more transparent and accountable, so that citizens will feel reconnected to the European process.

The most important aim is to re-establish the principle that Europe should proceed by the informed consent of the people on any issue, be it monetary union or constitutional change. Britain should make it clear that further progress requires the informed consent of the British people. Informed is the operative word, because the debate in this country has been debased in recent years. The arguments have not been properly articulated. Informed consent would ensure that either the European Union progresses with the support of the British and other people or it does not progress.

7.17 pm

Mr. Bowen Wells (Hertford and Stortford)

We should start from what people are saying in the streets. During and after the election campaign, they said to me, "I thought we joined Europe so that we could have a trading partner and so that we could have jobs and employment." At the time, the other markets of the world were closing against British and European products. Our natural trading partner—apart from third world countries, which were closing their doors at the time—was Europe.

A referendum was held and a yes vote was achieved. The Conservative party led Britain into Europe to expand the opportunities of people in this country to work, to be fully employed and to sell their goods freely to Europe without tariff barriers or any inhibition to trade or the expansion of our industry. Joining Europe enabled Britain to make use of its undoubted talent, initiative and enterprise and to continue to grow and fulfil the ambitions of the people of this country.

My constituents say, "Why are we going to substitute such a Europe for a Europe in which we are ruled by bureaucrats from Brussels, bureaucrats from Strasbourg and now bureaucrats from Frankfurt, who are entirely unaccountable to our House of Commons to which we elect Members of Parliament? That is not what we voted for in the referendum." In bewilderment they ask, "What is happening to our policy on Europe?"

At the heart of the change is the politically led drive by Chancellor Kohl, to which my hon. Friend the Member for Woodspring (Dr. Fox) referred. That move is driven by political reasons which have their origins in the second world war and the fear of further war. The drive is towards a political union which is seen as somehow binding Europe together so that European countries will never fight again.

To reiterate what my hon. Friend the Member for Woodspring said, the idea that one can combine Europe by huge steel girders is an illusion which will lead inevitably to conflict. Europe is a series of peoples who are proud of their cultures and who have their own languages and their own history. If the House really thinks that it can wipe all that away, it should look at our relationship with Northern Ireland and the effect that that has on the people of Britain. One cannot wipe away the history and culture of a people; one has to respect them. That means that Europe has to be a series of proud and self-confident nations which are respected by their neighbours. They have to have their own processes of gaining the consent of their people to Government actions and taxation.

The country that exemplifies such a democracy, with responsibility and accountability to its people, is Britain. No other country in the European Union has not experienced dictatorship of one kind or another, be it communist, fascist or military, within living memory.

Mr. Ken Purchase (Wolverhampton, North-East)

What about Sweden?

Mr. Wells

It is true that Sweden has been democratic in recent years, but it does not have a democracy of the length and type that we enjoy. Anyway, that example does not disprove what I am saying. Sweden is a proud nation with its own culture and language; it certainly does not want to be absorbed into a girdled, centralised state which is not accountable to its people.

There is a fear of a bureaucracy that is not accountable. It is no good wishing, as the hon. Member for Somerton and Frome (Mr. Heath) did, for it to be accountable. Monetary union, with a central bank, is designed to be independent of politicians. The central bank will be very much more independent than the Bundesbank because there will be no powerful Parliament to which it has to be accountable or responsible. The Bundesbank can be influenced by the federal parliament in Bonn and it was demonstrably overridden on the value of the western and eastern mark. Let that be a lesson to the House. What did that political decision achieve? It annihilated industry in east Germany and resulted in high unemployment.

Unemployment in Europe should be our major concern. It is the major concern of our people who want jobs and that is why they joined the European Union. Our people do not want a centralised and unaccountable bank which will dance to the tune of the strongest and largest economies in Europe. Monetary union is inevitably a highly centralising factor.

If the House wants a recent example of monetary union, it should look at the history of the United States dollar. The United States dollar was not the universal currency in the 13 states that won the war against Britain at Yorktown. Between that time and the civil war, several state currencies operated in the United States. The ending of the civil war imposed the Yankee dollar on the southern states. What is the history of the southern states after that imposition? There was a period of serious economic difficulty and decline for more than 100 years.

After monetary union in Europe, the south-eastern and southern states and Britain will find themselves on the periphery of the central states—the strongest economies—of Europe. That is why monetary union is wrong for Europe. It will also lead to violence. Unemployed people will try to move, but will we allow them to cross the boundaries of Europe? Britain certainly will not. Mass movements of people will be resisted and that will result in violence. Anyone who doubts that should look at the arrival of the Czech gipsies in Dover within the last month. Monetary union will result in violence.

If there is an increasingly unemployed periphery of Europe, there will be riots in the streets of the southern countries that are being deprived of employment. That is why we must be seriously concerned about monetary union.

Dr. Fox

Does my hon. Friend accept that, until we have completely free fiscal transfer—free from national considerations—and the completely free movement of peoples, we shall never be able to make the case successfully for economic and monetary union?

Mr. Wells

I fully agree with my hon. Friend. That point is what I am trying to explain to the House.

We shall not have the free movement of people. What can we do to compensate areas that suffer from high unemployment? We can transfer huge sums from the richer states to the poorer to try artificially to create employment there and to compensate people for their lack of capacity to move. War did not take place in the United States because people could move across state boundaries.

Dr. Fox

And there was one language.

Mr. Wells

Indeed, there was one language. The language was going to be German, but a majority of one vote made it English so we are lucky in that. The United States had a common language and people were able to move around.

We cannot transfer money because none of the nation states will contribute enough to compensate for the lack of employment in the peripheral areas. That rigidity will lead inevitably to the pulling apart of Europe rather than its joining together. That is why I am fundamentally against it.

In addition, monetary union is fundamentally undemocratic. Democracy in Europe is achieved, admittedly not terribly well, through national parliaments.

This Parliament does not do its job well enough in relation to European legislation, but most of the other European parliaments do not scrutinise such legislation at all. Europe is not fully democratically accountable. The European Parliament does not have the ability to call Ministers to account; it can call to account only the European Commission.

The House would not expect me to sit down without saying a brief word on the European Union's external relations, especially concerning the renegotiation of the Lome agreement. The International Development Committee, of which I am honoured and proud to be Chairman, visited Brussels only last week. It discovered that the EU's plans are very alarming. The EU is trying to divide up the old relationships of the European states, especially France and Britain, and treat the countries concerned as though they were just any other country with which the EU would like to have relationships. It wants to enhance its relationships with the Mediterranean group of north African countries. The Germans want to enhance the relationship through aid and trade with eastern Europe. The EU also wants third-world countries which are not encompassed in the Lome agreement to be made equal with those which are, as well as to divide up the African, Caribbean and Pacific nations into four regions, combine them with other countries in the same geographic area and treat them all the same.

Such behaviour on the part of the EU will break traditional ties and trading arrangements, which will seriously undermine some of the poorest countries in the world in Africa, the Caribbean and the Pacific. When that is combined with the proposed reforms of the common agricultural policy, which reduces commodity prices—that is its objective—it will lead to the decimation of the sugar, rum, banana and textile industries of the third world. As my hon. Friend the Member for Woodspring said, such industries are the only means by which they can climb out of poverty.

When we take up the EU presidency in January, we shall be able to influence the EU's negotiating position on renegotiation of the Lome agreement. It is absolutely vital that our Ministers reverse the European Commission's policy trend. If they do not, they will decimate the very vulnerable economies of our long-time friends in Africa, the Caribbean and the Pacific. They will break the unity of those countries into competing groups and thus weaken them and their capacity to negotiate with the EU.

It is extremely difficult for those countries to devote the necessary human resources to negotiate on a one-to-one basis with the kind of talent among EU representatives. The African, Caribbean and Pacific countries will not be given the remotest chance of continuing their relationship—or, indeed, enhancing it—with Europe, which is a matter not just of aid but essential investment and trade access. Action to prevent that should be one of the British presidency's primary objectives.

We are members of Europe. We need to play a full-blooded, robust part in Europe. We must respect European traditions and each country's history and culture. We must work together, but for an outward-looking Europe, a Europe that offers people opportunity of employment—both internally and to our traditional partners in trade the world over.

7.33 pm

Mr. Robert Jackson (Wantage)

Although what I plan to say was devised before the debate began, it follows very naturally on what my hon. Friend the Member for Hertford and Stortford (Mr. Wells) has said about the importance of the role of the nation state in Europe.

In its ruling of October 1993 on German accession to the Maastricht treaty, the German constitutional court focused on the question of the legitimation of the decisions of the European Union. Although it foresaw a growing role for the European Parliament, the court insisted that there was a limit to that body's legitimising capabilities. The European Union, it stated, is not a state based on a European people or Europaisches Staatsvolk, but rather an "inter-state community" of Staatenbund. It concluded that the community is based "first and foremost" on legitimation deriving from the citizens of member states which express their will through national Parliaments.

Mr. MacShane

What about a translation?

Mr. Jackson

I have noticed that French phrases are occasionally used in the House, so perhaps German may also be permitted from time to time. I assure the hon. Gentleman that I was translating accurately.

Such high-level German concern about legitimacy should find a ready echo in every Tory breast. If there is any single value that can be said to underlie the long history of the Tory party since its remote origins in the 1640s, it is its concern with the principle of legitimacy. For the constitutional Right, of which the British Conservative party is the paradigm, one of the highest values is that the authority of government should be such that its acts enjoy the trust and spontaneous consent of the people.

It is, however, fair to say that some of those, even in my own party, who are most enthusiastic about Europe have been too slow to recognise the relevance to the EU of the concern about legitimacy. "Full-hearted consent" is not just an empty phrase. As the hon. Member for Somerton and Frome (Mr. Heath) correctly remarked, it should be regarded as a prerequisite in the development of European structures.

For instance—here I strike a personal note—I concluded very early on after Maastricht that there should be no question of Britain joining European economic and monetary union without a prior referendum, even if, due to the natural scepticism of the British people about speculative projects, that made it inevitable that Britain could not join in the first wave. Here I find myself at variance with the hon. Member for Leominster (Mr. Temple-Morris).

European monetary union is a big step; it is an inherently risky venture and it has major constitutional implications. That is undoubted. It is a step that we should take only after the British people have given their informed consent, which was also a phrase used by the hon. Member for Somerton and Frome. This concern with legitimacy also makes me more sympathetic than some of my hon. Friends to the idea of a referendum on the Amsterdam treaty—however divisive such a referendum might be between and within the parties.

It is not enough, however, simply to say that the further development of the EU poses a problem of legitimacy, as though that were enough to put an end to that further development. The plain fact is that, in a union of 15 different states, with 15 different histories and cultures and 15 different public opinions, there will be at least 15 different concepts of the limits of legitimacy in relation to the EU.

There is a group of states—Britain, the Scandinavians and perhaps Greece—where the threshold of legitimacy might be said to be relatively high, in the sense that there is a high level of concern about the issue. There is another group of states—Germany, Italy, the Benelux countries and the Iberians—where the threshold is relatively low. Finally, there is a swing state—France—where the opinion of the political classes may be running ahead of popular consent, but where raison d'etat seems likely to prevail.

All of this creates a very difficult situation for those of us in Britain, in a high-threshold country, who are concerned that the developing structures of the EU should function on the basis of genuine legitimacy.

We face proposals and developments that pose legitimacy problems for us but it seems not for others—at least, not yet, despite the warnings of the German constitutional court, or not yet to the same extent as for us.

What, then, are our options? One option, which undoubtedly commands some support in the House, both overt and covert, is withdrawal—the most drastic resolution of our dilemma. I shall not say anything now about the costs and the risks of withdrawal from the European Union after some 30 years of membership. I merely observe that the only time that a political party—the party now in government—has fought an election on the basis of withdrawal, after only 10 years of membership, it suffered the second most humiliating defeat in recent political history.

I also make the perhaps novel point that attitudes to Europe differ among the nations of the United Kingdom, to the extent that it is now a real question whether the British Union would survive withdrawal from the European Union. Although there is a legitimacy problem with advancing in Europe, there is also a legitimacy problem with going backwards.

A second option, favoured by some, is that Britain should simply exercise the veto it undoubtedly enjoys under the treaties over future developments in the European Union. But this is only an illusory solution. No veto in the existing European Union structure can stop the other member states from exercising their sovereign right, if they so choose, to develop new structures among themselves for working together. That is precisely what is now happening among the EMU "ins". We may seek to prevent them from meeting in the Council buildings in Brussels, but they will simply drift across to a restaurant or another meeting room outside.

The same drawback arises in relation to a third possible option—the one favoured by the previous Government—that is to say, variable geometry or the negotiation of national opt-outs. The difficulty with that—it was graphically illustrated in the speech of my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard)—as in the case of the imposition of vetoes, is that if, whether inside or outside the structures of the Union, a substantial number of states create among themselves a critical mass of policy especially in the economic sphere, it is likely to generate a momentum and pressures which any opted-out member state will eventually find irresistible. That is what happened to Britain in relation to the Common Market in the 1950s and 1960s. It has just happened in relation to the social chapter opt-out of 1992, and a realist would probably recognise that it is highly likely that the same thing will happen in due course to our EMU opt-out.

I do not know that divine providence intended that the world should always be a comfortable place for us British. If my analysis is correct, we face a painful tension—perhaps more painful for some than for others—between realism about the correlation of forces and interests in today's Europe, and our well justified concern for the continuation in these islands of forms of government that enjoy a high level of legitimacy.

Obviously, our objective must be to persuade our partners to change the European Union so that we can be more comfortable in it. How that might be done is a subject that I might hope to address if I caught the Speaker's eye on another occasion. Tonight, I shall say only that there are many factors on which we can work in the longer term, notably the impending generation change in German politics; Germany's shift to the east; the increasing tensions surrounding European policy in France; and the growing scale and diversity of the European Union. We will have to think much more penetratingly and realistically about how to influence the balance of European politics than we are yet accustomed to, and with much more cool calculation and a lot less barely suppressed resentment and offended amour-propre.

I wish to pursue my theme of the problem of legitimacy in the European Union. I offer the perhaps radical suggestion that, if the European Union has a problem of legitimacy and if we cannot simply stop Europe and get off, our duty is not to complain and denounce and make the problem of legitimacy even worse, but actively to promote a sense of legitimacy for the structures that now play an ineluctable part in our government. Such a concern to promote the legitimacy of the Union of which we are a part is not by the way—as I would say to my hon. Friend the Member for Woodspring if he were in his place—it is not inconsistent with criticism. However, our criticism should always be balanced, tempered and constructive.

Legitimacy is not static or something that one acquires and then keeps—it is dynamic, and it can be lost and won. It also changes the way in which it is expressed. In the long history of my party, we have successively envisaged the basis of legitimacy as the divine right of the monarch; the union of the throne and altar; the sovereignty of the Crown in Parliament; and—in the dawning era of referendums—the sovereignty of the people.

What we in the political class say and do can have a large impact on the evolution of public opinion, which is the ultimate source of legitimacy in democracies. Politicians on both sides of the House have a choice. We can choose an ultimately impotent hand-wringing about the real challenges that the European Union poses to our current understanding of the legitimation of government—a posture that is ultimately self-defeating in terms of our concern that government should be legitimate. Or we can deliberately try to build legitimacy for the new structures, from which it seems, realistically speaking, there is no getting away.

An important source of modern legitimacy is, for example, the perception of benefits. Thus we could deliberately seek to focus the public's attention on the substantial interests that are at stake for our people in the European Union, rather than suggesting, as is sometimes done, that those interests are nugatory in a global setting. Perhaps nowadays we may hear a little less about how Britain's future lies among the Asian tigers.

Another important source of modern legitimacy is respect for law and due process. Thus we could set out deliberately to encourage a greater public understanding of the essential rule-boundedness and rationality of the European Union's structures, rather than promoting, as is sometimes done, the idea that there is an inherent judicial bias against Britain.

Yet another modern source of legitimacy is trust. We could make a serious effort to promote the idea that our partnership in Europe is based on mutual trust, rather than implying, as is sometimes done, that in the battles of Europe we have enemies who are looking for every opportunity to do us down.

Then there is the legitimacy that comes from vision. We could try to encourage our people to understand just what a remarkable and beneficent phenomenon is the coming together of the great historic nations of the old world—something we sometimes take too much for granted or even allow to slip from our minds.

In conclusion, I wish to address one or two words specifically to my party. Our leadership has indicated that, while it is sceptical about EMU, it wants to be robustly positive about Europe in general. I welcome that and I will strongly support it. In a well argued speech to the Confederation of British Industry, my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) amply justified his caution about EMU.

It is a perfectly reasonable position for the Conservative party to wait for EMU to prove itself, although we must be realistic about the potential costs for British influence that may arise from not participating in the crucial early phases of its developments. The question arises, however, of what the other limb of the policy—being positive about Europe—will mean. Uncomfortable as it may be for some, I dare to suggest that such a positive approach cannot be followed without making something like the analysis that I have sought to make in this speech, and reaching something like the conclusions that I have reached.

7.48 pm

Mr.ChristopherGill (Ludlow)

I am sorry that the hon. Member for Leominster (Mr. Temple-Morris), my constituency neighbour, is not in his place, because one of life's ironies is that I take such an interest in European affairs because, 10 years ago, he recruited me to the Conservative Back-Bench European affairs committee. The more I saw, studied and analysed what went on in Europe, the more I concluded that European union, by which I mean economic and political union, was not in the United Kingdom's best interests.

I invite the House to look at the events of this week, because we have seen in Great Britain a development of great significance. Although I will not pretend that it is unprecedented in the annals of British history, it is novel in my lifetime. I am referring to the action of Welsh farmers at Holyhead and Fishguard which is now replicated at ports in Scotland.

Farmers are acting out of frustration or sheer desperation as they see their livelihoods taken away from them. Their action is prompted by a slump in cattle prices, and is compounded by the Government's refusal to make compensation payments for the strength of sterling or to increase hill livestock compensatory allowance payments. In addition, the Government have terminated rendering subsidy, imposed arbitrary weight limits on over-30-months scheme cattle, reduced the rate of compensation and declined to renew the £60 million special assistance paid by the previous Government.

One might ask what this has to do with the European Union. I shall demonstrate as I go along that it has everything to do with the European Union. I am not talking about the export ban—which, as we all know, was imposed not for any scientific reason or any consideration of human health, but purely for political reasons. Nor am I talking about the European directive on transmissible spongiform encephalopathies. I am talking about developments in the European Union that have so undermined the process of democracy—the House will have been interested to hear my hon. Friend the Member for Wantage (Mr. Jackson), who referred to legitimacy in the process of government—that farmers have been driven to their action this week.

The farmers may not necessarily see it in these terms, but, by their actions, they are demonstrating their recognition of the fact that the conventional democratic process cannot solve their problems. They have lost confidence in the traditional process of democracy to obtain redress, for the simple reason that, as far as farmers are concerned—the same applies to fishermen—the conventional and traditional democratic process no longer exists.

Gone are the days when convincing a sufficient number of Members of Parliament of the strength of an argument produced change in agricultural policy. Gone are the days when Agriculture Ministers would use discretion in dealing with genuine mistakes made by farmers in filling in forms, for example. Gone are the days when Ministers who failed to measure up would be dismissed. It is probably true to say that Edwina Currie will go down in history as the last Minister to be drummed out of office on an issue affecting agriculture.

Nowadays, there is a grim realisation that neither changing the Minister nor changing the Government has anything other than the most marginal effect on agricultural policy. The reality is that agricultural policy is determined in Brussels. Under qualified majority voting, the United Kingdom currently has only 10 votes out of 87.

To those politicians—there are many of them—who say that reform of the common agricultural policy is the answer, I invite them to explain how that can be achieved. How will they achieve unanimity for any radical change, given that the French, for example, oppose Agenda 2000? How will they stop the creation of a blocking minority in circumstances in which several countries are such net beneficiaries that they would not dare to bite the hand that feeds them? When we talk about reform, it must not be thought of as a panacea because of the difficulty in achieving that reform. Talk of reform is merely a placebo—in other words, a medicine given to humour rather than to cure.

I return to my theme, which is the significance of the action taken by Scottish and Welsh farmers. By dint of the failure of the now virtually defunct traditional conventional democratic processes, they are driven to take direct action. They have seen that simply replacing a Conservative Government with a Labour Government has not in any way changed agricultural policy, which is dictated from Brussels and is not decided where it should be decided—here in the Westminster Parliament.

The failure of political parties to give satisfaction—because they have surrendered the power to do so to a higher authority—is leading inexorably to anarchy. Hon. Members may not wish to contemplate the fact that in the areas most affected by this week's disturbances, the electorate has already explored the whole gamut of party political possibilities. The voters are now discovering that, whereas they previously concluded that none of the major parties could satisfy their aspirations, the nationalist parties that represent those areas cannot do so, either.

In those circumstances, the farmers have taken direct action. They have gone to the barricades, driven there by the craven action of successive Parliaments here in Westminster which have given away—and continue to give away—the sovereign right of the British people to be governed by their own laws, made in their own Parliament, in accordance with their own free choice expressed in British ballot boxes.

The new Labour Government—still in a euphoric mood as a result of their success on 1 May—will not be disposed to heed my warning, but the writing is on the wall. Just as the previous Conservative Government were swept away on May day, so too will new Labour be driven out of office when it is seen that, in spite of wrapping itself in the Union Jack, adopting the British bulldog as a mascot and generally playing the patriotic card, it intends neither to stem the flood of parliamentary sovereignty away from these shores nor, least of all, to reverse a process that has already gone too far.

There is a notion in the minds of people who should know better that, in making an ever-closer union with the other nations of Europe, we are simply exchanging one sort of democracy for another. Nothing could be further from the truth. However else one might describe the EU, one cannot pretend for one moment that it is democratic. Labour Members have described it in previous debates as corporatist. I prefer to describe it as collectivist. How else can one describe a regime that tells the farmer what he may or may not grow, in what quantity, to what standard and at what price? How else can one describe a system that tells a fisherman what he may catch and where he may catch it, and results in hundreds of tonnes of perfectly saleable fish being dumped back dead into the sea?

The lesson for politicians is this: if neither they nor the parties they represent reflect the aspirations of the people they purport to represent, they deserve to be swept away, and swept away they will be. The precedent was created on 1 May. If, in turn, each party—because of its dalliance with European union—is seen to have rendered itself incapable of responding to the British people's natural and legitimate aspirations, the people will despair of the whole democratic process and turn to anarchy. That is the lesson of Holyhead, Fishguard and Stranraer, a lesson that the House ignores at its peril.

I, for one, stand four square with the farmer and the fisherman—mere pawns in the game of politics, but without whom we would all starve, just as surely as the people of North Korea starve today because of their Government's rigid adherence to the failed policy of collectivism.

I am not a collectivist; I am a Conservative. As a Conservative, I want to see the restoration of the situation in which I can act as a Member of Parliament on behalf of the people whom I represent and give them satisfaction. Within the collective in which we now find ourselves, neither I nor any other Member of Parliament can do that, because, by definition, the collective can act only in the interest of the collective and not in the interest of its component parts.

Almost more than any other, this week represents a watershed in our political history. Turn one way and we descend, sooner or later, into anarchy. Turn the other way and we will be greeted by a joyful nation. For the sake of our children and our grandchildren, I implore the House to recognise that even good government is no substitute for self-government. At the end of the 50th year of making a reality of self-government for hundreds of millions of people throughout the world, how can any hon. Member want this once proud nation, which 60 years ago stood as a beacon of hope in a troubled world and as a last bastion against tyranny, to be relegated to no more than a province of Brussels?

8 pm

Mr. Oliver Letwin (West Dorset)

I share many of the views that my hon. Friend the Member for Ludlow (Mr. Gill) expressed. The democratic deficit is perhaps more structural—because of the wide diversity of culture and the distance of the population in the centre of Government—than my hon. Friend the Member for Wantage (Mr. Jackson), in a characteristically intelligent and illuminating speech, allowed, but it is not to that, or to any of the important matters in the Amsterdam treaty and in the many directives that we have considered in European Standing Committees, that I wish to allude today. We have ample opportunity to consider those matters in other places and at other times. I should like to sketch a matter that is of moment to the House, if not to the European Union as a whole: the attitude of Her Majesty's Government, as illustrated by their attitude to the Amsterdam treaty and to directives that have been considered by the House recently.

When I was somewhat younger, I was instructed by a great British statesman in the extraordinary feature of our constitutional arrangements: each Department of State sponsored someone. I was told that the Department of Trade and Industry sponsored British business, that the Ministry of Agriculture, Fisheries and Food—perhaps less under the current Administration than hitherto—sponsored farmers and that the Foreign Office sponsored foreigners.

That is a travesty. In many respects, the Foreign Office has acted zealously to defend British interests for many years, but I fear that the current Government are coming close to making a reality of that unfair truism. My right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) illustrated clearly that the Government's actions have brought no greater influence over events in Europe. On the contrary, as he eloquently described, the Government appear to be entirely stranded. Their actions have led in other directions and it behoves the House to note two or three things to which the Government's attitude is leading.

Recently, we had occasion to debate article K.7 of the Amsterdam treaty. I endeavoured to persuade the House that there was a problem with paragraphs 1 and 6 of that article. In his closing remarks, the Minister entirely failed even to advert to my remarks or to challenge them. My assertion was—it was of some significance in the sense that it was either true or false and, if true, important—that, on 18 June, the Prime Minister had made an entirely false statement when he told the House that the European Court would not intervene in United Kingdom criminal justice as a result of those paragraphs.

I may be wrong about the matter. Goodness knows, a young Back Bencher, uninformed by the weight of legal opinion in the civil service, may make a terrible error. Why then did the Minister not take the trouble to say why I was wrong, or to defend the Prime Minister's position in the House? That oddity suggested that the Minister did not consider it important whether my assertions were true or false.

It is noticeable that, during the entire proceedings of the Committee when it considered the social chapter, no Government Member made the slightest allusion to paragraph 1 of article 109p, which states: The Community shall contribute to a high level of employment by encouraging cooperation between Member States and by supporting and, if necessary, complementing their action. Anyone remotely familiar with the progress of European law and the European Court in interpreting treaties, and with the way in which the Commission uses treaties—which is subject to the Court's interpretation—will be fully aware of the effect of paragraph 1 of article 109p. It will be a Christmas tree on which many currently unpredictable directives, decisions, framework decisions and regulations will be hung. In short, it is an analogue of the famous article 100, on which so much that was unpremeditated has been hung.

I am not raising that point to comment on the substance of article 109p. My comment is merely that the article is of the highest importance and that Ministers have not so much as alluded to it. I have gone through all—I hope—the statements by the Prime Minister and other Ministers since the Amsterdam treaty was under consideration and finally signed and I have not found the slightest reference to the article. I take it, therefore, that the Government consider that it is of no importance whether there is an article in the social chapter on which much else can be hung.

There is an oddity about European Standing Committee B. Although the Labour Members appear, they are broadly silent and, although there are only some 160 Conservative Members, the Conservative party regularly brings between five and 10 members to the Committee—about a 15th to a 30th of the party's strength. By and large, the Liberal Democrats are not present. The Committee's task is to vet a lot of important European legislation. Some hon. Members do not believe that it is necessary even to be present. Often, Labour Members do not believe that it is necessary to speak about those matters.

The situation is much worse than that. The Government bring explanatory memorandums before the Committee. Associated with those are compliance cost assessments and risk assessments. In a recent example—for the sake of brevity, I give just one—the Government brought before the Committee an important constituent of the social chapter, the parental leave directive, and a compliance cost assessment, in which they calculated the effect on British industry of unpaid parental leave.

The calculations, which I take it the Government asked some official to perform, were based on the assumption that the replacement cost of the labour—the marginal cost of the labour—was £1.70 an hour. Why is that of any importance? Only because, if the marginal cost of the labour is £1.70 an hour, the Government's minimum wage, which is always rumoured to be a multiple of that figure, would entirely destroy this country's employment base. The importance lies in the fact that the Government do not believe their own figure of £1.70 an hour.

When the Minister was pressed on the matter in European Standing Committee B, he showed every sign of not having the slightest idea whether that was the figure, why it was the figure or whether it justified the directive. Again, I allude not to the substance, but to the form.

In those three examples, we see a Government who are so cavalier about the extensions of the European Court's powers that they do not bother to answer a serious allegation. They are cavalier about the widespread, long-term effects of clauses in the Amsterdam treaty to the extent of not even mentioning them. They are cavalier about the way in which they bring directives before the House to be vetted, to the extent of offering justifications that they cannot possibly believe are consistent with the rest of their policies.

Why are the Government cavalier in those ways? Since 1 May, I have sat here in the House desperately trying to find out what motivates them in that pursuit and that attitude. I have been able to discern only one recurrent theme—a search for modernity. It is a search to be in tune with the piper and not to be left behind. In all the statements from right hon. and hon. Members on the Government Front Bench I have discerned that sense of a search to be modern. Above all, the House and the country need to guard against that attitude.

The desperate desire to be modern today and, hence, not to consider the long-term effects of major constitutional changes goes against the nature of those changes. Constitutional changes have their effects over, not five or 10 years, but 50 or 100 years, or even several centuries. The House and the country have much to fear if a Government pursue constitutional change and undertake such a major programme—that it is a major programme for constitutional change must be common ground on both sides of the House—in the earnest desire to be modem in 1997, with a view to advantages in 1998, 1999 or even 2000, but neglect to question whether the hundreds of years of history of this country and the others around it will be compromised in a future that might not contain the stability, freedom, democracy and rule of law to which we have become accustomed.

I hope that, as the Government move forward in the months and years ahead, they will change that attitude and investigate the long-term effects. I hope that they will take seriously the arguments that point to those effects, at least answer and explain if those arguments are wrong, and tell us why they are taking steps that could have long-term effects. That at least would be an improvement.

8.12 pm

Mr. Gary Streeter (South-West Devon)

This has been yet another excellent debate on Europe, with many telling contributions from hon. Members on both sides of the House. In his opening speech, the Foreign Secretary was, as usual, clever and witty, but had nothing to say. This is a Government without value, without substance and without principle. Above all the rest of the Cabinet, the Foreign Secretary is, perhaps, the very symbol of that. He spends his time attacking the Opposition. That may be good sport, but his technique was simply a ploy to hide his lack of policy.

The right hon. Gentleman referred to new Labour's welcome in Europe and they have had a warm welcome—that tends to happen when one caves in on vital national issues. He offered no real solutions to European unemployment. He did not tell us how the Luxembourg summit would create a single job either in the United Kingdom or elsewhere.

The Foreign Secretary was followed by the right hon. Member for Llanelli (Mr. Davies), who spoke as usual with great wisdom and accuracy. He has the respect of the House. He is one of the few Labour Members who is not dazzled by the bright lights of Brussels and he probed the Minister on the vital issue of the European rebate. I hope that the Minister will answer the questions put to him so robustly. I hope that he will be as diligent and robust in defending the rebate as we were when we were in government.

We heard an outstanding speech from my hon. Friend the Member for Woodspring (Dr. Fox), who applied his penetrating intellect to the vital issue of the future of Europe. It was one of the best speeches that I have heard in my time in the House. He spoke of the need for Europe to be outward looking and of the need for a sustainable Europe. He exposed the weakness of some of the economic arguments behind the single currency. His pursuit of the truth of Treasury statistics on the currency of invoice is a noble crusade, and I wish him well with it. He demonstrated that the single currency is a political and not an economic project, and he was right to open up the debate that dare not speak its name and to discuss the future of Europe in a mature and intellectual way.

The hon. Member for Leominster (Mr. Temple-Morris) followed my hon. Friend and set out his reasons for crossing the Floor. He is entitled to his view and to taking the action that he did. I do not suppose that all his constituents will see things as he saw them and he might be wise to reflect on whether it is a good idea to sell his shares in the company when it is at rock bottom. He may live to regret it when those shares are sky high again.

The hon. Member for Somerton and Frome (Mr. Heath) gave us what I would describe—not unkindly, I hope—as the classic Liberal Democrat speech. He toured the houses of Europe seeing both sides of the street at the same time, stopping from time to time for a committee meeting here and there and then pressing on with his all-embracing federal agenda. At least he is honest about that agenda, unlike his coalition partners—the Labour party—who soothe the electorate with soft-sounding words, while pursuing a centralist and integrationist agenda.

My hon. Friend the Member for Hertford and Stortford (Mr. Wells) has, if I may say so, really come into his own since being released from his vow of silence. He reminded the House of the importance of this nation's cultural heritage and how any future Europe must be a respecter of individual cultures. It must be a Europe of nation states. He spoke of democratic accountability, of the dangers of a single currency and the tensions that it may well create.

He must be right to say that those are issues of great concern and that whatever the ultimate response of this Government and this country to a single currency, any progress towards it must be undertaken in the light of all the circumstances and with the utmost caution. The single currency is a unique experiment, which has never been tried before in the history of this planet. Whatever else happens, the utmost caution must be exercised before participating. The party in government lightly brushes aside those concerns and yet they are fundamental.

My hon. Friend also spoke with great knowledge about the European Union's relationship with the developing world. I hope that the Minister will take on board the points he raised.

Mr. Doug Henderson indicated assent.

Mr. Streeter

The Minister nods. That is the first response that I have had from him all week, so I am encouraged.

My hon. Friend the Member for Wantage (Mr. Jackson), in a measured and wise speech, spoke of the importance of legitimacy. I shall certainly read that speech in the morning. He was right to point out that a single currency is possible only if people have given their informed consent, and to make it clear that a referendum must take place on such a currency. He reviewed with great skill the options facing us in our relationship with Europe and discussed the problems of exercising each of those options. He made a compelling case for legitimacy. His speech is well worth a second look.

My hon. Friend the Member for Ludlow (Mr. Gill) spoke with his usual passion and conviction about the plight of farmers in the United Kingdom, which has provoked the recent actions in Wales and Scotland. He explained the consequences of the collectivist approach of Europe—the damage being done to our farmers and fishermen—and explained the dangers of going too far down that road.

Finally, my hon. Friend the Member for West Dorset (Mr. Letwin) rightly probed the Government on their inability to garner extra influence abroad. He probed the Minister about the complete absence of a reply to the important point he raised a debate or two ago about the extension of the powers of the European Court of Justice into criminal law in this country.

The Minister is well known for his long winding-up speeches and we do not necessarily want a repeat performance tonight, but we want our questions answered. There is no point in Opposition Members asking the Government questions and holding the Executive to account if the Minister avoids giving us the answers. My hon. Friend is right to probe Ministers and to explain how cavalier the Government are when dealing with issues of vital national interest. He is right to challenge the Government to consider the long-term implications of some of the constitutional changes they want to make, reckless of the consequences.

We have had an excellent debate. It was started by my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), who spelled out our positive Conservative agenda for Europe. On enlargement, we must welcome into the family of Europe those central and eastern nations who languished so long under communism and so underpin stability and prosperity in greater Europe. On the single market, we must complete the task of making a true barrier-free trading area in Europe as part of our wider global perspective. On reform of EU institutions, we must streamline them in preparation for enlargement in the name of efficiency and value for money—especially the common agricultural policy.

On flexible labour markets, we must take our message and our experience of policies that really create jobs to every corner of Europe. I have heard the Minister of State and the Foreign Secretary say a great deal about flexible labour markets over the past few days and weeks, but it is apparent that they simply do not understand what flexible labour markets are. They seek flexibility by imposing additional burdens on management and companies—that is not flexibility, but more red tape. Conservative Members have a vital duty to the nation and to the people of Europe who have languished too long under high unemployment to explain what real flexible labour markets are all about. We shall carry on doing that while we have breath in our bodies.

Our Europe is a wider Europe, not a deeper Europe. Our Europe is an outward-looking Europe, as was so brilliantly expressed by my hon. Friend the Member for Woodspring—I mention him again because he missed my earlier reference to him. Our Europe is not a fortress Europe. Our Europe is a flexible Europe, not a frozen Europe. We have a positive approach to Europe and my hon. Friend the Member for Wantage was right to make that point. We are positive about our membership, and we shall strive to make Europe work for Britain and all its people.

What a contrast that is to the new Labour Government, who are so starry-eyed and idealistic about Europe. We heard today, as we did throughout the Committee stage of the European Communities (Amendment) Bill, about Labour's new influence in Europe and how they are leading in Europe—all evidence to the contrary. New Labour is not leading in Europe, but losing in Europe; not making new friends, but making a hash of it. Let us look at the record of the past seven months—the seven long months since paradise was lost.

First, we have demonstrated again and again throughout our scrutiny of the Amsterdam treaty that the Government were taken for a ride at Amsterdam. So many concessions were made on qualified majority voting, the social chapter and extra vetoes for the European Parliament, more power to the President, but so little was gained in return. The Government called it a negotiating triumph, but it was in fact a complete failure of diplomacy. Secondly, my right hon. and learned Friend the Member for Folkestone and Hythe exposed forensically this afternoon how the Government failed miserably to protect British interests over our border controls opt-in. The Government say that they are making friends in Europe, but the fact is that they were stitched up by the Spanish and the Dutch—a point to which I shall return at the end of my speech.

Thirdly, the Chancellor of the Exchequer has been keen to tell us about his new friends in the Economic and Finance Council. The Government say that they are leading in Europe, but—

Mr. Doug Henderson

Will the hon. Gentleman give way?

Mr. Howard

Ah, the Minister is rising in defence of the Chancellor of the Exchequer.

Mr. Streeter

Let me just finish this point. The Government say that they are leading in Europe, but the other Ministers would not even give the Chancellor a seat on their Euro X Committee.

Mr. Henderson

Is not the hon. Gentleman slightly embarrassed by raising the question of the British opt-in to Schengen? The previous Government had such a poor relationship with their European partners that they could negotiate almost nothing that was to this country's advantage, including the insertion of British border controls protection in the treaty of Amsterdam. That is what really protects British interests, and it was achieved only on the last day of the Amsterdam negotiations.

Mr. Streeter

The Minister is doing his best to defend an indefensible position. He knows that we negotiated and agreed as early as March this year a complete opt-out from border controls. That was confirmed by many sources and well broadcast in the British press.

Mr. David Davis (Haltemprice and Howden)

Will my hon. Friend give way?

Mr. Streeter

My hon. Friend is coming to my rescue.

Mr. Davis

I simply want to add a few facts that the Minister can check for himself. He might care to look at the record of the meeting in Downing street attended by Prime Minister Wim Kok, in which the deal—a rather better deal than Labour arrived at—was proposed to the United Kingdom. The Minister can also check public information sources. The fact is that the deal the Labour Government came out with is worse than the one that was on the table before the negotiations on the Amsterdam treaty began.

Mr. Streeter

The voice of authority and authenticity—game, set and match.

Fourthly, we have heard for months about how the new soft-focus approach to Europe will pave the way for the lifting of the beef ban that our farmers so desperately need. We were told that the Government's new friends in Europe would support them. The Government say that they are winning for Britain in Europe, but no progress whatsoever has been made on the beef ban.

New Labour is learning the hard way that the European Union is not about soundbites or even warm personal handshakes; it is about 15 nations who have come together out of their own self-interest. Each nation is trying to get the best deal it can for its own people, and there is nothing wrong with that. The Government are so starry-eyed about Europe that they are convinced that other nations are queuing up to do them a favour, just because they roll out their touchy-feely language. The truth is that the new Labour Government will be rolled over by our partners again and again, just as they were at Amsterdam and just as they have been ever since.

Based on the record of failure of the past seven months, we can look ahead to the UK presidency only with trepidation. We want to the Minister to spell out tonight, not in soft soundbites, but in hard-nosed substantial policies, precisely what the Government's objectives are for the UK presidency. What do the Government intend to achieve during that six-month period in respect of enlargement, vote weighting reforms, the CAP, EU financing and jobs? How many jobs will be created under the UK presidency?

How will the Government sort out the mess they have got themselves into over frontier controls? I ask the Minister again, how did that happen? What went wrong at the Amsterdam summit? Why was the Spanish amendment not challenged? Was the Foreign Secretary, the Prime Minister or the Minister of State in the discussions when the Spanish amendment was tabled?

Mr. Doug Henderson

Is the hon. Gentleman aware that my right hon. Friend the Foreign Secretary has already explained both to him and to his right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) that the Spanish amendment was challenged?

Mr. Streeter

I am sorry to say this to the Minister, but frankly I do not believe him. I want the Minister to tell us tonight how we are going to get out of the difficult situation that he has got us into.

Mr. Henderson

If memory serves, my right hon. Friend the Foreign Secretary has responded—if he has not, I have—in a written answer and made it absolutely clear that the Spanish amendment was challenged. Is the hon. Gentleman aware of that?

Mr. Streeter

The Minister is sticking to his line. The Foreign Secretary has told us on two occasions that the agreement on the voting arrangements for the opt-in on border controls happened after the end of the summit. Would the Minister care to intervene yet again to confirm that? Is that right or not?

Well, we can assume that, as the Foreign Secretary told us today, after the summit had been concluded an agreement was entered into between the Spanish and the Dutch presidency to change the arrangements that had been agreed at the Amsterdam summit. What does that say about new Labour's relationship with Europe? What does that say about making friends in Europe?

What is the Minister going to do now? How will he solve this problem? Is he going to hold a bilateral meeting with Spain during the Luxembourg summit? Is he going to call the Spanish and the Dutch together? Is he going to raise this matter in full session at the Luxembourg summit? Is he going to use the UK presidency to undo the damaging agreement that has been entered into?

It is an important issue and it requires specific answers. The Minister must understand that we will not let him off the hook. We will press until we ascertain precisely what went wrong and what the Minister will do about it. Will he put the record straight? Will he put on one side the new Labour handbook of soft-focus phrases, and deal with policy and substance?

Will he set out the Government programme for the United Kingdom presidency? Will he be able to muster from somewhere an intellectually coherent agenda to set out the Government's approach to Europe? Will he tell us where he is winning in Europe? Will he tell us what he is leading in Europe? We know that we have a Government without values or principles, but can we for once have some substance?

8.30 pm

The Minister of State, Foreign and Commonwealth Office (Mr. Doug Henderson)

We have had a good debate, although the House has not been as well attended as it has been for some of the debates on European matters over four of the past six sitting days. There has been considerable passion in some of the contributions to the debate. Many have been wide-ranging, and some have concentrated more on the Luxembourg summit than others.

I congratulate the hon. Member for Leominster (Mr. Temple-Morris) on his second maiden speech. It is sometimes thought outside the House that we do not on one side of the Chamber have colleagues on the other. Even when I sat on the Opposition Benches and the hon. Gentleman took his place on the Government Benches, I always thought that he was a good colleague with whom to talk about political issues. He would view them objectively and would agree or disagree with parliamentary colleagues, depending on their attitude. That approach was reflected in his contribution this evening, which was measured and dignified.

The hon. Gentleman did not attack the Conservative party, although there was plenty of scope for him to do so, had he wished. He made a thoughtful speech, and we look forward to many more from him.

My right hon. Friend the Member for Llanelli (Mr. Davies) talked about the financing of the European Union. I can reassure him that the British rebate is a central part of our negotiating position. We have no intention of giving ground on that.

I know that there are many worries about structural funds. I know also that my right hon. Friend will recognise that, regardless of any enlargement process, there is a need to look again at structural funds because of the changes in the European economy that have taken place over the past eight years. Achieving a fair and proper structure is a principal aim that arises from the Luxembourg conclusions.

The hon. Member for Woodspring (Dr. Fox) referred to the Lome convention, as did the hon. Member for Hertford and Stortford (Mr. Wells). It is an important issue and we have already begun to consider the review that is taking place. The Government will be pursuing the matter initially over the next six months. The focus of our direction will be to try to do the best that we can for the poorest countries. I hope that that will meet many of the points raised by the hon. Member for Hertford and Stortford.

The hon. Member for Woodspring said that he saw Europe doing nothing but contemplating its navel. Surely the last thing to which Conservative Members would want to draw attention is contemplating political navels after the events of the past seven months. If the hon. Gentleman wishes further to pursue that argument, I am sure that the House will enjoy it.

The hon. Member for Somerton and Frome (Mr. Heath) gave general support to many of the issues that are on the agenda which the Government will pursue at the Luxembourg summit. The code of conduct on arms is important and we shall be raising the issue during our presidency. There is a huge amount of common ground on open and accountable institutions in Europe. I am sure that the hon. Gentleman has welcomed the announcements that have already been given by my right hon. Friend the Foreign Secretary and myself in Select Committees, on opening up and extending scrutiny. My right hon. Friend the Leader of the House will be making an announcement shortly.

The hon. Member for Wantage (Mr. Jackson) made a good and rounded speech and tackled many issues that many right hon. and hon. Members did not wish to take up. When they read the report of the hon. Gentleman's speech in Hansard tomorrow, they will be able to assess the quality of his speech.

The hon. Member for Ludlow (Mr. Gill) makes predictable contributions in these debates. He makes them with conviction, however, and speaks well. I do not agree with much of what he said, but it is important in a debate of this sort that all views are advanced.

The hon. Member for West Dorset (Mr. Letwin) argued that the Foreign Office now acts only for foreigners—I paraphrase his remarks. His assertion was in contradiction to the argument advanced by the hon. Member for Ludlow, who accused the Government of being too patriotic. Conservative Members cannot have it both ways.

The hon. Member for West Dorset talked also about the powers of the European Court. I have explained the Government's position, including the modest extension of powers. I did so in Committee against the background of the Amsterdam treaty, and I am prepared to return to the issue in Committee. It would be inappropriate to go into the details now, when there are so many other issues on which I must respond.

The right hon. and learned Member for Folkestone and Hythe (Mr. Howard) ended his contribution by wishing the Government well in their presidency of the EU. I began to look for the catch, but I did not find one in relation to the agenda for Luxembourg. I gained the impression that the right hon. and learned Gentleman agreed with the broad thrust of the Government's position on the importance of enlargement and reform of the CAP.

Unfortunately for the House, the right hon. and learned Gentleman, in endeavouring to find areas of controversy, indulged in scaremongering about the social chapter. The arguments have been exhausted during our debates on the Amsterdam treaty. We believe that the social chapter is essential if British workers are to have the same rights as workers in other European countries. It is important that Britain is involved in the debates and discussions about the social chapter, so that we achieve the right balance between things that can be best arranged at European level and those that can be settled at nation state level.

The argument has been exhausted also on whether the social chapter runs in contradiction to competitiveness. Competitiveness is a different issue, about securing new products, new designs, new production systems and breaking into new markets. In many instances, the social chapter reinforces that approach.

Dr. Fox

If the Minister is correct in saying that the Government want the same conditions to apply, why did they not turn to domestic legislation rather than signing the social chapter?

Mr. Henderson

That is old hat, because we have been through the argument before.

Mr. Howard

There have been no answers.

Mr. Henderson

Answers have been given.

The United Kingdom is a member of the European Union. We must consider what can best be decided by the EU at Community level and what can best be decided at nation state level. When we are talking about consultation, procedures and broad initiatives that turn on more than one country and involve companies that employ more than 1,500 people, it clearly makes sense to have common standards across Europe. I refer to companies that operate across Europe.

The importance of the social chapter is that signing up to it enables a member state to have influence. That having been done, the member state can contribute, initiate and agree to what is best decided at European level. In addition, there is the right to advance arguments, as sometimes the Government will. It is better to decide some things, however, at a local or national level.

The right hon. and learned Member for Folkestone and Hythe has had a specific reply on information about the euro currency. The Government may seek support from the Commission, to provide information. Money is available.[Interruption.] An approach has been made, but no final decision has been reached. The previous Government had the opportunity to tap into those resources to provide information. There is no question of the money being used for any propaganda. Indeed, it would be an ultra vires use of the funds were that to happen.

Mr. Robert Jackson

In relation to the Schengen opt-in, serious allegations have been made about the propriety of the conduct of the Dutch presidency. Does the Minister have anything to say in its defence?

Mr. Henderson

I thank the hon. Gentleman for raising that point. My right hon. Friend the Foreign Secretary made the position clear when he was before the Select Committee on Foreign Affairs: that Britain opposed the Spanish amendment, that there was a mix-up, that, when an attempt was made to clarify the matter, the Dutch presidency would not accept that there had been a challenge. There was no provision in the proceedings—the previous Government were involved in the same proceedings—for minutes to be taken or for a record. Therefore, it is extremely difficult to challenge what happened. Subsequently, there was a bilateral understanding between the Dutch presidency and the Spanish Government. We then secured a declaration that makes it clear that, if we wish to join any of the existing Schengen acquis, we can do so if the other countries accept that.

Speaking theoretically, if we wanted to join any Schengen acquis, we would ensure that the Commission was consulted beforehand, and if any country wished to object to our application for involvement, it would have to state that in specific terms. It is our belief that, if a strong case is made for Britain to sign up to part of the Schengen acquis, it will be extremely difficult for any country to block the application.

It is a little rich that some Opposition Members—not the right hon. and learned Member for Folkestone and Hythe—raise this issue when, in government, they could not make progress in negotiation and could not protect Britain's position in the treaty on border controls. That is why I find it extremely strange that the Conservative party, which is totally opposed to any involvement in the Schengen acquis, is trying to make something of the negotiations.

Mr. Howard

It is important that my hon. Friend the Member for Wantage (Mr. Jackson) and the House should appreciate that these serious allegations, as my hon. Friend rightly said, against the Dutch presidency are made by the Government, not the Opposition. The Minister has told us something this evening that reverts to what the Foreign Secretary told us in oral answers to questions on 25 November, and differs from what the Minister told us in a written answer, published in theOfficial Report.

On 25 November, the Foreign Secretary alleged that this hole-in-the-corner agreement between Spain and the Dutch presidency was made subsequent to the hearings at Amsterdam. The Minister of State says, in the answer available inHansard, that that agreement was reached on the night of 16 to 17 June, during the summit at Amsterdam. Can the Minister of State tell us which it was?

Mr. Henderson

Initially there were discussions in the margins of Amsterdam. Subsequently, when it was discovered that there was a difference of historic interpretation, an attempt was made to clarify, and a number of exchanges took place in private between the various parties contesting the text of the agreement.

Mr. Howard

rose—

Mr. Henderson

I shall give way once more, then I shall move on.

Mr. Howard

I refer the Minister to the question that I asked him, which is inHansard: To ask the Secretary of State for Foreign and Commonwealth Affairs…when the bilateral agreement between Spain and the Dutch presidency of the EU was concluded. The Minister replied: We believe that the text reflected discussions in the margins of the Amsterdam European Council on 16–17 June."—[Official Report, 2 December 1997; Vol. 302, c. 123.] This is important, and we are entitled to a clear answer from the Minister.

Mr. Henderson

The right hon. and learned Gentleman is thrashing this to death. It is clear from the answer that, initially, during the discussions before the completion of the Amsterdam talks, there were discussions in the margins between the Dutch presidency and the Spanish Government. Once it was discovered that there was a difference of view—in other words, when the Dutch presidency was saying that the Spanish amendment had not been changed—there were further exchanges between the various parties before final clarification. Subsequent to all that, there was a declaration, which I believe protects our interests in these matters.

I shall now move on.

Mr. Gill

Will the Minister give way?

Mr. Henderson

No, I am not giving way. I shall continue, as I know that hon. Members are keen to conclude relatively early this evening.

The Opposition Front-Bench speeches had nothing positive to offer. There was no vision on Europe, no vision about the direction in which the Opposition want to travel. Opposition Members were split on monetary union, split on the Amsterdam treaty, and, indeed, split on the referendum. We have not yet had a reply from the right hon. and learned Member for Folkestone and Hythe to the point made by my right hon. Friend the Foreign Secretary, about what happened to the commitment that there would be a referendum on the Amsterdam treaty. The shadow Foreign Secretary first stated that there would be a referendum, then appeared to be overruled by the Leader of the Opposition.

The hon. Member for South-West Devon (Mr. Streeter) said that the Secretary of State, in his opening remarks, only attacked. I do not think that the hon. Gentleman was listening to what the Secretary of State said, because my recollection is that he covered very thoroughly all the issues that will be before the Luxembourg Council and, indeed, other issues that are central to our relationship with Europe.

My right hon. Friend made it absolutely clear that he believes that people see the advantage of the European Union, as a modern relationship among states, dealing with the movement of people, goods and ideas. He said that enlargement was about strength, about seeking a practical timetable to bring about enlargement at the earliest possible time, and about looking at the reform procedures for the common agricultural policy, structural funds and budgets. He gave the commitment, in answer to the right hon. and learned Member for Folkestone and Hythe, that the British presidency would forge ahead with those issues and others.

During our presidency, we shall be able to demonstrate what can be achieved on employment, the environment and the fight against drugs. I know that those policies are welcome in this country, and they will be welcome in Europe. We shall be very happy to pursue them in Luxembourg.

Mr. Clive Betts (Sheffield, Attercliffe)

I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.