HC Deb 11 June 1998 vol 313 cc1242-84

Question again proposed, That this House do now adjourn.

6.14 pm
Mr. Donald Anderson (Swansea, East)

I join the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) at least in this: I welcome the fact that the Council is being held in Cardiff. I should have preferred it to be held in Swansea, but I concede that there is a stronger case for the Council to be held in Cardiff than there is for Cardiff to be the site of the assembly.

The right hon. and learned Gentleman made a number of points, most of which were rather petty. Clearly, he had trawled through a series of newspapers in Europe in the hope of finding some criticism of the Prime Minister. He emerged with one quotation from a right-wing French journal—hardly surprising—and one from an Italian journal which is very close to the Northern League—again, a rather right-wing journal. That is hardly an impressive result from what must have been an assiduous trawl by Conservative central office.

The right hon. and learned Gentleman criticised the Government for inaction over Kosovo. He hardly remembers that the real crisis there stems from 1989 when President Milosevic reduced the autonomy of both Kosovo and Vojvodina. The Government can hardly be criticised for the crisis or, indeed, for delays that come, understandably, from the hesitation of some of those in the contact group, such as Russia because of its close links with the Serbs.

The right hon. and learned Gentleman said that nothing was being done on the jobs front. Surely he recognises that the guidelines set out in the jobs summit in Luxembourg last November have been carried forward and that, for the first time, member states have produced action plans setting out how they are implementing those guidelines. In addition, a series of remarkable and new practical steps have been taken. There has been agreement on a package of venture capital support for small and medium enterprises, progress on setting priorities for the next generation of EU education, training and youth programmes, acknowledgement that the EU social fund should support national employment and lifelong learning strategies, demonstration projects and a series of meetings, including the Belfast meeting of Ministers, relating to the employability of women and issues such as child care, and a conference in Glasgow on work organisation. That is rather an impressive roll-call of initiatives on jobs.

My right hon. Friend the Foreign Secretary has set out a remarkable feast of achievements. However, a number of spectres were at the feast, and I intend to refer to some of them. Over the period of our presidency, there has been considerable success in terms of technical organisation. From a number of my European contacts, I have heard high praise for the quality of civil service support. The period from 1 January has been one of the busiest for foreign affairs in our peacetime history. That has imposed enormous burdens on Foreign Office Ministers, and Ministers in other related Departments. As my right hon. Friend the Foreign Secretary and the right hon. and learned Member for Folkestone and Hythe mentioned, there has been a record number of summits—relating to EU enlargement, the first Europe-China meeting, the Europe-Russia meeting, the second Asia-Europe meeting, and preparation for Lomé—which must have imposed enormous burdens on both the machinery and the personnel, not least my right hon. Friend himself.

The presidency must be seen in the context of far greater warmth towards the United Kingdom among our European colleagues. I found significant the comment made on Wednesday morning by the National Farmers Union spokesman, who said that, had an attempt been made at diktat rather than negotiation, as had been made in the past—clearly, he meant by the previous Government—there would have been no progress in respect of BSE. Like my right hon. Friend, I cannot help but wonder what would have happened during the UK presidency had it been presided over by the Conservative party, which, as was shown by the shadow Cabinet reshuffle, is being pushed further in an unrealistic Euro-sceptic direction. Our European partners, at least for the time being, are prepared to give us the benefit of the doubt, in spite of our absence—temporary, I hope—from the euro.

It is clear that several of the objectives set by the Government at the start of the UK presidency have been met. I was especially impressed that my right hon. Friend achieved an unprecedented agreement on an EU code of conduct on arms exports. The ethical dimension of the foreign policy is often derided by its critics, but that code of conduct marks a serious change.

There is increasing Euro-realism among many of the leaders in Europe. I used to deride the previous Government's claims that Europe was adopting our agenda, at a time when there was clearly increasing divergence; but, in the tone of the joint letter by Chancellor Kohl and President Chirac, we see a greater willingness to accept subsidiarity, which is a theme of the Labour party. That is a highly significant acknowledgement. It was seen towards the end of last year during the Amsterdam debate in the Federal Republic of Germany, when the lander asserted their own views. It was Minister-President Biedenkopf of Saxony and the leaders of Bavaria who ensured, through the lander, that there was greater constraint on the federal Chancellor. If, as is predicted, the Social Democrats win the federal elections in September, there may well be a further move by the German federal Government in a direction that is favoured by this country.

In the past, there have been attempts to put an obstacle between France and Germany and to attract either France or Germany into the British orbit, but those attempts were misguided, because there is a clear foundation, from the Adenauer-de Gaulle era, for Franco-German friendship. I believe that Britain now has a real opportunity to enter that dialogue, not only because of the warmth towards and the acceptance of this country, but because of the direction in which the European agenda is moving and the practical vision of my right hon. Friend the Prime Minister.

I was intrigued by what my right hon. Friend the Foreign Secretary said about the discussion to be held in Cardiff on the future of Europe. I understand that that is to be a lunchtime exchange of views, so it might have been a little overblown to speak of the future vision of Europe being decided between courses. Nevertheless, the discussion will be worth while and it will be interesting to see what political vision my right hon. Friend the Prime Minister will feed into that lunch.

We cannot claim overmuch for our presidency, because any presidency is part of a continuum. The baton on the jobs agenda was taken up and carried forward by the UK Government after the jobs summit in Luxembourg last November. In exactly the same way, the themes that we have moulded and adapted will be taken up by our Austrian colleagues on 1 July. In my contact with the Austrians, I have been impressed by the way in which there is now a seamless gliding move from one presidency to the next, as themes are accepted and developed.

Whether the theme is jobs, the environment, crime, fraud or drugs, the overall agenda is now a people's agenda. There is a greater acceptance in the EU of the lesson taught by the first Danish referendum, which showed that the European elites had moved away from an agenda that had relevance to the people. I am glad that our Government are bringing us back to an agenda that our own people regard as relevant to their lives.

I see the importance of the scoreboard of performance in respect of the single market, which shows the greater strength of implementation, even among our Italian colleagues. The UK presidency would have been seen as an historic one in any case, because of the major decisions that had to be made on enlargement and on the European currency, but the success with which both those major advances have been completed is worthy of note; for example, on enlargement, the pre-accession strategies and dossiers have been agreed.

I was disappointed that my right hon. Friend the Foreign Secretary did not dwell on the subject of Turkey. Although the snub to Turkey did not come during the UK presidency but in Luxembourg in December last year, Turkey had reasonable cause for dissatisfaction, and my right hon. Friend has tried hard to build bridges with Turkey. I hope that my hon. Friend the Minister of State, who is to reply to the debate, will say something about whether Turkey has so far indicated that it is prepared to enter a dialogue on the Commission suggestions on building bridges.

I also hope that something will be said about the meeting in Glasgow on Monday, in which a number of threats were made about delaying enlargement because of concerns about regional funds among those who benefit so substantially from them and who fear their loss, especially the Iberian countries, Greece and Ireland. Because of the German elections, I suspect that there will not be as much progress made in Wales as we might want on revision and agreement of regional aid.

It is fair to say that the euro was launched well, in spite of the fracas. The markets have spoken more eloquently than the politicians by responding favourably, then and now.

A month or two ago, it was assumed that the Cardiff Council would be one of consolidation and continued preparation for the Austrian and, subsequently, the German presidencies. Since then, an amendment has been moved in terms of the major foreign policy crises that have overcome the smooth functioning of the presidency. I recall a distinguished former Labour Foreign Secretary, Michael Stewart, telling me that his nightmare as Foreign Secretary was that, at any one point in the day, two thirds of the world was awake and capable of causing mischief. I fear that the Foreign Secretary must share that same nightmare.

There have been several crises over the past six months in respect of Iraq, Algeria and Indonesia, and I compliment the Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Leeds, Central (Mr. Fatchett), on acting consummately and very sure-footedly in respect of each. Now, we must face the situation in Kosovo, nuclear tests and the middle east crisis—as well as, perhaps, the fact that Germany is raising questions over its financial contributions to the EU. The common theme is surely the absence of decisive leadership from the United States of America, whether on Kosovo, the middle east or elsewhere.

The challenge for Europe, particularly in respect of the Balkans, which is on our doorstep, is what we will do. If Europe is to be taken seriously in foreign affairs, as the common foreign and security policy apparatus is put in place following the Amsterdam treaty, we must ask ourselves whether the troika arrangement—in this case Luxembourg, United Kingdom and Austria—raises Europe's credibility and provides essential leadership.

In spite of the difficulties, the Government can take some considerable satisfaction from the way in which they have handled the presidency. They have ensured a smooth glide into the Austrian presidency. Lasting foundations for a stronger Europe have been laid.

6.31 pm
Mr. David Heath (Somerton and Frome)

It is curious that, despite being told that Europe is such a vibrant issue in this place, fewer than 20 hon. Members are present for this essential debate on the eve of the Cardiff Council. It is extraordinary that it attracts so little interest. Nevertheless, this is a very important and interesting debate.

I listened with care, as I always do, to the right hon. and learned Member for Folkestone and Hythe (Mr. Howard). I am in some difficulty because I share some of his elegantly phrased analysis of the British presidency, but, of course, I disagree with some of his conclusions. I find it extremely curious to suggest that the Conservatives, had they been in a position to do so, would have done better than the present Government. All recent history defies that proposition.

The right hon. and learned Member was right to draw attention to the start of the British presidency. The Government came in like a lion, but are going out rather like a lamb. There was the overblown hoo-hah, as the expression goes, of the advent of the British presidency. There were loud fanfares, loud assertions and even louder ties. Indeed, I see that the Minister with responsibility for Europe is sporting one.

It was probable that the rhetoric could never have matched the actions during the presidency, however successful Ministers were. That expectation has been justified by events. The British presidency has not achieved all the objectives set, and probably could never have done so. The rather offensive proposition—to many of our partner nations in Europe—that a newly elected Government would suddenly lead Europe has not been borne out by events.

The hon. Member for Swansea, East (Mr. Anderson), the Chairman of the Foreign Affairs Committee, suggested that there was a feast of achievement to celebrate. I must say that it is rather a jejune feast, although there have been successes, and it is right that we should pay tribute to them. The accession talks, for instance, were well managed. I am pleased that progress has been made.

It is probably unfashionable to do so, but I congratulate the Minister of Agriculture, Fisheries and Food on his activities in Europe. He has made a complete mess of agriculture at home, but in discussions in Europe to promote such matters as the lifting of the beef ban, he has done a fair amount of good work.

The European Union code of conduct on arms sales, which the hon. Member for Swansea, East mentioned, will be seen as the single most important achievement of the presidency. We were disappointed by the code's final form; it could and should have gone further and been a more transparent arrangement. Nevertheless, it is a signal achievement to have got so far—which makes it even more surprising that it was not mentioned in the Prime Minister's half-term report, which, as the right hon. and learned Member for Folkestone and Hythe said, was more of a half-baked report. It laid claims to great successes that amounted to no more than holding a meeting or having a half-formed idea of something that might be good in the short term.

The Government have some cause for celebration.

Mr. Donald Anderson

I hope that the hon. Gentleman would fairly agree that any criticisms about the inadequacies of the code of conduct should be laid at the feet not of the Government but of the attempts to gain consensus among more reluctant partner countries.

Mr. Heath

The hon. Gentleman is, of course, right in part; it was a process of negotiation. I believe that that process could have been taken forward had it been more open. Certain partner nations might have put rather more pressure on those more reluctant nations—let us not be mealy-mouthed—such as a particular one just across the English channel, which it might be said took a slightly different view. Nevertheless, let us simply accept that something has been done which should have been done, and a start has been made.

I agree with the Foreign Secretary that there is a record of environmental achievements; there have been tangible successes. There have also been moves towards more openness and accountability in EU structures—although not as quick as I would have liked. The baton of the Amsterdam treaty should have been picked up—without waiting for ratification—and taken forward on some suggestions which, under the treaty, require two years to be achieved. Nevertheless, some progress has been made.

Set against that background, there are the failures. The negotiations on European monetary union were a mess—by the Prime Minister's own admission. They did very little to promote the idea of a strong and stable arrangement which is consistent with the independence that is so crucial to the success of monetary union.

As far as I know, there has not been any success in cutting the costs of the EU. None of the range of options that we and others have put forward for cutting costs has been promoted or proceeded with. For example, it is a monstrosity that £700 million a year is spent on promoting the growth of tobacco—a substance which every member state's health department is actively trying to discourage people using. That needs to be addressed in double-quick time.

We have made very little progress on reform of the common agricultural policy and the common fisheries policy. The Agenda 2000 proposals are on the table, but no more than that. The most important thing that Ministers can achieve at the Cardiff summit is the establishment of a firm timetable for progress on talks concerning not just reform of the CAP and the CFP but of the structural cohesion fund and the institutions. Talks on each of those matters needs a firm timetable. Europe does not work without deadlines to meet. Those deadlines must be set if there is any hope of success.

I do not believe that we have seen a strengthening of common foreign and security policy across Europe. Indeed, some of the Government's actions over recent months have been retrograde in that respect. It cannot have been good for European cohesion for Britain to act on the difficult subject of Iraq as if it were a member of the permanent two rather than the President of the EU. Algeria is another example of the European Union signally failing to make the impact that it should have done on a significant problem on its doorstep.

We can set against that the position in Kosovo, on which the Foreign Secretary spoke at length. Liberal Democrat Members will give him every support in his proposals. I make two pleas to him: first, that he makes every possible effort to involve Mr. Primakov and the Russian Government in any demarche that is available to him. It is essential that the Russians use their influence on Mr. Milosevic, because no one else has the same reach. Secondly, he should consider carefully the position in the former Yugoslav Republic of Macedonia, which is in grave peril from an overspill of the problems in Kosovo, and the position in Montenegro, because there could be a serious destabilising effect on that country. We could witness further inflammation in the Balkans.

The right hon. and learned Member for Folkestone and Hythe was clear in his criticism about NATO's lack of preparation. I do not recall—he may correct me because he remembers his words better than I—his mentioning that point when we heard a statement on Kosovo a few weeks ago. I do not remember the right hon. and learned Gentleman making an explicit request—perhaps he did, or perhaps he has thought it up since then.

Mr. Howard

I made certain suggestions at that time—for example, concerning the stationing and reinforcement of United Nations troops in Macedonia—some of which have now been implemented. However, it never occurred to me that NATO had not prepared its options. There was no suggestion at that stage that it had not done so, and I assumed that it had. It was only when I read newspaper reports about a week ago that I had the first inkling that those options were, astonishingly, still under preparation.

Mr. Heath

Of course, I take it at face value that the right hon. and learned Gentleman made those implicit assumptions.

The Government have further failed in the parliamentary scrutiny of European Union matters within the United Kingdom. We heard from the Leader of the House earlier that proposals on that may be made shortly. I hope that they are, because it is essential that Britain has more effective parliamentary scrutiny of European affairs. There is a series of measures that would achieve that higher level of scrutiny.

The real opportunity in Cardiff, which has already been mentioned by several Members, is for the new start to the European institutions offered by the letter from Chancellor Kohl and President Chirac. It lays out important positions that the Government, by the happenstance of the UK presidency, have the opportunity to achieve. I am astonished by the language used in the letter, because some of it could have been written by members of my party's policy division. I see no difference between the subsidiarity proposals in the letter and the proposals that we have repeatedly made. It is interesting that the letter begins with the suggestion of an open and sober discussion at the European Council", for which the lunchtime venue does not bode well.

The letter goes on categorically to state: It cannot be the goal of European policy to establish a European central state". Hear, hear. It adds that some European institutions are becoming increasingly remote from the citizens and their day-to-day problems", which is absolutely right. The letter also says that decisions should be taken as closely as possible to the citizen. Citizens will only become more strongly committed to the common Europe if decision-making processes are clearly understandable and transparent". We have made precisely that point on many occasions. There is a need to reform Europe's institutions.

Perhaps it is now time to look beyond the rather flimsy protocol on subsidiarity that was appended to the Amsterdam treaty. I have criticisms of that: it was essentially a good thing, but it does not go far enough. We should consider a far more fundamental review of the levels at which decisions are made and, perhaps, try to achieve a concordat or protocol—call it what one will—that will establish once and for all where power is appropriately exercised in the different tiers of European Government, whether it is at the national tier or the regional and local tier.

We need a clear mechanism for ensuring that power does not gravitate to the centre, but is deployed at the lowest possible level. That is now a prerequisite for the development of a European Union that works for the citizens of Europe.

My criticism of the protocol in the Amsterdam treaty is that it is not an acquis communautaire; it leaves in place everything that has already been decided. We are talking about a new Europe with new problems and challenges. It is right that we consider whether what was decided in the past is necessarily right for the new Europe. The principle that Europe should do less, but do it better should commend itself to the House.

Finally, one outcome of the Cardiff Council must be a clear understanding on the timetable for the series of reforms that I have mentioned and a continuity beyond the British presidency into the Austrian, German and Finnish presidencies so that there is a continuum of reform that makes Europe a better place for its citizens. If Ministers can achieve that at the Cardiff summit, they will have served this country and Europe well.

6.46 pm
Mr. Alan W. Williams (East Carmarthen and Dinefwr)

I am glad to have the opportunity to take part in this debate on the eve of the European Council in Cardiff, and to add a Welsh voice to the proceedings.

I am delighted that we had the news yesterday from the European Commission that there are strong moves towards lifting the beef ban. Naturally, for my constituents in the very rural area that I represent, the beef ban has been a severe problem over the past two years. I follow these issues carefully and I know that, over the past months, the Minister of Agriculture, Fisheries and Food and his officials have worked hard in Brussels with the Commission to develop, first, the certified herd scheme and, now, the date-based scheme. If that scheme is passed by the veterinary committee and, eventually, the Council of Ministers, it will mean a lifting of the ban over the next few weeks and months. It may take years rather than months, but we expect to recapture the export markets that were once held by British beef. That will help to raise prices. I am pleased that that announcement was made yesterday. It forms an optimistic backdrop to the weekend's proceedings.

More generally on agriculture, there is progress—it is always very slow—on reform of the common agricultural policy. That is now driven by Agenda 2000 and the need, with enlargement, to devote relatively fewer resources to agriculture in those structural reforms. It is important that we move away from production-based subsidies. In the past few months, one of the problems in the disbursal of the £85 million that came from the Government last Christmas is that the small farmers, who needed most help, were receiving the least. Those with large stocks of animals received the most help, but needed the least. There is a perversion in the CAP, in that 80 per cent. of the money goes to the richest 20 per cent. of farmers. We need to move away from such production-based support to a system that is based rather on people or units of labour and the environment. Our farmers, especially in the upland areas, do an enormous amount of work to maintain the environment and to make the countryside attractive to tourists. The support structures must take account of that.

My hon. Friend the Member for Swansea, East (Mr. Anderson) referred to the importance of structural funds in the Agenda 2000 discussions. West Wales and the valleys are impoverished. The cases of Merseyside and South Yorkshire for objective 1 status have been accepted by the Commission. I hope that my hon. Friend the Minister will press hard for west Wales and the valleys to be recognised as eligible for objective 1 funding. Our gross domestic product per capita is below 75 per cent. of the European average, so we qualify and we need that support.

Mr. Wigley

Does the hon. Gentleman accept that the gross domestic product per capita of his county, Dyfed, at 68 per cent. of the European average, and of Mid-Glamorgan at 62 per cent. and Gwynedd at 72 per cent. of the European average, are all below the GDP per capita of South Yorkshire and Merseyside, and therefore should certainly be granted objective 1 status?

Mr. Williams

I am grateful to my colleague, the right hon. Member for Caernarfon (Mr. Wigley), for giving the latest statistics on our inheritance after 18 years of Conservative rule. We have lost much of our heavy industry in the industrialised parts of Wales, and west Wales has more difficulty in attracting inward investment such as Clwyd and south-east Wales have successfully attracted. Our case for European funding is strong, and I hope that it will be strongly argued by the Government.

When the history of the United Kingdom presidency is written, the most important single issue of the past six months—despite the difficulties of that weekend in Brussels—will have been the establishment of the single currency. It will start on 1 January 1999, with 11 countries signed up to it. I am disappointed, of course, that Britain is not a member. We could not join, because of our inheritance. In the discussions on the Maastricht treaty, the right hon. Member for Huntingdon (Mr. Major) achieved the opt-out from the social chapter and from economic and monetary union. A new Labour Government could not quickly join the single currency.

The Government are setting out the pathway. We are working with the public, the trade unions and business towards eventual membership of the single currency, which I hope will come early in the next Parliament. From the sidelines, we wish it well. Whether we are in or out, it is important for economic prosperity that the euro is a success. I note that, despite high unemployment, growth is returning to the economies of France and Germany. The latest figures are 3.5 per cent. growth in GDP in France and 3.8 per cent. in Germany. I hope that unemployment will soon start to fall in both countries.

In Britain, we must plan and work diligently for membership on 1 January 2002, pending a referendum. On that date, euro coins and notes go into circulation. That would be a reasonable time scale for us to join. If, as I am confident they will, our Government win the general election in 2001 or early 2002, we can hold the referendum to join by that date.

A major national debate is needed on the optimum value of the pound for joining the single currency. The pound is substantially overvalued. At DM3.10, it caused serious problems to farmers and manufacturing industry. The rate is now down to about DM2.92, but I do not believe that that is sustainable. If we joined at anything like that level, we should merely be repeating the sad experience of the exchange rate mechanism.

I do not know what the right figure is. I read all the economic commentators. I should be happy with DM2.70 or DM2.60. Some in the City favour DM2.50 or even as far down as DM2.30. There is a range of views. The Chancellor cannot give us his figure, because it is not conventional for the Chancellor to intervene in a matter that is so market-sensitive. The Confederation of British Industry, our leading businesses, trade unions, employers, chambers of trade and we as citizens should engage in a detailed debate to decide on a long-term sustainable value. For my part, it is below DM2.70. It is a critical decision, which we must get right over the next four to five years.

A further concern is the absence of any strategy to get our interest rates in line with those of France and Germany and those that will be set by the European central bank. The current interest rate of France and Germany is 3.5 per cent. Ours is 7.5 per cent. The Bank of England or the Treasury must develop a grand strategy over the next four or five years that would allow our interest rate to move from 7.5 to 3.5 per cent. Without creating a boom. If there was a rapid drop, there would be the danger of a house price explosion and of land values getting out of control.

We need a euro membership plan for 1999–2002, rather like the Chancellor's statement this afternoon on his fiscal strategy over the next three years, and the comprehensive spending review that will be published in July. Those critical background decisions are the Treasury's domain, but we must work on a larger national strategy for gearing ourselves to join the single currency.

We could be overtaken by events in the next year. Industrial corporations that do most of their trade on the continent will open accounts in euros. Banks will make it possible for farmers to have euro accounts. Ordinary citizens like us could open accounts in euros, instead of putting our money into building societies, for example. Indeed, there is the possibility next year of British citizens speculating against the pound by opening euro accounts, in the expectation that the pound will devalue as we approach membership.

I do not rule out the possibility of joining the exchange rate mechanism. We may need to consider that next year, if there is instability in the value of the pound. Perhaps we should join the exchange rate mechanism on 1 January 2000 at a negotiated rate. We would then be able to demonstrate stability for the two years before membership of the single currency.

Those are my thoughts on our relations with Europe. I am delighted that, despite last weekend's difficulties, the single currency will be launched on target on 1 January next year. I am convinced that it will be a great success and that we should join it. As the Foreign Secretary and the Chairman of the Foreign Affairs Committee, my hon. Friend the Member for Swansea, East (Mr. Anderson), said earlier, when we look back on our presidency, we can be proud of many achievements in the past six months. It was never going to be an easy task because of our inheritance of Euro-scepticism from the previous Government. Relations with our European partners were badly damaged during the period of non-co-operation over the beef ban, and we have tried to repair that damage in the past 12 or 18 months.

Let us look forward three, five or 10 years. I hope that there will be a change of Government in Germany and that the new Administration will be more centrist or centre left. The days of President Chirac in France are numbered, and I hope that we shall see a new social democratic or centre-left Government. In three or five years' time, I hope that the European Union will lean more to the centre left and will be very much in tune with the philosophy of the new Labour party. I believe that our influence will become stronger over the years and that we shall pull Britain back into the heart of Europe.

7.1 pm

Mr. Bowen Wells (Hertford and Stortford)

In preparing my remarks for today's debate, I sought not to offend the Government because I want them to work enthusiastically towards achieving some objectives—particularly in development and including the renegotiation of the Lom é convention—before our presidency ends at the end of June. The Government set themselves the objective of agreeing the European Union's negotiating mandate for the renewal of the Lom é convention, which expires at the end of 2000. I understand that a ministerial meeting took place on Monday in an attempt to settle the matter, but I have not heard that real progress has been made. If it has, I hope that the Minister will inform the House what has been achieved. That is one item that I wish to highlight.

I was provoked by the speech of the Secretary of State for Foreign Affairs. I have rarely heard in the House such a self-satisfied and smug speech about the Government's achievements during our presidency. There has clearly been modest progress in some areas, but it is very modest. Let us take the issue of arms exports, about which we are all concerned. The Foreign Secretary heralded the agreement on the European Union's conduct of arms sales as a great achievement, but he over-egged the pudding. I suppose that we should be used to that from the Labour party, which trumpets the most modest progress to the press and the media as a great triumph.

I do not wish to upset the Government: they have tried, but they have made only a modest achievement. The Foreign Secretary did not give any details of that achievement. It has been agreed that, if any European nation refuses a licence to export arms, it must inform the other member states. That is progress—and we hope to build upon it—but it is very slight progress; we cannot claim that it is a huge advance. Let us be modest about it: we have a huge way to go in controlling arms sales and ensuring that arms are not sold to people with genocidal intentions or to countries that wish to control their populations by military means, such as Sierra Leone, Nigeria, Indonesia or anywhere else. We have a long way to go before we secure agreement on that matter, but some progress has been made.

The Foreign Secretary trumpeted the achievement of the subsidiarity letter of Kohl and Chirac. It is mind-boggling that we are asked to believe that that represents progress. The hon. Member for East Carmarthen and Dinefwr (Mr. Williams) and the Foreign Secretary extolled the virtues of economic and monetary union, but there is no more centralising policy adopted by the European Union than the decision to form a single currency. West Wales will rue the day that it had an advocate such as the hon. Member for East Carmarthen and Dinefwr, who believes in the single currency. If the people of west Wales think that they are isolated from economic decision making in Britain, they will be even more isolated in Europe.

The hon. Member for Somerton and Frome (Mr. Heath) and I are in passionate agreement about subsidiarity: we welcome it. However, the Amsterdam treaty allows the European Commission to veto the appointment of Commissioners. That is a huge accretion of power to the centralised bureaucracy and to the President of the European Union. Let us see these great declarations for what they are: a mechanism for controlling political activity in Europe that is hostile to the increasing accretion of power in Brussels. In France and in Germany, they say, "Don't worry, old chaps, we believe that decisions should be taken as near to the people as possible, but we won't do anything about it. We shall do the reverse." We should not be fooled by the great declarations.

I return to the question of the management of aid under the Lomé convention, the renegotiation of that convention and the mandate that we must give to our European Union negotiators. I share the Government's ambition to achieve agreement during the United Kingdom presidency. That aim has not yet been realised, but there is still time. The International Development Committee has published a report on the matter—which I commend strongly to the House—which suggests that the European Union's approach to the issue is seriously flawed. I hope that I am right in assuming that the Government have not made progress because there is serious disagreement about the way in which the European Union should negotiate with the African, Caribbean and Pacific nations, which are the other parties to the Lomé convention.

The trade proposals are particularly damaging. The European Union proposes to enter into trade agreements with some of the poorest countries—which are African, Caribbean and Pacific nations—only if it can enter reciprocal free trade areas. The Lomé convention gives European Union countries free trade access to the European market, but they are now demanding free access to other markets. It has been calculated that, if that occurs, the value of 40 per cent. of European Union aid to vulnerable countries will disappear.

Under the agreement, which it has proposed, the EU will achieve huge trade advantages in respect of those small countries. What will that do to those vulnerable countries? South Africa is not as vulnerable in trade terms as countries such as Mozambique and Rwanda, but we should consider the EU's negotiations with it. At present, they have taken three years, and there is still no agreement. The EU is to give only five years for all those countries to enter into free trade agreements, yet it has not reached agreement with South Africa in three years.

Let us consider a little homespun story: the EU subsidises the production of tinned tomatoes, which it over-produces. Subsidised tinned tomatoes are exported to South Africa, now that it has opened up its markets at the request of the EU. What has that done to the tinned tomato factories of South Africa, which have traditionally exported to this country, to Europe and around the world? It has closed one factory and put more than 400 people out of work. That is an example of what the EU is trying to negotiate, not only with middle-income countries such as South Africa, but with the poorest countries of this world.

There has been a serious reversal of the trade policy that this country has offered to certain countries, some of which have been associated with us for 450 to 500 years. The EU wants us to abandon them and wants to force them into integrated free trade areas. We would then negotiate from the position of what I would characterise as the EU's seriously imperial ambitions in such areas, turning them into dependent countries and reducing them to producing only primary products at prices dictated by the hugely powerful EU.

That is not the right way to negotiate with such vulnerable countries, and the report of the International Development Committee makes that clear. I commend the report to the House and to the Government, because if the mandate is allowed to be settled on such a basis, we shall have a settlement that will be damaging to the countries about which we should be most concerned—the poorest countries.

I particularly want to discuss the banana protocol. Agriculture Ministers and Foreign Ministers have said to the Select Committee that they want the completion of a new agreement safeguarding the small farmers of the Windward Islands from being overrun by the big companies in the banana world, such as Chiquita and Dole. Few people are involved in comparison with the number at Chiquita, Dole and Del Monte, the huge companies which dominate the world banana trade. We are dealing with a tiny number of people—in St. Lucia, St. Vincent and Dominica—whose livelihoods are based on the industry. The sale of relatively few bananas accounts for 70 per cent. of Dominica's export earnings.

We must safeguard that trade. It is no good calling on such countries to diversify—diversify into what? Drugs? No. Into other agricultural crops? No, because the competitors are much more efficient. It would be much more sensible and practical to find a way to produce a formula. I believe that Ministers had the ambition to do so and that EU officials think that they can achieve one, but none has been forthcoming so far. Therefore, I ask Ministers to make another effort in the next six weeks. In particular, I ask them not to accept the advice that they are receiving from their civil servants, who are saying that the agreement has to be compatible with World Trade Organisation criteria. It does not. If Ministers decided so to do as a matter of policy, they could apply to the WTO to be absolved from its general rules. That evidence was given to the International Development Committee by WTO officials in charge of trade with developing countries and is spelled out in the report.

The EU has it in its power to get a waiver from the WTO, if, politically, it wants to do so. In European Standing Committee B, the Minister of State was unable to answer a question on the waiver, about which I have had correspondence with him. He revealed in a letter that he is under advice from civil servants—not only from this country, but from Europe—that they do not want to go down the policy route of seeking a waiver, to safeguard banana producers in the Windward Islands. That policy is wrong, unless an agreement can be produced to safeguard those producers by other means. The current proposals would simply benefit large producers—Del Monte, in particular—on the west African coast and would exclude and eventually eliminate the banana trade from the West Indies. I beg the Government to consider that seriously.

In respect of the report on Lomé, we must ensure that the management of European aid is improved vastly. It is constantly the subject of adverse Court of Auditors reports, and delivery of aid is slow—way behind the Lomé IV target. Aid that we are supposed to be disbursing now has not even begun to be disbursed, because we have not fully signed up to Lomé IV. European offices in recipient countries are short of staff and have to refer every decision to Brussels, because ministerial meetings must decide every nuance of policy. That must be decentralised, and there should be more competent staff in the field.

The report also suggests that EU nation states' bilateral aid programmes should be co-ordinated and should work together with EU efforts. Tomorrow, we are meeting at Westminster the chairmen of the equivalents of the International Development Committee from 11 of the 15 nation states to discuss how we can do that. Mr. Rocard, the chairman of the European Parliament Development Committee, is also attending, so we hope to contribute to the co-ordination of aid policy and its efficient delivery. I ask Ministers to redouble their efforts to reach agreement on the negotiating mandate for the Lomé convention before the end of our presidency.

7.17 pm
Mr. Mike Gapes (Ilford, South)

It is a pleasure to speak after the hon. Member for Hertford and Stortford (Mr. Wells), who made an interesting reference to the World Trade Organisation. Although my right hon. Friend the Foreign Secretary did not refer to it in his speech, the European Union, under the British presidency, has moved to resolve the long-standing dispute with the United States about the Helms-Burton provisions, extra-territoriality and attempts, through American domestic legislation, to penalise European companies for trading with Cuba, Libya and Iran. Alone, this country or any other European country would not be able to achieve anything on that issue. We have made progress only through the strength of the EU, under the leadership of our Labour Government.

I shall refer to several matters that my right hon. Friend the Foreign Secretary mentioned. First, I draw attention to the prodigious efforts of Ministers over the past six months. This week, our Prime Minister has done a massive amount of Henry Kissinger-style shuttle diplomacy around Europe. He was in three Scandinavian capitals in one day. Yesterday, I met a senior figure from the Swedish Social Democratic party, who was in London and had been in Stockholm when the Prime Minister was there. That person said that, although the Nordic model had always strongly emphasised partnership between the private and the public sector, and although the Nordic model had many similarities with policies that we were pursuing, our Prime Minister's visit received enormous coverage. The visit was regarded as significant in the context of building a new alliance between the British Government and Sweden, Finland and Denmark—the three countries which were visited during one part of the tour that has taken the Prime Minister all over Europe during the past week or so.

The Kohl-Chirac letter has already been mentioned, but I want to emphasise its importance. Earlier, in an intervention on the shadow Foreign Secretary, I said that such letters were nothing new. When they had leaders in different countries, the Christian Democrats often organised joint initiatives before European summits. President Mitterrand organised joint initiatives with Chancellor Kohl before a number of such summits, including Maastricht in 1991. What is significant about this initiative is the presence of so many themes that are similar to the policies being pursued in this country under the British presidency, which will be submitted to the meeting of Heads of Government at the end of next week.

Under a Conservative Government, we were pleased to be the odd one out—because we had "Madame No" as Prime Minister, or because, as happened in March 1997 in the last Parliament, our then Foreign Secretary told the Foreign Affairs Select Committee that the British Government had a list of so-called show stoppers. That seemed to be a growing list: every time the Foreign Secretary answered a question, something was added to that list of show stoppers, designed to prevent any agreement at the Amsterdam summit. Those days seem very long ago.

I look around the Chamber—particularly at the Conservative Benches—and ask: where are the Euro-sceptics? I recognise the Opposition Whip, but I am not sure where the rest of them are. I have regularly participated in European debates during the past six years, and I do not think that I have missed many: I was present for the Committee stage of the Bill dealing with the ratification of the Maastricht treaty, and for our debates on the Amsterdam treaty. I remember speaking at midnight, and being berated by nine or 10 hon. Members who harangued me with intervention after intervention. Where are they today? I am waiting for them, but they are not here.

The fact is that the debate has changed. It has moved on. [Interruption.] The Opposition Whip should understand that the debate has moved on. The Euro-sceptics were partly routed at the last general election. I see that a Europhile has joined us: I am pleased that Conservative Europhiles are coming into the Chamber.

Euro-sceptics not only lost a number of seats; they no longer seem to have the arguments. The truth is that Europhobia and xenophobia are not popular policies with the British people. The British people want a pragmatic Government who get things done—a Government who co-operate with our European neighbours. That is what they have, and that means that, as the Austrian presidency takes over from the British presidency, there will be a very good period of co-operation between the two Governments during the transition. The Austrian presidency will continue to pursue many of the aims that we have pursued during the past few months, especially preparation for enlargement.

There is a lengthy agenda for the European summit. Many items on that agenda are very complex, and some, inevitably, are for the long term. It is ridiculous to think that any six-month presidency of an organisation such as the European Union, comprising 15 states, can make a massive difference to the process. With a bad presidency, things can go badly wrong; with a good presidency, things can be dealt with efficiently. What needs to be done can be done, and the agenda can be taken forward—which is what the British presidency has done, in a number of important ways.

I agree with my hon. Friend the Member for East Carmarthen and Dinefwr (Mr. Williams), who said that the country would incur costs by remaining outside the single European currency. I was pleased that, in his interesting statement today, my right hon. Friend the Chancellor of the Exchequer specifically said that the Government would meet the fiscal criteria laid down in the Maastricht Treaty. That is important: it means that, when the time is right, there should be no arguments about unnecessary delays in regard to British engagement in, and membership of, the European single currency. I believe that, when we meet the necessary economic conditions, and have reached a political judgment that the time is appropriate and a popular mandate is there, we should join quickly.

As the letter from Chancellor Kohl and President Chirac points out, the issue that must be discussed—it is one of the issues that they want to be raised in Cardiff—is the further development of political union in tandem with the Economic and Monetary Union". Discussions on that are proceeding now—informally—among a number of European Union countries. If we are not part of the formal process within economic and monetary union, there is a danger that, in the long term, political discussions and developments that may impinge on this country will go ahead, and we shall not be part of them to the extent that we could be if we joined the 11 who are in economic and monetary union, as well as being one of the 15 members of the European Union.

Let me also say something about relationships between European Union countries. The letter from President Chirac and Chancellor Kohl is a sign of the close bonds between Germany and France. Those close bonds have been built up for long-term historical reasons. We need to recall only a few dates—1870, 1914 and 1940—to appreciate the reasons why, after 1945, democratic politicians decided that that relationship had to be built for the future peace and stability of the continent.

It is a mistake—some commentators have referred to this—to think that it is in Britain's and Europe's interests to try to break the relationship between Germany and France. It would be very dangerous and short-sighted for us, as British politicians, to take the view that we should be friendly with either Germany or France. It is essential for Britain to play a full role—alongside Germany and France—at the motor of the European Union, while retaining our historically excellent relationships with other European Union countries such as the Netherlands and Portugal, and our good relationships with countries outside the EU. An example is Norway, which, unfortunately, made the wrong decision in its referendum.

The victory of Gerhard SchrÖder in September will be a great boost to the new centre-left politics in Europe. Philip Stephens, in the Financial Times, pointed out that a Chancellor SchrÖder in Germany would take a more Atlanticist and northern approach than the present German Government. That remains to be seen, but it raises an interesting point. There might be less tension if the British Government had excellent relations with the United States and improving relations with the European Union, and the German Government had a similar approach.

Our approach should not be at the expense of our relationship with Lionel Jospin and the socialist party in France. The two countries have a different electoral system, and there are differences in the nature of the majorities. Prime Minister Jospin has a difficult coalition to manage, yet many of his policies are similar—leaving aside the rhetoric—to those that we have been pursuing. Over the next three, four or five years there will be significant cross-fertilisation. We shall learn from each other's experiences and build together coherent and constructive policies to create a new, dynamic, open, effective, efficient and more democratic western European and all-European political structure.

One of the difficult areas that we shall have to consider and which will cause great problems in the enlargement negotiations is the nature of the institutional framework for an enlarged European Union. It is absurd to think that we could continue the present structure and have an efficient decision-making process in a European Union of 25 or 27 member states. Therefore, there must be serious change. Everyone is agreeable in principle to change, except when it affects what they perceive to be their own vital national interests.

At the moment, we have two Commissioners, because we are a large country. It has been argued that the weighted vote of larger countries should be increased, because the present undemocratic system gives Luxembourg a large vote in European Union institutions. The voting system bears no relationship to the population distribution in the European Union. If Cyprus, Slovenia, Estonia and Latvia accede to the European Union, the problem will be compounded. However, we shall face difficulties if we move too far down that road.

How can the democratic legitimacy of decision making reflect the diversity of the different nation states in the European Union? We are not creating a single, centralised Euro state. That is also the contention of Kohl and Chirac. They are calling for more subsidiarity, less regulation and decision making that is more sensitive to the needs of particular countries. I thought that that was the agenda of the previous Prime Minister, the right hon. Member for Huntingdon (Mr. Major), or so we were told. The best way to achieve that would be to use the process of enlargement to bring about the required institutional changes.

Mr. Robert Walter (North Dorset)

Given that the Prime Minister came back from Amsterdam in great triumph, why was this matter not addressed in that treaty, because enlargement was on the agenda?

Mr. Gapes

I am grateful that at least one Euro-sceptic is present.

Mr. Denis MacShane (Rotherham)

The hon. Gentleman is one of us.

Mr. Gapes

I apologise to the hon. Member for North Dorset (Mr. Walter). I have embarrassed him. I assumed that he followed his party's official policy. I am sorry if I have slurred him, and I withdraw that remark.

The previous Government were in office until 1 May 1997. The Amsterdam negotiations were to come to a conclusion some six weeks later. The process had reached an impasse. Amsterdam was designed as an interim development before the discussions on enlargement. The Amsterdam agreement stated that negotiations would open six months after the signing of the treaty. It was important to get an agreement at Amsterdam so as to open up the process for enlargement. If the Conservatives had still been in government, we should have had no agreement at Amsterdam, so enlargement would have been a purely theoretical, hypothetical, distant question for the future.

Difficult decisions will have to be taken in the next few years. There will be arguments about objective 1 status for our regions. Objective 1 money has been important in the highlands and islands, in parts of England and in Northern Ireland. Many people have become more positive about the European Union because they have had the economic benefits of funding from Brussels.

As the EU is enlarged, the funding formula will have to change. As unemployment in this country is falling, it is questionable whether funding for some of our regions will be maintained for the future. It is important to emphasise not just the economic arguments for European Union membership, but the vital arguments about stability, security, environmental co-operation and the political integrity and democracy that come from having an organisation that gives us such a peaceful continent.

Mention was made of the crisis in Kosovo. I shall not go into that, but I believe that it is vital that the European Union does not allow ethnic and religious conflicts once again to develop across our continent. Extremists and fanatics in various communities want to foster hatred and animosity. The Balkan region—from Kosovo to Macedonia and involving Turkey, Greece and Bulgaria—could become another cauldron leading to a generalised regional conflict. It is vital that we act economically, politically and, if necessary, militarily to contain, control and prevent such regional conflict. The European Union has a vital role in such developments, and I am pleased that our Government are playing such a positive role to strengthen the European Union over the coming years.

7.39 pm
Mr. Dafydd Wigley (Caernarfon)

I am glad to follow the hon. Member for Ilford, South (Mr. Gapes) and to pick up on his point about the importance of the European Union as a vehicle for peace. Twice in this century, this continent has torn itself apart in two bloody wars. The basic reason for the EU' s existence is to ensure that that never happens again. There are, of course, important economic arguments, but the political imperative brought that vision about. That is what we must always retain in our minds.

I welcome this opportunity to speak briefly in a debate before the European Council meeting in Cardiff, the capital city of Wales. I would rather, of course, that it was coming to Wales in its own right—that Wales was inviting the European Council and had the presidency. I may have to wait a little longer for that. In the meantime, the meeting is well worth having and I am glad, as are the overwhelming majority of the people of Wales, that it is happening now, at an important time in the EU's development.

In listening to the Foreign Secretary, what came home to me was that six months is a very short period and that one cannot expect miracles to happen. Perhaps he was dressing up many of the things that have happened to create a background of achievement by the Government, but no Government or presidency can be expected to change things overnight. Progress has been made on some issues. The most important issue has been brought out in this debate—indeed; it is brought out when we consider the hon. Members who are present. There has been a change in attitude towards the European Union and that can be only for the good.

There is no doubt that, in working with the grain of Europe, we have a greater chance of finding solutions to our problems—or at least acceptable compromises with which we can live—than we would if we just took Europe on, issue after issue. Whatever may have been the arguments in the 1980s for making a stand on certain issues, certain lessons must be learned.

In the opening comments of the debate, reference was made to the expansion of Europe. I am glad that we are considering the possibility of countries from the east coming in. I am glad that some of the small countries are coming in. Yes, there will be problems when Slovenia and Estonia come in, but they are part of Europe, and we have to adapt the structures to ensure that they have a proper place, while not disrupting the balance of current structures.

I hoped that progress might have been made with one or two of the other states that wish to come in, particularly Lithuania. I am sad that it is not in the tranche that is being considered. I should like to have seen Lithuania, Latvia and Estonia knocking on the door together. I hope that progress can be made in that direction as we look towards expansion.

The point about the dangers in Kosovo has been made. Surely we have learnt some lessons from the experience of Bosnia. There is a will in Europe to try to avoid an escalation of those conflicts. We should, if we have to, make a stand to try to ensure that no inch is given to undemocratic, totalitarian and fascist forces that may be using racist arguments to fan debates that would be better not heard. I hope that the European Union can take a positive lead in that direction—a more positive lead than was the case with Bosnia.

A little progress, which we welcome, has been made this week on an issue that has dominated the economic argument in large parts of Wales: the bovine spongiform encephalopathy crisis, which has led to a rural crisis, with a real-terms drop in farming incomes per head of 45 per cent; the actual figures have been quoted as over 90 per cent. Farms in Wales are small and family run. Farmers there are not barley barons who pull in hundreds of thousands of pounds; there is subsistence farming. Experiences such as those over the past couple of years can undermine the viability of those farms. A solution is desperately needed to the BSE crisis.

Good progress is being made on the date-based scheme. I hope that the veterinary committee that considers the matter next will support the moves, that support will then be found in the Council of Ministers, and that assurances to those in Germany and in other countries who are fearful about the quality of the food—one accepts those fears entirely—will be enough to ensure not only that we have the right to export, but that those other markets will have the confidence to want to buy our products.

In the meantime, not only beef farmers but dairy farmers need to take advantage of the resources that are available from the European Union for this financial year to compensate for the effect of the value of the pound against the green pound. There is no doubt that the agriculture sector is suffering enormously because of the pound's high level. It is suffering in terms of the value of aid coming through from Europe in subsidies. It is also suffering because countries such as the Republic of Ireland are selling their dairy produce to the United Kingdom, including Wales, and undercutting our produce with the benefit of assistance from the European Union, benefit that is available to our farmers, but which we have not taken up fully yet; it has certainly not been taken up in the dairy sector. I hope that the Minister and his colleagues will give thought to that as discussions take place in Cardiff.

The parity of the pound has been of concern not only to farmers but to manufacturers. In my constituency, some 30 or 40 jobs are in danger of being lost this week at the old Ferodo factory, the Dynamex factory as it is now known, which depends largely on exports. It is finding that its markets have been undercut because of the value of the pound. That underlines the need for us to move towards the European single currency. Unless we do so, this problem will continue and possibly be exacerbated in the coming period.

Large companies in Wales are already preparing to deal in euros. Companies such as British Steel, Sony, Toyota, Nissan and Pilkington are already preparing to do so. We shall find ourselves with parallel currencies. As they do that—for good reasons—they will want transparency in their dealings and all the rest of it, and they will put pressure on their suppliers to deal in euros as well. Therefore, companies that want to sell products, components and other items to the large companies will be under pressure to deal in euros. It is likely that parallel currencies will operate in the UK, as they do in central America, where large companies deal in dollars and small companies in the local currency.

There are dangers that, when the euro has started up and there is a lot of international money moving around, some dealers will want to hedge their bets and come into sterling because they are not too sure about euros. Sterling's value could go up in that period again, causing even greater problems for our agriculture sector and manufacturing industry.

Of course, I am conscious of the fact that, in areas such as Wales, where we have severe economic problems in the old coal-mining areas and where, recently, those problems have arisen in some agricultural areas in particular, the advent of the euro will restrict some of the tools that have traditionally been available to Government to help depressed areas, where economic performance has not been so good. There will not be the option of devaluation, of playing around with interest rates, of deficit budgeting and of some of the Keynesian approach that we have had in the past. That is what makes objective 1 funding so important, to follow up the point that has been made by the hon. Members for East Carmarthen and Dinefwr (Mr. Williams) and for Swansea, East (Mr. Anderson).

No part of Wales has ever been designated for objective 1 purposes despite the fact that the only criterion for objective 1 eligibility is to be below 75 per cent. of the average European GDP per head. Unemployment is not a criterion for objective 1 status. We need areas of national statistics—nomenclature of units of territorial statistics, or NUTS 2 areas—that fall below the 75 per cent threshold. As we have had a rather stupid map—a north-south map—in NUTS 2 areas in Wales, neither the north nor the south has qualified, although there are large areas in both that would qualify. The east-west analysis in Wales is much more meaningful in terms of economic problems and development. If a NUTS 2 map were accepted that was based on the two old counties of Gwynedd and Dyfed through the coalfields of west Glamorgan and Mid-Glamorgan to Gwent—areas that have common problems—that area would have 72 per cent. of average European GDP and would qualify for objective 1 funding.

Northern Ireland, the highlands and islands of Scotland, Merseyside and South Yorkshire have had objective 1 funding, and I wish them the best of luck, but areas in Wales that have a low income per head desperately need assistance.

Mr. Quentin Davies (Grantham and Stamford)

The right hon. Gentleman should think carefully about his suggestion that the criteria for eligibility for objective 1 funding should include unemployment, rather than being based on GDP per capita. If such a criterion were imposed on the system, it would end up subsidising people and regions who might have priced themselves out of employment by demanding to high and unrealistic wages and penalising parts of the Union where labour markets were more flexible and people were prepared to work for more realistic levels of income.

Mr. Wigley

The hon. Gentleman has misunderstood me. I was referring to the current rules, and we have to work within the rules unless they are changed. The only relevant factor is GDP per capita. I am not advocating that unemployment should be a factor; I am saying that there is high unemployment in many areas, but the only criterion is GDP per head.

In the old county areas, three of the five counties with the lowest GDP per head in the United Kingdom are in Wales—Mid-Glamorgan, Dyfed and Gwynedd. Wales has the lowest GDP per head of any country or region in Britain, yet no part of Wales has ever qualified for objective 1 benefit which depends on the factor of GDP per head. Surely there must be something wrong.

I urge the Government, in their negotiations with our European partners and the agencies of government—from the Office for National Statistics, through to Eurostat in Brussels—to turn every stone to get it right. It is not that we have a begging bowl mentality. I hope that the economy of Wales develops in the same way as the economy of Ireland to a point at which we do not need assistance, but, at the moment, we most certainly do in order to overcome our problems. That is one of the themes that will come through from the people of Wales to our friends from various parts of Europe who meet in Cardiff. They will get a strong message that we need that assistance to overcome our problems.

I hope that everyone who comes to Wales has a constructive and happy time and leaves with a feeling of greater cohesion, a vision for the future of Europe, ready to deal with the difficult problems ahead in a positive and co-operative manner that will give greater hope to our continent.

7.52 pm
Mr. Alan Simpson (Nottingham, South)

Earlier this week, I took part in a Radio 4 round-table debate about a publication by DEMOS. This trailed a series of extensive surveys into public attitudes towards the European project and attempted to explain why there has been falling interest in or support for that project in recent years.

The panel comprised a representative from DEMOS, the former European Union ambassador to the United States and myself. We all took different views. The DEMOS line was that Europe's leaders had lost touch with their populations about the European ideal, or the European dream, and had pursued priorities that appeared to be bureaucratic and remote from people's lives. It suggested that a new agenda was emerging, embracing concerns such as crime and the environment. The only thing lacking was a bit more enthusiasm and leadership in Europe. If leaders would lead, the public would follow.

The European ambassadors' line was that the European project's fall in popularity was really no more than a press conspiracy—that a sustained attack on everything European had resulted in the growth of scepticism and hostility. My response is that it is difficult to describe 18 million people out of work in Europe as a press conspiracy. It could be described as a tragedy or a scandal. It ought not be described as something marginal to the lives of people in the United Kingdom or any other part of Europe.

I believe that the fall in enthusiasm was caused by a quite healthy doubt about the credibility and accountability of European institutions, and a legitimate concern that its economics do not work. I am looking forward to going to Cardiff as part of the alternative summit that has been organised on a broad, pan-European basis, bringing together trade unions, environmentalists and various non-governmental organisations. These all seek to take issue with what may be the agenda of the summit the leaders are addressing, and seek to define a different European agenda that is not narrowly nationalistic, xenophobic or anti-European. The alternative summit simply opposes the monetarism currently driving the European project and is anti-Maastricht in character.

Hon. Members have already warned about the dangers of unleashing new tides of xenophobia and, in that sense, the alternative summit is anti-xenophobic. This in itself is a minor tragedy as it echoes what happened last year around the Amsterdam summit, when I took part in organising marches from every part of Europe, including eastern Europe. We wanted to say that we were not at odds with each other; we are not each other's enemies. The real enemies of the European project are unemployment, social exclusion, job insecurity and environmental instability. The alternative summit in Amsterdam was structured around those key themes, and the alternative Cardiff summit will have the same agenda.

I should like to flag up four key issues that will be discussed in a pan-European context outside the main summit. The first is the presumption that the economics that are currently driving the European project are wrong. The single currency will either be inadequately underpinned or divisive and inherently unstable. The democratic deficit is rapidly turning into a democratic deceit, and the agenda for jobs, the environment and sustainability will be sacrificed on the altar of international competitiveness.

Many of us argue that Europe's economics are wrong because, although many of our debates, both on Europe and generally, are still being conducted on the presumption that inflation is the big threat to our economy, the world teeters dangerously on the edge of a global recession. Events in south-east Asia and the collapse in eastern Europe show a series of economies in deep crisis. Moreover, many aspects of the crisis in other parts the world will make their way to Europe and to the United Kingdom. This is the same crisis that has affected the strength of the pound, and damaged United Kingdom manufacturing and exports. As manufacturing and exports are hit, so, too, are people's jobs, earnings, sense of inclusion and confidence about the future.

In response to the crisis, around the world, many major political and economic thinkers have been saying that we have to begin to deal with the economics of reflation—that we should not be obsessed with convergence terms established in the Maastricht treaty. This will require a shift in thinking that parallels the tragic misjudgments made at the end of the first world war.

France provides an important lesson to us all. At the end of the first world war, France decided that it would never again be invaded by Germany. It would protect its land frontiers so that no similar invasion would ever again be possible. It invested in an enormous project. The Maginot line had reinforced concrete that was tougher than anything Europe had ever seen, and a services and communications infrastructure that was unparalleled in many of France's cities. However, at the beginning of the second world war, German aeroplanes flew over the line, and German troops went round it.

My fear is that monetarism will be the Maginot line of the end of the 20th century and the beginning of the 21st century. To squeeze ourselves into an economics of absurdity, we are putting at risk the whole sense of positive Europeanism. Rather than pursuing monetarist obsessions, we should go back and question whether those obsessions are leading us down sensible paths.

Monetarism is changing the way in which we perceive culture, society and economics. We have had many debates in this Chamber about the nature of public debt. Today's statement made it clear that the reconstruction of local government and changes in public spending and public debt are being undertaken to fit in with our Maastricht obligations. We have somehow blandly accepted that public debt is bad debt, that private debt is good debt, and that the private finance initiative is a way of taking spending off the books. We seem to accept that partnerships, which may leave the public sector with long-term financial obligations, will somehow be better if the debt is private rather than public.

I have to confess that I have never understood why having 40 or 50 per cent. of the economy in public debt—and thereby publicly accountable—should be a problem. I have always worried that more of the economy was not held to public account. The real risk arises when we push responsibility and accountability beyond public reach—which, under the terms of the Maastricht treaty, will happen when we are all left in hock to the private sector, and will cost us more.

It has never been cheaper to borrow personally and privately than to borrow collectively and publicly. Nevertheless, that is the ideology which is driving our view of the economy and society. We are all, therefore, part of the sacrifices demanded by Maastricht. The sacrifices have been called for on the presumption that—no matter how unpleasant the medicine—they will make everything better.

Before I was elected to the House, one of the last pieces of research I was involved in was on the sequence of invitations, expectations and deliveries in successive waves of the European jobs project. Beginning with the 1992 Ceccini report on the single European legislation, 1.8 million jobs were promised as part of the first wave of changes after the passage of that legislation. Although much fuss and publicity was given to Ceccini, two or three years later, the Neuberger report pointed out that rationalisation of European industry had caused massive job losses in smaller and medium-sized firms. We then realised that almost exactly the number of jobs promised by Ceccini were lost with passage of the Single European Act 1985.

We are now being promised that, if we can all pull together under the terms of Maastricht, Europe's 18 million unemployed people will disappear or be absorbed within the system. It is a wish, but it is not based on practical economics that will deliver jobs paying a living wage and offering secure prospects for the future.

I am, therefore, deeply worried about the single currency—although I accept the good faith in which hon. Members on both sides of the House believe that the single currency will be the answer to European instability. It is, of course, possible for a single currency to work. A single currency works in America, and one works in Germany—where the former West Germany's amazing commitment to reinvesting in reunification has been underpinned by a massive solidarity tax of 7 per cent. The tax is raised in the west and transferred to the east, and will probably continue for another generation. It is an enormous tribute to Germany's commitment to that process.

If we are to make Europe work, we shall require a similar fiscal transfer system. In 1977, in the MacDougall report, the European Parliament made its first and only attempt to spell out what such a system would mean in the European context. The report set out the different stages Europe would have to undergo to reach a stable and integrated European theatre in which we all felt that we had a place.

I should like to deal with two aspects of the MacDougall report. The MacDougall committee's conclusions on the nature of an integrated Europe described two possible scenarios—one in which Europe had a small public sector, and another in which it had a more substantial and integrated public sector. The committee pointed out that the Community budget necessary for a small public sector on the Community level would be about 5 to 7 per cent. of Europe's gross domestic product. I should say at this point that the United Kingdom's current contribution to the Union is 1.27 per cent. of GDP.

The Macdougall committee stated that spending of about 20 to 25 per cent. of Europe's GDP would have to be spent to create a more integrated approach in Community provision, to deal with external shock or internal inequalities of economic impact. Although I do not object to those who wish such a scenario to be realised, I have yet to find a politician of any persuasion who will knock on his or her constituents' doors and say, "To create the single currency, we would like you to pay an amount that is a four-fold increase in Britain's tax contributions to the European Union. But that is the good news. If you want more provision from the European Union, you might have to pay a 12 or 20-fold increase in contributions."

If people want to pay for that, that is fine, but we should be honest about how we would have to fund the process. If we are not honest, we shall set people against one another because of the deficits that we build into the process. We cannot make something work on an economics that is based on a fraud. What terrifies me is that people who are not hostile to one another may end up saying, "If insufficiency is built into the common European pot, why the hell should we in Merseyside pay taxes so that jobs can be transferred to southern Spain?" People will see themselves stealing jobs from one another. Those who want to embrace a European ideal quickly have to be honest enough to say not only how they would achieve the ends, but how they would will the means of delivering those ends.

I am worried that that problem exists in the European Union even before it is expanded. Moreover, this applies against a backcloth of Germany having declared a desire to reduce its contributions to the European budget.

My fear is that European states will end up locked in a fixed exchange rate mechanism, on the most suitable possible terms for the deutschmark, with fewer resources for fiscal transfers and a magnet effect that will suck resources into those areas that already have the greatest reserves.

That would be massively destabilising for a single currency zone. We must address the mechanisms of redistribution if the single currency is to have any prospect of working. Personally, I do not believe that it will be possible, given the different cultures and economies in Europe. There are, though, other very exciting ways in which these can be made compatible, just as a car has a clutch system that enables the gears to change. However, such compatibility will not be achieved in the context of a lumpen project that drives together and squeezes ideas in an assumption that if they can all somehow be put in the box, they will stay there for ever.

European institutions have been the central architects of the current proposals. When I was researching the resurgence of European racism and fascism, I spent some time in Brussels going through the commentaries on the re-emergence of far right organisations both within and outside the political system. The most interesting part of that experience was being inside the European Commission. Many people have spoken about the democratic deficit, but I was astonished by the fleet of corporate lobbyists who lay permanent siege to the European Union institutions. On one occasion during my time there, some trade unionists turned up. It was such a rare event that MEPs from the different parties of the left were really pleased. They rang one another up to say, "This is wonderful. Some trade unions are here; come and meet them."

We sometimes think that the House of Commons is inaccessible to the public, but the European institutions—the Commission and the Parliament—may as well be on another planet. That does not apply for corporate Europe, however, whose agenda is, I believe, putting at risk the agenda of civic Europe.

There are some interesting divisions of opinion on this. I pay a back-handed tribute to the work done by the European Round Table, an organisation pulled together by Agnelli of Fiat in the early 1980s. It comprises the chief executives of Europe's 45 biggest multinationals. The organisation has been engaged in a project systematically and insidiously to inveigle itself into the policy-making frameworks and decision-making structures of the European Union and of every Government in Europe. It has been incredibly successful in its aim. But what suits corporate Europe may be far removed from what suits civic and democratic Europe.

Divisions are opening up—I doubt whether the Cardiff summit will address them—between business and big business. Corporate demands are often in conflict with the interest of small and medium businesses, which underpin almost all our communities. Big business is becoming less and less interested in loyalty or obligation to the nation states in which they happen to reside. They are more interested in the subsidies they can secure from national Governments. When they receive a better offer, they hot-foot it to another country to pursue the cash waved in front of them.

Similar conflicts can be seen in agriculture. I am probably as non-rural as anyone can be, but in my discussions with farmers, many of whom have been committed to traditional farming practices, I have been told of the despair at the weighting of European policy in favour of big farming—agribusiness rather than agriculture—and at the incentives to overproduce and to overuse fertilisers, growth hormones and antibiotics, which increase the risks to all sections of our societies. That is part of the conflict that we are trying to address in the alternative summit.

On jobs and environmental sustainability, although I congratulate my right hon. Friend the Foreign Secretary and his European colleagues on banning the wall-of-death netting, I should point out that that is not the only big environmental issue that Europe has to address. In many ways, the real pressure is shown in the absence of a European challenge to the rise of companies such as Monsanto, which want to dump genetically modified crops in Britain and other parts of Europe. I congratulate Austria on being the one country so far to have adopted the precautionary principle and to have banned the import of genetically modified products. It is somewhat rare for me to occupy the same intellectual space as Britain's most famous organic gardener—the Prince of Wales—but his newspaper article has set the tone for the debate on the subject. The House should follow suit in recognising the dangers to European agriculture of being driven by a big business, rather than an agricultural, agenda.

We have an opportunity to create a different, inclusive Europe. We cannot do so without central reference to the 18 million people in Europe who are out of work. If we are to set an agenda through which they can find sustainable jobs, we shall have to challenge the pillars of free-market assumptions that are driving not only the Maastricht agenda, but the dialogue between Europe and the World Trade Organisation. If we are really serious about sustainability, we can find ways in which to create full employment in all our localities, and in all the European Union countries, without having to steal jobs from one another.

We need to create a politics and an economics of redistribution, not to remove the barriers to the private sector, to deregulate Europe's economies or to pursue international competitiveness so as to risk employment and environmental sustainability. I do not expect the Foreign Secretary to address that agenda, but I ask him to use his intellectual power and courage at least to remind the leaders in Cardiff this weekend of the people's Europe debate, which is taking place outside the summit. It is a debate waiting to be let inside.

8.19 pm
Mr. Robert Walter (North Dorset)

I am delighted that at least one Euro-sceptic Back Bencher managed to catch your eye, Mr. Deputy Speaker, albeit from the Government Benches.

Mr. Simpson

I am not a Euro-sceptic, but a monetarist-sceptic and a Maastricht-sceptic. I am sceptic about—no, an opponent of—capitalism, but I am not a sceptic about Europe.

Mr. Walter

I stand corrected.

At several stages, I got the impression that this would be a Welsh debate. I strongly share the emotion of my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), who expressed pleasure at the summit being held in the capital city of our country of birth, but I also echo the thoughts of the hon. Member for Swansea, East (Mr. Anderson), who expressed regret at its not being held in the city of my birth.

With 15 members of the European Union, the presidency does not come around that often. If nothing changed, it would be another seven and a half years before we occupied that position again. If, as I sincerely hope, we enlarge before then, it will be somewhat longer. What a disappointment, then, that so little has been achieved in the six months in which Britain has been able to set the European agenda.

There was much fanfare at the beginning of our presidency, with funny stars made of pizza, and ties for all those who wanted to be on message, but so determined were the Government to demonstrate the break with the past that they played down the 25th anniversary of our membership of the European Union, which fell just as we assumed the presidency. The failure to celebrate the silver jubilee of the great achievement of my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) in any meaningful way signified a break not with the past but with reality and with the realpolitik of today's Europe.

As we approach the summit, there is much shuttling between capitals, but the reality, which Cardiff will not address, is of a missed opportunity and the failure of Europe, led for the past six months by the Government, to address the great challenges of today: the consequences of enlargement; the reform of the common agricultural policy; and, for Britain itself, a response to monetary union and the single currency.

On enlargement, we all welcome progress in opening negotiations with the applicant states, but one has to regret the somewhat cynical assumption in some quarters that the negotiations will take so long that the consequences for the existing members need not yet be addressed. At Amsterdam, all the European Governments failed to address the institutional consequences of enlargement. Changes in the size of the Commission, voting rights and the Council of Ministers will all require another intergovernmental conference if we take the enlarged membership beyond a further five states.

The position of Turkey remains largely unresolved and must be linked with the negotiations with Cyprus. It would be totally unacceptable to negotiate with the people of only one side of the green line.

The greatest unresolved obstacle to enlargement is the common agricultural policy. Agenda 2000 fails to address the key reforms that are needed. I declare an interest as a farmer and a beneficiary of the CAP, but I echo what my right hon. and learned Friend the Member for Folkestone and Hythe said earlier: at the launch of the UK presidency in December, the Prime Minister criticised the cost and waste of the Common Agricultural Policy which continue to grow year by year". My right hon. and learned Friend also quoted the Foreign Secretary, who, in Warsaw last November, said: We need a reformed CAP which gives a better deal all round—fair prices for consumers, flexibility for farmers, protection for the environment".

Agenda 2000, in either its original or its revised form, fails to cut the cost to the taxpayer. In fact, on the Commission's own figures, it ends up costing the taxpayer more. It fails to take into account the pressures on us in the next world trade round. The Foreign Secretary failed today even to mention that next round and what position the European Union will take in it. Agenda 2000 will be a building block, but I am not sure whether it will be one that is acceptable to those with whom we are negotiating.

If the Cardiff summit agenda were to tackle the key targets that the Government have set themselves, we could look forward to reading next week of a Europe genuinely making progress toward a realistic agricultural policy for the next century. Instead, we have a deceitful fudge: Agenda 2000 does not address enlargement, because there is a hope that, at best, the negotiations will last so long that the new states will not enter before 2006 or, at worst, a transitional arrangement will delay their accession to the common agricultural policy at least until after that date.

Agenda 2000 envisages a common agricultural policy costing more rather than less, because the Government, in setting their agenda, failed to convince the other member states that expenditure on agriculture has to be reduced. It may be that the forthcoming elections in Germany have made the subject sensitive. Well, so be it—with 15 democracies in the Union, tough decisions will always be inconvenient to one member state or another.

Those are internal matters. We must all wish for success in the next world trade round, but there can be no successful outcome with the kind of subsidised agriculture still envisaged in Agenda 2000. Over-subsidised agriculture serves no one well, least of all the efficient British farmer, who merely wants a level playing field.

The UK presidency and the Government have failed to deal with the consequences of the single currency for the United Kingdom. It has been said before that economic and monetary union is a reality. It will happen on 1 January next year: 11 member states of the European Union will merge their currencies and operate a single zone of monetary stability.

Those countries constitute our largest market, and the effect of the scheme will be the most significant monetary event since Bretton Woods. There are those in Britain who wish that it would go away, and those who are convinced that it will not work and that the original European Community Six, with some of the fastest-growing and richest smaller states of Europe, are rushing over the precipice.

There are those who so totally misunderstand the project that they do not believe that it starts until Frau Schmidt collects her pension from the post office in euros in 2002. The effect on Britain and British monetary policy will be greater than any of the post-war monetary shocks.

I am not advocating our joining on day one. I am warning that the effect of the monetary bloc on our nearest continent will give the lie to any concept of monetary sovereignty. That may seem to be the same old argument about Britain always getting on the train after it has left the station, and that is probably as true of monetary union as it was of many aspects of our post-war European adventure. However, that argument is not good enough for an intelligent electorate. Our press has failed to give the British people any guidance, save for rubbishing the whole project.

The Government must begin to rehearse for the electorate the arguments about why a single currency is a good or bad thing for Britain and for international trade, and for why economic and monetary union is the solution. I may differ from some of my right hon. and hon. Friends on the matter, but I approach it from a monetarist standpoint. What is money? More specifically in this context, what should money be? It should be a means of exchange and a store of value. The value of sterling since Bretton Woods broke down in the 1960s was a one-way bet until the late 1980s. We then manipulated the currency to an unsustainable level, and we joined the exchange rate mechanism at the wrong rate at the wrong time. The policy was not without benefits—inflation halved, and interest rates dropped from 15 to 10 per cent.—but the ERM ended in failure.

Today, we are back at an exchange rate that is unsustainable—perhaps, I should say unstable—against those of our major competitors, the problem being compounded by a not unrelated uncompetitive interest rate. I part company with those monetarists who believe that effective monetary policy and parliamentary democracy are somehow indissoluble, for the same reasons that I believe in an independent judiciary and would not want politicians to make clinical judgments in the national health service. In central banks that are independent of day-to-day political control, the central bankers should be accountable, but the experience of Germany and the United States shows that, when they are left to get on with the job, they have a much better effect than any succession of Chancellors of the Exchequer.

Why would the euro deliver the objective of independent monetary policy? Why not have a British solution? The Chancellor has attempted to answer that with the Bank of England's Monetary Policy Committee, but that solution is not sustainable. British industry lives by international trade. The firms that make things and sell them on the world market—unlike the retailers who import cheap goods from the far east, and who finance Labour party campaigns—demand monetary stability. The chief executive of a United Kingdom-based multinational said to me the other day that he has eight manufacturing plants in the European Union in five countries for 15 markets. Which currency should he use next year? He will be pricing and accounting in the euro. His case is replicated across British industry. The Confederation of British Industry admits that the most enthusiastic supporters of early entry are medium-sized manufacturing exporters.

Who cares if British industry uses the euro? Manufacturers, the City and agriculture are, by the nature of their business, already committed to using it. However, it is an odd kind of sovereignty to abdicate monetary policy that determines the activities of major sectors of the economy to foreign central bankers. Such an abdication did us no harm during the period of our greatest imperial and industrial glory, when we all used gold. However, the experience of the gold standard during the inter-war years should tell us that a successful economy must work within a sensitive monetary framework. An independent European central bank could provide such a framework at some time in future.

The Government have a duty to prepare the industry and the people of Britain for the consequences of EMU. There is still no serious, informed debate on British membership. The promise of the razzmatazz around the UK presidency has fallen very flat. I still hope—a little—that the Government will address some real issues facing Europe and Britain in the dying days of our presidency. I hope that they will place the consequences of enlargement high on the agenda, along with a real discussion of genuine reform of the common agricultural policy that will go further than anything envisaged in Agenda 2000. I hope that they will encourage a domestic debate on monetary union.

8.34 pm
Mr. Tam Dalyell (Linlithgow)

In the bygone world when I was a new Member of Parliament and the father of the Opposition winder up—the hon. Member for Windsor (Mr. Trend)—was a distinguished Cabinet Secretary, a debate such as this would have been absolutely packed. I want to register, as did the right hon. Member for Wales—I mean the right hon. Member for Caernarfon (Mr. Wigley)—that it is good to have a pre-summit debate. However, there was a time when Members of the House of Commons would have tumbled over each other to have some input to such a debate.

I understand well that the pressures of the presidency are such that the Foreign Secretary, who has Kosovo and other problems on his hands, cannot be here. However, I lay down a marker to the effect that, if there are further debates after we have given up our presidency, it will behove the Foreign Secretary and senior Foreign Office Ministers to listen to what the House of Commons has to say on such important matters. If they do not, they will dig at the root of the whole set-up of parliamentary democracy. That said, it is good that we are having the debate, which gives us an opportunity to ask a number of questions about what will be raised in Cardiff.

I listened carefully to the hon. Member for North Dorset (Mr. Walter), who raised matters of great importance on the world trade round and agricultural prices. The farmers in my constituency wonder about milk prices, and hill farmers wonder how the price of tups—sheep meat—which was £58 last year, has fallen to £32 this year. My question is general. What will happen to hill farmers and milk producers when the Community expands and we take on possibly massive obligations to the farmers of Poland and Lithuania? Has that been discussed and worked out? After Cardiff, some of us will ask what was said there about the strain on the agricultural kitty caused by expansion of the Community. We should start thinking about that now rather than later.

I do not often agree with nationalists, but what the right hon. Member for Caernarfon said about firms in Wales being already involved in the ecu also applies to firms in my constituency, including Motorola, Hewlett Packard, Sun Electronics, Nippon Electric and Quintiles, where my constituents and those of my parliamentary neighbour the Foreign Secretary work. The Foreign Secretary says that the decision will be made in the hard-headed economic interests of the British people, if I have quoted him correctly. I make no bones about being one of those who would, even now, go in at the first opportunity.

I want to ask a factual question about a most succinct report on page 16 of The Independent on 5 June, referring to 4 June, under the byline of Katherine Butler in Luxembourg. The headline was Euro club shows Brown the door". I do not know whether it is true. If it is, it is very serious. if it is not true, we should be told in no uncertain terms that it is a load of rubbish.

The report states: Gordon Brown, the Chancellor, subjected himself to formal humiliation last night as ministers from the 11 euro-zone countries gathered at a chateau in Luxembourg for the inaugural meeting of their single currency inner circle, Euro-XI. I am very interested in the whole question of the crucial Euro X. The report continues: As representative of Britain's European Union presidency Mr. Brown was insisting on his right to attend the opening formalities at Senningen castle, but was told he would have to leave the room almost immediately. He was not allowed to attend a dinner that followed the first meeting of the new G8-style body which will co-ordinate economic policy in the euro-area. Was he told to leave a dinner?

The report continues: Senior officials of the euro-zone countries expressed amazement at his decision to muscle in on the informal meeting in the light of Britain's decision to opt out of the single currency. It merely highlighted Britain's political marginalisation, they said. Katherine Butler goes on: "'He"— that is the Chancellor— is a gatecrasher', said a Bonn source, 'he is bringing himself down to a level even ambassadors would not accept."' Was that said? The report continues: Another senior EU diplomat described British strategy as 'naive' and said it reflected the difficulty London has had in understanding"—

Mr. Deputy Speaker (Mr. Michael J. Martin)

Order. The hon. Gentleman and I have had discussions before about reading full articles into the record. That is not what is required. He could perhaps give us an abridged version.

Mr. Dalyell

You are quite right, Mr. Deputy Speaker. I have said enough on that. Is there any question of British marginalisation? If there is, should not the matter be frankly addressed at Cardiff next week? It is not merely a question of going or not going in, but a decision whereby the world will be altered by what is happening in Europe.

I return to the fact that, in all our constituencies, firms are taking it into their own hands to trade in ecus. We are in a different position. This is a matter of enormous importance to jobs and prosperity. Part of the reason for my concern is that I was exiled for four years from this House to the European Parliament. I was a member of the budget committee and the budget sub-committee with colleagues such as Martin Bangemann, Erwin Langer and others, and I know how they react. If we are not going to be in the club, they will make sure that we do not attend its meetings. I want to know what exactly the position is at Cardiff. If the article that I quoted is factually wrong, no doubt the Minister will say so.

I should like to raise a third question. In November, a delegation concerned with the environment will go to Buenos Aires. I understand that we go as the immediate past-President and that the delegation will be led by the Austrians, who are very anti-nuclear. I am open about the fact that I am totally pro-nuclear. I am dismayed by what has happened on the north coast of Scotland. The press has been wicked in its descriptions of Dounreay, which is a whipping boy for everything. In fact, technically, the position is not nearly as bad as is being made out widely in Britain. Leaving that aside, nuclear energy is the only way to produce energy without large quantities of CO2being put into the atmosphere.

Is policy for Buenos Aires going to be discussed at Cardiff? Unlike Kyoto, are representatives of the Department of Trade and Industry, who, it might be hoped, would put the nuclear side of the argument, going to go to Buenos Aires? When I first knew the Minister, he was an effective official of the GMB union, and many of his members are much concerned because they work in the nuclear industry. I should like a comment in his reply or by letter on Buenos Aires.

My fourth question concerns Kosovo. I listened carefully to the Foreign Secretary and agreed with what the hon. and learned Member for North-East Fife (Mr. Campbell) said about consulting the Russians. However, I do not think that I am wrong in saying that the military option was not ruled out because of the appalling things that are happening. Last May, I stayed with my former national service regiment, now the Royal Scots Dragoon Guards, in Bosnia. It was the tank regiment in Bosnia at the time. As one who never wanted us to go into Bosnia in the first place, I must say, having seen the situation, that we cannot possibly withdraw from Bosnia in the foreseeable future. I am not prepared to sit on green Benches and be involved in the former Yugoslavia without our having heavy armour there. Without it, there will be a repeat of what happened to the sappers who were taken hostage. Unless heavy armour is present, one does not have the perceived authority to carry out the job.

In the discussions in Cardiff, I hope that no one will think that air strikes will be at all effective. Air strikes are counterproductive. They simply unite those who are hit against those who are doing the striking. In Cardiff, will there be discussions, if action is to be taken in Kosovo, on sending armour? For Britain, that means sending what I understand from those who have to drive them in the way that I did 40 years ago, excellent Challenger tanks. I am told that driving the great, heavy Challenger tank is much easier than driving the Centurion, which some of us had to do, with mixed success.

Fifthly, there may be discussions of European policy on Iran. As one who was in Iran on holiday last October, I strongly hope that the Minister of State, my hon. Friend the Member for Leeds, Central (Mr. Fatchett), representing the European presidency, will go, if only to show support for the mayor of Tehran and the many other enlightened people in that country.

Sixthly, will there be a discussion of European policy towards the former Soviet republics of central Asia? My hon. Friend came to give an excellent speech to the Kyrgyzi delegation that was over here. He knows a lot about this and clearly takes an interest in this aspect of affairs. He will know how important it is that Europe has some policy towards the emerging republics, such as Kyrgyzstan, if I may put it that way.

Will there be a discussion of NATO expansion? I will not pursue the matter further if the Minister stands up and says that that is not on the agenda. Some of us think that it should be on the agenda, given the letter to the Prime Minister signed by Sir Hugh Beach, Dr. Helga Graham, Sir John Killick, Sir Michael Atiyah, Sir Michael Beetham, Frank Blackaby, Field Marshal the Lord Bramall, Field Marshal the Lord Carver, Sir Frank Cooper and many others—I have only reached the Cs—who are expressing extreme concern about the expansion of NATO to the Russian borders. Did I interpret the Minister as saying that that will not be discussed? I am not sure what the signals mean. The European Community must discuss the matter in relation to its own problems with the Soviet Union.

I warned the Foreign Secretary and others that I wished to raise the matter of European relations with Libya. I have had 14 Adjournment debates on the subject. It is not just a matter of obligations to the relatives; it is a matter of our whole relationship with the Arab world. This will be known to the Foreign Secretary because he has recently had meetings with Dr. Mudenge representing the Organisation of African Unity and, indeed, the African states.

On 21 December it will be 10 long years since that airliner went down over Lockerbie—10 long years of agony for the relatives and of increasingly festering relations not only with Libya but with many Arab countries. In these circumstances, should there not be a discussion, particularly with the Italians who have ceased to have any inhibitions about breaking sanctions? Italian Ministers have trade relations with Libya. Should not Europe discuss the whole position of the United States in relation to Lockerbie? After all, it is the United States that is driving the policy.

There is a growing belief among the relatives that certain leading Americans—Vincent Cannistraro, Buck Revell and Oliver North—had a kind of Faustian agreement with some unpleasant elements after the Vincennes shot down the Iranian airliner carrying pilgrims to Mecca. It may be most serious to say this in the House of Commons, but serious people believe that when Ali Akbar Mohtashemi, the Iranian Minister of the Interior at the time, raised the spectre of half a dozen, 10 or a dozen airliners being blown up in revenge for what the Vincennes had done, there was a tacit agreement that if one American airliner went down that would be tit for tat—the end of the matter. It would not be right to go in to all the details now and one has to be a professor of Lockerbie studies, but I would argue a case for this being taken seriously with any Foreign Office official.

Tonight, I ask that there be a frank discussion over lunch at Cardiff about how on earth the situation with Libya is to be resolved. It can be resolved, as Dr. Swire and Professor Black found out, by the Libyans sending those two alleged criminals—

Mr. Deputy Speaker

Order. It is one matter to say that European allies can try to help with Lockerbie, but to go into great detail about Lockerbie now is to go outwith the scope of the debate.

Mr. Dalyell

I do not wish to abuse the debate.

My final crisp point is this: at Cardiff I hope that this whole Lockerbie saga will be discussed with a view to resolving it.

8.55 pm
Mr. Michael Trend (Windsor)

I join those who paid tribute to Cardiff, especially the hon. Members for Swansea, East (Mr. Anderson) and for East Carmarthen and Dinefwr (Mr. Williams) and the right hon. Member for Caernarfon (Mr. Wigley), and I congratulate Cardiff on hosting this important event at the weekend and next week.

This evening's speeches have covered a wide variety of areas; I want to concentrate particularly on the road that the Government have taken to Cardiff. My hon. Friend the Member for Hertford and Stortford (Mr. Wells) made a splendid contribution and put a convincing case on the review of the Lomé convention and, in particular, economic relations with the West Indies. He is the House's expert on the banana regime and it was good to hear the subject raised again tonight. We have just heard a characteristically thoughtful contribution from the hon. Member for Linlithgow (Mr. Dalyell).

My right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) struck the right tone in his comprehensive and highly effective attack on what he rightly described as a flop of a presidency. He was spot-on in underlining several specific areas in which the Government have achieved little or nothing during their tenure of the presidency of the Council of the European Union.

On jobs, enlargement, human rights and reform of the common agricultural policy—the areas that matter for Cardiff—we remain at the same square one as when the Prime Minister embarked on his radiant, starry-eyed launch of the British presidency.

The road to Cardiff began at the PR launch for the British presidency. That was, we have heard, at Waterloo station. It was our first glimpse of the style-without-substance presidency. How many times have we heard the overworked metaphor about the necessity of being on the Euro train and not being left behind at the station, in the sidings or on the slow track? At Waterloo that day, the train finally turned up and it was a PR special. Two things hugely amused the Journalists that day: when the train turned up, it was empty; and when it left, it went nowhere. There was some powerful symbolism in that, so perhaps that was the last we shall hear of the wretched train.

The House will recall the rhetoric of that launch. The Prime Minister, ever mindful of the improvement that a group of children make to a photo call, was surrounded by the children who had painted the logo for the presidency. He told us: The children who produced the stars worked in teams. We want a Europe that works together as a team.

A new metaphor, one to replace the train, was born—the team. However, judged by that, the Prime Minister has not done well with his European partners in the six months of the presidency. According to the French Finance Minister, Britain—our team—has now been relegated to the second division. On another occasion, one of the Commissioners told the Prime Minister that he was no longer even in the game; he was on the touchline, and You cannot lead the game from the touchline. During our debates, we have heard about the reception given to the Chancellor of the Exchequer at Senningen. He was deliberately left out of the team photograph, as the hon. Member for Linlithgow pointed out.

What has happened in the past six months is that reality has caught up with rhetoric, and the Government will pay a high price for a problem that is entirely of their own making. By exciting high expectations, but falling well below them, the Government have made a rod for Britain's back. It was not necessary to do that. More realistic ambitions and more tempered language would have served British interests much better.

Let us return, for the last time, to those heady days, early in the new Government, when the Prime Minister said that he wanted to shape a new Europe. He told us that we were heading for a new era, a new millennium, a new Europe; Government insiders told the press that the children's logo was "very cool"; a think-tank was commissioned to "rebrand" Europe using focus groups. The message was: new Labour, new Britain, new Europe—next stop, new Jerusalem. That almost Messianic fervour inspired one Italian newspaper to declare the Prime Minister to be "Tony Blair Superstar"—perhaps Lord Lloyd-Webber is working on the musical.

Those were heady days—the days before the Prime Minister encountered the big players in Europe. The big players have cut him and the Government of this country down to size. The agenda was overblown; as the hon. Member for Swansea, East rightly said, any presidency is part of a continuum, which is why the Government made a mistake in making such claims in the first place. It was all part of the propaganda effort that is so characteristic of the Labour Government in all areas of activity.

I am glad to say that the spin doctors were also put in their place in Europe: The Sunday Times tells us that one Austrian journalist described Mr. Alastair Campbell as the tall, arrogant Brit with the coarse tone. The overblown expectations encouraged by the Government's spin doctors and the arrogance with which they have approached their task in Europe were neatly summed up this week by Martin Walker in The Guardian, who wrote: Fair Europeans … conclude that the main problem was the inflation of expectations. Marc Champion of The European said that, in his view, the UK presidency emerges from its six months bruised by a mix of hubris and political naivety. We could not have put it better ourselves.

Another verdict on the presidency should not go unnoticed. Less than a month ago, at a conference in Brussels of the European Movement, the Minister without Portfolio, on another of his excursions to Europe, told his listeners: Europe lacks leadership and a sense of mission and too many people don't feel part of it. Is that the Europe being led by his right hon. Friend the Prime Minister? Is that the view of a politician who plays a central role in the propaganda surrounding the Government? There was an opportunity for the Government to do something about leading opinion in Europe. There was an opportunity to bring forward policies that would force down the people's unemployment that so bedevils Europe. That opportunity is about to pass away at Cardiff and it is no use complaining or blaming others at precisely the moment when the Government have had a chance to do something—a chance to put forward or fight for a concrete idea.

Presidencies and Governments can have big ideas and two of the biggest in recent years came from Britain: the single market and subsidiarity, both of which came from and were driven by the Conservatives. Both are now taken for granted—indeed, they are trumpeted by the Labour Government and even by Chancellor Kohl, who has an appointment with the voters—but those ideas had to be fought for. That shows that real achievements are possible and that big ideas—real ideas—can be pursued. What a marked contrast with the current presidency.

Only today, the Foreign Secretary told the Daily Express that, at Cardiff, We are going to look at the future of Europe and address the big questions"— about time too, we on the Conservative Benches say. That is what the Government should have been doing over the past six months.

I shall go into the lion's den on one issue, about which we heard earlier: the common agricultural policy. I should like to set the context. The Foreign Secretary, on numerous occasions—particularly in a speech at Warsaw, as my hon. Friend the Member for North Dorset (Mr. Walter) mentioned in his excellent speech—the Deputy Prime Minister, during the Queen's Speech, and the Prime Minister himself, in a speech at the Mansion House, all made considerable reference to reforming the common agricultural policy. They said that it would be a central aim of their presidency. What happened? On 1 April, The Daily Telegraph told the story: EU throws out farm reform plans". Perhaps it is understandable that my right hon. and learned Friend the Member for Folkestone and Hythe and I missed the Foreign Secretary's reference to the CAP today. As it was such an important issue for the Government, we assumed that somebody in the Foreign Office would have written a section, a couple of paragraphs or a brief on CAP reform during our presidency. In fact, we heard less than a sentence—11 words—on the subject. I am told that the Foreign Secretary said that the Government have a clear sense of direction for reform of the common agricultural policy". There are two things wrong with that. First, it is wrong, and secondly, does it really cover the importance of the Government's top priority? Is the throwing away of a handful of words in the middle of a speech the right response at the end of a presidency to a matter that was thought to be at the top of the agenda at the beginning of it?

Let us go to another matter: the appointment of the president of the European central bank. My right hon. and learned Friend cited a vast array of criticisms that were levelled at the British presidency at that time. It is astonishing that Britain's Government and Prime Minister were criticised by, among others, the President of the European Parliament, the Prime Ministers of Luxembourg and Italy and the Austrian Chancellor, who said: We have now learnt…how not to organise a summit". That phrase will haunt the Government throughout their tenure of office.

The Government have fared little better in the press. As the Foreign Secretary will know, he had a very hard time when he visited Turkey and Italy—and when he went to Strasbourg, as well as when he did not go to Strasbourg, even though he was expected there in February. When he did go to Strasbourg, as we have heard, the fawning motion put before the Parliament was too clever by half, and it was lost. It was a spin too far for Members of the European Parliament.

I am sure that the Foreign Secretary will pack his bags for Cardiff with a huge sense of relief that the ordeal is almost over. I hope that he enjoys his brainstorming lunch, which appears to be the major feature of the occasion, for when the Government as a whole get to Wales this weekend, they will have very little to show for their presidency of the Council. I am sure that there will be many photo opportunities; it is always good to welcome President Mandela to our country. I am sure that it will not be unhelpful to the Prime Minister for the President of South Africa to join the President of the European Council for the cameras. It is probably a matter of great relief for the Government that they can hold the presidency only once in the lifetime of a Parliament, on a rota basis, rather as we get tickets for the Gallery.

The summit in Cardiff will be the last opportunity for the Euro-President Prime Minister to be centre stage. I am sure that the occasion will be made to work for all its worth. Many of the important issues that hon. Members have aired in this debate will not be touched on; many important concerns about the development of Europe will not be touched on. It will be a gigantic photo opportunity for the Prime Minister, and an attempt to paper over the cracks of the presidency.

We may well see a Welsh walkabout, which will, perhaps, be better organised than the visit by the Chancellor of the Exchequer and his partners to the great city of York, where he marched them up and down the street to the accompaniment not of the cheers, but of the jeers of the burghers of York, who know that many of the great figures of Europe are not exactly marching in tune with the peoples of Europe.

The Government's gigantic public relations exercise and their attempt to spin-manage Europe are getting Britain into serious trouble with our friends, partners and colleagues in Europe. That trouble is entirely of the Government's making. If that is how much influence Britain can wield and how much respect we can command in Europe while we hold the presidency, heaven help us when we are no longer in that potentially powerful position.

Whatever happens at Cardiff, it can only be a matter of time before the lessons learned about this Government in the past six months by the political leaders of Europe filter down to the people who matter most to us in this House—our constituents. Politicians cannot live by style alone. A realisation of the Government's failure in their presidency of the European Council, which mirrors a lack of achievement in so many aspects of their performance, will soon break through to the public at large.

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

I welcome the hon. Member for Windsor (Mr. Trend) to his post and congratulate him on his appointment. I am not one of those politicians who like to give advice to other politicians, but if the hon. Gentleman is to stay in his job, he was misplaced in criticising Eurostar, because he may find that he has to avail himself of its services from time to time, as I shall tomorrow morning at 6.14 on my way to Brussels.

We have had a thoughtful debate, which is different from past debates on Europe in which I have taken part, both in this capacity and when in opposition. Previous debates were characterised by ideology and zealotry. I am pleased to say that today's debate heralds a new approach, and there have been many thoughtful contributions from hon. Members on both sides of the House. The absence of ideology on the Opposition Front Bench has not been too obvious, but several contributions from Conservative Back Benchers have examined the issues that we face in Europe. I find it interesting that the Opposition, of all people, should be fond of quoting the press in their defence. That is a strange reversal of a role that I have known some Conservative Members to adopt in the past.

My hon. Friend the Member for Swansea, East (Mr. Anderson) said that he believed that the presidency would be the busiest period for British foreign policy in peacetime. I do not know whether that is true, but it certainly feels as if it is. We have had an active and productive six months during our presidency, which has one or two weeks to run.

My hon. Friend the Member for Ilford, South (Mr. Gapes) said that my right hon. Friend the Prime Minister has been deeply involved in European issues, which is the protocol for European matters when there is a summit at the end of the six-month presidency. My right hon. Friend has visited all the countries in the European Union over the past two weeks to examine the issues relating to the development of the European Union that are considered important not only by the presidency, but by other partner states.

My hon. Friend the Member for Swansea, East said that he had detected more warmth in Europe towards the Government. I cannot resist saying that that is not a difficult achievement when one considers the temperatures that existed before 1 May last year. There is a new warmth and a feeling that everyone in Europe is in a family. That does not mean that everyone always agrees on every issue or that one does not fight one's corner hard, but there are many issues on which we must look beyond Europe and decide how we can best co-operate. That has been a strong theme during the past six months.

Mr. Howard

Is that why the Chancellor of the Exchequer was treated as he was, just a few days ago?

Mr. Henderson

The right hon. and learned Gentleman, like one of my hon. Friends, reads too much into newspaper reports. The rules on the relationship of the various nations to ECOFIN and Euro X were clearly defined at the Luxembourg summit, when there was no doubt that the major issues of macro-economic policy in Europe are determined by ECOFIN, and that the Euro X committee deals with the details of the currency and its relationship to other currencies. There are occasions when it is appropriate for the four non-members of the currency to be present, and other occasions when it would be inappropriate. The right hon. and learned Gentleman refers to a situation when it was recognised that the 11 members wished to discuss matters specific to the currency.

The main focus of the presidency, and a topic that will feature prominently in Cardiff, is the enlargement of the European Union. An historic decision was taken in Luxembourg and has been driven hard by the British presidency over the past six months. It will change the future shape of Europe, uniting a Europe that was previously divided.

There are different views on the issue. In his introductory remarks, the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) expressed the view that we had gone backwards over the past 12 months. The hon. Member for Somerton and Frome (Mr. Heath) thought that the session had been well managed. Any objective person would recognise that the mandate that was given to the presidency by the Luxembourg summit has been fulfilled in its entirety.

That is the strong view of the states that want to join the EU. The Romanian European Minister said that it was an historic day and that the European conference had further added to that process. Indeed, some of the negotiators for countries that want to accede to the EU criticised me six or eight weeks ago because we had brought forward the screening process too quickly and they could not meet some of the detailed requirements set by the Commission officials. I pleaded guilty, because that is what they had asked for. They have worked hard, and I think that they are pleased now that considerable progress has been made on the screening process.

Mr. David Heath

When I said that the process was well managed, I meant that as a compliment. I hope that the Minister will agree that to start the accession process without a clear timetable for CAP reform, institutional reform and structural and cohesion fund reform is to invite the applicant countries to apply on the basis of a false prospectus. It is essential for the timetable to be in place.

Mr. Henderson

I am pleased that the hon. Gentleman is not retracting his support for the accession process. I agree that it is essential to recognise that the enlargement of the EU entails not just the changes that those countries must make if they want to accede to the EU; it also involves the changes that the existing members of the EU must make to respond to that challenge. That has been one of the important aspects of our presidency and will be discussed at Cardiff on Monday afternoon, when the leaders of the nations of Europe will seek a formula that will allow that process to go forward.

From a presidency position, we shall push forward the reform of the common agricultural policy, a key issue which several hon. Members raised. After the German elections in September, we shall be able to address the paper issued by the Commission for reform initially in cereals and beef. If carried through, that alone would save British consumers about £1 billion a year, so it is worth while. There is support for some of the proposals in the farming industry.

On structural funds, there is a need for reform if funding is to be available to assist the countries that want to accede to the EU. In the future, from the total pool of structural funds, there will be fewer resources available proportionally to be distributed to existing members of the EU. That is also recognised.

I shall return to the specifics of the structural funds, to which hon. Members on both sides of the House have referred. At Cardiff, we hope to make a commitment to work hard to try to bring those issues to a conclusion by March next year. The European Parliament, through its procedures, can then give assent to the aspects of any deal to which it is required by treaty to agree before the European elections next June. If the matter is not resolved by April, there will be no time to consider it until October or November—which is nearing the end of the existing structural funds regime. There are many reasons why we want to put the timetable in place, and we shall strive hard to do that in Cardiff.

My hon. Friend the Member for East Carmarthen and Dinefwr (Mr. Williams) and the right hon. Member for Dyfed asked what reforms are taking place in structural fund procedures. There must be a fair system if there is to be acceptance and understanding on the part of the 15 nations that wish to accede to the European Union. Areas in Europe that have the same characteristics should receive the same sort of support, regardless of their location. As the right hon. Member for Dyfed—

Mr. Wigley


Mr. Henderson

I apologise. My geography of Wales tends to be a bit anglicised. I must do some homework, lest I get into trouble with the right hon. Gentleman and others.

As the right hon. Member for Caernarfon (Mr. Wigley) said, it is not simply a matter of the new structural funds regime—although that is important to the whole United Kingdom. In some places in Wales, England and Scotland, the description of the area is a key factor. The right hon. Gentleman explained how one can calculate different GDP per capita definitions depending on whether Wales is divided north-south or east-west. The statisticians at Eurostat and the Commission must deal with that matter on the basis of what is fair and reasonably objective.

We have given our people a mandate to negotiate, and we are seeking a fair system. We must be able to say that areas that are classified as objective 1 in the United Kingdom are, broadly speaking, comparable to similar classifications made in other European Union countries. If that is achieved, it will be a fair settlement. I do not wish to comment on the specifics of any areas while the negotiating process is continuing—I am sure that hon. Members will understand why. The Government take a firm view and will try to advance the process.

We have been active on many other issues during our presidency.

Mr. Donald Anderson

Before my hon. Friend moves on, will he refer to the proposals for institutional reform? Have the Government made specific proposals in respect of a conference concerning institutional reform? What are the prospects of that occurring?

Mr. Henderson

My hon. Friend is moving ahead of me. I shall turn to that issue. There will be a discussion over lunch involving the Heads of Government—[Interruption.] I assure hon. Members that lunches are not perks in a European context. It means that one gets indigestion while eating at a meeting—and the Heads of Government are no more exempt than my right hon. Friend or I.

There will be an open discussion during which any contributor may lay any issue on the table. There is a desire to explore to what extent further integration is necessary if there is to be effective decision making and to what extent subsidiarity must be redefined and worked out in a way that is acceptable to member nations and will serve us well in the future. Those are the philosophical parameters of the discussion. It may go into institutional issues such as the role of national Governments, of the European Parliament and of the Commission, the size of the Commission, the scrutiny process and many others.

There is a wide agenda, and we shall aim to take it forward to the Vienna summit in December, where it could be progressed a little further along the line. Hon. Members on both sides of the House understand that there is no magic formula for reforming an organisation as complicated as the EU, and that reform does not happen quickly, because consent is essential for lasting agreement.

We have been active in many other areas, such as improving action against crime at an international level. On the environment, we have achieved discussion of the Kyoto obligations at the EU and practical decisions on new regulations on landfill and on drift nets. On the single market, there have been agreements on a research and development framework, which is important for British scientific institutes and universities, on mobile phones and on the introduction of a scoreboard system, so that we are not only saying that we are committed to the single market, but making everyone else aware of what we have done to achieve that. National obstacles to the single market will become transparent under the system, which is an important development.

Hon. Members will be pleased that there has been progress on beef this week, as was acknowledged in some of the speeches tonight. The Government will be pushing the Commission proposal through the various channels to achieve acceptance at the earliest stage.

The new arms code is a major achievement. The hon. Member for Somerton and Frome asked why it was not announced in the March half-time report. It was not agreed then, but only three or four weeks ago. I believe that it is a significant achievement and puts huge pressure on member states to play the game, not to act unreasonably and not to undercut foreign policy positions on those matters. That is an important move forward, which has been acknowledged by hon. Members on both sides of the House.

Mr. Dalyell

Is this a convenient point to ask my hon. Friend about Kosovo, or will he come to it later? If not, may I repeat my question about air strikes? Some of us feel strongly that if there is to be a military option, which has not been ruled out, it should not be air strikes, but infantry supported by armour, which is totally different from counter-productive air strikes. Can he say anything about the thinking on air strikes?

Mr. Henderson

I had hoped that hon. Members were satisfied with the response of my right hon. Friend the Secretary of State, who intervened on the right hon. and learned Member for Folkestone and Hythe to answer his points relating to those matters. Nothing is ruled out. We are considering the situation, and, as my right hon. Friend the Foreign Secretary said, there is a G8 Foreign Ministers meeting tomorrow and there has been a Defence Ministers meeting today. European Foreign Ministers will have an opportunity to discuss those matters at their lunch on Monday. There is a build up in the United Nations for seeking as much consensus as can be achieved to get the necessary resolution through.

Mr. Howard

May I bring the Minister back to the code of conduct on arms sales, which he was dealing with before he gave way to the hon. Member for Linlithgow (Mr. Dalyell)? Is not the most significant new feature that the EU code will introduce the obligation on a country to notify other countries when it has refused to grant a licence for the export of particular arms? Will that not present such an order, on a plate, to any other country that chooses to adopt a different interpretation of the code? For the first time, if a country refuses to grant a licence for an order, it will have to notify everyone else, and any other country could notify its industry to take advantage of the order.

Mr. Henderson

I understand why the right hon. and learned Gentleman is worried about that, but, given my understanding of the defence industry—I have been involved in it a bit; in fact, I once worked for Rolls-Royce— I can say that the main contractors are large-scale operators, who generally know who seeks what kind of purchase and the type of offer that will be made. I believe that they already have access to such information.

What the code of conduct does is inform those people and others that there is a reason why a sale has been rejected by one country, and that, if they are then going to undercut the politics of that decision, they will have to do so publicly, and justify their stance. I believe that that will have a major impact, in that, when there is a need to stop the sale of a particular weapon for a particular political reason, that reason will—hopefully—be upheld by those who were potentially alternative suppliers.

Mr. David Heath

At what point does the hon. Gentleman consider that it would be appropriate to return to the European Union negotiating table to strengthen the code of conduct, making it into something nearer what was originally envisaged?

Does the hon. Gentleman envisage any discussions with the United States about the code, with a view to reaching some agreement with the US about American arms manufacturers?

Mr. Henderson

I think common sense will suggest to the hon. Gentleman that we need to see how the code works. There is a commitment to review its procedures every 12 months.

It clearly makes sense to secure as much agreement as possible with the United States, so that the same policies are adopted by defence industries throughout the part of the world where there is the capacity to make the goods that we are normally discussing. We want to achieve that.

The hon. Member for Hertford and Stortford (Mr. Wells) referred to the Lomé mandate, which was discussed at this week's General Affairs Council. Considerable progress was made, and officials are now looking at some of the detail. The principles of the British position are as I described them to the hon. Gentleman when I gave evidence to the Select Committee, and we are pushing hard on them. The banana issue has been taken on board, but I must tell the hon. Gentleman that any decision must be consistent with World Trade Organisation rules. Otherwise, in the long term, it will not stick, and there will be problems. We shall return to that issue on 29 June, at the next meeting of the General Affairs Council. I hope that we shall be able to conclude the mandate then.

Much is expected of the weekend's proceedings in Wales. We are all looking forward to going to Cardiff. I always enjoy my visits to Wales, to see some of my old friends and some of my new friends. I believe that this will be a busy and productive summit. Important improvements will be made, and important progress will be made on economic reform, on enlargement and on Agenda 2000. There will be an important dialogue on the future of the European Union, and that that dialogue will concentrate on making the EU relevant to what people feel and to issues that they know are crucial to them. I believe that, at Cardiff, there will be a desire to provide continuity through to the Austrian presidency.

I must say that I think it was a little unworthy of the hon. Member for Windsor to demean the meeting between President Mandela and the Heads of Government. I think it very fitting that that meeting is taking place.

Mr. Trend

I am delighted that President Mandela is coming to the country: he is a hugely distinguished international politician. I merely sought to make the point that it was unlikely that he would not take advantage of a photo opportunity with the Prime Minister. I cannot help feeling that there may just be a slight amount of contrivance in this matter—but, as I have said, we shall be delighted to see President Mandela.

Mr. Henderson

I am grateful that we have managed to draw the tooth from the hon. Gentleman on that issue. It is fitting that President Mandela is meeting the 15 leaders of Europe. That is an important dialogue and an occasion to celebrate President Mandela' s great contribution to democracy and freedom in the 20th century. The values that he felt were important to fight for over his years of political life are the principles and values that will set the European Union in good stead for the future. I look forward to that occasion in Cardiff on Tuesday.

Ms Bridget Prentice (Lewisham, East)

I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.