HC Deb 17 June 1998 vol 314 cc367-85 3.30 pm
The Prime Minister (Mr. Tony Blair)

With permission, Madam Speaker, I shall make a statement about the meeting of the European Council which I chaired in Cardiff on 15 and 16 June. My right hon. Friends the Foreign Secretary and the Chancellor of the Exchequer and my hon. Friends the Minister of State, Foreign and Commonwealth Office, the Member for Newcastle upon Tyne, North (Mr. Henderson), and the Economic Secretary to the Treasury were also present. I have placed a copy of the conclusions in the Library.

I should begin by thanking the city council and the people of Cardiff for their warm welcome and hospitality. I congratulate them whole-heartedly on the arrangements for the summit, which were universally admired. Cardiff itself looked marvellous and did great credit to Wales and this country.

The European Council had four main themes: economic reform and employment, enlargement and the necessary accompanying policy reforms, the future development of the EU and foreign policy issues, notably Kosovo. We also discussed a range of other questions which touch the lives of ordinary people: the environment, crime and drugs and the millennium bug. The Finance Ministers issued a statement on the world economy, a copy of which is attached to the conclusions.

We had an important and valuable debate on the economic reform programme needed in Europe if the single currency is to succeed. There were four aspects to that. The first was employment. At Luxembourg last November, the European Council agreed a set of employment guidelines aimed at promoting a skilled, trained and adaptable work force and flexible labour markets responsive to economic change. Under the United Kingdom presidency, all 15 member states have submitted national action plans putting the guidelines into effect. We agreed at Cardiff that the next steps were concrete measures on lifelong learning, with a particular emphasis on older workers, strengthening equal opportunities, promoting new ways of organising work, revising tax and benefits systems to improve incentives to work and developing a culture of entrepreneurship. The need now is to implement the national plans. The guidelines themselves will be revised in December.

Secondly, the European Council endorsed broad economic guidelines to co-ordinate national economic policies. They incorporate commitments on macroeconomic stability and structural reforms of the labour, product and capital markets—essential if member states are to promote growth and employment and remain competitive in the face of globalisation. The guidelines also emphasise the need for reform to remove regulatory burdens on businesses. We established a process to exchange best practice and monitor progress to ensure that those commitments are lived up to.

Thirdly, good progress has been made on strengthening the single market during the past six months, for example through agreements on telecoms and gas liberalisation injecting genuine competition into those markets. The European Council agreed that the Commission should work on an extended scoreboard containing indicators of effective market integration and price differentials, as a tool for benchmarking progress in creating a genuine single market. The existing scoreboard has already helped implementation of single market measures by member states to improve from 73 to 82 per cent. in the past six months. We invited the Commission to table an action plan to improve the single market in financial services, and emphasised the need to promote competition and reduce distortions such as state aids. These are important commitments. Perfecting the single European market is vital for trade and investment.

The fourth area was the need to promote competitiveness and entrepreneurship. We were all fully agreed on the vital role of small companies in creating new jobs and wealth, and on the need for action to produce the best possible environment to encourage entrepreneurs. That means, in particular, increasing access to capital and cutting unnecessary regulation. Action in those areas was agreed.

Fundamental economic reform is essential if member states are to be able to compete and create jobs in the global marketplace, and is therefore particularly essential for monetary union. The measures agreed at Cardiff represent a new strategy to achieve that. I draw the House's attention to two points: the degree to which the strategy reflects British thinking about competitiveness and the direction of reform, and the unanimity across Europe that this is the right way forward.

The second major theme was enlargement and the policy reform needed for that. Enlargement negotiations and the accession process were successfully launched in March. The Commission also tabled then a package of proposals on the reform of EU policies and their financing—the so-called Agenda 2000. The proposals would, for example, reform the common agricultural policy and save the consumer at least £1 billion a year in lower prices. The European Council agreed a deadline of March 1999 for reaching agreement on the package, with final adoption before the European Parliament elections next June.

A crucial part of the negotiations will concern the EU' s future financing. There has been a good deal of press speculation about the position of the German and other Governments over their net contributions to the budget. No doubt member states will continue to make their case for change in one direction or another. For our part, I made it clear that I will maintain the United Kingdom budget rebate, which cannot be changed without the agreement of the Government and the House.

As part of our enlargement debate, we discussed Turkey. The UK presidency has worked hard to restore positive EU-Turkey relations following the downturn at the end of 1997. The Cardiff conclusions re-emphasised that Turkey's candidature to join the EU must be treated on the same basis as those of other candidate countries, and endorsed a new strategy towards Turkey. The Commission has now said that it will come forward with proposals for financing to overcome the existing impasse in that area. It is too soon to say definitively, but I believe that that will help to put this important relationship back on the rails and provide a basis for future progress.

On the foreign policy side, we issued a strong declaration on Kosovo, condemning the use of indiscriminate violence by the Federal Republic of Yugoslavia and Serbian security forces. If President Milosevic does not take steps to comply with our demands on dialogue, refugees, international monitoring and an end to violence, he should be in no doubt about our united resolve. We wait to see whether his discussions with President Yeltsin yesterday may lead to the necessary changes on the ground. Meanwhile, NATO planning and UN Security Council consultation will continue.

We also discussed our serious concern about the middle east peace process, where the EU remains supportive of US efforts. We called on India and Pakistan to take early steps to adhere to the international non-proliferation regime. We expressed support for Indonesia—provided a credible economic reform programme is followed—and underlined the need for an acceptable solution to the problems of East Timor, including the early release of political prisoners. The European Council gave its support to the Northern Ireland peace agreement, and agreed that the EU should continue its active role in promoting peace and prosperity there.

We also discussed the environment and crime and drugs. We agreed on the need to implement the Amsterdam treaty provisions on integrating environmental protection into EU policies. My right hon. Friend the Deputy Prime Minister began this process during the UK presidency by bringing the work of the Transport and Environment Councils together and ensuring that the next three presidencies are committed to an agreed programme. I am also delighted that, one hour ago, the Environment Council in Luxembourg concluded the European Union's burden-sharing arrangements to implement the legal obligation agreed at Kyoto for greenhouse gas emissions. That is an important step towards a cleaner world.

In Cardiff, we welcomed the excellent progress made in implementing the action plan on organised crime. We endorsed the key elements of the EU drugs strategy for the period 2000–04 and asked the Council and Commission to develop a comprehensive plan for action.

Heads of Government also had a wide-ranging discussion on the future development of the EU. We face big challenges: the introduction of the euro, enlargement, tackling unemployment and social exclusion, combating organised crime and giving the Union an effective voice in the world. There was agreement among EU leaders that, if the Union is to meet those challenges in a way that has the confidence of our citizens, it must ensure that people feel less remote from its political processes and institutions, and that they can support European solutions to shared problems without fear of losing their national identity. That means increasing the democratic legitimacy of the European political process and making a reality of subsidiarity—being ready to co-operate where that is the right way of resolving common problems, while reassuring our peoples that Europe will not encroach on national or regional freedom of action in areas where the state or, indeed, local authorities can best take responsibility.

There was widespread acceptance that the solutions do not simply lie in more centralised decision making, and that we need to find a more effective relationship between Europe's institutions and our national Governments and Parliaments. We now have to take those principles and make them the centrepiece of future European reform. The informal Heads of Government meeting in Austria in October will begin that process.

We have also agreed that, once the Amsterdam treaty is ratified, we will move on to the institutional issues not resolved at Amsterdam—notably, the size of the Commission and vote reweighting. We also asked the Commission and the Council to pursue work on improving their efficiency and organisation and to report on progress during the next presidency.

I was delighted to welcome Nelson Mandela to Cardiff, joining my European colleagues in paying tribute to his extraordinary leadership in South Africa, and taking the opportunity to discuss with him the prospects for completion of an EU-South Africa co-operation agreement. We are agreed on completing the negotiations by the early autumn. I understand that only 1 per cent. of the issues remain to be resolved.

I believe that the Cardiff European Council marked a solid step forward towards a more effective and better accepted European Union. We agreed, without rows or drama, on a series of substantive points to equip our countries and peoples better for the future. At the start of the UK presidency, I outlined five objectives: building support for a third way in Europe—economic reform, combining economic dynamism with social justice; launching monetary union; getting enlargement off to a good start; taking forward common action on crime, drugs and the environment; and demonstrating that Europe could be a force for good in its relations with the outside world.

Those objectives have been met. As important as anything else, for Britain, after years of negative and destructive posturing that isolated Britain in Europe but did not advance our interests, we have re-established strong, positive relations with our European Union partners. Those relations, not before time, are transformed and for the better. That is good for Britain, for Europe and for Britain in Europe. Cardiff was the proof of that.

Mr. William Hague (Richmond, Yorks)

I shall begin by agreeing with the Prime Minister on one thing: congratulating the city and the people of Cardiff on hosting the summit, fully justifying the decision taken on the matter by the previous Government and proposed by me as Secretary of State for Wales.

The Prime Minister's statement brings to an end a British presidency of disappointment, missed opportunities and poor diplomacy. Indeed, the presidency was recently censured by the European Parliament for reinforcing the image of a bureaucratic, rather than a people's Europe.

We welcome the progress on implementing the overdue single market directives in national laws, and the reaffirmation of the European Union's commitment to the World Trade Organisation. On Kosovo, we welcome the moves to ensure that the Serbian Government understand that political progress is the only long-term solution to the problem, and that that means that the province's autonomy must be reinstated and the civil rights of ethnic Albanians fully respected.

Progress in those areas cannot disguise what is absolutely clear from the European Council's conclusions: little or no progress has been made on the central objectives that the Prime Minister himself set for the British presidency of the EU. Does he remember saying, when he launched the British presidency at Waterloo station, that one of the top priorities was to get negotiations on EU enlargement off to a "flying start"? Does he share my disappointment that, six months later, that looks further away than ever? Is he aware that the Finnish Prime Minister has said publicly that enlargement is looking more problematic than it did a year ago"? Does he agree with today's editorial in the Financial Times, which sums up a widely held view at home and abroad: The most dispiriting aspect of the summit…was its failure to inject momentum into the reforms—financial, agricultural, and institutional—essential to proceed with enlargement to the east"? Does the Prime Minister also remember saying at Waterloo station that he would tackle the cost and waste of the CAP", which continue to grow year by year"? Will he now concede that, six months later, we are no nearer fundamental reform of the common agricultural policy? The first meeting on the Agenda 2000 negotiations on CAP reform all but collapsed, and member states have so far failed to find a common position on which to begin negotiations. For all the right hon. Gentleman's fine words, at the end of the British presidency we are left with the cost and waste of the CAP continuing to "grow year by year".

As for the reform of structural funds and of the internal institutions of the EU—both essential prerequisites to enlargement—the Prime Minister has admitted today that those have been left to the Austrian presidency later this year.

On reducing Europe's crippling levels of unemployment—another of his original Waterloo objectives—does the right hon. Gentleman agree with a view widely held across Europe that the momentum created by the Luxembourg summit on jobs in November has been all but lost over the past six months? After all the talk, talk, talk about tackling unemployment, the British presidency has achieved nothing of substance. All that the Prime Minister has been able to promise in his statement is that unemployment is yet another issue to be given greater urgency at the European Council in Vienna under the Austrian presidency.

Then there was the environment, which the Prime Minister described as a theme of his presidency. Has he seen the comments by Friends of the Earth, which condemned the Cardiff summit as not much greener than a multi-storey car park"? Let us hope that this afternoon's agreement has led to some improvement on that.

Another of the objectives that the right hon. Gentleman set himself six months ago was to smooth Europe's relations with the outside world. Does he share our disappointment that his presidency presided over the collapse of the EU's new transatlantic marketplace initiative, which would have taken us a long way towards creating a transatlantic free trade area, with all the benefits to businesses and jobs that that would have brought?

As for the failure to conclude a trade deal with South Africa—a deal that was supposed to be the highlight of the Cardiff Council—does the Prime Minister agree with Glenys Kinnock—[Laughter.]—who said: I don't know how the EU leaders can look Mandela in the face? The right hon. Gentleman may laugh at that. I do not want to embarrass Glenys Kinnock—he might tell her to get off the gravy train—but that is what she said.

In the light of the utter shambles surrounding the Brussels summit on a single currency, which the Prime Minister himself chaired, and for which I suspect his presidency will be remembered, does he regret saying at Waterloo station: dealing with whatever is on the agenda with dispatch and efficiency is the hallmark of an effective presidency"?

Does the right hon. Gentleman remember coming to the House after the Brussels summit and saying—not that anyone believed him at the time—that all the issues on the launch of a single currency had been "resolved satisfactorily"? Yet now we hear him on the "Today" programme saying that that summit was a "mess". It is a pity that he did not have the straightforwardness to say so here in the House of Commons at the time.

Six months ago, the Prime Minister set clear objectives for the British presidency, leading up to the Cardiff summit—objectives on enlargement, on CAP reform, on employment, on external relations and on the environment. He said that the presidency would be a test for Britain to show that we can and do offer strong leadership in Europe". Six months later, is it not clear that the Government have failed that test? Is it not clear to everyone that the Prime Minister is no closer to achieving his objectives than he was at the beginning of the year?

Can the right hon. Gentleman confirm that a huge number of things have been left to the Austrian presidency to take forward? On CAP reform, on enlargement and on recovering momentum on unemployment, all that the Cardiff Council could say was that those subjects would be dealt with in Vienna. No wonder the British presidency has been an object of derision across the continent.

Has the Prime Minister seen Le Point magazine, which said: the British Presidency of the European Union is, at the moment, one of the most timid and poor in recent years"? I am surprised that the Chancellor has not read what has been said about himself and the Foreign Secretary recently. Did the Prime Minister read the Austrian newspaper Der Standard two days ago, when it summed up the Prime Minister's performance as: A lion at the start. A lamb at the finish"? Is the Prime Minister aware that, when I was in Cardiff on Sunday, one European leader told me that, during the British presidency, he had had his photograph taken more often than ever before, but had never been asked to reach a substantive decision? When the right hon. Gentleman looks back on the past six months, does he not see that he has left only one real and worthwhile legacy to his successor? Referring to the Brussels summit of last month, the Austrian Chancellor says that he has now learnt how not to organise a summit".

The Prime Minister always wanted to be a president. What a shame that, when he was one, he made a mess of it.

The Prime Minister

Some of us recall the previous Conservative Government. Some of us recall the beef war, and the shambles that occurred every time they went anywhere near Europe. I can tell the Leader of the Opposition that the overwhelming feeling—not just in the rest of the continent but, I suspect, in this country—is, "Thank heavens that Conservative Government have gone."

If the Leader of the Opposition wants some quotations, I should point out that the German newspapers in the past few days have said: The Labour Prime Minister can pride himself on the fact that Britain has presided over two truly historic steps forward towards European unity during the British EU Presidency: the founding of monetary union and the launch of enlargement. From Spain, we hear: The British Presidency can be judged … as competent and professional. From Sweden: The most important change in the British Presidency this time round has been the will and ambition to actually achieve something positive and not to only delay and criticise. From France: In Cardiff, the Europe of nations is scoring points over the supporters of federalism. From Portugal: Germany and France are now more in agreement with Britain's economic positions: greater flexibility, greater competitiveness, less centralisation.

Mr. Dennis Skinner (Bolsover)

What about the Daily Express?

The Prime Minister

I would quote the Daily Express if knew what was in it. If it is on my side in this matter, that is very helpful. Whatever it is, I will pray that in aid as well. [Interruption.] The story probably is not true—at least I hope that it is not.

Quite the most bizarre experience in Cardiff was to be preceded there by the Leader of the Opposition running around, holding press conferences and saying what a disaster everything was about Cardiff and the British presidency. I just point out—seriously—that, if a Labour Opposition had ever behaved like that on the eve of a Tory presidency, those self-same newspapers that support the right hon. Gentleman at the moment would have accused us of being unpatriotic. The fact is that no one paid the slightest attention to him at Cardiff, or anywhere else—but that is more a reflection on the right hon. Gentleman than anything else.

The fact is that we achieved all that we said we would do as a UK presidency. We did launch monetary union, and we did get enlargement off to a flying start. It is bizarre for the right hon. Gentleman to say that nothing happened on enlargement—we launched the enlargement process. The accession partnership is now under way, and we have agreed a timetable for all the reforms to be put in place for Agenda 2000 by March 1999.

As for the common agricultural policy, as a result of the conclusions of the Agriculture Council—chaired by Britain—there is already agreement to reduce prices to consumers by more than £1 billion a year, rising to £2.5 billion later.

The right hon. Gentleman said that we achieved nothing on jobs and unemployment, but we have achieved an enormous amount. The agreements that have been made not just at the beginning of our presidency but at Cardiff represent—as he will see, if he reads the conclusions—probably the most radical change in direction for Europe for many, many years, and very good, too. They represent action by Government which is far more effective than some of the more bureaucratic regulations pursued in the past.

The right hon. Gentleman went on to say that we had failed on the environment— literally just hours after we scored a significant victory. We have implemented the Kyoto package and, under the brilliant chairmanship of my right hon. Friend the Deputy Prime Minister, we have got Europe to agree on how to implement it. That is a considerable step forward.

The right hon. Gentleman had a collection of criticisms from a Finnish newspaper, Friends of the Earth and Glenys Kinnock. On the EU-South Africa matter, we would have liked an agreement in place by Cardiff. However, it was not as a result of the UK that agreement was not reached. We have now agreed that we shall conclude the negotiations by the early autumn, and only about 1 per cent. of the matters are still outstanding—a considerable step forward.

It was extraordinary for the right hon. Gentleman to say that Europe's relations with the outside world have been adversely affected. The EU-US summit got us a way around the extraterritorial sanctions of the US—something that people in the EU have been trying to do for years. We managed to achieve that. On Kosovo, the EU has not been the problem. If there are problems, they lie outside the EU. For the first time in ages, we managed to get a common position established quickly.

As for the Brussels summit, as I have always said, the negotiation was very difficult, but the result was right. If we had followed the advice that the right hon. Gentleman was urging on me—he would have blocked the Dutch candidate—we would have ended up with the financial markets opening on the Monday without any candidate, or any candidate anyone had heard of, to head the European central bank. I assure the right hon. Gentleman that that would have been a complete disaster, both for Britain and for Europe.

If the right hon. Gentleman looks more closely at these things, he will see that, as I said, one of the most important aspects of the British presidency has been the establishment of good, solid relations between Britain and the rest of Europe. His problem—although I am not sure what position he really takes—is that many in his party are opposed to everything to do with Europe. They do not want the euro or anything in Europe to succeed—they are opposed to it and do not like it. That is why they and a few of their friends in the press have to go around saying that Britain can never get on with Europe—they do not want Britain ever to have a positive relationship with Europe. We have tried to establish good relations with the rest of Europe precisely to get rid of such attitudes. I suggest that, rather than attack us, the right hon. Gentleman should sort out his party, unite it and give it a sensible position to defend.

Mr. Paddy Ashdown (Yeovil)

In overall tone and initial intention, much in the British presidency over the past six months—culminating, of course, in Cardiff—can, we believe, be welcomed. It has been a pleasure to have a British Government who have taken a more constructive attitude, which has won Britain new chances. The Government's agenda—reform of the CAP and the common fisheries policy, cost cutting, institutional reform and jobs—has been right. Measured against the initial hype, however, the outcome has been more disappointing than we should have liked. The Government can reasonably claim to have made a start, but not to have made much progress.

I want to touch on three areas. The first is institutional. Does the Prime Minister agree—there was a hint of it in his statement—that the time has come for a much clearer definition of those powers that will be held at the centre of the European institutions and of those that must ultimately remain with the nation state?

Secondly, on Kosovo, we welcome the steps, small as they are, that have been taken as a result of the Milosevic-Yeltsin meeting, but does the Prime Minister agree that, unless President Milosevic is prepared, whatever he may have signed up to in Moscow, to silence the use of heavy weapons against his civilian population—which is a clear infringement of civil liberties and destabilises the Balkans extremely dangerously—NATO may have to do that for him?

Finally, the Prime Minister quoted with approval the comments of a German newspaper that there had been an historic achievement on monetary union. Does he find anything odd in the fact that monetary union had only a bit part in the concluding paragraph of his statement? Monetary union was one of the most historic achievements of the presidency, but Britain presided over it rather than took part in it. The previous Government's failure—and, I am bound to say, the timidity of this Government—on monetary union means that Britain is outside Euro X exactly when the provisions for external trade, in which Britain has a greater stake than any other European nation, are being drawn up.

As I have said before, the Prime Minister will have to grasp this nettle, and he will have to do so sooner rather than later. If he followed, as we recommend, a declaratory policy saying, "We will join," set a target date, held a referendum on the principle before the next election and took the decision afterwards at a time of the Government's choosing, the pound would go down, interest rates would go down, investment would come to Britain rather than be at risk of going elsewhere, and Britain would be able to capitalise on the Government's fresh and new tone, so that our influence in Europe would increase incredibly, giving us a better deal for the future. Why can the right hon. Gentleman not see that?

The Prime Minister

First, the two biggest steps that Europe has taken in the past few years have been enlargement and monetary union, which were both launched under the UK presidency, so it is odd to say that we have not made progress—we have made considerable progress. I could have quoted from other foreign newspapers, as the coverage has been extremely positive. The Conservative party and some of its supporters in the newspapers always want to pretend that Britain cannot get on with Europe—they can never have a good news story about Europe; it is a sort of suppressed thing. Anyway, we did extremely well on that.

The most important thing about the institutional changes is that the new debate which we have launched from Cardiff will not be limited to subsidiarity, but will deal with the areas in which Europe should co-operate and work more closely together, for example, crime, drugs, foreign policy, completion of the single market and economic co-operation, and those in which it can plainly do less from the centre and where we need decentralisation. That is a big debate and it is now under way. If it is properly fashioned and formulated, we can play a significant part in it.

As for what the right hon. Gentleman said about Kosovo, I agree entirely. NATO may still have to do that and, obviously, we have to build the maximum amount of support for it. However, what is heartening from the European Union perspective is that we got a common position together quickly, which has been promulgated. There is no difficulty within the European Union about taking action, including military action.

As for monetary union, of course, if we are not a part of it, we will have less influence over it—that is a statement of the obvious. It is the price that we pay if we are outside. However, we have to take the decision on monetary union on the ground of our national economic interest. That is what we have said all the way through. We have laid down the conditions clearly. I have said that I want the euro to succeed and that it is an important step for stability in Europe. We have to be sure that our national economic conditions are correct. At present, there is not sustainable convergence between ourselves and other economies and, if we joined without that, the result would be bad for Britain. We have set the right principles and I believe that we have set the right course. We are making preparations for our industry to be able to use the euro—to deal in it, in any event.

The different relations that we have in Europe are an important facet of this country's better standing in the world. Also, we have nailed one other myth, which is that Britain has to choose between a relationship with the United States and a relationship with the European Union. We are stronger in the US if we are stronger in Europe, and we are stronger in Europe if our relationship with the US is maintained.

Several hon. Members


Madam Speaker

Order. I wonder if we could make a little progress now. The statement has taken nearly half an hour and only two right hon. Members have been able to ask questions.

Mr. Giles Radice (North Durham)

Does the Prime Minister agree that the constructive British presidency has helped to reconcile the United Kingdom to its continental partners and the British people to membership of the European Union? The presidency has also seen the beginning of enlargement with the countries of central and eastern Europe and of economic and monetary union, which is a historic event indeed. Is it not the case, however, that, if the United Kingdom is to keep up its European momentum, the sooner we join the European currency, the better?

The Prime Minister

I do not think that there is any point in repeating what I have said on that. We have put our position very clearly and that is the position to which we will hold, but I thank my hon. Friend for his kind comments on our presidency.

Sir Teddy Taylor (Rochford and Southend, East)

Would the Prime Minister accept that many of us regard the presidency as a pathetic flop? We are well aware that the previous Government, and indeed this one, have tried hard, but the problem is that the European Union is not the sort of structure that is amenable to reforms.

On agriculture, does it not worry the Prime Minister, first, that every day since he came to office, £635,000—a lot of money—has been spent on destroying food and, secondly, that the most that he could achieve next year would be lower prices in exchange for higher subsidies? Will this Government—and, indeed, all Governments—not accept that there will never be a way of reforming that policy unless they take the responsibility back to member states?

The Prime Minister

Let me first say where I agree with the hon. Gentleman. I agree that the common agricultural policy requires fundamental reform.

Sir Teddy Taylor

But we will never get it.

The Prime Minister

We will get it. People say that Europe never reforms itself, but it constantly reforms and changes—the very process of enlargement is a massive reform in Europe, as is the single market. It is not correct to say that Europe never reforms. In the end, the hon. Gentleman takes the position—it is a perfectly honourable position—that Britain would be better out of Europe altogether. That is his view and I totally understand it. My own judgment is that that would be disastrous for Britain, in terms of jobs, investment and our standing in the world. In the end, the hon. Gentleman and the Conservative party must be careful not to leave themselves hoping the whole time that Europe will fail, because only failure will justify their position. It would be better to recognise that any serious Government will keep Britain in the European Union, and that we should try to make it work.

Mr. Tam Dalyell (Linlithgow)

May I press the Prime Minister on military action in Kosovo? In the absence of ground troops, including heavy armour, what will air strikes achieve? What is the common position on the delicate question of the further fragmentation of Yugoslavia? Do we have an undertaking that no military action will be taken without the agreement of both the Russians and the United Nations?

The Prime Minister

Of course we are working hard to get United Nations support for the action that we seek to take. It would not be wise for me—vis-a-vis President Milosevic—to speculate on what efficacy there may be in various military options. I assure my hon. Friend that the options are under consideration in NATO and that we are in consultation with our allies.

As for the break-up of the federal republic, if my hon. Friend is referring to the idea of independence for Kosovo, I will say that we have made it clear that that is not our aim or our desire. We support the idea of autonomy within the Federal Republic of Yugoslavia, but securing the independence of Kosovo is not our objective. Our objective is to ensure that the aggression and brutality happening in Kosovo should cease.

Mr. Crispin Blunt (Reigate)

Will the Prime Minister explain why the European Union feels it necessary to have a position on the merits or otherwise of Kosovan independence? With his apparent enthusiasm for the use of armed force around the world, will the Prime Minister bear in mind the almost unanimous feedback that the Select Committee on Defence received from the Royal Air Force in Germany and the British Army of the Rhine on our recent visit there, which was that overstretch on indefinite operations means that the armed forces frankly cannot sustain another indefinite operational commitment without severe damage to our military capability? Will he bear in mind the fact that we have been in Cyprus for 34 years, in the Gulf for eight and in Bosnia for six, before he takes steps to deploy armed service men on yet another operational commitment that has no end in sight?

The Prime Minister

I am sure that the hon. Gentleman and his colleagues on the Defence Committee are aware that we inherited a situation in which defence forces had been cut by 30 per cent. under the previous Government. What is important is that the strategic defence review is conducted not as a cost-cutting exercise, but as a genuine exercise in how to equip our forces for the modern world. When the review is published, the hon. Gentleman will find that it does precisely that. We hope to avoid the mistakes made by the Government that he supported.

The hon. Gentleman asked why it is necessary for the European Union to have a position. By implication, he suggests that we should not consider any action at all in Kosovo.

Mr. Blunt


The Prime Minister

Forgive me; I misunderstood that part of the hon. Gentleman's question.

It is important that the European Union should take a position because the strategic interests of the EU are engaged. There is already serious disorder, and if it becomes even more serious and the region is destabilised, it will spread into Albania and Macedonia. What could happen in the whole Balkan region is perfectly clear, and we have learnt enough from our history to realise that we have to take action. We had similar debates at the time of Bosnia, when many Conservative Members said, "Why bother?" If we had not bothered, we would face a catastrophe in that part of the world. We face the same choices again, and we shall try to ensure that whatever military action we take is swift and effective.

Mr. Kevin McNamara (Hull, North)

To save time, I associate myself with the remarks of my hon. Friend the Member for North Durham (Mr. Radice) about the role of my right hon. Friend the Prime Minister. I also support the Prime Minister's attitude towards Britain's joining the European single currency very quickly.

Many people are anxious about Turkey joining the European Union, especially when we consider its record on human rights, its banning of political parties and the treatment of its Kurds. Considering its current actions, one wonders whether it merits consideration for membership. It seems to have refused to attend to even the most basic human rights policies.

The Prime Minister

I thank my hon. Friend for his kind comments. It is clear that the Copenhagen criteria would apply to Turkey, as to any candidate country. As my right hon. Friend the Foreign Secretary said, human rights workers in Turkey want it to be part of the European Union. We must make it clear that we can discriminate neither in favour of nor against Turkey. It must be judged by precisely the same standards as everyone else. We also need to find a way of unblocking the financing strategy for the customs union, which is an obligation into which the European Union entered.

We made progress on Turkey at the Cardiff summit, and I hope that we can get a more positive response from Turkey as a result of the significant moves that we have made to help it.

Mr. Ian Taylor (Esher and Walton)

If anything, I should like the Prime Minister to have made more progress on the two key elements for the presidency: economic and monetary union and enlargement of the European Union. It is in the national interest for both to be successful. Will the Prime Minister draw certain conclusions, because the Chancellor's recent statement did not give clear evidence on how the convergence between our economy and those on the continent can take place, but it cannot simply happen by accident? The fiscal relaxation will clearly cause monetary tightening.

We must ensure that enlargement takes place, but will the Prime Minister explain to the House and to the British people that it is not a cost-free exercise? Economically, it will have considerable repercussions for the wealthier nations of the existing European Union, and there will be some tough institutional challenges that he will have to explain.

The Prime Minister

I do not accept that the fiscal relaxation of which the hon. Gentleman speaks has occurred. In fact, the fiscal tightening that was built into the Budget will apply for the next three years. Most people think that it was a tough settlement, and the debt to gross domestic product ratio is due to come down from the 45 per cent. which we inherited to 38 per cent. As I said at Question Time, current surpluses will run in every single year of the Labour Government. There has had to be monetary tightening because of the inflation that has come back into the system. We produced a pretty big fiscal tightening when we came to office, in the face of opposition from the Conservative party.

Mr. Taylor

We must watch the figures carefully.

The Prime Minister

Yes, I agree.

There will be no easy ride, and that is why we have not yet been able to reach an agreement, but it is important that we have now agreed a timetable. There will be changes to the common agricultural policy and the structural and cohesion funds, but it is not all one way and there will be great benefits from enlargement, in terms of both trade and an enhanced role for the former communist states of eastern Europe. We must have the courage to go ahead with enlargement and complete it in the German presidency. We made good progress in our presidency, and it was never envisaged that we would complete the process.

Dr. Phyllis Starkey (Milton Keynes, South-West)

In the context of improving democratic accountability in the European Community, does my right hon. Friend welcome today's report from the Select Committee on Modernisation of the House of Commons on scrutiny of European business, and in particular the extension of the powers of the Scrutiny Committee to scrutinise more effectively EC legislation and the proposals under pillars 2 and 3 of the Maastricht treaty?

The Prime Minister

Yes, we support that strongly. The better the scrutiny of European legislation and actions by national Parliaments, the easier it is to move Europe closer to people.

Mr. Christopher Gill (Ludlow)

May I ask the Prime Minister whether his experiences during the British presidency have helped him to understand that the European Union is not a democracy, but a collective? Does he recognise that a collective can operate only in its own interests and, by definition, cannot act in the separate interests of its component parts? Does that not explain why he has so abjectly failed to deliver any satisfaction on or resolution of the problems afflicting the British agriculture and fishing industries, which will most likely be bankrupt before the Community is able to change its ways?

The Prime Minister

Actually, we have achieved considerable progress on bovine spongiform encephalopathy, and we have had the ban lifted in Northern Ireland—the European Commission at least has agreed the date-based scheme, although there is still some way to go. At Amsterdam, we concluded a good agreement in respect of fishing, which, again, is progress.

I simply disagree with the hon. Gentleman, almost philosophically, that collectives can never operate in the interests of the individual parts. Britain is part of the European Union, not for reasons of Europe, but because it is in Britain's interest to be part of it. Of course that means that we pool sovereignty to an extent, as we do in the North Atlantic Treaty Organisation for defence reasons, and of course that means that we do not always get our way on everything—that is in the nature of collective arrangements—but, taken all in all, Britain's membership of the EU has been positive and good.

The hon. Gentleman should look back over 50 or more years of arrangements that we have had with the rest of Europe, and he should consider how the EU has developed—it has developed in a way that is positive for this country and for the whole of Europe. I am afraid that we just disagree.

Mrs. Louise Ellman (Liverpool, Riverside)

Did discussions at Cardiff include consideration of the significant contribution that EU structural funds have made to regional competitiveness in the United Kingdom through, for example, support for businesses, training, regeneration and initiatives such as the Merseyside special investment fund? Has he considered how regions of this country might have more authority in their dealings with Europe and in the administration of structural funding, to ensure that full benefit goes to them and that they achieve maximum competitiveness?

The Prime Minister

We certainly discussed the importance of structural funds, which are obviously very important in areas such as Merseyside. We believe that the new development agencies will help to co-ordinate European money in respect of the various regions of the country. There will have to be changes in structural funds, but areas of the United Kingdom, such as Merseyside, will still have a good claim.

Mr. Ieuan Wyn Jones (Ynys Môn)

May I echo the Prime Minister's congratulations to the people of Cardiff on a successful Council and the excellent arrangements? The Council certainly raised the profile of Cardiff as our capital city and of Wales as a nation.

As the Prime Minister knows, the presidency conclusions refer to the reform of structural funds, and progress was noted. Does he realise that parts of Wales, especially west Wales and the valleys, will qualify for objective 1 status for the first time when the reforms are taking place? Will he give a commitment that the Government will support that application?

The Prime Minister

We will certainly do our best for those areas of Wales. I cannot give a guarantee on what the outcome will be, but we shall make the case strongly. In relation to Cardiff, I agree with the hon. Gentleman entirely.

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

Will my right hon. Friend tell us a little more about the problem of Turkey? He has referred to its human rights record: is it being made clear that there is no way in which it could be accepted into the European Union for as long as it illegally occupies northern Cyprus? Is it being made clear to Cyprus that its application for membership of the EU will not in any way be vetoed by Turkey? Can we encourage Cyprus in that it will not be too long, even if the occupation continues, before it is properly a member of the EU?

The Prime Minister

It is, of course, not a precondition for accession by Cyprus that there is a settlement of the division there. It is, however, only right and honest to point out to people that it will be far easier for the accession negotiations to proceed smoothly if there is a settlement, and I believe that better relations with Turkey are an important part of achieving that.

We have made it clear that there should be no discrimination in favour of Turkey, which would have to abide by the same rules as every other country, but it is important to make it clear to Turkey that we are not discriminating against her either. We should in particular make it clear that the European Commission has now said that it is minded to introduce a strategy to unblock financing. That would be a big step forward, and I hope that there is a good response from Turkey.

Sir Peter Tapsell (Louth and Horncastle)

Does the Prime Minister recall that, during the European summit, he held a press conference at which he expressed the belief that the establishment of a single European currency would help to protect Europe from an Asian-style economic and financial crisis? I believe that that is the exact opposite of the truth.

Will the Prime Minister reflect on the fact that, if we leave out Japan, which has a different set of problems from the rest of Asia, the prime cause of the Asian financial and economic crisis was the fact that the countries involved had been on quasi-fixed exchange rates, operating theoretically through a basket of currencies, but actually dominated by a single currency—in their case, the United States dollar? I believe that those fixed exchange rates brought about the crisis, following tremendous tensions that eventually proved to be insupportable and unsustainable. I fear that similar considerations will in due course hit the euro, and will cause havoc in the economies of continental Europe.

The Prime Minister

I certainly recognise the hon. Gentleman's expertise in these matters, but I think that the Asian crisis was caused by, as much as anything else, the lack of transparency and accountability in those countries' financial systems. There was also an absence of political reform in certain systems, which meant that people were not confident that the economic information and data that they were receiving were correct.

As for monetary union, I said that it would be a force for stability provided two things happened. First, a strong financial monetary policy must be pursued by the European Union as a whole—by the central bank. Secondly, monetary union must be combined with a programme of economic reform—structural reform in Europe. I think that, if Europe does both those things—if it runs a tight and disciplined micro-economic policy, and pursues measures to encourage micro-economic dynamism—the EU and monetary union will succeed; but, obviously, debates on this matter will continue.

several hon. Members


Madam Speaker

Order. I can now call only Members who will ask brief questions, because I am not prepared to keep the Prime Minister at the Dispatch Box after 4.30 pm. There are eight minutes to go.

Mr. Richard Burden (Birmingham, Northfield)

I welcome my right hon. Friend's statement, and the progress that has been made.

May I refer my right hon. Friend to what he said about the middle east peace process? Does he agree that it is a matter of great concern that tension is increasing in the region, and that the situation is not helped by the recent intransigent attitude of the Israeli Government? There have been provocative actions—for instance, the military parades that took place on the 30th anniversary of the occupation of east Jerusalem.

Will my right hon. Friend join me in welcoming the good work done by our consulate in that part of the world in monitoring the human rights position, while also saying that there is a role for the European Union? If Israel wishes to proceed with new and deeper association agreements with the EU, there is a human rights dimension, which the EU would expect Israel to abide by like any other country.

The Prime Minister

I am certainly happy to congratulate the consulate on its work. As for the peace process, I believe that the United States proposals are the right basis for a settlement, and I hope they will succeed.

The EU has a role to play, particularly in regard to interim economic issues. If it can play a helpful role in any other context, it should do so, on the basis of the US proposals.

Dr. Julian Lewis (New Forest, East)

I shall be as brief as possible. Was the Prime Minister made aware in cardiff of the result of the Gallup poll published yesterday, showing that 65 per cent. of the British people oppose entry into EMU, only 33 per cent. support it and 2 per cent. are undecided? Does that not give him pause for thought when he pats himself on the back and congratulates himself on being in time with the process of European unification? He is certainly not in tune with the British people on this issue.

The Prime Minister

I believe that our position on monetary union is right. The hon. Gentleman takes the view—as do a large number of Conservatives—that it should be ruled out in any circumstances. That may be public opinion, but we have to decide what we believe is the right position and then argue for it. He and most of his party are opposed to monetary union on any terms. I think that the British people will take a more pragmatic view and will decide what is in their national economic interest. That is the position that we have adopted. Whether it is supported or not, it is, in my view, the right position.

Mr. David Kidney (Stafford)

The Prime Minister has reminded us that one of the priorities of the United Kingdom presidency was to encourage the European Union to create a more highly skilled work force and a more flexible labour market. Does he agree with me that those reforms are essential for the successful launch of a single currency, and that it is in Britain's interest that the currency is successful, whether we are in it or not? Will he confirm that the United Kingdom will continue to push for those reforms long after we give up the presidency of the European Union, so as to achieve a strong euro in the European Union and in the world?

The Prime Minister

I agree with that entirely. With the measures that have been agreed at Luxembourg and at Cardiff to promote a skilled, adaptable and flexible work force, we are investing in our people, but not burdening business with too much regulation. That is undoubtedly the right way forward. My hon. Friend is right to say that the euro matters to us whether we are inside it or not. Its success is in our national interest.

Miss Anne McIntosh (Vale of York)

The people's Europe was the theme of the British presidency at the beginning of the six months. Was that discussed at Cardiff? Does the Prime Minister realise that the people's Parliament in Europe is the European Parliament? Is this not a most extraordinary week in which to launch an attack on that institution, given that he is due to visit it tomorrow and to present the conclusions of the Cardiff Council?

The Prime Minister

I can never work out where the Tory party is coming from nowadays. We discussed the people's Europe: that was the purpose of the political discussion that we had on the first day. I yield to no one in my affection for the European Parliament. Indeed, I shall be addressing it tomorrow, so it is just as well that that is the case.

As many Heads of Government said, it is important that any abuses are rooted out. I am sure that the hon. Lady would agree with that. The President of the European Parliament made a clear statement on behalf of Members of the European Parliament, saying that he fully accepted and agreed with that approach. That was a responsible attitude to take.

Mr. Dale Campbell-Savours (Workington)

It is inevitable that one of the consequences of enlargement will be a reduction in the availability of structural funding, because more countries will be sharing the pool of resources. Is it not about time that national Governments joined together to work out a new regime to substitute domestic public expenditure for some of the programmes that at the moment are covered by European structural funding, or many parts of the United Kingdom and other European Union countries will suddenly lose money? Surely we should work out a new framework to enable national Governments to allocate these resources.

The Prime Minister

It is too early to say what the outcome of the negotiations will be. It is difficult to say whether national programmes will have to replace any European programmes that go as a result of the changes. We must ensure that, if any changes are made, the various regions of Britain are properly looked after, but we have a long way to go before the negotiations are over.

Mr. Graham Brady (Altrincham and Sale, West)

Much of British manufacturing industry is already in recession, particularly in the north of England, where the Prime Minister and I represent constituencies. Does he accept that hon. Members on both sides of the House are concerned about the wisdom of the Government's current approach of dividing fiscal and monetary policy? Does he believe that it is viable to conduct a European monetary policy without having a co-ordinated European fiscal policy?

The Prime Minister

The European Union has made it clear that it does not think that the EU should try to set tax rates for all its members. The hon. Gentleman asked about manufacturing. Of course, because of the strength of the pound, manufacturing faces problems in our areas and elsewhere, although the latest figures show a small rise in manufacturing output and employment. The worst thing that could happen to manufacturing is boom and bust, and I make no apology for repeating that. The worst setting for British industry would be a return to the days of spurts of growth followed by deep recessions. Unfortunately, that is what happened under the previous Government, and we must try to end that once and for all.

Mr. Bowen Wells (Hertford and Stortford)

Does the Prime Minister remember that, at the beginning of his presidency, one of his priorities was the agreement of the negotiating mandate for the European Union for the replacement of Lomé and, with it, the banana protocol? Why has he not been able to find an agreement on that matter?

The Prime Minister

Fortunately, I am well briefed by the Foreign Secretary and am able to tell the hon. Gentleman that on Monday the General Affairs Council will discuss both those matters. We have made progress, but whether we will be able to reach completion will have to wait until Monday's outcome. No doubt, after that, my right hon. Friend the Foreign Secretary can write to the hon. Gentleman telling him precisely what has been agreed.

Mr. Alasdair Morgan (Galloway and Upper Nithsdale)


Madam Speaker

To show what a softy I am, I call Mr. Alasdair Morgan.

Mr. Morgan

The presidency conclusion document calls on Indonesia to respect human rights and fundamental freedoms in East Timor. Can the Prime Minister say unambiguously whether those freedoms extend to the right to self-determination for East Timor?

The Prime Minister

That is not part of the presidency conclusions. However, we made it clear that we wish the process of negotiation between the Indonesian authorities and people in East Timor to carry on. The hon. Gentleman will know that the Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Leeds, Central (Mr. Fatchett), recently visited Indonesia and met some of the East Timorese dissidents who have been detained. The European presidency conclusions contained a strong statement urging the release of political detainees in East Timor and elsewhere. It also urged on the Indonesian Government fundamental economic and political reform. I think that that is as far as it was right for us to go.