UK Role in Europe

HC Deb 13 January 1999 vol 323 cc369-413

Mr. Deputy Speaker (Mr. Michael Lord)

I must tell the House that Madam Speaker has selected the amendment in the name of the Prime Minister.

7.14 pm

Mr. Malcolm Bruce (Gordon)

I beg to move, That this House regrets the display of "absentee government" by the Chancellor of the Exchequer in failing to be present at the official launch of the euro and in not giving a clear lead to British businesses in relation to future UK membership of the euro; believes that the Government's failure to come to terms with the euro will undermine the prospects for exercising British leadership in Europe; calls on the Government to set out a clear strategy and timetable for British membership of the euro, including measures to accelerate convergence of interest rates, an early report on plans to make Britain's inflation target compatible with that used within the euro zone, urgent clarification of the remit of the cross-party euro preparations committee, initiation of an annual HM Treasury report to Parliament on progress on the Government's five convergence criteria, and steps to encourage an open debate on the appropriate level at which sterling should join the euro; and further urges the Government to contribute to the development of a European Union which is open, accountable, democratic and decentralised, and in which the powers of European institutions, the constitutional relationship between the EU and member states and the rights of the citizens of EU member states are more clearly defined through the establishment of a constitution for Europe. I begin by welcoming the Chief Secretary to the Treasury to his new role and—although she is not here—by congratulating the new Paymaster General on her, perhaps unexpected, promotion.

Mr. Menzies Campbell (North-East Fife)

The Paymistress General.

Mr. Bruce

I think she is still called the Paymaster General. I hope that they will engage with us in the debate, even though this is the Chief Secretary's first outing. Nevertheless, it is a pity that, over the past month, the internal warfare of the Government has been a distraction from key policy issues facing the country—not least, during the middle of the mayhem, the introduction of the euro among 11 members on continental Europe: a matter of crucial importance to the future of this country.

In relation to the euro in particular, the lack of clarity on policy—not merely the chaos in the top echelons of Government—has been responsible for what I can only describe as a very low profile for the Chancellor and his team during that crucial episode. The Chancellor's own contribution to the relaunch of new Labour this week was a speech on Monday—I read the entire text—which failed even to mention the euro. In the first weeks of this new year, the Chancellor of the Exchequer did not even mention the euro—even though the speech was billed by the Chancellor himself as a look at the wider horizon of our vision … the country which we will build in the years ahead. I am sorry that the Chancellor will not seize the opportunity that we have given him today, since the launch of the euro, to shed some light from his perspective on the Government's position on the matter. That is in no way to denigrate the Chief Secretary's contribution to the debate. I wonder whether the Chancellor is still being distracted by the internal divisions within the Government. The funny thing about the Chancellor's speech is that, although there was no room to mention the euro, he did find space on page 5 to emphasise that action was needed urgently to tackle what he called the culture of adversarial industrial relations in the workplace. I just wonder whether that was a reference to his own workplace.

On the same page of his speech, the Chancellor said that he wanted to bring to an end the era of "absentee government". That seems particularly resonant when we are talking about the Government's handling of the euro. It seems to me, and to my party, that "absentee government" is precisely what the country is being offered in relation to this hugely important issue—absentee government when it comes to policy conviction or serious preparations, and even at the launch of the euro itself, when the Chancellor just decided to stay away. He is absent again today, ducking the first opportunity to tell us what the Government are doing about this central issue. So much for the Prime Minister's claim that the Government are returning to dealing with substance.

It is sad and extraordinary that, in the days that marked the beginning of this project, Britain's Chancellor was lying low at home in Scotland—where, incidentally, according to today's edition of The Scotsman, enthusiasm for the euro is a lot greater than in the rest of the UK; opinion is evenly divided. Interestingly enough, while the Chancellor was keeping quiet in Scotland, the shadow Chancellor was apparently touring the Pacific on business for an American investment bank. We had absentee government from the Chancellor and absentee opposition from the Conservative party. That is what Britain is getting on the issue of the euro.

My party regrets that the Government have not taken a clearer position and made greater efforts to convince the public of the potential benefits. We unashamedly regret the fact that not enough is being done to prepare Britain for the option of joining. The Chief Secretary will no doubt respond to that, but the Government's position, according to the Chancellor, is that they are determined to "prepare and then decide"—to put in place the necessary preparations while making absolutely no commitment on the final decision.

Would not a sensible Government decide first, and commit itself to, when, rather than if? Surely the logical decision would be to decide and then prepare, rather than the other way round. It is simply impossible for the Government to prepare seriously for the euro while remaining committed to a policy of indecision.

The Chancellor's approach means that what is being done by the Government tend to be only the small things that are not central to convergence or to preparation, with the rather big things being left undone. In the past few days, I have had a number of discussions with large and small businesses in Scotland and in England, and the definite response that I received was that people are looking for clarity and a clear lead from the Government on business decisions. How can anyone expect the private sector—hard-headed business men and business women—to invest serious amounts of cash in preparations that could turn out to be simply a waste of time? As a representative of one organisation said to me, if the Government are not prepared to tell us what they intend to do, why do they expect us to put our money where their mouth is not?

Jacqui Smith (Redditch)

In the interests of clarity, will the hon. Gentleman confirm that the Liberal Democrats believe that, regardless of the British economic interest, regardless of convergence criteria and regardless of where we are in the economic cycle, we should rush into the euro now?

Mr. Bruce

No. I am sorry that I gave way.

I should tell the Chief Secretary that "prepare and decide" is a political strategy to get through the next general election; it is not a sensible economic strategy designed to promote the national economic interest. My only comment on the intervention of the hon. Member for Redditch (Jacqui Smith) is that the Government must make clear their position if they are to provide leadership in the national economic interest.

We have rehearsed many times in the House the arguments for and against the euro in principle. That is not the subject on which I shall focus now. We know where most of us—although perhaps not the Government—stand on the issue. I ask the Government to do four specific things to advance preparations for the euro.

I hope that, on his first outing, the Chief Secretary will engage with us on these four points and give us four specific answers. His two new Labour predecessors proved to be careful and competent batsmen who could be relied on—that was their characteristic—to stay safely at the wicket and play a straight bat. I hope that we can use our debate to advance understanding of Government policy and to make some constructive suggestions, and I urge the Government to respond. If the debate has been worth while, it will leave us better informed about Government policy and what the Government propose to do to plan and prepare.

My first question relates to the Government's target for inflation. If we are to join the European single currency, we will eventually need to move to monitoring or targeting in terms of the harmonised index of consumer prices, as used in the euro zone. That raises important questions about the composition of different inflation indices, which may reflect different spending patterns in different member states, and how a new target will be defined.

According to one or two reports that appeared over the new year period, the Government seem to be briefing some newspapers on the matter already. I was asked to contribute to a discussion on it on "The World at One" around new year. Are the Government committed to introducing a target for the harmonised measure of inflation during this Parliament? What issues are the Government examining in that connection? When will we have an announcement on the matter, given the important effect that it would have on monetary policy, inflation expectations and the Bank of England's inflation target?

My second point relates to the stability and level of the pound. The Government are well aware that our membership of the euro could be blocked, at least for a time, if existing members cannot be shown a sustained period of stability in our exchange rate in the run-up to membership, or if they believe that the pound is fundamentally misaligned. The Government are sometimes a little complacent in assuming that that issue does not need to be addressed.

I draw the attention of the House to an article in The Independent today, which I suspect did not arrive there by sheer chance. It claims that the Treasury has submitted an unpublished report on the matter to the European Commission. When is the report to be made available to the House? [Interruption.] I hear that it is in the Library, but it is described in The Independent as "an unpublished report".

The Chief Secretary to the Treasury (Mr. Alan Milburn)

As a point of information to assist the hon. Gentleman, the report alluded to in The Independent—he should not necessarily believe everything that he reads in that newspaper or any other—which we submitted to the European Commission before Christmas was placed simultaneously in the Libraries of both Houses.

Mr. Bruce

I see. The report was presumably placed in the Library when the House was in recess, with no notification to any hon. Member of the fact that it had been placed there. Another example, then, of open government and freedom of information.

Mr. Paul Tyler (North Cornwall)

Did my hon. Friend hear a Minister earlier today denying that his Government ever made important statements without bringing them to the House? In the previous debate, during which I do not think the Chief Secretary was present, one of his colleagues stated explicitly that, when an important document was to be published, a statement would be made to the House. That does not seem to have happened.

Mr. Bruce

My hon. Friend makes a pertinent point which shows how these two debates fit logically back to back.

The Independent reports that the document states that the new arrangements provide the best platform to deliver greater stability in the sterling-euro exchange rate. I do not know what those arrangements are. Do the Government envisage any policy mechanisms to stabilise the euro-sterling rate? Will the Chief Secretary clarify that? If the Government have put a paper in the Library dealing with their policy to stabilise the exchange rate, will they tell us what their policy is, what the rate is and how they propose to achieve it?

If, as I suspect, that is just a general statement that the Chancellor is using to inform the debate without specific commitments, will he tell us what the Government think might be an appropriate rate for sterling to join the euro? Such a debate would help to create a consensus that could give stability to the pound in what would otherwise be rather turbulent waters.

In my discussions with business people in the past day or two, a number of them said that, although the launch of the euro had gone relatively smoothly, they could foresee mid-year circumstances that could create turbulence in the market and cause sterling either to shoot up or to shoot down, which would be extremely destabilising to an already fragile British economy.

Mr. David Lock (Wyre Forest)

According to the hon. Gentleman, he is the only one who has been working over Christmas, while everyone else has been doing other things. His motion refers to the level at which sterling should join the euro. As he has been working so hard, can he tell us at what rate he would wish sterling to join the euro?

Mr. Bruce

That is extraordinary. The Government will not even tell us whether they think there should be a rate, but they expect us to tell them what the rate should be. If that is the standard of debate on an issue as serious as this, we are in deep trouble. If that is the sort of leadership that the Government can offer, the country faces a serious problem. We need a more intelligent contribution than that to the debate.

Will the Chief Secretary describe to the House the remit of the new euro preparations committee, which has not yet met, even though its formation was announced four months ago? I understand that all parties may not yet have submitted nominations, but that is no reason to delay consideration of the remit and no reason why the committee should not meet at an early date. Does the Chief Secretary agree that the committee must consider preparations for possible British membership if it is in our interests to join?

To suggest that the euro preparations committee should not be allowed to discuss the possibility of Britain's joining is preposterous. No major party in the House is committed to staying out of the euro for all time—at least not yet. I do not know whether the shadow Chancellor has returned from the Pacific, but, if he withdraws his nominee, as I understand that he has suggested that he might, because the committee's remit is too wide and includes the possibility of Britain's joining, will the Chief Secretary offer the Conservative place to a Tory of a more sensible disposition?

If the Chancellor's five economic tests are to mean anything, will he undertake—[Interruption.]

Mr. Deputy Speaker

Order. There are far too many sedentary interjections from the Government Benches. I should be grateful if they ceased.

Mr. Bruce

Thank you, Mr. Deputy Speaker.

Will the Chancellor undertake to present an annual report to the House on progress towards meeting his tests? Will he allow for a regular debate on the progress being made on convergence? We have suggested that the Bank of England and the Treasury jointly should make half-yearly reports on convergence, stating first the progress that has been made and, secondly, what further steps need to be taken to ensure that convergence continues.

It remains my view that, whether we are in favour of joining at the earliest date, at an early date or in the fairly near future, or not even in the long term, we need to have a sensible strategy for how we are to live with the euro and what sort of exchange rate and interest rate convergence is sensible or necessary. Surely it is reasonable to suggest that we should have a report from the Government. I believe that it would serve to persuade some of us who are somewhat doubtful that the five tests are really relevant to policy. A regular report might clearly define where the Government stand, whereas at present some of us think that the tests are an infinitely elastic excuse for a Government whose policy is being driven by political rather than economic considerations.

There is a wider issue which I hope that my hon. Friends—

Mr. Barry Gardiner (Brent, North)

Will the hon. Gentleman give way?

Mr. Bruce

No. I am moving on.

I hope that my hon. Friends, if they are able to catch your eye, Mr. Deputy Speaker, will be able to elaborate on this issue later in the debate. It is our belief that the euro could be a huge advantage to Britain economically. It is our belief also that it will be acceptable to the British people only in the context of a Europe which is seen to be open, accountable, democratic and decentralised. We do not believe that it is only the British who take that view; indeed, there is wide support for it.

In that event, we need a Europe in which the nature and the limits of the power of European institutions are clearly defined. As Liberal Democrats, we find it odd that we are about to create a decentralised United Kingdom in circumstances where others are talking about powers that are being dragged unnecessarily to the centre of an excessively centralised European Union. That is not the way in which we see it. That is why we believe in the development of a European constitution, which would define and limit the powers of Europe.

Mr. John Bercow (Buckingham)

Will the hon. Gentleman give way?

Mr. Bruce

I will in a minute.

I am talking about an idea that appeared in the memoirs of Lord Lawson of Blaby. Although my right hon. and learned Friend the Member for North-East Fife (Mr. Campbell) has developed it as a Liberal Democrat view, it is not peculiar to our thinking.

Mr. Bercow

In the Liberal Democrat policy document entitled "Moving Ahead", published in the autumn of 1998, it is claimed on page 106 that the Liberal Democrat party is committed to the retention of the veto on tax matters. Will the hon. Gentleman clarify whether Liberal Democrats are committed to the retention of the veto in relation to business, savings and personal taxes, or only in relation to personal tax rates?

Mr. Bruce

We meant what we said. We would retain the veto that now exists on tax matters. If there is any doubt in the hon. Gentleman's mind, let me point out that it is our belief that the corollary of a European single currency with a European Central bank and a common rate of interest is that we need tax competition and tax flexibility. We are extremely robust on all three points. We are clear about that.

Mr. James Plaskitt (Warwick and Leamington)

rose—

Mr. Bruce

No. I am coming towards the end of my remarks.

We need greater accountability on the part of European institutions. It is true that problems in Europe are often much exaggerated by those who have an alternative agenda, but I accept that problems, such as the current fraud issues, exist and that they must be dealt with firmly. We on the Liberal Democrat Benches have reason to be proud that the European Liberal Democrats are leading the way in trying to bring accountability to Europe and to the Commission. If commissioners have failed to act effectively against fraud, Liberal Democrats believe that they should be held to account. We have no hesitation in saying that they should leave their jobs and in naming and identifying those whom we think should resign. Nobody should be beyond democratic accountability.

Our conclusion is that Britain's role in Europe cannot be allowed to continue under absentee government. That started under the previous Prime Minister and we have not broken away from it adequately. It is surely time for the Government urgently to take a lead on issues in Europe. However, for the Government to be able to give a lead in Europe effectively, they must first lead opinion in Britain—something that they are abjectly failing to do.

7.35 pm

The Chief Secretary to the Treasury (Mr. Alan Milburn)

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof: recognises the importance to the British economy of continued membership of the European Community; welcomes the step change that the Government has made in its economic relations with the UK's European partners and the real benefits that constructive engagement has brought for Britain; commends the progress made by the Government in promoting economic reform in Europe as the basis for growth and job creation; welcomes the Government's ongoing programme of practical assistance to British business on the implications of the euro; commends the Bank of England and the financial services industries for the skill and expertise with which they managed Britain's part in the transition of 1st January 1999; and welcomes the Government's decision to make the national economic interest the key test for British entry to the single currency on the basis of five economic tests and that any final decision should be made by the British people as set out in the Chancellor's statement to the House of 27th October 1997. I thank the hon. Member for Gordon (Mr. Bruce) for his warm welcome for my promotion to my new responsibilities. [Interruption.] I thank also Opposition Members for their support.

On 1 January, the single European currency became a reality. That being so, this is a timely debate. The launch in the dealing rooms and on trading floors across the world was almost flawless. The success of that launch reflects the extent of the planning and preparation carried out by firms and institutions throughout Europe. In London, over the Christmas and new year period, about 30,000 City staff were involved in preparing for the start of euro trading. Those efforts deserve considerable praise and I hope that all hon. Members will join me in paying tribute to all those involved for all of their efforts, and to the crucial role played by the Bank of England. It is thanks to them that London can now rightly claim to be the financial home of the euro, the principal international centre for euro trading.

The hon. Member for Gordon made in large part a serious speech. It deserves serious consideration. It is a shame, therefore, that his speech was so badly flawed by rather flippant and frivolous remarks about my right hon. Friend the Chancellor of the Exchequer. It is an absurd idea that somehow the Government absent themselves from the European debate and the European stage. The hon. Gentleman made rather unfortunate references, for example, to the fact that my right hon. Friend was not in attendance at the ECOFIN event at the launch of the euro. For information, the ECOFIN meeting was not a decision-making meeting; it was a publicity stunt.

Opposition parties usually spend their time accusing us of engaging rather too much in publicity stunts. I say to the hon. Member for Gordon, purely for information—he may read whatever he wishes into this—that it was not only the United Kingdom Finance Minister who was not present at the meeting; the German Finance Minister was not present either.

Overnight, from 1 January, the euro has become the world's second most important currency. It is now a reality, and not only for the 11 nations that joined the first wave. It is a reality also for the City of London and for the tens of thousands of businesses in our country that trade with Europe day in and day out. Its significance will increase, not diminish.

Europe is becoming more and not less important for Britain. Almost half our trade is with the euro zone, and that trade is increasing. Many companies are already pledged to use the euro regardless of whether Britain is in or out. It is in Britain's economic interest to influence the euro's development and to make it a success whether we are members or not. That is the Government's position. Indeed, the Government's policy on membership of the single currency is unchanged from the position set out by my right hon. Friend the Chancellor to the House in October 1997.

We believe that, if the single European currency is successful, and if the economic benefits to the United Kingdom from joining are clear and unambiguous, Britain should be part of it. We have set out five real economic tests against which Britain's economic interests in relation to the single currency can be judged. The tests define whether a clear and unambiguous case can be made for British entry, and they are: the level of convergence; the flexibility of our economy; the impact on investment; the impact on financial services, including in the City; and, of course, the impact on British jobs.

Mr. Andrew Tyrie (Chichester)

Does the Minister think that the convergence criteria should be expressed entirely in nominal terms, or should they involve real economic criteria?

Mr. Milburn

We have set out clearly, as we did in October 1997, what is required before a British decision to join. A number of key economic tests have been set, and we require, in particular, a period of stability and sustained convergence. All hon. Members should note what is perhaps most crucial: as the Chancellor made clear in October 1997, our participation—or otherwise—depends not only on what the Government and Parliament decide, but on what the British people decide in a referendum.

We will recommend joining if, and only if, it is in the national economic interest to do so—a decision that will not be possible until early in the next Parliament. Unlike the Conservative party, we do not believe that there is a constitutional bar to membership, but we do believe that the magnitude of the decision to enter requires a referendum of the British people. The British economy is not currently convergent with the rest of Europe.

Mr. Douglas Hogg (Sleaford and North Hykeham)

The House will be pleased to hear the Chief Secretary reassert the Government's commitment to a referendum. Does he accept, however, that a referendum would be all the more binding if, beforehand, a White Paper were published setting out clearly the constitutional implications and the price to be paid if we join the single currency?

Mr. Milburn

The right hon. Gentleman is an assiduous attender of the House, and I assume that he was present when my right hon. Friend the Chancellor spoke on 27 October 1997, setting out the constitutional issues. My right hon. Friend has said that the pooling of economic sovereignty is, of course, an issue, but it is not a sufficient bar to membership of the European single currency. All that has been covered. The current issue is that of our preparations to ensure that we have a real choice about whether to join. We must consider the requirements around convergence and stability. Since 1 January, the euro is no longer a matter of principle or debate, but a reality for tens of thousands of British businesses which will need help in informing their views about the potential gain from the single currency. Far from absenting ourselves on those issues, the Government are determined to help British business to prepare to trade in the euro.

Mr. Malcolm Bruce

Is that an active or a passive process? Will the Government set out specific measures to achieve convergence over a given time scale that allows a choice of yes or no to be made? Alternatively, will the Government simply sit back and wait to see what happens, and then give us their verdict on whether convergence has happened?

Mr. Milburn

The hon. Gentleman's charge is simply wrong. The Government have demonstrated three forms of leadership on this matter. First, we have provided leadership to ensure that we overcome the boom and bust cycle of the past, particularly during the previous Government's economic policy, and that is in the British interest for the long term. Secondly, we have helped British business to prepare for the reality of dealing with the euro. Thirdly, and in contradiction of what the hon. Gentleman and his party allege in the motion, we have given leadership in Europe on economic reform and other vital matters to do with our national economic interest.

Mr. Ben Bradshaw (Exeter)

Is it not true that the longer we stay out, the more we shall lose political influence in Europe? Is there not a danger of repeating exactly the same mistake made by every British Government since 1945, Conservative and Labour—missing the boat? We shall pay a political and economic price for that.

Mr. Milburn

In all candour, I must tell my hon. Friend, for whom I have the greatest respect, that we must take decisions in the British economic interest. That is the yardstick against which we must judge our decisions. The British economy is not currently in convergence with the rest of Europe. In part, we are at a different stage of the economic cycle, as can be seen from the difference in our interest rates. In part, too, the United Kingdom's current divergence is a legacy of our past susceptibility to boom and bust, notably during the damaging boom of the late 1980s and the severe recession that followed in the early 1990s.

Mr. David Curry (Skipton and Ripon)

Will the Minister give way?

Mr. Milburn

I shall in a moment, but I have given way several times already and want to make some progress.

Before Britain can be in a position to join, we need a period of preparation and a settled and sustained period of convergence. The Government inherited an economy with serious fundamental weaknesses. The familiar cycle of boom and bust was beginning to reappear. Inflation was rising because the previous Government had failed to take the necessary action. The national debt had been allowed to double, and the public finances were out of control. The Tories claim that all that amounts to a golden economic legacy. The truth is that, in the 18 years under their stewardship, Britain suffered the two worst recessions since the second world war. The UK had one of the highest average inflation rates and below average growth.

Mr. Curry

Will the Minister give way?

Mr. Milburn

Not at the moment.

The changes that we have made to the frameworks for monetary and fiscal policy are already delivering results. Low inflation is in line with the Government's target. Politics have been taken out of interest rates with independence for the Bank of England. We have the lowest long-term interest rates in 35 years. The Government are now living within their means, but are still able to invest £40 billion more in our schools and hospitals.

We are promoting greater flexibility in our economy and taking action to close the productivity gap with our competitors. Our new deals for the young and long-term unemployed are bringing fresh hope to communities up and down the country. Today, unemployment figures are down 26,000 on the previous three months, with more than 500,000 more people in work since the election. At a time of economic uncertainty across the world, the Government are giving clear economic leadership at home, steering a course of stability in an unstable and uncertain world.

Mr. Curry

Is the right hon. Gentleman not a little worried that events will move a great deal more rapidly than his stately timetable would suggest? Is there not a danger of the Government's losing control of events here and on the continent? Business needs to know where it stands, and it will increasingly demand to know. The debate on tax and other matters is proceeding in Europe and, to all intents and purposes, the referendum campaign has started. Should the Government not be in control of events, rather than risking the danger of being dragged behind them?

Mr. Milburn

I know the right hon. Gentleman's position on these matters, and I am sure that his Front-Bench colleagues are as interested in his position as I am. However, we are making active preparations to help business to be ready for the reality of the euro, and, before we can make any decision on whether to join, we must decide what is in the British economic interest. That was our position in October 1997, and it is our position now.

Dr. Norman A. Godman (Greenock and Inverclyde)

I offer my compliments to my right hon. Friend on his promotion.

In my right hon. Friend's opening remarks, he noted that 11 European Union member states have signed up to the single currency. That leaves four outside the euro. Are the other three member states adopting criteria similar to those that the Government have adopted in relation to joining? Is there any likelihood that, over the next few years, the United Kingdom will become the odd man out if the other three nations sign up?

Mr. Milburn

Frankly, those are decisions for the individual member states, just as we have to decide what is best for the British interest. That is our responsibility and that is their responsibility. I do not want to speak for other member states. I am keen to ensure that decisions taken here ensure that the British economic interest comes first.

Mr. Gardiner

Will my right hon. Friend give way?

Mr. Milburn

I will not give way for a moment.

Therefore, we are giving clear leadership at home and, in answer to the hon. Member for Gordon, we are giving leadership by helping business to prepare for the euro. For business, the euro is a fact of life. Some people, notably right hon. and hon. Gentleman on the Conservative Front Bench would wish it away. Others wish that it would arrive sooner. Neither view is right for Britain.

Instead, the Government, in partnership with business, are helping British firms to come to terms with the new economic landscape that the euro has brought. In the past year, the Government have stepped up work with British companies to help to equip them to do business in the euro. Our nationwide information campaign has increased, by 150 per cent. since the general election, the number of small businesses that have made preparations for the euro.

The hon. Member for Gordon asked whether the Government had any plans to change the inflation target from RPIX to the harmonised index of consumer prices. As we have repeatedly said, we will monitor the target and the measure of inflation in the light of the practices of the European central bank. That is precisely what we are doing, but the United Kingdom is under no legal requirement to change our target measure of inflation to the harmonised European index, which the central bank has adopted.

Also, we will shortly publish an outline national changeover plan to set out the key steps that would need to be taken by business and the public sector to facilitate British entry into the euro, should we decide to enter.

Finally, the hon. Member for Gordon raised the important issue of the euro preparations committee. He is aware, as is the right hon. Member for Wells (Mr. Heathcoat-Amory) on the Conservative Front Bench, that my right hon. Friend the Chancellor of the Exchequer wrote to all parties in November, asking them for nominations to that important committee. We have received nominations from all of the parties. The Chancellor wrote again last week, and I hope that all the parties represented in the House will take a responsible and positive attitude towards the committee, but time will tell.

Mr. Bercow

rose—

Mr. Milburn

I will not give way.

The Government want the single currency to succeed because it is in Britain's economic interests for it to do so. The prosperity of the British economy, both in manufacturing and in services, is closely linked to the euro's success. Those preparations are vital, too, if Britain is to have a genuine choice about joining the single currency.

The Government are providing leadership not only on the economy and on preparations for the euro, but in Europe too, by working in alliance with our European partners on a wide-ranging programme of economic reform. It is simply not true to say that, just because Britain is out of the euro, we are unable to shape developments in the European Union. The progress made under our presidency is clear evidence of that. A successful euro is one based on sound economics and markets that function well. Those ideas lie at the heart of the Government's agenda in Europe. Britain is playing a key role in taking them forward.

That is the Government's position on Europe and it is based on common sense, not narrow partisan ideology—national economic interest, not party interest. It is a principled position, which puts the national economic interest first.

Let us contrast the Government's policy with the position of the two major Opposition parties. On the one hand, the Liberals are prepared to say yes to joining the euro at any time, at any price. On the other, the Conservative party is prepared to say no to joining the euro—no at any price. We see uncritical support from the Liberals and uncritical opposition from the Tories. They are united only in their irresponsibility—an irresponsible neglect of the national economic interest.

The Liberals irresponsibly disregard the national economic interest for the sake of cloud-cuckoo economics. To join the single currency early, without the necessary convergence or preparations, would be a recipe for more, not less, instability.

Mr. Malcolm Bruce

Where are the preparations?

Mr. Milburn

I have just set some of them out.

The Liberal's position would be a classic mistake—seeking short-term solutions, rather than long-term solutions for long-term gain. It would be damaging for Britain and, frankly, for Europe. We need a period of stability and we need to have demonstrated sustainable convergence with the other European economies before we can join. That is yet another example of the same old fantasy economics from the Liberals, and now they want to halve Britain's interest rates overnight, without any regard for the state of the economic cycle or, indeed, the consequences for fiscal policy. Theirs is an economic policy without the slightest grounding in reality—an irresponsible policy that is totally against Britain's economic interests.

At the other extreme stand Her Majesty's official Opposition, the Conservative party. From the Conservatives, we see only a pursuit of their narrow party interest at the expense of the national interest. They have ruled out membership of monetary union for 10 years, even if it were in Britain's national economic interest to join before then. It is an arbitrary policy, which closes down the options available to this country. It ignores our national economic interest.

These are the questions that the shadow Chief Secretary must answer. If the Conservatives' hostility to a single currency is one of principle, why not rule it out for ever? If it is pragmatic opposition, how can they rule it out for 10 years even if it is in Britain's interest to join? Having moved so far to the right, today's Tory party is simply anti-Europe. The real agenda of that party is withdrawal from Europe altogether, with all the damage that that would do to British interests, jobs and future British economic prosperity. Indeed, the hysteria in the Tory party is such that the shadow Trade and Industry Secretary, the right hon. Member for Wokingham (Mr. Redwood)—a man not known for his temperate views—was compelled to say at one point: If we sign the present draft of the Amsterdam Treaty we will abolish our country. The truth is that the Conservative party is backward looking, with no vision of the future for our country. Meanwhile, a serious debate is going on in Europe about its direction. The Tories would isolate us from that debate, damaging Britain, the British economy, British business and British jobs. They are failing in opposition, just as they failed in government.

In contrast, the Government are working with our partners to shape Europe's future. The days of foghorn diplomacy—of shouting, but not being heard—are over. As the lifting of the beef ban shows, we can do more for Britain by working constructively in Europe. That approach—the Government's approach—goes with the grain of our history as a trading nation. Those who would turn Britain into an economic fortress are not only living in a dream world, but turning their backs on our history of commercial success over hundreds of years. Britain has always prospered best when we have led and looked outward. The Government are determined that we will help shape Europe's future, just as we have helped to shape its past. I commend the Government's amendment to the House.

7.59 pm

Mr. David Heathcoat-Amory (Wells)

This is the first time that the right hon. Member for Darlington (Mr. Milburn) has appeared at the Dispatch Box in his new job. I congratulate him on attaining that position, which carries great responsibility. I hope that he lasts a bit longer than his two predecessors and I look forward to many exchanges with him about these and other issues.

The background to this debate is not simply the launch of the euro, although the Chief Secretary's speech concentrated on that. In the European Parliament, events of great importance are unfolding, with the possibility of a censure motion against the entire European Commission. That tells us something about the European Union and how the drive towards the big projects of political integration and the launch of a single European currency have sidelined other matters of equal importance, such as whether taxpayers' money is being properly applied. That should have engaged his attention; it was mentioned by the hon. Member for Gordon (Mr. Bruce).

Fraud should worry the Treasury; not only is the general European taxpayer at risk, but the British taxpayer is disproportionately affected because of our very large annual contributions. They fluctuate from year to year for technical reasons but, averaged out, our gross contribution is nearly £18 million a day. We get some back—not necessarily for projects that we would choose to spend the money on—but our net contribution still runs at nearly £7 million every day. It was therefore doubly surprising that the Chief Secretary managed an entire speech on our relationship with the European Union, and our economic relationship in particular, without mentioning fraud and mismanagement.

The issue is not new. I am afraid that fraud and mismanagement are endemic in the European Union at all levels, and in the European Commission in particular. The European Court of Auditors produces a report every year itemising the scandalous waste and mismanagement of the European Union budget. I raise the matter now because of the debate that is taking place in the European Parliament and tomorrow's vote. I note that the problem is not new but the present revelations are interesting because they have come not from the European Commission, the Court of Auditors or member states, but from a Dutch official who blew the whistle and was promptly disciplined by his employer, the European Commission.

My point is relevant to the debate because, last year, the British presidency had an opportunity to do something about fraud and mismanagement. Indeed, at its start exactly a year ago, the Prime Minister and the Treasury announced that that was a British priority. Yet again, a huge gap has opened between what the Government said and what they did, between the rhetoric and the reality. For instance, spending on anti-fraud measures fell last year. One of the first things that the then Economic Secretary did, both last year and directly after the general election, was to tell European Standing Committee B that there would be a sharp reduction in the amount spent on anti-fraud measures. For greater accuracy, I have the figures.

In the internal market, industry and trans-European network, which is a huge item of expenditure, the sum allocated to anti-fraud measures—a tiny proportion of the overall sum—fell from 19.9 million ecu to 4.4 million ecu. At the same time, the Treasury and the Government were telling us how important they thought the drive against fraud and mismanagement was.

Exactly the same will happen next year. Expenditure on all the other programmes will go up but expenditure on anti-fraud measures will go down. That has now been spotted by the Select Committee on European Legislation, which reported to the House last July that the total budgetary provision for anti-fraud measures will drop next year by a further 20 million euros—a drop of nearly a third—on top of the drop the year before. When the Treasury was challenged about it, all that Ministers could say was that it did not matter because the rest of the Commission's budget would be directed to anti-fraud measures.

That is not the experience of Mr. Buitenen, the Dutch official faced with dismissal for blowing the whistle on the fraud and mismanagement at the heart of the Commission. The matter is very serious because he reports that, far from the Commission using its budget and making efforts to control fraud, it is part of the problem. It was not surprising that the Select Committee on European Legislation concluded its review of what the British Government were doing on fraud by saying that it was not convinced or impressed by the Minister's argument that a reduction of 20 million euros in the budgetary allocation did not imply a reduction in the effectiveness of the anti-fraud effort. I hope that Minister will tell us her attitude to the fraud and mismanagement in the budget, and what she is doing about it, because it is our taxpayers' money, which was voted by this House, that is being stolen and mismanaged.

I concede that it is not simply a question of spending money on anti-fraud efforts, but of political will. We therefore turned with some interest to the document "A New European Way", which was published last October by the socialist and social democratic Ministers of Finance in the European Union. It was reported that the Labour party had a prominent input. It is full of the usual waffle about a people's Europe. There are descriptions of all the wonderful things that can be done with the European budget—more trans-European networks and all the rest of it. There is not a single line, word or mention of fraud or mismanagement. All that stuff during the European presidency about how it was a priority—for the Treasury, I think that it was the priority—did not get translated into action during the British presidency, or in the document published by the left-of-centre Finance Ministers last October. That is eloquent testimony to what the Labour Government really think about fraud in the European Union and its institutions.

The reason for all this is that the Government are so anxious to fit into the European Union scene that they do not want to be accused of doing anything that might discredit the EU. We are well past that. The days when it could all be covered up so as not to startle the public are long past. The public know perfectly well what is going on and want something done about it. The European Parliament socialist group is manoeuvring to keep individual Commissioners from being singled out and asked to resign.

Mr. Lock

Do the right hon. Gentleman's views about the public knowing what is going on extend to his former colleague Mr. Phillip Oppenheim's description of the shadow Cabinet as consisting of donkeys, too many old faces, too many debts from the leadership election; in short, too many sad reminders of unhappy times past. Is that what the public are well aware of?

Mr. Heathcoat-Amory

Is that really the best that Labour can come up with? I advise the hon. Gentleman to have another go. This is a debate about the European Union. It is telling, and will have been noted by my hon. Friends, that Labour has nothing to say about the European Union and no defence to what I was saying about slashing anti-fraud measures or about the attitude of his colleagues in the European Parliament socialist group. They are clearly more interested in protecting individual socialist commissioners than in protecting the European taxpayer.

It has been left to the right of centre group, the European People's party, and, in particular, Conservative Members of the European Parliament, who have been doing what they can to strengthen the procedures against fraud in the EU, to get something done and, in particular, to stop the Commission and its employees hiding behind diplomatic immunity.

Mr. David Heath (Somerton and Frome)

I hope very much that British Conservative Members of the European Parliament will support the motion of censure tabled by my colleague, Pat Cox, in the European Parliament tomorrow. However, I hear that the Christian Democrat group is doing a deal with the socialist group in order to back Jacques Santer. Is that correct?

Mr. Heathcoat-Amory

If the hon. Gentleman wants to look at the voting record, he will have to wait until tomorrow evening. But in the few short weeks after these revelations first became clear, the Conservative group in the European Parliament has done more to strip away the diplomatic immunity than the European Parliament socialist group, with all its waffle and posturing. Therefore, I can assure the hon. Gentleman that we and our colleagues in the European Parliament do not just talk about this, we do something about it.

I, too, wish to congratulate all those in Britain who worked over the new year on the launch of the new currency in order to make it stable and successful. I was rather surprised by the tone of the exchanges was between the hon. Member for Gordon and the Chief Secretary. They were hardly in the spirit of the new alliance about which we keep reading, or at least pressed so strongly by the leaders of their respective parties. It is early in the new year, but all the festive spirit appears to have worn off. That is particularly so in that they have been squabbling about essentially constitutional matters.

The joint Cabinet Committee on those matters is not new. Throughout last year, the Liberal Democrats sat on a Government Sub-Committee discussing constitutional matters. One would have thought that, by now, they would have come to some kind of agreement, or at least a meeting of minds. Very sharp differences have again been exposed today.

We know—I think it is beyond dispute—that joining the euro will mean a massive and irreversible transfer of decision making from people who are elected and can be removed at home, to people who are not elected and cannot be removed in the institutions of the EU. That is practically a definition of a constitutional issue.

The Liberal Democrats welcome that. They cannot wait to give away those powers. For them, the creation of a European economic and political state is desirable, and they cannot get to it soon enough. The Labour party position seems to be simply to deny that that is ever likely to happen. That is again demonstrated by the amendment. The only tests that it raises for consideration of British entry are the five economic tests. There is not a word here about any constitutional implications.

Mr. Hogg

Is not another indication of the lack of importance that the Chief Secretary attaches to the constitutional issues his refusal to commit the Government to publishing a White Paper on the constitutional implications of the single currency as a prelude to holding the referendum?

Mr. Heathcoat-Amory

My right hon. and learned Friend is absolutely right. Conservative Members understand that it is not good enough simply to talk about economic tests, because joining a single European currency and giving up sterling is not just a question of changing the face on the bank notes; it is about a transfer of powers. That is a constitutional matter. We are owed an explanation and a promise that, before we go any further, a White Paper at the very least will be published and presented to the House.

A useful feature of the creation and launch of the euro on 1 January this year is that it has been accompanied by some candid remarks from other EU politicians about precisely these constitutional implications. It is clear that the launch of the new currency signals a new drive towards political and economic integration.

Mrs. Angela Browning (Tiverton and Honiton)

The Chief Secretary said in his closing remarks that a serious debate is going on in Europe about this, but does my right hon. Friend agree that much of that debate is about constitutional matters, and yet not only was the constitution argument not mentioned tonight, or simply dismissed, but the Government have actively tried to suppress debate on it?

Mr. Heathcoat-Amory

My hon. Friend is absolutely right. The Government do not know whether to deny that or ignore it, but it is taking place. We in Britain sometimes pride ourselves on the quality of our debate on those matters, but we are wrong. In many respects, a more honest debate is taking place on the continent, where it is freely admitted that there are those constitutional implications. They know that, at root, it is a political project.

Mr. Bercow

Further to what our hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) has just said, does my right hon. Friend recall, in talking about the constitutional issues, that the former Spanish Prime Minister, Felipe González, writing in May of this year, quite explicitly said: The single currency is the greatest abandonment of national sovereignty since the foundation of the European Community. He went on to support it, saying: We need this united Europe. We must never forget that the euro is an instrument for this project. Would it not be a useful addition to the reading list of the Chief Secretary to have a collection of the former Spanish Prime Minister's speeches in his red box?

Mr. Heathcoat-Amory

My hon. Friend is right. There is an essential deceit at the core of the Government's position on the euro in that it denies that this is at root a political project.

Mr. Plaskitt

Will the right hon. Gentleman give way?

Mr. Heathcoat-Amory

Will the hon. Gentleman excuse me? I want to make progress and I am aware that other hon. Members want to contribute in due course. When the German Finance Minister, Mr. Lafontaine, announced last year moves towards tax harmonisation, he was dismissed by the Government as someone who was simply making a private contribution to the debate, even though, as we know, a British Treasury Minister is chairing the EU committee which is charged with eradicating what is called unfair tax competition. I would say in passing that that committee's proceedings are secret. We know that British taxes are under scrutiny by an EU committee chaired by a Treasury Minister, but the House is not allowed to know about it.

We know from leaks that more than 80 tax measures are under consideration, and some of them are British, but the House, which was founded on the supposition that we alone control taxation, is not allowed to know which taxes are under consideration.

Mr. Plaskitt

rose—

Mr. Bill Rammell (Harlow)

rose—

Mr. Heathcoat-Amory

I shall give way to the hon. Member for Harlow (Mr. Rammell), and then perhaps to the hon. Member for Warwick and Leamington (Mr. Plaskitt).

Mr. Rammell

The right hon. Gentleman is clearly exercised about the committee. How, in principle, is that different from the former Chancellor of the Exchequer, Norman Lamont, negotiating and agreeing the standardisation of VAT rates, as he did in 1991?

Mr. Heathcoat-Amory

Everything that Lord Lamont did was public. The position that he was taking was well known. We had debates in the House about it. That is the difference. We had an opportunity to comment and to vote. In the committee on unfair tax competition, a secret agenda is being drawn up to reverse tax measures passed by the House, some of them in this Government's first Budget. For example, it is rumoured that concessions to the British film industry are now under consideration. They were passed by the House less than 18 months ago, but they now fall foul of the rule against unfair tax competition.

It is not only tax harmonisation that is being considered in Europe. The German Foreign Minister is saying that the European Union should now proceed by majority voting in all areas except important treaty changes. I suppose that the Government will now dismiss him as a deranged individual speaking solely in a private capacity, but he and others are speaking the truth. I do not dismiss German and French Ministers as people who are simply speculating about their private desires and priorities; they are speaking on behalf of their Government and, in the case of the German Minister, after a recent general election, so they are right to highlight the eventual destination of the euro project. It is only the Government who are fooling themselves and trying to fool the public that that is not the case.

Mr. Plaskitt

If, as the right hon. Gentleman makes out, those considerations are all constitutional impediments to sterling's entry to the euro zone, how does he imagine they will dissolve in 10 years?

Mr. Heathcoat-Amory

They probably will not dissolve. It is likely that, when tax harmonisation becomes a reality rather than just an aim, that will be a further objection for Parliament and the British people to consider before they make up their mind. The Government's object is to smuggle matters through before they become clear and their implications are fully understood.

Mr. Lembit Öpik (Montgomeryshire)

Will the right hon. Gentleman give way?

Mr. Heathcoat-Amory

I hope that the hon. Gentleman will forgive me for not giving way. I promised that I would make progress and I want to cover one more area of policy.

My essential point is that the Government face big issues on taxation in Europe, budgetary reform, the future voting system in Europe and monetary and economic integration, and there is a wide and growing gap between other member states' ambitions and what this country wants and what the Government say that they want. That is where self-delusion sets in. They honestly believe that they can head off all those powerful forces even though those forces are specifically promoted by France, Germany and almost all the other European Union member states.

Rather than confronting the issues, the Government are simply ignoring them because they do not want to be isolated. They are terrified of losing what they call influence, but the best influence that we have in the European Union comes, not from going along with what the EU proposes, but from our example. By avoiding the job-destroying regulations in the European Union and by not harmonising our taxes upwards to European Union rates, over the past few years this country has created jobs as fast as EU countries have been destroying them. That is the golden economic legacy that the Chief Secretary referred to in his speech, and we are proud of it.

The hon. Member for Gordon referred to the exchange rate. When will the Government come clean about their policy on the exchange rate? They smuggled out a document shortly before Christmas about the convergence programme, but they owe an explanation to the House. I have read the document, and it does not broach the issue of the treaty requirement for us to join an exchange rate mechanism as a prior condition to joining the euro. The treaty requirement is not that Britain should have joined the original exchange rate mechanism—that collapsed in 1993. The obligation remains. The decision cannot wait until after a referendum because that is when the Government would want to join the euro. They must start the process now.

Questions to the Government remain. Will the Chancellor decide that we should shadow the euro, and if so, when? The document contains only the usual waffle about exchange rate stability being a product of domestic and macro-economic stability. We all know that, but it does not answer the question of what the Government will do about the fact that they are committed in principle to joining the euro but there is a precondition that they must shadow or join a exchange rate mechanism with the euro.

We want to know—the Minister of State, Foreign and Commonwealth Office, the right hon. Member for Gateshead, East and Washington, West (Ms Quin), who will reply to the debate, will be able to tell us—whether the Treasury representative on the Monetary Policy Committee is now being told to make that precondition a consideration in setting interest rates. In other words, will interest rates increasingly be set to suit, not domestic economic requirements, but external requirements? That information should not be published or hinted at in a document placed in the Library; it ought to be explained to the House. The matter goes to the heart of how we control the domestic economy.

As the Government are committed in principle to the huge and irrevocable step to give up our domestic currency and join the euro, why are they so shy about hinting at or explaining the need to shadow the euro or join an exchange rate mechanism? That step could be reversed. Why are they so timid about taking the first steps when they are already committed to the final destination?

Mr. Öpik

Will the right hon. Gentleman give way?

Mr. Heathcoat-Amory

I shall give way briefly.

Mr. Öpik

I want to ask a short question. Am I to deduce from what the right hon. Gentleman has said that the Conservative bar to entry is cast in stone until 2008?

Mr. Heathcoat-Amory

No. The hon. Gentleman has misunderstood me. I am pointing out the self-evident truth that there are not only economic and financial matters to be assessed but constitutional questions. The Liberal Democrats at least accept that those constitutional changes are desirable, but the Government are denying that they are even considerations. That is a deceitful attitude, which I am exposing in this brief debate. We want to be assured, not only that there are economic advantages beyond dispute, but that those constitutional objections can be answered and overcome. The more that we learn about those constitutional issues, the more distasteful the entire project will seem.

We have heard in the debate that the Government are facing hard choices on Europe. Their response, on Europe and other measures, is to avoid those choices. As we have seen over the past few weeks, the Government spend a good deal of time fighting among themselves, but that is not an excuse. We now want them to turn outwards and start to answer questions about our relationship with the European Union.

This week, there has already been a relaunch of policies, which is always a sign that a Government are in deep trouble. Rather than relaunching or rehashing previously announced policies—many of them inherited from us—let the Government tell us how they intend to tackle the issues on Europe. Will they start to tell us the truth about what is on offer in the European Union and to govern on behalf of the people of the United Kingdom rather than in the interests of the Labour party?

8.29 pm

Mr. Clive Soley (Ealing, Acton and Shepherd's Bush)

In this debate on the role of the United Kingdom in Europe, I want to deal with a wider issue than the one that has so far been addressed—the euro. Before I do so, I shall make a few comments about Liberal Democrat and Conservative contributions.

I say to the Liberal Democrats that it is an untenable position to argue so fervently in favour of entering the euro without taking into account the economic cycle. The hon. Member for Gordon (Mr. Bruce) kept avoiding that point. There is obviously a case for trying to bring economies into line, but the last Conservative Government tried to do that; the Liberal Democrats would try to do so and the Government are trying to do so. However, the British economy has tracked the north American economy since the second world war more closely than it has tracked European economies and, for that reason, it is difficult to find a phase during which we could join the euro when it would not do devastating damage to the British economy. I believe that it can and will be done, but it is foolish to believe that it is possible to ignore the point of the economic cycle at which we join. No one will take the Liberal party seriously if it continues to argue on that basis without taking that point into account.

Mr. Edward Davey (Kingston and Surbiton)

Is the hon. Gentleman aware that the United Kingdom economy has closely tracked the main European economies since the war, contrary to what he says, except during a short period after the second oil shock?

Mr. Soley

I do not think that that is right. One can quibble about the figures. That is another argument and, if the hon. Gentleman wishes to pursue it, I shall be happy to do so on another occasion. Overall, the British economy has been more likely to track the north American one.

I would find it easier to accept the criticisms voiced by the right hon. Member for Wells (Mr. Heathcoat-Amory) about the Government's direction if I had not sat through the Conservatives' history in the past 15 years. I remember Baroness Thatcher joining the single market with enthusiasm. I, among others, said at the time that, once we joined the single market, it would be only a matter of time before we had a single currency. I remember the Conservative party firmly nailing into place the Single European Act—an Act that required us to follow the legislation that came from Brussels, albeit with the intervention and involvement of British Ministers. One knew then that we were speeding up on the road towards European integration.

I remember, as Conservative Members will remember only too clearly, the way in which the previous Conservative Government drove through the Maastricht Bill. One does not have to go back to the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), who, as leader of the Conservative party, took the country into Europe, to see how Conservative Governments have enthusiastically taken us down the road towards greater European integration. Baroness Thatcher and the right hon. Member for Huntingdon (Mr. Major) did the same.

There is only one explanation for Conservative Members' present position. Either they did not know what would happen, in which case they were incredibly naive and were shutting their ears to what everyone else was saying, or they knew but have now changed their minds. If they would start their interventions by saying that they have changed their minds, it would be much easier to accept their criticisms.

Mr. Bercow

The hon. Gentleman makes an important point. Does he accept that it is not especially surprising that, at the time of the Single European Act, a great many people from all parties did not know, and could not be expected to know, that it would be used as a vehicle for a massive programme of harmonisation, the effect of which would be deeply damaging to British industry?

Mr. Soley

It is entirely possible that they did not know, but one has to assume that such people were incredibly naive. One Conservative Member, for whom I have some respect, has said to me that he did not realise the implications at the time. At least he was straightforward about it. Harmonisation has always been the agenda of the continental European countries. They have never really hidden that. People have mentioned it at one time or another in the past 20 years, so it was not a secret. I think, however, that some people did not want to hear what was being said. One of the problems is Britain's ambivalence towards Europe.

I want to talk about the wider role of the United Kingdom because the Liberal motion is curious. The Liberals talk about widening the United Kingdom's role in Europe, but then focus on the narrow, although admittedly important, issue of the euro. There are many other important issues in relation to Britain's role in Europe and we ought to face them now if we are not to repeat the same old British mistake of addressing current and past issues instead of looking ahead to the shape and form that Europe will take in 20 years' time. We need to have a longer vision.

Perhaps I could put my comments in context, not by repeating what I have said on previous occasions in the House but by reminding the House of why Britain is ambivalent about Europe. It is important to understand why. At times, we say that Britain missed the bus, for example, at the 1957 conference at Messina, but we forget that Britain's reasons for being more ambivalent about Europe than almost any other European country have a good basis in reality. The first is that we are an island nation with a separate island culture. The second is that we have close links with the wider world, not only in the Commonwealth but in the English-speaking world. British people regard north America, Australia and other countries as closer to home than Europe. The third reason is, in a sense, a dying reason. Britain was the only major country in Europe not to be defeated and occupied in two world wars. That has produced almost a schizophrenic attitude among British people.

The right hon. Member for Old Bexley and Sidcup and Lord Healey are two people who, having experienced the war, came to the conclusion that the best thing for Britain was to be part of Europe so that war was less possible. The other side of that argument, which is the one that I was brought up with as a child, was that Europe spelt trouble and that was the direction from which the bombers came. If we ignore the factors that cause Britain to have a somewhat ambivalent relationship with Europe, we do not do ourselves a service or help ourselves to move forward.

The wider issue that I want to talk about is the British role in Europe. It is true that we have missed the bus on a number of issues. It is true that, on the euro, we are behind the others, although, under my right hon. Friends in the Government, we are catching up rapidly. However, there are some areas of policy in which we can take a lead. I would have been more encouraged if the Liberal party had given more time to them. One such area is foreign policy.

The curious thing about European development is that, a few years ago, we took a leap that could have moved us towards dealing with some of the crises around the frontiers of Europe, which we had proved ourselves unable to do before without United States help. The classic example was Bosnia. Everyone in Europe looked on in horror at what was happening and said that it should stop, but did not know how to do that. We did something that to my knowledge we had not done before. We appointed in effect a special envoy in the form of Dr. David Owen. One can argue whether he was the best person for the job, but he acted as a special envoy. [Interruption.] I know that he was a problem for the Liberal party, too.

The tragedy was that, because there was no backing in terms of a European foreign policy or a defence intervention, Dr. Owen was unable to enforce what Europe wanted to enforce in Bosnia. The whole of Europe sat back in horror looking at what was happening in that former Yugoslav country and we were able to intervene only when the United States took the lead. That is the reality and we all know it. It was a formative experience for people who now think about where Europe will be in 20 years.

The Soviet Union has collapsed and there are a number of unstable states around the borders of the European Union. Will we sit back and do nothing when such situations develop again? Will we try to intervene in a way that enables us to contain the situation? Or will we simply call across the water to the United States and say, "Please come in and help"?

The ambivalence about Britain's role within Europe can be advantageous to us. We have positive and close links with the United States, and always will have. Those links are not equivalent to a special relationship in an academic sense; the special relationship is our common language, culture and history, which gives us an advantage. Although many Europeans resent it, quite a few of them recognise that Britain's relationship with the wider world—particularly with north America, which is the dominant world power—is positive and could form the basis of a more effective way of dealing with future crises.

I am sorry that the Liberals have addressed that matter only in the title and the tail-end of their motion. The frightening issue for Europe is not whether the euro will work, but what happens in Russia, and we all know it. Almost every Member of Parliament is concerned about whether Russia will remain a stable power or whether, to use a simplistic historical analogy, it is in the Weimar Republic phase. If it is, Europe had better have some way of coping with that.

We should think carefully about the proposal to re-introduce special envoys and appoint the first one to Russia to help the Russians to deal with their current problems in a way that preserves democracy in a country with no history of democracy, and no stability either. The development of the use of special envoys in areas where force is not needed to back up that initiative, the lack of which was a failing in Bosnia, could be a positive step forward in helping Russia.

The use of such envoys could also be considered in the middle east. My right hon. Friend the Minister of State, Foreign and Commonwealth Office has done a great deal to assert Britain's role there, but Britain has an interesting opportunity. We have knowledge of the Arab world's needs, and of the needs of Israel, and long and intimate involvement with both. Continental European countries are reluctant to get tough with Israel, not least because of the history of anti-Semitism in Europe. We do not carry that baggage.

The United States has a different position and, inevitably, is biased towards Israel. Britain and the European countries could operate a more even-handed approach between Israel and the Arabs. Until we achieve that, we will not get a peaceful outcome in the middle east.

There is a role for Europe and, more importantly, a leadership role for Britain. We should build on the special envoy approach and Britain's recent history as the world's dominant power to develop the European-style foreign policy, which recognises the separate parts of Europe, but also recognises the desperately important common interest in maintaining stability round the borders of Europe and dealing with questions such as Russia.

No hon. Member will sit lightly in the Chamber in five, 10 or 15 years if Russia has descended into authoritarianism and is a right-wing, nationalistic state with ambitions to reclaim the empire that it has lost. No one should underestimate the importance of nationalist feeling in Russia at the moment.

Mrs. Browning

I agree with a lot of what the hon. Gentleman has said, but I do not understand why it would be necessary for independent nation states to give up their sovereignty within the European Union to achieve a common foreign policy instead of doing so on the basis of agreement. That arrangement has worked within the North Atlantic Treaty Organisation for many years. Why should states give up sovereignty, and why should we hand over power from this House?

Mr. Soley

This is a matter of pooled sovereignty, but, to answer to the hon. Lady, Richard Holbrooke, the United States mediator in the Balkans simply said, "The problem with Europe is that I do not know who to phone." It was impossible to get agreement within Europe about what to do, which is why a special envoy is important. We may not have been able to intervene with military force in former Yugoslavia because we did not have the necessary degree of agreement, but it is possible to intervene more diplomatically in areas such as Russia and the middle east without using military force.

We may decide to develop that potential. My view is that that is now inevitable, partly because of decisions taken by the previous Government to move Britain further into Europe. Whether we like that reality or not, we must face up to this issue: beyond the borders of the relatively small group of stable and democratic European countries, there is an unstable circumference towards which we must have a policy. We cannot go on ignoring that issue. I am sorry that it has not been addressed a little more in the Liberal motion, because we must take it much more seriously.

8.44 pm

Mr. Douglas Hogg (Sleaford and North Hykeham)

Like the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Soley), I wish to deal with the second part of the motion—the character of the European Union.

Mr. Edward Davey

The right hon. and learned Gentleman does not want to discuss the euro.

Mr. Hogg

No, I do not particularly want to talk about the euro. I want to discuss what I think is more important—the essential character of the European Union.

Having participated in many debates within and regarding the European Union, I have reached the clear conclusion that, as it is currently constituted, the European Union is a profoundly undemocratic and unaccountable institution. I draw upon as much experience in that matter as anyone currently in the House. I have attended very many European Union Councils, including the Telecommunications Council, the Research and Development Council, the Industry Council, the Foreign Affairs Council and, most latterly, the Agriculture Council. I have also attended many ad hoc councils. Some general conclusions can he drawn from that experience; my most marked conclusion is that it is an extremely undemocratic process.

To illustrate that, I shall take the example of the Agriculture Council because that is the one that I attended most recently. The Agriculture Council's decisions impact substantially on Europe as a whole because of the budgetary implications. They also directly affect the interests of our constituents. The decisions that come out of the Agriculture Council—or any council, for that matter—are neither democratic nor accountable in the sense that this House understands those terms. Policy proposals are made by the Commission. They are often made late, a day or two before the hearing of the Council, without much external examination or inquiry. They are presented to Ministers, many of whom have only a slight understanding of the technical issues involved. The issues are discussed late at night and are the subject of fudge, brokered agreements and private deals. There is little accountability on the part of either the Ministers involved or the Commission for the decisions that are taken. That process is profoundly unsatisfactory and wrong.

What is true of the Councils is also true, to an extent, of the other EU institutions, whether the Commission or the Court. The Commission instigates legislation, but, if we were honest about it, we would recognise that there is no transparency about the process as a result of which it makes its decisions. There is secrecy in its deliberations and about its appointments, and almost no control over its activities.

I regret to say that the same is true of the European Court—and I speak as a lawyer. The court is in the business of driving forward the interpretation of treaties well beyond the point that is reasonable, and certainly well beyond the point ever contemplated by the treaty makers. Therefore, as representatives of an elected body and members of a democratic country, we must recognise that what we have created, and the body to which we give ever-increasing powers, is profoundly undemocratic and does not have the characteristics that we would expect of nations seeking to join the European Union.

That is a bleak summary, but it is not far from the truth.

Mr. Davey

I share many of the right hon. and learned Gentleman's concerns about lack of democracy and accountability in the European Union. What measures did his Government propose while he was in office to improve democracy and accountability in the European Union?

Mr. Hogg

I do not want to be diverted because this is a serious but short debate, and I want to focus on the major issues. I want to express the consequences of what I have tried to explain to the House.

We must ask ourselves, as representatives of a democratic body, either what can we do or what is likely to happen. We flatter ourselves if we ask ourselves what can we do, because, I regret to say, our ability to shape the future is remarkably slight. That being so, it is more pertinent to ask ourselves what is likely to happen. To start with, in an ideal world, two things could happen. I must say that I believe that neither will. One is that member states will be able to recover some of the powers that they have ceded to the European Union, and the other is that we shall be able to create effective democratic controls which satisfy the representatives of member states.

I do not believe that it is possible to recover that which has been given to the European Union. I see my hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) in her place. She will remember fisheries policy. That is but an illustration, and not direct in point. The fisheries regime is a disaster for British fishermen, but it is, in effect, impossible to undo. We created that structure and we are living with the consequences.

Mr. Bercow

I entirely agree with what my right hon. and learned Friend has just said. Does he agree that the protocol on the application of the principles of subsidiarity and proportionality in the treaty of Amsterdam confirm the truth of what he is saying and make absolutely clear that the doctrines of the occupied field and of the acquis communautaire are unchallengeable?

Mr. Hogg

Yes, that is completely right. The concept of acquis communautaire is very important in this context.

The other question that I posed, to which I would like to respond, is whether it is possible effectively to create more genuine democratic controls in the EU. I am speaking only of the present; things may change and evolve. Let us be candid about what we are debating. Effective democratic controls can be created only if an effective Parliament, with powers that are analogous to member states' powers in their domestic assemblies, is created. I do not believe that that is possible at this moment for this reason: for there to be an effective Parliament, there must be an effective concept of statehood. There must be an identity of interest sufficient for people in the United Kingdom to accept the imposition of policies on which representatives of other member states vote, which they may see to be injurious to our interests. After all, it is difficult enough in the UK for the people of Scotland to accept the decisions of the United Kingdom Parliament, given that it can often be said that it represents the partial interests of England.

Mr. Davey

Will the right hon. and learned Gentleman give way?

Mr. Hogg

Not quite yet.

That being so, how much greater will it be to ask the peoples of the United Kingdom to accept the decisions, say, of the representatives of Greece, Iberian countries and Italy? I do not say that pejoratively; I am simply describing political reality. The conclusion is that, in the foreseeable future, we shall not have a concept of statehood—

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

Order. I know that the right hon. and learned Gentleman does not mean any discourtesy, but he has a habit of turning his back on the Chair.

Mr. Hogg

I apologise; I was turning my back on you, Mr. Deputy Speaker. I hope that you will forgive me. I was addressing my hon. Friends. The rebuke is accepted, and I am very glad that you have raised the point.

The point that I was making, if I may address you directly, Mr. Deputy Speaker, is that I do not think that, in the foreseeable future, there will be a concept of statehood, an identity of interest, that will enable us to create and put in place an effective set of democratic controls.

Mr. Davey

I have been following the right hon. and learned Gentleman's argument very closely. He makes an important point on whether we need a concept of statehood before we can move ahead with greater democracy in the EU. Will he reflect on the concept of statehood in the minds of those who drafted the federalist papers in the United States of America in the 18th century? Does he believe that they had a concept of statehood before they developed an agreement to work together for the economic and social benefit of their peoples?

Mr. Hogg

I do not believe that it is possible to impose an entirely integrated state on the peoples of Europe unless it is underpinned by consent, and I do not believe that consent would exist without a genuine sense of statehood.

I accept that the picture that I have painted is somewhat bleak, but I have not concluded that we should leave the European Union, although, in certain circumstances, I might reach such a conclusion. We should, however, ask ourselves what we should do, given a fairly bleak assessment of the facts.

First, we must communicate our anxieties to the peoples and Governments of Europe. They are well founded and worth communicating, and they need to be defended and justified as arguments. I do not believe that we should embark on any further policies to deepen the integration of Europe unless they are underpinned by genuine consent. I am thinking in particular of the single currency. Unless there is genuine consent in the country, manifested by the result of a referendum, we must not join a single currency.

In the European Union, there will be many occasions on which other member states wish to proceed with projects to deepen the process of integration, with which we do not wish to be associated. In such circumstances, we should stand aside and refuse to join. There will be a price to pay, in terms of less influence than might otherwise exist; but, ultimately, a judgment must be reached. Personally, I would accept less influence in the European Community rather than paying the price represented by the alternative—the loss of much more sovereignty in return for, perhaps, a little more say.

I view the future with considerable concern. What I have sketched is a bleak scenario. I believe that the process leading to greater integration is now irreversible; I do not think that the House, the Government or anyone else will be able to stand in its way. I think that the chance of effectively reinforcing the democratic restraints in Europe and creating democratic structures that mean something are very small, and I anticipate greater integration without proper control. At that point, there is a grave danger of disintegration. It may be triggered by the single currency: I believe that is precisely the sort of issue that might trigger disintegration. If that happens, the duty of Governments, of parties and of the House is to recreate arrangements that retain much of what is valued in the European Union, while avoiding the dangers that are inherent in a state that is too integrated and too closely combined.

I am against a united states of Europe, and I believe that the feeling of the House is against it as well. I condemn the Government for smuggling the process in.

8.58 pm

Ms Tess Kingham (Gloucester)

I am grateful for the opportunity to speak. I, too, wish to concentrate on the latter part of the motion, which asks for an open, democratic and accountable European Union and open, democratic and accountable European institutions. In doing so, I shall focus on two separate but related questions. The first relates to the way in which the EU aid budget is allocated and prioritised; the second relates to the wider role of the EU. I agree with what was said by my hon. Friend the Member for Ealing, Acton and Shepherd's Bush (Mr. Soley) about the role of the EU in the wider world, and the need to ensure that peace continues in the Mediterranean and north African region. I think that the United Kingdom Government has a role to play in that regard.

Over recent weeks, we have all been disturbed to see the debacle in the European Commission and to hear the allegations that have been flung at specific commissioners, ranging from fraud and corruption to economic mismanagement. That is nothing new. It is perhaps on a scale, that we have not seen before, but there have been allegations of fraud in the past.

My recollection of past activities is different from that of the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg). Having been a Euro-candidate and concerned with European affairs for many years, my recollection is that it is Labour Members of the European Parliament who have always been known as the biggest fraud busters in the EU, and Tory Members of the European Parliament who have fairly consistently blocked and failed to support measures to combat EU fraud

One of the commissioners who has been under the spotlight recently has been Mr. Marin, a commissioner with responsibility for part of EU aid spending. That is a sector that concerns me considerably. I worked in the international development sector before coming into Parliament. I am a great believer that much of the EU aid programme does much good, but there have been many questions about how the EU aid budget has been spent.

How is the budget spent? Is it transparent? Is it open enough? When the aid reaches its destination, is it effective? Is it well delivered? Those questions have hung around for many years. They are coming to a head at the moment.

One of the first things that the Labour Government did on getting into power was to produce a White Paper on international development. We clearly laid out our priorities for how aid should be spent. It was well received by almost everyone who has a role in international development. The Labour Government stated clearly that aid should be spent on eradicating poverty, and that the UK aid budget should be targeted on the poorest countries to help the poorest people—that aid should be prioritised for the poorest countries. We were also brave and right finally to untie our aid budget from trade and other domestic interests. I am sure that my constituents in Gloucester would assume that that was also the case in Europe. I am sure that they and taxpayers throughout the country would assume that EU aid is prioritised in the same way—that it goes to the poorest countries. I would assume, as I am sure that most of us would, that the major beneficiary of EU aid, the country that receives the most, would be one of the poorest countries.

Information that came to us at a recent public meeting of the Select Committee on International Development showed that that is not necessarily true. I was shocked by what I heard. There has been a monumental shift in relation to the country that receives the most from EU aid spending. That is something that the Government need to be aware of and that we should look into.

In 1986–87, the country that received the most from the EU aid budget was Ethiopia, which received $157 million; quite right—Ethiopia is a very poor country. In 1991–92, Ethiopia was again the top recipient; it received $257 million in EU aid. That is fine. It is just what I would expect. It is consistent with the UK's aid policies.

What about 1996–97? Which country would we assume received the most EU aid? I would assume that it would be a country such as Ethiopia again, Mozambique, Bangladesh or Rwanda—a country that has a very low gross domestic product and is one of the poorest in the world. Is it? No. It is Morocco. In 1996–97, Morocco was the top recipient of EU aid. How did that come about? Morocco shot up from nowhere to become the top country receiving EU aid; it did not even feature in the top 10 countries receiving EU aid in the previous 10 years.

I have a big question about how that happened and how Morocco has been prioritised in that way. I cannot believe that, all of a sudden, Morocco has dropped in the world rankings, ceased being a middle-income country and suddenly become one of the poorest in the world. It is obvious and transparent that the EU is prioritising its strategic interests over the needs of poor people throughout the world. That is not what I would call open, accountable and democratic practice.

If we allow such practices to continue, the EU will be prioritising trade policies, our own domestic interests and our interests in having secure borders ahead of using aid money as it should be used—to provide aid. The Government should be investigating the matter, and the United Kingdom could be playing a strong role in determining Europe's aid priorities.

Morocco is not only a middle-income country receiving EU aid, but is spending about $1 million a day illegally occupying Western Sahara. Therefore, while receiving EU aid money to the tune of $280 million a year, it is spending about $365 million a year illegally occupying another country. Allowing such a situation to continue does not demonstrate good, open, democratic and accountable governance in the EU, and hon. Members should be pressing the United Kingdom Government to make representations about it in EU institutions. The EU aid budget is intended not to serve the EU's strategic interests, but to help the poorest people in the world.

The EU should be flexing its strategic muscles and promoting good practice by trying to ensure that peace continues in the Mediterranean and north African region. The EU and its member states, including the United Kingdom, should be examining very closely a conflict that is brewing once again very near to our borders, in the Western Sahara. The Moroccan Government have not responded positively to a new peace package proposed by the United Nations. The mandate for the United Nations peacekeeping operation in Western Sahara expires at the end of this month, on 31 January.

I believe that the United Kingdom Government, the EU and the EU member states have a very important role to play in urging Morocco to move towards peace, and to accept and respond positively to the new United Nations peacekeeping package. If Morocco does not respond positively, the mandate will expire on 31 January, the United Nations is likely to pull out, the area is likely to tip back into conflict, and there is likely to be instability and devastation on the EU's doorstep.

The EU's strategic interests can be served best by ensuring that that part of the world has an opportunity to enjoy sustainable development and by ensuring that peace is maintained in the region. Building peace in Western Sahara and ensuring that it can develop with a sense of freedom would achieve those objectives.

The second part of the Liberal Democrats' motion urges the Government to play a wider role in Europe and not only to consider the effects of the euro. Like my hon. Friend the Member for Ealing, Acton and Shepherd's Bush, I also urge the Government to ensure that we have peace in the areas bordering the European Union. Peace in Western Sahara is an important strategic matter for the EU. I also have some questions about the prioritisation of EU aid.

I should therefore like the Government urgently to deal with prioritisation of the EU aid budget and to urge Morocco to respond positively to the United Nation's peace package, so that we can help to achieve peace in the region, which would serve everyone' s strategic interests.

9.8 pm

Mrs. Angela Browning (Tiverton and Honiton)

The wording of the Liberal Democrat motion accuses the Chancellor and the Government of being an absentee Government. I thought that the hon. Member for Gordon (Mr. Bruce) was rather unkind to the Chancellor in suggesting that he was absent for the euro's launch, on 1 January, because he was preoccupied with internal Labour party matters. I do not agree with that.

I thought that the low profile with which the Government approached the euro's launch was quite deliberate, and that it was indicative of something described very accurately by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory)—the fact that the Government now have a policy of deceiving the British people on the euro.

If the Liberal Democrats were in a position to influence anything, surely it would be when they sat around the Cabinet table with their Cabinet partners discussing constitutional matters. I do not think that there is any disagreement in the House that a single currency is a constitutional matter.

The Liberal Democrat motion is a cry of frustration that the Government are not enthusiastic enough about giving up the pound—that they are not going about it fast enough. It is clear from what we have heard tonight that the Government intend to take the UK into the single currency and give up the pound. They are already printing the notes and striking the coins, so I have no doubt that they would like to do that. Regardless of what the Chief Secretary said, they are slow-pedalling for one simple reason: they have committed themselves to a referendum of the British people on the issue. Poll after poll tells the Government that a single currency would not find favour with the British people.

My local newspaper, the Western Morning News, reported on Friday 4 December the results of a readers' poll. It was conducted by postal ballot, so there was no chance of the result being rigged by people repeatedly dialling the same number, as we know that the Liberal Democrats tend to do in the west country—they have a good track record. Some 6,255 people said that they did not want to join the single currency—that was the question—and only 281 said that they did. With polls giving such results—a 96 per cent. no vote in that case—it is clear why the Government are slow-pedalling. They are not in a position to secure a yes vote, so they are back-tracking.

The paper says of the poll: North Devon Lib Dem MP Nick Harvey said he thought it reflected thought on Europe at the moment, but added that once the euro gets under way and there is a concerted campaign in the lead to a referendum, it would alter. However, he expressed grave doubts that any campaign could deliver a 'yes' vote in a referendum. That is an acknowledgement from one of the Liberal Democrats' most senior spokesmen that the British people are not likely to support a single currency.

That is the Government's dilemma. They are committed and the clock is ticking. They have to attend meetings in Europe. They have to make sure when they are over there that they say the right things to their European partners so that they do not think that we will not come on board. However, back home, they do not know what to say—or, as we heard from the Chief Secretary, they select narrow elements of the subject because they are terrified of the British people hearing the truth and having a full debate. It is clear that the Government will not achieve the result that they want from a referendum.

The Liberal Democrats have an opportunity to discuss the issue when they sit down with the Government. I am a little mystified as to why they have brought it to the House. If influence means anything, a Cabinet table seat—of which they have four—is the place to exercise it. That shows their lack of real influence. Why do they continue to sit round the Cabinet table—I accept that they are nothing if not decorative—when they have been so let down by their Labour partners that they have to bring a constitutional matter to the House? I hope that they will press the Government on that next time they are round the Cabinet table. They should be more generous and understanding about the Government's dilemma.

Dr. Peter Brand (Isle of Wight)

Does the hon. Lady accept that the Liberal Democrats at least believe in open, political debate, and that sitting around a table—no matter where it might be—is no substitute for debate in this Chamber?

Mrs. Browning

Of course this is the place for open debate. The very substance of what I am saying is that the Government do not want open debate on the single currency because the more that the British people hear about the realities of what is at stake, the more we will get results such as we had in the west country last month.

I am normally quite critical of the Liberal Democrats, but they are lovable and consistent.

Mr. Edward Davey

And principled.

Mrs. Browning

I would not say that. The hon. Gentleman pushes me a little too far. They are consistent, however, and they would give up the pound tomorrow—as we have heard—and would rush us into union, which would create a country called Europe. They have some allies in the debate. Some big businesses—particularly the chief spokesmen of multinational companies—are also enthusiastic about giving up the pound.

Dr. Brand

What about the National Farmers Union?

Mrs. Browning

I will resist that temptation. If the hon. Gentleman wants me to give way, perhaps he might observe the customs of the House.

Dr. Brand

Will the hon. Lady give way?

Mrs. Browning

I will in a moment, but I have been more than generous.

Big business is very enthusiastic about supporting the rush to join the euro. I can understand some of the frustrations in terms of forward planning that big business is now experiencing because of the Government's attitude. Some companies—particularly multinationals—are keen also on the harmonisation of business taxes and on allowing unelected bankers to set our interest rates.

We all understand that the euro is now operational and—like any of the 80 currencies in which we trade as a nation—there is no reason why we should not trade in it. I am not unrealistic about that. However, some big businesses will now be trying to persuade their smaller suppliers to invoice them in euros. Many small companies in this country who do not export and who did not think that they would need to trade in euros will find that there is enormous pressure on them from their larger purchasers—in the same way as large companies put pressure on small companies in terms of their slowness of payment of debt. That same pressure will be exerted by large companies in a trickle-down effect on subcontractors and suppliers.

That development is part of the strategy on which the Government are relying—one of euro-creep. We have had Euro-speak, and we now have euro-creep. The Government are relying on the belief that, given sufficient time—and as long as they keep their head down and do not address the key important points—there will be sufficient acceptance, familiarity and inevitability about the existence of the euro among many people who had not thought that it would affect them. The Government are relying on the British people deciding in a referendum on the basis not of informed debate and information, but of acquiescence over a period. That is what my right hon. Friend the Member for Wells was referring to when he described this as a policy of deceit.

Mr. Gerald Bermingham (St. Helens, South)

Will the hon. Lady accept three points? If one is trading nationally and internationally, one wants to trade in the same currency—because that is sensible. If one's supplier companies are trading and pricing in the same currency, that is sensible—and, as we move into the European context, that becomes doubly sensible. Would not the hon. Lady, if she were an industrialist, like to pay 10 per cent. corporation tax, as in Eire, and a bank rate of 3 per cent. when she wanted to invest?

Mrs. Browning

I understand the need for individual companies to be able to choose the currency in which they want to trade. Is the hon. Gentleman telling us, from below the Gangway, that corporation tax is to be set at 10 per cent. under harmonisation? We would have preferred to hear that from a Minister at the Dispatch Box this evening. The Minister was reluctant to go into detail when pressed by my right hon. Friend the Member for Wells so that we could have a substantive debate on the Government's policy for harmonised taxation.

The Government are in a state of denial about harmonised business taxes. Every time the subject is mentioned, they run for cover and try to change the language. If corporation tax is to be set at 10 per cent., let us have a debate on that on the Floor of the House. Perhaps the hon. Gentleman is privy to information from Ministers. We pressed the Chief Secretary on the matter, but he was reluctant to discuss it.

As many hon. Members remarked in the debate, there is a price tag for what the Minister called the British economic interest in the context of a single currency. Again, that is a legitimate subject for debate. The Government deny that there is any constitutional price to pay for a single currency, but that constitutional price is beginning to frighten the British people. As the Minister said, there is a serious debate going on in Europe about the single currency, and constitutional as well as economic issues are under discussion.

The Government must consider carefully whether, in taking Britain into the single currency, as they clearly intend to do, they can persuade the British people by stealth or sleight of hand that there is no constitutional price to pay and that their everyday lives will not be affected. If the Government take Britain into the single currency under those circumstances, the backlash from the British people will have a devastating effect on the unity of the European Union of which the Government want to be part, and will tear this country asunder.

Mr. Tim Loughton (East Worthing and Shoreham)

My hon. Friend is right. There could not be a starker contrast between the transparency of the debate taking place on the continent and the opaqueness of the one going on in the Government. Is she aware that in the Financial Times today, Joschka Fischer is reported as saying: The introduction of a common currency is not primarily an economic, but rather a sovereign, and thus eminently political act"? The position could not be stated more clearly than that. Why do not the Government come clean and acknowledge that that is what the whole project is about?

Mrs. Browning

Indeed. The German agenda for the presidency is to move that project along in the next six months. The Government would do well to consider the views expressed tonight by my right hon. and learned Friend the Member for Sleaford and North Hykeham (Mr. Hogg), who argued that the Government should recognise that the British people may be ignorant of the consequences and the constitutional price of monetary union. The populations of the member states may not be prepared to accept that determinations and decisions will be made by people who are not necessarily their democratically elected representatives. That is a potentially dangerous state of affairs, and the Government should not gamble with the prospect simply because they are in a corner, having promised a referendum, but knowing that the people would not support them.

I hope that I have shed a little light for the Liberal Democrats and explained why they are frustrated by the reluctance of their partners around the Cabinet table to move as quickly as they would like. I am sure that the Government would have moved much faster, were it not for the fact that opinion polls tell them that they are out of tune with the British people. The Government's plans are not in the interests of the British people. Unless they can guarantee that the British people can continue to have democratically elected representatives to speak for them on a range of issues including taxation, spending, defence policy and foreign policy, they will pay the price, and not only in electoral terms.

9.25 pm

Mrs. Louise Ellman (Liverpool, Riverside)

Both the motion and the Government amendment emphasise the importance of a comprehensive economic policy to support business and to develop and implement that policy as part of Europe. Currency and the euro are extremely important issues, but so are policies that relate to investment, focusing investment and the interests of the regions. One of the Tory Government's legacies when they left office was the fact that not one region of the United Kingdom had a gross domestic product per head which could meet the European average.

Since taking office, the Government have managed to secure a major sea change in attitude. They have put jobs at the top of the agenda both in this country and in Europe. They have gone forward with a positive regional policy in a way that the previous Government refused to do. One of the consequences of the Conservative Government's refusal to accept regional policy was that the regions could not benefit fully from European policies that were based on reflecting the strengths of the regions across Europe as a whole.

In the 1980s and the early 1990s, local authorities had to come together and form their own partnerships with the private and voluntary sectors to ensure that they could work directly with the Commission in attracting structural funds to develop and support industry and in developing policies to promote certain sectors of industry.

Mr. Loughton

Will the hon. Lady give way?

Mrs. Ellman

No. I am sorry, my time is limited.

It was because of the initiatives that came from the north-west region, in working with other regions of Europe, that the PERIFRA and Konver funds were set up to support defence diversification. That initiative was able to assist so many jobs in the north-west.

One of the new policies that the Government have implemented is the acceptance of regional devolution. The development of regional development agencies together with regional assemblies means that we shall shortly have in place the mechanism to attract European funding and to shape the form of European regional policies so as to give maximum support to our areas.

The innovative Merseyside special investment fund has shown already how £5 million of European funding has attracted £15 million of private funding to support 1,100 jobs. That is only one sign of the support and benefit that has come from Europe.

I note that the Opposition have learnt nothing. They opposed our involvement in Europe, which meant that our regions did not fully benefit from European regional policy. They still oppose regional policy and regional development agencies. If the Opposition were to have their way, we would still not have that support.

Our new devolved regional structures mean that, for the first time, we shall be able to maximise the benefits of focused economic policies, putting together single regeneration budgets along with European structural funding based on the strengths and needs of our regional economies.

The questions of currency and the euro are important. It is to the Government's credit that they are to take a decision on timing in the national interest. It is important also that we recognise the differing needs of different regions in this country and create structures enabling us to make the best use of European funding by our active participation in Europe. That will enable us to shape policies for the benefit of the people, jobs and the generation of wealth.

9.29 pm

Mr. David Heath (Somerton and Frome)

We have had an interesting debate, including many interesting and thoughtful speeches. The Chief Secretary to the Treasury said little, but said it, as always, eloquently, which might fit in with the best possible job description of a Chief Secretary. The hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Soley) mildly castigated us for not extending the debate to wider issues. We should have loved to debate the common foreign and security policy, but we have done so before and shall do so again. We cannot debate every aspect of Europe every time a short debate is allotted to us. The hon. Member for Gloucester (Ms Kingham) made a fine speech on international aid, and the speech of the hon. Member for Liverpool, Riverside (Mrs. Ellman) was also good.

Mr. Loughton

Will the hon. Gentleman give way?

Mr. Heath

I do not have time as there are only 15 minutes in which to sum up the debate.

Among the Conservatives, the right hon. Member for Wells (Mr. Heathcoat-Amory)—no longer in his place—concentrated on the important issue of fraud, to which I shall return shortly, and on which I share much common ground with him. His remarks on the euro I found rather more cock-eyed. All the Conservatives who spoke talked of the constitutional implications of the euro, and about how they are a bar to their supporting membership of the euro. If that is so, there can be no time limit to that bar. It is intellectual nonsense for the Conservatives to persist in the notion that they can simultaneously say that there is a constitutional bar, and that the timing forms part of their policy. That is as nonsensical as the Labour party waiting for Murdoch.

The right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg) spoke interestingly on the European Council. He recognised the point that we have made repeatedly about the lack of democracy and accountability there. I do not quite share his doom-laden view of the likely outcome of any reforms, but we must keep asking questions about that part of the European Union.

Mrs. Browning

rose—

Mr. Heath

I shall give way to the hon. Member for Tiverton and Honiton (Mrs. Browning) but she must be very brief.

Mrs. Browning

The hon. Gentleman is most generous. May I clarify Conservative policy, which has been endorsed by a vote by our membership? When there is a referendum, either in this Parliament or the next—hence the 10-year period—we shall campaign for a no vote. Whether it is this Parliament or the next, if the people vote yes and we enter the single currency, any policy that follows will be academic, as the country will have been sold for 40 pieces of silver.

Mr. Heath

I absolutely agree that we need an early referendum that will allow the people to decide. I find it hard to be too harsh on the hon. Lady as she said earlier that the Liberal Democrats were lovable and consistent, neither of which words I can ever use to describe the Conservative party. I wish I could reciprocate, but I cannot.

I shall not dwell on the euro, as my hon. Friend the Member for Gordon (Mr. Bruce) has covered it, but we must not underestimate the many difficulties. A successful launch is one thing, but further difficulties will be experienced over the years to come. We want the Government to prepare for those difficulties, and to allow a choice to be made in the country. There is a gathering case behind those who see joining the euro as an essential part of Britain's economic future. We want an informed debate and the early consent of the British people to the proposal put before them. The difficulty will come if matters are delayed to the point at which there is a self-defeating prophecy.

The second part of the motion suggests establishing a constitution for Europe. I am loth to use that expression, because it can be misinterpreted. However, our motion makes it plain that we are talking about defining and limiting the powers of European institutions, the constitutional relationship between the European Union and member states, and the rights of citizens. Most of all, we are talking about a European Union that is open, accountable, democratic and decentralised.

I am disappointed in the Government's amendment, which contains not a word about democracy, accountability or decentralisation. The problem is that the amendment was drafted in the Treasury, and no one sent it across the road for the views of the Foreign and Commonwealth Office, which surely would have wanted to say something about the structures of Europe that are not Treasury led. Such omissions would be a shame at any time, but they are a particular shame in this week above all weeks, given the unfolding crisis in Strasbourg and the clear demonstration of some of the basic problems that we have for many years identified in European Union institutions.

The difficulties that the Commission has faced go to the heart of the issue of accountability. This is a critical time for the European Union. Hon. Members may say that it is always a critical time for the EU, but it is one now because a strategic agenda is on the table, in which the Commission must be involved—whether we are talking about the introduction of the euro and its development, the problems and opportunities of enlargement, or the minor but important reforms that flow from the Amsterdam treaty. Astride that agenda is the Commission—its members and the advice that they give. That is why confidence in the European Commission is so vital and why we stress to such a great extent the need for the Commission to be more accountable.

That accountability does not exist. We cannot talk about the Commission being accountable while it retreats behind a facade of collegiate responsibility. We cannot do so when the only tool of remonstrance available to the Parliament charged with proper scrutiny of the commissioners is the nuclear option of sacking the lot. Also, we cannot talk about accountability while some Members of the European Parliament use a scatter-gun approach, slinging mud at every member of the Commission to make their point, when clearly there are omissions and commissions on the part of one or two of them.

When Jacques Santer was appointed—let us remember that he was the British Conservative nominee for the presidency—he talked about zero tolerance of mistakes in financial affairs in the European Union and he has talked about it again since. His control of the Commission does not engender much confidence in that approach; it is not zero tolerance, but simply zero. Last November, the report of the Court of Auditors was qualified for the fourth year running. Why? Because of systematic failures to apply requisite checks", and because the incidence of financial errors was so high that the court has had to give an adverse opinion on legality and regularity. It was also because £3 billion was fraudulently spent, or could not be accounted for.

What was Jacques Santer's reaction? He suspended the whistleblower. He castigated the Swedish Prime Minister, Göran Persson, when he had the temerity to suggest that all was not well. He then tried to bluff his way through by demanding a confidence vote, which I am sorry to say the socialist group connived at and aided and abetted. That was Santer's Christmas.

That is no way to run anything. If individual commissioners, such as Manuel Marin who is responsible for the budget, which, as the hon. Member for Gloucester said, seems to be out of control, and Edith Cresson, who is said to have abused her position because of the way she appointed consultants and others, can hide behind a spurious Cabinet responsibility, which really amounts to irresponsibility and unaccountability, we have to ask why. The buck has to stop somewhere. That is why our colleagues in the European Parliament will be pressing the censure motion on those two commissioners to a vote tomorrow; I hope that they succeed. I am told that they will receive the support of the Greens and the Gaullists, but it is likely that the vote will fail because the socialist and Christian Democrat groups have been persuaded by Mr. Santer and bulied and cajoled by their Governments into a compromise. I gather that British Tory MEPs will support the Liberal Democrat motion in the European Parliament tomorrow, and that several British Labour MEPs will also do so.

We have a Conservative group in Europe that cannot persuade any colleagues to join it in putting the Commission to an accountability test, and Labour is split because it cannot understand the tergiversations of Pauline Green when she tries to hide the Commission behind a cloak of procedure. There must be a better way to manage the European Union, and we must be in the forefront pushing for it. That is why it is so disappointing that our Government cannot lead a strategy to sort this out. One cannot be both a friend of Europe and a friend of fraud, incompetence and mismanagement. If one is for Europe, one must be for a reformed Europe. That is why accountability and democratisation are so important; they make reality out of the rhetoric.

Mr. Plaskitt

I want to give the hon. Gentleman an opportunity to clarify something important in the Liberal Democrat motion. Is it his party's position that the reforms to achieve the openness, accountability, democracy and decentralisation mentioned in the motion are a necessary condition for sterling's entry to the European currency zone?

Mr. Heath

The reforms are a necessary condition for a healthy European Union based on the principles of openness, accountability and democracy. I had hoped that Labour Members would share those with us as our objectives in politics. There is no difference between our objectives in Europe and in the United Kingdom. We are committed to the same principles of accountability, democracy and devolution of power to the lowest possible level. That is why we are so convinced that we must set a new agenda for Europe. We must find and persuade allies—they are there—who also want basic reform of the European Union to make it a reality.

I ask the Minister to show that the rhetoric, which I know is sincere in her case and in that of many of her colleagues, will be backed by action to make proper accountability in Europe a reality. We want assurances that the rhetoric on preparing Britain for entry to the euro, and on the essential question that must soon be asked of the British people, will be backed by the actions needed to make it a reality.

It was said earlier that the economic cycle makes entry impossible, so we cannot even make the effort. The Liberal Democrats know that we cannot enter tomorrow. Which of us suggested it? However, we see the need to take action today so that the question can be asked tomorrow and we have the capacity to enter the day after. That must be the objective, both of this Government and of the Liberal Democrats. I ask the Minister to demonstrate that the leadership is in place to secure the necessary coalitions to make that a reality in Europe. I am sure that she will provide those reassurances.

9.44 pm

The Minister of State, Foreign and Commonwealth Office (Ms Joyce Quin)

As in any debate on European issues, many questions have been posed and topics referred to, including the single currency; fraud; EU aid policy—which was raised in a thoughtful contribution by my hon. Friend the Member for Gloucester (Ms Kingham)—democratic structures in the EU; Agenda 2000; tax issues, and, of course, through all those contributions, how Members on both sides of the House viewed the Government's record since taking office.

I was disappointed that, in introducing the debate, the hon. Member for Gordon (Mr. Bruce) did not give the Government credit for their active and co-operative role in the EU from the outset. I am glad that my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman) redressed the balance by talking of the many achievements in the European sphere that the Government have to their credit.

The Government's constructive approach was evident from the start in the way in which we approached and concluded the Amsterdam treaty. It is almost impossible to believe that a Conservative Government would have been able to conclude the Amsterdam treaty and agree to the improvements that we agreed with our partners, particularly with regard to social and employment policy, the environment, where we achieved a great deal, and continued and good co-operation on justice and home affairs issues.

My hon. Friend the Member for Riverside mentioned regional policy. The Government have also been active in promoting the cause of openness and democratic debate in the EU, which is why I found so unconvincing the various allegations about the Government smuggling or trying to hide information—euro-creep, as I think it was referred to by one Opposition Member. We have had a good record on openness.

Mr. Heathcoat-Amory

Given what the right hon. Lady has just said about her commitment to openness, will she now publish the British tax measures that are under investigation by the EU committee chaired by the Paymaster General? Will she give the House, either this evening or by letter tomorrow, a full list of the measures that are under scrutiny by the EU?

Ms Quin

I understand that much of that information is already available. I see hon. Members agreeing. Certainly, there have been accounts of the various measures that are under consideration. I commend the work done by my hon. Friend in leading the work of that group.

Furthermore, in considering openness, I want to underline what I said a few minutes ago. Having been present at the first-ever open debate conducted in the Justice and Home Affairs Council, which was at our initiative, I know how committed we have been to making more information available to the public than was previously available.

I also commend to hon. Members the work that we have done recently on the scrutiny of European business in both Houses of Parliament. In the paper that we have produced, we have outlined various ways in which parliamentary scrutiny of European business will be improved in the future, and how scrutiny will be extended to the second and third pillars in a way that did not exist in the past. I hope that hon. Members will welcome what the Government have done in that area and concede that we have been willing to share information not only in Parliament, but more widely.

The British presidency, too, had many successes to its credit, and was a period when it became clear how engaged British Ministers were with their EU partners, and how successful that partnership was turning out to be. During our presidency, we were pleased to preside over the start of the enlargement negotiations. After the presidency, we were also pleased that we got the beef ban lifted—again, something that the previous Government signally failed to do.

Hon. Members will see that, in the past few weeks, the Government have taken a great many initiatives with our European partners. The defence initiative resulted in the joint declaration with the French Government at the British-French summit at St. Malo. My right hon. Friend the Prime Minister and the Swedish Prime Minister recently issued a joint statement about specific ways of tackling social exclusion and raising that issue on the European agenda.

My right hon. Friend the Prime Minister and his Spanish counterpart put out a joint statement on various aspects of employment and competitiveness, which was welcomed by our European partners. Last month, a joint statement was issued by the Prime Minister and Chancellor Schroder on taxation, which gave the lie to many of the unjustified scare stories on taxation in the British press in November and December.

Much of the debate, particularly the opening contribution, focused on the euro. I was disappointed that credit was not given to my right hon. Friend the Chancellor and his colleagues in the Treasury for their work with business on preparations for the euro and, in particular, for dealing with the euro now that it is coming into force in such a large part of our internal market. My right hon. Friend the Prime Minister has said that we have a strong interest in the success of the euro because it operates in our internal market. We recognise the efforts that countries made towards ensuring not only that they met the criteria but that they were able to launch the euro at the beginning of January.

My right hon. Friend the Chief Secretary described fully the tests that my right hon. Friend the Chancellor of the Exchequer has rightly said are important if we are to be able to be part of the euro in future. I was surprised that the hon. Member for Gordon seemed to feel that those tests were not relevant; they deal with issues such as employment, investment and sustainable convergency which are crucial to our economy and our country. We are actively working with industry in preparing for the euro. As I said, we have a strong interest in its success.

The Conservative position on the euro seemed to shift during the debate. That is significant, but perhaps not surprising given the contributions of Conservative Members, who were saying that the fundamental threats posed by the euro to sovereignty and political and constitutional considerations logically rule out euro membership for ever. I see that the hon. Member for Billericay (Mrs. Gorman) is nodding. The Front-Bench spokesman, the right hon. Member for Wells (Mr. Heathcoat-Amory), conceded that. He said that he was in favour of that position, and perhaps even announced a change in Conservative policy on the euro. It is no longer a question of postponing for 10 years any consideration of joining; in his view, euro entry is ruled out for ever on constitutional grounds.

Mr. Heathcoat-Amory

The right hon. Lady must address what we said, not what she hopes that we said. Nothing my hon. Friends or I said can be interpreted as she is trying to do. We said that there are constitutional implications to the change that are deceitfully denied by the Government. Will the right hon. Lady take this opportunity to confirm that there are important constitutional implications involved in giving up sterling which ought to be considered in the decision to join the euro, because that is not stated in the amendment that she tabled?

Ms Quin

My right hon. Friend the Chancellor of the Exchequer certainly acknowledged that there are political and constitutional implications, but, in his statement last October, he also said that they were not of a magnitude to provide a constitutional bar to membership. That position was also reaffirmed by my right hon. Friend the Chief Secretary in his contribution this evening. [Interruption.] The hon. Member for Buckingham (Mr. Bercow) has just joined us. He clearly signalled that the constitutional and political implications of the euro were such that he could not contemplate joining it. He nods his head vigorously; so he does not support the policy that the Opposition spokesman has now grudgingly said that he supports, even though the right hon. Gentleman gave us the opposite impression in the debate.

Mrs. Teresa Gorman (Billericay)

Will the hon. Lady just acknowledge that the great majority of the British public, according to every poll that is taken, are on our side on this issue?

Ms Quin

I am not sure what the definition of "on our side" is, as there are obviously two distinct positions on the Conservative Benches. [HON. MEMBERS: "Three."] Three or possibly more, but, in this debate, two distinct positions have been articulated.

It is true that opinion polls do not show enthusiasm for the euro. None the less, if we believe that the euro is in our interests, there will be a referendum campaign in which the advantages and disadvantages are fully aired. That is another reason why I found unconvincing the charges that we were smuggling and being secretive about information about the euro. We are committed to holding a referendum. A referendum campaign is the perfect way to ensure maximum public open debate on the subject. It is a debate that I will welcome.

Some reference was made in the debate to tax harmonisation. We estimate that, far from Britain being isolated on that issue, at least nine countries in the EU do not support tax harmonisation leading to single EU tax rates. There are on record helpful statements that back up that view by leading politicians and Heads of Government in Spain, Sweden, Denmark, Finland, Ireland, Greece, Luxembourg and the Netherlands. I see that the hon. Member for Gordon is nodding in agreement. I welcome what he said in clarification of his party's position on the issue, which is similar to our own. We uphold the need to proceed by unanimity on such matters.

Mr. Nicholas Soames (Mid-Sussex)

Before the hon. Lady finishes, will she say something about what the Government have done to facilitate the enlargement of Europe and enable the countries of central and eastern Europe to join more quickly than they are able to do at present?

Ms Quin

I am grateful to the hon. Gentleman for raising that point. I said earlier that I was proud that, as president of the EU, we launched the enlargement negotiations. I am enthusiastic, as the Government are, about enlargement. It is a tremendous opportunity for the European continent. We expect to remain a firm and key supporter of the enlargement process in the coming months. I am grateful for the opportunity to put that on record.

Many hon. Members mentioned the real problem of fraud in the European Union. I was somewhat disappointed at the party politics that were played on the issue. As a former Member of the European Parliament, I know that British MEPs from different parties have played an important role in tackling fraud issues. Lord Tomlinson has played a prominent role in bringing those issues to the fore and taking a hard line with the European Commission on them. The Opposition spokesman is guilty of selective amnesia in talking about the importance of whistleblowing. I seem to remember that the previous Government were opposed to any type of whistleblowing in the national health service.

Unfortunately, I have to bring my comments to a conclusion, but I should like to say firmly that the Government's agenda is pro-Europe and pro-reform. We do not argue that Europe has got it all right but, unlike the previous Government, we are committed to working with our partners to get it right to make Europe work and to make it work for Britain. Those are Labour's aims. We have already begun to achieve them and I believe that we will achieve much more in the months to come.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 42, Noes 281.

Division No. 33]	[10 pm
AYES
Allan, Richard	Breed, Colin
Ashdown, Rt Hon Paddy	Bruce, Malcolm (Gordon)
Baker, Norman	Burnett, John
Beith, Rt Hon A J	Burstow, Paul
Brake, Tom	Campbell, Menzies (NE Fife)
Brand, Dr Peter	Chidgey, David

Cotter, Brian	Morgan, Alasdair (Galloway)
Dafis, Cynog	Oaten, Mark
Ewing, Mrs Margaret	Öpik, Lembit
George, Andrew (St Ives)	Rendel, David
Gorrie, Donald	Russell, Bob (Colchester)
Harris, Dr Evan	Sanders, Adrian
Harvey, Nick	Smith, Sir Robert (W Ab'd'ns)
Heath, David (Somerton & Frome)	Taylor, Matthew (Truro)
Hughes, Simon (Southwark N)	Tonge, Dr Jenny
Jones, leuan Wyn (Ynys Mô)	Tyler, Paul
Jones, Nigel (Cheltenham)	Tyler, Paul
Keetch, Paul	Wigley, Rt Hon Dafydd
Kennedy, Charles (Ross Skye)	Willis, Phil
Kirkwood, Archy
Livsey, Richard	Tellers for the Ayes:
Maclennan, Rt Hon Robert	Mr. Andrew Stunell and
Michie, Mrs Ray (Argyll & Bute)	Mr. Edward Davey.
NOES
Ainger, Nick	Colman, Tony
Ainsworth, Robert (Cov'try NE)	Connarty, Michael
Allen, Graham	Cook, Rt Hon Robin (Livingston)
Anderson, Donald (Swansea E)	Cooper, Yvette
Anderson, Janet (Rossendale)	Corbett, Robin
Armstrong, Ms Hilary	Corbyn, Jeremy
Ashton, Joe	Corston, Ms Jean
Atherton, Ms Candy	Cousins, Jim
Austin, John	Crausby, David
Banks, Tony	Cryer, Mrs Ann (Keighley)
Barron, Kevin	Cunliffe, Lawrence
Battle, John	Cunningham, Jim (Cov'try S)
Bayley, Hugh	Dalyell, Tam
Beard, Nigel	Davey, Valerie (Bristol W)
Beckett, Rt Hon Mrs Margaret	Davies, Geraint (Croydon C)
Bell, Martin (Tatton)	Davies, Rt Hon Ron (Caerphilly)
Benn, Rt Hon Tony	Davis, Terry (B'ham Hodge H)
Bennett, Andrew F	Dawson, Hilton
Benton, Joe	Dean, Mrs Janet
Bermingham, Gerald	Dewar, Rt Hon Donald
Berry, Roger	Dobbin, Jim
Best, Harold	Donohoe, Brian H
Betts, Clive	Dowd, Jim
Blackman, Liz	Drew, David
Blears, Ms Hazel	Drown, Ms Julia
Blizzard, Bob	Eagle, Angela (Wallasey)
Boateng, Paul	Edwards, Huw
Borrow, David	Efford, Clive
Bradley, Keith (Withington)	Ellman, Mrs Louise
Bradley, Peter (The Wrekin)	Ennis, Jeff
Brinton, Mrs Helen	Etherington, Bill
Brown, Russell (Dumfries)	Fatchet Derek
Burgon,Colin	Field, Rt Hon Frank
Butler, Mrs Christine	Fisher, Mark
Campbell, Alan (Tynemouth)	Fitzpatrick, Jim
Campbell, Mrs Anne (C'bridge)	Flint, Caroline
Campbell, Ronnie (Blyth V)	Flynn, Paul
Campbell—Savours, Dale	Follett, Barbara
Canavan, Dennis	Foster, Rt Hon Derek
Cann, Jamie	Foster, Michael J (Worcester)
Caplin, Ivor	Galloway, George
Caton, Martin	Gardiner, Barry
Chaytor, David	Gerrard, Neil
Chisholm, Malcolm	Gibson, Dr Ian
Clapham, Michael	Gilroy, Mrs Linda
Clark, Rt Hon Dr David (S Shields)	Godman, Dr Norman A
Clark, Paul (Gillingham)	Godsiff, Roger
Clarke, Charles (Norwich S)	Goggins, Paul
Clarke, Eric (Midlothian)	Gordon, Mrs Eileen
Clarke, Rt Hon Tom (Coatbridge)	Griffiths, Jane (Reading E)
Clarke, Tony (Northampton S)	Griffiths, Nigel (Edinburgh S)
Clelland, David	Griffiths, Win (Bridgend)
Clwyd, Ann	Hall, Patrick (Bedford)
Coaker, Vernon	Hanson, David
Coffey, Ms Ann	Harman, Rt Hon Ms Harriet
Cohen, Harry	Heal, Mrs Sylvia
Coleman, Iain	Healey, John

Henderson, Doug (Newcastle N)	Miller, Andrew
Henderson, Ivan (Harwich)	Mitchell, Austin
Hepburn, Stephen	Moffatt, Laura
Heppell, John	Moonie, Dr Lewis
Hesford, Stephen	Moran, Ms Margaret
Hewitt, Ms Patricia	Morgan, Ms Julie (Cardiff N)
Hill, Keith	Morgan, Rhodri (Cardiff W)
Hinchliffe, David	Morley, Elliot
Hodge, Ms Margaret	Mountford, Kali
Hoey, Kate	Mudie, George
Home Robertson, John	Mullin, Chris
Hood, Jimmy	Murphy, Denis (Wansbeck)
Hope, Phil	Naysmith, Dr Doug
Howarth, George (Knowsley N)	O'Brien, Bill (Normanton)
Howells, Dr Kim	Olner, Bill
Hoyle, Lindsay	O'Neill, Martin
Hurst, Alan	Palmer, Dr Nick
Hutton, John	Pearson, Ian
Iddon, Dr Brian	Pendry, Tom
Illsley, Eric	Pickthall, Colin
Ingram, Adam	Pike, Peter L
Jackson, Ms Glenda (Hampstead)	Plaskitt, James
Jackson, Helen (Hillsborough)	Pond, Chris
Jamieson, David	Pope, Greg
Jenkins, Brian	Powell, Sir Raymond
Johnson, Alan (Hull W & Hessle)	Prentice, Ms Bridget (Lewisham E)
Johnson, Miss Melanie (Welwyn Hatfield)	Prentice, Gordon (Pendle)
Jones, Barry (Alyn & Deeside)	Primarolo, Dawn
Jones, Ms Jenny (Wolverh'ton SW)	Prosser, Gwyn
Jones, Dr Lynne (Selly Oak)	Purchase, Ken
Jones, Martyn (Clwyd S)	Quin, Ms Joyce
Keeble, Ms Sally	Quinn, Lawrie
Keen, Ann (Brentford & Isleworth)	Rammell, Bill
Kemp, Fraser	Rapson, Syd
Kennedy, Jane (Wavertree)	Raynsford, Nick
Khabra, Piara S	Reed, Andrew (Loughborough)
Kidney, David	Reid, Rt Hon Dr John (Hamilton N)
Kitfoyle, Peter	Rooker, Jeff
King, Andy (Rugby & Kenilworth)	Rooney, Terry
King, Ms Oona (Bethnal Green)	Ross, Ernie (Dundee W)
Kingham, Ms Tess	Rowlands, Ted
Kumar, Dr Ashok	Ruane, Chris
Ladyman, Dr Stephen	Russell, Ms Christine (Chester)
Lawrence, Ms Jackie	Ryan, Ms Joan
Laxton, Bob	Savidge, Malcolm
Lepper, David	Sawford, Phil
Leslie, Christopher	Sedgemore, Brian
Levitt, Tom	Shaw, Jonathan
Lewis, Ivan (Bury S)	Sheerman, Barry
Linton, Martin	Sheldon, Rt Hon Robert
Livingstone, Ken	Shipley, Ms Debra
Lock, David	Singh, Marsha
McAllion, John	Skinner, Dennis
McAvoy, Thomas	Smith, Angela (Basildon)
McCabe, Steve	Smith, Miss Geraldine (Morecambe & Lunesdale)
McDonagh, Siobhain	Smith, John (Glamorgan)
Macdonald, Calum	Snape, Peter
McDonnell, John	Soley, Clive
McGuire, Mrs Anne	Southworth, Ms Helen
Mackinlay, Andrew	Squire, Ms Rachel
MacShane, Denis	Starkey, Dr Phyllis
Mactaggart, Fiona	Steinberg, Gerry
McWilliam, John	Stevenson, George
Mallaber, Judy	Stewart, Ian (Eccles)
Marek, Dr John	Stinchcombe, Paul
Marsden, Gordon (Blackpool S)	Strang, Rt Hon Dr Gavin
Marsden, Paul (Shrewsbury)	Straw, Rt Hon Jack
Marshall, Jim (Leicester S)	Stuart, Ms Gisela
Marshall-Andrews, Robert	Sutcliffe, Gerry
Martlew, Eric	Taylor, Rt Hon Mrs Ann (Dewsbury)
Meacher, Rt Hon Michael	Taylor, Ms Dari (Stockton S)
Meale, Alan	Taylor, David (NW Leics)
Merron, Gillian	Temple—Morris, Peter
Milburn, Alan	Tipping, Paddy

Todd, Mark	Wicks, Malcolm
Touhig, Don	Wills, Michael
Trickett, Jon	Winnick, David
Turner, Dennis (Wolverh'ton SE)	Wise, Audrey
Turner, Dr Desmond (Kemptown)	Wood, Mike
Twigg, Derek (Halton)	Woolas, Phil
Vis, Dr Rudi	Worthington, Tony
Walley, Ms Joan	Wright, Dr Tony (Cannock)
Wareing, Robert N	Tellers for the Noes:
Watts, David	Mr. Kevin Hughes and
Whitehead, Dr Alan	Mr. Mike Hall.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved, That this House recognises the importance to the British economy of continued membership of the European Community; welcomes the step change that the Government has made in its economic relations with the UK's European partners and the real benefits that constructive engagement has brought for Britain; commends the progress made by the Government in promoting economic reform in Europe as the basis for growth and job creation; welcomes the Government's ongoing programme of practical assistance to British business on the implications of the euro; commends the Bank of England and the financial services industries for the skill and expertise with which they managed Britain's part in the transition of 1st January 1999; and welcomes the Government's decision to make the national economic interest the key test for British entry to the single currency on the basis of five economic tests and that any final decision should be made by the British people as set out in the Chancellor's statement to the House of 27th October 1997.