European Union

HC Deb 25 May 1999 vol 332 cc178-259

[Relevant documents: Developments in the European Union July-December 1998 (Cm. 4352);

The Second Report from the Agriculture Committee, Session 1998–99, on CAP Reform: Rural Development (HC 61) and the Government's Response thereto (HC 441);

The Third Report from the Defence Committee, Session 1998–99, on The Future of NATO: The Washington Summit (HC 39) and the Government's Response thereto (HC 459);

The Third Report from the Foreign Affairs Committee, Session 1998—99, on European Union Enlargement (HC 86);

Minutes of Evidence taken before the Foreign Affairs Committee on 19th May 1999 on the Cologne European Council (HC 462-i);

The First Report from the International Development Committee, Session 1998–99, on The Future of the EC Development Budget (HC 44).]

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

4.31 pm

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

The Cologne Council takes place against the background of the conflict in Kosovo. That provides a sombre backdrop for the meetings of the Heads of Government and Foreign Ministers, and will dominate much of our political discussion. It is, therefore, right that I should start this debate by addressing that conflict.

President Milosevic took three gambles when he launched his spring offensive in Kosovo. All three now look like losing bets. The first was that NATO would not have the stomach for a military campaign of more than a few days. On that point, even he must now know that he was wrong. Instead of abandoning the campaign, NATO has intensified it. There are now twice as many aircraft taking part in the bombing campaign as there were at the start. As NATO grows stronger in the theatre, the Serb war machine in Kosovo grows weaker. We have now destroyed in Kosovo alone 70 tanks, 134 personnel carriers and 140 artillery pieces. We have destroyed half the ammunition in storage in Kosovo.

Belgrade's propaganda machine may still refuse to face reality, but the troops in the Yugoslav army know exactly how badly they are being hit. Last week, an entire battalion left the front line and walked through the hills to home. Belgrade has tried to put a brave face on that mass desertion by saying that the commanding officer ordered them to go home and check that their families were well. That does not sound like standard practice for a disciplined unit in the front line. On the contrary, it confirms that demoralisation and indiscipline among the Serb conscripts is now so deep that the army cannot halt mass desertion.

Milosevic, of course, is not moved by the casualties of the Serb conscripts, and he will try to sit out the campaign if he believes that NATO will be the first to give up. We have already shown that we have the superior force. We must now show that we have the greater determination if we are to convince Milosevic that the only exit for him is through accepting our demands.

Milosevic's second gamble was that the bombing campaign would secure his political base by rallying the nation behind him. That worked for a while, but like so many of Milosevic's manoeuvres, it has proved a short-sighted calculation. In the past week, and again over the weekend, we have learned of protests, demonstrations and near riots against the war in more than half a dozen towns in Serbia.

In Krusevac, several thousand mothers and families stoned the town hall and demanded the return of their sons. In Aleksandrovac, a similar crowd chased the mayor through the streets when he attempted to put the official line. In Cacak, the residents have formed a citizens parliament to discuss their grievances with the regime, and their disagreement with its actions in Kosovo. Addressing that parliament, the mayor said: All that is happening is very ugly…someone should be held accountable…We want those who led us into this adventure to realise they must go. Much of the grievance that prompts those protests comes from the knowledge that it is the sons of the provincial towns and the countryside who have been called up to do the dirty work, while the sons of the better-connected families in Belgrade are exempt.

However, even in Belgrade, open dissent is now on the increase. Two years ago, there were mass protests in Belgrade after Milosevic refused to recognise the election as mayor of Mr. Djindjic. As a result of threats directly inspired by Milosevic and his wife, Mr. Djindjic has now fled to Montenegro where he has called for an end to Belgrade's repression in Kosovo and for Milosevic to go when the war is over.

Mr. Djindjic's story illustrates the importance of Montenegro as a haven for those who speak out against Milosevic. In about an hour's time, I shall receive President Djukanovic of Montenegro on his visit to Britain. On behalf of all Members of the House, I shall congratulate him on the courage he has shown in opposing Milosevic's ethnic cleansing in Kosovo, and on the generous spirit in which he has kept open the borders of Montenegro to the hundred thousand refugees who have crossed over from Kosovo.

The best way in which we can now support Montenegro and all those people who want to see Milosevic go is to deny him the opportunity, which he desperately wants, to claim victory. The best blow that we can strike for freedom and democracy in Yugoslavia is to show that his confrontation with NATO ends in failure.

Milosevic's third gamble was that he could persuade NATO to accept failure and to back off in view of his programme of sustained atrocities against the Kosovo Albanians. That gamble has spectacularly backfired in his face. The more that the Governments of NATO learn of the brutality and butchery that he has ordered in Kosovo, the more they are determined that such aggression cannot be tolerated and will not go unpunished.

At the weekend, we saw further evidence, if any more were needed, of the barbarity with which Milosevic's forces behave in Kosovo, when more than 500 men staggered over the border, telling of how they had been abused and starved in a Serb prison. One man had been beaten with wooden clubs across his hands until every finger had been broken. He is a tailor. It must be a matter of doubt whether he will ever be able to return to his trade.

This morning, I was joined at our daily press conference by rape counsellors from the camps in Macedonia. The Albanian women who have been humiliated by the Serb troops are reluctant to speak publicly, but they have been speaking privately to rape counsellors. This morning, one of those counsellors—evidently moved by what she had had to hear—described how she had counselled a family of a mother and five daughters, all of whom had been raped.

It may be that Milosevic's thugs thought that they could get away with such brutality because, after all, that is the way in which they have behaved for a decade. The reports of ethnic cleansing, rape of young women and massacre of young men are chillingly familiar from the behaviour of the same Serb forces during the civil war in Bosnia. At that time, it took the international community three years to muster the resolve to launch an air campaign. This time, the Governments of NATO are agreed that Milosevic must be faced down now. If we do not want to see another instalment of the same brutality visited on Montenegro, Sandjak or Vojvodina, we must demonstrate that aggression does not pay by forcing Milosevic to reverse the ethnic cleansing in Kosovo.

Mr. Andrew Tyrie (Chichester)

May we conclude that it remains NATO's policy that Milosevic should be arraigned as a war criminal, and that there is no possibility that we will negotiate with him?

Mr. Cook

It has never been NATO's policy that Milosevic should be arraigned as a war criminal. That is a judgment for the International War Crimes Tribunal for which, as members of the United Nations, we all share responsibility. We set up the tribunal as an independent body with an independent prosecutor. I can assure the hon. Gentleman that Britain is sharing with that prosecutor all the information that we have on the atrocities in Kosovo, including some sensitive intelligence that we would not previously have shared on that scale with a court. We are leaving the prosecutor to come to a judgment as to whether an indictment should be brought.

As for dealing with Milosevic, I repeat what I have previously told the House: I shall deal with whoever has effective power in Belgrade to deliver our objectives. There will be no negotiation on those objectives and there will be no compromise on the key objective that the refugees must return in safety under the protection of an international force with a NATO core.

Dr. Norman A. Godman (Greenock and Inverclyde)

rose—

Mr. Tam Dalyell (Linlithgow)

rose—

Mr. Cook

I can think of no one better to give way to than my hon. Friend the Member for Greenock and Inverclyde (Dr. Godman).

Dr. Godman

When my right hon. Friend meets the President of Montenegro in 58 minutes, will he be able to outline plainly the role that the European Union will play in the reconstruction of those communities that have been razed by Milosevic and his murderous thugs? Surely the European Union will have to play an important interventionist role, especially where funds are concerned.

Mr. Cook

We are already conducting detailed discussions among our close allies and other members of the Security Council—including Russia—about the structure of the international presence that will follow the end of the conflict. It is agreed on all sides that the European Union will be the lead agency in the economic reconstruction of Kosovo and the physical reconstruction of its villages and towns.

We have already given 13 million euros in assistance to Montenegro to help it through a severe budgetary crisis caused by both the presence of the refugees and the loss of much of its trade through Serbia. I will explore with President Djukanovic how a democratic Montenegro, under the leadership that has provided the present policies, can play its part in the new start that we offer to all the countries of the region for an open trading area and a Balkan regeneration plan which will accelerate the integration of those countries into a modern Europe. We also hold out the prospect to the people of Serbia that they can be part of that programme if Belgrade turns its face away from the policies of fascism rooted in the middle of this century.

Mr. Dalyell

What is NATO's assessment of the damage caused so far to the environment by ammonia, benzene, mercury, phosgene and other pollutants as a result of attacks on chemical factories?

Mr. Cook

My hon. Friend will welcome the news that the United Nations Environment Programme today submitted its report on its assessment of the environmental hazards in Serbia and concluded that the environmental damage was minimal. My hon. Friend will also be aware that the United Nations Under-Secretary-General today completes his tour of Yugoslavia, which has included some days spent in Kosovo assessing the humanitarian impact of the Serb forces' activities. I will share with the House his conclusion at his press conference as he left Montenegro. He said: One word—it is pretty revolting. The Under-Secretary-General described town after town that has been reduced to a ghost town—emptied of a population who have fled in terror—and houses that have been burnt and destroyed. The impact of Serb forces on the environment in which the people of Kosovo lived is far greater than anything we have done in Serbia.

At the end of last week, I visited Washington. That visit demonstrated the solidarity of our two countries and our joint resolve to secure the objectives of NATO. Tonight, I set out on a tour of Rome, Bonn and Paris to consult my colleagues in the major European capitals of the alliance. I want to take stock with them on the success of our military campaign and the progress of the diplomatic initiatives. As both the military and the diplomatic tracks gather momentum, it is important that we prepare now to be ready for the day when we can escort the refugees back.

Britain is urging that we get on with those preparations so that we are ready to enter Kosovo as soon as our diplomatic initiatives have secured agreement on our objectives, or when our military campaign has left the Serb forces unable to cling on inside Kosovo. We will be exploring with partners what contribution we can each make to ensure that NATO has a balanced force with a broad base across the alliance, ready to move whenever the time comes for the refugees to go home.

Whether or not it is a member of NATO, every European Union member state is solidly behind our key objectives: the Serb forces must get out of Kosovo, NATO troops must be allowed into Kosovo, and the refugees must be allowed back in safety.

Mr. Bowen Wells (Hertford and Stortford)

Is proper provision being made to enable the Kosovo refugees to go home? They will need prefabricated homes in their present location in Albania or Macedonia, which they can pack up and take back to Kosovo to erect in their villages and towns while they rebuild their homes and the surrounding infrastructure. Has funding been made available and have preparations been made for that objective, and will the Foreign Secretary discuss it with all his interlocutors in the next few days?

Mr. Cook

The hon. Gentleman raises a serious issue, and speaks from a great depth of knowledge and interest in the subject. We are currently exploring with humanitarian agencies and our allies the important pre-positioning, within the region, of the building materials that we shall need to assist the refugees to get through the winter. Whether the refugees spend that time in Kosovo or elsewhere, building materials will be relevant to the winterisation programme. I hope that with the United Nations High Commissioner for Refugees, we will be able to proceed with that prudent contingency for winter. We have consistently demanded that when the refugees return, they should be accompanied by free, unhindered entry of all the relevant humanitarian agencies.

Mr. Douglas Hogg (Sleaford and North Hykeham)

The right hon. Gentleman referred to the entry of NATO forces into Kosovo when the Serb forces are, in his words, unable to cling on. To what extent does he contemplate using or involving forces from outside NATO, particularly from countries belonging to the Organisation for Security and Co-operation in Europe, and to what extent have there been talks with OSCE countries with a view to deploying their troops, with NATO troops, into Kosovo?

Mr. Cook

There have been discussions with a number of countries, inside and outside the OSCE, that might be willing to make a contribution, and some Islamic nations would want to participate in our force to pacify Kosovo and guarantee the ceasefire. NATO has a number of partners for peace that have also expressed an interest in taking part and, in the past few weeks, we have had direct discussions with Russia.

We have always stressed that to be credible and effective, that international military presence must have a NATO core with a NATO command structure, but we have also made it plain that it will not be an exclusively NATO show. On the contrary, we would welcome other partners, who are anxious to contribute to Kosovo' s reconstruction, working with us to demonstrate the broad range of international opinion that condemns the atrocities in Kosovo.

I am confident that when we agree the communique of the Cologne summit, it will affirm our joint resolve to complete the task and deliver on those key objectives without compromise. The Cologne summit will, however, also address a wide-ranging agenda. The key issues before the summit reflect this Government's priorities for a Europe of reform, a Europe of the people and a Europe of strength in the world.

Let me start with the reform of Europe. The Government recognise that Britain's future lies in Europe. We believe that our people will be more prosperous if we deepen our trade and ties with Europe, and that their Government will have more, not less, influence around the world if we act as one with our partners. The fact that we are for Europe does not, however, prevent us from arguing for reform of Europe. On the contrary, the respect that the Government have gained in every capital of the European Union achieves far more than the Conservative party ever secured when it was in government. That respect and credibility gives us a strength when we argue for reform which the previous Government never had.

At Cologne, Romano Prodi will report on his plans for modernising the Commission. We very much welcome his commitment to the guiding principles of transparency, accountability and efficiency, and his pledge to the European Parliament that he wants a culture in the Commission that has "zero tolerance of corruption". [Interruption.] I do not know why Opposition Members should find anything funny in zero tolerance of corruption. We should surely try to build a consensus in the House on that. I assure hon. Members that I shall say more contentious things later, but on that I had looked for bilateral support.

We shall judge the proposals that Mr. Prodi submits at Cologne by whether they address many of the endemic weaknesses of Commission practice. Following the dramatic report of the committee of wise men, we circulated among all our partners the priorities that we believed must be addressed: recruitment should be objective and fair; promotion should be on merit, not on patronage; contracts should be awarded by procedures that are transparent and open; and the inspection of fraud should be independent and robust.

Mr. Tim Loughton (East Worthing and Shoreham)

Does the Foreign Secretary think that his Government gained respect in the capitals of Europe when his Members of the European Parliament voted to keep a corrupt Commission in power for yet more months, which has now been forced to resign?

Mr. Cook

The European Parliament took no such decision. The treaty sets out that the Commission will remain in power until a new Commission is appointed. The European Council moved fast to appoint a new President, who is actively constructing the new Commission. As soon as that Commission is in place, the treaty provisions will take effect and the previous Commission will leave. The European Parliament did not vote to keep the Commissioners in office, nor did the European Parliament have the power to vote them out of office.

Mr. Michael Connarty (Falkirk, East)

To return to the point about the independence of fraud investigations, would it not be better for the new fraud investigating organisation to be outwith the Commission, so that it does not fall into the same trap as the previous organisation, which became part of the culture of the Commission?

Mr. Cook

We are clear that there must be changes in the structure so that the investigation of fraud is more independent. Fraud is theft from the taxpayers of Europe. The citizens of Europe are entitled to expect their funds to be spent with the same care and the same accountability as they demand from their national Government. At Cologne, we will be demanding that the management of the Commission matches up to the best standards in public administration.

Mr. Andrew Lansley (South Cambridgeshire)

I am not sure that I understood the Foreign Secretary's reply to his hon. Friend the Member for Falkirk, East (Mr. Connarty). Surely ECOFIN is today agreeing an anti-fraud system that is within the Commission, not independent of the Commission. Is it not necessary that the anti-fraud activity be outside the Commission and independent of the Commission?

Mr. Cook

I fear that the hon. Gentleman has misunderstood what was approved at ECOFIN. It was agreed that the new fraud investigation should be independent of the Commission, but should be within the European institutions. That reflects a judgment that if it were entirely outside, it would not get the access that it requires to be an effective invigilator. The development that we secured at ECOFIN today gives much greater independence and strength to the fraud investigator than ever occurred during the 18 years in which hon. Gentlemen were bleating about fraud.

Cologne will mark another step towards the creation of a people's Europe. We believe that if the European Union is to belong to the people, it must be driven by their priorities. First among their priorities is the opportunity of a job, or the security of the job that they hold. At Cologne, the German presidency will submit its proposals for an employment pact. We will want to ensure that the final text promotes economic reform and reflects the priorities of this Government in training the long-term and young unemployed.

We also welcome the initiative by the presidency in proposing a European charter of rights. In our view, that should not attempt to break new ground, but should consolidate in one place the many rights and freedoms that are already guaranteed in European legislation.

Mr. William Cash (Stone)

Does the Foreign Secretary agree with the German Foreign Minister, Mr. Joschka Fischer, when he said that the decisive task of our time in relation to Europe is the creation of a legal entity in international law? Does he accept that that would effectively be a European constitution? Would he go along with the idea, or will he dismiss it now, in the House?

Mr. Cook

I have a feeling that I dismissed the idea three or four months ago, when the hon. Gentleman last put it to me. For the record, we are not proposing a constitution of Europe. We are proposing that a charter of rights should codify in a single place the rights that already exist in European legislation.

I say to the hon. Gentleman that we should not be afraid of that concept. We have a national interest in insisting that membership of the European Union should underpin freedoms and rights throughout every member state. That is why we broadly welcome that European charter of rights, which will strengthen the identity of the European Union as an area of freedom, security, justice and equal rights. I am sure that he also would wish to achieve that.

Mr. Nicholas Soames (Mid-Sussex)

Will the Foreign Secretary give way?

Mr. Cook

I will certainly give way to the hon. Gentleman, but then I must, if I may, make some progress.

Mr. Soames

I am sorry to ask the Foreign Secretary to give way after he has done so, so often. If the employment pact paper does not reflect the steps taken by his Government, what will he then do?

Mr. Cook

I can assure the hon. Gentleman that we are already in dialogue with the German presidency on the text. I have seen a draft and can assure him that even he—and, even more so, some of his colleagues—will find it hard to regard it as threatening. It does not pose a major challenge to us, and it builds on work that has been done over the past two years in the European Councils. For example, the work that was done at Luxembourg secured employment guidelines which very much reflect the Government's priority of training for the long-term and young unemployed.

The text builds also on the decision taken at Cardiff that we should promote economic reform and require national reports on progress in the liberalisation of product and labour markets. Those reports are now coming in and will be summarised for us by the Commission when we meet at Cologne. I can assure the hon. Gentleman that the work, which is progressive and cumulative, and which builds on those previous achievements, will reflect our priorities.

Mr. Stephen Dorrell (Charnwood)

Will the Foreign Secretary give way?

Mr. Cook

I will, but then, if I may, I must finish my speech. I appreciate that many of the Members who are intervening will wish to make speeches themselves.

Mr. Dorrell

I am grateful to the Foreign Secretary for giving way. I want to follow up the point on which my hon. Friend the Member for Mid-Sussex (Mr. Soames) was probing. The Foreign Secretary said that he has seen a draft of the pact and thinks that it is satisfactory. Can he confirm that it includes, as was promised in the European socialist manifesto, agreed reductions in working time negotiated between the social partners"? Is that inside the pact or not?

Mr. Cook

The pact proposes greater dialogue between the social partners, but the particular passage chosen by the right hon. Gentleman—I remember very well the discussions on it—leaves it to the social partners within nations to decide for themselves. The terms in which it is drafted make it plain that the measure will not be imposed by the national Government, far less by the national Governments of Europe meeting in the Council of Ministers.

To turn to the last of the three areas in which Cologne will mark a step towards our objectives for Europe, there will be further progress towards achieving strength in the world for the European Union. We expect that the Cologne summit will endorse the Franco-British initiative, which we launched at St. Malo, for an enhanced capacity for the European Union to take decisions on security in support of our common foreign policy.

At Washington, in the NATO summit, Britain was instrumental in brokering a deal that will give Europe access to the common assets of NATO when we undertake military commitments in which the whole of the alliance is not engaged. At Cologne, we must make sure that Europe has the capability to take responsible decisions on security and the military capacity to carry out those decisions.

Mr. Cash

Majority voting.

Mr. Cook

No, that will be done by consensus.

I stress that that project is not in any way aimed at providing a substitute for NATO. The warm support at Washington from the United States for our initiative shows that we have been successful in designing proposals that will not decouple Europe from NATO, will not duplicate the functions of NATO and will not discriminate against members of NATO who are not members of the European Union. NATO will be stronger, not weaker, if we can make its European pillar more cohesive and more effective.

In sum, we will be working to achieve at Cologne real progress towards a Europe that is reformed, that responds to the priorities of its people and that is capable of exercising real strength on their behalf. We will be working to make a success of the summit and to show that Europe works. That provides quite a contrast with the Conservative party which, when in power, went to European summits to prove that Europe could not work. Those memories of glorious isolation still linger in the Opposition—or, at least, in some quarters of the Opposition; not in all. I recognise that some Opposition Members are isolated in their own party in resisting isolation within Europe.

The right hon. and learned Member for Folkestone and Hythe (Mr. Howard) has criticised me for signing up to a European manifesto for next month's European elections. In case he thinks we are worried about that, let me tell him that it is precisely because we have a score of sister parties throughout Europe—most of them in government—that we are able to secure a better deal for Britain. It is a sign of strength, not weakness, that we are able to stand on the same manifesto, with the same commitments, as the governing parties of most of Europe.

Let me remind the right hon. and learned Gentleman that his party also has sister parties, such as the European People's party, and that they have a common manifesto. The European People's party manifesto opens with the ringing promise:

"We will not try to win your vote by saying different things in different places. We will present the same ideas to everyone everywhere."

Mr. Michael Howard (Folkestone and Hythe)

We have not signed up to it.

Mr. Cook

Let me tell the right hon. and learned Gentleman, if he does not already know, that five of his Tory MEPs are on the executive of the European People's party, and that one of them presided over the working group that produced the home affairs section of the manifesto. Those who are standing for the Tory party in the election have signed up to it.

Miss Anne McIntosh (Vale of York)

Will the Foreign Secretary give way?

Mr. Cook

I will later.

If the right hon. and learned Gentleman has studied the manifesto, I understand why he is anxious to say that the Tories have not signed up to it. In the very first section, we find a commitment to the harmonisation of European legislation in asylum and immigration, with European criteria at all European borders. We also find that the European People's party considers that the single currency is the foundation-stone of what we intend to be a new era. The manifesto says: A federal Europe is now more than ever a necessary objective.

Mr. Howard

I am awfully sorry to spoil the right hon. Gentleman's fun, but can he produce a scintilla of evidence that the Conservative party has signed up to that document? We are not members of the European People's party; we are not bound by the document; we have not signed up to it; and we have made it absolutely clear that we disagree with it. We are candidates for the elections, but we are standing on the manifesto of the British Conservative party.

Mr. Cook

What the right hon. and learned Gentleman says will come as news to many of his Tory MEPs. Two of the vice-presidents of the European People's party are Tory MEPs. The treasurer is a Tory MEP. The person who presided over the group that produced the section on home affairs that I just quoted is a Tory MEP, Mr. Perry. If the right hon. and learned Gentleman is saying that the Conservatives cannot agree with those policies—

Mr. Michael Jack (Fylde)

On a point of order, Mr. Deputy Speaker. I understood that it was the practice of speakers to address their remarks through the Chair. I observe that the Foreign Secretary has spent a great deal of time looking in the opposite direction. Is he in order?

Mr. Deputy Speaker (Sir Alan Haselhurst)

The point raised by the right hon. Gentleman is obvious to all right hon. and hon. Members, but I do not think that it is worth an interruption of the debate.

Mr. Cook

Thank you, Mr. Deputy Speaker. I am happy to turn around if it assists the Chair.

Miss McIntosh

Will the Foreign Secretary give way?

Mr. Cook

No.

The right hon. and learned Member for Folkestone and Hythe is right to say that the Conservatives have their own manifesto. It is a manifesto dripping with commitments to oppose, to fight, and to opt out of what other member states want to do. The Tory manifesto was plainly written by people who regard Brussels as a dangerous beast that must be wrestled to the ground.

In their hearts, the Tories are afraid of Europe. [Interruption.] They are. Their manifesto makes it clear that they think that half of what Europe wants to do now is a mistake, and should be fought. As they have no allies—and the right hon. and learned Gentleman has been anxious to disown any that they might have—it is a fight that they are doomed to lose; but, in the meantime, they will guarantee that no other member state listens with patience to what they have to say.

By contrast, the Government have shown that constructive engagement in Europe can produce a better deal for Britain. By building alliances, we have secured an agreement to end the beef ban, which the Conservative party failed to shift by a strategy of disruption. We have won a bigger increase than any other member state in the number of regions eligible for objective 1 status from the structural funds. We have secured a clear legal base, for the first time, for Britain to retain border controls. We have cut the food bill of the average British family of four by £65 a year. We have brought the benefits of the social chapter and the working time directive to every British employee.

Mr. Loughton

That is fantasy island.

Mr. Cook

The hon. Gentleman may say that it is fantasy, but it is no fantasy to the 2.5 million British workers who now enjoy paid annual leave for the first time. If the hon. Gentleman and his Front-Bench colleagues still think that we are wrong and that the directive is Brussels red tape, perhaps before polling day they would make it clear to those 2.5 million voters and their families that the Conservatives believe that the decision was wrong.

The Government see Europe as an opportunity to make our people more prosperous, our freedoms more secure and our voice carry further around the world. We see a strong and healthy Europe not as a threat, but as an asset to Britain. That is why we go to Cologne with more respect from our partners than the Conservative party ever had, and with more trust from the British people that we can shape the Europe of the future that will serve them.

5.6 pm

Mr. Michael Howard (Folkestone and Hythe)

The Cologne Council takes place at a vital time for the European Union. There are many decisions to be taken, which will prove crucial in determining Europe's future development. One subject is more pressing than any of the others: it is the need to make decisions in the next few days about the course of the conflict over Kosovo.

We share the horror expressed by the Foreign Secretary at the atrocities committed by the Milosevic regime. All the commentators now seem to agree that if the refugees are to return home in any number before the onset of winter, a decision will have to be taken very soon about the deployment of many more allied ground troops in the region. Indeed, that is no longer denied by the Government.

As I have said before, the language used by the Government to describe the circumstances in which ground troops should be committed has repeatedly changed. First, it was only after a peace agreement had been signed, then it was in a permissive environment, then the phrase used was "semi-permissive", and in the past few days it has been "non-permissive." As I have also said, those changes may be justified, but they must be explained. The justification needs to be set out, not in a way that gives any advantage to Milosevic, but so as to present the Government's strategic thinking to the nation and to the House.

If that were done, I suspect that both the nation and the House would endorse that action. At the moment, Parliament is being asked to present the Prime Minister with a blank cheque. That is not the role of the House, and it is not the way in which we carry out our responsibilities in a parliamentary democracy. In the absence of a convincing explanation, we shall continue to scrutinise, question and, when necessary, to criticise the Government's conduct.

We wish the Foreign Secretary well in his visit to Rome, Bonn and Paris. We have supported NATO's objectives from the start. As the purpose of his visits will be to further those objectives, he carries with him our support and our good wishes for the success of the discussions in those capital cities in which he will no doubt participate.

Mr. Dalyell

How would ground troops be put in, given that access through the port of Thessaloniki will almost certainly be denied by the Greeks—if not by the Greek Government, certainly by the Greek workers? Piraeus is not available, as the mayor of Athens has said that not a single dock worker will lift a finger. They can hardly go through Hungary with 350,000 ethnic Hungarians. The Macedonians, when they were on the Inter-Parliamentary Union visit, made it abundantly clear that they did not want their country to be used as a springboard. To go through Albania with 6,000 ft mountains and roads that peter out would be a major problem. How would ground troops be supplied once they were there, if they got there?

Mr. Howard

Those are cogent questions. The hon. Gentleman must direct them at the Foreign Secretary. I have not taken part in any discussions or negotiations with the Greek Government, the Hungarian Government or any of the other Governments in the region. Certainly, as part of the convincing explanation that I seek, the reasonable points that have been raised by the hon. Gentleman will have to be answered. It is, of course, for the Foreign Secretary to answer them.

I have one question on Kosovo for the Foreign Secretary. I hope that he now, or the Minister of State, Foreign and Commonwealth Office in her winding-up speech, will assure the House that he will continue to argue that any military presence in Kosovo, whenever it enters that tragic and devastated land, will be NATO led.

Kosovo is the most urgent question on the agenda at Cologne, but it is by no means the only one. Other issues are vital, too. The German presidency has in many respects been a defining period. The arrival of the single currency in January was a sign of things to come. As the president of the European central bank said at the time, it meant that monetary policy, which had been, in his words, an essential part of national sovereignty", would in future be

decided by a truly European institution". As a result, it seemed that Europe's leaders felt able to be even more explicit about their intentions. Germany's Minister for Europe, for example, made his position clear: Normally a single currency is the final step in a process of political integration. This time the single currency isn't the final step but the beginning. Inevitably it will happen". Germany's Foreign Minister said:

Political union, including new member states, must be the lodestar from now on—it is the logical follow-on from economic and monetary union. He said that turning the European Union into an entity under international law, with a common constitution, is the decisive task of our time. Then along came Mr. Prodi, who said:

Europe needs a strong Government and that the Commission "will be the Government." He went on to say that, in due course, just as a European single currency exists, so there should be a single European army.

Therefore, the agenda of the integrationists on the continent of Europe is clear: one currency, one tax policy, one employment policy, one legal area, one army—what else is needed to create a single European state? Why do the integrationists here deny it? Why, alone in Europe, do they pretend that they do not subscribe to that vision?

Why did the Foreign Secretary say, flying in the face of all the facts, in his interview with the New Statesman last August, that Maastricht was the high water mark of integration"? Did he not realise that the ground would be cut from under him within months by the Downing street spokesman who told The Daily Telegraph on 26 March: Integration is part of our mantra … The Prime Minister is busy integrating now. Did the Foreign Secretary not foresee that, within weeks of that interview, he would be writing to me listing the areas that would remain the preserve of national Governments as to how we run our education and health systems, the welfare state, personal taxes and matters affecting our culture and identity? There was no mention of corporate taxation or any taxation other than personal taxation; no mention of asylum or immigration. They are clearly not matters that, in the Foreign Secretary's view, should remain the preserve of national Government.

In that letter to me, the Foreign Secretary explicitly identified defence as a suitable area for integration. Very few people witnessing the European contribution to the crisis in Kosovo would deny that there is much scope for closer co-operation among the European members of NATO in relation to defence. But co-operation is not the same as integration, and integration outside the framework of NATO, as is explicitly envisaged in the St. Malo agreement that was signed by the Prime Minister at the end of last year, could do great damage to the alliance between Europe and America in the form of NATO, which still remains critical to the future peace and prosperity of the world.

We have still to receive answers from the Government to the most basic questions on the future of European defence as they see it.

Mr. John Smith (Vale of Glamorgan)

Can we assume from what the right hon. and learned Gentleman says that he rules out the possibility of a European defence architecture even within NATO?

Mr. Howard

I have no idea what the hon. Gentleman means by the phrase "European defence architecture". As I have said, I am in favour of closer European co-operation on defence matters within NATO; that seems to make total sense. The problem up to now for European members of NATO in relation to defence matters has been not the lack of any institution or architecture, but the lack of agreement. Far too often, the European members of NATO have disagreed among themselves on what they should do.

We have still to receive answers to some basic questions. What is to be the position of the countries that are members of NATO but not of the European Union—Norway, Iceland and Turkey, and the new entrants—Poland, Hungary and the Czech Republic? What is to be the position of the members of the European Union who are neutral but are not members of NATO—Austria, Sweden and Ireland? As a senior civil servant told The Guardian on 26 October: It is refreshing but a bit unnerving for us to have a Prime Minister who is prepared to launch a major policy debate without knowing where it is going to end up. The leader of the European socialist party, at any rate, is under no illusions about where it will end up. On 12 January, Pauline Green said: We believe in the extension of majority voting on everything except changes to the Treaty, the membership of new countries in the European Union and taxation issues. So there we have it: a single European army committed to action—or, perhaps more likely, prevented from action—by majority voting. That is the socialist prescription for European defence, and it is a prescription that the Opposition utterly reject.

Defence is by no means the only matter on which the Government are working towards further integration. If the Governments of Europe were serious about taking action to reduce the number of people without jobs in Europe—more than 16 million of them—they would be spending their time in Cologne discussing how to cut down regulations and red tape. Instead, they will be discussing the so-called employment pact—which should be renamed the "unemployment pact", as it contains more of the policies that created Europe's tragic unemployment levels initially.

As my right hon. Friend the Member for Charnwood (Mr. Dorrell) has just pointed out, the manifesto on which the Labour party will be fighting the elections to the European Parliament talks about negotiating with the so-called social partners—union leaders and business organisations—at a European level. Now just imagine the uproar there would be if the Government legislated to make agreements between the Trades Union Congress and the Confederation of British Industry binding on all British firms. Everyone would realise that such an arrangement is far worse even than the mess that we got into under a Labour Government in the 1970s. Yet, these proposals are even worse than that.

The proposals would provide that agreements between trade unions and employers organisations at European level are binding on British firms—and we know the type of thing that they have in mind. Labour's manifesto for the European elections specifically talks about the further restrictions on working time that it wants to see. We know that the Commission wants to extend the working time directive to the transport industry, as if that directive had not created enough havoc already.

We know that the Commission is going ahead with its proposals on works councils—proposals that the Government themselves oppose, but which they are now powerless to prevent because they signed up to the social chapter and the extension of qualified majority voting that it provides. We also know that the German Minister for Europe has called for a co-ordinated wages policy.

Two weeks ago, the Economic and Finance Council agreed to make fiscal and monetary policy as well as wage developments mutually supportive. Perhaps the Minister will tell the House how that is to be achieved without inhibiting the private sector's ability to determine the salaries that its employees are paid.

Mr. Hogg

My right hon. and learned Friend has identified a major threat to Britain's industrial future. However, is he not notably concerned about another aspect of it—that the European Court will itself be able to interpret the agreements? Does not its track record suggest that it will drive forward the agreements to encompass matters that were not contemplated even by those who made them?

Mr. Howard

My right hon. and learned Friend is entirely right. We could point to numerous examples of that. The Labour party claims that at long last it has learned the lessons of the disastrous prices and incomes policies for which it was responsible in the past, but it now proposes to introduce them at a European level.

There is also the matter of tax harmonisation. At Cologne, Europe's leaders should be welcoming the effect of tax competition in creating an incentive for European countries to get their taxes down. Instead, we shall see more tax harmonisation to which yet again Labour is committed in its manifesto. It is perhaps hardly surprising that the Government should be prepared to give up their veto on taxes; they are not prepared to exercise the veto, even when they have got it. We still have no assurance that the Government will exercise their veto on the withholding tax which will do so much damage and destroy so many jobs in the most successful sector of the British economy. Indeed, so much importance do the Government attach to this measure; so high does it come on its list of priorities, that the Deputy Prime Minister had clearly never even heard of it until he was memorably questioned about it by my hon. Friend the Member for West Worcestershire (Sir M. Spicer) just a few weeks ago.

This morning, in another example of the Government's well-honed spinning tactics, we were told that the withholding tax had been toned down—not withdrawn, but toned down—so presumably the damage that it will do to British jobs and British commercial success will also be toned down, but not withdrawn. That simply will not do. The withholding tax should be vetoed at ECOFIN today. Anything less would be an abdication of the Government's responsibility to those whose interests they are charged to defend. However, the withholding tax is by no means the only tax harmonisation measure that we face. So sensitive are the Government about the extent of the proposals that one has to go to a Dutch Government website to find out what they are about—on the very day that the Government published their draft Bill on freedom of information.

Mr. Loughton

My right hon. and learned Friend might be interested to know that a press agency has just reported that the Chancellor has given in on the withholding tax. He has not used his veto, so the country will have to accept it subject to certain clauses. Would my right hon. and learned Friend like to comment on that?

Mr. Howard

Well, I did not know that. It is extremely bad news for jobs in this country and for what is perhaps the most successful part of the British economy. It is indeed a black day. If it is true, the Government should make a statement to the House explaining why they have surrendered in this fashion.

Mr. Jack

I very much support my right hon. and learned Friend in calling for a statement, particularly bearing in mind the assurances that the Prime Minister gave me in answer to an oral question in the House saying that the veto would be used to prevent the withholding tax from being imposed on the United Kingdom.

Mr. Howard

My right hon. Friend will be well aware that the Chancellor has repeatedly refused to repeat the assurance that the Prime Minister gave him. As he rightly pointed out, that is a serious matter.

Labour MEPs have already voted for the British veto to be abandoned "as a general rule" in much of the tax field, making Britain powerless to resist higher European tax rates.

There it is—in a nutshell. More red tape, higher taxes—the very measures that have crippled Europe's ability to compete with the rest of the world are to be reinforced and extended.

The proposals continue to spew out of a Commission that should not still be there. So discredited a body has it become that in March the Commissioners were obliged to resign. However, in the topsy-turvy world of the European Commission, resigning means staying in office, continuing to draw salaries and continuing to take decisions—125 decisions affecting the lives of 300 million people across Europe since March—and pretending that nothing has happened.

The responsibility for this lamentable state of affairs rests fairly and squarely with the Council of Ministers, with the Governments of Europe. They should have immediately declared their readiness to appoint new Commissioners to make the resignations effective and it is not too late for them to do it at Cologne.

The Governments of Europe should also be pressing for radical reform. My right hon. Friend the Leader of the Opposition has proposed a comprehensive agenda for reform, including the establishment of a truly independent fraud office outside, not inside, the Commission. The Foreign Secretary was unconvincing in dodging the question from the hon. Member for Falkirk, East (Mr. Connarty) on that simple point.

How can we expect serious reform from Ministers from a party whose leader in the European Parliament—Pauline Green, the leader of the European socialists—was singled out for criticism by Paul van Buitenen, the whistleblowing official suspended from his post by the Commission? How can we expect reform from a party whose Members of the European Parliament have refused to censure or dismiss a single Commissioner throughout the crisis? Labour MEPs put down a motion of censure on the Commission in the European Parliament, then withdrew it as soon as it looked as though it was going to be passed. The party's sole aim has been to protect its own, to save its face and to whitewash fraud.

The fundamental lesson arising from Europe's recent crisis is that Europe has been doing too much and doing it badly. At Cologne, Europe's leaders should discuss how the European Union could do less, but do it better, not least so that significant reductions can be made in the size of the European budget. They should also discuss enlargement. The Foreign Secretary's memorandum to the Foreign Affairs Committee last week did not mention enlargement, except in the context of qualified majority voting. We have consistently called for enlargement to be a priority for the EU. This is an historic opportunity to advance the principles for which Europe should stand: free trade, free markets, deregulation and co-operation. The timetable has been delayed as a result of Europe's failure to recognise the need to change itself, to make its procedures more flexible and to cut costs.

Perhaps when she winds up the Minister will make it clear whether she agrees with our proposal, made as part of our drive to increase flexibility in Europe, to give applicant countries the opportunity of a partial derogation from the acquis communautaire. Will she also clarify the effect that recent events in the Balkans will have on the accession timetable for countries such as Bulgaria and Romania, which are not included in the first wave?

We can tell that an election is imminent, because the Prime Minister has let his hitherto latent Euro-scepticism become known to the tabloids. Even for a Government driven by spin doctors, the tactic of repeatedly saying one thing while doing another must be nearing the end of its useful life. We have seen it all before. The House and the country should be fully aware of which Prime Minister will be travelling to Cologne. It will not be the Prime Minister who assured readers of The Sun just before the general election of his love for the pound, but the one who, shortly afterwards, committed his Government to abolishing the pound at the earliest opportunity. It will not be the Prime Minister who told British business men that Europe needed to deregulate, but the Prime Minister who then signed up to a European socialist manifesto calling for more regulation. It will not be the Prime Minister who, simply because there is an election coming, pretends that he does not want to bounce Britain into the euro, but the Prime Minister who travels to Aachen to receive a prize for promoting European integration, lamenting the attitude of this nation. We have got used to the Prime Minister and his Government saying one thing in Britain and doing another in Europe. It will not work any more.

At Cologne, Britain needs a Government who will put the case for a more flexible and more outward-looking Europe that deregulates more and interferes less— in short, a Europe in line with the mainstream views of the British people. That would be a positive vision for the future of Europe. It is the vision held by the Conservative party. The crucial difference between the Government and the Opposition is that the Labour party cannot grasp the fact that it is possible to be constructive about Europe and in Europe without conceding vital British interests. When the Conservative party co-operates with our sister parties in Europe, we do so without signing up to manifestos with which we disagree and without abandoning all vestige of principle. When we publish a joint statement with our centre-right colleagues we do so as well as, not instead of, giving firm pledges to the British people. Unlike Labour's, Conservative policies are made in Britain for Britain.

This is the first British election of any kind during which a major political party has not fought the election on a British manifesto. Instead, the Labour party has handed out the manifesto of the Party of European Socialists. The name Labour party is nowhere to be found in that document. Alas, that is the party that will represent Britain in Cologne. When it travels to the continent, it does so not to work for British interests, but to receive its instructions.

I have one question, which I hope that the Minister of State will answer when she winds up. Given that the manifesto of the Party of European Socialists is the platform on which her party is standing, would not it be more honest for their candidates to describe themselves on the ballot paper as representing the Party of European Socialists? After all, that is what they are asking people to vote for on 10 June.

Mr. Mike Gapes (Ilford, South)

Will the right hon. and learned Gentleman confirm that the xenophobic policy that he is now putting forward, and on which his party fought the general election, led to a humiliating electoral defeat for the Conservative party? Is he looking forward to repeating that on 10 June?

Mr. Howard

I am certainly looking forward to the results on 10 June and I suggest that the hon. Gentleman holds his fire until we have seen them.

The Government's approach to the vital questions facing Europe is a million miles away from the mainstream views of the British public. To coin a phrase, it is time for a change in Europe. That change will never come from Labour, and the Liberal Democrats have given up all pretence of defending Britain's interests. Only the Conservatives believe that Britain should be in Europe, not run by Europe. Only the Conservatives will work for the kind of Europe that the British people want.

Dr. Godman

The right hon. and learned Gentleman does not even speak as a representative of a British party.

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. The hon. Gentleman should not interrupt the debate from a sedentary position.

5.32 pm

Ms Rosie Winterton (Doncaster, Central)

I am grateful for the opportunity to speak in this debate, because I wish to address what my right hon. Friend the Foreign Secretary called the people's Europe and the role that the European Union has played in economic regeneration and in creating jobs, especially in the area that I represent. It may be helpful to give some background information about my constituency and South Yorkshire.

Some 30 years ago, the South Yorkshire economy was thriving and the heavy industries of steel and coal were buoyant. Tool and railway engineering companies were large employers and unemployment was well below the national average, while male wages were well above. Indeed, they were among the highest in the country. However, over the past 30 years those traditional industries have collapsed.

In 1984, South Yorkshire had 29 working collieries, which employed more than 30,000 people. In 1998, there were only three collieries, which employed 820 people. That is the scale of the reduction. Between 1977 and 1995, the number of industrial jobs fell by 60 per cent and more than 177,000 jobs were lost. It is true that some 46,500 jobs were created in service industries, but overall the total work force was reduced by a quarter. A total of 132,000 jobs were lost.

In 1997, unemployment in South Yorkshire was 10 per cent., compared with a national average of 7.1 per cent. The effect on local communities is enormous. Many people are surprised that this once-thriving area now qualifies for objective 1 status, but it does: the effect of unemployment has been devastating.

I have a letter from Nigel Pattinson, the head teacher of Armthorpe school in my constituency. The school recently made a promotional video to highlight the school's successes and the achievements of its pupils. It was shown to sixth formers, and Mr. Pattinson writes that, afterwards, one of them said: We're only kids from a pit village, you know. You seem to expect us to do better than we're meant to. The head teacher adds: I can't tell you what I feel about this … and how damaging it is to these youngsters in reaching their potential. That shows the scale of the devastation suffered by such communities. However, membership of the European Union has allowed South Yorkshire to access funds and establish projects that try to tackle the real problems created by mass unemployment and reverse the climate of despair that goes hand in hand with it.

Yet much of what has been achieved has been accomplished despite the opposition of the previous Conservative Administration. They refused to introduce any special domestic programmes to help coal mining regions during the main pit closure period after 1984. Europe, on the other hand, listened to our problems and set up the RECHAR programme in 1989. However, even after that programme was established, the Tories tried to prevent the benefits that it brought from reaching mining areas by trying to claw back, from local authorities, the funding that was made available.

The European Commission, lead by Commissioner Bruce Milian, backed the mining areas against the Tory Government, and threatened to block all EU spending unless the Government changed the rules. Eventually, the Tory Government had to back down and European funding became genuinely additional.

However, making the European Union real to people is a big task. We need to make them understand what European funding has done towards meeting their needs. People in South Yorkshire want to know what Europe is doing for them in terms of providing jobs, because that is what they are interested in. I shall give some specific examples of how European funding has directly benefited people in my area.

Between them, the Lakeside development project in central Doncaster and the Junction 4 employment project in Armthorpe in Doncaster have received almost £7 million from the European regional development fund. They are expected to generate more than 8,500 jobs. Local companies have benefited from the Doncaster technology centre, and more than £200,000 in European funding has been received. Companies such as Noel Village (Steel Founder) are accessing, through the export challenge programme, western European countries for export markets. Young people are being trained through a foyer scheme that received more than £0.5 million in funding from Europe.

Crime is being reduced through a CCTV scheme in the town centre, for which £200,000 has been received from Europe. The Doncaster College for the Deaf, a great project, received £93,000 to support residential students and promote interviewing, teamwork and personal skills, thus helping people with disabilities to get into work and live independently. In Armthorpe, European funding helped to set up a community centre, providing a focus for a community that had been devastated by pit closures. Since 1991, Doncaster alone has received £38 million in European structural funds.

Looking towards the future, we have the prospect of funding from the objective 1 programme. Approximately £90 million a year will be available over six years. It is vital that funding is used to meet the needs of local people. My right hon. Friend the Foreign Secretary referred to a people's Europe, driven by people and responsive to their needs. People set the priorities, and consultation must be thorough and systematic.

I can recommend a consultation method used in Armthorpe. Instead of simply publishing a questionnaire in the local paper and hoping that people would fill it in, Armthorpe community enterprise, locally known as ACE, joined with Armthorpe school to involve pupils in saying what would improve their job prospects and the quality of life in the community. That resulted in much greater participation than ever before, creating a real sense of involvement in the use of vital European funds among local people, particularly the young.

The results of the consultation will be published soon, and I invite my right hon. Friends the Foreign Secretary and the Minister of State to come to Armthorpe to see the results. They would be able to see what happens in practice when we go down to a lower level to involve local people.

Mr. Denis MacShane (Rotherham)

They could see the great brass bands, too.

Ms Winterton

And the great brass bands.

Mr. Robin Cook

They could go on a race day.

Ms Winterton

Indeed; the attractions are mounting by the minute.

Matched funding is vital to the success of the objective 1 programme.

Miss McIntosh

The hon. Lady is giving us a picturesque overview, and she will be aware that North Yorkshire is not a million miles from South Yorkshire. Some of my constituents have benefited substantially from EU funds in the past, particularly 5b funds and the Konver programme. The farming community is in a time of crisis. I hope that the hon. Lady will also plead the case for North Yorkshire with her Front-Bench colleagues so that the whole of Yorkshire can be happy.

Ms Winterton

The hon. Lady is well capable of pleading her own case, but lifting the beef ban is one thing that will make people happier.

The Government, in contrast to the previous Administration, are already preparing so that areas such as South Yorkshire will be able to receive the full benefit of objective 1 funding. With matched funding, the establishment of the coalfields enterprise fund and the coalfields regeneration trust has shown the Government's willingness to ensure that we can use the maximum available resources from objective 1 funding, and assurances have been given about, for example, the single regeneration budget.

Membership of the EU has brought many benefits to the area that I represent. The Government are showing how a positive attitude to Europe, leadership and a willingness to encourage participation in all areas can make a real difference to people's lives. As Linda McAvan, the Member of the European Parliament for my area, said recently, European Union funding means that our coalfields are turning the corner and much-needed new jobs are coming to our area and improving our communities. That is the way in which we can increase people's confidence and self-esteem.

I hope that we will no longer have a situation in which young people in the areas to which I referred say, "We're just from a pit village. Don't expect much from us." The Government are showing how we can change that view and the European Union is helping us to do it.

5.45 pm

Mr. David Heath (Somerton and Frome)

It is a pleasure to follow the hon. Member for Doncaster, Central (Ms Winterton), who gave us a charming view of the local perspective of Europe in her constituency. As an inveterate supporter of Somerset county cricket club, hon. Members may imagine my dismay at hearing Yorkshire people falling out among themselves as to their objectives.

This is a useful and important opportunity to air concerns before the European Council. I recall the similar debate before the Vienna Council six months ago, when some of the perspectives were rather different. For example, not one speech went by without a mention of Oskar Lafontaine, who seems to have virtually disappeared from our radar screens.

Some issues are still current. Tax harmonisation and its discussion has been touched on today. It is important to reiterate the view that however much tax harmonisation may be advocated from those on some Benches in the case of lorry fuel duty, it is not something that we Liberal Democrats advocate. We believe that that is the one area of flexibility available to national Governments within the strict financial controls of the Maastricht treaty. It is an area in which subsidiarity is important and decisions are best made at the national level. We think that tax competition is a beneficial device in determining national economic performance and policies.

For all those reasons, we dismiss the view that tax regularisation should never be discussed. That is nonsense. It may well be in the British interests to consider ways in which we can come to a similar view about taxation levels. At the same time, using the veto where it is necessary to protect British interests is also an important issue. We shall study carefully the decisions taken at the Economic and Finance Council. I hope that the Chancellor will be able to make a statement at a later date about precisely what has been decided.

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

I am grateful to the hon. Gentleman for giving way because that allows me to put on record that the withholding tax was not agreed today in ECOFIN. The council agreed to submit a report to the Cologne Council, highlighting our concerns about the eurobond market. Indeed, the Chancellor has promised ECOFIN a report in June on our position and difficulties with aspects of the proposed directive.

Mr. Heath

I am most grateful to the right hon. Lady for assisting us with that information. No doubt, those are the rather amorphous clauses to which one hon. Member referred. We must look in detail at that decision.

Kosovo was an afterthought in my comments of 3 December, but it is at the forefront of our discussions today. I am grateful to the Foreign Secretary for what he told us about the present situation, although the House may have to be further informed before the break for our recess on the rapidly changing situation, which involves the accumulation of troops. As the right hon. Gentleman would expect, Liberal Democrat Members very much welcome the fact that a decision appears to have been taken at least to provide the option of a peacemaking rather than a peacekeeping force through the accumulation of troops. The window for that to take place was narrow. If that option is what the Foreign Secretary has brought back from Washington, I welcome it.

I must repeat the question that I put to the Foreign Secretary at last week's sitting of the Select Committee on Foreign Affairs, which he was good enough to attend. A stark choice faces NATO in the execution of the war. Two options would remove the need for that choice. The first is the capitulation of Milosevic, which is devoutly to be wished and of which there are some signs in the information emerging from Serbia about a weakening of his position, both politically and militarily. However, that is by no means definite. The second is that we make an open-ended commitment to an attritional bombing campaign. I do not believe that that is acceptable or sustainable. If we set aside those options, the choice boils down to two alternatives. First, we could use ground troops effectively in sufficient numbers to finish the job that we have started. I do not dismiss for one moment the substantial logistical and strategic problems with that course. Secondly, we could maintain the line that NATO appears to have adopted hitherto, that we will not use ground troops except in an entirely permissive situation. The natural corollary of that is that we accept a negotiated settlement.

I ask the Minister to confirm again the point that I made to the Foreign Secretary. If there were a negotiated settlement as part of the endgame, apart from the conditions that are already clearly laid down as the objectives of the campaign, will the territorial integrity of Kosovo be maintained? By that I mean that there will be no partition by negotiation and no de facto partition arising from a partial withdrawal of Serbian forces or a zonal deployment of international forces that created a Slavic zone in the Kosovo province. Will she confirm that there can be no question of immunity for Milosevic or the key players in Serbia from prosecution by the International War Crimes Tribunal? Will she confirm that whatever solution emerges must be, because it would be a failure if it were not, acceptable to the refugees congregating in the front-line states?

I hope that there will be an opportunity at Cologne to consider further the support that this country and the European Union can give to the front-line states. I have often reiterated my concern about the position in Montenegro. I welcome the fact that the Foreign Secretary is due to meet Mr. Djukanovic tomorrow.

Mr. Robin Cook

Today, and in about five minutes.

Mr. Heath

In that case, I must make my point quickly. The position adopted by the Government of Montenegro has been heroic. They have a very large number of refugees on their soil without the obvious means of support that have been provided to other countries. We must do all that we can to ensure the protection of Montenegro's Government and people, and when the war is over, we must provide them with the support that they need to rebuild their economy. The same applies to Albania, Macedonia and to that most unlikely recipient of refugees, Bosnia-Herzegovina. It has not been much reported that the Bosnians have 21,500 refugees on their soil. Few European countries can be less able to meet that economic burden.

A major objective of our diplomatic effort in the near future must be to provide support for all the Balkan countries to create stability. The Royaumont process is one way of doing that but we need to go much further with a stability pact. We also need to consider the countries of the Caucasus and central Asia, which have taken a positive view of what NATO has done and put vital pressure on Russia.

In considering the consequences of the Kosovan situation, we must re-examine the European defence and security dimension. As might be expected, I agree with my right hon. Friend the Member for Yeovil (Mr. Ashdown) when he says that the European Union is a political heavyweight but a military lightweight. The Cologne summit may be the first opportunity to make the point forcefully to our European partners that they must share to a greater extent the burden of European security and make the contribution that is essential if the European dimension is to be a reality.

That does not mean a common European army, and I do not see why it should be interpreted as meaning that. It means that a European dimension must be firmly embedded in NATO. That is what every member of NATO, including America, wishes, but we must act to make the early steps taken at St. Malo a reality. That might include a Europe-wide defence review. It certainly must mean closer co-operation on procurement and development, and—something dear to the Foreign Office—stronger controls on arms sales.

If development of a common foreign and security policy is coupled with the enlarged European Union, which I think is critical to the future security of the European continent, that, by its nature, redefines the relationship with Russia. No hon. Member needs reminding that Russia has gone through a difficult political period, not least in the past few weeks. There was a risk that Russia would be rudderless this week. Happily, that is not the case. There is still a President, Government and Duma.

Dr. Godman

Is the hon. Gentleman aware of the lively debates on a European defence review in the neutral states, such as Sweden, Finland and the Irish Republic? I think that the Taoiseach and the Government of the Irish Republic are anxious to sign up for the "Partnership for Peace" initiative, and similar debates are taking place in the other two neutral states.

Mr. Heath

The hon. Gentleman is right. It is interesting that from several different directions there is a view that we must get the principle of European security right and that we cannot simply rely on the Americans, although we welcome and depend on our friendship and alliance with them and the other transatlantic forces. The CFSP will be effective only if it engages positively and carefully with Russia. We must recognise that as an EU priority in the months ahead. That should include not only Russia but Ukraine, which is often forgotten, and, if possible, Belarus.

The middle east has not yet been mentioned but I hope that it will be a key issue at Cologne. Hon. Members on both sides of the House have warmly welcomed the election of Ehud Barak in Israel. We should also greet that election with realism, because it was largely a referendum on the popularity of Binyamin Netanyahu rather than on the prospects for the peace process and the steps that need to be taken. Nor should we underestimate the difficulty of forming a united Government in Israel, let alone establishing a consensus on the way forward in the peace process. The difficulties are formidable and they will need our assistance. Let us not leave it to the Americans to be the only brokers of that peace; let the European Union take a real initiative.

Mrs. Louise Ellman (Liverpool, Riverside)

Does the hon. Gentleman agree that the form of the Government of Israel is a matter for the people of Israel and will largely be the product of their electoral system? Does he agree that while it is right that the European Union and others do their utmost to secure peace on the basis of Oslo and the Wye accords, it is ultimately a matter for negotiation between the Palestinian people and the Israeli Government?

Mr. Heath

Of course, the Government of Israel is a matter for the Israeli people. I should not dream of intervening in that process. However, this country and other member states of the European Union may have a part to play in forwarding the peace process—as the Berlin declaration set out. I hope that we can build on that and that, where we can provide support for that process and for the process of international law, we shall do so. The middle east is an important part of the world; it is of critical strategic importance. It is an area in which many people in this country have a real interest.

In relation to what are unflatteringly described as the Amsterdam leftovers, there are rather a lot of them. Given that the Amsterdam summit was rather a jejune feast at the best of times, it is rather perverse that the leftovers seem more extensive than what was agreed. However, we must now make significant progress. There is a great imperative for reform, not least in the matter of the Commission and the way in which the EU does its business. Liberal Democrat Members want to see the reform of politics in Europe, exactly as we want to see the reform of politics in Britain. It is the same process, but it takes place at different levels. Our objectives are consistent.

The wastefulness and mismanagement in the EU which were highlighted by the Court of Auditors report represent an open sore in the relationship between the EU and its member states. My party and I believe that there can be no compromise on corruption, no weakness on waste and no respite on reform. The episode that took place early this year has shown us a European Parliament that is beginning to grow in stature. However, having said that, the Parliament remains incoherent in its response to what happened. The socialist group defended the indefensible—cuddling up to Jacques Santer when it should have treated him with a great deal of care in relation to his defence of the European Commission. We also saw that Conservative Members of the European Parliament were unable to unite either to give support to Mr. Santer, who is a putative colleague on their Benches—I believe that he will be sitting with the Conservatives in the next European Parliament—or to disown him. That lack of ability to take coherent action was signposted by that admirable fellow Pat Cox in his proposals to name and shame the Commissioners who had been criticised. In effect, the European Parliament ducked the challenge. It has continued to do so in its reaction to matters such as the statute and the expenses. The Parliament is allowing the impression to be given that it is wedded to unacceptable practices that no Member of this House would want to defend.

Miss McIntosh

rose—

Mr. Heath

Perhaps one Member wants to do so. I give way to the hon. Member for Vale of York (Miss McIntosh).

Miss McIntosh

I should be interested in the hon. Gentleman's views on why the leader of the socialists in the European Parliament tabled a motion calling for the sacking of all the Commissioners and then—as my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) pointed out—withdrew it as soon as it looked as if it would be adopted. Does the hon. Gentleman agree that that is extremely odd behaviour?

Mr. Heath

I agree. That behaviour was shameful. The measure was an artifice, designed to try to buy time for the Commission in an unacceptable way. I find it equally unacceptable that the group of which the hon. Lady is a member was able to split three ways over the same issue, but that is another matter. The fact is that there was a need for the European Parliament to take a lead. I point out to the Minister of State that the fact that Mrs. Edith Cresson is still in post is preposterous, as many people outside the processes of the Parliament agree.

We need a new intergovernmental conference—there is a great deal for it to do. Its work will not lie merely in salvaging the fudge over the reform of the common agricultural policy, which is unsustainable in its current form. As a representative of a dairy farming area, the dairy farming agreement will not be sustained any further than the next meeting of the World Trade Organisation—the agreement will not pass the necessary tests. The policy is not the right recipe for allowing enlargement; that is a serious problem.

We also need some serious institutional reform to prepare the EU for the next decade and beyond. We need to entrench the diversity and decentralisation that many Members of this House want to see. We need the completion of the single market. When the updated league table is produced, it will be interesting to see whether it is similar to the one produced at the last juncture at the end of 1997, when only 70 per cent. of the relevant legislation had been implemented nationally. At that time, the United Kingdom was one of only five states to have implemented 95 per cent. or more of international market legislation. Will the rest of the states catch up? Will the single market be a reality?

We need to find a way to codify properly the principle of subsidiarity that is so important if we are to bring power down to the lowest level. We must be clear that what can be done locally and regionally will be done locally and regionally, that what has to be done nationally is done nationally and that only what must be done at a European level is carried out at that level.

We hold this debate in the shadow of the European elections. The right hon. and learned Member for Folkestone and Hythe (Mr. Howard) indulged himself with a little low-intensity electioneering. I was disappointed; in the past, he has been more robust, but perhaps he is looking forward to his additional hours of leisure during the next few months. Today, I did not think that he was running on all four cylinders in his electioneering function. Alternatively, it might have been because he represents only a fraction of the Conservative party and he was unable to unite all its members.

There were 18 years of Conservative Government; we know what that did for our status and our position in Europe. We know the result of Conservative non-engagement. There is a vice of which I was sometimes accused when I used to play rugby.

Mr. Stephen Pound (Ealing, North)

I hope the hon. Gentleman did not enjoy a line-out with Lawrence Dallaglio.

Mr. Heath

The hon. Gentleman is very quick. I left him that opening and he filled it.

In rugby, members of the pack are sometimes accused of flanking—hanging around at the side of the pack, hoping to do something flashy to please the crowd, but not providing any useful support to the rest of the team. When the Conservatives were in government, they had a record of flanking on Europe. The alternative is to get stuck in. It is time that we got stuck into Europe; only by being fully engaged can we bring about the reforms that are needed. I hope that Members of the new European Parliament—from whichever party they come under the new system—will get stuck in. I also hope that the Labour Government will do so.

The Government show a strange reticence; they know that they should make progress over Europe, but they oscillate from one side to the other. They oscillate from Mr. Murdoch to the focus groups. They are so busy oscillating that we end up with a quivering mess in the middle of the road; that does not provide the progress and leadership in Europe that we need. If we are serious about creating a more successful Europe, in terms of its structure and economy and the way in which its citizens perceive the EU, we must create a Europe that is more decentralised, democratic and diverse. That is a genuine agenda for Cologne. I hope that the Minister who replies to the debate will be able to convince me that the Government share the Liberal Democrat objective of making that agenda a reality in the months to come.

Mr. Francis Maude (Horsham)

On a point of order, Mr. Deputy Speaker. Have you received a request from a Treasury Minister to make an urgent statement to the House about developments at the ECOFIN Council in Brussels, which the Chancellor of the Exchequer is attending today? There is evidence that those developments go directly against what the Chancellor told the House only 10 days ago. On that occasion, he made it clear that: the United Kingdom will not accept any directive that requires member states to introduce a withholding tax. He said that twice. Later, he stated: the UK will not accept any directive that requires members to introduce and impose a withholding tax."—[0fficial Report, 13 May 1999; Vol. 331, c. 405.] The Chancellor gave a clear commitment that the United Kingdom Government would veto any directive that imposed a withholding tax. It is now clear from the conclusions reached at ECOFIN that that is simply not the case. The United Kingdom Government have committed themselves to submitting a technical paper on the exemption of one part of the market from that directive. This is a matter of great importance. Thousands of jobs in the financial services industry are at risk and people need to know what is happening.

Mr. Deputy Speaker

Order. I think I have got the sense of the right hon. Gentleman's point of order, which is developing into a speech. I have not received a request from the Government to make a statement about that matter—although they are able to do so at any time. The Minister who will reply to this debate may be of a mind to refer to that issue later.

6.11 pm

Mr. John Cryer (Hornchurch)

I was interested to hear the hon. Member for Somerton and Frome (Mr. Heath) talk about decentralisation and the European Union. His comments seem to be at odds with the direction in which the European Union and the European Commission have been moving in the past 20 or 30 years. For instance, what does decentralisation have to do with the treaty of Maastricht and the concentration of real economic and political power in fewer and fewer hands?

I am always fascinated to hear Conservative Members such as the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) refer to the abandonment of the veto. The single greatest abandonment of the veto occurred in 1985 when the Conservatives pushed the Single European Act through Parliament. Some serving Members of Parliament helped to push that legislation through: it was Mrs. Thatcher's great stand against the Brussels juggernaut.

I have always believed that the Conservative party managed to secure the worst of all possible worlds in its policy towards the European Union. The Conservatives managed to wrap themselves in the union jack at home—playing an appallingly nationalistic card that was entirely counterproductive. They then went to Brussels, Strasbourg or wherever and lay down and died in front of any treaty that was foisted upon them.

The United Kingdom joined the European Community in 1972 without any mandate from the British people. It was a Labour Government who held a referendum in 1975. We then had the Single European Act 1985, the common fisheries policy and the common agricultural policy. Finally, we witnessed that great victory for Conservatism: the Maastricht treaty, which was signed by the right hon. Member for Horsham (Mr. Maude), the shadow Chancellor. It is a shame that he is not in his place at present. If he is to respond to the debate later, I look forward to his sharing with us his special thoughts about how it feels to have been the British politician who put his name to the Maastricht treaty. He has never given us his views on that subject. [Interruption.] The hon. Member for Chesham and Amersham (Mrs. Gillan) may whinge from a sedentary position, but the fact is that the right hon. Gentleman put his name to the Maastricht treaty and has done nothing since then but criticise it. I would dearly love to know why he signed that treaty in 1992.

Mrs. Cheryl Gillan (Chesham and Amersham)

I was not whingeing from a sedentary position; I was simply remarking how ill informed the hon. Gentleman is. If he thinks that my right hon. Friend the Member for Horsham (Mr. Maude) is to make the winding-up speech for the Opposition, he is obviously in the wrong debate.

Mr. Cryer

In that case, why was the right hon. Gentleman in the Chamber earlier? He seemed to be making some notes—but there we are. Perhaps he will share his thoughts with us on another occasion. I look forward to that immensely.

Returning to the European Union—after that irrelevant intervention—I have always opposed the single European currency. I have made that clear both inside and outside this place. It is not because I am a little Englander—unlike many Conservative Members—or because I am a nationalist. I oppose the single European currency because I am an internationalist and I think it would be dangerous for people in Italy, France and Germany, as well as for working people and the democratic institutions of this country.

My objections to the single European currency are not economic—although plenty of criticisms may be levelled in that regard—but essentially political. The single European currency is basically a political project about the creation of a European super-state. The pro-Maastricht campaigners on the continent are quite open about that. They have always been Euro-federalists; it is only in this country that there is some equivocation among EU supporters about political integration.

I have always wondered why the supporters of Maastricht are so enthusiastic about transferring power from elected institutions to unelected bankers sitting in Frankfurt or Bonn who are accountable to absolutely no one. Why is it such a great victory for the democratic process that power over interest rates should be concentrated in the hands of a few unelected, unaccountable people sitting in a board room somewhere?

I will give hon. Members an example of the European Union's unaccountability. Before the launch of the euro at the beginning of the year, I saw an interview with the President of the European central bank, Mr. Duisenberg. When asked exactly what would be revealed about the decisions made by the board of the European central bank, he replied that the voting patterns of individual board members would not be disclosed as that would leave them vulnerable to pressure in their countries of origin. That is what democratic accountability is about: exposing oneself to pressure.

Our constituents may ask us to vote a particular way on a particular issue and to make a particular representation. At my last surgery, a constituent asked me to support the death penalty. I had to be honest and said that I would not support the death penalty in a million years. That constituent must now decide whether he will support me at the next general election. The bankers on the board of the European central bank will not be in that position; they will not be exposed to any public hostility or approbation.

As to democratic accountability generally across the European Union, I am absolutely convinced—this is a fairly obvious point—that the small, closed, rich, white shop, which is what the EU has always been, has led to the abuses of power and the corruption that we have witnessed in recent months. It has led also to the European Union's treatment of poor third world countries, which I can only describe as imperialistic. I refer my right hon. Friend the Minister to the report by the International Development Committee entitled " The Future of the EC Development Budget". In its conclusion, the Committee states: Recent fraud allegations have undermined the reputation of the European Commission. This report tells the story of an external assistance budget, unfocused, uncoordinated, ineffectively implemented and—to use the words of the Secretary of State—`skewed quite dreadfully against the poorest'". That is the record of the European Union in the third world viewed against the backdrop of its attempts to push poor third world countries into deeply disadvantageous and exploitative trade agreements with western EU countries in order to allow multinationals and big banks to exploit those third world countries more effectively. So much is revealed in a previous report by the International Development Committee about the Lomé convention.

Yet the European Union has somehow managed to maintain with some sections of the population a nice, cuddly, liberal image. The EU has perpetuated the myth that it is terribly nice to people, whereas it has behaved absolutely appallingly towards some of the poorest countries in the third world.

As to accountability, I would be interested to know the Government's intentions on the proposed referendum on the single European currency. To what extent are the Government prepared to support the recommendations of the Neill report about future referendums? Will the Government remain neutral in a referendum, as recommended in the report, or will they follow the line taken by the Labour Government in 1975? That was a perfectly honourable position, but it would be interesting to know which position the Government will take.

Hon. Members may remember—I was only 11 at the time, but I clearly remember it—that in 1975 the Wilson Government issued a document called "Britain's New Deal in Europe", which declared that the Government supported Britain's membership of the Common Market because we would retain a veto over all decisions that we did not like, and because there would never be an exchange rate mechanism, which would be a threat to jobs. Both those points now seem pretty ironic after Black Wednesday in 1992 and the Single European Act of 1985.

Will Ministers be allowed to voice their independent opinions during a referendum, as in 1975, or will they be expected to abide by the principle of collective responsibility?

I turn now to the European Union's spending on propaganda to promote the single currency. On 8 February, I wrote to the head of office at the European Parliament office in Queen Anne's Gate to ask questions about the spending of EU money—after all, it is our money because it comes from our taxpayers—on the promotion of the European Union and the single European currency. In that letter, I asked:

What was the expenditure last year, and how much will be spent this year, in the UK by the European Parliament on promoting the European Union on mobile information units or exhibitions? Hon. Members will be aware that trailers are touring the country, distributing pro-single currency information left, right and centre, outside schools and elsewhere. No information or propaganda about the other side of the argument is being distributed.

Secondly, I asked: How much money did the UK office of the European Parliament provide last year to support the European Movement in its programme of seminars and events and how much is expected to be provided this year? That was on 8 February, and so far I have not received a reply from the office of the European Parliament. That is how much it seems to care about accountability. When a British MP writes to it for a few simple explanations of how it distributes its funds, what answer does he get? Absolutely none. I must say that it comes as no great surprise.

Will my right hon. Friend tell the House whether a White or Green paper or a consultation paper will be issued in the run-up to a referendum to explain to people objectively and dispassionately the pros and cons of the single currency? That is important, and the publication of such a paper would again repeat the events of the 1970s, when the Wilson Government issued a paper to explain the pros and cons of membership of what was then the European Common Market.

I turn now to tax harmonisation. If we go along with a single currency, the next step will be tax harmonisation; there is no alternative to that and it is an exercise in mendacity to pretend otherwise. There have already been extensive discussions about that under the auspices of ECOFIN. There have been no discussions about, for example, the harmonisation of income tax, but there are no guarantees that it will not be debated under the auspices of ECOFIN in future.

Ms Diane Abbott (Hackney, North and Stoke Newington)

My hon. Friend will be aware that the Maastricht treaty—which 1 voted against because I read it from cover to cover—explicitly refers not only to monetary policy but to the need to harmonise fiscal policy. It is, as he said, an exercise in mendacity to pretend otherwise.

Mr. Cryer

My hon. Friend makes a good point. Anyone who has any doubts about the future direction of the European Union should read the Maastricht treaty. It is one of the biggest streams of right-wing monetarist poison that I have ever laid eyes on, which is why the previous Conservative Administration were successful in putting it through Parliament.

Can those who support the single European currency and try to argue that there will not be a move towards tax harmonisation say whether there is, anywhere in the world, a single currency but no single, central tax-gathering mechanism? Such a place does not exist, and any suggestion to the contrary does not hold water.

We are already experiencing cuts in regional funds. Objective 2 funds, for instance, will be spectacularly cut in the next year or two. Undoubtedly, one of the principal reasons for those cuts is that much greater funding is needed for the future single European currency. Any new currency requires enormous funds to create reserves, and funds must be moved around. That is why some of the structural funds are being withdrawn and money will be centred in the funds of the new single European currency.

With all due respect to my hon. Friend the Member for Doncaster, Central (Ms Winterton), we shall not gain the benefits that she has experienced in South Yorkshire and which she rightly welcomes. I come from Yorkshire, and the devastation of the mining areas is absolutely criminal; it was one of the greatest acts of political vandalism by the previous Government.

Dr. Godman

I intervene in case people from Northern Ireland are listening to the debate. I am not a defender of the European Union, but I point out to my hon. Friend that all EU member states have given a commitment to continue funding the peace initiative, which is so very important to the six counties and the Irish border counties.

Mr. Cryer

I thank my hon. Friend for that intervention. However, the withdrawal of funding from the structural funds will certainly intensify over the next years. I draw his attention to the McDougall report, which was recently released by the European Parliament. It says that the launch of any new currency requires enormous funding, equivalent to an income tax increase of several per cent. across the European Union. I do not hear many supporters of the single currency suggesting that we raise taxes by enormous margins to fund it.

There are one or two other matters to which I should like my right hon. Friend to refer in her wind-up speech. What progress has been made in reforming the common agricultural policy? That policy was another bequest that the Labour Government made to a grateful nation in the 1970s. The CAP is swimming in corruption; for example, funds are diverted to non-existent projects.

Will my right hon. Friend comment on the general state of the European Commission? Like other hon. Members who have spoken, I am amazed that Edith Cresson is still in power when she is clearly guilty of, at the very least, nepotism and mishandling funds, and probably something a great deal more serious. I look forward to my right hon. Friend's response.

6.28 pm

Mr. Stephen Dorrell (Charnwood)

I enjoyed the speech of the hon. Member for Hornchurch (Mr. Cryer) on several levels. He referred at the beginning of his remarks to the fact that my right hon. Friend the Member for Horsham (Mr. Maude), the shadow Chancellor, was one of two Conservative Ministers who signed the Maastricht treaty. The hon. Gentleman has no reason to know that because of my right hon. Friend's interrupted service in the House, I assumed his responsibilities in the Treasury after the 1992 election and was the Treasury Minister responsible for taking the Maastricht treaty through the House. The hon. Gentleman said that he regarded the Maastricht treaty as the enshrinement of right-wing monetary discipline, and I am happy to accept that description of the treaty—it is one reason why I was happy to be the sponsoring Minister as the treaty went through the House in the early 1990s.

The hon. Gentleman made a number of points that touched a chord with me. He asked the Minister important questions about the terms under which a referendum would be held on British membership of the single currency, and I hope that the Minister will answer them directly. What the hon. Gentleman said about the developing world was interesting, and I shall return to that subject.

As the hon. Gentleman was speaking, I was reflecting on what I had in common with him on his approach to matters European. It is not a great secret that we do not have everything in common, but he and I are both wholly at ease with the histories of our respective parties in the development of the European argument through the 1970s and 1980s. He, I expect, is proud of the fact that his party's official line was to vote against British membership of the European Community in 1971. He, I expect, is proud of the fact that his party fought the 1983 general election on a commitment to withdraw from the European Union—a manifesto on which the present Prime Minister entered the House as a newly elected Member, which is an ironic reflection, in view of his new status as a Europhile leader.

I expect that the hon. Member for Hornchurch would have been pleased to vote against the Single European Act 1985, as well as the Maastricht treaty. I am proud of the fact that my party was responsible for taking Britain into the European Community, and I am proud of the fact that I voted for the Single European Act, and that I was one of the sponsoring Ministers for the Maastricht treaty as it went through the House.

One of the most depressing aspects of our present situation is that the whole argument about Europe is thought by some to be encapsulated in the argument about monetary union. Those who are in favour of monetary union are thought therefore to be Europhile, whereas those who are suspicious or sceptical of monetary union are thought somehow to be Europhobic.

Even worse, those who are in favour of, or who at least leave open, the option of British membership of European monetary union in the future are said by some—I quote words that I have heard many times—to be "in favour of going in", whereas those who are anti-monetary union are said to be "in favour of leaving". Those phrases are redolent with memories of the 1975 referendum campaign, when many of us thought that, once and for all, we had decided the question whether Britain was an active member of the institutions of the European Union or whether we were outside.

I hope that it is possible to conduct an argument about the future shape of Europe without concentrating exclusively on the question of monetary union, but for the record, let me say that I am agnostic on the question of monetary union. When I was the sponsoring Minister for the Maastricht treaty, I made it clear that I did not believe that the continental project was well judged. I do not believe that it has been introduced in circumstances that are ideal from the point of view of those who have participated in the early stages of monetary union. However, I also believe that, given that the project has gone ahead, we should be clear about two things.

The first is that the countries that have introduced the new monetary union are Britain's major customers. It is, therefore, in Britain's interests for their project to be a success. It is a simple rule of economics that what is bad news for our customer is bad news for us. Because it is in this country's interest for our customers' economies to be successful, I wish them well in their project, and I recognise that it is in Britain's interests for the single currency project to succeed. That is the first thing that ought to be clear.

The second is that if, in the fullness of time, we in Britain are persuaded that the project is a success, it will be in our political interests to join. I do not believe that that is clear yet, but if and when it becomes clear, it would be in Britain's interest to join a successful single currency on the continent.

If we are not "ultra" on the question—not against the single currency in all circumstances, but not in favour of it now—that seems to be about all that we can say about the single currency and Britain's prospective membership of it. If we are not in either "ultra" camp, we have a choice: we can have an everlasting dress rehearsal of the arguments that we may one day use for or against Britain's membership of the single currency, or we can move on to deal with the other issues that are on the European agenda and which are of more immediate interest to Britain in 1999. I shall take the second course in the debate.

There is an urgent need to articulate a clear vision of the kind of Europe in which we want to live, and to demonstrate how that broad vision can be translated into reality. So often the European debate is defined by what a participant is against. We are told that particular individuals are anti-euro, anti-federalist or anti-bureaucratic. There seems to be an interminable gallery of music hall rogues who are held up for us to take pot shots at, in order to define our position by reference to what we are against.

Is it not high time to set out clearly what our objectives are—not what they are not, but what they are? What kind of institution do we want to support and join, and why do we support such an institution? I have a simple way of summarising the type of European institution in which I want Britain to be an active participant. It is summed up by saying that I am a supporter of the Europe that is defined in the treaties—not a Europe described by the commentators, or a Europe held out as a distant prospect by the dreamers, but simply a Europe that is defined in the treaties.

It sometimes serves us well to pause and reflect on what is set out in those documents. First, the European treaties as they have evolved since the treaty of Rome define a union of nation states. The great majority of political decisions within the member states of the European Union remain outside the ambit of all the European Union institutions—in my view, quite rightly. Even that part of political decision making that is within the European Union institutions is not all within the institution of the European Community. That was the purpose of the intergovernmental pillar that was introduced in the Maastricht treaty, part of which I sponsored.

Even in the decision-making aspects that are within the European Community's ambit, a substantial proportion of those subjects is reserved for decision by consensus—that is, by unanimity. Only a very small part of the political decisions affecting member states of the European Union is open for decision by qualified majority voting, and almost nothing by simple majority voting. It is worth restating the extent to which Europe remains—in my view, quite rightly—a Europe of nation states with very little decision-making power affecting those nation states available to be decided even by qualified majority voting.

Secondly, we need to underline the proposition that the Europe defined by the treaties is a Europe about which the hon. Member for Hornchurch was sceptical—rightly, from his point of view—because it is a Europe committed to liberal economics. I mean liberal economics as properly understood, not as often defined by the modern day Liberal party. The Europe of the treaties is a Europe of nation states that recognise that they have a common interest in the efficient creation of wealth. That requires an open single market with effective pro-competition policy, effective action against state aids that would distort that marketplace and a clear commitment to open, free trade with the rest of the world.

I am not seeking to impose my interpretation on the treaties; that is all set out in the treaty of Rome, as amended by the later treaties. It was a treaty, in a word, written by the liberals. That is why, as an economic liberal, I support it, and why I am not surprised that the hon. Gentleman does not. The treaties were written not by woolly-minded liberals of the modern variety, but by liberals of the tough-minded radical variety that has come more recently to be called Thatcherite. They recognised the need not only to set out a general ambition to achieve a free and open marketplace, but to police that marketplace and ensure that those disciplines were not merely embraced in general, but applied in the particular.

The European Commission was set up to enforce the disciplines signed up to in the treaty, and the European Court of Justice exists to ensure that the institutions use the powers accorded to them and set out in that treaty. That is why I am in favour of a strong Commission acting within the ambit of the powers set out in the treaty. Many of my hon. Friends, and members of other parties as well, become concerned when institutions seek to use injudicious wording in treaties to develop powers that were not intended to be accorded to them at the time that those treaties were signed. The Europe defined in the treaty—one committed to liberal free trade with institutions to police those disciplines—is the Europe to which I remain as committed today as I was when I campaigned in the 1975 referendum.

Having set out that framework, we have to test the extent to which the Government are pursuing those ideas. Against that test, there are a large number of respects in which I find them wanting. First, and most obviously, I want to associate myself absolutely with the remarks of my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) about the Prime Minister's initiative, which was set out at St. Malo, on a European defence identity. I simply do not see where a European defence identity comes within the ambit of the core range of activities set out in the treaties.

Of course I am not against co-operation between European countries on defence issues, but I believe strongly that there exists an institution designed for that purpose. It is called the North Atlantic Treaty Organisation. Why reinvent it? Furthermore, why reinvent it within an institution that does not have either the history or the institutions to support such an identity? NATO has both.

Defence co-operation within Europe is better done within NATO, partly because that involves the United States and partly because it allows us to build on more than 50 years of successful co-operation with partners in defence through NATO. Perhaps most importantly of all, I also believe that defence should be regarded as a NATO responsibility because the agenda of the liberal economic Europe that I have described is huge and neglected. The last thing that we should want is for Europe's institutions to be diverted into looking at defence issues when they should be getting on with the huge and neglected agenda on the liberalisation of the European economy.

Dr. Julian Lewis (New Forest, East)

I applaud the robust way in which my right hon. Friend is standing up for the role of NATO, but does he agree that a problem that our party faced in government is faced by the new Government? No sooner are people appointed President of the Commission than they proceed to outline a very different perspective on the defence of Europe—Mr. Santer did so originally and Mr. Prodi is doing so now—and announce straight away that they would like a common defence organisation, in which case this country could be outvoted in respect of its ability to defend itself by the other members of the European Union.

Mr. Dorrell

I also saw the remarks of Mr. Prodi and I have set out—with some clarity, I hope—why I disagree with them. Before Mr. Prodi referred to it, the Prime Minister was off to St. Malo talking about a European defence identity, but I would have hoped that, far from edging in such a direction, the Government would have drawn a distinction between defence, which is properly dealt with by NATO, and the huge agenda of liberalisation issues, which ought to be an urgent priority for handling through the European Community institutions.

Mr. Gapes

The right hon. Gentleman has referred to his commitment to the Maastricht treaty. Does not that treaty talk in terms of a common defence policy that might, in time, lead to a common defence? Therefore, the Government's St. Malo declaration, which was made with the French and supported by the Germans, is entirely consistent with the Maastricht treaty, which he says he supports. Why does he have such a problem with it?

Mr. Dorrell

I am not saying that the declaration is inconsistent, or that it is illegitimate for the Government to pursue their ambition; I am simply saying that it is wrong. Let me articulate the set of priorities that are in the mainstream of the economic agenda and which I think ought to be handled through the European Community and the Brussels-based institutions.

First, and most obviously, the exclusion of central and eastern Europe from participation in the single market of the old western Europe is becoming a stain on the modern history of Europe. It is worth reflecting on the fact that, this autumn, it will be 10 years since the collapse of the Berlin wall, and we have made virtually no progress in the inclusion of the countries of central and eastern Europe as full members of the European Union.

We were told that the Berlin summit would be the opportunity to confront the questions faced by the current European Union and the implications of the extension of Europe to the east, but we all know—it is a matter of history—that the Berlin summit funked the main issues that were placed before it. That is the first test that the Government have failed.

The second test—never mind the people in central and eastern Europe who are excluded from the benefits of a successful liberal economy—applies to the 10 per cent. of the people who live in the current member states of the European Union who are excluded from the benefits of liberal economics because of high unemployment. It is not a mystery why those countries suffer from high unemployment. We can see from our own experience, and from that of the United States and New Zealand, which has been repeated all around the world, that there is a direct relationship between labour market flexibility and low unemployment.

In some moods, the Prime Minister likes to align himself with that argument, but, looking at what the Government do rather than at what they say, they are resolutely going in the wrong direction in terms of policy here in Britain and the initiatives that they support within the European Union. They introduced the social chapter as a basis for new regulation of our domestic labour market, despite the fact that we had negotiated a situation in which it did not apply to Britain. Now we are told that, within the European socialist agenda, they propose to develop a pact for employment, the purpose of which, whatever the Foreign Secretary said earlier, is made explicit. It is to introduce agreed reductions in working time negotiated between the social partners". Either the Labour party believes that reduced working time is part of the European social obligation and a necessary step towards the introduction of a socially just Europe, or it does not. It has put that proposal in its manifesto, but then says, "Oh no, it does not apply really." That is an unsatisfactory state of affairs, to put it politely, particularly because, elsewhere in that same manifesto, there is a commitment to a stronger social chapter, which will make worse precisely the kind of regulation that is leading to high unemployment in parts of continental Europe and which needs to be put into reverse.

I think that not because I am against sharing the success of a successful liberal economy widely through the Community, but because I am in favour of that. Such regulation, wherever it has been used around the world, has undermined living standards and excluded less advantaged people from the benefits of a successful economy. It is something that we in this country should vehemently oppose.

Ms Rachel Squire (Dunfermline, West)

Does the right hon. Gentleman believe that the way for this country to compete successfully in Europe is to drive down pay and conditions of employment? Why has so much money from European structural funds had to come into this country to deal with the unemployment that was created by the previous Government, of whom he was one and who promoted the free market approach that he is espousing?

Mr. Dorrell

The hon. Lady should consult her pager. Her Government believe in liberal labour economics. All the rhetoric uses the language that I have just used. The hon. Lady's problem is that she looks at what the Government do and likes that, whereas Ministers hope that people will hear what they say and like that. The difficulty is not between the hon. Lady and me; it is between the hon. Lady and her colleagues on the Front Bench, who say one thing that she does not like and do another that, apparently, she does.

It is not just in the context of the labour market that the European socialist manifesto refers to steps in the direction of extra regulation. We see the same in its commitment to avoid harmful tax competition". We debated that issue in the House some months ago, and I do not propose to repeat everything that I said then. Let me simply reassert my belief that tax competition is one of the best available disciplines to limit the ambitions of the political parties, and that it should be made as vigorous as possible. I am suspicious of any party whose manifesto states that it wants to limit harmful tax competition.

Nor is this debate just about internal structures. The hon. Member for Hornchurch was right to say that, too often in the past, the European Union—like, it must be said, the United States—has been a protected market, excluding imports from the developing world. I believe that the EU remains damagingly protectionist, from the point of view of not only the developing world, but European countries themselves. While I cannot agree with much of what the hon. Gentleman said, I hope that we may make common cause on the desirability of a commitment within Europe to put Europe in the vanguard of the liberalisation of world trade, and promote the idea of new round of liberalisation talks.

Sir Leon Brittan has promoted the idea of a millennium round of tariff reduction talks. When I compare the benefit that such talks, if successful, could confer on mankind with all the meretricious trash surrounding the millennium that we are invited to welcome, I can think of no better celebration than the launching of a meaningful process of reducing tariffs that have excluded most of mankind from the richest markets in the world for the larger part of the century.

Mr. Wells

Are not sugar and textiles two products that the EU could gainfully consider in its efforts to reduce its protectionism in relation to the third world? If it offered that, we might indeed get some liberal economics going throughout the world.

Mr. Dorrell

As my hon. Friend will know, if I am drawn into a discussion of textiles, I shall have to declare an interest. Let me put it on the record that I am a director and shareholder of a family textiles business. As it happens, however, I wholeheartedly agree with what my hon. Friend says about both textiles and sugar.

Last on the list of issues on which I test the Government's visions for Europe's future is what I regard as almost the crowning absurdity of the various European institutions that currently exist. I refer to the regional and structural funds. It is hard to imagine anything more absurd than European national Governments' agreeing a European Union budget 40 per cent. of which is devoted to such funds, given that, as we all know, any Minister—however senior—who took a similar domestic spending programme to the present Chancellor of the Exchequer would be shown out without an interview.

The regional and structural funds reflect ideas of regional development that were fashionable in this country in the 1960s. To read descriptions of the way in which they are used is to take a trip down memory lane. It is absurd that we should use money to distort the liberal market economy that is set out in the treaties, which we in Britain—especially in view of our recent history—should unambiguously support.

Mrs. Ellman

Is the right hon. Gentleman suggesting that the major structural funds that are currently bringing employment to Liverpool, regenerating the city centre and giving support and skills to people in local communities constitute money that is being wasted, and money that his party would not wish to be spent?

Mr. Dorrell

I am crystal clear about the fact that the regeneration of Liverpool that has begun over the past 15 years is overwhelmingly a result of local initiatives on the ground: initiatives on the part of local business, focused on the development of the community, the infrastructure and the environment. It is not a result of blanket regional development funds. If such funds were the answer to the problem of high regional unemployment, we would have cracked that problem in the 1950s. The history of regional development, not only in Britain, but in every developed country—in European countries such as Germany, France, Italy and Spain—is that domestic Treasuries have scaled down such policies, because they know that they do not work; yet they persist in Brussels, as a kind of international social security budget.

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

Will the right hon. Gentleman give way?

Mr. Dorrell

No. I want to end my speech soon.

If the Government really want to stand four square for reform of Europe, the regional and structural funds are a natural target.

The Foreign Secretary has said that the Government favour European reform, and those of us who are pro-Europe can say amen to that. I agree with the Foreign Secretary that we need an ambitious programme of reform in Europe; the problem is that I do not think that the Government have shown the beginning of an understanding of what is necessary for the delivery of such a programme.

I believe that Europe—the 15 existing states of the EU, and the applicant countries to the east—can be the new tiger economy of the early part of the next century. The Prime Minister regularly tells us that he admires many aspects of the American economy; let him learn some of the lessons of that economy, and apply them in Europe. If he does that, he will unleash the most powerful and successful economy in the world.

The time for reform is now, as the Foreign Secretary rightly says. Unfortunately, that is a challenge that the Government have funked so far.

6.57 pm

Mr. Mike Gapes (Ilford, South)

I want to change the focus of the debate slightly. First, however, let me say that it is unfortunate that the shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), is not present. I understand that he tried to mislead the House by means of a point of order. I am afraid that the fact that Conservative Members do not even bother to stay to listen to a debate on which they have tried to intervene in such a fashion is a clear indication of the depths to which their party is sinking. As I understand it, the ECOFIN meeting had not agreed any directive relating to the withholding tax. No doubt the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for Gateshead, East and Washington, West (Ms Quin), will say more about that when she winds up the debate, but, as I have said, it is a shame that the shadow Chancellor is not here. No doubt we shall not see him again today.

The Foreign Secretary spoke of the need for Europe to develop its own defence capability and capacity, and a number of the documents made available to us by the Vote Office deal with defence policy. This is not the occasion for us to debate Kosovo, the reasons for our involvement there or the lessons to be learned, but wider issues are at stake relating to discussions now proceeding in the European Union and NATO about the European strategic and defence identity, and the proposed dissolution of the Western European Union.

I am not entirely convinced that the issues have yet been fully thought through. I say that in the light of what is clearly a divergence of opinion within the EU, and between the United States and Russia, about the future of European security in its widest sense.

Recently, I came across a quote from a poem written in 1918 by a Russian poet, Aleksandr Blok. It says: Russia is the Sphinx. Rejoicing and grieving, And steeped in black blood, She gazes, gazes, gazes at Europe, Now in hatred, now with love! The problem we face in Europe today is how to deal with Russia, which, despite its economic and political weakness, its bankruptcy and its governmental crises, is still a major, strategic nuclear power. I do not believe that any future European security and defence identity can be shaped—and certainly cannot have secure borders to its east—unless we have a proper relationship with Russia.

President Clinton, speaking recently to American war veterans about Kosovo, made clear his belief in the importance of a Russian political and military presence in any solution to the conflict. I welcome that. At the same time, a member of his Administration, his ambassador Mr. Verschbow, talked about NATO enlargement and the Baltic states. Referring to the NATO Washington summit, the official American embassy press release of 13 May said: He …'gave a very strong endorsement' to further enlargement. and noted that the Summit communique referred to Estonia, Latvia and Lithuania by name. The interpretation of that statement in the three Baltic states and in Russia will be that the United States wants NATO enlargement to include those three Baltic states. That is all very well, but the Washington communique also referred to the discussions going on in the European Union and the Western European Union about the relationship between the European strategic and defence identity and NATO. I, therefore, think that it is worth spending some time considering that issue in some detail.

Nothing is more important to the stability of Europe today than that Russia maintains a relatively benign orientation and approach towards our security. If we were to return to the depths of a new cold war, it would cause serious problems for our economic and social goals, for the diversion of spending, for increased military budgets and for other matters, and it would have a political impact in Europe. It would not be in anyone's interests if that were to happen.

Recently, NATO was enlarged to take into membership the Czech Republic, Hungary and Poland, and it celebrated its 50th anniversary. Coincidentally, but undoubtedly unfortunately, within a day of those celebrations the air strikes against Yugoslavia began. The interpretation of that action and the way in which it is used by the nationalist and communist parties in the Duma, and by people who want to foster an aggressive, anti-NATO approach in Russia, is very unfortunate. If hon. Members think that I am exaggerating a little, they need only refer to the useful third report of the Select Committee on Defence, "The Future of NATO: The Washington Summit". The helpful appendix in the back includes the statement submitted by the Russian ambassador dated 26 November 1998—which is before the enlargement took place. He makes clear Russia's deep opposition. I shall quote two sentences, which is enough to give the flavour.

Especially sensitive is the idea of admission to the alliance of former Soviet republics, in the first place the Baltic States. It is an open secret that if any one of these states is enticed into the NATO we shall have to reconsider our relations with the alliance. That was in November last year, and nothing that has happened in recent months, including the sacking of Mr. Primakov's Government and the internal crisis, gives rise to any optimism that the Russian mood has changed for the positive.

Mr. Ian Taylor (Esher and Walton)

There is an additional problem with the Baltic states. I have yet to meet a NATO general who is convinced that we could secure the Baltic states from attack. That has a knock-on effect on the European Union. It would be inconceivable that the EU would expand into territory that it could not provide a security guarantee in some form.

Mr. Gapes

I am grateful for that intervention, as I shall deal with the EU and the European security and defence identity in a moment. Anyone who has been to Estonia, as I have, and has seen where Narva is in relation to St. Petersburg will know that these areas are very close, and it would take no more than a few minutes for troops to go from one side of the waters to the other.

In his opening remarks, my right hon. Friend the Foreign Secretary mentioned the complications for countries that are members of NATO but not members of the European Union. He did not mention countries that are members of the European Union but not members of NATO: specifically Sweden, Finland, Austria and Ireland. There has been a continuing debate among the neutral and non-aligned states in the EU about the relationship between the WEU, which they also do not belong to, and the EU. If the WEU is to be completely removed from the scene, and if the EU is to take on all the functions of the WEU, the nature of the EU will significantly change. It will change not only for potential applicant members in the future, but for some existing member states.

I have been a long-time supporter of NATO. I even wrote a pamphlet 10 years ago that was not popular with people in the peace movement at that time, in which I argued strongly for Britain to stay in NATO. I describe myself as a left-Atlanticist, and I still take that position. However, I believe that it is time for Europe to have a much stronger defence identity. It is time for us to be able to take action as Europeans together in our own continent without having to rely on the whims of Congressmen from Alaska or Nebraska. We must be able to do that, as Europeans, but we must do it sensitively and we must take account of the political sensitivities and realities of this continent and our neighbours.

The communique that came out of the NATO summit on the future strategic concept of the alliance said:

This process will require close co-operation between NATO, the WEU and, if and when appropriate, the European Union. How is that appropriate relationship to be worked out? Difficulties have already been highlighted by other member states. Only a few days ago, the Foreign Minister of Sweden, Mr. von Sydow, made a speech to an important meeting of the WEU Council of Ministers. He made an important statement when he talked about the Petersburg tasks that are currently on the agenda and are undertaken by the WEU. He said:

We must not risk losing the current momentum in the debate by entering into the issue of common defence. Just to be clear: Sweden cannot accept that the mutual defence commitments of article V of the Modified Brussels Treaty be included in the EU. That is the Swedish position. There are similar concerns in other countries.

I hope that our Government, while pushing for greater co-operation with France over the St. Malo declaration—which I support—and for greater co-operation with Germany, will retain their traditional close relationship with the Nordic countries, particularly their excellent relations with Sweden and Finland, so that, in establishing the European security and defence identity and a much stronger European voice within the Atlantic alliance, they do not risk making the position more difficult for existing EU members that are traditionally neutral and non-aligned, and do not, in effect, block future enlargement of the EU by other states.

On economic grounds—certainly Estonia is already there—there is no reason why the Baltic states should not be able to be involved in the European Union. The Finnish-Estonian linguistic relationship, the economic relations between countries from one side of the Baltic to the other and the good relations in the region, all point to the fact that there is a logic in having countries on both sides of the sea within the European Union.

That could help Russia economically. The European Union would be so close to the Russian market; Russian trade could go backwards and forwards into the EU. It would be a good way to build European security, but my worry is that, if we complicate the matter by getting into a discussion about defence, whereby the Russians fear that NATO's borders are being expanded to the borders of St. Petersburg, we will set back that economic development and non-military aspects of security.

It is important to recognise that, whatever the outcome of the current difficulties in the Balkans—the European Union clearly has an important role to play in the reconstruction programme and in building civil society, not just in Serbia, but in Croatia, Macedonia and other states in the Balkans—we need to move our focus a little further, to recognise that other potential areas of conflict border the continent of Europe, and that our relations with Russia, and future relations between all of Europe, east and west, remain vital to us all.

7.13 pm

Mr. Michael Jack (Fylde)

I am grateful to you, Mr. Deputy Speaker, for calling me to speak at this stage in what is a very interesting debate.

One of my sadnesses is that, as I look at the place where the press would normally sit to report our affairs, I find large vacant spaces. It is a matter of some considerable sadness that a debate on matters that affect the well-being of the United Kingdom, our position in Europe and the world will go largely unnoticed by the media, who are sometimes all too quick to comment and to criticise on some of the complex issues that right hon. and hon. Members have already touched on in the debate.

The hon. Member for Ilford, South (Mr. Gapes) gave us some thoughtful observations on many important security matters. I found interesting his focus on the role of Russia. Clearly, some people might have felt that, had there been a stronger, more stable internal position in Russia, it could have played a more decisive role in negotiations before the conflict in Kosovo developed in the way in which it did. It is interesting to see the role that Russia is now playing to reach, I hope, some form of resolution.

I was interested in the Foreign Secretary's remarks about the situation in Kosovo and the role it will play in the Cologne summit. It was one of the occasions when he perhaps did not use the word "intensify". On just about every occasion that any statement has been made on the matter, when it comes to military action and to the bombing, the word "intensify" is used, as if that will give some guarantee of success. Yet, what is success in the conflict? I find it difficult to understand the measure of success.

Success at the beginning was to degrade the Milosevic war machine to such an extent that ethnic cleansing would be stopped, but still the tide of refugees flowed, still we pressed on with the bombing campaign—understandably, in humanitarian terms. Listening to the Foreign Secretary this evening, success seems to be being redefined as creating the opportunities where ground forces will be able to enter Kosovo, taking the refugees back to where they came from. It shows the difficulty in understanding and, at times perhaps, in supporting elements of the Kosovar policy. The aims and objectives of the campaign have shifted.

The debate takes place during preparations for the meeting in Cologne. I make a couple of quick points on what should be on the agenda before turning to the main part and focus of my remarks: agriculture. I should like the Heads of State to reclaim the agenda for politicians in Europe.

Too often when I go on the doorstep campaigning, the impression that is fed back to me is that it is the Commission that runs Europe, yet it is the Council of Ministers—in the many ways in which that institution manifests itself—that gives the democratic element and democratic accountability to what happens in Europe. If public confidence is to be maintained in the European Union—at a time when the purpose and membership of the Commission have properly been the subject of discussion and questioning in the debate—it is vital that people understand that it is elected representatives who have the final say, whether they be in the Council of Ministers or, indeed, the European Parliament. If Europe is to safeguard its institutional development, recapturing in the public mind the fact that it is politicians who are in charge will be important.

I make a short appeal to the Minister to reflect to the Leader of the House that, to give that important element of accountability further solace, we should reconsider the way in which the House scrutinises European legislation. I am aware that some improvements are coming along, but they do not involve the House of Commons and its Members looking at European legislation early enough in the process.

We do not have debates and comment on some of the Green Papers and pre-directive or regulation documents. The Minister looks sceptical as I say that, but in terms of the scrutiny process—I have been on both ends of it—Members of Parliament do not get stuck in, if I may put it that way, early enough in the process, when new ideas are floated that have yet to formulate in the form of directives or regulations.

Ms Quin

Surely the right hon. Gentleman recognises the recent improvements that were introduced via the European scrutiny White Paper, and the changes to procedures in the House to allow hon. Members to have an early say on matters that would come before European Council meetings.

Mr. Jack

I acknowledge that. In fact, I said it in shorthand in my earlier remarks. I said that I recognised that some changes had taken place, but I am looking at the position further upstream. It may be that, in reality, those changes do deliver what I still believe is lacking in our system.

One of the sadnesses is that the Cologne summit will not consider any further changes to the common agricultural package, which are much needed. Recently, the Minister of Agriculture, Fisheries and Food was triumphing some great reform package, but, when one looked at what was agreed, one found that there was much difference between the rhetoric and reality.

The concern that British agriculture has about the whole question of reform arises against a background where, in the past two years, in real terms, farm incomes in this country have declined by 74 per cent. It is therefore hardly surprising that our farmers had hoped that the discussions on common agricultural policy reform would free them to use their efficiency in operating to the advantage of British agriculture. Sadly, the discussions did not have that effect.

The CAP reform package agreed in March neither meets the requirements of the World Trade Organisation, nor addresses the issues of preparing for European Union enlargement. Undoubtedly, the matter will have to be revisited.

The document prefacing this debate—on events of the past six months in Europe—mentioned, perhaps optimistically, the possible ending of the ban on British beef exports to Europe. It was a pity, however, that Opposition Members had to point out to the Government that invitations should be issued to European Union officials and veterinarians to inspect our facilities. The Prime Minister said that invitations had been issued to officials—to start the process of unlocking Europe's meat markets to our beef producers—but, at that time, they had not yet been issued. Had the Opposition not acted, the invitations would not have been issued until much later.

Sadly, not one ounce of British beef has yet crossed the channel for sale in European markets. Despite all the Government's triumphal rhetoric on the subject, British beef producers have not yet seen the result that they seek. I hope that the issue of speeding up the lifting of the ban will be addressed at the Cologne summit—if nothing else, in the margins—so that Europe's beef markets are once again open to our farmers.

Will the Minister have a word with the Heads of State also on the British pig industry—which is in desperate straits? The industry has not been helped by, for example, the French Government paying what seem to be illegal state aids to assist the French industry, while our own Government are sitting on their hands.

There would have been no movement on the issue of the French payments had it not been for Opposition Members' efforts in providing the Agriculture Minister with concrete evidence of them. He even challenged us—almost as a precursor to taking any action—to provide such evidence. So far, however, the Government have taken no action, and parts of our pig industry are facing extinction. The Government owe it to those producers at least to ensure that all our producers receive even-handed treatment within the European Union.

In March, the Minister of Agriculture returned from the meeting on CAP reform. Before the meeting, he said that he was in favour of scrapping quotas and shifting subsidies from production to income, and that the Commission's proposals did not go far enough. However, after the package was agreed, the Prime Minister—in The Times of 12 March 1999—dismissed all the Agriculture Minister's optimistic rhetoric by saying that the outcome was not satisfactory as far as we are concerned. I agree with the Prime Minister on that point. At the meeting, the Minister of Agriculture effectively sat on his hands—he really did not have anything positive to contribute to it. From the intelligence that the Opposition have gathered from behind the scenes of the meeting, it is certainly clear that the Minister really did not do very much properly to represent the interests of Britain's farmers.

Perhaps that is why, on 11 March, the National Farmers Union issued a press release entitled: CAP Package 'Mixed Bag', says NFU". Ben Gill, the NFU president, said: The package is a 'mixed bag' for UK farmers, with most positive and negative elements contained within it. The situation worsened, however, 15 days after the package was agreed in Brussels—when it was dealt with at the Berlin summit, and there was a betrayal of British farmers. The rats, as they say, got at the package and started to unpick it. Only 15 days after the package was agreed, the NFU president was saying that the results of the Berlin summit were deeply disappointing. He said:

The original agreement made by farm ministers has been partially unpicked and is now considerably worse. While superficially this deal may seem attractive there are significant hidden dangers. British farmers will pay a heavy price for a deal which seems to have been made to allow some Governments to claim a symbolic victory. He was indeed right about that.

The results of the unpicking were a reimposition of restrictions on British farmers, a reduction in arable area payments to British farmers, and delay in reforming the dairy regime—one sphere in which the efficiency of Britain's farmers really does shine—probably until 2006. If ever there were a betrayal of the interests of one of the most efficient parts of British agriculture, allowing that deal to be unpicked was it. The betrayal was most distressing.

Other member states seemed to triumph in the negotiations on the dairy regime. Greece, Spain, Ireland, Italy and one other member state managed to win an increased milk quota, whereas it will take years—until 2003, to be precise—before we receive a small increase in quota. Why was not British back-bone used in objecting to a settlement conferring a competitive advantage on those countries, at the expense of British dairy farmers? Our farmers are receiving prices that, in real terms, are the same as they were four years ago.

In the farming press, the Minister of Agriculture was telling us that the cosy so-called London club was meeting quietly with Denmark, Sweden and Italy to plot the downfall of the milk regime, which was restraining competitive forces in British agriculture. But—oh, dear—as soon as Italy got a whiff of more quota, Italy was off, the club collapsed, and the British Minister's back-bone went very soggy indeed.

All of those so-called developments add up to a so-called reformed CAP—which will cost Europe's taxpayers dear. Agriculture expenditure already accounts for over half of the Community's budget, and it is rising. In 2000, expenditure will rise to 37.3 billion euros. By 2002, it will have risen to 39.6 billion euros. After a small decrease, expenditure will rise again, in 2006, as the dairy reforms are implemented. Those costs will be a further burden on Europe's taxpayers, and will go a long way in off-setting what the Agriculture Minister claimed would be a benefit to consumers.

Today, in just one line of his speech, the Foreign Secretary said that consumers will save £1 billion on their food bills. However, he forgot to add the salient detail that that estimate was predicated on the proposition that the savings will not begin until 2008. In fact, the reforms will create only £90 million savings in the first year.

Furthermore, the facts do not support claims that the CAP amendments will deliver real savings. Research provided to me by the Library shows that, in previous CAP reform, returns to producers have generally decreased, whereas shop food prices have increased. The research gives the lie to that much-vaunted claim that the reform will benefit Europe's consumers. Moreover, interestingly, the research also shows that food prices have decreased only in the potatoes and fresh vegetables sectors, neither of which have been subject to the current CAP reform.

Many elements of the reform have yet to be introduced. However, the Ministry—perhaps in a cost-saving mood—is arguing that the British lamb industry, for example, should be considering restricting its output, saying that it might be able to get better prices by doing so. Yet, the lamb industry is absolutely adamant that it wants the opportunity to sell competitively to Europe. There is seemingly a hidden agenda in MAFF to try to save money by such a measure. It is not very clever for MAFF officials to invite one of the most successful parts of British agriculture—a key feature in the upland economy—to cut back production.

I begin to wonder what is the Government's agenda for the British agriculture industry. If they really had the interests of British agriculture at heart, they would raise those matters at Cologne. Our agriculture industry is once again in a truly desperate position and I would have thought that it merited a mention on the Cologne agenda. It is an indication of the importance that the Government attach to agriculture that that item is missing.

7.30 pm

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

It is a pleasure to follow the right hon. Member for Fylde (Mr. Jack). I have participated in many agriculture debates over the years, but my comments this evening will be mainly on the single currency.

Relations with our partners in the European Union have been transformed in the two years since the Government came to power. Throughout their 18 years in office, the previous Administration seemed to be a reluctant member, very negative and destructive in their attitude. In particular, I remember Baroness Thatcher handbagging our European partners and trying to insist on her way. In the latter years of the Conservative Administration, there was the beef ban and the attempts to have it lifted by the absurd policy of non-co-operation, or vetoing many measures in which we believed.

The present Government were elected against that backdrop. We immediately struck a different chord and developed an excellent rapport with our colleagues in the European Union. Although we are not yet at the heart of Europe, that is our intention and we have adopted an attitude of co-operation and constructive dialogue. There were various opt-outs—on the social chapter and the single currency. It will take time to make good on the latter, but that is our policy. For the next five or 10 years we will be in there, punching our weight with Germany, France and Italy, building the Europe of the 21st century.

We are making good progress, despite the fact that the right hon. Member for Fylde commented on our slowness in reforming the common agricultural policy. His remarks could have applied to many such attempts over the past 10 or 15 years. I remember particularly the MacSharry plan that was announced by the then Conservative Government as the great breakthrough. The tone of their statements at the time suggested that it would solve the CAP' s problems for ever more, but that was not the case. We are making slow and steady progress in reforming the CAP. Our budget rebate was assured at the Berlin summit. We are working for the enlargement of the Community and making good progress on Agenda 2000.

At the beginning of the debate, my right hon. Friend the Foreign Secretary made a substantial speech on the war in Kosovo. No one in the House or in any NATO country wanted military action. In the early months of this year, my right hon. Friend the Foreign Secretary worked extremely hard at Rambouillet to try to produce a peaceful outcome. However, Milosevic would not withdraw his forces and was already engaged in ethnic cleansing. Evidently, with summer approaching it was his full intention to continue, so we were forced to take military action. I strongly support the work of NATO, in difficult circumstances, and the leadership given by my right hon. Friends the Prime Minister and the Foreign Secretary, together with the United States Government.

NATO has worked to very high standards. We do not know how long it will take or what the outcome will be, but in the past few weeks I have detected a cautious optimism that the attrition in Serbia and on Serbian troops in Kosovo is slowly working. We hope that there will be a successful outcome before winter so that the refugees can go back. The EU and NATO will emerge stronger from the Kosovo episode. We did not want to take action, but we were forced into it. We had to stop Milosevic and his appalling policy of ethnic cleansing. Twelve months, three years and 10 years hence, Europe, the European Union and NATO will be stronger because of the action that is being taken.

I now come to the single currency which was launched in January. In the language of the market, we all expected the euro to be a strong currency that would rise in value against the pound, the dollar and other international currencies. It came as something of a surprise that during the past five months it has depreciated by about 10 per cent. However, that relatively slow start has not diminished my long-term enthusiasm for Britain joining the single currency when the economic conditions laid down by the Chancellor 18 months ago have been met and it is in Britain's economic interests to join.

Mr. Loughton

Will the hon. Gentleman give way?

Mr. Williams

Later, perhaps.

The pound is certainly far too high against the euro and other European currencies for us to contemplate joining. I wish that there would be a national debate on the correct level for our entering the single currency. I wish that we could hear the views of the CBI, the TUC, the Bank of England, the Government and the Opposition. I wish that there would be a wide public debate over the next two or three years on what the long-term rate should be. Our experience of the exchange rate mechanism at DM2.95 to the pound is a depressing precedent.

Mr. Loughton

Will the hon. Gentleman give way?

Mr. Williams

In due course, but I want to develop my argument.

My own view is that a devaluation of the order of 15 per cent. is needed to achieve competitiveness. Perhaps the proper rate should be something like 1.30 euro or DM2.60 to DM2.70 to the pound.

In the past week or so I was concerned to read that my right hon. Friends the Prime Minister and the Leader of the House, in a speech and an interview, raised the possibility that the referendum on our joining the single currency may not be held in the second term of a Labour Government and that it may have to be delayed beyond 2001. We will not hold that referendum until the economic conditions are right and the Chancellor's five principles have been met, but there is a real problem in respect of getting the economy ready for the euro. My right hon. Friend the Chancellor has said that we do not want devaluation. The economic circumstances must be right before we can join.

The International Monetary Fund said last week that we cannot join at the current rate, because that would repeat the experience of the exchange rate mechanism. I agree that there must be devaluation before we can join. The following day, my right hon. Friend the Chancellor told the CBI that he would not contemplate devaluation. As far as he was concerned, the Bank of England's only target was the inflation target and it could not chase two targets at once. I believe that he is wrong, because all the countries that formed the single currency had to target their exchange rates. They had to have stable exchange rates before January 1999.

Mr. Loughton

I am following the hon. Gentleman's argument closely. He says that a fall of 10 per cent. in the value of the euro against the pound and the dollar is a slow start. I should hate to think what he would define as a fast start. Why does he think that the euro has been such a disastrous currency in its first four and half months, to the extent that many serious bankers in Wall street are saying that it is not a credible currency into which to put national bank reserves? Why does he think that it has gone down so much?

Mr. Williams

I am not a currency speculator, or an expert on the City, but my feeling, for what it is worth, is that the European economy is suffering from serious problems, particularly the high unemployment and slow growth in Germany and Italy. There is the added uncertainty that the war in Kosovo creates on the international exchanges. Speculators have tended to go to the safe havens of the dollar and the pound, because Britain is under such superlative economic management and has created a strong currency. In the longer term, as the European economy picks up and grows, the euro, judged over two or three years, will prove to be a strong currency. Nobody anticipated the early months being so difficult.

I said earlier that my right hon. Friend the Chancellor had set his face against devaluation. I think that he is wrong, as he was in 1992. During the months before Black Wednesday, the then Leader of the Opposition, the late John Smith, and the then shadow Chancellor, now the Chancellor, stuck out for the high value of the pound. At no stage did they say that devaluation would be the answer. I am afraid that my right hon. Friend has the failing of attaching himself to an over-valued currency.

Eddie George, the Governor of the Bank of England, is involved in cutting interest rates. In the report on the Monetary Policy Committee's most recent meeting, there were strong suggestions that the pound is over-valued and that interest rates should be cut to bring down the value of the pound. Over the next two years, I should like an aggressive policy of cutting interest rates. Already in the past 12 months they have been cut from 7.5 per cent. to 5.25 per cent. I should like further cuts to 4 per cent. over the next 12 months, and then to 3 per cent. the following year. Manufacturing industry certainly needs those cuts, as does the agricultural sector.

Yesterday's gross domestic product figures for the past quarter showed that we have achieved our soft landing. The figure touched zero in the past quarter. We do not want negative growth. The economy needs a stimulus from continued cuts in interest rates. Inflation is well under control and is not a problem. The figures last week were 2.4 per cent. for month-on-month inflation and a headline inflation rate of 1.6 per cent. The danger is that over the next two years we shall undershoot the lower limit of the target of 2.5 per cent., plus or minus 1 per cent. If interest rates were cut to 4 per cent. and then 3 per cent. over the next two years, we would achieve the devaluation that we need.

The argument against cutting interest rates too quickly is that it would add to inflation. What would a 15 per cent. devaluation over two years mean for inflation? About one quarter of our produce is imported, so a 15 per cent. depreciation in the pound would result in a one-off increase of about 4 per cent. in inflation. If that happened within one year, it would seriously affect the Chancellor's chances of meeting his target; but if it happened over two or three years, the additional inflation caused by devaluation would be half or a third of that 4 per cent.—about 1.3 per cent. a year over three years. That could be contained within the 2.5 per cent. target. That is why we need discipline in the other areas that contribute to inflation—the growth in average earnings or a too rapid growth in the economy.

My timetable for entry to the single currency involves the election in the spring or summer of 2001 and a referendum that autumn, enabling us to join on 1 January 2003. We would achieve our devaluation in the coming two years and would have a stable currency in 2002 and 2003.

There are problems of low economic growth in Europe, particularly Germany and Italy. The European economy is crying out for expansion. The European Union has a combined annual trade surplus of $100 billion. The American deficit is more than $200 billion. About 40 per cent. of that deficit is with Japan, which also has a surplus of about $100 billion. The United States has to carry the growth of the world economy, given the problems in south-east Asia and Russia.

How do we expand the European economy? Germany and Japan have a psyche of stagflation. Inflation is below 1 per cent. and they have enormous balance of payments surpluses, so why can they not stimulate economic growth? The normal stimulus is interest rate cuts, but rates are already very low—the European central bank rates are 2.5 per cent. Rates will have to continue coming down to 2.25 per cent., 2 per cent. or lower. Japan may even have to have negative interest rates. The economies need expansion. When that happens, the euro will prove to be a strong currency.

My constituency, west Wales generally, and the valleys have objective 1 status. I was surprised earlier that the right hon. Member for Charnwood (Mr. Dorrell), who has just left his place, seemed to imply that structural funds from the European Union were mistaken and counterproductive. For example, Ireland has seen rapid economic growth of some 7, 8 or 10 per cent. per year in the past six years and its objective 1 status has been a critical part of achieving such rates.

West Wales and the valleys, which form about half of Wales, have been identified as having a gross domestic product per capita of less than 75 per cent. of the European average, and so qualify for objective 1 status. I congratulate Welsh Office Ministers on their work in the past year to 18 months in making the case—and I congratulate the Government on their work at the Berlin summit and before in pressing the case for objective 1 status. Local government in Wales, the Welsh Development Agency and the new Welsh Assembly will all now be under pressure to ensure that we use that status over the next six years to 2006 to invigorate the Welsh economy.

I noticed an article in The Observer on 2 May about a task force that has been set up in the Welsh Office to consider objective 1 funding. It has set itself the ambitious target of economic growth of 4.5 per cent. a year over the next decade to increase Welsh income per capita to 90 per cent. of the European average from its present 83 per cent. I am pleased that that ambition exists at the highest level in Wales. British growth is at 2 per cent. a year, but the ambition is that objective 1 status will produce economic growth of 4 to 5 per cent. a year in Wales.

We will be in the remedial class for five or six years, thanks to 18 years of Conservative Governments and the destruction of our traditional industries. However, through European structural funds we will rebuild the Welsh economy. The Welsh Assembly will have the enormous responsibility of achieving that in the next five or six years.

7.53 pm

Mr. Ian Taylor (Esher and Walton)

By this stage of the evening, we have, as usual, had a scintillating array of speeches, not least from my right hon. Friend the Member for Fylde (Mr. Jack), whose contribution to agriculture debates is like grass to grazing cattle—an essential ingredient. However, the two speeches that caught my ear were those by the hon. Member for Hornchurch (Mr. Cryer) and my right hon. Friend the Member for Charnwood (Mr. Dorrell), who are not in their places to hear me say that I agreed with parts of both speeches. I am sure that the hon. Gentleman would be more embarrassed by that observation than my right hon. Friend.

Both speeches touched on the crucial point in a debate on the European Union—what is it for and how does it benefit this country. It is not that those of us who are more positive about Europe are somehow a little less patriotic and those who are Euro-sceptic are more patriotic. Some of the positions taken in the debate in the United Kingdom are close to being absurd and they perpetuate myths. The reality is that this House must address what is happening in the European Union: we are in it and nobody has suggested that we are about to leave the club, but there are many complaints about what the committee are doing. However, we will ensure that the European Union is in accordance with our wishes only if we are a full member of the committee, and not just a member of the club. If we do not like what is going on, it is largely because we are not playing a proper role on the committee.

We do not need to be run by Brussels if we organise Brussels to do things that we want to be involved in. That leads to natural differences between Conservative Members and the Government. The Government's agenda differs from the Conservative one in many crucial areas. My right hon. Friend the Member for Charnwood mentioned a liberal economic approach to some of the solutions that Europe needs to address. We can have a healthy debate about that, but it does not make one side right and the other wrong, any more than the British public were right or wrong to decide to change Governments as they did at the general election. I am sorry that they did, but I shall not criticise the British public for doing so.

We make different judgments about how to run the European Union, but to make changes we must understand that the United Kingdom will never make changes just because we are British. The Conservative party's agenda in the European Union is stronger the more we co-operate with centre right parties in the EU. Therefore, I am the last person who would criticise the Foreign Secretary for having a socialist agenda. All I ask is that the British public recognise that it is a socialist agenda and make their decision on that basis. The British people should clearly understand what the Labour Government will do in the European Union in the next year or two, because it will be important in its effects. That is the rub.

The Prime Minister made an important speech in Italy a few months ago in which he made several statements that made a lot of economic sense. However, we do not find much of that in the agenda of the European Socialist party. That is why I criticise it, and not because there has been co-operation between socialist parties.

Some interesting things are happening in the European Union, which are partly caused by the single currency. I admit that I am in favour of the single currency in the long term: if it works, we should be a member, as my right hon. Friend the Member for Charnwood agrees. I do not wish to get sidetracked into the single currency debate, because the House has had the dubious privilege of hearing me speak on that matter on many other occasions. However, it is interesting—and this is why I agree with the hon. Member for Hornchurch—that the single currency is based on some sensible economic factors, such as debt control and inflation, which will mean that some of the continental economies will have to change.

In a single market with no frontiers—once the programme has been fully applied—we will see changes in countries that national Governments will no longer be able to control and to which they will have to adjust. Look at what is happening in France. Superficially, France has a socialist Government, but they have introduced more reformist legislation on the structure of French industry than the previous Gaullist or centre right Government under Alain Juppé was able to do. For example, there have been more privatisations. Only in the past week or two, the French Government—admittedly cloaked in obscurity so that they did not offend their own supporters too much—started to recognise that the cost of labour is a factor in unemployment. If one overprices labour, in normal circumstances that will mean that employers do not take labour on or employ more people outside the country. The problem in France is not an endemic European-wide employment problem caused by lack of growth, but the fact that the French Government have pursued policies that have provoked unemployment in France. Therefore the solution is down to the French Government. If they were to continue down the route that they have tentatively started on, we would see changes very quickly.

Italy is another example. In the past few days, we have seen something that used to be unthinkable: a relatively small Italian company, Olivetti, has beaten off the might of Telecom Italia. Olivetti was backed by Deutsche Telekom, although in a rather anti-liberalised fashion. However, the small company has won. At least, it has so far, because the Italian Government have tricks up their sleeve that they may or may not decide to use. Nevertheless, the small company has won in a competitive bid.

Incidentally, and almost unthinkably, a similar competitive bid is apparent in the French banking industry. Banque Nationale de Paris has lobbed a stone in the water of the previously comfortable marriage between Société Genérale and Paribas. I am not saying who should win that contest, but things are changing.

It is very important that the Minister of State, who will wind up the debate, recognises explicitly that some of the policies that the Government will need to pursue over the next year or two are a good deal more in tune with some of the liberal economic ideas of the previous Conservative Government, if Europe is to be able to provide the competitiveness, flexibility and restructured labour markets necessary for economic survival in an increasingly difficult global economy.

That is not the nasty capitalist plot described by the hon. Member for Hornchurch. It is sensible economics, and must be adopted by Europe's left of centre Governments. The Minister must try and convince her fellow members of Europe's socialist group that the sooner such policies are put into practice, the quicker will the European economy begin to compete in the international markets with what I suspect will be a slowly resurgent Asia and the continuing buoyancy of the United States.

It is sensible economic policies, rather than the comforting phrase that we are "more respected", that will determine whether this Government are capable of rising to the challenge of Europe. Respect is given only if actions deserve it, and it will take a lot to persuade me that the Government are going to carry matters through.

If Europe can compete in international markets, it can start to play a more influential role in other matters. The other point that I wish to make is that, if Europe really wants to follow through the NATO agreement reached in Washington, and to follow through implications of the St. Malo accord between France and the United Kingdom, it will need to have a vibrant economy and to contribute a higher percentage of national expenditures to defence.

The idea that there is a peace dividend that will enable countries to reduce defence expenditure is wrong. Many people thought that such a dividend would be earned after the collapse of the Berlin wall, but we were wrong. Paradoxically, we were wrong because the greater the world's uncertainty, the more important it is to have armed forces with the latest equipment and rapid reaction capability.

It is also important that Europe takes a leading role in defence, under the NATO umbrella, but it can do that only if it puts money into armed forces and weapons procurement. France and the United Kingdom traditionally have done that, but in both countries defence expenditures, as percentages of gross domestic product, are in decline. Every other European country in NATO has also cut defence expenditure.

I disagree with my right hon. Friend the Member for Charnwood in that I thoroughly endorse what I think was intended to be achieved with the St. Malo accord. I do not support the vague notion of a European army, as popularised by Mr. Prodi, whose idea appears to be that such an organisation would appear out of the blue. Wellington said about the British squares at Waterloo that they might not frighten the enemy but they damn well frightened him, and a European army would terrify me. I think that Prodi meant that a strong European foreign policy would have to be backed up with muscle.

We have the structure—NATO—with which to do that, but it is no good relying on the Washington accord and assuming that Europe can use NATO's equipment and resources even if the United States is not fully engaged. Europe must have sufficient resources of its own. If we want to ensure that, when other problems like the one in Kosovo arises, we can take decisive action—I hope with the Americans, but not determined by votes in Congress that may not go as we would wish—we cannot be dependent permanently on American intelligence or lift capacity, nor on American logistics support.

I do not mean that we should break up NATO and leave America to its own devices—the very opposite. We can engage America by showing that we can take action—with America's permission and agreement, but not necessarily with it playing a leading part—that is credible.

So it is clear that the two parts of my speech are linked. They represent a challenge for the Minister. I believe that Britain cannot stay outside the single currency and retain an influence on the creation of the single market which is so important for this country. However, if the currency is to be desirable, it must be based on a strong and competitive Europe, which in turn must change some of the practices that safeguard existing jobs rather than create new ones.

Over the past five to seven years, 87 per cent. of the jobs created in the European Union have been in the high-tech sector, not in the traditional industries. Yet for too many of our partners in this great exercise the policy is somehow to protect existing jobs rather than to create new ones. That is not the way forward.

The test is whether the Government have the willpower to convince our partners in the European exercise to make the critical reforms demanded by the single currency and to make the adjustments to the UK economy so that we can join. The creation of a stronger Europe will increase our influence in the world. That will mean that, in future, we will not get caught in a problem such as has developed in Kosovo. There, we know that ground troops will have to be used, although we cannot say so explicitly because—regardless of what was said at the Washington summit—we cannot deploy such troops without the logistic support of the United States.

8.7 pm

Mr. Tony McNulty (Harrow, East)

It is a pleasure to follow the hon. Member for Esher and Walton (Mr. Taylor). His measured contribution did not excite too many enthusiastic nods on the sparsely populated Conservative Benches. He is far from the demented Euro-enthusiast described in the recent book by Giles Brandreth, the former Conservative Member for City of Chester. That author also mentions the Charnwood versus Fylde show that we have just witnessed. He writes: Little Michael Jack, eager beaver Financial Secretary, was on the line. 'You know today's the day we publish the Finance Bill. I am supposed to be on the media spreading the good news on the economy, and what happens? I am pulled from every programme, and the whole thing is hijacked by the Secretary of State for Health'"— that is, the present right hon. Member for Charnwood (Mr. Dorrell)— 'banging on about Europe. It is so bloody frustrating!' That was on 2 January 1997, when the right hon. Member for Charnwood had his Pauline conversion to a more Euro-sceptic view. The right hon. Member claimed in his speech that he has held the same views all the time. However, the former hon. Member for City of Chester was a very close friend of the right hon. Gentleman—either that, or the book is fiction—and he writes:

This isn't mere positioning. Stephen's view on the EU has changed markedly over the last three years, but the message has only filtered out fitfully. So there we have it. The right hon. Gentleman—who once represented Loughborough, and now represents Charnwood—was always a Euro-sceptic, or at least shifted in that direction when there was a leadership challenge in the air. He did so well in that challenge that now he has settled into a more natural, central position, between the sceptics and the Euro-enthusiasts, demented or otherwise.

It is interesting that much of what the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) said ranks very highly in the mythology, dishonest kidology and rhetoric in which the Conservative party indulges in. Like St. Peter in the Gospels, he denies his friends—those Tory Members of the European Parliament who sit on the executive of what he termed the European People's party—not once but at least two or three times.

Before the election, the Tories said that signing the social chapter would destroy jobs. Two years on, there is no sign of any destruction of jobs. In fact, more than half a million have been created. The piece of fiction produced as a manifesto by the Tories tells us that that is nonsense. It is certainly more—

Miss McIntosh

Will the hon. Gentleman give way?

Mr. McNulty

Not in mid-sentence. The hon. Lady must be fairly tired given that she has two jobs, but I shall get back to her a little later.

The shadow Foreign Secretary, despite his denial, is more than aware of the Tory MEPs in the European People's party. They clearly say that there must be a

"gradual—but resolute—transformation of the European Community into a genuine political union on a federal model".

Those are Conservative MEPs. Does that not make a mockery of the opposition of the right hon. and learned Member for Folkestone and Hythe to a federal Europe? It certainly suggests that the Conservative party is perhaps being disingenuous, or perhaps something more malevolent than that.

Miss McIntosh

Perhaps the House and the hon. Gentleman should remember that when Britain signed the social chapter, we agreed to be exempt from it for the first two years. That is why there have so far been no major job losses other than those incurred from the working time directive and the minimum wage.

Mr. McNulty

I am grateful to the hon. Lady, but I hope, in her best interests, that her interventions in the European Parliament are slightly better than that.

On defence, too, we heard hot air and wind from the right hon. and learned Member for Folkestone and Hythe. The Government's proposals for European defence co-operation were approved by NATO at the recent Washington summit. All EU members of NATO signed up to them. There is an accord, as the hon. Member for Esher and Walton said. In NATO, and in some parts of the House, a grown-up and mature debate is occurring on European defence co-operation.

Another example of the naivety, malevolence, incompetence and disingenuousness of the Tories is the statement in their manifesto that there should be one parliamentary location for Europe. They suggest that it should be Brussels. Yet in their next breath, they say that they are totally opposed to any extension of majority voting. They cannot have one without the other. The French will never sign up to having Brussels as the only location for the Parliament. Under qualified majority voting, it will never happen. Perhaps the Luxembourgeois will not sign up to it either.

That is a good example of how replete the Tory manifesto is with dishonesty, but there are more. Their manifesto calls for a stop to the abolition of duty free, but it was the Conservative Government who negotiated that. What weasel words does the manifesto contain? I had the misfortune of having to pay for that lovely document, so the Tories got a few bob out of me; I tried using ecu, but they would not have them. "In Europe, not run by Europe" says about the protection of duty free:

When plans were drawn up to abolish duty free, we set out clear conditions which had to be met. I have seen the conditions; they are not that clear. It goes on:

They have not been met. So we believe that duty free must remain in place. Since when have they thought that? Since 2 May 1997. Had they won the election, duty free could go to hell in a handcart.

There is nothing of substance in their manifesto. In three little lines, we can find one of the most historic flip-flop U-turns in Conservative party history, though God knows there have been plenty of them in the past two years. Here is another example from their pretty little manifesto. It says:

We want to see humane treatment of animals across the whole of Europe. Yet they troop in here to destroy the Bill on fox hunting and one of them—just one—singlehandedly destroyed a private Member's Bill on fur farming that 11 of the 12 remaining fur farmers in the country had signed up to. Somehow the right hon. Member for Bromley and Chislehurst (Mr. Forth) in his south-east London seat knows more about fur farming and humane treatment of animals than the fur farmers themselves do. That was abject nonsense from him.

Mr. Loughton

Why did the Government not support the Bill then?

Mr. McNulty

If the schoolchildren on the Back Benches want to speak, they can stand up and I will let them in.

Mr. Loughton

rose—

Mr. McNulty

Oh, there he is.

Mr. Loughton

As the hon. Gentleman takes such exception to the passages on animal welfare, would he tell us why his Government did not support the fox hunting measure, why they did not rescue the Fur Farming Bill and why they have done absolutely nothing about live animal exports and a host of other promises in their manifesto that have not even been started on? Can he explain that?

Mr. McNulty

Yes, I can, and in one simple phrase—the hillbillies up the other end of the building. We have a full five-year programme covering all aspects of the EU, including animal welfare. We are implementing much of our manifesto, such as the minimum wage, the Health Bill and other matters to do with the EU. We will not have it all blocked by the hillbillies up the corridor.

The whole Tory manifesto is full of contradictions. It is all over the place, but that is just a symptom of the Conservative position on Europe. It is rumoured that the document is just their official manifesto. A minority report challenging some of it is expected out soon, and two unofficial alternatives are on the way as well as the one produced by the completely separate pro-European party. The Conservatives are all over the place, trying desperately to talk in code so that the xenophobes and Europhiles can somehow seem to be speaking the same language. It does not wash, and the people of Britain will see right through it.

I am glad to see that my hon. Friend the Member for Hornchurch (Mr. Cryer) has popped back into the Chamber. I want to share with him one matter on which we agree.

Mr. John Cryer

Is there one?

Mr. McNulty

One among many, but not too many. I agree partly with what he said about London, although I do not share his doom and gloom about objective 2 status. It is right to get London's problems on the record. Those Members who represent outer London—and the responsibility weighs no less heavily on our inner-London counterparts—have a difficult task in persuading anyone on our own side of the House, never mind the Opposition, about the peculiarities of London. There is a myth that the whole of London and all its 7 million or 8 million inhabitants are rich and that there is no poverty.

Mr. MacShane

Streets paved with gold.

Mr. McNulty

My hon. Friend is joking, but that myth is a real problem. The streets of London are not paved with gold. Fourteen of the country's 20 poorest boroughs are in London, and they cover a significant majority of London's total area. In one sense, the city is a wealthy one, but it also has some of the country's most deprived areas, a fact that must be got through to the Government and to Europe.

Average earnings among Londoners are 30 per cent. higher than the UK average, but in boroughs such as Hackney and Tower Hamlets, more than one in three adults are on income support. Gross domestic product in London is the highest in Europe, but London has more unemployed people than Scotland and Northern Ireland combined. The European Commission and the Government need to take those matters seriously when they work on objective 1 status.

London has suffered far more than most, not over the past two years, but over the past 15 to 20 years. There has been a serious decline in manufacturing, which has largely gone. I do not make some cheap party political point here: the decline was rooted in the early 1970s and the oil crisis, and it has continued from there. It has not happened over the past two years. It was not some wicked plot by Baroness Thatcher and her Government to get rid of London's manufacturing base. A range of geographic and economic circumstances have contributed to the decline. It has not been matched by increases in growth in the service sector, as some people might think. Between 1984 and 1996, London gained only 9 per cent. extra service sector jobs in comparison with the west midlands, which gained 30 per cent.; the south-west, which gained 34 per cent.; and Scotland, which gained 22 per cent.

I am not saying that London is poverty stricken, but some flexibility is needed in the measure for objective 2 status to capture areas with deep pockets of poverty. At the moment, objective 2 status is limited to a small area around the Lea valley. The Association of London Government and others have clear proposals to expand that area, but not, hon. Members will be happy to know, to cover the west end and some other parts of London— certainly not the constituency of the right hon. Member for Bromley and Chislehurst, although even a borough such as Bromley, which is not dissimilar to mine in Harrow, has strong and affluent parts but also suburban pockets of poverty which are all the worst for being within seas of affluence.

We ignore at our peril, and not merely in London—I am sure that it happens elsewhere but I can speak only for London—the increasing difficulties caused by suburban pockets of deprivation. Precisely because they are suburban they need to be tackled differently from inner cities where an entire area is poverty stricken. That was my pitch for London.

I must return to the official Conservative manifesto document. If those who run—I use that term loosely—the Conservative party were honest, the leaflet would not be called, "In Europe, not run by Europe". One would only need three of those words. One could drop the "run by Europe" and move the "not" up front so that the title was honest and stated "Not in Europe". My hon. Friend the Member for Hornchurch would agree. He would have noted when he spoke that the cheers that he received were from Opposition and not from Labour Members. Clearly, that would be the honest position for Conservative Members.

Mr. Cryer

Will my hon. Friend acknowledge that I made a specific point and that I am not nationalistic in my views towards Europe—not a little Englander? My objection is towards the treaty, so I could be described as anti-treaty but not anti-Europe and I hope that my hon. Friend will acknowledge that.

Mr. McNulty

I will happily acknowledge that and I certainly did not mean to cause my hon. Friend offence [Interruption.] No, I did not and I shall not dwell on which treaty, or which aspect of which treaty, as we have discussed it at length before. I certainly would not dismiss my hon. Friend as a little Englander in any way. I shall save those remarks for Conservative Members—those who matter, of course, as I shall ignore those who do not.

Let us consider the next five-year plan—there are Stalinist implications here and I make no reference to my hon. Friend the Member for Hornchurch—according to the Conservatives. They may be waking up. All of a sudden, we are told:

Conservative MEPs are determined to fight fraud and maladministration in Europe". Where have they been? What were they doing for 18 years, both as a Government and as MEPs within the European Parliament? Not a whole lot.

When I had been barely three or four months in the House, I had the great pleasure to serve ad nauseam—no, I should say at length—on European Standing Committee B. We discussed at length the first year's auditors report. I was a member of the Committee long enough—I did not escape for a year—to be there when we discussed the second report. Both those reports preceded all the recent stuff about Commissioner Santer. They concerned the last two years in which the Conservative Government were in power in this country and the reports showed how the previous Government manifestly failed to do anything about fraud in the European context. The Opposition spokesman, the hon. Member for Windsor (Mr. Trend), shakes his head, but he should look at the documents that European Standing Committee B studied. If anything, Conservative plans were to take budgetary lines out of and resources away from the auditing functions of the European Commission, not to beef them up or add to them.

Now, the Conservatives come a little late in the day to being allegedly concerned about fraud. Indeed, only the other day—perhaps the hon. Member for Vale of York (Miss McIntosh) can tell us whether she was a party to this—Tory MEPs voted against a recent member statute that meant that MEPs, perish the thought. had to provide proof of expenses before claiming any money. Perhaps, after some thought, the hon. Lady will tell us whether she voted against such a radical move towards accountability in the European Parliament. I see that she has thought already.

Miss McIntosh

Perhaps this would be a good moment to ask the hon. Gentleman to ask his right hon. Friend the Minister of State, who is to reply to the debate, why this country welcomed the fact that a 40 per cent. income tax is to be imposed on MEPs, but there is to be a five-year contributions gap. That seems to be in line with taxing people on a contributory basis and then giving them a five-year contributions holiday.

Mr. McNulty

I was tempted to ask the hon. Lady to give way, but then remembered that I was on my feet. People from Yorkshire down to Essex will note with interest that the hon. Lady, who represents Essex in the European Parliament I believe, failed to answer where she stood on the thorny issue of MEP's expenses. That is fair enough—perhaps she will have a chance to do so later.

Mr. MacShane

We have an hour and a half.

Mr. McNulty

She may get there in the end.

The manifesto states:

Conservative MEPs are determined to fight fraud and maladministration in Europe. We will wait and see. They have had the best part of 20 years to do so and have done precious little, so why should we or the people of this country start to believe them now?

The manifesto continues:

Conservative MEPs will oppose Euro-Socialist efforts to impose new burdens on business, new Euro-taxes, new trade-union privileges and new red tape. Let us explore that commitment further. When challenged in Department of Trade and Industry or Foreign Affairs Select Committees, red tape often seems to mean health and safety and a range of other provisions that any normal sensible and good employer would want to provide anyway. That commitment is code for opposing much that is in the social chapter. Why do the Conservatives not say so? It is code for opposing any number of aspects of the social chapter that people in this country like.

The manifesto goes on:

Conservative MEPs will vote for the completion of the single market, to secure greater competition and wider consumer choice at lower prices. It is not for me to remind people of recent coverage in the press in the past year or two, and before that, which states that the variation and disparity in prices is between the European mainland and Britain. What did the Conservatives do in 18 years in power to remove that disequilibrium in consumer choice and prices? Absolutely nothing. Therefore, why should the people of Britain start to believe them now in any context?

Then we are told:

Conservative MEPs will push for effective action to make it easier for British citizens to trade, travel, study, work and live throughout the EU. I do not know why they do not add motherhood and apple pie to that list—everyone has signed up to that commitment. This is a new bold initiative from Conservative MEPs—I do not think so.

Finally, the Conservatives say among other things that their MEPs will work for proper environmental and consumer safeguards". Why should we believe that? They have done nothing about it for the past 20 years either in government or as a feeble Opposition.

The best laugh is that:

Conservative MEPs will defend Britain's farmers and fishermen to ensure they get the best possible deal in Europe. Where have they been for the past 18 years? What did they do for the interests of fishermen or farmers in Britain—precious and absolutely little. Now, returning to their fluffy little words, they say:

Conservative MEPs will use the European Parliament's powers to advance Conservative principles"— a contradiction in terms surely— and resist Socialism in Europe. I am happy to say that this document is replete with errors and contradictions. It is abject nonsense from start to finish, and bears no comparison with reality, or the reality of the Conservatives' record in government. Two years later, why should anyone take any notice of them?

The right hon. and learned Member for Folkestone and Hythe made some cursory introductory remarks about Kosovo. I felt like intervening then, but it would be nice finally to nail the lie, if indeed it is a lie, that the Conservatives have not yet paid back the £18,000 that they got from Slobodan Milosevic's front companies in the run-up to the general election. If they have paid it hack, fine, let them say so. If they have not, everything that they say about Kosovo or against Milosevic must be seen in that context. That is a fair point. If the Tory party, or at least those who have captured its soul, if indeed it has one—a malevolent, nasty group of xenophobic throwbacks and malcontents—were honest about their manifesto, it would be called "Not in Europe" or "Europe not on your Life, Guy" instead of "In Europe, not run by Europe". That latest pithy phrase is all that the right hon. Member for Richmond, Yorks (Mr. Hague) could come up with to try to hold his silly little party together. The Tories are all over the place on Europe and their cop-out on the euro has happily rendered them completely irrelevant to the future of this country. Long may they remain so.

8.30 pm

Mr. Tim Loughton (East Worthing and Shoreham)

As always, it is a dubious pleasure to follow the hon. Member for Harrow, East (Mr. McNulty). It is intriguing that in the entire 23 minutes of his manic rant he mentioned almost nothing about the Government's policy on Europe or the European Union, which is the title of the debate. It was all about his weird interpretation of the Conservative party manifesto on Europe. As we heard earlier, it is the Conservative party manifesto because we have our own manifesto on Europe, not one that we had to sign jointly with 20 other supposed partner parties in European socialism.

A debate on Europe in Government time is a rare beast these days. It took a Conservative Opposition day debate a couple of weeks ago to bring up European fraud. It took a Liberal Democrat Member's Adjournment debate some months ago to discuss the changeover plan. That was so important an announcement that the Prime Minister came to the House and regaled us with the luxury of all of 67 minutes of statement and questions when it is conceivably the most important sovereignty matter to face the House in a generation. Constant Conservative questioning on the withholding tax is still seeking a statement from a Treasury Minister. It is always interesting that Labour Members avoid the word that dare not speak its name, sovereignty. Any Conservative Member concerned about the dilution of British sovereignty in key areas is cast aside as a ranting little Englander, and no debate ensues.

Mr. John Cryer

The hon. Gentleman talks about probing the Executive on European issues. Neither of us was here then, but does he remember that in 1992, shortly after Maastricht, the Conservative Government got a bit jittery about the questions being asked about the treaty, kicked it upstairs and removed the time specifically allotted every fortnight for questions on the European Union? What does he think of that?

Mr. Loughton

The hon. Gentleman must admit that in those days we had much more debate on the subjects at the heart of Europe. The Maastricht treaty will affect us for years to come. The press and Members' questions were full of nothing but the treaty. However curtailed debating time was, it was considerably more than the few hours that we have had in the two years under new Labour.

This is a key time in our relations with Europe. The elections on 10 June will result in a new Parliament with many more powers than its predecessors had, thanks to the treaty of Amsterdam. It will have powers of co-decision in 38 areas of legislation where previously it was limited to 15. They include employment, social policy, health, transport, consumer protection and free movement of workers. There are powers to demand accountability from the European Commission and in respect of various other activities of the EU. That has been lacking in the past.

All this is happening in the context of an election that is probably doomed to the participation of only a third of the British electorate. That electorate will be exceedingly confused when they come out of the polling stations. They will resent not being able to vote—for most people, and for the first time in British election history—for a candidate of the elector's choice. It is only the Conservative party that is holding a debate on Europe, although I fear that too much of it is held in public. However, the real issues relating to Europe are being debated by the Conservatives; they are being completely skirted by the Government.

Labour party political broadcasts for the European elections are wholly free of European content. We see scenes of schools in the United Kingdom; the new deal is mentioned and we hear about pensioners and eyesight. We see nothing about European policies and the role of the Labour Government in Europe—there is a little bit tagged on at the end of the broadcast to remind people that it is a European election and not merely another homily on the fact that the Prime Minister can walk on water.

As we have heard so many times, the Labour party could not come up with its own manifesto for the European elections; it had to join in with the manifesto of the European socialists. We hear that the Prime Minister has rejected calls for a televised debate on the subject of Europe. Such a debate would ensure that more people in this country were enlightened as to the real issues.

There are two main fundamental issues, of which the first is sovereignty. There is an attack on the authority of this place through some of the measures that the Government are considering in their shared manifesto. The second issue relates to the inevitability argument-that the political and economic integration that we are seeing under this Government are all about softening up the British public to accept entry to the euro as inevitable.

To go back to basics, there are three roles of Government. The first role is to tax their subjects; the second is to defend their subjects in time of war; and the third is to administer justice and maintain the rule of law in this country.

Mr. Win Griffiths (Bridgend)

The hon. Gentleman has put them in the wrong order.

Mr. Loughton

They may be in any order that Labour Members choose; there is no order of preference. However, I shall deal with the last role first. Corpus juris is a phrase that has hit the headlines in recent months as the embryo of a future European criminal code. As the UK is one of the few countries in the EU to use the adversarial system—almost alone against the inquisitorial system elsewhere—it is clear which system will be the winner, despite the fact that our system has served this country well over many centuries of English law.

In relation to the right and the role of Government to defend subjects in time of war, we hear more and more about a common European defence policy. A country can wage war only by taxing its subjects in order to raise revenue to fund that war. That relates to the first of the issues that I raised: the subject of tax. Perhaps it is fitting that, as we speak, the ECOFIN meeting in Brussels is under way, discussing the future of European taxes—not least the withholding tax. If it goes through, that tax will be especially lethal to thousands of jobs in the City and will cost billions to the balance of payments of this country's trade.

During the past few days, news has leaked out—without an announcement to the House, as so often happens—that the code of conduct group, chaired by none other than the Paymaster General, is considering no fewer than 185 different tax rates and rates of so-called harmful tax competition. "Harmful tax competition" is a well worn phrase—it probably contains the greatest paradox of all. To my mind, tax competition can be nothing but beneficial, but we have been spoon-fed that phrase about harmful tax competition from all angles. Apparently, the code of conduct group is considering whether the tax breaks for small businesses in Northern Ireland will have to go, even though those tax breaks were only introduced in the Finance Act 1998—on whose Standing Committee I served. The group is also considering the scrapping of enterprise zones for depressed areas.

It is perhaps ironic that today, when the Standing Committee on the Finance Bill is discussing the tax treatment of British industry, the Paymaster General is apparently discussing the eradication of tax breaks for that industry. The Paymaster General must be holding some interesting conversations with herself. She has one hat on when she is in the Committee Room discussing the Finance Bill and preparing to abolish a measure that the Government introduced last year. She wears another hat as chairman of the code of conduct group, saying that the tax break is completely unfair and that we shall of course go along with banning it. I hope that she will not resort to the usual tactic of saying different things in different places to different audiences. Has the House been kept informed of any proposals of the secret committee, which is chaired by a Minister, that will inevitably dilute the House's authority to set the taxes that it thinks appropriate for our subjects, to whom we are all accountable?

Mr. Griffiths

Yes.

Mr. Loughton

The answer is no. It is no good Labour Members disagreeing: a list of the taxes and reliefs under consideration has never been released, despite constant parliamentary questions from this side of the House. Despite oral questions at Question Time, the Paymaster General refuses to describe what is on that list. Apart from the handful of measures that I have described, the list has never been released. It will affect the powers and privileges of the House to set taxes and to grant tax relief to our subjects, yet we—the legislators of this country—are not privy to that information. It will be discussed first with Finance Ministers of other countries behind closed doors in smoke-filled rooms. The first we will hear about it is through a leak, on the internet, or via a statement from the German Finance Minister, as occurred this evening.

Have we had any statement from the Government? Of course not. The Government have refused to publish the list or to give any details about the timetable to which the code of conduct group is working. We are left to guess the details. Yet those decisions represent the biggest transfer of sovereignty from the House that we have ever seen—and all in the name of ending the paradox of harmful tax competition.

I was at Mansion house a couple of weeks ago when the sacked-but-still-at-his-desk Commissioner Mario Monti gave a speech to the City of London. He made it clear that the withholding tax will be levied and that, if the Government do not get their act together and compromise, it will be much to the detriment of all concerned. The Commissioner offered very little hope to the eurobond business in the City of London, and all hon. Members know what will happen. If we have a withholding tax, the business of eurobond trading in the City of London will go overnight to Zurich and back to the United States, whence much of it came in the 1980s. That is a prime example of cutting off our nose to spite our face.

The Government publication "Developments in the European Union" refers to the taxing of savings. It claims that the withholding tax project is being discussed in order to eliminate evasion of tax on cross-border payments of interest to individuals in the EU. Yet the measure will affect people who live outside the EU. At a stroke, they will take their business to other financial markets in other parts of the world—namely, Switzerland and the United States. Apparently, we are going to let that happen.

Today's ECOFIN meeting in Brussels provided an ideal opportunity for Treasury Ministers to stop talking tough and start acting tough. Just 12 days ago, the Chancellor said at Treasury questions:

I have made it absolutely clear that the United Kingdom will not accept any directive that requires member states to introduce a withholding tax. It has been absolutely clear for months."—[Official Report, 13 May 1999; Vol. 331, c. 405.] For once, I agree with the Chancellor: it cannot be clearer than that. On 26 January, the Economic Secretary to the Treasury said:

We will not agree to any directive that applies to eurobonds. We will continue to defend the interests of the City of London and we will not accept any proposals which might damage it. She said that the Government were prepared to use their veto to block the "disastrous" withholding tax. The Paymaster General—who was not busy chairing the code of conduct group at the time—said:

We have made it absolutely clear"— there is clarity all over the place— that we will not agree to any course of action which would seriously damage the UK and other European financial markets. Today was the day for the Government to cash in on the respect that the Foreign Secretary opened the debate by claiming the Government had built up in bucketfuls with our partners in the other capitals of Europe. Today was the day for the Foreign Secretary and his Treasury colleagues at the ECOFIN meeting to tell their European partners that we will not accept withholding tax. Today was the day to wake up those European colleagues and tell them that introducing a withholding tax, which some years ago destroyed the bond market in the US overnight and which failed dismally in Germany when it was introduced in 1987, is against the interests not only of the City of London but of any of the financial markets in the European Union.

Failing the Foreign Secretary's ability to cash in on that respect or to persuade his European colleagues of his argument, today was the day to use the British veto. It is late in the day for that. The ghastly concept of a withholding tax should have been strangled at birth, as all Conservative Members realised when it first reared its ugly head. The Government have only themselves to blame for getting to this pretty pass today, because they should have stamped on the withholding tax many months ago when they first had the opportunity to do so. However, they wanted to appear to be good Europeans who go along with their EU partners, so they singularly failed to stamp on it.

The Government failed dismally again today, because the result of the ECOFIN meeting is that a compromise will be put on the table. The last rites on withholding tax and the eurobond market will conveniently be delayed until after the European elections, so as to minimise the impact on the Government and their policy on Europe. The Chancellor will write a technical note about the withholding tax. He had two years to write all manner of technical notes. We all know what will happen in a few weeks—there will be a fudged compromise, and that will be the end of the eurobond market in the City of London.

The City does not believe that any fudged compromise to exempt the wholesale bond market, such as the one discussed at ECOFIN today, will prove at all workable. The director general of the London Investment Banking Association recently said:

A plan to ameliorate a proposal which is clearly unsatisfactory will not work. Such a proposal would trigger a two-tier market of new and old bonds and early redemption clauses and would not work. The eurobond market—which is worth $3 trillion a year in London alone, with some 11,000 jobs relying on it—would leave London and the European Union overnight, much to everybody's detriment.

It is no surprise that, tonight, Swiss financiers are metaphorically licking their lips in eager anticipation. For the past few months, they have been busy installing new trading systems for dealing in eurobonds denominated in euros which are fully compatible with all EU country needs. The Swiss Economic Affairs Minister recently said that the Swiss were looking to the capital flight out of euroland which will be caused by the introduction of a withholding tax. They have already targeted 10 per cent. of the European equity market for the end of this year, and they are preparing to abolish stamp duty to make that flight even more rapid.

It is as if the City of London financial markets are to be punished for the British people's reluctance to accept at face value the Prime Minister's mantra, "The euro is good for you." They are to be punished also because the City is proving that there is life outside the euro, and a profitable one at that. Despite Government claims that the City needs to be part of a euro financial community, the opposite is proving true. We still have nearly 600 foreign banks—a record number—operating in the City of London. Some 600,000 people work in the financial community in the City, which is more than the entire population of Frankfurt.

Americans have not been scared off by our failure to enter the euro yet. The Japanese and the Germans have not been scared off. Let us consider some of the participants in the City of London. Merrill Lynch, one of the largest American banks in the world, has 5,000 staff in the City and has just spent £200 million on a new European headquarters. Where is that headquarters? It is in London. Where has another large American bank, JP Morgan, based 3,800 of its total European staff of 4,500? In London. Salomon Brothers has 1,800 of its 2,000 European staff based in London, and recently claimed:

We have no plans to change that balance because of the arrival of the Euro. If anything, more of our business will be consolidating in London. The Germans agree—the managing director of Dresdner bank, which now owns Kleinwort, said: London will retain its outstanding importance, even if Great Britain does not join monetary union. Similarly, the Japanese—Sanwa, one of Japan's largest banks, is closing its Paris offices and branches to consolidate European business in London. Its spokesman said:

We need London but we do not need both Paris and Frankfurt. From the implications of what happened today, it seems that the City and the thousands dependent on it in the financial services industry and beyond are to be punished by a Government desperate to prove themselves good Europeans, above all else.

The surrender of the withholding tax is just the tip of the iceberg. We have 300 other taxes and tax reliefs, which could now be up for grabs and which lie at the mercy of European Finance Ministers who take exception to the competitive advantage of so many low tax rates and pragmatic reliefs, many of which were built up over 18 successful years of Conservative economic rule. All are now under attack from the Government's taxing by stealth and after today are equally under attack from levelling up to continental rates—except in the case of British lorry drivers, on whose behalf our Finance Ministers see no reason to bat.

The British public are not stupid. They are waking up to the precedents being set in the harmonisation of tax rates and relief. They are wising up to the effect that that will have on stamp duty, corporation taxes, social and employment taxes, taxes on savings, the rates and scopes of VAT, and ultimately the effect on income tax, one of the most powerful tools for raising revenue available to the House.

The Government are desperately trying to wear down the public for the next and crucial phase in European integration—British entry into the euro. We all know that opinion polls consistently show that the British public are not in favour of joining the euro. It is an interesting paradox that many of the same opinion polls reveal that most British people think that going into the euro is inevitable.

Phrases such as "In a common market a common currency is common sense" are touted by the marketing gums behind the Labour party and shot at us. The former Economic Secretary to the Treasury, now the Minister for Transport, said a little while ago that in a few years, when the German tourist is on his sun-lounger next to the British tourist on his sun-lounger buying a beer on a Spanish beach, and the German tourist pays with his euros, while the British tourist has to convert his currency into euros before he can pay, British people will wake up to the fact that joining the euro is a sensible course of action. However, that German tourist may not be able to afford to be on the beach buying a beer, because of what has happened to the combined European economies. Those are the real issues, which the Government try to skirt around.

We recently saw the Government trying to wear down the resistance of the British public by going ahead with the changeover plan after only 67 minutes of explanation from the Prime Minister. British business and its shareholders will have to pay up billions. British taxpayers, through the Government, will have to pay up billions to prepare for our entry into the euro currency, which on the balance of probabilities, if it still depends on the outcome of a referendum, will not happen. The Government are selling off our gold reserves to reinvest in euros and to pool our reserves with the euro by stealth, to make it inevitable.

None of that has anything to do with considerations of sovereignty. The Government are surreptitiously resorting to the inevitability of gradualism. The real issue of sovereignty has been completely avoided in any contribution that I have heard today from the Government Benches. The issue that needs to be countered is that of inevitability. That is the Government's only chance of gaining credibility for our entry into the euro.

Nothing is inevitable, except death and taxes—and also, perhaps, the capacity of the hon. Member for Harrow, East (Mr. McNulty) to alienate everyone around him after a 27-minute rant. The Government do not want to discuss the real issues in Europe. They go to great lengths to avoid debating the real issues affecting the British people.

As with so much, new Labour resents the process of scrutiny and accountability which is the modus vivendi of this place. The Foreign Secretary referred to our attempts to scrutinise the Government on their plans for harmonization of taxes, and we have scrutinised them in respect of the increased social costs, red tape and regulation involved in Europe. Labour Members say that all that scrutinising, which is the role of the Opposition in the House, is down to fear of Europe. What a pretty pass that is, and on 10 June we shall see whom the British people fear most.

8.55 pm

Mr. John Smith (Vale of Glamorgan)

I welcome the opportunity to contribute to this important debate on the European Union in the run-up to the Cologne Council and the European elections, which will take place on 10 June. Although the hour is late, a number of hon. Members want to speak, so I shall keep my comments as brief as I can and focus on one area that has perhaps not been covered enough—the clear economic advantages to this country of membership of the European Union.

I have to admit that I was no great enthusiast when we first considered whether to enter the Common Market over 20 years ago. At that time, less than 20 per cent. of this country's income from foreign trade came from trade with the rest of Europe. However, 25 years later, Opposition Members are adopting an unbelievable position—this country depends on the European Union for nearly two thirds of its income from foreign trade. They argue against greater co-operation and against constructive engagement. They rule out a single currency for a fixed period—for decades, or whatever it is—which is absolutely ludicrous. Small wonder that this country's business community has no support for them whatever.

The party that once claimed to be the party of business has become a joke in the business community in Britain as a whole and particularly in the business community in south Wales, which is my part of the world. Tory Members of Parliament were wiped off the map at the previous election because of their completely unrealistic views on Europe. If they do not get their act together, stop squabbling and pull together a coherent economic policy on Europe, they will stay in the wilderness indefinitely.

The advantages of membership of the European Union are considerable. When I was briefly not a Member of the House, I worked in the inward investment business in Wales and I can tell hon. Members, if they do not already know, that the European Union is one of the most attractive—if not the most attractive—investment locations in the world. We sometimes forget that the European Union has 380 million of the most sophisticated consumers in the world consuming sophisticated goods and services at a higher rate of value than any other market in the world. It is the biggest consumer market by value, if not by volume, of consumption. That is the attraction of the European Union, that is why there are huge economic advantages in continuing to work closely with the rest of Europe and that is why the only policy that this or any Government can adopt is pragmatism towards Europe.

In south Wales, our economy has been transformed over 20 years. It was dominated by heavy industries, primarily coal and steel, which produced almost exclusively for domestic consumption, but 80 per cent. of the manufacturing industry in south Wales now produces goods for direct export to the European consumer market. That is why our business people want a Government who will continue to engage in it.

However, we should draw the attention of my right hon. Friend the Minister to a feature of that hugely attractive and economically seductive marketplace. It is structured unevenly and two thirds of all consumption in the economic union takes place in only 10 per cent. of the territory.

The wealth of the European Union is very concentrated. The highest rates of GDP per capita are in an area running through central Europe with which we are all familiar. We jump into our cars and drive down to the south of France using that route. I am talking about the south-eastern corner of Wales, the south of England, Paris, northern France, southern Belgium, southern Germany and the Turin-Milan axis. That is where most of the economic activity takes place, and that is why we have the structural funds that we have, and will continue to have for some time. We want to help to redress the balance.

I am delighted that Wales secured £1.3 billion in objective 1 funding for mid-Wales and the valleys, which have suffered particularly over the past 20 years. During that period, our GDP per capita relative to that of the rest of the UK, and the rest of the EU, has fallen, and the gap between Wales and the south of England—and between Wales and the rest of Europe—has widened. That must be dealt with in the EU.

My hon. Friend the Member for Doncaster, Central (Ms Winterton) described eloquently the advantageous impact that European funding could have on people, and I do not think that we can take that away. The right hon. Member for Charnwood (Mr. Dorrell) made a shameful contribution, dismissing structural funds as a return to the old-fashioned policies of the 1960s and 1970s. What nonsense! Anyone who has observed the successful way in which Ireland, for example, has used its structural funds will know that they can turn an economy around.

The secret lies in meeting the challenges, and ensuring that the funds are invested innovatively. They should be invested not simply to deal with people's needs, but to create an environment that will allow our regional economies to grow, develop and prosper throughout Europe. That challenge faces the entire United Kingdom. Over the past 20 years, not just Wales, but the north-west, the north-east, parts of Yorkshire and, certainly, Merseyside have been badly affected by the relative decline in wealth creation.

I am a great fan of the creation of the regional development agencies, which took place on 1 April this year. I think that they will go a long way towards helping us to disperse wealth creation more evenly—not to take wealth from one part of the country and give it to another, but to ensure that the regions start to grow more quickly and evenly as we prosper as members of the EU. People not only in the whole of this country, but in the whole of Europe will be able to benefit from that.

Nevertheless, the creation of the regional development agencies also presents a huge challenge to Wales in particular. Along with Scotland, over the past 20 years, we have been lucky in having a competitive edge. The Welsh Development Agency has helped us to attract investment, especially foreign investment. During those past two decades, we have had a good record in regard to the attraction of investment to Wales, and the jobs that go with it. Now we shall have regional development agencies throughout the United Kingdom, notably the London development agency, which will be created next year. That will make it much easier for the UK to compete for the existing capital in the EU, and to secure it for its own regions.

It is vital that we invest objective 1 money so that our economies can grow in a sensible way. As I said earlier, the south-eastern corner of Wales is at the core of the consumer market in the EU, which is what makes it such an attractive investment location. Whatever strategy is adopted in Wales—through the House, or through the newly created Welsh Assembly—we must retain the advantage of an attractive investment location that can offer competitive prices, direct access to the marketplace and a good quality of life for those who live in the area. Objective 1 expenditure must complement the development of the area, so that the whole of Wales can benefit. We must take a strategic approach to ensure that we expand the whole economy of Wales.

That point brings me on to objective 2, which is another crucial area of structural funding. We have already quite rightly allocated objective 1 money in Wales to the less-favoured areas, and that is where it should go. It is critical that any objective 2 funding that comes to the Principality is spent just as wisely. We must take into account two considerations.

First, we must examine indices of social and economic deprivation in other parts of Wales. My constituency is a good example. As a whole, it looks like one of the most prosperous constituencies in Wales in terms of income per household, but some areas, such as north-east and southern Barry, and particularly the coastal strip, experience enormous and unbelievable deprivation. The last recorded statistics—the figures are a little dated, but they still reveal the level of deprivation—showed that the average household income, including gross income apart from housing benefits, was less than £60 per week per household. One has to think about that to appreciate the level of deprivation that that implies. Those areas should automatically be considered for objective 2 status merely on the basis of social deprivation.

More importantly, we must also consider the value of such investment for regenerating the economies of south-east Wales as well as the less-favoured areas. The whole coastal strip—Barry, the port of Cardiff and the port of Newport—contains a cluster of areas that suffer deprivation. Investment in major infrastructural programmes through objective 2 funding would benefit not only the industrial south-east, but the whole of Wales. However, that money must be allocated and spent properly.

Three major projects could make an enormous difference: the M4 relief road in south Wales to accommodate the increase in traffic that is bound to happen with continuing economic growth; the electrification of the main rail link to south Wales; and the dualling of the access road to Wales's only international airport. Access to that airport is a crucial future business link. Those projects would ensure that we relieved poverty and deprivation, and that we created jobs and a stable environmental and economic framework for future growth and prosperity in the area.

Objective 2 funding is vital, especially in light of the fact that we now have regional development agencies throughout the United Kingdom. The Minister and her colleagues must address the problem of the structural imbalance in economic growth throughout Europe, and ensure that it is more evenly spread. When the time comes to allocate crucial objective 2 structural funding—I know that it is not her responsibility, but I am sure that she has a dialogue with her colleagues—those two criteria should be met. Ministers must relieve deprivation and ensure that the funding goes into innovative projects that will facilitate future economic growth in south Wales.

I have no doubt that, if we adopt that strategy, my constituency and the region of south Wales, like many other outlying regions of the United Kingdom, can look forward to prosperity and continued growth for some time to come.

9.9 pm

Miss Anne McIntosh (Vale of York)

I am grateful to be called to participate in the debate, especially following the speech of the hon. Member for Vale of Glamorgan (Mr. Smith), who is such an eloquent advocate for his area. I am sure that there will be a lot in common between the two Vales.

The mood was set by the Foreign Secretary—a rather sombre tone against the background of the hostilities in Kosovo. I associate myself with the eloquent remarks of my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), the shadow Foreign Secretary.

I should like to say a few words about the state of agriculture and the missed opportunity at the Cologne summit to build on the agreement that was concluded in Berlin in March on reform of the common agricultural policy and of structural funds. An opportunity has been missed to go over the regrettable failure of farm Ministers to reach agreement.

In particular, I note that milk quotas will put great pressure on dairy prices in England, Scotland and Wales following an agreement that is favourable to Northern Ireland. I do not begrudge Northern Irish Members that, but it will put great pressure on other agricultural areas in the United Kingdom such as the Vale of York, and further depress milk prices.

The Berlin summit left the beef sector broadly unchanged as well, and failed to take the opportunity to run with rural development policy and environment policy. In the arable sector, intervention prices were reduced only by 15 per cent. in two years, not the 20 per cent. that was first sought.

It is important to put on record the fact that, as my right hon. Friend the Member for Fylde (Mr. Jack) has said, the Agenda 2000 reforms will not meet our obligations under the World Trade Organisation. That is regrettable.

I know that pig farmers and producers of other products in the Vale of York feel particularly aggrieved that there is no support for pork products, either from the Government or from the Commission, when the sector is undergoing probably its greatest ever crisis throughout the European Union. As we have so many pig producers in the Vale of York, they are especially damaged.

I am disappointed that the hon. Member for Harrow, East (Mr. McNulty) is no longer in his place and that he failed to take account of the fact that, in 18 years in government, the Conservative party tried to create fair competition in agriculture, not least in animal welfare. It is regrettable that, having banned sow stalls and tethers in this country, we have imposed an additional unilateral burden on our farmers, which no other producers—whether in Denmark, Holland or other countries in the European Union—will have to meet.

Farmers in the Vale of York are one of the largest employers; although, individually, they do not employ many people, they are a large employer overall. They have had certain expectations from the Government, who have disappointed them. The Cologne summit was an opportunity for those expectations to have been revived and satisfied.

It is fair to say that the business community has different expectations of the Government in relation to the European Union. Its expectations have been disappointed as well. As time is short, I take just one specific example. This week, we heard that we were going to have record delays in air traffic this summer. That will affect not just travellers, but, equally important, members of the business community who go out there to seek orders for UK plc. I regret that the Government have not used the opportunity of the Cologne summit—perhaps they still might—to put pressure on Eurocontrol once and for all to achieve a single air traffic control unit.

I do not think that we need to cede any more sovereignty to the Commission; it is not the right body to achieve that. However, if the Government could use their offices to put pressure on member states that have failed to invest the same amount in air traffic control equipment as this country has—under the previous Government, we were a flagship in that regard—it would be helpful in satisfying business customers that they will be able to travel to reach their orders throughout the European Union. Patently, they are not going to do so this summer.

The Government have placed great emphasis on social Europe, calling for a working time directive and a minimum wage. Conservative Members should like flexible labour markets to be established. We therefore oppose the working time directive and the minimum wage, which will not promote the flexible labour market that we want.

The working time directive will apply to everyone—unless one is a junior hospital doctor. I regret that that sole exemption will continue, for possibly up to 13 years, as it does not send a very good message to our very hard-pressed junior hospital doctors. Perhaps the Minister will be able today to give us a good reason why the exemption should continue.

In an earlier intervention—which the hon. Member for Doncaster, Central (Ms Winterton) kindly allowed me to make—I mentioned pig farmers. In North Yorkshire, we are concerned that pig farmers, and other farmers, will be the 1990s equivalent of the coal miners in the 1980s.

I therefore make a plea to Ministers to ensure that, when they consider structural funds, Agenda 2000 and the additional role that will be played by national Governments, and indeed by regional development agencies, the Vale of York and other areas in North Yorkshire will continue to benefit from Konver and 5(b).

In the past, under the previous Conservative Government, it was recognised that rural areas did quite well. We want to ensure that the current Government maintain the balance between rural and urban areas. There will, therefore, be a contest between Doncaster, Central and the Vale of York. Although I am sure that the Vale of York will come out on top in such a contest, I simply ask the Minister to ensure that areas that have benefited in the past will continue to do so.

Young people look to the European Union as a continent of opportunities, and perhaps as a place where they may be able to use their languages. The House may not know it, but I am a Rentokil scholar. Rentokil is a Danish—owned company, and I gained a six-month scholarship to study at the university of Aarhus. Now, partly on the basis of that six-month scholarship from Rentokil, I am in there—in the House of Commons—fighting for Yorkshire. I hope that young people will not be disappointed in their expectations—dragged down because of burdensome, interventionist policies, such as the working time directive and the minimum wage—but will be able to avail themselves of that continent of opportunities.

I also hope that the Cologne summit will make progress on some issues, thereby giving us a little taste or soupcon of next year's intergovernmental conference. Opposition Members are committed to enlarging the European Union, and particularly to bringing in central and eastern European countries. We want the EU to have a wider and broader membership in order to enlarge the marketplace.

I hope that the Government and our European partners will not shirk from making the tough decisions that must be made. Tough decisions on institutional arrangements must be made, such as on the number of Commissioners and—dare I say it—even on the number of Members of the European Parliament and other institutions. The Amsterdam treaty negotiations did not face up to making those decisions, but they will have to be taken either this year, at Cologne, or at next year's intergovernmental conference.

Cologne will be the threshold of decision making for the millennium and will set Europe's future direction. Just as Cologne will be a threshold for Europe, I am approaching a threshold in my own career. At the European elections, and after serving for 10 years in the European Parliament, I shall retire—being a very retiring Member of Parliament—from the European Parliament, and devote myself entirely to my constituents in the Vale of York, who I hope will receive a piece of good news in the Minister's reply to the debate.

9.20 pm

Mrs. Louise Ellman (Liverpool, Riverside)

I welcome this evening's wide-ranging debate just as I welcome the Government's positive attitude to our participation in the European Union for the benefit of people in the United Kingdom. It is in marked contrast to the negative attitude adopted previously, when local authorities such as Lancashire county council and other regional groups had to open their own offices in Brussels so that the people of our regions could have their interests represented.

I deplore the continuing negative stance of Conservative Members this evening. Indeed, the speech of the right hon. Member for Charnwood (Mr. Dorrell) should ring warning bells among the electorate as we approach the European elections. His denunciation of the European structural funds should be a warning to the electorate in the English regions. Critical aspects of objective 1 and objective 2 funding and other aspects of structural funding are still under negotiation. The right hon. Gentleman was saying clearly to the people of this country that if they elect Conservative MEPs, they will be supporting a point of view that is against the interests of the people of the regions at a time of critical negotiation.

It is clear from what has happened in recent years that structural funds have been highly effective in supporting regional economies. They are effective because they are targeted and linked with single-programme documents. Programmes have been worked out to meet the needs of the regions in which they operate. That is very clear in my constituency in the Merseyside objective 1 area, where £630 million of European funding has generated additional money leading to the investment of £1.5 billion in the Merseyside economy. That has resulted directly in 19,000 new jobs. It has produced a wide range of achievements including the regeneration of Queen's square. It has provided business support through the innovative Merseyside special investment fund which has led to the investment of £53.5 million in the Merseyside economy, supporting more than 260 businesses and 3,000 jobs. It has helped growing industries in the arts through support for organisations such as ACME£the Association of Cultural and Media Enterprises£and has supported infrastructure, which is essential for economic development. Projects have included the development of docks, railways and the airport. The investment has contributed to the development of skills for all ages throughout the population, and capacity building in local communities through the urban fund, for example, which has focused on areas of greatest deprivation.

I believe that the future success of European structural funds lies in the regional dimension. Britain has been very slow at recognising the importance of regions. In most of the rest of Europe, regional structures are well advanced and have helped to support their economies. Now, at long last, we have regional development agencies supported by regional chambers, which I hope will become directly elected regional assemblies.

Today, the Select Committee on the Environment, Transport and Regional Affairs, of which I am a member, published its second report on regional development agencies. The report stresses the importance of linking regional economic strategies developed in the regions of the United Kingdom with the use of European structural funding. One of its key recommendations is for regional development agencies to assume what is now the role of the regional Government offices in leading and co-ordinating European structural funds.

The report also recommends that the regional development agencies should assume the role of regional Government offices in leading skills training by contracting directly with the training and enterprise councils and business links. That would bring together investment in our economy and the development of skills, linking that with European funds to enable the best use to be made of public and private resources. In looking at our regional economies, we must consider the importance of investing in business, investing in infrastructure and developing skills. We have to look at what we want in our regions, link that with European Union funding and put the funding sources together to have maximum impact in our economy.

That will be particularly important in the north-west. We need to develop a better transport system. We need to invest in freight and passenger rail services. We need to link up with trans-European fast routes. We need a fast rail link to the channel tunnel so that our economy can prosper. We need to support businesses and understand why the region has a low rate of business formation and survival. If we could increase that to the UK average, 100,000 additional jobs would be created and £4 billion would be added to our gross domestic product.

We need to support our growing tourism industry, which currently provides employment for 3,000 people in the north-west. We need to look at regional initiatives in the north-west, including developing trade with Ireland and with northern and central Europe. It means looking at the importance of diversifying our industries where they are vulnerable. It means developing the skills in our industry and our universities in a comprehensive way, embracing the information society so that skills and knowledge in our region can be applied to new circumstances to bring new jobs.

There is much more that this country can do to develop our regional policies. We need directly elected regional assemblies. We need to make regional interests more explicit at national level. We need to support regional representation in the reformed House of Lords through the regional chambers. We need to make it clear that we see regions as important not just for our economy, but for developing the interests of the people of this country, taking account of the views of all social partners in the regions.

Europe is far ahead of us in regional development. We are at a critical stage. We have our regional development agencies and regional chambers. We are developing our regional economies. We are to receive more significant funding from the European Union. It is time that we stopped being passive and thinking simply about how we can use the rest of Europe. We must become active participants at national and regional level. I hope that this debate contributes to moving us forward so that, as we develop our regional economies with all our social partners, we become fully part of the European Union—the Europe of the regions as well as the Europe of national Governments.

9.29 pm

Mr. Michael Trend (Windsor)

The House looks forward with varying levels of enthusiasm to these six-monthly debates on the European Union that take place before the two major summits in the year. After the forthcoming Cologne summit, which will mark the end of the German presidency, we shall welcome the Finnish Government to the presidency, even though they are said to be increasingly anxious about inheriting a somewhat paralysed European Union.

Many important and interesting subjects have been raised today. The debate was ably opened for the Conservatives by my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), who made an important contribution on Kosovo. Many others also mentioned that subject, but if the House will forgive me I shall pass over it.

Our relationship with Russia was mentioned by several hon. Members, and that is an important issue at the moment. The hon. Members for Somerton and Frome (Mr. Heath) and for Ilford, South (Mr. Gapes) both asked difficult but important questions that the Government must consider. It would be interesting to hear the Government's views on the subject tonight.

Many other hon. Members made contributions relating to their areas. My right hon. Friend the Member for Charnwood (Mr. Dorrell) put the cat among the pigeons on that score, although I cannot decide whether it was a fat cat among pigeons, a cat among fat pigeons or a fat cat among fat pigeons. Anyway, we have heard much pleading for Members' constituencies or areas, and that is understandable although it also raises important and difficult questions.

Another theme ran through the debate tonight and that was accountability. Several hon. Members questioned, in different ways, the growing lack of accountability in many different aspects of the European Union and our relationship with it. That was brought out by my right hon. Friend the Member for Fylde (Mr. Jack), who made an excellent speech on agriculture. He wanted to reconsider how we scrutinise European legislation. My hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) was concerned about accountability to this House, and the hon. Member for Hornchurch (Mr. Cryer) told us that he had written to the European Parliament office in London in February asking some straightforward questions, to which there must be straightforward answers, and had not yet received a reply.

The current argument over Europe is first and foremost about the growing lack of accountability at all levels. In Cologne, the Council will deal with, among other things, how business is done in Europe. The Foreign Secretary has given us a list of the subjects that are likely to be discussed, which is helpful as far as it goes, but it does not go very far and does not give much detail. Ministers attend an endless stream of other important meetings, about which the House hears very little. Why is that? It is because there is no procedure in the House that obliges Ministers to explain what they are trying to do or to report the outcome of their efforts. As the Government increasingly do their business in Europe, it is vital to reconsider that issue. I heard what the Minister said earlier, but we need to look at our procedures.

It is the belief of the Opposition that Ministers should be required before any formal Council meeting—not just twice a year—to come before the House, put the Government's intended position and face questioning on a debatable motion, if necessary. Similarly, the process should apply after any Council at which Ministers have agreed any result differing from that which they sought to achieve. With the growing complexity of the United Kingdom's relationship with the European Union, there is a growing lack of accountability of Ministers to this House.

Many hon. Members mentioned the ECOFIN meeting today, including my hon. Friend the Member for East Worthing and Shoreham. We have seen one of the documents that emerged from that meeting, and the German president in office, Hans Eichel, has told us that there was a big step forward and that the meeting expressed a broad willingness to achieve a compromise. What was that compromise? It is important that the House should be able to question the Chancellor of the Exchequer on those points.

The usual mechanisms are failing to discover exactly what is going on. That may be due in part to the Government's natural reluctance to explain to anyone, even this House, what they are up to. So-called new Labour shares with old Labour one shining, central belief that they know better how to organise people's lives than individuals do themselves. The man in Whitehall still knows best and now so does his friend in Brussels.

What are we to make of the fiasco of the Commission? That question was also raised by the hon. Member for Hornchurch. The finest moment of the Commission came when it resigned. The events speak for themselves, but it is clear to Opposition Members that—under orders from national Governments at the turn of the year—the socialists in Strasbourg intended to prop up the Commission for its remaining months. They were told to fudge it. They reached for the traditional standby of those looking for delay and set up an inquiry, in the hope that the problem had been kicked into the long grass. However, the animal that they let off the leash was not a docile French poodle, but some sort of lurcher, which lurched its way through the Commission, carrying the Commissioners with it.

Months later, the Commission still finds it difficult to find the door marked exit. The national Governments say that they have been tough on the Commission, but the Commissioners are still all in place and on the payroll. Many hope to be reappointed.

Would a British Government, after losing a confidence vote in this House, be prepared to go away, lick their wounds and then slink back into office a few months later, having dropped only a few of their more unsavoury characters? No: it would have been a bag and baggage job. A British Government in that situation would have gone at the moment of resignation. [Laughter.]

Labour Members laugh, but they must know that people who resign from this House go the same day. They leave in disgrace and cannot make a personal statement to the House, but this is different because it is the European Union. The system has been designed by professional politicians for professional politicians, not for people at large.

This is new Europe. The Government promised us a new Europe two years ago, and that is what we are getting. This is modern, and hon. Members should not bother themselves with the details: all is being taken care of by Ministers. We have to get used to the idea that accountability and trust is a one—way street. Either we trust the Government and their European allies-or partners, as they call them—or we can lump it.

Other hon. Members spoke about the single currency. Conservative Members have given countless examples and quotations from senior European figures that show that the commonly held view on the continent is that the euro is a political project as well as an economic one. The new Commission President himself has said that economic and political union are two sides of the same coin. The matter could not be any clearer, but the Government—in the House and in their communications to the British public—say that the decision about joining the euro is purely a matter of economics.

No issue facing the country at the moment is greater than the question of whether we join the euro. No greater difference exists between the two major parties than the difference on this issue. Conservative Members relish the opportunity to make and win the case for retaining the ability of this House, which is democratically accountable to the British people, to determine our economic and political future.

What else have the Government to say about other policy areas affecting the development of the European Union over the next five years? On what programme or manifesto will new Labour go to the British people at the forthcoming European Parliament elections?

For the first time, as my right hon. and learned Friend the Member for Folkestone and Hythe so ably pointed out, a political party in the United Kingdom has failed to put together its own manifesto for national elections. The Government have signed up lock, stock and barrel to the Euro socialist programme. That is a damning indictment of their approach. In contrast, the Conservative party has published a British manifesto, made in Britain, for Britain. We will be accountable to British voters.

I want to clear up a point that various Labour Members have brought up during the debate. The confusion was begun by the Foreign Secretary—I am sure in ignorance rather than mischief—and concerned the manifesto of the European People's party. The Foreign Secretary was wrong to say that the whip, Mr. Perry, had a hand in drafting that manifesto. He did not, and neither did any Conservative MEP. The positions of responsibility listed by the Foreign Secretary are in the EPP parliamentary group, not in the party itself. The party drew up the manifesto, and Conservative MEPs had no involvement.

I am sure that the Foreign Secretary did not mean to mislead the House on this matter. He should know that the European Democratic Union—a different organisation altogether—has put together a common position. We are able to sign up to that position, at the same time as producing our own manifesto for the British electorate.

The electorate can hold us accountable on what we advocate and do in Europe. That is not true of the Government. The first secretary of the French socialists has kindly pointed out that the socialist document for which the Labour party is campaigning commits Governments as well as MEPs. European socialists are devising policies that bind British Governments before the British people cast a single vote.

One subject should be at the top of the agenda at Cologne. Enlargement is unquestionably the most important subject facing the European Union. Several hon. Members have referred to it today, and we shall hear more warm words from the Minister about the matter being well in hand and progress being made. Those over—familiar phrases count for nothing in reality. While applicant countries are making progress, especially in legislative terms—an enormous amount of hard work is being done—all of them know that preparing for success is far from achieving it.

Politicians in those countries are increasingly worried that the EU may not let them in. The Berlin summit was billed as a great moment of reform that would enable enlargement, but it turned out to be a big fix for the interests of the current Governments of member states. As my right hon. Friend the Member for Charnwood said, the Berlin summit effectively funked enlargement. Government Members cheerfully admit in private that the whole matter will have to be revisited before serious progress can be made on enlargement. As my hon. Friend the Member for Vale of York (Miss McIntosh) said, the common agricultural policy will have to be revisited very seriously.

This is not good enough. The Opposition see enlargement as a historic duty of the highest importance. What hopes and aspirations will the Poles, the Czechs and the Hungarians have at Cologne when the British Prime Minister seeks a formula by which to claim that he has preserved the British rebate? It is his proud boast, but is it true? Of course not. When it is pointed out that the Prime Minister has sold future rebate, he says that that is a different matter, and that he did it in any case to help enlargement. Round and round we go. Nonsense is piled on nonsense. He says one thing, and does another, as my hon. Friend the Member for Esher and Walton (Mr. Taylor) pointed out.

Ten years ago, I had the honour of standing for election to the European Parliament in the old London, North-East seat. At that time, that seat was not a Conservative heartland. The only safe Westminster seat was Chingford, and it still is. The then right hon. Member for Chingford was full of practical help and many kindnesses as a candidate. The House will be unsurprised to learn that I detected a certain lack of enthusiasm in him for the cause as a whole. I would have served happily in the European Parliament had I not been defeated by many tens of thousands of votes by Mr. Alf Lomas.

I want the European Union to work in the interests of all the people and nations of Europe. Much can be done, but we must break away from the historic architecture to build a better organisation for the future. To be critical of how Europe is going is not to be anti-European. To be in Europe, but not run by it is the aspiration of my party, of the British people and of peoples across the continent. UK voters need to feel that politicians are accountable in a much more immediate way than the structures of the European Union can hope to allow.

With the left in charge, Europe is following the wrong agenda. It is moving towards higher taxes, more regulation and deeper and dangerous integration. At Cologne, the Government should press for a Europe that is flexible, not rigid, a Europe that is diverse, not uniform; and a Europe that is outward-looking and not building an exclusive fortress. Only the Conservatives will work for a Europe that does less and does it better. Only we believe that Britain should be in Europe, not run by Europe.

9.44 pm

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

As is usual in these debates, a wide variety of issues have been raised. Unfortunately for me, a common thread throughout the speeches was that they nearly all contained specific points for me to deal with in my reply. As I have only 15 minutes to answer all those questions, it is not merely a Herculean but an impossible task. However, I can write to hon. Members if they feel that I have not covered certain matters.

There were many interesting speeches. Indeed, many of my hon. Friends spoke effectively and movingly about the importance of representing their constituents on European issues. That was clear from the speech of my hon. Friend the Member for Doncaster, Central (Ms Winterton), who mentioned the way in which Europe has helped and will be able to help in her area. Given that this debate is in the run-up to the European elections, it seemed entirely appropriate that hon. Members on both sides of the House should remind us of local and regional aspects of European policies. Certainly, my hon. Friends the Members for Vale of Glamorgan (Mr. Smith) and for Liverpool, Riverside (Mrs. Ellman) effectively referred to the situation in their areas, as did the hon. Member for Vale of York (Miss McIntosh).

I also commend the many speeches from both sides of the House that stressed the importance of an outward-looking European Union in various ways. It was important to stress, as did my hon. Friend the Member for Ilford, South (Mr. Gapes) and the right hon. Member for Fylde (Mr. Jack), the situation with regard to Russia and the importance of European engagement with Russia, which is why it has been identified as the subject of the first common strategy under the European Union's common foreign and security policy. I very much welcome that.

My hon. Friend the Member for Hornchurch (Mr. Cryer) mentioned the importance of developing countries. I hope that I will get an opportunity to pick up on one or two of the points that he made later, but he was right to bring developing countries into the debate on the European Union.

The hon. Member for Somerton and Frome (Mr. Heath) mentioned the middle east and the importance of ensuring that we do what we can to give the necessary momentum to the peace process, in particular in the light of the new Government in Israel.

My right hon. Friend the Foreign Secretary spoke at some length on the situation in Kosovo and responded to many thoughtful and probing interventions. He gave examples, which moved us all, of the extent of the suffering and the appalling experiences that have been inflicted on whole families—men, women and children—by Milosevic's troops. He also looked to the future—rightly in my view—and mentioned the work that the European Union wants to do to help economic recovery and progress throughout that region in a way that can make all the countries concerned feel that they can move towards and into the European mainstream.

Our proposals will be considered at the Cologne European Council. We wholeheartedly endorse the presidency proposal for a south-east Europe stability pact, which could provide a unique and multilateral forum, involving all the countries of the region in due course, and could help to create a future partnership based on core democratic values.

The United Kingdom Government are also contributing ideas for action in other international forums, such as the Organisation for Security and Co-operation in Europe, NATO and the international financial institutions, to ensure that those various initiatives do not duplicate each other, but can complement each other and be effective, in that important task.

Various questions were put to my right hon. Friend the Foreign Secretary. Although some may obviously be pursued with him directly, in answer to the shadow Foreign Secretary I can say that in NATO we are examining arrangements for an enhanced force to underwrite a ceasefire in Kosovo and to provide security for refugees to return. It is envisaged as a NATO force, under a NATO command structure, and will provide the core for an international military presentation in which we would welcome the participation of other partners. The sense of direction is clear.

The hon. Member for Somerton and Frome asked my right hon. Friend the Foreign Secretary several specific questions about which I think that I can reassure him. There is no question of immunity for Milosevic and others, but those will be matters for the International War Crimes Tribunal. He also asked about territorial integrity. We are not advancing solutions based on partition, or partial or zonal arrangements of the sort that he mentioned.

I was pleased that my hon. Friend the Member for East Carmarthen and Dinefwr (Mr. Williams) paid tribute to the efforts of the Foreign Secretary, which have been remarkable before, during and after Rambouillet. It is a record of which the country, and certainly the Government, are proud.

On internal European Union policy issues, I thought that our debate was interrupted by a disgraceful intervention on a point of order by the shadow Chancellor. I had already explained to the House what happened in ECOFIN, but he was not present when I intervened. As he had intervened, I thought that I had better check my information. In a short absence from the Chamber, I checked with my Department and the Treasury but the situation was as I had described it to the House. What happened at ECOFIN was very advantageous to this country and to the Chancellor's work. He has managed to move the debate on to a recognition of the particular problems of the eurobond market and financial markets in a way that did not exist before. We should recognise and pay tribute to his achievements.

I think that the shadow Chancellor should come to the House to apologise for his intervention. While I have him in my sights, I want to deal with a claim that he made in last week's debate on fraud in the European Union. I am not sure why, but he claimed that I had been forced to admit that we had done little to tackle such fraud. I do not know where he got that from. I said no such thing and would happily defend to the House in detail our record on tackling fraud and financial irregularities, at both national and European level. In the early days of the Government, we managed to get into the Amsterdam treaty a legal base to combat fraud against the Community budget. I hope that it can be used now that the treaty has come into force.

In January, the Chancellor proposed that the head of UCLAF—Unité de Coordination de la Lutte AntiFraude—should be boosted to make him independent of the Commission, and I am glad that that independence has now been agreed. Some hon. Members on both sides of the House expressed concern about the office being within the European Commission, but I defend that strongly because I know well from the past it is when people have had access to the system, the files and the information, that fraud has been uncovered. The proposal ensures that the head of the unit is independent and does not owe his career or prospects to the European Commission. That independence is the key to tackling fraud effectively in the European Union.

Mr. Howard

Does not the right hon. Lady understand that it is possible for an independent body to have full access to all the documents and people that it needs while being outside the body that it is investigating? The Foreign Secretary gave no direct answer to the hon. Member for Falkirk, East (Mr. Connarty). Why will she not undertake to reconsider the proposal so that we can have an independent fraud investigating body outside the Commission?

Ms Quin

I have already answered the right hon. and learned Gentleman. We have agreed the best combination of independence and access to the information. That is what we believe is really important in tackling fraud. I am glad that that has now been agreed.

Many other points were raised and it will be difficult to cover them all in the course of my remarks. Although I enjoyed and appreciated many of the contributions that were made, I was somewhat depressed by the degree of inaccuracy in the speeches of many Opposition Members and by the repeated scare stories and assertions that have no foundation in reality. One Opposition Member said that it was a rarity for us to discuss European issues in the House. That is complete nonsense. Apart from the regular debates on progress in the European Union, statements are made and questions are answered after every European Council meeting. A variety of debates are held and evidence is given to Cornmittees; only last week, my right hon. Friend the Foreign Secretary gave lengthy evidence to the Select Committee on Foreign Affairs—quite rightly—on the prospects for Cologne. We have overhauled the European scrutiny arrangements in the House, which means that Members have a better opportunity to scrutinise European legislation than ever before. We are proud of our record in bringing such issues before Parliament. I should like Opposition Members to acknowledge that, rather than making constant wild allegations that we do not listen to them.

I struggled to find anything to agree with in the speech of the right hon. and learned Member for Folkestone and Hythe (Mr. Howard). I thought that I was going to agree with some of his comments about Kosovo when he said that we have a bipartisan approach—although his version of bipartisanship could most kindly be described as idiosyncratic. However, I agreed with him and his hon. Friend the Member for Windsor (Mr. Trend) about enlargement. Unfortunately, both of them gave a wholly inaccurate version of the Government's policy on enlargement. Instead of going slow, we are speeding up the enlargement process through our actions in the EU. I commend to them the speeches made by my right hon. Friend the Prime Minister in Romania and to Members of the Bulgarian Government, when he said that we would support an invitation to Romania and Bulgaria to open negotiations at the Helsinki summit. As the right hon. and learned Member for Folkestone and Hythe mentioned Romania and Bulgaria specifically, I was surprised that he did not acknowledge the work that we had carried out.

Furthermore, we recognise and encourage the aspirations of other states in the enlargement process, especially the other two Baltic states, Slovakia, which has made good progress recently, and Malta, which has recently come back into the frame with its renewed application. A couple of weeks ago, I visited Malta and the Maltese are thoroughly preparing their accession negotiations, so that they will be in a position to take advantage of them when the time comes—despite the fact that the hon. Member for Chesham and Amersham (Mrs. Gillan) seems to be laughing at the prospect. That time will be as soon as possible.

The right hon. and learned Member for Folkestone and Hythe and his colleagues were keen to disown what he daringly described at one point as his sister parties in the EU. I think that he was also keen to disown some of his party's MEPs, who obviously work closely with the European People's party group. He should read the information that I found on the internet yesterday, in which the links of Tory Members of the European Parliament with the European People's party are trumpeted. The list of the key positions held by Tory MEPs in the European People's party is highlighted.

It is good to remind the House of what the allies of the Tory party are putting forward in the European elections. My right hon. Friend the Foreign Secretary rightly entertained us, but perhaps I could add something that he did not mention—the phrase in the European People's party manifesto that the party was committed to greater social integration.

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.