HC Deb 27 March 2000 vol 347 cc21-36 3.30 pm
The Prime Minister (Mr. Tony Blair)

With your permission, Madam Speaker, I should like to make a statement.

With my right hon. Friends the Foreign and Commonwealth Secretary and the Chancellor of the Exchequer, I attended a special meeting of the European Council in Lisbon on 23 and 24 March.

Ever since the Government took office, we have consistently advocated the need for comprehensive economic reform in the European Union. From the first European Council that I attended at Noordwijck, to the launch of the British presidency and since, we have made clear that the central European economic issue for Britain in this Parliament is reform: how we modernise the European social model and how Europe embraces the enterprise agenda and seeks to match the dynamism of the United States, while preserving our commitment to social justice.

The idea of holding a special summit at Lisbon on economic reform was originally put forward as a joint British-Spanish initiative. The Portuguese presidency has been rightly praised for the energetic and thorough way in which it took the issue forward.

The challenge that faces Europe today is fundamental. In many aspects of the new knowledge economy, the United States has established a clear lead. Seventy per cent. of all electronic commerce business in the world is conducted in the US; less than 20 per cent. in Europe. Despite the gathering strength of Europe's economic recovery and the advances that we have made in some key areas—for example, mobile telephones—15 million European men and women are without jobs.

The Council marks a sea change in European economic thinking. It points Europe in a new direction—away from heavy-handed intervention and regulation, towards a new approach based on enterprise, innovation and competition. As part of that fundamental reorientation of economic policy, the Council agreed a series of concrete measures with clear deadlines, including: rapid agreement this year on an effective legal framework for e-commerce in the EU; a fully liberalised and competitive telecoms market by the end of the next year; access to the internet for all schools by 2001; electronic access to the main basic public services by 2003; the introduction of a European diploma for basic information technology skills; a Community-wide patent by the end of 2001, making European patent protection as simple, inexpensive and comprehensive as it is anywhere in the world; and Government and Community procurement to be done fully online by 2003.

The need for reform is not confined to the so-called new economy. We agreed at Lisbon on the need for urgent measures to make the European economy as a whole more competitive, flexible and dynamic.

To support that objective, the Council reached the following conclusions: there must be faster liberalisation of previously protected sectors like gas, electricity and transport; there should be further support for European research and development, with the European investment bank making an additional 1 billion euro available for venture capital to support small businesses over the next three years; there should be a general reduction in the level of state aids throughout the Union; the financial services action plan should be implemented in full by 2005, with earlier progress in priority areas—for example, the introduction of a single prospectus for companies raising capital across the EU and the elimination of barriers to investment in pension funds. The Council also agreed that a European charter for small firms should be developed to clear the obstacles to the growth of small businesses.

On those and other matters, we agreed to benchmark each member state's performance and progress not only against other countries in Europe but, when appropriate, against the best in the world.

We also agreed that EU social policy must be modernised to respond to changing employment patterns, increasing life expectancy and deepening social exclusion.

Again, the European Council agreed on a number of specific measures to take the new agenda forward. We agreed action to combat social exclusion, with member states setting targets on specific matters such as unemployment, youth unemployment, overall employment and child poverty. We agreed to halve by 2010 the number of 18-to-24-year-olds excluded from the labour market because of low educational qualifications. We finally opened up the issue of the long-term sustainability of member states' pension systems and the need to reform them across the European Union. We agreed to establish a new Europe wide database on jobs and learning opportunities. We agreed to put lifelong learning at the centre of job creation and to monitor each member state's progress against a series of agreed aims. We also agreed to improve equal opportunities, to increase the provision of childcare and to promote greater flexibility in the management of working time.

Each year, the European Council will now meet to examine progress and agree further action specifically on economic reform.

The Lisbon European Council represents a turning point in Europe's approach to economic and social policy. With a sound macro-economic framework in place and the euro safely introduced, the concrete actions agreed at the Council should help to deliver an increase in the European Union employment rate over the next 10 years, from an average of some 61 per cent. today to something close to 70 per cent. I have no doubt that that is achievable. In the last three years, we have created more than 800,000 jobs in Britain. In Spain, there have been more than 1 million new jobs. In France, too, employment has risen by over 800,000 in the last three years, which, in part, reflects new measures to cut the cost of labour.

Above all, the European Council agreed that, once again in Europe, we can seriously contemplate a return to full employment. That post-war goal, achieved 30 or 40 years ago but then abandoned, is back on the agenda, and quite right too—each citizen unemployed is a resource wasted. We have had the courage to recognise that the aspiration cannot be met unless we are prepared to make the fundamental reforms that are necessary to equip our countries for the modern age—for a 21st century economy. The true significance of Lisbon lies in the combining of traditional aims and values with modern means and reforms.

We also had a full discussion of the situation in the Balkans, including the continuing problems in Kosovo and Montenegro. We agreed that the countries of the region needed to be brought more into the European mainstream, and committed us to enhancing economic assistance through, among other things, early trade liberalisation. The Lisbon Council recognised the immense progress made since the Kosovo conflict began a year ago, but agreed that a more coherent approach on the part of the international community was needed. We asked the Council's Secretary-General, Javier Solana, and the European Commission to present early recommendations on how to strengthen the impact of the European contribution, and enhance co-ordination of the overall international effort. We believe that that will enable Mr. Solana and Chris Patten to promote a more coherent international strategy for Kosovo and the region.

Finally, we discussed relations with Russia on the eve of the presidential elections, agreeing on the need for a full partnership between the European Union and Russia and emphasising again our concerns about the situation in Chechnya. I spoke to President Putin this morning to congratulate him on his emphatic election victory. He was very conscious of the weight of responsibility on his shoulders, both to restore order and democracy in Chechnya and to rebuild the Russian economy.

The Lisbon summit was highly successful. By getting our way in Europe, we are indeed standing up for Britain's economic interests. Making Europe more dynamic benefits Britain. More competition in Europe means new markets for British business; more enterprise in Europe means more jobs in Britain; more electronic commerce means more opportunities for British companies; more jobs, cheaper goods and better access to the internet are good for Britain.

Once again, constructive engagement has been shown to be the right policy for Britain and for Europe.

Mr. William Hague (Richmond, Yorks)

I join the Prime Minister in welcoming the completion of another democratic election in Russia. Hon. Members in all parts of the House wish Vladimir Putin well in the difficult responsibility that he has taken, and fervently want him to succeed in promoting prosperity and bringing order and stability to his country, while always remembering the value of liberty and freedom.

The whole House will also endorse what the Prime Minister said about the importance of peace and stability in the Balkans. One year after the start of the NATO action, I know that he recognises that serious problems remain in Kosovo. As the Lisbon conclusions state, Europe and the international community need to provide support in a much more co-ordinated, coherent fashion. Will the Governments in Europe now ensure that our service men, operating in extremely difficult circumstances, receive the political back-up that they deserve at all times?

Following the discussions at Lisbon, can the Prime Minister categorically deny stories on the front pages of today's newspapers claiming that the Government intend to opt into the full Schengen arrangements, which would mean abandoning our own immigration and border controls? That would cause great alarm and be a very serious policy mistake.

We welcome the fact that the central topic for discussion at Lisbon was economic and social reform. It is obviously sensible for the Heads of Government to discuss what can be done to promote the creation of more jobs and sustainable economic growth. However, it is notable that there was a great deal more adoption of targets—benchmarking exercises, reports and studies, strategic goals, co-ordination exercises, commonly agreed indicators, reflections on Commission communications, exchanges of experience on information networks, "a European innovation scoreboard" and "a European award for particularly progressive firms"—than of actions. Many or all may be sensible in themselves, but is not the real challenge to turn them into action?

Is it not the case that, alongside all those targets, a major shift in the direction of policy is needed if the European Union is to overcome the problem of high unemployment and catch up with America in the development of the new economy? Is it not time for everyone to recognise that businesses, not Governments, create real jobs? Should not Governments cut down on red tape and regulation and get out of business's way? Unless all that happens, the setting of targets and empty gestures will be all that is remembered in future years. All those Air Force meals will have been eaten in vain, even by the Chancellor and the Foreign Secretary. It is vital to remember that such rhetoric will not create a single job. If the object—[Interruption.] We are all entitled to have a little dig at Ministers now and again.

If the object is to create jobs, as we all agree that it should be, why did the Prime Minister do the following in the summit communiqué? Why did he commit himself to the so-called pending tax package—tax harmonisation by another name? Will that not lead to higher taxes in countries such as Britain? Why did he commit himself to renewing the European social model—the very thing that has led to such high unemployment in Europe in the first place? Is he aware of Lionel Jospin's comment that People tell us to take inspiration from Anglo Saxon countries. That isn't our approach at all? Why was President Chirac able to conclude after the summit that the European social model was recognised by all? What, exactly, gave him that idea? Why did the Prime Minister give the green light to the forthcoming French presidency on proposing a new five-year European social agenda at the Nice summit, about which the Confederation of British Industry, for example, has expressed great concern? As the International Herald Tribune noted: Some reports said that France had been isolated at the summit meeting in opposing the…views championed by Mr. Blair and Mr. Aznar, but these reports emanated mostly from the British Prime Minister's spokesman. Alastair Campbell. Surely not! Whoever could imagine such a thing?

Although we welcome any genuine commitment to updating the public procurement rules and completing the financial services internal market, if adapting the economy for global competition is a priority—again, we agree that it should be—why did the Prime Minister agree to drop the target dates for the liberalisation of transport and energy markets? Last year, at the CBI conference, he described some of the working time directive as "over the top". In a speech to business leaders in Bristol, he said: A lot of these different regulations that have come about from a slightly different era can be revisited again. Was not Lisbon a unique opportunity to put his money where his mouth is, reform such things as the working time directive and say precisely which regulations will be revisited? If he does not do those things, he will be accused of saying one thing to the CBI and another in Europe. Of course he would not want to be accused of that. Was not Lisbon a chance to turn those words into action?

Although we welcome the holding of the summit and the subjects that it discussed and believe that it is time to set Europe on the path of free enterprise and increased prosperity and to shorten some scandalously long dole queues, is it not also time to recognise that soundbites, pious pledges and rhetoric will have to be backed up by action to cut the burdens of tax and regulation, which still stand in the way of job creation?

The Prime Minister

I am glad that the right hon. Gentleman at least welcomed the fact that the summit took place, and that it was on this topic. The trouble is that, if we pursued the policy that he outlines, no such summit would ever take place under a British initiative. He is dedicated to attending his first European Council to renegotiate the treaty of Rome. [Interruption.] That may come as a shock to Conservative Members, but that is their party's policy.

The other day, the Bruges group of MPs—to which 120 Conservative Members are signed up—told the right hon. Gentleman that the option of withdrawal should be clearly contemplated if the treaty renegotiation was not agreed. He has never been able to name a single country in favour of a treaty renegotiation—not one. [HON. MEMBERS: "Norway."] We will glide over that small misunderstanding. As he cannot name one such country, it is highly unlikely that he would be able to initiate such a summit. Anyway, I shall leave that aside and come to the points that he made—[HON. MEMBERS: "Oh!"]—out of generosity to the right hon. Gentleman.

I shall deal first with the issue of the Balkans and Kosovo. Of course our service men and women have our strong political back up—they have had that all the way through. However, the real issue is how we better co-ordinate European and international action. The purpose of highlighting the roles of Javier Solana and Chris Patten is to have at the right level people with the authority and weight to carry through the decisions that the international community is making. Following the Lisbon summit, I hope that there will be greater clarity and co-ordination, and therefore a greater push given to our efforts in Kosovo.

It is barely a year since the conflict ended. Even though there are still enormous problems in Kosovo, let us never forget that it is better that those people are back in Kosovo than still being shut out of their homeland. We need to ensure that, having won the conflict, we also win the peaceful resolution following it.

On the Schengen arrangements, there is no question of us giving up border controls. That story was wrong, as could have been discovered had the Conservative party asked us. We have made it clear that we will work more closely under the Schengen arrangements on police co-operation, judicial co-operation, tackling organised crime and drug trafficking. That is perfectly sensible. However, I remind the right hon. Gentleman that, at Amsterdam, this Government won the legal protection of our border controls, and we do not intend to give that up.

The right hon. Gentleman said that the summit was all targets and no action. That is unfair: it was both targets and action. It is important to have targets on key issues to do with education and employment, but we also agreed measures on gas, electricity and telecommunications liberalisation. Specific measures were agreed by the European investment bank on the help that it will give small businesses. A directive on electronic commerce was agreed, and there were agreements on information technology skills to make them portable across Europe. There was a set of deadlines and agreements on Government procurement of services, which is immensely important. It would not be right to say that the Council was all targets and no specific action: it was a mixture of both targets and action, and rightly so.

On the tax package, we are committed to finding agreement, and I believe that we can do so on our terms. We are not against everything in the tax package. Indeed, we are strongly in favour of some parts of it. We want tax laws that are used as a hidden state subsidy to be removed, and that is a major part of the tax package. We must resolve the issue of the withholding tax, but we are making progress on that, and it is sensible that we continue to be engaged in discussion. It is always better to win the argument, and I believe that we can.

The right hon. Gentleman asked me why I agreed to the European social model. Let me make it clear, because he has misunderstood our position. I fully support the notion of a European social model—I am 100 per cent. in favour of it—but it should be updated, reformed and modernised for today's world. In case the right hon. Gentleman thinks that that is an extraordinary thing to say, let me quote to him from the Single European Act 1985, to which Margaret Thatcher, no less, signed up—that should instil calm and discipline in Conservative Members. An article, to which she agreed, states: Member states shall pay particular attention to encouraging improvements, especially in the working environment, as regards the health and safety of workers, and shall set as their objective the harmonisation of conditions in this area, while maintaining the improvements made. It is not so long ago that even those whom Conservative Members worship was prepared to take a slightly more open-minded view towards the social agenda. Margaret Thatcher also recognised, rightly, that Europe should have a social dimension, but that it should be sensible and improve employment and job opportunities for people.

In relation to the working time directive, I said that I believed that some parts of it were "over the top" because I thought that some of it was an unnecessary interference with the way in which employers run their business. For that very reason, we revisited it and have issued new guidance and made it more flexible, but the directive was agreed in 1990 under the previous Conservative Government.

In relation to the issue of dole queues and how we shorten them, one of the great points about the summit was that it recognised that there will be pockets of high unemployment and social exclusion that traditional policies of macro-economic demand management will simply not cure. It is for that very reason that, in this country, we have the new deal. I would have hoped that, if the right hon. Gentleman believed in cutting the dole queues, he would support a measure that has cut them here by 200,000. A total of 200,000 young people have jobs in this country today as a result of precisely the same type of measure that the rest of Europe is now willing to follow.

This summit has been highly successful not simply for Britain, but, most important of all, for Europe. It set a new direction for European economic policy. It has set very clear policy and targets for how we are going to achieve it. It is a very straightforward, clear example of how a positive, constructive engagement, rather than destructive negativism, yields results not just for Europe but, far more important, for Britain.

Mr. Charles Kennedy (Ross, Skye and Inverness, West)

On the last part of the Prime Minister's statement, may we echo the sentiments expressed in congratulating and wishing President Putin well? As the Prime Minister took the opportunity a couple of weeks ago to visit him, perhaps he might be able to flesh out whether there is some early possibility of the new president visiting this country. While we all wish him well in all parties, equally, in all parties there will be those of us who will want to express direct concern to him—appreciating the difficulties that he faces domestically—over some of the military engagements that he was, apparently, willing to sanction in Chechnya, which must be a great humanitarian concern.

In regard to the Balkans in general and to Kosovo in particular, the Prime Minister speaks about the need for "enhanced economic assistance". Will he clarify whether there has been further more detailed discussion about that? On television yesterday, Chris Patten said, for example, that the issue is either greater contributions from member states, or a rearrangement of existing budgets within the European Union. Can the Prime Minister give us some further flesh on those bones?

There is much to welcome in the Lisbon summit conclusions, but, at the end of the day, the communiqués must be judged in terms of not just their words, but actions. Will the Prime Minister acknowledge that liberalisation and greater deregulation are welcome, but that the truth is that, over the past five years, the burden of bureaucracy emanating from Whitehall has been significantly in excess of that emanating from Brussels? Therefore, if we wish to see more liberalisation and deregulation within the single market, we must tackle some of the problems at home, as well as some of those at a European level.

Can the Prime Minister clarify the French position in respect of liberalisation? What is their position in respect of energy and utilities in particular? A date has been specified on the liberalisation of telecoms, but not on those two other sectors. Can he clarify what the position is and whether the French are proving a particular obstacle?

The Prime Minister is right to say that, where Britain takes a lead, we can benefit in Britain and Europe benefits with that. Where the Government is still not taking a sufficient lead is on the issue of the euro. Given the generally positive response that he had at the weekend, will he and his colleagues redouble their efforts so that we make continuing constructive progress in Europe, and do not disappear up the cul de sac that the Conservative party is offering?

The Prime Minister

I think that I can promise at least not to do the latter, I hope.

President Putin has a standing invitation to visit this country. Of course we continually express our concerns about the action in Chechnya. Nevertheless, I believe that the European Union was right to emphasise the importance of engaging with Russia.

On the Balkans, at least currently, it is more a case of ensuring that the economic aid that we have already agreed gets through and is used properly in Kosovo and in the wider Balkan strategy. I think that, if that were happening, people would look far more favourably on any fresh applications. In my view, it is essential that we co-ordinate the different aspects of that policy. I and other European leaders have been concerned at the recent lack of co-ordination. Our efforts will therefore be directed at improving that.

On liberalisation, the important thing is the combination of liberalisation in the internal market plus measures that improve social justice. Traditionally, there has been at least as much regulation coming out of Whitehall as out of Brussels. I hope that the right hon. Gentleman will therefore support us in the measure that we wish to introduce to make it easier to get rid of unnecessary regulation. It is important that Governments are doing that themselves nationally, as well as at a European level.

The most important aspect of this economic summit is that the focal point was on measures to reduce unemployment and to improve educational qualifications and skills—whereas, if this type of economic summit had been held a few years ago and discussed social policy, the focal point would have been on regulation. I think that that is a big difference.

We have agreed to open up the energy and utilities market in each individual country as quickly as possible. Some countries have a different position on the matter—France has been mentioned. On the other hand, as we all know, French utilities have quite a significant part of the British utilities market. Obviously, we point that out to our French colleagues as well. It is important to realise that that process of liberalisation will go on, and that it is the right process for the future of Europe.

Our position on the euro remains as it is.

Mr. Ian Pearson (Dudley, South)

I welcome the Lisbon summit's progress on market liberalisation and the prominence that it has given to electronic commerce. However, does my right hon. Friend agree that we must aim at providing internet access for all, and that particularly the elderly stand to benefit enormously from being able to buy goods on-line? Will he therefore consider providing free internet training courses for pensioners and letting our grannies go Windows shopping?

The Prime Minister

That bit came a little late for the Budget. Certainly one of the principal purposes of the summit was to improve access to the internet, and we agreed a series of measures to do that, including measures on access to learning centres as well as access to the internet in schools. We are in the process of setting up 1,000 learning centres across the United Kingdom, so that people should be able to get access to decent information technology literally wherever they live. We are also giving help—both tax breaks and a subsidy—for information technology courses. That action will help our elderly as much as people in the work force, who will need increasing access to internet skills to be able to do their job.

Sir Peter Tapsell (Louth and Horncastle)

After what has happened to Rover and the west midlands, did the Prime Minister, at Lisbon, repeat his wish at the earliest practicable moment to place the British pound under German management by joining the euro?

The Prime Minister

I did not. Our position on the euro remains unchanged. That was a fairly bizarre intervention, in the light of the comments that have been made about the matter. Our concern is to ensure that we do everything that we possibly can for the workers who have been displaced by the news. It is important that we do so. The difference between this Government and the Government whom we replaced is that we recognise that we have a responsibility and an obligation to develop job opportunities and, particularly where restructuring occurs, to help people to find new employment.

Mr. David Winnick (Walsall, North)

Is my right hon. Friend aware that—both before the elections, and in their immediate aftermath—a number of Russians have expressed fears about the possibility of an authoritarian regime being restored to Russia? Is not the position of the European Union and of the British Government that we do not want any type of repression—military or otherwise—in Russia, but we want a fully law-based state with justice and protection for ordinary people in Russia?

The Prime Minister

I agree entirely. That has to be the purpose of the European Union's engagement with Russia.

Sir Raymond Whitney (Wycombe)

Is it not surprising, but nonetheless welcome, that the Prime Minister's statement made no reference to the third way? Was the third way discussed at Lisbon, or does the Prime Minister now accept that the concept is dead and that, as a collection of empty clichés, it deserved to die?

The Prime Minister

No, I do not. Perhaps I shall send the hon. Gentleman cuttings from the various foreign media that have paid tribute to the influence of the third way on the summit.

Mr. Bill Rammell (Harlow)

Does my right hon. Friend share my view that, when the European Union talks of pursuing structural reform to increase competitiveness and modernising the European social model, it shows that Europe is working to this country's agenda? Does that not show that we can and do win the debate in Europe, as was reflected throughout the quality press in Europe at the weekend? Should that not be contrasted with the view of the Conservatives, who increasingly want to renegotiate the past and join the North American Free Trade Agreement at the expense of our position in Europe, in the process putting 3.2 million British jobs at risk?

The Prime Minister

I do not know whether the initiative on NAFTA has the blessing of those on the Conservative Front Bench but, if we joined NAFTA, we would have to leave the European Union. That is probably why it has been proposed by those who have proposed it. My hon. Friend is right to say that we are modernising the European social model and combining policies for enterprise with policies that tackle social exclusion. That answers the question from the hon. Member for Wycombe (Sir R. Whitney).

Mr. Dafydd Wigley (Caernarfon)

I warmly welcome the full employment targets, particularly the gender balance targets that have been accepted. Does the Prime Minister accept that, to take those targets forward in the UK, we need action plans for employment on a UK level and within the nations and regions? Do we not need to look at the guidelines for the Bank of England to make the maintenance of full employment one of its targets, alongside inflation?

The Prime Minister

Of course it is important that activity to stimulate jobs and tackle social exclusion happens in every part of the UK. I think that the Bank of England's remit is the right one. We have long since moved beyond the notion that, by taking a responsible view of inflation, we are somehow acting in a way contrary to the interests of employment. The balance between the Bank of England remit and the Government remit is the right one.

Mr. Denzil Davies (Llanelli)

Given that 13 of the official languages of the member states of the European Union are not English and that the language of the internet is English—or perhaps American—is there not a strong likelihood that, in the age of the internet, the European Union may never catch up with America?

The Prime Minister

That is a slightly limited view of how people can develop in the modern world. Some Scandinavian countries that are at the forefront in developments of new technology and the internet use English perfectly easily. That is the world in which we live. A better way of putting it is that the fact that English is the internet language gives us a huge opportunity, which we should use.

Mr. Ian Taylor (Esher and Walton)

The Prime Minister is at his best when he follows a positive Conservative agenda, which the previous Government set on opening up Europe for e-commerce, on telecoms liberalisation, the first stage of which was reached in 1997, and on movements towards a European patent. I congratulate the Prime Minister on those issues. Will he ensure that the target dates are met? The Commission has real power and must exercise its responsibility. There are always ways to throw obstacles in the course of progress on such issues at Council of Ministers meetings. I hope that the Commission will be given the authority to ensure that all member states, including those which are less likely to be enthusiastic, are obliged to carry out the commitments that they made at Lisbon.

The Prime Minister

Of course, where there is European legislation, the Commission will have a power to enforce it. It will be able to take an active role on issues such as the European patent, when we develop it. There will be a European Council every year on economic reform, which will also provide impetus.

The Conservatives used to take a sensible view of Europe. In the first six or seven years even of Margaret Thatcher's time as Prime Minister, whatever some of the rhetoric, a constructive attitude was taken. The single European market was a British Government initiative. Conservative Front Benchers express their horror at what the Labour party's policy used to be; it is precisely for that reason that we changed it. What a shame it is that, as we left our extremism behind, the Conservatives took it up.

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

I very much welcome the positive role that the UK Government played in persuading our European partners to address the issue of promoting employment and enterprise. Was the UK-Swedish joint statement before the Council on promoting female entrepreneurship discussed by the Council? Did the Council take up some of its positive suggestions about removing barriers to women entrepreneurs?

The Prime Minister

It is for precisely that reason that the Council's conclusions contained passages on the better balance of work and family life and on more flexible time. We recognise that specific groups of people have had difficulty gaining access to such things as venture capital, which are necessary to start businesses. The UK tabled a number of papers with other countries, and the contents of the Swedish paper were well reflected in the Council's conclusions.

Mr. Patrick McLoughlin (West Derbyshire)

Did the Prime Minister have time to discuss the future of Sellafield with either the Irish or Danish Governments?

The Prime Minister

I did discuss that with the Irish Taoiseach, who expressed concern on environmental grounds—a traditional Irish concern. I gave him the traditional British answer, which is that we are sure that the procedures are entirely safe.

Mr. Piara S. Khabra (Ealing, Southall)

The Prime Minister is considering participating in the Schengen agreement. I hope that he will not open this country's borders to facilitate the entry of racists into this country to stir up racial trouble.

The Prime Minister

Of course we will not do that. As I said, the border controls of the UK remain in place. The purpose of our further engagement with Schengen is to tackle some cross-border issues that we really need to tackle.

Mr. David Curry (Skipton and Ripon)

It was bad luck that Lionel Jospin arrived at the summit hotfoot from a total retreat on pensions reform, a failure to reform the Finance Ministry and yet another capitulation to France's extremely greedy public sector unions. Does the Prime Minister understand why it is that, however much we want the agenda that he has outlined to succeed, and we have genuine concerns about the willingness and ability of the continent's socialist Governments to deliver it? Would he take them aside and explain to them that socialism does not work?

The Prime Minister

I shall make two points in response to the right hon. Gentleman. First, real reform is going on in the rest of Europe. A FF40 billion tax cut has been proposed by the French Government in various areas to encourage business, and liberalisation is being pursued also in certain areas. In Germany, there is a comprehensive corporate tax reform package. In Denmark and Holland, for example, major welfare reform is taking place. All those countries have centre-left Governments.

Secondly, it would be true to say that some people take a different position in terms of their enthusiasm for economic reform. That would be entirely natural. What is different now is that they are in the minority, not the majority. It is also different because this country, by engaging in the process and in the summit, has been able to get a result. That is surely the right way to approach the matter. There will be people with different views on different aspects of economic reform. The important thing is that a summit such as this, dedicated to economic reform and with the specifics that it contained, would have been unthinkable a few years ago. It would be instructive for the right hon. Gentleman and some of his Conservative colleagues to read the French press if they want to see where the balance of argument lies.

Mr. Dale Campbell-Savours (Workington)

Does not the raft of highly important initiatives that my right hon. Friend led the discussions on in Lisbon point the way to an early decision on entry into the euro? May I suggest that the five conditions should be met as soon as possible, because business men in my constituency now totally reject the Tory approach and want entry into the euro?

The Prime Minister

Of course the Conservatives' approach would be a disaster. To rule out the euro irrespective of the economic circumstances for a certain period or forever—whatever is their latest policy—would be a disaster, sending a terrible signal right across Europe about Britain and British industry. It would put at risk the 800,000 jobs linked to inward investment. Surely the policy of keeping the option open, making the economic tests clear and saying that the final decision should be with the British people in a referendum is the right decision.

I emphasise to those who want me to commit myself to going in without regard to the economic circumstances that it is an economic and monetary union, so the intelligent way forward is to set down the economic conditions and pursue them, with the final choice left to the British people. We should neither stay out nor join without having proper regard to the economic circumstances.

Mr. John Swinney (North Tayside)

I welcome the direction of the Prime Minister's statement. Does he recognise the genuine challenge of e-commerce for the small and medium-sized enterprise community, as it is estimated that only about 7 per cent. of SMEs are equipped to trade on the internet? What was agreed at the summit specifically to intensify preparedness to trade on the internet, and does he believe that it would be strengthened by a swifter time scale for joining the single currency?

The Prime Minister

The most important measures for small businesses are telecoms liberalisation, the charter for small businesses that was agreed and the programme of the European investment bank. For the United Kingdom, the measures announced by my right hon. Friend the Chancellor in the Budget—in particular, the tax relief for small businesses in relation to investment in technology—will have a big impact. Perhaps the most important thing that we can do is to keep emphasising to our business community that the whole question of the internet and electronic commerce is not only about businesses specifically engaged in that business: every business will be affected by the new technology, so they should all look into how they can use it. It has been interesting to see the number of not only multinational but UK companies that have recognised within the past 12 months that that has to be their No. 1 business priority.

Mr. Tam Dalyell (Linlithgow)

Was anybody in Lisbon the least bit surprised that it was deemed unsafe for George Robertson to go to Mitrovica? If the Prime Minister talks about winning the peace, does he not have to address the subject of Serbia—a wounded and deeply resentful animal—and may it not mean spending a great deal of money and talking, however unpalatable it may be, to Mr. Milosevic?

The Prime Minister

Of course we discussed the Balkans and Serbia in detail. Money is reserved for Serbia, but there has to be the democratic transition. We are not prepared to put money in the pockets of Milosevic. It is important for us to keep up the pressure for change there, to engage properly with the democratic opposition in Serbia and to recognise that it is in the interests of a wider Balkan strategy for Serbia to become a proper democratic state. We are working to that end, and that is really the best thing that we can do.

Mr. Tim Collins (Westmorland and Lonsdale)

Does the Prime Minister have any message from Lisbon for the hon. Member for Liverpool, Walton (Mr. Kilfoyle), who is about to give him a message?

The Prime Minister

I have not the faintest idea what the hon. Gentleman is talking about.

Mrs. Alice Mahon (Halifax)

On the Balkans, does the Prime Minister agree that it is equally important to get back home the 800,000 refugees who are now living in Serbia, a quarter of a million of whom have been ethnically cleansed from Kosovo? During a recent visit to a camp there, my hon. and learned Friend the Member for Medway (Mr. Marshall-Andrews) and I witnessed at first hand just how miserable the conditions are, and we were informed by the Red Cross and the United Nations High Commissioner for Refugees that sanctions are really hurting refugees, some of whom have been there for eight years. Did the European Council discuss what could be done to relieve the plight of those 800,000 people, or do we have undeserving and deserving refugees?

The Prime Minister

No, we certainly do not have those two categories. We have agreed already that humanitarian aid can go to those refugees, and that is not the principal problem. The principal problem is how one reconstructs Serbia while a highly dictatorial, undemocratic regime is in place there. That we cannot allow. My hon. Friend is right to say that there were refugees from Kosovo into Serbia. but think how much worse the situation would be if we had allowed Kosovo to be ethnically cleansed and we had a million Kosovo Albanian refugees going around Europe. The only way forward was to right the wrong that was done and work constructively to win the peace, but that cannot be done—or at least, it is far more difficult—while Milosevic remains in power in Serbia.

Mr. Julian Brazier (Canterbury)

While the Prime Minister was having discussions with colleagues on the sustainability of pensions, did he tell his European colleagues that when he took office, this country had as much saved in its pension funds as the whole of the rest of Europe put together? Did he advise them to do what he has done, which is to tax £5 billion a year out of pension funds, and to tax even very small amounts of dividend income held by pensioners, while at the same time providing a minimum income guarantee to those who have not been able to provide for their pensions?

The Prime Minister

That is a slightly different topic. First, the single most important aspect is the value of the money in people's pension funds. As a result of what has happened in this country over the past two or three years and the strength of the economy, that value is high and has risen enormously. Secondly, the lop tax rate on savings has been very helpful and, thirdly, we have agreed a series of measures—such as lifting the savings rate on capital and ensuring that all pensioners get a proper tax-free winter allowance—that help not just the poorest pensioners. I make no apologies, as I have said before to the hon. Gentleman and his colleagues, for taking the necessary measures in the first two years of office to ensure that we eliminated the huge financial deficit that we inherited. The worst thing that we could possibly have for pensioners is a return to the high inflation and the boom-and-bust days that were presided over by his party's Government.

Mr. Dennis Skinner (Bolsover)

Is my right hon. Friend the Prime Minister aware that, when all the glitz and the glamour of the Common Market and the summits and the rosy-eyed views have been removed, bosses still have power to sack workers? Did he bump into any of the Germans across there, and tell them that the British people are disgusted by the way in which BMW tore up all the so-called agreements that were started when the Tories were in power when they negotiated the Rover deal in the first place? Whatever happened to the social chapter and the mountain of legislation that is supposed to protect workers inside the Common Market? Will he tell BMW, if he has not told it already, that it is time that it operated in a totally different fashion? If it believes in togetherness, it should not have sacked those workers like it did, leaving us to try to pick up the pieces. If he did not do that, I hope that he will get on the blower immediately.

The Prime Minister

We certainly did, and we have repeated our concern about BMW management's handling of this situation and our strong disagreement with the way in which the announcement was made. We have made that clear all the way through. It is worth pointing out that the German Chancellor also made clear on Saturday his disagreement with the way in which BMW handled the issue. We are living in a European market in which changes will be made, but the very reason that we want to be part of the social chapter is to ensure that basic minimum standards in the workplace apply to people.

Mr. John Wilkinson (Ruislip-Northwood)

Are not the bland words in section 3 of the communiqué on the western Balkans belied by the dire report of Secretary-General Solana and Commissioner Patten on the situation in Kosovo? Will not the Government and their European partners have to make up their minds whether to get more deeply involved in the military task of containing the growing insecurity in Kosovo or to get out?

The Prime Minister

The conclusions welcomed the paper by Solana and the European Commission, so I do not believe that they were bland. The very purpose of raising the issue in that way was to ensure that Europe co-ordinates its assistance better.

There will inevitably be problems sorting out an issue such as Kosovo, especially given the wider problems in the Balkans. However, the alternative—a policy of disengagement—would be disastrous. It would destabilise the entire region, and lead to renewed bouts not just of ethnic conflict, but also of ethnic war, into which we would inevitably be drawn back. That is why I took the view from the very beginning that we had to become engaged with the conflict. We shall see the peace through in the same way that we saw the conflict through.

Mr. Ben Bradshaw (Exeter)

Is my right hon. Friend aware of the other comments made by the German Chancellor at the weekend, when he said that the liberalisation and deregulation achieved at Lisbon would not have been possible without the leadership shown by the British Government? Does my right hon. Friend agree that the best proof that Lisbon was a success is the deafening silence about the summit among the anti-European British newspapers?

The Prime Minister

The summit showed that, with a positive attitude in Europe, Britain can be successful. I hope that we carry on learning that lesson.

Mr. David Chidgey (Eastleigh)

In the Prime Minister's discussions about security and stability in the Balkans, did he touch on the acute problem of the shortage of law-enforcement officers in Kosovo? Was he made aware of the high regard in which British police officers working on secondment there are held? British officers lack of firearms training means that there is a great shortage of them, although the authorities in Kosovo say that they would be more than happy to provide that training because they value the officers' skills so highly. Will the Prime Minister revisit the matter and make more British police officers available to restore peace in Kosovo?

The Prime Minister

We are doing what we can, and we have already doubled the contingent of British police officers in Kosovo. I understand what the hon. Gentleman says about firearms training, although I think that the matter is a little more complicated. However, we are also providing additional help to crack organised crime. We are giving a range of help and we stand ready to do more, but that help has to be given in conjunction with the authorities in Kosovo.