HC Deb 18 March 2002 vol 382 cc21-36 3.30 pm
The Prime Minister (Mr. Tony Blair)

With permission, Mr. Speaker, I should like to make a statement about the European Council in Barcelona on 15 and 16 March.

Two years ago at Lisbon, the European Union set out to become the world's most competitive and dynamic economy by 2010. Since that time, the European Union has created 5 million new jobs. There are now neatly 3 million more women in work. Tax rates on low wage earners have been falling. We have agreed a new framework for competitive telecoms markets. Telecoms liberalisation has cut the price of calls across the European Union by almost a half. As a result of the EU action plan, internet access has doubled across the EU. We have cut red tape for small firms so that a private limited company can now be set up in under two weeks in 10 EU member states. We have recently agreed proposals to deliver a single EU securities market, and cheaper capital for small firms.

However, the recent difficulties faced by the world economy mean that we cannot rely on cyclical growth to deliver the employment that Europe's citizens need. We must therefore push ahead with the structural reforms to Europe's economy.

At Stockholm a year ago, progress stalled. Barcelona had to recover momentum. There is no doubt that after Barcelona we are indeed moving again, although there is still much ground to be made up by 2010. Such progress as there is represents a tribute to the European Commission and the leadership of the Spanish presidency, and I pay tribute to the excellent chairmanship of Prime Minister Aznar.

We set a timetable under majority voting to complete the single market in financial services, itself capable of boosting Europe's national income by half a percentage point. No fewer than 25 different liberalising measures have already been agreed. Seven more key measures will be agreed by the end of the year. Most of all, we made a breakthrough in opening up the European energy market. All member states have now agreed fully to open up the non-domestic market by 2004 with free and fair competition. That represents over 60 per cent. of the total market in gas and electricity. In addition, it is clear that the overriding majority of EU countries are now ready to open up their domestic markets as well. We agreed a decision on the relevant directives to be taken by majority vote, at the latest by the end of 2002. That means that for the first time a single market in energy is now attainable.

We agreed to deliver broadband technology across the European Union by 2005. That means internet access at 10 times the present speed. We agreed to boost our commitment to research and development towards a target of 3 per cent. of gross domestic product by 2010. 1 he new research framework programme will spend 17.5 billion euro to that end. New industries such as the growing biotech market will benefit significantly. We agreed to implement by the end of 2002 proposals to reduce regulation on business, and a new system for consultation with business before regulation is introduced.

Those steps go hand in hand with a social policy that seeks to encourage more and better jobs for all. The record of the British Government in this regard is strong. We have guaranteed fair rights at work. We have a national minimum wage. Our disability, gender and race equality legislation is among the most advanced in Europe. We have introduced a new system of tax credits to make work pay. Our new deal has put more than 300,000 young people into work. Since we came to power, unemployment in Britain has therefore fallen to its lowest level for 25 years. We have one of the highest employment rates in Europe overall, including for women and for older workers. [HON. MEMBERS: "Barcelona?"'] At Barcelona, Europe agreed that the enlargement agenda must focus on measures such as those, targeted at jobs, enterprise and moving people into work rather benefit, without heavy-handed regulation. It was, in other words, in agreement with the British approach—increasingly a European one. As the Barcelona conclusions say,

employment is the best guarantee against social exclusion". The enlargement countries came to Barcelona and for the first time participated in policy debates. We also discussed how to make our decision making more streamlined and efficient once we become a European Union of 25, 27 and more member states. I welcome the proposals of the Secretary General of the Council, Javier Solana, which will now be taken forward by the Spanish presidency. In many respects, those echo the ideas that Chancellor Schröder of Germany and I put forward in a recent paper on Council reform.

The Council also addressed a range of pressing international issues. The European Union committed to increase its average development aid to 0.39 per cent. of GDP by 2006. That achievement owes a lot to the lead given by my right hon. Friends the Chancellor and the International Development Secretary. It is worth an extra $7 billion a year. If delivered it means another 80 million children in schooling for the first time in Africa and elsewhere.

On the middle east, we underlined the extreme gravity of the present situation and called on both sides to take action to stop the bloodshed. We welcomed the resolution adopted by the United Nations Security Council last week and the initiative taken by Crown Prince Abdullah of Saudi Arabia offering full normalisation of relations with Israel in return for full withdrawal from occupied territories. There must be an immediate ceasefire all round to give the peace process a chance to start to work again.

On Zimbabwe, the European Council accepted our judgment that the elections were neither free nor fair. It agreed to take forward specific measures through the Foreign Ministers.

On the Balkans, the Council warmly welcomed the agreement brokered by Javier Solana between the authorities in Serbia and Montenegro for a new relationship within a single state. That agreement underlines just how far the countries of south-east Europe have come in the past four years. A democratic Government is in place in Belgrade. Milosevic is on trial in The Hague. Kosovo has held successful elections for its provisional Government. Moderates are in power in Croatia and Bosnia. The noose is tightening around Karadzic. In Macedonia, active diplomacy last year stopped what would have become another Balkan war.

Progress at Barcelona came about in large part through Britain acting in alliance with others. Prior to the summit, we took initiatives with no fewer than seven different countries. Five years ago, such alliances between Britain and those other countries would have been unthinkable.

Under the last Conservative Government, Britain was marginalised, without influence appropriate to our weight and size, in the isolation room of Europe. Now, from the economy to defence to institutional reform, Britain is in there, shaping Europe's future, making Europe work in a way that is better for Britain and for Europe. The policy of constructive engagement is right. Britain's proper role is as a leader and partner in Europe. We will continue to get the best for Britain out of Europe. Under this Government, the days of weakness and isolation will not return.

Mr. Iain Duncan Smith (Chingford and Woodford Green)

I thank the Prime Minister for his statement on the Barcelona economic summit and for giving me early sight of it.

We on the Conservative Benches deplore and condemn, as he would, the violence that we yet again saw on the streets of the city while Ministers were discussing, their various points. There were, however, some good points to come out of Barcelona, and I want to start with them. On overseas aid, we say unequivocally that we welcome the goal of increasing the average EU contribution to 0.39 per cent. by 2006, and we look forward to the Economic and Finance Council's report on debt relief for the least developed countries. However, I suspect that we will still need to see greater speed in the delivery.

Out of the 30-odd pages of the presidency's conclusions, only about four short paragraphs can possibly give the Prime Minister cause for any significant claims to progress. Those are only aspirational anyway. For anyone reading it, 99 per cent. of the document is simply Euro-waffle. For example, The euro clearly demonstrates what the European Union can achieve when the political will is there. What on earth does that mean? Does the introduction of the coins demonstrate "political will"? What of the euro's decline in value against the dollar and the pound?

What about the serious crisis in pensions? In Europe that has been going on for years. Governments have been warned about it. The document states that the European Council calls for the reform of the pensions systems to be accelerated to ensure that they are both financially sustainable and meet their social objectives That is meaningless. There is a crisis, and that is the best that Ministers can do. Let us hope that what is proposed is more coherent than paragraph 32, which calls for—this is the ridiculous bit—"early retirement incentives" and in the next breath states that they want an increase of about five years in the effective average age at which people stop working". Wonderful muddle and contradiction.

At Lisbon two years ago, did not the Prime Minister describe that summit as a "sea change"? After Barcelona, it is difficult to find out from the Prime Minister's words whether he sees the tide as coming in or going out. In October last year, did he not refer to Barcelona as make or break for Europeans' future prosperity"? Yet yesterday those two high-flying aspirations had been reduced to—I quote his own words—"limited but solid achievements".

The Prime Minister said a moment ago that the EU was getting more like this Government in Britain. Well, there is another 10-year plan that they seem to have copied.

Did not the Prime Minister fail to get any action to enforce the lifting of the illegal French ban on British beef, which is costing our farmers so dear? Some £200-million worth of exports would be a shot in the arm for the beleaguered agricultural sector. I seem to recall the Prime Minister, when he was in opposition, criticising my predecessor for failing to get any movement on that, yet it is five years later and there is still no movement from the Prime Minister.

Did the Prime Minister get firm action on asylum seekers, who are costing the rail freight companies £500,000 a week? There was nothing in that regard.

Was not the Prime Minister pushed into accepting UK involvement in further military operations in Macedonia—both militarily risky and essentially a political gesture on our part—knowing full well that the Ministry of Defence has said that it is against it?

Did the Prime Minister really sign up to the dishonourable concept of the EU effectively offering 30 million pieces of silver to bribe the Gibraltarians, to try and get them off our hands?

What of Zimbabwe? No words on decisive action; just more delay and more talking. Once again, under the Prime Minister's leadership, the wrong message was sent to Mugabe.

Would the Prime Minister tell the House how a strongly worded statement on the US steel tariffs sits with the refusal of the French to open up their energy markets? We have a French state-owned subsidised energy sector buying up British utilities while refusing to open up to free and fair competition. Where was the make or break there?

In Lisbon the aim was "a fully liberalised and competitive telecoms market by the end of the next year." That was 2001. Two years later in Barcelona, we are told that "further progress is needed." A telephone call in Europe costs three times as much as in the United States. Where was the make or break there?

Lisbon was about making Europe more competitive. Since then, Europe has gone backwards. Hourly labour costs in the EU have risen—risen—by 3.5 per cent. between 2000 and the autumn of 2001. The working time directive, the European works councils directive and so on have all reduced market flexibility. Where was the make or break there? The Prime Minister went to Barcelona to urge the need for less red tape on industry, yet in Britain alone more than 5,000 more regulations have been imposed on industry in the past year. Where is the make or break there?

Was not the Prime Minister isolated in his support for America in dealing with the potentially lethal problems of countries possessing weapons of mass destruction—Saddam Hussein and Iraq? Where was the make or break there? Absolutely nothing. The Prime Minister claims to be at the centre of European decision making. After the last summit, he said: Europe needs Britain to be engaged and Britain needs to have influence in Europe."—[Official Report, 17 December 2001: Vol. 377, c. 27.] Let us look at the facts. On asylum, he has lost the bilateral agreement with France that Germany and Denmark retain. On Zimbabwe, the Commission, the Belgians and the French have all rolled out the red carpet for Mugabe. Where was the Prime Minister's influence? Is that what he calls having influence in Europe? I doubt it. At Nice he gave up the veto in more than 30 areas. What influence did he gain in Barcelona from any one of those? None.

Once again, Barcelona failed to address the future of the common agricultural and fisheries policies. Without this sweeping reform, all talk of economic reform founders at the first hurdle.

The Prime Minister came back with so little from Barcelona that half his statement was taken up in talking about what Britain had been doing in the past three to four years—there was nothing about the EU. The truth is that Barcelona was, once again, all about fine words from the Prime Minister and no action. After claiming for five years to be at the centre of Europe, is it not an indictment of him that such an important summit can have achieved so little and at such great cost?

The Prime Minister

That response was certainly as anticipated and expected. I should like to deal with some of the points that the right hon. Member raised. He said that we had to speed up our delivery on overseas aid. I might point out to him that it was this Government who increased overseas aid after years of the Conservative party refusing to increase overseas aid. As for his strictures on Europe not going further on pensions, the reason is that we do not want Europe to run all the pensions systems of various countries. I am not sure whether he is saying that he does want Europe to do that.

The right hon. Gentleman made the extraordinary remark—extraordinary for reasons that I will explain—that nothing whatever had been achieved at the summit: no dates, no timetables. In fact, as I pointed out, 25 measures on financial services have been agreed and another seven were agreed at the summit, with dates attached. In respect of energy, the right hon. Gentleman said that nothing was agreed. In fact, it was agreed that 60 per cent. of the energy market—the non-domestic market—would be liberalised by 2004. The right hon. Gentleman accused us of giving away the veto on directives, but it is only because we have qualified majority voting on the directive to open up the domestic market that we agreed and were able to agree at Barcelona that by the end of this year there will be agreement on opening up that market too. As ever, with the greatest respect to the Conservative party, it has to be negative about everything to do with Europe.

The right hon. Gentleman also made the extraordinary statement that we should not be in Macedonia—that we should have nothing to do with it. I cannot believe— [Interruption.] The right hon. Gentleman will have to be a little less excitable and listen for a moment. I know that he does not believe that we should be in Afghanistan. [Interruption.] I think that the right hon. Gentleman should calm himself for a moment. He does not believe that we should be in Afghanistan; he does not believe that we should be in Sierra Leone; and he certainly does not believe that we should be in Europe, after the statement we have just heard. Then he said that we should not be in Macedonia, when it is as a result of our action there that we have managed to prevent civil war.

The right hon. Gentleman then said, in another extraordinary aside, that nothing was achieved in Barcelona and that it was a total failure and disaster. Why does he have to say that? Because, for the Conservative party, it is necessary always to be totally negative about Europe. There was one name that he did not mention in his response—one little thing that he did not get round to talking about: the position of Margaret Thatcher on Europe. The Conservative party has worked out its new policy on Europe, which is to be silent about it. Why does it want to be silent? Because it has moved further and further against Europe with every change that it has made. Just a few weeks ago, the shadow Foreign Secretary said again that he wanted to renegotiate the treaties.

Mr. Michael Ancram (Devizes)


The Prime Minister

Oh, I see—that is the policy. That is clear, then. When the shadow Foreign Secretary revisits the treaties, what do we think that that visit will entail? Will he revisit it and say, "That was a good treaty; I liked that one."?

The Conservatives' policy on the single currency is, "Never. Not in any set of circumstances." We did not get a single word of dissociation from the remarks of Margaret Thatcher. [Interruption.] Well, does the right hon. Gentleman agree with her remarks? A nod of the head would do.

The Conservative right and the right hon. Gentleman say that nothing good comes out of Europe. How can anyone seriously argue for withdrawal from Europe? How can anyone seriously argue that nothing good has come from Europe in the past half century? What about rising prosperity and peace for our people? What about the queue of countries that want to join the European Union, with only the British Conservative party wanting to exit?

The right hon. Gentleman's policy is to talk about withdrawal and end up ruling out a single currency for ever, whatever the economic circumstances. I say in response that his policy on Europe is not an act of patriotism: it is an act of folly.

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

To coin a phrase, it is a joy, as ever, to hear another prime ministerial statement on a European summit. The only thing that was missing in the response that we have just heard was, "And another thing—I had that EU in the back of the cab once".

Does the Prime Minister acknowledge that, in the politics of this summit and increasingly in the politics of British involvement in the European Union, welcome and vital as that is—we obviously strongly support it—the fact that we do not have a clear timetable for a referendum on our participation in a successful single European currency is holding us back from making the diplomatic contribution that we could make in Europe?

When that referendum campaign comes, we will want a broadly based coalition of interests, which will involve some Conservatives, the Government, the Liberal Democrats, the CBI and the TUC. To be seen cavorting with the likes of Berlusconi, given the response that that has elicited from John Monks, is not helping to build that long-term coalition for the referendum.

We welcome the progress that was made on the liberalisation of energy policy, and we would have liked it to go further. None the less, it was a positive step and is to be welcomed.

On Zimbabwe, when the three leaders are in the country tomorrow, will the Prime Minister take the opportunity to stress to them the continuing British concern, which is certainly shared by his party and by ours, and the need for trenchant action following that rigged election?

The Prime Minister

On the last point, our views have been expressed on many occasions and will be expressed again. What has happened is a tragedy for the people of Zimbabwe. It is important continually to emphasise that the main victims of violence and intimidation in Zimbabwe are not whites: they are black people—ordinary Zimbabweans—who wanted the right to elect a Government freely and fairly.

With regard to the initiatives that we took prior to the summit, as I said in my statement, we took a range of initiatives with seven different countries. Without any apology or hesitation, I shall continue to work with all Governments inside the European Union when I believe that it is in the interests of this country.

The tests, for the single currency must be passed. That is the basis for the referendum, and that is the position that we have taken for many years. I believe that it is right to judge the tests on the basis of the national economic interest, and if they are met, to put the case to the people in a referendum.

Ms Gisela Stuart (Birmingham, Edgbaston)

I am sure that we all look forward to receiving postcards from the Leader of the Opposition when he revisits the various treaties of Europe. In the meantime, the Prime Minister referred to the progress that was made in Barcelona on constitutional and institutional reforms. Will he give us more details of how he sees the next steps, especially on reform of the workings of the Council of Ministers?

The Prime Minister

The important thing about the proposals that we put forward with Germany before the summit was that we were saying that, when the European Council enlarges—and, frankly, even now—we should try to deal with a lot more of the detail of the business and the dossiers before we get to the Council, and that we need to make Council proceedings shorter and simpler. It is important to do that now, and it will be essential when we enlarge. The comments and proposals made by Javier Solana in that regard tie in well with that. Many people do not understand—although I know my hon. Friend does—the implications of the probable addition of 10 member countries to the European Union in 2004. That will significantly change the whole nature of the EU. These proposals for detailed change may seem anoraky, but they will be vital to the proper working of the Council.

Mr. Kenneth Clarke (Rushcliffe)

First, I congratulate the Prime Minister on the modest advance that has been made towards energy market liberalisation in Europe. I also congratulate him on using arguments about labour market flexibility against his critics in the TUC that are identical to those that were used a few years ago by Ministers in the Major Government when the right hon. Gentleman was leading the Labour movement in opposition to that Government.

Will the Prime Minister comment on progress towards a single market in financial services, from which this country could benefit considerably? It is all very well to have seven directives, but they are a modest advance towards the aims of the Lamfalussy agreement. Does he think that it will be possible to improve on the target of 2005 for an integrated capital market, and does he think that his new alliances with centre-right politicians in the European Union might enable him to improve on that?

The Prime Minister

I thank the right hon. and learned Gentleman for those generous comments on the achievements of the summit. [Interruption.] I thought they were fine, actually; I liked them.

In respect of energy, it is worth pointing out that before we got to the summit people thought that we would not be able make advances on any front. In fact, on non-domestic we have done so. The important point is that only one country is standing out against liberalisation, but because we will he able to decide the matter on a majority voting basis we should be able to get round that in time.

On financial services, I agree with the right and learned hon. Gentleman that we have to do far more to make progress on the Lamfalussy proposals, and I think that we will be able to do so. I also hope—this is not directly in relation to financial services—that we can unblock the single European patent negotiations, which are essential for the future.

As for the Governments with whom we work, we work with both centre-left and centre-right Governments when it is the country's interests to do so.

Denzil Davies (Llanelli)

My right hon. Friend may know that prior to the summit the European Commission estimated that the European Union's gross domestic product per head of the European Union stood at around only 65 per cent. of the equivalent figure for the United States. In view of that, and given that enlargement will further reduce the European figure, is not it reasonable to assume that Europe may never catch up with the United States and that the euro may never be able to look the dollar in the eye?

The Prime Minister

I think that my right hon. Friend takes too pessimistic a view. If Europe makes the necessary structural reforms—the single currency makes those all the more important because of the lack of exchange rate flexibility—we will indeed be able to compete with the United States and we will have a huge opportunity to do so. When the European Union finally enlarges we will have a market of about 500 million, which is bigger than those of the US and Japan combined. If we look back over the past few years at the changes that have been made in Europe, it is clear that many parts of the continent are enjoying a prosperity that was previously unheard of.

I am not minimising the challenges—that is why I described the progress at the summit as solid but limited. It is important that we continue the process. I repeat the view that I have taken throughout—that we are far more likely to get a Europe that is more shaped in Britain's image and in agreement with what we believe in if we are in there pursuing our interests in a constructive way.

Sir Teddy Taylor (Rochford and Southend, East)

Is the commitment to fair and free elections in Zimbabwe wholly consistent with the widely reported comments in the Spanish press and in The Daily Telegraph that the Prime Minister and the Spanish Prime Minister discussed making an offer of £35 million to the people of Gibraltar if they voted yes, but offering them not a penny, and the undermining of their financial institutions, if they voted no? If that is in any way true, would not it be worse than Mugabe ballot rigging?

The Prime Minister

Well, it is not.

Kate Hoey (Vauxhall)

Following on from the question of the hon. Member for Rochford and Southend, East (Sir Teddy Taylor), did my right hon. Friend speak to the Spanish Prime Minister during the private chit-chats that happen at Council meetings? If so, did he convey the feeling of the House and the country against any dilution of Gibraltarians' rights to be British? Did he also tell him that Gibraltarians, who are marching in their thousands today, will not be bought off?

The Prime Minister

The Government's position and the constitutional guarantees remain, as we have said constantly. I stress to my hon. Friend and those on the Conservative Benches who want to disown the Brussels process, which the previous Government began, that it is manifestly in the interests of the people of Britain, Spain and Gibraltar to find a proper modus vivendi for the future. It is in everybody's interest, and the constitutional guarantees remain. Maintaining the stand-off that has occurred between people in Gibraltar and people in Spain when they live side by side cannot be in anyone's interests. The conspiracy theorists can have their theories, which abound, but what we are trying to achieve is in the interests not only of this country and our relationship with Spain but of the people of Gibraltar. That is why the Brussels process was started.

Mr. Ian Taylor (Esher and Walton)

The Prime Minister was right to say that at least the summit was moving in the right direction. However, for those of us who are committed to Britain's playing a full role in the European Union, it was rather disappointing.

Away from the public discussions, did the Prime Minister sense that the leaders of France and Germany were genuinely prepared to make progress and thus make a success of the single market, which Baroness Thatcher helped to create when she was at her peak as Prime Minister? Were they prepared to put in an effort to increase research and development by Governments and to deliver the broadband objectives for telecommunications by 2005?

Will the Prime Minister confirm that, under qualified majority voting—another great achievement by Margatet Thatcher—the energy market will genuinely open up after 2004?

Was there any discussion on the Galileo satellite network for global positioning, which seems vital if we are to make a full impact on world politics?

The Prime Minister

On telecoms, I believe that we will achieve the goal. I also believe, as I said to the right hon. and learned Member for Rushcliffe (Mr. Clarke), that we can be confident about achieving the goal for energy because we are able to open up the domestic market through qualified majority voting.

It is not for me to speak for the leaders of France or Germany, but I believe that the overwhelming desire of those who attended the summit was to push forward opening up the market. The Commission supports that position strongly, as do almost all the member states, whether centre right or centre left. I believe that there is an unstoppable momentum towards it. The pace of change will be governed by many matters, including political considerations. However, the atmosphere of the discussion of economic reform was qualitatively wholly different from four or five years ago.

We have agreed in principle to take Galileo forward. We insist on its civil application and proper systems of sound financial management. If they are in place, we believe that it could play a big part in the technology and technological opportunities for Europe in future.

Ms Debra Shipley (Stourbridge)

What does my right hon. Friend consider to be the environmental impact of the European energy market that he described?

The Prime Minister

We have made it clear that at the same time as opening up the energy market, we must push forward on energy efficiency and fulfilling the Kyoto targets. We are well aware that opening up the market may benefit consumers on price but that it is important to take other measures on energy efficiency that are necessary for the environment. All the evidence that I read week after week suggests that climate change has become a more serious rather than a less serious issue. It is essential that the Governments of the world face up to its seriousness.

Mrs. Angela Browning (Tiverton and Honiton)

To be generous to the Prime Minister, I believe that he misunderstood or misheard the comments of my right hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) in response to the statement. My right hon. Friend challenged what the Prime Minister signed up to on British military deployment in the Balkans because it was specifically against the advice of the Ministry of Defence. Why did he disregard that advice?

The Prime Minister

Of course we do not disregard the advice that we receive. The point that I was making to the Leader of the Opposition—I am glad that the hon. Lady agrees that he requires translation nowadays—was that, if we are to play our proper role in the Balkans, it is important that we are part of the system of peacekeeping there. We learned from Bosnia, where we did not go in in the early 1990s when we probably should have done and where tens of thousands of people died, and in relation—[Interruption.] If the Leader of the Opposition will forgive me. In respect of any European role on defence, it has been made clear that it, too, must be consistent with the Berlin-plus arrangements for NATO. I say to the hon. Lady—as I keep trying to tell Opposition Members—that it must be right that Europe upgrades its defence capability so that, in circumstances where NATO does not want to be engaged, Europe has the ability to act. That, de facto, is what is happening in Macedonia. It is important that we take forward European defence and it would be a very, very great shame if we turned our back on it.

Mr. Ian Davidson (Glasgow, Pollok)

Does the Prime Minister accept that there is great concern both in this place and elsewhere that a British Prime Minister—a Labour Prime Minister—appears to have as his closest ally a Spanish Conservative and an Italian neo-fascist? Do not we spend our time trying to marginalise the right here, and is it not therefore contradictory to seek to ally ourselves with the right in Europe?

The Prime Minister

We spend a lot of time trying to marginalise the right and on the basis of the last two elections I think we have been reasonably successful. The reason for that is that we have been prepared to do things that sometimes, traditionally, people would not have done.

I am happy in the alliance that we had before the summit with Italy and with Spain. We also had one with Germany and with Sweden—both of which have centre-left Governments. It is important that when this country works with other Governments we are prepared to work across traditional lines. I see no problem whatever in that; in fact, it is one of this country's strengths. It is in part because we have been able to do that that we are making a difference in Europe, whereas previously we were entirely isolated. We should leave that type of ideological prejudice to the Conservative party and not adopt it ourselves.

Mr. David Heathcoat-Amory (Wells)

Does the Prime Minister recall, two years ago, after the Lisbon summit, promising to lift the regulatory burden on small and medium-sized businesses, since when there has been a steady stream of new EU measures adding to business costs? Specifically, does he remember the pledge on page 17 of the Lisbon conclusions promising to set up an action plan to deal with that regulatory problem by 2001? Why was that action plan never brought forward, as the Barcelona conclusions recognise? Would it not be simpler if the Prime Minister and his colleagues agreed to keep the promises that they made in the past rather than waffling on, as they did at the latest Council, about what they hope to do in the future.

The Prime Minister

First, when the Leader of the Opposition was speaking, I should have said that the numbers given by the Conservatives for new regulations on business are actually the numbers of statutory instruments. Vast numbers of those have nothing whatever to do with regulation on business; indeed, some of them are deregulating measures. In respect of the action plan on Europe, that is precisely why we brought forward the Mandelkern report—to ensure that there is less regulation on small businesses—

Mr. Duncan Smith

What happened to it?

The Prime Minister

I am just about to explain what happened to it.

Secondly, we put in place a new mechanism for deciding regulation in Europe. The principles of that plan were agreed at Barcelona, so we did not fail to take it forward—we actually agreed to take it forward.

Mrs. Louise Ellman (Liverpool, Riverside)

Will my right hon. Friend tell us whether there were any discussions about how to tackle the international terrorism supported by Iraq, Iran and Syria? When his European partners were discussing a solution to the middle eastern conflict did they agree that those who support the suicide bombers and the suicide gunmen who kill young people on the streets of Tel Aviv, Jerusalem and Natanya do not want a just solution to the conflict but the annihilation of Israel?

The Prime Minister

The summit focused on economic reform as regards the foreign policy issues that we discussed, although of course the issue of the middle east was raised. I agree with my hon. Friend that the acts of terrorism that are taking place in Israel are absolutely appalling. In this country, we have experience of that type of terrorism—as have other countries in Europe—although on nothing like the scale seen in Israel. It is important, however, that the reaction of Israel and the Israeli Government is proportionate. That is why we welcome very much the moves that have been made by the Americans to send General Zinni back to the region. I think that Vice-President Cheney is there today. Without repeating all that I have said before, may I say that some people will condemn the Israelis and some people will condemn the Palestinian terrorists—we can all state our position on this—but the absolute essence of this is what action we are going to take to resolve the situation, because I understand the reaction.

I spoke to Prime Minister Sharon when I was in Barcelona, and I understand how difficult it is for a Prime Minister in situations where he knows that terrorist attacks are about to happen. Does he sit back and do nothing; or does he take pre-emptive action? I understand the problems that Israel has. My only point the whole time is what is the strategy to get from where we are to where we need to be, and that strategy has to involve minimum confidence-building steps of security and then, as soon as possible, going back into a process. There are signs, first, that Israel recognises, as the UN Security Council did in an open way, that there will have to be a viable Palestinian state at the end of this negotiation and, secondly, in respect of Israel itself, that the whole of the Arab world—this is why I welcome the initiative that Crown Prince Abdullah wants to take—must respect Israel's right to exist.

Mr. Nicholas Soames (Mid-Sussex)

I very much welcome what the Prime Minister said in his statement about the middle east peace process—or so-called peace process—and the move towards it, but does he agree that, even allowing for the fact that Saddam Hussein and his regime have to be dealt with, it would be an act of culpable folly if any action against Iraq were to take place before there was a proper move towards a resolution towards peace between the Arabs and the Israelis?

The Prime Minister

As I said when I was asked about that at the summit, I totally understand why there is a lot of speculation about action on Iraq, but, as I constantly repeat, no decision has been taken at all in respect of any action. There is a very clear view, which must be right, that Iraq should come back into compliance with UN Security Council resolutions and that it certainly posed a threat on weapons of mass destruction, but no decision-making process has taken place as yet. I think, though, that it is very clear that, for the sake of the whole of relations with the middle east—with Israel and the Arab world—we should all be doing what we can to get the peace process back on track there. That is pretty much a statement of the obvious, and there are many signs from the US Administration that they take their responsibilities seriously and are significantly upgrading their efforts to find a way through.

Mr. John McFall (Dumbarton)

May I gently chide the Prime Minister for being too hard on the Leader of the Opposition? After all, when that right hon. Gentleman was a humble Back Bencher in the early 1990s, he worked tirelessly with the then Labour Opposition and others to ensure the defeat of his own Government on European matters, so all is not bad. May I remind the Prime Minister of the pre-eminence of London and Edinburgh as financial centres, with more than 1 million jobs involved? Can Europe not learn from our example of having a single financial regulator? What steps is the Prime Minister taking to ensure that the voice of business and finance is heeded when it comes to regulation and EU directives?

The Prime Minister

I agree very much with my hon. Friend about London and Edinburgh being major financial service centres, and I hope and believe that the changes that we agreed at Barcelona will make a difference, although the devil will be in the detail and we must make sure that whatever intentions are expressed in the Barcelona summit are carried forward in the directives that come through on financial services.

On the point about business and regulation, as I say, we agreed to commission a report by Mr. Mandelkern. That has now been agreed effectively, and that will make a difference to the way in which Europe views regulation. An indication of that was the agreement by Europe that industrial restructuring issues should be taken forward by the social partners—by the trade unions and business sitting down and talking together—rather than through regulation.

Mr. Simon Thomas (Ceredigion)

What became of the decision in the Gothenburg Council meeting that the following spring Council should be dedicated to sustainable development? How was the cause of sustainable development advanced in Barcelona? Although the extra £7 billion of international development aid is welcome, the target of 0.39 per cent. is barely half the United Nations target of 0.7 per cent. of gross domestic product. Will the Prime Minister at least give an undertaking that his Government will beat the EU average?

The Prime Minister

We have done a substantial amount on sustainable development aid and we led the way in securing that agreement at the EU summit. There are two ways to advance sustainable development: first, through our endorsement of the Kyoto process, our measures to improve energy efficiency and by having regard for environmental considerations in economic growth; and, secondly, through our decisions on aid and development. The hon. Gentleman might be right in one sense by saying that 0.39 per cent. is not ambitious when set against the UN 0.7 per cent. target, but it would be a huge advance if countries achieved the target of 0.39 per cent. because they are so far distant from 0.7 per cent. at the moment. We should not make the best the enemy of the good.

Mr. Mike O'Brien (North Warwickshire)

Does my right hon. Friend understand the concern in North Warwickshire that while he was building stronger trade links with Europe in Barcelona, he was being undermined in this country by a former British Prime Minister who was in effect calling for us to leave the EU? Companies such as BMW, TNT and the IM Group are investing in the future in my constituency by creating jobs because they need that European trade link. The failure of the Leader of the Opposition to dissociate himself from the comments of a former leader of the Conservative party will raise questions in the minds—

Mr. Speaker

Order. The question is out of order and does not require an answer.

Michael Fabricant (Lichfield)

The hon. Member for North Warwickshire (Mr. O'Brien) mentioned manufacturers in the west midlands. Is the Prime Minister aware of the logjam in that region because manufacturers are unable to export to the EU through the channel tunnel? He will be aware that despite all the negotiations between the British Government and the French, there are still only 15 gendarmes and five security men guarding the Calais port. What steps have the Government taken while formulating the Barcelona treaty to ensure the permanent reopening of the channel tunnel for freight? May I remind the Prime Minister, when he says that Britain is in there shaping Europe's future, that the west midlands happens to be in Europe too?

The Prime Minister

This is a serious issue and of course we raised it with France at the summit. It is important that, over the next few days and weeks, the French authorities take proper measures to ensure that the exit route is secure. There is no doubt that the responsibility primarily rests with them. That point has been made repeatedly and will be made again.

Mr. Win Griffiths (Bridgend)

Will my right hon. Friend elaborate a little more on the course of action likely to be taken by EU Foreign Ministers on the tragic situation in Zimbabwe? Given the condemnation of the election by the Commonwealth observers and statements by individual members of the Commonwealth refuting those observations, it might be necessary to recall the whole of the Commonwealth to repudiate what happened in Zimbabwe. That would be for the good of democracy in Africa, where other countries are also about to have elections.

The Prime Minister

European Union Foreign Ministers will discuss what further sanctions should be taken in respect of Zimbabwe as a result of what happened there. On the Commonwealth, my hon. Friend probably knows that crucial meetings will take place in the next couple of days. The conclusion of the Commonwealth observers' report, of most independent observers and of the parliamentary delegation from the Southern African Development Community is clear. That is why I believe that there is no serious alternative but for the Commonwealth to act against Zimbabwe. The EU will deliberate, in the limited way that it can, on what further sanctions to take in a couple of weeks.

Mr. Edward Garnier (Harborough)

What precise arrangements did the Prime Minister reach with the Spanish, either bilaterally or within the context of the Barcelona summit, on the future of Gibraltar? Is he prepared to go to Gibraltar, prior to the conclusion of the Madrid-London talks on the principles, to explain to the people there what he and his Spanish counterpart have in mind?

The Prime Minister

The process of discussion between Britain and Spain has not yet concluded. When it does, the proposals will be announced and people in Gibraltar will be able to see them. I appreciate what political advantage the hon. and learned Gentleman and his colleagues may squeeze out of this issue, but they would be very unwise to try to derail a process that was begun under the previous Conservative Government for a very good reason. In a European Union that is moving closer together, when relations between Britain and Spain are not those between the Britain and Spain of 20 or 30 years ago and when people in Gibraltar desperately need a good relationship with Spain so that they can go about their daily lives, it is important that we try to come to a proper accommodation.

The constitutional guarantees remain: in the end there will be no constitutional change unless people in Gibraltar agree to it. It would be very unfortunate—in fact, it would be misjudged and wrong—if the Conservative party attempted to inflame feelings in Gibraltar in a way that was irresponsible and wrong. In the end it is right for Britain, for Spain and for the people of Gibraltar that we find a sensible way forward.

Mr. Andrew Miller (Ellesmere Port and Neston)

My right hon. Friend mentioned some of the complex alliances that develop in negotiations such as those in Barcelona. In view of the fact that many of the applicant countries were participating in the negotiations, what assessment has my right hon. Friend made of our relationships with those countries, particularly those in central Europe where there seems to be real enthusiasm for joining the European Union and an unstoppable momentum towards that end?

The Prime Minister

All those countries have made huge changes. In the past it would have been impossible to conceive of them entering the European Union in the numbers in which they will enter in 2004. Some of the initiatives that we took before the summit were with applicant countries, not least with the centre-left Government in Poland, and those countries look on Britain as a champion of enlargement. One of the most unfortunate things about the Conservative party's position is how far it seems to be moving away even from enlargement.

Mr. Jonathan Djanogly (Huntingdon)

Most people saw Barcelona as a chance to get to grips with deregulation and liberalisation. I appreciate the Prime Minister mentioning the start of the deregulation process and the reports that are part of that, but is he not aware that businesses in this country see this Government as a regulatory Government and that regulations are increasing rather than decreasing? That being the case, will he now commit himself to practising in this country what he preached in Barcelona, and cut regulations on our businesses?

The Prime Minister

What business really welcomes is the economic stability that has delivered us the lowest interest rates and the lowest inflation for decades, the lowest unemployment that this country has had for 25 years and the highest employment of any major industrialised country. That is in addition to the measures taken, such as the reduction of corporation tax to boost business. The hon. Gentleman is mistaken. The procedures that we have agreed will allow us to take account of the views of business far better before regulation is made in Europe, and that is a significant step forward.

Mr. James Plaskitt (Warwick and Leamington)

Does my right hon. Friend agree that it is important to press on with enlargement in the EU, not only in the interests of the candidate members who were present in Barcelona but because enlargement will provide an added essential spur to structural reform?

The Prime Minister

I entirely agree. The enlargement process is essential for the future of Europe and for its security. It is one reason why it is so important that this country carries on playing a leading and constructive role in Europe. When the EU enlarges to 25, 27 or 30 members, it would be absolute madness for this country to be on the sidelines of Europe. Our national interest is heavily engaged in Europe, and all our experience teaches us that when we are engaged and we are constructive, we achieve results.

Brian Cotter (Weston-super-Mare)

Will the Prime Minister give the House more information on the consultation with small businesses which he talked about? Will he give us specific information on the implementation of the small business charter, with firm dates and tick boxes? Will he consider the paper produced by Small Business Europe, which I have in my hand? Bearing in mind that that organisation was set up by the Government and has only recently started to operate in Europe, the paper contains important recommendations for small businesses in particular, and we would welcome views on it.

The Prime Minister

Small business co-operation in Europe is far better now, because of the changes that we have been making, as the hon. Gentleman implied. We have agreed a whole series of measures to take forward work with small businesses, but the important point that we have been trying to establish is that the right way forward on jobs, the labour market and enterprise is not for Europe to try to impose uniformity in all circumstances, but for us to agree certain objectives, benchmark that process, and then say that it is up to individual countries to take the measures necessary to get there. That is why a major issue in next month's Budget will be measures to stimulate small business and enterprise. Our belief is that in Europe, this is about getting the right process to judge the impact that regulation is having on small businesses, and the support for small businesses set out in the charter.

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