HL Deb 09 June 1982 vol 431 cc267-85

8.15 p.m.

Lord Balfour of Inchrye rose to ask Her Majesty's Government whether the action of the European Economic Community in forcing through this year's farm prices package on a majority vote does not deprive Parliament of the power of decision on a matter of vital national interest; and whether, if majority voting is extended to other economic issues, the sovereign rights of Parliament will be made subject to a European Communities' majority, contrary to assurances given to the electorate at the time of Britain's joining the European Communities.

The noble Lord said: My Lords, I beg to ask the Unstirred Question which stands in my name on the Order Paper. I can make no apology for raising this Question at a late hour and to not exactly a packed House. But the reason I do so is that the Question raises possible results arising from the EEC farm package majority vote which the Minister of Agriculture accepted as a matter of national importance. Indeed, the result of the farm package has an effect upon every household in the country and so one can confirm that it is a matter of national importance.

This is the first time that an issue of vital national importance has been decided upon by a vote in the EEC. I question: where can this lead us? I say nothing at all about the merits or otherwise of the farm package deal. I am not qualified in any way to give a view upon that. But I want to put to Her Majesty's Government the possible results of this precedent and I look forward to hearing the reply from the Minister whom I am grateful for being here at this hour.

The Luxembourg understanding was not a formal agreement incorporated in the rules of the EEC. It accepted that matters of vital national importance to a country should be unanimously agreed. But this has now been thrown overboard over the farm package. Parliament has had to knuckle down to the majority verdict in the EEC. My fear is that once this majority voting is allowed, it could be extended and broadened in future.

One can of course question what is a vital national issue and who is to judge it? If we are all working together, as we are told we are in the EEC, then surely the fellow members of any country declaring something of a vital national interest would accept that country's statement that it is something of vital national interest. A decision of vital importance given on a majority vote brings to our affairs a grave constitutional issue. It is no good anyone saying, "Oh well, it will not happen": it has happened. In the 1970s, when the campaign for entry to the EEC was waged, we were constantly assured that the supremacy of Parliament would not be endangered.

I do not wish to weary your Lordships at this hour with a large number of quotations, but I cannot resist quoting what a colleague of my noble friend on the Front Bench, Sir Keith Joseph, who was a member of the then Government, said. In 1971, he stated: It will never be requisite upon us once we are in the Community to take any decision, or to join in any decision, against our national interests".—[Official Report, Commons, 22/10/71; cols. 1114– ;1115.]

That seems to me to be pretty clear. I should like to remind your Lordships of what Mr. Heath's White Paper said on this matter. The White Paper, Command 4715, published in July 1971, said: Like any other treaty, the Treaty of Rome commits its signatories to support agreed aims; but the commitment represents the voluntary undertaking of a sovereign State to observe policies which it has helped to form. There is no question of any erosion of essential national sovereignty.

I could continue to quote, but I shall not weary your Lordships by doing so. However, even in your Lordships' House the noble Earl, Lord Jellicoe, confirmed on 26th July 1972 at column 1481 that: The practical position in the Community and the way in which the Community works, as most noble Lords know, is that in a situation in which a member State judges that its vital national interests are affected the Community, as it works at present, and is likely to work for some time to come, only proceeds by common consent.

I have given your Lordships three examples. Undoubtedly, any of your Lordships who took part in the campaign from 1971 onwards must accept that speeches like those were made by the leaders of the campaign. Let me interpose here that I speak as a supporter of the EEC, but I think that it is important to raise this particular issue of national sovereignty.

I believe that the danger lies in fields beyond this particular and comparatively minor national issue of the farm package deal as compared to other vital issues. Let us take fishing policy. Our proposals for the fishing policy have twice been rejected. Let us suppose that the Community becomes exasperated and says that Britain is too obstinate. There could then be a majority vote. There could be majority votes on taxation, on matters vital to this country, on social matters, on fishing or on any other matters. This country would be driven to knuckling down—as the Government have had to do over the farm package deal—or being faced with withdrawal from the EEC. Those are the alternatives.

Once we are overruled by the Community, can the Minister say whether there would be any alternative other than the Government's acceptance of being overruled, accepting a majority vote, or contemplating withdrawal from the EEC? We are constantly assured of the supremacy of Parliament. It was on that assumption that all of us supported the EEC. I would earnestly ask the Government to consider asking for the veto to be reintroduced in respect of matters which are accepted as being of vital national importance. The member States should say whether they could accept the veto or would wish to enshrine in the documents of the EEC a proviso that there should be a unanimous decision on all such matters. Unless some protective measure is taken, we are putting the power of Parliament into pawn with our neighbours and colleagues in the EEC. That is a danger that I foresee looming up in a larger way than the farm package deal, which started this off and caused the knuckling down of the Government against the wishes of our Minister of Agriculture and probably against the wishes of the Government.

That is why I ask this Question tonight, and I sincerely hope that we shall receive a positive reply from the Government on such matters—a reply similar to that which we should receive if the fishing policy was before us again—and whether that could ever be decided on a majority vote?

8.28 p.m.

Lord Cledwyn of Penrhos

My Lords, the House will be grateful to the noble Lord, Lord Balfour of Inchrye, for raising this matter of considerable importance and for a speech which demonstrates his conviction that this is a serious matter for Parliament and for the country. In fact, the House debated the Luxembourg compromise when the matter was raised by the noble Lord, Lord Soames, on 27th May. The noble Lord, Lord Balfour, has taken the matter a stage further in his speech this evening, with references to the sovereign rights of Parliament.

In my view, there are a number of crucial questions to be considered: were the negotiations on the price proposals conducted in a reasonable manner and was the United Kingdom justified in holding out so long against the majority of its Community partners? Further, were the majority justified in putting the Luxembourg compromise aside and ignoring the veto? Again, what now becomes of the compromise? This is a question which the noble Lord himself has just asked. It does not have legal authority and its breach was not a breach of the Treaty of Rome; it was a breach of a convention—of a gentleman's agreement, as my noble friend Lord Peart said in the debate on 27th May.

Finally, will that breach of the compromise mean that majority voting in future will be used to erode the sovereign right of Parliament, as the noble Lord, Lord Balfour of Inchrye, fears it may? On the first question—namely, the conduct of negotiations—the Secretary of State for Foreign and Commonwealth Affairs, Mr. Francis Pym, had no doubt in his mind when he said in a debate in another place on 26th May: There is no doubt that the vote at the Agricultural Council on 18th May constitutes a major departure from the way in which Community business has customarily be conducted. It is a departure which will have the most serious implications for the future if we are not able to establish clear procedures which everyone follows as an essential basis for confidence between member states ".—[Official Report, Commons, 26/5/82; col. 937.] We know, of course, that it was the French Government which argued in 1965 that majority voting should not carry the day if a member state considered that important national interests were at stake. A serious constitutional crisis had developed at that time. We were not members, but the French put up a sustained fight. They proposed an amendment to the treaty which would have given a veto a force of law; and they went so far as to boycott Community institutions for a period of seven months.

If France had succeeded then, the action taken on 18th May by the majority, which included France, would not have been possible. Although the French attempt to legalise the veto failed, the Luxembourg compromise produced what may be called a procedural understanding which has been honoured for over 15 years. This was the position when the United Kingdom entered the Community in 1973. We did so in the knowledge that the veto was in existence, and although it was not in the treaty, it had none the less become an established precedent by then; and the 1971 paper stressed this. The noble Lord, Lord Balfour of Inchrye, has quoted from speeches which were made at that time by leaders like Sir Keith Joseph which underline what was in the White Paper.

The noble Lord, Lord Soames, dealt with this aspect in his speech on 27th May, when he said: We must realise that me did not join a Community which takes its decisions on the basis of unanimity. There are carefully prescribed areas which do require unanimity, but, on the whole, decisions are taken by majority vote ". Of course, we knew this at the time, but the precedent was by then well established and we did not think that the veto would be set aside where important interests were at stake. That is my point of disagreement with the noble Lord, Lord Soames.

Obviously, the Government were wrong to think that the veto would continue to be recognised. They made a miscalculation—and I suppose an understandable one; but the very fact that they believed the veto would hold good gives credence to the view that the United Kingdom took the Luxembourg compromise very seriously when we entered the Community in 1973. It is necessary to look at the precise wording of the Luxembourg compromise. It justifies the use of the veto where: very important interests of one or more partners are at stake ". What does this mean? That was a question asked by the noble Lord, Lord Balfour of Inchrye. There is no guidance upon it. What may be of interest to one partner may not be regarded as important by another partner. In this particular case on 18th May, seven partners concluded that their important interests were best served by disregarding the veto. Mr. Pym had no doubt that, important British national interests were at stake in what was being decided ". And he went on to make a further crucial point—namely, that the Community budget and the agricultural proposals are "effectively inseparable" because their influence on the budget is so great.

It is the linking of the agricultural proposals with the budget that makes the case for the validity of the use of the veto a strong one on this occasion. I do not suggest that the proposals themselves are not an important national issue. Sub-Committee D, of which I have the honour to be chairman, recently proposed a report on the draft proposals and on the Guidelines for European Agriculture submitted by the Commission. Taking both documents together, the sub-committee was in no doubt that the proposals were deficient and not in accord with the Commission's own guidelines. The House debated the report on 30th March and those who spoke endorsed that point of view. This point was stressed again by my noble friend Lord Peart in the debate, and he was right to do so, because this House always takes careful note of the recommendations of its own committees. I will not go into detail on the report save to say that the average price rise in the final package was higher than the rise recommended by the March draft—that is to say, it was 10; per cent. as compared with the 9 per cent. when we debated the report of Sub-Committee D.

Even so, it would be unfair, in my submission, not to recognise that there were in the package elements which are advantageous to the British farmer; and this has been conceded by the National Farmers' Union. The question is whether the ultimate package in itself was so bad as to justify using the veto. We are getting near the heart of the problem there. There must be some doubts about this and one must relate it to the budget to make a complete case.

The root of the whole problem is our annual budget contribution. The demands made upon this country are very high and arguably excessive, though we did rather well last year. Currently our prosperity is lower than the average for the Community as a whole. We are a net contributor on a large scale to the Community budget, and it is the bearing which agriculture has on that budget which may justify the linkage to which I have just referred. What the Government seem to have said is, "We are proposing to veto this agricultural package mainly because it increases our annual budget contribution substantially, and therefore is against the spirit of the negotiations which have been going on since the 1980 agreement". Is that a fair summary? I shall be interested to have the Minister's reaction to that when he comes to reply.

That 1980 Agreement brought the CAP and the budget together and certainly, so far as the United Kingdom is concerned, they are importantly related. Whichever way one turns one has to come back to the same conclusion, namely, that it is not the principle of our membership of the Community which is wrong but the fact that we joined it at the worst possible time. The annual haggle about the agricultural price package and the refunds is merely a reflection of the difficulty of making the system work during the last few years; and the long period of economic recession further compounds the problem.

This calls for great patience on all sides, perhaps more patience than may be available. We have to remember that disagreements on the one hand between us and most of our European partners have been matched by support for us at a very testing time. On the whole, the issues have been kept apart, but they are bound to impose a very great strain on our relationships. For example, we must not forget that Germany has been a good friend of ours in the Community and given us a good deal of support on a variety of matters, and they are particularly affected by the price proposals. We must not allow the tensions of recent weeks—and they have been extremely worrying times for us all and particularly for those who are in the Government—to upset the balance of our long-term judgment and our long-term interests.

The noble Lord has related these developments to the sovereign rights of Parliament. If the Luxembourg compromise is a dead letter that must have significant consequences. I am not sure that it is a dead letter, as the noble Lord seemed to think it was. I have a feeling that the seven partners who decided to vote notwithstanding the Luxembourg compromise did not intend to kill the Luxembourg compromise by so doing. I believe they think that the Luxembourg compromise is still in being, and they may well invoke it again. This is something upon which the House will be glad to hear the comments of the noble Lord, Lord Belstead.

If a majority of states can outvote others on issues which they regard as issues of vital national importance, then the Community may find itself in further trouble, as the experience of 1965 demonstrated. France could be the next victim, and we know how sensitive France is about what she regards as her national interests. Majority voting, therefore, must have some effect on our national sovereignty. I am not sure how much. That is a matter which has to be considered very carefully. Is this acceptable to all members of the Community? Have they weighed the full implications of what has taken place? I noted the interesting suggestion made by the noble Lord, Lord Soames, in his speech. It is worth considering, but he will accept that what he proposed in fact effectively does away with the veto.

We must also bear in mind that this is all part of a continuing debate and that it is best not to be too dogmatic at this point. The Colombo-Genscher proposals are on the table and will be discussed again at the next Council meeting on 20th June. Paragraph 8 of that document deals with the decision-making processes and voting procedures and there will clearly be lengthy debates upon it. I understand that we may have a revised version of the proposals and a Government memorandum upon them very soon, possibly during the next day or so. Perhaps the Minister can tell us when we may expect to see them. I also understand that there may be a debate in another place next week, and what is said there of course will be listened to with interest.

Lastly, Sub-Committee E of our own Select Committee on the EEC, which deals with legal matters under the chairmanship of the noble and learned Lord, Lord Scarman, has been asked to look at the implication of the Colombo-Genscher proposals and the Luxembourg accord, and given the quality of that committee and of its chairman, that should be of some comfort to us all.

Even so, if the Community is to survive it must surely take a fundamental look at some of its rules, and this includes the Luxembourg compromise. This must be more precisely defined fairly soon so that member states know exactly where they stand. It was breached on 18th May in a fit of frustration and impatience—at least that is how it seemed to me—and it is clear that the Government had no hint from any quarter that this was to happen. That was extremely unfortunate and an act of some discourtesy. But, more important still, the causes of internal conflict and bitterness like the budgetary dispute must be studied and must be removed if we are to become a stable Community. The support Britain has received in the South Atlantic conflict shows that there is a big fund of goodwill for Britain in the Community, and this must be a foundation to build upon in the future.

8.43 p.m.

Lord Banks

My Lords, I too am grateful to the noble Lord, Lord Balfour of Inchrye, for asking this Question this evening, for he gives us a second opportunity to discuss the significance of the use of the majority voting procedure by the Council of Ministers with regard to the agricultural settlement. The noble Lord's Question lays the emphasis upon the political and constitutional aspects of that event rather than on the agricultural ones. Having thanked the noble Lord for putting the Question, I then must part company with him because I think that the view I would take would be diametrically opposed to the view which he has put so clearly before us this evening.

I do not share his fears. Personally I welcome the use of majority voting on this occasion as I would on others. I think that the veto, the practice—and both noble Lords who have spoken have made clear that it is only a practice—of searching for unanimity has held up the decision-making process and led to delay and frustration. A whole series of reports from committees, from wise men, from statesmen like Mr. Tindemans of Belgium, from the Commission, have laid emphasis on the paralysing effect of the unanimity practice. I do not believe that it will be feasible to run a Community of possibly 12 nations on the practice as it has been pursued in recent years.

I cannot see that the sovereignty of our Parliament receives a deadly blow if that Parliament decides to accept decisions taken in a Council of Ministers by majority voting where provided for in the Treaty of Rome, rather than merely being bound by decisions taken by unanimity. The Ministers in the Council of Ministers would still he responsible to the Parliament at Westminster for the way in which they voted, for what they said, and for their conduct generally at the Council of Ministers.

If there were a greater use of majority voting it is clear that some of the decisions would not go our way but other of the decisions certainly would. We might, for example, at last get some progress on the question of insurance; freedom for insurance operation in Europe. Our insurers might at last be able freely to seek business anywhere within the Community, for which we have been waiting so long. I would not weep any tears at the demise of the veto. However, I do not suppose for one moment that we have heard the last of it. Like the noble Lord, Lord Cledwyn, I do not think it is dead by any means, whatever my own view of the matter or my own wish in the matter might be. I recognise that we may still need to have some form, a restricted form, of a veto: an opportunity for a nation to say that its vital interests are at stake, but with some much more precise rules, if you like, or agreement, as to how this is to be operated than exists at the present time. It would be of a restricted kind so that it would in fact be only in the extreme cases, where national interest of a very considerable degree of importance is involved, that it would be used.

Of course, what annoyed our partners over the agricultural settlement and the linking of it with the settlement of Britain's complaint over the budget contribution was that so far as the agricultural settlement itself was concerned—and the noble Lord, Lord Cledwyn, hinted at this—the British Government were not strongly opposed to it. They would have preferred a lower rate of increase, but there was much in it that was acceptable to Britain. The Government could not for one moment claim that Britain's vital interest was involved if that settlement were accepted. We were merely holding it up in order to get a more satisfactory, a more favourable, settlement of the other issue of the budget, and we pushed that linkage too far and the tactic backfired.

As the noble Lord, Lord Cledwyn, has said, this matter is to be discussed on 20th June by the Council of Ministers in the context of the Genscher-Colombo plan. As he pointed out that plan makes some provision in this respect for a more precise and more specific procedure with regard to the declaration of vital interests being at stake. That plan also envisages a much greater use of majority voting. I am not suggesting for one minute that we ought to try to write into the Treaty of Rome the Luxembourg compromise, or any version of it. I am merely saying that we need to have what would be, in effect, a new convention about the convention that has operated since the Luxembourg compromise was originally arrived at.

It is sometimes said that majority voting would lead to more power for the Commission. I do not object to that at all so long as the Commission is firmly controlled by the democratically elected European Parliament. Reverting back for a moment to the Genscher-Colombo plan, I very much hope that when this is discussed the Government will be taking a positive and constructive attitude towards it in respect of not only the particular matter we are discussing tonight but also the wider nature of that plan for a European union. Incidentally, speaking of the European Parliament, it is interesting to note that 11 members of the British Conservative group there—if I have understood the reports aright—voted in favour of majority voting on the agricultural issue.

I conclude by making three points briefly about the budget, which was referred to by the noble Lord Lord Cledwyn. First, I think there is unlikely to be a substantial reduction in the total expenditure on the CAP. Clearly, we want to seek to reform it. Of course, we want to eliminate anything which leads to over-production, although I understand that the surpluses have now more or less disappeared. But, even when that is done, and even if the run-down continues in the number of people in the Community engaged in agriculture—a run-down which has gone on steadily since the Community was established—it would be unrealistic to suppose that there will be any great saving in the amount of money spent on the CAP.

Secondly, if that is so, then any long-term improvement in the United Kingdom budget position will be brought about by an increase in the Community budget through the development of other common policies, from which Britain will get more advantage than we do from the CAP. I believe that is more likely to be achieved if majority voting is the normal practice than otherwise.

My third and final point about the budget is that it is important to keep the figures in perspective. The year before last, £203 million was our net contribution to the budget; it was £55 million last year; and there is the possibility that it might go as high as £900 million this year. Those figures must be offset by the reduction which has recently been negotiated. The figures may seem high, but when they are compared against the 110,000 million which is our total national expenditure, they are not so high. When one thinks that the EEC budget represents only 2½ per cent. of the total national government budgets within the Community, then the figures are seen in perspective. The budget represents I per cent. of the gross domestic product of the Community. If it were increased, as the McDougall Committee suggested some years ago, to 2½ per cent., the situation from our point of view could well be transformed. Therefore, I hope the Government will actively promote the greater use of majority voting and will press for an increased EEC budget as the best way to solve the problem of the British contribution to the EEC.

8.53 p.m.

Lord O'Hagan

My Lords, before we turned to uncensored films, the House was discussing the question of unemployment. Whatever else is uncertain, there is no doubt that were this country to leave the European Community, the prospects of decreasing unemployment would move over the horizon and the chances of the 2 to 2½ million jobs which depend directly on our membership of the Community continuing would be in jeopardy. Thus, while much of this interesting discussion tonight centres round the nature of our national interest and the way in which it can be protected within the Community, there is no question but that it is a major British interest to remain in the European Community. What the House is debating tonight is how that interest is best to be defined, how it is to be protected and how the overall interest of the Community itself is to be encompassed and developed at the same time.

I am glad that my noble friend Lord Balfour has asked this Question. It is a second barrel of, or complement to, the Question asked by my noble friend Lord Soames the other day, as others have commented. Like Lord Balfour, I feel that those assurances given in the past should be honoured. Admittedly, in my case, commitments made, undertakings given and words spoken in either House of Parliament before we joined veer into the era of my political childhood and I would not claim total responsibility for everything that was said then. Nevertheless, though progress has to be made and history develops, those undertakings are firm and I share with my noble friend an eagerness that they should be respected.

There are other assurances which I would like respected, too. There are Members—I hope not of this House—of another place who promised, when the referendum on our Community membership was over, that they would abide by the people's decision. Let those assurances be honoured as well and, when they are, we shall have a better discussion about the future of Britain in the Community.

The second part of my noble friend's Question comes to the nub of the matter which has been touched on by every speaker so far. I shall only make some comments in parenthesis, as it were, because the hour is late and your Lordships would not wish for a lengthy treatise from me at this time of night. If I understood my noble friend correctly, he was addressing himself to the key to our future relationship with the Community and the scope of the power of the Community to resolve its own problems. We are talking in a thin House, too late at night, about the kernel of our link with the Community and its power to act. It is a major topic, and there is one major reason why it is a pity we are talking about it now. I do not reprimand my noble friend for raising it—I would not dare—but in the closing stages of the Falklands campaign and the South Atlantic crisis, there is a mood of vibrant patriotism in the country which makes us all particularly sensitive to the status and role of our nationhood and the way in which it is treated by others. Whether or not we arc as dispassionate as the noble and learned Law Lords at their best, Nye cannot help but be affected by that spirit which, rightly, is present in every quarter of the Kingdom.

Perhaps we do not remember often enough how many jobs have been endangered in other EEC member states, how many businesses have been put, even marginally, at risk and how much prosperity has been threatened because other Community nations have gone along with us in a conflict which, to them, often is strange, if not incomprehensible. Other countries have sacrificed their prosperity to some extent because of a political entanglement which involves this country primarily, if not alone. I suggest that we should put on record our gratitude—not our cringing obeisance but our gratitude—to the majority of the Community who have seen this one through; and it was this question, as the noble Lord, Lord Banks, rightly hinted, which was in the atmosphere, if not on the agenda, that led to an unfortunate occasion, a single occurrence, so that constitutional progress within the Community happened in a particularly difficult way for we in this country to accept. I think—and I hope that I will not be sent to the Tower for saying this—that when an honourable friend of mine in the other place likened President Thorn to General Galtieri in the debate on 26th May, the mood of vibrant patriotism that I was talking about had gone a little far. In all the discussions about sovereignty and our national rights at the moment it is difficult to secure a dispassionate approach. I do not complain about it, but I beg my noble friend on the Front Bench to use his best endeavours to arrange in a month or two's time a major debate on the future of the Community, perhaps on the report to be issued in due course by the noble and learned Lord, Lord Scarman, when we can talk about these things at a better time of day, and with a fuller House.

I want to make it quite clear that I—as I hope do all of your Lordships—support fully the Government in their endeavours to secure a lasting solution to the British budget problem. I believe that Her Majesty's Government, and in particular the Prime Minister, should be backed in their efforts in this regard. As the noble Lord, Lord Cledwyn, pointed out, we must settle the issue if we are to secure our relationship with the Community in a way that is acceptable to them and to us. Nevertheless while we are engaged in this important exercise, and afterwards when we can better develop the Community together, we must see to it that the treaty works. Wherever it can be made to function we must make it function.

When I studied the debate initiated by my noble friend Lord Soames on 27th May I supported the view that he put forward about the way in which the Luxembourg accord, agreement or whatever you like to call it should be developed. I did not take it as I think one other Lord noble who spoke took it; that it involves the total abandonment of the veto. I also supported the notion put forward by my noble friend Lord Beloff who again addressed himself to the way in which the council of Ministers works and the manner in which it could be made to function better. I believe that this is what is necessary for all member states to focus upon now.

I consider that some of our partners have recoiled with some anxiety at what was achieved on the famous day on which majority voting was being reintroduced after a lapse of years. I believe that the smaller states, in particular, are worried about the effect that it might have on them. Indeed, President Thorn himself who was a key figure in the use of majority voting said that, It should not be deduced from the vote on agricultural prices that in future the use of the majority vote would become an automatic procedure which would threaten to steamroller the interests of some countries, especially the smaller ones ". I say to my noble friend Lord Balfour of Inchrye that in the discussions on what are called the Genscher/ Colombo proposals there is an opportunity to reassemble the most useful and functional part of the Luxembourg accord in a way which will not lead to the Community being blocked on minor matters.

I come from the South-West; I represent Devon. If we were to be overruled on a majority vote on the common fisheries policy I would be in trouble and rightly so. I believe that the common fisheries policy is a major difficulty for this country, and I should never like to see this country in a position whereby we could be overruled on such an item as the common fisheries policy. Deep though my intellectual convictions might go along with much of what the noble Lord, Lord Banks, said, I feel that it would not be practical politics either nationally or within the Community. But for such an anxiety to block the Community from re-examining its procedures would be very had indeed. If Her Majesty's Government are to be inhibited by this single occurrence—their frustration, irritation and cumulative anxiety about the future of the Community—from examining closely and with enthusiasm ways in which the Council of Ministers reaches decisions, that would be very bad, too. I say that because, as the noble Lord, Lord Banks, pointed out, when we have a Community of 12, as I hope we will have and as I believe we should, then the present cumbersome procedures will be under even greater strain. If we care about the community, we must worry about the way it takes its decisions. Of course, it may not be possible in my political lifetime to do away with the veto, desirable though that might be in political theory but we must make progress towards achieving decisions quickly and firmly with general and common assent.

Before I become too enthusiastic, I would try to reassure my noble friend Lord Balfour and my noble friend Lord Harmar-Nicholls (who has been sent here to take a note of what I say) that there are many other countries with our type of anxieties. There are countries such as Denmark and Greece with constitutional objections to the abolition of the veto permanently. There are other countries with deep political objections to the quick elimination of the veto and if anybody thinks that the new member states will come into the Community to be overruled quickly then there is scope there for them to gain some reassurance.

As the noble Lord, Lord Cledwyn, said, it is necessary for us to have a fundamental look at some of the Community's rules. We have had a major shuddering and juddering of the machinery which has led to many distorted and unpleasant interpretations, political recrimination, national distrust and a halting of progress on the policies which really matter, the kind of policies that would lead to helping with the problems of unemployment. What we now need to do is not what my noble friend Lord Balfour of Inchrye implied—that this particular incident meant that we in this Parliament should knuckle under the will of the Community. That is not necessary, not at all.

What we have to do is to follow through the logic of those events on the night when the common practice of the veto broke down. We have to re-examine what the Community, in middle age—over 25 years old; grown up—wants to do, and can do. We have to examine the way it works and what it is best suited to do. It may be that (to misquote Polonius) neither a federalist nor a confederalist we should be; that the Community is something of its own. We must not forever rest on those rather faded laurels that it has already acquired. What we must do is examine what it is good at and make sure it can do it better.

In that spirit I welcome what my noble friend has said, because in introducing his Question he has given the Government an opportunity to reassure this House that there is going to be a chance for an increasingly positive contribution by Her Majesty's Government to the evolution of the Community. I hope my noble friend the Minister will use his endeavours to persuade my noble friend the Leader of the House to have a fuller debate on the future of the Community on some later occasion. But what I hope he will also do is confirm that the Government are not going to draw back from this unhappy incident into a mood of pained lack of constructive thought, but that they are going to use it to open a new chapter in our relationship with the Community in which we will maintain, with just as much firmness, if not more firmness, our own national position and rights, but will also increase and accelerate the extent to which we contribute to its long-term evolution by putting forward new policies of the sort to which the noble Lord, Lord Banks, referred, from which we can derive benefit, and at the same time engage actively in the procedural suggestions under Genscher/Colombo which will make the council function better.

9.10 p.m.

Lord Harmar-Nicholls

My Lords, the only reason why I want to intervene is that I do not believe that the three speeches we have heard from noble Lords—that is, with the exception of that from my noble friend Lord Balfour of Inchrye—represent in any degree the reaction of the country as a whole to what happened when the majority vote went back on the Luxembourg compromise. The noble Lord, Lord Cledwyn, the noble Lord, Lord Banks, and my noble friend Lord O'Hagan seemed to approach this (if I understood their words correctly) from the point of view that the Government would have their sympathetic understanding if they did nothing about it.

I believe that unless the Government do something about it, or try to do something about it, the reaction in the country will be such that it might precipitate the very thing that neither my noble friend Lord O'Hagan nor I, nor anybody, wants. It could precipitate the possibility of our having to leave the Community, and I believe it would be disastrous if we had to do that. It is vital we should remain now. It is vital that we should be there to see that the work to the universal good of every member of the Community is continued. But if this breach of faith is pushed under the rug—and unless the vital questions put by my noble friend are dealt with in some constructive way, which means that the Government are alerted to doing something about it—then I do not believe we shall he able to carry the country with us to do the vital thing of remaining there to take full advantage of being a member of the Community.

Lord Cledwyn of Penrhos

My Lords, I am sure that the noble Lord, knowing him, as I have, over very many years, would not wish to misinterpret my speech or cause any misunderstanding about what I said; but I made it abundantly clear—and he will read it in Hansard tomorrow—that I think that some conclusion about the Luxembourg proposals has to be reached very soon. That implies, of course, that the Government must take a lead in making certain that this will he done.

Lord Harmar-Nicholls

My Lords, I accept that; and, of course, as the noble Lord has said, we have been good friends on issues now for many years. But I repeat: the general tenor of his speech gave me the impression that he would have a general sympathetic understanding if nothing very fundamental was done about it.

I do not expect very much of a reply from the Government tonight. I do not think that my noble friend ought to attempt to give a detailed answer. All I would expect from my noble friend, all I think it would be prudent for him to say, is that the Government are aware of this fundamental thing that happened and are giving detailed consideration as to how best we can extricate ourselves from the danger that that showed to the continuation of the Community; and I expect that he will ask us to wait until the Government have had a chance to weigh all the aspects so that they can be properly dealt with.

That something fundamental has happened, there is no doubt. And, the fundamental thing that has happened could be interpreted as interfering with our national sovereignty, as my noble friend Lord Balfour of Inchrye said. It could mean that, because of what happened, and the Treaty of Rome originally laid down directly and specifically—and we knew it before we joined—that there was no veto and that a majority vote was all that was required. That was clear as far as the treaty went. But before we signed it, as a result of the stand taken by France, by universal acceptance the rigid position as originally laid down in the treaty by general acceptance had been replaced by what was known as the Luxembourg compromise. That was, without attempting an interference with the treaty, because the treaty itself could not be altered in any particular without having to go back to each of the ten Parliaments to be ratified again.

Everybody knew the practical possibility of that being done was not on, but they recognised the dangers shown by the French stand and there was this general understanding that, although the treaty said what it did, they were prepared to accept that the procedures in future would virtually give every member of the Community power to veto if they adjudged that their vital national interests were concerned. When we joined the Community it was with the existence of the treaty as written but amended in its application as universally agreed. When in the 1960s and 1970s those who were critical of the possibility of our signing the Treaty of Rome asked this question, they were told on every occasion by leaders in this country, of every political persuasion, who welcomed our signing the treaty, that this power to stop anything affecting national interests would be left in the hands of the individual nations. That was the understanding which we signed when we joined, and it has been the practice for 16 years.

The amendment of the Act by agreement is the thing which has operated and it is working well. During the 16 years, because every member of the Community knew it had this power to protect its interests, they got together and we have seen a strengthening and good things flowing and affecting our employment possibilities. Now all of that is at risk because the almost certainty of the power of veto to protect national interests no longer seems to be there. I believe the reaction in the country is not only against the ignoring of the Luxembourg compromise; I believe the reaction in this country, which is very strongly held, relates to the way it was done.

If the argument put forward by the noble Lord, Lord Cledwyn, and supported by the noble Lord, Lord Banks, from the Liberal Benches is right, that they thought our vital national interests were not involved, or that we had agreed to the farm increases and we were wrong in tying them to the budget contribution, and in their view our interpretation of vital interests was not correct, then they should have given themselves and us time to consider the compromise procedure—and there was time. There was no special need for a quick decision to be made that night. My right honourable friend the Minister of Agriculture made it clear when he resisted their applying the majority decision. He said that there was no timetable necessity for the voting to be done.

I believe that if our partners felt that our assessment of vital national interests and the possibility of applying the veto was wrong, they should have given themselves time to discuss with us whether or not we ought to amend the Luxembourg compromise. It should have been discussed, and not merely thrown down and accepted in their own interests. That is why they did it against our judgment of our interests. We cannot look at the treaty alone; we can only look at the treaty as amended by usage whereby for 16 years the Luxembourg compromise had been attached to it.

I want to say to my noble friend Lord Belstead, when he speaks for the Government, that while I do not expect him to answer fully any question that my noble friend Lord Balfour of Inchrye put to him, I hope he will convey to his colleagues in the Government that the general mood presented by the three other speeches does not really represent the reaction of the nation as I have found it. When they are working out how best they can safeguard the continuance of the Community, despite this fundamental breach of what was an understanding, I hope that they will realise that, unless we can find an answer which is going to satisfy the feelings of people who consider they have been let down by what has been done and the way it has been done, then we shall be putting our membership at risk, and none of us want it to be put at risk.

My last word is this. I understood the noble Lord, Lord O'Hagan, to say that, while he had a lot of sympathy and understanding for the point of view of my noble friend Lord Balfour of Inchrye, he did not think that now was the time to put this Question to the Government. He did not think it ought to be asked. I think the timing of this Question is absolutely right. It is vital that the Government should know what the feeling is so that, when they are trying to find a good, constructive and workable answer to what has happened, they will realise the feeling that there is likely to be in the country when they are setting about it.

Lord Cledwyn of Penrhos

My Lords, the noble Lord takes it upon himself to tell the House that he is the one who knows what the country are thinking and no one else in the House seems to have any opinion about the views of the people of this country. I can say to him that I know well what the people of my area are thinking about this problem. I should be grateful if he would be good enough not to misinterpret my speech. I sought to make careful analysis of the problem as I saw it and to indicate what action I thought the Government ought to take. I have no doubts about the gravity of the situation. I thought I had made that plain in what I had said. Therefore I regret that he should seek to, as it were, give the impression that somehow or other I am satisfied with the state of affairs as it is. I am totally dissatisfied, and I thought I made that abundantly clear.

Lord Harmar-Nichols

My Lords, I am delighted to hear what the noble Lord has said. He has given me a different understanding as to what the message of his speech was. He and I are thinking along the same lines in that case. I feel—and I repeat it—that up to the point when I rose to my feet the muted approach to this vital problem, with the exception of my noble friend's introduction to his Question, was one that would not give the Government the message that they ought to be getting. I am not expecting a detailed reply; but I hope, adding all the speeches together, that there is some advice he can give to his colleagues. I hope that my noble friend is in a position to tell us that the Government are seriously thinking of what steps they can take in order to rectify the damage that has been done so that we can continue honourably to be a Member of the Community, which has so much to offer.

9.23 p.m.

The Minister of State, Foreign and Commonwealth Office (Lord Belstead)

My Lords, the Government are grateful to my noble friend Lord Balfour of Inchrye for asking this Question which illustrates the degree of concern at the events which took place at the Agricultural Council on 18th May. First, I want to assure all noble Lords that the Government share my noble friend's concern.

For the first time since 1966 when the Community resolved the most serious crisis of its early years by means of the Luxembourg compromise, decisions were taken by majority vote despite the fact that a member state had made it clear that very important national interests were at stake. This development constituted a major departure from the way in which Community business has customarily been conducted and created a very grave situation.

In sum, the reason why the common agricultural policy farm price settlement for this year involved national interests of importance to us was because the issues of agricultural expenditure and of our contribution to the European Community budget are so closely bound up as to be in effect inseparable. At the time of our accession to the Community, the situation in which we find ourselves—that of being one of only two net contributors to the Community budget though being one of the less prosperous members of the Community—was clearly foreseen by our negotiators. It seemed an inevitable consequence of the relatively small size of the agricultural sector in the United Kingdom and of a Community budget devoted largely to agricultural spending.

My noble friend was justified, I think, in referring to statements which were made when we joined the Community. May I refer in general terms to statements which were made from the Community. We were assured at that time by the Six that things would turn out differently and that the structure of the budget would change; and we obtained an undertaking that: if an unacceptable situation arose, the very survival of the Community would require the institutions to find a solution ". That assurance remains of the utmost importance. In the event our fears proved justified, and the fact that an unacceptable situation had arisen was recognised by our partners in the agreement on the budget which this Government negotiated on 30th May 1980. That agreement produced very large reductions in Britain's net contributions to the Community budget in 1980 and 1981. It further required, as your Lordships will remember, that the Commission should produce a report on a longer-term solution to the problem and provided for a possible third year of refunds in this year, 1982, if the longer-term solution had not yet been found.

In the Commission's report, which was produced exactly a year ago, your Lordships may remember that the Commission again noted that the United Kingdom's problem arose largely from the excessive concentration of the Community's spending on agriculture, from which we got relatively little benefit. The Commission proposed that measures designed to shift the balance of expenditure away from agriculture and towards other policies ought to be adopted. But the Commission's report acknowledged that it would take some time to achieve this result and that meanwhile there must be an arrangement for dealing with the United Kingdom's budgetary problem until this structural change could take effect.

The report thus falls into three so-called "chapters"—and I apologise for going over ground which may be familiar to your Lordships and not least to the noble Lord, Lord Cledwyn of Penrhos, but I think it is important to put on the record the Government's view on this and to underpin it with some of the facts again. The three chapters concerned are the development of the Community's non-agricultural policies, agricultural reform and an arrangement for budgetary adjustment. The European heads of Government acknowledged the interdependence of those three chapters when, in London last November, they agreed that progress on all three should be made in parallel.

During the subsequent negotiations we really did make an effort to secure an outcome which all the Community partners could agree to be fair; but by the first half of last month a satisfactory solution to the budget problem was still well over the horizon and, while agreement was on hand on a CAP price package, it was one which held out little hope for the agricultural reform that the Commission's report had urged and which, in the absence of a budget settlement, would have added some £120 million to our net budget contribution.

It was in these circumstances and in defence of these important national interests that the Government argued that the farm price package should not be adopted by majority voting, and invoked the Luxembourg compromise. In doing so, we were relying on 16 years of unbreached practice and, if the noble Lord will forgive my saying so, contrary to the views expressed by the noble Lord, Lord Banks, I believe that the Government were right to rely in that way.

The noble Lord, Lord Cledwyn, in essence, pulled out that part of Lord Balfour's Question and asked: Will majority voting erode sovereignty? Of course, the treaty lays down how Community decisions are to be taken, and in many specific areas unanimity is the rule. It is the rule, in particular, if the Community is to take decisions in new areas not provided for explicitly in the original treaty, and that is an important safeguard. But, as your Lordships well know, the treaty also provides that, in certain other clearly defined areas of Community business, decisions shall be taken by a system of what is known as qualified majority voting.

In 1965 the French Government argued that qualified majority voting should not be applied if a member state considered that its very important national interests were involved, and the noble Lord, Lord Cledwyn, told the story in his speech. The end of the story was that the Community reached the Luxembourg compromise—not a legally binding agreement. But the French view on this was accepted as the practice of the Community, and it has been the case, without any exception until 18th May this year, that if a member state makes clear that its important national interests are involved, discussion is continued and no vote is taken. That was the Luxembourg com- promise which, in effect, became a procedural convention.

My noble friend Lord Harmar-Nicholls rightly pointed out that all British Governments have made clear the importance which they attached to the Luxembourg compromise. Its terms were explained in the White Paper dealing, with our accession to the Community. The procedure was regarded as an inherent and essential safeguard and, for the first time, it has been disregarded without the agreement of the parties concerned. My noble friend Lord Balfour said that something protective needs now to be done. My right honourable friend the Foreign and Commonwealth Secretary made our grave concern abundantly clear when he met his European partners in Brussels last month. My right honourable friend impressed upon them that there cannot be confusion about the way in which decisions are to be taken. This is for the good of the Community—not just for the good of the United Kingdom.

The Community's practice really must apply equally to all members and there must be a means of safeguarding the important national interests of any member state. There was a preliminary discussion in the context or the proposals recently put forward by the German and Italian Foreign Ministers for decision-taking in the Community. It was agreed that, after further reflection, the subject should be taken up again at the next Foreign Affairs Council on 20th June—only just over a week and a half away.

The noble Lord, Lord Cledwyn, asked me what view our Community partners now take about the present status of the Luxembourg compromise. I really cannot answer that at the moment, except that I think it is common knowledge that France and the Federal German Republic have both made clear that, in their view, the compromise is still valid. But what I want to do is to give an assurance to my noble friend Lord Balfour and to your Lordships that the Government's aim in the discussions which are to come will be to clarify decision-taking procedures, with a view to ensuring that what happened on 18th May will not happen again.

Meanwhile, as your Lordships will be aware, agreement was reached at the council on 24th/25th May—that is, within a week of the overriding of the Luxembourg compromise in the Agriculture Council—on a settlement of our budget problem for 1982, which, though not as good as we would have wished, is reasonable in the circumstances. It was also agreed that the problem for subsequent years should be dealt with by the end of November this year. This gives the Community a much-needed breathing space to sort out these problems.

There are two questions which I feel I ought to answer before finishing. First, my noble friend Lord Balfour asked in essence: do we not now risk having to accept an unsatisfactory common fisheries regime being imposed by majority voting? It is unlikely that there would be pressure for such major issues as access and quotas in fisheries policies to be decided by majority vote, especially since, on the question of access, what are under discussion are successor arrangements to those explicitly set out in the Act of Accession. Our partners know that there would be no question of the United Kingdom accepting a situation in which Community vessels were fishing right up to our beaches. In any case, the history of the negotiations shows that these are not issues upon which the United Kingdom is always the odd man out. Other individual member states have in the past blocked agreement on terms which we could have accepted so far as fisheries policy is concerned.

The noble Lord, Lord Cledwyn of Penrhos, asked about further information being laid before Parliament on the Genscher-Colombo proposals. I am advised that it is our intention to lay a further explanatory memorandum about the proposals in the near future in order to try to give more information to Parliament, but 1 am afraid I cannot be more definite than that.

I have tried to make clear that the Government view the events of 18th May as being unjustified and unreasonable. The Community cannot work if the important national interests of a member state can simply be overriden. Not by accident is the Luxembourg compromise so entitled, for it was born out of a spirit of compromise, of a readiness to find common ground which is fundamental to the operation of a community of sovereign states. We shall be ready to make our contribution to the reassertion of that spirit and to work constructively for the development of a Community in which we shall play a full and active part. I want to say that in reply to the speech which was made by my noble friend Lord O'Hagan.

Last month had its disappointments for us, but it also saw the heartening extension to us by our European partners of firm and strong support over the Falklands crisis. My noble friend Lord O'Hagan was absolutely right to emphasise that in his speech. Let us not, by over-accentuation of the negative, ignore the positive. The Government believe that it is a positive approach to the Community that is now more than ever necessary, and that is the approach which we are determined to adopt.