Lords Sitting of 21 October 1985

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Southwark.

Strategic Defence Initiative: NATO Discussions
Lord Molloy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in view of the report of the strategic defence initiative submitted to members of the US Congress and its effect on US-Soviet arms talks, they will initiate talks thereon in NATO generally.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, the SDI, comparable Soviet activities and the implications for arms control are regularly discussed in NATO.
Lord Molloy: My Lords, I am grateful to the noble Baroness for that reply. Is she aware of the report in The Times and in the International Herald Tribune to the effect that a report of Congress has caused considerable consternation in the United States and that one senior general of the United States Army has resigned on the grounds that, in its present form, SDI could make nuclear war much more likely? In view of the fact that there is no serious discussion in the United States, would it be possible for our Government to initiate some discussion within NATO?
Baroness Young: My Lords, the most recent discussions in NATO were by the United States Secretary of State, Mr. Shultz, when he briefed all his colleagues on the North Atlantic Council on 15th October about the current negotiations in Geneva and the forthcoming meeting between President Reagan and Mr. Gorbachev.
Lord Cledwyn of Penrhos: My Lords, can the noble Baroness say whether the SDI has any implications for the ABM Treaty? Secondly, is she able to tell the House whether the Soviet Union are developing their own form of SDI? Is there any clear evidence of that?
Baroness Young: My Lords, on the first point mentioned by the noble Lord, Lord Cledwyn, as President Reagan has repeatedly confirmed the SDI research is consistent with present obligations, including the ABM Treaty, and this was confirmed again by Mr. Shultz when he spoke at the North Atlantic Assembly. On the second point, the Soviet research programme has continued since the 1960s. The ABM defences around Moscow are the only type in existence in the world, and they are being upgraded. There is an extensive programme based on ballistic missile defence-related technologies.
Lord Kennet: My Lords, from the discussions in NATO, do the Government get the impression that the Americans are going to be willing to discuss the prevention of an arms race in space with the Russians at Geneva?
Baroness Young: My Lords, so far as the negotiations are concerned, we are glad that the Geneva talks are focusing on preventing an arms race in space. We recognise that both SDI and the parallel Soviet research are permitted under the existing agreements.
Lord Molloy: My Lord, is the noble Baroness aware that the gravamen of my submission is simply that the issue could determine the future of all mankind? Some eminent scientists said in Britain on Sunday that thermo-nuclear war is inevitable and is going to happen unless there is very serious examination by all the nations involved. I accept from the noble Baroness that the talks between the Soviet Union and the United States of America are very important, but I would ask the Government whether they consider that Great Britain should take a lead among all the other NATO countries in being involved in these discussions so that we might know precisely what the dangers to mankind are.
Baroness Young: My Lords, I think we would all agree that we want to see progress made at Geneva, but we must face the fact that the talks are not going to produce quick or easy results. However, we are all working with the objective in mind of achieving some constructive results.

Aid and Trade Provision: Administration
2.41 p.m.
Lord Beaumont of Whitley: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether it would not be to the advantage both of efficient help to exporting industries and of the proper provision of worthwhile aid to developing countries if the administration of the aid and trade provision were transferred from the Overseas Development Administration to the Department of Trade and Industry.
Baroness Young: My Lords, our view is that it is in the best interests of the United Kingdom and of the developing countries that we assist, for the ATP to be administered by the Overseas Development Administration as part of our aid programme.
Lord Beaumont of Whitley: My Lords, is it not true that there have been major delays over the past year or so in companies receiving answers to their requests for aid to accompany their bids, and that this has sometimes led to the loss of contracts? Is not really the only reason for keeping this provision with the aid budget a matter of concealing the pitiful smallness of our real aid budget?
Baroness Young: My Lords, I do not intend to comment other than on a specific point. However, I can confirm to the noble Lord, Lord Beaumont, that we use a greater proportion of our aid than our competitors for ATP-type financial packages, and that over the three years 1982 to 1984 we won over £ 1,000 million worth of contracts with the help of the ATP. Those include major contracts in India, Brazil, Indonesia, Egypt, Zimbabwe, Kenya and Peru.
Lord Beaumont of Whitley: My Lords, the noble Baroness has not answered the major question, which is: is it not true that sometimes it has taken months for companies to get answers to their requests for help, and should not a better way of dealing with these matters be found?
Baroness Young: My Lords, if the noble Lord has a specific case in mind, I shall be happy to look at it. But my understanding is that in the past three years the DTI has proposed almost 100 ATP cases. Only six cases out of those did not meet the appraisal criteria of the ODA. We believe that financing sound investments is not only a good use of aid but is also in our own commercial interests,
Lord Bottomley: My Lords, is the noble Baroness aware that over recent years overseas aid from Britain has decreased, whereas in the case of the western countries as a whole it has increased? In particular, cuts made in Africa, where aid is urgently needed, have been the greatest of all. Would it not be better, instead of transferring work from one overworked Government department to another, for the Government to consider recreating the Ministry of Overseas Development?
Baroness Young: My Lords, the Overseas Development Administration is there. It is of course now part of the Foreign and Commonwealth Office, but it is within that a separate entity.
Lord Oram: My Lords, is there not a serious anomaly in having the aid and trade provision within the ODA! Has not the ODA declared that its policy is to help the poorest nations, whereas the list of countries which the noble Baroness read out in answer to the first supplementary question is a list of countries of the middle income bracket? While I can accept that there is a lot to be said for having an aid and trade provision, particularly because our competitors exercise that kind of procedure, should we not make it clear that the provision is there for the promotion of our exports and not primarily for the development needs of the developing countries? Would this not be made clear if the suggestion of the noble Lord, Lord Beaumont, was carried out and the administration was transferred to the Department of Trade and Industry?
Baroness Young: My Lords, as the noble Lord, Lord Oram, has quite properly said, the ATP was established to help counter the often aggressive way in which some countries use aid funds to support their national firms in competition for large contracts in developing countries. The ATP is used to help British companies compete on an equal basis where other
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countries are using their aid money to support their particular projects, and where it can be shown that the contract will contribute to the development of the recipient country. In fact, a higher proportion of our aid goes to mixed credits in semi-concessional aid loans in our bilateral programme than in many other countries because we recognise among other things the importance of helping British companies in this way.
Lord Hatch of Lusby: My Lords, will the noble Baroness answer the question which was put by my noble friend Lord Bottomley? Would it not be better if the Ministry of Overseas Development were recreated and given an overall supervision not only of aid but of overseas trade, so that it can work, as my noble friend has pointed out, both in the interests of the poorest of the world and also in the interests of developing trade with the under-developed countries and opening up their markets to firms in this country?
Baroness Young: No, my Lords. For the reasons that I have given, we do not believe that that would be the best line to pursue.
Lord Hatch of Lusby: My Lords, but what reasons have the Government given? The noble Baroness did not give any reasons in answer to my noble friend Lord Bottomley.
Baroness Young: My Lords, we believe that it is in the best interests both of ourselves as a country and of the countries that we assist that the ATP should continue to be administered by the ODA. That is the subject of the Question. That is the answer to it.

Armageddon: US Leaders' Statements
Lord Jenkins of Putney: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they are taking having regard to the fact that the American President and Defence Secretan have been reported in the Observer as both believing that Armageddon is real, specific and imminent.
The Minister of State for Defence Support (Lord Trefgarne): My Lords, both President Reagan and his Defence Secretary, Mr. Weinberger, have made it clear on many occasions that a nuclear war cannot be won and must never be fought. They and we believe that a strong deterrent posture is the best guarantee of peace. The approach of Armageddon remains therefore a matter for scholarly speculation rather than reality.
Lord Jenkins of Putney: Yes, my Lords, but is it not somewhat disturbing that the man with his finger on the button seems to confuse the two issues and to mix up—as he has done five times during his presidency—the question of biblical possibilities with the actuality of the nuclear weapon on which his finger rests? Is that not somewhat alarming from our point of view?
Lord Trefgarne: My Lords, I think that the best thing might be if I were to quote the relevant passage from the Book of Revelation:
"Behold, I come as a thief. Blessed is he that watcheth, and keepeth his garments, lest he walk naked, and they see his shame.
"And he gathered them together into a place called in the Hebrew tongue Armageddon."
I believe that says it all.
Lord Beloff: My Lords, does the noble Lord the Minister agree that he might well suggest to the noble Lord, Lord Jenkins, that he could allay his anxieties by the simple process of moving his dwelling to a nuclear-free zone, in which case he would be perfectly safe even if Armageddon came?
Lord Trefgarne: My Lords, that is a suggestion which I dare say the noble Lord, Lord Jenkins, will wish to consider, probably at the same time avoiding taking his holiday at a point 15 miles south-east of Haifa.
Lord Molloy: My Lords, I wonder whether the Minister, his party and this Government realise that the majority of ordinary British folk take Armageddon and thermo-nuclear war very seriously indeed. Is not the noble Lord the Minister to be congratulated in so far as he can find the whole matter of nuclear war a big joke—
Noble Lords: No!
Lord Molloy: My Lords, that is how it seems to me, and Hansard will record it.
Is the Minister not aware that United States generals have decided that they cannot go along with the present attitude and have therefore resigned their positions? I do not find that a laughing matter: it is serious. Ought not the Government to take this matter seriously, and not do what the noble Lord the Minister is very able at doing, which is to provide a difficulty in the way of every possible examination?
Lord Trefgarne: My Lords, I do not think I need any lessons in the need —
Lord Molloy: My Lords, neither do we.
Lord Trefgarne: —to maintain the peace of the world. That is why we have the policies that we do; that is why we devote the resources that we do to our defence programme; and that is why we have been successful for more than 40 years.
Lord Kennet: My Lords, is the Minister of State aware that if he goes to the ruins of Armageddon in the modern State of Israel he will find that there are both hawks and doves nesting there?
Lord Trefgarne: My Lords, I am grateful for that advice.
Lord Morris: My Lords, is my noble friend aware that the noble Lord opposite can draw certain comfort from the support of generations of old men who tramped the streets of the capital bearing the yoke of a sandwich board?
Lord Trefgarne: My Lords, I am not quite sure as to which noble Lord my noble friend is referring, but I, too, have seen the boards to which he refers.
Lord Soper: My Lords, is the noble Lord the Minister aware that the Book of Revelation is a very dangerous document for quotation because you can make up your mind what you intend to believe and then find the appropriate text? Is the noble Lord further aware that there is a radical difference between the concept of apocalypse and that of Armageddon, but that they have one thing in common? Does he agree that they both involve an element of inevitability, which I believe is the very worst aspect of the problem that faces us in the world today? Would it not be far better to recognise that we have the option now of resisting a process of inevitability in the interests of what we still have a capability to do if we are prepared to disarm and to look at the world with hopeful eyes?
Lord Trefgarne: My Lords, I am afraid I take the view that the one way to make nuclear war inevitable, or in any event more likely, would be for us to disarm unilaterally, and that is why we reject that policy.
Lord Graham of Edmonton: My Lords, surely we are entitled to assume that every effort will be made to make the November summit as successful as possible. What comment do Her Majesty's Government have on, not the staggering statements but the swaggering statements that have been made recently by the President, by Robert McFarlane and by Richard Perle? Surely Her Majesty's Government should try to instil in them and in the United States Administration our desire to enhance and not to hinder the prospects of reaching a settlement in November.
Lord Trefgarne: My Lords, the Government are of course wholly supportive of the efforts of the United States, not only at the talks that are to take place in November but in the other fora which are already in process to reach balanced and verifiable methods of arms control. That support will continue.
Lord Jenkins of Putney: My Lords, does the noble Lord not agree that some of the statements made by President Reagan which are quoted in this book on President Reagan would indeed be amusing but for the awesome power which rests in the President's hands? In these circumstances, does the noble Lord not consider that he has a responsibility to take the matter seriously and to do his best to ensure that American representation in Geneva takes the matter more seriously than the President sometimes seems to take it himself?
Lord Trefgarne: My Lords, I can assure the noble Lord that both the United States and the other members of the Western Alliance take this matter most seriously. I would advise the noble Lord not to believe everything he reads as ascribed to the President.
Lord Beswick: My Lords, I wonder whether the noble Lord is not underestimating the genuine apprehension that is growing in this country about

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recent activities. Is he not aware that it is not simply the statements of President Reagan that cause this apprehension but his activities; for example, the ordering of planeloads of armed troops on the airfield of a friendly nation?
Lord Trefgarne: My Lords, I am not quite sure what the noble Lord is referring to but the one thing that has been achieved under the Administration of the President of the United States is the making of the strength of the Western Alliance such that nobody will now attack us.
Lord Beswick: My Lords, do I gather from that answer that the noble Lord, a Minister of the Government, is not aware of what happened on an Italian airfield recently?
Lord Trefgarne: My Lords, the noble Lord did not describe in any detail the event to which he was referring. I can now understand the matter he had in mind.
Lord Annan: My Lords, would the noble Lord agree that the putting down of Questions with a high metaphorical content is bound to induce from the Government a comparable response? One might expect the Government to have said to a Question of that kind that the only thing to do was to wait for Providence to intervene, which is always, of course, a disastrous thing. Is it not a fact that the best thing for the Government to do is what they are doing at the moment, which is to advance step by step in trying to reduce nuclear armaments, as they have done in NATO, which has reduced the number of short-range nuclear weapons and replaced them by medium-range ones, thereby reducing just slightly the risk of a mistake being made in the front line?
Lord Trefgarne: My Lords, I am grateful to the noble Lord for his appreciation of the efforts that have been made in the areas to which he refers.

GLC: Transfer of Functions
2.56 p.m.
Lord Boyd-Carpenter: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether the Greater London Council and the trade unions mainly concerned are now co-operating with Her Majesty's Government and with the successor authorities in transitional arrangements in connection with the abolition of the Greater London Council.
The Minister of State, Department of the Environment (Lord Elton): My Lords, I believe that there is an increasingly realistic attitude within the GLC to preparing for the transfer of functions. My right honourable friend and I have been in discussion with the Local Government Committee of the TUC since 11th July about staffing aspects of abolition, and I hope to conclude negotiations with them soon.
Lord Boyd-Carpenter: My Lords, while I thank my noble friend for that moderately encouraging reply, may I ask him whether he is aware that, now that Parliament has decided this matter, public opinion generally expects all concerned to do what they can to secure that the transition takes place effectively, efficiently and at a minimum cost to the citizens of London?
Lord Elton: My Lords, I think that is the general perception, and with it goes a perception of the fact that it is in the interests of the staff themselves that matters should be so conducted.
Lord Graham of Edmonton: My Lords, if in fact one needs the collaboration of the GLC and the trade unions in these matters, ought we not also to have the collaboration of the Government? Is the Minister aware of the circular issued last week by the Staff Commission, which said that at present,
"GLC and MCC employees are being required to make important decisions about their future against a background of uncertainty and confusion. The commission are looking to the Government to publish draft transfer orders as soon as possible and have also pressed the Government to settle quickly the details of the compensation terms so that their employees know where they stand".
Those are the words of the Staff Commission., Is it not ironic that a body set up by the Government to expedite these matters is having to complain that those dragging their feet are not the trade unions or the GLC but the Government themselves?
Lord Elton: My Lords, I think the noble Lord has perhaps read the circular with a partial eye. I am well aware of it. I am grateful to the Staff Commission for the help which they are giving in making expedition possible. I have taken their views, and I am negotiating with all speed with the interested parties.

Business
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Glenarthur will, with the leave of the House, repeat a Statement which is to be made in another place on inner city disorders. This will be followed by my noble friend Lady Trumpington, who, again with the leave of the House, will repeat a Statement on supplementary benefit board and lodging payments.
Associated British Ports (Port of Ayr) Order Confirmation Bill [H.L.]
Considered on Report.
Church of Scotland Trust (Amendment) Order Confirmation Bill [H.L.]
Considered on Report.

European Union: ECC Report
3 p.m.
Lord Kearton Lord Kearton rose to move, That this House takes note of the Report of the European Communities Committee on European Union (14th Report, 1984–85, H.L. 226).
The noble Lord said: My Lords, in moving, That this House takes note of the Report of the European Communities Committee on European Union, I ask the permission of the House to give a little of the background. It is now 28 years since the Treaty of Rome established the European Economic Community with six original participants. The attractiveness of greater European integration, both economic and political, had been widely discussed and canvassed in the preceding postwar years.
The treaty itself had a long gestation. Although it concentrated on establishing closer economic ties, its existence helped to satisfy political needs—notably the rapprochement between France and Germany. The preamble to the treaty described it as a step towards closer union among the peoples of Europe. What was meant and covered by the word "union" was never closely defined. It was an aspiration and there was no detailed programme to reach an agreed goal.
The treaty, as the various transitional arrangements fell away and the details of policy were settled, was a great success. Its provisions undoubtedly played a major part in the great surge forward of European economic growth and prosperity of the 1960s and early 1970s. In 1963, Britain indicated its wish to join the Community. This approach was rebuffed, and it was further rebuffed in the following years. It was not until 1972 that Britain, after lengthy negotiations, finally signed the treaty and in 1973 became a full member of the Community. Ireland and Denmark became members at the same time.
It is worth recording that at a summit meeting in Paris in the autumn of 1972, the original Six and the three acceding members affirmed their commitment to full European union by the end of the decade, but without defining what they meant by union. Such a timetable was always unrealistic and there were no serious negotiations. But various initiatives in the 1970s kept the concept of union alive and there were, notably, the Genscher-Colombo proposals in 1981.
Meanwhile, a significant stage in the development of the Community was reached with the establishment in 1979 of the first directly elected European Parliament, replacing a parliament of nominees. The 1980s saw the enlarged Community—now numbering 10 members—facing many problems not envisaged by the founding fathers. The world and Europe had moved on and had greatly changed both economically and politically. Moreover, it was only too apparent that the institutions of the Community itself were no longer working in the way that the founders had intended.
As to Community problems, the common agricultural policy had more than achieved its original aims and had gone on to become over-dominant in the Community's budgetary disbursements—wastefully so. The internal market, although tariff-free, was beset by numerous other barriers and in many respects
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remained nationally fragmented. The harmonisation in the provision of services and in other matters was not carried forward. The arrangements called for in the treaty did not take place. It was a major worry that in technology Europe was not keeping up with America and Japan. It was a cause for grave concern that unemployment in the Community was so high and rising.
As to the working of Community institutions, the balance of powers and duties set out in the treaty was in disarray. Decision making had become slow and laboured, with items held over for years and years. A major new factor had been the emergence of a European Council made up of heads of government which had become the de facto ultimate authority in Community affairs. The council, nonetheless, had no formal legal basis.
In the situation the European Parliament, which under the Treaty of Rome has a largely consultative and advisory role, became increasingly unhappy. It was alarmed by the lack of impetus and the disunity in Community affairs. It was also frustrated by its own comparative impotence, and so it set up a committee on institutional affairs which reported at the end of 1983.
That committee recommended that the existing Treaty of Rome be subsumed in a new and considerably more far-reaching treaty establishing a European union. A comprehensive and detailed draft of the proposed new treaty was worked out. In the preamble attention was drawn to the declarations in favour of European union by the heads of government at their 1972 meeting and to the reafirmation at the Stuttgart summit meeting in 1983 by the heads of government of the need for, as they put it,
"broad action to ensure the re-launch of the European Community".
The European Parliament approved the preliminary draft treaty in February 1984. It is generally known as the Spinelli Treaty because Signor Spinelli took a major part in inspiring its formulation and was indeed the co-ordinating rapporteur. The European Parliament asked that the treaty be submitted to the parliaments and governments of member states with a view to ultimate approval after taking account of opinions and comments.
The draft Spinelli Treaty, backed by the European Parliament's endorsement, helped to put reconsideration of the nature of the institutions, and the aims and workings of the Community, very much at the top of the European political agenda. Support for the treaty in all its detail rapidly came from Italy. Warm support for its thrust was expressed by Chancellor Kohl of Germany and President Mitterrand of France. The European Council at its Dublin meeting that year responded by setting up its own committee for institutional affairs. It was composed of personal representatives of the heads of government under the chairmanship of Senator Dooge of Ireland, and reported at the end of last year.
Its conclusions were not unanimous, but the general feeling was that a new approach to Community affairs was indeed urgently necessary. The Dooge Committee as a whole considered that a qualitative leap forward should be taken with particular regard being paid to

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the long-term objective of establishing a genuine political entity; that is, a European union. After discussing the scope of the matters to be covered—very much wider than in the Treaty of Rome—the Dooge Committee recommended that a new draft European union treaty should be negotiated, and that it should be based on the acquis communataire and on the new needs as the committee saw them. Significantly, the committee said that the negotiations should be guided also by the spirit and measure of the Spinelli Treaty.
The Milan summit conference of June this year broadly accepted the Dooge recommendations. It was decided—although Britain in particular had reservations—to set up an inter-governmental conference to arrive at some preliminary consensus on the future shape and direction of the enlarged Community of 12. Those discussions are currently taking place.
It was in the spring of this year, in the light of those events, that your Lordships' own Select Committee set up an ad hoc sub-committee with the following terms of reference:
"To consider the implications for the institutional structure of the European Community and for the United Kingdom of proposals for European union, taking particular account of the draft treaty establishing the European Union adopted by the European Parliament on 14th February 1984".
The first meeting of the ad hoc committee was held on 26th March and the report was published on 31st July. The committee held 11 witness sessions in this country and also had the opportunity of visiting the Commission in Brussels and the European Court of Justice in Luxembourg. It received written evidence from several sources. The committee was most grateful to all those who gave evidence and who provided information. The committee is particularly indebted to Professor David Edward of the University of Edinburgh who acted as expert adviser throughout the inquiry. The committee specially wishes to record its appreciation for the services of Mr. Brendan Keith, the clerk of the committee, and Mr. Karl Newman its legal adviser. My personal thanks go to the members of the committee themselves who had to meet on an irregular schedule and who worked so hard on the committee's remit.
In writing the report the committee had to bear in mind the political dimension of its investigation and the subjective nature of much of the evidence it received—evidence which was sometimes contradictory and inconsistent. The conclusions of the report are the result of the committee's own analysis of the issues using the evidence, both oral and written, as background.
It is common to all consideration of the Community and its future that the present system is working badly and it is common ground that a rapid realisation of a true internal market is a vital necessity. There is less agreement that the right way forward is to formulate the new treaty which, while a long way from creating a federal Europe, would amount to a step in that direction. While nothing in the nature of the Anglo-Scottish Act of Union is under discussion, the advocates of a new treaty certainly contemplate member states ceding more powers to the European Parliament and to the new central authority; and they advocate that the present informal political co-
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operation between member states should be formalised and become part of the new arrangements.
But why is the present system working badly? Essentially it is because member states have taken back to themselves powers they had ceded to Community institutions. The Treaty of Rome provided for a Council of Ministers drawn from member states to be the decision-making authority. In certain areas set out in various articles decisions had to be unanimous. Other decisions—in areas again set out in appropriate articles—could be taken by majority vote. The votes were weighted as to members and on substantive matters a majority vote is 45 out of a maximum of 63.
The Council appointed a Commission and a president of this Commission. This body was entrusted with the executive action required by the Council decisions and it also had, most importantly, the power of initiative with regard to proposals for action. The European Parliament did not have a legislative role but had advisory and consultative functions as regards the Commissions' proposed actions and the Commissions' dealings with the Council of Ministers. Parliament also had certain budgetary powers in relation to the spending of the budget agreed by the Council.
A Court of Justice ruled on questions of the competence of the Commission and ensured that treaty law was interpreted and observed, and thus gave practical effect to the obligations undertaken by member states.
Under the Rome Treaty the Commission had the key role both of initiation and in the execution of decisions. It was a very positive role. It was never intended that the Commission should be merely a bureaucracy. It was not envisaged that the Council of Ministers would spawn 20 or so subject councils with attendant national experts to discuss and consider Community activities in the greatest detail. It was not foreseen that the power of ultimate decision would pass to a European Council formed by heads of government and meeting briefly only three times a year.
The sea-change however, which in time undermined the working of the Community, was the introduction of the co-called Luxembourg Compromise in 1956. This meant that any state could hold up a Council decision if it felt that a very important national interest was at stake. This interest did not have to be spelled out or justified in any detail. In effect, majority voting in those areas provided for in the Treaty of Rome was virtually eliminated. Decisions were simply not taken. Numerous Commission recommendations were left in limbo. Even in discussions at official level within Council advisory bodies the implied threat of veto action was used to block compromise proposals. By degrees, progress in Community matters slowed to a crawl.
The directly elected parliament also had its grievances. It felt that its role in consultation and advice was not working satisfactorily and that its treaty obligations were not being properly fulfilled. The sense of the treaty, it considered, was that parliament should be taken into the confidence of the Commission and of the various Councils of Ministers on a much more intimate basis than was actually happening; and the

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blocking of agreed recommendations by the Council of Ministers caused great dissatisfaction.
It seemed to Signor Spinelli and his colleagues that a re-launch of the Community was the way to overcome all the various difficulties and the way to recapture the impetus towards a closer European union, political as well as economic. The text of the Spinelli draft treaty is given in our report, as is the text of the Dooge submission. In brief, Spinelli proposed giving clear institutional status to the European Council which would be the senior body of the union. He stipulated that the Council of Ministers, once subordinate to the European Council, would be the decision-making body in the carrying on of Community affairs and would generally decide matters by a majority vote. He proposed a new system for appointing the commissioners who would be the executive arm of the union—a system in which the Parliament would have a major voice. He gave to the European Parliament a central role in the union's legislative process.
The draft treaty makes a distinction between two methods of action by the union: common action and co-operation. Within the field of common action the union would have law-making powers. This field would cover competences already existing under the Treaty of Rome and could be extended by union legislation. The European Council would be responsible for the initiation of action to extend that competence. It is provided that union legislation would restrict itself to determining the fundamental principles covering common action and entrust that the responsible authority of the union or member states was setting out in detail the procedures for implementation. Provision is made in the treaty for differential application of laws where union application would create special difficulties for individual member states. This position could conceivably lead to a two-tier system of states within the union, with some more integrated with the union than others.
The second method of action—co-operation—would cover all commitments which member states undertake within the European Council. For instance, it would be expected to lead to a steady convergence on matters of foreign policy.
Our report attempts to set out the various arguments and considerations relating to a proposed new treaty of union. I will not rehearse them in this introduction to your Lordships' debate but will confine myself to the committee's conclusions. In arriving at these conclusions the committee was more and more convinced that making a reality of the Common Market was a matter of the greatest priority and urgency. It very much welcomed the commission's recent initiative in this regard, set out in a comprehensive White Paper. It noted that even with priority and urgency the completion of all the measures needed was estimated to require some seven years.
The key conclusion of your Lordships' committee was that the Treaty of Rome could and should be restored to its original intentions. Some amendments would be required: in particular, to recognise the role of the European Council and to give the Commission authority to deal with new problems which had
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emerged. However, the committee did not support a major rewriting of the Treaty of Rome or a new treaty of union. When the institutions of the Community are again working properly and the internal market in goods and services is truly established, that might be the time to take further political steps towards European union. It would then be a case of building on success and on the knowledge that member states would indeed cede powers to a European authority.
To restore the vitality of the Community within the Treaty of Rome, the committee's view is that there should be strict limits on the use of a national veto. It accepts that sovereign states are unlikely to renounce completely the use of the veto but it considers that such use should be a last resort. It should only be used in the case of a vital national interest—not just important but vital—which the head of government concerned will have to explain and justify to his colleagues in the European Council. Making the veto a rare event will greatly speed decision-making. Decisions should in general be decided by weighted majority vote, if a vote is necessary.
The Council of Ministers, in its various manifestations, should primarily concern itself with taking decisions of principle and laying down policy guidelines. There must be more self-discipline on the part of member states, with fewer subject-matter councils, themselves with fewer subordinate committees and working parties with their accompanying national experts.
The Commission, which your committee found to be hardworking but understaffed, should be restored to the role which was envisaged for it in the Treaty of Rome and it should have the necessary staff resources to perform this role. However, in the committee's view the number of actual commissioners is already too large at 14. With the accession of Spain and Portugal the proposed increase to 17 would make it still more cumbersome. For rational working and an effective distribution of duties and responsibilities, the committee considers the right number of commissioners to be nine, but it is recognised that immediate political considerations might limit this reform to the appointment of 12, one for each member state.
Your committee considered that the time for an extension of the powers of the European Parliament had not yet arrived, particularly in the legislative field, but it was felt that a return to the relative powers and duties of the Commission and the Council of Ministers, as set out in the Treaty of Rome, would give the elected parliament more effective powers of advice, consultation, and—importantly—of scrutiny. The committee share Parliament's view that commissioners who are appointed and not elected should pay great attention to the views of Europe's elected representatives and work closely with them.
Your committee has been impressed by the devotion of Her Majesty's Government to Community ideals and by its desire to make the Community more effective. In implementing Community law and decisions, in many respects Britain has been more communautaire than some of her more vocal partners, yet there seems to be some residual doubt by these partners as to how deeply the United Kingdom is committed to the Community.
One signal of deep commitment, which was recommended in an earlier report of the Select Committee, would be Britain's full participation in the European Monetary System.
Finally, your committee considered whether there was a real risk of a two-tier Europe developing, with some member states, notably France, Italy and Germany, moving towards a closely integrated group of which Britain was not a full member. Such a development is not seen as being very likely but if it happened it would not be in the interests of the United Kingdom. The committee therefore welcomed the Government's close involvement in the post-Milan inter-governmental discussions which are currently taking place.
My Lords, the subject that we are debating is complex, and I apologise for this rather long introduction. The future development of the Community is of vital importance to our country, of absolutely vital importance, and we offer our report as a contribution to the discussion on this future.
Moved, That this House takes note of the Report of the European Communities Committee on European Union (14th Report, 1984–85, H.L. 226)—(Lord Kearton.)
3.24 p.m.
Baroness Young: My Lords, "European Union" is an elusive and emotive term upon which many different constructions may be put. I should like to begin by congratulating the Select Committee on the thoroughness with which it has tackled this important subject.
Their report is a cogent and perceptive analysis of the ideas which lie behind the concept, and how it relates, or should relate, to the activity of the European Community. It will be a valuable reference work for some time to come.
May I also congratulate the Select Committee on the timeliness of its work, a point to which the noble Lord, Lord Kearton, himself referred. The report was published just before the start of the Intergovernmental Conference on the development of the Community which is now taking place, and has proved a valuable contribution to the debate on the direction which the European Community should now take.
On this difficult subject it is as well to remind ourselves that our basic text is the preamble to the Treaty of Rome, which commits us fully to the shared goal of creating,
"an ever closer union among the peoples of Europe".
This closer co-operation among member states, leading to practical benefits for our peoples, is what membership of the European Community is all about. It is an aim to which successive British Governments have long subscribed. The Select Committee's report rightly emphasises that union is not about a Utopian plan for a European federation. It is how best to realise the aims of the Community so that its future and success are assured.
I think that the best definition of European Union is provided in the Solemn Declaration of European Union, based on the efforts of Hans Dietrich Genscher
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and of Emilio Colombo and signed by heads of government at Stuttgart in 1983. This said:
"European Union is being achieved by deepening and broadening the scope of European activities, so that they inherently cover a growing proportion of member states' mutual relations and of their external relations".
It should be obvious from all this that we are not afraid of European Union. As my right honourable and learned friend the Foreign and Commonwealth Secretary has said, the authors of the Treaty of Rome saw European Union as a continuing process; as a Community growing politically and economically interdependent. Being in constant development, it had no finite shape. They saw it as a journey travelled together in an agreed direction. In that sense—the sum total of the ever closer relationship between us—such a union exists today; I have no doubt that it will be stronger tomorrow. It is a reality as well as an aspiration. It exists in the definite political and economic sense solemnly affirmed at Stuttgart; and the political imperative is growing all the time. The question is how this organic process of "ever closer union" is to be taken forward, allowing Europe to enjoy the real power and influence that its unity alone can bring.
The Select Committee recognise that the Common Market itself is far from complete. Obstacles to the free movement of goods and services continue to hamper trade and make a mockery of the term "common market". It is for this reason that the Government wholeheartedly agree with the committee's diagnosis of the Community's current condition and their conclusion that the completion of the internal market must be a major priority. Progress in this field is the single most important contribution that can be made to making the European Community more effective, more real to its citizens, and the motor for greater prosperity and jobs that its citizens rightly expect it to be.
To the outside world we present a single tariff barrier within which there exists in theory a single domestic market—the internal market. But the Select Committee have recognised in their report that there is still a large element of theory to this—too large for our taste. For example, I would commend to the attention of your Lordships the list of documents required for the transit of a vehicle from Germany to Italy, which appears as an appendix to the Select Committee's Report on page 301.
The Government are glad to note that the committee do not believe that a new treaty is necessary to achieve this and other desirable improvements. Nevertheless, the committee have rightly recognised that there is some impatience with the pace of progress in Europe and a recognition that in a Community of Twelve it will be even more difficult to take decisions than it is now. That is what is now being discussed in the Inter-governmental Conference.
The Select Committee concluded that we should consider amending the treaty, if this was necessary to achieve the practical improvements in decision-taking which we want to achieve. That is our approach. For us, the crucial test of any proposals at the conference is whether they are necessary, whether they will help achieve the goals we have set ourselves, and whether they are susceptible to being agreed by all. We must

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aim for realistic and practical proposals capable of implementation in all member states. Meanwhile, as the committee recommends, we are active participants in the Inter-governmental Conference. Your Lordships may rest assured that Britain will continue to play a central role in European Community affairs.
I shall now turn to some of the detailed issues raised in the report. The Select Committee report mentioned abuse of the Luxembourg Compromise as the greatest obstacle to the completion of the internal market (in paragraph 101). The Government have no doubt about the importance of the Luxembourg Compromise. The Luxembourg Compromise reflects the political reality that all member states must in the last resort be able to defend themselves against being outvoted on any issue affecting their very important national interests. On matters which fall under majority voting rules, in our view a member state must be able to insist that discussion continues until unanimous agreement is reached if it considers that a very important national interest is involved. But we agree with the committee that we must prevent the Luxembourg Compromise from casting its shadow over decision-taking. We have suggested ways of limiting potential abuse.
The Select Committee's report has some wise words on the role of the European Parliament. We are first and foremost a union of democratic countries. We are unique as a Community in having a directly elected parliament. The Parliament tends to hit the headlines when it rejects the Community budget. But its positive suggestions for the improvement of Commission proposals appear, if at all, at the bottom of the page. Although the parliament is consulted on many issues, it cannot ensure that account is taken of its opinions in the Council's decisions. Hence the frustration felt by many MEPs and the disillusion of some voters.
The Council-Parliament relationship never will be easy. Ministers meeting in the Council are all conscious that they are well and truly accountable to their own parliaments and electorates. That is not going to change. But we can do more to give the European Parliament a proper role in the European partnership without putting that accountability at risk. This means earlier consultation and an earlier opportunity for the European Parliament to give its views on issues under discussion. The Government endorse this aspect of the recommendations of the committee's report.
The Select Committee has made four recommendations about the Council of Ministers. They are a counsel of perfection. The Council's role should of course be one of taking decisions of principle and of laying down the policy within which the Commission should work. This was the intention of Article 155 of the Treaty of Rome which says that the Commission shall,
"exercise the powers conferred on it by the Council for the implementation of rules laid down by the latter".
But it is often difficult to do this in practice. Some of the most technical and detailed matters of Community business, which ought on the face of it to be dealt with by the Commission under managerial powers, are the most contentious—weights and dimensions of commercial vehicles and the chemical content of
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water for human consumption (such as lead) are examples. We cannot see any alternative to the Council examining on a case-by-case basis detailed matters of this sort in order that Ministers may themselves take decisions for which they can be called to account by their own parliaments. However, we are in favour of greater delegation of authority to the Commission wherever possible.
This leads me to the role of the Commission on which the Select Committee had made four recommendations. The Government wholeheartedly endorse these recommendations. I would in particular draw your Lordships' attention to what has been said about the staff of the Commission who, far from being the overstaffed bureaucracy of popular mythology, are hard-pressed and can be expected to carry an even greater burden when the Community is enlarged in January.
Although the thrust of the Select Committee's report is very much in accordance with the Government's thinking, I must explain to your Lordships why in some cases the Government draw different conclusions from the committee. The committee made a recommendation in favour of a reduction in the number of commissioners to nine. We believe a reduction is necessary. But it would be inequitable for some member states not to be represented at all. We continue to think, and have said so in the Inter-governmental Conference, that one commissioner per member state will suffice after enlargement.
On the proliferation of specialist councils we think that, provided the Foreign Affairs Council retains its overall responsibility for the direction of Community business, specialist councils with the expertise they can bring to bear have a major contribution to make. In practice, the Council of Ministers has to be the major negotiating forum in the Community. It is, after all, dealing with decisions which have to be implemented in each member state and which are often significant legally, politically and economically. We are against everything being referred up to the highest level. But there are limits to the extent to which delegation is possible.
The Government's position on United Kingdom membership of the exchange rate mechanism of the EMS is well known. We have always said that we will join when the circumstances are right, but sterling's status as a major trading currency and the market's perception of sterling as a petro-currency pose particular problems for the mechanism. We also need to consider carefully the implications for the operation of domestic policy. We do not accept the argument that sterling's absence from the ERM is an impediment to liberalisation of the market in financial services.
The Select Committee's report draws attention to the proposals the Government have put forward for a treaty formalising co-operation in foreign policy and security. Such a treaty would play an important role in cementing the valuable practice of consultation and concertation among the ten member states. We need to move from consultation to common action wherever possible. The Inter-governmental Conference is discussing how the strengthening of political co-operation can be achieved by embodiment

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in a new treaty reflecting the fact that foreign policy is a matter for collaboration between sovereign member states and not something that lends itself to definition under the Treaty of Rome, with the problems of competence and jurisdiction that that would entail.
This debate takes place against the backdrop of the Inter-governmental Conference. European Community affairs inspire varying emotions, but confusion as to what is going on is probably the commonest reaction. This is especially true about the progress of the Inter-governmental Conference. The issues before it are complex, but they are important to the future shape of the Community.
The first session of the Conference was held on 9th September. There have been regular meetings of senior officials in a preparatory group to discuss possible amendments to the treaty, covering in particular those measures necessary to complete the common market, the role of the European Parliament, and whether to update the treaty to include specific reference to issues such as technological co-operation, which are already dealt with in the Community but to which the European Community Treaty makes no direct reference. In a separate preparatory group, political directors of member states' foreign offices are working on the text of the possible new treaty on political co-operation which I mentioned earlier.
A large number of proposals have been put forward. It is too early to judge the shape of any package that the Luxembourg presidency may try to pull together next month for presentation to the European Council in Luxembourg in December. The Treaty of Rome is not immutable. There may be cases where majority voting does not apply, and should apply. But we are not going to find it easy to improve on its authors' work. If we do, it has got to be for a purpose and not to change the rules in the hope that that alone will be enough fully to establish the common market with the enhanced opportunities for wealth creation that this will offer or create a technologically viable Europe able to compete with the United States and Japan. We have to will, and to decide on, the ends as well as the means. We will, therefore, take a view on any overall package at the end of the process on the basis of whether or not it will contribute to the practical improvements in the way the European Community works that we all seek and to the realisation of treaty objectives.
In the time we have available it is difficult to do justice to every detail of this extremely comprehensive and useful report. I hope that it will suffice at this stage to repeat my thanks to the noble Lord, Lord Kearton, and to the Select Committee for the important contribution they have made to a better understanding of the working of the European Community and for the light they have cast on the most advantageous ways in which the Community should develop. My colleagues will find it a helpful guide in the difficult discussions on the future of the European Community currently taking place at the Inter-governmental Conference.
3.40 p.m.
Lord Kennet: My Lords, may I endorse everything the Minister of State has said about what an able and useful report this is? It covers exactly what one wishes
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it to cover and was produced with admirable dispatch. The House owes the noble Lord, Lord Kearton, and his colleagues more than the usual debt of gratitude for this document.
We must also be grateful to the Government for not having dismissed it before the House had an opportunity to debate it. In these days, these little forbearances should not go without due recognition!
I regret in a way that the Labour Party has not chosen to speak in its usual place at the start of the debate, because it would have given the House up-to-date news as to whether or not the Labour Party intends to stay in the Common Market. That is something we must resign ourselves to not knowing until the end of the debate.
A noble Lord: My Lords, may I ask the noble Lord, Lord Kennet, to speak up?
Lord Kennet: My Lords, we do suffer under a permanent disability on the SDP Front Bench. It is much better in front, and it is also much better behind.
A noble Lord: I did not wish to miss anything.
Lord Kennet: My Lords, much of the report, it goes without saying, we on these Benches endorse. We endorse the reduction in the number of subject councils as clearly good, and it stands to reason that the reduction of the Commission at least to 12. if not to nine, is clearly a good thing; we endorse that strongly. We also endorse the restoration of the Commission to its proper functions under the treaty, and an adequate staff ratio. In all this I was glad to learn that the Government are in agreement with the report. That is good, and no more need be said.
I endorse strongly the requirement of the report, its request, its suggestion, urging that we join the EMS. I am sorry to hear that the Government still think the conditions are not right. What are the conditions which are not right? It cannot be anything to do with the position of sterling vis-à-vis other currencies because since the Government first said that conditions were not right sterling has been all over the place, and if none of the positions it occupied in the last three or four years was right, I should like to know what position would be.
Completing the Common Market, the by now famous and I hope soon to become more famous, list of 46 documents that a German lorry must carry to get into Italy makes the point without further argument. Nothing became the career of our late colleague the noble Lord, Lord Cockfield, in this House so well as his first reaction to being exposed to the Common Market in all its absurdities: he came forward with 300 proposals which would be required in order to complete it.
He made a good splash with that and adopted a positive stance. I regret that no more has been heard of the 300 Cockfield proposals. Assuming he is right, we have a long way to go, and I am not surprised to hear that seven years is the estimate of the Commission for how long it will take. But the point is that to get those 300 proposals it will take majority voting. The reason why this has not been completed already is that there

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has not been majority voting, or not enough. There has to be more, and the speed with which the Common Market can be completed depends on how much more majority voting there is.
My Lords, looking at the general development of this great, amazing, baffling, new institution of ours, the European Community, I find I am not among those who believe that to stand still is to go backwards. This is a widespread view on the continent. I think a period of no institutional advance is not to be regarded as a tragedy or a dead loss. There must be organic development. To force it will only produce distortion. If there is a kind of winter during which no organic development takes place, that is a pity, but let us not despair. On the other hand, winters of organic development do stimulate vision and it is to the latest winter that we owe the remarkable vision of the Spinelli Treaty.
I want to say a word of personal praise for this particular member of the European Parliament, who year after year has turned out visionary draft after visionary draft, always keeping the right distance ahead of common humanity, who pant after him achieving what they can and seldom going astray from the route he has marked out, though, of course, at nothing like his vertiginous speed. The world needs its Spinellis.
We have nothing against a new treaty. We do not demand it and think it is the only way forward, but I fear that the Government and, indeed, the Committee may have been a little insular in saying, "No new treaty whatsoever". This is a question of national traditions. It is our custom not to have a new document but to amend the old one or, if we cannot amend it, to carry on patching things up, doing things without writing them down. This is not the custom on the continent. There they proceed with carefully thought-out documents succeeding each other over decades and centuries. If they want a new treaty, I do not see why we should object unless it contains something bad. But there is no logic which says there is no need for a new treaty. We might just as well yield to their vision which says, "Since we are agreed we are going to do it, we might as well have it in a new treaty".
This arises most sharply for the British Government at present in the matter of the political co-operation machinery. If the Government are ready to have that as a new treaty and then presumably to face the swallowing-up of that treaty into a later amalgamation—as they faced the swallowing-up of the Coal and Steel Community and Euratom into the European Community, a later amalgamation or separate treaty—then why not take it on board now as an amalgamation in the form of a new treaty as soon as it is born? A lot of undue weight is being given to formalities here. It is always good to give way on formalities, especially when there are points of substance that you cannot give way on.
I strongly support the demand for deformalisation of the European Council, the meeting of Prime Ministers. It has got too grand, too formal. I commend to the House the evidence to our Select Committee of my right honourable friend Dr. Owen. He gave a sardonic account of the accretion of officials who now
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go to the European Community, which used to be a private meeting of people talking without papers, without decisions to take, to become of like mind on general questions. We should go back to Chancellor Schmidt's original vision of it. There is no reason why the supreme decision-making body should not remain the Council of Ministers, as it is under the treaty. If the Council of Ministers fail to take decisions they are in clear dereliction of their duty under the treaty, and they are in clear contradiction of political and structural common sense in insisting on passing it up to the higher level, to the European Council. But maybe there is room for a system whereby every tier in this pyramid—COREPER to subject councils, subject councils to the Council of Ministers, Council of Ministers to the European Council—should have to obtain the permission of the tier above to pass up a decision. It would be quite salutary, for instance, if the Prime Ministers refused permission to the Foreign Ministers not to decide, and if the Foreign Ministers refused the Ministers of Transport permission not to decide, and to pass it up.
Such a thing would have to be explored. Of course, you could turn the European Council into a two-tier system of its own. I do not mean in any fundamental political way, but procedurally. It could have a few meetings, not more than half a day a year, in which they took decisions, and longer, more frequent meetings in which they consulted generally in private, without officials and without papers before them.
I turn now to majority voting. Part of these reforms—this did not come clearly from the report—must be the written statement of overriding national interest. It is one thing to say that the words, "very important national interest", should give way to something a little stronger, not necessarily "supreme" but probably "vital national interest". That would be an improvement on "very important".
However, if all that we face is a change between a Minister saying that it is "very important" and a Minister saying that it is "vital", that will not take us very far. What is needed is for that Minister, that Government, to be bound to produce a written piece of paper, in advance of the occasion, stating the reasons for which they will refuse to have majority voting on a given decision. They will have to fill up one side, or two sides, of a sheet of paper—I would not be against putting a minimum length on it, as they do on exam papers, which state, "Write on at least two sides"—to be passed to colleagues saying, "This is a vital decision to my country for the following reasons" and listing them as 1, 2, 3 and 4, and publishing it. That would be the end of the story for the Government. They would have their point, and there would not be majority voting on that matter, and the other Ministers would have to lump it. But it would not be the end of the story for the development of the institutions because our national parliaments can read it, the European Parliament can read it and our peoples can read it, and form a proper, true and informed judgment on the policy of each country in this vital regard of how much democracy they are willing to accept in the council.
Turning to the Commission, I have said that we agree with our own Committee's report on this. But there is one point that goes beyond the Committee and

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which should be examined in future. It would, I believe, be a good idea. The Committee discusses whether or not the European Parliament should have a veto on the election of individual commissioners. It already has the power to dismiss individual commissioners. It comes to the conclusion that it should not—or, at any rate, should not the first time round, although it might perhaps the second time round. One sees the point of that because the first time a person is appointed the European Parliament will not know him and will not have any reason to exercise judgment. The second time around they will know him as he will have been a commissioner for four years. They will have seen him, probably once a month, during those four years, and will have an opinion on whether he deserves to continue.
I propose that we might go one stage further and say that the commissioners should be found from among the members of the European Parliament. This is not a new proposal; it has been going around. It looks a bit bold, but it would have two good effects. First, it would, in itself, strengthen the European Parliament. I am among those who believe that the Community is in desperate need of the scouring action of a bit of democracy on all the dross and incrustations that infest it. It would improve the power of the democratically elected Parliament and, at the same time, make the Commission, in a certain sense, more directly the servant of the European peoples. The trouble about the Commission is that, under the treaty, it is not anyone's servant. It is just a disembodied set of intelligences that is charged with having ideas and then seeing whether they will wash in the Council of Ministers for an outright "yes" or "no" or in the parliament for a "yes" or "no" type of advice.
Who are they, the Commission? That is a constitutional loose end. If the commissioners were elected by the European Parliament from among its own members, the analogy is clear with a national democratic civil service in a national democracy. I submit that we are unlikely to construct a European democracy that does not bear considerable resemblances to our national democracies.
This brings me to my last point. The Government say that the time for greater powers for the European Parliament has not arrived. In general, I do not think that this is true. The time for greater powers for elected people is something that those elected people must decide. It is paternalistic for others who are not members of that directly-elected parliament to judge when it is fit to be considered grown up and to be allowed to settle its own hash. I believe that it should have greater powers.
Even before that, there is something the importance of which is greatly underestimated throughout the Community—the question of the seat of the parliament. Those who have been members of it—there are plenty in the House today, I see, looking around—know what an immense burden it is on the development of European democracy that it should be stuck down there in Strasbourg. Let us think of it in national terms, the national analogy. How would British democracy have grown if the law said that the Sovereign and the Civil Service shall be in London, that the Parliament shall be in Edinburgh and shall not be allowed to meet anywhere except in Edinburgh, and
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that the Clerks of both Houses of Parliament shall have their being and their houses in Glossop? Every time that Parliament met, its own Clerks, the Committee Clerks, the Clerk of the Parliaments, Hansard writers, the transport office and everyone else would have to proceed from Glossop to Edinburgh, and the permanent secretaries from London to Edinburgh. From time to time, held on a rather short lease, the Committees of the Parliament, collecting their Clerks in Glossop on the way, would be allowed to meet for a short time in London.
We all know that the very essence of democracy is immediate communication between the legislature, the executive and the judicature. If you do not have that, you do not get democracy. You get bureaucracy, confusion and doubt. Those are precisely the factors that now disfigure the European Community. Lastly, I believe that the new treaty, or a new treaty, or an amendment of the old treaty, should not only say that there will be a uniform electoral system but that that uniform electoral system will be adopted by 1989. Democracy (surprise, surprise!) is the answer in this great bureaucracy, as in others.
3.57 p.m.
Baroness Elles: My Lords, first, I owe an apology to the House. I will not be able to stay to the end of the debate. For one of the reasons that the noble Lord, Lord Kennet, adumbrated, I have to take the plane to Strasbourg tonight—there are not many of them—for a meeting tomorrow morning at 9 o'clock during the parliamentary session. I apologise therefore to noble Lords, especially those who are taking part in the debate. I should like to join previous speakers in congratulating the European Communities Select Committee of your Lordships' House on producing what is a most valuable and far-reaching report. The noble Baroness, Lady Llewelyn-Davies, as chairman of the Committee and the noble Lord, Lord Kearton, chairman of the sub-committee, will know how enormously the reports from that Committee are appreciated not only by your Lordships but throughout all the institutions of the European Community including, if I may say so, the somewhat maligned members of the European Parliament as well as the nine other Governments of the member states and of the two other member states as from 1st January 1986. The report has been welcomed and has been read with the greatest of interest. I welcome very much this opportunity to say a few words on the subject.
I should like, first, to comment on the meaning attributed to European union. The introduction to the report states that European union is about
"how best to realise the aims of the Community so that its future and its continuing success are ensured".
This is, with respect, a somewhat minimalist approach. It is one that is certainly not shared by the vast majority of other member states throughout the Community. Of course, in today's debate, we are absolutely right to take the United Kingdom's position and the Government's position, which is well understood and which has been very clearly put forward by my noble friend Lady Young. Let us be aware, however, that there are nine other member states discussing the same problem with us. We have to be careful not to take too nationalistic an approach to

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this term. Following the speech made by my right honourable friend the Foreign Secretary in Bonn the other day—and may I say in parenthesis how I wish that it had also been made in Birmingham, Bristol and other cities of the United Kingdom—I welcome the fact that my noble friend the Minister has actually made pretty well the same statement in this regard in this House in this country. This is, I think, the first time that the Government have said in this country what they believe by European union. My right honourable friend the Foreign Secretary went a little further following the Genscher/Colombo definition. But I believe that the term implies, as my noble friend has said, both a progress towards closer union—as spelt out in the preamble to the treaty—but also an objective. To my mind, therefore, the best definition (because it was one which looked to the future and is one with which I think few would argue) was perhaps that contained in the Tindemans Report of 1975, then rhetorical and now reality.
Summarily, the objectives were and now are: a united front to the outside world in foreign policy, security, economic relations and development aid. Here, tribute should be paid to the Government for the draft treaty on European political co-operation which I know has been put forward to the inter-governmental conference. Secondly, common policies in economic and monetary matters, in industrial and agricultural sectors and in energy research and regional and social policies as well. Ten years ago those were new, but look where we are today. Ten years later we are now looking to recognise the urgent need for common co-operation in technology, environment and health matters as well. Third, in the Tindemans Report it was stated that there was the need to have institutions with the necessary powers to determine a common, coherent and all-inclusive political view, the efficiency needed for action, and the legitimacy needed for democratic control.
These sum up what 10 years ago was seen to be the vision of Europe and which, bit by bit, has been achieved in these last 10 years. It is indeed not necessary to be a federalist to support this view. While debate on terminology shows a wide gap between rhetoric and reality, the issue itself cannot and must not be ignored, recognising that Britain has a direct interest in the outcome. The Spinelli draft treaty, to which all of your Lordships have already referred, adopted by the European Parliament last year, contains this principle, but goes further. The contribution made by Mr. Spinelli and the European Parliament has provided the major basis for ongoing discussion together with the findings of the Dooge Committee, which spelt out in more discreet terms many of the ideas contained in Spinelli. Both documents express the need for action and highlight by their proposals existing difficulties and blocks in the decision-making process, implicitly recognising that failure to adopt new policies will contribute to a decline of economic and social prosperity of the European Community.
I know that there are some views as to how Governments implement treaties, and these must be taken into account if one is considering a new draft treaty. The United Kingdom has always honourably
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inplemented every treaty that it has ratified. If it is not a tactless remark to make in your Lordships' House, the same is not true of all other governments; and we have to bear this in mind.
The Commission's carefully spelt out proposals for the completion of the internal market by 1992, as your Lordships will know, drafted by my noble friend Lord Cockfield and broadly supported by the Government, would bring a saving to industry on Commission calculations of something like £8 billion a year lost by formalities at inter-Community frontiers, plus another one or two billion pounds for delays. Since 45 per cent, of British exports go to other European Community countries, our own industries are also losing millions of pounds a year. It is therefore of direct interest to the United Kingdom to support these proposals totally.
The technological Europe—which was also referred to in the Dooge Report—is essential if the gap between Japan, the United States and ourselves (and by "ourselves" I mean Europe) is not closed, and we are already 10 years behind.
Esprit, a common Community programme, has allocated over 100 projects to the United Kingdom this year within a totality of over 400 projects. Here again is direct proof that we are talking not only about ideals and future prospects: we are talking about the realities of today for the citizens both of Britain and other member states of the Community. Surely this is an area which must be more closely co-ordinated. But these policies cannot be achieved if the institutions, whose task it is to make the relevant decisions, are incompetent, inefficient or undemocratic and do not represent the interests of the people affected.
I checked today—indeed, the services of the Commission kindly counted them up for me—and as at 1st June, 1985, there are 763 draft proposals before the Council. Some may not be important; but some are. Only recently the directive on architects was adopted after 17 years, the one on pharmacists after 16 years; and yet these draft decisions directly affect businesses and individuals throughout the Community. I can give one example. We all know about the draft directive known as the Vredeling directive. Businesses are still asking: what is happening? Are we going to be affected? Is it going to be adopted? Is it going to be amended? If your Lordships, and indeed another place, ran the business of legislation in this way, I think all governments would be turned out immediately—and rightly. Consequently, vast numbers of people throughout the Community are kept in suspense because of inefficiency or unwillingness to come to an agreement. Therefore, if for no other reason—and there were many other reasons adumbrated in the report before your Lordships' House—the decision-making process needs serious reform.
First, I believe that draft proposals should not remain undecided longer than an agreed time; possibly two years after the European Parliament's opinion has been received. A time limit would impose either a negative or a positive decision. Updating of the treaty to make certain provisions, notably Articles 57(2), 99, and 100 of the Treaty of Rome, subject to majority rather than unanimous vote might cosmetically improve the situation. But many of the proposals for the formation of an internal market, and which are

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waiting for decision, could be decided now by majority vote if the threat of veto did not undermine the decision-making process. All governments appear to be agreed that the veto should, first, be retained for vital national interests. I think here that my noble friend referred to "very important" national interests but I hope eventually that the Government might be prepared to amend this to the word "vital". Secondly, they agree that they must be modified so that the threat of its use does not impede progress. It may be that a simple alteration of the Council's internal rules of procedure could deal with that matter, imposing written and public justification where a member state wishes to apply the veto. A gentleman's agreement, though pleasant sounding and in accordance with the traditions of this Government, would not, I believe, be in the interests of any government, all of which, after all, are subject to their own national parliamentary control, when a Minister, on return to his own national parliament, could only refer to an agreement as the reason why he did not apply the veto on a matter on which there may have been sustained propaganda by narrow sectoral interests. I therefore think that however nice a gentleman's agreement sounds, it would not be effective in removing the threat of a veto hanging over what could normally be a majority decision.
Those who are aware that I am a member of the European Parliament will not be surprised that I have a few comments to make about the somewhat Luddite and anti-democratic attitude as to the future and increased powers of the European Parliament in the legislative process. This is clearly one matter on which the European Parliament feels most strongly, rightly and understandably. Having for years watched the delays and procrastinations of the Council for good or bad reason, but having direct adverse effect on our constituents, it is no longer tolerable for European Parliament members to spend hours, days, or months, amending draft legislation but to have no further right to intervene in the legislative process and to have their amendments overwritten, rejected or ignored by the Council of Ministers.
There are proposals before the inter-governmental conference, I believe, from the French Government and from the Commission, as well as from other sources. Her Majesty' Government are asked to recognise the unacceptability to the European Parliament and the possible consequences if some positive consideration is not given to the legitimate demands of the European Parliament. I do not ask for the final decision but I think that the position is intolerable to a democratically elected parliament. We are responsible to our constituents in exactly the same way as those in another place are responsible to the same constituents; we are elected by the same people and we have to answer to them. I am not issuing a threat—far be it from me to do so—but I think that Her Majesty's Government should be aware of the very strong feeling which will turn against this Government in particular if it is shown that we are the country which has denied the European Parliament at least some advance in the legislative process.
I should like to deal with the budget issue. If the European Parliament had not rejected the budget in 1979, the common agricultural policy may well have
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taken 81.5 per cent. of the budget, as it did in 1978. The fact is that the budget was rejected at that time and pressure was put on the Council. This is of course the Parliament's view; I accept that it may not be the Council's view. Something like 65 per cent. is spent on agriculture and there is increased social fund spending of 35 per cent., which again is of direct benefit to the United Kingdom.
Who can respect an organisation, an institution, such as the Council, which last year dared to present a budget for 10 months when I think we all know that, after all, the year consists of 12 months? That was the 1985 draft budget. The 1986 draft budget contains proposals for 10 member states and totally ignores the fact that, as from 1st January 1986, there will be 12 member states. It is clearly quite impossible for a parliament—which at least expects to be taken seriously by the Council of Ministers if by no one else—to be presented with a draft budget of this magnitude and these characteristics.
The European Parliament is not irresponsible if it is taken seriously. I would say the same for the seal of the parliament. The noble Lord, Lord Kennet, has more than fully explained the difficulties under which members of the European Parliament work. Under the treaty, governments are meant to decide where the seat of the parliament should be. However, the present situation with at least three working places is a recipe for inefficiency, expense, exhaustion and divisiveness between both the parliament and the other institutions with which it is expected to work efficiently. Therefore, at the end of the day I think that the parliament will probably take its own decision as to where its working place should be. As we well know, it is only the temporary that lasts, and we temporarily find our working seat in one place and hope to stay there until member states have finally recognised that we have actually come.
The European Parliament has of course also been the recipient of tens if not hundreds of petitions from individuals and groups claiming to have had their rights, which are established under Community law, violated by member states' governments, their agencies or European Community agencies. I mention this because I do not think it was dwelt on in the report on European union, but it is a matter which I believe is of vital importance for the role of the European Parliament in protecting the citizens whom we represent against violations of their rights under community law. We should certainly like governments to recognise the right of the European Parliament to investigate those matters which concern Community law. It may be that these issues could be resolved by an inter-institutional agreement and not at this stage by a new treaty. But I thought it right to inform your Lordships of the views and opinions of a large majority of the European Parliament.
The success of the inter-governmental conference is of deepest concern to us all. We do not want to see a two-speed Europe encouraged and enhanced. After all, the United Kingdom already has derogations on lorry weights and on clawbacks for the sale of lamb, and I believe—and it is a belief that is shared by many in this House, and by leading businesses and industrial organisations—that it is shameful and harmful for our businesses and for commerce in this country that we

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are not members of the exchange rate mechanism. It cannot make sense that, when eight out of 10 of our largest export markets are member states of the Community, we are the only country which has a floating exchange rate. I do not pretend to be a major economist; but there are enough economists in your Lordships' House who I am sure would tell me that to have one country with a floating exchange rate against all the others which have exchange rates which remain stable in relation to each other simply cannot be for the benefit of our businesses or our industry.
I would very much hope that—I was about to say at the end of the day but I hope it will be at the end of this year—the Government will see their way, regardless of the fact that it is a petrocurrency, regardless of the fact that they have never found the time right, to be able to be part of the exchange rate mechanism of the EMS.
In conclusion, there are many issues before Her Majesty's Government at the inter-governmental conference. We wish to assure Her Majesty's Government of our firm and loyal support for a successful and positive outcome of these meetings, knowing that if substantive measures are taken to make progress along the road of European union, it will be for the prosperity and security of United Kingdom citizens, who will be the main beneficiaries of the decisions which we hope Her Majesty's Government will take.

Civil Disorders
4.15 p.m.
The Parliamentary Under-Secretary of State, Home Office (Lord Glenarthur): My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Home Secretary. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a Statement on the recent serious disorders. In the past six weeks there have been three serious riots; in the Lozells Road area of Birmingham, in Brixton, and at the Broadwater Farm Estate in Tottenham. Four people have died, one a police constable who was savagely killed. There have also been disorders in Liverpool, Leicester and Peckham in South London. Many police officers and others were injured. There were appalling attacks on the police with petrol bombs and other missiles, and particularly in Birmingham and Brixton there was extensive looting and attacks on shops and cars.
"My Speaker, all responsible members of our society will condemn the disgraceful criminal behaviour which has occurred. All responsible members of our society will applaud the courage and dedication of the police in doing their job of maintaining and restoring order in the streets and on the housing estates of our major cities. Public order is essential for the maintenance of a civilised way of Ufe and for the safety of individual citizens. On that there can be no compromise. So far 700 people have been charged with offences arising from these disorders.
"The riot in Brixton was triggered by the tragic shooting of Mrs. Groce, and the riot in Tottenham
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followed the death of Mrs. Jarrett after a search had been made at her home. These police operations are being investigated by senior officers from other police forces under the supervision of the independent Police Complaints Authority. These arrangements will ensure that they are fully investigated and that any necessary action is taken as a result. In the case of the Lozells Road riot, the Chief Constable of the West Midlands is preparing a report which will be published. Her Majesty's Inspector of Constabulary is being associated closely with the preparation of this report.
"So far as police operations are concerned, though the other disorders were serious enough, the riot at Tottenham stands out for the problems it presented to the police. In that riot a police officer was killed, firearms were used and the police had to face a ferocious barrage of petrol bombs and other missiles. The design of housing estates like that at Tottenham poses particular difficulties in such circumstances. The Metropolitan Police Commissioner is urgently reviewing the tactics of the force on such occasions. There must be no "no go" areas in any of our cities.
"The riot at Tottenham was the first occasion in Great Britain when the chief officer of police gave authority for plastic baton rounds to be used if necessary, though in fact they were not used. Plastic baton rounds and CS gas were made available to the police in Great Britain for public order use following the riots in 1981. They may be used only in the last resort, where conventional methods of policing have been tried and failed, or must from the nature of the circumstances be unlikely to succeed if tried, and where the chief officer judges such action necessary because of the risk of loss of life, or serious injury, or widespread destruction of property. That threshold was reached at Tottenham. The commissioner had my full support in making it clear that such weapons would be deployed if similar circumstances arose in the future.
"Other matters need to be looked at in the light of police experience in these disorders. The defensive equipment introduced in recent years—helmets, shields and protective overalls—proved its worth. Without it there would have been more serious casualties. The Metropolitan Police are acquiring more shields and other defensive equipment. It is also right to consider whether any further equipment is required, and this is being done. Similarly, there may be lessons to be learned in relation to police training and deployment. The commissioner is pursuing these matters and I am in close touch with him. I shall ensure that any lessons learned are disseminated nationally.
"This Government have done more to meet the needs of the police than any in recent history. Since 1979 the Metropolitan Police has increased in strength by nearly 4,500 officers; other forces in England and Wales are stronger by a similar number. Including civilians, strength has increased by some 12,000. These figures speak for themselves. Even after a recent welcome intake of recruits the Metropolitan Police still has scope to increase strength by about 300 within its present establishment of 27,165. I support the

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commissioner in his efforts to make good this shortfall as quickly as possible.
"The force's reorganisation should, in addition, release 200 officers for operational duties; and I have authorised an increase of nearly 50 in the civil staff ceiling next year for further civilianisation. Following my predecessor's announcement in July on drugs, I have told the commissioner that I am prepared in principle to agree to an increase of 50 officers in the establishment next year, specifically to strengthen his efforts against drug trafficking.
"Taken together, these steps mean that there will be a substantial strengthening of theMetropolitan Police in the months ahead. Beyond that I have set urgent work in hand to assess where there are specific needs for further increases in the Metropolitan Police establishment. I shall consider applications from provincial police authorities on the same basis; namely, that the police should have what they need in the fight against crime.
"In recent years a great deal of effort has been put into establishing good liaison and consultation between the police and the community in inner city areas, particularly, for example, in Brixton and Handsworth. These disorders must be deeply depressing for those community leaders and police officers who have put so much effort into establishing a better understanding. But it would be wrong to assume that these efforts were misplaced. On the contrary, they must be continued and redoubled if the police are to protect and serve the community efficiently.
"More broadly, the Government will continue their strong commitment to urban regeneration. The Urban Programme has more than tripled, from £93 million in 1978–79 to £338 million in 1985–86, and there has been substantial expenditure in all the riot areas. The Department of Employment and the Manpower Services Commission are spending more than £ 100 million in the Partnership areas, and my department plans to spend some £90 million in 1985–86 through Section 11 grants. We must ensure that the very substantial sums that now go, and will continue to go, to inner city areas are spent to the best advantage and directed to the real needs of the people who live there. The city action teams have been set up to improve the co-ordination and targeting of Government programmes in the Partnership areas. We shall do everything possible to ensure that our objectives in the inner city areas are achieved.
"These disorders are shocking events. It is of paramount interest to us all, young and old, people of all ethnic backgrounds, that public order should be maintained. I acknowledge the social problems which exist in these areas, but it is no solution to loot and burn shops which serve the area, or to attack the police. Mob violence must be dealt with firmly and effectively and criminal acts punished according to the criminal law. The police should have the support of all of us in striving to maintain order and uphold the law. It is their first priority. It is the Government's also".
My Lords, that concludes the Statement.
4.24 p.m.
Lord Mishcon: My Lords, the House will be grateful to the Minister for repeating a very serious Statement on very serious matters which was made by his right honourable friend the Home Secretary in another place. There are three matters which I want at once to emphasise are matters in common between these two Front Benches and I imagine are shared in common in all quarters of your Lordships' House. The first is to express sympathy for the victims of these disorders, whether they be police or whether they be civilians. The second is to condemn, as I do in a forthright, unequivocal manner from this Front Bench, murder, violence, arson, riot, and looting. The third thing is general support for the police and other services in their unenviable task in facing an unwelcome new chapter in the history of our inner city areas
Having said that, there must be equal condemnation, or at least equal concern, if there be any attempt to turn our great police force into a quasi-military force. I noted in the Statement a reference to certain matters. I shall only say, briefly, let us go a little carefully before assenting to plastic baton rounds and CS gas, and other measures, even when they are stated to be weapons of last resort.
When talking of the police force I must say that I am a little confused. I read—as possibly some Members of your Lordships' House heard—the statement made by the Prime Minister to great applause at the Conservative Party conference. She offered a blank cheque to the Metropolitan Police Force in manpower and equipment. The new Secretary of State hastily got hold of that cheque and filled in the figures before he himself saw the Metropolitan Commissioner. He asked for greater manpower immediately. The Home Secretary did not issue that blank cheque; as I said, he had already filled in some figures, and those are the figures which occur in the Statement but with which the commissioner, as I understand it, is certainly not himself content.
There is great concern, and I believe there is no point in any of us trying to hide the fact, at what would appear to be—I underline the word "appear" on purpose—tragic and expensive blunders of the police immediately prior to the disastrous events which occurred at Brixton and Tottenham. I mention this matter only because the Statement again refers to the internal inquiry which is being made by various chief constables of different areas and under the aegis of the complaints authority.
I say deliberately from these Benches that if anything ever called out for a judicial inquiry it is the events chronicled in the Statement made to your Lordships this afternoon. Those who are very much interested in race relations want it, require it, and are entitled to it. I believe that all of us are interested in seeing that if mistakes are made by us nationally they are seen to be frankly faced so that we can avoid them in the future. From this Front Bench I call for that judicial inquiry to be made.
Lastly, may I briefly talk about causes—not causes which justify (I repeat that) riots, violence, murder, arson, looting, but causes which have to be looked at if one is taking into account some of the black youths and white youths who were engaged in these riots,

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some of us may think, misguidedly. The Home Secretary first saw fit to blame the whole of these matters on what he described as criminality. Then, and I pay him due credit for this, he thought again. In a speech last Friday in speaking about these disaffected young blacks he referred to them as the "tinder which caught fire in the recent incidents". One cannot leave tinder lying about in inflammable areas. It is the duty of Government to see to that. There are issues of unemployment, housing, racial discrimination and decayed inner city areas. We all know about them.
In conclusion, I merely ask a question that is based upon an article that I read in today's Times headed
"Hurd devising new strategy for inner city action"
In the course of that article an interesting comment is made by the political correspondent of The Times:
"A meeting of ministers last week concluded that the present system of co-ordination, a Cabinet sub-committee chaired by Lord Young, needed to be revamped to give particular emphasis to the difficulties faced by disaffected young blacks".
The article continued later:
"Mr. Hurd is to draft a minute for Mrs. Margaret Thatcher in which he will suggest that the Home Office, the Department of Education, the Department of Health and Social Security need stronger representation".
I ask the question: is that true?
4.32 p.m.
Baroness Seear: My Lords, we from these Benches wish also to thank the Minister for repeating this lamentable Statement. Of course, we agree with the noble Lord, Lord Mishcon, in extending our sympathy to those who have been injured, whoever they may be, and in deploring totally and absolutely violence, arson and rioting, as has been said already. But, like the noble Lord, Lord Mishcon, one must also make it absolutely clear where we stand in relation to violence. I ask the noble Lord the Minister to make clear that the inquiry which is being made into what has happened from the point of view of the police will be an inquiry which will be thorough and that there will be no conceivable cover up, and that it will be made absolutely clear to the country as a whole that there is no cover up.
We have to face the fact that in these communities the relations between the police and the local community has deteriorated to a lamentable point. Whoever is to blame for this, whatever the reason, that fact is a fact of cardinal importance. The noble and learned Lord, Lord Scarman, pointed out the importance of these relationships when he made his inquiry into the Brixton riots in 1981. We can only say on the evidence that, despite the genuine efforts that have been made by the police—and we applaud them—they have not been successful. Therefore, it is essential to fall over backwards to reassure local communities that are already disaffected, and those who may easily sympathise with them although at present they do not go along with them, that the actions of the police are open to investigation as is the action of any other person in this country.
I should like to say a little more about causes. Of course, it is right that in this Statement the emphasis has been put on the damage, the violence and the position of the police and the need for support for the
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police. But it is also surely clear that these issues are symptoms of problems which we have not solved. This rioting was not only by young blacks; there was rioting by young whites as well. That points to a wider and even more difficult problem than the problem of the young blacks. It is a problem of the failure of the youngsters to respond to the school system. This is a huge question in itself. They have contracted out of what the education system is able to offer. Why? We do not know the answer. Of course, it is a problem of unemployment. Surely this emphasises again and again that now is the time to put money into the inner cities in a way which creates jobs for these youngsters. The unemployment rate among the under-25s all over the country is appalling, and it is particularly appalling in inner city areas. This must be a matter of the very highest priority.
While the unemployment of the young whites is deplorable, the unemployment among the young blacks is a total disaster. Again we have not conquered that problem and, despite determined efforts on the part of a great many people, including those on the Government Benches, we have not even begun to tackle it.
There are one or two particular points. We know that in the youth training scheme, not as a result of intention on anybody's part, the extent of participation among young blacks is less than it should be. As a matter of urgency can we not try to understand why this is so and, if we cannot, try to raise greatly the participation of young blacks in that scheme for youngsters from 16 to 18? After all, that is the crucial age group in the troubles in these centres.
Similarly it has been said that the Government are considering contract compliance. If this is true, in my view it is a positive step that might help greatly with the unemployment problem as it affects young blacks. But these recent events must underline the fact that our present policies are not working and that in the inner city centres something far more determined, far more drastic, is needed if these riots are not to be repeated.
4.38 p.m.
Lord Glenarthur: My Lords, I am grateful both to the noble Lord, Lord Mishcon, and to the noble Baroness, Lady Seear, for their expressions of sympathy both to the police and to the victims in these terrible circumstances. I am also grateful for their round condemnation of the kind of action which has been taken by those who employ violence such as we have seen.
Perhaps I can deal first with some points raised by the noble Lord, Lord Mishcon, who was concerned that we were marching towards a quasi-military force in the police. There is no question of his fears being realised. There is no question of the police becoming a permanently armed force. There are considerable objections to arming the police as a matter of course. The main objection is the belief that if it were known that the police always carried firearms and were prepared to use them, the ordinary criminal would be more likely to arm himself. The result might be the shooting of more policemen and perhaps other innocent people and a general escalation in armed

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crime and violence. That is something we certainly do not want to see.
The Government believe that the advantage lies in seeking to preserve law and order as far as possible by traditional methods of policing. This is a view which the noble Lord will know is shared by all chief officers of police. The noble Lord urges caution in the use, for example, of plastic baton rounds. Yes, of course, but then they have the reassurance which my right honourable friend has given that they will have the protection they need to carry out their difficult tasks. That is something which cannot be denied them.
The noble Lord expressed concern because he felt that there was disparity between what my right honourable friend the Prime Minister had said and what had been said by my right honourable friend the Home Secretary. I think that when I repeated the Statement, I made clear that the application for provincial authorities in the same way as the metropolitan authority would be considered on the same basis; namely that,
"the police should have what they need in their fight against crime".
It is true that the commissioner expressed a view that an establishment increase of the order of 3,500 is needed in the median term and my right honourable friend has stated that we shall be examining the case for an increase in the coming months while the force is recruiting up to its present authorised establishment. Of course it is important that the issue is fully examined and that is what is now being done.
On the question of a judicial inquiry, I do not share the noble Lord's view, although I understand the force of his arguments. A judicial inquiry would cut across the investigations which are already in train. It could prejudice any criminal or disciplinary proceedings which might flow from the investigations being conducted under the supervision of the Police Complaints Authority. The wider aspects of police community relations have already been well explored and it is difficult to see how an inquiry would really carry matters further forward. Police equipment and tactics are matters which need to be looked at by those with operational experience and expertise rather than by a judicial inquiry. That is why we do not see that any useful purpose would be served by an inquiry in the form that the noble Lord suggests.
On the question of the inquiries that are being conducted, perhaps I may say to the noble Lord that the investigations are indeed being carried out by police investigators. In the cases of Mrs. Groce and Mrs. Jarrett, they are being carried out by assistant chief constables from provincial forces but under the supervision of members of the Police Complaints Authority. Authority members are of course wholly independent of the police: by law, no person who has even been a police officer may be a member of the authority. They have the power to approve or disapprove the appointment of the investigating officer and to give directions during the course of the inquiry.
In regard to both Mrs. Groce and Mrs. Jarrett, a member of the authority has been closely involved within a few hours of the events occurring and has been in close contact with the investigating officer ever since. They are there to ensure that there can be the
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public confidence for which the noble Lord is asking in the ways that these important cases are investigated but they will not, by their presence, inhibit subsequent proceedings if they should be appropriate. The Birmingham report will be published, and the Police Complaints Authority will be publishing a report in due course.
On the question of the article in today's Times, to which the noble Lord referred, of course the causes of disturbances such as these are complex. It is essential that we ensure that we get full value and benefit from the money which we are spending in the inner cities—and we spend a great deal of it—and that we see that it is properly aimed at the real, underlying problems which concern both the noble Baroness, Lady Seear, and the noble Lord opposite. It may be that the existing arrangements for doing this are capable of further improvement. This is being actively considered, although I do not think it would be proper for me to go into the exact mechanism in the speculative way in which the newspapers have suggested it.
The noble Baroness, Lady Seear, did not want to see any cover up in the inquiries. Of course there will be no cover up. That is why the publishing of both the report of the Police Complaints Authority and the other report to which I referred will take place. The noble Baroness expressed the view that of course whites as well as black people were involved in the riots, particularly in Handsworth and Brixton. She is quite right in saying that. Twenty nine per cent.—in fact, nearly 30 per cent.—of those charged in connection with Handsworth were white, and nearly 35 per cent. at Brixton, which I think adds weight to the remarks that the noble Baroness made.
While again understanding the complexity of the social issues, education, employment and so on. which the noble Baroness put forward, I simply cannot believe, and neither do I think would any of my noble friends, that they provide any excuse for the terrible violence which has besieged various parts of this country in the course of the past few weeks. No amount of social difficulty can provide an excuse for that kind of occurrence.
The noble Baroness asked about the YTS. She suggested that more money ought to be put into the inner cities to create jobs and that in connection with the YTS the participation of younger blacks is lower than it should be. Perhaps I may simply tell her that the Government are extending the YTS to two years and are doubling the number of places offered under the communities programme. I know that my noble friend Lord Young is conscious of the need to ensure that these programmes are well targeted in the inner cities and that that problem of low take-up among certain groups is redressed and overcome. Thus the matter is certainly being looked at.
On the question of contract compliance, perhaps I may simply emphasise two points. First, the Government are firmly committed to equality of opportunity in employment and totally opposed to racial discrimination. Secondly, we believe that individuals should be employed or promoted on their merits and not because of their racial or ethnic origins.

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I think that I have covered most of the points raised by those on the Benches opposite. I shall study their remarks with care and reply to any others that I have not answered.
4.45 p.m.
Baroness Fisher of Rednal: My Lords, for a period of six years I served as a representative of the Handsworth area on the Birmingham City Council. I know the area particularly well. During the period that I have been away from that area, which is now about 15 years, one has seen the whole area sliding down a very slippery slope. One is amazed because the Birmingham City Council has been putting a great deal of money into the Handsworth area. It has also set up its own inquiry as a city council under the eminent barrister Julius Silverman, an ex-Member of the other place.
The difficulties are confounded in as much as that in the area, there is the metropolitan council as well as the Birmingham city council. While the metropolitan authority is dealing with the police inquiry, the city itself feels that it ought to have its own inquiry, which is now taking place and which of course will be published.
However, this afternoon we have heard about the difficult role of the police. That role will continue to be difficult unless we do something to prevent further riots of this nature. I think one must face up to this. If noble Lords in this House were to visit the Lozells area, they would say immediately, without any discussion at all, that something must be done there; some more money must be put into that area.
The Government say that they are doing this and that for urban redevelopment, inner city partnerships. I become a little worried that while they are doing that, they are also rate capping the City of Birmingham. What they are giving with one hand, they are taking away with the other. They are taking away more in the rate capping than they are giving in urban redevelopment. How does one solve problems if the Government are trying to tackle problems in that way? We understand from the Government that it is all a case of presentation. However, presentation will not prevent riots and it will not prevent the bad feelings that arise. If noble Lords were to see the areas, they would see what I am talking about.
One out of every two males living in the particular area in Birmingham where this happened is unemployed. In view of the very large number of young people in that area with nothing to do, it is very difficult for a lot of these young people even to get on the YTS courses. The most advantage they get is in relation to the community programmes. There is a particular difficulty in that area because Handsworth has its own probation service which is run exclusively there. Practically all the community service jobs, more often than not, are taken up by the young people who are placed on probation. They are in a difficult area, and all I would say to the Government is this: make quite sure that when you are making all the inquiries you look at the amount of money you are putting into the inner cities.
There is another small point I should like to mention in conclusion. Many of the traders who lost
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their businesses in the Lozells area were small traders. They are in a very difficult situation regarding compensation. Here again they are asking that the Government come forward quickly with the necessary money, because the small businesses that were running there are really the mainstay of the local community. So may I urge the Minister to look at that particular point about paying compensation very quickly?
Lord Glenarthur: My Lords, the noble Baroness points to what she believes to be the difficulties caused by constraints on local authority spending preventing action to tackle the sort of problems she is concerned about. However, I am sure the noble Baroness will be aware that the Government give Birmingham substantial support under the Urban Programme. They allocate £25 million per annum to the Partnership and high priority is given to Handsworth, where some £20 million has been spent in the last five years.
The noble Baroness referred to the question of rate capping, but the basic block grant distribution arrangements produce a substantial redistribution of resources in favour of areas where needs are high, such as the inner cities—Handsworth being part of that—and where rateable capacity is low. I think that is a fact which is all too easily lost sight of in the perennial arguments about just how relative needs should be assessed, which affect the position only at the margin. It is the inner city authorities themselves who are opting to throw away some of this benefit by spending at levels which they know will reduce their grant entitlement and impose extra burdens on local people and businesses. Of course, the noble Baroness expresses concern, and she knows the area well, but unless the national economy thrives the inner cities certainly will never thrive. That is why it is necessary to secure a sustained national economic recovery, and that is what is being secured at the moment.
So far as the speeding up of payments under the Riot (Damages) Act is concerned, it is certainly right that those responsible for the compensation arrangements should not allow public money to be paid out without rigorous scrutiny of the claims. I am sure the noble Baroness would agree with that, but I know that those who are involved and who are dealing with the claims recognise the need to get the money to genuine claimants as quickly as possible. The receiver, who is the compensation authority in the Metropolitan Police District—that may not be part of Birmingham but certainly it is part of areas where other troubles have taken place—is making payments to applicants on their claims.
The point about the YTS which the noble Baroness raised was, I think, dealt with in the answer which I gave to the noble Baroness, Lady Seear. However, I will examine what the noble Baroness has said and if I can follow it up in writing I will do so.
Viscount Tonypandy: My Lords, before we leave this subject, may I ask the Minister whether he is aware how deeply public opinion is on his side and that of the noble Lord, Lord Mishcon, and the noble Baroness, Lady Seear, in regarding this as a national issue in which the police are our barrier for our parliamentary democracy? If the police were not there the bully boys would indeed take over. But there appear to be people

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stirring up black people, because they have a vested interest in trying to get power there. This is one new feature of our life in these islands where we rejoice in one of the most tolerant societies in the world. It is a comfort, I believe, for the British people that from both sides of the House today we have had a recognition that the police are public servants who deserve our support and our deepest gratitude.
Noble Lords: Hear, hear!
Lord Glenarthur: My Lords, I am very grateful indeed to the noble Viscount, Lord Tonypandy, for his remarks in support of the police. Of course, they deserve every word of what he said. The noble Viscount referred to those among certain parts of society who foment trouble. Extremists will seek to make political capital out of disorders of this kind. Their presence does not help, but there is no evidence that the disorders were organised in advance by external agitators. All the indications are that the disorders were local, that they were criminal and hooligan, rather than political and externally organised. With that, I can simply share entirely the noble Viscount's sentiments and agree with every word he said in support of the police.
Lord Maude of Stratford-upon-Avon: My Lords, is my noble friend aware that experience has shown that pouring very large sums of Government money into inner city areas is a very costly way of creating not very many jobs and that one of the reasons why there are not enough jobs in some of these areas is that left-wing local authorities, by the size of their industrial rate bills, have driven out of their areas the firms which used to provide employment and have deterred any fresh ones from coming in? And if the level of industrial rates is not enough to deter new firms from coming in, rioting and looting certainly is.
Lord Glenarthur: My Lords, I think my noble friend is quite right. Certainly pouring money into areas such as this is by no means the only solution. That is why the problem has to be tackled on a much wider front, in much the same way as I suggested in answer to the noble Lord, Lord Mishcon, that it was being tackled. So far as local authorities' rates bills are concerned, it is true that they do lead, or can help to lead, towards the sort of difficulties that we face. I think that my noble friend is quite right to put his finger on it.
The Lord Bishop of Manchester: My Lords, the noble Lord the Minister has made the point of the Government's commitment to equality of opportunity regardless of race in matters of employment; but some of us would value an assurance that the kind of surveys we have been seeing recently about discrimination over jobs are being taken seriously by Government, together with the enormous problems which are being faced by young blacks, in particular in inner urban areas, in obtaining employment.
There has been a general unanimity in what has been said in the debate today about the enormous pressures on the police, about the value of the police and the need to support them. But we would like also to be assured that there is a recognition of the very
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great pressures facing young people, in particular in these areas. While in no sense can the kind of behaviour which we have seen be in any way condoned, and it must be condemned from the point of view of the Christian Churches—these are sins as well as crimes—it would be very foolish for any of those who hold responsibility not to recognise that what has been happening in British cities is a sign of these very great pressures on young people in particular. I, for one, would like to be assured that there is an awareness on the part of Government that these problems must be set in their wider context and that they are prepared to review policies in general over a whole range of issues, of which unemployment is one and housing policy another.
Lord Glenarthur: My Lords, the right reverend Prelate puts his finger on one area which came out in the report on the earlier riots on which the noble and learned Lord, Lord Scarman, reported. May I say to him in relation to employment here that training and special programmes have been reviewed in the light of that report. Many relevant initiatives have been taken. Small businesses have been encouraged, there are local enterprise agencies, enterprise allowances and an expansion of the small firms service. Training has been reviewed; I referred to the new two-year YTS. There has been a vast expansion of the community programme, with £2 billion spent annually on special measures, and special consideration is given to the schemes and projects which he no doubt desires to see in inner cities. Recreation and leisure schemes are also supported under the urban programme. I think that that action indicates that we have concern in the way that he desires.
Lord Donaldson of Kingsbridge: My Lords, may I ask the noble Lord one last question? Am I right in thinking that there is a strong connection in each of the inner city areas with drug traffic, and that for unemployed people wanting to earn easy money it is a great temptation to take some money for distributing drugs? This means that the very big and powerful drug barons who are in no sense black, but are of all colours and all nations, are to some extent behind this? If the police are to make a special effort, as they are now doing, will this make the relationship with the people in the area even more difficult? Is this the true picture or an exaggerated one?
Lord Glenarthur: My Lords, it is certainly the case that the sort of things we have witnessed may be, to some extent, involved with drugs; but I think that a lot of it has to await the further inquiries which are taking place. Certainly I from this Dispatch Box, and many of my noble friends in the past and others in another place, have condemned in every way the drug barons to whom the noble Lord referred. He further knows that, all being well, it will be possible before long to introduce legislation to remove the proceeds from those who benefit from drugs. But I do not think there is any conspiracy of drug traffickers to encourage rioting as such. Riots may simply be symptoms of something else which is occurring in those areas.
Lord Mishcon: My Lords, only for the purpose of the record, I am sure the noble Lord will readily

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acknowledge that the policy in regard to drug traffickers is a universal policy of both Houses of Parliament and is not just the prerogative of one party.
Lord Glenarthur: Absolutely, my Lords. I hope that I had not indicated to the contrary.
Lord Marley: My Lords, may I ask the Minister whether any consideration has ever been given to consulting the French police, who appear to me to be very efficient at handling these matters?
Lord Glenarthur: My Lords, I must confess that I do not know whether or not any particular liaison has been made with the French, but I shall certainly ask and will let my noble friend know.

Board and Lodging Payments
5.3 p.m.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington): My Lords, with the leave of the House I shall now repeat a Statement which is being made in another place on supplementary benefit board and lodging payments.
"In April the Government took action to control rapidly increasing expenditure and to help curb abuse. Between December 1982 and December 1984 spending rose from £166 million a year to £380 million a year. At the same time, the number of boarders under 26 had more than trebled from 23,000 to around 85,000.
"Regulations were introduced which provided for the maximum weekly amounts for board and lodging to be determined by Ministers, rather than by local offices. In addition, the regulations limited the period during which certain unemployed people under 26 could be paid as boarders. There was a wide range of exemptions to protect the most vulnerable who needed to be boarders, such as families with children. The regulations were scrutinised by the Joint Committee on Statutory Instruments and debated and passed by both Houses of Parliament.
"On 31st July, after Parliament had risen, the High Court decided an application for judicial review on the regulations. Mr. Justice Mann rejected the argument that we had failed properly to consult the Social Security Advisory Committee and he also rejected the argument that the time limit of four weeks applied in this case was unreasonable. The judge did, however, find that the powers in the 1976 Supplementary Benefits Act were insufficient to make regulations enabling Ministers to determine board and lodging areas and limits.
"In other words, the judge's view was that the regulations would have been in order if they had themselves contained the board and lodging areas and limits. Mr. Justice Mann declined to make a formal order on our undertaking not to apply the time limits pending the making of new regulations or the outcome of any appeal. Immediate action was taken to put this undertaking into effect and I should
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like to pay tribute to the efforts of local office staff in carrying out this work.
"We have lodged an appeal against the judgment and arrangements have been made for an early hearing in the Court of Appeal. This will take place at the end of November. However, as Mr. Justice Mann specifically recognised, there is a need for a sensible interim operation. It is in the general interest that there should be stability during which the outcome of the appeal can be given proper consideration and the review, which we are committed to carrying out, completed.
"I have accordingly laid draft regulations today. They include temporary provisions—which will expire at the end of April 1986—to meet the judge's points. There are two important differences from the regulations passed by the House in April. First, time limits will not apply to existing boarders on benefit. They will apply only to new claimants. The second important difference is that I am also taking powers, in addition to the exemptions in the previous regulations, to exempt claimants from the time limits who would otherwise suffer exceptional hardship.
"The House will appreciate, in view of what I have said, the need to clarify the position. The regulations achieve this without in any way prejudicing the outcome of the appeal. The House will have the opportunity to discuss them when they are debated next week. We hope in this way to restrain spending, tackle abuse, but at the same time protect the interests of genuine claimants."
My Lords, that concludes the Statement.
Baroness Jeger: My Lords, I thank the Minister for repeating that Statement. I am sure your Lordships will be relieved to know that, in view of the fact that there is to be a debate next week, I do not intend to reiterate the sincere belief held by my noble friends and myself that this problem is caused by lack of employment for young people and lack of housing at affordable costs and that it is these factors that are at the heart of the problem. I shall confine myself to just a few questions.
First, I should like to ask the noble Baroness whether the review to which she referred will deal only with the time limits, or will it deal also with the amount of payments to be made and the limitation of payments? Next I have to ask whether she can make clear at what date people are to be designated as new claimants. Do they become new claimants in April, 1986, or are they new claimants as from now, in which case it would appear to contradict the fact that the judgment quashed all time limits; or is there some other explanation? If the time limits are to apply to new claimants as of now, pending the appeal, then there would seem to be some contradiction of the court's decision.
On the point of people who suffer exceptional hardship, can the noble Baroness tell us a little more about who is to decide exceptional hardship? What advice will be given to local officers? Will this include special consideration for the refugees, about which we have had some correspondence, and for people newly discharged from mental hospitals and psychiatric units

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who need support for longer than the time limits at present in force allow? Can she also say whether there will be in the review any variation of time limits as there is now in different areas? Will there be this geographical difference whereby someone can stay for two weeks in one place and for four weeks in another place? This causes a good deal of confusion and there is a lack of clarity here. Those are the main points which arise from the Statement, for which again I thank the noble Baroness the Minister.
Lord Beaumont of Whitley: My Lords, I should like to thank the noble Baroness for repeating the Statement. I am appalled by the attitude and by the tone of the two Statements that we have heard this afternoon. In both cases the Government appear to be treating with very severe arm's length disdain the fact that they themselves have caused the troubles which the community is now reaping. This was so when we were talking about the rioting; it is so when we are talking about the very real misery which is being imposed by some of these regulations on board and lodging payments which have indeed resulted in the past in suicide and a very great deal of distress.
The Statement says that the number of boarders under 26 has more than doubled from 23,000 to around 85,000, as if that were an act of God. It is not an act of God, my Lords; it is an act of this Government. The next paragraph of the Statement says that:
"The regulations were scrutinised by the Joint Committee on Statutory Instruments and debated and passed by both Houses of Parliament".
The noble Baroness will remember the debate in which your Lordships' House passed those regulations. It was one in which the noble Baroness had her baptism of fire on the Front Bench. It was most unfortunate that she had to put them forward because they were wholeheartedly condemned by every Member of your Lordships' House from every side of the Chamber.
We give the interim measures which the Government are proposing to take now a modified welcome, though I certainly wait with interest to hear the answers to the questions which the noble Baroness asked. I should like to ask a question about the review which the Statement says,
"we are committed to carrying out"
Is the review awaiting the outcome of the appeal in any sense, or is it in fact going on at the moment? Is there going to be an appeal anyway; or if the Court of Appeal reverses the judgment will there then not be a review because the Government see that there is very little to do? There is a very great deal to do.
I too will not add more to what I am saying today because there is going to be a debate on the subject which I suspect will result in a real condemnation of the insensitive and harsh measures by which this Government seek to cure the economic problems of this country by taking it out on the lives of the poorest and weakest members of the community.
5.15 p.m.
Baroness Trumpington: My Lords, I am grateful to the noble Baroness, Lady Jeger, for the brevity of her
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speech. The noble Baroness would not wish me to comment on her opening remarks. She asked about the time limits. The time limits are currently suspended. Under the new regulations the time limits will remain suspended for existing boarders. The difference is that the new boarders who become boarders after the regulation comes into force on 4th November will be subject to time limits, unless of course exempt. With regard to financial limits, they have never been suspended and continue to apply. On the Notting Hill case, which is the other case which was involved, we have not suspended the financial limits, in line with normal practice not to implement tribunal decisions pending the outcome of an appeal.
When I was answering a question from the noble Baroness, Lady Jeger, last week, I should really have said that in regard to the findings in the case the only position on which the judge did not agree with the DHSS was over the fact that it lay in the Minister's power under the regulations as they were originally put through both Houses—on neither of the other issues raised did he disagree. So there is no contradiction of the court's decision into what is happening now.
The noble Baroness asked me about refugees. Our view has always been that refugees should be among those protected by the categories originally drawn up for exemption from the time limits which apply to benefit at the boarder rate for certain unemployed young people. But I acknowledge that difficulties were being encountered initially in some cases. Instructions have just been issued to our local offices about the further changes in the arrangements concerning boarders; in particular, headquarters should be approached by telephone in any case where it appears that a refugee may not qualify for exemption. I trust that this additional safeguard will remove any remaining cause for concern on the question of time limits as they affect refugees. The noble Baroness also asked me about discretionary powers for exceptional hardship. These will be exercised by experienced people in headquarters.
The noble Lord, Lord Beaumont, painted a picture which is simply not the case. The reason why the new arrangements were brought in was that originally the maximum amounts payable for board and lodging were determined locally for each local security office. This local limits system simply reflected local patterns of charges determined by landlords without any checks on unreasonable increases. It facilitated cartel type activities by groups of proprietors and charges were being pushed up far in excess of the rate of inflation. Young people could receive large amounts of money as boarders—in some cases more than £100 a week—and this far exceeded what many of them could earn and is a considerable work disincentive. It is also much more than they would receive as householders or non-householders.
The Government recognised that the benefit system gave excessive encouragement to some people to leave home. As a consequence they became trapped in accommodation they could not afford if working. This was of no service to the taxpayer and of no service to claimants themselves. There were indications of a growing market specifically for DHSS claimants, sometimes at higher charges for people on benefits, as shown by the rapid growth in new establishments.

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Some proprietors were making very high returns on letting at the local limits.
With regard to the changes being kept under review, we have said that we will keep them under review. We realised that the measures were not the last word on the subject and so the Government are continuing closely to monitor the operation of the new rules and are undertaking further research, including a study by a firm of management consultants into the operation of the market for private and voluntary care. The result of those exercises will be considered carefully when they are completed in about six months' time, before the full review of all the limits is made next year.
With regard to suicides, the Government very much regret the recent tragic occurrences. In introducing a new board and lodging regulation, steps were taken to protect those vulnerable young people who need to be in board and lodging accommodation for more than a short time. A number of the cases brought to the Government's attention would appear to have been covered by the exemption categories had the full facts been made known to the local DHSS office. The Government introduced regulations to allow the exemption categories to be extended quickly should the need be shown. Also, the new discretionary provision should and will help. As the noble Baroness said, we shall be having a full debate on this subject next week, and so I hope that I have answered sufficient questions for the time being.
Baroness Jeger: My Lords, I apologise for speaking again but there is one point about which I am still not clear. It is one that affects very many people. The judgment was made during the Recess that the time limits should be quashed. I understand that there is to be an appeal heard at the end of November. The noble Baroness stated that after 4th November new claimants will be subjected to time limits. I understood that to be what the noble Baroness said.
Therefore, between 4th November and the date of the appeal at the end of November, surely the Government will be disobeying the order of the court? I am interested to see that the noble Baroness is shaking her head because I want to have it on the record what the case is. This point has caused much confusion.
Baroness Trumpington: My Lords, Mr. Justice Mann clearly envisaged the possibility of amending regulations and framed his judgment accordingly. It is in no one's interest that there should be uncertainty over the next month. Regulations will expire after six months—the period during which the Court of Appeal and the parties concerned will decide upon any further action any of them may wish to take. I repeat that the regulations will not affect those living in board and lodging accommodation at the time when the regulations come into force.

European Union: ECC Report
5.23 p.m.
Debate resumed.
Viscount Rochdale: My Lords, I take it that we may now return to the subject of European union. I had the
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privilege of being a member of the ad hoc committee under the skilful and very perceptive chairmanship of the noble Lord, Lord Kearton, which examined this very difficult and complex subject of European union. We greatly admired the way in which the noble Lord conducted our deliberations. I should also like to thank him for the way in which he has introduced the debate this afternoon.
One of the earliest problems we came up against in the report, and which the noble Lord himself mentioned today, was the exact definition of what was meant by European union. Every noble Lord who has spoken this afternoon mentioned that point. I shall not dilate upon it except to say that I agree with those who believe that the best definition is to be found in the words of the Treaty of Rome:
"an even closer union among the European peoples,"
With due respect to my colleagues, I believe that we dodged the issue: we did not pursue that point further. What we did was to emphasise that whatever the title and whatever its scope and competence, a major ingredient in achieving ever closer union and a really effective Community, with its potential worldwide impact, was completion of the internal market, so that it really did operate as a common market.
I agree with the importance of achieving a common market. My own limited experience, based on having been a member of a number of inquiries set up by the Select Committee covering several different issues, and of proposals which have emerged from Brussels, has led me and others to reach the rather depressing conclusion that so often, however good the various proposals were in a commercial or practical sense, they were—if I may use a colloquialism—bogged down by the lack of union and crusading fire which in the early days brought the Community—with its intended but never achieved common market—into being.
The problem of a common market, with all the various components which contribute towards it, really epitomises the lack of union; the lack of willingness of member states to give as well as to take. I conclude from this that important as the completion of the market is (and I certainly will not say that it is other than extremely important), the failure to achieve it is a symptom of a far deeper problem and not the main problem itself.
Perhaps your Lordships will allow me to cite one or two examples. I have particularly in mind an inquiry that we held earlier this Session and debated this spring; that on airline policy, where it was clear that industrial and commercial progress was all too obviously being frustrated by national political fears and interests. So much for union. Again, the inquiry of 1984 into the distribution and servicing of motor cars pointed in exactly the same direction. Indeed, the Select Committee's own report on internal markets in 1982 also pointed to the fact that it was lack of union and not necessarily the proposals themselves which posed the difficulty. Those inquiries all had the same lessons to teach.
The whole situation, as has been mentioned by the noble Lord, Lord Kearton, has changed enormously since the Community was first launched. Membership has doubled. The United Kingdom has joined with its

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very special problems. World trade patterns have changed significantly. There has been a prolonged economic crisis and recession. All of this has surely tended to make union more difficult and to encourage member states when in difficulty to draw back into their national shells.
So while the institutional framework of the Community may have been adequate in the earlier days, stimulated no doubt by the inspiration and enthusiasm of many, stemming from great expectations and the problems of history, today it can hardly be surprising that the framework is perhaps no longer adequate for the case.
Some important institutional changes and adjustments are clearly needed. It is encouraging to feel that such a need is becoming more widely recognised throughout the Community. I was very glad to hear my noble friend on the Front Bench making precisely the same point; that some adjustments were definitely needed. Had that not been so, and had that fact not been recognised, surely the draft treaty of February 1984 or the Dooge Committee could never have emerged at all. It was the recognition of need that brought them both into being.
I should now like to make three points. Firstly, I believe it would be quite wrong—and indeed ungracious to the efforts of many devoted individuals in the Commission and elsewhere—to overlook the very real successes that the Community has in fact achieved in many directions—and often, as the report points out, with very limited resources at their disposal. I hesitate to mention the subject which is to be debated later this evening but the common agricul-trual policy has been, in effect, a real success even though at the moment it has run into difficulties. But there have been other successes which need to be acknowledged; so we build on a lot of good but need change.
My second point is that I do not believe that the importance of the United Kingdom being seen today to be totally committed to the Community can be over-emphasised. However difficult some of our rather special problems in relation to the Community may sometimes appear to be, in this context—as I think has been mentioned—the Select Committee totally rejected the idea of a two-tier or two-speed Community. If that suggestion were to be pursued it would, I believe, put the United Kingdom in an impossible position and at the same time be extremely damaging to the Community as a whole.
My third point concerns the question of the treaty. I was very interested to hear what the noble Lord, Lord Kennet, had to say on that. The question we considered was whether an entirely new treaty should be considered or should the line taken be for amendments to be made to the existing treaty. I entirely agree with my colleagues on the committee that the latter course—amendments to what there is already—should be adopted, however that may best be arrived at.
I remember very clearly on one occasion when we met that a witness said to us that he had been present years ago when the original treaty was being discussed. He had first-hand experience of the problems of arriving at a treaty. The way in which he put it
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convinced me that any attempt to embark now on a totally new treaty might be expected to be long, drawn, frustrating and possibly a disruptive exercise that could well be counter-productive to the main objective of closer union. He certainly recommended otherwise. I was very impressed by that point, as I believe we all were.
I have not in my brief remarks—and I intend to be very brief—pursued some of the particular points that loomed so large in our inquiries: the use of the veto, majority voting, the Luxembourg Compromise, greater expedition in the decision-making and execution of business and the proper distribution of responsibility as between the different institutions of the Community. These are of course all immensely important matters and must be put right if the day-to-day working and the monitoring of projects, once they are in motion, are to go ahead smoothly and effectively. These are issues which I think are all covered in the recommendations in our report and with which I fully agree.
However, there is just one conclusion on which I want to say a few words: that is, paragraph 103 dealing with the European Council. As the report points out, and to use its words:
"The European Council has 'emerged'. It now has the vital role in the Community system. But it has no Treaty status."
If it really is to be,
"ultimately responsible for coordinating and directing policy".
surely, as a matter of priority, it must be brought within the treaty institution. Without it, surely the Community will be like a ship without a rudder. Might it not be that this weak link underlies so many of the problems we are here to discuss this afternoon?
5.35 p.m.
Lord Gladwyn: My Lords, I well remember during the war writing papers in the Foreign Office on the possibility of forming some kind of Western European association after it. When the war was over I even found myself soon negotiating, under the direction of Mr. Bevin, the famous Treaty of Brussels which set up what was called the Western Union, on the council of which I then represented Her Majesty's Government. After that, I actually drafted a great deal of the charter of the Council of Europe. When I arrived in Paris as ambassador I witnessed, at close range, the sad collapse of the European Defence Community which, on reflection, was no doubt too idealistic in conception. I witnessed also, with expressed dismay, our own failure to associate ourselves with the negotiations for what eventually led to the European Community.
After retirement from the Foreign Service I sat for some years on the parliamentary delegation to the Western European Union and the Council of Europe, ending, after we joined the Community, as representative of my party on the European Parliament when I became the rapporteur, at the end of 1975, of a report of European security or defence. I am still, of course, associated with the European movement. So I suppose I could say that over some 40 years I have been in the forefront of the many efforts to achieve some form of European Union. It is in the light of that experience that I venture to make a few reflections regarding the

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report now before us and on the production of which—with the possible exceptions of the paragraphs relating to the powers of Parliament—I congratulate the authors most sincerely.
Well, over all these years, although I may have changed my mind in certain minor respects, I have consistently held to one principle: that it is no use—indeed, it is positively counter-productive—to propose the constitution in this part of the world of a federation in the usual sense of that term; namely, a union with a directly-elected president, a sovereign parliament, federal armed forces, a federal police and a federal foreign service under a federal Minister of foreign affairs.
Federations of this type have been formed elsewhere, of course, notably in the United States of America, and have functioned satisfactorily. However, the 13 original American colonies had a common language, religion, law, history and social practices. In Western Europe these conditions, or anything like them, do not exist. So a federal union in this part of Europe of the type described is almost inconceivable. It might possibly be considered by some of the democracies concerned—notably the Italian—but if it or anything like it actually came before the various parliaments for ratification it would, I feel sure, certainly be rejected by the majority of them.
Wherein, then, does the unifying principle lie, the adoption of which will result in that closer European union which in the opinion of, I think, most Members of this House is essential if we are not, individually, to sink into the position of impoverished client states of one or other of the super powers? It lies, as we all know, in the acceptance by all concerned of certain supra-national obligations involving the taking by a Council of Ministers, usually by a qualified majority vote, of decisions on the recommendations of an independent commission—the brilliant notion which Jean Monnet succeeded in grafting into the Treaties of Rome—all with the advice and, increasingly, the consent of a directly-elected European Parliament.
There is no reason why this genial conception should not have worked reasonably well and have resulted by now in a Community which, though necessarily less effective than a full-blown federation, would have been an economic entity capable as such of playing a role in the world not much less significant than those of the super powers. The reason why as yet it has not so resulted is very simple, in my humble opinion. It lies in the adoption in 1966, at the instance of General de Gaulle, of the so-called Luxembourg Compromise, which, I think cannot be denied, permitted and indeed encouraged the indiscriminate use or threat of the famous "veto" and which has thus seriously delayed the general progress of the European idea. At last, after 20 years, no doubt with the prospective arrival of Spain and Portugal, this truth is largely accepted and a drastic revision of the so-called Luxembourg Compromise is thus perhaps the principal recommendation of the sub-committee which we are now considering.
It is also in effect the chief recommendation of the admirable, as I think, Dooge Report, the full text of
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which has happily been produced by the committee, though of course both the Dooge Committee report and our report which we are now considering to some extent have been overtaken by events, owing to the progress of the negotiations now going on for a European Union. Though the committee does not say so, it would seem that, with a couple of exceptions that I shall refer to later, it approves of the Dooge Committee as a whole. I speak subject to correction, but that seems to emerge from the report. Certainly Dooge's proposals, in my own view, offer far better grounds for advance than those contained in the draft treaty, approved by a considerable majority of the European Parliament at the instance of its originator, Mr. Spinelli, which even if approved by all the parliaments, I feel could hardly function without the application of further frankly federal measures.
However, the Spinelli report contains some interesting ideas; for instance, the distinction between "common action" and "co-operation", and I am a little surprised that such short shrift was given to it in the report that we are now considering. But even Spinelli contemplates, for a provisional period of 10 years, some sort of national veto. So let us get back to what is that essential point.
It looks as if (Spinelli excepted) we were confronted by three different proposals for reform. First, there is the Select Committee's conclusion that,
"a Member State should be entitled to invoke only a vital national interest"—
and "vital" is underlined, which must only be used in the most exceptional circumstances; and that,
"the Head of State or Government must explain to his colleagues on the European Council why such an interest is at stake".
Next, there is the opinion of the majority of the members of the Dooge Committee; namely, that,
"decision (in the Council) must be taken by a qualified or a simple majority. Unanimity will still be required in certain exceptional cases … the list of such cases being restrictive"—
I am not quite sure what is meant by that.
"The Presidency must call a vote if the Commission or their Member States so request. The vote must be taken within thirty days".
Finally, in the Dooge Committee a minority, consisting of the representatives of the United Kingdom, Denmark and Greece, think that,
"more use will need to be made … of the majority voting provisions of the treaty",
and that, after a reasonable time,
"the President should call for a vote",
but that—and this is the crucial point—
"when a Member State considers that its very important"—
that is my emphasis—
"interests are at stake, discussion should continue until unanimous agreement is reached".
If I heard aright the noble Baroness, Lady Young, I think that is a formula which is accepted now by Her Majesty's Government.
It will be seen that the most radical proposal is probably that of the majority of the Dooge Committee, the next most radical proposal is that of the Select Committee, and the least radical, which really does not depart very much from the Luxembourg Compromise, is that supported by Mr. Rifkind with the not unexpected support of Denmark

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and Greece, neither of which states has shown any enthusiasm for the idea of any meaningful European Union at all.
I do not know how many of your Lordships will be prepared to accept the formula proposed by the majority of the Dooge Committee which I have read out. I need hardly say that I myself have accepted it, along with many committed Europeans in this country I believe, but if it should not be acceptable to the Government, then at least I hope that on consideration and in accordance with what I hope will also be the majority in this House they will prefer the proposals of the Select Committee to that which they presumably instructed Mr. Rifkind in the recent negotiations to plump for. Cannot they possibly have a change of heart?
I have one further general observation to make which concerns European defence—or security, which perhaps is a word more palatable to some people. The whole of Section C in Part II of the Dooge Com-mittee's report—which, incidentally, except as regards the veto, unless I am wrong appears to have been approved by Mr. Rifkind—is devoted to political co-operation, in which defence necessarily plays an important, and indeed an essential part. However, unless I am wrong, it is not referred to at all again in the Select Committee's report, apparently on the grounds that defence, or security, is not covered by the treaties. Of course it is not, but it is or should be part and parcel of the machinery of political co-operation which has now been functioning for many years. In practice it cannot be totally differentiated from the machinery set up under the Treaty of Rome. Consequently, I shall only ask whether Section C of the Dooge Report, which happily embodies various proposals made as long ago as 1975 in a resolution which, with great difficulty, I myself managed to get through the European Parliament, is now broadly acceptable to Her Majesty's Government? I suppose it is, but I should like it confirmed.
A second question follows. Even if such proposals are not accepted by certain other members of the Community—and how could they possibly be accepted by Ireland, which is officially neutral?—would we be prepared to see them accepted and applied by such members of the Community as are prepared to do so? So far as political co-operation is concerned, it is evident that this would result in a sort of two-tier Europe; but why not? The arguments against a two-tier Europe advanced by the committee in respect of the machinery of the EC itself are no doubt valid, and I would not dispute them, but there is no apparent reason why decisions taken in the vital realm of defence outside the treaty should necessarily apply to members who, for one reason or another, cannot accept them. After all, they only need to abstain. Surely, if the veto of a small country such as Denmark is to apply in this highly important and vital sphere, the whole future progress of the projected Union on the political side will be vitiated?
There is, of course, still a general danger. I suppose it is possible that what might be called the "core" of the EC—namely, Germany, France, Italy and the Low Countries—may decide to go ahead on the basis, not so much of Dooge as of some more federal plan, which is perhaps not very different from the essential points
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made by Spinelli. If this were to happen, then I repeat that I agree with the sub-committee. Since I do not think our Parliament would approve of any federal plan, a two-tier EC, as I have already said, would be unlikely or even impossible to work in that respect. Perhaps if the Government see fit to accept the Dooge proposal on majority voting, the danger, which is a real one, might be averted. Therefore, I finally ask the Government whether they think that there is any foundation for such apprehensions as these?
I said at the beginning of my remarks that there were two points on which apparently Mr. Rifkind differed from his colleagues. The first was on decision-making, which I have already dealt with. The second was on the power of the parliament. I very much hope that the Government will eventually rally to the proposals of the majority of the Dooge Committee in this respect also. The difference between what Mr. Rifkind was suggesting at the instance of the Government and what the Dooge Committee report suggested, if read with attention, did not seem to me to be totally irreconcilable. I have no doubt that if the Government went as far as that it might again help to avert the danger of a split in the EC, which would clearly be a disaster for all concerned. I wonder whether the noble Baroness when she winds up the debate will be able to deal with this point also.
5.50 p.m.
Lord Rodney: My Lords, I start by congratulating the noble Lord, Lord Kearton, on his excellent speech, which gave an admirable resumé of our report. I should also like to compliment him on the expert way in which he directed our inquiries in the subcommittee.
The European Community is a ready target for the media. It is all too easy to point to its shortcomings, but, regrettably, the advances that have been made and the advantages that derive from membership are seldom newsworthy. It has to be admitted that in recent years progress along the road to implementing the Treaty of Rome has been painfully slow. But is it not remarkable that politically we now have a situation in Western Europe where conflict among the countries of that area is unthinkable, whereas only some 40 years ago we were emerging from the most horrendous world war that mankind had ever known and in which the majority of the protagonists were those very same countries?
Then again on the economic front all customs duties for the six founder members were abolished in 1968, and the same process is applied to all new members within three or four years of their joining the Community. In conjunction with that a common external tariff for imports has been established for all members, thus forming the basis for the largest single market in the world. We can add to that the magnificent strides which were made up to 1973, with an increase in internal trade of some 600 per cent, whereas world trade for the same period grew by only 250 per cent.
It cannot be denied that initially significant progress was made, but that is where the good news ends. Since then the internal market has, if anything, declined. There has been a logjam of proposals submitted by the Commission to the Council of Ministers, and

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indecision and disenchantment have replaced the original enthusiasm. There is no doubt that the world recession has played a large part in the stagnation which set in, but it went beyond that. The idealism faded away and narrow national interests took its place.
The aims of the Treaty of Rome can for convenience's sake be classified under two headings: first, the political dimension; and secondly, the internal market. I would not want to say that one is more worth while than the other or that they are unrelated and can each be put into their own pigeon-hole, but I believe that steps to achieving the internal market are clearly definable. In fact, the recent White Paper did just that. Therefore, given resolve and good will, that is an attainable goal. The political dimension is much more difficult to define and consequently that much more difficult of attainment. I agree that the major effort should go into achieving a genuine internal market with all the advantages that will accrue in improved employment possibilities, a higher standard of living for Europeans as a result of greater wealth creation and a more prestigious standing for the Community in the world.
There is a spin-off from that which I consider most important. At the present time the attitude to Community membership is lukewarm, public interest is minimal and proposals emanating from Brussels are for the most part unwelcome. But might not the whole climate of public opinion change if a thriving internal market could be achieved, creating the largest single market in the world, larger than either the United States or Japan; and might not the approach to closer political integration be greatly facilitated with the creation of a spirit of Europeanism rather than of nationalism?
If one reads the brave words uttered at successive summit meetings and compares them with the little progress made, is it surprising that cynicism and disbelief have crept in? Many of your Lordships will remember the report on the internal market debated in your Lordships' House on 13th December 1982. In it were listed the main obstacles to a common market, among which were border delays, administrative barriers, documentation requirements, statistical collections, transport quotas, VAT procedures, and so forth. Incredible as it may seem, three years later the list is almost identical. Is it a wonder that the business community views all ministerial pronouncements with scepticism? They have heard it all before.
But I believe that there is a glimmer of hope for the future; and here I must say how impressed I was by the atmosphere of optimism among the people we met at the Commission in Brussels. Some of them have been there for very many years but they have managed to retain their enthusiams and dedication in spite of the evident frustrations to which they must have been subjected.
Apart from that, I suggest that hope stems from an economic climate which is much more conducive to progress; and the unemployment situation is, I believe, a powerful political incentive to action rather than words. The Heads of State and Government pledged themselves (granted, once more) in Brussels in March of this year to the completion of the internal market by
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1992. In June in Milan the Commission's White Paper was welcomed (granted, with some reservations) and instructions were given for the establishment of a precise programme. That has been followed very rapidly by a draft directive issued by the Commission in July.
I think that here it is appropriate to commend the achievements of the noble Lord, Lord Cockfield, in Brussels. He has certainly proved a happy choice as our senior Commissioner. If he can maintain the momentum that he has achieved in his first 10 months, I think the grounds for optimism will not have been misplaced.
But most important of all, there is just the possibility that the political will to achieve a true internal market is being rekindled; and I submit that in the final analysis that will be the factor which will decide whether or not the 1992 target date is achieved.
5.58 p.m.
Lord Broxbourne: My Lords, the concept of European union belongs to that considerable category of concepts which as generalisations win universal assent and acclaim, only to encounter difference and disagreement when practical effect is sought to be given to them. I think that today we must concentrate on the practicalities of this matter, and that to some extent means a dichotomic debate—on the one hand, Spinelli; on the other, other and perhaps more practical approaches.
To reject many of the proposals of Spinelli, as I feel constrained to do, does not imply any disrespect. It may seem perhaps a poor return for the Herculean labours involved, but so far as the authors of the report and the treaty are concerned, I recognise the high purpose which animated their endeavours and respect the conscientious industry which they devoted to their task. Nevertheless, I do not believe that the product of these protracted labours, three years of work and four years since the committee was set up, is something which can give practical effect to the generalised concept of European union.
I am reminded of the phrase sometimes applied by my headmaster to my efforts to translate Thucydides, "ingenious, but incorrect"—not altogether surprising, I think, considering the provenance of the report and the draft treaty. As your Lordships know, it is the product of the Committee on Institutional Affairs of the European Parliament. This committee did not exist before 1979. In those days in what I suppose we must now call the unreformed parliament, although it had the advantage of being in closer touch with the national parliaments and the member states—I am glad that my noble friend with all his great experience agrees with that—these matters were dealt with ad hoc by the political committee and the legal committee of that Parliament. Of course, to set up a specialist committee with grandiose terms of reference is an invitation to produce a grandiose and imprecise report. That is one of the political laws of nature, and has happened in this case. The difficulties and weaknesses of committee drafting are well known, but in this case they are aggravated by special difficulties.
My Lords, we get an indication of the climate and content of the committee discussion from the

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memorandum on Page 307 of the Report of the Select Committee by my respected friend Derek Prag, MEP for Hertfordshire where he says that the main struggle was between advocates of an ideal federal constitution versus pragmatists. The inevitable result is a draft lacking in precision and practicality. In reading some of its provisions I am reminded of the dictum about a document emanating from Lloyd George's Cabinet: "Only God and the Cabinet knew what this was intended to mean, and now only God". I find much cogency in the objections spelt out in the Foreign Office memorandum. In my view, these proposals are unsatisfactory in three fundamental respects; first, the relationship of the suggested union with the existing Community; secondly, the provision regarding legislative procedures and decision-making in Article 38, and, thirdly, the provision for the taking effect of the proposed treaty in Article 82.
On the first of these matters, Article 7 of Spinelli provides that the union shall take over Community patrimony. That is not phraseology easily comprehensible to British lawyers at any rate, nor do I think the phrase from which it is translated, acquis communautaire, is much more explicit. The article goes on to preserve the basic provisions of the EC treaty where they are not explicitly or implicitly amended by the new treaty. Implicit amendment by so complex a document may well give rise to considerable doubt and dispute.
Finally, Article 7 preserves the other provisions of the existing treaty in so far as they are not incompatible with the proposed new treaty—if anything even more open to doubt and difficulty in its interpretation than the provisions regarding implicit amendment in Article 7.
The second weakness is in regard to the provision for legislative procedures and decision-making, and the importance of this is clear from Article 42, whereby the law of the union once established would become directly applicable in member states and take precedence over national law. Unfortunately, the evolution and enactment of such laws is less clearly stated than their effect when enacted. The voting procedures and resolution of disagreement dealt with in Article 38 are complex, lengthy and difficult, and hardly constitute a reassuring basis for laws so far-reaching in their application and so absolute in their effect. On the provisions for taking into effect, the objections are succinctly stated in Paragraph 11 of the Foreign Office memorandum, and I need not seek to gild the lily.
The necessary rejection of some of the grandiose proposals in Spinelli does not imply, and should not dictate, a negative approach. On the contrary. In my view, it reinforces the need for a positive approach giving effect as fast and fully as possible to existing treaty requirements in what is, after all, an economic community. That involves practical steps for establishing the internal market, as was said by several noble Lords in this debate, steps specified and recommended in the report of the Dooge Committee and the Cockfield White Paper: free circulation of goods, free movement of capital, common transport policy and the like—all excellent objectives.
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I refer specifically to only two matters. First, for what my view is worth, I accept the conclusion of the Select Committee. I should like to join in with my tribute to the members of the sub-committee, and to the noble Lord, Lord Kearton, for his admirable chairmanship thereof. I accept for what my view is worth its conclusion that the United Kingdom should participate in the exchange rate mechanism of the European Monetary System. I say "for what my view is worth" because I am bound to tell your Lordships that in matters of high finance and taxation my first instinct is to call for an accountant or an aspirin, or sometimes both simultaneously. But it does appear to me, as very much a layman in that sphere, that this mechanism seems a natural and necessary ingredient of an economic community, and participation would seem to be both helpful and appropriate.
There is one other matter in the economic sphere of which little or no mention has been made, certainly not in this debate: what has happened to the projected European company and the related subject of the two-tier board and workers' participation? These were matters keenly canvassed in the European Parliament and its Legal Committee in the early days of British entry. We had high hopes of them, particularly in the context of workers' participation with representation on the supervisory board and through the workers' council. This would have advantages nearer home than the European scene. Worker participation, influencing and advising management but not obstructing or usurping its functions, could help to replace the concept of two opposing sides in industry by a constructive approach to what should be the common objectives of all. I believe it could be an emollient influence in a troubled world and could inject new strength and spirit into our industrial and commercial endeavours. So I ask the question, to which I hope my noble friend will have a reply: are these possibilities now lost sight of, or is there some hopeful progress that she can report?
May I briefly say a final word on political cooperation and institutional matters? Of course, political co-operation between like-minded European nations is desirable in a difficult and dangerous world, but it is not constitutionally appropriate that it should be sought through the mechanics of an economic structure like the EEC. I am doubtful if it requires any treaty provision at all, since it is a matter for political agreement and goodwill. If further machinery is required beyond the existing NATO procedures and in a less formalised context, it should be formed outwith the Treaty of Rome, whose objectives do not extend to this.
On institutional matters, as your Lordships know, the Treaty of Rome divided decision-making into three categories: the simple majority, the qualified majority and unanimity for certain important articles like Articles 100 and 235. Then, the Luxembourg compromise qualifies majority decision by postponing decisions where very important interests are involved until unanimous agreement is reached. Of ourse, this does not constitute an ideal instrument in the eyes of lawyers. But, on the whole, it works, not so much perhaps in its actual operation as in its background and influence. Spinelli would, by Article 23, phase out the veto after 10 years during which the postponement

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of vote would depend on matters of vital national interest. The Select Committee, at Paragraph 48 of its report, while retaining the veto in principle, suggest the replacement of "very important" interests by "vital" interests and also that the head of state or government must explain to colleagues on the European Council why such an interest is at stake.
I have two reservations about these well-intentioned proposals. The change from "very important " interests to "vital" interests might well turn out to be a matter of semantics. A nation that wishes to veto on the grounds of very important issues will have no difficulty in envisaging those same interests as vital. Secondly, is it not rather naïve to suppose that the obligation to explain will embarrass or deter national statesmen in making their case? Can one really envisage the majestic presence of President de Gaulle or indeed, in contemporary terms, the elegant presence of our own Prime Minister abashed and crestfallen conceding their case and abandoning their veto under such a requirement? There may be those among your Lordships who think that such a consummation is devoutly to be wished. I must ask you to believe that in terms of reality the prospect is remote.
Therefore, I conclude by saying this: the better course is the practical one. Retain the principle of the veto as a necessary fact of political and national life but continue to explore ways and means of extending and improving majority voting. This, on the institutional side, combined with measures to improve the internal market within the ample scope and provisions of the Treaty of Rome, will be work enough for statesmen without involving themselves in visionary aspirations and unrealistic endeavours outwith the structure and beyond the contemplation of the Community of which we are part.
6.13 p.m.
Lord Ezra: My Lords, there is no doubt about the timeliness of this debate. At the present time, the intergovernmental conference, set up as a result of the meeting of the European Council in Milan, is deliberating and preparing its report to be submitted to the next meeting of the council in December. According to informed or normally informed newspaper reports, such as that in the Financial Times of 14th October, all the proposals from governments have not yet been received or considered by this inter-governmental conference. We are therefore in a position, with the presence here of the noble Baroness, Lady Young, to make suggestions as to what the United Kingdom Government's proposals might be, if they have not already been submitted.
I believe that a degree of consensus is already emerging in our debate this afternoon, with some differences of emphasis. We have been helped in developing that degree of consensus by the admirable report presented by the noble Lord, Lord Kearton, and his colleagues. What we all feel, I believe, is that a priority objective is the completion of the internal market and that, in addition, we should seek to consolidate and build on the progress made in political co-operation among member countries.
The question arises, however, as to how we are most effectively to achieve these objectives as a further step
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towards union among the countries of Western Europe as defined in the treaty. I believe that in order to achieve these desirable objectives, based upon the proposals put in the report and in the other documents emerging from the Community, three orders of action need to be taken. The first is that there has to be a clarification of the institutional framework of the Community. For a start, there is defacto a new institution; namely, the European Council. That needs to be brought within the scope of the treaty, and its rights, duties and obligations need to be clearly defined.
The Council of Ministers has been referred to a number of times in the debate. There is little doubt that it has gone beyond, in its practical operation in recent years, what was originally intended in the Treaty of Rome. It meets in no less than 17 different formations. It is tending to do more and more the work that most of us who have been concerned with the European Community thought should have been reserved for the Commission. So the Council of Ministers needs to be brought back to what it was originally intended to do and concern itself with major issues of policy in the different spheres of action rather than in their detailed implementation.
The Commission correspondingly needs to be given back its original powers. The Commission was there to make proposals to the Council of Ministers, which would deliberate on a collegiate basis and then, according to the methods of voting laid down in the Treaty of Rome, decide what needed to be done. This, in practice, has not worked particularly well. So we need to give the Commission back its original powers and authority.
So far as the European Court is concerned, I believe that the report of the sub-committee has made some very useful suggestions. I feel that these would be well worth following up. Finally, so far as the parliament is concerned, this is the one area where I feel that the Select Committee report has been perhaps inadequate. I was very impressed with the remarks made by the noble Baroness, Lady Elles. We had the good fortune of having her speak in this debate as someone who is a member of that parliamentary institution. I believe that her view that that institution, now that it is directly elected, should be given progressively enhanced powers was a very cogent one, and that we should be looking carefully at that issue. For a start, I believe that the whole process of consultation needs to be firmed up and taken much more seriously.
Secondly, we ought to consider whether some form of legislative role of a limited nature might not be entrusted to the parliament. If that cannot be done, then at least its consent should have to be sought on certain specific occasions. The parliament has indeed been given powers—very extreme powers. It can get rid of the whole Commission; and it could hold up the budget. But in my opinion these powers are much too extreme to be the only powers that it possesses. We need some intermediate powers to make it a more effective body.
If we could have that degree of clarification of the institutional framework, then we come to the second major issue which has to be dealt with and which has been referred to throughout this debate; namely, the problem of the Luxembourg Compromise and the

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veto. Here I should simply like to say that I believe that the recommendation made in the report of the Select Committee is a very reasonable one. If we can get the European Council to become part and parcel of the institutional framework of the Community, then it seems to me to be right and proper that where vital interests are involved and a government wish to impose a veto then they should have to do that in writing to the top level within the Community, which would be the European Council. Those are two of the issues which I feel need to be addressed in order to achieve our objectives; namely, clarification of the institutions and dealing with the question of the veto.
Thirdly, I think that we need to incorporate within the treaty the whole question of political co-operation which has developed very effectively alongside the main treaty activities and has served the Community very well to an increasing degree. However, here again we need to bring that matter within the ambit of the treaty.
There is another development which I feel has to be introduced within the ambit of the treaty and that is the European monetary system. That, again, has developed on the side but needs to be integrated within the treaty. Here I must say that I fully join with my noble friend Lord Kennet, the noble Baroness, Lady Elles, and the noble Lord, Lord Broxbourne, in proposing to the Government that the time is indeed now ripe for us to join the exchange rate mechanism. It is particularly ripe because if we are committed to the objective of introducing a complete internal market within the Community—and I am very impressed with what my noble friend Lord Broxbourne said a few moments ago—it is inconceivable that that could work effectively unless we also try to make sure that there is some greater stability of exchange rates, which the other members have achieved but on which so far we have been reluctant to take the final step.
Whether all this could be done as a series of amendments, or whether the matter needs to be looked at as a new treaty, I feel should be left an open question at this stage. We do not yet know what the other countries would like to propose. We do not yet know the extent to which the European Council will agree that there should be amendments of greater or lesser importance. Therefore, I feel that we should leave the matter open. I am in favour of doing it whichever way is likely to be the more effective. It sounds as if amendment rather than a new treaty negotiation would be more effective. On the other hand, if there are amendments of such importance and of such an extent, it might be simpler to introduce a new instrument altogether. So I hope that that question can be left reasonably open.
To sum up, in order to achieve the things which we want to achieve as a next step in the development of the European Community we need to ensure that the procedures are brought up to date. We need to.ensure that there is clarification about the rules and regulations affecting the institutions. Above all, I should like to associate myself particularly with what the noble Lord, Lord Rodney, had to say: underlying all these changes there must be a common political will to make progress.
6.25 p.m.
Lord Reay: My Lords, I should like to start by joining with other Peers in congratulating the Sub-Committee on European Union under the chairmanship of the noble Lord, Lord Kearton, for having introduced an admirably sensible and succinct report. They received outstanding evidence. I was not a member of that sub-committee, but I had the good fortune to be present on one occasion to hear a brilliant contribution from Mr. Christopher Tugendhat, who had recently retired as commissioner and was therefore able to combine experience with, for the first time, independence.
I should next like to say how pleased I am by the constructive approach which has been taken recently by Her Majesty's Government towards the intergovernmental conference. Speaking in another place on 24th July the Foreign Secretary said:
"Our objective throughout is to achieve effective changes in the decision-making procedures of the Community because we believe that it is an essential British interest for the Community to be able to function more effectively and for the United Kingdom to be in the mainstream of developments to that end".—[Official Report, Commons, 24/7/85; col. 1061.]
Speaking in Bonn earlier this month the foreign Secretary, in a speech to which my noble friend Lady Elles has already referred, deliberately contrasted a failure on Britain's part to appreciate the significance of the Community in its early days with our attitude now. He said:
"There is no such failure to understand the importance of the changes that are taking place in Europe today. In Britain we are in no doubt about the significance of today's European agenda".
In other words, the Foreign Secretary has been at great pains to explain that we are not to be regarded as Europe's odd-man-out.
I have one central point which I wish to make, which is this. I think that Her Majesty's Government should make it their strategic priority throughout the conference until it finishes towards the end of the year, a determination not be isolated from France, Germany and Italy, as they were at Milan. I think that the Government made a mistake in voting against holding the intergovernmental conference, even though I know that the Government had good arguments and that the vote was sprung on a council which was largely taken unawares. Nevertheless, the consequence of this impulsive vote, with its isolating result, has been, and must continue to be, a long and dedicated deplomatic repair job to ensure that our partners do not spend their time preparing a special side road for us to follow, off the beaten track, together with perhaps the Greeks who, in the words of a recent Financial Times editorial, seem to treat the Community as nothing more than a source of development finance, and the Danes, while the remainder forge Europe's future.
When France proposed last week that member states should be excluded from new EC policies if they cannot approve them, one cannot but suspect that she had Britain in mind. We must not forget that our refusal to join the exchange rate mechanism of the EMS marks us out as a reluctant Community member, however good the reasons may be for us to have remained out orignially, and however difficult it is to judge the right moment to step into the system. I

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should like to add here in parenthesis that I think the right moment to do so is probably not today, owing to a considerable underlying difference in the rate of inflation between us and our Community trading partners as a result of rising unit labour costs in this country. But if this country is not to be pushed out of the mainstream of Community life during the course of the conference, what might we have to be prepared to put up with?
For one thing there is the question of treaty amendment. Her Majesty's Government do not believe that treaty amendment is necessary to achieve improvements in Community decision-taking. Accordingly, they have not laid any proposals before the conference which they had not already Iaid before the summit in Milan. But this is probably a minority view; otherwise, there would not have been a favourable vote for calling the conference, the purpose of which, after all, is the consideration of treaty amendments. Therefore, the Government are wise not to rule out treaty amendment absolutely; but they may find that they have to go further and eventually accept it, whatever their own preference.
Then there is the question of rhetoric. In the past the Government and government officials have shown an almost passionate contempt for the concept and the phrase of "European union". On 2nd July in another place, at col. 199, the Prime Minister said:
"I wish that we could drop the phrase 'European union' ".
However, now an attempt seems to be being made by the Government to swallow the phrase after all. The Foreign Secretary, in the excellent speech which he made in Bonn on 3rd October, went out of his way to give the impression that the Government will try to live with the phrase. He quoted Churchill on a united Europe; and he quoted the Treaty of Rome, to which the Treaty of Accession commits us, on an ever-closer union. He quoted past summit communiqués signed by British Prime Ministers, including the Solemn Declaration of European Union signed at Stuttgart in 1983 by the Heads of Government. He then concluded:
"It should be obvious from all this that Britain is not afraid of European union".
Those words were repeated this afternoon by my noble friend the Minister. The Foreign Secretary went on to say:
"Such a union exists now today and I have no doubt it will be stronger tomorrow".
In view of all this, if there were to be an amending treaty I think it would be inconsistent—and it certainly would be seen as being inconsistent—for the Government to refuse to accept in its title the words "European Union".
Then there is the question of powers for the European Parliament. The Germans, Italians and French last week all submitted proposals concerning an extended role for the European Parliament. The Italians appear most enthusiastic for increasing its powers. On the face of it, however, an expansion of the role of the Parliament—certainly anything like the joint decision-making with the council which was proposed by the Dooge Committee—seems hardly compatible with the goal of speeding up the Community's own decision-taking procedures.
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However, this point cannot be lost on the French and Germans. Like Her Majesty's Government, I am sure that they will want the last word to remain with the council. In fact, the German proposals for extending consultation procedures between the council and Parliament seem in principle not too far removed from that which the United Kingdom has supported in the past. They involve an extension of the present consultation procedure.
In any case, something will have to be done to increase the role of the European Parliament. To do nothing, I submit, would be to break faith with the decision to proceed to direct elections. I suggest that it would also be seen as an inappropriate response to the European Parliament's own role, by means of the Spinelli Treaty, in having sparked off the whole process of institutional stocktaking which has led to the intergovernmental conference, as was described by the noble Lord, Lord Kearton, and by my noble friend Lord Broxbourne. On this question I think that Her Majesty's Government should try to stay in the middle of the pack and, as my noble friend Lady Elles said, not be the one to block progress.
Although views about the means and the degrees differ, all parties agree that there needs to be more voting by qualified majority in areas defined in some way, either by subject, as they are in certain specific articles of the treaty, or perhaps more hopefully by policy area where the mainline of action has been taken by a unanimous decision. It is generally accepted that curbs must be imposed on the persistent abuse of the Luxembourg compromise, although its retention, perhaps in some other form—at present it does not even have legal status—will I am sure be upheld. I accept the point that, whereas the unanimity requirement has resulted in failure by the council to take decisions on hundreds of Commission proposals, as has been pointed out this afternoon, nevertheless by the same token it has meant that many of the proposals have not been voted out but still lie on the table for possible adoption in the future.
On the question of the number of commissioners, if I understood my noble friend the Minister correctly, I think that the Government should think again as to whether they really want one commissioner for each country. As Mr. Tugendhat pointed out in his evidence to the sub-committee, this would give a built-in bias in favour of the small country; that is to say, in favour of the big-spending country. I wonder whether the Government really want that. I think that they should reconsider the possibility that there could be 17 commissioners for a Community of 12. I wonder whether, in fact, that would necessarily be excessive for a Community stretching, as it will, from Elsinore to Cape St. Vincent. There could perhaps be senior and junior commissioners. I would prefer the Government to re-open their mind on this subject.
There is a great need for the Community to make progress again. Unless it moves forward it will break apart, particularly with the accession at the end of the year of Spain and Portugal, and the approach once again of a financial crisis caused by the apparently unstoppable excesses of the agricultural policy. Politically it must move forward in order to help prevent Germany falling for the dangerous illusions of reunification. Nor will the United States put its own

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population at risk to defend a Europe in the process of Balkanising itself. And what an irresistible provocation for Soviet expansion would also be provided by such a development!
Therefore, the stakes are very high. Economically, it is widely realised that the continental-size market of the EEC must be made into a single market if all European countries are not be be relegated to second-rate industrial and commercial status.
For all of this a joint effort of will is required. Yet sometimes this country behaves as if it does not appreciate what is involved in nurturing a friendly relationship with a continental neighbour. I should like to ask rhetorically: what was the point of offering New Zealand assistance at the very moment when it was France which had fallen to a nadir of embarrassment over the Greenpeace affair? My noble friend Lord Bruce-Gardyne has already, quite rightly, used his column in the Sunday Telegraph to rebuke the Government on this matter. To borrow a French phrase, it was an opportunity lost to keep quiet.
Too often we spoil things by rudeness. There is no point in always loudly insisting that we know how to do things best; in demolishing everyone else's arguments before constructing our own, which often, after a lot of ill-will has been caused, produce a remarkably similar conclusion; in particular in praising our own pragmatism—which is not pragmatism if it succeeds only in arousing animosity between us and our friends and allies—at the expense of others' so-called dreams. A truly pragmatic approach has to include a pragmatic assessment of its own diplomatic consequences.
Let me conclude by suggesting that there is no reason for failure at the intergovernmental conference. Most countries want progress, and have an interest in progress. There is no reason why the conference should not succeed, and can then be used to build a rapid development of Europe's political and economic unification. What is required is a constant eye on the main goal. Let us hope that this time the governments of the Community will not lose their way in philosophical sterilities or national or personal animosities, but collectively see the immensely important task they have set themselves right through to the end.
6.41 p.m.
The Earl of Bessborough: My Lords, we must all be grateful to the noble Lord, Lord Kearton, for having produced his admirable report, introducing it so lucidly, and inspiring what so far has been a fascinating debate. I must say that I agree with the report and conclusions—that is to say, that there is no need for a new treaty. We are not keen on precise, written constitutions in this country. I agree nonetheless that more majority voting in the Council is essential, even if an ultimate right of veto is retained in some form.
As I have explained in considerable detail on more than one occasion in your Lordships' House over the past seven years I believe, with my noble friends Lady Elles and Lord Broxbourne, and I think with my noble friend Lord Reay, and certainly with the noble Lord, Lord Ezra, we should join the exchange rate mechanism of the European Monetary System, in the not too far distant future.
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Having said this, I must admit that, speaking entirely personally, ever since Count Coudenhove Kalergi's pre-second world war thoughts about a United States of Europe, and certainly after Sir Winston Churchill's advocacy of it after that war, I have been something of a loose confederalist. ! think this is partly due—and here I suppose I should declare a kind of multiple interest—to the fact that 1 had a French mother, close ties and knowledge of the working of the Canadian confederation, to say nothing of a Greek son-in-law, an Italian nephew whom my noble friend Lord Thorneycroft knows well, and of course many close friends and relations in all the present and indeed future Community countries (that is my multiple interest) and even an American wife, in whose country citizens of every European stock seem to be reasonably happily united. All this has had some influence on my thinking.
I was sad therefore to read the somewhat depressing article by Mr. Apple of the New York Times in the Sunday Times yesterday that European unity remained a distant vision, and that typical Britons feel little sense of identity with their continental cousins. That depressed me yesterday. I realise that western Europe is different from the United States, or even the People's Republic of China, which is also a federal state, and it is to those two great countries to which I have been travelling most in recent years. It is there in the United States as well as in China where I have found, and still find, so many people asking me why we have not in western Europe achieved a greater degree of integration and union; not only an economic and a genuine internal common market which begins to exist, but also a greater degree of political union as well as a European industrial and energy policy as effective as—or perhaps I should say more effective than—the kind of wasteful, common agricultural policy which for good or ill exists and which is to be debated later tonight. That is why I have been sympathetic to the idea of creating a loose confederation, perhaps somewhat on the lines of Canada, with each member state nonetheless retaining its own sovereign or presidential head.
I recognise however that this is not practical at present, and also that there seems little support in this country even for the relatively modest terms of the proposed Spinelli Treaty and the Dooge Report, to which I think every other noble Lord has referred. Therefore in recent years I have tried to be severely practical—like my noble friend Lord Broxbourne—in this sense and have urged, as indeed I am glad to see that Her Majesty's Government are doing, a breaking down of existing technical barriers to travel and trade; and of course I strongly support the views of my right honourable and learned friend Sir Geoffrey Howe in his recent speeches, as well as the admirable proposals of my noble friend Lord Cockfield, vice-president of the European Commission. All these are good steps in the right direction.
As your Lordships know, I have always—certainly for some 25 years—been advocating greater scientific and technological co-operation in Europe. This has to some extent been achieved not only through the European Torus at Culham which we discussed last week, but also through ESPRIT, the European Strategic Programme for Research in Information

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Technology, which was referred to by my noble friend Lady Elles. Indeed, I would support EUREKA too, even if I believe that we should also join the United States in their strategic defence initiative.
I am glad to say that western European co-operation in space seems to be effectively achieved through the European Space Agency. But I have for many years thought that we should achieve greater unity in defence, which has more or less been achieved through NATO. Like the noble Lord, Lord Gladwyn, I greatly regret the collapse of the European Defence Community in the 1950s.
Here I might add that when as an MEP I used to have meetings with NATO in Brussels, I would find considerable support for the proposition that the Community should have its own defence policy, even if this is not recognised in the Rome Treaty. I then also at that time also found positive support in NATO for debating defence in the European Parliament, and we debated this on more than one occasion during my period in that Parliament. But it has always seemed to me that we should not only have greater unity defencewise but also industrially, expecially when European firms are trying to increase their trade with such a vast country as the People's Republic of China. I regret that the EEC-China Trade Treaty, which was signed in the late 1970s, has not been implemented to the extent that I hoped it would be.
I greatly regret that the kind of sectoral industrial working parties contemplated in that trade agreement have not been set up, and that in our trade negotiations with China we have not—certainly individual firms have not—been able to present a united front in assisting the People's Republic to develop its own high technology in a way in which I know they wish to do.
As my noble friend Lady Young knows, I had the good fortune to lead a science and technology mission to China almost exactly a year ago in the company of the noble Lord, Lord Kearton, who opened this debate so effectively. The main object of that visit was to show the Chinese that it was not only the Japanese and the Americans who were capable of assisting China to develop its new technologies, but that we in Britain and the European Community could also help them. I hope that the Government will give some thought—it will not be easy for them—to the possibility of setting up such joint Sino-European industrial working parties.
Finally, in so far as political union is concerned, political co-operation, as has already been said this afternoon, is working reasonably well; but I hope very much that the European Parliament might develop more on the lines of your Lordships' House as a forum for the scrutiny and revision of European legislation. Having been a member of that Parliament for six and a half years I believe that the European Parliament could play a greater revising role in this respect. I am glad to learn, as I understand it and as I understood it more or less from my noble friend Lady Young at the beginning of this debate (I hope she can confirm this) that Her Majesty's Government are prepared to see the European Parliament more fully involved in discussions and deliberations with measures considered by the Council, as well as the introduction of procedures which would enable the Parliament to
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express its views before the Council comes to a conclusion. In this respect I used to play my part in the conciliation procedure between the Council and the Parliament over the budget.
I should like to see this kind of procedure extended to other fields and other departments. I think the report of the noble Lord, Lord Kearton, is along the right lines for the present, but that perhaps we must think rather more deeply about what out ultimate long-term aims in Western Europe should be, bearing particularly in mind that both the United States and the People's Republic of China would like to see us more effectively united, not only politically and defence wise, but also industrially.
The Times leader of 1st August on the day after the publication of the report of the noble Lord, Lord Kearton, referred to the possible extension of the competence of the Community to cover high technology and some other areas in which it is increasingly important for Europe to pursue a common policy to enable it to compete effectively with Japan and the United States. I thank the noble Lord, Lord Kearton and the members of the Committee for their remarkably comprehensive and indeed fascinating report.
6.54 p.m.
Lord Beloff: My Lords, my excuse for rising so late is to add my congratulations to the noble Lord, Lord Kearton, and his sub-committee for a report which, considering the timetable imposed, impresses one with the thoroughness with which these issues were examined. However, it leaves open questions upon which, had I been a member of that sub-committee, I would have liked to press the witnesses further—especially the degree of support which exists in our partner countries in the Community for the changes now being advocated and whether the difference that appears to exist between the citizens of this country and those of our partners is not to some extent an illusion based on different modes of political discourse.
I rise also because, like the noble Lord, Lord Gladwyn, I have long been concerned with these issues—though I hasten to add that I have never, like the noble Lord, been in the forefront of them. In 1957 I was the author of a report commissioned by the Council of Europe, on the basis of the work of a study group, to examine the general range of questions from politics and economics to science and culture which were involved in the development of European institutions. That committee met between "Messina" and "Rome". The shape of the future was beginning to reveal itself. Since the report was translated into German, Italian, Spanish and Portuguese, though not I hasten to add into French (they never are), it provided at that time some material for discussion.
It is interesting now, and revealing of some of our problems, to look back at what we then thought. The most striking point is that my economics colleagues, who were considerable professional economists, were unanimous in believing that agriculture would be the last major economic activity to be integrated—it was so difficult to think of integrating European agriculture—and that transport, industry and energy

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would long precede it. That shows that one can be wrong.
On the other hand, the difficulties that have accumulated and which are the cause of our discussion today and of this report were foreseen. That is to say, although the European countries had had the shock of a war and had jumped the first hurdle, in the Coal and Steel Community, of successfully bringing together the previous warring powers—that, as other noble Lords have said, was Jean Monnet's principle intention—it was already evident that the Common Market, the European Economic Community, would be less centrally directed than the Coal and Steel Community, that the Commission would have less power than the High Authority and that individual governments would have more. In that sense we were responding to an observation that in Europe the necessary degree of public popular consent for allowing important issues affecting people's employment and income to be transferred to an international or supranational body would be lacking. It would be lacking for a very good reason; namely, that many of the countries concerned had taken centuries to attain even their existing measure of national unity and the idea of a European Union based on some kind of pan-European feeling would, if it were to happen at all, take centuries more.
Indeed, this has been illustrated in the course of our discussions this afternoon. Why is Denmark the odd man out on the Dooge Committee? Because Denmark is the only Scandinavian country in the Community and naturally is unwilling to be tied more closely into an institution from which its closest friends are excluded. Greece, as has been pointed out, is a part of what before the days of Lord Byron we used to call the Near East; it is not a part of Europe in the sense in which Belgium, Holland or even Spain are parts. So one could go on.
Therefore, one is left with what can be done to make these European countries function better to their own advantage. Much has been said, and rightly, to the effect that the original impulse towards setting up a single common market for things other than agricultural products, which achieved the first goal of a single tariff area, has now been baulked. It has been illustrated by the number of permits which a German lorry requires to go to Italy, and we have had a vivid illustration in the report, and referred to by the noble Baroness, to prove that point. This starts me thinking again whether we are right to say that it is possible to do this kind of thing without a much greater departure from sovereignty than even the committee, which admits some derogation of sovereignty is required, is prepared to accept.
Perhaps I may remind your Lordships that the common market of the United States, which is, after all, the model that we have, the model with which we wish to compete, is based not on a commission and a treaty and a series of institutions but on 15 words in a constitution: the Congress shall have power to,
"regulate commerce with foreign nations and among the several States and with the Indian tribes".
That is all. The entire wealth, prosperity and unity of the American system is based upon 15 words in a written constitution interpreted by a court. If we are to consider the kind of institutions that we need, ought
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we not perhaps to think of whether a strengthened central point and, above all, a strengthened court might not be the root?
Instead of that, the people who are willing to have new treaties, new assemblies, new organisations, cannot bring themselves to tackle the fact that their existing Court is undermanned and overworked and badly requires internal reform, just as they apparently cannot tackle the problems which the Commission faces. One has the feeling, with matters like the Spinelli initiative, that what one does when one finds an obstacle is not to think of ways of tackling it but to think of ways of getting round it and pretending it is not there.
This may be impossible. If it is impossible, then ought we not to reconcile ourselves to the fact that what we have in Europe is not in fact a supranational organisation except in very limited respects? What we have, and what we appear to deplore, is increasing consultation between sovereign governments. There were, in the first six months of this year, no fewer than 36 ministerial meetings. It may be said, and it has been said, that this all shows that we are becoming hopelessly bogged down with their specialists, their experts and their officials. However, may we not look on this as a hopeful sign? If, say, before 1939 or before 1914 there had been regular and constant meetings of Ministers concerned with industry, agriculture, technology and education, would we not have thought that Europe was making rather considerable progress towards managing its affairs?
Similarly, ought we not to look at the reasons, not only why the parliament is disgruntled (I can imagine that intelligent and public spirited persons in an assembly which appears to have restricted powers should be disgruntled) but also why their powers are, and are likely to be, restricted? The reason seems to me to be this. All our countries, though their constitutions are different in many ways, have in common today a strong aspect of democracy in its strictest sense. That is to say that people look to their legislatures, look to their elected representatives, or heads of state if they happen to be directly elected persons, and make demands upon them in their capacities as consumers, as producers, as members of particular parts of the community with specific interests. Until they feel that they can equally well go to my noble friend Lady Elles (who I am sorry could not stay for the rest of this debate) equally with the members of the other place who are elected from that area, then the European Parliament cannot expect to receive major powers. If it did, it would fly in the face of the expectations of ordinary people.
I am not sure that, on the whole, direct elections were a very good idea, for the reason which has been alluded to; namely, that it made a bigger gap between members of that assembly and the members of the national parliaments. If there is to be a greater role for the European Parliament, then certainly greater consideration must be given to the interlocking of its activities with those of the national parliaments which the peoples themselves still regard as their major voice.
Therefore, it seems to me to be quite reasonable for the committee to have put forward the conclusions that it has, provided it does not believe that they will make a very major difference. Whatever is said about

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the veto, so long as a Minister for whatever it may be—agriculture, energy or whatever—is more susceptible to the pressures, electoral or otherwise, from an interest in his own country, the veto will be there. Ought we not therefore always to be looking at ways in which we can strengthen the existing mechanism?
This is virtually my last point because I have spoken for too long. It is interesting to note that much of the discussion about the number of commissioners—whether there should be one for every country or whether they should be grouped and reduced in number—has all along assumed that the commissioner is in some sense linked to and an exponent of his own country. Otherwise, if they are to be chosen entirely as European citizens of major competence, why should not all the commissioners be German, French, Italian or whatever? In other words, there are, even in the Commission, which we have not yet tackled, inbuilt national differences.
Finally, speaking as a member of the Law Sub-Committee of your Lordships' European Communities Committee, it very much strikes me, as one sees the people who come from the Commission and from the Court, that there are still major gaps in the understanding of each other's legal systems, habits of thought and ways of looking at constitutional commitments, and a long dialogue will be necessary before that situation changes in the way in which all of us in the end would like to see.
7.10 p.m.
Lord Thomas of Swynnerton: My Lords, when I first read this powerful report I recalled the advice of a Cambridge don to one of his undergraduates some years ago, suggesting that he should read The History of the English People by Mr. J. R. Green. He said:
"This book is short, it is interesting and it is usually true."
I must say that one of the great benefits of this report—and it must have taken a very great deal to ensure it—is its brevity. That is a great achievement, on which the noble Lord, Lord Kearton, and his colleagues should be congratulated, particularly since there is almost no aspect of European affairs which it does not illumine by its terse and sharp prose.
Naturally, like other noble Lords, I have found much with which to agree in the recommendations. I agree it is useful to be reminded that, contrary to the views even of some Englishmen, Britain is a good deal more communautaire—a difficult word for us, I agree—than some of our colleagues suppose. I agree that we and the European cause in general suffer from an exaggerated idea of the size of the Commission. I think it is obvious that the Parliament must sit in the same place and not travel around in the way that one of my noble friends so graphically described. I certainly agree that the number of commissioners should not go up as far as it might otherwise do, although I would agree with the noble Baroness, Lady Young, in suggesting that the final figure might be something like 12.
I support with more qualifications two of the recommendations. First, like other noble Lords, I now
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believe that we should join the European Monetary System as soon as reasonably possible, but I do not think it should be done in order to make a concession or a gesture to our partners. I think it should be done as a quid pro quo of the realisation of a full internal market in financial services.
I also think that the role of the European Council must obviously, if it is going to go on being important, be defined, although how exactly that is to be done is a different matter. I must confess that any institution which consciously takes a name which is so close to the name of another institution in the same undertaking—and, after all, there is a Council of Ministers—causes one to wonder whether it deserves to survive. Certainly, whoever christened it the "European Council" showed plainly that he did not care at all if confusion was created in the public's mind. And, as a matter of fact, while I am on the question of words, there is no doubt whatever that the public at large in all countries is always confused by the fact that every institution in the European Community seems to have the same name. If this is going to be a vital enterprise, as I hope it will be, something should be done about that by some committee, somewhere, soon.
I have two or three doubts about the report, and the fact that I mention them obviously does not mean in any respect that I did not enjoy and profit from reading the rest of it. First, the implication is left—I am sure it was not intended—by paragraph 1 of the report that the Select Committee thought that Europe equalled the European Community. That is a dangerous implication to leave behind since after all the grandiose words "European Union" are words which affect countries like Switzerland and Austria, which are not part of the Community but are part of the West, and also countries east of the Iron Curtain, which are never mentioned at all in this report. Of course they should be, at least by implication, since we all hope that in the end Europe can once again really comprise those European peoples.
My second doubt concerns the point which others have made about the distinction between "vital" and "very important". In an age of euphemism, I cannot believe that that distinction is the right one to insist upon.
Thirdly, I question whether the report, in paragraph 22, is right to say that one of the original aims of the European Communities was to try to ensure that Western Europe faced the super powers on the same footing. I cannot believe that was one of the original aims, even though there may have been many people who worked towards that through other ways.
Finally, and much more important, is the doubt that I have about the Select Committee's understandable reluctance to become involved in a discussion of what these two words "European Union" actually mean. It seems to me that they refused the fence, so to speak, of defining those words or of becoming involved in a serious and profound argument such as is needed as to what those words imply. It is understandable that the Select Committee, being composed of rational Members of this House, had a natural reluctance to become too involved in bland, high-sounding words which might turn out not to mean very much, and so they concentrated on the practical details. But in this

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respect, and in this respect alone, I confess that I found the report a little disappointing because to cut through the "guff' and expose the real choices which face us in respect of Europe and the European Community as a whole is not only essential but is now very appropriate, considering that the process of integration which brings Spain and Portugal at long last into the Community is now done.
The words "European union" remind me rather of the phrase which was used earlier this afternoon during QuestionTime by the noble Lord, Lord Soper, in relation to the Book of Revelation, in which he said that the Book of Revelation could be interpreted to mean anything or nothing. Her Majesty's Government, obviously, from the words of the noble Minister, favour the concept of European union although my noble friend Lady Young rightly pointed out that the two words related to a rather elusive concept. My noble friend Lady Elles also favoured the concept of European union and my noble friend Lord Reay even likes the phrase itself. But although my noble friends Lady Elles and Lord Reay sit on the same side of the House as the noble Minister Lady Young, my noblefriend Lord Broxbourne and myself, there is, I submit, a difference between us as big as there is on normal occasions between this side of the House and the other side.
The fact is that, if European union is going soon to be what my noble friend Lady Elles said it should be—she quoted the present Foreign Minister of Belgium, Mr. Tindemans, saying that the aim was to achieve a united front to face the outside world as well as to achieve economic and monetary unity within the Community—and if that is what she believes and the whole enterprise is to remain democratic, then of course the European Parliament should have the powers which my noble friend says are necessary. My noble friend Lady Elles—and I regret that she is not here to comment at the moment—said she is not a federalist, but if in fact she is looking forward soon to a united front to the outside world and if she is not a federalist surely she must support the idea of a unitary European state. These are some of the sorts of questions which should be discussed, and I believe it is a pity they were not raised in the report.
I do not think we should "despair"—this is a word used in paragraph 18—if at the moment we can say that all we have achieved is a sophisticated customs union. That is a very remarkable achievement. It is realised in the report itself, because in paragraph 29 it is stated that this is a "unique and experimental" way of achieving co-operation without major concessions of sovereignty. This idea of economic unity without political unity is one that could well attract, and that has indeed already attracted, nations in other continents who are desirous of economic collaboration without substantial concessions of sovereignty.
My noble friend Lord Rochdale said in a powerful speech that perhaps the failure to achieve a full internal market was due not so much to failure of negotiations as to political failure. If he is right, then the European Community will, oddly enough, then cease to be that unique and experimental undertaking which the report claims it to be and will simply become—if I may suggest it in a rather exaggerated way—what the German Zollverein became in the end
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in 1870, rather than remaining a successful Zollverein, such as did not, after all, occur in Germany in the last century. I think it is much more interesting to support the Government's plan of trying to achieve a full internal market by 1992, without the complete collapse of all national sovereign distinctions.
So, again, I regret that the report did not explore this foggy marshland which was explored in their excellent and powerful speeches by my noble friends Lord Broxbourne and Lord Beloff—a marshland across which, inevitably, some kind of line is drawn and must be, for the foreseeable future. If we manage to achieve by 1992 an internal market of the sort envisaged that would be the time to see what further stages would be needed or desired. Perhaps we should then consider Tindemans, Spinelli and, to put it in rough terms, Elles, Bessborough or, indeed, Rochdale.
I have two further points to make and the first is about political co-operation. The report touches on this only twice and on the major occasion in two paragraphs, Nos. 82 and 83. Those paragraphs are interesting not for what they say, but for what they do not say. Is this modest attention due to some kind of scepticism about its benefit? If so, I, like my noble friend Lord Broxbourne, share that scepticism. Political co-operation should surely stick, as was originally intended, to considering the political issues arising from European economic problems and should not consider questions arising from political anxieties throughout the world, from Nicaragua to South Africa. There are certain occasions when these meetings of foreign ministers seem to be under the aegis of political co-operation, and in danger of confusing statesmanship with journalism. After all, statesmanship of that sort is concerned with power and not with fashionable crises.
The second point that I have to make is that we should have liked in this report a few more words about culture. It is true that the report reminds us in paragraph 85 that education is specifically excluded from the competence of the European treaties, save when it is dealing with the movement of persons. Even so, in a report with such a grand title it would have been pleasant to have known for sure that the committee members realised that what makes us Europeans is not basically a common policy towards sheepmeat, but a common recollection of Shakespeare and other masters of European art. This is specially important at the present time, when British educationists are, interestingly enough, trying to see how they can integrate Asian cultures into what they call British culture. That is important, because we should realise that British culture has always been a part of European culture.
7.25 p.m.
Baroness Robson of Kiddington: My Lords, I must first pay tribute to the way in which the noble Lord, Lord Kearton, introduced this report this afternoon, but, above all, to the way in which he conducted the committee. He was faced at the beginning by a number of people on that committee who had widely divergent views about what European union meant, and he managed by skill and by leadership to make us agree to the report that your Lordships have in front of you. There are many of us who advocated Britain's

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entry into Europe long before we ever achieved it. To many, this report will probably not sound particularly revolutionary. That commitment to Europe is the commitment that Spinelli has—an ever-closer union among the peoples of Europe, as in the preamble to the Treaty of Rome. Those words obviously have a much wider implication than a purely economic union, which is what we have concentrated on over the years.
The noble Lord, Lord Thomas of Swynnerton, suggested that the committee should have spent more time trying to define their ideas for European union. I think that those ideas would be very diverse among the members of the committee, but I believe that we could have come together on a definition of what we mean by "European union".
The noble Lord, Lord Rodney, referred to the miracle that has happened in Europe since the end of the last world war; the fact that we cannot envisage another war breaking out among the member states of the European Community. The noble Lord, Lord Beloff, referred to the fact that it has not managed its affairs too badly since the end of the war. But we must also look back and think how much greater the influence of the European nations could have been on peace and on détente between the super-powers if union in Europe had existed in foreign affairs and defence. My noble friend Lord Gladwyn talked about the need for a unified defence in Europe, and the noble Lord, Lord Reay, talked about the same thing. As long as Europe is not united we shall be played off against each other. We had an example not so long ago, when Mr. Gorbachev visited France. He tried to play off President Mitterrand against our Foreign Secretary, and he succeeded up to a point. Their answers were not united.
Attempts have been made in the past by different nations in Europe to influence the super-powers, and because there has not been unity within the nations we have failed. Chancellor Brandt's attempt to create the Ostpolitik failed because there was not enough support from all the rest of the countries in Europe. Also, there is no doubt about the fact that Britain would have been a member of the Community a lot earlier if it had not been for the claim that we have a special relationship with the United States and for the Polaris agreement, which took place at the same time as President de Gaulle said "No."
I am using these examples only to show that there is a lot more to European unity than just the Economic Community. On the other hand, having been a member of this committee I visited these institutions and listened to all the expert evidence that was presented to us. I came to the conclusion that without an improvement in the European Community and without a true free market and free movement of people, goods and services within Europe, we could not achieve any of these other aims. I believe that if that was achieved we would really be in a position to move forward to the much greater issues that challenge us.
The majority of Members of the House who have spoken have approved of the report and its recommendations. There was absolutely no dissension from the recommendation that this country should join the European monetary system now. There were some
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doubts about the recommendation to change the expression "important national interest" to "vital national interest". I agree: on the surface there does not seem very much difference between the two words. But the main recommendation is that this "vital national interest" should be presented by a Minister to his peers. What we did discover in our visits to Brussels was that it is not the use of the veto that is barring advance: it is the threat of the use of the veto by people much lower down the scale. The committee felt, and I felt in particular, that a Minister having to present his case to his fellow Ministers would not use it on an issue which was not of vital importance. He would hope that his fellow Ministers would consider that if he raised it at that level it really was vital. I do not believe, for instance, that a British Minister would raise a minor issue and pretend that it was vital—but neither would any of the others. I believe that this would improve the speed with which agreement might be achieved.
I turn now to another recommendation which I wholly support. I would prefer to see an amendment or amendments to the present treaty rather than a new treaty. There is a tremendous risk that getting involved in talking about a completely new treaty could be completely divisive among the nations and could detract from the need to concentrate on completing the free market in Europe, which would drop even further back. I am not a lawyer but I should have thought that the recommendations we have made could certainly be included as amendments in the Treaty of Rome.
We have made important recommendations about the European Court. They may appear minor in the report, but the only basic safeguard of nations, organisations and individuals under Community law is an appeal to the European Court. It seems to me a tragedy that the court should be saddled with having to adjudicate on staff questions at the Commission. It is not making the right use of the people working there, who are being overworked. Secondly, it is creating a backlog of cases which take too long to come before the European Court. I should like to see private individuals have greater access to the European Court if they feel aggrieved in any way.
Those are the main points I wanted to mention. In accepting this report—I hope that the Government are going to accept its recommendations—if the recommendations are implemented and we move forward at a slightly faster speed in creating the European market we must never forget that this is only a step, though an important one, towards European union. We must keep the aim of much closer co-operation in Europe always in front of us.
7.37 p.m.
Lord Oram: My Lords, this report is not a dramatic report: still less the revolutionary report to which the noble Baroness pointed in her opening sentences. Indeed, it would not be so good or so useful a report if the sub-committee had tried to make it dramatic and had tried to catch the headlines by putting forward radical proposals. I very much agree with its somewhat cautious but nevertheless very constructive approach. Like other noble Lords, I congratulate the noble Lord, Lord Kearton, both on the achievement of the report

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and on the lucid way in which he presented it to us at the beginning of the debate.
In particular, I welcome the fact that it rejects the Spinelli draft Treaty. It seems to me that that proposal was altogether too formal, too legalistic, too intricate and certainly untimely for it to get any general acceptance. I agree, perhaps not surprisingly, with the evidence given to the committee by the two witnesses from the Labour party, my honourable friends Mr. Foulkes and Mr. Robertson. In discussing the Spinelli report they went so far as to suggest that the proposals, though they may have been a useful stimulus to debate about the future of the European Community, may nevertheless have done more harm than good. The proposals have diverted people's attention away from the real problems of Europe, notably massive unemployment, and have engaged too many people chasing what I would call the will-o'-the-wisp of constitutional perfection. I welcome the fact that in this debate this evening most if not all of those who have contributed have not sought a perfect constitutional solution.
Let us remember that it is only 30 years since the Common Market started. Surely, in the span of human history, that is all too short a time for any set of institutions to be properly tested or to be subject to fundamental amendment. Having regard to Europe's complex history and geography, 30 years is surely much too short a time in which to have expected to reach complete satisfaction in constitutional terms. But as the noble Lord, Lord Rodney, pointed out, a great deal has been achieved in international relations and in internal organisation within the existing institutions.
If we make comparisons and consider, for instance, the timetable of the evolution of constitutions—our own included—and if we think of the constitutions of the United States of America, the United Nations and the Commonwealth, no one can reasonably suggest that root and branch constitutional changes should have been brought into effect in those cases after such a short period of testing. It is surely too soon for anything like the Spinelli proposals to be adopted.
It is in my view not a question of devising new constitutions. It is a question of making the existing institutions work more effectively. This, as the report before the House suggests, can be done pragmatically and mainly within the limits of the existing treaties. The report recognises, as I am sure we all do, that changes in the treaties will be necessary from time to time because of changes in the European scene—economic or political. But the report is wise to suggest that we should in meeting those changes build on and improve the existing treaties rather than attempt root and branch reformation, as Spinelli proposed.
Relationships between member states are bound to change over time and modifications of the treaties are needed to meet those changes. The noble Viscount, Lord Rochdale, listed many of the changes which have taken place since the formation of the Community. I would add just two others. First, there is the increase in the number of states, which obviously raises questions about representation on the Commission or
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voting rights within the Commission. That is one change that neeeds to be met—but it does not take a new treaty to meet the kind of situation.
To take another example, on the economic front there has been a considerable change in this country's degree of self-sufficiency in relation to food production. I believe that we are now something like 75 per cent. self-sufficient. Certainly at the time when the Common Market was formed we were in a very different situation compared with our continental neighbours in that particular respect. This is something that must have an effect on the constitutional arrangements.
It is developments such as those which must be constantly assessed and reassessed. That is the reason why I have always said that the issue of British membership of the Common Market has never been, as some would have it, a question of high principle—of black and white. It has always been a grey situation and a developing situation. Opinions and attitudes can change according to those changing situations. Indeed, we can say that we have now reached the point where those who 10 or 15 years ago were enthusiastic advocates of European unity are now perhaps less enthusiastic; and where those who were vigorous opponents of European union are now less inclined to oppose it.
It is for all those reasons that I believe it would be wrong to force the pace of constitutional change as Spinelli proposes. Let us rather be cautious; prepare to change but not make too much change too soon. Let us remember also that institutional changes—especially those of a radical nature—must stand the test of public opinion and of the democratic process in all member states.
I noticed from the minutes of the committee's proceedings that the MEPs who gave evidence, and who attended in their capacity as members of the European Parliamentary Institutional Affairs Committee, were of the opinion that there was an upsurge of feeling in Europe in favour of closer European union. I believe they were deluding themselves. As I have explained, there are questions of change—but I do not believe that they are prompted by any upsurge of opinion in favour of union, as some suggested. It was perhaps wish fulfilment on their part. I am glad that this was pointed out to them by my noble friends Lord Gallacher and Lord Ardwick, who stressed the difficulty that would face us if we adopted the Spinelli proposals.
With all this in mind I would point to three of the committee's conclusions in Part 6 of their report which are in my view particularly wise. I have already dealt with the first of them; the committee's rejection of the Spinelli proposals. Secondly, and as other speakers have said, I agree wholeheartedly with paragraph 99 concerning the Community's failure to establish an effective internal market. Several speakers have pointed to that aspect as being a most crucial issue and I thoroughly agree.
I refer now to an earlier report by the European Select Committee of this House which dealt specifically with the problem of the internal market. I was privileged to serve on that particular subcommittee, and under the chairmanship of the noble

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Lord, Lord Greenhill, in drawing up that report. I recall the very impressive evidence we received about the folly of barriers preventing the flow of goods freely from one country to another within the Community. The noble Baroness, Lady Young, made mention of the horrific list of documents listed on page 301 of the report which have to be dealt with before a lorry can move. The noble Lord, Lord Rodney, also referred to this point.
I remember that in the sub-committee of three years ago to which I have referred we received an estimate that the cost of delays to lorries which were being kept standing still at frontiers while complicated documentation was being processed was anything up to 10 per cent. of the value of the goods. It is perhaps worth quoting the main conclusion of the sub-committee which dealt with the internal market. We said:
"It is only by a general understanding by governments and peoples of the advantages to be gained from an integrated Community market that the 'political will' needed to achieve it will be created. At the present time the Committee"—
that is, the committee of three years ago—
"regretfully conclude that this will is absent".
Reading through the evidence which the subcommittee of the noble Lord, Lord Kearton, has received, time and again it seems the finger was pointed at the lack of political will. As I have said before, it is not so much a question of whether the constitution would allow an internal market to be created; it is more the need to get on with the job within the confines of the present constitution.
The third issue to which I refer—and again is one which has been well debated today—is the question of decision-making. The Committee has dealt very fully and helpfully with the questions of the veto, majority voting, the Luxembourg Compromise and the excessive use of that Compromise. I believe, as the noble Baroness, Lady Robson, pointed out, that the recommendation contained in, I think, paragraph 102 of the report, about what should be done with the veto deserves the closest attention. Indeed, I think that the noble Lord, Lord Kearton, and his colleagues are to be congratulated on the formulation of a feasible solution to this vexed series of problems connected with the veto.
They propose that if the use of the veto is to be confined it could be done by the head of state who wants to exercise the veto having to explain at the European Council why it is a vital issue for his or her country. I believe that that is a very sound recommendation but I take up the point that I believe three or four speakers have taken up—first, by the noble Baroness, Lady Elles. We all noticed that the Minister in her opening speech used the phrase "very important" rather than the word "vital". Was that deliberate, my Lords? If so, I hope that she will explain why the Government stick to that formulation rather than adopt the suggestion of the Committee headed by the noble, Lord, Lord Kearton, that the word should be "vital". In the report the word "vital" is printed in italics which shows that the committee was concerned about that. I am concerned that the Government may not have taken this recommendation properly on board.
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For instance, take the last occasion when the veto was used. Germany was protesting about a proposed increase in food prices—or perhaps it was the other way round; I am not sure. Can we imagine that Chancellor Kohl would have stood up in the European Council and said that this 1 per cent. difference in food prices was vital to Germany's wellbeing? I think he would have seen the absurdity of the position. I believe that that is the right method in order to confine the use of the veto to the issues for which it should be used.
It is the series of similar commonsense proposals which commend this report very much to me. I believe it to be a very valuable report. I hope it will have a lasting effect. I noticed a reference in one of the early paragraphs of the report to the Spinelli proposals being one of a long series of initiatives applauded at the time but soon forgotten. I hope that this report will not have that fate. We can certainly applaud it, as we have been applauding it, but I hope it will not be soon forgotten.
7.54 p.m.
Baroness Young: My Lords, we have had a most useful and, I believe, constructive debate and I am grateful to your Lordships for providing the opportunity to consider this important report. The Government will take careful note of what has been said today. I am sure that the report will attract much attention in Europe.
The European Community Treaty rightly talks about ever closer union among the peoples of Europe. In other words, the process has to be real and of measurable value to ordinary men and women. That is why the Community, and the Government in particular, have focussed on the steps needed to break down barriers. Many more people now have first-hand knowledge of Europe through greater opportunities for travel. Barriers to trade are being pulled down. Europe speaks with an increasingly powerful voice to the rest of the world as a result of the continuous growth of political co-operation—the regular consultation process between governments on foreign policy issues which is one of the most remarkable developments in Europe. This debate has, I think, helped to emphasise the fact that, although much has yet to be done to achieve a real common market, the picture is not the one of stagnation which some would have us believe.
New opportunities have opened up for collaboration and for joint endeavours for European businesses and firms, contributing to growth and jobs. I should like to assure my noble friends—in particular my noble friend Lord Beloff, my noble friend Lord Rodney and my noble friend Lord Broxbourne—that we shall continue to press on with our determination to liberalise the internal market: a view which I think is shared by all of your Lordships who have spoken today and one also shared by the noble Lord, Lord Oram. There is a common awareness that the frontiers of technology are better tackled on a European, as opposed to a national, scale if the challenges of the 1980s and 1990s are to be faced and the risk of domination by the United States and Japan is to be avoided.
We are not just talking about the goals of the Community but of real achievements—a point made by my noble friend Lord Rochdale. In the past two years we have created the Esprit programme; agreed

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on the general research programme for the next five years; revised the regional and social funds; made a big advance on standards; agreed on the single administrative document of custom clearance; negotiated the accession of Spain and Portugal; started to tackle the problem of CAP surpluses; agreed on a common fisheries policy; agreed on a mechanism for budget discipline; and dealt with the problem of budget imbalances. I do not think that that is too bad a record.
I am glad that a number of your Lordships have referred to what my right honourable and learned friend said in Bonn about European Union, which I repeated today. Indeed, I am grateful to my noble friend Lord Thomas for adding to our understanding of European Union by correctly expanding on authoritative descriptions of it by others, including Mr. Tindemans in his report on European Union in 1976. The European Council, commenting on that report, declared that:
"European Union will be built progressively by consolidating and developing what has been achieved within the Community".
That seems to me to be a further admirable description.
At this hour there is not time to answer all the important points that have been raised in the course of the debate. Therefore, I shall focus on two or three areas which have been the subject of much discussion and try to answer one or two other important matters. The first area is what has come to be known as the Luxembourg Compromise. The noble Lord, Lord Kennet, my noble friend Lady Elles and the noble Lord, Lord Oram, asked that the term "very important", which I used in my opening remarks, should be changed to the "vital" interests referred to in the committee's report and that the justification of a veto should be published—a point raised by the noble Lord, Lord Ezra.
We recognise the need to prevent the abuse of the Luxembourg Compromise but the wording is not simply a question of semantics. We are not sure that change of usage from the words "very important"—which dates from the birth of the Compromise in 1966—to "vital" would achieve any of the results that we all wish to see. However, I can confirm to the noble Lord, Lord Ezra, and others, that we have proposed that there should be a special procedure of the Council under which a member state should explain its use of the veto fully and formally.
The noble Lord, Lord Gladwyn, said that the United Kingdom delegate on the Dooge Committee should have joined the majority view as regards voting; that is to say, that the general rule should be majority voting and the unanimity should be required only in exceptional cases. The present treaties have many articles—over 40—which provide for majority voting, yet relatively few of these are used in practice. The Community has always been able to take decisions where the political will exists whatever the voting rules may say. We continue to believe, as we argued in the Dooge Committe, that more use should be made of the many majority voting provisions already in the treaty, but we see no point in tinkering with voting procedures in the hope that this alone will bring about a real common market or a technologically strong Europe. The starting point has to be for
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member states to demonstrate that they really are committed to the early achievement of these objectives.
My noble friend Lord Broxbourne asked whether the obligation to explain the veto would stop its abuse. Like the noble Lord, we recognise the political reality that member states may sometimes have to invoke a very important interest to request postponement of a vote, but we do not consider that there is any validity in the distinction between a vital or a very important national interest. The principle is the same. We have made two linked proposals, that the Presidency call a vote once a full discussion has been held, and then that the veto be explained. These measures together could introduce more clarity into an area over which the possibility of a veto may be unjustifiably casting a shadow.
Many of your Lordships referred to the legislative role of the European Parliament, in particular my noble friend Lady Elles, to whom I think we all listened with great interest. The Government have made proposals at the Milan European Council to increase the European Parliament's involvement in the legislative process. We particularly want the Council systematically to take account of European Parliament resolutions and to consult the European Parliament at an early stage on Commission proposals for legislation, and indeed, as my noble friend Lord Bessborough pointed out, we should like to see the European Parliament more involved in legislation. But the European Parliament must use its powers responsibly and make sure that its resolutions are targeted for action.
Both the noble Lord, Lord Kennet, and my noble friend Lady Elles commented on the seat of the European Parliament and here the Government believe that the solution lies in the European Parliament's own hands. We should be glad for the Parliament itself to make clear what specific seat it would desire, as the noble Baroness, Lady Elles, has recognised.
Nearly every noble Lord who spoke in the debate has commented on the question of the ERM. Could I say that the United Kingdom keeps the question of membership of the ERM constantly under review. We have always said that we would join the mechanism when the circumstances were right and it is no easy matter to judge when those circumstances are right. Sterling and the Deutschemark are both major trading currencies. At present the ERM only holds one major trading currency. The addition of a second could put the system under strain, especially when the dollar is volatile. The market's perception of sterling as a petrocurrency is also an important factor. Developments in the oil markets tend to cause sterling to move one way and other countries' currencies the other way, for reasons beyond the control of any ERM participant. Expectations of future oil prices are also likely to have an important effect on the exchange rate. Against this background we need to give consideration to the implications of ERM membership for the operation of domestic policy. We have always believed that one of the most significant steps towards strengthening the EMS would be the abolition of exchange controls. Most of our partners retain such controls, and they are

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a serious impediment to the creation of the internal market for which we have been pressing.
A number of your Lordships commented on the whole question of political co-operation, and I should like to make clear the Government's position on a new political co-operation treaty. We are taking an active part in negotiations. The text of a new treaty on political co-operation has been proposed, but we are convinced that it should be free-standing alongside the Treaty of Rome. Foreign policy is a matter for co-operation between member states. It is not to be confined within the sort of legal regulation which incorporation into the Treaty of Rome would entail.
The noble Lord, Lord Ezra, and my noble friend Lord Rochdale commented on the European Council. It may be helpful if I say that the idea behind the European Council was to offer strategic guidance to the Community, not as a sort of court of appeal on the day-to-day business of the Community, which is for Foreign Ministers; we favour a return of the European Council to that strategic role. If it were to be incorporated into the treaty structure, the temptation would be strong to delay decisions even more than happens at present, so that Heads of Government could be consulted. That would not improve the decisionmaking process, which is something that we all want to see improved.
A number of your Lordships commented on the role of the commissioners and particularly on the Committee's proposal that there should be only nine commissioners. My noble friend Lord Reay asked about the Government's position on this matter where we have proposed that there should be 12 commissioners. Our proposal is based on the principle that commissioners are not representatives of their countries but impartial servants of the Community; and in any case we are not convinced that there would be substantial portfolios for all 17 commissioners. Thirdly, the Commission's decision-taking would be very cumbersome if there were 17 commissioners. We are therefore persuaded that we should press for a smaller Commission, but, for the reasons which I gave, we feel that each country should have a commissioner.
There were a number of quite specific issues which were raised, of which perhaps the most important was the one raised by my noble friend Lord Bessborough and also by the noble Lord, Lord Gladwyn, on defence. I am glad indeed that this was raised in the context of European Union. By our membership of the NATO Alliance we are committed to the defence of Europe and by our membership of the European Community we are committed to its prosperity. But it would be wrong to think that the institutions of the one could be superimposed on the institutions of the other. They were built for different purposes. There is, however, scope for the co-ordination of positions in matters of security, for example, and we shall continue to be on the look-out for other matters on which the Ten can pool their resources.
My noble friend Lord Broxbourne asked about the progress on the European company. Progress has been made on the discussions on a European economic interest grouping, but there has been no recent substantive discussion in the Council on the Vredeling proposal on worker participation. We believe that
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matters of this kind are better left to individual member states.
My noble friend Lady Elles referred to the 763 proposals that have piled up before the Council, and we agree with my noble friend that some proposals spend some considerable time in the Council before being decided. However, over the long term the picture is not quite so sombre. According to the Council Secretariat the Commission has submitted 3,481 proposals to the Council over the past six years and the Council has adopted 3,235 of them. If we ask why some proposals have to wait, this may often be because of the Community's habitual search for consensus despite the provisions of majority voting.
I began by speaking of the importance which the Government attach to the full implementation of the internal market and I should like to conclude by saying something on the very important question of technology that has been raised particularly by my noble friend Lord Bessborough but also by other speakers. There are proposals before the Intergovernmental Conference for new Treaty articles which recognise the degree to which technological co-operation has already become part of Community activity. Technology was high on the agenda of both the European Councils held earlier this year. The Community is the world's largest industrial grouping, yet we supply only 10 per cent. of the world market in information technology. In 1983 eight out of every 10 personal computers sold within the Community were manufactured in the United States.
The heart of that challenge is commercial competitiveness. Europe is not lagging behind America and Japan in pure science, and our development of new technologies has been fully equal to theirs. Where we have failed, and where the United States and Japan have conspicuously succeeded is in the development and marketing of products based on those new technologies. For the Community the essential task must be to create the conditions in which our high technology companies can collaborate together and exploit their expertise. That requires us to drop the philosophy of European national champions and move towards open competition throughout the Community. It requires us to promote collaborative ventures between European enterprises aimed at the development of products designed to secure a substantial share of the world market. That is where the completion of the common market becomes so vital.
I should like to end with a quotation from Sir Winston Churchill—something already referred to by my noble friend Lord Reay. Sir Winston Churchill summed up the vision of a Europe united and powerful in a famous speech in Zurich in 1946, at a time when Europe was still devastated by the aftermath of the war. He described the task as being:
"to recreate the European family and provide it with a structure in which it can dwell in peace, in safety and in freedom.'
Our membership of the European Community has brought us closer to that goal. The committee's report is a timely pointer to the right way forward towards the ever closer union described in the Treaty of Rome—a perceptive analysis of what that term ought to mean and of the consequences for action in the Council of the European Community now. The Government are most grateful to the noble Lord, Lord Kearton, and to

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his committee for the contribution they have made to their thinking and for the observations made by your Lordships today.
8.12 p.m.
Lord Kearton: My Lords, I can be brief. I should like first to thank once again the members of the subcommittee, who must be very pleased that the report has given rise to such an interesting, wide-ranging and comprehensive debate. I should like to thank all noble Lords and Baronesses who have taken part in the debate. Speeches have been powerful and eloquent. Finally, let me say how much I appreciated the concluding speech of the noble Baroness, Lady Young. I think that she covered an immense amount of ground and was most positive and constructive. What she said, together with the speeches of Sir Geoffrey Howe over the past 12 months, have convinced me that the Government are moving forward towards a closer European union—I say this to the noble Lord, Lord Thomas of Swynnerton—however one defines that phrase. I think that we are getting there, and I can only say that I hope we get there quickly.
On Question, Motion agreed to.

CAP Reform: ECC Report
8.13 p.m.
Lord Plowden Lord Plowden rose to move, That this House takes note of the Report of the European Communities Committee on the Reform of the Common Agricultural Policy (17th Report, 1984–85, H.L. 237).
The noble Lord said: My Lords, the common agricultural policy has been outstandingly successful in increasing agricultural productivity and with it agricultural production. Many farm products, including wheat, barley, sugar, milk, butter, beef, wine and olive oil, are greatly in surplus, in great contrast to the shortages of the 1940s and to the famine which exists in parts of Africa at the present time. But the price for those achievements has been high. A heavy cost has been borne by the Community as a whole and by consumers who have often had to pay more for their food than they would had the CAP not existed.
The CAP currently accounts for about 65 to 70 per cent. of the Community budget. Even with the increase in the VAT ceiling on the Community's own resources to 1.4 per cent., funds will be under pressure. The Commission's preliminary draft budget for 1986 contains the statement that the VAT rate it entails would be 1.35 per cent. even under the strict assumptions on which the draft budget is based. The Select Committee report states:
"Left unreformed the CAP could break down. If this were to happen, the committee fear that the existence of the EEC itself would be put in jeopardy. They therefore consider reform to be imperative".
The committee welcomed the initiative taken by the Commission in instigating a Community-wide debate on the future operation of the CAP. Although the Commission's debate centres on six topics for reform, the committee, partly because of the constraints of time, decided to concentrate on those aspects bearing most directly on the problems of surpluses and cost.
In several earlier reports the committee has argued that the CAP must move towards a greater reliance on the price mechanism. This is the chief message of the present report. But there are three new factors influencing the committee's recommendation. The first is the decision of the European Council at Fontainebleau to place specific constraints on the growth of CAP expenditure on agricultural price support. The second is the Commission's recently published Green Paper which is strongly in favour of greater reliance on the price mechanism. The third is that the committee, like the Commission, acknowledges that continued price restraint will adversely affect some farmers, chiefly those who farm in less favoured areas and on a small scale.
Because of widespread Community industrial unemployment the prospect of other employment for displaced agricultural workers in many areas is bleak indeed. The committee considers that provision of direct income aids, at least in the short term, is an essential complement to the successful use of the price mechanism. It recommends that arrangements for direct income aids should be at the discretion of member states and in accordance with detailed schemes made or administered by those individual states or delegated by them to appropriate regional authorities. But—and this is important—it should be within a policy framework drawn and approved on a Community footing and subject to Commission approval.
The committee is convinced that the CAP must change now. It must move towards restrictive pricing and realistic thresholds for all products which are in heavy surplus. In the view of the committee, consistently applied price restraints will reduce the overall level of output in the Community, and raise standards of efficiency, but it will take time to have an effect.
Price restraint broadly will have five main advantages. It will benefit consumers. To a limited extent it could stimulate demand for farm produce in the food industry and in the increasingly important industrial sector. It will reduce the cost of CAP and its economic distortions. It will facilitate agricultural trade and minimise any cause of legitimate criticism of its effect on international markets. Finally, restrictive pricing would lead to direct savings in support expenditure and so would release funds which might in part be used to finance structural measures.
The structural, or guidance, section of the Community's Agricultural Guarantee Fund was originally intended to receive 25 per cent of CAP funds. But so high has been the growth of agricultural support spending that the guidance section is currently only about 5 per cent of CAP spending. The committee repeatedly questioned witnesses whether they would prefer the CAP to be reformed by means of price restraint or by quantitive restraints such as quotas or quantums. With one possible exception, the witnesses, including the National Farmers' Union, representatives of food manufacturers and traders and the consumers in the European Community Group, said that they would prefer the use of price restraint. The committee consequently reject the extension of the quota system.
Quotas would not bring agricultural prices nearer to world levels, and they would tend to ossify agricultural structures. Furthermore, quotas are difficult to administer both consistently and uniformly, and undoubtedly would require the creation of a large bureaucracy. But I recognise that there are people of great experience who believe the objectives of the committee could be achieved by the use of quotas and quantums. Nonetheless, the committee, after the most careful consideration, were not of this view.
The committee strongly recommend that the CAP should be reformed on the basis of the prices policy. Such a policy can be both a measure of reform in itself and a precursor of further reform. It is essential that such a policy should operate with two main considerations in mind: that the farming community should be encouraged to cut production of commodities in massive surplus; and, second, that they should be protected from sudden sharp changes in policy. Farmers throughout the Community must be able to plan their businesses secure in the knowledge that politicians will not suddenly lose courage and change direction.
In evidence to the committee, the National Farmers' Union called on the Council of Agriculture Ministers to make long-term price projections, and to stick to their decisions. The Agriculture Mortgage Corporation told the committee that if regular price reductions are to be imposed, and a phased approach is adopted, it will be essential for a clear indication to be given at the start of the phasing period of the final target price figure. Therefore, the committee call on the Council of Agriculture Ministers to declare its commitment to a policy of restrictive pricing as the central element of the CAP for the future. Without such a declaration, the committee believe that the present initiative of the Commission, like all earlier attempts to reform the CAP, will fail.
The chief message of the report is the need for a consistently applied restrictive pricing policy tempered by direct income aids for those genuinely in need. The report makes a number of other recommendations. It recognises that the trend away from farming will continue. This trend is already marked. The number of people employed in agriculture fell from over 19 million in 1960 to 12 million in 1970 and 8.2 million in 1982. The trend is partly due to increased efficiency and technological advances, but the trend is also partly due to demographic change. The average age of farmers in the Community has increased in recent years. Fewer young people are entering farming and some young people, born in farming families, are opting for alternative employment.
The committee believe there is justification for speeding up the pace of such change. Large numbers of small, inefficient family farms cannot be supported in the long run by Community mechanisms. Therefore, the committee support the suggestion of the Commission that farmers be encouraged to leave production by means of a pre-pension scheme paid to older farmers who agree to abandon their agricultural activity. The pre-pension could be granted until the beneficiaries reach the age at which they would normally start to receive pensions under the national pension schemes.
The report also acknowledges that in the long-term environmental considerations will play a greater part in the formation of agricultural policy. Selective mechanisms should be used to regulate agricultural and environmental priorities. Agriculture, like other sectors of economic activity, should be subject to controls to protect the environment from pollution. In the majority of cases the Community's polluter pays principle should apply.
The report also approves the proposals of the Commission for policies designed to promote farming practices which conserve the rural environment. Management measures and a limited number of environmentally sensitive structural programmes, in which farmers would agree not to farm certain areas of land and might turn instead to forestry, tourism or craft industries, might be particularly suited to less favoured areas or marginal zones; but I think this should be considered in other regions as well as the Community.
On the subject of world food markets, the report calls for a new round of GATT talks to defuse the present atmosphere of mutual distrust which is growing between the Community and the United States of America on agricultural trade. The report states that the Community can best increase its share in world food markets by relying on an increased use of the price mechanism.
Finally, there is the question of food aid to developing countries. The Commission's Green Paper states that the,
"problem of food aid goes far beyond the confines of agricultural policy; it is the task of society as a whole to reflect on the matter and to find adequate solutions".
The committee believe that the ultimate goal must be to assist developing countries to achieve greater self-sufficiency on food as has happened in India over the last 20 years. Care must be taken to prevent gifts of food from hindering the development of indigenous agriculture.
These are the main conclusions of our report. Everything that I have said about the reform of the CAP, and indeed much of what was said in the debate on European Union earlier this afternoon, depend on one factor—political will. The penultimate sentence of the committee's report says:
"The reform of the CAP must not be allowed to fail through lack of courage and political will".
I hope that the House will support and encourage Her Majesty's Government, the European Parliament, the Commission and the Council of Agriculture Ministers to carry out the vitally needed reform of the CAP. I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on the Reform of the Common Agricultural Policy (17th Report, 1984–85, H.L. 237).—(Lord Plowden.)
8.31 p.m.
Lord John-Mackie: My Lords, I want, first, not only to congratulate the noble Lord, Lord Plowden, for putting this report before us but also to thank him for all the work that he did towards it. I do not think we realise how much he contributed behind the scenes. We had rather a short time to prepare the report. It

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had to go before the Select Committee on a particular day, seven days after our last meeting. I have the minutes before me, two long paragraphs showing what we asked the noble Lord to do at the last moment. It is to his great credit that he carried that out, working late into the night. I went along in the middle of the week, thinking that I would find the clerk there, to make a certain amendment. But there was the noble Lord beavering away in order to get the report to the Select Committee in time. We must thank him for all the work that he did behind the scenes as well as for his speech today.
Before examining the report, it is necessary to look at the introduction to the Commission's Green Paper. There are several points in that introduction that are worth mentioning. The first relates to the family farm. The Commission emphasises that it does not want vast spaces of land and few farmers. This is neither possible nor desirable in European conditions in which the basic concept remains the family farm. Most of us, I believe, would agree with that, although in our country and in Europe family farms are disappearing. In this country alone in the last 20 years the size of the farm has doubled. Admittedly in this country the average is not big. It is 170-odd acres. Nevertheless, this shows the trend. One hopes that we shall not so much try to reverse the trend but at least to keep it where it is.
The next point relates to price policy in the market. The Commission concluded that,
"there can be no alternative to pursuing a price policy more adapted to the realities of the internal and external markets but taking account"—
I emphasise this—
"of the Community's obligations to the agricultural population".
The noble Lord, Lord Plowden, mentioned this point.
Next, there is the question of the perspective for farmers in the long term. As your Lordships know, farming is a long-term job. There is no doubt that the Commission realises this. It recognises that farmers must have a long-term perspective to enable them to carry on. The paragraph at the bottom of page 43 states:
"There is no miracle solution".
They can say that again! There is no miracle solution to this problem, as the noble Lord, Lord Plowden, has so adequately explained.
There is also the question of the farmers' role. I am intrigued by the point made that farmers must accept a role not only as technicians but as managers and entrepreneurs. I have always considered myself a manager and an entrepreneur. It is a little hard on farmers to suggest that they do not manage. The noble Lord mentioned retirement, which is recommended. I always feel a little guilty having progressed about eleven years beyond the time for farming. However, I see the point that early retirement helps the situation in many cases.
Emphasis is placed on cereals. This was the point that we took up in our report. The issue of farmers' incomes is put very clearly together with the impact of restrictive price policy on agricultural incomes. This must be examined carefully. Added to this is the depopulation of the countryside. There is emphasis on part-time farming, which of course applies much more
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to other parts of Europe than to this country. This has an important role in many parts of Italy and Germany and for that matter all over the continent, and will apply even more when the two new countries join next year.
There is emphasis on the question of the environment. This is, of course, very important. Finally, on the last page of the introduction, there is reference to the reduction of prices and the effect of reducing production. The two points with which I should like to deal are those of cereals and the reduction of prices and what effect this will have. Before dealing with those matters, I should like to refer to the environmental point that we make in paragraph 74.
If the environmentalists think that reducing agriculture to anywhere near its state in the late 1920s and the early 1930s is a help to the environment, they could not be more wrong. If farming is not profitable no amount of grants to plant trees and dig ponds will be taken up. The way to get farmers to do better is to consider the point made, I think, by the farmers' union on page 27 of the report, where it emphasises this point:
"It must be recognised, however, that farmers may be more inclined to farm in an environmentally sensitive manner during times of agricultural prosperity rather than when profits are slack".
That is only too true. The way to get farmers to do better is through co-operation. Some remarks that I read recently about the malign influence of agriculture on the environment make me mad.
I should like now to consider the major recommendations in the report. To be brief, cut prices and you will cut the surpluses, with, of course, all the attendant savings in storage costs and restitution costs. Taking cereals as the Commission's first worry, I am nevertheless surprised by its attitude towards milk. It may be thought that the problem has been solved a little through quotas. However, when one considers that we have a million tonnes of butter stored at a cost of £6 a week per tonne—£6 million a week—one feels that something should be done. But it is the issue of cereals that the Commission has taken up. At present there is a stock of over 30 million tonnes. Unless something is done, that could rise to nearly 90 million tonnes by the end of the decade. Economists tell us that the price factor will control production; but very few, if any of them, will tell you how long that will take and what percentage of change will have to be made in the price to have an effect. This is what I fear. It took a long time in the 'twenties—and I am old enough to remember those times—before there was a serious reduction in agricultural production, although one has to admit that costs also came down at the same time.
That is not the case today. If anything, our costs are rising and our prices are coming down. But I cannot see a straight price reduction having a quick enough effect. In the last two years we have had a fairly savage cut in cereal prices—I think at least £20 a tonne, if not a little more—and there is little sign of any reduction in acreage so far. This last harvest may have some effect. There is no doubt that some farmers are looking for alternative crops, but the scope is very narrow indeed—protein peas for stock feed, linseed, lupins—and will be filled up very quickly indeed. I do not think one can stress alternative crops too hard.

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A drastic cut could force out poorer land from cereal production, but what is the alternative—more sheep and trees? These two products are deficient in the EC. The two are not supposed to be compatible—when I was in the Forestry Commission I had a long battle with many farmers on the subject of planting trees on hill lands—but that is a theory with which I do not agree. There are many examples, and, generally speaking, well integrated forestry with farming can more often increase the farming production. But even if on all the poorer land—and this is an important point—cereal growing was stopped, this is not where the surplus comes from. The immediate reaction by the large cereal-growing areas to a cut in price would be to grow more per acre, and our plant breeders and agronomists tell us that we are nowhere near the maximum yet; so we should get an increase in production initially, however savage the cut might be. All this adds to what I said earlier, and not even a dramatic price reduction will have a quick enough effect to get the Commission out of the mess we have got into because of tardy action in the past to prevent it.
There is the question of other uses for surplus products. The noble Lord, Lord Plowden, mentioned this fact. Biotechnology is advancing in the use of cereals and sugar for industrial purposes, but it will be a long time before any appreciable help can be achieved.
We suggest that we could share in the world food market. With the world surplus of grain, as I understand, at about 250 million tonnes, this will not be easy and certainly not short-term. It could bring us into conflict with the United States. But I shall not stress that point. I believe that the noble Lord, Lord Middleton, has ideas on this subject.
We have rejected quotas. However, in the Recess I spoke to many people interested in the subject, and they have been advocating quotas and prepared to accept them. There has been considerable discussion in the agricultural press on the subject. I am philosophically against them. As I think the noble Lord said, it would be very frustrating to good farmers to be tied down to quotas. He said that it would "ossify" some sectors of agriculture, and I should be against that. A national quota handled by our national Government could probably be made to work in this country, but the administrative difficulties which were pointed out for the rest of Europe, with the enormous numbers of farms and the size of them, would I think be insurmountable.
Quotas also conflict with my next point, which is the much wider question of the fact that it is estimated that 800 million people have a standard of nutrition barely sufficient for good health and that probably half of them are on virtually a starvation diet. This has been borne out by the situation in Africa and some other parts of the world today. The Commission states (and I should like to quote this; I know the noble Lord also quoted it):
"The problem of food aid goes far beyond the confines of agricultural policy; it is the task of society as a whole to reflect on the matter and to find adequate solutions".
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I agree with the last part, but I do not think that they can defend the first part, that,
"The problem of food aid goes far beyond the confines of agricultural policy".
I would say agricultural policy is to feed people wherever they are, and I am afraid that I do not altogether agree with that point.
The Commission made the point that food aid should not distort local agricultural production. But on the same page the Commission suggest in the next paragraph the point that they make in the Green Paper, that,
"within the framework of national food strategies of the developing countries an intermediary facility should be set up to assist the purchase of foodstuffs commercially on concessionary terms without this being allowed to interfere with development policy priorities".
I would agree with that. I should say that help with this should surely be pursued with all the vigour that we can muster, to help in getting food that way. In my opinion, and in that of most people, the production of foods in developing countries to the standard of nutrition that the rest of the world has is a very long-term job. Look how long it took us to become self-sufficient—and they are much further behind where we started. The world's population is estimated to reach 600 million in the next 20-odd years. Therefore, the food situation will not be solved overnight.
I can see the "price mechanism" ultimately reducing production, but I cannot see it getting rid of the surpluses and of those that will be built up during the time that this reduction takes place; because we have a graph showing what will happen if production is not slowed down very quickly. We could have 90 million tonnes of cereals by the end of the decade.
There is considerable criticism—and rightly so—that in the present world food situation surpluses should be lying in stores and in many cases deteriorating, if not actually rotting. A combination of price reduction and an orderly distribution of surpluses, either through the aid organisations or by commercial means, or both, with price concessions, as suggested by the Green Paper, is morally and commercially the correct way to solve this problem.
8.47 p.m.
Lord Mackie of Benshie: My Lords, my noble kinsman has said much that I was going to say and for that I thank him. I could not believe when I accepted a late invitation to dinner and said, "I shall come at 9.30" that I should not be able to see the end of the debate. With the time of night being what it is, I apologise to the House but I assure noble Lords that I shall read tomorrow what they say, and with much greater interest than listening to them today while waiting for my dinner.
Having dealt with the question of hunger, let me go on to the report and to the noble Lord, Lord Plowden. I have greatly enjoyed sitting under him (if that is the correct expression) in the committee because he is a man of much experience in committees. His recommendations vary somewhat. In the case of top people, he puts them up; in the case of the farmers, he cuts them down. But nevertheless his reasons for so doing are sound, I dare say, in both cases.

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This is a very interesting committee. I think that the noble Lord, Lord Plowden, has found it interesting because we have 14 members—we had a very distinguished member who had served a long time and who retired last year, the noble Baroness Lady Elliot. Of these, eight—with the Lady Elliot, nine—were farmers directly interested in farming, and six were others. By "others" I do not mean anything derogatory.
However, it is interesting that the recommendations of this report have been against the short-term interests of farmers. When the usual anti-farming lobby produces its venom against the farming community, it might take a look at this small question of the membership of this committee, which has consistently advocated that the CAP behave in a sensible manner, that prices be cut according to the laws of supply and demand, and that forecasts be made of what the prices will be in order that farmers can plan. That appears to be common sense. If I may say so, that common sense has emanated from a majority of these short-term farmers about whom people speak badly.
On the whole question of agricultural production, other reports from this House have received a great deal of publicity. They have said that we shall be in queer street as soon as oil exports start to decline and that therefore a great deal needs to be done in other fields or we shall be extremely poor. It is worth pointing out that under the CAP in this country in relation to agriculture we have saved imports in the region of £2,000 million, which would have to be found from a manufacturing industry which, according to other distinguished committees of this House, does not appear to be doing too well. I dare say it might be said that that of course has nothing to do with the Government.
However, the whole problem of the surpluses stems from the fact that we have large numbers of primary producers who have no marketing organisation. When you manufacture on a large scale you organise your market and you organise your production to meet your market. The returns which even extraordinarily competent people farming good land are achieving are not extraordinary in relation to the capital employed. They are nothing compared to the returns achieved by other businesses; they are nothing compared to the reward achieved from selling newspapers, even when they are bought out against their will. However, these are the returns achieved by farming, an achievement which has done a great deal of good for this country.
Throughout the globe farmers are not doing very well. The competent people on the prairies of America are going bust by the score. Inside the EC we have a protective system. It is a protection which this country normally dislikes, but it is the system which has produced these enormous surpluses, and surpluses must be better than shortages. Therefore, we must deal with that.
However, in the EC we are not logical. My noble kinsman spoke about the third world. Under the CAP the community imports from the third world manioc;—or tapioca, call it what you will—which helps the balance of payments of third world countries.
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Manioc is a substitute for barley, which is in surplus, and it costs us a great deal of money to import it. We also import maize gluten from the mighty United States, with whom we are certainly at war if you bear in mind the subsidies which at present they are throwing about regarding the importation of wheat into Algeria. We import it without imposing the normal levies which we impose on other cereals. Therefore, the CAP is not enitrely logical or protective, and under GATT and in relation to the third world, it is doing its best to try to work a system of world trade.
There is no question in my mind about the alternatives posed by the Commission. They were, first, price cuts; secondly, season-to-season adjustment of prices, which is exactly the same and refers to the threshold; thirdly, intervention restrictions, which of course mean falsifying the standards of grain relating to intervention by raising the standard so much that it is forced on to the free market, thus lowering the price—a dishonest way of carrying on; fourthly, a co-responsibility levy; fifthly, quotas; and lastly, a set-aside policy, which certainly would not work in this country. The committee is absolutely right that price must be the right way to do it. Quotas are too complicated, too ossifying (to use that lovely phrase), and the argument for them will no doubt be put later by my noble friend Lord Walston. However, the committee as a whole thinks that they would be bad for agriculture.
Therefore, we are left with price restriction, and as we have said we do not want price restriction to be so savage that socially we destroy whole areas of the countryside which mainly depend on agriculture. If I may say so to my noble kinsman, that is the argument which I and others have heard put forward in third world countries: that if large quantities of food are imported, you not only destory agriculture, but you destroy the social system in the countryside and you drive the displaced Africans, or whichever peoples in the third world are involved, into the towns where they have nothing to do but take to crime and be unemployed. The same is true to a very large extent in the Community. If we agree that we cannot allow people to produce for evermore increasing surpluses and we have to cut the price to do it, we must look at variations of the system in order to make it effective.
As my noble kinsman said, it is perfectly true that we cannot do it quickly by moderate price cuts. We must look at co-responsibility payments. If, for example, one takes a premium per acre for growing cereals, it would concentrate the cereals on land that should be growing cereals; in other words, the land which is capable of growing 3 tonnes, 5 tonnes or even 6 tonnes of wheat an acre. I suppose that that would be the correct thing to do. However, we must do something with the land that is going out of production in the poorer areas. I think that we must look at this in a far more positive way than we have so far. We must say that, for example, in forestry not only will it be profitable for rich men to recoup tax and to plant trees and for their heirs to reap the profit in 50 years' time—in fact, at present people are advertising for land for just that purpose—but we should be spending that money, or the same sort of money, on making it profitable for the small farmer to plant the

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trees. I know that at present the grants are quite good, but they do not bring a positive cash flow.
That would be a very reasonable way in which to proceed because the shortage of wood is absolute. There is no question that, to take our continued use of paper and wood, for years and generations to come there will be a shortage of cellulose of one sort or another. We must also look at positive conservation measures. It is all very well saying that we will pay subsidies to build stone walls but not to dig ditches; that we will give subsidies for hedging but not for something else. That does not produce a positive cash flow. Therefore, if we are to encourage people to stay in the countryside, money must flow in positively—capital-wise for tourism and income-wise for forestry.
Other new techniques are being spoken of, including the biological techniques of production from sugar, and so on. Surely it is possible to go a lot further than has been achieved at the moment. We cut down thousands of acres of forest every day to provide the newspapers that we read. Surely in this country we could be growing crops and techniques could be produced to make paper—of which we use plenty here—out of straw. Certainly during the war we were using it. A lot of money might go into that sort of thing to provide alternative crops.
I come lastly to a simple point. The reason why the farmers, the agriculturists, on this committee have recommended what would appear to be cuts against their interests is simply that they are thinking in the long term. The primary producer is always at the mercy of the five per cent. surplus producing the 50 per cent. drop in price, and it mostly appears to go in that way and not in the other way, and therefore he deserves some protection against that sort of action of the market.
What has been wrong up until now is that for extraordinarily selfish and stupid reasons the agricultural ministers on the council have not recognised this fact so that we have reached a stage now where, as my noble kinsman said, at any moment we shall have not 30 million tonnes of surplus, but we could have 90 million tonnes of surplus in great bins all over the place and running out of every store in the country, and no money to pay for it. So in our long-term self-interest it is right that we should bring the spending under control, that we should produce alternatives and try to preserve the fabric of the countryside by other means. This report goes a long way towards pointing some of the ways in which this can be done, and our chairman is to be congratulated on his chairmanship of the committee and on his introduction of the report.
9.2 p.m.
Lord Stanley of Alderley: My Lords, I look on this report wearing two hats. The first is as a member of the Select Committee whose task it was, as I saw it on behalf of the taxpayer, to limit the cost of the CAP in order, among other things, to prevent it from going bankrupt and so causing ad hoc cuts—which the noble Lord, Lord Mackie of Benshie, referred to as totally unfair—and the real possibility of a complete collapse of the Community as a whole. Wearing that hat, I support the report, particularly the method of price restraint.
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I have no time for quotas or quantums for commmodities such as grain, if only for the simple reason that they are impractical in so large and diverse a body as the EC. Indeed, the noble Lord, Lord John-Mackie, made this point. Those on whom they will work will not understand them because they are not as literate, as numerate, or perhaps indeed as articulate as some of your Lordships, in particular the noble Lord, Lord Walston, who I know likes quantums.
However, wearing my other hat as a farmer, and I think indeed as a citizen, I have to point out that such price restraint, unless carefully and gradually put into operation, will carry quite a lot of price tags. We never get anything in this world for nothing. Indeed, some of these points were forcefully brought out by the noble brothers—if I may call them so—Mackie.
The first tag that I see us picking up for price restraint is that if it is to work properly it will bankrupt—or, as perhaps the Minister would put it more kindly, put out of business—perhaps up to 20 per cent. of the farm workforce. Here I am afraid that I have to disagree slightly with my chairman; it will not just be in the West, it will also be in the South, and it may be the so-called efficient large farmers who may well suffer.
After many years of price restraint, farmers have little financial fat. Indeed the noble Lord, the Lord Mackie of Benshie, pointed this out. The price cuts that we have experienced—in this year in cereals in particular—have been substantial. I am supported in this view by looking at the rapid exodus of the financial institutions from the agricultural scene, over which I cry not one tear.
Secondly, the United Kingdom might want agricultural production again when North Sea oil runs out in, I believe, the 1990s. We might then be short of currency, and the report from your Lordships' House, which caused quite a storm, suggested this. The United Kingdom is not self-sufficient in temperate foods, even those commodities which are in structural surplus in the Community as a whole.
Thirdly, price restraint will increase the rate of drift from the land. The report, as my chairman, the noble Lord, Lord Plowden, pointed out, says this, and it says it in paragraph 69. I fear that this drift will go southwards into our cities, so perhaps aggravating the law and order problem, and that it will increase the social problems in the areas deserted by this labour force. There will be a further decline in services such as schools, post offices, village shops, and of course there will be no ladies for the Tory tea parties, if of course those ladies who remain are still of that political persuasion.
Fourthly, price restraint of any kind whatsoever will harm the environmental work. I have said this before, but the farmer's first duty is to his family and not to the birds and the bees, and there will certainly be more derelict farm buildings, larger fields, more smoke, and plenty of corner cutting, particularly in such things as safety.
I have mentioned only a few of the price tags which will have to be picked up by price restraint. It certainly is not, thank God, for me to decide whether the game is worth the candle. It is for the Council of Ministers to decide; but I hope that they, and my noble friend Lord

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Belstead, will consider these points before a final decision is made. Talking to our Continental partners, who in the past have suffered more unrest than we have in Great Britain, I suspect that they value the social stability of a rural population more than we do in this country.
So I ask my noble friend Lord Belstead to accept the principle of price restraint as the best way of controlling CAP expenditure and to recognise that it is essential that any price reduction is known well in advance by the farmers. This was put very forcefully by the noble Lord, Lord Plowden. Secondly, any price restraint must be introduced slowly to allow the industry to adjust, and, like the noble Lord, Lord Mackie of Benshie, I believe that this adjustment should have been started many years ago. Thirdly, I ask my noble friend to remember the social price tags.
If your Lordships asked me to stop sitting on my hedge (if I have not grubbed it out already) I would come down on the side of price restraint, or maybe price freeze, for those commodities in structural surplus. If this does not balance the budget I would suggest that the VAT contribution is made higher, despite the fact that it has already gone up 0·4 per cent. this year, to make sure that the CAP does not run into debt.
9.10 p.m.
Viscount Sidmouth: My Lords, when the shape of the CAP first became known in this country about 20 years ago many people, of whom I was one, viewed with some scepticism its apparent reliance almost exclusively on price mechanism to regulate both supplies of food for the Community and the well-being of the farming industry. There was provision for a common external tariff, which has limited the sources from which the food supplies of the Community could be expected to come, but even so the market to be regulated was large and, in many respects, complex. The accession since then of what will shortly be a further six states into the Community has greatly increased that complexity and also the political pressures.
In defending the policies which have resulted in the present financial problems, the Commission has taken the line that all would have been well if only the price recommendations made in recent years had been followed. It is true that over that period both the European Parliament and the Council of Ministers have consistently raised the price levels above those proposed by the Commission. But within the criteria laid down by the Treaty of Rome political decisions on these matters are inevitable. The objectives for the CAP set out in Article 39 of the Treaty are expressed in general terms, and in some cases can be seen as mutually conflicting. Furthermore, they are specifically set above the provisions of Article 43, which deals with the general rules of competition in the market.
It is clear, therefore, that in the CAP we do not have a free market, with the free flow of supply and demand making the market price. On the other hand, it is not a fully managed market, either. In the end, the only really finite control is the amount of finance which can be made available, and this appears to be running out.
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Sooner or later it must become necessary to introduce a further parameter. I believe this should lie along the lines of determining levels of food from Community resources which are required from time to time to meet the needs of the internal market and any external markets that may present themselves. Recognition of such targets must surely be essential for shaping policy from year to year, whatever methods are finally adopted for working towards them.
It so happens that research and development can help in adding precision to such calculations. Much has been made of the increases in productivity brought about by agricultural research and development. They have even been used as a stick with which to beat the fanning community or the research council itself. But the measures can also be seen as helping to reduce the fluctuations in food supplies brought about by variations in weather and natural conditions from year to year. Indeed, much research has been directed specifically to this objective. For example, I believe this could justify a reduction in the expensive storage of reserves to cover a possible shortfall in any crop year, and that would also bring more conviction to forward projections of our future production requirements.
In making its recommendation that,
"the principal tool for reform must be an increased use of the price mechanism,"
the committee was influenced by the immediate financial crisis in the European Community budget, and its possible consequence of a complete breakdown. Direct financial action under the price mechanism is no doubt the logical way to meet a short-term financial crisis because it would obviously reduce the cost to the Community of any particular crop year. However, I believe it is too blunt an instrument to resolve on its own all the long-term problems which have been thrown up. Indeed, like its forensic counterpart, it could, if wielded too violently, lead to grave injury and even murder. Foremost among the vicitims would be a myriad of small farmers and growers, and before I conclude, like previous speakers, I should like to draw attention to their plight.
It happens that the crop to which particular attention is paid in this report is cereals, where there is a minimal problem regarding small growers, mainly because there are very few of them—anyway in this country. However, other products which have been examined recently by the committee—for example, grapes for wine-making, olives for oil, or dairying in the animals sector—illustrate all too clearly the problems arising where there is a multiplicity of small producers and a product which is in surplus.
It is not that they are inefficient, necessarily. Very recently I visited an area in the centre part of Mallorca where the combination of a Mediterranean climate and ample supplies of subterranean water have created a prosperous community of small producers, mainly of fruit and vegetables. Very nice it looked, too, with immaculate buildings and miles of impeccable dry stone walls. No doubt this area will continue to thrive within the Community when it comes in. However, elsewhere there are millions of small producers, typically on marginal land, who are very vulnerable to any reduction in support prices.

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In the days of the Community of Six, Commissioner Mansholt, I believe, brought in a plan to shake something like eight million of these people out of agriculture. That plan was not implemented as such, but we have heard earlier this evening from the noble Lord, Lord Plowden, of the vast efflux of people from agriculture that has taken place within the Community since that time. We have also heard this evening cogent reasons why we should not go down that road any further—reasons both social and environmental.
On this score, I believe that particular importance attaches to Nos. (ii) and (iii) of the topics selected for the great debate on agricultural policy proposed by Commissioner Andriessen. Some of the evidence submitted to the committee, for example by the AFRC, indicated the work being done on alternative crops. But, important though this is, there was little to suggest that it would have a significant effect in the short term.
As for new uses for agricultural products, previous inquiries have revealed possibilities; for example, ethanol from cereals and alcohol from wine. The problem in most cases appears to be more economic than technical, in that the price of these products as food makes them too expensive as feedstocks for the new uses, as compared with sources already available elsewhere.
Thus the outlook for the small grower remains bleak. Recognising this, the committee considers that direct income aids must be a corollary to the more rigorous application of restrictive prices. These views are set out in paragraphs 57 to 64 of the report. I believe that the problem of the small grower is at the root of the present difficulties within the CAP, and that it can be solved only by vigorously pursuing both the long-term and the short-term remedies which have been proposed.
9.24 p.m.
Baroness Elliot of Harwood: My Lords, perhaps I may add my thanks to the noble Lord, Lord Plowden, for the admirable way in which he conducted this report and this committee. It was fascinating to listen to and fascinating to read afterwards when it was printed. I think the evidence which was taken was extremely interesting and will be of value for a long time to come. Certainly it was a very well worthwhile exercise. We are much indebted to the noble Lord for the enormous amount of trouble he took and the great area of agricultural activities which is covered in this report. The enormous number of organisations we saw and the great numbers of people whom we interviewed were all of great importance.
Tonight I do not want to take long. I should like to pick out merely one or two vital matters arising from the report.
I think that one of the things the Commission perhaps does not realise strongly enough is that farmers want a clear indication of the policy of the CAP for at least three or five years. Decisions which are taken instantly cannot be implemented instantly. If you are a farmer who is engaged in production, you cannot change your policy instantly: it is quite impossible. I think it takes at least three years to
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change a policy, whether it is for stock rearing or for cereal growing. Too often the Commission has given pratically no notice of any change in policies, so I hope that whatever else happens in the future we may at least have sufficient notice to be able to reorganise our agricultural production.
Tonight everyone has spoken, quite rightly, of the problem of surpluses. I believe that is the key to much of the reform that we ought to engage in. How do we tackle these surpluses? I do not think we concentrate nearly enough on the all-important business of selling what we are producing. We do not give enough thought to it; producers do not give enough thought to it; the Commission does not give enough thought to it. No one on the production side gives enough thought to how we are going to sell the produce that we make.
I went to the opening of the Royal Agricultural Show this year, which was performed by the noble Lord, Lord Sieff. He made an excellent speech, I thought, and one of the things he stressed very strongly was the story of how—and after all he is involved in a great selling operation—the producers must produce what the consumers want to buy. I was very interested in his speech. He talked about one or two particular examples, and I remember that one of them concerned the Arctic lettuce, which Marks and Spencer have managed to get the producers to grow and which are selling in their thousands, whereas before that the kinds of lettuce being produced were not really those that the consumer wanted to buy.
I think more could be done if there had been closer liaison between the producer and the consumer. We have marvellous selling agencies here—businesses like that of the noble Lord, Lord Sainsbury, or of the noble Lord, Lord Sieff. There are many others such as Tesco and so on which are all wonderful selling agencies. I think that we are as good at selling as any country in the world but we do not have a close liaison between the consumers and the people who are providing the consumers with what they really want to buy. I should like to see much closer co-operation between those of us who are producing and those who are selling, because I believe that in that way we might avoid the surpluses we have today.
I know that the cost of the CAP is the biggest item of expenditure in the Community's budget and people are asking whether the Community gets good value for this expenditure. My answer is, "Yes". We have provided all the food, and more, that the people in the 10 nations of the Community want. Farming life is still of the greatest importance both to the Community and to the people who live in our countryside. Rural life must be supported. More people crowding into towns would certainly be quite intolerable: it is quite bad enough as it is now. I agree with all that the noble Lord, Lord Mackie of Benshie, said on this subject just now. We must see that the rural communities are preserved, but we must change those rural communities and rural life while recognising that agriculture is an essential part of the national life in all EC countries.
That is where it is so very important for people to study the question of over-production. I know that we have recommended in our report the idea of price control, and that is probably a very good way of doing what is needed. But more could be done in other ways

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if we studied this matter more closely. I also agree—and this is in our report—that if we are to have cutbacks in the rural areas the consequences to the community must be measured and looked after. That is where the question of direct grant aid comes in.
We have suggested in the report that other activities could be introduced into rural areas. Examples are tourism, craft industries and forestry, although, in my opinion, forestry does not increase employment. I am surrounded by forests in the area in which I farm and the number of people employed is far fewer than in agriculture until the moment when the forests are cut down. That is when a lot of people are employed, and then there has to be replanting, but it takes a great number of years to reach that point.
We shall have to go for direct aid for those areas which will be severely hit if and when there is a great reduction in production. At the end of the day, we must all agree that it is better to have more food than too little. We must all consider very carefully the problems by which we have been obsessed in the last few months in Ethiopia and in Africa generally. I shall not discuss them now, because they do not come into our report, but where you see a shortage of food there you see disaster. In a way, we are fortunate because we are dealing not with shortages but with surpluses.
I have one other suggestion, and I wonder whether the Commission would consider it. Many years ago, the United Nations started an organisation, which is now famous, called the Food and Agriculture Organisation—FAO. When it was first started, it was run by a very remarkable man named Lord Boyd-Orr, who was the chairman. As your Lordships know, he has been dead many years, but he then made a suggestion which nobody took up. It was that there should be a world food board to help with distribution and with the way in which production and distribution could be united. It was rather like the World Bank which we have today. I do not know whether that is at all a possibility; certainly it is something which has been discussed and rejected.
It would be a pity if ideas such as that could not be looked at again because we are now in a position that is quite different from our position immediately after the war, when agriculture was only beginning to be the enormous industry it is today. If there could be some liaison between areas of over-production and areas of starvation, we should be doing something of enormous value not only to the agricultural world but to the whole community. I do not know whether the Agriculture Commission would ever consider that suggestion because it goes outside Europe and would mean that Europe would simply be part of a much bigger world organisation. But it might be worth thinking of; indeed, there are many ideas which we must consider as well as those that we have recommended.
However, as a farmer, I support the EC. I do not think it impossible to find a way out of these problems and I hope that the Commission will take advice from us as well as from other people. I believe that this matter could be solved and I do not think that it is insoluble.
Lord John-Mackie: My Lords, before the noble Baroness sits down I think I should correct her on the question of labour for forestry and for agriculture. Statistics show that, on comparable land, forestry employs three times as many men as hill farming.
Baroness Elliot of Harwood: My Lords, I am very interested to hear that, because the noble Lord, Lord John-Mackie, was the chairman of the Forestry Commission. I can only tell him that in the area in which I live that does not happen, but it may happen in time.
9.30 p.m.
Lord Lever of Manchester: My Lords, it is with some diffidence that a mere townsman with little or no knowledge of the details of farmers' problems rises to speak briefly, not under the delusion, which could be readily brought about by reading the report of the noble Lord, Lord Plowden, and his colleagues, that I had acquired that expertise simply by studying the masterly report which they have presented to the House.
I want to make some general comments as briefly as I can. First, self-sufficiency in food as an aim can be defended on social and environmental grounds even by those who see that that modest aim is economically not necessarily the best path and certainly not to be pursued rigidly in food or in any other area of our activity. What we have achieved here is not self-sufficiency, but we have achieved a structure quite different that produces these surpluses. Within a self-sufficiency programme you can structure productivity gains so that these will be manageable in the Community, will bring down prices and will bring benefits and a reduction in the burden of the subsidy required. But when you go on to the field of surplus you are moving into a totally different and more dangerous and destructive area.
When you are subsidising self-sufficiency you are at least subsidising useful work. The moment you move into producing surpluses in goods which are already in surplus in the rest of the world, you are subsidising waste, and in circumstances which affront the common sense of most of your citizens. So we really have to worry that our political leadership in Europe has been so slack that it has allowed the situation to get into the grave and complicated condition which the noble Lord, Lord Plowden, outlined briefly today and which is fully outlined in the report. What is worse is that, with the best will in the world—that is to say, even if we handed over the problem of running Europe to the Select Committee—it would take many years and much heartache before it is put to rights.
The problem continually increases with productivity gains. This has another political aspect to which I draw your Lordships' attention. It means that our people who are bearing the burden of the cost of this system see that they are bearing the burden of tax and prices in order to supply foodstuffs to the world outside at prices massively lower than they themselves have to pay; or, alternatively, they are forced even more unattractively to witness the sacrifices they are making in subsidising food production thrown away as the food is allowed to rot or deteriorate. When we act in this way we force ourselves to try to get rid of some

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of the surpluses in ways which inevitably disrupt world markets and patterns of trade. In doing so we are openly challenging and undermining the basis for the liberalisation of world trade. This adds to the frictions between nations and gives an impetus to protectionist trends already at a dangerously high level.
In political terms, the majority of our citizens who have to finance the production of these surpluses will readily come to feel that they are financing a process which undermines their own legitimate and healthy trading opportunities. This is not a static situation but one that grows worse all the time. We make productivity gains in agriculture and, because the system is upside down, those gains are not of benefit to us but are a further menace. They do not lighten the burden on the Community but increase it and present the Community and its citizens with the almost insoluble problems which are now upon us.
We must be careful not be become a 20th century version of the Luddites. The original Luddites tried to strangle production at birth. The 20th century versions of them could be said to be allowing production to come into being using the most modern techniques available for producing food but they then destroy it, waste it, use it or otherwise attempt to get rid of it in ways which redound to our harm.
If I may now say a few words about the LDCs, I agree with the committee in the principle of one having to be very careful not to act, however generously, in giving away food when that action undermines the food production of other countries. I also wholeheartedly agree with my noble friend Lord John-Mackie when he says that there is quite a distance to travel in many parts of the world before people will be able to feed themselves. It is a real problem and the committee were right to draw attention to it.
What is to be done? I do not know whether it heartens the bucolic membership of the committee to know that a mere townsman utterly endorses their majority view in favour of a market solution. Almost every knowledgable and objective person who has examined this problem is driven to the conclusion that, basically, the market solution must play a part. There are undoubtedly occasions in the modern world when the brilliant insights of Adam Smith on the workings of the invisible hand on markets must be
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intelligently and humanely related by government action to 20th century conditions. However, such interventions by governments have a fundamental justification; they are interventions to correct market anomalies and not to create them. The interventions we have organised in Europe are calculated to create anomalies on a growing scale.
I support also the committee's recommendations concerning generous selective action to help farmers where difficulties will be created. I fully support the committee's judgment in favour of timing changes in a realistic and compassionate manner. However, the difficulties of some can no longer serve to justify subsidies on this scale to the rest. We have reached a point—as the noble Lord, Lord Plowden has made clear in his report and again today—where such arrangements do not merely threaten the solvency of the Community but will increasingly embitter relations between its members and threaten the existence, and certainly the fundamental purposes, of the EC. We have already seen that this system of agricultural support—uncorrected even after it became fairly obvious that correction was required—has already done great injury to the major European purposes, which have had my full support or many years and continue to do so. That system not only eats up a great part of the budget but has too often reduced the contribution of Ministers to tedious and destructive nationalistic budgetary squabbles. This is a lamentable dissent from the great European purpose.
I conclude by fully recognising that we must act with circumspection and compassion. I fully recognise also the complexity of the problem, as outlined in the report. However, complexity is not an excuse for taking no action. I very much favour market action because it is the neglect of that action which is in part responsible for the present situation. It has been said that the alternatives to the market are the state and prayer. Neither of those has a compellingly successful record so far in this area, so I have no difficulty in supporting the noble Lord in recommending the market solution. The future will belong to those nations which can respond most swiftly, intelligently and compassionately to change. It will very heavily penalise those who obstinately resist it. The mischiefs involved in the present system of agricultural support have gone on too long. They must be corrected.
Lord Sainsbury: My Lords, first, may I join with others in praise and appreciation of the wise and firm chairmanship of the noble Lord, Lord Plowden, during his three-year term as chairman of Sub-Committee D. He will be greatly missed.
The shortcomings of CAP have been its failure to adapt its policies to changing circumstances. At the end of the war memories of hunger were vivid in the minds of millions. In fact, shortages of food continued into the 1950s. So naturally all the emphasis was on expanding production and on higher productivity. In this, undoubtedly CAP policy was very successful. But in due course this ever-expanding production became both excessive and increasingly embarrassing.
In the United Kingdom, in the 10 years from 1973 to 1983 there was, in the case of wheat, an increase of 45 per cent. in yield per hectare. In the case of barley the figure was 17 per cent., and for milk it was 25 per cent. per cow. These increases in yield were, of course, not confined to the United Kingdom. As long ago as the 1960s far-sighted Sico Mansholt, the agriculture commissioner at that time, proposed in his well known memorandum a substantial long-term cut back on CAP price supports. But that and other of his proposals were rejected, showing then, as so often since, that the Commission and the Council were incapable of taking decisive action. Now, nearly 20 years later, growing surpluses and unacceptable costs have reached crisis proportions.
The Commission, in its Green Paper or discussion document on the future of the common agricultural policy, states that agriculture, like the rest of the economy, is subject to the law of supply and demand. It goes on to say:
"Unless the Community succeeds in giving to market prices a greater role in guiding supply and demand within the agricultural policy, it will be drawn more and more into a labyrinth of administrative measures for the quantitative regulation of production."
I could not agree more.
In my opinion the importance of a restrictive price policy operated consistently over a period of time cannot be exaggerated. To date the Council of Agricultural Ministers has unanimously agreed that something needs to be done but disagreed as to what it should be. In the light of experience I am not surprised at this disagreement and its reluctance to accept a realistic restrictive price policy. So often in the past prices have been fixed as a result of political compromises acceptable to all member states, and generally well in excess of the prices ruling in international transactions or the domestic markets of countries with which the Community is in competition.
Of all the commodities in surplus it is probably cereals which present the greatest long-term problem; but that is not to say of course that there are no others. As has already been said, there are over 1 million tonnes of butter in store, in spite of the milk quotas, which are costing the EC taxpayer approximately £6 million per week. There are also over 800,000 tonnes of beef.
The Home Grown Cereals Authority has projected that end of season EC stocks of cereals may grow to the
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staggering total of 89 million tonnes by the year 1990–91. If the Home Grown Cereals Authority's projection is anywhere near right, then the number of intervention stores that will be needed is beyond belief. The Commission itself suggests that the very large harvest of 1984, which amounted to 155 million tonnes, could be a normal level of production in 1990 compared with the level of 125 million tonnes which was the average in the period 1980–83. It also goes on to say that even optimistic assumptions do not suggest that export markets can be relied on to absorb the future increases in Community production.
The Commission, as well as many others, has advocated for several years that European cereal prices should come more in line with those of our competitors in world markets. In 1982 the Council introduced a system of guaranteed thresholds which should result in the price being reduced if the threshold is exceeded. But the recent experience of the 1985–86 price negotiations shows how difficult it is for the Council to put such a policy into practice if it is not complemented by other measures concerning farm incomes.
Farmers particularly hard hit by a restrictive price policy should be helped; but the big questions are how and by whom? The committee considers provision for direct income aids to be an essential complement to the successful use of the price mechanism. But agriculture and rural conditons vary so greatly in different parts of the Community that the committee feels that it would be impossible to devise and administer centrally measures which can meet every case, where some form of direct income support is thought desirable on political or social grounds.
Detailed arrangements for income support, in the committee's view, must therefore be framed and administered nationally and in some member states regionally. Unfortunately both EC farm Ministers and farmers' organisations across Europe have shown practically no interest in the Commission's proposal for direct income aid to farmers. Mr Graham Avery, Agricultural Adviser to the European Farm Commissioner, said recently at a seminar in London that there was some enthusiasm for schemes designed to ease early retirement for farmers which, I should have thought, however valuable in themselves, are hardly an alternative to direct income aids.
I should now like to refer to something rather different. Agriculture is not just food production. The demands of consumers, their nutritional needs, their concern for quality and the requirements of the food industry have in the past, in my opinion, not been given the attention that they warrant. It is not always recognised that 80 per cent. of the food that we consume is processed or is manufactured. It is a very important industry. Its competitiveness has not always been helped by the common agricultural policy. I should therefore welcome a more integrated approach being taken and more attention paid to food policy.
I understand that the Commission anticipates six months of consultation and negotiations on its various proposals in the Green Paper. The great question at the end of the day is: will the Ministers of the member states have the political will and courage to take the

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necessary drastic steps, or will they jeopardise, by compromise and inadequate measures, the whole future of the European Community?
9.54 p.m.
Earl Ferrers: My Lords, I should like to declare an interest as one who has been involved in agriculture and farming throughout my life and also as chairman of the British Agricultural Export Council, whose purpose is to try to encourage exports from firms ancillary to agriculture which supply input to agriculture. I should also like to add my thanks to the noble Lord, Lord Plowden, and his committee for their remarkable report. It is clearly a result of a great deal of work and a thorough review of the whole problem.
It is interesting to note that out of 17 Members of your Lordships' House taking part in the debate I think that only the noble Lord the Minister and four others are not members of the committee. Therefore, there is a certain healthy whiff of unanimity of view expressed this evening. The committee have addressed their minds to the frantically difficult problem which has exercised Governments, the European Community, farmers, financiers and ordinary bemused individuals. I sympathise with anyone who tries to find the route out of the problem of the common agricultural policy.
Some of your Lordships may remember about two years ago a little word was coined called "TINA", which was supposed to mean "There Is No Alternative". Sometimes I think the word TINA can be applied to the common agricultural policy with a different translation, which is "There Is No Answer". It is difficult to find a solution, and even more difficult, having found it, then to get the other nine colleagues in the Community to agree. In the world of politics this is unlikely and, therefore, the most that could be expected is that we would get a watered-down version of the best and therefore the problem will continue.
The noble Lord, Lord Sainsbury, gave us some alarming figures of what the stocks might be in 1990 and later if rates of production continue at present levels. I do not dispute for a moment that those figures are correct. The only consoling thing is that when something seems perfectly obvious in this life it is the one thing that usually does not happen.
It is fashionable to lambast the CAP, which has in fact been a success. It set out to do two things: first to produce food for members of the Community at a reasonable price, and, secondly, to raise the standard of living of those in rural parts of the Community. This it has done; and it suffers from its success. I liked the definition of the noble Lord, Lord Lever of Manchester, when he said that it is justifiable to subsidise for self-sufficiency but not to subsidise for surpluses. That is correct. The difficulty is that one cannot actually bring the guillotine down at the moment one arrives at the point of success.
The committee's main plank was that there should be a reduction of price. They say that a continuation of existing policy will cause difficulty to paying members, and might end the European Economic
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Community if the CAP cannot be brought under control. I agree. I think there would not be many who would not agree. The suggestions of the committee are logical, intellectual and reasoned; indeed, so logical, so intellectual and so reasoned that it is very difficult to disagree with them. But I would venture to make one humble, modest criticism, if I might. It is almost an impertinence to do so, but my criticism is that possibly they have looked at the tactics of the solution as opposed to the strategy.
Agriculture, not only in the EEC but particularly in the United Kingdom, is undergoing very severe pressures, and has been for the past two years. Cereal prices—and this is the example taken by the report—in fact have dropped by £20 a tonne over two years which means that returns have dropped by about £60 an acre. Costs have increased at the same time, from the point of view of both inflation and technological improvements. This year has been a bad harvest, with a drop of about half a tonne per acre. I do not lay emphasis on this because in farming one has good years and bad years, but nevertheless it is a fact. As my noble friend Lord Stanley of Alderley said, there is not much fat left. Of course, there are some farmers who always do well and who are on good land. There are others who are not so fortunately placed. In general, the only point I wish to make is that agriculture is undergoing some pretty severe strains.
I therefore enter one word of caution, if I might. What happens if prices go on being lowered? It is not as if you say that 5 per cent. off one year will rectify the position. It will not. It is, as the noble Lord, Lord Plowden, I think, said, a policy of continuing price reductions. Two things will happen if prices are lowered. One is that by lowering profitability it will stimulate farmers, by every conceivable means, to increase their productivity in order to gain by extra production that which they have lost by price reductions. The result will be to add to the very problems we are trying to resolve. It is another example of what I once described to your Lordships, I hope with a degree of humility, as "Ferrers' law", which says that everything has the reverse effect of that intended.
The second thing is that if reducing prices works the way that it is intended, then farmers will be put out of business. That may be desirable. The noble Lord, Lord Mackie of Benshie, said that farmers in the vast prairies of North America were going bust by the score. I do not believe that this is a policy that we want to see pursued here. What happens if bankruptcies take place and businesses come to an end to any reasonable extent? One thing is that land prices will drop. That, in turn, will put in jeopardy other farms and other agricultural businesses for which security largely rests on the price of the agricultural land. That being so, that will put them in jeopardy, and land prices will drop still further. That is the effect of market forces. This may be perfectly justifiable, but I doubt whether it is something that we wish consciously to see happen.
The committee says that there will be a trend away from farming. That is perfectly true in numbers, but not necessarily in acreages. What do you do with land that is made uneconomic in that way? What happens

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to it? I do not think the committee addressed their minds to that. If the land that has become uneconomic is bought by a neighbouring farmer who is more economical, he can then farm that land more efficiently and so continue to produce that which the person who has gone out of production used to produce. And so the problem continues. What is the alternative? It cannot be put down to grass. Because there are beef mountains, butter mountains and milk lakes, it cannot be put down to rape. Although the committee suggest rural industries and tourism, I do not believe that this is a satisfactory alternative. It is a method of providing employment; it is a method of providing an additional income: it is not an alternative land use. The uplands will be particularly badly hit.
The committee say, as I think the noble Lord, Lord Sainsbury, said, that those people should be helped by some form of rural subsidy. That helps economically those who live there, but it is slightly akin to a rural dole. I do not believe that it is a satisfactory land use. It might be an aid in difficult circumstances, but it is not really a satisfactory strategy.
There are those who say—the committee did not say this—that land which came into a state of non-viability would be a wonderful opportunity for conservation. Conservation is good and should be encouraged; it is worthy. But as a policy, conservation is complementary to agriculture; it is not an alternative. To see large areas of land become derelict because of the financial inadequacies of agriculture and to consider that it provides environmental conditions for birds and insects to flourish is not an acceptable strategy. It would be tantamount to seeing a return to the depressed era of the 1930s. I do not say that this is what the committee wishes but I hoist one word of warning: if that particular policy of continued price decreases were to take place that would be the possibility.
Then one asks: what is agriculture? It is not just farmers and farm workers. It is all those whose work and livelihood brings them into contact with agriculture. It is the farm workers, the villages, the agricultural merchants, the corn merchants, the agricultural engineers, the machinery manufacturers from the small blacksmith up to the Fords and Massey Fergusons of this life. It is the agricultural chemical companies such as Shell and ICI and their purveyors. It is a whole range of country, industrial, chemical, manufacturing, and processing activity, all of whom depend upon agriculture in its widest sense. All those people, companies and industries will be affected if we have a decline in rural agriculture.
It is significant to remember that agriculture is the biggest industry in the United Kingdom other than oil exploration. I do not suggest that that is a reason for continuing to subsidise at uneconomic rates the production of food that at present has no particular home, but, if we followed the line of the committee of the noble Lord too far, it would have quite deleterious results. Paragraph 95 of the report says that the cereal problem could mount in almost geometric proportions. I agree entirely. However, decline can happen quickly and, if an avalanche begins, it is not easy to stop. What we have to try to do is to make adjustments without causing the avalanche.
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We are not alone in this. Other members of the European Community and the United States of America face the same problem. We are all suffering, curiously enough, from a technological success. I think that it was the noble Lord, Lord Wilson, who said when he was Prime Minister that if industry had the output that agriculture produced we should have no problems in this country. But, as in industry, in order to succeed one has to modernise. Modernising invariably creates the very unemployment that we all seek to alleviate. One sometimes thinks that life would be very much simpler if mankind had not thought of these innovations and technological advances. Everyone would be employed and the countryside and our cities would look nicer. But one cannot deal in fantasy. One has to deal in the realities of life. We are in a world with disadvantages as well as advantages.
I should like to draw this thought to your Lordships' attention. It was mentioned, I think, by the noble Lord, Lord Sainsbury, and certainly by the noble Lord, Lord John-Mackie. In 1960 there were 3,000 million people in the world. In the year 2000 there are likely to be 6,000 million; and we are only 15 years off that. All those people have to be fed, housed and clothed. What to us at the moment is a carbuncle of anxiety induced by over-production in the West is in the totality of the world no surplus at all. We ought to find a way to get what is a surplus in the West over to those who are not so fortunate. That does not mean that the provision of food to other countries is in itself necessarily a good thing. Somebody has to pay. Frequently the food does not get where it is needed; and there is a possibility that it may lull people into security as they wait for the next load of food as opposed to trying to find their own methods of production. But it is something which we ought to consider; and in some way to try to find an answer to. Without doubt there are those in this world who ought to be able conveniently and easily to deal with what at present is a surplus. One should remember that, despite their gross inconvenience, surpluses are very much better than deficits.
If the Government find the right answer to this and if the answer be that advocated by the noble Lord's committee, I wish them well. I asked them to be cautious for the reasons which I have given and I hope that they will not find the problem too intransigent because I rather doubt whether in the end they will be able to get their other colleagues in the Community to agree. That sounds a little depressing, but things do not always work out in quite the way we expect, and I have no doubt that in the end some solution will be found. However, I do not think that it will be an easy one and I do not think that it will be quite the one which the committee of the noble Lord, Lord Plowden, suggests.
10.11 p.m.
Lord Northbourne: My Lords, I, too, should very much like to thank and congratulate the noble Lord, Lord Plowden, on his sensitive and charming chairing of the committee. I should like to touch on one or two aspects of the report. The first is debt. I am very worried about the question of debt, which the noble Earl, Lord Ferrers, touched on a little. If the price restraint policy which we are advocating is indeed applied, there will be a very serious problem of debt for

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those farmers who in the last few years entered into financial commitments when land prices were high and everything looked good.
A few years ago the future of the CAP seemed buoyant. The question is: were people who entered into debts at that time misled by the CAP or did they just make a bad business judgment? How do we draw the line? The problem of debt will not get any easier as land prices fall away, as they undoubtedly will under the influence of lower prices.
In paragraph 71 the report stresses the wide variation in the levels of debt within countries of the EEC. For example, debt in the Netherlands and Denmark represents respectively 81 per cent. and 89 per cent. of operating capital. The level in this country is of course very much lower. I trust that the Government will look carefully at any element of concealed subsidy which is contained in these debt differentials, and make sure that Community funds are not spent relieving debts on loans which have been unfairly subsidising competition with British producers.
A particularly important point on the subject of debt in this country is made at page 87 of the evidence given by the Agricultural Mortgage Corporation. I quote Mr. De Salis, who said:
"In many instances people are over-borrowed because… they are farming more land than they now wish to … They find it difficult to sell off part of their land because of the incidence of capital gains tax. It is impossible to roll over capital gains into the paying off of an overdraft as it is into investment in other assets. It is rather extraordinary, in the current economic climate, that it is not possible to roll over capital gains tax into reducing the size of one's business … If that could be changed, I think that it would make it easier for farmers to solve their borrowing problems".
What will happen to farmers who are put out of business by price restraint? Last Tuesday John Cherrington in an article in the Financial Times said:
"The political question of the day is, 'Whose land is to be sterilised, and how will farmers be compensated?' ".
We cannot just shrug our shoulders and say, "Let them grow brioche!" We have to do something about it. I think that it is necessary very clearly to differentiate between help which is given to maintain existing farm structures and help which is given to compensate the farmer and his family against personal suffering. For the former category, the Council for the Preservation of Rural England has recommended annual management grants tied to agreed farming practices and urged hectarage payments rather than headage payments to avoid over-grazing and preserving the countryside.
I think that part-time farming can also help to maintain existing structures in areas of the countryside where small farms are important to the landscape or indeed to the structure of the rural community. More alternative part-time occupations are needed in these areas, and there is also the possibility of new part-time farmers. I remember a conversation with a Frenchman who asked me about my job. I said, perhaps a little sententiously, "I am a peasant". He said, "Me too", in a flash, "but not a practising one". I think there probably is some room for part-time peasants.
Finally, I should like to turn to the question on which many noble Lords have touched—European
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food surpluses in the context of world hunger. I agree with the report—and it is generally accepted—that, apart from emergencies, gifts of food to developing countries are counter-productive. Cheap food distorts markets, lowers food prices, and discourages local production. The aim of development aid must be to stimulate self-sufficiency, but this does not detract from the need for emergency food supplies.
Many developing countries do not have the regularity of rainfall which we enjoy, and, except under irrigation, production fluctuates widely from year to year and so do prices. The only solution to this problem which provides regular food supplies to the consumer and a more regular return to the farmer is strategic storage. Adequate storage is an essential ingredient of any policy against hunger. Strategic stores should ideally be replenished from domestic production in the good years. This holds up prices and encourages local producers. However, there are many countries today where bad year has followed bad year: no replenishment of strategic stocks has been possible. In cases of this kind, and in cases where strategic storage has not yet been established, there is a very real justification for donating some of Europe's surplus grain to refill the stores.
A brilliant Jewish politician flew over to Rome in 1974. Henry Kissinger in his keynote speech at the World Food Conference in that year suggested a policy of world food storage. The initiative unfortunately failed through lack of political will. I suggest that the recent response to the Live Aid appeal might indicate that there may now be more political mileage in support for the third world's starving people. It is disappointing, in this context, to note that the United Kingdom Finance Minister was among those who, in September of this year, supported the withdrawal of the 500,000 tonnes emergency food aid proposed by the European Commission for 1986. I would ask the Minister whether he can give an assurance that this question will be reopened. In Mali, Chad, and Ethiopia today the stores are empty.
I should like to read to your Lordships a sentence or two about another brilliant Jewish politician 3,200 years ago:
"Joseph said to Pharaoh, 'Let them take up the fifth part of all the food of those seven good years and lay up corn under the hand of Pharaoh, and that food shall be for store to the land against the seven years of famine which shall be in the land of Egypt, that the land perish not through the famine".
That was 3,200 years ago. Surely it is time we learned the lesson!
10.20 p.m.
Lord Middleton: My Lords, I had the privilege of sitting on the committee of the noble Lord, Lord Plowden, having myself a direct interest in farming. It is getting late so I should like to make my brief contribution to this debate by concentrating on the cereals section of the report, where the problem is summed up in three short sentences, on which I should like to base my remarks:
"[grain] surpluses are heavy and still increasing. Productivity continues to rise. Disposal on the world market is costly and a cause of international friction".
Noble Lords have referred tonight to an estimated build-up of surpluses by 1990–91 of 90 million tonnes.

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The growth of EC grain surpluses is illustrated by Table IX in the report, and the production figure for this year's crop was a guess because our report was published at the end of July.
The Home Grown Cereals Authority has this month told me that its estimate for 1985–86 (that is the year's grain crop) for the EC should be revised upwards from the estimated figure in Table IX which is 133 million tonnes to 140 million tonnes. If this is right, it would generate a much larger surplus over the next seven years and it would generate significantly greater costs of disposal. The authority's new figures, which include a revised estimated annual increase, envisage a total liability in 1990–91 of 14·3 billion ecus in respect of cereals alone. That is not much less than last year's total appropriation for the whole of the EC's agricultural market support of 16 billion ecus.
This latest piece of information surely underlines and magnifies the problems of marketing grain surpluses which are described in the report, and as the report says they call into question the viability of an intervention system that is already very near to taking the Commission's expenditure well beyond the budgeting ceiling.
Even allowing for the vagaries of the weather, therefore, productivity continues to rise, so what is to be done about it? The Commission is quite clear what is to be done and that is to check the continuing rise in cereal support prices. For this 1985–86 season they proposed a 1·8 per cent. cut in intervention prices for grain, but the Council of Ministers failed to agree on this particular issue. Since the report was published, the Commission has said that in the absence of a Council decision it will implement its own recommendation.
The reasons Lord Plowden's sub-committee supports a policy of cutting back institutional prices have been given by the chairman and are set out in the report. The logic is inescapable. The noble Lord, Lord Plowden, has referred to the other options, the other possible control mechanisms, and the reason for preferring the use of the price mechanism. I was very interested to hear the views of the noble Lord, Lord Lever, on that.
The crucial question is: will such an apparently modest institutional price reduction have any effect upon the build-up of surplus grain stocks? The answer has been given by my noble friend Lord Ferrers. The answer has to be that it will not in itself reduce output by so much as a bushel. What it will do is to reduce to some extent the financial burden on the Community's funds, and that is the overriding necessity.
What kind of price reduction is needed to affect grain output? Any farmer will say—and it has been mentioned tonight—that the price he is actually receiving for his corn is dropping steeply. The National Farmers' Union has given me up-to-date figures, the figures are confirmed by what my noble friend Lord Ferrers has said and my experience confirms their accuracy. These figures illustrate quite clearly what is actually happening. The market price for feed wheat in September 1983 was £120 a tonne; in September 1984 it was £ 100 a tonne, and this September it was between £95 and £100 a tonne. That is a fall of up to 20 per cent. in two years. But this is not the end of the story
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because last year the Commission imposed a 120-day delay in the payment to farmers for grain sold into intervention and that in itself is equivalent to a £4 a tonne reduction. Finally, during the same two-year period input costs have risen by at least 10 per cent.
This sharp downward trend in grain prices should be considered in the light of paragraph 57 of the report, which quotes the evidence given to us by the Agricultural Mortgage Corporation. I think this has already been referred to tonight. The corporation estimated that a 15 per cent. reduction achieved by cutting prices would have eliminated the net farming income for 1984. Whether or not this is a reliable estimate, there can be little doubt, as is said in paragraph 58 of the report, that a significant reduction in support prices will cause genuine hardships to many individuals.
My noble friend Lord Stanley has referred to this fear within the agricultural industry and it is why the report recommends measures to mitigate the personal and social impact of lower prices. I was very interested to hear what my noble friend Lord Ferrers had to say on that. However, even with the present order of price reduction that has actually happened, and notwithstanding what the Commission may be putting on to the institutional prices, volume of output is unlikely to be affected. Here, I am in complete agreement with the noble Lord, Lord John-Mackie.
The normal reaction of a producer in this situation is to cut costs by increasing efficiency if possible and to produce more in order to compensate for lower prices. That would be my reaction and probably that of my fellow arable farmers. I cannot speak for European farmers, but I guess that their reaction would be similar. However, farmers on the continent would suffer much more quickly and more severely by reason of their relatively smaller average size of farm. The differential is very well illustrated on pages 119 and 120 of the report. There is a very interesting Home Grown Cereals Authority document which was published after our report and confirms this view that a much smaller support price reduction for cereals than is sometimes mooted would have a significant impact on a large number of European farmers
Those who are less keen on the operation of market forces than I am may argue that this reinforces the case for other measures such as quotas or quantums or co-responsibility levies. I would not agree with them; nor do I believe would the majority of the committee of the noble Lord, Lord Plowden. If it is true that, as my noble friend Lord Ferrers suggests, in a competitive world efficient producers will always step in where others cannot cope in a harsh economic climate, then there will remain the problem of surplus grain. I wish we could do more for the hungry people in the world. Emergency aid can do a little to alleviate desperate situations; but I find myself in complete agreement with the noble Lord, Lord Plowden, in saying that the hard truth is that the only practical way to prevent recurrence of famine is to ensure that people have the means to grow sufficient food or the means to purchase it. Can we expand home consumption of cereals? Table IX illustrates that home demand has changed very little. Increased total home consumption is likely only if domestic EC cereal prices move downwards.

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With regard to the development both of new crops in place of those in surplus and to the development of new uses for agricultural products, the evidence that we heard was that little progress has been made. But here again high domestic prices discourage farmers from seeking alternative products and they discourage the search for new uses; so it remains to consider the disposal of grain on the world market.
The figures relating to world production and consumption of cereals are interesting. When we last had a general debate on agriculture two years ago on a Motion of the noble Lord, Lord Mackie of Benshie, I quoted some figures showing that the world level of production of grains over consumption was slim. Over a period of 20 years up to 1981 it averaged out each year at about one week's world supply. I found also that whereas world cereal production had doubled in those 20 years, world consumption had kept pace. And looking at more recent figures it is plain that such a trend continues. Furthermore, in eight of the last 13 years consumption has exceeded production; so the advice of which the noble Lord, Lord Northbourne, has reminded us just now—the advice of Joseph to the Egyptians—remains sound to this day.
Shortages, at any rate in the more developed countries, are overcome by means of the build-up of surpluses in the fat years, chiefly in the United States. And it is those stocks which are moved in response to the demands of world trade. The uncertain factors which make any guesses about the future volume of world trade difficult are the capacity of the Soviet Union to grow food more efficiently, the great fluctuations of output caused by the weather, which also causes huge swings in Russian grain output and which can cause (as it did recently) a 55 per cent. reduction of Australian output in one year of drought. Lastly, the great uncertainty is the question of how fast China can become self-sufficient in wheat, which her people are consuming in ever-increasing quantities, having relied so much in the past upon rice.
The largest exporter of wheat is the United States, with the EC catching up fast, having already overhauled all other exporting countries. The United States also exports over 60 per cent. of the world's trade in coarse grains. Therefore it is not surprising that she looks on the prospect of the growth of subsidised EC surpluses with unease. One's natural instinct is to say that the EC should endeavour by every means to capture a greater share of the world grain market and that the United Kingdom in its turn should fight to increase its share of the total EC exports. The report rightly spells out the difficulties in the way of such a course and, as the noble Lord, Lord Plowden, has told us, the report calls for a new round of GATT talks in order to thresh out some kind of understanding with the United States.
I myself believe that this will be an uphill task. How, for instance, do you interpret the condition laid down in Article 16 of GATT, which permits export subsidies providing they do not allow a country more than an equitable share of world trade? You can argue about what is an equitable share of world trade until the cows come home. Nevertheless, I believe firmly that the trading route is the most promising one that
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we should follow. There are immense difficulties along that road, not the least being the uncertainty about the future strength or weakness of the dollar; but I support fully and wholeheartedly the Committee's firmly stated view in paragraph 87 of the report that the Community can increase its share in world markets and that increased use of the price mechanism will help to achieve that object.
10.35 p.m.
Lord Walston: My Lords, this is for me a sad occasion. It is sad because it is the last time that I shall address your Lordships as a member of Sub-Committee D, having been a member of it, with a two-year break while I was in the European Parliament, since its inception 11 years ago, and having served as chairman for three years. But it is also sad for a far more serious reason, and that is because this is the first time that I find myself in very fundamental disagreement with the findings of the committee, and with the report.
The committee has always had a reputation for sound, thoughtful, constructive and helpful reports. I wish that I could say that I felt this report lived up to that reputation, but I am afraid that I cannot do so. That does not in any way lessen my respect and affection for my colleagues on the committee, and in particular for the noble Lord, Lord Plowden—and I share in the admiration which has been expressed by many other speakers. But in my view this report is inadequate, illogical, unimaginative and complacent. It does little more than endorse the Commission's green discussion paper, itself completely lacking in imagination and reality and emulating the ostrich in its desire to hide its head from unpalatable facts.
In essence, the report places reliance solely on the price mechanism, and we have heard a great deal from other speakers today about the price mechanism. It is, I agree, a very useful weapon, but it is only a subsidiary weapon in the fight to contain the cost of the CAP and to slow down the increase in these butter and grain mountains and in the mountains and lakes of the other commodities that we know so much about. I repeat that its role can be a supporting one only, and not the main weapon.
There are several reasons for this. First—and my noble friend Lord Sainsbury made this perfectly clear—experience has shown that Ministers simply do not have the guts to cut prices sufficiently to reduce production. Year after year, even when the Commission has gathered all its courage in its hands—and it does not have very much courage, or perhaps it has too much realism—the Council of Ministers has whittled away even those very modest suggestions about price reductions. Therefore, to produce a policy which is based solely on solving this problem by price reductions is simply unrealistic. Many noble Lords who have spoken today have said that it has not worked in the past, and our trouble is that because it has not worked in the past we have no reason for believing that it will work in the future. Will there be a stubborn change in the attitude of the Council of Ministers? I do not believe there will.
But, in a way, I must confess that I feel it is fortunate that Ministers have not had the guts to do what is

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necessary because if they relied solely on drastic cuts in prices we would, after five or 10 years, but not before then, have seen widespread bankruptcies—and bankruptcies not only of farmers, as the noble Earl, Lord Ferrers, pointed out, because before the farmers' bankruptcies there would have been bankruptcies of machinery makers, of dealers and of suppliers of fertilisers and all the other things which go into farming. This would have had a devastating effect upon our rural environment. If any noble Lord doubts that, let him look at the Middle West of the United States, where just this is happening. Obviously, the conditions there are very different, but they are nonetheless severe.
We would also have seen what those of us who are old enough saw in the late 'twenties and in the 'thirties. We would have seen derelict farm buildings; we would have seen overgrown hedges, waterlogged fields, no new planting of trees and a general run-down of the environment; and increasingly the urban public is concerned with these matters. They do not want to see that sort of thing and they must realise—those who understand it do realise full well; one noble Lord has already mentioned this in his speech although I do not remember who it was—that the best protection for the environment as we know it and like it is a prosperous agriculture.
But today it would be far worse than in the 'thirties because conditions are so different. In those days most farmers were tenants. They had as a buffer against economic pressure their landlords—bad luck on the landlord perhaps. But farmers would go along to him and say, "I'm very sorry sir, but I can't pay my rent", and he, rather than have the farm put back into his own hands in time of depression, would forgo the rent or would reduce it. Now there are relatively few tenant farmers. Most farmers are now owner occupiers; most of them have pretty heavy mortgage payments to meet; and, with the best will in the world, the mortgage companies and the banks cannot behave in the way the landlords did in those days.
There is another difference. There was very little farm capital, tenant capital, in those days—very little was needed because there was not the same intensive use of inputs. Today all farmers have substantial overdrafts with banks and that makes them yet more vulnerable to these pressures. It took years, and then only because of war, to recover from the 'thirties. By then we had lost our position as the leading agricultural country of western Europe. Today we still have not recovered it. Virtually all our farm machinery is imported; our leading dairy cows come from Dutch and Canadian stock; our leading beef cows come from France—we who had once been the stock farm of the whole world. These are some of the things that happened then; and to a far greater extent they would happen now if the price mechanism alone were pushed far enough to achieve the desired cut in production; and Unless it is applied so drastically that widespread bankruptcies would occur, it simply will not work.
Farmers' reaction, as we have heard, is to grow more. This is what has been done. We have been experiencing cuts in prices for several years now. The Home Grown Cereal Authority's prices show that over the past three years there has been a drop in the price
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of wheat of more than 20 per cent. That bears out some figures which the noble Lord, Lord Middleton, has given us. Professor Harvey of Reading University has written in a most helpful and interesting paper that,
"farming income is now more than 30 per cent. lower than it was in 1971–72. The industry is paying out more for bought-in labour, and especially capital, than it was and as a result has less left over for itself.
Those who pin their faith on the price mechanism would surely say, "If this has happened, if farming income has been dropping even since 1971, if the price of grain has dropped by 20 per cent. in the past three years, surely less must be produced". But has the butter mountain declined? Has the cereal mountain become any smaller? It is still rising and it is rising fast. Surely that must be sufficient to convince even the most committed supporters of the price mechanism pure and simple that it is not enough to solve this problem.
I am not saying that it should not be used. It should be used—but it should be used as a back-up to other policies, and they should be based on quantitative restrictions. That is to say, not on the amount that farmers may produce (I am not advocating an individual quota for each farmer in any way) but on the amount for which they will receive a guaranteed price. This is very much in line with the suggestion made by the noble Lord, Lord Lever. He said that we should by all means pay subsidised prices for what we want but not for what we do not want. That is precisely what I am saying also.
There are various ways of doing that. I will make only two suggestions, and those as briefly as I can. But I must begin by making it clear that the ultimate target should be announced now but reached only after 5 years, thus putting farmers on notice as to what the future holds for them and giving them plenty of time to adjust. One cannot bring about rapid changes when one is dealing with farming.
One method would be adopting in a modified form a scheme that has enjoyed some success in the United States. I speak of the guaranteed loan scheme. Under that scheme, farmers are free to grow as much as they wish and sell at the best price they can get—but the Government undertake to lend them money interest-free on the security of a specified quantity of their crop. If the farmer has not sold that quantity by the end of the harvest year, the Government take the security—they take the wheat—and the loan is discharged.
There is one obvious drawback. It can be overcome but it is a serious drawback; the need for a fixed amount of this loan to be allocated to each farm. However, I believe that with some modifications this scheme would be workable in the Community, and it deserves a great deal of thought.
There is a second and, to my mind, preferable method. That is, for the Commission to agree on the amount (let us stick to wheat) that the Community consumes annually. That would constitute the Community quantum. This amount would receive a guaranteed price, gradually reducing—and here the price mechanism comes into play—until it comes closer to the world price. It is for the politicians and the Ministers to decide how close that should be.

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This Community quantum would be divided among member states according to their average production over the past five years; a purely statistical and not political exercise. Each member state would then receive from the Community funds which would represent the difference between the world price and the guaranteed price for its national quantum. Each national government would be free to divide this amount among its own farmers in any way they wished.
A government could give every farmer exactly the same amount per acre. If they wished to favour those in the hard-hit areas or small farmers, then a government could give a larger proportion to them, and a smaller proportion to the bigger farmers. A government could also supplement these deficiency payments by national payments—I stress national payments—from a social fund in order to alleviate hardship in special cases. However, this would be done only in a way that does not encourage greater production.
Many people have said that quota systems or quantum systems—whatever you like to call them—cannot work. The noble Lord, Lord Stanley of Alderley, particularly said so. But I remind your Lordships that we have lived with them in one case for a long time and in another case for a short time. Sugar beet—the sugar régime—is based on a Community quantum allocated to each country. It was much too big and has been badly administered, but it has been done. It can be done—it works.' We also have the famous milk quota, which is in fact individual quotas, which I do not like, but which is working. So if people dismiss this argument of quantum on the ground that it cannot work, let them look at the facts and see what has in fact happened.
There are many advantages in such a scheme. In the first place, it puts a ceiling on the cost of the CAP, and that is one of the most important things that it is desired to do. Then, it lowers the price of cereals to the consumer, which includes livestock producers and thus, indirectly, the consumer of livestock products; it abolishes intervention buying, reducing bureaucracy, and allows farmers to grow as much as they wish and to take their chance on the open market; it does away with accusations of unfair competition from the United States of America; it gives freedom to member states to support their farmers on social grounds from their own resources; it entails the minimum of bureaucracy; and it cushions farmers from violent changes in world prices but renders them more liable to economic forces.
I believe that it is along such fines that we should be directing our thoughts and urging the Ministry, our own Government and, through them, the Council of Ministers and the Commission to tum their minds, and not of this blind adherence to the price mechanism which, as I have said, has been proved not to work. In my opinion this is a great opportunity which the committee has missed.
10.51p.m.
Lord Campbell of Croy: My Lords, I will be brief at this stage of the debate. I was not a member of the
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committee but I state categorically that I am convinced that reform of the CAP is essential and that nothing should be allowed to delay carrying it out.
The original agricultural policy of the Six which started nearly 30 years ago has achieved most, if not all, of its early aims. It is in more recent years that it has produced these massive surpluses demanding more and more granaries and stores. The system must be changed. The EC cannot afford paying the agriculture industry to produce quantities of food that cannot be consumed in Europe or apparently disposed of elsewhere. Farmers should not be encouraged to produce for public intervention: that is, for markets which do not exist.
The committee's main recommendation is that there should be more use of the price mechanism. I do not have time to pursue the points which the noble Lord, Lord Walston, so eloquently put, but I believe that that is one of the remedies that should be used, not necessarily entirely on its own. However, I draw your Lordships' attention to the part of that policy which has not been spelt out in either of the documents—either in the Commission's Green Paper or in the committee's report: namely, the direct income aid which would be a counterpart to the reduction of prices and aid to those who would be hard hit and indeed might have to go out of business. Money will have to be spent on schemes which it will be difficult to agree upon. Nonetheless, this must be done if the policy of price restraint is to be followed.
The noble Lord, Lord Northbourae, spoke on this part of the policy and I should like to say more on it. The debate so far has concentrated on the effects there would be in this country on the environment, on hill farming, and so on. I should like to refer also to other member countries. That is where more of the difficulty will be met.
To devise solutions which will accompany the reform of the CAP, we should have closely in mind two factors which have contributed to the situation in which we now find ourselves. First, there has always been an extra element in the CAP as it was originally introduced among the original six members of the EC which was not contained in British agricultural support policies at that time. That factor means that there has been a regional development subsidy within the CAP, which was always intended. It was intended to provide a form of assistance to Less Favoured Rural Areas, especially in France and in Germany. In Britain, on the other hand, regional aid programmes have been needed by and designed mainly for industrial areas in decline, and they have been quite separate from agricultural support measures.
There have been two different approaches, therefore, I believe that the recent German refusal to allow cereal support prices to be reduced should be regarded in the light of that fact. I have no doubt that the Germans had in mind rural communities where a large percentage of the population is still employed either full-time or part-time in agriculture.
The second factor to which I refer is that there are problems arising from the fact that most forms of agricultural support policy apply virtually across the board, so that large efficient farms on good land benefit more than most small units. This was always the

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problem in this country under the old deficiency payments system and others. Some of the smaller units will undoubtedly need special consideration as a price restraint policy is applied.
As the noble Lord, Lord Walston, has said, in Europe Ministers have not been prepared in recent years to reduce prices. I believe they will only do so in the future when they know that there are measures prepared for those who will be hard hit, for the environment and for disadvantaged areas. The crucial and difficult part in drawing up an effective price mechanism policy will therefore be the creation of schemes over the whole of the EC for areas, communities and individuals, in order to temper the harsh impact. of the policy upon them. The British Government must be ready to include elements of regional aid, special aid and aid for the environment. The agricultural policy of the EC is making it economically unbalanced and top heavy. Unless reform is embarked upon soon, the serious distortions which the CAP is causing will upset other parts of the EC's economic and financial policies. We must make sure that we do not reach that stage.
10.58 p.m.
The Earl of Radnor: My Lords, at this late hour I shall be as quick as I possibly can be. In point of fact, after the very good debate that we have had there is little left to be said; and I, myself, view the whole question in fairly simple terms. Before I say anything more I should like to compliment the noble Lord, Lord Plowden, and indeed the whole of his committee, on this report.
I agreed with their conclusions for the most part, though there were perhaps some unimportant details on which I might or might not touch. What I disagreed with was the degree of emphasis which I read into the whole report. I felt that it described the situation in a very calm manner and reached very sensible conclusions, but to me it did not transmit any of the urgency which the noble Lord, Lord Campbell of Croy, has brought out, and which I am sure is inherent in the situation as it now exists.
I cannot agree with the noble Earl, Lord Ferrers, with the noble Baroness, Lady Elliot, and with others that the CAP has done a particularly good job. Certainly it has a purpose, but it has got out of control. The noble Earl said that one cannot bring the guillotine down at just the right moment. As far as I am concerned, that guillotine needed lubricating a long time ago and has been stuck at the top for far too long. We are in Europe in the embarrassing predicament which has been described so well by so many noble Lords. We are spending a lot of money to produce products which we ourselves do not want, and then more money to store them. In spite of what your Lordships say, it is hard to see quite what the end of it all will be.
Having said that, let me now say that I agree entirely with the committee that the price mechanism must be the right mechanism to use. I am sorry in many ways that the quota cannot be used. I think the reasons have been covered perfectly well. However, I am sorry that it cannot be used. The small farmer has a very
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important part to play, certainly in English society, and I should imagine even more so on the continent, and I think the price mechanism bears heavily on him. It is not that the small farmer is suffering from lack of scale—there are extremely good and efficient small farmers—but his marketing is at a severe disadvantage. When this business eventually sorts itself out I hope that he will survive in our society, and I expect and hope that that will be through some form of co-operative movement which might emerge when he sees the danger which is portrayed in the report.
I cannot produce solutions any more than has any other noble Lord. At least two and probably more noble Lords suggested that in the world there was not a surplus and that, what is more, there could be a shortage coming. That is all very well, and it may be true; but, as I said at the beginning, the situation is more immediate. A future shortage could probably be met from land which had run derelict (I hope that that does not happen) in precisely the same way as the need was suddenly catered for in 1939 after the 1920s and 1930s, about which the noble Lord, Lord John-Mackie, spoke.
Where the emphasis of the report is completely wrong is in producing three solutions (as far as I read it) for this country and presumably for farmers in general. One is diversification into different crops, which is just not realistic. The table in the report that I read shows that in the case of those commodities in which we in Europe were not self-sufficient we nearly were, and so any swing into those products, as many noble Lords have said, would immediately produce the problem again in a different commodity. If the members of the committee were thinking of the stranger crops about which one reads, I do not think that that is practicable. We all know of people who grow anything from borage to evening primroses, for whatever purpose I cannot think. They may do it well and make some money, but it is not the answer to this question.
The next alternative is diversifying into the service, craft or tourist industries; in other words, farmers must do something different. I think that that is an equally impracticable suggestion. Farmers are farmers. Who is going to finance this sudden change into a new business? Who is going to teach them to be good with tourists? Who is going to teach them their new craft? Where are the craftsmen going to come from who are not going to drive a tractor but will do some fancy ironwork, pottery, or something of that sort? Again, this is where the emphasis is wrong. It is written in a paragraph as though it is a solution, but in my opinion it should be disregarded entirely.
That brings one back to the third matter, which is a solution, but a difficult one, and that is direct grant aid. There will be considerable hardship if the price mechanism is used with such force that it will have an effect on surpluses more quickly than the noble Lord, Lord John-Mackie, thinks it might. If there is hardship, money will be required in quite a large measure to alleviate that hardship and deal with the situation. How much money that is, I do not know. Presumably it will not equate with money that is used to support the present system. I hope not. This is where the emphasis must lie and where there must be a full

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realisation that the price mechanism will cause hardship if it is used in such a way that it is going to deal with this situation of surpluses past, present and future.
I would suggest—and these are peripheral matters—that research should be directed at alternative crops such as the ones which have to do with fuel in some way or other. Research should move away from those crops which are in surplus. Obviously thought should be given to alternative occupations, particularly the financing of people who might wish to do something altogether different from farming and yet stay on their farms.
My last point is the most important of all, because the report says that this will all need political will. Indeed this is so. It is not just will in this House; it is will in Brussels, with the commissioners, the heads of state and so on—particularly the heads of state. Looking round, I see that not many of your Lordships who are here now were present during the previous debate, but I sat through practically the whole of it. The previous debate was to do with European Union; it was very learned and interesting to listen to. I missed about two or three speeches. The common agricultural policy was mentioned with some emphasis once by the noble Lord, Lord Reay, and once by my noble friend Lady Young. If it was hardly mentioned in the previous debate, what sort of notice is going to be taken, and what sort of action is going to take place, in Brussels? I think it will be a very awkward situation that will dribble on.
The rules of the game here are the Treaty of Rome. This was spoken about frequently earlier in the day—the veto, the Luxembourg Compromise, where the veto can be brought up under spurious and unreal situations. I do not think anything very helpful will happen regarding these food mountains until a situation is created in Brussels whereby a majority, a two-thirds majority or something of that sort, deals with the possibility of one member nation stopping action for its own parochial reasons. That is where my noble friend must talk to his other friends and Ministers and try to persuade them to use every power in the world to influence the commissioners and the heads of state to behave in a sensible way. I feel it is they who have let us down and who have led us into the position we are now in.
11.10 p.m.
Lord Gallacher: My Lords, it is worth putting on record at the outset that support for agriculture, at least in Britain, pre-dates our entry into the Common Market. The milk marketing boards of the 1930s, the major agricultural Act of 1947 and subsequent legislation all show clearly that before Britain became a member of the EC, we accepted in principle the concept of support for farming. Consumers are sometimes inclined to overlook that fact, and I think that it needs to be stressed.
Furthermore, even the system that we had—a system of deficiency payments—was not without blemish. One can recall, for example, in the matter of world meat prices, and so on, that major additional sums of money were required by way of supplementary votes by Parliament causing great
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upheavals in the country even though we had the shelter of what was thought to be a better system; namely, deficiency payments. Nevertheless, the common agricultural policy is basic to the Treaty of Rome. I belong among those people who believe that without the CAP there would never have been a Treaty of Rome. Certainly, there would not have been the free movement of manufactured goods throughout the Community which gave the EC its initial buoyancy and proved it to be a success resulting in Britain's decision to join.
The reform of the common agricultural policy is designed to benefit consumers. But, no less, it is designed to assist EC manufacturers to compete in world markets. Here, there is a fundamental distinction between the policy that applied when world trade was buoyant and manufacturers within the Community could afford to sustain the CAP at its then cost, and the present position whereby manufacturers are having to compete in a world recession and are finding that more often than not their prices are out of line with those of their main trade competitors.
It is fair to say that the price mechanism vis-à-vis the CAP has not yet been seriously tried. I know that the farmers' union and other bodies can show that there has been a reduction in price. But, certainly, the Council of Agricultural Ministers has so far not summoned up enough courage to make really radical reductions in prices. That is what the proposals in the Green Paper are all about. I believe that your Lordships' sub-committee would have been foolish, given an apparent willingness on the part of the Commission to make fundamental proposals as regards the price structure, to have followed the advice of the noble Lord, Lord Walston, and said, "We will set that on one side and opt instead for a system of quotas" when that was furthest from the mind of the Commission at the time the present proposals were made.
Furthermore, on his own admission, the noble Lord, Lord Walston, has been frank with the House, saying that, on the matter of sugar, it has not been a wild success. The price of sugar in the Community—sugar is supposed to be on a self-financing quota basis—is not appreciably less than the world price. In fact, it is considerably higher. So far as the quota itself is concerned, there is intense dissatisfaction in the United Kingdom with current proposals which show clearly that France, for example, is in a far more preferential position as regards its sugar quota than we, here in the United Kingdom, are. Although quotas may be a recipe for solving the problem, I foresee greater arguments in Brussels about national quotas than we get about prices under the present regime.
So far as milk is concerned, it is mildly ironic that without milk marketing boards in the United Kingdom, which are not much in favour with the Commission because of their statutory character, it would not have been possible, in my opinion, to have ensured such a smooth introduction of milk quotas as we have. Although they are related, as the noble Lord, Lord Walston, said, to the individual farmer, it is a fact that we are currently, as a nation, under quota, and to that extent it is not of itself an immediate answer to this problem.

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The problem of consumption within the Community is not easily solved. Fashions are of course changing all the time. Socialist propagandists in the 1930s used to make our flesh creep—such flesh as we had in those days—by pointing out that children in lower income groups who were fed skimmed milk were pre-disposed to rickets. It now transpires in the light of current medical opinion that necessity was the mother of nutrition. Today, for example, the diet which used to suffice for manual workers—cheap, high energy food, fats, sugar, starch, which are not bad in themselves—is now bad because manual workers are not quite so heavily manual workers as they were in the days when those foods were part of the basic diet. We cannot divorce what is happening in the community from what people want to eat and are eating; a fact that my noble friend Lord Sainsbury quite rightly stressed and which the noble Baroness, Lady Elliot, also mentioned.
In this connection one would wish to congratulate the Government on having apparently found a permanent funding basis for the Food From Britain organisation. All I would say is that they should take considerable note of the advice which the noble Lord, Lord Sainsbury, gave and using the Food From Britain organisation try to bring together farmers and food manufacturers to make sure that what is being produced by farmers is what is asked for by food manufacturers and therefore what can be sold.
There is also a great deal of money being spent on generic advertising by organisations which preceded and predate the Food From Britain organisation. I would refer to milk products, meat, eggs, fruit, and bread. All of these product organisations—some statutory, some not—are spending substantial sums of money, often financed by the trade, and it seems to me that having found a breathing space for the organisation by reason of solving its funding problems, there should now be an attempt to extend Food From Britain's umbrella so that it is the comprehensive organisation which those who advocated it in the first instance wished to see.
The effect of reform, unless backed by supports as described in the Select Committee's Report, will undoubtedly have a serious effect on farm communities and the environment. Reform may not be a cheaper option, certainly in the short run. Indeed, I have fears myself—bearing in mind Lord Ferrer's law—that we could find ourselves paying more in order not to grow food than we are currently paying for growing it. Nevertheless, I think that the size of the problem has now reached such proportions that in fact we have very little alternative but to try.
Of course, if we are going to restrict prices and consequently change the pattern of farming, we need to ask ourselves: what kind of farming? Is it to be low input or low output? If that is thought to be the solution, then one would wish to see that farming conducted on a current cost-accounting basis because one has the feeling that many of the claims being made for it as a solution are based on artificial costings and would not be capable of implementation by those people who are entering farming for the first time.
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If we are to reduce acreage, where are we to reduce it? As the sub-committee was told by the Agricultural Food and Research Council, anything can be grown in the eastern half of the country. On the other hand, the further west one goes, the less successful certain products are. Here I think that there is a dilemma for British agriculture; namely, do we farm less intensively in the east and move west in order to reduce production? Or do we in fact continue to farm productively in the east and allow farming to languish in the west of the country?
I think that land use comes into this in a very significant fashion. Planning, too, comes into it in a very significant fashion. I was very glad that the noble Earl, Lord Ferrers, touched on this. It seems to me that the east of England—and particularly the south-east of England—is inevitably that part of Britain which stands in closest proximity to the European Market. Indeed, when we were being urged to go into the Market, the triangles and quadrangles showed quite clearly that within a 150 or 200-mile radius of London there were in fact millions of consumers. I believe that we still have that problem with us today. Undoubtedly, if there are serious attempts being made to alter land use patterns then the Ministry of Agriculture and the Department of the Environment will have seriously to tackle the problem of where in effect changes in land use are to take place.
We are living through a second industrial revlution. Fortunately, in my opinion, it will not scar England as the first industrial revolution did. It is a fact already reflected in land prices that this is the area of greatest potential, if we regard membership of the EC as an opportunity to trade in a very large and enhanced market; and that was what joining was all about. But it would be foolish not to tackle this problem of where and when development is to be allowed to take place. Whichever Government grasps this nettle can expect to be thoroughly unpopular for the exercise because, apart from the joys of the weather, undoubtedly the people who are most articulate and who are best able to resist such alternative uses will oppose this strongly. Nevertheless, I think that the dilemma is there.
A rolling programme has been mentioned and I think that it is indispensable. It was rather disappointing for the sub-committee to find that the Minister of Agriculture appears to be frightened of planning ahead in agriculture. The Minister—not on this occasion but on a previous occasion when he met the committee—seemed to indicate that attempts to plan ahead had not been successful in the past. That may or may not be so. Nevertheless, I think that, given the nature of the problem and the importance of letting farmers know what the future holds for them, it is an inescapable fact that there must be rolling programmes of at least five years' duration. I think that these are possible within the context of what the Commission is seeking to do, and I sincerely hope that the Government, particularly the Minister of Agriculture, will modify their attitude to the whole concept of a rolling programme.
I began by saying that I think that the CAP was responsible for the success of the Common Market in the first instance. I believe that unless it is reformed, it is capable oí destroying the Common Market, and for that reason the sub-committee's report—an excellent

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one in my view—is worthy of every consideration. I hope that the Commission will take note of it and that we shall make a major attempt to grasp the nettle and to reform what has undoubtedly become a major embarrassment to the members of the European Economic Community.
11.21 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, this debate and the Report of the Select Committee on the European Communities come at a most opportune moment. I should like to congratulate the noble Lord, Lord Plowden, not only on a speech which I very much admired, but also on chairing the committee, which has undoubtedly made a most valuable contribution in its report to the search for a solution to the problems facing the common agricultural policy.
The particular relevance of the report is that it has been made when the European Community is engaged in a wide-ranging debate stimulated by the Commission's green paper, Perspectives for the CAP. The committee has been able to take this into account in the work which it wisely set in hand before the publication of the green paper.
There is a great deal in the noble Lord's committee's report with which the Government can find common cause. It is the Government's view that the committee is right to emphasise the fundamental role of a more market-orientated price policy in seeking reform of the CAP; right that action through the price mechanism is to be preferred to quotas; right that unlimited price guarantees are not an effective instrument for tackling the social issues raised by changes in our countryside.
All your Lordships' speeches this evening have identified the basic problems facing European agriculture—its rising budgetary costs and the problem of finding outlets for mounting surpluses. I must say that I was very glad that the noble Lord, Lord Plowden, spoke of the achievements of the common agricultural policy in the past. But we must face the fact that the problems stem directly from the failure of CAP market support to respond adequately over a long period to rises in agricultural productivity, so that the provision for all market support in the Community for agriculture in 1985 will apparently be equivalent to £11¾ billion, or 70 per cent. of the whole Community budget.
I was also very glad that the noble Lord, Lord Gallacher, in what I thought was a most interesting speech, reminded us, and said that we should remind others, that agricultural support certainly predates the European Community.
The appalling weather in some parts of the British Isles this summer, which in some areas has persisted right through the autumn, is a salutary reminder that there is still a need for an agricultural support system. However, I think that we should also do well to remember that in the last 10 years support prices in the Community have risen overall more slowly than rates of general inflation in the member states: consequently—and many of your Lordships have made this point this evening—many producers have suffered a decline in income in real terms. So the difficulty we face is not in identifying the problems, for
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there are plenty of those, but, as my noble friend Lord Ferrers said, in finding effective solutions that can be agreed by 12 member states and sustained over a sufficiently long period of time.
One point on which the committee were adamant, and I think your Lordships are all agreed, is that we need to get away from crisis management and to make longer-term decisions based on a realistic and objective analysis of the likely conditions in which European agriculture will have to operate in the future. The recent history of the milk sector provides a striking example of what can happen when decisions are put off and put off until drastic action is finally necessary and quotas are imposed—but quotas still with an inbuilt surplus and with the costs of disposal continuing to increase.
Therefore, I am sure that it is right that both the committee (with a distinguished dissentient voice, but nonetheless the committee) and the European Commission have stressed the need for a policy of sustained price restraint as the best means of tackling the basic problems of the CAP. Support prices more in line with market realities will not only contain directly the costs of the European budget by immediately reducing the costs of disposal of surplus produce, but in the longer term will bring a better market balance of supply and demand by reducing the incentive to overproduce and by encouraging greater consumption.
May I come closer to the difficult point? It is argued—and we have heard it in the debate this evening from some of your Lordships—that the response to reducing prices is going to be higher production. With respect, I think this is to ignore the recommendation of the committee, and indeed the policy of the Government, for action through the price mechanism sustained over a period of years, which will give a clear signal to producers and can, I argue, restrain production. This approach would avoid the practical difficulties that quantitative controls such as quotas can entail. Nor would it artificially freeze the structure of agriculture, as quotas may do—a consideration which I think accounts for the support for the price option, after a good deal of hesitation, from my noble friend Lord Stanley.
From all these viewpoints a more market-orientated price policy surely addresses many of the CAP's pressing problems. But, of course, as your Lordships well know, a sufficiently tough price policy has proved difficult to agree. We hear various alternatives suggested—co-responsibility levies, quotas, support based upon a quantum, and set-aside policies are the main mechanisms. Co-responsibility levies would be a false solution in the Government's view. They are attractive to those who advocate them because they represent an escape route from the budgetary controls which have been agreed for the CAP. Moreover, co-responsibility levies are likely to result in higher support prices to compensate producers, with the result that consumers end up bearing the burden which would otherwise fall on the Community budget.
Although the committee were clear that a policy based on quotas does not meet the needs of the present situation, the committee also referred to the concept of a price differentiation system based on a quantum—a matter to which the noble Lord, Lord Walston,

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devoted part of his speech. Under such a system production up to the level of the quantum would receive full price support, and the excess would have to be disposed of at much lower prices. What worries the Government is that in order to operate such a system surely it would be necessary to identify how much production was within the quantum, and to do this would seem to require quotas to be set, and indeed to be enforced, at some level in the production or supply chain, probably at farm level—and, of course, for cereals this would be far more complicated than it is even for milk and for sugar beet. The idea could, the committee suggests, also involve deficiency payments: not a concept, as I understand it, that the noble Lord, Lord Walston, was advocating. Unless the guaranteed prices were set at levels rather lower than those at the moment, deficiency payments would be likely to be extremely costly. Without dismissing these ideas out of hand, they are, I suggest, the realities which we should have to recognise if we were to consider this option.
Finally, thinking of the options, set aside was disposed of by the noble Lord, Lord Mackie of Benshie, as being, in his view, impracticable for this country. It would certainly be very expensive if we wanted to offer the financial inducements necessary to attract a significant amount of land out of surplus crops.
Cereals have quite rightly been selected for special attention by the committee in the report and by the Commission in its green paper, for the sector is pivotal to the agricultural economy. As my noble friend Lord Middleton said in his speech, the trend in cereal production is ever upward. The committee endorses the policy which the Government have long pressed the Community to adopt; a restrictive price policy. Particularly for cereals, a policy based on keeping market prices in check will be to the competitive advantage of the United Kingdom, because we have a highly efficient industry which is better placed to adapt to the challenges of the market than that in many other countries.
The Government are prepared to look carefully at additional measures to improve the way in which the existing system is managed, such as changes in quality standards. But most of the suggestions to be found in the Commission's green paper for new approaches outside the framework of the existing system cannot be said to represent solutions to the real problems of the cereals sector. In principle, cereals quotas could provide a solution, but I strongly agreed with the noble Lord, Lord John-Mackie, when he said that there would be massive problems of negotiation and administration; they would choke off demand by being inflationary and would introduce rigidities. Other noble Lords said very much the same thing. New uses for cereals, while being interesting in themselves, as mentioned by some of your Lordships, do not represent any real prospect for the use of large new quantities of grain at a reasonable cost and would, furthermore, only have a chance of viability if grain prices were very much lower.
The Commission has not, of course, restricted itself to analysing the cereals sector. It has suggested more broadly in the green paper that price policy could be accompanied by other measures: first, that the farmer might be offered some alternative and, secondly, that
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particular groups of producers could be offered some form of direct income support. Lord Plowden's committee expressed views on both those approaches and I shall say a brief word about them.
On behalf of the Government, I certainly agree that there is a place for alternative crops, but we must surely analyse the costs carefully. It is no use replacing cereals with an acre of a substantially more costly product. We can also expect, almost as surely as night follows day, that there will be demands from some in the Community for measures to offset the cost of supporting alternative crops, for example, by increasing the level of protection against imported substitutes, and thus we would expect renewed demands for a tax on vegetable fats and oils, to which we remain adamantly opposed.
One of the alternatives available to farmers is the possibility of expanding farm woodlands. The Government recognise that woodlands on farms have the potential to make a valuable contribution to farm income as well as having wider environmental benefits. In the presence of experts on this subject this evening, I think I must cut short my remarks on this particular subject, but I should just say that, as I think your Lordships know, we are considering what measures might usefully be taken to encourage farmers to bring existing farm woodlands under proper management and to plant woodlands. To assist in this process, the views of interested organisations are currently being sought on the basis of a report which the Ministry of Agriculture published a little while ago called Woodland as a Farm Crop, which we hope will be a contribution to this important subject.
In seeking alternatives, one other theme pursued by the committee and in the green paper is the role of agriculture in the economic structure of rural areas. Here I should simply say that I think we are trying to take some positive steps to try to deal with, and address ourselves to, the economic decline which occurs because of people being attracted away to urban areas. As your Lordships know, we have from the beginning of this month instituted a new grant scheme which incorporates grants for tourism and craft projects on farms in the less favoured areas. If I may say so, I am more optimistic than my noble friend Lord Radnor about this, because through ADAS farmers are put in touch with bodies such as the tourist boards, the Development Commission and the Council for Small Industries in Rural Areas, which are particularly well qualified to help.
Not all family farms in remote rural areas can, of course, turn to tourism or to craft works. We should remember, however, that expenditure on hill livestock compensatory allowances in the United Kingdom this year is likely to amount to about £100 million including payments for the first time to farmers in the new less favoured areas following the extension of the LFA agreed in the council last year. When I heard the noble Viscount, Lord Sidmouth, speaking of small farmers, I could not help but reflect that over half the farmers who claim HLCAs have holdings of less than 25 cows or 167 sheep.
We have also taken measures to mitigate, so far as is possible, the effects that the introduction of milk quotas has had on small producers. Using quota bought up under the outgoers' scheme we have been

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able to restore the small producers to their 1983 production levels. We also aim by the next financial year to remove the whole of the cutback on development awards to those with less than 200,000 litres of quota. Small milk producers are also benefiting from an abatement to the co-responsibility levies in the LFAs; and, in the beef sector, the suckler cow subsidy, which was raised last year to a ceiling of £24·75 per cow, will also have been of assistance to the smaller producer.
Whether additional measures might be considered by the Community in the area of additional support for particular groups of producers is, I realise, a central issue in the debate currently taking place on the Commission's Green Paper. The provision of direct income support has been recommended by the noble Lord, Lord Plowden, and the committee, and I give your Lordships the assurance that we approach the Community discussions on this with an open mind. But we have to recognise that there could be some very difficult problems associated with this. Of course, provided they act within the Treaty member states can and do operate income aids already in the context of their social policies. But if a Community measure were to extend much beyond general guidelines for national policies there would be numerous difficulties. How could this support be paid for, given the constraints on Community expenditure? What may be considered rural poverty in one member state does not necessarily mean the same thing in another. Agreement would have to be reached on who was eligible, and on what they should be paid and for how long.
If I may, I shall remain silent on overseas aid this evening and, if the noble Lord, Lord Northbourne, will allow me, I shall write to him on the direct question which he addressed to me.
Perhaps I may say a final word on one other area addressed by the committee; namely, agriculture and the environment. On this, I simply wanted to say that in many respects I think we can claim to be ahead of some of our Community partners in this whole area. Our recent extension of the less favoured areas and the changes in our farm capital grants—which, incidentally, address the problem of pollution more directly than it has been addressed before are, I think, examples of this. We were also, as your Lordships know, instrumental in securing new provisions in Community legislation: the Structures Regulation 797/85, which will enable us to introduce entirely new measures to help protect areas where the countryside is particularly sensitive to major agricultural changes.
We readily accept the need to encourage the farming industry to adopt high standards in such matters as animal welfare and the protection of wildlife and the countryside. But equally we must recognise, as the noble Lord, Lord John-Mackie, certainly did in his speech, that there is a need to maintain an efficient and competitive industry which is able to fulfil this role. In these circumstances it seems to us to make practical sense to attract the sympathy and the co-operation of those who derive their livelihood from the countryside.
Having said that, I would just make the point that we feel very strongly that individual member states are best placed to decide exactly what they should do
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within general Community policy so far as conservation and environmental protection is concerned. I hope that is the way in which the Community can continue to go forward.
May I finally answer just one question that my noble friend Lady Elliot asked me. My noble friend suggested that we should concentrate far more on selling agricultural produce. That was in tune with a great deal of what the noble Lord, Lord Sainsbury, said in the second part of his speech. In reply, I would just say that the agriculture and food industries in this country have, as your Lordships know, faced a significant change over the years since the second world war, and particularly since joining the Community. Our self-sufficiency, as your Lordships know, has gone up by leaps and bounds, particularly in recent years. This changes also our attitude to marketing and exports. The volume of agricultural exports has risen by 52 per cent. since 1973. May I also say that member companies of the British Agricultural Export Council, of which my noble friend Lord Ferrers is such an energetic chairman, have most certainly contributed. Incidentally, in connection with agricultural exports, I was most interested to hear that my noble friend Lord Middleton had reached the conclusion that, providing one was talking about realistic prices, there will continue to be opportunities for Community grain exports, of which we have claimed an increasing share in recent years.
Having said that, there is of course greater interest today in food quality and marketing. The development of food quality marks and the success of Food from Britain are further evidence of this; and I was grateful to the noble Lord, Lord Gallacher, who recorded the point that he was glad that the Government had now made a statement and would put Food from Britain on firm funding for the future, as we would hope.
Perhaps I may finish with just a word on the Commission's whole perspective exercise in more general terms. I would say to your Lordships that discussions in the Community are still in their early stages on that particular document, and that in their Green Paper the Commission have attempted to cover issues affecting the whole of agriculture. But they are suggesting at the moment options for debate—only options and not proposals. These do not pretend to form a complete policy. Necessarily these options reflect not just the needs of different sectors of agriculture but also the needs of different interests in different member states. What I am trying to say to your Lordships is that I think the position of the Commission's Green Paper represents complex issues with important implications, particularly for an enlarged Community. As in the annual Community price fixing, it is going to be a substantial task to pull together the various measures which will be needed to respond to the problems the Community faces.
Nevertheless, the prospect of finding improvements in the operation of the CAP which will benefit producers, taxpayers and consumers is one which the Government welcome, and we intend to work for effective measures which will enable agriculture to develop on a secure but rational basis in the years ahead.
11.45 p.m.
Lord Plowden: My Lords, I thank the noble Lord the Minister for his comprehensive reply to the debate and all those who have taken part in it. One thing on which everyone agrees is that the common agricultural policy is in a state of crisis and that something must be done in order to deal with it. Otherwise, as the committee said, it will run away and may jeopardise the whole working of the Common Market itself.
At this late hour it would be invidious to deal with points that were raised by many speakers, and I will only touch on what the noble Lord, Lord Walston, said. With his usual lucidity, he put forward the idea of quantums and quotas, with which the Minister dealt in his reply. The noble Lord, Lord Walston, mentioned sugar and milk quotas. Those happen to be two commodities that have to go through small sugar refineries or dairies, and therefore there is a much easier way of controlling them. Other speakers who are farmers will know much better than I the difficulties of dealing with quotas in the cereal field, and it is something we considered very carefully.
This is a debate that will take place right throughout the Community and the Green Paper, as the noble Lord, Lord Belstead, said, offers a series of suggestions. But inherent in all the suggestions is better use of the price mechanism, which was the majority view both of the witnesses who appeared before us and of the members of the committee. I feel that, however this problem is solved, it will require a great deal of willpower on the part of Ministers who do this, because it is bound to affect a great many farmers throughout the Community. But they will be far more affected if the common agricultural policy collapses because governments are unwilling to continue to vote increasing sums of money to produce commodities for which there is no use.
On Question, Motion agreed to.
House adjourned at thirteen minutes before midnight.