European Political and Monetary Union

HL Deb 06 June 1990 vol 519 cc1375-446

3.21 p.m.

Lord Jenkins of Hillhead rose to call attention to the case for Her Majesty's Government taking an active role in seeking to define a more precise shape for future European political and monetary union; and to move for Papers.

The noble Lord said: My Lords, in a number of debates over the past two years I have sought to indict the Government for their persistent semi-detachment and the consequent ineffectiveness of their European posture. Today I thought I should try a somewhat different approach for three reasons: first, to try to avoid the boredom of repetition; secondly, because there are some fairly faint signs of an improvement in the Government's attitude and therefore encouragement may be in order; and thirdly, because it is desirable to try to understand why British governments so persistently and, I believe, damagingly march out of step with Europe, rather than merely abuse or mock them for doing so.

The persistence of this misjudgment, as I see it, has been remarkable and bipartisan. It was a Labour Government of which I was a fervid supporter at the time that kept us out of the Coal and Steel Community. I voted—as I now see, wrongly—in the crucial 1950 Division, so I claim no early impeccability of judgment and wisdom. It was said at the time that the Durham miners would not stand for it. That was rather dangerous nonsense. It is the same as Mrs. Thatcher last summer over-estimating the appeal of populist nationalism in her approach to the European Parliament elections of 1989.

In my view, the trouble in our relations with Europe has been much less with the British public than with the British leaders. When a lead was given, as at the time of the 1975 referendum, the public responded perfectly well. However, British leaders with few exceptions have steadily got it wrong. The Attlee Government kept us out of the Coal and Steel Community; the Eden Government kept us out of the Economic Community. And the first years of the Macmillan Government landed us with the false alternative of EFTA which became a predictable embarrassment within a year.

Jumping forward 20 years, the Government of my noble friend Lord Gallaghan of Cardiff kept us out of initial full membership of the European monetary system in contrast with every one of the other nine members of which the Community was then composed. The explanation for this remarkable consistency lies more in persistent misunderstanding than in a lack of British goodwill towards the Community. The result, I believe, is equally unfortunate.

In what does the misunderstanding lie? There are three aspects. First, there is exaggerated and unnecessary fear of a formal and flattening federalism that would make Europe the analogue of the United States, and Britain merely the equivalent of a Pennsylvania or an Illinois within it. I do not believe for one moment that that will happen; nor that it needs the war dances of British nationalists from Mr. Tebbit to Mr. Benn to prevent it. It will not happen because Europeans in Europe will always be very different from the Europeans who crossed the Atlantic and made the United States of America. They have not been through the melting pot. They have not turned their backs on their own countries.

It will not happen because none of the leaders of Europe—not President Mitterrand, nor Chancellor Kohl, nor Senor Gonzalez—has any intention of ceasing to be a Frenchman a German or a Spaniard. They have no more intention of doing that than the noble Lord, Lord Stoddart of Swindon, has of ceasing to be an Englishman.

The leaders want to carry on an increasing number of important activities together, certainly, with some element of federalism in the methods. But that is different from changing what I call the psychological polity. I do not believe that, in the year 2000 or in the following decades, when a Frenchman in Tokyo is asked what he is, he will say, "I'm a European" in the way that a New Yorker or even a Texan would say, "I'm an American" in similar circumstances. I do not believe that that will change much over subsequent decades. However by harbouring rather phantasmagoric fears, we merely reduce our influence on further developments.

Secondly, in the country we have always found it difficult to grasp the central paradox that although the European Community, has largely used economic means, it is and always has been about a political end: the security of the Continent and the regaining so far as possible of the influence in the world that we all in Europe so wantonly threw away in two European civil wars.

The Government have sometimes sounded as though Europe ought to be almost exclusively about moving packages freely across frontiers and with any wider political purposes a dangerous excrescence. I recall that the noble Lord, Lord Young of Graffham, when on the Front Bench opposite, was a particularly lucid exponent of that point of view. It sounds simple and straightforward, but it is the most terrible snare. First, it is self-defeating, for without the lubricant of a little idealism and without the sense of direction given by a political purpose, we would never get 12 countries to make the give-and-take concessions on a variety of national interests without which 1992 could never be a reality.

It is an attitude terribly out of touch with their level and momentum of current events. When, for example, Civic Forum in Czechoslovakia campaigns—as it does—on the basis of a reintegration of that country into Europe, it is not the thought of lorries travelling freely across frontiers that moves it. In the foreseeable competitive state that would be a considerable imposition, a price that could only be paid in order to achieve greater and wider benefits. It is very desirable that packages should cross frontiers freely. However, Europe is about much more than that. If we try to tell the Community to stick to a narrow trade line we shall be Philistine, isolated and ineffective. Yet we need not be any of those three things.

That leads me to what in my view is the third misunderstanding. The Continental intellectual tradition is undoubtedly to think more in terms of general declarations of intent and direction than our own, which is more empirical and more a matter of nudging one's way forward, determining each step only after the previous one has been taken. There is something to be said both for and against both those approaches. The test of European statesmanship, and the only way to be an effective European leader, is to be able to reconcile them.

There is sometimes a logical gap between the end and the means of ringing European declarations. The words used sometimes have a sharper meaning for British ears than for the Continental drafters. The sensible reaction is not to denounce the declarations of aim as either meaningless humbug or, more contradictorily, as imprisoning and unacceptable commitments, but to profit from the vagueness if it be there and make oneself central to the enterprise and play a major role in shaping the highly important modalities.

To do that, however, one has to want the enterprise to succeed and make other people think that one wants the enterprise to succeed. There is certainly room for dispute about the route. I do not necessarily believe that every word of the Delors plan is perfect. One would have to be a very charitable person to believe that every word of one's successor in any job was perfect and engraved on tablets of stone and could not possibly be allowed to go cheap. There is room for a little diversion. Chesterton wrote of: The night we went to Birmingham by way of Beachy Head". If one is to be anywhere near the driving seat on such an expedition one has to look as though one wants to get to Birmingham at the end of the day and not merely end up bogged down in Eastbourne.

In my view that was the trouble with our EMU paper. It came out of the most unpromising remit which was given to the Treasury after last year's Madrid European summit to produce an alternative to the Delors route to monetary union which had as little as possible to do with either union or a common money. It set a formidable intellectual task even for the most distinguished brains in the Treasury. As a result we got the not very exciting proposal for alternative currencies, which failed to engage either of the major practical disadvantages of the existing position. Those are, first, uncertainty as to what one will receive in one's own currency when a trade deal has been carried out and, secondly, the enormous exchange rate costs involved trying to operate a single integrated market with 11 different currencies. As a result the British paper has been received with all the enthusiasm of a lead balloon.

To do better in the future on monetary union and on political unity we must be prepared to show much more that we really want to get to Birmingham, or at least fairly near to it, to Rugby let us say.

Surely in our political approach we should give up some of our apparently deep-seated anti-European Parliament prejudice. There is nothing which has disappointed our European partners more than the fact that we have contributed so little to the European Parliament. They thought that with our great parliamentary tradition we would have a very special contribution to make. They have found that we are mostly concerned with finding out what it is doing and telling it to stop. It is not possible to envisage any significant advance which keeps us remotely in step with the leaders of Europe unless there are substantial powers for the Parliament. Otherwise, to use the catchphrase, the democratic deficit will grow unacceptably.

Nor, I hope, will we be tempted to make the tumultuous events in Eastern Europe an excuse for delay. The majority of the other 11 members of the Community do not want that. Nor do the emergent Eastern European countries themselves, to which the Community can be and is to some extent a beacon that gives them some sense of direction. It is a very fragile world in which we now live as regards Eastern Europe and Russia itself.

I do not know Eastern Europe very well When I was President of the Commission it was terra incognita; I did not go there. They did not recognise us and we did not recognise them. However, in the past few weeks I have been once to Bucharest and once to Czechoslovakia. One is bound to be struck by the tremendous sense of hope but also the fragility of the position when beyond there are such extraordinary shadows over the future of the Soviet Union.

I was recently engaged in a television discussion in America to celebrate the anniversary of a university with Henry Kissinger and Fyodor Burlatzky, who is a well known Soviet spokesman. Fyodor Burlatzky riveted us all when, asked what he thought was the future of the Soviet Union as a political entity, he said that it will become an alliance. After consultation with his interpreter he said, "What I mean is something rather like the Commonwealth". I asked him whether he really meant the British Commonwealth, which is one of the loosest organisations in the world. He said "Yes, that's right". If there is a possibility of the Soviet Union dissolving its sinews to the extent of moving even halfway to becoming a commonwealth, and given the extremely fragile position throughout the Eastern European countries, it is a most extraordinary time of opportunity. It is also a time of immense dangers.

The German question also has to be faced. I believe that many fears about Germany are exaggerated. The salient fact of the past 40 years has been that Germany has not exercised the political muscle which its economic strength entitles it to use. That has been the imbalance in the European Community. Both France and ourselves, in our differing ways, have tried to exercise a political power which our economies could not sustain. Germany, by contrast, has been pushing political power away over those four decades. The position may necessarily change, but it would have to be a very great change before Germany could be accused of throwing its weight about. Nonetheless, there are question marks over the future of that pivotal country in the centre of Europe, which now again, for the first time for many years, means the centre of the world.

The old world of only a few years ago is changing with remarkable speed. There seemed to be an unattractive and oppressive but considerable solidity in the whole of the eastern half of the Continent. In the Cold War situation we could compensate to some extent for our weakness in the European Community by being President Reagan's favourite cis-Atlantic ally. That period has already slipped far behind us. Unless the Government can play a more effective hand in Europe from the intergovernmental conference at the end of this year onwards, I fear that Britain will be playing a very weak hand in a world which is in a greater state of flux than anything we have known for half a century. I beg to move for Papers.

3.40 p.m.

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

My Lords, I am most grateful to the noble Lord, Lord Jenkins of Hillhead, for tabling today's debate on European political and monetary union. Few members of the House bring to this important subject the wealth of direct experience of the European Community and life-long commitment to its development which marked the noble Lord's speech at the beginning of the debate.

I welcome today's debate for three particular reasons. I welcome it, first, because of its timeliness and because of the manifest importance of the subjects that it raises. As we stand at a crossroads in European history, the European Community is central to our vision of our continent's future stability and prosperity. A community like ours cannot remain static. It must move forward. At the end of this year we are already committed to beginning an inter-governmental conference on the question of economic and monetary union. The European Council in Dublin in less than three weeks' time will decide whether to convene a parallel conference on the subject of political union. Those discussions will shape the Community for the years ahead.

Secondly, I welcome the debate because the issues that it raises touch directly the interests of this House and this Parliament. The United Kingdom wants a strong Community and strong Community law, but we also want to maintain our national traditions and distinctive way of life. By that I do not mean just our cultural and social traditions—Shakespeare, cricket or pints of beer. I mean also our political traditions and the maintenance of strong political traditions requires them to be based on the continuing exercise of real responsibility. The balance between national governments and parliaments and central European institutions is of vital interest to your Lordships. The Government are eager to hear and consider carefully your views in preparation for the debates on political and monetary union on which the Community is now embarked.

Thirdly, I welcome the debate because, although you might not immediately believe it having just heard the speech of the noble Lord, Lord Jenkins, the Government can agree unequivocally with every single word in his Motion. I know that he did not intend it that way, but his Motion describes with uncanny precision the policy that the Government have adopted on those important issues.

Let me begin with the subject of political union or, as some of our Community colleagues call it, the political dimension of the Community. We are of course committed to those solemn and famous words at the beginning of the Treaty of Rome: to lay the foundations of an ever closer union among the peoples of Europe". The Single European Act, which was negotiated in 1985 and came into force less than three years ago, reaffirmed the commitment to transform relations as a whole among [member] states into a European union and introduced a series of major institutional changes which, together with the accession of Spain and Portugal, have invigorated the Community in recent years.

The changes brought in by the Single European Act included a timetable for completion of the internal market; the inclusion in the treaties of areas of activity such as research and the environment; a new co-operation procedure involving the Council, the Commission and the European Parliament; and the formalisation, on a treaty basis, of European political co-operation.

We believe that the Community institutions have responded well to those significant changes. The 1992 programme in particular has transformed the Community and given it the forward-looking, open and liberal credentials which have acted as a pole of attraction for the countries of Eastern Europe and consolidated the Community's authority and credibility in its relations with major trading partners elsewhere.

I am sure that it is the very confidence which the 1992 programme has given the Community, combined with a feeling on the part of some of our partners that the Community needed to push forward internally in response to events in Central and Eastern Europe, that has stirred the current interest in further institutional change. The special European Council in Dublin on 28th April therefore asked Foreign Ministers to analyse ideas on political union and report back to the European Council at the end of June, with a view to a decision then on the holding of an inter-governmental conference. As my right honourable friend the Prime Minister made clear at the April summit and as my right honourable friend the Foreign Secretary has confirmed in a series of speeches in the United Kingdom and other member states, there are three basic strands to British policy on the political dimension.

First, we have made clear that starting new Community discussions on institutional reform should not weaken our resolve to complete successfully the major tasks on which the Community is already embarked in 1990. I have in mind in particular the establishment of new relationships with Eastern Europe; the development of dialogue with the EFTA countries; concluding the GATT Uruguay Round; working out arrangements for the integration into the Community of East Germany; pushing ahead with the 1992 programme itself; and, finally, preparing the conference on economic and monetary union. We have made the point—and I do not think that any of our partners has dissented—that success in those challenges will itself strengthen the Community. Grave damage would be done to our internal coherence and external credibility were we to fail to carry through our commitments in those six vital areas of work.

Secondly, my right honourable friend the Prime Minister made clear at the Dublin summit in April that there was a need to analyse more thoroughly what political union should cover before we proceeded further. That is why the words chosen by the noble Lord, Lord Jenkins, are so clever. The Government have made clear that Community discussion should first indicate those things which political union does not mean, such as giving up our separate heads of state, our national parliaments, our legal or electoral systems, or our defence arrangements through NATO. Nor should political union mean the emasculation of the Council of Ministers as the Community's main decision-making body. Again, those points are widely accepted elsewhere in the Community.

We have therefore sought to bring political union down from the clouds in which it was shrouded before 28th April. We do not see that simply as the usual British campaign for pragmatism and good sense, although those qualities should not be undervalued in Community debate, but as necessary in order to reassure public opinion and build consensus about what this debate means. Reassurance is also relevant to the third strand of British policy; namely, that the debate on political union should not be conducted in an introspective vacuum. It should take full account of the wider Europe beyond the Community negotiating table. The institutions that we create today should not be throw-away paper models. They must last. But if they are built to last, they must take into account the fact that the Community is not static, is moving on and must remain open to the other countries of Europe. That means that the Community's institutions of today and tomorrow must take into account the possibility of a larger Community in the Europe of the 21st century.

It is those principles which underlie the series of ideas which the Government have floated in recent weeks on possible institutional change. I shall elaborate more fully on those ideas later in the debate, but let me now pick up the more important strands in our thinking.

First, in keeping with our views on the importance of the diversity of national traditions, we have advocated the need to improve democratic accountability in the Community. There are several ways to do that maintaining or enhancing the accountability of Ministers in the Council to their national parliaments; stronger links between national parliaments and the European Parliament; giving the European Parliament a greater role in examining the way in which the Community's funds are spent and its decisions carried out.

Improving the financial accountability of the Commission to the European Parliament would make a substantial contribution to the Community's efficiency and effectiveness. We have also suggested that, in that regard, greater attention needs to be given to improving implementation and enforcement of agreed EC legislation, perhaps by giving the European Court of Justice and the Commission stronger powers of enforcement.

We also believe that there is scope for improving the Community's effectiveness in the area of political co-operation and foreign policy co-ordination. Finally, we must take a long, hard look at the principle of subsidiarity.

Discussion in the Community—for example among Foreign Ministers at their informal meeting in Ireland last month—has revealed a fair measure of support for the basic principles which the United Kingdom has advocated and interest in the specific positive proposals which we have floated. It would be wrong to conceal the fact that there are a number of other ideas for institutional change in circulation at present which do not appeal to the Government. But we are satisfied that the debate is now basically on the right track, concentrating on how to make the Community institutions work better, and working up practical ideas for achieving that, rather than purporting to create a blueprint for a brave new world of centralised control which none of us wants to enter. The Government are committed to maintaining this open, active and constructive approach in the continuing debate on political union before and after this month's European Council in Dublin.

On economic and monetary union too the UK has been among the most vigorous participants in the debate. We are of course committed, as are all member states, to move progressively towards economic and monetary union. We all want to achieve much closer economic integration, with higher living standards and more flexible, market-orientated economies. Closer monetary integration offers the prospect of price and currency stability, cheaper financial transactions and the opportunity for all Community citizens and businesses to enjoy free and equal access to financial instruments and services.

The question is how to achieve those objectives. The Delors Report put forward one model, based on centrally determined moves first to locked currencies and then to a single currency and single monetary policy administered by a single, independent European central bank, backed by an enlarged redistributive EC Budget and binding controls on national budget deficits. The Government do not accept that model, which would imply a massive transfer of sovereignty over fiscal and monetary policy away from national parliaments and might well fail to deliver the benefits we all seek. This view has been endorsed in debates both in this House and in another place last November. The Government put forward an alternative, market-based approach in their paper, An Evolutionary Approach to Economic and Monetary Union. That paper has made an important contribution to the debate in Europe.

Our approach is practical; our starting point the importance of the single market. Completion of the single market programme will mean genuinely free movement of people, goods and services throughout the Community. It will over time lead to increasing convergence of the economic performance of member states, and it will lead to greater stability in prices and exchange rates. Creating the single market is therefore central to the first stage of economic and monetary union, which will begin in July.

To complete Stage 1, we must also build on the competitive forces released by the single market; we must reduce state aids for industry; and we must create the freest possible climate for financial transactions across the Community. All Community currencies must also participate in the exchange rate mechanism on the same terms. The Government have confirmed their intention to join as soon as our well-known conditions are met.

As I have already said, heads of government have agreed to hold an inter-governmental conference in December to consider further steps towards economic and monetary union. The UK Government have said that we shall play a full part in that conference, and we have been participating constructively in preparations for it. Moreover, we have been winning converts along the way. There is now considerable agreement about the way in which economic arrangements should develop beyond Stage 1. Our Community partners now agree that we should build on the arrangements for voluntary co-ordination and surveillance of member states' economic policies which are already in place. They agree with us that there should be no monetary financing of budget deficits and that member states should not bail each other out in times of difficulty. Many member states have come round to our view that there should not be rules limiting the size for national budget deficits, and the Commission has now concluded that they are "economically unjustified".

There is less agreement on the monetary side. The UK has three fundamental concerns about the Delors Report's approach. First, we believe that ultimate control of monetary policy must lie with elected national governments and not with an independent and unaccountable Community central bank. Governments must continue to be accountable to their own electorates for their conduct of monetary affairs.

Secondly, we believe that monetary policy set out by a central Community body would deliver an average inflation performance, not the best. However independent that body, there would be a tendency to compromise. The pressure of national democratic institutions will continue to provide the sharpest incentive for governments to keep prices stable. That is why we believe that, beyond Stage I of EMU, there should continue to be competition between national monetary policies, while the use of the ecu should also be encouraged.

Thirdly, we do not believe, as the Delors Report suggested, that EMU should mean more budgetary support for poorer regions. The Community should not move ahead on the monetary side until all regions are strong enough to take part. A bigger budget, redistributing resources across the Community, would be no substitute for adequate prior convergence of economic performance, not least because history shows that artificial resource allocation run by bureaucrats works much less effectively than natural resource allocation working through markets.

We shall continue to explain our approach and to put forward our own ideas in the coming months as the inter-governmental conference approaches.

I hope that I have succeeded in demonstrating that the Government are indeed taking an active role in seeking to define the Community's future development. But your Lordships should not take my word for it. All that noble Lords need to do is scan the comment columns of the Community's newspapers to see that our constructive approach is well appreciated elsewhere in the country. Our friends in Europe and around the world want us to play an active role because they recognise that we have a distinctive contribution to make to shaping the Europe of the 21st century.

Lord Clinton-Davis: My Lords, before the noble Lord concludes, I wonder whether he will allow me to intervene. In his comments today, in the Government's response to the Foreign Affairs Committee's observations on the operation of the Single European Act and on many other occasions the Government have declined to make any observations whatsoever about those twin pillars of the Single European Act; namely, social policy and environmental policy. Why is it that the Government omit all reference to those matters in their response?

Lord Brabazon of Tara

My Lords, the noble Lord has his name down to speak later in the debate and I shall respond at the end. If he wishes to make those points in his speech I shall certainly take them into account. In the meantime I have slightly overrun the time allowed to me so I shall conclude.

We do not intend to miss that opportunity and I shall be listening intently to your Lordships' remarks, which will help the Government to prepare fully and imaginatively for the discussions ahead.

3.57 p.m.

Lord Cledwyn of Penrhos

My Lords, we are grateful to the noble Lord, Lord Jenkins of Hillhead, for tabling this important and timely Motion and also for the comprehensive speech in which he set the scene for our debate. The words of his Motion are reasonable. The noble Lord, Lord Brabazon, indicated that the Government agree with it. The noble Lord, Lord Jenkins, asks the Government to be more active in seeking to define a more precise shape for future political and monetary union. However, Parliament, and not only Parliament but the people of this country, want to know much more about the Government's policy on these crucial issues.

The noble Lord, Lord Brabazon, as he always does, made an agreeable speech, but he has not added greatly to the fund of our knowledge on these matters. We move from Paris to Dublin and on to Rome later this year, giving the impression that on many issues we are making policy as we go along. Of course we know that there are differences of view in the Government and in the Cabinet, but at some stage we are entitled to expect the Government to produce a clear foreign policy which is pursued with consistency and not, as the Economist stated recently, " a government scrambling to adapt to events set in train by others."

I think we all agree that the Rome summit will be the most important Community meeting since the Treaty of Rome was signed, if political union is added to the agenda. The Community itself will be in the melting pot. The treaty will be up for amendment and the issues in this debate will be at the top of the agenda.

The Minister made some general observations on the main topics of interest but we have a duty to press the Government to define more precisely their economic and political objectives so that Britain knows where it stands at this important time. For example, there has been a great deal of argument and uncertainty on the economic side and about when we should join the exchange rate mechanism. The Chancellor of the Exchequer and the Governor of the Bank of England have said that Britain should be ready to join as soon as the Government can bring inflation under control. Then the rumour has spread that Britain may join rather sooner than expected; and, as the noble Lord, Lord Ezra, said at Question Time today, the markets have reacted excitedly.

Following Mr. John Major's remarks on 17th May hinting that there would be an early entry into the ERM, noble Lords will recall that markets soared—the sharpest surge in share prices for nearly three years. Mr. Major said: Anybody who thinks we are playing with this as a gesture is wrong". We then hear contrary platitudes from the Treasury Benches in both Houses.

We understand the difficulties, but we also believe that we should negotiate entry into the ERM at the earliest opportunity although we know that it will not cure our economic problems overnight—far from it. But in the longer term it could provide us with the stability, terms of investment and steady growth that this country so badly needs. My noble friend Lord Williams of Elvel will deal with that aspect of the Motion when he winds up on this side of the House.

But if the road to economic union is strewn with difficulties, they are not insuperable, whereas the way to political union is far harder to negotiate. EMS, ERM and all the implications of economic union have been on the Community drawing board for a long time, and although political objectives have been discussed from time to time, political union has only very recently been under serious discussion. As we know, the recent initiative has been taken by Chancellor Kohl and President Mitterrand. We must consider very carefully in this debate the relevant extract from the communique of the Dublin Summit of 30th April. It states: The European Council discussed the proposal of President Mitterrand and Chancellor Kohl on political union and the paper submitted by the Belgian Government on the same subject. In this context the European Council confirmed its commitment to political union and decided on the following steps: A detailed examination will be put in hand forthwith on the need for possible treaty changes with the aim of strengthening the democratic legitimacy of the union, enabling the Community and its institutions to respond efficiently and effectively to the demands of the new situation and assuring unity and coherence in the Community's international action. Foreign Ministers will undertake this examinalion and analyse and prepare proposals to be discussed at the European Council in June with a view to a decision on the holding of a second inter-governmental conference to work in parallel with the conference on Economic and Monetary Union with a view to ratification by member states in the same time frame. That is a crucially important communique.

We are on the threshold of the Council meeting which will decide whether to recommend that political union should be on the agenda for Rome. Will the Government support that? The Minister did not make it clear in his speech.

The implications of this are profound, more so I think, than those on the economy, mainly because of our attachment to our political institutions which are more deeply rooted than those of other countries in the Community. We want the Community to succeed. I want it to be democratic and I want Britain to be a part of it. But I do not want this Parliament to be dismantled or converted into a parish council. The noble Lord, Lord Brabazon, gave some welcome assurances on that in his opening remarks.

That of course is the sovereignty argument, and the debate is fundamentally about sovereignty and how much more power the Government are proposing and planning to convey to the Community. We shall need to know its extent and in which authority or authorities it will be invested. I am quite sure that the House will agree that our chief concern is accountability.

The noble Lord, Lord Jenkins, referred to the European Parliament when he spoke. There is also the Council of Ministers and the Commission. I believe that there is a genuine effort at each of those levels to operate the structure efficiently. But there is also a feeling that accountability is again not as strong as it should be. I realise that some thought has been given to this. There are the Belgian proposals, to which I have referred, the Martin Report and of course the Franco-German proposals. Those will now be followed by the Foreign Ministers' report to the Council later this month. But there is a very long way to go before we can say that a formula for political union can be presented to the 12 governments.

The Belgian aide-memoire sets out a reasonable basis for future study. Let me summarise it. The proposals aim to strengthen the existing institutional structure to make it more efficient; to increase the democratic input in this structure by strengthening the Parliament and developing the Community's social dimension; and finally to increase the convergence between political co-operation and Community policy, policy towards Central and Eastern Europe providing the first opportunity for doing so.

Most of us can sympathise with a good deal if not all of that, but we also realise that it is only the beginning of an immensely complex process. Chancellor Kohl and President Mitterrand have taken a lead in this initiative but we shall have to wait and see how their general words of welcome translate into practical detail. I have respect for both leaders, and I am sure that they know that a United States of Europe lies far beyond the horizon.

The full implications have not been studied seriously, in my submission. I noted that President Mitterrand said that there was no question of suppressing the national identities. It is indeed hard to contemplate a situation where one would be allowed to forget the French identity. Of course the European Parliament is focal in all these considerations. Should it be given more power, and if so, how much? Its present powers are negative; namely, the power to veto the Commission's Budget, to hold up legislation and to dismiss the Commission.

The Belgian proposals would give it the right to veto, alter and even rescind Community laws. They would also increase the power of the European Court so that compliance with its judgments would be mandatory and not voluntary as they are at present. It seems that there are significant reforms which would not radically undermine Community parliaments. But there must first be the most detailed study.

I am delighted therefore that the Select Committee of this House under the chairmanship of my noble friend Lady Serota has decided to set up an ad hoc sub-committee with the following terms of reference: To consider the implications for the United Kingdom and the European Community of proposals for economic and monetary union and for political union, with special reference to the institutional changes which might be involved". The reputation of the committee's reports is well known and we may be sure that its work will be valuable. As I have said before, there is a need for all-party support for any final proposal. It is not desirable that we should move far and fast in the direction of constitutional and political reform without seeking the support of all parties in this country.

We on this side believe that against the background of the great changes taking place in Europe the Community should be deeper and wider in its membership; that it should be a real community, really European and not just a single market.

Over the years the Community has gained powers from member parliaments. But unhappily that transfer of powers has not been accompanied by greater democratic accountability and scrutiny. We know from experience in this country that undemocratic agencies can accumulate powers unobtrusively—like a thief in the night. We do not like it when it happens here, but if it developed in Europe it could be very dangerous. Autocracy lives just round the corner from every one of us and it needs to be watched all the time.

I greatly look forward to hearing the speech of my noble friend Lord Richard. He has great experience in this area and was also our ambassador to the United Nations. These are interesting and historic times but they are also unpredictable times. We must make sure that we stick to our principles and safeguard our democratic institutions for the sake of the next generation.

4.10 p.m.

Lord Bridges

My Lords, I welcome the Motion introduced by the noble Lord, Lord Jenkins of Hillhead. It will lead to a timely and useful debate. I suggest that it is timely for two reasons. First, although the general issues posed by economic, political and monetary union are well known, the particular international context in which we examine the issues has changed profoundly in recent months. Secondly, between now and December, when the first inter-governmental conference will be held in Italy, the Government will no doubt be examining the issues afresh. Therefore, this is an appropriate moment for your Lordships to consider them.

Later in the year, and I hope before the inter-governmental conference is held, the sub-committee, referred to by the leader of the Opposition and presided over by the noble Lord, Lord Aldington, will have issued its report. Perhaps the noble Lord, Lord Aldington, will have something to say about that. The debate provides a useful opportunity for us to consider the issues in a preliminary way.

I shall not follow the noble Lord, Lord Jenkins, down his broad political road leading to Rugby and Birkenhead, but prefer to approach the subject from a different angle. I particularly invite your Lordships' attention to the relationship between what is happening inside the Community and the fundamental changes which are taking place elsewhere in the wider Europe. I also invite attention to the relationship between the super powers and their negotiations over disarmament and arms control.

Some noble Lords may ask whether it is right that at this moment the European Community should embark on further integration and take new steps in the direction of union, whatever that may mean, at a time when the possibility of a more general pacification between East and West has so suddenly come about. Should we not, it may be argued, stay our hand until the European Community has had an opportunity to explore more thoroughly the possibilities of co-operation with the countries of Eastern and Central Europe now that they are free to shape their destinies for the first time in a generation? Is there not, it may be asked, some potential conflict between the process of tightening and deepening upon which we are again embarking in Western Europe and the urgent need to broaden our collaboration with Eastern and Central Europe?

I do not see the question in that way. But I believe that, as these two areas of political action present themselves at the same moment, we need to be clear in our own minds about the relationship between them if we are to make the correct response in each case. In the case of the Community we should do well to reflect on the causes which lie behind this renewed impulse for integration and institutional advance. I suggest that one important cause is the positive result brought about by the changes introduced by the Single European Act. The greater use of majority voting in the Council of Ministers, and perhaps even more the knowledge that majority voting is available, has enabled the drive towards the fulfilment of the internal market to make worthwhile progress.

Your Lordships will recall that the programme was first launched by the Milan summit and was ably promoted by the noble Lord, Lord Cockfield, as the commissioner responsible. It is now widely believed within the Community that the changes produced by the Single European Act—which were at the time criticised for their apparent modesty—have, in effect, transformed the atmosphere within the Community. It is the opinion of many of our partners that the successsful creation of the internal market will, in turn, require the creation of stronger and more democratic institutions to oversee its proper functioning. That is what is intended by the much-used phrase, "the democratic deficit".

Allied to that belief is a widespread impression that, since the extension of its powers in the same Single European Act, the European Parliament has used those powers in a responsible manner. I am encouraged to see that that sentiment is evident in another place, judging from a recent report of its Select Committee on Procedure. The committee examines ways in which Members of the European Parliament might be associated with the scrutiny of EC legislation. That is a most encouraging development.

Another strand in the story, and part of the impetus for more integration, is the steady purpose of those who have always believed in institutional advance in the Community. It is not surprising to find that those who enthusiastically supported the Spinelli Draft Treaty are arguing their case again. Of course, the same objections will continue to apply to their more far-reaching ideas. But we are in a new situation and it would accord with our own national approach to examine these proposals—whether for economic and monetary union or political union—in a pragmatic and careful way. I was encouraged by the remarks in another place immediately after the Dublin summit, which suggested that that is what the Prime Minister intends.

Another reason has been advanced for the need to accelerate integration, with which I disagree. It is the suggestion that the reunification of Germany makes it imperative for the Community to hasten its own institutional advance so as to bind the united Germany ever more closely to Western Europe. I find that argument defective. It does less than justice to German motives and I believe that it misunderstands them. Most Germans regarded the division of their country during the past 45 years as an arbitrary and artificial act. They had long hoped that it would be corrected but believed that it would not occur for many years to come. But now that the opportunity to restore that unity has arisen in an unexpected way it is hardly surprising that the Germans should regard that as being their most urgent task. They are addressing it in the thorough, comprehensive and democratic way which we associate with the Federal Republic. The process is quite separate from the integration of the Community, in which the political parties of the Federal German Republic also have a sincere belief There is no conflict between those two German motives and, in my opinion, any attempt to set those two processes in some kind of Hobbesian balance is quite misconceived as well as being unnecessary.

I submit that we need to consider the effect of the events in Eastern Europe on the future of the European Community. The profound changes now apparent in the political geography of Europe will need to be taken into account by the architects of political union. For example, we should note that instead of a Community with four large member states of approximately equal size in terms of population, which we have at present, we shall in future have an entity in which one member state will be both more numerous and, by any measure, more powerful than any other.

We must note that the grouping of EFTA associates, which is so important to us in trade and so close to us in outlook, is seeking a more intimate form of collaboration with the Community. Now we have a wider group of nations in Eastern and Central Europe which seek our urgent and practical help and support, and some of those also aim at ultimate membership of the Community.

I mention those facts because the second inter-governmental conference which has been proposed will need to think very carefully about the identity of the future Community—identity in terms of geography (where does Europe end?) of political scope and of cultural homogeneity. It encourages me to read that the form of association now contemplated for East European states will be of a new type adapted for their particular needs. However, we must consider where that will lead and how it will relate to the membership of EFTA, which is already knocking on our door hoping for a new kind of partnership in the Community in the so-called "European economic space".

We shall want too to reflect on the range of competence with which the Community is charged. It was very interesting to note that, in the message sent by President Mitterrand and Chancellor Kohl to the Irish President on the eve of the recent Dublin summit, they spoke of including on the agenda of the second inter-governmental conference the definition of a common foreign and security policy. That will be a cardinal point for those who wish to discuss political union.

While I would not wish to see the Community charged with the total conduct of foreign policy nor endowed with a formal defence competence (at least not at this stage), it is possible that we might want to add to the Community's responsibilities a wider remit to handle broad questions in the area of political security. That was done only to a limited extent in the Single European Act. In the changed circumstances, additional involvement by the Community in that area would provide a valuable element of cohesion and stability in Central Europe in years to come, without—and I emphasis this—trespassing on the territory of other organisations already in being. I can see considerable advantage in making that plain at the next revision of the treaty so as to avoid any doubt about the future role of the Community.

I do not propose to examine the particular issues arising on economic monetary union which have been fully explored in public. However, I suggest that noble Lords interested in this subject might find it helpful to read a recent communication from the Commission which was forwarded to the House by the Treasury in April. That sets out the arguments in favour of economic and monetary union in a clear and convincing manner. Of course, reasoning on this subject is not capable of proof, whether it is negative or positive. We cannot regard economics as so conclusive a science, if indeed it is one. However, I find the logic of the Commission's argument in favour of economic and monetary union coherent and convincing.

The paper also gives rise to the thought that, had the structured discussions proposed in that document about the economic policy of member states been in place some years ago, we might have been spared some of our past misfortunes in the area of economic and monetary policy. At least we cannot claim that our record in this field has been an unqualified success. I believe that the disciplines proposed now could well benefit us in the future. We should note that in the latest version of the Commission's proposals, only the procedures for the discussion of national economic policy and budget deficits would be binding.

The same comments may be made generally about our exchange rate policy. We must face the fact that our economy has not prospered by comparison with those of our European neighbours either under the Bretton Woods system or under the floating rate regime which has prevailed latterly. We should have a greater justification in opposing a return to fixed rates, this time on a quite different basis, if we could ourselves point to a more convincing record.

It is my hope that we can approach all these issues without preconceptions in the very important discussions which lie ahead in the coming months.

4.25 p.m.

Baroness Elles

My Lords, I should like to thank the noble Lord, Lord Jenkins of Hillhead, for initiating this debate although he is not in his place at the moment. In his brief historical analysis of our membership of the Community, without making any contentious remarks, I should have been grateful if he had mentioned that it was Mr. Heath, a Conservative Prime Minister, who took us into the European Community.

Before making a few observations on this debate, perhaps I may say how much I welcome the opportunity to listen to the maiden speech of the noble Lord, Lord Richard. The last time I heard him was in the European Parliament: he was a very distinguished commissioner at the time.

This will be a difficult debate. We all look at the position of Europe in rather a different way. Nevertheless, I believe I am right in saying that it is the first time that the House has been able to address the subject in a spirit of all-party unity. For the first time, I believe, it is in the manifesto of the Labour Party that it believes in the future of Britain within the European Community. I hope that I have phrased that correctly. Therefore, we can now approach the matter as one that is non-contentious between the parties and one on which we can go forward together. That is, after all, what the vast majority of people in Britain wish.

I make three preliminary remarks. As my noble friend the Minister said, the Prime Minister has set out the parameters within which she would regard political union. We in this country become very excited and taken up with what can be called Euro-jargon words. However, political union means something different to almost everybody. Let us be quite clear that the rhetoric that we hear from leading statesmen on the Continent is often quite distant from the political realities of which they are aware.

If you speak to members of any other national parliament, I assure noble Lords that they share the same sentiments as Members of our national Parliament. They do not wish to see political union in the form of a federation and the removal of their own powers. That is quite understandable.

It should be said that although so often in our press we see criticisms of the United Kingdom and the way it conducts itself on the Continent, it should be observed that over and over again it is the United Kingdom which takes the lead on so many issues which are of mutual interest to member states. I allude to my own past as chairman of the legal affairs committee of the European Parliament. I was very well aware that, time and time again, on very contentious and difficult issues it was the United Kingdom which sought to unlock the complex difficulties which arose between member states. Often, too, it was the United Kingdom which was on the side of the qualified majority vote in favour of a directive rather than on the side of one or two minority countries which abstained from voting. That is seldom recognised in the public eye. We tend to be condemned very unfairly in many instances. That does not mean that the United Kingdom does not fight its own corner. It is perfectly proper that it should, as the other 11 member states do. In this country we tend to denigrate ourselves rather too easily and quickly, without looking at the realities.

My noble friend referred to the reform of the institutions. As everyone realises we are in an extraordinary situation in the course of European history. We see barriers tumbling down in all directions, both internally within the European Community and externally in Eastern European countries. Within the Community there is a need to look at the way in which institutions are working. In this Parliament we are always looking to see how we should adapt to new situations, demands and pressures. That is also true within the Community.

The Commission itself needs overhauling to some extent. It is a very efficient bureaucracy, and certainly the most open bureaucracy that I have ever come across. I should like to pay tribute to the very high standard of the officials with whom I, in my modest capacity, have had to deal. However, in the new system of "comitology" which was set up under the Single European Act, whole rafts of secondary legislation are adopted in advisory, management or regulatory committees and such legislation is not published until adopted. It affects the rights and needs of individuals, groups and other interests. If my noble friend is to propose some changes in the institutions and the way they work, this is certainly something that should be looked at closely.

The Commission must be obliged to publish every draft that comes before these committees before being adopted so that, if necessary, there can be some form of European parliamentary or governmental intervention or objection. Certainly, a recent case before the European Court is one which gives us great pleasure in the European Parliament, Under Article 173 the European Parliament is not allowed to take a case before the Eurpean Court in order to annul a decision of another institution. But the European Court of Justice has recently handed down a decision granting admissibility of the Parliament to bring a case before the court. This strengthens the hand of the European Parliament in its control and scrutiny of the Commission's activities. I hope very much that we shall see a reform of Article 173 of the EC Treaty brought forward later this year or the beginning of next year.

Thirdly, the co-operation procedure should be much more widely used. It is seldom recognised, certainly in this country, that over 50 per cent. of all the amendments adopted by the European Parliament in its plenary sessions pass, either in substance or verbatim, into European Community law. The noble Lord, Lord Cledwyn, understandably referred only to the negative powers of the European Parliament. But the power is a very formidable one when there are so many amendments such a vast proportion of which are now adopted and take their place in European Community law which of course comes down into national law. That is indeed a reason why there should be much closer co-operation between members of the European Parliament and members of national parliaments. I hope very much that the committees being set up in another place will give substance and strength to the co-operation which is ceded for political and other reasons by MEPs from the United Kingdom to those committees. I believe that MEPs can make a very valuable contribution to the political developments of the Community.

With regard to the budget, Parliament is one of the budgetary authorities with the Council. Here again, it is clear that the difference between obligatory and non-obligatory expenditure should be abolished and that Parliament should have equal rights as regards both parts of the budget in conjunction, of course, with the Council. Its powers should also be strengthened in the budgetary control committee where it really could be much more effective in its scrutiny of the Commission's expenditure and of the different programmes and policies set up through the Commission. I believe that if the Parliament is able to keep its main base in Brussels it will facilitate more effective and efficient working. As your Lordships will know, the peripatetic existence of parliamentarians has made it extremely difficult, with all the goodwill and stamina in the world that so many MEPs have, for them to do their work as competently as they would wish.

I would make one comment about the Council. Many MEPs and others have asked that decisions should be taken in public by the Council. I believe this to be both a non-starter and unnecessary. Members of the Council must be able to negotiate in private. Under the co-operation procedure the Council is obliged after first reading to publish a common position. So it is already known before legislation comes to be adopted what the thinking of the Council is. And, of course, it is also generally known what line different member states take. Therefore, I do not think it is necessary to press in that particular area.

There is one aspect which I do not think has been raised so far regarding the control and scrutiny of European activity. Although European political co-operation has been mentioned, we have seen between 1979 and now—I think the noble Lord, Lord Jenkins, would agree—a remarkable change in the Community's institutions. We have seen a whole series of "building blocks" set up in different areas. We have the European Space Agency, the European Environmental Agency and the Trevi meetings of ministers of the interior deciding matters of asylum and immigration together with trans-border travel. We have of course European political co-operation. All these things, with others, have been set up, but they are not properly scrutinised, certainly not by national parliaments, and not even by the European Parliament. I believe that a study should be made of how these different blocks might be looked at so that in some way the decisions and the processes by which the decisions are taken can be scrutinised more closely. The development of European political co-operation, I believe, is essential for the strength of Europe.

Many of your Lordships will have felt as I did when reading about the meetings between President Bush and Mr. Gorbachev and will have wondered why the whole future of Europe was being decided at Camp David, or at any rate in the United States. Why was not a European or someone representing European interests involved? Our own territories and the lives of subjects throughout the European Community were clearly the subject of major discussions. The decisions taken during those last few days could affect the whole future of this area of the world. I believe that our Government and the governments of other member states must look much more closely at the way European political co-operation is to work, how it is to be controlled and how we can have effective leadership on the world stage in foreign policy. Certainly, for the future of Europe as a whole, it is essential that we should speak with one voice. We have the largest population and we are the largest trading bloc, yet our voice is minimal. The only place where it seems to have been actively developed is at the United Nations. There, it has been able to strengthen its voice in the field of international affairs. Nevertheless, I think the past week has shown us how Europe has lost out and will continue to lose out in discussing the future unless we can develop EPC.

I do not want to say too much about economic union because, as the noble Lord, Lord Bridges, has said, we have debated the topic so often in this House. I firmly believe that the ecu will become more widely used, encouraged by industry and tourism as the single market develops. There are many firms which now do their accounting in ecus in cases of trans-border trade, and I believe this is to the benefit of Europeans as a whole. Your Lordships may indeed have seen that there is now a FF500 note printed on the reverse side with the value in ecus. It would be pleasing to hear my noble friend the Minister say that we here shall be producing a £5 or £10 note with sterling shown on one side and ecus on the other, so that the notes can be taken across to the Continent and used without problem.

As regards external pressures on the Community, there have been changes in Eastern Europe, as most speakers have mentioned. However, let us all admit how fragile that change is. There are differences of environment, of training, of personnel and in the development of economies. The European Community has a great role to play in supporting Eastern Europe and strengthening its future. We can do that only if we ourselves in the Community are strong. It will not help our purpose to have a weak or diluted European Community if we wish to play a real part in the future of Europe as a whole.

The castle of Europe has not been mentioned but I believe that it should be used as the gateway for these Eastern European countries to come into the Community. It is the castle of Europe which enforces recognition of multi-party systems and of course they would have to ratify the European Convention on Human Rights and accept fundamental freedoms which, after all, are the basic conditions for membership of the Community. Therefore, I would welcome a policy from member states that for all countries which wish to join the Community, perhaps in the distant future 10 to 20 years from now, it should be a training ground for democracy to be part of the Council of Europe.

Finally, as regards security, NATO has served us well over these 40 years. Let us keep NATO. Let us encourage Germany to remain in NATO. I believe that Mr. Gorbachev realises only too well how valuable it is to him that Germany should be part of NATO and not a neutral country lying between Western Europe and the Soviet Union; though clearly it will be difficult for him to get that message across after 40 years of propaganda and saying how evil NATO was. It may therefore take a little time to switch the mentality of the Russian people to understand that NATO is probably their best friend just as it has been our best friend for so many years.

I conclude by saying that history has shown that economic prosperity will only come in a strong democracy and that peace will only come if we have a strong defence. Those are the two principles to which I hope the Government will be looking as they develop their policies for closer integration within the Community.

4.41 p.m.

Lord Richard

My Lords, I am indeed grateful for the opportunity to take part in this debate. I am delighted to follow the noble Baroness, Lady Elles, and I am delighted to see too that she has lost none of the determination, vigour and enthusiasm that she had when she presided over the affairs of that somewhat unruly body, the European Parliament.

1 echo some other speakers in this debate who have said that it is both timely and important. I entirely echo that view and totally agree with it. Qualities that we need in our approach to the Community must include clarity and consistency. I hope that the debate this afternoon will aid the process of making our policy clearer, more consistent and more understandable.

Our relations with the Community should be those of congratulations for what has been achieved in the past and of hope for what we think may be achieved in the future. After all, the achievements have been great and the possibilities are immense; but regrettably our relations with the Community are not so perceived in this country today. They are too often seen to be matters of confrontation, almost of mutual irritation. Every meeting of the European Council tends to be presented and weighed in terms of national gains or losses. Sessions of the Council of Ministers tend to be viewed as attempts by others to impose their collective will on us; indeed, attempts which should be resisted and if at all possible repelled. It is all really rather sad because in reality the prospects opened up by a greater degree of European unity, particularly having regard to what is happening in Eastern Europe, must surely be welcomed with enthusiasm as opportunities rather than resisted as if they were a serious danger to our national culture and identity.

Perhaps I may say at the outset that the fault does not seem to me to lie solely with the present Government. I must say also—and I do so, knowing the traditions of this House, in as uncontroversial a way as I can—that the attitude of the present Administration has not been immediately and obviously helpful in that regard. However, the fault goes further back.

If one were to characterise the three major blunders of British foreign policy since the war, with the possible exception of Suez they would all be connected with our attitudes and policies towards the Community. First, we said that the Six would never get their act together sufficiently to create the Community at all. We were wrong. Secondly, we said that if they created a Community its internal tensions would mean that it could not amount to very much. We were wrong. Thirdly, we said that if they created a Community and if it survived and prospered it would not seriously affect British interests. Again we were wrong.

With hindsight, it is hard to imagine a series of misjudgments of more breath-taking insularity and, as it turned out, more damaging to our national interests. Therefore, we begin any discussion or approach to the Community from the starting point of collective misappreciation. Having started from that point it has been a catching up process for this country ever since. We still seem to fail to appreciate the nature and the extent of the transformations which are now taking place. Now that the debate on the principle of membership of the Community is dead, the real argument should surely be about how to maximise our position inside the Community and how best to influence those collective decisions which directly and deeply affect our continuing prosperity and indeed our social cohesion. That is true whether we place it in the context of developments in British agriculture, future employment policy, or just about anything else.

It is not for me today, on the first occasion that I have burdened the House, to venture into the intricacies of the exchange rate mechanism or the European monetary system. Noble Lords will realise that naturally I have my views on those matters, and in due course I hope to have an opportunity to express them. However, I venture to make four perhaps more general points, all of which seem to me to be relevant to our whole approach to the problems of greater unity inside the Community.

First, we really must stop regarding foreigners, particularly those who are closest to us geographically, as if they were inconvenient distractions from the main business of government, which is of course to preserve our national sovereignty against their knavish tricks. Reading the press during the past week one would be forgiven for believing that war had been redeclared, this time against a new enemy. There is, I must tell the House, a long history in the Community of using health arguments to protect trade interests. I must also tell the House that it is by no means confined to one nation.

I remember well a disease called Newcastle disease. I am sure that noble Lords will remember it too. It was a plague which was apparently about to fall upon the great British public from French turkeys if French turkeys were to be admitted into Britain in the run-up to Christmas 1983. The Commission went into the matter in some detail; first, to see whether there had been any unlawful state aids to the French turkey interests, and, secondly, to see whether or not there was anything in Newcastle disease. We came to the conclusion that it was a disease that did not have a great effect, as far as we could tell, either on the turkeys or on the people who might eat them. The House will not be surprised to hear that it was a disease that disappeared as quickly as it came—in fact, as soon as 25th December had passed and French turkeys had been excluded from the British market at Christmas!

The only point I make is the simple one that we should not be quite so ready to assume that everyone else in the Community cheats apart from ourselves. Moreover, we should also not forget that despite these trade irritations, which are sometimes considerable, members of the Community are nevertheless prepared to co-operate and co-ordinate their policies in what they perceive to be the common good.

Secondly—this follows from a recognition of our interdependence within the Community—let us learn to pursue those common interests and common solutions in what I hope is a more sensible way. A diplomatic approach which starts off by sandbagging—perhaps I should say handbagging—the opposition as an immediate precursor to the search for a consensus is certainly a novel diplomatic approach; but is it effective? To pursue a consensus requires a readiness to listen and a willingness to compromise. Of course one must have regard to vital national interests—that goes without saying—but the difficulty always lies in defining those national interests and in determining how best to defend them. It is that which creates the problem.

The four years that I spent on the Commission were dominated—I use the word advisedly—by the difficulties associated with the United Kingdom's contribution to the Community budget. It was, and indeed it is, an issue the importance of which I do not minimise. A lingering sense of grievance or unfairness is no basis on which to proceed. All that is perfectly true. But the way in which the argument was presented, almost to the conscious disregard of other issues about which our partners felt equally strongly, created a reservoir of ill-will and irritation in our over-lectured partners which I fear is not yet exhausted.

Thirdly, we must not continue—I echo what has already been said by some speakers this afternoon—to give the impression that for us Europe is only about trade and economics. I declare a former interest as regards social policy because that is the portfolio I had when I was on the Commission. I was attempting to guide the formulation of social policy. Social policy, the human face of the Community, or whatever you like to call it, is taken more seriously by almost all of our partners than it is by us. If we are to make a success of 1992 and beyond that social dimension cannot be ignored.

Finally, I echo what my noble friend Lord Cledwyn said about the institutions of the Community and the necessity for a greater degree of democratic accountability. I shall not go into the details of arguments on the subject this evening. I merely say this. The argument about the democratic accountability of the institutions of the Community is joined whether or not this country likes it and whether we are prepared to participate in that argument fully or whether we wish to stand on the sidelines and look at it. The argument is joined at least by the other members of the Community. The sadness and the danger which I feel and which I should like to warn about is that yet again events will take place, attitudes will be formulated, institutions may be created and this country will be standing outside looking at them. We shall be finding ourselves again trying to catch up and to join institutions which, if only we had had the perception to have participated at their formulation, we should be in a much better position to influence.

In the Community we are moving from an era of slow decision-making to one of quicker decision-making. Consensus-building is slow; votes and vetoes are quicker. I believe that there will be more votes and fewer vetoes. The danger I perceive is that, when the votes take place, this country will find itself too often on the losing side. I am obliged to the House for its indulgence.

4.53 p.m.

Lord Ezra

My Lords, with very great pleasure it falls to me, speaking after the noble Lord, Lord Richard, to congratulate him on his maiden speech; all the more so because I fully support the thrust of his remarks. As the noble Lord, Lord Cledwyn, reminded us, he had a remarkable career at the United Nations when he led our delegation there. Subsequently he was a commissioner in Brussels. As he has told us, in that capacity he was concerned with the formulation of social policy. There is not the slightest doubt that, when we come to that subject and later phases of considering our relationship with the European Community, he will be able to play a major role in advising us.

The fact is that the noble Lord, Lord Richard, is one of a number of Members of this House who have had direct experience of the European Community. We have a distinguished number of former commissioners and some of them will be speaking today. There is the noble Lord, Lord Clinton-Davis, the noble Lord, Lord Cockfield—though his name is not on the list of speakers—and my noble friend Lord Thomson. Not least there is my noble friend Lord Jenkins, who was a most distinguished president of the Community. We have heard from the noble Baroness, Lady Elles, who contributed so much to the affairs of the European Parliament.

With persons with direct experience of the affairs of the Community and with the sterling work of our Select Committee, we are probably unique among assemblies in Western Europe with our in-depth, detailed and considered knowledge of the affairs of the Community. I believe that this fact will stand us in very good stead as we reach the crucial discussions in the future concerning the next steps in the Community. In his opening remarks the noble Lord, Lord Brabazon, said that the Government will continue to consult us at every stage and will listen to the differing views, some of which they may agree with and others not but all of which will be based on a full consideration and knowledge of this important subject.

In introducing this debate my noble friend Lord Jenkins drew attention to what has perhaps been one of the most interesting and fundamental issues that we as a nation have faced since the war. I believe that it will be called by future historians the "European question". We have never really come to terms with that question. In considering what our policy should be in the future we should take a quick look at what has happened in the past.

Looking briefly at the Community, there is no doubt at all that when Jean Monnet, supported by M. Schuman, launched the project with coal and steel in 1950, they started something that was fundamentally new in the history of our old Continent. It was taken up enthusiastically by a number of other countries.

At that stage I was involved as a representative of the British coal industry in considering what response the then Attlee Government should give to the invitation to us to join the European Coal and Steel Community. The working party with which I was involved was positive in its view as to what our response should be but for political reasons the Government decided otherwise. I agree with the noble Lord, Lord Richard, that that was a mistaken decision.

Since the creation of the European Coal and Steel Community and the European Economic Community, there was a period of great difficulty in the Community. In my opinion the next big step forward was one with which the name of my noble friend Lord Jenkins will always be associated; namely, the creation of the European monetary system. It was the creation of that system in 1979 which has continued successfully, much to the surprise of many people in this country. It has represented a further historic step in the creation of Europe.

After the signing of the Treaty of Rome and the formation of the EMS, the third step has been the signing of the single market treaty in which we are full participants. We have been contributing much to its formulation. Then there has been the move towards EMU, economic and monetary union, and, finally, there are the proposals for political union.

Therefore, we must admit that Western Europe is very much on the move. I travel a good deal on the Continent, mainly in a commercial and industrial capacity. What is happening there is taken for granted. The deepening of the Community is accepted without question as being what has to be continued at the present time and all the more so in the light of the developments in Eastern Europe. In that regard I differ slightly from the remarks made by the noble Lord, Lord Bridges, who seems to take another view on the subject.

We now have a more united momentum on the part of our European partners as to the next steps in the creation of Europe than we have ever witnessed before. The question remains as to what our response should be to that momentum. We have, to say the least, appeared to be reticent. We have been reminded on numerous occasions from the Government Benches and others that the United Kingdom contribution to what is going on in the Community is substantial. I agree with that. A great deal of work is going on, as the noble Baroness, Lady Elles, reminded us. But when it comes to policy statements and to general attitudes we give the impression of considerable reticence, to use the mildest term that I can think of. That, rather than the hard work going on at the coal face, if I may employ that phrase, is what communicates itself to people. The time has come to consider whether we should reconsider our attitude and where it is leading us.

I fully accept that in historic terms entering the European Community in a wholehearted and unreserved manner has been a very difficult choice for this country. With our imperial past, our Commonwealth past and our special relationship with the United States, there has always been the feeling that we should not become too committed to one part of the world because it might jeopardise our relations elsewhere. For example, in the time of Sir Anthony Eden there was the talk of the three circles. It was said that somehow Britain was at the centre of those circles—the European circle, the Atlantic circle and the Commonwealth circle.

The other factor that has complicated our approach to Europe is the feeling that what we really want out of Europe is a free trade area, a point to which a number of noble Lords have already referred. That, I suppose, is one of the reasons why we signed the single market treaty with such alacrity. It would remove the obstacles to trade so that we could move the packages across the frontiers, as my noble friend said in his opening speech. A good many people prefer to see the development of a free trade area and the removal of the obstacles to trade so that governments can get on with the business of governing their countries. That formulation would be entirely satisfactory to many people. It is, however, no longer a feasible formulation. The way Western Europe is developing and the commitments already made to that development would prevent that easy solution. We have to come to terms with those fundamental issues.

The Europe that is being created today is not simply a Europe of trade. That is not the way in which any Continental Western European country sees it. I believe that an increasing number of people in this country are also beginning to realise that. But even in matters of trade one cannot just stop by removing the physical obstacles, whether they be tariff barriers or non-tariff barriers. Trade cannot flow freely unless we have something approaching a single currency. The fluctuation of currencies is a large impediment to trade. It is a major non-tariff barrier. It is easy for some to say that traders can always insure themselves against fluctuations. Of course they can, but it all adds to the cost of the operation. If we really want to create a single market, a single market currency follows as night follows day. This is what we have to work for.

I am a little reluctant to accept the alternative proposals put forward by the Government. They have said that we should go to stage one and then have competing currencies. Competing currencies and letting the best currency win means only one thing—a currency area effectively dominated by the deutschmark. Is that what we want? The Germans themselves are ready to put their currency at the disposal of a single currency operation. If they are ready to do it, which would safeguard the rest of us, why should we be pleading an alternative solution which would inevitably lead us to being subjugated and submerged by the deutschmark in a free currency operation? I have found it very difficult to understand the rationale of the Government's alternative proposals. I am relieved that they are not being taken very seriously by other countries as I do not believe that they would be in our interests let alone anyone else's.

There are other aspects of the matter. The question of political union has now come on to the agenda. Of course this has begun by being a general declaration of intent. That happens to be the way our Continental friends work. Right from the start in the Community there have been declarations of intent and then the detail has been worked out later. We prefer to do it the other way—we prefer to start with the detail and see where it leads us. It has been unfortunate that the Government's principal response to this idealistic vision of a future Europe united in like-minded institutions and objectives has been that we should first sit down and discuss what it is not going to do.

I happen to be on a number of commercial and industrial boards. If I went to a board meeting with a proposition for the expansion of the business and one of my colleagues said to me, "Wait a minute; before we consider your plan for expanding the business let us go through all the ways in which the business should not be expanded", I would take a very dim view of that colleague's intervention. We give that impression to our friends on the Continent. There is no harm in our having a different view about what political union should be, but to start by setting down what it should not be seems to create a rather reluctant impression.

What we need to do seriously at this juncture, with all that is happening in Eastern Europe, with the momentum that has been developing in Western Europe and with the much greater importance which now attaches to Western Europe in world terms, is to reassess our role. Indeed we need to address ourselves to the very question which has been raised in such a timely way in the Motion put to us today by my noble friend Lord Jenkins. I hope that in that reassessment, without in any way minimising our own interest as a nation, we would seek to identify the extent to which those interests could be better served by doing it in conjunction with our European partners. That is what it is all about.

The question of sovereignty is frequently raised but there is no real sovereignty these days among nations which trade with one another. A large chunk of British sovereignty was given up with the removal of exchange controls. Once money moves freely, once people move freely and once goods move freely, there is a limitation on sovereignty. There is no harm in sovereignty being given up in that way in the wider interest. The time when sovereignty has to be defended to the end and to the limit is when there is a hostile intent, as has happened in two world wars. Then one defends one's sovereignty to the limit. But when there is the prospect of linking up with others with similar institutions, political backgrounds and so on in the common interest to do these things together more effectively than we can do them separately, to talk about defending sovereignty can create the wrong impression.

We now need to make a reassessment of many issues. We need to reassess our attitude to developments in the Community and to Europe in general. We need to reassess our attitude to the momentum that has very clearly developed. I suspect that we are doing that. I say "I suspect" because some of the speeches made from the Government side from time to time are a little coded, but when they are decoded, as the newspapers have tried to do recently, a more positive intent seems to be emerging. I hope that is true and I hope that we in this House can help that forward.

5.10 p.m.

Lord Weidenfeld

My Lords, I should like first to congratulate the noble Lord, Lord Richard, on his maiden speech, which reflected his considerable first-hand knowledge and his wide historical perspective of the European question. It is with that historic perspective that I should like to begin my remarks. When we discuss today, following the lead of the noble Lord, Lord Jenkins, the future of European unity we must first of all count our blessings, for never in a thousand years of history has there been a more auspicious and stable Europe than that of the European Community. It is not only a functioning institution; it is also the epicentre of an evolving process. But with all its imperfections the Europe of the Twelve is a healthy organism which is flexible enough to weather much turbulence and bend to changing circumstances.

I endorse the remarks of the noble Lord, Lord Jenkins, and those of other noble Lords when they sketch certain route maps and timetables for the economic sphere, especially when they urge us to join the European monetary system. I emphatically believe that in this context we should put on record the fact that much more must be done in the educational and cultural field. Of course, I applaud the sentiments that reach for growing consensus in the political realm. More co-ordination of foreign and social policy is a worthy aspiration, but such aspirations should be much more carefully thought through than they have been. The processes may be hastened but not rushed.

I know that there is a widespread impression abroad that the British Government, and particularly the Prime Minister, have acted as silencers of the sonorous clarion calls from Paris, Bonn and Brussels. But there has also been a very recent perception—and I believe my feeling in this is shared by the noble Lord, Lord Jenkins—that, while on-stage Mrs. Thatcher may have sounded muted tones for European unity, both the French and German leaders tend to hammer a whole octave lower off-stage. Whenever the vital interests of the two great Continental powers are at stake, they are just as self-assertive as they have ever been. They may ask for sweeping powers for the Strasbourg Parliament but, in reality, neither the French Chamber of Deputies nor the Bundestag relishes the thought of turning into rubber-stamping assemblies; just as at any time the British Prime Minister baulks at the thought of the Palace of Westminster being downgraded to a listed building.

In essence there may be much more scope for co-ordinating European foreign relations. There is still a legitimate role for the traditional, individual foreign policies to be shaped and practised in the old chancelleries of Europe. I for one am reassured living in a country the government of which do not share Spain's compassionate regard for Fidel Castro, France's complaisance for Saddam Hussein, Italy's benevolence towards Colonel Gadaffi or Greece's uncritical respect for Chairman Arafat. I approve of a government who do not lightly offer the other cheek to states protecting terrorism in the awareness that those states, while occasionally releasing some prisoners with one hand, still hold or snatch more captives with the other.

I believe that rather then rushing into rapid institutionalisation we should greatly expand into European trade, industrial mergers, tourism and educational and cultural exchanges. But, above all, we should strengthen the human links of the Community and shed those stereotypes of old received ideas and misconceptions about our neighbours. Let us discard this Maginot mentality which only focuses on dangers of the past rather than on the perils of the future and neglects opportunities offered by radical change. Let us see our neighbours as they are today in a fresh light for there is now a generation of truly new Europeans.

Such a new attitude of mind will help us to deal much more effectively with the great momentous issues and priorities before us—none more momentous or immediate than the question of German unification and Germany's role in a uniting Europe. The noble Lord, Lord Jenkins, said, quite rightly, that a united Germany must be expected to play a political role commensurate with its economic prowess. Fortunately, the record and achievement of the Federal Republic, not only in the economic and other material fields but also in the sphere of human rights, the building of a fully functioning civil society, a healthy respect for the third world, and a revulsion against militarism among the young are hugely impressive.

Two generations of Germans that bear no responsibility for the decades of darkness have governed and been governed in exemplary fashion.

In fact, future historians may well consider that era of Bonn as the truly golden age of German history. Far from being resigned to or grudgingly acknowledging this achievement, we in Britain should feel a sort of co-proprietorial pride in having played a major role in the early stages of democratising and humanising many sectors of German political life: the German trade unions, a free press, school reforms, notions of civic ethics and much besides.

Like so many others, I must admit that I still see Hitler's footprints far from erased. The virus of racism and anti-semitism is rampant once again, but today it does not nest on German soil. Instead, it is spreading fast both east and south. Let us give credit where it is due. In 45 years no neo-Nazi movement in Germany has sent a single deputy into the legislative chamber. In a country that has lost in two world wars more than two-fifths of its historic national territory, only the other day the one major party of the extreme Right, a party of revisionism and revanchism, had secured a mere 1.9 per cent. of the vote while, regrettably, elsewhere—for instance, in France—its equivalent is safely ensconced with 11 per cent., 12 per cent. or 14 per cent. of the vote. In Italy a neo-fascist movement can claim up to one-tenth of the electorate.

1 believe that the consolidation of Anglo-German relations must be one of the most important objectives of British foreign policy, just as the consolidation of a united Germany embedded within the Community must be the prime objective of all Europeans and of course the prime objective of any German Government. Chancellor Kohl's insistence on speedy coalescence of the different provinces of the German Democratic Republic with the federal units of West Germany, set forth in Article 23 of the West German constitution, is the most solid recipe for a smooth transition of the troubled former communist lands into a free and democratic policy.

The European Community is already tackling with laudable speed the question of assisting the Central and East European countries. The thrust towards democracy in the lands between the Baltic and the Black Sea may well be irreversible, but the traumas of transition are tremendous. The gap between great expectations and sparse results facing untutored, raw electorates may create tremendous new dangers. Worse still, old demons, amalgams of communist and fascist relics, may well resurface in new garbs and thwart the progress in Central and Eastern Europe at the end of this century, just as the diehard Bourbons and Bonapartistes eroded France's constitutional monarchy and its second republic in the last. Will the newly enfranchised peoples surmount the turmoil, or will patience snap in the face of economic distress, administrative inefficiency or moral lapses by the new untried governing elites?

Above all, and worst of all, will the colossus in the East survive the most excruciating time of troubles in all its imperial history? Nevertheless, we must have faith in the enduring will for freedom inherent in the peoples of those lands and we must resolve to do all we can to make the transition to democracy as smooth as possible. Before long these nations should share many of the benefits of the EFTA countries. But we are entitled to ask for strict disciplines. Far from bundling them together—there is a great danger of thinking of them as a whole—we should one by one insist that they show us how they can establish those economic practices as well as observe those human rights and standards of which we can approve. At the same time, we should not delay the continuous growth and expansion of the European Community beyond the benchmark year of 1992.

There are at the moment some suitable candidates who could add hugely to our strength. I should like to refer to Austria's application of 17th July 1989 to become a full member of the Community. The positive arguments speak for themselves. Austria is a successful democracy, economically prosperous and geographically a key link between north and south, east and west. Seventy per cent. of its trade is already transacted with the Community. There may well be two sources of possible misgiving. Austria's status of permanent neutrality is sometimes considered to be a question mark. However, recent developments in the East have largely, if not wholly removed its significance. In fact, as Austria has played such an active and constructive role internationally as one of the most helpful actors in the CSCE process and in the framework of the United Nations peace keeping efforts, it should be considered a valuable asset rather than a liability. Further, there is a feeling in some quarters that Austria's adherence would be "Anschluss by the back door", reviving echoes of a greater Germany; but that can be easily countered by the manifest emergence of an unselfconscious and genuine Austrian identify and by the practical consideration that, as an equal member of the Community, Austria would less than ever have to lean on a powerful neighbour.

The noble Lord, Lord Bridges, asked where Europe ends and where are its frontiers. I hope that by the end of this millenium at least some if not all of the EFTA countries and a few of the emerging democracies of Eastern Europe might join the solidly built house of Europe. A dream of wider structures which would see Europe in ever closer friendship and partnership with the great democracies of America and a reformed Russia, a dream of a great community from Vancouver to Vladivostok, is today far less Utopian and far more real than the prophetic vision of that French exile in wartime Britain, cited by the noble Lord, Lord Ezra, Jean Monnet, when he produced his first blueprint for a coal and steel community which would evolve into a common and ultimately single European market—and all this still within the lifetime of most of us who are today in your Lordships' House.

5.23 p.m.

Lord Thomas of Swynnerton

My Lords, I too should like to thank my noble friend, Lord Jenkins of Hillhead, for introducing the debate. The terms of the Motion are of particular interest since they in a sense go back on the philosophy of the founders of the European Community among whom, above all, is Mr. Jean Monnet, the predecessor but four of the noble Lord, Lord Jenkins of Hillhead, as President of the European Commission.

Mr. Monnet and the other founders of the Community felt, even after two world wars caused by nationalism, that nationalism in Europe was so strong that there was no point in trying to persuade the European states to sit down at some great conference in the Palace of Versailles to sign away ther national sovereignties. If one believed in European unity, as of course they did, and as the noble Lord, Lord Jenkins, does, the way to obtain it was to begin with small things. Start with coal and steel first, if the noble Lord, Lord Ezra, will forgive me for referring to coal as a small matter, and in the end one would achieve one's aims. To paraphrase what the noble Lord, Lord Jenkins, described as the route to Birmingham via Beachy Head, the way to the heavenly city of European union was via lettuces and tomatoes.

In a sense that has worked. We have not had a major conference on European union since the 1950s. Had we had one at any time, I have no doubt that the European Community would have collapsed. That is what makes the present situation so extraordinarily interesting. There is the possibility of an inter-governmental conference on European union within the year. I am not sure that we have reached the stage of maturity in this country nor indeed in some other European countries where we can afford such an international conference to consider signing away sovereignty in the way that the Motion suggests.

I should like to congratulate my noble friend the Minister on a positive and constructive speech. It must have given all sceptics of the Government's European policy grounds for confidence and optimism, as I do not believe that I have heard in the House a governmental speech so positively phrased. There are one or two points upon which I disagree with my noble friend; I shall come to those in a minute.

Before we settle to discussing what kind of European union we have or should have, we need to resolve six major points. I should like to draw attention to them. First, there is the question of Central Europe. Let us call it Central rather than Eastern Europe because the phrase "Eastern Europe" means eastward looking, and the countries about which we are talking were always referred to as Mitteleuropa before 1914 and 1939. Obviously, Western Europe has the major role to play in leading those countries back towards civil and civilised societies, of which they were in reach before 1914 or 1939. However, that is a difficult matter.

The idea that eight new countries from Eastern Europe could, within the foreseeable future, try to join the Community, as well perhaps as five out of the six EFTA countries, not to speak of Malta, which I understand applied to join the Community yesterday, suggests an enormous task. Is it conceivable that the European Community of 2010 could have 24 members? As I understand it, the Community of Twelve works reasonably well; but a greatly expanded number of nation state members of the Community would threaten the work that has already been achieved.

My conclusion is that in Western Europe we should press ahead as fast as possible to achieve the single market to which we have already given our names, carry out that degree of European monetary and economic union which we decide we want and carry through the institutional changes which we think appropriate, before we accept large numbers of new applications. That will obviously be a delicate and sensitive matter, especially as it is clear that, by the end of the year, the East Germans, as part of the newly united Germany, will probably already be European Community nationals. If the East Germans are already in the door, so to speak, it will make it difficult for us to be other than encouraging in the long term towards the Poles, the Czechs, the Hungarians and others who will obviously wish to apply.

My second point is that we must take extremely seriously the need to make the European union which we are constructing as profound (in every sense of the word) as possible in order to enable the newly united Germany to find its satisfaction within it. In this respect, I differ from the noble Lord, Lord Bridges, who seemed to feel that to make a special effort to satisfy a united Germany within the European Community was unnecessary. I see what he meant; nevertheless the Germans themselves are surely aware of the anxiety which their unification could cause among their neighbours. After all, it is they who have so often quoted the admirable phrase of Thomas Mann: he said that he wished to see not the germanisation of Europe but the Europeanisation of Germany.

Thirdly, we should take a good look again at the ideas canvassed in the 1950s, and subsequently from time to time, for some kind of European security organisation. There was a time when to mention such a suggestion was to risk accusations that one was likely to cause decoupling with the United States. I remember making this suggestion at a conference at Konigswinter and the then editor of the Sunday Times telling me that I was risking the future of civilisation itself. I knew perfectly well if I had caused such a reaction I must be on the right lines.

Now, however, that point of view is no longer so eccentric. My noble friend Lord Carrington suggested it at Luxembourg earlier this year when delivering the Winston Churchill Memorial Lecture. On these Benches I am fortunate enough to have been bred in the good old school which suggests that when my noble friend Lord Carrington takes up a point of view, it is bound to be both practical and desirable. In the changed strategic situation of the world after the collapse of communism which is apparently no longer a threat, as the United States Secretary of Defence said, we should, cautiously, no doubt (the Soviet Union still being a major nuclear power with a large arsenal of nuclear weapons scattered around the surface of the Soviet Union, including, I understand, some territories which are already wishing to secede) reconsider these ideas for a European security organisation which could in the long run arrange for Europe to look after her own defence.

Fourthly, we should carefully consider this word "subsidiarity" which I find difficult to pronounce; it is an ugly word. I understand that it originated in the Vatican. There is no harm in that. The whole idea of representative government is said to have derived originally from Vatican procedures in the Middle Ages. Although "subsidiarity" gives the impression of being a clear concept, it is not really at all clear what it means. Therefore, we should contemplate a new treaty on subsidiarity, as suggested by Otto von Habsburg, MEP, in a recent interview with Dr. George Urban, published in the journal of the Royal Institute of International Affairs.

Why is this necessary? It is necessary because the whole ambiguity as to what should be within the competence of the European Community and what should remain within the competence of the nation state seems to me to risk damaging the relations between this country and her fellow members of the Community.

My next point relates to the democratic deficit, a rather unworthy way of describing the need to increase democratic accountability within the Community. We have had interesting contributions on the matter in the course of the debate from my noble friend Lady Elles and also from the noble Lord, Lord Richard, in his admirable maiden speech. I feel, however, that unless we contemplate sooner or later the European Parliament having its own tax-raising powers, we shall not take the Parliament seriously nor will the Parliament take itself seriously. This is something we should consider.

I have two other points, the first of which relates to this country. We need to make a psychological change. It is 17 years since we signed the Treaty of Rome, during the course of which European law has applied in this country. We have more or less accepted a federal agriculture and a federal policy relating to fisheries. It is plain that during these years we have had no intention of withdrawing from the Community. Nevertheless, as several noble Lords have pointed out, many seem to suppose that the battles of 1961, 1973 and 1975 have to be fought, even now, every day. If we read leader writers even in the quality papers we feel that the option of withdrawing from the Community is still considered, even though the real chances of another place contemplating the repeal of the European Communities Act 1972 must be as remote as the possibility of the Queen dissolving Parliament and sending for a Member of your Lordships' House to form a government.

The fact is that we are in the European Community, even though the nation has not fully accepted it. The Governraent could do a great deal more to try to get over this psychological block. Now that the Opposition have become convinced of the virtues of the Community, they have a great responsibility also to do so. I have never seen the bishops take part in a debate on Europe but they also could play a part; universities too—why not? At all events, it is necessary to carry out what I suppose it will be fair to say—recalling Thomas Mann's remark—is the Europeanisation of Britain at the same time as the Europeanisation of Germany.

When thinking how all this fits together, I am aware that I have not devoted adequate attention to the terms of the Motion before us. If we resolve the questions which I have indicated as being important positively and constructively, we shall, however, find that it will not matter much whether we are operating, or think we are operating, within a European confederation, a federation or a union. All these words are vague, and have different meanings, or are understood to mean different things, in different countries. It will all the same have become plain that we shall have formed an association which will dominate our lives and the lives of our neighbours for the foreseeable future. We shall in some way have broken through into a newly constructive period in our national life.

5.39 p.m.

Lord Stoddart of Swindon

My Lords I too wish to thank the noble Lord, Lord Jenkins, for putting down this Motion and I congratulate my noble friend Lord Richard on his maiden speech. We all know that he has had a distinguished career not only in the United Nations and in the European Community but also in another place. I served with him there and enjoyed debating this subject with him and many others, if not in the Chamber then in the Tea Room. I very much enjoyed his speech, although enjoyment does not necessarily indicate agreement, as he will know. The whole House enjoyed his speech and I congratulate him on it. I sincerely hope that we shall hear a great deal more from him in the future on this subject and on many others.

The noble Lord, Lord Jenkins, in opening his speech said that the Government and this country were marching out of step with Europe. I do not necessarily agree with that, even though it is a Tory Government. Which Europe did he mean? Is it the Europe of 12 nations, or was he talking about the Europe of 30 nations, many of which have only recently escaped from tyranny and fought to regain the sovereignty which some people now fear we are about to lose? Therefore, when we talk at>out Europe let us make sure that we are talking about the wider Europe and not the narrow Europe of 12 Western European states.

The noble Lord, Lord Jenkins, also made the point that the Prime Minister took a populist, nationalist approach to the Euro-elections last summer. The implication was that because she took that approach she lost the election. The noble Lord has been around long enough to know that that is not true. That election was lost because of the intolerable policies which the Prime Minister was imposing at home. The policy of under-funding the National Health Service, for example, was one of the major issues. I am certain that the reason for the Conservatives losing that election was far removed from the question of sovereignty.

The noble Lord, Lord Jenkins also sought to reassure the House and the country concerning the fear of federation which is threatened. He said, in effect, "Don't worry, chaps, all will be well. You are not going to have a federal United States of Europe". But I have heard it all before. Time and time again I have heard assurances that this would not happen or that would not happen. I remember reading the document which was issued by the Government at the time of the 1975 referendum as to whether we should remain within the European Community that the then Government had ensured through negotiations that there would not be economic and monetary union which would cause unemployment. Now it is on the agenda. So that assurance did not come to much, did it?

However, do not listen to what I say. Listen to what the Foreign Affairs Committee in another place had to say in its second report about the danger from creeping federalism. On page xvi of the report the committee says: We should not underestimate the continued strength of feeling and momentum for a move towards federal objectives. These may be long term goals, but they provide the context in which many are developing their thinking at present. There exists a high degree of consensus which, we believe, will grow. Emphases may change. There may be varying tactical shifts and differences of detail, but the old objective of a federal Europe is being reinforced at the highest official and political levels". Noble Lords do not have to take it from me that federalism is very high on the agenda. They can take it from the Select Committee on Foreign Affairs in another place, which issued its report on 14th March.

Are we good Europeans or are we not? The noble Lord, Lord Jenkins, and others believe that we are not. We are always being criticised, whatever the government. The present Government are being criticised because Britain is not sufficiently communautaire. However, this country contributes a devil of a lot to the EC. It certainly contributes £2,000 million a year to its coffers. It is also a dumping ground for its manufactured goods, as is evidenced by the £13-4 billion trade deficit in manufactures last year. We also helped it out in invisibles, because last year we had a deficit in invisibles of £2-8 billion. If that were not enough, we also inflict upon ourselves higher food prices to the extent of £20 per week per family. So when it is said that we are not making any contribution or a sufficient contribution to the EC, those facts should be taken into account.

I hate having to do this, but I find myself having to defend the Prime Minister. She is accused of being shrill and of handbagging or sandbagging other European leaders. Is that not what a Prime Minister should do? Should she not stand up for the people she represents? I thought that that was what it was all about. That is why she is elected. The Prime Minister of this country is not elected to sit down and be handbagged or sandbagged by somebody else. The Prime Minister of this country is there to speak for this nation and to safeguard the interests of the people of this nation. Let us hear no more about that.

If anybody was sandbagged or handbagged at the last Dublin conference it was our Prime Minister when the Franco-German axis suddenly brought forward, with little notice, the question of political union. There are other points of view, and I hope that I shall be able to put some of them.

The situation in Europe is, as many noble Lords have noted, developing very quickly. Countries which have been in bondage for 40 or 50 years have suddenly decided that they want their freedom. We have been urging them to do that for years. What we must not now do is to frighten them by building in Western Europe a new superstate. If they see that there is a new superstate in Western Europe, perhaps with a central defence system, as was propounded by the noble Lord, Lord Thomas of Swynnerton, who has just spoken, will that not frighten them off? Will they not be concerned that they will be put under threat or duress by that new powerful body in Western Europe of which a reunified and strong Germany is the centre? We should take those matters into account too.

We have heard a great deal about this country joining the exchange rate mechanism of the European monetary system. It is thought, not only on the Conservative side but apparently now on my side of the House as well, that that will be a great panacea which will solve our problems. But it will not do so. The only way in which we can solve the deep economic problems of this country is by doing the right things in this country. No one else will do it for us. We have to do it. The suggestion that, by going into the ERM, interest rates and mortgage rates will suddenly come down and that nothing else will have to give is quite frankly a bit of economic illiteracy because it will not happen that way. We can succeed only if we have the economic will to succeed and to do those things in this country which are necessary.

I am sure that the Minister has the statistics. I am looking at the noble Lord, Lord Ezra, because he once took me to task when I dared to give those figures. The fact is that this country, which is outside the ERM, has since 1981 out-performed those countries which are within the ERM. The average rate of growth in Britain since 1981 has been 3-4 per cent. as against an average of 2-7 per cent. for the countries inside the ERM. Unemployment in this country is 5-6 per cent. as opposed to France's unemployment figure of 9-4 per cent. We are outside the ERM and the French are inside the ERM. As for inflation, apart from the past year, the British average and the European average of those people outside the ERM has been just as good as that of those inside the ERM, so the arguments are not all one way. Before we join the ERM, we should be sure that it will do us good rather than harm.

Like me, the noble Lord, Lord Ezra, mistrusts the short-termism of the City. However, at present the prime mover regarding our entry into the ERM is the City and we should therefore suspect its motives and be wary of its recommendations.

I am approaching the end of my time. I have a great deal more to say, but I just cannot say it. I do not believe that it is for us, now or at any time in the future, to enter into greater political union within Europe. We know that federalism will end a thousand years of great history. People say to me, "We must make progress". I heard one of those European MPs say on television last night, "We must make progress", but progress towards what? When a man is condemned to death, he proceeds from the condemned cell along the passage to the place of execution, but after that he is dead. That is progress too.

I am afraid that that is the kind of progress that would come about if we accepted the recommendations of those people who want greater political, monetary and economic union. I sincerely hope that this Government and any future government will resist those recommendations and insist that this country and this Parliament retain the sovereignty of the British people so that they and only they—not a group of foreign potentates—decide what is good for this nation and its people.

5.55 p.m.

Lord Gladwyn

My Lords, like my noble friend Lord Jenkins, I believe that opposition in this country to our becoming a full member of what is now an incipient European Political Community is, as was evident from the speech of the noble Lord, Lord Stoddart of Swindon, largely based on the fear that we should thereby inevitably become a mere state in some kind of federation closely resembling that of the United States. That fear, though widespread, is, in my view, groundless for the following reasons.

The American colonies which came together at the end of the 18th century already had many things in common; namely, language, religion, cultural background, history and, above all perhaps, a common system of law. They therefore found it possible to create a federation which featured a President with extensive powers; a Congress which also had certain agreed powers over the states; a federal army and navy recruited from all over the Union; and a federal police force. Many of the same features were present at the formation of other successful federations.

The situation on the mainland of Western Europe in 1945 was totally different from that of America in 1779. The states concerned had just emerged from a devasting war in which almost all had at some stage been totally defeated. The idea common to all was that it simply must not happen again and that the best way to prevent that was in some way to co-operate closely. However, they did not possess then, as we have noted, those features which resulted in federation in other parts of the world. That was to make efforts towards some kind of political unity much more difficult.

Let us see what happened. After a year or two of discussion which only resulted—thanks chiefly to our influence—in the creation of the Council of Europe, which had no supra-national powers at all, the first step towards unity came in May 1950 in the shape of the Coal and Steel Authority. Encouraged by its success, the federalists—those who looked towards something like the United States—put forward the Pleven Plan for a merger of the armed forces of France and Germany in the shape of the European Defence Community. However, that was rejected in 1954 by the French Assembly and it was the first victory of the nationalists.

Impressed by that, the Continentals began discussing after Suez, at first with our participation, an entirely new and genial project for economic union which resulted in the Treaty of Rome. That was obviously where we should have come in by persisting in, and not abandoning, the negotiations. The treaty did, of course, have certain supra-national features to which we strongly objected on nationalistic grounds. However, it was nothing like a United States of Europe on the American model.

In 1958 de Gaulle appeared to accept the treaty but after the Algerian settlement in 1964 he rejected its provisions for a qualified majority vote which resulted in the famous Luxembourg Compromise, the second major victory of the nationalists. That compromise, which we accepted when we joined in 1972, remained theoretically in force until 1986; in other words, the essential structure of the Community did not change throughout that period, in spite of the doubling of its members and some slight increase in the powers of the European Parliament.

But as the 1980s wore on, it became more and more evident that the complete abolition of all impediments to inter-Community trade which, largely on our insistence, had already been agreed should take place in 1992, would of itself necessitate some strengthening of the treaty. It is in fact difficult to see how an economic union of states with very different standards of living can operate if it is based purely on what would in effect be some sort of survival of the fittest.

The Single European Act was therefore negotiated and eventually accepted in 1987 by all the national parliaments, including our own. It did not go so far as many would have wanted but it provided for rather more decisions being taken by qualified majority vote, for rather more powers for the European Parliament and for some strengthening of the means of achieving a common foreign policy which might eventually—as my noble kinsman Lord Thomas suggested—even involve a common defence.

Very broadly speaking, that is where we now stand. Various things are obviously now on the horizon, including a common currency and a largely independent European central bank which, however, as a guess, could well be made dependent on some qualified vote in the Council of Ministers and on a large majority in the European Parliament. It is also possible—and, I should have thought, clearly desirable—that Brussels should increasingly be the centre of most Community activities. Certainly the European Parliament should be situated there and no doubt eventually the Council of Ministers, who, on the political side, might well have a small permanent staff.

Now there are those who say that all this is old and out-of-date thinking. We should now concentrate on creating a wider Europe, a "European House" which, according to some, must incorporate Russia or even the Soviet Union in close association with North America. But these are very vague, long-term considerations, dependent on the future of NATO and on what actually happens in the Soviet Union. Nor are they likely to achieve any reality unless there is a strong Western Europe, including Germany, speaking increasingly with one voice.

Here the essential point is that the existing structure of the Community will not change. There will be no President of Europe directing a European federal government dependent on the European Parliament. There will be no European ministry of foreign affairs or of defence, or indeed any European ministries at all. There will be no European foreign service, no European army or navy and not even a European CIA. Rightly or wrongly, the national feeling in all our ancient nation states is too strong to allow any such developments.

So I suggest that if the Community, without changing its essential structure, proceeds on its present projected path, there is no reason whatever for the inhabitants of this country, any more than those of the other member states, to feel that they are, as it were, being governed by foreigners in some rather alien administration. It is, rather, a welcome opportunity to take part in a great international venture of a completely novel type which will preserve the individual characteristics of members while enabling all collectively to play a significant part in world affairs.

This is all the more necessary in the present condition of the world. The collapse of communism and even possibly the Soviet Union, coupled with the prospective unification of Germany, make a united Western Europe all the more essential. The absorption of East Germany into the Community will naturally be difficult but, with all the wealth of Western Germany behind it, it will be possible. The prospect of a united Germany being a full and active member of the Community is even more important than formerly, in view of the fact that NATO—though it must go on—will clearly, given the collapse of Russia, be of much less significance.

The relations of the Community with the other European countries which have also recently abandoned communism will clearly be different. Certainly they, or at least three of them, are as "European" as we are. But nearly half a century under communism has made it impossible for them to change over quickly to a free market economy. There will be unemployment and many hardships and perhaps their present love affair with the West will suffer. As friendly associates, a common Community policy towards them is essential. But that can hardly come about unless Germany is a full member of the Community and the ministerial Council in Brussels and thus does not, or cannot, pursue an independent policy.

One would have thought that at this critical moment Her Majesty's Government would be in the forefront of those who favour greater political European unity. It is not only a question of our joining the European Monetary System, which seems already to be imminent. It is our general attitude toward any proposal for greater unity, whether economic or political, that is so deplorable. Some proposals, such as the Delors plan, may be criticised, but the necessity of progress in principle must surely be acknowledged.

For instance, what is the point, among other things, of totally rejecting a social charter which in principle is accepted by all other Community Members; of refusing some additional powers of co-decision to a European Parliament which, if the Community is to have any supra-national characteristics, must play an essential part; of rejecting the views on this point even of the Tory Members of the European Parliament; of declining to agree to its election by proportional representation, which alone might make it fully representative of European public opinion; of effectively preventing MEPs from even entering the Palace of Westminster; and finally, being obviously suspicious of any proposal for increasing political unity, which alone, according to many experts, is more likely than anything else to bind the reunited Germany to the Western world?

There are rumours that these views are not altogether shared by some Members of the Cabinet. But it is pretty certain that they are those at present held by an embattled Britannia in Downing Street, conscious of considerable nationalistic support, brandishing her trident at the misguided federalists on the other side of the Channel, no longer ruling the waves but intent, so far as concerns the Single European Act, at least on waiving the rules! Britannia's attitude must surely change if Britain is not to find herself marginalised in the vital conference at the end of the year. Happily, some reliable political prophets are predicting that it will change. The forward-looking speech of the noble Lord, Lord Brabazon, this afternoon encourages us to hope so.

6.10 p.m.

Lord Aldington

My Lords, I venture to intervene in this important and interesting debate for the reason that your Lordships may have gathered from the speech of the noble Lord the Leader of the Opposition and the noble Lord, Lord Bridges. I have been appointed chairman of a committee formed by the European Communities Select Committee to consider these matters. I shall say a few words on the debate and then quite shortly I should like to tell your Lordships about that sub-committee.

I regard the debate as of enormous value. Like all your Lordships, I am greatly indebted to the noble Lord, Lord Jenkins of Hillhead, for starting it off I am also indebted to the noble Lord, Lord Richard, for his speech. I join in welcoming him for a number of reasons. Since I first heard him speak (I believe in another place) I have enjoyed listening to his voice; and I liked hearing it again.

I agree with him that the debate is timely: it will help to make these problems more understandable. I most strongly agree with what the noble Lord, Lord Jenkins, said at the start of the debate, that there has been persistent misunderstanding. To have a debate in this House during which not only the former President of the Commission but three other former commissioners, two ambassadors, a Minister and one or two former ministers speak is of enormous value.

However, there can be misunderstandings. I most humbly suggest to your Lordships that that was proved by the robust speech of the noble Lord, Lord Stoddart of Swindon. He said "I have heard it all before". If I may say so to the noble Lord, so have we.

Lord Stoddart of Swindon

And we shall hear it again.

Lord Aldington

We shall hear it again. The noble Lord made a new point about the fear of the new Eastern European countries that they would shrink away from the European Community because of the proposals that he put into the mouth of the noble Lord, Lord Jenkins. It seems to me much more likely that, as the Eastern Europeans look at the Community, they will see a most successful community of nations. They will see a community whose economic growth, trade and happiness have improved, a community which stands free, with sovereign member states uniting together in their common purposes. I wish the Community to develop that aspect further so that it can be of value to the Eastern European countries as it has been of value to the EFTA countries whose main trading partner it is.

I have had the honour to chair an inquiry into relations between the Community and EFTA. Noble Lords will see the report in two days' time. Why is EFTA interested in the Community? It is because of the success of the Community. Why are the Eastern European countries looking to the Community? It is because of its success.

I return to the theme of misunderstanding. The Motion refers to a more precise shape for future European political and monetary union. There is nothing new about those aims. They have been there for a long time, as the noble Lord said at the outset of our debate. The arguments—there are arguments, and they will continue—are about what those words mean. What are the aims? What do those words entail? What steps should be taken towards their achievement? What institutional implications are there?

I give an example. Noble Lords will have found difficulty over the past few years in understanding what is meant by the proponents of monetary union and by the Government when they talk about monetary union. It is quite clear that they do not mean the same thing. There appeared to be a new definition of monetary union in the mind of my noble friend when he gave his very interesting and positive speech. I applaud the call for our Government to take an active role in seeking to define the more precise shape for those proposals. I am very glad that they welcome those words in the Motion. I know that the Government have taken a positive stance on the implementation of European legislation, directives and policies. However, I very much hope that they will continue to take a positive attitude to the proposals for the future.

I read with great pleasure the positive speech by my right honourable friend the Foreign Secretary in Paris at the end of April. As has been said, much that the noble Lord, Lord Brabazon, said today was positive. However, I share the views of some about the danger that we may be forced to dance to someone else's tune because our tune is not being played. That is one of the reasons why I welcome the Motion today.

What is the best way to sort out misunderstandings? Debates such as this help. But your Lordships' House has developed a very good means of securing a little more clarity on issues that trouble our nation. Many of us have been members of Select Committees on various subjects. As a new member of the European Communities Select Committee, perhaps I may say that under the chairmanship of the noble Baroness, Lady Serota, it has played an enormous part in informing your Lordships and informing public debate.

The noble Lord, Lord Kearton, preceded me as chairman of sub-committee A. The role that he has had as chairman of that committee over the past five years on many very difficult economic, financial and trade subjects has been of enormous value both to this House and to the understanding of the problems within the nation.

I welcome the idea of the noble Baroness, Lady Serota, that an ad hoc committee should be set up to consider the proposals for economic and monetary union and for political union. They appear to be related in time and on the accountability issue. The sub-committee's terms of reference, which were read out by the Leader of the Opposition, are: to consider the implications for the United Kingdom and the European Community of proposals for economic and monetary union and for political union with special reference to the institutional changes which might be involved The inquiry will benefit from work done by the Select Committee in previous years. We should have in mind two notable reports; first, that published in 1985 on European union and, secondly, that published in 1989 by the committee presided over by the noble Lord, Lord Kearton, on the Delors Committee report. Many other reports are also of value to us.

The membership of sub-committee A is only 12. We have recently undertaken the EFTA report and are now carrying out another inquiry. However, the membership of the new ad hoc sub-committee will total 20, drawn from all sides of the House. It will have as its members some of your Lordships who have special experience of the matters into which we are looking. We hope to be well equipped to listen to evidence which we shall be taking from next week on. We shall sit fairly intensively until the end of July, expect to deliberate in October and report in November. I am sure that my colleagues share my view that we shall draw strength and understanding from debates such as this. Indeed, I hope that this will not be the last debate on these issues before we come to deliberate.

The work of the Select Committee and its sub-committees is an excellent example of the way in which national parliaments can play a part in the general accountability process of the Commission, the Council and the European concept. As a result of the steps taken by our predecessors, we in this House have set an example. When talking to Members of the European Parliament, which we visited two weeks ago, I found that we are well understood and respected. During my visit to Strasbourg I learned for the first time how that Parliament works. I gained an understanding of the importance and value of its work and of the high quality of our Members of that Parliament.

We in the Select Committee have a relationship with those Members. We call for evidence and co-operation from them when carrying out our inquiries. I am glad to know that the other place is taking steps to afford Members of the European Parliament higher status in their affairs. The House has heard from my noble friend Lady Elles, and your Lordships know of the high quality in everything that she does. Our country as a whole does not understand how well we are served by our representatives in the European Parliament.

6.23 p.m.

Lord Clinton-Davis

My Lords, at the outset, perhaps I may, as a new boy, congratulate my noble friend Lord Richard. He is a friend in every sense of the word and I was delighted to sit next to him this afternoon and hear his remarkable maiden speech. I congratulate too the noble Lord, Lord Jenkins upon initiating the debate on this important issue. Like him, I suppose that I should enter into a confessional, which is a term of art when it comes to European Community affairs, but somewhat different from the confession that he made. I readily confess that my views have drifted apart from those of my noble friend Lord Stoddart. They are based on my experience before I became a commissioner and on that gained during the four years that I held the office. I also congratulate the noble Lord, Lord Aldington, on his important appointment. I am sure that the House recognises that he will shoulder his burdens with the skill and sincerity for which he is so respected in this House and elsewhere.

Like other noble Lords I agree that this is a timely debate. It takes place against the backcloth of the seismic changes that have occurred in Eastern Europe. Those changes clearly challenge so many of the assumptions on which out post-war policies were built. The debate enables us to reflect on the kind of Community that we wish to see constructed and on the pace of that construction. It also provides us with the opportunity to consider, albeit briefly, the recommendations of the second report of the Foreign Affairs Committee on the operation of the Single European Act and the Government's response to it. I am bound to say that I found that feeble and unconvincing.

Against that backcloth the advice of the Government appears to be to go slow on European Community integration. Some say "Let us wait for the new burgeoning democracies of Eastern Europe to be able to clamber on board the Community". I believe that that is profoundly bad advice, but I shall return to the point later. I share the view of the noble Lord, Lord Gladwyn, in saying that the Government also appear to say, "Let us ignore some of the objectives, even some of the legal duties, that have been prescribed by the Single European Act".

That appears to be the message that was preached by the Prime Minister even before the recent events which took place in Eastern Europe. But it is a message that is essentially rejected by other members states. They believe that it is vital that we should continue to strengthen the existing Community, make it more efficient, more democratic, more accountable, and more cohesive, so that it can offer a vision of greater prosperity and a sense of greater community to the peoples of Eastern Europe who look to the Community as the main architect for planning the European structures of the future. I cannot believe that they would wish to see a Community enfeebled by delay as we simply wait on events.

Therefore, while other member states call for progress on political union, currency union, the implementation of the concepts envisioned by the social charter, progress on environmental policies built upon the principles of the new chapter in the Single European Act, the Government essentially stand apart—ever the awkward partner. I regret some of the arguments which the Prime Minister has relied on from time to time in order to justify that stance. I believe that not only do those arguments trivialise the important issues that we face but they cause great offence to people in the institutions of Europe because they are trivial and because they are wrong.

I wish to exemplify what I mean. Recently the Prime Minister even invoked the monarchy: the monarchy might be threatened by the developments which are happening in the European Community. There she is standing firm to protect the monarchy. It seems to have escaped her notice that five other member states have monarchies. I have seen no evidence—not a scintilla of evidence—to suggest that any of them has a desire to abolish its royal family. She says that what is happening today is a movement towards an indentikit Europe. That is not a view which is shared by other members of the Community. They see their contribution as an important part of sharing responsibilities and creating a new sense of sovereignty for the Community itself.

Then there are the pejorative descriptions affecting the socal charter; for example, the suggestion that it was born out of neo-Marxist ideas. Anybody having a brief look at the social charter, whatever criticisms one may make of it, would find that a rather inexplicable and absurd view to take. Indeed, it is deeply insulting to those Right-wing leaders of governments in Europe who have embraced the concept of the social charter.

Of course, it ignores the fact that the changes to come out of the establishment of the internal market will not be secured—and they are important changes which can enrich the Community—if progress is not made on issues like equal pay; the right to permanent training and equal treatment for all workers, especially women; protecting the interests of workers in their workplace; and indeed, the participation of the workforce in decisions which affect its members' working life.

Perhaps I may quote the words of the president of the Community, Jacques Delors, who said: This Europe also needs clear rules and respect for the law. While we are trying to pool our efforts, it would be unacceptable for unfair practices to distort the interplay of economic forces. It would be unacceptable for Europe to become a source of social regression, while we are trying to rediscover together the road to prosperity and employment". I do not believe that it is right that Mrs. Thatcher really fears a federalist Europe. I believe she fears a socially progressive Europe. In my view, it is not that she fears that Britain will be run by the Brussels bureaucracy but rather that Britain and the Community will not be run according to her precepts, which I readily acknowledge she holds very sincerely.

However, for the Prime Minister, the internal market concept was originally envisaged as an exercise in a massive European-wide deregulation while, for others in the Community, it is potentially an exercise in social solidarity. For her, it is to be a common market and for them—and I use the words of my noble friend Lord Cledwyn—it is to be a European Community in the full sense of that term.

Yesterday I noticed that the Secretary of State for Trade and Industry, Mr. Ridley had decided to intervene in the debate. I worry about many of his interventions and sometimes I worry also about his non-interventions. I wonder whether some of his words might embarrass the noble Lord, Lord Brabazon of Tara, because, according to the Financial Times, he said that: governments could opt out of EC arrangements, depending on national instincts or economic circumstances". He suggested that: there could be regional groupings within the overall union within which France and Germany could form a closer alliance if they wished". That is a view which I think is profoundly dangerous.

What are we to make of that intervention? Is it the obiter dictum of yet another semi-detached Minister or is it the view of the Government? Perhaps the Minister will clarify that issue at the end of the debate. However, in my judgment, that view—that we should have a two-speed Europe—is not only dangerous for the Community but is profoundly dangerous for this country.

Regrettably, in the main, my submission is that the Government's response to the foreign affairs committee's report corroborates Mr. Ridley's approach. There is not a word about the significance of the new chapter on the environment in the Single European Act. There is not a word about the provisions on social policy which impose legal obligations on the Commission to promote proposals for the upward harmonisation of working conditions and also to promote the concept of maximising consensus.

It is a remarkable case of selective amnesia, because, after all, the Government subscribed to the whole of the Single European Act. When the Prime Minister attended a NATO summit not very long ago, I recall that she complained that some member states were reneging on that to which they had subscribed their names. She said: When you sign up to something, you sign up, you sign up! What about the Single European Act?

What of accountability? That is the essence of greater democracy in the Community. It is precisely so as to confront the fear, real or imagined, that civil servants rather than elected politicians will take decisions that we must tackle this question of the democratic deficit. That is why I believe that we need to consider urgently whether majority voting should become a routine procedure in the Council of Ministers, not confining the issue simply to matters affecting the internal market. The secrecy surrounding decision making within the Council of Ministers needs to be carefully eliminated.

I believe with (he noble Lord, Lord Thomas of Swynnerton, that the European Parliament must be taken seriously and, therefore, that the powers of the only elected body in the constellation of Community institutions—the European Parliament—need to be enhanced. I say that not because I believe that there is any question of replacing the powers of national parliaments but because it is necessary to complement them. I believe also that the European Commission should be elected by the European Parliament from candidates who are proposed by the Council of Ministers. There are many other changes which I should like to see as regards the powers of the parliament, particularly on initiating legislation.

However, when it comes to the question of accountability, it is somewhat ironic that the Government have made some very interesting observations at paragraph 17. They say that agreed legislation should be implemented and enforced. My only wish is that they had done that rather more readily in relation to certain directives affecting the environment on which we read the other day in our newspapers that they have engaged in a calculated attempt to frustrate laws for which they themselves have been responsible.

I believe passionately in getting ahead with Europe, in building it safely and in making sure that it can be an example to those developing democracies of Eastern Europe. I believe that it is important that we should sustain our own democratic rights. I can think of no better way of doing that than enshrining the European Convention of Human Rights in the Community treaties.

About most of those vitally important issues, save for the question of ensuring that the European Court should have greater powers—and I totally agree with the Government about that—the Government are silent. A French writer once said that history does not allow us to abstain. My only wish is that the Government, for the short time which they have left to them, should follow that dictum.

6.39 p.m.

Lord Thomson of Monifieth

My Lords;, I am very happy to follow the noble Lord, Lord Clinton-Davis, and to have listened to the maiden speech of the noble Lord, Lord Richard. However, I am conscious that I am the fourth former member of the European Commission to address the House in this debate, and although kindly remarks have been made about us, I fear that I may be beginning to strain the general tolerance of the House.

I wish to confirm myself to one general point and one more specific point about the so-called principle of subsidiarity. We are all very much aware in holding this debate that we have the privilege of living in momentous historic times. As the Soviet bloc is breaking up into its national and nationalist units, within the European Community we are moving towards greater integration, both economic and political.

I believe that the movement within the European Community is irreversible. I also believe that, if anything, it is bound to be speeded up by events in Eastern and Central Europe. I would say to the noble Lord, Lord Stoddart, who is no longer in his place, that there is no question of creating a Western European superstate. By far the best way in which we in Western Europe can make a contribution, and perhaps restore some of our former influence in affairs, towards East and Central Europe, where there are going to be times of great difficulty, is by creating the maximum unity among ourselves.

The European Community at the moment is led principally by France and Germany. Indeed, since it was the Franco-German quarrel, which cost Europe so much blood, and its reconciliation which lie at the heart of the European Community, that is only proper. However, over a number of years it has been unfortunate that the United Kingdom has not felt able to play its full and proper role alongside France and Germany in the leadership of the European Community. That is bad both for Europe's sake and for Britain's.

When I was in the European Commission, a wise old Dutchman said to me during the very early days of British membership, "There are two nations within the European Community which make great difficulties for the rest of us by looking after their national interests within the Community. One is France and the other now is the United Kingdom". He went on to say, "There is, however, a difference in the way they play their hands. In France's case, if France is looking after what she regards as a major national interest, she is inclined to say 'Anybody who disagrees with us is betraying the future construction of Europe'. In the British case, when you are looking after your interests you are inclined to say, 'This is the rest of Europe putting us at a disadvantage'".

Those were wise remarks, made perhaps some 15 years ago, and, sadly, I think they have remained true almost until today. I say "almost" because, like other Members of your Lordships' House, we were impressed by much of what the Minister said. Perhaps we can take it as a sign that there is going to be a more positive contribution from the British Government to the developments now taking place within the European Community. As has been said by other speakers, we are inclined in the United Kingdom to distrust the Cartesian grand design that is part of the intellectual make-up of the mainland of Europe. We are supposed here, as my noble friend Lord Jenkins said, to be apostles of empiricism and pragmatism.

I am getting into my anecdotage, but I remember perhaps one of the greatest of our diplomats who helped to bring Britain into the European Community, the late Sir Con O'Neill, telling me as I set off for Brussels: "In Brussels you are going to learn lessons in pragmatism you never dreamt of in the Fabian Society". That is one of the things we sometimes fail to realise about the real nature of the way the European Community works. The way forward to economic, monetary and political union.

of necessity, will be a pragmatic one: it will be a gradualist way forward and a step-by-step one.

What is tremendously important for us to realise is that for a group of ancient member states such as we have in the European Community to make the great changes that are involved in economic, monetary and political union, it is necessary for us to have a vision of the goal ahead in order to have the necessary commitment to tackle the difficult empirical steps to reach that goal.

My second point is that the more progress is made towards greater economic and political unity in the Community, the more important will become this so-called principle of subsidiarity. It is one of the more ghastly Community jargon words, which is perhaps comparable with the word "additionality", used in my day. I take it to mean the principle that you should not seek to do at Community level what is better done at national level. There is a corollary to the principle that governments who enunciate it sometimes forget: it is also better to do at the regional or local level—or sometimes not to do at all—something which it is sought to do at the national level. I think that the Government are sometimes guilty of interpreting the principle of subsidiarity in that rather limited way.

However, I have some sympathy with the Government's view about this. It is true that the European Commission and the European Parliament are sometimes both tempted to seek to harmonise national habits in areas which are best left alone. We can all feel some sympathy for the Members of the European Parliament. They are all keen to make the contribution to the building of a European Community, and I think they sometimes find it a frustrating business to make progress. Sometimes they seem to promote matters that involve expenditure without having the direct responsibility for raising the necessary taxation to meet that expenditure.

Just as the historic principle of no taxation without representation is a sound one, I think it is probably equally true to say that the rights of representation without the responsiblities for taxation have their dangers. Therefore I support what the noble Lord, Lord Thomas, was saying about the need to have in mind moving forward towards giving the European Parliament some tax-rasising powers of its own.

The main point that I want to make to the Government is that in enunciating the principle of subsidiarity, which I believe will become more and more important as the move towards integration goes forward, it is important that it should not be used as a protectionist device, rather as the French are doing at present over the import of British beef, to resist (as my noble friend has just said) the very necessary and widely supported Community progress towards a Community social policy or towards an environmental policy. The Government should not declare that things cannot take place at Community level because the institutions are not yet sufficiently accountable.

The wise reaction to that situation is to seek with positive enthusiasm ways and means of making the institutions more accountable. The truth is, as my noble friend Lord Ezra said, that national sovereignty in some of its most important aspects is rather a myth these days. It has either been pooled or eroded by the realities of modern international life. We have pooled our sovereignty over the most crucial aspect—national defence—in a way which makes it difficult to argue that democratic accountability had been fully met before we took that very necessary step.

Equally of course, the present monetary situation in Europe and in the international community as a whole means that another crucial aspect of sovereignty is deeply eroded. Therefore the question is how one can organise things so as to share sovereignty sensibly. I think it is that question which we should approach in the most positive manner possible.

I do not fully understand the fears expressed about the dangers to national identity involved in moving forward at the fastest practicable pace towards greater integration. If I may say so to my noble friend Lord Cledwyn, there is no question of even seeking to create in the European Community any kind of single state. We in the United Kingdom have for 250 years had an economic, monetary union and political union; but I have not noticed that as a result my noble friend has become noticeably less Welsh or that I for my part have become noticeably less Scottish. The national identity argument is very much a red herring. What we want—it is in the best interests of all of us—is to make a success, and to have a major British contribution towards making a success, of the present welcome movement forward of the European Community.

The Minister said that the Government want a strong Community. We were all glad to hear him say that so very clearly. The best way to obtain a strong Community is for the British Government to show a positive enthusiasm for seeking that goal and then to join in shaping the historic changes that lie ahead which will affect us as they will every other nation in Western Europe.

6.50 p.m.

The Earl of Bessborough

My Lords, I am always glad to listen to the noble Lord, Lord Jenkins of Hillhead, speaking about greater economic and political integration in Europe. I was also glad to listen to the noble Lord, Lord Richard. I was on the Budget Committee in the 1970s and I listened to him then with great interest. He made a most interesting and entertaining maiden speech today. I think we can assure him that it was not too controversial. I am also always glad to listen to the noble Lord, Lord Thomson of Monifieth. We are all old friends. We may not be old friends in the parliamentary sense, as those I have mentioned seem largely to be on the other side of the House, but nevertheless they are old friends; as indeed is my noble friend Lady Elles on this side of the House.

I am pleased to note the commitment of Her Majesty's Government to and progress on the completion of at least Stage 1 of the Delors proposals as well as the single market. I cannot emphasise too much how important I believe it is that we should achieve exchange rate stability for our exporters and, as my noble friend Lady Elles said, our tourists.

I look forward to the inter-governmental conference on economic and monetary union which is due to take place at the end of this year. I hope that it will be followed by a second conference to discuss political union. I greatly welcomed the stirring speech of my noble friend Lord Aldington on that subject. I am glad to hear that he is chairman of this ad hoc committee. We look forward with the greatest of interest to reading its report.

In regard to monetary union—the famous EMU—which should follow Britain's adoption of the exchange rate mechanism, I am inclined to endorse the views of the European Commission and particularly those of our former commissioner, my noble friend Lord Cockfield. Moreover, if we adopt wider use of the European currency unit—the ecu; and I certainly support the Government's initiative in issuing ecu-denominated Treasury bills—this would, I believe, be a considerable money saver. I think many of my noble friends, as well as several noble Lords opposite, agree with me in that respect. It is to be hoped that Britain will join the exchange rate mechanism later this year.

I do not consider that the possible loss of sovereignty by being full members of the European monetary system should worry us unduly. I agree with the noble Lord, Lord Thomson of Monifieth, in that regard. If we had been full members of the ERM earlier it would have been advantageous to this country both in regard to inflation and interest rates. I should certainly not oppose a closer relationship between sterling and the deutschmark; nor, indeed, to the establishment of a European banking system of central banks—not just one central European bank but the system as it has been enunciated. As I said, in regard to sovereignty our present membership of the EC has meant that we have lost some sovereignty. That also applies, as the noble Lord, Lord Thomson, said, to our membership of NATO and even the United Nations and its various agencies; and especially to the IMF, to say nothing of some other international organisations.

I should like to say at this point that, apart from possibly the delaying stance of my right honourable friend the Prime Minister on becoming full members of the European monetary system, I agree very much indeed with her policies in other spheres. In Europe she is certainly a strong advocate of the single European market, which comes into effect in 1992, and of complying with EC directives, in which Britain leads the other 11 member states. My noble friend Lady Elles made a good related point on that.

The Government have made it clear that Britain will join the ERM when our level of inflation is considerably lower, when there is more freedom of capital and financial services in the Community and when more progress has been made on the completion of the single market. Though considerable progress has been made, not all the conditions have been met. There is no question of that and I defend the Government, but we cannot delay indefinitely. Untimately we must carry European integration forward into a permanent political, economic and monetary association.

General de Gaulle was, and M. Mitterrand is, an Anglophile and would not wish Britain to withdraw from the Community. The French want Britain as a part of Europe and are glad that she supports the single European market. Perhaps because of being half French I am not unsympathetic to the views of M. Delors, President of the European Commission, or of President Mitterrand, whom I knew when I was in the British embassy in Paris after the Second World War. Both, I think, seek greater European political and economic union which might ultimately lead to at least a kind of loose confederation. I know that some people in Britain do not favour any kind of European federation. I wonder whether we could not have a similar confederation as that in Canada, though much more complicated. M. Rocard, the French Prime Minister, has spoken about building one European nation and there is no doubt that many French people would like to see France as leader of a European super-puissance and not leave it mainly to a unified Germany to play that role.

Now that following the Ottawa summit the two Germanics and four wartime allies have agreed the principle of German unification, the pace of change may well be swifter than could have been foreseen only a few years ago. In my view the main concerns over German unification are the guaranteeing of the Polish-German border—namely, the acceptance of the Oder-Neisse line—and the sensitivities and interests of other European states, as well as whether a unified Germany should be a member perhaps both of NATO and the Warsaw Pact. It will be interesting to hear the results of the present Warsaw Pact meeting which is starting today.

Like some in the White House in Washington (I have recently been in America) I find this latter concept of a unified Germany being a member of both NATO and the Warsaw Pact somewhat difficult to contemplate, certainly at present. Yet I do not believe that a unified Germany will prove a threat to the West. However, as I have said, we must wait and see what results from the present Warsaw Pact meeting.

Nonetheless, I would rather see a CSCE—a conference on security and co-operation in Europe—as the basis for a new pan-European structure. As I said recently in my address to the American Philosophical Society in Philadelphia, there are various alternatives. First, there is the EC, which came into being in Rome in 1957. There is also the Council of Europe, which was born considerably earlier in Strasbourg in 1949. As we know, the EC has 12 member states, while the Council of Europe, which meets, like the European Parliament, in Strasbourg, is a 23-nation body.

The Council of Europe, though perhaps best known for its work on human rights and broadcasting standards, now sees an opportunity to expand its role. I am glad that my noble friend Lady Elles mentioned that. We must also not forget, as some of your Lordships have mentioned, other organisations such as the European Court of Justice and the European Investment Bank, to say nothing of the other European agencies concerned with space and the environment. All these organisations are playing useful roles.

The Conference on Security and Co-operation in Europe started in Helsinki in 1972. In Ottawa recently my right honourable friend the Foreign Secretary spoke of using the CSCE as a launch-pad for a new secretariat to arbitrate on likely new problems of borders and minorities. I understand that the Council of Europe is somewhat sniffy, if there is such a word, about the 35-nation CSCE, which includes the United States of America and Canada.

I believe that the Council of Europe thinks that it would not be the correct basis for creating a kind of confederation of European states. How well I remember Coudenhove Kalergi's thoughts on European union before the Second World War and Winston Churchill's advocacy of it at the end of the war. If the pan-European movement had taken off in the 1930s, we might well have avoided the horrors of the Second World War. NATO came into being in 1949. I think that it is also sceptical of the CSCE. All these alternatives must be considered.

Some are touting NATO as an all-embracing European body. The new Secretary-General of NATO, Herr Manfred Woerner, certainly seems set, as some of us were in the past, on implementing Article 2 of the North Atlantic Treaty concerned with its non-military role. I think that Herr Woerner has had meetings with the Czech Foreign Minister about this and he is visiting the USSR.

I presided over the Soviet Ambassador in London about a week ago. I was interested to hear him say that Mr. Gorbachev is seriously contemplating a confederation or a kind of commonwealth of nations of the 15 Soviet republics. Some Eastern, or perhaps I should say Central, European countries might also join the WEU or EFTA, which is the European Free Trade Association that started in Stockholm in 1960. I think that these are organisations of the past. However, as we know, an international body seldom disappears altogether.

1 believe that these various alternatives should be borne in mind. I shall be interested to know what my noble friend Lord Brabazon thinks of the alternatives and which Western European grouping or groupings he thinks it would be appropriate for democratic Eastern European states to join in the first place.

I was interested in what the noble Lord, Lord Weidenfeld, said about Austria. I imagine that my right honourable friend the Foreign Secretary and my noble friend Lord Brabazon must be exploring these various possibilities. I shall be interested to know their preliminary views. With Eastern Europe in such a state of flux it must be difficult to conceive when it will be possible to negotiate the entry of the Eastern European countries into any one of these organisations.

At all events, I hope that an enlarged democratic Europe will become united. What with America's budget deficit and vast trade deficit as well as many other problems—the disastrous failure of perestroika in the USSR and the decline and possible disintegration of the Soviet empire—it seems that a larger united Europe of, say, 500 million people could well become world leader in partnership with the United States of America and Canada in the next century.

As the newly re-elected President of the European-Atlantic Group, it is a solution on these lines that I would like to see.

7.8 p.m.

Lord Jay

My Lords, in congratulating my noble friend Lord Richard on his maiden speech and the noble Lord, Lord Jenkins, on introducing this debate, I cannot help remarking that the speech of the Minister was very much more precise in detail than the speech of the noble Lord, Lord Jenkins.

The noble Lord, Lord Bridges, rightly mentioned the fact that this year negotiations are going forward for a combined economic zone between the EFTA countries—which are Sweden, Norway, Finland, Austria and Switzerland—and the EC. The essence of that agreement would be that the EFTA countries would accept the genuine commercial rules of the 1992 so-called single market but that they would not have to swallow the protectionist common agricultural policy or the legislative rigidities imposed from Brussels on EC members at the present time.

That is not merely an arrangement which would have suited the United Kingdom ideally, had we had had the sense and patience to wait for it, but it might well suit some of the independent East European countries which may not like the protectionism and expense of the CAP. Having newly escaped the intrusion of Moscow into their internal affairs they may wish not to substitute for that any similar intrusion from Brussels. Indeed, a larger and looser economic zone has real attractions for many people in many parts of Europe.

It is paradoxical, when this spirit of independence and liberation is spreading so vigorously in central and Eastern Europe, that Brussels should still be hankering after further centralism and the imposition of even more hard and fast rules from the centre which it describes under the vague name of "union". How is it that this outdated centralism still survives? Perhaps like the noble Lord, Lord Thomson, I too may indulge in an anecdote. I well remember hearing the message expounded by M. Monnet in a three-hour private conversation in 1952 and again in 1962. That message, which he preached with such extraordinary fervour and persistence for 30 or so years, was in essence threefold. First, the great objective for all of us was the prevention of another war between France and Germany. Secondly, this could be achieved only by tying down a possibly resurgent Germany in a firm political and legislative group of some kind. Thirdly, the required union could be achieved only by a series of nominally functional and economic agreements which would conceal the real objective of loss of national independence. This point was referred to earlier this afternoon. It is fully understandable that M. Monnet, with his Alsace-Lorraine background, should have made these assumptions in 1945 and the years immediately afterwards, but they are in my view largely out of date and no longer valid today.

First, the hard fact is that nothing has been more improbable in post-1945 Europe than a new Franco-German war, and nothing is more improbable today. Secondly, now that we are faced with a Germany of 80 million people and the strongest economy in Europe, so far from the EC tying down the Germany of the future, it is far more likely, and perhaps inevitable, that Germany will increasingly tie down the rest of the EC. Thirdly, the attempt to impose political centralisation by stealth has not merely involved what amounts to deception of the ordinary electorate of this and other countries, who, after all, also have a right to self-determination, but has led to a series of economic measures—from the CAP to the EMS—whose aim was not really economic at all.

One example was the Single European Act. Its actual effect was to transfer more power to Brussels. It is doubtful whether it will have any great economic effect. The latest example is the EMS and the propaganda about the single currency. Again, the motive behind this is not economic policy but the obsession with centralising more power in Brussels or, in some people's minds, even in some EC central bank.

From the point of view of economic policy, for the United Kingdom, with an over-valued currency, a weak economy caused by the mistakes of the 1970s and a large overseas payments deficit, to adopt a fixed over-valued exchange rate would be to ignore most of the lessons of the past 60 years in this sphere of policy. As a country we have thrown away the power to control imports, capital exports, the level of incomes and government purchases. No way is left to cure a payments deficit in the short or even medium term except by letting the exchange rate move to its natural level. To throw that power away, as some people lightheartedly seem disposed to do without following the argument, is to condemn the British economy to both chronic payments deficit and, probably, rising unemployment. We are asked to do all this in the name of what is described, in yet another attempt to confuse the electorate, as some undisclosed form of political union.

Those who advocate this—in this respect I agree with the Motion of the noble Lord, Lord Jenkins, although not with his speech—should say precisely what they mean. The noble Lord should define his policies as clearly as the Minister did. Of course we all agree that this country should be active and wholehearted in genuine international organisations. But, if it is suggested—this is the crux of the matter—that the realities of self-government and national independence, the power of legislation, taxation and control of economic and defence policy should be taken out of the hands of the British electorate and handed over to someone else, we are faced with an entirely different proposition. Then there would be at stake not just the rights of Parliament but the rights of the electorate. It is not just a question of the legal conception of sovereignty but the reality of self-government and self-determination which we are all so busy recommending to Lithuania, Latvia, Namibia, South Africa and many other countries.

I imagine that no one in this Chamber or in another place would like to see a world in which Britain had ceased to be an independent self-governing country and presumably no longer a member of the United Nations while all manner of other countries which I need not now retail remained independent and members of the United Nations. But, if that is so, the time has come for people to say so fairly explicitly and fairly audibly. In the words of the Motion, they should define in a more precise shape what they mean and how far they would go or not go.

One thing is certain. Neither government nor Parliament has the right to deprive the British electorate of these fundamental powers without the explicit consent of the voters themselves. It is rather remarkable that in this fairly long debate no one has mentioned the British electorate; yet we are talking virtually about altering the British constitution. In that connection it is worth remembering some of the promises and assurances that were given when decisions were taken about this matter both by Parliament and by the electorate in the 1970s.

When the House of Commons first voted on EC entry in 1971 it was given the following promise by Mr. Heath's White Paper of that year. It stated: There is no question of any erosion of essential national sovereignty". In the referendum of 1975 the electorate voted on the basis of the following assurance from the Labour Government's pamphlet distributed to all voters. It stated that in Brussels, the Minister representing Britain can veto any proposal for a new law or new tax if he considers it to be against British interests". It went on to state: The movement in the Common Market towards economic and monetary union … could have forced us to accept fixed exchange rates for the pound, restricting industrial growth and so putting jobs at risk. This threat has been removed". The pamplet from the organisation of the noble Lord, Lord Jenkins, and others, of which I think he was the chairman, which argued on the "yes" side of the referendum said that, in the Community: All decisions of any importance must be agreed by every member". Those are the solemn assurances upon which the country voted in 1975.1 do not think that we should just cynically cast them aside or dishonour them, particularly when most of us are preaching self-determination and democracy to the rest of the world. The British electorate has not voted that Britain should cease to be an independent, self-governing country. Therefore, whatever our personal views may be, neither the Government nor Parliament has any right to give away any more realities of independence without the specific and explicit consent of the electorate.

7.20 p.m.

Lord Bonham-Carter

My Lords, it is difficult to try to sum up the whole range of opinions expressed in this debate. I shall certainly not try to do so. It is especially difficult as I am following the noble Lord, Lord Jay, who expressed a view which is certainly at variance with that of the majority of those who have spoken. He expressed his view with characteristic clarity and honesty. It seems to me that the arguments he made show that there is, as it were, a flat disagreement between the point of view which he holds and that which I and other noble Lords have expressed during the course of the debate. I think that I am right in saying that he hankers after, as other people do, a free trade area rather than a European Community, which has and always has had profound political implications.

I disagree with the noble Lord in his view that the electorate of this country has been deceived by M. Monnet or that he ever concealed that he saw his strategy of a functional approach through economic measures to a political end as one which it was right to pursue in the circumstances in which he found himself. I do not think that we would ever have denied that fact. I do not think that anyone who was interested in the European Coal and Steel Community or the European movement at that time was in any doubt about the situation.

However, the noble Lord has a point that the question of sovereignty was in some respects fudged. In this connection I must point out that the old Liberal Party, which was the first party to propose that we should join the European Community, never fudged the issue. It always made it absolutely clear that a substantial loss of sovereignty was involved in any such change in the status of this country. But I think that the noble Lord has returned to an issue which has run through the whole of our debate this afternoon. Our debate has been returning again and again to the question of sovereignty, about which there has been, in the words of my noble friend Lord Jenkins, persistent misunderstandings. The issue has also given rise to psychological difficulties. When people say that we must change our attitude, one of the attitudes which I think we should change is our attitude toward sovereignty.

When I was preparing my speech for the debate I thought that the best description of the situation in which we now find ourselves was expressed by Sir Ralph Dahrendorf in his Brandon Rhys Williams Memorial Lecture. He came to four conclusions. The first was that in the absence of a world order it was important to create a zone of stability in Europe, not merely because of economic and monetary reasons or for trade reasons, but also for more general political reasons.

Given the events which are occurring and those which have occurred in Eastern and Central Europe and in Russia, the need for a zone of stability in Western Europe is self-evident. In addition, because of the absence of a world order, Sir Ralph Dahrendorf said: We therefore need an optimum of European co-operation in areas of policy in which sovereignty has long left national shores and borders". The central point which so many people refuse to accept is that national sovereignty has already slipped through the fingers of national government. He continued: Europe 1992 is a step in the right direction, especially if it remains open for the wider European Economic Space and for post-communist Europe. But the 1992 project must be followed by a deepening of the institutions.

The third point Sir Ralph made in conclusion was that economic and monetary union involves a real loss of sovereignty. He said that if we had, as the noble Lord, Lord Thomas of Swynnerton, suggested we might have, defence co-operation—a common European defence policy and a common European foreign policy—that would mean a further overt loss of sovereignty. But as he pointed out, and as I have already said, sovereignty is already losing its relevance in any case. As my noble friend Lord Thomson of Monifieth asked, who controls the flow of capital in the world today? What exactly is national defence in the nuclear world? What sovereign decision-maker controls the environment?

Finally, Sir Ralph Dahrendorf concluded that: the choices before modern countries in this condition are stark and simple. They can either remain bystanders, at or beyond the fringe of the new centres of gravity, in which case they will become satellites, or in the worst case, forgotten islands of decline, or they can be active participants in the attempt to shape, with others, the institutions of the future". It seems to me that that is what the noble Lord, Lord Richard, was saying. In other words, in order to control our destiny we had better play a full part as active participants in the work of the European Commission. That is the conclusion I have drawn. It is through our commitment to the European Community that we can best influence our destiny.

In point of fact we are committed to Europe, as the noble Lord, Lord Brabazon, said in his promising but not patronising speech. When I say "promising" I mean promising in that it seemed to me to indicate a change of attitude. As he reiterated, we are committed to Europe by our signature to the Treaty of Rome and by the passage of the Single European Act. However, what we have failed to do—and this is apparent from a whole series of speeches by noble Lords—is to commit ourselves with any appearance of enthusiasm. We have failed to commit ourselves wholeheartedly. Our response to initiatives has too often been no, whereas as Sir Leon Brittan said, it should have been "Yes, but".

I agree with other noble Lords that the communique which came from the Dublin summit showed a welcome change. But, as other noble Lords have said, it is truly unnecessary in these circumstances to put up Aunt Sallies in order to knock them down. No one is proposing to abolish the monarchy. All the other members of the European Community have Parliaments which are jealous of their powers. But political and monetary union are genuine objectives which must be taken seriously and we must take our part in the process. Who doubts now that if we had joined the ERM when my noble friend Lord Jenkins first proposed that or had done so on a number of occasions since then, it would have been a good thing?

The argument put forward by the noble Lord, Lord Stoddart, that, because the City is wrong about short-term ism, we should not take its advice about the ERM, is reasoning which I do not fully follow. Because someone is wrong about one thing, it does not mean that they are wrong about everything. Economic and monetary union will follow the implementation of the Single European Act. When that happens we shall have to develop institutions to control the arrangements which will inevitably follow and accompany that process.

That leads one straight to the question of how the democratic deficit is to be filled. I wholly agree with the noble Lord, Lord Clinton-Davis, that one of the things required is that the proceedings of the Council of Ministers should be opened up to the public. The meetings should not be held in private. We should not be presented with conclusions which have been reached we know not how. It also means of course that the powers of the European Parliament should be strengthened. The Prime Minister's answer to the question of the democratic deficit is that the best Europe we can build is a Europe of 12 sovereign states sitting freely and willingly together. That was also the theme of the Bruges speech, which was little more than a plea that we should return to EFTA rather than develop the European Community—a hope which neglects the fact that it is members of EFTA who are queueing up to join the European Community and not members of the Community who are queueing to join EFTA. The same theme was recently repeated in a speech by Mr. Tebbit in which he argued with characteristic perversity that an EC which moved towards further political integration would be likely to provoke a resurgence of German nationalism.

Finally, as the noble Lord, Lord Clinton-Davis, pointed out, there has been the extraordinary speech by Mr. Ridley which was reported in the Financial Times today, in which he suggests that governments could opt out of the European Community arrangements depending upon national instincts or economic circumstances. That is a new government policy. The Minister must explain what it implies, because it undermines the policies which he expressed, or I understood him to express, in his opening speech, and which his right honourable friend the Foreign Secretary expressed in the speech in Paris earlier this month which was referred to earlier.

The formula—this is the point that I wish to make—of 12 sovereign states sitting together is an inaccurate description of the Community as set forth in the Treaty of Rome and the Single European Act. By signing the Treaty of Rome and passing the Single European Act, we ceased in certain respects to be a sovereign state in the sense in which the Prime Minister suggests. That is something which people must accept. It lies at the heart of the idea of the European Community. In addition, we have now accepted economic and monetary union. We have accepted qualified majority voting. They are all limitations on our national sovereignty.

The posture adopted by the Prime Minister has another disadvantage. It fails to offer a constructive alternative to proposals put to us from M. Delors or Presidents Kohl and Mitterrand. Because of that posture, and because we refuse to define the route along which we are proceeding, or our destination, we have lost control of the agenda. The agenda is in the hands of and composed by others. Again and again we find ourselves responding, apparently negatively, to the initiatives of others and to an agenda set by others. The latest example of that is of course the Kohl/Mitterrand statement of 12th April.

The post-war years were dominated politically and militarily by two superpowers and economically by the United States. The Gorbachev revolution has shifted that balance of power radically in favour of the West. We can foresee a smaller US military presence, growing pressure on NATO countries to contribute more to their own defence and greater European influence on NATO's policies. At the same time, political co-operation with the European Community is becoming slowly established and the European Community will become, in the words of a statement from the State Department on the 22nd, An important political factor in the world with which the United States wishes to have a formal relationship". Thus, should the USSR survive and hold together—I should like to reinforce the description given by my noble friend Lord Jenkins of the condition in Central and Eastern Europe and the USSR as being extremely fragile—we shall be living in a tripolar world politically, and with the establishment of monetary union, either London or Frankfurt will become the third centre of financial power with New York and Tokyo.

Those are huge changes which would probably have happened anyway but which are being hastened by the Gorbachev revolution. I hope that within the development of the momentous events which follow that revolution this country will not remain a bystander at or beyond the fringes of the new centres of gravity or that it will become a satellite or a forgotten island but will be an active participant, shaping with others the institutions of the future.

7.37 p.m.

Lord Williams of Elvel

My Lords, the House will be grateful to the noble Lord, Lord Jenkins of Hillhead, for introducing his Motion. It is an opportune Motion at an opportune time, as many noble Lords have said. It has also given us the opportunity to hear from a number of distinguished former members of the Commission, not least my noble friend Lord Richard, who made an eloquent and distinguished maiden speech. I am sure that we shall hear much more from him in the future.

We were also glad to hear about the appointment of the noble Lord, Lord Aldington, as chairman of the committee, and we look forward not just to hearing what the committee has to say about those momentous matters but to participating in discussions with the noble Lord and members of the committee and debating his conclusions in your Lordships' House.

Perhaps I may return, as did my noble friend Lord Jay, to the terms of the Motion. It is: To call attention to the case for Her Majesty's Government taking an active role in seeking to define a more precise shape for future European political and monetary union". I want to concentrate on the financial side—that is, on economic and monetary union—as my noble friend Lord Cledwyn, when opening from these Benches, dealt comprehensively with political union; not, I have to say, that the two are inseparable. One of the themes that has emerged from the debate is that there is a linkage between economic and monetary union and political union, whatever that, in the end, may mean.

It is impossible to consider economic and monetary union without considering also its political aspects. That is a point which has been made by a number of noble Lords. The noble Lord, Lord Jenkins, in my view put his finger on the point when he talked, as the noble Lord, Lord Bonham-Carter, reminded us, of persistent misunderstanding. There has been persistent misunderstanding by a number of people in the United Kingdom of what the Community is about; and also persistent misunderstanding by some of us, if I may say so, of what the Government's position is; because today we had from the Minister a speech which was different in content from contributions we have had from Ministers in the House before.

At the same time, as my noble friend Lord Clinton-Davis and the noble Lord, Lord Bonham-Carter, reminded us, we read in the press this morning a contribution from the Secretary of State for Trade and Industry. So far as I know, he is a Member of the Cabinet and I believe it is proper to quote what he said at some length. As the noble Lord, Lord Bonham-Carter, said, it goes in a completely contrary direction to what the noble Lord, Lord Brabazon, said earlier. I quote from the article in the Independent this morning which reported Mr. Ridley's speech: How far individual member states wished to travel along the road of economic and monetary union would be for them to decide. Could there not be regional groupings within the overall union, as we already have with Benelux or the Schengen group? France and Germany could form a closer alliance still if they wished. There could be currency agreements, either of the ERM type or full currency union as envisaged in current plans for European Monetary Union. Those who wished could form joint central banks to manage their currencies. But there should be no compulsion on others to join such arrangements". I have to ask the noble Lord, Lord Brabazon, in the starkest possible terms, whether that represents the view of Her Majesty's Government or whether what the noble Lord, Lord Brabazon, said earlier this afternoon represents the Government's view. I hope that when winding up the noble Lord will be quite clear about this, because if not we shall press him until it is clear.

My noble friend Lord Cledwyn dealt with political union, and again there is some misunderstanding about what it means. In my view it is not a fixed concept. It is not that there will be supra-national government, federalism. It is not a concept that we either have or do not have. It is not like virginity, where one is either a virgin or not a virgin, we either have political union or we do not. We already have a measure of political union and my noble friend Lord Jay was quite right to point out that the Single European Act of 1986 gave us a substantial measure of political union because, on a qualified majority vote, it gave to the Council of Ministers of the various European authorities power to dictate to Parliament what it should put into legislation in the United Kingdom. If anything, that is part of a political union.

We should not be too shy about saying that political union is something we cannot accept at all. This Parliament and this House have voted to grant to the European authorities and institutions a significant measure of political union. The question we must ask ourselves now is: will the measures proposed require a cession of sovereignty, an increase in political union beyond that which is tolerable? Here we enter the area of controversy.

I should like to advance to your Lordships three propositions about economic and monetary union, and I pick up a comment of the noble Lord, Lord Ezra. The first is that there is a consensus throughout the Community that economic and monetary union will happen. There is no question mark as to whether this will happen; it is how it will happen that is in question. We must first get used to the idea—and most noble Lords are used to it—that it will happen, whether or not we like it. There can be differing views on that subject. I suspect that there is also a consensus in the United Kingdom that it will happen, again whether we like it or not.

My second proposition derives from the first. It is that the Exchange Rate Mechanism is seen, at least by 11 members out of 12 in the Community, as being a halfway house. It is not a final stop. The single market requires a single price. The single price requires some kind of fixed exchange rate mechanism or the best we can obtain under present circumstances.

My third proposition is that in Europe—that is, in the Community—11 out of 12 states perceive political union and European economic and monetary union as going side by side. I wish to start from that base, and we begin with a divergence of views. This is the second matter on which I ask the Minister for clarification. There are two proposals for the structure of a monetary union. There is the common currency proposal which one can call in shorthand, Delors Stage 3; and the UK Treasury proposal, to which the noble Lord, Lord Brabazon, referred in his opening speech.

I can understand it if the Government say that the Treasury method is better than Delors Stage 3 for arriving at monetary union. If they support monetary union, that is presumably what they say. However that is incompatible with the statement that competition between monetary policies in the Community is what the UK Treasury paper is all about. The logical end of the Treasury position—assuming we go to monetary union—is irrevocably fixed exchange rates and monetary policy throughout the Community properly co-ordinated. If we go on a competing monetary policy basis, we shall not get to monetary union.

I ask the noble Lord to be quite clear in his winding up. Which view of the Treasury document do the Government aspire to: monetary union and irrevocably fixed exchange rates; or no monetary union and freely floating exchange rates but competing monetary policies? The two views are not compatible. I ask the noble Lord when he replies which one the Government adopt.

The answer to that question determines the answer to the Government's view of political union. As many noble Lords have pointed out, the Monnet principle is that one starts with something practical with a view to bringing in something political behind its back, if I may interpret what my noble friend Lord Jay said. The Monnet view is exactly what we perceive to be the Delors view. Once we have an institution, a central bank, a common currency, inevitably such an institution will require—through the process of democratic accountability—some further form of political union.

I do not have to remind your Lordships that the United States, in trying to set up a central bank, had two attempts at it before the federal reserve system came into being. The two attempts were failures because there was no political consensus to set up a central banking mechanism. It was only when there was a political consensus that the federal reserve system was made to work and could work.

On the other hand, if one has monetary union but without a central bank, it is possible to look at the monetary union between the United Kingdom and the Republic of Ireland. Between Irish independence and 1979 there was monetary union between the United Kingdom and the Republic of Ireland, but there was no common central bank, no political union. I do not believe that anyone would say that there was any form of political union between ourselves and the Irish during that period, yet it seemed to work reasonably well.

I do not regard that as a good model for the future of Europe because clearly the United Kingdom was dominant in that relationship in monetary terms and therefore the Bank of England could take monetary decisions and the United Kingdom Government could take monetary decisions which were, by the nature of things, extended into Ireland.

I come back to the noble Lord's Motion. The Government must make up their mind. If they say they are in favour of monetary union and of political union, moving the frontiers towards some further cession of sovereignty on an agreed basis, they must make up their mind exactly where they are. Not only that, but they must tell us where they are. I agree with my noble friend Lord Stoddart of Swindon on one precise matter. I believe that there is a case for a Green Paper setting out what the Government think would be the effect on the United Kingdom of our entry into the Exchange Rate Mechanism. I do not see why the electorate, Parliament and informed opinion should not have the benefit of the Government's views on exactly what will happen. I believe that the Government must be much more open and forthright than they have been up to now in saying what they think about these matters.

I accept the view of the noble Lord, Lord Jenkins, with reference to the train going to Birmingham via Eastbourne, or possibly getting to Rugby. It is clear that the European express is on the point of leaving the station. How many times it will stop to pick up new passengers, we do not know. How many passengers will want to get off, we do not know. How fast it will go, we do not know. We shall certainly not stop the passengers from arguing as it goes along about which way it should be going and how fast. Nevertheless, the train is on the move. The idea that we should not be passengers or should have second class seats is not one that should be on the agenda. Equally, to get on the train simply to pull the cord and try to bring it to a shuddering halt is not something that could be seriously advocated, and I hope is not an idea that the noble Lord, Lord Brabazon, himself would advocate.

My noble friend Lord Cledwyn made the point that there was not enough direction from Government on foreign policy generally. I would reinforce that point. I believe that ministerial statements need to be made about where we are going in Europe. It is not just a question of statements, it is a question, as the noble Lord, Lord Bonham-Carter, said, of tone. Do the Government embrace this with enthusiasm or do they not?

Perhaps I may tell a short story about President de Gaulle. When he became President of France in 1962 he went to the Elysee. He said that he did not like the Elysee very much, and that he should have liked to go to the Louvre because one cannot make history in the 8th arrondissement. I should like the Government to move, psychologically, from the 8th arrondissement to the 1st arrondissement. I should like them to say where they stand. I know that we do not go in for declaratory politics in the same way as our friends on the Continent of Europe, but from time to time perhaps we should be less shy. If we wish to send out signals to the international community we ought to do so in terms that the international community has learnt to understand.

There may be a case for a government statement about where the Government are going and what we are invited to accept. It is time for the Government to give a lead. It is time for the Government to accept the thrust of the Motion of the noble Lord, Lord Jenkins of Hillhead, to give us a lead and to tell us and the world what their European policy is and where they intend to take us.

7.57 p.m.

Lord Brabazon of Tara

My Lords, I began my speech this afternoon by making clear why I welcomed this debate. My hopes for it have not been disappointed. We have heard a most distinguished list of speakers, many of them with great experience of European matters. I noted particularly the interesting maiden speech of the noble Lord, Lord Richard. I should like to join other noble Lords in congratulating him.

The thoughtfulness of many of the speeches made today shows precisely why national parliamentary views on the future of the Community must be taken fully into account in the debates on which we are now embarked and why the thread of national parliamentary interest and scrutiny must be woven more extensively into the new institutional fabric of the Community.

Of course I regret that not all of your Lordships have accepted that the Government's approach to these vitally important subjects is the right one. The noble Lord, Lord Jenkins, was the first this afternoon to challenge our policy. I took the liberty of looking back in his European Diary of the years when he was President of the European Commission to what he was doing 10 years ago, on 6th June 1980.I saw that on that day he gave some friends an outline for a speech he was to make the following week. One of them: sensibly was inclined to take the view that if he were me he would say as little as possible, but this was not the view of the others nor at that stage mine". I wish the noble Lord, Lord Jenkins, had taken similar advice on this occasion, for I thought his speech uncharacteristically misread the points of principle on which government policy is based and too easily dismissed the core issue of maintaining a balance between national and central powers. In doing so, the noble Lord has failed to understand where the true centre of gravity now lies in the Community on institutional issues and why others, as well as the United Kingdom, place such emphasis on the role of national parliaments in enhancing democratic accountability and, to use the phrase of the French Foreign Minister, the "motor role" of the Council of Ministers in the Community's decision-making.

Perhaps I may set out in greater detail the ideas which the Government have floated in recent weeks on possible institutional change. First, we have advocated the need to improve democratic accountability in the Community. As I have said, there are several ways to do this, but a central element is maintaining or enhancing the accountability of Ministers in the Council to their national parliaments. There has been increased emphasis on this in recent Community discussions.

Only a fortnight ago the Government announced a package of measures designed to improve the effectiveness of the scrutiny arrangements in another place to which the noble Lord, Lord Bridges, referred. We should also like to see stronger links between national parliaments and the European Parliament. The noble Baroness, Lady Scrota, attended a valuable meeting last month of the chairmen of scrutiny committees in member state legislatures. We hope that such meetings take place more regularly in the future. I am sure that a number of members of your Lordships' House will be attending the assizes, involving national parliaments in the European Parliament, which will be held in Italy in the autumn. Improved contacts, better procedures, more accountability—that is the essence of the British approach.

Another way of increasing democratic accountability would be to give the European Parliament a greater role in examining the way in which the Community's funds are spent and its decisions carried out. We know from our own history that parliaments derived their strength from two basic functions—the power to legislate and the power to hold the executive accountable for its actions. Some of our partners would like to see the European Parliament's legislative role strengthened. The Single European Act did, however, provide for that. What it did not do, and we should like to remedy the omission, was to encourage Strasbourg to develop the other arm of parliamentary authority.

Improving the Community's efficiency and effectiveness should in our view be a major objective of that exercise. We have suggested that in this regard greater attention needs to be given to improving implementation and enforcement of agreed EC legislation.

A recent Commission report showed that Britain's record in implementing single market measures was best in the Community. Our record in other areas is also good. Unfortunately that of some of our partners is rather uneven. The Government are pleased that many of them are now paying more attention to this. We have also suggested that the Commission should extend the practice of publishing six-monthly reports on implementation of the single market programme into the other major areas of Community activity—transport, telecommunications, industry, agriculture, and the environment.

We think that that would make a difference to Community decision-making. It would narrow the gap between the Europe of phrases and the Europe of facts. It would enhance the Community's international credibility: those who can deliver internally are bound to be taken more seriously on the international stage. It will also ensure that the Community continues to enjoy the support of its own citizens. For if the 1992 dream of bringing down the barriers and creating an even playing field for Europe's citizens and businesses does not come true, our citizens will rightly ask why.

As I have said, a searchlight on implementation can be switched on without any change of treaties, but we have also made clear that the Community should, in addition, consider the more radical step of giving the European Court of Justice and the Commission stronger powers of enforcement. That would mean real sanctions, added to the political and moral force which decisions on non-compliance already enjoy.

We also believe that there is scope for improving the Community's effectiveness in the area of political co-operation and foreign policy co-ordination, to which the noble Lord, Lord Wiedenfeld, referred. Most member states are quite clear that separate national interests are involved which they are not prepared to surrender. We do not quarrel, for example, with the independent action by President Mitterrand and Chancellor Kohl on Lithuania in April. Each of the Twelve has faced occasions when there was a need to pursue distinct national interests, but increasingly the Twelve are speaking together on an increasingly wide range of issues. We shall be examining ways of improving the coherence of the Community's international performance—in capitals, in the work of our embassies abroad and in international bodies.

Finally—this matter was discussed at the Dublin summit in April—we must take a long, hard look at the principle of subsidiarity to which my noble friend Lord Thomas and the noble Lord, Lord Thomson, referred. The Government do not pretend that this will be an easy task, but it is an essential one. There is a widespread concern in the Community to be more precise about the limitation of national and Community areas of activity. That seems particularly important in a developing Community in order to preserve powers for national governments and national parliaments. We see a fundamental democratic principle at stake here: the need to keep decisions, power and accountability as close as possible to people. So we and our partners will be considering how subsidiarity might be embodied more fully in the treaty. It is already there in embryonic form in provisions dealing with the environment, but what we are talking about now is a more systematic application of the principle.

Perhaps I may now turn to some of the remarks made by noble Lords. It was good of the noble Lord, Lord Jenkins of Hillhead, to acknowledge some of his past mistakes, but the Government are not, as he alleged, short on either commitment to or understanding of the Community. We do not think that the Community will become a United States of Europe and we are happy to debate vigorously with those who do. But we have no doubt that the Community has a strong political dimension. It has a central role to play in, for instance, the future of Eastern Europe. The noble Lord is wrong to suggest otherwise. We have both vision and practical ideas, as was demanded of us and of European Governments. So in all three of the noble Lord's examples it is clear that the Government are pursuing an active and committed approach.

The noble Lord, Lord Cledwyn, asked whether the Government would support a decision to call an IGC on political union. That is a decision for the Dublin council and it will be taken by a simple majority. We have made clear our willingness to go along with such a decision if our partners want to pursue the debate. The noble Lord implied that at present the European Parliament has no power to amend legislation. It has such a power, as my noble friend Lady Elles explained, but the Belgian paper to which the noble Lord referred goes much further than that and proposes co-decisions between the Parliament and the Council.

The noble Lord, Lord Bridges, referred to the Commission's paper on EMU and particularly on the need for structural discussions of member states' economies. I agree. Such discussions already take place in the exercise known as multilateral surveillance. Arrangements will be strengthened as part of Stage 1 of EMU, which has been agreed and which begins on 1st July. The Government are ready to agree rules to make participation in those arrangements binding.

My noble friend Lady Elles said that we too often run ourselves down. I entirely agree with her on that point. The UK plays a positive part in the Community and we more often than not find ourselves in the majority. I am not entirely in agreement with my noble friend on the kind of institutional changes proposed. For example, we do not believe that there should be a wholesale extension of the co-operation procedure, but I agree with my noble friend's call for increasing scrutiny of Community legislation, for increasing the financial accountability of the Community and for improvements in European political co-operation.

I listened carefully to the very good maiden speech of the noble Lord, Lord Richard, drawn from long experience in the Community and in diplomacy. I should simply point out to him that it was the diplomatic expertise of my right honourable friend the Prime Minister which won us the Fontainebleau abatement to our budget contribution in 1984—an achievement which by the end of this year will have been worth £7-5 billion to the United Kingdom. I hope that that will at least get two cheers from the noble Lord, Lord Stoddart of Swindon.

I welcomed the ready acknowledgement of the noble Lord, Lord Ezra, that the Government are hard at work at the coal-face of the European Community. I entirely agree that the EC is not just a matter of trade. As I said earlier in the debate, we are committed to an ever closer union among the peoples of Europe, but in constructing that union it is vital that the principle of subsidiarity is respected.

The noble Lord, Lord Weidenfeld, and my noble friend Lord Thomas of Swynnerton—I was grateful to my noble friend for his kind words about my earlier remarks—spoke of the countries of Central and Eastern Europe. The Government's overall aim in their policy on Eastern Europe is to support and encourage the political and economic reform process in those countries and thus to increase European stability and security. On the question of enlarging membership of the European Community, we and our Community partners are agreed that association agreements should be the next stage in our relations with Central and Eastern European countries. Such agreements will provide an ever closer relationship as political and economic reforms continue in those countries. The question of full EC membership is not one for the immediate future. It is clear that reform must go much further before those countries can meet the obligations of EC membership, but, when they can and if they choose to apply, we should certainly welcome them.

The noble Lord, Lord Stoddart of Swindon, made a characteristically robust speech to which I always enjoy listening. However, I must admit that I do not agree with all that he said. I thank him for his eloquent defence of the Prime Minister's approach to political union and his recognition that the UK makes a significant contribution to the Community's activities. I should perhaps point out to the noble Lord that in financial terms the Federal Republic of Germany is by far the largest net contributor to the Community budget. Our position on the exchange rate mechanism, with which the noble Lord dealt at some length, has been made clear many times, most recently this afternoon in answer to a Question from the noble Lord, Lord Ezra, which was answered by my noble friend the Paymaster General.

I was grateful to the noble Lord, Lord Gladwyn, for making clear quite how significant were the changes to the Community agreed by the member states with the Single European Act which came into effect so recently and how resilient are the individual characters of each member state. We agree with his view that an active and dynamic united Germany as a member of the Community is an entirely welcome prospect.

I am grateful to my noble friend Lord Aldington for his words about my opening speech. I welcome the establishment of his ad hoc committee. I note that officials from the Foreign and Commonwealth Office have already given informal evidence to it. Obviously we shall continue to co-operate as much as possible with that committee.

It seems clear to me that the noble Lord, Lord Clinton-Davis, has slightly lost touch with the Community and the United Kingdom's role since he left the Commission 18 months ago. It is absurd to claim on the basis of the Government's reply to the FAC report that the Government are not committed to all aspects of the Single European Act. Of course we are. We are in the lead in the formulation of EC environmental policy. The noble Lord's successor as Environment Commissioner recently published a table of infractions of environmental legislation which showed that the UK had a good record of compliance. Generally, as I have said before, our record on implementation and compliance in the single market and other areas is second to none. We are wholly committed to the social dimension of the EC, but we thought—and we made our feelings clear—that the social charter marked a return to the bad old days of over-regulation, ignoring the top priority of creating new jobs and enhancing competitiveness. The noble Lord, Lord Stoddart of Swindon, was good enough to give some comparative figures for the movement in unemployment between us and other member states.

My noble friend Lord Bessborough asked what the Government thought of the possibility of Eastern European countries joining some of the multilateral organisations of Europe. We welcome the interest shown by East Europeans in the Council of Europe and hope that they will become members as they meet the requirements, which are a pluralist democracy and a guarantee of human rights. The applications of some Eastern European countries to join are well advanced, such as those for Hungary Czechoslovakia and Poland, and we expect to see them as members soon. The whole of the united Germany will of course be a member.

The important thing is to integrate the East Europeans via the CSCE, close association with the EC and membership of the Council of Europe into a wider Europe politically and economically. The CSCE will provide a forum at which security arrangements for all 35 can be discussed. Although I agree with the questioning attitude of the noble Lord, Lord Jay, toward centralisation, I could not help thinking that there were aspects of his speech which seemed to ignore some of the lessons of the past 50 or 60 years. I am clear that the noble Lord underestimates the potential benefits to the United Kingdom of the single market and of closer economic and monetary integration.

I dispute the assertion of the noble Lord, Lord Bonham-Carter, that the Community agenda is set by others. We are acknowledged to be among the leaders on the approach, for example, to EC relations with Eastern Europe, on developing relationships with the United States and Japan, on our liberal approach to the GATT-Uruguay round and on the 1992 programme. Even on political union it is clear that the principles advocated by the United Kingdom are widely accepted in the Community.

The noble Lord, Lord Williams of Elvel, and indeed the noble Lords, Lord Clinton-Davis and Lord Bonham-Carter, referred to quotations from a speech made by my right honourable friend the Secretary of State for Trade and Industry. I think it would be unwise of me to comment on selective quotations from a speech which I have not seen.

Lord Stoddart of Swindon

My Lords, perhaps the noble Lord will allow me to intervene. I have a copy here and I shall lend it to him.

Lord Brabazon of Tara

My Lords, I am afraid that I do not have time to read through it right now. But for the avoidance of any doubt I can tell noble Lords that the speech which I made this afternoon obviously represents government policy.

Nor do I accept the view of the noble Lord, Lord Williams, that there is a contradiction in the Treasury EMU paper. We believe that Stage I will lead to increasing convergence. We believe that our evolutionary market-based approach will produce greater monetary stability. At this time I do not propose to go any further, but the Treasury paper means what it says.

To conclude, the United Kingdom is committed to the Community, which is the heart of our foreign policy and central to the United Kingdom's and Europe's future prosperity. The United Kingdom Government have a clear vision of the Community's future. We want it to remain open, liberal, a model for democratic and civilised relationships between advanced countries. We want the Community to be dynamic, responding to the world outside as well as acting as a catalyst for positive change in our Continent and beyond. But we also seek to combine our vision with practical ideas. Our contribution is both to the architecture and the actual construction of the new Europe. We shall not leave the building site or lose interest in the work when the bricks and mortar arrive. And it is because we care about the finished product that we want to close the gap between the Europe of facts and the Europe of fantasies. That is why we shall go on doing what today's Motion enjoins us to do—taking an active role in defining the future shape of the European Community.

8.13 p.m.

Lord Jenkins of Hillhead

My Lords, I am not a great believer in second speeches, particularly now that the hour has reached its present point. As the debate took a constructive and non-polemical tone—which I hoped it would—I do not propose to reply to the Minister's second speech. It was sometimes a little more polemical than his first speech but we thank him very much for the two speeches. I therefore confine myself to thanking the 16 noble Lords who, apart from the government spokesman, took part in the debate.

I should also like to say how much we welcome the appointment of the noble Lord, Lord Aldington, and look forward to the work of his committee. I congratulate my noble friend Lord Richard on his maiden speech in this House. It was a notable maiden speech. He comes to us with a great record of European service. To the best of my recollection he is indeed the only member of the Labour Party who has ever rebuked me for lack of adequate European fervour. That was in 1968 when he thought that I handled a monetary conference in Bonn without sufficient regard for the European dimension. I was almost tempted to ask him whether he would give me a certificate to the effect that my European fervour was inadequate as it might have been rather useful to me in the Labour Party in subsequent days. I greatly welcome him to this House and congratulate him on his admirable speech. I thank all the participants. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.